Kimberly-Clark (KMB) 24 Oct 232023 Q3 Earnings call transcript

Good day, and welcome to the Kimberly-Clark Third Quarter 2023 Earnings Call. [Operator Instructions].

It is now my pleasure to turn the floor over to your host, Christina Cheng. Ma'am, the floor is yours.

Welcome, everyone, to our third quarter 2023 earnings conference call.

note will please forward-looking begin, we today's include presentation statements. Before undue those may you implied any forward-looking vary results expressed should on statements. materially place and Actual statements, from or our forward-looking in not reliance our

refer of that list to materially could for expectations. results factors from actual to our our our Please filings deviate a SEC cause

business non-GAAP financial remarks performance. of understand our news in today items certain described investors press our refer Our consult reconciliations measures. our help We Please to comparable financial use release exclude our discussion to adjusted financial GAAP ongoing measures results, which a to measures release. for and non-GAAP

materials our We supplemental which have of found Relations website. in published the section Investor are

Officer, Mike and Nelson we the provide and performance Participating floor discussion Financial Officer, quarter. start Chief will provide before Mike our will the Hsu; and our our are in an Chief today's call strategic Q&A. Urdaneta. our for to outlook Nelson open discussion our on results the with Chairman of priorities our QX detailed overview Executive a and

I that, turn With Mike. over the to will call

Thank the strategy. Christina. are teams proud our of our We around results. quarter delivered how strong you, of growth I'm executing world another

Our momentum and and the market commercial strong are share gross top innovation and with contributing to trends programs line improving volume margin expansion.

raising year outlook. full our the on are year-to-date of strength we Based performance, our

for enabled consecutive Personal all growth. by X% were quarter third management our increased organic and across volume price importantly, with business, segments. improved and while X% volume growth in revenue Further and Care, Third led year-to-date sales sequentially capability, way growth, organic a largest strong growth quarter. gains the mix with X%,

trends we to pricing continue to and brands. our cycle We continue prior as volume expect invest in actions improving

margin on We progress continue to make excellent recovery. also

grew per up XX%, our and Operating adjusted to earnings was an margin in up profit Gross XXX and milestone gross XX%. commitment exceeded our basis share points levels, important XXXX restore margin. was

the outlook. to performance, organic categories and we're raising demand to in share North Given XXXX grow year-to-date In X% organic and Global strength X%, X% markets, earnings XX% In healthier our key America remains price expect sales growth per now XX%. to X%. both our increase balance in a with We our for adjusted of our of sales volume. were and Consumer, we're up brands volume resilient. to up seeing

double Dynamics category similar up In China, sales were were softness. organic EMEA. digits and ongoing in volume despite both

In market and continues America, in constraints mixed, enabled a increased was While America. and in care shares to year-to-date largest markets, a execution, commercial growth This easing tissue. Latin improving. significant marketing across activation be our In are consumption categories. of X D&E of personal sequential our digits facial strong North X supply improvement in double by saw we

performance-enhancing new to up offerings with of U.K., for initiatives XXX the pack gains continuing over strong momentum the designs, we're points price Andrex. nearly basis quarter. points Huggies in and year-over-year basis in China, In digital And share XXX in share have market see resulted share

our expanding and us with a comprehensive offering needs. across spectrum. the advantaged committed by to unmet products consumers elevating by technology categories value meeting address bar need the also range they products raising we're to leaders, where superior market of As and We're

continues reduce rash. we North new XXXX consumers diaper North been lasts health both for daytime this mess China, dissolve to than America, this Scott's with value-oriented to core important why proposition growth segment. America Scott higher-capacity Huggies the deliver absorbency These use highlight better overnight. design of frequency pads. This forms robust has powerful I'll tissue, to is foundational a pads In Scott faster, designs of our introduced breakthrough daily babies examples. that among X-drop provide platform. a in ultra observancy X-drop launched In Poise and protection of longer few in a in global Also and and away and innovation element we that's skin whisks

in more ultimately technology grow levels our consumers, margins and we've of our a and communications advantage occasions ongoing P&L. goal. pre-pandemic I'm end the will our and made offset not usage attract the brand increase We our of on proud investment inflation multiyear to to impact was believe progress milestone categories. Restoring

