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Kimberly-Clark Corporation (KMB)

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$26,191.40. $29,308.80. $32,611.96. $33,360.85. $1,610.00. $1,627.00. $1,642.00. $1,770.00. $1,583.00. $1,500.00. $740.00. $704.00. $745.00. $800.30. $844.50. $932.80 – PowerPoint PPT presentation

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Title: Kimberly-Clark Corporation (KMB)


1
Kimberly-Clark Corporation (KMB)
  • December 4, 2007
  • Gloria Ho, Jonathan Li, Jason Mueller, Patricia
    Shongedza

2
Investment Managers
  • Gloria Ho
  • gho2_at_uiuc.edu
  • Jonathan Li
  • jxli2_at_uiuc.edu
  • Jason Mueller
  • jcmuell1_at_uiuc.edu
  • Patricia Shongedza
  • pshonge2_at_uiuc.edu

3
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 worlds
    population) trust K-C brands EVERYDAY.

5
Consumer Brands

6
Business Segments Brands
Personal 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
7
Business Segments Products
Personal Care Disposable diapers, training and youth pants, and swim pants Baby wipes Feminine and incontinence care products Consumer Tissue Facial bathroom tissue Paper towels Napkins
K-C Professional Other Facial 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
8
Revenues by Segment
9
Revenues by Region
  • Net sales grew 14 in the developing and emerging
    markets, with each of the regions contributing to
    the increase.

10
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

11
Presentation Outline
  • Company Overview
  • Business Segments
  • Risk Assessment
  • Competitor Analysis
  • DCF Analysis
  • Recommendation

12
Risk Assessment
  • Significant increases in costs
  • Foreign market risk
  • Heavy price competition
  • High failure risk for new products

12
13
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.

13
14
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 RD to make products more
    adaptive to local markets

14
15
Risk Factors Contd
  • 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

15
16
Presentation Outline
  • Company Overview
  • Business Segments
  • Risk Assessment
  • Competitor Analysis
  • DCF Analysis
  • Recommendation

17
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

18
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
19
1 year chart (competitors)
20
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

21
RCMP Position
  • Purchased 300 shares on April 20, 2005 at
    63.91/share
  • Total investment 19,173
  • Current market price 69.81
  • Unrealized gain of 1,770.00 (9.23)

22
Position in the portfolio
23
Correlation Matrix
24
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 2007
  • November 15, 2007 0627 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 0911 AM EST

25
Presentation Outline
  • Company Overview
  • Business Segments
  • Risk Assessment
  • Competitor Analysis
  • DCF Analysis
  • Recommendation

26
DCF Analysis
  • WACC calculation
  • Beta 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)

27
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

28
DCF Analysis
Key Assumptions
29
DCF Analysis
  • Based on DCF ?Share Price 73.49

30
Presentation Outline
  • Company Overview
  • Business Segments
  • Risk Assessment
  • Competitor Analysis
  • DCF Analysis
  • Recommendation

31
Recommendation
  • Based on DCF ?Share Price 73.49
  • Current Share Price 69.56 (3 Dec 07 closing)
  • HOLD
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