Q3 2010 Earnings Call
October 26, 2010 10:00 am ET
Michael Masseth - Vice President of Investor Relations
Thomas Falk - Executive Chairman, Chief Executive Officer, President and Member of Executive Committee
Mark Buthman - Chief Financial Officer and Senior Vice President
Paul Alexander - Director of Investor Relations
Constance Maneaty - BMO Capital Markets U.S.
Lauren Lieberman - Barclays Capital
John Faucher - JP Morgan Chase & Co
Ali Dibadj - Bernstein Research
William Schmitz - Deutsche Bank AG
Jason Gere - RBC Capital Markets Corporation
Wendy Nicholson - Citigroup Inc
Andrew Sawyer - Goldman Sachs Group Inc.
Linda Weiser - Caris & Company
Karen Lamark - Federated Investors
Chip Dillon - Crédit Suisse AG
Gail Glazerman - UBS Investment Bank
Christopher Ferrara - BofA Merrill Lynch
Previous Statements by KMB
» Kimberly-Clark Corp. Q2 2010 Earnings Call Transcript
» Kimberly-Clark Corporation Q1 2010 Earnings Call Transcript
» Kimberly-Clark Corporation Q4 2009 Earnings Call Transcript
Ladies and gentlemen, thank you for your patience in holding. We now have your speakers and conference. [Operator Instructions] It is now my pleasure to introduce Mr. Paul Alexander. Mr. Alexander, you may begin, sir.
Thanks, David, and good morning. Welcome to our Third Quarter Earnings Conference Call. With us today are Tom Falk, Chairman and CEO; Mark Buthman, Senior VP and CFO; and Mike Azbell, Vice President and Controller.
Here's the agenda for the call. Mark will begin with a review of our third quarter results, then Tom will provide his perspective on our results and discuss the 2010 outlook and we'll finish with Q&A. For those wishing to follow along, we do have a presentation of today's materials in the Investors section of our website, which is www.kimberly-clark.com.
Before we begin, let me remind you we'll be making forward-looking statements during the call. There can be no assurance that future events will occur as anticipated or that our results will be as estimated. Please refer to the Risk Factors section of our latest annual report on Form 10-K for a description of factors that could cause our future results to differ materially from those expressed in any forward-looking statements.
I'd also like to point out that we will be referring to our adjusted 2010 outlook. That excludes a one-time loss in the first quarter with a re-measurement of the local currency balance sheet in Venezuela as a result of the move to highly inflationary accounting. Management believes that reporting in this manner enables investors to better understand and analyze our ongoing results of operations. For further information and reconciliations to comparable financial measures determined in accordance with GAAP, please see today's news release and additional information on our website.
Now I'll turn it over to Mark.
Thanks, Paul and, good morning. I hope you had a chance to review this morning's news release with the details of our results for the quarter. Let’s start with a few headlines. First, organic sales volumes were up 1%. We generated strong growth in Personal Care and a number of our targeted growth initiatives. Debt performance was mostly offset by softness elsewhere in a weak economic environment. Second, we had another strong quarter of cost savings that helped us to partially offset significant input cost inflation in the quarter. And third, our cash flow remained strong that's allowed us to continue to invest appropriately in the business and return cash to shareholders.
Now, let's cover the details of the quarter starting with the top line. Overall sales increased about 1% to $5 billion. Organic sales also rose 1% driven by higher sales volumes. Similar to last quarter, lower volumes in Venezuela were a one point drag on our overall company sales in the third quarter.
Now let me turn to the top line for each of our segments. In Personal Care, organic sales rose 3% driven by strong volume growth of 5% at selling prices and product mix were each off 1%. In North America, organic sales increased 3%. Sales volumes were up 5% with broad-based growth in most areas, while product mix and net selling prices were each down one point.
Feminine Care volumes increased double digits for the third consecutive quarter as a result of the U by Kotex innovation. Adult Care volumes also grew double digits with excellent performance in both Poise and Depend. Child Care volumes were up 6% in conjunction with market share gains, and Huggies diaper volumes advanced 1%.
Moving to Europe. Personal Care organic sales were up 4%. It was driven by mid- single-digit volume growth in diapers and strong performances in Child Care and Baby Wipes. K-C International Personal Care organic sales rose more than 4%. Sales volumes were up nearly 6% with double-digit growth in China and most of Latin America. Net selling prices were down 1%, as increases in Venezuela were more than offset by modest declines elsewhere in response to competitive activity.
Now turning to Consumer Tissue. Organic sales increased about 3%. Net selling prices were up 2% and product mix improved 1%, reflecting our actions to increase revenue realization. Sales volumes were even with last year.
In North America, organic sales were up more than 1% with product mix up two points and sales volumes higher by 1%. Net selling prices were down 1% as planned increases in promotional activity were mostly offset by sheet count reductions that we took earlier in the year. Volume performance included a 4% increase in bathroom tissue led by COTTONELLE and the benefits from new Kleenex Hand Towels. Paper towel volumes were down and continue to be impacted by consumer trade-down. Facial tissue Kleenex volumes were even with year ago in a soft overall category. Like I said, I was pleased to see market shares advance more than one point behind our best ever base sheet and a strong back-to-school marketing campaign.
In Europe, Consumer Tissue organic sales were up about 3% driven by higher net selling prices. For K-C International, Consumer Tissue organic sales increased about 5%. Strategies to increase revenue realization delivered a six-point increase in net selling prices and one point of growth from product mix. Sales volumes fell 2% due to declines in Venezuela.
Moving to K-C Professional & Other. Organic sales were down 1%. Net selling prices and product mix each increased 1% as we continue to focus on net realized revenue. However, sales volumes fell 3% in a challenging economic environment. High unemployment and office vacancy levels continue to impact the North American washroom category, where our volumes fell at a double-digit rate. Volume performance also reflects our disciplined pricing strategies in this high-cost environment. On the other hand, volumes advanced nicely in the high-margin Safety and Wiper businesses, although KCP volumes in Europe were down 4% in the quarter.
Lastly, Health Care organic sales were down 6% as volumes were off 4% and net selling prices fell two points. Last year's increased demand for face masks because of the H1N1 flu virus had a negative effect on volume comparisons of about 6%. In addition, volumes in our North American Supplies business were impacted by a slowdown on market demand. Meanwhile, organic volumes of high-margin medical devices were up 9%.