Kimberly-Clark Corp (KMB) — Q4 2020 Earnings Call Transcript

Thank you and good morning, everyone. Welcome to Kimberly Clark's year-end earnings conference call. This morning, you will hear from Mike Hsu, our Chairman and Chief Executive Officer; and Maria Henry, our CFO. We sincerely hope everyone is continuing to stay healthy and safe and in keeping with our social distancing procedures, this morning, Mike, Maria and I are each in different locations in our Dallas office. As a reminder, we will be making forward-looking statements today. Please see the Risk Factors section of our latest annual report on Form 10-K for further discussion of forward-looking statements. Finally, we will be referring to adjusted results and outlook, both excludes certain items described in this morning's news release. That release has further information about these adjustments and reconciliations to comparable GAAP financial measures. Now I'll turn the call over to Maria.

Thanks, Paul, and good morning, everyone. Thanks for joining the call this morning. Let me start with the headlines for the full year results. We delivered strong top and bottom line growth and exceeded our previous outlook. We significantly increased our brand and capability investments and improved our market shares. We generated excellent cost savings and cash flow, and we returned significant cash to shareholders. Now let's cover the details of our results starting with sales. Full-year net sales were $19.1 billion, that's up 4% year-on-year and included a 2 point drag from currency rates. Organic sales grew 6% with healthy underlying performance and increased demands related to COVID-19. Volumes were up 4% and net selling prices and product mix, each increased 1%. Mike is going to provide more color on our topline and market share performance in just a few minutes. Moving on to profitability, full-year adjusted gross margin was 37.1%, up 210 basis points year-on-year. Adjusted gross profit increased 10%. We generated $575 million of cost savings from our FORCE and restructuring program, that was well above our initial target and slightly better than we expected in October. For 2021, we're targeting $400 million to $460 million in total cost savings. Commodities were favorable by $175 million in 2020, although they turned inflationary in the fourth quarter. We're planning for commodity inflation of $450 million to $600 million in 2021. Costs are projected to increase broadly in most areas, including pulp and recycled fiber, resins, superabsorbent, and distribution expenses. Other manufacturing costs were higher in 2020, including costs related to COVID-19. Foreign currencies were also a headwind reducing operating profit at a high single-digit rate. Moving further down the P&L, between the line spending was up 110 basis points as a percent of sales. That was driven by advertising which was up 90 basis points. SG&A spending also increased and included higher incentive compensation along with capability building investments. Adjusted operating margin was 18.7%, up 90 basis points and adjusted operating profit grew 9%. In terms of company profitability for 2021, the midpoint of our planning assumptions implies a 70 basis point decline in adjusted operating margins. And while there are a number of moving pieces, it's likely that adjusted gross margin will be down somewhat more than that. Turning back to 2020 results, full-year adjusted earnings per share were $7.74, up 12%. Our October guidance was for earnings of $7.50 to $7.65. In addition to the strong growth in adjusted operating profit, the bottom line benefited from higher equity income, a lower share count, and a slight decline in adjusted effective tax rate. Now let's turn to cash flow and capital efficiency. Cash provided by operations was an all-time record $3.7 billion, up $1 billion year-on-year reflecting outstanding working capital performance and strong earnings. Cash flow is expected to be down year-on-year in 2021 driven by higher cash taxes and working capital. Nonetheless, cash flow should remain strong and well above 2019's level. Capital spending was $1.2 billion in 2020, in line with plan and the prior year. We plan to spend between $1.2 billion and $1.3 billion in 2021, including activity for our restructuring program and a pickup in growth projects. Based on an initial outlook at longer-term opportunities, we believe spending will be elevated again in 2022. On capital allocation, dividends and share repurchases totaled $2.15 billion. That's the 10th consecutive year we've returned at least $2 billion to shareholders. We expect to return a similar level of cash to shareholders in 2021. And as mentioned in the earnings release, our Board has already approved our 49th consecutive annual dividend increase and authorized a new $5 billion share repurchase program. Let me finish with a short update on our restructuring program. We continue to make significant progress as we head into the last year of this program. We're about 85% to 90% through the total pretax charges, which we've increased somewhat to reflect delays as a result of COVID-19 and costs for additional savings opportunities. So far, we've generated $420 million of savings and expect to achieve between $540 million and $560 million of savings by the end of 2021. Our original savings estimate was $500 million to $550 million. Finally, at this point, cash payments are about 75% to 80% complete. Overall, it was an excellent year financially, while we invested more in the business for the long term and navigated the COVID-19 environment. I'll now turn the call over to Mike.

