Investor Presentation - Kimberly

Leading the world
in essentials for a better life.
Investor
Presentation
Financial Information
as of DecemberLeading
31, the
2013
world in essentials for a better life.
Highlights
• $21+ 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 billiondollar brands:
Leading the world in essentials for a better life.
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Our Values
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
Leading the world in essentials for a better life.
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Commitment to Sustainability
A Trusted Brand…Yesterday, Today and Tomorrow
• Sustainability 2015 vision built around a
framework of People, Planet and Products
– Engage with people to build enduring relationships
– Respect our planet and conserve its resources
– Deliver quality products today and for generations to
come
• Visit www.kimberly-clark.com/sustainability for
information on our sustainability strategy and
performance
Leading the world in essentials for a better life.
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Senior Leadership Team
Thomas Falk
Chairman and CEO
Lizanne Gottung
Senior Vice
President and Chief
Human Resources
Officer
Robert Abernathy*
Executive Vice
President
Michael Hsu
Group President of
Kimberly-Clark North
America
Elane Stock
Group President of
Kimberly-Clark
International
Joanne Bauer
President of Global
Health Care
Mark Buthman
Senior Vice
President and Chief
Financial Officer
Nancy Loewe
Senior Vice
President and Chief
Strategy Officer
Thomas Mielke
Senior Vice
President and
General Counsel
Anthony Palmer
President of Global
Brands and
Innovation
Kim Underhill
President of
Kimberly-Clark
Professional
*CEO of new health care company if potential spin-off of K-C Health Care occurs.
Leading the world in essentials for a better life.
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Four Global Segments
Personal Care
Consumer Tissue
• Diapers
• Training/Youth/Swim Pants
• Infant and Child Wipes
• Feminine Care
• Incontinence Care
• Facial Tissue
• Bathroom Tissue
• Paper Towels
K-C Professional (KCP)
Health Care
• Facial Tissue, Bathroom Tissue and Paper
Towels for away-from-home use
• Wipers
• Safety Products
• Surgical and Infection Prevention Products
• Medical Devices
2013 Net Sales
14.9%
17%
16%
45%
18.3%
17.8%
7%
8%
31%
2013 Operating Margin
2013 Operating Profit
14.2%
48%
28%
Operating profit and margin exclude corporate and other (income) and expense, net.
Leading the world in essentials for a better life.
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Geographic Breakdown
2013 Net Sales
14%
49%
37%
North America
Asia, Latin America and other
Europe
2013 Operating Profit
2013 Operating Margin
7%
19.9%
32%
61%
13.9%
8.2%
Operating profit and margin exclude corporate and other (income) and expense, net.
Leading the world in essentials for a better life.
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Global Business Plan (GBP)
• 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 strategies
– Manage portfolio to balance growth, margin, cash flow
– Invest in brands, innovation, growth initiatives
– Deliver sustainable cost reduction
– Disciplined capital management to improve ROIC and return
cash to shareholders
Leading the world in essentials for a better life.
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GBP Objectives and Results
Improvement
Objective
2004 – 2013
CAGR
Net Sales
3 to 5 percent
4 percent
EPS*
Mid- to highsingle digits
6 percent
ROIC*
20 to 40
basis points
40 basis points
In line with EPS
9 percent
Dividend
* EPS and ROIC are adjusted.
Leading the world in essentials for a better life.
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Business Unit Strategies
PERSONAL
CARE
Win globally in Personal Care
CONSUMER
TISSUE
Deliver targeted growth and improve
margins in Consumer Tissue
K-C
INTERNATIONAL
Drive rapid growth throughout K-C
International (KCI)
• Focus on China, Russia and Latin America
K-C
PROFESSIONAL
K-C
HEALTH CARE
Grow in higher margin segments in KCP
Pursuing spin-off of business
• Announced 11/14/2013
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Win Globally in Personal Care
• Leverage strong brands
• Win with consumers by providing superior innovation
supported by integrated marketing campaigns
• Long track record of success
‒ 10-year organic net sales CAGR: +6 percent
Personal Care Net Sales
% of Total Company
45%
39%
2003
2013
Leading the world in essentials for a better life.
