Kimberly-Clark Corporation

Greetings. Welcome to the Kimberly-Clark's third quarter 2024 question and answer session. I will now turn the conference over to your host, Chris Jakubik, Vice President, Investor Relations. You may begin.

Thank you, and hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly-Clark, and welcome to our Q&A session for our third quarter 2024 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures today. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com. Before we begin, I'm going to hand it to our Chairman and CEO, Mike Hsu, for a few quick opening comments.

Thank you, Chris, and good morning, everyone. I want to let you know our team has made great strides advancing our power and care strategy, bolstering our confidence to deliver above our long-term growth algorithm in 2024. To be global category leaders, we must lead growth in our categories. We're executing and making steady progress on our strategy to achieve this. We're driving consumption and growing our share across categories and markets driven by our acceleration and innovation and enhanced commercial execution. Our productivity is fueling our investments in innovation to support our growth initiatives while delivering our bottom line growth aspiration. We've achieved key milestones and our transformation is on track with no disruptions. Notably, on October 1st, we successfully completed our new organizational structure to become a better, faster, and stronger organization. We're rapidly transforming Kimberly-Clark to thrive in an increasingly complex and competitive global environment. However, there are some discrete headwinds that are creating pressures on growth in the near term. And these include retail inventory reductions as our service levels improve, lower demand in private label businesses that we're exiting, and weaker than anticipated demand in North American professional channels and some pockets of deceleration in Asia and Latin America. And the actions that we're taking as part of our transformation strategy, are positioning us to navigate a dynamic consumer and retail environment, accelerate investments across the enterprise so that we can lead market growth, and enhance the value of Kimberly-Clark for all of our stakeholders. So with that, I'd like to open it up for questions.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Lauren Lieberman with Barclays.

Hey, morning, Lauren. Hi, Lauren.

Hey, good morning. Hey, good morning. So I wanted to just touch first on retail inventory because, you know, you had talked about before the quarter, you know, some expectation, you were laughing, some rebuild last year. But this has really been, I guess, a source of volatility. So I was curious if you could talk about kind of how you think about it, where service levels stand today. And also, you know, is there anything going on from a shelf space standpoint? Because, again, the disconnect between shipments and consumption, has been such a source of volatility. Thanks.

Yeah, thanks, Lauren. Yeah, no disconnect from a shelving. I mean, we feel very good about our distribution growth and skew count, you know, I think remains robust. And, you know, we have a great innovation pipeline that we're bringing in that will continue to support that. So I would say the retail inventory reductions, you know, they may be a little localized to us and do reflect, as you point out, Lauren, reflect, you know, the supply challenges we had last year. Just to give you a little, you know, just to remind you, we had a packaging supplier that was down for a couple months last year that impacted most of our personal care brands in North America. And as we got back into supply, I think we got fully back into supply third quarter of last year. And so you could see in that chart that we had in our presentation kind of a spike in inventories in the third quarter last year, and we're cycling that this quarter. So I think that's really the you know, the overall driver. So, you know, between restocking last year, reductions this year, and the hurricane, you know, we've seen about an 80 basis point overall headwind of global net sales year to date, primarily in North America. And as I said, that reflects, you know, I'd say an improving service environment from our side and potentially, you know, impact from higher financing costs for inventory. You know, at the end of the quarter, I'd say retail inventory's look consistent to us with historical levels. So, you know, hopefully I think we should be mostly through it. You know, but I would say, hey, you know, you are working through some, you know, some dynamism in the environment. And so we could still see some further reductions, you know, through the retail or fiscal year ends, which happened in Q3 of next year. So if that persists, you know, at similar levels in Q4, you know, we could be closer to a 3% organic growth for the full year.

