the 07/23/2008

Financial outlook looks grim for cosmetic companies

 Financial outlook looks grim for cosmetic companies

The latest prediction came from BMO Capital Markets - which hasdowngraded the US personal care and household sector to'outperform', following a week when some of the biggest playerswere battered on the stock markets.

For prospective investors, financial experts believe that the time might be getting close for them tobuy into the sector, but for existing shareholders theprospects seems less rosy as profits look set to plummet, followedby share dividends.

Commodity prices hit

In its financial briefing concerning the sector, BMO said the factthat commodity prices are set to rise still further means that further volatilityfor personal care companies on the stock markets may be'prolonged'.

In particular, BMO cut the rating for Procter & Gamble, theworld's largest consumer goods player, from 'market perform' to'outperform', despite stressing the fact that the company might beless affected by commodity pricing pressures than other players.

On the stock market talk of acquisitions, personnel changes and theimpact of lowered financial outlooks meant that Wall Street shareprices suffered last week, with some of the biggest global playersbeing effected.

Big company share values fall

Revlon shares fell 6.3 percent on Friday, while Estee Lauder'sshare prices fell 60 cents to $43.41.

Shares in Elizabeth Arden also slipped by 8 cents to $15.40, whileshares in Avon Products fell by 16 cents to $36.21.

Although it was a tough week for the industry, one major underlyingproblem that is likely to have longer lasting repurcussions is theprice of commodities, a factor that seems to be shaking theindustry's foundations right now.

Oil prices add to pressures

Key to this is the price of oil, which is affecting every area ofmanufacturing, increasing prices of energy and transportation costsin particular.

Two weeks ago the price of oil hit record levels of around $145 abarrel but last week dropped below the $130 mark as fresh supplieshelped to ease the pricing situation.

However, with many financial experts predicting that prices couldexceed $200 a barrel by the end of the year, the outlook looksunsteady for the short- to mid-term.