sustainable executing continue term. the long commercial programs will by and margins expand and to deliver our to productivity growth We balanced for

turn it details of on year. provide remainder to outlook our the quarter now over more I'll the for to third Nelson and

company. basis business. and quarter minus of impact X% delivered in contributed We Currency versus X% by XXX sequentially Volume sales third growth by the single-digit Organic had was to row the Personal while North realization X%, high year. in business Professional were XXX points. Consumer a points, Thanks, negatively $X.X tissue Brazil and of segment exit and strong of across an primarily led sales sales increased America. The improved results another Net in Tissue Care mix Mike. price quarter our approximately the for last basis billion, up X impacted net additional our of point growth. X%, on

a minutes our spend me on Let each few segments. of

basis points in in X segment single and in X% time our a increase margin brands. continue X%. volume mix our markets investments North grew of with our increased for improved positive single in realization Operating Personal sales by and and low X%. North grew to digits. markets First, quarters, Price the Care emerging driven points year Personal subcategories turned Care, Developed increases growth high increase while an quarter. contributed with X versus digits, organic we improvement, for gross high sales single of of grew each this Volume ago, America first XXX America. the organic drove digits. Within margin the developing

the XX% for results XXX growth points year's and margin the improved in top by a Consumer up basis Within X% dry markets was Outstanding from levels. revenue and by of segment Second, ago, drove management developed the versus Tissue, growth in Consumer America towels. delivered service year X% was driven driven on organic growth increase. X%. demand Operating North organic Tissue growth, last U.K. healthy bath in

K-C X% year. against drove our was X%. posted Professional for washroom last gains in Finally, remains growth healthy America. share challenging despite a comparisons Demand sales business On new average, programs our organic business organic X-year commercial and North growth

timing realization was by was XXXX. Professional price Strong margin the broadly by XXX select were with which in improved first planned of basis Operating partly points, by revenue the for line partially lower volumes, half offset driven adjustments. of which

of the Turning to rest the P&L.

mixed. basis growth favorability tailwinds and XXX than cost and million about Revenue manufacturing input savings management, energy in Third With costs quarter currency in gross by materials XX.X%. offset to margin cost environment XX.X% headwinds $XX prices, increased year-on-year FORCE more raw The than higher other currency spending versus inflation points and headwinds. remains higher last capabilities. the and was $XX our brands, labor million our Between in higher costs. manufacturing our net up costs year. ago, points XXX lines Other and basis sales, investments people of were reflecting year a offset

the impact, a the X due results transactional operating increased $XXX basis for compensation were to Operating balance percentage largely This XXX currency of profit point points million profit includes costs. earnings by to of of improved headwind or was XX translation reflect and margin accruals. operations These from which higher points a driven incentive by XX%, the XX.X%. quarter and non-U.S. also year-on-year

the adjusted XX.X%, year's line last effective rate in the tax was Lastly, for with quarter XX.X%.

per adjusted drove operating earnings quarter. equity XX% in results, coupled with income expense net a growth interest Our in $X.XX lower share in the third and gains to

Through to highlights. year. $X.X first and Turning X billion cash million flow last operations. we to spending balance compared million the Capital sheet $XXX year, months was $XXX flow of the cash from in generated

to with we CapEx dividends repurchases. billion million. $XXX the share to end expect shareholders year We approximately and of $X.X through returned Year-to-date,

our about let to net currency X% raising we a of expect me strong reflecting guidance. organic and full of and on X% growth impact our divestitures. results, say growth X% our are Now to unfavorable X%, now sales outlook. Based of few the We year sales words

against per that recent assumption of previous line curves, a earnings to worsen approximately the of key share currencies. continue headwind Currency headwinds of forward growth impact basis other to dollar Based We XX% line points have from we strengthening Argentina XXX million and expect recent up will also currency U.S. bottom the XX%. on and million top now our given the projecting currency of million, $XXX a for negative of are year. adjusted $XXX approximately $XXX to the peso

