Why Is Kimberly-Clark Cutting 5,000 Jobs?

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While reporting its fourth-quarter financial results on Tuesday, Kimberly-Clark Corp. (KMB) said it will cut 5,000 to 5,500 jobs, or 12 to 13 percent of its workforce globally, under its 2018 Global Restructuring Program.

In addition, Kimberly-Clark will close or sell about 10 manufacturing facilities and expand production capacity at several others to improve overall scale and costs.

As part of the restructuring, Kimberly-Clark expects to exit or divest some low-margin businesses that generate about 1 percent of company net sales and are concentrated in the consumer tissue business segment.

Kimberly-Clark, the maker of Kleenex tissues and Huggies diapers, is grappling with sluggish sales of consumer product essentials as well as increased competition in the U.S. market.

The company's organic sales dropped 1 percent in the second quarter of fiscal 2017, while it remained flat in the third quarter and again declined 1 percent in the recent fourth quarter.

In the consumer products segment, organic sales were down 3 percent in North America as well as developed markets in the fourth quarter.

For fiscal 2018, Kimberly-Clark expects net sales to increase 1 to 2 percent and organic sales to increase about 1 percent.

Kimberly-Clark Chairman and Chief Executive Officer Thomas Falk said, "Although we expect market conditions will remain challenging in the near-term, we plan to deliver better results in 2018 while we begin to implement our new restructuring. We expect organic sales to return to growth while improving our margins and delivering double-digit growth in adjusted earnings per share."

Kimberly-Clark expects the restructuring to generate annual cost savings of $500 million to $550 million by the end of 2021.

To implement the restructuring program, Kimberly-Clark expects total cash spending of $1.50 billion to $1.70 billion and non-cash restructuring charges of $800 million to $900 million by the end of 2020.

This will make the total expected restructuring charges to a range of $1.70 billion to $1.90 billion pre-tax, or $1.35 billion to $1.50 billion after-tax.

For 2018, Kimberly-Clark expects restructuring charges to be $1.20 billion to $1.35 billion pre-tax, or $950 million to $1.05 billion after tax.

The company has established a cost savings target of more than $1.5 billion over the four-year period from 2018 to 2021, from its ongoing FORCE, or Focused On Reducing Costs Everywhere program.

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