L'Oreal Co Eur Ord

Beauty is essential for humanity. At L'Oréal Groupe, we create the beauty that recycles 100% of its industrial water by 2030, that celebrates everyone for who they are, and without animal testing since 1989. Beauty that cares, with 67% of PET plastic packaging from recycled sources, and 100% of our natural ingredients sustainably sourced by 2030. Beauty that opens doors with 25,000 work opportunities for young people every year. That creates a more inclusive future with 22,500 possible foundation shades. Beauty that protects the planet, restoring 1 million hectares by 2030. At L'Oréal Group, we create the beauty that moves the world.

Good morning, everyone. I'm delighted to welcome you in person for the very first time to present our 2022 results. So we'll start with a detailed presentation from Christophe Babul, our CFO. Then you'll have a short presentation by each division president. So Alexis Perakidvala for Consumer Product Division, Omar Hajeri for the Professional Products Division, Myriam Coel Velgrim for Active Cosmetics and Cyrille Chapuis for L'Oréal Luxe. So without further ado, I will hand over to Christophe and of course, you'll have a presentation from myself and a Q&A at the end of this presentation. Christophe, you're on.

Ladies and gentlemen, good morning. L'Oréal showed another excellent performance in 2022, in spite of the fact that we had to face an unprecedented number of challenges. If I had to summarize the past year in three key figures, I will highlight the double-digit like-for-like growth of plus 10.9%, the operating profit margin of 19.5% at 40 basis points, and the 27.6% surge in EPS to 11.26 euros per share. Consolidated sales increased by a substantial 18.5% to above 38 billion euros. Foreign exchange had a very positive impact of 7.2% as the euro remained weak throughout the year. More detail on our invoicing currencies and their evolution against the euro can be found in the appendix of the presentation posted on our website laurelfinance.com. The change in scope of consolidation was a positive 0.4%. It was mainly due to the acquisition of Youth to the People in December 2021 and of Skin Better Science last October. On a like-for-like basis, growth came to plus 10.9% over the full year. Excluding 2021, which was an exceptional year in many respects, 2022 showed the best growth in more than 20 years. On a reported basis, it was the best in almost 30 years. Looking now at the performance of the last quarter alone, you can see on the left that sales increased by 13.5% to 10.3 billion euros, passing the 10 billion euro mark for a quarter for the first time. Like-for-like growth came to plus 8.1%. On the right of the chart, the comparable quarterly growth since 2019. Over three years, annual growth was plus 23.4% on a comparable basis, and growth sequentially accelerated quarter after quarter to plus 26% in the last quarter. Let's look at sales by division. Like for like, they all grew strongly. The professional product division ended the year on a high note and posted a 10.1% increase. L'Oréal Luxe continued at a strong pace, up plus 10.2% despite the turbulence in the Chinese market. Active Cosmetics posted another year of stellar growth at plus 21.9%. The division has almost doubled in size since 2019. And the most remarkable, however, was the acceleration of the consumer products division, which achieved its best growth in 20 years at plus 8.3%. Our business is well distributed by region. Europe and North Asia account for around 30% of sales. With North America at over 26% of our business, three zones are now exceeding 10 billion in sales. The emerging markets, combining SAP MENA SSA and Latin America, now account for 14% of total sales and are becoming a true growth engine for the group. Business was very dynamic in all regions, both versus 2021, which was a year of sharp recovery, and even more versus 2019, as shown on this slide. On the left, in Europe, we recorded 11.6% like-for-like growth, up double digits for the second year in a row, led by the Spain-Portugal hub, hub mid-teens, while the German-Austria hub, the UK and Italy, rose high single digits, a strong performance in these large countries where we sold significant shares. In North America, momentum remained very strong, up 10.4% like for like, as the American consumer showed strength throughout the year. In North Asia, growth came to 6.6% over the full year, as business was softer in the second half due to the challenging market conditions in China with the resurgence of COVID. In a declining market, sales in mainland China rose 5.5%, boosted by double-digit growth in e-commerce and a strong performance on Singles Day. Emerging markets, up by 20.5%, punch well above their weight, contributing a quarter of the group's overall growth. India, the Malaysia-Singapore hub, the Gulf countries and Vietnam drove a swift 22% like-for-like increase in SAP MENA SSA, while growth of 18.6% in Latin America was quite broad-based, led by Mexico. To be noted on the right, the remarkable three-year growth in North Asia and emerging markets. Let's now look at sales by category. Skincare, our number one category, grew by 10.1%. The category accounted for 40% of our total sales. Makeup continued its rebound at plus 9.2%, but was penalized by health restrictions implemented in China. It represented 20% of our total sales. Haircare was very dynamic at plus 12%, both in the professional and consumer divisions. Fragrances recorded an impressive 22.8% increase and accounted for 12% of our turnover. And hair color grew by 4.6%. In a nutshell, the key word of 2022 is balance. A balanced contribution to growth by division and by region. and the balance can also be applied to the components of the growth. One third came from volumes, one third from price increases, and one third from mixed improvement. Let's move to the profit and loss account. Gross profit increased by 16.1% to 27.6 billion euros. The gross margin stood at a high 72.4%, 150 basis points below the level of 2021. As every year, let me give you some additional color on the development of the gross margin. Currency impact, including conversion and transaction, were negative by a significant 85 basis points. Thus, on a comparable basis, the gross margin decreased by a much more limited 65 basis points. The value effect, combining price increases and mixed improvement, offset about two-thirds of the substantial input cost inflation. Research and innovation expenses advanced 10.7% to 1.1 billion euros. we have continued to invest significantly to support the growth of our brands. Advertising and promotion expenses increased by 14% or by 1.5 billion euros in absolute value to over 12 billion, amounting to 31.5% of sales. Selling and administrative expenses continued their relative decline, down 40 basis points to 18.4% of sales. This demonstrated the strict management discipline in the context of strong growth and improved efficiency of our organizations thanks to the creation of hubs in various geographical areas. Operating profits surged 21% to almost 7.5 billion euros. The operating margin stood at a record 19.5% at 40 basis points over 2021. Last year, the group expensed the cost of configuring and customizing software used in software as a service model. This cost, previously recognized as fixed assets, had a negative impact of 20 basis points on the operating margin in 2022. On a comparable accounting basis, the operating profit margin will therefore have increased by a noticeable 60 basis points. By division. The profitability of the professional product division was unchanged at 21.3, that of consumer product divisions stood at 19.8%. L'Oréal Luxe increased 10 basis points to 20.9%, and Active Cosmetics came out at 25.4%, up 20 basis points. Non-allocated expenses, consisting mainly of corporate and fundamental research costs, were 40 basis points lower in relative terms at 2.4% of sales. Note that the operating margin of each division was negatively impacted by 40 basis points in 2022 as a result of structural accounting adjustment. minus 20 basis points related to the reallocation of certain central costs to each division, which is reversed in the non-allocated cost at group level, and minus 20 basis points in each division and at a group level due to the change in accounting of software-related expenses I mentioned earlier. Therefore, before taking into account this reallocation and accounting adjustment, the operating margin will have been up 40 basis points for the professional product division and change for the consumer product division up 50 basis points for L'Oréal Luxe and up 60 basis points for the active cosmetics division. Since 2019, L'Oréal has gone from strength to strength. A few key figures to highlight how well we have navigated the last three years. Consolidated sales advanced 28% to over 38 billion. Comparable growth was 23% over three years. Operating profit increased 34% from 5.5 to 7.5 billion euros. The operating margin advanced 90 basis points to a record 19.5, notwithstanding the fact that we substantially invested behind our brands to secure our growth and prepare for tomorrow. In relative terms, our ENP spend was up 70 basis points. And in absolute terms, it increased a third to over 12 billion euros. From operating profit to net profit excluding non-recurring items. The net financial charge came at 73 million euros. For the full year of 2023, a net financial charge of 130 million can be anticipated, all other things being equal. Sanofi dividends amounted to 468 million euros. In addition to the annual 393 million euros, Sanofi paid a dividend in kind in the form of newly listed euro API shares for an amount of 74.5 million euros. Income tax was 1.8 billion euros, representing a tax rate of 22.8% below the 23.7% rate the year before. For 2023, we can anticipate at this stage a tax rate of slightly below 24%, all other things being equal. Net profit, excluding non-recurring items, exceeded 6 billion euros. Diluted earnings per share of 11.26 euros showed a substantial 27.6% increase. And the impact on EPS of the distribution of Euro API dividend amounted to 13 cents of a euro per share. To help you in estimating your EPS for 2023, I will recommend that you base your calculation on the diluted number of shares equivalent to that of 2022. Non-recurring items were broadly unchanged at 347 million euros. The other income and expenses of 241 million euros mainly include restructuring charges of 172 million, of which 114 million related to the ongoing disposal of Logocos, and 37 million for various reorganizations in Europe and Sapmina. Last, 39 million euros for Declare Brand impairment. donations to charities, and exceptional costs related to the Ukraine conflict for 43 million. Gross cash flow advanced 9.8% to over 7 billion euros. Working capital increased significantly due to some precautionary stock building at raw materials and supplies, the price of which had risen sharply, and of finished goods to mitigate supply chain disruptions. Capital expenditure of 1.3 billion euros represented 3.5% of sales. For 2023, an investment in the order of 4% of sales may be expected. Net operating cash flow amounted to 4.9 billion euros. Lastly, after payment of 2.6 billion euros of dividends, of 740 million for acquisition, of 500 million for share buybacks and of redemption of the LIBS debt, the residual cash flow was positive at 518 million euros. The balance sheet remains robust, with shareholders' equity of 27.2 billion euros, or 58% of the total balance sheet. And the financial situation remains healthy. At the end of December, net debt amounted to 3 billion euros and to 1.4 billion, excluding the financial lease debt. The gearing ratios stood at 11%, and the financial leverage of net debt over EBITDA was down to 0.3. The Group's 2022 outstanding performance, as well as the quality of the balance sheet, led the Board of Directors to propose to the AGM a further 25% increase in the dividend to €6 per share. This new increase in the dividends leads to a payout ratio of 53.3%. This is another illustration of L'Oréal's consistent, dynamic and balanced dividend policy. With regards to L'Oréal for the future, 2022 was a year of further progress. You can see on this slide some of our achievements in the effort to fight against climate change, manage water sustainably, respect biodiversity, and preserve natural resources. For example, regarding climate, the group is committed to achieving carbon neutrality for all of its sites by 2025. At the end of 2022, 110 sites, including 22 factories, had already achieved carbon neutrality, that is 65% of our sites. In 2022, L'Oréal was once again rewarded for its social and environmental performance and recognized among the best companies in the world by non-profit organizations, rating agencies, or international bodies, all leading in their respective fields. I thank you for your attention.

