Natura Cosméticos (NATU3) Q1 2025 earnings summary

Executive summary

• Consolidated net revenue reached BRL 6.7 billion in Q1 2025, up 45.8% year-over-year, driven by strong Natura brand growth in Latam and the reconsolidation of Avon International sales.

• Merger of Natura & Co into Natura Cosméticos completed, with new management roles assumed and ongoing simplification and restructuring initiatives, including a 25% headcount reduction at Avon International.

• Recurring EBITDA was BRL 790 million (11.8% margin), up 30% YoY, with Latam margin at 15.0% (+50 bps YoY), offset by Avon International margin dilution.

• Net loss narrowed to BRL -151 million from BRL -935 million YoY, as higher EBITDA was offset by BRL -190 million in transformation costs and BRL -251 million in net financial expenses; underlying net income, excluding non-recurring items, was BRL +264 million.

• Strategic focus remains on Latam, with further cost reductions, operational efficiency, and ESG initiatives recognized by industry awards.

Financial highlights

• Group revenues reached BRL 6.7 billion in Q1 2025, up from BRL 4.6 billion in Q1 2024, reflecting 15.5% growth in LATAM and contribution from Avon International.

• Consolidated recurring EBITDA margin was 11.8%, down 140 bps YoY, mainly due to Avon International's lower margin; LATAM recurring EBITDA margin improved to 15.0%, up 50 bps YoY.

• Gross margin in Latam reached 67.1%, up 90 bps YoY, supported by Wave 2 rollouts and pricing actions.

• Free cash flow to firm was negative, with BRL -531 million in Q1, mainly due to working capital and transformation costs, while Latam generated BRL +185 million despite seasonality.

• Net debt at BRL 2.9 billion, with net debt/EBITDA ratio at 1.43x and cash balance of BRL 3.7 billion at quarter-end.

Outlook and guidance

• Wave 2 implementation in Mexico to complete in Q2 and in Argentina in Q3, with transformation costs for 2025 not exceeding 2024 levels and expected to phase out after 2025.

• Commitment to expanding recurring margins year-over-year and reducing EBITDA margin volatility, with efficiencies partially reinvested in marketing and strategic projects.

• Ongoing restructuring of Avon International, with a dedicated team exploring strategic alternatives and aiming to minimize cash outflow.

• Final steps to streamline Holding expenses to be completed by Q3-25.