Feb 13, 2012
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L'Oreal sees further profit, sales growth in 2012

Feb 13, 2012

Feb 13 - French cosmetics maker L'Oreal said it expected increased revenue and profits again this year, with emerging markets set to eclipse Western Europe as the biggest contributor to sales.

The provider of Garnier shampoo, Lancome creams and Yves Saint Laurent perfume posted 2011 operating profit of 3.29 billion euros, up 7.7 percent and ahead of an average estimate of 3.23 billion in a Thomson Reuters I/B/E/S poll.

The world's biggest cosmetics group's operating margin rose to 16.2 percent from 15.7 percent the previous year. Full-year sales rose 5.1 percent like-for-like to 20.34 billion euros, also just ahead of the average estimate of 20.28 billion.

Chief Executive Jean-Paul Agon said the group was well-equipped to "achieve another year of sales and profit growth in 2012" following a year in which the global cosmetics market trend was favourable.

L'Oreal saw the fastest like-for-like sales growth in the Asia-Pacific region and Latin America last year, reaching around 13 percent. Overall, emerging markets achieved 10.6 percent growth.

Among its divisions, L'Oreal said demand grew fastest for its luxury products, "bolstered by a lively market trend", with sales up 8.2 percent to 4.8 billion euros.

The luxury division "ended the year well" in Western Europe, especially in France, while North America "recorded strong growth" and emerging markets were "growing fast", L'Oreal said.

Overall, L'Oreal suggested a two-speed Europe, with good growth rates in France, Germany and the UK but a difficult situation in Southern Europe, and in particular Greece and Portugal as the euro zone debt crisis rages on.

Eastern Europe also suffered, with like-for-like sales down 2.8 percent due to a "dismal economic context" affecting all the countries in the region.

"There are good aspects and bad aspects, it's mixed," one analyst said of L'Oreal's results, asking not to be identified. Positives included an improvement in profitability in all divisions, while Western and Eastern Europe were disappointing.

"Maybe we should be expecting restructuring measures in Western Europe," the analyst said.

Earlier this month, U.S. cosmetics maker Estee Lauder posted a 10 percent rise in sales and a 15 percent increase in operating profit for the three months to Dec. 31.

However, the maker of Bobbi Brown, MAC and Clinique brands forecast quarterly earnings far below Wall Street estimates as it spends more on advertising to support new products and gain market share in emerging markets.

Anglo-Dutch consumer goods group Unilever warned 10 days ago that 2012 would be a difficult year as growth in emerging markets slows and demand in Europe and North America stays flat at best. It said 2011 underlying sales rose 6.5 percent.

L'Oreal, whose shares are up slightly since the start of the year, trades on a multiple of 17.8 times estimated full-year earnings, against 24 times for Estee Lauder and 14 for Unilever.

The group said it would propose an 11 percent rise in the dividend paid on 2011 earnings to 2 euros a share.

(Reporting by James Regan and Pascale Denis; Editing by Christian Plumb and Helen Massy-Beresford)

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