Essilor: A Robust Quarter, Led by Product Innovation

  Essilor:A Robust Quarter, Led by Product Innovation

  *Revenue up 8.4% excluding the currency effect
  *Stepped-up expansion in fast-growing markets and rebound in the US
  *Success of the Crizal^® Prevencia™ and Transitions^® Signature™ lenses
  *Transitions Optical and acquisitions completed

Business Wire

CHARENTON-LE-PONT, France -- April 29, 2014

Regulatory News:

Essilor International (Paris:EI), the world leader in ophthalmic optics, today
announced that consolidated revenue for the three months ended March 31, 2014
totaled €1,322.6 million. Compared with first-quarter 2013, this represented
an increase of 8.4%, excluding the currency effect.

Consolidated revenue
                          Q1 2014       % Change         % Change              Change in the       Currency
in € millions          ^a         (reported)    (like-for-like)    scope of         effect
Lenses and Optical     1,159.7    +1.0%         +3.0%              +2.9%            -4.9%
North America          466.8      +0.9%         +2.7%              +2.7%            -4.5%
Europe                 399.6      -0.7%         -1.0%              +0.6%            -0.3%
Asia/Pacific/Middle    211.1      +3.1%         +9.1%              +3.9%            -9.9%
Latin America          82.2       +4.4%         +8.9%              +13.4%           -17.9%
Equipment              38.9       -8.4%         -4.4%              -1.0%            -3.0%
Readers                124.0      +45.7%        -1.8%              +51.0%           -3.5%
TOTAL                  1,322.6    +3.6%         +2.4%              +6.0%            -4.8%

(a) Since second-quarter 2013, Nikon-Essilor’s revenue in North America and
Europe has been recognized in their respective regions, whereas previously, it
was recognized in the Asia/Pacific/Middle East/ Africa region.

Commenting on these figures, Hubert Sagnières, Essilor’s Chairman and Chief
Executive Officer, said: “With 8.4% growth in revenue excluding the currency
effect, Essilor delivered one of its best quarterly performances of the past
three years, in a more favorable global environment.  It reflected the
vitality of our value creation strategy built on product innovation, consumer
marketing, the development of a high-quality sunwear range and the deployment
of our unique partnership model.  Since April 1, 2014, Essilor has also
strengthened its business base with the acquisitions of Transitions Optical
and, the world leaders in photochromic lenses and online vision
care retail.  Our teams are determined to capitalize on these promising trends
and these new competitive advantages to strengthen the Company’s momentum in
the coming quarters.”

First quarter shaped by the rebound in the Lenses and Optical Instruments

The 2.4% like-for-like increase in revenue was led by the rebound in the
Lenses and Optical Instruments division. Despite the impact of the loss of a
major contract in Europe in 2013 and unfavorable weather conditions in North
America, the division reported a 3% like-for-like gain, its best performance
since fourth-quarter 2012. Growth was driven by a number of promising

  *Popular new products, such as the Crizal^® Prevencia™ lens, the new
    Transitions^® Signature™ photochromic lens and the Xperio^® range of
    polarizing lenses.
  *A powerful dynamic in fast-growing markets, such as Brazil, China and
    India, and a recovery in their export business.
  *An upturn in demand in most developed markets, especially the United
  *A very good performance by the progressive lens line-up, especially
    products made using digital surfacing technology.

The other divisions were adversely impacted by a number of expected one-time
events, such as the weak backlog in the Equipment division early in the year
and the unfavorable inventory situation in the Readers division.

Newly acquired companies increased reported revenue for the period by 6%, led
by a major contribution from Costa Inc. in the United States and Xiamen Yarui
in China, two sunglass distributors that are leaders in their respective
market segments. Among the noteworthy additions to the scope of consolidation
over the period were Polycore, a sun lens manufacturer, and Riverside, a large
Canadian prescription laboratory.

Lastly, the currency effect remained negative, at 4.8%, due to the decline
against the euro in every billing currency except the British pound. The most
keenly felt impacts concerned the US dollar and the Brazilian real.

