Kimberly-Clark de Mexico Seeks New Export Markets for Paper Goods

--Paper goods maker looks to expand export reach

--Mexican consumer demand seen absorbing some excess capacity

--Company projects 7% organic sales growth for 2012

--Pegs Mexican peso average exchange rate at MXN12.70/USD for 2013

By Amy Guthrie

MEXICO CITY--Paper goods maker Kimberly-Clark de Mexico SAB (KIMBER.MX) said Friday it's looking for ways to utilize excess manufacturing capacity that previously served other markets for U.S.-based Kimberly-Clark Corp.'s (KMB) goods.

Pablo Gonzalez, chief executive of the Mexican manufacturer of products such as Huggies diapers and Kleenex tissues, told analysts during a conference call that exports typically represent around 5% of the company's sales.

Mr. Gonzalez said that exports to other parts of Latin America, in particular, have fallen in recent months, although he didn't specify how much exports as a whole decreased year-on-year during the third quarter.

Exports have always been used as a "buffer," the executive said, to absorb excess manufacturing capacity. The company expects some of its extra production to be needed in Mexico, where domestic demand has been increasing.

Kimberly-Clark de Mexico is also exploring the possibility of shipping goods to regions other than Latin America where Kimberly-Clark products are sold, Mr. Gonzalez said.

Going into the fourth quarter, the consumer products company expects raw material costs to compare favorably with a year ago. An exchange rate for the Mexican peso of less than MXN13 per U.S. dollar would also help financial results.

The peso was recently trading around MXN12.86 compared with MXN13.72 a year ago. Kimberly-Clark de Mexico is projecting an average exchange rate of MXN12.70 for 2013, although Chief Financial Officer Xavier Cortes said the company doesn't expect to release 2013 earnings guidance until January.

For 2012, Kimberly-Clark de Mexico expects 7% organic sales growth and 10% total sales growth. The company plans to invest in its brands via strategic marketing, and to increase prices on products when possible. The company expects to make $100 million in capital expenditures this year.

The company reported Thursday a better-than-expected 36% year-on-year increase in quarterly net profit, as the peso's strengthening during the July-September helped its dollar-denominated debt position whereas in the year-ago quarter the peso had depreciated sharply.

Kimberly-Clark de Mexico shares were recently down 2.3% to MXN32.50 on the Mexican Stock Exchange. Mexico stocks in general were lower on profit-taking after Thursday's record close.

Write to Amy Guthrie at [e-mail]

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