Beiersdorf results show upturn, but outlook is unsure

By Simon Pitman

- Last updated on GMT

Related tags: Cent, Sales growth, Organic growth, Beiersdorf

Beiersdorf’s fourth quarter and full year results show clear signs of improvement, but analysts believe a strong rebound is far from close.

Although the results showed that strong growth has returned in developing markets, particularly China, the company lost market share in its mainstay Western Europe region where recovery is continuing to be very slow.

According to Andrew Wood, a senior analyst with Sanford C. Bernstein “Overall, Q4 performance showed improvement over the rest of 2009 but was still fairly disappointing, especially in Consumer, which showed little progress over Q3."

Cut in A&P expenses puzzling

“We are particularly puzzled with management’s decision to cut A&P spend in Q4 – a growth engine behind the top-line – by 140bps in this very competitive market,” ​Wood added.

Beiersdorf has significantly increased expenditure on advertising and promotion in recent years, mainly as part of aims to grow Nivea into a global super brand, but hardship in the company’s developed markets has put any further increases on hold.

Sales for fiscal 2009 fell by 0.7 per cent in organic terms and by 3.7 per cent in nominal terms to €5.75bn, compared to €5.97bn in 2009 – a figure that was hard hit by a big drop in sales for its industrial adhesive business, Tesa.

Sales growth for personal care remains steady

However, sales growth for the personal care segment of the business remained positive in organic terms, growing 1.2 percent to €5.01bn. In nominal terms this figure represented a decline of 2.2 per cent compared with the €5.12bn sales in 2008.

Profits after tax were €380m, compared to €558m, a drop of 33 per cent, while the EBIT margin was 10.2 per cent, compared to 11.7 per cent in 2008.

Wood also highlighted the language the company used in its end of year report and press statement, which he said showed a change in demeanour and optimism.

Where's the optimism gone?

“While the CEO [Thomas Quaas] stated he was still ‘absolutely okay’ with the 2009 results, he also appeared unhappy with the current situation of the business and the markets. His usual confidence was simply not there,”​ Wood stated.

“Consumer growth seems to be struggling for momentum, and while Beiersdorf was still better than L’Oreal in Q4, it underperformed most peers, which does not bode well for 2010.”

However, Sanford Bernstien says that Beiersdorf’s expectations for the current financial year are modest and is predicting that the company will achieve organic sales growth of around 15 per cent in 2010, and has upped its earnings per share forecast by 3 per cent to +15 per cent.

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