Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Kimberly-Clark Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,602 – 9.91% × 12,877 = 1,326
The analysis of economic profit from 2016 to 2020 reveals a period of consistent value creation, characterized by a significant volatility event in 2018 followed by a strong recovery. The company maintained positive economic profit throughout the entire five-year window, indicating that the net operating profit after taxes consistently exceeded the minimum required return on invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited notable volatility, starting at 2,399 million USD in 2016 and reaching a peak of 2,602 million USD by 2020. A significant contraction occurred in 2018, where NOPAT dropped to 1,883 million USD. This decline was followed by a steady upward trajectory in 2019 and 2020, suggesting a recovery in operational efficiency or market demand.
- Cost of Capital
- The cost of capital remained relatively stable over the observed period, fluctuating within a tight range between 9.91% and 10.25%. The minimal variance in this percentage suggests that the company's weighted average cost of capital was not a primary driver of the fluctuations seen in economic profit.
- Invested Capital
- Invested capital remained relatively flat between 2016 and 2019, with a slight dip in 2018 to 11,239 million USD. However, a substantial increase was recorded in 2020, with invested capital rising to 12,877 million USD. This expansion in the capital base coincided with the highest NOPAT in the series, indicating that the additional investment was effectively deployed to generate higher absolute returns.
- Economic Profit Performance
- Economic profit closely mirrored the trends of NOPAT, peaking at 1,326 million USD in 2020. The sharp decline to 753 million USD in 2018 highlights a period of reduced value creation, which was driven by the drop in operating profit rather than an increase in the cost of capital. The subsequent growth in 2019 and 2020 demonstrates a restoration of financial strength, with the final year showing the strongest overall economic performance of the period.
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Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in restructuring liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Kimberly-Clark Corporation.
6 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 556 × 3.55% = 20
7 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 272 × 21.00% = 57
8 Addition of after taxes interest expense to net income attributable to Kimberly-Clark Corporation.
9 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 8 × 21.00% = 2
10 Elimination of after taxes investment income.
The analysis of the annual financial data over the five-year period reveals several notable trends regarding the company's profitability metrics.
- Net Income Attributable to Kimberly-Clark Corporation (US$ in millions)
- Over the period from 2016 to 2020, net income shows some volatility with an overall upward trend. Net income started at 2,166 million USD in 2016, increased to 2,278 million USD in 2017, then experienced a significant decline in 2018 to 1,410 million USD. Following this decline, net income recovered considerably, reaching 2,157 million USD in 2019 and further increasing to 2,352 million USD in 2020. This pattern suggests a temporary setback in 2018, followed by a strong recovery and growth in the subsequent years.
- Net Operating Profit After Taxes (NOPAT) (US$ in millions)
- NOPAT exhibits a similar pattern to net income, indicating a correlation between operational efficiency and overall profitability. The values start at 2,399 million USD in 2016, rise slightly in 2017 to 2,464 million USD, then decline sharply in 2018 to 1,883 million USD. From 2018 onwards, NOPAT increased steadily to 2,321 million USD in 2019 and 2,602 million USD in 2020, surpassing the initial levels reported at the start of the period. This trend shows an initial operational challenge in 2018, followed by a robust performance improvement.
Overall, the data indicates that the company faced a period of decreased profitability in 2018, reflected in both net income and NOPAT, likely due to operational or market challenges. However, the subsequent years demonstrated effective recovery strategies and strong financial performance, with profitability exceeding prior peak levels by 2020. The close alignment between net income and NOPAT trends suggests that operational improvements directly influenced the bottom line.
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Cash Operating Taxes
Kimberly-Clark Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
- Provision for income taxes
- The provision for income taxes shows a downward trend from 2016 to 2018, declining from 922 million US dollars to 471 million US dollars. This is followed by an increase in the subsequent years, rising to 576 million US dollars in 2019 and further to 676 million US dollars in 2020. Overall, the provision decreased initially but then experienced a moderate recovery, ending lower in 2020 than the initial 2016 figure.
