Kimberly-Clark Corporation (KMB) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Kimberly-Clark Corporation. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Mike Hsu, Chairman and CEO of Kimberly-Clark. Mr. Hsu, the floor is yours.

Okay. Thank you. Good morning, everyone, and welcome to Kimberly-Clark's annual meeting. This meeting is now called to order. We hope all of our stakeholders are staying healthy and safe during the ongoing pandemic. I'd now like to introduce Jeff Melucci, our Chief Legal Officer, who will serve as the secretary for today's meeting. Jeff?

Thanks, Mike. Good morning, everyone. It's great to be with you today, and welcome to our annual meeting. I'll start by going over a few housekeeping matters, and then we'll turn it back to Mike for an update on our business performance. We welcome you today on a virtual-only meeting that's a live webcast, and we do have a meeting portal. You'll find our agenda there and our rules of conduct. The portal also has some links to our annual report and our proxy materials for this meeting. I'm happy to welcome a representative from our inspector of election in attendance, and they've confirmed that a quorum is present. So what that means, if you have not voted or wish to change your vote, you can do so during the meeting by clicking the link provided online. Any stockholder who has already voted and doesn't want to change his or her vote need not take any further action at this time. And we're going to accept votes until the polls close later in the meeting. [Operator Instructions] And we will respond to questions later in the meeting following Mike's business presentation. Finally, Mike's business presentation today will include forward-looking statements, and we will discuss certain financial measures that have not been calculated in accordance with generally accepted accounting principles. Please see the meeting rules of conduct for more information on these matters. So now for the presentation of proposals. We have 7 proposals for this meeting: one, the election of 11 directors; two, the ratification of our independent auditors; three, approval of the compensation of our named executive officers; four, approval of the 2021 Equity Participation Plan; five, approval of the 2021 Outside Director Compensation plan; six, approval of a charter amendment, reducing the ownership threshold to call a special meeting of stockholders; and seven, a stockholder proposal regarding the right to act by written consent. Each of these proposals is described in our 2021 proxy statement. I'll now ask for a motion that the 7 proposals listed on the agenda be approved.

So moved.

Thanks, Mike. I second the motion. So we'll now go ahead and open the polls. If you wish to vote at this meeting, you may do so by clicking the link provided online, and the polls are now open. [Voting]

So next, for the introduction of directors, I'm happy to welcome and introduce our director nominees who are all in attendance on today's call. That includes John Culver; Robert Decherd; our Chairman, Mike Hsu; Mae Jemison; Todd Maclin; Sheri McCoy; Christa Quarles; Ian Read; Dunia Shive; Mark Smucker; and our Lead Director, Mike White. I also want to take a moment to acknowledge Al Bru. Al is retiring from the Board at the conclusion of this meeting, and Al has given a number of years of great service to the Board and the company. He has made many significant and long-lasting contributions to the company. And so Al, congratulations. Thank you for all that you've done for Kimberly-Clark, and we wish you all the very, very best. In addition to the directors joining this meeting are representatives of Deloitte & Touche, our independent auditors. And I'd like to welcome Bill McFarland, who's the partner in charge of our 2021 audit and who's in attendance. Welcome, Bill. And now for the presentation of our stockholder proposal, the proponent of proposal 7 is Mr. James McRitchie. He's acting on behalf of Myra Young, who owns 50 shares of the company's common stock. We have made it possible for Mr. McRitchie to join this call and provide a statement. That's an optional thing. Mr. McRitchie, have you joined? Okay. We've included Mr. McRitchie's proposal in our proxy statement. The company's response to Mr. McRitchie's proposal can be found on Page 107 of the same proxy for this meeting. Now we'll close the polls and provide voting results. The polls are now officially closed, and based on the preliminary results, the inspectors are now advising me of the following: First, all 11 director nominees have been elected to the Board. Our stockholders have approved the proposals to ratify our independent auditors, approved our executive compensation, approved the 2021 Equity Participation Plan, approved the 2021 Outside Director Compensation Plan, and approved the charter amendment reducing the ownership threshold to call a special meeting of stockholders. In addition, the stockholders did not approve the proposal regarding the right to act by written consent. Now we do plan to announce these final results in a Form 8-K filing with the SEC within 4 business days. And so Mike, with that, I'm happy to turn it back to you for a brief business update. Mike, you may be on mute.

