KMB
#We don't measure that on a quarterly basis.
We would have said last year the global growth rate was somewhere in the 3% to 4% range.
We haven't redone the math for this year, but I would say it is going to at the low end or even slightly lower than the low end if I would have to guess.
Just when you see places like Argentina where we were tracking mid-single negative category growth through the first half of the year and saw kind of double-digit category dips in the third quarter.
That and ---+ or Brazil would be the other big market that is kind of mid-single-digit negative category growth comps.
Those are the things that would be a bigger drag on that standpoint.
That and the pricing environment in China is probably the only one that is a big shift this year relative to what it would have been doing last year.
And so, we will take another look at it going into 2017.
But I would guess it is certainly lower than the 3% to 4% we had estimated last year.
Yes, again, you are right.
We will give you a more complete look in January.
And I would say for us it tends to start with our outlook on category growth and some of that is driven by what is going on economically.
So every economic forecast it seems like that we look at lately has a lower GDP growth number than the one before it.
So we are not expecting a snapback from category growth.
In terms of ---+ as we tend to look at the combination of input price, currency and commodity costs, that probably still net feels like a drag year on year going into 2017.
On the other hand, we have also seen lots of big swings between now and the end of the year.
And so, we have a number of other events happening between the presidential election and two more Fed meetings.
So we will see where we are at on that calculus a couple of months from now.
Yes, sure.
That is an important market.
So I would say if there was all of the above on your ---+ as an option for your answer I would probably ---+ it is probably a little bit of all of those things.
But let me go category by category.
So fem care for us doing really well, I think we are up 3 share points year to date.
Category leadership, have launched a bunch of innovation.
And I would say that business looks pretty solid overall.
Diapers has been more competitive, the category has been weaker.
There has been some trade down in the category as well and you have seen more Tier 2 growth.
It has been more competitive.
And so from a pricing standpoint, promotions standpoint, there has been more activity on that front as well.
And I think within that you have seen some ---+ either it is household inventory destocking or it is moms who were using four or five diapers a day now using three or four diapers a day.
And so, you take one diaper a day out of the equation and that is a double-digit category decline for that consumer.
And so, I think it takes a little while to get household panel data to really understand what is driving that.
But it has gone on for long enough now, it is probably more than just inventory destocking where you are actually seeing the middle class in some cases in Brazil are getting poorer and having to make tough tradeoffs.
You can certainly see the same kind of phenomena in Argentina as well as they are moving to more of a market-based economy.
In some areas that is putting big pressure on consumer wallet.
So while we are still well-positioned and bullish long-term on Brazil, it has been a tough economic environment.
You've had a recession for the second year in a row.
Their overall outlook is not that optimistic and the economy is running expectations.
And until people start to believe it is going to get better it is not going to snap back, probably.
In Brazil we have a very strong Tier 2 business.
So we actually are continuing to drive that and are benefiting in that area.
But now that the whole category is down it has been ---+ there hasn't been enough to stimulate the consumer to use more at this point, anyway.
No, I think year to date we are almost right on.
As a percent of sales it is 3.8% or 3.9%, something like that.
So very little movement.
And I think the thing that you don't see is that we are probably doing more digital couponing, which shows up as a reduction of net sales which can factor into our price column of our analysis of change in sales.
But there has been more competitive couponing activity as well.
Yes, I mean the volume growth for us was very strong, particularly in newborn, and we are expecting and seeing a stronger birthrate in China that was backend loaded this year.
And it is really across all classes of trade.
We tend to look at modern retail, baby superstores and then e-commerce as sites that we have data insight into.
And we are doing well and growing strong double-digits in all of those categories.
In terms of the pricing, I think again that is the place where it is one of the fastest growing markets in the world.
And you are seeing lots of competitors chasing it.
So the two Japanese competitors as well as P&G are all very aggressive and it is probably one of those things, <UNK>, where everyone thinks the other guy started the price war but we are all trying to drive our business in that market.
And our shares are pretty stable overall and we have got good innovation in the market and more coming.
And so we feel pretty good about our position in that market.
No, I mean it is a pretty similar product lineup.
You may have different pack counts or pack sizes by channel.
And for us, as we said, newborn has been a strong driver this year.
But our premium lineup is continuing to do well and China overall Tier 5 which we would call it, but our top of the line Huggies products are doing well in China.
I don't think it is going to get any easier anytime soon, because China is one of the best growth opportunities available in the world right now.
And I think it is going to be the biggest consumer market at some point in time in just about every category.
And everyone is trying to build a position there and we are certainly among them.
Yes, that is fair, <UNK>.
So if I were to give it to you regionally, I would say in Latin America it is probably more category decline than competitive activity.
