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After 2012 sales grow, L’Oreal expects to outperform market in 2013

The good results of its luxury division and the dynamism of its sales in emerging markets, as well as in North America, have enabled L’Oréal to grow significantly faster than the global cosmetics market in 2012. In the wake of theses good results, the French cosmetics giant is optimistic for 2013 and expects to accelerate its growth in Asia. The group also announced the opening of a new factory in Egypt and said it will seize the opportunity of new acquisitions when consistent with its strategy.

Jean-Paul Agon, Chairman and Chief Executive Officer of L’Oréal, was right to be confident during the presentation of the group’s 2012 first half results. While the global cosmetics market grew by 4.6% in 2012, L’Oréal’s sales amounted to 22.463 billion euros, an increase of +10.4% at December 31st, 2012. Like-for-like, i.e. based on a comparable structure and identical exchange rates, the sales trend of the L’Oréal Group was +5.5%. The Group benefited of a favourable currency effect, thanks to the (relative) weakness of the euro at the beginning of 2012. Globally, currency fluctuations had a positive impact of +4.2%. Eventually, the group’s net profit grew by +17.6%.

Reflecting the evolutions of the global cosmetics market, L’Oréal results are quite contrasted from a geographic area to the other.

Consolidation on mature markets

In Western Europe, the economic context saw the decline of markets in the southern countries, particularly in hair salons and the luxury segment, and the resilience of the rest of Europe. At 12 months, L’Oréal sales increased by +0.6% like-for-like, and +2.1% based on reported figures, thus raising its market share. The group performed well, particularly in France - where the acquisition of Cadum fully played its part - in the United Kingdom, in Germany and in Northern Europe. Despite this moderate growth, Western Europe remains the group’s most profitable region.

In North America, L’Oréal ended 2012 with growth of 7.2% like-for-like and 18.3% based on reported figures. The good results seen in 2011 were surpassed in 2012, with a strong growth of Garnier, Maybelline and Essie, the very good results of Clarisonic and the increased presence in drugstores of products of the Active Cosmetics Division.

“New markets”

2012 also marked a milestone in the acceleration of L’Oréal’s internationalisation, as the “New Markets” (Asia-Pacific, Eastern and Central Europe, Africa, and Middle-East) became the number one geographic zone, accounting for 40% of the group’s turnover.

In the Asia-Pacific region, L’Oréal achieved annual growth of +9.6% like-for-like (+18.4% based on reported figures). India, Indonesia and Thailand are particularly dynamic. India (+35% on average), for instance, is the main contributor to the growth of the Professional Products Division. In the geographic area, according to Jean-Paul Agon, the improvement of the group’s results requires to strengthen the penetration of local retail channels. In China, in particular, L’Oréal is seeking to strengthen its positions in 3rd and 4th rank cities.

In Latin America, L’Oréal faces more difficulties. The group achieved like-for-like growth of +10.4% and +8.7% based on reported figures, and bets on its acquisitions to accelerate its growth.

New plant in Egypt

In Africa and in the Middle East, L’Oréal is growing by +14.7% like-for-like and +17.6% based on reported figures, with very good performances in Turkey, the Gulf States and the Levant.

2012 was notable for the rising momentum of new subsidiaries in Egypt and Kenya, and the opening of a new subsidiary in Saudi Arabia. Furthermore, the cosmetics giant will open a new plant in Egypt in 2013 to serve the Middle East area.

Confident for 2013

In such a context, L’Oréal shows strong confidence. “The Group achieved strong sales growth, and once again demonstrated its ability to outperform the beauty market, and to gain market share, even in the more difficult markets of Western Europe and the United States,” said Jean-Paul Agon. “2012 was also a very good vintage in terms of innovations - amongst the most remarkable in the industry - in each of our Divisions and major business segments. In view of these successes and improvements, we are facing the future with optimism and confidence. The Group is thus well prepared to outperform the market in 2013, and to achieve another year of sales and profit growth,” he adds.

L’Oréal’s CEO has confirmed that the group would remain attentive to the possibilities of new acquisitions provide they are consistent with its strategy.

Vincent Gallon

Portfolio

© 2013 - Premium Beauty News - www.premiumbeautynews.com
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