Oriflame Q3 results show organic revenue growth despite Russian tax investigation

By Deanna Utroske

- Last updated on GMT

Related tags Revenue

Oriflame Q3 results show organic revenue growth despite Russian tax investigation
Although suffering from economic weakness in a number of its key markets, compounded by an ongoing taxation enquiry in Russia, Oriflame's Q3 results show that organic sales revenues are on the up.

The company announced this week that despite the ongoing Russian tax probe, group sales in local currency were up 1% over the past three months to €274.5m. However, factoring in currency translations against a strong Euro, the actual revenues represented a 7% decrease to €294.6m.

A strong Euro currency is affecting currency translations for several major companies. According to the Oriflame earnings report, “The Board of Directors will continue to prioritise reducing the debt during the forthcoming quarters to ensure that the company remains financially strong. As a consequence, the Board has decided for no dividend payment in Q1 2015.”​  

Oriflame reported an EBITDA of €26.3m for Q3. And for the nine months ending September 2014, the company's reported sales after currency translation fell 12% to €912.1m, against an EBITDA of €88.5m.  

Tax predicament

Over the summer, Russian tax investigators seized papers from the beauty company’s headquarters in that country. The investigation has been almost entirely dropped and Oriflame is disputing the authorities’ claim, tied to royalties, for 1bn rubles, Bloomberg Businessweek reports.

Russia is of particular importance to Oriflame, which has been operating there for 12 years, as that country accounts for over half of the company’s annual €1.4bn in sales.

Fewer consultants

Oriflame sells its nature-inspired products in 60 countries via independent beauty consultants. The company reports that over the past three months the number of consultants has dropped by 2% to 2.9m.  

For comparison, direct sales beauty company Avon did well in Russia this past quarter. Success that company attributes to active consultants/representatives and higher average orders.  

Optimism in other markets

 “As mentioned in connection to the second quarter report, we began to see positive effects from the strategic initiatives carried out in the CIS. While the geopolitical situation remains uncertain these positive effects start to result in overall improved development,"  commented CEO Magnus Brännström.

"Currency movements continued to impact us negatively in the quarter, although with consistent price increases and implementation of cost saving initiatives, we managed to offset most of the impact. We have continued challenges ahead of us, especially related to exchange rates and macro-economic development in some of our main markets. At the same time, I am very pleased to see continued strong development in Latin America, Turkey, Africa & Asia.”



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