Luxottica Group S.p.A. ( LUX) Q3 2010 Earnings Call October 25, 2010 12:00 PM EST Executives Alessandra Senici – Group IR Director Andrea Guerra – CEO Enrico Cavatorta – CFO Analysts Daniel Hofkin – William Blair & Company Edouard Crowley – Exane BNP Paribas Erwan Rambourg – HSBC Domenico Ghilotti – Equita Valentina Romitelli – UBS Allegra Perry – Nomura Presentation Operator
During the course of today's call, certain projection or other forward-looking statement may be made regarding Luxottica Group's future financial performance or future events. We wish to caution you that such projection or statement are based upon current information and expectation, and actual results may differ materially from those projected in the forward-looking statements. You can read more about such forward-looking statements on page two of the slide presentation.We also refer you to our filings with the SEC and Italian securities authorities. These filings contain additional information concerning factors that could cause actual results to differ materially from those contained in management projection or forward-looking statements. We will begin with our CEO, Andrea Guerra. Andrea Guerra Welcome to our third quarter review conference. Obviously, I am and we are all in Luxottica very pleased with our results. There are a number of reasons why we are pleased. I think the first being one of the main reasons why we live and we are in this market, and it is our brand portfolio, a portfolio which has demonstrated to be effective in very different market conditions. I am so happy to say that we are back with a solid double-digit high teens growth in our premium and luxury segment and not only what we shipped, but we also have an excellent order portfolio in our hands. The sun season has been good and long. And, obviously, Ray-Ban and Oakley were ahead of the pack. The second growth factor of which we are particularly pleased is our ability to grow in Europe and North America. In Europe, our growth rate has been 12%. In US, in dollars, our growth of our all our businesses have been plus 8%. So it means that in all developed markets of the world, we were able to grow and to have a solid growth rate.
On the other side, emerging markets, we were much faster. And I think this was again in another quarter of quick growth in emerging markets above the 20% rate, I would say in all major emerging markets.Third fact is that our profitability has grown much faster than the sales growth, above 30%. And I would say that even if we have grown 30%, obviously, probably we would have grown a little bit faster if we were not comparing ourselves with the third quarter last year in which we had reversed some accruals, and Enrico will tell you more in details about this, and the second being a continuous not positive performance in Australia, a geography in which I have to say the last four weeks have shown a solid improvement. So profitability has grown, has grown significantly and systematically around the company. And I think that our fourth quarter will drive profitability even faster than what we have done in Q3. Fourth factor of our happiness today is that again we have been able to generate consistent free cash flow, EUR250 million in a quarter. And I think this is also paying the continuous effort that all our people daily are putting on working capital with excellent results on inventory and receivables. Fifth, we have invested for the long quarter. It’s not just we are just reaping the efficiency activities of a year-ago of higher growth rate of sales. We also reinvested back in the business. And in the first nine months of the year, we have invested EUR40 million more in our marketing activities and I think this is very important for our long term. Enrico, if you want to give us some more details, thank you. Enrico Cavatorta Thank you, Andrea, and good evening. So let's have a quick look of our main financial highlights for the third quarter and the nine months of 2010.
First of all, we are pleased to see that we have an acceleration of sales growth in both division and total group, both at constant exchange rate of current. Andrea mentioned we are in the 19%, 20% area of current exchange rate in both division and the group.Read the rest of this transcript for free on seekingalpha.com