Q1 2021 Kimberly-Clark Corp Earnings Call

Ladies and gentlemen, thank you for your patience and holding we now have your presenters in conference.

Please be aware of that each of your lines is in a listen only mode.

Of the conclusion of this morning's short remarks, we will open the floor for questions at that time instructions will be given as to the procedure to follow if you would like to ask a question. It is now my pleasure to introduce today's first presenter Mr. Paul Alexander. Please go ahead Sir.

Thank you and good morning, everyone welcome to Kimberly Clark's first quarter earnings Conference call.

I'm joined today with Mike <unk>, our chairman and Chief Executive Officer of Maria Henry Our CFO.

Earlier. This morning, we issued our earnings news release, and we also published prepared management remarks from Mike and Maria.

<unk>, our first quarter results and full year outlook. Both documents are available in the investors section of our website.

And just the moment, Mike will share a few opening comments and then we'll take your questions.

During this call we may make forward looking statements. Please see the risk factors section of our latest annual report on form 10-K for further discussion of forward looking statements.

We may also refer to adjusted results and outlook also excludes certain items described in this morning's news release that.

That release has further information about these adjustments and reconciliations to comparable GAAP financial measures now I'll turn it over to Mike.

Thank you Paul good morning, everyone.

I'd like to start the call today with a few brief remarks.

Our first quarter results and outlook have been impacted by supply chain disruption.

Faster than expected consumer tissue, Destocking, and a sharp rise of income and input costs.

While I'm not pleased with the results and our outlook, we're taking decisive actions to manage through the short term challenges we face.

We continue to invest in our brands and commercial capability to ensure we're able to grow both in the near term out of the long term.

We gained market share in 2020, and our shares are off to a good start this year with strong gains in many key markets.

At the same time, we're moving rapidly, especially with selling price increases to offset commodity headwinds.

We've done the successfully in the past commodity cycles, and we expect to do this again now.

I remain confident in the underlying health of our brands and in our growth strategies.

We're operating in a very dynamic environment, we know how to manage through this I'm confident our team will execute with excellence and we'll continue to build a stronger company for long term success of value creation.

Now with that we'd be happy to take your questions.

Thank you ladies and gentlemen at this time the floor is open for your questions if you'd like to ask the question you may do so by pressing the star one on your Touchtone phones now.

If you're using a speaker phone. Please make sure that your mute function is disabled to allow your signal to reach of our equipment again to ask the question. Please press star one now.

The first question comes from Dara <unk> with Morgan Stanley.

Good morning, guys.

So a.

A couple of questions first Mike you mentioned in the prepared remarks are that were published price increases in many other businesses. Besides what you already announced in late March can you just put a little more meat on the bone there in terms of additional product categories in the U S, where you might take pricing, maybe some international country.

Freeze, where where pricing is more likely.

I know you want a view of a vague at this point, but you know any any type of commentary on potential timing magnitude of increases as you think about it the across the portfolio.

Thank you Dara Yeah. Our teams have moved very rapidly and made decisive actions.

To realize additional price this year, obviously, we announced.

Many price moves back in towards the end of the March and those will take effect over the next couple of quarters.

In North America pricing is typically going to be in the mid to high single digit range across both of our consumer tissue business and our personal care business is it'll cover about 60 per cent of our overall portfolio, we are taking pricing and in multiple other markets, including in Europe.

Merica in parts of Asia.

We expect pricing and additional productivity to offset most of the raw material inflation and incremental of all raw material inflation. This year.

And again or off the execution, we have generally announced the most of our moves thus far.

Okay. That's helpful and the other 40 per cent of North America do you think that comes eventually is uncertain. At this point is of more just timing and you're waiting for the right timing.

And yes, I would say.

Well the phased effects and you know obviously you might recognize we took some actions in the list and some in count and so we had the plans for count a.

That we're rolling out the wildcard of little bit later.

Okay, and then looking at the full year topline guidance it implies a pretty robust recovery relative to some of the softness that we saw in Q1. So just give us a sense for what's driving the confidence there is it more a category of recovery.

