Restructuring helps Revlon to cut back its losses

By Simon Pitman

- Last updated on GMT

Related tags: Quarter, Net sales, Sales growth, Revlon, The quarter at tropicana

Cost-cutting measures, the discontinuation of the ill-fated Vital
Radiance line and general restructuring have helped take Revlon
back from the brink, as its latest quarterly results finally start
to show clear evidence that it is reducing its losses.

The company said that net loss for the second quarter was reduced considerably, down 87 percent from $87.1m in the corresponding quarter for 2006, to reach $11.7m The figure was boosted by an increase in sales of 8.75 percent, from $321.1m to $349.2m, further boosted by an operating loss of $45.9m in 2006 that was turned into a profit of $16.9m in the most recent quarter. On a six month basis net sales were up 4.8 percent to $677.8m, while net loss came in at $46.5m, compared to $145.3 in 2006. The figures also compare more favorably to the corresponding quarter in 2006 because the company was in the midst of discontinuing its Vital Radiance line, a cosmetics range specially developed for older women. This meant that during the second quarter in 2006 net sales were reduced by approximately $14m and operating profitability was reduced by $40m. "Our performance in the second quarter was driven by a combination of sales growth, benefits from the restructuring actions we took last year and ongoing control of our costs,"​ said CEO David Kennedy. "We remain on-track with our expectation to generate approximately $210min adjusted EBITDA in 2007,"​ he added. This compares favorably against the adjusted EBITDA figure for 2006, which was $78.2m. The investment world has reacted positively to the results, with share prices up 7.7 percent on the NYSE index at 11am today, trading at $1.12. Investors' reaction to the results comes as now surprise, as analysts had predicted that sales growth would only be marginal, forecasting sales of $325.1m for the quarter, representing a rise of just 1.5 percent. On a geographical basis, net sales in the US market were up 13.4 percent to $204.2m, driven by higher shipments of Almay and beauty care products. This figure was slightly offset by lower sales of Revlon color cosmetics. For the international sales, second quarter figures increased 2.7 percent to $145.0m, which meant that the figure was largely changed once currency fluctuations were taken into account. The company said that this figure represented sales growth in the Asia Pacific and Latin America regions, offset by lower sales in Europe.

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