L’Oreal nine month results show continued growth in all divisions

By Simon Pitman

- Last updated on GMT

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All four of L’Oreal divisions have recorded strong growth in the first nine months of financial year 2010, reaffirming the strength of the company’s recovery.

Sales for period grew by 11.6 per cent to €14.52bn on a reported basis, which represented growth of 6.2 percent, based on a comparable structure with identical exchange rates. The company said that currency exchange rates positively impacted the results by 5.1 percent.

“Organic growth remained sustained in the 3rd quarter, despite a higher comparison base. This performance confirms the clear upturn in sales recorded since the start of the year,”​ said Jean-Paul Agon, CEO of L’Oreal.

On a geographical basis, recorded sales growth in Europe of 1.8 percent during the nine month period was comparatively tame, but this was counterbalanced by what Agon described as ‘solid’ growth in North America and an even better performance in new markets.

New markets drive growth

Like-for-like sales growth in the new market was reported to be 12.3 percent, driven by a particularly strong performance in Hong Kong, China, South Korea, Brazil, Argentina and Russia.

Of the company’s four business divisions, the highest growth rate during the period was reported for luxury products, with sales increasing by 8.3 percent, underlining the fact that luxury consumers have returned to the spending patterns that many abandoned in 2009.

For the other divisions, professional product sales during the period increased by 4.5 percent, while consumer product sales increased by 6.5 percent, and active cosmetics grew by 4.3 percent.

Body Shop sales take a dive

The only disappointment for the company was its Body Shop division, which saw like-for-like sales fall by 0.1 percent during the period, on account of ‘challenging conditions in the UK, the US and Japan.

Earlier this month there were rumors circulating that L’Oreal was in secret talks to negotiate a take-over bid of direct cosmetic sales giant Avon.

The source of the rumors was an article that appeared in an online edition of UK daily newspaper the Daily Mail.

Although the newspaper did not name its source, the article stated that ‘several big industry players' were interested in making a bid, and named L’Oreal as the highest profile bidder.

L'Oreal lining up for an acquisition?

According to the article, L’Oreal is believed to be lining up a bid to the value of $44 a share, a significant premium given the current market price, and one that is believed to have had a an impact on yesterday’s share price rally.

The rumored bid price is approximately 40 percent above the current share trading price and would put the value of the company at an estimated $19bn.

Although L’Oreal has refused to acknowledge the Avon bid rumors, financial experts believe that the company is in a strong acquisitive position, given its healthy cash flow and the fact that its results have shown a marked recovery in 2010.

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