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• Introduction Xavier Fontanet
• 2003 Results Philippe Alfroid
• Asia – Pacific Patrick Cherrier
• Conclusion Xavier Fontanet
• Questions and answers
4
4Growth modest in the beginning of the year, strong in the fourth quarter
4Sharp improvement in margins
4Numerous acquisitions
Essilor in 2003
5
2002 2003 % change
Sales 2,138 2,116 -1%+4.3% like-for-like
Gross margin 59.7% 60.6%
Operating income 340.6 364.9 +7.1%
Operating margin 15.9% 17.2%
Net income afterminority interests 182.4 200.3 +9.8%
Earnings per share (in €) 1.82 1.98 +8.8%
Net debt to equity 13% 8%
€ millions
Financial Highlights
6
2,138.3
+92.2
+74.5
2,116.4
-1%
Dec. 31, Organic Scope of Currency Dec. 31, 2002 Growth consolidation effect 2003
+4.3%
+3.5% -188.5
Sales Growth Analysis
-8.8%
in € millions
7
0
2
4
6
8
1996 1997 1998 1999 2000 2001 2002 2003
5.7% 5.7% 6%
4.2%
6.5%5.6%
7%
4.3% 1H +2.3%2H +6.5%
Organic Growth(1996 - 2003)
8
Sales by Region
Europe North America South America Asia
973
1,048
970 869
51 49 143 150
+7.3%+1%
+17% +2%
% growth like-for-like
9
Sales by Region
Europe North America South America Asia
973
1,048
970 869
51 49 143 150
+9%+5.5%
+17% +12.2%
% growth excluding currency effect
10
2003 Highlights (1)
4Growth in Europe led by France, United Kingdom, Spain, Eastern Europe and Germany in the fourth quarter
4US down in the first half, with an upturn in the third quarter and strong growth in the fourth
4Sales still lower in Japan but stable in the fourth quarter
MARKETS
11
2003 Highlights (2)
4Transitions® Next Generation
41.67 and 1.74 high indexes
4Polycarbonate lenses
4Varilux® Ipseo™
4CR 39 lenses down slightly
PRODUCTS
12
€ millions
Record Operating Margin
858 901 961 997
2,1162,1382,0701,978
1,6621,563
1,4261,196
9.310.7
12.513.2 12.5 13.3
14.4 13.8
17.2
13.915
15.9
0
1000
2000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20038
10
12
14
16
18
20
22
24Sales Operating margin
13
Breakdown of Operating Margin Gain
4Product mix added 0.9 point to gross margin
4Transitions®
4Cost control: 0.4 point
4Germany in 4Q: 0.4 point
1.3 pointincrease
14
Sales and Operating Income Analysis
340.6
+45.9+9.8 -31.3
364.9+7.1%
2,138.3
+92.2
+74.5
-188.5
2,116.4
-1%
+13.4%
+2.9%-9.2%Op.
income
Sales
+4.3%
+3.5%
-8.8%
Dec. 31, Organic Scope of Currency Dec. 31, 2002 Growth consolidation effect 2003
15
2003 2003Actual € rate 2002 € rate
Sales 2,116.4 -1% 2,304.9 +7.8%
Op. income 364.9 +7.1% 396.3 +16.4%
Op. margin 17.2% 17.2%
Net income 200.3 +9.8% 214.9 +17.8%
Net margin 9.5% 9.3%
Op. margin 17.2% 17.2%
Currency Effect = Translation Adjustment
16
2003 2003 2003Actual € m in ¥ bn in $ m
Sales 2,116.4 -1.0% 278.9 +10.5% 2,416.8 +19%
Op. inc. 364.9 +7.1% 48.1 +19.6% 416.7 +29%
Op. margin 17.2% 17.2% 17.2%
Currency Impact on Sales and Operating Income
17
2002 2003 % changerestated*
Operating income 340.6 364.9 +7.1%
Net interest expense (36.7) (33.5) -8.7%
Non-operating expense (20.1) (14.9)
Income tax (78.3) (90.3)
Net income (loss) of 0.5 (2.9)companies accounted forby the equity method
Amortization of goodwill (23.7) (22.5)
Net income after 182.4 200.3 +9.8%minority interests
€ millions
*VisionWeb accounted for by the equity method
Net Income
18
Non-Operating Expense
2002 2003
Bacou-Dalloz revaluation gain 8.2
Real Estate gain 4.5
US restructuring costs (9.5) (11.3)
Europe (10.8) (1.0)
