Strong sales growth
+9.4% based on reported figures; +7.7% like-for-like

Operating profitability up by 50 basis points
to 17.6% of sales*

Net earnings per share growth : +10.7%
compared with a very high 2006 base

Annual sales growth target raised :
between +7% and +8% like-for-like

Strengthened confidence in another year of double-digit
net earnings per share growth


Commenting on the results, Mr Jean-Paul Agon, Chief Executive Officer of the L'Oréal group, said:

"The first half was marked by strong sales growth and good quality results, which increased significantly compared to a very high reference base.

There was a clear acceleration in sales, reflecting the contributions made by all Divisions. The upturn in growth is being confirmed in Western Europe, a gradual improvement is being made in North America and the pace is accelerating in the Rest of the World.

Operating profitability, excluding The Body Shop, has advanced by 50 basis points. This improvement can be attributed to the product value enhancement policy and continuing cost cutting efforts. Despite a very high comparison base in the first half of 2006 and the negative impact of exchange rates, the group achieved double-digit growth in net earnings per share.

In view of the strong first-half sales growth and the prospect of sustained dynamism up to the end of the year, we are raising our like-for-like sales growth target to the +7% to +8% range, which is at the upper end of our medium-term growth target of +6% to +8%.

The quality of these results strengthens our confidence in our ability to achieve another year of double-digit net earnings per share growth in 2007."


* excluding The Body Shop, which has been consolidated since July 1st 2006, and whose profits are almost entirely made in the second half of each year.

Strong sales growth

• The sales of the L'Oréal group, at June 30th 2007, amounted to 8.51 billion euros, an increase of + 9.4% (based on reported figures). Like-for-like (i.e. based on a comparable structure and identical exchange rates) the increase in the group’s sales was + 7.7%. The net impact of changes in consolidation, as a result of the acquisitions of The Body Shop and Sanoflore in 2006, Beauty Alliance and PureOlogy in 2007 amounted to + 5.2%. Currency fluctuations had a negative impact of - 3.5%. Growth excluding the exchange rate impact was + 12.9%.

• The news release of July 12th 2007 sets out in detail the activity of the cosmetics divisions and the geographic zones for the first half of 2007. This news release is available on the site www.loreal-finance.com and can be downloaded.

• The table of cosmetics sales by division and by geographic zone is provided in the appendix.

Operating profitability up by 50 basis points*

Consolidated profit and loss account, from sales to operating profit

The Body Shop, consolidated since July 1st 2006, has an operating profile which is quite different from that of the L'Oréal group as a whole. In the interest of visibility and comparability of performance, the table below sets out the operating items of L’Oréal with and without The Body Shop.
  A   B   C   C/A
€m June 30th 2006 As %
of sales
30.06.2007 without The Body Shop As %
of sales
30.06.2007 with The Body Shop As %
of sales
Growth
Sales 7,785.5 100% 8,173.8 100% 8,514.3 100% +9.4%
Cost of sales -2,219.0 28.5% -2,322.0 28.4% -2,428.4 28.5%  
Gross Profit 5,566.5 71.5% 5,851.8 71.6% 6,085.9 71.5%  
Research and
development expenses
-253.9 3.3% -270.9 3.3% -272.4 3.2%  
Advertising and promotion
expenses
-2,360.9 30.3% -2,523.6 30.9% - 2,599.1 30.5%  
Selling general and
administrative expenses
-1,575.0 20.2% -1,625.3 19.9% -1,777.3 20.9%  
Foreign exchange gains -43.3 0.6% +7.6 0.1% +3.8 -  
Operating profit 1,333.4 17.1% 1,439.5 17.6% 1,440.9 16.9% +8.1%

Consolidated profit and loss accounts without The Body Shop

Gross profit amounted to € 5,852m, at 71.6% of sales.

Two factors had an impact on the gross profit trend in the first half of 2007. The first was the non recurrent profits in inventories resulting from the American acquisitions in the Professional Products Division amounting to € 13.4m; the second was the exchange gains and losses recorded in the profit and loss accounts, of which it is estimated some three-quarters affected gross profit. If these two factors are stripped out, gross profit in the first half of 2007 compared with the first half of 2006 would have increased by +70 basis points, reflecting ongoing efforts in product value enhancement, plant productivity and purchasing cost control.

* excluding The Body Shop, which has been consolidated since July 1st 2006, and whose profits are almost entirely made in the second half of each year.

Research and Development expenses, which grew by +6.7% represented 3.3% of sales.

Advertising and Promotion expenses came out at € 2,523m. They thus increased by +6.9%, and represented, in the first half of 2007, 30.9% of sales.

Selling, General and Administrative expenses amounted to € 1,625m, representing 19.9% of sales, compared with 20.2% in the first half of 2006.

