Kimberly-Clark unveils new operating model, sets long-term financial targets

Kimberly-Clark Corporation (NYSE:KMB) unveiled the next phase of the company's transformation as part of the company's Analyst & Investor Day event on Wednesday.

The household products giant outlined a new operating model and key commercial initiatives designed to grow its brands and businesses at a faster pace than its categories.

"Over the past five years, our global team's dedication and strong execution have positioned us to fully leverage the scale we've built and to catapult Kimberly-Clark into its next chapter of growth," said Hsu. "We are building on the consumer centricity and commercial advantages we've established by moving to a more agile and focused operating structure that we are confident will help accelerate our proprietary pipeline of innovation in right-to-win spaces and improve our growth trajectory, profitability, and returns on investment," he added.

Moving ahead, the company will focus on driving a step-change in performance by sharpening its strategic focus through the new operating model that includes accelerating pioneering innovation to capture significant growth available in its categories by investing in science and technology to satisfy unmet and evolving consumer needs. Kimberly-Clark (KMB) highlighted that it will focus on growing 12 powerhouse brands that have #1 or strong #2 positions and drive more than 80% of the company's net sales in five, global daily-need spaces with a total addressable market of approximately $240B.

KMB also plans to optimize its margin structure to deliver superior consumer propositions. Notably, the company said it would implement initiatives and deploy technology and data analytics designed to create a fast, adaptable, integrated supply chain with greater visibility that can deliver continuous improvement. The planned supply chain modernization is expected to generate more than $3B in gross productivity and $500M in working capital savings that will be used to help fuel growth investments.

KMB expects to complete its transition to the new organizational structure by the end of 2024. The actions are expected to generate approximately $200M of selling, general and administrative savings in the next few years that will be available to invest back in the business.

In terms of guidance, Kimberly-Clark (KMB) set long-term growth and return targets that included organic sales growth ahead of market growth; adjusted operating profit growth in the mid-to-high single digits on a constant currency basis; adjusted EPS growth in mid-to-high single digits on a constant currency basis; annual free cash flow generation of at least $2B.

"We see a clear path to consistent growth and strong margin expansion as we sharpen our focus on areas of competitive advantage and where we believe we have the right to win," said CFO Nelson Urdaneta, Chief Financial Officer.

The company currently expects to incur approximately $1.5B in one-time restructuring and reorganization costs, split roughly into 50% in non-cash charges and 50% of cash expenses, over the next three years as it implements the new plans.

For the near term, KMB continues to expect to deliver a low-to-mid single-digit percentage increase in 2024 organic sales. 2024 adjusted operating profit is still expected to grow at a high single-digit to low double-digit rate on a constant-currency basis and EPS is expected to grow at a high single-digit rate on a constant-currency basis.

Shares of KMB edged up 0.66% in premarket trading on Wednesday.