By Alexander Marrow and Koyena Das
Nov 5 (Reuters) – Huggies maker Kimberly-Clark maintained its annual sales and profit forecast on Thursday, and blamed a decline in organic sales on false claims about its diaper quality in China that continue to weigh on demand.
The diaper issue emerged in June when China’s state market regulator launched an inquiry following reports claiming that diapers sold by Huggies and Chinese brands Babycare and Bibabebe contained formamide, a substance that can irritate the skin, eyes and respiratory system.
While Chinese authorities cleared Kimberly-Clark’s products in October, saying no formamide was detected and effectively disproving the false social media claims, the saga that has hindered the company for the last two quarters is set to continue.
The Kleenex maker expects annual organic sales growth to be about 100 basis points below its weighted average growth in the categories and countries it competes in. This primarily reflects unfavorable impact of around 100 basis points from the China disruptions, Kimberly-Clark said.
The company, which has recently completed its roughly $40 billion acquisition of Tylenol-maker Kenvue, also expects annual adjusted earnings per share to grow in high single digits on a constant-currency basis.
Its third-quarter organic sales fell 1.3%, hurt by a 270-basis-point impact from China-related claims, as well as changes in retailer stock levels in North America.
Volumes for North America grew 2%, while that in its international personal care segment fell 4.6% during the quarter ended September 30.
Quarterly net sales of $4.13 billion were in line with analysts’ estimate, according to data compiled by LSEG.
Adjusted gross margin stood at 35.5%, down 130 basis points from the year earlier, hurt by 1.1% price decrease despite higher input costs and supply-chain investments.
Peer Procter & Gamble also maintained annual forecast and warned of rising raw material, energy and freight costs.
(Reporting by Koyena Das in Bengaluru and Alexander Marrow in London; Editing by Shilpi Majumdar)
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