China luxury slump weighs on Beiersdorf profits despite sales growth

07 Aug 2024 --- Beiersdorf posted group sales of €5.2 billion (US$5.7 billion) up 7.1% in organic terms, despite a slowing down of the luxury market, notably in China. Group shares fell by as much as 5.9% to €123.65 (US$135.02) in the trading morning — its lowest price since November. 

Beiersdorf’s Consumer Business segment saw organic sales growth climb by 8% to €4.3 billion (US$4.7 billion), outperforming the market. It was led by Nivea’s double-digit sales growth (+11.1%) and “significant” sales increases across all key regions and categories, including consumer brands Derma (+8.3%), Healthcare (+4%) and La Prairie (-7%).

The company discloses an investment shift in marketing, digitalization and sustainability efforts that has led to a “more balanced profitability” across the year.

“These positive results more than offset the recurring headwinds in the challenging luxury market, which were particularly evident in China. As expected, our Tesa business returned to growth after an anticipated slow start to the year,” says Vincent Warnery, CEO of Beiersdorf.

“Despite the volatile economic and geopolitical environment, we remain fully on track to achieve the profitable growth target for the full year,” he highlights.

“With our focus on capturing geographic white spaces and delivering breakthrough innovations, showcased by our recently launched anti-aging innovation Epicelline, we are clearly underlining our ambition to be the best skin care company in the world.”

The group’s operating result (EBIT) excluding special factors amounted to €838 million (US$915.2 million) in the first half of the year (H1 2023: €852 million / US$930.5 million) resulting in an EBIT margin (excluding special factors) of 16.2% (H1 2023: 17.3%).

Nivea leads portfolio with double-digit growth
Organic sales in the Consumer Business Segment increased by 8% in the first six months of 2024. In nominal terms, sales grew by 5.4% to €4.3 billion (US$4.7 billion) (H1 2023: €4.1 billion / US$4.5 billion). 

Beiersdorf’s Consumer Business was lead by Nivea double-digit sales.EBIT (excluding special factors) for the first half of the year stood at €688 million (US$751.3 million) (H1 2023: €700 million / US$764.4 million) with an EBIT margin of 15.9% (H1 2023: 17%).

Nivea — including Labello — achieved excellent organic sales growth of 11.1% year over year in the first half. Nominal sales at Nivea climbed 7.6% to €2,956 million (US$3,227 million) (H1 2023: €2,748 million / US$3,000 million). This strong performance was fueled by continuously balanced price and volume growth.

Beiersdorf’s leading brand grew in all key regions, most significantly in Emerging Markets and in its home country, Germany. All key categories posted impressive double-digit growth. Sales performance in the face care, body care, sun care and deo categories proved to be “particularly successful.”

The Derma brands Eucerin and Aquaphor recorded organic sales growth of 8.3%. In nominal terms, Derma sales increased by 7.7% to €714 million (US$779.5 million) (H1 2023: €663 million / US$723.8 million). 

Excluding Argentina, the Derma business continued to grow double-digit driven by strong performance in most regions globally. Eucerin also saw “significant” growth in the key categories of sun protection and face care. Altogether, the Derma business gained “significant” market share in all categories.

The luxury brand La Prairie saw a 7% sales decline. Sales fell by 7.2% in nominal terms to €272 million (US$296.9 million) (H1 2023: €294 million / US$321 million). The decline was primarily due to the considerable weakness of the Chinese ecosystem. In this volatile environment, La Prairie managed to outperform the market in the first half of the year.

The Healthcare business, which primarily comprises the plaster brands Hansaplast and Elastoplast, posted organic sales growth of 4%. Sales increased by 3.5% in nominal terms to €150 million (US$163.8 million) (H1 2023: €145 million / US$158.3 million). The main driver for this growth was the continued success of the wound care category, in particular large-sized plasters for post-operative wound treatment.

Tesa performance
Beiersdorf’s Tesa business segment recorded organic sales growth of 2.9%. In nominal terms, sales increased by 2.0% to €844 million (US$921.5 million) (H1 2023: €828 million / US$904 million).

Excluding special factors, EBIT at Tesa declined year on year in line with expectations to €150 million (US$164 million) (H1 2023: €152 million / US$166 million). This development was primarily attributable to higher spending in the areas of innovation, sustainability, and digitalization. The EBIT margin was 17.8% (H1 2023: 18.4%).

After an expected slow start to the year, the Tesa business picked up again “significantly” in the second quarter.

Sales and EBIT guidance for full-year confirmed
Beiersdorf has confirmed its sales guidance for the full year 2024. It expects organic sales growth in the range of 6–8% in the Consumer Business Segment.

The EBIT margin (excluding special factors) in the Consumer Business Segment is expected to be 50 basis points above the previous year’s level.

Subject to uncertainty regarding market development in 2024, Beiersdorf expects sales growth above the market in the Tesa Business Segment, which translates to expected organic sales growth in the range of 2–5%. The EBIT margin from ongoing operations (excluding special factors) is expected to be at the level of the previous year.

Based on the forecasts of the two business segments, group organic sales growth is expected to be in the range of 6–8%. Beiersdorf anticipates the consolidated EBIT margin (excluding special factors) to be “slightly above” the previous year’s level.