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Jafra’s Fortunes, Solid Here, Falter in Mexico

Jafra’s Fortunes, Solid Here, Falter in Mexico By SHELLY GARCIA Senior Reporter Another Hispanic marketer, Jafra S.A., has filed plans to go public, but the international company, with a large presence in Mexico, may be facing a much different environment. Jafra is seeing strong sales in the U.S. Hispanic market, but the company’s growth has been stymied by its South American operations. Jafra, a direct marketer of cosmetics and other personal care products, has seen sales decline in its Mexican markets, and the company has recently pulled out of a number of other Central and South American operations. Its plans to go public, announced late last month, follow an unsuccessful search for a buyer. Terms and timing for the IPO have not yet been determined, but Jafra has engaged Merrill Lynch, Credit Suisse First Boston and Banc of America Securities LLC as underwriters for the deal. Jafra, with corporate headquarters in Luxembourg and U.S. headquarters in Westlake Village, in 1998 was acquired by a New York-based buyout firm for $226.5 million. Clayton, Dubilier & Rice Inc. bought the company from The Gillette Co., presumably intending to turn it around and sell it. But a search for a potential buyer, which took up most of 2002, never materialized. Last year CD & R; completed a $290 million recapitalization plan intended to retire some debt and provide proceeds to CD & R.; The mergers and acquisitions market at the time was depressed, but Jafra’s Mexican operation has also been troubled. In the most recent nine-month period, revenues in Mexico decreased almost 10 percent to $172 million. Meanwhile, U.S. sales saw an 11.4 percent increase to $74.5 million for the same period, largely based on a reorganization focusing on the U.S. Latino market. The result? Sales in the U.S. Hispanic division increased 13.6 percent for the first nine months of 2003. For the nine months ended Sept. 30, Jafra’s net loss was $8.1 million on sales of $276.7 million, compared with earnings of $14.8 million on sales of $285.3 million for the nine-month period of 2002.

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