Thomas Falk - Chairman, Chief Executive Officer Mark Buthman - Senior Vice President, Chief Financial Officer Paul Alexander - Vice President, Investor Relations.

Ali Dibadj - Sanford Bernstein Chris Ferrara - Wells Fargo Olivia Tong - Bank of America Merrill Lynch Bill Schmidt - Deutsche Bank Gail Glazerman - UBS John Faucher - JP Morgan Lauren Lieberman - Barclays Erin Lash - Morningstar Javier Escalante - Consumer Edge Research Pat Trucchio - BMO Capital Markets Caroline Levy - CLSA.

Ladies and gentlemen, thank you for your patience in holding, and we now have your presenters in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today’s presentation, we will open the floor for your questions.

At that time, instructions will be given as to the procedure to follow if you would like to ask an audio question. It is now my pleasure to introduce today’s first presenter, Mr. Paul Alexander..

Thank you and good morning everyone. Welcome to Kimberly-Clark’s year-end earnings conference call. Here with me today are Tom Falk, Chairman and CEO; Mark Buthman, Senior VP and CFO; and Mike Azbell, Vice President and Controller. Now here is the agenda for the call. Mark will begin with a review of our 2014 results, focusing mostly on the full year.

Tom will then provide his perspectives on our results and then address the [indiscernible], and we’ll finish with Q&A. As usual, we have a presentation of today’s materials in the Investors section of our website. That presentation and this morning’s news release both include our detailed planning assumptions for 2015.

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. We’ll also be referring to adjusted results and outlook. Both exclude certain items described in this morning’s news release.

The release has further information on these adjustments and reconciliations to comparable GAAP financial measures. And now I’ll turn it over to Mark..

developing and emerging markets, and developed markets, and that will replace KC International in Europe. Developing and emerging markets will comprise Eastern Europe, the Middle East and Africa, Latin America and Asia Pacific, and will exclude Australia and South Korea.

Developed markets will consist of western and central Europe, Australia and South Korea. So for some perspective, in 2014 our D&E markets business represented 33% of our company sales, 30% if you take into account the currency rate change in Venezuela.

The business generated organic sales growth of 11%, excluding Venezuela, and improved operating margins year-on-year. We expect high single digit to low double digit organic growth in 2015 for our developing and emerging markets business. Our developed markets business was approximately 21% of company sales in 2014.

Organic sales were up 1% with healthy and improving operating margins. That wraps up my comments, and I’ll turn it over to Tom..

Thanks Mark, and good morning everyone. I’ll share my perspective on our full-year 2014 results, and then I’ll address our outlook for 2015. So let’s start with 2014. We delivered on our financial commitments while making strategic changes to further improve our company.

As Mark just mentioned, our organic sales grew 4% in 2014, and that was right in line with our long-term target. KC International had another great year, including excellent progress with our key growth initiatives. For example, in our diaper business in KCI, organic sales were up 25% in Eastern Europe, 25% in China, and 10% in Brazil.

We continue to benefit from innovation in these markets, and in China Huggies diapers are now sold in 105 cities, and that’s up from just 90 cities at the end of 2013. We’re targeting to be in 115 cities by the end of this year. Our feminine care organic sales rose as a double-digit rate in KC International.

We continue to grow our brands and launch innovations in this category around the world. Our adult care organic sales were also up double digits in KCI, and baby wipes rose high single digits. Elsewhere in KC International, our KC Professional sales, organic sales were up double digits.

This is now a billion-dollar business for us with attractive margins, so we’ll be making additional investments in this part of our portfolio to drive further growth in the future. Moving to our North American consumer business, we generated solid sales growth and launched innovations on several brands in 2014.

That included Viva towels, Goodnites youth pants, Huggies baby wipes, and our Poise and Depend adult care brands. Our North American market shares were up or even with the prior year in six of the eight categories that we track. One of our businesses had a soft year in North America, and that was mainline Huggies diapers.

To improve our performance in 2015, we will be making investments in innovation, marketing and relative value to key competition. Turning to KC Professional in North America, we delivered high single digit volume growth in safety products while volumes were down in washroom.

We have made some investments to be more competitive in this category, and with better execution and an improving U.S. economy we expect to drive more growth in this business in 2015.

Mark’s already highlighted how we continue to manage our company with financial discipline, so I’ll just add that I’m pleased with our cost savings, our margin improvement and our cash returns to shareholders during the year. I’m also pleased that we delivered on our bottom line growth target in a challenging environment.

We also made some important strategic changes to the business this past year. We successfully executed the spin-off of our healthcare business, and that’s allowed both Kimberly-Clark and Halyard Health to further increase focus on their own strategies. We initiated our 2014 organization restructuring.

