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Executives

Jean-Paul Agon - Chairman, Chief Executive Officer and Chairman of Strategy & Sustainable Development Committee

Jean-Régis Carof - Director of Shareholder and Market Authority Relations

Christian Mulliez - Executive Vice President of Administration and Finance

Analysts

Celine A.H. Pannuti - JP Morgan Chase & Co, Research Division

Loic Morvan - Bryan Garnier & Co Ltd, Research Division

Hermine de Bentzmann - Raymond James Euro Equities

L'Oreal SA (OTCPK:LRLCY) H1 2013 Earnings Call August 30, 2013 3:00 AM ET

Jean-Paul Agon

Thank you for being here at our meeting this morning for presentation of first half financials 2013. This is the first time we are having this meeting because we are going to end our -- this last time that we're having this meeting. We will do what most other group's do, is to publish only at the end of July, is that right, Christian? Just wonder if there was something I wasn't unaware of, but now Christian has confirmed, that's what will happen. So and this will be the last time we'll be having this kind of meeting for half year results. Secondly, you'll notice that we have been renovating the headquarters here. There's a lot of work underway. I'll just give you a quick update. You know that there was the part of the building on the upper side that was the labs. That's now been transferred to our new hair lab facilities [indiscernible].

So we have now renovated, refurbished the campus part, putting in the renovated facilities we have, Consumer Products. And then, with the renovation of the whole campus, not that, that has increased our workforce, of course, we're not talking about lifting the headcount. We're looking to improve the working conditions of our staff, who are worth it, and you've seen the new entrance to the building. Next time you're here, I hope we'll be able to show you the large garden that should be ready by then. And we've had new facilities built in, a sports room, for example. You could use it next time. You come if you wish, but the idea is to really refurbish the headquarters so that it is a place where people enjoy living and working.

So I think that's about it. Jean-Regis, I think you have a few housekeeping comments to kick off with.

Jean-Régis Carof

Yes, good morning, ladies and gentlemen. So before we begin the meeting, I'd just like to give you a few details about the practical arrangements. So firstly, safety information that you have to be aware of, and I would also invite you to read the disclaimer that's on the last page of the brochure that you were given or you found on your seats. As you came in, you should have found the headsets for simultaneous translation. French is on channel 1, English on channel 2, so I would suggest that you check that you are listening to the channel of your choice. The second thing is that we have WiFi coverage in the lobby and in this room that enable you to have an internet connection via the log-in and password that is on the screen behind me, and we would therefore ask you to put your mobile phones in silent mode. Thirdly, as you came in, on your seats, you should have found the brochure with the tables that Mr. Mulliez will comment on.

And also, as you came in, you should have found the press release in English and French on the financial results that were released to the financial community yesterday at 6 p.m. And as always, this meeting is going out on your dedicated website, loreal-finance.com. All presentations and the podcast of the meeting will be available in the Presentations and Webcast section on this same website as of 4:00 Paris time, and the half yearly financial report 2013 be available this evening in French and English. And when we're finished, the refreshments will be available in the salon there just next-door where you're able to take your breakfast. Thank you very much. Refreshments, up to you, whether you wish to refresh yourself. Anyway, the room, yes, it's not quite as comfortable as the old amphitheater, which is under renovation and it's possible that both this time and next time, this is where we'll be, but no problem, right?

So Christian, off to you to kick off now with the financials?

Christian Mulliez

Thank you, Jean-Paul. Good morning to you all. The presentation of L'Oréal's financial results for the first half of 2013 will include information about sales, a reminder of what we published at the end of June, profit, the cash flow trend and the cash situation.

Consolidated sales amounted to EUR 11.74 billion, up by 6.4% at constant exchange rates. Like-for-like sales grew by 5.4%. Structural effects had a positive effect of plus 1%. This results mainly from the acquisition of Urban Decay in the United States in December 2012. After allowing for a foreign exchange effect that was negative at minus 1.7%, the trend based on reported figures comes out at plus 4.7%. As far as the ForEx effect is concerned, it's difficult to forecast what it will be for the full year. I can, however, indicate that with current exchange rates, that is with EUR 1 at $1.33, it's at 1.32 this morning, the impact on our annual sales should be negative, of the order of minus 3.6%.

The first half of 2013, the Euro accounted for 27.7% of group sales compared with 28.4% in the first half of 2012. With the exception of the Chinese Yuan and the Mexican peso, which strengthened over the period against the Euro, all the other currencies weakened, particularly the Brazilian real at minus 9.6%, and the Japanese Yen, down 17.5%.

Sales figures by branch and division on a like-for-like basis. Professional Products, up 1.4%; Consumer Products sales have grown by 6.3%; L'Oréal Luxe grew by 6.4%; Active Cosmetics sales stands at 7.8%. The Cosmetics branch grew by 5.7%, a disappointing start to the year for The Body Shop, plus 0.5%. Lastly, Dermatology, Galderma posted growth rate of 0.3% reflected by the impact of heightened competitive pressures actually in the United States because of the advent of generics for certain products. Galderma should achieve modest sales growth over the full year 2013.

Zones. All zones are up. Western Europe posted a performance of plus 1.7%, quite outstanding in view of the market trend in this zone. North America recorded good dynamics, up 5.4%, easily outperforming its market. The New Markets delivered growth of 9.9%, confirming their place as the group's number 1 geographic zone. Within New Markets, Asia Pacific comes out up 8%; Latin America recorded strong growth, up 13.5%; Eastern Europe posted a good start to the year, up 8.4%; lastly, Africa, Middle East, once again grew strongly, up 15.1%.

The BRIMC countries recorded sustained growth, up 11.5% end of June with, in fact, steady quarterly growth, up 11.9% in Q1 and up 11% in Q2. China grew 11% and Brazil up 15%.

Segments. Business segments all recorded growth in the first half of 2013 at broadly similar growth rates. Skincare, up 6.6%; make-up grew 4.2%; hair care, up 7.5%; hair color grew by 4.5%; and fragrances are up 4.5%.

The profit and loss statement. With a significant increase in operating profit close to 8% and a further improvement in profitability, that is up 50 basis points, at 17.4% of sales, which is a record level.

Let's begin by analyzing gross profit. Gross profit at EUR 8,419,000,000 stands at 71.7% of sales compared with 71% in the first half of 2012, representing an improvement of 70 basis points. This improvement from half year-to-half year particularly reflects the positive effects of an increase in product value, that is the price/mix component, and changes in currency exchange rates. And on the negative side, the consolidation of American companies, Urban Decay, L'Oréal Luxe and Emiliani in the Professional Products division. And secondly, a slight increase in promotional offers which, as you know, are deducted from sales, and thereby, have an impact on gross profit. So that's for gross profit.

