L'Oreal Unsp/Adr

So good morning again and welcome to this 2024 annual results presentation. Christophe Babul, our CFO, will kick off with a presentation of the 2024 financial statements. Then each head of divisions will summarize the 2024 key points for his or her division, as well as the prospects for 2025. So we'll start with Myriam Coel-Welgreen, president of the Dermatological Beauty Division. Then Omar Ageri, President of the Professional Division, Cyril Chapuis, President of L'Oréal Luxe, and Alexis Perrakis-Vallat, President of the Consumer Product Division. And I will conclude this first part of the meeting, share with you my key takeaways for 2024, my thoughts on 2025, and how we'll continue to expand our beauty conquests. Then we will, of course, move to the Q&A session, which we expect to last around 40 minutes. And finally, I draw your attention to the disclaimer that's now on that screen. So I give you a little bit of time to read it, and then we will start with Christophe's presentation. So Christophe, please, you can go to the desk.

Okay, so ladies and gentlemen, good morning. A record year for L'Oréal. In 2024, L'Oréal set several new records. Let me share some of the highlights with you. First, like-for-like growth came in at 5.1%, marking another year of market outperformance. At 74.2%, our gross margin reached a new all-time high, up 30 basis points from last year. Our operating profit margin increased 20 basis points, touching 20% for the first time. And our operating net cash flow at 6.6 billion euros, up close to 9%, implied a cash conversion of over 100%. Consolidated sales increased by 5.6%, reaching €43.5 billion. On a like-for-like basis, growth amounted to 5.1%. The change in scope of consolidation was a positive 1.7%. It was mainly due to the acquisition of ESOP in August 2023 and the impact of hyperinflation accounting in Argentina and Turkey. Foreign exchange had a negative impact of minus 1.2%, as the euro strengthened throughout the year. You can find details on our invoicing currencies in the appendix of the presentation. Growth was driven by a combination of volume up 1.4% and value up 3.6%, well balanced between price at 2.1% and mix at 1.5%. Its division grew on a like-for-like basis. Professional products grew 5.3%, supported by the ongoing boom in premium hair care and the division's successful omnichannel strategy. Consumer products posted 5.4% growth, with all four key brands contributing. Emerging markets and Europe were particularly dynamic. L'Oreal Lux grew 2.7% like for like and 4.5% reported, boosted by the consolidation of ESOP. Outside North Asia, sales grew slightly more than 10%, driven by continued strong momentum in fragrances. And L'Oreal Dermatological Beauty reported a 9.8% increase in sales, allowing the division to hit the 7 billion euro mark for the first time. From a regional point of view, 2020 was the tale of two cities, as you can see very clearly on this chart. Momentum was strong in three of our regions, helping offset the softness in North Asia. Europe advanced by a remarkable 8.2%, making it the single biggest contributor to our growth. Every country in the region grew, with Germany, Spain and the UK particularly dynamic. In North America, growth was solid at 5.5%. Each of the division advance flux the most dynamic. With 11.7% growth, the emerging markets remain in the lead. They accounted for more than 16% of group sales and more than twice that of group growth. SAP MENA SSA grew 12.3%, driven by Australia, Thailand, and Saudi Arabia. Latin America was up 11%, led by Mexico and Brazil, which crossed the 1 billion euro mark. In Asia, sales declined by 3.2% on a like-for-like basis. This was due to the continued weakness in both mainland China and travel retail. As a result of that, let's take a look at the distribution of our sales by region, which has changed quite dramatically in the last five years. Our exposure to North Asia declined from almost 27% to less than 24% of sales. Our developed regions remain stable with a stronger contribution from North America, but the real winners were our emerging markets. They now account for more than 16% of sales from just 14% five years ago. Let's move on to our categories. Every one of them grew. In the order of their growth, fragrances at 14.1% were the most dynamic category for a fourth consecutive year, boosted by our couture brands. At 12.7%, haircare was our second fastest growing category, driven by the continued premiumization in both mass and professional. Makeup increased by 5%, with solid growth in both the consumer products and luxe divisions. Skincare, our largest category, advanced by 2.8%. All regions were up, with the exception of North Asia. And hair color advanced by 2.3%. Like our regional food breed, our category food breed changed significantly over the last five years. Despite its significant exposure to North Asia, the contribution from skincare increased by four points, illustrating its critical importance in an aging, increasingly health and wellness conscious world. Fragrances saw the biggest increase. Its contribution rose from 9% in 2019 to 14% today. And there is more to come as we are adding two new licenses this year. The contribution from these two categories increased by 10 points, which clearly had a terrible impact in our mix. And now let me put some perspective around our top-line performance in 2024. First, 2024 was a tale of two cities on our like-for-like growth to that 5.1%. But excluding Othesia, it amounted to a very strong 8%. As you saw earlier, all other regions contributed to that growth led by Europe and our emerging markets. But 24 was also a tale of two halves, as a strong first half was followed by a softer second. Let me take you through the three main reasons. First, over the course of last year, growth in the global cosmetic market eased from a dynamic 5.5% in the first half to a more moderate 4.5% in the full year. As you know, we had expected that slowdown as inflation-driven pricing started to unwind. But the shape of the slowdown was different from what we had predicted. On the one hand, developed markets, especially Europe, held up better than anticipated. On the other hand, the Chinese ecosystem, which we had hoped would at least stabilize, did not. Let's take a closer look at what happened in this Chinese ecosystem. In mainland China, total beauty market growth deteriorated from minus two in the first half to minus four in the full year. In a selective market that continued to decelerate, the luxe division continued to