This will help us improve our efficiency, will offset the impact of stranded overhead costs from the spin-off, and will increase our flexibility to invest in future growth. We expect to make significant progress with this program in 2015. We also completed our European strategic changes initiative and we are realizing the benefits we expected.

Over the past two years, our European consumer business has increased operating profit by 10% and improved operating margin by 300 basis points, and we’re growing volumes in our high margin childcare and baby wipes businesses.

So all in all, I’m encouraged with our accomplishments in 2014 and our teams are focused on driving further improvements going forward. Now let’s move to our outlook for 2015.

The environment has become significantly more volatile recently, particularly with currency rates and commodity cost, so planning in this environment has become much more dynamic. Regardless, our teams continue to focus on our global business plan strategies and the fundamentals that create long-term shareholder value.

In 2015, we’ll leverage our brands, our growth initiatives, our innovations and marketing investments to drive organic sales growth.

We’ll deliver healthy levels of cost savings to improve our margins and fund reinvestments in the business, and we’ll generate strong cash flow, improve our return on invested capital, and allocate capital in shareholder-friendly ways. In terms of our specific 2015 targets, on the top line we expect organic sales growth of 3% to 5%.

We’ll continue to focus on driving rapid growth in personal care and KC Professional and developing in emerging markets. We will launch innovations throughout our businesses. Near-term activity in North America will include upgrades on Huggies diapers, Huggies baby wipes, and in our adult care business.

Internationally, we’ll introduce new or improved products across a number of categories. To support our innovations and growth initiatives, our advertising spending should be up somewhat as a percent of sales. On the bottom line, we’re targeting adjusted earnings per share in the range of $5.60 to $5.80.

That’s up 2% to 5% compared to adjusted earnings per share from continuing operations in 2014. Similar to this past year, we expect that earnings in 2015 will be higher in the second half of the year as compared to the first half of the year. Like other multinational companies, we’re facing significant currency headwinds.

Including the rate change in Venezuela, we expect that translation effects will reduce our sales by 8% to 9% and reduce earnings by 9% to 10%. Adding in transaction effects, currency is likely to hurt our bottom line by more than 15% in 2015.

On the commodity front, the outlook has improved some in the past three months, but at this point we are not planning for a big commodity windfall. Oil-based costs have started to fall recently, but not nearly as much as the drop in oil prices. We expect pulp costs, including secondary fiber, to be similar to last year or even up slightly.

We’re also assuming that local inflation will continue in some of our international markets. Adding it all up, our plan assumes cost deflation in 2015 of zero to $150 million.

At the midpoint, that’s only a two point benefit to the bottom line, so the primary ways that we’ll offset currency headwinds will be by raising selling prices where we can, delivering cost savings, and controlling our overhead spending. We will continue to focus on cash generation and capital allocation in 2015.

Cash provided by operations should be similar to 2014 or perhaps up somewhat, despite the lost cash flow from the spun-off healthcare business. We expect to allocate at least $2.1 billion to dividends and share repurchases in 2015. That represents a cash return of about 5%, based on our current market capitalization.

So in summary, we delivered on our growth targets in 2014 while making strategic changes to improve our company. We continue to focus on the fundamentals that drive our long-term performance and we remain optimistic about our prospects to generate attractive shareholder returns.

That wraps up our prepared remarks, and now we’ll begin to take your questions..

[Operator instructions] Our first question comes from Ali Dibadj with Bernstein..

Hi. A few questions for you. One, I wanted to dig a little bit deeper into North American consumer tissue, given the price mix was down quite a bit. I get that you’re rolling off the sheeting, I get that there is competitors in the marketplace, Georgia Pacific in particular that was aggressive.

But can you tell us a little bit of how you think it should go forward? You said pricing actions.

I wanted to get a sense of what you think that should look like going forward, and if you can give us any more detail if it is a capacity issue - I know we’ve all heard about [indiscernible] capacity coming online, if there’s anything around that that you think is more sustainable from a pressure downwards. .

Yes, I guess the way I’d look at this, Ali, is probably the fourth quarter was more of a year-on-year impact than timing of promotions.

If you looked at it sequentially, I’d say tissue pricing in the market was pretty similar third quarter to fourth quarter; and again, we wouldn’t see a big swing going forward, so I’d say second half was a little bit more competitive than first half, but pulp prices have been pretty stable and aren’t moving around very much, so there’s not a lot of driver for competitive pricing at this point in time..

Okay, so the capacity issue is not an issue, it sounds like, so no change there?.

I mean, I think industry operating rates are still hovering around 90%, so that may be down a tick. As we look at the industry capacity increase in 2015, it looks like there’s maybe net 1% additional capacity coming online. That’s pretty much what the market grows every year, so there is not a huge imbalance at this point in time.

