Kimberly-Clark Gets Hit by Pulp Costs as Outlook Fall Short

(Bloomberg) -- Kimberly-Clark Corp. fell as much as 5.1 percent after its fourth-quarter profit and outlook both fell short of Wall Street estimates amid rising costs of pulp and other raw materials for its consumer goods.

  • The company, whose brands include Kleenex tissue and Huggies diapers, projects profit of $6.50 to $6.70 a share this year, excluding some items, saying 2019 will remain “challenging, although somewhat better than in 2018.” Analysts anticipated $6.79.

Key Insights

  • New Chief Executive Officer Michael Hsu, who took the reins from long-time CEO Tom Falk at the start of this year, is up against shrinking margins, higher commodity costs and currency volatility.
  • Earlier Wednesday, Procter & Gamble Co. had raised the upper end of its own forecast for the year, but like Kimberly cited a “challenging” environment.
  • To boost growth and reduce expenses, Kimberly introduced a plan dubbed “K-C Strategy 2022,” which refers to the year the company will turn 150 years old. Details were scarce, but the plan includes driving e-commerce, innovating, and saving costs in the supply chain.
  • Pulp prices surged last year to multiyear highs but have eased since then, leading analysts to cut the estimates for pulp producers.

Market Reaction

  • Kimberly-Clark shares dropped as low as $109.41 in New York trading Wednesday. The stock had gained 1.1 percent this year through yesterday’s close.

Get More

  • For Kimberly’s statement, click here.
  • More details on the results, here.

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