MILAN — A lower cost of debt, fiscal benefits from Italy’s Patent Box regime and the effects of tax reform in the United States boosted Luxottica Group SpA’s profits in 2017.
In a statement following the close of trading in Milan, where the company is listed, Luxottica said adjusted net income rose 10 percent, at current exchange rates, to 970 million euros.
The company confirmed its previously released turnover figures for the just-ended full year: 9.15 billion euros, up 0.8 percent, at current exchange rates. At constant currencies, 2017 revenues increased 2.2 percent.
In its note, Luxottica — which makes frames under license for brands including Armani, Michael Kors and Prada, among others, as well as own brands Ray-Ban, Oakley and Oliver Peoples — explained that the adjusted net profit figure includes restructuring and reorganization costs as well as a series of one-off gains, including from a real estate sale and the Patent Box regime. Net of these adjustments — whose combined effect was worth 68.4 million euros at the net income level — total net profits for 2017 were up 22.4 percent, to 1.038 billion euros, the first time this figure broke through the billion euro mark.
In its statement, the company pointed out that there were some 18.5 million euros in non-recurring costs related to the Essilor combination. It also said that former chief executive officer for product and operations Massimo Vian, who left the company in December, three months ahead of the expiration of his term, received a 5.3 million euro payment, net of taxes.
As forecast in the Jan. 29 trading update, free cash flow reached record levels in 2017, hitting 1.02 billion euros, and the net margin — at 11.3 percent — passed the 10 percent mark for the first time in 15 years, the company’s finance chief, Stefano Grassi, said during a conference call with analysts Monday evening.
In a brief update of progress on the Essilor merger, Alessandra Senici, the group’s head of investor relations, said that the combination has so far been cleared in Chile, Canada and Mexico and that last Friday Brazil also cleared it unconditionally. “We continue to conduct open and constructive dialogue with governments which have not yet taken up the issues,” Senici said, adding that the company expected the merger to be cleared “within the first half of this year.”
For the current year, Grassi said the company expects to post 2 to 4 percent sales growth, with developed markets (like North American and Europe) growing “low-single digits” (although Europe should grow at a “slightly higher velocity”) and with developing countries putting in mid to high-single-digit growth. He said he expected Asia-Pacific to grow at a faster clip, although he said that China and Hong Kong will continue to remain challenging. In China, the challenge remains getting the company’s repositioning strategy — which is leading to a more direct relationship with retail and e-commerce consumers — in place.
Grassi said that in Latin America he expected high-single-digit growth, also thanks to the Óticas Carol acquisition in Brazil, even as Colombia and Chile — where the company is focusing on developing a more direct presence — has slowed down.