Natura &Co aims to create “sustainable growth” after boosting Avon and The Body Shop margins amid inflation

16 Aug 2023 --- Natura &Co Q2 consolidated net revenue of BRL 7.8 billion (US$1.6 billion), up 1.9% at constant currency (-4.1% in BRL), driven by solid constant currency (CC) growth at the company’s Latin America division. 

Gross margin was 65.4%, up 430 bps vs. Q2-22 and adjusted EBITDA margin was 9.7%, up 230 bps vs. the same period last year, reflecting improving margins at all three business units, Natura &Co Latam, Avon International and The Body Shop, as well as a 5.7% drop in corporate expenses.

The group ended the quarter with a cash position of BRL 3.7 billion (US$742 billion).

“Natura & Co’s second-quarter performance continued to show the improvement already observed in Q1, with low-single digit top line growth at constant currency and a significant improvement in adjusted EBITDA margin,” Fabio Barbosa, group CEO of Natura &Co, remarks.

“This was mainly driven by gross margin, benefiting from mix effects, partially offset by investments and inflation. Net income was still impacted by high financial expenses, which will be addressed upon closing of the sale of Aesop, expected to occur in Q3-23.”

“Our results improved in H1 23, but we are still not satisfied with them,” says Barbosa. “We look forward to delivering our strategy, continuing to position Natura &Co on the course towards strong profitability and low leverage, allowing us to pursue meaningful and sustainable growth in the future.”

Barbosa maintains that cash conversion remains the business’ main focus, and this quarter the company saw further improvement in operating working capital dynamics, partially offsetting seasonal cash consumption in the quarter.

Natura &Co is the parent company of skin care brand Avon International (Image credit: Avon International).“We continue to drive our cash conversion improvement, mainly through working capital and net Capex optimization, among others, and we still see more opportunities to be captured on these fronts, although we might face volatility from quarter to quarter.”

“Landmark” quarter
Q2 23 was a “landmark” quarter for Natura &Co, as the company kicked off “Wave 2” of the Natura-Avon integration in Latin America, beginning with Peru and Colombia, with “quite compelling initial results.”

“We are pleased with the initial learnings from Peru and Colombia and we are confident that they will support us to deliver strong results for our biggest market in the region and the other ones that will follow,” states Barbosa.

In both markets, the company reports a “meaningful acceleration” of cross-selling between brands and “significant” productivity growth, resulting in greater prosperity for the company’s beauty consultants. 

Updates on climate action
In environmental strategy updates, Natura &Co highlights it has obtained approval from the Science Based Targets initiative for its ambitious plan to reduce absolute scopes 1, 2 and 3 Greenhouse Gas emissions by 42% by 2030 from a 2020 base year.

The company believes its target is in line with the 1.5°C trajectory required by the Paris Agreement.

“Closing the sale of Aesop, implementing Wave 2 in Latam, further work on simplifying and turning around our international assets while delivering our ESG agenda are fundamental steps that will help us achieve our ambition.”

Edited by Benjamin Ferrer