Kimberly-Clark Corporation (KMB) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong First Half Performance: Kimberly-Clark has delivered strong results in the first half of 2024, driven by a comprehensive innovation-led growth strategy.
• Market Share Improvement: The company has seen improvements in market share globally, with significant gains in key brands and markets such as China, the UK, South Korea, and Brazil.
• Volume and Mix-Driven Growth: There has been a solid volume mix-driven growth, particularly in the company's largest and most profitable geographies like the U.S., China, and the U.K.
• Resilient Demand Across Categories: Demand remains resilient across Kimberly-Clark's product categories, reflecting the essential nature of their offerings.
• Supply Chain Productivity: The company has achieved $255 million in supply chain productivity savings year-to-date, contributing to overall performance.

Pessimistic Highlights

• North American Tissue Volume Decline: North American tissue volumes were down, partly due to retail inventory destocking.
• Promotional Environment: There is increased consumer price sensitivity, leading to a more promotional environment in some categories.
• Supply Constraints: Certain products like Scott 1000 experienced supply constraints, impacting the ability to meet demand effectively.

Company Outlook

• Investments to Strengthen Brands: Kimberly-Clark plans to increase investments in the second half of the year to strengthen its brands and innovation pipeline.
• Focus on Volume and Mix-Driven Growth: The company aims to continue its focus on volume and mix-driven growth, with pricing playing a lesser role sequentially.
• Supply Chain Transformation: Kimberly-Clark is on track with its supply chain transformation, aiming to deliver $3 billion in savings over the next five years.

Q & A Highlights

• Q: Can you discuss market share trends and organic sales growth? (Lauren Lieberman, Barclays)

  A: Overall, market share is improving globally, with significant gains in key markets. North America is showing improvement, and we expect further progress as we move through the year. (Mike Hsu)

• Q: Could you elaborate on the cadence of margins and EPS in the back half of the year? (Dara Mohsenian, Morgan Stanley)

  A: We expect the second half to grow at a similar pace to Q2, with volume and mix as key drivers. Investments will increase, impacting margins and EPS, but productivity and pricing net of costs remain strong. (Nelson Urdaneta)

• Q: How do the organizational design changes and new hires fit into the new strategy? (Nik Modi, RBC Capital Markets)

  A: The interim organizational changes are progressing well, and new hires bring valuable skills and expertise to advance our growth and innovation strategies. (Mike Hsu)

• Q: Can you provide more color on savings and the impact of exiting small markets? (Javier Escalante, Evercore)

  A: Savings are primarily driven by supply chain transformation, with $255 million achieved year-to-date. Exiting small markets like Nigeria and Bolivia is a strategic decision to focus on markets where we have a long-term right to win. (Mike Hsu and Nelson Urdaneta)

• Q: Could you elaborate on volume improvement and expectations for cost inflation? (Anna Lizzul, Bank of America)

  A: Demand remains resilient across categories, with a focus on volume and mix-driven growth. We have good visibility on pricing net of cost neutrality for the year, despite cost inflation. (Mike Hsu and Nelson Urdaneta)

• Q: What is the outlook for the North American tissue business and personal care volumes? (Andrea Teixeira, JPMorgan)

  A: We expect positive volume trends to continue, with a focus on strengthening our value propositions across the board. Tissue categories remain robust, and personal care volumes grew solidly in North America. (Mike Hsu and Nelson Urdaneta)

• Q: How will promotions impact the tissue business in the back half of the year? (Bonnie Herzog, Goldman Sachs)

  A: While there is increased consumer price sensitivity, our focus remains on profitable growth rather than over-promotion. We expect volumes to inflect positively in the second half. (Mike Hsu)