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Kao Net Sales Down 1% for Six Months Ended September 30

Posted: October 23, 2012

Kao Corporation announced its consolidated business results for the six months ended September 30, 2012, the interim period of the fiscal year ending December 31, 2012. The company’s net sales for the period were at ¥608,976 million (US$7,847.6 million), a 1% decrease from the six months ended September 30, 2011. Operating income was at ¥53,377 million (US$687.8 million), a 7.2% drop from 2011’s ¥57,508 million, and ordinary income was at ¥55,353 million (US$713.3 million), down 6% from 2011’s ¥58,896 million, while the net income for the time period came in at ¥35,861 million (US$462.1 million), up 16.6% from the same period in 2011. Ultimately, comprehensive income was ¥37,808 million (US$487.2 million), an increase of 3.3% over 2011’s ¥36,595 million for the same time period.

During the six months ended September 30, 2012, uncertainty about the outlook for the global economy increased with the problem of the sovereign debt crisis in Europe. In the Japanese economy, conditions remained severe as the recovery stalled. The household and personal care market in Japan, a key market for the Kao Group, grew by about 1% on a value basis compared with the same period of the previous fiscal year, although consumer purchase prices fell, partly due to the effects of deflation. The cosmetics market in Japan was flat compared with the same period of the previous fiscal year.

The company’s consumer products business saw sales that were firm, reflecting the contribution of its human health care business, which includes sanitary and other products, and its fabric and home care business. Sales increased 0.2% compared with the same time period a year earlier to ¥507 billion, excluding the effects of currency translation, sales would have increased 1.2%. In Japan, sales for the consumer products division increased 1% to ¥421.1 billion. In Asia, sales increased 3.7% to ¥42.4 billion, and excluding the effect of currency translation, sales would have increased 8%. In North America, sales decreased 3.9% to ¥28.1 billion, but excluding the effect of currency translation, sales would have decreased 1.4%. In Europe, sales decreased 12.5% to ¥27.4 billion, but excluding the effect of currency translation, sales would have decreased 3.5%. Operating income increased ¥0.1 billion to ¥44.2 billion as the Kao Group worked to nurture new and improved products, pare down expenses and conduct cost-reduction activities.

Specifically for the company’s beauty care business, sales decreased 1.7% compared with the same period a year earlier to ¥267.2 billion.

Sales of prestige cosmetics, which consist of self-selection and counseling cosmetics, were essentially unchanged from the same period of the previous fiscal year (a 0.1% decrease to ¥125.2 billion; an increase of 0.5% excluding the effect of currency translation). In Japan, amid a continuing shift toward lower-priced products in the cosmetics market, sales of counseling brands Sofina Primavista base makeup, Aube Couture makeup and Coffret D’Or makeup increased, as did sales of self-selection brands Kate makeup and Ururi skin care. Sales outside of Japan decreased compared with the same time period a year earlier with the impact of concerns about an economic slowdown.

In premium skin care products, sales in Japan increased, reflecting the steady performance of Biore skin care products and Curel sensitive skin care products. In Asia, Biore performed strongly with the effects product improvements, while in North America, sales of Jergens hand and body lotions increased.

Sales of premium hair care products decreased in Japan as intensified competition weakened sales of shampoos, conditioners and hair coloring products. In Asia, sales of Liese foam hair color were steady in Hong Kong and sales of Essential hair care products increased in Taiwan and Hong Kong. In North America and Europe, sales of John Frieda foam hair color increased.

Operating income increased ¥0.3 billion yen to ¥7.3 billion due to the Kao Group’s ongoing efforts to rebuild the prestige cosmetics business in Japan, among other factors.

More information on this financial report from Kao’s six months ended September 30, 2012, is available here.