Beiersdorf CEO Predicts Sluggish Markets For Rest of the YearJulie Cruz
Beiersdorf AG Chief Executive Officer Stefan Heidenreich expressed caution for the second half of the year after the maker of Nivea hand creams reported sales growth at its biggest unit that trailed some analysts’ estimates.
“Markets are still sluggish,” Heidenreich said in a conference call with analysts today. “We see some risks at the horizon with emerging markets. How that will affect us? Who knows?” The shares fell as much as 4.6 percent in Frankfurt trading, the biggest intraday drop since December 2010.
Beiersdorf today reported sales growth at the consumer unit of 6.5 percent on an organic basis in the first half, trailing a consensus estimate of 6.9 percent, according to DZ Bank. Sales in Europe dropped 0.8 percent in that period, the Hamburg-based company said today.
The company, which generates more than 80 percent of its sales from consumer brands including Eucerin and La Prairie, is shifting investment to emerging markets as demand in Europe remains under pressure. Under Heidenreich, Beiersdorf is also focusing on new products like a Nivea in-shower skin conditioner at its biggest brands to lift growth.
Unilever, the maker of Dove soap, last month reported sales that trailed estimates and said that growth was slowing in emerging markets while conditions remain difficult in the U.S. and Europe.
Beiersdorf specified its forecast for 2013 today, saying it expects revenue could gain 5 percent to 6 percent this year, compared with sales growth of 3 percent to 4 percent on the market. It also expects its earnings before interest and taxes margin to reach 12 percent to 13 percent this year. The company had previously said that revenue would grow above the market and the Ebit margin would exceed last year’s level, which was 12.2 percent, this year.
“One consequence of a more specific guidance is that it highlights that Beiersdorf is expecting a good, but not outstanding 2013, and certainly not the significant performance acceleration that was perhaps hoped/expected as the stock rallied in 2012,” said Andrew Wood, an analyst at Sanford C. Bernstein, in a note.
Beiersdorf shares slipped as much as 3.22 euros to 67.27 euros and traded at 68.17 euros a share at 12:35 p.m. in Frankfurt. The stock has advanced 10 percent this year, after rising 41 percent in 2012.
Heidenreich dropped singer Rihanna from Nivea’s advertisements last year as he vowed to return the brand to its roots. This year, the company introduced a skin conditioner across Europe under the Nivea brand to win over women who don’t moisturize daily and redesigned its Nivea Men brand.
Such products in the first half of the year “have exceeded expectations,” Heidenreich said today, adding that the company has a “great pipeline.”
Beiersdorf in 2011 announced plans to cut 1,000 jobs over the next three years to reduce expenses annually by 2014. The company is done eliminating jobs in Europe, the CEO said today, adding that the savings may be reinvested in the business rather than just immediately boosting profit.
Second-quarter adjusted earnings before interest and taxes rose to 219 million euros ($291.4 million) from 191 million euros, Beiersdorf said today. That beat the 215.5 million-euro average estimate of 15 analysts surveyed by Bloomberg.