So I’d say we’re cautiously optimistic about how that will play out..

Okay, two other ones, one on Venezuela.

Just wanted to get a sense of what’s changed over the past several months that makes you change the way you’re accounting for it, and moreover as we look at it going forward, how much historically, w whether it be between consumer tissue or personal care, you are benefiting from price mix from Venezuela that affects KCI, and we see good price mix in Latin America, for example, for PC, how much of that was Venezuela and how we should expect that going forward.

So what’s different and then kind of going forward on the Venezuela pulling out from a price perspective..

Yes, you know, I think it’s something that Mark and I have been spending a lot of time watching and working with Elane Stock and the KC International team to kind of monitor what’s going on on the ground in Venezuela.

Really if you look at what happened with the oil price shock and that economy is so dependent on oil, we really expected probably some other deflation or devaluation action to happen, and we got to the end of the year and felt like it was the right thing to do, to move to a rate that was maybe more reflective of economic reality on the ground.

We’re still getting foreign exchange at the 6-3 rate, but translating in our U.S. dollar results felt like we should use a rate that was a little closer to the economic reality, so something that we spent a lot of time thinking about and talking about in the fourth quarter. But the drop in oil prices certainly made a difference.

It’s also a key that we--you know, as we said in the last call, that we’ve kept our U.S. dollar exposure there, and so we started to take some down time in the country due to lack of foreign exchange, and that also was a factor in our decision.

In terms of the impact on Venezuela, it’s been about a one point tailwind to KCI growth if you look at it in total, or if you took Venezuela out of the KCI growth rate, it’d probably drop by about a point, if that makes sense..

It does help. So last question, and it’s something I asked a little while ago, a few years ago actually, and I just want to revisit it and get your point of view again, which is 2014, dividend plus repurchase was $3.3 billion, which was very impressive.

But yet again, that was higher than your free cash flow, as it has been for the past several years, and it sounds like back of the envelope it will probably be the same type of return to shareholders higher than your free cash flow in 2015 as well.

I want to get a sense of how you think about that, especially as you describe in a more volatile environment, and whether it’s sustainable..

Yes, that’s a good question. In 2014, basically the difference was the Halyard dividend, and so as part of the spin, we pulled the Halyard dividend out, so that boosted us up to the top end. But Mark, maybe you want to give a little bit more color on 2015 and how you’re thinking about that..

Yes Ali, I think it’s a fair assessment. As the company grows, we’ve grown our balance sheet a little bit in line, but our target is to be a solid single-A credit. Heading into the year, we expect free cash flow to equal dividends and share repurchases.

This year coming into the year, our outlook was to increase debt just a little bit associated with the healthcare spin, and we felt we had a little bit of capacity. But there’s nothing changed about our target to be a solid single-A, and we watch those metrics pretty closely..

Okay, thanks for all the answers. .

Our next question comes from Chris Ferrara with Wells Fargo..

Thanks guys. Good morning. So I guess you’re looking for one to two points of pricing in ’15. You did about two in ’14.

I guess I’d like to get a sense of your confidence level that you’ll be able to take incremental pricing, especially in light of where crude is sitting, from a competitive standpoint, and how much of that maybe is follow-through pricing that you’ve already taken, like how much is incremental pricing in ’15..

Yes, good question. So a fair amount of it is follow-through, and it’s not going to be broadly based, so it’s going to be targeted in key markets. Where you’ve seen big currency moves, like Russia, Argentina, you’ll see a disproportionate amount of pricing in markets like that.

If you see a market like Australia where you’ve had currency weakness, or the euro zone where you’ve seen currency weakness, it will be much tougher to get pricing in those markets, and I think the commodity factor that you mentioned as well will make it more difficult.

But in a market like Russia, you could see double-digit, mid-teens kinds of pricing in Russia and Eastern Europe, just because of the shock that you’ve seen to currencies in those markets..

I guess more specifically, I think in the personal care KCI blurb in the press release, you talked about Brazil volume being down there, and relating it to pricing. Is that the risk--I mean, volume fell off pretty markedly, I guess, in KCI without a lot of incremental pricing relative to last quarter.

Could you talk about that risk a little bit?.

Yes, I mean, Brazil we took some pricing on November 1, and so we had a little bit of a late third quarter, early fourth quarter buy-in ahead of that, so it was a little softer in the end of the quarter as a result of that.

We were probably--year-over-year, our promotional timing was not quite as heavily back end-loaded, so I’d say overall we felt pretty good about our volume in Brazil being up double digits in diapers for the year. We’ve got great momentum and innovation coming, and I’m expecting them to have a very solid year in 2015..

