In the third quarter 2024 Q&A session, Chris Jakubik, Head of Global Investor Relations at Kimberly-Clark, introduces the session and mentions the forward-looking nature of the statements and the use of non-GAAP financial measures. CEO Mike Hsu then highlights the company's progress in executing their Powering Care strategy, which aims for above-average growth. He emphasizes their success in driving category growth through innovation and improved commercial execution, while also maintaining productivity to fuel further investments and achieve bottom-line growth, noting that their transformation is on track without disruptions.

The paragraph discusses Kimberly-Clark's transformation to a new organizational structure aimed at enhancing efficiency and competitiveness. Despite their progress, they face short-term challenges such as retail inventory reductions, declining private label demand, and weaker demand in certain regions. The company's strategic actions aim to navigate these challenges and enhance growth and stakeholder value. During a question-and-answer session, Lauren Lieberman from Barclays inquires about retail inventory volatility and shelf space issues. Mike Hsu responds, stating that they are confident in their distribution growth and SKU count, indicating no disconnect in shelving.

The paragraph discusses the company's innovation pipeline and the challenges it faced due to supply chain issues last year, particularly with a packaging supplier problem impacting Personal Care brands in North America. This led to a spike in inventories in the third quarter last year, which they are now balancing out. The company is experiencing an 80 basis point headwind to global net sales year-to-date due to restocking, inventory reductions, and hurricane impacts, mainly in North America. Despite these challenges, retail inventories seem consistent with historical levels, and consumer demand was strong, with 3.2% growth in Personal Care and Consumer Tissue. However, shipment issues caused by these factors led to a disconnect between consumer offtake and deliveries. If the current trends continue, the company expects to achieve around 3% organic growth for the full year. Nelson Urdaneta adds that consumer offtake was robust, but shipments were affected by various factors.

The paragraph discusses factors affecting the company's Q3 performance, highlighting transitory issues like changes in retail inventory, a hurricane impacting shipments from the Southeast, and declines in private label volumes due to business exits. Additionally, there was weakened demand in professional and some international markets. These factors collectively accounted for about two-thirds of the shortfall in Q3, with a significant impact on the North America Personal Care and Consumer Tissue segments. Lauren Lieberman asks about potential effects from consumer stockpiling related to a port strike and hurricanes, and Mike Hsu responds, indicating that any benefits from such behavior are minimal at the enterprise level and should be resolved within the quarter. The conversation then shifts to Nik Modi from RBC Capital Markets for his question.

In the paragraph, Nik Modi inquires about the market shares and competitive environment, particularly in relation to product innovation, such as Skin Essentials. He notes data indicating high cannibalization rates and asks Mike Hsu for his perspective on whether innovation is aimed at gaining market share or expanding the value pool. Mike Hsu responds by expressing confidence in their market share growth and category expansion efforts. He highlights progress in the US market, where consumption has been solid and categories have performed well compared to the previous year. Overall, their strategy involves investing in better products and pioneering innovation, which is driving progress in market share.

The paragraph highlights an organization's strategy to enhance its advertising efforts and commercial activation by utilizing various approaches, with a focus on margin-accretive premium innovation. They aim to cater to all market segments, from good to best, by incorporating innovative features, such as Skin Essentials, that provide significant consumer benefits. Despite challenges, the organization emphasizes delivering value across all product tiers. Following a brief interaction with Nik Modi, Anna Lizzul from Bank of America inquires about the company's exit from certain private label businesses and how this strategy aligns with achieving a gross margin target of at least 40% by 2030.

The paragraph discusses a company’s strategic focus on strengthening its branded business by reducing its involvement in private label products. This shift allows the company to invest more in developing proprietary, science-based innovations for their main brands, enhancing brand differentiation and growth. An example given is Kleenex, which saw a significant increase in market share as a result of this strategy. The company is phasing out production of a large private label diaper business in the US by 2025, which will reduce its private label product mix. This transition was noticeable in the company's latest financial results. Following this discussion, Bonnie Herzog from Goldman Sachs asks about the sustainability of the company’s gross margin improvements, given potential consumer pressures and the need for promotions.

The paragraph discusses the company's progress and strategy regarding its financial performance, specifically focusing on gross margins and operating profit margins. Nelson Urdaneta highlights the company's achievement of an average 37% gross margin for the year, attributed to consistent gains over the last eight quarters. The company aims for a long-term goal of at least 40% gross margin and an operating margin between 18% and 20% by the decade's end. Key strategies driving these improvements include meaningful innovation, proactive cost management, risk management strategies, and a transformative supply chain approach as part of their Powering Care strategy, all contributing to strong productivity gains.

The company reported $130 million in gross productivity in manufacturing and supply chain for the past quarter, as part of their strategy to achieve $3 billion over the next few years. They emphasize that margin progression will fluctuate quarterly but should be evaluated annually. Despite some cost increases in Q3, these were anticipated, and Q4 is projected to follow a similar trend. The focus is on volume and mix-driven organic growth, maintaining price discipline to offset cost inflation, and enhancing brand value through innovation, advertising, and strong commercial execution.

In this Q&A paragraph from an earnings call, Chris Carey from Wells Fargo Securities asks Mike Hsu and Nelson Urdaneta about their organization's new structure and expectations for category growth. Chris seeks clarity on why category growth is expected to decelerate despite the new structure being in place since October 1st. He also inquires about how the organization plans to achieve its sales growth trajectory, particularly looking towards 2025 when pricing may be less influential. Additionally, Chris asks about the expectations for Q4 operating profit and whether it will be affected by discretionary investment decisions, as well as how these might impact gross margin performance. Mike Hsu acknowledges the multitude of questions and asks for clarification if needed as they address each point.

