Provo nutraceutical firm reports strong profits, despite drop in Asian business

Weak Japan sales hit Nu Skin shares

Grace Leong

Nu Skin Enterprises Inc. on Thursday reported a 40 percent jump in net profits for the second quarter, but weak sales in its largest market, Japan, weighed on its stock and prompted management changes in its north Asia team.

Shares of the Provo nutraceutical company fell 6.1 percent or $1.05 to $16.16 at the close of Thursday's trading session. In afterhours trading, shares fell 0.03 percent or 1 cent to $16.155 a share.

The company reported a 13 percent drop in second-quarter sales in Japan, due in part to a "tough regulatory environment," the company said in a conference call Thursday. "The [new] regional team's top priority will be to restore growth to Japan."

The international market accounts for about 85 percent of Nu Skin's total sales, with Asia (primarily Japan and South Korea) accounting for more than 70 percent of sales.

Meanwhile, Nu Skin's net profits jumped 49 percent to $20.6 million, or 32 cents a share, for the second quarter ended June 30, from $13.8 million, or 21 cents a share a year ago, the company said.

A weak dollar, combined with strong sales in Latin America and Canada, helped boost the company's second-quarter revenues to $321.7 million, up 12 percent from a year ago. The dollar's slide against most currencies in recent months has made U.S. products more affordable overseas.

"We are seeing good global momentum due to improved distributor alignment and strong product initiatives, which was demonstrated by 31 percent growth in our personal care brand and continued stability in our nutrition line," said Truman Hunt, president and chief executive officer.

"Moreover, as the world's economic situation remains relatively unstable, we are seeing more and more people looking at our business opportunity as a source of supplemental or replacement income," he said.

The company now expects third-quarter revenues of between $305 million and $310 million, and its earnings per share to be in the 30- and 32-cent range.

Hunt reiterated the company's focus on improving its business in Japan.

The company named Brett Nelson president of the North Asia region. He will relocate from Nu Skin's Provo corporate headquarters to Japan. Among his most recent responsibilities, Nelson has served as the company's vice president of global distributor support and was president of the Southeast Asia region.

Luke Yoo was appointed regional vice president of the North Asia region and will also continue in his role as president and general manager of the company's South Korea business. Yoo joined Nu Skin South Korea in 1999 and has served as president and general manager of Nu Skin's South Korea operations since 2003.

Ryan Napierski was appointed vice president of business development for North Asia. Napierski was recently appointed vice president of business development for Nu Skin Japan.

Gary Sumihiro will continue in his role as president of Nu Skin Japan. Sumihiro has served as president of the market since April 2007 and has nearly 20 years of experience in the direct selling industry.