1 Long-term sustained growth of the cosmetics market 2 · Long-term sustained growth of the cosmetics market ... Long-term sustained growth of the cosmetics market ... of L’Oréal

1February 15th 2007

Long-term sustained growth of the cosmetics market

Ability to grow sustainably faster than the market

Ability to improve margins for increasingly profitable growth

1

2

3

Ability to boost cash flows regularly and significantly4

2February 15th 2007

2

3

4

5

2004 2005 2006

Worldwide cosmetics market 2004 – 2006*

+ 4.8 %

+ 3.8 %

+ 3.4 %

*Excluding soaps and toothpastes2006 provisional estimate

3February 15th 2007

Worldwide cosmetics market 1992/2006*(in billions of dollars)

Average annual growth rate, excluding exchange rate impact + 4.5 %

66.4

1992

69.8

1993

72.8

1994

75

1995

79

1996

83.3

1997

87.9

1998

92.5

1999

101.3

2001

113.9

2004

118.2

2005

+5.0 %+4.4 %

+5.3 % +5.4 %

+5.5 %+5.3 %

+4.9 %+4.3 %

+4.0%+4.6 %

+3.0 %

+3.4 %

+3.5 %

123.9

20062000 2002 2003

+4.8% +3.8%

97.1

105.9110.1


4February 15th 2007

Western Europe + 1.9 % + 1.1 %

2004 2005

+3.4 %

2006

Cosmetics market 2004 – 2006*

20052004 2006

France - 1.5 %- 0.4 % + 3.5 %

Germany + 0.3 %- 1.8 % + 3.0 %

UK + 2.2 %+ 5.9 % + 4.1 %

Italy - 0.1 %+ 1.2 % + 2.6 %

Spain + 4.7 %+ 6.4 % + 4.0 %

Growth in constant currencies


5February 15th 2007


2004 2005 2006

North America + 2.8 % + 3.8 % + 2.6 %

Professional Products + 4.1 % + 3.5 %

Mass market + 1.3 % + 3.1 %

Luxury market + 4.7 % + 3.8 %

2004 2005

+ 0 %

+ 4.5 %

+ 0.6 %

2006

Source NPD, Nielsen, Market and internal StudiesRetail sales



6February 15th 2007

2004 2005 2006

Japan - 1.2 % + 2.2 % + 0.9 %




7February 15th 2007

2004 2005 2006

Rest of the World + 8.5 % + 8.1 % + 9.9 %




8February 15th 2007

Worldwide and emerging cosmetics markets 1996 – 2006*

Index 100 = 1996

Emerging countries

Worldwide market

*Excluding soaps and toothpastes2006 provisional estimateGrowth in constant currencies

9February 15th 2007

Pourcentage Weight of emerging countries in worldwide cosmetics market and pourcentage contribution to cosmetics market growth

Pourcentagecontributionto cosmetics marketgrowth

Pourcentage Weightof emerging countriesin worldwidecosmetics market


20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

10February 15th 2007Real GDP (based on Purchasing Power Parity)Source: IMF International monetery Fund, World Economic Outlook

BRIMC countries Real GDP Growth rate 2001 - 2006

4.16 %3.72 %

6.48 %6.08 %

5.28 %

6.88 %

3%

4%

4%

5%

5%

6%

6%

7%

7%

2001 2002 2003 2004 2005 2006

Middle Class* High-income

Millions of inhabitants

Breakdown of world population (in millions)by income bracket

Source: World Bank*Middle Class: per capita income between 4 000 and 17 000 $ PPP

0

500

1000

1500

2000

2500

3000

3500

2005 2030

1670

1290489

670

70 millionnew potential consumers every year for L'Oréal

12February 15th 2007

Per capita cosmetics consumption (manufacturer’s price)as an index

100

150

200

250

300

350

400

450

500

550

600

1998 2000 2002 2004 2006 2008 2010

Index 100 = 1997

Brazil

Russia

Mexico

China

India

Source: Euromonitor





1

2

3



Consolidated sales growth 2006(in millions of euros)

