Key cosmetics players point to sustainability as way out of recession

By Simon Pitman

- Last updated on GMT

Related tags Estée lauder Sustainability Generally accepted accounting principles Ecological footprint

Following a succession of weak financial results some, of the biggest players in the personal care industries are pointing to sustainability measures as a means of exiting the recession.

During 2009 most of the leading suppliers and finished goods players reported declining sales, largely due to big falls in consumer sales in the developed market of North America and western Europe.

Repeatedly the full year financial results have shown that companies which have been working towards cutting back costs, often in the guise of sustainability measures to increase production efficiencies, were the businesses best placed to weather the storm.

In the finished goods segment, two good examples of this were Elizabeth Arden and Estee Lauder, which both delivered improved bottom line results over the course of 2009, despite sales growth remaining modest.

Restructuring helped Estee Lauder battle recession

In fact, Estee Lauder’s results were one of the few bright exceptions in an otherwise endless list of financial results that made depressing results.

For the six months ending in December, 2009, the Company reported net sales of $4.10bn (€3bn), a 4 per cent increase from the comparable period in 2009, while net earnings were $396.9 million for the six months, compared with $209.1 million for the same period in the previous year.

What has been crucial to the improved profitability is the fact that restructuring is expected to save the company an estimated $275m - $300m in the course of the current financial year, attributable to a comprehensive restructuring plan introduced by CEO Fabrizio Freda when he took over the reins just over two years ago.

Following the example of the likes of Estee Lauder, many big personal care business are looking to cost cutting as a means of pulling out of the recession. Likewise, such measures can also serve as a means of upping sustainability efforts that will ultimately reduce carbon footprints.

Unilever points to growth and sustainability

One particular example of this is Unilever. Its CEO Paul Polman, who has been noted for his commitment to environmental issues, has underlined is plans to use sustainability measures as a means of increasing the company’s turnover.

For the full year 2009 Unilever’s sales were up 3.5 per cent on an underlying basis, to €39.82bn, while net profit fell by 31 per cent to €3.66bn and net operating profit fell by 30 per cent to €5.02bn.

While Polman has indicated that there are no clear signs of recovery yet, he recently unveiled longer term plans to double the size of the business, while in turn reducing the ecological footprint of the business.

Polman believes that the two objectives will be inextricably linked, with added cost savings from improved production efficiencies helping to spur further growth in the business.

BASF says sustainablity measures will help it cut costs

Likewise, chemicals and ingredients supplier BASF recorded one of its worst performances on record during 2009, but again, the company is pointing to sustainability measures and resulting cost savings as a means of recovery and securing future growth.

This week the company outlined energy efficiency measures at its production facilities worldwide that aim to cut costs by nearly €40m a year, which will likewise serve to cut down on its carbon footprint, the company claims,

Although cost cutting has long been the key to getting a poorly performing business back on track, there are now countless examples that show the added impetus of sustainability is helping to lend such measures a renewed sense of purpose.

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