L'Oréal S.A. (OR) Earnings Call Transcript & Summary

Good morning, everybody. We are right on time to start this meeting. Let me begin by saying that I hope that you and your families are all safe and well. I'm joined here today by Christophe Babule, our CFO; and Nicolas Hieronimus, Deputy CEO and Head of Divisions. As you know, Nicolas will become CEO of L'Oréal, of the group on the 1st of May. In previous years, we have been joined by the presidents of our divisions. This year, to respect the strictest health and safety measures, we have decided to limit the number of people on stage. The presentation of the 4 division heads have been recorded, and they will then join us remotely by telephone to answer your questions during the Q&A session. So first, a quick word from Françoise Lauvin with the housekeeping details, and then we will begin.

Good morning, ladies and gentlemen. We are happy to welcome you to this virtual presentation of our 2020 annual results which is webcast live in our dedicated website, loreal-finance.com. Let's have a quick look at the agenda of this meeting. Christophe Babule, our CFO, will kick off with a presentation of the financial statements and of our extra financial performance. Then, each head of division will summarize the 2020 highlights of his or her division as well as the prospects for 2021. Jean-Paul Agon, our Chairman and CEO, will explain how well L'Oréal navigated through this unprecedented year, and he will let Nicolas Hieronimus, our Deputy CEO, conclude the session. Nicolas will share his strategic perspectives for the long term and his total confidence in the future of L'Oréal. At about 10:00, we will move to the Q&A session, which will last to the end of the meeting at around 11:00. Before we start, I would like to draw your attention to a couple of points. The meeting will be held in English, so -- but there is a simultaneous translation in French for those of you who feel more comfortable in that language. At the end of the presentations, the Q&A session will be in audio mode. You may use the audio connection now if you would like to follow the presentations by phone in a listen-only mode. All slides and visuals shown during the presentation are available in English and French on our website. During the audio Q&A session, we will kindly ask you to state your name and company name as clearly as possible before you ask your questions in English. We will also take some questions sent by e-mail. And we kindly ask our journalist guests to raise their questions during the latter part of the Q&A session. Before we start, I would like you to read the disclaimer that you should now see on the screen. For those of you in an audio mode, it can be found on the last page of the presentations. Last point, the recorded webcast of the meeting will be available this afternoon in the Annual Results section of our dedicated finance website. I thank you for your attention and wish you a pleasant meeting.

Thank you very much, Françoise. Now I will pass the microphone to Christophe who will show us the results of 2020.

Thank you, Jean-Paul. Ladies and gentlemen, good morning. The presentation of L'Oréal's financial results for 2020 will include information about sales, profit, cash flow, balance sheet, dividend and extra financial performance. Consolidated sales amounted to EUR 27.9 billion, down 4.1% like-for-like. Sales recovered swiftly from June onwards from an 11.7% decline in the first half to a like-for-like growth of plus 3.2% in the second half and even to plus 4.8% growth in the fourth quarter. At constant exchange rates, sales decreased 3.6%. The change in the scope of consolidation is positive by 0.5%, mainly due to the acquisitions of the Mugler and Azzaro brands as well as of the American skincare brand Thayers, partly offset by the disposal of Roger & Gallet and the termination of Clarisonic. After taking into account the negative currency impact of minus 2.7%, reported sales declined by 6.3%. Note that the currency impact deteriorated throughout the year to minus 5.6% in the fourth quarter. Currencies. More than 60% of the group's business is invoiced in 3 currencies: the euro, which accounted for 20.7% of sales in 2020; the U.S. dollar for 22.8%; and the Chinese yuan for 18.2%. In 2020, most currencies weakened against the euro but for the Japanese yen, which was stable. The dollar was on average 1.8% lower. The Chinese yuan depreciated 1.7%; and the pound sterling, 1.3%. The Canadian dollar dipped by 2.8%. The Russian ruble lost 11.6%, and the Brazilian real fell by 24.1%. You may find this table useful to update your estimates in the current year. And as far as the impact of currency is concerned, it is too early at this stage to forecast precisely what it will be in 2021. However, I can tell you that extrapolating current rates of EUR 1 at around $1.21, the impact on full year sales will be negative to the tune of 3.5%, which, of course, have a more negative impact in the first quarter, estimated at around minus 6%. Sales by division. The Professional Product Division ended the year at minus 6.4%, with a very strong rebound of plus 8.7% in the second half. The Consumer Product Division was penalized by its heavy footprint in makeup and posted a decrease of minus 4.7%. L’Oréal Luxe achieved a good fourth quarter with a growth of plus 4.4% and ended the year with an 8.1% sales decline. The division recorded growth in the Asia Pacific zone in 2020. Lastly, the Active Cosmetics Division achieved record growth of 18.9%. Note that the division posted growth in all regions, especially in North America, which grew at 42.5%. By region. Western Europe posted an annual decline of minus 10.3% with a much better second half at minus 4.3%. It was penalized by the sharp reduction in international travel, and excluding travel retail, the zone will be flat in the second half. North America is at minus 7.4% with a positive second half. The Professional Products and Consumer Product Divisions were remarkably resistant, but the performance was held back by L'Oréal Luxe. The New Markets zone recorded growth of 1.5%, with growth of 13.5% in the fourth quarter. Sales in Asia Pacific increased by 3.5% driven by a strong growth of 27% in Mainland China. Sales in Eastern Europe were at minus 4.9%. Latin America limited its decline to minus 1.5% thanks to good growth of 10.5% in Brazil. And Africa, Middle East, which was affected by instability in certain markets, posted a 3.3% decrease. Now here is the breakdown of 2020 sales by geographic zone. The weight of Asia Pacific has increased further, and the zone now accounts for 35% of total sales. Western Europe represents around 27% of total sales; and North America, a little less than 1/4. And in descending order by weight come Eastern Europe at 6%; Latin America at 5.2%; and Africa, Middle East at 2.2%. Sales by category now. Skincare is growing in all the divisions that are active in the category, with slightly more than EUR 11 billion in sales and growth of 8.7%. Skincare now accounts for close to 40% of total group sales. With a decline of 21.6% over full year and of minus 15.5% in the second half, makeup was heavily impacted by the pandemic. The category now represents 21% of total sales. Hair care is stable at minus 0.8% while hair coloring posted 2.3% growth. Finally, the fragrance category, which represents 9% of total sales, posted a decline of 15.4% over the full year with a much better second half at minus 6.2%. Let's move to the profit and loss account. Gross margin is up by 10 basis points to 73.1% of sales. Currency impacts, both translation and transaction, are positive by 60 basis points. The impact of changes in the scope of consolidation are negative by 40 basis points. The positive mix effects within each division almost compensated for the negative impact of the lower production volumes on the cost of sales and of the increase in distribution costs. Research and innovation expenses are up by 10 basis points at 3.4% of sales. Advertising and promotion expenses are also higher by 10 basis points at 30.9% of sales. Our choice was to be extremely flexible in allocating these business drivers in order to seize all possible market opportunities where they occur. Note that 63% of our media expenses were digital. Selling, general and administrative expenses declined by 7.1% in absolute terms or by 20 basis points to 20.1% of sales. And operating profit amounted to EUR 5.2 billion or 18.6% of sales, a level unchanged from that of 2019. 2020 was a tale of 2 halves: the first half of resilience and the second half returning to a virtuous P&L dynamic with a like-for-like sales growth of 3.2% and 140 basis points improvement of the operating profit margin to 19.1%. Profitability by division. The profitability of the Professional Products Division came out at 18.8% compared with 20.1% in 2019. The profitability of the Consumer Product Division increased by 20 basis points at 20.4%. The profitability of L'Oréal Luxe at 22.4% decreased slightly by 20 basis points. And the profitability of Active Cosmetics Divisions came out at 25.4%, a significant increase of 210 basis points compared to 2019. Non-allocated expenses came out at 2.9% of sales, and therefore, the operating profit margin is stable at 18.6% of sales. Let's continue with the P&L. Finance expenses amounted to EUR 95 million. In 2020, they were higher due to the cost of interest rates, hedging instruments and the commissions related to the credit line secured in the second quarter. For 2021, finance expenses can be expected, at this stage, to be close to EUR 90 million. Sanofi dividends amounted to EUR 372 million. You will have noted that Sanofi recently announced a 1.6% increase in dividend. Tax amounted to EUR 1.383 billion. The tax rate at 25.2% is similar to the level of 2019 at 25.4%. For 2021, at this stage in the year and all other things being equal, we anticipate a tax rate similar to the level of 2020. Net profit excluding nonrecurring items amounted to EUR 4.1 billion, and earnings per share declined 5.7% to EUR 7.30. For those of you who would like to carry out a simulation for 2021, it will be best at this stage of the year to factor in an average diluted number of shares close to 561 million. Nonrecurring items in 2020 were negative by EUR 535 million. On top of the EUR 322 million already accounted for in the first half, they include mainly: first, charges for the reorganization of the distribution network of L'oréal Luxe in the United States and of the Maybelline and Vichy brands in Mainland China; second, charges for miscellaneous reorganizations in Western Europe; and then other charges including acquisitions-related costs, litigation, donation and endowment. The full year 2020 pretax nonrecurring items break down as follows: depreciation of assets for EUR 90 million, charges for various reorganizations for a total of EUR 322 million and the remaining EUR 297 million for other charges. After taking into account all nonrecurring items, net attributable profit amounted to 5 -- to EUR 3.563 billion, down by a limited 5%. Cash flow amounted to EUR 5.7 billion, marginally below that of 2019. Working capital requirement showed a strong improvement of EUR 729 million. This improvement is mainly due to the disciplined management of inventories and of account receivables, combined with the phasing of some expenses towards the end of the year. CapEx amounted to 3.5% of sales or EUR 972 million, below the level of 2019. The decrease is mainly due to lower investment in stores and [ POS ] material. For 2021, an investment level in the order of 4.5% of sales may be expected. Operating net cash flow increased 8.9% to around EUR 5.5 billion. Finally, after payment of the dividend, acquisitions, redemption of the lease debt and increase in share capital results for employees, the residual cash flow is positive at EUR 1.3 billion. The balance sheet remains particularly solid with shareholders' equity amounting to EUR 29 billion. The cash flow -- the cash situation, sorry, is positive by EUR 3.8 billion and by EUR 5.5 billion excluding the financial lease debt. The resilience demonstrated by the group in the pandemic and the quality of the balance sheet led the Board of Directors to propose to the AGM a 3.9% increase in dividend to EUR 4 per share. This increase in dividend leads to a payout ratio of 54.8%. I would like now to speak about our extra financial performance. 2020 is the final year of our Sharing Beauty With All program initiated in 2013 and which led to an in-depth transformation of our organization. We have fulfilled a substantial number of the targets within the allotted time frame as you can see on this slide. We can therefore prove that it is possible to decouple environmental impact from growth while also contributing positively to society. Thanks to these performances, L'Oréal has been recognized by several renowned international organization as a leader in the field of corporate, environmental and social responsibility: by CDP as the global leader in sustainable development for our actions to fight climate change, protect forest and manage water sustainably; by Refinitiv as a top ranking company for diversity and inclusion; by Ethisphere in the field of ethics; and Bloomberg for gender equality. With the L'Oréal for the Future Program, our sustainable development journey enters the second phase. This program aims at a more radical transformation of our business model to respect the planetary boundaries. Our new commitments will also tackle our indirect extended impacts relating to the activity of our suppliers and through the use of our products by our consumers. We also want to contribute to solving today's most pressing environmental and social challenges. The outcome of L'Oréal for the Future is an ambitious strategy with measurable time-bound impact reduction targets. These 2030 objectives, of which you can see a few on this slide, have been defined in accordance with the rationale of Science Based Targets, in line with what the scientific experts say is necessary to follow the 1.5-degree trajectory and preserve our planet. Finally, starting in 2020, we are committing EUR 150 million to address urgent social and environmental challenges, allocating, first, EUR 50 million over the next 3 years to a charitable endowment fund to support highly vulnerable women; and second, EUR 100 million to impact investing in the L'oréal Fund for nature regeneration and in financing innovative projects to promote a circular economy. We are committed to report regularly on each and every objective with clear and transparent indicators in order to share our progress both internally and externally. I thank you for your attention.

