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Beiersdorf Climbs to 16-Year High on Increased Margin Target

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Aug. 2 (Bloomberg) -- Beiersdorf AG, the maker of Nivea skin cream, rose to the highest in more than 16 years in Frankfurt trading after raising its 2012 margin forecast and reporting higher emerging-market sales in the second quarter.

Earnings before interest and taxes as a percentage of sales will be about 12 percent, higher than a previous forecast of 11 percent to 12 percent, the Hamburg-based company said today in a statement. Second-quarter sales were slightly below analysts’ estimates, weighed down by weakening demand in Europe.

Beiersdorf rose as much as 7.7 percent to 57.21 euros, the steepest intraday gain since Sept. 29, 2010 and the highest price since at least January 1996. The stock led gains in Germany’s benchmark DAX Index.

“We are getting more optimistic regarding Beiersdorf’s ability to revive its sales growth in the mid-term, while the margin potential is pretty obvious,” said Joerg Frey, an analyst at M.M. Warburg in Hamburg, in a report to investors.

Chief Executive Officer Stefan Heidenreich, who joined the company from Hero AG this year, is seeking to address dwindling profitability in Beiersdorf’s consumer unit. The company said in November that it planned to cut as many as 1,000 jobs over three years to reduce expenses by 90 million euros annually by 2014.

Heidenreich “made clear he intends to focus on strengthening the brands and innovations as well as to extend the presence in emerging markets,” Frey said.

Second-quarter sales rose 2.3 percent to 1.53 billion euros ($1.88 billion), Beiersdorf said, less than the 1.55 billion-euro average estimate of 17 analysts compiled by Bloomberg. The company expects revenue growth of about 3 percent this year.

European Slowdown

European sales fell 5.5 percent in the quarter to 912 million euros. Revenue gained 13 percent in the Americas and 19 percent in the Africa, Asia and Australia region.

Heidenreich said on a conference call that business needs to start improving in Europe, where economic confidence is at a three-year low amid the sovereign-debt crisis.

“There is no reason why Europe should not grow,” the CEO said. “Europe not growing in the mid-term is unacceptable.”

Business in China has improved “significantly,” Heidenreich said, adding that the company plans to break even in the country in 2014. After that date, Beiersdorf expects high single-digit growth in China, the CEO said.

Acquisitions are not a priority at the moment though skincare-related purchases could become a priority in the mid-and long-term as the company has cash available, the CEO said.

Adjusted earnings before interest and tax rose to 192 million euros in the quarter, compared with the 191.5 million-euro average estimate of 11 analysts surveyed by Bloomberg.

“We expect Beiersdorf’s performance to materially improve in the third quarter,” Guillaume Delmas, an analyst at Nomura Holdings Inc. in London, wrote in a report.

-- With assistance from Jan-Henrik Forster in Frankfurt. Editors: Paul Jarvis, Celeste Perri

To contact the reporters on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

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

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