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CHICAGO — Kimberly-Clark Corp. on Friday said it will cut 6,000 jobs and close or sell 20 plants as it moves to strengthen its diaper and health-care businesses and expand its presence in emerging markets.
The restructuring news came as the maker of Huggies diapers and Kleenex tissues posted better-than-expected quarterly earnings.
Kimberly-Clark said it will record charges of $625 million to $775 million through 2008 to cut about 10 percent of its work force and eliminate 17 percent of its manufacturing facilities under the restructuring.
The majority of the plant closings will be in North America and Europe, Chairman and Chief Executive Thomas Falk said during a conference call. He declined to be more specific, but said the consolidation would mostly move production to other plants within the same region.
"It's really about focusing on where we have (manufacturing) scale" rather than moving production to lower-cost countries," Falk told Reuters in an interview.
Cost savings would come from operating fewer plants, which will also streamline shipping and inventory management.
Kimberly-Clark expects savings of $300 million to $350 million annually by 2009, which it plans to use to improve its diaper business, speed growth in India and China, move into higher-margin products in health-care and boost new product development.
The company will also focus on improving its feminine care business and shift its commercial products operation into more profitable areas such as workplace safety products.
Kimberly-Clark shares rose 2 percent on Friday on the New York Stock Exchange, to $64.06. In the past 52 weeks, the shares have traded in a range of $58.74 to $69.
Dallas-based Kimberly-Clark has improved profits from operations and sales in recent quarters as it pushed to be more competitive with top rival Procter & Gamble Co., analysts said.
"I think they have started to make some improvements both in volumes and profitability, but they apparently looked in the future and decided they wanted to take the next step," said Dan Popowics, analyst at Fifth Third Asset Management.
ONGOING SERIES OF CUTS
In December, the company announced plans to cut $400 million to $500 million in costs over three years. But those savings have been needed to combat rising energy and pulp costs.
"They seem to be absorbing these costs all right," Lauren DeSantos, analyst at Morningstar said. "But it's not giving them margin expansion they wanted."
Second-quarter profit fell to $421.8 million, or 88 cents per share, from $454.3 million, or 90 cents a share, a year earlier.
Before one-time charges, the company earned 95 cents per share, a penny better than the average analyst expectation compiled by Reuters Estimates and 8 percent higher than the year-earlier level.
The company took a charge of 7 cents a share in the quarter to repatriate $660 million in overseas profits.
Sales rose 8.1 percent to $3.99 billion. Analysts, on average, expected $3.86 billion. Volume rose more than 5 percent at the company, which has raised prices on products including Cottonelle bathroom tissue.
Kimberly-Clark said it expects to earn 94 cents to 96 cents a share before unusual items for the third quarter, and narrowed its forecast range for the year to $3.77 to $3.83 before one-time items from $3.70 to $3.85.
Analysts, on average, estimated $3.80 for the year and 95 cents for the third quarter.
source: http://online.wsj.com/article/0,,SB112203224705193293,00.html?mod=home_whats_news_us 22jul2005
NEW YORK — Kimberly-Clark Corp., maker of Kleenex tissues and Huggies diapers, said Friday it would cut about 6,000 jobs as part of a restructuring program, as second-quarter profit declined due to a tax charge for repatriating overseas earnings.
Kimberly-Clark, based in Dallas, said the restructuring would result in after-tax charges of between $625 million and $775 million over 3 1/2 years, starting with the third quarter of 2005.
The plan, which calls for streamlining administrative operations and the closure or sale of about 20 factories, mostly in North America and Europe, is intended to save a pretax sum of $300 million to $350 million by 2009. The job cuts, which would affect about 10% of Kimberly-Clark's employees, are expected to be completed by 2008, the company said.
Shares in Kimberly-Clark rose $1.53, or 2.4%, to close at $64.38. The stock added as much as 3.4% to $64.99 during the session.
Kimberly-Clark's move marks the second major restructuring among consumer goods companies since late 2004. In December, Colgate-Palmolive Co. said it would cut its work force by 12%, or about 4,400 employees, as part of a four-year restructuring plan. That overhaul is projected to save Colgate $250 million to $300 million annually.
Thomas Falk, Kimberly-Clark's chairman and chief executive, said the restructuring is needed to boost margins, which have not met the company's growth objectives as inflation has acted as a drag on other cost-savings strategies.
"We haven't delivered on our margin growth," said Falk, on a conference call with analysts, noting that the company experienced $200 million in cost inflation in the first six months of the year.
"So it became obvious that the cost-savings plan that we were on was not going get the cost savings fast enough to allow us to achieve our margin objectives," Falk said.
Savings in Europe, spending in developing markets
The restructuring will focus on operations in Europe, but Falk declined to name specific facilities slated for closure or sale. Another four plants will be streamlined, Kimberly-Clark said, and 7 will be expanded to take up production capacity from the factories that will be closed or sold.
Business in Europe has been challenging for Kimberly-Clark. Its diaper business has come under competitive pressure from Procter & Gamble Co., maker of Pampers and Luvs, while the consumer tissue business has been hampered by private label offerings.
