Dear Shareholders,
In 2022, Kimberly-Clark celebrated our 150th anniversary, a significant milestone for the company. For 150 years, Kimberly-Clark has been developing category defining innovation to deliver essential health and hygiene products to people around the world. We are proud to have created many of our categories, including feminine care and facial tissue. Our values and commitment to consumer needs enabled us to evolve from a pulp and paper company founded in 1872 to a global business delivering products and solutions through our Personal Care, Consumer Tissue and K-C Professional segments with a portfolio of trusted brands such as Huggies®, Kleenex®, Kotex® and Depend®. I am inspired by our heritage and our purpose of providing Better Care for a Better World will continue to guide us as we forge the path forward for long-term value creation.
2022 was also a year of continued resilience for Kimberly-Clark. As we navigated a dynamic operating environment, strong execution enabled us to deliver healthy, organic growth and profit improvements as we exited the year.
Grow Iconic Brands
We successfully executed our strategy for balanced and sustainable growth despite a challenging macroeconomic environment.
- Scaling innovation. Innovations from the last three years accounted for approximately 60% of our organic growth in 2022. In Personal Care, the contribution to organic growth has doubled in the last 2 years. We believe these investments will continue to strengthen our competitive position with stronger product differentiation and deliver even greater value to consumers.
- Enhancing our commercial capabilities. Effective revenue growth management initiatives enabled us to mitigate significant inflationary impacts and drive growth in 2022. Our U.S. retail customers voted Kimberly-Clark the best out of 80 consumer packaged goods companies in the 2022 Advantage Survey, recognizing our outstanding retail partnerships, execution, trustworthiness, and vision. Seventy-five of our markets are considered top-tier, led by North America, our largest business.
- Expanding in key developing and emerging (D&E) markets. Organic sales increased double-digits in China Consumer, despite the challenging pandemic restrictions in place for much of 2022. We continue to see strong growth potential in this market and we expect to continue delivering breakthrough innovation that will strengthen our position across categories. We believe that favorable demographics in D&E markets will fuel long-term growth, and we have and will continue to grow our foothold in these markets.
- Propelling digital growth. During the year, we leveraged technology to transition to a digital-first marketing model that is delivering strong returns on investment. Today, digital marketing accounts for over 70% of our global media mix.
In 2022, we:
- Achieved 7% organic sales growth, above our three-year average of 4%
- Grew or held market share in ~50% of our markets
- Generated Adjusted EPS of $5.63
- Began the journey of margin improvement with y-o-y and sequential improvement in Q4
Drive Cost Efficiencies and Financial Discipline
Improving margins. Our commercial agility this year stabilized profitability in the back half, with gross margin up year over year. Although input costs remain high, in 2023, we will remain committed to sustaining margin improvements through a combination of top line growth and cost discipline.
Reducing costs. We continue to drive cost optimization through our FORCE (Focused On Reducing Costs Everywhere) program, which achieved savings of $290 million in 2022 through strategic procurement and operational efficiency.
Prioritize Capital Towards Value-Creating Initiatives
Investing in growth. We are also increasing investments in advertising to fuel demand, support category growth and expand our markets. In addition, with close to $900 million in capital spending in 2022, we believe these investments will reinforce our ability to meet demand and maintain a resilient supply chain.
Exiting our tissue business in Brazil. In October 2022, we entered into an agreement to sell our Neve® tissue brand and related consumer and K-C Professional tissue assets and license certain tissue brands (Kleenex®, Scott® and WypAll®) in Brazil. This transaction, post approval, will leverage local expertise and will allow us to focus on accelerating the growth of our Personal Care portfolio. The transaction is pending customary conditions and regulatory approval and is expected to close in the first half of 2023.
Returning capital to shareholders. In 2022, we returned $1.7 billion to shareholders in the form of dividends and share repurchases. We again raised our dividend in 2022, the 50th year of consecutive dividend growth.
Advance Our 2030 Sustainability Goals
We also continued to make progress against our sustainability ambitions with our goal to improve the well-being of one billion people by 2030 through programs designed to help children thrive, empower women and girls and improve access to water and sanitation. This includes advancing global initiatives such as “SheCan” by Kotex® and “Toilets Change Lives” while supporting partnerships with nonprofits including Water for People, WaterAid and Plan International. We also remained focused on our environmental footprint reduction goals (climate, water, forests and biodiversity, waste) while advancing more sustainable solutions, including expanding our range of biodegradable baby wipes made with plant-based fibers, investing in reusable period and incontinence solutions, and continuing to focus on sourcing tissue from certified and alternative sources.
Deepen Our Leadership Bench
We added talented and experienced members to the Kimberly-Clark leadership team in 2022. In April, Nelson Urdaneta was appointed Senior Vice President and Chief Financial Officer, bringing strong global and operational leadership as well as a breadth of experience across all financial disciplines. Zack Hicks joined us in July as Chief Digital and Technology Officer, a newly created role reflecting Kimberly-Clark's increasing focus on digital technology in building brands and creating differentiated capability for the company. Tamera Fenske, who has over two decades of experience leading complex supply chains, was appointed Senior Vice President and Chief Supply Chain Officer in September. I am confident our leadership team will unlock exciting growth opportunities for our global brand portfolio.
I would like to thank our teams around the world for their unwavering commitment and passion for our business and the people we serve. I also want to thank you, our shareholders, for your continued support and trust. We are proud of our 150-year legacy and could not be more excited for the immense potential our future has to offer. I am confident we will deliver long-term value as we fulfill our purpose of Better Care for a Better World.
Sincerely,
Michael Hsu
Chairman & Chief Executive Officer
Read the original letter here.
