DALLAS – Kimberly-Clark Corp., the maker of Kleenex tissues and Huggies diapers, said Monday its first-quarter profit fell by more than one-third on higher costs for raw materials, a trend it expects to continue through this year.
The company said it earned $275 million, or 60 cents per share, compared with $450 million, or 93 cents per share, a year earlier.
Excluding what the company termed unusual charges related to restructuring, Kimberly-Clark said it would have earned 93 cents per share in the quarter ended March 31.
Analysts expected the company to earn 92 cents per share, according to a survey by Thomson Financial.
Revenue rose 4.2 percent, to $4.07 billion.
Shares of Kimberly-Clark rose $1.95, or 3.4 percent, to $59.14 in morning trading on the New York Stock Exchange.
The company, based in the Dallas suburb of Irving, said it had to absorb $90 million in higher costs.
About one-third was driven by higher costs for polymer resins, absorbents and other oil-based materials, and another third by energy costs. Fiber, higher taxes and the cost of expensing stock-based compensation also ate into earnings, the company said.
“As we entered 2006, we knew higher costs would pressure our margins, particularly in the first half of the year,” said Chairman and Chief Executive Thomas Falk. He said the company sold more products at higher prices and cut other costs to offset the increase in raw materials and energy costs.
Falk said cost inflation this year will be greater than the company had assumed, mostly because of increases for fiber and oil used to make paper products and other goods.
But, Falk said, the company is sticking to its forecast of earning $3.85 to $3.95 per share for the full year. He said second-quarter earnings would be 93 cents to 95 cents per share. Analysts expect 94 cents per share.
Average selling prices for personal-care items fell 1 percent. Late last year, rival Procter &Gamble Co. rolled back price increases on diapers, forcing Kimberly-Clark to follow suit.
“They didn’t get the diaper prices they wanted – pricing is still really tough – but they are getting good volume growth,” said Linda Bolton Weiser, an analyst with Oppenheimer &Co.
As for the larger picture, Bolton Weiser said Kimberly-Clark performed fairly well in the first three months of the year but that profits excluding corporate expenses were worse than she expected.
Jason Gere, an analyst with A.G. Edwards &Sons Inc., called it “a good solid quarter” for Kimberly-Clark, but said he was still waiting for profit margins to start improving.
Analysts say another concern for Kimberly-Clark is the recent announcement by Wal-Mart Stores Inc. that it plans to cut inventory in U.S. stores, which could cause the world’s largest retailer to buy fewer diapers and paper towels.
Procter &Gamble immediately lowered sales-growth forecasts after Wal-Mart’s announcement, but Falk said Wal-Mart was “no big factor for us in the (first) quarter” and doesn’t expect to change its sales outlook for the year because of it.
Kimberly-Clark said it saw double-digit sales gains during the first quarter in developing countries and sold more diapers and health care products in North America and Europe.
Kimberly-Clark took $154 million in after-tax charges for cutting manufacturing and administrative costs in North America and Europe. Most of the charges were for accelerating depreciation and lowering the value of assets.