Thank you, Maria, good morning everyone. Okay, let me begin by saying that I'm very proud of our K-C team and our accomplishments in 2020. We worked tirelessly to protect the health and safety of each other by setting and maintaining strict safety protocols, all of which are in place today. We kept our global supply chain running and safely served the needs of our consumers and customers and in many cases delivering record output. At the same time, we delivered healthy topline growth across our portfolio, gained market share, invested the strength and long-term brand fundamentals and delivered strong financial results. Looking more closely at our business segments, we saw excellent performance in personal care, with 5% organic sales growth and strong share performance. In North America, organic sales rose 6% driven by broad-based growth in baby and child care. Our market shares were up nicely on both Huggies diapers and Goodnites Youth Pants. In D&E markets, personal care organic sales were also up 6% despite volatile market conditions. More specifically, personal care organic sales were up double digits in China, India, and South Africa, up high single-digits in Europe and up low single digits in Latin America. We also improved our share positions in many D&E markets. Looking at our other segments, organic sales were up 13% in consumer tissue and down 7% in K-C Professional. As expected, both businesses experienced the effect of COVID-19 and the shift to more consumers working from home. We're pleased with how our K-C team managed through that volatility. To meet elevated demand in consumer tissue, we significantly reduced our SKU count and leveraged our global supply network to increase production, including support from KCP. We continue to focus on category expanding and brand-building programs, while improving our market execution. Those actions helped us gain market share for Kleenex facial tissue in North America and Europe. In KCP, where the washroom category continues to be a significant part of our business, we made good progress pivoting the growth opportunities in other parts of the business, including in wipers and safety products. Sales of those products were up double-digits in North America. Importantly, we grew or maintained market share in approximately 60% of the 80 key cohorts that we track. I'm pleased to see our brands winning in the marketplace. Overall, our results were strong and I'm encouraged by the way we executed in 2020. Next, I'll turn to our outlook for 2021. We expect a more challenging environment, especially compared to last year. More specifically, we expect some of the net benefit from COVID dynamics, including higher consumer demand to reverse. In addition, commodity costs are rising globally and we're also reflecting our latest view on economic conditions and birthrate trends. Despite these factors, we're confident in our ability to deliver topline growth and expect to strengthen our market positions and improve our company for long-term value creation. Our plans call for total sales growth of 4% to 6% in 2021 and that includes 2 points from the Softex acquisition, and a 1-to-2 point benefit from currencies. We expect to grow organic sales 1% or 2%. We plan to leverage and scale our brand building capabilities and investments that we've made over the past two years. We have a healthy innovation pipeline including near-term launches for Huggies in North America, China, Eastern Europe and Latin America and we've also upgraded products for our global Kotex brand in several markets. We expect to benefit from selective pricing actions and other revenue management programs, but we're not currently planning for broad-based list price increases. And we will continue to make capability and technology investments to drive long-term success. On advertising, spending should be similar to 2020 levels and this reflects the increases we made over the last two years and confidence in the strong ROIs from digital. We believe this level investment is sufficient to support our growth plans in the current environment. On the bottom line we're targeting adjusted earnings per share of $7.75 to $8. That's evened up 3% year-on-year. We're focused on delivering our annual plan, while managing the quarter-to-quarter volatility that could be higher than normal in this environment. Finally, because of the different COVID dynamics in 2020 and 2021, we think it is relevant to consider our performance over both years. So on that basis, using the midpoint of our 2021 outlook we're projecting to grow organic sales approximately 4% and the increased adjusted earnings per share of 7% on average over that two-year period. Those growth rates are slightly above our medium-term objectives. In conclusion, we're on track with K-C Strategy 2022 and we're managing effectively through a very challenging environment. We're improving our topline and strengthening our brands, our market positions and our company for the long term. We continue to be optimistic about our opportunities to deliver balanced and sustainable growth and create shareholder value. That concludes our prepared remarks and so now we'll be happy to take your questions.

