Oriflame defies inflation with strong quarterly results

By Simon Pitman

- Last updated on GMT

Related tags Cent Cent increase United states dollar Euro

Restructuring has helped put Oriflame in a much stronger position, with sales growth also contributing to a healthy increase in profits.

The Sweden-based company said that sales for the second quarter, ending June 30, grew by 15 per cent to reach €311.0m, up from €269.6m in the corresponding quarter last year.

Sales in local currency terms increased by 21 per cent, reflecting the strength of the Euro against key markets, which the company says was driven by a 22 per cent increase in the size of the direct sales force.

Restructuring hits net profits

Net profit increased by 13 per cent, up from €29.1m to €32.8m, but this figure did not take into account a restructuring charge €3.8m.

When factoring in the restructuring charges into the figures for the second quarter this year and last year, net profits increased by 5.5 percent, due to the fact that the €3.8m restructuring charge for the most recent quarter was double that of the corresponding quarter.

Unit sales were up by 10 per cent, which the company said was helped by the successful implementation of price increases and a positive product mix that was well timed according to seasonal demands.

Likewise, those retail price increases helped to curb the effects of inflation, which have hit all manufacturers hard, mainly on the back of rising materials and transport costs.

Increased efficiencies

This, alongside increased efficiencies from the restructuring programme, meant that the operating margin increased by 13.5 per cent, while operating profit for the quarter increased by 11 per cent to €41.9m.

On a regional basis all markets saw significant sales gains, with the Asian region leading the pack at 37 per cent, Latin America sales rising 30 per cent, CIS and Baltics rising 28 per cent, Central Europe & Mediterranean rising 7 per cent and Western Europe and Africa rising 6 per cent.

For the full year 2008, the company predicts that sales growth is expected to be above the 15 per cent mark in local currency, a figure that is likely to be diminished by the impact of the strong Euro.

But despite the challenge presented by the strength of the Euro, the company says it expects that operating margins before restructuring charges should still improve on last year.

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