L'Oreal says sales growth to accelerate in H2

By Astrid Wendlandt

PARIS (Reuters) - French cosmetics group L'Oreal sees sales growth accelerating in the second half as demand in Western Europe and the United States improves.

The world's biggest cosmetics group said on Thursday positive exchange rate movements helped to produce its strongest revenue growth in twenty years in reported terms, or a year-on-year increase of 15.3 percent, in the second quarter.

The group said Armani, thanks to its "Si" and "Acqua di Gio" perfumes, and Yves Saint Laurent, boosted by the success of "Black Opium" perfume and make-up, recorded double-digit first-half growth while its professional hair products unit saw a rebound, helped by its L'Oreal Professionel and Redken brands.

"We believe that the market will be comforted by the improvement in the two developed regions," UBS said in a note, referring to the United States and Western Europe.

L'Oreal's like-for-like 3.6 percent sales growth year-on-year in the second quarter undershot market expectations of 4 percent.

But Chief Executive Jean-Paul Agon told Le Figaro newspaper the miss was mainly due to business deteriorating in Brazil and without that country, sales growth would have been 4 percent.

"The bad news this year comes from Brazil and it is there to stay because the crisis is structural," Agon told the French daily.

Agon predicted sales growth of the global cosmetics market would be 3.5-4 percent in 2015, of the same order as last year and with which L'Oreal's underlying sales growth was in line.

"But it (the group's sales growth) will be higher in the second half thanks to the expected pick-up at our mass market division and which will continue in 2016," Agon told Le Figaro.

Agon told the paper that online sales, up 40 percent in the first half, now represented around 4-5 percent of L'Oreal's total revenue.

"E-commerce is a an activity with good profitability, with low costs," Agon said.

Agon declined to say if L'Oreal would try to lure Gucci's perfume licence from Coty, which just acquired it from Procter & Gamble as part of a $12.5 billion deal.

"This is great news," Agon told the paper about the transaction. "It means that P&G abandoned its ambition, set 15 years ago, of becoming a world leader in the beauty market."

L'Oreal, which makes Lancome cream and Garnier shampoo, achieved operating profit of 2.32 billion euros ($2.53 billion) in the first half, broadly in line with the average estimate in a Thomson Reuters I/B/E/S poll of 2.31 billion.

(Editing by Andrew Callus and Mark Potter)