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Oriflame Q2 pretax rises on strong sales growth; results above expectations


Published :
Wed, 01 Aug 2007 11:51
By : Agencies
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STOCKHOLM (Thomson Financial) - Oriflame Cosmetics SA said second-quarter pretax profit rose 23 pct to 31.9 mln eur as strong sales growth offset slightly slipping operating margins.

The profit figure includes restructuring costs of 1.7 mln eur, while none were recorded for the same period last year.

Market expectations for the Swedish cosmetics company were for a pretax profit of 28.2 mln eur, including restructuring costs of 1.4 mln eur, according to SME Direkt.

Sales in local currencies rose 27 pct, driven by a 24 pct increase in the size of the sales force and a 3 pct productivity improvement, and by 25 pct in euros to 269.6 mln eur. Unit sales were up by 29 pct.

Oriflame hiked its sales outlook. It now expects sales growth for 2007 to be well above 15 pct in local currency. In the previous outlook, the company expected sales growth to be well above 10 pct in local currency.

Oriflame reiterated that 2007 operating margins excluding restructuring costs to be slightly better than in 2006, despite the current negative currency effects.

The company's closing sales force increased by 24 pct to 2,242,500 consultants, Oriflame said.

Gross margins increased to 70.3 pct from 69.7 pct mainly as a result of production gains from higher volumes and lower write offs of obsolete products, Oriflame said.

Operating margins excluding restructuring slipped to 14.0 pct from 14.5 pct, partly as a result of currency movements affecting margins negatively by 0.6 percentage points and higher selling expenses as a result of 'sales enhancing activites, the company said.

It said the establishment of new operational platform on plan.

'Negotiations with the various representative bodies have been completed. The restructuring charges are now expected to amount to 3035 mln eur over two years,' Oriflame said.

hans.chumakonde@thomson.com

hc/gp

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