Oriflame Q3 results below market expectations

By Simon Pitman

- Last updated on GMT

Swedish direct sales group Oriflame has announced a strong set of
third quarter results, although profits did come in below some
market expectations.

The company has been struggling to overcome a drop in its profits following significant investment in developing markets - namely China and Russia - but the latest results show it is now starting to recover its ground.

The company said that euro sales grew by 20 per cent in euro currency for the three month period to reach €170.9 million, compared to €142.4 million during the same period in 2004. For the nine month period, the figures stood at €521 million, a jump of 10 per cent in euro currency terms

Profit before tax for the quarter stood at €18.1 million, below the €19.6 million guidance given by Swedish market analysis provider SME Direkt. Over the nine month period, this figure stood at €66.1 million, a rise of rise of 5 per cent during the same period in 2004.

The company said that the main reason for the increase in quarterly sales was a 14 per cent growth in its workforce, combined with a 4 per cent rise in productivity.

Of its current product line up, Oriflame said that women's fragrances had shown high double digit growth during the period, with the new Ice and Fire fragrances be singled outas particulararly successfull.

The supply chain has also been a continued focus for the company as a means of ensuring product availability. In particular the integration of its CIS supply chain, a source of considerable investment in recent months, was earmarked as being a future source of improved margins.

The company said that its CIS supply chain center in Moscow will be open in the first half of 2006, while construction work is now complete on its manufacturing plant in China, with production also due to commence in the first half of 2006.

On a greographical basis, sales increases continue to be strongest in the CIS and Baltic region, where a 27 per cent rise in sales was recorded at €81.7 million.

Sales in Scandinavia were described as strong, but weak in the UK. Furthermore an 8 per cent increase in the Western European workforce meant that a 7 per cent rise in sales to €18.7 million offset a 1 per cent decrease in productivity.

Euro sales in Latin America rose by 32 per cent to reach €8.7 million, while Aisan sales rose 7 per cent to reach €7.2 million.

Oriflame​ said that its outlook for the full year remains the same in view of these results. Operational investments in Russia and China, combined with the expenses associated with the increased workforce are expected to impact operating margins by between two and three per cent for the full year.

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