Kimberly-Clark (KMB) Unveils Operating Model & Long-Term Targets
Kimberly-Clark Corporation KMB is leaving no stone unturned to transform its business to drive long-term growth. Keeping along these lines, the leading consumer products unveiled the next phase of the transformation, which includes a new operating model and key commercial efforts aimed at growing the brand and business. The company announced long-term growth and return targets while reaffirming its previously provided 2024 guidance.
Kimberly-Clark’s shares have increased 4.8% in the past three months against the industry’s 2.9% decline. Let’s delve deeper.
More on the Operating Model
Kimberly-Clark’s past efforts have positioned it to leverage the scale into the next growth chapter. Management is leveraging its consumer-centricity and commercial advantages to fuel innovations and accelerate growth, profitability and returns on investment.
The company’s new operating model includes three synergistic forces — accelerating pioneering innovation, optimizing its margin structure and wiring its organization for growth. With respect to accelerating innovation, the company is keen on capturing evolving consumer needs and is investing in science and technology. Management will focus on growing 12 powerhouse brands and generating more than 80% of net sales in five global daily-need spaces, namely Baby & Child Care, Adult Care, Feminine Care, Family Care and Professional.
Under the optimizing margin pillar, the company will use technology and data analytics to generate a quick, adaptable and integrated supply chain to keep driving growth. Kimberly-Clark’s envisioned supply chain modernization is likely to generate more than $3 billion in gross productivity and $500 million in working capital savings, which will be invested in the business for future growth. Talking about wiring its organization for growth, management plans to reorganize its operations into three business segments, North America, International Personal Care (IPC) and International Family Care and Professional (IFP), in the coming months.
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Long-Term Growth Targets
Kimberly-Clark announced long-term growth targets, wherein it expects organic net sales growth ahead of market growth. The company anticipates adjusted operating profit to grow in mid-to-high single digits on a constant currency (cc) basis in the long run. The adjusted earnings per share (EPS) growth is envisioned in the mid-to-high single digits on a constant-currency basis. In addition, management is likely to generate annual free cash flow generation of at least $2 billion in the long run.
Reaffirmed Guidance
For 2024, management still anticipates organic net sales to increase low-to-mid single digit percentage. Reported net sales growth is likely to reflect an unfavorable currency impact to the tune of nearly 300 basis points (bps) and a 60bps headwind from the Brazil Tissue divestiture. Adjusted operating profit is still projected to grow at a high single-digit to low double-digit rate on a cc basis in 2024. Adjusted EPS is anticipated to grow at the high single-digit rate on a cc basis for the full year.
Final Thoughts
The Zacks Rank #4 (Sell) company is battling an inflationary environment, which has been hampering its margin performance. Inflation in some markets also poses challenges for the company’s product volumes. This is because inflation causes companies to resort to necessary price increases, which affects consumer affordability and demand. An inflationary landscape in some of the developing countries where Kimberly-Clark operates is likely to remain a hurdle in the near term.
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Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report
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