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Beiersdorf Surges After Pledging Higher Profitability This Year

Beiersdorf 2012 Earnings Miss Analysts’ Estimates on Europe
Pots of Nivea skin cream under production at the Beiersdorf AG factory in Hamburg, Germany. Full-year revenue rose 7.2 percent to a record 6.04 billion euros, the fastest growth rate since 2008, Beiersdorf said on Jan. 24. Photographer: Michele Tantussi/Bloomberg

March 5 (Bloomberg) -- Beiersdorf AG, the maker of Nivea skin cream, surged the most since November in Frankfurt trading as the company pledged higher profitability this year.

Earnings before interest and tax as a percentage of sales will improve this year as revenue increases faster than the market as a whole, the Hamburg-based company said in a statement today. The stock surged as much as 5.1 percent to 70.19 euros, the biggest intraday move since Nov. 2.

Chief Executive Officer Stefan Heidenreich, who joined the company at the start of last year, said the company will focus on China, Brazil and Russia as it introduces new products to help keep revenue growing as European customers rein in spending amid the region’s debt crisis. Sales from emerging markets now account for almost 50 percent of total revenue.

“We expect Beiersdorf to report best-in class organic Ebit growth over the next few years of 13 percent” versus 7 percent for its European industry peers, Guillaume Delmas, an analyst at Nomura Holdings Inc., wrote in a report today.

Adjusted Ebit rose 14 percent to 735 million euros ($957.8 million) in 2012, the company said, less than the 748.2 million-euro average estimate of 11 analysts surveyed by Bloomberg. Profitability was pulled down because of expenses related to the relaunch of its Chinese haircare-product line, the company said.

’Blue Agenda’

Under Heidenreich, Beiersdorf is focusing on large innovations and core products to drive growth as part of his “Blue Agenda,” dubbed for the company’s trademark Nivea packaging. Heidenreich last year dropped singer Rihanna in advertising as he vowed to return the brand to its roots, which include values such as trust and care.

The company will need between three and five years to deliver sustained profitability, it said today. It will also take as long to be in the “top tier” of the cosmetics sector.

The stock “offers a lot of upside potential given the expected margin improvement, which will be the result of the company’s Blue Agenda program,” Christian Weiz, an analyst at Baader Bank AG, wrote in a report.

The operating margin at the consumer unit, which accounts for more than four-fifths of sales, widened to 12 percent of revenue in 2012 from 11.4 percent a year earlier, Beiersdorf said. That was below Natixis’s estimate of 12.7 percent and DZ Bank’s 12.4 percent projection. The margin would have been at least 0.3 percentage point higher without the Chinese relaunch, the company said.

The company also said today that Heidenreich’s fixed basic remuneration was 1 million euros in 2012. That compares with 435,000 euros for former CEO Thomas Quaas in 2011. The CEO’s total remuneration, which also includes bonus payments and non-cash benefits such as the provision of company cars and the payment of insurance contributions, amounted to 2.6 million euros, Beiersdorf’s annual report shows. That compares with 1.44 million euros for Quaas in 2011.

Beiersdorf will maintain the dividend at 70 euro cents a share, lower than a Bloomberg estimate of 80 cents. Full-year revenue rose 7.2 percent to a record 6.04 billion euros, the fastest growth since 2008, Beiersdorf said Jan. 24.

To contact the reporter 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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