Natura Cosméticos (NATU3) Q3 2024 earnings summary

Executive summary

• Net revenue rose 18.5% YoY in constant currency, with strong growth in Natura (+19.4%) and Avon CFT (+14.4%) in Brazil, and accelerating momentum in Hispanic markets, partially offset by Home & Style declines.

• Recurring EBITDA increased over 50% YoY to BRL 870 million, with margin expanding 340 bps to 14.6%, reflecting gross margin gains and cost efficiencies.

• Deconsolidation of Avon Products Inc. (API) due to Chapter 11 resulted in a BRL 7.0 billion non-cash, non-operating loss in discontinued operations, leading to a consolidated net loss of BRL 6.7 billion for Q3-24.

• Underlying net income, excluding one-off effects, was BRL 524 million, down from BRL 1,135 million pro-forma in Q3-23, as EBIT gains were offset by higher financial and tax expenses.

• Integration of Natura and Avon in Latam (Wave 2) is progressing, driving productivity, digital transformation, and margin recovery, with full rollout expected by end of 2025.

Financial highlights

• Q3-24 consolidated net revenue: BRL 5,976 million (+17.4% YoY); 9M-24: BRL 16,342 million (+8.3% YoY).

• Gross margin expanded to 67.3% (+340 bps YoY), supported by operating leverage, richer country mix, and improved price/promotion execution.

• Recurring EBITDA margin reached 14.6% (+340 bps YoY); consolidated EBITDA was BRL 659 million (+88% YoY).

• Net income from continued operations was BRL 302 million; consolidated net loss was BRL 6,693 million due to discontinued operations.

• Free cash flow from continuing operations improved to BRL 60 million in 9M-24 from a negative BRL 1.9 billion in 9M-23.

Outlook and guidance

• Wave 2 integration to be completed in Mexico and Argentina by 2025, leveraging best practices from other regions.

• Continued focus on digital and marketing investments to sustain top-line momentum and operational efficiencies.

• Management aims to use learnings from 2023 and 2024 to minimize disruptions in future rollouts.

• Strong cash generation anticipated in Q4, historically the most important quarter.