Post on 15-Jul-2020
Investor
Presentation
Financial Informationas of December 31, 2017
www.kimberly-clark.com
Leading the world in
essentials for a better life
Highlights
• $18 billion global company founded in 1872
• Products used by one-quarter of world’s population
• Strong legacy of innovation – created 5 of the 8 major
product categories in which we compete
• Products sold in more than 175 countries
• #1 or #2 position in 80 countries
• Strong global brands, including five billion-dollar brands:
2
Our Values
33
Authentic
Our heritage is
one of honesty,
integrity and
doing the
right thing
Accountable
We take
ownership for
our business and
our future
Innovative
Our commitment
is to new ideas
that add value
Caring
We respect each
other and care for
the communities
where we live
and work
Commitment to Sustainability
4
• Sustainability 2022 (K-C’s 150th anniversary) is a commitment to:
Harness innovations to
reduce our impact on
natural forests
Improve social and
physical well-being in
communities around
the world
Set our sights on
zero waste
Build powerful
partnerships to create
a leading sustainable
and responsible
supply chain
Increase our energy efficiency and
use of alternative energy sources
each year
Read more about our sustainability strategy and performance at kimberly-clark.com/sustainability
Senior Leadership Team
5
J. Scott Boston
Senior Vice President and
Chief Human Resources
Officer
Maria Henry
Senior Vice President and
Chief Financial Officer
Sergio Cruz
President, Latin AmericaSandra MacQuillan
Senior Vice President and
Chief Supply Chain Officer
Anthony Palmer
President, Global Brands
and Innovation
Jeffrey Melucci
Senior Vice President
and General Counsel
Aaron Powell
President, Kimberly-Clark
Professional
Thomas Falk
Chairman and CEOAchal Agarwal
President, Asia-Pacific
Michael Hsu
President and
Chief Operating Officer
Kim Underhill
Group President, Kimberly-
Clark North America
Tristram Wilkinson
President, Europe, Middle
East and Africa
Three Global Segments
6
Personal Care Consumer Tissue K-C Professional (KCP)
• Diapers
• Training/Youth/Swim Pants
• Baby Wipes
• Feminine Care
• Incontinence Care
• Facial Tissue
• Bathroom Tissue
• Paper Towels
• Facial Tissue, Bathroom
Tissue and Paper Towels for
away-from-home use
• Wipers
• Safety Products
21%18%
20%
2017 SALES 2017 OPERATING PROFIT 2017 OPERATING MARGIN
Operating profit and margin exclude corporate and other (income) and expense, net.
$9.1billion
$5.9billion
$3.3billion
18%
32%50%
18%
29%53%
Geographic Breakdown
7
North America
Outside North America
Operating profit and margin exclude corporate and other (income) and expense, net.
49%51%
36%
64%
2017 SALES
2017 OPERATING PROFIT 2017 OPERATING MARGIN
25%
14%
Global Business Plan (GBP)
8
Strategies
Invest in brands,
innovation, growth
initiatives
Manage portfolio to
balance growth,
margin, cash flow
Deliver
sustainable
cost reduction
Disciplined
capital
management to
improve ROIC and
return cash to
shareholders
• GBP is our strategic plan that prioritizes growth opportunities
and applies greater financial discipline to our operations
– Launched in mid-2003 and designed to generate sustainable
growth and improved shareholder returns
GBP Objectives and Results
9* EPS and ROIC are adjusted.
Sales
Organic Sales
3 to 5 percent
3 to 5 percent
2 percent
4 percent
EPS*Mid- to high-
single digits5 percent
ROIC*20 to 40
basis points75 basis points
Dividend In line with EPS 8 percent
Annual
Improvement
Objective
2004 – 2017
CAGR
Business Unit Strategies
10
Drive rapid growth in Developing &
Emerging Markets (D&E)
– Focus on China, Eastern Europe and
Latin America
Deliver targeted growth and improve
margins in Consumer Tissue
Win globally in Personal Care
Grow in higher margin segments in KCP
D&E MARKETS
K-C PROFESSIONAL
CONSUMER TISSUE
PERSONAL CARE
D&E = K-C’s business in Latin America, Eastern Europe, the Middle East and Africa, and Asia-Pacific, excluding Australia and South Korea.
