Growing in a Bigger Playing Field
Investor Day – June 25, 2014 – London The Optical Industry in 2014
€68bn in retail value 4.3bn people in need of 1.8bn people wearing vision correction / +2% CAGR eyeglasses / +3% CAGR
1.6bn myopes 2bn presbyopes +3% CAGR +2.5% CAGR
Investor Day - June 25, 2014 1 The Lens Industry is still Fragmented…
Number of players Breakdown of local across the value chain spectacle lens leaders
Non-prescription Prescription lenses Readers sunglasses
150 to 200 Essilor 250 to 350 Manufacturers Manufacturers Small operators
150-200 400-600 Distributors 1,500 to 2,000 500-600 & Laboratories Local operators 400-500
Retail 400,000 Eye Care Professionals 200-300
1.2 billion 220 550 million prescription lenses million pairs of pairs of non- readers prescription sunglasses
Source: Essilor estimates
Investor Day - June 25, 2014 2 Value-Added Lens Categories are Underpenetrated
Penetration of total worldwide lens industry in volume, %
Progressive lenses Antireflective lenses Thin lenses
57% 48%
14% 15% 12% 15%
2007 2013 2007 2013 2007 2013
Photochromic lenses Prescription sun lenses Polarized lenses
9% 10% 6.9% 7.2% 2% 1%
2007 2013 2007 2013 2007 2013
Source: Essilor estimates
Investor Day - June 25, 2014 3 Lens Spending per Capita is Low, Particularly in Fast-Growing Markets
55
50
45
40
35 Finland U.K. U.S.A Australia Lens 30 Canada Spending/ 25 Belgium Capita Italy Denmark 20 (€) Portugal H.K. Austria Singapore 15 Spain New Zealand 10 Brazil Korea Japan China 5 India Russia 0 -5 0 5 10 15 20 25 30 35 40 45 50 -5
-10 GDP/Capita (k€) Source: Essilor estimates, World Bank , 2012 figures Bubble size in proportion to lens market volumes
Investor Day - June 25, 2014 4 Essilor is a Pure Player, Fully Dedicated to “Improving Vision”
Vision solutions Awareness
Poor vision is the world’s leading handicap Yet a full range of solutions exists
Investor Day - June 25, 2014 5 Essilor is a Key Player, but Only in Small Parts of a Large and Growing Optical Industry
Prescription lenses Readers & Sun Contact lenses
Worldwide manufacturers
Worldwide distributors & laboratories < €11.0 bn €7.5 bn +3-4% +6-7%
North America Europe Fast-growing markets Rest of world
Retail
Online sales €3.0 bn +14%
€68.0 bn Essilor market shares
Investor Day - June 25, 2014 6 A Bigger Playing Field, Entirely in Optics
Eye Care Professionals
Geography Strategy
One Mission “Improve Lives by Improving Sight” Consumers Technology
Healthcare
Investor Day - June 25, 2014 7 An Extended Playing Field Leveraging the Full Width of Essilor Capabilities
2008-2013 2013-2018
PRESCRIPTION PRESCRIPTION SUNGLASSES ONLINE LENSES LENSES
Manufacturers, €12.7 bn €8.5 bn €5.8 bn Distributors & Laboratories +3-4% +6-7% +14%
FAST GROWING MARKETS
+c.10-12%
Developed Markets +c.1-2% <€11.0 bn €27.0 bn +3-4% +6-7%
Investor Day - June 25, 2014 8 Technology is Further Expanding our Playing Field
Online Technologies
Design & Surfacing Technologies
Premium: personalization Thin Layer Sun prescription Technologies Essilor strong both in branded products and in private labels Coatings Digital surfacing has increased Filters value pool accessible to Essilor Protection Polarization
Investor Day - June 25, 2014 9 Essilor is Getting Closer to the Consumer
Online sales platform Media spending Initiatives for retail
Investor Day - June 25, 2014 10 Significant Geographic Upside Left
Revenue in Growth drivers New countries fast-growing markets(a)
Premium / Mid-tier / Entry
All business models Revenue in € billions Sun Partnerships 2018
2.8
2013
1.1 21%*
* As a percentage of total Group revenue
Industry growth in fast- 120 countries & 2.0 billion Expected CAGR: 20% growing markets >10% people yet to cover
(a) Fast-growing markets include China, India, ASEAN, South Korea, Hong-Kong, Taiwan, Africa, the Middle East, Russia and Latin America
Investor Day - June 25, 2014 11 We Have All the Talent and Resources Needed to Drive this Expansion
Leveraging Essilor Capabilities and Talents
Online Sales R&D Supply chain Segmented offerings Geographical coverage Acquisitions MyOnlineOptical Brands
Fast-Growing Markets
Acquisitions & Partnerships New countries All segments
Investor Day - June 25, 2014 12 Outperforming a Bigger Playing Field
(a) 2013 Change 2018
(b) Industry Size <€11.0 bn €27.0 bn Industry Growth 3-4% 6-7%
~ 10% CAGR
Revenue €5.1 bn ~ €8.2 bn Like-for-Like Growth 3.6% (c) > 6%
~ 11% CAGR EBITDA €1.17 bn €2.0 bn
(a) At constant exchange rates (b) Corrective lenses only (c) 2012-2013 average
Investor Day - June 25, 2014 13
Driven by Innovation Paul du Saillant – Chief Operating Officer Innovation has been in Essilor’s DNA for 160 Years
Cooperative roots
Entrepreneurship culture
Pioneering through breakthrough innovations in the ophthalmic optics industry
Investor Day - June 25, 2014 15 World Recognition for Essilor Innovations
Awards Won by Essilor R&D Innovations
Investor Day - June 25, 2014 16 A Global Organization Supported by the Best Scientific, Industrial and Academic Communities
Essilor Centers of Innovation & Technology (CI&T) CI&T EUROPE Strategic partnerships Paris IVS Main R&D partnerships Paris Bar-le-Duc Dijon
Norway CROSSBOWS Ireland SATISLOH Toulouse CI&T Montreal, QC Boston, MS London (Dudley) Switzerland AMERICAS and Germany CHEMIGLAS NIKON-ESSILOR FGX Seoul Tokyo Smithfield, RI Madrid San Diego SHAMIR Shanghai NEIJRC Israel Tel Aviv Chihuahua, MX TRANSITIONS Wenzhou Tokyo Tampa, FL Bangkok Bangalore
CI&T Singapore ASIA Jakarta
Rio de Janeiro
Melbourne
Investor Day - June 25, 2014 17 Key Expertise by Region
High-index materials Polymerisation / Casting EUROPE Myopia Anti-fatigue AMERICAS and computer vision Fundamental studies Tinting Computer sciences Film technologies Thermoplastics Chemical characterizations Nanomaterials Sputtering Segmentation … Spin coating and Personalization Dynamic vision studies Vision ageing Photochromic Thin layers ASIA Polarized Augmented reality Web/Net Technologies … …
Investor Day - June 25, 2014 18 Essilor Invests More than All Other Industry Players Combined
R&D Expenses* (€m)
200 187
180 164 151 160
140 2009-2014:
120 up 20%
100
80 CI&T 60 Capex: €50m 40
20
0 2009 2013 2014 Est.
