Kimberly Clark : KMB 1Q 2026 Pre-Recorded Management Discussion
KMB
Published on 04/28/2026 at 06:56 am EDT
First Quarter 2026 Earnings Pre-Recorded Management Discussion April 28, 2026
Please view these remarks in conjunction with our Q1 2026 earnings release, which is furnished on Form 8-K, and additional information regarding our non-GAAP financial measures, including GAAP to non-GAAP reconciliations, available on our website investor.kimberly-clark.com under SEC Filings, or via the following link: https://www.investor.kimberly-clark.com,sec-filings
We also invite you to listen to our live question-and-answer webcast with Kimberly-Clark management which will begin at 8:00 a.m. Eastern Daylight Time on April 28 and will also be available on investor.kimberly-clark.com under Events & Presentations.
Q1 2026 Earnings Pre-Recorded Management Discussion Slide 1 | Cover Page
CHRIS JAKUBIK, HEAD OF INVESTOR RELATIONS, KIMBERLY-CLARK CORPORATION
Hello. This is Chris Jakubik, Head of Investor Relations at Kimberly-Clark. Welcome to our first-quarter 2026 business update.
Today, our Chairman and CEO Mike Hsu will provide an update on our overall business performance. Russ Torres, our Chief Operating Officer, will provide an overview of segment results and key market highlights. And Nelson Urdaneta, our Chief Financial Officer, will review our first quarter consolidated results and update our full year outlook.
We have also scheduled a separate live question-and-answer session with analysts.
You can access our earnings release, supplemental materials, and audio of our Q&A session at investor.kimberly-clark.com. A replay of the Q&A session will be available following the event through the same website.
During our review, we will make some forward-looking statements that are based on how we see things today.
Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC.
We will discuss some non-GAAP financial measures during these remarks. These non-GAAP financial measures should not be considered a replacement for and should be read together with the GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com.
With that, I will turn it over to Mike.
MIKE HSU, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, KIMBERLY-CLARK CORPORATION
Thank you Chris, and thanks to everyone for joining us today.
I'd like to begin by recognizing the excellent execution and agility of Kimberly-Clark teams around the world. Since our last update in January, our teams continue to exhibit strong leadership, helping our company navigate a rapidly shifting external environment. Our people are the power behind our Powering Care growth engine. They fuel our resilience, enabling Kimberly-Clark to win with consumers around the world.
We continue to perform while transforming, and advance our ability to capture a generational opportunity, to reimagine care and create lasting value for shareholders.
In the first quarter, we continued to strengthen momentum in our base business, across key focus areas of baby care, women's health, and active aging. Our fast-and-lean operating model is helping us effectively navigate new challenges. These include new geopolitical and macroeconomic challenges, as well as a fire that engulfed a West Coast distribution center in Ontario California, operated by a third-party logistics partner.
We have robust mitigation plans in place, and expect our base business will continue to grow, supported by the strongest slate of commercial activation, in our recent history.
Through our pending acquisition of Kenvue, we're making tangible progress toward the creation of a global health and wellness leader. Integration planning is progressing well, and we look forward to seamlessly plugging Kenvue brands and businesses, into our proven, durable operating model. Together, we will unlock a new phase of growth, and establish a strong foundation for a new kind of health and wellness leader.
In Q1, we delivered another strong quarter on the top and bottom lines. Despite turbulence around the world, we remained disciplined and focused on executing Powering Care. We're consistently delivering volume-plus-mix growth and strengthening market positions through our innovation-led approach, amplified by emotionally resonant advertising, and superior commercial activation.
We're also off to a strong start, and positioned well, to deliver another year of industry-leading productivity gains. Our focus is managing input cost volatility and building competitive advantage. We're doing this by delivering the best products at the lowest cost, across all price-value tiers, and in every category and market where we compete.
