Kimberly-Clark to reorganize business, incur $1.5 billion in costs

By Thomson Reuters Mar 27, 2024 | 7:23 AM

(Reuters) – Kimberly-Clark said on Wednesday it would reorganize into three business units as the Kleenex tissue maker looks to simplify operations and cut costs.

The Irving, Texas-based consumer goods maker said it would incur about $1.5 billion in related costs over the next three years.

Cash costs are expected to be about half of that amount, primarily related to workforce reductions, it said in a filing without disclosing the number of jobs it would cut.

The restructuring comes at a time when the company is seeing benefits from its consistent price hikes wane and inflation-stricken customers pull back on purchasing its pricier products.

Kimberly-Clark, like its peers Procter & Gamble and Unilever, is also losing shelf-space at retailers to more affordable private-label alternatives.

The company’s reorganized segments will now include its business in North America, the international personal care segment and the international family care and professional businesses.

It previously had three business segments — personal care, consumer tissue and Kimberly-Clark professional — with each having three geographic sub-divisions.

The company said its planned supply chain modernization is expected to generate more than $3 billion in gross productivity and $500 million in working capital savings that would be used for growth investments.

Kimberly-Clark expects to complete its transition to the new organizational structure by the end of 2024. The actions are expected to generate about $200 million of selling, general and administrative savings in the next few years.

The company also reaffirmed its annual organic net sales and adjusted profit targets it had provided in January.

It had missed fourth-quarter sales and profit estimates in January and warned that weak retail inventories could lead to flat volumes in the first quarter.

Kimberly-Clark’s shares were up 1.5% before the bell.

(Reporting by Granth Vanaik in Bengaluru; Editing by Shilpi Majumdar and Shinjini Ganguli)