The speaker, Chris Jakubik, introduces the Fourth Quarter 2023 Business Update for Kimberly-Clark, a company that produces consumer goods. He mentions that the update will include some forward-looking statements and non-GAAP financial measures, and encourages listeners to access the earnings release, supplemental materials, and Q&A session on the company's investor website. The CEO, Mike Hsu, then provides an overview of the company's performance in the past year, highlighting strong organic growth and cost recovery. He also expresses pride in the team's hard work and commitment to satisfying consumers and navigating industry challenges.

Kimberly-Clark has made significant improvements to their business and successfully navigated challenges such as inflation and supply chain disruptions. They have learned valuable lessons and are now in a strong financial position to continue growing. They will be hosting an Investor Day in March to share their strategic priorities and initiatives for future growth. In 2023, their main objectives are to elevate their categories and expand their markets, as well as drive profitable growth while remaining disciplined on costs. They have over-delivered on their expectations for organic growth and have a healthier balance across price, volume, and mix.

The company has experienced organic growth since 2019, with sales gains in the pandemic period and a decrease in the impact of inflation. They have focused on elevating their categories and launching innovative products that meet consumer needs. This has been particularly successful in the Personal Care business, with a focus on Skin Health & Wellness and Leak-Free Comfort. The team has successfully scaled the launch of Kotex globally in its first year.

The company's recent innovations in Youth Pants and Diapers have been successful due to their consumer-preferred solutions and strategic investments in commercial execution. This includes enhancements in innovation and product technologies, a digital-first approach, and improved in-market execution and revenue realization. These efforts have resulted in new product launches accounting for a significant portion of net sales and organic growth. The company has also improved its commercial tools and has been recognized as the top CPG manufacturer in North America. These factors have contributed to a recovery in gross margin through the end of 2023.

The company has experienced a rapid recovery in gross margins due to accretive innovation, improved commercial execution, and cost savings. This has allowed them to pivot their focus from cost recovery to accelerating growth and building competitive advantages. Despite ongoing challenges, they are confident in their ability to expand margins and drive further growth. The company's strong financial position is a result of their exceptional execution and portfolio optimization. Looking back at 2023, they have reasons to believe in their potential and ability to maintain momentum across the enterprise.

In the fourth quarter, the company experienced 3% organic growth, with flat volumes due to past pricing actions. Gross margin increased by 210 basis points, but adjusted operating income margin and earnings per share were slightly lower than the previous year due to currency headwinds and inflationary markets. The negative impact from monetary losses in hyperinflationary economies was approximately $70 million, resulting in a $0.09 per share decrease in earnings. These impacts were largely driven by a significant devaluation since the last guidance update in October.

In 2022, the company saw strong organic sales growth, with adjusted gross margin improving and adjusted operating margin growing. However, there were negative impacts from monetary losses in hyperinflationary economies. The company also made investments in marketing, research, and technology, which have held back operating profit margins but are expected to drive organic growth and margin leverage in the future.

The company saw positive growth in their Personal Care segment, driven by a balanced contribution from volume, mix, and price. North America and China saw strong growth, while other markets also showed improvement. Feminine Care had double-digit growth due to share gains. In Consumer Tissue, the company saw improved volumes and flat volumes in North America for the full year. The UK also saw momentum in their Andrex brand. Operating profit margins improved as the year progressed due to volume trends and productivity initiatives.

The success of the K-C Professional business can be attributed to their strategic focus on resilient segments, investments in innovation, and necessary pricing. While volumes have been impacted by pricing and inventory levels, operating margins have improved and cash flow and balance sheet have strengthened. This provides a strong foundation for the company to drive growth and make significant changes in the future.

The company has announced a dividend increase and is cautiously optimistic about their future outlook for 2024. They expect low-to-mid single digit organic net sales growth, with a boost from pricing in hyperinflationary economies. Operating profit is expected to see high single-digit to low double-digit growth, with improvements in revenue realization, business mix, and cost savings. However, reported results will be impacted by currency translation and divestitures. The company also expects high single-digit earnings per share growth, but this will be negatively impacted by currency translation. The pacing for 2024 is expected to be relatively balanced between the first and second half of the year, with a lower rate of organic net sales growth in the first quarter.

The company expects a split of 48% in operating profit and earnings in the first half of the year and 52% in the second half, compared to a 51:49 split in 2023. This is due to a balance of sales, currency headwinds, and expected productivity gains. The CEO thanks employees and discusses the company's strategic plans and financial discipline. The call concludes with a reminder of forward-looking statements and the discussion of non-GAAP financial measures.

The CEO of Kimberly-Clark, Mike Hsu, welcomes Chris to the company and expresses pride in the company's performance in 2023. He also mentions that they have consistently invested to build a consumer-centric organization and are on a path of growth. The company will be detailing their strategic priorities and plans in March. The first question from an analyst is about the company's organic sales growth guidance for next year, which is expected to be low to mid single digit, higher than the 3% growth in the current quarter and the lower growth in Q1.

The consumer market for Personal Care, Consumer Tissue, and Professional products remains strong, with low substitution and room for growth. Despite a mixed consumer picture, employment and wage growth are up, and the impact of economic policies has yet to fully materialize. In North America, category value was up six in the fourth quarter and eight for the year.

