Brazilian beauty and personal care group Natura &Co announced strong financial results for the third quarter of 2024, driven by solid revenue growth and significant profitability improvements. The company reported revenue of R$6 billion, an increase of 18.5% compared to Q3 2023 at constant currency.
According to a company press release, this growth was primarily driven by Natura’s strong sales in the Brazilian market and the recovery of Avon CFT, which resulted in a positive market response.
Revenue and profitability highlights
Natura &Co achieved significant progress in the Latin American market, with sales growth of 18.5% year-on-year (excluding currency effects). Excluding Argentina, revenues in Brazilian real terms increased by 17.4%, demonstrating the company’s effective management in a volatile currency environment.
Natura & Co’s third-quarter earnings report said the company’s gross margin in Latin America improved 340 basis points (bps) year-over-year due to “operating leverage, improved country mix, and increased exposure to the Natura brand.” I did. This gross profit expansion increased Natura & Co’s recurring EBITDA by 52% to R$870 million, with a margin of 14.6%.
This growth was partially driven by the improved performance of Natura Brasil, whose sales increased by 19.4% year-on-year, and Avon CFT, which recovered after a difficult period in 2023 with sales increased by 14.4%. Although they reached almost double digits, Avon’s performance in the region capped these gains.
Benefit from strategic integration and cost savings
Natura & Co’s ongoing integration of the Natura and Avon brands, known as ‘Wave 2’, is critical to maintaining the company’s growth momentum in Latin America. “These third quarter results demonstrate that Wave 2 of the Natura and Avon integration in Latin America is well underway,” Natura &Co CEO Fabio Barbosa said in the company’s media statement. said.
Barbosa also noted that reinvestment in marketing and technology under the combined initiative is already boosting sales. He added that expanding brand integration to Mexico and Argentina by 2025 will be “key to advancing our margin recovery plan.”
Additionally, cost efficiencies such as a 43% reduction in corporate expenses and optimization of logistics and credit management have allowed the company to allocate resources to strategic initiatives. Barbosa stressed that the company was reinvesting the funds it saved in marketing, which “further increased sales” and solidified the foundation for continued profitability in the Latin American region.
Financial resiliency during a Chapter 11 filing
The quarter also saw a significant Chapter 11 financial adjustment for Avon Products Inc. (API). Submitted early this year. This led Natura & Co to exclude API and its subsidiaries from its financial reporting. As part of this process, the company recognized non-recurring non-operating losses of approximately R$7 billion. This is an accounting adjustment that reflects the investment in API and the amortization of impaired receivables, but has no cash impact.
Despite these challenges, Natura & Co’s capital structure remains strong. In July, the company issued its 13th bond worth R$1.3 billion due in 2029, a media release confirmed. The issuance is the first sustainability-linked bond in Brazil for Natura Cosmeticos, which focuses on environmentally friendly initiatives such as the development of biological raw materials in the Amazon.
The new issuance extends the company’s debt maturity profile and replaces previously repurchased emissions, leaving Natura &Co with a net debt-to-recurring EBITDA ratio of 1.5x and cash reserves of R$3.5 billion. It will be.
Promoting environmental and social initiatives
The company’s third quarter results reflect the company’s continued commitment to environmental sustainability and social impact. “The fundamentals of our triple bottom line have also evolved, and as we celebrate our 10th anniversary as a B Corp, we stand out among the pillars of our community with our recent recertification,” Barbosa said in a press statement, adding that Natura $1 million will be paid by 2023 to support agricultural mining communities in the Amazon, noted that &Co has invested R$43.
This investment highlights Natura & Co’s dedication to promoting sustainable livelihoods within its supply chain.
Climate transition planner Natura &Co added 20 new biogas-powered trucks this quarter, bringing the proportion of heavy goods vehicles powered by biogas to 35%. This adjustment reduced cargo emissions by 82%, consistent with the company’s goal of developing a regenerative economy through green business practices.
Future prospects
Looking to the future, Natura &Co remains focused on completing the integration of the Natura and Avon brands across Latin America. Expanding Wave 2 to Mexico and Argentina next year is an important step in achieving long-term profit growth and consolidating Natura & Co’s market position.
Natura &Co aims to redefine industry standards for sustainability and inclusive growth by combining business strategy with a firm commitment to environmental and social goals.
