Kimberly Clark 4Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

We’re facing significant currency headwinds, like other multi-nationals

“Like other multinational companies, we’re facing significant currency headwinds. Including the rate change in Venezuela, we expect that translation effects will reduce our sales by 8% to 9% and reduce earnings by 9% to 10%. Adding in transaction effects, currency is likely to hurt our bottom line by more than 15% in 2015.”

Costs not falling as fast as currency headwinds

“On the commodity front, the outlook has improved some in the past three months, but at this point we are not planning for a big commodity windfall. Oil-based costs have started to fall recently, but not nearly as much as the drop in oil prices. We expect pulp costs, including secondary fiber, to be similar to last year or even up slightly. We’re also assuming that local inflation will continue in some of our international markets”

Try to offset currency headwinds where possible

“Adding it all up, our plan assumes cost deflation in 2015 of zero to $150 million. At the midpoint, that’s only a two point benefit to the bottom line, so the primary ways that we’ll offset currency headwinds will be by raising selling prices where we can, delivering cost savings, and controlling our overhead spending.”

Changed the conversion rate for Venezuela operations to reflect economic reality

“We’re still getting foreign exchange at the 6-3 rate, but translating in our U.S. dollar results felt like we should use a rate that was a little closer to the economic reality, so something that we spent a lot of time thinking about and talking about in the fourth quarter. But the drop in oil prices certainly made a difference.”

The greater the currency move, the easier it is to take price

“Where you’ve seen big currency moves, like Russia, Argentina, you’ll see a disproportionate amount of pricing in markets like that. If you see a market like Australia where you’ve had currency weakness, or the euro zone where you’ve seen currency weakness, it will be much tougher to get pricing in those markets, and I think the commodity factor that you mentioned as well will make it more difficult. But in a market like Russia, you could see double-digit, mid-teens kinds of pricing in Russia and Eastern Europe, just because of the shock that you’ve seen to currencies in those markets.”

polymer pricing hasn’t really followed oil quite yet

“n the polymer side, we would say that over time it generally follows oil. It seems to be a little slower at this point in time, and there’s been some supply constraints on polypropylene, which we use a lot of, that has held pricing up a little bit more than maybe you would expect.’

Cost savings are not going to flow through in the first half

“eah, you would expect that over time if oil stays at this level for an extended period of time, that you’ll see more of that flow through, but it’s not going to happen at this point in the first half. We may get a little bit more as the year progresses – we’ll see, but at this point based on what we know, we’re not calling for that windfall to flow through at the same level as our traditional rules of thumb would have indicated.”