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Net Sags at Kimberly Clark

Charges hit the bottom line.
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Restructuring charges drove down profits in



first quarter, although the consumer-products outfit was able to exceed Wall Street forecasts and left guidance intact.

Kimberly-Clark earned $275.1 million, or 60 cents a share, in the quarter, compared with $450.1 million, or 93 cents a share, a year ago. The latest period had restructuring items totaling about $154 million, before which it earned 93 cents a share in the quarter, a penny above the Thomson First Call consensus estimate.

First-quarter sales rose 4.2% from last year to $4.07 billion, roughly matching the consensus estimate. Kimberly-Clark said sales rose 6% excluding currency effects, reflecting a 4% rise in sales volume coupled with higher net selling prices and favorable product mix.

"We delivered on our commitments for the first quarter while absorbing almost $90 million in cost inflation," CEO Thomas Falk said. "As we entered 2006, we knew higher costs would pressure our margins, particularly in the first half of the year. I am encouraged by the way K-C teams have risen to the challenge. By staying focused on our Global Business Plan, we generated good volume growth and improved selling prices in the first quarter, with net sales rising to a new quarterly record.

"At the same time, we cut costs by an additional $45 million, building on the success of our Focused On Reducing Costs Everywhere program and moving rapidly to implement the strategic cost reductions announced last year. We also have plans in place that give us confidence that we'll continue to deliver on our commitments, quarter by quarter, over the balance of the year."

For the current quarter, the company expects earnings of 93 cents to 95 cents a share, reflecting rising costs offset by broadened marketing. Analysts are forecasting 94 cents a share. For the year, the company maintained its earnings forecast of $3.85 to $3.95 a share; analysts were forecasting $3.80 a share.

"We will also continue to relentlessly take costs out of the system. Meanwhile, we now believe that inflation in 2006 will be greater than our original planning assumptions, primarily due to recent increases in fiber and oil costs. As a result of our aggressive actions to reduce costs, we also expect to generate a higher level of savings than originally planned, which should enable us to fully offset the additional inflationary pressures," the company said.