Three months ended 31 December 2006 * Local currency sales increased by 16% and Euro sales increased by 14%, to ¤279.5m (¤244.7m). * Average size of the Sales Force increased by 16%, to 1,896,200 Consultants and closing Sales Force was up by 15%. * EBITDA increased by 11%, to ¤47.6m (¤43.0m). * The operating margin amounted to 15.4% (16.0%) resulting in an operating profit of ¤43.0m (¤39.1m). * Net profit amounted to ¤31.1m (adj ¤32.0m). Twelve months ended 31 December 2006 * Local currency sales increased by 18% and Euro sales increased by 20%, to ¤917.9m (¤765.7m). * EBITDA increased by 20%, to ¤144.6m (¤120.3m). * The operating margin amounted to 13.8% (13.9%) resulting in an operating profit of ¤127.1m (¤106.7m). * Net profit increased by 3% to ¤93.5m (adj ¤90.5m). * EPS after dilution increased by 6% to ¤1.61 (adj ¤1.52). * Cash flow from operating activities amounted to ¤121.6m (¤63.4m). * Oriflame's Board of Directors will propose to the AGM a dividend of ¤1.01 (¤0.90) per share, amounting to ¤56.2m in total. * New operational platform proposed, resulting in restructuring charges of ¤25-30m, to be spent over the next two years. +-------------------------------------------------------------------------+ | | | | | | |FINANCIAL |3 months ended| |12 months ended| | |SUMMARY |31 December | |31 December | | |(¤ Million) |--------------| |---------------| | | | 2006| 2005|Change| 2006| 2005|Change| |----------------------------+------+-------+------+------+--------+------| |Sales | 279.5| 244.7| 14%| 917.9| 765.7| 20%| |----------------------------+------+-------+------+------+--------+------| |Gross margin, % | 68.2| 67.8| -| 69.1| 68.3| -| |----------------------------+------+-------+------+------+--------+------| |EBITDA | 47.6| 43.0| 11%| 144.6| 120.3| 20%| |----------------------------+------+-------+------+------+--------+------| |Operating profit | 43.0| 39.1| 10%| 127.1| 106.7| 19%| |----------------------------+------+-------+------+------+--------+------| |Operating margin, % | 15.4| 16.0| -| 13.8| 13.9| -| |----------------------------+------+-------+------+------+--------+------| |Profit before tax | 37.0|35.6(1)| 4%| 108.3|101.7(1)| 6%| |----------------------------+------+-------+------+------+--------+------| |Net profit | 31.1|32.0(1)| (3%)| 93.5| 90.5(1)| 3%| |----------------------------+------+-------+------+------+--------+------| |EPS, diluted, ¤ | 0.55|0.54(1)| 2%| 1.61| 1.52(1)| 6%| |----------------------------+------+-------+------+------+--------+------| |Cash flow from operating | 65.4| 53.7| 22%| 121.6| 63.4| 92%| |activities | | | | | | | |----------------------------+------+-------+------+------+--------+------| |Net interest-bearing debt | 193.5| 73.5| 163%| 193.5| 73.5| 163%| |----------------------------+------+-------+------+------+--------+------| |Sales force, average, '000 | 1,896| 1,634| 16%| 1,808| 1,597| 13%| +-------------------------------------------------------------------------+ 1) Excluding loss on disposal of ¤4.2m related to the UK business SALES AND EARNINGS Three months ended 31 December 2006 Sales in local currencies increased by 16% and by 14% in Euro to ¤279.5m compared to ¤244.7m in the same period last year. Unit sales were up by 15%. Sales growth in local currencies was driven by a 16% increase in the average size of the Sales Force and a constant productivity. Closing Sales Force increased by 15% or 253,300 to 1,976,500 Consultants. Local currency sales in Asia, CIS & Baltics, Latin America, Central Europe & Mediterranean and Western Europe & Africa increased by 54%, 21%, 8%, 7% and 3% respectively. Gross margins improved to 68.2% (67.8%) as a result of a positive mix effect, pricing and sourcing gains, but partly offset by a negative currency effect. Operating profit increased by 10% to ¤43.0m (¤39.1m) reflecting increased sales. Operating margins decreased to 15.4% (16.0%) partly as a result of currency movements affecting margins negatively by 0.4 percentage points and partly due to higher administrative expenses. Costs for the management bonus and share plans affected results negatively by ¤2.7m (¤0.9m). Profit before tax (the comparable period