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Essilor - 2009 Financial Results

    CHARENTON-LE-PONT, France, March 4, 2010 /PRNewswire-FirstCall/ --

    - A Remarkable Year in the Context of 2009
    - Revenue up 6.3%
    - Contribution Margin at a Record High of 18.2%
    - Restated EPS up 10% to EUR2.03
    - Free Cash Flow up 25% to EUR390 Million
    - Recommended Dividend of EUR0.70 per Share, up 6.1%

At its meeting yesterday, the Board of Directors of Essilor approved the financial statements for the year ended December 31, 2009. The financial statements have been audited and the auditors are in the process of issuing an unqualified opinion.

    EUR millions                             2009      2008    % Change

    Revenue                                 3,268   3,074.4     + 6.3%
    Contribution from operations(1)         594.4     551.2     + 7.9%

    As a % of revenue                        18.2%     17.9%        -
    Profit attributable to equity holders   394.0     382.4     + 3.1%
    Restated earnings per share(2) (EUR)     2.03      1.85    + 10.0%
    Reported earnings per share(EUR)         1.91      1.85      +3.2%
    Free cash flow(3)                         390       313    + 24.6%

    (1) Operating profit before compensation costs of share-based
        payments, restructuring costs, other income and expense, and
        goodwill impairment.
    (2) Restated for the EUR26.1 million provision in 2009 in respect of
        various risks and tax litigations
    (3) Net cash from operating activities less purchases of property,
        plant and equipment and intangible assets, according to the IFRS
        consolidated cash flow statement.

In a recessionary economy, 2009 saw an unprecedented slowdown in the ophthalmic optical market. In this context, Essilor was able to demonstrate the solidity of its growth model and continued to progress in the market by leveraging its innovative products and efficient distribution networks and by stepping up its acquisition strategy.

    The year's highlights included:

    - Successful new products, including the new Crizal(R) anti-reflective
      lens, Xperio(TM) polarizing lens, personalized lenses incorporating
      eyecode(TM) technology and the Mr Blue(R) edger.
    - Faster deployment in the mid-range, thanks to a dedicated local
    - Entry of 27 new companies into the Company in all regions.
    - Pursuit of productivity gains and operational efficiency.


Based on its confidence in the Company's outlook, the Board of Directors will recommend that shareholders at the Annual Meeting on May 11, 2010 approve the payment of a 2009 dividend of EUR0.70 per share, representing a 6.1% increase over the 2008 dividend. The payout ratio increased to 37%. The dividend will be payable as from May 28, 2010.


In 2010, the economic environment is expected to be more favourable than in 2009, with a progressive recovery in global activity. The ophthalmic optical market enjoys positive trends, linked to the ageing of the population, the potential of high value-added products and the rise of a middle-class in emerging countries. Backed by the robustness of its business model, demonstrated in 2009, Essilor will step up its strategy of market share gains. 2010 will therefore be a major year for new product launches, geographic expansion and the acceleration of bolt-on acquisitions. Essilor expects a gradual improvement in its revenue and will continue to pursue operational efficiency gains.

Analyst Meeting

A meeting with financial analysts will be held today, March 4, at 10:30 a.m. CET. It will be webcast live in French at and in English at

Forthcoming investor events

First-quarter 2010 report: April 23, 2010

Annual Shareholders' Meeting: May 11, 2010

The world leader in ophthalmic optical products, Essilor International researches, develops, manufactures and markets around the world a wide range of lenses to correct myopia, hyperopia, presbyopia and astigmatism. Its flagship brands are Varilux(R), Crizal(R), Essilor(R), Definity(R) and Xperio(TM). Based in France, the company reported consolidated revenue of EUR3.2 billion in 2009, with 34,700 employees and operations in 100 countries.

For more information, please visit

The Essilor share trades on the NYSE Euronext Paris market and is included in the CAC 40 index. Codes and symbols: ISIN: FR FR0000121667; Reuters: ESSI.PA; Bloomberg: EI:FP.


