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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

Marc Menesguen – President of Consumer Products Division

Nicolas Hieronimus – President of Selective Divisions

An Verhulst-Santos – President of Professional Products Division

Brigitte Liberman – President of Active Cosmetics Division

Barbara Lavernos - Multi-Division Head of Travel Retail

Analysts

Celine A.H. Pannuti - JP Morgan Chase & Co

Loic Morvan - Bryan Garnier & Co

L'Oreal SA (OTCPK:LRLCY) Q4 2013 Earnings Conference Call February 11, 2014 3:00 AM ET

Operator

[Interpreted]

Good morning everybody. As you probably know, we have important news for you. I hope you have received the press release and we have set up a press conference earlier this morning to talk to our journalist friends and that press conference is now over. And I am sure that very – the matter will be discussed – this morning. So let us present L'Oreal’s performance in 2013.

Jean-Régis will be in charge of the usual housekeeping announcements.

Jean-Régis Carof

[Interpreted]

Good morning ladies and gentlemen and before we get the ball rolling, a few housekeeping announcements as to the practical arrangements we have set up a quick reminder of the – instructions which we need to bring to your attention.

I suggest that you look at the last page of the leaflets you found on your seat. Headphones are available at the entrance. As you listen to the simultaneous translation, switch to channel one for French, channel two for English. I’d suggest that you select your preferred channel right now.

Also, the campus has Wi-Fi coverage which means you can online and type in the login and a password that you can see on the screen. Of course, we ask that you please turn off your smartphones or cell phones.

Thirdly, as I indicated earlier, you must have found on your seats a leaflet containing the charts that Mr. Mulliez will present later and also at the entrance to this room, you probably found the press release on the 2013 annual financial statements which was issued with the financial community last night at 6 PM.

This room is packed and so we have added a second room for the overspill and of course the conditions will be the same in terms of Q&A between the two rooms. I am going to ask or O’ Riley Geisinger to please confirm that the people in the second room can hear us alright?

O’ Riley Geisinger

[Interpreted]

Yes, Régis, we can hear you fine.

Jean-Régis Carof

[Interpreted]

Thank you. You can hear you fine as well. See you later O’ Riley. On your seats you found the card, so you can questions. Ask your questions in writing – first and please don’t hesitate to do so, throughout the presentation the hostesses will pick up the cards and of course after the break you will get to the opportunities to ask questions directly. But please, before you ask a question, state your name and business.

Item number five; of course the entire meeting is being broadcast live on your dedicated website www.loreal-finance.com all of the presentations as well as the webcast recording will be available under the presentations and webcasts heading on that same website starting 4 PM. At the end of the meeting cocktails will be served in the guest lounge where you had breakfast this morning. Thank you for your attention.

[Interpreted]

Thank you, Jean-Régis, cocktail, certainly in the morning, you can stop at nothing. Sorry about this room, it’s not the best. You probably noticed we are busy remodeling our usual premises. It will be ready for next time.

As usual, Christian of course will present the financial statements and then we will ask each division heads to summarize the highlights for 2013 as well as prospects for 2014 and we have a guest speaker for you today. Ms. Barbara Lavernos. We have asked her to give a presentation on travel retail.

As you will know Ms. Lavernos was appointed late last year. She was appointed as the Multi-Division Head of Travel Retail. This is no small matter, more than €1 million in revenues, double-digit growth, highly profitable growth and so travel retail is becoming an important aspect of L'Oreal’s business model and I will also share with you my thoughts on 2013 and of course what you care the most about prospects for 2014. Christian, you are on.

Christian Mulliez

Good morning one and all. Now, this presentation will include information pertaining to revenue income, changes in cash flow, the balance sheet and also dividends but also discuss the financial impacts of the transaction we announced this morning.

Consolidated revenues came to nearly €23 billion, up 6% in a like-for-like forex basis. Like-for-like revenue was up 5% of differences are slightly positive, up 1% mostly due to the acquisition of our – US make up brand following forex difference was a negative 3.7% of the changes, a positive 2.3% on approved basis.

With regard to the forex difference, it is of course just to what happened in 2014 at this point, we do not wish to give a figure, but using the current rates, you won't be surprised to hear that the impact in 2014 will be negative.

As regards to cover differences it is difficult to be specific, because there remains uncertainty as to the date at which Decléor and Carita and Magic will be consolidated will be consolidated. However, we can expect that 0.7% positive impact on a reported basis for 2014.

Currencies, the euro accounts for 26% versus a 29% in 2012 and versus 40% in 2012. The U.S. dollar accounts for 23.7% of our billings, down 3.2% against the euro. The Chinese Yuan, 7.1% of our billings, down 0.7% relative to the euro, sterling 6.1% of our billings, down 4.5% against the euro and the Brazilian real, 3.6% of our billings, down 12% against the euro. So the euro has gone up against pretty much every other currency in 2013.

Our revenues per branch and per division on a like-for-like basis, all of our divisions are growing. Professional products are up 2.1%, consumer products have grown by 4.9%, L'Oréal Luxury is up 6.8%. Strong growth in a brisk market and also Active Cosmetics is leading the way up 7.8%. The Body Shop had a disappointing year, up only 1.2% and lastly, Dermatology Galderma up 3.9% after Q2 and Q3 were strongly impacted by generification in the U.S.

Geographic areas, they are all growing. Western Europe is up 1.9% and North America up 3.8% and the new market going strong up 9.4% and even up 10% excluding Japan, Now within the new markets, every zone has posted steady growth. The Asia-Pacific region up 8.4% and excluding Japan, up 9.5%, South America up 11%, Eastern Europe, 8.2% and lastly Africa and the Middle East up 14.3%.

The new markets have, since 2012 become the leading geographic area for the Group accounting for nearly 40% of revenue, that is more than twice the level in 2000, which was 19%.

Revenue per business line, we are seeing strong balanced growth for all of our business line this year again, a strong performance in skin care up 7.5% excellent performance for makeup and hair care.

P&L, this is significant growth in profit from operations, as you can see on the screen, up by more than 40 points, reaching 16.9% of revenues, that is a record year.

Let us start by analyzing gross profits. Gross profit comes to 71.3% of revenue versus 70.7% in 2012, which is a 60 points improvement. This improvement is the result in particular of the number of positive impacts, better cost price and product mix and also forex.

On the negative side, the consolidation of U.S. companies Urban Decay consolidated into L'Oréal Luxe and also Emiliani which is now part of the Professional Products division. These two consolidations have had a negative impacts.

Research costs have increased from 3.5% to 3.7% as a percentage of sales or rather revenue growing 8.4%. This increase reflects the Group’s unwavering determination to support its research and innovation investment.

A&P expenses comes to 30% of sales, which is close to the 2012 level, excluding acquisitions A&P expenses are stable as a percentage of revenues. Our share of voice is flat or up and we are still capitalizing on our improved buying trends combined with the positive impacts and growing positive impacts of the development in digital media.

Sales and administrative costs represent 20.7% of revenue and come to slightly 20 points or rather the level of sales and administrative cost is slightly 20 points higher than in 2012 as anticipated mid-year. This is mostly the result of currency translation impacts to the tune of about 10 points and also decisions to strengthen our sales teams in China, Brazil and Russia.

Productivity gains are ongoing in the administrative areas; by and large operating profit comes to €3874 million, up 4.8%, also standing at 16.9% of revenue. On a like-for-like forex basis, growth in operating profit comes to 7.8%.

You are going to find the next chart interesting. Well, every chart is interesting, but particularly this one, you are all familiar with the announcement that we made this morning with regard to our stake in Galderma. The entry into force of the new IFRS 11

Accounting Standard which removes the possibility for proportional consolidation of joint ventures would in any case have meant that Galderma and the smaller JV any of can no long be consolidated either into revenue or into operating charges.

Now to help you with the projections for 2014, let me present you the P&L for the L'Oreal Group pro forma, that is, without taking into account Galderma and EMEA on the operating side of the P&L. What we find here is an even growth in gross profits for 2013 up by more than 70 points.

Cosmetic research costs are growing steadily coming to 3.4% of sales, and advertising and promotional expenses are growing at slightly less than 30% of revenues. Record operating profit 17% of revenue.

Profitability by divisions. Professional Products division has a profitability of 20.5%, this is in line with 2012 and 2011, a pretty palatable performance for a division that has been operating in a difficult market over the past three years. Profitability of the Consumer Product division has further improved, significantly improved, 19.9% of revenues, just up 80 points.

L'Oreal Luxuries’ profitability has surged in 2013, up 70 points on active cosmetics. Profitability has further increased to 21.2% also on the profitability front, Active Cosmetics is leading the path. Profitability of the Body Shop has crumbled by 50 points in 2013, only 8.6% of revenues, this is expected to improve in 2014 and lastly, Galderma’s profitability is 14.1% of revenues. Dermatology was impacted by a difficult year on the U.S. markets.

Every geographic area has improved its profitability, Western Europe, profitability has improved by 90 points, coming to 22.2%. North America, profitability has improved by 30 points, 18.7% and the new markets, profitability has improved by 70 points, i.e. 19.2%.

The new markets’ contribution to the Group’s operating profit on the cosmetics front has further improved 38% which is twice the level eight years ago.

Let’s keep analyzing the P&L. Financial expense comes to €42 million. In the absence of financial debt, we are talking mostly commissions on standby of credit lines and also taking into account the impact of the IAS 19 standard on calculating employee benefits.

As you may know, this standard was modified starting in 2013, which means that the discount rate and the rate of return expected for investments intended to finance the pension fund. Those two rates have been aligned and also as we indicated in 2013, we reclassified part of the pension expense which – until then it was entirely posted as an operating expense.

So the reclassified amounts comes to €40 million. For 2014, we can expect the same amount of interest expense in the same order as in 2013, close to €40 million all other things being equal.

Sanofi dividends came to €327 million. With regard to building up to 2014 you may have noticed that Sanofi announced last week that dividends would grow by 1%.

Tax came to €1,038 million i.e. 25% tax rate, slightly lower than in 2012 which was 25.6%. At this juncture, for 2014, even though it is too premature that this could stance right now, we can expect a slightly higher tax rate in the order of 26%.

