Kimberly-Clark (KMB) 23 Jul 202020 Q2 Earnings call transcript

Company Profile

Participants

Paul Alexander	Vice President of Investor Relations
Maria Henry	Chief Financial Officer
Mike Hsu	Chairman & Chief Executive Officer
Dara Mohsenian	Morgan Stanley
Lauren Lieberman	Barclays
Kevin Grundy	Jefferies
Steve Powers	Deutsche Bank
Nik Modi	RBC Capital Markets
Andrea Teixeira	JPMorgan
Olivia Tong	Bank of America
Jason English	Goldman Sachs
Wendy Nicholson	Citigroup

Call transcript

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Operator

Ladies and gentlemen, thank you for your patience and holding. We now have your speakers in conference. Please be aware that each of your lines is in a listen-only mode. [Operator Instructions] At the conclusion of today’s presentation, we will open the floor for questions. [Operator Instructions] It is now my pleasure to introduce Mr. Alexander. Paul sir. ahead go Please

Paul Alexander

and you, and Quarter hear to Second Executive everyone. Mike CFO. good Conference Call. morning, Officer; Chief Earnings and will our Welcome Henry, This our Hsu, Kimberly-Clark’s Chairman Thank Maria morning, from you

today's presentation of in the We our of Investors website. have materials a section

further making As of and quarterly our be today. discussion forward-looking see forward-looking for statements. of reminder, a will the Please latest annual statements we Risk section report Factors

and information outlook be in to also we adjustments results measures. items release. to Lastly, and financial exclude referring described both adjusted this That will certain release about reconciliations news morning's GAAP has comparable further these

turn I'll call Maria. Now over the to

Maria Henry

stay and for this everyone. Thanks in good I environment. joining Paul, hope morning, and continuing healthy safe call. Thanks, to the everyone is

start me COVID-XX. adjusted the underlying good all-time cash demand margin achieved and significant and ahead flow. Let the record increased operating improvements sales quarter. X%, related headlines and achieved increased with we from reflecting And go additionally Organic savings to net benefits momentum cost We earnings. for record

of results Now the details the let's starting with cover sales.

color but By top one the minutes. care K-C sales point net Our XX% from declined tissue a provide were mix $X.X on net personal sales rose four up rates. That's from just currency each segment, in in more year selling and organic prices Mike quarter ago and and includes up point. improved a billion. X% a XX% Volumes in and line second X% consumer few slightly Professional. in were will drag product

profitability. Moving on to

cost year-on-year. savings We Adjusted XX.X%, the was margin XX%. XXX FORCE savings including improvements. gross outstanding restructuring productivity from and totaled our performance increased profit Combined program $XXX in strong gross points basis quarter. had adjusted quarter million, Second up

to Commodities savings to full a cost benefit of $XX pulp. original by outlook. year up million. $XXX That's quarter $XXX targeting nicely $XXX were now million our the $XXX $XXX are deflation We million. in of to our million to million We better compared driven million range commodity of year that's full original now $XX of million average than expect On million. $XXX

On high profit were currencies rate. in our a foreign by other a the quarter, single-digit operating reducing the hand, headwind

year, year-on-year. benefit expected currency to be commodity Versus of full our improved effects on manufacturing single-digit plan, are incremental currency operating the the drag For about costs high are original the twice a outlook. also the headwinds higher were Other profit.

offset to than to the originally For related full expected these fixed incremental cost absorption. planned. expenses are COVID-XX costs by partially we increase more due improved to year, That's

the down digital Moving nice was spending further profit of was P&L. All-in-all, driven a sales, adjusted in points Between the a percent up advertising. operating by lines up XX%. basis XX as pickup

Margins versus ago. were margins Second an basis XX.X%, in operating significant segments up three consumer absorption. approximate XXX was adjusted points point year basis business quarter up cost from improved Consumer with included tissue benefit fixed XXX in all improvement margin tissue.

On share $X.XX, line, earnings the were record adjusted a year-on-year. up bottom per XX%

temporary an was and by quarter strong cash in billion, in unusually working million benefits, to record nearly compared and to ago all-time $XXX capital efficiency. year by provided capital The the flow payments. operations earnings turn Cash Let's driven was in quarter. of higher increase second $X.X tax a the delay

full back very While decline nicely year, year up half flow of in the year-on-year. cash flow be expected is expect will the cash to we

most share repurchases repurchases and to million. for temporarily lower totaled share of our suspend quarter quarter. That normal Second dividends was second the of because $XXX than decision about

tomorrow. over across As delivered in success. turn now invest All in call continuing for very we release, repurchase while news share program results board, we future this good our the we mentioned morning's to restarting I'll be the beginning all, to will Mike.

Mike Hsu

really then I how want turn environment everyone. and and Maria. your you, operating current to commenting safety. we're by you to on the good morning and I'll the I'll in wish Thank health our begin family's Good and outlook. results

outbreak to our this through effectively since action taken manage of Kimberly-Clark crisis. decisive has business Now, the COVID-XX,

priorities Our operating remain key as follows.

and are we foremost, focused and supply on third, managing protecting supply managing proactively second, the really our strengthen to First while the of proud business consumers; and our essential I'm our we're products of safety and health global to of ensure continuing chain we're employees our employees prudently challenges managing how facing Kimberly-Clark. XX,XXX every we're long-term day. through are health volatility, through the the our near-term of

doing led chain an is our outstanding by manufacturing rolling. our global employees keeping chain Our job organization supply frontline supply

our not had cost we've We strong markets rates. in the several elevated as have teams experienced savings environment, Despite continue tough improvements. deliver productivity material disruptions and impact to with infection even

of execute near our much attention been on longer-term to we While term, continuing strategies. has the our are

to e-commerce better meet in new pivoted this pandemic and rapidly growth opportunities, created opportunities includes wellness and accelerate brands. to also and the pursue health, with around end-user and opportunities protection, our workplace. digital change Our as consumer consumers engage been includes teams needs they environment and in in that both to home have the It how

to Now, I'd comments a make about like results. few our

sales organic up Maria mentioned, in As North In the American X% XX%. increased consumer organic quarter. were sales products,

customer bath was X% latter strong North exceeded increased Category Shipments moderated at-home part Huggies, XX%. consumption sales wipes. consumer levels. by Now consumer child in the and momentum of tissue. continued demand in inventory restore stock-up within bath increased quarter. rose tissue work American growth we as premium-tier demand reflecting in especially In driven to the organic, category ongoing and tissue some XX/X that baby care personal Category and care on that was

challenging early organic fell volumes included that in And X%. experienced customer Professional decline April. North in the late declined from strong America, March fulfilled K-C reflects in environment. were This note benefits X% we to in and which that quarter I'll sales the Turning orders ultimately higher-than-normal shipments

double digits washroom, safety. in Now, by in down volumes product were category, XX% down second quarter about

and Now double volume was in digits wipers up other products.

