Natura &Co accelerates Avon integration amid COVID-19

Natura &Co accelerates Avon integration amid COVID-19

PR Newswire

SÃO PAULO, May 8, 2020

Step up in business digitalization; Avon integration synergies raised by US$100M

SÃO PAULO, May 8, 2020 /PRNewswire/ -- Natura &Co posted revenue growth in the first quarter of 2020, with a very strong digital ramp-up in the past several weeks as the company quickly adapted to the unprecedented global impacts of the Covid-19 pandemic.

Roberto Marques, Executive Chairman and Group CEO of Natura &Co, declared: "We entered 2020 with excitement and a solid plan around the integration of Avon into Natura &Co. We had no idea that so quickly our focus and resolve would be tested by a global pandemic as never before seen. As a Group dedicated to relationships and a better way of living and doing business, we had to immediately assess how we could best serve and protect our associates, their families and societies. First, we prioritized our people, offering job security, support to our network and safety conditions to our frontline associates. Second, we quickly moved to increase our production of essential items, donating a significant amount to local communities while supporting the important cause of domestic violence. Finally, to keep our business running, we increased training and capabilities with our digital selling tools so that everyone could access our products. I would like to express my heartfelt gratitude to our teams for the exceptional commitment they have shown during this challenging time caring about our people, our communities and our business".

This quarter is the first to include Avon Products, Inc after its acquisition closed on January 3, 2020. With the addition of Avon, Natura &Co becomes the leader in the Latin American CFT market with 11.8% market share (source: Euromonitor). Natura &Co has accelerated Avon's integration and is raising its target synergies by US$100 million to between US$300 million and US$400 million, including new top line synergies to be achieved over four years at Natura &Co Latam.

Natura &Co's consolidated net revenue reached R$7.5 billion, up 1.9% vs the same quarter last year. The growth was driven by a strong increase in sales by the Natura brand in Brazil and in Hispanic Latin America and continued double-digit growth at Aesop. Adjusted EBITDA was R$571.5 million, with margin of 7.6%, reflecting one-off costs associated with the Avon acquisition and impacts from Covid-19.

Amid the Covid-19 pandemic, digital social selling and e-commerce sales grew exponentially as consumers adapted to social distancing and lockdown measures by mid-March. Group e-commerce sales grew by nearly 250% in recent weeks vs. the same period last year. During the quarter, e-commerce grew 150% at Natura and Avon combined, 300% at the Body Shop and over 500% at Aesop.

Natura &Co also focused its efforts on ensuring supply of essential products such as soap and hand sanitizer, whose production rose 30%, and the group made donations of over 10 million units. The Group also launched a campaign focusing on the increase in domestic violence associated with social distancing, and the Avon Foundation donated US$1 million in support of organizations caring for survivors. 

Natura &Co Latam, posted net revenue growth of +2.4% in BRL. The Natura brand's net revenue increased by 14.9%, supported by strong sales growth at Natura Brazil (+9.8%) and Hispanic Latam (+25.8%,) despite Covid-19 impacts toward the end of the quarter. The Avon brand's net revenue declined 7.1% in BRL on a reduction in representatives across all markets in Latin America and Covid-19 impact later in the quarter, partially offset by an improved price/mix combination. Brazil declined 4.3%, which is half the rate of Q4-19 (-8.3%), showing significant sequential improvement, while Hispanic Latam declined 8.9%.  Adjusted EBITDA for Natura &Co Latam was R$287.5 million (+3.6%), and adjusted EBITDA margin was 6.9% (+10 bps).

Avon International, which comprises Avon's activities in 50 markets throughout Europe, Asia, Africa and the Middle East, saw its Q1 net revenue decrease by 2.4% in BRL. The decrease was caused by a reduction in representatives and a Covid-19 impact, partially offset by an improved price/mix combination across most markets. Representatives increased adoption of digital assets from a low single digit in 2019 to over 37% in recent weeks. Sales via the digital brochure have increased nearly 85% since January 1st. Adjusted EBITDA was R$102.9 million, or 4.8% margin.

The Body Shop's net revenue increased 2.6% in BRL. Covid-19 impacted performance in February and March across all markets, offsetting strong growth in January. In Q1, the At-Home business grew by 61% while E-commerce achieved 300% growth in recent weeks, helping to mitigate the stores closures globally. EBITDA in Q1 reached R$133.6 million, or 15.0% margin. 

The Aesop success story continued in Q1, with strong double-digit growth in both sales and profitability. Although Covid-19's impact was felt from February onwards due to its concentration in Asian markets, Aesop partially offset store closures by accelerating enhancements to its digital customer experience, resulting in online sales growth of 500% in the last weeks and contributing to overall revenue growth in BRL of 26.6%. EBITDA in Q1 grew by 28.1% to R$77.8 million, with margin up 30 basis points to 22.8%.

Natura &Co finished Q1 with a strong cash position of R$4.6 billion. It is also strengthening its balance sheet and liquidity with a private capital increase of, at least, R$1 billion, and at most R$2 billion. This private placement has secured a minimum amount of R$1.0B, to be subscribed by the controlling shareholders and selected financial investors. All shareholders will be able to participate in this transaction. Finally, the Group has also raised a new one-year financing of R$750 million to increase liquidity, with no impact on net debt.

About Natura &Co
Natura &Co is a global, purpose-driven, multi-channel and multi-brand cosmetics group which includes Avon, Natura, The Body Shop and Aesop. Natura &Co posted net revenues of R$ 14.4 billion in 2019 and R$32.9 billion on a proforma basis, including Avon. The four companies that form the group are committed to generating positive economic, social and environmental impact. For 130 years Avon has stood for women: providing innovative, quality beauty products which are primarily sold to women, through women. Founded in 1969, Natura is a Brazilian multinational in the cosmetics and personal care segment, leader in direct sales. Founded in 1976 in Brighton, England, by Anita Roddick, The Body Shop is a global beauty brand that seeks to make a positive difference in the world. The Australian beauty brand Aesop was established in 1987 with a quest to create a range of superlative products for skin, hair and the body.

(Adjusted results exclude effects that are not considered recurring not comparable between the periods under analysis.)

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