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Acquisitions Fuel Wella To 2.3% Income Gain

NEW YORK — Wella AG on Tuesday reported first-quarter results that were lifted by acquisitions but hampered by unfavorable currency translations.<br><br>In the three months ended March 31, the Darmstadt, Germany-based beauty and hair care firm...

NEW YORK — Wella AG on Tuesday reported first-quarter results that were lifted by acquisitions but hampered by unfavorable currency translations.

In the three months ended March 31, the Darmstadt, Germany-based beauty and hair care firm reported corporate operating profits, or earnings before interest and taxes, rose 2.3 percent to $67.1 million from $65.6 million in last year’s quarter. As a percentage of sales, EBIT rose to 7.9 from 7.5 percent in the year-ago quarter. Excluding the detrimental effect of currency fluctuation, EBIT would have risen 7.7 percent.

Despite a currency-driven 18.5 percent decrease in North American sales, the firm said overall results were largely in line with expectations. Forecasting results for the full year, the company said: “We still believe that Wella Group will achieve a double-digit EBIT margin for the first time over this year as a whole. EBIT growth should thus again outpace a sales increase in fiscal 2003.”

Dollar figures have been converted from the euro at current exchange rates. The firm didn’t report net profits for the quarter.

Sales for the group, which has agreed to have the majority of its equity acquired by Procter & Gamble, declined 3.1 percent to $843.5 million from $870.1 million last year. Eliminating the effect of currency swings, sales would have escalated 6.6 percent, a figure reduced to 3.5 percent if acquisitions are subtracted.

The Cosmetics and Fragrances group was the only one of Wella’s three business units to register increases in sales or earnings. Bolstered by the April 2002 acquisition of Escada Beauté Group SA, EBIT bounded 73 percent to $14.8 million from $8.5 million in last year’s quarter, while sales advanced 26.2 percent to $187.8 million from $148.9 million. Excluding both currency fluctuation and acquisitions, EBIT was up even more, 75.7 percent, but sales were up a less-robust 17.9 percent.

The Professional division, Wella’s biggest, weathered an 8 percent drop in sales, to $413.3 million, and a 5 percent drop in EBIT, to $52.2 million. Excluding currency and acquisition effects, EBIT declined 4.2 percent and sales dipped 0.9 percent. The Consumer segment saw EBIT fall 12.7 percent to $8 million, although the figure advanced 17.7 percent in local currencies. Consumer sales declined 10.9 percent, to $242.4 million, but accelerated 2.9 percent in constant currencies.