Like-for-like Growth:

15 790

20062005

14 533


+6.0% +5.6%+5.2%

+6.5%

0%

1%

2%

3%

4%

5%

6%

7%

Q1 Q2 Q3 Q4

2006 like-for-like sales growth, per quarter


2001 2002 2003 2004 2005 2006

Consolidated sales growth

+ 6.5 %

+ 3.6 %

- 1.8 %

+ 4.0 %

+ 8.4 %

Published growth

+ 8,7 %


Consolidated sales 2006(in millions of euros)

15 790

20062005

14 533

+ 1 257 M€


+5.7%

+1.9%

+6.1% +2.4%

+1.7%

+7%

Western Europe: + 3.5%

Scandinavia

Cosmetics salesLike-for-like growth


North America: + 2.7 %



Mass-Premium make-up market shareof L’Oréal Paris and Revlon from 1984 to 2006

Data Source: ACNielsen, Total US Outlets1999 based on Total US Outlets Excluding Wal-Mart2000 and forward based on FOOD/DRUG/KMART/TARGET2002 and forward Nielsen Database Event/Refresh


5.9%

4.6%

2.4%

0%

1%

2%

3%

4%

5%

6%

7%

2003 2004 2005 2006

n°12 n°5 n°3 n°2

6.5%

Fructis market share and ranking, USA

Source AC NielsenShampoo, haircare, conditioners


Western Europe

North America

Rest of the World

Cosmetics sales Weight of geographic zone1990-2006

1990*

72.9 %

19.1 %

8.0 %

46.6 %

26.3 %

27.1 %

20061995

64.3 %

20.2 %

15.5 %

2000

50.6 %

30.3 %

19.1 %

(*): The 1990 sales figures includes the sales of L’Oréal USA and L’Oréal Canada – French gap.

Rest of the World: + 12.7 %



Eastern Europe: + 22.0%

+21.4%

+13.2%+21.7%

Russia

PolandTchechRepublic

Ukraine

n.s.



Latin America: + 16.1 %

+15.3%

+12.7%

+14.7%

+26.4%

Mexico

Brazil

Chile

Argentina



China: + 21.2 %

Yue-Sai: The Chinese affordable Luxury Brand

May 2004800 counters 250 cities

2006655 counters

200 cities

Japan: - 3.2 %

Cosmetics sales Like-for-like growth

India: + 40.3 %Cosmetics sales Like-for-like growth


2006 Cosmetics sales Growth per Division with and without North America

Professional Products

Consumer Products

Luxury Products

Total cosmetics

Active Cosmetics

+ 3.8 %

+ 5.8 %

+ 5.1 %

Cosmetics SalesGrowth

+ 12.2 %

+ 5.6 %

Cosmetics Sales Growth without

North America

+ 6.0 %

+ 6.7 %

+ 6.2 %

+ 11.5 %

+ 6.7 %


The 6 cylinders driving the growth engine

Technological innovation

Creation of blockbusters

Product value enhancement

Brand power

Globalisation

Acquisitions

PRO-XYLANE®

L’OREAL

®


290

300

310

320

330

340

350

360

370

2005 2015 2025

Proportion of people over 50 in Europe,the United States and Japan

34%

38.2%

41.5 %

Source: United Nations, World Population prospects


100

135148

169

8090

100110120130140150160170180

30-39 40-49 50-59 > 60

Average spending on Beauty Products per age group

Consumption index Base: 30-39 age group = 100

Secodip-France


2004 2005 2006Effet Volume Effet Valeur

+ 3.7 %

+ 5.7 %

+ 2.5 %

+ 0.6 %

+ 1.1 %

+ 3.1 %

Cosmetics – Like-for-like growthVolume / Value evolution

Value Effect Volume Effect


Professional Products

Luxury Products

Active

Cosmetics

The Body Shop

MIZANI

A diversified brand portofolio

Consumer Products


The Body Shop Sales2nd half-year

Retail sales(1)

Retail sales with a comparable store base(2)

Consolidated sales

+ 6.6 %

+ 3.2 %

+ 9.7 %

As a %Variation

(1) Retail sales: Total sales to consumers through all channels.(2) Retail sales with a comparable store base: total sales to consumers by stores which operated continuously from July 1st to December 31st, 2005, and over the same period in 2006.


