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Luxe Sales Help Bolster L'Oréal's First Half of 2012
Posted: August 29, 2012
Reporting its full financial results for the first half of 2012, L'Oréal recorded strong numbers, increasing its sales 10.5% based on reported figures for an operation profit increase of 11.4% at 16.9% of sales.
Commenting on the figures, Jean-Paul Agon, chairman and CEO of L'Oréal, said, "With strong growth in sales and results, the first half of 2012 confirms the group's good dynamics. L'Oréal is continuing to strengthen its positions, and is thus reinforcing its leadership of the worldwide cosmetics market. Driven by an ambitious project, the universalization of beauty and the conquest of the next billion consumers, the group has continued to build the L'Oréal of tomorrow: dynamizing our brands, strengthening our geographic footprint, rolling out our research laboratories, opening new industrial sites, and continuing efforts to raise the productivity of advertising and promotion business drivers and organizational structures. The growth in results confirms the relevance of our business model: although it is important to emphasize that half-year figures are not particularly representative, this performance reflects the group's ability to build solid and profitable growth. Bolstered by these results, and despite the uncertainties of the economic environment, we confirm for 2012 our ambition to outperform the market, and achieve another year of growth in sales, results and profitability."
Furthermore, the L'Oréal board of directors has decided, in application of the authorization approved by the annual general meeting on April 17, 2012, to buy back L'Oréal shares for a maximum amount of 500 million euros, by December 31, 2012. The shares bought back will be canceled.
For first-half 2012 sales, based on reported figures, the group's sales, at June 30, 2012, amounted to €11.21 billion, an increase of 10.5%. Like-for-like, i.e. based on a comparable structure and identical exchange rates, the sales growth of the L'Oréal group was 6%. The net impact of changes in consolidation was 0.7%. Currency fluctuations had a positive impact of 3.8%, and growth at constant exchange rates was 6.7%.
The company’s operating profitability was at 16.9% of sales. Gross profit, at €7,966 million, grew strongly, 9.7%, and it came out at 71% of sales, compared with 71.2% in 2011 and 71.5% in the first half of 2011. The variation particularly reflects the exchange rate effect due to the weakening of the euro against the main currencies, and the impact of the consolidation of the American company Clarisonic. It also reflects a slight increase in promotional offers, in the context of arbitrage with advertising and promotion expenses.
Research and development expenses have remained stable as a percentage of sales, at 3.4%, and have grown strongly. This increase demonstrates the group's constant determination to support its investments in Research and Innovation. Advertising and promotion expenses came out at 30.4% of sales, a level slightly below that recorded in the first half of 2011. Selling, general and administrative expenses, at 20.3% of sales, were at a lower level than in the first half of 2011, confirming the fact that productivity efforts are continuing.
Operating profit grew by 11.4%, representing an improvement of 10 basis points compared with the first half of 2011, at 16.9%. The profitability of the professional products and consumer products divisions, at 19.9%, are virtually stable compared with the first half of 2011. The profitability of the L'Oréal Luxe division, at 19.5%, is significantly higher than in the first half of 2011. The active cosmetics division, whose seasonality is always very pronounced, once again recorded extremely high profitability in the first half of 2012, at 26.1%, and non-allocated costs, at 2.7%, were reduced slightly compared with the first half of 2011. The profitability of The Body Shop, which is mainly achieved in the second half of each year, came out at 3.1%, and the profitability of the dermatology division, which is traditionally stronger in the second half of each year, came out at 11%, a significant improvement on the first half of 2011.
To learn more about L'Oréal’s first-half 2012 financial results, click here.