Net profit, excluding non-recurring items comes to €3117 million and net earnings per share, €5.13m, up 4.4%. For those of you who would like to – in relation for 2014, it might be relevant at this stage to select an average diluted number of shares in the order of 608 million or 609 million, but this number should factor at the share buyback that we announced this morning, 48.5 million, which means the pro forma balance of 560 million shares. \

Clearly, under IFRS Accounting Standards the impact of the share buyback will be taken into account pro rata ten for us in 2014.

Now, non-recurring items came to €159 million, mostly we are talking restructuring cost in Europe. Asset impairments and also expenses incurred following a decision to shut down the CCB Beauty Creators Club and also a French tax rate of 3% on dividend payouts. Most of these items were posted at the end of June 2013.

Cash flow. Cash flow came to €3,106 billion, up 6.7%. Working capital requirements increased by €155 million in 2013 as we already announced at the beginning of the year, inventory is slightly up as a percentage of revenue. So up from 9.1% at the end 2012 to 9.4% at end 2013.

So receivables are slightly down from 14.3% to 14.2% of revenue. For 2014, we can expect yet another year during which working capital requirement will increase in the order of €100 million to €200 million.

Investments came to 4.6% of revenues, slightly up from 2012 where the level was 4.3%. For 2014, we can expect an investment level in the order of 4.5% of revenues. Operating cash flow stands at €2.689 million, that is up 4.4%.

Lastly, after paying out dividends, factoring in acquisitions and taking into account the exercising of stock options and also the share buyback, residual cash flow comes to €717 million.

Our balance sheet is particularly strong. Shareholders’ equity has been a short up related to the end of 2012, this is mostly due to retained earnings and also revaluation of Sanofi shares make-to-market.

Our financial situation at December 31, 2013, we had net cash flow of €2.215 million up by €640 million. This has been invested into very safe instruments, i.e. better deposits with top ranking banks as well as short-term money market funds.

In a couple of minutes, I will say a few words about the impact of today’s announcements on our debt. Our healthy balance sheet has led the board of directors to suggest, a further increase in the dividend bringing it to €2.5 per share, up 8.7%.

This dividend increase leads to a further increase in the payout rates, 48.7%. This year, which testifies to L'Oreal’s ongoing determination to maximize shareholder returns.

The announcement that we made this morning, let me say a few words about the financial aspects of the transaction. Let me say a few words about the structure of the transaction. On the left-hand side of the screen, this is the share buyback of €6 billion worth of shares from Nestle. So 48.5 million L’Oreal shares that is 8% of our share capital and we are buying it at a share price of €124.48.

The share price of €124.48 is an average of the closing prices of between November 11 and February 10. Now, how do finance this? We are selling our 50% stake in Galderma to Nestle for a net price value of €3.13 billion. The EBITDA multiple is 15.

2013 is a typical for Galderma and considering Galderma set, the share price would be rather, the amount would be approximately €2 billion. And secondly, payment would pay cash of €4.2 billion approximately.

And what about the financial impacts? On the right-hand side, debt we are starting the year with a cash flow positive of €2.2 billion and so the cash surplus. The cash outlay will be €3.4 billion. Galderma has debt of about €1.5 billion vis-à-vis L’Oreal and €500 million vis-à-vis now Galderma will pay us back the €500 million. In other words, our debt, our net debt will be €700 which is a 7.2 times EBITDA in 2013. This will be financed mostly by commercial paper.

As we indicated in the press release, we do not have to sum any Sanofi shares and the debt will be paid back entirely by the end of 2014.

The impact on earnings per share on a full year basis represent – I am specifying on a full year basis, because as I said, before from an accounting point of view, that will be a pro rata to – impacting 2014 will be closer to 3 then 5. But you can do the math 5% accretion rate.

This transaction, as you can see on the next document is leading to changes in the shareholding structure and also to the governance system. The Bettencourt

Meyer’s family will benefit from the accretion and the entire cancellation of all the shares but back for the 8.5%, it currently holds 30.5% to capital and this will be increased to 3.3%.

Nestlé’s stake for increase from 29.5% to 23.29%, so much for the shareholding structure. As for governance, L'Oreal governance, the governance system will be adjusted to reflect the new shareholding structure. There will be two new Nestle representatives on the Board versus three today.

And also the ownership ceiling provisions will continue to apply, but to the new owning ceiling of 33.3% discuss what I was saying where the regulations and also Nestle, 23.29%. Another important aspect, the Nestle Group and the Bettencourt Meyers family have decided to continue working together.

Last document, and future steps, with regards to the disposal of Galderma, the transaction is subject to customary conditions including the prior consultation of Galderma’s and L’Oréal’s works councils and so the clearance with relevant anti-trust authorities we are not expecting any problems in this front.

The implementation of the share buyback will take place against the backdrop of the current program and also simultaneous, the share buyback and disposal will have done, wind down by the end of the first half of 2014.

Thank you for your attention.

Jean-Paul Agon

[Interpreted]

Thank you, Christian. That’s overly clear. So we are not going to move to the presentation by divisions. Starting with of course the largest consumer products division, Marc, over to you.

Marc Menesguen

Thank you, Jean-Paul. Hello everyone, good morning to all. The Consumer Products division ended 2013 with a growth rate of 4.9%. We are outperforming the market which grew less quickly than last year by around 3.9%. 2013, another year of strengthening our positions in mature markets. It’s a good year in Western Europe where our sales grew by 2.5%, our best performance with five years. Our main markets posted good growth figures, Germany, 99, UK 25, France 25.

Furthermore, the intuition is improving in Southern Europe. Overall in this zone, we have reinforced our leadership with a record market share 29%.

North America, the division recorded sales growth of 2.8%. In sellout, we are up 4.1% outperforming the market of 1.6% difference between our sales and sellout is mainly the result of inventory adjustments by our distributors in a market that is slowed by ROE confirmed our number one position in our categories with record market share growth of 19.8%.

2013 is also a year that saw acceleration in new markets where the division grew by 8.4%. This dynamism is visible across regions. In Eastern Europe, we are growing by 6.7% even though the market was sluggish in Russia, note the very good performance in Turkey.

In Latin America our growth rate stands at 8.9% driven by double-digit growth in Brazil. In Asia-Pacific our growth rate stands at 8.1%, with India and Indonesia leading the way and finally, Africa Middle East is growing at 15.5% with strong growth in the Gulf States. This dynamism reflects significant gains in distribution in new markets.

Turning now to the performance of our brands, in 2013, all the divisions international brands posted growth and grew faster than the market. L'Oreal Paris, the world’s number one beauty brand recorded very good growth up 5.8%.

This substantial work performed on the brand allowed to score major worldwide victories in two strategic categories, hair care, LV range achieved strong growth of more than 15% topping the €1 billion mark confirmed its number one position in Europe accelerating in the markets it is looking to conquest.

In China, with the – oil franchise, in Brazil with – and India with Total Repair 5. And finally, the major event for the brand in 2013, the launch in the U.S. under the name Advanced Hair Care was the best hair care launched in the U.S. over the last five years.

Now I’d like to show you our commercial featuring our new ambassador Blake Lively.

[Advertisement]

The [French] facial skin care by L'Oreal Paris is also recording double-digit growth and represents more than €1 billion. Lot happening in this country during 2013. The global rollout of Revitalift, the successful launch of Age Perfect Cell Renew and the very good start made by Skin Perfection in Western Europe, a new facial skin care for perfect skin down to the last pixel dedicated to a new group of consumers in the thirties. L'Oreal Paris thus reinforced its skin care offering to better media expectation of women of all ages.

Lastly, L'Oreal Paris, the number one beauty brand in China recorded double-digit growth in the country performed particularly well in the strategic Chinese skin care market. Thanks to the highly innovative launches of hydrafresh mask in Lotion and the premium range Age Perfect Lumia.

Garnier, number two brand of the division and the Group recorded growth, up 4.5%. Garnier posted double-digit growth in hair colorant so major event for the brand in 2013 was the launch of Olia. Olia is the first mass market permanent hair colorant with no ammonia ODS to oil technology. The best launch of this category is seen in Europe for several years.

The global rollout is continuing as proving success will keep on driving the brand forward in 2014. Garnier is also continuing its worldwide contribution. In Brazil, [Foreign Language] saw a major hit in 2013 with its [Foreign Language] effect for damaged hair.

In India, the success of Garnier Men with ideal for the cleansing of men skin and finally in South Asia Light Complete a very efficient whitening care led us to become number one in 2013 in whitening in Thailand and here is the commercial for this product in English.

[Advertisement]

In 2013, Maybelline, the world’s number one make up brand posted sales growth of 4.2% with strong volume growth of 7.3%. The priority in 2013 for Maybelline was to innovate in the most accessible categories to win over new consumers and this led to great success of the new Color Sure nail varnishes.

Enormous global success for Baby Lips color lip balms and a major breakthrough for Maybelline eyeliners category in which we generated new worldwide dynamism. Not also the brand’s fine performance in lipsticks with color ellipse currently rolling out.

Furthermore, the brand is continuing its global adventure by educating women in all countries about makeup. In China, with Baby Skin a perfect one-step make up base that hydrates provides UV protection and instantly gives a rosy complexion.

In India, in deep trade the tremendous success of color - modern interpretation of a traditional beauty routine but also in Brazil where Maybelline is inventing a new distribution model with kiosks that are winning over new consumers in the country’s extremely popular shopping malls.

Finally, a word about S8 which is continuing its global growth of 8.2% and our brands dedicated to women of African origin growing. Thanks to the success of Amla Legend skin care and hair relaxes.

Other highlights in 2013 the digital ramp up of our brands, it’s a key component of our growth strategy, 2013 media investments in digital increased sharply accounting for 11% of net total media spend. We took break to measure the effectiveness of our investments.

Digital media also saw some inspiration and innovation, fine example is the magnificent adventure hair colorants by – new hair color trend that’s rang up in California picked up by the teams monitoring search engines, product was widely developed by our labs and successfully launched globally.

Ecommerce, the division is continuing to grow primarily on the websites of our distributor partners but also on the sites of pure players such as China, T Mall in China online sales already account 5% of the division’s sales. So we can say that 2013 was a strong year from which the division has emerged even stronger than before with good performance across regions and brands.

