PARIS L'Oreal (OREP.PA), the world's biggest cosmetics group, said it was still open to making an acquisition, a day after unveiling plans to return 500 million euros ($669 million) to shareholders.
Chief Executive Jean-Paul Agon said on Tuesday the French company had the "means and the guts" to do a takeover deal, helped by a 1.58-billion-euro cash pile at the end of 2012.
"We look at every business in the cosmetics industry ... but we are very selective," Agon said, adding L'Oreal did not wish to make an acquisition that would transform its business.
L'Oreal, which makes Lancome creams and Garnier shampoo, on Monday posted 2012 results at the top end of expectations and announced plans to buy back shares.
Financial advisers and analysts said there were no obvious big targets for L'Oreal as few businesses were for sale. Some said Agon made the comments to justify the group's cash pile and an absence of big acquisitions recently.
L'Oreal has rebuffed ideas about building its own retail network - unlike LVMH (LVMH.PA) which also makes cosmetics and perfume and owns retailer Sephora and duty-free shops.
Agon also said he "was glad we are not in the business" of direct selling, which involves door-to-door representatives.
Advisers said L'Oreal had, in the past, turned down pitches to acquire direct retailers such as Brazilian group Natura (NATU3.SA), Avon (AVP.N) in the United States and Oriflame ORIsdb.ST in Sweden.
Another potential candidate could be Organix Hair Care, a U.S. maker of shampoos, body washes and lotions which is up for sale in a deal that could be worth $800 million or more, according to sources familiar with the matter.
L'Oreal's recent acquisition track record has been mainly made up of small purchases.
In 2012, it acquired U.S. make-up company Urban Decay which made sales of 130 million euros, baby soap brand Cadum which had turnover of 60 million euros, and Colombian make-up brand Vogue which generated 30 million euros.
GROWTH NEXT YEAR
Looking ahead, Agon said he expected the global cosmetics market to achieve "growth close to that of 2012" this year after a 4.6 percent rise in 2012.
Agon said he expected sales in 2013 to benefit from strong trading in the United States, Asia and recovering demand in Russia.
He also reiterated that L'Oreal aimed to outperform the market and increase profit and sales this year.
"We feel that the management is confident about the evolution of its markets this year and about its capacity to outperform," Catherine Rolland, analyst at Kepler Capital Markets said after the group's annual results presentation.
L'Oreal shares were up 3.8 percent in afternoon trade. They have gained 3 percent so far this year and 30 percent last year.
On Monday after the market closed, L'Oreal posted 2012 operating profit of 3.70 billion euros, slightly above an average estimate of 3.66 billion in a Thomson Reuters I/B/E/S poll.
Full-year revenue of 22.5 billion euros compared with a forecast for 22.3 billion. Its operating margin rose to 16.5 percent from 16.2 percent in 2011.
"Most regions and businesses slightly over-delivered versus expectations," Sanford C. Bernstein analyst Andrew Wood said in a note, adding the luxury business had underperformed, while the buyback was a "positive surprise".
L'Oreal also spent about 500 million euros buying back its shares last year following a break since 2008.
(Additional reporting by Anjuli Davies; Editing by Dan Lalor and Mark Potter)