First-half 2015 results
STRONG SALES INCREASE: +14.7%
12.82 billion euros, i.e. +3.8% like-for-like and +5% at constant exchange rates
STRONG OPERATING PROFIT GROWTH: +14.5%
2.32 billion euros, at 18.1% of sales
STRONG RISE IN NET EPS*: +18.9% at 3.47 euros
- Very positive currency effect
- Gradual improvement in sales in Western Europe and North America
- Solid sales in New Markets excluding Brazil
Commenting on the figures, Mr Jean-Paul Agon, Chairman and Chief Executive Officer of L’Oréal, said:
"At the end of June, our reported growth is the strongest recorded for the last twenty years, with a very positive currency effect.
All Divisions are growing. L’Oréal Luxe is significantly outperforming a dynamic worldwide market with a double-digit growth of its brands Giorgio Armani, Yves Saint Laurent and Kiehl’s. Professional Products are showing a clear rebound thanks to the performance at L’Oréal Professionnel and the success of Redken. The Active Cosmetics Division is also greatly strengthening its worldwide position, driven in particular by its La Roche-Posay brand, whose success is continuing in all regions. Finally, growth in the Consumer Products Division is improving slightly, due especially to the renewed dynamism of its make-up brand Maybelline.
Among the geographic zones, sales are improving in Western Europe and North America. The New Markets are experiencing solid momentum, excluding Brazil where the economic context is very unfavourable.
The strong increase in sales has been achieved alongside good quality first-half results. As announced, operating profit growth is very strong and our operating profitability is practically stable at a high level. We are continuing to make significant investments in accelerating the digital transformation and in the development of our brands. In all, the EPS increased +18.9%.
Thanks in particular to a rich innovation portfolio, prospects of rapid e-commerce growth and the continuing roll-out of recently acquired brands, we are projecting an acceleration in growth in the second half. We are confident in our ability to outperform the beauty market and achieve a year of significant growth in both sales and profits."
* Diluted earnings per share of continuing operations, after non-controlling interests, excluding non-recurring items.
A – First-half 2015 sales
Sales by operational Division and geographic Zone
|2nd quarter 2015||1st half 2015|
|By operational Division|
|Cosmetics Divisions total||6,163.1||3.6%||15.2%||12,407.0||3.8%||14.8%|
|By geographic zone|
|New Markets, of which:||2,398.4||5.1%||16.4%||4,919.9||6.3%||16.9%|
|Africa, Middle East||190.1||13.2%||34.5%||378.8||12.3%||33.1%|
|Cosmetics Divisions total||6,163.1||3.6%||15.2%||12,407.0||3.8%||14.8%|
|The Body Shop||219.5||1.5%||17.1%||411.9||2.8%||13.2%|
|Group total||6,382.6||3.6%||15.3%||12,818.9||3.8%||14.7 %|
At the end of June, the Professional Products Division posted growth of +3.5% like-for-like and +15.6% based on reported figures, with improvements particularly in the United States.
- Haircare, the number one contributor to growth, is being driven by the success of Thérapiste at Kérastase, Frizz Dismiss at Redken, Biolage Cleansing Conditioner at Matrix and the very good start made by Pro Fiber at L'Oréal Professionnel. Hair colour is benefiting from the strong momentum of Redken and Matrix and the solid sales of Majirel and Inoa at L'Oréal Professionnel. Essie is growing strongly in Europe. Growth in professional skincare with Carita and Decléor is promising in Western Europe.
- All the geographic Zones are growing. The main contributors to growth are the United States, India and the United Kingdom.
In the first half, the Consumer Products Division recorded growth of +1.9% like-for-like and +12.4% based on reported figures. Excluding Brazil, the Division is accelerating, from +1.7% in the first quarter to +2.9% in the second quarter.
- The Division is boosting its growth in make-up with the launches of Infallible Gloss and False Lash Superstar by L'Oréal Paris, with eyebrow make-up and palettes by Maybelline. In addition, NYX is expanding very quickly.
In haircare, the globalisation of L'Oréal Paris is continuing thanks to the successful launches of Hyaluron Moisture in China and Nutri-Gloss in Western Europe and North America. Ultra Doux by Garnier is maintaining its winning momentum.
The men's skincare ranges L'Oréal Men Expert and Garnier Men are growing in Asia.
