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Press release content from PR Newswire. The AP news staff was not involved in its creation.

Natura &Co Posts Slight Sales Decline In Q3 But Strong Growth Versus Pre Pandemic Levels

November 11, 2021 GMT

SÃO PAULO, Nov. 11, 2021 /PRNewswire/ -- Natura &Co (NYSE – NTCO; B3 – NTCO3) recorded a slight sales decline in the third quarter, reflecting a record-high comparable base and a challenging external environment, but posted strong growth in the first nine months of the year and compared to Q3 two years ago, prior to the onset of the pandemic. On a year-to-date basis, net income improved by over $1 Billion Reais, despite short-term cost pressure.

In this challenging operating environment, Natura &Co continued in the quarter to make major advances on key strategic initiatives that will fuel future growth. A key highlight is the progress made on Avon’s turnaround, with the start of the implementation of the new commercial model and an acceleration in digital tools. For the first time in 5 years, total sales of the Avon brand, encompassing both operations in Latin America and in international markets, showed growth of 10.7% (+3.4% in constant currency) in the first nine months of the year vs the same period last year, underscoring initial gains from the transformation plan. Planned synergies are fully on track, with 40% of the overall target already achieved by the end of this year, helping Natura &Co offset raw material inflation and foreign currency headwinds.

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The group also announced it is launching a share repurchase plan of up to R$ 1.5 billion and is evaluating switching its primary listing to the NYSE to highlight its increasingly global nature, while maintaining a dual listing with Brazilian Depositary Receipts (BDRs) in Brazil.

And underscoring its commitment to sustainability, Natura &Co led a call to action to world leaders at the COP26 summit to address not just climate change, but also nature. Natura &Co is strongly pushing for the creation of a carbon market with effective mechanisms put in place, and for an Agreement on Nature similar in scope and significance to the Paris Agreement on climate change. It also launched the PlenaMata platform, aiming to mobilize people, businesses, institutions and communities to work together for forest conservation and ending deforestation in the Amazon. The region, which counts 390 billion trees, lost over 400 million trees in 2021 alone. The instrument is public and tracks the deforestation or the regeneration of the forest on a daily basis.

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Roberto Marques, Executive Chairman and Group CEO, declared: “Despite a very tough comparable vs last year, when we grew over 20%, and some persistent external headwinds related to the global pandemic, Natura &Co continues to progress on its key initiatives, attesting to the underlying strength of our business. We again outperformed the global Cosmetics, Toiletries and Fragrances market on a year-to-date basis and versus pre-pandemic levels, all our brands and businesses posted growth over nine months and the Group’s digitalization continued to advance. We also made major headway on the integration of Avon. With a further roll-out of Avon’s new commercial model, continued deployment of social selling tools at Natura, new conversions to The Body Shop’s new store concept and preparations for an entry onto the Chinese market at Aesop well underway, we have a number of initiatives to fuel growth in 2022 and beyond.”

Over the first nine months of the year, net revenue was R$28.5 billion, up 14.4% vs the same period last year in Brazilian Reais (+8% at constant currency), adjusted EBITDA margin stood at 9.1% (-190 basis points) and net income reached R$352.6 million, reversing a loss in the year-ago period of R$827.6 million.

Consolidated net revenue in Q3 stood at R$9.5 billion, down 4.2%* in BRL and 4.5%* at constant currency, reflecting a record-high comparable base as Q3-20 was up by 26%* (+6.7%* at constant currency*). Digitally-enabled sales, which include online sales (e-commerce + social selling) and relationship selling using our main digital apps, reached 52% of total revenue. Adjusted EBITDA, which excludes transformation costs, costs to achieve synergies and non-recurring effects, was R$819.1 million, with margin of 8.6%. Adjusted EBITDA margin was down 620 basis points year-on-year. Excluding the temporary effects from the challenging operating environment both this year and last, adjusted EBITDA margin would have increased by 10 basis points year-on-year. Net income was R$272.9 million compared with R$381.7 million in Q3 of last year.