We're advancing our culture of cost discipline on all fronts. Adjusted RSG&A leverage, as a percent of net sales, improved by 90 basis points versus the prior year. We're doing more with less. We're effectively navigating new headwinds, and we're building a better future, to enable durable, profitable growth for the long-term.
We're proud of our ability to build and sustain volume-plus-mix momentum. We've delivered two consecutive years of broad-based volume-plus-mix growth.
In the first quarter, our volume-plus-mix growth increased to 3%. That was a step up from last year, and in-line with the fourth quarter last year. This is being driven by strong, broad-based market share gains, which Russ will detail shortly.
Powering Care is powering transformation throughout Kimberly-Clark, with tangible impacts on our growth, profitability, speed, and agility. We've rewired our organization to deliver more impactful innovation, build brand love, and improve productivity and efficiency. Our goal is to out-innovate, out-market, and out-activate our competition, while delivering the best product at the lowest cost.
We remain well positioned to invest for impact, and accelerate our Virtuous Cycle of value creation, enabling us to deliver sustainable and profitable growth over time, despite a choppy macro and geopolitical environment.
Over the past two years, about 60% of our total net sales, and more than 75% of our organic growth, have been driven by innovation.
This year, our new product launches will touch 50% more markets than they did just three years ago. 2026 will be among our most active programming years in recent history. Our Q2 launch slate promises to double the net sales contribution we've had versus the quarterly average, since 2022. This will fuel strong organic growth momentum in the second half.
Looking further out, our pipeline of innovation is robust. Our 2026 through 2028 pipeline is 1.6 times the size of our pipeline back in 2020, and we expect it to be margin accretive to our base business.
Our innovation is supported by continued delivery of industry leading productivity. This allows us to reinvest behind growth, and in solving meaningful, unmet consumer needs. This focus underpins our efforts to expand and premiumize categories. We're deploying a disciplined approach, to cascading premium innovations into value-oriented offerings, ensuring we meet consumers across the good better best spectrum.
Regarding productivity, we're off to a strong start. We have good visibility to our pipeline of productivity initiatives for the remainder of the year.
In the first quarter, we delivered gross productivity of 6% of Adjusted Cost of Goods Sold. We're on track for a third consecutive year of industry-leading gross productivity of approximately 6%.
Our focus on three enterprise supply chain strategies, Value Stream Simplification, Network Optimization, and Scalable Automation, is fueling these gains.
For example, at our Baby & Child Care plant in Nanjing, China, we're implementing a fully automated workflow, from material handling to finished goods. This is reducing labor intensity, cost, and waste, as we automate processes like adhesive application and carton loading. It's a great example of how we're leveraging technology to enhance operational performance, and drive to best product at the lowest cost.
Through our pending acquisition of Kenvue, we have a generational opportunity to provide extraordinary everyday care, to billions of consumers around the world. Upon close, we will be uniquely positioned to tap into favorable growth and penetration opportunities, in baby care, women's health, and active aging. We'll have leadership positions in many of the industry's largest categories, with further exposure to favorable demographic and usage trends.
Russ will discuss our progress on integration planning, as we prepare to plug Kenvue into Kimberly-Clark's proven and repeatable growth engine. Now, I'll highlight a few milestones we've recently met, as we work toward our shared future.
Earlier this month, we named the Post-Close Leadership for the future combined company. The team brings an exceptional blend of market experience, functional capability, and technical expertise, to unlock the potential of our combined portfolio, iconic brands, and talented people.
With regard to organizational design, we've taken a "best of both" approach, to enhance operating momentum while retaining institutional knowledge critical to both companies. In North America and Asia Pacific Focus Markets, we'll continue to leverage the strong talent that has driven Kimberly-Clark's strong volume-plus-mix and share performance. We're also tapping into experienced Kenvue leaders, including veteran market operators like Carlton Lawson, who will lead our business in EMEA, Andy Dasgupta, who will lead Enterprise Markets, and Leo Curado in Latin America. Combined, our leaders have a strong track record of performance.
