Q2 2024 Kimberly-Clark Corp Earnings Call - Q&A
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Operator: Good morning and welcome to Kimberly-Clark's second quarter 2024 earnings question-and-answer session.
Operator: Good morning, and welcome to Kimberly-Clark's second quarter 2024 earnings question and answer session. I will now hand the conference over to Chris Jakubik, vice president and best relations. Please go ahead.
Christopher M. Jakubik: Good morning and welcome to Kimberly Clark's second quarter 2024 earnings question and answer session. I will now hand the conference over to Chris Jakubik, Vice President and Best Relations. Please go ahead.
Christopher Jakubik: I will now hand the conference over to Chris Jakubik, Vice President and Best Relations.
Operator: Please go ahead.
Christopher M. Jakubik: Thank you and hello everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly-Clark, and welcome to our Q&A session for our second quarter 2024 business update.
Christopher M. Jakubik: Thank you. And hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly-Clark. And welcome to our Q&A session for our second quarter 2024 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. However, actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also make some non-GAAP financial measures today or discuss some non-GAAP financial measures today. And these non-GAAP financial measures should not be considered a replacement for, and should be read together with, GAAP results.
Christopher M. Jakubik: Thank you and hello everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly Clark and welcome to our Q&A session for our second quarter 2024 business update.
Christopher M. Jakubik: During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also make some non-GAAP financial measures today, or discuss some non-GAAP financial measures today. And these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the gap to non-gap reconciliation within our earnings release and the supplemental materials posted at investor.kimbillyclark.com.
Speaker Change: During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC.
Speaker Change: We will also make some non-GAAP financial measures today, or discuss some non-GAAP financial measures today. And these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results.
Michael D. Hsu: And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberlyclark.com. Before we begin, I'm going to hand it to our Chairman and CEO , Mike Hsu, for a few quick opening comments.
Michael Hsu: Before we begin, I'm going to hand it to our Chairman and CEO, Mike Xu, for a few quick opening comments. Thank you, Chris. Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at the company Clark, who are working diligently on the augmentation of our comprehensive innovation like gross strategy and delivered strong results for the first half. We're excited about the opportunity to accelerate investments to build our powerhouse categories and brands and our pipeline of innovation. We are effectively navigating external dynamics while driving our consumer-centric culture. We're making the company better, stronger, and faster, and we are turbo-charging our ability to provide better care to consumers around the globe.
Christopher M. Jakubik: And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberlyclark.com. Before we begin, I'm going to hand it to our Chairman and CEO, Mike Hsu, for a few quick opening comments. Thank you, Chris. Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at Kimberly-Clark, who are working diligently on the implementation of our comprehensive innovation-led growth strategy and delivered strong results for the first half. We're excited about the opportunity to accelerate investments to build our powerhouse categories and brands and our Pipeline of Innovation. We are effectively navigating external dynamics while driving our consumer-centric culture.
Michael D. Hsu: Thank you, Chris. Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at Kimberly Clark who are working diligently on the implementation of our comprehensive innovation-led growth strategy and delivered strong results for the first half.
Michael D. Hsu: We're excited about the opportunity to accelerate investments to build our powerhouse categories and brands.
Michael D. Hsu: and our pipeline of innovation. We are effectively navigating external dynamics while driving our consumer-centric culture. We're making the company better, stronger, and faster, and we are turbocharging our ability to provide better care to consumers around the globe.
Michael D. Hsu: We're making the company better, stronger, and faster, and we are turbocharging our ability to provide better care to consumers around the globe. I'm very proud of our progress to date. It bolsters our confidence in delivering on our outlook for the year and our ability to ramp up our investments to further leverage our core strengths and achieve our potential. We are on an exciting path and are well-positioned to deliver durable growth and sustainable shareholder returns. So with that, I'd be happy to open it up to questions.
Michael Hsu: I'm very proud of our progress today. It bolsters our confidence in delivering our outlook for the year and our ability to ramp up our investments to further leverage our core strengths and achieve our potential.
Michael D. Hsu: I'm very proud of our progress to date. It bolsters our confidence in delivering our outlook for the year and our ability to ramp up our investments to further leverage our core strengths and achieve our potential.
Michael D. Hsu: We are on an exciting path, and our well-positioned deliver durable growth and sustainable shareholder growth.
Michael D. Hsu: We are on an exciting path and are well-positioned to deliver durable growth and sustainable shareholder returns.
Operator: So, with that, I'd be happy to open it up to questions. Certainly, everyone at this time be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.
Michael D. Hsu: So with that, I'd be happy to open it up to questions.
Operator: Certainly. Everyone will be conducting a question and answer session at this time. If you have any questions or comments, please press star 1 on your phone at this time.
Speaker Change: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.
Operator: We do ask that while you're posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Lauren Lieberman from Barclays. Your line is live. Great, thanks. Good morning.
Operator: We do ask that while posing a question, please pick up your handset if you're listening on speaker phone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone.
Speaker Change: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.
Speaker Change: Once again, if you have any questions or comments, please press star 1 on your phone.
Lauren Lieberman: Your first question is coming from Lauren Lieberman, from Barclays; your line is live. Great, thanks for coming. First, I wanted to check in and talk a little bit about market share trends because the organic sales growth this quarter was really solid. Volumes were up; you had this unexpected headwind from inventory, these stocks, but I wanted to also check in a bit on market share trends where you stand versus not just competition, but also what you're seeing from private label of weight.
Speaker Change: Your first question is coming from Lauren Lieberman from Barclays. Your line is live.
Lauren Rae Lieberman: So first, I want to check in and talk a little bit, Mike, about market share trends. You know, because the organic sales growth this quarter was really solid, volumes were up, you had this unexpected headwind from inventory destock, but I wanted to also check in on market share trends, you know, where you stand versus not just competition, but also what you're seeing from private label by weight. Okay, good morning, Lauren.
Lauren Rae Lieberman: Great thanks, good morning. So first I want to check in and talk a little bit Mike about market share trends.
Speaker Change: Transcribed by https://otter.ai
Mike: On market share trends, you know, where you stand versus not just competition, but also what you're seeing from private label of late. Okay, good morning, Lauren. Yeah, thanks for the question. Yeah, overall, I feel good about the progress we're making on market share.
Michael D. Hsu: Yeah, thanks for the question. Yeah, overall, I feel good about the progress we're making on market share, and I do expect further improvement as we progress through the year. We were, overall, globally, even on a weighted basis, and up or even in about half of our cohorts around the world.
Michael Hsu: Okay, morning Lauren, thanks for the question. Overall, I feel good about the progress we're making on market share, and I do expect further improvement as we progress through the year. We were overall globally even on a weighted basis and up or even in about half of our cohorts around the world, and that's progress versus the past couple of years where, if you recall this time last year, I think we were up or even in about 40% of our cohorts. I think we've made solid progress, but there still remains plenty of work for us to do.
Mike: And I do expect further improvement as we progress through the year. We were overall, globally, even on a weighted basis.
Mike: and up or even in about half of our cohorts around the world. And that's progress versus the past couple years where if you recall this time last year I think we were up.
Mike: or even in about 40% of our cohorts. So, you know, I think we've made, you know, solid progress, but there still remains plenty of work for us to do. As you may recall, Lauren, North America was a bit soft last year. That is improving. You know, that softness last year was primarily due to supply constraints.
Michael D. Hsu: And that's progress versus the past couple years, where if you recall this time last year, I think we were up, or even in about 40% of our cohorts. So, you know, I think we've made, you know, solid progress. But there still remains plenty of work for us to do. As you may recall, Lauren, North America was a bit soft last year, but that is improving. You know, that softness last year was primarily due to supply constraints. The first half of North America on a weighted basis was flat, and then up or even in about six of eight categories. And that continued in the second quarter.
Michael Hsu: As you may recall, Lauren North America was a bit soft last year that is improving. That softness last year was primarily due to supply constraint. The first half in North America on a weighted basis was flat, and then up or even in about six of eight categories in that continued in the second quarter, and I expect further improvement in North America as we cycle some of those constraints last year. We also had pretty solid gains on market share in certain brands across our what were called focus markets or other big five markets beyond North America.
Mike: The first half of North America on a weighted basis was flat, and then up or even in about six of eight categories, and that continued in the second quarter. And I expect further improvement in North America as we cycle some of those constraints last year.
Michael D. Hsu: And I expect further improvement in North America as we cycle some of those constraints. We also had pretty solid gains on market share in certain brands across our what we're calling focus markets, or our other big five markets beyond North America. In China, Huggies was up 180 basis points in share.
Mike: We also had pretty solid gains on market share in certain brands across our what we're calling focus markets or our other big five markets beyond North America.
Michael D. Hsu: In China, Huggies was up 180 basis points in share; in the UK and direct switches, the leading brand there was up 350 basis points. In South Korea, Huggies has been up over 800 basis points since 2019 and was up over 300 basis points in the quarter. And in Brazil, I think that will work and improve the brand proposition, and so we were up about a hundred basis points in Brazil. So we're making progress, but as I pointed out, we're about flat on a weighted basis, and so there are signals that there's plenty of work for us to do.
Michael D. Hsu: In the UK, Andrex, which is the leading brand there, was up 350 basis points. In South Korea, Huggies has been up over 800 basis points since 2019, and was up over 300 basis points in the quarter. And in Brazil, I think that we're working to improve the brand proposition, and so we were up about 100 basis points. So we're making progress, but, as I pointed out, we're about flat on a weighted basis, and that signals that there's plenty of work for us. Okay, great.
Mike: In China, Huggies was up 180 basis points in share. In the UK, Andrex, which is the leading brand there, was up 350 basis points. In South Korea, Huggies...
Mike: has been up over 800 basis points since 2019 and was up over 300 basis points.
Speaker Change: Unknown Executive, Michael Hsu, Nelson Urdaneta, Christopher Jakubik
Lauren Lieberman: Okay, great, and the just curious, I know you mentioned a couple market share bunch of market share positions outside of North America and China that have been very strong.
Michael D. Hsu: And the, just curious, I know you mentioned a couple of market share, a bunch of market share positions outside of North America and China that have been very strong. But when do we start to see that translate into growth, you know? Because I think one of the interesting parts of the strategy you've laid out and the sort of, shifting the focus a bit so that we can get more visibility into the other areas of your business.
Speaker Change: Okay, great. And the, just curious, I know you mentioned a couple of market share, bunch of market share positions outside of North America and China that have been very strong. But when do we start to see that translate into into growth? You know, because I think one of the interesting parts of the strategy you've laid out and the sort of
Lauren Lieberman: But when do we start to see that translate into growth, you know, because I think one of the interesting parts of the strategy you've laid out and the sort of shifting the focus a bit so that we can get more visibility into the other areas of your business. But when should we start to see, you know, growth become more material and, you know, matter more movement needle more in markets outside of the US and China.
Speaker Change: shifting the focus a bit so that we can get more visibility into the other areas of your business. But when should we start to see, you know, growth become more material and, you know, matter more, move the needle more in markets outside of the US and China?
Michael D. Hsu: But when should we start to see, you know, growth become more material and, you know, matter more, move the needle more in markets outside of the US and China? Yeah, I mean, Lauren, we have a very proven playbook that we're really proud of.
Michael D. Hsu: And we're implementing that more systematically behind this, you know, wiring for growth initiative that we have. We're going to implement those playbooks more systematically around the world. One, we have great technology that the world you all haven't seen yet, which we're rolling out. And we're excited about our launch that I mentioned in our opening comments in the script for skin essentials in the US. So we have a great, great technology portfolio; we have the right, we've been investing the past five years to build the right commercial and supply capabilities to accelerate performance.
Michael D. Hsu: Yeah, I mean, you know, Lauren, it's a we have a very proven playbook that we're really proud of, and we're implementing that more systematically behind this, you know, wiring for growth initiative that we have. We're going to, we're going to implement those playbooks more systematically around the world.
Speaker Change: Yeah, I mean, you know, Lauren, I'd say we have a very proven playbook that we're really proud of, and we're implementing that more systematically behind this, you know, wiring for growth.
Speaker Change: We're going to implement those playbooks more systematically around the world. One, we've got great technology that the world, you all haven't seen yet, which we're rolling out and we're excited about our launch.
Michael D. Hsu: You know, one, we got great technology that the world you all haven't seen yet. We're to roll an out and we're excited about our launch that I mentioned in our opening comments in the script on skin essentials in the US. So we got great, great technology. Before we go, we got the right. We've been investing in the past five years to build the right commercial and supply capabilities to sell performance.
