Kimberly Clark 2Q17 Earnings Call Notes

Thomas J. Falk – Kimberly-Clark Corp.

Environment has become more challenging

“while I remain optimistic about our long-term future, the near-term environment has become more challenging than maybe we saw at the beginning of the year. So category growth has slowed broadly in lots of places over the last year or so, and we expect that growth will pick back up over time, but that pickup may not happen quickly. In the meantime, competitive activity has increased, including higher spending in North America over the last 12 months.”

Competitive environment in NA

“When you have weaker category growth overall and you have about the same number of people fighting over it, you can see that play out. And there is no question, there is channel shifting going on as e-commerce grows and that’s putting pressure on lots of retailers.”

2016 birthrates were down

“in Personal Care and baby and child care in particular, it’s been birthrate-related in a lot of the developed markets. So we had kind of projected 2016 was going to be a flat birthrate year. In the second quarter, we got the final fourth quarter numbers that showed it down 2% for the fourth quarter, which brought the full year down 1%. So that obviously has caused category growth to be weaker than we would’ve anticipated going into 2017. Korea’s birthrate, I think, we got the final 2016 numbers, was down 7%, which is a pretty big, big drop. So I think there is potentially lots of reasons, we don’t really understand it at a deep enough consumer insight level, I’d say. But a broad trend is that Millennials are having their children a little later, as long as they have the same number, we’re in good shape because the category growth will return.”

Infant care in US down 5%, 1% volume, 4% price

“In terms of the U.S. category growth rate, as we looked at that year-over-year, I mean, the big driver is infant and child care in terms of why we’re down. If you kind of look across the categories, adult care is still growing mid-single digits. Baby wipes is still growing low single digits. FemCare is pretty flat. Consumer tissue is pretty flat. And value of infant and child care is down 5%, it’s like 1% volume and 4% price. And so net-net, our total categories were down 1% with a good chunk of it being driven by birthrate and then competitive pricing activity in baby and child care.”

I don’t think the birthrate is going to change so quickly

“I’d expect the birthrate change isn’t going to shift quickly. So, given that we had the 2% decline in births in the U.S. in the fourth quarter, that’s going to roll over into this year. And I don’t think the Korean birthrate that we talked about is going to turn around quickly either. So I think you are going to see some of the continued drag on category, and then we’ll see where share falls out.”

Kimberly Clark 4Q16 Earnings Call Notes

Thomas J. Falk

Expect another year of significant volume growth in China

“Looking ahead in the China market, we expect another year of significant volume growth. Category demand should remain strong and we have lots of innovation coming on Huggies including a new super premium diaper pants that we recently launched on Singles Day in November. Based on market trends in the last 2016 were cautiously optimistic that pricing in China will be less negative than 2017”

We’re not counting on a lot of price in 2017

“I think I would say, we’re going to have some carry-over price drag in places like China. We still probably will get some additional positive price in markets like Brazil and Argentina, but we’re not counting on a lot of price. In some of these markets the consumer has been pushed pretty hard and we just don’t see of a big opportunity to take price. And even in markets like the U.K. where you’ve had though the Brexit phenomena, we will try to take some small positive price increases, but we’re not counting on a lot of that to drive our year in 2017. So I think while the currency hit isn’t as big as it’s been in the past, the commodities we’re assuming that oil is up double digits and secondary fiber is up double digits. But some others like eucalyptus pulp is going to be pretty flat, but we’d just say the net of that is we’re not counting on a lot of price in 2017.”

Growth rates in a lot of our categories have slowed

” growth rates in a lot of our categories have slowed. We said we were expecting category growth rates of roughly 2%. We would have said several years ago three to four was probably more what we were trending. So growth rates have come down, there’s still lots of competition including local competitors who are aggressively pursuing business and we’re trying to make sure we’ve got the right innovation, we got the right price point, we’re executing well in market and that probably makes it a little tougher in this environment to get price increases, in a market like Brazil, where the category is going backwards 3% to 4% in volume and you’re taking list price up, you can generate some short-term category value increases, you don’t want it to be a race to zero either.”

E-commerce is driving more of an EDLP environment

“I think the point I would make there is that e-commerce is making pricing more transparent everywhere. So there’s more – you know if retailers just to comp each other’s promoted prices and now e-commerce you can go comp three websites quick and easy and there’s apps that’ll do it for you and so I think that’s probably driving more of an EDLP type environment recognizing, there’s still room for some promotion. I don’t know Mike if you’ve got a view of that of what you see in North America.”

