Long-term sustained growth of the cosmetics market. Ability to grow sustainably faster than the market

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1 1 Long-term sustained growth of the cosmetics market 2 Ability to grow sustainably faster than the market 3 Ability to improve margins for increasingly profitable growth 4 Ability to boost cash flows regularly and significantly 1

2 Worldwide cosmetics market * % % % *Excluding soaps and toothpastes 2006 provisional estimate

3 Worldwide cosmetics market 1992/2006* (in billions of dollars) Average annual growth rate, excluding exchange rate impact % % % % % +5.4 % +5.5 % +5.3 % +4.9 % % +4.6 % % % % +3.4 % +3.5 % *Excluding soaps and toothpastes 2006 provisional estimate 3

4 Cosmetics market * Growth in constant currencies % % +3.4 % France % % % Germany % % % UK % % % Italy % % % Spain % % % Western Europe *Excluding soaps and toothpastes 2006 provisional estimate

5 Cosmetics market * Growth in constant currencies % % % Professional Products % % +0% Mass market % % % Luxury market % % % 2004 North America Source NPD, Nielsen, Market and internal Studies Retail sales *Excluding soaps and toothpastes 2006 provisional estimate 5

6 Cosmetics market * Growth in constant currencies Japan *Excluding soaps and toothpastes 2006 provisional estimate % % % 6

7 Cosmetics market * Growth in constant currencies Rest of the World *Excluding soaps and toothpastes 2006 provisional estimate % % % 7

8 Worldwide and emerging cosmetics markets * Index 100 = 1996 Emerging countries Worldwide market *Excluding soaps and toothpastes 2006 provisional estimate Growth in constant currencies 8

9 Pourcentage Weight of emerging countries in worldwide cosmetics market and pourcentage contribution to cosmetics market growth 70% 65% Pourcentage contribution to cosmetics market growth 60% 55% 50% 45% 40% 35% Pourcentage Weight of emerging countries in worldwide cosmetics market 30% 25% 20% *Excluding soaps and toothpastes 2006 provisional estimate 9

10 BRIMC countries Real GDP Growth rate % 6.48 % 7% 6.08 % 7% 6% 5.28 % 6% 5% 5% 4% 4.16 % 3.72 % 4% 3% Real GDP (based on Purchasing Power Parity) Source: IMF International monetery Fund, World Economic Outlook 10

11 Breakdown of world population (in millions) by income bracket 70 million Millions of inhabitants 3500 new potential consumers every year for L'Oréal Middle Class* Source: World Bank *Middle Class: per capita income between and $ PPP High-income

12 Per capita cosmetics consumption (manufacturer s price) as an index Index 100 = Russia Brazil 400 China India Mexico Source: Euromonitor 12

13 1 Long-term sustained growth of the cosmetics market 2 Ability to grow sustainably faster than the market 3 Ability to improve margins for increasingly profitable growth 4 Ability to boost cash flows regularly and significantly 13

14 Consolidated sales growth 2006 (in millions of euros) Like-for-like Growth:

15 2006 like-for-like sales growth, per quarter 7% +6.0% +6.5% +5.6% 6% +5.2% 5% 4% 3% 2% 1% 0% Q1 Q2 Q3 Q4 15

16 Consolidated sales growth Published growth + 8,7 % % % % % %

17 Consolidated sales 2006 (in millions of euros) M

18 Western Europe: + 3.5% Scandinavia +7% +5.7% +1.7% +1.9% +6.1% Cosmetics sales Like-for-like growth +2.4% 18

19 North America: Cosmetics sales Like-for-like growth % 19

20 Mass-Premium make-up market share of L Oréal Paris and Revlon from 1984 to 2006 Data Source: ACNielsen, Total US Outlets 1999 based on Total US Outlets Excluding Wal-Mart 2000 and forward based on FOOD/DRUG/KMART/TARGET 2002 and forward Nielsen Database Event/Refresh 20

21 Fructis market share and ranking, USA 6.5% 7% 5.9% 6% 4.6% 5% 4% 2.4% 3% 2% 1% 0% n Source AC Nielsen Shampoo, haircare, conditioners 3 n 5 n n