Thanks. Just lastly, real quick, the mainline Huggies diapers, obviously that’s where you’ve been losing share. You commented on it, and one of the things you noted, I guess, was adjusting relative value to key customers or versus competition.

Could you talk about how big a piece price will be to what you end up doing in mainline diapers, and what kind of timeframe you expect that at?.

Yes, I think value, as you know Chris, is a combination of performance and price, so we’ll make sure that we’re competitive in our promotion calendar, that we’ve got the right amount of display activity, that we’re executing it well at retail.

So I wouldn’t expect anything major from a list price standpoint; it’s really more of just making sure we’re executing and more competitive with at least our fair share of display activities at competitive prices in-store, and then we’ll have some product news as well coming with some mainline improvements in late first quarter and additional improvements coming during the year, just to make sure we get off to a better start and have a much better year on Huggies in 2015..

Thank you..

Our next question comes from Olivia Tong with Bank of America Merrill Lynch..

Great, thanks. Appreciate it. On commodities, most of your assumptions are ahead of where current spot rates and external estimates are.

Broadly speaking, I understand that many forecasters guess that prices will stabilize higher for oil, but can you give more color on your other forecasts, including pulp, and also what you’re thinking in terms of resin?.

Yes, from a pulp standpoint and secondary fiber, it’s looking fairly stable in the outlook.

I mean, they see some--we’ve actually in recent weeks seen eucalyptus going up a little bit and northern softwood coming down a little bit, secondary fiber has been pretty firm - it’s maybe trended down just a bit, but our outlook for both of those is to be pretty stable during the year.

They don’t seem to be affected as much by some of the big currency moves maybe as they have been in the past, and the underlying supply-demand balance has been fairly stable and even tight in some grades of pulp, and in some markets for secondary fiber. So on the polymer side, we would say that over time it generally follows oil.

It seems to be a little slower at this point in time, and there’s been some supply constraints on polypropylene, which we use a lot of, that has held pricing up a little bit more than maybe you would expect. That one’s been the toughest one to forecast, and there aren’t as many good forecasting services out there for that.

There is a little bit of a forward market, but it’s not that reliable and not that heavily traded. So we’d expect us to get some benefit on that zero to 150 million of cost deflation, and polymer is a pretty good chunk of that, but that’s the harder one to call for the year, probably..

How have your discussions with retailers gone, particularly in the U.S., given what has happened with prices at the pump?.

Well with the fourth quarter, we still had $55 million of cost inflation in our quarter, so we still had polymer and other materials going up $30 million, pulp was still up $15 million, distribution costs, unrelated to fuel surcharges, but just rates were up $15 million.

So we haven’t had any deflation yet to talk about, so I think at this point they’re all watching it closely but it hasn’t been that noisy at this stage..

The other perspective I’d add, Olivia, is that as inflation has been moderate for the last few years, we really haven’t recouped that on the way up, so that may help us if costs go down a little bit in 2015. .

Got it, thanks. Just if I could follow up with one quick question on the organic sales, you guys give that by key emerging markets.

You gave for the full year, but can you give it to us for Q4?.

Yes, are you referring to the diaper business, Olivia?.

Right, diapers - Brazil, Eastern Europe - exactly..

Yes, so China was up almost 30% in the fourth quarter in diapers, Eastern Europe was up about 25%, and Brazil was down slightly due to the pricing action Tom described..

Got it, thank you..

Our next question comes from Bill Schmidt with Deutsche Bank..

Hey guys, good morning. Just had a few questions.

So was there any pre-buy ahead of all these price increases, especially in Eastern Europe and Russia, that might have impacted things a little bit on the volume side in the quarter?.

Not so much in Eastern Europe, and some of their pricing--they’ve been getting pricing all year, and there’s some more going in in the first quarter. As we talked about in Brazil, there was some forward buy that probably boosted late third quarter, very early fourth quarter, and then it was a little lighter in November and December in Brazil..

Okay, thanks. Then did you exit Italy, because I didn’t see a press release, but I looked at some of the Nielsen data and it looks like volumes there are down 30, 40%..

No, we’re still selling in Italy in diapers and in tissue, so. I haven’t seen that in the Nielsen data. I’d say our business was a little softer in the fourth quarter, but it wasn’t to that extent. .

Okay, and then as I look at the raw material guidance, the zero to $150 million, you kind of look at the different pieces, maybe I’ll just confirm some of the assumptions.

But I thought that every dollar move in oil was $6 million to EBIT, and then you gave us the other assumptions on polypropylene and super-absorbers, and the numbers I’m getting to are significantly higher than your zero to $150 million, so I’m just trying to figure out where I’m wrong..