adjusted for restructuring charges) was up by 4%. Profits were negatively affected by ¤2.0m in higher interest costs and charges as a result of higher borrowings following the company's dividend and redemption offer to shareholders. Net profit decreased by 3% to ¤31.1m (adj. ¤32.0m) and fully diluted earnings per share increased by 2% to ¤0.55 (adj. ¤0.54). Twelve months ended 31 December 2006 Sales increased by 18% in local currency and by 20% in Euro, to ¤917.9m (¤765.7m). Unit sales were up by 16%. Sales growth in local currency was driven by a 13% increase in the size of the Sales Force and a 4% productivity improvement. Gross margins increased to 69.1% (68.3%). Operating margins decreased by 0.1 percentage points to 13.8% (13.9%) resulting in an operating profit of ¤127.1m (¤106.7m). Net profit increased by 3% to ¤93.5m (adj. ¤90.5m) and fully diluted earnings per share increased by 6% to ¤1.61 (adj. ¤1.52). OPERATING HIGHLIGHTS Marketing and Products In 2006, the split in sales of the five product categories were: Skin care 26% (25%) Colour Cosmetics 26% (28%) Toiletries 19% (20%) Fragrances 17% (17%) Accessories 11% (11%) In line with Oriflame's efforts during the year to further strengthen its position within skin care, this category showed a strong sales increase, growing by 25% both in the fourth quarter as well as in the full year period. Successful product introductions during the autumn, such as Skindividual and Optimals, contributed to this. Colour Cosmetics grew by only 2% in the fourth quarter, partly due to very strong product introductions in prior year, and by 13% in the full year. Although this category showed sales that were below expectations, Oriflame has successfully re-launched its luxury colour and fragrance brand, Giordani Gold, with higher quality packaging, enhanced formula and a wider range of colour shades. In addition to the normal sales support, the re-launch was communicated in print and TV. Global Supply The Product Fulfilment Project, Oriflame's review of its entire supply chain, is now in the implementation phase and is showing some promising early results. During the quarter Oriflame has shown improvements in inventory efficiency and management is continuously working hard to improve responsiveness to consultants. Oriflame has completed the review of its logistical foot print and is now starting the restructuring of this new footprint with more Group distribution centres planned for Eastern Europe. The CIS Supply Centre has commenced test activities and a new picking system has been installed in the warehouse and is showing good potential. Due to certain delays in the implementation of lipstick manufacturing, Oriflame is expecting that production will commence during the latter part of the year. This is expected to lead to reduced gains in 2007 compared to previous expectations. REGIONAL HIGHLIGHTS CIS & Baltics Local currency sales in the fourth quarter increased by 21% as a result of a 22% increase in the average size of the Sales Force and a constant productivity compared to previous year. Euro sales increased by 19% to ¤159.1m (¤133.9m) and closing Sales Force was up 20% year over year. All main markets performed well and sales growth was particularly strong in Kazakhstan, Belarus and Mongolia. Sales in Russia increased by 13% in local currency. Demand and sales of fragrances and in Men's fragrances in particular have been very strong during the fourth quarter partly as a result of some competitors still lacking their license to sell fragrances. Unfortunately the service levels have not been satisfactory, which has led to some out of stocks due to the higher than expected demand, not only due to fragrances but also due to high demand of limited life accessories. Operating margins amounted to 22.0% (22.6%) resulting in an operating profit of ¤34.9m (¤30.3m). Central Europe & Mediterranean Local currency sales in the fourth quarter increased by 7% driven by a productivity increase of 12% partly offset by a 4% decrease in the average size of the Sales Force. Productivity increased mainly as a result of the launch of an additional catalogue during the period. Euro sales