AmorePacific Q3 net down on toothpaste recall costs

South Korea's top cosmetics maker AmorePacific Co. said Tuesday that its third-quarter net earnings were slightly down from a year ago as recall expenses of its toothpastes weighed on its balance sheet despite strong sales.

Net profit came to 151.4 billion won ($132.5 million) in the July-September period on a consolidated basis, down 0.4 percent from a year earlier, the company said in a regulatory filing.

Operating income rose 16.7 percent on-year to 219.7 billion won during the cited period, and sales gained 22.9 percent to 1.65 trillion won over the cited period, it said.

In late September, AmorePacific halted sales of 11 types of toothpaste and recalled them as some of chemicals contained in the products sparked safety concerns among consumers.

The chemicals used in the toothpastes were the same ones used in the toxic humidifier sterilizers that have led to over 100 deaths. But local health authorities said the chemicals, which were at levels far below the international standards, posed no significant health risks as consumers rinse it with water.

"The expenses related to the toothpaste recalls were calculated in the net profits, but the overall sales of main products were brisk in the third quarter," a company spokeswoman said. "The recall process was mostly completed in the third quarter, while some of remaining costs could be calculated in the next quarter."

While the mass products account for a small amount of its overall profit, its mainstay cosmetics posted strong earnings at home and abroad.

Sales from the global and domestic markets rose 27 percent and 22 percent, respectively, in the quarter that ended in September.

"Duty-free channels continued to drive the fast growth thanks to expanded distribution channels," the company said in a release.

"Online malls and mobile commerce channels increased sales as premium products expanded marketing efforts in the digital channels."

The Asian market showed faster growth as its products enjoyed popularity in China, its largest export destination, as the luxury line Sulhwasoo continued to post solid growth by expanding distribution channels in department stores and online malls.

The North American market logged a 17 percent surge on the back of expanded distribution channels, while the European market retreated on sluggish demands.

Among the brands, Etude House, a color makeup line, recovered from last year's slump to advance 34 percent during the period, and Innisfree, a nature-themed budget line, continued to post brisk sales, it said. (Yonhap)