Thank you, hi. I guess the first thing is the area that I'm hearing I guess more concerned about in the outlook for next year is on sales and organic, and it's also the 1 to 2 is kind of above what we were thinking was likely. And I just was curious to understand a little bit about how market growth is playing into that outlook, how mix and you said no pricing, but perhaps mix is a bigger part of it than maybe is externally appreciated. And then also you've got the big lapse in consumer tissue, so I would be curious a little bit more on that build to organic sales being up in 2021 with the backdrop of the tougher birthrate environment? Yes Lauren, the outlook for 2020 shows our confidence in maintaining strong brand performance, although we anticipate some negative impact due to COVID-related demand from 2020. The projected organic growth of 1 to 2 percent is at the lower end of our expectations, but it still indicates solid underlying performance in both personal care and consumer tissue, with personal care seeing about 5 percent organic growth in the fourth quarter. We expect K-C Professional to improve in the second half of the year. In terms of consumer tissue, we believe there is a strong correlation with mobility data. We foresee that the current situation in developed markets will remain consistent through the first half of the year, with a gradual return to work beginning in the second half. This is incorporated into our plans, which account for the significant levels of activity we experienced at the end of the first quarter and throughout the second quarter of last year. While we will be comparing against that strong activity, we expect at-home consumption to remain higher than it was in 2019, although it will be lower than in 2020. Overall, we feel confident about the momentum in our personal care business globally, as we witnessed significant growth and an increase in market share across various regions.

Okay. And what are you assuming for that birthrate, I know there is Brookings Institute study that talks about the birthrate being down an estimated 8% in 2021 in North America. Is that sort of what's folding into your outlook you know or is it something less severe than that?

Yes, we are anticipating a decline in birthrates in North America, though not as drastic as previously mentioned, likely in the mid-single-digit range. However, recent data indicates that the category has been performing slightly better than that. Our team in North America is closely monitoring this situation. Sales for the category increased by about 3% in the quarter, and generally, the North America category has been outperforming expectations over the last several quarters.

Okay, great. And then just the last thing on consumer tissue is about promotional activity, and so it was really just in the fourth quarter you had this very strong pricing number you specifically talked about the lack of promotion in those numbers, but I was just curious on, given the forecasted pulp inflation, given what you've talked about in terms of inflation that's in your outlook and then you said no pricing assumed, but how do we think about promotion maybe coming back into the marketplace in 2021, is that 2 or 3 is that also contemplated in the organic sales outlook?

Yes in North American…

Yes…

Oh go ahead Maria.

No, no, please go ahead, Mike.

We're in different rooms, so I'll start here and Maria can add some thoughts. The promotion activity in the fourth quarter was lower, which has been consistent for us in North America this year. We're aligning with demand and still working to meet our customers' needs. We anticipate that promotion intensity will remain reduced in the first quarter, likely extending into the first half of the year. We expect it to return to more normal levels in the latter half, but our plans are focused on lower promotional activity during the first half. Given the current state of commodities, we plan to implement necessary measures to maintain our margins, including further cost savings and selective price increases.

Okay, all right, great. Thank you so much.

Maria?

Yes, the only thing I would add there Lauren is that in the fourth quarter, the North America consumer tissue pricing was a bit elevated, because we evaluate our trade programs on a full-year basis, and as we close out the year, there was a bit of incremental benefit in that number.

Okay.

Those timings also sort of reflects in their backward place and timing.

Okay, all right. Thank you, so much, that's helpful.

Hi thanks, good morning. I wanted to see if you could talk a little bit about more about the components of your 2021 organic sales outlook, whether volume versus price mix or by product segment or geography. First, like similar to 2020, are you expecting fiscal 2021 to show segment growth in two or three segments, while one clearly lags? And then just a little bit more color on the North American consumer tissue pricing, I know you said that there was a little bit of timing. So, is it just a function of sort of like marking to market essentially at the end of the year and Q4 will obviously set up for a more dramatic comp next year, or is there something else in that? And then I have a follow up on my pricing, thanks.

Yes, Olivia, I'll begin there. Regarding consumer tissue, we believe there will be a decline in the first half in developed markets like North America. We experienced significantly high demand until March of last year, which continued through the second quarter. This was driven by two factors: people spending more time at home, leading to increased consumption, and the high levels of stockpiling reported in the media, with consumers bringing home more inventory. We expect to cycle through some of that extreme stock-up behavior; however, we anticipate that home consumption levels will stay high at least for the first half of the year, before tapering off in the latter half. That covers the first part; I can't recall the other part of your question.

Yes, I think it was around North America, again. Right.

Yes, certainly. We manage the trade programs on a yearly basis and continuously update our estimates throughout the year. This year has been unusual for consumer tissue, with demand and supply playing out differently, resulting in more dynamic changes to customer-specific plans and events compared to previous years, which has made forecasting more challenging. As we wrapped up the year and finalized our balances, we experienced a slight benefit in the fourth quarter. If you consider that, it primarily relates to timing compared to previous quarters. It's also important to note that in the fourth quarter, given the dynamics, we indeed had lower promotional activity.

