Kao targets improved operating margins

By Simon Pitman

- Last updated on GMT

Kao targets improved operating margins

Related tags: Profit, Shiseido, Kao, Asia

Japanese multinational cosmetics player Kao says it is targeting a further increase in sales for its cosmetics division while also raising the profit margin target through to 2020.

The company says it wants to reach a 10% operating margin in the division with the aim of pushing the operating profit to ¥30 billion ($294m).

Kao is also aiming to continue to increase its international cosmetics footprint in the coming years, and is targeting double-digit sales growth for the division up to 2020 in the hope of achieving sales of ¥300 billion.

The new targets not only aim to put this period firmly behind, but also to put the company in line with its major competitors Kose and Shiseido, which are both currently reporting similar operating margins on the back of expanding their footprints internationally.

Kao cosmetics still in recovery

Kao’s cosmetics division was hit hard in 2012 following a scandal caused by one of its skin whitening products in Japan, which caused unwanted skin discolouration.

The result was significant losses for the business in 2013 and 2014 due to legal issues caused by consumers seeking damages, a huge product recall, throughout Asia, as well as the damage that this did to the company’s reputation.

However, since then, the company has weathered the storm well and has emerged from its problems with increased sales and profits in the last couple of years.

Group sales recover well in 2015

In 2015 group sales, which include a number of other fast moving consumer goods division, came in at ¥1.47 trillion, beating a target of ¥1.40 trillion, while operating income rose to ¥164 billion, beating a target of ¥150 billion.

This compares to a figure of ¥1.10 billion and operating income of ¥52.8 billion in 2012, the year the skin whitening scandal impacted the business.

Kao’s improved performance has come about from a significant move to improve the company’s business reach by extending further into international markets. Reflecting this, in 2015, the company’s overseas sales were 35% of the total, beating a target of 30%.

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