MARKET - Kimberly-Clark Restructures in a Tough Market

The World's Leading Producer of Sanitary Cellulose Sheds up to 13% of Workforce and Closes 10 Plants

Reading Room

In days gone by, dual purpose reading materials were a necessary element of life and sanitation. For more than 2 billion people around the world, sanitation is still an issue. 

However, the loss of catalogues, newspapers, sales flyers and other newsprint hasn't really affected much in the developed world because of improvements in sanitary cellulose by companies like Kimberly-Clark. 

Recognizable brands like Kleenex, Scott, Andrex, Huggies, Pull-Ups, Kotex, Poise, Depend, Cottonelle and Kimberly-Clark Professional have allowed Kimberly-Clark to maintain annual sales of just over US$18B.

According to the company, nearly a quarter of the world's population trust Kimberly-Clark's brands and the solutions they provide to enhance their health, hygiene and well-being. Brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark hold the No.1 or No. 2 market share position in 80 countries.

However, the industry has been in a consolidation phase since early this century. Kimberly-Clark has managed to meet shareholder expectations by acquisition, by moving away from unprofitable brands or markets and by the FORCE initiative, an element of the Global Business Plan launched in 2003. The plan has produced hundreds of millions of dollars in savings by reducing discretionary spending and increasing operational efficiency.

Kimberly-Clark Brands

In his report to shareholders this week, Chairman and CEO Thomas J. Falk noted:

"In 2017, we achieved all-time record FORCE cost savings of $450 million and reduced discretionary spending to help offset inflationary cost headwinds. In addition, we returned $2.3 billion to shareholders through dividends and share repurchases."

The company has established a four-year cost savings target of more than $1.5 billion from its FORCE program by 2021. Savings will be driven by workforce reductions, which are anticipated to be in a range of 5,000 to 5,500 (12 to 13 percent of current headcount), by increasing supply chain efficiencies and by closing or selling approximately 10 facilities while expanding production capacity at others to improve overall scale and lower cost.

Falk believes these savings will further enhance the company's ability to invest in growth opportunities, offset headwinds and improve gross margin while the company meets its environmental sustainability objectives.

The stiff competition among retailers and supply side consolidation have produced a downward trend in margins and retail prices that benefits the consumer with the lowest cost of sanitary supplies since dual purpose newsprint.

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