Revenue Growth Management program drives significant margin improvements
Company raises 2023 outlook for EPS growth
DALLAS, April 25, 2023 /PRNewswire/ -- Kimberly-Clark Corporation (NYSE: KMB) today reported first quarter 2023 results. Comparisons are made versus the prior year period, unless otherwise noted.
"I'm proud of our teams around the world for a strong start to the year. We grew organic sales by 5 percent, which reflects the health of our categories and the essential nature of our products," said Chairman and CEO Mike Hsu. "Our growth strategy continues to deliver behind strong execution of our commercial programs. Revenue growth management initiatives drove continued sales momentum with a better-than-expected elasticity impact on volume. Looking ahead, we have an exciting innovation pipeline that will deliver superior performance in health, wellness and sustainability. With our strong portfolio of trusted brands, we have our sights set on growing our categories and winning with consumers to enable long-term, profitable growth."
Hsu continued, "While inflationary pressures have yet to subside, we drove continued improvement in our gross margin this quarter. We will continue to lean into our productivity and cost savings programs to mitigate elevated costs, while strategically investing in future growth platforms that will expand our presence in attractive markets for years to come."
Quarter Highlights
Delivered strong top-line growth, with net sales of $5.2 billion, up 2 percent with organic sales growth of 5 percent. On a combined two year basis, organic growth increased 8 percent.
Gross margin increased 340 basis points versus the prior year, driven by favorable net revenue realization offsetting inflation.
Diluted earnings per share were $1.67, up 8 percent; up 24 percent versus adjusted earnings per share last year.
Raised 2023 outlook for adjusted earnings per share growth of 6 to 10 percent, with operating profit up low double digits on a percent basis versus adjusted results last year.
Strategic Highlights
Continuing advances in commercial capabilities, including revenue growth management and in-market execution.
Personal Care driving occasion-led innovation with Kotex overnights and GoodNites.
Refreshed Cottonelle Ultra Comfort and Ultra Clean in key U.S. accounts.
Launched a new innovative washroom solution, Kimberly-Clark Professional ICON, that brings game changing hygiene and design in the United Kingdom.
Recognized as one of Barron's 100 Most Sustainable Companies in 2023 and one of Ethisphere's 2023 World's Most Ethical Companies(R) for the fifth year in a row.
First Quarter 2023 Results
First quarter sales of $5.2 billion increased 2 percent, with organic sales up 5 percent, driven by a 10 percent increase in price and favorable product mix from ongoing revenue growth management programs offset by a 5 percent decrease in volume. Changes in foreign currency exchange rates decreased sales by approximately 4 percent. On a combined two year basis, organic growth increased 8 percent.
In North America, sales increased 5 percent over last year, including increases of 2 percent in Personal Care, 5 percent in Consumer Tissue and 12 percent in K-C Professional.
Outside North America, organic sales were up 4 percent in developing and emerging (D&E) markets and 10 percent in developed markets (Australia, South Korea and Western/Central Europe).
Gross margin improved by 340 basis points to 33.2 percent, with higher net revenue realization and cost savings offsetting higher input costs of $160 million.
First quarter operating profit was $787 million compared to $693 million last year, resulting in an operating margin of 15.1 percent, an increase of 150 basis points. On an adjusted basis, operating profit increased by 25 percent, driven by higher gross profit including $105 million in FORCE (Focus on Reducing Costs Everywhere) savings, offset by planned marketing, research and general expenses. Inflation increased input costs by $160 million this quarter, driven primarily by fiber and energy costs. Unfavorable currency effects impacted operating profit by $75 million during the quarter. Operating margin of 15.1 percent increased 280 basis points over adjusted operating margin last year.
Net interest expense was $66 million, an increase of 5 percent over the prior year due to higher weighted average interest rate on outstanding debt.
First quarter effective tax rate was 24.5 percent compared to reported rate of 18.2 percent and an adjusted rate of 21.0 percent last year due to benefits of certain tax planning initiatives.
Net income of equity companies was $43 million compared to $23 million last year driven by Kimberly-Clark de Mexico.
EPS increased 8 percent to $1.67 per diluted share on a reported basis and increased 24 percent on an adjusted basis, driven by the 25 percent increase in operating profit versus adjusted results last year.