We're also deploying our lean, fast, and agile operating model, that has contributed to the strong momentum in Kimberly-Clark's performance. Our focus is on winning locally. Our organization mindset is to bring global might, to enable all our markets to win the "local fight." Our operating model wires our markets and functions together, with a shared mindset of ownership, speed, and competitiveness. Markets own the business end-to-end, and are empowered to be locally agile, while the role of the functions is to bring our best to the markets, fast.
The Kenvue leadership team has made significant moves to enhance their operational performance. This progress is prominent on two fronts.
In February, Kenvue announced a restructuring program which encompasses actions to optimize its operating model. This program aims to enhance operational performance and drive overhead efficiency. Kenvue announced the program is expected to result in a 3.5% net reduction in its global workforce. This streamlined operating model is aligned to our market-centric and balanced matrix approach.
We also believe Kenvue is well positioned to make further commercial and operational improvements this year. Leaders like Carlos De Jesus and Jon Halvorson, who joined Kenvue last year, will take on key roles in the combined company. We're excited about the positive strides they and their teams are making in brand strategy, innovation, advertising, and commercial activation.
Kenvue's recent management actions will strengthen the earnings power we're targeting as a combined company. We remain confident, and well positioned to hit the ground running, and deliver the full potential of this acquisition, including our combined ability to achieve $2.1 billion in total net synergies.
I'll now turn it over to Russ, to discuss our segment results, highlight the onslaught of growth initiatives powering our performance, and update you on our integration plans.
RUSS TORRES, PRESIDENT AND CHIEF OPERATING OFFICER, KIMBERLY-CLARK CORPORATION
Thanks, Mike.
Powering Care is continuing to drive growth and agility across Kimberly-Clark. Our teams around the world are energized by our purpose and running full speed ahead. They are executing our repeatable, proven growth model, which continues to consistently deliver despite the challenging environment. Every day, our people are looking for ways to improve, to get better, to find new ways to win with consumers.
So, I want to take a moment to thank all our employees, including those working on the Kenvue acquisition and the formation of our joint venture with Suzano, for their unwavering commitment to delivering for our consumers and their passion to achieve our goals.
Our North America team is continuing to build momentum by leading the development of our categories.
On the top line, we are on track for our fourth consecutive year of positive volume-plus-mix growth. This reflects strong execution and strengthening fundamentals, driven by continued investment in marketing and innovation, along with focused commercial execution.
In terms of organic growth, volume-plus-mix was up 1.7% for the quarter reflecting both the resilient category demand and the momentum of our innovations and activations. This was led by our personal care categories, where we gained 20 basis points of weighted value share and 60 basis points of volume share.
This progress is grounded in sustainable actions and a strong activation agenda coming together, across categories.
Baby and Child Care drove volume growth of 5%.
Adult Care is driving accelerated category growth through better marketing and retail execution, with high-single digit consumption growth.
Kleenex continued to build on its momentum, supported by strong retailer execution, targeted marketing campaigns, and a pipeline of winning innovation. That resulted in a 180 basis point share gain in Q1.
Our Professional business delivered its sixth consecutive quarter of volume-based growth, with 2.4% organic growth in the quarter.
Category growth rebounded. In Q1, weighted average growth for our categories was 3.3%, a step up from 0.4% in Q4 last year. Q1 organic growth was lower due to the timing of shipments versus consumption in the quarter, but the robust, resilient consumption we're seeing is encouraging.
At operating profit, as anticipated, we saw a year-over-year decline in the first quarter driven by a 490 basis point headwind from the private-label diapers business exit, strong comparisons in the prior period, as well as a step up in investments behind our brands.
Looking forward, we anticipate the fire that destroyed our California distribution center will impact second quarter organic growth by roughly 70 to 80 basis points. Higher energy-related costs will impact operating profit margins by 70 basis points.