Asset write-downs and other (8.0) (7.1)
TOTAL (20.1) (14.9)
(28.3) (19.4)
19
0
50
100
150
200
250
300
350
400
95 96 97 98 99 2000 2001 2002 20034
5
6
7
8
Stocks Rotation
232
326345 351
325310
255276
284
€ millions
Consolidated InventoryDown 5% like-for-like
20
0
40
80
120
160
200
1995 1996 1997 1998 1999 2000 2001 2002 2003
76 79
98
133
152
7.5% 7.4%6.9%
8.5%9.1% 8%
158
120
5.8%
€ millions
6.5%
140
6.6%
140
Net Capital Expenditure
21
UNITED STATES / CANADANassau / Stockhouse June 1SLC / Polarizing lenses March 3Optical Suppliers Hawaii / Laboratory July 11Omni Texas / Laboratory August 30Canadian laboratories February - September
ASIAEssilor Korea Chemiglas / Topex February 1Laboratories May
EUROPERupp & Hubrach October
TOTAL:Annual sales €169 millionTotal price €122 million
Consolidation date
Acquisitions Since January 1, 2003
22
ROA: EBIT / net assetsROA vs total net assets (€ millions)
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
1995 1996 1997 1998 1999 2000 2001 2002 20030
5
10
15
20
25
30
Actifs nets % EBIT / Actifs nets
18.6%
15.5%
18.3%
14.7%16.4% 15.7%
16.9%
21.2%24.1%
Net assets %EBIT / Net assets
23
348
6626
Cash flow
Share issueReduction innet debt
98
59
250
Capital expenditure(140)+ ∆ WCR (-41)
Dividends
150
Acquisitions, incl. purchasesof shares (24)
€ millions
Consolidated Cash Flow
24
€ millions in %
270161 143 164
466321
164 97
632
811938
1,2101,2141,209
1,0481,157
0
200
400
600
800
1000
1200
1400
96 97 98 99 2000 2001 2002 2003
Dette nette Capitaux propres
43
2015 14
44
26
138
05
10
152025
30354045
50
96 97 98 99 2000 2001 2002 2003
Ratio Dette / SNShareholders’ equity ratio Debt to equity ratioNet debt
Balance Sheet Structure at Dec. 31, 2003
25
ActualDec. 31, 2002
1,214.2
4.4+
Capitalincrease
Net of share cancellations
200.3+
Income
59-
Dividends
2.2-
Treasurystock
net of sharecancellations
Actual Dec. 31, 2003
1,210
150-
Translationadjustment
1.6+
Minorityinterests
€ millions
Consolidated Shareholders’ Equity
26
19 2126
3336
39 41
0.410.390.340.320.260.22
0.21
0.500.56
0
10
20
30
40
50
1995 1996 1997 1998 1999 2000 2001 2002 20030
0,5
1
Total payout Dividend per share before tax credit
€ millions
(restated for 2001 10-for-1 stock split ) 51 57
Dividend Raised 12%
27
Change in Issued Capital(Shares outstanding at Dec. 31, 2003)
4800,000 shares cancelled
4856,495 new shares issued
41,269,837 shares held in treasury
4101,470,271 shares outstanding excluding treasury stock
28
Outlook for 2004
4Global rollout of leading products:• Crizal® Aliz陕 Varilux® Ellipse• Varilux® Ipseo™
42003 and 2004 acquisitions
4Germany
Favorable Unfavorable
31
Total population by region
People needing corrective lenses Percentage wearing corrective lenses
60%60%
15.5%15.5%
35%35%
16%16%
19%19%
World population: ~ 6 billionCorrection needs : ~ 4 billionWearers: ~ 1.3 billion
Correction Needs
32
1967Hoya JV
1979Philippinesplant
1985Thailandplant
1987 -1990SingaporeThailandHong KongMalaysiaSouth KoreaIndonesia
1991Hoya JVhaltedSouth Korean operations sold
1996ChinaWholesaleAustralia
2000Nikon
2003SouthKorea
1998IndiaLab.Australia
1999NewZealand
A Long-Standing Presence in Asia
33
Japan
China
Hong Kong
PhilippinesThailand
MalaysiaSingapore
IndonesiaAustralia
Korea
India
New Zealand
Distribution subsidiaries (13)
Asia-Pacific headquarters
Prescription laboratories (27) Chemi
One Asia or five?
34
One Asia or five?