Although when a category is declining you do still have more competitive activity as everyone is trying to hang onto their share of the business.
In China it is more competitive activity.
The categories are fine; the birth rate is fine in China.
You are seeing good underlying category growth on a unit volume standpoint.
In North America honestly on a year-to-date basis we are fine.
We had a tougher third quarter; we had tougher comps for sure in a lot of areas because of some of the launch activity last year.
But if I looked at Consumer Tissue in North America, which had a negative comp it had more to do with we had a little heavier promotional schedule in the second quarter, we had great volume growth than we did in the third quarter where we went backwards.
We are expecting to finish with a strong fourth quarter and that business is on track from a share perspective.
Europe, Eastern Europe, I would say Western Europe, the UK was pretty weak overall economically.
Some of their reaction to the Brexit vote ---+ you had a lot of people who didn't want to hold inventory for a while, we had fairly weak growth in both the consumer and the KCP side.
Eastern Europe is essentially fine.
It is competitive, about like normal, categories are performing reasonably well.
So, it is more of a region-by-region assessment.
You do have some of both factors in both places.
But I don't know if that helps you understand it better, but that is probably how I would break it down for you.
Well, we will find out I guess this week.
But that would be my assessment.
I mean, I think, <UNK>, I would just adds it's probably better to look at results through nine months.
As <UNK> said, there was a lot of noise in the third quarter.
And I think if you look at through nine months that is probably a better reflection of how we are doing.
I would agree with the statement that it is not going to get better quickly.
I don't expect a snap back here.
On the other hand, there are some green shoots in some places.
I am encouraged by the volume growth in China, the birth rate in China; we have got lots of good innovation coming in lots of places.
I look at our fem care business for example where we have seen share growth in the vast majority of the categories that we compete in around the world and the consumer is still responding to innovation.
We have still got good growth opportunities for adult care overall and it is a little bit more competitive in North America, but we have seen good growth outside North America.
And so, while there is ---+ maybe we are going to a tougher economic period of time, I do think in the long term there is still lots of room for category penetration here.
I mean it is one that ---+ again, we didn't give you guys quarterly guidance, but it was one that we expected to do a little bit better in the third quarter than we did.
Some of it was our primary competitor in North America probably did a better job of executing against the Olympics promotions.
And while we had activity, it didn't compare at the same level.
And so will have a little stronger program in the fourth quarter.
On the other hand we did have a very strong second quarter and last year our comps were tougher.
So it made it look worse then maybe it would.
If you looked at it on a year-to-date basis it looks fairly similar.
I mean overall it is up double-digits in the quarter across Russia, Ukraine, CIS, which should be what we would all bucket into those categories.
And I would say Russia and CIS are probably performing the best.
Ukraine is maybe less negative than it was in the past, but that is still an economy that is under quite a bit of stress with everything else that is going on in that market.
But overall I would say our Russian business is on track for the year with our expectations.
Yeah, I mean, it is one that ---+ I think to hit our revised full-year guidance we only need, <UNK>, what ---+ about a point of growth in the fourth quarter ---+
Yes.
---+ versus zero in the third quarter.
So it is not a huge uptick to be able to round to 2% growth for the year.
So it is one that ---+ again I think that is doable across a number of places.
But overall I would expect the ones that were off the most in the third quarter will have the biggest opportunity to close the gap.
We typically look at dollar share.
We look at both, but the one that we probably focus more on is dollar share.
So when you hear us talk about it externally it is typically dollar share.
Yes, I would expect that the sequential improvement will be mostly volume-based.
Particularly in North America I don't expect to see any big pricing improvements.
There is no major price increases that are happening in any of the categories.
Yes, we had commented on that a little earlier.
Typically our long-term outlook has had the categories growing 3% to 4%.
And we haven't re-measured that for what we think actually happened in 2016 or what we think might happen in 2017.
And we will give you another look at that when you give you guidance in January.
My guess is that it had slowed down just because of the category declines that we have seen in Latin America as well as the pricing activity that we have seen in China, those two together would probably ---+ those are all large markets and would definitely bring down the category growth rates a bit.
Sure.
We did have really strong cash flow in the quarter, as you saw, and we had really good performance in working capital, particularly in reducing inventories, and that came through to help our cash flow numbers.
In terms of CapEx, we do expect that we will be below our original guidance that we gave coming into the year.
But that is driven by a couple of things.
First, we have had really strong productivity this year and you see that showing up in our FORCE cost savings as one of the levers that we used to drive that.
And we also do have slower volume in sales growth than we expected coming into the year.
And so, we are very rigorous on what we spend capital on and making sure that we are matching up the timing of when we are putting assets in the ground with our expectations.
