Kimberly Clark Corp.'s Proposed Senior Unsecured Notes Due 2030 Rated 'A'

CHICAGO (S&P Global Ratings) March 24, 2020--S&P Global Ratings today assigned its 'A' issue-level rating to Dallas-based Kimberly-Clark Corp.'s proposed senior unsecured notes due 2030. The company will draw the offering from its Rule 415 shelf registration statement filed on Feb. 7, 2019. We expect the company to use the net proceeds from this leverage-neutral issuance for general corporate purposes, including to repay its outstanding commercial paper. Kimberly-Clark had about $7.7 billion of debt outstanding as of Dec. 31, 2019.
All of our existing ratings on the company, including our 'A/A-1' issuer credit rating, remain unchanged.
Our ratings on Kimberly-Clark incorporate its solid market shares in North American tissue, global diapers, incontinence care, and feminine care; its portfolio of well-known brand names (most of which have high consumer brand equity); the nondiscretionary demand for most of the product segments in which the company competes; and its good geographic diversity, solid profitability, and ongoing cost-saving initiatives.
We expect that the company will report a strong first half of the year given the high level of consumer demand for tissue products due to the coronavirus pandemic. We believe volume growth will moderate in the second half due to the high likelihood of consumer overstocking in the first half, but will nevertheless remain steady.
Our ratings also reflect the significant competition that Kimberly-Clark faces from formidable global competitors including Procter & Gamble Co. and Georgia-Pacific LLC. Notwithstanding the company's success in raising prices in 2019, we believe its pricing power in the tissue space is limited because of effective private-label competition. We anticipate that Kimberly-Clark's leverage will remain slightly above 2x through 2020 because of the sizable costs associated with its large global restructuring program. However, the company is performing ahead of expectations because of its successful pricing and moderating commodity costs and we expect it will restore leverage to 2x or below in 2021 as management's productivity enhancements take hold. We also believe that Kimberly-Clark's financial policy will continue to support our current rating.
We rate the group's debt at the same level as our long-term issuer credit rating on the company. Parent Kimberly-Clark Corp. is the issuer of the majority of the group's debt, which primarily comprises senior unsecured notes. The group's low leverage limits the possibility than any lenders will be significantly disadvantaged relative to other lenders. In addition, we believe the majority of the company's senior unsecured debt is pari passu.
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