L'Oreal Unsp/Adr

Well, good morning everyone and welcome to this 2023 annual results presentation. Christophe Babul, our CFO, will kick off with the presentation of the financial statements, some highlights on our corporate responsibility program. Then each head of division will summarize the 2023 key points of his or her division, as well as the prospects for 2024. So we'll start with Alexis Perrakis-Valla, President of the Consumer Division, then Omar Ajeri, President of the Professional Division, Cyril Chapuis, President of L'Oréal Luxe, and Myriam Coel-Wellgreen, President of the Dermatological Beauty Division. And I will conclude this first part of the conference and share with you, hopefully, my confidence for the future. We'll then move to the Q&A session, which we expect to last about 40 minutes. And finally, I draw your attention on the disclaimer that is now on the screen. So, let's start with the awaited Christophe Babul presentation.

Ladies and gentlemen, good morning. 2023 was a record year for L'Oréal, a year that demonstrated the power of our multipolar model and the virtue of our P&L. My personal highlights were the double-digit like-for-like growth of 11%, the growth margin of 73.9%, up 150 basis points, the operating profit margin at 19.8%, up 30 basis points, and the 24% increase in cash flow to 6.1 billion euros. Consolidated sales increased by 7.6%, crossing the 40 billion euro mark. On a like-for-like basis, growth amounted to plus 11%, the best growth in over 20 years, excluding 2021. The change in scope of consolidation was a positive 1.6%. It was mainly due to the acquisitions of Skin Better Science in October 2022 and ESOP in August 23, as well as the impact of hyperinflation accounting in Argentina and Turkey. Foreign exchange had a negative impact of minus 5% as the euro strengthened throughout the year. You can find detail in our invoicing currencies in the appendix of the presentation. Growth was driven by a healthy combination of volume, up plus 4.1%, and value, up plus 6.9%, driven by both price, up 5.5%, and mix, up 1.4%. As you can see in the chart on the left, like-for-like growth came in at 6.9% in the fourth quarter, below the level of the first nine months. I see two main reasons for this. First, travel retail in Asia continued to weigh. Sell-out remained soft. That accounted for around one-third of the decline in our sales. The other two-thirds reflect our relentless effort to reduce our inventory in order to be able to start 2024 with normalized levels. We saw travel retail Asia group like for like growth in Q4 was up double digits. Second, mainland China traditionally over-indexes in the last quarter, which includes 11.11. And we are therefore disproportionately impacted when the local markets decline as consumer sentiment remain weak and shoppers show signs of festival fatigue. Reassuringly, we continued to gain market share in this challenging context as our consistent investment in offline channels paid off. And when we look outside North Asia, we see strong momentum across all regions. And what you can see in the chart on the right is that on the four-year CAGR, we have maintained a pretty even pace throughout the year, including in the fourth quarter and concluded the year at plus 8.2%. Each division grew on a like-for-like basis. The two standout performers were Consumer Products and L'Oréal Dermatological Beauty. Professional Products posted a 7.6% increase, supported by its omnichannel strategy. The standout performance came from Consumer Products. At plus 12.6%, it reported its best growth in over 30 years as each of the division's key brands pulled its weight. L'Oréal Lux grew plus 4.5%. Double-digit growth in developed and emerging markets was partly offset by the situation in travel retail Asia and the market softness in China. Meanwhile, L'Oréal Dermatological Beauty remained on its stellar trajectory. At plus 28.4%, the division delivered the sixth consecutive year of double-digit growth. From a regional point of view, 2023 was a tale of two cities, and you can see that very clearly in the chart on the left. Three of our regions grew well into double digits, helping offset the temporary softness in North Asia, allowing us to deliver a