By Kimberly Chin
Kimberly-Clark Corp. said it was switching chief executives in the midst of a restructuring program intended to boost profits as the maker of Kleenex tissues, Scott toilet paper and Huggies diapers struggles with weak sales.
Current President and Chief Operating Officer Michael Hsu is set to become chief executive officer effective Jan. 1, succeeding CEO Thomas Falk, who has served in this position since 2002. Mr. Falk, who has been chairman since 2003, will become executive chairman, the company said.
Before his promotion to COO last year, Mr. Hsu was group president of the company's personal care and consumer tissue business in North America. He remains a member of the company's board.
Earlier this year, the company launched a restructuring program aimed at reducing between $500 million and $550 million in costs by the end of the year by slashing its workforce and slimming its manufacturing supply chain. It also said it would exit or divest from some of its low-margin businesses.
Mr. Hsu said in a call with analysts that he would like to reinvest some of the savings from the restructuring program, both in core areas like personal care as well as its digital and e-commerce operations.
However, he said rising commodity costs and weakened foreign currency, particularly from its Latin American markets, will be a drag on earnings in the coming quarters. The company, which reported its earnings on Monday, said its profit was hurt by $120 million of higher input costs over the latest quarter.
Kimberly-Clark has dealt with rising costs for commodities like pulp, which is the material used in tissues and toilet paper, polymer and other raw materials. Mr. Hsu said those contracts are "unlikely to be as favorable as they are this year" due to the current environment.
Mr. Hsu said the company will focus on selling its more popular items, as well as introducing a mix of larger packs to offset weaker categories.
In August, Kimberly-Clark said it would increase its list prices and change package counts in the U.S. and Canada for several brands, including Cottonelle bathroom tissue and Huggies diapers, to offset rising commodity costs. The price increases will mostly go into effect in the first quarter of next year.
Several consumer-products makers, including rival Procter & Gamble Co., have also raised prices on some of their products in North America.
Kimberly-Clark also said Monday that third-quarter sales fell 2% to $4.58 billion from the same period a year ago, compared with the $4.53 billion forecast of analysts polled by Refinitiv.
Kimberly-Clark reported its profit fell 20% to $451 million, or $1.29 a share, from a year earlier. Excluding special items, it reported earnings of $1.71 a share, topping analysts' expectations of $1.63 a share, according to a Refinitiv poll.
The Dallas-based company said it would further cut its earnings guidance for the full year. It expects to earn between $3.29 and $3.79 a share, compared with the $3.37 to $3.87 a share it previously forecast. It maintained its organic sales growth target of about 1%.
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