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L'Oréal

Earnings Release Feb 12, 2015

1467_iss_2015-02-12_ce1cd247-d151-4460-9db6-359f72ea87c1.pdf

Earnings Release

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2014 Annual Results

GROWTH IN ALL DIVISIONS AND ALL GEOGRAPHIC ZONES RECORD OPERATING MARGIN STRONG GROWTH IN NET PROFIT

Sales: 22.53 billion euros

  • +3.7% like-for-like
  • +1.8% based on reported figures
  • +4.1% at constant exchange rates
  • Operating profit: 3.891 billion euros, representing 17.3% of sales
  • Net profit after non-controlling interests: 4.910 billion euros
  • Net earnings per share*: 5.34 euros
  • Dividend**: +8% at 2.70 euros

The Board of Directors of L'Oréal met on February 12th, 2015 under the chairmanship of Jean-Paul Agon and in the presence of the Statutory Auditors. The Board closed the consolidated financial statements and the financial statements for 2014.

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

"As anticipated and announced, L'Oréal recorded in the fourth quarter its strongest growth of the year. In a volatile economic context and a less dynamic market, the Group posted growth in all its Divisions and regions of the world.

L'Oréal Luxe and Active Cosmetics achieved very good growth and outperformed their market significantly. The Professional Products Division continued to improve. Meanwhile, in a slowing market, the Consumer Products Division saw a temporary sag in its growth, particularly in the United States.

2014 was also a year of transformation for L'Oréal, in particular through the acceleration of our digital transformation and strategic acquisitions such as Magic, NYX, Decléor, Carita and Niely***, which complement our brand portfolio in key categories and regions of the world.

Despite adverse currency effects, operating margin increased once again in 2014 highlighting the strength of our business model. Following the capital gain realised upon the disposal of Galderma as part of the strategic transaction with Nestlé, net profit has grown strongly.

We are looking to the future with confidence, driven by our "Beauty for All" mission and our "Universalisation" strategy towards our ambition of winning one billion new consumers.

In an economic environment that is uncertain, but more favourable on the monetary front, all our teams are focused to ensure L'Oréal outperforms the market in 2015, and to deliver sales and profit growth."

The Board of Directors has decided to propose to the Annual General Meeting of Wednesday, April 22nd, 2015, the renewal of the tenure of Mr Charles-Henri Filippi.

After 8 years of active participation in the work of the Board, Mrs Annette Roux has decided not to seek the renewal of her tenure which expires at the end of the 2015 Annual General Meeting. The Board warmly thanks Mrs Roux for the quality of her contribution to the Board's debates and decisions.

The Board will propose to the Annual General Meeting the appointment as new Board Director of Mrs Sophie Bellon who is in charge of the Research, Development and Innovation Strategy of Sodexo and Vice Chairman of its Board of Directors.

* Diluted net earnings per share, based on net profit from continuing operations, excluding non-recurring items, attributable to owners of the company.

** Proposed at the Annual General Meeting of April 22nd, 2015.

*** Acquisition which is currently being finalised.

A – 2014 sales

Like-for-like, i.e. based on a comparable structure and constant exchange rates, the sales trend of the L'Oréal Group was +3.7%.

The net impact of changes in consolidation amounted to +0.4%.

Currency fluctuations had a negative impact of -2.3%.

Growth at constant exchange rates was +4.1%.

Based on reported figures, the Group's sales, at December 31st, 2014, amounted to 22.53 billion euros, an increase of +1.8%.

Sales by Operational Division and Geographic Zone

The announcement on February 11th, 2014, of the disposal of 50% of Galderma leads to account for this business in accordance with IFRS 5 accounting rule on discontinued operations. In accordance with IFRS 11 accounting rule, Innéov has been consolidated under the equity method as of January 1st, 2014. All figures for earlier periods have been restated accordingly.

th quarter 2014
4
At December 31st, 2014
€m Growth €m Growth
Like-for-like Reported Like-for-like Reported
By Operational Division
Professional Products 782.1 1.9% 7.7% 3,032.4 2.6% 2.0%
Consumer Products 2,710.0 3.0% 6.3% 10,767.5 1.6% -1.0%
L'Oréal Luxe 1,795.5 8.6% 12.2% 6,197.9 7.1% 5.7%
Active Cosmetics 359.2 7.5% 7.1% 1,660.4 8.7% 5.3%
Cosmetics Divisions total 5,646.7 4.8% 8.3% 21,658.2 3.8% 1.7%
By Geographic Zone
Western Europe 1,921.9 4.3% 6.7% 7,697.7 2.4% 3.1%
North America 1,443.4 1.9% 11.1% 5,389.4 1.1% 0.6%
New Markets, of which: 2,281.4 7.2% 8.1% 8,571.1 6.9% 1.3%
- Asia, Pacific 1,235.2 4.6% 13.5% 4,563.6 5.3% 4.1%
- Latin America 511.3 13.9% 8.6% 1,853.7 10.0% -1.7%
- Eastern Europe(1) 390.9 5.4% -9.5% 1,585.4 6.0% -6.3%
- Africa, Middle East(1) 144.1 12.5% 20.3% 568.4 13.5% 12.5%
Cosmetics Divisions total 5,646.7 4.8% 8.3% 21,658.2 3.8% 1.7%
The Body Shop 319.6 6.0% 11.4% 873.8 1.6% 4.6%
Group total 5,966.4 4.9% 8.5% 22,532.0 3.7% 1.8%