Thank you, Christophe, for these great results. And we'll now hear from the division, starting with Consumer Products Division and Alexis Perakis-Vallas.

So good morning, everyone. 2022 was a dynamic year for the mass beauty market, which grew at plus 6%. And it was a great year for our division, which crossed the 14 billion euro mark and grew at plus 8.3%, our best result in 20 years. This acceleration was very balanced, coming from value at a solid plus 5.7%, but without sacrificing volumes, which grew at plus 2.6%. This dynamic shows the power of our brands and of our data science of pricing capabilities. We're not only growing, but accelerating our market share gains, widening our lead over the market year after year. We achieved all this while protecting our profit despite exceptional cost of goods increases. All our major brands are growing and gaining market share. L'Oréal Paris reinforced its place as the world's leading beauty brand at plus 7%, while Garnier accelerated by plus 8%, powered by green science and innovations. The boom of Maybelline at plus 16% and NYX Professional Makeup at plus 21% fueled a spectacular bounce back of makeup. The category is on fire for us at plus 15%. Hair care was another highlight, growing double digits twice as fast as the market thanks to our focus on premium. And in fact, beyond makeup and hair care, the division gained share on all of its major categories. Our growth was also balanced across regions. We performed well in Europe and the US, both growing above 8%. And at the same time, 40% of our growth came from the emerging markets of South Asia, Latin America, the Middle East, and Sub-Saharan Africa, led especially by high-potential countries like Mexico, India, and Brazil. So, Building on a successful 22, we are determined to keep accelerating thanks to four strategic growth drivers. First, our focus on the upper half of the middle class. This group represents 2 billion people worldwide. And thanks to search, makeup tutorials, and TikTok influencers, they are becoming more beauty savvy every day. And as they learn, they seek out more efficient and desirable products at a premium. Our division is perfectly positioned with brands that are particularly strong among these more affluent and demanding mass consumers. Emerging markets are key for this target, representing 38% of this upper middle class group. Take India, for example, which is rapidly growing into a beauty epicenter. In India, 50% of the mass beauty spending is done by consumers that fall in the top two socioeconomic classifications. But in our division, 70% of our business comes from this upper half of the Indian middle class, which will fuel the market growth for years to come. Second, we specialize in beauty categories with high potential to premiumize and inspire new consumer habits. Skincare, premium haircare, makeup, and hair color are markets in which people seek innovation and desirability, not just utility. That makes these categories ripe for new products and segments. Look at skincare serums, a high-efficacy product with a massive price positioning. In the US, the number of households buying at least one serum has increased by over 80% since 2019. The third driver is obviously our highly desirable brands that are creating game-changing innovations. L'Oréal Paris is a luxury brand that happens to be sold at mass. It is a unique blend of femininity, feminism, and superior science. After the successful launch of Yaluron Plump in 2022, Elviv is introducing Bond Repair, a highly effective salon solution brought to mass for the first time. Garnier is the champion of green beauty, from its innovations to its social causes. In 2022, its new vitamin C serums took the skincare market by storm. And this year, the brand will reinvent at-home hair color with the launch of Garnier Good. Maybelline, the world's number one makeup brand, is on an innovation winning streak. First, sky-high mascara, then vinyl ink lipstick, and this year they launch Surreal Mascara, a groundbreaking fiber technology for a stunning lash lengthening effect. NYX Professional Makeup is accelerating its presence as the brand of entertainment. In 22, the brand created lines inspired by Cirque du Soleil and Avatar 2, with more blockbuster collaborations coming in 23. Fourth and last, we are pioneers of beauty tech and data, which actually unlocks value in many ways. Thanks to tech, we are bringing service to the self-service world of mass. Our tools, like the Skin Genius diagnosis by L'Oréal Paris, is like putting a beauty advisor in the pocket of millions of consumers. We're also leveraging our data capabilities to target the right consumers with the most compelling messages. Our brands are already winning on this front, with Maybelline topping the Digital Genius ranking by Gartner. And finally, we're exploring new digital territories, like NYX Professional Makeup's recent launch of Gorgias, a web-free community of 3D artists and beauty makers whose mission is to create the future of digital beauty. So as you can see, we are entering the year of the rabbit with confidence, speed, and agility as we open a new era of strong, profitable, and balanced growth. Thank you.

Thank you, Alexis. Omar, let's look at the professional products division.

So, good morning everyone. In 2022, our division saw yet another year of exceptional performance. We passed the 4 billion euro turnover landmark with two billionaire brands, L'Oréal Professionnel and also Kerastase, which passed the symbolic billion euro landmark for the first time. On a full year basis, we grew by 10.1%, twice the speed of a market estimated at plus 5%. Compared to 2019, the division has grown by 29%. We outperformed the market in all zones. In our historical key zones, in North America, we up 7%, led by our powerful salon-centric distribution network and strong growth in e-commerce and specialty retail. In Europe, we're up 7%, with impressive growth in our major markets and a strong rebound in salons. Our growth markets also recorded substantial growth, plus 32% in China, which has become our number two country worldwide, with still strong and top potential in many cities, and plus 50% in India, now our fifth biggest country worldwide, where an exciting e-commerce journey is only beginning. We outperform the market in our two key categories, hair care and hair color, fueled by innovations and supported by the breadth of our powerful brand portfolio, covering all hair needs at all price points. In hair care, we grew by 16.5%. The division keeps accelerating on the hair care market, which is premiumizing. Following the COVID period, we see a strong appetite of consumers investing more in the premium hair care category and sophisticating their hair care routines. Premium hair care is becoming a luxury category. Kerastase is growing by 16% through the ongoing success of its two blockbusters, Genesis and Blanc Absolue. Following our metal detox disruptive innovation, L'Oréal Professionnel recorded double-digit growth at plus 27%. In Hercolor, we grew by 5.3%. Growth is driven by our blockbuster Shades EQ by Redken, enhanced by powerful innovations like our Shades EQ Bonder Insights. Our performance since 2019 is the result of our winning strategy, built on two major transformations in our business model. First, a reinvented relationship with consumers. Today, our division is truly omnichannel. To recruit new consumers at scale, we continue, of course, to capitalize on our strong salon footprint. We remain dedicated to our 400,000 salon partners, leveraging the fantastic power of stylist advocacy and professional expertise. And we go further by accelerating in e-commerce. And we are progressively extending our distribution in specialty retail. Together, e-commerce and specialty retail represent 30% of our total turnover. Our omnichannel strategy is supported by investments in media, CRM, and advocacy, financed by a strong valorization plus a tight control of our SDNA. Our second key transformation is a reinvented relationship with hairstylists. We continuously adapt to a never-evolving market characterized by the rise of independent stylists. To reach them all, we are building the most powerful data-driven digital ecosystem. There are 7 million hair stylists in the world. Every week, the division is interacting with 2.5 million of them. And the number keeps growing. Digital now drives our relationship with salons and stylists. Through commerce, thanks to our B2B e-commerce platform, L'Oréal Partnership. Through education, thanks to our online academy, L'Oréal Access. And through services, thanks to the recent launch in the U.S. of the first ever marketplace dedicated to beauty professionals. Capitalizing on all these transformations, the division is uniquely positioned to reach consumers and stylists at scale and recruit new clients. In 2023, I'm confident. I'm confident that we'll keep our growth momentum thanks to our cutting-edge innovation agenda and our strong potential of conquest in our growth markets. Innovation in hair care, with the launch of Symbios by Kerastase, are a unique answer to the huge anti-dandruff market. Innovation in hair color, with the relaunch of INNOA by L'Oréal Professionnel and INNOA ID, the ultimate in-salon luxury color experience. Innovation in beauty tech, with the rollout of our disruptive steam pot 4, the first all-in-one professional steam styler. Innovation in sustainability, with the deployment of our L'Oréal water saver, our breakthrough showerhead, saving up to 69% water. and acceleration in our growth markets. We will further strengthen our footprint by recruiting new consumers and conquering new salons in China and in India. As you can see, we are ready for the future and ready for growth. Thank you.