Global consumer is a bit of a mixed bag

” So the global consumer I would say probably a bit of a mixed bag if you’re in a economy that had oil as a large part your economy, but you’re feeling still some pressure. So now you saw negative GDP in Russia. Nigeria, certainly under pressure, very slow or negative GDP per capita growth there. Some of the challenges in Brazil have been there as well. So if you’re a oil consuming nation you’ve got a big windfall in 2016 and so a pretty good GDP per capita growth generally or improving. So I would say if you look at a market like China, the underlying category demand growth, the birth rate those are all really positive signals. Despite a little bit of a little bit of a slowdown in their overall GDP growth, you still saw a really good growth in GDP per capita and more consumers coming in reach of our products and entering the category and starting families et cetera. And you’d see some similar things. Vietnam is a very a good market for us as well”

There are gains to be had in automating back office, but we’ve still got a long way to go to get there

“if you could think about the perfect order or the perfect payables transaction or the quantity, the price, the delivery terms, everything lined up perfectly with the purchase order or it could sale right through your system and get paid without any human involvement, that would be the gold standard. I’d say too often some of those things don’t work out and you need human beings to fix and adjust and correct all those minor errors that happen. And if you think about a customer transaction, if we could take the customer’s order, get the price exactly right, the quantity shipped on the date they wanted it with the correct terms. So it applies right through our system and their system without any additional intervention that’s a big opportunity and it takes friction out of everyone’s transaction costs. But we still got a long way to go to get to that.”

Kimberly Clark 2Q16 Earnings Call Notes

Kimberly-Clark (KMB) Thomas J. Falk on Q2 2016 Results

7% volume growth in NA

“Now let’s turn to our North American consumer businesses. Our teams there delivered another strong quarter with 7% volume growth and healthy market shares. Product innovations, great marketing programs and good retail execution continues to drive results across our portfolio. Promotion activity was also a little higher than average in the second quarter. Our adult care, child care and feminine care volumes each increased by about 10% including benefits from innovations on Poise and Depend, Pull-Ups and U by Kotex. Our Huggies diaper volumes rose mid-single digits and market shares improved by about a point as we continue to make progress following last year’s Snug & Dry relaunch. Consumer Tissue volumes improved 6% with mid-to-high single-digit growth in the all categories led by Kleenex facial tissue. So overall, our brand positions are very healthy in North America.”

Expecting positive second half volume in Brazil

“Yeah, I mean, I think Brazil, if you look at it how the year has played out, it was a pretty start tough to the year with negative volume trends as we pushed pricing into the market. Second quarter the volume was positive in diapers and then a significant amount of price. We’d expect to see more volume in the back half, and so I’d say on – if you look at share positions in Brazil, we’re up a couple points in fem care and have a good momentum there, and are down about 0.5 point in diapers and would be looking to close that gap in the back half of the year.”

Expecting birth rate to pick up in China

“In China, we’re really expecting the birth rate to pick up as we’d expect to see a little bit more volume come there in the back half. Pricing has been more competitive than we’d anticipated, and we’re expecting it’s going to continue to be competitive in the back half of the year.”

China e-commerce growth is effecting promotional environment

“I mean, actually the consumers are trading up in terms of product format. So if you look at the Tier-5 super-premium type products, those segments are still growing. And so the issue is you’ve got – it’s one of the largest diaper markets in the world. It’s probably one of the fastest-growing diaper markets in the world on unit volume, and so you’ve got us and a couple of big Japanese players and P&G all competing in that same space. And I know everybody thinks the other guy started the fight, but it’s gotten more price competitive. And there’s also a channel issue whereas we’re – e-commerce is growing dramatically in that space and retailers are also trying to make sure they don’t lose their share of that young family’s market basket. And so there’s a lot of competition and promotional activity and the manufacturers like us are certainly fully participating.”

Early signs of optimism in Brazil

” Although I was on the phone with our guy who runs Brazil last week, and I think there are some early signs of optimism perhaps there that they’re things – expecting things to be a little bit better in 2017. And so we’ll see. I think the economy’s run on expectations and, hopefully, the Brazilian consumer will start to be a little bit more optimistic. And we’ll see that translate into category growth. But I would expect for 2016, it’s still going to be a challenging category story.”