(1) As of July 1st, 2013, Turkey and Israel, which were previously included in the Africa, Middle East Zone, were transferred to the Eastern Europe Zone. All figures for earlier periods have been restated to allow for this change.

PROFESSIONAL PRODUCTS

The Professional Products Division recorded sales growth of +2.6% like-for-like and +2.0% based on reported figures in a market that remains difficult. The Division is strengthening its positions in Western Europe and continues to develop in the New Markets.

  • Haircare, the number 1 contributor to sales growth, is continuing to expand, boosted by the success of Densifique and Discipline at Kérastase, Absolut Repair Lipidium and Serioxyl at L'Oréal Professionnel, and Biolage and Oil Wonders at Matrix. Hair colour - a category in which all the brands are growing - benefits from the dynamism of Majirel and Inoa at L'Oréal Professionnel, Color Graphics at Matrix and Chromatics at Redken. Styling has returned to a good growth level, thanks to L'Oréal Professionnel and Redken which have renewed their product line-ups.
  • In geographic terms, the United States and Western Europe have confirmed their return to growth. The Division is growing across all the New Markets excluding Japan. The United States, Brazil, India and Russia are the largest contributors to growth.

CONSUMER PRODUCTS

In a market that slowed in 2014, the Consumer Products Division posted +1.6% like-for-like and -1.0% based on reported figures, with an improvement at the end of the year.

  • The Division's three major global brands are progressing. The two 2014 acquisitions, NYX and Magic, are growing strongly. L'Oréal Paris is proving very dynamic in haircare with its Extraordinary Oils range, and is increasing make-up sales with the launch of its new "Makeup Designer" platform and Miss Manga mascara. Ultra Doux by Garnier is continuing to expand thanks to its Honey Treasures range and the brand's successful United Kingdom launch. In Southern Asia, Garnier is maintaining its facial skincare momentum with the success of Sakura White and Garnier Men. Maybelline is rolling out its eyebrow make-up innovations worldwide, and is now growing again in the United States with the launch of the Nudes Palette.
  • In a flat European market, the Division is increasing its sales and strengthening its number 1 position. In North America, the Consumer Products Division gained market share in haircare and make-up. In the New Markets, the Division is outperforming the overall market trend, and winning market share in Eastern Europe and the Africa, Middle East Zone.

L'ORÉAL LUXE

Following accelerating sales in the final quarter, L'Oréal Luxe recorded growth of +7.1% likefor-like and +5.7% based on reported figures. The Division is continuing to clearly outperform the selective market. The make-up and women's fragrance categories are particularly dynamic.

  • Yves Saint Laurent is continuing to grow with a double-digit increase in 2014, thanks to the women's fragrance Black Opium, make-up and Asia. Giorgio Armani also had a very good year with its successful fragrance and its make-up products. Lancôme delivered a solid performance in fragrances with "La vie est belle", the number 1 selling fragrance in France, and number 2 in Europe. The brand is currently revamping its point-of-sales identity, advertising campaigns and ambassadors. The skincare cream Visionnaire and Grandiôse mascara, winner of the Prix d'Excellence Marie Claire, are very successful. The alternative lifestyle brands Urban Decay, Kiehl's, Clarisonic and Shu Uemura are also boosting the Division's growth. Amongst the designer fragrance brands, Midnight Romance by Ralph Lauren and Bonbon, the new women's perfume from Viktor & Rolf, are proving to be clear winners.
  • In 2014, L'Oréal Luxe outperformed the market in all its main Zones, particularly in Europe, China, the Middle East and the United States. E-commerce sales are growing very strongly.

In 2014, the Division accelerated its growth, with sales advancing by +8.7% like-for-like and +5.3% based on reported figures, outperforming a healthy market. Like-for-like growth rates were higher than in 2013 on every continent.

