Originally created 04/25/06

Kimberly-Clark profit falls by a third

DALLAS - Kimberly-Clark Corp., the maker of Kleenex tissues and Huggies diapers, said Monday its first-quarter profit fell by more than one-third on higher costs for raw materials, a trend it expects to continue through this year.

The company said it earned $275 million, or 60 cents per share, compared with $450 million, or 93 cents per share, a year earlier.

Excluding what the company termed unusual charges related to restructuring, Kimberly-Clark said it would have earned 93 cents per share in the quarter ended March 31. Analysts expected the company to earn 92 cents per share, according to a survey by Thomson Financial.

Revenue rose 4.2 percent, to $4.07 billion.

The company said it had to absorb $90 million in higher costs.

About one-third was driven by higher costs for polymer resins, absorbents and other oil-based materials, and another third by energy costs. Fiber, higher taxes and the cost of expensing stock-based compensation also reduced earnings, the company said.

"As we entered 2006, we knew higher costs would pressure our margins, particularly in the first half of the year," said Chairman and Chief Executive Thomas J. Falk. He said the company sold more products at higher prices and cut other costs to offset the increase in raw materials and energy costs.

Mr. Falk said cost inflation this year will be greater than the company had assumed, mostly because of increases for fiber and oil used to make paper products and other goods.

Average selling prices for personal-care items fell 1 percent. Late last year, rival Procter & Gamble Co. rolled back price increases on diapers, forcing Kimberly-Clark to follow suit.

Analysts say another concern for Kimberly-Clark is the recent announcement by Wal-Mart Stores Inc. that it plans to cut inventory in U.S. stores, which could cause the world's largest retailer to buy fewer diapers and paper towels.

Procter & Gamble lowered sales-growth forecasts after Wal-Mart's announcement, but Mr. Falk said Kimberly-Clark doesn't expect to change its sales outlook for the year because of it.


Nationally, Kimberly-Clark is in the midst of cutting about 10 percent of its work force and closing or selling certain plants. Its Beech Island tissue mill, however, is undergoing a 900,000-square-foot expansion that will add 150 jobs.


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