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REGISTRATION
DOCUMENT
2011
ANNUAL FINANCIAL REPORT

Table of contents

  • Page 1
    REGISTRATION DOCUMENT 2011 ANNUAL FINANCIAL REPORT

  • Page 2
    ...1.7. 1.8. 1.9. Mission History Business activities and strategy International and cosmetics market Research and innovation: excellence, to meet the needs of all markets Operations Investment policy Risk factors Information policy 3 4 5 5 8 12 14 17 17 24 5 2011 parent company Financial Statements...

  • Page 3
    2011 Registration Document Annual Financial Report In application of Article 212-13 of the General Regulation of the Autorité des Marchés Financiers (AMF), this Registration Document was filed with the AMF on March 14th, 2012. This Registration Document may be used in connection with a financial ...

  • Page 4
    2 REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011

  • Page 5
    ...al and its partners: working together to innovate 1.1. Mission 1.2. History 14 14 14 14 14 14 1.3. Business activities and strategy 5 1.3.1. The foundations of a winning strategy 1.3.2. An organisation that serves the Group's development 5 6 1.4. International and cosmetics market 1.6.6. Strong...

  • Page 6
    ... to one business: beauty. It is a business rich in meaning, as it enables all individuals to express their personalities, gain self-confidence and open up to others. Beauty is a language. L'Oréal has set itself the mission of offering all women and men worldwide the best of cosmetics innovation in...

  • Page 7
    ... of winning over one billion new consumers. 2010 - Acquisition of Essie Cosmetics in the United States. 2011 - Acquisition of Q-Med, by Galderma, and of Clarisonic. 1 1.3. Business activities and strategy 1.3.1. The foundations of a winning strategy 1.3.1.1. A growth market: an immense potential...

  • Page 8
    ... innovation, the Group's ambition is to conquer a billion new consumers over the next 10 to 15 years. ♦ the Consumer Products Division offers the best in cosmetic innovations at accessible prices in all mass-market retail channels (hypermarkets, supermarkets, drugstores and traditional stores) on...

  • Page 9
    ...years, the laboratory Galderma crossed the threshold of one billion euros in sales in 2010, confirming its place as one of the leaders in dermatology. 1 (1) Cosmetics Branch Professional Products Division Consumer Products Division L'Oréal Luxury Division Active Cosmetics Division The Body Shop...

  • Page 10
    ... Resources President Professional Products Division Executive Vice-President Asia, Pacific Zone 1.4. International and cosmetics market 1.4.1. A historical presence in developed markets L'Oréal is present in 130 countries in all 5 continents. Founded in France in 1909, the Group developed rapidly...

  • Page 11
    ... dozen million inhabitants have access every year to levels of revenues which make them part of the "middle classes" and allow them to consume modern cosmetics products. The marketing teams, in particular in large countries, pay heed to these new consumers.The laboratories on all continents study...

  • Page 12
    ...of the Group International and cosmetics market NORTH AMERICA 23.3% OF GROUP COSMETICS SALES +5.5% Sales growth in 2011(1) +4.3% Market growth in 2011 Sales: 4,406 Mâ,¬ Operating profit: 18.4% (% of sales) (2) WESTERN EUROPE 38.4% OF GROUP COSMETICS SALES +0.6% Sales growth in 2011(1) +0.7% Market...

  • Page 13
    ... up their magic for consumers. Main worldwide players(2) (in billion of US dollars) 25.89 19.57 16.98 8.29 7.75 L'Oréal Procter & Gamble Unilever Estée Lauder Shiseido Competitive positions and market shares held by the Group's divisions and brands mentionned in this report are based on...

  • Page 14
    ...hair enables L'Oréal's researchers to think up new concepts which lead to the synthesis of new molecules.The Group subsequently multiplied the number of patent filings (613 in 2011) and developed a large number of active principles, the main ones being at the source of the Group's flagship products...

  • Page 15
    ...the launch of an innovative product are connected to the market. There is a veritable interaction between research and marketing. This approach is closely related to the Group's development strategy in the New Markets. Consumers in India are not the same as those in China or in Europe.Their cosmetic...

  • Page 16
    ... With locations all over the world, the Group's plants produce 87% of cosmetics units sold.This choice of in-house production offers a guarantee of quality and traceability and reduces risks. Plants are generally dedicated to the production of one Operational Division and a limited number of product...

  • Page 17
    ... Libramont (Belgium), the Group has developed a 100% 1 41 industrial sites worldwide EUROPE NORTH AMERICA LATIN AMERICA AFRICA, MIDDLE EAST ASIA, PACIFIC Active Cosmetics: 2 factories Professional Products: 3 factories L'Oréal Luxury : 5 factories Consumer Products: 23 factories Raw Materials...

  • Page 18
    ...next billion consumers in the emerging markets, the Group launched a new plant in Russia in 2011. In 2012, three other sites are scheduled to open in Mexico, Indonesia and Egypt. Cosmetics investments (production and supply chain commitments, â,¬ millions) Comparable product purchasing price index...

  • Page 19
    ... of research teams and enhancement of the value of brands. The 866 million euros that were invested in 2011 can be broken down as follows: 1 2. ♦ production and physical distribution represent 37.6% of the total investments; ♦ marketing investments, including moulds, POS and stores account...

  • Page 20
    ... best positions and launch the most attractive and most effective product ranges, with an optimal price/quality ratio, winning market share, improving operating profitability and thereby ensuring growth are a permanent challenge. ♦ vigilance with regard to any new scientific data; ♦ cooperation...

  • Page 21
    ... field for many years. In order to protect the Group against the risk of another company claiming one of its molecules, a production process or packaging, L'Oréal has set up a specific structure, the International Industrial Property Department as part of the Research and Innovation Division; this...

  • Page 22
    ... affect, the financial situation, assets or operations of the Company and the L'Oréal Group. 1.8.3.3. Environment, Health and Safety (EHS) The cosmetics industry has a limited environmental risk profile. However, as is the case for any production, distribution, research and general administration...

  • Page 23
    ... Detailed information on EHS risks and the way they are managed is available in the Group's Sustainable Development Report which is accessible on-line at www.loreal.com. 1.8.4. Counterparty risk The Group enters into financial relations in priority with international banks and insurance companies...

  • Page 24
    ... sale of items and products are carried out between subsidiaries in different countries. Procurement by subsidiaries is mainly made in the currency of the supplier's country. In order to limit currency risk, the Group adopts a conservative approach of hedging at year-end annual requirements for the...

  • Page 25
    ... standards applied by the Group in managing its operations and in designing and manufacturing its products. The health and safety of consumers and employees is a constant priority at all levels of Group operations. 1.8.7.7. Core commodity risk The production of cosmetics depends on the purchase...

  • Page 26
    ... are looking for full information on the life of the Group, offers animated information, enriched with a large number of documents, videos, interviews and testimonials. L'Oréal adventure was published in the autumn of 2011 for the Actionaria Stock Market fair. This publication, which has innovative...

  • Page 27
    ...financial communication, or development of the cosmetics market. In 2011, the Shareholder Consultation Committee met 4 times; ♦ the Investor Relations Department organises numerous meetings throughout the year with institutional investors of the main international financial market places. In 2011...

  • Page 28
    26 REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011

  • Page 29
    ...and corporate officers in L'Oréal shares in 2011 2.5. Internal Control procedures 2.5.1. Definition and objectives of Internal Control 2.5.2. Components of the system 2.5.3. The players 2.5.4. Internal Control system relating to the preparation and processing of financial and accounting information...

  • Page 30
    ... organised, and on the Internal Control and risk management procedures put in place by the Company, describing in particular those of its procedures that relate to the preparation and processing of accounting and financial information for the parent company financial statements and, where applicable...

  • Page 31
    ...at operational level and there is a process for the regular review of risks. 2 2.2.1. Composition of the Board of Directors The composition of the Board of L'Oréal, the rules it applies to its work, its modus operandi, and the work that it has carried out in the year, evaluated on an annual basis...

  • Page 32
    ... 12 years but his professional experience and his freedom of judgment, combined with his good knowledge of the Company, make a big contribution to the Board's discussions and decisions. It is furthermore specified that a review was carried out of the financial flows that took place in 2011 between...

  • Page 33
    ... the share price. Such inside information may, in particular, fall into one of three main categories: strategic, linked to the definition and application of the Group's growth strategy; recurring, linked to the annual schedule for production and publication of annual and interim financial statements...