Yes, those are the rules of thumb we’ve given. Those rules of thumb aren’t working right at the moment, so I think eventually they’ll probably work, but it’s going to take a little longer for it to flow through the pipe at this point in time.

So yeah, you would expect that over time if oil stays at this level for an extended period of time, that you’ll see more of that flow through, but it’s not going to happen at this point in the first half.

We may get a little bit more as the year progresses - we’ll see, but at this point based on what we know, we’re not calling for that windfall to flow through at the same level as our traditional rules of thumb would have indicated..

Yes, the reason I bring it up is that if oil really is--just oil alone is $6 million per dollar move, that alone should be $225 million next year, right?.

If you got it all in one year, but it’s got to flow through adhesives and packaging materials, and that’s just taking a little longer at this point in time. We’ve seen nowhere near that kind of drop-off in the cost of polymer at this point.

It’s come down modestly, and as we said, in the fourth quarter we still had inflation in those material areas so we didn’t see any benefit yet at this stage..

Okay.

Not to keep belaboring this, but oil is exclusive to the polypropylene and the natural gas, right, so oil is the $6 million and then it’s the different buys also in the different raw materials - is that correct? So I’m not double counting in terms of the $6 million, right?.

The oil--the rule of thumb that we’ve given you was intended to kind of roughly cover all of our oil-based materials. We don’t have that much direct oil exposure at all..

Okay, all right. That makes sense. Thanks very much..

Our next question comes from Gail Glazerman with UBS..

Hi, good morning. Could we go back to the North American diaper situation? Your volumes have been pretty weak for a while.

Have you started to take any of the actions that you’re talking about, and as you think of your plan for 2015, how concerned are you that with a potential deflationary environment, the competitive environment is only going to get worse?.

I’d say that’s started, to take some of the competitive action, yet; but it takes a lot longer to effect retail or promotion plans, so much of that work was started in ’14 and will play out in ’15. So a little bit better in late fourth quarter, but it didn’t show up much in the numbers. We know it’s a competitive environment out there.

It has been, and we’re going to be competing harder and we’ve anticipated that there will be some competitive response in our outlook..

Okay. Can you talk a little bit about what you’re seeing in private label? Obviously Amazon made some noise earlier this week, as well as a few weeks ago.

Are you seeing any incremental or less pressure there?.

I would say the Amazon thing was kind of here and gone fairly quickly, so that one didn’t have much of an impact in the marketplace. It probably generated more media interest than consumer interest, I would say.

Private label shares didn’t do much this year, so you’re seeing more of the activity probably has been with Luvs and the value segment has been where more of the action has been this year in terms of share growth..

All right.

Can you talk a little bit about North American [inco], just kind of your latest thoughts on how Procter’s return to the market is playing out?.

Yes, I think they’ve done pretty well on the light end, the part that would compete with Poise. They’ve probably--I think they’ve picked up seven share points.

I’d say we’ve lost our fair share, but have defended pretty effectively in terms of promotion; and the category has grown a little bit, so our volume actually was flat overall in the quarter, despite a big competitive launch.

We’ve done better on the Depend end of the spectrum where we really haven’t lost any share and have done well in that segment of it. We’ve got more innovation coming in that space and feel pretty good about our business around the world.

As we noted, we’ve had double-digit growth in adult care globally as well, so it’s an exciting category, on trend, and we’re going to keep driving hard to get at least our fair share of the growth there. .

Our next question comes from John Faucher from JP Morgan..

Good morning. Just want to talk a little bit about the view on the promotional environment.

This came up a little bit, but right now, given how the competitive environment is looking, the balance between marketing spend and trade promotion, do you feel like you’re in the right situation there, and have you seen any risk of any of the competitors maybe tilting a little bit more towards promotion in advance of some of the raw material benefits flowing through? Then also, can you just talk a little bit about some of the timing of some of your innovation in terms of how we should see that playing out over the course of the year? Thanks..

Sure. On the trade versus strategic, I think it’s a little early at this point in time because there hasn’t been much deflation that’s made it into anybody’s P&L yet. On the tissue side, you certainly haven’t seen pulp costs come down significantly, if at all, so that’s not really driving anything there.

You’re not seeing it really either on the personal care side that would be driven by oil particularly, so it’s not a factor at this stage and we feel pretty good about our mix of marketing spend going into 2015.

We’re trying to make sure we can drive even better performance off the trade money that we spend, so we’d love to drive more volume for the same investment by executing it better at retail and coming up with the right strategic price points, the right kinds of display activity that tie into the things that retailers are supportive of, so we want to get better at that around the world where we can.

So I think from an innovation standpoint, you’ll see some of the diaper stuff happen in first quarter. There’s some adult care activity that’s happening in the first half as well, so pretty strong calendar around the world, but quite a few things getting started already early in the year..

