Hamburg Although many consumers want or have to save, they continue to buy Nivea products. Their producer Beiersdorf increased its sales in the past year by 10.2 percent to 8.8 billion euros. The Dax group announced this on Wednesday morning.
Consumer goods manufacturers are currently struggling with adverse circumstances. On the demand side, customers are hesitant in the face of inflation and often switch to cheaper private labels for everyday goods. In terms of costs, on the other hand, companies still have high expenditures for energy, freight and raw materials.
Despite 20 percent additional costs, Beiersdorf managed to increase its profit. Before interest and taxes (EBIT) excluding special effects, this rose by 17 percent to 1.16 billion euros. The profit for the year was 771 million euros. Beiersdorf was able to push through price increases and worked on its costs.
“For the first time in two decades, we are seeing double-digit organic sales growth,” said Beiersdorf boss Vincent Warnery. The good result fills him with pride, said the Frenchman, because 2022 was a challenging year in many ways.
The figures underscore a trend reversal at Beiersdorf, which is majority-owned by the Herz family’s Maxinvest Holding. In the past decade, the traditional group had not grown noticeably in terms of profit or sales. This caused unrest, almost the entire top management was replaced. Recently, Beiersdorf has been relegated to and from the Dax several times, and since the summer of 2022 the paper has been part of the first stock exchange league again.
Stronger growth than expected
Growth has now been stronger than analysts had expected for several quarters in a row. The new strategy seems to be paying off: The group is concentrating on fewer but higher-margin products such as face care creams, particularly with its core brand Nivea, which accounts for the bulk of sales. This area is considered a growth market in the cosmetics industry.
At the same time, the group is exiting segments such as hair care, where competitors have long dominated the market. The group also wants to close geographic gaps and is expanding – most recently to Indonesia, for example. Asia is considered a very important market in cosmetics and especially in skin care.
Investors appreciate that: Since the beginning of the year, the share has increased by five percent. Although this is weaker than the Dax, the paper grew faster in 2022 than any other leading German index.
>> Read also: Beiersdorf share will grow more strongly in 2022 than any other in the Dax – is it worth getting started now?
Many branded companies are currently increasing their sales because they have implemented price increases in retail. In January, for example, deodorant was 23.4 percent more expensive than in 2020, and shower gel was 19 percent more expensive, according to figures from the Federal Statistical Office.
Beiersdorf had announced the goal of passing on 70 to 80 percent of its increased costs in the past year. The British competitor Unilever (Dove, Knorr) was able to pass on 75 percent of its costs to retailers, the group recently announced.
Despite price increases, Beiersdorf sold more Nivea creams
Manufacturers of consumer goods walk a fine line here. They have to pass on the higher additional costs in order to keep the margin stable. However, there is a risk that customers will switch to cheap commercial brands that are often of the same quality. Branded products lost around three billion euros in sales last year.
>> Read also: Price calculation reveals why branded products are often much more expensive – and who makes the most money from them
According to Beiersdorf, it has succeeded in increasing the quantity sold of its Nivea products despite price increases. This can be attributed in particular to the development in the emerging countries. In addition, Nivea products have gained market shares on all continents.
The group is getting through the crisis better than many of its competitors. Unilever recently had to accept a drop in sales of 2.1 percent. Pril and Persil manufacturer Henkel also complained that it had sold five percent fewer detergents and cleaning agents in the first nine months of 2022. The Düsseldorfers will present their annual balance sheet next Tuesday.
For the current year, Beiersdorf anticipates sales growth in the mid-single digits. Beiersdorf announced in the summer that it intends to grow faster than the market – i.e. more than four to five percent on average.
The margin should increase by 0.5 percentage points every year, the group confirmed on Wednesday. Hamburg still has some catching up to do here. In its consumer business with Nivea creams, Hansaplast plasters and Labello lip care, Beiersdorf achieved a return on sales of 12.3 percent (previous year: 12.1 percent). Competitor Unilever achieves values of between almost 19 and almost 20 percent, depending on the product group.
The business with adhesives for industry and private users is significantly more profitable for Beiersdorf. The subsidiary Tesa achieves a return on sales of 16.7 percent (previous year: 16.9 percent). However, this business is not that important for the group as a whole. Sales increased organically by 11.3 percent to 1.7 billion, EBIT rose slightly to 278 million euros. The growth here is largely explained by price increases.
For investors, however, there remains a drop of bitterness. Despite the good results, Beiersdorf continues to only pay a dividend of 70 cents per share – as in previous years.
More: Beiersdorf boss wants to expand China business: “We don’t judge countries according to whether they are a democracy”