third consecutive year of double-digit like-for-like growth. To me, the most remarkable performance was in Europe, which grew plus 16%, making it the single biggest contributor to our growth. Every country in the region advanced strongly, led by Germany, Spain, and UK, all of which were up in double digits, impressive given their large size and our significant market share. Emerging markets continue to go from strength to strength. With 24% growth, they punch well above their weight. They contributed 15% to group sales and twice that to group growth. Sapena SSA grew plus 23.3%, driven by the Australian cluster, the Gulf countries, and India. And Latin America was up 24.4%, led by Mexico. In North America, momentum remained very strong at plus 11.8%, supported by a dynamic beauty market and several divisions' omnichannel focus. In North Asia, sales declined by minus 0.9% on a like-for-like basis. This was due to the reset in travel retail and to the lack of recovery in mainland China. Also, we significantly outperformed the market there. Like-for-like growth stood at plus 5.4%. Other countries in the region progressed well, notably Hong Kong, which benefited from a rebound in tourism, and Japan, which delivered its best growth on record. The chart on the right shows the growth by regions versus 2019. Over that period, growth was remarkably balanced across the developed markets and North Asia, all of which advanced in the mid to high single digits. And emerging markets clearly emerged as serious growth contributors to the group. As a result, our business is increasingly well distributed by region. Each of the three largest Europe, North America, and North Asia has sales between 11 and 13 billion euros, led by Europe, our historic home. Emerging markets, which include SAP MENA, SSA, and Latin America, now account for 15% of total sales and are becoming a true growth engine for the group. Every one of our large categories advanced in double digits. In order of their growth, we have fragrances. They were particularly dynamic, growing plus 16.9%, supported by a number of highly successful new product launches. Haircare was our second fastest growing category, at plus 15.3%, driven by the continued premiumization in both mass and professional division. Skincare, our largest category, advanced by 10.4%, with growth well in the double digits across all regions, with the exception of North Asia. Makeup continued its rebound at 10%, primarily driven by outstanding growth in the consumer product division. And hair color advanced by 6.5%. Let's now move to the P&L. Gross profit rose 10% to 30.4 billion euros, and the gross margin returned to its pre-inflationary high of 73.9%, an increase of plus 150 basis points year on year. Let me give you some of the gross margin building blocks. Currencies and scope of consolidation had a positive impact to the tune of 30 basis points. On a comparable basis, the gross margin increased by 120 basis points, still very impressive. The value effect, combining price increases and mix improvement, offset over half of the continued input cost inflation in 2023. Research and innovation expenses advanced 13% to almost 1.3 billion euros. We continue to invest significantly behind our brands. Advertising and promotion expenses rose by 11% to 13.3 billion euros. This is equivalent to 32.4% of sales. Selling and administrative expenses were up 10 basis points at 18.5% of sales. Had it not been for the first time consolidation of ESOP, which had an adverse impact of 20 basis points, SG&A will have continued its downward trajectory, driven by disciplined cost management and the creation of regional hubs. Operating profit increased plus 9% to 8.1 billion euros. The operating margin increased 30 basis points to a record 19.8%. In 2023, every division had an operating margin in excess of 20%. That of the professional product division was up by 30 basis points to 21.6%. That of consumer product division increased by an impressive 70 basis points to a record 20.5%. In Lux, the operating margin declined 60 basis points to 22.3, impacted by the first-time consolidation of ESOP, which had a negative 30 basis point effect and the adverse mix stemming from the slowdown in North Asia. In