  • Page 34
    ... of the Strategy and Sustainable Development Committee [since March 18th, 2011] Professional address: L'Oréal - 41 rue Martre - 92117 Clichy cedex - France Holds 31,500 L'Oréal shares Other corporate offices and directorships held French company L'Air Liquide S.A. Foreign companies Galderma Pharma...

  • Page 35
    ...[since March 18th, 2011] Chairman of the Strategy and Sustainable Development Committee [until March 17th, 2011] Professional address: L'Oréal - 41 rue Martre - 92117 Clichy cedex - France Holds 3,029,005 L'Oréal shares Other corporate offices and directorships held French companies Alba Plus SASU...

  • Page 36
    ... 27,500 L'Oréal shares Main corporate office held outside L'Oréal Nestlé S.A. (Switzerland) Other corporate offices and directorships held Foreign companies Credit Suisse Group (Switzerland) Delta Topco Limited (Jersey) Exxon Mobil (United States) Nestlé Health Science S.A. (Lutry, Switzerland...

  • Page 37
    ...Board's work is prepared and organised Liliane Bettencourt French Age: 89 Director since 1995, end of term of office: February 13th, 2012. Member of the Strategy and Sustainable Development Committee Professional address: Téthys - 27-29 rue des Poissonniers - 92200 Neuilly-sur-Seine - France 5,633...

  • Page 38
    ... 2005 Professional address: Nestlé - Avenue Nestlé, 55 - CH 1800 Vevey - Switzerland Holds 2,165 L'Oréal shares Main corporate office held outside L'Oréal Nestlé S.A. (Switzerland) Other corporate offices and directorships held Foreign companies Galderma Pharma S.A. (Switzerland) GEA-Group AG...

  • Page 39
    ...Strategy and Sustainable Development Committee Professional address: Nestlé - Avenue Nestlé, 55 - CH 1800 Vevey - Switzerland Holds 3,500 L'Oréal shares Main corporate... of the Board Corporate offices and directorships over the last five years that have expired Foreign companies Alcon, Inc. ...

  • Page 40
    ... - France Professional address: Citigroup France - 1-5 rue Paul Cézanne - 75008 Paris - France Holds 2,000 L'Oréal shares Main corporate offices held outside L'Oréal Octagones (parent company) and Alfina (subsidiary) Citigroup France Other corporate offices and directorships held French companies...

  • Page 41
    ... Strategy and Sustainable Development Committee Professional address: 1 rue Saint-James - 92200 Neuilly-sur-Seine - France Holds 1,525 L'Oréal shares Other corporate offices and directorships held French company Arkema S.A. Director Foreign company Nucor (United States) Director Corporate offices...

  • Page 42
    ... Professional address: Fimalac - 97 rue de Lille - 75007 Paris - France Holds 32,340 L'Oréal shares Main corporate office held outside L'Oréal F. Marc de Lacharrière (Fimalac) Other corporate offices and directorships held French companies Agence France Museums Casino Gilbert Coullier Productions...

  • Page 43
    ... Director since 2007 Professional address: Les Embruns - 16 boulevard de la Mer - 85800 Saint-Gilles-Croix-de-Vie - France Holds 1,000 L'Oréal shares Main corporate office held outside L'Oréal Bénéteau S.A. (1) (2) Other corporate offices and directorships held French companies Beri 21 S.A. Vice...

  • Page 44
    ... of the Strategy and Sustainable Development Committee [since April 22nd, 2011] Professional address: Renault - Bât. Pierre Dreyfus - 8-10 avenue Emile Zola - 92109 Boulogne-Billancourt Cedex - France Holds 2,000 L'Oréal shares Other corporate offices and directorships held French companies BNP...

  • Page 45
    ... with legal requirements, and is also conducive to good corporate governance. Appointed by shareholders, the Directors control the economic and financial management of the Group and participate in determining its strategy. They review and approve the main lines of action adopted by the General...

  • Page 46
    ...♦ sharing the Group's development through good corporate citizenship. The committee reported to the Board on all its work. The Audit Committee The main remit of the Audit Committee involves monitoring the process for preparation of financial information, the effectiveness of the Internal Control...

  • Page 47
    ... de Lacharrière, who has been a Director of L'Oréal for over 12 years, it considered that his professional experience and his freedom of judgment, combined with his good knowledge of the Company, make a big contribution to the Board's discussions and decisions. At the Board of Directors' request...

  • Page 48
    ... presence of the senior managers who are members of the Executive Committee. Once again this year, the approach to strategy was examined in detail in the course of the Board's work in light of the development of the brands, the countries and the markets on which the Group operates and, within this...

  • Page 49
    ... work and reports thereon to the Shareholders' Annual General Meeting. The Chairman is actively involved in defining the Company's growth strategy and encourages and strengthens, inter alia, links between the Company and the main market players. The Chairman oversees the work of the Company's bodies...

  • Page 50
    ... to enable it to identify and manage the economic, financial and legal risks facing the Group inside and outside France in carrying out its normal and exceptional operations.This is in order to avoid the possibility of any impairment of the value of the Company's assets. Without prejudice to the...

  • Page 51
    ... committee of significant Internal Control weaknesses, with regard to the procedures for preparation and processing of accounting and financial information, and provide it with the documents required by law every year. The committee can also, in agreement with the General Management, consult other...

  • Page 52
    ...main strategic lines of development, options and projects presented by the General Management, and their economic and financial consequences; ♦ opportunities for acquisitions or investments which involve significant amounts or which represent a departure from the Group's usual business operations...

  • Page 53
    ...the French financial markets supervisory authority (AMF). 4.6.4. Obligation of declaring trading in the securities of the Company In accordance with the applicable regulations, the Directors and individuals closely related to them, as defined by decree, must inform the AMF of all acquisitions, sales...

  • Page 54
    ... to improve it. The Board informs the shareholders accordingly in the Annual Report. ♦ stock options are allocated to the corporate officers in order to involve them in the long-term development of the value of the Company and its share price on the stock market, in a way that reflects their...

  • Page 55
    ...according to the degree of regularity in attending meetings; âˆ' an additional share for Review Committee members." A total amount of â,¬1,051,500 was distributed to Directors at the beginning of 2012 in respect of the 2011 financial year, for a total of five meetings like in 2010, according to the...

  • Page 56
    ... compared to the budget, market share as compared to the main competitors, operating profit plus advertising and promotion expenses, net earnings per share and cash flow as compared to 2011; half on the basis of an assessment of the qualitative aspects of management: the appropriateness of strategic...

  • Page 57
    ... the financial year Valuation of stock options granted during the financial year Valuation of performance shares awarded during the financial year Total (1) Fair value estimated under IFRS for the preparation of the Company's consolidated financial statements. The figure 2011 takes into account the...

  • Page 58
    ... (1) Fair value estimated under IFRS for the preparation of the Company's consolidated financial statements. (2) The Board of Directors on April 22nd, 2011 allocated 400,000 stock options to Mr. Jean-Paul Agon. Mr. Jean-Paul Agon waived at 200,000 of these stock options. He therefore benefits from...

  • Page 59
    ... Stock options exercised during the financial year by the executive officers Date of the Plan Mr. Jean-Paul Agon Sir Lindsay Owen-Jones (until March 17th, 2011) 12.01.2004 - Number of share subscription (S) or purchase (A) options exercised during the financial year 20,000 (S) - Exercise price...

  • Page 60
    ... Annual General Meeting on April 27th, 2010. Mr. Agon has been Chairman and Chief Executive Officer since March 18th, 2011. (2) Mr. Agon's employment contract is suspended throughout the entire length of his corporate office. (3) Pursuant to his employment contract, Mr. Agon is entitled to benefit...

  • Page 61
    ... Group's financial and accounting information is reliable and provides true and fair statements. By contributing to preventing and managing the risks to which the Group is exposed, the purpose of the Internal Control system is to enable the Group's industrial and economic development to take place...

  • Page 62
    ... Group's entities. An annual reporting system makes it possible to monitor implementation of the entire ethics process.Visits to countries and the inclusion of ethical issues in internal audit assignments complete the programme. Centres offer technical training and personal development programmes...

  • Page 63
    ... and manage the economic, financial and legal risks facing the Group inside and outside France in carrying out its routine and exceptional operations". On the basis of the work by the Internal Audit Department, the analysis of major accounting and financial risks, in conjunction with the processes...

  • Page 64
    ... to the quality of production and finally the Information Systems Department assesses compliance with the Security Policy. Indicators and reporting procedures enable the regular monitoring of the local activities of most of these Functional Divisions. 2.5.3. The players The main players involved in...

