The rating matches the one given to Natura in 2012 and is described as reflecting factors such as the company’s strong capital structure and good cash flow, balanced against declining market share in a highly competitive business environment.
Natura was also rated an AAA on the national scale rating, with its future outcome being considered “stable.”
Key factors
Major factors in the rating company’s decision included Natura’s strong capital structure, leading cosmetics market position and “robust” operational cash flow generation.
The company benefits from strong brand recognition and a good direct sales structure. Brazil’s cosmetics industry in general also has a good medium-to-long term outlook, which boosts Natura’s rating.
However, Natura’s successes are balanced by a slightly declining market share from 2010, reflecting a huge and highly competitive market.
Competitors
Major competitors of the company include Avon and the recently launched Boticario. Competition was singled out as producing significant pressure on Natura.
While noting that the company’s ability to reach customers through its 1.5 million sales consultants was a significant competitive advantage, Fitch stated that Natura needed to find alternatives in order to improve its operating efficiency.
Fitch’s report states that the company may be able to recapture benefits from internal measures to reduce costs, but that stronger marketing initiatives, high R&D expenses and a lower product mix will probably prevent them from making a full recovery.
New strategies
Fitch notes that the harsh environment is encouraging Natura to develop new business strategies in order to recover market share.
The company is seeking to “strengthen its innovation pipeline” in order to reach new categories of the market and be more competitive at a retail level.
It will also increase sales terms and promotional items through the sales cycle in order to improve the productivity of its consultants, and it is hunting for opportunities outside its regular markets in order to take advantage of its well-developed distribution system.