Yeah, and a few things just to add on. As we think about the inventory, the hurricane impacts, and what we had in Q3, Lauren, the quarter consumer offtake in North America is pretty strong, both in personal care consumer tissue combined. It grew 3.2%, so ahead of the category. And the disconnect, if you will, is really with the shipments, and that was impacted by a couple of factors. One, transitory factors, and that's the retail inventory changes, which again, we lapped a bill last year. We had a slight reduction in inventories again in Q3 of this year. Then we had the impact of the hurricane at the end of the quarter with shipments out of the southeast. And then lastly, some drops in private label volumes from both businesses were exiting as well as some businesses will exit next year. The other bit to take into account is there was some underlying demand weakness in professional and some international markets that Mike referred to. But the key is the shortfall in Q3, about two-thirds is attributable to the transitory factors that I just referred to. And if you think about the North America business in particular, the combination of these two led to about a 280 basis point headwind in North America personal care. Whereas in consumer tissue, that was around 350 basis points in consumer tissue in North America. So overall, that's how you would be able to bridge the two numbers.

Okay, great. Thanks so much. And I was just curious, just... In the Nielsen data, for what it's worth, we've seen a surge in some of your categories in and around port strike. There's been questions around consumer takeaway ahead of the hurricane. So did you see that? Anything to just consider in terms of shipment dynamics and any things to think about for 4Q that would be a benefit?

Yeah, Lauren, I would say we're not really expecting any benefit from any stock-up behavior by consumers today. You know, I'd say, yeah, we did see a little bit of it related to both the hurricane and potentially the port strike. You know, I'd say not meaningful at an enterprise level. And, you know, we would expect we'll kind of work through that in the quarter.

Okay, perfect. Thanks so much.

Thanks, Lauren. Thank you.

Your next question is from Nick Mody with RBC Capital Markets.

Morning, Nick. Hey, Nick.

Morning. Morning, guys. So... Mike, maybe you can just talk about market shares, you know, in the release, you, you know, suggested things looked pretty good from that standpoint. So I wanted to kind of get your thoughts on that and just the competitive environment in general, but just kind of tagging onto that on innovation. I mean, some of the data we've seen, you know, out of numerator on some of your innovation, like skin essentials will suggest that suggests there's a very high cannibalization rate. And so I just wanted to get your thoughts on kind of how you think about you know, innovation and the role it's going to play, is this really about market share gains or is this about kind of expanding the value pool, as you've been suggesting, with some of the price share opportunities that you have in the U.S. and other markets?

Okay. I'll try to answer all of that, Nick. You may have to steer me depending on how I answer. But I think the short answer is, hey, we're after growing our market shares overall, and we're after expanding the category. So it's both of those. You know, I'd say I feel very good about the progress overall that we're making on market share and for the quarter. You know, I think overall, I think we're globally overall about flat, you know, on a weighted basis. And, you know, on a cohort basis, you know, I'd say we're slightly more than half, which is an improvement versus this time a year ago, pretty significant improvement. Importantly, I think in the U.S. where we're making, you know, strong progress and so what, where we have this discrepancy in consumption, Consumption is very solid, and we're up or even in seven of eight categories versus a year ago in the quarter, and eight of eight sequentially. So I think we're making good progress on the market share front, and that's really driven by the strategy that we've been talking to you all about, Nick, which is, hey, we're investing to make better products in pioneering innovation. We're investing to improve our advertising and driving strong commercial activation, and we're pulling all those levers together. So I think your question on innovation is, you know, in overall, you know, as we look to, you know, premiumize or drive trade up in our categories, obviously our preferred path is to do that in a margin accretive way, right? And so if you're driving premium innovation, that should be at a higher margin. You know, I'd say the overall goal is to delight the consumer in whatever way that we need to. And so You know, in a lot of ways, like Skin Essentials, I feel great about the product that delivers really great benefits from a skincare perspective. That's kind of a new feature in the category, and I'm excited that consumers see that worth investing in, right? And so that's a great thing. But we also are focused on every tier on the good, better, best spectrum, right? And so we're going to bring cascading our innovation into throughout all of our tiers to make all of our products better. And so the short answer, which maybe frustrates some of my organizations sometimes when they ask me, you know, well, do you want us to trade up or do you want the value? And I say yes, right, because our job is to deliver across all tiers of that good, better, best spectrum.

Thanks so much. I'll pass it on. Okay.

Thanks, Nick.

Your next question for today is from Anna Lazul with Bank of America.

