L’Oreal chief says he is committed to making further acquisitions

By Simon Pitman

- Last updated on GMT

Related tags Eastern europe Europe

L’Oreal CEO Jean-Paul Agon says the company will maintain the strong position of its cash balance in readiness for interesting acquisition possibilities.

Speaking at a press conference in Paris following the announcement of the company’s first half-year results, Agon pointed to the fact that the company still wanted to make further acquisitions, although he did not specify a category or geographic region.

The admission came after Agon was quizzed as to whether L’Oreal was considering buying back shares. The CEO said this would not be the case and underlined the fact that the company wants to keep its war chest at the ready should any suitable businesses come on the market.

L'Oreal's has been quiet on the acquisition front

Although there have been several rumours of possible acquisition bids in recent months, including speculation that L’Oreal was considering a bid for direct sales giant Avon Products, there have been no significant moves in this area over the last year.

In January of last year the company bought two salon distributers in the US – Maly’s Midwest and Marshall’s Salon Services - while it bought up the YSL Beaute brand and a 50 percent stake in 3 Suisse in 2008, together with the Body Shop in 2006.

The company recently reported first half year results that underlined a struggling Western European and Eastern European market, together with challenging conditions in the Northern European markets.

Acquisitions likely to favor emerging markets

In view of the continued divide between these markets and the prolonged growth pattern that the company has seen in the developing markets of Latin America and Asia Pacific, it is likely that L’Oreal will concentrate its acquisition wish list on businesses with strong global exposure or good potential in emerging markets.

During the press conference Agon referred to the fact that the company’s performance in Western Europe has become difficult to predict, given the continued economic difficulties there.

“The consumption of mass market (products) in July in Western Europe has not been extraordinary,”​ he said, adding that the market trends in the region were “not brilliant”.

Eastern European sales take a dive

Sales for the first six months of the year grew by 5.0 percent to reach €10.15bn, while on a like-for-like basis the figure was 5.2 percent and excluding the negative impact of currency translation the growth was 5.9 percent.

Although the overall sales growth was buoyed by strong results in the Latin America and Asia markets, the results in Europe dragged the figure down significantly.

Overall reported sales in Western Europe grew by just 1.4 percent in the first half, to reach €3.76bn, while reported sales in Eastern Europe fell by 3.8 percent to reach €680m.

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