As you look going forward or are there other factors and then also can you just comment on what you've assumed on north American market share in both personal care and consumer tissue in the balance of the year I'm wondering what the assumptions are there, particularly in light of some of the price increases that you mentioned.

Yeah, Okay, just just on the outlook again.

One of the things around the maybe the quarterly phasing is just recognizing that.

We had unusually high demand in the first half of last year and that started in the back towards the end of March in the first quarter and then all through the second quarter. So that will that's that's really driving of a difference in our outlook of one of the big reasons for our adjusted net adjustment in the reduced outlook organically was well you know we are.

Seeing as a faster destock in consumer tissue, particularly in Bath tissue and I think you can see that in the Nielsen and the scan our results as well.

I do think of it is a faster destock and that looks like it's related to maybe a faster a vaccination and and a faster pace of mobility, that's changing you know inch.

Kristin we track mobility data in it.

It looked like January February Dara in the U S mobility was down about 30% in January and February and the climb to the being down 15% you know why by the time, we got the March So again I think it does a lot of it is the demand of tracks with kind of what we're seeing happening in the tissue.

Yeah, and the other the other area had the the effect of the supply chain disruption in the first quarter of that impacted our eye or sales.

Net.

Yeah, I mean, the and that's that's mostly of first quarter of events.

And then as Mike said the comp side.

The comps get easier in the second half versus the first half.

And if you look at our underlying debt, yeah and market shares.

The underlying business is is performing well and if you look at our of KCP business, but our expectations around the ability we would yeah. We would expect KC P to pick up all of that.

Okay, and just one clarification go.

Go ahead sorry.

Oh go ahead.

I was just going to ask because the Q1 volume loss do you recover any of that going forward or is that more of that loss of volume sort of applies to the full year or is there a recovery at some point.

Well were hoping to recover some of it but there was a pretty big impact of the quarter that we think will stick for the year. Let me let me just touch on the winter storm a little bit just to give you a little more texture and what our estimate would be conservatively on Q1 would have been worth about 15 cents a share and two points overall, the organic which was which would be about five points of growth organic.

Growth for North America.

Important to note. This will also and this goes back to the facings are it's also going to constrain our Q2 volume in North America, particularly in family and personal care and it's also going to affect our shares in the second quarter.

So the the back story is and I think you may may understand but the February storm hit in the Southern U S.

And really significantly impacted our supply network with the shutdown large personal care and consumer tissue facilities that we have based in Texas, Oklahoma and Arkansas for up to 10 days.

So sales were impacted due to you know it did flow through the sales for US are typically I would say hey, you know a week or two down.

Should not affect the visits that much but because of COVID-19 last year, we were already running in a tight supply situation and so that's why it has rolled through and affected our sales.

It's also going to continue the impact of raw material supply of polymer producers have been affected.

More than us I would say and so we're having some spot outages of some materials and so again overall in North America, you know brought from <unk>.

Underlying brand performance has been very healthy.

But we do expect because of supply issues, our shares of soften a bit in the second quarter.

Yeah, and it's tough because we were in the fixed consumption category and so people use our products on a daily basis. So when.

When you when he died of bite on net fortnight, an eye on the shelf.

Then the they'll find they will find it elsewhere outside of it.

Kimberly Clark and tell you.

You know typically in the first quarter.

When theres challenges, we wave of up to recap of it until it's a little little tougher given the the al day jazz.

Given that it takes the consumption so but that impact is.

It is definitely factored into our full year reduction in our in our top line outlook.

That makes sense thanks, guys.

Okay. Thank you the R.

Thank you. Our next question comes from Lauren Lieberman with Barclays.

One of them.

Good morning, Adam.

I was hoping you could talk a little bit about spending levels.

So just thinking about the balance here I think you've commented that investment kind of steps happening in T. T vs. One queue, but one of the questions I've gotten from people a couple of times. This morning was just the degree to which you're in and tap into G&A spending for the balance of the year to kind of you know to deal with some of the with the unforeseen costs.

When.

And then also just related to that and just following up on Gary's question is the point of clarification.

