Oriflame: Comment on Currency Impact, Actions and Sales Trend

Regulatory News:

This information is to meet the requests for clarification and comments on the impact on Oriflame’s sales and earnings and foreseen actions following the recent sharp decline in the Russian Rouble.

Oriflame (STO:ORISDB) is increasingly impacted by currency movements as a result of the Russian Rouble devaluation and the company will intensify its efforts to limit the currency impact for the group. With Russia being the largest market for the group, representing around 30 percent of total sales, the Russian Rouble is the currency with the largest impact on group sales and operating margin.

With the current exchange rates (Rouble to Euro at 90) and compared to prior year, the gross impact of the exchange rates on group sales is estimated to be approximately 12 percent for the full year 2014 (compared to 10 percent as estimated at the time of the quarter 3 announcement) and 14 percent in quarter 4 2014. The gross impact of the exchange rates on operating margin is expected to be slightly above 400 basis points for the full year 2014 (compared to below 400 basis points as estimated at the time of the quarter 3 announcement) and 500 basis points in quarter 4 2014.

Oriflame has a strategy and strong track record of consistently increasing prices, in line with or above inflation, in order to ensure the income level for its consultants, sustain a strong brand position as well as to compensate for currency devaluation. During the last couple of years, the price increases in the CIS region have averaged mid to high single digit percent year over year. The recent sharp devaluation of the Rouble together with the increasing inflation in Russia, require further actions. As a result, Oriflame will substantially speed up the pace and level of price increases in Russia during next year as well as continue to seek further efficiency improvements.

"With a large part of our sales generated in Russia, we are clearly impacted by the recent additional devaluation of the Rouble. We will continue to carry out our strategy and sequentially implement price increases at levels required to enable a healthy business development. Despite the macroeconomic difficulties, I’m pleased to see a continued positive local currency sales trend for the fourth quarter in line with earlier communication. I am confident that the earnings opportunity that Oriflame offers will be increasingly attractive in this environment, offsetting parts of the Euro productivity drop”, CEO Magnus Brännström comments..

More information to be released in the full-year 2014 announcement.

Founded in 1967, Oriflame is a beauty company selling direct in more than 60 countries. Its wide portfolio of Swedish, nature-inspired, innovative beauty products is marketed through approximately 3 million independent Oriflame Consultants, generating annual sales of around €1.4 billion. Respect for people and nature underlies Oriflame’s operating principles and is reflected in its social and environmental policies. Oriflame supports numerous charities worldwide and is a Co-founder of the World Childhood Foundation. Oriflame is a Luxembourg company group with corporate offices in Luxembourg and Switzerland. Oriflame Cosmetics is listed on the Nasdaq Stockholm Exchange.

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