R&D expenses grew as a percentage of sales from 3.4% to 3.6%, and are thereby, up by 8.7%. This increase reflects the group's constant determination to strengthen its investment in research and innovation.

Advertising & Promotion expenses stand at 30.2% of sales, which is identical to the figure for the first half of 2012. Based on constant exchange rates and scope of consolidation, our shares of voice have been maintained or strengthened. We've continued to benefit from the improvement in our purchasing conditions, media buying, combined with the positive influence of the Digital factor. I can confirm that over the full year 2013, advertising and promotional expenses as a percentage of sales should be close to their 2012 level.

Selling, general and administrative expenses at 20.5% of sales come out at a slightly higher level by 20 basis points to that for the first half of 2012. This is mainly the result of currency conversion effects for approximately 10 basis points and the decision to strengthen our sales teams, particularly in China, Brazil and Russia. Productivity efforts are continuing in the administrative areas. Overall, operating profit has increased by 7.7% and totaled 17.4% of sales.

Operating profitability of branches and divisions. I would remind you that the half-year operating profitability figures cannot be extrapolated for the full year as shown in the first 2 columns of the table showing the figures for 2012. The profitability figures for each of the divisions have increased during the course of the first half of 2013.

Professional Products, up 20 basis points from 19.9% to 20.1% in a challenging market context. Consumer Products grew from 19.9% to 20.8%. That's up 90 bps. L'Oréal Luxe, up from 19.5% to 20%. That's up 50 basis points. And Active Cosmetics grew from 26.1% to 27.3%. That's up 120 basis points.

The profitability of the Cosmetics branch at 18.4% increased by 80 basis points in the first half. As with every year, The Body Shop achieves most of its profit in the second half. The increase in the first half is therefore not significant. However, given a disappointing start to the year in sales terms, this business will probably not improve its profitability this year.

Finally, we come to Dermatology with Galderma. Profitability is traditionally stronger in the second half. However, I can tell you today that the annual profitability of Galderma in 2013 should be slightly below that of 2012 because of an increase in competitive pressure in the United States and the dilutive effect in the first year of the acquisition of Spirig.

From operating profit, we now move to net profit excluding nonrecurring items. The basis for our earnings per share calculation, financial costs totaled EUR 18 million as compared to EUR 4.7 million for the first half of 2012. This increase is the result as we announced in February 2013 from, on the one hand, the modification of IAS 19 standard on employee commitments, that is the alignment at the same level of the discount rate and the expected rate of return of investments intended to finance pension obligations. This factor is estimated to have an impact of about EUR 8 million on the on the half year. And the other hand, the restatement of the financial component of the actuarial pension charge, this factor had an impact of approximately EUR 12 million. To assist you in your expectations, for the full year 2013, we can anticipate the total finance cost will be of the order of EUR 40 million.

The Sanofi dividends totaled EUR 327 million. Income tax totaled EUR 560 million, representing a tax rate of 24%, slightly below that for the first half of 2012, which came out at about 25%. For the full year 2013, we can anticipate a tax rate of the order of 26%, all other things being equal.

Net profit, excluding nonrecurring items, totaled EUR 1,789,000,000. That's an increase of 7.9%. Finally, net earnings per share amounted to EUR 2.94, an increase of 7.1%.

As for the average number of diluted shares for the full year 2013, to assist you in your net EPS estimates, you can expect an amount of the order of 609 million shares.

Net profit, after allowing for nonrecurring items, comes out to EUR 1.70 billion, an increase of 5.2%. Nonrecurring items consist mainly of restructuring costs in Southern Europe and the French tax of 3% on dividends paid, which amounts to EUR 41 million. The tax is recorded under this heading of the P&L statement, as it's not a tax linked to the group's activity but a tax on profit distribution.

Cash flow. Gross cash flow amounted to EUR 2.115 billion, an increase of 7.8% compared with the first half of 2012. Working capital requirement, as is the case each year in the first half, increased significantly. The increase for this half is slightly lower than that for the first half of 2012. And as with every year, this increase is mainly the result of trade accounts receivables because of the seasonality of our business.

As indicated in February 2013, for the full year, the change in working capital requirement should increase by about EUR 200 million as compared with 2012.

Capital expenditure at EUR 524 million represent 4.5% of sales over the full year. As we indicated in February, they should represent around 4.5% of sales.

Operating cash flow stands at EUR 943 million. That's an increase of 22.7%.

Finally, after payment of the dividend and equity investments, which I would remind you consist mainly of the acquisitions of Vogue in Columbia, the Beauty business of Interconsumer Products in Kenya and Spirig at Galderma, the residual cash flow stands at minus EUR 1.017 billion.

Balance sheet. Balance sheet structure, as you know, is particularly strong as shareholders' equity represents some 70% of total assets. The increase as compared with December 31, 2012, is the result of the balance between, on the positive side, the net profit for the period and the rise in the valuation of Sanofi shares mark-to-market and the negative factor, the payment of the dividend by L'Oréal.

And lastly, gearing, lastly -- June 31, the financial situation is very healthy. Net cash is positive and stands at EUR 572 million. It's down compared with December 31, 2012, because of the annual dividend payment made during the first half.

Thank you for your attention.

Jean-Paul Agon

Thank you, Christian.

Now as you've noted, the results for the first half are very solid in every way. Dynamic market, strategic positions have been strengthened across all continents and all channels, original and powerful product innovations, a significant reinforcement of our major global brands, and lastly, the record levels in terms of operating profit and cash flow.

I'm not going to go into the details of the first half sales, which we reported mid-July, or the results which Christian has just commented on very comprehensively in his presentation. They speak for themselves. I will concentrate my short presentation on the major strategic advances we've made during the first half which are now enabling us to advance in our conquest of the worldwide beauty market.

First, a few words about market. As I've said in July, we estimate that it grew between 3.5% and 4% in the first half year, that's remained dynamic even though it has slowed down slightly compared with 2012 or closer to 4.5%. This slowdown is quite widespread across regions and channels. By region, Western Europe is down slightly still, with some European countries still proving difficult and the northern countries remaining stable. The North American market, something that surprised us last month, 1/3 of its growth compared with 2012. It's about 2.8% compared with 4.4% last year. And at the moment, to be honest, the upturn in American consumer spending and the economy in general is really in terms of consumer durables, and we know that from the past, as Lindsay Owen-Jones explained, the more cars they buy, strangely, the fewer cosmetics they buy.

