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L’Oreal Confident on 2014 Outlook After Earnings Meet Estimates

L’Oreal SA shares have been buoyed by speculation it may buy back some or all of Nestle SA’s 29 percent stake in the maker of Maybelline mascara even as sales slow in western Europe and North America. Photographer: Fabrice Dimier/Bloomberg

L’Oreal SA, the world’s largest cosmetics company, reported a 4.8 percent increase in 2013 earnings and said it’s confident of outperforming the global cosmetics market this year.

Operating income rose to 3.875 billion euros ($5.3 billion), Paris-based L’Oreal said yesterday in a statement after markets closed. That about matched the average of 19 estimates compiled by Bloomberg. The shares earlier surged 4.5 percent following a Bloomberg News report that Nestle SA is exploring ways to reduce its $30 billion stake.

L’Oreal shares have been buoyed by speculation it may buy back some or all of Nestle’s 29 percent holding in the maker of Maybelline mascara even as sales slow in western Europe and North America. L’Oreal said last month it is seeking to grow 1.5 times faster than the global cosmetics market in 2014, which Sanford C. Bernstein analysts say will be a challenge.

“Underlying growth has accelerated in cosmetics, which the market will like,” Alex Howson, a London-based analyst at Jefferies International Ltd., said by phone. “People will be pretty happy with the luxury number.”

L’Oreal shares rose to 129 euros at the close of trading in Paris. The stock has gained 1 percent this year, giving the maker of Vichy skincare a market value of 78.2 billion euros.

Higher Dividend

“We are starting 2014 with confidence,” L’Oreal Chairman and Chief Executive Officer Jean-Paul Agon said in yesterday’s statement. The economic context “is still marked by uncertainties, particularly on the monetary front.”

Fourth-quarter sales gained 5.4 percent, excluding acquisitions, disposals and currency shifts, beating analysts’ estimates for 4.7 percent growth.

Like-for-like sales climbed 1.6 percent in western Europe, 3.7 percent in North America and 9.4 percent in new markets, led by Africa and the Middle East, L’Oreal said.

“The U.S. still looks pretty soft, which is disconcerting,” though western Europe was good, Howson said.

Sales advanced more than analysts estimated at L’Oreal’s professional products, luxury and Body Shop units. They were weaker than predicted at the consumer-products division.

L’Oreal said it will increase its dividend by 8.7 percent to 2.50 euros a share. It also said it will propose to shareholders the appointment to the board of Merck KGaA’s Belen Garijo. She is president and CEO of the German company’s prescription drug unit Merck Serono.

Net income in the 12 months through December increased to 2.96 billion euros from 2.87 billion euros in 2012, L’Oreal said. Total sales advanced 2.3 percent after currency fluctuations wiped 3.7 percent off growth, it also said.

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