K-C to Exit Integrated Pulping Operations

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Kimberly-Clark Corp., Dallas, Texas, USA, plans to restructure its pulping and tissue making businesses, which will involve exiting its integrated pulp manufacturing operations. As part of this effort, K-C will streamline, sale, or close five to six manufacturing facilities around the world.

Basically, the company said that it plans to get out of the business of making the pulp used in its paper products, as it copes with rising costs for oil, fiber, and other commodities. The restructuring is expected to be completed by the end of 2012. K-C said that exiting pulp manufacturing should improve its profitability and return on invested capital of its consumer tissue and K-C Professional units.

Facilities to be streamlined, sold, or closed include the company’s pulp and tissue plant in Everett, Wash., and its two Australian facilities that make pulp and tissue. It will also move some production to lower-cost locations. K-C did not indicate how many jobs might be lost in the overhaul.

The total cost of the restructuring is expected to be $280 to $420 million after tax ($400 to $600 million pre-tax). Cash costs are projected to be 25% to 50% of the total charges. As a result of the restructuring, the company expects that by 2013 annual net sales will decrease by $250 to $300 million and operating profit will increase by at least $75 million.

Most of the restructuring will impact the consumer tissue business segment. At this point in time, K-C expects that $195 to $265 million of the after tax charges ($280 to $380 million pre-tax) will occur in 2011, while benefits from the restructuring in 2011 are expected to be immaterial. In 2011 and 2012 the company will report adjusted results, which will exclude the costs of the restructuring. The company will report on the progress of the restructuring on a quarterly basis or when material developments occur.