Essilor is working on many new acquisitions in all three continents. Combined with other recent takeovers such as that of Novacel, a large French laboratory that is expected to generate sales of €39 million this year, they could add between 4 and 5 percentage points to the group's annual growth in 2007 to a rather positive organic growth, lifting the growth rate well above Essilor's long-term target to raise sales at an average rate of 5-6 percent per year.
The nature of the new targets could not be determined, but it is almost certain to continue to include a good number of prescription laboratories that will help sustain the launch of the company's value-added products in the USA and elsewhere. As indicated in the previous issue, Essilor is also particularly interested in new technologies and in further penetration of the growing emerging markets in Asia.
The 2007 financial year has started well for the world leader in ophthalmic lenses. Boosted by a strengthening price mix, Essilor's revenues increased by 8.1 percent on a comparable basis during the 1st quarter ended March 31, with gains all over Europe and in other parts of the world. This performance was all the more remarkable as the French company had already scored an 11.5 percent sales increase on a comparable basis in the 1st quarter of 2006.
The effect of previous and new acquisitions helped to lift the turnover by a further €20.3 million, or 2.9 percentage points, in the latest quarter. However the weakening of the U.S. dollar and other currency changes had a negative effect of €33.7 million or 4.9 percent on the actual reported revenues, which ended up showing an increase of only 6.2 percent to €735.6 million for the three months.
Sales in Europe rose by 11.5 percent on a reported basis to €334.5 million. On a comparable basis they were up by 8.6 percent with increases of 7.1 percent in France, 7.7 percent in the UK, 5.9 percent in Central Europe and 16 percent in Southern Europe. In Central Europe, the German market grew by only 1 percent for Essilor. Sales in Eastern Europe jumped by 21 percent, reaching a relatively respectable level of €9 million for the quarter.
Sales in North America continued to grow by 8.6 percent on a comparable basis, thanks in part to a growing network of labs, building up further on a 12 percent rise that Essilor had recorded in the region during the 1st quarter of 2006. On a reported basis, however, North American sales moved up by only 0.9 percent to €311.7 million.
Sales increased by 12.8 percent in the Asia-Pacific region on a comparable basis, driven in particular by gains of 25-26 percent in both China and India. The group did 4 percent better in Japan, indicating an improved market share in the home country of Hoya Vision Care. Sales in Australia and New Zealand grew by 10 percent. In terms of euros, the region contributed 8.3 percent higher revenues of €65.3 million.
Latin America remained a relatively marginal market for Essilor, with sales of only €24.1 million in the quarter, represented mainly by Brazil. The group's sales rose by 2.9 percent in euros and by 8.4 percent on a comparable basis during the period, but the management is budgeting a double-digit increase for the full year.
The gradual introduction of the Varilux Physio range of free-form progressive lenses last year was a significant factor of growth. A certain role in this regard will be played by the launch this year of a new range of free-form progressive lenses by Essilor's BBGR subsidiary, called Anateo in some countries and Accolade in others, but it will probably have less of an impact on this year's overall results, which will depend in part on the level of orders by key accounts in the USA and in some other countries. Described as the first progressive lens that adopts to the anatomy of the eye, using a new exclusive biometric technology, it features a slightly different technology from Varilux Physio.
Essilor also benefited last year from the successful launch in North America of its new line of anti-static anti-reflective coatings based on nano-technology, Crizal Alizé AST, which is now being brought to Europe. Additional revenues will be generated in Europe by the launch last month of the CR39 version of Transitions' Generation V of photochromic lenses. In the USA, where polycarbonate is more popular than in Europe, customers will have to wait until next year for Transitions' worldwide launch of its Generation VI, which is based on polycarbonate.
Essilor's sales of high-index lenses, whose market penetration is strongest in Europe and Japan, increased by a hefty 24 percent during the 1st quarter of this year, contributing to raise the overall price mix. In fact, group sales went up by only 2-2.5 percent in the quarter in terms of volume as compared to the very strong first quarter of 2006. Progressive lenses went up strongly. Single-vision CR39 lenses instead declined by 5 percent in units, while polycarbonate lenses were largely flat.