  • Page 65
    ... make it possible to orient the work of the Internal Control Committee and to identify the priority areas for improvement and strengthening of procedures. The Operations Division This Division comprises the Quality, EHS (Environment, Health and Safety), Purchasing, Information Systems (production...

  • Page 66
    ... set. The reporting and consolidation system, used by all entities, ensures the consistency and reliability of figures at the level of each subsidiary through blocking controls that operate before the financial data is uploaded to Group level. In this regard, the operating profit and loss account by...

  • Page 67
    ...2 The Statutory Auditors All accounting and financial information prepared by consolidated subsidiaries is, at a minimum, subjected to a limited review at the time of the half-year closing process and to a full audit at year-end, by the external auditors. Twice a year, the Managing Director and the...

  • Page 68
    ... Code for the year ended December 31st, 2011. It is the Chairman's responsibility to prepare and submit to the Board of Directors for approval, a report describing the Internal Control and risk management procedures implemented by the Company and providing the other information required by Article...

  • Page 69
    ... the financial statements for the year ended December 31st, 2011) To the shareholders, In our capacity as Statutory Auditors of your Company, we hereby present our report on regulated agreements and commitments with third parties. It is our responsibility to communicate to you, based on information...

  • Page 70
    ...and the Company-level agreements applicable to all L'Oréal executives. Mr. Jean-Paul Agon will continue to benefit from the defined benefit pension scheme currently applicable to the Group's senior managers. ♦ Amendment of certain terms and conditions relating to the suspension of the employment...

  • Page 71
    ... the profitability of the New Markets zone increased substantially. Comments on the 2011 financial year 3.3. Recent events and prospects 3.3.1. Significant events that have occurred since the beginning of 2012 3.3.2. Prospects 3.1. The Group's business activities in 2011 70 3.1.1. Overview of the...

  • Page 72
    ... By geographic zone Western Europe North America New Markets, of which : - Asia, Pacific - Eastern Europe - Latin America - Africa, Middle-East Cosmetics total The Body Shop Dermatology(3) Group total (1) Diluted net earnings per share based on net profit excluding non-recurring items attributable...

  • Page 73
    ... di Gio and Code Homme, and by the growing success of the women's fragrance Acqua di Gioia. Consumer Products The Consumer Products Division achieved growth of +4.5% like-for-like and +3.2% based on reported figures at end-2011. Maybelline posted another year of strong growth and L'Oréal Paris is...

  • Page 74
    ... In 2011, the Active Cosmetics Division grew by +3.2% like-for-like and +2.6% based on reported figures. With strong dynamism in Latin America, the United States and Africa, Middle East, the Division is strengthening its position as number one in the worldwide dermocosmetics market. New Markets At...

  • Page 75
    ... lovers, a range of eco-designed, 100%-biodegradable shower gels, as well as White Musk Libertine, a fragrance based on animalfriendly musk and Community Fair Trade organic alcohol. In 2011, The Body Shop achieved growth in Europe and North America and quickly expanded in the New Markets.The brand...

  • Page 76
    ... on the 2011 financial year The Group's business activities in 2011 Operating profit by branch and Division 2010 â,¬ millions % sales 2011 â,¬ millions % sales By Operational Division Professional Products Consumer Products L'Oréal Luxury Active Cosmetics Cosmetics Divisions total Non-allocated...

  • Page 77
    ...' equity compared with end-2010 is mainly the result of profit allocated to reserves and the net increase in value of the Sanofi shares, valued at market price. Cash flow Statement, Balance sheet and Debt Gross cash flow amounted to 3,226 million euros. The working capital requirement increased by...

  • Page 78
    ... business is composed of the cosmetics and the dermatology branches and The Body Shop. Group share. i.e. 50%. Non-recurring items include mainly capital gains and losses on long-term asset disposals, impairment of long-term assets, restructuring costs and elements relating to identified operational...

  • Page 79
    Comments on the 2011 financial year Financial highlights 2011 consolidated sales of the cosmetics branch By division Professional Products 14.9% Active Cosmetics 7.5% L'Oréal Luxury 25.5% Consumer Products 52.1% By business segment Skincare 27.9% Other (1) 4.9% Perfumes 9.8% Hair colourants 14.6%...

  • Page 80
    ....0% 16.2% Cosmetics The Body Shop Dermatology (2) Total group 3,105 68 120 3,293 Sales and operating profit by Division Consolidated sales â,¬ millions Growth Like-for-like Reported figures +2.5% +4.5% +8.2% +3.2% +5.0% +3.6% +3.2% +6.5% +2.6% +4.0% Professional Products Consumer Products L'Or...

  • Page 81
    ... financial year Financial highlights Sales and operating profit by geographic zone Consolidated sales â,¬ millions Growth Like-for-like Reported figures +0.6% +5.5% +9.5% +13.0% -2.8% +13.2% +10.5% +5.0% +0.9% +2.7% +8.3% +13.4% -4.4% +10.8% +4.1% +4.0% Western Europe North America New Markets...

  • Page 82
    ... North America New Markets Total Consolidated sales by business segment â,¬ millions 2010 973.8 340.8 1,402.6 2,717.1 2011 995.8 322.8 1,495.2 2,813.8 % of 2011 sales 35.4% 11.5% 53.1% 100% Growth 2010/2011 Like-for-like Reported figures +2.8% -4.5% +3.9% +2.5% +2.3% -5.3% +6.6% +3.6% Hair...

  • Page 83
    ...1,836.2 1,064.8 1,899.1 4,800.1 % of 2011 sales 38.2% 22.2% 39.6% 100% Growth 2010/2011 Like-for-like Reported figures +2 1% +9.4% +14.0% +8.2% +2.1% +4.8% +12.3% +6.5% Western Europe North America New Markets Total Consolidated sales by business segment â,¬ millions 2010 1,753.9 1,730.4 1,022...

  • Page 84
    ...23.7% 100% Growth 2010/2011 Like-for-like Reported figures +5.4% +5.1% +20.4% +8.4% +44.4% -0.2% +37.9 +17.1% Western Europe North America New Markets Total (1) Total sales to consumers through all channels, including franchisees. (2) Total sales to consumers by stores which operated continuously...

  • Page 85
    ...12.31.2011 20,343.1 14,491.6 -720.5 -6,291.6 -4,186.9 3,292.6 3,196.3 -25.2 2,582.9 -144.5 2,438.4 4.08 4.32 % of sales 100.0% 71.2% Sales Gross profit Research and Development Advertising and Promotion Selling, general and administrative expenses Operating profit Operational profit Finance costs...

  • Page 86
    ... 2011 financial year Financial highlights 3.2.7. L'Oréal 2005-2011 â,¬ millions 2005 2006 2007 (1) 2008 (1) 2009 2010 2011 20,343 3,293 16.2% 3,563 2,583 2,438 1,212 19,135 6,071 1,652 17,638 -504 3,226 Results Consolidated sales 14,533 15,790 17,063 17,542 17,473 19,496 Operating profit...

  • Page 87
    ... the New Markets zone increased substantially. The good quality of these results means that the Group is more confident than ever in its ability to achieve sustainable and profitable growth. L'Oréal is well equipped to succeed in its strategy of universalising beauty and to achieve another year of...

  • Page 88
    86 REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011

  • Page 89
    ...operational income and expenses Other financial income and expenses Income tax 90 91 92 93 93 100 102 105 105 106 107 107 125 129 131 132 136 137 138 138 138 139 139 Personnel costs and number of employees 105 4.7. Consolidated companies at December 31st, 2011 4.7.1. Fully consolidated companies...

  • Page 90
    ...parent company is a French company with its registered office in France, which performs a sales activity specific to that country. At the same time, L'Oréal parent company has firstly a role of holding company and strategic coordination and secondly that of scientific, industrial and marketing...

  • Page 91
    ... net profit and gains and losses recognised directly in equity Attributable to: - owners of the company - non-controlling interests (1) The tax effect is as follows: â,¬ millions 2011 -63.9 1.1 -62.8 56.2 56.2 -6.6 2010 14.6 1.1 15.7 76.3 76.3 92.0 2009 -19.8 39.6 19.8 41.6 41.6 61.4 Financial...

  • Page 92
    ....2 389.7 23,291.5 Equity Share capital Additional paid-in capital Other reserves Items recognised directly in equity Cumulative translation adjustments Treasury stock Net profit attributable to owners of the company Equity attributable to owners of the company Non-controlling interests Non-current...

