Kao’s net income up 16% in Q1, yearly forecasts confirmed

Japanese cosmetics group Kao has posted a 16% rise in net income in the first quarter 2017, boosted by rising sales in Asia and reductions in costs, and has confirmed its prudent annual forecast.

Between January and March, the group’s net income rose to JPY24.17 billion (nearly €200 million based on the exchange rates applied by Kao), while EBIT grew 12% reaching JPY38.6 billion.

The profitability results come on the back of a 3% rise in revenue for Kao, up to JPY345.18 billion. Excluding exchange rate effects, revenue was actually up 8.6%, driven by solid skincare and personal care product sales in Japan and Asia.

In Japan, where the group generates two thirds of its revenue, sales slumped slightly within a stagnating market. Demand by tourists, especially Asian ones, also recorded a shortfall, having been very strong in the last few years but being very sensitive to exchange rate fluctuations. The group is hoping to improve its performance thanks to a series of new cosmetics launches in the second part of the year.

Elsewhere in Asia, revenue rose by 11.4%, with “solid growth in China, Indonesia and other countries.” At constant exchange rates, the increase was as high as 23.4%.

Revenue was on the up in other regions too, growing 10.8% in the Americas and 2.2% in Europe.

Kao’s consumer goods brands (beauty, house cleaning and diet food) were flat overall, but the chemical products division was very positive, up 14.7% as the trend of the infrastructure market improved in Japan, and Chinese automotive production was also buoyant.

In terms of annual results, Kao has confirmed the forecasts published in February, with sales growing 0.9% to JPY1.470 trillion, a net income of JPY138 billion (+9%) and an EBIT of JPY200 billion (+7.8%), all of this within a “tough competitive environment.”