1998 Net Profit: up 12.1% Dividend up 15.6%

At its meeting of 7 April 1999, chaired by Mr. Lindsay OWEN-JONES and held in the presence of the Statutory Auditors, the Board of Directors of L'OREAL reviewed the Group's consolidated accounts and those of its parent company, L'OREAL S.A., for the 1998 financial year.
FF billions Euros billions % change
Sales 75.42 11.49 + 9.1 %
Operating profit 9.49 1.45 + 9.1 %
Adjusted operating profit* 9.56 1.46 + 13.6 %
Profit on ordinary activities before taxation and
employee profit sharing
8.78 1.34 +13.1 %
Net profit before capital gains and losses,
after minority interests
4.71 0.72 +12.1 %
Earnings per share (FF and euro) 69.72 FF 10.63 euros +12.1 %
Cash flow 7.3 1.1 + 8.3 %
Shareholders' equity 32.4 4.9 + 7.6 %
Debt to equity ratio** (per%) 13% - - 2.65 %

Financial Results

The estimated results published in February were confirmed and remained in line with forecasts. Profit on ordinary activities before taxation and employee profit sharing rose 13.1% to FF 8.78 billion (euro1.34 billion), thus marking the fourteenth consecutive year of double-digit growth. Despite a 15.4% increase in the Group's corporate tax charge, consolidated net profit before capital gains and losses and after minority interests increased by 12.1% to reach FF 4.71 billion (euro 0.72 billion).


Consolidated cosmetics sales climbed to FF 61.54 billion (euros 9.38 billion), up by 9.6% on 1997, or by 11.9% excluding exchange rate fluctuations. Like-for-like growth stood at 10.6%, the best performance on record since 1990.

In Western Europe, sales grew by 11.8%, or 12.1% excluding exchange rate fluctuations. Exceptional levels of sales growth were reported in Spain (+17%), the United Kingdom (+20%), the Netherlands (+22%) and Finland (+24%).

Sales in North America grew by 12.7%, or 12.3% excluding exchange rate fluctuations. In this region, L'OREAL holds front-running positions in hair colourants and make-up segments. In the United States, the acquisition of Soft Sheen, a leader in ethnic haircare, will enable the Group to develop a position within a new, highly promising market.

In the rest of the world, efforts to step up global expansion went ahead, unaffected by economic fluctuations. Business volumes increased significantly in Mexico (+28%), Hungary (+33%), China (+63%) and Turkey (+133%), as well as in India (+124%) where the Group is currently establishing a market presence.
Expenditure on research and development rose 12.6%, representing a higher rate of growth than the overall increase in cosmetics sales.

The decision to focus on core businesses requiring high levels of technological specialisation involves a consistent policy of rapidly expanding R&D endeavours in these areas.

The Group's production centres pursued ongoing refocusing efforts while keeping pace with the strong development in hair colourant and make-up ranges. During the year, the Group also increased production capacity by extending its Polish facility and completing construction of a new industrial plant in China.


In 1998, Galderma's sales increased to FF 2 billion (over euros 300 million)(1), up by 24.9%, or 25.3% excluding exchange rate fluctuations. Leading dermatology products such as Differin gel, Rozex and Metrogel continued to gain ground on high-potential markets. Globalisation was significantly boosted by new product launches, notably in Asia and Latin America. Galderma also strengthened its presence in Scandinavia and South Korea.


Sales for the pharmaceuticals division rose to FF 12.53 billion (euro 1.91 billion), up by 6.8%, or by 8% excluding exchange rate fluctuations. In spring 1998, Synthélabo signed an agreement with Searle which will enable it to consolidate 100% of Lorex in 2002. At end-1998, L'OREAL and Elf announced their intention to merge their two pharmaceuticals subsidiaries into a new company, Sanofi-Synthélabo, which would become the leading pharmaceuticals group in France and the sixth-largest in Europe.


At the Annual General Meeting, the Board of Directors will propose a net dividend of FF18.50 (approx. euros 2.82) plus tax credit of FF9.25 (approx. euro 1.41). This compares with a net dividend of FF16 paid in 1998, on the same number of shares and investment certificates as last year (67,606,216). The dividend will be payable as of 15 June 1999.

(1) L'OREAL's interest, i.e. 50%