The growth of Essilor International slowed down in the 2nd quarter ended June 30, leading to an 8.39 percent drop in the share price on the day it published its sales results for the first half of the year. On a comparable basis, excluding the effect of acquisitions and changes in foreign currency, its sales went up by only 4.6 percent in the quarter, after the 6.2 percent increase of the first quarter.

Noting that these figures stood up against exceptionally high increases of 8.4 percent and 8.9 percent in the 1st and 2nd quarters of 2007, respectively, the management told investors that it expects comparable growth of between 5 and 6 percent for the full year, in line with historical trends. Profit figures for the first half are only going to be disclosed next month, but the operating margin should have remained close to the record levels achieved in the past year.

In reported terms, the company's revenues of €1,520.3 million for the full six-month period of 2008 were only 2.9 percent higher than in the first half of last year. Excluding acquisitions, the growth was 5.4 percent, and it was an even stronger 9.6 percent excluding foreign currency effects. Acquisitions contributed 4.2 percentage points. The currency effect was a negative 6.6 percent, mostly attributable to the fall of the dollar versus the euro, but also due to the decline of the British pound, the Canadian dollar and the Korean won.

On a comparable basis, first-half sales grew by only 2.7 percent in Europe, by 7.0 percent in North America, by 6.9 percent in the Asia-Pacific area and by 17.6 percent in Latin America. Within the European region, growth of 6 percent in Northern Europe was partly offset by a rise of only 1.5 percent in Southern Europe. The German market confirmed its strength with an increase of 9 percent. Sales in Eastern European countries grew by between 20 and 30 percent, but slower increases were recorded in Croatia and the Czech Republic.

In the second quarter, Essilor's revenues of €758.1 million were up by 2.3 percent on a reported basis as reported and by 4.6 percent on a comparable basis. Again, Latin America increased the most on a comparable basis, up by 21.0 percent. European sales were up by only 1.8 percent. While sales in the Asia-Pacific region went up by 7.3 percent, those in North America increased by 5.7 percent on a comparable basis, but in spite of some more recent acquisitions, they fell by 1.1 percent in reported euros.

Revenues were particularly strong in Argentina and Mexico, with jumps of around 30 percent. The market in Australia and New Zealand began to recover after a difficult first quarter. On the other hand, the Chinese market increased by only 15 percent during the first half because of the earthquake in Sichuan.

Macro-economic factors apparently played a role in the quarter, particularly in Europe. The British market showed slightly negative growth. Sales in Italy and Spain went up by only 2 percent and 2.5 percent, respectively, and they virtually stopped growing in Spain from May onward. Sales growth in the USA declined to around 6 percent, despite the introduction of a new generation of Transitions lenses there. The new range will be introduced in some European markets during the last two months of 2008, a little earlier than planned.

The price mix was responsible for one percentage point of the growth in the USA. It had a lower impact in Europe where more customers preferred the lower price points. Overall, sales of lenses rose by between 3 and 4 percent in Europe, and equipment sales were affected by delayed shipments of edgers and other new products.

In the quarter, Essilor continued its expansion through numerous little acquisitions. It bought a majority interest in Nika, a German lens wholesaler with sales of about €9 million that is the country's distributor of Nikon products. Essilor also acquired majority interests in Deschutes Optical and Optimatrix, two prescription laboratories in the USA with revenues of $2.7 million and $4.6 million, respectively. It bought Frame N' Lenses, the leading independent lab in Malaysia, with revenues of €2 million and 5 percent market share there. In India, Essilor purchased the assets of the ophthalmic division of Sankar & Co., represented for the most part by five former franchised laboratories that generate €0.9 million in revenues annually.

The acquisitions conducted in the first half of the year cost Essilor €67 million, but they should generate annual revenues of at least €81 million. This doesn't include the agreement announced in June for the purchase of Satisloh, which has yet to be completed. Excluding Satisloh, these acquisitions and others still in the pipeline are expected to add four percentage points to the company's total growth for the full year.