The strength of the dollar helped to boost the reported revenues of Essilor International by 25.4 percent to €1,659 million in the first quarter. On a comparable basis, they went up by 4.0 percent, as changes in the scope of consolidation and currencies boosted the top line by 8.7 and 12.8 percentage points, respectively. Strategic acquisitions like Transitions Optical and Coastal.com contributed 6.8 percentage points to the growth in the quarter.

In the Lenses & Optical Instruments division, which grew organically by 4.4 percent, Europe performed above expectations during the first quarter, especially in the U.K., Italy, Spain, the Eastern European countries and even in the domestic French market. The group's management attributed this to a strengthening market situation, the effect of Essilor's higher media spend, good acceptance of the company's new products and the establishment of a new management structure for each major country on the continent.

Unit volumes increased in Europe for key product lines such as Varilux, Transitions and Crizal Preventia. The group has decided to boost advertising from April on after a successful media campaign in France for an interesting two-product package called Qualissime.

As previously reported, the group has decided to raise its global spending on consumer media to €200 million this year from €150 million in 2014. Most of the promotions are starting during the current second quarter. The budget for this year is being raised by €8-10 million because of the strong profit contribution expected from the group's strongly rising sales in euros.

Essilor Revenues

(Million Euros, Quarter ended March 31)

 

Q1 2015

% Change (reported)

Like-for-like Growth (%)

Change in the scope of consolidation (%)

Currency Effect

Optical Lenses andInstruments

1,454

25.3

4.4

9.0

12.0

North America

650

39.2

4.5

13.4

21.3

Europe

441

10.4

2.5

7.0

1.0

Asia-Pacific & Africa

267

5.6

5.6

4.9

15.9

Latin America

96

10.0

10.0

4.3

2.0

Sunglasses & Readers

163

1.8

1.8

9.6

20.0

Equipment

42

-2.1

-2.1

-2.4

13.7

TOTAL

1,659

25.4

4.0

8.7

12.8

Thanks to the dollar, North America became the largest region by far in the first quarter, with a share of more than 47 percent of total group revenues. On an organic basis, sales increased by 4.5 percent in the region.

Among the group's main brands, Crizal and Xperio enjoyed double-digit growth and Varilux' sales accelerated in the region. Boosted by media campaigns, its online sales in the U.S. through Eyebuydirect and Framedirect grew by more than 40 percent.

In Latin America, sales expanded by 10.0 percent. The company continued to cope with an ongoing market slowdown in Brazil, but Crizal and Kodak performed well, and its local manufacturing activities are keeping Essilor competitive in view of depreciation of the Brazilian real.

Essilor says it is booming in all other Latin American countries, led by Colombia, and improving in Mexico. During the first quarter, Essilor achieved the number one position in Costa Rica through the takeover of a local company, Grupo Vision, which was the first company to launch Varilux in Central America more than 40 years ago. It operates also in neighoring Nicaragua.

Sales grew by 5.6 percent elsewhere organically. All the fast-growing markets outside Latin America expanded at double-digit rates, with a combined 12 percent increase in local currencies. However, exports from India, China and Korea were globally flat because of the strength of the dollar. In India, the group's main high-end brands enjoyed rapid growth, while its mid-tier brands benefited from a switch from glass to plastic lenses and a partnership with a local wholesaler, Enterprise. Essilor's branded products enjoyed double-digit growth in China.

Essilor reported very strong growth also in smaller markets such as South Africa, Indonesia and even Russia, where it has just launched its Nikon lenses.

On the down side, the group reported a further sales decline in Japan, which represents 1.5 percent of total sales, attributing it to the economy, the demographic situation in the country and the change in the VAT rate a year ago. Sales in Australia developed at a rate close to 5 percent.

Organic sales rose by only 1.8 percent for Sunglasses & Readers in the quarter. The group's mid-tier sun brands, Costa and Bolon, experienced high growth in their respective markets - the U.S. and China. FGX continued to decline due to an inventory rundown, but Essilor's management indicated that it should have been the last negative quarter for this U.S. subsidiary. The second quarter is due to show a high single-digit increase for FGX, due to new contracts that have been put in place.

After a relatively strong performance in the fourth quarter of 2014, the Equipment division recorded an organic sales drop of 2.1 percent. The group's management said it is not worried about this performance, considering that any acquisition made by the group reduces the size of the addressable market outside the company.

Going forward, the company is expected to benefit from the launch of several new products. Among other highlights, Eyezen, a lens that is meant to relax the user's eyes, is being  launched in Europe and the U.S. in single vision and progressive designs, with Asia scheduled to follow in the second and third quarters. New Varilux Comfort and Physio lenses are being introduced in the U.S. and China. A full line of Transitions Xtractive photocromics will be launched worldwide and will include a lens that darkens behind the windscreen of the car.

The company did not report its profit figures for the first quarter, but the management said they came in above plan. It confirmed its previous guidance, which calls for a contribution margin of at least 18.8 percent and organic sales growth of 4 to 5 percent. It said that the integration of Transitions and Coastal.com is going well and contributing to strong operating margins.

At its annual meeting yesterday, the shareholders of Essilor, many of whom are employed by the company, approved an 8.5 percent increase in the annual dividend to €1.02 per share.