* Research, Development and Global Engineering Expenses
Investor Day - June 25, 2014 19 Innovation, a Key Driver for Value Creation
Products
Solutions Services
Investor Day - June 25, 2014 20 4 Main Factors to Build the Innovation Roadmap
ECP segmentation & Larger, aging population chains’ development Urbanization with stronger New devices for refraction near-vision solicitation and framing Growing middle class E-business models Sensitive to well-being & health Distribution networks Consumer pull Unmet/unexpressed needs INNOVATION ROADMAP
Unsolved problems, Eliminating compromises Technological push Geographic specific needs, Sun
See-through display Mass Prod / Prescription Lab Embedded electronics Premium / Mid-tier / Emerging and wearable computers Single vision vs multifocal lens High technologies on thin layers Sun
Investor Day - June 25, 2014 21 Roadmap Integrated into the Wearer Lifespan…
Myopia
Segmentation and personalization / Web
Health
Seniors
Sun, polarized and photochromic
Investor Day - June 25, 2014 22 …Addressing 6 Growing Segments…
Presbyopia Myopia Health & seniors
↗ Peri-central acuity ↗ Detecting at very early stage ↗ Reducing AMD factors ↗ Stability on dynamic vision ↗ Slowing the pace of myopia ↗ Reducing UV effects ↗ Adaptation to progressives ↗ Decreasing eye fatigue ↗ Migraine ↗ Better night vision ↗ Lens thickness ↗ Amblyopia
↗ Color blindness
Sun, polarized Personalization Online & photochromic & segmentation
↗ Color choice with dyes expertise ↗ Morphological parameters ↗ e-platforms for wearers
↗ Dark and clear balance ↗ Behavior parameters ↗ Virtual Try-On
↗ Prescription Sun ↗ Ethnicity ↗ Distance measurement accuracy
↗ Polarized lens technologies ↗ Gender ↗ Kiosk and brick and mortar models for each substrate ↗ Age ↗ Web models
Investor Day - June 25, 2014 23 …With Promising Innovation Curves
100.0%
90.0%
80.0% Unsolved problems Unmet needs 70.0% Prevention / protection 60.0% Personalization 50.0% WHERE WE CURRENTLY STAND 40.0% Crizal Prevencia Crizal UV 30.0% Varillux S series Optifog 20.0% Definity dual add Airwear polycarbonate Crizal Antireflective coating 10.0% Transitions photochromic lens Varilux progressive lens Orma 0.0%
Investor Day - June 25, 2014 24 Three Areas of Excellence
Chemistry Designs Technology
Substrates Progressive lenses Satisloh
Coatings Personalization/segmentation Web technologies
Photochromic dyes Digital surfacing Measuring: IVS, instruments…
Filters and additives
Investor Day - June 25, 2014 25 Around 70% of Lens Value Comes from Coatings and Materials….
Substrates Equipment Technologies
↗ >7 different substrates ↗ Vacuum and plasma coaters ↗ Injection ↗ Thermoplastic ↗ Polymers ↗ Casting ↗ Mirroring processes ↗ Spin, dip, vacuum, plasma Thin layers ↗ Dip coating machines ↗ Gradient, tinting ↗ Organic and mineral ↗ Film lamination compound deposits ↗ Tailor-made color ↗ Films ↗ Wafer injection ↗ Wafers ↗ Surface functionalization ↗ Dyes ↗ Film production for edging process (Azur) ↗ Filters (UV,…)
Patents
50% of Group patents are dedicated to coatings and materials
A unique set of capabilities to create new products
Investor Day - June 25, 2014 26 Around 70% of Lens Value Comes from Coatings and Materials….
Size = number of functions (added value) on the lens
Polarized
Photochromic
UV Back Side Blue Light Protection
Anti-fog Scratch Booster
Anti-static
Easy to clean
Anti-reflection
12 14 16 18 20 22 24 26 28 30
Nbr of layers
Investor Day - June 25, 2014 27 …While around 30% Comes from Designs
Good vision correction comes from high performance designs
Accrued experience is essential to creating new designs
3 major players own the design patents: Essilor, Zeiss and Hoya/Seiko
Quality guarantee is central: Essilor validates all its designs with thousands of wearer tests in every region of the world
Today, technology makes it possible to apply designs on the front, the back or both sides of a lens
The value of progressive lenses is in the design, not in the technology
Investor Day - June 25, 2014 28 Essilor is the Leader in Digital Surfacing
Digital surfacing has been an opportunity for Essilor and the industry… for 20 years Greater levels of personalization and customization have been reached with digital surfacing Quality and performance of designs are far more important than the technology itself Essilor has embraced the technology in all of its businesses
Digital surfacing has a positive impact on logistics optimization, and therefore costs and WCR
Essilor is best positioned to capture digital surfacing opportunities in both branded and mid-range products
Investor Day - June 25, 2014 29 Transferring Know-How to the Sun Industry
Core Lenses Core Lenses (clear and (clear, and Sun prescription sun) prescription sun)
Correction 2013 2018 . Traditional, DDS, FBS Vision comfort . Scratch resistant . Anti-reflective . Anti-static . Easy-to-clean, smudge-free . Anti-fog Functionalities . Photochromic . Polar Protection . E-SPF 25, E-SPF 50 E-SPF 50 Prevention . Bad blue light protection . Computer anti-fatigue lenses
Investor Day - June 25, 2014 30 Seize Opportunities from Unsolved Problems
Lenses sold per year
1,200 Better resistance, lighter, thinner lens, better fit to frame, better eye shape 1200000
1000000 Abrasion free Windshield
800000
Smudge free, Invisible 600000600 Thin UHI no rain bad lenses blue cut Less temperature 400000 Permanent dependent activation
200000
0 0 2013 Anti- Easy-Clean Progressive Photochromic Anti-Static Polarized Computer & Anti-Fog UV Protection Blue Light Reflective Anti-Fatigue Protection
Investor Day - June 25, 2014 31 Great Start for New Products… More Growth to Come
Correction Protection Prevention
Deflect harmful Blue-Violet Light
UV protection
Varilux S series: up to 40% Transitions Graphite Green: market penetration. Growing Launched in May in every fast in the US and Brazil region Crizal Prevencia: Worldwide adoption of UV Up to 15% of Crizal volumes protection and E-SPF by in France leading key accounts
Investor Day - June 25, 2014 32 Future Product Launches
Chemistry Designs Technology
New level of performance Innovative lens for myopes High base curve for sun for Crizal Myopia control for children lenses Thinnest high-index polarized New technology for Varilux Virtual try-on for web users lens Comfort and Varilux Physio Polarized Photochromic
Investor Day - June 25, 2014 33 Yesterday… Today… Tomorrow… Essilor is a Pioneer
Customer Augmented Myopia Health Sun experience reality glasses
Selective filtration 2020 Sun lens designs Online technology Personalization 2010 Digital surfacing Anti-reflective lens 2000 Photochromic lens Progressive lens 1990 Organic lens 1960
Investor Day - June 25, 2014 34 Building Stronger Consumer Brands Carl Bracy – VP US Marketing & Business Development Alain Riveline – VP Strategic Marketing Why Market to Consumer in Optics?
