DALLAS - Kimberly-Clark Corp., which makes Kleenex tissues and Huggies diapers, said Wednesday its second-quarter profit fell more than 10 percent as higher costs for energy and raw materials offset a 4 percent sales increase.
Executives said full-year costs will rise more than they had expected, and they plan to recoup some of it with price increase.
The risk in that strategy is that price increases sometimes drive shoppers away. That is apparently what caused Kimberly-Clark's tissue business to be nearly flat this spring.
Kimberly-Clark said it earned $378 million, or 82 cents per share, in the quarter ended June 30, compared to $422 million, or 88 cents per share, a year earlier.
Revenue was $4.16 billion, slightly more than analysts had expected and up from $3.99 billion a year ago.
But costs rose too. Executives said energy and raw materials - pulp for tissues and petroleum derivatives for diapers and other goods - will cost $300 million to $350 million more this year than in 2005, up to $100 million more than their original estimate.
Yet, Chairman and Chief Executive Thomas J. Falk said price increases and more cost-cutting should produce profit of 96 to 99 cents per share in the July-September quarter, in line with analysts' forecast of 98 cents per share. And he said the company is sticking with its full-year forecast of earning $3.85 to $3.95 per share.
Kimberly-Clark said it was able to raise net selling prices by 2 percent and sell a slightly higher proportion of high-priced goods in the second quarter. The company raised prices on bathroom tissue and paper towels by about 6 percent earlier this year.
Mr. Falk said it will keep prices steady on some premium diapers but put 5 percent fewer diapers in the package. Companies use that kind of indirect increase because they know consumers don't like price increases.
Kimberly-Clark is in the middle of a multimillion dollar plan to add more than 900,000 square feet of manufacturing space to its Beech Island tissue mill to boost production of Kleenex and Scott brand tissues and Huggies diapers.
The expansion, announced in January and expected to be completed next year, will create nearly 300 jobs and turn the facility into the company's largest North American manufacturing plant.