L'Oreal first half results prompt ratings upgrade
sales on the back of a solid performance in both North America and
new markets, prompting investment firm UBS to upgrade its rating,
reports Simon Pitman.
Like-for-like sales for the group amounted to €7.163 billion for the first six months of the financial year, up 4.1 per cent on the same period last year. But the performance for the second quarter reflected even stronger growth, with a like-for-like sales turnover representing a 5.1 per cent growth on the corresponding quarter in 2004.
The performance marks a significant rebound after a sluggish first quarter for the company. L'Oreal particularly ear-marked the turn-around in the European market, which bucked a small fall in the first quarter, due in part to a proliferation of new product launches.
On the back of this performance UBS said it had upgraded its rating for L'Oreal from 'neutral' to 'buy', saying that it expected share prices to rise from €62 to €70.
Commenting on the results, Sir Lindsay Owen-Jones, L'Oreal CEO, said "We have seen a significant increase in activity across all our businesses in the second quarter… In view of our intensive programmes of promotional activities and new product launches, sales growth should continue to accelerate for the rest of the year."
Sales for the Professional Products Division and the Consumer Products Division rose 4.3 per cent to reach €1.02 billion and 4.1 per cent to reach €3.76, respectively - both boosted by improved performances in the second quarter.
A poor first quarter performance for the Luxury Products division counterbalanced by a significant turnaround in the second quarter. Overall sales for the six months grew 1.4 per cent to reach €1.63 billion, which boosted by a 3.2 per cent jump in revenue during the second quarter.
But the most spectacular jump in sales came from the company's smallest division - Active Csometics. Like-for-like sales grew 13.1 per cent for the six months to reach €560 million, representing an increase of 16.1 per cent during the second quarter.
L'Oreal said that growth in actives reflected the success of new launches and range renewals at the beginning of the year. Particularly successful products included anti-wrinkle treatment Lift-Activ Pro, hair loss treatment Amniexil SP94 and the anti-dandruff range Kerium.
Besides the return to form in the European market, the US market also performed well, with like-for-like sales growing by 7.2 per cent for the six months, to reach €1.79 billion. The company said that this growth was particularly driven by a strong performance in the Consumer Products Division, with the shampoo and styling market proving strong.
Asian sales grew 9 per cent for the six months, to reach €668 million, with Latin American sales for the period up 8.3 per cent to reach €375 million. But the biggest increase was experienced in the Eastern European market, where like-for-like sales grew 26.1 per cent to reach €325 million.
L'Oreal said that in the Eastern European region Russia had been the star performer, with a six monthly sales increase of 39 per cent, followed by the Czech Republic with a 22 per cent increase.
Looking ahead to the full financial year, Owen-Jones said, "If the present strengthening of the main currencies against the euro is maintained, exchange rates should have a slightly positive impact on 2005 sales figures. All of these factors reinforce our hope of seeing a significant improvement in our results."
