L’Oreal 2012 First-Half Profit Rises 11%

L’Oreal SA (OR), the world’s largest cosmetics maker, reported an 11 percent increase in first-half profit as sales gained in Africa and Asia, and said it still expects revenue to grow faster than the market in 2012.

Operating income rose to 1.9 billion euros ($2.4 billion), the Paris-based company said today in a statement after the stock market closed. The average of four analysts’ estimates compiled by Bloomberg was 1.92 billion euros.

The maker of Body Shop hemp hand-cream confirmed its target of outperforming the global cosmetics market, which it has estimated will grow about 4 percent this year. Like-for-like sales should increase 5.6 percent in 2012, according to Andrew Wood, an analyst at Sanford C. Bernstein.

“This performance reflects the group’s ability to build solid and profitable growth,” L’Oreal Chairman and Chief Executive Officer Jean-Paul Agon said in today’s statement.

L’Oreal fell 0.2 percent to 101 euros at the close of trading in Paris. The stock has gained 25 percent this year, giving the company a market value of 61.3 billion euros.

Net income increased 10 percent to 1.66 billion euros. Allowing for non-recurring items, net profit after controlling interests reached 1.63 billion euros, up 11 percent.

The global cosmetics market is growing at an annual rate exceeding 4 percent, L’Oreal’s director of financial communications, Thierry Prevot, said on a call with reporters.

Wider Margin

The first-half operating margin widened to 16.9 percent of sales from 16.2 percent at the end of 2011 as L’Oreal reduced the amount it spent on advertising, promotions, selling, administration and other activities relative to revenue.

Gross profit as a percentage of sales narrowed to 71 percent from 71.2 percent at the end of 2011. L’Oreal attributed the decline to the weakening of the euro, the consolidation of Clarisonic, a maker of sonic skincare devices that it agreed to buy at the end of 2011, and an increase in promotional offers.

L’Oreal also said it will buy back as much as 500 million euros of shares by the end of the year that it will then cancel.


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