Hi, good morning. Thank you so much for the question. I was wondering if you could talk about the private label businesses. You did exit certain private label businesses, which impacted this quarter. So can you give us more detail on where you are now in that process, maybe what we should be expecting moving forward, and just how this is overall helping you get to your longer-term gross margin goal of at least 40% by 2030. Thank you.

Yeah, thanks, Anna. Yeah, I think, you know, the overall kind of, you know, underlying strategy behind, you know, the private label, you know, shift for us is, you know, we're really focused on, you know, proprietary science-based innovation in right-to-win spaces, and that's really behind our brands. So I really want to focus our capacity and technology investment in the brands to drive further differentiation. And so we've been moving out of some private label business for the past 18 months. You know, that has enabled us to step up our growth in our branded business. For example, Kleenex, which was up almost 500 basis points in share this quarter or last quarter. You know, part of that is because we've been able to expand some of the capacity that we've had behind the brand. So I think that's been an important move. I think the last quarter in Q3, it's the first time that the exit combined with maybe some weaker private label sales that some customers was material enough for us to call out. And I think we noted that in our presentation. You know, I did highlight last quarter that in 2025, we'll cease production for a large club private label diaper business in the U.S. And that's going to create a headwind of about 2% for us next year. And so as a result, our private label sales mix will shrink from about 4% in 2023 to about 2% next year, and I expect that to decline further over time.

Great. Thank you so much.

Okay. Thanks, Ana.

Your next question is from Bonnie Herzog with Goldman Sachs.

Morning, Bonnie. Good morning.

Good morning.

I wanted to ask about your gross margin, which it's expanded pretty meaningfully year to date and tracking ahead of pre-COVID levels. So just wondering how we should think about the sustainability of these margin levels, especially given the softer organic sales and probably the possibility that promos need to step up given pressures on the consumer and to to limit downtrending. I guess, you know, what's the right level of support you see from a benign input cost environment and, you know, considering also your ongoing productivity savings? Thank you.

Yeah, so a few things, Bonnie. Overall, we're pretty pleased with the trajectory of our gross margins, operating profit margins, and more importantly, gross margin dollars. I mean, that's our focus at the end of the day because that's what really funds our ability to invest in the business, invest behind the brands, and drive the sustainable innovation that we've been putting in the marketplace, which Mike was just talking about. For the year, what we've seen is we're right around an average of 37% gross margin, which is a pretty healthy gain. And we've been doing consistently for the last eight quarters or so gains on gross margin quarter after quarter, year over year. And we still expect, as we exit the year, to continue to have gains on gross margin on a year-over-year basis. A few things have played out in terms of what's driving the gross margin and why we still have strong confidence in our ability to get to our long-term stated goal of at least 40 percent gross margin or operating margin in the range of 18 to 20 percent before the end of the decade. And what's playing out is the following. One is, first and foremost, our focus on driving meaningful innovation and focus on making it accretive to overall margins. Secondly is our shift to really managing our cost basket in a different way than what we did, say, three, four years ago. We're much more proactive around risk management strategies. how we look at the cost basket overall, and that allows us to have more visibility into what's coming our way so we can react appropriately. The third element, and it's been playing out very well this year, and it's part of our power and care strategy, is our transformation in the supply chain. We've delivered very strong productivity through the first three quarters of the year. We're This past quarter, $130 million, and that's just in our gross productivity from manufacturing and supply chain, not including procurement. And we have a very strong pipeline going forward as part of our power and care strategy over the next few years as we really get underway to deliver that $3 billion. So we see that as very sustainable over time. A key point to take into account is margin progression is not linear. So there will be ups and downs quarter to quarter. The important thing is what's happening from a year-to-year basis and over time. So overall, very pleased where we stand right now. We obviously, from a cost basket, that was part of your question, right now we are still staring at about the same number that we had provided as an outlook at the beginning of the year. We've seen a bit of an uptick on costs in Q3, but that's exactly in line with what we had projected. And we expect Q4 to kind of have the same trajectory that we have seen in Q3. So no change at this stage versus what we're seeing.

