1St Half 2005 Results

Clichy, Friday, September 2nd 2005 – 8.45 a.m.





Commenting on the results, Sir Lindsay Owen-Jones, Chairman and Chief Executive Officer of L’Oréal, said: "The faster sales growth recorded in the second quarter should continue in the second half, in view of the more intensive programme of product launches and promotional activities. Although a single half-year’s performance has limited significance, the results of the first six months are in line with our projections. In 2005, L'Oréal should once again achieve double-digit earnings per share growth".

Main indicators
€ millions

At June 30th 2005 IFRS At June 30th 2004 IFRS pro forma* At June 30th 2004 IFRS
Sales 7,164 6,922 6,922
Operating profit before exchange gains and losses 1,123 1,087 1,087
Operating profit 1,115 1,115 1,115
Pre-tax profit 1,257 1,242 1,330
Net profit after minority interests 892 878 947
Net profit excluding non-recurrent items (1) 892 875
Earnings per share (2) (€) 1.40 1.34

1st half 2005 sales
Growth by operational division and geographic zone

1st Half 2005 2nd Quarter 2005
€ million Growth Growth
Like-for-like IFRS Reported IFRS Like-for-like IFRS Reported IFRS
By operational division
Professional Products 1,023 +4.3% +3.3% +5.1% +5.0%
Consumer Products 3,768 +4.1% +3.7% +4.7% +5.2%
Luxury Products 1,632 +1.4% +0.3% +3.2% +3.0%
Active Cosmetics 560 +13.1% +13.8% +16.0% +17.2%
Cosmetics total 7,027 +4.1% +3.5% +5.1% +5.4%
By geographic zone
Western Europe 3,534 -1.0% -1.1% +1.1% +1.0%
North America 1,794 +7.2% +3.8% +6.6% +4.8%
Rest of the World, of which: 1,700 +12.7% +14.1% +12.7% +16.4%
- Asia 668 +9.0% +8.7% +6.5% +7.8%
- Latin America 375 +8.5% +12.4% +11.3% +19.9%
- Eastern Europe 325 +26.1% +31.0% +30.9% +35.5 %
- Other countries 332 +13.3% +13.2% +11.6% +14.1%
Cosmetics total 7,027 +4.1% +3.5% +5.1% +5.4%
Dermatology (1) 136 +5.6% +3.9% +6.6% +5.8%
Group total 7,164 +4.1% +3.5% +5.1% +5.4%
(1) Group share, i.e. 50%

Sales trends by geographic zone were as follows:

Western Europe returns to growth in second quarter

In Professional Products, consumer spending in hair salons slowed at the start of the year in Western Europe, but our many new product launches and the success of our products enabled an increase in second quarter sales.
There was a return to growth in Consumer Products sales in the second quarter. This recovery reflects the launch of new higher value-added products, particularly in the skincare and make-up segments. The sales of the Luxury Products Division began to pick up in the second quarter, despite continuing imbalances between sales in boutiques and amounts invoiced by the business units.
Once again, the Active Cosmetics sales trend was favourable.

Strong growth continues in the United States

In North America, like-for-like sales growth amounted to +7.2%.
Growth was once again particularly strong in the Consumer Products Division, thanks to the success of Fructis from Garnier which is continuing its winning ways in the shampoo and styling market, a very good start for the Men Expert range from L’Oréal Paris, and the successful launches of Maybelline foundations and mascaras.

In Professional Products, the Division has continued to make market share gains, thanks in particular to the success of Color Smart from Matrix and Platinium from L’Oréal Professionnel and the very rapid growth of Kérastase in the upmarket segment.
In the field of luxury products, the main developments were the spectacular sales of the new perfume Armani Code, the success of Flower Bomb from Viktor & Rolf in highly exclusive outlets, and the excellent start made by the new skincare line Rénergie Microlift from Lancôme.
Lastly, the acquisition of SkinCeuticals will support the expansion of the Active Cosmetics Department in the American market.

Rapid growth in new markets

Sales in Asia advanced by +9.0% like-for-like, thanks largely to strong growth in China (+24%) and Hong Kong (+19%). Sales in South Korea are still being held back by the crisis in the country's selective distribution channel.
The success of L’Oréal Paris in China, Watershine lipstick from Maybelline in Japan and Skin Naturals from Garnier in Thailand are boosting Consumer Products sales. The Luxury Products Division has strengthened its position thanks to Line Peel cream from Biotherm and Cleansing oil from Shu Uemura. The excellent scores of Luxia colourant from L’Oréal Professionnel have bolstered the brand's position in Japan. Matrix is continuing to expand in several Asian countries. Finally, Active Cosmetics is growing very strongly thanks to Effaklar K from La Roche-Posay and Bi-White from Vichy.