Personal driven Professional. in were X%, K-C sales X%. sales D&E D&E were care to Moving up organic markets, primarily by down

Now in by Eastern results demand were despite mobility organic low Europe, In consumer sales sales developed favorable X%, Latin and organic lockdowns. power were digits care were economic D&E slightly, In fell consumer sales destocking in impacted America, social in although tissue. in has In pricing drop purchasing key personal digits India. Argentina. some countries growth restrictions operations. and many by Category by China on mid-teens sales single up in organic markets, impacted been in organic driven strong were and of double markets, up impact in the up a and store government up

on we're somewhat or making even we're up In five Europe our and Overall, in good American of market XX% U.K. China market South positions up products or America. Eastern focused markets and share market that maintaining even in XX improving track. North approximately we're know, our eight in Now, in In shares category/country as you were we and combinations shares up of progress. Korea are product up also developed growing consumer shares very or in Latin In categories. D&E mixed the markets were in

safely delivering our So We're I'm We're managing encouraged this and and we're crisis strong effectively. by market very positions results. to our half, our summarize financial through first strengthening progress.

business unclear COVID-XX and on I'll there uncertainty of Now our continues the and outlook. address impact remains The environment. be in to duration the

organic original restoring guidance we're digital plan We're also and both investment, and growth we're for primarily in However, our our Compared outlook to visibility advertising. forward-looking XXXX. for raising our earnings. sales increasing improving is

about our we higher continue outlook, demand driven have thoughts a our increase organic the second of reflects additional with by innovation. half On and sales few to X%. brands targeting advertising and X% and underlying we're this plan to top our strong original which And underlying momentum of COVID. performance good improved X% A combination line growth brand support organic we'll is above of

innovation New Pull-Ups on ASEAN. Eastern launches Brazil America care in North and Europe and includes feminine in

North in addition, home being bath customer we more actions inventory from benefit from people expect and at In improve America will tissue to our levels. sales

expect conditions consumer challenging markets. in D&E in We Professional continue to and some in categories K-C facing

second to expect in destocking additional see also We consumer the half.

up $X.XX to to to year-on-year $X.XX. outlook plan That's to per On bottom is earnings adjusted line our our XX% share $X.XX the revised X% $X.XX. of of original compared

and our invest better to conclusion, position and investment people increase and our We're We're approach. In operate to some and restore remain and outlook further doing our we we'll sustainable our of and consumers. growth to health We'll and brands we paused temporarily increasing value. to balanced We a generate long-term success. we're very this to the opportunities us plan shareholder year. our now this optimistic strategies and quarter While, business long-term momentum safety continue and our with sustainable prioritize well our executing the about continue also investment second capabilities. in share more to for in market fuel create

Now and happy that questions. take your concludes our prepared we'd be now remarks to

Operator

with question [Operator comes Stanley. Morgan Mohsenian Instructions] Our first Dara from

Mike Hsu

Dara. Hey be on mute. you may Dara

Dara Mohsenian

you guys Can hear me?

Mike Hsu

got We you.

Paul Alexander

Yes. We got you.

Dara Mohsenian

well end. your is all Hope on Great. Okay.

even full of end Your back in guidance earnings the the year half year. the dropped seems high single EPS digit at high year-over-year

the behind a offset So a some levels assuming rebuilding I the inventory by of a moderating given towards perspective. line you more First, but that top end for bit drivers retailer depresses quarter, just was that? shipment probably bit about the pantry hoping your be clarity of I'm growth a consumer from on category might deload guys perhaps comments results

line the come that be have from a just versus the in a more the half the of quarters any Thanks. conservatism the commentary in for P&L environment? expected? your the levels Is just budgeted would give a sense? than back second, normally back a So first half you you of guidance as helpful? And just advertising. the original couple us Can then have versus significant then some into better items amount of half, you the reinvestment hangover behind would elevated given in other on of mentioned you reinvestment sort guidance than topline back, volatility back last standpoint that And

Mike Hsu

A questions. handful Okay. Thanks Yes, of Dara. yes.

But because in largest There and in safely be the tissue takes on me some are which favorable demand. demand happens in our growing impact that operate net obviously though. I'll a to ask our context. growth environment. in overall Maria say, certainly We she'll demand puts America North little off of you will in ability and that to jump big definitely bit better resuming the I businesses. our COVID one And this in strong reflects Let reflects lead think guidance confidence I give to see

is But be should demand on for some degree uncertainty that and that wide net out the I fairly exists markets some outside And think point in think seen. I are of KCP, D&E effects, We at to be remains still some I And overall seeing that feel the us still still China. our reflects positive. like and of we both some offsetting range probably there. to year, as overall, of mentioned, this a

investment communications feel in our are the and and very -- definitely the product most in our increase a On half, about good programs where investment more investment in tilted to quality where plan good very second the the marketing was we underlying is half. side, for bit half feel in the brand across second performance or our and little about markets. consumers, We globally second

really uptick plan significant pretty And us so, is increasing for a we The -- feel investment. our about last year. good we had

and it that. was you would original to jump was advertising about meet to want and year plan, our do in Maria, think But there? of plan we that. XX north And be I increase, that in this bps our plan

Maria Henry

Sure.

financials highlights. you look the I overall the Mike When think covered I think the really good. about year,

