Oriflame profits dip but performance beats expectations

By Andrew MCDOUGALL

- Last updated on GMT

Oriflame profits dip but performance beats expectations

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Oriflame reports better-than-expected second quarter earnings with sales rising 4% in the third quarter so far too, thanks to successes in Latin America, Turkey, Africa and Asia as the company still contends with a tough climate in Russia and Ukraine.

For the three months ended 30 June 2015, the cosmetics maker saw local currency sales decreased by 2% and Euro sales decrease by 3% to €301.0m (€310.4m).

Oriflame's operating profit also fell to €29.6 million from €32.8 million a year ago, but this was still better than what analysts predicted.

Development

“We are pleased with the development in our key growth markets in Latin America, Turkey, Africa & Asia contributing with 48 % of the total Group sales during the second quarter. The strong growth in China continues and is now an increasingly important part of the business,”​ comments CEO Magnus Brännström.

The Oriflame chief also points to further substantial price increases in the quarter to offset the devaluation in CIS, foremost in Russia and Ukraine, which were implemented according to plan with adverse effect on volumes.

“Although a promising start in the third quarter, positively impacted by timing within the quarter, reversing the volume trend for the Group remains a challenge,”​ he adds.

“The efforts of reducing our cost base and driving efficiency across all parts of the organisation continues.”

The second quarter results mean that for the year’s first 6 months, local currency sales have decreased by 1% and Euro sales by 5% to €608.9m. Operating profit amounts to €52.6m.

Building on tough times

In April, the manufacturer signed a new Revolving Credit Facility amounting to €110m​ in total with its existing core relationship banks which replaces the previous €330m facility.

Reporting its results for the previous quarter, the direct seller saw Euro sales decrease by 6% to €307.8m, down from €327.2m last year, whilst its operating profit fell to €23.0 million euros, down from 29.4 million the previous year.

Oriflame was coming off the back off a challenging 12 months following a Russian tax probe taking its toll at the end of 2014, and with a slowdown in sales in the country seeing profits drop too.

Back then Brännström singled out Latin America, Turkey, Africa and Asia as markets that would help to offset the challenges in Russia.

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