Leading global cosmetics company L’Oreal has announced that it will buy back €500m of its own shares.
The decision was taken at the director’s meeting chaired by Jean-Paul Agon. The shares purchased will be intended for cancellation.
This buyback will take up more than a third of L’Oreal’s available cash and cash equivalents for the first half of 2013, according to the company’s half-yearly financial statement. This action has been pegged to be completed by the first quarter of 2014.
The company previously suggested that it would make the buyback in September 2013. Agon has also suggested that L’Oreal may make an additional, larger deal for its own stock next year, with analysts from the Financial Times suggesting that this may total up to €1.5bn.
Plans for a Nestle buyback?
L’Oreal’s half-yearly financial statement shows that the cosmetics giant has cash and equivalent reserves of €1.245bn, meaning that the financial buyback will take more than a third of the company's available funds.
According to the Financial Times, analysts believe that the company could instead “keep its powder dry” for a potential buyback of Nestle’s 30% stake in the company, which has been pegged at a price of up to €23bn. The company's $9bn stake in Sanofi has also been suggested as a financial resource for this buyback.
L’Oreal’s financial position
L’Oreal reported respectable sales in their September report, particularly in emerging markets such as China, India, Brazil and Russia.
The company has also succeeded in transforming a net $4.5bn debt into $500m available cash over the past four financial periods, leaving them with excellent resources available as of the middle of the year.
However, their October financial statement reveals that sales were significantly impacted by currency fluctuations and sluggish growth in North American markets, with up to 0.5% negative growth. The company’s shares also dipped significantly in the wake of the announcement.