Kimberly-Clark (NYSE:KMB) de México (KCM) reported a 5% increase in sales, excluding tissue parent rolls exports, for Q3 2023. Despite a 0.9% decrease in overall sales compared to Q3 2022, the company's bottom-line results and margins improved, buoyed by strong performance in consumer products and professional businesses, cost reduction efforts, and lower raw material prices.
Key takeaways from the call include:
- Sales of tissue parent rolls declined substantially due to increased supply from Asian producers, lower prices, and exchange rate differentials.
- KCM posted a gross profit increase of 20% with a margin of 40.2%. This aligns with the company's gross profit of 1100.39M USD and a gross profit margin of 35.64% as reported by InvestingPro data.
- Operating profit rose by 30.6% with an operating margin of 23.2%, which is slightly higher than the 20.04% operating income margin reported by InvestingPro.
- Net income for the quarter was 1.7 billion pesos, a 34.2% increase from the same period last year. This profitability is consistent with the InvestingPro Tip that analysts predict the company will be profitable this year.
- The company maintains a strong balance sheet with a total cash position of 18.4 billion pesos.
- KCM plans to strengthen its market position through innovation and brand investments, which aligns with the InvestingPro Tip that the company is a prominent player in the Household Products industry.
Despite a decrease in tissue parent roll sales, Kimberly-Clark de México anticipates a rebound in finished product exports. The company expects the economy and domestic consumption to continue showing resilience and support growth in their categories. They also plan to maintain lean inventories and capitalize on any market price decreases, which is reflected in the InvestingPro data showing a 6.35% quarterly revenue growth in FY2023.Q2.
During the earnings call, the company discussed the possibility of passing on price increases to customers under certain conditions. They also noted that they are observing some Asian imports in the US market, but not as much in Mexico.
Regarding future dividends, the company stated it is too early to make a definitive statement but expects an increase compared to last year. This is supported by the InvestingPro data showing a dividend growth of 7.92% in LTM2023.Q2. They also mentioned that costs of fibers and pulp have come down from historical highs, and they expect stability in prices going forward.
Pablo González, a representative from an undisclosed company, emphasized during the call that selling finished products is preferable for KCM, but tissue parent rolls serve as a safety valve when there is excess capacity that cannot be converted into finished products due to demand. González concluded the call by expressing willingness to answer further questions and wishing everyone a successful end to the year.
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