dermatological beauty, the operating margin rose by 60 basis points to a best-in-class 26%. Non-allocated expenses, consisting mainly of corporate and fundamental research costs, were stable, amounting to 2.4% of sales. Since 2019, L'Oréal has gone from strength to strength. Let me just show a few key figures to illustrate this. Reported sales increased 38% to more than €41 billion. On a like-for-like basis, the four-year CAGR amounted to 8.2%. In spite of going through a period of severe cost inflation, our gross profit advanced at a slightly faster pace than sales, resulting in 90 basis points gross margin expansion. We substantially invested behind our brands to secure our growth and prepare for tomorrow. Relative to sales, our E&P spend was up 160 basis points, amounting to over 30 billion euros. Last but not least, our operating profit increased at a four-year CAGR of plus 10.1%, reaching 8.1 billion euros in 2023. our operating profit margin expanded by 120 basis points, or 30 basis points on average per year. Let's now move down the P&L. The net financial charge came at 113 million euros. At this stage, we anticipate a net financial charge of around 160 million euros for full year 2024, all else being equal. The dividend from Sanofi amounted to 421 million euros. Please remember that the 2022 figures included a one-off dividend totaling 75 million euros. Income tax was close to 2 billion euros, representing a tax rate of 23.2%, slightly above that of 2022. And at this stage, we anticipate a tax rate slightly over 24% for full year 2024. Next profit, excluding non-recurring items, amounted to 6.5 billion euros. Diluted earnings per share came in at 12.08 euros, up by 7.3%. To help you estimate your EPS for 2024, I will recommend that you base your calculation on a diluted number of shares of 536 million. Non-recurring items amounted to 303 million euros. They included other income and expenses of 450 million euros, of which primarily 270 million euros for the impairments of IT Cosmetics and Éclair, and 89 million euros of restructuring charges, of which 38 million related to reorganizations in Europe, and 17 million euros related to the reorganization of legal structure in France. Cash flow increased nearly 10% to 8 billion euros. In an operating environment marked by a gradual normalization of the supply chain, working capital improved significantly. Capital expenditure of 1.5 billion euros came in at around 3.6% of sales. For 2024, we anticipate an investment in the order of 4% of sales. Operating net cash flow amounted to 6.1 billion euros, a sharp increase of 24% versus the prior year. After paying a dividend of 3.4 billion euros, spending 2.5 billion euros for acquisitions, and 500 million euros for share buybacks, and redeeming the lease debt, the residual cash flow came to a negative 897 million euros. The balance sheet remained robust with shareholders' equity of 29.1 billion euros, or 56% of the total balance sheet. The financial situation remained healthy in 2023. At the end of December, net debt amounted to 4.4 billion euros and to 2.6 billion, excluding the financial lease debt. The gearing ratios stood at 15.1%, the financial leverage of net debt over EBITDA at 0.5 times. The strength of our performance in 2023, coupled with the quality of our balance sheet, led the Board of Directors to propose a further 10% increase of the dividend to 6.60 euros per share at the AGM. This results in a payout ratio of 54.6% and is yet another illustration of L'Oréal consistent, dynamic, and balanced dividend policy. With regards to L'Oréal for the future, 2023 was another year of progress. On this slide, you can see some of our achievements in the effort to fight against climate change, to manage water scarcity, to respect biodiversity, and to preserve our natural resources. Let's take climate. The group is committed to having all of its sites reach 100% renewable energies by 2025, and we reached 91% at the end of last year. Last but not least, in 2023, L'Oréal was once again rewarded for its social and environmental performance and recognized among the best companies in the world by nonprofit organizations, rating agencies, and international bodies. Thank you very much for your attention.