When you talked about pricing and productivity offsetting most of the inflation is that on a calendar year basis or is that of overtime comment.

Yeah.

Yeah and let.

Let me take the the last one first and then all of that come back to the between the lines. So.

You know when one way to think about the the run up in inflation that we have for the year is that within within the year will cover about half of that with our pricing and then when you add in the additional cost savings both in terms of our increased outlook on the force.

Graham as well as <unk>.

Additional tightening of the belt.

Around discretionary items, you are you would get to check cover a good portion of the M. B inflation I and then.

If you if you look at the reduction of our EPS outlook, you could you could look at it and say.

After all of that it comes down to a day decline in volumes, which are are are affected by all the reasons that Mike just talked about so.

Within Europe, all I think we're saying about half is recovered.

On pricing and then over time, we would expect to fully recover.

The commodity increases as we always do it through a combination of price increases.

And and cost saving if that's helpful.

Definitely.

And then on but yeah, Yeah, and then the mix.

Yeah.

And then on between the lines.

Yeah, well the the way the way I think about that for the year is first and formats.

We will continue to invest behind our of KC 'twenty 'twenty, two strategy, which means we will see.

Can you just support our brand investments will continue to invest in and the innovation and capability development as is.

All of those things have been paying off for us.

So I look at that is protected in depth net and.

Then on discretionary costs.

Well, we'll certainly look to tighten our belt and prioritize any any spending that we have this year given the more challenging conditions and then addition.

We are continuing to push the force cost savings and as I just mentioned, we upped our savings outlet for the year. They are and our teams are working hard to try to pool in productivity programs into this year as well as find.

New opportunities given given the overall pressure they are.

And I'll add Lauren it's important for us to protect that investment in our brands. Because you know we feel like it's working very well globally and our brands of responding well to the investment.

It's been performing very well despite of what I would say are some challenging conditions are definitely we believe are better execution of investments in our quality innovation advertising are really working market shares are broadly up of globally in almost all key markets around the world I'll just rattle off some shares just you may be able.

See these but in North America in diapers were up about a point in the half and share.

In China, almost three share points, the Korea, Australia, Peru, where all of over four share points.

India Argentina.

S. C E. You were up over two points and so again, we feel like we have great products in the marketplace, great marketing, especially through digital and great execution from our teams and so we want to continue to support that.

And just to double check my math, which I can follow up off line with Pall of the type of wrong, but it sounds like North America personal care was on track to be up.

The low single digit this quarter, if the storm hadn't created supply chain issue debt per.

That's a reasonable assumption more.

Okay, Alright, thanks, I'll pass it on.

Yeah.

Thank you. Our next question comes from Kevin Grundy with Jefferies.

Good morning, Kevin Great. Thanks, Good morning, guys.

Quick question on KC professional.

Did you see a pickup in the month of March I guess like looking back the last year, there should be somewhat of a natural hedge.

Mike There was a comment in the prepared remarks about potentially seeing some early effects of social mobility picking up which had an unfavorable impact from the consumer side of the business I wanted to tie that in two ways number one did you see that pick up in the in the month of March because it wasn't necessarily evident in the quarter.

But again.

It could be looking better relative to the January and February and then two what was the demand elasticity in that business in line with your expectations and it looks like you took some pricing with the obvious effect on volumes, but the business did come in quite a bit of lower than than the street had modeled suggest hedge.

<unk> implications from some weakness on the consumer side, and then comments on demand elasticity would be helpful.

Yeah, great questions, Kevin I guess, the short answer is.

Guarding pickup not yet and the organic was down about 13% with continued improvement in North America, but I would say the improvement was more on the wipers and safety of business than on the core washroom business. The Washington business was down about 35%, so about where its been I did say mobility is improving so well.

Again, just to refresh your memory I think January February was down about 30% and then in March it had improved to being down 15% it isn't flowing through to our washroom business yet in our business tends to be concentrated in travel and lodging offices in high traffic locations like.

Like sporting events. So we may see some of that start to pick up of as we go forward.

