Aug 5, 2015
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Nivea maker Beiersdorf surprises with rise in profits

Aug 5, 2015

Beiersdorf reported better than expected profits on Wednesday, thanks to rising sales of its Nivea and Eucerin skin creams, the weaker euro and lower costs, and said sales growth should accelerate in the second half, lifting its share price.

The Hamburg-based company also stuck to its forecast for 3-5 percent organic sales growth for the year despite achieving only 1.4 percent in the first half, which was partly due to slower business in its important Western European market.

Earnings before interest and tax (EBIT) in the second quarter rose 17 percent to 253 million euros ($275 million), beating the average forecast of 246 million euros given in a Reuters poll of analysts.

Shares in the company rose more than 3 percent in early trading and by 0840 GMT were still up 2.7 percent at 82.12 euros, topping the gainers in the German DAX index, which was up 0.9 percent.

"Even though CEO (Stefan) Heidenreich's dynamic strategy/push for top-line growth (above everything else) seems to be failing ... we expect investors might react positively to the increased chance that Beiersdorf is becoming the margin turnaround story that everyone wants to see," analyst Andrew Wood of Bernstein wrote in a note.

Beiersdorf's shares have underperformed their peers this year so far, gaining 19 percent compared with a 27 percent gain in the Stoxx Europe 600 personal and household goods sector index, which includes rival L'Oreal and Schwarzkopf maker Henkel.

Beiersdorf's results were lifted by the weaker euro, since much of its sales come from outside the euro zone while its production costs are mostly in euros.

The world's second-biggest skincare products maker has also been pushing its suppliers to cut prices. "These activities are progressing well and are continuing in 2015," it said in a statement.

First-half sales in Beiersdorf's consumer division, which brings together brands like Nivea, La Prairie, Eucerin and Labello, fell in Germany, Switzerland and Italy but rose in eastern Europe and the Americas.

Western Europe accounts for more than a third of group sales.

Beiersdorf said demand for its skin and hair products in Russia was still soaring and was rising in the United States, where it has struggled to establish its brands against those of global rivals like L'Oreal and Procter & Gamble.

Sales in China are stabilising although the market environment remains difficult, Beiersdorf said.

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