  • The Vichy brand is continuing to expand particularly in skincare, underpinned by the growth of its major franchises, particularly Liftactiv Supreme and Neovadiol in the anti-ageing segment. With another year of double-digit growth, La Roche-Posay is maintaining its growth in all regions and across its product range, with outstanding performances from its two pillar ranges, Anthelios and Effaclar. SkinCeuticals is confirming its success both in its original market, the United States, and in the new geographies where it is expanding.
  • All the regions are contributing to the Division's dynamism. The significant scores in France, the world's largest dermocosmetics market, Brazil, where the Division is contributing to the development of the market, and China are particularly worth noting.

Multi-division summary by Geographic Zone

WESTERN EUROPE

In a flat market, and a highly competitive environment between mass-market retailers, growth came out at +2.4% like-for-like and +3.1% based on reported figures. This increase is particularly encouraging because L'Oréal accelerated in the fourth quarter, and is growing both in Northern and Southern Europe, particularly in Germany, the United Kingdom and Spain. All Divisions are contributing to the sales increase, with a special mention for L'Oréal Luxe and Active Cosmetics.

NORTH AMERICA

After a strong momentum over the last few years, growth in 2014 was more moderate because of the Consumer Products Division. Sales increased by +1.1% like-for-like and +0.6% based on reported figures. The Professional Products Division, Active Cosmetics and L'Oréal Luxe are continuing to develop, thanks, among others, to the American brands Redken, SkinCeuticals, Urban Decay and Kiehl's. In a market that improved in the second half, the Consumer Products Division increased its sales, in particular from the contribution of L'Oréal Paris. The recent acquisitions of the very fastgrowing brands NYX and Carol's Daughter complement the Consumer Products Division, and boost its product offering.

NEW MARKETS

  • Asia, Pacific: L'Oréal recorded annual growth of +5.3% like-for-like and +4.1% based on reported figures. Excluding Japan, like-for-like growth came out at +5.8%. The Group is strengthening its positions further with very good performances from Kiehl's, Yves Saint Laurent, Giorgio Armani, La Roche-Posay and Clarisonic. By country, India, Indonesia, Hong Kong and Australia are all recording high growth. Magic, acquired in China in the first half, is growing solidly in the beauty mask market.
  • Latin America: L'Oréal recorded +10.0% like-for-like and -1.7% based on reported figures. The Professional Products Division, Active Cosmetics and L'Oréal Luxe recorded double-digit growth, underpinned by their major brands L'Oréal Professionnel, Lancôme, Giorgio Armani, La Roche-Posay and Vichy. Consumer Products Division growth is being driven by L'Oréal Paris with its Elsève brand and Maybelline, thanks in particular to the kiosks initiative in Brazil.
  • Eastern Europe: The Zone recorded +6.0% like-for-like and -6.3% based on reported figures, and is growing significantly faster than the market, thanks to the good momentum of L'Oréal Luxe and the Professional Products Division. The Consumer Products Division is winning total Zone market share with a very good performance in hair colour, driven by the launch of Prodigy by L'Oréal Paris, and in deodorants thanks to Néo by Garnier. Active Cosmetics is outperforming the market in Russia and Turkey.

Africa, Middle East: Sales rose by +13.5% like-for-like and +12.5% based on reported figures. All Divisions recorded double-digit growth and gained market share. South Africa, the Gulf states, as well as growth-relay countries like Egypt, Saudi Arabia and Pakistan posted strong performance. L'Oréal Paris, Maybelline, Lancôme, Giorgio Armani and Vichy contributed to the Zone's good score, along with the more recently launched brands Kiehl's and SkinCeuticals.

THE BODY SHOP

The Body Shop had a satisfactory end to the year in all its categories.

The brand recorded growth of +1.6% like-for-like and +4.6% based on reported figures. The strategic priority given to skincare is continuing to pay off, thanks in particular to the fourth quarter launch of Drops of Youth Eye Concentrate. The Americas' region that now includes the addition of the Emporio Body Store stores in Brazil, drove the highest growth.

B – Important events during the period 10/01/14 – 12/31/14

  • On October 20th, L'Oréal USA announced the acquisition of Carol's Daughter, an American multicultural beauty brand with a pioneering heritage in the natural beauty movement. The brand caters to a diverse, rapidly growing market and has established a loyal consumer following throughout the United States. For the last 12 months to end September, Carol's Daughter had net sales of US \$27 million.
  • On November 27th, L'Oréal and Nestlé announced their project to end the operations of their joint venture Innéov in the first quarter 2015.
  • On December 18th, L'Oréal stated that it had been informed of the French Competition Authority's decision to rule against manufacturers of household and hygiene products concerning events which took place in the early 2000s. L'Oréal has appealed this decision.
  • Currently undergoing finalisation in the first half of 2015, the acquisition of Niely Cosmeticos, announced on September 8th, 2014, has been approved by the Brazilian regulatory authorities. Niely Cosmeticos is the largest independent hair colour and haircare company in Brazil, with a net revenue of 140 million euros in 2013.

