Coty turns losses into a tidy profit

By Simon Pitman

- Last updated on GMT

Coty turns losses into a tidy profit

Related tags Generally accepted accounting principles Revenue

One year on and fragrance player Coty has turned a big loss in the third quarter of last year into a profit, thanks to a focus on its key brands and cost-cutting measures.

The company reported net revenues of $933.8m, which on a like-for-like basis were flat compared to the corresponding period last year, but with the negative impact of currency exchange rates, this represented a fall of 7%.

The sales were driven by strong growth in the color cosmetics category, but this was negated by declines in both fragrances and skin & body care. Color cosmetics sales increased 6%, while fragrance sales declined 2% and skin and body care fell 4%.

On a geographic basis, the company said that solid like-for-like revenue gains in the Americas of 5% were offset by declines in both the EMEA and Asia, where revenues fell by 3% and 2% respectively.

Turning a loss into a profit

The biggest advances came in the company’s profit margins, with adjusted operating income increasing 24% to $100.9m, and net income jumped out of the red to $75.5m, compared to a loss of $253.3m last year.

Last year’s net income loss did reflect a hefty one-time asset impairment charge, which meant that the adjusted net income for the current quarter fell to $63.6m, compared to $86.7m in the corresponding period last year.

For the first nine months of the fiscal year, net revenues were $3.37bn, which were flat on a like-for-like basis and decreased 4% on a reported basis, while adjusted net income increased from $30.63m to $329.8m.

Cost restructuring saves the day

Coty CEO Bart Becht attributed the increase in profitability to its cost restructuring program, while he also said that revenues had been boosted by the second consecutive quarter focusing on the growth of the company’s power brands.

Speaking of the success of the cost restructuring program, Becth stated: “As our success in this area is very good, we will be looking to increase the $200 million target for our Global Efficiency Plan.”

Becht also pointed out that gains in sales had been somewhat ‘muted’, despite some stronger sales growth for brands such as Sally Hansen, Rimmel and Chloe, but said that the addition of the Bourjois brand to its portfolio, should serve to boost revenues significantly.

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