Speaker Change: that I mentioned in our opening comments in the script on skin essentials in the U.S. So we've got a great technology portfolio, we've been investing the past five years to build the right commercial and supply capabilities to accelerate performance.
Michael D. Hsu: You're going to see a sharper focus on what we're calling our focus markets, right? Those are the U.S. plus the next five markets for us. And so, you know, that said, I would say, you know, local conditions remain dynamic.
Michael Hsu: You're going to see a sharper focus on what we're calling our focus markets, right? Those are the US plus the next five markets for us. And so, you know, that said, I would say, you know, local conditions remain dynamic and so, you know, there is plenty of opportunity to tighten up our brand propositions on a market specific basis. For reference, you know, just tell you, so, up, co-text is the leading brand or we call it intimacy in Brazil, the leading brand in Brazil, but you know, share was a little soft and down about, you know, just a little bit less than a hundred basis points.
Speaker Change: You're going to see a sharper focus on what we're calling our focus markets, right? Those are the U.S. plus the next five markets for us.
Speaker Change: And so, you know, that said, I would say, you know, local conditions remain dynamic. And so, you know, there's plenty of opportunity to tighten up our brand propositions.
Michael D. Hsu: And so, you know, there's plenty of opportunity to tighten up our brand property. On a market-specific basis, for reference, you know, I'll just tell you, so Huggies, as I mentioned, was up in share in China, while Kotex was flat.
Speaker Change: on a market specific basis. For reference, you know, I'll just tell you, so Huggies, as I mentioned, was up in share in China.
Michael D. Hsu: And, you know, again, it grew high single digits in the quarter on Kotex, but, you know, we'd love to get more share growing in China on Femcare. In Brazil, Huggies was up. Kotex is the leading brand, or we call it Intimus in Brazil, the leading brand in Brazil, but, you know, share was a little soft and down about a little bit, so we got some work there. South Korea, I said, Huggies was up over 300 basis points.
Speaker Change: Kotex was flat and you know again it grew high single digits in the quarter on Kotex But you know we'd love to get more share growing in China on Femcare. In Brazil Huggies was up Kotex is the leading brand or we call it Intimus in Brazil the leading brand in Brazil But you know share was a little soft and down about you know just a little bit less than 100 basis points
Michael D. Hsu: So we got some work there, South Korea. I said, Huggies was up over 300 basis points, but that tissue was down a little bit, and so we have work to do around the world. And so, you know, part of, you know, our strong starts going to force the ability to make surgical investments to get our good better best, you know, where we think they need to be in the local markets.
Speaker Change: So we got some work there. South Korea, I said, Huggies was up over 300 basis points.
Michael D. Hsu: The bath tissue was down a little bit, and so we have work to do around the world, and so, you know, part of, you know, our strong start is going to give us the ability to make surgical investments to get our good, better, best, you know, where we think they need to be in the local. Thanks so much.
Speaker Change: Unknown Executive, Michael Hsu, Nelson Urdaneta, Christopher Jakubik
Lauren Lieberman: Okay, thanks so much. I'll pass it on.
Operator: Okay, thanks, Lauren.
Dara Mohsenian: Thank you. Your next question is coming from Guerra, Mussonin, from Morgan Stanley; your line is live. Big of morning, guys. Some radar. So a pretty sizable margin in the NEPSB and Q2. But it does sound like investments are getting pretty from the back half of the year.
Speaker Change: Okay, great. Thanks so much. I'll pass it on. Okay. Thanks, Lauren.
Lauren Rae Lieberman: I'll pass it on. Okay. Thank you. Your next question is coming from Gara Mohsenian from Morgan Stanley. Your line is live. Be good morning, guys. I'm Adar.
Speaker Change: Thank you. Your next question is coming from Gara Mohsenian from Morgan Stanley . Your line is live.
Dara Warren Mohsenian: So a pretty sizable margin in EPS beat in Q2, but it does sound like investments are gonna increase in the back half of the year. So Nelson, can you just discuss a bit the cadence of margins in EPS in the back half, how we should think about Q3, Q4 margin performance, particularly as the divestiture impact should ramp up in the back half of the year? Sure, Dara, so let me start by echoing what Mike said. I mean, we're very proud of how our teams have performed in the first half of the year.
Dara Warren Mohsenian: Good morning, guys.
Dara Warren Mohsenian: [inaudible]
Dara Warren Mohsenian: So, a pretty sizable margin in EPSBEQ2, but it does sound like investments are going to increase in the back half of the year.
Dara Mohsenian: So Nelson, can you just discuss a bit the cadence of margins in NEPS in the back half? How we should think about Q3, Q4, margin performance, particularly as the divestiture impact should ramp up in the back half of the year?
Dara Warren Mohsenian: Nelson, can you just discuss a bit the cadence of margins and EPS in the back half, how we should think about Q3, Q4 margin performance, particularly as the divestiture impact should ramp up in the back half of the year?
Dara Mohsenian: Sure, Dara. So let me start by echoing what Mike said. I mean, we're very proud of our teams of executed in the first half of the year. And we've gained momentum on a number of fronts relative to our Power and Care strategy. As a reminder, I mean, as we think about margins, our main focus is on driving profit dollars growth. Margins for us, as we've stated, are milestones, and we're moving on that progression. Growth in the second quarter on the first half reflected, you know, solid volume mix, driven gains, and on the third quarter is it's a third quarter on a row that we drive positive volume mix.
Nelson: Sure Dara, so let me let me start by echoing what Mike said. I mean we're we're very proud of our teams have executed in the first half of the year. I mean we've gained momentum on a number of fronts relative to our power and care strategy.
Nelson Urdaneta: I mean, we've gained momentum on a number of fronts, particularly relative to our power and great care strategy. As a reminder, I mean, as we think about margins, our main focus is on driving profit-dollar growth. Margins for us, as we've stated, are milestones, and we're moving on that progression. Growth in the second quarter and the first half reflected, you know, solid volume mix driven gains. And for the third quarter, it's the third quarter in a row that we have driven positive volume.
Speaker Change: As a reminder, I mean, as we think about margins, our main focus is on driving profit-dollars growth. Margins, for us, as we've stated, are milestones, and we're moving on that progression.
Speaker Change: Growth in the second quarter and the first half reflected solid volume mix-driven gains. And on the third quarter, it's the third quarter in a row that we drive positive volume mix.
Nelson Urdaneta: Importantly, in some of our largest, most profitable geographies like the US, China, and the UK, we saw solid volume mixed growth, which is something we've been focusing on. And as Mike said, I mean, it is the key to a long-term algorithm.
Dara Warren Mohsenian: Importantly, in some of our largest, most profitable geographies like the US, China, and the UK, we saw solid volume mix growth, which is something we've been focusing on, and as Mike said, I mean, it is the key for a long term algorithm. We delivered, you know, more than half of our profit dollar objectives for the year in the first half, and this actually gives us flexibility for the second half, to further invest and strengthen our brands and our innovation pipeline. Especially as we manage through some of the challenges in the macro environment and some of the increase in consumer pressure that, you know, we're all seeing.
Speaker Change: Importantly, in some of our largest, most profitable geographies like the U.S., China,
Speaker Change: And the UK, we saw solid volume mixed growth, which is something we've been focusing on. And as Mike said, I mean, it is the key for a long term algorithm.
Nelson Urdaneta: We delivered more than half of our profit dollar objectives for the year in the first half, and this actually gives us flexibility for the second half to further invest in strengthening our brands and our innovation pipeline, especially as we manage through some of the challenges in the macroenvironment and some of the increased consumer pressure that we're all seeing. As we think of the cadence of first half and second half, on the top line, we would expect the second half to grow at a similar pace to what we saw in the second quarter, with again volume and mix being key drivers of growth, while pricing will continue to play a lesser role sequentially. At the profits, four things to keep in mind. First one is productivity delivery.
Mike: We delivered, you know, more than half of our profit dollar objectives for the year in the first half and this actually gives us flexibility for the second half to further invest in strengthening our brands and our innovation pipeline, especially as we manage
Speaker Change: For some of the challenges in the macro environment and some of the increased consumer pressure that you know We're all seeing as we think of you know cadence of first half second half on the top line We would expect the second half to grow at a similar pace of what we saw in the second quarter
Dara Mohsenian: As we think of, you know, cadence of first half, second half on the top line, we would expect the second half to grow at a similar pace of what we saw in the second quarter. With again, volume and mix key drivers are growth, while pricing will continue to play a lesser role sequentially.
Speaker Change: with again volume and mix key drivers of growth while pricing will continue to play a lesser role sequentially.
Dara Warren Mohsenian: At the profits, four things to keep in mind: first one, productivity delivery. It's been solid in the first half and ahead of our original plans given the timing of some of the projects, so we do expect a lower absolute dollar productivity delivery in the second half, but still very strong on the year. Secondly, pricing that of course, it's been strong and favorable in the first half due to timing of pricing actions relative to costs, and you got to take into account Argentina, which again, a lot of the hits that we took on the currency were in the second half of last year, so we're going to be lapting that as we head into the second half of this year.
Speaker Change: At the profits, four things to keep in mind. First one, productivity delivery.
Nelson Urdaneta: It's been solid in the first half and ahead of our original plans, given the timing of some of the projects. So we do expect a lower absolute dollar productivity delivery in the second half, but still very strong for the year. Secondly, pricing net of costs.
Speaker Change: It's been solid in the first half and ahead of our original plans, given timing of some of the projects. So we do expect a lower absolute dollar productivity delivery in the second half, but still very strong on the year.
Nelson Urdaneta: It's been strong and favorable in the first half due to the timing of pricing actions relative to cost, and you've got to take into account Argentina, where again, a lot of the hits that we took on the currency were in the second half of last year, so we're going to be lapping that as we head into the second half of this year. For the balance of the year, we expect pricing at cost benefits to taper off. However, it's important to reiterate that on a full-year basis, we expect to be pricing that at least cost-neutral. The third aspect is the timing of investments.
Speaker Change: Secondly, pricing net of costs.
Speaker Change: It's been strong and favorable in the first half due to timing of pricing actions relative to costs.
Speaker Change: and you got to take into account Argentina which again a lot of the hits that we took on the currency were in the second half of last year so we're going to be lapping that as we head into the second half of this year.
Dara Mohsenian: For the balance of the year, we expect pricing that across benefits to taper off; however, it's important to reiterate that on a full year basis, we expect to be at least pricing that across neutral.
Speaker Change: For the balance of the year, we expect pricing net of cost benefits to taper off. However, it's important to reiterate that on a full year basis, we expect to be at least pricing net of cost neutral.
Nelson Urdaneta: In the back half of the year, we expect to step up investments behind our brands. Given the timing of some of the innovation programs that we have, as a reminder, in the first half of the year, our Spend on Our Brands was approximately 6% of sales. Heading into the second half, this number is going to be closer to 7% as we take advantage of our strong first half and we strengthen the overall investment profile, setting up the time for us to continue growing sustainably in years to come.
Dara Mohsenian: The third aspect is timing of investments. In the back half of the year, we expect to step up investments by our brands, given the timing of some of the innovation programs that we have. As a reminder, on the first half of the year, our spend on our brands was approximately 6% of sales. Jones, heading into the second half, this number is going to be closer to 7%, as we take advantage of our strong first half, and we strengthen the overall investment profile, setting up the time for us to continue growing sustainably in years to come. And the last but not least is the divestiture of our personal protective equipment.
Speaker Change: The third aspect is timing of investments. In the back half of the year, we expect to step up investments behind our brands, given timing of some of the innovation programs that we have. As a reminder, on the first half of the year, our
Speaker Change: Spend on our brands was approximately 6% of sales. Heading into the second half, this number is going to be closer to 7% as we take advantage of our strong first half and we strengthen the overall investment profile, setting up
Speaker Change: [inaudible]
Speaker Change: The time for us to continue growing sustainably in years to come. And then last but not least is the divestiture of our personal protective equipment. We expect it to...
Nelson Urdaneta: And last but not least, is the divestiture of our personal protective equipment. We expect it to be a headwind in terms of profits of around 180 basis points in the second half of the year, but we didn't have that in the first half.
Dara Mohsenian: We expect it to be a headwind in terms of profits of around 180 basis points in the second half of the year; we didn't have that in the first half of the year.
