July 28, 2017 / 12:45 PM / a year ago

UPDATE 2-Essilor cuts sales target amid tough markets

* Shares down 3.5 pct

* Cuts full-year revenue growth outlook to 3 pct

* Profitability indicator still expected at 18.5 pct

* First-half revenue up 2.5 pct to 3.9 bln euros (Adds details)

By Matthias Blamont

PARIS, July 28 (Reuters) - Essilor surprised investors on Friday by cutting its revenue growth target, citing difficulties in China and Brazil and a tougher market environment following the announcement of its merger with Italy’s Luxottica.

Shares in the world’s leading maker of opthalmic lenses were down 3.52 percent at 1118 GMT, making France-based Essilor one of the biggest fallers in the STOXX 600 index. Shares in Luxottica were down 3.05 percent.

Essilor, which posted higher revenues in the first half, said it was now targeting sales growth of about 3 percent this year on a like-for-like basis and at constant exchange rates, compared with a previous target of 3 percent to 5 percent.

Essilor, however, confirmed its profitability target.

It said the adjusted contribution from operations, a revenue figure stripping out the cost of sales and operating expenses, would be close to 18.5 percent of total sales in the second half, compared with 18.4 percent in the first six months, and 18.9 percent a year earlier.

Essilor Chief Operating Officer Laurent Vacherot told a conference call that difficulties in Brazil and China were among the reasons for the more cautious outlook in the second half, as was the “challenging market reaction” to the Luxottica deal.

But Vacherot said the companies still aimed to complete the antitrust approval process around the end of the year.

“So far, both companies had communicated on the relatively good acceptance of the deal by clients,” analysts at Raymond James wrote in a note.

Luxottica, the maker of Ray-Ban sunglasses, agreed in January on a 46 billion euro ($53.9 billion) merger with Essilor to create a global eyewear powerhouse with annual revenue of more than 15 billion euros.

The deal between two top eyewear players is aimed at helping the businesses take full advantage of expected strong demand for prescription lenses and sunglasses as populations age, and an increasing awareness about eye care in emerging countries.

Essilor’s sales in the first half rose 2.5 percent to 3.9 billion euros, in line with forecasts of analysts polled by Reuters in partnership with Inquiry Financial.

Revenue at its sunglasses and readers division fell 1.5 percent in the first half. The company cited high inventory levels in China as one of reason for the decline. ($1 = 0.8539 euros) (Editing by Sudip Kar-Gupta and David Clarke)

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