UPDATE: Kimberly-Clark To Raise Prices By As Much As 8%
Friday May 23rd, 2008 / 23h44
By Matt Andrejczak Adding to the sticker shock faced by many U.S. consumers, Kimberly-Clark Corp. (KMB) announced plans Friday to hike prices on tissues, toilet paper, diapers and paper towels - again. Kimberly-Clark, like other consumer-goods makers and food companies, is being squeezed on the commodity front as crude oil surges to new highs and raw-material costs escalate. This is forcing companies to protect profit margins through price increases, sales of lower-margin businesses, factory closings and job cuts. The Dallas-based consumer goods giant said its latest round of price increases will become effective between July 20 and Aug. 31. It said boosting prices is "necessary to offset significant inflationary pressure from higher raw material and energy costs." Kimberly-Clark said prices will be 6% to 8% higher on Kleenex facial tissue, Cottonelle and Scott bathroom tissue, Viva paper towels, Huggies diapers and Pull-Ups training pants. These products accounted for U.S. sales of about $4.5 billion in 2007. Back in February, Kimberly-Clark boosted prices on those same products by 4% to 7%. The company's commodity bill is rising: For the quarter ended March 31, Kimberly-Clark paid $160 million more for raw materials, such as fiber, and fuel. And this slowed profit gains: Three of its four business units reported a lower operating profit. Larger rival Procter Gamble Co. (PG) faces the same predicament. It too has been raising prices to withstand rising costs for energy and base materials. At a Goldman Sachs investor conference this month, Chief Financial Officer Clayton Daley said P&G plans to pay more than $2 billion for commodities over the next year. He said P&G will boost prices to recover 75% of those costs. This translates into a 2% price increase on the company's broad portfolio of razors, diapers, detergents and beauty care products. Kimberly-Clark shares fell more than 1% to $62.79. P&G slipped 0.5% to $65.27. Both stocks are down around 10% this year, compared with a decline of 6% for the S&P 500. -Matt Andrejczak; 415-439-6400; AskNewswires@dowjones.com
