Kimberly-Clark Corporation (KMB) December 4, 2007 Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza
Kimberly-Clark Corporation (KMB) December 4, 2007 Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza.
Dec 17, 2015
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Kimberly-Clark Corporation (KMB)
December 4, 2007Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza
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Investment Managers
Gloria Ho
Jonathan Li
Jason Mueller
Patricia Shongedza
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Presentation Outline
Company Overview Business segments Risk assessment Competitor analysis DCF Analysis Recommendation
4
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
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