After allowing for a foreign exchange gain of € 7.6m, operating profit totalled
€ 1,439.5m. This represents 17.6% of sales, a clear improvement on the first half of 2006, when it stood at 17.1% of sales.

Consolidated profit and loss accounts with The Body Shop

The profits of The Body Shop are almost entirely made in the second half of each year. In the first half of 2007, The Body Shop recorded an operating profit of € 1.4m. In the second half of 2006, its operating profit amounted to € 58.3m.

The operating item totals including The Body Shop are as follows:

Sales reached € 8,514m, up by +9.4%.

Gross profit amounted to € 6,086m.

After foreign exchange gains and losses, operating profit came out at € 1,441m, or 16.9% of sales. It was thus +8.1% higher than in the first half of 2006, when the growth rate was very high at +19.6%.

Operating profit by branch and division

  June 30th 2006 June 30th 2007
  €m % of sales €m % of sales
By operational division
Professional Products 224.0 20.9% 245.6 21.3%
Consumer Products 799.8 19.6% 879.9 20.6%
Luxury Products 327.3 18.3% 350.3 19.1%
Active Cosmetics 178.7 27.4% 177.9 24.8%
Cosmetics divisions total 1,530.8 20.1% 1,651.4 20.6%
Non-allocated* -214.2 -2.8% -225.6 -2.8%
Cosmetics branch 1,316.6 17.2% 1,425.8 17.8%
The Body Shop - - 1.4 0.4%
Dermatology branch(1) 16.8 11.0% 13.7 8.6%
Group 1,333.4 17.1% 1,440.9 16.9%
* Non-allocated = Central group expenses. fundamental research expenses. stock option expenses and miscellaneous items. As % of total sales.
(1) Group Share: ie 50%
The profitability of the cosmetics Divisions improved, rising from 20.1% of sales in the first half of 2006 to 20.6% in the same period in 2007.

The profitability of the dermatology branch, Galderma, was lower in the first half of 2007 because of substantial research investments. Its profitability should increase significantly in the second half of 2007.

Net earnings per share growth: +10.7% compared with a very high 2006 base

Consolidated profit and loss account, from operating profit to net profit excluding non-recurrent items

€m June 30th 2006 June 30th 2007
with The Body Shop
Growth
Operating profit 1,333.4 1,440.9 +8.1%
Finance costs -45.9 -75.4  
Other financial income (expenses) -0.9 -2.7  
Sanofi-Aventis dividends 217.4 250.4  
Share in net profit of equity affiliates - 0.2  
Profit before tax excluding non-recurrent items 1,504.1 1,613.4 +7.3%
Income tax excluding non-recurrent items -417.2 -431.2  
Minority interests -1.0 -1.1  
Net profit excluding non-recurrent items
after minority interests (1)
1,085.9 1,181.1 +8.8%
Net EPS * (in euros) 1.76 1.94 +10.7%
Net profit after minority interests 1,086.7 1,177.6  
Diluted net EPS after minority interests (€) 1.76 1.94  
Diluted average number of shares 618 628 946 607 695 515  
* Diluted net earnings per share excluding non-recurrent items. after minority interests.
(1) Net profit excluding non-recurrent items after minority interests does not include capital gains and losses on disposals of long-term assets. impairment of assets. restructuring costs. associated tax effects or minority interests.
Finance costs amounted to € 75m, an increased figure reflecting higher interest rates, particularly in the United States and Europe, the acquisitions of The Body Shop, Sanoflore, Beauty Alliance and PureOlogy, and the continuation of the share buyback programme.

The dividend received from Sanofi-Aventis for 2006 amounted to € 250m, an increase of +15%.

Profit before tax excluding non-recurrent items amounted to € 1,613m, an increase of +7.3%.

Income tax excluding non-recurrent items amounted to € 431m.

Net profit after minority interests amounted to € 1,178m, up by 8.4% compared with the first half of 2006.

Net profit excluding non-recurrent items after minority interests totalled € 1,181m, up by +8.8%. After allowing for the positive impact of share buybacks, EPS amounted to € 1.94, up by +10.7 %, compared with an EPS of € 1.76 in the first half of 2006, when growth was very strong at +25.2%. • Cash flow/Balance sheet

Gross cash flow amounted to € 1,455m, an increase of +8.5%. This increase is in line with the rate of earnings growth.

Net debt totalled 4.46 billion euros at June 30th, 2007.

The balance sheet structure is solid. Shareholders' equity represents 54% of total assets. The decline in this figure compared with December 31st 2006 primarily reflects the combined effect of the dividend payment, share buybacks, the lower market capitalisation of Sanofi-Aventis, and, on the other hand, the profit for the period.