Beiersdorf Sees Margin Improvement Amid Emerging-Market Push

Beiersdorf AG (BEI), the maker of Nivea skin cream, reported estimate-beating full-year profit and forecast further gains in profitability this year as it pushes into emerging markets to counteract slower growth in Europe.

Earnings before interest and tax and excluding one-time items reached 13.2 percent of sales last year, compared with 12.2 percent in the prior year, Hamburg-based Beiersdorf said in a statement today. Sales this year may rise 4 percent to 6 percent and profit margin will improve slightly, the company also said, pushing the shares up as much as 2.5 percent.

The maker of Labello lip balm is expanding in China and other emerging markets to make up for slower growth nearer to home as European consumers keep a lid on spending. Chief Executive Officer Stefan Heidenreich has been investing in developing new products such as extending the Nivea line.

“We see good chances that Beiersdorf can gain further market shares in both the mature consumer markets and in emerging countries such as China with a stronger brand portfolio,” Thomas Maul, an analyst at DZ Bank AG, said in a note to clients. “It makes a lot of sense to provide cautious guidance at the beginning of the year.”

Beiersdorf rose 1.9 percent to 73.45 euros at 11:57 a.m. in Frankfurt. The stock rebounded from a 2.4 percent drop in early trading as disappointment among some analysts over the scale of the margin improvement was quickly cast aside.

Cash Balance

Speaking at a press conference in Hamburg today, Heidenreich said Beiersdorf doesn’t share the caution of some competitors regarding market development.

“It’s looking good at the moment,” he said.

The CEO also said the company could use cash for acquisitions at “some point” -- cash and equivalents stood at 984 million euros ($1.35 billion) at the end of last year.

Beiersdorf expects “double-digit growth” in China this year and continues to anticipate breaking even there after years of losses, Chief Financial Officer Ulrich Schmidt said at today’s earnings presentation.

Emerging markets aren’t as profitable as Europe and North America, which means the company needs to expand production to reach a “critical mass” in China and other new markets, Bassel Choughari, an analyst at Berenberg Equity Research in London, wrote in a Feb. 24 note. Sales in Asia, Africa and Australia now account for nearly 27 percent of revenue, he said.

Net income last year was 543 million euros, topping the average analyst estimate of 532.6 million euros. Earnings before interest, tax and special items rose to 814 million euros from 735 million euros.

Unchanged Dividend

Beiersdorf will pay an unchanged annual dividend of 70 euro cents a share, which corresponds with the company’s benchmark of about 30 percent of net earnings per share, Schmidt said.

“In that respect we are at an average of all DAX companies,” the executive said. “We believe that our shareholders last year again benefited from an increasing share price, that’s why the dividend wasn’t in the focus.”

Beiersdorf, which also makes Hansaplast bandages and La Prairie beauty products, on Jan. 16 reported sales rose 1.7 percent to 6.14 billion euros last year. Excluding currency shifts, acquisitions and disposals, revenue grew 7.2 percent, the strongest performance since 2008.

To contact the reporters on this story: Aaron Ricadela in Frankfurt at aricadela@bloomberg.net; Nicholas Brautlecht in Hamburg at nbrautlecht@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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