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Kao 9-Month Profit Falls on Raw Material Costs

The company also cut its full-year earnings forecast.

TOKYO — Kao Corp. saw its nine-month net profit slide and cut its full-year earnings forecast, citing a change in tax policy.

Kao said Monday its net income for the nine months ended Dec. 31 fell 3.6 percent on the year to 49.38 billion yen, or $635.1 million at an exchange rate provided by the company. The company blamed the drop on the rising cost of raw materials.

Operating income contracted 6.1 percent to 94.07 billion yen, or $1.21 billion.

Net sales for the period grew by 2.2 percent to 934.8 billion yen, or $12.02 billion. Kao’s beauty care business, which includes brands such as Kanebo, Molton Brown, Jergens and Bioré, saw sales growth of 0.3 percent as new products performed well outside of Japan. The beauty care business netted sales of 410.7 billion yen, or $5.28 billion.

“Sales of prestige cosmetics, which consist of self-selection and counseling cosmetics, increased 0.4 percent with the launch of new products, although the downtrend continued in Japan’s cosmetics market with the impact of the earthquake in addition to the shift in consumer preference toward lower-priced products,” the company said in a release.

Kao experienced particularly strong growth in Asian countries other than Japan, where its sales were up by 18.8 percent year-on-year, to 132.7 billion yen or $1.71 billion.

While the company left unchanged its full-year guidance for operating income and sales, it revised downward its net income forecast “to reflect the impact of a reversal of deferred tax assets and liabilities in connection with a revision of the Japanese tax code.”

The company now predicts net income will grow by 13.4 percent to 53 billion yen, or $681.8 million, compared with a previous forecast predicting growth of 22 percent to 57 billion yen, or $743.6 million.
Kao sees operating income increasing 3.3 percent to 108 billion yen, or $1.39 billion. It expects sales to expand 4.1 percent to 1.24 trillion yen, or $15.89 billion.