Strong increase in 1st half results
- Upturn in sales growth (8.7%)
Net profit +21.9%
Strengthened confidence in full-year earnings
- Substantial improvement in gross profit
- Each division contributes to strong opertaing profit growth(19.6%)
- Large increase in EPS(25.2%)
Commenting on the results, Mr Jean-Paul Agon, Chief Executive Officer of the L'OrÃ©al group, said: "Over the first half of 2006 there has been a clear upturn in sales growth, thanks to the return to growth in Western Europe and the strong advances still being made in the new markets, particularly in Latin America and Eastern Europe. The efforts made in cost control, in enhancing the value of products and the favourable impact of currency fluctuations have resulted in a large increase in the gross profit and operating profit of each of the Divisions, thus contributing to a large increase in net profit.
Although once again it is important to emphasise that the significance of half-year figures is limited, the quality of these results and the prospect of sustained growth in the second half mean that we are very confident of achieving another year of double-digit earnings per share growth in 2006."
(1) EBIT: Profit before interest, tax and other income and expenses.
|At June 30th 2005||At June 30th 2006||Growth|
|Operating profit before foreign
exchange gains and losses
|Operating profit (EBIT) (1)||1,115||1,333||+19.6%|
|Net profit after
|Net profit excluding
non-recurrent items (2)
| Net earnings per share
(3) (in euros)
(2) 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.
(3) Net earnings per share: diluted net earnings per share based on net profit excluding non-recurrent items after minority interests.
First half sales
Cosmetics sales growth by operational division and geographic zone
|1st half 2006||1st half 2006||1st half 2006|
|€M||Growth Like-for-like||Growth Reported|
|By operational division|
|Professional Products||1,070||+ 2.7 %||+ 4.7 %|
|Consumer Products||4,077||+ 5.8 %||+ 8.2 %|
|Luxury Products||1,786||+ 6.1 %||+ 9.4 %|
|Active Cosmetics||653||+ 11.6 %||+ 16.6 %|
|Cosmetics total||7,633||+ 5.8 %||+ 8.6 %|
|By geographic zone|
|Western Europe||3,671||+ 3.7 %||+ 3.9 %|
|North America||1,965||+ 3.8 %||+ 9.5 %|
|Rest of the World, of which:||1,997||+ 12.0 %||+ 17.5 %|
|- Asia||740||+ 6.3 %||+ 10.8 %|
|- Latin America||481||+ 16.2 %||+ 28.0 %|
|- Eastern Europe||411||+ 21.9 %||+ 26.7 %|
|- Other Countries||365||+ 8.9 %||+ 10.1 %|
|Cosmetics total||7,633||+ 5.8 %||+ 8.6 %|
|Dermatology (1)||152||+ 7.9 %||+ 11.6 %|
|Group total||7,785||+ 5.8 %||+ 8.7 %|
Sales trends by cosmetics division were as follows:The Professional Products Division recorded a like-for-like growth rate of +2.7% and +4.7% based on reported figures, with positive scores in Western Europe and strong expansion in the Rest of the World. In the United States our brands achieved high sell-through ; inventory reduction in professional distribution to hair salons, which was substantial in the first quarter, returned to a more moderate level in the second quarter.
L'OrÃ©al Professionnel benefited from the launches of the Play Ball and Hair Mix styling ranges, and of the haircare line SÃ©rie Expert Lumino Contrast for hair with highlights. KÃ©rastase very successfully relaunched its Nutritive range. Redken launched the haircare line Blonde Glam and a new hair colourant Shimmer One. Matrix launched a new range, Matrix for Men.
The Consumer Products Division achieved a like-for-like growth rate of +5.8% and +8.2% based on reported figures. Western Europe confirmed its good start to the year.
North America remained dynamic despite inventory reductions by some major customers, and the growth rate in the Rest of the World was double-digit. L'OrÃ©al Paris made progress thanks to the success of ElsÃ¨ve haircare products, Revitalift and Combleur CollagÃ¨ne facial skincare lines, and the bodycare lines Nutribronze and Solar Expertise.
Garnier recorded double-digit growth as it continued the global roll-out of its three flagship products: Fructis, Nutrisse and Garnier Skin Naturals.
Maybelline, boosted by the launch of Lash Stylist mascara and Superstay lipstick, made great strides forward in the United States.
The sales of the Luxury Products Division at the end of June grew by +6.1% like-for-like, and by +9.4% based on reported figures.
The strong growth seen in Western Europe confirms the rebound which began at the end of 2005.
The fragrance business is proving particularly dynamic. It is being driven by the success of the new fragrance ArmaniCode Women by Giorgio Armani, now one of the top 10 best selling perfumes in Europe, the encouraging start made by Amor pour Homme by Cacharel, and confirmation of the success of HypnÃ´se by LancÃ´me and Polo Black by Ralph Lauren.
