Sanford C. Bernstein Strategic Decisions Conference

Transcription

1 Sanford C. Bernstein Strategic Decisions Conference June 2, 2011 Essentials for a Better Life

2 Agenda Company Overview and Performance Strategic Review Financial Discipline 2

3 Headlines Executing well in difficult environment Managing factors we control Leveraging strong financial and cost discipline Investing for future growth and long-term success 3

4 Essentials for a Better Life Products used by approximately one-quarter of world s population Long history of innovation #1 or #2 position in 80+ countries Strong global brands 4

5 Four Global Businesses (2010 Sales) Personal Care ($8.7B) Consumer Tissue ($6.5B) K-C Professional & Other ($3.1B) Health Care ($1.5B) 5

6 Results vs. Global Business Plan Improvement Objective Actual CAGR Sales 3-5% +5% E.P.S.* mid/high single digits +5% ROIC* bps +20 bps Dividend In line with E.P.S. +10% *E.P.S. and ROIC are adjusted. The reasons why we make these adjustments are in the Investors section of our website at 6

7 April 2011 Plan Sales up 4-6% Organic growth 2-4% E.P.S.* $4.80 to $5.05 (+3-8% vs. 10) ROIC* up 0-20 bps Dividend increase 6% Announced January *2011 E.P.S. and ROIC are adjusted. 7

8 Cost Inflation Cost Inflation ($ Million) Significantly higher than original plan for 2011 $790 >2X original assumption $450- $550 Market pulp costs at all-time highs Oil prices have risen rapidly $240 $200- $250 Original Plan Equivalent to ~20 percent earnings headwind compared to Average April Plan 8

9 Actions to Offset Cost Inflation Raising selling prices Price/mix up 1 to 2 percent year-on-year Implementing additional cost savings programs Up $50 million from previous plan Reducing overhead spending Below-the-line spending to grow in line with, or potentially slower than, rate of sales growth Expect to offset most, if not all, of incremental headwinds compared to original plan 9

10 Global Business Plan (GBP) Strategies Manage portfolio to balance growth, margin, cash flow Invest in brands, innovation, growth initiatives Deliver sustainable cost reduction Disciplined capital management to improve ROIC and return cash to shareholders 10

11 Business Unit Strategies 1 Win globally in Personal Care Targeted growth and improve margins in Consumer Tissue Drive rapid growth throughout K-C International focus on China, Russia, Latin America Grow in higher margin segments in K-C Professional (KCP) and Health Care K-C International = K-C s business in Asia, Latin America, the Middle East, Eastern Europe, Africa 11

12 North American Baby/Child Care 1 Leading market shares (41%) Continuous innovation; near-term launches: Improvements to HUGGIES diapers, PULL-UPS training pants HUGGIES Jeans diapers/wipes Exciting diaper category innovation coming Q

13 North American Feminine Care U BY KOTEX* 1 Premium line extension aimed at younger females Significant innovation with powerful integrated marketing campaign Launched Q1 last year; exceeding expectations Q market share 5 pts Double digit feminine care volume growth 5 consecutive quarters Further innovations introduced Q

14 North American Adult Care 1 Attractive category #1 position (~55% share) Innovation and marketing programs delivering strong growth Volume Growth 10% 1-in-3 Like Me POISE marketing campaign 6% 7% Q

15 Consumer Tissue Targeted Growth and Improve Margins 2 Global focus on net realized revenue, mix, cost reduction Price/mix +3% 2009, 2010, Q Innovations to strengthen brands and enhance margin/mix Step-change improvement on KLEENEX facial tissue Market share up 3 points since 1 st half 2010 Launching new KLEENEX On-the-Go packs 15

16 Pulp and Tissue Restructuring 2 Exiting remaining integrated pulp manufacturing operations Improving underlying profitability and returns of consumer tissue/kcp Impacts 5 to 6 facilities Completed by end of 2012 After-tax charges $280 - $420 million Annualized operating profit benefit at least $75 million Annualized Operating Margin Benefit of Restructuring >50 bps KCP 150 bps Consumer Tissue 16