Thank you, Omar, for this great presentation. And Cyril, let's talk about L'Oréal Luxe.

Good morning everyone. In 2022, Laurel Lux outperformed the luxury beauty market for the 12th consecutive year. The market ended at a solid plus 8 and we closed with a very strong plus 18.6 in published and plus 10.2 in like for like. Our net sales reached 14.6 billion euros. Our worldwide market share increased by 60 business points in just one year, and if we consider the long-term perspective, it has increased by over 200 business points versus pre-COVID. In skincare, the first category of luxury, we again made significant strides at plus 7 versus the market at plus 2. This is thanks to the success of our ultra-premium skincare, namely LNR-Robinstein and Lancome Absolue, A strong start for our recent acquisitions, Takami and Youth to the People. And last but not least, our powerful award-winning innovation in the edge-defying segment. In fragrance, the fastest-growing luxury category, we strengthened our worldwide leadership big time at plus 23 on a market at plus 17. This despite some disruptions in our supply chain. Our worldwide blockbusters were consolidated, like for instance, Libre by Yves Saint Laurent, number three in Europe just three years after hitting the market. Our launches of the last few years also kept gaining traction, and we had very impressive scores with the new Paradox by Prada, the best feminine launch of 2022. Finally, our collection business in Asia maintained impressive momentum, namely Maison Margiela, recording a phenomenal growth at plus 90. In makeup, our third category, the main drivers were Saint Laurent and the reinvented Urban Decay, both recording double-digit growth. In 2022, L'Oréal Luxe balanced its geographic footprint more than ever. In North Asia, the biggest luxury beauty region, we had a strong year, ending at plus eight on the market, at minus two. The performance was particularly strong in China local markets, with the highest ever market share, over 30% in China local markets. In 2022, L'Oréal Luxe China grew 11 points above its market and was the only major player to grow in a difficult context affected by several lockdowns. L'Oréal Luxe is the leader by a long distance in China, and I'd like to pay special tributes to our teams there. We also continued gaining market share in travel retail in the Asian region, despite keeping a very tight control policy on our brands. In North America, L'Oreal Lux grew by 7%, slightly below market as we concentrated on revamping our business. The second half showed some very encouraging signs of acceleration of our sellout. In Europe, where we are the historical clear leader, L'Oreal Lux again delivered a solid year at plus 16 and is evolving at double-digit growth in Germany, Spain, Italy, UK. In the promising emerging markets, we became the luxury market leader. Importantly, 2022 was another year of profit improvement for L'Oréal Luxe. At 22.9%, our profit level far exceeds all direct competitors. Let's now look ahead to 2023 and beyond. I am extremely confident in our capacity to deliver consistent, strong growth. First, because I'm convinced the market will continue to show strong dynamism. Desire for luxury amongst the global upper middle class is extremely robust. Our market registered a 6% CAGR over the last decade, and it will remain at least at the same pace. And because I'm convinced L'Oréal Luxe is perfectly equipped to keep outperforming the market. Here are seven very important points I'd like to highlight. The first one, L'Oréal Luxe has the most diversified and balanced brand portfolio of the industry. We now have five powerful billionaire brands we will consistently be investing in. Elena Robinshine is joining this very selective billionaire club in 2023. We have exceptional growth relays, brands like Takami, Youth to the People, Prada, Valentino, Carita, which are just beginning their globalization journeys. With our 23 brands, All price points in the luxury ladder are covered perfectly. The quality of our portfolio allows us to answer to all beauty aspirations, all communities, from culture lovers to science lovers, from boomers to Gen Z, from classical to highly creative customers. Point two, L'Oréal Luxe has a dominant position in the Chinese ecosystem, which will bounce back big time after Q2. Six of our brands are in the top 20 of this gigantic market. Three, we are solid leaders in Europe and in conquest mode in the US with a restructured footprint and P&L. Moving to four, we are now leaders and growing by over 20% every year in emerging markets where many new luxury customers will be located. Five, our channel strategy gives us a very balanced business behind brick and click, each with highly specialized teams and performance management tools. We can manage any shift in luxury consumption from one channel to the other. Six, the innovation we've developed for 2023 and beyond are exceptional. Their added value is clearly understood by customers, allowing us to keep valorizing our prices significantly every year. Last key point, L'Oréal Luxe. is permanently stepping up its luxury know-how, becoming the industry's very best in class. With exceptional services, the Maison Carita Rue du Faubourg Saint-Honoré showcases this perfectly. With ultimate experiences rooted in emotion, art and culture, take the incredible Couturisme exhibition by Mugler, a spectacular success. And with high-tech innovation, always pushing the boundaries of personalization. Look at APTA by Lancôme, which won multiple awards at the last CES, allowing women with disabilities to enjoy the pleasure of makeup. All in all, I'm very confident that the unique brands and the passionate teams at L'Oréal Luxe will continue driving strong, highly profitable growth and gain shares in the coming year. Thank you.

Thank you, Cyril. And to finish, last but not least, Myriam Cohen-Wellgreen for Active Cosmetics. With a little surprise.

Good morning, everyone. 2022 was another outstanding year for our division, growing by 21.9%. Our division almost doubled in size in the past three years. We now reached a sizable 5.1 billion euro business, which is even more profitable at 25.4%. We consolidated our leadership, growing 2.4 times faster than the market. Our business model is successful. It is powered by medical, amplified by digital, and driven by outstanding teams. I want to thank them for their ongoing commitment. So, what explains our remarkable growth? Four key success factors. First, the power of our complementary brand. They address all consumer needs, those related to skin pathologies and those to aesthetics. As you can see, All our brands recorded a very strong performance in 2022. I chose to zoom on La Roche-Posay and CRV as they contributed to more than 80% of our growth. Indeed, La Roche-Posay reinforced its position as the number one dermocosmetic brand. In 2022, it grew by more than 23% and climbed the ranks to become the number six biggest global skincare brand across all channels. Its life-changing products and UV Immune 400 were key to this success. As for CeraVe, it grew by 38% and became the number two dermocosmetic brand worldwide. International business now represents nearly half of the brand's growth. In the US, the cradle of the brand, CeraVe became number two in total skincare across all channels. I also want to highlight that we acquired the US professional brand SkinBetaScience to reinforce our aesthetic anchorage. Second success factor, our medical leadership. Today we reach 250,000 doctors globally, 13% more than last year. Three of our brands are now in the top five most recommended. And more and more doctors are consulting and advocating online. Digital allows to amplify our medical strategy. This is our third success factor. We can now reach many more consumers than before. We are number one in medical advocacy, meaning we recorded 48% of share of views of the brand videos posted by doctors. E-commerce grew by 20% and is key to make our products more accessible. Finally, our last growth factor, our international expansion. All zones grew strongly. U.S. and China recorded an exceptional performance, growing three and six times faster than their markets. Emerging countries rose sharply at nearly 26%. Europe is accelerating. Now, looking into 2023, you may wonder if our growth will continue. I believe it will. One, for two reasons. One being that the demo cosmetic share will continue to grow within beauty. Dermacosmetics gained 3 points of market share in the last 4 years, reaching 8% in 2022. For perspective, in 5 best-in-class markets, Dermacosmetics already reached a 15% share of beauty. This trend is driven by two elements. First, the booming consumer quest for health. Skin issues affect 2.1 billion people and are unfortunately on a constant rise. Separately, there is a boom of consumer visiting aesthetic professionals. In the coming years, these consumers should represent a pool of over 600 million. And second element, the scale-up of teleconsultation and diagnosis services are increasing accessibility to skin health. Finally, I'm convinced our division will keep growing its share of the dermocosmetics market. We have a strong innovation plan and our brands can still expand their geographic footprint. To sum up, growth will continue as we will grow the pie and our slice of the pie. Today, to stand more clearly for who we are, a division with dermatological brands on the pathological and aesthetic fronts, I'm thrilled to announce that L'Oréal Active Cosmetics becomes L'Oréal Dermatological Beauty, a division that strives to change people's life and increase access to skin health to everyone, everywhere. LDB also means Let's Dream Big. Thank you.

