Strong growth continues: +7.3%Â 1
Substantial increase in operating profit: +12.1%Â 2
- Sales: 14.81 billion euros
- +7.3% like-for-likeÂ 1
- +8.4% at constant exchange rates
- +10.6% based on reported figures
- Â Double-digit growth at L'OrÃ©al Luxe and Active Cosmetics
- Â Very dynamic growth in Asia Pacific
- Â Strong progression of the main growth drivers: Asia, Travel Retail, e-commerce and skincare
- Â Substantial increase in operating profit: +12.1%Â 2Â at 2,888 million euros
- Â Record operating margin of 19.5%
- Â Operating cash flow up +23.2%
Commenting on these figures, Mr Jean-Paul Agon, Chairman and Chief Executive Officer of L'OrÃ©al, said:Â
"L'OrÃ©al has delivered its strongest first half like-for-like growth in more than a decade at +7.3%Â 1, outperforming a dynamic market which has, for the second year running, posted one of its highest-ever growth rates.Â Â
All the Divisions are growing, and notably the L'OrÃ©al Luxe and Active Cosmetics Divisions which posted double-digit growth. The progression of L'OrÃ©al Luxe is being driven by its four big brands: LancÃ´me, Yves Saint Laurent, Giorgio Armani and Kiehl's. The Active Cosmetics Division continues to benefit from the growing appetite for healthy beauty and is posting geographically balanced growth. The performance of the Consumer Products Division is improving semester by semester, thanks especially to the success of L'OrÃ©al Paris, the world's number one beauty brand. Meanwhile, the transformation of the Professional Products Division is ongoing.
Across the geographic Zones, the New Markets are growing very strongly, particularly the Asia Pacific Zone, which is now the Group's number one Zone. China is maintaining its pace of growth, and India, Malaysia, Indonesia and Vietnam are all posting double-digit growth. North America is still being held back by the slowdown in makeup. Sales are increasing in Western Europe, in a market which remains difficult.
Digital continues to boost growth and reinforces our relationship with our consumers. At the same time, e-commerceÂ 3Â is up by +48.5%Â 1, and represents 13.2% of total sales. Travel Retail, another of the Group's growth drivers, has grown by +21.2%Â 1.Â
Operating profit has increased strongly by +12.1%Â 2, setting a new record in operating margin of 19.5%. Net earnings per shareÂ 4Â is up +7.2% at 4.38 euros. After allowing for 139 million euros of non-recurring items, net profit comes out at 2,326 million euros. Operating cash flow is up +23.2%.Â
In a volatile and contrasted environment, this good first half gives us confidence in our capacity to outperform the market in 2019 and achieve another year of growth in sales and profits."Â
Moreover, the Board of Directors has decided, under the authorisation voted by the Annual General Meeting of 18 April 2019, to set up a share buyback programme amounting to a maximum of 750 million euros and with a maximum number of shares to be acquired of 3 million during the second half of 2019. All the shares bought back will be cancelledÂ 5.
2019 Half-Year sales
Like-for-like, i.e. based on a comparable structure and identical exchange rates, sales of the L'OrÃ©al group grew by +7.3%.
The net impact of changes in the scope of consolidationÂ was +1.1%.
Growth at constant exchange ratesÂ amounted to +8.4%.
Currency fluctuationsÂ had a positive impact of +2.2%. If the exchange rates at 30 June 2019, i.e. â‚¬1 = $1.138, are extrapolated until 31 December 2019, the impact of currency fluctuations on sales would be approximately +1.5% for the whole of 2019.
Based on reported figures, the Group's sales at 30 June 2019 amounted to 14.81 billion euros, i.e. +10.6%.
