Kimberly Clark (NYSE:KMB) is set to release its first quarter 2013 earnings on Friday, April 19 after a solid growth in fiscal 2012. The company reported revenues of $21 billion in 2012, an organic growth of 5% over the previous year. This was backed by an incremental improvement in net selling prices coupled with a positive movement in sales volumes. See more on Kimberly-Clark’s last year’s result here.
We expect Kimberly-Clark to clock near 3% y-o-y organic sales growth this quarter in line with the management’s outlook.  This is achievable through a combination of growth in organic volumes, higher net selling prices and an improved product mix. We also expect upside from the international segment through increased penetration in emerging economies.
The company posted 10% growth in organic sales from its international operations in 2012. The baby care division showed huge growth potential as sales volumes increased by 45% in China, 20% in Russia and 15% in Brazil. (See: Why China Is The Next Frontier For Kimberly-Clark)
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The first quarter results should also reflect sustained efforts by the company towards restructuring its business and the impact of its FORCE (Focus on Reducing Costs Everywhere) model. These have helped Kimberley-Clark achieve cost savings of $295 million in 2012, and this quarter, we estimate the FORCE program to add about $70 million in cost savings. As per the management, key input costs are slated to rise by ~$55 million.  The company will also spruce up its strategic marketing spending to support product innovation and targeted growth initiatives. Marketing spend stood at about $115 million for 2012, an 11 percent increase over 2011. We expect the company to report 4% growth over the previous quarter in operating profits.
Strategic Changes in the Western and Central European Business
Kimberley Clark exited its diaper business in Western and Central Europe with the exception of Italy in October 2012. This was done in order to streamline its resources towards its strongest markets and capitalize on its growth opportunities. The company has started divesting some of its lower margin businesses, mainly in the consumer tissue segment. The restructuring is expected to take place through 2014, and we expect the company to incur $35 million in costs in Q1 2013. Sales would also be marginally affected by about $100 million this quarter due to this divestiture. 
Pulp and Tissue Restructuring Activities
The company had decided to restructure its pulp manufacturing operations in January 2011, and last year it streamlined an additional facility in North America to further enhance profitability of its consumer tissue business. The effect of these efforts will be seen as a reduction in sales by $100 million while operating profits would increase by about $20 million this quarter. We have taken this into consideration while estimating the top-line and bottom-line growth figures. 
Based on the company’s performance in the upcoming Q1 2013 results, we will update our price estimate for Kimberly-Clark which currently stands at $86.Notes: