L'Oreal Unsp/Adr

It is 9 o'clock. Good morning, everyone. And welcome to this 2025 annual presentation for the results of L'Oréal. Christophe Babulle, our CFO, will kick off with the presentation of our 2025 financial statements. Then each head of division will summarize the 2025 highlights and share with you the outlook for 2026. So you have Omar Hajeri, who's president of the professional products division. Fabrice Megardin, who is our newly appointed President of the Consumer Products Division, Myriam Coel-Wellgreen, in charge of Dermatological Beauty Division, and Cyril Chapuis, President of L'Oréal Luxe. Then I will conclude the first part of the meeting by explaining why 2025 was a defining year for L'Oréal and why we are uniquely well-placed to seize the ascending currents in emerging beauty trends in order to accelerate our top-line growth and deliver superior long-term performance. We will then move to the Q&A session, which we expect to last around 40 minutes. Finally, I draw your attention on the disclaimer that is now on the screen. And I guess we are ready to hear you, Christophe.

Ladies and gentlemen, good morning. Let me share some of the key 2025 highlights with you. Like-for-like growth came in at 4%, marking another year of market outperformance. At 74.3%, our growth margin reached a new all-time high, up 10 basis points from last year despite the adverse impact from tariffs. Our operating profit margin increased 20 basis points, touching 20.2% for the first time. And our operating net cash flow of 7.2 billion euros, up almost 8%, implied cash conversion of over 100%. Sales increased by 1.3%. Foreign exchange had a negative 3.6% impact as the euro appreciated against all of our key currencies. You can find further detail in the appendix of this presentation. If the exchange rates on the 31st of January 2026 were extrapolated until the end of the year, the impact of currencies on sales would be a negative 2.5%. The change in scope of consolidation contributed a positive 0.9%. It reflects the acquisitions of Dr. J in March, Medicaid and Corowow in September, as well as the impact of hyperinflation accounting in Argentina and Turkey. On the like-for-like basis, growth stood at 4%. Volumes were up as we passed the 7 billion unit mark for the first time. Value was positive, driven mostly by mix. Let's now take a look at the progression by quarter. As you can see on the left, like-for-like growth, adjusted for the impact of our IT transformation, accelerated quarter after quarter. from 2.6% at the beginning to 5% at the end of the year, boosted by the step-up in our innovation pipeline. On the right, you have the reported quarterly light-for-light growth, and as you can see, there is no difference between the adjusted and reported figures on a full year basis. On the subject of IT transformation, 2026 will be our most important year as we will cover the US as well as the UK, Ireland and Australia-New Zealand clusters, and the rollout has already started in the first quarter. By the end of the year, we will have completed around 60% of our total IT transformation, up from close to 30% in 2025. We will, of course, update you every quarter on the impact this has on our divisional and regional growth numbers. Let's now turn to our regions. All of them show positive momentum, illustrating the power of L'Oréal's geographical footprint, which allows to grow, whatever the context, at any time and everywhere. Emerging markets spearheaded a growth at 9.7%. They contributed 17% of group sales and 40% of growth. SAP MENA SSA grew 10.9% with particularly strong performances in Vietnam and the Gulf countries. Latin America was up 8.3% with Mexico and Brazil both advancing in high single digits. Growth in Europe remained very robust at 4.4% with particularly strong performances in the Iberia and Darf clusters. In North America, sales increased 3.4%. Adjusted for the impact of our IT transformation, they accelerated between first and second half with a very strong finish at 4.5%. In North Asia, sales advanced 0.5%, a figure that masks several distinct market stories. Let's take a closer look. Overall, growth accelerated from minus one in the first half to plus 2% in the second half. This was driven by mainland China, our single largest market in the region, where growth went from plus one to plus five, helped by the gradual recovery of the market, especially in Lux. But I know that you expected more from North Asia, given the improving news out of Hainan. The reality is that Hainan is only a small part of the travel retail ecosystem. As you can see in the chart on the left, it accounts for around 20% of the total. What we saw in the other parts of the market was continued softness in Korea and mainland China travel retail market that was temporarily disrupted by the suspension of Sunrise App and the change in domestic airport operators. To maintain healthy inventory levels, we adjusted our sell-in in Q4. Sell-out progressively accelerated and was close to flat in the fourth quarter, allowing us to improve our share by 260 basis points. Travel Retail Asia now accounts for less than 4% of our sales versus more than 6% only three years ago. Therefore, excluding the impact of Travel Retail Asia, our growth at group level accelerated by one point each quarter from 3 to 4 to 5 and nearly to 6%. Let's now look at our divisions. On a like-fun-like basis, all grew and accelerated between first and second half. Professional products was the fastest-growing division, up an incredible 7.5%, supported by the ongoing boom in premium hair care. Consumer products advanced 3.5%, led by hair care and a sharp recovery in makeup in the second half of the year. Lux grew 2.8%, with momentum accelerating to 3.6% in the second half, and dermatological beauty advanced 5.5%, led by both hair care and skin care. All three brands contributed, and SkinCeuticals became the division's third billionaire brand. Let's move on to our categories. Every one of them grew. At 12.9%, hair care was the most dynamic category, driven by strong volume growth. All divisions, professional, mass, and derma, contributed. Fragrances maintained their double-digit pace at 10.5%. for 4%, growing twice as fast as their market, driven by our couture brands and boosted by a highly successful launch plan. Makeup increased by 3.5%, with a strong acceleration between first and second half, especially in North America. Hair color advanced by 0.6%, led by mass, and skincare was up 0.4%, accelerating to close to 2% in the second half, thanks to the innovation-driven recovery of