Kimberly-Clark looks appealing on cost-saving efforts

Kimberly-Clark Corporation (KMB) looks well placed on the back of its robust growth endeavors. In this regard, the company’s key strategic growth pillars and cost-saving plans are yielding. Moreover, its K-C Strategy bodes well. Apart from these, the company is witnessing higher consumer demand for its products stemming from stockpiling amid the coronavirus outbreak.

Impressively, management projects 2020 net sales to grow in the range of 1-2%. Further, Kimberly-Clark projects organic sales improvement of 4-5% in the same period. Also, it envisions adjusted earnings per share of $7.40-$7.60 in 2020, which indicates an increase from $6.89 reported in 2019.

We note that, Kimberly-Clark’s shares have gained 8.9% in the year-to-date period against the industry’s decline of 3.4%.

Let’s delve deeper.

Factors Working in Favor of Kimberly-Clark

Kimberly-Clark is progressing well with its three key strategic growth pillars, which are aiding portfolio and expanding global business. These include focus on improving its core business in the developed markets; accelerate growth in the Personal Care segment in developing and emerging markets as well as enhance digital and e-commerce capacities. Notably, Kimberly-Clark recently signed a definitive agreement to acquire Softex Indonesia — a leading player in the Indonesia personal care market. The company expects the deal to augment its footprint in the Southeast Asia region.

Also, Kimberly-Clark is undertaking robust steps to lower costs. This is highlighted from the 2018 Global Restructuring Program and the Focus on Reducing Costs Everywhere or FORCE Program. The 2018 Global Restructuring Program, which is the company’s biggest restructuring plan, focuses on enhancing profitability by simplifying the supply chain and manufacturing structures. This enables Kimberly-Clark to compete better and provides it more flexibility to undertake growth-oriented investments.

Until the end of second-quarter 2020, the company generated cumulative savings worth $380 million from the 2018 Global Restructuring Program. Management is on track to generate pre-tax savings of $500-$550 million from this program by the end of 2021. Some of these could be realized in 2022 due to uncertainties regarding the coronavirus outbreak. Also, Kimberly-Clark is aggressively cutting costs and enhancing supply-chain productivity through its FORCE Program. The program has been generating solid cost savings for a while, which are in turn driving the company’s adjusted operating profit.

Apart from these, the company’s K-C Strategy 2022 that was introduced in January 2019 is noteworthy. The strategy concentrates on strengthening the company’s brand portfolio, undertaking efficient capital allocation and executing robust cost discipline.