Fundamentals in optics New phenomena
Unrealized category growth More educated shoppers and repurchase rate potential from browsing to purchase
Growing complexity, more Improving ECP ability choices and sophisticated to explain innovations ↗ Because it works innovations
Other players compete Improved balance between for consumers’ choice: managed Fashion & Function care, retail, frame brands
Grow the industry
Investor Day - June 25, 2014 36 Positive Impacts of Consumer Marketing in Optics
For consumers For ECPs
↗ Educational ↗ Confidence to prescribe ↗ Empowerment and explain innovations
↗ Clearer choice ↗ Strongly relay POS execution
For managed care For Essilor
↗ Accelerate category building ↗ Better clarity on coverage and pricing decisions driven ↗ Brand building by product benefits ↗ Organic growth
Investor Day - June 25, 2014 37 Transitions: Year on Year Growth in Brand Building
TV AD TV AD Product Launch Revenue
Product Launch
Product Product Launch Launch
Product Launch
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Similar successes with Varilux in France, Brazil, Portugal and Spain
Investor Day - June 25, 2014 38 Essilor Learning Curve and Deployment Plan for Building Consumer Brands
2009-2013: Deploying winning models to be used in each geography
2014-2016: Global deployment in selected countries
2016 onwards: Further global deployment
Investor Day - June 25, 2014 39 Establishing Brand Awareness (Crizal, US)
Investor Day - June 25, 2014 40 Establishing Brand Awareness (Crizal, US)
Key Message: . New Crizal protects your lenses and your eye health . Scratch-proof, smudge-proof, no-glare lenses now have E-SPF 25 – to help protect your eyes 25 times more from the damaging rays of the sun
Four-quarter media presence
Q1 2014 Results . Crizal grew 9.1% in Q1 2014 . Penetration increased 3% in Q1 2014
Investor Day - June 25, 2014 41 Building on Top of an Established Brand (Crizal Prevencia, France)
Investor Day - June 25, 2014 42 Building on Top of an Established Brand (Crizal Prevencia, France)
Key messages . Dangers of light & Crizal Prevencia as the solution . Call to action (satisfied or exchanged offer)
Media plan . Print campaign – 14m contacts . Radio: 66m contacts (national and local stations) . Digital and professional marketing waves
Q1 2014 Results . Prevencia penetration rate and volume doubled . Total Crizal growth: +6.1% during the campaign
Investor Day - June 25, 2014 43 Building a Brand with a Seasonal Campaign (Xperio UV, US)
Investor Day - June 25, 2014 44 Building a Brand with a Seasonal Campaign (Xperio UV, US)
Key messages . Polarized Sun lenses are available in your prescription . Xperio UV eliminates 100% glare, offers crisper vision and brighter colors
Media plan . 360° media campaign: Seasonal media wave March-July 2014 . Pullthrough maximized with POP campaign in ~3000 iECP offices (May)
Results . 2013: Polarized lens unit 2x segment growth rate . 2014 YTD: • Xperio UV growth: 21% • Polarized lens unit growth: 12.7% iECPs
Investor Day - June 25, 2014 45 Improving Campaign Return on Investment: the Essilor Experience
By adding By providing By assisting consumers in merchandizing promotion
Crizal Singapore Increasing multi-pair Varilux Czech Republic Transitions …
Essilor constantly deploying new concepts
Investor Day - June 25, 2014 46 Adding in Promotion with Group ECP Partners
Key messages . Varilux superiority . Second pair with special price on Crizal Transitions or Prevencia
Media plan . Quarterly TV waves . POS marketing support
Results . Varilux yoy growth: 30/40% in volume . Varilux share growth in PAL mix
Investor Day - June 25, 2014 47 Vision is More Important than Fashion for Key Retailers
Investor Day - June 25, 2014 48 Deploying New Business Model with Key Accounts
Key concept . Pushing « Branded vision correction solutions » within Walmart’ « Save Money Live Better » mission
Key messages . Nikoneyes lenses give sharper & clearer vision, resist scratches & reduce glare, and now have E-SPF 25 protection . Satisfaction guaranteed . Available at Walmart & Sam’s Club
Results . First 12-month Nikoneyes unit growth: c.50%
Strong value creation based on co-sponsored brand building
Investor Day - June 25, 2014 49 A Step Change in Resources to Talk to Consumers
Total Group* consumer marketing budget projection
€125m >€125m €25m
2013 2016 2018
* Excludes Bolon, Molsion and Costa media spendings
Investor Day - June 25, 2014 50 To be Deployed Globally in Selected Countries
2014 Resources 2014 Allocation
Essilor 2014 incremental budget North America (Transitions synergies) 35 33
12 Europe Regular Essilor €90m Amera media consumer budget 25 5 7 Latin America 3 Others
Transitions own media 30 30 Transitions own media consumer budget consumer spend
↗ Priorize core countries and proven brand building models 2014 ↗ Open new countries, including fast-growing markets
↗ Redeployment of Transitions consumer marketing budget 2015 - 2018 ↗ Accelerate the deployment of proven models ↗ Starting new models (brands, media, etc.)
Investor Day - June 25, 2014 51 New Plan to Build Permanent Media Presence in the US as of Q4 this Year
Investor Day - June 25, 2014 52 Getting Closer to the US Consumer with…
Adults 35-54 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
Week Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
Investor Day - June 25, 2014 53 Leveraging Essilor Key Brands to Constantly Raise Consumer’s Awareness on Good Vision
Adults 35-54 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
Week Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
50 weeks on air in a year!
Investor Day - June 25, 2014 54 Building Stronger Consumer Brands Will Push Innovation
Accelerate category building in strategic countries
Reinforce Group pricing power on high margin products
Build the right brand portfolio as long-term Group assets
Boost group organic growth Strengthen Essilor’s leadership
Investor Day - June 25, 2014 55 “Here Comes the Sun…” Eric Thoreux – President Sun & Readers Group Chief Marketing Officer
Sun: Over 50 Years of Expertise
2014 Organic Drivers Acquisitions Snapshot
Costa/Intercast Polaroid Bolon c. €500 million revenue Onbitt /Polycore Xperio c. 70 million sunglasses FGX / Stylemark Polarized Kbco c. 25 million prescription 2000 BNL sun lenses Transitions Cartier 1990 12 sun specialist labs Killy Tint/Mirror A leader in premium Armor non-prescription sun lenses 1950
Investor Day - June 25, 2014 57 An Underpenetrated Category with Solid 5% to 7% Growth
Structural drivers Under-penetrated category
EMERGING MIDDLE World population owning sunglasses CLASSES c85%
CHILDREN c25%
FASHION Today Potential
Sun prescription among eyeglass wearers c50% AGING c10%
Today Potential
AWARENESS Source: Estin & Co estimates and analysis; Essilor International Several growth engines for Essilor: fragmentation, prescription, better vision, health, innovation (polarized, etc.)