Revenue by region and division

In North America, growth rebounded sharply, rising 2.7% like-for-like. In the
United States, revenue was lifted by growing demand for the Company’s
progressive lenses made using digital surfacing technology, the positive
impact of Managed Vision Care networks on the laboratory business and the
successful sales of new products. Crizal^® anti-reflective lenses returned to
sustained growth, the Varilux^® S series™ progressive lens enjoyed faster
momentum and the new Transitions^® Signature™ photochromic lens launched early
in the year got off to a promising start. The polarizing lens segment was also
very dynamic, led by strong growth of the Xperio^® range. Sales to key
accounts trended favorably.

Lastly, strong momentum in the laboratory business also drove a return to
robust growth in Canada.

In Europe, like-for-like revenue eased back 1.0% as reported, impacted by the
loss of a sales contract in 2013. Business in the region benefitted from the
success of the new Varilux^® E series™ and Intuitiv™ mid-range progressive
lenses and the Varilux^® S series™ high-end lens. Sales were led by a strong
rebound in Spain, where the Company won a major contract with the country’s
leading optical chain and benefitted from a successful promotional campaign.
In the United Kingdom, growth was supported by a favorable trend with both key
accounts and independent opticians. Led by the Varilux^® range, revenue rose
in Switzerland and Eastern Europe, offsetting more difficult business
conditions in Portugal and the Netherlands. In France, where demand was
adversely impacted by changes in the regulatory environment, innovations like
the Crizal^® Prevencia™ lens continued to be warmly received by independent

Revenue in the Asia/Pacific/Middle East/Africa region rose by 9.1%
like-for-like (of which + 5.0% in developed countries and + 10.6% in
fast-growing markets), lifted by the ongoing solid domestic performance in the
region's main fast-growing markets, as well as by a recovery in export sales
and a rebound in the developed markets. In China, the new products went from
strength to strength with the growing sales of anti-fatigue lenses and
Crizal^® UV anti-reflective lenses, leading to market share gains with
existing customers and contracts with new ones. In India, demand continued to
be led by the reputation of the Varilux^® and Crizal^® brands. Business rose
sharply in Russia and recovered in South Africa. In the region’s developed
markets, Japan continued to deliver sharp growth thanks to the more normal
competitive environment, robust customer relationships and the successful
sales of new products. In Australia, business benefited from the solid gains
with independent optometrists, buying groups and optical chains.

Revenue rose by 8.9% overall in Latin America, with growth in every country
except Argentina, where the market continues to suffer from a highly
disruptive economic environment. In Brazil, growth continued to be led by the
Company’s flagship brands, especially Varilux^®, as well as by the other
product offerings. In particular, the Company positioned the Kodak^® brand as
the benchmark in the mid-range segment, making it possible to fine-tune its
multi-network strategy. In Mexico, Essilor is continuing to widen its market
share in a sluggish economy, in particular thanks to the deployment of a
long-term contract with one of the country’s leading not-for-profit
organizations that provides health care access to low-income people. In
Colombia, new promotional campaigns were successfully rolled out to strengthen
the Varilux^® and Transitions^® brands and the Nikon^® lens brand was
launched. Lastly, operations in Chile delivered very strong growth.

Revenue in the Equipment division contracted by 4.4% like-for-like on a
decline in billings in the wake of the extensive deliveries in fourth-quarter
2013, especially in Latin America. Setting aside this factor, Satisloh enjoyed
sustained growth in the developed markets, led by box coater sales and the
success of its new edging solutions. During the quarter, Satisloh also
introduced a green alternative to the traditional alloy ophthalmic blocking
process. Known as ART, for Alloy Replacement Technology, the machine uses a
universal, reusable organic block-piece and UV-curable adhesive. It aroused
considerable interest among visitors to the Vision Expo optics trade show in
New York in late March.

