The Kimberly-Clark's First Quarter 2024 Earnings Call is about to begin and participants are on a listen-only mode. The host, Chris Jakubik, introduces himself and reminds everyone that forward-looking statements will be made during the call. The CEO, Mike Hsu, thanks his colleagues for their hard work and discusses the company's strategy and strong Q1 results. He also mentions the company's focus on innovation and navigating external challenges while maintaining a consumer-centric culture.

The speaker is proud of the company's progress and confident in their potential for growth. They are open to questions from the audience. The first question is about the company's better-than-expected Q1 results and why they didn't pass on the full beat. The speaker explains that the organization is running well despite geopolitical challenges and the quarter's strength was due to better volume and market share gains. There was no pull forward and the market shares are moving in the right direction.

The company is feeling positive about their strong Q1 performance, with volume momentum and stable input costs driving their success. The team has been operating well, despite challenges in certain regions and ongoing geopolitical issues. In Q1, the company saw significant growth in China and a rebound in North America after a trade de-stock. However, they remain cautiously optimistic for the rest of the year due to potential challenges such as rising commodity prices.

The company expects a $250 million increase in input costs for commodities in the full year, but this was within the previously provided range. They also anticipate an $0.08 headwind from the Personal Protective Equipment divestiture and plan to increase advertising spend and investments as their innovation pipeline builds up. In response to a question about market share, the company did not directly address any specific competitor's missteps but mentioned that they expect to see growth in market share as their innovation pipeline progresses.

The speaker, Mike Hsu, responds to a question about market share and retail inventory reductions in the first quarter. He is encouraged by the progress made in market share and expects further improvement throughout the year. In North America, they were up or even in 6 out of 8 categories, with Kleenex seeing a significant increase in share due to a new social media campaign and restored merchandising. In China, they also saw an increase in market share thanks to a strong Chinese New Year execution.

The company reported a double-digit increase in volumes compared to a category that was down 10% in China. The management team expressed optimism about the business performance and volume delivery. They stated that the volume plans for the rest of the year remain unchanged and they are on track to achieve their $3 billion productivity and $200 million SG&A savings targets announced at the Investor Day. The company has implemented an integrated margin management process which has improved visibility, discipline, and accountability across the entire value chain.

The company has been focused on driving lower costs and has seen success in the first quarter with non-procurement-related savings of $120 million and additional savings from procurement efforts. They expect to deliver the full $3 billion in savings over the next few years, with the new operating model going live in October. While there was a 50 basis point increase in advertising as a percentage of sales, there was also good operating leverage on SG&A, which is a change from previous years.

The speaker is discussing the company's reinvestment levels and how they have been investing in advertising and capabilities to improve their operations. They feel that they have made significant progress in this area, but they still may need to increase their investment in order to match their peers. In the past, the speaker was not confident in their ability to invest, but in the last five years, they have built world-class capabilities with the help of Alison. They have made progress in this area.

The speaker discusses two factors that have contributed to their company's success: building their digital capabilities and recovering from a period of inflation. They also mention geopolitical issues and their plans to continue investing in the business for the long term. The speaker clarifies that there was a retail inventory reduction in the first quarter and provides their perspective on the current state of the consumer and the category.

The company had planned for a decrease in sales due to inventory destocking by retailers, which is a common occurrence in the December and January timeframe. They have efficient logistics capabilities and are early adopters of new inventory management systems. This decrease in sales was expected and offset by stronger than anticipated volume. The consumer environment remains resilient, with strong demand for the company's daily essential products.

Nick is noting that premium demand is growing strongly in developed markets like the U.S., China, UK, and South Korea, as well as in emerging markets like Brazil. However, there is concern about the strain on middle to lower income households. While there may be some trade down in certain categories, the company is focused on providing value at every level of the market and improving their products overall. In terms of specific regions, both China and the U.S. have seen strong numbers from competitors.

The speaker is discussing the strong performance of the company in China and the US, particularly in relation to their respective markets. He attributes the success in China to a combination of strong Chinese New Year execution, high-quality products, and effective digital marketing strategies. He also notes that the company is the market leader in China but still has room for further growth. In the US, the company is also outperforming the market, but the speaker focuses more on China in his response.

The company's strategy includes being great at every tier of the good, better, best ladder and accelerating innovation throughout their product line. The CEO believes that the current year is a more normal year for the CPG industry, with stable input costs and demand starting to stabilize. The company has strong productivity plans in place to manage any potential margin issues.

The speaker discusses the factors that will affect the company's operations, including demand signals and environmental changes. They have built capabilities to manage through ups and downs, and see the current situation as manageable. They originally predicted $200 million to $250 million in net input costs for the year, but now expect to be at the high end of that range. Core commodities and energy are expected to be a tailwind, while distribution, logistics, labor costs, and currency will be a headwind. The phasing of input cost inflation is expected to be more muted in the first half of the year.

The company expects to see an increase in costs due to inflation in the first two quarters of 2023, but it is factored into their outlook and they are confident in their ability to manage it. They have a strong pipeline of productivity initiatives and have changed how they manage the business to become more predictable. They also have better tools and are committed to delivering on their $3 billion gross productivity commitment in the next five years.

The speaker is discussing steps they have taken to better manage input costs and protect the company. They have been working to reduce volatility in their business, particularly in regards to pulp. They have implemented new tools and strategies to help with this, and are confident in their ability to handle the current inflation cycle.

The integrated margin management approach that the company has been working on for the past year addresses volatility by looking at all the elements that drive total delivery cost and margins. This includes revenue growth management, price backed architectures, proactive risk management, productivity initiatives, and procurement. The company has been building this muscle over the past five years and has better visibility and ability to react to changes in commodities. This approach has helped the company manage through volatility.

The speaker addresses a question about the company's plans to exit some private label businesses and mentions that they are focusing on differentiating their brands with proprietary science-based innovation. They also mention that their private label production represented 4% of global sales last year and that this will likely be cut in half by the end of 2025. They explain that the company is making significant technology and capacity investments and wants to be more selective in where they spend their capital. This will enable them to focus on their strategic priorities and may lead to a further decrease in their exposure to private label over time.

Nelson Urdaneta and Mike Hsu of Colgate-Palmolive discussed their expectations for the company's bottom line, which should be consistent with their top line growth. They also mentioned their supply chain optimization initiative, which is one of their three strategies unveiled at Investor Day. They will have more to say on this in their 2025 guidance. When asked about restructuring savings, they confirmed that the $120 million in savings is part of the $3 billion commitment they made for the next five years. They also mentioned an element of procurement savings that will be disclosed annually. The new organization will start in October, earlier than expected.

The speaker is questioning the discrepancy between the company's faster savings and revenue realizations and their conservative guidance for the rest of the year. The company acknowledges the uncertainty in the global market and input cost environment, but remains confident in their performance for the year. They also mention that margins can fluctuate due to factors such as country and category mix, innovation pipeline, and productivity delivery.

The company has a positive outlook for the year and plans to invest more in their business and innovation pipeline. They are also taking into account the sale of their PPE business, which will have a negative impact on their earnings. The company is being conservative in their guidance and is open to increasing investments if opportunities arise. A Q&A session followed the presentation.

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