Latin America drives Avon results, but China suffers

By Katie Bird

- Last updated on GMT

Related tags Middle east United states China

Avon results up on strong Latin American sales in the second quarter but the company’s sales in China suffered significantly.

The direct seller recorded group sales of $2.7bn for the second quarter of 2010, 8 percent up on the figures for the corresponding quarter last year, although foreign exchange contributed 1 percent to this growth.

Operating profit and net income were also significantly up on last year’s figures, with operating profit rising 48 percent to $271.5m, while net income grew from $83m to $169.2m.

Commenting on the results, CEO Andrea Jung said the company was pleased to have succeeded in improving cash flow.

“We are also very pleased with the improving operating margin and strong increase in earnings per share. In addition, we ended the quarter with improved operating cash flow resulting from our ongoing efforts in this area,”​ she said in a statement.

Latin America up, China down

Latin America and Europe, Middle East and Africa were two of the best performing regions, whereas North America and China were down significantly on last year’s results.

In Europe, Middle East and Africa, it was the company’s growth in Turkey and South Africa, as well as the acquisition of UK business Liz Earle skin care that drove sales.

Latin America, which makes up the largest proportion of the company’s turnover, brought in sales of $ 1.14bn, 16 percent up on last year’s figures, mainly boosted by Brazil and the continuing recovery in Mexico.

North America saw sales fell by 6 percent recording a figure of $546.4m, approximately one fifth of the company's total turnover.

However, it was the China market that suffered the most significantly, which the company put down to a continued transition from a hybrid model (using both door-to-door sales techniques and beauty stores) to a direct selling only model.

China recorded sales of $60.7m, down 32 percent on last year. While price increases boosted these results, volume sales stood at almost half that of the previous year period.

In terms of profit, China had an operating loss of $2m in the quarter compared to $7m in profit in the second quarter of the previous year.

The company is currently investigating its China operations relating to its compliance with the Foreign Corrupt Practices Act (FCPA).

Last week a shareholder filed a lawsuit against the company relating to the FCPA. More information can be found here​.

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