Coty reveals mixed bag for its first quarter results

By Simon Pitman

- Last updated on GMT

Coty reveals mixed bag for its first quarter results

Related tags Generally accepted accounting principles United states dollar

It’s been a busy week for Coty, with announcements for another big acquisition, reorganization plans and now first quarter results that show profits are up while revenues are down.

The company said that net sales were down on a reported basis by 6% to reach $1.11 billion, a figure that was up 3% at constant currency rates, underlining how the performance was hit by the strength of the US dollar against other currencies.

On the positive side, color cosmetics growth has continued to be very strong due to the Sally Hansen and Rimmel brands, while the skin and body care categories also saw an uptick.

Asia Pacific powers ahead

Looking at the results geographically, solid growth in the Asia Pacific region was offset by a weaker performance in the EMEA and the Americas. Asia Pacific revenues grew by 4% on a like-for-like basis, while revenues in both the EMEA and the Americas declined by 3%.

The reported revenues were hit by a combination of currency headwinds and lacklustre fragrance sales. Coty executives said the sales revenues suffered because of an unsustainable pipeline of historical launches not being supported by branding efforts.

 “We will be working hard to clean up past portfolio practices, while strengthening our innovation pipeline and improving our capabilities in the areas of innovation and sales & marketing execution,”​ said Bart Becht, chairman and interim CEO in a press statement.

“We continue to believe that our strategy of investment in growing our power brands while bringing Coty back to profitable growth behind our efficiency programs, remains the right basis for delivering shareholder value over time."

Net profits surge on tax benefits and restructuring

The strongest indicator for Coty’s first quarter was the net profit figure, which was up from $10.6m in the corresponding period last year, to reach $125.7m.

The company said that this performance reflected some tax benefits, some cost savings on early debt repayments, as well as the company’s on-going cost reduction and restructuring program.

Looking ahead to the full 2016 financial year, this is going to be the biggest in the company’s history, if the $12.5bn acquisition of 43 P&G brands and the $1bn acquisition of the Brazil-based Hypermarcas brands is cleared by authorities.

The new brands are expected to be incorporated into the company’s portfolio during the second half of 2016, so the acquisitions are not likely to impact revenues for the current financial years.

In the meantime, the company says that for the current financial year its focus will remain on growing its power brands worldwide, while also maintaining cost optimization opportunities.

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