SALES BY DIVISION AND GEOGRAPHIC ZONE
|Â||2NDÂ QUARTERÂ 2019||Â||1STÂ HALF 2019|
|Professional Products||878.9||Â +2.7%||Â +5.4%||1,714.2||Â +2.5%||Â +5.1%|
|Consumer Products||3,245.9||Â +2.8%||Â +5.9%||6,530.5||Â +3.1%||Â +6.4%|
|L'OrÃ©al Luxe||2,470.4||Â +12.2%||Â +15.5%||5,150.1||Â +13.2%||Â +17.3%|
|Active Cosmetics||665.7||Â +14.4%||Â +16.3%||1,416.7||Â +13.6%||Â +15.1%|
|Groupe total||7,261.0||Â +6.8%||Â +9.8%||14,811.5||Â +7.3%||Â +10.6%|
|BY GEOGRAPHIC ZONEÂ||Â||Â||Â||Â||Â||Â|
|Western EuropeÂ||2,043.6||Â +0.9%||Â +1.7%||4,212.6||Â +1.0%||Â +1.9%|
|North America||1,910.3||Â -1.1%||Â +4.5%||3,805.7||Â 0.0%||Â +6.8%|
|New Markets, of which:||3,307.1||Â +16.5%||Â +19.2%||6,793.1||Â +16.6%||Â +19.3%|
|Asia PacificÂ||2,228.4||Â +25.5%||Â +30.3%||4,626.4||Â +24.3%||Â +30.4%|
|Latin AmericaÂ 6||456.3||Â +0.2%||Â +0.1%||878.6||Â +1.9%||Â -0.5%|
|Eastern Europe||447.8||Â +7.9%||Â +6.1%||931.3||Â +7.5%||Â +3.5%|
|Africa, Middle East||174.6||Â -9.7%||Â -6.4%||356.7||Â -5.4%||Â -1.5%|
|Group total||7,261.0||Â +6.8%||Â +9.8%||14,811.5||Â +7.3%||Â +10.6%|
At the end of June, the Professional Products Division is at +2.5% like-for-like and +5.1% based on reported figures.
The Division continues to grow, driven by the acceleration in the United States and in the Asia Pacific Zone, where it is winning market share. Eastern Europe remains dynamic, while Latin America and Western Europe are penalised by the inertia of certain markets.
Haircare, the number one contributor to growth, is being boosted by the strong growth ofÂ KÃ©rastase, fuelled by the success ofÂ Resistance ExtentionisteÂ andÂ Blond AbsoluÂ and by the solid performance of theÂ Total ResultsÂ range atÂ Matrix. Hair colour is benefiting from the outstanding double-digit growth ofÂ Shades EQÂ atÂ RedkenÂ and the strong acceleration ofÂ InoaÂ atÂ L'OrÃ©al Professionnel.
In the first half, the Division posted growth of +3.1% like-for-like and +6.4% based on reported figures.
L'OrÃ©al ParisÂ maintains good growth momentum, thanks to the strong performance of face care, with the successful launch ofÂ Revitalift FillerÂ ampoules and the international roll-out ofÂ ElviveÂ Dream LengthsÂ and the very good start ofÂ Elvive Colour Protect PurpleÂ shampoo. The resounding success ofÂ Rouge SignatureÂ in makeup is worth noting.Â GarnierÂ is growing, driven by skincare with the strong worldwide growth ofÂ Micellar Cleansing WaterÂ andÂ Tissue Masks, and the promising start ofÂ Garnier OrganicÂ in Western Europe. The Korean makeup brandÂ 3CE StylenandaÂ is starting very well in China. TheÂ NYX Professional MakeupÂ brand meanwhile is implementing a reworking of its distribution channels.
The Division is performing well in Western and Eastern Europe, particularly in Russia. It is clearly accelerating in Asia, particularly in China, India and Indonesia.Â It is however being held back by the sluggish makeup market in the United States.
Travel Retail and e-commerce are strong growth drivers.
At the end of June, L'OrÃ©al Luxe confirmed its excellent start to the year, posting growth of +13.2% like-for-like and +17.3% based on reported figures, driven by its good performances in skincare.
The dynamism of the Division's top four brands continues, and once again recorded double-digit growth in the first half.Â LancÃ´me, thanks to its iconic linesÂ GÃ©nifiqueÂ andÂ Absolue, andÂ Kiehl'sÂ with theÂ Ultra FacialÂ andÂ CalendulaÂ lines, delivered excellent performances over the period.Â Giorgio ArmaniÂ andÂ Yves Saint LaurentÂ are taking advantage respectively of the success, in the lip segment, ofÂ Lip MaestroÂ andÂ Rouge Pur Couture The Slim, and in fragrances ofÂ SÃ¬Â andÂ Black Opium.Â Helena RubinsteinÂ is confirming its success in the ultra-premium skincare market, andÂ Atelier CologneÂ continues to expand rapidly.