Revenue in the Readers division declined by 1.8% like-for-like, due to a
number of unfavorable effects during the period, including inventory drawdowns
by a large customer in the Readers segment (which nevertheless reported higher
sales) and a one-time negative restocking effect in sunglasses sales. On the
other hand, retail sales of FGX products were very lively and sustained by the
launch of new products and advertising campaigns. International sales
continued to expand, especially in FGX International’s European host

Major events since January 1, 2014 and other transactions

Transitions Optical Inc.

On April 1, Essilor International finalized the acquisition of PPG Industries’
51% stake in Transitions Optical, the world’s leading provider of photochromic
lenses to optical manufacturers, and of all the outstanding shares of
Intercast, a manufacturer of premium sun lenses. Founded in 1990 and based in
Pinellas Park, Florida (USA), Transitions Optical reported sales of US$844
million in 2013, of which around US$279 million with lens manufacturers other
than Essilor. Transitions Optical and Intercast have been consolidated since
April 1. According to Essilor estimates, the consolidation of Transitions
Optical will have a positive impact on the Company’s financial indicators,
notably with an increase in the consolidated contribution margin of around 150
bps as from the second year, an accretive effect on earnings per share as from
2014, representing at least 5% a year in subsequent years, and a positive
impact of around 50 bps on the like-for-like growth in consolidated revenue as
from the third year.

Costa Inc.

In the first quarter, Essilor completed the acquisition of all outstanding
shares of Costa Inc., a US leader in high-performance sunglasses.

Based in Lincoln, Rhode Island (USA), Costa Inc. designs, assembles and
markets sunglasses under the Costa and Native brands. Costa has become the
fastest growing performance sunglass brand in the United States. The company
generated revenue of nearly US$100 million in 2013. Costa Inc. has been
consolidated in the Readers division since February 1.

On April 28, Essilor International has completed the acquisition of all
outstanding common stock of, one of the world’s leading online
vision care retailers (please refer to the news release issued on April 28).

Based in Vancouver, British Columbia (Canada), designs and
distributes one of the widest online selections of optical equipment,
including contact lenses, prescription and non-prescription eyeglasses,
sunglasses and accessories. It reported revenue of CAD 218 million for the
fiscal year ended October 31, 2013. will be consolidated by
Essilor from May 1^st, 2014.

Other partnerships

Since the beginning of the year, Essilor has broadened and deepened its local
roots in the United States by acquiring a majority stake in two prescription

  *Plunkett Optical, an Arkansas-based prescription laboratory with annual
    revenue of US$3.3million.
  *iCoat, an independent California-based prescription laboratory specialized
    in the development and licensed sale of thin-film deposit and coating
    technologies for premium optical equipment. It generates around US$26
    million in annual revenue, primarily through optical chains and eye care
    insurance companies in North America.

New Centre for Innovation and Technologies opened in France

Essilor has opened in Créteil (France) a new Centre for Innovation and
Technologies (CI&T), the world’s largest private campus dedicated to research
and innovation in the ophthalmic optics industry (900 employees).
Consolidating research and engineering teams and expertise in a single site
will foster fruitful collaboration and optimize quality, performance, product
development as well as new products and technologies launches.

Together with two other Centers for Innovation and Technologies, one in the
United States (Dallas) and one in Asia (Singapore), this new campus, which
represents an investment of €35 million, completes the Company’s global
research organization.

New production facility opened in Laos

Essilor has opened a new production facility near Savannakhet, Laos, in order
to serve growing demand in the region and in a constant commitment to
optimizing its industrial capacity. The new facility will be dedicated to
producing finished polycarbonate lenses, for which consumer demand is
increasing by 4-5% per year. It will be able produce 20 million lenses per
year when at full capacity, enabling Essilor to provide competitive, mid-range
polycarbonate products to major customers, particularly in emerging markets.

Cash and financing

The payment for the 51% stake in Transitions Optical and the normal seasonal
fluctuations in the business increased net debt to €1,878 million at March 31,
2014, from €369 million at the end of 2013.

