Kimberly-Clark To Streamline Operations, Cut Workforce

Kimberly-Clark Corporation KMB disclosed its transformation strategy, which includes a new operating model and key commercial initiatives.

The company plans to drive significant growth in its categories by investing in science and technology. It will focus on growing 12 powerhouse brands and drive over 80% of its net sales in five global daily-need spaces.

Also, Kimberly-Clark plans to optimize its margin structure through implementing initiatives and deploy technology and data analytics. The company expects to generate more than $3 billion in gross productivity and $500 million in working capital savings through supply chain modernization.

Apart from this, the company plans to reorganize its operations into three business segments – North America, International Personal Care (IPC) and International Family Care and Professional (IFP).

The company expects to complete its transition by the end of 2024, which is projected to generate selling, general and administrative savings of around $200 million in the next few years.

The company expects to incur one-time restructuring and reorganization costs of around $1.5 billion, split roughly into 50% in non-cash charges and 50% of cash expenses, over the next three years throughout the implementation phase of these initiatives. Cash costs are expected to be approximately half of that amount, primarily related to workforce reductions.

Long-term growth: The company expects organic net sales growth to be ahead of market growth and adjusted operating profit growth in the mid-to-high single digits on a constant currency basis.

Kimberly-Clark projects adjusted EPS growth in mid-to-high single digits on a constant currency basis, and sees annual FCF generation of at least $2 billion.

FY24 Outlook Reiterated: Kimberly-Clark expects to deliver a low-to-mid single digit percentage increase in 2024 organic net sales, with reported net sales growth reflecting negative impacts of around 300 basis points from currency translation and 60 basis points from the Brazil Tissue divestiture. 

The company expects adjusted operating profit to grow at a high single-digit to low double-digit rate on a constant-currency basis and adjusted EPS to grow at a high single-digit rate on a constant-currency basis. The currency translation is anticipated to impact reported EPS and operating profit by 400bps.

Investors can gain exposure to the stock via IShares MSCI Global Sustainable Development Goals ETF SDG and Federated Hermes ETF Trust Federated Hermes U.S. Strategic Dividend ETF FDV.

Price Action: KMB shares are up 0.52% at $126.75 on the last check Wednesday.

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