OP our year. our stronger and forecast growth expected be than Operating January. for As back raised we've the we we flow the year should for cash in forecast, EPS raised

for given for not overall, that business year investment good in comes favorability financially should and it's a the situation and near COVID be business. increased the in only Kimberly-Clark, really of reasons is term half The this weighted, impacts first our way with but that, our that flow-through for on all long-term. its the that So obvious

partially, benefits are but we outlook in areas is full Currency by year Savings expected and look raised FORCE So, increasing by from said, our long-term advertising, top are from capability we're particularly Mike total benefiting price. on growth significantly but volume We builds. when the year, I not million outlook, are plus deflation And benefits. to to entirely $XXX in strong. line also million this at commodity led offset which and headwinds mix the like growth, be GRP from to savings solid other investments for $XXX year. as

had a we little So a slowing we good. our the profit not compare for expecting and promotion. it will in shelf which we're first half benefit first modestly by to the half. as -- second -- more volume to as from return to cost improves expected back a as second And pricing impacts Commodities half A year, looks profit, in investment and increasing sizable the in also XXXX Mike benefit for normal the total year, half a availability inflationary half. our we're the in actions, be also about. should little where becoming the give second savings have are our addition, are of the half, see the I If the end growth, more of back we slightly detail. talked bit strong in levels half you year. further of And In the

team's comfort more happy chain uncertain to fight in on. frame. reinstate during COVID. less comment really the to guidance that's to point, operations our at our And what's going into spikes us So of that is, time April back guidance supply ability the That have I'm this given maintain my and we was on

So Number April. currency overall, risk number the has the in environment has were supply been where two, reduced, chain March, we down one. since commodity calmed

so take through the based on thinking the realistic guidance and remainder of reflects would to what actions what we're intend say, the And we the we and I see it year. is

Dara Mohsenian

big terms are That's comprehensive. the linger? U.S. helpful. That's the you of pricing seen environment, on Okay. U.S. Particularly, weakens pricing the balance in we we've Does bit, promotional very growth you a promotional guys environment, if to competitive back in a here the that touch you're of And a more year? then And create standpoint, What obviously, Do post-COVID. the normalized here the in category some expecting environment? label private environment. a risk? pullback does in just on mentioned that type seeing of of on what more particularly from perhaps the get front

Mike Hsu

that's I same broadly say, especially is care now, is the been U.S. Dara thing still progress on rebuilding the the focus we I I think made would inventories. in because I last think said constructive. particular I Yes. would quarter that say, side. And has on market the and supply personal right are we've

aren't be We up to still tissue. in-stock our service and we're levels are we're where on -- where to want want our it be. But catching still still and we we gaining isn't them

promoting in And past as so we're as still we we're environment. had working in much so through this that not the and

other as are categories promoting much I players either. or think market actually the in the not

of category I category Volumes between down factoids. think a couple on sold quarter in promotion the somewhere and just for was the depending the XX%. on XX%

think I think business and And so -- does the reflect sense point. the situation at this sense makes for makes I that that as and

Dara Mohsenian

growth the of any what was expecting, July? Okay. you looking Thanks. to towards getting what dissipating to more ahead back half started far the you environment new category with balance year, we see so of this out you quarter And ramp-up sort in post-COVID or bit? end the sort of the likely behavior? the guys a look are of of in as the is more seen you linger see year. I could Have And in your a mind, changes to So,

Mike Hsu

catch have don't see a we progress in our it the Yes. because changing on the balance of I supply work said supply is but of a tight. to I that just still making mean, improving up, that little do significantly because tissue, year, I of we're the situation think to in still supply situation. I of lot and

from see our And from I our environment heavy so certainly a promotional end don't perspective.

Dara Mohsenian

Thanks. Great.

Operator

you. Thank

Lauren from comes with question Barclays. next Lieberman Our

Mike Hsu

Lauren. Good morning,

Lauren Lieberman

Thanks much. so Great.

one is mix. the about elevating that quite that you're towards of talk of was bit some in putting categories of I that you've things the efforts the bit So you could hoping a little innovation. and Mike terms talked a about first

So quarter. personal care this mix was up X%

challenged your you're agenda? if Latin that Central evolves Thanks. more as innovations. bit over -- in or mix markets seeing economically perhaps then talk think a where with you're little think some in innovation Eastern could and the we So it higher-priced about in we about like how greater should you about traction if how Europe, And that America should

Mike Hsu

Yes. markets. categories in been our consumer core Yes. Mix generally Great I question. mix favorable strategy KCP us and care across And which part it's is has think, both personal and all the being of tissue across consumer for overall, elevate one.

more couple being We ago shifted premium-tier value-tier been later. our brand our that. -- on the two recently higher years better categories precipice so premiumizing significantly. primarily for primarily product have the at focused a of were a products with We serve brand. features, that years we've a of we're this diapers better And and primarily Brazil with reference, driven And margin mix at consumers point we've in

is And of so we've the to our be that now and to consumer. needs got economic conditions, with the pivot the to meet caveat shift able in

high mostly There's of the Brazil at spend on the in was think to and even Brazil really for They've a and years in the consumer driving purchasing consumers so as the the I lot their And quarter, And the look you made single-digits less team through for -- macros, rapidly. shifted couple if mentioned up power, focused has household literally of category progress. so budgets. all premiumizing down or less tightening right? the we premium remarks driven of last they're money tiers

we of play tier And and a And so the broad both want is the be to sides. to for us, strategy in we our long-term like premiumization, we tier. portfolio premium play while able having kind that value drive

accordingly at pivoting point. so business And and we're value-tier this driving the

a has positive Notably us in Cottonelle ways. some as was couple and this in almost I for points a tissue well. mix effect consumer occurred of that's share that so up And quarter our think on

our a a also KCP us. have are Little diapers, obviously, be in And then, at interestingly diapers Snugglers wipers, growing faster, bit for premium-tier strong little movers. behind been look mix little higher to in margin you quarter which positive shift this business. If tend our

Lauren Lieberman

to just and was that down performance? high-single on digits complete in your And Brazil. mentioned Brazil, thought the you've what Great Okay. then was category the

Mike Hsu

Yeah.

and overall -- markets. up right? And D&E so were so would to we -- I slightly, apply -- So our of and this and many think

happened as around brand what I in D&E. across has been or or implications the we D&E PPP, of like strong, the programs going these in was our underlying quarter what's highlighted the of market is like unknown impact some on And in But maybe doesn't the conditions. end the Russia Brazil the have COVID the was government some to be market U.S. last think and performance markets

And so have not consumers subsidy plan going when to a backup don't a out or work. of work the they're or

down we're hatches household And programming because performance pivoting underlying say, which so that, be emphasize. battens around But we on pretty the the it I tightly, spending, products quickly. would pretty And strong. continued really their of to our

the For were was a category pretty macro slowdown example, had up. in there in slightly. which Russia, gained But category, three share points, big down the we similar but a We effect. was

