Kleenex Maker Cuts Up to 13% of Jobs as It Shuts Factories
(Bloomberg) -- As companies move to boost jobs and pay in the wake of the U.S. tax overhaul, Kimberly-Clark Corp. is going in the opposite direction.
The producer of Kleenex tissues and Huggies diapers is cutting 5,000 to 5,500 workers -- or 12 to 13 percent of its headcount -- as part of its drive to reduce spending and boost margins amid uneven revenue growth and higher material costs. Kimberly-Clark will also close or sell about 10 factories while expanding production at other sites, according to a statement.
The cutbacks threaten American factory jobs at a time when the Trump administration is trying to reinvigorate the manufacturing economy. The company didn’t lay out where the jobs would be eliminated, other than saying they would hit every major region where it does business.
Chief Executive Officer Tom Falk said the changes will make the company “leaner, stronger and faster.” He pledged to improve results in 2018, even as market conditions will remain “challenging in the near term.”
Kimberly-Clark sees the job cuts and restructuring creating annual cost savings of $500 million to $550 million by the end of 2021. The company reported fourth-quarter profit excluding some items of $1.57 a share, exceeding analysts’ average estimate of $1.55.
The shares alternated between losses and gains on Tuesday, climbing 0.6 percent to $117.64 at 2:27 p.m. in New York. They had dropped 3.1 percent this year through Monday’s close.
In the wake of the U.S. government’s move to slash corporate taxes, a series of companies have boosted pay and announced plans to expand production in the U.S.
The price of pulp, key for the production of paper goods, “quite frankly surpassed our expectation in how quickly its gone up,” Falk said on a conference call. Meanwhile, the company is only planning to increase prices in “selective” areas. It sees cost savings of more than $1.5 billion -- on top of the savings from job cuts -- from 2018 to 2021 under its plan to cut spending.
Kimberly-Clark says it will exit or divest low-margin businesses in the tissue segment that generate about 1 percent of net sales.
The consumer-goods market has come under pressure as shoppers have become less attached to established brands and upstart companies have nibbled away at a range of categories.
©2018 Bloomberg L.P.