million of in input costs manufacturing Other now outlook approximately we our headwinds versus expected increase by $XXX of outlook. $XXX expect compared previous to the now to approximately $XX On costs, million. are million prior $XXX million

cost driving gross remain levels in With to growth. for returning discipline more productivity we on pre-pandemic fuel create the focused and quarter, to margins

deliver our materials favorable year, million, $XXX of to to million purchases. results we For the full project $XXX negotiations from FORCE ongoing reflecting

gross Continued to a margin full the we advertising programs, puts and expect our increase continue in commercial progress in points by for position to great XXX to spend year. us recovery basis approximately advance

line, Overall, single basis July to Below the we now in of decline net in expect points compared of expected guidance the our our at points the XXX to high increase expense to margin operating guidance. basis increase XXX midpoint digits. interest is an

XX%. earnings our updated tax per XX% result for growth to outlook XX%. have XX% rate full to These adjusted to our in We assumption for adjusted improvements of share also year

we long-term our continued In in in closing, remain growth to on investments focused and including continue operate capabilities we value brands creation. while our environment, volatile a strategy, executing for

floor With that, the questions. we will for open

coming is question first Chris Wells Your Instructions] Carey Fargo. from [Operator from

around just question one commodities. So

but the late. from see see So things kind some just of wonder commodity favorability, how specifically And I to firming you horizon to medium-term near- clearly we continuing seen basket? over have of

that the hedges watching this really context balance need to over overall volumes timing you're and take balance of to to there's medium you're in commodity trying have potential how environment. seeing but against going that just basically pricing how the that going you really this the the aren't term? asking impact work So this year, year, impacts and to fact this is I'm favorability

kind a we I'd inflection then more us. environment with the Nelson quick start a context additional and ask to detail. one, cost I'll you for Yes. say, and Chris, in give lot comment, saw of But I'll finally

and a additional, about impact. taken million over you past inflation currency we've commodities, this plan $XXX lot even of the year, And was between of of As years. know, the on couple

so quarter the And so were actually quarter were in first costs -- our the favorable. --

a cost expect tailwind point be be to modest a I that's behind there's input us. for do lot to that's come a don't so expect inflection going going but that forward, And significant that. necessarily

basis prepared between it's we on and time, ongoing to our and of cost believe The do we I the side we remarks one Nelson, a thing mentioned margins opportunity also what side. job believe and over that on this have maybe... expand is, lot doing though, that revenue we're the on in do the to an But

Yes.

you a to Chris, Mike was on Just elaborate through. walking little, what

we that stand benefit, that So the the our other commodities. we've seen you at first by favorable where the dissimilar year, still the as an quarter by fourth Based increases, quarter, this not so in for we've and savings and of seen on had in pulp, energy we in what of the what quarter are general, project $XX way forecast the amount July. that's a it's playing half be we And year. seeing negative will we million. the the fourth distribution In around resin-based materials today, out back were from and year we're $XXX we some we the look in of costs. especially had remember, million. first driven quarter that And had of actually as stage, forward, We on we

negotiations in no actively materials FORCE hedging. for would some the And commodities pursuing been our there's where in this in around And market also engage we've driving in through the we lot the to benefits, last program. few mind of us of keep One we've be impacted. Remember, $XX for quarters. negatively of we year, in clear been full engage terms is a Chris, to thing over million

includes which material our that's also that's -- prices, our been negotiated flowed through. a net contributor FORCE, So for and

we going we're overall tailwinds said, tremendous costs are Mike expect but don't this with at stage. where As pleased the forward,

North Personal can just can growth Care you year to to the That's ago the do very I helpful. North volume you about what wonder comps And on America specifically And driving then America part Care The categories are follow-up then with the just Personal this? and the talk that? there, business. division. what talk durability, had of within X if

robust. I'd components. say couple the I Yes, of And Chris. I'll consumption does great view reflect essential you different category. a overall One, America our question, and nature remains give North really think maybe a of that

we think mid-single in Personal categories. And was I Our Kleenex then of constraints business K-C all in affected that for coming Care did our is businesses growth solid mostly the off thing across up America mention I supply North significant fairly most prepared are digit with throughout consumption one remarks the year. some our and

have Care. in low-teens, did you we up up Organic little were And than X%. and Baby I'll so shipments X% And was consumption. teens, a give between on the about an while example were higher consumption shipments that

been so retailers since of really shipments that think, on getting back We And in Huggies allocating the reflects, had I inventories the their beginning position. year.

