Kimberly-Clark Corp said higher pulp costs and increased marketing spending to promote new products will weigh on profit this year as it posted lower first-quarter earnings.
The company, known for Kleenex tissues and Huggies diapers, said this year's profit is more likely to come in toward the low end of its forecast that it reconfirmed just a month ago. Some analysts had already said that Kimberly-Clark's outlook for a profit of $4.80 to $5 per share were too high.
As expected, the company is seeing much higher costs for pulp and other materials than it had previously anticipated.
First-quarter profit fell to $384 million, or 92 cents per share, from $407 million, or 98 cents per share.
Excluding a currency-related charge, the company earned $1.14 per share versus analysts' average forecast of $1.16 per share.
Sales rose 7.6 percent to $4.84 billion, but much of that lift came from foreign currency exchange rates. The volume of goods sold rose just 1 percent.
Analysts, on average, expected Kimberly-Clark to post $4.9 billion in revenue, according to Thomson Reuters I/B/E/S.
In the North American consumer business, the volume of Kleenex tissues sold fell 3 percent, due in part to a mild cold and flu season, while paper towel sales continued to be hit by consumers opting for cheaper goods.
Businesses that performed well included international operations and the health care division, where demands increased for face masks due to the H1N1 flu virus.
The company, which competes against powerhouse Procter & Gamble Co in categories such as diapers, tissues and tampons, must prove it can sell higher-end products while it faces pressure from branded rivals and a variety of heavily-marketed store-branded goods.
P&G and other major household products makers are also ramping up their marketing behind a bevy of new goods this year, hoping to gain the attention of shoppers who have started to spend again. Kimberly-Clark is spending more to market products such as U by Kotex tampons and Kleenex hand towels.
For 2010, Kimberly-Clark expects sales to rise 4 percent to 6 percent, instead of 5 percent to 6 percent, as it sees a lower benefit from currency exchange rates than it had expected.
On a more positive note, it expects higher prices and a better mix of products to add 1 point to sales growth after predicting those factors would not be beneficial.
Kimberly-Clark previously expected to pay $300 million to $400 million more for pulp, oil-based materials and other raw materials this year and now sees such costs up $600 million to $700 million. Most of the increase stems from pricier pulp.
(Reporting by Jessica Wohl; Editing by Derek Caney)