    Revenue               2009       2008     % Change     % Change

    EUR millions                             (reported) (like-for-like)
    Europe              1,331.7    1,356.3     - 1.8%       - 2.7%
    North America       1,354.0    1,253.0     + 8.1%       - 0.4%
    Asia-Pacific          344.7      301.8    + 14.2%      + 12.3%
    Latin America         134.0      127.2     + 5.3%       + 7.0%
    Laboratory            103.6       36.1   + 186.9%       - 7.0%
    Total               3,268.0    3,074.4       6.3%         0.1%

    Consolidated revenue rose 6.3% to EUR3,268 million in 2009.

    - On a like-for-like basis, revenue grew by 0.1%, reflecting stable
      Lens revenue and a 2.3% increase in Instrument revenue.
    - Consolidation of companies acquired in 2008 and 2009 accounted for 4.9%
      of reported growth, of which 2.3% from Satisloh.
    - The 1.3% positive currency effect was mainly due to the rise in the
      dollar and, to a lesser extent, the yen against the euro, which
      offset the negative impact on revenue of the weaker British pound,
      Brazilian real and Canadian dollar.

Geographically, unit sales edged back slightly in mature countries but rose sharply in emerging markets:

    - Revenue in Europe declined by 2.7% in a challenging environment.
      During the year, Essilor stepped up deployment of its multi-network
      strategy, which allows it to capture the strong demand for
      entry-level products while continuing to pursue its innovation
      strategy. Operations in France, Germany and Italy, as well as the
      Instruments Division, held up particularly well, with operations
      in Russia and Finland reporting the strongest performances.
    - Revenue was virtually unchanged in North America (down 0.4%). In
      the United States, firm sales to eyecare professionals and independent
      laboratories offset difficulties encountered with certain optical
      chains. Revenue in Canada was hurt by a fall-off in unit sales.
    - In Asia, where revenue rose 12.3% overall during the year, performance
      was satisfactory in every country except Japan. Growth was
      led in India, China and South Korea by sales of specialty lenses and
      other new products, and lifted in Australia by strong demand for the
      Varilux and Crizal lines. Revenue also saw sustained growth in South
    - After enjoying very strong growth in 2008, revenue in Latin America
      rose a solid 7% in 2009 despite the economic slowdown. The sharp
      increase in anti-reflective lens sales in Brazil and especially Mexico
      helped to improve the product mix.
    - Lastly, in a particularly challenging year for the capital equipment
      industry, Satisloh held the decline in sales to around 7%, thereby
      enabling the company to increase its market share. Surfacing machine
      sales remained strong during the year.

    Fourth quarter: continued recovery in growth

    Revenue            Q4 2009    Q4 2008     % Change     % Change

    EUR millions                             (reported) (like-for-like)
    Europe               342.3      338.9      + 1.0%       - 0.7%
    North America        302.4      319.3      - 5.3%       + 1.1%
    Asia-Pacific          85.0       75.7     + 12.3%      + 11.2%
    Latin America         38.1       28.7     + 33.0%      + 15.1%
    Laboratory            31.6       34.0      - 7.1%       - 7.1%
    Total                799.4      796.6       +0.4%       + 1.5%

Consolidated revenue for the fourth quarter alone stood at EUR799.4 million, up 0.4% year-on-year as reported and 1.5% like-for-like. With Satisloh now contributing to organic growth, the contribution from acquisitions declined to 2.3% for the period. Lastly, for the first time in 2009, the currency effect turned negative (at 3.4%), primarily due to the appreciation of the euro against the US dollar.

    Business conditions improved in every operating region during the quarter:

    - Business stabilized in Europe.
    - Demand turned up noticeably in North America and significantly in
      Latin America.
    - Growth remained strong in Asia.
    - The Laboratory Equipment business recovered.

Six new prescription laboratories were acquired in Europe, the United States, India and South Africa, along with a distributor in Brazil, for total additional full-year revenue of EUR23 million.

                    CONTRIBUTION MARGIN AT 18.2%

    EUR millions                           2009       2008

    Gross margin                        1,832.6    1,749.3

    As a % of revenue                      56.1       56.9
    Operating expenses                  1,238.2    1,198.2
    Contribution from operations(1)       594.4      551.2

    As a % of revenue                      18.2       17.9

    (1) Operating profit before compensation costs of share-based
        payments, restructuring costs, other income and expense, and
        goodwill impairment.

