KIMBERLY CLARK CORP Q2 FY2025 earnings call

• Strong organic sales growth driven by the strongest volume quarter in 5 years, with global weighted share gains and significant share gains in key categories.
• Progress in China and positive early returns on the global playbook. Strategy of delivering exceptional brand propositions across the value spectrum is paying off, retaining value-seeking consumers within brand franchises.
• Excellent commercial execution, superior innovation, and strong investment in brand differentiation. Delivered industry-leading productivity to reinvest for profitable growth.
• Organization rewiring enhancing agility, bringing better consumer solutions and lower product costs faster. Decisive action to focus the portfolio, confident the joint venture with Suzano will unlock potential of International Family Care and Professional, enabling laser focus on North America and International Personal Care.

The company is laser-focused on its higher growth, higher-margin North America and International Personal Care businesses. Globally, they gained weighted share and made significant share gains in key categories. In North America, consumption was up 4.5% in Q2 with categories ranging from low single-digit (e.g., bath tissue around 4%) to near double-digit (e.g., adult care). In international markets, there were frequency declines in more informal economies like Latin America, but larger developed markets showed stable demand. Revenue contribution % isn't explicitly stated in absolute terms but emphasizes the focus on North America and International Personal Care as higher margin segments.

• Expect to continue volume mix-led organic growth in the second half, fueled by a strong pipeline of innovation. The vast majority of first-half growth was driven by innovation.
• Gross productivity expected to be in the top end of the 5%-6% range. Adjusted operating profit growth based on North America and International Personal Care performance, with low single-digit growth expected on a constant currency basis.
• Brand spend to step up in the back half to around 7% versus 6.4%-6.5% in the first half, to sustain volume/mix momentum.
• Confidence in second half due to strong pipeline of new product and go-to-market activations and innovations.

• Uncertainties in consumer purchasing power, which affects category performance. Impact of informal economies on international markets leading to frequency declines. Noise in year-on-year comparisons due to factors like hurricane impacts, port strikes, etc. Commodity pressures affecting pricing discipline and the need for pricing to offset costs.

Q: Maybe you could just talk about, obviously, a very strong quarter within the context of what's been going on pretty broadly across the space. So just kind of 2 questions, like any more specifics in terms of really what drove this level of outperformance. But more importantly, given everyone is kind of moderating their expectations for the back half of the year and you guys obviously are suggesting otherwise, what give us the reasons to believe on why we should feel comfortable with kind of the outlook in the back half?

A: Michael Hsu and Nelson Urdaneta discuss consumer state, innovation driving demand, international market differences, pipeline confidence, and comp details.

Q: So Nelson talked about volume mix led growth in the back half. So I wanted to kind of talk a little bit about the pricing environment and your pricing outlook. On the one hand, if we think about what we've heard year-to-date and through the second quarter, I think we've heard and we've seen pockets of increasing promotion and competitive activity in certain areas, particularly in the U.S. On the other hand, obviously, there are inflationary pressures building and indications that we should see some kind of pricing rolling through as we move through the back half into next year. So I guess in that context, just your overall assessment of competition, your pricing outlook for the balance of the year and any expectations or considerations you have just for customer and consumer acceptance of that incremental pricing if it's to come?

A: Michael Hsu talks about pricing discipline to offset commodities, not using pricing as growth driver, promotional intensity below category average.

Q: Just wanted to unpack the outlook update a little bit. There's some constants, but obviously also some changes with tariffs or some of the impact on the portfolio reshaping. And you gave some details in the prepared remarks, but maybe just bridge the changes for us and put the spread trends together and it feels like there's a good number of moving parts from 3 months until now -- 3 months ago until now.

Q: Just sneaking a quick follow-up on the brand spend. You also called out some of the awards at Conn and just how much improved that performance is. What's driving the better execution? Is it just a bit more spend? Is it better capabilities? Or is there a pivot there and how you approach it?

A: Nelson Urdaneta and Michael Hsu discuss outlook changes, brand spend improvement due to in-house capabilities and emotional brand connection.

Q: I had a quick question on your JV deal with Suzano. With the IFP out of the base business, how should we think about the organic sales growth and margin EPS accretion to your long-term algo? And then you touched on this a bit, but volume in the quarter was strong and broad-based. But I guess I just wanted to verify, there wasn't any pull forward. I mean you highlighted some benefits given changes in retail inventory. So maybe hoping for just a little bit more color on that and how you're thinking about that in the second half. Ultimately, should we assume volume growth in 2H?

A: Michael Hsu and Nelson Urdaneta talk about JV impact on growth and margins, volume being strong with focus on consumption, and IFP transaction's effect.