Thank you very much, Christophe. We will now hear the presentation of the divisions, and we will start with the Professional Products division by Nathalie Roos.

Good morning, ladies and gentlemen. 2020 was a year of remarkable performance for the Professional Products Division. We did far better than our competitors and gained huge market shares. On the full year basis, we declined by only 6.4% in a professional market estimated to be minus 16%, and we had a record second half at plus 8.7%, the best growth in 16 years. This exceptional performance came in a year unlike any we had ever seen as all salons worldwide closed simultaneously. But if this crisis affected us in the short term, it has made us stronger than ever for the long term. It has revealed how essential the hairstyling profession is for people. It has drastically accelerated the trends that we had anticipated: digitalization of salons, e-commerce and the rise of independent stylists. We were able to accomplish in just a few months what would have normally taken years. We have outperformed the market in all geographies, and the mobilization of our teams led to an impressive rebound in the second half of the year. In North America, at plus 9%, our distribution network, SalonCentric, delivered its full potential to reach independent stylists. In Western Europe, at plus 4%, we've gained 11,000 new salons and accelerated e-commerce. And in Asia Pacific, at plus 14%, our growth is boosted in the region by China at plus 78%. We have found the winning strategy there, personalized services in salons, live streaming and e-commerce. From the very beginning of lockdown, our solidarity plan for hairstylists with both financial and human support has reinforced our ties with the industry like never before. And above all, we succeeded because our transformation strategy that we initiated more than 3 years ago has enabled us to seize all market opportunities. We created unprecedented reach for our customers at a lower cost by digitizing 2 key engines of the division: order taking and education. Our e-learning platform, L'Oréal Access, was in 17 countries at the beginning of March. It is now deployed in 85. We trained 2.5 million hairdressers in only 2 months. We massively accelerated our e-commerce, both B2B and B2C. Plus we created a new social commerce with hairdressers at the center, allowing them to sell directly online to consumers. Our e-commerce has doubled since last year and now represents 20% of our total turnover. Within this new ecosystem, our brands have adapted and demonstrated their unique attractiveness. The best example is Kérastase at plus 14% over the year, showing innovation leadership and professional execution through all channels. Capitalizing on all these transformations in 2021, the division should once again significantly outperform the market. We will lead the innovation agenda: innovation in our formulas. We filed 9 patents around the new METAL DETOX by L'Oréal Professionnel. This disruptive protocol neutralizes metal in the hair fiber to eliminate risk of breakage in bleach and balayage with a 100% reliable color results. Innovation in our packaging. Redken Lightener will be made available as dissolvable pods, caring for the planet while optimizing the customer experience. And innovation in inclusion and diversity. Curl Manifesto by Kérastase will respond to the immense demand of women to express their natural beauty. We will roll out our global program salons for the future by L'Oréal, proving our sincere commitment to sustainability, from sourcing and production to delivery and in the salons, 65% water savings with Gjosa breakthrough technology and waste collection for strategic recycling. We will continue to elevate the profession through education. Real Campus by L'Oréal is now international, thanks to a twinning degree program with Arizona State University. Our commitment to all stakeholders during the crisis, first and foremost, hairdressers, has seeded our market leadership. In a market whose value has been renewed, the division records historic growth across all geographies, revealing the power of its strategy. We will stay committed to the profession through these turbulent times. And together, we will accelerate into the future. Thank you.

Thank you very much, Nathalie. As you have seen, it's true that 2020 has been probably one of the most amazing years for the professional division with strongest share gains ever. So now we'll hear Cyril Chapuy talking about the year for the Luxury division.

