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UPDATE 2-Kimberly-Clark cuts year outlook, says profit fell
July 14, 2008 / 10:40 PM / 9 years ago

UPDATE 2-Kimberly-Clark cuts year outlook, says profit fell

(Adds sales, price rises)

ATLANTA, July 14 (Reuters) - Consumer products maker Kimberly-Clark Corp (KMB.N) said on Monday its second-quarter profit fell and cut its full-year outlook as rapidly rising energy costs pressure margins.

The company warned that it might be forced to implement more price increases, adding to inflationary pressures facing American shoppers, and its shares fell 7 percent in extended trading.

Consumer products makers have faced rising input costs in light of record oil prices as the weak U.S. economy leads buyers already struggling to pay higher food and gasoline costs to curb spending. Kimberly-Clark has cut costs and raised prices of tissue and personal care goods to deal with the commodity inflation.

The maker of Kleenex tissues, Huggies diapers and other hygiene products said diluted net income for the second quarter was an estimated 99 cents a share, down from $1.00 the year before, according to preliminary quarterly results.

Earnings excluding certain costs for the quarter fell to $1.03 a share from $1.04 a year earlier and was below an April forecast of $1.08 to $1.11 a share, the company added.

In addition to higher costs for natural gas and oil-based materials, Kimberly-Clark also cited a planned higher investment in strategic marketing of nearly $25 million for the shortfall.

Second-quarter sales rose 11 percent to $5 billion, aided by personal care and professional businesses.

Kimberly-Clark said details of its quarterly results would be announced on July 24.

The company now expects full-year adjusted earnings of $4.20 to $4.30 a share, below a previous forecast of $4.45 to $4.60 a share and 2007 earnings of $4.25.

Second-quarter cost inflation was $50 million higher than estimated, Kimberly-Clark said in its statement.

Chief Executive Thomas Falk said in a statement that near-term margins are expected to remain under pressure.

“Further pricing actions may be warranted by the cost environment,” Falk said. He added that the company just raised prices again in the K-C Professional division in the United States, and would shortly be rolling out a second price increase of the year in U.S. consumer and tissue products.

Kimberly-Clark also said third-quarter earnings were expected to be 98 cents to $1.03 a share excluding items, below the $1.07 a share in 2007.

The company said it expects adjusted earnings to “improve sequentially” in the fourth quarter as price increases gain traction, assuming no further significant rises in input costs from current levels.

The company’s shares fell to $54.80 in extended trade from their close of $58.80 on the New York Stock Exchange, where they touched a year low on Monday. (Reporting by Karen Jacobs; editing by Mark Porter and Carol Bishopric)

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