Essilor International's total revenues went up by 22.6 percent to €3,408 million in the first half of this year, and the “contribution from operations” grew at an even faster rate of 24 percent, raising the operating margin to 19.1 percent from 18.9 percent a year ago, thanks in part to a better product mix, new operational efficiencies and the integration of Transitions. The gross margin reach a new record at close to 60 percent.

Excluding a currency effect of 13.2 percentage points and 5.3 percentage points in incremental sales from acquisitions, the group's sales still advanced at a nice rate of 4.2 percent in the first half. The organic growth rate improved to 4.4 percent in the second quarter.

As the second half of the year tends to be less profitable, the management is forecasting a contribution margin of at least 18.8 percent for the full year, compared with 18.6 percent in 2014. Sales are expected to increase by more than 4.5 percent organically. Including acquisitions, they should go up by between 8 and 11 percent on a currency-neutral basis.

Essilor Revenues

(Million Euros, Six Months ended June 30)

 

2015

2014

% Change (reported)

Like-for-like Growth (%)

Acquisitions (%)

Optical Lenses and Instruments

2,954

2,419

22.1

4.7

5.3

North America

1,312

985

33.2

4.1

7.0

Europe

904

826

9.5

3.8

4.4

Asia-Pacific & Africa

536

433

23.8

5.4

2.6

Latin America

202

176

14.8

10.3

7.0

Sunglasses & Readers

362

276

31.3

2.6

7.0

Equipment

92

85

7.9

-4.8

-1.3

TOTAL

3,408

2,780

22.6

4.2

5.3

All the segments recorded organic sales increases except for the Equipment unit, whose sales declined by 4.8 percent during the six-month period. Dominated by Satisloh, its reported sales continued to be affected by increasing consumption of its products in-house. On the other hand, Sunglasses & Readers began to move up more quickly, registering organic sales increases of 2.6 percent for the six months and 3.2 percent in the second quarter, thanks in part to the acquisition of Fabris Lane in the U.K. and the start of a big new seven-year contract by FGX with a large U.S. chain of drugstores, CVS.

FGX' sales in North America returned to growth and are expected to accelerate for the balance of the year. Meanwhile, two brands of sunglasses previously bought by Essilor, Costa in the U.S. and Bolon in China, continued to develop satisfactorily. Costa's sales increased by close to 20 percent in the first half.

The biggest business unit of the group, Lenses & Instruments, generated an organic sales increase of 4.7 percent for the six months, accelerating to 4.9 percent in the latest quarter in spite of lower third-party sales by Transitions, whose total turnover declined by 3-4 percent, and by the group's lens factories in China and Korea. The management was particularly pleased with the relative strength of the group in the mature markets of North America and Europe, where sales of lenses and optical instruments increased in the first half by 4.1 percent and 3.8 percent on a comparable basis, respectively.

The growth rate declined to 3.7 percent in North America during the second quarter, but quickened to 5.0 percent in Europe, rebounding from the 2.5 percent increase of the first quarter. Good growth was reported in the U.K., Eastern Europe, Spain and Italy. There was an improvement even in Russia. Sales accelerated in Germany, but remained softer in the Benelux countries and Scandinavia.

There was no big change in sales volumes in Europe. The company attributed the progress in Europe to an improved product mix, the introduction of the Eyzen line of lenses, the effect of new marketing actions and expanding partnerships with key accounts. New contracts were signed with accounts in France and Northern Europe. Incremental media spending was deployed in countries such as France, the U.K. and Spain, apparently with good results. It is advertising also in China, Russia and Brazil.

Globally, Essilor has set a marketing budget of €215 million for this year, up from €150 million in 2014. However, an observer noted that the group's international marketing efforts around its own brands remains much lower than that which some major optical retailers spend on a national basis.

Essilor Int'l. Consolidated Income Statement(Million Euros , Six Months ended June 30)

 

2015

2014

% Change

REVENUES

3,408

2,780

22.6

Cost of Sales

1,367

1,182

15.7

Research & Development

104

90

15.6

Selling & Distribution

841

649

29.6

Other Operating Expenses

445

346

28.6

Other Income (Expense), Net

(37)

321

-

Finance Costs

19

16

-

Pre-Tax

594

818

-27.4

Tax

172

88

95.5

NET

422

730

-42.2

Euro/Share (Diluted)

1.79

3.26

-45.1

Organic sales of lenses and instruments grew by 5.4 percent during the first half in the Asia-Pacific-Middle East-Africa region. They rose by more than 30 percent in the Middle East. The group said it gained market shares in India. Meanwhile, Chinese customers are developing an appetite for higher-value solutions such as Crizal and Transitions.

With an organic increase of 10.3 percent, Latin America was the fastest-growing region in the first half of the year. Sales rose by almost 10 percent in Brazil and Mexico and at stronger rates in Colombia and Costa Rica. The business in Brazil was aided by media campaigns against the Crizal and Kodak brands.