Great, thanks..

Our next question comes from Lauren Lieberman with Barclays..

Thanks, good morning.

Can you talk a little bit about the competitive environment in diaper pants? I know that’s been a place where in emerging markets, you seem to be a bit ahead of the game, but Procter talked about launching a new and improved in the second half of the year, so just curious if you see any change in dynamics in that category in terms of share, or even a deceleration in the diaper pants segment as the economies in emerging markets have been a bit tougher.

Thanks..

Yes, that’s been a pretty exciting business around the world, and really we’ve been a strong player but also Unicharm and Kao, two Japanese competitors--you know, in Japan diaper pants are the majority of the diaper category, and they’ve got terrific products, so we’ve been competing with them for some time.

We have been launching diaper pants pretty aggressively around the world, and Procter has recently kind of entered that part of the category both in China and Russia, and a few other places - Brazil, so there’s a lot going on there. It’s really a strong source of category growth everywhere. Not seeing it slow down at this point in time.

I think it will be interesting to see what happens in markets like Russia with the economic activity that’s playing out there, but at this point it didn’t seem to slow anything down significantly in the fourth quarter, so we’ll watch that one closely going forward..

Great. Also just on Russia, you talked about mid-teens kind of pricing but still had really strong volume.

Are you anticipating that volume decelerates because of the pricing, or do you think the consumer is going to be able to bear the pricing?.

This is a bit of uncharted territory. If Russia and some of the other eastern European economies decline by mid-single digits, which is what some of the forecasters say, we’ll see how that plays out in terms of consumer purchasing power. At this point, our momentum looks pretty good.

Our team over there is pretty motivated, and while the size of the P&L is going to wiggle around with the exchange rates, they are really focused on improving the shape of the P&L and making sure they take market share, they drive their innovation hard, they’re improving their margins, trying to get pricing where they can, and come out of it with a much stronger market position as the crisis starts to move forward..

Okay.

Then just finally on KC Professional and kind of the cyclical exposure to an improving U.S economy, in your comments it sounded a little bit like there is some investment in price necessary, so can you talk about in what segments of business that might be, and has that been holding the business back thus far?.

It’s probably typically been to hold some lower tier volume, where we’ve had to make some price investments to make sure we were competitive, so that’s probably one soft spot.

We’re trying to not chase low margin business, but there are some strategic pieces of business that you have a fuller range of products in that you might be more competitive on washroom, if you’ve got their safety and wiper business.

But broadly, secondary fiber prices actually have continued to go up, so there have been some industry price increases still in that market as well, so that’s offsetting the kind of price drag to be competitive in some markets with some customers as well.

But overall, we think that KCP, and we’ve talked to our distributors, they’re looking to have a better 2015 as the U.S. economy continues to recover and employment levels are pretty good, so they’re a little bit more bullish than they were a year ago..

Okay, great. Thanks so much..

Our next question comes from Erin Lash from Morningstar..

Thank you for taking my question.

A lot of my questions have been answered at this point, but I was wondering - and you kind of alluded to this a little bit earlier - but I was wondering with regards to just the logistics and transportation costs, if you could talk to whether the degree to which truck driver shortages is impacting you to any meaningful degree and offsetting some of that benefit that you might otherwise see from the decline in oil prices..

Yes, as we talked in the quarter, of our $55 million in cost inflation, $15 million was in distribution, and virtually all of that was rate increases related to driver availability.

So that has been a big problem for the industry overall, and it’s actually caused us some customer service issues in some of our businesses for periods of time where there was an inability to get trucks in certain lanes.

So that’s something that we’ll continue to watch, but that certainly was a bigger drag than any benefit we got from lower diesel prices in the quarter..

Got it, thank you. That’s very helpful. I was wondering if you could just speak to just across your channel exposure, if there is any opportunity to further penetrate other alternative outlets - dollar stores, or if there’s any areas where you feel you’re under-penetrated to this point..

We try to sell our products wherever mom wants to shop, so we’re doing pretty well across the channels. I think we were probably a little late to ecommerce in the U.S. - we’re catching up quickly.

We’ve probably been ahead in ecommerce in markets like China, where we’re doing quite well there, but we’re also trying to make sure--you know, there’s a channel of baby stores in China which is very popular, that we do well in.

There are small format diaper store in markets like Argentina where they might have 6,000 little tiny mom-and-pop run shops that just sell diapers and baby formula, so our customer teams around the world are constantly challenging to say, where else is mom looking to shop, what’s emerging, how do we make sure we get on the front end of it so that we’re there with the right offer..

Thank you, that’s helpful..

Our next question comes from Javier Escalante with Consumer Edge Research..