• Australia / New Zealand• Japan / South Korea• Tigers and Dragons• China• India
35
Australia–New Zealand
A U.S.-type market
• 1989 – 1995 Initially, a laboratory in Sydney7 difficult years, Sola ultra market leader
• 1996 Direct Optical: contact with independentlaboratories. Volumes suddenly jump
• 1998 Perkins: a network of laboratories coveringall of Australia
• 1999 Success of Transitions, first sales to OPSM, which expands from just “one-hour service”
• 2003 Essilor is the market leader, on top of each niche (laboratories, sales to chains, sales to opticians)
36
Tigers and Dragons
• Each country has a structure similar to Australia and the
United States
• Essilor tailors its strategy to each country, but always
with the same goal
• Taiwan is the only country where Essilor is not present
37
Japan
• World’s second biggest market in value terms
• Difficult market that revived in mid-2003
• Competition: only integrated manufacturers
• Very strong concentration on sophisticated products: ultra high index materials and progressive lenses
• Nikon-Essilor has steadily won positions over the last three years, now No. 2 behind Hoya
• Nikon-Essilor is currently focusing on independent opticians and is starting to work with medium-sized chains
38
South Korea
• Startup in 1987, exit in 1993, return in 2002 through Samyung Trading joint venture
• Two goals: • Enter the laboratory market with Topex• Understand and support the strategy of Chemiglas, the leading
South Korean producer
• Multi-brand, multi-channel strategy similar to European practice
• Currently difficult South Korean market, in which Essilor is No. 2 (Topex/Chemiglas)
• Chemiglas is focusing on Asia and China in 1.6 index lensesA plant is coming on stream near Shanghai
39
China
• The region’s biggest market in volume terms (100 m lenses). Plastic lenses already dominate, but:
• Progressives are not widespread (people are near-sighted)• Prices are very low• Per capita consumption is still very weak
• Essilor has a two-pronged strategy:
• Essilor in the premium segment No. 1• Chemilens in the mass market No. 3 or 4 today
• The potential is enormous, but the road will be long (training opticians and developing the progressive lens concept with threelaboratories only)
40
India
• Market logic similar to China (70 m lenses)
• But progressives will expand• Hyperopic population• 40 million bifocals
• Essilor • Applies a strategy similar to China• Is developing a network of laboratories across the country,
both owned and in partnership
41
Conclusion
• Apart from South Korea and Japan, Essilor is No. 1 almost everywhere
• The potential is tremendous, but we have to expand distribution and train optometrists
• China and India: which will develop the fastest? Place your bets…But in any case, Essilor will be No. 1 in each market
43
• Asia
• 2003
• Organic growth and acquisitions
• Outlook for 2004
• Essilor and its customers
• The Essilor supply chain
• The future
44
Asia
• Obvious long-term potential
• A market share gain strategy that adapts to local conditions
• Value added / core market• Sales to opticians / sales to laboratories• Joint ventures / acquisitions
• So far, few competitors can withstand Essilor’s momentum
• Asia, Eastern Europe and Latin America share the same growth logic
45
2003: A year of turmoil that nonetheless strengthened…
… our long-term options
… market fundamentals
…. the responsiveness of our teams
48
Bettervision
PolarizationAnti-reflectivePhotochromic lenses
ThinnerMoretransparentMore resistant
Progressive lenses
IPSEOProgressives for optical chainsShort progressionWrap-arounds
Anti-reflective treatment
Alizé
Photochromic lenses
Transitions 1.67
Polarized lenses
BNLSLC
Tint / Protection
PhysiotintsMelanin
Materials
PC1.671.74
A large number of new products in 2004
49
0
2
4
6
8
1996 1997 1998 1999 2000 2001 2002 2003 2004
5.7 5.7 6
4.2
6.5
5.6
4.3
7
*
%
Organic growth
50
D & A
Essilor’s experiencein laboratories
RUPP
NASSAU
The Essilorsupply chainand plants
TOPEX
TheEssilorlineup
SLCBNL
R&D andthe Essilor
network
2003 : Acquisitions in four niches, with obvious synergies in each
51
-2
0
2
4
6
8
10
12
14
1996 1997 1998 1999 2000 2001 2002 2003 2004
13
7
4
-11
3.5 *
%
Growth through acquisitions
52 -2
0
2
4
6
8
10
12
14
1996 1997 1998 1999 2000 2001 2002 2003 2004
13
7
4
-1
1
3.5 *
Growth through Acquisitions%
0
2
4
6
8
10
12
14
16
1996 1997 1998 1999 2000 2001 2002 2003 2004
13
10
4
6
5
87
Overall Growth
*
%
*5.7 5.7
6.56
4.25.6 4.3
7
Organic Growth%
0
2
4
6
8
10
12
14
1994 1996 1998 2000 2002 2004
The outlook for 2004 is not too bad
53
Essilor and its customers
Independents
Chains marketing mainly manufacturer brands
Chains marketing mainly theirown brands
Essilor
Nikon
BBGR
55
Breakthrough in rimless frames
Rimless frames givelaboratories a greater shareof the mounting business
56
Lower costs… across the board!
• Plant productivity gains• Ongoing relocation and automation programs
• Laboratory productivity gains• Products travel more easily and laboratories are specializing
• Rimless frames give laboratories a greater share of the mountingbusiness
• Information systems can significantly improve supply chain management
Thanks to its supply chain, Essilor is a creative, flexible, powerful partner for each of its customers
57
The future
• Volume Asia, Latin America and Eastern Europe
• Mix Europe, Japan and North America
• Vision Photochromic lenses, sunglass lenses, anti-reflective treatment, etc.
Essilor still has a lot to do!