Kao results show growth, despite drag from Kanebo whitening re-call

Kao results show growth, despite drag from Kanebo whitening re-call

Related tags Cosmetics

Kao’s full year results show healthy gains, despite being weighed down by a mass recall relating to skin whitening products in its Kanebo business.

The company said that net sales grew at 7.8%, to ¥1.315 trillion ($12.48bn) – a figure that was positively affected by currency translations, while net income grew by 21.5% to ¥64.76bn, reflecting group operation sales across beauty, health, home care and chemicals.

In the beauty care division, full year sales grew by 6.0% to ¥570.3bn, reflecting operating income of ¥20.1bn, a figure that was up by 3.8% in adjusted terms.

Gains in beauty sales were negated by re-call

Gains in sales for the beauty division were the smallest across the five business divisions, reflecting the challenges that the company experienced during the financial year with its Kanebo skin whitening products.

The company said that the overall results reflected a weak recovery from the global economic downturn, which was also reflected in the domestic Japan economy, where sales of household and personal care market where overall sales were up by 2%.

To tackle a small decreased in its own cosmetic sales in Japan, the company said that it focused on the marketing and launch of new products with high added value based on its Yoki-Monozukuri concept, which focuses on high-end products derived from intense research and development practices.

Rhododenol was isolated as the cause of the recall

Back in July of last year, the company announced a voluntary recall of its Kanebo Cosmetics skin whitening lines after a number of cases of white blotches on the skin were confirmed following use.

The company said that its research had made a connection with the symptoms to an ingredient called Rhododenol, which was used in the products.

Following the recall, the company said that it had written off a total of ¥12.1bn in sales, which hit profits by an estimated ¥2.4bn, and also accounted for approximately ¥9.7bn in expenses relating to returns from retailers.

Regional sales were positively impacted by currency translations

On a regional basis, sales in the consumer business reflected strong gains in the Asia region, where sales increased by 33.3% to ¥116.4bn, 11.0% after negating the positive impact of currency translations, while in the domestic market sales increased by 2.8% to ¥866.4bn.

In the Americas consumer sales grew by 21.7% to ¥68.9bn, while in Europe they increased by 26.0% to ¥72.1bn, although most of these gains were attributed to the positive impact of currency translations.

Looking ahead to the financial year 2014, the company predicts that overall sales for its consumer products division should grow slightly, although its projection for the cosmetics market is that it will remain flat.

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