Right, okay, thanks. And then, I know you said that you weren't embedded in the 2021 outlook is no pricing, but now pulp prices are obviously up a lot, but they're still below prior peak, so can you just, like is it possible to take price increases if pulp continues to inflate or does it have to reach the prior peak in order to even consider that?

Olivia, we didn't indicate no pricing changes. We mentioned there wouldn't be broad-based list price increases, but we will implement select pricing actions across various markets in our businesses. We have plans regarding volume and specific list price adjustments in some areas. Additionally, through revenue growth management, we aim to optimize our trade funding to improve efficiency. There's no strict rule related to the commodities we’re dealing with, but our objective is to enhance margin expansion. This initiative is part of our KC 2022 strategy, and we are confident in our long-term capabilities. Given the current environment's complexities, it's reasonable to anticipate some fluctuations from quarter to quarter, and even year to year. However, our long-term goal remains focused on managing pricing, costs, and driving margin expansion.

All right, thank you.

Hey thanks.

Hey guys.

Good morning, Dara.

So just two questions. First, I just wanted to follow up on pricing. Your commentary was helpful, but you are looking at significant commodity cost increases as you outlined for 2021. So maybe just talk a little more conceptually about your approach to pricing. Are you a little more hesitant to be aggressive in terms of pushing it given you're coming off a couple years of gross margin expansion? Is there maybe more pricing later in the year? Just sort of how you think about pricing across your portfolio in light of what does look like it will be pretty significant commodity pressure? And then secondly, we did see some slowdown in this in the US in December, January, is that more temporary factors where there will be supply constraints or consumer de-loading? Is that expected to be more of a temporary phenomenon or how are you thinking about trends over the next couple of months given what we've seen in the recent U.S. data? Thanks.

Yes, I'll start with the last part first. We did see an increase in December due to consumption, especially in tissue products, but it has softened somewhat, which was evident throughout last year. The monthly and even weekly fluctuations are something we anticipate. However, we believe the underlying trend shows that more people are staying at home now compared to last year, and this will likely continue for a significant part of 2021. Eventually, as populations get vaccinated and people return to work, we expect to see a decline in at-home tissue consumption. We have incorporated these factors into our forecasts. Regarding pricing, we do expect notable cost inflation this year, which will impact both the consumer tissue and personal care segments. We are prepared to take appropriate actions, focusing on cost management. We are pleased to have a strong revenue growth management capability in operation globally, and we are actively managing our strategies. This includes selective account changes, price list increases, and improving trade efficiency while managing promotions. We anticipate that the pricing environment will remain favorable due to the pressures I mentioned, although demand may remain elevated with supply constraints in developed markets, particularly in North America. We are confident in the progress of our strategy and prefer to build a strong, sustainable business rather than rely on promotional activities to gain market share.

Great, thanks.

Thanks, Dara.

Great, thanks. Good morning everyone and congratulations on a strong year, particularly in the current environment. Maria, first question for you just on commodities, because naturally it is a big, big focus for the company. Can you maybe just spend a little bit of time on some of the key assumptions by your key commodity exposure that's embedded in your 2021 outlook? And then I believe it's fairly common not to enter into any notable hedging, maybe just confirm that if you do have any hedging in place and then I have a follow up next.

Sure. I'll start with the hedging questions. We broadly don't use hedging. We do take advantage of our contract negotiations to try to put some parameters around the highs and lows that we will experience on certain commodities, but no formal hedging. In terms of the 2021 outlook, as a reminder if commodity costs in general were at low levels in 2020, particularly in the first half of the year, and costs for many inputs, excluding pulp started to move higher sequentially over the last couple of months and exited the year already meaningfully above 2023 average. So many of those are expected to move higher again in the early part of 2021. If you look back three months ago, we were expecting some inflation in 2021 and the forward outlook has moved higher, just in the last 60 days. The top two inflation drivers for this year are expected to be pulp and polymer based materials. Together those two input costs represent more than half of the inflation outlook. So if I tick through a few things, virgin pulp, we're expecting inflation, and that follows a year and a half of very low pricing. So in virgin pulp we're looking for it to be up high single digits on average. Polymer resins we're expecting to be up significantly, 30% or maybe even higher in North America, non-wovens and superabsorbent will follow that but to a lesser degree. Those dynamics are largely supply driven at this point. Recycled fiber, we're expecting to be up mid-teens. Distribution costs we're expecting to remain inflationary and that's mostly due to industry supply constraints and other material such as third-party purchased safety gloves and PPE and KCP are facing significant increases if you look at what's happening in those markets. So that's the assumption for 2021.