But I do think that had been lagging and these of these sectors that we tend to play harder and tend to lag the overall mobility of a little bit.

Why not wait for safety were up strong double digits in the quarter, we feel great about the momentum of that business and regarding your price and Kevin.

There has been some significant pricing on the gloves side and our safety business, that's driven a lot of the pricing. So I would I wouldn't say, it's the elasticity is probably coming in as we planned. It's just that there's been some unusual pricing I'll, usually high pricing on the safety side.

Got it all very very helpful. If I could just squeeze in one more of this of the Mike for you of Maria as well.

Just on I think it's the building on some of the Lauren's question the decision to maintain advertising and marketing levels, which I think there were some questions among the investment community, whether the company would decide to do that.

Even increased commodity cost Mike the of course this has been a big focus of yours since since taking over can you talk about.

How internally those discussions went just given the significant commodity cost pressure of the balance may be considering pulling back a little bit your visibility on the ROI and what's arguably a really bottle of volatile environment and maybe some of the ROI model is sort of less reliable, giving given that context, maybe just a little bit there in terms of.

What went into the decision, making and the visibility you feel like you have one on maintaining these levels and then I'll pass it yes. Thank you.

Yeah, Kevin I think you're all over the issues as we discuss them.

One point is you know we feel like we have strong brand momentum as I, just rattle off a bunch of share and growth.

And what I would say, it's still fairly choppy waters in the categories, but we feel great about the share momentum of of business globally.

And really we can tie it back to the investments, we're making the product quality innovation and marketing and team execution, which is excellent. So so we feel good about that there has been some discussion around that I will say, we will make some adjustments, but in a small manner of overall, we want to maintain our investment levels, but for example in North America of what we have.

Of supply constraints.

You know it may not be the highest ROI decision in the short term.

To be driving let's say promotions in that business. When you don't have supply. So so we will make some tactical adjustments, but overall I think your point on all of our is also important.

Is it is going to vary we don't have the latest data for rois on the on the quarter, but.

Generally our marketing Rois, especially digital has been very strong.

And so it may not be the lever that we traditionally think of when when when the.

Of course, because the cost conditions get a little tough because the.

It's hard to see how cutting advertising if it's working that effectively for us actually helps the piano, but as you can imagine we had a pretty pretty extensive discussions at the day at the market by market level should range you are.

The the advertising plans for 2021 given given the environment, where we believe we've got strong rois that it makes sense to continue to spend the the dollars because we're getting the payback on the dollars.

But we did have some pretty deep internal discussions around that and and.

Well it varies by market and by product line and the.

The decisions what I'd say is is in our and our current outlook, we're expecting advertising spending to be relatively similar to the 'twenty 'twenty levels on a dollar basis and on a percentage of sales basis right.

It will be in line with our original plan coming coming into the year all of that said that the the mix of it and where it is and I'm on what it is is it different than definitely whether the expected three months ago, but but the.

The income at all.

But that's kind of how how we're thinking about it.

Okay. Thank you both very much of a great weekend.

Okay. Thank you Kevin.

Thank you. Our next question is from Steve powers with Deutsche Bank.

Hey, good morning. Thanks.

I guess, maybe just to round out what we've talked about so far can you just talk about in the context of the year.

The cadence of your EPS guidance.

Over the balance of the year, because obviously <unk> was a tough start it sounds like <unk> is going to be.

Directionally tough as well at least from an EPS perspective so.

So when you talk about meaningful EPS growth in the back half I guess is there a way of better frame what that looks like and how confident you are in the drivers.

I guess, because you know it sounds like there's gonna be back half loaded savings I'm, assuming you have good visibility there, but I just think of.

And what I'm hearing this morning, just a lot of investors are concerned about market share movements in the <unk>.

Half of elasticity in the back half back half from the actual efficacy.

Of pricing rolling through just given the loss sales that you've highlighted in the first half and then you know differences in the way that you've announced price increases this year versus what we heard from P&G earlier in the weeks of just any thoughts you have around that would be very helpful.

Sure I'll give son my.