LDB Division. Next, I would like to share with you the development of our e-commerce footprint. In 2025, sales in e-commerce amounted to 13 billion euros, crossing the 30% threshold for the first time. That's an increase of 200 basis points from 2024. Let me remind you, back only 10 years ago, e-commerce contributed only 1.3 billion euros or 5% to our sales. So why does it matter? First, it means that we are winning with the winners. Global beauty market growth in e-commerce is four times that in brick and mortar. Second, e-commerce is a real game changer in emerging markets, where its weight rose by 400 basis points in 2025. Third, e-commerce is not only margin accretive, but also highly cash generative. So let's now move to the PML. Gross profit rose 1.5% to 32.7 billion euros. The gross margin reached a record high of 74.3, up 10 basis points year-on-year and 50 basis points in the second half. On a full year basis, tariffs had a negative 20 basis points impact, which was more than offset by a strong contribution from price and mix, as well as cost efficiencies. Research and innovation expenses increased 1.9% to 1.4 billion euros, equivalent to 3.1% of sales. We continued to invest behind our brands. Advertising and promotion expenses rose 1.2% to 14.2 billion euros, or 32.2% of sales stable versus last year. As anticipated, they increased by 15 basis points in the second half. Selling and administrative expenses were down 10 basis points at 18.8% of sales, reflecting our continued discipline and recurring cost control. All of these lines of the PML have clearly started to benefit from AI efficiencies. Last, operating profit amounted to 8.9 billion euros, up 2.4%. The operating margin increased 20 basis points to a record 20.2, despite an unfavorable ethics impact of 40 basis points. Let's now look at operating margin by divisions. In 2025, each division reported an operating margin in excess of 21%, and with the exception of dermatological duty, reached a new record. That of professional product was up by 70 basis points at 22.9%, That of consumer products increased by 30 basis points to 21.4%. That of Lux rose by 10 basis points to 22.4%. And that of dermatological beauty was flat at 26.1%, with a better balance between the two halves. Non-allocated expenses, consisting mainly of corporate and fundamental research costs, remain stable at 2.5% of sales. Let's now return to the P&L. The net financial charge came in at 236 million euros. Total dividends received amounted to 351 million euros, down from 445 million euros last year, following the reduction in our stake in Sanofi in February 2025. Income tax, excluding non-recurring items, stood at 2.2 billion euros, representing a rate of 24.3%. Now, including the exceptional French tax, which amounted to 253 million euros, and non-recurring items, income tax was close to 2.4 billion euros, representing a tax rate of 27.8%. Net profit excluding non-recurring items amounted to 6.8 billion euros, and therefore, diluted earnings per share came in at 12.71 euros, up slightly compared to last year. To help you estimate your EPS for 2026, I will recommend that you base your calculation on a diluted number of shares of 534.9 million. Non-recurring items amounted to 679 million euros. They included other income and expenses of 504 million euros, of which primarily 209 million euros of restructuring charges related to various reorganization measures at group, divisional, and regional level, and 179 million euros related to product liability lawsuits. Net profit after non-recurring items came out at 6.1 billion euros, down 4.4% versus the previous year. Cash flow decreased by 2.2% to 8.3 billion euros. Our working capital improved significantly, reflecting more efficient management across all key lines. Capital expenditure of 1.5 billion euros came in at 3.4% of sales, 40 basis points below last year. Operating net cash flow amounted to 7.2 billion euros, an increase of 7.8%, implying strong cash conversion. Dividends amounted to 3.9 billion euros. We spent 2.4 billion euros on acquisitions, half a billion euros on share buybacks, and 454 million euros on lease debt repayments. Investment in non-controlled entities primarily includes the proceeds from the partial sale of our standoff stake last February. The residual cash flow came to a strong 2.4 billion euros. Our balance sheet remained robust with shareholders' equity of 35 billion euros or 57% of the total balance sheet. As a result, the financial situation remained very healthy in 2025. At the end of December, net debt amounted to 2.1 billion euros and to 254 million excluding the financial lease debt. The gearing ratio stood at 5.9%, the financial leverage at 0.2 times based on an EBITDA of 10.5 billion euros. For your information, we just closed on the Galderma transaction we announced last year. This will lead to a cash outflow of 4 billion euros. After we will have paid for the current beauty acquisition, We estimate our leverage will stand at less than one turn at the end of the year. This will allow us to pursue further opportunities should they arise. The quality of our performance in 2025, coupled with the strength of our balance sheet and our confidence in the group's outlook, led the Board of Directors to propose a 2.9% increase in the dividend to €7.20 per share at the AGM. This results in a payout ratio of 56.6% and illustrates L'Oréal's consistent and dynamic dividend policy. Now, with regards to our L'Oréal for the Future ESG program, 2025 was a key year. At the halfway point of this program, we have reflected on our progress and learnings, refined our roadmaps, and reinforced our commitments. We have introduced new targets addressing key material topics, including virgin plastic reduction, natural regeneration and water resilience. Let's take circularity. In 2025, we reduced the use of virgin plastic for product packaging by 37% in absolute compared to 2019, and our objective is to reach 50% by 2030. In 2025, 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, and international bodies. We were particularly proud that L'Oréal was awarded a AAA rating by CDP for a 10th consecutive year, the only company in the world with that distinction. Thank you very much for your attention.

thank you christophe for this very clear presentation and now we will start with the presentation of the divisions with the professional product division our fastest growing division this year with omar ageri good morning everyone i'm very pleased to present the outstanding performance of the l'oreal professional products division