That's very helpful Maria, thank you. Mike, I'm going to apologize ahead. I'm going to ask on pricing maybe a little bit differently, not to beat the dead horse here, but just on the heels of what Maria just communicated, and the fact that the commodity increases like roughly 300 basis point unfavorable impact, understanding you're coming off a strong gross margin year, also understand you said, at this point you're not planning on broad based list price increases. What do you think that either you or retailers want to see? I know sometimes there's you know retailers want to see certain permanence if you will, to price increases, they don't want to whip prices around, frankly nor do you as the brand owner. But, given the fact that you're looking at 300 basis point headwind close to it and then you sort of tumble through the numbers for what you guys outlined for FORCE savings and restructuring, and there's not a big offset, not a tremendous offset outside of those two favorable numbers at least we're kind of doing the math right in terms of what you're getting around revenue growth management, et cetera. So it kind of begs the question, why not, with respect to pricing behind a strong brand portfolio. So, hopefully I asked that a little bit differently, just would be great to get your response and I'll pass it on. Thank you.

Yes, I mean, Kevin. Yes Kevin, I think we're still working through kind of the mechanics of how we will drive the realization. I will say the pricing calls have come in more recently and so they've changed over the last several months. And so we are working through that and, but certainly we recognize the goal is that we've got to drive margin expansion and we need to recover some of the input cost increases. And so for us pulling our lever across both the commercial side and our cost side, whether that's supply chain costs, or being a little bit more aggressive on taking the right pricing actions for us is going to be important for this year, and so we are going to make those moves as we kind of work through the plan.

That's helpful. Thank you very much. I'll pass it on. Good luck.

Thanks Kevin.

Hey, great. Thanks, good morning.

Good morning, Steve.

Hey, so I have a question also on guidance, but more on the drivers as it relates to operating income. So if I take the midpoint of your sales guidance and apply it to 2020's operating income base, grow it say 5%, subtract out the midpoint of your inflation outlook, add back expected savings also round about the midpoint, I essentially tie out your 2% OI growth guide. So first, just want to kind of validate if that's a fair way to think about it, and if it is, I guess I'm a little surprised at its simplicity, and so I'm guessing that there are some moving parts around those variables. If you could maybe call out some of those moving parts and think about how you're thinking about them and why they sort of cancel each other out? It looks like you get a little bit of net leverage on the constant dollar based marketing spend, but I'm just struggling to find out some of the nuance around the OI guide.

Sure, I'll take that question. If we look at our outlook for 2021, we anticipate significant benefits from revenue growth. On the organic side, we expect positive contributions from volume, mix, and pricing. Additionally, as Mike noted, we expect Softex and favorable currency fluctuations to benefit our top line. Beyond sales, we also anticipate good cost savings this year; however, we face commodity inflation, which we previously discussed, along with ongoing investments in the business that reflect general non-commodity inflation. Our calculations lead to our guidance on operating profit. Furthermore, we foresee a reduced share count and lower non-operating expenses, while equity income is expected to remain about the same, possibly increasing slightly, though this will be offset by a slightly higher effective tax rate. This accounts for the extra point in the upper range of our EPS growth projection. Regarding advertising spend, our numbers for 2020 suggest that spending will be roughly similar in 2021, which we believe is appropriate given the current environment and follows two years of significant increases in our advertising investments. We will continue to invest in building capabilities and technology. I've already covered our commodity assumptions, as well as pricing considerations related to those factors.

Yes, okay, that's, that's helpful. It's confirming. I guess just a little bit, I guess, versus my own coming in expectations is a little bit less, net capabilities investment that's envisioned, based on the rough math? And I guess, is that just because, maybe Mike, is this just because you've been able to fast track more of those investments the prior two years, especially in 2020 and now you're a little bit ahead of the curve or is this sort of more in line with the relative reinvestment that you'd always anticipated coming into 2022?