Good morning, everyone. 2020 was a very challenging year for the luxury beauty industry. The brick-and-mortar doors were closed for several months, especially in Europe and Americas, and the worldwide air traffic was down 75%. The total market therefore ended the year with an evolution of minus 14% versus plus 10% in 2019. The first semester was at minus 23%. The second semester showed a gradual improvement at minus 10%. Within that context, L’Oréal Luxe had a very strong performance. We ended the year at EUR 10.2 billion and minus 8.1% like-for-like, overperforming the reference market each and every quarter, accelerating strongly during the year and ending with a very strong Q4 at plus 4%. All in all, in 2020, L’Oréal Luxe outperformed the market for the tenth consecutive year. Furthermore, despite the very challenging environment, the division closed the year with a level of profit of 22.4%, just 20 basis points below 2019. How did we achieve this? Well, this crisis has actually enhanced furthermore our strength, and confirmed the transformative choices we made very early in the crisis were the right ones. One, the choice of going full blast into e-commerce. The division adapted very quickly to the new market conditions by reshaping and reallocating its business drivers across its whole digital ecosystem. Total e-commerce has grown by 63% in 2020. It has grown in every single region. And e-commerce is now 37% of our L’Oréal Luxe business. It will soon be 50%. Two, the choice of investing strongly behind direct to consumer, both in offline and online. Direct to consumer is the most strategic channel of all because we control there the full customer experience, the full data. Direct to consumer has now become our first source of growth. Three, the choice of believing more than ever in meaningful big innovations. When every competitor canceled or postponed their launches, well, we kept them and pushed very hard day on day. Four, the choice of reinforcing our position on the Chinese consumer, the #1 luxe consumer on the planet. We invested more than ever in China in 2020. And L’Oréal Luxe is more than ever #1 in the Chinese local market; and Lancôme, more than ever, the favorite brand of Chinese women. Thanks to this approach, the division has gained market shares in almost every region. In Asia Pacific first. L’Oréal Luxe has grown by 12% on a market of minus 1%. This great performance is driven by Mainland China, which, once again, posted a remarkable growth at plus 30%. But we also gained market shares in all 15 Asian markets in 2020. L’Oréal Luxe has delivered a strong performance in Western Europe also, evolving at minus 6% on a market of minus 16%. In our historical region, we are still making solid share gains, reaching highest historical levels despite the closing of our brick-and-mortar point of sales. L’Oréal Luxe France, for instance, became, for the first time, the #1 luxe player ahead of the historical leader. In North America, we slightly lost share. This is due to our footprint in makeup and department stores. So we finished the year at minus 17% on a market of minus 15%. But thanks to an impressive e-commerce acceleration on the second half of the year, North America confirmed its road to recovery. Finally, in travel retail. Well, the global shopper portion of the business has suffered for sure. The market was at minus 25%, but we managed to keep our strong positions, closing at minus 22%, thanks to our strength in Hainan and Korea. In terms of luxe categories now, L’Oréal Luxe has outperformed the market in all 3 categories. This is thanks to a strong and balanced brand portfolio, an ideal blend of big brands and growth relays. In luxe skincare first, the biggest category of luxe, we made very significant strides at plus 6% on a stable market for the full year and a plus 18% like-for-like in Q4. This is thanks to well-established pillars such as Génifique by Lancôme, thanks also to the confirmed success and expansion of Helena Rubinstein on ultra-premium skincare and thanks to the performances of Kiehl's, which perfectly meets the naturalness and science expectation. In luxe fragrance, on a double-digit negative market, we strongly reinforced our worldwide leadership of the category with the successful launch of 2 new fragrances, My Way by Armani and Voce Viva by Valentino; with the integration on April 1 of the Mugler and Azzaro brands; and finally, with the continued success of Libre by Yves Saint Laurent launched last year but already ranking in the top 10 fragrance worldwide, which is simply exceptional for such a recent product. In luxe makeup, the third category, the one which has been the most impacted worldwide, we continue to gain market share. This is thanks to a strong offer in face makeup and very mask-relevant makeup with our brands like Lancôme, Armani, Shu Uemura, IT Cosmetics. To conclude on the 2021 outlook. We first acknowledged the first months are still going to be difficult until the vaccine programs launched all over the planet show their efficiency, but we are absolutely convinced that the market will bounce back and get back to double-digit levels of growth. The desire for luxury amongst the rising upper middle class is indeed intact in all the research conducted recently across the globe. At L’Oréal Luxe, we will be fully ready to take advantage of the recovery. Our portfolio of brands is stronger than ever, reinforced recently by the arrival of Prada, one of the most admired fashion brands on earth; and the acquisition of Takami, the ultimate Japanese clinical skincare brand. [ Our pillar ] of innovation is on time and is best in class in 2021, embodying the new values of the post-COVID world. Progress with science, respect of our planet, health as the new wealth. And last but not least, our P&L is fully reshuffled to fuel the channels, the geographies and the brands in growth. In 2020, we have proven our capacity to adapt to very rapidly changing market condition and still win very significant market shares. I'm confident in the strength of our L’Oréal Luxe teams to keep outperforming the market in 2021. Thank you.

Thank you very much, Cyril. As you have seen also, a very strong year for the Luxury Division, probably the best performance in the luxury world for beauty in 2020 and certainly one of the best years ever in terms of market share gains. So now let's hear Alexis Perakis-Valat for the Consumer Division. Please, Alexis?

Good morning, everyone. The beauty mass market declined last year by 5% but the impact of the COVID crisis was very different by category and by channel. Some categories were particularly hit, especially makeup; others less so, like hair care and skincare; and some clearly accelerated. That was the case of at-home hair color. It was contrasted as well in terms of channels: e-commerce boomed; food, convenience and value stores held up pretty well; but others suffered, especially drug stores, beauty specialists and department stores with drops in footfall and some closures. In a very challenging environment, our division closed the year at minus 4.7%. But what's more telling is the breakdown of this number by category. Makeup is our biggest business and declined broadly in line with the market by 21%. However, we achieved a plus 6% in face care, plus 4% in hair care and plus 13% in hair color, gaining market share on every one of these categories. So in the short term, we have been penalized by the weight of makeup in our category footprint, but the division has actually weathered this storm very well. The performance was particularly notable in the second half, where we returned to positive territory, outperformed the market and achieved the growth of plus 8% excluding makeup. So you can imagine what we might expect when makeup does bounce back. Let me share some additional highlights with you. 2020 was a pivotal year for us in e-commerce. We gained online market share in most major markets, increased our global sales by 47% and notched up spectacular results in some geographies like the U.S.A., where online sales nearly doubled. Garnier closed the year at plus 2.4% after accelerating in the second half at plus 9%. This second semester bounce back of the division occurred across most of our regions. Western Europe, the U.S.A., Asia Pacific, Latin America and Africa, Middle East all returned to growth. We gained market share in Western Europe. We had a great year in China at plus 18%, strongly outperforming the mass market. And you can take a look at how L'Oréal Paris, the #1 mass beauty brand in China, celebrated the Chinese New Year with a drone show in the Shanghai sky streamed on WeChat. And we also achieved a major turnaround in Brazil, the world's largest emerging beauty market, with the year at plus 7%, our best year since 2013. We delivered these results thanks to 6 strategic choices. First, we accelerated innovation: innovations that democratized the very best of our technologies like the L'Oréal Paris hyaluronic filler serum, disruptive sustainable innovations like Garnier's solid shampoos and innovations that we rolled out faster than ever before like Garnier's Fast Bright line. Second, we focused on skincare. And we did that across our brands, with L'Oréal Paris pioneering science and Garnier championing natural yet highly effective skincare. In the U.S., we acquired Thayers, a high-potential brand at the intersection of nature and health. Third, the COVID crisis allowed us to leverage our digital leadership. We reallocated resources everywhere to further strengthen our e-commerce firepower. Thanks to ModiFace, we rolled out digital services around the world in a few weeks. And our brands strengthened their digital connection with consumers. In the U.S., for example, NYX Professional Makeup was recognized by Gartner as the country's most digital-savvy brand across all channels and categories. Fourth, we deepened our partnerships with key retailers, helping them reinvent a seamless on- and offline beauty experience and co-creating with them powerful back-to-beauty operations to reignite consumers' desire for beauty. Fifth, 2020 was the year where we pushed the boundaries of commitment and purpose on all our brands. Two examples, L'Oréal Paris launched a global crusade against street harassment while Garnier championed Green Beauty powered by green science. Our sixth priority was the reengineering of our P&L. We have been very disciplined in lowering general expenses, reassessing our marketing costs to focus on ROI, and that allowed us to gain market share by investing effective brand support after the first lockdowns. These 6 strategic choices will continue as our key priorities for 2021. This year, we have a very strong plan of superior high-value innovations like L'Oréal Paris retinol skin serum and Elvive 8 Second Wonder Water. And of course, we haven't given up on makeup and are currently launching 2 great products well attuned to the times. Maybelline Sky High mascara to highlight your eyes above the mask; and NYX Professional Makeup Shine Loud, a non-transfer mask-proof lipstick, both off to an impressive start. In addition, the division will benefit from 4 significant tailwinds when the world gradually recovers from the pandemic. First, in many countries, the upper part of the middle class is growing and has more available income to spend. Second, our markets are premiumizing, fueled by the e-commerce and digital boom that makes consumers everywhere choose more sophisticated beauty solutions, and that's great news for our brands. Third, with the rise of beauty at home, new consumers have been recruited to the likes of at-home hair color, at-home nails and skin masks, and many will stick to their new beauty routines. And finally, we know that makeup will bounce back strongly. In fact, we are even anticipating a makeup boom because lipsticks and mascaras will be one of the symbols of our return to a more social and unconstrained world. So even though the beginning of the year remains uncertain, we are confident in a progressive acceleration of our business and are very ambitious for the future. Thank you.