The speaker attributes the resilience of their product categories to low substitution. They also mention seeing demand for premium products in various markets. The speaker believes their approach of elevating categories and expanding markets is still working, although they recognize the need to offer value at all price tiers. The speaker also addresses a question about the decomposition of their top-line growth for the year, stating that they expect volume to pick up in Q2 and pricing to be in line with Q4, largely driven by hyperinflationary economies. They clarify that the volume pick up is due to a combination of pricing moderating and early signs of volume recovery.

Mike Hsu is pleased with the progress the company has made in terms of volume and consumer response. The company is shifting to a volume mix-driven plan and will use contribution pricing to offset inflation. They have seen improvements in their business in North America and believe they have the right mix and growth drivers in place. The cost picture and FORCE savings benefit from deflation, but in the fourth quarter, FORCE savings were lower than expected. This is due to the phase of cost recovery and supply chain stabilization being mostly behind them.

The company expects disruptions and inflation to ease in the foreseeable future, but costs will remain at higher levels. Core commodities like pulp and resin are expected to be favorable, but other factors like distribution, logistics, and labor inflation will offset this. Currency-related inflation in emerging markets will also need to be addressed. The net cost headwind is projected to be around 100 basis points for the year, but the company has strong productivity plans in place. They ended last year with $325 million in FORCE results.

Over the past 20 years, FORCE has delivered over $6 billion in productivity gains and is now focusing on gross productivity and integrated margin management. They have a strong pipeline of initiatives that will contribute to their bottom line. The company is excited to discuss their transition at an upcoming meeting. When it comes to Argentina, they are staying the course but will balance potential with the volatility of the market. The company is inspired by their employees operating in difficult conditions.

The company is proud of the impact its employees make in difficult markets and will continue to serve consumers in those conditions. However, they will not stay in markets that become untenable, which could be due to inability to make products or convert currency. Last year, the company had a $115 million impact on the net monetary position in other income and expense line, resulting in a net impact of $0.16 on EPS. This year, they are projecting half of that impact, with more in the first half of the year.

The speaker discusses the volume of the Professional segment, which was weaker than expected due to the impact of COVID-19. They mention that volume has decreased by 23-24% since 2019 and attribute this to the shift to work-from-home environments. The speaker also notes that the team has adjusted to this change and has rightsized the business to offset the effects of lost volume. They clarify that the decrease in volume has not resulted in significant deleverage due to cost adjustments.

The company's team has successfully increased margins through a combination of price increases, product mix, and innovative products. They have also overcome supply constraints that affected their North American Consumer business in the previous year. These constraints have been resolved, and the company hopes to see a tailwind in the first half of next year as a result.

The speaker discusses the company's market share performance and acknowledges that it was negatively impacted by certain issues. However, they have addressed these issues and are confident that their market share will improve in the upcoming year. They also mention their focus on brand investment and maintaining a strong market share in the face of increasing competition from private label brands.

The biggest challenge for the company in North America has been supply constraints, but they have seen strong gains in their largest markets such as South Korea and Australia. In the past quarter, they have also seen an uptick in private label sales, but the company is committed to having a superior value proposition in every price tier. They have improved their commercial execution capability and are confident in their trajectory for the future.

The speaker discusses the company's performance in the first quarter and the rest of the year, noting a lower rate of organic growth and a back-half weighted earnings profile. They mention that volumes have stabilized and they are encouraged by how they finished the previous year.

In the first quarter, the company experienced a flat volume and mix growth due to a combination of their go-to-market plans, productivity initiatives, and currency headwinds. However, they expect to see improvement in volumes and organic growth as the year progresses, with Q1 being relatively muted. There has been a lot of investment in Personal Care, leading to strong market share and organic growth, but Consumer Tissue and KCP continue to struggle with volumes.

The speaker discusses the balance of investment and contribution to growth in their Consumer Tissue business for the upcoming year. They see the business as a premier consumer franchise and are proud of the margin recovery they have achieved. They note that volume has remained resilient, reflecting the essential nature of the category. Inflation has been historically high in the past few years, but the team has done a great job in recovering margins and implementing better risk management tools.

The company has made changes to its supply chain practices and invested in revenue growth management tools, which have helped drive margin recovery. They have also focused on driving value-added innovation and improving the quality of their products. The company has increased its advertising budget by 100 basis points in 2023 and plans to continue expanding it at a slower pace in the current year.

The speaker discusses the projected overheads for the year and states that they are expected to be largely flat in dollar terms year-over-year. They mention that this gives an idea of the investments and overall spend in 2024, building on previous years. The speaker also mentions that they will take one more question and then answers a question about the breakdown of the 2024 guide by division, stating that they anticipate mid-single digit growth in Personal Care, flat or low-single growth in Consumer Tissue, and negative growth in Professionals, particularly in the first quarter as they lap contracts. They also mention that they have been gaining market share in Personal Care and express confidence in meeting their projected numbers. There is also a clarification about reinvestment.

During a Q&A session, Nelson and Mike discussed the company's investments and growth plans. Mike mentioned that they have been investing for a while, with a focus on advertising, which yields high returns. They will also be competitive on trade promotions, but that won't be their main driver of growth. Nelson provided a breakdown of expected growth by segment, with Personal Care growing in the mid to high single digits and the other two segments in the low single digits. Pricing will also contribute to growth, primarily due to currency-related movements in hyperinflationary economies.

Chris Jakubik is thanking everyone for attending the conference and invites analysts to ask follow-up questions. He also mentions that they are excited to see everyone in March. The operator then ends the event and thanks everyone for participating.

This summary was generated with AI and may contain some inaccuracies.