Oriflame sees sales slowdown in Russia hit profits
Reporting its results for the quarter ended March 31,2015, the direct seller saw Euro sales decrease by 6% to €307.8m, down from €327.2m last year, whilst its operating profit (EBITDA) fell to €23.0 million euros, down from 29.4 million a year ago.
Giving an update on the second quarter, Oriflame says the underlying sales development to-date is around -1% in local currency.
It was not all bad news as the performance in Latin America, Africa and Asia picked up and was strong, but this was offset with ongoing challenges in its key market in Russia.
Oriflame CEO Magnus Brännström comments: “The overall market conditions remain very volatile in the CIS region, despite the recent strengthening of the Rouble, and we have seen a slow-down in Russia.”
The beauty firm’s boss explains that in the quarter, Oriflame implemented significant price increases, which resulted in short-term adverse effect on the volume.
Despite this, Brännström says that the company will continue to sequentially implement the price increases and other measures that it considers appropriate in order to secure both its margins and the income opportunity for its consultants.
“The difficulties in some of our core markets are however balanced by the strong performance of our key growth regions Latin America, Turkey, Africa and Asia representing close to 45% of group sales in the quarter,” he adds.
“While the strong growth in these regions is encouraging, we focus our strengths on getting back to sustainable growth in CIS and Europe.”
The interim report announcement comes after Oriflame signed a new Revolving Credit Facility amounting to €110m in total with its existing core relationship banks which replaces the existing €330m facility (signed in May 2011 and with maturity in 2016).
As part of the refinancing process, the covenants for the company’s existing Private Placement Notes and the new Revolving Credit Facility were aligned.