Lauren Lieberman

range the for X% in reaccelerate toward X%. were sort to all X% I that Okay. general, in we're organic in ask going upgrade as you plan, idea XXXX. could question, X% longer-term innovation, I challenging you capabilities, this investments product a quality you've just marketing, those have year, to so to comparisons as making But sales That's Strategy of for to that things you're XXXX that And if looking slightly can with great. X% out growth know your laid originally

sort near-term both beyond you organic in to kind of of commodity spending, as long-term environment? environment again serve time the the closer out COVID-enhanced you terms get line do higher look beyond to you, -- if will, the those how the of we that allowing consumer plays targets, demand that is think and the With

Mike Hsu

longer-term as over would categories again. Yeah. And get the environment think our still we we then, time. medium-term the the there we category fundamentals And our like of targets up think, like the of confident, feel And building the Great I some medium-term in growth moved obviously was both -- right to in more we we're significantly. has the had our But -- back put get our a still the we're slowed that the this question, And our down to I ability and to we'll to now I capability. we kind get point for are originally building we targets invest, believe ticked one targets hope of we And to when update right would it's and ones think investments us. plans and the those out quality at appropriate. in to algorithm faster time. reasons

Lauren Lieberman

again, And and innovation than And your, still more magnitude that I to would rather growth. so product call category have wanting the to advertising that strength with guess, not and the quality on? do the programs, of Mike,

Mike Hsu

Yeah.

of I would a be combination think, it both.

I get Paul Maria, more little definitely over a and consistency think I in confidence also any longer time. And own period we would own and category, a our from when of executions -- plans, there? our more see more commentary the other

Maria Henry

investments. would return I are investment growth-related investments. say the investments of a just making, that expecting is much we No. on And we're that the those

is capabilities there investment but related. related, Although also growth not on also only core productivity

-- we they return those expecting a investments. are So on strong

Lauren Lieberman

pass great. Thanks. Thanks Okay, it so much. on. I’ll

Mike Hsu

Lauren. Thanks,

Next one.

Operator

you. Thank

from with Our next question Kevin Jefferies. comes Grundy

Mike Hsu

Good Kevin. morning,

Kevin Grundy

And of pick year, the levels, up line the around marketing. everyone. in Mike, to congrats and particularly just half regarding on, morning advertising first of investment Good the environment, some of particularly the strong the given on results, questioning Hi.

pretty a kind tumble given restructuring offset well you numbers savings to numbers. and maybe then question the about get Will with us when what And is, think the just provided longer year is Maria level of permanent appropriate there's do think step-up you've what your respect commodities and be So help to the of this the and substantial increase you're to that and one? my for this FX magnitude through a you the for we term? year targeting as because

about about then So, advertising we be and how it are longer much term? Mike And is you And thinking thinking should that marketing? of how that? how

Mike Hsu

we terms don't increase but of step-up. did overall our -- Kevin But of maybe some are we the year. year significant But have Yes, a I comment direct recognize I it's a our average just has in Maria historically I been advertising the of this further would should than I'll our details while planning long-range for what The competitors. -- be. of set been last industry, target about on internally less we not -- as A&P the kind spending let

And so we going products our to that more accelerate like at better do two feel programming, that both and there are so that. sales to to we is time, growth programs. like need investment factors better it's we're advertising the which And and we fuel feel to business we with and same doing development want drive require programs to and market

would have year. finish Now, would public this don't but of are today where like what I to long-range we we that's a we we say and north be target

Kevin Grundy

anything Okay. to add? Maria

Maria Henry

I as Yes, investment and will loaded. our that just be reminder also advertising back-half add would capability our loaded will a back-half be investments building

all talked about with that April, pausing we recall in uncertainty the were fact we investments. some were the volatility the on our that may phone You of we of when and

levels And so for and numbers year. investment also the original given the those stepping partially increasing to investments of up are back-half the related our the then level overall that performance to back of higher

Kevin Grundy

color. Thank questions, for onto a Okay. I'll the you. folks. Appreciate Thank but it. number you, pass have I both it of other

Mike Hsu

Kevin. Thanks

Paul Alexander

Kevin. Thanks

Operator

you. Thank

with Powers comes next the Bank. from Steve Deutsche Our question

Mike Hsu

morning Good Steve.

Steve Powers

because to second but XQ XXX there a headline I so gross it's you. Morning. margin the was less better talk hoping variables. looked gets way. relative I you first points at based to just of us But I to guys versus lot Maria just it have were relative if margin how maybe a But year the disclosures through don't you the the guess of basis quarter hard on in quarter Morning. could Thank ago, know I this know XQ. conceive

So, sense bit just parts. a give -- that to little maybe the a of of us you moving I'm unpack can

Maria Henry

Sure. comment second in we quarter A very pieces on. the were few to discussed. savings strong as The

margin side of benefit the from geographic have also house, mix. On we

North of stronger America margins than our board the and look higher when the helped where margin in the the developing are us house. across definitely So, emerging you side market, in on performance

were drivers. those the two So, of bigger

Steve Powers

the bit the more Lauren on That that Kevin's and question just can think nature I is to listen of talk I -- about little can to this. a little makes other before I I okay. Okay, to your the the But talked there half question sense. extent investments. second a bit guess to specific guess you maybe answers you you as

Just be a helpful. those And investments get for would sort I'm returns more trying specificity of where more guess being little of of that how much I can a the really bit tactical mentioned next you in to coming think those XX necessarily nature yielded there Is sense return we in versus a capabilities a the longer to months are years. that that three-plus that two next term but in yield won't are that way year or the describe are balance?

