JP/16/Money
Avon posts higher profit for Q1, boosts 2005 guidance Associated Press New York
Avon Products Inc., the world's largest direct-seller of cosmetics, reported a 16 percent increase on Monday in first- quarter profit from a year ago, as its robust international business offset weakness in its U.S. division.
It also raised its full-year profit outlook, but its shares fell more than 3 percent in Monday trading.
Net income grew US$172 million, or 36 U.S. cents per share, for the three months ended March 31 from $148.1 million, or 31 U.S. cents per share, a year ago. Revenue rose 7 percent to $1.88 billion from $1.76 billion last year.
Financial analysts surveyed by Thomson Financial were looking for earnings of 35 U.S. cents per share on sales of $1.90 billion in the latest period.
In the United States, as expected, revenue decreased 6 percent and operating profit fell 15 percent in the first quarter, as Avon continues to reposition the business for improved performance in the second half.
In Europe, first-quarter revenue and operating profit increased 17 percent and 26 percent respectively. Meanwhile, in Latin America, first-quarter revenue increased 10 percent in dollars and 8 percent in local currency. Operating profit rose 12 percent.
The Asia Pacific region posted first-quarter revenue growth of 10 percent in dollars and 8 percent in local currency.
Avon said that revenue growth in the second quarter should accelerate sequentially, and expects U.S. results to be in line with those of the first quarter.
It continues to expect to restore growth in profits in its U.S. business in 2006. Meanwhile, Europe's revenue is projected to grow in the high teens, with operating profit increasing slightly ahead of revenue.
Latin America's revenue and operating profit should each increase in the mid-teens, and Asia Pacific's revenue is expected to be up by double-digits, the company said.
Avon is forecasting second-quarter earnings of 66 U.S. cents per share, reflecting a non-cash benefit of about $80 million, or 17 U.S. cents per share, relating to prior years' tax-audit settlements. This compares to earnings of 49 U.S. cents per share in last year's second quarter, which included a tax benefit of 5 U.S. cents per share.
The company said that additional tax settlements are possible during 2005, which could result in further benefits.
Avon also raised its previous full-year 2005 earnings outlook to the range of $2.12 to $2.17 per share from $1.95 to $2 per share, reflecting the $80 million second-quarter benefit.
"We're pleased with Avon's performance in the first quarter, especially given the very challenging year-over-year comparisons," said Andrea Jung, chairman and chief executive, in a statement.
"Looking ahead, we're projecting that local currency revenue will accelerate as increased innovation in our second-half product pipeline drives stronger beauty sales."