Thank you very much, Alexis. In fact, as you have seen, the consumer division had also a very good year, considering the difficult handicap of their heavy footprint in makeup. So now let's pass the microphone to Active Cosmetics with the new queen of growth. Myriam Cohen-Welgryn who succeeded Brigitte Liberman at the beginning of the year.

Good morning. Despite the difficult context, 2020 was an exceptional year for L'Oréal Active Cosmetics. We passed the EUR 3 billion sales mark. In a dermocosmetic market experiencing a slow growth estimated at around 2%, we achieved a new annual growth record of 18.9% on a comparable basis, the strongest growth in the last 20 years. Thanks to this spectacular acceleration, the division strengthened its leadership in medical beauty. Four success factors explain these exceptional results. First, our brand perfectly addressed the growing concerns of consumer looking for more health, performance and safety. In the COVID context, our dermatological brands are more relevant than ever as skin is weakened by repeated hand washing and the use of masks. La Roche-Posay grew at a double-digit rate for the ninth time in 10 years. At the cutting-edge of microbiome science, the brand launched with great success LIPIKAR AP+M for atopic prone skin. CeraVe is experiencing historic growth and practically doubled in size. The brand's star products, the moisturizing cream and its hydrating cleanser are particularly relevant during COVID to strengthen the skin barrier, thanks to the ceramide technology. The brand also benefits from its affordability and its first major international successes particularly in the U.K., Brazil and Australia. Further, SkinCeuticals' exceptional growth is driven by its high-performing formulas and outstanding results in China and in the U.S. Last but not least, Vichy, which reported growth in the second half of the year, maintained its leadership in anti-aging in Europe and experienced very strong growth in Latin America. The second success factor, our medical business model based on the recommendation of health care professionals who are more trusted than ever in these COVID times. In 2020, we have strengthened our collaboration with health care professionals and now reach more than 180,000 physicians. La Roche-Posay is the most recommended brand by dermatologists worldwide; and CeraVe, the #1 dermatologist-recommended moisturizer brand in the U.S.; SkinCeuticals, the #1 medical aesthetic skincare brand worldwide; while Vichy ranks #1 in anti-aging in Europe. Third, our digital advances have enabled us to adapt with agility to our new context. Our e-commerce sales are skyrocketing and now represent 29% of our business. The accelerated digitalization of our interactions with doctors enables us to radically increase our reach. Through webinars and on digital events, we reached more than 250,000 doctors. These physicians reach more and more consumers as they increase their presence on social networks. The collaboration of health and beauty influencers revolutionizes our ability to increase product recommendation. Finally, the division accelerated its international expansion with spectacular growth in North America and Asia while all regions are growing and gaining market share. We approach 2021 with confidence as the medical business model of our division is now more relevant than ever. While skin health has been a major trend over the past years, the pandemic has turned it into a core expectation. More and more consumers in search of higher efficacy are relying on our dermatological brands and on doctor's recommendation. The acceleration of the health ecosystem digitalization, particularly with the growth of telemedicine, is opening up new possibilities. Furthermore, our medical brands still have a strong reservoir of growth, especially in the U.S. and Asia. Finally, our 2021 innovation plan is very promising. Health, which is our [ recent bet ], is more than ever the future of beauty. Thank you.

