L'Oreal shares climb after strong Q4 figures, CEO comments on Nestle's stake

[PARIS] Shares in French cosmetics group L'Oreal rose on Friday after its fourth quarter sales beat expectations, along with a confident outlook for 2018, while comments regarding its intentions on Nestle further buoyed the stock.

L'Oreal's chief executive reiterated L'Oreal's willingness to buy Nestle's 23 per cent stake in the firm should its Swiss shareholder want to sell, also helping lift L'Oreal shares. Nestle declined comment.

L'Oreal shares were up 1 per cent in early session trading, among the top gainers on France's blue-chip CAC-40 index.

Nestle shares were up 0.7 per cent.

"Q4 17 organic sales of 5.5 per cent is 50 basis points above Inquiry Financial consensus of 5 per cent, strong 2018 outlook," Liberum analysts wrote in a note, retaining a "hold" rating on L'Oreal shares.

L'Oreal Chairman and chief executive Jean-Paul Agon said on Thursday he was confident of significant growth in like-for-like sales in 2018. This was after L'Oreal reported that sales had risen by a better-than-expected 5.5 per cent in the fourth quarter on a comparable basis.

"FY 2017 results are reassuring", added Investec Securities analysts, who kept a "buy" rating on the stock.

"We note CEO Agon's interview in the Financial Times, reiterating L'Oreal's willingness to buy Nestle's 23 per cent take.. Scarcely a surprise, but this may excite some: an acquisition of the stake by L'Oreal, part-funded by a sale of its own Sanofi stake would be circa 10 per cent accretive, we think.," the brokerage added.

Asked if L'Oreal was ready to repurchase its stake, Mr Agon told the Financial Times: "We have all the resources for that.

We are cash rich. We have our Sanofi stake, we are absolutely financially very solid and we have what it takes to do anything" The death in September of billionaire Liliane Bettencourt has focused attention on how L'Oreal's founding family and major shareholder Nestle would manage their stakes in the world's biggest cosmetics firm.

Meanwhile billionaire investor Daniel Loeb, founder of hedge fund Third Point, has pushed for Nestle to sell its L'Oreal stake as he keeps up pressure with demands that Nestle move faster to overhaul its general corporate strategy.

REUTERS