17 Drive Rapid Growth Throughout K-C International (KCI) 3 Market growth 5-7 percent 34% Penetration rates to increase 22% 16% 27% Current diaper penetration ~40 percent Multi-tier product strategies % of K-C Sales % of K-C Operating Profit* Targeted geographic expansion and growth plans *Adjusted 17

18 Focus Areas: China, Russia, Latin America 3 Approximately 50 percent of KCI Innovation across all categories Selling and marketing investments to further enable growth China business expanding into more cities and product tiers Numerous capacity expansions underway First Russian manufacturing facility 3-Year Organic Sales CAGR Through % KCI 16% China, Russia, LAO 18

19 Higher Margin Segments KCP Wipers/Safety 4 More than 30 percent of KCP Long-run market growth mid-single digits Numerous innovations Expanding Jackson Safety internationally Strong results as U.S. manufacturing activity improves North American Volume Growth 8% 8% 2010* Q *2010 excludes the effect of acquisitions. 19

20 Higher Margin Segments Health Care Medical Devices 4 About 30 percent of total Health Care Leading market positions Mid-single digit market growth Growth acceleration underway Integration of I-Flow Expanding sales, R&D capabilities Innovations to improve patient outcomes, reduce hospital-acquired infections Excellent business momentum Volume Growth 10% 8% 2010* Q *2010 excludes the effect of acquisitions. 20

21 Investing For Growth Supporting innovation Building brand equity Growing K-C International Increasing use of nontraditional channels and programs Improving efficiencies % of net sales up 110 bps since 2007 Strategic Marketing Increases ($ Million) $95 $90 $

22 Sustainable Cost Reduction FORCE Savings ($ Million) $161 $372 $250- $300 Ongoing program Supply chain focus Global procurement organization Lean manufacturing practices Performance accelerating Average F 22

23 Working Capital Improvement Cash Conversion Cycle (Days) Strong improvement since 2008 Inventory focus Improved accounts payable Expect continued progress going forward Building further capabilities Target 23

24 Disciplined Capital Spending Core to improving ROIC Portfolio management driving investment decisions More targeted expansion Increased emphasis on innovation and cost reduction Leveraging scale GBP target % sales % of Net Sales 7.0% 4.7%

25 Dividends Per Share Dividend (Declared) $2.80 Dividend Payout* 56% 41% $ Dividends increased 39 years consecutively Top-tier dividend in CPG industry Current yield >4 percent *Declared dividends per share divided by adjusted basic earnings per share from continuing operations. 25

26 Share Repurchases Share Repurchases ($ Billion) Shares Outstanding (Millions) 2.8 $9.6 billion in total % F Year-end Mar 31 st 2011 Excess cash flow for share repurchases Strong track record of reducing share count 26

27 Shareholder Returns Versus S&P Year 3-Year 5-Year 10-Year 59% 36% 17% 27% 22% 15% 26% 3% KMB S&P500 KMB S&P500 KMB S&P500 KMB S&P500 Total Shareholder Returns through 05/26/11 assumes reinvestment of dividends. 27

28 Summary Delivering in the short-term Investing for sustainable, long-term growth Building strong capabilities Confident GBP will lead to improved shareholder value 28

29 Reminders Forward-Looking Information Certain matters in today s presentation constitute forward-looking statements and are based upon management s expectations and beliefs concerning future events impacting the company. There can be no assurance that these future events will occur as anticipated or that the company s results will be as estimated. For a description of certain factors that could cause the company s future results to differ from those expressed in any such forward-looking statements, see Item 1A of the company s Annual Report on Form 10-K for the year ended December 31, 2010 entitled Risk Factors. Non-GAAP Financial Measures In our presentation, we refer to certain non-gaap financial measures, including adjusted earnings per share, adjusted ROIC and adjusted operating profit. Management believes that reporting in this manner enhances investors understanding and analysis of the company s performance. For additional information on why we make these adjustments and reconciliations to comparable measures under generally accepted accounting principles, see the supplemental information posted to the Investors section of our website ( 29

30 Q&A Essentials for a Better Life