So we are therefore fighting fit for 2014 and to succeed in 2014 three priorities, firstly, major global innovations on our key brands starting right away in the first quarter, L'Oreal Paris Fibrology by LV first hair care product to increase hair diameter. Thanks to a new active ingredient filox in results 17 years research to visibly provide more volume and body to the hair. And then this color rich – new generation lipstick for which the first time ever combined the color intensity of a lipstick, the shine of a lip gloss and the comfort of a balm.

Take a look at the commercial, it’s great.

[Advertisement]

At Garnier the big news is – revolutionizing anti-ageing with its two-stage action. One immediate transformation of the skin, thanks to optical care patented technology, two, long-term anti-line anti-blemish and radiance action. Maybelline, at the moment, we are launching super stay, better skin, first long-lasting foundation to provide perfect coverage and improve the quality of the skin visibly.

Second priority for 2014, acceleration of our growth in new markets. A major component of our strategy through 2013, we strengthened our marketing developing teams in the new markets to make sure we do even better in meeting customers’ needs and finally this new regional focus will allow us to complete global launches with locally attuned launches.

Finally, last priority for 2013 continue to improve the efficacy of our growth drivers. We are going even further in improving our media buying by systematically putting up our contracts to the competition continuing to optimize the efficiency of our marketing spend. Thanks to ramping up of our econometric models to measure ROI.

Lastly, digital more than ever - the heart of our strategy, the greater media efficiency more customized services and the rapid rollout of our ecommerce. Overall, we are starting 2014 with determination and confidence. Thank you for listening.

Unidentified Company Representative

Thank you, Marc. Well done. Now, the Luxe division which as you know delivered another very fine year, great growth, outperforming the market, also great end of year Nicolas tell us all about it.

Nicolas Hieronimus

Good morning to all. For L'Oréal Luxe 2013 was another splendid year. The division has clearly outperformed a selective market that is growing at a rate of over 4% growing 1.5 times faster with comparable growth of 6.8% of turnover that stands at €5.867 billion. L'Oréal Luxe showing stronger steady growth in market share, accelerated during the year with the second half of 7.2%. It was an overall success and we can take pride in seeing every major zone above its market.

North America, the new markets, particular China, which continues to drive growth of the division as well as Western Europe without forgetting travel, retail on six continents. Each category is moving forward with an impressive consistency. I can point out skin care’s success of 10% with strong 2013 innovations and face care with breakthrough products like Dreamtone by Lancôme, Blue Therapy Serum-in-oil by Biotherm. Super Multi-Corrective Cream by Kiehl's, the premium offer of our designer– by Giorgio Armani and strong growth of Clarisonic instrumental cosmetics with a deep facial cleansing kit and the Pedi foot care kit.

Year ago announced 2013 be a fine year for fragrances, be the case for Lancôme, more about the later Flowerbomb by Viktor & Rolf has become number four in the female fragrance in the U.S. The Diesel recently launched its huge initiative Loverdose Tattoo in the masculine market, Spicebomb by V&R continues its unstoppable climb to the Summit and polo red by – one of the most impressive launches in the past years.

Moving to the top stop in Latin America, launched in third place in the U.S. for end of year holiday season. The Polo franchise thus become the leading men’s fragrance line sold on this market.

Turning now to the performance of two brands in particularly, Lancôme the world’s luxury leading brand for women repeated another year of fine growth above the market. La Vie Est Belle confirms unprecedented sales success for its full first full year. This fragrant is now among the top bestselling women’s fragrance extremely rare occurrence date backs to 2000 preserve the brand’s iconic fragrant benefited from exceptional ad campaign featuring Penélope Cruz which showed immediate results.

On the beauty side, Lancôme received the industry flagship award, the Marie Claire Prize for Excellence, Dreamtone revolutionary treatment for pigmentation and diversity. Advanced from L'Oreal Research was one of the high points of the year up 13.5% while absolutely the brand’s best-of-best is the leading Lancôme beauty care line in Asia.

Finally, the smart spirited Lancôme makeup range had some high moments in 2013 with the launch of Hypnose Drama pallets, foundation and the collection created by Alber Albaz.

2013 was also the Giorgio Armani year. Giorgio Armani the division’s second leading brand has confirmed that it’s one of the world’s most sought after luxury beauty brands with turnover up 8.3%.

The brand has clearly made another step forward towards ultimate luxury with new beauty excites around the world packaging materials both subtle and sophisticated some textures where its ultra-premium products and the fragrance collection Armani Perfection.

On fragrances, in addition to consolidating the position of classics such as Aqua Di Gio and world leaders along with Armani is above all succeeded and see its new women’s fragrance among the top five European best-sellers that are launched. A very fine fragrance and a distillation of emotions that are spoken to the heart of today’s women.

[Advertisement]

Finally, for Giorgio Armani, 2013 represents a year of strategic beauty orientation with growth of 30% for makeup and extended line with a range of subtle shades by Linda Cantello, one of the world’s best makeup artists, exceptional packaging, a successful launches such as – Giorgio Armani presented the very select club of great beauty brands.

Operational success can be found everywhere in the U.S. In Asia, the brand is rising in all rankings. This step forward for Armani Beauty also illustrates the return of color throughout the luxury division. One year later, we can confirm that we have made one of the industry’s most outstanding acquisitions with Urban Decay.

Urban Decay showed breathtaking growth of 42% globally 2013 with an explosion of colors which were hit as make up – colors the brands called product featuring turn-on-turn shade harmony, right shadows sells at a rate to one every thirteen seconds globally. The brands just extended its expertise to lipstick with the arrival of revolution lipstick and instant hit.

For us Urban Decay represents the missing link in makeup and global rollout of the brand has just begun. We also reviewed its positioning now proposes fully updated Tokyo’s star make up artistry.

A new point of sales identity with spectacular sales impact, a collaboration with – and a new star product with light bulb foundation and its ergonomic sponge for optimal application were this year’s highlights. Also emphasizing [French] found its vision with a great campaign in the fashion spirit featuring [French] to 2013’s star model, the glossy stain phenomenon continues with the successful Rebel collection and lastly launched, the top performing novelty with Baby Doll Mascara.

Thus we approach 2014 with serenity and we have many reasons to feel confident. Firstly, the quality and health of our brand portfolio that’s impressive. L'Oreal Luxe is running on all cylinders. Great global brands like Lancôme, of course Giorgio Armani, as well as Kiehl's, a well-oiled machine which has added an average of €100 million in sales annually for the past three years.

Next come the growth drivers like – cell that has extended to all Asian countries. Clarisonic adapted by the division for export to 30 countries just two years after its acquisition of Urban Decay which will apply the same rollout solution and designer fragrances, Ralph Lauren Viktor & Rolf and Diesel.

Finally, certain brands are reinventing themselves finally, Shu Uemura Biotherm or you saw in China. Secondly, the strength of L'Oreal Research is outstanding and is implied in priority to the L'Oreal Luxe division, the Group’s spearhead in innovation.

Third strength, the geographical footprint is great, the dynamism and strength in high growth areas, the Americas, Middle East, Eastern Europe and Asia, including China in which we are confident for 2014.

Travel Retail is also a key leveraging global shoppers in the areas they visit such as airports of course, as you will see the later the large flagship department stores in global capitals. We provide them with their favorite products in a world of information and services are online.

Fourth point of ramping up for L'Oreal Luxe in the most dynamic distribution areas is the reality which includes assisted self-service, et cetera, ecommerce, self-standing stores and top department stores. We pay particular attention to be agile and the most molten distributions where our customers shop.

Finally, the increase in the luxury level of our brand remains a priority with respect to products, services and the customer experience in parallel, we have a pool of entry-level luxury brands such as Kiehl's, Biotherm and Urban Decay, this way we can lead all needs and everyone’s dreams of luxury.

To conclude, what’s the outlook and the launches for 2014. In a market that should maintain a growth rate of around 4%, our strategy to gain share based on continuity in skin care firstly, with initiatives in Q1 across brands here on the street. French Lift, the Whitening Renovations plus UV protection by Lancôme in Asia. The launch of LaRoche Premium Care by Effaclar, Kiehl's Micro-Blur and skin care by Biotherm.

Profitable growth on fragrance. The division should be – by the impact of success in 2013. Several high quality initiatives planned for the start of the year. The launch of Bon Bon by Vienna, the Ralph Lauren Midnight Romance and [French]. Only the Brave Wild by Diesel and Oda Homme by Armani will be featured on the masculine side as well as the new YSL by Olivia.

Finally, look for an acceleration in make up where we have seen an explosion of color in 2014 with numerous initiatives for each of our brands.

L'Oreal Luxe strides into 2014 with the results confidence and the weapons to ensure another year of strong growth. Thank you for your attention. I’ll leave you in the company of Penélope Cruz in the latest film clip. Thank you.

[Advertisement]

Unidentified Company Representative

[Interpreted]

This is a perfect transition into our presentation on professional products where we are showing much energy and ambition on a difficult market and you have the thoughts.

An Verhulst-Santos

[Interpreted]

Ladies and gentlemen, good morning. 2013 was off to a difficult start, then took off with three quarter of growth including 3.3% growth in the last quarter. So the division ended 2012 with 2.1% like-for-like growth. We improved our market share in all regions worldwide and accelerated our growth in new markets with an increase of 11.3%.

Our challenge to win the next million – well, this change was taken up successfully since more than 53,000 new hair stylists joined us in 2013. Our ambition of course is to grow even faster and to attract another million stylists over the next ten to fifteen years.

Let’s now look at some of our major achievements in 2013. Hair care grew by 4.2% representing the division’s largest contributor to growth. This business experienced a robust 10% growth in the luxury hair care marketing to Kerastase and Shu Uemura.

Kerastase grew five times faster than the market at 7.5%, particularly through its new styling segment. The brand has confirmed its expertise in hair and skin care with the dense thick shipments. Our hair care business also benefited from the continued success of hair oils which grew by 48% including Redken’s Diamond oil and the launch of Matrix Biolage Advanced including Repair Inside which was developed by our hub in Brazil.

On the coloring front, we use ODS, oil delivery system technology in our three main brands and ODS technology has grown by 25%. At the end of the year, the very trending launch of hair chalk was well received by hair stylists.

