Business Overview
Kimberly-Clark Corporation (NYSE:KMB) is a global consumer products company that has been a leader in the personal care and consumer tissue markets for decades. With a strong portfolio of iconic brands like Huggies, Kleenex, and Scott, the company has established a dominant position in its core categories and continues to drive innovation and growth.Kimberly-Clark operates in three main business segments: Personal Care, Consumer Tissue, and K-C Professional. The Personal Care segment includes products such as diapers, training and youth pants, feminine and incontinence care products, and other related items. The Consumer Tissue segment encompasses facial and bathroom tissue, paper towels, and napkins. The K-C Professional segment partners with businesses to provide a range of solutions and supporting products, including wipers, tissue, towels, personal protective equipment, and more.
The company's global footprint spans North America, Developing and Emerging (D&E) markets, and Developed Markets. Kimberly-Clark has a strong presence in the United States, its largest market, as well as key international regions like China, Brazil, and the United Kingdom.
Financials
Kimberly-Clark has demonstrated resilience and consistent financial performance over the years. In 2023, the company reported annual net income of $1,764 million and annual revenue of $20,431 million. Its annual operating cash flow was $3,542 million, and annual free cash flow reached $2,776 million.In the second quarter of 2024, Kimberly-Clark reported net sales of $5,029 million, a 2% decrease compared to the same period in the prior year. This decline was primarily driven by a 5% negative impact from foreign currency exchange rates and a 1% decrease from the divestiture of the company's Brazil tissue and K-C Professional business. However, the company's organic sales, which exclude the impact of divestitures and currency, grew 4% in the quarter, driven by a 2% increase in net pricing and a 1% improvement in volume.
Segmental Performance
Kimberly-Clark's three business segments have exhibited varying performance in the second quarter of 2024:Personal Care:
Net sales in the Personal Care segment were $2,692 million, flat compared to the prior year period. Organic sales grew 8%, with a 4% increase in net pricing and a 3% improvement in volume.Consumer Tissue:
Net sales in the Consumer Tissue segment were $1,486 million, a 4% decrease compared to the same quarter last year. This decline was primarily due to a 2% negative impact from the divestiture of the Brazil business and a 2% decrease in organic sales.K-C Professional:
Net sales in the K-C Professional segment were $841 million, a 5% decrease compared to the prior year quarter. This was mainly attributable to a 3% negative impact from the Brazil divestiture and a 2% decline in organic sales.Guidance and Outlook
Kimberly-Clark has provided guidance for the full year 2024. The company expects organic sales growth to be in the range of 4-6%, with volume and mix being the primary drivers. The company also anticipates delivering pre-tax savings of approximately $3.0 billion over the next five years through its 2024 Transformation Initiative, which aims to improve the company's focus on growth and reduce its structural cost base.Risks and Challenges
While Kimberly-Clark has a strong market position and a diversified portfolio, the company faces several risks and challenges, including:1. Macroeconomic and geopolitical uncertainties: The company's operations and financial performance can be impacted by global economic conditions, currency fluctuations, and geopolitical events.
2. Competitive landscape: Kimberly-Clark operates in highly competitive markets, where it faces pressure from both branded and private label competitors.
3. Input cost inflation: The company is exposed to fluctuations in the prices of raw materials, energy, and other inputs, which can squeeze profit margins.
4. Regulatory and compliance risks: Kimberly-Clark must navigate a complex regulatory environment, particularly regarding product safety, environmental, and labor standards.
Liquidity
As of June 30, 2024, the company had a current ratio of 0.85 and a quick ratio of 0.58, indicating potential liquidity challenges. The company's debt-to-equity ratio was 7.01, suggesting a high level of leverage.In terms of profitability, Kimberly-Clark's gross profit margin was 36% in the second quarter of 2024, and its operating profit margin was 15%. The company's return on assets and return on equity were 13% and 242%, respectively, highlighting its efficient use of assets and capital.
Kimberly-Clark's strong cash flow generation is also noteworthy. In the second quarter of 2024, the company reported operating cash flow of $1,459 million and free cash flow of $1,083 million, providing ample resources for investments, dividends, and other strategic initiatives.