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China helps Japan cosmetics maker Shiseido return to back

Japan's top cosmetics maker Shiseido has said burgeoning demand from Chinese women for luxury beauty products helped it swing back into the black in the year to March.

The company also benefited from the absence of costs incurred the previous year because of early retirement packages and other restructuring.

The cosmetic giant reported a net profit of 14.44 billion yen (125.80 million dollars) for the full year to March, reversing a loss of 8.86 billion yen made a year earlier and beating its own forecasts.

Operating profit rose 37.8 percent to 38.88 billion yen on revenue up 4.9 percent to 670.96 billion yen.

For the year to March 2007, Shiseido expects net profit to hit 23 billion yen on sales of 685 billion yen.

"The successful launch of two new mega-brand cosmetics, together with aggressive marketing in the Chinese market, drove cosmetics sales," Shiseido president Shinzo Maeda told a news conference.

Overseas sales were the key driver over the past year, jumping 12.3 percent while domestic sales edged up 2.1 percent.

"In China, sales rose some 36 percent in the past year and by continuing to roll out strong brand cosmetics there, we are aiming for more than 30 percent growth this fiscal year," Maeda added.

Shiseido, which has boosted research in China where women are buying more cosmetics, plans to expand the number of shops there to 5,000 by the end of 2008 from 1,000 at the end of 2005.

"As a result of the brisk sales in China, overseas sales will exceed 30 percent of our total sales this fiscal year ... a year earlier than we had originally planned," Maeda said.

Shiseido has created cosmetic brands specifically for the Chinese market under names such as Aupres and Pure Mild in hopes of luring beauty-conscious Chinese women with deepening pockets thanks to an economic boom in urban areas.

The toiletry division swung to an operating profit of 328 million yen from a loss of 4.7 billion yen a year earlier as the company cut unprofitable product lines and focused on shampoos, body soap and facial cleansers.

As part of the restructuring reforms, Shiseido stopped selling its toiletry products in South Korea over the past fiscal year and also reviewed its marketing partners in Taiwan.

In the core cosmetics division, operating profit grew 14 percent to 43.7 billion yen, driven by brisk sales of its Maquillage make-up line, Tsubaki shampoo and Uno, a male cosmetics brand.