Speaker Change: The headwind in terms of profits of around 180 basis points in the second half of the year We didn't have that in the first half of the year
Nelson Urdaneta: Two more things, as you think of EPS, equity method investment income, while it grew in the first half of the year, some of it had to do not just with the underlying performance of our equity method investments, but it also had to do with the strength of the Mexican peso in the first half year on year. That's going to revert in the second half of the year. And we expect net equity investment to be largely flat in the second half of the year.
Dara Mohsenian: Two more things, as you think of EPS, equity, method, investment income, while it grew in the first half of the year. Some of it had to do not just with the underlying performance of our equity, method investments; it also had to do with the strength of the Mexican peso in the first half year on year. That's going to revert in the second half of the year, and we expect the net equity investment to be largely flat in the second half of the year. And the other item on EPS is the effect of the adjusted effective tax rate.
Speaker Change: Two more things that you think of EPS, equity method investment income, while it grew in the first half of the year.
Speaker Change: Some of it had to do, not just with the underlying performance of our equity method investments, it also had to do with the strength of the Mexican peso in the first half, year on year. That's going to revert in the second half of the year, and we expect the net equity investment to be largely flat in the second half of the year.
Nelson Urdaneta: And the other item on EPS is the adjusted effective tax rate. For the full year, we're now projecting a 23% to 24% adjusted effective tax rate. And for the first half, our adjusted effective tax rate was 22.3%.
Speaker Change: And the other item on EPS is the adjusted effective tax rate. For the full year, we're now projecting 23% to 24% adjusted effective tax rate. And for the first half, our adjusted effective tax rate was 22.3%.
Dara Mohsenian: For the full year, we're now projecting a 23-24% adjusted effective tax rate, and for the first half, our adjusted effective tax rate was 22.3%. So when you combine all those factors, that gives you the cadence of how we're looking at the first half in second half.
Dara Warren Mohsenian: So when you combine all those factors, that gives you the rhythm of how we're looking at the first half and second half. Great. That's very detailed and helpful.
Speaker Change: So when you combine all those factors, that gives you the cadence of how we're looking at the first half and second half.
Michael D. Hsu: And if I could slip in one more question, you talked about price in regards to the second half outlook. Can you give us an update on the North American pricing environment for personal care and consumer tissue? You know, A, is there the ability to drive mix to a greater extent in the back half of the year?
Operator: That's very detailed and helpful.
Dara Warren Mohsenian: And if I could slip in one more question, you talked about price in regards to this second half outlook. Can you give us an update on the North American pricing environment in both personal care and consumer tissue? Is there a ability to drive mix to a greater extent in the back half of the year? How do you think about that? Be the promotional environment, and how we should think about pricing realization from here in North America in a more normalized environment?
Speaker Change: Great. That's very detailed and helpful. And if I could slip in one more question. You talked about the price in regards to the second half outlook.
Speaker Change: Can you give us an update on the North American pricing environment in both personal care and consumer tissue?
Speaker Change: You know a is their ability to drive
Dara Warren Mohsenian: How do you think about that? B, the promotional environment, and how we should think about pricing realization from here in North America in a more normalized environment? Thanks. Hey, yeah, thanks.
Speaker Change: mix
Speaker Change: To a greater extent in the back half of the year, how do you think about that, be the promotional environment and how we should think about pricing realization from here in North America in a more normalized environment. Thanks.
Michael D. Hsu: Yeah, and I overall in the pricing environment, particularly in North America, I'd say remains, You know, stable, you know, and, you know, as you may recall, you know, since COVID, you know, in the COVID environment, or the pandemic related environment, you know, we did see a reduction in promotion activity in our categories. You know, I'd say, you know, over the past two years, that that has kind of returned and normalized post pandemic, and I'd say it's remained at that level, you know, we are seeing a touch of promotion and, you know, You know, in some categories, in some retailers, but overall, again, our strategy is to remain focused on volume and mix-driven growth, and we're maintaining what we're calling PNOC, or Pricing Net Input Cost Discipline.
Dara Mohsenian: Thanks. Yeah, and overall in the pricing environment, particularly in North America, I say remains stable. As you may recall, since COVID, in the COVID environment, with a pandemic-related environment, we did see a reduction in promotion activity in our categories. I'd say over the past two years that has kind of returned and normalized post-pandemic, and I'd say it's remained at that level. We are seeing a touch of promotion in some retailers, but overall, our strategy is to remain focused on volume and mixed-driven growth. And we're maintaining, we're calling, Pinoc, or pricing that of input cost discipline.
Speaker Change: Hey, yeah, thanks, Dara. Yeah, and overall, in the pricing environment, particularly in North America, I'd say it remains...
Speaker Change: As you may recall, since COVID, in the COVID environment or the pandemic-related environment, we did see a reduction in promotion activity in our categories.
Speaker Change: I'd say over the past two years, that has kind of returned and normalized post-pandemic, and I'd say it's remained at that level. We are seeing a touch of promotion.
Speaker Change: You know, in some categories, in some retailers, but overall, again, our strategy is to remain focused on volume and mix-driven growth.
Speaker Change: And we're maintaining what we're calling PNOC, or Pricing Net of Input Cost Discipline.
Michael D. Hsu: And so, you know, overall, as you're well aware, pricing, toss-set, cost inflation is receding for us. You know, as expected, we really want to be more valuable at every rung of the good, better, best ladder. I think one of the things that's great about our portfolio is that we do serve all consumers, you know, from value to premium, even though premium is really the big growth driver for us. And so we're really focused on working to ensure that our value propositions all along the value spectrum are going to remain strong.
Dara Mohsenian: And so overall, as you're well aware, pricing, cost inflation is receding for us, as expected. We really want to be more valuable at every run of the good, better, best ladder. I think one of the things that's great about our portfolio is that we do have all consumers from value to all the two premiums. Even though premium is really the big growth driver for us. And so we're really focused on working and sure that our value and propositions all along with value spectrum are going to remain strong. And so our focus on building brands with advertising, great storytelling, pioneering innovation.
Speaker Change: And so, you know, overall, as you're well aware, you know, pricing to offset cost inflation is receding for us.
Speaker Change: As expected, we really want to be more valuable at every rung of the good, better, best ladder. I think one of the things that's great about our portfolio is that we do serve all consumers from value to premium, even though premium is really the big growth driver for us.
Speaker Change: And so we're really focused on working to ensure that our value, you know, propositions all along the value spectrum are going to remain strong. And, you know, so our focus on building brands with advertising, great storytelling, pioneering innovation.
Michael D. Hsu: And, you know, so our focus on building brands with advertising, great storytelling, pioneering innovation. But, you know, again, we also recognize, you know, in some categories, promotion is very important, and we're going to be competitive where we need to be, but, again, we're focused on driving the category's growth through advertising. Thank you. Okay.
Dara Warren Mohsenian: But again, we also recognize that, in some categories, promotions are very important. And we're going to be competitive where we need to be. But again, we're focused on driving the category's growth advertised here.
Speaker Change: But, you know, again, you know, we also recognize, you know, in some categories, you know, promotion is very important and we're going to be competitive, you know, where we need to be. But again, we're focused on driving the category's growth through advertising.
Sunil Harshad Modi: And your next question is coming from Nick Modi from RBC Capital Markets. Your line is live. Thank you. Good morning, everyone.
Speaker Change: Thank you. Okay.
Speaker Change: Thank you. And your next question is coming from Nick Modi from RBC Capital Markets. Your line is live.
Sunil Harshad Modi: Michael, good morning. Good morning. So two questions, just one on the organizational design change that is going to take place in a few months' time. Just, you know, like, I remember when Procter & Gamble did, you know, a similar type of thing, not exactly the exact structure, but they had like a transitionary kind of era or, you know, moment between kind of the old structure and the new structure. And I'm just curious if that is something That's the first question.
Sunil Harshad Modi: Thank you. Good morning, everyone. Good morning. Good morning. So two questions, just one on the organizational design change that are going to take place in a few months' time.
Sunil Harshad Modi: I remember when Proctor & Gamble did a similar type of thing, not the exact structure, but they had like a transitionary kind of era or moment between the old structure and the new structure. And I'm just curious if that is something that is going on right now within Kimberly, which will make that transition much smoother when we get to October . That's the first question.
Michael D. Hsu: And then I was hoping you could just kind of give us your thoughts. Since Analyst Day, you've hired two new people, one from, you know, Chief Growth Officer who has a consumer healthcare background, and then obviously, a new head of R&D that just was announced. You know, just wanted to give us some words of kind of how they fit into the new strategy. Yeah, great. Nick.
Speaker Change: And then I was hoping you can just kind of give us your thoughts. Since the annual stay, you've hired two new people, one from, you know, Chief Growth Officer that has a consumer healthcare background. And then obviously, a new head of RD that just was announced, you know, just want it was hoping you can give us some words of kind of how they fit into the new strategy.
Michael D. Hsu: Okay, you're everywhere all over. And I think it's a great question. As I mentioned, I think in the prepared script, you know, we made an interim move on July one that changed some of the reporting in our global, our global supply chain, and North America, and then Brazil moving into international personal care on an interim basis. And so I'd say, you know, your observation around an interim structure; we've done some significant shifts there already.
Speaker Change: Yeah, great. Nick, okay, you're all over it. I think that's a great question. As I mentioned, I think in the prepared script, you know, we made an interim move on effective July 1.
Speaker Change: that changed some of the reporting in our global supply chain.
Speaker Change: and North America, and then Brazil moving into international personal care on an interim basis. And so I'd say, you know, your observation around an interim structure, we've done some significant shifts there already.
Michael D. Hsu: And again, that goes back to, you know, I had some experience with another corporate transition where Nelson and Chris and I worked, and so having that interim model working before you officially make those moves helps a lot.
Nelson: And again, that goes back to, you know, I had some experience with another corporate transition where Nelson and Chris and I worked. And so having that interim model working before you officially make those moves helps a lot. And I think, you know, the organization is making tons of progress in the new ways of working.
Michael D. Hsu: And I think, you know, the organization is making tons of progress in the new ways of working. I'm very, very excited about the progress that teams are making and very appreciative of all the hard work that they're putting in to make this happen. So, again, I feel great thus far about our Wire for Growth initiative or the organizational change, and we're making strong progress there. With regard to Patricia and Craig, I'm excited to have them on board.
Nelson: I'm very, very excited about the progress that teams are making and very appreciative of all the hard work that they're putting in.
Nelson: I feel great thus far about our Wire for Growth initiative or the organizational change, and we're making strong progress there. With regard to Patricia and Craig,
Michael D. Hsu: You know, Alison Lewis, who was our Chief Growth Officer, and Robert Lung, our Chief Innovation Officer or R&D Officer, did great work for us and really, you know, advanced the agendas in both those areas very, very strongly. But I knew I had intercepted them at a point in their careers where they wanted to go on at some point and do other things.
Nelson: I'm excited to have them on board. You know, Alison Lewis, who was our Chief Growth Officer, and Robert Wong.
Nelson: Our Chief Innovation Officer, our R&D officer, you know, they did great work for us and really, you know, advanced the agendas in both those areas very, very strongly.
Nelson: But I knew I intercepted them at a point in their career where they wanted to go on at some point and do other things. And so, you know, I think we have an excellent transition period between the four of these leaders.
Michael D. Hsu: And so, you know, I think we have an excellent transition period between the four of them, and as Patricia and Craig come aboard, you know, I think they both bring great skills to Kimberly-Clark. You know, Patricia has worked at companies like Kraft and Unilever and Heineken before Bayer, and she knows a lot about the consumer health space, and is really, really focused on marketing and advertising, which is a great thing for us
Speaker Change: As Patricia and Craig come aboard, I think they both bring great skills to Kimberly Clark. Patricia has worked at companies like Kraft, Unilever, and Heineken before Bayer and knows a lot about the consumer health space.
Speaker Change: Really, really focused on marketing and advertising, which is a great thing for us.
Michael D. Hsu: And then Craig is a real great transformational leader with Unilever and Sun Products further in his background, as well as a great run at Campbell's. And so I think they'll bring a lot, both in terms of organizational development but also expertise in their fields that will advance the things that we're working on with Power, Helpful. I'll pass it on.
Speaker Change: And then Craig is a real great transformational leader.
Speaker Change: with Unilever and Sun Products further in his background, as well as a great run at Campbell's. And so I think they'll bring a lot, both in terms of organizational development, but also expertise in their fields that will advance the things that we're working on with Power and Care.
Speaker Change: Helpful. Pass it on. Okay. Thank you, Nick.