Yeah. And, Bonnie, maybe you touched on pricing or the promotion environment. I'll just say, you know, that overall, you know, we're really focused right now on volume and mix-driven organic growth And to do that, you know, I think we're also very focused on driving what we call PNOC or price net of commodity discipline, right? And so, you know, and the magic of that is if we had that discipline on PNOC, then, you know, the productivity kind of drives the margin expansion on its own. But, you know, I would say overall pricing to offset cost inflation is receding as we had planned throughout the year. We really want to be, as I had just mentioned earlier, better value at every rung of the good, better, best ladder. And so our focus on building the brands with innovation, world-class advertising or storytelling in our vernacular, and then really, really strong commercial execution. That's kind of how we want to play it, I would say. You know, we do use promotion, but primarily as a trial driver, you know, with our pioneering innovation is how we think about it.

Okay, very helpful. Thanks for the color.

Okay, thanks, Bonnie.

The next question is from Chris Carey with Wells Fargo Securities.

Hey, Chris. Hey, Chris.

Hey, everyone. So I just have a question about you know, the new organizational structure and category growth. And I'm going to sneak one in on just the Q4 operating profit expectation. So regarding the, you know, the new organizational structure that you have in place as of, you know, October 1st, you also have an expectation for category growth to decelerate or at least to be the lower end of your long-term range. I think I saw that in the prepared remarks. And so how do these two things fit together, right? So the outlook for Q4 is, I think, similar to Q3, so maybe even a bit below that global category growth rate, and yet you have the new organization in place. How long before this organization is really driving the outcomes that you're looking for, and specifically with an eye on on 2025 where perhaps you'll have a little bit less pricing than you've had this year and where that organizational, those organizational changes are going to be, um, you know, an important part of, uh, you know, driving organic sales growth, um, you know, next year. And I just, I just wonder how you see that, that kind of top line trajectory coming together. Um, And if I could just sneak in on Q4, is the operating profit being muted in Q4? Is that really a discretionary decision behind investment? Should we be expecting some narrowing of gross margin performance? How would you characterize just the relative differences between Q4 gross margin and just the sorts of things that you're being a bit more offensive about from an investment standpoint? So thanks so much.

Okay, Chris, you were up earlier. There's a lot of questions I'm packing there. So just steer us around if we forget to address something. But one, I will say I'm really pleased with the progress that our organization is making in implementing our Wire for Growth organization. And we've been operating that, as we said, in October 1 officially. The truth behind that is we've been doing that on an informal basis earlier. So, you know, I think it's gone off very, very well. And we're starting to see the benefits of kind of moving that structure. I'll hit on the categories. You know, I'd say, hey, the overall categories remain resilient. You know, underlying category growth, I think, Chris, remains very healthy. You know, consumer interest in better performing products remains healthy, especially in developed markets, but in developing and emerging markets as well. You know, we're still very mindful about affordability and our need to strengthen our brand value propositions more. So I'd say overall the categories are growing in dollars and units. The underlying demand drivers remain healthy, and that includes penetration, which I think overall is stable, and long-term for us remains a big opportunity. We are seeing in some markets like lower births, as you're well aware, like in South Korea and China, but that has tempered and slowed down. The declines in the birth rate have slowed down. I'd say they actually have troughed. And so, you know, our businesses are still performing well in that kind of environment. We have a lot of markets with categories that still remain at the very early stages of development across developing and emerging markets. And then, of course, this aging population is a strong tailwind for our adult care business across developed markets. And so I think penetration, I think, is a good story. Trade-up remains a big driver of the category. especially in developed markets, but even including developing emerging markets, and we're still seeing the demand for premium products continue to grow, both in the U.S. and developing emerging markets. You know, I think frequency is where we see typically some softness right now. Typically, you know, in a tougher economic environment, consumers in some markets, notably like in Latin America and Southeast Asia, tend to try to stretch out their their money a little bit by using the products for a little bit longer duration. And so we are seeing a little bit of softness in Latin America and Southeast Asia. And in addition, I think we mentioned in our presentation, we're seeing some traffic slowdown in our North American professional businesses. So as a result, I think our full year weighted category growth is likely to be closer to 2% versus the 2 to 3 range that we had highlighted previously. That said, I'd say we remain on algorithm. You know, of course, our goal is to lead category growth, which we will continue to do, we think. And then, you know, as we're flat to slightly up on share across our businesses globally this year.