  • Page 93
    ... Items attributable NonCommon Additional earnings recognised Cumulative to owners controlshares Share paid-in and net directly Treasury translation of the ling outstanding capital capital profit in equity stock adjustments company interests 119.8 996.5 11,933.5 2,239.7 2,169.9 -1,071.6 -552.9 13...

  • Page 94
    ... financial assets (including investments in non-consolidated companies) Effect of changes in the scope of consolidation Net cash (used in) from investing activities (B) Cash flows from financing activities Dividends paid Capital increase of the parent company Disposal (acquisition) of Treasury stock...

  • Page 95
    ... impact for the Group. The revised IFRS 3 and IAS 27 applicable to business combinations taking place on or after January 1st, 2011 do not have a material impact on the financial statements since acquisitions carried out in 2010 and 2011 involved 100% of the share capital of the companies acquired...

  • Page 96
    ... financial statements in accordance with international accounting standards requires that the Group make a certain number of estimates and assumptions that may affect the value of the Group's assets, liabilities, equity and net profit (loss). These estimates and assumptions mainly concern...

  • Page 97
    ... and consumers. They are charged to the income statement for the financial year in which they are incurred. The cost of goods sold consists mainly of the industrial production cost of products sold, the cost of distributing products to customers including freight and delivery costs, either directly...

  • Page 98
    ...when distribution circuits and commercial/ management structures are pooled. Recoverable values are determined on the basis of discounted operating cash flow forecasts covering a period of 10 years (the period considered necessary for the strategic positioning of an acquisition) and a terminal value...

  • Page 99
    ... protection. Formulas, which are not protected by legal means, are amortised over a maximum period of 5 years. Market shares and business concern accounted for in the consolidated financial statements prepared in accordance with French accounting standards do not meet the definition of a separable...

  • Page 100
    ..., which is generally 5 years for purchase options and 4 years for free shares. The fair value of stock options is determined using the Black & Scholes model.This model takes into account the characteristics of the plan such as the exercise price and exercise period, and market data at the grant date...

  • Page 101
    ... vested at January 1st, 2005 are accounted for in accordance with IFRS 2. The impact of IFRS 2 on profit for the period is booked on the Selling, general and administrative expenses line of the income statement at Group level, and is not allocated to the Divisions or geographic zones. The charges...

  • Page 102
    ... and production facility in Uppsala, Sweden. In 2010, the company had total revenues of SEK1.5 billion and an operating profit of SEK287 million. The acceptance period for the offer started on January 4th and ended on March 11th, 2011. 2.1. 2011 On January 1st, 2011, Matrix Distribution GmbH...

  • Page 103
    ... for the Group over the 12 months of 2010. 2.3. 2009 On April 9th, 2009, L'Oréal USA signed an agreement for the acquisition of Idaho Barber and Beauty Supply (IBB), a distributor of professional products to hair salons in several states in the North West of the United States, particularly Idaho...

  • Page 104
    ..., plant and equipment, trade accounts receivable and inventories. â,¬ millions 2010 Professional Products Consumer Products L'Oréal Luxury Active Cosmetics Cosmetics Divisions total Non-allocated Cosmetics branch The Body Shop branch Dermatology branch Group Sales Operating profit 2,717.1 9,529...

  • Page 105
    ... Notes to the consolidated financial statements â,¬ millions 2009 Professional Products Consumer Products L'Oréal Luxury (2) Active Cosmetics (2) Cosmetics Divisions total Non-allocated Cosmetics branch The Body Shop branch Dermatology branch Group Sales Operating profit 2,388.5 8,555.2 4,041...

  • Page 106
    ... Breakdown of operating profit of Cosmetics branch by geographic Zone 2011 1,512.3 810.1 1,328.1 3,650.6 -546.2 3,104.4 2010 1,552.0 708.5 1,124.8 3,385.3 -512.9 2,872.4 2009 (1) 1,472.2 554.8 893.8 2,920.8 -482.0 2,438.8 Western Europe North America New Markets Cosmetics Divisions total Non...

  • Page 107
    ...4.1. Number of employees (1) 12.31.2011 12.31.2010 29,542 14,811 22,266 66,619 12.31.2009 29,439 14,127 21,077 64,643 Western Europe North America New Markets Total 30,155 15,195 23,536 68,886 (1) Including proportionally consolidated companies and excluding temporary employees of The Body Shop...

  • Page 108
    ... in the time value (forward points and premiums paid for options); These amounts are allocated to the appropriate operating expense items as follows: â,¬ millions 2011 -15.2 -8.0 -2.1 -1.1 -26.4 2010 -118.1 11.1 -15.9 -9.1 -132.0 2009 70.8 2.7 5.0 9.6 88.1 Cost of sales Research and development...

  • Page 109
    ... 2010 and 2009 is mainly due to the elimination of withholding taxes in the United States in 2009 for which a provision had been set aside in 2008, and the increase in withholding taxes on distributions due to the increase in profits. The expected tax charge reflects, for each country, the sum of...

  • Page 110
    ... Including mainly the tax effect on actuarial gains and losses recognised in equity and in 2011 on newly consolidated companies for â,¬100 million. ...end of 2011, 2010 and 2009). Deferred tax liabilities on temporary differences mainly relate to intangible assets acquired in the context of business...

  • Page 111
    ... out earnings per share attributable to owners of the company: 4 Earnings per share attributable to owners of the company (â,¬) Net profit attributable to owners of the company 2011 Earnings per share Stock options Free shares Diluted earnings per share (â,¬ millions) Number of shares 592,763,295...

  • Page 112
    ... attributable to owners of the company excluding non-recurring items: Net profit attributable to owners of the company excluding non-recurring items 2011 Earnings per share excluding non-recurring items Stock options Free shares Diluted earnings per share excluding non-recurring items (â,¬ millions...

  • Page 113
    .../PureOlogy Other Professional Products Total L'Oréal Paris Maybelline/Garnier Softsheen Carson Other Consumer Products Total Lancôme Shu Uemura YSL Beauté Perfumes Clarisonic Other L'Oréal Luxury Total Vichy/Dermablend Other Active Cosmetics Total Other The Body Shop Dermatology Group Total 12...

  • Page 114
    .../PureOlogy Other Professional Products Total L'Oréal Paris Maybelline/Garnier Softsheen Carson Other Consumer Products Total Lancôme Shu Uemura YSL Beauté (1) Perfumes Other L'Oréal Luxury Total Vichy/Dermablend (1) Other Active Cosmetics Total Other The Body Shop Dermatology Group Total 12...

  • Page 115
    ... of the "distance selling" business under the Consumer Products Division. (2) After reclassification of the Roger & Gallet business from the L'Oréal Luxury Division to the Active Cosmetics Division. 4 2009 acquisitions mainly relate to Idaho Barber and Beauty Supply, Maly's Midwest and...

  • Page 116
    ....9 2,177.5 11.9 57.9 57.9 (1) This item consists mainly of changes in the scope of consolidation resulting from Essie Cosmetics and C.B. Sullivan. (2) At December 31st, 2010, brands with an indefinite life span consist mainly of The Body Shop (â,¬481.1 million), Matrix (â,¬274.5 million), Kiehl...

  • Page 117
    ... in the scope of consolidation resulting from Idaho Barber and Beauty Supply. (2) At December 31st, 2009, brands with an indefinite life span consist mainly of The Body Shop (â,¬466.7 million), Matrix (â,¬259.5 million), Kiehl's (â,¬116.9 million) and Shu Uemura (â,¬104.7 million). (3) Impairment...

  • Page 118
    ... the YSL Beauté and The Body Shop CGUs are not material, no specific discount rate has been used in this respect. (2) After reclassification of the Roger & Gallet business from the L'Oréal Luxury Division to the Active Cosmetics Division. At December 31st, 2011, the impact of a 1-point increase...

  • Page 119
    ...financial statements NOTE 14 Property, plant and equipment Acquisitions/ 12.31.2010 Depreciation 1,729.4 2,585.3 1,161.0 1,337.5 6,813.2 924.8 1,725.2 797.9 687.8 4,135.7 2,677.5 65.2 156.9 245.7 287.7 755.5 68.2 209.3 223.1 107.1 607.7 147.7 â,¬ millions 2011...value...599.0 43.3 100.7 197.0 ...mainly...

  • Page 120
    ... amount at December 31st, 2009, December 31st, 2010 and December 31st, 2011 (â,¬6,509.6 million, â,¬5,657.2 million and â,¬6,709.4 million respectively) corresponds to the market value of the shares based on the closing price at each of these dates (â,¬55.06, â,¬47.85 and â,¬56.75, respectively...

