Objective for 2005: another year of double-digit earnings per share growth
- 2nd QUARTER SALES GROWTH: +5.4%
1st Half Results: In line with annual projections.
- OPERATING PROFIT: € 1,115 M, OR 15.6% OF SALES
- GRADUAL IMPROVEMENT IN EXCHANGE RATE IMPACT
- DILUTED EARNINGS PER SHARE: +4.5%
Commenting on the results, Sir Lindsay Owen-Jones, Chairman and Chief Executive Officer of LÂ’OrÃ©al, said: "The faster sales growth recorded in the second quarter should continue in the second half, in view of the more intensive programme of product launches and promotional activities. Although a single half-yearÂ’s performance has limited significance, the results of the first six months are in line with our projections. In 2005, L'OrÃ©al should once again achieve double-digit earnings per share growth".
* For purposes of comparison, the pro forma profit and loss account presented has been restated to allow for the deconsolidation of Sanofi-SynthÃ©labo on January 1st 2004:
|At June 30th 2005
|At June 30th 2004
|At June 30th 2004
|Sales||7 164||6 922||6 922|
|Operating profit before exchange gains and losses||1 123||1 087||1 087|
|Operating profit||1 115||1 115||1 115|
|Pre-tax profit||1 257||1 242||1 330|
|Net profit after minority interests||892||878||947|
|Net profit excluding non-recurrent items (1)||892||875|
|Earnings per share (2) (€)||1.40||1.34|
- by replacing the share in the net profit of Sanofi-SynthÃ©labo by the dividends received;
- and by neutralising the dilution capital gain, net of tax, relating to these shares.
(1) Net profit excluding non-recurrent items after minority interests does not include capital gains and losses on disposals of long-term assets, impairment of assets, restructuring costs, associated tax effects or minority interests.
(2) Earnings per share: diluted net earnings per share based on the net profit excluding non-recurrent items after minority interests.
1st half 2005 sales: Growth by operational division and geographic zone
(1) Group share, i.e. 50 %
|1st Half 2005||2nd Quarter 2005|
|By operational division|
|Cosmetics total||7, 027||+4.1%||+3.5%||+5.1%||+5.4%|
|By geographic zone|
|Rest of the World, of which:||1,700||+12.7%||+14.1%||+12.7 %||+16.4%|
|- Latin America||375||+8.5%||+12.4%||+11.3%||+19.9%|
|- Eastern Europe||325||+26.1%||+31.0%||+30.9%||+35.5%|
|- Other Countries||332||+13.3%||+13.2%||+11.6%||+14.1%|
Sales trends by geographic zone were as follows:Western Europe returns to growth in second quarter
In Professional Products, consumer spending in hair salons slowed at the start of the year in Western Europe, but our many new product launches and the success of our products enabled an increase in second quarter sales.
There was a return to growth in Consumer Products sales in the second quarter. This recovery reflects the launch of new higher value-added products, particularly in the skincare and make-up segments.
The sales of the Luxury Products Division began to pick up in the second quarter, despite continuing imbalances between sales in boutiques and amounts invoiced by the business units.
Once again, the Active Cosmetics sales trend was favourable. Strong growth continues in the United States
In North America, like-for-like sales growth amounted to +7.2%.
Growth was once again particularly strong in the Consumer Products Division, thanks to the success of Fructis from Garnier which is continuing its winning ways in the shampoo and styling market, a very good start for the Men Expert range from LÂ’OrÃ©al Paris, and the successful launches of Maybelline foundations and mascaras.
In Professional Products, the Division has continued to make market share gains, thanks in particular to the success of Color Smart from Matrix and Platinium from LÂ’OrÃ©al Professionnel and the very rapid growth of KÃ©rastase in the upmarket segment.
In the field of luxury products, the main developments were the spectacular sales of the new perfume Armani Code, the success of Flower Bomb from Viktor & Rolf in highly exclusive outlets, and the excellent start made by the new skincare line RÃ©nergie Microlift from LancÃ´me.
Lastly, the acquisition of SkinCeuticals will support the expansion of the Active Cosmetics Department in the American market. Rapid growth in new markets
Sales in Asia advanced by +9.0% like-for-like, thanks largely to strong growth in China (+24%) and Hong Kong (+19%). Sales in South Korea are still being held back by the crisis in the country's selective distribution channel.
The success of LÂ’OrÃ©al Paris in China, Watershine lipstick from Maybelline in Japan and Skin Naturals from Garnier in Thailand are boosting Consumer Products sales. The Luxury Products Division has strengthened its position thanks to Line Peel cream from Biotherm and Cleansing oil from Shu Uemura. The excellent scores of Luxia colourant from LÂ’OrÃ©al Professionnel have bolstered the brand's position in Japan. Matrix is continuing to expand in several Asian countries. Finally, Active Cosmetics is growing very strongly thanks to Effaklar K from La Roche-Posay and Bi-White from Vichy.