Thank you very much, Myriam. As you have seen, also an amazing year for Active Cosmetics. So now it's my turn. As you have seen globally, L'Oréal has demonstrated remarkable resilience and solidity through the crisis, thanks to the fantastic engagement, fighting spirit and dedication of our teams. We did what we announced at midyear. We strongly outperformed the market over the full year. We got back to positive like-for-like sales growth in H2 and accelerated our growth in Q4 while preserving our profitability as we delivered the same record level of operating margin as last year. For the beauty market, it was clearly a year like no other. For the first time in history, the closure of millions of salon, perfumeries, department stores and airport stores around the world heavily impacted the beauty market during the first half. The recovery was progressive in H2. This extraordinary crisis of supply translated into an unprecedented drop of the market that we estimate to be around minus 8%. However, there is also good news. Consumers' appetite for beauty remains strong. We saw rapid recovery everywhere when stores reopened. The quest for higher performance and superior quality continued the premiumization trend. And last but not least, the huge surge in e-commerce is helping to democratize beauty. In this totally disrupted environment, contrasts were stronger than ever. By sector, closures particularly affected the professional sector with almost all salon closed in the second quarter and the luxury sector, which suffered also from a strong headwind on makeup and a heavily impacted travel retail market. On the other hand, dermocosmetics experienced a much less disturbed market and was the only positive sector as retailers, pharmacies, drug stores largely reopened and consumers looked for healthy products. Mass remained open, but stores suffered from less traffic as also many consumers preferred to stay at home and shop online. By channel, the pandemic brought monumental shifts as e-commerce saw during lockdowns and continued to accelerate even as stores reopened. Many consumers discovered this channel for the first time during the pandemic and embraced its convenience. At the same time, travel retail dropped dramatically with the halting of international travel. By category, skincare, the largest category in beauty, was the least affected as consumers looked for more care and protection during the pandemic. Hair care resisted pretty well. Makeup and fragrance were the 2 categories that suffered most from home working and mask wearing and less opportunities, obviously, to socialize and celebrate. Finally, by geography, North America was heavily impacted but is recovering progressively thanks to e-commerce and skincare. Western Europe was heavily affected by lockdown measures. In the New Markets, China was the only country with significant growth, its market rebounded very quickly, returning to growth as e-commerce remained strong and offline recovered. In this exceptional context, L'Oréal managed to weather the crisis remarkably. Since day 1, our first priority was the health and safety of our employees. We implemented drastic health and safety measures in workplaces and aggressive remote work strategies. We also took swift action to protect and reinforce our partners, retailers and suppliers, and we mobilized to support caregivers and frontline workers, notably by donating hand sanitizers. On the business front, after a very negative H1, we have been on the offensive to bounce back. Our strategic bets have paid off as we returned to positive like-for-like growth in H2 and accelerated our growth in Q4. The first bet was to maintain our launches of our key product initiatives in H2 to create excitement and reenergize the market and ourselves. The second bet was to unleash strong media support and business drivers to seize all opportunities and fuel growth. We have been full blast with Back to Beauty program to stimulate consumption and help retailers reopen and bring customers to their stores. Within this particularly difficult context, we made historic market share gains. As you have seen with our division presidents, 3 divisions out of 4 remarkably outperformed the market, and one is on par despite the footprint on makeup. Active Cosmetics, which achieved another year of stellar growth, perfectly seized the opportunities of the skincare boom and a growing aspiration for performance, health and security. In a very challenging market, professional products bear the fruit of its in-depth transformation over the last few years and especially its ability to jump on the e-commerce opportunity. L'Oréal Luxe significantly outpaced the market, thanks to its presence in China, its edge in e-commerce and by maintaining its strategic launches in H2. Consumer Products considerably reinforced itself in all geographies and managed to return to growth and overperformance in H2 despite, as I said, its large makeup footprint. The division is poised to flourish when makeup returns to shine. We also outperformed in most regions. Our share gains in Western Europe were the best in a long time and were even more impressive excluding travel retail. Almost all big countries beat the market. We continue to break new grounds in the New Markets. In Brazil, the group is now back and forth with strong share gains after a few years of reengineering our presence. And China rebounded quickly to end the year at plus 27%, growing several times faster than the market. Online sales now represent 60% of our business, still growing at plus 56%. In the U.S.A., our sales were positive in H2 as we managed to offset the headwinds of our heavy footprint in makeup, thanks to the explosion of e-commerce in which L'Oréal doubled its weight in just a few months, reaching 22% of sales. The group became the #1 company in the 2020 Digital IQ beauty rankings with 5 brands in the top 10. We are accelerating the penetration of digital and e-commerce in the U.S.A. at lightning speed, just as we did in China a few years ago. Lastly, we beat the market in all categories, with a special mention to skincare and hair. As you heard from Christophe, L'Oréal also delivered very solid results. In this exceptional year, we were able to preserve and even optimize our P&L. We increased our already high gross margin, mainly thanks to valorization. We lowered SG&A from 20.3% to 20.1%, thanks to strict cost discipline. We were able to maintain, in relative value, our investment in R&I and A&P in order to support our brand and fuel future growth, and we were able to preserve our profitability at the same record level as last year at 18.6%. The net earnings per share decreased by only 5.7%. And lastly, our operating cash flow increased by plus 9%. And considering all these results, the Board of L'Oréal has decided to propose at the next shareholder meeting a dividend of EUR 4, an increase of 3.9% compared to last year. We also posted, as you've seen, exemplary extra financial results. The group achieved almost all its ambitious 2020 goals and made its first sustainability program, Sharing Beauty with All, a resounding success. Most notably, as Christophe already showed you, we reduced our CO2 emission by 80% since 2005, which represents a real milestone. Independent experts have recognized our efforts and placed L'oréal on top of key ESG rankings. Paradoxically, in such a challenging context, the crisis has been an accelerator of transformations and reinventions that actually strengthened L'Oréal to weather the challenges of 2020 and prepare future growth. The group opens 2021 stronger than even before for 10 important reasons. First, our relationship with our partners are closer than ever. We solidified trust and proximity and multiplied goodwill with hairdressers, retailers and suppliers through our solidarity during the crisis. Second, our market share gains are stronger than ever. Many new consumers who shifted towards our brands this year are likely, of course, to stay loyal to them in the future. Third, our increased leadership in China is more forceful than ever. Our winning strategy places us in the best position on this market, which will soon become the biggest beauty market worldwide. Fourth, our digital prowess gives us a cutting edge. In 2020, we continued to transform our marketing model very fast to build even more personalized relationship with consumers. We are now a digital-first company that is making beauty more connected, more social and more conversational than ever. Fifth, our leadership in e-commerce, as you've seen, is more powerful than ever. Online sales were an absolute game changer, increasing by plus 62%, growing 1.5x the market and reaching 27% of our total sales. This impressive surge was seen across all categories, all divisions and all regions. E-commerce is now the first [ country ] for L'Oréal and we have, for the first time ever, 2 e-billionaire brands as L'Oréal Paris and Lancôme each surpassed EUR 1 billion in e-commerce sales. Sixth, our leadership in skincare is more pivotal than ever. We have swiftly embraced this rising wave. Skincare is the biggest and fastest growing category in the beauty market and now represent 40% of our sales. Seventh, our research and innovation is sharper than ever. In the last 5 years, we have positioned our R&I on the most promising fields of science and technology. Barbara Lavernos, our new Head of Research, Innovation and Technology, will be appointed Deputy CEO in May. This places R&I at the highest level of the group, confirming its crucial role in our company. Eighth, our sustainability and responsibility effort is more exemplary than ever. We took a bold step forward with the launch of our new commitment, L'Oréal for the Future. It is one of the most ambitious program in the world with more radical goals for 2030 that address pressing environmental and social issues. Ninth, our organization is more agile and our teams are more empowered than ever. The agility and adaptability of our teams enables us to respond to huge shifts in categories and channels and reimagine our products, marketing models, manufacturing and distribution at high speed. Our approach, strategically concentrated and operationally decentralized, is perfectly adapted to the crisis and will be also to the post-COVID world. Lastly, the tenth reason is that our P&L is more virtuous than ever. Thanks to valorization and productivity, we are improving gross margin. In terms of SG&A, we cut all unnecessary spending and fixed costs. And in terms of A&P, we are reshuffling all our spending, dramatically reducing [ POS ] material and tester for brick-and-mortar and rebalancing our media investment to digital and precision advertising. Digital media now represent more than 60% of our total media with a stronger ROI. As I prepare to pass the baton, I'm thrilled to see the strength of our unique business model that has proven both its effectiveness and ability to develop our leadership and create value in usual times and its capacity to resist exceptionally well in terms of market share and profitability in times of crisis. I am totally confident because this business model is perfectly suited for the world of tomorrow as L'Oréal has anticipated all fundamental shifts to win in the 21st century. Our group is now ready to make miracles under the leadership of a new captain. I'm extremely happy and serene to hand over the helm as CEO of this fantastic company to Nicolas in May. I have full confidence in him. Nicolas and I have known each other for 30 years and trust each other completely. He has played a key role by my side as Deputy CEO in charge of divisions and has developed the group's brand with great talent. I have the deepest conviction that he is the best to lead our beautiful company in the years to come. He will drive L'Oréal to new heights, in full continuity of our strategy and values while also reinventing the group and adapting it to the major challenges of our future well. Thank you. And now here's to Nicolas.