In nail care and color, the rollout of Essie has been fast track. The brand grew by 28% and the latest product Essie Gel was successfully launched in the U.S. and will debut in Europe this year.

Our ambition for 2014 is to fast track our growth by pursuing a leadership strategy relying on three main drivers. First of all, developing the professional hair care business in new markets, secondly, boosting growth in mature countries and thirdly, forever promoting the professional difference to men and women across the world.

Let’s discuss the new markets first. They account for just 25% of our business and our division is growing strongly. Eight of the ten countries that contribute the most to our growth are new markets and these include Brazil which is growing by 12.7% and Russia which is growing 15%.

These markets rank first and second respectively. Our strategy is based on increasing our penetration of distribution networks and also winning over new consumers as well as promoting the hair styling expertise. Expanding our distribution network also involves micro distribution in Brazilian – with a specific range called master results by Matrix.

Training in hair styling and promoting the hair styling expertise represents a strategic challenge for our division, particularly in new markets. Some 3.6 million hair stylists were trained worldwide in 2013. With our training institutes in India, in Brazil in South Africa and in Saudi Arabia, we are going one step further in enabling populations without access to education to learn a new job, to learn hair styling skills. This approach is part of the group’s sharing beauty with our program.

Next, mature markets. Mature markets currently account for 75% of our business and our aim is clearly to boost our growth by helping the profession regain its attractiveness.

Thanks to our leadership position and with our pioneering Salon Emotion project, we intend to help hair stylists improve quality of service and upgrade their salons for both women feel good there and want to return often.

In Spain, for example, the resource chain saw revenue go up by 23% in just six months. Product sales increased by 125% and coloring services by 32%. We intend to build on these initial results and rollout Salon Emotion in France as well as in the rest of Europe and our aim is to upgrade some 20,000 salons over the next five years.

Another approach for attracting consumers to your salons is to reconnect hair dressers, hair stylists with fashion. This means, offering hair stylist ways to create looks that women want and associating our brands with celebrity ambassadors. For example, actress Kirsten Dunst through L'Oreal Professional, or the top model Kate Moss for Kerastase or Sky Ferreira, who is the face of Redken.

Reconnecting hair dressers also means using social media and working with bloggers and studio hair stylists to be at the forefront of trends and share backstage news from the 900 fashion shows that our division attends.

Thirdly, we will increasingly promote the professional difference to men and women worldwide, but to do this, we need to continue to offer professional innovations, as well as exclusive services that are based on what customers wants that are inspired by trends, but that also required skills and knowhow of hair stylists.

Take our new and exclusive professional services for example. Beachwaves by L'Oreal Professional or Splash Lights by Redken. In 2014, we will maintain our rate of innovation in our three main areas, color, hair care and styling.

For example, Absolute Repair Lipidium by L'Oreal Professional Discipline by Kerastase, - by Redken or Color Graphics by Matrix. Each of these launches will boost professional innovation and help grow traffic to salons once again.

Finally, moving over 2014 will be the year of professional beauty. Up until now, we’ve been operating in two of the three professional beauty markets. Hair care for more than 100 years and nail care and color with our product Essie.

The upcoming acquisition of Carita and Decléor, two major names in body skin care will establish the division’s presence on the three professional beauty markets. Hair care, nail care and color as well as skin care.

By this conclusion, we are fully confident and determined to fast track our growth across the world men and women are more teen to trust professionals with their looks. Our mission is to offer the best professional beauty and to support the growing number of professionals in promoting their expertise. Thank you for your attention.

Jean-Paul Agon

[Interpreted]

Thank you very much An, congratulations. Now the division that showed the best growth in 2013 was Active Cosmetics, please hear from Brigitte Liberman

Brigitte Liberman

For Active Cosmetics, things really picked up in 2013. We experienced the first growth in the derma cosmetic market which grew worldwide by around 5%. This was clearly faster than in 2012. This growth rate owes mainly to continued strong sales across the board, particularly in South America and also to faster growth in Europe.

The European market grew by 3% and did you know that in 2013, over 25% of total skin care sales in Western Europe were made in pharmacies and consumer health stores. Now there are three main reasons behind this buoyant growth.

First of all the efficacy and safety of derma cosmetics which is in line with consumer expectations also derma cosmetic products provide good value for money and thirdly, experts provides quality guidance.

The Active Cosmetics business grew faster, up 7.8% versus 5.8% in 2012. We clearly outperformed the market by growing 1.6 times faster. In fact, the division generated nearly 40% of the worldwide derma cosmetic market growth.

What has been driving this growth? Well, the first driver, we short up our positions not only in Europe, our legacy market, but also in new markets. In Western Europe, the division increased business considerably during the year with a record-breaking sellouts in both Northern and Southern Europe.

We are moving on this twice as fast as the market. And this with thanks to our successful products innovations across all our brands and also our high-quality partnerships with pharmacists. This has resulted in enhanced visibility for our brands and better guidance provided by pharmacy staffs.

On our major developing markets, this has been a year of great satisfaction for us. Sales took up again in Russia increasing by 12%, Brazil, once again produced very dynamic growth, up 21%. The Gulf states in Saudi Arabia grew by 25% and China grew noticeably faster during the second half of the year, up by 15%.

Now, the second factor driving growth in 2013 has been the strength and the relevance of our brand portfolio. Vichy confirmed the recovery with excellent performance in the anti-aging segment, thanks to effective and aspirational product launches such as the Earlier Life Serum, LiftActiv eye lashes or even Neovadiol Magistral.

Another example with these Excessive Neogenic a breakthrough product in anti-hair loss. The repositioning of Vichy as a premium health and beauty brand has attracted new consumers who are looking for their own ideal skin. With this new communication strategy, new packaging and its renewed identity, at points-of-sale Vichy has once again become a desirable end-modern trend.

La Roche-Posay again achieved a double-digit growth for the fourth year running. Its mission is a better life percentage of skin and it has a business model based on prescriptions by dermatologists and based its mission and its business model, the brand is now a major skin care player using its knowhow in skin care, the brand is also innovated in the area of pathological skin problems with the launch of its iso-urea Baume for Psoriasis as well as it’s a daily skin care nutritic intense product for dry and sensitive skin.

Finally, Skinceuticals has written on the back of the expansion of a static medicine has continued to develop its business outside of its original market. In only one year, Brazil has become the second Skinceuticals market behind the U.S. Skinceuticals today is a benchmark for professional medical brands.

Thanks to its exceptionally effective skin care products which can be used either before or after plastic surgery. And this is the case for our body correct range which we just successfully launched.

The third driver, ongoing diversification of our distribution channels alongside pharmacies. This began with consumer health stores in Western Europe. We now sell through 2400 consumer health stores which account for 13% of our revenue, up 10% in 2013.

And more recently, the division has shown its pragmatic and flexible approach by adapting its legacy distribution model based on pharmacies, adapting today realities of new markets. We now sell through drug stores in the USA and in Asia, where we generate more than 20% of our sales.

Derma centers have been created in shopping malls or department stores which enables us to display and showcase our brands in a high quality context with heavy emphasis on health and safety and with the presence of specialized skin care advisors.

Finally, we are strengthening our online presence mainly in the U.S. and China where ecommerce already accounts for 15% of our sales.

Now the outlook for 2014 is looking very good for our division. Today we have a brand portfolio that is more clearly defined, better balanced and built around two major global brands Vichy and LaRoche-Posay. While at the beginning of the year, we will be launching major new initiatives for all our brands based on our core business.

Skin care, a couple of examples, Neovadiol Magistral it concentrates in omega rich vital oil for – skin. – a new line of lighter addition cream for sensitive skin and also pigment chlor a dermatological corrector for dark spots, clinically proven to prevent recurrence.

Research will be Skinceuticals as a new generation of anti-oxidants for the strong concentration of pure respirator. We are fully confident in our ability to move into new markets in Asia, South America and the Middle East.

Finally, we are riding on the back of growing an universal demand for health, safety and medicalized beauty in the face of new enemies such as pollution, climate changing, allergies.

In conclusion, I can assure you that the Active Cosmetics division has great ambitions for 2014. Thank you for your attention.

Unidentified Company Representative

Thank you very much, Brigitte. Thank you so much. As you can see, we have quite an innovation plan for all four divisions for 2014. As promised, let’s bore the plan of travel retail and here this presentation by Barbara Lavernos, let’s take off with a wonderful land of growth and profitability, travel retail.

Barbara Lavernos

Good morning ladies and gentlemen. It is a great pleasure to share with you our results and opportunities within the travel retail channel. We at L'Oreal consider the travel retail market as six continents. This new continent is a territory without borders. It has its own capital cities, its own economy, its own traffic, its own population. It is a thick continent in which L'Oreal once again outperformed the market in 2013.

Travel retail refers to business undertaken in shops located in duty free areas or in areas dedicated to travelers with more than 50% that business in airports, but not only that, a third of revenue is generated in downtown or border shops mostly in Asia or South America. Not forgetting in-flight sales.

Finally, the fast-growing cruise market in Asia, the Caribbean and Europe. Therefore, the main market driver is passenger traffic particularly air traffic. You can see on the screen a 24 hour satellite view of global air traffic. Air traffic is growing continuously by 5% on average every year and represents over 6 billion international flights in 2013.

Therefore the travel retail market fully benefits from growing traffic, but more importantly it is already growing faster than traffic over the past ten years and according to the generation research for guests, this market is expected to double in the next ten years.

The travel retail market has undergone profound changes in recent years, firstly, traveler profiles is shifting – are shifting from western businessman to fashion static consumers from emerging countries. But the business model of airports is also changing.

In the 1970s this business was limited to a few multi-category stores around the boarding gates, but it’s the opposite today, airports has become large shopping malls surrounded by boarding gates.

Historically speaking, the Beauty segment is the leading category for this channel accounting for 25% of total revenue and the segment continues to experience strong growth. The estimated figure for 2013 is a growth of 7.4%.

L'Oreal is the historical leader in the Beauty category of the travel retail market with over 20% market share. L'Oreal has continued to outperform the market again this year by the factor of 1.3.

In addition to revenue, travel retail is a strategic channel for brand development and visibility. Not only has travel retail an opportunity to showcase our brands, but as a historical leader in this channel, we have developed the fine understanding of our traveling consumers, shop-by-shop and this allows us to target the best locations.