Sunil Harshad Modi: Okay. Thank you. Thank you. Your next question is coming from Javier Escalante from Evercore. Your line is live. Hi, good morning, everyone. I would like to see whether I can get more color on the savings, right? Because I at least see three buckets.
Speaker Change: Thank you. Your next question is coming from Javier Escalante from Evercore. Your line is live.
Javier Escalante: Hi. Good morning, everyone. I would like to see whether I can get more color on the savings, right? Because at least I see three buckets. So basically, you're announcing something in North America.
Javier Escalante: So basically, you're announcing something in North America. My understanding is that the supply chain, so if you can talk about... The benefits of what you're trying to do there are that you are exiting two small markets. But when you look at the P&L, it feels as if the SG&A is where we get better numbers relative to consensus. So if you can expand on that, and then I have a follow up. Thank you. You know, maybe I'll just start, and I think Nelson will kind of give you more color on the savings.
Speaker Change: My understanding is that the supply chain, so if you can talk about the benefits of what you are trying to do there, you are exiting two small markets.
Speaker Change: But when you look at the P&L, it feels as if the SG&A is where we get better numbers relative to consensus. So if you can expand that and then I have a follow-up. Thank you.
Speaker Change: Unknown Speaker 06. Hi. How are you? Unknown Speaker 06. I'm good. We'll see you next time.
Speaker Change: You know, maybe I'll just start and I think Nelson will kind of give you more color on on the savings. I would say, on on the small market exits, you know, you know, my overall on that would be, you know, we are taking steps to make, you know, our categories and all our markets
Michael D. Hsu: I would say, on the small market exits, you know, my overall take on that would be, you know, we are taking steps to make our categories and all our markets more robust and predictable contributors to growth and return. And we like our positions in most markets. But that said, in places where we don't really feel, Javier, that we have a long-term right to win, or the market conditions in that market are not conducive to winning.
Speaker Change: More robust and predictable contributors to growth and returns.
Nelson: You know and we like our positions in most markets, but that said in places where we don't really feel heavier that
Nelson: And then we have a long-term right to win.
Michael D. Hsu: We're going to be disciplined and methodical, and so we made the difficult decision to announce our planned exits in Nigeria and Bolivia, and we recognize the downside. It does affect our employees there, but I think it's the right move long-term for Kimberly-Clark. But, you know, Nelson, you can comment on the other sources. Yeah, in terms of, Javier, the sources of the savings. They're two, two
Nelson: or the market conditions in that market are not conducive to winning, you know, we're going to be disciplined and methodical. And so we made the difficult decision to announce our planned exits in Nigeria and Bolivia.
Nelson: and you know and you know we recognize you know the downside it does affect our employees there but I think there's a wrong the right move long term.
Nelson: You know, I don't think those will contribute, you know, to be a huge source of savings, but I think it does take some risk out of, you know, the ongoing performance of the business. But you know, Nelson, you can comment on the other sources.
Nelson Urdaneta: I mean, first and foremost, and the lion's share of the savings will derive from our supply chain transformation. As a reminder, it encompasses three strategies. The first one is our value stream simplification.
Nelson: Yeah, in terms of, Javier, the sources of the savings.
Nelson: They're twofold. I mean, first and foremost, and the lions share the savings.
Nelson: We'll derive from our supply chain transformation.
Nelson: As a reminder, they encompass three strategies. The first one is our value stream simplification. And as I've explained and Tamera has explained, this has to do with product specifications.
Nelson Urdaneta: As I've explained and Tamera has explained, this has to do with product specification and a few other items that will drive significant savings over time. The second one is optimizing our network, and that's the footprint. It's our four walls, and you're seeing some actions that are being taken today, and they'll be taken over the next few years. And then the third bucket is scalable automation, and that encompasses two areas. One is the actual automation of supply chain processes in our factories and our warehouses.
Tamera: and a few other items that will drive significant savings over time. Second one is optimizing our network, and it's the footprint. It's our four walls, and you're seeing some actions that are being taken today, and they'll be taken over the next few years.
Speaker Change: And then the third bucket is scalable automation, and that encompasses two areas. One is actual automation of supply chain processes in our factories and our warehouses.
Nelson Urdaneta: And the second one is digital automation, where we're deploying tools to optimize our procurement capabilities as well as our... Supply and Demand. We are on the early stages of our transformation journey, especially in the supply chain, and we're pleased with where we're at in the first half of the year. Productivity delivery is ahead of what we had planned. We are at about 255 million a year to date on the.
Nelson: And the second one is digital automation, where we're deploying tools to optimize our procurement capabilities, as well as our...
Nelson: Supply and Demand Capabilities.
Nelson: We are on the early stages of our...
Nelson: Transformation journey and especially in the supply chain and we're pleased with where we're at on the first half of the year. Productivity delivery.
Nelson: is ahead of what we have planned. We are at about $255 million a year to date.
Nelson Urdaneta: Supply Chain Productivity, and that does not include procurement. We will update annually on the procurement savings, but we are well on track as we seek to deliver the $3 billion over the next five years, as we say, specifically on actions that have been taken and what's driving them.
Nelson: on the
Nelson: Supply Chain Productivity, and that does not include procurement. We will update annually on the procurement savings.
Nelson: But well on track as we seek to deliver the $3 billion over the next five years, as we said. Specifically on actions that have been taken and what's driving this.
Nelson Urdaneta: One, we're seeing conversion and waste reduction. That's a big bucket that's helping us drive, and that, again, is within the value stream. It's product material specification standardization. That's starting to happen.
Nelson: One, it's, you know, we're seeing conversion and waste reduction. That's a big bucket that's helping us drive, and that, again, is within the value stream.
Nelson: It's product material specification standardization. That's starting to happen, and we've been working to get that going in the last year and a half or so. And then lastly, it's transportation and warehousing cost reductions. So that's in a nutshell what's driving the savings on the supply chain.
Nelson Urdaneta: And we've been working to get that going for the last year and a half or so. And then lastly, transportation and warehousing cost reductions. So that's, in a nutshell, what's driving the savings on the supply chain. The other bid is on the overheads. On overheads, we said that our target is to deliver about $200 million of savings over the next two, three years. The lion's share of those savings is really going to kick in once the full organizational model is in place. And that goes into effect in the latter part of the year. So we will not see a lot of savings this year on the overhead line coming from that item.
Nelson: The other bid is on the overheads. On the overheads, we said that our target is to deliver about $200 million of savings over the next 2-3 years.
Nelson: The lion's share of those savings is really going to kick in once the full organizational model is in place, and that goes into effect in the latter part of the year.
Nelson: So, we will see not a lot of savings this year on the overheads line coming from that item. What you're seeing on the overheads, which I think you're alluding to, is we're seeing absolute dollars largely flat sequentially.
Nelson Urdaneta: What you're seeing on the overheads, which I think you're alluding to, is that we're seeing absolute dollars, largely flat sequentially, which is that the discipline that we've had on overall spend is still in place. I mean, we're driving a lot of discipline in terms of spending and costs, and that's flowing through, and you're seeing it in the P&L at this stage. Oh, that'
Nelson: is that the discipline that we've had on overall spend is still in place. I mean, we're driving a lot of discipline in terms of spending and costs, and that's flowing through and you're seeing it in the P&L at this stage.
Javier Escalante: Okay. I do have a question because we got Scania data today that includes Costco, which is an important retailer, and Amazon. And we saw, what the data shows is volume accelerating at the end of the quarter. I mean, we have around 2%, which is, [inaudible] Yeah, maybe I'll start with that, Javier.
Speaker Change: Oh, that's great color, okay. I do have a question because we got Scania data today and includes Costco, which is an important retailer.
Speaker Change: and Amazon and we saw I mean what the data shows is volume accelerating at the end of the quarter and we have around 2% which is
Speaker Change: 2-3 points better than what you reported.
Speaker Change: Your commentary when it comes to inventory reduction and, you know, uncertainty there. So, in light that volumes accelerated, you know, in the last four weeks, ending July 7th,
Speaker Change: Should we expect kind of like a more consistent, you know, retail sales in North America versus where you are when I report going forward? Thank you very much.
Michael D. Hsu: You know, I think, my adage is, in the end, shipments must track with consumption. And so I tend to focus more on the consumption number. You know, we feel great about the progression we're making on volume and mix. And I think in the quarter, if you add volume and mix, it was up about two combined. And so that's the progress we're making. I think, you know, it's great to cycle.
Speaker Change: Yeah, maybe I'll start with that, Javier. You know, I think, you know, my adage is, in the end, you know, shipments must track with consumption. And so I tend to focus more on the consumption numbers.
Speaker Change: You know, we feel great about the progression we're making on volume and mix, and I think in the quarter, I think if you add volume and mix...
Speaker Change: You know, it was about two combined, and so that's...
Speaker Change: The progress we're making, I think, you know, it's great to cycle. You know, we're very glad to have cycled a lot of the pricing moves that we had to take to offset inflation. But, you know, we think the underlying momentum...
Michael D. Hsu: You know, we're very glad to have cycled a lot of the pricing moves that we had to take to offset inflation. But, you know, we think the underlying momentum in our categories remains solid. These are essentials and daily use categories.
Speaker Change: and our categories remain solid. These are essentials and daily use categories and so.
Michael D. Hsu: And so we're encouraged to see that volume progression. There's going to be some noise because of retail inventory changes. In North America, you had two effects because there were some, I would say there were some, a soft quarter last year because of supply issues. And so probably a little more inventory going in on personal care. And then, you know, on the tissue side, we saw, you know, consumption stronger than organic. And so that implies, you know, we saw some inventory come out of tissue. And so I think that's, I would say, generally, you know, typical.
Speaker Change: So we're encouraged to see that volume progression. There's going to be some noise because of retail inventory changes. In North America, you had two effects because there were some... I would say there were some... We were comping a soft quarter last year because of supply issues, and so probably a little more inventory going in on personal care.
Speaker Change: And then, you know, we were, you know, on the tissue side, we saw, you know, consumption stronger than organic. And so that implies, you know, we saw some inventory come out of tissue. And so I think that's, I would say, generally...
Speaker Change: You know, typical, and so that stuff is going to move around from quarter to quarter. But overall, we're very encouraged with our volume trends.
Anna Jeanne Lizzul: And so that stuff is going to move around from quarter to quarter. But overall, we're very encouraged with our volume. Thank you. Your next question is coming from Anna Lizzul from Bank of America. Your line is live.
Speaker Change: Thank you. Your next question is coming from Anna Lizzul from Bank of America. Your line is live.
Anna Jeanne Lizzul: Morning. Thank you so much for the question. I was wondering if you could just elaborate more on the volume improvement that we saw in the quarter, just where you're seeing gains across the categories more specifically. And also, in the back half, there is an expectation of additional cost inflation, which you mentioned. I was wondering if you can touch on the balance of pricing and investment in innovation to help offset this. Thank you.
Anna Jeanne Lizzul: Hi, good morning.
Anna Jeanne Lizzul: Morning, thank you so much for the question.
Anna Jeanne Lizzul: I was wondering if you could just elaborate more on the volume improvement that we saw in the quarter, just where you're seeing gains across the categories more specifically.
Anna Jeanne Lizzul: And also in the back half, there is an expectation on additional cost inflation, which you mentioned. Was wondering if you can touch on the balance of pricing and investment on innovation to help offset this. Thank you.
Michael D. Hsu: Okay, yeah, overall, and I, you know, I'll start with, hey, you know, we're seeing, you know, resilience in demand across our categories, overall, globally, you know, the underlying growth in our categories remains healthy. You know, as I just mentioned, we provide daily essentials. And therefore, as you're probably well aware, category substitution remains low.
Speaker Change: Okay, yeah, yeah, overall, and I, you know, I'll start with, hey, you know, we're seeing, you know, resilience in demand across our categories, you know, overall globally, you know, the underlying growth in our categories remains healthy.
Speaker Change: You know, as I just mentioned, you know, we provide daily essentials, and therefore, as you're probably well aware, category substitution remains low.
Michael D. Hsu: And, you know, we still believe there's a lot of room for us to expand penetration and also revenue per user across our markets. And, you know, we are mindful of the consumer environment. And as I said, you know, we're working to sharpen up our positioning across the good, better, best value spectrum. A little bit more specifically in North America, demand remains resilient. You know, although I am seeing some value sensitivity, you know, more broadly, across staples, I'm well aware of that. You know, our categories in the quarter were up.
