Intervention de Christophe Babule, Directeur Général Administration et Finances, L'Oréal

Hello Laurent. And so we thought that to give a first taste of the activities of a beauty specialist, the best way was to do it with images and to show what L'Oréal is in a short video. And right away, here we go.

First of all, I would describe L'Oréal as a very beautiful French story and a very beautiful success. A very beautiful French story because I like to recall that it is a company born more than 110 years ago. It was originally a French chemist, a magnificent entrepreneur, Eugène Schueller. And it is the story of a company that truly gave itself a vocation: beauty for all, and a raison d'être which is to create the beauty that moves the world. And all that is easily summarized: it is first the world leader in beauty, with a turnover approaching 40 billion euros. It is also nearly 7 billion products produced each year in all our factories in the group, so you can imagine the impact of a company like ours. And it is also the most beautiful portfolio of brands in the beauty world, with about 80 brands that are very complementary, and 35 of them are truly global. They are grouped into 4 major divisions: for example, the Luxe division, today the largest of our divisions, with brands like Lancôme, Yves Saint Laurent, Biotherm, but also Ralph Lauren or Mugler perfumes. The second division, almost equivalent in size to the Luxe division, is the Consumer Products division with brands that everyone knows: L'Oréal Paris of course, Garnier, but also Maybelline New York. Then we have the division specialized in so-called active cosmetics products, the brands you find in pharmacies, the most well-known of which is probably La Roche-Posay, but also Vichy, CeraVe, and SkinCeuticals. And finally, the Professional Products division, which serves all our hairdressers in France, for example, with brands like L'Oréal Professionnel, Kérastase, or Redken. So it is a group that covers all our markets. We are present in more than 150 countries today, so we really cover all geographies. We handle all categories of the beauty world: of course hair color, hair care, but also skin care, makeup, fragrances. And what more can I say? I would say it is also a group that covers all price segments, precisely to be able to offer the best of beauty to all consumers. And finally, perhaps what makes the strength of the group today is the 85,000 employees who every day ensure that this group continues to develop across all geographies, and more than 4,000 researchers among these 85,000 employees, which is also worth mentioning. That is what makes the strength of this group: its innovation and its research.

What makes the beauty of this market is that it is first a very large market. We are talking about a market that globally weighs about 230 billion euros, 130 billion euros in enterprise value, in retail value it is perhaps around 400 billion euros. It is also a market that is continuously growing. You should know that the beauty market grows each year by about 3 to 4% per year, so it is very sustained, very resilient growth. And in this context, L'Oréal continues to develop and even outperforms this market growth. So not only is it a market that continues to develop, but effectively in this market, L'Oréal outperforms. That is, when the market is growing at 4%, L'Oréal always manages to do one or two or three percent more. Recently, for two years, we have been growing about twice as fast as the market. And that is why we are happy to be able to fuel this growth, and have been for many years.

First of all, L'Oréal is a growth model that relies on very solid drivers: the drivers of its divisions, the drivers of its different geographic zones, all its categories. When I say the drivers of the divisions, I am of course referring to the strength of our brands. We have brands today that have an extremely important reputation, with brands like L'Oréal Paris, the largest beauty brand in the world, and other brands like Lancôme, the largest beauty brand in the luxury field. So an exceptional asset for L'Oréal. And behind these brands, there is absolutely incredible innovation. That is certainly what makes the uniqueness of this group: its research, its ability to innovate, as you saw in the film. The group spends about, even more than, 1 billion euros each year. 1 billion euros, 4,000 researchers, as you saw, in 20 research centers. And today, L'Oréal files about 500 patents each year that are developed and filed in France. Within this innovation, there is necessarily the impact of digital. We hear more and more about beautytech at L'Oréal. You will have to explain what that is. So indeed, we are of course trying to capture all the innovations that the world offers us today. And the new bet for L'Oréal is effectively the bet of beautytech: using technology, using digital innovation to accelerate innovation within the group. And in this area, of course we invest. I will give you two examples in digital innovation. For example, in 2018, the group acquired a company called Modiface, and Modiface is the leader in virtual reality and artificial intelligence for new beauty experiences. And these services are what we offer today on our platforms. You should know that this tool has already been used more than 1 billion times by consumers. So that's one example. And the second example is of course the investments we make today in our startups. We have a startup ecosystem that contributes to the development of the L'Oréal group through our fund, BOLD (Business Opportunities for L'Oréal Development), and we have made investments in the digital field, in technology, and in all the startups that help L'Oréal become more and more efficient in sustainable development. I have in mind, for example, Carbios, which is a French startup based in Clermont-Ferrand that has developed a technology for recycling plastic waste. Stability, I want to say, stability in shareholder and management structure is also a strength for L'Oréal. It is an advantage because having shareholder stability, people who understand our group, who understand our model, who accompany the group over the long term, is a chance for management, for the people who lead L'Oréal, to be able to support development over the long term. So this very long-term strategy is what makes the strength of the group today: this ability to prepare and develop the group over the very long term, and I believe the results demonstrate that.

So the 9-month results, it's true that it's important to come back to them. First, it's very strong growth this year. You see on the graph, it's growth of more than 20% in reported terms, so in euros, and in like-for-like it's growth of more than 12%. Moreover, it's growth that I can describe as very balanced because it is visible across all our four divisions. Even the Consumer Products division, which operates in a market that grows less strongly, is in strong outperformance with growth of nearly 9%. It is also growth that is strong across all geographies. It is not growth only in Europe or the United States; no, it is strong across all geographies, including in North Asia, despite the turbulence we have today in a large country like China. And finally, it is growth driven this year by emerging markets, which are growing by more than 20% in like-for-like. And we see it, you said it: doing twice as much, we are there because it's plus 12% when the beauty market is around plus 6% growth on a sliding basis. Absolutely. So in a market that we estimate at about 6% growth, I was talking earlier about markets that are developing strongly, that is the case again this year. 6% is still enormous, and in this context, the group does about twice as well as the market growth.