Hi, good morning everyone. I would like to talk about the 2015 forecast for operating profit growth to be up 1% to 4%. In Slide 27, you basically said that the currency impact, including transaction costs, is going to be 15%.

So essentially, what is the currency-neutral EPS growth that you guys are planning, like 20%? You cannot get there, even having all the full savings flowing through the P&L, having all the restructuring savings going through the P&L, and even taking $150 million in commodity benefits. You don’t get to 20% operating profit growth.

So if you can help me understand this commentary of the currency impact on profits being more than 15%, that would be very helpful..

So Javier, was that a question or a performance review? I just was--.

Well, I don’t see how you can grow currency-neutral profits at 20%..

So if you looked at it, it kind of--I’d say it’s a fair question.

There are some big moving parts in the P&L, maybe more than we’ve seen in the past, so if you looked at it in big buckets and said, okay, currency translation and transaction is probably $500 million to $600 million, and if we get the price that we’re talking about of one to two points of price, that offsets maybe half of the currency drag.

You get some commodity deflation, which is another chunk, so if you can get price and commodity deflation, that probably offsets two-thirds of the currency translation and transaction.

Then you’ve got to get benefits of volume growth, benefits of our cost savings program and our organization restructuring program, cover other costs increases, and deliver your profit growth year-on-year. So you’ve got probably bigger buckets of activity moving through the P&L than maybe we’ve had in the past, but the math actually works. .

So what would it be, then, the currency-neutral EPS growth that you are forecasting?.

Well, the question would be, as you said, some of the price we’re getting is because of currency, so--and these things, if you think about currency, commodity costs, and price, they’re all somewhat related.

So you could look at it in the absolute sense, but you might be kidding yourself that you could still get all the price in a currency neutral environment..

But it’s not that currency-neutral EPS growth, it’s over 20%?.

Well as you said, if currency translation and transaction is 15-plus, and we’re growing our bottom line EPS 2 to 5, you can do the math and add it to the 15, and that’s the underlying growth. It’s going to come in cost savings, volume improvement, price mix, and commodity deflation. .

But do you think that your forecast is conservative or it’s aggressive for 2015, because it seems like everything has to go well to grow EPS 2 to 5%..

Well Javier, we usually try to give guidance right down the middle of the fairway, that it’s the best estimate we have at this point in time of what we think is going to happen.

I will tell you, there is more big moving parts flowing through the P&L, so if currency moves suddenly in one direction and we don’t recover quickly enough on price, that’s a risk.

On the other hand, there have been other questioners on the call saying, well gosh, what if commodities stay down longer and lower than you thought and you get some benefit? So I think we will do the best we can in the environment we’re in, and we’ll give you visibility as we go through the year on how we’re tracking against these big assumptions that we’ve made..

Thank you very much..

Our next question comes from Connie Maneaty from BMO Capital Markets..

Hey, good morning. It’s actually Pat Trucchio on the call for Connie.

Just first, can you talk about some of the big forest projects for the year?.

Yes. We’ve got three big buckets of activity around forest. One is negotiated material savings, and our global procurement group is ramping up again to deliver against that. They delivered more than $50 million of bottom line benefit in ’14 and are looking to do that, or even better, in ’15. Productivity for us is another big opportunity area.

We are driving lean continuous improvement, design for value around our organization, and are continuing to get benefits from that and would expect that to be another strong contributor.

Then material specification changes, so how can we get even more effective on the product design so that we’re giving mom everything that she wants and able to take cost out of design by the choices we make on that front.

So those will be three big factors again, and we’d expect that to roll forward to deliver $300 million in cost saves again for another strong year for us. .

Pat, we probably have 25% of our capital goes to productivity and waste-type cost savings projects as well, so in addition to just kind of the way we work, we’re also putting some capital behind cost savings and margin improvement. .

Okay.

Then lastly, how is Poise Impressa doing in tests? Is the test regional or nationwide, and is it being expanded? When might the product come to market?.

Yes, that’s really just a test in one market at this point in time, in Kansas City. I haven’t seen the read of the test so far.

They’re testing a lot of different combinations down there, so I’ve generally heard it’s going well but I haven’t seen the output, and we’ll have final launch plans once we get a read on the test and what exactly we’re going to do with that. It’s an interesting product, and we’ll see where it plays out..

Okay, great. That’s it for me. Thank you..

Our next question comes from Caroline Levy with CLSA..

Good morning. Thanks so much. I’d just like to understand better what happened in U.S. diapers. It just seems a quite dramatic market share loss and volume decline, and if you could just--you know, maybe see what you hadn’t foreseen, because I’m sure this was a lot below your projections..

It was about a point share loss sequentially, and I’d say the trend has continued all year. Essentially, Luvs has been the big share gainer - I think Luvs has picked up two share points so far this year.