gain share and reach a new record high. In May, we slightly underperformed a rapidly slowing market impacted by our online footprint. In Asia, travel retail and total beauty market growth went from minus 3 in the first half to minus 10 in the full year, driven by both Hainan and Korea. Together, they are down 35% from 2022 levels, and we choose to accompany this decrease in consumption with a reduction in our stock in trade. We believe that the resizing of the travel retailers in Asia is now largely behind us, and I'm happy to say that we are entering 25 with healthy inventory levels across the region. My third comment is about dermatological beauty. The difference we had observed between sell-in and sell-out in the first half, mainly related to sun care in Europe, reversed in the second half. Sell-out is robust and ahead of sell-in. Cerave slowed in the US. This is partly due to the low of big numbers. In the last seven years, the brand has grown sevenfold and is now our second biggest brand in the US. In addition, our key launch, the brand's first entry into hair care, happened at the very end of the year, starting with Walmart.com. With that, let's move to the P&L. Gross profit rose 6% to 32.3 billion euros. The gross margin reached a record high of 74.2%, up 30 basis points year on year. While currencies and scope of consolidation had a negative 30 basis points impact, this was more than offset by a strong contribution from price and mix, as well as cost efficiencies. Research and innovation expenses increased 5% to 1.4 billion euros. We continue to invest behind our brands. Advertising and promotion expenses rose 5% to 14 billion euros, equivalent to 32.2% of sales. Selling and administrative expenses were up 40 basis points at 18.9% of sales and operating profit amounted to 8.7 billion, up 7%. The operating margin increased 20 basis points to a record 20%. On a comparable basis, consolidating ESOP in both 23 and 24, our gross margin increased 50 basis points. On that same basis, advertising and promotion expenses rose 10 basis points. Selling and administrative expenses were flat, reflecting once again our disciplined approach to cost management, including several reorganization and restructuring measures in several regions. Last, the operating margin increased by a very strong 40 basis points. In 2024, each division reported an operating margin in excess of 21% and, with the exception of LUX, reached a new record. That of professional products was up 60 basis points at 22.2%. That of consumer products increased by 60 basis points to 21.1%. That of LUX was flat at 22.3%, but up 50 basis points on a comparable basis. and that of dermatological beauty rose by 10 basis points to a best-in-class 26.1%. Non-allocated expenses consisting mainly of corporate and fundamental research costs rose slightly to 2.5%. Before we look at the rest of the P&L, I would like to take a step back and remind you how much we have achieved in the last five years. Reported sales increased 46% to over 43 billion euros. Like for like, our four-year CAGR was an impressive 7.6%, more than twice that of the market. Despite going through a period of severe cost inflation, gross profit advanced at a slightly faster pace than sales, resulting in 180 basis points gross margin expansion. We invested behind our brands to secure our future growth. Relative to sales, ANP was up 140 basis points. In 2024 alone, it amounted to over 14 billion euros. Last but not least, our operating profit increased at a four-year CAGR of over 9% and our operating profit margin expanded by 140 basis points or 30 basis points per year. Let's return to the PL. The net financial charge came in at €261 million. The dividend from Sanofi amounted to €445 million. Income tax was slightly over €2 billion, representing a tax rate of 23.4%, very slightly above that of 23%. Net profit, excluding non-recurring items, amounted to €6.8 billion. Deleted earnings per share came in at 12.66 euros, up by 5%. Now, to help you estimate your EPS for 2025, I will recommend that you base your calculation on a deleted number of shares of 535 million, 0.9. Non-recurring items amounted to €378 million. They included other income and expenses of €438 million, of which primarily €237 million of restructuring charges related to various reorganization measures at group, divisional and regional level, and €100 million related to product liability lawsuits. Cash flow increased by 6.4% to 8.5 billion euros. Working capital continued to improve. Capital expenditure of 1.6 billion euros came in at 3.8% of sales. Operating net cash flow amounted to 6.6 billion euros, an increase of 8.6%, implying strong cash conversion. We paid a dividend of 3.6 billion euros, spent 160 million euros for acquisitions and half a billion euros for share buybacks and redeemed our lease debt. You will find the acquisition of our 10% stake in Galderma in the other line given it was a minority investment. The residual cash flow came to 51 million euros. The balance sheet remained robust, with shareholders' equity of €33.1 billion, or 59% of the total balance sheet. As a result, the financial situation remained healthy in 2024. At the end of December, net debt amounted to €4.4 billion and €2.5 billion, excluding the financial lease debt. The gearing ratio stood at 13.4%, the financial leverage at 0.4 times based on EBITDA that has surpassed the €10 billion for the first time. Earlier this week, as you have probably seen, we sold 2.3% of our stake in Sanofi, benefiting from the recent share price move. This allows us to diversify our sources of financing following the ESOP, Galderma and DrG transactions and give ourselves the means for other acquisitions, and there are plenty of opportunities. The quality of our performance in 2024, coupled with the strength of our balance sheet, led the Board of Directors to propose a 6.1% increase in the dividend to €7 per share at the AGM. This results in a payout ratio of 55.3% and illustrates L'Oreal's consistent and dynamic dividend policy. Now, with regards to our L'Oreal for the Future ESG program, 24 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. Last April, the SBTI approved our short-term and long-term decarbonization targets as aligned with the 1.5 degrees trajectory. Additionally, in 24, L'Oréal already reached 97% renewable energies for its sites. In 24, L'Oréal 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.

Thank you, Christophe. Thank you for your presentation. And now on to Myriam Coelm-Wellgreen for L'Oréal Dermatological Beauty.