- Net sales up 2 percent, organic sales grew 5 percent
- Revenue Growth Management program and productivity drive continued margin recovery
Company raises 2023 outlook
DALLAS, Oct. 24, 2023 - Kimberly-Clark Corporation (NYSE: KMB) today reported third quarter 2023 results. Comparisons are made versus the prior year period, unless otherwise noted.
"We delivered another strong quarter, with organic growth across all segments and continued margin progress," said Kimberly-Clark Chairman and CEO Mike Hsu. "I'm proud of how our teams around the world are executing our growth strategy. Our innovation and commercial capabilities continue to enhance the value proposition of our brands, while strong execution of our revenue growth management and ongoing productivity programs enabled us to restore gross margin to pre-pandemic levels."
Hsu continued, "Based on our year-to-date performance, we have raised our full-year outlook. We're confident that continued investments in our brands and commercial programs will deliver superior value to our consumers and balanced and sustainable growth for our shareholders."
Quarter Highlights
- Delivered net sales of $5.1 billion, up 2 percent, with organic sales growth of 5 percent.
- Gross margin was 35.8 percent, up 530 basis points versus the prior year, driven by favorable net revenue realization and productivity.
- Diluted earnings per share were $1.73; adjusted earnings per share were $1.74, up 24 percent versus prior year.
- Raised 2023 outlook for organic growth to 4% - 5%, and for adjusted earnings per share growth of 15% - 17%, with adjusted operating margin up 170 basis points at the midpoint versus last year.
Third Quarter 2023 Results
Third quarter sales of $5.1 billion increased 2 percent, with organic sales up 5 percent, driven by a 5 percent increase in price from ongoing revenue growth management programs and a 1 percent favorable product mix, offset by a 1 percent decrease in volume. Changes in foreign currency exchange rates decreased sales by approximately 2 percent and the divestiture of its tissue and K-C Professional business in Brazil decreased sales by approximately 1 percent.
In North America, organic sales increased 7 percent over last year, including increases of 9 percent in Personal Care, 4 percent in Consumer Tissue and 7 percent in K-C Professional.
Outside North America, organic sales were up 5 percent in developing and emerging (D&E) markets. Organic sales for developed markets (Australia, South Korea and Western/Central Europe) were in line with year ago.
Gross margin improved by 530 bps to 35.8 percent, with higher net revenue realization, cost savings and favorable input costs partially offset by unfavorable currency impacts and other manufacturing costs.
Third quarter operating profit was $774 million compared to $655 million last year, resulting in an operating margin of 15.1 percent. Operating profit increased by 18 percent, driven by higher gross profit including $90 million in FORCE (Focus on Reducing Costs Everywhere) savings and $75 million in lower input costs, partially offset by other manufacturing costs of $30 million, planned increases in marketing, research and general expenses, coupled with higher incentive compensation levels. Unfavorable currency effects impacted operating profit by $135 million during the quarter.
Net interest expense was $56 million, 19 percent lower than prior year.
Third quarter effective tax rate was 22.5 percent broadly in line with prior year. On an adjusted basis, the effective rate in the third quarter was 22.5 percent, compared to 22.3 percent prior year.
Net income of equity companies was $50 million compared to $29 million last year driven by Kimberly-Clark de Mexico.
Diluted EPS increased 25 percent to $1.73 on a reported basis. On an adjusted basis, EPS increased 24 percent to $1.74, driven primarily by the 18 percent increase in adjusted operating profit, in addition to gains in equity income.
Year-To-Date Results
For the first nine months of the year, sales of $15.5 billion increased 2 percent, with organic sales up 5 percent, driven by an approximately 8 percent increase in price from ongoing revenue growth management programs and 1 percent from favorable product mix, offset by a 3 percent decrease in volume, with sequential improvements throughout the year. Changes in foreign currency exchange rates decreased sales by 3 percent, and the exit of our tissue and K-C Professional business in Brazil decreased sales slightly.
Gross margin improved by 400 basis points to 34.2 percent, and adjusted gross margin improved by 410 basis points to 34.3 percent with higher net revenue realization as well as cost savings from its FORCE program of $275 million more than offsetting higher input costs of $115 million and higher other manufacturing costs of $195 million.
Year-to-date operating profit was $1.7 billion in 2023 versus $2.0 billion in 2022. Results included non-cash impairment charges on intangible assets, higher marketing, research and general expenses, unfavorable impact from foreign currency, offset by the net benefit from the Brazil divestiture in the second quarter 2023.
Year-to-date adjusted operating profit was $2.3 billion in 2023 versus $1.9 billion in 2022. The increases from organic sales and the benefits from FORCE savings were partially offset by higher input costs and other manufacturing costs, marketing, research and general expenses, and unfavorable impact from foreign currency.
Through the last nine months, diluted earnings per share were $3.70 in 2023 compared to $4.22 last year. Year-to-date adjusted earnings per share were $5.06 compared to $4.09 last year.
Source: Kimberly-Clark
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