Booming CIS sales inject vitality into Oriflame results

By Simon Pitman

- Last updated on GMT

Swedish direct sales player Orilfame has announced a significant
increase in its quarterly sales and profits to June 30 on the back
of a 41 per cent rise in local currency sales in the CIS and Baltic
region.

The company reported a quarterly jump of 22 per cent in its net profits of €22.3m, against Euro sales that jumped 28 per cent to reach €215.7m. Recent restructuring initiatives have also paid dividends, with operating profits rising by 59 per cent for the quarter to reach €31.3m.

The company said that a 23 per cent sales growth in local currencies for the quarter was down to a 13 per cent increase in the sales force and a 10 per cent improvement in productivity.

On a six month basis Euro sales also rose 28 per cent to reach €449.7, while net profits were up 26 per cent to reach €61.1m.

Sustained market growth in the CIS and Baltic region has helped to push sales and profits both for the quarter and throughout the year, due mainly to a 23 per cent increase in the size of the sales force and a 15 per cent productivity improvement, compared to the same period last year.

Euro sales for the region increased 49 per cent to reach €109.6m, with particularly strong performances experience in Belarus, Mongolia, Ukrain and Georgia. The company added that local currency sales in Russia increased 30 per cent.

All of Oriflame's other markets also performed well, with local currency sales in Latin America, Central Europe and Mediterranean and Western Europe up 31 per cent, 25 per cent, 7 per cent and 6 per cent respectively.

The company said that other key countries had proved to be Poland, Romania and Egypt in the Central Europe and Mediterranean region, together with Holland and Portugal in the Western European region, and all countries except Peru in Latin America.

In Asia the company said that it has applied for its license to start direct sales in China, adding that operational preparations are continuing.

The move into China has been keenly awaited since the Chinese government lifted a ban on direct sales at the end of last year. Avon has thus proved to be the first cosmetics company to be licensed to make direct sales in China and is expecting to achieve considerable gains on the back of the currently huge market growth there.

On the products side, the company said that a combination of strong existing product sales and new launches had helped to boost the results. Key launches in the skin care category have included the Performance Body Care range, Ultra Shape-Up Gel and Beauty Bust, while colour cosmetic launches have included the re-launch of Visions V to target teenagers.

On the back of the strong performance the company said it was still on track to achieve long-term local currency sales growth of 5 - 10 per cent for the financial year.

However, for the full year 2006, the company said that it thought it unlikely that it could maintain the strong financial performance it had managed in the first six months of the year.

Oriflame executives said that a number of factors, including the effectiveness of recruitment programmes for sales staff and the effect of currency on sales were not expected to be repeated in the rest of the year.

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