L'Oreal's sales growth affects profit

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L'Oreal has managed to reach its financial year sales target, helped by the concentration of products launched in its first and last quarter. However, the cost of achieving this growth may translate into low earnings for its 2003 second half results to be released in February.

The consolidated sales of L'Oreal at year end 2003 amounted to €14 billion. Like-for-like - based on a comparable structure and identical exchange rates - the group's consolidated sales grew by 7.1 per cent.

Having experienced unusually weak second and third quarters it is thought that the company's numerous fragrance launches before the Christmas season helped to pull up L'Oreal's last quarter figures.

With a focus on new launches it is anticipated that an increase in advertising and promotion will only translate into low earnings growth. The worry for the multinational is therefore not the magnitude of the sales growth but the cost in achieving it.

"In 2003, thanks to further market share gains, L'Oréal was able to maintain a growth rate very close to the average achieved over the past ten years, despite an exceptionally unfavourable economic climate,"​ said chief executive of L'Oreal Mr Owen-Jones.

Professional products continued to perform globally with increases of 8.6 per cent, particularly in North America and Eastern Europe. Consumer products and luxury products also progressed with increases of 7.7 per cent and 4.2 per cent respectively.

Active Cosmetics achieved the most vigourous growth at €749 million, up 11.9 per cent, partly due to the growing popularity in growth driver countries and increased market share in Western Europe.

The success of the first Innéov product, Innéov Firmness, in the nine European countries where it was launched, reflects the group's entry into the nutricosmetics market.

L'Oreal also made breakthroughs in the newer markets. In China, where the group's core brands are now fully installed, the growth rate was +69.3 per cent, claimed by the company to be the success of the Maybelline brand.

Growth was also strong in Central and Eastern Europe (26.2 per cent), particularly in the Russian Federation, where sales advanced once more (38.8 per cent) after three years of fast growth.

To help fulfil the growth potential in India, up 33.4 per cent, the group started up a new factory near the city of Puna in 2003.

In Western Europe, growth amounted to 4.9 per cent (€7222 million), with 12.5 per cent increases in Great Britain and 11.6 per cent increases in Spain.

In North America, growth reached €3784 million, up 6 per cent, over the whole year and was higher than the rates achieved by the company in the previous two years. The company claims that the success of Fructis shampoo and haircare products in the United States gave Garnier a foothold in this market.

During 2003, the group made a large number of strategic moves to plan for future market growth. In luxury products, the group acquired Shu Uemura in Japan also launching L'Oréal Paris skincare and make-up lines in the country to establish the brand in the market.

The acquisition of Mininurse, one of the leading skincare brands in China, is also hoped to open up new routes for expansion in Asia.

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