Kimberly-Clark slashes workforce

CHICAGO - Kimberly-Clark Corp says it will cut 6000 jobs and close or sell 20 plants as it moves to strengthen its nappy and health-care businesses and expand its presence in emerging markets.

The restructuring news came as the maker of Huggies nappies and Kleenex tissues posted better-than-expected quarterly earnings.

Kimberly-Clark said it would record charges of US$625 million ($914 million) to US$775 million ($1.13 billion) through 2008 to cut about 10 per cent of its workforce and eliminate 17 per cent of its manufacturing facilities under the restructuring.

The majority of the plant closings will be in North America and Europe, chairman and chief executive Thomas Falk said during a conference call. He declined to be more specific, but said the consolidation would mostly move production to other plants within the same region.

"It's really about focusing on where we have [manufacturing] scale" rather than moving production to lower-cost countries," Falk said.

Cost savings would come from operating fewer plants, which will also streamline shipping and inventory management.

Kimberly-Clark expects savings of US$300 million to US$350 million annually by 2009, which it plans to use to improve its diaper business, speed growth in India and China, move into higher-margin products in health-care and boost new product development.

The company will also focus on improving its feminine care business and shift its commercial products operation into more profitable areas such as workplace safety products.

Dallas-based Kimberly-Clark has improved profits from operations and sales in recent quarters as it pushed to be more competitive with top rival Procter & Gamble.

"I think they have started to make some improvements, both in volumes and profitability, but they apparently looked in the future and decided they wanted to take the next step," said Dan Popowics, analyst at Fifth Third Asset Management.

In December, the company announced plans to cut US$400 million to US$500 million in costs over three years. But those savings have been needed to combat rising energy and pulp costs.

"They seem to be absorbing these costs all right," Lauren DeSantos, analyst at Morningstar said. "But it's not giving them margin expansion they wanted."

Second-quarter profit fell to US$421.8 million from US$454.3 million a year earlier.

Sales rose 8.1 per cent to US$3.99 billion. Volume rose more than 5 per cent. The company has raised prices on products including Cottonelle bathroom tissue.

- REUTERS