22 Cosmetics sales Weight of geographic zone * Western Europe 72.9 % 64.3 % 50.6 % 46.6 % North America 19.1 % 20.2 % 30.3 % 26.3 % 8.0 % 15.5 % 19.1 % 27.1 % Rest of the World (*): The 1990 sales figures includes the sales of L Oréal USA and L Oréal Canada French gap. 22

23 Rest of the World: % Cosmetics sales Like-for-like growth

24 Eastern Europe: % Russia +21.4% Ukraine Tchech Republic Poland n.s % +21.7% Cosmetics sales Like-for-like growth 24

25 Latin America: % +12.7% Mexico Brazil +15.3% Chile +14.7% Argentina +26.4% Cosmetics sales Like-for-like growth 25

26 China: % Cosmetics sales Like-for-like growth

27 Yue-Sai: The Chinese affordable Luxury Brand counters 200 cities May counters 250 cities

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29 Japan: % Cosmetics sales Like-for-like growth

30 India: % Cosmetics sales Like-for-like growth

31 2006 Cosmetics sales Growth per Division with and without North America Cosmetics Sales Growth Cosmetics Sales Growth without North America Professional Products % % Consumer Products % % Luxury Products % % % % % % Active Cosmetics Total cosmetics 31

32 The 6 cylinders driving the growth engine Technological innovation Creation of blockbusters Product value enhancement Brand power Globalisation Acquisitions 32

33 PRO-XYLANE

34 L OREAL

35 Proportion of people over 50 in Europe, the United States and Japan % % % Source: United Nations, World Population prospects

36 Average spending on Beauty Products per age group 180 Consumption index Base: age group = Secodip-France > 60 36

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38 Cosmetics Like-for-like growth Volume / Value evolution % % % % % % Effet Volume Volume Effect 2006 Effet Valeur Value Effect 38

39 A diversified brand portofolio Professional Products MIZANI Consumer Products Luxury Products Active Cosmetics The Body Shop 39

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48 The Body Shop Sales 2nd half-year Variation As a % Retail sales(1) % Retail sales with a comparable store base(2) % Consolidated sales % Retail sales: Total sales to consumers through all channels. Retail sales with a comparable store base: total sales to consumers by stores which operated continuously from July 1st to December 31st, 2005, and over the same period in (1) (2) 48

49 Retail sales, breakdown by geographic area Variation % of Sales As a % Western Europe 45.5 % % North America 21.5 % % Rest of the World 33.0 % % % % Total 49

50 Opening of 89 new stores, second half-year 2006* 2nd Half 2006 Western Europe North America *Balance of store openings and closures 15 8 Rest of the world 66 Total 89 50

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52 L Oréal market share* % *Excluding soaps and toothpastes 2006 provisional estimate 2006 without The Body Shop 15.2 % 2006 with The Body Shop 15.6 % 52

53 The 6 cylinders driving the growth engine Technological innovation Creation of blockbusters Product value enhancement Brand power Globalisation Acquisitions 53

54 1 Long-term sustained growth of the cosmetics market 2 Ability to grow sustainably faster than the market 3 Ability to improve margins for increasingly profitable growth 4 Ability to boost cash flows regularly and significantly 54

55 Consolidated profit and loss accounts without The Body Shop From sales to operating profit (in millions of euros) % of Sales without The Body Shop Sales 14, % 15, % Cost of sales - 4, % - 4, % Gross profit 10, % 10, % Research and development % % Advertising and promotion % - 4, % Selling, general and adm. expenses - 3, % - 3, % 2, % 2, % % % 2, % 2, % Operating profit before foreign exchange gains and losses Foreign exchange gains and losses Operating profit % of Sales + 5.7% + 7.4% + 9.8% + 9.6% 55