However, we are very confident in our mitigation plans and the underlying momentum of our business. We expect to deliver another year of solid volume-plus-mix driven growth at a level that is in line to ahead of our categories. We expect bottom line delivery to improve sequentially, powered by strong contributions from accretive innovation, strong productivity, and cost controls, as the year progresses.
We're very proud of our supply chain teams for their problem-solving agility and commitment to maintaining continuity for our customers and consumers. Regarding the distribution center incident, we are extremely grateful there were no reported injuries. We offer our sincere thanks to the emergency response teams for their bravery and care.
To give a bit more insight into our momentum in North America, I want to share one of the analyses we installed last year to drive disciplined organizational focus on winning in our priority category country cells. This is not only one of the key metrics we use to compensate our local category teams, but it's also a great way to measure the strength of our consumer value propositions and health of our business.
The chart for North America shows the percentage of our sales that are gaining or holding market share among the 18 country-category segments we focus on in North America. We have delivered improvement in market share momentum since 2023. At the end of 2025, 67% of North America net sales within our key cells were gaining or holding share, and this reached 95% in Q1 2026 on a rolling twelve-month basis, both up meaningfully from only 32% in 2023. This reflects sharper execution and improved competitiveness of our value propositions across categories.
Importantly, this progress was achieved while improving profitability, with operating margins up 80 basis points in 2025 versus 2023 and holding at that level in 2026. In these 18 cells, we have been focused on,
Innovating to drive the best product performance at the lowest delivered cost.
Deploying breakthrough marketing to build brand love.
And delivering differentiated value propositions across price-value tiers and channels.
We look forward to using a similar approach with the Kenvue portfolio.
In the second quarter we will continue the momentum by Out-Innovating with Kleenex, Out-Marketing with Depend, and executing a complete end-to-end-transformation of Kotex.
Our U.S. Facial Tissue business delivered strong performance in the first quarter, with more than 180 basis points of market share gains as we drive growth through our iconic Kleenex brand. Kleenex has been growing by driving strong brand love, emotionally resonant marketing, and compelling activation in stores around the country.
Now we are ramping up innovation. During the quarter, we launched Kleenex Snap & Go, a new on-the-go tissue format designed to address one of the most common complaints about portable tissue packs -crushed, exposed, or messy tissues. The compact design features a secure snap lid that protects tissues from the dirt and clutter that collect inside bags and purses. Its sleek, modern design is also visually appealing and supports a winning consumer experience.
Early response to the product has been exceptional, with the first 1,000 ratings and reviews averaging 4.8 out of 5 stars.
As category leaders, it's our role to lead category expansion. We take great pride in doing this in adult care by crushing the stigma associated with the category through authentic celebrity partnerships.
Our campaign with NFL legend Deion Sanders, which launched in 2025, continues to perform. On March 3, Coach Prime kicked off a new "Don't Be Afraid" campaign across social media. He encouraged men to take control of their health, like he did, and embrace the support that Depend Guards provide. His post resonated with consumers and is being amplified by our paid media programming.
The Depend business in North America is off to a running start in 2026, gaining 80 basis points of value share, with consumption growth outpacing the category by 190 basis points in the first quarter.
Moving onto feminine care, during the quarter we completely relaunched Kotex in the U.S., with new products, new packaging design, and new tactics for driving consumer discovery on-shelf and online. We are really excited about the growth potential ahead for this strong brand.
The Kotex portfolio now includes five new pad variants, each delivering distinct benefits with a compelling overall value proposition. The common feature across our lineup of pads is outstanding protection, driven by our Gravity Core technology that delivers superior cleanliness, dryness, and comfort. Our proprietary absorbent core rapidly pulls blood to the bottom of the pad so our consumers feel clean, dry, and protected, and can actually see the difference versus conventional pads.
Gravity is now scaled across 27 markets, and we're building premium benefits on top of it, such as our new Kotex BioCare technology that helps support a healthy skin pH and defend against odor and irritants. Consumers are receiving the new product line well, with thousands of strong ratings and reviews from our first several weeks. Rapidly scaling a premium innovation like this across the world was made possible by re-wiring our R&D teams through Powering Care.