Thank you, Myriam. So, good morning again. Over the next few minutes, I'd like to outline some of the key 2022 highlights, then explain why we are confident for 2023, and finally share with you L'Oréal's vision for the future. Let's start with 2022. As you already heard this morning, 2022 was a year of remarkable performance. Our sale of 38.3 billion euros represented another year of double-digit growth, close to 11%, or 3.5 billion euros of pure organic growth. As Christophe already showed it, we increased our growth quarter after quarter versus 2019, the only year without any lockdowns or reopening comparative bias. Once again, we significantly outperformed the market at a 1.8 multiplier and thus strongly solidified our position as the world champion of beauty. Before going into further details about 2022, I would really like to thank our 87,000 strong teams around the world for this great collective performance. This performance truly belongs to them. 2022 was another grand slam year. We outperformed across all geographic zones, divisions, and categories for the second year in a row. We can talk about perfect balance or say that all the L'Oréal engine, all the L'Oréal cylinders are firing in L'Oréal's engine. Let's take a quick look at the geographic cylinders. I'm pleased to say that in 2022, Europe was, despite the context, our number one gross contributor, up 11.6% like for like, leading to a 20% market share in core countries. 2022 was the confirmation of the turnaround for North America, exceeding 10 billion euros in annual sales for the first time ever, with like-for-like growth of 10.4%. It was notably the year of the comeback of CPD in the US, with growth ahead of its local mass markets accelerating in Q4. North Asia grew plus 6.6% like-for-like, with Japan and South Korea both up double digits. Of course, I want to highlight the extraordinary performance of our teams in mainland China in a very difficult sanitary context. Their resilience, together with the agility of our operations, who managed to keep product availability close to 100%, and of course the power of our brands, allowed L'Oréal to grow 11 points above the market. Finally, our emerging markets, SAP MENA SSA and Latin America, are accelerating, as promised, slightly above 20% in aggregate growth. There, middle classes are young, digitalizing, and growing a perfect combination for future growth in beauty. From a distribution channel standpoint, 2022 saw the return of our brick and mortar, which is up 11.7% versus last year. We are reinventing the retail experience with further O plus O integration. In parallel, our e-commerce continues to grow faster than the market at plus 8.9% and therefore stays above 28% of our total sales. On divisions, you've heard their precedents, but let me point out my personal highlights. In a dynamic beauty market which continues to premiumize, each has come out stronger. L'Oréal Luxe, our number one division and growth engine, continues to outperform the luxury market, both in sales and profitability, continues to up its luxury game and to play in all the keys of its superb brand piano, accelerating in skincare and strengthening its leadership in fragrance and in China. CPD, our largest division in units, has confirmed its turnaround, notably in the USA, thanks to premiumization, acceleration in makeup and hair, and has delivered a real breakthrough in emerging markets. The division managed to hold its profitability despite massive input cost increases and is now poised for margin improvements. The professional products has become truly omnichannel, serving stylists and consumers alike, and leveraging the global appetite for premium professional hair care. Enactive Cosmetics, now L'Oréal Dermatological Beauty, is working hand-in-hand with the largest global network of dermatologists, above 100,000 across the world, to provide the safest and most efficacious products. It has doubled its size in three years and thrives on the two strongest ascending beauty currents, skin health and aesthetics. Now, with Skin Better Science as a new jewel to its crown, LDB can indeed dream big. Let's now look at our performance by category. Our largest category, skincare, which now represents over 40% of our sales, remained our number one gross contributor at plus 10% in a market growing low single digits. Skincare is a cross-generational need, from Gen Z to seniors, driven by science and performance. Makeup continued its rebound, driven by the return to social life, by innovation and creative flair, as demonstrated by NYX Professional Makeup, one of the key contributors to our global overperformance at plus 9%. Then, two categories came as post-COVID good surprises, fragrance and haircare. On fragrances at plus 23% on a market going double digit, it's not just about going back to social life. From the USA to China, we also see fragrance as an affordable luxury aspiration and a self-pampering feel-good gesture. So I think it is bound to last. Finally, hair care, where we grew at plus 12% well above the market, has become the new skin care. We see longer hair, more diverse types of hair, and great hair is increasingly a sign of health and youth. People invest in it with a strong appetite for professional products and premium mass products. So the market is premiumizing, and selective retail has made it a growth category. So you see, whether it's from a zone, channel, division, or category perspective, the L'Oréal engine is indeed firing on all cylinders. The fuel for this fire is once again a great vintage of innovation. We spent over 1 billion euros in R&I, and it is worth it. In 2022, we have launched several groundbreaking innovations. The one you see on the screens have been mentioned by the division presidents. And we have filed 561 patents that are laying the groundwork for future successes. Innovation are an important asset in our capacity to valorize, most being launched at an accretive gross margin. But of course, financial performance is only one side of the equation. Consistent with our dual performance model, L'Oréal has continued to deliver a strong environmental and social performance. Christophe has mentioned our numerous awards and external recognitions, but allow me to showcase some of our concrete achievements in 2022. First, on the environments. Close to two-thirds of our sites are carbon neutral, including the sites of North Asia, Brazil, and our first site in India joining this year. 97% of our products, of our new products and renovations, are eco-designed. We are developing and advocating refills, like with the new Prada refillable fragrance. Over three quarters of our PET plastic packaging comes from recycled plastic. And 82% of all our hair care bottles are now in PCR. On societal contribution, our program Laurel for Youth launched in 2021 has reached its cruising speed. We are now creating 25,000 job opportunities for people under 30 years old every year. In 2022 alone, our solidarity sourcing programs have supported over 21,000 people coming from struggling communities in gaining access to employment. Through our funds, we have invested 22 million euros last year alone to restore the graded ecosystem, 30 million euros to support over 1.2 million vulnerable women throughout the world. Our brands have also played their part, working in partnership with organizations around the world to support a wide range of causes on health, mental wellness, women empowerment, and of course, the environment. We have achieved a lot to date, but we are conscious there is still more than we can do, and will do, to continue sharing values with the world and its people. I am, with all 87,000 L'Orealians, committed to this. To conclude on 2022, I would like to reflect on the past three years in which the world has faced unprecedented challenges. But as they say, when the going gets tough, the tough get going. And we have emerged from this time stronger than ever. We saw that the L'Oreal engine is firing on all cylinders, and this translates into an increase in our overperformance versus the market, compared to the pre-COVID period, as this graph shows it. Since 2019, we have delivered an average growth of more than five points above market growth, significantly increasing the gap with both the markets and our competitors. However, growth is not the whole story. We have emerged from the pandemic more profitable than before, improving our profitability by 90 basis points, whilst at the same time increasing the fuel behind our brands. ANPs in share of sales is up 70 basis points from 2019, which represents over 3 billion euros in additional ANPs over the 2019-2022 period. and SG&As have come down 190 basis points. This is the L'Oréal Virtual Circle. We have also transformed our organization. First off, our new geographical organization, much of it put in place during the pandemic, has been a complete game changer. Not only has it brought better coherence to each zone in terms of consumer profile and market maturity, it has helped to create the optimum conditions to maximize growth. This has been at the heart of the group's strong outperformance in North Asia and the real acceleration in SAP MINE SSA. To drive more efficacy and productivity, we have regrouped several markets into clusters. This has allowed us to control SG&A and fuel our virtuous P&L model. Secondly, our brand portfolio has been reinforced. The group has built a portfolio of 36 global brands, 11 of which are members of the exclusive Billionaire Brand Club, with both three new members this year and a couple more knocking at the door. So I'd like to say a big welcome to Kerastase, CeraVe, and welcome back to L'Oréal Professional to the Club. More importantly, our portfolio is a winner. We have the number one beauty brand in the world. We have the most prescribed brands by other skin professionals or hair experts. We have several of the most coveted luxury brands. And we have brands at all price points and for all tribes and generations, including those loved by Gen Z. This portfolio has been strengthened by acquisition as we have identified white spaces. Since 2019, we onboarded Takami, Used to the People, the Prada license, Mugler, Sayearth, and recently Skin Better Science. And then we aim at supercharging this acquisition, as it was the case with CeraVe, which we took to billionaire status in barely five years, growing it tenfold over the period. Throughout the crisis, we have continuously also invested in maintaining our digital leadership. In 2022, L'Oreal has the number one position in terms of paid media share of voice in beauty and the number one share of influence. L'Oreal is the number one group in Gardner's 2022 Digital IQ ranking for the personal care category in the US, with seven of our brands in the top genius ones, including the number one and the number two. Yet, we are never complacent, ever seizing what is starting, being first movers on TikTok, for example, or exploring the metaverse with Nick's professional makeup and his first-of-a-kind digital creators community. Finally, we have deepened and increased our team's engagement into the unique L'Oreal culture, continuously adapting to the new ways of working emerging over the last three years. In a world of quiet quitting and great resignation, we continue to see high levels of engagement amongst our employees, reaching 79%, and a significant rise in job applications, over 1.3 million, an increase of 7% versus 21%. Our teams are passionate and engaged, behind our strong company cultures and values, leading us to enter the top five most attractive employers ranking from Universum. So in all aspects of our activities, it is clear that we are emerging to the post-COVID world in a much stronger position and are ready to take on the future. Now, I'd like to look forward to the year ahead. Whilst remaining prudent in this world of poli-crisis, I am confident in L'Oréal's ability to build on our strength and deliver another year of growth in sales and profits. At a macro level, And even if currencies should be less favorable in 2023, we see some patches of blue sky amongst the dark clouds. There are a few early signs of reduced inflation on some raw materials. Recession is seen as less likely in many parts of the world. And China is reopening with a clear focus on economic growth. If we look at our markets, we know that beauty is an essential human need. And even in times of recession, there is a continued consumer demand for beauty products. The beauty market has always been resilient to economic uncertainty, with an average growth of over 4% over the past 23 years. And this has proven true once again in 2022, growing a robust plus 6%. We believe it will keep growing at this rate of 4% to 5% on average in the coming years. In the current inflationary context, we saw limited volume decrease. And even though there are nuances by geography and category, our latest consumer panels show that valorization more than compensates any drop in volume. Indeed, the beauty market maintains solid growth in Q4, mostly everywhere in the world, with the exception of China. And as for China, well, you've all seen the sharp market contraction in December, which will see a way on our growth at the start of the year. However, we believe in the rebound of the Chinese beauty market after Q1, and we are prepared for it. I know that some of you worry about the risk of down trading, especially in developed markets as inflation weighs on consumers' wallets. Needless to say, we monitor this very closely, but feel reassured. The market has remained dynamic throughout the year, as mentioned previously. We are not seeing significant levels of down trading in 2022. And internal studies have shown that the L'Oréal consumer is skewed towards upper middle classes who are less vulnerable to inflationary pressures. And to continue to fuel that consumer appetite, we have a strong pipeline of cutting edge innovation for 23, designed to drive consumer towards new and often more premium offerings. We will continue to work on improving our growth margin in 23. We would benefit from 2022 price increases, mostly taken in the second half. They have yet to show their full year impact, as well as from new ones at the beginning of 23. So all in all, with the experiences gained during the pandemic, coupled with our balanced footprints and unique operating model, we are perfectly equipped to drive growth despite the uncertain environments. To finish, I would like to talk about the future. It is increasingly clear that these past few wars of crisis and constant change will mark the dawn of a new era. It will be an increasingly multipolar era, more fragmented than a previous one, an AI and tech-led era with the highest expectations in terms of sustainability, purpose, and cultural diversity. In this increasingly complex and fragmented world, having solid roots and structural agility will be essential to a company's success. And we have that. Transformation is part of our DNA. Like a unicornus rex, we are a truly unique creature that combines the strength and scale of a 114-year-old leader, the dinosaur, together with the unmatched speed, agility, and innovation capabilities of a unicorn, always ready to seize what's starting. That's why L'Oréal is uniquely positioned to win in this new era. Firstly, L'Oréal is multipolar by design. A multipolar geographical footprint which will allow us to grow in and beyond China in emerging markets and seize opportunities in North America and Europe. A multipolar supply chain with 38 owned factories globally to de-risk our service levels. A multipolar divisional model to go beyond luxury and leverage fast-growing dermatological beauty, a premiumizing consumer products division, and a truly omnichannel professional products division. A multipolar R&I model with 20 research centers close to the world's consumers. And finally, a multipolar distribution strategy with an O plus O boosted brick and mortar going beyond traditional e-commerce to explore the possibilities of D2C and B2B platforms. Next, in an AI and data-powered world, we will extend our digital leadership to harness the possibilities that beauty tech has to offer and explore new horizons like the metaverse. We have over 2,000 dedicated experts working in beauty tech and IT, together with 800 data analysts. Our entire R&I organization is being augmented with powerful AI and data. including strategic partnership with tech experts such as Verily and Alphabet subsidiary, where we'll combine their large-scale consumer data with our own to better understand skin and aging. Data and AI will allow us to develop next-level diagnosis services for personalized recommendation to drive loyalty and satisfaction. Beauty tech will also help us to create a range of augmented beauty solutions, such as Hapta, specially developed for those with limited hand and arm mobility, which was showcased at this year's CES. Finally, the world of beauty has expanded into the metaverse. To address this need, we have developed the first dedicated incubator in partnership with Station F and Meta, and the first multi-brand avatar partnership with Ready Play Army. Third, in this new purpose-driven era, companies that do not take action on environmental or societal issues will simply be left behind. Our long-standing track records of commitments and clear actions in sustainability will give us a head start. We've already discussed the progress we've made in reducing CO2 emissions and plastic, and we'll continue to work towards achieving our 2030 goals. We have embarked on our green science transformation, which will reinvent the way we develop and manufacture our products. Currently, 61% of our ingredients are bio-based, like hyaluronic acid and vitamin C produced through biotechnology. And this is just the beginning. We will continue to invest in developing new bio-sourced ingredients, including partnerships or investing in startups such as Global Bioenergies or Microfit. In addition to harnessing the power of nature, we'll also harness the power of beauty tech to develop new-to-the-world sustainable solutions like L'Oréal Water Saver, and once again, invest in startups that can scale to have a real impact, like Net Zero in carbon capture. And of course, we can't do this alone, so we'll continue to help consumers make more informed choices towards sustainability with initiatives such as the industry-led Eco Beauty Score. Fourth, in this increasingly fragmented world, we will evolve from universalization to singularization, from offering beauty for all to beauty for each. And we are uniquely equipped to face these shifts. Beauty for each with our unrivaled portfolio of brands with different cultural backgrounds. Beauty for each with regionally developed innovation with global potential like the Garnier Vitamin C Serum, born in Thailand, developed in India, and a winner in emerging markets and beyond. Beauty for each with a multipolar R&I organization designed to cater to the infinite diversity of hair and skin types around the world. Beauty for each with personalized products, service, and experiences powered by AI, data, and beauty tech. Finally, we will succeed in this new era thanks to our L'Oréal culture, which will only deepen. This culture full of passion, creativity and commitment, which have been living and breathing for 37 years, is truly unique. It is the secret sauce to our success for the years ahead. To conclude, I would like to leave you this morning with three key takeaways. Firstly, in 22, in a world of public crisis, we have delivered our best and most balanced growth since 1999, outperforming the market in all division, geographic zones, and categories. And we have reached historical levels of profitability. Second, while we know that 2023 may continue to be another bumpy year, we strongly believe that the beauty market will grow yet further and L'Oréal is ready and confident to deliver another growth of solid growth in both sales and profits. And as we look beyond 2023 and towards a new era, our multipolar model, coupled with our proven capacity to harness the power of data and AI and drive sustainable change, will place L'Oréal in a unique position to strengthen our leadership and deliver strong value for our shareholders. I thank you for your attention. Okay, we can start with the Q&A, and Christophe will explain a little bit the rules.

