Kimberly-Clark reports strong Q2 results amid dynamic market conditions
The company credited innovative products and productivity gains for significant earnings growth, despite a challenging economic environment
Kimberly-Clark Corporation announced its second-quarter 2024 results, showcasing significant volume and mix gains attributed to innovative new products and sustained productivity momentum, leading to robust earnings growth compared to the previous year.
“I am very proud of how our teams around the world have advanced our new operating model and delivered high-quality, top and bottom-line results in the first half of this year. We have made strong progress while navigating dynamic consumer and retail environments”, said Kimberly-Clark chairman and CEO Mike Hsu. “We have a strong foundation that we can leverage to accelerate investments across the enterprise. Our focus is to deliver high-quality consumer solutions at every price point, increase our operational scale, and enhance our long-term potential. We’re excited about our opportunities to capitalize on our momentum to deliver our enduring goal of enhancing value for all our stakeholders”.
QUARTER HIGHLIGHTS
Net sales for the quarter stood at US$5.0 billion, marking a 2% decrease compared to the previous year. However, organic sales growth was 4%. The reported gross margin was 36.0%, while the adjusted gross margin was 36.9%, an increase of 290 basis points from the prior year, driven by organic net sales growth and productivity gains.
Diluted earnings per share (EPS) were reported at US$1.61, with adjusted EPS at US$1.96, up 19% from the previous year, despite a US$0.12 negative impact from currency translation.
SECOND QUARTER 2024 RESULTS
Sales in the second quarter were US$5.0 billion, 2% lower than the same period last year. This decline included a 5% negative impact from foreign currency translation and a 1% impact from the divestiture of the tissue and K-C Professional business in Brazil in June 2023. Organic sales, however, increased by 4%, driven by a 2% rise in prices and a 2% increase from a combination of volume and mix. Price gains were primarily due to necessary pricing actions in hyperinflationary economies, notably Argentina. Volume and mix were positive across North America, Developing and Emerging (D&E) markets, and Developed Markets, which include Australia, South Korea, and Western/Central Europe.
In North America, organic sales increased by 1% compared to the previous year, driven by a 5% growth in personal care, offset by declines of 4% in K-C Professional and 2% in Consumer Tissue. In D&E markets, organic sales rose by 12%, reflecting both pricing gains and volume/mix gains. Conversely, organic sales in Developed Markets were 3% lower, primarily due to lower pricing in Western Europe compared to the temporary energy surcharge-related price increases from the previous year.
Operating profit for the second quarter was US$655 million, including US$190 million in costs related to the company’s 2024 Transformation Initiative. Adjusted operating profit saw a 16% increase despite a 7-percentage point unfavorable impact from currency translation, largely driven by hyperinflationary economies. Excluding currency impacts, growth in adjusted operating profit was driven by organic growth and gross productivity gains, which were partially offset by input cost inflation in D&E markets, supply chain investments, and planned increases in marketing, research, and general expenses.
Net interest expense for the quarter was US$63 million, down from US$67 million in the previous year. The effective tax rate was 15.1%, while the adjusted effective tax rate was 20.9% compared to 20.5% the previous year. Net income from equity companies was US$63 million, up from US$50 million last year, primarily due to increased income from Kimberly-Clark de Mexico.
Reported diluted EPS was US$1.61, including a US$0.35 negative impact from transformation-related costs. Adjusted EPS increased by 19% to US$1.96, driven mainly by the 16% increase in adjusted operating profit, lower net interest expenses, and higher equity income.