Natura Cosméticos (NATU3) Q2 2026 earnings summary

Executive summary

• Q2 2026 results were below expectations due to significant operational and macroeconomic challenges in Brazil, including severe product shortages, supply chain disruptions, and a temporary tax mismatch, resulting in a consolidated revenue decline of 9.1% year-over-year.

• Hispanic markets delivered steady growth and margin improvement, with revenue up 7.2% in constant currency and strong performance in Mexico, Peru, and Chile, offsetting some of Brazil's weakness.

• Net income was BRL 35 million, down from BRL 446 million in Q2 2025, mainly due to worsened net financial results, derivative settlement costs, and higher tax expenses.

• Net debt decreased to BRL 3.9 billion, with leverage ratio at 2.06x, supported by positive free cash flow generation of BRL 342 million.

Financial highlights

• Consolidated net revenues were BRL 5,170 million, down 9.1% YoY; Brazil declined 14.8% YoY, while Hispanic Latam grew 0.7% YoY (+7.2% in constant currency).

• Gross margin was 65.7% in Q2-26, down 70 bps YoY; EBITDA margin was 12.0% (13.2% ex-tax effect), down 200 bps YoY.

• Net income was BRL 35 million, down BRL 410 million YoY, mainly due to negative operating leverage, derivative settlements, and higher tax expense.

• Free cash flow to firm was BRL 342 million, supported by working capital improvements.

• Net debt was BRL 3.9 billion at quarter-end, leverage ratio at 2.06x, down BRL 179 million sequentially.

Outlook and guidance

• Gradual recovery in Brazil is expected in the second half of 2026 as operational fixes and supply chain stabilization take effect.

• Full-year 2026 ambitions revised: EBITDA margin expansion over FY-25 is no longer targeted, with focus on restoring revenue in Brazil and maintaining growth in Hispanic markets.

• Positive and higher YoY cash generation to firm is still expected for 2026, with leverage to remain within optimal range.