In ideal locations to come into contact with our highly qualified consumers as our counter in downtown Hong Kong where more than 1.2 product is sold per minute. As regards our money, we have two counters at Dubai Airport which rank among the best performing points of sales for the brand worldwide.

As for Kiehl's, not only is travel retail one of the top growth contributors in recent years, but it also gives the brand the ability to attract new consumers. In some of our points-of-sale, more than 20% of travelers discover the Kiehl's experience and buy the brand’s products for the first time.

Thanks to our longstanding ties of retailers, L'Oreal is able to negotiate from locations to establish new brands, for example, the Clarisonic space that we opened two months ago in Macau.

Thanks to the collaboration of brands and local markets that travel retail therefore helps maximize the exposure of international travelers to our brands. improve customer loyalty, but also win over new customers.

Today, these travel retail consumers habits are new in six continents. They are global shoppers, they don’t only shop where they live, they shop wherever they are, they shop in their local markets, while traveling and also wherever they go.

Let’s first cover the region and then extend the reach to other parts of the world. Paris for example is a top destination outside of Asia for Chinese tourists followed by San Francisco.

Turkey is a popular destination with Russians, but in recent years, they have been flocking to our shops in the Middle East and Thailand.

Top destinations for our Brazilians include – Miami and Lisbon, Nigerians love London and Iraqi tourists rank among our best customers in India and as for Koreans they travel more and more to Southeast Asia.

L'Oreal has conducted an in-depth analysis of the “nationality” corridors across the world and this has enabled us to develop a bespoke personalized approach to better engage these global shoppers wherever they are.

For example, while celebrating the Chinese New Year in Paris Charles de Gaulle Airport where our Chinese customers travel to or celebrating Ramadan at Dubai Airport of course, but also in Heathrow Airport or celebrating Diwali at Dubai Airport and most travelers there are from India.

Finally, the global shoppers traveling always comes with souvenirs and gifts. Once again, we target our products to provide them with a customize bespoke experience of premium products such as the beautiful limited edition of Crystal by Armani available in our most selected points of sale or gift sets that our global customers traditionally bring home from trips.

In addition to global shoppers, the travel retail market is experiencing a new trend. Traveling is now accessible to more and more people. The middle-class in all emerging countries is keen to travel outside the country. This new influx of travelers will transform the travel retail market which is now evolving from a strictly largely driven business model, towards a more diversified range of purchasing power.

The L'Oreal Paris brand is already sold via their travel retail channel and we have decided to expand and fast track its deployment. Similarly, we recently introduced the Body Shop brand which is very popular among travelers and we have planned more point of sale openings.

This acceleration should benefit brands across the group and that is for this purpose that in 2013, the group has created a cross-division travel retail department based on our expertise, acquire thereafter 30 years of working in the luxury category, this will allow us to target the implementation of the various brands from luxury to mass market, from derma cosmetics to hair care products, not forgetting the Body Shop.

These are significant growth opportunities for our travel retail business and we can see how much this channel can contribute to winning over the one billion new consumers targeted by Jean-Paul Agon.

Thanks to its uniquely robust and diverse portfolio of brands L'Oreal is ideally positioned to offer travelers from around the world all the products they want irrespective of their beauty routines or purchasing power.

Thank you for your attention.

[Unidentified Company Representative]

[Interpreted]

Thank you, Barbara. That was great. That is important, it’s one of the major developments marking the start of the 21 century. The emergence of a new channel, a new continent as we call it, because it really does has the economic dimension and it’s only a beginning. It will become absolutely key and it’s a significant competitive edge for L'Oreal, because L'Oreal was the first company and here all credit is due to the pioneers of L'Oreal 30, 40 years back, it was the first to take a close look at this channel to partner these customers. L'Oreal is the number supplier to these stores, number one partner and the multi-division approach that we now have is extremely promising for growth and profitability.

So, I’ll also be very brief, the presentations have given you a good overview. I think it’s good for once a year that you should delve into the life of the divisions, the business models, the prospects, their opportunities, you’ve seen actually the outlook is very big.

Overall, 2013, L'Oreal Group achieved another good year, fine year by making market share gains, reinforcing our positions across divisions, across regions which isn’t always easy. By growing faster than the market and achieving as you have seen significant growth in its earnings and profitability.

Like to begin with a few words about the Cosmetics market, that was important for you in 2013, as you saw the market remained solid even though it has slowed down slightly according to our estimates, it grew by 3.8%. We always said, between 3.7% and 3.4% we haven’t got it wrong and well below last year’s growth.

By region, briefly, market was flat in Western Europe as in previous years, Southern Europe difficult situation, Northern Europe positive, but have high hopes that we are seeing the end of the tunnel in Southern Europe because we are beginning to see signs of improved Southern Europe markets which will be a great inflows because L'Oreal was oversized in Southern Europe which heavily impacted the past five years by the economic difficulties in those Southern Europe countries and of course would benefit more than others from the rebound at least, stabilization and bounce back of these countries.

North America is a surprise, the market slowed, slowed considerably. We are expecting a market in 2013 pretty strong of the order of 4.4% it’s slowed considerably, plus 2.6 percentage point to the U.S. consumption up turn, but as you know, it’s not focused – involving all consumers, but favored initially consumer durables in Japan.

Market trend was slightly positive and once again in 2013, new markets proved to be the most dynamic, although they did slowed down a little in two regions in Asia excluding Japan with a slowdown in India and South Korea and to a lesser extent, China and in Eastern Europe where growth weakened particularly in Russia.

Good growth however in Latin America and in Africa, Middle East which are maintaining their lively momentum. In terms of channels, as you would have gathered from the presentations, luxury channel remains buoyant with a slight slowdown in H2 mass markets, slowed a little in North America, Asia, Eastern Europe.

Hair dressing, professional hair dressing remains difficult but some encouraging signs at the end of the year. Derma cosmetics market has really accelerated, the division has really accelerated and finally the direct sales channel seems to be slowing globally.

2013 L'Oreal outperformed the market in all regions and across all divisions, Western Europe, good progression, we are delivering growth. This indicates that everyone and of course beneficial to our profitability as you saw that’s increased well. Performance noteworthy in Northern Europe, strong in Germany, the UK, Scandinavia, but also in France where we are up, where the degree of improvement in southern countries giving us optimism for 2014, return to growth in Eastern Europe after a few difficult years.

As you know, we’ve significantly outperformed the market in sellout terms in North America where we are making market share gains although in the end, we have not achieved the growth we were hoping for because of a clear slowdown in the market and a reduction in distributors inventories.

Fine growth in Latin America, particularly Brazil, strengthened our positions in Asia, excluding Japan where let me remind you we’ve been number one in the Asian cosmetics markets in 2010. Lastly, strong growth in Africa, Middle East, where huge potential remains.

By division, as you’ve heard strong out performance by both the luxury, Active Cosmetics divisions, global strengthening of consumer products division and significant – and market share gains for professional products in the context of depressed market. Body Shop performance was objectively disappointing. We are counting on changes we have made and on its integration into selective divisions to put it back on the road to growth and give this brand all the success it deserves.

2013 was also a good year as you have seen in terms of growth in earnings and profitability, once again confirmed the strength of L'Oreal’s business model which creates value and strong cash flow generation, the quality and solidity of our results as the favorable prospects of the company led the board of L'Oreal to propose the next Shareholders’ Meeting a further significant increase in dividend at €2.5.

2013 was also and above all another year of progress in all areas of the company to adapt it to a changing world to make it more efficient, boost its performance and to enable it to continue building dynamic sustainable and profitable growth. On that that I wish to focused for a few moments. We’ve continued to build on our innovation firepower, it’s our firm belief, crucial in our business cosmetics is a supply-led market in which leadership is primarily built on the appeal and superiority of its products.

It’s our determination to wager on innovation and superior quality and performance that makes the difference for consumers enables L'Oreal to stay one step ahead – our innovation headed by – continuing its transformation its budgets have risen faster than sales in 2013. We are investing in all areas, advanced research as in formulation both in France as well as in our five regional hubs that are strategic for the universalization process.

Secondly, we have continued to renew our major brands, very important success is delivered by major products, major innovations built on major brands. These major brands must always be fully attuned to consumers who are constantly evolving L'Oreal Paris the world’s number one beauty brand is accelerating and posted its best performance for five years.

Lancôme, the world’s number one women’s luxury beauty brand is growing strongly and scored a success with La Vie Est Belle, Vichy, the world’s number one derma cosmetics brand has successfully reinvented itself once again making market share gains. Kerastase is transforming itself to conquer the world of luxury.

Hair care more than ever our brand portfolio is the most varied, richest and most powerful in the industry. In 2013, we’ve made some very interesting acquisitions which will supplement our brand portfolio, our geographic footprint. Nicolas mentioned Urban Decay. It is tremendous addition to our luxury brands, really achieving spectacular growth. Its globalization is only just beginning, Decléor and Carita will enable us to start up a new business for the Group.

Professional skin care which will open new growth potentials for the professional products division and regionally, as you know, we made some acquisitions such as Vogue in Colombia, Nice and Lovely in Kenya, and – for the Body Shop in Brazil enabling us to accelerate locally spectacularly our penetration of these markets.

Lastly, Magic is the brand that we needed to conquer the mass market skin care segment in China, which would have been very difficult and costly for Garnier in China with L'Oreal Paris, the number one beauty brand in China.

Maybelline New York the number one make up brand in China. Magic, we will have the idea of combination to conquer the Chinese skin care mass market.

In 2013, we’ve also profoundly transformed as you know the organization of the Group to make it more agile, more efficient and better tailored to our universalization strategy as you know. We’ve combined under the same leadership of Nicholas unanimously selected divisions luxury Active Cosmetics, Professional Products and the Body Shop.

So that they can share their know how and their best practices and in parallel we’ve organized zone responsibilities into eight uniform strategic hubs and located the management of distant regions. I have to say that this reorganization decided, announced and implemented within three months is a fine illustration of the company’s flexibility and responsiveness.

