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The New York Times

The New York Times

BUSINESS

Kimberly-Clark Announces Plans to Cut 6,000 Jobs and Close 20 Factories
By ERIC O’KEEFE
Published: July 23, 2005

DALLAS, July 22 - Kimberly-Clark said on Friday that it would cut 6,000 jobs and close or sell 20 manufacturing plants by the end of 2008 as part of a broad-based strategy to reduce costs.

The cutbacks, which amount to about 10 percent of the company's global work force and 17 percent of its plants, were part of Kimberly-Clark's announcement of its second-quarter earnings, which fell 7.2 percent.

The company, which is based in Dallas and makes Kleenex tissues, Viva paper towels, Huggies diapers and Scott products, said net income was $421.8 million, or 88 cents a share, compared with $454.3 million, or 90 cents, in the period a year earlier. Excluding a one-time charge of 7 cents a share to bring back $660 million in foreign profits, the company earned 95 cents a share, a penny better than analysts expected.

Sales increased 8.1 percent, to $3.99 billion from $3.69 billion, with consumer tissue products and personal care products registering gains of 12.9 percent and 7.4 percent.

The introduction of Kleenex antiviral facial tissue contributed to an almost 16 percent increase in North American tissue product sales. In Europe, sales increased 1 percent. In developing and emerging markets, personal care sales climbed 18 percent, with robust growth in Latin America.

Kimberly-Clark's chairman and chief executive, Thomas J. Falk, told analysts in a conference call that the company's biggest challenge so far this year has been responding to $200 million in unanticipated cost increases related to higher oil prices.

Mr. Falk noted that the company was able to offset these pressures through currency benefits, price increases, a slightly lower tax rate and increased sales volume.

The job cuts and plant closings will result in after-tax charges of $625 million to $775 million beginning in the third quarter and continuing through 2008. In addition to the closing of the 20 plants, 4 factories will be streamlined and 7 others will be expanded. The company expects the announced reductions and other cutbacks to generate $300 million to $350 million in annual savings beginning in 2009. Executives declined to identify the plants that would be closed.

A primary objective of these savings will be to accelerate investment in developing and emerging markets. In particular, Mr. Falk singled out Brazil, Russia, India, China, Indonesia and Turkey. "We're going to move even faster to capitalize on the tremendous opportunities in these markets," he said. He added that Kimberly-Clark's sales in those countries were up about 30 percent in the second quarter.

Mr. Falk also said that earnings would be 94 to 96 cents a share in the third quarter. The company's earnings guidance was narrowed to $3.77 to $3.83 for the year, which is at the top end of the previous outlook of $3.70 to $3.85 a share. That would compare with earnings of $3.55 a share in 2004.

Shares of Kimberly-Clark rose $1.53, to $64.38.