Kimberly-Clark at Piper Sandler Conference: Strategic Transformation Unveiled

On Wednesday, 10 September 2025, Kimberly-Clark (NASDAQ:KMB) presented its strategic transformation at the Piper Sandler 4th Annual Growth Frontiers Conference. Led by CEO Mike Hsu and CFO Nelson Urdaneta, the company outlined ambitious plans for reshaping its portfolio, focusing on premium offerings, and enhancing productivity. While the transformation aims to reduce earnings volatility, challenges such as stranded costs from recent divestitures were also discussed.

Key Takeaways

• Kimberly-Clark is targeting a 40% gross margin and 18% EBITDA by 2030.
• A joint venture with Suzano is expected to reduce pulp cost volatility.
• The company is investing significantly in digital and AI-driven advertising.
• Kimberly-Clark aims to offset $150 million in stranded costs from the IFP divestiture.
• R&D and CapEx investments are set to drive innovation and supply chain improvements.

Financial Results

• 2030 Targets: Kimberly-Clark is aiming for a 40% gross margin and 18% EBITDA.
• Volume/Mix Led Growth: Transitioned to a growth model focusing on volume/mix over the past 1.5 years.
• Gross Productivity Program: A $3 billion plus program over five years is ahead of schedule.
• SG&A Savings: Targeting $200 million in savings, with progress tracking well.
• Stranded Costs: Due to the IFP transaction, $150 million in stranded costs are expected, with plans to offset them.
• EPS Impact: Anticipates a $0.30 to $0.40 EPS impact from these costs.
• R&D and CapEx Investment: R&D spending is 1.9% of net sales; CapEx was 3.6% last year, 4.3% in the first half of this year, and is expected to reach 6% in the coming years.

Operational Updates

• IFP Joint Venture: Partnered with Suzano, enhancing margin improvement and reducing pulp cost volatility.
• Brand Spending: Increased advertising investment by $500 million to $600 million.
• Digital Shift: Almost entirely transitioned to digital advertising.
• China Model: Leveraged an advanced digital ecosystem for over 4,000 ads for Kotex.
• Innovation: Launched innovative absorbent core technology in China and the US.

Future Outlook

• EPS Growth 2025: Expected to reflect ongoing business performance in North America and IFP.
• Stranded Cost Offset: Plans are underway to fully offset stranded costs.
• Long-term Productivity: Anticipates significant productivity gains due to scale.

Q&A Highlights

• Category Growth: Categories have grown around 2% in the first half of the year.
• Diaper Promotions: Observed increased promotional activity in diapers, with Kimberly-Clark opting out.
• Portfolio Focus: Two-thirds of the remaining portfolio will emphasize personal care.

For further details, readers are encouraged to refer to the full conference call transcript.

Full transcript - Piper Sandler 4th Annual Growth Frontiers Conference:

Michael, Piper Sandler Analyst, Piper Sandler: All right, thanks everyone for coming. It’s welcome to Piper Sandler’s fourth annual Growth Frontiers Conference. It’s our pleasure today to have Kimberly-Clark here with us. We’ve got Mike Hsu, the Chairman and CEO, Nelson Urdaneta, CFO, and Chris Jakubik, Head of Investor Relations. Mike’s been CEO since 2019 and has driven an interesting evolution of Kimberly-Clark by reshaping the portfolio, a greater focus on premium, more value-added offerings, and a stronger focus on brand building and building a consumer-centric team. I actually knew the company about 15 years ago as the junior at a different firm, and it’s quite a different story today and much more interesting, in my opinion.

Maybe, Mike, could you just start with some of the ways that the transformation has gone in recent years and how you’ve reshaped the portfolio and really changed it from a bit more of an industrial-type company to really CPG-focused?

Mike Hsu, Chairman and CEO, Kimberly-Clark: Yeah, OK, Michael, thanks for having us. It’s great to be here in Nashville. I think so this year the company is 153 years old, right? Founded as I think we invented paper in the U.S. For much of the company’s history, we were a very industrial company, as you just mentioned. If you name a paper, we probably invented it, and we were the leader of it. Cigarette paper, newsprint, stationery, you name it, right? I think that was the heritage of the company. If you listen to that background, the company didn’t decide to become a consumer company until, I would say, the late 1980s, early 1990s. We’re a very young CPG company.

