L'Oreal Unsp/Adr

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.