Speaker Change: And, you know, we still believe there's a lot of room for us to expand penetration and also revenue per user across our markets and, you know, we are mindful of the consumer environment.
Speaker Change: And as I said, you know, we're working to sharpen up our positioning across the good, better, best value spectrum.
Speaker Change: A little bit more specifically in North America, demand remains resilient, although I am seeing some value sensitivity more broadly across staples, I'm well aware of that. Our categories in the quarter were up.
Michael D. Hsu: Mid-single-digit, with categories having positive volume, and again, I think that reflects the essential nature of our categories and products. We are closely monitoring consumer health, seeing sensitivity in mid to lower income households in a few of our categories.
Speaker Change: Mid-single digit with the categories having positive volume, and again, I think that reflects the essential nature of our categories and products.
Speaker Change: You know, we are closely monitoring the consumer health, seeing sensitivity in, you know, mid- to lower-income households.
Michael D. Hsu: But overall, we feel like we're very well positioned, and we have a robust offering. As I mentioned earlier, we're proud to serve all consumers and have a robust offering across the value spectrum. And, you know, we're proactively working with our customers to better serve consumers and ensure that our propositions remain strong as we go forward.
Speaker Change: In a few of our categories, but you know overall we feel like we're very well positioned and you know we have a robust offering as I mentioned earlier, you know, we're proud to serve all consumers and have a robust offering across the value spectrum.
Speaker Change: And, you know, we're proactively working with our customers to better serve consumers and ensure that our propositions remain strong as we go forward.
Nelson Urdaneta: You know, address your question on expectations of volume and expectations. What to Expect on Inflation? We've seen the progression of volume in the second quarter. We expect the back half, as we stated, to be volume-mix driven, and the impact of pricing to continue to subside in the back half. This especially has to do with the timing of pricing actions in Argentina. We already saw a step-down in the contribution of Argentina from the first quarter to the second quarter, and we expect that, based on what we are seeing today, to continue to be the case in the back half. That takes us to pricing net of cost.
Anna Jeanne Lizzul: And maybe just, Anna, to build a little bit on, you know, address your question on expectations of volume and expectation of, you know, what to expect on inflation in the year.
Speaker Change: We've seen the progression in volume in the second quarter. We expect the back half, as we stated, to be volume-mix driven, and the impact of pricing to continue to subside in the back half.
Speaker Change: This especially has to do with the timing of pricing actions in Argentina. We already saw a step down of the contribution of Argentina from the first quarter to the second quarter, and we expect that, based on what we are seeing today, to continue to be the case in the back half.
Nelson Urdaneta: In principle, we're holding the enterprise minimally to a pricing that is across a neutral standard on an annual basis. We have good visibility today for that to happen this year, absent, you know, a market dislocation shock like what we saw in 2021 and 2022. As we think of the pacing, and I stated that in a prior question, pricing net of cost has been rather strong and favorable in the first half of the year, and that had to do with both the timing of pricing realization, largely Argentina, and then some of the timing of cost inflation.
Speaker Change: That takes us to pricing net of costs.
Speaker Change: In principle, we're holding the enterprise minimally to a pricing that across neutral standard on an annual basis. We have good visibility today for that to happen this year, absent, you know, a market dislocation shock like what we saw in 2021-2022.
Dara Mohsenian: Do, as we think of the pacing, and I stated that in a prior question, pricing that across has been rather strong and favorable in the first half of the year, and that had to do with both timing of pricing realisation, largely Argentina, and then some of the timing on the cost inflation. Overall, we still expect to be at least neutral, if not positive on the year and pricing that across. From an overall cost inflation standpoint, we're not seeing a material change versus what we've discussed in the last call.
Speaker Change: As we think of the pacing, and I stated that in a prior question, pricing net of cost has been rather strong and favorable in the first half of the year, and that had to do with both timing of pricing realization, largely Argentina, and then some of the timing on the cost inflation.
Nelson Urdaneta: Overall, we still expect to be at least neutral, if not positive, on the year in pricing net of cost. And from an overall cost inflation standpoint, we're not seeing a material change versus what we've discussed in the last. Great. Very helpful. Thank you so much.
Speaker Change: Overall, we still expect to be at least neutral, if not positive on the year and pricing net of costs.
Speaker Change: And from an overall cost inflation standpoint, we're not seeing a material change versus what we've discussed in the last call.
Operator: Great, very helpful. Thank you so much. Okay, thank you.
Speaker Change: Great. Very helpful. Thank you so much.
Anna Jeanne Lizzul: Okay, thank you. Thank you. Your next question is coming from Andrea Teixeira from J.P. Morgan. Your line is locked.
Andrea Teixeira: Thank you. Your next question is coming from Andrea Teixeira, from JP Morgan. Your line at life. Hi, good morning everyone. So I want to go back to, and thank you, we're back to the North American T-shirt discussion. Anderson, volunteer down, 3%, and then there was about 250 basis points due to retail stocking. But on the other hand, you're probably shipping more clinics.
Speaker Change: Okay, thank you.
Speaker Change: Thank you. Your next question is coming from Andrea Teixeira from J.P. Morgan. Your line is live.
Andrea Faria Teixeira: Hi, good morning, everyone. So I wanted to go back to, and thank you, go back to the North American tissue discussion. I understand volumes were down 3%, and then there was about 250 basis points due to retail stocking. But on the other hand, you were probably shipping more Kleenex.
Andrea Faria Teixeira: Hi, good morning, everyone. So I wanted to go back to, and thank you, go back to the North American Tissue discussion. I understand volumes were down 3%, and then there was about 250 basis points due to retail destocking.
Michael D. Hsu: So I was wondering, looking ahead, with the lag of the supply chain issue, should we expect the underlying to be still negative? And on the personal care side, if I can squeeze that in, what was the exit rate for the quarter in North America globally? Well, let me start with tissue in North America.
Andrea Teixeira: So I was wondering, looking ahead, if the, with the lap of the supply chain issues, should we expect the underlying to be still negative.
Speaker Change: But on the other hand, you're probably shipping more Kleenex, so I was wondering, looking ahead, with the lap of the supply chain issue, should we expect the underlying to be still negative?
Andrea Teixeira: And on the personal care side, if I can squeeze that in, what was the exit rate on the quarter in off American globally?
Speaker Change: And on the personal care side, if I can squeeze that in, what was the exit rate on the quarter in North America and globally?
Michael Hsu: Yeah, well, let me, let me start with the T-shirt and with America, you know, overall. You know, again, as I said, there was a bit of a retail inventory change, and so our organic numbers are different than kind of what the consumption was. Consumption was up 3 and the quarter, which is just a little bit under what the category did overall. And so again, I think the T-shirt categories in North America remain, you know, robust or healthy, resilient depending on what adjective you want to use. You know, I'd say, you know, overall share, you know, we've made strong progress on clinics.
Michael D. Hsu: You know, overall, as I said, there was a bit of a retail inventory change, and so our organic numbers are different than kind of what the consumption was. Consumption was up three and a quarter, which is just a little bit under what the category did overall. And so, again, I think the tissue categories in North America remain, you know, robust or healthy, resilient, depending on what adjective you want to use. You know, I'd say, overall share, we've made strong progress on Kleenex. I think Kleenex was up almost all the time.
Speaker Change: Yeah, well, let me start with the tissue in North America, you know, overall.
Speaker Change: You know, again, as I said, there was a bit of a retail inventory change and so our organic numbers are different than kind of what the consumption was.
Speaker Change: Consumption was up three and a quarter, which is just a little bit under what the category did overall. And so, again, I think the tissue categories in North America remain.
Speaker Change: robust or healthy, resilient, depending on what adjective you wanna use. I'd say overall share, we've made strong progress on Kleenex. I think Kleenex was up almost.
Michael Hsu: I think clinics was almost 500 basis points on sharing the quarter. That does reflect and improve supply condition that I said, we were cycling worse the last year. You know, that tissue, I think our share was a little, was a bit soft, you know, a little bit under, you know, a point and share down. And that reflects a couple things: a hard, what we call a hard roll over a packaging change, and shelving reset on cotton, now. And then, you know, Scotland, 000 has still been somewhat supply constrainier today. And so we cut back on our normal merchandising calendar.
Michael D. Hsu: 500 basis points on share in the quarter. That does reflect an improved supply condition that I said we were cycling versus last year. You know, in bad tissue, I think our share was a little, was a bit soft, you know, a little bit under, you know, a point in share down, and that reflects a couple of things. A hard, what we call a hard rollover, a packaging change, and a shelving reset on Cottonnell.
Speaker Change: 500 basis points on sharing the quarter, that does reflect an improved supply condition.
Speaker Change: that I said we were cycling versus last year. You know, in bad tissue, I think our share was a little, was a bit soft, you know, a little bit under, you know, a point in share down, and that reflects a couple things. A hard, what we call a hard rollover, a packaging change, and shelving reset on Cottonelle.
Michael D. Hsu: And then, you know, Sky 1000 has still been somewhat supply-constrained year-to-date, and so we cut back on our normal merchandising calendar. And so, because of that, we are seeing a little bit more... promotional availability for private label, and that's kind of had a bit of an effect on Scalding Thousand. I think the brand remains very, very healthy, and it's a power brand, you know, especially for value consumers in this environment, and we feel great about that.
Speaker Change: And then, you know, Scout 1000 has still been somewhat supply-constrained year-to-date, and so we cut back on our normal merchandising calendar. And so, therefore, because of that, you know, we are seeing a little bit more increased promotional availability for private label, and that's kind of had a bit of an effect on Scout 1000. I think the brand...
Michael Hsu: And so therefore, because of that, you know, we are seeing a little bit more increased promotional availability for private label. And that's kind of had a bit of an effect on Scotland, 000. I think the brand remains very, very healthy and it's a power brand, you know, especially for value consumers in this environment. And we feel great about that. But overall, I think we feel great about the progress. You know, I think the inventory change was a little bit different than what we were expecting coming into the quarter. But I think, you know, would hope that we're mostly through that.
Speaker Change: remains very, very healthy. And it's a power brand, you know, especially for value consumers in this environment. And we feel great about that. But overall, I think we feel great about the progress. You know, I think the inventory change was a little bit different than what we were expecting coming into the quarter.
Michael D. Hsu: But overall, I think we feel great about the progress. You know, I think the inventory change was a little bit different than what we were expecting coming into the quarter, but I think, you know, I would hope that we're mostly through. Yeah, and on personal care, your question of what we grew, Andrea, I mean, we grew mid-single digits solidly in North America, and it was volume and mix driven. The impact, as Mike said, on the trade de-stock in the quarter was largely contained in consumer tissue. And this is super helpful.
Andrea Faria Teixeira: The exit rate of personal care, do you think even with merchandise? I'm assuming that you shifted merchandising dollars from consumer tissue into personal care, or you just basically kind of flow through, and then now you can kind of as the supply chain improves into consumer tissue, you're going to merchandise more into the second half. Or just as an exit rate, just an idea of how personal care continues to do well into the remaining months, right into June. Yeah, I mean, Andrea, I'm not sure I know how to answer that question about the exit rate. You know, it's not how I think about it.
Speaker Change: But I think, you know, would hope that we're mostly through that.
Dara Mohsenian: Yeah, and on personal therapy or a question of what we grew on Dram. I mean, we grew mid-syncle digits solidly in North America. And it was volume and mixed ribbon. So the impact was Mike said on the trade D stock in the quarter was largely contained tissue consumer tissue. Bassist, on the promotional environment, you know, I do think, you know, hey, recognize broadly across staples that there is increased consumer price sensitivity. And so making sure that we have the right value proposition is going to be important. The thing I'll point you to is, you know, what's fundamentally changed in these categories over the past 10 years, 5 years, is the analytics that we have available to drive the right decision making.
Andre: Yeah, and on personal care, your question of what we grew, Andrea, I mean, we grew mid-single digits solidly in North America, and it was
Andre: Volume and Mix Driven.
Andre: The impact, as Mike said, on the trade D stock in the quarter was largely contained to tissue, consumer tissue in North America.
Speaker Change: And this is super helpful, the exit rate of personal care.
Speaker Change: do you think, even with merchandise, I'm assuming that you shifted merchandise and dollars from consumer tissue into
Speaker Change: Interpersonal Care, or you just basically kind of flow through and then now you can kind of as you regularly in the supply chain improves into consumer tissue, you're going to merchandise more into the second half.
