Natura &Co shows strong sales growth and successful entry into China
15 Mar 2023 --- Natura &Co has consolidated net revenue of R$10 billion (US$2 billion) for the fourth quarter of the financial year, driven by constant growth in the Latin American division and the cosmetics brand Aesop.
The brand grew 17.9% in Brazil, supported by price increases. Net revenue increased by 16.9%, driven by Argentina, Colombia and Mexico. R&D investments drove the strong top-line performance of its margins.
A key quarter highlight was Aesop’s successful entry into China, with initial performance exceeding expectations. In addition, the penetration of “digital” – consultants who logged in at least once to the digital catalog or app – reached 82% compared to 80% the previous year.
At Avon International, penetration of the Avon On app – active representatives who logged in at least once in the last three campaigns – reached 31%, compared to 26%.
“Important changes were carried out, such as a stronger focus on profitability and cash conversion, a revision of the cost structure and the role of the Holding company, alongside important revisions in our footprint worldwide to position the business for success going forward,” says Fabio Barbosa, group CEO, Natura &Co.
Growth in beauty and fragrance
Natura &Co has seen a steady improvement in cash conversion and growth for Q4 of FY2022.
The 2022 financial year showed stable revenue at constant currency while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin decreased by 160 basis points (bps).
Fragrance sales grew more than twice the average, aligned with Aesop’s category diversification strategy. The EBITDA margin was 29%, up more than 190 bps.
The company reports continuous improvement in cash conversion and growth in Avon fundamentals and the “beauty” category, which grew 7.3% in CC, aligning with its strategic priority. The segment grew more than 12%. Avon International’s revenue went down by about 10% in CC, reflecting the war between Ukraine and Russia.
Net revenue decreased by around 1.1% in CC, with good performance in Argentina. This was adversely affected by a decrease in Mexico, Peru and Chile.
Adjusted EBITDA margin was 10.5%, down 280 bps versus the same period last year. Net income was R$890 million (US$169 million). The group ended the quarter with a solid cash position of R$6 billion (US$1 billion).
“In the challenging environment we faced in 2022, we decided mid-year to reassess the group’s growth model to enter a new stabilization cycle,” says Barbosa.
“Structural steps to create sustainable shareholder value are in motion in all our brands. At Natura &Co Latam, we are accelerating the integration of Natura and Avon to capture the full benefits of the combination.”
“At Aesop, we are evaluating strategic options to improve the company’s capital structure,” Barbosa explains.
ESG agenda
Natura &Co has put a continued focus on its environmental, social and governance (ESG) agenda.
Avon International is optimizing its geographic footprint to concentrate on profitable markets while reducing the cost structure. The Body Shop focuses on efficiencies and its core retail model in light of the challenging channel mix changes it experienced.
“We remain as focused as ever on our commitment to our environmental agenda, the Amazon and its biodiversity, social inclusion and female empowerment,” says Barbosa.
“We are confident that the actions we are taking will position Natura &Co to return to growth. While we expect 2023 to be another challenging year, our priorities of focusing on cash generation and improving the company’s capital structure will allow us to invest in our priorities.”
Industry developments
The Natura brand grew by about 18% in Brazil.
Earlier this year, market uncertainties pertaining to inflation, disrupted supply chains and fluctuating demand for luxury purchases have pivoted beauty companies to shift gears. However, newly released annual results maintain a bullish outlook as industry’s hair and skincare titans have managed to keep ahead of sales predictions.
The effects these macroeconomic dynamics have had on the industry are apparent in the financials of industry giants Kao, Moët Hennessy Louis Vuitton (LVMH), Estée Lauder Companies, Givaudan, Symrise and e.l.f Beauty.
International Flavors & Fragrances is updating its strategic plan and launching an operating model as part of the next stage of its transformation.
Beiersdorf has been particularly resilient amid the complex economic environment in its flagship
Nivea cream and dermo-cosmetics brands, Eucerin and Aquaphor. The derma brands are growing organically at a 25.3% annual rate.
Evolva reported a 46% growth in its health ingredients segment for the 2021 fiscal year. The company’s full-year revenue for 2021 reached CHF 9.9 million (US$10.6 million), up 31% from the previous year.
Coty reported solid financial progress for Q3 of the fiscal year 2022, fueled by the company’s Consumer Beauty and Prestige business segments.
In addition, LVMH saw a 34% profit increase in the first half of 2022.
By Inga de Jong