year a actually supplier has kind a situation constrained with And outage the volume, of on is throughout the pretty of significant supply share of a number our had we brands. our that constrained course

that, some of allocation mid-September. we off in out came brands we so point all came at across And

why quarter a in bit ended that's so kind And higher. the of up shipments little probably

the QX a on last destock. the year September, And we Chris, in of bit also remember a comp, in had

kind So very weighing also where ended we consumption that's more of importantly, underlying America. up. the in. North pleased in And with But

Anna coming from from of next Bank Lizzul question Your is America.

you savings better better question. a oil recently follow on the from which Just And are this the also can the benefited quarter? gross clearly higher FORCE seeing on prices? elaborate costs the lower also, input input was up drove I that had question like you Chris' I of costs. on with a if the to in cost what reversal margins, wondering

Sure.

a things. few So

headwind based the on heading year of quarter, we still as we QX We -- the of half million have, on half commodities net current still Chris, basis. to million second year, the $XXX full we're the of through $XX million first we of an indicated, for third to around I go the on we calling and estimate net. negative. year, assumptions, expect Because a As remember, favorability in $XX a favorable the were through were in into

quarter-or-so, to still oil And move the down seen said fact, with resins favorable resins, the to of we least. expect I watching at to we of happening over markets the the begin we curves plateau So fourth the and in level and resins. quarter. Having don't impact the bit to But little prices. still overall, that. we're of watchful we're, course, be in but for They be mean, a are upwards, starting commodities that, implications immediately have next at expect what's

basis, other bid million, savings gross year said, the to to you call taken margin, We $XXX a The our quarter. for in as actually was a and the for FORCE. had at $XXX FORCE $XXX year-to-date strong million million. we've delivery On we're up of

program encouraged our I mean, net-net, overall savings are in the we FORCE. and by So cost

for takes because gross as forward not to us And expand keep and But road. quarter-to-quarter. linearly of XX.X% then milestone it's linear. puts mark in hit terms down the margin, look important is We expect grow in don't after having gross margins quarter quarter mind, margins an are to the always there we

maybe additional And an then, just comment. Anna,

maybe capability input to question underlying in over with be the before, years. continue say, think underlying And cost would of our to and the management and is. job they're volatility several term, enhance some appears costs, cost was, management program disciplined that past I I dealt likely and we hey, our remain to so revenue believe we've Chris and margins, -- would significantly your there it's we capability. terms in longer our also

dollar. Currency volatile. quarters the item seen is has the And another strengthening U.S. mean Anna, I gotten of you about few the expected XXXX. as seen think again, again, add, that as currency operating next headwinds more our And to as from currency. would did take watching about have we're outlook, think we've we up And carefully on we profit. in our our you

follow-up, Great. benefit you That's were while have pricing from the very helpful. And a quarter, in just as the volumes soft. did better-than-expected

to of QX So sequential see the improvement volumes potentially change to about volumes? from QX? did wondering QX in was you think how the I we in QX nice improvement sequential should from a

Well, volume say, quarters we've would X had, improvement. successive of I

down we quarter. X, down down were X, X, think this down importantly, were whatever, Care X. So And up volumes Personal I

I solid we're would I'd the improvement. We're in I most solid said So I We're from And prepared to ready our yet, pricing actions expect continued seeing volume think say but year. making big we remarks think progress. volume call that momentum. not -- cycled we 'XX of last

as And our to and so commercial programs we we drive behind trends invest continue would expect to improve brands. volume our

is Escalante question from next Your coming from ISI. Javier Evercore

where which least it's visibility pickup pricing constructive, My But Promotional in seems a with the for are more track private of be particularly on. a have label. see channels. at XX% on and levels did pricing question right, profits is has bit little in side, to America, we year-end, XXXX. we to your of North The do below

about you point? it is So categories after What's on more -- if then you question talk can of whether comment If that. out allocation? your promotionally coming Is are of the a because can it And that? some what have what is categories? strategic I the

say path I view this I especially we promotion I'd one, drive think of new and Javier, philosophically, trial, part items. the I think Well, Yes. said past a to as trade in

it mix. so marketing fits in that's of kind And our where

of using I'm or so of to share a borrow fan not And time. promotion period rent a for

