Shiseido cuts full year forecast

17-Aug-2016 - Last updated on 17-Aug-2016 at 16:02 GMT

Japanese multinational Shiseido announced steady sales and a big increase in profits for the first half of its financial years, but cuts its forecasts on the back of restructuring and currency exchange.

The company’s results for the first six months of the year showed that profits were up significant to ¥24.5bn (US$244m), compared to ¥4bn last year as positive effects from earlier restructuring filtered through.

Meanwhile the company’s revenue for the period were virtually flat compared to the previous year, registering ¥412bn, compared to ¥410bn in the same period last year.

Sales and profit forecasts down for full year

In local currency the revenue for the period was up by 5.5%, a figure that largely reflecting the negative impact of currency exchange rates on the reported figure.

However, what alarmed investors when the figures were revealed at the end of last week was the cut in forecasts for the rest of the year. Shares fell by almost 10% upon initial reports of the forecast cut, last week.

Shiseido executives say that they expect sales for the full year 2016 to be ¥848bn, down by 2.8% from its original forecast at the beginning of the year, while the forecast for net income in 2016 was cut by 13% to ¥30bn.

In its financial statement for the half year, the company said that there had been a steady increase in its domestic Japanese business, which still accounts for around 50% of its total revenues, while other global market remained positive on the whole, despite some pockets of volatility.

Outlook contrasts first half performance

However, the company said that the outlook for the next six looks set to contrast the first half of the year, due to a growing sense of uncertainty in a number of key areas.

“This largely reflects further appreciation of the yen and a drop in stock prices, mounting anxiety toward overseas economies, and signs that corporate-sector earnings and consumer spending have stalled,” the company said in its financial statement.

Analysts praised the company for its second quarter performance, with a Credit Suisse report citing a noticeable improvement in the company's performance in China.

However, the same report also cautioned over the outlook, putting the reduced forecast down to internal structuring and the weakness of foreign exchange movements.