I was brought in by my predecessor, Tom Falk, and the board because recognizing that we wanted to be a world-class CPG, I was the first senior executive to come from a consumer practices company, right? I had, in my mind, a pretty clear remit, which is, and we all work, including Michael, we all used to work at Kraft, right? Recognizing, you know, and where it’s a different company than it was 20 years ago. I viewed Kraft as what I called an academy company that had world-class capability. Really, my focus was to instill world-class consumer products capability into the company. Where I’d say the great starting point that Kimberly-Clark always had, Michael, is if you listen to all the categories that we were in, the common thread is the company has fantastic science and engineering. We invented most of our categories.

We invented how to make most of our products. We still manufacture, we still build the machines that make our products today, right? We’re a very engineering-centric company. That was a great base to start from. If you have to have one thing, you have to have the product, right? I think where we were able to enhance the capability is more the consumer perspective. I would say starting with like divining great consumer understanding, consumer insights, laddering that into how we communicate with consumers through our marketing, digital, how we execute in retail with our customers. Lastly, while we are great manufacturers, I think strengthening our productivity cost discipline has been a real big focus. I’d say from a capability perspective, what we’re trying to build is like, hey, world-class capability. I think we’ve come a long way in my, I think I’m in year 13 now.

We feel good about that. The other thing that had to change is kind of where you led off, Michael, was on the portfolio. We had to reshape the portfolio. One of the challenges I was wrestling with as I came into this role about seven years ago was, you know, it was clear that our valuation or our multiple relative to our peer set was lower. If you looked at, asked the question, and I’m a quant, so we built multiple regression models to kind of explain the variance. Number one driver was, you know, we had lower organic growth than our peer set. Since I came in this role, we’ve been growing at about 4% compounded. We had the lowest gross margins of our peer set. You’ll hear us talk more about productivity and why that’s so important. We feel very bullish about that.

The third one is one that people don’t talk about as much, Michael, which is we had the highest EPS volatility of our peer set. Why? It’s primarily driven by exposure to pulp costs. While the price of tissue does not vary in the market at retail, the cost of pulp varies quite a bit. That’s the impetus behind our last move that we announced earlier this summer, where we’ve entered in a joint venture with Suzano, who is the largest producer of eucalyptus pulp. We’re their largest customer globally, and they’re taking the majority ownership of our international family and professional business. We’ll be the 49% owner. That says a couple of things. One, certainly, when you have a very efficient eucalyptus producer majority owning that business, inherently, I think you might understand that the volatility behind that business is going to be reduced significantly.

Secondly, importantly, I think by deepening our relationship with them and recognizing that the volatility isn’t great for either of us, I think it gives us better visibility into the other parts of our tissue business that are remaining with the company. I think those are the big areas, both capability and then portfolio reshaping to structurally reduce volatility.

Michael, Piper Sandler Analyst, Piper Sandler: No, that’s great stuff. We’ll come back and drill into a little bit more of the marketing side and brand building piece. Maybe first, Nelson, can you touch on some of how the portfolio evolution impacts or shapes your thinking on your 2030 targets, which I think, if I’ve got them right, are like a 40% gross margin and 18% EBITDA?

Nelson Urdaneta, CFO, Kimberly-Clark: Sure. Happy to be here. A few things. We’ve been building great momentum on the business in the last couple of years since we launched our Power and Care transformation. We’ve transitioned to a volume mix-led growth in the last year and a half or so. We’ve made significant progress in our margin progression targets, which again, those are milestones, not end states. With the recently announced transaction, we should see an acceleration in reaching those milestones. As we said, that was an objective by 2030. Because of the mix of the portfolio and North America and IFP being higher margin businesses, we should be able to get to that milestone ahead of what had been planned. A few things on that end. One, we are ahead of where we expected to be on the gross productivity front.

We announced a $3 billion plus program for the next five years, and we are tracking ahead of that in terms of the timing of when we expect to deliver that. Added to that is the SG&A savings, which was another $200 million, and that’s an enabler to push margins ahead. That’s also tracking very well as we’re in about half the year where we said in two years we would be delivering that number. We expect all of our businesses to deliver at least their fair share of these savings. With IFP in the transaction, we still expect the benefit from the ongoing savings that the IFP business will continue to drive with Suzano, a very strong operator and an expert in fiber, bringing to bear at that end.

There will be some stranded costs as a result of the transaction, say about $150 million, which we pointed out when we announced it. We’re confident in our ability to add that to our objective of savings going forward. We’re working on those plans, and we’ll be sharing them as we get closer to closing the transaction in midway through next year.