C – 2014 Results

Audited financial statements, certification in progress.

The announcement on February 11th, 2014, of the disposal of 50% of Galderma leads to account for this business in accordance with IFRS 5 accounting rule on discontinued operations. In accordance with IFRS 11 accounting rule, Inneov has been consolidated under the equity method of January 1 st, 2014. All figures for earlier periods have been restated accordingly.

1) Operating profitability at 17.3% of sales

Consolidated profit and loss account: from sales to operating profit.

(2013 figures restated in accordance with IFRS 5 and IFRS 11 accounting rules)

2013 2014
€m % sales €m % sales
Sales 22,124.2 100% 22,532.0 100%
Cost of sales -6,379.4 28.8% -6,500.7 28.9%
Gross profit 15,744.8 71.2% 16,031.3 71.1%
R&D expenses -748.3 3.4% -760.6 3.4%
Advertising and promotion expenses -6,621.7 29.9% -6,558.9 29.1%
Selling, general and administrative expenses -4,614.4 20.9% -4,821.1 21.4%
Operating profit 3,760.4 17.0% 3,890.7 17.3%

Gross profit, at 16,031 million euros, came out at 71.1% of sales, compared with 71.2% in 2013, that is a decrease of 10 basis points. Foreign exchange effects had a negative impact of 30 basis points: the other factors represented a positive impact of 20 basis points.

Research and Development expenses remained stable as a percentage of sales at 3.4%.

Advertising and promotion expenses, as announced one year ago, came out as a lower percentage of sales compared with 2013. At 29.1% of sales, that is a decrease of 80 basis points.

Selling, general and administrative expenses, at 21.4% of sales, have come out at a higher level, by 50 basis points compared with 2013, as they did in the first half of 2014.

Overall, the operating profit, at 3,890 million euros, has grown by 3.5% and amounts to 17.3% of sales. At constant exchange rates, operating profit growth would have been +5.5%.

2) Operating profit by Operational Division

(2013 figures restated in accordance with IFRS 5 and IFRS 11 accounting rules)

2013 2014
€m % sales €m % sales
By Operational Division
Professional Products 609.5 20.5% 608.8 20.1%
Consumer Products 2,166.7 19.9% 2,186.2 20.3%
L'Oréal Luxe 1,174.2 20.0% 1,269.2 20.5%
Active Cosmetics 342.6 21.7% 376.4 22.7%
Cosmetics Divisions total 4,293.0 20.2% 4,440.6 20.5%
Non-allocated* -604.5 -2.8% -615.2 -2.8%
The Body Shop 71.9 8.6% 65.3 7.5%
Group 3,760.4 17.0% 3,890.7 17.3%

* Non-allocated = Central Group expenses, fundamental research expenses, stock options and free grant of shares expenses and miscellaneous items. As a % of cosmetics sales.

  • The profitability of the Professional Products Division at 20.1% is down by 40 basis points, due mainly to the dilutive effect of the consolidation of Decléor and Carita.

  • The profitability of the Consumer Products Division once again improved very significantly at 20.3%, up by 40 basis points.

  • The profitability of L'Oréal Luxe grew by 50 basis points, at 20.5% in 2014.

  • At Active Cosmetics, there was a further increase in profitability at 22.7%. That is a 100 basis point improvement.

  • The profitability of The Body Shop weakened in 2014, to 7.5%.

3) Profitability by Geographic Zone

(2013 figures restated in accordance with IFRS 5 and IFRS 11 accounting rules)

2013 2014
Operating profit €m % sales €m % sales
Western Europe 1,661.8 22.3% 1,746.1 22.7%
North America 1,003.1 18.7% 1,010.4 18.7%
New Markets 1,628.2 19.2% 1,684.1 19.6%
Cosmetics Zones total* 4,293.0 20.2% 4,440.6 20.5%

* Before non-allocated.

Profitability in Western Europe improved by 40 basis points to reach 22.7%.

In North America, profitability remains stable at 18.7%.

And in the New Markets, profitability again increased this year, by 40 basis points, to reach 19.6%.

4) Net profit from continuing operations

Consolidated profit and loss accounts: from operating profit to net profit excluding non-recurring items.