And with slower volume growth this year our capital is lower than we expected.
This is an area that we continue to drive.
You know that we set up a global supply chain organization last year.
And that organization partnering with the finance organization and the operating teams are continuing to drive added rigor into our capital process.
And so, we are not changing our long-term expectation there, but we are incredibly rigorous on that and we will flex the CapEx spend with the needs of the business.
I wouldn't take it as a signal for anything else other than just where we are as a Company this year.
Yes, those are good questions.
And so, I mean if we look at China today the birthrate is definitely helping.
And we expect more live births this year and it could be as much as 7% more live births in 2016 than there was in 2015.
You are still seeing GDP per capita go up in China, so more consumers have more money to spend in categories like ours which helps.
We are continuing to drive our city expansion, so we are in now 130 cities where we started the year at 115.
So we have got more geography to cover as well which is fueling our growth.
And we continue to launch innovation.
And so we have been driving some improved newborn products and that has really helped drive a lot of our near-term volume growth.
But we've also ---+ we are also driving diaper pants hard across a number of tiers, both mainline and premium tiers.
And so, I think there is ---+ a combination of those factors has really helped our volume growth this year.
China tends to skew a bit premium.
The golden baby phenomenon is alive and well in China.
And Chinese moms and dads invest a lot in their child ---+ and hopefully children as they go to more than a one child policy.
And we tend to see the best for baby is a strong pull for our business in China.
Yes, Brazil you are seeing a bit more trade down, more growth in the lower tier products there still as a segment of the consumer that has money to spend and will pay more for best for baby.
So you have got to balance your innovation across those tiers.
But you are seeing more emphasis on the value equation in markets like Brazil and Argentina.
Okay, on China pricing and ---+ broadly I would say the market got a little bit more competitive in Q3 than Q2.
And so again, you saw lots of innovation, lots of good global competitors trying to drive their business and the Chinese consumer is the beneficiary of that for sure.
I wouldn't say we have seen any significant destocking impacts in any of our businesses.
I mean we have a pretty big e-com presence in China and that business tends to be relative ---+ for us at least relatively efficient, low inventory and it flows pretty directly to the consumer.
So again, China a good growing competitive market, we are competing well and we feel pretty good about our position there.
On the tissue comps, I mean again it was a ---+ we had a weaker promotional calendar in the third quarter as it turned out than we needed and we expect to have a stronger quarter going into the fourth quarter.
Fourth-quarter is also typically a little bit better facial tissue quarter, so we will see how cold and flu shapes up.
And on the pulp question, at the levels of pulp change that we are seeing I wouldn't expect that to have much impact on pricing.
Okay, you have got a pretty eclectic list there, <UNK>.
Yes.
On the tissue growth, and some of it is timing of promotions and when they ship.
I think overall we had a pretty good promotional calendar.
On the other hand we probably underestimated the impact of front of ad circular Olympic stuff and how much lift that would provide to a primary competitor.
So in some cases we had the promotion we just didn't get as much out of it as we thought we were going to get.
And that obviously has lapped and we will expect a little stronger performance going into the fourth quarter.
And so we feel pretty good about the lineup we have got.
And again, year to date we feel like the tissue business in North America is at or ahead of its plan.
So we are comfortable with what we are doing on that front.
The fourth-quarter comps, I essentially would say that to get to the low end of our guidance we only need to deliver one.
And so to put that in perspective, I wouldn't say I was predicting that and we will see what it looks like when we post it in January.
As you guys know, I would rather give you guys annual guidance anyway.
And this is the one quarter of the year where I have to give you quarterly guidance, otherwise I would just rather talk about where we are going from an annual plan and not manage the business quarter to quarter.
SG&A growth, we are ---+ maybe, <UNK>, you want to comment on that.
Because we are really trying to make sure we are focused on controlling that element of our P&L that we can control.
Sure.
We also have some currency effects when you look on the face of the P&L and SG&A.
If you unpack that and look locally, we actually have SG&A increases in some places, particularly in Personal Care where we continue to invest in our capabilities and building that business out in developing and emerging markets.
We also operate in some high inflationary environments.
And so again, when you strip the currency, we have increasing SG&A in some places because of inflation.
But we balance it out, we continually look at our SG&A spend to make sure that we are directing as much of it toward growth oriented initiatives.
And then have extreme rigor on the more discretionary non-growth oriented core SG&A spend.
All right, well, we appreciate all the questions everyone and we will wrap up with a comment from <UNK>.
Well once again thank you all for spending some time with us this morning.
We hope to deliver a little stronger performance in the fourth quarter and thank you again for your support of Kimberly-Clark.
Thank you very much.