And let me unpack a little bit the top-line trajectory, and then we can get into the Q4 margins. Chris, so a few things as we look at the top-line trajectory. So absent the transitory factors, A key thing is one, pricing. We are lapping the pricing actions that have been taken across category, all players, and ourselves. And as you can see from Q1 to Q3, what's happened is, and as we had projected at the beginning of the year, the impact of pricing and our overall organic growth has come down as expected. For the quarter, we were only 1% pricing. But if you go back to Q1, that was four. So it's been coming down, and we expect that to pretty much be the case as the year closes, also because pricing in hyperinflationary economies has been coming down. The other bit is that it's also having an incidence on the category growth. While EQ has remained healthy, et cetera, we're seeing that pricing, and you're seeing it in Nielsen data, is also coming down, and that's having an impact on what you see in overall category growth rates. So that's something we expect to have. But overall, the key element is, as we said at our investor day, this new phase is really about volume-mixed lead growth, and that's what we expect for Q4. If you look at our outlook for Q4, the implication of what we're stating is that we do expect our top line for Q4 to be actually stronger than what we saw in Q3 once we normalize for the transitory factors that we saw. And again, there could be one-offs. We can't predict what we don't control, but based on what we know, we'd expect that to happen on the top line. In terms of the gross margin, for Q4, a few things. One, we are stepping up investments behind our brands and our platforms. We saw that play out in Q3, as we had signaled in July. We stepped up advertising spend by 60 basis points. We expect to step up advertising and brand support by at least that amount in Q4. So the combination of the two should be north of 7%. So that's one element to be taken into account. Secondly, there are some discretionary costs that we expect to hit our P&L in Q4. Last but not least is we had a little, I mean, as we had indicated back in January, out of our bucket of input cost inflation, including currency, because of the timing of some of the pricing actions in hyperinflationary economies last year and how these costs would flow in, we would be more back half-loaded. That played out in Q3. That will play out in Q4. But overall, the key thing is we are making year-on-year strong progress on margins. and we expect to continue to do that over time. What did we miss, Chris?

I think that was as comprehensive as I could have hoped for, so thank you for entertaining all that. All right, good luck.

All right, thanks, Chris.

Your next question for today is from Kevin Grundy with BNP Paribas.

Hey, Kevin. Hey, Kevin. Hey, morning, guys. Morning, Mike. Morning, Nelson. Question for you as a follow-up on Chris's question, a bit of a different angle though. Just as it pertains to visibility on results, sort of amidst, Mike, all this organizational change that you've kind of been pushing through in what is still a pretty dynamic environment. So I asked that in the context, you know, the quarter fell a bit short of your own internal expectations in the street. Some of these factors evolved throughout the quarter. There's something like the inventory bill was known You know, when you were speaking with the street as recently as like early September, it did sound some of these factors were really being amplified such that, you know, the street was kind of braced for the magnitude of it. So, you know, I can appreciate the volatility of the environment. Nelson, your points and what the organization has done, you know, around productivity and visibility there further down the P&L, certainly well taken. But my question for both of you really kind of speaks to the visibility you have as you're sort of contending with all this organizational change and why investors should not be concerned that this is really kind of a setback quarter in terms of the visibility that you're conveying and the guidance to the street. So thanks for all that.

