February 27, 2015

World News

Oriflame Consolidates Russia Operations in New Production Plant

Oriflame Cosmetics S.A. has completed another step toward streamlining its Russia business with the inauguration of a new production facility in Noginsk. The Swedish beauty and hygiene products group sold its production site in Krasnogorsk to consolidate operations in the turbulent market. The new facility dovetails with Oriflame’s strategy to focus and simplify its business amid geopolitical tensions in Russia and Ukraine.

The $170-million complex, including production facilities, warehousing and a LEED-certified distribution center, enables Oriflame to cut down on lead times and prices in Russia, where it draws a third of its business. The company has scrambled to increase prices in the region, and it anticipates further increases this year as the devaluation of the ruble continues to impact its core business. Oriflame has also retooled its compensation plan and ramped up promotion of its skincare and wellness offerings, particularly the brand’s daily skincare regimen and products sets.

“We continue our ambition of providing the most attractive offer in the markets—both when it comes to our beauty offer and business opportunity offer,” said Johanna Palm, Oriflame’s Senior Director of Investor Relations & Finance Projects, of the company’s strategy in Russia and Ukraine. “The improvements we have made to our compensation plan have definitely strengthened our position in the region, and will constitute a competitive advantage given the current challenges.”

In the quarter ended Dec. 31, 2014, Oriflame’s adjusted operating profit totaled 29.8 million euros ($33.7 million). Adjusted operating margin fell to 8.4 percent from 12.6 percent, slightly above the forecast. For 2014, the company posted net sales of 1.27 billion euros ($1.41 billion), down 10 percent from 2013 and up 1 percent in local currency.

Oriflame is working to counter economic uncertainties by working closely with its consultants and leaders and maintaining a well-managed product portfolio, said Palm. “This, in combination with price increases and administrative and organizational efficiency measures, should help us manage the challenges we see in CIS and Europe while ensuring continued strong momentum in Latin America, Turkey, Africa and Asia.”