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183140
Thu, 05/19/2011 - 13:27
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https://oananews.org//node/183140
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AmorePacific to post continued growth in China
By Kim Young-gyo
HONG KONG (Yonhap) - AmorePacific Corp., South Korea's No. 1 cosmetics manufacturer, is expected to post continued growth in China despite rising costs in the world's most populous market, a report said Thursday.
Samsung Securities said in the report that it has a positive outlook on AmorePacific's China operations from a long-term perspective, although profits in China will likely decrease due to the company's launch of a premium brand and the establishment of new sales channels.
"We expect Chinese earnings to decline in the short term due to costs associated with the Sulwhasoo launch, door-to-door (D2D) channels and aggressive advertising and promotion during the first quarter of 2011," said Shin Jung-hyun, an analyst at Samsung Securities.
"But we maintain a positive view on the business from a long-term perspective, believing the expenditure will ensure continued growth."
In the first quarter this year, AmorePacific's China sales rose 36 percent on-year to 44.6 billion won (US$41 million), helped by its well-established brands Mamonde and Laneige.
However, operating profit fell 5 percent on-year as the advertising and promotion costs-to-sales ratio increased to 32 percent from 24 percent in the first quarter of 2010. It resulted in an operating margin decline of 5.6 percentage points to 13.1 percent.
"Such a figure is still far higher than the division's 2011 target of 4 percent, and the first quarter operating profit is equivalent to 75 percent of the 2011 target of 8 billion won," Shin said.
The brokerage expected the cosmetics maker's earnings to slow in the second half of this year, as the China division is expected to spend 8-10 billion won in the D2D-related business when the firm gains government approval to build a customer center.
China has become one of the most important markets for AmorePacific, as the second-largest cosmetics market in Asia continues to expand rapidly.
In mid-March, the company opened the first shop for its high-end Sulwhasoo products in the Beijing Parkson Department Store, which was followed by the second shop in the Beijing Shinkong Place Department Store and the third shop in the Shanghai Parkson Department Store.
AmorePacific stands as the No. 14 cosmetics company in China. It saw its 2010 sales in China rise 22 percent on-year to 1.43 trillion won.
HONG KONG (Yonhap) - AmorePacific Corp., South Korea's No. 1 cosmetics manufacturer, is expected to post continued growth in China despite rising costs in the world's most populous market, a report said Thursday.
Samsung Securities said in the report that it has a positive outlook on AmorePacific's China operations from a long-term perspective, although profits in China will likely decrease due to the company's launch of a premium brand and the establishment of new sales channels.
"We expect Chinese earnings to decline in the short term due to costs associated with the Sulwhasoo launch, door-to-door (D2D) channels and aggressive advertising and promotion during the first quarter of 2011," said Shin Jung-hyun, an analyst at Samsung Securities.
"But we maintain a positive view on the business from a long-term perspective, believing the expenditure will ensure continued growth."
In the first quarter this year, AmorePacific's China sales rose 36 percent on-year to 44.6 billion won (US$41 million), helped by its well-established brands Mamonde and Laneige.
However, operating profit fell 5 percent on-year as the advertising and promotion costs-to-sales ratio increased to 32 percent from 24 percent in the first quarter of 2010. It resulted in an operating margin decline of 5.6 percentage points to 13.1 percent.
"Such a figure is still far higher than the division's 2011 target of 4 percent, and the first quarter operating profit is equivalent to 75 percent of the 2011 target of 8 billion won," Shin said.
The brokerage expected the cosmetics maker's earnings to slow in the second half of this year, as the China division is expected to spend 8-10 billion won in the D2D-related business when the firm gains government approval to build a customer center.
China has become one of the most important markets for AmorePacific, as the second-largest cosmetics market in Asia continues to expand rapidly.
In mid-March, the company opened the first shop for its high-end Sulwhasoo products in the Beijing Parkson Department Store, which was followed by the second shop in the Beijing Shinkong Place Department Store and the third shop in the Shanghai Parkson Department Store.
AmorePacific stands as the No. 14 cosmetics company in China. It saw its 2010 sales in China rise 22 percent on-year to 1.43 trillion won.