Broad commentary in the my Mike can talk more specifically about pricing, but then when we look at the the second half we are expecting a stronger second half and that is for a few reasons are the biggest reason being that our of pricing actions and the benefits of that will be.

Coming through the P&L in the in the second half.

In terms of the Fi.

The cost inflation that is ramping in the in the first quarter and the second quarter.

We expect that it will peak and then I and then moderated at moderate and in some cases come down a bit in the in the second second half.

Additionally, we've got our savings program.

Program ramping as you can tell from the the force cost savings of 65 million in the first quarter and the outlook of $3 40 to two of 380.

For the full year same day this will be ramping up as is typical in a typical here and then we also have some elevated costs in the in the first half of the here, which will come down some are in in the second half of the year. So we.

We have good visibility into what are the.

But the the when.

When I when I look at the the factors driving that day.

The.

The one the one area that has some.

Well, what's the word I would use some dynamicism around it would be pricing. So I'll, let Mike talk a little bit more about how of how how we see that come to fruition. Yeah. So Steve. So we did make our assumptions and our pricing around the elasticity impact of we do have volume coming out of the plan.

As real as it relates to the pricing I would say we have good experience from it.

From just a couple of years ago and in general our calls regarding the elasticity generally were in and in the ballpark of what our original plans were and.

And so so we feel good about kind of all of our ability of call. It. The the one difference I would say in this market would be.

You know what exactly happens.

Due to the COVID-19 environment and some of the volatility related to that and then we did have some assumptions regarding competitive price points.

Which we still need to learn how that is going to be executed.

Yeah, one other.

The comment that I'll make just in terms of thought of.

The thing to to put a point on it is.

Hi.

You know you know the performance in the first quarter when I look at the the second quarter of well, while we don't provide detailed quarterly guidance.

We do expect of the second quarter of conditions will remain challenging and and that that will show up in the in the numbers and if you think through some of those factors.

There'll be more cost inflation, that's coming in ahead of most of our new selling price increases that will have escalated caught stuff.

That's where the pricing is really getting into the market.

We will be working through the tail end of the supply chain disruptions in North America that Mike already commented on and then the category dynamics in consumer tissue in KC professional I R. R of more volatile than than normal right.

And then as we said in the prepared remarks, we do expect that the between the lines spending will pick up from a relatively low level in the first quarter and that includes more investments.

Spending and then in addition to all of that it's worth noting that we had all time record earnings in the second quarter of 'twenty.

'twenty behind a very strong volume growth in consumer tissue.

And last year, we also had commodity tailwind and in the second quarter, we had very strong force cost savings so hot.

All of them all of that is shaping up to have a challenging conditions for the second quarter with our performance picking up in the second half of the year.

Okay. That's that's very helpful.

And I guess, if I could just two.

How how are you thinking about the setback in terms of the the lower outlook for 'twenty one.

From a in terms of of the lasting impacts here because you didn't I guess when I think about it in the context of KC strategy 'twenty two.

We've been talking about the mid single digit E. P. S CAGR.

Yeah for a while ever since that the strategy was was unveiled and I think we've all been doing that in our conversations at least you know where the kind of like a 5% CAGR in mind and quite frankly, you. Some you seem very much on track and even ahead of.

In terms of your strategic investments coming into the year. So in that context is this are you approaching this this kind of setback in in early 'twenty. One is of a speed bump on that path or is this likely to have more enduring.

Impacts of the 'twenty, two and I'm not asking for 'twenty two guidance I'm just trying to understand how you are.

How impactful this is as you think about it in the context of the broader strategy.

Yeah, I'll check and see if I understand the question, but you know I think we view it as a temporary impact that should not affect our long term strategy. That's why we are continuing to invest in our brands I think as I said before I think our investments are working we feel great about where the brands are growing.

And but you know I don't really want to take apart what we're doing in China, because we had a plant that came down for a week in Texas and so that's that's kind of how we're thinking about it and so you know we we recognize what our medium term guidance has been we want we plan to hit that over the long term.

