1. Kimberly-Clark Corporation (KMB)
December 4, 2007
Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza

2. Investment Managers Gloria Ho gho2@uiuc.edu Jonathan Li jxli2@uiuc.edu
Jason Mueller
Patricia Shongedza

3. Presentation Outline Company Overview Business segments
Risk assessment
Competitor analysis
DCF Analysis
Recommendation

4. Company Overview Global health and hygiene company
Personal Products industry
Products made from natural or synthetic fibers
Advanced technologies in fibers, nonwovens, and absorbency.
Founded in 1872 & headquartered in Dallas, TX
Consumers in more than 150 countries worldwide
Manufacturing facilities in 40 countries
More than 55,000 employees
FY2006 Total Revenues of $16.75B; Market cap: $29.5B
More than 1.3 billion people (1/4 of the world’s population) trust K-C brands EVERYDAY.

5. Consumer Brands

6. Business Segments: Brands
Personal Care
Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise
Consumer Tissue
Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page
K-C Professional & Other
Kimberly-Clark, Kleenex, Scott, WypAll, Kimtech, Kleenguard, Kimcare
Health Care
Kimberly-Clark, Ballard

7. Business Segments: Products
Personal Care
Disposable diapers, training and youth pants, and swim pants
Baby wipes
Feminine and incontinence care products
Consumer Tissue
Facial & bathroom tissue
Paper towels
Napkins
K-C Professional & Other
Wipers
Various safety products
Healthcare
Surgical gowns
Drapes
Infection control products
Sterilization wrap
Disposable face masks and exam gloves
Respiratory products

8. Revenues by Segment

9. Revenues by Region
Net sales grew 14% in the developing and emerging markets, with each of the regions contributing to the increase.

10. Innovation
K-C invented five of their eight major consumer product categories:
facial tissue, paper towels, toilet paper on a roll, feminine pads and disposable training pants
Primary raw material: fiber recycled from recovered waste paper
Polypropylene and other synthetics

11. Presentation Outline Company Overview Business Segments
Risk Assessment
Competitor Analysis
DCF Analysis
Recommendation

12. Risk Assessment Significant increases in costs Foreign market risk
Heavy price competition
High failure risk for new products 12

13. Risks: Input Costs Pulp, polypropylene, and synthetic polymers
Direct input to 25% of total revenue.
Cost increase for 2007 more than 120% greater than originally forecast.
Result: 4-7% increase in prices for tissue paper, diapers.
Costs partially offset by increased volume, outsourcing. 13

14. Risks: Price Competition
Highly competitive segments
Low cost substitutes, private/generic labels for virtually all consumer products.
Questionable customer loyalty: Brand loyalty vs. Brand repertoire.
The Wal-Mart Effect
13% of total firm-wide revenues
Mitigating Factors
Leverage customer knowledge and increase responsiveness.
Ex: Packaging alternatives for diapers
Leverage global R&D to make products more adaptive to local markets 14

15. Risk Factors Cont’d Foreign Markets New Product Acceptance
Rapid investment in BRICIT could lead to overcapacity.
Political and socioeconomic volatility in emerging markets.
Latin America, Eastern Europe.
Success highly contingent on ability to form partnerships.
Adapting to cultural differences, building distribution networks, etc.
Intellectual property protection.
New Product Acceptance
High initial marketing costs
High market saturation of existing products: difficulties in continuing innovation 15

16. Presentation Outline Company Overview Business Segments
Risk Assessment
Competitor Analysis
DCF Analysis
Recommendation

17. Competitors Vary in size and function
Competes against well known branded products therefore faces risk in consumer acceptance
Principle areas of competition include brand loyalty, product quality and innovation, price and marketing strategies

18. Competitors KMB Georgia Pacific Playtex Products PG Market CapNA
228.33B
Employees
55,000
50,000
1,250
138,000
Revenue
17.82B
2.15B
636.20M
77.89B
Net Income
1.85B
623M
30.20M
10.56B

19. 1 year chart (competitors)

20. Porters five forces Threat of new entrants; LOW
Bargaining power of suppliers; LOW
Bargaining power of buyers; MODERATE
Threat of substitutes; HIGH
Industry rivalry; HIGH

21. RCMP Position Purchased 300 shares on April 20, 2005 at $63.91/share
Total investment: $19,173
Current market price: $69.81
Unrealized gain of $1, (9.23%)

22. Position in the portfolio

23. Correlation Matrix

24. Recent News Kimberly-Clark Declares Dividend
Kimberly-Clark Declares Regular Quarterly Dividend of 53 Cents/Share
Dividend increased 9% in 2006, and expected to increase 8% in 2007
November 15, 2007: 06:27 PM EST
Ahead of the Bell: Kimberly Clark
Analyst Upgrades Kimberly-Clark, Says 2005 Restructuring Program Paying Off with potential increased revenue coming from BRIC emerging markets
November 26, 2007: 09:11 AM EST

25. Presentation Outline Company Overview Business Segments
Risk Assessment
Competitor Analysis
DCF Analysis
Recommendation

26. DCF Analysis WACC calculation Beta: 1.3 (Google Finance: 0.71)
WD: 7.18%
WE: %
KD: Weighted avg. interest rate
KE: Cal. from CAPM
Tax rate: 36.7% (effective tax rate)

27. DCF Analysis Key assumptions: Sales Growth Rate (2007-08): 4.8%
Cost of product to Sales: %
Terminal Growth Rate: 3.0%
Dividend Growth: 8%

28. DCF Analysis
Key Assumptions

29. DCF Analysis
Based on DCF Share Price: $73.49

30. Presentation Outline Company Overview Business Segments
Risk Assessment
Competitor Analysis
DCF Analysis
Recommendation

31. HOLD Recommendation Based on DCF Share Price: $73.49
Current Share Price: $69.56 (3 Dec 07 closing)
HOLD