Coty is About to Become the Largest Fragrance Company

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Coty has reported third quarter 2016 sales and provided an update on its acquisition of P&G brands, which will position it as a top beauty player in several categories.

Net revenues for the third quarter totaled $950.7 million, a drop of 1% like-for-like and a gain of 2% as reported. Adjusted operating income totaled $81.7 million. For the first nine months, net revenues totaled $3,273.5 million, a decline of 1% on a like-for-like basis. Adjusted operating income totaled $469.7 million.

The acquisitions will also lead to cost savings of as much as $780 million over the next four years, according to Coty.

Meanwhile, Coty announced that the brands it is acquiring from P&G will have a total annual revenue impact of more than $9 billion (based on fiscal 2015 performance). The gain in revenue will position Coty as the world's top fragrance company, and a leader in color cosmetics, hair coloring and hair styling, according to Coty.

The acquisitions will also lead to cost savings of as much as $780 million over the next four years, according to Coty. The closing of the transaction will incur one-off costs of approximately $1.2 billion over the next four years.

The brands being acquired include:

  • Hugo Boss fragrance
  • Gucci fragrance
  • Max Factor
  • Wella
  • Clairol.

“We continue to make strong progress on the P&G transaction which we expect will make Coty a global leader and challenger in the Beauty Industry," said Bart Becht, chairman and interim CEO of Coty. "We now expect the transaction to close in October 2016. We’ve also substantially increased our estimates for cost synergies compared to when we announced the transaction, significantly improving the outlook for Coty’s adjusted operating margin and adjusted earnings per share, excluding amortization.”

He added, "Q3 revenues were consistent with our expectations for muted like-for-like trends through the end of the fiscal year, as we gradually rationalize non-strategic product lines and businesses. Power brands on the other hand continued to outperform the overall business both for the quarter and fiscal year-to-date. While Q3 adjusted operating income was down due to one-off items and fiscal year-to-date adjusted operating income is largely flat, we continue to target high single digit growth for the full year adjusted operating income at constant rates largely offset by negative FX impact ... In summary, we believe we are well on track to build a healthy platform for Coty to become a global leader and challenger in the beauty industry and provide the right basis to drive profitable growth and deliver shareholder value over time."

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