Michael, Piper Sandler Analyst, Piper Sandler: Two quick follow-ups on the stranded cost mitigation or ultimately, ideally, removal. Any sense of what that timing might be? Is that still a bit to be determined? The second one, with the divestiture, can you give a sense of how to think about the go-forward portfolio, whichever way might be the most helpful to split it? The family products, I think, it’s mostly things like toilet tissue. The feminine care and diapers are more value-added or have room for premiumization. If you maybe kind of think about the more differentiated or premiumizable categories versus the rest, how does that look now for where you’re looking at?

Nelson Urdaneta, CFO, Kimberly-Clark: I’ll touch upon the stranded a little bit in the portfolio. If Mike or Chris want to add anything. On the stranded, a couple of things. One, we expect in the immediate years, and that’s, you know, once we close the transaction, we’ll action the plans to address the $150. It’ll take, you know, not an unreasonable amount of time for us to address it. We’re talking in the $0.30 to $0.40 out of the gate EPS. That’s kind of the impact that we’ve guided to. We expect to be in a position to fully offset that in the next few years right after the transaction. Those costs are related to largely shared services that we have across the enterprise, global supply chain costs, and unallocated overheads.

Given our track record of cost savings, delivery over time, and being ahead of where we expect it to be, that should be something we can address. On the portfolio, a couple of things to keep in mind. 2/3 of our portfolio of the remaining company will be personal care, so very different margin profile to begin with. Of the tissue and professional business, that’s in North America, which is a fairly profitable business. I mean, that’s a business that has an operating profit that’s around 20%. It’ll be a very different profile than what we were seeing before, which is why Mike was referring to before the fact that it was a much lower business, the international family and professional (IFP) business. Premiumization, all the portfolio that remains is subject to premiumization.

There’s ample opportunity for us to keep elevating our categories in the way we talk internally because there are met needs across both tissue and the personal care categories that we have.

Michael, Piper Sandler Analyst, Piper Sandler: You have been increasing some of the brand spending. Both quantity and quality seem to be improving. Can you maybe give us some context for that and maybe touch on some of the recognition you’ve received recently that seems to validate that externally as well?

Mike Hsu, Chairman and CEO, Kimberly-Clark: Yeah, advertising. Actually, I learned just before we came on that we both worked on Jell-O back in the day. Not at the same time, but you know, I think Mike Hsu understands how important advertising is to a consumer business. What we’re trying to do, Mike, a new term for me, brand love, is what we’re trying to achieve, right? I think for me, that’s a newer-fangled term. What do I mean by that? It’s like what we’re trying to illustrate to consumers is the positive impact our categories, our products can do for consumers, the positive things our brands can do for consumers through the product features that create brand love, that create that connection with the brand.

I think in the past, since I came into this role, maybe in the last five years or so, we’ve significantly increased our advertising investment, $500 million to $600 million or several hundred basis points of investment. He wouldn’t do it if it wasn’t a positive ROI. The underlying thing is, why is it such a positive ROI? It’s because we’ve also, at the same time, almost shifted entirely to digital, right? If you think about our categories, the reason that’s so important and different than Jell-O is that even though these are big brands, they’re very narrow. They target narrow slices of consumers. If you think about in the U.S., Huggies, we’re only trying to reach 6 million people, right? You can imagine when you think about those numbers, then advertising on TV is a gigantic waste, right?

If you can target them on search or other digital avenues, that’s a much more efficient spend. I think we’ve advanced that model the most in China for us. We’ve built an advanced, there’s an advanced digital ecosystem that’s tied to e-commerce in that market. We have a very innovative model that we’ve pioneered in China, very AI-driven. For example, this year on our fem care business, Kotex in China will produce over 4,000 ads this year, Mike. Obviously, we couldn’t do that if we weren’t using AI, right? I think there’s an advanced model, but also it’s become very scientific. I started my career in direct response marketing or mail order, direct response. It’s become a little bit more like that, where it’s almost like a CRM relationship with consumers. That’s why we feel so confident in our investment and our spending. That’s one big piece.

