Key Points:
- Kimberly-Clark announced a restructuring plan to simplify operations and reduce costs; the company will reorganize into three business units.
- The restructuring is expected to incur approximately $1.5 billion in related costs over the next three years, with cash costs constituting about half of this amount.
- The reorganized will comprise units focused on North America, international personal care, and international family care and professional businesses.
- Kimberly-Clark aims to generate significant savings through supply chain modernization, with plans to redirect these savings toward growth investments.
Kimberly-Clark, the maker of Kleenex tissue, revealed its plans to reorganize into three distinct business units to simplify operations and reduce costs. The Irving, Texas-based consumer goods company anticipates incurring approximately $1.5 billion in related costs over the next three years as part of this restructuring effort. Cash costs are projected to comprise about half of this amount, primarily attributed to workforce reductions.
This restructuring initiative comes at a critical juncture for Kimberly-Clark, which faces challenges such as dwindling benefits from consistent price hikes and subdued consumer demand due to inflation. Like its competitors, Procter & Gamble and Unilever, Kimberly-Clark is also contending with losing shelf space to more economical private-label alternatives at retailers.
The reorganized structure will comprise three main segments: the business in North America, the international personal care segment, and the international family care and professional businesses. Previously, Kimberly-Clark had three business segments, each with three geographic sub-divisions.
As part of its modernization efforts, the company plans to revamp its supply chain to generate over $3 billion in gross productivity and $500 million in working capital savings. These savings will be redirected towards growth investments. Kimberly-Clark anticipates completing the transition to the new organizational structure by the end of 2024, with expected cost savings of about $200 million in selling, general, and administrative expenses over the next few years.
Despite the restructuring, Kimberly-Clark reaffirmed its annual organic net sales and adjusted profit targets as provided in January. The company fell short of sales and profit estimates in the previous quarter. Ahead of the announcement, Kimberly-Clark’s shares showed a 1.5% increase in pre-market trading, indicating a positive market response to the restructuring plans.
