Avon attempts to smooth over cracks with China chief

By Simon Pitman

- Last updated on GMT

Related tags Board of directors

Avon Products has appointed a new head for its China operations, a move that aims to smooth over the heavy burden of ongoing bribery investigations and poor financial results.

The company has named John Lin as the head of the company’s China operations, which comes amidst international investigations that have centered on Avon executives’ business dealings in the country.

Lin is currently the president of the company’s operations in Canada. He has previously worked for Avon as vice president of strategy for the company’s Latin American operations, and then held a position as a managing partner in a private equity company, before rejoining Avon last year.

Making a fresh start in China

News of Lin’s appointment was first reported by the Wall Street Journal at the end of last week, and has since been confirmed in a company memo.

Lin will take up the new position on March 1st, replacing Rene Ordonez, a long-serving Avon executive who headed up the company’s Latin American operations before being made president of China operations in 2010.

The company’s bribery allegations were first opened in 2008 and concern allegations that have mainly involved executive bribery in China, but also other cases in Brazil, Mexico, India Argentina and Japan.

Big changes in the executive board

In January of this year the company confirmed in an SEC filing that its vice chairman Charles Cramb had been fired following on-going investigations into bribery centred on its China operations.

Clearly the Avon executive board feels that the appointment of Lin will represent a new start for the company’s China operations, which currently account for approximately 2 percent of its yearly revenues, but also offer considerable potential for growth on account of strong economic growth in the country.

Lin’s appointment is one of a series of high-level executive shuffles. At the end of last year, the company said that Andrea Jung will give up her position as CEO and chairman in a move that makes her the executive chairman, giving way to a dedicated CEO.

The announcement came amidst not only the on-going corruption investigations, but also continued pressures created by the company’s troubled financial performance.

Financial pressures add to the problems

These troubles were further underlined by the company’s most recent quarterly results, which were unveiled on February 14th showing that sales took a continued dive on the back of distribution problems in Brazil and poor results in developed markets.

Speaking at an investor conference following the results announcement, Jung stated that the company is looking to recover margins by implementing cost cuts, which is likely to spell a new round of job cuts.

The company said that revenue for the most recent quarter fell by 4 percent to $3.04bn, down from $3.18bn in the corresponding period last year, while the net loss came in at $400,000, compared to a positive figure of $229.5m in the corresponding period last year.

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