Mike Hsu

Yes, yes.

characterize going as and what less investment say tactical big brand Steve. of So sense sooner. term nature, the the them I would short more -- longer in lot building is term. in term advertising over caveat that the and equity the of is digital a returns generate the does most But that of long now, of equity-building and includes in let's classify more I that longer that I see we nature and component. guess I capability we're reasons more one promotion", investment. But an volume it's in some now has it. those sense long a -- time and we one one or get And probably that's buy term both building as to would versus all short-term can but I think component -- that advertising long term -- do volume-driving of the "Hey right? why a in free term, both in ways do and And evaluate real

chunk digital And is Maria advertising. as her mentioned so big in I'd say a remarks

notion We to that And the the We architectures need flow we're analytics efficiency a approach is that talent the the us building. right really global to a how right globally. will price we more the promotion of trade which global as we've to to and what the have significant was tools. with the framework and and a need really capability And are to it. investing help overhead a and lines we here right is going in to our we aggressively areas investing have capability, have world. through in We management pack need sum couple do we're of building pricing growth called around revenue have

that requires so call in capability, the significant and not they're investments would we're talent digital but management, and the revenue that highlighted is what digital that performance I driving is things just same analytics, our improve only to And what tools. spend, marketing Similarly on we're there. growth Alison making And which in capability. capability

were some longer-term making. we're those so investments And

Steve Powers

Yes. to up Just now of demand there last is that That's make just or sit discretion have are guess environment pricing flexed and do looks investments how it, follow-up or kind in you the here that in the July, the earmarked be not investments on differently or a elements the that to back the for investments. time you these especially much -- that kind dries right in flex can second lined in half? good as on you've there's lead we helpful. I Are of these for of lot flex need just half what's extent locked up? that environment looks the to the and

Mike Hsu

in our digital flexibility think ever how case we maybe there's Maria's more lot which I'll we everything, in bought a to say market would I defer by I'll definition, Well, there's in in to go let always some haven't. but we set of unless I And upfront here, there. flexibility. stone terms -- Nothing's judgment

Maria, any insights? additional So

Maria Henry

Yes.

And the investments meaningful on I pause some investments the I half back we that were as shore investments. then And QX, second one I and as affected to our did well the included to that we flexibility in think circle that that comment to mills chain spending additional quarter up my and investment second a first which reiterate the weighted. year. G&A. discretionary on on just make other supply component that question, quarter our Those you may an first made compensation take of have right. that's We QX missed recall your other do to relevant plan the in to we

the So quarter. the than first G&A the increase was second lower quarter in

math So try with to the just to there. help

Steve Powers

comments Yeah. much. I'll Thank it Thank all. very really helpful. on. That's those you you. All pass were

Operator

you. Thank

Capital next from with Nik Markets. comes Our RBC question Modi

Mike Hsu

Good morning, Nik.

Nik Modi

Yes.

I terms at rapid closings has Mike, changing at-home wanted openings Obviously that rate impact an get on of sense. things are your in at and kind just to and a consumption. especially So of consumption,

So some have based execute by I what position your on you're very in place or that of it changes regional state yet, taking can supply level? or it of basis? some on context just chain us where changes relates be whether can kind been was hoping July just is actually these of seeing you a as that And in county it micro on the a regional by to some give city

Mike Hsu

asking as I Nik, assume markets really infection around you're And rates Yes. change or locations?

Nik Modi

yes. Yes,

Just economy that's dictating given open an how is.

Mike Hsu

very executing COVID-XX. doing lowest sporadic make we're economy. phenomenal for rates mode our a well Yeah. in outages. team I the the you, we and the or what by – plants will And the means closely U.S. in with based we those other then start cleaning And really decisions. possible. is proactively plants. closed have I Well, the will I'll been our approach we to been tracking very really talk We our decisions is a prioritizing county on to are. on disciplined employees the safety make think which that infection rates job we're some our where tell with we've has Nik, operations had maybe of operations, I and the One, infection level now

as this ability thus more done that that confident to year overall, operate mentioned environment in infection rate and throughout fluctuates, we've earlier, become our we've in I And far. an so think I

procedures component, that really that. about think we've and our I escalated we safety on so And feel good

I we're changes. think think from were in markets an of be some perspective, would highlighted we I that economy and of the in QX working through there still question again, developing affected. kind marks emerging that how And kind

markets for as particularly money in we're spend. Latin there down lot of of countries consumers less realized I a mobility, where plus in lockdowns fairly strict there think the government a America I to on COVID earlier, to seeing of impact high mentioned that come social and a lot be down very has

impact. seeing And a so we're bigger

more why have underlying by And financially, that's our if there. being the called little the markets though range D&E we've work strong. in made of it some it I left mentioned then think probably uncertainty in with to often. and like some say, the challenges market U.S. our largest people be modestly some because we bit – the net-net, continues the feel reasons at a the our there wider, U.S. we'll we and I is of would right. a far our forecast, in performance higher, we we the still positive net call be would even bath and tissue But because at of through is of one But would brand home being look you we expect

Nik Modi

I up a then, question. And on quick if quick could real online just follow

online not arms being do in in it Just race around especially you now? will this consumer's like the case? the what those you more to you going Or kind your basket, in that number is a of think How it disagree that me. current that's get basket terms the see Because you consumers. seems an new positioning with a in Do environment. lot brick-and-mortar of the one sticky forward normally because right than about be would choice feel could seems

Mike Hsu

really or progress last businesses We've and years developed the over our Overall, particular. we South made U.S., I think – strengthened No, no. in e-commerce and think mean, think over particularly in I and Asia, we've we've feel in so. – very The got capability, good. five I China. we e-commerce I very digital highly time Korea

or little we're in up, – think to online I And I at child caught we our off, think in think lighter share when started a the U.S. a we've little care, the in ahead. a party now. baby tissue, later we're think bit we've little I a bit little been but and probably I fair and

we're some good even XX are lessons China, Brazil, And And at an talking like from we business. It's we're was nobody interesting lot areas about or about The in where in development overall fairly global this interesting of very it globally applying positioning. becoming the our feel having a making capabilities, e-commerce our talking part with progress e-commerce so we the was of and really infinitesimal the capability Korea significant thing of impact. ago that's South D&E months and is really markets and our top digital best. and are big a markets,

Korea running adopted really our key For is that the strategies is South from of instance, one business. Brazil

Nik Modi

Good luck. Thanks, Mike. Great.

Mike Hsu

Thanks, Okay. Nik.

Operator

you. Thank

Our from with question JPMorgan. Andrea next comes Teixeira

Mike Hsu

Good morning, Andrea.