In April the company combined its North Atlantic personal care and family care businesses into a single organization, a change that was seen by analysts as step in the right direction toward improving results in Europe.
Kimberly-Clark said the cost savings will allow the company to invest more in high-growth markets such as Brazil, Russia, India, China, Indonesia and Turkey.
About a quarter of the restructuring charges, or approximately $150 million to $250 million aftertax, are expected to be taken in fiscal 2005, Falk said, with cost-saving benefits first showing up in fiscal 2006.
Profits falls on tax charge; sales driven by volume gains, currency
Kimberly-Clark's announcement was made as part of the company's second-quarter earnings reports, in which it said net income fell to $421.8 million, or 88 cents a share, from $454.3 million, or 90 cents, a year ago. Excluding the tax charge for repatriated earnings, the company's profit would have been 95 cents a share, or 1 cent ahead of analysts' average estimate, according to Thomson First Call.
Sales for the period ended June 30 expanded 8.1% to $3.99 billion from $3.69 billion in last year's second quarter. The sales gain was driven by volume growth of more than 5% and a benefit of about three percentage points from currency exchange, the company said.
Net selling prices remained flat, however, as higher prices for consumer tissue and professional products in North America, as well as for personal-care goods in developing markets, were negated by lower prices in diapers and training pants in North America and Europe and consumer tissue in Europe.
In North America, personal care sales advanced approximately 3%, helped by an 8% volume gain. Greater shipments of children's Pull-Ups training pants and GoodNites underpants boosted childcare sales volume by a double-digit percentage rate. Infant care sales volume expanded 7% on stronger shipments of Huggies.
Outlook narrowed, but in line
Based on the company's results through the first six months of the fiscal year, Kimberly-Clark narrowed its fiscal 2005 earnings outlook to $3.77 to $3.83 a share before one-time items. Previously the company had forecast earnings at $3.70 to $3.85 a share. Analysts' average estimate stands at $3.80 a share.
For the third quarter, Kimberly-Clark targeted earnings of 94 to 96 cents a share before nonrecurring items, bracketing analysts' average forecast of 95 cents a share.
"Our guidance reflects continued solid growth in sales volumes as well as benefits from price increases, including the increases that are taking place this quarter for our infant care, child care and incontinence-care products in the U.S.," said Falk. "These actions, along with continued success in delivering cost reductions in the second half of the year, should help us counteract ongoing inflationary cost pressures."
Falk added that the company still expects inflation to affect most of its key raw materials in the third quarter, but a recent decline in prices for fibers and polymers should provide some relief.
Also on Friday, Kimberly-Clark raised the target for its ongoing share-repurchase program to $1.5 billion from at least $1 billion.
Dan Burrows is a reporter for MarketWatch in New York.
source: http://www.marketwatch.com/news/story.asp?guid=%7B88F2707F-10B3-49F2-A9B6-79527FC229EA%7D&siteid=google&dist= 22jul2005
Kimberly-Clark Corp. said it plans to cut about 6,000 jobs, or about 10% of its work force, and sell or close about 20 manufacturing plants as it reported lower second-quarter earnings.
Kimberly-Clark, the maker of Kleenex tissues and Huggies diapers, said its net income fell 7.2% in the latest quarter as the company booked a charge for repatriating foreign earnings.
The Dallas company also narrowed its earnings guidance for the full year based on year-to-date performance and plans for the rest of 2005. It expects earnings per share of $3.77 to $3.83 for the year, which is near the top end of its prior outlook of $3.70 to $3.85 a share.
In 4 p.m. composite trading Friday on the New York Stock Exchange, shares of Kimberly-Clark added $1.53, or 2.4%, to $64.38.
Kimberly-Clark said second-quarter net income decreased to $421.8 million, or 88 cents a share, from $454.3 million, or 90 cents a share, a year earlier, which included two cents a share of earnings from a business since divested. The latest quarter includes a charge of $34.8 million, or seven cents a share, for moving some earnings into the U.S. Before items, Kimberly-Clark's earnings totaled $456.6 million, or 95 cents a share. Wall Street, on average, expected Kimberly-Clark to earn 94 cents a share for the second quarter.
Sales rose 8.1% to $3.99 billion from $3.69 billion, amid continued strength in developing and emerging markets during the latest quarter.
The consumer-products company said the restructuring moves are part of a multiyear program to streamline manufacturing operations and become more efficient. The cuts will affect about 17% of its manufacturing facilities. It did not identify the sites.
In addition to the 20 plant closings or sales, it plans to streamline four other facilities while expanding seven others as some production capacity from affected facilities is transferred to them.
Excluding a tax expense of seven cents a share for repatriated overseas earnings, the company earned 95 cents a share, in the latest quarter.
The restructuring moves will result in cumulative after-tax charges of $625 million to $775 million over a 3½-year period beginning in the third quarter of 2005, the company said. Kimberly-Clark said annual pretax savings from the moves are expected "to increase to $300 million-$350 million by 2009."
source: http://online.wsj.com/article/0,,SB112203224705193293,00.html?mod=home_whats_news_us 22jul2005
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