Kimberly-Clark Corp posted a lower-than-expected quarterly profit and gave a disappointing outlook as paper goods such as its Cottonelle toilet paper remained under pressure while consumers choose cheaper items.

The maker of Kleenex tissues and Huggies diapers is planning for a slow and modest economic recovery in 2010, Chief Executive Officer Thomas Falk said in a statement.

Shares of Kimberly-Clark, whose results kicked off the earnings season for U.S. household products makers, dropped 3 percent to $59.30 in premarket trading.

Sales of healthcare products such as gloves and face masks jumped 22.1 percent as people try to protect against the H1N1, or swine flu, virus.

Still, larger consumer businesses have faced pressure as cost-conscious shoppers opt for store brands. Consumer tissue product sales in North America fell nearly 6 percent, with a double-digit drop in volume for Kimberly-Clark paper towels, which include Scott and Viva.

TAX RATE CUT INTO PROFIT

Kimberly-Clark said fourth-quarter profit rose to $492 million, or $1.17 per share, from $419 million, or $1.01 per share, a year earlier. A higher effective tax rate clipped about 8 cents per share from earnings, the company said.

Sales rose 8.4 percent to $4.98 billion, while the volume of goods sold rose about 2 percent. The acquisitions of I-Flow Corp and Jackson Safety added a percentage point of sales growth.

Analysts on average expected Kimberly-Clark to earn $1.25 per share on sales of $4.92 billion, according to Thomson Reuters I/B/E/S.

The company forecast 2010 earnings of $4.80 to $5.00 per share, compared with analysts' estimates of $5.14. The company expects sales to rise 5 percent to 6 percent, with volume up 2 percent to 3 percent.

Kimberly-Clark said it would resume share repurchases this quarter, with a goal of $500 million to $600 million in buybacks in 2010. It also expects its board to approve a high single-digit to low double-digit percentage increase in its dividend.

The company is still evaluating the rate at which its sales in Venezuela will be translated into U.S. dollars after the bolivar devaluation earlier this month. [ID:nN11158065] About 3 percent of its 2009 sales came from that country.

Kimberly-Clark expects to take a one-time charge of 14 cents to 22 cents per share in the first quarter for the currency issue, but does not expect the devaluation to materially affect 2010 earnings.

The company stood by its annual goals of 3 percent to 5 percent net sales growth and mid-to-high single-digit increases in earnings per share. It will detail more of its plans in March.

(Reporting by Jessica Wohl; editing by John Wallace and Lisa Von Ahn)

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