L'OrÃ©al Luxe is posting strong growth in Asia Pacific, particularly in China and in Travel Retail. Eastern Europe and Latin America are also performing well. The Division's sales remain sluggish however in North America.
As for e-commerce sales, the Division is continuing to accelerate.
The Active Cosmetics Division had an outstanding first half at +13.6% like-for-like and +15.1% based on reported figures.
All Zones are contributing to growth, with Asia Pacific, North America and Latin America performing particularly well.
All the major brands are contributing to growth.Â La Roche-Posay, posting double-digit growth, continues to accelerate in anti-ageing, with the continuing success ofÂ Hyalu B5Â and the successful launch ofÂ Pure Vitamin C10Â serum.Â VichyÂ is maintaining momentum, particularly with its star productÂ MinÃ©ral 89, which continues to grow. The brand is also reinforcing its anti-ageing expertise by offeringÂ Vichy SkinConsultAI, the first algorithm for analysing signs of ageing from a selfie, which has been developed with dermatologists.Â SkinCeuticalsÂ is growing very fast across all Zones, with a record performance in Asia.Â CeraVeÂ is winning market share across all the Zones where the brand is present, with a sharp acceleration in America, the brand's original market. The brand has been successfully launched in China.
SUMMARY BY GEOGRAPHIC ZONE
The Zone recorded growth of +1.0% like-for-like and +1.9% based on reported figures.
In a mass market that is growing moderately, the Consumer Products Division is winning market share, particularly in makeup and face care with a good start from theÂ Garnier OrganicÂ line and the success ofÂ RevitaliftÂ FillerÂ ampoules byÂ L'OrÃ©al Paris. L'OrÃ©al Luxe is dynamic in Germany, Scandinavia and across Southern Europe, but the second quarter was difficult in France. Growth in the Active Cosmetics Division is being driven byÂ La Roche-Posay, which continues to outperform its market. The Professional Products Division is still being held back by a slowdown in sales in France and a difficult market in Italy.
The Zone is stable at 0.0% like-for-like and +6.8% based on reported figures. In a slowing market, the skincare and fragrances categories are still growing. The Active Cosmetics Division continues to post double-digit growth. L'OrÃ©al Luxe performed well in skincare and fragrances, driven by theÂ Kiehl'sÂ andÂ Yves Saint LaurentÂ brands, but is being held back by the decline in makeup. The Professional Products Division is winning market share and growing in hair colour, thanks toÂ RedkenÂ andÂ Pulp Riot. The Consumer Products Division is winning market share in skincare withÂ L'OrÃ©al ParisÂ but is struggling with a strong footprint in makeup.
Asia Pacific:Â Growth in this Zone was +24.3% like-for-like and +30.4% based on reported figures. All Divisions achieved double-digit growth, with the most outstanding performances for the L'OrÃ©al Luxe and Active Cosmetics Divisions. Growth is still being driven by Chinese consumers, and even more powerfully by the increasing success of e-commerce in China and across the whole Asia Pacific Zone. The premium skincare brands are performing particularly well, especiallyÂ LancÃ´me,Â Yves Saint Laurent,Â Giorgio ArmaniÂ andÂ Helena Rubinstein. Growth in the Consumer Products Division meanwhile is being driven by the performance ofÂ L'OrÃ©al ParisÂ and the roll-out ofÂ 3CE Stylenanda. In Southern Asia, L'OrÃ©al is posting strong growth and winning market share.Â
Latin America:Â The Zone is at +1.9% like-for-like and -0.5% based on reported figures. Like-for-like growth in this Zone is being held back by Argentina. Sales are accelerating, especially in Mexico and Chile. In Brazil, the Consumer Products Division continues to face difficulties, while the other Divisions are growing. Across the Zone as a whole, the L'OrÃ©al Luxe and Active Cosmetics Divisions continue to grow, with a double-digit increase for Active Cosmetics, driven by the dynamism of its big brands. In the Consumer Products Division, the makeup brandsÂ Maybelline New YorkÂ andÂ VogueÂ are performing well.Â KÃ©rastase, in the Professional Products Division, is recording double-digit growth.Â
