Transcript Kimberly-Clark Corp. David Mizell Mary Voss 4/19/2005

Kimberly-Clark Corp.
David Mizell
Mary Voss
4/19/2005
Why is K-C a good company?
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Strong Portfolio of Brands
International Growth Potential
Innovation/Product Improvements
Continuing Cost Reduction
Good Management and Strong Corporate
Governance
Commitment to Environmentalism
Company Overview
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Founded in 1872 in Neenah, WI by John A. Kimberly,
Charles B. Clark and two other partners.
Company Timeline
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First paper towel (Scott) invented in 1907
Kotex pads created in 1920
Kleenex invented in 1924
Huggies developed in 1978
Depends introduced in 1980
Pull-Ups developed in 1989
Kimberly-Clark and Scott Paper Merge in 1995
Neat Sheet introduced in 2002
Brands
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Kimberly-Clark Brands
Kleenex facial tissues
 Cottonelle toilet paper
 Scott and Viva paper towels
 Kotex pads
 Huggies, Pull-Ups, Depends, and Poise diapers
 Neat Sheet
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Market Share
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Category
2004 2003 2002
Diapers . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .38% 38% 40%
Training, Youth and Swim Pants . . . . . . . . . . .69% 68% 73%
Feminine Care . . . . . . . . . . . . . . . . . . . . . . . . . 20% 22% 23%
Adult Incontinence Care . . . . . . . . . . . . . . . . . .56% 56% 55%
Baby Wipes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40% 41% 42%
Facial Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . 51% 53% 54%
Bathroom Tissue . . . . . . . . . . . . . . . . . . . . . . . 29% 28% 27%
Paper Towels . . . . . . . . . . . .. . . . . . . . . . . . . . . 19% 19% 19%
Financial Performance
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Total Revenue
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Basic net earnings per share
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$13,231,500,000 in 2002
$14,026,300,000 in 2003
$15,083,200,000 in 2004
$3.24 in 2002
$3.34 in 2003
$3.64 in 2004
Market Cap is $31.04 B
P/E Ratio is 18.04
Kimberly-Clark’s Numbers
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Trailing P/E: 18.04
Forward P/E: 15.57
Profit Margin (ttm): 11.40%
Operating Margin (ttm): 16.62%
Return on Assets (ttm): 10.22%
Return on Equity (ttm): 26.56%
Beta is .85
KMB 1 Year Chart
KMB 5 Year Chart
KMB 5 Year vs. S&P 500 and DJIA
Competitor Comparison
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Kimberly-Clark (KMB)
 Market Cap:31.04B
 Employees:60,000
 Rev. Growth (ttm):5.10%
 Revenue (ttm):15.08B
 Operating Margin (ttm):16.62%
 Net Income (ttm):1.77B
 EPS (ttm):3.574
 P/E (ttm):18.04
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Proctor & Gamble (PG)
 Market Cap:137.73B
 Employees: 110,000
 Rev. Growth (ttm):18.5%
 Revenue (ttm):51.49B
 Operating Margin (ttm):19.16%
 Net Income (ttm):6.81B
 EPS (ttm):2.513
 P/E (ttm):21.73
Playtex Products (PYX)
Market Cap:625.23M
Employees:1,500
Rev. Growth (ttm):1.4%
Revenue (ttm):666.90M
Operating Margin (ttm):18.70%
Net Income (ttm):55.51M
EPS (ttm):.907
P/E (ttm):10.85
Industry Averages
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Market Cap: 947.34M
Employees: 8,100
Revenue Growth (ttm): 7.5%
Revenue: 1.60B
Operating Margin (ttm): 3.90%
Net Income: 14.31M
EPS: .39
P/E: 16.87
KMB 1 Year vs. PG and PYX
KMB 5 Year vs. PG and PYX
Porter’s Five Forces
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Threat of New Entrants: Low
Threat of Substitutes: High
Bargaining Power of Buyers: Moderate
Industry Rivalry: High
Bargaining Power of Suppliers: Low
Financial Forecast
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From company guidance:
3-5% Revenue growth expected
 Reduction of 150 million in cost each year for next
couple of years
 Plan to repurchase 25 million shares over the next 5
years
 Capital spending 5-6% of sales
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Concern over rising commodity prices
Financial Forecast
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Discounted Cash Flow Analysis returns a price
of $77.40 per share
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View excel spreadsheet
Scenario Analysis
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Growth Rates
- rates at 5% : 78.62
- rates at 4% : 75.99
- rates at 3% : 73.44
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WACC
- WACC at 8% : 82.89
- WACC at 8.5% : 74.56
- WACC at 9% : 67.64
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Cost of Products Sold
- at 65.40% : 66.92
Global Growth Potential
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Sells products in more than 150 countries
Manufacturing facilities in 37 countries
In K-C’s developing and emerging markets sales and operating
profit rose at double-digit rates
Developing and emerging markets account for less than 25
percent of sales
BRICIT, where K-C has established assets and a marketplace
presence: Brazil, Russia, India, China, Indonesia and Turkey.
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Per capita income in each of these countries is rising
Using multi-tier product strategy to drive penetration and usage and to
build brand loyalty
Good Management
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Fortune magazine named K-C among the 100 Best Companies to Work For in
America in 2002 and 2003.
K-C has won several similar global awards
Wal-Mart recognized Kimberly-Clark with a Supplier of the Year Award in
2003
Named in 2002 to the Calvert Social Index:
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Criteria relates to workplace issues, environmental management, product safety,
application of consistent high standards to international operations, respect for
indigenous peoples’ rights and progressive community relations.
Kimberly-Clark was listed on the Financial Times Stock Exchange Index for
Good US 100 Companies and the FTSE4GOOD Global 100 Companies
Index in 2002
Kimberly-Clark was recognized in 2002 by the National Safety Council as a
Charter Member for the company’s involvement in founding the organization
in 1912.
Thomas J. Falk ,Chief Executive Officer, has worked for Kimberly-Clark
since 1983.
Environmental Policies
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Protection of the Biosphere
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Sustainable Use of Natural Resources
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Recycled fiber in products and packaging and following
sustained yield forestry practices
Use and Conservation of Energy
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Periodically audits environmental performance at all locations.
Establishing ongoing energy conservation programs in all
locations
Reduction and Disposal of Wastes
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Supporting an integrated approach to solid waste management
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Recycling
Conservative use of landfills
Recommendation
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Purchase 300 Shares of KMB at the Market
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KMB closed at 64.48 as of 4/18/2005
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300 shares at 64.48 yields an investment of
$19,344.