Kimberly-Clark Corporation (NYSE:KMB) Q3 2017 Earnings Conference Call - Final Transcript

Oct 23, 2017 • 10:00 am ET


Kimberly-Clark Corporation (NYSE:KMB) Q3 2017 Earnings Conference Call - Final Transcript


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Maria Henry

line with our expectations. Cash flow in the year-ago quarter was $948 million and included very strong working capital improvements. Our third quarter 2017 working capital cash conversion cycle was down six days compared to full-year 2016. I'm pleased that our teams continue to make good progress in this important area.

We're also managing capital spending even more tightly in this environment, and we expect that full year spending will be slightly below our $850 million to $950 million target range.

On capital allocation, third quarter dividend payment and share repurchases totaled more than $500 million. We expect that the full year dividends and share repurchases will total $2.3 billion. That number includes $900 million of expected share repurchases.

Looking at the segment results. In Personal Care, organic sales fell approximately 2%. Organic sales were up 3% in developing and emerging markets but down elsewhere. Personal Care operating margins were 20.8% and up 100 basis points. The improvement was driven by cost savings and reduced between-the-lines spending.

In Consumer Tissue, organic sales were up 2%, driven by North America. Consumer Tissue operating margins were solid at 17.1%, although down 100 basis points. The results were impacted by higher input costs, mostly in pulp.

In K-C Professional, organic sales in the quarter were up 2%, with gains in all major geographies. K-C Professional operating margins were strong at 20.9%, up 130 basis points. That comparison included benefits from both sales growth and cost savings.

In summary, we continue to grow earnings in a difficult environment, we are tightly managing costs, working capital and capital spending and we continue to allocate capital in shareholder-friendly ways.

I'll now pass the call over to Tom.

Tom Falk

Thanks, Maria, and good morning, everyone. I'll give you some more detail on our top line sales and market conditions, and then I'll address our outlook for the balance of the year.

Looking at the third quarter, our organic sales were up slightly year-on-year after being down about 1% in the first half of the year. Volumes in the third quarter increased more than 1%, while net selling prices fell about 1%. But overall, it's challenging to find growth right now in several of our large markets.

So looking at some of those key markets. In North America, conditions remain relatively difficult, including elevated competitive activity. In the consumer categories that we compete in, the total market did grow by about 1% in the third quarter, and that's 1 point better than that same category grew in the first half of the year.

In our consumer businesses in North America, organic sales were similar year-on-year after being down 3% in the first half of the year. Volumes rose 1%, led by our Consumer Tissue and Adult Care brands. On the other hand, net selling prices fell 1% as a result of competitive activity and some of the fine-tuning of our promotion strategies that we mentioned on our earnings call in July.

Looking at our individual businesses in North America,