Firstly, we continued to transform our marketing models as crucially important because, I believe it’s one of the key drivers of opportunity for L'Oreal. Today the marketing world is undergoing major transformation having to digital, we transformed our marketing models to leverage the extraordinary opportunity offered by digital media, all our divisions, all our brands across all our regions are rapidly making the digital shift in the U.S. for example, Lancôme, Kiehl's and L'Oreal Paris hold the top three slots in the IQ Digital ranking for the brands that have setting the pace on the net of our brands have worked incredibly hard to offer their consumers, the best information content, service and relations on the web.

Our operation of online and offline media is now totally integrated at the same time we are very proactive to make our investments in growth drivers, A&P more effective and more productive by using econometric models and optimizing our media buying. When we have 30% of our P&L that’s devoted to A&P. Obviously, all these progress is in transformation that will generate greater productivity, a very important news for the company.

And finally, we set ourselves new ambitions, very important in terms of corporate social responsibilities societal and environmentally. We’ve launched a major program very defining, very strategic for the Group, sharing beauty with all, it’s a new corporate paradigm. These new commitments will lead us to radically rethink the way we design manufacture source and advertise our products. We pledge that by 2020, 100% of our products provide an environmental, societal benefit. In other words, a positive contribution to the world.

It’s a defining change, a new paradigm for our brands, sharing beauty with all includes pledges for 2020 in terms of sustainable innovation, sustainable production, sustainable consumption, but also in terms of employee relations with our suppliers and the communities around us, we believe not only that this ability to server the general good will make a real difference for companies such as ours in the 21st century.

But the resulting transformation will also have a positive impact on the company and of course, we’ve continued to upgrade our industrial facilities to boost efficiency and productivity implementing a major supply chain action plan to modernize our processes from which we expect substantial efficiencies in terms of performance over the coming years and we’ve continued as with every year the optimization and pooling process is underway in our organizations to boost productivity.

So in all areas of the company reinventing to build the new L'Oreal perfectly attuned to the world’s major transformation, economic, digital, societal and a new L'Oreal that is fully equipped to implement its mission of beauty for all and its universalization strategy and advancing towards its target, as you know one billion new consumers. As per 2014 we are beginning the year as we do every year with confidence and determination despite an economic backdrop that remains unstable, unpredictable.

We believe the growth of the cosmetics market should be of the same order that’s seen in 2012, that is between 3%, 5% and 4%. Currency effect should once again in 2014 be unfavorable for us. We are less exposed than others to certain countries that have suffered strong devaluations in their currency.

Growth in sales, probably it won't be uniform across the four quarters, because of disparities in comparison basis and initiatives. We expect the first quarter to be lower than the annual average, because of the strong comparison base effect in the US consumer products division which last year launched major initiatives, advanced hair care and Olia and which is adversely impacted at the start of this year by US market that is slowing sharply and tightened country controls.

By distributors, be there as you are, deeply confident in the dynamism of our market share gains and strengthening our positions in this American market as indeed across all markets.

Our new organization is in place, our divisions are fighting fit and the quality of the new products in 2014 vintage will be high. So, once again this year we are confident in our ability to deliver a performance that will outperform the market and increase our earnings.

Lastly, I am very pleased with the draft, the proposed strategic transaction that was approved by the boards of Nestle and L'Oreal yesterday. It’s L'Oreal buys back 48.5 million of its own shares, that’s 8% of its shares from Nestle funded by the disposal of our 50% stake in Galderma – the rest in cash, as I indicated in the press release this morning, this transaction will be a strategically defining milestone for L'Oreal, for its employees, for its shareholders.

L'Oreal will devote itself, fully to its cosmetics business as part of its mission beauty for all, its strategy of universalization and a 1 billion new consumers L'Oreal will benefit in this new configuration from the very significant stake of the founding family Bettencourt Meyers.

That will be even further strengthened and whose commitment towards the company is both historical and total and furthermore Nestle that’s always been a loyal and constructive shareholder will continue to provide its active support and lastly, as you can see, all L'Oreal’s shareholders will benefit from this transaction. Thanks to accretion of the EPS because of the buyback and cancellation of L'Oreal shares held by Nestle.

Hey, I’d tried to be as concise as possible. Thank you for your attention and with Jean-Régis, it’s time for coffee and possibly cakes right behind me. How long is the break? 15, 20 minutes. Take full advantage of it. See you later.

Question-and-Answer Session

Operator

(Operator Instructions) He wants to go first, I can see somebody raising their hands. That would be Celine. Celine is always first.

Celine Pannuti - JP Morgan Chase & Co

[Interpreted]

Thank you. Question number one. Market growth, you said that market growth is probably going to be pretty much the same as last year, what is your take on emerging countries? Are there competitors have indicated a decline in lose emerging markets? Along the same lines, do you expect a slight increase in business on the US markets?

Question number two, with regard to the new shareholding structure, considering the thresholds that have been met, could we possibly contemplate future share buybacks assuming the two shareholders willing to sell of course?

Jean-Paul Agon

[Interpreted]

Your questions are always easy, aren’t they? Question, let me say, in answer to your first question, we don’t have a crystal ball and so the global economy is becoming more and more unpredictable and as a result, it is more and more difficult to predict what the cosmetics market will look like one year ahead of time. So I don’t think I am taking too much of a chance by saying that the growth rate is expected to range between 3.5% and 4% or hopefully more.

Celine Pannuti - JP Morgan Chase & Co

[Interpreted]

Now what about the growth of each market segment?

Jean-Paul Agon

[Interpreted]

That’s much tougher to predict, what we can say as the year begin, that we expect good surprises in Western Europe. As far as we are concerned, that’s both important and profitable because we have an established leadership in the western part of Europe and as you know, this is where our profitability is the highest. So the fact that the Western European market is taking off and that we are still gaining market share in western Europe, that’s strategically important for us.

As far as Northern Europe is concerned, that’s a great unknown, isn’t it? Last year we did not expect a slowdown. And it got us what surprised, it caught everybody by surprise. We did not expect the slowdown in the North American market, because the economy was that contract and we expected the cosmetics market to follow, but the opposite happened.

So, one potential explanation would be that in the US when the economy is back on track then consumers go into debt to buy consumer durables which means that they pay more attention to how much to spend on those fluids. As far as Asia is concerned, we expect that by and large the Asian market - business in the Asian market will remain brisk.

There should be a slowdown. There was a slowdown last year relative to previous years, but I think that this particular pace of growth is sustainable and as far as other regions of the world are concerned, there is uncertainty in markets such as South America. We don’t know what countries are sustainable.

So as you can see, there is economic uncertainty and this is reflected in markets uncertainty, but as I said before, those markets did not make a huge contribution to our revenues. When you add it all up, yes, those markets are interesting but they are not major contributors to our revenue. So by and large, we expect the global market conditions to stay pretty much the same.

As regards to your second question, you want more share buybacks, Celine? We just completed one to the tune of €6 billion and you want more that’s pretty palatable already. I think we should rest a little bit. The answer is no, we don’t have a lot. But we need to pay for those shares, don’t we? So, we will talk in zero cash flow. And easy answer would be, yes this has been a measured transaction. So let’s catch our breath. We’ll see what the future brings.

Loic Morvan - Bryan Garnier

[Interpreted]

Loic Morvan from Bryan Garnier.

Unidentified Company Representative

[Interpreted]

Hello, Loic.

Loic Morvan - Bryan Garnier

[Interpreted]

Could you please elaborate on China? And more specifically on your penetration strategy into smaller cities in the Chinese markets? Second question, as a subscript to Celine’s question, the Bettencourt family now owns 33% of the company’s capital. You have not requested an exemption from the A&F securities authorities. So would they say yes, would they approve another share buyback?

Unidentified Company Representative

[Interpreted]

We don’t have an opinion about that because we didn’t requested. And clearly this is why we stand below the 33.3% of threshold. No, there are no plans to that effect over the short-term. No plans to change anything. What I can say however is that, this transaction is going to help a new shareholding balance emerge. This is a major change when you think about it, previously, rather at the moment until the transaction is complete, the family, Bettencourt family had about what, 35% of shares, 30.5% versus 28.3 and now Nestle will hold the 23.3%, So it’s just going to be 10 point gap between Nestle, 23.3% and the Bettencourt family’s 33%.

So, the Bettencourt family they have founded L'Oreal. They have a strong commitment to the company and they have clearly expressed their intention to maintain their support to their company over the very long-term. But I wouldn’t want to hug the mikes. I am to hand over to my colleagues here.

Unidentified Analyst

[Interpreted]

The question is, how can we support our penetration of the Chinese market, take the luxury segment, switch over to the luxury segment look a loss?

Marc Menesguen

[Interpreted]

Yes, as regards to luxury segment, our pioneering brand in the luxury segment is Lancôme. It is the division’s leading brand in China, We sell our products in 86 different cities in China to two to three, cities we opened up a dozen of those this year bearing in mind that our approach mostly boils down to opening up new stores and also maintaining a growth in our like-for-like sales.

So this is along with our penetration strategy, but we also want to continue to strengthen resource increases though. Now the other divisions are following suite, so we are starting out with brands such as Lancôme Kiehl's or Biotherm and their penetration rate as far from being as high as Lancôme.

As far as luxury is concerned, Nicholas is absolutely right that our prospects for growing our categories in luxury stores in China, but we are just getting started. We go there twice a year and every time we visit a different city and we clearly see that this city is where it didn’t used to be luxury stores.

But department stores that are making it appearance and major brands such as Lancôme are quite a hit, because there are new consumers, they have money and they are very happy to spend their money on products such as Paris Yue-Sai, Yue-Sai is a Chinese brand that operates in as many as 190 different cities.

It’s more prestigious brand, the middle luxury type brand. The mass market segment is a different story.

Last year, we reorganized, we overhold our sales force in China, one sales force is now dedicated to make up and facial skin care. So L'Oreal Paris and Maybelline because we are trying to tap into this amazing opportunity in China personal care stores are emerging and we are creating products that are specifically tailored to this new market.

Secondly, we created another sales force for mass market, mass market hair care, L'Oreal and also men’s care. And men’s care is growing nicely. Now what’s interesting is that, that part of our sales forces are concentrated on the mass market segment.

That is starting to pay off in the second half of 2013 be penetrated an additional 150 tier 3 and 4 type cities. So major gains have made in terms of distributor networks being penetrated and hair care is a strategic challenge for us. Sell-out or sell-through has improved significantly from 25% to 35% or 40% today.

