Kimberly-Clark (NYSE: KMB) has announced that it is laying off between 5,000 and 5,500 employees, about 13 percent of its work force, in an effort to reduce expenses. The job cuts are expected to affect all parts of the business around the world. In a statement, Thomas J. Falk, the chairman and chief executive, said that the cuts would make the company “leaner, stronger and faster.”
The company will also be shedding factories worldwide. Kimberly-Clark is expecting to close or sell about 10 factories. The company currently has 91 production factories worldwide. Executives declined to say which factories the company would be closing
This would be the biggest restructuring move at Kimberly-Clark in over a decade. The moves are expected to save up to $550 million by the end of 2021. The company is also aiming to save more through improved productivity at its factories and more efficient distribution.
Kimberly-Clark said it will use savings from the recently enacted corporate tax cut to help pay for the cuts and other restructuring efforts. Chief financial officer Maria Henry said the company’s rate would drop to between 23 and 26 percent in 2018 as a result of the congressional action. She told analysts that it would boost year-over-year earnings growth by 6 points. The company had an effective tax rate of 28.6 percent in 2017
Ms. Henry said the tax savings would also be used to make capital investments and to “allocate significant capital to shareholders.” Kimberly-Clark said it would raise its quarterly dividend by 3.1 percent this year. The company spent about $900 million last year repurchasing its own shares.
Kimberly Clark’s revenue rose by 1 percent in the fourth quarter of 2017, compared to the same period a year earlier. Profits rose 21 percent, or $1.75 a share, for the quarter. Mr. Falk says that “market conditions will remain challenging in the near term.” The company projected sales growth of between 1 and 2 percent for this year. Its shares have risen less than 1 percent over the past year.
Kimberly-Clark is facing a challenging retail environment. The company is facing stiffer competition for consumer staples like tissues, paper towels and wet wipes. A retail price war is driving down prices for household items, weighing on profits. Kimberly-Clark’s selling prices fell more than 1 percent last year.
Declining birthrates are affecting the company’s diaper sales. In the United States, many millennials are putting off or skipping parenthood. Diaper sales have long considered one of Kimberly-Clark’s bedrock lines of business. The company’s 2017 sales were stronger in emerging markets.