increased by 9% to ¤66.4m (¤61.0m) while the closing Sales Force was down 4% year over year. Sales growth was particularly strong in Romania, Serbia & Montenegro and Bosnia-Herzegovina, while Greece and Hungary were below expectations. Operating profit increased by 3% to ¤14.4m (¤14.0m). Operating margins decreased to 21.7% (23.0%) mainly as a result of lower gross margins and higher costs for sales and marketing. Western Europe & Africa Sales increased by 3% both in local currency and in Euro to ¤25.4m (¤24.8m) as a result of a 14% increase in the average size of the Sales Force partly offset by a 9% decrease in productivity. Growth was strong in Portugal, Spain and Egypt while Sweden and Norway were weaker than expected. Closing Sales Force was up by 14%. Operating margins decreased to 12.7% (13.1%) resulting in a constant operating profit at ¤3.2m (¤3.2m). Margins were lower as a result of a less favourable product mix in the period. Comparable figures for last year have been adjusted for Oriflame's UK operations which were disposed of in the fourth quarter 2005. Figures have also been adjusted for the addition of Egypt and Morocco to the region. These two countries were previously in the Central Europe & Mediterranean region. Latin America Local currency sales increased by 8% driven by a 20% increase in the average size of the Sales Force partly offset by a 10% decrease in productivity. Colombia and Mexico had strong sales growth while Peru and Chile were more disappointing, declining in the quarter. The main reasons for the slow down in sales growth during the fourth quarter were less successful product launches and service level issues in certain countries. Euro sales was constant at ¤10.5m (¤10.5m) negatively affected by currency movements. Closing Sales Force was up by 15%. Operating profit increased to ¤0.7m (¤0.6m). Asia Local currency sales increased by 54% as a result of a 63% increase in the size of the Sales Force and a 6% decrease in productivity. Euro sales increased by 48% to ¤12.4m (¤8.4m). All countries showed a strong growth during the quarter and particularly Indonesia, India and Vietnam. The strong sales trend is to a high degree attributed to Oriflame's focus on sales and recruitment processes which has led to many new Leaders in the region taking more responsibility for the training and recruitment of the Sales Force. Oriflame commenced sales activities in China in November 2006. Operating profit amounted to ¤0.2m (¤-0.4m). CASH FLOW & INVESTMENTS Cash flow from operating activities amounted to ¤65.4m (¤53.7m) during the fourth quarter and ¤121.6m (¤63.4m) for the full year. Operating cash flow for the full year increased partly as a result of ¤24.3m in higher EBITDA. In addition, inventories in 2006 decreased by ¤2.8m while in 2005, the inventory build-up amounted to ¤32.0m. This was partly offset by ¤6.5m in higher interest and charges paid and ¤1.9m in higher taxes paid. Cash flow from investing activities during 2006 amounted to ¤-39.5m (¤-39.5m). FINANCIAL POSITION Net interest-bearing debt amounted to ¤193.5m compared to ¤73.5m at year-end 2005. Interest-bearing debt increased mainly as a result of ¤53.5m in dividend paid in the second quarter of 2006 and ¤153.4m in redemption payments during the third quarter 2006. ORIFLAME TO EXPLORE NEW OPERATIONAL PLATFORM The proposed platform principally would entail co-locating the Groups' product development and catalogue functions to Stockholm, Sweden where the company was founded 40 years ago. The proposal would also entail expanding central logistic hubs in Warsaw, Poland and Moscow, Russia. As a consequence, the proposal would lead to the closure of the offices in Waterloo, Belgium and Malmö, Sweden. In addition, the proposal includes investment in R&D capabilities with the establishment of a skin care research centre in Stockholm to further enhance the development of skin care products based on Swedish science and ingredients. The proposal also includes a further investment of ¤1.5m in Oriflame's R&D centre in Dublin. The proposal would constitute a next strategic step towards creating a more effective platform for future growth, and