Make-up margins the focus for Revlon result

Revlon will expected 2011 release Q1 earnings on April 28. We appreciate Revlon stock with a $14.88 price estimate, roughly 5% below market price. Revlon competes with other consumer goods and beauty product companies such as Procter & gamble, Unilever, Colgate-Palmolive, l ' Oréal and Estée Lauder.

We were pleasantly surprised with Revlon's 2010 performance, with revenues 2%, a moderate turnaround from the 4% previous year decline in sales of rising 2007-09. The company suffered also margins despite difficult market conditions. [] We are always given Revlon's heavy debt, nor very carefully in terms of his approach - we pay special attention to its EBITDA margins, corporate overhead expenses and operating current capital. Here we highlight that is why these are crucial for Revlon.

What's with the Revlon heavy debt burden?

Revlon's balance sheet results in net debt of $1.14 billion. Compare this with Revlon's total turnover of $1.32 billion in the year 2010 and the extent of its debt is obvious. We have previously discussed our concerns about Revlon the progressive reduction of the leverage effect, the funding for R & D and advertising in our should spend note with the title despite debt, Revlon color cosmetics has restricted on branding.

While we expect, Revlon, leverage in future reduce, would have on their advertising budget this negative effect on market share.

What the Revlon EBITDA margins and corporate overhead expenses?

Revlon increased its advertising costs $ 34 million in the year 2010. The additional costs of around 19 billion dollars worth of savings in the consumption of storage, leads partially offset improvements in gross margins. As a result, Revlon the EBITDA margin remained relatively flat, with approximately 19.7% over 2009-10.

But here is our main concern. With rising raw material prices in the current inflationary environment we expect gross margins, be further stretched. Therefore, Revlon must recognize to keep savings in operating costs, EBITDA margins in the future.

Revlon's corporate expenses include mainly restructuring costs and amortization of debt issuance costs (expenses during its mammoth debt). While this completely aside thrown will not, can we expect certainly Revlon purse strings a little - to tighten up, especially when it comes to the restructuring costs.

See our full analysis of Revlon's stock here

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