L'Oréal posted a 13.5 per cent rise in 2003 net operating profits from €1.46 billion a year ago to €1.65 billion, outperforming the analyst forecast of €1.61 billion.
Sales fell 1.8 per cent however, knocked by a strong euro, to €14 billion, producing an operating margin of 14 per cent versus 12.9 per cent a year earlier.
Equity affiliates, which includes the company's 19.5 per cent stake in drug maker Sanofi, contributed €420 million, or 25.4 per cent, to net operating profit.
The maker of Maybelline and Lancome make-up, Fructis and Biotherm skincare lotions reported a 6.7 per cent gain in operating profit - after currency effects and provisions - to 1.96 billion euros.
The company's performance was helped by what chairman Lindsay Owen-Jones called 'spectacular progress' in emerging markets as well as by innovation, new products and tight cost controls.
On a regional basis, Western Europe turned in the best operating margin, at 14.8 per cent, followed by North America with 12.9 percent and the rest of the world at 10.2 per cent.
L'Oreal gave no immediate forecast for 2004, but analysts predicted that a global economic pickup would help the firm.