Eastern Europe:Â The Zone recorded growth of +7.5% like-for-like and +3.5% based on reported figures. Russia, Turkey and Central European countries such as Romania and Ukraine are driving growth in this Zone. The Consumer Products and Active Cosmetics Divisions have the highest growth rates, thanks respectively toÂ Maybelline New YorkÂ andÂ NYX Professional Makeup, as well asÂ La Roche-Posay.Â
Africa, Middle East:Â The Zone is down by -5.4% like-for-like and -1.5% based on reported figures. The luxury market remains difficult in the Middle East. Egypt, Morocco and Pakistan are growing, as well as the countries in sub-Saharan Africa. The Active Cosmetics Division is recording good growth, driven byÂ La Roche-PosayÂ andÂ SkinCeuticals.Â
Important events during the period 1/4/19 to 30/6/19 and post-closing events
- From 16 to 18 May at the fourth edition of Viva Technology, L'OrÃ©al presented its latest technological innovations, and its vision of the future of beauty and customer experience at its Limitless Beauty stand.
- On 6 June, L'OrÃ©al inaugurated at Aulnay-sous-Bois in France "MYT - Make Your Technology", the first 4.0 technology incubator dedicated to the industry and supply chain of the future.Â
- On 19 June, Jean-Paul Agon, Chairman and Chief Executive Officer of L'OrÃ©al was voted No.1 in the Glassdoor France Top CEO 2019 ranking, by the employees of the ranked companies.Â Â
- On 26 June, BOLD (Business Opportunities for L'OrÃ©al Development), the corporate venture capital fund launched by L'OrÃ©al in December 2018, took a minority stake in Carbios, a startup pioneering a solution for the recycling of plastic packaging.Â
- On 2 July, L'OrÃ©al announced it had entered into exclusive negotiation with the Clarins group with a view to acquiring theÂ MuglerÂ andÂ AzzaroÂ brands.
- On 12 July, L'OrÃ©al announced the appointment of three new members to its Executive Committee: Alexandra Palt, Chief Corporate Responsibility Officer and Executive Vice-President of the Fondation L'OrÃ©al, and Vincent Boinay, General Manager for Travel Retail Worldwide, will join L'OrÃ©al's Executive Committee as of 1stÂ September. Fabrice Megarbane, President L'OrÃ©al China, joined L'OrÃ©al's Executive Committee on 1stÂ July.
2019 Half-Year results
The limited review procedures of the half-year consolidated accounts have been completed. The limited review report is being prepared by the Statutory Auditors.
OPERATING PROFITABILITY AT 19.5% OF SALES
Consolidated profit and loss account: from sales to operating profit.Â
|IN â‚¬ MILLION||30/6/18||AS % OF SALES||31/12/18||AS % OF SALES||30/6/19||AS % OF SALES||CHANGE H1-2019 VS. H1-2018|
|Sales||Â 13,390.7||100.0%||Â 26,937.4||100.0%||Â 14,811.5||100.0%||+10.6%|
|Cost of sales||Â -3,598.3||26.9%||Â -7,331.6||27.2%||Â -3,988.5||26.9%||Â|
|Gross Profit||Â 9,792.4||73.1%||Â 19,605.8||72.8%||Â 10,823.0||73.1%||Â|
|R&D expenses||Â -447.2||3.3%||Â -914.4||3.4%||Â -459.7||3.1%||Â|
|Advertising and promotion expenses||Â -4,018.3||30.0%||Â -8,144.7||30.2%||Â -4,471.7||30.2%||Â|
|Selling, general and administrative expenses||Â -2,751.0||20.5%||Â -5,624.7||20.9%||Â -3,003.3||20.3%||Â|
|Operating profit||Â 2,575.9||19.2%||Â 4,922.0||18.3%||Â 2,888.4||19.5%||+12.1%|
Gross profit, at 10,823 million euros, came out at 73.1% of sales, stable compared to the first half of 2018.Â
Research and Development expenses,Â at 459 million euros, came out at 3.1% of sales.Â
Advertising and promotion expensesÂ came out at 30.2% of sales, an increase of 20 basis points, compared to the first half of 2018.Â
Selling, general and administrative expenses, at 20.3% of sales, have decreased by 20 basis points.