  • Page 121
    ... to the consolidated financial statements NOTE 17 Trade accounts receivable 12.31.2011 3,042.3 46.2 2,996.2 â,¬ millions 12.31.2010 2,733.4 48.1 2,685.3 12.31.2009 2,493.5 50.2 2,443.3 Gross value Valuation allowance Net value Trade accounts receivable are due within one year. Group policy is...

  • Page 122
    ...,023 8,597,659 644.4 â,¬ millions At 01.01.2011 Shares cancelled Options and free shares exercised Treasury stock purchased At 12.31.2011 â,¬ millions 850.9 -206.5 644.4 - b) 2010 The change in the number of shares in 2010 is as follows: In shares Share capital 598,972,410 -500,000 2,520,175...

  • Page 123
    2011 Consolidated Financial Statements Notes to the consolidated financial statements The change in Treasury stock in 2010 is as follows: In shares Buyback programme - Allocated to stock options ...11.30.2017 03.25.2019 04.27.2020 04.22.2021 Exercise price 63.02 71.90 64.69 55.54 60.17 61.37 62...

  • Page 124
    ... 2010, 2011, 2012 and 2013 fiscal years for the 2009 plan compared to the growth of the cosmetics market; for 50% of shares granted, the percentage, over the same period, resulting from the ratio between the contribution before advertising and promotion expenses, i.e. the sum of operating profit and...

  • Page 125
    ... French residents, during which the shares cannot be sold. The performance conditions concern: for 75% of shares granted under the 2010 plan and 50% of shares granted under the 2009 plan, the percentage, over the same period, resulting from the ratio between operating profit and published Cosmetic...

  • Page 126
    ... in profit and loss Reserve at end of period A 10% increase (decrease) in the euro against all Group currencies would have had an impact of +â,¬181.6 million (-â,¬171.1 million) on the foreign exchange cash flow hedge reserve and the market value of hedging instruments at December 31st, 2011. A 10...

  • Page 127
    .... 4 The actuarial assumptions used to calculate these obligations take into account the economic conditions specific to each country or Group company. The weighted average assumptions for the Group are as follows: 12.31.2011 Discount rate Salary increase Expected long-term return on plan assets...

  • Page 128
    ... defined benefit obligation by â,¬172.3 million for the Euro zone, â,¬41.6 million for the United States and â,¬34.8 million for the United Kingdom. The expected return on plan assets is determined on the basis of the asset allocation of the investment portfolio, taking into account the associated...

  • Page 129
    ... Notes to the consolidated financial statements The variations during 2011, 2010 and 2009 are set out below: â,¬ millions Present value of defined benefit obligations 2,288.4 87.2... Past service cost: new plans/plan amendments Curtailments Settlements Benefits paid Contributions paid Actuarial...

  • Page 130
    ...Statements Notes to the consolidated financial statements The retirement expense charged to the income statement is recorded within personnel expenses under operational profit and can be analysed as follows: â,¬ millions 2011 111.7 131.4 -114.5 -0.3 -2.1 126.2 2010 99.0 135.2 -102.9 -3.1 -1.0 127...

  • Page 131
    ... risks relating to operations (breach of contract), personnel-related costs and risks relating to investigations carried out by competition authorities. (2) National competition authorities from several European countries have launched investigations focusing on the cosmetics industry. Notifications...

  • Page 132
    ... Total (1) Mainly resulting from translation differences. (2) These figures can be analysed as follows: â,¬ millions Charges 95.2 263.9 0.6 61.9 Reversals (used) -106.7 -217.3 -0.1 -6.2 Reversals (not used) -6.1 -35.1 -7.9 Other income and expenses Operating profit Financial (income)/expense...

  • Page 133
    ... computed on the basis of the effective interest rate at the end of the financial year, after allowing for hedging instruments and assuming that no debt is rolled over at maturity.Amounts payable under capital leases are not taken into account as they are not material. 23.3. Debt by currency (after...

  • Page 134
    ..., directly by the Group's subsidiaries when required by local regulations. Such operations are supervised by REGEFI. To manage its exposure to currency and interest rate risks arising in the course of its normal operations, the Group uses derivatives negotiated with counterparties rated investment...

  • Page 135
    ... As the Group's companies must borrow and invest their cash in their own currency, the exchange rate risks generated by managing their own cash and debt are almost non-existent. Owing to the Group's policy of hedging a large part of annual requirements for the following year at the end of the...

  • Page 136
    ... financial statements The market values by type of hedging are as follows: â,¬ millions 2011 (1) 2010 -18.7 -20.1 -38.8 2009 3.8 -15.8 -12.0 Fair value hedges Cash flow hedges Net foreign investment hedges Total -5.4 -31.8 -37.2 (1) Fair value hedges relate to currency risks on operating...

  • Page 137
    ... 10% in the market price of these shares relative to the market price of â,¬55.06 on December 31st, 2009 would have an impact of plus or minus â,¬651.0 million before tax on Group equity. 24.4. Counterparty risk The Group has financial relations with international banks rated investment grade. The...

  • Page 138
    ... of financial instruments recorded at fair value by level of the fair value hierarchy. â,¬ millions December 31st, 2011 Assets at fair value Foreign exchange derivatives Interest rate derivatives Sanofi shares Marketable securities Total assets at fair value Liabilities at fair value Foreign...

  • Page 139
    ... purchase commitments under logistics supply contracts (1) These consist mainly of guarantees given to governmental bodies or concerning loans granted to third parties who are partners of the Group. 4 26.3. Contingent liabilities In the course of its normal operations, the Group is involved in...

  • Page 140
    ... parties with a significant influence on the Group No significant transactions have been carried out with a member of senior management or a shareholder with a significant influence on the Group. 29.3. Associates The Group had no equity-accounted companies in 2011, 2010 or 2009. 138 REGISTRATION...

  • Page 141
    ... Other directly related audit assignments (1) L'Oréal Fully consolidated subsidiaries Audit sub-total Other services Other services (legal, tax, employee-related, other) Total (1) Mainly concerning acquisition audits. 0.5 7.6 0.5 8.4 7% 100% 6% 100% 0.6 7.6 0.3 6.4 8% 100% 5% 100% NOTE...

  • Page 142
    ... - Maybelline New York Goldys International Helena Rubinstein Helena Rubinstein Italia S.p.A. Holdial Kosmepol Sp z.o.o. L & J Ré La Roche-Posay Dermato-Cosmétique La Roche-Posay Laboratoire Pharmaceutique 100.00 (1) In accordance with the provisions of Article D. 248-12 of French trading law...

  • Page 143
    ... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 92.97 100.00 100.00 100.00 100.00 99.88 100.00 100.00 100.00 100.00 50.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 % control (2) Laboratoire Sanoflore France Lai Mei Cosmetics International Trading...

  • Page 144
    ... Financial Statements Consolidated companies at December 31st, 2011 Company Head office Philippines Poland Portugal France France Germany Germany Romania Italy Singapore Slovenia Slovakia Mexico South Africa Switzerland Sweden Taiwan Thailand Turkey United Kingdom Ukraine Uruguay United States...

  • Page 145
    ...companies at December 31st, 2011 Company Head office France United Kingdom Venezuela France China France Hong-Kong United Arab Emirates Singapore Russia Russia % interest 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 % control (2) Sparlys The Body Shop (as a group...

  • Page 146
    ...2011 Consolidated Financial Statements Consolidated companies at December 31st, 2011 Company Head office Brazil Canada Chile Czech Republic Slovenia Germany Spain France Greece Italy Mexico The Netherlands Turkey Austria Poland China Slovakia Switzerland France France... Trading ...group) (1) Companies...

  • Page 147
    ... and fair view of the assets and liabilities and of the financial position of the Group at December 31st, 2011 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. 4 II. Justification of our...

  • Page 148
    4 2011 Consolidated Financial Statements Statutory Auditors' Report on the consolidated financial statements III. Specific verification As required by law and in accordance with professional standards applicable in France, we have also verified the information presented in the Group's Management ...

  • Page 149
    ...Free shares Note 18 Maturity of receivables 5.8. Five-year financial summary 174 5.9. Investments (main changes including shareholding threshold changes) 5.10. Statutory Auditors' Report on the financial statements 175 176 This information forms an integral part of the Annual Financial Report as...

  • Page 150
    ... Tax Code and the table showing trade accounts payable provided for by Articles L. 441-6-1 and D. 441-4 of the French Commercial Code. The Statutory Auditor's Report on the parent company financial statements completes this information 5.1. Compared income statements â,¬ millions Notes 2 3 12...

