Cost control and brand focus keeps LVMH ahead of the rest
goods group LVMH combat the persistent effects of adverse currency
exchange rates in 2003.
Overall sales at the diversified group (which also produces jewellery, watches, perfume and leather goods) were down 6 per cent at €11.96 billion, but would have been 4 per cent higher without the currency impact, LVMH said.
Cost controls and efficient currency hedging helped the group improve operating profits even after the currency movements, with income some 9 per cent higher at €2.2 billion. Lower financial expenses related to debt reduction during the year helped push the group's net profits through the €1 billion barrier for the first time with a 25 per cent increase to €1.02 billion.
In the wine and spirit business, operating profit was up 6 per cent to €796 million, making it the second most important unit for LVMH after fashion and leather goods. The performance was driven by a handful of core Champagne and Cognac brands: Moët & Chandon, Dom Perignon and Veuve Clicquot performed particularly well in the UK and Japan, while Veuve Clicquot and Krug posted excellent results in the US.
Hennessy consolidated its leadership of the US Cognac market (where sales of many brands have been boosted by the drink's association with rap artists), and there was a recovery in sales to Asian markets such as China and Taiwan after several years of recession.
With dozens of wine and spirit brands in its portfolio, the company has been selling off a number of brands with lower growth prospects, allowing it to target its investments moer effectively. In July, the Hine Cognac brand was sold to Caribbean group Angostura, while the Canard-Duchêne Champagne brand went to the Thiénot group in October.
The current year has started well, the company said, predicting an increase in tourist numbers in Asia and the US would give a major boost to sales - much of LVMH's business is done through Duty Free outlets, and is linked closely to tourist travel as a result. The first two months of the year have seen organic growth rates of around 7 per cent, the company said, adding that it was targeting a "tangible increase" in operating income in 2004 on the back of the expected good performance.
