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Struggling Kanebo Ltd. said Wednesday its group sales in the April-June first quarter of fiscal 2004 fell 26.8 percent to 76.56 billion yen, mainly because it sold its cosmetics division to a new entity formed with governmental aid.

But the sales figure for the quarter includes roughly one month of revenue earned at the cosmetics division, which the textile and food maker sold to the new government-backed enterprise May 7.

The new entity, Kanebo Cosmetics Inc., began operations May 7 as a spinoff from Kanebo, which had a negative net worth of 355.3 billion yen as of March 31.

Kanebo received 380 billion yen for the division from the entity, which is 86 percent owned by the Industrial Revitalization Corp. of Japan. Kanebo said it plans to use the proceeds to wipe out the negative net worth during the current business year.

In the first quarterly earnings report Kanebo has released since it received the public aid, it said combined sales from all noncosmetics segments came to 62.88 billion yen in the April-June period, up 8 percent.

Kanebo said it cannot release pretax and net profit figures because it drew up a business rehabilitation program only on May 31 and could not determine in-house accounting guidelines in time for the quarter book-closing.

“Since we announced our reconstruction program only on May 31, we did not have the leeway to compile a profit-and-loss statement and balance sheet” for the latest quarter, Kanebo spokesman Kyoji Shimada said.

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