Sales in Latin America have increased by +8.5% like-for-like. With a growth rate of +11.5%, sales in Mexico have been boosted by the success of 100% Color from Garnier. Professional Products have taken advantage of the successful launch of Majirel Absolu colourant throughout Latin America, and the promising start made by Matrix in Brazil. The Active Cosmetics Department has confirmed the strong growth in its sales, thanks largely to the success of the Liposyne slimming line from Vichy and Anthélios sun protection products from La Roche Posay.

Like-for-like sales in Eastern Europe have grown very strongly at +26.1%. Sales in the Russian Federation have advanced by +39%, and sales in the Czech Republic by +22%. The Garnier brand continued to grow rapidly with the success of Color Naturals colourant and the Skin Naturals bodycare lines. The launch of Elsève Anti-dandruff shampoo and the Happyderm skincare line from L’Oréal Dermo Expertise have contributed to the good scores of the L’Oréal Paris brand.

In the Other countries, like-for-like sales have increased rapidly by +13.3%. The excellent growth rate of +49% in India reflects the success of the Garnier Skin Natural facial skincare lines, Color Natural colourant and Fructis shampoos.

Operating profitability

It is important to note that for many years the half-year results of L'Oréal have tended to be volatile and have rarely been representative of the year as a whole. It is therefore advisable to compare each line of the profit and loss account with the same line for the previous full year.

Sales for the first six months amounted to €7,164m, up by 3.5% based on the reported figures compared with the 1st half of 2004.

Gross profit at €5,001m represents 69.8% of 1st half 2005 sales, i.e. a level virtually equivalent to that of the full year 2004, when the figure was 69.9%.

Research and development expenses amounted to €240m, an increase of +8.3%. They represented 3.4% of sales, a level identical to that of 2004 as a whole.

Advertising and promotional expenses totalled €2,183m, or 30.5% of sales, at June 30th 2005. This percentage is almost stable compared with the full year 2004.

Selling, general and administrative expenses amounted to €1,455m, or 20.3% of sales, lower than the level of 20.9% recorded over the full year 2004.

Operating profit before foreign exchange gains and losses amounted to €1,123m in the first half-year, and represented 15.7% of sales, significantly higher than the 15% of sales recorded over the full year 2004.

Changes in the exchange rates against the euro of the other main currencies led to the recording of an exchange loss of €8m in the 1st half of 2005, compared with an exchange gain of €28m in the 1st half of 2004.

After foreign exchange gains and losses, operating profit came to €1,115m.

Net profit

Finance costs and other financial expenses for the first half amounted to €27m.
Dividends received from Sanofi-Aventis for 2004 amounted to €172m, up by 17.7% compared with the dividends of the previous year.
The pre-tax profit of €1,256m was slightly higher (+1.1%) than the corresponding figure at June 30th 2004 pro forma, i.e. after neutralisation of the effects of deconsolidating Sanofi-Aventis in 2004.
After income tax, the net profit after minority interests amounted to €892m, up by +1.6% compared with the pro forma net profit at June 30th 2004

Operating profit by branch and division

In accordance with IAS 14 (segment reporting), the L’Oréal group is continuing to improve the quality of its financial information by presenting the profitability of its activities by branch and by division.

€ millions
1st Half 2005 1st Half 2004 Full year 2004

By operational division
Professional Products 194.9 206.8 365.4
Consumer Products 668.7 644.8 1,186.6
Luxury Products 279.2 291.3 693.6
Active Cosmetics 138.5 114.0 156.8
Other Cosmetics 0.4 4.0 4.0
Cosmetics divisions total 1,281.7 1,260.9 2,406.3
Non-allocated * -181.3 -155.3 -368.0
Cosmetics branch 1,100.4 1,105.6 2,038.3
Dermatology branch 14.2 9.7 50.6
Group 1,114.6 1,115.4 2,088.9
* group central expenses, fundamental research expenses, stock option costs and miscellaneous expenses.

"This news release does not constitute an offer to sell, or a solicitation of an offer to buy, L'Oréal shares. If you wish to obtain more comprehensive information about L'Oréal, please refer to the public documents registered in France with the Autorité des Marchés Financiers [which are also available in English on our Internet site: www.loreal-finance.com].
This news release may contain some forward-looking statements. Although the Company considers that these statements are based on reasonable hypotheses at the date of publication of this release, they are by their nature subject to risks and uncertainties which could cause actual results to differ materially from those indicated or projected in these statements."

Contacts at L'ORÉAL

Shareholders and market authorities
Mr Jean-Régis CAROF
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Analysts and institutional investors
Mrs Caroline MILLOT
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