SHISEIDO’S PROFIT JUMPS

Byline: Koji Hirano

TOKYO — Shiseido Co. Ltd. reported a nearly 50 percent increase in consolidated net income while consolidated sales declined slightly for the fiscal year ended March 31. The Japanese cosmetics giant also announced an expected net loss of $309 million.
All dollar figures are converted at current exchange rates.
Consolidated net income rose 48 percent to $139 million from last year’s $93.9 million, thanks partly to the absence of business restructuring expenses incurred in the previous fiscal year, according to Shiseido. Last year, the firm reported restructuring expenses of $68.7 million as an extraordinary loss.
Consolidated operating income also rose 7.4 percent to $345.4 million from $321.5 million a year ago. “In addition to firming domestic sales of cosmetics, this gain stemmed from enhanced profitability of all divisions,” said a company spokesman. Consolidated net sales declined 1.3 percent to $5.42 billion from last year’s $5.49 billion.
Despite languishing personal consumption in Japan, Shiseido slightly raised sales of its mainstay cosmetics products above previous levels.
Overseas sales grew 12.7 percent in local currency, but the yen appreciation during the year caused a decline of 6.5, said the beauty group, which has 80 subsidiaries and two affiliated companies.
Sales of cosmetics, 74 percent of the entire business, declined 0.7% to $4.01 billion from last year’s $4.04 billion. “Domestic sales of cosmetics rose 0.4%. In overseas cosmetics sales, we achieved a double-digit increase in local currency terms, but sales were down 5.7 percent on a yen-denominated basis due to a major appreciation of the yen during the year,” explained Shiseido.
The fragrance business of Beaute Prestige International SA continued to report a healthy performance, according to Shiseido. Toiletries, 15.3 percent of the business, declined by 7.4 percent to $832.9 million. Other businesses, which made up 10.7 percent of the overall volume, increased 4.6 percent to $578.6 million, although overseas sales of the other division fell 12.5 percent.
“Zotos International Inc., our North American subsidiary, suffered from the effects of a depressed market for hair- perm agents, as well as delays in entering lucrative markets. The situation was further exacerbated seemingly by the yen’s appreciation,” said Shiseido.
The North America region, which made up 3.8 percent of the entire consolidated sales, decreased 11.2 percent to $205.4 million. Sales from Europe, 6.7 percent of the total, dropped 15.6 percent to $366.2 million.
Sales from the Asia-Oceania region, 4 percent of the total, rose 23.4 percent to $216.8 million.
“Our performances in overseas markets were all affected by the yen’s appreciation,” said the firm. “Sales in North America stagnated due to the weak performance of Zotos International. Sales in Europe grew in local currency terms, boosted by improved performances by sales subsidiaries in Germany and Italy, as well as BPI. Amid economic recovery in Asia, sales in China and Hong Kong rose significantly, generating a double-digit sales gain in the Asia-Oceania region, even in yen terms.”
Total overseas cosmetics sales dropped 5.7 percent from a year earlier, to $683.3 million.
To increase profitability and grow, “we must further raise the value of individual brands and build an efficient management system,” said the group in a statement. “Overseas, we will strengthen the functions of our regional headquarters in Europe, the Americas and Asia-Pacific. At the same time, we will reorganize the capital structure of our umbrella of regional headquarters. In this way, we will create a system that will permit flexible marketing beyond national borders as well as concentrated investments in key markets.”
For this fiscal year, which will end March 31, 2001, the Japanese beauty giant expects to post a $309 million net loss, “due to extraordinary losses arising from the complete elimination of the shortfall in the company’s pension reserves associated with the planned introduction of retirement-benefit accounting, as well as from the amortization of goodwill related to Zotos International,” said Shiseido.
Consolidated net sales for this fiscal year will increase 4 percent to $5.6 billion and sales from cosmetics are expected to rise 5 percent to $4.3 billion.