* H1 EBITDA 2.04 bln euros vs f'cast 2.05 billion
* Gross margin up 70 basis points to 71.7 percent
* R&D spending up 8.8 percent
* Ad/promotion costs stable at 30.2 pct of revenue
(Adds detail, quotes, background)
By Astrid Wendlandt
PARIS, Aug 29 French cosmetics maker L'Oreal
posted improved margins and a nearly 8 percent rise in
first-half operating profit, despite slightly weaker demand in
major markets such as the United States.
The group's gross margin rose 70 basis points to 71.7
percent, helped by the launch of new and more expensive items
such as the anti-aging skincare product Advanced Genifique by
The group, which last month posted disappointing first-half
sales, noted a slight growth deceleration in the first half,
mainly due to a slowdown in the United States and weaker demand
for luxury goods, particularly in countries such as South Korea.
L'Oreal's luxury products, which include Rouge Pur Couture
Yves Saint Laurent lipstick and Armani perfumes, saw growth slow
to 5.5 percent on a like-for-like basis in the second quarter
from 7.2 percent in the previous three months.
"Overall profits and operating margin are broadly in line
with expectations, but the gross margin delivery is encouraging
and has fuelled increased research and development spending,"
said Alex Howson, analyst at London-based brokerage Jefferies.
The maker of Garnier shampoo and Maybelline make-up reported
earnings before interest and tax (EBITDA) of 2.04 billion euros
($2.7 billion), roughly in line with the average estimate of
2.05 billion in a Thomson Reuters I/B/E/S poll.
The group's spending on research and development rose 8.8
percent, while its advertising and promotion costs remained
stable at 30.2 percent of revenue.
The operating profit margin rose 50 basis points to 17.4
Earlier this month, L'Oreal agreed to buy Chinese facial
mask provider Magic Holdings, allowing it to expand in the
fastest-growing sector of China's $15 billion skincare market.
The group is holding a press conference on Friday starting
at 0700 GMT, at which analysts are expected to grill management
about current trading and its planed use of funds, having net
cash of 572 million euros on its balance sheet at end-June.
"Sentiment will be driven tomorrow by what management may or
may not say about second-half margin trends," said Pablo Zuanic,
analyst at New York brokerage Liberum Capital.
L'Oreal reiterated its generic target of outperforming the
market and increasing both sales and profits in 2013.
($1 = 0.7562 euros)
(Editing by James Regan and David Holmes)