Overall,Â operating profitÂ increased by +12.1%, at 2,888 million euros, and amounted to 19.5% of sales, an increase of 30 basis points. Excluding the impacts related to the application of the IFRS 16 accounting rule, this increase comes out at +11.3%.Â Â
OPERATING PROFIT BY DIVISION
|Â||â‚¬M||% OF SALES||â‚¬M||% OF SALES||â‚¬M||% OF SALES|
|Professional Products||Â 313.4||19.2%||Â 651.5||20.0%||Â 327.9||19.1%|
|Consumer Products||Â 1,275.4||20.8%||Â 2,428.1||20.2%||Â 1,351.1||20.7%|
|L'OrÃ©al Luxe||Â 1 026.7||23.4%||Â 2,072.4||22.1%||Â 1,227.3||23.8%|
|Active Cosmetics||326.2||26.5%||Â 523.0||23.0%||Â 376.1||26.5%|
|Total Divisions before non-allocated||Â 2,941.7||22.0%||Â 5,675.0||21.1%||Â 3,282.3||22.2%|
|Non-allocatedÂ 7||Â -365.7||-2.7%||Â -753.1||-2.8%||Â -393.9||-2.7%|
|Group||Â 2,575.9||19.2%||Â 4,922.0||18.3%||Â 2,888.4||19.5%|
The L'OrÃ©al group is managed on an annual basis. This means that half-year operating profits cannot be extrapolated for the whole year.
The profitability of theÂ Professional Products DivisionÂ came out at 19.1%.
TheÂ Consumer Products Division's profitability came out at 20.7%.
L'OrÃ©al LuxeÂ improved its profitability at 23.8%, an increase of 40 basis points.
TheÂ Active Cosmetics DivisionÂ remains at a very high profitability level at 26.5%.
NET PROFIT EXCLUDING NON-RECURRING ITEMS
Consolidated profit and loss account: from operating profit to net profit excluding non-recurring items.
|IN â‚¬ MILLION||30/6/18||31/12/18||30/6/19||CHANGE H1-2019 VS. H1-2018|
|Operating profit||Â 2,575.9||Â 4,922.0||Â 2,888.4||+12.1%|
|Financial revenues and expenses excluding dividends received||Â +14.5||Â -1.9||Â -30.2||Â|
|Sanofi dividends||Â 358.3||Â 358.3||Â 363.0||Â|
|Profit before tax and associates excluding non-recurring items||Â 2,948.7||Â 5,278.4||Â 3,221.1||Â +9.2%|
|Income tax excluding non-recurring items||Â -646.7||Â -1,286.8||Â -748.8||Â|
|Net profit excluding non-recurring items of equity consolidated companies||Â -0.1||Â +0.1||Â 0.0||Â|
|Non-controlling interests||Â -1.4||Â -4.1||Â -6.1||Â|
|Net profit excluding non-recurring items, after non-controlling interestsÂ 8||Â 2,300.6||Â 3,987.6||Â 2,466.2||Â +7.2%|
|EPSÂ 9Â (â‚¬)||Â 4.08||Â 7.08||Â 4.38||Â|
|Diluted average number of shares||563,242,060||563,098,506||563,247,153||Â|
Overall financial expensesÂ came out atÂ 30 million euros, of which 26 million euros are related to the application of the IFRS 16 accounting standard.
Sanofi dividendsÂ amounted to 363 million euros.
Income tax excluding non-recurring itemsÂ came out at 748 million euros, i.e. a tax rate of 23.2%, slightly above that of the first half of 2018, which was 21.9%.
Net profit excluding non-recurring items after non-controlling interestsÂ came out at 2,466 million euros, an increase of +7.2% compared with the net profit excluding non-recurring items reported on 30 June 2018.
Earnings per share, at 4.38 euros, has risen by +7.2% compared with the first half of 2018.
