Latest Avon cost cutting measures get approval from investment world

By Simon Pitman contact

- Last updated on GMT

Related tags: Cost cutting, Stock market

Financial experts have applauded the latest round of cost cutting, announced at Avon Products earlier this week, while the investment world has also reacted positively, as share prices rise.

As part of moves to bring down costs by $400m, the latest cuts will see 400 executive jobs axed, while the company has also said that it will pull out of several business areas and geographic markets, the most noteworthy being to completely exit the Republic of Ireland.

As well as Ireland, the plan will also see the restructuring or closure of certain smaller, underperforming markets, primarily in Europe, Middle East & Africa.

Further cost cutting helps put Avon on track

Financial analysts gave the thumbs up to the latest round of cost cutting, which aims to put an end to the falling sales and sliding profitability that has characterized the company’s financial results for the past couple of years.

“We believe that the company’s strategies are paying off, which is evident from its fourth-quarter 2012 operating results,”​ stated financial research company Zacks in its research note.

“After reporting dismal results over the past 6 quarters, Avon posted better-than-expected total revenue and earnings for the fourth quarter,”​ the note added.

Avon shares opened trading at $20.10 a share on Monday. But the company announced the current round of cost cuts on Sunday, which sent investors scurrying to buy as soon as trading opened up.

At the close of trading on the NYSE on Tuesday, April 9th​, the share prices had increased to $20.80, marking an uptick to a more solid share price reading following the low point in November of last year when share prices went below the $14 mark.

In the same period two years ago, Avon Shares had been trading above the $30 mark.

Revolving credit facility

The latest cost cutting measures come after Avon completed refinancing activities last month, in a bid to manage its large debt and improve the health of its balance sheet, which has been through a torrid time.

That will see the completion of a public offering of $1.5 billion in notes, as well as entering into a $1 billion four-year unsecured Revolving Credit Facility Agreement, which replaces the previous $1 billion Revolving Credit Facility Agreement.

"Through this refinancing, we have achieved increased financial flexibility, which is critical to our ability to successfully execute Avon's turnaround,"​ said Kimberly Ross, Executive Vice President & Chief Financial Officer, Avon Products.

Related topics: Business & Financial

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