You kind of mentioned the award. Before our last earnings call, I had to learn how to pronounce Cannes, I think how it’s spelled. It wasn’t a big focus of mine. For the prior five years, I think we had picked up maybe five or six Lion Awards at Cannes in the past. We won 11 this year, so more than doubling our five-year cumulative total. What’s changed with us there is we wanted to get great brand love. We brought in a new Chief Growth Officer, Patricia Corsi, who kind of brought this language, Cannes, brand love to us. We’ve in-housed a lot of our creative talent. It doesn’t mean we make all of our ads internally. In China, we make most of our ads internally. We have brought in creative people that were Chief Creative Officers of major agencies.

In fact, our Head of Creative is probably the most awarded Chief Creative Officer in the last 10 years. Because of that, I’d say what we’re trying to do is create advertising that both expands the category, but also demonstrates how our products improve lives in a, I would say, a memorable and charming way. The examples I’ll give you is, I’ll tell you a funny story. We got called down by our largest customer. Hey, you got to come to this important meeting. We want to meet with you on this other stuff. We go, we get down there, and they’re like, we want to know what’s going on in the category. We’re like, what’s your concern? They’re like, it’s growing, like more than we thought. They said, we took it all apart. We’ve analyzed this. The only thing we can figure is it’s your advertising, right?

Their point was, do more of it, right? That was on adult care, right? If you’ve seen, we have a couple of campaigns in adult care, in child care, that internally we say we want to crush the stigma associated with some of these categories, right? On Poise or Depend, there’s a stigma associated with using the product. What we’re trying to do is normalize the condition. We’ve worked with Katherine Heigl, the actress from Grey’s Anatomy, to kind of, and her, she likes to talk about with her friends, the giggle dribble because it really, women start leaking at an earlier age than people think, right? It typically comes with childbirth, right? Normalizing that condition is helping expand the category. We brought in Emmitt Smith and Deion Sanders to talk about prostate cancer, because that is what drives kind of leakage for men, right?

That has grown the Depend category. With Goodnites, which is the bedwetting garment that we have, we brought in astronaut Scott Kelly, demonstrating how astronauts use products like Depend because they have nowhere else to go when they’re in space. I think that is doing a great job expanding the category for us. The other side of it is, let’s also talk about how our products improve lives with some, I would say, charm and memorability. You could probably see, and I don’t know if you’ve seen, we have this diaper on Huggies called the 360 Blow-Out Blocker as the innovation. If you’ve ever had a baby, you will know what a blow-out is. I won’t describe it here, but it can be messy. If I want to tell you, hey, we made an ad to market the Blow-Out Blocker, the ad could, in your head, be very gross, right?

I think our team’s found a way to deliver that message memorably with charm, fun, and not gross. I think our marketing is getting better. We think it’s a real driver of the business and what our brands deserve.

Michael, Piper Sandler Analyst, Piper Sandler: That’s a tight rope to walk. Yeah, nice job. Maybe just elaborating a little bit more on innovation, can you maybe give a sense of how you approach it, what kind of, you know, how robust your pipeline might be at the moment, and a little bit of what sort of investments it takes to deliver that?

Mike Hsu, Chairman and CEO, Kimberly-Clark: Yeah. The founding principle, the number one founding principle of a company, Michael, if you go back and we have this all over our walls and we have books that say, we make the best product. That’s like number one job for people at Kimberly-Clark. Where we really rely is on our engineering, our ability to make a better product. Right now, I think why we feel great about the first half that we delivered is it’s on the backs of great performing products. We feel like we have product superiority, also at a very competitive or, in some markets, we would say at lowest cost. That’s a powerful lever. That’s kind of where it starts with us. The backstory is we developed an innovative core, if you think about for diapers, but this can apply to the balance of personal care.

We’ve developed an innovative absorbent core technology that we’re the leaders on and still rolling out globally. That’s been a driver of our current success. We first launched this in China back in 2018. In 2020, we became market leaders. We rolled it to Korea and Australia back in 2022. Those were a little higher share in those markets. Our shares have grown from, let’s say, the low 40s to the 60s in that time period on the back of the technology. That’s all good. We are in the process. We just launched it in the U.S. at the end of the second quarter and Brazil earlier this summer. We still have plenty of opportunity to kind of roll out what we think is an advantage absorbent core technology around the world.

The other thing I’ll say, though, Michael, is we’ve been focusing our technology bets and concentrating them based on the insights that we’ve kind of divined. We have what I would call the next generation core, the next generation fiber that we’re working on that’s in the pipeline and in the works. We’re very bullish on our technology and what we’ve got set to roll out.

Michael, Piper Sandler Analyst, Piper Sandler: No, that’s a great color and just investment.