  • Page 151
    ...669.7 21.0 12.6 11,324.6 (net amounts) Intangible assets Tangible assets Financial assets Non-current assets Inventories Prepayments to suppliers Trade accounts receivable Other current assets Marketable securities Cash and cash equivalents Current assets Prepaid expenses Unrealised exchange losses...

  • Page 152
    ... was made to the provision for investments in respect of employee Profit Sharing for 2011 (â,¬5.7 million in 2010 and â,¬5.3 million in 2009). This provision includes the transfer to the Company of some of the provisions set aside by our subsidiaries under a Group agreement. In 2011, an amount of...

  • Page 153
    ... paid Changes in financial debt Net cash from (used in) financing activities Cash acquired or sold in the period (complete transfer of assets and liabilities) Change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 25 26 27...

  • Page 154
    ... to the advertisement and promotion of products to customers and consumers are recognised as expenses for the year in which the advertisement or promotional initiative takes place. 1.1. Sales 1.3. Research and development costs These are comprised of sales of goods (net of rebates and discounts...

  • Page 155
    .... 1.7. 1.7.1. Financial assets Investments and advances These items are recognised in the balance sheet at purchase cost excluding incidental expenses. Their value is assessed annually by reference to their value in use, which is mainly based on the current and forecast profitability of the...

  • Page 156
    ... the market price, representing the difference between the book value of the Treasury stock and the average share price in the month preceding the reporting date. A provision for liabilities and charges in respect of shares of Treasury stock allocated to free share plans for L'Oréal parent company...

  • Page 157
    ... 781.5 8.0 1,053.0 39.0 169.6 2,051.1 Goods Raw materials, packaging Services (1) Rentals Other revenues from ancillary activities Total (1) Mainly invoicing of technological assistance. The Company generated â,¬1,362.1 million of its sales in France in 2011, compared with â,¬1,272.0 million in...

  • Page 158
    5 2011 parent company Financial Statements Notes to the parent company financial statements NOTE 6 Net financial income Net financial income amounts to â,¬2,033.0 million in 2011 (â,¬1,913.9 million in 2010 and â,¬1,597.1 million in 2009), and mainly includes the following items: â,¬ millions ...

  • Page 159
    ... of â,¬50.3 million in net profit for 2011, mainly reflecting the net charge to regulated provisions along with tax credits on research, corporate sponsorship activities and employee Profit Sharing. Income tax has been calculated taking account of the additional 5% contribution, in accordance...

  • Page 160
    ...Gross value Patents and trademarks Business goodwill Software Other intangible assets Amortisation Patents and trademarks Other intangible assets Provisions Net book value In 2011, the increase in the Patents and trademarks and Other intangible assets captions mainly results from the acquisition of...

  • Page 161
    ...Investments Loans and other receivables Other Gross value Investments Loans and other receivables Other Provision for impairment Net book value The table detailing subsidiaries and affiliates is presented at the end of the notes to the financial statements. REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011...

  • Page 162
    ...gross and net basis). In 2011, the total market value of Treasury stock amounted to â,¬679.0 million based on the average share price in December and to â,¬693.8 million based on the closing share price on December 31st. In 2010, the total market value of Treasury stock amounted to â,¬968.2 million...

  • Page 163
    ... company Financial Statements Notes to the parent company financial statements NOTE 17 Stock purchase and subscription options - Free shares 17.1. Stock purchase and subscription options The table below sets out data concerning the option plans in force at December 31st, 2011. Grant date Number...

  • Page 164
    ..., the increase over the same period in the Group's consolidated operating profit. for 25% of shares granted under the 2010 plan and 50% of shares granted under the 2009 plan, the increase in comparable Cosmetics revenues for the 2011, 2012 and 2013 fiscal years for the 2010 plan and for the 2010...

  • Page 165
    ... for liabilities and charges at different levels of the income statement are shown below: â,¬ millions Charges 29.4 32.6 30.4 92.4 Reversals (provisions used) 18.0 22.0 2.0 42.0 Reversals (provisions not used) 3.2 0.6 3.8 Operating profit Net financial income Exceptional items Income tax Total...

  • Page 166
    ....0 20.5 57.8 27.1 343.0 Trade accounts payable Payables related to non-current assets (1) Tax and employee-related payables, of which Provision for employee Profit Sharing Provision for incentives Other payables Total (1) Mainly concerning Essie in 2010 et 2011. 164 REGISTRATION DOCUMENT âˆ' L'OR...

  • Page 167
    ... Borrowings and debt Trade accounts payable Other payables Derivative financial instruments Total In accordance with the accounting principles described above, the overall foreign exchange position at December 31st, 2011 is an unrealised loss of â,¬6.7 million arising mainly on the Venezuelan...

  • Page 168
    ... Notes to the parent company financial statements NOTE 23 Derivative financial instruments Derivative financial instruments mainly consist of futures transactions and can be broken down as follows: â,¬ millions 12.31.2011 Notional 12.31.2010 12.31.2009 12.31.2011 Market value 12.31.2010 12...

  • Page 169
    2011 parent company Financial Statements Notes to the parent company financial statements NOTE 24 Off-balance sheet commitments 24.1. Lease commitments Operating lease commitments amount to â,¬61.6 million due in less than one year, â,¬172.3 million due between 1 and 5 years and â,¬31.7 million ...

  • Page 170
    5 2011 parent company Financial Statements Notes to the parent company financial statements NOTE 26 Changes in other financial assets This caption includes flows related to Treasury stock in the year, classified within marketable securities. NOTE 27 Cash and cash equivalents at the end of the ...

  • Page 171
    ...,824 45,616 319 8,100 31,654 106 29 12,957 479 7,207 4,815 4,485 1,989 16 (1) The SNCs (general partnership), GIEs (economic interest groupings) and Sociétés Civiles (non trading companies), that are not tax consolidated, distribute all their profit. REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011 169

  • Page 172
    ... groupings) and Sociétés Civiles (non trading companies), that are not tax consolidated, distribute all their profit. (2) Sanofi: this information is not available. At the balance sheet date, L'Oréal owns 118,227,307 shares. Their total stock market value at the price prevailing at 12.31.2011...

  • Page 173
    ...816 12,296 1,376 For foreign subsidiaries and investments, the capital reserves and retained earnings have been translated into thousands of euros on the basis of year-end exchange rates, while profits and losses have been translated at average rate for 2011. It is specified that the list above is...

  • Page 174
    ... basis of year-end exchange rates, while profits and losses have been translated at average rate for 2011. It is specified that the list above is not exhaustive. (3) Figures from the sub-consolidation of L'Oréal USA.Inc. (4) The Body shop, consolodated ligures for the sub-group 172 REGISTRATION...

  • Page 175
    2011 parent company Financial Statements Other information relating to the financial statements of L'Oréal parent company Information relating to all subsidiaries and investments Subsidiaries French Book value of shares held ♦ gross restated ♦ net Amount of loans and advances granted Amount of...

  • Page 176
    ...,585 0 2,231.0 2011 120.6 602,984,082 (1) 0 2,421.1 I. Financial position at financial year-end a) Share capital 123.6 b) Number of shares 617,975,610 c) Number of convertible bonds 0 II. Overall results of operations a) Net pre-tax sales 2,073.8 b) Pre-tax profit before depreciation, amortisation...

  • Page 177
    ...company Financial Statements Investments (main changes including shareholding threshold changes) 5.9. Investments (main changes including shareholding threshold changes) Investments (main changes including shareholding threshold changes) (â,¬ thousands) Situation at 12.31.2010 Amount % 100.00 100...

  • Page 178
    5 2011 parent company Financial Statements Statutory Auditors' Report on the financial statements 5.10. Statutory Auditors' Report on the financial statements (Year ended December 31st 2011) In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, ...

  • Page 179
    2011 parent company Financial Statements Statutory Auditors' Report on the financial statements Concerning the information given in accordance with the requirements of Article L. 225-102-1 of the French Commercial Code relating to remuneration and benefits received by corporate officers and any ...

  • Page 180
    178 REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011

  • Page 181
    ...Corporate social, environmental and societal responsibility 180 180 6.2.4. Contribution to adapting to and combating climate change 6.2.5. Protection of biodiversity Methodological note 197 197 198 6.1. Social information 6.1.1. The L'Oréal Group's Human Resources policy 6.1.2. Social information...