Hello. Thank you, dear Jean-Paul, for your kind words and continued trust. Today, I would like to share with you my vision for L'Oréal's future, which is shaped around 3 key words: continuity, confidence and ambition. The first word, continuity, applies to the transition between Jean-Paul and I. I have been part of L'Oréal for 34 years and a member of the group's Executive Committee for the last 13. We have built a close relationship and partnership over the past 8 years. Indeed, in my previous capacities as head of selective divisions and as Deputy CEO in charge of divisions and digital, I have been associated and involved in every transformational decision of the group. This transition could not have been better prepared. We'd make an efficient duo, and our relationship will continue to evolve on different terms but in the same spirit of proximity. I would like today to pay a very special tribute to Jean-Paul Agon for his formidable track record, be it financial or extra financial, and the transformation of the L'Oréal group he has led. Second word, confidence. I have a lot of confidence for the future, which relies, on the one hand, on the power of the L'Oréal model; and on the other hand, on the potential of the beauty market. I'm extremely confident in the resilience and the power of the unique L'Oréal model, a model that ensured our performances in 2019, our best year in 15 years on a dynamic market; but also in 2020 with a very solid result in the middle of the biggest global storm of the last 75 years. A model that has been constantly evolving over the years in a permanent revolution was remaining true to its roots. First, we are a pure player in beauty and we will remain so. Yet, we are a multifaceted beauty player. We were born 110 years ago in hair salons, and we continue to leverage the innovations borne from the high demands of professional stylists. We are also a major FMCG player, democratizing the best of beauty to reach the middle classes of the world with superior quality at affordable price. We have become a leading luxury group regularly outperforming its peers, offering premium products and experiences to the aspiring affluent consumers of the world. And we have lately become the leading dermatological beauty company, partnering with prescribing doctors in every country. These multiple facets allow us to satisfy all consumers at all price points to seize all trends and absorb even severe market conditions like in 2020. Second, we believe in research, in science and innovation. Since the creation by Eugène Schueller of the harmless hair tint, we are the biggest investor in R&I in the beauty industry to provide superior and safer products to consumers. The choice to regroup R&I and tech under Barbara Lavernos' leadership underlines our belief in the synergies of data, AI and biology to create an augmented R&I, increasing the speed and relevance of our innovations and invent the beauty of the future. Third, we believe in brands and in marketing creativity. Our brand portfolio is stronger than ever. It is made of billionaire brands, including the #1 beauty brand in the world; and of small indie-like brands, which are growth relays for the future. In 2020, most of our billionaire brands have grown above their respective segments, and many of our smaller brands like Stylenanda, Valentino or CeraVe have been real growth contributors. In 2020, we also focused on planting the seeds of the future with Prada, Takemi and Thayers. Our brands are fueled by a unique marketing flare and creativity that transform R&I discoveries into products that satisfy consumers' needs and more importantly, their dreams. This is one of L'Oréal's magic touches as beauty is clearly science plus creativity. Some of this year's initiatives are a perfect proof of this. Fourth, I'm also confident in the relevance of our universalization strategy in this more fragmented and sometimes community-centric world. We roll out global brands which we adapt for local relevance. Our local teams are true entrepreneurs with the freedom to operate within a strategic frame. Our R&I has hubs in every major region, and we have recently changed the organization of our zones, basing it on consumer similarities rather than geographic proximity. Fifth, the power of the L'Oréal model lies in its capacity to constantly evolve to anticipate change and adapt; forever true to the François Dalle famous mantra, seize what is starting. One of our secrets is the agility and the unique capacity of the formidable L'Oréal teams to embrace change. This is a unique strength in such a fast-changing [ beauty ] world. To conclude this section, I believe in the power of this multifaceted L'Oréal: true to its roots and values but always evolving, combining the strength and solidity of a [ central ] leader and the agility and speed of a start-up. Looking ahead, I'm also extremely confident in the beauty market, in its capacity to bounce back after COVID and in its long-term potential. The COVID crisis has clearly had a major impact on the world and on our market. Social distancing, widespread use of mask and its impact on makeup, in addition to lockdowns and store closures, did not help beauty. But like a flower after winter, beauty is ready to blossom as soon as the COVID goes away. We've already seen it in China, where all categories returned back to normal, placing the beauty market at positive double-digit growth. Even this holiday season in the U.S., they showed a bounce back in fragrance sales, which increased by 4% in December. We are confident that like in the roaring '20s, there will be a big beauty party once the pandemic is over. And as a leader, we will make sure to cater for it. If we take a longer-term vision, beauty is and always will be essential, an intrinsic part of humanity, source of surface team, well-being, pleasure and of inclusion, both a need and an aspiration. In the next decade, the beauty market growth will be driven by solid trends, the rise of the middle and upper classes, the young who are consuming younger and younger. Seniors who have a busier social life, men who are consuming more beauty products, particularly in Asia and urbanization, with 2.3 billion extra people living in cities by 2050, which will impact haircare and skincare routines. Around 1.5 billion new consumers will enter the middle and upper classes before 2030. This consumers see quality products and are our traditional targets. More purchasing power will mean more spending per capita. Take China. The market still has many years of growth ahead as the beauty and personal care consumption per capita there is almost 6x lower than that of Japan or the U.S.A. This is also true in Southeast Asia, where the consumption per capita is 3x lower than the worldwide average. Finally, the market will go through valorization, the aspiration for personalized and superior products should lead to the acceleration of premiumization. It is a trend in all regions, all categories. Even in 2020, in the middle of a pandemic, we saw price increases on our major categories versus 2019. So the beauty market is poised for long-term growth. But after the COVID crisis, it will be a different beauty market because the crisis has brought some very powerful trends that will durably impact the beauty market. Most of these trends preexisted COVID, but were accelerated by the pandemic. And on all these trends, L'Oréal was ahead of the curve. The first of this trend is digitalization, obviously, as we have volted 10 years forward in consumer and business digital adoption in a matter of few months. People have lived virtual lives, and many of these habits will stay. Today, digital is embedded at all levels of the company. Tomorrow, we will take digital to the next level, thanks to the power of real-time data and fast-evolving technology. Data would allow us more personalization in terms of engagement and of product creation. We'll invest in new services in a world where online and off-line will be seamlessly intertwined. Second, the sanitary crisis shed light on the vulnerability of our ecosystem and sustainability is more than ever an imperative. Sustainability is core to L'Oréal. We announced L'Oréal for the Future Program, working within the planet's boundaries because we can have a positive impact because it is our duty as a leader. All our brands are reinventing their formulas, their packaging, whilst our operations work on the whole supply chain within a total cradle to shelf action plan. Our product's environmental footprint will be communicated to consumers. The third trend is health and transparency as we enter a new health first era where ingredients are questioned and transparency expected. Consumer safety has always been at the heart of L'Oréal values. Inside our Products, an online platform launched in March 2019, explains transparently our ingredients philosophy, whilst R&I was relentlessly to create the cleanest yet most effective formulas. Our Active Cosmetics Division is well positioned to satisfy the healthy beauty expectations. The fourth one is the importance of companies and brands values and purpose. 6 in 10 consumers say they will choose products from brands or companies, which are aligned with their values or act for the greater good. In 2020, the group published its sense of purpose, create the beauty that moves the world. I am committed to this mission. I believe in L'Oréal's duty and capacity to make the world and humanity better. Our brands will also play their role like L'Oréal Paris, We Stand Up; or Urban Decay, promoting the beauty of being different. The fifth COVID-generated trend is the return of science and tech on the center stage as the solution to the world issues. We are a science-based company. More than ever, we will invest in R&I today at 3.4% of L'Oréal's turnover, but a new R&I, augmented by data and AI. And green sciences will be the next revolution that reconcile efficacy, naturalness and sustainability in a new competitive advantage for our products. So as you can see, we are ready for the post-COVID beauty. And I would now like to share with you my ambition for L'Oréal for the next decade. Top line growth and beating the market will always be my priorities. This top line growth and a virtuous P&L management will allow delivering regular increases in profitability. The first driver of my ambition is our market share potential. L'Oréal's #1 priority is always to beat the market. Even as a leader, our global market share is only around 13%. The regional differences also shoot through potential. As you can see, there is still some room for gains. In Asia, our market share is only 11%, huge opportunity on the fastest growing region. Even within our best region, Western Europe, there is growth potential as our shares vary from 16% to 30%. My 3 regional priorities will be pursuing the Chinese momentum, boosting growth in the U.S.A. and accelerating in the emerging markets, where the rapid digitalization and the rise of e-commerce will give us easier access to this pool of aspiring consumers. The second driver of my ambition is our category strategy. Our top priority will be skin care, whether it is dermatological, super premium, high-tech or natural. It is the biggest and most dynamic beauty category. At the crossroads of all trends, a high added value category, driven by science and performance, where R&I gives us the upper hand as proven this year. We will grow valorized haircare and color, both in the professional and mass world. Our global leadership in fragrance puts us in the best position to benefit from this category's acceleration in China. As far as makeup is concerned, we are both confident and ambitious. This has always been the most cyclical category and now is a down cycle, but makeup remains the easiest, fastest way to express ones personality to look better and younger or just to feel good, makeup will come back and we will lead it. The third driver of my ambition is e-commerce, which will continue to be a strong growth engine. We are preparing for a time when e-commerce may represent 50% of our business, split between direct-to-consumer, e-retailers and pure players. We will scale social commerce as a new way to reach and engage our consumers. We will invest in developing loyalty to increase the lifetime value of our consumers. Finally, I want to express my ambition to deliver regular improvements in profitability through top line growth and ever more virtuous P&L. A high -- in a high gross margin model, top line growth translates into profit. 2020 has allowed a P&L reset, which freed new resources to reinforce our brand-building investments and profit at the same time. In this context of crisis and accelerated digitalization, each division has reallocated and optimized their resources. We could digitalize our B2B. We have experienced new ways of working of less traveling. Our distribution footprint is more productive with fewer better point of sales to attend. Data and AI will make our A&P more productive. So we should get more bang for our bucks. So as you can hear, I am very ambitious for the future, and it begins in 2021. Of course, we remain cautious about the first half, but believe that the beauty market will get back to growth. The engines that allowed us to overperform in 2020 will remain in 2021, and all our divisions will rely on a strong plan of innovations. We are, therefore, confident in our capacity to outperform the market again this year and subject to the evolution of the sanitary crisis, achieve a year of growth in sales and profits. For the next decade, we will continue the unique L'Oréal adventure. This adventure will take us to new heights to explore new business models and new territories from green sciences to beauty tech. I am confident in our ability to strengthen the group's model to deliver financial and extra financial performance. I have the ambition to shape L'Oréal as a company of the future, a global leader with strong values committed to sustainability, to growing while respecting planetary boundaries, but also to make beauty play its role towards humanity, a role of inclusion, a role of harmony of respect and encouragement of diversity and differences, with the strength and passion of the L'Oréal teams, I want to create the beauty that moves the world. Thank you.

