Kmb Q

Image source: Kimberly-Clark.

Kimberly-Clark (NYSE:KMB) reported third-quarter results on Wednesday. The maker of Huggies diapers and Kleenex tissues saw its sales and profits dented by negative foreign exchange rate fluctuations, but the consumer goods giant was still able to muster solid organic growth and volume gains.

Kimberly-Clark results: The raw numbers

 

Q3 2015

Q3 2014

Growth (YOY)

Sales

$4.718 billion

$5.056 billion

-6.7%

Net Income

$517 million

$562 million

-8%

Adjusted EPS

$1.51

$1.50

0.7%

Source: Kimberly-Clark Q3 2015 Earnings Press Release.

What happened with Kimberly-Clark this quarter?

  • Kimberly-Clark's 7% year-over-year decline in sales was largely due to the significant negative impact from foreign exchange fluctuations, which reduced sales 12%. Excluding the impact of changes in foreign currency rates, organic sales rose 5% -- including a 10% increase in developing markets -- as volumes increased approximately 5%, and product mix was slightly favorable.
  • Excluding pension settlement charges and restructuring costs, adjusted operating profit fell 6%, to $826 million, as cost savings related to Kimberly-Clark's FORCE (Focused On Reducing Costs Everywhere) program, and lower raw material costs, were offset by foreign exchange effects and increased marketing expenses.
  • Cash provided by operations was $849 million in the third quarter compared to $976 million in Q3 2014, due to lower cash earnings and a smaller improvement in working capital than in the prior-year period.
  • Management continues to pass on that cash to shareholders, with 1.4 million shares repurchased in Q3 2015 at a cost of $150 million. The company expects full-year share repurchases to total $800 million, in line with the previous target of $700 million to $900 million.

What management had to say
"Organic sales grew mid-single digits, with benefits from targeted growth initiatives, innovations and brand investments," said Chairman and CEO Thomas Falk.

We achieved significant cost savings and improved adjusted gross margin. In addition, our adjusted earnings per share from continuing operations set a new quarterly record and we allocated capital in shareholder-friendly ways. We are executing well in a challenging environment and are raising the low end of our previous guidance ranges for full-year organic sales growth and adjusted earnings per share.

Looking forward
Management now expects full-year 2015 organic sales growth to be in the range of 4% to 5%, compared to the company's prior expectation of 3% to 5%. Full-year 2015 adjusted earnings per share are anticipated to be $5.70 to $5.80 versus the company's previous guidance of $5.65 to $5.80.

Yet foreign exchange is likely to continue to take a toll on Kimberly-Clark's results, with currency translation now expected to reduce full-year 2015 sales by 10% to 11% versus a prior assumption of 10%, and operating profit by 11% to 12%, which was previously 11%.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.