Beauty business snapshot: Coty and Inter Parfums see growth, Evonik and Azelis weather economic headwinds

10 Nov 2023 --- Amid a slowly recovering global economic environment, Personal Care Insights rounds up the latest financial performances by specialty chemical providers Evonik and Azelis, and prestige fragrance company Inter Parfums and beauty titan Coty.

Coty has kicked off the fiscal year 2024 on a high note, showcasing “very strong” financial results for the first quarter ended September 30, 2023.

Notably, the cosmetics giant disclosed an 18% sales growth in the quarter, surpassing the recently raised guidance of +10 to 12% for the first half of FY24. This marks the 13th consecutive quarter of operational results “in line to ahead of expectations.”

“Coty continues to deliver on our balanced growth agenda, with strong LFL growth across both divisions and all regions, with growth contribution from volumes and premiumized mix, complemented by targeted pricing, and from our key categories, including fragrances, cosmetics and skin care,” says Sue Nabi, Coty’s CEO.

“While the external environment remains complex and consumers are being considered in their spending, the beauty category remains advantaged, at the nexus of affordable luxury, self-care and confidence-boosting. We remain well positioned to benefit from this strong beauty performance while capitalizing on our portfolio’s multiple white space opportunities, including female fragrances, ultra-premium fragrances, skin care, China and travel retail.”

She adds that these opportunities enable Coty to raise FY24 guidance for the second time this fiscal year.

Prestige and Consumer Beauty driving growth
Coty experienced “robust” growth particularly in the Prestige and Consumer Beauty segments. Prestige revenues surged at a rate of 23% as reported. Coty’s Prestige revenues surged at a rate of 23% and its Consumer Beauty revenues grew by 10%.

“The exceptional performance of our recent fragrance launches, and in particular Burberry Goddess, which has become the #1 female fragrance launch in key markets, reaffirms Coty’s position as a leading fragrance expert with best-in-class end-to-end capabilities, from developing a winning scent which resonates with consumers across all regions to activating distinctive marketing campaigns, and launching disruptive in-store and online activations,” comments Nabi.

The Consumer Beauty revenues grew by 10%. Coty witnessed strength in color cosmetics, mass fragrances and mass skin & bodycare sales. The e-commerce sector also showed momentum, with over 25% LFL sales growth.

Double-digit growth across regions
Geographically, Coty experienced double-digit percentage revenue growth across all regions.

EMEA sales expanded by 20%, driven by growth across most markets and travel retail. Americas sales rose 17% and Asia-Pacific 16% in Q1, with notable strength in broader Asia and travel retail.

This is in contrast with financial reportings by other beauty sector players, including Beiersdorf and L’Oréal, who each observed pressures from the emergent “daigou” surrogate shopping culture in China — in which buyers outside these markets purchase commodities to sell to customers at a cheaper rates — impacting regional travel retail sales.

Coty’s strong Q1 sales momentum translated into increased profit expansion. Despite expected gross margin declines, Coty highlights 15% YoY growth in reported operating income, which reached US$197.5 million.

Evonik shows resilience
In the face of a persistent economic challenges, Evonik showcased resilience in its third-quarter financial results. Despite a 21% year-on-year decline in adjusted EBITDA due to weak demand, the company reported an 8% increase in adjusted EBITDA to €485 million (US$519 million) in the third quarter compared to the second quarter.Evonik sales in the Nutrition & Care division declined by 13% in the third quarter of 2023 despite increased demand.

Evonik’s Group sales experienced a 23% dip in the third quarter, amounting to €3.77 billion (US$4 billion). The decline was attributed to a 5% reduction in sales volumes and a 6% price drop.

“The economic recovery is still a long time coming,” says Christian Kullmann, chairman of the Management Board at the chemical company. “That is why we are focusing on the levers at our disposal. And that is increasingly having an effect.”

