Kimberly-Clark to exit low-profit European businesses

Wed Oct 24, 2012 9:26am EDT

(Reuters) - Kimberly-Clark Corp (KMB.N) said on Wednesday that it would stop selling its Huggies diapers in much of Western and Central Europe as part of a plan to leave low-profit businesses in that region.

The company, best known for its Kleenex tissues, also reported lower quarterly sales due to the stronger U.S. dollar, but earnings rose, and it raised its profit forecast for the year.

Kimberly-Clark said it would remain in the diaper business in Italy. It also plans to sell or exit some lower-margin businesses, mostly in its consumer tissue unit. The company plans to cut 1,300 to 1,500 jobs, which include closing or selling five manufacturing plants.

The businesses Kimberly-Clark will exit or divest generate annual net sales of about $500 million and negligible operating profits. The company would not identify all of the specific markets or products those businesses entail.

"We are pleased that (Kimberly-Clark) has made this deliberate choice," said BMO Capital Markets Connie Maneaty, who has been looking for household products companies to manage costs better in a slow-growth environment.

Kimberly-Clark has been cutting costs and has benefited from a decline in commodity costs, which for years had been a pressure point for the tissue, toilet paper and diaper maker. Still, the impact of the stronger U.S. dollar crimps overseas sales, and the company has been spending more on marketing to compete against larger rivals such as Pampers diaper maker Procter & Gamble Co (PG.N).

HIGHER OUTLOOK

Kimberly-Clark earned $517 million, or $1.30 per share, in the third quarter, compared with $432 million, or $1.09 per share, a year earlier.

Excluding restructuring costs, earnings per share rose to $1.34 from $1.26, topping the analysts' average estimate by a penny, according to Thomson Reuters I/B/E/S.

Sales fell 2.5 percent to $5.25 billion, missing the analysts' average forecast of $5.35 billion. Foreign exchange rates reduced sales by 5 percent, Kimberly-Clark said.

Organic sales, which exclude the impact of foreign exchange rate fluctuations and sales lost due to the restructuring of the pulp and tissue business, rose 3 percent.

The company said it expected to earn $5.15 to $5.25 per share this year, excluding restructuring costs. In July, it had forecast $5.05 to $5.20.

Back in January, Kimberly-Clark said 2012 would be a tough year and set its profit target at $5.00 to $5.15 per share, below the analysts' average estimate of $5.24 at the time. Since then, Wall Street has cut its forecast to $5.18.

Kimberly-Clark said it expected deflation of $100 million to $150 million in key commodity costs this year, with pulp prices falling and oil toward the high end of the company's prior outlook. It had previously expected key commodity costs to be flat to down $100 million this year.

Kimberly-Clark will trim its European manufacturing and administrative teams as part of its international overhaul. Related after-tax restructuring costs should reach $250 million to $350 million through 2014, the company said.

(Reporting by Jessica Wohl in Chicago; Editing by Gerald E. McCormick, Maureen Bavdek and Lisa Von Ahn)

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