So, an amazing pocket of growth we can tap and also the Magic acquisition. It has yet to be fully complete, but we are hoping this will happen. Magic is a platform that will help us penetrate entry-level luxury market segments as it means immediate beauty.

They have tremendous expertise in a very buoyant market segment, facial masks and facial skin care. So they have this tremendous local expertise and we fully trust their ability to fast track our penetration of the mass market skin care segment.

Unidentified Analyst

[Interpreted]

Thank you, Marc

Unidentified Company Representative

[Interpreted]

More questions. Yes.

Unidentified Analyst

[Interpreted]

Still on China, rather the mass market segments in China and also the Magic brand, do you think that this brand can stretch beyond the mass market segment and become the new Garnier for skin care?

Secondly, maybe, Christian can tell us more about the great improvements in profit margin in Western Europe, what have been the main drivers and also dermatology, you sold Galderma generously, is this going to have an impact on what you intend to do for Active Cosmetics and the development in networks and also what you intend to deal with skin care?

Unidentified Company Representative

[Interpreted]

Okay, let’s start at the end, actually it makes no difference in terms of the tremendous potential the sale of Galderma to Nestle. It makes no difference whatsoever in terms of the tremendous potential of Active Cosmetics.

You got to understand that implementation is very different. The scope of implementation is very different depending on whether you are talking about derma cosmetic treatments which are sold through pharmacies to people with healthy skin, yes, that skin maybe sensitive and maybe it needed special treatment or maybe they need “ medicalized channels” or they prefer to have a skin care prescription, they prefer to go pharmacies as opposed to medical products intended for diseased skin.

It’s sort of different. There are – rather there were basically no synergies between our two businesses. We are talking about two very different lines of work. So, together with Brigitte Liberman who is overseeing the developments of Active Cosmetics, we have a further potential for developing medicalized treatments via pharmacy guidance, pharmaceutical care for women who want special care, the kind of care they are not getting from the mass market segments or even the luxury segment or anywhere else.

So we are fully confident in our ability to travel along this yellow crowd. What we saw in 2013 the channel that has grown the most in – with some years in 2013 is the pharmacy channel at least in our line of work. So expectations are high and this is our core business, we deal in healthy skin not diseased skin. Healthy skin requiring special treatments.

Unidentified Company Representative

[Interpreted]

Second question? Profit margin has increased significantly for the third or fourth year running in Western Europe, this is due to a variety of factors, revenue has grown by just 1.9%. But still good. Very few players in Western Europe are gaining significant market share, we are one of them and also there is a slight value, slight positive value effect in terms of revenue and thirdly as you can well imagine all of our affiliates in Western Europe have kept the tight lid on expenses.

We are pooling expenses and costs as much as we can. We are developing indirect purchasing policies that are paying off. And also, Western Europe one of the regions of the world where the mass market and the luxury segments are trying hard to optimize marketing expenses in general and media buys in particular and all of these efforts are paying for us, not forgetting digital media.

So again, Western Europe has made a huge contribution this year and this probably bodes well for 2014. I am not issuing a guidance here but the fact that L'Oreal has a strong presence in Western Europe in 2014, now there maybe turbulence in Argentina, Venezuela, the Ukraine or even in Thailand and I am forgetting couple of more countries, but it might turn out to be an asset.

L'Oreal is after all a well-balanced company. With regard to the Magic acquisition, let me get back to that. It is an important aspect, it’s a very small brand. It’s almost non-existent in China and Garnier at the time was launched on the mass market skin care segment. But it never broke through and the decision was made to shut down the brand for two reasons.

First of all, it was a very small, it was losing money and secondly, we knew that the Magic acquisition was on the pipeline. So clearly, Magic is going to be the top Chinese mass market brand. It’s going to improve our footprint there. It is the number one facial mask player in China, but maybe one day it can stretch itself and broaden its range.

Allow me a comparison. To the Chinese skin care is what make up is to the U.S. market, not in terms of income but in terms of market size. Make up is the largest product in the U.S. mass market segment. And, we are number one in the U.S. market today, because of being able to go around with our brands and also the Maybelline acquisition has been helpful.

As a U.S. brand, specialized in eye care and we turned it into a multi-purpose make up brand and now it has more than 20% market share. And thanks to the Maybelline acquisition, that regained a strong foothold in the U.S. market. So the idea is to use the, pretty much the same strategy on the Chinese market using the Magic acquisition with perfectly a mixture of different brands, L'Oreal Paris, a premium brand, now number one on the beauty market in China.

Maybelline, for makeup, Maybelline New York and lastly Magic. Magic will be the leading skin care up around for the Chinese mass market. Yes, very good business and very clear vision, very good business decision with very promising prospects for the market.

Unidentified Company Representative

[Interpreted]

Next question please. We see a hand over there.

Unidentified Analyst

[Interpreted]

Yes hello. Sorry on going to return to the Nestle deal. Three questions, sorry, it’s a very fine transaction, of course naturally. Very sure of that, first question more for Christian, the impact to be expected to the exit of Galderma on the balance sheet.

Just give us more color on that and you have a small idea to have your take on that, impact on interest expense the cash that you have to use to try and see what impact this might have on the interest expense. 8% is part of the share buyback which is 10% over 18 months.

Could you just recall when your share buybacks and as of when you could perhaps have another 18 month share buyback. Third question, does your attitude changed regarding your stake in Sanofi as to its usefulness. That’s always been strategic.

Unidentified Company Representative

[Interpreted]

Okay, we’ll try and give you our take on that. Okay, well, I’ll give you my take. My sound of the bell, so the balance sheet Galderma in our balance sheet consolidated is worth of the order €420 million, okay all in had we consolidated it with the new accounting standards with proportional €420 million in our books, hence what I indicated on the chart, that’s to say that the disposal enterprise value €3.1 billion given the debt equity value, €2.6 billion.

If you remove the if you remove the €400 million of value in our books. You have a consolidated capital gain of €2.200 million with a tax of €120 million, approximately that’s one thing. Interest expense actually modest, because, will derive, say between €701 billion commercial paper, commercial paper costing, something like 0.25 full year should cost us €2 million in interest expense. So it’s a deal goes ahead in May or June. It will cost us €1.2 million. The guidance I gave €40 million goes with or without this transaction.

Next, yes, the 8% bought is part of the existing resolution authorizing us to buy up to 10%. So and then you had a question on next stage, but since there is no next stage or this stage, so on Sanofi Jean-Paul, it’s said in the press release, we need just under €1 billion in commercial paper, why would you want us to sell Sanofi shares.

Unidentified Company Representative

[Interpreted]

Yes, next question. I said this morning let me just return to this, I said at my press conference this morning that we too were a shareholder, a major shareholder in Sanofi, so Nestle says that they are a major shareholder of L'Oreal and we too are also a major shareholder of Sanofi. So it’s true that when we don’t need to sell, we don’t sell. We took part, I mean here again.

There are a lot of points in common here. There is a common history of 40, 41 years shared history. L'Oreal was absolutely really there with the creation of the Adventure followed by Sanofi and so, we’ve been supporting the growth of this company. It’s important for us. We are a major shareholder, we also have two board members on the Sanofi board, lot of parallels. Yes.

Unidentified Analyst

[Interpreted]

I’d like to return to your margin trends regionally, question about Western Europe, same question on emerging markets, fine margin increase, despite the fact that these remain highly competitive markets where you don’t necessarily have the same market shares in Western Europe and also conversely why in the U.S. margin increase that’s more sluggish than in other regions? Is that due to lower growth?

Second on luxury, you mentioned the fine performance of Giorgio Armani, could you give us the performance in terms of sales growth of Lancôme and YSL? Thanks.

Unidentified Company Representative

[Interpreted]

Nicholas will answer.

Unidentified Company Representative

[Interpreted]

As to the margin at the various regions, well, North American margin is clear, it’s due to two factors. First factor significant investment, in fact we want last year that that be a significantly investment in the U.S. which was the launch of advanced hair care and Olia, let me remind you, it looks nothing, advanced hair care is probably the biggest launch in the history of L'Oreal all markets all countries all times.

So, it’s not a small launch and we are happy latest market shares let me tell you 4.1% in January this year, it’s – for us it’s like the day in the other direction. I mean, it’s a landing of L'Oreal hair care landing on the U.S. market against the major competitors in hair care like – costs a bit of money.

So, we invested last year significantly. Second reason, growth wasn’t as we anticipated. So we deployed the resources to make it, we made it, but since the market slowed, we didn’t get the growth expected. That’s why profitability was - didn’t grow as sharply as in the two other regions.

And in the other regions, it’s growing strongly and that's encouraging for you for L'Oreal’s shareholders to see that our conquest of the global cosmetics market is further more conquest with increased profitability and we explained this. We are starting now in many countries to have critical business masses that are very significant many of our affiliates including in highly competitive markets that are very profitable, some are even more profitable in certain European markets.

So, we are very confident as to our ability to regularly grow the profitability in this region.

Now, Nicolas.

Nicolas Hieronimus

[Interpreted]

Yes, we’ve chosen to discuss Armani growth, Lancôme as I said in my presentation, Lancôme delivering in high single-digits above market. Lancôme brand continues to grow market share whilst being the number one women’s luxury brand in particular as highlight the exceptional success of La Vie Est Belle perfume number one worldwide, number two most widely sold in spearhead of Lancôme growth delivered another fine year which as per usual the power of R&D allowing us to make a breakthrough in care.

Dreamtone, very fine launch with all the technology supplied by L'Oreal Thailand. The fine Lancôme and YSL, the year was more modest in terms of growth. For us, it was the year, 2013 it was a really watershed year for YSL. We wanted to shift this brand from an exclusively European brand, high European focus to a global brand, a brand rooted in Asia.

So last year we launched Care, led us to open one after the other the major Asian geographies. We opened China this year. We are accelerating strongly, very good rankings in sales stores. YSL that really went up range, up market, as you have seen if you have traveled a bit it’s up 11%. The travel retail Chinese visitors are beginning to see the range and buy it up 30% it’s a watershed year not a great growth year in billings, but nevertheless up it’s a watershed year for this brand offering great promise for the future. That’s why spontaneously rank YSL as a growth driver for this division in the world.