They’ve been on promotion really every week with a particular key retailer, and that’s one that we’ve been working hard to make sure we do better in that particular category with that particular customer.

In the meantime, we’re working to drive the business across the country with better product performance, making sure we’re competitive on shelf with the right display activity and the right offer. So it’s really the basics of execution in that business, and we didn’t do as good of a job as we needed to in 2014, and we will do a better job in 2015..

It isn’t just about price, though? I mean, doesn’t it just require you to lower your prices, or shift your mix in order to compete?.

No, I mean, I think--well, value is always a function of performance and price, so will we be more competitive on shelf and our promoted pricing? I would expect that will be a part of it, but it will also be product improvements and news and innovation that drive mom’s preference in these categories..

So to that point, there’s some optimism about the U.S. consumer. Do you think that we, or are you seeing any signs of consumers being willing to trade up or of demand improving in your U.S.

business?.

Well, when we look at our Huggies super-premium diaper, we are seeing that - we’ve picked up probably half a share point this year on our super-premium Huggies diapers in the U.S., so mom will trade up for real innovation. We’ve got more innovation coming behind that segment of our line-up as well, so it is also focusing on that trade-up consumer.

I wouldn’t say we’ve seen an uptick in the numbers of consumers heading in that direction at this stage, but it’s pretty early days in this oil price cycle as well..

And Caroline, that’s true across categories. If you look at super-premium bath, it’s growing as a percentage of the category and our share is growing. Our Viva Vantage launch in the super-premium end of the towel category this year has been a case, and continence is largely being driven by the super-premium end of the category.

So even through a tougher economic time, the categories are growing not only in the value tier but the super-premium segment as well..

Right. Okay, thank you.

Then just to ask about Russia, and getting back to if you take double-digit pricing, have you done that already, or is that something that’s coming and therefore the demand impact has not been felt?.

There were multiple price increases during 2014 as the economic crisis unfolded, and then there is another wave of pricing coming to that market in early 2015 with the recent fall of the ruble..

So do you think that the price elasticity is well below one-to-one?.

I think when you see an economic shock like this, we’re all going to find out what this consumer is going to do in a negative GDP growth environment.

But in the meantime, there’s so much of these products are based on imported raw materials, even though we make the diapers in Russia, the polypropylene and packaging materials are all dollar-based, the pulp is all dollar-based, and so you’ve got to get some pricing just to cover the huge shift in the cost of those imported materials in local currency.

.

Got it. Then just to your equity income line, you talked about Mexico being down because of the peso.

If you were to take out the currency impact, would you be--are you seeing a recovery in sort of the local operating dynamics in Mexico, or are you still under pressure there?.

Well, I think they saw--Mark and I were just down in Mexico earlier this week, and we met with Pablo and Claudio and the team down there. I think their volume growth or their organic growth was up 5% in the quarter, but it was off an easier comp in last year’s fourth quarter.

Their shares are stable - they’re north of 60% in bath and diapers, which are their two big categories. It’s a tough competitive market. The consumer is still pretty weak. There’s been lots of reforms down there that have probably affected consumer purchasing power in the short term.

On the other hand, they're optimistic that there’s going to be better economic growth and a better consumer environment in the medium to long term. In the meantime, they’ve got a fairly tough peso exchange rate that gives them a little bit of the impact of imported material costs, because a lot of their costs are dollar-based as well.

So it’s a challenging environment, but we’ve got a very strong position down there and a great team to operate the business..

Thank you. I have one last one, just on China and demand there. You’ve done just unbelievably well taking share for a lot of years.

Are you seeing anything out there as you head into this year that suggests that the growth is going to slow or that competition has picked up their game, online in particular?.

There’s lots of competition in China and has been for years. Pretty much every multinational CPG in the world is doing something in China - you know, the Japanese are aggressive competitors, Proctor is aggressive, SCA just bought Vinda, which is a local tissue player, so they’re in there now in some categories.

So we’ve got a terrific team, great innovation, and we’re executing pretty well in that market, and that has been translating into terrific business results. So Mike Zhang and our China team, and Achal Argawal and our Asia team have done a great job of executing in that market, and we feel like we’ve got great momentum and more good things coming..

Thanks so much..

Mr. Falk, at this time we have no further questioners in the queue..

Well once again, everyone, thank you for your support of Kimberly-Clark. We had a terrific year in 2014 in executing and delivering great value for our shareholders, and we’re headed into a more challenging environment in 2015 but rest assured that our global business plan is pointing us in the right direction. Thank you again..

Thank you very much..

Ladies and gentlemen, that concludes today’s presentation. You may disconnect your phone lines and thank you for joining us today..