L’Oreal Maintains Annual Targets as First-Half Profit Rises

L’Oreal SA (OR), the world’s largest cosmetics maker, said first-half earnings rose 7.7 percent and confirmed its full-year targets as stronger sales in emerging markets fueled improved profitability.

Operating income climbed to 2.04 billion euros ($2.7 billion), Paris-based L’Oreal said today in a statement after markets closed. The median of eight estimates compiled by Bloomberg was 2.03 billion euros.

Operating profit as a percentage of sales reached 17.4 percent, a record for a six-month period. The maker of Maybelline is benefiting from growth in developing regions such as Asia-Pacific and Latin America. The company this month agreed to buy Magic Holdings International Ltd. (1633), the top-selling facial-mask brand in China, where Euromonitor estimates beauty and personal-care product sales will expand 8 percent this year.

“We expect a modest positive share price reaction” to the earnings, said Eamonn Ferry, an analyst at Exane BNP Paribas in London with an outperform recommendation on the stock.

L’Oreal fell 0.4 percent to 122.4 euros in Paris today.

L’Oreal is confident in its ability “to once again outperform the market and to achieve a further year of growth in sales, results and profitability,” Chairman and Chief Executive Officer Jean-Paul Agon said in the statement.

The company said last month that global beauty-market growth is slowing to about 3.5 percent to 4 percent annually.

Margin Expansion

Profitability widened in all divisions in the first half, the company said. Margin expansion was led by gains in the consumer-products unit, whose operating profit was 20.8 percent of sales compared with 19.9 percent a year earlier.

“The mass cosmetics business had such a good margin, which is pretty exceptional in staples,” said Rahul Sharma, managing director of Neev Capital in London. Beauty is a category “where you still have some pricing power,” while L’Oreal is benefiting from its exposure to fast-growing markets, he said.

First-half sales rose 4.7 percent to 11.7 billion euros, L’Oreal reported July 16.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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