Avon shares buck global downward trend on news of lawsuit settlement

By Simon Pitman

- Last updated on GMT

Avon shares buck global downward trend on news of lawsuit settlement

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Despite the major downward trend of global stock prices, Avon has had some good news as its share prices rose almost 5% upon news that a $62 million lawsuit is about to be settled.

The lawsuit stems from the company’s long-standing legal battle over bribes received by overseas executives, specifically in China, and names the company’s CFO and CEO for misleading shareholders about dealings related to the bribes in the period 2006 – 2011.

The proposed settlement for the lawsuit was filed at the District Court in Manhattan, and requires a judge’s approval for it to be validated, a Reuters report confirms.

Avon only pays $2m for the settlement

The settlement means that insurers would pay $60m of the total settlement, while Avon would only be required to pay up for the remaining $2m – giving investors reason for cheer over the company’s otherwise beleaguered performance of late.

Avon executives must have been hugely relieved when at the end of last year a New York judge cleared the company of its pending bribery charges.

In a 59-page court document published in September last year the judge decided that Avon executives did not intend to deceive shareholders about its ability to comply with the federal Foreign Corrupt Practices Act, which prohibits bribing foreign officials.

Outlook is still a massive challenge

But the gains in the current share price are a mere blip compared to the downward trend that has seen share prices from a five year peak of almost $35 back in October 2010 to today’s share price of just $4.54.

For its most recent second quarter results, the company’s revenues slipped by 17% to $1.82bn, mainly on account of currency headwinds against a strong dollar.

On the positive side, revenues increased by 1% in constant currency terms, while Net income for the period also rose, up from $20m last year to $30m this year, gains that came from cost cutting measures mainly from the exit of several international businesses.

In March of this year the company fell off the S&P 500 Index for the first time since June of 1967, a significant mark in its on-going downward performance.

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