an investment in Oriflame's brand image and unique selling point - Natural Swedish Cosmetics. The cost of the proposal is expected to be in the range of ¤25-30m to be spent over the next two years. A separate press release about this initiative has been issued and is available on www.oriflame.com. DIVIDEND Oriflame's Board of Directors will propose to the AGM a dividend of ¤1.01 (¤0.90) per share, or 60% of net profit and ¤56.2m in total. The dividend will be paid after the AGM in May 2007. MANAGEMENT Oriflame's Chief Financial Officer, Kevin Kenny has decided to leave the Company in August 2007 after 27 years with the Company. During the next six months, Kevin will hand over his responsibilities to Gabriel Bennet, currently Oriflame's Group Controller. Gabriel has then been with the Company for two years. OUTLOOK AND LONG TERM FINANCIAL TARGETS Oriflame's long term financial targets are to achieve local currency sales growth of 5-10% per annum and to reach an operating margin of 15% in 2009. A number of factors impact sales and margins in-between quarters: * Effectiveness of individual catalogues and product introductions * Effectiveness and timing of recruitment programmes * Timing of sales and marketing activities * The number of effective sales days per quarter * Currency effect on sales and results The outlook for 2007 remains as previously communicated. Oriflame expects 2007 to be within the sales target. As a consequence of projects initiated during 2006 as well as investments in infrastructure, fixed overhead growth has been increasing. Oriflame expects this growth to continue, but at a slower pace in 2007, while the benefits from the various projects will only start to come through during the latter part of the year. Overall, Oriflame expects the operating margin for 2007, excluding the effects of the restructuring, will be in line with 2006. PERSONNEL The average number of employees during the fourth quarter 2006 was 5,842 (5,283). ANNUAL GENERAL MEETING AND SHAREHOLDERS' DAY Oriflame's forthcoming Annual General Meeting will be held in Luxembourg on 21 May 2007. Oriflame will also host a Shareholders' Day in Stockholm on 25 April 2007 where shareholders will have the opportunity to meet with members of the Board of Directors and management. Oriflame's annual report 2006 will be published on Oriflame's website on or about 13 April. FINANCIAL CALENDAR FOR 2007 Interim reports and other shareholder activities are planned as follows: * First quarter 2007 and Shareholders' Day on 25 April, 2007 * Annual General meeting on 21 May, 2007 * Second quarter 2007 on 1 August, 2007 * Third quarter 2007 on 24 October, 2007 OTHER This report has been reviewed by the Company's auditors. A Swedish translation is available on www.oriflame.com. Oriflame will present its full year 2006 results at 15.00 CET on Tuesday 13 February. The presentation will be live web cast and accessed through Oriflame's website: www.oriflame.com To listen to the call and participate in the question and answer session, you are kindly requested to call +32 (0)2290 1407. A replay of the conference will be available on the company website. 13 February 2007 Magnus Brännström Chief Executive Officer For further information, please contact: Magnus Brännström, Chief Executive Telephone: +32 2 357 5524 Officer Kevin Kenny, Chief Financial Officer Telephone: +32 2 357 5544 Patrik Linzenbold, Investor Relations Telephone: +35 2 26 203 232 Oriflame Cosmetics S.A. 20 rue Philippe II L-2340 Luxembourg www.oriflame.com Company registration no B.8835 Oriflame is an international cosmetics company selling direct, with sales in 59 countries. Oriflame offers a complete range of high quality skincare, fragrances, colour cosmetics, toiletries and accessories, marketed through a Sales Force of independent Sales Consultants. Although the company has grown rapidly it has never lost sight of its original business concept - natural Swedish cosmetics, sold from friend to friend. Oriflame is a co-founder of World Childhood Foundation. Oriflame Cosmetics is listed on the Nordic Exchange. The full report including tables can be downloaded from the following link: