Kimberly-Clark de México’s Mixed Earnings Call Highlights

Kimberly-Clark de Mexico SAB de CV (ADR) ((KCDMY)) has held its Q2 earnings call. Read on for the main highlights of the call.

Kimberly-Clark de México’s recent earnings call painted a mixed picture of the company’s current standing and future prospects. While the company celebrated record sales and effective cost-saving measures, challenges such as volume decline, cost increases, and a challenging economic environment were evident. However, the company’s proactive strategies in innovation and export growth offer a glimmer of optimism for future improvements.

Record Quarterly Sales

Kimberly-Clark de México reported record quarterly sales of MXN 14.1 billion, marking a 1.7% increase from the previous quarter. This achievement set an all-time quarterly record, although sales remained flat compared to the previous year.

Strong Export Growth

The company experienced a robust 24.5% increase in exports, with double-digit growth in both converted products and hard roll sales. This surge in exports highlights the company’s successful expansion into international markets.

Cost Reduction Success

Kimberly-Clark de México’s cost reduction program yielded approximately MXN 500 million in savings. These savings were primarily achieved through improvements in sourcing, materials, and process efficiencies, significantly impacting the cost of goods sold.

Healthy Balance Sheet

The company maintains a strong balance sheet, boasting a cash position of MXN 11 billion and no debt maturing for the rest of the year. The net debt-to-EBITDA ratio stands at a healthy 1, reflecting financial stability.

Innovation Initiatives

Product improvements were introduced in categories such as diapers, wipes, and incontinence products. Further innovations are planned in bathroom tissue, incontinence pads, and feminine care, showcasing the company’s commitment to product development.

Decreased Total Volume

Total volume declined by 3.3%, with the Consumer Products and Away from Home segments decreasing by 2.2% and 7.8%, respectively. This decline underscores the challenges faced in maintaining volume growth.

Increased Costs

The cost of goods sold rose by 7.2%, influenced by unfavorable comparisons in virgin fibers, recycled fibers, and fluff. Additionally, the FX rate increased by 17.3%, adding to cost pressures.

Decline in Gross Profit and EBITDA

Gross profit decreased by 9.7%, with margins negatively affected by lower-margin hard roll sales. EBITDA saw an 11.5% decrease, and operating profit dropped by 13.9%, reflecting the financial challenges faced by the company.

Economic Slowdown Impact

The challenging economic environment and consumption slowdown led to flat top-line growth and muted volume growth, particularly affecting categories like diapers and bathroom tissue.

Professional Business Decline

The Away from Home segment experienced a notable decline in sales due to a slowdown in tourism and distributors reducing their inventories, further impacting the company’s performance.

Forward-Looking Guidance

Looking ahead, Kimberly-Clark de México provided guidance on its future performance. Despite a 3.3% decrease in total volume, the company expects healthier volume and pricing in the second half of the year. The strategic reduction in promotional support aims to protect brand value, setting the stage for potential improvements. The company’s strong cash position and strategic focus on innovation and export growth are expected to support future resilience.

In conclusion, Kimberly-Clark de México’s earnings call highlighted a mixed sentiment, with record sales and cost-saving measures providing optimism amidst challenges such as volume decline and increased costs. The company’s strategic initiatives in innovation and export growth offer hope for future improvements, despite the current economic headwinds.