KAO SALES DROP, PROFITS RISE, AS CONGLOMERATE REORGANIZES

Byline: Koji Hirano

TOKYO — Kao Corp. reported a drop in sales, but a sharp rise in net profits for its fiscal year ended Mar. 31.
Consolidated net income for the period rose 50.2 percent to $491.3 million. (All dollar figures are converted from the local currencies using current exchange rates.)
Continuing from the previous year, Kao recorded an extraordinary loss in connection with restructuring at Goldwell GmbH in Germany.
However, “the elimination of restructuring losses stemming from the information technology business, which amounted to $224.2 million in the previous period, contributed to a considerable jump in net income,” the firm said in a statement.
Consolidated sales dropped 8.4 percent to $7.98 billion. According to the company, the principal factors causing this decline were a drop in sales of $456 million due to the previous year’s withdrawal from the information technology business, as well as a negative currency translation effect of approximately $282.6 million due to appreciation of the yen.
Consolidated operating income also rose 8.2 percent to $934.3 million. “In Japan, operating income rose strongly as a result of savings achieved through rationalization and cost reduction activities, together with the effects of a stronger yen,” said a spokesman for the firm, who added that overseas operating income fell significantly relative to the previous year, mainly as a result of reduced profits in the personal care products business in the U.S. and the effects of yen appreciation.
“Although the Japanese economy began to exhibit a few visible signs of recovery, consumer spending in most areas remained sluggish during the year, and the business environment surrounding Kao remained harsh,” the spokesman continued. “Overseas, having ridden out their various currency crises, Asian economies, as a whole, began to recover. The U.S. economy continued to grow strongly, while a gentle, paced expansion persisted in Europe,” the firm added.
Consolidated sales for its consumer products business amounted to $5.95 billion, while consolidated operating income rose to $810.2 million.
“The consumer products business in Japan was marked by a continued downward trend in prices and sluggish consumer demand,” said the spokesman. “In the U.S., sales of Biore Pore Pack, which is marketed through the Andrew Jergens Co., declined significantly as demand fell below the peak of the previous year. Even so, a number of new lines, including a facial cleanser, were successfully launched to further develop the Biore brand.”
In Europe, sales of Goldwell, which markets hair care products for beauty salons, grew satisfactorily in terms of local currencies, said the spokesman.
In Kao’s cosmetics business, net sales of Sofina cosmetics were $667 million, while operating income totaled $20.7 million.
Comparison of sales and operating income with those of the previous year is not available, because the figures from its cosmetics business are shown separately as a new segment from this term. Also, the Household Products division has been renamed the Consumer Products division.
The forecast for the full year ending March 31, 2001, is $8.05 billion in consolidated net sales and $518.1 million in consolidated net income.
Also, Kao announced that eight directors and one auditor will resign. Among the directors set to retire are Fumikatsu Tokiwa, currently chairman and representative director; Shotaro Watanabe, currently executive vice president and representative director; and Kazuya Inbe, currently executive vice president and representative director.
Tokiwa and Watanabe will become special advisers and members of the advisory committee. These changes will be effective on June 29, 2000.
Due to the dramatically changing management environment, the firm said in a statement, Kao has decided to establish an Advisory Committee as of June 29, 2000, to reinforce corporate governance — with the goal of fairer and more transparent management — and to strive for speedier decision-making and business operations and enhance the effectiveness of the board of directors.