Yes. So since the meeting is recorded, I can ask you to state your name and company as clear as possible before you ask your question in English. And I also kindly ask our journalist guest to raise the questions during the latter part of the Q&A session. Thank you.

Céline.

Thank you. Celine Benuti, JP Morgan. Well, two questions to start with. Number one, on the growth of the market. So you seem to think that 4% to 5% is what the growth of the market would be for this year, which maybe sounds a bit low if I think about China reopening, which you seem to be quite bullish about, and as well further pricing. So if you could a bit... elaborate on that and maybe as well tell us a bit about Europe, which I found it was quite interesting to see how strong it was at the end of last year, in fact, all of last year. My second question is on China. Just to clarify, do you expect a bounce back after Q1 or after Q2? Because those two were mentioned in your presentation. if you could elaborate a bit about how you see the bounce back coming through by divisions in that channel. And maybe could you also tell us how big is Enan? And, yeah, you didn't talk about travel retail, so maybe sharing your views on that and how that will benefit the reopening. Thank you.

OK, so that's a lot of questions. I'll start with China because that's probably one of the questions that's on everybody's mind. It's true that in China, for most companies, December and the beginning of January was very low consumption because people We're sick and staying home. But the early signs we are getting from February, the first weeks of February, are pretty positive, very positive in terms of traffic and as well in terms of purchases. So to answer your question, I think that the Chinese market will rebound from Q2, not from the second half. but it probably will be progressive as consumers need to regain trust. I think it will bounce back on all divisions, but clearly the divisions that have a stronger brick-and-mortar footprint, like L'Oréal Luxe, will probably benefit even more from this reopening, but I think every division will benefit from it. Hainan is a nice part of the Chinese market. And of course, today, travel retail, the air traffic has really bounced back a lot in 2022, but it's still more than 30% below that of 2019. So I guess it will be another year of acceleration in China. in 2023. And as far as the way we manage, by the way, because this is the implicit question, we have a very good cooperation between our travel retail teams and our local market teams in China to make sure that the local market and the value for L'Oréal is perfectly protected. As far as the market growth is concerned, we've looked at decades of market growth. The market was always between 4% and 5%. It's true. It has bounced back stronger last year, and this year was 6%. So frankly, we don't know. It's too early to say. Maybe it's going to be 4%, maybe 5%, and maybe a bit more. We hope it's going to be a bit more. And what's important for us is to continue to overperform that market, which, of course, as you heard, everybody is very determined to do. You had a question on Europe. Europe was really a good surprise for us, and I really want to pay tribute to Vianney Derville, who's in the room, who's managing Europe with great talent. The market has been very resilient, including at the end of the year. The last quarter on the European market, Omnichannel was at plus 12%. It seems that consumers continue to want to enjoy beauty, to indulge, to wear fragrances, to take care of their hair, and we have no evidence at the beginning of the year that things are changing course, but it's really too soon to tell. I know that the European teams are ambitious.

