Kimberly-Clark's China diaper woes linger as it stands by annual outlook
KMB•Kimberly-Clark maintained its annual sales and profit outlook, while saying China-related diaper claims would weigh on organic sales growth by about 100 basis points. Third-quarter organic sales fell 1.3%, and net sales were $4.13 billion.
1. Annual outlook maintained
Kimberly-Clark maintained its annual sales and profit forecast. It expects annual organic sales growth to be about 100 basis points below its weighted average growth in the categories and countries where it competes, primarily reflecting an approximately 100-basis-point impact from China disruptions. The company expects annual adjusted earnings per share to grow at a high-single-digit rate on a constant-currency basis.
2. China claims weigh on demand
The issue emerged in June after China's state market regulator launched an inquiry following reports that Huggies and Chinese brands Babycare and Bibabebe diapers contained formamide. Chinese authorities cleared Kimberly-Clark's products in October, saying no formamide was detected and effectively disproving the social media claims. Kimberly-Clark said the episode continued to hinder the company.
3. Quarterly sales decline
Third-quarter organic sales fell 1.3%, including a 270-basis-point impact from China-related claims and changes in North American retailer stock levels. North American volumes grew 2%, while volumes in its international personal care segment fell 4.6% in the quarter ended September 30. Net sales of $4.13 billion were in line with analysts' estimate, and adjusted gross margin fell 130 basis points to 35.5%.
