The company's sales are expected to grow by between 10 and 10.5 percent in constant currencies this year, including a gain of about 6 percent for continuing operations. The acquisition of a few more prescription laboratories ? mainly in the USA, but perhaps also in Canada and in Brazil ? should add 4.0-4.5 percentage points to the growth. The level of profitability should remain at the high level registered in 2007.
The management gave this guidance to financial analysts yesterday in reporting an 8.1 percent sales increase to €2,908.2 million for 2007. Without the decline in the value of the dollar and other currency changes, the rate of increase would have been 12 percent. Organically, sales rose by 8 percent. Acquisitions boosted the final figure by 4 percent points. As usual, Essilor did not disclose its earnings for the year at this time, but the management indicated that the 18.1 percent operating margin reached in the first half of 2007 was more or less maintained in the second half.
On the other hand, the second half of the year was not as strong as the first one, recording organic sales growth of 7.5 percent as compared to 8.5 percent. The 4th quarter was the weakest, showing organic growth of only 6.4 percent, but that compared with a particularly strong gain of 8.9 percent during the 4th quarter of 2007. Total consolidated revenues increased by 6.1 percent to €708.0 million in the latest quarter.
Essilor claims to have won market shares almost everywhere last year with the possible exception of the UK, where its sales declined by 3 percent due to a change in the relationship with one major client. According to the company, the world market for ophthalmic lenses grew by only 4 percent last year.
Average selling prices rose again at Essilor, which shipped a total of 225 million lenses around the world in 2007, or 5 percent more than in 2006, with a stronger increase in progressive lenses and other value-added products. CR-39 continued its decline, whereas 1.6-index polycarbonate kept its momentum. New double-digit increases were recorded for Transitions photochromics and for anti-reflection coatings.
On a comparable basis, the company recorded sales increases of 6.2 percent in Europe, 8.1 percent in North America, 13.4 percent in the Asia-Pacific region and 15.6 percent in Latin America. In terms of euros, sales were up by 9.1 percent in Europe to €1,317.6 million, followed by North America with €1,214.2 million, Asia-Pacific with €266.9 million and Latin America with €109.5 million.
In Europe, comparable sales increased last year by 4.2 percent in France, by 7 percent in Central Europe and by 10 percent in Southern Europe. Sales in Eastern Europe excluding Russia rose by 20 percent to reach €37 million. In the 4th quarter, the organic growth rate in Europe slowed down to 3.1 percent from 8 percent in the same quarter of 2006. They were up by 3.4 percent in France.
The strong rally in North America continued through the 4th quarter, where sales were up by 7.4 percent on a comparable basis. The management pointed out that there had been no slowdown in December or at the beginning of January, in contrast with the general retail situation in the USA, which instead affected Luxottica (see following story). About 70 percent of Essilor's sales in North America are now generated by the labs, which work mainly for independent opticians who have apparently suffered less than the chains.
Expansion in emerging markets played a role in other parts of the world. China and India grew by between 25 and 30 percent, each generating revenues of €25-30 million for Essilor, which consolidates only half of the results of its joint venture with Korean interests in China. The Nike-Essilor joint venture in Japan recorded growth of 5 percent, indicating a further increase in its market share to an estimated 22-23 percent in the country, where the market is still dominated by Hoya.
Some growth will come this year from the introduction of new products. The new Generation VI of Transitions lenses will be launched in North America and in Asia, ahead of a launch in Europe in 2009. Essilor is also introducing a new anti-static A-R coating under a licensing agreement with 3M. The new Crizal Avancé technology uses elements of 3M's Scotchgard Protector coatings. It is different from the technology used by Essilor for Scotchgard branded A-R coatings sold to LensCrafters in the USA.
The 16 acquisitions made by Essilor in 2007 ? half of them companies based in the USA - contributed €107 million in extra revenues for the group last year. They cost €144 million and will generate supplemental annualized sales of €160 million, including €91.5 million in the USA.
In addition to the takeover of additional labs in North America, Essilor is targeting some acquisitions in Asia and Latin America. It announced a few days ago its first acquisition in Brazil. Essilor moved to buy a stake in Unilab, a prescription lab based in the Northeastern part of the country. Officials did not publicize the size of the initial investment, but indicated that Essilor's shareholding in the company will reach 51 percent of the equity by 2011. Essilor already has a distribution subsidiary in the country as well as a factory and a number of lens treatment centers. Unilab generates $5 million in annual sales and carries several Essilor products, including the Varilux range of progressive lenses. Essilor has decided to keep Unilab's management in place for the time being.
The world leader in ophthalmic frames has also announced the acquisition of yet another independent laboratory in the USA, Interstate Optical. Based in Ohio, it was ranked fifth largest in the country by Vision Monday's 2007 Top Lab Report. Essilor has stated that it will keep the former owners on - John, Rob and Debbie Art - as the lab's management team. Last year Interstate Optical had revenues of $26 million.