To broaden its access to capital markets, Essilor disclosed its issuer ratings
from Standard & Poor's – A1 short-term – and Moody's – P1 short-term and A2
with a stable outlook long-term. The group first launched a $1.5 billion US
commercial paper program, of which around $800 million had been issued as of
March 31. In early April, it then issued €800 million in bonds in two
tranches: a €500-million seven-year tranche, with a 1.750% coupon, and a
€300-million ten-year tranche, with a 2.375% coupon. This is the lowest rate
ever obtained on an inaugural seven-year issue by a non-financial issuer and
the lowest ten-year rate obtained by a non-financial issuer so far this year.

This illustrates investor confidence in Essilor’s business model and the
quality of its credit profile. These two new sources of financing have enabled
us to raise funds under competitive conditions, while diversifying our
investor base.


Essilor confirms its 2014 targets of 10% to 12% growth in revenue at constant
exchange rates and an 18.2% to 18.6% contribution margin, depending on the
final IFRS adjustments on the Transitions Optical acquisition. These figures
are stated before the consolidation of

A conference call in English will be held today at 10:00 a.m. CEST.

Please dial-in at the following numbers: +33(0)1 70 99 42 71 or +44(0)20 3427
1908 (access code: 3721179).

The call may also be heard later at

Forthcoming investor events

The Annual General Meeting of shareholders will be held in Paris on May 7,

The 2014 first-half results will be released on August 28, 2014.

About Essilor

The world’s leading ophthalmic optics company, Essilor designs, manufactures
and markets a wide range of lenses to improve and protect eyesight. Its
corporate mission is to improve lives by improving sight. To support this
mission, the Company allocates more than €150 million to research and
innovation every year, in a commitment to continuously bring new, more
effective products to market. Essilor’s flagship brands are Varilux^®,
Crizal^®, Transitions^®, Definity^®, Xperio^®, Optifog^TM, Foster Grant^®, ^ 
Bolon^® and Costa^®. It also develops and markets equipment, instruments and
services for eyecare professionals.

Essilor reported consolidated revenue of over €5 billion in 2013 and employs
more than 55,000 people. It distributes its products in some 100 countries
with 28 plants, more than 450 prescription laboratories and edging facilities,
as well as several research and development centers around the world.

For more information, please visit

The Essilor share trades on the NYSE Euronext Paris market and is included in
the Euro Stoxx 50 and CAC 40 indices.

Codes and symbols: ISIN: FR0000121667; Reuters: ESSI.PA; Bloomberg: EI:FP.


Essilor International’s consolidated revenue (€ millions)
                                        2014     2013
First Quarter                                    
Lenses and Optical Instruments           1,160    1,149
  *North America                        467      463
  *Europe                               400      402
  *Asia/Pacific/Middle-East/Africa      211      205
  *Latin America                        82       79
Equipment                                39       42
Readers                                  124      85
TOTAL First Quarter                      1,323    1,276
Second Quarter                                   
Lenses and Optical Instruments                   1,148
  *North America                                452
  *Europe                                       400
  *Asia/Pacific/Middle-East/Africa              203
  *Latin America                                93
Equipment                                        50
Readers                                          102
TOTAL Second Quarter                             1,300
Third Quarter                                    
Lenses and Optical Instruments                   1,114
  *North America                                439
  *Europe                                       376
  *Asia/Pacific/Middle-East/Africa              208
  *Latin America                                91
Equipment                                        52
Readers                                          71
TOTAL Third Quarter                              1,237
Fourth Quarter                                   
Lenses and Optical Instruments                   1,095
  *North America                                416
  *Europe                                       394
  *Asia/Pacific/Middle-East/Africa              197
  *Latin America                                88
Equipment                                        60
Readers                                          97
TOTAL Fourth Quarter                             1,252


Investor Relations and Financial Communication
Véronique Gillet – Sébastien Leroy – Ariel Bauer
Tel.: +33 (0)1 49 77 42 16
Corporate Communication
Lucia Dumas
Maïlis Thiercelin
Tel.: +33 (0)1 49 77 45 02
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