P&G Takeover Hampers Wella’s Net

BERLIN — Restructuring charges and exceptional items largely relating to Wella’s takeover by Procter & Gamble adversely affected the German hair care company’s earnings for the abridged financial year ending June 2004.

Wella reported $249.1 million (195.2 million euros) in earnings before interest and taxes at Wella AG for the nine-month period. The company did not provide a comparable figure for 2003, but noted that a pretax loss of $290.8 million (227.9 million euros) compared with pretax earnings of $91.7 million (71.9 million euros) for the nine-month period in 2003. All dollar figures are calculated from the euro at current exchange rates.

The Darmstadt-based firm said even after adjusting for $276.9 million (217 million euros) in restructuring charges, exceptional factors such as spending on defensive measures in the professional division, residual fixed costs in the consumer division and legal expenses took their toll on earnings for the shortened business year. Wella made the decision to shift to a July 1- June 30 fiscal year in keeping with P&G’s financial calendar at an extraordinary general meeting in February 2004.

Sales, including the consumer division, which is in the process of being transferred to P&G, reached $1.98 billion (1.55 billion euros) in the nine-month period, a nominal increase of 0.2 percent. The core professional and cosmetic and fragrance divisions grew sales a nominal 5 percent in the period, or 7.2 percent when adjusted for currency effects.

The worldwide transfer of the consumer division will be completed by mid-2005. Sales for the division fell as expected, down 10.9 percent to $524.7 million (411.2 million euros). The division generated a loss in EBIT of $249.1 million (195.2 million euros), of which $215.9 million (162.9 million euros) can be attributed to restructuring charges.

The professional division increased sales for the abridged year a nominal 2.3 percent, or 4.4 percent after adjusting for currency effects to $973.6 million (763 million euros). EBIT was down to $44 million (34.5 million euros) due to restructuring charges of $49.6 million (38.9 million euros) and other exceptional items.

Cosmetics and fragrances continued its strong growth performance, with sales up a nominal 11 percent to $479.5 million (375.8 million euros). Wella said North America and Asia were the regional motors behind the division’s growth. In terms of brands, Gucci Parfums, Escada and Rochas increased sales and revenues about 20 percent compared with last year. However, restructuring costs also slashed the division’s EBIT, with an operating loss of $18.1 million (14.2 million euros) compared with earnings of $19.3 million (15.1 million euros) for the period last year.

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