The organization is making progress in implementing its growth strategy, which has been informally in place before its official start on October 1. Overall, the market categories are resilient and healthy, with strong consumer interest in high-performing products, particularly in developed markets but also in developing ones. The business is focusing on affordability and brand value. Despite slowing birth rates in some markets like South Korea and China, there's stability and growth prospects remain, with an aging population boosting the Adult Care business in developed markets. The demand for premium products is rising across all markets, although there is some softness in purchase frequency.

The paragraph discusses the economic challenges impacting consumer behavior, particularly in Latin America, Southeast Asia, and North America. Consumers in these regions are using products for longer periods due to financial constraints, leading to slower category growth, which is now expected to be around 2% for the year, down from the previous estimate of 2% to 3%. Despite this, the company aims to maintain category leadership and market share growth globally. Nelson Urdaneta further explains that the reduced impact of previous pricing actions has contributed to a decline in organic growth from 4% in Q1 to 1% in the current quarter, as pricing pressures ease, particularly in hyperinflationary economies. This has also affected overall category growth rates.

The paragraph discusses the company's expectations for Q4, focusing on growth driven by a better mix of product volumes. They anticipate a stronger top line compared to Q3, once transitory factors are normalized, but acknowledge potential unpredictable elements. The company plans to increase investments in advertising and brand support, affecting gross margins. Additionally, they expect some discretionary costs in Q4. Despite these factors, they have seen strong year-on-year progress on margins and aim to continue this trend. The conversation concludes with acknowledgments and a transition to a new question from Kevin Grundy.

The paragraph discusses the context of a recent financial quarter that underperformed expectations. The speaker acknowledges challenges related to inventory and evolving market conditions, especially in regions like Southeast Asia and Latin America. Despite the setbacks, the speaker, Mike Hsu, expresses confidence in the strong global execution and management of controllable factors within the organization. He emphasizes the transient nature of the retail inventory issue and assures that the organizational changes have been successful, maintaining good visibility on business conditions. The message aims to reassure investors that the quarter's results should not be seen as a major setback in terms of future visibility and guidance.

The company has been undergoing a "soft reorganization" for six months, improving operational visibility without significant management changes. While they acknowledge market softness due to category conditions and areas for product or marketing improvement, they are focusing on growth in key markets like North America, Personal Care, and Consumer Tissue sectors. They are better positioned to diagnose and respond to market conditions, with specific challenges noted in Kotex in China, fem care in Brazil, bath tissue in South Korea, and Huggies in parts of Latin America. Despite these issues, they are optimistic about their reorganization and growth strategies.

The paragraph discusses a business's disciplined approach to managing volume consumption and the role of promotions, emphasizing a focus on consumption rather than just chasing volume. The business is pleased with strong consumption in North America, despite a disconnect between shipments and consumption. There is an emphasis on managing profitability to reinvest in the business, with performance improving. The team has undergone changes recently and is focused on a profitable, sustainable growth strategy known as the Powering Care transformation. The objective is to lead category growth sustainably. After Kevin Grundy and Christopher Jakubik speak, Mike Hsu takes over and the operator introduces Javier Escalante from Evercore ISI, who plans to address both external and internal factors, with inventory destocking as a major external issue.

In the paragraph, Javier Escalante and Nelson Urdaneta discuss factors affecting the company's growth, specifically in Q3. Urdaneta explains the impact of inventory movements, a bill from the previous year, supply chain normalization in the US, and events like a hurricane and exiting private label contracts. These elements resulted in slightly over one point of growth for the quarter, contributing to an overall 80 basis point increase year-to-date. Escalante then notes that the company, despite being highly decentralized, is shifting away from private label products.

The paragraph features a discussion involving Mike Hsu about the company's strategic initiatives and organizational changes. Hsu mentions that the company's response to a recent reorganization has been positive, with minimal disruption to management in local markets, resulting in continued strong business visibility. He outlines the company's private label segment, noting that it will represent about 4% of global sales this year but will decline to 2% next year as part of an exit strategy. Additionally, he briefly references the implementation of S/4 HANA and the evaluation of strategic options for certain business segments, which constitute a small percentage of profits. Overall, these efforts aim to manage volatility and enhance operational control.

In the paragraph, a discussion is held between Nelson Urdaneta and Javier Escalante, with Mike Hsu addressing questions about the implementation of S/4 HANA, a digital technology service. Hsu praises his team for a smooth transition to the new system in North America, which went largely unnoticed due to its seamless execution, drawing interest from the software vendor. Escalante inquires about potential strategic options for divestment related to international tissue and professional business segments. Hsu refrains from commenting on rumors but assures that efforts are underway to enhance the growth and reliability of these segments, emphasizing the company's commitment to adding value to its categories, consumers, and customers.

The paragraph discusses a strategic decision made by a company regarding its operations in Brazil. The company recognized challenges in competing within the Consumer Tissue sector due to government incentives that they could not access. Consequently, they decided to optimize their participation in this area, which they believe was a wise decision. The discussion highlights the company's ongoing approach to making difficult decisions in markets where they don't see a long-term advantage. The conversation concludes with an appreciation for the participants in the discussion and an invitation for further queries through Investor Relations.

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