I don’t think you’re going to see people try to take price in England. It’s easier to take price in some economies than others

“I’d say in markets where they have – where it’s pretty common to have big currency swings, if you looked at most – a number of Latin American markets or Eastern European markets, the retailers are quite understanding of the need for their imported products to – or products with imported raw materials to take price. I mean, that’s kind of the way the market works. And in probably more established markets, if you looked at like Australia and the U.K. and maybe even China, the currencies have been pretty stable and they’ve had a history of being pretty stable and you don’t typically get a big price-driven impact from currency.”

“For example, the sterling has weakened a bit since the Brexit announcement. I don’t think you’re going to see a lot of suppliers taking price in the U.K. because A, it wasn’t that big of a swing, and B, it’s a challenge to push price through with a U.K. retailer, if that color gives you some context for the way you think about it.”

Kimberly Clark 1Q16 Earnings Call Notes

Kimberly-Clark (KMB) Thomas J. Falk on Q1 2016 Results

Now expecting slightly less drag from currencies and prices than we had been

“our current assumptions have improved somewhat compared to three months ago. And while this helps our U.S. dollar results, it also means we’re expecting less benefits from selling price increases this year. As we said before, it’s important to look at currencies, commodities and selling prices together since they are all related. We’re now planning that the net impact of these three factors will be a mid to high single-digit drag on our bottom line growth this year, and that’s slightly better than what we shared with you in January. If this turns out to be the case, we’ll have added flexibility to invest more behind our top line growth initiatives.”

Everyone is expecting results to improve as the year progresses

“I would say the momentum throughout the first quarter, particularly in some of the key emerging markets, they had a stronger March than they started the year, and so that’s a positive sign. I was just with a lot of our international teams recently at our brand week, and I would say everybody is expecting their results to improve as the year progresses”

Saw private label share down in the US which is good

“In terms of the U.S., actually, we saw probably better growth in our business than the underlying category growth because we picked up share in a number of markets and consumers are still responsive to innovation. We saw private label shares flat to down in nearly every category that we’re in, which is again another sign of health of the consumer for us, and are probably maybe more bullish on the outlook in North America at this point in time than maybe we would have been even at the beginning of the year.”

Toughest competition in China has been from Japanese competitors

“Yeah. I would say in China in particular, the toughest competition of late has been our two Japanese-based competitors, Kao and Unicharm. Obviously, the weaker yen last year helped them support that in a way. At least it didn’t have as big of a negative impact on them relative to what was going on in the U.S. And so they’ve been more aggressive, Kao in particular. We’ve been gaining share, Kao has been gaining share, Unicharm has been losing share. And so there’s been more competition in that direction.”

China may be skipping a generation of retail development

“We are looking to see how e-commerce does scale. And it’s certainly in a market like China, where it may be skipping a generation of retail development, you don’t have as many retail channels developed in a lot of those markets, and you are seeing very dense population, very high smartphone penetration, and a much lower delivery cost to get that last mile delivery”

Kimberly Clark 4Q15 Earnings Call Notes

Kimberly-Clark’s (KMB) CEO Tom Falk on Q4 2015 Results

Remain very optimistic about growth prospects in 2016

“Even though volatility has increased and economies are slowing in some parts of the world we remain very optimistic about our growth prospects. For 2016 we are targeting organic sales growth of at least high single digits for our business in the developing and emerging markets.”

Facing continued currency headwinds in foreign markets

“Like other multinational companies, we’re facing continued currency headwinds. We’re planning that currency translation will reduce sales and earnings by 5% to 6% this year. The all-in drag on earnings including currency transaction is expected to approach 15%. These projections are based on forward exchange rates as of a couple of weeks ago which are pretty consistent with recent spot rates in most cases. To reduce the impact of currency headwinds we plan to raise selling prices in some of our international markets.”

Lots of competition around but I wouldn’t say it’s getting worse

“In China, we saw a bit more competitive pricing being spent in the market by some of the competitors which we matched up to at some extent, but we saw some of that in the third quarter as you may recall, but had a very strong volume quarter again and again have lots of innovation coming. So still tons of competition around, but I wouldn’t say it is getting worse, but it is continuing.”

