Skin care specialist Nu Skin says continued problems in its China operations have weighed heavily on its second quarter results, causing revenues and profits to fall.
The US-based global player said that revenues during the quarter fell by 3% to reach $650.0m, a figure that was also negatively impacted by currency translations by approximately 2%.
The results were also significantly impacted by a $50m write-down for inventory in the mainland China market, which meant that net income was down from $74.43m in the corresponding quarter last year, to $19.50m for the current quarter.
Performance in China hit by inventory charges
The write-down relates to significant problems the company had with regulatory authorities in China, after the company was accused of improper practices and a freeze was placed on its operations in the country.
On top of that there was also a $25m charge due to the transition to a new exchange rate for the Bolivar in Venezuela.
The company’s performance in its mainstay Greater China market saw the heftiest losses, with revenues for the quarter slipping from $261.24m to $229.87m, while revenues also slipped in the South Asia/Pacific market.
China market missed the mark
"Our business performed in-line with our guidance for the quarter, with the exception of the China LTO, which occurred shortly after resuming our promotional efforts and did not meet our expectations," said Truman Hunt, president and chief executive officer.
in the Americas, the company's results were significantly better, proving to be the highlight for the quarter, with revenues up 8 percent to $89.9m, compared to $83.4m in the prior-year period.
This strong performance in the Americas region came about despite the fact that results were negatively impacted 11 percent by foreign currency fluctuations, mainly on account of the devaluation of the currency in Venezuela.
Share prices hit hard
The financial world reacted negatively to the results, with shares falling by almost 20% to $11.40, on the day that the financial results were published.
Hunt said that as marketing activities are being resumed in China, the company’s outlook for the next two quarters looks set to improve, as revenues steadily recover from to last year’s levels.
"We anticipate that third-quarter revenue will be in the $620 million to $640 million range with earnings per share of $0.90 to $0.95," said Ritch Wood, chief financial officer. "We anticipate our fourth-quarter revenue to be in the $650 million to $675 million range with earnings per share of $1.00 to $1.05."