Speaker Change: Or just as an exit rate, just an idea of how personal care continues to do well into the remaining of the month, into June .
Speaker Change: Yeah, I mean, Andrea, I'm not sure I know how to answer that question on exit rate. You know, it's not how I think about it. You know, I would say kind of what we're doing is, you know, we're very encouraged with our start to the year through the first half.
Michael D. Hsu: You know, I would say kind of what we're doing is, you know, I'm very encouraged with our start to the year through the first half to grow the category through advertising and bringing out the right kind of innovation that we just launched in North America. Thank you very much. I'll pass it on.
Andrea Faria Teixeira: Thank you both. Great. Thanks a lot.
Speaker Change: I think the volume and mix are proceeding and moving in the right direction for us, we feel great about that. You know, there's going to be some inventory noise here and there. You know, in personal care, I would say it's going to be a positive in the category because we had some supply constraints last year that were cycling.
Speaker Change: You know, as I just mentioned, there were some inventory changes on the other direction on consumer tissue. But overall, you know, I feel very good about where the brands are, recognize we have more work to do.
Speaker Change: But also, you know, I feel good that we have, you know, the opportunity to make some additional investments to make sure that our value propositions are robust.
Speaker Change: But that doesn't, you know, that doesn't mean we're going to ride it through promotion. As you may be well aware, I said in the past, I'm not a fan of over-promoting our categories. And so really where our focus on investment is, is to grow the category through advertising and bringing out the right kind of innovation.
Speaker Change: to drive the categories, just like I talked about with Skin Essentials that we just launched in North America in the second quarter.
Speaker Change: Thank you very much, I'll pass it on. Thank you both. Okay, thanks a lot. Thank you. We'll take one more question.
Bonnie Lee Herzog: Thank you. We'll take one more question. Certainly. Your next question is coming from Bonnie Herzog from Goldman Sachs. Your line is live. I just had a maybe a quick follow-up question on your tissue business. As you just mentioned, promotions really have started to step up there, so I guess I'm trying to get a sense for how much you may need to or be willing to increase promos in an effort to, you know, essentially, drive volumes in the back half of the year, possibly resulting in a net negative price contribution similar to what we saw in Yeah, maybe I'll start with the last part, Don, and Bonnie.
Speaker Change: Certainly. Your next question is coming from Bonnie Herzog from Goldman Sachs. Your line is live.
Bonnie Lee Herzog: I just had a maybe a quick follow-up question on your tissue business you know as you just mentioned
Bonnie Lee Herzog: promos really have started to step up there. So I guess I'm trying to get a sense for how much you may need to or be willing to increase promos in an effort to, you know, essentially drive volumes in the back half.
Speaker Change: of the Year, possibly resulting in a net negative price contribution similar, you know, really to what we saw in Q2, and, you know, do you expect continued retail inventory destock impact in the back half as well?
Michael D. Hsu: I, you know, again, I tend to focus a little bit more on consumption, and the consumption trends remain, I would say, healthy. I think there's going to be some shifting here and there. I don't expect, you know, ongoing retail inventory contractions, but, you know, there could be some moves here and there, and, you know, we don't control those, right? But we are, you know, we do work in these big categories, and so our customers are He's out over time, and so, you know, I feel good about the inventory position that we have right now, but can't exactly predict, you know, what On the promotional environment, you know, I do think, you know, hey, you know, I recognize broadly across staples that there is increased consumer price sensitivity.
Speaker Change: Yeah, maybe I'll start with the last part, Don, Bonnie. Yeah, I, you know, again, I tend to focus a little bit more on the consumption and the consumption trends remain, I would say, healthy.
Speaker Change: I think there's going to be some shifting here and there. I don't expect, you know, ongoing retail inventory contractions, but, you know, there could be some moves here and there, and, you know, we don't control those, right? But we are.
Speaker Change: You know, we do work, you know, these are big categories, and so our customers do work with us very closely to plan these out over time, and so, you know, I feel good about the inventory positions.
Speaker Change: that we have right now, but can't exactly predict, you know, what will go forward on a, what will happen on a go-forward basis.
Speaker Change: On the promotional environment, you know, I do think, you know, hey, you know, I recognize broadly across staples that there is increased consumer price sensitivity.
Michael D. Hsu: And so making sure that we have the right value proposition is going to be important. The thing I'll point you to is, you know, what's fundamentally changed in these categories over the past 10 years, 5 years, is the analytics that we have available to drive the right decisions. And so, and I know there gets a lot of play about the promotional environment, but, you know, in the last five years, we've invested a lot in the predictive modeling tools that enable us to make the right choices on promotion.
Speaker Change: And so making sure that we have the right value proposition is going to be important. The thing I'll point you to is...
Speaker Change: You know, what's fundamentally changed in these categories over the past 10 years, 5 years...
Michael D. Hsu: And so, you know, again, I tend to focus more on profitable growth and promotion is a tool to drive the overall brand strategy, but it is not, in my mind, in itself.
Speaker Change: is the analytics that we have available to drive the right decision-making. And so, and I know there gets a lot of play about the promotional environment, but, you know, in the last five years we've invested
Dara Mohsenian: And so, and I know, it gets a lot of play about the promotional environment. But, you know, in the last 5 years, we've invested a lot in the predictive modeling tools that make, you know, enable us to make the right choices on promotion. And so, you know, again, I tend to focus more on profitable growth. And, and promotion is a, you know, trade promotion is a tool to drive, you know, the overall brand strategy, but it is not a strategy in my mind, in itself. And so, you know, again, I think we'll work to make sure that, you know, our products are affordable and competitive.
Speaker Change: A lot in the predictive modeling tools that make you know enable us to make the right choices on promotion And so you know again? I tend to focus more on profitable growth and and promotion is a
Speaker Change: Trade promotion is a tool to drive the overall brand strategy, but it is not a strategy in my mind in itself. And so, again, I think we'll work to make sure that our products are affordable and competitive. But again, we're focused on growing the categories.
Michael D. Hsu: And so, you know, again, I think we'll work to make sure that our products are affordable and competitive. But again, we're focused on growing the category. That's awesome.
Andrea Faria Teixeira: But, again, we're focused on growing the categories. That's awesome.
Bonnie Lee Herzog: Just maybe one final clarification. I mean, is it fair to assume, or maybe ask this way, is it your expectation that volumes will inflect in the second half in tissue just based on everything you said and how you expect things to play out? Yeah, well, I'd say, yeah, I mean, we've shifted our emphasis to volume and mix-driven growth. And so, yeah, over time, we're expecting all of our businesses to drive positive volumes. And that's kind of the model for how we want to grow. So I think that includes.
Andrea Teixeira: It just may be one final clarification.
Andrea Teixeira: I mean, is it fair to assume, or you're made out this way? Is it your expectations that volumes will influence in the second half in tissue just based on everything you said and how you're expecting to play out? Yeah. Well, I'd say, yeah. I mean, you know, we've shifted our emphasis to volume and mix-driven growth. And so, yeah, over time, you know, we're expecting all of our businesses to drive positive volumes. And, and that's kind of how the model on how we want it grow. So, I think that includes more of the merit issue.
Speaker Change: That's awesome. Just maybe one final clarification. I mean, is it fair to assume that
Speaker Change: Or maybe ask this way, is it your expectations that volumes will inflect in the second half in tissue just based on everything you've said?
Speaker Change: and how you expect things to play out.
Speaker Change: Yeah, well, I'd say yeah, I mean, you know, we've shifted our emphasis to volume and mix driven growth. And so, yeah, over time, you know, we're expecting all of our businesses to drive positive volumes. And that's kind of how the model on how we want to grow. So I think that includes North America.
Michael D. Hsu: Perfect. Thank you. Okay, thank you, Bonnie.
Operator: Horace, thank you. Okay. Thank you, Bonnie. Thank you.
Speaker Change: Tissue.
Speaker Change: Perfect, thank you.
Operator: Thank you. Alright, well, thanks everybody for joining us, and if anybody has any follow-up calls, we'll be available to take them. Thanks very much for your time. Thank you everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day.
Operator: All right.
Speaker Change: Okay. Thank you, Bonnie. Thank you.
Operator: Well, thanks everybody for joining us. And, if anybody has any follow-up calls, we'll be available to take it today. So, thanks very much for your time. Thank you, everyone.
Speaker Change: Alright, well thanks everybody for joining us and if anybody has any follow-up calls, we'll be available to take them today. So, thanks very much for your time.
Operator: This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Speaker Change: Thank you everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Operator: Thank you for your participation. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ?? ?? ?? ?? Good morning and welcome to Kimberly-Clark's second quarter 2024 earnings question and answer session. I will now hand the conference over to Chris Jakubik, Vice President, Investor Relations. Please go ahead.
Speaker Change: www.globalonenessproject.org www.globalonenessproject.org
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Operator: C.J. Good morning and welcome to Kimberly-Clark's second quarter 2024 earnings question-and-answer session.
Speaker Change: [inaudible]
Speaker Change: [inaudible]
Christopher M. Jakubik: Thank you. And hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly-Clark. And welcome to our Q&A session for our second quarter 2024 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. However, actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also make some non-GAAP financial measures today or discuss some non-GAAP financial measures today. And these non-GAAP financial measures should not be considered a replacement for, and should be read together with, GAAP results.
Christopher M. Jakubik: Good morning and welcome to Kimberly Clark's second quarter 2024 earnings question and answer session. I will now hand the conference over to Chris Jakubik, Vice President and Investor Relations. Please go ahead.
Christopher Jakubik: I'll now hand the conference over to Chris Jakubik, Vice President, and Vest Relations. Please go ahead.
Christopher Jakubik: Thank you, and hello everyone. This is Chris Jakubik, head of Global Investor Relations at Kimberly Clark, and welcome to our Q&A session for our second quarter, 2024 business update.
Christopher M. Jakubik: Thank you and hello everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly Clark and welcome to our Q&A session for our second quarter 2024 business update.
Christopher Jakubik: During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release in our filings with the SEC. We will also make some non-GAAP financial measures today, or discuss some non-GAAP financial measures today, and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the gap to non-gap reconciliation within our earnings release and the supplemental materials posted at investor.kimbolycark.com.
Speaker Change: During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC.
Speaker Change: We will also make some non-GAAP financial measures today, or discuss some non-GAAP financial measures today. And these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results.
Christopher M. Jakubik: And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberlyclark.com. Before we begin, I'm going to hand it to our Chairman and CEO, Mike Hsu, for a few quick opening comments. Thank you, Chris.
Michael D. Hsu: And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberlyclark.com. Before we begin, I'm going to hand it to our Chairman and CEO , Mike Hsu, for a few quick opening comments.
Michael Hsu: Before we begin, I'm going to hand it to our Chairman and CEO, Mike Xu, for a few quick opening comments. Thank you, Chris. Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at Kimberly Clark, who are working diligently on the implementation of our comprehensive innovation like gross strategy and delivered strong results for the first half. We're excited about the opportunity to accelerate investments to build our powerhouse categories in brands and our pipeline of innovation. We are effectively navigating external dynamics while driving our consumer-centric culture. We're making the company better, stronger, and faster, and we are turbo-charging our ability to provide better care to consumers around the globe.
Michael D. Hsu: Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at Kimberly-Clark, who are working diligently on the implementation of our comprehensive innovation-led growth strategy and delivered strong results for the first half. We're excited about the opportunity to accelerate investments to build our powerhouse categories and brands and Our Pipeline of Innovation. We are effectively navigating external dynamics while driving our consumer-centric culture.
Michael D. Hsu: Thank you, Chris. Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at Kimberly Clark who are working diligently on the implementation of our comprehensive innovation-led growth strategy and delivered strong results for the first half.
Michael D. Hsu: We're excited about the opportunity to accelerate investments to build our powerhouse categories and brands.
Michael D. Hsu: and our pipeline of innovation. We are effectively navigating external dynamics while driving our consumer-centric culture. We're making the company better, stronger and faster and we are turbocharging our ability to provide better care to consumers around the globe.
Michael D. Hsu: We're making the company better, stronger, and faster, and we are turbocharging our ability to provide better care to consumers around the globe. I'm very proud of our progress to date. It bolsters our confidence in delivering on our outlook for the year and our ability to ramp up our investments to further leverage our core strengths and achieve our potential. We are on an exciting path and are well-positioned to deliver durable growth and sustainable shareholder return.
Michael Hsu: I'm very proud of our progress today. It bolsters our confidence in delivering our outlook for the year, and our ability to ramp up our investments to further leverage our core strengths and achieve our potential.