Investor Day - June 25, 2014 58 Today, Most Sunglasses Don’t Offer the Right Vision Quality
Street Sales Mass Channels Specialty Retail
15 $ 150 $ 300 $
Sunglasses sold on the street can be harmful Limited differentiation in vision quality whatever the price Technologies exist to differentiate vision performance
Investor Day - June 25, 2014 59 Essilor’s Strategy to Change the Sun Game
Setting a new sun lens standard Leverage Essilor’s unique assets R&D, consumer / shopper Innovate beyond understanding, etc. fashion Improve lens performance: prescription and non-prescription to answer growing needs for better vision and protection Leverage lens innovations to serve our brands as well as other players
Deploy sustainable growth strategy Leverage their clear positioning to innovate and expand Acquire strong in more segments and channels regional brands Set up the best prescription offer Leverage Essilor’s experience and global networks to expand globally Capitalize on our new Internet strength
Comprehensive Prioritize our proprietary brands approach Multiple price point expertise Multiple channel expertise
Investor Day - June 25, 2014 60 A Strategy Capturing Growth in all three Sun Segments
Lens Innovation Retail + Lab Service sell-out price (For clients such as Luxottica, Safilo, etc.) Performance Luxury fashion RSP > $100 Lens Innovation RSP > $100 26m units + Lab Service + Brand Portfolio 12m units +Multi-price Point
Entry/ mid-tier
RSP $5 - $100 Brand Portfolio + Supply Chain 510m units + Key Account + Acquisition Consolidation
“INFORMAL TRADE”
Functional use
Investor Day - June 25, 2014 61 Essilor has the Right Capabilities to Succeed in Sun …
Core Essilor . R&D . Rx Labs . Mass manufacturing Frames / Logistics . Scale: 125m pairs of eyewear Consumer Access . Chinese partners . Multi-channel presence . Partnerships with Sun players . Online presence
Brand portfolio Sun Lens know-how
Prescription Sun know-how
Investor Day - June 25, 2014 62 … a Strong Portfolio of Proprietary Brands…
8 major proprietary sun brands
Strong awareness and annual sales growth since acquisition
. Foster Grant: 80% in US, sales up 10%
. Bolon: 85% in China, sales up 20%
. Costa: 60% in US shore fishing communities, sales up 15%
Doubling FGX revenue since acquisition in 2010 (at constant exchange rates)
Investor Day - June 25, 2014 63 … and Unique Innovations
Technology Retail Offerings
Design Value-added Frame
Performance and Fashion Frame/Lens Package Polarized Lenses
Investor Day - June 25, 2014 64 An Operational Set-up Aligned with Business Priorities
Profitable growth Bolt-on acquisitions Entry / Mid Tier Sunglasses Growing product offer (sun prescription, readers) FGX + Yarui Increased distribution and Internet New consumer segments (children) Bolt-on acquisitions
Growing product offer Performance (sun prescription, product technology, female) Sunglasses Increased distribution Costa (10k US doors, new channels) and Internet Strategic acquisitions
Performance Lenses Increase in profitability Polycore, BNL, …
Investor Day - June 25, 2014 65 Synergies: Examples of Opportunities
Cost Synergies Business Synergies
Performance sun lenses Performance sun lenses
↗ Combine operations ↗ Polycore to supply Bolon with CR39 lenses ↗ Leverage Polycore factory
↗ Increase factory yields
↗ Leverage Essilor technologies Sunglasses ↗ Buy surfacing machines from Satisloh Sunglasses ↗ Essilor coatings ↗ Shamir designs ↗ Increase Costa’s 15% margin ↗ Leverage Essilor Canada ↗ Streamline SG&A for Canadian expansion ↗ Leverage FGX finance/legal support
$6 - 8m $2 - 3m
Investor Day - June 25, 2014 66 Future Synergies will Depend on Acquisition Types
Smaller Bigger Acquisition Acquisition
Synergy categories Sourcing scale Shared services Product development Prescription lens Shared key accounts Internet & distribution
Investor Day - June 25, 2014 67 A Profitable €1.1bn Sun Business by 2018
Sun revenue 2013-2018 snapshot
€ billion
Organic revenue* growth: ~ 7% p.a. from 2015
2018 Total revenue growth > 10% p.a. from 2015
1.1 . € 100-150m of new acquisitions
Profitability in the high teens 2013
0.5
*40-45% revenue from sun lenses reported in “Lens and Optical Instruments” / 55-60% revenue from sunglasses reported in “Readers”
Investor Day - June 25, 2014 68 A Clear Integration Plan for High Value Creation Bertrand Roy – SVP Strategic Partnerships A Global Leader in a Key Optical Category
A unique business model supplying Innovation leadership major lens manufacturers . A powerful product portfolio: Everyday lenses (clear to dark): Transitions Signature VII, . 2013 revenue: $844m, of which $279m Transitions Vantage (clear to polarized), Xtractive (driving) Sun lenses (dark to darker) with third party lens manufacturers . Superior product performance: 170 patent families . 90% of revenue from products less than 4 years old Strong ties with Essilor
. Co-created in 1990 and co-managed One of the most renowned brands in optics in JV (49%/51%) with PPG Industries . Over $500m invested in consumer marketing since inception Operational excellence Aided Transitions brand awareness among prescription Eyeglass wearers . Distribution in 75 countries 86% 63% 59% . Available in over 100 designs (open business model) USA Brazil Singapore
Investor Day - June 25, 2014 70 The Largest Transaction in Essilor’s History Set to Create High Value
Acquisition price*: $1.73bn on closing and $125m spread over five years for 51% of Transitions . Adjusted 2013 EBITDA acquisition multiple**: 11.8x . Post Transaction Gearing*** < 0.4x
Impacts on Group financial metrics: . Increase Essilor’s contribution margin by 150 bp after PPA costs by mid-2016 . EPS accretive from Year 1 of the integration and by at least 5% p.a. from Year 2 . Increase Essilor like-for-like growth by 50 bp from Year 3 of the integration
*Including 100% of outstanding shares of Intercast **Adjusted for royalties paid to shareholders *** Consolidated net debt to equity
Investor Day - June 25, 2014 71 Management of Light: an Essential Vision Need
High consumer awareness High interest in finding out more Strong retention within the category Category Awareness Intent to Ask ECP About Transitions Wearers’ Intent to Among Prescription Eyeglass Photochromic Lenses Among Purchase Transitions Next Time Wearers (%) Eyeglass Wearers (% very likely) (% Definitely/ Probably)
95 92 93 86 83 76 75 76 65 54 55 59
A category building on wearer’s satisfaction and loyalty
Source: Transitions Consumer Brand Tracking (MSW-ARS)
Investor Day - June 25, 2014 72 Significant Untapped Photochromics Potential in All Geographies
China is the biggest opportunity in volume Canada 15% Eastern Europe Western Europe Asia Japan 10% 6% USA 19% 5% 1% 5% Mid-tier still underpenetrated Africa/Middle-East 18%
Latin America India 9% Successful mid-tier strategy in Brazil 27% 17% >80 % in glass 25% South Africa Australia 0% ~ 5% 5% ~ 10% Same penetration in SV and PAL New 10% ~ 25% Zealand > 25% Source: Essilor estimates - IM 2011
Investor Day - June 25, 2014 73 Setting the Path for Growth
Significant room to Photochromic segment grow in all segments growing twice as fast as the optical industry 19% 400
300
10% 200 6%
100
0 Single vision All lenses Progressive 2000 2004 2008 2012 2016 2020 lenses lenses Base 100: volume in 2000 / Source: Essilor estimates
Penetration rate of photochromic lenses in volume
Enhance product positioning and features to develop myopia share
Investor Day - June 25, 2014 74 Integrating Transitions As a Product Line
Increase sales and …while keeping an Reinforced R&D marketing efficiency… open business model capabilities
Leverage Essilor & Transitions Build on brand loyalty Resources alignment expertise Bespoke developments Specific product development Build on brand recognition outside Time-to-market innovation the US Leveraging Transitions technologies
An organization to maximize the reach to eyecare professionals
Investor Day - June 25, 2014 75 Driving Faster Growth Through Better Use of Group Capabilities
Leveraging all Actively managing Enlarging distribution networks a rich brand portfolio with new categories
ECP’s/Key accounts Segmentation New tints Mid-tier and low end Pricing power Clear to polarized Fast-growing markets/Europe Dark to darker Adapted SV lens offerings
Develop the photochromic segment worldwide
Investor Day - June 25, 2014 76 Generating Over $100 million of Synergies
Increase efficiency Optimize the supply chain of marketing spending
↗ Co-branding campaigns ↗ Lean manufacturing ↗ Leveraging Group’s ECP sales ↗ Working capital force makes it possible to ↗ Obsolescence management streamline Transitions sales ↗ New business models force
A clear integration plan with low execution risks
Investor Day - June 25, 2014 77 “Optics 2.0”: A Major Growth Opportunity Jean Carrier – President, Essilor of America Roy Hessel – President, Online Initiatives The Online Optical Industry is on a Fast Track
Global online optical retail* (in € billions)
As a percentage of the total optical retail industry
+14% 2013-2018e CAGR 5.8 +13% 2008-2013 10-15% CAGR
3.0 2.7 6% 2.4 2.0 1.6 1.7 c.4%
c.2%
2008 2009 2010 2011 2012 2013 2018e 2025e
* Includes online pure players and click & mortars / for spectacles, contact lenses and sunglasses Source: Estin & Co 2013 estimates and analysis; Essilor International
Investor Day - June 25, 2014 79 Global Online Optical Potential is Significant
Worldwide Penetration Rate of Online Optical Retail*: c.4%
Scandinavia 6% UK 10% Germany Japan 4% 8% 2% 7% France North America 4% China
Online optical retail* Latin America as a percentage of total optical retail industry 1% (in value) 1% – 2% 4% 2% – 5% 5% – 10 % Australia / New Zealand Major growth drivers: Internet penetration, increased comfort with online payments, technology improvements (e.g., virtual try-on in 3D), etc.