China probably a bit of a slowdown, but still growing overall

“In other markets China kind of a mixed bag with a little weaker quarter for us and yes some of that was execution on our front that we need to improve and there is plenty of competition there, probably a bit of the economic slowdown, but again that market is still growing overall, it’s just not at the same pace that it once was.”

Birth rates are ticking up

“If you look at a market like China, we’d still say high single digit growth. It is going to be the year of the monkey in China which is a good year and so you typically have a little bit of an uptick in the birth rate, restarts with the forecasters were calling for, the birth rate in the U.S. is actually ticking up. ”

Local competitors have exposure to dollar priced commodities

“If you look at a market like China, we’d still say high single digit growth. It is going to be the year of the monkey in China which is a good year and so you typically have a little bit of an uptick in the birth rate, restarts with the forecasters were calling for, the birth rate in the U.S. is actually ticking up. ”

We’re pretty bullish on China

“We’re doing a ton in e-commerce and that channel is growing pretty dramatically in China and so it’s probably a third of our diaper sales were in e-commerce which is over wait the rest of the categories. We’re still seeing good mid-tier super premium segment growth where we tend to do better. So again, I’d say China we are pretty bullish, lots of competition but good growth in innovation coming and some geography expansion as well.”

Miscellaneous Earnings Call Notes 10.22.15

Advanced Micro Devices’ (AMD) CEO Lisa T. Su on Q3 2015 Results

Not anticipating that Windows 10 will drive PC refresh

“While we are not anticipating Windows 10 will drive a dramatic near-term PC refresh cycle the continued adoption of Windows 10 which has already been installed on more than 110 million PCs to date, provides a great opportunity for AMD over the coming year based on a semi-consumer and commercial refresh cycle environment”


Suntrust Banks’ (STI) CEO Bill Rogers on Q3 2015 Results

We’ve been in the lower for longer camp for a long time and think it stays that way in ’16

” We, as you know in our case, we have sort have been in the lower for longer camp for some time and set ourselves up appropriately for that type of an approach. As we look forward into ‘16, I think also lower for longer stays, I think if there are Fed increases, they will be very deliberate and the pace of rate rise will probably be slower now than the market had been thinking six months ago.”

Capital Markets activity should be better this quarter

“M&A had another really good quarter and pipelines are still good there. The volatility numbers are in sort of high yield bonds and the equity sales and trading and that’s better. Spreads have come in. I think things will get done more this quarter than they did last quarter if things stay stable. And based upon what I see in terms of our pipeline, I feel good about our pipeline”

CCAR has changed the way that the whole banking industry is thinking about risk

“I think one of the other benefits also that you see for SunTrust and perhaps for the industry overall is the benefit of CCAR. The CCAR has changed the way that companies think about their overall risk. They apply a stress test to all their portfolios now and think about how portfolios would behave during a stress test.”


Kansas City Southern’s (KSU) CEO David Starling on Q3 2015 Results

Volume continues to improve in October

“volume so far in October continue to improve. And subject to ongoing uncertainty in energy markets, we feel good about the trajectory of demand as we head into the end of 2015. Through the close of business, Wednesday, average daily carloads for October were running about 1% higher than September and 1% higher than October of last year as well.”

Business demand still feels very good to us

“business demand still feels very good to us, with the obvious caveat about the uncertainty in energy markets, which you have seen across the entire rail sector, have made it more difficult to forecast demand and provide guidance.”

Mexico is probably linked to the US, but they’ve done a good job managing their inflation and unemployment rates

“I think, Mexico ends up being fairly tightly linked with the U.S. economy, given the amount of goods that end up going north into the U.S. But they’ve done a really good job managing their overall inflation rate, which is now running below 2%, unemployment is below 5%.”


Hasbro’s (HAS) CEO Brian Goldner on Q3 2015 Results

Toy industry growth is strong ytd

“The trends that we see and the data that we have would indicate that the Toy industry year-to-date is up high-single digits, and we see that as boding well as we get into the holiday season and continues our trends.”

Labor is the biggest cost input to our COGS and it’s up in the double digit range

“The single biggest cost input to our cost of goods is labor. And we continue to see labor inflation rates in the double-digit range. We have seen a slight decrease in the cost of certain types of resins over the period since the end of 2014. But they tend to be more nominal and they run in arrears to whatever the petroleum or gasoline costs prices are out there as you know.”


