Natura &Co sees 18.5% revenue growth amid LATAM expansion

14-Nov-2024 - Last updated on 14-Nov-2024 at 14:58 GMT

"These third-quarter results demonstrate that the integration of Natura and Avon in Latin America, the Wave 2, is progressing well," stated Natura &Co CEO Fábio Barbosa in the company's media statement. © aywan88 Getty Images

Natura &Co delivers a robust Q3, achieving R$ 6 billion in revenue, fueled by sales growth, operational efficiencies, and sustainable investments.

Brazilian beauty and personal care group Natura &Co has announced strong financial results for the third quarter of 2024, driven by robust revenue growth and significant profitability gains. The company reported revenues of R$6 billion, an increase of 18.5% in constant currency compared to Q3 2023.

According to the company's press release, this growth was primarily propelled by strong sales within Natura's Brazilian market and the recovery of Avon CFT, which resulted in a favorable market response.

Revenue and profitability highlights

Natura &Co achieved an 18.5% year-over-year revenue increase in constant currency, marking substantial progress in its Latin American markets. Excluding Argentina, revenue in Brazilian reais rose by 17.4%, underscoring the company's effective management amid volatile currency environments.

According to Natura & Co's Q3 earnings release, the company's gross margin in Latin America improved by 340 basis points (bps) compared to the previous year due to "operational leverage, a better country mix, and higher exposure to the Natura brand." This gross margin expansion contributed to Natura & Co's 52% increase in recurring EBITDA, reaching R$870 million with a 14.6% margin.

This growth was partially driven by improved performance in Natura Brazil, which saw sales rise by 19.4% year-over-year, and Avon CFT, which rebounded with a 14.4% increase in sales following a challenging period in 2023. Although growth in Hispanic markets nearly reached double digits, Avon's performance in this region tempered these gains.

Strategic integration and expense reductions fuel gains

Natura & Co's ongoing integration of the Natura and Avon brands, known as "Wave 2," has been pivotal in sustaining the company's growth momentum in Latin America. "These third-quarter results demonstrate that the integration of Natura and Avon in Latin America, the Wave 2, is progressing well," stated Natura &Co CEO Fábio Barbosa in the company's media statement.

Barbosa also noted that reinvestments in marketing and technology under this integration initiative have already bolstered sales. He added that expanding the brand integration to Mexico and Argentina by 2025 will be "crucial for advancing our margin recovery agenda."

Additionally, cost efficiencies, including a 43% reduction in corporate expenses and optimized logistics and credit management, helped the company allocate resources to strategic initiatives. Barbosa highlighted that the company is reinvesting savings into marketing, which has "further boosted sales," cementing the foundation for sustained profitability in the Latin American region.

Financial resilience amid Chapter 11 Filing

This quarter also saw a notable financial adjustment due to Avon Products Inc.'s (API) Chapter 11 filing earlier this year. This led to Natura & Co's deconsolidation of API and its subsidiaries from its financial reporting. As part of this process, the company recognized a non-recurring, non-operating loss of approximately R$ 7.0 billion, an accounting adjustment that reflects the write-off of investments in API and impaired receivables but has no cash impact.

Natura & Co's capital structure remains solid despite these challenges. In July, the company issued its 13th debenture worth R$ 1.3 billion, maturing in 2029, the media release confirmed. The issuance marked Natura Cosméticos' first Sustainability-Linked Bond in Brazil, focusing on eco-friendly initiatives, including developing Amazonian bioingredients.

The new issuance extends the company's debt maturity profile and replaces previously repurchased emissions, positioning Natura &Co with a net debt-to-recurring EBITDA ratio of 1.5x and R$3.5 billion in cash reserves.

Advancing environmental and social initiatives

The company's Q3 results reflect its continued commitment to environmental sustainability and social impact. "Our triple bottom line fundamentals have also evolved, and as we celebrate a decade as a B Corp, we stood out in the Community pillar in our most recent recertification," remarked Barbosa in the press statement, noting that Natura &Co invested R$ 43 million in 2023 to support Amazonian agro-extractive communities.

This investment underscores Natura & Co's dedication to fostering sustainable livelihoods within its supply chain.

Furthering its Climate Transition Plan, Natura &Co added 20 new biogas-powered trucks to its fleet this quarter, bringing the proportion of biogas-powered heavy freight vehicles to 35%. This adjustment led to an 82% reduction in freight emissions, aligning with the company's goal of developing a regenerative economy through environmentally conscious business practices.

Future outlook

As Natura &Co looks ahead, the company remains focused on completing the integration of its Natura and Avon brands across Latin America. Next year, extending Wave 2 to Mexico and Argentina will be a critical step toward achieving long-term margin expansion and solidifying Natura & Co's market position.

By coupling its business strategies with a steadfast commitment to environmental and social objectives, Natura &Co aims to redefine industry standards for sustainability and inclusive growth.