The Division's performance has also been bolstered by skincare products, with the success of new launches such as LancÃ´me's Bienfait Multivital and Blanc Expert XW (specific to the Asian market), Biotherm's Biofirm Lift, and Helena Rubinstein's Life Pearl Cellular.
Active Cosmetics is continuing to achieve strong like-for-like growth at +11.6% and +16.6% based on reported figures. This growth across all zones reflects the launches made at the start of the year, such as LiftActiv Pro Nuit anti-wrinkle firmness skincare and Normaderm Nuit skincare from Vichy, Redermic anti-wrinkle skincare and TolÃ©riane Teint from La Roche Posay, and the good start made by the sun protection products of both brands. InnÃ©ov sales are also growing strongly thanks to the new InnÃ©ovSolaire, the first sun preparation product to include Skin Probiotic.
Upturn in Western Europe confirmedProfessional Products achieved growth in all product categories in Western Europe, and sales trends for its American brands Redken and Matrix were extremely buoyant.
Consumer Products recorded a good first half, with growth in major countries such as Germany and France, driven by the success of ElsÃ¨ve in shampoo and haircare, whose growth rate was considerably higher than the market. Facial skincare products from Garnier and LÂ’OrÃ©al Paris also proved outstandingly successful.
The Luxury Products Division achieved strong growth thanks to the success of its perfumes, particularly during special "Mother's Day" promotional periods, and thanks to the success of High Resolution from LancÃ´me, particularly in France, Germany and Italy.
The favourable trend in Active Cosmetics sales is continuing, with a particularly good performance from La Roche Posay.
Good sell-through in United StatesIn North America, like-for-like sales growth amounted to +3.8%, with sales clearly gathering pace in the second quarter, despite some inventory reduction in most of the distribution channels.
The Consumer Products Division achieved high sales growth, reflecting the success of the HIP make-up line and Natural Match hair colourants from L'OrÃ©al Paris, and also the continuing breakthrough of Fructis by Garnier, with the launches of Body and Volume shampoos and conditioners and Pure Fixe Styling. Maybelline won market share by capitalising on the success of Superstay lipstick, Lash Stylist mascara and the new Pure foundation.
The Professional Products Division enjoyed some major successes, with the launches of the new styling sprays and the Shimmer One hair colourant line by Redken, and of Matrix for Men haircare products. KÃ©rastase is continuing to achieve very rapid sales growth in the high-end segment.
Growth in the Luxury Products Division was bolstered by the performance of LancÃ´me, in skincare, with its successful Collaser and High Resolution lines, and in perfumes, with HypnÃ´se. The launches of the women's fragrances Ralph Hot by Ralph Lauren and Armani Code Women were greeted with immediate success.
The Active Cosmetics roll-out is continuing with the launch of Vichy in the north-east of the United States.
High growth in new marketsGrowth in the Rest of the World amounted to +12.0% like-for-like and +17.5% based on reported figures.
Like-for-like sales growth in the Asia zone was +6.3%, driven by rapid expansion in China and Indonesia, despite a more contrasting situation in Japan.
Professional Products sales growth was double-digit, thanks to the excellent performance of hair colourants and the KÃ©rastase brand.
The growth in sales of Consumer Products outstripped the expansion of the market, and was boosted by the success of the L'OrÃ©al Paris brand in China and all the ASEAN countries, thanks in particular to Revitalift and UV Expert skincare products, and in China the launch of Garnier Skin Natural which will be more extensively distributed in the second half of the year.
Luxury Products sales are growing strongly in China thanks in part to the contributions of Biotherm and Blanc Expert from LancÃ´me. The Division continues to face a more competitive market in Japan.
The successful launch of Lift Activ Pro by Vichy is bolstering the growth of the Active Cosmetics department in this zone.
Sales growth in the Latin America zone increased strongly by +16.2 % like-for-like, supported by good performances in major countries such as Brazil and Mexico, together with Argentina and Chile.
Professional Products is achieving rapid growth with the success of Hi-Richesse from L'OrÃ©al Professionnel and the expansion of Matrix in Brazil and Chile.
There was a good first-half performance in Consumer Products, reflecting the remarkable success of ElsÃ¨ve NutriGloss, and the launches of Combleur CollagÃ¨ne skincare in the DermoExpertise range and of XXL mascara by Maybelline.
Sales of Luxury Products increased sharply, boosted by the success of HypnÃ´se from LancÃ´me, LinePeel and Biofirm Lift skincare from Biotherm Homme and the enthusiastic reception given to Polo Black by Ralph Lauren.
