L'Oreal SA (LRLCY.PK)

H1 2012 Earnings Call

August 29, 2012 3:00 am ET

Executives

Jean-Paul Agon - Chairman, Chief Executive Officer and Chairman of Strategy & Sustainable Development Committee

Jean-Régis Carof - Director of Shareholder and Market Authority Relations

Christian Mulliez - Executive Vice President of Administration and Finance

Analysts

Eva Quiroga - UBS Investment Bank, Research Division

Celine AH Pannuti - JP Morgan Chase & Co, Research Division

Erik Sjogren - Morgan Stanley, Research Division

Catherine Rolland - Kepler Capital Markets, Research Division

Gael Colcombet - MainFirst Bank AG, Research Division

Presentation

Jean-Paul Agon

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So maybe we can get a little bit of organization, or I maybe start. So good morning, all. Thank you all for being back to work the same time as us, because I know that we're one of the few who publish half yearly results at the end of August. So we're all back at school together. Jean-Régis, tell us how this is going to work.

Jean-Régis Carof

Fine, thank you. Good morning, ladies and gentlemen. Before we start the meeting, I'll just give you a few practical details about how it's organized. And I would invite you, firstly, to read the disclaimer that's on the last page of the leaflet you've been given. As for the organization of the meeting, first thing, as you came in, you would have found some translation headsets. French is on Channel 1 and English on Channel 2. I would therefore suggest that you select the channel you wish to hear.

Secondly, we have WiFi in this building. And thus, you can have an Internet connection by using the login and the password that you have on the screen before you and that you will also find on the posters in the lobby outside. Therefore, we would ask you to switch your mobile phones and smartphones to silent so they don't sound off during the meeting.

Thirdly, as you came in, you were given the leaflet with the charts that Mr. Agon will talk about during the presentation. You also have the press release on the half yearly results that was made available to the financial community yesterday at 6 p.m. And fourthly, as usual, the whole meeting will be on a webcast on the loreal-finance.com website.

And in that respect, I first will tell you the French communication department has developed, under L'Oréal my finance, a certain number of iPad and iPhone applications that have been specially designed for you. And as now, I can tell you that quite a number of you have already downloaded these applications from App Store and told us, in fact, this morning how happy they were with the availability of this information on their iPad or iPhone. You seem to be blowing your own trumpet there. Well, not really. I'm just telling you how our communication systems are growing. All right. No more self-publicity then.

So just wanted to say that all the presentations and the recording of the webcast of the meeting will be available on Presentations & Webcasts on the same website this afternoon as of 4:00, and the half yearly report 2012 will be available online as of the 31st of August in French and English. Thank you very much.

Jean-Paul Agon

Okay. Thank you very much, Jean-Régis. We will kick off, therefore, with the figures. Christian Mulliez, the floor is yours.

Christian Mulliez

Thank you, Jean-Paul. Good morning, everybody. As part of today's presentation of L'Oréal's financial performance in H1 2012, we will present information pertaining to sales, profit, cash flow and the balance sheet.

Consolidated sales came to EUR 11,213,000,000, up 6.7% on a like-for-like ForEx basis. Like-for-like sales rose 6%. We have a 0.7% positive scope difference, which is mostly due to the impact of the Q-Med acquisition by Galderma in March 2011, of the Clarisonic acquisition in the U.S. in December 2011 and of Cadum in France in April 2012.

With the highly positive currency fluctuations at over 3.8%, the increase on a reported basis comes to over 10.5%. With regard to the ForEx difference, it is difficult to forecast exactly where it will stand for the full year of 2012. I can simply tell you that with the current exchange rate, that is EUR 1 for $1.25, the impact on yearly sales should be a positive 5% or more.

With regard to the currency situation in the first half year of 2012, the U.S. dollar and to a lesser extent, the Chinese yuan and sterling were the main contributors to this positive impact. With regard to our main billing currencies, only the Brazilian real and the Mexican peso have weakened against the euro. Please note that the weight of the euro in H1 2012 accounted for 28.4% of the group's sales, down from 31.1% in H1 2011 and 32.5% in H1 2010. Therefore, the group is continuing to steadfastly strengthen its position outside of the Eurozone.

Sales per branch and division on a like-for-like basis. Professional Products are up 2.9%. Consumer Products have grown 4.7%. L’Oréal Luxe is still going strong, rising 10.4%. Active Cosmetics comes to 5.4%. The Body Shop is at 5.4%. And lastly, Dermatology or Galderma is enjoying 11% growth. Please note that on a reported basis, L’Oréal Luxe's strong growth, standing at 17.9%, is due both to the Clarisonic acquisition and to a positive ForEx impact, not forgetting a reported -- a 19.9% growth of Galderma on a reported basis. And this is due to the Q-Med acquisition and also to the fact that the -- we have a stronger dollar, and this has an impact on the U.S. to euro conversion of Galderma sales in the U.S.

On a geographic basis, every geographic area is growing. Western Europe is enjoying modest growth, 0.8%. North America is enjoying brisk business, 7.3%. The New Markets are enjoying double-digit growth, 10.2%. The New Markets are seeing the relative weight strengthening again since they account for 38.8% of the Cosmetics sales in H1 2012, up from 37.4% in H1 2011. This year, the New Markets have become the leading geographic area for the group. They have now overtaken Western Europe. Asia -- the Asia Pacific region is enjoying strong growth, 12.5%; South America, 8.2%. As announced, Eastern Europe stands at 3.1%. So Eastern Europe is gradually recovering following a disappointing year in 2011. Africa and the Middle East is enjoying strong growth, 17.2%.

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