Avon restructing charges continue to spiral

Although the company did not relate which specific positions the latest payments related to, the latest move is part of a comprehensive world-wide restructuring program that has seen Avon trim its 48,000 international workforce by nearly 5 per cent.

Currently around 20 per cent of that workforce are employed in the US, with the remaining working in its operations worldwide. The company has hinted that a great deal of the restructuring will concentrate on streamlining the company's workforce, particularly at the middle management level.

At the end of last month the company said that it would record total charges, mostly as future cash expenditures, of approximately $25 - 30 m before taxes for cost relating to the termination of the 900 employee contracts.

This followed the termination of 1,300 jobs at the end of April, which the company said it would incur costs of $73m directly relating to the termination of the contracts, suggesting that that round of cuts was more geared towards higher paid management posts.

Avon has already said that it expects to announce further cuts in the course of the next few months as it plows ahead witht the program.

In fact that plan has already proved to be more far-reaching than was first expected, with total costs thus far reflecting this.

When the restructuring program was first announced in November last year, CEO Andrea Yung said she expected costs would be in the region of $300m - $500m.

However, with the aggressive implementation of the program costs have spiraled and now the company is estimating that the total bill will be closer to the $500m mark.

The company added that it was expecting to make further announcements relating to exit and disposal costs throughout the course of the coming year.

In February Avon announced a big drop in its fourth quarter profits, due partly to the closure of its Indonesian manufacturing operations and the associated costs.

However, the restructuring has been well received by industry experts and financial analysts, who believe that the program should leave the company in far better shape.

But marking a bad period on the stock markets and the impact of the spiralling restructuring costs, the company's shares are currently trading at $30.40, following a high of $32 when the first round of job cuts were announced at the end of April.