Avon 2010 Annual Report Download - page 47

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Central & Eastern Europe – 2010 Compared to 2009
%/Point Change
2010 2009 US$ Constant $
Total revenue $1,585.8 $1,500.1 6% 5%
Operating profit 297.8 244.9 22% 22%
CTI Restructuring 4.7 29.7
Adjusted Non-GAAP operating profit 302.5 274.6 10% 12%
Operating margin 18.8% 16.3% 2.5 2.7
CTI Restructuring .3 2.0
Adjusted Non-GAAP operating margin 19.1% 18.3% .8 1.1
Units sold 3%
Active Representatives 4%
Total revenue during 2010 increased as a result of growth in Active Representatives and a higher average order, as well as favorable foreign
exchange. The region’s revenue benefited from growth of 11% in Russia, due partially to favorable foreign exchange. During 2010,
Constant $ revenue in Russia increased by 7% due to a growth in Active Representatives and a higher average order. Russia’s revenue grew
26% in the first half of 2010, but was flat during the second half, with Constant $ growth rates of 14% in the first half and 2% in the
second half. Russia’s performance in the second half of 2010 was primarily a result of slowing field growth due to weak incentives. Increases
in social benefit taxes levied against certain Representatives exacerbated the slowdown in field growth. The increased taxes
disproportionately reduced new and developing Representatives’ earnings, which reduced their motivation to recruit. In Russia, weaker color
and skincare performance negatively impacted revenue growth in the second half of 2010. During the first quarter of 2011, we launched a
new sales leadership compensation plan to help offset the tax burden on these Representatives.
During 2010, operating margin benefited by 1.7 points due to lower CTI restructuring compared to the prior year. On an Adjusted
Non-GAAP basis, the increase in operating margin during 2010 was primarily driven by the benefit of leverage from higher revenues with
fixed overhead expenses, partially offset by a lower gross margin.
Central & Eastern Europe – 2009 Compared to 2008
%/Point Change
2009 2008 US$ Constant $
Total revenue $1,500.1 $1,719.5 (13)% 9%
Operating profit 244.9 346.2 (29)% (12)%
CTI Restructuring 29.7 3.3
Adjusted Non-GAAP operating profit 274.6 349.5 (21)% (3)%
Operating margin 16.3% 20.1% (3.8) (3.8)
CTI Restructuring 2.0 .2
Adjusted Non-GAAP operating margin 18.3% 20.3% (2.0) (2.2)
Units sold 2%
Active Representatives 10%
Total revenue decreased for 2009 as compared to 2008, impacted by unfavorable foreign exchange. Constant $ revenue for 2009 increased
despite recessionary pressures throughout the region, reflecting growth in Active Representatives, driven by investments in RVP as well as
strong marketing offers. While the impact of unfavorable foreign exchange rates drove revenue declines of 7% in Russia and 19% in
Ukraine for 2009, Constant $ revenue grew during 2009 by 18% in Russia and 20% in Ukraine.
A V O N 2010 35