L’Oreal’s dip in net profits is less than expected

By Simon Pitman

- Last updated on GMT

Related tags Profit Marketing

L’Oreal has announced a 14 per cent drop in its first half profits as a gradual rise in sales helps get the global cosmetics player back on track, beating market forecasts.

The company posted a net profit of €1.09bn for the period, a result that prompted share prices to rise as the company also reaffirmed its belief in a further recovery for sales during the second half of the year.

Likewise operating profit for the first six months fell by 8.3 per cent to €1.37bn, which was also significantly above the €1.27bn average that financial analysts had predicted.

“These results confirm the resilience of L’Oreal’s business model, and reflect the first effects of the anti-crisis strategy adopt,”​ said Jean-Paul Agon, company CEO.

L'Oreal crisis strategy

L’Oreal’s strategy to tackle the economic crisis concentrates on increasing innovation, creating new categories, extending further into global markets, reducing costs and maintaining ad and marketing campaigns.

The financial world also reacted positively to the results, with a number of analysts raising their ratings from ‘neutral’ to ‘buy’. Share prices rose by over 9 percent when trading began on the Bourse this morning.

Andrew Wood from Sanford Bernstein described the results as weak but above expectations, but stressed that net income and EPS were 'well ahead'.

Sales trend looks more positive

The company reported sales were down 2.1 percent on a like-for-like basis during the second quarter, to reach €4.40bn, a figure that represented an increase of 2.6 per cent on a reported basis.

For the full six months like-for-like sales were down 3.2 per cent to €8.77bn, up 1.4 percent on a reported basis, reflecting particularly tough trading conditions in the first quarter.

On a geographical basis the company said that India was accelerating, while China and Brazil were maintaining previously strong levels of growth. Likwise Mexico and Russia were both showing signs of improvement.

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