Kimberly-Clark Corp., the maker of Kleenex tissues, Huggies diapers and other household goods, is still waging a battle against rising costs that pushed its fourth-quarter profit down 19 percent.
The company, which increasingly relies on overseas markets to help offset weak demand in the U.S., also on Tuesday offered a 2012 adjusted earnings forecast that was below Wall Street's expectations. Its shares fell $1.25, or 1.7 percent, to $72.27 Tuesday.
Like many businesses, Kimberly-Clark is struggling with higher costs for raw materials like oil, wood, pulp and other things it needs to make and transport its products. It has raised prices on some products to help offset some of the expense, but must tread cautiously with price hikes to avoid turning off budget-minded shoppers.
The Dallas-based company continues to face soft demand in North America, as high unemployment and uncertain economic conditions keep many consumers focused on buying basic products on an as-needed basis.
In the fourth quarter, Kimberly-Clark earned $401 million, or $1.01 per share. That's down from a year ago, when it recorded a profit of $492 million, or $1.20 per share.
Excluding restructuring costs in its pulp and tissues segment, adjusted earnings were $1.28 per share, which fell short of the $1.30 per share that analysts surveyed by FactSet expected.
Wendy Nicholson of Citi Investment Research said in a client note that investors are probably disappointed by the company's results and the outlook for this year.
"While the incremental pressure to come from foreign currency exchange was likely anticipated, we suspect some will be frustrated that lower commodity prices are not expected to sufficiently cushion the blow of foreign currency exchange and still weak consumer spending in developed markets," she wrote.
Revenue for the quarter ended Dec. 31 climbed 2 percent to $5.18 billion from $5.08 billion on higher prices and sales volumes, but missed Wall Street's $5.21 billion estimate.
Sales of personal care items fell about 5 percent in North America. While Kimberly-Clark raised prices on infant and child-care goods, it was not enough to counter increased promotions.
Chairman and CEO Thomas Falk told analysts during a conference call that another challenge the company faces is the multi-year decline in the nation's birth rate. According to the Census Bureau, there were 60 births per 1,000 U.S. women in 2010, down from 64.2 in 2008.
Total sales for Kimberly-Clark's personal care division edged up 2 percent to $2.2 billion. Consumer tissue segment sales were essentially flat at $1.7 billion, while the health care unit's sales rose 10 percent to about $420 million, partly on sales of exam gloves and surgical products.
Chief Financial Officer Mark Buthman said overseas markets continue to be a source of earnings strength, particularly in Latin America, China and South Korea. Falk said Kimberly-Clark's diaper business continues to expand in China, with Huggies now available in more than 70 cities.
For the full year, earnings fell 14 percent to $1.59 billion, or $3.99 per share. That compares with earnings of $1.84 billion, or $4.45 per share, in the previous year.
Adjusted earnings were $4.80 per share, while annual revenue increased 6 percent to $20.85 billion from $19.75 billion.
"Reflecting on the full year, bottom-line results were somewhat below our original goal for the year, mostly due to higher-than-expected cost inflation and soft demand in portions of the developed markets," Falk said.
"Regardless of the reasons, we are not satisfied with the results we delivered in 2011 and plan to get back on track in 2012," he added.
Falk said the company continued to clamp down on its costs over the course of the year, achieving $265 million in savings.
Looking ahead Kimberly-Clark anticipates 2012 adjusted earnings between $5 and $5.15 per share, below the analysts' average forecast for earnings of $5.23 per share for the year.
Annual revenue is expected to be flat to up 1 percent, which would imply revenue of about $20.85 billion to $21.26 billion. Wall Street forecast revenue of $21.22 billion.
"While we are cautiously optimistic that portions of the U.S. economy are improving, we are not planning for a big increase in market demand," Falk said.
He anticipates that demand will remain soft in the infant and childcare categories in the U.S. this year.
Commodity costs are expected to be a lesser concern, but Kimberly-Clark anticipates foreign currency exchange rates will continue to be volatile.
The company also expects to raise its dividend at a mid-single digit rate, effective in April.