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Kao Sales Up 8% for First Half of 2013

Posted: July 30, 2013

Kao Corporation announced its consolidated business results for the six months ended June 30, 2013, the interim period of the fiscal year ending December 31, 2013. The company's net sales for the period were ¥624,953 million, an 8% increase over the same period in 2012. Operating income was ¥42,944 million (+23.2%), and net income was ¥18,262 million, a decrease of 5.1%.

During the six months ended June 30, 2013, amid an ongoing weak recovery of the overall global economy, the tempo of economic expansion moderated in China and other emerging nations, while some underlying strengths became apparent in certain countries such as the United States. In the Japanese economy, there were early signs of recovery, including in personal consumption, due to a sense of expectation regarding government economic measures. The household and personal care products market in Japan, a key market for the Kao Group, grew by 2% on a value basis compared with the period from January to June 2012, and consumer purchase prices were flat. The cosmetics market in Japan was flat, with a recovery trend from March.

Under these circumstances, the Kao Group worked to launch and nurture products with high added value in response to changes in consumer needs based on its concept of Yoki-Monozukuri, which emphasizes research and development geared to customers and consumers. The Kao Group also promoted cost reduction activities.

Kanebo Cosmetics Inc., Lissage Ltd. and E’quipe Ltd. of the Kao Group announced a voluntary recall on July 4, 2013, due to the confirmation of cases of white blotches appearing on the skin of consumers who have used brightening products containing the ingredient Rhododenol that are manufactured and sold by the three companies because of the possibility of a connection between the symptoms and the products. Expenses related to the voluntary recall had an impact on net income for the period of ¥8.4 billion.

Based on the above, net sales increased 8% compared with the first six months of restated FY2012 to ¥625 billion. Excluding the effect of currency translation, net sales would have increased 2.5%. In the consumer products business, sales of each business were steady with the contribution of factors such as market growth, further strengthening of sales promotion activities and new products in Japan.

For Kao's consumer products business, sales increased 8.6% compared with the first half of restated FY2012 to ¥516.7 billion. Excluding the effect of currency translation, sales would have increased 4.4%.

In Japan, sales increased 4.4% to ¥407.2 billion. The Kao Group launched new and improved products in response to changing consumer lifestyles and social issues such as health consciousness, the aging society and the environment, and enhanced proposal-based sales, among other measures. In Asia, sales increased 33.8% to ¥56.7 billion. Excluding the effect of currency translation, sales would have increased 11.1%. Steady growth continued as a result of integrated management in Asia, including Japan, and the Kao Group carried out aggressive measures including collaboration with retailers, utilization of wholesale channels, expansion of sales of laundry detergents and the launch of baby diapers targeting middle-class consumers in China.

In the Americas, sales increased 22.2% to ¥34.3 billion. Excluding the effect of currency translation, sales would have increased 1.8%. Sales of improved skin care products grew, but some hair care products were impacted by intensified market competition.

In Europe, sales increased 24.1% to ¥34 billion. Excluding the effect of currency translation, sales would have increased 3.1%. Professional hair care products contributed to sales growth.

Specifically for Kao's beauty care business, sales increased 8.5% compared with the first half of restated FY2012 to ¥278.6 billion. Excluding the effect of currency translation, sales would have increased 3.1%. Sales of cosmetics increased 3.7% compared with the first half of restated FY2012 to ¥126.3 billion. Excluding the effect of currency translation, sales would have increased 1.8%.

In Japan, in a market environment that entered a recovery track from March, the Kao Group continued to work to reinforce focal brands. Sales increased compared with the first half of restated FY2012, with growth in sales of counseling brands Coffret d'Or makeup, Sofina Primavista base makeup and the renewed Grace Sofina skin care line, as well as self-selection brands Kate makeup, Allie UV care and Fréshel skin care. Outside Japan, sales increased compared with the first half of restated FY2012, excluding the effect of currency translation.

Sales of skin care products increased compared with the first half of restated FY2012. In Japan, sales increased with growth in sales of Bioré facial cleansers and UV care products and strong performance by Bioré U body cleanser and Curél derma care products. In Asia, Bioré facial and body cleansers performed strongly and sales grew. In the Americas, sales of Jergens hand and body lotions increased, partly due to the effect of product improvements to Natural Glow, which gradually changes skin color to a healthy bronze.

Sales of hair care products were flat compared with the first half of restated FY2012. Sales in Japan were impacted by intensified competition for shampoos and conditioners and the contraction of the hair coloring products market, but new products, including hair styling products, performed strongly. In Asia, sales of Liese foam hair color increased. In the Americas and Europe, sales of the Goldwell professional hair care brand increased.

Click here for a the full first half 2013 financial report from Kao Corporation.