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Deliver Targeted Growth and Improve
Margins in Consumer Tissue
• Launch value-added innovations
• Focus on net realized revenue, mix, cost reduction
• Excellent progress with margin improvement
Operating Margin
13.6%
10.2%
2010
14.9%
11.4%
2011
2012
2013
Leading the world in essentials for a better life.
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Pulp and Tissue Restructuring Actions
• Exited remaining integrated pulp
operations; streamlined tissue
manufacturing asset base
• Charges completed at end of 2012
Annualized Operating
Margin Benefit of
Restructuring
>175
175bps
– Cumulative costs $375 million after tax
(2011-2012)
• Operating profit benefit at least
$100 million in 2014
>5050bps
– Realized $70 million through 2013
Consumer Tissue
Leading the world in essentials for a better life.
KCP
13
Drive Rapid Growth Throughout KCI
2004 - 2013 CAGR
10%
11%
• Double-digit growth since GBP
introduction
– Nearly 40 percent of company sales
Net Sales
Operating
Profit
KCI % of Total Company
39%
22%
32%
16%
2003
2013
Net Sales
Operating Profit
•
•
•
•
Strong market positions
Attractive market dynamics
Multi-tier product strategies
Targeted geographic expansion
and growth plans
Total company operating profit amounts are adjusted.
KCI = K-C’s business in Asia, Latin America, the Middle East, Eastern Europe and Africa.
Leading the world in essentials for a better life.
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Focus Areas: China, Russia, Latin America
• Over 55 percent of KCI
• Innovation across all categories
5-Year Organic Net
Sales CAGR
(through 2013)
• Selling and marketing investments
• China business expanding into more
cities and product tiers
13%
8%
– Expansion opportunities in Russia and Latin
America also
• Increasing manufacturing asset base
to support growth and improve
profitability
KCI
China, Russia,
Latin America
• Emphasis on Personal Care and KCP
Leading the world in essentials for a better life.
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Personal Care in KCI
• Double-digit sales CAGR since GBP
launch
• Personal Care in KCI larger than
North America
Net Sales
Geographic Mix
Personal Care
2003
30%
• Leveraging strong brands, innovations
and favorable market demographics
• Driving market development,
penetration and frequency of usage
• Making adult care and baby wipes
businesses more global
13%
2013
44%
51%
5%
North America
Europe
Leading the world in essentials for a better life.
57%
KCI
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Grow in Higher Margin Segments in KCP
• Provide essentials for a healthy, safe and productive
workplace
• Invest in high-growth, higher-margin Safety & Wiping
segments
• Expand in Latin America, Russia and China
• Leverage global go-to-market capabilities and
sustainability leadership
Net Sales Growth
(2010-2013 CAGR Index)
2.5x
1.0x
Washroom
Wipers/Safety
Leading the world in essentials for a better life.
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Pursuing Potential Health Care Spin-Off
• Announced November 14, 2013
• Would create publicly-traded company with $1.6 billion in
annual net sales and leading market positions
• Rationale
– K-C Health Care strategic fit and growth priorities have changed
over time
– Allow K-C Health Care to optimize performance and flexibility to
pursue value-creation opportunities
– Further sharpen K-C’s focus on growing consumer and KCP brands
• Expect to complete spin-off by end of Q3 2014, subject to
Board approval and market, regulatory, other conditions
Leading the world in essentials for a better life.
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European Strategic Changes Announced
October 2012
• Exit diaper category in most of Western/Central Europe and
some other lower margin or slower growing businesses
– Streamline cost structure to align with strategic changes
– Restructuring costs through 2014 $300 to $350 million range (after tax);
cumulative costs through 2013 $308 million
• Benefits
– Improves underlying profitability
– Better focus on strongest positions and growth opportunities
• Status
– Diaper market exits complete
– Impacted facilities all closed or sold
– Workforce reductions essentially complete
– Overall results on track with operating plan
Leading the world in essentials for a better life.
