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Oriflame sees Q1 sales fall in Russia, not paying dividends due to Ukraine conflict

 Swedish cosmetics producer and retailer Oriflame Cosmetics S.A., which operates on a direct sales system, saw first quarter sales in Russia fall 8% year-on-year, the company said in a report.

Decline in Russian sales accelerated compared with the fourth quarter of 2013, when revenue had declined 5% after 2% growth in Q3.
The company said weak demand on the Russian market was one reason sales declined in January-March.
"With sharply devaluating currencies and challenges of exceptional nature in our two largest markets Russia and Ukraine, there is no doubt the company is facing very tough conditions," Oriflame said.
"Given the exceptional geopolitical events in Russia and Ukraine, impacting currencies and economic climate, the Board does not intend to make any dividend payment in Q3. Subsequent dividend payments will be announced in upcoming quarterly reports," the report says.
Future dividend payments will be announced in the next quarterly reports. In the current situation, it is necessary for the company to return to growth and boost profitability on the markets of the CIS and Europe, Oriflame said.
"The exceptional situation in Ukraine had a substantial negative impact on consumer sentiment which clearly affected sales during the quarter," the company said. Sales in CIS countries, including Russia and Ukraine, fell 11% in the first quarter (in local currencies) due to a 14% decrease in the number of active consultants and an increase in productivity of
3%. Revenue in euro declined 24% to 154.9 million euro.
Oriflame's overall revenue declined 14% to 327.2 million euro, while earnings before taxes, depreciation, and amortization (EBITDA) fell 35% to 29.4 million euro. Adjusted net profit decreased 57% to 12 million euro.
Oriflame operates in more than 60 countries, distributing its products by direct sales through independent consultants. The company has factories in Poland, India, Sweden, China and Russia.
In Russia, Oriflame operates through LLC Oriflame Cosmetics. The company's revenue fell totaled 17.9 billion rubles in 2012 versus 19.1 billion rubles the year before, the SPARK-Interfax database shows.
9 May 2014

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