Yes, there are definitely a few things to consider. We are pleased with the investments we've made, which have been substantial over the past couple of years. We believe these investments are effectively contributing to broad-based growth across most of our markets now. I mentioned earlier that we expect advertising in 2021 to be similar to 2020 levels, which we believe is sufficient for our growth plans this year. However, in the short term, we aim to improve efficiency, particularly regarding commodities. We anticipate enhancing productivity in our advertising expenditures, trade spending, and throughout the supply chain. This aligns with our growth plans for the year. Additionally, we have further investment plans in other capability areas this year. We will continue to focus on our digital marketing initiatives and will be investing more in our cost management capabilities. We recently brought in a new supply chain leader who sees promising opportunities, and we will invest in tools to enhance our planning and capabilities across the organization and its markets. We view productivity as a crucial driver for our long-term strategy and the investments we need. Lastly, I would like to see the investment levels increase over time, and we will pursue that as we refine our plans and build confidence in our abilities.

Great, and if I could squeeze one more in a different line of questioning, D&E markets, I'm just curious as to your assumptions around just overall volume growth in those markets, the outlook there, just in light of the economic backdrop, birthrates in those markets, et cetera? And relatedly any commentary on how you're thinking about pricing in those markets just given that I think you'd expect a little bit less dollar based inflation given where FX is? Thanks so much.

Overall, our business is strengthening globally, particularly in developing and emerging markets. We believe we are building a better company, driven by improved execution and recent investments in innovation, advertising, and commercial capabilities. This improvement is broad-based, with growth in the fourth quarter occurring in every region, including double-digit increases in China, Argentina, and India, which is a key long-term growth market for us. We also saw growth in Africa for the first time on this call and high single-digit growth in Eastern Europe and Brazil. While we are pleased with our market performance, we anticipate continued uncertainty in 2021 due to COVID, especially in developing and emerging markets. The uncertainty is expected to be greater than last year as infections rise faster than before. We anticipate additional challenges in Latin America and may already be seeing early effects. Last year’s experience showed that economies often went into restrictions and then rebounded, as we saw in Brazil, where we experienced high single-digit organic growth in the fourth quarter after a significant lockdown in the third quarter. Therefore, we expect some ups and downs in developing and emerging markets but are planning for overall growth.

Okay, very helpful. Thank you so much.

Okay, thank you.

Good morning, Nik.

Hi good morning. Mike, I just wanted to probe on online if I could, just a few thoughts, one, just give us general perspective on how you guys are progressing there? Two, is there any way you can measure incrementality of your online business in terms of how many new consumers you're actually bringing into the portfolio, versus just share migration from other channels? And then three, just wanted to get your assessment on private label and how it's performing online? Because my understanding is that it's actually doing quite well relative to brick-and-mortar, but I just wanted to get your views on that. Thanks.

Yes, overall, the e-commerce side is doing very well for us, with the company growing by more than 30% for the full year. It's encouraging to see that our largest e-commerce business is also our fastest-growing segment, exceeding that growth rate. We feel optimistic about this, especially with many retailers in North America transitioning to omni-channel strategies, which is boosting grocery pickup and other areas. We're still figuring out how to measure incrementality, as the data is evolving. It's challenging to isolate the figures, especially with services like grocery pickup. While I don't have a definitive answer at the moment, we're actively working on it. However, we believe we are gaining market share in online channels, and our growth is strong worldwide, which we're excited about. Our emphasis on data and analytics in our key e-commerce markets is proving effective, and our customers appreciate this as it helps them market more efficiently to their audiences. I apologize if I missed part of your question.

Just the private label share dynamic online versus what we see in brick-and-mortar?

Yes, I don't have the specifics off the top of my head. I do, I will say, generally, certainly across all channels, we saw private label shares down in general across the marketplace. But I'll have to get back to you on the online component.

Great. Thanks, Mike. Best of luck this year.

Okay, thank you, Nik.

Good morning Andrea.

Well, hello good morning. So, could you help us clarify the cadence of the first quarter? If I understand correctly, your guide for 2021 is more back loaded into the second half because you're lagging this 8% growth in volume in the first quarter? And if my math is correct, you have a two-year stack in the last quarter that just closed of about 1% volume growth. So how can we bridge into the first quarter? I understand that you have used the comps for January and February and tougher just for March? So is that because you're building in those market share gains that you were talked about? And can you give us an idea of the volume share in dollar share in customer tissue in the U.S. and globally and how you stack most recently? And in a follow-up question earlier about the pantry stocking, your response seems to indicate that you expect consumption to improve for January and February, at least to what we have seen in the U.S. kind of data. And it seems like you really should be seeing some destocking happening early January, but you expect that to normalize into the rest of the quarter. Thank you.