- Cash operating taxes
- Cash operating taxes exhibit a similar trend to the provision for income taxes, starting at 1,053 million US dollars in 2016 and declining steadily to 526 million US dollars in 2018. From 2018 onward, cash operating taxes increased each year, reaching 604 million US dollars in 2019 and 686 million US dollars in 2020. Although the amounts increased after 2018, the 2020 value remained below the initial 2016 level.
- Overall tax-related trends
- Both provision for income taxes and cash operating taxes show a clear pattern of decline during the period 2016 to 2018, followed by a partial rebound from 2019 to 2020. The recovery phase, however, does not fully restore the tax figures to their peak 2016 levels. This pattern may suggest changes in taxable income, tax planning strategies, or other tax-related factors impacting the reported amounts over time.
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Invested Capital
Kimberly-Clark Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of LIFO reserve. See details »
5 Addition of restructuring liabilities.
6 Addition of equity equivalents to total Kimberly-Clark Corporation stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
- Debt Levels
- The total reported debt and leases demonstrate relative stability from 2016 through 2019, fluctuating between approximately $7.9 billion and $8.1 billion. There is a notable increase in 2020, where the debt rises to $8.92 billion, indicating an increased leverage or possibly additional financing taken during that year.
- Stockholders' Equity
- Stockholders’ equity shows considerable volatility over the five-year period. The figures reveal negative values in most years, with a drastic decline in 2017 reaching -$287 million. A recovery trend appears afterward with values improving to -$33 million in 2019 and then increasing sharply to $626 million in 2020, suggesting a significant improvement in net assets or changes in accounting treatment or capital structure.
- Invested Capital
- Invested capital remains relatively consistent between 2016 and 2019, ranging from $11.2 billion to $11.9 billion. In 2020, there is a marked increase to $12.88 billion, which corresponds with the rise in total debt and equity changes, indicating increased total resources committed to the business. This growth in invested capital may reflect expansion efforts or new investments.
- Overall Trends and Insights
- The data suggest that while debt levels remained steady initially, the company took on more debt in 2020. The stockholders’ equity, although negative for much of the period, shows signs of improvement in the last year, which could reflect enhanced profitability, asset revaluation, or capital restructuring. The rise in invested capital alongside debt and equity changes implies an overall expansion in the financial base of the company during 2020. These trends point to a possible strategic shift or response to external conditions impacting capital structure and financing.
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Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,694) | 44,694) | ÷ | 55,100) | = | 0.81 | 0.81 | × | 11.62% | = | 9.42% | ||
| Debt3 | 9,850) | 9,850) | ÷ | 55,100) | = | 0.18 | 0.18 | × | 3.27% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 556) | 556) | ÷ | 55,100) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 55,100) | 1.00 | 9.91% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,472) | 49,472) | ÷ | 58,528) | = | 0.85 | 0.85 | × | 11.62% | = | 9.82% | ||
| Debt3 | 8,652) | 8,652) | ÷ | 58,528) | = | 0.15 | 0.15 | × | 3.47% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 404) | 404) | ÷ | 58,528) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 58,528) | 1.00 | 10.25% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,045) | 39,045) | ÷ | 47,223) | = | 0.83 | 0.83 | × | 11.62% | = | 9.60% | ||
| Debt3 | 7,687) | 7,687) | ÷ | 47,223) | = | 0.16 | 0.16 | × | 3.28% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 491) | 491) | ÷ | 47,223) | = | 0.01 | 0.01 | × | 3.28% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 47,223) | 1.00 | 10.05% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,170) | 39,170) | ÷ | 47,663) | = | 0.82 | 0.82 | × | 11.62% | = | 9.55% | ||
| Debt3 | 7,945) | 7,945) | ÷ | 47,663) | = | 0.17 | 0.17 | × | 3.64% × (1 – 35.00%) | = | 0.39% | ||
| Operating lease liability4 | 548) | 548) | ÷ | 47,663) | = | 0.01 | 0.01 | × | 3.64% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 47,663) | 1.00 | 9.97% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,797) | 43,797) | ÷ | 52,387) | = | 0.84 | 0.84 | × | 11.62% | = | 9.71% | ||
| Debt3 | 8,056) | 8,056) | ÷ | 52,387) | = | 0.15 | 0.15 | × | 4.16% × (1 – 35.00%) | = | 0.42% | ||
| Operating lease liability4 | 534) | 534) | ÷ | 52,387) | = | 0.01 | 0.01 | × | 4.16% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 52,387) | 1.00 | 10.15% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kimberly-Clark Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,326) | 1,152) | 753) | 1,275) | 1,203) | |
| Invested capital2 | 12,877) | 11,405) | 11,239) | 11,929) | 11,778) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 10.30% | 10.10% | 6.70% | 10.69% | 10.21% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,326 ÷ 12,877 = 10.30%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation from 2016 to 2020 is characterized by general stability, a significant contraction in 2018, and a subsequent recovery. The consistent generation of positive economic profit throughout this period indicates that the returns on invested capital consistently exceeded the company's cost of capital.
