Kao Corporation has released its financial report for 2023, indicating a sales slump for the year. The company experienced a decrease in sales of 1.2%, amounting to 1.53 trillion yen ($10.29 billion). The sluggish recovery of the Chinese market following the impact of Covid-19 was a primary factor contributing to this decline.
Kao Corporation cited growing geopolitical risks in Europe and the Middle East, along with rising costs due to inflation, as additional factors that affected sales. Furthermore, the company incurred a charge of 54.7 billion yen ($367.7 million) related to its business structure reforms, leading to a decrease in operating income from 110 billion yen ($739.5 million) in 2022 to 60 billion yen ($403.4 million) in 2023.
Within Kao’s cosmetics division, sales decreased by 5.1%, reaching 238.6 billion yen ($1.6 billion). This decline was attributed to a decrease in makeup sales in Japan, primarily due to product returns related to the company’s structural reform changes. Additionally, restraints on travel retail sales in South Korea had an adverse impact on the overall cosmetics performance. However, the company noted a steady performance from Molton Brown and the successful launch of new products under its Sensai brand, partially offsetting the decline.
On a positive note, Kao’s Health and Beauty Care arm demonstrated stronger performance, with sales increasing by 6.3% to 392.9 billion yen ($2.64 billion). This growth was primarily driven by a spike in sales of hair care products and the contribution of Essential products’ sales in Japan.
In April of the previous year, Kao Corporation implemented a new pan-regional organizational structure for its Functions and Operations business. This move aimed to strengthen the company’s business growth in the Americas, Europe, Middle East, and Africa regions (AEMEA).
Although the global impact of the Covid-19 pandemic had subsided, Kao Corporation acknowledged the forecasted severity of the business environment and the uncertain outlook due to factors such as rising geopolitical risks and a potential slowdown in China’s economy.
Looking ahead, Kao Corporation remains optimistic for the new financial year, forecasting a 3.1% year-on-year increase in net sales to 1,580 billion yen ($10.62 billion). The company aims to leverage its acquisition of Bondi Sands, an Australian brand acquired for an estimated US$450 million in August 2023. Bondi Sands, founded in 2012, operates in 32 markets and has a strong presence in Australia, the UK, and the US.