  • Page 182
    ..., this chapter includes information on the way in which the L'Oréal Group took into account the social, environmental and societal consequences of its business activities in 2011. The scope and the methodology of the reporting are detailed in the methodology note placed at the end of each of the...

  • Page 183
    ... Europe North America New Markets Total Distribution by gender 29,542 14,811 22,266 66,619 2011 30,155 15,195 23,536 68,886 Men Western Europe North America New Markets Total Average age by geographic zone 33% 29% 36% 33% Women 67% 71% 64% 67% 2011 Western Europe North America New Markets Total...

  • Page 184
    ...) 2010 3,624 2011 3,833 Total (1) The comparison between the two years takes into account foreign exchange impacts and structural changes. In each country, remuneration policy is based on a system of performance assessment applied everywhere in the world. Career development is managed on an...

  • Page 185
    ...programme are carried out locally by the General Management of each subsidiary. In addition to the systems of Mandatory Profit Sharing, Incentive and Profit Sharing schemes for employees, the Group has for many years granted stock options in an international context, in order to associate those who...

  • Page 186
    ... and receive an additional employer contribution of +50%; ♦ to invest Profit Sharing and Incentive amounts in a Company savings plan (PEE) consisting of seven investment funds offering a wide range of possibilities (money market, bonds, shares, French and international securities, etc.) and great...

  • Page 187
    ... and the United Kingdom).This series of defined benefit and defined contribution schemes makes it possible to share the financial risks and ensure improved cost stability. In defined contribution schemes, the Company's commitment mainly consists in paying a percentage of the employee's annual salary...

  • Page 188
    ..., linked to the 35-hours working week agreement and the Time Savings Account (Compte Epargne Temps - 12.31.2009 M W Total Early retirement leave Compulsory retirement on the Company's initiative Voluntary retirement (Source: HR France statistics 2009, 2010 and 2011). 12.31.2010 M W Total 49...

  • Page 189
    ... applicable as from January 1 st, 2008. The financial management of this scheme was outsourced to insurance companies in July 2011. 6 Healthcare expenses The employees of L'Oréal parent company and its French subsidiaries benefit from additional schemes covering healthcare costs. REGISTRATION...

  • Page 190
    ... business activities carried out. The number of part-time employees is 8,995, of which 8,404 women and 591 men. Organisation of working time at L'Oréal parent company L'Oréal parent company applies the National Collective Bargaining Agreement for the Chemical Industries and various Company-level...

  • Page 191
    .... Professional relations and social welfare at L'Oréal parent company Social dialogue at L'Oréal parent company. is based around a Central Works Council, 3 works councils at its establishment, 13 Health, Safety and Working Conditions Committees, 9 employee representative bodies and 30 trade union...

  • Page 192
    ...2011 (1) ♦ 72 out of 115 factories and distribution centres recorded zero lost-time accident. ♦ Group: operational and administrative sites TFc = 2.01 vs. 2.10 in 2010 (-4%) TFc (Conventional Frequency Rate) = number of lost-time accidents per million hours worked by L'Oréal staff. Management...

  • Page 193
    ... recognised scales; at the end of the process, results are shared with the occupational doctor; an annual analysis of the Company's collective results by the Health, Safety and Working Conditions Committees. âˆ' âˆ' After being initially tested on 2 L'Oréal parent company's sites in 2009, this...

  • Page 194
    ... and fathers for family reasons" put in place in 1976 or more recently (2008) maintenance of the salary for paternity leave. the annual review of the report on the Comparative Situation on the general conditions of employment and training of women and men in the Company. ♦ L'Oréal completes...

  • Page 195
    ... of the "Cosmetics","Dermatology" and "The Body Shop" branches. Safety reporting covers all the sites and distribution centres. In 2011, it covers 70% of the workforce of the administrative sites and research centres. 6 (1) Including employees with a permanent or fixed-term contract of employment...

  • Page 196
    ... sold or closed during the financial year are reported in full up to the date of their exit from the scope. The factories or distribution centres that join the Group have a maximum period of 2 years to connect to the environmental and safety reporting systems: however, for the 2011 financial year...

  • Page 197
    ...) and North America (19 people), who all have operational functions in this area. In 2011, 42 L'Oréal participants took part in open seminars for site managers on the topic of "EHS & leadership", held at the CEDEP, the collaborative learning community based on the INSEAD campus in France. The main...

  • Page 198
    ... been developed. It allows to take into account site specifics such as equipment and type of product, then to apply the most effective cleaning processes in the factories. In 2011, several factories ran pilot projects (particularly in Warsaw, Poland, Florence in the United States, and Vichy, France...

  • Page 199
    ... but renewable energy production projects are developed on site in order to achieve the objectives. The BUS project, a Group-wide pilot project run by operations managers, draws on expertise from across L'Oréal to identify methods, technical solutions and good practices in cleaning, cooling...

  • Page 200
    ... to a scope different from that of the "Cosmetics","Dermatology" and "The Body Shop" branches, the scope of consolidation is indicated in a note. The environmental indicators of the factories and distribution centres sold or closed during the financial year are reported in full up to the date of...

  • Page 201
    ... the 2011 financial year. Regional development and local populations As L'Oréal's business is at the heart of people's everyday lives and their well-being, the Group plays an active role in the life of the communities in which its activities take place. L'Oréal is committed to demonstrating good...

  • Page 202
    ... that time, L'Oréal has never stopped developing projects all over the world to combat all forms of exclusion. Through its subsidiaries, its brands and its Foundation, the Group intents to go one step further and make commitment to good corporate citizenship a real strategy in the Company. L'Or...

  • Page 203
    ... it is of crucial importance to support reconstructive surgery in countries where these operations are not reimbursed by the health insurance schemes in order for these patients to be able to lead a normal life. In 2011, it enabled over 1,100 operations to be carried out in Asia and Africa, through...

  • Page 204
    ...al's added value, in terms of the safety assessment of its ingredients and end products, lies in its investment for over twenty years in the development of predictive methods and tissue engineering. For many years, L'Oréal has been investing in science and technology to create new assessment tools...

  • Page 205
    ...collected from the departments concerned (Communications, Sustainable Development and Public Affair Department, Human Resources Department, Purchasing Department, International Product Safety Assessment Department). Country Reporting Ethics , an annual reporting system on ethical issues, covers all...

  • Page 206
    204 REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011

  • Page 207
    ... to the Company 7.1.8. General Management (Article 11 of the Articles of Association) 7.1.9. Fiscal year (Article 14 of the Articles of Association) 7.1.10. Statutory Distribution of profits (Article 15 of the Articles of Association) 7.1.11. Annual General Meetings 7.1.12. Statutory share ownership...

  • Page 208
    ... of Association) "The Company's corporate purpose, both in France and/or at any other location anywhere throughout the entire world, shall be as follows: 7.1.2. Law governing the Issuer French law. ♦ the manufacturing and the sale of cosmetics products in 7.1.3. Business activity The L'Oréal...

  • Page 209
    Stock market information and share capital Information relating to the Company 7.1.8. General Management (Article 11 of the Articles of Association) "1. In accordance with legal provisions,the General Management of the Company is assumed, under its responsibility, either by the Chairman of the ...

  • Page 210
    7 B. Stock market information and share capital Information concerning the share capital The number of shares eligible for these preferential dividends may not exceed 0.5% of the share capital at the closing date of the past financial year, for the same shareholder. The losses (if any) shall be ...

  • Page 211
    Stock market information and share capital Information concerning the share capital The table set out below summarises (particularly in application of Articles L. 225-129-1 and L. 225-129-2 of the French Commercial Code) the currently valid authorisations granted to the Board of Directors by the ...

  • Page 212
    7 Stock market information and share capital Shareholder structure 7.2.3. Changes in the share capital over the last five years Amount of the change in share capital â,¬250.00 -â,¬2,698,150.00 â,¬11,290.00 -â,¬1,645,020.00 â,¬3,470.00 -â,¬1,437,400.00 â,¬6,920.00 -â,¬1,682,080.00 â,¬600.00 -â,¬794...

  • Page 213
    ...), which, if they were to be valued at their purchase price, would represent â,¬644.4 million. 5,166,554 of these shares were allocated to covering the stock option plans for the purchase of shares allocated to employees and corporate officers of Group companies that have not yet expired and 1,038...

  • Page 214
    7 Stock market information and share capital Shareholder structure 7.3.3. Employee share ownership The employees of the Company and its affiliates held 4,404,950 shares as at December 31st, 2011, that is 0.73% of the share capital, through the Company Savings Plan (PEE). At that date, this stake ...