New Markets have lost roughly 1% of growth compared with previous year because of a clear slowdown in Eastern Europe, and a dip in growth in Asia, excluding Japan, because of decelerating sales in Travel Retail in China and South Korea still. This slowdown can be observed in all of the major emerging countries, China, Russia, India, Brazil. But overall, the New Markets, nonetheless, are still driving the growth of the worldwide Cosmetics market and will continue to play an absolutely crucial growth driver role in this same market over the coming years. And it will be really key given the emergence of middle classes, which is the process bound to continue.

Looking at channels now. Professional hairdressing market is around plus 0.4%, and virtually flat then globally, hampered by the spare[ph] recession in Southern Europe, but also all other markets are not that strong either. The luxury market remains buoyant and is developing at roughly the same pace as expected as in the second half of 2012. Mass market remains dynamic even though its growth has declined slightly compared with 2012. And it's the Dermo-cosmetics market that is picking up slightly. And the most striking development, even though we're affected by less, is the substantial slowing of direct sales across all continents.

So a slowdown in market growth was already perceptible in the first quarter as we reported, and there has been no change in the growth rate of between the first and second quarter. So this leads us to expect that this rate will be maintained across the rest of the year, and that growth of the worldwide Cosmetics market, thus, this year, should be somewhere between 3.5% and 4%.

So L'Oréal, more specifically. During the first half, L'Oréal once again clearly strengthened its strategic positions in all channels, all the segments and across all regions. In all, with a growth of 5.7% for the Cosmetics branch, L'Oréal has outpaced the growth on the worldwide cosmetics market 1.5x. And what's interesting to look at is that all of our divisions and regions are growing.

Consumer Products posted its best performance for many years, growing almost twice as fast as the worldwide market, and strengthening its positions across all continents. In the United States, the division has been growing twice as fast as the mass markets since the start of the year, in particular, in hair care.

Western Europe where the market trend is negative, L'Oréal is the only major cosmetics company to have made significant market share gains, and thus, has recorded positive growth in sellout, thanks to the substantial strengthening of its positions in the hair care area, colorants and skincare.

L'Oréal Luxe is maintaining its dynamic, and continuing to outperform its market, 1.5, 1.3, 1.5x, in particular, to its progress in skincare, women's fragrances, and Active Cosmetics just returned to an excellent growth rate for the past few quarters now, is growing very well, much faster than its benchmark market, in particular, Western Europe and Latin America. So the division now makes more than 50% of its sales outside of Western Europe, and we'll be able to benefit fully from growth in new markets and its foothold, growing foothold, in the United States.

Lastly, Professional Products, whose growth, it's true, has been modest, around 4%, is also, to a certain extent, outperforming its market. Certain positive signs point to a rebound in this division in the second half after several difficult quarters. It grew by 2.7% in the second quarter, thanks to faster growth in the developed countries and faster conquest of new salons around -- the well on 25,000 new ones since start of the year.

In this first half only, The Body Shop and Galderma delivered rather disappointing performance. The Body Shop quite clearly, because its innovation plan was not strong enough, and Galderma because of stiff competition from generics and because of the extreme competitiveness of the markets of dermatology in the United States. At the same time, we are also strengthening our positions in all the regions of the world. I would say, once again, for all divisions in Western Europe where despite negative markets, our market share gains are enabling us to post substantial growth in some countries, such as France, where we're up 3%; and Germany, up 7%, and positive dynamics across the continent as a whole, which is quite rare and which if all goes well for our profitability.

Same would apply to North America where we are also outperforming market and competition for several quarters in several years now across all divisions, and we also hope that we will take advantage of the economic upturn now taking shape.

In New Markets, excluding Japan, L'Oréal has really outpaced the market, double-digit growth, 5.6% for the market, and up 7% for us, and is particularly true in BRIMC countries, we are growing very well across all the 5 countries.

In Asia, the group is continuing to really outperform the market. In China, our growth is not weakening. It's maintained, driven by the powerful dynamism of our L'Oréal Luxe division up 25%. Consumer Products, the L'Oréal Paris brand is continuing to expand driven by the development of skincare, hair care and men's skincare. And as you know, we are going to further reinforce our positions in the strategic Chinese market with our plans to acquire Magic Holding's MG, which will enable us to become market leader in facial skincare masks, which is one of the fastest-growing segments on the Chinese beauty market.

Our businesses in Latin America have returned to strong growth, with sales increasing 1.5x faster than the market, with further performance in Brazil as well.

And finally, in Africa and Middle East, we're also making market share growth, with strong performances in South America, those countries and Turkey, I'll also remind you that we have laid the foundations for our future development in Eastern Africa with the acquisition of a major beauty market player in Kenya.

So these strategic advantages -- advances are, of course, being made through the success of our product innovations from research. I remind you that, that is what is behind the success of our products, brand and growth.

Just to give you a few examples taken from the Consumer Products division. In hair care, L'Oréal Paris is strengthening its positions everywhere, United States, with the launch of the Advanced Hair Care range, which is the equivalent of Elsève on American market. In Western Europe, with the extreme -- with the excellent success of Total Repair Extreme. And in Latin America, Elsève Quera-Liso. And L'Oréal Paris hair care has, in fact, have been the largest contributor to the group's growth during the first half.

Skincare. It's the same with Revitalift Laser's international success, further reinforced by the Revitalift franchise, the world #1 in wrinkle reduction, and Renaissance Cellulaire has completed its success with its breakthrough in mature skin market.

Hair colorants at Garnier. Garnier has had an outstanding success. It's the first mass-market hair colorant to incorporate ODS2 technology has been added to the success of Nutrisse and enable Garnier to make substantial market share gains both in Western Europe and North America, as you can see from the slide.

And lastly, the very dynamic market of men's skincare in Asia, L'Oréal Men Expert has captured leadership in China, and Garnier Men is now leader in the Asian countries.

The strengthening of our strategic positions is also the result of the thorough overall renovation that you've seen in recent years of our major brands. Many of which have been repositioned, the images updated and the innovation policies enriched. This includes, for example, L'Oréal Paris, I just mentioned this and going through a number of examples, Garnier as well. You've seen a lot of innovation, BB cream, Olia, for example, these were huge global hits recently, straws of Lancôme, you've seen a major overhaul there in the last 2, 3 years. And Yves Saint Laurent voted best brand in the United States 2012. Vichy as well had some difficulties, but is now back to strong growth because its positioning is now clear and the offering enriched.

And of course, Kérastase in Professional Products, which with its couture styling launch and the contribution of Kate Moss, has been completely transformed. So at the same time, the brands we have acquired over the last 3 years adding great modernity and powerful growth dynamics to our catalog. And this would be in the case of Essie, which you see everywhere now. Whose sales have increased fourfold since its acquisition. Clarisonic, too, which is proving resounding success wherever it's been launched. After the U.S., it was launched in Europe, China, and everywhere, it's been a huge success. And now, Urban Decay, which has grown 34%, even though for the moment, it's mainly on American market.