So hello, everyone. 2023 was a dynamic year for the mass beauty market, which grew by 9%. The consumer products division outpaced this market at plus 12.6%, our highest result on record. This performance comes just after a 20-year high in 2022, reinforcing that our acceleration is not a one-off, but the fruits of a successful transformation. And what's striking about these results is how we continued to democratize beauty with volume growth at around 4%, while at the same time premiumizing with strong value growth at around 9%, including contributions from both price and mix. For the first time ever, each of our major brands grew by double digits. L'Oréal Paris, at plus 11%, extended its industry leadership, crossing the 7 billion euro mark. Garnier, at plus 17%, was fueled by green beauty innovations. But it was also an excellent year for our makeup champions, Maybelline New York, at plus 17%, and NYX Professional Makeup, at plus 21%. Let me also highlight two regional brands driving growth. Mixa, winning with mass medical expertise in Europe, and 3C by Style Nanda, spreading K-beauty across Asia. All categories grew and gained market share. Haircare and makeup led the way with growth in the high teens, while skincare grew high single digits. Many regions around the world made decisive contributions from our historical foundations to our new frontiers. It was an exceptional year in Europe, especially in our Germany hub at plus 23%, the Nordics at plus 26%, and France at plus 8%, where we increased what is already our highest market share worldwide. At the same time, our emerging markets of Southeast Asia, Africa, the Middle East, Latin America, continued rapid growth at plus 24%, compounded on the massive gains of 2022. We also had a strong performance in North America, driven by the US at plus eight. In China, the division outperformed a challenging mass beauty market and successfully expanded in social commerce. So thanks to this growth, coupled with a significant gross margin increase of 220 basis points, we were able to invest much more behind our brands while delivering 70 additional basis points of operating margin to reach 20.5%. So as we turn towards the future, there is one major market insight to take into account. A tremendous wave of beauty knowledge and desire among mass beauty consumers all over the world. The boom of social media and beauty influencers is educating and inspiring consumers. For example, online beauty video views doubled in the last year to reach more than 442 billion. And this is particularly impacting mass consumers, because with more expertise at their fingertips, they are seeking more efficient and desirable products, as well as discovering new beauty habits. So to capture this trend, our division laid out a winning strategy aimed at a clear consumer target. Our strategy is encapsulated in two words, democratize and premiumize. Our target is the upper half of the middle class. It represents more than 2 billion of the most demanding consumers who seek the elevated beauty that our brands deliver. In 2024, we are focused on four strategic growth drivers. The first is an obsession with innovation. Our 2024 launch plan is truly bringing premium to mass. We'll continue to premiumize hair care with L'Oréal Paris' Glycolic Gloss and Garnier's Hair Filler, as well as skin care with Bright Reveal by L'Oréal Paris, our most advanced solution against all kinds of skin spots. Our makeup brands are raising the bar again with Maybelline's Firework Mascara, L'Oréal Paris' Panorama, and NYX's Duck Plump Lip Gloss, which will be featured in the brand's first ever Super Bowl commercial this weekend. But innovation is also our instrument to democratize. Democratize with accessible formats, like Garnier's new hair color sachet, which will be the most affordable way to color your hair in Europe and the US. Democratize new beauty habits, like adding hair care treatments on top of traditional shampoos or conditioners, or introducing serums to skin care routines. And we're also democratizing sustainable beauty, like with our upcoming haircare eco-refill campaign. With 60% less plastic, these cost-efficient pouches are good for the planet and good for the wallet. The second strategic driver is beauty tech, which is premiumizing the beauty experience in two ways. First, through services. Our vision is to put a beauty advisor in the pocket of billions of consumers. That's why we unveiled Beauty Genius at CES in Las Vegas. It's a Gen-AI-powered beauty advisor to give personalized advice at scale. Another major beauty tech step is the launch of our ColorSonic device, a true revolution for at-home hair color coming to the US in July. Our third driver is our relentless focus on flawless execution. It starts with our operations teams, which have reinforced our supply chain and boosted our service levels by 420 basis points and counting. It's also about transforming our partnerships with retailers. In the Independent Advantage Survey, which asks retailers across the world to rate their FMCG suppliers, we went from bottom tier to top tier in just three years. And we're now leveraging these relationships to reimagine the mass shopping experience. Our joint efforts are making beauty aisles more informative and more desirable. Finally, we're in the midst of a once-in-a-lifetime opportunity in emerging markets. After two years of booming growth, we're just scratching the surface in these regions that will be home to over 1 billion consumers within our target by 2030. But beyond that potential, what makes the opportunity so unique is the increasing sophistication of consumers in emerging markets, as well as the distribution shift from door to door towards e-commerce and modern trade. So powered by these four drivers, innovation, beauty tech, flawless execution, and emerging markets, our division enters 2024 stronger than ever. And with a market share at 11% globally and just 8% in emerging markets, we have plenty of room to grow and unleash the unlimited potential of beauty democratization and premiumization. Thank you very much.