And so as are we -- below, levels. you any I XXXX still think out, point that might promoting data you say, say I'd

the unit and that this the sheets I it's XX,XXX some little denominator categories, tissue see the would promotions. and is diapers. right, I equivalent is But one for a I your say all X,XXX did units. EQ, diapers, bit think or thing is metric skews kind And in whole analysis we have note, participated for the equivalent of

on our is in you especially definition piece when basis basis, tissue X,XXX per happens, has do what so consumer by or that it Scott XXXX And a on business sheets.

brands. Xx And say, Xx about, and let's so more any other that's between than

kind a to we've brands. us little measures on bit makes probably when an bit on EQ the so taken underpriced than we've of And basis. little I a moved that pricing, But think overall, tends pricing you other do skew look it faster

And our to to I'd normal price normalize. have say gaps so me, begun

note. Very the helpful on

flat, add setup, XXXX possibility The that than higher going is margins mix, think gross of you volume -- if are there to possible plus mix, margins cannot the at given XXXX be running right, structural forward that year-over-year you we're to that other going the the operating or you given happen. the gross be is, you above is forward, going given that, that do think levels that's do

I'll start, job. and But me. then say, let I'll would our I correct it's Nelson

my say to Javier. so do and out from I back you have last so But -- chair, And and know we right? came would the or story And it, year so, I growth; -- volatility; into to when things this set thing, do reduce came was, the organic importantly, enhance is one, second, role, X out third we our margins. our accelerate the that earnings and I

And shocks fundamental the the was demand between curveball in, and I shock, that role. The shocks. inflation this so that supply into kind COVID, was everything of goal a in came came that in the when else

so marks XXXX And last levels. are quarter pretty think back we we've of we our this restore to point a hey, which goal hey, of, pre-COVID said, or margins, we years, over of couple that kind an one, interim us significant the for got got I

for to to more job Nelson to I'll see But revenue have internally, cost -- it's I'm the here. and some term. of I to our just on program, margins. ask that's from you our And But continue us you commercial we discipline give the kind our we disciplined programming, maybe still expand margins give to specifics around our also a be our innovation around saying near is opportunity further and talk management I'll as enhance still, what

Yes.

made had X So our mean point XX.X% can in Javier, point quarters XX%, just building I to back -- build And on we said. happened see what's at which we've not a gross whole we've talking to the about state. capabilities ago. we organization. really, going in is and and is end behind the been what been to this margin Mike making lowest significant -- we've since you And and investments were was that and an milestone get about our

and lot formats the right we So we've the across a deal to building different growth the includes for the ability this and with management, packs around price-back architecture also globe. that of and been customers have and muscle revenue sizes

remains see productivity, We've that element can ongoing Secondly gross then productivity made sure productivity. we've strong productivity intend gross to and that overall our is been an we buttress And around and to delivering we as margin strengthen time, pipeline deliver over that how that. today. and drive you

focus combine really the of accretive innovation. you then our over around that's We've increased is And and X, years last truly going and come margins margins. year, if for we're drove what's our innovation; XX% the growth time, revenue around expanding to at it's these other growth, way balanced staring gross for innovation. sustainable bid our And drive that's us. And to

Your next Bank. from question from Steve Powers is Deutsche coming

X So questions.

look you could are on for higher where that just we one, inflation as forward? first little the of maybe detail and to a Just maybe Nelson, as that other today? you've further in the cost the and manufacturing year made cycle expand we a there call drivers bit The the bit

Sure.

call of we hyperinflationary it's inflation, through and weighed in some lot inflation this So economies close what's year $XXX as and really first And through X our this a quarters things. tad were below. to took a keep being inflation service million $XXX the of flow of few from a the that the in driving indicated, just deal mind you cetera, some One, we million, $XXX to that And et with. the million cost lease by is number.