As we introduce these pioneering innovations, we know we need powerful creative storytelling to break through the noise and drive brand love and preference.
Complementing the Gravity relaunch in North America, we also unveiled our new global platform for Kotex called "Own Your Flow." The campaign is anchored in an inspiring global anthem video focused on crushing period stigma. Set to a remake of the popular Tears For Fears song, "Everybody Wants to Rule the World," the campaign reignites the brand's mission "to ensure a period never gets in the way of any woman's progress."
"Own Your Flow" has begun rolling out globally, with teams tailoring it to their local cultural contexts. Coverage of the campaign has generated more than 20 million earned media impressions. Just like our approach to scaling innovation in a repeatable manner, our marketing teams have also created a repeatable model that delivers economies of scale to build brand love.
In International Personal Care, we are continuing to execute our Powering Care matrix structure to bring the best of K-C across the world. Our results in the first quarter are further proof that we are winning over consumers by strengthening our value propositions across the good-better-best ladder around the world.
In our Focus Markets, we saw continued top-line momentum across the portfolio, where new innovation, strong execution, and our social commerce expertise are contributing to significant share gains, especially in Diapers and Pants.
On the top line, we delivered another quarter of strong volume-plus-mix-led growth at 5.5%. Our organic growth was 4.0%, reflecting double-digit growth in Indonesia and Brazil, as well as solid gains in China and South Korea. The combination of strong innovation pipelines, highly relevant brand storytelling, and excellent commercial execution continued to drive share gains versus a year ago as well. China diapers gained 180 basis points, Indonesia diapers 320 basis points, and Brazil diapers 40 basis points.
Lower pricing in the quarter reflected three things. First, the ongoing deflationary backdrop in China. Second, strategic investments to drive trials for a very strong innovation agenda. And finally, ensuring we maintain competitive value propositions for our consumers in selected markets.
Operating profit grew 21.9%, supported by sustained healthy margins and continued momentum into the first quarter. Strong productivity gains and overhead savings are funding investments to enhance brand propositions and strengthen brand equity across our markets.
Similar to North America, International Personal Care share momentum has improved significantly across our key cells in the past few years.
In 2025, approximately 60% of net sales in our key International Personal Care cells were gaining or holding share, up from approximately 50% in 2023. As of Q1 2026, that trend has accelerated to 84% versus 2025, on a rolling twelve-month basis, as we continued to build on our strong share momentum.
At the same time, operating margin has expanded to 16.2%, up approximately 500 basis points versus 2023, supported by improved top-line growth, productivity gains, and disciplined reinvestment. This highlights IPC's ability to convert enhanced competitiveness and the "the best product, lowest cost" into sustainable profitability.
Growth initiatives across IPC will continue to fuel our momentum in the second quarter and beyond, across markets.
In South Korea, where Huggies leads a highly competitive market with more than 60% market share, we introduced a breakthrough material innovation with superior absorbency and breathability benefits to keep babies drier and more comfortable. The technology, based on a new material processing capability, is now integrated into premium Huggies lines such as Max Dry and Naturemade and is winning high marks from consumers relative to competition.
In collaboration with our North America Huggies team, our global teams worked together to bring the technology to life. The design process eliminated expensive supplier-driven steps, enabling greater efficiency.
Since launch, we have seen net sales and margin improvement in premium tiers where the technology has been introduced, and that momentum carried through into the quarter.
Like South Korea, our performance in Indonesia accelerated in the first quarter. These markets are providing excellent examples of how our innovation surge, and effective wiring, make an outsized impact globally.
In Indonesia, our Diapers business gained 320 basis points of share in the quarter fueled by our strategy to deliver superior value propositions that enable outperformance in both the value and premium tiers.
