Oriflame 2Q sees operating profits dip
period last year, as the company's attempts to expand into new
markets hit the bottom line, reports Simon Pitman.
Operating profits were SEK 19.7 million (€2.1m), down 26 per cent, from the SEK 26.5 million reported in the corresponding period of 2004. Yet the results brought no major surprises and were actually slightly higher than market expectation.
Oriflame said that the operating profit was expected to be well down on last years figure, as the company operating costs have risen significantly on the back of attempts to expand operations in both China and Russia.
In line with this the company said that construction work on both its CIS supply centre and its Chinese manufacturing plant were both set to achieve targeted opening dates in the first half of 2006.
The downturn came despite group sales rising eight per cent for the quarter up from SEK155.9 per cent in 2004 to SEK168.5 this year. For the first six months to 30 June, the sales were up six per cent to reach SEK350.1, reflecting an improved momentum in the second half.
As a direct result of the fall in operating profits, net profits for the quarter fell by 11 per cent, from SEK 20.4 million, to SEK18.2 million. For the six month period the figure was fell 12 per cent to reach SEK42.5.
On a regional basis the direct sales cosmetics maker reported that its local currency sales were up in Latin America and Western Europe by 19 per cent and 14 per cent respectively. Sales growth in Central Europe & the Mediterranean, CIS & Baltics and Asia were up eight per cent, six per cent and four per cent respectively.
The company said that sales growth in the most recent quarter had been down to its latest product innovation programme. This included the launch of the new Oriflame Colour range back in May, as well as specific products such as Wrinkle Repair Retinol Night Cram and Performance Body Care.
For the full financial year the company said that it was sticking by the outlook given in the first quarter of the year, when the company said it was expecting operational margins to fall by between two and three per cent, but that this performance would be significantly weighted towards the first two quarters.