* Oriflame Cosmetics has been granted a direct sales licence for China. Sales activities are expected to begin in November 2006. * Trading for the Group for the third quarter indicates that operating margins will be down on last year due to previously communicated timing differences and project costs and also sales shortfalls in certain countries. * Oriflame expects that sales and operating margins for the year as a whole will be in line with the Company's expectations, with a sales increase well above adopted financial targets.
Oriflame granted direct sales license in China
"I am pleased and honoured that the Chinese government has granted Oriflame a licence to commence direct sales activities in China. We are the first European and only the third foreign company to have been granted this licence", says Magnus Brännström, CEO of Oriflame. "We believe this decision reflects Oriflame's status as a cosmetics industry leader as well as our long-term commitment to the Chinese market.
Oriflame has received a licence from the Chinese Ministry of Commerce to commence direct sales in China. The licence is granted for the cities of Nanjing, Wuxi, Suzhou and Kunshan in Jiangsu province. Oriflame will begin its sales activities in China in November 2006.
Trading in the third quarter
Oriflame continues to develop in line with its communicated overall financial targets and strategies although quarterly variations are a natural part of the Company's operation.
While sales in the third quarter are developing according to expectations in most product and geographical areas of the Group, sales have been affected by external factors, such as weather conditions, mainly in Central Europe, and the economic uncertainty in Turkey. In addition, Russia sales have suffered from the fact that from 1 July 2006 the authorities require a licence to import alcohol based products, which includes fragrances. Oriflame has now been issued such a licence and sales of fragrances re-commenced on 18 September. Sales of fragrances in the third quarter are thus below the Group's expectations.
As earlier communicated, the operating margin in the third quarter will be negatively affected by timing differences relating to sales and marketing costs as well as the cost of investment in the new projects, particularly in infrastructure and HR to create the platform for continued growth.
Combined, these factors are estimated to negatively affect the operating margin for the third quarter in isolation by some 5 percentage points compared to last year.
However Oriflame expects that sales and operating margin for the year as a whole will be in line with the Company's expectations, with a sales increase well above adopted financial targets.
Oriflame Cosmetics SA is publishing its interim report for the period July - September on 25 October.
For further information, please contact:
Magnus Chief Executive Telephone: Brännström Officer +32 2 357 5529 Kevin Kenny Chief Financial Officer Telephone: +32 2 357 5544 Patrik Linzenbold Investor Relations Manager Telephone: +32 2 357 5675
The press release can also be downloaded from the following link:
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