* Includes online pure players and click & mortars / for spectacles, contact lenses and sunglasses Source: Estin & Co 2013 estimates and analysis; Essilor International
Investor Day - June 25, 2014 80 All Optical Products are Sold Online Today…
Investor Day - June 25, 2014 81 ...But Everything Must Begin with an Eye Exam which Still Cannot be Done Online
Necessarily done by an eye care Can be done Relationship Ophthalmic professional (ophthalmologist or online today management Examination optometrist) Cannot be done (“stay in touch”, online today re-trade, trade across)
6 1
Optical Payment 5 Consumer 2 Prescription Journey
4 3
Only basic measurements Measurements Product education All optical products are sold are available online (e.g., PD) as needed & selection online: contact lenses, frames, prescription eyeglasses, sunglasses, readers
Investor Day - June 25, 2014 82 Essilor has Invested in this Field for Many Years…
Customized supply chain for online players
2000 2004 2009 2010 2012 2013 2014
Investor Day - June 25, 2014 83 … Has Built Solid Expertise…
Customized supply chain Online Marketing Expertise Back-office support for several North Category push: anti-reflective, American and European online players polarized, anti-UV, photochromic EyeBuyDirect supply chain from lenses Danyang Dedicated online brand: Teklite Various marketing approaches: banners, search engine optimization (e.g., Google), paid search, affiliates, affinity publishers, etc.
Frames Direct: premium, branded frames, c$250-350 per pair EyeBuyDirect: unbranded frames, Suite of online services for Eye c$50 per pair Care Professionals, including Sun brands already very active a virtual store platform: online (Bolon & Costa) MyOnlineOptical (adopted by FGX web stores: Fostergrant, 1,500+ ECPs) Ryders, Gargoyles, Turn-key online Readerglasses.com, etc. services/solutions Multi-channel models
Investor Day - June 25, 2014 84 … And Learned to Expand Globally
Likely to grow rapidly as it meets a specific need: younger consumers with simple vision correction Supply chain capabilities are key for success Efficient media to educate consumers on the importance of vision and solutions and to push categories (anti-reflective, anti-UV, etc) Drives behaviors that increase overall demand for optical equipment Online Channel Higher appetite for… … multi-pairs … re-trade … antireflective lenses Average pairs per order Average renewal rate years Average penetration rate
100% 1.4 c.3 ≥1 57% 0.8
EyeBuyDirect Worldwide EyeBuyDirect Worldwide Coastal.com Worldwide
Remain the best channel for sophisticated progressive lenses, personalized lenses and tailored customer services Role of Clear role to play online: connecting with existing consumers, offering a wider range Eye Care of frames, etc Professionals MyOnlineOptical approach works well… Eye Care Professionals need it to compete and are asking for it
Investor Day - June 25, 2014 85 Strong Financial Upside
Strong Revenue Growth Better margins per consumer
Year-to-date like-for-like revenue growth Base 1 = Essilor Lens Business’ estimated contribution margin per consumer +30% x5
+22%
x2
1
Lens Business
US market prescription eyeglasses
Order size Key profitability Integrated supply chain drivers Marketing efficiencies for customer acquisition, loyalty and product mix
Investor Day - June 25, 2014 86 Shaping the Development of the Online Channel with our Customers for the Benefit of Consumers
Eye Care Professionals Online Players Eye Exam / Health Simple vision correction needs Refraction (single vision products) Complex products Information and education Personalized products platform for consumers Tailored customer services Key brands (e.g., Varilux)
Referrals Traffic Shared technologies (e.g., MyOnlineOptical)
Investor Day - June 25, 2014 87 New Online and Mobile Technologies are Accelerating the Development of the Online Channel
Innovations in online frame fitting technologies increase customer take-up and conversion rates of the channel New lens performance visualization techniques educate customers and drive higher value orders Mobile sites and technologies increase access and frequency of purchase
Investor Day - June 25, 2014 88 Coastal.com, a Major Online Vision Care Retailer
Revenue by Segment Strategic Overview
Global player (based in Vancouver) Eyeglasses 27% ↗ ↗ Large multiproduct platform
↗ Strong strategic fit to drive profitability 73% Contact Lenses ↗ Future consolidation platform
Revenue by Region Key Financials
Rest of the 22% ↗ 2008-2013 revenue CAGR: 13% world 34% Canada ↗ 2013 net loss: CAD (16)m Norway 9% ↗ Financial loss solely in eyeglasses
Sweden 19% 16% USA ↗ Consolidated since May 1, 2014
Investor Day - June 25, 2014 89 Our Plan with Coastal.com: Global Growth and Value Creation
>10% p.a. revenue growth . New team in place, combining Essilor, EyeBuyDirect, Frames Direct and Coastal strengths . Leverage the platform and best practices for worldwide development
Synergies of CAD 30-35m . Optimize marketing spend . Synergize supply chain (lenses, purchases, laboratories) . Essilor know-how especially relevant to eyeglasses division
Reaching double digit margin by 2016
Investor Day - June 25, 2014 90 Our Ambition: To Build a Profitable €400-500m Online Business by 2018
In € millions
Strong organic growth
2018 Selected bolt-on acquisitions
Synergies
400-500 Cost optimization
2014
2014-2018 CAGR: (1) 2013 c.185 >20% Margin: 10-12% c.30
(1) Including Coastal.com full-year revenue
Investor Day - June 25, 2014 91 2018 Blueprint for Value Creation Laurent Vacherot – Chief Operating Officer A Stronger Essilor Since 2008
Innovation leadership . E-SPF (UV), Blue Light, Varilux S, Optifog, photochromic segment, etc. . New CIT organization
Strengthened market coverage . Mid-tier, FGM expansion, new countries . New Vision Generation initiative
Reinforced human resources and expertise . 55,000 employees dedicated to a central mission: providing better vision . Internationalized Executive Committee
New growth platforms: Readers & Sun, Equipment, On-line models
Operational and management efficiency
Increased global industry share with no additional debt
Investor Day - June 25, 2014 93 Delivering High Shareholders Returns
Revenue +€2 billion in 5 years EBITDA + 40 basis points
(in €m) 1 200 (in €m) 4 800 1 100 CAGR: 4 300 1 000 CAGR: +10.5% 3 800 900 +10.9%
3 300 800 700 2 800 600 2 300 500 1 800 400 2008 2013 2008 2013 Free Cash Flow €2.5 bn in 5 years Dividend €880 millions in 5 years
(in €) 240 (in €m) 550
CAGR: 200 CAGR: 450 +12.1% +11% 160 350
250 120
150 80 2008 2013 2008 2013
Investor Day - June 25, 2014 94 €2 Billion in Additional Revenue Generated by Organic Growth and Acquisitions
MM organic growth FGM organic growth Strategic acquisitions Bolt-on acquisitions 6
5
+€2bn* 4
3
2
1
0 2008 2013
Web Readers & Sun Equipment Lens (FGM) Lens (MM)
* Split excluding the change in currencies and the change in the method of consolidation
Investor Day - June 25, 2014 95 Fast Growth while Maintaining High Quality Margins
18.1% 18.1%
+50 -50 +50 -50 +30 +60 -60 -20 -50 +40
2009 2010 2011 2012* 2013 Operating leverage = 210bp (in bp)
Dilution from acquisitions (in bp)
2008 2013
Initial dilution from acquisitions consistently offset by: Operating leverage Synergies from acquisitions and partnerships
*Of which 20 bp gain stemming from change in the method of consolidation
Investor Day - June 25, 2014 96 What is the Ambition for the Next 5 Years?
