Essilor International reported consolidated revenues of €840.4 million for the three months ended March 31, representing increases of 10.3 percent in euros and 5.4 percent in local currencies. Excluding acquisitions, sales were down by 1 percent on a comparable basis, and the company credited this decline mainly to its instruments business.
No profit figures were given, but the management indicated that cost controls allowed the company to maintain its margins at roughly the same levels as a year ago, excluding the recently acquired operations of Satisloh, which had lower margins on net sales of €24.4 million in the quarter, not including €7.7 million in revenues from its sales to Essilor. Satisloh is facing weaker demand from prescription laboratories, primarily in Europe.
The group's sales of lenses were generally flat in value and down in volume by about 2 percent in a difficult market where only the high-end segment and the low segment enjoyed some growth. Essilor's sales of equipment fell by about 10 percent to around €29 million excluding Satisloh. In particular, sales of edgers went down by 20 percent as customers preferred to wait for deliveries of a new model whose shipments was schedule to start in the second quarter. Many orders have been collected for this new instrument.
Excluding Satisloh, Essilor's European revenues in the first quarter fell by 4.5 percent in euros, or by 4.4 percent on a comparable basis, going down to €330.8 million. Sales of lenses were off by 2 percent in the region. Besides the decline in instrument sales, the group was affected by very challenging economic conditions in the U.K., Spain, Italy, where sales fell by around 5 percent overall, and by a softening of the growth in Eastern Europe, where sales were up by only 4 percent. By leveraging the group's multi-network strategy, operations in France and Germany remained flat overall during the period, while Russia saw very strong growth and an increase in market share following the recent establishment of a sales subsidiary there.
In the U.S., sales from Essilor's prescription labs to independent eye care professionals held up well during the quarter, but its sales to the chains declined by about 8 percent, as the business with some of them became more difficult. Total sales in North America were up by 18.1 percent to €375.9 million, but there was a drop of 1.9 percent on a comparable basis.
The Asia-Pacific region overall had revenues of €81.5 million, a 17.8 percent increase in reported terms and 15.1 percent up on a comparable basis. Emerging markets in Asia continued to enjoy very strong growth in revenues, especially India, but the growth in China declined to a rate of 5 percent. Operations in Australia also reported sustained momentum. On the other hand, sales in Japan declined by about 5 percent in a persistently difficult market.
Essilor maintained its robust expansion in Latin America, led by operations in Brazil and in Mexico where sales were up by 15 percent. Total revenues in the region were €27.8 million, amounting to a 1.9 percent drop in reported terms but, bucking the trend in other regions, with an increase of 10.2 percent on a comparable basis. South Africa sported a 20 percent increase.
Financial analysts responded favorably to the management's presentation of the group's results and its short-term projections. Going forward, revenues are expected to grow by between 6 and 7 percent in the second quarter, thanks mainly to acquisitions, as sales are predicted to remain stable or strengthen a little on an organic basis.
Several new acquisitions are due to be finalized in the second quarter, During the first quarter, Essilor completed the acquisition of four small Australian laboratories that generate annual sales of €3.6 million. It also raised its stakes in two companies in Poland and India, and it bought back 220,418 of its own shares, for an investment of €3.6 million.
Essilor raised its stake in JZO, the Polish leader in ophthalmic lenses, from 10 percent to 51 percent. Its interest in the joint venture with GKB Rx Lens Private was increased from 50 to 60 percent. The Polish company, which is also BBGR's distributor in the country, had sales of €15.5 million in 2008. The Indian company had sales of nearly €20 million.
Changes in the scope of consolidation added 6.4 percentage points to the group's growth for the first quarter, with half of the impact coming from the consolidation of Satisloh and half from the other acquisitions made in 2008. The 4.9 percent positive currency effect primarily reflected the stronger U.S. dollar, and to a lesser extent the yen, against the euro. On the downside, reported sales were reduced by the weakness in the British pound, the Australian dollar, the Korean won and the Brazilian real over the period.