Kimberly Clark is a company in the Household and Personal Product Industry that takes pride in offering a wide range of product solutions just to meet the essentials of its esteemed customers. Their distinctive global brands include Poise, Kleenex, Plenitude, Depend, Cottonelle and Huggies across a base market of 175 countries that serves the purpose of meeting consumer needs. Kimberly Clark products are designed or manufactured to meet each category of consumer needs that the company strives to address, which include adult care, baby care, family care, and feminine care. The company vision is to lead the world in essentials for a better life. The Vision of the company is made clearer by day through well-executed goals and objectives, such as the sustainable development goals of the year 2022.
The ability of the company to be the lead in providing personal care, however, faces a strict competition. With a number of key players in the Household and Personal Product industry, the CEO and the management of the company ought to make effective competitive strategies just to ensure their vision in course of time becomes a reality. Currently, the corporation takes pride to be amongst the leading players but however faces strict competition from multinational corporations such as Procter & Gamble, Colgate Palmolive, Unilever, and Clorox. As of 2018 financial reports, Kimberly Clark achieved a revenue sum of $18. 5 billion compared to $66.8billion and $15.5 billion for Procter & Gamble and Colgate Palmolive respectively (Kimberly-Clark Competitors, n.d.). Arguably, Procter & Gamble leads in revenue that further illustrates the company position relevant to the market. Gross profit of Kimberly Clark in the financial year 2018 is $5.6billion compared to $9.9bilion of Procter and Gamble and $9.2 billion for Colgate Palmolive. Kimberly Clark is thus doing fairly well in the current market position but cannot be termed as the leading corporation. However, Kimberly Clark is ahead of other companies such as Clorox and Edge well Personal Care. The total number of employees in Kimberly Clark is approximated to be 42,000 compared to 92,000 Proctor &Gamble and 35900 for Colgate Palmolive (Kimberly-Clark Competitors, n.d.). Thus the company is slightly smaller in comparison of major of its key competitors.
The blue-chip corporation has four main divisions that include Consumer Tissue, Personal Care, K-C Professional, and Health Care. Personal Care makes the most of Kimberly Clark operating division, accounting for a percentage of 42.12% share of the company total revenue. The Consumer Tissues with well-acknowledged brands such as Huggies and Kotex contributes to shared revenue of 31.4% and is considered the second largest. Health Care and K-C Professional only account for 7.7% and 15.7% respectively of the total share revenue (Trefis, 2014). All these major divisions operate in both foreign and domestic market of the company across the 175 countries. Furthermore, K-C Professional makes most of the profit with a percentage of 16.6% relative to its operational cost. Personal Care Unit has a 16.2% of profit margin and ranks second in profitability ratio to the company. Operating profit margins of Health Care and Consumer Tissue are 12.9% and 13.5% respectively.
The company invests in current assets, property, plant and equipment, and non-current assets. Current assets are easily converted into cash or appear in the form of cash, while property and plant equipment appear in the form of machinery that produces goods and services. Non-current assets are expected to be converted into cash in a period exceeding one year. Kimberly has experienced an increase in current assets from the year 2016 to 2017 but a significant decrease in the year 2017 to 2018. The same effect is on property, plant and equipment as the value of these assets increased from 2016 to 2017 but decreased in the year 2017 to 2018 (Kimberly Clark Corp, 2018). Liabilities of the company, on the other hand, are presented by current and non-current liabilities. Current liabilities, on the other hand, are expected to be settled within a years' time, Kimberly Clark has experienced a gradual increase in the liabilities from the year 2016, 2017 to 2018. Non-current liabilities, however, exhibit a decline from the year 2016 to 2017, 2017 to 2018. The company uses the straight-line method, by stating the initial value of property, plant, and equipment and estimated the cost of depreciation in the course of 40 years. Plant and machinery estimated usefulness is measured from 16 to 20 years, while computer software relevance to its tasks is measured in a period not exceeding 5 years using the straight-line method (Kimberly Clark Corp, 2018). To ensure that plant and machinery are fully fit for use, it is vital for the company to initiate a periodic review and warrant changes if need be. Being a multinational corporation, Kimberly Clark uses a lot of inventories, thus to ensure management of the company achieve operational effectiveness, the corporate giant deploys both First in First Out (FIFO) and Last in First Out (LIFO) on valuing inventory at the lower cost. In the financial year 2017 to 2018, Kimberly Clark inventories increased in comparison to financial year 2016/2017 after LIFO reserves were expected to be consumed or sold within a period of one year (Kimberly Clark Corp, 2018).
Liquidity ratio is an important managerial tool that assesses the ability of a firm to meet its short term obligations. Kimberly Clark liquidity ratio illustrates a significant deterioration in all of its indicators that include cash ratio, quick ratio, and current ratio. All the named indicator exhibit a significant fall in the year 2018 as compared to the year 2017. Hence management should consider the options to invest more on assets and limit liabilities in any way possible. As at the 2017 financial reports, the company investment strategies aimed at improving the capital and asset base of the corporation. Amongst the strategies includes clearing short term liabilities, plan funded status and increase the base of equity and fixed income investments. The cash flow statements exhibit a trend of fluctuation in the stream of revenue from the company. As of 2017, the company realized a cash flow income approximated to be $2.32 billion and significantly fell to $1.45 in the next financial year. The significant fall in the cash flow income raises a red flag, as such fall has not been witnessed in the last five years. Trends in the last five years show in 2015, the least income cash flow was 1.05 billion realized in that specific year. Net cash used to fund operating expenditures has exhibited a significant rise from $2.97 billion to 2.93 billion. The company ought to be more vigilant in financing asset operations such as fixed-income investments, equity investments and plant and machinery to ensure more funds are availed in production, sales, and marketing opportunities.
Trends of annual income cash flow are quite different relative to its competitors as they have even better results compared to Kimberly Clark. As earlier noted in the report, Proctor and Gamble realized an overall gross profit of $9.9billion compared to Kimberly Clark with $5.6 billion gross profit in 2018. However, keeping pace with competitors might not be the only problem. The company has a long history of relying heavily on debt financing as opposed to equity investment. The normal or accepted debt to equity ratio of a financially healthy business is expected not to exceed 40%. As of 2018, the debt to equity ratio of Kimberly clerk was 51.84%, a percentage very high that raises red flags. Thus, the company heavily relies on debt to finance its operations that is more than its net worth. To avoid liquidation, insolvency or bankruptcy of the company in the near future, the company should be looking for alternative sources of financing such as reinvesting profits instead of distribution, put more additional shares in the market for acquisitions or source strategic partners.
Recommendations and Insights
The company is doing fairly well and has the capacity to do even better. I recommend that the management of the company be more vigilant in assisting other division units to even perform better such Health Care and Consumer Tissue. The strategy will be more effective by channeling profits realized by other division to sustain and grow the other business units. The debt financing of the company is alarming, thus alternative sources of finance such as strategic partnerships, mergers and acquisitions prospects and reinvesting profits.
Kimberly-Clark Competitors. (n.d.). Retrieved from Craft: https://craft.co/kimberley-clark/competitors
Kimberly Clark Corp. (2018, 2 8). Retrieved from Stock Analysis On Net: https://www.stock-analysis-on.net/NYSE/Company/Kimberly-Clark-Corp/Financial-Statement/Liabilities-and-Stockholders-Equity
Trefis. (2014, September 17). A Look At Kimberly-Clark's Health Care Business. Retrieved from Forbes: https://www.forbes.com/sites/greatspeculations/2014/09/17/a-look-at-kimberly-clarks-health-care-business/
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