PARIS — L’Oréal confirmed Wednesday its aim to achieve double-digit pretax profit growth for its 20th year while also posting a first-half net income gain of 21.8 percent to 960.9 million euros, or $1.17 billion.
The group, however, adjusted its full-year like-for-like sales growth target from 7.1 percent to a figure “broadly in line” with the 6.4 percent growth registered in the first half.
“It’s slightly less positive than we had hoped at the beginning of the year,” said Lindsay Owen-Jones, L’Oréal’s chairman and chief executive officer, at a meeting for analysts and journalists here Wednesday. “[But] overall growth is very strong.”
He said the forecasted growth target is “more than adequate to drive our business model.”
“[L’Oréal revised the forecast, as it] does not expect the cosmetics market to recover in the second half,” said Antoine Belge, an HSBC analyst, in a research note.
Owen-Jones said first-half sales and earnings, coupled with the prospect of a decline in the impact of currency hedges, prompted the company to confirm its full-year profits target of at least 10 percent.
Net operational profit after minority interests was up 6.3 percent to 965.7 million euros, or $1.18 billion, in the first half. Operating profits rose 7.8 percent to 1.12 billion euros, or $1.36 billion, while adjusted operating profits grew 1 percent to 1.14 billion euros, or $1.39 billion, in the period. Dollar figures have been converted at the average exchange rate.
As reported, L’Oréal rang up first-half sales of 7.39 billion euros, or $9.01 billion, up 3.6 percent over the same period in 2003. On a like-for-like basis, they were up 6.4 percent.
Owen-Jones was upbeat about first-half figures, noting the period was characterized by “considerable pessimism” and a sluggish market for consumer products in France, Germany and Italy. He also said consumption in the U.S. is not picking up as much as he would like.
“Once again, we have achieved a strong increase in our sales, despite unfavorable market conditions, not only in Europe but also in the United States,” said Owen-Jones in a statement Wednesday. “The success of a large number of launches and the rapid expansion of our subsidiaries in new and emerging countries have helped boost turnover. This growth, combined with strict cost control, contributed to a significant improvement in our profitability compared with 2003, even though the first half of last year was exceptionally good. This has largely offset the decline in exchange gains.”
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Among subjects discussed at the meeting were Sanofi-Synthelabo, the pharmaceuticals giant in which L’Oréal deconsolidated its stake in August. As a result of dilution following Sanofi’s recent successful bid to take over its rival, Aventis, L’Oréal will add a “dilution profit” of about 2 billion euros, or $2.44 billion, to its net income in 2004. L’Oréal’s share of Sanofi-Synthelabo’s profit in the first half was 233.2 million euros, or $284 million, up 22.4 percent year-on-year.
The firm also discussed new markets, which were particularly dynamic in the first half. Notably, sales were up 85.3 percent in China, 46.3 percent in Russia and 49 percent in India. “Everything suggests that emerging markets will be as profitable as established ones,” said Owen-Jones.
Regarding new products, Owen-Jones was bullish about second-half launches, among them an antidandruff shampoo by Elseve, the rollout of a new hair colorant and fragrance launches.
And looking at new retail formats, Owen-Jones said, “Are we interested in new forms of distribution? You bet.” Owen-Jones noted some L’Oréal-owned brands have had a lot of success with stand-alone doors. “It’s an alternative we’re looking at.”
Shares of L’Oréal closed with a 1.37 percent gain on the Paris Bourse Wednesday at 55.40 euros, or $67.47.