DALLAS — Kimberly-Clark Corp., facing higher prices for the raw materials it needs to make tissues and diapers, said Tuesday that its first-quarter profit slipped 2.5 percent despite an increase in sales.
The company also forecast second-quarter earnings slightly below Wall Street’s target.
Kimberly-Clark, which makes Kleenex tissues and Huggies diapers among other brands, said it earned $440.9 million, or $1.04 per share in the quarter ended March 31. That compared to $452 million, or 98 cents per share, a year ago, when there were more shares.
Excluding restructuring costs, the company said it would have earned $1.08 per share last quarter. Analysts, who usually exclude such costs from their numbers, had estimated the company would earn $1.07 per share, according to a survey by Thomson Financial.
Revenue rose 9.7 percent, to $4.81 billion. Analysts had $4.75 billion.
Kimberly-Clark said sales volume and net prices both rose, but nearly half the revenue gain came from changes in currency exchange rates.
The company said it absorbed $160 million in higher costs and increased marketing spending by $22 million.
The company, based in suburban Dallas, said it expects to earn $1.08 to $1.11 per share in the April-to-June quarter, excluding charges. Analysts had expected the company to earn $1.12 in the new quarter.
Chairman and Chief Executive Thomas J. Falk called the first-quarter results a good start to the year despite “unrelenting inflationary pressures,” especially for fiber and energy. He said the company was reducing costs where it could but increasing the marketing of its brands.
Falk said the company underestimated its exposure to inflation by $100 million to $200 million. He said the company will try to offset the increases with more revenue instead of more cost-cutting, and that if inflation continues at its current rate, Kimberly-Clark will raise prices.
Kimberly-Clark pushed through price increase of 4 percent to 7 percent in February on diapers, training pants, bathroom tissues and paper towels, yet saw no loss of market share to cheaper private-label brands, Falk said.
“That would say the consumer is holding up pretty well in this environment,” he said, adding that female shoppers are looking to give their families “little luxuries that don’t cost that much more,” such as premium tissues.
Kimberly-Clark has been more aggressive in raising prices on commercial customers, such as office buildings — sometimes twice a year. Executives said they would pave the way for even faster increases by changing contracts to allow price increases any time, not just when the contracts expire.
Kimberly-Clark faces rising costs for energy and pulp used to make its products.
Deutsche Bank analyst Bill Schmitz Jr. said Kimberly-Clark’s projections for future earnings, while lower than Wall Street was expecting, appeared solid considering expected higher taxes. Despite strong sales and price increases, he said, the company was unlikely to post earnings above those forecasts.
Kimberly-Clark shares have slumped in the past two months from about $70. Shares rose 33 cents to $64.36 in midday trading Tuesday.
AP Business Writer Lauren Shepherd in New York contributed to this report.
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