Western Europe

North America

Rest of the World

45.5 %

21.5 %

33.0 %

% of Sales

+ 6.1 %

+ 0.8 %

+ 11.4 %

As a %

Variation

Total 100.0 % + 6.6 %

Retail sales, breakdown by geographic area


Opening of 89 new stores, second half-year 2006*

2nd Half2006

15

8

66

Total 89

Western Europe

North America

Rest of the world

*Balance of store openings and closures


L’Oréal market share*

20052006 with

The Body Shop

15.0 % 15.6 %

2006without

The Body Shop

15.2 %



The 6 cylinders driving the growth engine

Technological innovation

Creation of blockbusters

Product value enhancement

Brand power

Globalisation

Acquisitions





1

2

3


55

Consolidated profit and loss accounts without The Body ShopFrom sales to operating profit(in millions of euros)

Cost of sales

Research and development

Operating profit before foreign exchange gains and losses

Sales 14,532.5 15,355.1

31.12.2005

Advertising and promotion

Selling, general and adm. expenses

Foreign exchange gains and losses

Gross profit 10,185.2 10,940.7

2,312.6 2,538.9

- 4,347.3 - 4,414.4

- 496.2 - 531.0

- 4 367.2 - 4,717.6

- 3,009.2 - 3,153.2

- 46.6 - 56.3

%of Sales

%of Sales

71.3%

16.5%

28.7%

3.5%

30.7%

20.5%

0.4%

100%

70.1%

15.9%

29.9%

3.4%

30.1%

20.7%

0.3%

Operating profit 2,266.0 2,482.6 16.2%15.6%

31.12.2006without

The Body Shop

100%

+ 7.4%

+ 9.8%

+ 9.6%

+ 5.7%


Industrial purchasing

7 sourcing centers

for the world

37 decentralized

sourcing centers


Cosmetics plants labour productivity index* 2003-2006

100.0104.3

110.8

120.6

2003 2004 2005 2006

*2003 = Base 100

58


Cost of sales



Sales 14,532.5 15,355.1

31.12.2005




Gross profit 10,185.2 10,940.7

2,312.6 2,538.9

- 4,347.3 - 4,414.4

- 496.2 - 531.0

- 4 367.2 - 4,717.6

- 3,009.2 - 3,153.2

- 46.6 - 56.3

%of Sales

%of Sales

71.3%

16.5%

28.7%

3.5%

30.7%

20.5%

0.4%

100%

70.1%

15.9%

29.9%

3.4%

30.1%

20.7%

0.3%


31.12.2006without

The Body Shop

100%

+ 7.4%

+ 9.8%

+ 9.6%

+ 5.7%


Research budgets

396429

443467

496

533

+7.3%

2005 20062001 2002 2003 2004

In millions of euros

60


Cost of sales



Sales 14,532.5 15,355.1

31.12.2005




Gross profit 10,185.2 10,940.7

2,312.6 2,538.9

- 4,347.3 - 4,414.4

- 496.2 - 531.0

- 4 367.2 - 4,717.6

- 3,009.2 - 3,153.2

- 46.6 - 56.3

%of Sales

%of Sales

71.3%

16.5%

28.7%

3.5%

30.7%

20.5%

0.4%

100%

70.1%

15.9%

29.9%

3.4%

30.1%

20.7%

0.3%


31.12.2006without

The Body Shop

100%

+ 7.4%

+ 9.8%

+ 9.6%

+ 5.7%



Cost of sales



Sales 14,532.5 15,355.1

31.12.2005




Gross profit 10,185.2 10,940.7

2,312.6 2,538.9

- 4,347.3 - 4,414.4

- 496.2 - 531.0

- 4 367.2 - 4,717.6

- 3,009.2 - 3,153.2

- 46.6 - 56.3

%of Sales

%of Sales

71.3%

16.5%

28.7%

