Beauty Beat: Currency Cuts Wella Sales … Beiersdorf Rumors Pick Up

BERLIN — The Wella Group felt the impact of a strong euro and weak economic conditions worldwide in the second quarter of 2002.<br><br>Sales fell 4.1 percent to $920 million, but rose 5.7 percent when adjusted for currency fluctuation, the...

BERLIN — The Wella Group felt the impact of a strong euro and weak economic conditions worldwide in the second quarter of 2002.

This story first appeared in the August 14, 2003 issue of WWD.  Subscribe Today.

Sales fell 4.1 percent to $920 million, but rose 5.7 percent when adjusted for currency fluctuation, the company said. Dollar figures have been converted from the euro at current exchange, as Wella reported sales of 814.2 million euros.

Wella said the volatility of the U.S. dollar, the Japanese yen and Latin American currencies, combined with the “continuously difficult overall economic situation and the accompanying restraint in consumption, had a strong dampening effect on sales development.” However, with the exception of some Asian countries, the company said the war in Iraq and the SARS epidemic had no significant influence on its performance.

Professional division sales dropped 3.1 percent for the quarter to $437.8 million, or 387.4 million euros, but were up 6.1 percent in local currencies. The January acquisition of PPS Hairwear Australia contributed 2.9 million euros to sales. Earnings before interest and taxes were adversely affected by exchange rate influences, and fell 22.1 percent to $46.1 million, or 40.8 million euros.

The consumer division saw sales drop 9.1 percent to $284 million, or 251.3 million euros, for the quarter, though adjusted sales rose 3.3 percent. EBIT was down 21.7 percent to $13 million, or 11.5 million euros, but after exchange rate adjustments, increased 2.6 percent.

The cosmetics and fragrances division increased nominal sales by 2.5 percent to $198.3 million, or 175.5 million euros, or 8.5 percent when adjusted for currency effects. The acquisitions of Tony & Tina in June 2002 and Atkinsons in August 2002 contributed $8.4 million, or 7.4 million euros, to second-quarter sales. The company said Escada Ibiza Hippie, Anna Sui Dolly Girl, Puma Flowing and Mexx Pure Life were the main contributors to sales growth for the period. Quarterly operating profits for the period improved to $2.6 million, or 2.3 million euros, from a loss of $678,000 or 600,000 euros, in 2002.

In light of uncertain economic conditions and what Wella termed “the particular challenges for the company in connection with the planned takeover by Procter & Gamble,” the management board is refraining from issuing forecasts for 2003. However, in the company’s quarterly report, Wella chief executive officer Heiner Gürtler said, “We are confident that 2003 can become a good business year.”

Beiersdorf Rumors Pick Up

Speculation in the German financial press that Procter & Gamble now has its sights on acquiring Beiersdorf sent shares of the Nivea skincream maker skyrocketing Wednesday, one day after the company lowered its 2003 sales target 2 percentage points in light of the sliding U.S. dollar.

Beiersdorf shares closed up 9 points or 8.43 percent at $130.85, or 115 euro, in Frankfurt Wednesday. Financial analysts noted that almost five times as many shares were traded as in an average session over the last six months. All dollar figures are calculated from the euro at current exchange rates.

Acquiring Beiersdorf would cost P&G an estimated $12 billion to $13 billion, a German analyst noted, because P&G would have to make an offer to all shareholders. This is not the first time P&G has been said to be interested in Beiersdorf, but the company’s shareholder structure has presented hurdles in the past.

Allianz AG, Europe’s largest insurance company and the majority shareholder, holds a 43.6 percent stake which it is reportedly keen to sell at the “right price.” Sources say that when earlier negotiations between P&G and Allianz faltered, P&G turned its attention to Wella. P&G acquired a majority stake in Wella this March at a cost of $6.3 billion, or 5.6 billion euro.

Beiersdorf’s second-largest shareholder, the German coffee chain Tchibo, has a 30 percent stake. While Tchibo has long signalled its interest in buying part or all of Allianz’s stake, a family feud has so far prevented it from doing so. In the stalemate, Tchibo’s 30 percent stake has remained a “blocking minority” for any other company striving to take over Beiersdorf.

The situation at Tchibo, however, may dramatically change at the company’s shareholders meeting Monday, August 18, when two of the feuding Herz family members are expected to leave the company. However, it remains unclear whether the rest of the family will agree to join forces and finally move to increase Tchibo’s Beiersdorf holdings.

One Frankfurt analyst remained skeptical of a P&G takeover of Beiersdorf.

“P&G already has its work cut out for it with Wella, and two acquisitions on this scale would be too great a strain,” he said. Moreover, potential anti-trust problems loom large in light of Nivea and Olay’s large market shares, he added.

Beiersdorf executives were not available for comment, nor were spokesmen for Allianz or Tchibo. A P&G spokeswoman declined to comment.