  • Page 215
    ... relationship and the management of their stakes within the L'Oréal Company. 7.3.6. Buyback by the Company of its own shares 7.3.6.1. Information concerning share buybacks during the 2011 financial year In 2011, the Company did not buy back any of its own shares. It did not therefore make any use...

  • Page 216
    7 Stock market information and share capital Shareholder structure 7.3.6.2. Transactions carried out by L'Oréal with respect to its shares in 2011 Percentage of share capital held by the Company directly and indirectly at December 31st, 2011: These shares could be acquired by any means, on one ...

  • Page 217
    ... cosmetics sales as compared to a panel of competitors; ♦ and for the other half growth in the Group's consolidated operating profit; calculated at the end of the lock-up period on the basis of the arithmetical mean for the four full financial years from 2012 to 2015. The number of stock options...

  • Page 218
    7 Stock market information and share capital Shareholder structure 7.3.8.3. Currently existing L'Oréal parent company share purchase or subscription options (1) The main features of the plans that existed at December 31st, 2011 are included in the tables set out hereafter: AGM authorisation date ...

  • Page 219
    Stock market information and share capital Shareholder structure 7.3.8.4. Stock options to purchase or subscribe for shares granted to employees other than corporate officers of L'Oréal or exercised by them during the 2011 financial year Total number of options granted/ shares Weighted Plan of ...

  • Page 220
    7 Stock market information and share capital Shareholder structure Vesting of the shares is subject to a dual condition of: ♦ presence: the shares granted will only finally vest after a period of 4 years at the end of which the beneficiary must still be an employee of the Group (save the ...

  • Page 221
    ... United States through certain banks operating in the United States. x3 IN 10 YEARS 1.38 1.18 1.00 0.82 0.64 0.54 0.73 1.44 1.50 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 7.4.1.2. Stock market data Price at December 31st, 2011 High â,¬80.70 ♦ Share...

  • Page 222
    ...Stock market information and share capital L'Oréal share market 7.4.2. L'Oréal share market 7.4.2.1. Trading volumes and change in the price of the Company's share According to NYSE-Euronext data, the only stock market... 74.16 54.33 57.26 Date 2011 January February March April May June July August...

  • Page 223
    Stock market information and share capital L'Oréal share market Change in the L'Oréal share price compared to the CAC 40 index from January 1st, 2007 to February 29th, 2012 L'ORÉAL 120 CAC 40 rebased on L'Oréal 100 â,¬75,9 - 80 5541,76 - 60 +12.79% â,¬85.61 40 - 37.70% 3,452.45 20 12/...

  • Page 224
    7 Stock market information and share capital L'Oréal share market The initial capital has thus been multiplied by 1.19 over 5 years (5-year inflation rate = 9.4% - Source: INSEE) and the final capital is 1.17 times the total net investment. The Total Shareholder Return of the investment is thus ...

  • Page 225
    Stock market information and share capital L'Oréal share market 7.4.2.2.3. 20-year evolution of a portfolio of approximately â,¬15,000 invested in L'Oréal shares with reinvestment of coupons and share attribution rights Date of transaction 12.31.1991 06.26.1992 06.25.1993 06.28.1994 06.28.1995 ...

  • Page 226
    7 Stock market information and share capital L'Oréal share market The Total Shareholder Return of the investment is thus 12.15% per year (assuming that the shares are sold on December 31st, 2011, excluding tax on capital gains). Over the same period, the CAC 40 index increased by +6.10% per year ...

  • Page 227
    8 Annual General Meeting 226 226 228 8.1. Report of the Board of Directors on the Draft resolutions 8.1.1. Ordinary Part 8.1.2. Extraordinary Part 8.3. Statutory Auditors' Special Report on the cancellation of shares purchased by the Company 234 8.2. Draft resolutions Ordinary and Extraordinary...

  • Page 228
    ...♦ the parent company financial statements, with a profit and loss account which shows net income of â,¬2,169,772,192.21 for 2011, compared with â,¬1,995,329,601.31 at December 31st, 2010; The Board of Directors proposes to the Annual General Meeting the appointment of three new Directors as well...

  • Page 229
    ... the United States. Over the last two years, in the context of his professional experience, Jean-Victor Meyers spent several months within L'Oréal Group's Divisions, in France and abroad. He is a member of the Supervisory Board of Téthys, the Bettencourt family holding company, since January 2011...

  • Page 230
    ..., to the benefit of employees and corporate officers of L'Oréal Group; ♦ market animation of the share; ♦ retaining them and subsequently using them as payment in connection with external growth operations. The acquisition of these shares could be made by any ways, in one or several times, on...

  • Page 231
    ... the corresponding shares, purchased by the Company under Article L. 225-208 of the French Commercial Code, is due to expire. A proposal is made that, for a maximum of 500,000 shares, namely a maximum reduction in the share capital of â,¬100,000, the shares corresponding to share purchase options...

  • Page 232
    ...the last three financial years, given that no preferential dividend distribution has been made in respect of those years: ♦ the number of shares issued between January 1 , 2012 and st the date of payment of this dividend following the exercise of stock options with 2011 dividend rights; ♦ the...

  • Page 233
    ... the stock markets, including through the acquisition of blocks of shares. These transactions may be carried out at any time, in accordance with the regulations in force at the time of the transactions concerned, except during periods of public offers with regard to the Company's capital. The Annual...

  • Page 234
    ... that the various agencies of the Company are operating satisfactorily, and that Directors are in a position to carry out their duties." New version "§ 2-The Chairman of the Board of Directors organises and directs the deliberations of the Board, reports on these deliberations to the General...

  • Page 235
    Annual General Meeting Draft resolutions Ordinary and Extraordinary General Meeting of April 17th, 2012 Current version New version that takes place before the third working day prior to the Meeting at zero hour (Paris time), the Company...Powers for formalities The Annual General Meeting grants full...

  • Page 236
    ...report on the cancellation of shares purchased by the Company issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France...

  • Page 237
    ...9.1.1. Fees of Auditors and members of their networks charged to the Group 9.5. Table of contents 238 9.2. Historical financial information included by reference 9.6. Registration Document table of concordance 240 9.7. Annual Financial Report table of concordance 9.8. Table of concordance of the...

  • Page 238
    ... on March 22nd, 2010 under the number D. 10-0131, and also information extracted from the 2009 Management Report presented on pages 64 to 70 of Volume 2 of the Registration Document. ♦ the consolidated financial statements for the year ended December 31st, 2010, prepared in accordance with...

  • Page 239
    ... to the financial year ended December 31st, 2009; this report is set out on page 190 of the 2009 Registration Document filed with the Autorité des Marchés Financiers on March 22nd, 2010 under the number D.10-0131 and contains a technical observation with regard to the changes in accounting methods...

  • Page 240
    ...the Autorité des Marchés Financiers. Chapter 1 Presentation of the Group 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Mission History Business Activities and Strategy International and cosmetics market Research and Innovation Operations Investment Policy Risks factors Information Policy Pages 4 5 5 8 12...

  • Page 241
    ...2011 st 148 149 150 151 152 169 173 174 175 176 Other information relating to the financial statements of L'Oréal parent company Five-year financial summary Investments (main changes including shareholding threshold changes) Statutory Auditors' Report on financial statements Chapter 6 Corporate...

  • Page 242
    ... fulfil investments on which the management bodies have already made firm commitments and planned material tangible fixed assets assets 11. Research and development, patents and licenses 12. Trend information information 13. Profit forecasts or estimates 240 REGISTRATION DOCUMENT âˆ' L'ORÉAL 2011

  • Page 243
    ...annual financial information 20.5. Age of latest financial information information 20.6. Interim and other financial information 20.7. Dividend policy 20.8. Legal and arbitration proceedings 20.9. Significant change in the issuer's financial or trading position 21. Additional information 21.1. Share...

  • Page 244
    ... of concordance In order to facilitate the reading of Annual Financial Report (Rapport Financier Annuel), the following table provides the page references of the main information required by Article L. 451-1-2 of the French Monetary and Financial Code and by Article 222-3 of the General Regulation...

  • Page 245
    ... thematic table makes it possible to identify the main information provided for by Articles L. 225-100 et seq., L. 232-1 and R. 225-102 et seq. of the French Commercial Code. Headings of Management Report The Group's situation and business activities in 2011 Comments on the financial year Analysis...

  • Page 246
    ... of the Management Report Information concerning the share capital Statutory requirements governing changes in the share capital and shareholders' rights Structure and changes in the share capital (including the table summarising the authorisations in force granted by the Annual General Meeting...