KMB Presentation: RCMP By: Paul Ripsky, Joe Vaccaro 4/21/2009
Current Position and Recommendation Purchased 300 shares of KMB on April 20th, 2005 at $63.91/share Purchased an additional 100 shares on November 30 th, 2008 at $56.29/share Currently own 400 shares at $49.92/share (4/20/09) Recommendation : HOLD
Company Overview Kimberly-Clark Corporation engages in the manufacture and marketing of health and hygiene products worldwide Founded in 1872, headquarters in Dallas, TX Nearly 53,000 employees Operations in 35 countries Consumers in more than 150 countries worldwide Over ¼ of the world’s population uses Kimberly-Clarks products everyday The number 1 or 2 market leader in over 80 countries
Business Segments Personal Care Disposable diapers, training and youth pants, and swim pants; baby wipes; and feminine products Consumer Tissue Facial and bathroom tissue, paper towels, napkins, and related products for household use
Business Segments K-C Professional & Other Facial and bathroom tissue, paper towels, napkins, wipers and various safety products for the away-from- home marketplace
Business Segments Health Care Surgical gowns, drapes, infection control products, sterilization wrap, disposable face masks and exam gloves, respiratory products, and other disposable medical products
Product Profile *Kimberly Clark 2008 Annual report
Macroeconomic Overview 2008 was a challenging year with the unprecedented volatility within the market: Slowdown in world economies Large swings in commodity prices Exchange Rates Lack in the credit markets Historically the consumer staples industry has been defensive during times of recession
Macroeconomic Overview Commodity Outlook Kraft pulp and petroleum based commodities are the main raw materials used in the manufacturing process Majority of raw materials purchased from third parties 8% of pulp is produced internally Derivative products haven’t been used to mitigate these risks
NBSK Pulp Index $
CME Wood Pulp Futures
Management Assessment Maintained a solid financial position throughout the economic downturn Committed to the manufacturing, researching and disposing of products in an environmentally safe way Concentrates on the needs of consumers Revamping supply chain network
Management Assessment Maintained & Developed Product Segments Increased R&D to support long-term growth Expansion within K-C Professional & Healthcare Global Expansion Hit opportunities within Emerging Markets Concentrating on BRICIT Countries
SWOT Analysis Strengths International diversification Global Market Leader Brand name Commitment to environmentalism Innovation/Product Improvements Weaknesses Mature Markets Patent Losses Dependency on Commodities Opportunities Emerging Markets (BRIC Countries) Demographic Trends Resistant to Economic Cycles Threats Intense industry competition Commodity prices Currency volatility
Industry Outlook Consumer Staples/Personal Products Competitive Factors : Brand recognition and loyalty, product innovation, quality and performance, and marketing and distribution capabilities Industry consolidation could lead to pricing pressure Substantial development and marketing costs when introducing and improving products Moderate Bargaining power of buyers Net sales to Wal-Mart was approximately 14% in 2008
Relative Valuation: Comps
Historical Stock Price (One year)
Recent Trends
Recent Trends (cont) Cash Flow Pattern Indicates Mature Company
Balance Sheet FAQs
DuPont Analysis
WACC Adjusted WACC based on 10% cost of Equity
Growth Estimates
DCF Analysis Sensitivity Analysis Reveals Price Range of $48 to $61
Dividend Growth Model
Dividend Growth Model (cont) Sensitivity Analysis $41 ~ $62 for Constant Growth Sensitivity Analysis $46 ~ $57 for Two Step Model
Correlation Matrix
Recommendation Purchased 300 shares of KMB on April 20th, 2005 at $63.91/share Purchased an additional 100 shares on November 30 th, 2008 at $56.29/share Currently own 400 shares at $49.92/share (4/20/09) Recommendation: HOLD our current position of 400 shares Evaluation shows fair value between $46-57 Current Market price $49.92 (4/20/09)