Thank you very much, Nicolas. Congratulations for this great vision and this great ambitions. So now, we are ready to start the Q&A session. Of course, we will share the answers between, of course, Nicolas, Christophe, the 4 President heads and myself, and I'm ready to take the first question.

[Operator Instructions] The first question comes from Celine Pannuti from JPMorgan.

First of all, I want to say, congratulations for quite an exceptional performance in an extraordinary year. And thank you for the presentation that are testimony to all that has been achieved over the past 15 years. So I also want to keep my hat off to you, Mr. Agon.

Thank you, Celine. Thank you.

Now to my questions. First of all, on the beauty markets, you said it was down 8% in 2020. You seem to be a bit quite cautious about the start of the year, which is quite surprising, given that you had quite a tough time from March. So do you have any views on what the market growth would be like in 2021? And should we expect you to continue to outperform to the same level as you did in 2020? And my second question is on this reset in P&L. Obviously, I understand now what handsome margin means if I look at H2. But does it mean that when we have higher top line growth, with the reset of, let's say, the SG&A and continued high level of A&P investment yet flat, are we going to get a bit more drop-through to the bottom line?

Thank you very much, Celine. I'm not surprised that you asked the first question. I think that during this last 15 years, you were always the first one to ask the questions, and I'm very happy about that, and I will miss your first question. So -- and thank you for your comments. So first, about the growth of the market and maybe our growth in this quarter and the next month. Well, obviously, we have to be cautious because the situation is more weaker than ever, more volatile and certain complex, ambiguous and it's very difficult to do predictions. Still, we are, as you have seen or heard, we are positive and optimistic. We believe, as Nicolas said, that the market should be back to growth in 2021. Of course, everything we say is dependent on the evolution of the pandemic. But considering what we know today with the arrival of vaccines, and et cetera, we think that the market should be back to growth. And of course, as we have this commitment to beat the market every year, it means also that we want also to be seriously back to growth. And regarding the trend right now, I would just say that because we don't want to give guidance, of course, for the first quarter. But what we can say to just to give you a hint is that you have seen that we were at plus 3% on the last 6 months, plus 4.8% on the last 3 months. And I would say that there is no reason to believe that we should not be able to be in positive territory, of course, in this first quarter, and that should come also even stronger for the second quarter because we will have different historic basis. So that's for the growth. So we are pretty, of course, not -- I cannot say bullish, but we are optimistic. And you know there is always a kind of voluntarist attitude at L'Oréal. And confidence. Second thing, the reset of P&L, it's true that this crisis, which was a terrible crisis in terms of pandemic, in terms of health for the world, was also, at the same time, for a company like L'Oréal, an opportunity to reset cost and P&L. There are -- as Nicolas explained and Christophe also, there are costs that have been eliminated because of the pandemic that will not return to where they were before the crisis. So for us, it has been a great opportunity to redefine exactly new ways of working. And definitely, this will have a positive impact on our SG&A. As Nicolas said, for traveling, for meetings, for training, we will do things differently after the pandemic than we did before. And most of these changes will have a very positive impact on the cost. Same, by the way, for the A&Ps, the shift from brick-and-mortar to e-commerce has always -- has also obvious consequences in terms of reduction of cost in bricks and mortars. For example, we are reducing significantly what we spend in terms of merchandising in stalls, PPE materials, testers and many other things because we don't need them, obviously, for e-commerce. And as e-commerce is increasing in terms of percentage of sales, this cost will diminish. So there is a very important reset in terms of SG&A costs, A&P, and this will be significant in this year and also the next year is when the pandemic will be gone. I think that was the question. Thank you. Thank you, Celine.

The next question comes from Olivier Nicolai from Goldman Sachs.

Just got 2 questions. First, in interview I think in [ UNESCO ], you highlighted Africa as one of the big next growth opportunity. Would be interested to know what's your current footprint there and how you're thinking about the region? And then just going back to follow-up on Celine's question actually. You had, obviously, very impressive margin progression in H2. Now we finally know what handsome means at L'Oréal. As we look into 2021, between Active Cosmetic accelerating, L'Oréal Luxe rebounding, the direct-to-consumer sales which are more important than ever, also perhaps some margin catch up in Professionnel products, how should we perhaps think about good margins this year in 2021? If they are not handsome, they're at least be good looking, for instance.

Thank you for the question. I remember that when I said last year that we -- you have all reasons to expect a handsome profitability for the second half. It was a surprise for many of you because it's true that in financial vocabulary, handsome is not very, very precise. But at least you were not disappointed, which is very good. So I cannot -- of course, Nicolas will be the next CEO starting in May. So I don't want to take any commitment on his behalf, and we never give guidance anyway. But we won't -- last year, we were able to maintain the profitability of the year before, which is already, I think, quite spectacular. Clearly, what I can say and as we have said also in the presentation, is that we want to get back to profitability increase in 2021. So will it be good looking, handsome, beautiful, I don't know yet. It's too early to tell. But I don't think you will be disappointed. Regarding Africa, yes, Africa, it's my only regret. I'm very happy and proud of what we have been collectively doing for this past 15 years together with the teams here. And the only regret I have is that I wish we could have done more in Africa because I think that Africa is a fantastic continent. It's probably the first in the world where women are the most excited about beauty where beauty is the most important. And so that's the great next adventure for Nicolas. Of course, it's not the only one. There will be many, many adventures. It's right to say that development in Asia will be super important. There are still a lot of potential, U.S.A., but I think that for L'Oréal, the last frontier is Africa, and I'm sure that it's going to be an exciting adventure for Nicolas and for the teams in the next 10, 20 years.

The next question comes from Bruno Monteyne from Bernstein.

A few questions for me. You clearly indicate a lot of confidence in gaining share again in 2021. But if I think about your competitors, they have delayed some of their launches, which will they now accelerate and bring back all their delayed launches. They're clearly learning from your e-commerce prowess and starting to copy that. So despite those delayed launches, despite them copying what you do, where do you get the confidence that you will have enough in the bag to keep outgrowing the market in 2021? My second question is you've alluded several times that e-commerce is more profitable, lower distribution costs and the like. However, can you just quantify? Are you talking about it being tens of basis points more profitable or 100? And as part of that, would it be right to expect that all those kind of profitability savings will always be reinvested? And last but not the least, Mr. Agon, if you were to give you a successor advice in terms of where do you think the most likely threat to L'Oréal's success is going to come from during his reign. What should he most look out for in terms of a potential threat?

Thank you very much. Thank you, Mr. Monteyne. So I'll start with the last one, threats. At L'Oréal we are more we are more obsessed with opportunities than with threats. We'll respond to threats when we see them coming. But -- and usually, we respond well. So I'm sure that Nicolas will be good enough to see when threats are coming, and I will not recommend to him any -- to worry about any specific threat. Number one, gaining shares. Nicolas, again, will be the new captain starting May 1. So maybe, Nicolas, how would you gain market share in 2021?

