Kimberly-Clark Corporation (KMB) December 4, 2007 Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza

Investment Managers Gloria Ho gho2@uiuc.edu Jonathan Li jxli2@uiuc.edu Jason Mueller jcmuell1@uiuc.edu Patricia Shongedza pshonge2@uiuc.edu

Presentation Outline Company Overview Business segments Risk assessment Competitor analysis DCF Analysis Recommendation

Company Overview Global health and hygiene company Personal Products industry Products made from natural or synthetic fibers Advanced technologies in fibers, nonwovens, and absorbency. Founded in 1872 & headquartered in Dallas, TX Consumers in more than 150 countries worldwide Manufacturing facilities in 40 countries More than 55,000 employees FY2006 Total Revenues of $16.75B; Market cap: $29.5B More than 1.3 billion people (1/4 of the world’s population) trust K-C brands EVERYDAY.

Consumer Brands

Business Segments: Brands Personal Care Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise Consumer Tissue Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page K-C Professional & Other Kimberly-Clark, Kleenex, Scott, WypAll, Kimtech, Kleenguard, Kimcare Health Care Kimberly-Clark, Ballard

Business Segments: Products Personal Care Disposable diapers, training and youth pants, and swim pants Baby wipes Feminine and incontinence care products Consumer Tissue Facial & bathroom tissue Paper towels Napkins K-C Professional & Other Wipers Various safety products Healthcare Surgical gowns Drapes Infection control products Sterilization wrap Disposable face masks and exam gloves Respiratory products

Revenues by Segment

Revenues by Region Net sales grew 14% in the developing and emerging markets, with each of the regions contributing to the increase.

Innovation K-C invented five of their eight major consumer product categories: facial tissue, paper towels, toilet paper on a roll, feminine pads and disposable training pants Primary raw material: fiber recycled from recovered waste paper Polypropylene and other synthetics

Presentation Outline Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

Risk Assessment Significant increases in costs Foreign market risk Heavy price competition High failure risk for new products 12

Risks: Input Costs Pulp, polypropylene, and synthetic polymers Direct input to 25% of total revenue. Cost increase for 2007 more than 120% greater than originally forecast. Result: 4-7% increase in prices for tissue paper, diapers. Costs partially offset by increased volume, outsourcing. 13

Risks: Price Competition Highly competitive segments Low cost substitutes, private/generic labels for virtually all consumer products. Questionable customer loyalty: Brand loyalty vs. Brand repertoire. The Wal-Mart Effect 13% of total firm-wide revenues Mitigating Factors Leverage customer knowledge and increase responsiveness. Ex: Packaging alternatives for diapers Leverage global R&D to make products more adaptive to local markets 14

Risk Factors Cont’d Foreign Markets New Product Acceptance Rapid investment in BRICIT could lead to overcapacity. Political and socioeconomic volatility in emerging markets. Latin America, Eastern Europe. Success highly contingent on ability to form partnerships. Adapting to cultural differences, building distribution networks, etc. Intellectual property protection. New Product Acceptance High initial marketing costs High market saturation of existing products: difficulties in continuing innovation 15

Presentation Outline Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

Competitors Vary in size and function Competes against well known branded products therefore faces risk in consumer acceptance Principle areas of competition include brand loyalty, product quality and innovation, price and marketing strategies

Competitors KMB Georgia Pacific Playtex Products PG Market Cap NA 228.33B Employees 55,000 50,000 1,250 138,000 Revenue 17.82B 2.15B 636.20M 77.89B Net Income 1.85B 623M 30.20M 10.56B

1 year chart (competitors)

Porters five forces Threat of new entrants; LOW Bargaining power of suppliers; LOW Bargaining power of buyers; MODERATE Threat of substitutes; HIGH Industry rivalry; HIGH

RCMP Position Purchased 300 shares on April 20, 2005 at $63.91/share Total investment: $19,173 Current market price: $69.81 Unrealized gain of $1,770.00 (9.23%)

Position in the portfolio

Correlation Matrix

Recent News Kimberly-Clark Declares Dividend Kimberly-Clark Declares Regular Quarterly Dividend of 53 Cents/Share Dividend increased 9% in 2006, and expected to increase 8% in 2007 November 15, 2007: 06:27 PM EST Ahead of the Bell: Kimberly Clark Analyst Upgrades Kimberly-Clark, Says 2005 Restructuring Program Paying Off with potential increased revenue coming from BRIC emerging markets November 26, 2007: 09:11 AM EST

Presentation Outline Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

DCF Analysis WACC calculation Beta: 1.3 (Google Finance: 0.71) WD: 7.18% WE: 92.82% KD: Weighted avg. interest rate KE: Cal. from CAPM Tax rate: 36.7% (effective tax rate)

DCF Analysis Key assumptions: Sales Growth Rate (2007-08): 4.8% Cost of product to Sales: 66.9% Terminal Growth Rate: 3.0% Dividend Growth: 8%

DCF Analysis Key Assumptions

DCF Analysis Based on DCF Share Price: $73.49

Presentation Outline Company Overview Business Segments Risk Assessment Competitor Analysis DCF Analysis Recommendation

HOLD Recommendation Based on DCF Share Price: $73.49 Current Share Price: $69.56 (3 Dec 07 closing) HOLD