These strong results were driven by a balanced set of growth levers, combining innovation, good marketing, strategic pricing investments, and improved retail execution. Our Sweety brand's Gold Pants and Skin Premium lines continue to perform extremely well. We're also encouraged by the performance in our Bronze and Silver value tiers, which grew double digits in the first quarter and remain the growth engine in Indonesia diapers.
In Brazil Diapers, 2025 marked a milestone year. We relaunched our portfolio to create a consumer-centric offering that now covers 100% of consumer needs in Brazil, up from just 46%. The relaunch featured new technologies, superior product performance, and a modernized packaging design that elevated premium perception and strengthened brand equity.
In the first quarter, Diapers gained 40 basis points of share, marking the seventh consecutive quarter of gaining or holding share sequentially. We also grew organic sales in Diapers by double digits, led by the premium tier.
Brazil has benefited from scaling innovations from around the world, as we leveraged the power of our IPC Focus Market strategy, and rapidly scaled innovations. For example, we leveraged the E-Cloud waistband technology from other IPC markets and customized it for Brazilian consumers. The success in Brazil is a clear outcome of how our Out-Innovate and Out-Market initiatives come together to deliver share gains. By fast-scaling proven technologies across IPC markets, we're delivering meaningful solutions for families and driving growth.
As we prepare for our next exciting chapter, these examples give further proof that we're in the early innings of what we can deliver.
Our IFP joint venture with Suzano is progressing well. The regulatory process is on track. Our teams around the world are working hard to get ready for Day 1 of the separation and address stranded costs, all while performing in the base business. We remain on track to close mid-year.
As Mike noted, we're also making significant progress on our Kenvue integration planning efforts, and we remain on track to close in the second half of the year. We are seeing a wide range of value creation opportunities as we get deeper into the planning. We have over 40 integration teams working to ensure a smooth integration, deliver synergies, and build the future of the combined company. It is also very clear that our organizations share a deep cultural connection and a commitment to providing exceptional care for consumers.
For the Kenvue acquisition, we're seeing synergy opportunities across Cost of Goods Sold, overheads, and growth spending.
We have a team mobilized to identify and plan to deliver against opportunities across a combined base of $17 billion in Cost of Goods Sold, to capture sourcing, network, and value stream savings.
On overheads, we plan to leverage the integration as a catalyst to modernize how we work and drive outcomes, including automation and AI-driven applications, as well as to accelerate the Global Business Services platform both companies have been building.
Additionally, our Systems & Tech team is focused on advancing process harmonization and a unified strategy for our ERP and data platforms to drive simplification across the new, bigger enterprise.
Lastly, on revenue synergies, we are very excited about the possibilities. Our integration planning teams are focused on several areas of opportunity to accelerate growth following the close of the transaction. We have big opportunities to expand distribution, leveraging the go-to-market strengths of each company around the world. We also see powerful opportunities to deploy the growth capabilities Kimberly-Clark has built in critical areas like e-commerce or Revenue Growth Management across the broader portfolio.
Additionally, we're fleshing out the potential to leverage the power of our combined brands to innovate in our categories over the medium term.
I want to acknowledge the tremendous amount of work that is being taken on by the incredibly talented people involved at both companies. We are remaining very choiceful about what to prioritize and how to
sequence things so we can bring focus to the places where the opportunities to create value are the most attractive.
I am very proud of our people. They care deeply about what we are doing. They believe in our direction and are incredibly resilient in the face of challenging obstacles. So, we are focused on empowering them to win. I believe we are still in the early innings relative to our potential.
Now, I'll turn it over to Nelson to provide an overview of our financial results for the quarter and an update on our financial outlook.
NELSON URDANETA, CHIEF FINANCIAL OFFICER, KIMBERLY-CLARK CORPORATION
Thank you, Russ.
Together with Mike and Russ, I would like to start by recognizing the responsiveness and agility of our teams, delivering strong operating performance, mitigating multiple headwinds as they arise, and advancing our strategic initiatives to truly transform our company to deliver sustained value to all our stakeholders.
