The Mexican company dedicated to the manufacture, distribution, and marketing of cleaning, care, and personal hygiene products, Kimberly Clark, increased revenues due to higher prices but its profits fell due to higher raw material prices.
In the third quarter of 2021, Kimberly Clark achieved a 2% increase in sales from $11,097 million to $11,343 million. However, its net income was reduced by 35% due to the increase in raw material prices.
The company expected that prices for some categories would fall in 2021; however, it has faced increases in the cost of raw materials that have pressured its financial results. The company's CEO, Pablo González, recalled that adjustments of 4% had already been made, but in the face of current pressures, the increase would reach up to 7%.
"We are implementing a price increase of 3 to 4% and that given market conditions, we expect the implementation of 7% to take longer than it normally would. Therefore, we do not expect that 7% to be fully reflected until late in the first quarter or early in the second quarter of next year," he explained.
According to its latest report, during the third quarter of the year Kimberly saw a 20 to 30 percent increase in fiber costs, while fibers for recycling and fluff averaged increases of close to 10 percent. This caused EBITDA to decline 21 percent to Ps. 2.235 billion, compared to Ps. 2.845 billion in the same period of 2020.
Also, the gross profit of the company, which has brands such as Huggies, Pétalo Kleenex, Escudo, and Kotex, was Ps. 3.598 billion, 14% less than the third quarter of 2020.
The company detailed that all raw material categories compared negatively against the previous year, with cost increases of 20 to 30% in virgin fibers and 10% in fibers for recycling.
"In personal care, superabsorbent materials were up more than 40% and resins were up more than 120%."
Also, the company invested $1,881 million in Capex, paid $5,114 million in dividends to its shareholders, paid $6,090 million in debt, and repurchased shares for a total of $337 million.
The executive explained that there is still no certainty as to when inflationary pressures will diminish in a complex environment due to complications in logistics, in addition to the fact that a long period of rising raw material prices is still foreseen.
"On the cost side, given the imbalances between supply and demand and rising logistics costs, we will continue to pay significantly higher costs for basically all raw materials. And at this point, it is unclear when we might see some significant relief. Overall, with any major change in trend, given how much and how fast they have risen, all commodities will be significantly higher during the last quarter, the fourth quarter and the first half of next year," he said.
