Strong growth by Natura &Co Latam and
Aesop;
Avon International enters positive territory in
Beauty category
SÃO PAULO, May 9, 2023
/PRNewswire/ -- Natura &Co (NYSE – NTCO; B3 – NTCO3) posted a
resilient performance in the first quarter of 2023, with sales
growth in constant currency and an improvement in profit
margins.
Natura &Co posted Q1 consolidated net revenue of
R$ 8 billion, up 3.4% at constant
currency (-2.8% in BRL), driven by solid constant currency (CC)
growth at Natura &Co Latam and Aesop. Gross margin was 67.7%,
up 370 bps vs Q1-22, and adjusted EBITDA margin was 10.5%, up 330
bps vs the same period last year, reflecting improving margins at
Natura &Co Latam and Avon International and a 36% drop in
Holding expenses. Net income was R$ (652.4)
million, a sequential improvement vs the previous quarter
and broadly in line with last year's R$
(643.2) million in the period. The Group ended the quarter
with a solid cash position of R$ 4
billion.
Fabio Barbosa, Group CEO of
Natura &Co, declared: "Natura &Co's performance in the
first quarter is in line with our plan and with our previous
communication, as Q1 numbers show a solid improvement both in gross
and adjusted EBITDA margin, while the company continues to put in
action important structural changes in its portfolio, focusing on
simplifying its structure and improving its capital structure.
Excluding Aesop, Q1-23 showed a strong profitability
improvement, mainly driven by gross margin expansion across all
business units and continuous cost control, that were partially
offset by sales deleverage at The Body Shop, Avon Latam and, to a
lesser extent, Avon International. This quarter's gross margin
expansion is driven by price increase carry-over and more favorable
mix, more than offsetting the inflationary environment we continue
to experience. As per the normal seasonality of the business, cash
consumption in Q1 was high, as planned, and working capital
management was impacted by build-up of inventories for Q2 and
changes related to the continued integration of the Natura and Avon
brands in Latam. From a revenue standpoint, the highlight remains
the Natura brand, which continued its strong momentum from last
year, with Natura Brazil sales
growing 25%, led by volume and strong productivity growth.
Shortly after the close of the quarter, Natura & Co
announced important milestones, which are transformational for the
future of the group. First, the group announced it has entered into
a binding agreement to sell Aesop to L'Oréal for an enterprise
value of US$2.525 billion (subject to
customary regulatory approvals). Furthermore, in April we had our
first day of full integration of Natura and Avon in Peru
as part of Wave 2, with sales forces completely integrated and
sharing the same experience. Finally, The Body Shop announced it
was entering its next chapter, with Ian
Bickley taking over as interim chief executive after
David Boynton stepped down.
Our triple bottom line agenda also showed important advances,
with significant improvements in the share of renewable or natural
ingredients and of biodegradable formulas. Natura &Co also
released its third pay equity report, showing we maintained our
target of equal representation, with 52.7% of women in leadership
roles -Director and above- across the organization.
While 2023 continues to shape up as another challenging year,
our strategic priorities are clear and, the first results give us
confidence that we are on the right track. We believe that
massively reducing the company's net debt, combined with stronger
EBITDA margins resulting from the businesses' operational
improvement, alongside our relentless focus on cash conversion,
will pave the way for strong cash generation in the coming years,
allowing us to make disciplined investments in our business
priorities and unlocking value for our shareholders."
Performance by business unit:
Natura &Co Latam's net sales were up by 9% in
constant currency ("CC) and up 2.4% in BRL. CC growth was driven by
double-digit growth at the Natura brand, which grew by 25.1%, while
the Avon brand was down 9.8% at CC. The Natura brand posted
strong momentum, with growth of 24.9% in Brazil, supported by price increases and
better mix, as well as 20.4% growth in consultant productivity in
Q1. In Hispanic Latam, net revenue was up 25.5% at constant
currency despite a challenging situation in several countries,
driven by Argentina and
Colombia. The Avon brand in
Brazil was broadly stable vs the
same period last year (-0.6%) in Q1. The Beauty segment continued
to grow, with sales up +5.6%, while Fashion and Home (F&H) was
down 18%, in line with our portfolio optimization strategy. In
Hispanic markets, net revenue was down 14.8% at CC (-22% in
BRL). Performance was good in Argentina, but impacted by a decrease in
Mexico and Chile. The Beauty category was broadly stable
in constant currency, while beauty productivity per representative
is up more than 20% year-on-year. Adjusted EBITDA margin was up by
a solid 400 basis points to 13%. Margin benefited from strong gross
margin improvement and SG&A efficiencies by the Avon brand in
Brazil, even as the Natura brand
continued to invest in marketing and innovation.
Avon International's revenue was down 7.5% at CC (-12.8%
in Reais.) This drop continues to reflect the situation in
Ukraine; excluding that, CC sales
were down 4%. The TMEA region showed year-on-year growth, while
Western Europe posted a slightly
better performance. Digitalization is progressing and the use of
digital tools reached 30.4%, up from 21.9% in the first quarter
last year. Adjusted EBITDA margin was 6.1%, up 170bps, driven by
gross margin expansion of 480 bps thanks to price increases and
product mix, combined with continued focus on transformation
savings.
The Body Shop's Q1 net revenue declined by 9.4% at
constant currency (-16.5% in BRL.) The tough macro environment,
particularly in the UK and the rest of Western Europe, continued to impact retail
sales, while The Body Shop at Home continued its steep decline.
Adjusted EBITDA margin was 6.1%, down only 30 bps year-on-year,
thanks to a return to positive territory of gross margin, up 50 bps
to 78.6%, combined with strict cost control. efficiency gains.
Under the new CEO, management will be working to refine The Body
Shop's current business plan and transformation agenda, while
continuing to prioritize profitability and cash conversion
recovery.
Aesop again recorded another quarter of double-digit
growth in constant currency, up 16.8%
(+9.2% in BRL). All regions delivered double-digit growth despite
the challenging environment. Fragrance sales grew at more than
twice the overall pace, aligned with Aesop's category
diversification strategy. Q1 adjusted EBITDA margin was 18.5%, down
320 bps, mainly reflecting planned investments to deliver
sustainable growth. Following the announcement of its sale to
L'Oréal, whose closing is expected in the third quarter, Aesop has
been classified as Discontinued operations.
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$36.3 billion in 2022. The four companies that
form the group are committed to generating positive economic,
social and environmental impact. For 136 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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