By and  on April 24, 2008

TOKYO — Impacted by rising fuel and raw material costs — plus greater marketing expenses than in its prior fiscal year — Kao Corp.'s profits fell 5.6 percent to 66.56 billion yen, or $664.3 million at average exchange, in the 12 months ended March 31.

Sales increased 7 percent to 1.32 trillion yen, or $13.16 billion, the Tokyo-based firm announced Wednesday. According to the company, its revenues were driven by a solid performance in each business segment — beauty care, health care, fabric and home care, plus chemicals. Sales growth was also boosted by the consolidation of Kanebo Cosmetics, which Kao acquired in 2006, for one month longer than in its previous fiscal year.

Kao's operating income fell 3.8 percent to 116.25 billion yen, or $1.16 billion. The company said despite cost-reduction activities, its expenses increased 10.1 percent to 554.1 billion yen, or $5.53 billion, due to growth in its sales volume and a substantial increase in prices for raw materials, mainly natural oils and fats and petrochemicals.

Gross profit came in at 764.3 billion yen, or $7.63 billion, up 4.9 percent.

Marketing investments, freight and warehouse expenses associated with higher sales volume and rising fuel costs, and the impact of the longer period of consolidation of Kanebo caused Kao's selling, general and administrative expenses to rise 6.7 percent to 648.1 billion yen, or $6.47 billion.

Kao's beauty care division posted revenues of 627.9 billion yen, or $6.27 billion, up 7.5 percent. Its sales in Japan increased 7.8 percent to 448.6 billion yen, or $4.48 billion. There, despite a flat market for prestige cosmetics, the company said its Dew Superior and Sofina Beauté product launches got off to strong starts. Kao's department store brands, such as Impress, and self-selection brands, including Kate, also performed well, Kao said, adding its premium skin care products, including Bioré, performed strongly.

Sales in Asia were also strong, the company said. In China, Kao expanded its prestige cosmetics business within the department store and high-end drugstore channels. It rolled out its Bioré-branded body cleanser to other countries in the Association of South Eastern Nations region. The company also added a moisturizing line to its premium Asience hair care brand in Taiwan and Hong Kong.

Excluding the effect of currency exchange, Kao's sales in North America and Europe were flat year-on-year. Growth for the John Frieda premium hair care brand held steady in Europe, but was slower in the U.S., due to growing competition there. Molton Brown prestige cosmetics performed well, mainly in the U.K., the company stated.

For the fiscal year ending March 31, 2009, Kao projects a 3.7 percent rise in net income to 69 billion yen, or $670 million at current exchange. It also expects a 0.6 percent rise in operating income to 117 billion yen, or $1.14 billion, and a 0.9 percent sales increase to 1.33 trillion yen, or $12.9 billion.

— Koji Hirano

Blue Lagoon Taps Fedorczyk


Blue Lagoon skin care, the brand named for the mineral-rich lagoon in Iceland, has named Suzanne Fedorczyk vice president of sales and education.

Fedorczyk, a 15-year beauty sales veteran, was most recently vice president of sales for Zirh International. Her duties now include the U.S. launch of Blue Lagoon Skincare, focusing on general management, distribution and sales results, as well as various training, communication and consumer education programs, the brand stated.

"I look forward to seeing the progression of Blue Lagoon Skincare as more and more consumers respond to the naturceutical approach of the brand," stated Fedorczyk, who also previously worked as East Coast director for Unilever Prestige and regional sales director for L'Oréal USA's designer fragrance division.

— Matthew W. Evans

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