Kao full year results hard hit by recession, though trend is upwards

In the full financial year ending March 31, 2010, the company recorded a 7.2 per cent fall in sales, down to ¥1,184.4bn ($12.72bn), from ¥1,215.8bn in the financial year 2008 – 2009, a figure that would have been down 2.5 per cent discounting the negative effect of currency translations.

The company said that its performance in the household goods sector was stronger than its performance in the personal care and beauty market, where the prestige segment was described as ‘weak’.

Reduced spending of Japanese consumers​

The results were particularly impacted by a poor performance in its all important domestic market, which was affected by the fact that consumer prices have continued to fall to meet the reduced spending power of Japanese consumers.

In particular the company said that Japanese consumers have been progressively swapping from prestige products to lower-priced personal care products in an effort to make compromised household budgets stretch further

Beauty sales for the financial year decreased by 6.9 per cent to ¥547.9bn, which the company said would have been a drop of 3.9 per cent discounting the negative impact of currency translations.

On a positive note, beauty sales were revived by an increase in sales in the China market, thanks to an aggressive marketing campaign, while the company said it strengthened its Kanebo brand in Russia with the addition of a new subsidiary there.

Fall in profits​

The decrease in group sales also hit profits hard, with net income falling 37.2 per cent to ¥40.50bn, from ¥64.46bn in the financial year 2008 – 2009.

Although the company said that the fall in profits was to a certain degree counterbalanced by a fall in raw material prices, particularly for natural oils and petrochemicals, the lower selling prices and higher tax rates squeezed profit margins considerably.

Looking ahead to the full financial year 2010 – 2011, the company said that there were clear signs that a global economic recovery is taking place, although it did also underline that, despite production picking up, deflation is likely to continue to compromise profits.

Year ahead for beauty​

In the coming year the company says that its beauty division will be ‘adding greater value to products’ in response to the deflationary situation in Japan, while overseas the focus will be on cultivating and strengthening the position of core brands.

The company says it is targeting a year-on-year increase of approximately 0.9 per cent for beauty sales, to approximately ¥553.0bn