Yes, that sounds good. As you know, we don't provide specific quarterly guidance and current volatility in this macro environment is certainly making forecasting a bit more challenging. What I would say though is, the pace of our earnings in 2020 was unusual and we're going to have to face that lap as we go through this year. If you look at how 2020 played out, we had that very strong run on tissue at the end of March, which enabled us to deliver a record level of sales in Q1 followed by record profit delivery in the second quarter. So, you know that the first half has very challenging year-over-year comps for us just by the math. We do expect sequential benefit from things like growth and revenue management initiatives that we talked about. Our cost savings programs should build as the year progresses and you put all of that together, and you'll kind of get a picture of how the quarters in the first half, second half might play out. But I'll turn it back to Mike to talk a little bit more about the specific dynamics on the top line.

Yes, Andrea, maybe I'll talk more to consumer tissue in North America. But, as we think about cycling the demand from last year, I think there's one component which is, in general right now, I think we're still living in a world with elevated at home tissue demand with more people at home translates to more usage of particular bath tissue at home. Obviously, there's elevated consumption of towels as well, because people are cleaning more often. So that's one overall effect. Specific to last year though, starting with, I think it was the second or third week of March, we started to see extreme elevated levels of consumption, with consumers stocking up and that's when you recall, all the shelves were empty. I think the third week of March last year the scanner data would say the category was up 212%. So that's one lap I think we will not see that as much this year. And that's certainly a piece that we're going to have to cycle. And we saw that behavior starting in March and it remained through a big piece of the second quarter. So I think the consumer stock up effect will come out over time, but I think for the first half at least, we'll continue to see elevated at-home usage.

That's helpful. On the market share, can you help us like bridge as I know you mentioned that your market share is up which makes a lot of sense. So when – if you give us the cadence when your share really got better, so that's why you're probably building into that as well from a volume and value perspective?

Overall, I would say our tissue market shares in North America are about even with last year, with a slight decline in back tissue due to supply constraints. The demand is strong, and we're shipping everything we can to meet both consumer and customer needs. However, we have experienced a slight decrease in market share. Last year, the category saw an unprecedented 20% growth in North America, and we made significant efforts to meet that demand. For the year, our market shares remained strong, as I noted earlier, being up or steady in around 60% of our key global markets. We observed progression throughout the year, particularly with a strong performance in the second half. This has influenced our strategy and aligns with our belief that our personal care business globally has been less impacted by COVID. In fact, while some categories faced challenges due to COVID, personal care saw a 5% increase for the year, with notable acceleration in the latter half and strong growth in various markets. I can tell you, Andrea, that the growth was widespread. We experienced robust performance in China with both diapers and Brazil in the fourth quarter, and in Argentina, where we gained leadership in the diaper category during the year. Peru, which was a difficult market for us in 2019, has improved significantly, and we gained multiple share points in the latter half of the year. Eastern Europe and Russia have also shown strong shared growth, and important emerging markets like Africa and India are seeing good and robust shared growth as well.

That's super helpful. Thank you. I'll pass it on.

Okay, thank you.

Good morning, Jason.

Folks have, hey, happy New Year. I think it's I don't think it's too late to say that just yet, still January.

Yes.

Thank you, thank you. A couple of cleanup questions. First, in response to Lauren's question on birthrates, you talked about the category of last year, so growing well above infant population. I guess my question is, why do you think that is? Is this like a COVID benefit, parents at home, changing more frequently than the caregiver usually would? Is it a stock-up dynamic or is it something perhaps more enduring that would prevent this category for reverting back to some population or maybe even overshooting some of the stuff on once?

Yes, well, Jason, I would say the category has behaved, as at least the data would suggest, meaning the last data that we had, and the birthrate data does lag by about a year. So the last piece of data we saw was down about 1% or 2%. And actually, as we got into 2020, I think a slight improvement, I think was down to one versus it was down to two the prior year in 2019. In that range, and so I think the category, at least lagging year, would say, has behaved similarly, in the sense of volume, I think, for the categories has been from quarter-to-quarter down one or two-ish, right in that range. So consistent with the birthrate, the category, dollar value has grown, because of premiumization. And I think that is our core strategy for big develop markets, we still think there's a lot of opportunity for us to elevate our categories, our customers, believe that and I think we're seeing that in the performance, particularly with Huggies in North America, for the quarter, I think we were up over 3 share points in the diaper category. And, if you try to kind of put your finger on exactly what that is, there's nothing, there's no one silver bullet. There's a lot of things going on. And, we're excited about the innovation we've brought to the category. We have more comprehensive innovation we're bringing this year I think we're touching are focused on premium this year, and I think we're really excited about that.