It's Jeremy Fialkow from HSBC. Thank you very much for the presentation. Good to be back in person in Clichy. So a couple of questions from me, maybe following up one on China. Clearly, we're going to get more Chinese traveling outside the country this year, so Japan, Korea, and perhaps further afield. What do you think the impact of that might be on the Chinese market and your business when you get that big increase in external tourism? The second question is on a compare and contrast between China and India. If you think of China, say, 10 or 15 years back, how similar do you think India is at the equivalent stage of development in its capacity to become a market of the scale that China is? Thanks.

Okay, well, first of all, on India and China, I think there are two very different markets. I don't think India will ever look like China, but it's still a very promising market for us. We have high ambitions. Statistics say that by 2030, India will represent 20% of the world's population and 30% of the qualified workforce, so it will definitely be a driver of growth for us. Middle classes are rising in a major way. I was in India two months ago, and I was really impressed by the growth, the development, and the accelerated sophistication of this market. It's still not as developed as we would like in terms of distribution, but it's really accelerating. And our shares are growing. We have only two divisions over there. We already have an 8% market share. It's actually over 10% if you take e-commerce, which is our... our main growth driver. So from a 500 million business today, I think we can take it to a billion in the foreseeable future. So very excited about India, but I don't think it will be like China today. We are growing a lot through our CPD business. Maybe, Alexi, you want to say a word about your CPD business in India, because I think you have great results.

Yeah, no, absolutely. So as Nicolas was saying, I think what's interesting is to look at this upper part of the Indian middle class, which is today, let's say, 200, 300 million people, but which is set to double in the next five to 10 years. So that's very exciting. And it's true that already we had a great year in India. We grew two times faster than the market. What was also interesting and what we pay a lot of attention to is to have a balanced growth in these countries between volume and value. because it's important for us to both premiumize and recruit. And maybe the last point, as Nicola was saying, I've been going to India almost every year since the last 10 years, and I've seen changes in the last two years like never before in terms of sophistication of the market, in terms of change of the distribution, thanks to e-commerce, and all that powered by a super digital ecosystem. So we're very, very bullish about India.

And to go back to your first question about Chinese travelers, I don't think, for us, the driver of our growth in China is not so much whether they travel or they travel here or there. We don't hide like some other luxury industries have huge price gaps that justify... big consumption abroad. Of course, our French team is going to be very happy if Chinese consumers come and buy some Lancôme in Paris. But overall, our drivers are more the rise of the middle classes, the penetration of our brands in China. Today, we have approximately 100 million customers that buy our brands in China and we have to double that. We have potential in tier 3 and 4 cities where our penetration is half of the one we have in tier 1 and 2. So this is more my focus on the Chinese growth markets rather than knowing whether they're going to go to Thailand or to Paris. Morning.

Tom Sykes from Deutsche Bank. Just firstly, you mentioned the FX impacts on margin, and then you alluded to some FX impact on the business and maybe a bit of a headwind, but Could you maybe talk about in periods when the dollar is particularly strong, has that helped you to sell in and be more competitive? And is that at all a headwind to full year 23 given FX movements at all? And then would you be able to just clarify some Q4 movements to work out what happened by the category? I think in fragrance, you said at the nine-month level, you were at about 35% year-to-date, or at least at the half year where you were 35. You're obviously quite a bit below that, and you mentioned for the full year, and you mentioned capacity constraints from glass, and just what impact that may have had on the Q4 growth, please. And perhaps then just on skincare, was there a rebound at all in North Asian skincare compared to Q3? And if so, and skin care has remained the same growth, does that not imply that skin care elsewhere may have been a little weaker in Q4, perhaps the U.S. at all? Please.

Okay, so I'll let Christophe take the question. FX, Cyril on fragrances, and I'll try to complement. Thanks.

So coming first on the ethics effects, I think what is most noticeable, of course, is the impact on the net sales. As you've seen, it has been a true massive impact of more than 7% growth. Obviously, we'll see now what will happen in 2023. Now coming on the P&L, I have to say that As I was mentioning before, there is an impact, of course, in the cost of goods. That's probably the area in the P&L that is the most visible. In the rest of the P&L, it's much less. It's due to the weight, you know, of our factories and the divisions. Meaning that, of course, if the euro reinforced this year, of course, it will have a positive impact on the gross margin. But then on the whole P&L and also on the profits, I think that this impact is 10 basis points. It's very small.

So regarding fragrances, the market was, as I mentioned in my presentation, extremely dynamic throughout the year because the market ended at plus 18. To look at it by halves, by semester, first half was plus 25, second half was plus 15. So there was a slight decrease. but still an extremely dynamic market on fragrances on plus 15 and second up. There were some supply constraints from the whole industry, as you mentioned, mainly glass ones. I think they are behind us now. And for most of the industry, 2023 is going to be healthier supply-wise. At least for us, it's going to be much healthier. And I'm very confident in the work that my SNOP teams have done on glass supply. What you need to understand is that it's the fundamentals of the fragrance market which explain the growth. The daily usage of fragrance, which is something extremely strategic for us to look at, has increased between 2017 and 2021 by 10 points in the U.S. In China, it has gone from 40 to 52. So half of the Chinese luxury consumers use fragrance every day, which is pretty new. And so overall this market is bound to grow thanks to the development of the usage and especially among the young generations. The young generation in America, the young generation in China are really crazy about fragrances right now. They love it not only for its social benefits but also for some wellness benefits that they associate to the fragrance. So I'm very confident that this market will keep driving us. And as you know, we are the number one worldwide by far in fragrances. So I'm confident it will be a strong business for L'Oréal and L'Oréal Luxe especially.

And on skincare, I'm not sure I can answer your question because we do not have yet the whole sellout performance of the end of the year. But most likely, I don't think there's been a slowdown somewhere to offset the North Asia rebound because December was very low in China. So the odds are that skincare has remained strong everywhere. I think it's been very strong in the U.S. I look at the CPD performance. It's been very, very strong on skin care. So, you know, skin care is one of these categories that is bound to grow because, as I said, it addresses everybody from Gen Zs. And that's new because they weren't using so much skin care. They're investing into UV protection and so the penetration and the usage of skin care. is going to grow on younger generations. And of course, as you know, as people age, it is the one category that they continue to use. So skincare is doing good. It's premiumizing. And I have seen no slowdown anywhere at the end of the year. If you allow me, before handing over to you, we have two questions on the phone, which have been alerted on. So we'll take them, and then we'll go back to the room.

The first question from the conference call is from Bruno Montaigne with Bernstein. Please go ahead.

Hi, good morning. My first question is on those four high growth emerging markets that you mentioned at quarter three. I think it was Mexico, Brazil, India, and Indonesia. At quarter three, they were all growing around 30%. Could you just comment on what they're growing at right now? And I think they've slowed down. Is there anything to read in the quarter four slowdown of some of those countries? And second of all, I'm not sure that I missed the number, but could you give us the quarter four growth in mainland China and Hainan, please? Thank you.

Just on SAP MENA SSA and our emerging market in general, Q4 has accelerated significantly versus 2019. But the drop you see on Q4 is just a fact of comparatives. Last year in Q4 was the reopening, massive reopening of India after a very strong lockdown. So there's just a base effect. But if you look at our actual sell-out numbers, the market remains as dynamic as it was. A bit like L'Oreal overall, you have a Q4 that, compared to 2019, continues on its acceleration path. So there is no slowdown and nothing to read more than a tough comparative. Christophe, you have some info on Q4 on China?

Yes, to be precise.

We don't have the sell-out yet. It's very, very...

To be precise, the growth in China in the last quarter was plus 3.8%, so higher than the growth in Q3.

I think we have a second phone question, and then we'll be back to you, gentlemen.

The next question is from Guillaume Delmas with UBS. Please go ahead.

Good morning, all. A couple of questions for me, please. The first one is on the consumer division. I think in your presentation, Alexis, you mentioned your ambition to accelerate the division's growth. So does this mean you are targeting a like-for-like sales growth in excess of 8% in 2023? And I guess related to that, you showed how your growth last year was particularly strong in countries like Mexico, India, and Brazil. My question on this would be, what about the margin impact from this strong growth? So any color you could provide on the growth and operating margin impact from this strong push in EM would be interesting. And then my second question is on the Yves Saint Laurent license. So you signed an agreement with Caring back in 2008. I think if I remember well, the wording at the time was very long-term agreement. So it's now been 15 years. YSL has been a fantastic growth driver for you, but wondering if we are getting closer to the end of this long-term agreement, and maybe if you've had already some conversations with the owner of YSL, and if you've got any early indications on whether they would like to take the brand back in-house or not. Thank you.

So, Alexis, you'll take the first one. I'll take the one on the carrying license.

