Kao Cuts Profit Forecast After Recall of Skin Whitening Products

Kao Corp. (4452), Japan’s biggest maker of toiletries, cut its profit forecast to reflect the costs of recalling skin whitening lotions that caused blotches in more than 2,000 consumers.

The company cut its net income forecast for the year ended December by 8.2 percent to 67 billion yen ($685 million) after posting a special loss of 5.6 billion yen from the product recall, it said in a stock exchange statement today.

Net income for the first half of the year will probably be of 18.3 billion yen, 3.7 percent below previous forecast, it said.

Kao’s Kanebo Cosmetics unit began recalling products containing a whitening ingredient called “Rhododenol” earlier this month after customers complained about a loss of pigmentation. The company received more than 100,000 inquires, and 2,250 people reported “depigmentation,” the company said on July 23.

The recall involves 54 types of products including face lotions and creams. Rhododenol is derived from a substance Kanebo found in a search for natural chemical compounds in the bark of the white birch tree, the company said on its website. It discovered that one of these compounds confers strong brightening effects by suppressing the production of melanin in several stages, according to the website.

“The impact on the third quarter and fourth quarter will be reflected in our future forecasts,” Shingo Sakai, a Kao spokesman, said by phone today. The company is still assessing the damage, he said.

Kao’s share dropped 3.7 percent to 3,005 yen in Tokyo trading today, the lowest close since June 13. It cut its forecast after the Japanese market closed.

To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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