So overall, with this strong performance, we are looking ahead to the second half of this year. Perhaps we're already in it, but we're looking ahead with confidence, confidence in the market, which as I said earlier should remain buoyant, confidence in a plan of new product initiatives that are highly original, very quality-oriented and extremely powerful, which I'll just mention here because this is what our business is all about. Skin perfection by L'Oréal Paris, a major innovation in skincare for women over 30 using the LR 2412 molecule. Lisseur Optique by Garnier, which is a real paradigm shift. It's really revolutionary because it has a revolutionary concept of anti-aging with an immediate optical effect.

Maybelline has got off to a wonderful start. Maybelline Big Eyes, which is highly innovative dual mascara to enlarge the eye and intensify its gaze. It's only Idealia Life Serum by Vichy, which is continuing the success of the Idealia franchise. And Honeymania, The Body Shop, which should boost the brand sales in second half.

Major serum launch of Génifique Visionnaire by Lancôme, that will be Dream Tone, which is the first complexion serum. And the 2 major fragrances, Red for men by the Ralph Lauren. And finally, the big classic that we've been waiting for years now in women's fragrance from Armani, Armani Si, which as I say, I think has promised a huge success. It should be a classic with its ambassador, Cate Blanchett. And I cannot resist the temptation of inviting you to share in this wonderful film that we're about to show. I hope you like it.

[Presentation]

Jean-Paul Agon

A very nice film. I hope you agree. And people are now buying into the slogan that Si for growth, Si for market share and cash flow, of course. So we have confidence then as the -- no doubt, realizing ability to continue to strengthen our strategic positions across all the major regions of the world, and therefore, confident that we will continue in the second half to outperform the market as we have been able to do in the first. And that should mean sales growth of the same order, but probably split unequally across the next 2 quarters. Weaker in the third stronger in the fourth because, like last year, launched timings and sell-in, sell-out adjustments in North America that I remember I explained at our conference call in mid-July. And lastly, confidence after the good first half in our ability to increase our results and improve our profitability.

So overall, the group is continuing its growth and worldwide market conquest in Cosmetics. And what we should note in the first half is that we've achieved a pretty unique score across the board, in all markets, all regions. So world market conquest based on unique strategy, universalizations, target and conquering. We're conquering 1 billion new consumers, a steady, powerful dynamic that is strong in terms of value creation, on which the whole company's assets, I kind of show you, are focused.

Thank you. And we'll now go to the Q&A.

Question-and-Answer Session

Jean-Paul Agon

So who would like to ask the first question? Celine, yes? I knew you'd like to ask the first question.

Celine A.H. Pannuti - JP Morgan Chase & Co, Research Division

So I have 2 questions. The first, we've seen that shampoos have grown significantly during the course of the year, so a lot of competition on the market, I'd like to know whether there are rather more challenging competition dynamics, and if that's the reason why you had more promotions? So that's my first question on shampoo. Second question, on an interview that you gave today, I believe, where you mentioned your ability to use your balance sheet if required or if that possibility were available, and if that didn't happen, what would happen in terms of the balance sheet? I mean, there are perhaps some plans to share cash with shareholders, perhaps a one-off dividend? And third question on Magic Holdings. I'd like to know if you could perhaps tell us a bit about the ability of the product. I mean is this a product that's really Chinese-specific or that perhaps has potential outside China? What are the overlaps in terms of distribution between your distribution and their distribution, very much hair focused?

Jean-Paul Agon

Okay, I'll start with the last question. Magic Holdings, yes, it really is a fine opportunity, Magic Holdings. I mean, I don't know if you're all familiar with the care masks. I mean this morning, I wasn't planning to apply a facial mask. I mean it's an Asian care routine that Westerners adopted. It's great. It's very effective because when you apply this facial mask for 10 minutes, the application of cosmetics, it really does hydrate, and it's very effective. So we're really strong believers in this product, this category. This company is really the #1 in this category. It's very interesting because, for skincare, I mean Asia is the continent for tomorrows skincare and this the #1 category in Asia. Masks in China is really a very prominent category, offering high growth. And so, for us, it's very attractive to be in there. So the idea is when this transaction happens, really, to continue the great invention of MG on the Chinese market. In fact, their distribution is very parallel to our own, so they'll obviously be efficiencies they'll able to tease out in terms of distribution, but of course, the idea is to be able to extend this brand across Asia because this facial mask routine is very present in northern Asia or it could be rolled out further and perhaps 1 day, turn this brand into an international brand that will offer really an iconic flagship product to be rolled out across markets. So it really is a very attractive, interesting proposition. In terms of shampoos now, what can we say about that? Well, the fact that this number 1 contributor to growth shows that we're doing well. It's a market that's competitive, but always has been. I mean, it's true that with my 35 years in L'Oréal, I mean I recall that L'Oréal have always been the most competitive market in cosmetics, nothing new. And to be frank, it's no more so today than it was yesterday. The players are not necessarily the same. Some brands have disappeared. New brands have come to the fore, our brands exist. They're still around there growing its strength, and the highlight of the year is really the global rollout of L'Oréal hair care, which in certain countries is called Elsève, Elvital, in other countries just L'Oréal hair care, with the major launch on the U.S. market that, in fact, is off to a great start and the sell-through is really on plan. And we have the firm intention to establish L'Oréal hair care as one of the leading hair care brands on the American market. What's interesting, it's not just shampoo, because one of the interesting characteristics of L'Oréal hair care in the U.S. is that with henceforth, one of the #1 players in the conditioner and hair care market, which really is a good way of driving the market forward, very positive. On the cash front, I didn't quite really understand your question. But cash is there to be used, so we'll see what the opportunities are to use it, but I'm confident that there will be opportunities. We've always said that our financial stake in Sanofi was financial -- was a financial, not a strategic stake, and Christian has always said that we could use it if an opportunity were to arise, whatever the opportunity. Thank you, Celine. I can't really see very clearly, so if anybody wishes to speak, I mean if your raise the hand, otherwise we can go for refreshments. So really do show your hand if you have a question.

Unknown Analyst

Apology, speaking in English. Could you tell us a bit about the direct selling market and why this is doing so poorly, particularly in Brazil? Is it structural? Is it something to do with your competitors? Is it a forever situation? I'm thinking Natura and Avon have done particularly poorly recently?

