Jul 29, 2016
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L'Oreal banking on new products to turn around Chinese face mask provider

Jul 29, 2016

L'Oreal said on Friday it had boosted the pipeline of new products to turn around Chinese face mask provider Magic Holdings after taking a 213 million euro ($237 million) impairment charge on the company's carrying value at the half-year.

Jean-Paul Agon, the cosmetics giant's chief executive, said Magic Holdings faced 10 times more competitors than it did when the French group bought the business two years ago for more than 600 million euros ($665.46 million).

"Now we are coming back with a strong pipeline of innovation that we did not have at the beginning," Agon told investors on a conference call on Friday.

L'Oreal, also took a 234 million euro non-cash charge on its sonic skin treatment unit Clarisonic which did not meet expectations since it joined the group in 2011. News of the writedowns came as L'Oreal published late on Thursday a 4.3 percent rise in second-quarter sales.

"These two acquisitions were not typical for us," Agon said. "We have had some difficulties for a while... and we preferred to be rigorous and decided on this impairment," he said, adding the two companies remained relevant and strategic for L'Oreal.

Agon said one dark cloud for the group was France, where the poor state of the market cost it one percentage point in sales growth in the second quarter. France represents around 8-9 percent of total group sales.

"France has been the problem child of this second quarter," Agon said.

"The French market cumulated all possible negative elements including a poor economic environment, bad weather and low morale due to the attacks," he said, referring to a series of Islamist attacks.

L'Oreal said it expected sales growth to pick up in the second half.

Agon said sales of Yves Saint Laurent make-up and perfume had risen 25 percent since the beginning of the year.

"Yves Saint Laurent is on fire," Agon said. "It is probably the most successful luxury brand in the market right now."

Agon said Atelier Cologne, the first niche perfume brand L'Oreal acquired this year, made annual sales of 15 million euros and hoped the business became profitable once integrated with the group.

He said L'Oreal planned to complete the acquisition of a small French cosmetics brand, which the group later clarified to be the Saint-Gervais Mont Blanc spa and a license for their skin care products, for which it made an offer earlier this month.

Agon said that for the moment, Britain's decision to leave the EU did not have any impact on L'Oreal's operations.


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