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Kao Reports Net Sales of ¥950.5 billion for First Nine Months of 2013

Posted: October 30, 2013

Kao Corporation announces its consolidated business results for the nine months ended September 30, 2013, the third quarter of the fiscal year ending December 31, 2013. Net sales for the time period were ¥950.5 billion ($9.724 billion), a 6.8% increase. Operating income was ¥81.8 billion ($837.5 million), while net income was ¥39.5 billion ($404.6 million), a drop of 0.5%.

During the nine months ended September 30, 2013, a wear recovery of the overall global economy continued. While the tempo of economic expansion moderated in emerging nations, the U.S. showed a recovery trend and the downturn in Europe bottomed out. In the Japanese economy, personal consumption picked up due to a sense of expectation regarding government economic measures, and gradual recovery is ongoing. The household and persona 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 September 2012, and consumer purchase prices were flat. The cosmetics market in Japan also was flat.

The company was also affected by Kanebo Cosmetics Inc., Lissage Ltd and e'quipe, Ltd. of the Kao Group announcing a voluntary recall on July 4, 2013, due to the confirmation of cases of white blotches appearing on the skin of consumers who had used it brightening products containing the ingredient Rhododenol. Currently, the companies are conducting a thorough recall of the relevant products and are working to gain a full understanding of the conditions of people who are experiencing symptoms and to support their recovery.

For the company's consumer product business—which consists of its beauty care business, human health business, and fabric and home care business—sales increased 6.5% compared with the first nine months of Kao's restated fiscal year 2012. Sales grew as Kao launched new and improved products in response to changing consumer lifestyles and social issues. On the other hand, sales in Japan were impacted by returns from retailers and self-imposed cutbacks in marketing activities in connection with the voluntary recall. In Asia, sales increased 34.3% to ¥85.4 billion. In the Americas, sales increased 23.4% to ¥51 billion, as sales of improved skin care products grew but some hair care products were impacted by more intense market competition. And in Europe, sales increased 26.7% to ¥51.7 billion, with the professional hair care products particularly contributing to growth.

Specially for its beauty care business, Kao reported sales increased 5.5% to ¥414.5 billion. However, excluding the effect of currency translation, sales would have decreased 0.3%.

Sales of cosmetic products decreased 2.1% compared with the first nine months of restated fiscal 2012, to ¥181.3 billion. In Japan, sales decreased compared due in part to the impact of returns from retailers and marketing cutbacks related to the recall. In a flat market, Kao continued to work to reinforce focal brands, with growth in sales of counseling brands Sofina Primavista base makeup and the renewed Grace Sofina skin care line, as well as self-selection brands Kate makeup and Allie UV care. Outside Japan, sales increased compared with the first nine months of fiscal 2012, excluding the effect of currency translation.

Sales of skin care products increased compared to the same time period for fiscal 2012. In Japan, sales increased with growth in sales of Biore facial cleansers and UV care products and strong performance by Biore U body cleanser and Curel derma products. In Asia, Biore facial and body cleansers performed strongly and sales grew. In the Americas, sales of Jergens hand and body lotions increased, partly due to product improvements to its Natural Grow sunless tanning lotions.

Sales of hair care products were flat compared to the same time period for fiscal 2012. In Japan, shampoos and conditioners were impacted by intensified competition, although new products performed steadily. New hair styling products performed well too. Hair coloring products were impacted by market contraction. In Asia, sales of Liese foam hair color increased, and in the Americas and Europe, sales of the Goldwell professional hair care brand increased.

Read a more comprehensive report of Kao's financials for the first nine months of 2013 here.