Jul 27, 2017
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L'Oreal eyes record margins as first-half profits rise

Jul 27, 2017

Cosmetics company L'Oreal on Thursday predicted it would make a record profit margin this year as it posted higher first-half sales and earnings boosted by growth in luxury products and emerging markets.

L'Oreal is the latest luxury group to announce strong half-year results. - Guinot

L'Oreal said its first-half operating profit rose 7.1 percent from a year ago to 2.53 billion euros ($2.95 billion), while revenue increased by 4 percent to 13.41 billion euros.

According to a consensus forecast compiled for Reuters by Inquiry Financial, analysts had been predicting an operating profit of 2.56 billion euros and sales of 13.8 billion euros.

L'Oreal sold The Body Shop earlier this year and it said the earnings boost from that disposal, along with its first-half results, made it well placed for the rest of 2017.

"Over the full year, the sale of The Body Shop, and the accretive effect this has on profitability, means that we will be able to strongly increase our profitability, which for the first time could reach 18 percent of sales, and also to take the opportunity to strengthen our business drivers in order to accelerate our market share gains and thus our future growth," said L'Oreal Chairman and Chief Executive Jean-Paul Agon.

"This strategic choice, combined with the good first-half results, strengthens our confidence in our ability to once again outperform the cosmetics market in 2017, and to achieve growth in both our sales and profits," added Agon.

Sales rose 15.4 percent at the company's luxury arm, which includes products such as Lancome, and L'Oreal also reported a strong performance at its digital and online businesses.

The French company added there were also strong growth in markets such as mainland China, Hong Kong and Mexico, which was helping offset slower growth in France and Europe.

L'Oreal is the latest major luxury goods group to post robust first-half results.

Earlier this month, French peer LVMH reported a 23 percent rise in first-half operating profit, Burberry posted better-than-expected same store sales while Swatch struck a confident note on its outlook.

Swiss foods group Nestle owns around 23 percent of L'Oreal, while L'Oreal in turn owns some 9 percent of healthcare company Sanofi.

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