Andrea Teixeira

Hi. Good and congrats Brothers team and restoring buybacks this for for morning. all the And guidance shipping also the volume.

margin offsetting exiting you as So business you on was Brazil, than you what of other the lower great reopenings? income in in up on And more both the following developed much China in are this words, what professional markets, in rate seeing can you. catching improving or emerging in accretive consumer Eastern about are destocking still innovation shop Thank saw the disposable the a than can the the – the pressures times orders emerging in the for or the in comment said it's and you to Europe, and and mix also you And couple side? comments but call? markets on quarter, category up were on hear June volume in quarter you

Mike Hsu

with a texture. Yes. more think Maybe the I'll KCP, just -- I little start you to give

but pivoting impacted by to team healthier create the slowdown, the business definitely think the aggressively is I workplaces. is really global

North business And XX%. in and the mentioned your we shipped X%. was April. I globally down I organic so we the remarks And that in March for was that in per down orders think, question my America significant had overall

that So offsets.

industrial of declines I but pickup XX%. we and grocery core And mean factors. e-commerce also down K-C but a business, some there's the are see definitely I X%. the -- was some all that washroom to And washroom lodging significantly growth. We globally, think down. down travel the and and So care in that's worse significantly health I is I capturing think in run remains then mentioned rate degree. do business than little Offices, Professional, a in offsetting about couple

mix us effect. wipers mentioned up I we're that's some positive then and one -- mask our had we sold with a is masks have We for co-pack are And a like but We masks. non-wovens great large so As we small a mask expanding so fabrics We're we producer masks. think and a double-digits positive self-manufacturing our begun feel materials business, materials perspective. actually have non-wovens a have are technology from we very excellent for we offering.

part now be mills internal our producing going business forward. are and for good we production started will for are Primarily so selling plants, of externally using masks. them we our that but our And some a we

might So stock-up Again the there think and we the personal in I question that's care, pronounced again recall on in the KCP part. have across as the was your And first categories. side. consumer a quarter double-digit you growth

like If like no there's a you personal think about a surge diaper care reason for that.

out are some normalized. more at more to subsequently home that reverse positive, -- home. tissue use overall care equals it'll you I And so of In more normalized out. -- but we're do people seeing still but if QX level personal in at look the And probably think in Nielsen numbers at

America significant -- there's North I little of a year. despite we developed will And a tissue quarter a in see tissue the three in but think this the reversals, think in up been up see in for overall categories. other tissue fairly growth last And And we're all so overall in for higher we categories the year and balance North consumption softness we markets some both still should the double-digits. America

pause So I'll there.

a I there of questions there. couple think were other

just hit else remind me to on. If Andrea want you what me could you

Andrea Teixeira

Yes.

to you us tissue Are world. wanted the if before I take just your But consumer like Yes. throughout the Mike. to you just seeing… go Sorry, about finalize business. comment -- do you

Mike Hsu

Yeah.

Andrea Teixeira

I share you share. you're -- Because think, that losing what like out you gaining are categories we've seen industry? of non-track you or seeing Nielsen channels. capture mean, five Are obviously, mentioned doesn't the eight I like

channels. I'm all is that of So encompassing assuming

throughout So through if talk also the about those us of China take and categories? share you that Korea then terms and us world can of in take for

Mike Hsu

Yes.

Okay. Yes.

track we track feel and cohorts. By in North very in what the we XX of the categories, there. or share we're we So And good country-category We're progress largely all consumer and in of driven we combinations making eight. our about way Scott XX% tissue. I up mostly of performance all even that Scott call America brands supply-constrained think, those. across with Within outlets -- we the exception or the up was probably -- XXXX. And Scott we on five we're lone by we're tissue tracked most had in we the -- bath

points many almost two And a we Kleenex so about the over up up overall. share point. or up markets in Cottonelle share about was significantly good share two Kleenex performance was so up points. and feel

the in America, North and side up premium momentum If Central strong around click share share I the in Europe. points the business. Importantly strong momentum and on so world, behind Huggies of two was Eastern

and up up earlier, about As points category shares down we're well share our CIS. because across up X power. X I CEE, were Ukraine mentioned across has growing growing significantly. diapers, point. X in in points; femcare -- up We three points Russia, But still consumer in slowed of were and Kazakhstan about purchasing the up In

And progress so, I to there. that think, make we'll continue

care. value, in up right on declines is -- two of but And which Importantly the in a in we're bit now. share significantly we're mix on diapers and premium a tale offset of in about China, almost are the share pretty up really little in diapers side we in deemphasizing probably I the by points China, even feminine business, think,

the the in and I about story think, in think, mentioned, up and even and overall, category economy on Brazil, in is strong the So holding or we're we the the as the pivoting and in in category. think, the on And feel the China, and China well I mid-teens I in digits the areas, China then Brazil progress we And, making good other strategy one is think, double category we accordingly. one up business. up more overall, we category, in about performance. I team But down one were were quarter

of our making in the biggest But that I second quarter, strong in for business. very areas progress us the improvement other improvement down sequential good making towards is share with an more similar story category Peru. in past, pretty drop, about XX% last is which the XX perhaps, Peru The -- we think, year. the are the diaper that's mentioned category years. we story in half the there. The was issue We've Brazil, We're to progress significant mentioned in share pretty been in

strongly And so performance. I been us time. long -- which improving And a for brand strong a category all see for has really And that's related growth to COVID.

I you. I you just have any a threw here. know, So, and lot if at there ask other pause follow-ups I'll

Andrea Teixeira

then your capabilities? And on color. is putting you're money more us goal quarter? the since the how what second as Appreciate it update evolved you great. the first and That's No. And can put e-commerce the that quarter all together, capabilities the behind those you to

Mike Hsu

we've Chief think, I and we've Well, capabilities kind of commercial we've the about. got of kind Growth Alison our Officer. core each from talked Lewis, We've an Yes. that leaders the report of four overall capability They perspective, kind approach in of through resourced global teams. out built

staff, the who stood driving in to the decision-making. now us I cold we're people the the this making in we mentioned, stuff analytics, of do so, in talent, up that better tools, then in as right to or and help process adding know and investments, how to adding And

Andrea Teixeira

you you much grew, on how in it do globally? much ready much like, how from And now how -- represents your the it are second sales your to -- share, e-commerce quarter and

Mike Hsu

and defer maybe but yet, that share Paul to to I'll ready we're think don't I I'll here. pause

Paul Alexander

Mike, can Yes. that. take I

year-to-date via growing a we at sales the e-commerce see, XX% we company. perspective what So, say would Andrea, an basis, or can on would across omni-channel from be,

Andrea Teixeira

you. Thank helpful. That’s Okay.

Paul Alexander

Okay.

