October 22, 2018 / 12:03 PM / a year ago

Kimberly-Clark sees more pain from commodity, forex costs, shares fall

(Reuters) - Huggies diaper maker Kimberly-Clark Corp on Monday forecast a bigger-than-anticipated hit to full-year adjusted operating profit from higher commodity costs and a stronger dollar, sending its shares down as much as 5 percent.

The company also reported third-quarter profit and revenue that topped estimates and said long-time chief executive officer will step down from that role next year.

U.S. packaged goods companies have been plagued by surging commodity and transportation costs for most of this year, but Kimberly-Clark, in particular, has faced higher costs than peers.

“While higher input costs are a headwind for all household-product peers, Kimberly-Clark has more exposure to the commodities seeing the steepest increases in prices,” said Brittany Weissman, consumer analyst at Edward Jones.

The Kleenex tissue maker said commodity expenses would now be at the upper end of its previously forecast range of $675 million to $775 million, due to rising costs of pulp, polymer resin and eucalyptus trees.

Kimberly-Clark also said full-year sales would take a 1 percent hit from the stronger dollar.

“We expect commodity and currency to be further headwind next year,” Chief Operating Officer Michael Hsu said on a conference call with analysts.

Hsu will succeed Thomas Falk, the company’s chief executive officer since 2002, on Jan. 1, 2019, while Falk will take on the role of executive chairman, the company said.

Full-year adjusted operating profit may decline more than the previously forecast range of 2 percent to 5 percent, the company cautioned on Monday.

The company, however, retained its targets for earnings and organic sales growth, which excludes impact from acquisitions, divestments and forex, for the full year.

Kimberly-Clark reported a better-than-expected profit of $1.71, compared with the average analyst estimate of $1.63, but some analysts attributed the beat to a lower tax rate than what the Street had expected.

The company said its tax rate for the year would be 21-22 percent, lower than a previously expected range, but warned the rate could be higher at 23-26 percent range for 2019.

“We’re expecting that the tax rate will be a pretty significant year-on-year earnings headwind for us in 2019,” Chief Financial Officer Maria Henry said on the call.

Overall, revenue slipped 1.7 percent to $4.58 billion, due to foreign exchange headwinds, but higher pricing pushed up organic revenue 1 percent.

The company’s shares regained some lost ground and were down 3.4 percent at $106.85 in late-afternoon trading.

Reporting by Soundarya J in Bengaluru; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila

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