Feb 10, 2014
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L'Oréal fourth-quarter growth beats forecasts

Feb 10, 2014

PARIS, France - L'Oréal's underlying sales growth improved more than expected in the fourth quarter, helped by solid demand in the Americas and western Europe, and strong growth in new markets in Africa and the Middle East.

The French maker of Garnier shampoo and Biotherm cream said sales growth in the three months to December 31 reached 5.4 percent, beating analysts' forecasts of 4.5-5.0 percent and the 4.1 percent achieved in the previous quarter.

The upbeat trading update came after L'Oréal shares jumped on Monday on speculation it could buy part of Nestle's 30 percent stake in the cosmetics group and cancel the stock, thereby boosting earnings per share.

L'Oréal management is likely to face questions at its annual results news conference on Tuesday about whether Nestle has informed the French group of its intentions regarding the stake, as reported by Bloomberg on Friday.

L'Oréal, which has declined to comment on the report, did not give a precise forecast for the year but said it expected to outperform the market, and post higher sales and profit.

"Western Europe remains very solid, North America recorded another year of growth and market share gains in a less buoyant market context," L'Oréal Chief Executive Jean-Paul Agon said in a statement.

The company also pointed to strong growth in Latin America, Africa and the Middle East.

"The foreign exchange impact is less negative than expected and the organic growth is better than expected," Deutsche Bank analyst Harold Thompson said, adding it was a positive sign that the group proposed to raise its payout by so much.

The group proposed a dividend of 2.5 euros ($3.41) a share for 2013, up 8.7 percent, to be paid out of full-year earnings per share of 5.13 euros, up from 4.91 euros in 2012.

Growth accelerated at the luxury division, which makes Armani perfume and Lancome cream, reaching 8.4 percent in the fourth quarter on a like-for-like basis, compared with 6.2 percent in the nine months through September.

Overall, L'Oréal's luxury division saw sales rise 6.8 percent in 2013, roughly in line with the perfume and cosmetics division of industry giant LVMH, owner of the Givenchy, Dior and Guerlain brands, whose sales rose 7 percent.

The group's consumer products division, its biggest in terms of revenue, suffered a slowdown with growth at 3.7 percent in the fourth quarter against 5.3 percent in the preceding nine-month period.

Overall, L'Oréal said its operating margin improved over the course of last year to reach a record level of 16.9 percent, against 16.7 percent as reported in its annual report for 2012.

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