We also recognize the you know we want to accelerate organic growth beyond what our medium term guidance wasn't from what we were we are making progress on that but recognize that we operate environments like COVID-19 affected by COVID-19 and also now this.

I think once in a lifetime at least living here in Texas, a once in a lifetime of storm.

You know, we always prepare for we always prepare for but you you know you never really think it's going to happen, but we you know the teams are doing a great job responding to the challenge and doing the best with what they can and are and our suppliers are doing a great job partnering with us. So so again I think it's a I feel like it's a temporary effect more yeah, yeah I would agree.

And we've we by bidding.

Been encouraging people to take a two year look on our business given the.

Meaningful effects that the COVID-19 related dynamics have had on I got primarily the tissue category, both on the consumer side and the professional side. So yeah. When you look at our performance last year, it's a it.

Especially in the in the first half where we had the the incredible shifting in demand and some stock of dynamics. We we didn't expect that to change our long term outlook for the business and when you look at it this.

This year, where the.

The consumer of Destocking.

Around the consumer tissue. This year, we expected that consumer Destocking would happen, we didn't expect that it would happen as quickly.

As it appears to want to be happening so if.

If you if you look at the business over a two year period, where we had a net benefits from the COVID-19 last year I mean, we've got some net net.

Headwinds on the consumer tissue side this year.

The the performance over the two years.

It actually looks good and relative to our medium term guidance and.

It does not affect the long term outlook for our business. It's just we had the two year period.

Uh huh.

Big impacts from COVID-19 related items.

Great. Thank you very much very generous in your answers I appreciate it.

Great. Thanks, Steve.

Thank you. Our next question comes from Jason English with Goldman Sachs.

Good morning, Jason.

Hey, good morning, Good morning, guys. Thank you very much of a slot.

Okay.

I was hoping you could provide a little more context on the cadence of your expected price realization, particularly relative to the promotional environment.

Thing that really stood out this quarter was the the deterioration of the the pricing environment in North America tissue of the last quarter, you reported I think 11% of price growth in North America lower promotions.

The price mix plus eight we're back to neutral already it looks like promotions are coming back certainly faster than I expected.

Is that what you're seeing there and how much of the gating factor on your pricing of price increase will have.

Yeah, but for the that's for Mike Mike jumps in I I would I would call out that we had an unusually high price of fact show up in the fourth quarter of last year that had to do with the the.

The timing on AR on accruals, where we had an accrual true up in the fourth quarter debt that caused that to be unusually high it was not indicative necessarily of the up market market environment. So I wouldn't say much compare to the fourth quarter.

I'd point, you more to the full year average from from last year or at least the the the last three quarters of last year, but my comment have you comment yeah. Yeah. So overall, Jason that's why you know knowing that we had some of.

Different items in that statement I would say overall, we still view, the north American market across personal care and tissue to be constructive.

I think promotional volume in personal care of returned to low while I recall I think our team calls normalized levels of few quarters ago, and so it's proceeded along that path and I would say it's.

That's kind of where personal carriers and tissue I would say promotional levels for us at least our perception is and our planning is a little of it still lower than where it had been in and primarily because we still had been in tight supply, obviously, given kind of where the man's going the supply situation is getting reversed a little of it now but.

Again, we don't have significant plans in the first half the promote aggressively and frankly as you've heard me say before we remain committed to two of our journey on the high Road and we really believe we want to grow of brands by investing in products and innovation and advertising and so over promoting cash.

We're as you know for us in and of fixed consumption category does not feel like the healthy way of the business. So again I would say overall.

The market appears to us constructive.

No. That's good context I appreciate that I guess I didn't realize there was such a big onetime benefit in the fourth quarter last year.

Quick math on that suggests it was almost 100 million, which suggests you're going to have north of 20 cents EPS headwind in the fourth quarter.

Yeah.

Is that right and given that your guidance of so back half weighted how are you going to overcome such a big hurdle.

Yeah, our guidance balances a lot of different moving factors the as I as I described earlier.

And I won't repeat.

Repeat myself and going going three of those that day.

If you look at the pricing.

