UN Unilever NV

French cosmetics group L'Oreal SA (OR.FR) Tuesday reported an 11.6% rise in first-half net profit, as rising sales in emerging markets such as China failed to offset the impact of higher commodity prices.

L'Oreal, which makes mass-market shampoo brand Garnier as well as high-end cosmetics, said it was confident it would improve its profitability for 2011.

Net profit for the six months to June 30 rose to EUR1.47 billion from EUR1.31 billion a year earlier, in line with Credit Suisse's expectations of EUR1.5 billion.

Operating profit rose 2% to EUR1.70 billion from EUR1.67 billion the previous year.

The company last month reported a 5% increase in first-half sales to EUR10.15 billion as rising demand in North America and China for high-end cosmetics and perfumes, such as its Lancome brand, offset sluggish growth in Western Europe and plummeting sales in Russia and Ukraine. L'Oreal attributed the fall to "consumer confidence and market dynamism [proving] more difficult than expected."

In the U.S., while department stores--critical for sales of high-end perfume and makeup-- bounced back, the company's salon business suffered.

The company's bottom line has been hit by the higher prices of commodities such as oil combined with slowing growth in western Europe where consumers have been tightening their belts in response to government austerity cuts, higher taxes and fears over rising unemployment.

L'Oreal shares have traded down 10.7% over the past three months, outperforming the Paris CAC-40 index, which fell 20.3% over the same period. This is a result of investors feeling the company's exposure to rising raw material prices is lower than other consumer goods companies, such as Unilever NV (UN) and Procter & Gamble Co. (PG).

L'Oreal shares closed down 1.8% at EUR77.01 on Tuesday. The company released its earnings after the Paris stock exchange had closed.

-By Noemie Bisserbe, Dow Jones Newswires; +33 1 4017 1756; noemie.bisserbe@dowjones.com

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