In hair colour, the successful launch of Excellence Age Perfect by L'Oréal Paris shows it is well suited to the senior target group.
- The Division is still being held back by a sluggish European market but is winning market share in the New Markets.
L'Oréal Luxe posted solid growth at +6.7% like-for-like and +20.1% based on reported figures. The Division is continuing to win market share.
- Lancôme is expanding thanks to the successes of its fragrances "La vie est belle" and La Nuit Trésor, its innovative Miracle Cushion foundation launched all over the world, Grandiôse mascara and the relaunch of the star skincare Génifique. Giorgio Armani is posting double-digit growth thanks to the upsurge in its fragrances Sì Eau de Toilette and Acqua di Giò Profumo. Yves Saint Laurent is growing very quickly thanks to Black Opium and the quality of its make-up initiatives. Urban Decay is now being rolled out internationally. The American skincare brand Kiehl's is maintaining a very high growth level, confirming the relevance of its business model. Shu Uemura is successfully developing its Asian make-up artistry concept.
- L'Oréal Luxe is outperforming the world market, particularly in Western Europe, in Asia thanks to the strategically important Chinese market, in the Middle East and in Latin America. Travel Retail also remains very robust.
At +7.1% like-for-like and +10.6% based on reported figures, the Active Cosmetics Division is continuing to grow very strongly and reinforcing its worldwide position.
- Vichy is boosting its Idealia franchise with the successful launch of Idealia Skin Sleep and is strengthening its position in the body care segment with the success of Ideal Body.
La Roche-Posay is demonstrating its great vitality with double-digit growth in all Zones, building on the success of its franchises Lipikar in body care and Anthelios in sun protection.
SkinCeuticals is gaining share in all geographic Zones.
Roger & Gallet has successfully launched its perfume Fleur de Figuier.
- All Zones are contributing to growth, with outstanding performances in Brazil, the United States and China.
Multi-division summary by geographic Zone
Growth amounted to +1.9% like-for-like and +4.5% based on reported figures. L'Oréal Luxe made a major contribution to this performance by outstripping the growth of the dynamic selective channel. In a mass-market channel which remains lacklustre, the Consumer Products Division is making progress in the haircare, and skincare and facial cleansing categories. Both Divisions are making large market share gains in Germany and the United Kingdom.
L'Oréal recorded +2.7% like-for-like and +26.8% based on reported figures. L'Oréal Luxe and the Active Cosmetics and Professional Products Divisions are driving growth, with several brands - including Kiehl's, Giorgio Armani and La Roche-Posay - posting an increase of more than 10%. The Consumer Products Division is continuing to strengthen its positions in make-up. Meanwhile, its two recent acquisitions NYX and Carol's Daughter are maintaining momentum with market share gains.
- Asia, Pacific: L'Oréal recorded growth of +5.0% like-for-like and +25.5% based on reported figures. Despite a slowdown in Hong Kong, L'Oréal Luxe posted good growth, still driven by Kiehl's, Yves Saint Laurent and Giorgio Armani, and by the dynamism of the Japanese market. The Consumer Products Division remains dynamic in the countries of South-East Asia. In China, L'Oréal Paris is growing thanks to the success of its launches. Another highlight of the first half was the very good performance of Active Cosmetics Division, thanks to La Roche-Posay.
- Latin America: Sales grew by +5.3% like-for-like and +8.3% based on reported figures. Excluding Brazil, sales achieved double-digit growth, thanks to L'Oréal Paris, Maybelline and Lancôme. In a difficult economic environment, the Brazilian market is also being held back by the recent reform of the IPI (Tax on Industrialised Products).
- Eastern Europe: The Zone posted +9.7% like-for-like and -2.6% based on reported figures, with an acceleration in the second quarter, reflecting good performances from the Consumer Products and Professional Products Divisions. The four Divisions are gaining market share. Russia and Turkey, whose sales rose by more than 10% over the period, are the largest contributors to growth.
- Africa, Middle East: Growth amounted to +12.3% like-for-like and +33.1% based on reported figures. The Group is outperforming the market in the Zone, and posting strong market share gains in Saudi Arabia, South Africa and Pakistan. This performance is being driven by Elvive by L'Oréal Paris, Color Naturals by Garnier and Maybelline in Consumer Products Division. In other Divisions, the fragrances of Giorgio Armani, the brands Yves Saint Laurent, Kérastase, Vichy and La Roche-Posay are achieving double-digit growth.
