Natura &Co's sales stabilized in Q2 and profitability is impacted by cost pressure

Strong growth by Natura brand and Aesop, further improvement in Avon fundamentals

SÃO PAULO, Aug. 12, 2022 /PRNewswire/ -- Natura &Co's (NYSE – NTCO; B3 – NTCO3) second--quarter performance continued to reflect the challenging environment in which it is operating, but the Group recorded positive signs including strong growth by the Natura brand in Brazil and Latin America, another quarter of double-digit growth by Aesop in constant currency and further improvement in Avon's fundamentals.

Natura &Co posted consolidated net revenue of R$8.7 billion, up 0.4% at constant currency (-8.6% in BRL) in the second quarter, on the back of a very strong comparable base, as Q2 of last year saw sales growth of 31.7% at constant currency (CC) and 36.2% in BRL. Adjusted EBITDA margin was 8.0% (-50 bps). Net income was R$ (766.0) million and the Group ended the quarter with a solid net cash position of R$ 4.3 billion.

Digitally-enabled sales represented 49.5% of total sales and were above their pre-pandemic levels at all business units despite a channel rebalancing as retail reopened, with continued growth at Natura and Avon. Digitally-enabled sales include online sales (e-commerce + social selling) and relationship selling using digital apps. At Avon International, penetration of the Avon On app (active representatives who logged in at least once in the last three campaigns) reached 23% in Q2-22, compared to nearly 16% in Q2-21. At Natura Latam, the average number of consultants sharing content increased to 28% this quarter, compared to 24% in Q2-21, while orders through the 1.5 million+ consultant online stores increased by 29% in the region.

Fabio Barbosa, Group CEO of Natura &Co, declared: "In my first few weeks as Group CEO, I have focused mainly on two priorities: the first is redesigning Natura &Co's organizational structure to make it lighter and leaner. At this stage, we have mapped significant savings at the holding company level. If the Company had implemented those changes last year the impact would have been an annualized reduction of at least 40% in recurring corporate expenses. Other changes and estimated savings will be announced later. The second is a review of the governance model and ways of working within Natura &Co, with the holding company strongly concentrated on defining key performance indicators, monitoring and tracking the performance of more autonomous brands, leading the allocation of resources within the group and continuing to promote our 2030 Commitment to life sustainability vision. We are confident that a leaner and a more agile structure, built on a strong foundation of accountability for results, will empower the Business Units to respond with agility to their current strategic and market challenges. At the same time, we are strongly focused on improving the fundamentals of our underperforming businesses, which we regard as our principal challenge and main upside driver.