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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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