Sorry. I gave you my best speech right there. Thanks, Jeff. With the polls closed, I want to provide an update on our recent performance and our strategic priorities. First of all, let me talk about dividends, which are an important part of our overall investor story, and we have a long-standing commitment to return cash to shareholders. We paid dividend 87 years in a row and have increased the dividend for 49 consecutive years, including a 6.5% increase announced for this year. In the last 10 years, we've increased our dividend per share on average by about 5%, and over that decade, we paid out more than $23 billion in cash to shareholders between dividends and share repurchases. We introduced our strategy, K-C Strategy 2022, 2 years ago. This plan is about driving balanced and sustainable growth and creating shareholder value through the 3 pillars that you see here: driving top line growth, leveraging our cost and financial discipline, and allocating capital in value-creating ways. We're making excellent progress with this plan, and it's delivering strong results. And underpinning our strategy is the incredible talent in K-C that executes our strategy, supports our passion for continual innovation and our drive to meet the unmet needs of our consumers and our customers. We have experienced -- we have an experienced and refreshed senior team that brings a wealth of industry experience from their time at Kimberly-Clark and other leading consumer products companies. This team is driving a winning culture that values performance, speed and accountability. Let me talk a little bit more about our first pillar, which is all about growth. When I initially joined Kimberly-Clark, I did see a long runway of growth potential in our categories, and I see that even more clearly today. And since I became CEO, we've been very focused on building sustained top line growth, and that's my #1 priority. Our 2 growth strategies are to elevate our categories and to expand our markets. Elevating our category means driving premiumization, especially through innovation, that delivers enhanced consumer benefits. Expanding our markets is a focus on accelerating development and growth in developing and emerging markets. Our primary focus in D&E markets is in personal care, where there is tremendous potential to increase category penetration. Now to enable these growth strategies, we are investing behind our brands. We're strengthening our commercial capabilities in innovation, digital, revenue management and sales execution, and we're leveraging our global scale. While we have more work to do, I'm pleased with our progress so far. Our top line is improving. And in 2020, we grew market share overall. I also want to take a moment to talk about purpose and, more specifically, how Kimberly-Clark is growing for good. Our purpose is grounded in our values and behaviors and drives both our social and environmental commitments and our focus on creating innovative products that are a win for Kimberly-Clark, a win for consumers and a win for the planet. I'm also proud to advise you that we continue to receive strong recognition for our stewardship of your company. Here's a list of some recent recognition, which includes Forbes' Best Employers for Diversity; Ethisphere's World's Most Ethical Companies; Working Mother's Top Companies for Executive Women; Barron's 100 Most Sustainable Companies for 2021; and one of Fortune's Most Admired Companies. We really value being recognized for creating a diverse and inclusive workplace at Kimberly-Clark. So I'll close our presentation with 3 points. We're on track with K-C Strategy 2022. We're improving our top line and strengthening our brands, market positions and our company for the long term. And finally, we're confident in our ability to deliver balanced and sustainable growth and create shareholder value. So with that, now we'll consider some questions or comments that you may have about Kimberly-Clark. Jeff, do we have any questions that came in?

Mike, we have 2 questions from shareholders. And the first is from [ Frank Prestissimo ], and he asked the following. How does this year and next look with rising production costs? Will these costs be passed on to consumers?

Yes. Great question. And the basic answer is we have been challenged with significant rising commodity costs, in fact, at very, very significant levels. The company has taken decisive action and has announced price increases broadly around the world in many markets. And so we are increasing our pricing -- prices, and we'll recover a significant portion of those increased commodity costs or offset those costs this year.

Great. Thanks. The next, from [ Edward Fulmer ], what is the Board's plan to grow K-C's stock over the next year? I depend on its growth. The Board needs to remember their utmost responsibility is to the stockholder and to the company, not the pandemic. Why should I vote for you that have let the K-C stock fall so much?

Yes. We are very committed to our shareholders and creating shareholder value. Our revised outlook this year reflects the significant change that's occurred in environment, including the commodities that we just talked about. We are taking decisive action, and we remain confident in our high-road approach to growing our brands, and that includes the fundamentals, increasing our top line growth and delivering mid-single-digit bottom line growth over our medium-term plan.

Thanks, Mike. That's all the questions we have from our shareholders.

Okay. Thank you, Jeff. And to all our shareholders, I want to thank you for dialing in today. We thank you for your continued support, and this meeting is now adjourned.

This concludes the meeting. You may now disconnect.