(2013 figures restated in accordance with IFRS 5 and IFRS 11 accounting rules)

€m 2013 2014 % change
Operating profit 3,760.4 3,890.7 +3.5%
Financial revenues and expenses excluding dividends received -31.4 -24.1
Sanofi dividends 327.5 331.1
Profit before tax excluding non-recurring items 4,056.4 4,197.7 +3.5%
Income tax excluding non-recurring items -1,018.0 -1,069.5
Net profit excluding non-recurring items of equity consolidated
companies
-3.0 -3.0
Non-controlling interests -3.2 +0.1
Net profit excluding non-recurring items after non-controlling
interests*
3,032.4 3,125.3 +3.1%
Net EPS** (€) 4.99 5.34 +7.1%
Net profit after non-controlling interests 2,958.2 4,910.2 +66%
Diluted net EPS after non-controlling interests (€) 4.87 8.39
Diluted average number of shares 608,001,407 585,238,674

* Net profit excluding non-recurring items after non-controlling interests does not include impairment of assets, restructuring costs, tax effects or non-controlling interests.

** Diluted net earnings per share excluding non-recurring items after non-controlling interests.

Finance expenses amounted to 24 million euros.

Sanofi dividends amounted to 331 million euros.

Income tax excluding non-recurring items amounted to 1,069 million euros. This represents a tax rate of 25.5%, slightly higher than that of 2013 which came out at 25.1%.

Net profit excluding non-recurring items amounted to 3,125 million euros.

Net Earnings per Share, at 5.34 euros, is up by 7.1%, compared to Net Earnings per Share for 2013 restated from discontinued operations.

Non-recurring items amounted to a charge net of tax of 357 million euros, due in part to the decision by the French Competition Authority.

After the capital gain on the disposal of Galderma, 2.1 billion euros, net profit came out at 4,910 million euros, which represents a large increase of 66%.

5) Net earnings per share(4): 5.34 euros, up by 4.1%

It is the comparison of net profit per share, excluding non-recurring items, attributable to owners of the company - as it was reported in 2013 - with the net profit per share, excluding non-recurring items, attributable to owners of the company, for the year 2014.

In € million 12/31/13 12/31/14 Change
Net profit from continuing operations, excluding non
recurring items, attributable to owners of the company
3,032.4 3,125.3
2013 contribution of Galderma to net profit
excluding non-recurring items
85.1
Reported net profit excluding non-recurring items,
attributable to owners of the company
3,117.5(1) 3,125.3(2)
EPS (€) 5.13(3) 5.34(4) +4.1%
Diluted average number of shares used to calculate the
EPS
608,001,407 585,238,674

(1) Reported net profit excluding non-recurring items, attributable to owners of the company at Dec.31st, 2013.

(2) Net profit from continuing operations, excluding non-recurring items, attributable to owners of the company, for the year 2014. (3) Diluted earnings per share based on reported net profit excluding non-recurring items, attributable to owners of the company at Dec.31st, 2013.

(4) Diluted earnings per share based on net profit of continuing operations, excluding non-recurring items, attributable to owners of the company.

6) Cash flow statement, Balance sheet and Net financial situation

Gross cash flow amounted to 3,808 million euros.

The working capital requirement in 2014 was reduced by 55 million euros.

Investments, amounted to 1,008 million euros, representing 4.5% of sales, slightly less than in 2013, when it represented 4.6% of sales.

Finally, after payment of the dividend, acquisitions, and the purchase of shares from Nestlé, the net debt came out, at December 31st , 2014, at 671 million euros.

With a shareholders' equity amounting to 20 billion euros, the balance sheet remains particularly solid, after the purchase of 8% of the capital from Nestlé for 6 billion euros.

7) Proposed dividend at the Annual General Meeting of April 22nd, 2015

The Board of Directors has decided to propose that the Shareholders' Annual General Meeting of April 22nd, 2015 should approve a dividend of 2.70 euros per share, an increase of 8% compared with the dividend paid in 2014. The dividend will be paid on May 7th , 2015 (ex-dividend date May 5th, 2015 at 0:00 a.m., Paris time).

8) Share capital

As of December 31st, 2014, the capital of the company is formed by 561,230,389 shares, each with one voting right.

"This news release does not constitute an off er to s ell, or a solicit ation of an offer to buy L 'Oréal shares. If you wish to obtain more comprehensive information about L'Oréal, please refer to the public documents registered in France with t he Aut orité de s Marchés Financiers, also available in English on our Internet site www.loreal-financ e.com.

This news release may contain s ome forward -looking statements. Although t he Company considers that thes e statements are bas ed on reasonable hypotheses at the dat e of publication of t his release, they are by their nature subject t o risks and uncertainties which c ould cause actual results to differ mat erially from those indic ated or projected in these statements."

This a f ree translation int o English of t he 2014 Annual Results news release issued in the French language and is provided solely for the convenience of English speaking readers. In case of discrepancy, the French version prevails.