Active Cosmetics is continuing its rapid expansion, thanks in particular to the proven success of Lift Activ Pro by Vichy and Redermic anti-wrinkle skincare from La Roche Posay.
Sales in Eastern Europe grew by +22%, with rapid expansion in all divisions. This figure reflects the success of the main initiatives taken in the different markets: Glam Shine Crystal lipstick in L'OrÃ©al make-up, the new Nutri-CÃ©ramide line from ElsÃ¨ve, Body Summer skincare from Garnier, and the Maybelline Pure Make-up range for younger consumers.
Luxury Products benefited from the excellent reception given to Armani Code Women perfume, which is ranked number one in all its markets.
The continuing advances made in hair salons by Matrix, and the success of the Normaderm range at Active Cosmetics are also worth noting.
In the Other Countries, like-for-like growth was +8.9%, as sales accelerated in the second quarter. Growth is very strong in the Middle East, but above all in India where very rapid sales growth has been underpinned by the Garnier brand in hair colourants with Color Naturals and in skincare with Garnier Light, and by the L'OrÃ©al Paris brand in skincare and make-up with Volume Shocking.
Consolidated profit and loss account
|En M€||At June 30th 2005||As % of sales||At June 30th 2006||As % of sales|
|Cost of sales||2,163||30.2%||2,219||28,5 %|
|Gross profit||5,001||69.8%||5,567||71.5 %|
|Research & development expenses||241||3.4%||254||3.3 %|
|Advertising & promotion expenses||2,183||30.5%||2,361||30.3 %|
|Selling, general & administrative expenses||1,455||20.3%||1,575||20.2 %|
|Operating profit before foreign exchange gains and losses||1,123||15.7%||1,377||17.7 %||+22.6%|
|Foreign exchange gains and losses||- 8||- 0.1 %||- 43||- 0.6 %|
|Operating profit (EBIT) (1)||1,115||15.6%||1 333||17.1 %||+19.6%|
Strong growth in operating profitabilityWith sales growing by +8.7% and the cost of sales by +2.6%, gross profit has increased considerably from 69.8% to 71.5% of sales. This increase of course reflects the tight rein kept on production costs and the improvement in price mix, and the positive exchange rate impact.
Research and development expenses increased by +5.4% to €254m, representing 3.3% of sales.
Advertising and promotion expenses grew by +8.2% to €2,361m, or 30.3% of sales, compared with figures of 30.5% of sales in the first half of 2005 and 30.1% for the full-year 2005. These ratios confirm L'OrÃ©al's commitment to providing significant support for the development of its brands.
Selling, general and administrative expenses amounted to €1,575m, representing 20.2% of sales, an improvement compared with the figures of 20.3% of sales in the first half of 2005 and 20.7% for the full-year 2005.
Operating profit, before foreign exchange gains and losses, amounted to €1,377m in the first half-year, or 17.7% of sales, representing an increase of +22.6% compared with the first half of 2005.
Fluctuations in the main currencies against the euro, and currency hedges, resulted in a foreign exchange loss of €43m for the first half of 2006. Following the transition to IFRS, this item now covers not only exchange rate gains and losses but also the cost of hedges.
Operating profit after foreign exchange gains and losses (EBIT) (1) amounted to €1,333m, or 17.1% of sales, a sharp increase (+19.6%) compared with the first half of 2005, when it stood at 15.6% of sales.
Operating profit by branch and divisionThere were clear increases in the profitability of each of the four cosmetics divisions in the first half of 2006.
* The group's central expenses, fundamental research expenses, stock option expenses and miscellaneous items.
|In millions of euros||At June 30th 2005||At June 30th 2006|
|By operational division|
|Cosmetics divisions total||1,281.7||1,530.8|
|Non-allocated*||- 181.3||- 214.2|
Net profitFinance costs in the first half-year totalled €46m, an increase compared with 2005, reflecting in particular the higher interest rates in the United States and Europe, and the continuing share buyback programme.
Dividends received from Sanofi-Aventis for 2005 amounted to €217m.
Profit before tax grew strongly to €1,505m (+19.8%) compared with the same period in 2005.
The net profit excluding non-recurrent items and after minority interests amounted to €1,086m, reflecting an increase of +21.8% compared with June 30th 2005.
With the accretive effect of the share buyback programme, the group's net earnings per share amounted to €1.76, representing growth of +25.2% compared with the first half of 2005. "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.
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'OREALIndividual shareholders and market authorities
Mr Jean-RÃ©gis CAROF
Tel. : +220.127.116.11.83.02
Financial analysts and institutional investors
Mrs Caroline MILLOT
Tel. : +18.104.22.168.86.82
Fax : +22.214.171.124.80.02
Mr Mike RUMSBY
Tel. : +126.96.36.199.76.71