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Moody's affirms L'Oréal on strong business profile, profitability

Moody's Investors Service on Sept. 4 affirmed the Prime-1 short-term commercial paper ratings of French cosmetics giant L'Oréal SA and its U.S. subsidiary, L'Oreal USA Inc.

The rating agency said the affirmation reflects the group's strong business profile, solid profitability and strong credit metrics, which, according to Moody's, is supported by the beauty products maker's leadership in the global cosmetics industry and its capacity to grow organically at a faster rate than the global personal care market.

Moody's said it expects L'Oréal's growth to continue to outperform the global beauty industry.

The agency has credited the company's performance to its marketing and research and development investments. Moody's said Asia Pacific is now the group's largest region of growth.

Moody's said that in terms of ESG considerations, the most relevant factor for L'Oréal's ratings are the governance considerations related to its financial policies. The agency expects the company to seek growth opportunities through acquisitions and to increase returns to shareholders.

The company has recently unveiled a €750 million share buyback program and has progressively increased its dividend payout ratio.

The agency's outlook on L'Oréal remains stable, reflecting the group's steady and predictable cash flow generation, sustained by a strong and diversified portfolio of brands.

Moody's said the rating could be downgraded if the company initiates a credit-transforming acquisition or if it funds exceptionally high share buybacks with debt.