Oriflame reveals recovery plans from drop in Russian ruble

The Russian ruble has plummeted in value over the last year as a result of Western sanctions over Ukraine and falling oil prices. 

The country is the largest market for the Swedish cosmetics maker, representing around 30% of total sales, so the drop in currency has had the largest impact on Oriflame's group sales and operating margin.

In the last couple of years, the price increases in the CIS region have averaged, mid to high single digit per cent year over year. The recent sharp devaluation of the ruble together with the increasing inflation in Russia, require further actions.

Plan is to speed up pace of price increases in Russia​

As a result, Oriflame says it will substantially 'speed up the pace and level of price increases in Russia' in 2015 as well as continuing to seek further efficiency improvements.

The brand has a strong track record of consistently increasing prices, in line with or above inflation, in order to ensure the income level for its consultants and sustain a strong brand position.

The gross impact of the exchange rates on Oriflame's group sales is estimated to be approximately 12% for the full year 2014 and 14% in Q4 2014.

“We will continue to carry out our strategy and sequentially implement price increases at levels required to enable a healthy business development. Despite the macroeconomic difficulties, I’m pleased to see a continued positive local currency sales trend for the fourth quarter in line with earlier communication,​" says CEO Magnus Brännström.

"I am confident that the earnings opportunity that Oriflame offers will be increasingly attractive in this environment, offsetting parts of the euro productivity drop,” ​he adds.

With the current exchange rates (Rouble to Euro at 90) and compared to prior year, the gross impact of the exchange rates on group sales is estimated to be approximately 12% for the full year 2014 (compared to 10% as estimated at the time of the quarter 3 announcement) and 14% in quarter 4 2014.

"Despite the macroeconomic difficulties, I’m pleased to see a continued positive local currency sales trend for the fourth quarter in line with earlier communication. I am confident that the earnings opportunity that Oriflame offers will be increasingly attractive in this environment, offsetting parts of the Euro productivity drop​”, Brännström concludes.