The contribution from operations increased 7.9% to EUR594.4 million in 2009, while the contribution margin improved by 0.3 points to 18.2%, despite the dilutive impact of consolidating Satisloh. The growth may be analyzed as follows:

    - Gross margin declined by 0.8 points to 56.1% of revenue, due to the
      dilutive impact from Satisloh and other acquisitions. Excluding the
      impact of these acquisitions, gross margin was unchanged for the year.
    - Operating expenses as a percentage of revenue declined by 1.1 point,
      to 37.9%, thanks to i) tight control over selling and distribution
      costs (EUR706.6 million) and major reductions in overheads while
      maintaining a strong research and development commitment (funded at
      EUR151.2 million before deduction of a EUR10.4 million research tax
      credit) and ii) the positive impact of acquisitions whose operating
      expense/revenue ratio is lower than the Company average.

    Profit attributable to equity holders of the parent up 3.1%

Profit attributable to equity holders rose by 3.1% to end the year at EUR394 million, it represented 12.1% of revenue, close to the level of 2008. It may be analyzed as follows:

    - Other income and expenses from operations amounted to a net expense of
      EUR39.2 million, comprising EUR21.9 million in compensation costs of
      share-based payments and EUR17.3 million in restructuring costs,
      charges to provisions for contingencies, claims and litigation, and
      other expenses.
    - Operating profit increased 7.9% to EUR555.2 million for the year.
    - Finance costs and other financial income and expenses represented a
      net expense of EUR11.2 million compared with EUR2.5 million in 2008,
      reflecting the increase in net finance costs due to the higher average
      net debt for the year and, to a lesser extent, a decline in creditor
      interest income.
    - Share of profits of associates remained unchanged at EUR26 million, as
      higher earnings at Transitions (49%-owned) offset a decline at Sperian
      Protection (15%-owned).

Income tax amounted to EUR168.2 million, including a EUR26.1 million provision in respect of the various tax controls and litigations underway for the Company. Excluding this non-recurring item, the effective tax rate was 26.1%. The improvement was primarily led by a decline in the tax rate in Brazil and the faster earnings growth in regions with more favorable tax regimes.

Earnings per share rose 3.2% to EUR1.9. Restated earnings per share rose by 10 % to EUR2.03.


Essilor's business model continued to demonstrate its ability to generate strong cash flow in 2009. Operating cash flow amounted to EUR515 million, providing ample funds to finance the company's growth, by covering:

    - The EUR71 million rise in working capital requirement due to an
      increase in trade receivables.
    - EUR125 million in gross capital expenditure, representing 3.8% of

This left free cash flow[1] up 24.6% to EUR390 million.

This good cash flow performance also enabled Essilor to continue deploying its acquisitions and partnership strategy around the world (EUR161 million invested, net of acquired cash); pursue its share buyback programs (EUR76.1 million) and increase the dividend (EUR136 million).

    Change in net debt

    EUR millions

    Operating cash flow (before     586  Purchases of property,  125
    WCR)                                 plant and equipment
    Conversions of OCEANE           153  Change in WCR            71
    convertible bonds and other
    Issue of share capital           37  Dividends               139
    Other                             2  Financial investments   161
                                         net of the proceeds
                                         from disposals
                                         Share buybacks           76
                                         Decrease in debt        206

    Net cash position

The growth in earnings and cash flow helped to further strengthen an already very solid balance sheet. At December 31, 2009, the Company had net cash of EUR92.8 million, equivalent to 3.4% of consolidated equity.


Goodwill increased by EUR102 million in 2009, to stand at EUR1,060 million at year-end, or 25% of total assets.


Inventories amounted to EUR486 million at December 31, 2009, an increase of EUR10 million or 1% like-for-like.

In all, the balance sheet structure was strengthened, with an equity to assets ratio of 65.2%.


Essilor actively pursued its acquisitions strategy in 2009, purchasing interests in 27 companies during the year, mainly prescription lens laboratories or distributors. The strategy was deployed in every region, with 13 acquisitions in North America, five in Europe, six in Asia-Pacific, one in the Middle East, one in South Africa and one in Brazil.


