Kimberly-Clark Plans 6,000 Job Cuts

Friday, July 22nd 2005, 11:55 am

By: News On 6

DALLAS (AP) _ Kimberly-Clark Corp., the maker of Kleenex tissues and Huggies diapers, said Friday it plans to cut about 6,000 jobs and sell or close up to 20 manufacturing plants, while boosting spending on certain core product lines and emerging markets during the next three and a half years.

The Irving, Texas-based company announced the plans as it reported earnings for the second quarter fell slightly due to a tax expense for repatriating foreign profits. Sales rose 8 percent, helped by strong sales of tissue products in North America.

Its shares rose $1.11 to $63.96 in morning trading on the New York Stock Exchange. Its shares have traded in a 52-week range of $58.74 to $69.

The multiyear restructuring plan will result in a net work force reduction of about 10 percent and include closing or selling about 17 percent of its plants worldwide by the end of 2008, the company told analysts Friday morning. In addition, another four facilities will be streamlined and seven other facilities will be expanded as some production capacity from affected facilities is transferred to them, the company said.

The company, however, said it would not elaborate on plans for plant closures and work force reduction.

``These are tough decisions, ones we don't take lightly,'' said Thomas J. Falk, Kimberly-Clark chairman and chief executive officer. ``But they are absolutely necessary to improve our competitive position. We will treat all affected employees fairly in this process.''

When pressed by analysts, Falk said that most changes among the 118 plants worldwide would be in North America and Europe, ``but we will not provide any more detail at this time.''

One analyst also was concerned about freight costs offsetting the savings from plant closures and consolidations.

``Any time you have fewer manufacturing facilities, you have less complexities,'' Falk said. ``Obviously there is some freight trade off that you have to consider, but most of the freight is occurring within regions.''

Kimberly-Clark aims to boost spending on baby and child care, adult care and family care, as well as accelerate growth in developing and emerging markets by focusing on high growth countries such as Brazil, Russia, India, China, Indonesia and Turkey.

These actions will result in cumulative after-tax charges of about $625 million to $775 million over a three and one-half year period beginning in the third quarter of 2005. Kimberly-Clark said annual pretax savings from the moves are expected ``to increase to $300-$350 million by 2009.''

Falk said the plan is part of an initiative the company put in place two years ago that aims ``to instill financial discipline throughout the company, invest in businesses and opportunities with high-growth potential and support those businesses that already command strong positions in their markets.''

In its financial report, Kimberly-Clark said it earned $421.8 million, or 88 cents per share, for the three months ended June 30, down from $454.3 million, or 90 cents per share, a year ago, which included 2 cents of earnings from a business since divested. Excluding the tax expense of 7 cents per share, the company earned 95 cents per share, a penny above the mean estimate of analysts surveyed by Thomson Financial.

Sales rose 8 percent to $3.99 billion from $3.69 billion, as sales of consumer tissue products rose 12.9 percent and sales of personal care products increased 7.4 percent. The sales figure surpassed the mean analyst estimate of $3.87 billion.

Tissue product sales in North America jumped 16 percent, helped by the introduction of Kleenex Anti-Viral facial tissue. While sales of personal care products, including baby diapers and incontinence products, were higher, selling prices declined due to intense competition, particularly in the diaper market, where Kimberly-Clark competes with Procter & Gamble's Pampers and other brand.

For the third quarter, Kimberly-Clark forecast earnings of 94 cents to 96 cents, up 8 percent to 10 percent from earnings from continuing operations of 88 cents a year earlier. The company it plans to boost ad spending on new products during the period. Analysts forecast third-quarter earnings at 94 cents.

The company narrowed the range for its estimate for full-year earnings to $3.77 to $3.83 per share, compared with an earlier projection of $3.70 to $3.85. Earnings from continuing operations for 2004 were $3.55 per share. Analysts currently are looking for the company to earn $3.80 per share, at the midpoint of the new range.

``Our guidance reflects continued solid growth in sales volumes as well as benefits from price increases, including the increases that are taking place this quarter for our infant care, child care and incontinence care products in the U.S.,'' Falk said.