Operator

you. Thank

Our question of America. with Bank from Olivia comes Tong next

Olivia Tong

Thanks.

Paul Alexander

Olivia. Hi,

Olivia Tong

Hi. you FORCE your than well. cost your hope about January I to quite bit a ask bit savings better guys other Thank you quite were and restructuring better savings. doing morning. are are than -- expectations Want you. a Good expectations. the

that nothing COVID-related are you from projects of the absolutely have that the the efficiencies come like, to sounded -- Or second some projects. to the half the projects it new some these pandemic? are these into that because meet pushed required So, Because half, out savings out with first savings came demand? have do cost

Thanks. first my that's question. So

Maria Henry

Sure.

strong that's FORCE related, Some expected of from really and COVID negotiated and than expecting pricing. associated productivity savings sites, is restructuring well the in in manufacturing step-up coming let our we It about was very a FORCE. both but material talk on a and were quarter better me with as benefit as

some higher, of half changeovers. the when And our the is, On much with run, machines reason is second back than discussed we about have we SKUs delays, COVID-related also on we've to COVID they output less those are side, mentioned talk did April, the some And impact SKU as to the see do we I related before the of fewer there. which going is say more productivity in in so some quarter. rationalization. we strong second productivity waste the When did it we fewer

up running FORCE. the on we people get we impact The stood restructuring with on had you first productivity. as will delays we considerations, that have starting into that part half programs, half. and can't of that restrictions safety expected. assets up than more are those there those on the that's So on the get travel program again the mills benefit the as restructuring, better same second we then than And restructuring And the

Olivia Tong

flexibility other cases those get if lower -- returns? obviously, in are productivity a that do region and the bit that a go things and end cases parse right. just in a back you in What the spike -- it once in a a came out. manufacturing And just All the reinstated in with sees plant you then and little you. talk COVID through Can your Basically is, thing if you in about comes results you from particularly Thank costs plant. up could a distribution, better. talk potentially

we you Now, see in guys rising cases stuff. areas that actually make where

couple it Thanks. these that and the typically a when plans of down? from have in to a What are you in distances. It's area if capacity particular a flexibility ship categories other do And region tough to kind move things have little comes there? you of shut another what place? there bit kind of long obviously tissue So, towel don't given do very is

Maria Henry

sure. Sure,

that wouldn't to back order strong level the of go where SKU we in that delivering were. we're to expect to also related the currently had productivity rationalization we expect to think rationalization, I elevated gains the but meet demand, we we don't

term. also there benefit from should have by out some look lot benefit are savings a cash driven longer volumes across and and of So, that P&L higher be Productivity volumes. we ongoing flow. Higher the as

FORCE think one elements is from of of product benefit If about savings program you our design changes. the the

you've the producing And and the of so, reduce then we a multiplied got product, cost the if net savings volumes. by that's

when So, have you've higher savings. got volumes you bigger

the on supply that volumes our things inventories, P&L. the and other done to part few shows in way So, help of on chain on it we've inventory ensure taken question as And a to supply to The supply goes up your move the from. team chain that of got to is we've number customer and actions the meet the has coming consumer a go demand demand. closer where

are we out constrained. looked We at where we have capacity the capacity where globe across have production help to also

third-party team efficient area, more But the tissue of in has our been that's some note, products, has which on de demand. you working great. personal As help care suppliers from area to getting the also levels help tissue And the qualify area. actively us on particularly we're México, been versus meet the to of high some the K-C

Olivia Tong

on That's just one And then personal business. question, the helpful. the side super of Mike care

talk course environment thinking of your in demand. but as you just pretty now growth, supply the balance you're as little market about of what a may go is become macro and you the view through try much a of bit competitive drive difficult -- looking like terms more we to can for, share So, environment up What's sort forward? caught it sounds to

your still as actually back come stay and the Does production suppressed, supply what's environment? or So promotional does it normalizes? it on view

Mike Hsu

Yeah.

to we're personal terms the say would but at which the point, haven't healthy side, I in they think had we on the are and I closer we're this price-sensitive or to caught maybe product think In think at do markets been tissue. the quality are generally so. three very personal I than we're China, turned, in up of I for -- notably care competition getting all I years point. certainly prior think we closer, in advertising this most have care way though

needs meeting to in I of category think a was sense dynamic return competitive maybe bringing a dimension. the in in that consumers' more there and healthier the innovation

into high is, which -- and better kind versus that consumers our trying more something share. our to take and category make is bring strategy, to the that's road, rent products I think focus certainly -- of, the to

with bit that seeing it's Brazil I Maybe generally category. we're China, for say so a little in of And Eastern competitive some that's competitors. marketing -- there would think is Argentina But and generally America, Europe, in we've like Central on been overall markets. entry healthy I competing most local been and feel North in the and I a innovation and

Olivia Tong

so you Thank much. Great.

Mike Hsu

Okay. Thank you, Olivia.

Operator

you. Thank

with Jason Sachs. Our next English question Goldman comes from

Mike Hsu

Good morning Jason.

Jason English

befuddled. the of bit implicit the strong the I of the you of getting the results still in the environment. to Thank to early back were come question a impressive back in same left because quarter back and on half the you. year-to-date. Congratulations on guidance year, I'm particularly line come want It's the strong for this and context just call results

currency commodities neutral netting You've half. back talked about in the and

of XXX to come. XXX got You've productivity to still

EBIT sales to expecting in both the $XXX and the is of growth to on organic price so or roughly million yet back half $XXX You're million be volume down year. going

heavy half. $XXX and implies north the of up expenses. came up evidence half. is in in well There in it of the SG&A and you of reinvestment on already deferring of front business, doesn't that's be to it X% stack that first of investment You a the lot million look the top

That's away walk going we really huge if or other the not to there right is conclusion everyone's what wrong? such this money. a think They're chunk offsets, spend be going I So a big where of that is of missing? would figure? And will much. dollars spend that you to slug that saying, are why Are Like conservative.