Flextronics International’s (FLEX) Mike McNamara on Q2 2016 Results

Partnering with Nike for connected products

“Last week, during NIKE’s Investor Day, NIKE announced a partnership with Flex to accelerate the introduction of advanced innovation to NIKE’s manufacturing supply chain. Working together, NIKE and Flex will deliver innovation that enables product to reach consumers more quickly with customized solutions and increased performance innovations.”

There’s an electrification of the world going on and we can help mechanical companies adopt that

“the amount of electrification in the world, the amount of smart products in the world that are going into what’s not typically electronic products that are now moving forward, whether it’s anything from a shoe to a shirt to a door lock is tremendous. So you’re getting a tremendous amount of this electrification of the business. And as we look forward, the value to us is if we can create more value for these customers whether it’s automation or engineering or making a non-connected product connected or providing electrification where they’re more traditionally a mechanical type company”


Zions Bancorporation’s (ZION) CEO Harris Simmons on Q3 2015 Results

Energy chargeoffs are from borrowers that were already weak in the last cycle

“the charge-offs have fundamentally been borrowers that were weak in the last cycle, they’ve been kind of limping along, and for whatever reason, you know, we have not been able to get totally out, and this recent downturn was just kind of another very difficult blow to them.”

Restraining loan growth because concerned that we may find ourselves in another downturn before things get better

“I think that, you know, I for one have a concern that we may find ourselves set [ph] into another downturn before we see the economy strengthen a great deal again, I mean. So we’re trying to be very careful.”


Hawaiian Holdings’ (HA) CEO Mark Dunkerley on Q3 2015 Results

Hawaiian airlines has had a tough time getting flights in on schedule

“It’s been a poor summer operationally as reflected in our having recently posted our worst monthly punctuality in over a decade. The culprits have been several; the combination of a burgeoning flight schedule of Honolulu and airport construction has meant that during the peak hours of the day there have been insufficient gates. This has been exacerbated by congestion in customs, resulting in our not being permitted to de-plane arriving international passengers promptly. And lastly, an abrupt change in the traffic control procedures at Honolulu gave us no opportunity to make schedule changes to address the lengthen block times that have resulted.”


Yahoo! (YHOO) Marissa A. Mayer on Q3 2015 Results

Experiencing continued revenue headwinds

“our Q4 outlook, which Ken will return to later, is not indicative of the performance we want. While there are some well-known headwinds, year over year and even quarter over quarter like the loss of the Alibaba TIPLA, we are also experiencing continued revenue headwinds in our core business, especially in the legacy portions”


ACE’s (ACE) CEO Evan Greenberg on Q3 2015 Results

Underwriting environment continued to grow more competitive

“I want to now say a few words about current commercial P&C market conditions. The underwriting environment continued to grow more competitive in the quarter for our commercial P&C business globally. With some exceptions, price declines accelerated modestly. They were varied by class of business and geography.’

Large account more competitive, wholesale and property

“Large account business, particularly shared and layered is more competitive than midsized. Wholesale is more competitive than retail and property more so than casualty related”


Kimberly-Clark’s (KMB) CEO Tom Falk on Q3 2015 Results

The rate of currency deterioration hasn’t been as severe as it was

“The rate of currency deterioration hasn’t been as severe as it was, say, a year ago. On the other hand, there’s still some opportunity for price in some markets.”

Not seeing trade down in EM

“so far we are not seeing as much as a trade down as you would think. And we are still seeing — we launched boy/girl diaper pants in some of the super premium kind of tiers. We are seeing good response and growth there… particularly the economies that are in recession like Brazil and Russia, we are watching that see how the consumer performs and make sure we got the right offer, but we are also seeing really good innovation. Mom still wants the best for her baby.”


Texas Instruments, Incorporated. (TXN) Q3 2015 Results

It’s a weak environment but some segments were stronger than we expected

“our revenue declined 2% from a year ago, and we obviously would describe that as a weak demand. That’s actually similar to what we saw last quarter. But, inside of that, certainly it was stronger than what we had expected. There were a couple of areas that were stronger than we had expected. Wireless infrastructure and industrial were both stronger than what we had expected. ”


Kinder Morgan’s (KMI) CEO Steve Kean on Q3 2015 Results

By 2030 gas should be 39% of electric generation mix

“Its projected increase from today’s level of 76 Bcf a day to about 110 Bcf a day by 2025, that’s an increase of 40%.”

” If you look at the 15 mix of generating output and this is according to the EIA, 32% is gas and 33% coal. For those of you who have been in this industry a long time or followed it you know that that represents a dramatic shift to the positive for natural gas. If you flash ahead again these are EIA numbers to 2030 their projection of the mix of generation is 39% gas, 18% coal’

Renewable energy will need natural gas facilities as backup

” reliable flexible natural gas facilities are absolutely necessary to back up wind and solar. So to sum up the idea that we could move directly from coal to renewables without increasing natural gas usage for electronic generation is an unrealistic pipe dream with the substance and the pipe being legal only in Colorado and Washington State.”


Danaher (DHR) Thomas Patrick Joyce on Q3 2015 Results

Seen some incremental slowing, but in pockets

“Overall, we have seen some incremental slowing in the macro. That being said, it’s in pockets. There’s some pockets regionally where we’ve seen some of that slowing, clearly, and in some of the more industrially oriented markets.”

China is still one of our better markets

“we’ve actually seen China, while slowing incrementally, it’s still one of the better markets where we play today. Our growth rates continue to be very good in a number of our businesses. ”

Kimberly Clark 4Q14 Earnings Call Notes

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.”

Kimberly Clark 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

International led 4% core revenue growth

“First quarter sales were $5.3 billion. That’s down 1% versus last year. Underlying organic sales rose 4% led by strong growth in K-C International. Currency rates were a 3 point drag and restructuring activities reduced sales by a further 2%.”

Venezuela earnings locked up in the country

” We measure our results in Venezuela at the rate at which we transact our business in the country. Since March of last year, that’s been at the official exchange rate of 6.3 bolivars per US dollar. To date, we’ve not had access to US dollars through either the complementary currency exchange system known as SICAD or the recently announced SICAD II auction process. At this time, it’s not clear if we’ll able to access either of those systems going forward or what amount of currency exchange will transact through those mechanisms in the market as a whole.’

Big growth in Huggies internationally

“In diapers, our organic sales increased about 30% in China, 25% in Russia and 15% in Brazil in the first quarter. So our Huggies business has good momentum in these three markets and broadly throughout Kimberly-Clark International, and we’ve got more innovation coming yet this year to help us drive additional growth.”

Targeting 3-5% sales growth

“our organic sales growth target remains 3% to 5%. We got solid topline momentum right now and that’s driven by our targeted growth initiatives and our innovation and we expect that to continue going forward. On the bottomline, we continue to expect full year adjusted earnings per share to be in a range of $6 to $6.20.”

Retailers like selling diapers because it attracts a great type of consumer

“I’d say Personal Care stuff is probably a little bit more efficient to ship on an online environment. It’s not to say that you won’t see it in the offline or in having tissue move into online as well. But I do think Personal Care diapers in particular is a bigger item. And I think many of the online retailers want diapers for a lot of the same reasons that other retailers are focused on that category, because they want to get the young family as a regular customer.”

Rate of change in Chinese city expansion slowing a little bit

“if you looked at China, we’ve been growing at 40 and now I think in the first quarter, we were at 30. We were at 70-ish cities and now we got 90 by the end of last year. We went from 90 to 95 in the first quarter. So the rate of new city expansion is probably slowing a little bit, which is why those numbers are coming down.”

No shortage of competitors

“there’s a lot of competition everywhere. So in China in particular, Proctor, Unicharm, Kao are all over the mid and premium tiers. Hang On is all over the lower part of the marketplace.”

Venezuela currency situation unsustainable

“I don’t think I can remember in my entire career a situation like this in a significant currency market where you’ve got a range from 6 at the rate to if you look at SICAD II it’s trading at 50. And so I do think that something is going to happen to close that gap at some point, because it’s not sustainable to have that kind of a spread in a marketplace.”

Aside from financial disclosure risks, there’s operating risks too

“so I’m looking at this from two perspectives, what do we need to do operate in Venezuela, so how do we set pricing, how do we import product, how do we pay the bills and manage our exposure level. So that’s one set of activities.”

Mexico growth slower than forecast

“I guess I would say broadly economic conditions in Mexico continue to be challenging with less growth overall in the economy than forecasted. And they had a fairly challenging fourth quarter. And I’d say some of the same challenges that they had in the fourth quarter seem to continue into the first quarter. But the team down there is committed to continue to improve their business and they’ve got a solid track record and they’ll deliver improved results in the back half for the year.”