01—Abstract
Summary
Summary of the 8-K filed March 27, 2024. Cited figures are marked; the original filing is the authoritative source.
On March 25, 2024, Kimberly-Clark Corporation approved a global transformation initiative aimed at improving its focus on growth and reducing its structural cost base.
The initiative includes reorganizing the company into three new segments, making corporate and regional overhead more efficient, and optimizing the global supply chain. Actions have commenced in the first quarter of 2024 and are expected to be completed by December 31, 2026. The company expects cumulative pre-tax charges of approximately $1.5 billiona over that period, with cash costs roughly half of that amount, primarily related to workforce reductions, and non-cash charges primarily related to incremental depreciation and asset write-offs.
It also expects to spend approximately $800 millionb in capital related to the initiative through December 31, 2026. The company cautions that these estimates are preliminary and subject to change. In a news release furnished as Exhibit 99.1, Kimberly-Clark unveiled a new operating model centered on 12 powerhouse brands in five global daily-need spaces, with a total addressable market of approximately $240 billion.
The company targets more than $3 billionc in gross productivity savings and approximately $500 million in working capital savings, and expects about $200 million of SG&A savings over the next few years. It set long-term targets including organic net sales growth ahead of market growth, adjusted operating profit and adjusted EPS growth in the mid-to-high single digits on a constant currency basis, and annual free cash flow of at least $2 billion. It also set a 100% Natural Forest Free ambition across its product portfolio, expecting to be more than halfway there by 2030.
The company reiterated its 2024 outlook from January, expecting a low-to-mid single-digit percentage increase in Organic Net Sales, with reported net sales affected by approximately 300 basis points from currency translation and 60 basis points from the Brazil Tissue divestiture. Adjusted Operating Profit is still expected to grow at a high single-digit to low double-digit rate on a constant-currency basis, and Adjusted EPS at a high single-digit rate on the same basis.
02—Key points
Key Highlights
- Approved a global transformation initiative on March 25, 2024, with actions expected to be completed by December 31, 2026.
- Expects cumulative pre-tax charges of approximately $1.5 billion through 2026, roughly half cash (mainly workforce reductions) and half non-cash (mainly incremental depreciation and asset write-offs).
- Expects approximately $800 million in transformation-related capital spending through December 31, 2026.
- Plans to reorganize into three segments: North America (about $11 billion annual sales, 23% operating profit margin), International Personal Care, and International Family Care and Professional (about $3.5 billion annual sales, approximately 10% operating margin).
- Targets more than $3 billion in gross productivity savings and approximately $500 million in working capital savings, plus about $200 million in SG&A savings.
- Set long-term targets of organic net sales growth ahead of market growth, mid-to-high single-digit adjusted operating profit and EPS growth on a constant currency basis, and at least $2 billion in annual free cash flow.
- Maintained 2024 outlook: low-to-mid single-digit organic net sales growth, with about 300 basis points of currency translation and 60 basis points from the Brazil Tissue divestiture affecting reported net sales.
03—Questions
Frequently Asked Questions
What is the total expected cost of the transformation initiative?
The company expects cumulative pre-tax charges of approximately $1.5 billion through December 31, 2026, with cash costs about half of that amount, primarily workforce reductions, and non-cash charges primarily related to incremental depreciation and asset write-offs. It also expects approximately $800 million in related capital spending through that date.
When will the transformation initiative be completed?
Actions have commenced in the first quarter of 2024 and are expected to be completed by December 31, 2026. The company expects to complete its transition to the new organizational structure by the end of 2024.
What savings does the company expect from the initiative?
The company targets more than $3 billion in gross productivity savings, approximately $500 million in working capital savings, and approximately $200 million of selling, general and administrative savings over the next few years, with the savings to be reinvested in the business.
Are the cost estimates certain?
No. The filing states that the estimates of charges and their timing are subject to assumptions and may differ from current expectations, and that additional charges or cash expenditures not currently contemplated may be incurred. Risks include failure to realize anticipated benefits and delays or disruptions in implementation.
How does the company's 2024 outlook compare with prior guidance?
The company stated that the outlook it provided in January is consistent with its new long-term growth and return targets. It continues to expect a low-to-mid single-digit percentage increase in Organic Net Sales, and high single-digit to low double-digit growth in Adjusted Operating Profit on a constant-currency basis, with Adjusted EPS growth at a high single-digit rate on that basis.
04—Continue