By Sharon Terlep and Joshua Jamerson 

Kimberly-Clark Corp. will step up spending on new products and plants around the world to combat sluggish demand for household staples from diapers to toilet paper.

The maker of Kleenex tissues and Huggies diapers on Tuesday forecast tepid sales growth for 2017 as consumers remain reticent to spend and competition mounts from global and local rivals.

"This is an environment where growth is hard to come by," Kimberly-Clark Chief Executive Thomas Falk said in an interview.

The company entered 2016 predicting 3%-5% organic sales growth but ended the year with just a 2% increase and said it expects the same for 2017.

Meanwhile, Procter & Gamble Co., the world's largest consumer-products company, has picked up steam in the last six months after years of stagnating growth. It nudged its organic sales forecast to 2%-3% for the fiscal year, up from 2%, when it reported earnings last week.

Mr. Falk said he is planning for around $900 million in capital spending this year, about 10% higher than in 2016, on projects that will include new product development, upgraded factory lines and additional capacity where it is needed.

Kimberly-Clark has offset slower sales with a cost-cutting plan, completed last year, that is expected to save $140 million annually. Investment is needed as well, Mr. Falk said, to address changing consumer tastes and to capitalize on areas of growth, such as in China.

"We have the same players chasing a smaller pie, and more competitors moving into more markets," he said in a call with analysts. "It used to be us and our primary global competitors, and now we have one or two more global players."

The Dallas company reported organic sales growth of 1% for the quarter ended Dec. 31 and eked out a small gain in net sales. Its profit rose to $505 million, or $1.40 a share, up 50% from $333 million, or 91 cents a share, a year earlier.

Revenue edged up 0.1% to $4.54 billion. For 2017, Kimberly-Clark projects earnings in a range of $6.20 to $6.35 a share and net sales similar to the $18.2 billion reported for 2016.

The company also said Tuesday that it plans to raise its quarterly dividend to 97 cents a share from 92 cents. The dividend will be payable April 4 to shareholders of record March 10.

Kimberly-Clark shares, which have risen recently but are still 3% lower than a year ago, climbed nearly 4% to $121.36 in recent trading Tuesday.

Write to Sharon Terlep at sharon.terlep@wsj.com and Joshua Jamerson at joshua.jamerson@wsj.com

 

(END) Dow Jones Newswires

January 24, 2017 13:20 ET (18:20 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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