56 Industrial purchasing 37 decentralized sourcing centers 7 sourcing centers for the world 56

57 Cosmetics plants labour productivity index* *2003 = Base

58 Consolidated profit and loss accounts without The Body Shop From sales to operating profit (in millions of euros) % of Sales without The Body Shop Sales 14, % 15, % Cost of sales - 4, % - 4, % Gross profit 10, % 10, % Research and development % % Advertising and promotion % - 4, % Selling, general and adm. expenses - 3, % - 3, % 2, % 2, % % % 2, % 2, % Operating profit before foreign exchange gains and losses Foreign exchange gains and losses Operating profit % of Sales + 5.7% + 7.4% + 9.8% + 9.6% 58

59 Research budgets In millions of euros %

60 Consolidated profit and loss accounts without The Body Shop From sales to operating profit (in millions of euros) % of Sales without The Body Shop Sales 14, % 15, % Cost of sales - 4, % - 4, % Gross profit 10, % 10, % Research and development % % Advertising and promotion % - 4, % Selling, general and adm. expenses - 3, % - 3, % 2, % 2, % % % 2, % 2, % Operating profit before foreign exchange gains and losses Foreign exchange gains and losses Operating profit % of Sales + 5.7% + 7.4% + 9.8% + 9.6% 60

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62 Consolidated profit and loss accounts without The Body Shop From sales to operating profit (in millions of euros) % of Sales without The Body Shop Sales 14, % 15, % Cost of sales - 4, % - 4, % Gross profit 10, % 10, % Research and development % % Advertising and promotion % - 4, % Selling, general and adm. expenses - 3, % - 3, % 2, % 2, % % % 2, % 2, % Operating profit before foreign exchange gains and losses Foreign exchange gains and losses Operating profit % of Sales + 5.7% + 7.4% + 9.8% + 9.6% 62

63 Consolidated profit and loss accounts without The Body Shop From sales to operating profit (in millions of euros) % of Sales without The Body Shop Sales 14, % 15, % Cost of sales - 4, % - 4, % Gross profit 10, % 10, % Research and development % % Advertising and promotion % - 4, % Selling, general and adm. expenses - 3, % - 3, % 2, % 2, % % % 2, % 2, % Operating profit before foreign exchange gains and losses Foreign exchange gains and losses Operating profit % of Sales + 5.7% + 7.4% + 9.8% + 9.6% 63

64 Operating profit Divisions (as % of sales) Professional Products 19.7 % 20.8 % Consumer Products 17.2 % 18.0 % Luxury Products 20.2 % 20.6 % Active Cosmetics 19.0 % 19.6 % Cosmetics divisions total 18.4 % 19.1 % 64

65 Cosmetics Operating profit Geographic zone % CA % CA Western Europe 21.0 % 21.8 % North America 18.3 % 18.8 % Rest of the world 13.5 % 14.5 % Total of geographic zones 18.4 % 19.1 % 65

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67 Main indicators Impact The Body Shop (in millions of euros) Without The Body Shop 2006 Sales 15, % Operating profit 2, % Profit before tax and non-recurrent items 2, % Net profit 1, % Per share* % 15, % Operating profit 2, % Profit before tax and non-recurrent items 2, % Net profit 1, % Per share* % (excluding non-recurrent items) % like-for-like growth % of sales % of sales after minority interests Growth Published figures + 5.7% 16.2% 16.9% Group (excluding non-recurrent items) Sales % expansion comparable % of sales % of sales excluding non-recurrent items after minority interests + 5.8% 16.1% 16.7% * Diluted net earning per share on net profit excluding non-recurrent items after priority interests 67

68 Dividend per share 1.18 * *Proposed at the shareholder s meeting to be held on April 24th,

69 1 Long-term sustained growth of the cosmetics market 2 Ability to grow sustainably faster than the market 3 Ability to improve margins for increasingly profitable growth 4 Ability to boost cash flows regularly and significantly 69

70 Cash flow statement (in millions of euros) , , Gains and losses on disposals of assets, change in deffered tax and others Cash flow 2, , Investments Operating net cash 1, ,730.7 Dividends paid , , Net income Depreciation and provisions Change in working capital requirement Divestments and others Residual cash flow (before acquisitions or disposals) Acquisitions Residuael cash flow after acquisitions % % 70

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