KMB Presentation: RCMP By: Paul Ripsky, Joe Vaccaro 4/21/2009
Jan 13, 2016
KMB Presentation: RCMP
By: Paul Ripsky, Joe Vaccaro
4/21/2009
Current Position and RecommendationPurchased 300 shares of KMB on April 20th, 2005 at
$63.91/share
Purchased an additional 100 shares on November 30th, 2008 at $56.29/share
Currently own 400 shares at $49.92/share (4/20/09)
Recommendation : HOLD
Company OverviewKimberly-Clark Corporation engages in the
manufacture and marketing of health and hygiene products worldwide
Founded in 1872, headquarters in Dallas, TXNearly 53,000 employeesOperations in 35 countriesConsumers in more than 150 countries worldwide
Over ¼ of the world’s population uses Kimberly-Clarks products everyday
The number 1 or 2 market leader in over 80 countries
Business SegmentsPersonal Care
Disposable diapers, training and youth pants, and swim pants; baby wipes; and feminine products
Consumer TissueFacial and bathroom tissue, paper towels,
napkins, and related products for household use
Business SegmentsK-C Professional & Other
Facial and bathroom tissue, paper towels, napkins, wipers and various safety products for the away-from-home marketplace
Business SegmentsHealth Care
Surgical gowns, drapes, infection control products, sterilization wrap, disposable face masks and exam gloves, respiratory products, and other disposable medical products
Product Profile
*Kimberly Clark 2008 Annual report
Macroeconomic Overview2008 was a challenging year with the
unprecedented volatility within the market:Slowdown in world economiesLarge swings in commodity pricesExchange RatesLack in the credit markets
Historically the consumer staples industry has been defensive during times of recession
Macroeconomic OverviewCommodity Outlook
Kraft pulp and petroleum based commodities are the main raw materials used in the manufacturing processMajority of raw materials purchased from third
parties8% of pulp is produced internallyDerivative products haven’t been used to mitigate
these risks
NBSK Pulp Index$900
800
700
600
500
400
CME Wood Pulp Futures
Management AssessmentMaintained a solid financial position throughout
the economic downturn
Committed to the manufacturing, researching and disposing of products in an environmentally safe way
Concentrates on the needs of consumers
Revamping supply chain network
Management AssessmentMaintained & Developed Product
SegmentsIncreased R&D to support long-term growthExpansion within K-C Professional &
Healthcare
Global ExpansionHit opportunities within Emerging MarketsConcentrating on BRICIT Countries
SWOT AnalysisStrengths
International diversification
Global Market Leader
Brand name
Commitment to environmentalism
Innovation/Product Improvements
Weaknesses
Mature Markets
Patent Losses
Dependency on Commodities
Opportunities
Emerging Markets (BRIC Countries)
Demographic Trends
Resistant to Economic Cycles
Threats
Intense industry competition
Commodity prices
Currency volatility
Industry OutlookConsumer Staples/Personal Products
Competitive Factors :Brand recognition and loyalty, product innovation, quality
and performance, and marketing and distribution capabilities
Industry consolidation could lead to pricing pressure
Substantial development and marketing costs when introducing and improving products
Moderate Bargaining power of buyersNet sales to Wal-Mart was approximately 14% in
2008
Relative Valuation: Comps
Historical Stock Price (One year)
Recent Trends
Recent Trends (cont)
Cash Flow Pattern Indicates Mature Company
Balance Sheet FAQs
DuPont Analysis
WACCAdjusted WACC based on
10% cost of Equity
Growth Estimates
DCF Analysis
Sensitivity Analysis Reveals Price Range of $48 to $61
Dividend Growth Model
Dividend Growth Model (cont)Sensitivity Analysis
$41 ~ $62 for Constant Growth
Sensitivity Analysis $46 ~ $57 for Two Step Model
Correlation Matrix
RecommendationPurchased 300 shares of KMB on April 20th, 2005 at
$63.91/sharePurchased an additional 100 shares on November 30th,
2008 at $56.29/shareCurrently own 400 shares at $49.92/share (4/20/09)
Recommendation: HOLD our current position of 400 sharesEvaluation shows fair value between $46-57Current Market price $49.92 (4/20/09)