Beiersdorf 2009 profit hit by sales downturn

By Simon Pitman

- Last updated on GMT

Related tags Macroeconomics

Profits fell by one third for global beauty provider Beiersdorf as European consumers cut back on their beauty spend during 2009.

In the face of the tough economic conditions, the company reported provisional figures showing that net income fell from €567m in 2008 to €379m, a fall of 33 per cent.

Although Beiersdorf said that the earnings were within its forecast range, the figures fell short of analysts expectations. Estimates given by 12 analysts polled by Bloomberg had averaged a figure of €399m.

The company blamed its falling profitability on the tough economic conditions, which led to falling consumer spend and a competitive pricing environment that impacted the value of sales.

Group sales fall by 3.7 per cent

Group sales fell from €5.97bn to €5.74bn, a decrease of 3.7 per cent, which on a like-for-like basis meant a decline of 0.7 per cent. Defending the performance, Beiersdorf said that the comparison faired better when set in the context of its very strong performance in 2008.

Beauty sales fell from €5.12m in 2008 to €5.01m, a decline of 0.7 per cent, which in organic terms reflected a rise of 1.2 per cent

The company’s mainstay beauty business recorded huge variations in its global regional sales during the course of the year, with the China and Latin American markets achieving double-digit growth.

Beauty sales hard hit in Europe

On the other hand beauty sales in Europe, and particularly the domestic market of Germany, were hard hit by the consumer downturn, as household budgets tightened on lower spending power.

However, hardest hit was the company’s Tesa division, which supplies adhesives tape to a variety of industries, including the automotive sector.

Tesa sales fell from €846m in 2008 to €737m, a decline of 12.1 per cent. Beiersdorf said that the figure reflected a relatively strong performance considering the sharp contract experienced in this market category.

During the last quarter of the financial year Beiersdorf CFO Bernhard Duetmann​conceded that it would have to ‘fight hard’ to achieve the objectives that were set for the 2009 financial year.

Ambitions for Nivea brand now seem a tall order

“I don’t think we will see growth in our markets…next year,”​ Duetmann is quoted as saying in an interview with news agency Reuters back in October, adding “I’m not that euphoric.”​ .

Nivea’s ambition has been to increase its global market share to 5.5 percent by 2010, building on a share of 4.9 per cent in 2008.

However, the impact of the global recession on the company’s European market is likely to hamper this goal if the economic recovery does not filter down to consumer spending fast enough.

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