Natura Cosméticos (NATU3) Q4 2024 earnings summary

Executive summary

• 2024 saw significant progress in simplification, with Wave 2 integration completed in Brazil and ongoing in Mexico and Argentina, driving revenue and operational efficiencies.

• Sale of Aesop and The Body Shop in 2023, further holding structure reduction, and completion of API's Chapter 11 in 2024 contributed to deleveraging.

• Avon International remains under strategic review, with alternatives including sale or joint venture being considered, and ongoing restructuring.

• Strong Q4-24 revenue momentum led by Natura brand in Brazil (+21.1%) and Hispanic Latam, but profitability impacted by higher investments in IT, marketing, and integration.

• Q4-24 net loss narrowed sharply to BRL 439 million from BRL 2.7 billion in Q4-23, mainly due to non-operational adjustments and integration costs.

Financial highlights

• FY24 consolidated net revenue was BRL 24.1 billion, up 12.4% YoY in constant currency; Q4-24 revenue reached BRL 7.7 billion, up 16.1% YoY in constant currency.

• FY24 recurring EBITDA was BRL 2,935.7 million (margin 12.2%, +100 bps YoY); Q4-24 recurring EBITDA was BRL 703 million (margin 9.1%, down 70 bps YoY).

• FY24 net loss was BRL 8.9 billion, mainly due to discontinued operations and non-recurring items.

• Net debt at year-end was BRL 2.4 billion, with Net Debt/EBITDA at 1.27x; adjusted for non-operational effects, 0.86x.

• Free cash flow from continuing operations in FY24 was BRL -126 million, with underlying free cash flow at BRL 931 million.

Outlook and guidance

• Wave 2 integration to be completed in Mexico and Argentina by end of 2025, with further efficiency and margin gains expected.

• Ongoing focus on expense control, margin expansion, and cash generation, especially in Latin America.

• Transformation and integration costs to remain high in 2025 as programs ramp up in new countries.

• Macro uncertainty in Brazil and potential beauty market slowdown are noted as risks for top-line growth.

• Strategic review of Avon International continues, with focus on accelerated restructuring and cash outflow minimization.