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Natura &Co Holding S.A. (symbol: NTCO) is a leading Brazil-based cosmetics manufacturing company that operates under a multi-channel and multi-brand structure. The group unites several distinguished brands, including Natura, Avon, and The Body Shop, which cater to over 200 million clients globally through an extensive network of 7 million dedicated consultants and representatives, as well as through 2,000 stores and franchises.
Company Overview: Natura &Co reported net revenues of R$36.3 billion in 2022, demonstrating its significant presence and influence in the cosmetics industry. The company is committed to creating positive economic, social, and environmental impacts and has taken substantial steps to align with its sustainability goals.
Recent Achievements: In recent quarters, Natura &Co has shown steady sales growth in constant currency, driven by solid performance in Latin America, particularly in Brazil. The company posted consolidated net revenue of R$ 7.8 billion in Q2 2023 and R$ 7.5 billion in Q3 2023. Despite challenges, it has succeeded in improving its profit margins, with gross margins reaching 65.4% in Q2 2023 and 65.3% in Q3 2023. This growth is attributed to effective pricing strategies, enhanced product mix, and portfolio optimization.
Natura &Co has also made significant strides in reducing its financial leverage by using proceeds from strategic divestments, such as the sale of Aesop to L'Oréal for US$2.58 billion. This sale has bolstered the group’s balance sheet, enabling a stronger capital structure and facilitating investments in core business areas.
Current Projects: The company is currently focused on the integration of the Natura and Avon brands in Latin America, referred to as 'Wave 2'. This project has shown promising results in regions like Peru and Colombia and is set to roll out in Brazil. Natura &Co also continues to streamline its operations by divesting non-core assets, such as the pending sale of The Body Shop to Aurelius.
Strategic Initiatives: Natura &Co is pursuing further strategic initiatives that include potential separation of its business units to unlock shareholder value. This plan involves creating two independent companies, enhancing their ability to tailor strategies and deliver growth.
Financial Condition: The company holds a solid cash position of R$ 6.8 billion as of Q3 2023 with a debt-to-EBITDA ratio of -0.37x, reflecting significant deleveraging. In 2023, Natura &Co announced a dividend payment of BRL 979 million, underscoring its robust financial health.
Environmental, Social, and Governance (ESG): Natura &Co remains at the forefront of ESG initiatives. The Science Based Targets initiative (SBTi) approved the company's ambitious plan to reduce greenhouse gas emissions by 42% by 2030. Furthermore, Natura &Co has reached its goal of providing a living wage for all employees, highlighting its commitment to social equity.
Natura & Co's Q1 2024 financial results reveal a mixed performance. Consolidated net revenue hit BRL 6.1 billion, showing a 1.1% rise in constant currency but a 5.7% decline year-on-year in Brazilian Reais. Natura Latam excelled, with revenue growth of 3.1% YoY in CC, led by Natura Brazil's 11.3% increase. This was driven by strong retail sales and the launch of the 'Perfumada' fragrance campaign. However, Avon Latam reported declines of over 11% in Brazil and Hispanic Latam due to fewer representatives.
Avon International faced a 4.7% revenue drop in CC despite efforts to enhance gross margins and explore new distribution channels. Consolidated profitability improved thanks to a 90 bps increase in gross margin, reaching 65.2%. Adjusted EBITDA was BRL 683 million, with a margin expansion of 110 bps YoY.
However, the reported net loss widened to BRL 935 million, impacted by discontinued operations, higher taxes, and FX losses. Excluding one-offs, the underlying net income was BRL 116 million. CEO Fabio Barbosa highlighted the positive impact of the Natura-Avon integration but acknowledged ongoing challenges.
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