Yeah, of course. So thanks for your questions. On the 23 acceleration of the division, first, you know, we're genetically engineered to outperform the market and accelerate. So that's what we do every day. What I can tell you is that we start the year with momentum. Because what I see is that if I look at both the market and our sell-out performance in the Q4, I see an acceleration and I see also an outperformance of the market, of the division versus the market that accelerates in the Q4. So we're starting, I would say that we're starting the 2023 with a good momentum. So that's what I can say. And of course, we're going to do everything to outperform the market and to widen the gap between us and the market in every single country and in every single category. Then on your question on the profit impact of emerging markets, let me maybe give you one fact which is interesting, because what is interesting also in those markets, what we follow very precisely, is gross profit. once your growth generates money through gross profit, then you can strategically decide where you allocate this money between media or REX. So I think the gross profit measure is something that we look at. And if you take a country like India, The gross profit that we have in India is pretty comparable with the gross profit that we have in the U.S. or Europe. So we really think that we can grow emerging markets in a profitable way for the future.

Okay, so just on the caring license, going back to the room. First of all, we take the decision of caring to enter beauty as a very strong sign that beauty is definitely a category to invest in because it's not an easy category, but we see that we have new players. And as it relates to the license, I would say that it's a very, very, very, very long-term license. And that's about all I can say, but there is absolutely no risk that this license is taken back from L'Oréal. Allons-y. Maybe a microphone, please, so that I can hear you, but I just want to make sure that people that are connected can.

Hello, Marcus Armani, the Rand Capital Partners. So first of all, my compliments for the results. So I have two questions. So the first one concerning your B2C strategy. So B2C is not so big out of a total, but you have some brands that sell directly online. There are some other brands with some with their own stores. So what is your B2C strategy? And now you put this strategy inside the overall approach to distribution. So this is the first question. So second question concerning more specifically the U.S. market. So which trend do you observe in terms of distribution? So we see strong increase, market share increase, specialty retailers like Ulta Beauty and Sephora. You see indie brands selling also on Amazon. So what is your strategy for U.S. distribution and what trend we can expect in the mid-long term? Thank you.

Okay, so on D2C, which is mainly, not only because we can add Kerastase to it, but it's mainly a L'Oreal Luxe play, so I will happily hand over to Cyril.

Yeah, obviously D2C is a high priority for L'Oréal Luxe. Why? Because it's where the consumer experience is the best in the luxury business. So we keep investing relentlessly, consistently in our D2C capabilities, both offline and online. And D2C online is also extremely important. critical for us and we link the two permanently obviously with data and CRM and loyalty programs. So the division has 23 brands so I would not say D2C is a priority for all brands. Some of our brands are more targeting specialty as you mentioned as a priority channel. But I would say most of the top of the pyramid of the L'Oréal Luxe brands are investing heavily in D2C capabilities and want to win on this channel, which we think is going to remain a key element of connection when you are in the luxury business.

Yeah, clearly we want to. D2C is really part of our luxury brands or premium brand strategy. It's obviously a bit more difficult to make it a very profitable business on mass market. But on premium brands, it's really part of the strategy, both in terms of consumer connection and data. As far as the U.S. is concerned, I would say that, first of all, the U.S. market remains very dynamic, and that's great news. Last year, the second half was a plus-seven growth. The beginning of the year is positive, too. And we do not see any signs of recession in the U.S. And then retailers, as always, there are some winners and losers. But overall, I guess what you felt from the presentation of the brands and the division is that the world is omnichannel, and we are more and more omnichannel. I mean, you've seen the professional products division that has its Carastas brand in Sephora. Redken and Matrix brands on Amazon. You've seen Active Cosmetics also being quite omnichannel. So our approach is to be where consumers want to shop as long as the qualitative criteria that are defined by each brand are respected. Even if we take L'Oreal Lux today, a brand like Urban Decay is on Amazon because there's a good match between the Amazon consumer and way of expressing the brands and Urban Decay. So we are constantly assessing options. We have no taboo, but we are here to serve consumers and protect the equity of our brands in the long term.

Thank you.

We had a lady over there, because you were almost asking your question earlier, so back to you.

Thank you. It's Emma Leatherin from RBC. So I wanted to ask about your AMP spend, which fell recently. as a percentage of sales this year for the first time in several years. How are you thinking about that going forward? Do you still see further scope for efficiencies or can we go back to that trend of increasing that year on year as inflation headwinds recede? Secondly, Sounds like you've got some great innovations in the consumer product division. I was just wondering how you view the risk of cannibalisation of sales when you're using similar innovations such as the vitamin C serums in your consumer product division as well as in L'Oreal Luxe. And lastly, I wondered if you could split out the volume, price and mix growth you had in Q4.

So, yeah, I've read the memos from your company. They seem very concerned about our ANP spend, which keeps on progressing. So I know you look at basis points, but as I expressed, since 2019, we added 3 billion euros on fuel on our brands, which is a pretty significant amount of money, at a time when... Obviously, and hopefully, and we have also that question, we are improving in our accuracy, capacity to target, to measure. We are investing, as I said, in AI to measure both the short-term and mid-term efficacy of our media spending. We are absolutely and totally and utterly determined to continue to fuel and support our brands, both the ones that are already billionaire but all the ones in the making. That's why we continue to increase our media spend. But we do it with more and more efficacy. So my view is that ANPs are going to continue to grow, whether they're going to do it – in basis points or not, we'll see. The intention is to continue to grow and that's a clear objective because our brands are our number one priority. Your second question was on Cannibalization. That's an old topic for L'Oréal. It's always been our business model. We spend over 1 billion euros in R&I. Our teams come up with great innovations. We usually launch them first in the most premium part of the business because Usually, a new product, a new molecule, an innovation is more expensive in the beginning, and then when we can reach economies of scale or slightly more affordable versions of the same technology, we trickle it down. We call it cascading at L'Oréal to the mass market division or to other divisions, and it has always worked. As you may have noticed, L'Oréal Lux has become the number one division of the group despite this cascading strategy. So I'm not worried about it. All the more as our premium divisions are constantly at their time upgrading their products, bringing new molecules, improving the ones that are already on the market. So that's a very virtuous model for us. And I think that's one of the uniquenesses of L'Oreal is that we can precisely invest in products in groundbreaking innovations because we know that at some point we'll be able to leverage and scale them. And as far as the volume value mix on Q4, you want to say that or not, Christophe?

I don't want to give too much details, but I think it's worth mentioning that the volume was still up at nearly 1%, and all the rest was value. So that's part of the strength of this year, that we've been able to increase both in volume and value. And we'll keep fighting for the same results next year, of course.

Okay, so gentleman here, you've been raising your hand for a while now.

Thank you. It's Karel Sutter with Kepler Chevrolet. I have a question on derma because you spoke about unmet consumer needs. And in some markets where the derma cosmetics is 15% of the market and others between 5 and 10. So what basically explains this gap and what are you doing to increase penetration and develop the market? Then one on cash flow. Inventory is a billion higher than normal. You mentioned high safety stocks, also for raw materials. Can we expect this to unwind in 2023? And if you may be locked in raw materials at high prices? And the last one is more on ESG. A lot of progress, but when it comes to the ambitions to reduce water in your own operations, there's still a big gap towards the 2030 ambition. What are the big blocks to progress a lot in seven, eight years?

Okay. So, I'll start with you, Myriam.

Yes. Indeed, there are different ways of building the dermal market in the world. The countries that benefit from strong pharmacy networks and that have a medical ecosystem where patients go first to dermatologists have developed a dermal market that is very valued and premium. And that is Europe, LATAM. And other markets, more the Anglo-Saxon market, that are based on patients going to see GPs and buying the product in drugs, have developed a market that is less valued and less developed. And what we are doing to develop the growth is we are entering premium brands in the mass market to premiumize the market. So, for instance, as we grow CRV greatly in the U.S., the brand grew by 29% in the U.S., and became a very, very big brand locally, we still are able to premiumize the market of the US by growing La Roche-Posay, which has become the second fastest growing brand in the US. At the same time, in the countries that are developed on a premium dermal market, we can still carry on growing a market that is very developed by affordability. This explains the beautiful growth that we are seeing In, for instance, the European market, where theory has become a very, very significant business.

Christophe, cash flow. Yes, cash flow.

So indeed, we have been facing an unfavorable amount in our working capital, and this is mainly of roughly one billion. And this is mainly due to our inventory policies. You know, we have been trying, like many people, to try to mitigate all the disruptions caused by logistics issues and also the COVID. So we decided to increase our safety stocks, mainly in the US. So we have been increasing our coverage by, I think, something like eight days for raw materials, and the same for some finished goods. I think it's quite wise in this period, and I fear a little bit also if really the Chinese market starts to produce strongly from Q2. So we will see. If the market normalizes, of course we'll be able to decrease the level of our inventories. If we still see many disruptions, I prefer to have a higher level of inventories and be able to serve our customers.

