Kimberly-Clark adapts in Europe

26 October 2012

LONDON: Kimberly-Clark, the personal care group, is aiming to exit several product categories in Central and Western Europe, reflecting difficult trading conditions and longer term challenges.

The firm intends to divest or shut down "low margin or slower-growing businesses" in various markets. As a result, it will stop manufacturing and selling diapers in markets across Europe, apart from in Italy.

"The diaper businesses have not been able to meet our growth or return targets and, unlike the rest of our European businesses, they've not been earning their cost of capital," Thomas Falk, Kimberly-Clark's chief executive, told analysts on a conference call.

"We expect the European market to remain challenging going forward, so our teams there will continue to focus on improving our profitability and generating solid cash flow and returns on capital."

A new management team for Western and Central Europe was appointed earlier this year, tasked with conducting what Falk described as a "comprehensive review" of its business and strategy.

The company's European consumer division delivers sales of slightly more than $2bn annually. The changes now being implemented are anticipated to trim this figure by some $500m.

"Making a decision to exit the diaper category in Europe was a tough call for us. It's one ... that we're in all over the world," said Falk.

"It came down to the call: do you want to spend more, chasing the European diaper opportunity? Or do you want to go harder in China, Brazil, Russia, Eastern Europe? And I think the team made us a strong recommendation," said Falk.

The organisation will also streamline its local operations, including selling or closing five plants, transferring production to other facilities, and cutting headcount by between 1,300 and 1,500 people.

These changes will begin in the fourth quarter of 2012 and will be completed by the end of 2013. Restructuring costs are due to hit $250m to $350m over the period to 2014.

"At the same time, we'll be placing more focus on our strongest branded positions, particularly in the UK, Italy, Spain and Switzerland," Falk added.

Some of the categories receiving heightened emphasis will be childcare, baby wipes, moist bathroom tissues and facial tissues, he added.

Corrected: October 30, 2012

Data sourced from Seeking Alpha; additional content by Warc staff.