WWD.com/beauty-industry-news/financial/kao-h1-profit-falls-on-kanebo-recall-costs-7070022/
government-trade
government-trade

Kao H1 Profit Falls on Kanebo Recall Costs

Sales spiked 8 percent while operating profit rose 23.2 percent.

TOKYO — Costs related to a recent recall of more than 50 products bit into Kao’s first-half profit and forced it to cut its full-year earnings forecast.
 
Kao said Tuesday its net income for the six months ended June 30 fell 5.1 percent to 18.26 billion yen, or $185.2 million at an exchange rate provided by the company. Kao restated its January to June 2012 figures as it has just shifted its fiscal year to start in January rather than April.
 
Earlier this month, Kao unit Kanebo said it was voluntarily recalling more than 50 different products in the Japanese market due to reports of unexpected side effects of active quasi-drug ingredient Rhododenol. Customers said the products caused white “blotches” to appear on their skin, the company said.
 
Kao said costs related to the recall totaled 8.4 billion yen, or $85.78 million at current exchange rates.
 
The Japanese cosmetics and personal care products manufacturer said its first-half operating income rose 23.2 percent to 42.94 billion yen, or $435.6 million.

RELATED CONTENT: WWD Earnings Tracker >>
 
Net sales for the period rose 8 percent to 624.95 billion yen, or $6.34 billion.
 
Kao saw sales increases across all of its business segments and geographic areas. Its beauty care business, which includes such brands as Kanebo, Bioré, Molton Brown and Jergens, saw its net sales grow 8.5 percent to 278.6 billion yen, or $2.83 billion.
 
Kao’s biggest adjusted sales growth in terms of geographic region came from the Americas, where sales rose 19 percent to 54 billion yen, or $548.1 million. The company even saw growth in its home market of Japan, where sales were up 3.7 percent to 452 billion yen, or $4.59 billion.
 
Kao cut its net income guidance for the twelve months ending Dec. 31, while at the same time increasing its sales forecast.
 
It said it expects net profit to grow 6.8 percent to 67 billion yen, or $679.6 million. The previous forecast was for 73 billion yen, or $776.2 million.
 
The company is forecasting adjusted sales growth of 6.5 percent to 1.3 trillion yen, or $13.19 billion. Previously, it had forecast sales of 1.27 trillion yen, or $13.5 billion.
 
Kao left its full-year operating profit forecast unchanged at 116 billion yen, or $1.18 billion, up 3.8 percent.