Hmm tumor tissue from last year, and you look at that the trends it's about one per cent in the first half flat in the in the third quarter and then the.

The net benefit of <unk>.

6%.

In the fourth quarter, and and so I'd I'd.

As I said I I'd encourage you to look at the full year and our interest that we've taken all of the various factors into our second half outlook commentary yeah, Jason you've been in our chair. So I think you recognized kind of we have a lot of you know what we're paid to manage through these things and so these things come up every year and so you know the I'm sorry, I mentioned in my prepared remarks, you know.

We know how to manage with the situations and we will.

Yeah, No I understand thank you guys. So much of your time I really appreciate it.

Thanks, Jason.

Thank you. Our next question comes from Andrea to share with J P. Morgan.

Good morning, Thank you.

Good morning, So I have a three part of question. Please I'm sorry for that but first of all of them. If you can comment on the competitive environment in personal care outside of North America.

I think you called out from market share gains, which are encouraging but first of all in China.

Heard comments from one of your competitors that the market share of the market has been more competitive.

As of late and diapers why have you seen in your share of dynamics. There. That's the first part and then the second one is on the call out for the price increases you've taken in Europe and Latam.

And obviously you have some competitors that were low coal and reporting different currency. So have you seen any resolve itself I mean, I know you had amazing results from Brazil in the first quarter, but have you taken prices there already and with you know the government incentives trading how do you expect that to be.

The balance of the year.

And inside of third parties is what is embedded in the KCP of guidance are you know your comments about a wash of what was coming in a little bit more of them.

You know obviously type of we made it a bit.

It's more back loaded what are you expecting for that business at the balance of the year. Thank you.

All right I'll try to I'll start with the yeah.

Competitive environment overall again, I think we've been competing as I've as I've mentioned Andre out kind of in this high road approach, which would be again build the brands through quality innovation marketing and local execution, that's very very good and so that you know it feels like the west has been working very effectively China, especially.

You know we were up double digits in China.

Cross, both fem care and diapers, so we feel great about their business organic was up over 20% in China in.

In the quarter and huggies was up double digits and that was driven by volume.

And what I would say the premium margin mix and so our share is up as I mentioned, almost three points and we feel like we have the the.

Best product in the marketplace.

And the teams are very good on both of <unk>.

And in Fem care around digital marketing agility, and so theyre very good of a building that digital relationship with the consumers and so I think that's been a key component of driving our business and so yeah I think the the market you know maybe.

Maybe getting a little bit more competitive, but we still feel like the Chinese consumer.

I was looking for high quality products and right now the view was our products as being the best in the marketplace.

Mhm, that's helpful and on the price increases in Europe, and Latam, If you can comment on those.

Yeah, I would say overall, we have announced pricing in Europe, and we have been announcing pricing.

Fairly continuously in Latin America. So in general I would say we have seen a competitive.

Competitors move pricing in Europe.

And then local and then locally in Latin America has been mixed and so we have seen pricing moves from some of the larger competitors and then there have been one or two local ones that have not moved and so that's just the dynamic that's been going on.

The fourth for a year or so now and all of our teams have been able to operate with them.

Mhm and non KCP sorry for the three part of question Yeah. Okay feature of the KC I think the guide is yes, we do see we are planning for sequential improvement throughout the throughout the course of the year and again you know us.

As Maria mentioned earlier, we were seeing mobility pick up faster, but in the KC V business that hasnt flown through the the washroom segments that we typically play stronger rent and so we will we do expect to see that occur as more people get back to work I do think it's related to at least the North America of what would be a faster.

Vaccine rollout that we initially saw as we.

We're ending last year.

That's great. Thank you so much I'll pass it on.

Yeah.

Thank you. Our next question comes from Chris Carey with Wells Fargo Securities.

Morning, Chris.

Good morning, everyone. So just just one follow up and then another question just on the follow up to a prior question.

I I know that you're planning to keep promotional levels.

The steady or at least below pre pandemic levels can you just comment on maybe how much control you would have over that situations day. If overall category promotions were to start to take off right. So from a competitive standpoint.