Jean-Paul Agon

I'm a little bit -- it's a bit difficult for me to talk about direct sell because by definition, I'm not talking about our business, it's the business of others. So I don't want to say anything bad about competition. But no, I think what's interesting, first, is that things are changing. If you had been in this room 3 or 4 years ago, I mean, questions would have been, "Why are you not in the direct sell business. It's fantastic, it's great. You should be in." But today, the questions are different, and we are very happy that we are not in the business. So that's good. Why? Isn't it working well? I think there are -- there may be 2 or 3 reasons. Number 1 reason, it's a very difficult business. And it's one of the reason why we never wanted to be in. When you have to run millions of beauty consultants, many of them selling 2, 3 or 4 other brands at the same time, it's a difficult business and good luck for those who run it. Number two, it's true that in some countries, the development of retail eventually is not going in the same direction. In -- for example, maybe in Russia today, with the development of retail in Russia, I mean, definitely, maybe there is less space for direct sales, maybe, I don't know. But what is true -- anyway, I'm obliged to say that I'm quite happy about the situation today because even if we are not competing in the same channels, these consumers do -- who bought before some makeup products or some skin care products from direct sell companies, I think they're going to buy more from us. So that's good. I can't say much more, if you allow me. [French] In the middle, perhaps, yes? [French] Gentleman in the middle of the room, and then we'll move further back. [French]

Unknown Analyst

[French] Yes, I'm from [indiscernible]. Could you perhaps just return to the meaning, I mean, the sense not just of the reorganization that you organized, announced, but the combination of activities on the same management of the Luxe division, Active Cosmetics and Professional, I mean, what's that going to change in practical terms in the way you do business? I mean, what can it bring to the performance across L'Oréal group? And what's the reading that can be made for mid and long term in terms of management?

Jean-Paul Agon

Well, I don't know. I mean, it's really complicated to see what you can read into that. I mean, I wouldn't do that. I mean, it's really just a simple measure, and all I did was to ask Nicolas Hieronimus to supervise 3 divisions in addition to Luxe, to oversee Professional Products, Active Cosmetics and Body Shop. Why? Because first off, he will have more time than I to organize all the meetings with the brands that are necessary to organize to help them grow. So it's a good thing for those divisions. Secondly, I mean, there are points in common across these divisions. It would be a good thing to have someone who leads them jointly in order to have a great cross-fertilization between the brands. I'll give you a specific example. Take Body Shop, really, one of the reasons why Body Shop was -- delivered a rather disappointing return was that it was left alone. It was sort of out on its own. And the fact that Body Shop has now come closer, not much, but with the Luxe and Active Cosmetics, Professional Products and led directly by Nicolas Hieronimus, who once again have more time, I think that will be good thing. I won't be surprised if it leads to better results. So it's that sort of thing, if you like. I mean, there is nothing revolutionary here. It's really just a way of optimizing the time, people's talents in the overriding interest of the company. [French] There's a question at the back, I think. Yes, go ahead.

Unknown Analyst

[French] [indiscernible]. The acquisition of Magic has to be approved by the Chinese competition authorities. It's usually a long process. How long do you think that will take to get that approval? And is this likely to be problematic with overlaps? Will you have to seed something else? And you said something but maybe you could explain a bit more about the funding of the operation. And thirdly, you mentioned possible external growth opportunities. Any particular region that you are interested in?

Jean-Paul Agon

[French] Thank you for your question about Magic. Right, Magic is a business that -- or a deal that we hope will be completed next spring 2014. That's all I can say at the moment about our talks with MOFCOM. And as for the funding of the operation, the cost should be around 6 -- EUR 36 million, EUR 40 million, and we easily have enough cash to pay for that, no problem. As for acquisition opportunities, as you've no doubt noticed for the last year or so, it's very interesting to look at what we acquired because it really is scattergun. And yet, at the same time, this is all following a clear strategic line that's to say strengthening our positions in our different segments across all regions of the world. So Magic comes on the heels of acquisition in Kenya, which will strengthen our position in East Africa, where we have obviously no foothold,. There's Vogue, in Colombia, where we were weak in popular makeup market, and it's Urban Decay, which is a global brand in a segment but we didn't really have a presence. So I would say the same thing. We look at everything, all the acquisition opportunities in the world, everywhere, because our banker friends some of whom are in the room enjoy making the presentation to it, fair enough. We reach to those kind people you want to lend to. So we look at all of these proposals, but we're very selective because as you've seen, we don't acquire much but we acquire the right things. And they're all in line with the same vision, extending, strengthening our mission statement, offering women of the world the best in beauty, and we'll continue along that line. Yes, another one there?

Loic Morvan - Bryan Garnier & Co Ltd, Research Division

[French] Loic Morvan, a couple of questions. Firstly, you talked about gross margin and the value effect. Could you give us some details about the breakdown? And still about gross margin, do you think your performance in the first half could be repeated in the second?

Jean-Paul Agon

Okay. Thank you, Loic. A really nice question for Christian there.

Christian Mulliez

Breakdown -- I'm not quite sure what you mean.

Loic Morvan - Bryan Garnier & Co Ltd, Research Division

Breakdown of the gross profit.

Christian Mulliez

Well, I mean, you look at the sales in the first half, the volume value breakdown was something like 1/3 of the value as gross contribution and 2/3 from volume. That's really what I could say at the moment. And your second question, Loic, relates to the gross profit in the second half. Obviously, that will improve in the second half and, therefore, for the full year.

Jean-Paul Agon

You must have enjoyed that answer, I imagine. It will be significant, says Christian. That's what I can say. Yes, another one here?

Unknown Analyst

[indiscernible] in English.

Jean-Paul Agon

No problem. It's a pleasure.

Unknown Analyst

In terms of margins, you've obviously done very well so far in the first half. Do you see -- I mean, do you see this being able to trend in a longer-term horizon up towards maybe a sort of Procter & Gamble style, 20%? And also kind of linked in with that, on the marketing side of things, obviously, you've spent a phenomenal amount and you're supporting phenomenal brands, but is there a rationalization that can occur here? And is that something that you would look at in terms of bringing that margin up to that level?

Jean-Paul Agon

Okay. I don't know if Procter & Gamble or any other competitors are good model for us. What is clear is that our intention is to improve our margin steadily year after year and clearly increase it on the long term. And we think that we have some good opportunities to be able to achieve it. There is -- there are many, many progress that are being made in term of production, production cost, in term of supply chain cost with effects on gross margin. Some of our big, profitable brands are getting bigger every year. And also, we are always reviewing our portfolio of businesses and brand, and businesses and brands that would not be profitable enough could also be reconsidered. So I think that on many aspects, we have good reasons to believe that we will -- first, it is our intention and that -- to increase and improve the margin and, secondly, that we would be able to do it. Yes, any other question? [French] At the back, yes, I see one.