THE BODY SHOP
The Body Shop recorded growth of +2.8% like-for-like and +13.2% based on reported figures. The strategy based on innovation, service, digital communication and point-of-sale optimisation is reaping rewards. Europe, the Americas and the Middle East are continuing to expand, while growth in some key Asian countries remains difficult. The integration of the Australian franchisee and the reorganisation in the United States are on track.
B - Important events during the period 04/01/15 to 06/30/15
- On April 16, L'Oréal unveiled the first results of its Sharing Beauty With All programme for sustainable development, including a 50% reduction of CO2 emissions from the Group's production in absolute terms, from a 2005 baseline.
- At the Annual General Meeting on April 22 at the Palais des Congrès in Paris, L'Oréal shareholders adopted all the resolutions by a very large majority, including the appointment of Mrs Sophie Bellon as a Director, the renewal of the tenure of Mr Charles-Henri Filippi as a Director and the decision to maintain simple voting rights. At its meeting at the end of the Annual General Meeting, the Board of Directors decided to cancel 2,905,000 shares acquired under the buyback programme approved by the Board on November 29, 2013.
- On June 3, L'Oréal announced the signing of a license agreement with Proenza Schouler for the creation and development of fine fragrances. A New York-based women's wear brand, Proenza Schouler was founded by designers Jack McCollough and Lazaro Hernandez in 2002, and is considered to be one of today's most exciting American fashion brands.
C – First-half 2015 results
The half-year consolidated accounts have undergone a limited examination by the Statutory Auditors.
1) Operating profitability at 18.1% of sales
Consolidated profit and loss account: from sales to operating profit.
|In € million||06/30/14||As % of sales||12/31/14||As % of sales||06/30/15||As % of sales||Change H1-2015 vs. H1-2014|
|Cost of sales||-3,151.2||28.2%||-6,500.7||28.9%||-3,630.3||28.3%|
|Advertising and promotion expenses||-3,270.9||29.3%||-6,558.9||29.1%||-3,753.3||29.3%|
|Selling, general and administrative expenses||-2,356.2||21.1%||-4,821.1||21.4%||-2,732.6||21.3%|
Gross profit, at 9,189 million euros, has come out at 71.7% of sales, compared with 71.8% in the first half of 2014, representing a decrease of 10 basis points. At constant exchange rates, gross profit would have posted a noticeable increase as a percentage of sales.
Research and Development expenses, at 380 million euros, i.e. 3.0% of sales, decreased in relative value due to the impact of currency conversion, as the largest part of Research is carried out in the Euro zone.
Advertising and promotion expenses, at 3,753 million euros, are flat as a percentage of sales, which corresponds to a stronger investment in volume.
Selling, general and administrative expenses have increased in percentage of sales, due in particular to the acceleration of our digital transformation.
Overall, the operating profit, at 2,323 million euros, amounted to 18.1% of sales, representing a very strong increase of +14.5%.
2) Operating profit by operational Division
|€m||% of sales||€m||% of sales||€m||% of sales|
|By operational Division|
|Total Divisions before non-allocated||2,302.0||21.3%||4,440.6||20.5%||2,641.3||21.3%|
|Total Divisions after non-allocated||2,026.3||18.7%||3,825.4||17.7%||2,330.2||18.8%|
|The Body Shop||2.7||0.8%||65.3||7.5%||-7.2||-1.8%|
(1) Non-allocated expenses = Central Group expenses, fundamental research expenses, stock option and free grant of shares expenses and miscellaneous items. As a % of total Divisions sales.
The Professional Products Division's profitability has declined from 19.6% to 19.1% following the consolidation of Decléor and Carita brands.
At 21.3% of sales, the profitability of the Consumer Products Division has further improved by 20 basis points.
L'Oréal Luxe also improved its profitability by 20 basis points.
The Active Cosmetics Division, with a profitability of 27.5%, has re-balanced its profitability which reached a record level of 28.2% in the first half of 2014.
The Body Shop is affected by the technical impact of the first time consolidation of its Australian franchisee.