Natura &Co Latam’s net revenue decreased by 2.4%* in BRL in Q3 but was up 14.4% over nine months. In the quarter, Natura’s brand power reached its highest level, while the Avon brand continued to gain strength and was above its Q3-20 level. Consultant/representative loyalty and satisfaction at both brands also reached their highest-ever levels. Avon’s new commercial model, a key pillar of its turnaround, has been fully implemented in Brazil. Natura online sales also grew +13% vs Q3 20 and our own payment solution, &Co Pay, is already working with 300,000 accounts and Total Payment Volume ahead of the annualized estimate of R$4 billion. Adjusted EBITDA margin for Natura &Co Latam was 9.6% (-690 basis points) in Q3 and 10.8% (-90 basis points) in the nine months.

Avon International’s net revenue decreased 14.3%* in Q3 but was up 6.3% in the first nine months. Key markets such as the UK, South Africa and the Philippines gained market share this quarter and in the nine months. The new commercial model, mirroring Natura’s segmentation approach, is being implemented across Avon International’s top 9 markets. Investments in digital made since the acquisition are supporting the increase in social selling adoption at Avon International, already reaching 15% vs. 3% pre-pandemic. Online sales were up by +19% vs. Q3-20. Adjusted EBITDA margin was 3.9% (-350 bps) in Q3 and 4.1% (-160 bps) in the nine months.

The Body Shop posted another solid performance, with net revenue up 0.4% in BRL in the quarter and 20.6% in the nine months. Deployment of the new store concept resumed, with 100 stores expected to be renovated by year-end. Stores converted into the new concept see a like-for-like sales uplift of about 10%. Online and At-Home channels are still twice above pre-pandemic levels. EBITDA margin was 18.0% (-430 bps) in Q3 and 15.3% (-270 bps) in the nine months.

Aesop posted another excellent quarter, with net revenue increasing 12% in BRL in Q3 and 39.8% over nine months. Aesop continues to show strong momentum, posting revenue growth, notably in Asia and the Americas, against a tough comp in Q3-20 and despite supply-chain challenges in certain markets. Aesop’s omnichannel model was further consolidated with the continued growth of online sales, which are twice above their pre-pandemic level. EBITDA margin was 19.6% (-1,170 bps) in Q3, notably reflecting planned higher investments in digital, categories and geographic expansion to accelerate growth, and 22.5% (-500 bps) in the nine months.

The Group is also updating its medium-term guidance. We remain very confident in our ability to drive top-line growth and achieve our target of growth in the high single digits over the coming years. We are also confident on showing margin progression over time, but we now expect to achieve adjusted mid-teens adjusted EBITDA margin in 2024, versus 2023 previously, as a result of the unforeseen challenging operating environment, with inflation, supply chain disruption and foreign currency headwinds. We have been able to largely offset these thanks to the synergies from Avon’s integration and revenue management.

*Excludes the phasing effect of the cyber incident that increased Q3-20 consolidated net revenue by R$ 454 million

About Natura &Co
Natura &Co is a global, purpose-driven, multi-channel and multi-brand cosmetics group which includes Avon, Natura, The Body Shop and Aesop. Natura &Co posted net revenues of R$36.9 billion in 2020. The four companies that form the group are committed to generating positive economic, social and environmental impact. For 130 years Avon has stood for women: providing innovative, quality beauty products which are primarily sold to women, through women. Founded in 1969, Natura is a Brazilian multinational in the cosmetics and personal care segment, leader in direct sales. Founded in 1976 in Brighton, England, by Anita Roddick, The Body Shop is a global beauty brand that seeks to make a positive difference in the world. The Australian beauty brand Aesop was established in 1987 with a quest to create a range of superlative products for skin, hair and the body.

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SOURCE Natura &Co