Yeah, I think I'll start, Kevin, with, you know, one, I'm really, really pleased with the strong execution globally that we have from the team around the world. You know, overall, I'd say, you know, I'm really pleased that we are managing the controllables very, very well. I think what happened in the quarter, I would say, certainly, I think you understand on the retail inventory, it's very certainly to be a transitory impact. I do think part of it is we're reacting to evolving market conditions, and so we're starting to see a little softness in Southeast Asia and in Latin America, and as we noted in our professional business. I think You know, for us, you know, the opportunity is, you know, we have good visibility on it. I think the organizational change has gone very, very well. We've been operating, I would say, in our words, internally, a soft reorg condition, you know, for the past six months. And so I think we have pretty good visibility operationally. And importantly, you know, management in the markets, you know, that are running the businesses has not changed significantly. So I think that should give us you know, or investors' comfort there. I think what we are, you know, calling out is that there is some softness in some markets that we're well aware of. You know, some of that is certainly category conditions. Are there things that we could be doing better from a product perspective or a marketing perspective? Sure. And so I think the thing I like about our rewiring, you know, for growth is it's creating more visibility into the big markets that make the biggest impact. And that's, you know, international personal care for us, North America and some of our big consumer tissue markets. And so we're able, I would say, to diagnose what's going on and respond much quicker. And, you know, some of the areas that we have opportunity to work on harder are Kotex in China. Even though it was up slightly on share in the quarter, you know, it softened it a little bit. You know, our femcare business in Brazil, similarly, that tissue in South Korea was a little soft in the quarter. You know, one of the things that, you know, reasons why we saw a little bit of a slowdown in Korea in the quarter was, you know, we have been growing multiple share points that offset some of the category conditions. And now that, you know, we're only growing, you know, a little bit of share or, you know, let's say 100 basis points of share rather than 300, you know, that slowdown in category growth hits home a little bit harder. So I think, you know, we have some opportunity there. And then lastly, you know, Huggies and parts of Latin America, you know, I think we do have some product improvement opportunities, which we're all over. And so, again, I feel good about the visibility and I feel good about where we are in the reorganization. But, Nelson, I don't know if you wanted to add anything.

Yeah, so just to add, Kevin, a few things. One, we will remain and we've been instilling a lot of discipline in the business around our approach to volume consumption and how we – manage on that end. So we will remain steadfast on the role that promotions play, and we're not going to be chasing volume. We're going to be chasing consumption, and that's what we're doing. We're pleased with the fact that in North America consumption remains strong. Again, there's a disconnect between shipments and consumption, and there are elements there that we can't predict on a month-to-month basis because they just happen. Our focus is And our discipline has also remained around how we manage bottom line overall profitability of the business to be able to generate the fuel to invest back in the business. Our performance has been strong on that end. And again, we're getting better by the day as we execute. Our teams have been going through a lot of change over the last few months, and we're very proud of what they've accomplished and how they're looking at what we're going to be doing over the next few years as we carry out our power and care transformation. So overall, you know, we'll manage through the next few quarters, and there'll be market dynamics, but ultimately our objective is to lead category growth in a profitable and sustainable manner, and that's what we're setting the organization to do.

Very good. One more question?

Okay.

Sorry.

Your final question is from Javier Escalante with Evercore ISI.

Good morning, Javier. Hi. Hello, guys. Good morning, everyone. I'm going to revisit some of the items discussed in a way that I think that it may be simpler because there is a lot of moving pieces. So say kind of like external issues versus internal factors. So the external one, The bigger one is this inventory, this stocking is not just you. We have been talking about this with some of your peers. If you can talk about what's driving it. Is it just mechanics of COVID? Is it shift to e-commerce that they are using the stores differently? And if you can basically say, I think that I heard that it was 80 basis points on a year-to-date basis. If you can just simply tell us what was the impact on Q3. So that's the externality. I'll wait, but I would like to go more into the internal piece, which to me is more interesting. So if you can address that and then give me a minute for the internal piece question. Okay.

So, Javier, let me reconcile the numbers for you just to give the sense of what's that 80 basis point on Q3. And you can get to that and see. But as you state, I mean, there are externalities, inventory movements. We had a bill last year, especially particularly in Q3, as our supply chain normalized in the U.S. And then we had a bit of more D-stock in Q3 following what had happened in Q1 and Q2 of this year. We also had the hurricane impact at the very end of the quarter, the last three, four days of shipments. And then the other element was the private label shipments. I mean, we exited some contracts and then on top of that, we had software demand and other private label that materialized at the end of September. Those three elements that we've called, that I've referred to as transitory factors, added to slightly north of one point of growth in the quarter. So roughly 1.3 points, if you want me to round it to be exact. That's what that drove for the enterprise overall in growth. That's the 80 bips, give or take, that Mike referred to for the year, if you add all that.