3) Net profit from continuing operations
Consolidated profit and loss account: from operating profit to net profit excluding non-recurring items.
|In € million||06/30/14||12/31/14||06/30/15||Change H1-2015 vs. H1-2014|
|Financial revenues and expenses excluding dividends received||-8.1||-24.1||-9.8|
|Profit before tax and associates excluding non-recurring items||2,352.0||4,197.6||2,650.1||+12.7%|
|Income tax excluding non-recurring items||-575.4||-1,069.5||-692.1|
|Net profit excluding non-recurring items of equity consolidated companies||-1.5||-3.0||─|
|Net profit continuing operations, excluding non-recurring items, after non-controlling interests(1)||1,773.5||3,125.3||1,957.3||+10.4%|
|Net EPS(2) (€)||2.92||5.34||3.47||+18.9%|
|Net profit after non-controlling interests||1,734.8||4,910.2||1,882.6|
|Diluted earnings per share after non-controlling interests (€)||2.85||8.39||3.34|
|Diluted average number of shares||607,667,507||585,238,674||564,094,688|
(1) Net profit from continuing operations, excluding non-recurring items after non-controlling interests does not include capital gains and losses on disposals of long-term assets, impairment of assets, restructuring costs, as well as competition litigation, and tax effects or non-controlling interests.
(2) Diluted earnings per share of continuing operations, attributable to owners of the company, excluding non-recurring items.
Overall finance costs amounted to 9.8 million euros, compared with 8.1 million euros in the first half of 2014.
Sanofi dividends amounted to 337 million euros.
Income tax excluding non-recurring items amounted to 692 million euros, i.e. a tax rate of 26.1%, slightly above that of the first half of 2014.
Net profit from continuing operations, excluding non-recurring items, after non-controlling interests, amounted to 1,957 million euros, up by 10.4% compared with the first half of 2014.
Net EPS rose 18.9% to 3.47 euros.
Net profit after non-controlling interests rose 8.5% to 1,883 million euros.
4) Operating cash flow and balance sheet
Gross cash flow amounted to 2,370 million euros, up by +12.4% compared with the first half of 2014.
The change in working capital amounted to 816 million euros. As it is the case every year, it includes the impact of the seasonality of part of the business on the trade receivables. In the first half of 2015, it takes also into account the payment of the fine linked with the decision of the French Competition Authority.
Investments, at 512 million euros, represented 4% of sales.
Operating cash flow has come out at 1,042 million euros.
After payment of the dividend and acquisitions, the residual cash flow amounted to -701 million euros.
At June 30, 2015, net debt amounted to 1,394 million euros, higher than the level of December 31, 2014, mainly due, as is the case every year, to the payment of the annual dividend in the first half.
The balance sheet structure is particularly solid: shareholders' equity of 22.9 billion euros is stronger than the level at December 31, 2014.
"This news release does not constitute an offer to sell, or a solicitation of an offer to buy L'Oréal shares. If you wish to obtain more comprehensive information about L'Oréal, please refer to the public documents registered in France with the Autorité des Marchés Financiers, also available in English on our Internet site www.loreal-finance.com.
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."
This a free translation into English of the First-half 2015 results news release issued in the French language and is provided solely for the convenience of English speaking readers. In case of discrepancy, the French version prevails.
Contacts at L'Oréal
Individual shareholders and market authorities
Mr Jean Régis CAROF
Tel.: +33 1 47 56 83 02
Financial analysts and institutional investors
Mrs Françoise LAUVIN
Tel.: +33 1 47 56 86 82
Mrs Stephanie CARSON-PARKER
Tel.: +33 1 47 56 76 71
Tel.: +33 1 47 56 70 00
For more information, please contact your bank, broker or financial institution (I.S.I.N. code: FR0000120321), and consult your usual newspapers, and the Internet site for shareholders and investors, www.loreal-finance.com, or call +33 1 40 14 80 50.
D – Appendices
Appendix 1: L'Oréal Group sales 2014/2015 (€ millions)
|The Body Shop||176.4||192.4|
|First quarter total||5,638.6||6,436.3|
|The Body Shop||187.4||219.5|
|Second quarter total||5,536.0||6,382.6|
|The Body Shop||363.8||411.9|
|First half total||11,174.6||12,818.9|
|The Body Shop||190.4|
|Third quarter total||5,391.1|
|The Body Shop||554.2|
|Nine months total||16,565.7|
|The Body Shop||319.6|
|Fourth quarter total||5,966.4|
|The Body Shop||873.8|
|Full year total||22,532.0|
> Access the audio webcast of the Half-Year Results 2015 conference call.