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Kao to Lose $61 Million in Operating Profit After Product Recall

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Kao to Lose $61 Million in Operating Profit After Product Recall
Shoppers walk past an advertisement promoting Kanebo cosmetics products in a department store in Tokyo. The whitening products by Kao Corp.’s Kanebo Cosmetics unit were recalled starting this month. Photographer: Andy Rain/Bloomberg

July 31 (Bloomberg) -- Kao Corp., Japan’s biggest maker of toiletries, said it would lose 6 billion yen ($61 million) of operating profit this fiscal year after it recalled whitening products that caused skin blotches to more than 2,000 customers.

“The sale of our whitening products will fall in the second half. Our reputation was hurt,” Kao President Michitaka Sawada said at a press conference yesterday. The company expects to lose 10 billion yen in sales this fiscal year, he said.

Kao is still assessing how much damage it will face from the product recall that caused “depigmentation” to more than 2,000 people in Japan. The company plans to compensate customers and it hasn’t decided on the amount, said Sawada who apologized yesterday to the affected people.

The whitening products by Kao’s Kanebo Cosmetics unit were recalled starting this month. They were sold in 10 countries and areas outside of Japan, Shinji Yamada, a spokesman for Kanebo, said yesterday. About 100 people in Taiwan reported the skin blotches after using the products, he said.

The Tokyo-based company said on July 29 it lowered its net income forecast by 8.2 percent to 67 billion yen because of the special loss of 5.6 billion yen resulting from the recall it posted in the first half.

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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