Many factors contributed to the fantastic jump of 23.6 percent to €1,269.9 million reported last week by Essilor in its sales for the first quarter, compared with the year-ago period. Acquisitions contributed 12.5 percentage points to the growth, including 3.3 percentage points from Shamir Optical and Stylemark. An additional 2.6 percentage points came from a weaker euro against the U.S. and Australian dollars as well as the Chinese yuan.
Essilor reported a significantly high increase of 8.5 percent on an organic basis overall and in the area of lenses and optical instruments. The company attributed this in part to the launch of new products such as Optifog and Crizal UV and to what the management described as “vigorous global demand for better visual health.” For lenses and optical instruments alone, the company's organic growth reached 5.2 percent in Europe, 7.8 percent in North America, 13.3 percent in Latin America, and 17.9 percent in Asia-Pacific and Asia.
Represented mainly by Satisloh, Essilor's sales of equipment rose by 13.2 percent, up by 11.9 percent on a comparable basis, and orders in hand indicate that double-digit growth will continue over the next few months. Sales of readers nearly doubled to €85.2 million under the impact of Stylemark's acquisition, but they were up by 5.2 percent on an organic basis.
The management admitted that the group benefited in the first quarter from Hoya's inability to deliver many of its products because of the floods in Thailand, mostly in Europe and Japan, but quantified the impact at only about €10 million for the quarter. Company officials stressed that it had no impact on its sales in the U.S. or Latin America. They indicated that the “Hoya effect” has already started to fade, but Essilor hopes that some temporary clients will take on special new Essilor products such as Optifog and Crizal UV.
The growth reached in Europe was the highest since 2007. The management was very satisfied by the group's performance in France as well as in the U.K., where Hoya's problems accelerated the planned switch of the Boots Opticians chain from the Japanese company to Essilor as its primary lens supplier. However, sales in southern Europe fell by between 4 and 5 percent, and the business in northern Europe was not good, partly due to the delayed launch of new products and because – the management said – the group lacks a multi-channel strategy in that part of the continent.
Besides the launch of new products, North American sales were boosted by contracts signed with two major chains, with effect from the third quarter of 2011. They also benefited from very good weather conditions.
In Asia, sales rose by more than 25 percent in India and in China. They grew by between 13 and 14 percent in Japan, partly due to the “Hoya effect.” Australia performed well during the quarter.
In Latin America, Brazil turned in a satisfactory performance, led by strong demand for high value-added products such as progressive lenses and anti-reflective coatings. Essilor continued to enjoy faster growth in Mexico, especially in the AR segment. On the other hand, the group faced complications in Argentina because of the government's new trade regulations.
The management was particularly pleased with the acquisition of Shamir, whose sales have increased by around 15 percent in the nine months that the company has been under Essilor's control.
Despite the very strong performance of the group during the first quarter, the management reiterated its forecast of an overall sales increase of 12 to 15 percent in constant currencies for the full year, with only about 6.5 percentage points coming from acquisitions.
The growth will be fueled in the next months by the rollout of new products such as Optifog and Crizal UV in countries that have not been covered yet. The introduction of a “very revolutionary” new generation of Varilux lenses next September will add further steam, the management said.
The company still has about €1 billion worth of cash available for acquisitions, but with many new ones in the pipeline, it wants to ensure that they are worth the investment. In the meantime, Essilor paid nearly €102 million to buy back many of its own shares, offsetting the dilution resulting from the exercise of stock options held by senior executives and employees.