Well, first of all, I have lots of respect for our competitors, and I have no doubt they are working very hard to catch up. But I'm really confident that we are very equipped to continue to gain market shares because it's not just about launches. But first of all, as you said, we made -- we took lots of great initiatives on the back half, and these are going to spill over on 2021, where we have additional extra launches to put on the market. We have our R&I, and I want to insist on that because we saw in the trends of this post-COVID world that consumers are more -- pay more and more importance to the superior quality, safety of the products. And all our initiatives, particularly in skin care, but it's true in all categories, are supported by extremely strong R&I contribution, and that makes a difference that consumers do perceive. And we have also the power of our business model, which is very hard to replicate because this universalization strategy, this model of being strategically centralized, but operationally decentralized, gives a lot of strengths to L'Oréal. The entrepreneurship, their qualities of our teams are in every country in adapting our mixes and our global strategy to the reality of each market is extremely powerful. And with the growth relay of digital, well, as you said, we are ahead, not just in e-commerce, but also in the capacity to engage consumers in social networks, in leveraging the TikToks and the new networks of the world, leveraging social commerce, which is just in its infancy, but which we are going to scale, I'm quite confident that we have many cartridges to continue to lead the growth and to gain market share.

You want to speak also about the e-commerce profitability without committing to...

No, no. Don't worry. No, no. I have to say that, first of all, the thing that must be said is that the profitability of e-commerce is very different from one country to another, from one model to another, whether you're talking about direct-to-consumer, pure players or-e retailers. And even from 1 division to another, depending on the price points of your products. So it is helping in terms of profit. It's stronger. It's a stronger help in divisions such as the Professionnel division, for example, than in the consumer division, but it's allowing us, and that's what happened this year to reinvest fuel in terms of media to support our launches, to support our brands, which is another way to continue to gain market share.

The next question comes from Iain Simpson from Barclays.

Congratulations on a strong finish to a challenging year.

Thank you.

A couple of questions from me, please. Firstly, could you talk a little bit more about what you've learned over the last year about activating new product launches with little or no bricks-and-mortar presence? And what does this mean for the business and how you approach innovation going forward? And secondly, what do you think will be the catalyst for makeup rebounding as a category? Is it the world moving on from COVID or consumer preferences and fashion just changing again? Or perhaps something else we should be looking out for?

Okay. Thank you very much. So maybe, Nicolas, you take the first question, and we will share the second one because I would like to share my conviction about this famous roaring 20s that you share, by the way.

I will leave you the roaring 20s with great pleasure. As far as the -- what we've learned from the crisis, first of all, I have to say that before talking about the ways to launch product, what we've learned and I've been extremely impressed during this crisis is the extraordinary agility, dedication of the L'Oréal teams around the world who -- we've all gone on homeworking for those who were working in offices and gone to the factories to produce hand sanitizers in our factory. So great power of the teams, which I want to really pay special tribute to. Beyond that, what we've seen is that, first of all, that -- and we knew that, that through e-commerce and digital, you could launch very fast, very powerfully products. And especially if products are of great quality. They're picked on upon by influencers, by consumers, and there's a snowball effect, which makes some of our products extremely successful. I was looking yesterday, which is an opening on the answer on makeup. We were looking at the results of our new Maybelline Mascara Sky High, which was presented by Alexis Perakis. This product has been launched in the U.S.A., and we cannot keep it on the shelves, and we cannot keep it in stock either in -- on Amazon because it's such a great product that consumers have just taken it and made it a huge success. So we can go directly through e-commerce, but we also want, and that's very important, we believe that beauty is also a category that needs to be smell, touched in stores. And that's why we are -- all our 4 divisions created very strong activation plans on the back end of 2020. Alexis Perakis shared his Back to Beauty plans. But all divisions really reactivated their -- the stores because we believe that maybe in the future, as I said in my presentation, e-commerce may represent 50% of our business, but brick-and-mortar, will represent the other 50%. And there is a brick-and-mortar that needs to be exciting, providing experience to the consumer, and that's what we are going to do with our partners in the years to come. So this year has been fantastic because we can really leverage the power of our brands, the power of digital, and at the same time, focus on providing the best experience in store. As far as makeup is concerned, I will hand over to Jean-Paul, but what I can say, and I've shown it with a graph in my presentation is that if you look over the last 25 years, the makeup category has always been the most cyclical. It's always been going up higher when the market was going up. And going down faster when the market was a bit more down. So we are used to these ups and downs, and it will come, as you said, from our initiative, from our launches for our capacity to engage with consumers. And it will come also from fashion because it's true that when masks are the fashion, it's really not helping beauty. But we know, and that will be a perfect transition for Jean-Paul. We know that people love makeup. I mean it's still the #1 discussed category on social networks today. So as soon as people can go out, they will wear makeup again, and we'll make sure to tempt them with great exciting products.

Talk about the roaring 20s.

No, no, please.

Now before talking about the roaring 20s, what I want to say, and I thank you very much for your question on makeup because, to be honest, the makeup drop in 2020 was maybe the most severe handicap that we had, even in a way stronger than the closure of stores because of course, we are the #1 makeup manufacturer in the world. Makeup is very -- is important for us. For example, makeup is 35% of the sales of the consumer division. And definitely, in 2020, with mask wearing, no ways to going out, to going to restaurant, to going to the office, to socialize, to whatever to celebrate, obviously, makeup was something very penalized. And I have to say also that I have a great respect for all the women who still wear makeup. And still, the market is not completely down. It's only down minus 20% last year. So I'm absolutely sure that it will come back. And why it will come back? For all the reasons that Nicolas has said, and also because there are many -- more and more people, writers, even from universities that think that when the COVID will be gone because 1 day, the COVID will be gone, let's be positive and again, optimistic when the COVID will be gone, people will be happy to go out again, to celebrate, to socialize. And this will be like in the famous roaring 20s, and this will be the fiesta of makeup and fragrances, by the way. So we are very, very positive.

The next question comes from Eva Quiroga from Bank of America.

Nicolas, you've obviously talked about China being one of your areas of focus going forward. So I was wondering if you can maybe talk to us about the big white space opportunities there. I'm not really thinking about luxury. I'm thinking about mass and the other 2 divisions. We've obviously heard a lot about local brands emerging strongly in mass, whether it's in skin care and makeup. Yet you have been -- L'Oréal Paris has been #1 on Tmall. So if you can talk us through this dynamics. And then my second question is on Professionnel products. And after years of maybe of silence, I have seen there were SalonCentric peer in a lot of press release this year. Can you maybe talk us through a little bit on how that concept has come into its own, and what we've learnt from it on a more global basis?

So first, China. Nicolas, China?

Yes. I will -- and then we'll hand over to Nathalie on SalonCentric. As far as China is concerned, it's true we have -- we are the #1 beauty group in China. And we have -- lucky to have 2 brands, Lancôme and L'Oréal, who are really the favorite brands of Chinese consumers. And we see a lot of -- still a lot of growth potential in this country. As you know, the Chinese love beauty. They are really aspiring to it, and it's not just Chinese women. It's also Chinese men. They love great brand and they know quality. They want quality products, and we've established in the minds of the Chinese consumers that the L'Oréal brands were providing superior quality at the good price. And for that, I'm extremely confident in our capacity to continue to lead in this market. We also have -- we are also very strong in e-commerce. It is the market where 50% of the market is already online. And our digital advantage, our capacity to overperform, as you mentioned, on Tmall, on a market that's already 50% digital and 60% for our business, is extremely powerful, and that will continue to allow us to overperform. And finally, as mentioned, the market has still many years of growth ahead. As I showed in my presentation, the spending per capita of Chinese consumers is still quite low compared to that of the U.S.A. So there is no limit to the growth potential of China. We haven't launched all our brands yet in this country. So we have also expansion potential. We've made acquisitions of brand like Takami, which is the Japanese skincare brand. We also have a very interesting potential in China like Stylenanda. So overall, we are -- China will remain probably the strongest or one of the strongest growth engines for the group for the next years.