EssilorLuxottica Slips as 2019 Vision Lacks Clarity -- Update

(Adds analyst comments, share movement.)

--Shares in EssilorLuxottica slipped after the company released combined 2018 figures for the newly merged Essilor and Luxottica businesses

--The eyewear maker said net profit for the year fell on an adjusted pro forma basis

--EssilorLuxottica's 2019 guidance and comments on its future plans failed to dispel questions, analysts said

By Cristina Roca

Shares in EssilorLuxottica SA (EL.FR) traded lower Friday after the company reported decreased 2018 net profit when adjusting for the merger of its two constituent businesses, and set out goals for the year ahead.

Reported net profit at the company--which was created in October 2018 when Italy's luxury eyewear maker Luxottica merged with France's optical-lens manufacturer Essilor--was 1.16 billion euros ($1.31 billion). On an adjusted pro forma basis, net profit was EUR1.87 billion, representing a 1.7% decline from 2017.

At 1032 GMT, EssilorLuxottica shares traded 5.3% lower at EUR102.90.

The results are uneventful, but it is what comes next that counts, Citi analyst Mauro Baragiola said.

For 2019, EssilorLuxottica said it expects sales to grow between 3.5% and 5% at constant-exchange rates. The company added that it sees net profit for the period, adjusted for the expenses from the Essilor-Luxottica combination and other special items, growing at 1-1.5 times the pace of sales growth.

Analysts' consensus expectations are around the top end of EssilorLuxottica's guided range, which implies small downgrades to estimates, Goldman Sachs analyst Veronika Dubajova said.

EssilorLuxottica's revenue guidance seems feasible, at least as far as the low end of the targeted range is concerned, Mr. Baragiola said. However, investors still run the risk of being disappointed this year, as integrating the two companies might prove more complicated than it seems on paper, he said.

The eyewear company said it was considering governance issues, but gave no update on plans regarding its leadership, a topic that has had investors concerned during the past few months. Questions on how the new company will be structured also persist, Mr. Baragiola said.

EssilorLuxottica said it expects synergies from the merger of the two businesses to range from EUR420 million to EUR600 million as a net yearly impact on its operating profit within the next five years. The company also said it sees revenue synergies in the EUR200 million to EUR300 million range.

EssilorLuxottica's reported revenue was EUR10.8 billion for 2018. On an adjusted pro forma basis, revenue for the year was EUR16.16 billion, representing a 1.2% year-on-year decline. EssilorLuxottica said that this represents 3.2% revenue growth at constant-exchange rates, and that both the Essilor and Luxottica businesses contributed to the result.

EssilorLuxottica reported separate 2018 figures for each of its two constituent businesses. Essilor's 2018 revenue was EUR7.46 billion, up 0.8% from 2017. Luxottica's sales for the year were EUR8.93 billion, down 2.8% from the year before due to currency headwinds. Luxottica's net profit for the year was EUR900 million, down 14% year-on-year, EssilorLuxottica said.

The company declared a dividend of EUR2.04 a share, to be approved at its annual meeting on May 16.

Write to Cristina Roca at [e-mail]; @_cristinaroca

(END) Dow Jones Newswires

March 08, 2019 05:53 ET (10:53 GMT)

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