Contacts at L'ORÉAL (Switchboard: +33 1 47 56 70 00)

Individual shareholders Financial analysts and and market authorities Institutional investors Journalists

Tel: +33 1 47 56 83 02 Tel: +33 1 47 56 86 82 Tel: +33 1 47 56 76 71

Mr Jean Régis CAROF Mrs Françoise LAUVIN Mrs Stephanie CARSON-PARKER [email protected] [email protected] [email protected]

For more information, please contact your bank, broker or financial institution (I.S.I.N. code: FR0000120321), and consult yo ur usual newspapers, and the Internet site for shareholders and investors, http://www.loreal-finance.com, alternatively, call +33.1.40.14.80.50.

D – Appendices

Appendix 1: L'Oréal Group sales 2013/2014 (€ millions)

The announcement on February 11th, 2014, of the disposal of 50% of Galderma leads to account for this business in accordance with IFRS 5 accounting rule on discontinued operations. In accordance with IFRS 11 accounting rule, Innéov has been consolidated under the equity method as of January 1st, 2014. All figures for earlier periods have been restated accordingly.

2013 2014
First quarter:
Cosmetics Divisions 5,583.6 5,462.2
The Body Shop 181.9 176.4
First quarter total 5,765.5 5,638.6
Second quarter:
Cosmetics Divisions 5,390.0 5,348.5
The Body Shop 186.9 187.4
Second quarter total 5,576.9 5,536.0
First half:
Cosmetics Divisions 10,973.6 10,810.8
The Body Shop 368.8 363.8
First half total 11,342.4 11,174.6
Third quarter:
Cosmetics Divisions 5,103.2 5,200.7
The Body Shop 179.9 190.4
Third quarter total 5,283.1 5,391.1
Nine months:
Cosmetics Divisions 16,076.8 16,011.4
The Body Shop 548.7 554.2
Nine months total 16,625.5 16,565.7
Fourth quarter:
Cosmetics Divisions 5,211.7 5,646.7
The Body Shop 287.0 319.6
Fourth quarter total 5,498.7 5,966.4
Full year
Cosmetics Divisions 21,288.5 21,658.2
The Body Shop 835.8 873.8
Full year total 22,124.2 22,532.0

Appendix 2: Compared consolidated income statements

€ millions 2014 2013 (1) 2012 (1)
Net sales 22,532.0 22,124.2 21,638.4
Cost of sales -6,500.7 -6,379.4 -6,388.3
Gross profit 16,031.3 15,744.8 15,250.1
Research and development -760.6 -748.3 -680.4
Advertising and promotion -6,558.9 -6,621.7 -6,531.6
Selling, general and administrative expenses -4,821.1 -4,614.4 -4,479.7
Operating profit 3,890.7 3,760.4 3,558.4
Other income and expenses -307.2 -128.6 -121.1
Operational profit 3,583.5 3,631.8 3,437.3
Finance costs on gross debt -31.4 -23.1 -27.3
Finance income on cash and cash equivalents 42.3 36.4 35.0
Finance costs, net 11.0 13.3 7.7
Other financial income (expenses) -35.1 -44.7 -6.0
Sanofi dividends 331.0 327.5 313.4
Profit before tax and associates 3,890.4 3,928.0 3,752.3
Income tax -1,111.0 -1,043.6 -985.4
Share of profit in associates -13.5 -3.0 -4.6
Net profit from continuing operations 2,765.9 2,881.4 2,762.3
Net profit from discontinued operations 2,142.7 80.0 108.1
Net profit 4,908.6 2,961.4 2,870.4
Attributable to:
• owners of the company 4,910.2 2,958.2 2,867.7
• non-controlling interests -1.6 3.2 2.7
Earnings per share attributable to owners of the company (euros) 8.51 4.95 4.79
Diluted earnings per share attributable to owners of the company (euros) 8.39 4.87 4.74
Earnings per share of continuing operations attributable to owners of the company
(euros)
4.79 4.82 4.61
Diluted earnings per share of continuing operations attributable to owners of the
company (euros)
4.73 4.73 4.56
Earnings per share of continuing operations attributable to owners of the company,
excluding non-recurring items (euros)
5.41 5.07 4.78
Diluted earnings per share of continuing operations attributable to owners of the
company, excluding non-recurring items (euros)
5.34 4.99 4.73

(1) The consolidated income statements for 2013 and 2012 have been restated to reflect the impacts of IFRS 5 concerning discontinued operations along with the impact of applying IFRS 11.

