Sales and profits

In 2012, the Beauty Care business sector continued its profitable growth recorded in previous years. Sales increased further, by a nominal rate of 4.2 percent. Organically – i.e. adjusted for foreign exchange and acquisitions/divestments – sales rose by 3.1 percent, driven by both price and volume. The increase was once again much higher than the growth rate of our relevant markets. As in previous years, the foundation for this success was provided by our strong innovation program. By launching profitable new products and selectively increasing prices, we were able to raise the average price level. This was all the more gratifying in light of the intensive competition and continued strong promotional activity that again characterized our market environment in 2012.

In the following, we comment on our organic sales performance.

From a regional perspective, business performance was particularly successful in the emerging markets, with Asia (excluding Japan) standing out through strong double-digit growth thanks to very strong business growth in China. The Africa/Middle East region posted double-digit growth rates, continuing the successful trend of previous years. Sales growth was solid also in Latin America, despite political instability. We were able to increase overall sales in the mature markets, with particularly good sales performance in North America. In Europe, we managed to sustain the level of sales achieved in 2011 despite the euro crisis and adverse economic development in Southern Europe. Sales in the mature markets of the Asia-Pacific region, however, fell short of the previous year’s level. This was due to the difficult market environment in Japan, which was not compensated by the good performance in the other mature markets of this region.

We were able to increase operating profit (EBIT) to 483 million euros, 2.6 percent above the level of the previous year. Adjusted operating profit increased significantly by 6.8 percent versus the prior year, to 514 million euros, our highest earnings figure to date. As a result, the adjusted return on sales rose by 0.3 percentage points to 14.5 percent, likewise reaching a new high.

Following significant increases in the previous year, raw material costs stabilized at a high level in 2012, and increased only slightly. We succeeded in increasing our gross marginIndicates the percentage by which a company’s sales exceed cost of sales, i.e. the ratio of gross profit to sales.
over the previous year through our innovation offensive and ongoing measures to reduce costs and enhance efficiency in both production and supply chainEncompasses purchasing, production, storage, transport, customer services, requirements planning, production scheduling and supply chain management.
. In addition, the continuation of our strict cost management also in other areas had a positive impact on the return on sales.

We were once again able to achieve a significant reduction in our net working capitalNet balance of inventories, trade accounts receivable, and trade accounts payable.
compared to the previous year, reaching a new low of 2.1 percent of sales. In addition to efficient management of our liabilities to suppliers, we also focused on continuously improving our production and warehousing structures. The return on capital employedCapital invested in company assets and operations. Equity + interest-bearing liabilities.
(ROCEReturn on Capital Employed (ROCE)), at 23.2 percent, and the economic value added (EVA®)The EVA concept reflects the net wealth generated by a company over a certain period. A company achieves positive EVA when the operating result exceeds the weighted average cost of capital. The WACC corresponds to the yield on capital employed expected by the capital market. EVA is a registered trademark of Stern Stewart & Co.
, at 285 million euros, fell just short of the previous year’s figures. This was mainly due to the negative effect of the one time gain from the sale of our Branded Consumer Goods business in India in 2011.

+3.1 %organic sales growthGrowth in revenues after adjusting for effects arising from acquisitions, divestments and foreign exchange differences – i.e. “top line” growth generated from within.
.