Michael D. Hsu: I'm very proud of our progress to date. It bolsters our confidence in delivering our outlook for the year and our ability to ramp up our investments to further leverage our core strengths and achieve our potential.
Michael Hsu: We are on an exciting path, and our well-positioned deliver durable growth and sustainable shareholder growth turns.
Michael D. Hsu: We are on an exciting path and are well-positioned to deliver durable growth and sustainable shareholder returns.
Michael D. Hsu: So with that, I'd be happy to open it up to questions. Certainly. Everyone will be conducting a question and answer session at this time. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while you're posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Lauren Lieberman from Barclays. Your line is live. Great, thanks. Good morning.
Operator: So, with that, I'd be happy to open it up to questions. Certainly, everyone. At this time, we conducted a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.
Michael D. Hsu: So with that, I'd be happy to open it up to questions.
Speaker Change: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.
Operator: We do ask that while posing a question, please pick up your handset if you're listening on speaker phone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone.
Speaker Change: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.
Speaker Change: Once again, if you have any questions or comments, please press star 1 on your phone.
Lauren Lieberman: Your first question is coming from Lauren Lieberman from Barclays. Your line is live. Great. Thanks. Good morning. So first I wanted to check in and talk a little bit about market share trends, because the organic sales growth this quarter was really solid. The volumes were up. You had this unexpected headwind from inventory these stocks, but I wanted to also check in a bit on market share trends. You know, where you stand versus not as competition, but also what you're seeing from private label of weight.
Speaker Change: Your first question is coming from Lauren Lieberman from Barclays. Your line is live.
Lauren Rae Lieberman: So first, I want to check in and talk a little bit, Mike, about market share trends. You know, because the organic sales growth this quarter was really solid, volumes were up, you had this unexpected headwind from inventory de-stock, but I wanted to also check in on market share trends, you know, where you stand versus not just competition, but also what you're seeing from private label by weight. Okay, good morning, Lauren.
Lauren Rae Lieberman: Great thanks, good morning. So first I want to check in and talk a little bit Mike about market share trends.
Speaker Change: you know, because the organic sales growth this quarter was really solid, volumes were up, you had this unexpected headwind from inventory destock, but I wanted to also check in a bit.
Mike: On market share trends, you know, where you stand versus not just competition, but also what you're seeing from private label of weight. Okay, good morning, Lauren. Yeah, thanks for the question. Yeah, overall, I feel good about the progress we're making on market share.
Michael D. Hsu: Yeah, thanks for the question. Yeah, overall, I feel good about the progress we're making on market share, and I do expect further improvement as we progress through the year. We were, overall, globally, even on a weighted basis, and up or even in about half of our cohorts around the world.
Michael Hsu: Okay. Morning, Lauren. Yeah. Thanks for the question. Yeah. Overall, I feel good about the progress for making on market share. And I do expect further improvement as we progress through the year. We were overall globally even on a weighted basis and upper even in about half of our cohorts around the world. And that's progress for the rest of the past couple of years where, if you recall this time last year, I think we were up or even in about 40% of our cohorts.
Speaker Change: And I do expect further improvement as we progress through the year. We were overall, globally, even on a weighted basis.
Speaker Change: and up or even in about half of our cohorts around the world. And that's progress versus the past couple years where if you recall this time last year I think we were up.
Michael D. Hsu: So, you know, I think we've made solid progress, but there still remains plenty of work for us to do. As you may recall, Lauren North America was a bit soft last year that is improving. You know, that softness last year was primarily due to supply constraint. The first tap in North America on a weighted basis was flat and then up or even in about six of eight categories in that continued in the second quarter, and I expect further improvement in North America as we cycle some of those constraints last year. We also had pretty solid gains on market share in certain brands across our what were called focus markets or other big five markets beyond North America.
Speaker Change: or even in about 40% of our cohorts. So, you know, I think we've made, you know, solid progress, but there still remains plenty of work for us to do. As you may recall, Lauren, North America was a bit soft last year. That is improving. You know, that softness last year was primarily due to supply constraints.
Michael D. Hsu: And that's progress versus the past couple years, where if you recall this time last year, I think we were up, or even in about 40% of our cohorts. So, you know, I think we've made, you know, solid progress. But there still remains plenty of work for us to do.
Speaker Change: The first half of North America on a weighted basis was flat, and then up or even in about six of eight categories, and that continued in the second quarter. And I expect further improvement in North America as we cycle some of those constraints last year.
Michael D. Hsu: As you may recall, Lauren, North America was a bit soft last year, but that is improving. You know, that softness last year was primarily due to supply constraints. The first half of North America, on a weighted basis, was flat, and then up or even in about six of eight categories, and that continued in the second quarter.
Speaker Change: We also have pretty solid gains on market share in certain brands across our, what we're calling focus markets, or our other big five markets beyond North America.
Michael D. Hsu: And I expect further improvement in North America as we cycle some of those constraints. We also had pretty solid gains in market share for certain brands across what we're calling focus markets, or our other big five markets beyond North America. In China, Huggies was up 180 basis points in share. In the U.K., Andrex, which is the leading brand there, was up 350 basis points.
Michael Hsu: In China, Huggies was up 180 basis points in share; in the UK, Direct, which is the leading brand there, was up 350 basis points. In South Korea, Huggies has been up over 800 basis points since 2019 and was up over 300 basis points in the quarter. And in Brazil, I think that will work and improve the brand proposition, and so we were up about a hundred basis points in Brazil.
Speaker Change: In China, Huggies was up 180 basis points in share. In the UK, Andrex, which is the leading brand there, was up 350 basis points. In South Korea, Huggies...
Michael D. Hsu: In South Korea, Huggies has been up over 800 basis points since 2019, and was up over 300 basis points in the quarter. And in Brazil, I think that we're working to improve the brand proposition, and so we were up about 100 basis points. So we're making progress, but, as I pointed out, we're about flat on a weighted basis, and that signals that there's plenty of work for us. Okay, great.
Speaker Change: has been up over 800 basis points since 2019 and was up over 300 basis points.
Speaker Change: [inaudible]
Michael D. Hsu: So we're making progress, but as I pointed out, we're about flat on a weighted basis, and so that signals that there's plenty of work for us to do.
Lauren Lieberman: Okay, great and the just curious I know you mentioned a couple market share bunch of market share positions outside of North America and China that have been very strong.
Lauren Rae Lieberman: And the, just curious, I know you mentioned a couple of market share, a bunch of market share positions outside of North America and China that have been very strong. But when do we start to see that translate into growth, you know? Because I think one of the interesting parts of the strategy you've laid out and the sort of, Shifting the focus a bit so that we can get more visibility into the other areas of your business, but when should we start to see growth become more material and, you know, matter more, and move the needle more in markets outside of the U.S.? Yeah, I mean, you know, Lauren, we have a very proven playbook that we're really proud of.
Speaker Change: Okay, great. And the, just curious, I know you mentioned a couple of market share, bunch of market share positions outside of North America and China that have been very strong. But when do we start to see that translate into into growth? You know, because I think one of the interesting parts of the strategy you've laid out and the sort of
Lauren Lieberman: But when do we start to see that translate into growth, you know, because I think one of the interesting parts of the strategy you've laid out and the sort of. Shifting the focus a bit so that we can get more visibility into other areas of your business, but when should we start to see. You know, growth become more material and, you know, matter more move the needle more and markets outside of the US and China.
Speaker Change: Shifting the focus a bit so that we can get more visibility into the other areas of your business But when should we start to see? You know growth become more material and you know matter more move the needle more in markets outside of the US and China
Michael D. Hsu: And we're implementing that more systematically behind this, you know, wiring for growth initiative that we have, we're going to we're going to implement those playbooks more systematically around the world. You know, one, we have great technology that the world you all haven't seen yet, we're rolling out, and we're excited about our launch that I mentioned in our opening comments in the script on skin essentials in the US. So we have a great, great technology portfolio; we have the right, and we've been investing the past five years to build the right commercial and supply capabilities to accelerate performance.
Michael Hsu: Yeah, I mean, you know, Lauren, it's a we have a very proven playbook that we're really proud of, and we're implementing that more systematically behind this, you know, wiring for growth. Initiative that we have, we're going to implement those playbooks more systematically around the world. You know, one we got great technology that the world you all haven't seen yet worked for role and out and we're excited about our launch.
Speaker Change: Yeah, I mean, you know, Lauren, I'd say we have a very proven playbook that we're really proud of, and we're implementing that more systematically behind this, you know, wiring for growth.
Speaker Change: We're going to implement those playbooks more systematically around the world. One, we've got great technology that the world, you all haven't seen yet, which we're rolling out and we're excited about our launch.
Michael Hsu: Did I mention in our opening comments in the script on skin essentials in the US? So we got great, great technology. Before we go, we got the right. We've been investing in the past five years to build the right commercial and to apply capabilities to sell performance. You're going to see a sharper focus on what we're calling our focus markets, right? Those are the US plus the next five markets for us. And so, you know, that said, I would say, you know, local conditions remain dynamic. And so, you know, there's plenty of opportunities to tighten up our brand propositions on a market-specific basis for reference, you know, just tell you.
Speaker Change: that I mentioned in our opening comments in the script on skin essentials in the U.S. So we've got a great technology portfolio, we've been investing the past five years to build the right commercial and supply capabilities to accelerate performance.
Michael D. Hsu: You're going to see a sharper focus on what we're calling our focus markets, right? Those are the U.S. plus the next five markets for us. And so, you know, that said, I would say, you know, local conditions remain dynamic.
Speaker Change: You're going to see a sharper focus on what we're calling our focus markets, right? Those are the U.S. plus the next five markets for us.
Speaker Change: And so, you know, that said, I would say, you know, local conditions remain dynamic. And so, you know, there's plenty of opportunity to tighten up our brand propositions.
Michael D. Hsu: And so, you know, there's plenty of opportunity to tighten up our brand property on a market-specific basis for reference. You know, I'll just tell you that Huggies, as I mentioned, was up in share in China, while Kotex was flat.
Michael Hsu: So, how he says I mentioned was up in chair in China. Co-tech was flat and, you know, again, it grew high single digits in the quarter on co-tex, but, you know, we'd love to get more share growing in China on femcare in Brazil. Huggies was up; Co-Tex is the leading brand, or we call it intimacy in Brazil. The leading brand in Brazil, but, you know, share was a little soft and down about, you know, just a little bit less than a hundred basis points. So, we got some work there, soft career. I said, Huggies was up over 300 basis points, but that tissue was down a little bit.
Speaker Change: on a market specific basis for reference. You know, I'll just tell you, so Huggies, as I mentioned, was up in share in China.
Michael D. Hsu: And, you know, again, it grew high single digits in the quarter on Kotex, but, you know, we'd love to get more share growing in China on Femcare. In Brazil, Huggies was up. Kotex is the leading brand, or we call it Intimus in Brazil, the leading brand in Brazil.
Speaker Change: Kotex was flat and you know again it grew high single digits in the quarter on Kotex But you know we'd love to get more share growing in China on Femcare
Speaker Change: In Brazil, Huggy's was up, Kotex is the leading brand, or we call it Intimus in Brazil, the leading brand in Brazil, but, you know, the share was a little soft and down about, you know, just a little bit less than 100 basis points.
Michael D. Hsu: But, you know, the share was a little soft and down about, you know, just a little bit less than 100. So we got some work there. South Korea, I said, Huggies was up over 300 basis points. A bath tissue was down a little bit, and so we have work to do around the world, and so, you know, part of our strong start is going to give us the ability to make surgical investments to get our good, better, best, you know, where we think they need to be in the local. Thanks so much. I'll pass it on.
Speaker Change: So we got some work there. South Korea, I said, Huggies was up over 300 basis points.
Michael Hsu: And so, we have work to do around the world. And so, you know, part of, you know, our strong starts going to force the ability to make surgical investments to get our good, better best, you know, where we think they need to be in the local markets.
Speaker Change: We have work to do around the world. Part of our strong start is going to force the ability to make surgical investments to get our good, better, best, where we think they need to be in the local markets.
Lauren Lieberman: Okay, great. Thanks so much, all parts of life.
Operator: Okay, thanks, Lauren.
Dara Warren Mohsenian: Okay. Thank you. Your next question is coming from Gara Mohsenian from Morgan Stanley. Your line is live. Good morning, guys. I'm Eddard.