Maria Henry

Yeah.

year-over-year of, investments about it, we it more kind Mike and tick turn while to the input If comparison, inflationary the then commodity benefits Input at talk over that go through turned in us to benefit to materialized and XXXX the I ahead the me, took look you half. inflation relatively are stay half currency itself to first P&L. that the benefit be has from pricing price the that year. I costs, we the the Let remember costs of Jason, and now year-over-year the I'll from are weighted are of actions half expected the costs in the drag will of in And in year. maybe look at back first half year that that a price, stable and mentioned, meaningful half you'll we second to On in when for deflationary had last input a as second the slightly making.

from benefits volume we when P&L the the in the in enjoyed don't look So half. mix. first year-over-year, that lower you We're we have getting benefit

be we savings step-up from And half, those clear comment lower so Our main advertising costs on other FORCE to in and will it in in we we back given the both stand remain safety and program continue manufacturing capability to I'll and on the sanitation the then the and the restructuring just to second elevated, have on program talked Mike drivers. that investments. investments then the to protocols have turn where place. We about

Mike Hsu

still the it KCP And in of revenue marketing. planning our of for emerging half. then markets, saw probably think I'd where because say we I a and digital impact, lot Yes. related plan. there's I a we to beginning about would of little the kind But significant more is in would I probably KCP. as my for. the that other developing Part two have we in in it and to opportunities quarter. mentioned, second April, and uncertainty lot good capabilities in a then talked do COVID-related I lot We America or would mentioned March, of still April mean, digital slowdown think mention primarily And it advertising things have expect – – that North I that feel is, I just as growth investment of management back the related we still say remarks like I spend me uncertainty on, of the a we there's there's –

there's that also unknown. our manage still COVID-related issues we're definitely exists And so impact – which two we're is room widely still aspects plans there's but the some to there's in some through that two – investment really of are leaving ourselves

Jason English

There's Okay. price, the lot cost I business kind costs it mix. understand that. look seems figures one not no Real the it and there's heroic. the I leakage that's a gave, despite though And because sort quarter when what fits. margin quick on at our evidence margins just the was with some manufacturing bridge. elevated to me bridge be thing missing second gross When all the the the of through input that's decremental with expansion you maybe of we and volume, of from productivity to

it that Why build same to leakage sort So the in of manufacturing that hold? year of half look build the see start why the lot What we in wouldn't of sense? costs sort simple on doesn't if like would a elevated second Like that makes back of there's quarter. margin was it?

Maria Henry

Right.

standard form costs, up the And that's on relatively unusual. I first within so inflationary including call product on to shows continued generally for the of manufacturing the costs investment on is versus other drag the – the think not inflationary be the have that back category improvements, it's from increases around stronger manufacturing supply the the half will our safety of components which half similar. other partially the offset costs volumes be we what in we And manufacturing not in elevating the it in regular but offset. standardization and to to chain P&L that related related absorption these. by labor also cost cost completely is that's and part What those are And new protocols fixed then and impacts COVID rate that inflation. is

Jason English

Okay. you pass Thank much. very on. it I’ll

Mike Hsu

Jason. Thanks,

Operator

Thank you.

Nicholson Wendy from comes Citigroup. question next with Our

Mike Hsu

Wendy. morning, Good

Wendy Nicholson

I'm quarter third the direct started. I volume I call, third think you that really Thanks. corporate long on that gross it my in Hi. know can or seeing are of what make to the in of so expectations simply in wondering business average? And decline questions for short. expected one, this a better Is quarter, we above But or and in your And the to same business? are remind has worse? weak. us I been business want number trends type business, what be margin then below has just you that all professional

Mike Hsu

But Maybe came that off the margin, high March we Maria shipped worse you in head. orders top remarks have Paul I slightly Yeah. the I'll that that given April. the, And Wendy I trend. trend what or made the and the the I of don't had of were gross would quarter, if the maybe would have my be, could, that say of we because than the second of at probably kind the end in think

probably And we that -- up so, ended core little so North than X% we'll the a have business – down, was double-digits. the touch That run a quarter. lower in America washroom rate in the the said

And our our on progress I making are mask business. as mentioned, We wipers. new

to offsets be the good. will those so And

Maria Henry

gross And margins. Paul, I'm we not sure about -- comment on if

that So to to I'm going pass you.

Paul Alexander

Maria. Thanks, Yeah.

And the So we on at What for numbers I care personal they're tissue. surprisingly segment consumer be don't not gross overall. margins. between level and maybe in pretty healthy that, say specific would provide is KCP margins would

Wendy Nicholson

reason is I the because... ask And

Mike Hsu

my Wendy Hi apologies.

Wendy Nicholson

Yeah. Yeah.

Mike Hsu

because just I'll us apologize. COVID. three in are The of separate rooms I'll of --

if started that with to but that me not slap able would he's Paul normally now. ruler, So I answering right a do

Wendy Nicholson

I And particular the of really the and your your which that because -- problem. there. obviously -- a No commodities sales reason ask profits insulated or I you in control, the cost again we in gross business But is margin, benefits the benefits saw expected. sharp mean of shortfall

and to think not we that probably an that's the about going just assume wondering, all perspective. half I'm you're investment modeling, spending, spending so much business of a investment the as second quite as And I from spend

a made cetera, which business of still is fair like, so I think I you've assumption? kind continue significant et a cost given So little much et bit. day have the could perspective, of restructured whatever, environment that a Am too commodity carry that Sounds business sort cetera. that? that the that's simply to profitability Is from into would cuts favorable reading a that

Mike Hsu

our is workplaces, would one doing job pivoting now doing our Russ of outstanding create But managing president mission-critical to that division healthier team right? costs. I create healthier the a maybe to outstanding of what workplace. that an think also an the job to kind It's think they're -- I call the essential

masks the from a become effect, piece that a has wipers so, perspective. margin of And it mix positive notion the bigger business, will and a

Wendy Nicholson

you thank so And much. it. Got

Maria Henry

component geographic call about, that is we that yeah. business That is from And the talked benefiting that business -- so mix would also I out.

Wendy Nicholson

enough. Fair a Thanks lot.

Mike Hsu

Thank Okay. you, Wendy.

Operator

queue. Thank questioners in you. we no at this Speakers further the have time,

Paul Alexander

the appreciate go ahead close -- we Well questions. We'll all Mike. Great.

Mike Hsu

and I us everybody to thank growth long-term and dialling value. to opportunities about joining generate We today. just our Yeah. in Okay. shareholder want very for remain create optimistic

Our opportunity to see K-C XXXX elevate working. expand for strategies are And we categories. and more us our

So you. thank

Paul Alexander

you Thank much. very

Operator

that gentlemen, presentation. and this concludes Ladies you. morning's Thank

thank You may disconnect lines. phone you for joining your And today. us

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