Nelson Urdaneta, CFO, Kimberly-Clark: That’s going to pay the bills. Investments, I mean, two things, right? We take into account the first one, which is how much we’re investing in R&D per se and how much we’re investing in CapEx. R&D levels are pretty healthy. We’re investing about 1.9% of our net sales, and we’re driving a lot of efficiency, especially as we are implementing our power and care transformation and our new ways of working across the globe. CapEx-wise, we’ve been stepping up investments, especially in North America and international and personal care. We invested around 3.6% of net sales last year. The first half of this year, we’re up at 4.3% of net sales. In the next few years, we expect to be more on the 6% as we drive particularly the transformation of the supply chain in North America behind some of the platforms as well that Mike was referring to.

Michael, Piper Sandler Analyst, Piper Sandler: One more quick one for each of you. First, just from a little bit of a hand-holding perspective for investors about any puts and takes over the next year or so from the IFP divestiture transition. We’d love to hear from you as well on just what investors might be missing on the Kimberly-Clark story. We’ll do a little housekeeping first and then hand it off to you to wrap up.

Nelson Urdaneta, CFO, Kimberly-Clark: Housekeeping, let me start with the categories because I think it’s important to give a perspective. Categories have been growing through the first half at around 2%. We’ve seen some heightened, especially in the last couple of months, promotional activity, particularly in diapers and some of the private label and in-house brands. That is driving a subdued category in diapers. Recently, we’re seeing 1%. We’re choosing not to participate in those activities that are happening in the marketplace. There’s some level of pantry loading as a result. We expect some of our activities to move more towards Q4. That’s thinking of the short term. As it refers to the transaction itself or any impact on financials, how to think about it EPS-wise for 2025, three factors. First, it’ll reflect our North America and our international and personal care business. That’s our ongoing operations.

Secondly, it will reflect 100% of our international family and professional business as discontinued operations, but we’ll still own it for the full year. So it’ll be in EPS. Last but not least, there will be a one-time benefit of about $0.16 in depreciation and amortization because of the halting of the depreciation and amortization on that business. For next year, EPS growth, constant currency will reflect one, and assuming that the transaction closes around midway through the year, the ongoing business, our continuing operations of North America and IFP. We’ll have to deduct any dilution that we’ll have from the transaction once it goes live, as well as the fact that we’ll lap the depreciation and amortization benefit, which will be around seven months in 2025 and around six months for next year.

We’re working through the plans to offset all of the stranded costs, which I referred to earlier. We’ll come back with that once we get closer to the transaction next year.

Michael, Piper Sandler Analyst, Piper Sandler: Yeah, no, that’s very helpful. Mike, could you just wrap up maybe how you see what, how to think about the stock, maybe what some of what investors might be missing, and any other closing thoughts?

Mike Hsu, Chairman and CEO, Kimberly-Clark: Yeah, maybe the big thing, Michael, is I would say we’re a better, more capable company than we were, let’s say, a decade ago. I think part one, and maybe this has been missing, we structurally reduced or eliminated our earnings volatility because of what we’ve done with the portfolio and our partnerships with our primary supplier. That’s part one. Two, as I just was articulating on innovation, we have a fantastic pipeline that the world hasn’t seen yet. That gives us confidence to our strategy and why we’re doing well this year is we’re cascading our best technology from premium tiers into our value tiers. The reason we can do that is because we know what’s coming behind it, right? We have more that we’re going to be launching. I think we’re really excited about that.

Nelson had mentioned it, but we are in the very early innings of becoming world-class at productivity. We delivered 6%, about 6% last year. We’re on the path to high fives, low, around 6%. This year, that we would consider world-class. We’re in the early innings because of our historical, I would say, more decentralized approach to cost management. We’re getting much better at leveraging scale. There’s a long runway of productivity ahead for us. The other thing, I’ve talked about the world-class capability, but I would say that’s all packaged together in what I think is a little different in our industry, which is a lean and fast operating model. We are very market-centric. We’re very nimble and agile. Everything we’re doing from a corporate perspective is we’re working to help win in the local markets. That’s our job. I think we’re very bullish on our future.

We’d love to get investors bullish too. Thank you for the time, Michael.

Michael, Piper Sandler Analyst, Piper Sandler: Thank you for being here. I appreciate your time. I appreciate all the thoughts and colors. Thanks again.

Mike Hsu, Chairman and CEO, Kimberly-Clark: Thank you.

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