We've delivered a strong start to the year. The risk mitigation actions we've taken in the past through Integrated Margin Management are enabling us to maneuver more effectively through a complex operating environment, and we're positioning ourselves to hit the ground running on both the IFP joint venture and the Kenvue acquisition.
We delivered 2.5% organic growth in Q1, led by 3% volume plus mix growth, as Baby and Child Care achieved broad based volume growth across key markets including the U.S., China, South Korea, Brazil, and Indonesia.
For the first quarter of the year, Adjusted Operating Profit dollars were up about 4% versus the prior year. This reflects ongoing gains from supply chain productivity as well as the RSG&A-related efficiencies we achieved in the quarter, which were partly offset by unfavorable pricing net of input costs due to the planned investments made to enhance our value propositions in several geographies.
As noted, gross productivity for the quarter was 6.0% of Adjusted Cost of Goods Sold - a strong start to the year that continues to fund strategic investments behind our innovation led growth model and enables sustained enhancements of our value propositions to consumers.
We continue to see RSG&A leverage come through in the P&L, which resulted in a year-on-year 90 basis point improvement of Adjusted RSG&A as a percent of net sales. This enabled a 60 basis point increase in brand investments in the quarter versus the prior year. We will further build on this solid foundation as overhead savings continue to flow through in the coming quarters in line with our Powering Care plans.
First quarter Adjusted Earnings per Share from Continuing Operations decreased 1.2%, while Adjusted EPS attributable to Kimberly Clark increased 2.1% versus the prior year. The increase was driven by solid adjusted operating profit growth, partially offset by a 550 basis point increase in the adjusted tax rate from continuing operations, primarily due to the lapping of discrete tax benefits related to the resolution of certain tax matters in the first quarter of 2025 and a change in U.S. tax laws effective July 2025.
And finally, we delivered Adjusted Free Cash Flow of $405 million, and we remain on pace to deliver approximately $2 billion for the full year.
As we look forward, I think it's important to appreciate how far we've come in fundamentally strengthening how we operate, bringing greater cost discipline, proactive margin management, and focus to how we manage the business.
Our margin profile today is materially more stable than it was coming out of the pandemic. This improvement reflects not a single action, but the cumulative impact of executing the Powering Care strategy and the integrated, end-to-end margin management approach across the organization I've highlighted in the past.
In Procurement, we've migrated to more strategic partnerships with fewer suppliers, we've adopted clear commodity and currency risk management strategies which involve programmatic hedging where possible, and we've deployed AI-enabled tools like Coupa globally, to fully digitize procurement processes.
As you can see in the chart on the right, it's moments like these when effective cost discipline and risk management pay off.
As of now, we're roughly 80% covered across our cost basket for the year, a cost basket where oil and oil-linked derivatives like resins represent about a quarter of our cost of goods sold.
As Russ mentioned, we expect an impact in the second quarter of approximately $50 million related to the fire at our Distribution Center in California, as well as some incremental costs due to the conflict in the Middle East. We expect to fully mitigate these costs in the second half of the year with the many levers available within our Integrated Margin Management capabilities.
If oil prices were to persist at the $100 dollar per barrel level for the duration of the second half, we could see additional gross input cost inflation in the range of $150 to $170 million. While this is not built into the outlook we're providing today, we're proactively evaluating levers available to mitigate any potential impact.
I will note that, under such a scenario, the improved stability we've developed gives us confidence and flexibility to continue investing behind our brands, supporting our robust innovation agenda, and ensuring strong commercial and operating momentum as we bring together Kimberly Clark and Kenvue to accelerate growth and create long term value.
Which brings me to our outlook for 2026.
For 2026, our focus remains on delivering against the outlook we shared in January as we navigate through a challenging, and more dynamic operating environment.
On the top line, we continue to expect Organic Growth to be in-line to ahead of category growth from both our North America and International Personal Care businesses. On a weighted average basis, our country category mix is currently growing at approximately 2.5 percent, slightly higher than where we started the year.