Appendix 3: Consolidated statement of comprehensive Income

€ millions 2014 2013 2012
Consolidated net profit for the period 4,908.6 2,961.4 2,870.4
Financial assets available-for-sale -172.7 677.4 1,730.9
Cash flow hedges -17.2 13.2 103.0
Cumulative translation adjustments 584.0 -457.0 -134.3
Income tax on items that may be reclassified to profit or loss (1) 7.3 -32.1 -116.9
Items that may be reclassified to profit or loss 401.4 201.5 1,582.7
Actuarial gains and losses -672.7 188.9 -271.9
Income tax on items that may not be reclassified to profit or loss (1) 225.1 -63.8 86.7
Items that may not be reclassified to profit or loss -447.6 125.1 -185.2
Other comprehensive income -46.2 326.6 1,397.5
Consolidated comprehensive income 4,862.4 3,288.0 4,267.9
Attributable to:
• owners of the company 4,864.3 3,284.9 4,265.1
• non-controlling interests -1.9 3.1 2.8
(1)
The tax effect is as follows:
€ millions 2014 2013 2012
Financial assets available-for-sale 7.2 -28.0 -90.0
Cash flow hedges 0.1 -4.1 -26.9
Items that may be reclassified to profit or loss 7.3 -32.1 -116.9
Actuarial gains and losses 225.1 -63.8 86.7
Items that may not be reclassified to profit or loss 225.1 -63.8 86.7
Total 232.4 -95.9 -30.2

Appendix 4: Compared consolidated balance sheets

Assets

€ millions 12.31.2014 12.31.2013 (1) 12.31.2012 (1)
Non-current assets 23,288.4 21,489.3 20,902.7
Goodwill 7,525.5 6,206.0 6,270.1
Other intangible assets 2,714.6 2,105.4 2,164.0
Property, plant and equipment 3,141.1 2,891.2 2,832.4
Non-current financial assets 9,069.0 9,204.0 8,526.2
Investments in associates - 435.2 414.8
Deferred tax assets 838.2 647.5 695.2
Current assets 8,774.6 9,389.6 8,331.4
Inventories 2,262.9 2,085.2 1,971.1
Trade accounts receivable 3,297.8 3,022.8 3,051.7
Other current assets 1,199.3 1,500.3 969.4
Current tax assets 97.6 122.1 104.0
Cash and cash equivalents 1,917.0 2,659.3 2,235.2
Total 32,063.0 30,878.9 29,234.1

(1) Includes the impact of applying IFRS 11.

Equity & liabilities

€ millions 12.31.2014 12.31.2013 (1) 12.31.2012 (1)
Equity 20,188.7 22,642.8 20,925.5
Share capital 112.3 121.2 121.8
Additional paid-in capital 2,316.8 2,101.2 1,679.0
Other reserves 9,765.1 14,220.8 13,679.7
Other comprehensive income 3,745.9 4,370.1 3,586.4
Cumulative translation adjustments 17.8 -566.4 -109.4
Treasury stock -683.0 -568.1 -904.5
Net profit attributable to owners of the company 4,910.2 2,958.2 2,867.7
Equity attributable to owners of the company 20,185.1 22,637.0 20,920.7
Non-controlling interests 3.6 5.8 4.8
Non-current liabilities 2,595.6 1,928.6 2,114.3
Provisions for employee retirement obligations and related benefits 1,479.7 939.6 1,191.2
Provisions for liabilities and charges 193.6 174.5 181.8
Deferred tax liabilities 855.2 730.6 694.3
Non-current borrowings and debt 67.1 83.9 47.0
Current liabilities 9,278.7 6,307.6 6,194.3
Trade accounts payable 3,452.8 3,249.7 3,230.7
Provisions for liabilities and charges 722.0 528.8 533.8
Other current liabilities 2,415.6 2,095.5 2,055.6
Income tax 167.1 178.3 134.0
Current borrowings and debt 2,521.2 255.3 240.2
Total 32,063.0 30,878.9 29,234.1

(1) Includes the impact of applying IFRS 11.

