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Sales Inch Up for Kao's Beauty Business

Posted: February 4, 2014

Kao Corporation announced its consolidated business results for the fiscal year ended December 31, 2013, with net sales of ¥1.315 trillion, a 7.8% increase from 2012’s ¥1.012 trillion net sales. Operating income for 2013 was ¥124 million, and net income was ¥64.7 million, an increase 21.9% from 2012.

During the fiscal year ended December 31, 2013, a weak recovery of the overall global economy continued. As the tempo of economic expansion moderated in emerging nations, the U.S. showed a recovery trends, and signs of an upturn became evident in Europe, although weakness persisted. The Japanese economy gradually recovered as personal consumption picked up due to a sense of expectation regarding government economic measures. The household and personal care products market in Japan, a key market for Kao, grew by 2% on a value basis compared with the period from January to December 2012, and a sense emerged that the decline in consumer purchase prices had bottomed out. The cosmetics market in Japan fell short of the level of restated FY2012.

Under these circumstances, Kao worked to launch and nurture products with high added valued 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 company 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 had 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. A total of ¥12.1 billion related to the voluntary recall consisted of a decrease of ¥2.4 billion in gross profit due to factors including the deduction from net sales of goods returned from retailers and ¥9.7 billion in expenditures.

Net sales increased 7.8% compared with restated FY2012 to ¥1.315 trillion. Excluding the effect of currency translation, net sales would have increased 2.1%. In the consumer products business in Japan, sales of each business were steady, excluding the impact of the voluntary recall, due in part to market growth, new product launches and further strengthening of sales promotion activities. For the consumer products business segment, sales increased 7.1% compared with restated FY2012 to ¥1.091 trillion, and excluding currency impact, sales would have increased 2.9%. In Japan, sales increased 2.8% to ¥866.4 billion. Sales grew in a relatively stable market environment as the company launches new products and enhanced proposal-based sales, among other measures. Negative impacts were felt due to the involuntary recall. In Asia, sales increased 33.3% to ¥116 billion, and excluding currency translation, sales would have increased 11%. Steady growth continued in as a result of integrated management in Asia, including Japan, and Kao carried out aggressive measures including collaboration with retailers and utilization of wholesale channels. In the Americas, sales increase 21.7% to ¥68.9 billion and excluding currency translation, sales would have increased 0.5%. Sales of improved skin care products grew. In Europe, sales increased 26% to ¥72.1 billion, and without currency translation, sales would have increased 1%. Sales of professional hair care products were steady.

Specifically for Kao’s beauty care business, sales increased 6% to ¥570.3 billion, and excluding currency translation, sales would have increased 0.2%. Sales of cosmetics decreased 1.1% to ¥257.1 billion, and currency translation brings a 3.4% sales decrease. In Japan, sales decreased compared with restated FY2012, due in part to the impact of the voluntary recall. In a contracting marketing, Kao continued to work to reinforce focal brands, with growth in sales of counseling brands Sofina Primavista base makeup and the Grace Sofina skin care line, as well as self-selection brands Kate makeup and Allie UV care. Outside Japan, sales increased compared with restated FY2012, excluding currency translation.

Sales of skin care products increased compared with restated FY2012. In Japan, sales increased with growth of sales in Bioré facial cleansers and UV Care products and strong performance by Bioré U body cleanser and Curel derma care products. In Asia, Bioré facial and body cleansers performed strongly and sales grew, while in the Americas an improved version of Jergens Natural Glow self-tanner performed steadily.

Sales of hair care products were on par with restated FY2012. In Japan, shampoos and conditioners were on a recovery track as new products performed steadily and new hair styling products performed well, but hair color products were impacted by market contraction. In Asia, sales decreased, and in the Americas and Europe, sales of the Goldwell personal hair care brand increased.

Expanded information about Kao’s 2013 fiscal results can be found here.