And of course, this year, the value of the stock itself was increased significantly by the increase in input. So as this starts stabilizing, we should not see this type of increase, at least of this magnitude, this year. Okay. And your third question was? ESG. ESG. Yeah, on the water loop, yes, we have a commitment to increase the percentage and to bring all our factories progressively to being water loop. So this year there was no investment plan, and actually we had a little bit of a setback. Our Mexico factory, which was Waterloop, had to cope with a very strong increase in demand in our products. And therefore, it could not be 100% Waterloop on its production, which is going to be corrected in 2024. And we have another three factories which investment were planned to happen in 2023. Both Mexico and three more will be a water loop again in this coming year. So it's just we had a – there was no more plan this year, and we had a little bit of a setback in Mexico, and four are coming into the loop in 23. So it's – but as you rightfully say – All these ESG commitments, you know, it's getting harder. All the teams are mobilized. We also work, as you heard, in influencing our consumers' behaviors with the EcoScore that we've shared with all the rest of the industry in our consortium. We are advertising on the way to recycle and refill. And we are, as you know, promoting this L'Oreal Water Saver shower head in all the hair salons of the world and hopefully tomorrow in the homes of consumers. So it's really a 360-degree commitment from everybody in the company. And sometimes, you know, things do not progress as fast as you want. But on the other hand, you've got – you know, when you've got – three-quarters of your, or a bit more than two-thirds of your sites, industrial sites that are already carbon neutral, it shows also good progress in that respect.

Thank you for the question. Chris Pitcher from Redburn. Two questions, please. Firstly, on the US. In 2019, you had slowing growth, but had plans in place to improve the business to see an acceleration. Obviously, we had the huge distortion of the pandemic. Were you able to do everything you'd hoped to do then during the pandemic, or is there more still to do in the US in terms of strategic development? Obviously, you advanced your channel and your category exposure. And then secondly, on China and Hainan, there's a big expansion in retail space in Hainan. Is there a risk that you see some cannibalization from the mainland? And are you incrementally expanding your space in places like Haiku and some, hopefully, in the future developments? Thank you.

Okay, so on the U.S., I think we could do all the transformations that needed to be done during the pandemic, whether it's the reduction of the distribution footprint of L'Oreal Luxe, whether it's the refocus on some categories and reorganization at the commercial level of L'Oreal USA. And, of course, the acceleration because that was – right before the pandemic, but the organization of our active cosmetics, sorry, L'Oreal Dermatological Beauty organization in the U.S. with the combination of CeraVe and La Roche-Posay as it relates to our medical visitors. All this was done, and frankly, most of it is paying off, where we still expect more return still is in luxury because it's a We've, I would say, cleaned our distribution, but we still have to accelerate more in the USA, which we've done on the last quarter. So it's promising, thanks to fragrance, skin care, and probably we need a bit more oomph in Luxe makeup. But I guess it's coming in 23. And your second question was the famous Hainan. I have to say, I wish I could. I can go pretty soon to this new incredible store, which, by the way, is totally LEED certified. So it's a huge store, but very eco-conscious. All our brands are there. What we've seen in the past is that travel retail in general, whether it's in Hainan, in Hong Kong before, in Macau, or even in Paris, is never a cannibalization. It serves several purposes. First of all, it's a fantastic exposure of our brands. We are talking about the ANPs and, by the way, to create brand desire. These stores, all the biggest airports in the world, are just incredible showcases for our brands. I haven't seen it physically, but I've seen the film of the Lancôme boutique, the Prada counter or the Valentino beauty counter. It's a way for Chinese travelers from often that are, by the way, from a larger number of cities than the tier one and two where we're usually very strong to discover the brands, to touch them, feel them. And that's a fantastic asset and a very important input in our strategy. And then, of course, you've got people that do repurchase there, and you have people, the famous Daigus. And then it comes to our way to manage the equation between mainland China and these travel retail stores. And what we can see is that our mainland China share is continuously growing, which tends to indicate that we must have struck the right balance between travel retail and domestic markets.

So, let's go. Thanks very much. It's Ian Simpson at Barclays. A couple of questions from me, if I could. Firstly, could we dig a little bit into Helena Rubinstein? It's sort of been a bit under the radar in the last few years, but clearly a phenomenal success, meaningfully more premium than anything else you've got in skincare. I'd be fascinated to hear where you think price points can get to structurally over the medium term, and if it could go up to some of the I guess, ultra, ultra high-end skincare brands that some of your competitors have in the space, if that's your ambition. And then secondly, I know we've talked about them a bit, but I wondered if we could dig into some of those big emerging markets, X, China, India, Brazil, Mexico. What's driven the turnaround here in recent years? Because it feels like they are performing better than they have for a while. Is it greater investment, change in strategy, management changes, or a sort of combination of those? Thank you so much.

Okay, so Cyril, you'll take the... We'll share with Alexis the question on emerging markets, which are mostly a CPD play, even though not only. So, Eleanor Winstein.

Eleanor Winstein is a brand which has a long history in skincare. It has always been an extremely impressive skincare DNA, but it's true that the brand was rather tiny a few years ago, and we decided to... develop it in an accelerated way because we saw the premium skin care market was growing three times faster than the average luxury skin care market. So we needed a strong offer on this market and we thought the Enarmation brand had the perfect DNA to do so. So since then, the brand is almost at 1 billion. It ended the year at 950, if I want to be precise. So it's going to be a 1 billion brand in 2023. And it's positioned at what we call super premium skin care. So the prices of Eleanor Ben Shine products are between $200 and $300. Then we have another offer, which we relaunched. just this year to go higher, which is Carita, Maison Carita. Maison Carita is not super premium skincare, it's ultra premium skincare with prices which are above the 300 bar. Maison Carita has also a long history and tradition of luxury beauty, because as you know, it was a Maison de Beauté, a beauty house in Paris, already in the 50s. So it has a long history, amazing formulas. And we think we're going to keep growing on this very valorized part of the skincare market. It's today, for your information, it's today almost 25% of the luxury skincare market worldwide is what we call really the prestige skincare, i.e. above the $200.

Thank you, Cyril. On emerging markets, I'll give a very short soundbite and over to Alexis, but it's really innovation and e-commerce penetration, which are the two main drivers, and probably Alexis can elaborate a bit more. And then I'll take the last questions because I'm being reminded that we have time constraints.

Yeah, I think emerging markets first start with strategic intent. So we've strategically decided with Nicolas to really focus on it. That's the first point. And the second thing is, coming back to innovation, one of the differences between beauty and food... is that in beauty there is a certain transversality of needs across emerging markets. Unlike food, because it's mostly hot and humid climates, it's mostly dark hair, it's mostly skin unevenness problems, etc. So that's why we've taken, in terms of creation and innovation, a more transversal approach on creating new groundbreaking products for emerging markets. That's the example that Nicolas showed on vitamin C serum. And we also slightly make our organizations evolve because of that. I have next to me a GM in charge of emerging markets, so that represents all these emerging markets together, represent the big cloud, it's the same thing in the labs, it's the same thing in industry. So that really has helped us really pump up the innovation. And on the kind of activation side, the reorganization that Nicolas showed you clearly helped a lot in terms of execution.

Okay, so we'll finish with a question from Rogerio, and we will have to call it a day. Sure, we'll find some coffee breaks, extra questions, but I'm reminded that we have to stop.

Thank you very much. My follow-up questions are actually for Christopher. It should be probably quick ones. I think you've mentioned your expectations about gross margin expansion in 2023, help by pricing, valorization, and moderation in input cost inflation. So if you could elaborate a little bit in terms of magnitude of moderation and H1, H2 dynamics. And then on the SG&A XAMP, when you think about selling general and administrative, what type of cost inflation you're thinking of, the natural cost inflation and whatever needs you have in terms of reinvesting in digital customer service, et cetera?

Thank you. Okay. So that's a $1 million question because, of course, regarding the gross margin, it will depend a lot on what will happen in raw material. We have nevertheless some good news for the time being. But again, I prefer to be extremely prudent because of the situation, you know, of a potential rebound in China that could dry again. capacities that are coming from this country. Nevertheless, our ambition, of course, is to go back to what was the strong level of gross margin, even if 72.4, I consider it's a very strong one. But we are willing, of course, to catch up on this. As you know, that's very strategic for us because gross margin will give the company the means to keep investing in our brands. And with all the gestures that have been already put regarding price increase, etc., that are already there, I'm pretty confident that this will improve this year. But I prefer to be extremely prudent because at this stage, you know, with the currencies evolving very fast, it's very difficult to give a precise number.

On SG&A, it's very hard to answer because the situation is very different from one country to another in terms of salary inflation. What is true is that we are continuously recruiting talents, particularly in the tech and data arena, which I explained in my presentation. So we will continue to recruit and invest, but of course keep tight control of our SG&A, as we've shown. And by the way, all the, you know, the clusterization of our activity in several countries is bringing a lot of efficacy and allows to generate fuel on the ground. And that's been proven one of the success cases of Europe. Ladies and gentlemen, we have to call it a day, so I guess we'll hear you, aside from the coffee break, we'll hear you at the Q1 call, but I thank you for your attention and your questions. Thank you.