Luxottica reports positive financials ahead of Essilor merger

Luxury eyewear giant Luxottica said on Monday it expected to close by mid-2018 its proposed merger with lens maker Essilor, while forecasting steady growth in its own sales and profits for the year.

The deal agreed a year ago to create an industry leader worth 48 billion euro ($59 billion) is awaiting regulatory clearance in Europe, the United States and China after receiving an unconditional green light on Friday from Brazil’s competition watchdog.

Luxottica, which makes eyewear for luxury brands such as Chanel, said its expected sales to grow between 2 and 4 percent this year, net of currency swings, after a 2.2 percent rise in sales for 2017 to 9.16 billion euros.

The group said adjusted operating profit in 2018 would grow in line with sales or slightly less, while the increase in adjusted net profit could be as much as twice that of sales thanks to lower taxes and interest payments.

The eyewear industry is set to expand as the world’s population ages and middle-classes in emerging countries grow. But it also faces increasing competition from cheaper rivals and the sector’s traditional distribution and licensing models are being called into question.

Luxottica has been restructuring since 2014 when founder and 62-percent shareholder Leonardo Del Vecchio took back the reins of the group as executive chairman.

Operating profit was 1.44 billion euros last year, up 2.7 percent annually net of currency swings and adjusted for one-off items and restructuring costs. ”The new Luxottica we have created over the last three years … is beginning to remind me of the group I had left,” Del Vecchio, 82, said in a statement.

Adjusted net profit jumped 12 percent at constant currencies to 970 million euros – above a 952 million euro average analyst forecast – boosted by a tax relief accord over industrial patents Luxottica signed last year with Italian authorities. Luxottica, which makes 57 percent of its sales in the United States, said it also benefited from the U.S. tax reform.

After parting ways with four chief executives in three years, Luxottica in December appointed Del Vecchio’s close aide Francesco Milleri as its new CEO. Milleri did not join Luxottica’s post-results conference call with analysts.

Essilor CEO Hubert Sagnières, who is set to share powers with Del Vecchio at EssilorLuxottica for the first three years, said in December that the merged group would look to hire a CEO at some point.

Chanel eyewear

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