Unknown Analyst

In English, I'm afraid.

Jean-Paul Agon

Don't be afraid, it's great. I'm just afraid that we speak French and it's true that we do speak English during the conf calls than we speak French during this meeting. Maybe, by the way, we should change next year and do the meeting in English. So don't be -- please don't be afraid. On the contrary, we are very happy to answer in English and to have you. And maybe it's a good lesson for us. And maybe next year, we should do the meeting in English, by the way. So please, you're welcome.

Unknown Analyst

In May last year, I believe, on your investor trip, you gave quite a bit of color on ongoing cost saving programs that were going on in the U.S. I believe there was some rationalization of hair care manufacturing capability. And you also talked a little bit about streamlining your professional distribution chain in the U.S. It has been sort of 15 months now. I just wondered if you could give any update on how that was progressing?

Jean-Paul Agon

Good, thank you. So I was not at this trip, so maybe I'm going to ask Christian. What did you tell them and how can you answer that now?

Christian Mulliez

Just really no -- as far as the PPD, Professional Product division, supply chain is concerned in the U.S., we can confirm that the streamlining program is on, is rolling out very, very quickly. And the factory reorganization is on. We are closing down a factory in the States. We opened, 6 or 9 month ago, a big factory in -- a new one in Mexico, working for both North, Latin America and United States. So all these programs are on and including other programs in administration and commercial aspects. So it's going on, contributing to either profitability improvement or new additional fuel for the business.

Unknown Analyst

And just a quick follow-up, if I may. This time last year, you had a slightly disappointing gross margin and you very kindly broke out some of the individual drivers within that, I'm thinking some Clarisonic transactional FX, and gave us a little bit of the gross margin bridge. You've obviously got a very nice gross margin this year around. I wondered if you could sort of give us the bridge in the other direction as it were?

Christian Mulliez

You have a good memory. So I did it for the full year. So this year, I'm not going to give you basis points by half year because as you know, the company is managed on a full year basis. What I told you and I'm trying to confirm is that the positive drivers in half 1, were price mix and currencies and a slightly negative increase in customer allowances and the consolidation of Urban Decay and Emiliani and, of course, considering negative impact from Urban Decay and Emiliani is a one-off effect, which we won't have to bear in 2014.

Jean-Paul Agon

Thank you. [French]

Unknown Shareholder

[French] I'm from the L'Oréal shareholders' committee. A very broad, wide-ranging question, every year, you talk about the billion new consumers to be conquered. I mean, are there still 1 billion new consumers to be won over every year? We're beginning to -- and what are we speaking about here? I mean, do you know how many consumers you have worldwide today?

Jean-Paul Agon

Okay. You've really revealed us. Okay, by definition, we don't know the exact, specific number from a day to day -- of the number of consumers because, of course, we don't have a detailed inventory of them. I mean, the calculation we did a couple of years ago with Christian was to say that, overall, we have about 1 billion consumers. We sell about 6 billion products by estimating -- I mean, that's kind of a rough estimate of the number of consumers, about 1 billion consumers, which really is consistent with the areas where we're present, Western Europe, North America, historically, Latin America, starting out in Asia, et cetera. So I mean, our idea is to ensure that all the new middle classes that are emerging and that are reaching the market year-after-year, and it's been estimated by the OECD that there would be about 1.5 billion, 1.7 billion people reaching the middle class in the next 10, 15 years to win them over, to add them as consumers. So that's the idea. I mean, 1 billion consumers really is a vision. I can't say exactly how many we've conquered over the past 2, 3 years. What is certain is that when we're achieving growth of 5.5%, of which 10% in China, Brazil, Indonesia, Mexico, obviously, we're increasing the number of consumers. What's sure is when we buy a company, such as IPC (sic) [ICP] in Kenya, selling 40,000 products, it must be at least 10 million, 15 million new consumers. So we are making progress. We're making inroads. When you're right, we need to have a -- sort of a stock take review perhaps not this year, next year, the number of new consumers that we won over and the number of consumers. I mean, I like -- there are always 1 billion new consumers to be won over. It keeps everyone clued up. [French] Next question?

Unknown Analyst

[French] Could you perhaps return to your earlier comment, business brands and profitability to be reconsidered in parallel. Could you perhaps just remind us, refresh our memory -- sorry for my memory lapse. But if you already sold the brand and as from when or on the basis of what financial criteria might you be led to reconsider one of your brands and be a seller rather than a buyer because you're really focused pretty much on acquisitions?

Jean-Paul Agon

Well, that's a good question. I mean, it's really -- you're right. I mean, sell brands -- we haven't sold any for a long time. I mean -- we've returned, I mean, licenses recently over the past 2, 3 years. There were fragrance, perfume license that we felt that -- they were, of course, very fine, interesting, attractive but were not really consistent with our objectives and our idea that in the perfume sphere, it's better to have few strong fragrances than to be spread too thinly over too many. I'm not mentioning any names, but over the past couple of years, I mean, we've returned 2 or 3 perfume licenses that we didn't view as core business. In the past, we've sold brands. I mean, one I recall was Jean Piaubert [ph] -- it was a long time ago. But what we do, I mean, without necessarily stating each and every time in detail, sometimes, I mean, we discontinue businesses when we feel that those businesses, first off, don't make long-term strategic sense but they are dilutive in terms of profitability and growth. I mean, to be frank, when I was in the U.S., I discontinued several brands in the Luxe segment, Biotherm, Helena Rubinstein. And next, we decided to discontinue Shu Uemura because we considered in the U.S. market and the luxury market, which is highly competitive, very challenging where to make money. We really mustn't have a scattergun approach. It was more attractive to focus on a more limited number of brands that could become powerful and profitable rather than to having an overly diversified portfolio. We did the same thing with Helena Rubinstein in Europe, but what I can say is constantly and we'll repeat that this year. We constantly and continually screen all our businesses worldwide to be sure that each and every one of our brands in each and every country offers strategic interest and, at the same time, contributes to the growth and profitability momentum of the business. So my belief, this is a healthy process and must be continued. Shu Uemura, a few years back, we took the strategic decision to refocus Shu Uemura essentially on Asia. We had Shu Uemura, at the outset, a strategy of global expansion. We realized that it was perhaps putting the cart before the horse and that it was perhaps better to turn Shu Uemura into a strong powerful Asian champion. Once Shu Uemura became an Asian champion, we could roll it out. So we shut down 5 or 6 subsidiaries. So it's a necessary, healthy process to trim what doesn't make sense and dilutive so as to focus on the core business that can expand, okay. [French] Yes, next question, please?