So of on U.S., accelerate outside the costs some we've because Steve. end that seen we're being impacted

we're based at, what's So million of part at on that's stage. this driving $XXX that where

Okay.

regard, in growth been that commercial A&P And then, the of investments talked made think where you've Mike, the I in general, over there's your you aggregate lot priorities? bigger maybe strategic you've years long-term been versus higher Okay. you been you just about a picture, initiatives just that investment And about strategic that last year. and couple do marketing making. and -- this you the you've think as of are guess spending

do see next year need investment an of year, that think or to invest as is opportunity Is accelerated an year? you're you we more -- a where in growing making continue investments it expansion with at it And pace at kind about to to past line you the are some couple sales? Or where the been start you and leverage from actually margin can investments a lever a over you've standpoint, point of of is years?

Thanks, I'm the team. pleased with Yes. One, really Steve.

which are We set growth. what do, balanced delivering we sustainable to out is and

see, As The them we remains you could the along very as mentioned, pre-COVID coming organic are restored momentum the levels. strong. margins

I good We've feel our And made of progress progress in of progress we've lot made a lot in innovation a a say made the we of building pipeline. and in lot the so We've capability investment. innovation capability. about improved that. would improving

years, the we're hundred up so a points over in investment. couple of think basis X last probably advertising And I

to we approaching there, really investment. At sales. X% make I that from think we're need overall point, this

It's so And in our would plan programming have to perhaps competitive be as great And business. outspend them. our primary would not but commercial to our innovation, competitive is much say spend. plan global great competitor, I not as drive our a and that's

think Do think do invest? the I for think, don't continue But to better? with some -- advertising we've opportunity we there's need to line expect don't Yes. I infinitely". I'll Yes. made investment we to already "Hey, also say, increased and I I continue in a investments go Steve, have leverage to so us straight And

done it more opportunistic years that it's you X feel identified Okay. have ROI, where clear or spend catch Yes. need so you've you because play a back, you're sounds huge it but you underspending? -- might up No, feel catch ago, I up now to you've X a like like don't and there's the

years -- competitive were great. Xs for we the too I we on ROIs at operate I spending the this I and feel a to of in that in. that have we categories and X But think Because Yes. low was also ago, are felt company great opportunities point. spend like so

And that to to so to we're things so going especially more going want as migrate more there's in. to plenty continue and and invest digital to of we be

Your is Andrea Instructions] JPMorgan. from Teixeira question [Operator next from coming

into ask possibly coming this some some for This especially think in your the resin retailers wanted may Andrea. commodities just of lower, I in XXXX, understand on up, you need add to is the especially but I elaborated pulp pricing how to Shabana coming go with mean XXXX you, back views regarding to with just is the and color can roll on into about pricing I carryover seeing oil better? that higher. potentially you please

If you could a just us like, in bit picture? little more aggregate, give

Yes. did pricing would I'll say we I start. in pricing Maybe year, so last of our have this and some most went year.

plan of -- So huge I there will be driver driver will be the year. huge for a next a little carryover. wouldn't say a it's

the we 'XX cost see year still what you and 'XX. are costs up being after up this on just in discussed environment, can Given significantly

so not deflation. a And we're of seeing ton

continue starting term some in, quarters. the to be see huge modest might may we're there seeing, near least inflation. But not I'm for While -- a that in few at a tailwinds

back down. shot pricing really Professional up notably energy then have some and in Europe, in because We rolled costs it we that came had back

for And we environment thus priced it so cost as is adjusted we the we've sense. have far some makes I we that where that some in general, environment expected. markets, and that But out anticipate appropriately in we'll playing do pricing think and

hand will Mike for remarks. closing Executive to back the concludes Please now Officer, Chief Q&A I That Hsu, session. conference go ahead. our

your you see Thank next I in as you the will sustainable proud Kimberly-Clark, that we're for quarter. Well, team growth. interest said, Okay. delivering of successfully and and developing balanced -- we

concludes This everyone. you, Thank today's event.

you time, your and You may have participation. disconnect at for a Thank day. this wonderful