Playing Field Sales EBITDA Cash Return
Creating More Value While Expanding the Playing Field
Investor Day - June 25, 2014 97 A Clear Value Creation Plan for Each Segment
Playing Field Sales EBITDA Cash Return
2013-2018
PRESCRIPTION LENSES SUNGLASSES ONLINE
Accelerate in our core industry Outperform the industry Grow a profitable distribution channel innovation roadmap Performance sunwear Consumer marketing push Selected brands Capture higher value per sale Leverage Transitions acquisition Push Rx Solutions Build a strong consumer data base Bolt-on acquisitions strategy Leverage Group capabilities Leverage Group supply chain Targeted acquisitions Opportunistic M&A
Expand in fast-growing markets: €2.8 bn revenue ambition €12.7 bn €8.5 bn €5.8 bn
+3-4% +6-7% +14% €27 bn Outperforming every segment +6-7% through organic growth and acquisitions
Investor Day - June 25, 2014 98 Building a Stronger Portfolio in Optics to Capture New Long-Term Growth Playing Field Sales EBITDA Cash Return
Sales in €bn Organic Acquisitions* Major acquisitions done**
9 ~0.5 8 ~1.1 7 >€3bn ~0.8 6 5 0.5 ~2.2 0.5 4 1.0 3 ~3.6 2 3.0 1 0 2013 2018e
Web Sunlens & sunwear Equip&Instr. + Readers Clear Lens (FGM) Clear Lens (MM)
Growing at c.10% over the next 5 years***
* Excluding new strategic acquisitions ** Transitions, Yarui, Costa, Coastal.com *** On average, at constant exchange rates
Investor Day - June 25, 2014 99 Key Acquisitions Strengthening the Group’s Business Portfolio Playing Field Sales EBITDA Cash Return
PRESCRIPTION LENSES SUNGLASSES ONLINE
1) Costa ACQUISITION Transitions Coastal.com 2) Yarui (Bolon)
Take the lead in one of the Innovate in performance Grow a profitable RATIONALE fastest growing optics sunwear and expand distribution channel category in the mid-tier globally
1ST YEAR 1) c.€80-85m (>1.5%) SCOPE EFFECT c.€200m (<4%) c.€150m (c.3%) (IN % OF SALES*) 2) c.€75-85m (c.1.5%) MID-TERM IMPACT ON ORGANIC +50 bp** ~15bp ~10bp GROWTH
Continue partnerships New geographies / NEXT MOVES Selected brands and seize opportunities products
* At constant exchange rates ** As of year 3 after integration
Investor Day - June 25, 2014 100 Balanced Revenue Growth Between Mature Markets and Fast-Growing Markets Playing Field Sales EBITDA Cash Return
Targeting Revenue of ~€8.2bn by 2018
Dedicated strategy to provide better 2.8 vision to more than 80% of WW population
Fast-growing 1.1 markets 5.4 Still a lot of 4.0 untapped potential Mature markets in mature markets
Sales in €bn
* At constant exchange rates
Investor Day - June 25, 2014 101 Solid, Sustainable Organic Growth
Playing Field Sales EBITDA Cash Return
>80bp >70bp >100bp >6% Innovation Strong Sunglasses Media push Demand Sun lenses 3.6% Photochromic Trade-up Web Country focus New countries
2012-2013 Share gains Favorable FGM ambition 2018 trend average business mix
Gradual acceleration in organic growth
Investor Day - June 25, 2014 102 Implementing a Successful Acquisition Strategy
Playing Field Sales EBITDA Cash Return
Low integration Fast turnaround Pursuing partnership risk for Transitions at Coastal.com strategy with local players
Plano Prescription Lenses Readers sunglasses
20%
Manufacturing & marketing Significant synergies costs Proven value creation strategy reinvested in brand building Reach double-digit margin Rich pipeline of new targets
Clear integration plans to deliver quick returns
Investor Day - June 25, 2014 103 Leveraging the Group’s Innovation Edge
Playing Field Sales EBITDA Cash Return Developing key categories Media push on High-value solutions in every segment high-margin brands for key accounts
Materials Designs Photochromic deployment Dual side High indices Full backside Sun prescription
Coatings Protection / Prevention & new functions Cascading in mid-tier … Sunwear
Balanced value drivers Over €500m in consumer Leveraging Group capabilities: marketing investments . Supply chain, IT, Technology . Product portfolio . Brands / Private label
Strengthening our pricing power in the high-end and in the mid-tier
Investor Day - June 25, 2014 104 Continuous Cost Optimization
Playing Field Sales EBITDA Cash Return
Industrial efficiency programs Supply chain Cost management
Shared services Laboratories
Lean management Transitions Opex efficiency Fixed costs reduction On-line model efficiency Productivity gains Synergies with Sun business
Investor Day - June 25, 2014 105 From non Dilutive to Margin Accretive Growth
Playing Field Sales EBITDA Cash Return
2008-2013 2013-2018 Ambition
Expected Revenue CAGR: Revenue CAGR: 10.5% ~10%
Stable operating margin Increase in EBITDA margin by more than 100bp
Investor Day - June 25, 2014 106 2018 Free Cash Flow Ambition: €1 Billion
Playing Field Sales EBITDA Cash Return
Financial discipline Steady deleveraging
Capex supporting growth 2500
. 4% to 5% of sales 2000
Bolt-on acquisition strategy 1500
. €200-250 million per annum 1000
Dividend pay-out Ratio 500 . Keep current level 0 2013 2014 2015 2016 2017 2018
Without new strategic acquisition * At constant exchange rates
Investor Day - June 25, 2014 107 Return on Capital to Remain High
Playing Field Sales EBITDA Cash Return
ROCE will continuously remain over-market: Significantly higher than average cost of capital Catching up as of 2016
ROCE*
Value creation
WACC** scenarii
2014e 2015e 2016e 2017e 2018e
* Return on capital employed, excluding new strategic acquisitions ** Weighted average cost of capital: market consensus and estimate
Investor Day - June 25, 2014 108 Creating Value in a Bigger Playing Field
2013 Change 2018
Market Size <€11.0 bn €27.0 bn
Market growth 3-4% 6-7%
Total Revenue Growth (ex-currency) ~ 10% CAGR Like-for-like growth 3.6%* >6%
~ 11% CAGR EBITDA €1.17 bn ~ €2.0 bn
~ 12.5% CAGR FREE CASH FLOW €0.55 bn ~ €1.0 bn
NET DEBT From c.€2 bn** to c.€1 bn
Excluding new strategic acquisitions * 2012-2013 average **Including the financing of Transitions and Coastal.com acquisitions
Investor Day - June 25, 2014 109 Growing in a Bigger Playing Field Hubert Sagnières – Chairman & CEO A Bigger Playing Field, Entirely in Optics
Eye Care Professionals
Geography Strategy
One mission “Improve lives by improving sight” Consumers Technology