Astrid Wendlandt

Astrid from Reuters. This morning, you told the Les Echos newspaper that you preferred to buy the stake of Nestlé. Now could you tell us perhaps and perhaps explain to us what the strategy would be, in other words the rationale, for your buying out Nestlé's stake? And what would be the consequences on the capital structure? Would you buy back shares because, I mean, there are several questions that arise? I mean, we're all asking ourselves these questions. So we really appreciate some clarification of your strategy if -- I mean, you said you have the wherewithal.

Jean-Paul Agon

Well, thank you for that excellent question. It allows me really just to set the record straight. I mean, I didn't at all state in the Les Echos interview that we'd be ready desirous to buy their stake in our cart. I didn't say that at all, but since in the system of journalism, there is sometimes quotes that are stuck in the middle of paragraphs, I mean, the quote was not at all consistent with -- they were, in fact, referring to other questions that were put to me. So allow me to set the record straight. I didn't say that at all. I was asked the question as to whether, first of all, we were surprised by statements made last week. I said no because the fact that the preemption right was expiring at the end of April 2014 was something that was public knowledge. I mean it's in our Annual Report. I was asked whether the fact that the Nestlé board is considering all the options, that all the options on the table, including status quo, was something that we wish to react to. I said no because, I mean, it seems to me perfectly normal. I mean, it's the job of the Nestlé board to do that. It's as it should be. And I was asked, "What would you do, et cetera?" And I said -- well, I mean, I didn't answer. All I said was that we -- and everyone knows that, we have considerable financial wherewithal because we have positive cash and 9% of Sanofi, period. I mean, that's all I said. I'm very sorry to disappoint you, but I won't answer anything that really smacks of business fiction because, I mean, the problem doesn't arise. [French] No, I will not fall into that trap, too obvious, but thank you for giving it a go anyway. Any other questions? [French] I seem to have doused your enthusiasm. There are lots of things I would love to talk about. Celine? Yes, madame?

Celine A.H. Pannuti - JP Morgan Chase & Co, Research Division

I have a question about emerging markets. So you showed that there was a slowdown in demand in those countries. Is that something that you think will continue because there are a lot of questions about the financial health of consumers in those countries? So maybe, there is going to be inflation. You've got -- volatile currencies have gone down. Is that going to happen? Is that something that might continue to hold down the market? And would it stop you from moving on well in those markets?

Jean-Paul Agon

That's a good question. We're wondering too. What can we say about that? Firstly, it's true that when you look at emerging countries, it hasn't all been a bed of roses always. I know. For example, I was head of Asia before the big meltdown in 1997, and the person who is in charge at the time was with me -- at that time and that hits us 3 months after we moved it, but it was a positive impact in the end because it enabled us to speed up our growth in all those countries. So this makes sense. When you have these countries that are growing economically, it's really linear. So I have no idea what's going to happen in the emerging markets. But as I said, there hasn't been any real change in consumer habits. It's true that what's happened with currencies, that's very recent. So I don't know what will happen. But what I believe, basically, in all these countries, there is a groundswell of domestic growth because of the rise of middle classes. And you've got all this desire to consume that is being unleashed. People want good products, and that's not going to stop. Or we look at China and the fact that after the 2 -- Tier 2, 3, 4, 5 cities, you have virtually all Chinese consumers that want good quality products. This is a groundswell. It's not going to stop, so I'm not really -- but there might be a little turndown. But there is this basic thrust to consume products like ours', and that will continue. However, as always, you know L'Oréal is a well-balanced group. We don't have all our eggs in emerging countries basket unlike some. We have our eggs in lots of different baskets because they're in emerging countries basket, of course. We have our eggs -- quite a nice basket of eggs, actually, in the United States because we are on the North American market, achieving very strong positions, growing every quarter. And here, I mean, on the contrary, we really will be driven forward by the growth of the American economy. And also, a lot of people turned their back on Europe. But we've got our eggs in that basket because we have a very strong Western European position. We're continuing to gain market share there, and we have real strength there. And therefore, end of the day, once again, it's this balance, one thing offsetting the other that L'Oréal has geographically. This is going be very positive for us. [French] Yes, Igor [ph]?

Unknown Analyst

[French] I have 4 small questions. Could you tell us about consumer sales in China in the first half? I know that there was a small problem there, wasn't there?

Jean-Paul Agon

I'm sorry, no.

Unknown Analyst

Yes, but it would be nice to be have the answer. And how is your Egyptian factory doing at the moment? And what I imagine -- you guess what the next 2 are [ph], given your good relations, Mr. [indiscernible], have you been involved in negotiations between Bettencourt family and Nestlé aimed at extending the preemption right beyond April of next year, which could be an interest of both parties? And last question, since you look at all the acquisition possibilities, would you be willing to consider acquiring [French] then would you consider the development of Nestlé stake in L'Oréal?

Jean-Paul Agon

Well, I think we announced the fourth. Obviously, the third, I won't answer. Maybe the second, I might answer. Egypt, you asked about Egypt. Well, it's still up and running. We would have liked better conditions for the opening, but we have 1 shift rather than 2 as we planned, but the problem is the supply chain really. There are problems in Egyptian harbors where products are blocked. You can't get anything transported, but we're doing what we can and for the moment, no doing too badly. And the first question, I forgot? What it was?

Unknown Analyst

[French]

Jean-Paul Agon

Oh, yes, Consumer Products in China. High single-digit is the answer from Christian, but things are picking up. I think that's the way it's looking at the moment. And since you like individual notes either [ph], as we say in L'Oréal, I can tell you this summer, there was a reorganization we didn't tell about, sorry, but that was in China. We reorganized our sales team in consumer so as to achieve a better coverage and so that we continue to supply the department stores that's excellent for L'Oréal, but also better coverage of the mass market, where we're growing. And on 1st of July, we reorganized, and recent feedback is telling me that apparently, it's running very well. And so our sellout is growing in -- not high, double digit, but in double digit, very good, not high, but very good double digit. So we have full confidence there. So anything else from anyone else? Yes, go ahead there.

Unknown Analyst

It's [indiscernible] from Santander. I was wondering about The Body Shop. I think you said that, well, sales weren't as strong because the innovation plan wasn't as strong. So what plan have you got for The Body Shop in the next few quarters? And what do you expect to attain and also regarding the margins of the division? And then my second question would be about Dermatology. What margins should we expect from this division in the future in a less volatile -- excluding acquisitions and extraordinary items?

