Pranay Damania

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• Pranay Damania
• Juan Espinosa
• Ryan Foelske
• Brandon McArthur
• Thursday, November 13, 2008

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Company Overview
Improving the Health and Hygiene of People
Everyday 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 FY2007 Total
Revenues of 18.26B Market cap 23.39B More
than 1.3 billion people (1/4 of the worlds
population) trust K-C brands EVERYDAY.
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Consumer Brands
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Business Segments Brands
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Business Segments Products
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Company Overview
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 COGS Makes up about
69 of Sales Primary raw material fiber
recycled from recovered waste paper Largest
Consumer of Polypropylene- Oil Derivative
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Macroeconomic Overview

Oil continues to be volatile, but lower prices
will have positive impact on economy and K-C.
Yesterdays Price 55.47 /barrel Decline in
Consumer Confidence K-C affected by decline in
economy, but generally looked as recessionary
proof Strained consumers continue to purchase
K-C products during any economy, but may look to
lower priced generic brands.
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• Total net sales grew 21 between 2004 and 2007.

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• Total operational profit grew 4.4 between 2004
  and 2007.

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• Total operating profit grew 4,4 between 2004 and
  2007.

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Key Factors

• Significant increases in inputs that can reduce
  KMBs financial results
• Competitive market
• Change in the policies of retail trade customers
  and dependence on key retailers.
• No successful of the reduce costs plan.
• Differences between real and estimated sales.
• Foreign market risks

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Strategic cost reduction plan

• Implemented since 2005, this plan expects to
  reduce costs by reform manufacturing and
  administrative operations. So far, this plan
  includes
• Less facilities
• Reduce selling, general and administrative
  expenses
• Relocation of equipment
• Reduction of workforce
• This plan expected to result in cumulative
  charges of approximately 630 million by the end
  of 2008 (4 of total 2007 net sales).

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Peer Group Comparison Business Focus

• Highly competitive industry
• Industry participants vary in size and function
• Proctor and Gamble
• Johnson Johnson
• Georgia-Pacific - Private firm
• Colgate Palmolive

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Peer Group Comparison

• Criteria for Peer Companies
• Growth Potential
• Risk Profile
• Peer Companies
• Proctor and Gamble (PG)
• Johnson Johnson (JNJ)

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2 Yr Stock price KMB, PG, JNJ, SP500
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Ratio Analysis DuPont
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DCF Analysis

• Beta estimates
• Yahoo 0.33
• Bloomberg 0.7
• 3-year Weekly 0.63
• Used 0.65
• Used 0.65 to due to confidence in our own
  calculations and huge differences in other
  sources.

• Cost of Debt
• Used weighted average of LT and ST debt from
  balance sheet
• Found costs on Yahoo
• LT 10-yr corporate AA
• ST 2-yr corporate AA
• WACC 8.22

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Oil Price vs. COGS
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DCF Analysis

• Sensitivity Chart WACC vs COGS/Sales

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DCF Analysis
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DCF Analysis

• Projected Cash Flows

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DCF Analysis
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Relative Valuation Multiples
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Relative Valuation

• Football Chart

Relative Valuation Range 61.22 70.35
Triangulated Value 74.73
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Current Position

• RCMP purchased 300 shares of KMB on April 20th,
  2005 for 63.91/share
• Currently KMB is trading at 56.64 as of November
  12, 2008 for an unrealized loss of 2,181.00
• Dividend Payouts sum up to 2,151.00
• Total Unrealized Loss 30.00

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Recommendation

• Value per Share
• DCF Value 73.40
• Triangulated Value 74.73
• Current Market Price 56.64
• Currently under-valued by approx 22.83
• BUY 100 Shares at Market Price