FF billions % Growth
1997/1996
Sales 69,12 + 14,5 %
Operating profit 8,69 + 18,2 %
Profit on ordinary activities
before taxation and employee profit sharing
7,76 + 17,0 %
Net profit before capital gains and losses,
after minority interests
4,21 + 12,8 %
Earnings per share 62,21 FF + 12,8 %
Cash flow 6,77 + 10,3 %
Shareholders' equity 30,1 + 13,7 %
Debt to equity ratio 1 15,6 % + 9,8 %
1 Net debt over shareholders' equity, minority interests and provisions

BUSINESS BY SECTOR IN 1997

Cosmetics
Consolidated cosmetics sales rose 14.6% to FF 56.16 billion. Growth was driven by the increased pace of expansion in new markets, stronger positions for our U.S. subsidiary, which is established as the Group's second world centre, and the return to growth in Western Europe. Excluding the impact of exchange rates, cosmetics sales were up 9.3%, outstripping the increase for the world market as in previous years, according to our estimates.

Our U.S. subsidiary confirmed its status as the Group's second centre for creative strategy after Paris, enhancing the international scope of our brands. US sales exceeded US$ 2 billion. The increase expressed in French francs was nearly 23%. The Group, which currently generates a quarter of its sales in North America, has taken its place among the front-runners in make-up, hair colour and skin care in this zone and worldwide.

In several European countries, particularly in the United Kingdom, sales rose at similar rates to those recorded in new markets. We expanded sales by nearly 8% in Western Europe.

Emerging markets already account for more than 15% of sales. We are continuing to step up our drive into these markets with growth of 27% in Asia excluding Japan, 35% in Latin America and 45% in Eastern Europe. Despite the economic fluctuations experienced by these countries, we firmly believe in their potential for rapid expansion, particularly in Asia, where the Group currently generates less than 6% of its total cosmetics sales.

Our determination to position L'ORÉAL PARIS amongst the world's top brands in the four corners of the world is expressed by the slogan: "L'ORÉAL, because I'm worth it". Globalisation depends on the competitiveness of our products. We have therefore stepped up our research and development endeavours and have organised our laboratories around the Group's core businesses.

Hand in hand with this international expansion, the Group rounded out its industrial facilities, notably in China, Poland, and Brazil. Value analysis endeavours were also continued during the year.

Dermatology
This sector's sales climbed to over FF 1.5 billion, up 52.6% (L'ORÉAL share: 50%). DIFFERIN treatment for mild acne, the first product developed by GALDERMA's research centre, has achieved very significant market share worldwide. The acquisition of the German company, BASOTHERM, has enabled us to establish a strong market presence in this country.

Pharmaceuticals
In 1997, SYNTHÉLABO increased turnover 12.6% to FF 11.74 billion, accounting for 14% of consolidated Group sales. SYNTHÉLABO's core strategy hinges on advanced research in three specialist fields (Central Nervous System, Cardiovascular and Internal Medicine) and on a strong market presence in Europe. The company is developing activities in cardiac pacing, urological devices, generic medicines and OTC products.

DIVIDEND

At the Annual General Meeting, the Board of Directors of L'ORÉAL will propose a net dividend of FF 16 plus tax credit of FF 8, payable on 12 June 1998. This compares with a net dividend of FF 14 paid in 1997, on the same number of shares and investment certificates as last year (67,606,216).