NEW YORK — Special items and challenges in Latin America dragged down Avon Products Inc.’s third-quarter profits by 21.2 percent as income from continuing operations rose in the period.
This story first appeared in the October 23, 2002 issue of WWD. Subscribe Today.
Net income fell to $90.3 million, or 38 cents per diluted share, for the quarter ended Sept. 30. This compared with year-ago profits of $114.6 million, or 48 cents.
As expected, the firm’s business transformation initiatives levied, in aggregate, an aftertax charge of $25.2 million, or 10 cents per share, on the quarter. The initiatives include a series of actions to streamline its processes and operations. No more charges from the plan are expected.
Exclusive of this charge, as well as special items in the year-ago quarter, income from continuing operations rose 10.1 percent to $115.5 million, or 48 cents per diluted share. With some help from higher-than-expected currency hedging gains, results crossed the finish line a penny ahead of Wall Street’s expectations for earnings per share of 47 cents.
Revenues rose 3 percent for the period to $1.46 billion from $1.42 billion. Without foreign currency translation, sales rose 11 percent, driven by 13 percent unit growth and a 10 percent increase in active representatives.
Quarterly sales in the U.S. rose 6 percent, with a 9 percent uptick in units. Active representatives increased by 2 percent. Operating profits climbed 17 percent.
European sales jumped 28 percent, or 23 percent in local currencies, while units grew by 32 percent. The region’s operating income increased 21 percent, or 18 percent in local currencies.
Latin American sales dropped 14 percent, but expanded 13 percent in local currencies. Operating profits slid 9 percent, but picked up 14 percent, excluding fluctuations in exchange. Avon noted its business in Argentina remains profitable, despite the country’s economic challenges, including a major currency devaluation this year.
In Asia, sales improved 9 percent, or 7 percent in local currencies. Operating profits were up 26 percent, or 23 percent excluding currency fluctuation.
Jim Gingrich, an analyst with Bernstein, noted: “When you step back and look at it, it was a pretty solid quarter in a tough environment, given how much of their business is in Latin America. Certainly, they’re doing a heck of a job in Latin America, given the circumstances.”
For the nine months, net income inched up 2.2 percent to $341.6 million, or $1.42 per diluted share, from $334.2 million, or $1.39, a year ago. Before unusual items, net income grew 12.9 percent to $366.8 million, or $1.52 cents per share. Revenues for the year-to-date were up 3 percent to $4.37 billion from $4.25 billion a year ago.
For the year, Avon continues to expect earnings of $2.30 per share, excluding unusual items.