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Investing For Growth –
Advertising
• Supporting innovation
• Building brand equity
• Increasing use of non-traditional
channels and programs
• Improving efficiencies
• Significant increase in spending
in last five years
Advertising Spending
($ Million)
$777
$512
2.6%
NSV
2008
Leading the world in essentials for a better life.
3.7%
NSV
2013
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Sustainable Cost Reduction
FORCE Savings
($ Million)
$295
$310
$265
• Ongoing program
– Delivered $2.2 billion over past
10 years
– Accelerated performance in recent years
$190
• Supply chain focus
– Global procurement organization
– Lean manufacturing practices
2004-2010
Avg.
2011
2012
2013
• Targeting at least $300 million in
2014
Leading the world in essentials for a better life.
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Working Capital Improvement
Cash Conversion
Cycle (Days)
73
• Strong improvement since 2008
– Improved accounts payable
– Inventory focus
58
50
47
45
39
• Expect continued progress going
forward
– Building further capabilities
– Targeting 1 to 2 day improvement in
2014
2008 2009 2010 2011 2012 2013
Leading the world in essentials for a better life.
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Return on Invested Capital
ROIC*
17.5%
13.7%
2003
• Excellent progress since GBP
introduction
• Key component of long-term
incentive compensation program
• Expect additional improvement in
2014
2013
* Adjusted.
Leading the world in essentials for a better life.
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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
• Grow dividend
– Top tier payout
• Consider M&A
– Not core part of growth strategy
• Return excess cash to shareholders via share repurchases
Leading the world in essentials for a better life.
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Dividends
Per Share Dividend
(Declared)
Dividend Payout*
56%
$3.24
41%
$1.36
2003
2013
2003
2013
• Top-tier dividend in Consumer Packaged Goods industry
• Expect 2 to 4 percent increase for 2014 dividend
– 80th consecutive year K-C has paid a dividend, 42nd consecutive annual increase
– Smaller than average increase in advance of planned health care business spin-off
• Paid $10 billion in cash dividends over past 10 years
* Declared dividends per share divided by adjusted basic earnings per share from continuing operations.
Leading the world in essentials for a better life.
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Share Repurchases
• Cumulative share
repurchases of $11.8
billion 2004-2013
Shares Outstanding
(Millions)
502
• Strong track record of
reducing share count
-24%
• Targeting $1.3 to $1.5
billion in 2014
381
Year-end
2003
Leading the world in essentials for a better life.
Year-end
2013
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Total Shareholder Returns
158%
155%
141%
KMB
128%
S&P 500
109%
S&P 500 Consumer Staples
104%
85%
57%
28%
32%
1 Year
59%
26%
3 Year
5 Year
10 Year
Total Shareholder Returns through 12/31/13 – assumes reinvestment of dividends.
Leading the world in essentials for a better life.
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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 2013 Annual Report on Form 10-K,
SEC filings or news releases, call 800.639.1352
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Safe Harbor Statement
Forward-Looking Information
Certain matters in this presentation, including our 2014 outlook, expectations and plans, and any
estimates, projections, and statements relating to our business plans, strategies 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, and market demand and economic
conditions. There can be no assurance that these future events will occur as anticipated or that
the company’s results will be as estimated. Furthermore, unless otherwise specifically indicated,
forward-looking statements contained in this presentation are based on our fourth quarter 2013
earnings communication which occurred on January 24, 2014. We undertake no obligation to
publicly update any of these statements. For a description of certain 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, 2013 entitled “Risk Factors.”
Non-GAAP Financial Measures
This presentation contains some financial measures that have been adjusted to exclude certain
items and differs 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 posted to the Investors section of our Web site (www.kimberly-clark.com/investors).
Leading the world in essentials for a better life.
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