Consolidated profit and loss account: from net profit excluding non-recurring items to net profit.
|IN â‚¬ MILLION||30/6/18||31/12/18||30/6/19||CHANGE H1-2019 VS. H1-2018|
|Net profit excluding non-recurring items, after non-controlling interestsÂ 8||2,300.6||3,987.6||2,466.2||+7.2%|
|Â - other income and expenses||Â -40.4||Â -94.7||Â -170.3||Â|
|Â - tax effect||+15.0||+2.5||+30.8||Â|
|Net profit after non-controlling interests||2,275.2||3,895.4||2,326.7||+2.3%|
Non-recurring items mainly take into account costs relating to the reworking of theÂ NYX Professional MakeupÂ distribution channels, andÂ Clarisonic's goodwill and brand impairment.
OPERATING CASH FLOW AND BALANCE SHEET
Gross cash flowÂ amounted to 3,305 million euros, up by +18.9% compared with the first half of 2018. The amount includes a depreciation value of 209 million euros with regard to the right-of-use assets (IFRS 16).
TheÂ change in working capitalÂ amounted to 813 million euros.
Investments, at 559 million euros, represented 3.8% of sales.
Operating cash flowÂ amounted to 1,932 million euros, an increase of +23.2%.
After payment of the dividend, theÂ residual cash flowÂ came out at -248 million euros.
At 30 June 2019, after taking into account finance lease liabilities for 2,151 million euros,Â net cashÂ amounted to 200 million euros, compared with 362 million euros at 30 June 2018.
This news release may contain some forward-looking statements. Although the Company considers that these statements are based on reasonable hypotheses at the date of publication of this release, they are by their nature subject to risks and uncertainties which could cause actual results to differ materially from those indicated or projected in these statements."
This a free translation into English of the 2019 Half-Year results news release issued in the French language and is provided solely for the convenience of English-speaking readers. In case of discrepancy, the French version prevails.
CONTACTS AT L'ORÃ‰AL
Individual shareholders and market authorities
Mr Jean RÃ©gis CAROF
Tel.: +33 1 47 56 83 02
Financial analysts and institutional investorsÂ
Ms FranÃ§oise LAUVIN
Tel.: +33 1 47 56Â 86Â 82
Ms Stephanie CARSON-PARKER
Tel.: +33 1 47 56 76 71
Tel.: +33 1 47 56 70 00
APPENDIX 1: L'ORÃ‰AL GROUP SALES 2018/2019 (â‚¬ MILLION)
|First quarter||Â 6,778.6||Â 7,550.5|
|Second quarter||Â 6,612.1||Â 7,261.0|
|First half total||Â 13,390.7||Â 14,811.5|
|Third quarter||Â 6,473.3||Â|
|Nine months total||Â 19,864.0||Â|
|Fourth quarter||Â 7,073.4||Â|
|Full year total||26,937.4||Â|
Other appendices can be found in the PDF version.
 The increase came out at 11.3 % excluding the impact of IFRS 16.
 Sales achieved on our brands' websites + estimated sales achieved by our brands corresponding to sales through our retailers' websites (non-audited data).
 Diluted net profit per share, excluding non-recurring items, after non-controlling interests.
 The L'OrÃ©al Registration Document filed with the AMF (AutoritÃ© des MarchÃ©s Financiers) on 14 March 2019 includes, on pages 370 and 371, the other pieces of information that must appear in the share buyback programme description pursuant to Article 241-2 of the General Regulation of the AMF.
 The Group has applied the IAS 29 accounting rule (Financial Reporting in Hyperinflationary Economies) to Argentina from 1 July 2018 onwards. The negative impact of this adjustment amounts to 420 basis points on like-for-like growth in Latin America and to 30 basis points on the growth of the whole L'OrÃ©al group in the first half of 2019.
 Non-allocated expenses = Central Group expenses, fundamental research expenses, stock options and free grant of shares expenses and miscellaneous items. As a % of total Divisions sales.
 Net profit excluding non-recurring items, after non-controlling interests, does not include capital gains and losses on disposals of long-term assets, impairment of assets, restructuring costs, tax effects and non-controlling interests.
 Diluted net profit per share, excluding non-recurring items, after non-controlling interests.Â