Jean-Paul Agon

Okay. So I will answer the question about Body Shop and Christian will take the one on Dermatology. So on Body Shop, you're right. I mean, we are disappointed. We are disappointed also because, in fact, 2012 and 2011 had shown some improvement. And so we were expecting a pretty good 2013. And so -- but it shows again that in our industry, when you are, what we call -- we call it the panier de provisions [ph], the -- how do you, what -- basket of new products. When your basket of new products is not perfectly strong and right and -- I mean you don't get the growth that you need or that you deserve. So we are going to work on that. Already, we think that the basket for the second half is better than for the first half. And as I said before, I think that maybe one of the reason that maybe it was more difficult for The Body Shop than for the other divisions was that they were a little bit alone. Now we changed that. We're going to change a little bit of sort of team. After a while, it's good to have a fresh team coming on board for the next competition, and so we have a new team coming on board. And with all that, we are still very confident that this brand can be strong. I think there is absolutely no reason to think that The Body Shop cannot be renovated, relaunched and get back to a strong growth. And the profitability of The Body Shop will come with the growth. Clearly, in this kind of business, better mind comes with the top line. It's not as simple as that, but it's very much correlated, okay. Galderma, Christian?

Christian Mulliez

Yes, thank you. Galderma -- as far as profitability of Galderma is concerned, you should expect, in the midterm, less volatility. And why? Because historically, as you know, this company was based only on prescriptions, pharmaceutical prescriptions. And gradually, they are selling up, building 2 other pillars, one in OTC and the second one in aesthetic -- corrective aesthetic, which means that in the midterm, it should be more stable.

Jean-Paul Agon

Yes, please?

Unknown Analyst

Can I ask you a bit about, let's say, India and other emerging markets where there isn't modern retail. In India, I believe there are about 50 million people that can afford to buy your products, like a small European country, but how do you get to them? Do you employ wholesalers? And do you have to give away a lot of profit to the wholesalers in the process and therefore do you make any money at the moment in a country like India or, indeed, Kenya?

Jean-Paul Agon

No, it's a good question. It's true that India is not the easiest country to do business in because, as you know, our dynamic is based on different channels. And when you don't have these channels in a country like in India, where you don't have [indiscernible], you don't have department stores, you don't have pharmacies, you don't have all this kind of things -- or active markets, it's definitely more difficult. So that's why we are always adjusting our strategy to the -- relative to country. Of course, we are pragmatic. And what we did is that we focused the development of our business in India, mostly on Garnier. So Garnier is our top brand in India. And in order to distribute Garnier, we do as every other company do. We have distributors, and thanks to the distributors who are able to reach 500,000 little stores in India for -- in order to reach the consumers who buy our products. And we did -- we started with Garnier, then we launched L'Oréal Paris. And in fact, L'Oréal Paris hair care is doing pretty well. The third initiative that we are doing right now is Maybelline, and Maybelline has quite a surprising success in India. We are finding way in terms of sort of distribution to Maybelline products available for consumers. So it's doing pretty well. And the other business that is pretty successful is the professional business because the salon business in India is pretty dynamic and so as -- the growth that we had in the salon business, for example, was one of the best in the world in this first half. So you're right. It's more difficult, so -- but we have to adjust our strategy and usually, we find ways. And eventually, I hope that there will be an opening of modern retail in India, too. And when this will happen, definitely, we will have a huge opportunity. It will accelerate our growth tremendously. Yes?

Hermine de Bentzmann - Raymond James Euro Equities

[French] Hermine de Bentzmann, Raymond James. A question on the work you've undertaken these past few years you mentioned again today. You modernized, relaunched a number of brands in your portfolio. Are there brands that you've identified that require the same work today, smaller brands that you mentioned less, such as Sanoflore, for example?

Jean-Paul Agon

Okay, first of all -- firstly, in terms of the substance, I mean, this is an ongoing effort of work that we perform constantly because to maintain brands that are modern, that are connected, that attract the younger generations, they need to be renewed on an ongoing basis. It's not by accident we have a brand such as L'Oréal Paris that's almost 100 years old; or a brand such as Lancôme that, I mean, is more -- has 60 years old, maybe more; Garnier, over 100 years old. I mean, these brands are modern. It's a constantly -- we renovate them. So this is an ongoing effort, of course. It's in cycles because once we relaunch a brand to the state-of-the-art, we turn to another and then we return to the first. So it's a continuous process. Delighted that you mentioned Sanoflore because if there's really a brand where we've done an effort that wasn't one of renovation, but really of transformation, it's Sanoflore. I mean, we acquired it. That was really a very kind of organic buyer brand and the kind of hard organic. I mean, there's no really market. I mean, it really just imploded and we transformed Sanoflore brand into a sophisticated luxury buyer, organic that is. I mean, organic is natural, respecting the environment with fine-smelling fragrances, synthetics, et cetera. So Sanoflore was up 30 since the start of the year. I'll send you a small sample because I'm delighted that you mentioned it. But we do this across our brands. I mean, we do this -- and where you're right is that from time to time, some of our brands that are little weaker than others it's because it's work in progress, not completed, et cetera. And I can guarantee you that it really is also the #1 job of divisional managers and brand managers and what satisfactory is they're reasonably managed to do this for our leading brands because L'Oréal Paris, if you take the batting order in terms of sales, L'Oréal Paris is really up-to-date, state-of-the-art, more than ever attracting the new generation, Garnier ditto, Lancôme ditto, Maybelline ditto, Vichy. So if you look at the kind of the leading 7 or 8 brands, they're really all tiptop.

Hermine de Bentzmann - Raymond James Euro Equities

Well, just a follow-up on the brands, if you could give us some performance trends for the first half of your leading brands?

Jean-Paul Agon

Well, I'm sure Christian can't refuse that.

Christian Mulliez

As long as you don't ask for the volume value, the contribution of the gross margin for the second half -- no, I mean, what we can tell you is that we really have a bull's eye, the mass market, with the L'Oréal Paris, Garnier and Maybelline. They're all up between 6% and 7%; Elsève smaller, but strong double-digit growth; and for Luxe, growth of a similar order; Lancôme, Yves Saint Laurent, slightly lower; and the recent acquisitions, Clarisonic, Urban Decay are up between 20%, 35%; Kiehl's, not a recent acquisition but we've -- we acquired it 2 years ago, continue to deliver levels close to 20%, it can be -- I'd say close to 20%, I mean, we have now 20%; La Roche Posay, double-digit, up for 5 years now; Vichy came back to mid-single -- no, it's pretty good; Kérastase at high single digit; L'Oréal Professionnel, slightly weaker but positive nevertheless. There you have it.

Jean-Paul Agon

[French] Good, well, if there are no further burning questions in the room, Jean-Régis will be delighted to invite you to his light refreshments. Thank you, all, very much.

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