Appendix 5: Consolidated statements of changes in equity

Common Additional Retained
earnings
Other Cumulative Equity
attributable
to owners
Non
€ millions shares
outstanding
Share
capital
paid-in
capital
and net
profit
comprehensive
income
Treasury
stock
translation
adjustments
of the
company
controlling
interests
Total
equity
At 12.31.2012 598,356,662 121.8 1,679.0 16,547.4 3,586.4 -904.5 -109.4 20,920.7 4.8 20,925.5
Consolidated net profit for the period 2,958.2 2,958.2 3.2 2,961.4
Financial assets available-for-sale 649.5 649.5 649.5
Cash flow hedges 9.1 9.1 -0.1 9.0
Cumulative translation adjustments -457.0 -457.0 -457.0
Other comprehensive income that may be
reclassified to profit and loss
658.6 -457.0 201.6 -0.1 201.5
Actuarial gains and losses 125.1 125.1 125.1
Other comprehensive income that may not
be reclassified to profit and loss
125.1 125.1 125.1
Consolidated comprehensive income 2,958.2 783.7 -457.0 3,284.9 3.0 3,288.0
Capital increase 6,199,701 1.2 422.2 423.4 423.4
Cancellation of Treasury stock -1.8 -996.7 998.5 - -
Dividends paid (not paid on Treasury stock) -1,380.6 -1,380.6 -2.5 -1,383.1
Share-based payment 97.2 97.2 97.2
Net changes in Treasury stock -4,762,333 1.4 -662.1 -660.7 -660.7
Purchase commitments for minority interests -48.3 -48.3 -0.9 -49.2
Changes in scope of consolidation - 1.4 1.4
Other movements 0.4 0.4 0.4
At 12.31.2013 599,794,030 121.2 2,101.2 17,179.0 4,370.1 -568.1 -566.4 22,637.0 5.8 22,642.8
Consolidated net profit for the period 4,910.2 4,910.2 -1.6 4,908.6
Financial assets available-for-sale -165.5 -165.5 -165.5
Cash flow hedges -17.0 -17.0 -0.1 -17.1
Cumulative translation adjustments 584.2 584.2 -0.2 584.0
Other comprehensive income that may be
reclassified to profit and loss
-182.5 584.2 401.7 -0.3 401.4
Actuarial gains and losses -447.6 -447.6 -447.6
Other comprehensive income that may not
be reclassified to profit and loss
-447.6 -447.6 -447.6
Consolidated comprehensive income 4,910.2 -630.1 584.2 4,864.3 -1.9 4,862.4
Capital increase 3,828,502 0.8 215.6 -0.1 216.3 2.3 218.6
Cancellation of Treasury stock -9.7 -6,035.9 6,045.6 - -
Dividends paid (not paid on Treasury stock) -1,507.3 -1,507.3 -2.8 -1,510.1
Share-based payment 113.5 113.5 113.5
Net changes in Treasury stock -49,380,654 0.2 -6,160.5 -6,160.3 -6,160.3
Purchase commitments for minority interests 21.0 21.0 -2.3 18.7
Changes in scope of consolidation - 2.5 2.5
Other movements -5.3 5.9 0.6 0.6
At 12.31.2014 554,241,878 112.3 2,316.8 14,675.3 3,745.9 -683.0 17.8 20,185.1 3.6 20,188.7

Appendix 6: Compared consolidated statements of cash flows

€ millions 2014 2013 (1) 2012 (1)
Cash flows from operating activities
Net profit attributable to owners of the company 4,910.2 2,958.2 2,867.7
Non-controlling interests -1.6 3.2 2.7
Elimination of expenses and income with no impact on cash flows:
• depreciation, amortisation and provisions 856.2 767.8 623.4
• changes in deferred taxes 60.0 15.9 34.9
• share-based payment (including free shares) 113.5 97.2 86.4
• capital gains and losses on disposals of assets -0.9 0.1 -4.3
Net profit from discontinued operations -2,142.7 -80.0 -108.1
Share of profit in associates net of dividends received 13.5 -4.6 4.6
Gross cash flow 3,808.2 3,757.9 3,507.3
Changes in working capital 55.9 -67.6 -108.6
Net cash provided by operating activities (A) 3,864.1 3,690.3 3,398.7
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets -1,008.2 -1,018.8 -923.3
Disposals of property, plant and equipment and intangible assets 18.7 8.5 7.1
Changes in other financial assets (including investments in non-consolidated companies) 403.4 -464.8 443.6
Dividends received from discontinued operations 41.7 56.3 48.0
Effect of changes in the scope of consolidation 1,194.0 -138.4 -464.7
Net cash (used in) from investing activities (B) 649.6 -1,557.2 -889.3
Cash flows from financing activities
Dividends paid -1,589.3 -1,425.4 -1,267.8
Capital increase of the parent company 216.4 423.4 408.8
Capital increase of subsidiaries 2.3 - 1.4
Disposal (acquisition) of Treasury stock -6,160.3 -660.6 -257.7
Issuance (repayment) of short-term loans 2,225.0 48.9 -792.8
Issuance of long-term borrowings 0.2 - -
Repayment of long-term borrowings -13.0 -19.7 -13.1
Net cash (used in) from financing activities (C) -5,318.7 -1,633.4 -1,921.2
Net cash (used in) from discontinued operations (D) - 23.0 -20.4
Net effect of changes in exchange rates and fair value (E) 62.7 -75.6 -17.2
Change in cash and cash equivalents (A+B+C+D+E) -742.3 447.1 550.6
Cash and cash equivalents at beginning of the year (F) 2,659.3 2,235.2 1,664.2
Change in cash and cash equivalents of discontinued operations (G) - -23.0 20.4
Cash and cash equivalents at end of the year (A+B+C+D+E+F+G) 1,917.0 2,659.3 2,235.2

(1) The statements of cash flows for 2013 and 2012 have been restated to reflect the impacts of IFRS 5 concerning discontinued operations along with the impact of applying IFRS 11.

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