Win Globally in Personal Care
11
• Leverage powerful brands
and strong market positions
• Innovation supported by integrated marketing
campaigns
• Long track record of success
– Organic sales CAGR +5 percent
since launch of GBP
• Near-term performance
impacted by category
slowdown and competitive
activity
– Organic sales CAGR +1 percent
(2016 – 2017)
39%
50%
PERSONAL CARE SALES % OF TOTAL COMPANY
2003 2017
Deliver Targeted Growth and Improve Margins in Consumer Tissue
• Launch innovations, leverage advantaged technologies
and iconic brands
• Focus on net realized revenue, mix, cost reduction
• Drive trade-up strategies in D&E markets
• Excellent progress with margin improvement
– 2017 margins remain healthy despite input cost inflation
12
2013 2014 2015 2016 2017
15%16%
18%19%
18%
OPERATING MARGIN
2014 2015 2016 20172013
Grow in Higher Margin Segments in KCP
• Provide essentials for a healthy,
safe and productive workplace
• Invest in Safety and Wiper businesses, differentiated tissue
offerings
• Expand in D&E markets where
industrialization and economic development are occurring
• Improve mix and margin to
fund growth
13
18%20%
2%
7%
ORGANIC SALES GROWTH(2013-2017 CAGR)
TOTAL KCP OPERATING MARGIN
KCP
SEGMENT
KCP
D&E MARKETS
2013 2017
Drive Rapid Growth in D&E Markets
• Excellent long-term performance
• Near-term growth has
moderated – macro factors
• 2017 volumes +5 percent
• Optimistic about long-term
potential
– Attractive market dynamics
– Significant opportunities to increase penetration and frequency of usage
– Targeted geographic expansion and growth plans
14
14%
30%
D&E SALES % OF TOTAL COMPANY
2003 2017
2011 – 2015 CAGR +11%
2016 +4%
2017 +3%
ORGANIC SALES
D&E Focus Area:China, Eastern Europe, Latin America – Personal Care
• Approximately 50 percent of
D&E business
• Near-term environment
– Some category slowdown in Latin America
– Pricing down somewhat (improving currencies, competition)
• Encouraged by volume
performance in 2017
• Execute long-term growth plans
through focused investments
– Grow diapers, diaper-pants, baby wipes, feminine care, adult incontinence
– Innovation, selling and marketing, distribution expansion
15
8%
4%
6%
ORGANIC SALES ANDVOLUME GROWTH
2013-2015 CAGR
2016 2017
Organic Sales Volume
+14% +5% +4%
Illustrating the Diaper Opportunity in D&E Markets
16
• Significant growth
opportunity
– Number of babies
– Middle class
expansion
– Frequency of
usage increases
• Innovation and
brand strength
critical to winning
2016 births and current category size per Euromonitor.
Potential category size assuming U.S. penetration rate.
Category size includes diapers and pants.
U.S. 4 $6
China 18 $7 $27
Eastern
Europe4 $3 $6
Brazil 3 $2 $5
India 25 $0.5 $38
ANNUAL
BIRTHS(mm)
CURRENT
CATEGORY
SIZE (B)
POTENTIAL
CATEGORY
SIZE (B)
Adult Care and Feminine Care in D&E Markets
17
• Excellent progress over last
several years
• Driving category development
• Leveraging well-known brands
• Launching steady stream
of innovations
13%11%
ADULT CAREORGANIC SALES GROWTH
11%9%
FEMININE CAREORGANIC SALES GROWTH
2013-2016CAGR
2017
2013-2016CAGR
2017
Marketing in a Digital World
• Supporting innovation and
building brand equity
• Increasing use of digital /
non-traditional channels
– Targeted and direct digital
marketing programs
– 1x1 relationship with
consumers
– More efficient reach
– Easier to track ROI
• Traditional advertising still has important role to play
18
Selling in a Digital / Omni-channel World
19
• Investing to further improve
capabilities
• Building strong presence wherever
consumers want to shop
• Many categories are well positioned for online environment
– High frequency product usage
– Long-term relationship with
consumers
– Strong brand / product awareness
• K-C sales online growing rapidly
– High-single digit percent of
company sales
– Sales growing at double-digit rates
$210
$360
$450
Sustainable Cost Reduction – FORCE
20
• Ongoing program
– Delivered $3.8 billion over past
14 years
– Performance has accelerated,
including record savings in 2017
• End-to-end supply chain focus
– Procurement, lean manufacturing
practices, product design, distribution
• Global supply chain organization
created in 2015 tightly linked to
businesses
– Improving capabilities and
long-term visibility
• Multi-year savings commitment
established January 2018
– Targeting more than $1.5 billion over
next four years (2018 – 2021)
ANNUAL SAVINGS($ Millions)
2004-2012Avg.
2013-2016Avg.
