Dec 12, 2010
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Beiersdorf cuts 2010 margin goal on product revamp

Dec 12, 2010

FRANKFURT, Dec 10 (Reuters) - Nivea maker Beiersdorf (BEIG.DE) said profit will be hit by restructuring as the Hamburg-based company cuts the number of products to focus on skin care to counter a decline in market share.

Beiersdorf, which also makes hair products and make-up and the La Prairie luxury skincare brand, has been losing ground in the consumer and personal goods market to rivals such as Henkel (HNKG_p.DE) and L'Oreal (OREP.PA) and has disappointed investors with its results so far this year.

The package of measures, which will include investment in new skin and body care products, will cost the company 270 million euros ($357.6 million) by 2012, 120 million of which will be taken as charges in the current year, it said on Friday.

Some of the total charges also stem from write-downs on the goodwill of brands it acquired when it moved into China three years ago.

This means that the 2010 target for earnings before interest and taxes (EBIT) as a percentage of sales will now be 9 percent, down from a previous EBIT margin outlook of about 11 percent.

Shares in the company, which have far underperformed rivals this year, reversed earlier gains after the statement on Friday and were down 3.2 percent at 44.91 euros at 1504 GMT.

Analyst Robert Greil at Merck Finck said the relatively high amount of additional costs for 2010 was especially surprising, almost half of which he said was likely for the writedowns in China.

The departure of the Finance Director, Bernhard Duettmann who has been with the group for 21 years, also prompted concern.

"You have to remember that two board members have already left this year," said another analyst who declined to be named.

"Duettmann was one of the strong bases of the company so the fact that he's leaving will make people question what's going wrong in the company."

Merck Finck's Greil suggested the size of the investment programme had dampened takeover speculation and could also be weighing on the shares.

"It's a fairly large investment programme, which in my opinion shows that they want to remain independent for the next few years," he said.

U.S. consumer goods giant Procter & Gamble (PG.N) has often been cited as a potential suitor for Beiersdorf and admiring comments from its chief executive caused a spike in the German group's shares earlier this year.

The timing of the statement was also earlier than expected. Most analysts had been expecting the group to provide details of its mid-term strategy at an investor day next Wednesday.


Beiersdorf also signalled its intent to focus on emerging markets with the appointment of Turkey-born Umit Subasi to the last place on its management board.

Sumbasi joins from SC Johnson, whose brands include Pledge furniture polish and Mr Muscle cleaners. The board position had originally been expected to focus on American operations but Beiersdorf decided to shift the role to emerging markets, which offer faster growth.

Among the products to disappear from shelves as part of the revamp will be Nivea make-up in Germany, the company said in a statement.

It will invest in its brand marketing and new skin care products, however, to make up for the loss of revenue from discontinued products in the medium-term.

The Nivea brand, known for its blue packaging, will celebrate its 100th anniversary in 2011.

"In the coming years we will launch a large number of new products for our skin and body care brands that represent innovations for the consumer," said Chief Executive Thomas Quaas.

By Victoria Bryan

(Additional reporting by Michelle Martin; Editing by Jon Loades-Carter) ($1=.7551 Euro)

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