Record results for NuSkin, but cosmetic division takes a dive

Related tags Direct selling Multi-level marketing

NuSkin Enterprises, the Utah-based cosmetics and supplements maker,
has announced record quarterly revenue. Results were given a big
boost by the performance of its supplements division, which
detracted from the performance in the cosmetics division,
reports Simon Pitman.

The company​ reported revenues of $310.1 million in its second and most recent quarter of 2005, a 9 per cent increase on the prior year period, which was driven by its Pharmanex supplements brand.

Operating income was also up 6 per cent, from $34.96 million in the corresponding period of 2004 to $$37.04 million this year.

NuSkin's personal care revenue fell 10 per cent compared to prior-year results, to $127.9 million - again, something the company said was directly attributed to the emphasis placed on the Pharmanex division.

The company did point out that the performance of its personal care division, which makes skin care, hair care and cosmetics products featuring premium formulations, had grown sequentially by 8 per cent, and was positively influenced by successful product launches throughout the world.

In turn, this meant that the direct selling company's results were driven by its supplements division, which reported global revenue of $175.6 million - a 29 per cent increase over last year.

The company says its Pharmanex Biophotic Scanner was the main reason for the impressive figures. Tapping in on the growing demand for antioxidants of every kind, the nutritional testing tool is a non-invasive measurement of carotenoid antioxidants in the body's tissue, giving an indication of how a person's diet and supplements are protecting their cells and overall health.

NuSkin's home market of the United States was also the fastest growing, accounting for $39.2 million of overall revenue - 9 per cent more than last year.

But it is also onto a winner with its Asian operations. North Asia and South Asia experienced revenue increases of 7 and 6 percent respectively, and in August the company will start trading in Indonesia under the direction of general manager Agung Sardjono, who has been director of Avon Indonesia for the past 15 years.

As with all direct selling companies active in the region however, it is China that is showing the most potential at present, due to the lifting of the ban on direct selling - even if it is not presently apparent.

Revenue from Greater China increased 8 percent to $64.1 million in 2Q 2005 thanks to gains of 13 and 15 percent in Taiwan and Hong Kong respectively, but in Mainland China the results were slightly down as the company adjusts its operations for the new selling environment, which it says will improve its long-term prospects there.

"These adjustments include making modifications to our remuneration plan,"​ said president and CEO Truman Hunt.

"While we are confident these changes will enable us to tap China's potential, our sales representatives will require a few months to adjust their sales and training activities to fit the new plan. Therefore, we feel it prudent to guide to no sequential growth in the third quarter with a return to sequential growth in the fourth quarter. This sequential trend would result in year-over-year growth of 10 to 15 percent in the second half of the year."

Plans are also in place to open for business in Russia in 2006.

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