Big gains in Latin America help push Avon Q2 profits

By Simon Pitman

- Last updated on GMT

Related tags Revenue

Avon has reported a big gain in its net profit for the second quarter, driven by gains in Latin America, where Mexico and Brazil led the way.

Sales for the quarter grew by 9 percent to $2.9bn, which was positively impacted by a 7 percent currency translation on the back of a strong US dollar.

Total units sold declined by approximately 3 percent during the period, but this was more than counterbalanced by the fact that price/mix rose by 5 percent.

Net income on the rise

As a result net income increased by a robust 23 percent to $206.2m, compared to $167.2m in the corresponding period last year – a figure that was also attributed to gains in the personal care and fragrance division, together with color cosmetics.

Surprisingly it was skin care that did not fair so well, with reported sales rising by 3 percent, which represented a decline of 4 percent when taking into account currency translations.

“We continue to expect mid-single digit revenue growth in the second half of this year, drive by our major global field activation program,”​ said Andrea Jung, Avon CEO.

Margin forecast to expand in the second half

“We also continue to expect significant margin expansion in the second half, resulting from gross margin improvement and revenue leverage.”

In Latin America, the company’s biggest market by revenue, sales during the quarter increased by 19 percent to reach $1.35bn, a figure that was positively impacted by foreign currency translations at a rate of 10 percent.

Brazil led the way, with sales up by 17 percent in constant dollar terms, while in the smaller Mexico market the equivalent figure was up by 18 percent and in Venezuela the figure was up by 15 percent.

North America and China fail to shine

North America once again registered disappointing results, with sales down by 7 percent to reach $508.4m, a result that was attributed to a 16 percent decline in the number of units sold.

In Central and Eastern Europe sales were up by 5 percent to $375.1m, which represented a fall of 3 percent after currency translation, while in Western Europe sales were up 13 percent to $398.3m, which was a rise of 5 percent after currency translations.

Sales were also down in the Asia-Pacific region, with revenues coming in 5 percent lower at $226.4m and 12 percent lower after currency translations. The main reason for the fall was again the China market, where sales declined by 28 percent on account of the shift from a hybrid to a direct sales model.

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