L’Oréal first half year results: strong growth, despite missed forecasts

By Lucy Whitehouse contact

- Last updated on GMT

Related tags: Chief executive officer, Profit

L’Oréal first half year results: strong growth, despite missed forecasts
L’Oréal’s results for the first half of 2017 indicate the global beauty giant is still on track for record profit margins this year, even though it fell slightly short of market expectations.

L’Oréal announced a 7.1% rise in operating profit, with organic growth momentum coming in at 4.3%. The company says performance was driven by luxury and the new markets it has begun tapping into.

According to Reuters, analysts had been predicting an operating profit of 2.56 billion euros and sales of 13.8 billion euros.

With L’Oréal recording an operating profit of 2.53 billion euros and sales of 13.41 billion euros, it has missed these expectations, and shares slipped slightly in response; but the results prove strong nonetheless.

"In a beauty market which, as in the first quarter, turned out to be highly contrasted and atypical, the Group has continued to expand, with solid organic growth and differentiated performances across the Divisions​,” Jean-Paul Agon, Chairman and Chief Executive Officer of L'Oréal, said of the results.

“The Group's results are up significantly across the board: operating profit, earnings per share and cash flow​.”

Challenges

The results confirm that L’Oréal has faced specific challenges so far this year, with the company picking out key markets where slowdowns have affected its growth: the US, Brazil, India and the Middle East. It also notes that it has faced ‘persistent difficulties’ in the French market.

The company notes that the sale of The Body Shop in this half means the company is able to ‘strongly increase’ profitability. For the first time, L’Oréal says it is eying profitability reaching 18% of sales.

Highlights

In terms of confirmed highlights from the results, L’Oréal Luxe division delivered excellent double-digit growth, substantially outperforming its market.

Alongside this, the Active Cosmetics Division accelerated significantly in the second quarter, the company says.

In terms of geographic Zones, Western Europe remains dynamic, says L’Oréal, and the New Markets as a whole are posting sustained growth, thanks to the strong contribution of Asia Pacific and solid sales in Eastern Europe.

The Group's digital breakthrough is continuing, particularly in e-commerce, which posted +29.5% growth in the first half and represents 7.0% of total sales.

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