Since the beginning of 2010, Essilor has continued to expand in the global marketplace with new partnerships. In China, a majority interest was acquired in Danyang ILT, an ophthalmic lens manufacturer, while a prescription lens laboratory was purchased in Abu Dhabi. In Australia, Essilor acquired a 70% interest in Eyebiz Pty Limited, Luxottica's Sydney-based optical lens finishing laboratory that supplies Luxottica's retail optical outlets in Australia and New Zealand.

In December 2009, Essilor agreed to acquire FXG International, the leading designer and marketer of non-prescription eyewear in the United States, with revenue of $259 million in 2009. The transaction, which is subject to regulatory approvals and the affirmative vote of a majority of FGX's shareholders, is expected to close in March. It will enable Essilor to enter a new growth market.


    [1] Net cash from operating activities less purchases of property,
        plant and equipment and intangible assets, according to the IFRS
        consolidated cash flow statement.


                             As of December 31, 2009

                          CONSOLIDATED INCOME STATEMENT

    EUR thousands, except per share data                  2009         2008

    Revenue                                          3,267,978    3,074,419
    Cost of sales                                   (1,435,333)  (1,325,106)

    GROSS MARGIN                                     1,832,645    1,749,313
    Research and development costs                    (151,221)    (144,518)
    Selling and distribution costs                    (706,619)    (672,268)
    Other operating expenses                          (380,367)    (381,368)

    CONTRIBUTION FROM OPERATIONS                       594,438      551,159

    Restructuring costs, net                           (11,383)      (3,736)
    Impairment losses                                        0            0
    Compensation costs on share-based payments         (21,865)     (24,906)
    Other income from operations, net                    2,456        1,926
    Other expenses from operations, net                 (7,128)      (9,284)
    Gains and losses on asset disposals, net            (1,303)        (629)

    OPERATING PROFIT                                   555,215      514,530

    Finance costs                                      (31,498)     (28,181)
    Income from cash and cash equivalents               18,739       29,042
    Other financial income, net                         41,551       43,349
    Other financial expenses, net                      (39,946)     (46,716)
    Share of profit of associates                       25,974       26,053

    PROFIT BEFORE TAX                                  570,035      538,077

    Income tax expense                                (168,169)    (149,266)

    NET PROFIT                                         401,866      388,811
    Attributable to equity holders of Essilor          394,036      382,356
    Attributable to minority interests                   7,830        6,455

    Basic earnings per common share (EUR)                 1.91         1.85

    Weighted average number of common shares
    (thousands)                                        206,691      206,875

    Diluted earnings per common share (EUR)               1.89         1.81
    Diluted weighted average number of common
    shares (thousands)                                 210,557      213,615



    EUR thousands                               December 31,    December 31,
                                                       2009            2008

    Goodwill                                      1,059,941         957,605
    Other intangible assets                         221,688         205,249
    Property, plant and equipment                   803,022         811,484

    INTANGIBLE ASSETS AND PROPERTY, PLANT AND     2,084,651       1,974,338

    Investments in associates                       180,034         164,690
    Other long-term financial investments            73,920          44,214

    Deferred tax assets                              57,229          51,955
    Non-current receivables                          10,570           8,093
    Other non-current assets                            854             693

    OTHER NON-CURRENT ASSETS, NET                   322,607         269,645

    TOTAL NON-CURRENT ASSETS, NET                 2,407,258       2,243,983

    Inventories                                     485,606         475,299
    Prepayments to suppliers                         12,373           9,521
    Current trade receivables                       746,266         684,797
    Current income tax assets                        17,039           5,859
    Other receivables                                18,434          37,294
    Derivative financial instruments                 40,485          50,996

    Prepaid expenses                                 20,765          21,242
    Marketable securities                            33,965          32,538
    Cash and cash equivalents                       385,548         505,571

    CURRENT ASSETS, NET                           1,760,481       1,823,117

    TOTAL ASSETS                                  4,167,739       4,067,100


                             EQUITY AND LIABILITIES

    EUR thousands                               December 31,    December 31,
                                                       2009            2008

