Kimberly-Clark Profit Falls As Costs Climb
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DALLAS (AP) – Kimberly-Clark Corp., the maker of Kleenex and Huggies, said Monday that its first-quarter net income fell 9 percent and blamed the rising costs of pulp, oil and other materials.
To fight back, the consumer-goods giant said it will raise prices and cut costs, though it didn’t give details on either measure.
The company also lowered the low end of its expectations for full-year earnings because of uncertainty about how much costs will climb.
Kimberly-Clark’s first-quarter net income fell to $372 million, or 86 cents per share, from $411 million, or 92 cents per share, last year.
Excluding one-time items, earnings were $1.09 per share. Analysts had expected more, $1.17 per share.
Rising costs of raw materials are taking center stage at many companies, from restaurants to clothing stores, as they report first-quarter earnings this month.
Kimberly-Clark will have to see how much it can raise prices without driving away recession-wary customers. The company and its competitors ran numerous promotions for the past two years, which could make it hard for customers to adjust to higher prices.
In a research note this month, UBS analyst Kaumil Gajrawala raised doubts about the “blame-it-on-commodities” line many companies are taking as they raise prices. The Goldman Sachs Commodity Index is up 25 percent in the past 18 months, according to an April 15 note by Gajrawala. It rose a much steeper 84 percent from January 2007 to July 2008, Gajrawala wrote.
The bright spot was sales. Overseas markets including Asia and Latin America were strong, though competition there will be fierce as other U.S. companies try to grab a piece of the fast-growing markets.
First-quarter revenue rose 4 percent to about $5 billion. The company said it expects sales to keep growing, and raised its predictions for 2011 growth.
Sales of Kotex and Kleenex increased, the company said, and sales of bathroom tissue increased as consumers traded up to “premium-priced products.”
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