Speaker Change: Okay, great. Thanks so much. I'll pass it on. Okay. Thanks, Lauren.
Speaker Change: Thank you. Your next question is coming from Gara Mohsenian from Morgan Stanley . Your line is live.
Dara Warren Mohsenian: Good morning, guys.
Dara Warren Mohsenian: [inaudible]
Dara Warren Mohsenian: So a pretty sizable margin in EPS, BEQ2, but it does sound like investments are going to increase in the back half of the year. So, Nelson, can you just discuss a bit the cadence of margins in EPS in the back half, how we should think about Q3, Q4 margin performance, particularly as
Nelson: The divestiture impact should ramp up in the back half of the year.
Dara Warren Mohsenian: So a pretty sizable margin in EPS beat in Q2, but it does sound like investments are gonna increase in the back half of the year. So Nelson, can you just discuss a bit the cadence of margins in EPS in the back half, how we should think about Q3, Q4 margin performance, particularly as the divestiture impact should ramp up in the back half of the year? Sure, Dara, so let me start by echoing what Mike said.
Nelson Urdaneta: We're very proud of how our teams have executed in the first half of the year. We've gained momentum on a number of fronts, relative to our power and care strategy. As a reminder, I mean, as we think about margins, our main focus is on driving profit-dollar growth. Margins, for us, as we've stated, are milestones, and we're moving on that progression. Growth in the second quarter and the first half reflected, you know, solid volume mix driven gains.
Nelson: Sure Dara, so let me start by echoing what Mike said. I mean we're very proud of how our teams have executed in the first half of the year. I mean we've gained momentum on a number of fronts relative to our power and care strategy.
Speaker Change: As a reminder, I mean, as we think about margins, our main focus is on driving profit-dollars growth. Margins, for us, as we've stated, are milestones, and we're moving on that progression.
Speaker Change: Growth in the second quarter and the first half reflected solid volume mix-driven gains. And on the third quarter, it's the third quarter in a row that we drive positive volume mix.
Nelson Urdaneta: And for the third quarter, it's the third quarter in a row that we drive positive volume, importantly, in some of our largest, most profitable geographies like the US, China, and the UK. We saw solid volume mixed growth, which is something we've been focusing on. And as Mike said, it is the key to a long-term algorithm. We delivered more than half of our profit dollar objectives for the year in the first half, and this actually gives us flexibility for the second half to further invest in strengthening our brands and our innovation pipeline, especially as we manage through some of the challenges in the macroenvironment and some of the increased consumer pressure that we're all seeing.
Speaker Change: Importantly, in some of our largest, most profitable geographies like the U.S., China,
Speaker Change: And the UK, we saw solid volume mixed growth, which is something we've been focusing on, and as Mike said, I mean, it is the key for a long-term algorithm.
Mike: We delivered, you know, more than half of our profit-dollar objectives for the year in the first half. And this actually gives us flexibility for the second half to further invest in strengthening our brands and our innovation pipeline, especially as we manage
Speaker Change: For some of the challenges in the macro environment and some of the increased consumer pressure that you know We're all seeing as we think of you know cadence of first half second half on the top line We would expect the second half to grow at a similar pace of what we saw in the second quarter
Nelson Urdaneta: As we think of the cadence of first half and second half, on the top line, we would expect the second half to grow at a similar pace to what we saw in the second quarter, with again volume and mix being key drivers of growth, while pricing will continue to play a lesser role sequentially. On the profits side, four things to keep in mind. First one is productivity delivery.
Mike: with again volume and mix key drivers of growth while pricing will continue to play a lesser role sequentially.
Dara Mohsenian: Jones, heading into the second half, this number is going to be closer to 7%, as we take advantage of our strong first half, and we strengthen the overall investment profile setting up the time for us to continue growing sustainably in years to come. And the last but not least is the divestiture of our personal protective equipment. We expected to be a headwind in terms of profits of around 180 basis points in the second half of the year; we didn't have that in the first half of the year. Two more things, as you think of EPS, equity method investment income, while it grew in the first half of the year.
Dara Warren Mohsenian: Some of it had to do not just with the underlying performance of our equity method investments; it also had to do with the strength of the Mexican peso in the first half year on year. That's going to revert in the second half of the year, and we expect the net equity investment to be largely flat in the second half of the year. And the other item on EPS is the effect of the adjusted effect of tax rate. For the full year, we're now projecting 23 to 24% adjusted effect of tax rate, and for the first half, our adjusted effect of tax rate was 22.3%.
Dara Warren Mohsenian: So when you combine all those factors, that gives you the cadence of how we're looking at the first half and second half.
Dara Mohsenian: That's very detailed and helpful, and if I could slip in one more question, you talked about price in regards to the second half outlook.
Dara Mohsenian: Can you give us an update on the North American pricing environment in both personal care and consumer tissue? Is there a ability to drive mix to a greater extent in the back half of the year? How do you think about that?
Dara Mohsenian: Be the promotional environment, and how we should think about pricing realization from here in North America in a more normalized environment?
Dara Mohsenian: Thanks. Yeah, and overall in the pricing environment, particularly in North America, I say remains stable. As you may recall, since COVID in the COVID environment, with a pandemic related environment, we did see a reduction in promotion activity in our categories. I'd say over the past two years that has kind of returned and normalized post-pandemic, and I'd say it's remained at that level. We are seeing a touch of promotion in some retailers, but overall, again, our strategy is to remain focused on volume and mixed-driven growth. And we're maintaining what we're calling P-knock or pricing that of input cost discipline.
Dara Mohsenian: And so overall, as you're well aware, pricing, toss-set cost inflation is receding for us.
Dara Warren Mohsenian: As expected, we really want to be more valuable at every run of the good, better, best ladder. I think one of the things that's great about our portfolio is that we do serve all consumers from value to all the two premium. Even though premium is really the big growth driver for us. And so we're really focused on working in sure that our value, you know, propositions all along the value spectrum are going to remain strong. And, you know, so our focus on building brands, with advertising, great storytelling, pioneering innovation. But, you know, again, you know, we also recognize, you know, in some categories, you know, promotions are very important.
Dara Warren Mohsenian: And we're going to be competitive, you know, where we need to be. But again, we're focused on driving the category's growth through advertising.
Operator: Thank you. Okay, thanks, Tara.
Nick Modi: Thank you, and your next question is coming from Nick Modi from RBC Capital Markets; your line is live. Thank you for joining, everyone. Good morning.
Nick Modi: So two questions: just one on the organizational design chains that are going to take place in a few months' time. You know, like I remember when Proctor and Gamble did similar type of thing not exact, exact structure, but they had like a transitionary kind of, era or moment between kind of the old structure and the new structure. And I'm just curious if that is something that is going on right now, then Kimberly, which will make that transition much smoother when we get to October. That's the first question.
Sunil Harshad Modi: And then I was hoping you can just kind of give us your thoughts.
Nick Modi: Since the analyst that you've hired, two new people, one from, you know, two growth officer that has a consumer health care background. And then, obviously, a new head of R.D. that just was announced. You know, just want it with hope you can give us some work to kind of how they fit into the new strategy.
Michael Hsu: Yeah, great. Nick, okay, you're all over all over it.
Michael Hsu: I think there's a great question. As I mentioned, I think in the prepared script, you know, we made an interim move on the effective July one that changed some of the reporting in our global supply chain in North America. And then Brazil moving into international personal care on an interim basis. And so I'd say, you know, your observation around an interim structure. We've done some significant shifts there already. And again, that goes back to, you know, I had to make experience with another corporate transition where Nelson and Chris and I worked. And so having that interim model working before you officially make those moves helps a lot.
Michael D. Hsu: And I think, you know, the organization is making tons of progress in the new ways of working. I'm very, very excited about kind of the progress that teams are making and very appreciative of all the hard work that they're putting in to make this happen. So again, I feel great thus far about our, our wire for growth initiative or the organizational change, and we're making strong progress there.
Michael Hsu: With regard to Patricia and Craig, excited to have them board, you know, Alison Lewis, who was our Chief Growth Officer, and Robert Wong, our Chief Innovation Officer and the officer. You know, they did great work for us and really, you know, advanced the agendas in both those areas very, very strongly. But I knew I intercepted them at a point in their career where they want to go on at some point and do other things. And so, you know, I think, I think we have an excellent transition period between the four, the four of these leaders.
Michael Hsu: And as Patricia and Craig come aboard, you know, I think they both bring great skills to Kimberly-Clark. But, you know, Patricia has worked at companies like Craft and, and, you know, Labor and, and he can, before Buyer and so and knows a lot about the consumer health space. Really, really focused on marketing and advertising, which is a great thing for us. And then Craig has, is a real great transformational leader, you know, with Unilever and Sun Products further in this background, as well as, you know, a great run at Campbells. And so, you know, I think they'll bring a lot, both in terms of organizational development, but also expertise in their fields that will advance the things that we're working on with power.
Operator: Karen, Alfa, pass it on. Okay, thank you, next.
Javier Escalante: Thank you.
Michael Hsu: Your next question is coming from Havier Escalante, from Evercore; your line is live. Hi, good morning, everyone. I would like to see whether I can get more color on the savings, right? Because at least I see three buckets. So basically you're announcing something in North America. First thing is that they supply chains, so if you can talk about the benefits of what you're trying to do there, you are exiting two small markets. But when you look at the P&L, it feels as if the SGA is where we get better numbers, whether it took two consensus.
Michael Hsu: So if you can expand that, and then I have a follow-up.
Operator: Thank you.
Michael Hsu: You know, maybe I'll just start, and I think Nelson will kind of give you more color on the savings. I would say on the small market exits, you know, my overall on that would be, you know, we are taking steps to make, you know, our categories and all our markets. More robust and predictable contributors to growth and returns, you know, and we like our positions in most markets. But that said, in places where we don't really feel happier that, you know, we have a long term right to win. Or the market conditions in that market are not conducive to winning. You know, we're going to be disciplined and methodical.
Michael Hsu: And so we made the difficult decision to announce our planned exits in Nigeria and Bolivia. And, you know, and, you know, we recognize, you know, the downside that does affect our employees there, but I think is the wrong, the right move long term, you know, for Kimberly Clark. You know, I don't think those will contribute, you know, to be a huge source of savings, but I think it does take some risk out of, you know, the ongoing performance of the business.
Nelson Urdaneta: But, you know, Nelson, you're in common on the other sources. Yeah, in terms of how the air, the sources of the savings, they're two, two. I mean, first and foremost, and the lion's share the savings will derive from our supply chain transformation. And, as a reminder, they encompass three strategies. The first one is our value stream simplification. And as I've explained, and Tamara has explained, it has to do with product specifications, and a few other items that will drive significant savings over time. Second one is optimizing our network, and it's the footprint that's our four walls, and you're seeing some actions that are being taken today, and they'll be taken over the next few years.
Nelson Urdaneta: And then the third bucket is scalable automation, and that encompasses two areas. One is actual automation of supply chain processes in our factories and our warehouses. And the second one is digital automation, where we're deploying tools to optimize our procurement capabilities, as well as our supply and demand capabilities. We are on the early stages of our transformation journey, and especially in the supply chain, and we're pleased with where we're at on the first half of the year.
Dara Mohsenian: So, supply chain productivity, and that does not include procurement. We will update annually on the procurement savings. But well on track, as we seek to deliver the $3 billion over the next five years, as we said, specifically on actions that have been taken and what's driving. You know, trade promotion is a tool to drive, you know, the overall brand strategy, but it is not a strategy in my mind in itself. And so, you know, again, I think we'll work to make sure that, you know, our products are affordable and competitive, but again, work focused on growing the categories.
Dara Mohsenian: That's awesome.
Andrea Faria Teixeira: It just may be one final clarification. I mean, is it fair to assume, or maybe I have to say, is it your expectations that volumes will influence what, in the second half, in tissue, just based on everything you said, and how you expect things to play out? Yeah, well, I'd say, yeah, I mean, you know, we've shifted our emphasis to volume and mix-driven growth. And so, yeah, over time, you know, we're expecting all of our businesses to drive positive volumes, and that's kind of how the model on how we want it grow. So I think that includes an worth of merit tissue.
Operator: Perfect.
Operator: Thank you. Okay. Thank you, Bonnie. Thank you.
Operator: All right. Well, thanks everybody for joining us. And if anybody has any follow-up calls, we'll be available to take them today. So, thanks very much for your time. Thank you, everyone.
Operator: This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.