    Share capital                                    38,792          37,984
    Additional paid-in capital                      415,321         311,765
    Retained earnings                             2,107,571       1,829,870
    Treasury stock                                 (174,580)       (153,407)
    Convertible bond (OCEANE) call option             6,854          22,206
    Revalution and others reserves                  (21,653)         (9,109)
    Translation reserve                             (50,194)        (70,235)
    Net profit attributable to equity
    holders of Essilor International                394,036         382,356

    HOLDERS OF ESSILOR INTERNATIONAL              2,716,147       2,351,430

    Minority interests                               21,786          14,544

    TOTAL EQUITY                                  2,737,933       2,365,974

    Provisions for pensions and other
    post-employment obligations                     131,316         132,401
    Long-term borrowings                            282,222         437,617
    Deferred tax liabilities                         24,678          22,406
    Long-term payables                                2,393           2,359

    NON-CURRENT LIABILITIES                         440,609         594,783

    Provisions                                       68,887          36,720
    Short-term borrowings                            82,929         212,835
    Customer prepayments                              2,866           8,611
    Short-term payables                             624,184         631,945
    Current income tax liability                     46,507          35,626
    Other liabilities                               144,289         143,159
    Derivative financial instruments                 10,897          28,480

    Deferred income                                   8,638           8,967

    CURRENT LIABILITIES                             989,197       1,106,343

    TOTAL EQUITY AND LIABILITES                   4,167,739       4,067,100


    EUR thousands                                           2009       2008

    NET PROFIT                                           401,866    388,811

    Share of profits of associates, net of dividends
    received                                              19,504     20,637
    Depreciation, amortization and other non-cash items  143,400    148,886

    Profit before non-cash items and share of profits
    of associates, net of dividends received             564,770    558,334
    Provision charges (reversals)                         19,724      9,810
    (Gains) and losses on asset disposals, net             1,303        629
    Cash flow after income tax expense and finance
    costs, net                                           585,797    568,773
    Finance costs, net                                    13,027       (692)
    Income tax expense (current and deferred taxes)      168,169    149,266
    Cash flow before income tax expense and finance      766,993    717,347
    costs, net
    Income taxes paid                                   (172,226)  (144,650)
    Interest (paid) and received, net                     (8,773)     8,607
    Change in working capital                            (70,656)   (84,503)
    NET CASH FROM OPERATING ACTIVITIES                   515,338    496,801
    Intangibles assets and purchases of property,
    plant and equipment                                 (125,275)  (184,298)
    Acquisitions of subsidiaries, net of the cash
    acquired                                            (128,634)  (452,879)
    Purchases of available-for-sale financial assets     (24,263)    (4,673)
    Purchases of other long-term financial investments    (8,071)   (11,978)
    Proceeds from the sale of subsidiaries, net of
    cash sold                                                  0          0
    Proceeds from the sale of other non-current assets     8,889      3,799
    NET CASH USED IN INVESTING ACTIVITIES               (277,354)  (650,029)
    Proceeds from issue of share capital                  37,085     31,385
    (Purchases) and sales of treasury stock, net         (76,096)  (112,613)
    Dividends paid to:
    - Equity holders of Essilor International           (136,189)  (128,393)
    - Minority shareholders of subsidiaries               (2,922)      (188)
    Repayments of borrowings other than finance lease
    liabilities                                         (185,931)   177,782
    Purchases of marketable securities                    (1,427)    (1,359)
    Repayments of finance lease liabilities               (2,521)    (2,644)
    Other movements                                         (536)       473
    NET CASH USED IN FINANCING ACTIVITES                (368,537)   (35,557)

    EQUIVALENTS                                         (130,553)  (188,785)
    Cash and cash equivalents at January 1               486,765    677,164
    Effect of changes in exchange rates                    7,690     (1,614)
    CASH AND CASH EQUIVALENTS AT DECEMBER 31             363,902    486,765
    Cash and cash equivalents                            385,548    505,571
    Short-term bank loans and overdrafts                 (21,646)   (18,806)

                Investor Relations and Financial Communications
                       Veronique Gillet - Sebastien Leroy
                           Phone: +33(0)1-49-77-42-16

SOURCE Essilor

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