Kao hit by material price hike as income slumps in half-year 2022 results

By Alessandro Carrara | 3-Aug-2022

Kao’s cosmetics and beauty categories performed better during the period, with strong growth in Asia and Europe

Japanese beauty owner and formulator Kao has reported a slump in income for its half-year 2022 results, attributed to the rising prices of raw materials.

New Covid-19 variants, exchange rate fluctuations and Russia’s invasion of Ukraine were also factors which affected the business’ operations.

The global economic factors meant operating income slumped by 23.9% to ¥53.7bn, a decrease of ¥16.9bn yen when compared with the same period a year earlier.

Income before income taxes was ¥60.5b, down 18.4% on 2021, while net income slipped by 25.6% to ¥39.8bn.

Kao’s consumer products business, which includes cosmetics and personal care, performed better, with a 2.3% increase in sales to ¥556.9bn.

Sales for Kao’s cosmetics arm were also up 4.9% to ¥116bn, compared with the same period a year earlier.

This was driven by new product launches from global beauty businesses such as G11, the prestige skin care and make-up brand SUQQU and make-up company Kate.

In Europe, Sensai and Molton Brown saw significant sales growth.

“Amid these circumstances, the Kao Group has been steadily advancing the management strategy announced in February 2022, including its capital allocation policy, brand management reform and adjustments to selling prices, among other factors,” Kao said in a statement.

Japan was the weakest geographic performer for the consumer products category, with sales down 1.4% to ¥359.4bn.

Sales in Asia, meanwhile, increased 8.1% to ¥113.2bn, while US sales rose by 13.3% to ¥53.2bn.

The strong performance outside of Kao’s home territory was the result of it proactively raising prices outside of Japan, in order to offset material costs.

In February, Kao revealed it was considering divesting or discontinuing 13 more cosmetics brands by 2024.

In total, 28 brands had been scheduled by Kao for discontinuation, with 15 having already been axed.

Shedding the 13 as-yet-unnamed brands would allow Kao to allocate investment towards growth-driver brands and regional strategy brands, said the Tokyo-headquartered company.

Kao is not the only Japanese company to trim its outlying brands in recent months.

Shiseido recently streamlined its business to focus on luxury skin care, offloading prestige make-up brands to Advent International last year and its Asia-Pacific professional hair care business to Henkel earlier this month.

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