Kimberly-Clark Corporation (KMB)

1. Kimberly-Clark Corporation (KMB) December 4, 2007 Gloria Ho, Jonathan Li, Jason Mueller, Patricia Shongedza

2. Gloria Ho gho2@uiuc.edu Jonathan Li jxli2@uiuc.edu Jason Mueller jcmuell1@uiuc.edu Patricia Shongedza pshonge2@uiuc.edu Investment Managers

3. Presentation Outline • Company Overview • Business segments • Risk assessment • Competitor analysis • DCF Analysis • Recommendation

4. Company Overview • Global health and hygiene company • Personal Products industry • Products made from natural or synthetic fibers • Advanced technologies in fibers, nonwovens, and absorbency. • Founded in 1872 & headquartered in Dallas, TX • Consumers in more than 150 countries worldwide • Manufacturing facilities in 40 countries • More than 55,000 employees • FY2006 Total Revenues of $16.75B; Market cap: $29.5B More than 1.3 billion people (1/4 of the world’s population) trust K-C brands EVERYDAY.

5. Consumer Brands

6. Business Segments: Brands

7. Business Segments: Products

8. Revenues by Segment

9. Revenues by Region • Net sales grew 14% in the developing and emerging markets, with each of the regions contributing to the increase.

10. Innovation • K-C invented five of their eight major consumer product categories: • facial tissue, paper towels, toilet paper on a roll, feminine pads and disposable training pants • Primary raw material: fiber recycled from recovered waste paper • Polypropylene and other synthetics

11. Presentation Outline • Company Overview • Business Segments • Risk Assessment • Competitor Analysis • DCF Analysis • Recommendation

12. Risk Assessment Significant increases in costs Foreign market risk Heavy price competition High failure risk for new products 12

13. Risks: Input Costs • Pulp, polypropylene, and synthetic polymers • Direct input to 25% of total revenue. • Cost increase for 2007 more than 120% greater than originally forecast. • Result: 4-7% increase in prices for tissue paper, diapers. • Costs partially offset by increased volume, outsourcing. 13

14. Risks: Price Competition • Highly competitive segments • Low cost substitutes, private/generic labels for virtually all consumer products. • Questionable customer loyalty: Brand loyalty vs. Brand repertoire. • The Wal-Mart Effect • 13% of total firm-wide revenues • Mitigating Factors • Leverage customer knowledge and increase responsiveness. • Ex: Packaging alternatives for diapers • Leverage global R&D to make products more adaptive to local markets 14

15. Risk Factors Cont’d • Foreign Markets • Rapid investment in BRICIT could lead to overcapacity. • Political and socioeconomic volatility in emerging markets. • Latin America, Eastern Europe. • Success highly contingent on ability to form partnerships. • Adapting to cultural differences, building distribution networks, etc. • Intellectual property protection. • New Product Acceptance • High initial marketing costs • High market saturation of existing products: difficulties in continuing innovation 15

16. Presentation Outline • Company Overview • Business Segments • Risk Assessment • Competitor Analysis • DCF Analysis • Recommendation

17. Competitors • Vary in size and function • Competes against well known branded products therefore faces risk in consumer acceptance • Principle areas of competition include brand loyalty, product quality and innovation, price and marketing strategies

18. Competitors

19. 1 year chart (competitors)

20. Porters five forces • Threat of new entrants; LOW • Bargaining power of suppliers; LOW • Bargaining power of buyers; MODERATE • Threat of substitutes; HIGH • Industry rivalry; HIGH

21. RCMP Position • Purchased 300 shares on April 20, 2005 at $63.91/share • Total investment: $19,173 • Current market price: $69.81 • Unrealized gain of $1,770.00 (9.23%)

22. Position in the portfolio

23. Correlation Matrix

24. Recent News Kimberly-Clark Declares Dividend Kimberly-Clark Declares Regular Quarterly Dividend of 53 Cents/Share • Dividend increased 9% in 2006, and expected to increase 8% in 2007 November 15, 2007: 06:27 PM EST Ahead of the Bell: Kimberly Clark Analyst Upgrades Kimberly-Clark, Says 2005 Restructuring Program Paying Off with potential increased revenue coming from BRIC emerging markets November 26, 2007: 09:11 AM EST

25. Presentation Outline • Company Overview • Business Segments • Risk Assessment • Competitor Analysis • DCF Analysis • Recommendation

26. DCF Analysis • WACC calculation • Beta: 1.3 (Google Finance: 0.71) • WD: 7.18% • WE: 92.82% • KD: Weighted avg. interest rate • KE: Cal. from CAPM • Tax rate: 36.7% (effective tax rate)

27. DCF Analysis Key assumptions: • Sales Growth Rate (2007-08): 4.8% • Sales Growth Rate (2009-12): 2.0% • Cost of product to Sales: 66.9% • Terminal Growth Rate: 3.0% • Dividend Growth: 8%

28. DCF Analysis Key Assumptions

29. DCF Analysis • Based on DCF Share Price: $73.49

30. Presentation Outline • Company Overview • Business Segments • Risk Assessment • Competitor Analysis • DCF Analysis • Recommendation

31. Recommendation • Based on DCF Share Price: $73.49 • Current Share Price: $69.56 (3 Dec 07 closing) • HOLD