Profits down but rosy outlook boosts Avon
quarter the result was still better than expected - further boosted
by stronger sales predictions for 2008.
Net profit came in at $128.9m, compared to $184.1m for the same period a year earlier, a figure that was negatively impacted by significant restructuring costs. The company said that expenses related to simplifying its product line had contributed to higher than expected costs during the quarter, but likewise the results were still less than financial experts had expected. Originally the company had said that its restructuring plan would not top the $500m mark when it was first proposed in 2004, but now that figure is likely to exceed $530m, of which $444m of the costs have now been accounted for. Sales growth of 17 percent Developments in the fourth quarter sales were extremely positive, with revenues growing 17 per cent to reach $3.05bn, boosted by the fact that all six operating regions contributed to the growth. In particular sales of beauty products rose by 20 per cent - a figure that the direct sales company said was largely attributable to an 11 percent increase in the number of sales representatives. Andrea Jung said that the overall results reflected a significant increase in advertising spend over the last two years, as well as improving the structure and incentives for its sales representatives. "Our results also reflect the strength of our diverse geographic portfolio, which is highly advantaged particularly in developing and emerging economies where we enjoy leading market positions," Jung said. Share prices rise in early trading The financial markets reacted positively to the results, with share prices rising by over 5 percent in early trading on the NYSE, following their release. On a geographical basis the highest sales were recorded in China, Latin America, Europe, the Middle East and Africa. In North America total revenues were up just 2 percent to $766.5m, with changes to the structure of sales helping to offset rising gas price and the slowing retail environment in the US. Latin America showed a rise of 28 percent in fourth quarter sales, to reach $989.7m, which was accounted for by strong sales in Brazil and Colombia, where revenue growth exceeded 40 percent. In Western Europe, Africa and the Middle East fourth quarter sales were up 22 percent to $434.2m, while in Eastern Europe sales were also up 22 per cent to $558.6m. In Asia Pacific fourth quarter sales grew by 8 percent to reach $239.9m, while in China sales grew by 29 percent to reach $86.6m. For the full financial year 2007, the company said that sales increased by 13 percent to reach $9.84bn, while net profits were up 11 percent to reach $530.7m. Looking ahead to 2008 Jung said she was confident the company would be able to sustain mid-single digit topline growth.