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Shiseido Profits Soar on China Sales

Shiseido Co. Ltd. announced a strong increase in profits, thanks to its business in China, during the nine months ended Dec. 31.

Shinzo Maeda, chief executive officer of Shiseido.

TOKYO — Shiseido Co. Ltd. announced a strong increase in profits, thanks to its business in China, during the nine months ended Dec. 31.

The Japanese beauty giant reported its net earnings in the period rose 29.3 percent to 26.2 billion yen, or $223.7 million at average exchange rates. Operating profits came in at 50.3 billion yen, or $429.6 million, a 23.3 percent gain, thanks to marginal increases from overseas sales expansion, an improved cost-to-sales ratio stemming from a change in product mix and a decline in domestic market expenses.

Shiseido registered sales of 536.7 billion yen, or $4.58 billion, a 3.7 percent rise on the first nine months of the company’s prior fiscal year.

“In the period under review, growth in the domestic cosmetics market was very slight, restricted by increases in resource prices and deteriorating consumer purchasing sentiment stemming from uncertainty about the economic outlook,” the company said. Shiseido explained that its overseas business was negatively impacted by concerns about a global economic slowdown sparked by the U.S. subprime mortgage crisis.

By contrast, Shiseido reported healthy sales in Asia, especially in the Chinese cosmetics market, where business continued to grow rapidly. The European and North American markets for prestige cosmetics, particularly the Shiseido brand and the company’s designer fragrances, were solid, according to the firm.

Domestically, Shiseido reported that its sales declined, due to competition in categories including prestige cosmetics, “self-selection” cosmetics and toiletries.

Shiseido is in the final year of its three-year plan, called “Growth and Enhancement,” aimed at maximizing the company’s growth potential and raising its profitability. The firm seeks to accomplish further domestic reform objectives, continue boosting its global development, with a focus on China, and carry on implementing fundamental structural reforms.

For the fiscal year ending March 31, Shiseido projects a 34.4 percent rise in net profits to 34 billion yen, or $319.4 million at current exchange; a 20 percent uptick in operating profits to 60 billion yen, or $563.7 million, and a 4.4 percent increase in sales to 725 billion yen, or $6.81 billion, versus the prior fiscal year.