Thank you. Yeah, so basically the real question is the following, right? So you basically, you are doing a lot. This is a highly decentralized company, but at the same time, the categories are roughly the same. So basically, you are moving away from private label. So if you can tell us how you are in that process again. So what was your, at the beginning of the year, what percentage of global sales were in private label, where they are now? what is the plan for next year? Because there is the impending exit of private label business that is two points coming into 2025. So if you can explain that, you know, as an item alone. So then if you, if you, there is, there is the implementation of Fort Hazana to what extent that had an impact or give you more visibility so you can guide better going into next year. And there is another item that came out, a news item, in terms of you guys being evaluating strategic options for the international tissue and professional businesses, which in my math is about 7% of the profits. So you seem to be doing a lot at the same time. So tell us how the organization is responding. Do you have the system to manage this so you can control the volatility going forward? Thank you.

Yeah, I think I'll start maybe. And, you know, as I said, I think we've been very pleased with the organization's response to the reorganization. And, you know, Javier, as I mentioned, we put the switch on the new operating model or new operating structure October 1st. But the reality is we have been running in a kind of a soft mode for several months leading up to it. And the reality is what's happening in each of the markets, you know, we haven't changed management significantly in any of the local markets that kind of deliver the P&L. And so, you know, our expectation would there be little disruption. And in my mind, there hasn't been very much disruption at all. So, again, I think we feel very good about how the organization is proceeding and our visibility into kind of looking at the business remains very, very good. I'd say on the private label, again, I think I'd mentioned earlier, you know, this year it will be about 4% of our overall sales of the company. Next year after the exit, it will be about 2% private label. And then our plans would be, you know, probably work our way down from there. So, you know, so that's that part. I forgot what the, what else did you want to ask for, Javier?

You had a question on S4, Javier?

Go ahead. Actually, the question is more about, you know, whether for Hazana will give you the capacity to basically better foresee these volatility because there is this this news item about you guys looking for strategic options for divest, I don't know what that is, but international tissue and pro-business, which is about 7% of profit.

First, though, Javier, since you opened the door, my DTS, my Digital Technology Service Organization, will be really miffed at me if I don't compliment them, but we did flip the switch on our North American S4 HANA implementation strategy uh, at the, at the end of July, actually the date, the weekend before the earnings call last quarter. And, uh, you know, contrary to what, you know, most experiences are nobody noticed other than it was easier to run. And so I think our organization has done a great job. I think, uh, actually the vendor who provides the software wants to meet with us to see how did you, how did we pull that off without any slippage? So I think, I think we've done a very good job there. And, uh, And so from that perspective, I think, again, the organization, I think, continues to perform extremely, extremely well. With regard to your questions on international family care and professional, I'd say we're taking important steps to make that a more robust and predictable contributor to growth and returns for us. And for me, obviously, as a matter of practice, I'm not going to comment on on news articles or rumors, and I'll let you know when I think there's something that you need to know. But we like the categories that we're in. We believe we can add a lot more value to our categories, our consumers, and our customers. That said, Javier, I think you'll also recognize that in places where we don't feel like we have a right to win in the long term, we'll look to optimize our participation in those assets. You know, and, you know, the example that I think you and I have discussed is in Brazil where we saw some structural factors that made it difficult for us to compete. On the consumer tissue side of the business, due to some, I would say, some government incentives that we couldn't access that made the category more difficult to compete in, you know, we made a different decision that I think was a very good one for the company. And so, you know, I think we'll continue to make those tough decisions. But, you know, again, I think we'll let you know if there's anything – to think about regarding the tissue business.

Thank you very much, guys.

Okay. Thank you, Javier. Thank you. Well, thanks, everybody, for joining us today. And for anybody who has follow-up questions, you know, investor relations will be around to take your calls. So thanks very much, and have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.