- Economic Profit Trends
- Economic profit exhibited a volatile trajectory, beginning at 1,203 million USD in 2016 and increasing to 1,275 million USD in 2017. A sharp decline was observed in 2018, with profit falling to 753 million USD. This downturn was followed by a steady recovery, with values increasing to 1,152 million USD in 2019 and reaching a five-year peak of 1,326 million USD by December 31, 2020.
- Invested Capital Analysis
- The capital base remained relatively stable for the majority of the period, fluctuating between 11.2 billion USD and 12.9 billion USD. A slight reduction in invested capital occurred in 2018, reaching 11,239 million USD. However, a notable increase in capital allocation was observed in 2020, where invested capital rose to 12,877 million USD, the highest level recorded in the analyzed timeframe.
- Economic Spread Ratio Evaluation
- The economic spread ratio closely mirrored the trends seen in economic profit. After starting at 10.21% in 2016 and peaking at 10.69% in 2017, the ratio contracted significantly to 6.70% in 2018, signaling a temporary decrease in value creation efficiency. The ratio recovered to 10.10% in 2019 and 10.30% in 2020, effectively returning to the baseline performance levels observed prior to 2018.
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Economic Profit Margin
Kimberly-Clark Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,326) | 1,152) | 753) | 1,275) | 1,203) | |
| Net sales | 19,140) | 18,450) | 18,486) | 18,259) | 18,202) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 6.93% | 6.25% | 4.07% | 6.98% | 6.61% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,326 ÷ 19,140 = 6.93%
3 Click competitor name to see calculations.
The analysis of economic value added metrics between 2016 and 2020 reveals a period of volatility in value creation, characterized by a significant contraction in 2018 followed by a consistent recovery. While net sales maintained a generally stable upward trajectory, the economic profit margin experienced a sharp decline before returning to near-peak levels by the end of the period.
- Net Sales Trends
- Net sales demonstrated steady growth for most of the period, rising from 18,202 million US dollars in 2016 to 19,140 million US dollars in 2020. A marginal decline was noted in 2019, where sales dipped to 18,450 million US dollars from the previous year's 18,486 million US dollars, before achieving the period's highest value in 2020.
- Economic Profit Performance
- Economic profit exhibited substantial fluctuations. After an initial increase from 1,203 million US dollars in 2016 to 1,275 million US dollars in 2017, a significant drop occurred in 2018, with profit falling to 753 million US dollars. This downward trend reversed in 2019 and 2020, with values climbing to 1,152 million and 1,326 million US dollars, respectively.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrored the volatility of the absolute economic profit. The margin grew from 6.61% in 2016 to a peak of 6.98% in 2017. A sharp contraction to 4.07% was observed in 2018, indicating a decrease in value creation relative to sales during that fiscal year. Subsequently, the margin recovered to 6.25% in 2019 and reached 6.93% in 2020, effectively restoring the efficiency of value generation to 2017 levels.
The divergence observed in 2018 is particularly notable; while net sales reached a three-year high of 18,486 million US dollars, the economic profit margin plummeted to its lowest point in the series. This indicates that the decline in economic profit during that year was not driven by revenue shortfalls, but rather by factors impacting the cost of capital or operational profitability. The subsequent recovery suggests a successful realignment of capital charges or operational improvements through 2020.
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