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Analysts favor industry growth prospects

By Simon Pitman , 21-Jul-2006

Shares in leading cosmetic companies were boosted on the New York Stock Exchange after leading investment analysis gave the sector a good report.

A sector report from Credit Suisse gave the sector a 'market weight' rating, stating that a prevalence of stable and sizable cash flow for the key players gave the sector significant international growth prospects.

In particular Credit Suisse earmarked Avon Products with an 'outperform' rating, acknowledging the progress that has been made on the back of the company's comprehensive global restructuring programme.

 

At the end of last year Avon revealed a $500m restructuring program that aims to boosts the company's sliding financial performance. This has led to a significant number of job losses on a global basis, particularly at management level.

 

On the back of the Credit Suisse announcement, made at the beginning of this week, Avon shares rose sharply exceeding the $32 mark in early trading on Wednesday, jumping from $30.4 at the beginning of the week.

 

Likewise, the bank also gave 'neutral' ratings to Estee Lauder and Revlon. Both companies have been hit by a large tax bill and dampened sales respectively in recent weeks, so the rating should help to calm investor fears.

 

Both companies' share prices rose marginally following the announcement.

 

According to Credit Suisse consumer products analyst Filippe Goossens, the global cosmetics industry has significant growth potential overall, although that potential is particularly focused on the developing markets of Latin America, China and Eastern Europe.

 

Goossens also pointed that the only real challenge facing the industry is the more mature US market, where excessive competition is likely to curb future growth potential.

 

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