UPDATE 2-Avon profit beats views; offer to settle bribe probe rejected

Thu Aug 1, 2013 9:33am EDT

Aug 1 (Reuters) - Avon Products Inc reported higher-than-expected earnings on Thursday, helped by a jump in business in its biggest market, Latin America, but said its attempt to settle a bribery investigation was rebuffed.

Shares of the beauty products company rose 6 percent to $24.24 in early trading.

In a regulatory filing, Avon said the U.S. Department of Justice and the Securities and Exchange Commission had rejected a $12 million offer it made in June to settle a probe into whether employees had engaged in bribery overseas to develop new markets. The government's investigation began in 2011.

Avon said it might have to pay more than that to settle the investigation, on which it has spent hundreds of millions. The company's own probe opened in 2008.

The company reported net income of $31.9 million, or 7 cents per share, compared with $61.6 million, or 14 cents per share, a year earlier.

Excluding special items, the profit from continuing operations was 29 cents per share, 4 cents more than Wall Street expected, according to Thomson Reuters I/B/E/S.

Revenue fell 2 percent to $2.51 billion, but would have risen 2 percent if not for unfavorable currency fluctuations. Avon said the number of items it sold and the size of its sales force were unchanged in the quarter.

In Latin America, where Avon gets half of its revenue, sales rose 7 percent excluding the impact of currency. Avon also said it had 2 percent more sales representatives in Brazil, the latest sign the company is fixing its business there.

It has upgraded computer systems in Brazil to make it easier for representatives, many of whom had defected to rivals like Natura Cosmeticos SA, to fill orders.

Avon has also been offering more products specifically for Russia, another top market, and more sales representatives have signed on there.

But problems persisted in North America, where sales fell 12 percent, and in China, where they dropped 28 percent.

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