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11/08/10 7:09 PM

#3 RE: DewDiligence #1

KMB Lowers 2010 Guidance on Weak 3Q10 Results

[In 3Q10, “organic sales growth,” defined as the year-over-year change in sales excluding exchange rates, acquisitions, and divestitures, was 1% (consisting of 1% from volume, and zero from pricing and mix); this was below the prior guidance, causing KMB to lower the organic-sales guidance for the full year to 2% from the prior guidance of 2-4%. The new EPS guidance for the year is $.460-4.70 (reduced from $4.80-5.00).

Among the problems in the quarter were higher marketing expenses to retain market share, lower sales of masks for H1N1 (which peaked in 2H09), and higher pulp prices, the latter being the most consequential factor.]

›By Lauren Coleman-Lochner - Oct 26, 2010

Kimberly-Clark Corp., the maker of Huggies diapers and Viva paper towels, posted a 19 percent drop in third-quarter profit and lowered its full-year earnings forecast on higher materials costs and lower demand from other businesses.

The stock fell the most in almost two years. Net income declined to $469 million, or $1.14 a share, from $582 million, or $1.40, a year earlier, the Dallas-based company said in a statement. Twelve analysts surveyed by Bloomberg estimated average profit of $1.28 a share.

Profit was trimmed by lower demand in the professional services unit, which sells brands such as Kleenex and Scott toilet paper to workplaces, currency devaluation in Venezuela and rising materials costs. Chief Executive Officer Tom Falk has cut costs, eliminating about 3 percent of the company’s jobs last year, and expanded health-care and professional revenue to lessen reliance on raw materials such as wood pulp.

“The challenging business environment weighed on our bottom-line results more than we previously expected, with relatively soft market demand, cost inflation and slightly higher competitive spending,” Falk said in the statement.

Kimberly-Clark expects pulp prices to remain about the same next year, Falk said during the company’s earnings call today. The inflation in the previous quarter was the highest ever, the company said.

Sales advanced 1.3 percent to $4.98 billion in the third quarter. Analysts predicted sales of $4.99 billion on average.

The company lowered its full-year [2020] profit forecast to as little as $4.60 a share [actually a range of $4.60-4.70], from a previous minimum of $4.80 [a range of $4.80-5.00]. The company earned $4.52 last year. Kimberly-Clark said earlier this year it expected commodity costs to rise in 2010.‹