Developing markets help drive big sales gains for L’Oreal

By Simon Pitman

- Last updated on GMT

Related tags United states dollar Euro

L’Oreal has proved it is well and truly on the road to recovery after posting double digit second quarter growth on the back of a particularly strong performance in developing markets.

On a reported basis sales grew by 12.4 per cent to €4.95bn for the second quarter, compared to a figure of €4.4bn in the same period last year.

On a like-for-like basis, this represented an increase of 5.2 per cent, discounting the highly positive impact of currency fluctuations as the Euro weakened against almost all major currencies in the light of economic uncertainty in the Euro Zone.

Weakened Euro boosts overseas results further

CEO Jean-Paul Agon commented that a further weakening of the Euro is likely to continue to positively impact the company’s results during the course of the financial year.

The company said that the Euro weakness had positively impacted results to the end of June by an estimated 3.6 per cent and also stated that if currency trends remain the same for the full financial year 2010, the impact will be 6.8 per cent.

For the first six months of the year, reported sales were up 10.2 per cent to €9.66bn, up 6.3 per cent in reported terms.

Growth in sales biggest in nearly three years

The growth in sales is the biggest in almost three years and is a significant turnaround following a year of stagnant performance due to the company’s disappointing results in the mainstay markets throughout Western Europe.

“All divisions are recording dynamic trends, thanks to major innovations which are proving very successful,” ​said Agon, who went on to earmark particularly strong growth for the Yves Saint-Laurent and Maybelline brands.

Besides several of the brands putting in particularly strong performances, the results were also significantly boosted by the company’s performance in what it terms ‘new markets’, an area of the business that has been stressed as a major source of future growth revenues.

BRIC markets on a roll

“L'Oréal has once again strengthened its geographic positions, thanks to the group's good performance in North America, and major breakthroughs in the New Markets, particularly in China, Brazil, Russia, India and Indonesia,”​ said Agon.

The company’s highest growth division was professional products, which saw reported sales increase by 15.1per cent to €709.9m, while the luxury division registered an increase of 13.6 per cent to €1.09bn.

All divisions registered like-for-like sales growth in excess of 11 per cent.

On a geographic basis, the figures still showed that the European market remains slow, with reported sales growing at just 1.9 percent to €1.83bn, reflecting the continued economic hardships experienced throughout the region.

North America posts healthy gains

However, this result was counterbalanced by outstanding performance in other regions, with North America registering a 14.7 per cent rise to €1.12bn on a reported basis, a figure that was particularly impacted by positive currency rates, although like-for-like sales rose by a creditable 4.2 per cent.

Sales in new markets grew by 25.2 per cent on a reported basis to €1.66bn, and 11.1 per cent on a like for like basis, driven by reported sales growth of 37.5 per cent in Latin America and 25.6 per cent in the Asia Pacific region.

The financial world responded positively to the results, which beat most forecasts, and a number of banks and financial agencies chose to upgrade their ratings on the strength of the performance.

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