Oriflame Q3 pretax rises 31 pct but falls short of expectations

Oriflame Q3 pretax rises 31 pct but falls short of expectations

	Published : Wed, 24 Oct 2007 07:26 By : Agencies Print this Story

STOCKHOLM (Thomson Financial) - Oriflame Cosmetics SA said third quarter pretax profit before restructuring costs rose 31 pct to 13.4 mln eur boosted by higher gross margins and strong sales, but the results fell short of expectations.

However including restructuring costs pretax profit fell 62.9 pct to 3.8 mln eur.

Market expectations for the Swedish cosmetics company were for a pretax profit excluding restructuring costs of 19.1 mln eur, according to SME Direkt.

Sales in local currencies rose 24 pct, driven by a 24 pct increase in the size of the sales force with unchanged productivity, and by 22 pct in euros to 229.6 mln eur. Unit sales were up by 22 pct.

Oriflame reiterated its sales outlook. It expects sales growth for 2007 to be well above 15 pct in local currency terms. Oriflame also reiterated that 2007 operating margins excluding restructuring costs will be slightly better than in 2006, despite the current negative currency effects.

Oriflame said it has decided to hike its sales growth target to achieve local currency sales growth of around 10 pct a year. The previous growth target was to achieve local currency sales growth of 5-10 pct.

Oriflame's margin target is for an operating margin of 15 pct in 2009.

Gross margins increased to 70.5 pct from 68.9 pct mainly as a result of lower provisions for obsolete products and production gains from higher volumes, Oriflame said.

Operating margins excluding restructuring rose to 8.6 pct from 7.3 pct, as a result of higher gross margins, leverage on fixed overhead costs as well as higher marketing expenses in the third quarter last year, the company said.

hans.chumakonde@thomson.com

hc/cw

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.