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Beauty Units up 3% at Avon

03 Aug '09
5 min read

Second-quarter 2009 operating profit was $183 million compared with $374 million in the prior-year quarter and the operating margin was 7.4%, compared with 13.7% in second quarter 2008. The aforementioned higher costs to implement restructuring initiatives lowered operating margin year over year by 310 basis points. Additionally, unfavorable foreign exchange lowered operating margin by an estimated 370 basis points (approximately 250 of that from foreign-exchange transaction and approximately 120 from foreign-exchange translation) year over year.

The second quarter 2009's effective tax rate of 47.1% compared with 2008's rate of 31.2%. The higher 2009 rate results from the establishment of a valuation allowance on certain deferred tax assets as a result of the company's 2009 restructuring actions. The impact of this allowance was $.05 per share in the 2009 quarter, and is part of the $.19 per share cost of restructuring in the quarter.

Net income in the second quarter 2009 was $83 million, or $.19 per share, compared with $236 million, or $.55 per share, in the year-ago quarter.

At quarter end, Avon's total debt had increased $203 million from the year-end level, to $2.7 billion, and cash had increased $116 million, to $1.2 billion. Net cash provided by operating activities was $75 million through six months of 2009 compared with $172 million of cash provided by operating activities in the same period of 2008, with the change due primarily to lower net income.

Second-Quarter regional results
Latin America's second-quarter 2009 revenue was 3% lower year over year, but up 15% on a local-currency basis. Local-currency revenue increased 23% in Brazil, 14% in Mexico and 2% in Venezuela, which, on a reported basis, were -2%, -11% and 2%, respectively. The region's Active Representatives grew 13%, and units sold were up 5%. Operating profit was 29% lower (-11% in local currency) due equally to unfavorable foreign exchange and the impact of costs to implement restructuring initiatives. Latin America's second-quarter operating margin was 13.7%, including a 240-basis-points impact from costs to implement restructuring.

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Avon Products Inc

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