L'Oreal plans to widen margins to combat downturn

The world's largest cosmetic company yesterday posted a rise in operating profit of 11.3 per cent to €2.8bn and a sales increase of 8.1 per cent to €17.1bn for the year ending 31 December. Focus on margins​ Following the announcement of its financial results the company's CEO Jean-Paul Agon told investors that it expects to improve margins by improving its supply chain management. In 2007 L'Oreal's operating margin remained steady rising to 16.6 per cent from 16.1 per cent the year before. The France-based company is planning to increase this figure by cutting the number of its buying offices to four from seven and study targeted partnerships with suppliers to reduce costs. Resilient sales growth ​ As for sales in 2008 L'Oreal expects to achieve growth of between 6 and 8 per cent despite the mounting economic gloom. "In fact, our business has always proven extremely resilient during periods of crisis, we intend to continue strengthening our positions and growing faster than the market, and a large proportion of our sales are now made in new and fast-growing markets is providing a powerful relay for our global growth,"​ said Agon. Emerging markets overtook North America in terms of profitability for L'Oreal in 2007 with operating profit from its activities in the 'rest of the world' rose 31.4 per cent to €774m. The continuation of high sales and improved margins is a formula that the CEO hopes will result in improved profits for 2008. Acquisitions​ With regards to acquisitions he told reporters and investors that L'Oreal studies all opportunities that present themselves but is very selective when it comes to committing to a purchase. He said L'Oreal could sell more shares in Sanofi-Aventis to fund acquisitions after the company raised €1.5bn from the sale of 1.8 per cent of the pharmaceutical firm last November, reducing its stake to 8.7 per cent.