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2012 was an excellent year! The group delivered in every area in which it had promised to do so, with like-for-like growth in sales, margins and cash generation. Some doubted whether it would be able to revive like-for-like growth in Q4 and margins in H2: they should have kept their doubts to themselves! Management is embarking on 2013 with optimism, confident that the group’s fundamentals will enable it to outperform the global cosmetics market (forecast to grow by 4%) and deliver another year of strong business and earnings growth. The announcement of a new €500m share buyback programme should support the share in H1 . We reiterate our PLUS rating for the share .
L’Oréal has published a solid set of interim results. Although the 14 bps increase in the company’s operating margin was below expectations (+40 bps), it mainly reflects the impact of the weaker euro, the consolidation of Clarisonic and the trade-off by which gross profit was impacted by more promotions while EBIT was boosted by less advertising expenditure: a promising lever for future profitability! Management appears very confident as to the rest of the year, and has confirmed its targets. The company has announced a share buyback programme (1% of total share capital) that should support the share in H2 2012. We reiterate our PLUS rating for the share.
L’Oréal posted sound 2011 results, outperforming expectations under every heading (sales, Ebit, margin, EPS and dividend). The improvement of the operating margin (+50 bps over the year as a whole including +148 bps in H2) was a nice surprise and appears to be of good quality; the management has achieved the targets announced in H1. The dynamism of the Asian and American markets is very reassuring, while the difficulties in Europe have been confirmed. Besides the defensive qualities of L’Oréal, this visibility provided by buoyant markets and operational leverage which remains substantial are strong assets for 2012. PLUS code confirmed for this share.
H1 results proved reassuring and the business and operating performance prospects for H2 2011 are also looking more favourable. In view of the uncertain stock market and sluggish economic prospects, the defensive qualities of L’Oréal are more than ever an asset. Good visibility for the next few months validates our positive opinion of this share.
In our opinion, the H1 2011 results are sound with a stronger gross margin and higher Ebit (although the increase is only moderate because of higher investments in research and marketing costs to prepare for the future). H2 2011 is therefore promising in terms of organic sales and margin growth. Management announced a significant improvement of operating profitability for H2. Besides the defensive qualities of L’Oréal, this visibility is an additional asset in the current uncertain market and economic situation. PLUS code confirmed for this share.
2011 is off to a good start! L’Oréal posted +5.8% organic growth in Q1 2011, exceeding consensus expectations (+5%): good news considering tough comps (Q1 2010 +7.5%). Group sales remained dynamic on the emerging markets (+11.6%) and performed strongly again in the USA (+7.2%). Only Europe is still sluggish (+0.5%). Japan does not present a major risk to L’Oréal (just 2% of sales) nor does it undermine the management’s confidence in growth prospects for 2011. PLUS code confirmed.
L’Oréal’s geographical mix is a strong asset in the environment of an expanding global cosmetics market (dynamic emerging countries and US recovery). Besides rising volumes, the full effect of the restructuring operations put in hand in 2009 and the brand’s pricing power will help to improve profitability in 2011-2012. The group’s visibility validates our PLUS code for this share.
2010 results confirmed L’Oréal’s strong comeback: sales +11.6% sales at €19.5 billion, Ebit +18.6% at €3.06 billion and net profit +18.7% at €2.37 billion. This publication broadly in line with expectations shows a slowdown in Q4 which is likely to weigh on the share price today following its good track record. Any price fall is a good opportunity to buy, especially as L’Oréal’s visibility is better than that of its competitors. This is reflected in the confidence expressed by management in 2011 prospects. PLUS code confirmed.
Q3 and 9 months sales published by L’Oréal grew strongly and proved better than expected. The +5.8% organic growth recorded in Q3 exceeds market forecasts (+4%), thanks to the improved sales of Products for the General Public (+6.5% versus +3% forecast). In a stable market, the continuing dynamic performance of this division (~50% of sales and 60% of REX) and that of Luxury Products augur well for the end of the year. We understand the confidence expressed by the management. PLUS code confirmed.
L’Oréal’s geographical mix is a strong asset given the upturn of the international cosmetics market (dynamic emerging countries and US recovery). Besides rising volumes, the full effect of restructuring operations put in hand in 2009 will significantly improve profitability during the 2010-2012 period. The speculative aspect surrounding a potential change of its shareholding structure is another plus.
L’Oréal has announced sales growth of 10.2% to €9.67 billion in the 1st half, i.e. +6.3% in organic terms. Unsurprisingly, organic growth slowed slightly in Q2 (+5.2%) after the strong recovery in Q1 (+7.4%). The foreign exchange impact was greater (+3.6% in H1, +6.9% in Q2). The situation has improved distinctly in the US (+4.9% in H1) and the emerging countries are proving highly dynamic (+14.9% in H1). CEO Jean-Paul Agon looks forward confidently to H2 2010 performance, stressing the market share gains of the different divisions worldwide and the positive impact of the foreign exchange factor over the year as a whole. PLUS code confirmed.
Q1 2010 sales are good! Organic growth (+7.4%) is well above expectations (+5.8%) even if the consensus had recently been revised upwards. Professional Products has made substantial gains, the General Public division is reporting dynamic growth while Luxury Products are making rapid headway. The news flow is positive overall: restocking has been confirmed, the USA is recovering strongly, while Europe is doing better and the emerging countries are dynamic. The management is confident for the current year and so are we! PLUS code confirmed.
In the consumer goods business (Neutral code), we recommend L’Oréal whose geographical mix is a strong asset to benefit from dynamic emerging countries and an economic recovery in the USA. The group will profit from substantial growth relays and cash on the full effect of restructuring actions made in 2009. The speculative aspect surrounding a potential change in its shareholding structure is another catalyst for the share.
The 2009 results are good! Even if the market is disappointed in the short term by lower organic growth than would have been desirable in Q4 (+1.5% vs +2.4%), the recovery is very real! Moreover, the restructuring measures are paying dividends: the gross margin has improved by +10 bp to 70.5% over the year, including +80 bp in H2 alone! A positive news flow on business in H1 2010 is expected; the end to destocking has been confirmed and better days are in sight in the USA, while the emerging markets will continue to drive growth and profitability. The fact that the share price has currently fallen is a buy opportunity. PLUS code confirmed.
The publication of Q3 2009 sales figures justifies our scenario of a progressive recovery of the group’s activity. Organic growth (+0.8%) is better than expected (+0.4%) and typified by a substantial improvement of the Cosmetics branch (94% of group sales) by +1.1% against -3.9% in H1. From this angle, the strong performance of the General Public division (+5.9%; 53% of sales) is good news for the margin, with the management confirming a further improvement of sales in Q4. PLUS code confirmed.
L’Oréal is a quality investment in the consumer goods sector in the face of an economic recovery in emerging markets, the United States and Europe. The opportunism of its geographic mix complements its strong growth engines, a restructuring in progress and an outlook for a rebound in results. The speculation surrounding a potential change in its shareholding should support the stock.
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