Essilor International had a solid first quarter, with a 7.8 increase in turnover to €905.8 million, meeting expectations. At constant currencies and on a comparable scale, revenues grew by 2.5 percent, led by higher sales in emerging markets and a slow rise in established markets. The effect of foreign currencies was negligible.
It was the fourth sequential quarterly organic increase for the group, but its chief executive, Hubert Sagnières, cautioned in a conference call that ?the shadow of the crisis is still out there, especially in the mature markets, where we are not yet back to the levels of 2007.? He said he and the rest of the management team remained ?confident yet attentive.?
The company had recorded a sales decline on a comparable basis in the first quarter a year ago. The group's management thus reiterated its forecast of a sales increase of between 5 and 7 percent on an organic basis this year, but specified that this would include ?organic acquisitions? of laboratories.
The recent ?strategic? acquisition of FGX International and Signet Armorlite, which were consolidated in mid-March and at the beginning of April, respectively, should add six percentage points to the growth. The group's operating profit should remain in the range of 18.2 percent, but each of these two companies will probably dilute it profitability by between 0.2 and 0.3 percentage points. The introduction of IFRS accounting guidelines should lower the operating profit more or less by an additional €10 million.
In the first quarter, Essilor's revenues from optical lenses and instruments grew by 5.9 percent to €863.9 million, a 2.7 percent increase on a comparable basis. Unit sales of lenses increased, particularly in the mid-priced range. Sales of instruments rose by around 20 percent, representing about 4 percent of the total turnover. Represented mainly by Satisloh, sales of laboratory equipment decreased by 3.4 percent to €23.6 million, indicating an improvement from its previous performance.
Essilor remains positive about Satisloh's prospects, partly in view of its recent launch of new products and of its deployment in Asia, but also because of a new acquisition concluded last month. The company has acquired a 60 percent interest in DAC Vision, a leading supplier of consumables for lens surfacing, coating and mounting, with annual sales of about €30 million.
The partnership should allow the U.S. company to develop new products in combination with Satisloh, which had been looking at an acquisition in the area of consumables for several years. It will help Essilor to extend the range of products delivered by Satisloh and Delamare.
In addition to previously announced acquisitions such as a 72 percent interest in the ILT Danyang factory in China, Essilor has made investments in other companies over the last few weeks. It has bought a majority stake in Frames of America, which generates annual sales of around $10 million through its FramesDirect.com website. It has acquired Hawkins, an American prescription laboratory based in Kansas with sales of $4.5 million, and it has acquired control of SMJ, a distributor with a laboratory in Taiwan that makes annual sales of €1.6 million.
Previous acquisitions contributed just over five percent to Essilor's sales growth in the first quarter. Acquisitions accounted for 3.2 percent of the increase in Europe, 2.6 percent in North America, 3.3 percent in Asia-Pacific and Africa, and 5.9 percent in Latin America. but all the regions showed positive figures on a comparable basis. Europe saw a 4.6 percent increase to €345.3 million, including organic growth of 0.7 percent percent, with significant variations from one country to the other.
France had a rather solid sales increase thanks to the company's multi-channel strategy, with an improvement in the lens business and strong demand for instruments. Belgium returned to growth. Parts of Eastern Europe also turned to an upswing, led by Poland, while Russia continued to grow. In Western Europe, Spain had the worst performance. The Nordic countries and the Netherlands still struggled as well. Sales results remained negative in the U.K., Italy and Germany, but continued to show a certain improvement.
Sales in North America rose by 0.9 percent to €375.6 million, but this time the major chains shared with independent opticians in the overall organic growth of 2.1 percent, thanks in particular to the success of Essilor's new Xperion offer of polarized lenses.
In Asia-Pacific and Africa sales grew by 20.4 percent to €103.1 million, with an 8.5 percent organic increase. The growth rate was higher than 10 percent in China and higher than 20 percent in India and in Southeast Asia. Sales in Latin America jumped by a whopping 43.6 percent to €39.9 million, including an organic rise of 15.3 percent, with Argentina and Mexico progressing by more than 20 percent.
Sales to independent eye care professionals rose in Australia. Japan remained sluggish. Equipment sales to prescription lens laboratories started to pick up during the quarter with orders rising significantly, especially in emerging market.
Company officials were bullish about the prospects for Signet Armorlite under Essilor's ownership, noting in particular that the group can help the U.S. company to take advantage of strong demand for its Kodak brand in emerging markets such as China and India. The takeover went through after U.S. competition authorities gave their blessing, but the acquisition price was not disclosed.
The purchase will help Essilor expand in the high-quality mid-range segment. Signet Armorlite has annual revenues of $115 million, mostly through subsidiaries in the U.S., the U.K., Germany, Spain, Colombia, Portugal and the Netherlands. The company will continue to be led by its present management team.