Kimberly-Clark De Mexico Raises Prices, Warns On Exchange Rate

Paper-goods maker Kimberly-Clark de Mexico SAB (KIMBER.MX) said Friday it has begun to implement a 5% average price increase for its products after having absorbed rising costs in recent years.

Chief Executive Pablo Gonzalez told analysts during a conference call that the company expects domestic demand in Mexico will continue to improve, backed by economic and job growth, despite the uncertainty that Europe's troubles have brought to the world economy.

The maker of products such as Huggies diapers and Kleenex tissues began raising prices in early-April, Gonzalez said, adding that a couple of competitors have already followed suit in what Kimberly-Clark views as a "good initial response."

Gonzalez said the company is also "happy" with the progress it has made integrating its January acquisition of Evenflo baby products. Evenflo's February and March sales were on-target, he said, and the company sees ample opportunity for growth via the brand in the coming years.

Kimberly-Clark expects capital expenditures of between $80 million and $100 million this year.

The company has focused its efforts on increasing market share and volume sales, while also cutting costs where it can, to combat swings in raw-materials prices and foreign-exchange levels.

Kimberly-Clark expects some raw materials costs going forward to decrease in U.S. dollar terms, making the Mexican exchange rate key to its bottom line. Gonzalez said that, if the peso remains around MXN13 to the dollar, then the company will face difficult earnings comparisons in the coming quarters.

The peso was trading at MXN13.1240 to the dollar early Friday compared with MXN12.80 at the end of March and MXN11.60 around this time last year.

Kimberly-Clark reported after the market close Thursday that its first-quarter net profit slipped 3% on the year to 931 million pesos ($70 million), hurt by higher raw-materials costs, a weaker Mexican currency and expenses related to the Evenflo acquisition.

The company's shares were up 0.5% to MXN26.90 in recent trade on the Mexican Stock Exchange, outpacing the 0.1% advance in the broader IPC local stock index.

-By Amy Guthrie, Dow Jones Newswires; 5255-5980-5177; [e-mail]

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