Kimberly-Clark de Mexico SAB de CV (ADR) ((KCDMY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Kimberly-Clark de Mexico’s recent earnings call painted a mixed picture, highlighting both achievements and challenges. The company reported growth in sales and cost savings, maintaining a robust balance sheet. However, it faced declining exports, increased costs, and a cautious consumer environment. The company’s innovation and share repurchase program signal potential for future growth, yet current economic conditions present significant hurdles.
Net Sales Growth
The company reported net sales of MXN 13.4 billion for the quarter, marking a 2% increase from the previous year. Consumer products saw a notable growth of 5%, driven by a 1% increase in volume and a 4% improvement in price/mix.
Cost Reduction Success
Kimberly-Clark de Mexico’s cost reduction initiatives were successful, yielding approximately MXN 500 million in savings. These savings were primarily achieved through sourcing, materials improvement, and process efficiencies.
Strong Balance Sheet
The company’s financial health remains strong, with a cash position of MXN 11 billion and no debt maturing for the rest of the year. The net debt-to-EBITDA ratio stands at 1x, and EBITDA to net interest coverage is 10x, underscoring financial stability.
Share Repurchase Program
The company repurchased nearly 50 million shares, representing about 1.5% of shares outstanding. This move contributed to a total payout to shareholders of approximately 7%.
Innovation Driving Volume Growth
Innovation in product lines such as diapers, tissue, and economic products like Vogue has led to market share gains and increased consumer acceptance, driving volume growth.
Exports Decline
Exports decreased by 15%, significantly impacted by a 32% drop in hard rolled sales. However, finished products experienced a 7% growth, partially offsetting the decline.
Higher Cost of Goods Sold
The cost of goods sold rose by 3%, influenced by higher raw material prices and unfavorable foreign exchange impacts, presenting a challenge to the company’s profitability.
Decreased Operating Profit
Operating profit saw a 4% decline, with EBITDA decreasing by 3%. The operating margin was recorded at 21.3%, while the EBITDA margin stood at 25%.
Increased Financing Costs
Financing costs increased to MXN 404 million from MXN 287 million the previous year, with net interest expenses rising to MXN 401 million.
Weak Consumer Environment
The consumer environment remains weak, characterized by increased uncertainty, job growth deceleration, and a slowdown in remittances, impacting overall economic growth.
Forward-Looking Guidance
Looking ahead, Kimberly-Clark de Mexico anticipates improved margins due to favorable raw material prices and a stronger peso, despite the challenging consumer environment. The company remains optimistic about its ability to navigate these challenges and capitalize on growth opportunities.
In summary, Kimberly-Clark de Mexico’s earnings call reflects a balanced view of achievements and challenges. While the company has made significant strides in sales growth and cost savings, it continues to face economic headwinds. The focus on innovation and shareholder returns provides a positive outlook, yet the current market conditions require cautious optimism.