3.5%

30.7%

20.5%

0.4%

100%

70.1%

15.9%

29.9%

3.4%

30.1%

20.7%

0.3%


31.12.2006without

The Body Shop

100%

+ 7.4%

+ 9.8%

+ 9.6%

+ 5.7%

63


Cost of sales



Sales 14,532.5 15,355.1

31.12.2005




Gross profit 10,185.2 10,940.7

2,312.6 2,538.9

- 4,347.3 - 4,414.4

- 496.2 - 531.0

- 4 367.2 - 4,717.6

- 3,009.2 - 3,153.2

- 46.6 - 56.3

%of Sales

%of Sales

71.3%

16.5%

28.7%

3.5%

30.7%

20.5%

0.4%

100%

70.1%

15.9%

29.9%

3.4%

30.1%

20.7%

0.3%


31.12.2006without

The Body Shop

100%

+ 7.4%

+ 9.8%

+ 9.6%

+ 5.7%


Operating profit – Divisions(as % of sales)

Consumer Products

Luxury Products

Active Cosmetics

18.0 %

20.6 %

19.6 %

Professional Products 20.8 %

17.2 %

20.2 %

19.0 %

19.7 %

20062005

Cosmetics divisions total 19.1 %18.4 %


2005

Cosmetics – Operating profitGeographic zone

13.5 % 14.5 %Rest of the world

18.3 % 18.8 %North America

21.0 % 21.8 %Western Europe

% CA2006% CA

18.4 % 19.1 %Total of geographic zones

67

Main indicators – Impact The Body Shop(in millions of euros)

2006 GrowthPublished figures

+ 5.7%15,355+ 5.7%

Sales% like-for-like growth

Without The Body Shop(excluding non-recurrent items)

+ 9.6%2,48316.2%

Operating profit% of sales

+ 9.7%2,59916.9%

Profit before tax and non-recurrent items% of sales

+ 10.0%1,809Net profitafter minority interests

+ 13.1%€ 2.94Per share*

Group(excluding non-recurrent items)

+ 8.7%15,790+ 5.8%

Sales% expansion comparable

+ 11.9%1,833Net profitexcluding non-recurrent items after minority interests

+ 14.7%€ 2.98Per share*

+ 12.1%2,54116.1%

Operating profit% of sales

+ 11.3%2,63816.7%

Profit before tax and non-recurrent items% of sales

* Diluted net earning per share on net profit excluding non-recurrent items after priority interests


Dividend per share

1.18 €*

20062005

1 €

*Proposed at the shareholder’s meeting to be held on April 24th, 2007





1

2

3



Cash flow statement (in millions of euros)

Net incomeDepreciation and provisionsGains and losses on disposals of assets, change in deffered tax and others

Operating net cash

Dividends paid

Change in working capital requirementInvestments

Divestments and others

Residual cash flow (before acquisitions or disposals)

Cash flow

31.12.2005

1,973.2426.9

- 270.5

1,431.6

- 563.3

- 35.7- 662.3

- 25.8

842.5

2,129.6

31.12.2006

2,062.1579.4

- 231.2

1,730.7

- 633.8

+ 65.6- 745.2

+ 25.0

1,121.9

2,410.3 + 13.2%

+ 20.9%

Acquisitions

Residuael cash flow after acquisitions

- 181.7

660.8

- 1,065.7

56.2

1 Long-term sustained growth of the cosmetics market 2 · Long-term sustained growth of the cosmetics market ... Long-term sustained growth of the cosmetics market ... of L’Oréal

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