Healthcare
Investor Day - June 25, 2014 111 Essilor by 2018
€ 2.8bn in fast-growing markets / ~20% CAGR €8.2bn Revenue > 6% like-for-like growth ~10% CAGR
€ 0.5bn Online revenue € 1.1bn Sun revenue < €1.0bn Net debt ~20% CAGR / ~17% CAGR
Investor Day - June 25, 2014 112 The Optical Industry Solid Growth Potential Driven by Demographics, Ageing, Urbanization and Lifestyle
2013 Volume CAGR 2020
Worldwide Population 7.0 1.0% 7.6 Demography (in billions of people) Urban Population 3.7 4.3% 5.0
Correction Needs 4.3 2.2% 5.0 Vision Industry (in billions of people) Correction Wearers 1.8 3.0% 2.2
Myopia 1.6 3.2% 2.0 Visual Impairments (in billions of people) Presbyopia 2.0 2.3% 2.3
Cataracts 250m 3.6% 320m Visual Health (in millions of people) AMD* 100m 2.6% 120m
* Age-related Macular Degeneration Source: Essilor estimates, Worldbank, United Nation, CIA, World Population Prospects, Epidemiological and Marketing studies
Investor Day - June 25, 2014 114 Presbyopia and Myopia: Two Segments with Structural Growth
In millions of people
Europe North America
361m 340m 272m 141m 153m 157m 248m Asia-Pacific* 134m
1,274m 1,178m 2013 2020 2013 2020 2013 2020 2013 2020 993m 996m Presbyopia Myopia Presbyopia Myopia
Africa-Middle East Latin America
188m 155m 150m 195m 241m 115m 117m 168m 2013 2020 2013 2020 Presbyopia Myopia 2013 2020 2013 2020 2013 2020 2013 2020 Presbyopia Myopia Presbyopia Myopia
Source: Essilor estimates, Worldbank * Including Russia
Investor Day - June 25, 2014 115 Eye Glasses Account for 86% of Vision Correction in the World
REFRACTIVE SURGERY 6%
CONTACT LENSES 6-7% Does not cure or sufficiently treat presbyopia Insufficient for people with presbyopia
4% PRESCRIPTION 10% LENSES 3+%
READING GLASSES 4%
SINGLE VISION LENSES: Suitable for near vision 11% One optical power per lens Suitable for people with myopia, Offer clearer vision to people hyperopia or astigmatism with presbyopia Insufficient for people with presbyopia
BIFOCAL LENSES: Two optical powers per lens Suitable for people with presbyopia 75% PROGRESSIVE LENSES: Seamless gradients of optical powers from distant to near vision Weight in value Suitable for people with presbyopia Volume CAGR Source: Essilor estimates
Investor Day - June 25, 2014 116 Photochromic and Sun Growing Twice as Fast as the Optical Industry…
400
300 CAGR c.7% CAGR 5-7% 200
100 CAGR 3+%
0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Base100 in 2000 / Source: Essilor estimates
Optical volume Sun volume Photochromic volume
Investor Day - June 25, 2014 117 Strong Regional Differences in Penetration of Value-added Lenses
Progressive lenses Anti-reflective lenses Thin lenses (index>=1.6)
100% 62% 49%
57% 60% 30% 32% 39% 15% 13% 26% 15% 16% 8% 5% 3% 2% 4%
China Italy WW USA France New Mexico India USA WW Spain Japan Brazil Czech. USA WW China Korea Zealand Rep.
Photochromic lenses Prescription sun lenses* Polarized lenses
27% 30% 7.2%
18% 19% 20% 4.0% 10% 10% 2.2% 7% 7% 7% 1.7% 2.0% 2.0% 1% 0%
Japan France WW India USA South India USA WW Brazil France Korea Germany Singap. WW Switz. Australia USA Africa
Penetration of total lens industry in volume in 2013 / Source: Essilor estimates * Excluding polarized lenses
Investor Day - June 25, 2014 118 Fast-Growing and Mid-tier Offer Strong Volume Growth
Fast- Developed Growing Markets High-end ~2.5% 120 Markets 35
+1-2% +6-8% Mid-tier 80 125 >5%
Entry 20 190 ~6%
570 million consumers per annum
Growing globally at 3+% Volume CAGR Source: Essilor estimates
Investor Day - June 25, 2014 119 China is the Largest Optical Industry in Volume, the US is the Largest in Value
Expected growth in value (CAGR 2013-2018, in %)
20
Size proportional to 2013 volume India
9 MPc Russia
15 China
Colombia Turkey Kenya
Ghana Kazakhstan
Egypt 10 Ethiopia Vietnam Morocco Costa Rica Chile Saudi Arabia Brazil Dom Rep. Nigeria UAE Mexico South Africa USA 5 Serbia Canada Croatia Finland Argentina UK Ireland Taiwan Norway France
Denmark Netherlands Switzerland Germany Spain Japan 0
0,2 0,5 1 2 5 10 20 50 100 200
Source: Essilor estimates, Estin & Co. Volume in 2013 (millions of lenses)
Investor Day - June 25, 2014 120 Strong Regional Differences in Replacement Rate of Spectacle Lenses…
In number of years
Japan 4.1 France 3.0 USA 1.9 2.8 China 2.9 India
Brazil
2.9
4.2 South Africa 1.6 Australia More than 4 years Between 3 and 4 years Between 2 and 3 years Between 1 and 2 years Source: Essilor estimates
Investor Day - June 25, 2014 121 … as Well as in Optical Retail Penetration
# inhabitants per optical retail outlet
Europe Asia-Pacific 10,700 Fast-Growing Markets* 29,350
North America 6,650 Asia-pacific Developed Markets 10,700
Africa-Middle East 55,000 Latin America 13,300
5,000 to 15,000 16,000 to 30,000 More than 30,000
* Including Russia / Source: Essilor estimates
Investor Day - June 25, 2014 122 Fast-Growing Markets Rapidly Emerging Middle Class With Significant Purchasing Power Creates Outstanding Opportunities…
In billions of inhabitants 9
8 High income
7
6 Middle-class 5
4
3
2 Low income 1
0 2010 2020 2030
Source: United Nations
Investor Day - June 25, 2014 124 …Both In Volume and Value
Volume growth potential Value growth potential
Spectacle lenses per person with correction need (2012) Price to consumer (log $)
UK Size proportional to 1.0 1,0 USA the population with correction need Canada 30 M
France Australia Geography with 0,80.8 Austria strong market growth Malaysia Germany Netherlands in value (CAGR 2012- Argentina Finland Hong-Kong 2017 > 5%) Belgium 0.6 Italy Sweden 0,6 Switzerland Turkey Taiwan Slovenia Ireland Slovakia SpainDK Brazil Poland NZ China Portugal 0,40.4 Czech Japan Indonesia Russia Egypt Philippines Mexico Hungary 0,20.2 S. Africa Thailand GDP per capita India (in PPP USD, 2012) GDP per capita (log $) 0,00 0 1000010,000 2000020,000 3000030,000 4000040,000 50,00050000 60,00060000 $2,000 $20,000 $100,000 Fast-Growing Markets Developed Markets Fast-Growing Markets Developed Markets
Fast-Growing Markets per capita GDP: +8% per year Middle class: from 26% (2012) to 59% (2030) of worldwide population
Source: Worldbank, Essilor estimate, Estin & Co.
