Despite the economic adversity, in the first half year L’Oreal’s has posted a big hike in profits.
Its income rose from €1.09bn last year to reach €1.32bn, an increase of 21 percent – a figure that was driven by a 10 percent rise in sales for the first six months of the year to €9.7bn.
First half operating profit was also positively impacted, driven by reductions for internal costs manufacturing expenses, which helped to increased production volumes by 21 percent to €1.67bn.
Cost cutting initiative and ad investment pay off
L’Oreal introduced a major cost cutting strategy last year in an effort to help stave off a slump in sales caused by the worldwide economic recession.
However, the one area the company chose not to reduce costs was advertising, with investment in this area rising by 0.45 percent to reach 30.5 per cent of total sales for the six month period.
According to Andrew Wood, financial analyst at Sanford Bernstein, this investment has helped to boost growing sales in developing markets and to stave off further declines in the more troubled European markets.
Profits beat expectations sending share prices soaring The profit figures beat market expectations and share prices jumped by 10 percent on the Paris Bourse following the announcement – the biggest rise in nearly two years.
In a rare statement made to French financial newspaper Les Echos, L’Oreal CEO Jean-Paul Agon stressed his belief that the strong results showed the recent financial scandal implicating L’Oreal heiress Liliane Bettencourt had no bearing on the way the business operated.
However, in a press conference to discuss the results, Agon did also state that he was more cautious about the outlook for the rest of the year by underlining that the strength of the performance in the first half of 2010 was unlikely to be repeated in the second half.