Would you follow of those promotions or or do you have levers that you can deploy to keep market share. If you know of competitive activity reflected in higher from a word of takeoff.

And then you know my my my question is just around the.

There's been a lot of focus on in 2021, and I think appropriately. So there's also this broader narrative around.

The unemployment rates impact on birth rates, certainly developed markets coming back a bit faster than emerging markets.

But can you just talk about you know.

What you would expect from a from a category growth rate standpoint say over the next six to 12 months and maybe even even a bit longer term as well.

Yeah Okay.

I tried to address Chris.

And overall promotion I would say you know.

Our approach is to kind of grow the brands through you know investing in the quality of the products and in advertising and then with digital that's quite an effective tool for us I mean, not only is digital tends to be higher rois than any of our other spend including including retail promotions.

It's also you get faster faster feedback on its performance right. So so again I think we have plenty of levers are we did shift to this this approach a couple of years ago and I think it's working very effectively for us. So if you asked kind of do we have the levers in our control I would say, yes, and what we feel good.

About as we have programs developed that are robust in that sense and as I, just rattle off a bunch of the shares we feel like those are working very effectively.

That said you know we want to be competitive on price or promotions, but you know I don't think promotions and of fixed consumption category are the right long term way to grow the category because it's different than let's say, an impulse category like cookies, where you can drive incremental consumption through promotion.

You know all of our categories you generally don't drive incremental consumption, you can drive share of but.

But I'd, rather earn our share of rather than rent of our share for the short term.

And it's a very expensive way to rent share right. So so again, we do have the levers and by the way we were making.

Significant investment in our revenue growth management capability. So we have the tools in and even where we've worked to invest more of promotion I think we'd be very selective in terms of how we spend it and we want them, we would want to make that efficient as well.

I don't know if that address your question on that part.

That's helpful and then just on the.

The birth rate dynamic are you starting to see more impact in your results would you expect cash.

<unk> slowing I Wonder if you can you know maybe divide your comments between developed and developing markets.

Where maybe birth rates come down, but you have a you know.

More of a GDP per cap upside type drivers so anyway just.

The the you know the broader question. There is just around near and medium term medium term expectation for growth rates and whether you're starting to see some slowing there. Thanks, yeah yeah.

Great question, Kristen, we are seeing a little slowing in the birth rate overall, both in developed and developing markets are for instance in the U S where the data typically lags.

We were down about a point the birth rate was down about a point in 2019 of the latest data, although it's not officially published I think Paul but.

I would say roughly down three last year and so so that that was a slowdown and and you know where.

Seeing some of that to where you may have read in China. The birth rate has come down significantly as well.

I think the balancing factors of couple of different components. One is our core strategy is the Oliver to elevate our categories by creating more value added products and premium rising our mix over time, and that's really taken hold and as I mentioned, we're up almost three share points in China, That's all true.

The premium mix of products and for instance, this year.

There we of the best product, we feel like and then what we call our tier six which is our premium tier we are launching a T or seven product that brings a lot of the features that we have in our current premium products and escalates them further and we're launching tyr seven of the 50% premium to your six and so I do think in some markets like China.

Where the where the consumer certainly is one of the willing to pay for what they what are better products and the.

In the near term, we will continue to drive our business that way.

That said, we also have many other developing markets like Indonesia, and India that are continuing to grow and.

Where the birth rates are not as impacted yet or still maintaining their birth rates and also we still have category penetration growth. So so again I think we feel good about our overall strategy you recognize that the environment likely because of COVID-19 has affected the growth rates to some extent, but we feel like our strategies both in developed markets.

As to elevate our business and our categories and then continue to expand and Danny are the right ones for us.

Thank you for both of those I appreciate it okay.

Okay. Thank you Chris.

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

Okay.

Thank you all for joining us today, our revised outlook really reflects some significant change in our environment.

And I want to assure you that our teams are taking decisive action and we remained very confident in the hybrid approach to growing our brands. So thank you.

Thank you very much.

Thank you ladies and gentlemen that concludes today's presentation. You may disconnect your phone lines and thank you for joining us this morning.