Confidence is born first from a market, as I explained earlier. Despite everything we hear, despite the economic risks, it remains a very resilient market. That is what makes the strength of our market. The beauty market has always proven in its history that it is very resilient, whatever the situation. Even in 2009 during the economic crisis, the market was growing at 1%. So that's a first factor. And then this confidence also comes from our ability to innovate. So in this context, we have a very strong launch portfolio that fuels this growth. I see here a photo of the latest Prada perfume, Paradoxe, which is one example among many. And you should know that this beauty market is fueled by an appetite that remains very strong for beauty, whatever the geography. I can tell you that I was not long ago in Singapore. We must not forget that in some geographies, economies are booming, and this beauty market is driven by a very strong development of the middle class. We estimate, for example, that in a country like China, about 100 million people will accede to this middle class.

So the particularity of China is that today the market is very disrupted by COVID problems. But in China, what makes our strength is our capacity and, let's say, the power of our brands, which allows us today to be extremely strong in e-commerce. You should know that today in China, 60% of our turnover is achieved through e-commerce. So when points of sale are closed due to COVID, we are able to activate the consumer on e-commerce. And that is why, in a market that is slightly declining, we think the market is around -4 to -5%, L'Oréal manages to achieve growth. Today we are at +6% growth as of September in China.

Yes, of course. We take advantage of the strength of the group and its global geographic presence. So whether in our supply, we have suppliers who have been with us for a very long time with long-term contracts. And in an inflation situation, we have the ability, thanks to our innovation, to generate what we call value enhancement, because the consumer is always looking for products that are more effective. And that allows us, of course, when we launch products, to reposition our products at the right price.

Well, listen, old Europe is doing magnificently well, with growth of nearly 13%. So it's really exceptional growth for countries like ours. And I think the growth today is driven by a huge need from European consumers. With socialization back to pre-COVID levels, consumers have turned again to beauty products, especially makeup, because as you know, when we wore masks, it wasn't easy, it was more complicated. But also the fragrance category is booming worldwide. We estimate the market growth at about 16%, and the group is growing at 27% in fragrances.

That's a very good question because it's a subject we have placed at the heart of our raison d'être. And we have a very strong conviction at L'Oréal: economic performance and environmental and social performance go hand in hand. So it is no longer a question of reconciling one with the other, but really of changing our mindset. And it is undoubtedly one of the greatest ambitions we have at L'Oréal: not only do we want to maintain a very strong leadership in beauty, but we want to make L'Oréal a champion in sustainable development. That is the whole objective of our program called L'Oréal for the Future: to ensure that our development stays within planetary limits, and to ensure that we are not overconsuming the goods that the planet offers us. We absolutely must stay within those limits. It's a fantastic challenge because it concretely means that, for example, all our formulas will gradually shift to green sciences. And behind this program, we have the ambition of 4,000 researchers who will undoubtedly have to reformulate perhaps today a catalog of 40,000 formulas, and ensure that all the products that consumers use daily will be neutral for the planet.

Yes, of course. It is an absolutely enormous ambition because it touches our research, but it also touches the entire production system of the L'Oréal group, whether in terms of energy, plastic use, or land use through the raw materials we use. And all of this is broken down into a set of indicators that go up to 2030. L'Oréal absolutely must follow its roadmap on all these indicators. So we have an investment plan, for example in industrial matters: we want all our factories to be carbon neutral by 2030. You should know that today, 56% of our factories already are. They also need to be what we call 'waterloop', meaning they no longer use water except for... which helps us develop new technologies that will allow us to respect this roadmap, which is indeed very ambitious.

No, because we believe that a company like L'Oréal must be a leader in all areas. Extra-financial performance covers many themes: the environment, but also social well-being. And we believe today that L'Oréal has a role to play in that area. That is why we have funds dedicated to biodiversity, impact funds in the circular economy, 50 million have been invested. But we also have a philanthropic endowment fund that is directed towards women who are in difficult situations. It seemed important to us today to participate in finding solutions for this entire population.

First of all, investing in L'Oréal is investing in the absolute leader in the beauty field. A leadership that is of course carried by iconic brands. We have the largest portfolio of brands in the beauty world, as I said earlier. And as I also said earlier, brands that are strengthened each year by this innovation, which is nourished by research continuously. To also demonstrate over the long term that year after year, the returns and results are there. In addition, it is a dividend that is also constantly increasing. The dividend last year was €4.80. 10 years earlier, it was €2. So you see the progression year after year. And that is also a guarantee for potential investors, a guarantee of the solidity and sustainability of our results.

Absolutely. For us, what seems important, and that's why I am also here today, is that individual shareholding is important to us because it is stable shareholding. And this stability, this loyalty, we reward it. And indeed, for shareholders who have been registered for more than two years, there is a 10% bonus given in terms of dividends. So last year, for the dividend of €4.80, there was an additional 10% paid to these loyal shareholders.

I believe that is what makes the uniqueness of the L'Oréal group: we have the chance to be in this wonderful market that is beauty, and within this market, it is a unique company. Unique because of its history, its development. It is a jewel of French industry today, extremely, how to say, very anchored in French territory. You should know that today we have more than 10 factories in France, a large part of the products are still produced here, a large part of the research comes from France. And that is what makes the uniqueness of the group. And of course the values, the values that drive us daily, and as you said, the raison d'être is something that gets me up every morning to go to work, absolutely, to make the group shine. Create the beauty that moves the world.