PARIS — Jean-Paul Agon, L’Oréal chairman and chief executive officer, was upbeat Friday while addressing financial analysts and journalists gathered a day after the company published its fourth-quarter sales and 2014 results.
“We are entering 2015 with confidence and ambition,” he said, speaking in English for the first time — rather than the traditional French — at the annual meeting at company headquarters in the Paris suburb of Clichy.
It was a telltale sign of how international the firm has become. L’Oréal now generates practically as much of its sales in North America as it does in the euro zone, with New Markets its largest region.
The company’s net profits last year were 4.91 billion euros, or $6.53 billion at average exchange for the period, an increase of 66 percent, due largely to the disposal of its half of Galderma, resulting in a capital gain of 2.1 billion euros, or $2.79 billion. Meanwhile, L’Oréal sales rose 1.8 percent to 22.53 billion euros, or $29.96 billion, as reported. Despite the upbeat mood at L’Oréal, the company’s stock closed down 1.2 percent Friday in Paris to a unit price of 156.05 euros, or $178.03 at current exchange.
Agon attributed his confidence to numerous factors, including the ongoing growth of the company’s markets.
“Despite an economic context that is still unstable and unpredictable, we think that the growth of the global cosmetics market should be roughly the same as in 2014, around 3.5 percent or even a bit better if there is an acceleration in the U.S. and some consumption recovery in Western Europe,” the executive explained.
“Secondly, [we have] confidence in our capacity to deliver organic growth that will outperform the market. This organic growth will not be linear along the year and will start softly with the first quarter, below the average of the year, but will accelerate afterwards,” Agon continued. “In Europe, of course, the first quarter will be very strong.”
He noted the robust dollar would “provide a very substantial tailwind both in sales and profits.”
Not only are approximately 25 percent of L’Oréal’s sales rung up in North America, but nearly 40 percent of its revenues worldwide are either made in dollars or currencies linked to the dollar.
Said Agon: “For many years, we have been handicapped by the strength of the euro, but now it seems that the wind is turning, and we intend to make the most of this very positive currency effect that will help us deliver a nice increase of our sales and our profits in 2015.”
Christian Mulliez, L’Oréal executive vice president and chief financial officer, said that at current exchange rates, “the impact in 2015 would be very positive on our sales at plus 5.5 percent. As for the change in the scope of consolidation, a positive impact of about plus 1 percent may be expected.”
Given the favorable currency environment, the company should have a “substantial increase in profits and a moderate increase in profitability. In the same way and for the same reason, we intend to rebalance the profitability [over] the two [halves]. For several years now, the first semester has been much more profitable than the second,” Mulliez said.
Among the wide-ranging subjects covered during the conference was The Body Shop, whose sales growth improved in the fourth quarter, when it rose 6 percent to 319.6 million euros, or $399.3 million.
The brand will undergo a transformation this year, following L’Oréal’s recent buyout of its Australian franchisee. This includes the acceleration of store modernization, the renewal of products and a reorganization in the U.S., including the closing of the distribution center and some low-potential stores, plus a transfer of headquarters, explained Mulliez, who added The Body Shop’s profitability should not improve in 2015.