Kimberly-Clark Corporation (NYSE:KMB) Q1 2018 Earnings Conference Call Transcript

Apr 23, 2018 • 10:00 am ET

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Kimberly-Clark Corporation (NYSE:KMB) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for your patience and holding. We now have your presenters in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of this morning's presentation, we will open the floor for your questions. At that time, instructions will be given as to the procedures to follow-up, if you would like to ask an audio question.

It is now my pleasure to introduce today's first presenter, Mr. Paul Alexander.

Executive
Paul Alexander

Thank you, and good morning, everyone. Welcome to Kimberly-Clark's first quarter earnings conference call. With us today, are Tom Falk, Chairman and CEO; Mike Hsu, Chief Operating Officer; and Maria Henry, our CFO. Here's the agenda for the call; Maria will start with a review of first quarter results and provide a brief update on our global restructuring program. After that, Mike will share his perspectives on our results and the outlook for the year. We will finish with Q&A, with Tom, Mike and Maria.We have a presentation of today's materials in the Investors section of our web site.

As a reminder, we will be making forward-looking statements today. Please see the Risk Factors section of our latest Annual Report on Form 10-K for further discussion of forward-looking statements. Finally, we will also be referring to adjusted results and outlook, both which exclude certain items described in this morning's news release. The release has information about these adjustments and reconciliations to comparable GAAP financial measures.

And now, I'll turn it over to Maria.

Executive
Maria Henry

Thanks Paul. Good morning, everyone. Thanks for joining the call today. Let me start with the headlines for the quarter. We returned to delivering organic sales growth, with a solid increase of 2%. Margins were impacted by significant commodity inflation. Helping to offset that, we delivered strong cost savings and reduced overhead spending, and our adjusted earnings per share increased 9%. And finally, we are on track with our restructuring programs and our overall capital plan.

Now, let's look at the details of our results. Let me start with sales. Our first quarter net sales were $4.7 billion. That's up 5% year-on-year, with a 3 point benefit from currency rates. Organic sales grew 2% in the quarter, led by improved performance in North America. Mike is going to provide some more color on our top line in just a few minutes.

Moving on to profitability, our first quarter adjusted gross margin was 33.8%, down 310 basis points year-on-year. Commodities were a drag of $175 million in the quarter, primarily due to higher pulp costs and secondarily, inflation in other raw materials. We are now expecting the full year cost inflation will be between $400 million and $550 million, that's a $100 million to $150 million more than we assumed in January. Meanwhile, our FORCE cost savings program continues to deliver strong results. First quarter savings were $90 million.

Moving down the P&L, adjusted operating margin was 17.4%, down 140 basis points. Between-the-lines spending fell 140 basis points as