Kao 9-Month Net Profit Slips

A Kanebo recall hurt the company on the net level but operating profit and sales grew.

TOKYO — Kao Corp. said Wednesday that its nine-month net profit fell slightly on costs related to a recent product recall at its Kanebo unit but operating profit and sales grew for the period.

Kao said net profit for the nine months ended Sept. 30 fell 0.5 percent to 39.55 billion yen, or $409.76 million at average exchange rates for the period, compared with restated results for the same period a year earlier. The company recently changed its fiscal year end from March 31 to December 31.

Kao said costs associated with Kanebo’s voluntary recall of over fifty skin brightening products hurt its profits. Earlier this year, Kanebo received complaints that the recalled products left white splotches on the skin. Kao said it has booked costs and losses of 11.3 billion yen, or $117.07 million on the recall.

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“Currently, the companies are conducting a thorough recall of the relevant products and are working to gain a full understanding of the conditions of people who are experiencing symptoms and to support their recovery,” Kao said in a release accompanying its financial results. “In addition, the Kao Group is working to prevent a recurrence.”
Kao’s nine-month operating profit grew 17.5 percent to 81.86 billion yen, or $848.11 million.
The company said net sales grew by 6.8 percent to 950.54 billion yen, or $9.85 billion.
Despite the Kanebo recall, Kao’s beauty care segment, which includes such brands as Kanebo, Jergens, Molton Brown and Bioré, posted adjusted sales growth of 5.5 percent over the nine months, totaling 414.5 billion yen, or $4.29 billion. The company also posted adjusted sales growth of over 20 percent in each of its geographic areas except Japan, where sales only grew 1.6 percent to 689.9 billion yen, or $7.15 billion.
Kao lowered its net profit guidance for the fiscal year ending December 31, but kept forecasts for operating profit and sales unchanged. It now expects net income to grow two percent to 64 billion yen, or $654.51 million at current exchange rates. This is down from a previous forecast of 67 billion yen, or $685.19 million.
The company is forecasting operating profit will increase by 3.8 percent to 116 billion yen, or $1.19 billion. Sales are expected to grow 6.5 percent to 1.3 trillion yen, or $13.29 billion.