Yes, no Sure. I'm That's the unpacking between premiumization is by environment really helpful. So I appreciate that. But let's take on the topic quickly. The Brookings Institute is one source project with America there's reports abundant reports across the developed markets from Japan to Australia to Europe et cetera, talking about declines during COVID. And also deceleration or even declines in emerging markets. So what are you expecting on a more global basis in terms of infant population? And what, if any implications? Do you think this could have a competitive intensity? Assuming that the addressable audience does shrink?

Yes, we are closely monitoring the situation and have noticed some slowdowns in various categories. While I don't have enough data to confirm it as a definitive trend, it seems to be related to COVID or population factors. For instance, we've observed a decline in Russia that aligns with population dynamics, specifically due to fewer women of childbearing age. In Korea, we have seen some improvement over the past couple of years, but the overall trend remains negative. In several markets, particularly in developing and emerging economies, the situation is somewhat difficult to assess at this moment. The impact of COVID in those markets has been quite erratic; we've seen declines during lockdown periods, but as I mentioned earlier regarding Brazil, there was a notable recovery once the economy reopened.

Got it. Thank you guys so much. I'll pass it on.

Okay, thanks, Jason.

Good morning Carey.

Hi, good morning. So I guess, by my math, maybe portfolio wide promotions are still running down, I don't know, 700 to 800 basis points as a percentage of sales relative to the end of last year. And I guess I'm hearing comments about, how to be more efficient on trade spending, and maybe even how that's potentially sustainable. So I guess, these promotional levels stay lower over the course of 2021 especially if demand remains elevated. And it gets, just like more simply put, can these lower promotional levels stick longer than, I think what people have been anticipating, right, because that would potentially have pretty important applications for competitors, the broader sector. And so, maybe I'm reading too much into that. But if you could just talk about, if you've learned something from this past year about how much you do need to spend and how sustainable that might be going forward. And I appreciate any perspective there.

Yes, well, Chris, I think you're hitting a kind of an important spot for me. I mean, philosophically, I just, I don't like, I don't believe in over promoting categories. And really, for me, but the purpose of promotion, at least that I tend to sign up for is it's the drive trial of your brand, right. And, whether you have important news or you're trying to get that brand to a population that hasn't experienced it before, so, that's for me that the strategic point. I do think when categories get over promoted; it tends to drive some commoditization. And over time, I think it lowers the growth potential of that category. So for me, I would like our organization to be very disciplined about how we reintroduce promotions into the marketplace. Certainly, I think we're, we have great partnerships with our customers and recognize the importance to build their business, and we're going to be great partners with them. But I do think, how we think about promotions, I think you're asking the right questions. And so for us to be continue to be very disciplined about how we think about it, and how we manage it will be important going forward. And the other part of it is it's a big spend for us. And it's not, in any given year, the money is not perfectly spent and so we can always get better. That's why we've invested in capability and brought in a lot of tools and our revenue management capability to give us the analytics to help us spend that money more wisely going forward.

Okay, thanks. And maybe just one follow up, just longer term and I guess to use your word, maybe philosophically, the professional channel, is obviously going to come back to a certain degree, whether it comes back to the levels that it had pre-COVID as, people changed how they work and in general, how they interact with these locations. Can you just talk about maybe the capacity in this business and what if people are going to these channels much less often, what you might need to do to right size this organization for the long term or whether spare capacity can be used for other things? So just basically a longer-term perspective on that professional business maybe over the next couple of years? Thanks.

Yes, that's a great point, Chris. Our professional team has successfully adapted, leading to significant sequential improvement in the quarter, particularly in wipers and safety products. You're also right that the core washroom business saw sequential improvement in the third quarter, although it remains down overall. Having both professional and consumer sides to our business is advantageous, as it allows us some flexibility to adjust capacity. While we have unique assets tied to the professional side, we expect the professional business to recover over time, though it's uncertain if it will reach pre-2020 levels. I hope it does, but we are committed to managing our capacity and investments effectively to align the business with growth opportunities or to reallocate assets where needed. We will make decisions that benefit the business, and it's important to note that margin expansion is central to our role, so we will continue to make wise management choices for the long term.

Okay, well, thank you. Certainly we feel like we're very well positioned. Our categories are essential. Our brands are healthy and we think there's lots of room for us to elevate and expand our categories. So thank you for joining us today.

Thank you very much.

Thanks, everyone.