Aug 4 (Reuters) - Kimberly-Clark cut its annual sales and profit forecasts on Tuesday, citing a significant hit to second-quarter sales in China that stemmed from false claims about the quality of some of its diaper brands.
The Kleenex maker said claims circulating on Chinese social media that the company's Huggies diapers contained toxic formamide weighed on demand despite independent testing by a government-certified third party confirming their quality and safety.
On June 22, China's market regulator
announced it would establish a joint investigation team to look into the "formamide issues in infant diapers" without naming any specific brand or company. It has not given any update about the status of that investigation since.
The disruption in China, a major market, would continue to affect sales and profit in the near term, Kimberly-Clark said.
Volumes in Kimberly-Clark's North American business slipped 0.3% in the second quarter, as sticky inflation and higher food and gas prices in the United States forced lower-income consumers to cut back spending.
Kimberly-Clark, on track to complete its roughly $40 billion acquisition of Kenvue by the year-end, now expects 2026 organic sales growth to trail the weighted average growth of its categories and markets by about 100 basis points. Those categories grew about 2% over the last 12 months.
It had previously forecast growth in line with or above the then weighted category average of about 2.5%.
The company expects annual adjusted earnings per share to grow at a high-single-digit rate on a constant-currency basis, compared with its earlier forecast for double-digit growth.
Last month, Kimberly-Clark finalized the sale of a 51% stake in its international tissue business to Suzano, creating the $3.4 billion Arbex joint venture to compete with rivals Procter & Gamble and Essity.
Net sales rose 0.6% to $4.19 billion for the three months ended June 30. Analysts on average expected $4.22 billion, according to data compiled by LSEG.
Adjusted operating profit increased 6.2% to $757 million, helped by one-time tariff refunds, productivity savings and favorable currency effects.
(Reporting by Neil J Kanatt in Bengaluru and Alexander Marrow in London; Editing by Joyjeet Das)