At Adjusted Operating Profit, we continue to project an on-algorithm year with a mid-to-high single digit growth on a constant-currency basis, assuming a mid-year close of the International Family Care & Professional transaction.
For adjusted EPS growth from Continuing Operations, on a constant currency basis, we expect double-digit growth, as the close of the International Family Care & Professional transaction results in an approximately 40% increase in Income from Equity Companies for the full year.
Our outlook assumes an adjusted effective tax rate of approximately 23%. We're also assuming relatively flat net interest expense and shares outstanding, as we plan to hold the proceeds from the International Family Care & Professional transaction in cash to help fund the cash portion of the Kenvue acquisition.
For adjusted EPS attributable to total Kimberly-Clark, we expect to be largely in line with 2025 levels on a constant currency basis. This will essentially reflect underlying growth consistent with our long-term algorithm, partly offset by the reduction in Income from Discontinued Operations, which we expect to be half of the 2025 level with a mid-year projected close of the International Family Care & Professional transaction.
Also note that, following the close of this transaction, Adjusted EPS from Continuing Operations and Adjusted EPS attributable to Kimberly-Clark should be the same on a quarterly basis.
Finally, we remain well positioned to deliver approximately $2 billion of Adjusted Free Cash Flow consistent with 2025 levels, even as we accelerate capital investments in our growth and transformation plans to approximately $1.3 billion up from $1.1 billion last year.
As far as pacing during the year, as we mentioned in January, we enter 2026 with good momentum and we have a strong pipeline of new products launching in the second quarter, which we will support with strong marketing and retail execution. This should fuel strong organic growth momentum in the second half of this year.
We continue to expect net sales will be balanced, roughly 50-50, between the first half and the second half of the year, and adjusted operating profit to be roughly 49-51, first half versus second half.
For the second quarter, we expect a roughly 50 basis point headwind to net sales growth related to the West Coast distribution center fire in Ontario, California. In addition, as mentioned, our outlook reflects an estimated $50 million dollar impact from the fire as well as higher energy and oil-related costs in the quarter, which we expect to mitigate in the back half of the year.
Looking ahead, the environment and related scenarios remain dynamic. As I highlighted before, we could potentially face gross, incremental input cost headwinds, in the second half of the year, in the range of
$150 to $170 million, if oil prices were to stay at the $100 dollar per barrel level. We have not reflected this in our outlook and our teams are currently working through mitigation plans. If a scenario along those lines or worse were to unfold, we'll be ready to share any potential net impact to input costs and net profit on our next earnings update.
Also, keep in mind that the dilution from the International Family Care & Professional transaction will impact EPS in the second half of the year. As a result, Adjusted EPS attributable to total Kimberly Clark is expected to be weighted roughly 52% to the first half and 48% to the second half, while EPS from Continuing Operations is expected to be split 47%,53% first versus second half.
This includes the impact of our decision to retain the proceeds of the IFP transaction to fund part of the cash consideration for the Kenvue acquisition.
Finally, please note that our outlook excludes anything related to the closure of the Kenvue acquisition prior to December 31st.
With that, I'll turn it back over to Mike.
MIKE HSU, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, KIMBERLY-CLARK CORPORATION
Thanks, Nelson.
We're building for the future and working to stand up a new kind of health and wellness company. I'm very proud of the dedication, speed, and agility our teams are bringing every day, to make our bold ambition a reality.
Our Powering Care growth engine will continue to fuel our momentum and enable us to remain resilient through the evolving external environment. We're looking forward to extending our track record of growth and share gains through the remainder of 2026, while enhancing our operating model, advancing key transaction workstreams, and delivering extraordinary everyday care.
Thank you for your time and interest in Kimberly-Clark.
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Kimberly-Clark Corporation published this content on April 28, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 28, 2026 at 10:55 UTC.