The new joint venture between Essilor and Nikon, which should break even this year, is launching now in Japan an organic lens with an index of 1.74, the highest to have been offered sofar in the market. Manufactured at Essilor's own facilities in small quantities for the moment, the lens will be gradually introduced in other markets.
This is just one of many high-tech projects in which the world's largest manufacturer of optical lens is involved, frequently on a joint venture basis as it already does with its 10-year-old Transitions venture with PPG. Essilor has taken a 20 percent stake in The MicroOptical Corp., a firm in the Boston area with which it is developing a system to display computer and mobile phone images on corrective lenses.
Essilor has a majority stake in VisionWeb, the new B-to-B site that it plans to start up in the USA in mid-2001, charging 50 US cents per click, with Johnson & Johnson acting for the moment as a minority shareholder, but it plans to reduce its own stake in that venture to about 40 percent as new partners are brought in from all branches of the eyewear industry. There are no plans for the moment to expand this operation to Europe.
These and other initiatives are all attempts by Essilor, which is spending 5 percent of sales on research, to optimize its sales growth and margins in a global market which is still expected to grow at an average annual rate of about 5 percent. According to Essilor, the market for high-index lenses should increase at an average annual rate of 10-12 percent over the next 5 to 10 years. Polycarbonate lenses, which have already gained 20 percent of the French market, may reach a growth rate of 15-20 percent. Growth rates of between 8 and 10 percent are anticipated for progressive lenses, photochromic lenses and anti-reflection coatings ? all areas where Essilor is a market leader.
Essilor's management is anticipating a sales increase of only between 5.5 and 6 percent this year. Based on preliminary figures, Essilor raised its total sales by 19.2 percent to 1,483.4 million euros in the 9 months ended Sept. 30, but they grew by only 10.6 percent in constant currencies and by 6.7 percent on a comparable basis, without including the Nikon-Essilor joint venture and a few recent acquisitions. The company's sales growth is particularly slow in the USA, where its profit margins declined in the 1st half of this year.
The Paris stock exchange has displayed a somewhat neutral reaction to the release of these figures and to the announcement earlier this month that Saint-Gobain, the diversified French glass manufacturer that has been Essilor's largest shareholder, will not sell its 32 percent stake to any strategic partner, as some analysts had speculated.
Saint-Gobain has decided to sell a 22 percent stake in the company on the Paris stock exchange and to transfer its remaining 10 percent interest to Essilor itself. The stock offer will be closed on Nov. 7, with 90 percent of the shares going through a global placement, coordinated by the Lazard bank, at a fixed place due to be set on Nov. 8. After this buyback, which will raise only slightly Essilor's debt load, shareholders will be asked to cancel the shares and to vote for a 10-for-1 stock split, enhancing the return on equity. After this operation, more than 90 percent of the total equity will be floating on the stockmarket, leaving the balance in the hands of the management.