Investor Day - June 25, 2014 125 Essilor’s Organization is Geared to Deliver High Growth...
2010 2011 2012 2013
Growth ex. currency* 22.0% 25.6% 27.3% 20.3% Moscow
Shanghai
Dubai
Bangalore
Singapore Brazil
Regional hubs Headquarters AMERA: Asia, Middle East, Russia, Africa
Investor Day - June 25, 2014 126 Expanding Through a Proven Partnership Strategy...
45 acquisitions or partnerships completed since January 1, 2011
750-1,000 players
Optik Mekk
MOC Opak Seeworld Onbitt L’N Optic Ipek Optik Isbir Optik Youli Incheon Optics Optiben Optiplas SIVO Xiamen Tianhong LATIN Nemkul Yarui Crystal y Plástico Optical Trend Optical AMERICA Movisia Enterprise Opti Express VST Lab Ophthalmics Optics India Shih Heng PSA Nilo Deepak Optic AAiJoke’s JWL Phuket Lab Centralab GKB Hi-Tech Unilab Servi Optica Optiminas Global Vision Polycore Comprol CM Cientifica Equipamentos Ópticos de Precisão AMERA Comopticos Riachuelo Evolution Optical Orgalent Repro Megalux Plants Transitions Optovision Prescription Labs & Wholesalers Readers and Sunglasses Equipment 450-600 players
Players: Prescription laboratories, manufacturers, wholesalers, etc.
Investor Day - June 25, 2014 127 ...To Be Rolled Out in New and Significant Territories
Uncovered markets
Almost 2 billion inhabitants yet to cover
Uzbekistan
Syria Irak Afghanistan
Algeria Pakistan Egypt Iran Myanmar Soudan Yémen Bangladesh
Nigeria Ethiopie Venezuela Ghana Uganda Congo Tanzanie Peru
Mozambique Madagascar
3 countries over 150m inhabitants 9 countries over 50m inhabitants 21 countries over 20m inhabitants Countries with no direct presence
Investor Day - June 25, 2014 128 Additional Growth Engines Shaping the Way to a Significant Increase in Sales by 2018
>20% CAGR >27% CAGR • Photochromic
• Media push • New countries • 2.5 NVG • Equipment • Sun & Readers • Internet
2009 2012 2015e 2018 Ambition €360m €911m >€1,500m €2,800m 249
21% 2013
Investor Day - June 25, 2014 129 A Unique Strategy for Total Chinese Market Coverage
CITIES
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
High
Mid-high
MARKET
Mid-low
Low
Combining organic growth and key partnerships
Investor Day - June 25, 2014 130 Innovation at Every Market Segment in China
CITIES
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
High
Mid-high
MARKET
Mid-low
WHITE LABELS Low Upgrade from low index
Innovation creates value at each price point
Investor Day - June 25, 2014 131 Value Creation in Brazil Through Segmentation
Segmentation by Population Tiers Class A: 10m; Class B: 65m
Premium AB X1.5 in 10 years
Mid-Tier C + 20 M of people
Class C: 102m
Entry No Name D/E no Line Class D/E: 23m GBO and ILT Brazil 2013 200m People
Investor Day - June 25, 2014 132 Corporate Mission “Improve Lives by Improving Sight” 2.5 Billion People in the World Still Need Eye Correction
7 billion people in the world
4.3 billion people (60%) require vision correction
1.8 2.5 billion billion
Corrected Uncorrected
North America Europe Asia 50 130 1,600 170 550
Latam Africa
In millions of people
Investor Day - June 25, 2014 134 Poor Vision is the World’s Largest Handicap
Children Workers Elderly Drivers
810 1,100 300 280 million million million million Uncorrected Uncorrected Uncorrected Uncorrected
$275 billion Global economic productivity loss due to poor vision
Source: World Health Organization, BCG
Investor Day - June 25, 2014 135 Essilor Is Committed to Reversing the Trend
Ambition of 50 million new wearers per year by 2020
# non-corrected (in billion of people) 3.2
Before 2.6
2.6 2.5 -10% - 54%
2.4 After 2.4
1.5
0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2050
Investor Day - June 25, 2014 136 A Unique Governance System to Increase Impact and Gain New Customers
Essilor’s Mission: Improve lives by improving sight
Executive Committee Board of Directors
Creation of the Position of Creation of a Corporate Social Chief Corporate Mission Officer Responsibility Committee
Investor Day - June 25, 2014 137 Four Areas of Action
BOP Innovation Lab
Investor Day - June 25, 2014 138 Awareness: Educate Consumers and Drive Policy Change
Non-profit association funded by Essilor
Collects and publishes valuable data and research on vision economics
Calls for action by stakeholders, policy makers, eye care professionals and media
Investor Day - June 25, 2014 139 : An Independent Advisory Board
Pr Kevin Frick Dr. Clare Gilbert Mr. Arun Bharat Exc. Wu Jianmin PR Kovin
Ram Former China Naïdoo Professor Ophthalmologist President Ambassador to the & Vice Dean Professor at the PhD, OD MPH SRF Ltd United Nations in Johns Hopkins London School of Optometrist Geneva Carey Business Hygiene and BHVI Global India School Tropical Medicine China Program Director Baltimore UK USA South Africa
Investor Day - June 25, 2014 140 Inclusive Business: Innovating to Bring Vision Care to the Last Mile
India Eye Mitra & Refraction Vans
China Presbyopes & Children
Brazil Enterprise & Urban Poor
Investor Day - June 25, 2014 141 Inclusive Business: Leveraging Essilor’s Capabilities to Facilitate On-the-Spot Dispensing
‘Ready to Clip’ lenses Quick: <5min dispensing time Affordable Similar comfort and satisfaction as custom-fitted lenses Low stock lens inventory with no machinery required
Reading Glasses Leadership
Investor Day - June 25, 2014 142 Inclusive Business: a Growing Global Presence
China Mexico (2012) (2014) Brazil India (2013) (2011) Gambia (2014) Indonesia (2014)
Investor Day - June 25, 2014 143 Philanthropy: Serving Those Most in Need
2014
2013
2008
Investor Day - June 25, 2014 144 Sustainability and SRI: a Longstanding Track Record as a Responsible Corporate Citizen
Signatory to the Global Compact since 2003
The only industry player to be ranked in the major CSR and SRI indices
Ranked one of the Most Sustainable Corporations in the World for 2nd year running
Investor Day - June 25, 2014 145
Investor Relations Contact For further information, please contact:
Investor Relations
Sébastien Leroy Véronique Gillet Ariel Bauer
Financial Communications Senior Vice President, Investor Relations Director Manager Investor Relations – Asia Pacific
France France Singapore
Tel: +33 (0)1 49 77 42 16 E-mail: [email protected] Headquarters: 147 rue de Paris - 94220 Charenton-le-Pont - France Website: www.essilor.com
------Disclaimer This presentation contains forward-looking statements that can be identified by terminology such as “potential,” “expected,” “will,” “planned,” “anticipate” or the negative of these terms or similar expressions. Such forward-looking statements reflect the current views of the Group regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. For a detailed description of these factors and uncertainties, please refer to the section “Risk Factors” in our Registration Document (which is available on www.essilor.com). Accordingly, readers of this presentation are cautioned against relying on these forward-looking statements. These forward-looking statements are made as of the date of this presentation. Essilor undertakes no obligation to publicly update or revise any of these forward-looking statements. This presentation includes information relative to our markets and our competitive positions. Such information is based on market data and our actual revenues in those markets for the relevant periods. We obtained this market information from various third party sources (industry publications, surveys and forecasts) and our own internal estimates.
Investor Day - June 25, 2014