Decline in LOreal H1 Profits

06 September 2005

The world's biggest cosmetics company, L'Oreal, has reported a 6% drop in net profits for the first half of the year.

The French-headquartered firm, which owns such diverse brands as Maybelline mascara, Ralph Lauren fragrance and Garnier Fructis shampoo, says H1 profits came in at €892 million ($1.11bn; £607m).

The results follow a down turn in spending in European beauty salons and a fall-off in sales of the company's luxury brands.

Sales rose 3.5% in H1, faster in the second quarter, and the company forecasts full year sales growth of between 5% and 6%. Overall operating profit was unchanged at €1.12 billion and the company's operating margin slipped to 15.6% from 16.1%.

Outgoing chairman and ceo Sir Lindsay Owen-Jones warns reporters and analysts against judging L'Oreal solely on the basis of the first half, saying: "A single half-year's performance has limited significance."

He revealed at a results presentation in Paris that the company is among the potential bidders eyeing the cosmetics arm of Japan's Kanebo and he promised an "intensive program" of product launches and promotional activity lined up for the second half ahead of the busy holiday season.

L'Oreal is expected to spend around €4.7bn on advertising in 2005.

Data sourced from Financial Times Online; additional content by WARC staff