Unidentified Company Representative

[Interpreted]

Thank you, Nicolas. Question from the room next, the lights blinking, here maybe we could have a question, take question from room number two. Okay, go ahead sir. The technology is working, manage to get the microphone.

Unidentified Analyst

[Interpreted]

Yes, a couple of follow-ups, the first easy answer I see that, depreciation and provisions item has increased sharply, 20% is there any particular reason for that? I mean, it’s just the technical detail. Second, more interesting question, last year, I raised the problem the possibility of finding a low cost market in your activity and you indicated if memory serves that you look to the number of products to target revenue or income lower incomes.

You speak of mass market, does it mean that it’s the same thing as that it’s in your range of products you have various levels from luxury, down to the low cost and that after the difficulties that you may have encountered in China recently, are you going to continue to address the three levels.

A follow-up question if I may. One that just been broached, growth driver for the margin of late has been the increased profitability of what you call the new markets, new regions. When we look at your figures, we have got the same profit ratio between the three types of regions, Europe, US as well as new markets. So we are kind of losing this general increase in the margin.

What’s going to take up the slag? What’s going to grow the margins, will it be innovation in terms of products, R&D is it’s something really new on that front or is it just going to be the usual business of marketing?

Unidentified Company Representative

[Interpreted]

Well, thanks for that. I’ll start with the last point. I believe that quite the contrary the fact that the prospects for margin growth that’s good in three regions for different reasons is in fact very encouraging and the outlook is good, because in Western Europe, an uptick in the market would lead to greater growth and that by definition that’s where we have the best leverage on very positive profitability.

In North America, the – is behind us and so we should return to levels of profitability that will be on the up. And in new markets, the momentum that we’ve had will continue to kick in. So the fact, that the three regions now making money is rather more good news and bad.

First question was on price cascading, yes, we will explain a bit. I mean, I can tell you that we sometimes had a slight hand, if that’s the case this time showing our scale of prices for skin care which I mean, I know this is one of byheart so, most expensive skin cares Armani product of €400 and our cheapest skin care is the Garnier for India at €0.4 or even less.

So the scale, the fact that we have at L'Oreal all these divisions and brands allows us to cover all markets from the highest to the lowest. And in China, it’s also the case. Absolutely and we practice cascading across all our brands, particularly Garnier, Maybelline.

Let’s give you two examples to illustrate this, the Maybelline in my presentation you saw we’ve grown sharply in volume with very strong in mascara and foundation, the most value-creating products of makeup. We wanted to be more aggressive on makeup categories that are more affordable, nail varnish, eye liners, lip balms, I mean not just to offer products to people with lower incomes but to attract to the brand younger women who will subsequently become loyal to the brand and move upscale.

That's on Maybelline. Second example on Garnier, hair colorant, Spain is a challenging market, it remains difficult in terms of growth. Garnier has progressed well in hair colorant both by pushing its Nutrisse range which is a mid-range launching color sensation which is an affordable range and also launching the value-added range Olio with a premium price.

So it’s really this practice of cascading and let us to cover all need and boost the brands. Cascading, yes, low cost no L'Oreal strategy is research. Innovation, value-added and we are always more in the additional performance, additional quality, additional customer satisfaction, boost strategy but we are not going to attack our peers from below with products that are less good and cheaper.

On the amortization, yes, the items increased resulting from an increased investment for three years now in industrial. Sale, R&D, IT and also advertising on point-of-sales. So that’s normal and that's part and parcel of the Group’s growth drivers. Question over there.

Unidentified Analyst

[Interpreted]

I have two questions. Number one, what about growth in BRIM countries, you only mentioned Brazil? Secondly, what is your strategy for Decléor and Carita? And third question, every observation that you make or rather every brands within your group it looks extremely dynamic any disappointments this year except for the Body Shop?

Unidentified Company Representative

[Interpreted]

Nicolas, would you like to say a few words about Decléor and Carita?

Nicolas Hieronimus

[Interpreted]

Good morning, clearly our ambition is to provide further impetus to those two beautiful brands Decléor and Carita and upscale. This is the second leading professional beauty market segment. It is more dynamic than the hair care segment, That’s what I can say for now, because the acquisition has yet to be fully complete. It’s very interesting as far as your concerns.

This is one of the very few cosmetics market segments in which we did not operate, except for direct sales which shows not to go in this direction. We covered every channel except for that. And now professional skin care, beauty institutes, SPAs, professional beauty channels that is – there is no booty to it and it’s very much in line with our expertise in terms of product quality.

Beauty education, this is in line with the knowhow of our professional and yet we did not operate in this channel which is not really consolidated, there aren’t major players in this channel.

The kind of major players you find in other channels. So this is a brand new world as far as we are concerned and we are hoping to repeat the successes that we scored 30 years ago in the hair care sector.

Now Nicolas will talk about that next time. We are keeping that a surpass lead for now and also Brim five countries, the five countries growth was 9% in 2013 pretty much in par with 2012, slightly more than 9%. Brazil, 13.5% growth, Russia 7%, India 15%, Mexico a negative 3%. We have to make adjustments for sales policy in Mexico.

In China, slightly over 10% growth. So in total, the BRIM’s contribution to cosmetic’s revenue grew further this year. In total, BRIM countries account for 18% of our revenue. Other questions?

Unidentified Analyst

[Interpreted]

Couple of questions for me if I could. Firstly, within China, could you talk a little bit about what your growth rate might have been in coastal China and also in interior China, or Tier-1 China and ex Tier-1 China, however you guys split it?

Secondly, in new markets, clearly a very strong margin improvement there, if you look at there is a little bit of color on any particular countries within the new markets, but where you are particularly happy with the margin progression?

And then just lastly, we’ve seen you exit a couple of small businesses over the last six months after quite a long time and is this is sort of symptomatic of that bit of a change in how you view your portfolio and perhaps exiting some more small tail things we might see over the next few years? Thank you very much.

Unidentified Company Representative

[Interpreted]

Okay, so the first – the third question again, what’s clear is that we are reviewing very seriously all our businesses around the world and we are doing that altogether and we are really questioning businesses regarding their long-term potential, their growth potential and their, of course the profitability.

And when we see that, there is no growth potential, no growth at all and no profitability, I mean, definitely we question this business, that’s what we deal with [French] and we took the decision of stopping this business, because this business was going nowhere. It was highly dilutive in terms of growth and highly dilutive in terms of profitability. And so that’s what we are doing.

We are doing it – we’d say the L'Oreal way which means that we are keeping a long-term strategic vision on this thing, but when we think that there is no potential, I mean, there is no reason to keep a business that lose money and goes nowhere.

The first question was about, coastal China, central China, Tier-1, Tier-2, Tier-3, honestly I won’t give you that, first, because it’s private information and I don’t want our competitors to evolve that. What I can tell you is that globally, we estimate the market growth in China, around probably 7%, a bit higher than 7% last year and we grew above 10% and what we want to achieve in China is the same type of rhythm of growth but we want to achieve globally which is the 1.5 times market.

It’s an ambition, it’s not a guidance, it’s an ambition, but it’s the ambition that is shared with all divisions and all countries around the world. This is what is given to all our managers around the world which is to grow in their markets and their objective is to grow their markets at 1.5 times or above the rhythm of the market. So – and we are pretty confident that we will be able to do that in China in the year to come and the third question was, I lost it. Christian do you have.

Christian Mulliez

Some color on new markets.

Unidentified Company Representative

[Interpreted]

Color on new markets, in fact, we were quite happy with several strategic markets this year, I mean, Christian told you about Brazil and Brazil after several years where we were not delivered with the market, we had a good year and catching up and now we are growing above the level of the market. We are pretty also confident about Russia, Russia have been difficult.

You know Russia have been a great story for ten years, difficult for two three years and then we are back to growth to Russia and growing market share. What else? India, India, we are pretty – also doing pretty well in India. Countries like Indonesia and some starts like Turkey. Turkey is a fantastic country with a huge potential. We are still pretty small and we are growing above 20%. So it’s very, very positive.

Also Middle East in the new zone of – and we have some very many new territories to conquer like Dubai, like Saudi Arabia where we grow our business very strongly and of course all the new markets in Africa where we are already starting from zero. But, in fact we had many, many good stories in 2013 and we expect the same in 2014. Okay?

Unidentified Analyst

[Interpreted]

Could you please give the volume value split of growth over the full year and then any comments you can make on the outlook for 2014, both in terms of pricing but also competitive pressures. There is a lot of stories regarding the U.S. in particular about the increased competitive pressure there in Q3 and Q4?

Unidentified Company Representative

[Interpreted]

Okay, so the number for volume value as you know the total cosmetic 5.2 in 2013, volume was 3.6 and value was 1.6 with a good fourth quarter. So which means that we are keeping our ability to have value effects, increased value of our products.

Regarding the promotional pressure, I would say it’s pretty similar to what we had last year, obviously specially in the consumer division. It has been hair care, absolutely hair care has been a tough battle in 2013 for obvious reasons, because there has been a fight between two of our competitors who lost promotions and on top of that.

They were not totally happy with the delay of – for L'Oreal hair care. So, definitely it was a tough competitive environment. In Europe, it’s no major change and but it’s part of the game. We don’t see that as a major problem, we just have to take into consideration. Yes, question, well, if you don’t want more questions, we can stop and have a drink. No more questions?

Unidentified Analyst

[Interpreted]

Can you give an indication of the brands apart from that was in the luxury division, i.e. I think it has the most potential in travel retail.

Unidentified Company Representative

[Interpreted]

Yes, good, all of them. Really all of them, that’s – I think that’s what Barbara explained is that now there is such a diversity of consumers in airports or in the downtown shops that frankly all our brands as long as they have consumer appeal or have a great potential in travel retail. So some already there, and already big and some haven’t even started, when you saw the first shop of Clarisonic which is off to a great start, obviously, Urban Decay is not there yet. So there is more to come, but frankly, I think all our brands are really up to a great future in the travel retail world which is very dear to our hearts.

Good, well.

Unidentified Company Representative

[Interpreted]

Excellent, drinks wait. We’ll get to enjoy them earlier than planned. Without further ado, let’s close the session. Thank you very much and Happy New Year.

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