Sales in the Nutrition & Care division declined by 13% to €924 million (US$989 million) in the third quarter of 2023 despite increased demand. This was due to lower selling prices than in the prior-year quarter and negative currency effects.

Since the second half of 2022, Evonik has implemented measures to safeguard earnings, including not filling vacant positions, reducing external service providers and cutting down on business travel, saving about €175 million (US$187 million) by September 30. The company plans to continue these measures into 2024.

Previously, Evonik was hit with “significant profit decline” amid EU recession and impacts from the Chinese economy in its second quarter.

Azelis cruises along steady growth
In the first nine months, Azelis reported revenue of €3.2 billion (US$3.4 billion), marking a year-on-year growth of 2.3%. Despite facing organic revenue decline and foreign exchange translation impact, the company’s strategic M&A initiatives contributed to this growth.

“In EMEA, organic revenue declined by 2.2%, with Life Sciences mitigating lower demand in Industrial Chemicals. In the Americas, the competitive pressures in South America, in addition to the continued challenging environment in Industrial Chemicals in the US, are reflected in organic revenue decline of 13.4% in the region,” shares the company.In the first nine months, Azelis reported revenue of €3.2 billion, marking a year-on-year growth of 2.3%.

“In Asia Pacific, sustained growth in Southeast Asia offset the continued weakness in China, as reflected in organic growth of 2.4% in the region.”

Notably, in Q3, group revenue experienced a 4.6% year-on-year decline, amounting to €1 billion (US$1.1 billion). Azelis achieved a gross profit of €760.1 million (US$814.5 million), reflecting a 3.3% growth compared to the previous year.

“I am very proud of the unwavering commitment of the entire Azelis team to support our principals and customers during this challenging period. I am equally grateful for our teams’ focus on protecting our profitability as we navigate the current pressures in the industry. Our results for the first nine months of 2023 reflect the resilience of our business model, as well as the dedication of our colleagues to continue delivering for our stakeholders,” says Dr. Hans Joachim Müller, Azelis Group’s CEO.

“Based on our performance year to date, I remain confident that we will achieve at least 10 to 15 bps of adjusted EBITA margin expansion for the full year 2023. Revenue growth for the full year is expected to fall below the average annual growth guidance of 8 to 10% due to the impact of the challenging macroeconomic conditions, significant F/X headwinds and our portfolio optimization program.”Inter Parfums affirms its FY2023 net sales guidance of US$1.3 billion, reflecting a 20% growth from FY2022.

Favorable tailwind for Inter Parfums
Inter Parfums has reported a “confident” third quarter with record-breaking results, demonstrating robust growth in the fragrance industry.

“We continued to see favorable trends across the robust fragrance industry, high demand for our brands, and success in our launches, extensions, and distribution, all of which combined to produce record quarterly net sales and very strong earnings,” comments Jean Madar, chairman and CEO at Inter Parfums.

“North America continued to be our largest market, with sales increasing 29% in the third quarter compared to the prior year, and Western Europe followed at 24% sales growth. Asia, our third largest market, performed well, with net sales increasing 20% over that period. We have increased our sell-out in China, namely on Coach, Montblanc and Ferragamo, enabling us to manage down our stock-in-trade levels, which should provide a favorable tailwind in 2024.”

Inter Parfums affirms its FY2023 net sales guidance of US$1.3 billion, reflecting a 20% growth from FY2022.

“Concerning Roberto Cavalli and Lacoste, we expect to benefit from these recent license acquisitions beginning in 2024. Roberto Cavalli fragrance products are scheduled to start shipping in January 2024, with extensions planned for mid-summer next year. The Lacoste license will take effect in January 2024, and we are well prepared to launch our corresponding strategy and product innovation,” Madar continues.

In other financial reports, ELF Beauty and Ashland released their second quarter results and preliminary outlook for fiscal fourth-quarter performance, respectively. Also, Estée Lauder Companies’ sales dropped 11% after a slow China recovery, while the Israel-Hamas war affected the group’s FY24 projection.

By Venya Patel

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