L'Oreal sales power ahead fueling further possible acquisitions

By Simon Pitman

- Last updated on GMT

Related tags: Cent, Euro

Having announced strong growth in sales and profits L'Oreal
CEO Jean-Paul Agon says that the company has never before been so
engaged in the process of considering new acquisitions.

Speaking in an interview with French newspaper Le Figaro, Agon said that the company was interested by every potential acquisition in the market place, stating the company is interested by everything unless there are reasons not to. The fact that the company is looking at further acquisitions reflects contintued strong growth by the company on the back of recent acquisitions, which in turn has helped to boost funds. The interview with the newspaper was published on the same day that the company revealed first half results that showed like-for-like sales were up 7.7 per cent to reach €8.51bn. In turn net profit for the six months climbed 8.2 per cent to reach €1.18bn, a figure that was just ahead of average market expectations. The company said that the results had been particularly boosted by the consolidations of new acquisitions, including the Body Shop, Sanoflore, Beauty Alliance and Pureology, which combined to add 5.2 per cent to the total sales figure. On the down side, currency fluctuations had a negative impact of 3.5 per cent, reflected by turmoil on the worldwide financial markets, in turn impacting the euro currency exchange rates. Likewise, although net profit continued to grow at a healthy rate, it did show the slowest growth in two years, on the back of increased expenses to expand the Body Shop as well as high advertising revenues aimed at re-igniting the US market. Agon stated that the results in the second quarter had increased at an even stronger rate than the first quarter, with the group's total sales on a reported basis increasing by 10.4 per cent during the period. "This strong growth reflects both very rapid growth in new markets as L'Oreal captures strategic positions, and sustained growth in Western Europe and North America… Despite the negative impact of exchange rates, these good levels of performance mean that we are confident about the sales and results outlook for the full year 2007,"​ Agon said. Growth was led by the company's consumer products division which recorded a like-for-like sales increase of 8.1 per cent for the first half, to reach €4.27bn. The company said that this figure was driven by particularly strong sales growth in Western Europe and policy innovation and focus for flagship brands. On a geographical basis the company reported solid like-for-like sales growth of 3.7 per cent in Western Europe for the six months, while the North American market came in at 3.8 per cent. However, the main growth came from new markets, where like-for-like sales growth came in at 19.0 per cent for the period. This was fueled by growth of 17.5 per cent in Asia - excluding the Japan market, a 16.1 per cent growth in Latin America and a 30.0 per cent growth in Eastern Europe. The company said that highlights in the new markets included China, Venezuela, Colombia and Argentina, together with Russia and Ukraine. Sales for the company's newly acquired Body Shop rose by 7 per cent on a like-for-like basis, whereas the company's newly formed dermatology division showed growth of 10 per cent. The company said that it expects sales growth revenues to increase at 7 - 8 per cent, slightly up on predictions at the beginning of the year that had estimated a 6 - 8 per cent margin. At mid-day today L'Oreal's shares were trading at €85.37, a rise of 1.16 per cent on the closing price yesterday, contributing to a 11.2 per cent rise in the share price since the beginning of the year.

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