Sales in Latin America have increased by +8.5% like-for-like. With a growth rate of +11.5%, sales in Mexico have been boosted by the success of 100% Color from Garnier. Professional Products have taken advantage of the successful launch of Majirel Absolu colourant throughout Latin America, and the promising start made by Matrix in Brazil. The Active Cosmetics Department has confirmed the strong growth in its sales, thanks largely to the success of the Liposyne slimming line from Vichy and AnthÃ©lios sun protection products from La Roche Posay.
Like-for-like sales in Eastern Europe have grown very strongly at +26.1%. Sales in the Russian Federation have advanced by +39%, and sales in the Czech Republic by +22%. The Garnier brand continued to grow rapidly with the success of Color Naturals colourant and the Skin Naturals bodycare lines. The launch of ElsÃ¨ve Anti-dandruff shampoo and the Happyderm skincare line from LÂ’OrÃ©al Dermo Expertise have contributed to the good scores of the LÂ’OrÃ©al Paris brand.
In the Other countries, like-for-like sales have increased rapidly by +13.3%. The excellent growth rate of +49% in India reflects the success of the Garnier Skin Natural facial skincare lines, Color Natural colourant and Fructis shampoos.
It is important to note that for many years the half-year results of L'OrÃ©al have tended to be volatile and have rarely been representative of the year as a whole. It is therefore advisable to compare each line of the profit and loss account with the same line for the previous full year.
Sales for the first six months amounted to €7,164m, up by 3.5% based on the reported figures compared with the 1st half of 2004.
Gross profit at €5,001m represents 69.8% of 1st half 2005 sales, i.e. a level virtually equivalent to that of the full year 2004, when the figure was 69.9%.
Research and development expenses amounted to €240m, an increase of +8.3%. They represented 3.4% of sales, a level identical to that of 2004 as a whole.
Advertising and promotional expenses totalled €2,183m, or 30.5% of sales, at June 30th 2005. This percentage is almost stable compared with the full year 2004.
Selling, general and administrative expenses amounted to €1,455m, or 20.3% of sales, lower than the level of 20.9% recorded over the full year 2004.
Operating profit before foreign exchange gains and losses amounted to €1,123m in the first half-year, and represented 15.7% of sales, significantly higher than the 15% of sales recorded over the full year 2004.
Changes in the exchange rates against the euro of the other main currencies led to the recording of an exchange loss of €8m in the 1st half of 2005, compared with an exchange gain of €28m in the 1st half of 2004.
After foreign exchange gains and losses, operating profit came to €1,115m.
Finance costs and other financial expenses for the first half amounted to €27m.
Dividends received from Sanofi-Aventis for 2004 amounted to €172m, up by 17.7% compared with the dividends of the previous year.
The pre-tax profit of €1,256m was slightly higher (+1.1%) than the corresponding figure at June 30th 2004 pro forma, i.e. after neutralisation of the effects of deconsolidating Sanofi-Aventis in 2004.
After income tax, the net profit after minority interests amounted to €892m, up by +1.6% compared with the pro forma net profit at June 30th 2004.
Operating profit by branch and divisionIn accordance with IAS 14 (segment reporting), the LÂ’OrÃ©al group is continuing to improve the quality of its financial information by presenting the profitability of its activities by branch and by division.
* group central expenses, fundamental research expenses, stock option costs and miscellaneous expenses. "This news release does not constitute an offer to sell, or a solicitation of an offer to buy, LÂ’OrÃ©al shares. If you wish to obtain more comprehensive information about LÂ’OrÃ©al, please refer to the public documents registered in France with the AutoritÃ© des MarchÃ©s Financiers.
|€ Millions||1st Half 2005||1st Half 2004||Full year 2004|
|By operational division|
|Cosmetics divisions total||1,281.7||1,260.9||2,406.3|
|Non-allocated*||- 181.3||- 155.3||- 368.0|
This news release may contain some forward-looking statements. Although the Company considers that these statements are based on reasonable hypotheses at the date of publication of this release, they are by their nature subject to risks and uncertainties which could cause actual results to differ materially from those indicated or projected in these statements."
Contacts at L'OREALShareholders and market authorities
Mr Jean-RÃ©gis CAROF
Tel. : +184.108.40.206.83.02
Analysts and institutional investors
Mrs Caroline MILLOT
Tel. : +220.127.116.11.86.82
Fax : +18.104.22.168.80.02
Mr Mike RUMSBY
Tel. : +22.214.171.124.76.71