(Reuters) - Kimberly-Clark Corp (KMB.N), maker of Kleenex tissues, posted a bigger-than-anticipated rise in quarterly profit on Tuesday on continued growth overseas as well as global cost cutting.
While total sales rose a modest 0.3 percent, when stripping out the impact of acquisitions, divestitures and foreign exchange fluctuations, sales increased 5 percent.
That rise in so-called organic sales surpassed analysts’ expectations for an increase of just under 3 percent, with much of the growth driven by the developing markets, said Edward Jones analyst Jack Russo, who has a “hold” rating on the stock.
Kimberly-Clark kicked off the earnings season for U.S. household products makers with strength in emerging markets and manageable foreign exchange and commodities, which may “be perceived as a positive across” the sector, said Wells Fargo analyst Chris Ferrara.
Shares of Kimberly-Clark rose 3 percent to $101.84. Shares of other companies still due to report their results, such as the larger Procter & Gamble Co (PG.N), showed more modest gains.
Third-quarter sales and operating profit declined in personal care, the company’s biggest unit with products such as Huggies diapers and Depend and Poise incontinence products. Much of the sales decline in that business stemmed from Kimberly-Clark’s decision to exit much of its European business.
Kimberly-Clark plans to reduce the number of Huggies diapers in most packages in North America by about 7 percent starting in the first quarter of 2014 without changing the price, a move that will lead customers to pay more per diaper. The change comes as Kimberly-Clark tries to get its Huggies package sizes more in line with competitors, Chief Executive Officer Thomas Falk said on a conference call.
Sales in the North American personal-care division were flat, as volume increased but prices fell 1 percent due largely to promotional activity in the diaper category, where Huggies competes against P&G’s Pampers and other brands.
Kimberly-Clark earned $546 million, or $1.42 per share, in the third quarter, up from $517 million, or $1.30, a year earlier.
Kimberly-Clark earned $1.44 per share on an adjusted basis, which excludes restructuring costs, up from $1.34 a year earlier and 4 cents above analysts’ forecast of $1.40, according to Thomson Reuters I/B/E/S.
Total sales increased 0.3 percent to $5.26 billion and surpassed analysts’ forecast of $5.23 billion. The volume of goods sold rose 3 percent and prices were up 1 percent.
Kimberly-Clark raised the low end of its 2013 adjusted earnings-per-share forecast by 5 cents. It now anticipates earning $5.65 to $5.75 per share this year. It still expects organic sales to rise from 3 percent to 5 percent.
While the company cut $70 million in costs, it also had to deal with $55 million in additional costs for raw materials and transportation versus the same period a year earlier.
Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and Maureen Bavdek