Tags: Kimberly-Clark | stormy | waters | KMB

Kimberly-Clark Navigating Stormy Waters

By    |   Wednesday, 07 March 2012 08:42 AM

Kimberly-Clark (KMB), one of the world’s biggest manufacturers of health and hygiene products, is navigating stormy waters. But the maker of Kleenex tissues, Scott paper towels and Huggies diapers has dealt with plenty of tough times since its founding in 1872 and always has come out the other side.

Sluggish economic growth in much of the world represents a major negative for Kimberly-Clark. First, consumers are trading down from premium consumer products.

Second, the U.S. birthrate has dropped since the Great Recession began in December 2007, and Europe’s birth rate is expected to decline too, according to Morningstar. Germany, the largest and strongest economy on the continent, already has the lowest birth rate there.

Third, Kimberly-Clark forecasts that a strong U.S. dollar will take 2 percent off of sales this year. That’s significant, given that the company expects net sales to come in between flat and 1 percent from 2011.

On the bright side, Kimberly-Clark is going gangbusters in emerging markets. Its sales have increased more than 10 percent a year on average in Asia and Latin America over the past five years. Once developed market economies sustain an economic rebound, the company should be back in the saddle again.

Short-term worry

Standard & Poor’s analyst Tom Graves has a hold rating on Kimberly-Clark shares. “Our near-term outlook is tempered by concern about economic conditions and competition in developed markets,” he writes.

“We see KMB working to increase the market share of its core consumer brands through targeted investments in product innovation and marketing support.”

The company’s shares have produced a total return of 13 percent over the past year. Kimberly-Clark’s profit fell 18 percent to $401 million in the fourth quarter. Sales gained 2 percent to $5.2 billion.

The company next reports earnings April 20.

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