2017
2018 Global Restructuring Program
21
• Action announced in January 2018 to accelerate return to
delivering GBP growth objectives over time
• Latest example of proactive and strategic approach to
improving K-C and creating long-term shareholder value
• Biggest restructuring undertaken since GBP launched in 2003
• Will generate annual savings of $500 to $550 million by end
of 2021
– More flexibility to invest and improve margins
• Investment priorities
– Strengthen and grow core businesses
– Accelerate personal care growth opportunities in D&E markets
– Build further digital and e-commerce capabilities
2018 Global Restructuring Program
22
• Streamline and simplify overhead organization and
manufacturing supply chain, better leverage scale
opportunities and technology
– Shift more routine work and transactional activities to shared
services centers; drive more process discipline, efficiencies, best
practices sharing
– Expect to close or sell approximately 10 manufacturing facilities
and expand several others
– Anticipated workforce reductions 5,000 to 5,500
• Exit or divest lower margin businesses equivalent to about 1
percent of company net sales, concentrated in consumer tissue
• Total cash spending of $1.5 to $1.7 billion by end of 2020
– Pre-tax charges of $900 million to $1 billion
– Incremental capital spending of approximately $600 to $700 million
• Total pre-tax charges $1.7 to $1.9 billion, including non-cash
charges of $800 to $900 million
Disciplined Between-the-Lines Spending
23
BTL SPENDING* (% Sales)
2013 2014 2015 2016 2017
18.8%
18.0% 18.1%17.9%
17.5%
13.2%
12.4% 12.5% 12.5%
12.2%
Excluding advertising and R&D
• Long track record of
efficient SG&A spending
– Tightly managing
overhead spending in
current environment
• Continuing to invest in
advertising and R&D
• 2018 Global
Restructuring Program
will lower overhead spending further
* Adjusted. Between-the-lines spending defined as marketing, research and general expenses between gross profit and operating profit.
Working Capital Improvement
24
• Strong improvement since
2008
– Extending payables terms
– Inventory management
• Continued focus going forward
– Building further capabilities
– Global supply chain
organization efforts
PRIMARY WORKING CAPITAL CASH CONVERSION CYCLE
(Days)
73
(78%)
22
2008 2017
16
Return on Invested Capital
25
• Key component of long-term
incentive compensation
program
• Excellent progress since GBP
introduction
• Expect additional
improvement in 2018
– Above long-term GBP target
* Adjusted.
13.7%
24.1%
ROIC*
2003 2017
Capital Allocation Strategy
• Maintain ‘A’ credit rating and balance sheet flexibility
• Fund business needs (growth, innovation, cost savings)
– Capital spending 4.5 to 5.5 percent of net sales
Expect somewhat higher capital spending in 2018 and 2019 due to 2018
Global Restructuring Program and other long-term investments
• Grow dividend
– Top-tier payout in Consumer Packaged Goods industry
• Consider M&A
– Not core part of growth strategy
• Return excess cash to shareholders via
share repurchases
26
Strategies
Dividends
• Top-tier dividend in CPG industry
• Announced 3.1 percent increase for 2018 dividend
– 84th consecutive year K-C has paid a dividend, 46th consecutive
annual increase
• Paid $15+ billion in cash dividends over past 14 years
27
2003 2017
$1.36
$3.88
PER SHARE DIVIDEND(Declared)
2003 2017
41%
62%
DIVIDEND PAYOUT(Based on adjusted EPS)
2003 2017 2003 2017
28
Share Repurchases
• Cumulative share
repurchases of $16.3 billion 2004-2017
• Strong track record of
reducing share count
• Targeting $700 to $900
million in 2018
SHARES OUTSTANDING(Millions)
502
(30%)
Year-end2003
Year-end2017
351
Total Shareholder Returns Since Launch of GBP (July 2003)
29
299%
270%
317%
KMB S&P 500S&P Consumer
Staples Index
As of December 31, 2017.
To Learn More About Kimberly-Clark
• Contact Investor Relations with your questions
– Paul Alexander, Vice President at (972) 281-1440
• Visit www.kimberly-clark.com/investors to view our annual report, SEC filings or news releases
• To obtain copies of our 2017 Annual Report on Form 10-K,
SEC filings or news releases, call (800) 639-1352
30
Safe Harbor Statement
31
Forward-Looking Information
Certain matters in this presentation, including our 2018 outlook, expectations and planning assumptions, and any estimates, projections, and statements relating to our business plans or objectives, constitute forward-looking statements and are based upon management’s expectations and beliefs concerning future events impacting the company. These statements are subject to risks and uncertainties, including currency rates and exchange risks, cost savings and reductions, raw material, energy, and other input costs, competition, market demand and economic and political conditions, effective tax rate, the anticipated cost savings from the company’s FORCE program, charges and savings from the 2018 Global Restructuring Program, and contingencies. There can be no assurance that these future events will occur as anticipated or that the company’s results will be as estimated. Forward-looking statements and guidance speak only as of the date they were made, and we undertake no obligation to publicly update them. For a more complete listing and description of other factors that could cause the company’s future results to differ materially from those expressed in any such forward-looking statements, see Item 1A of the company’s Annual Report on Form 10-K for the year ended December 31, 2017 entitled “Risk Factors.”
Non-GAAP Financial Measures
This presentation contains some financial measures that have been adjusted to exclude certain items and differ from reported results using Generally Accepted Accounting Principles (GAAP). Management believes that reporting in this manner enhances investors’ understanding and analysis of the company’s performance. For additional information on why we make these adjustments and reconciliations to comparable measures under GAAP, see the supplemental information for this presentation posted to the Investors section of our website (www.kimberly-clark.com/investors). This presentation also includes information on organic net sales, which describes the impact of changes in volume, net selling prices and product mix on net sales. Changes in foreign currency exchange rates and acquisitions and divestitures also impact the year-over-year change in net sales.