Kimberly-Clark to Reassign Makers of Office Toilet Paper to Meet Demand for Softer Stuff
23 April 2020 - 4:16AM
Dow Jones News
By Sharon Terlep
The people who churn out oversize rolls of flimsy toilet paper
for the office have a new assignment: make the good stuff.
Kimberly-Clark Corp., maker of Cottonelle and Scott toilet
paper, is looking to overhaul its massive bathroom-tissue
operations to meet record demand fueled by the coronavirus
pandemic, executives said Wednesday.
The Irving, Texas-based consumer-products company makes toilet
paper both for consumers and businesses. Americans are scrambling
to find enough toilet paper, but demand has plunged for tissue sold
in bulk to offices, hotels, restaurants and other businesses as
many of those establishments remain closed.
CEO Mike Hsu said the company has no plans to start selling its
bulk product -- the thinner, scratchier tissue that comes on
oversize rolls -- directly to consumers. Instead, it is working to
repurpose manufacturing capacity to make more consumer-quality
products.
"The products will be every bit the same and of the quality that
consumers expect," Mr. Hsu said. "There is a lot that will be
involved if we do this," he said, noting that each line has
different tissue technology.
Even the fundamental materials used to make tissue are
different. Bulk toilet paper is generally made with pulp that comes
from recycled material, while bathroom tissue used in homes
isn't.
U.S. sales of consumer toilet paper are up 65% for the four-week
period ended April 11, according to Nielsen. Rival
consumer-products company Procter & Gamble Co. has also
scrambled to ramp up production for its Charmin toilet paper and
Bounty paper towels. P&G doesn't have a separate line for bulk
sales to businesses.
Uncertainty over future demand complicates planning, executives
said. Demand is clearly high now, but as consumer stockpiling
abates and Americans return to work, there is a risk of amassing a
costly glut of product later in the year.
Some commercial-quality toilet paper has begun to be available
to individual consumers on online platforms such as Amazon.com Inc.
and by way of businesses and smaller retailers who have begun to
redirect those oversize roles to consumers desperate for any
supply.
Kimberly-Clark and P&G have said they are able to make
enough toilet paper to meet demand even as more people stay home,
but that consumers stocking up along with the length of time it
takes to get toilet paper from factories to stores has led to empty
shelves across the country.
The company on Wednesday said organic sales, a measure that
strips out currency moves and deals, rose 11% in the recent quarter
as consumers stocked up on household staples.
Executives warned that fallout from the pandemic could quickly
reverse the company's fortunes, explaining why it pulled financial
guidance for the year and halted a share buyback program.
Sales for the period ended March 31 were up 13% in
Kimberly-Clark's consumer tissue business, which includes toilet
paper, Kleenex tissue and Scott paper towel. Sales were up 6% in
the personal-care segment, which includes Huggies diapers and Kotex
feminine-care products.
The company's professional unit, which covers bulk sales to
businesses, rose 4% for the period, though executives said demand
began to fall in March and is expected to decline further as
businesses are forced to remain closed. Broadly, office use is down
80%, while hotel occupancy is at 21% capacity, the company
said.
The company's net income climbed 45% to $660 million.
Kimberly-Clark's earnings were $1.92 a share, up from $1.31 a share
a year earlier. Adjusted earnings were $2.13 a share.
Kimberly-Clark executives said uncertainty over the future is
weighing heavily. The company has teams poring over epidemiological
studies in hope of getting a read on the path of the virus, Chief
Financial Officer Maria Henry said. Unknowns around the length of
the economic shutdown, whether the infection rate will force major
factory shutdowns and what consumer spending will look like in an
all-but-certain recession make it impossible to predict the future,
she said.
The company is looking at models for the virus's eventual toll,
and the data shows an eventual infection rate anywhere between 1%
and 50%.
"In our jobs, I don't think we ever thought we'd be arguing over
epidemiology models," Mr. Hsu, the CEO said. "And we are."
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
April 22, 2020 14:01 ET (18:01 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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