Kimberly-Clark Corporation (KMB) December 4, 2007 Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza.

Kimberly-Clark Corporation (KMB)

December 4, 2007Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza

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Investment Managers

Gloria Ho

gho2@uiuc.edu

Jonathan Li

jxli2@uiuc.edu

Jason Mueller

jcmuell1@uiuc.edu

Patricia Shongedza

pshonge2@uiuc.edu

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Presentation Outline

Company Overview Business segments Risk assessment Competitor analysis DCF Analysis Recommendation

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Company Overview Global health and hygiene company

Personal Products industry Products made from natural or synthetic fibers Advanced technologies in fibers, nonwovens, and absorbency.

Founded in 1872 & headquartered in Dallas, TX Consumers in more than 150 countries worldwide Manufacturing facilities in 40 countries More than 55,000 employees FY2006 Total Revenues of $16.75B; Market cap: $29.5B

More than 1.3 billion people (1/4 of the world’s population) trust K-C brands EVERYDAY.

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Consumer Brands

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Business Segments: BrandsPersonal Care

Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise

Consumer Tissue Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page

K-C Professional & Other Kimberly-Clark, Kleenex, Scott, WypAll, Kimtech, Kleenguard, Kimcare

Health Care Kimberly-Clark, Ballard

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Business Segments: ProductsPersonal Care Disposable diapers, training and youth pants, and swim pants Baby wipes Feminine and incontinence care products

Consumer TissueFacial & bathroom tissue Paper towels Napkins

K-C Professional & OtherFacial & bathroom tissue Paper towels Napkins Wipers Various safety products

Healthcare Surgical gowns Drapes Infection control products Sterilization wrap Disposable face masks and exam gloves Respiratory products

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Revenues by Segment

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Revenues by Region

Net sales grew 14% in the developing and emerging markets, with each of the regions contributing to the increase.

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Innovation

K-C invented five of their eight major consumer product categories: facial tissue, paper towels, toilet paper on a

roll, feminine pads and disposable training pants

Primary raw material: fiber recycled from recovered waste paper

Polypropylene and other synthetics

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Presentation Outline

Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

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Risk Assessment

Significant increases in costs

Foreign market risk

Heavy price competition

High failure risk for new products

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Risks: Input Costs Pulp, polypropylene, and synthetic polymers

Direct input to 25% of total revenue. Cost increase for 2007 more than 120% greater than originally

forecast. Result: 4-7% increase in prices for tissue paper, diapers. Costs partially offset by increased volume, outsourcing.

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Risks: Price Competition Highly competitive segments

Low cost substitutes, private/generic labels for virtually all consumer products.

Questionable customer loyalty: Brand loyalty vs. Brand repertoire.

The Wal-Mart Effect 13% of total firm-wide revenues

Mitigating Factors Leverage customer knowledge and increase responsiveness.

Ex: Packaging alternatives for diapers

Leverage global R&D to make products more adaptive to local markets

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Risk Factors Cont’d

Foreign Markets Rapid investment in BRICIT could lead to overcapacity. Political and socioeconomic volatility in emerging markets.

Latin America, Eastern Europe.

Success highly contingent on ability to form partnerships. Adapting to cultural differences, building distribution networks, etc.

Intellectual property protection.

New Product Acceptance High initial marketing costs High market saturation of existing products: difficulties in

continuing innovation

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Presentation Outline

Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

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Competitors

Vary in size and function Competes against well known branded

products therefore faces risk in consumer acceptance

Principle areas of competition include brand loyalty, product quality and innovation, price and marketing strategies

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Competitors

KMB Georgia Pacific Playtex Products

PG

Market Cap 29.44B NA NA 228.33B

Employees 55,000 50,000 1,250 138,000

Revenue 17.82B 2.15B 636.20M 77.89B

Net Income 1.85B 623M 30.20M 10.56B

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1 year chart (competitors)

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Porters five forces

Threat of new entrants; LOW Bargaining power of suppliers; LOW Bargaining power of buyers; MODERATE Threat of substitutes; HIGH Industry rivalry; HIGH

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RCMP Position

Purchased 300 shares on April 20, 2005 at $63.91/shareTotal investment: $19,173

Current market price: $69.81 Unrealized gain of $1,770.00 (9.23%)

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Position in the portfolioMV % of Portfolio

41.53%

5.64%9.11%

9.74%

2.80%

5.53%

6.24%

4.92%4.82%

6.87%

Cash

AEE

AEO

CPRT

DFS

FR

JKHY

KMB

MVSN

SRCL

SRZ

WAG

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Correlation Matrix

AEE AEO CPRT FR JKHY MVSN SRCL SRZ WAG DFSAEE 1.00AEO -0.03 1.00CPRT 0.38 0.20 1.00FR 0.30 -0.03 0.28 1.00JKHY 0.22 0.38 0.40 0.12 1.00MVSN 0.16 0.41 0.32 0.21 0.55 1.00SRCL -0.13 0.11 -0.02 -0.06 0.08 -0.12 1.00SRZ 0.11 0.21 0.41 0.18 0.38 0.46 0.04 1.00WAG 0.06 0.13 0.08 -0.15 -0.02 -0.05 0.09 -0.17 1.00DFS 0.31 0.28 0.10 -0.02 0.40 0.80 -0.55 -0.61 -0.11 1.00

KMB 0.36 0.10 0.48 0.08 0.31 0.03 -0.01 0.00 0.24 -0.18

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Recent News

Kimberly-Clark Declares Dividend Kimberly-Clark Declares Regular Quarterly Dividend of 53 Cents/Share• Dividend increased 9% in 2006, and expected to increase 8% in

2007November 15, 2007: 06:27 PM EST

Ahead of the Bell: Kimberly Clark Analyst Upgrades Kimberly-Clark, Says 2005 Restructuring Program

Paying Off with potential increased revenue coming from BRIC emerging markets

November 26, 2007: 09:11 AM EST

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Presentation Outline

Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

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DCF Analysis

WACC calculationBeta: 1.3 (Google Finance: 0.71)WD: 7.18%

WE: 92.82%

KD: Weighted avg. interest rate

KE: Cal. from CAPM

Tax rate: 36.7% (effective tax rate)

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DCF Analysis

Key assumptions: Sales Growth Rate (2007-08): 4.8% Sales Growth Rate (2009-12): 2.0% Cost of product to Sales: 66.9% Terminal Growth Rate: 3.0% Dividend Growth: 8%

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DCF Analysis

2007 2008 2009 2010 2011 2012Marketing, research and general expenses 2,991 3,134 3,197 3,260 3,326 3,392

Depreciation and amortisation 880 991 1,104 1,220 1,338 1,458

Key Assumptions

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DCF Analysis

Based on DCF Share Price: $73.49

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Presentation Outline

Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

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Recommendation

Based on DCF Share Price: $73.49 Current Share Price: $69.56 (3 Dec 07

closing)

HOLD