Strong revenue growth at Natura &Co in Q3 driven by all three brands
Acquisition of Avon Products, Inc. approved today by Natura and Avon shareholders; The Body Shop became a B-Corporation
SÃO PAULO, Brazil, Nov. 13, 2019 /PRNewswire/ -- Natura &Co posted another strong performance in the third quarter of 2019, with revenue growth in all three of its brands, Natura, The Body Shop and Aesop.
The group has also taken major steps towards closing the transformational acquisition of Avon Products, Inc., with new milestones reached: Only a few days after CADE, Brazil's anti-trust authority, approved the acquisition without restrictions, Natura and Avon's shareholders today both voted in favor of the transaction at extraordinary shareholders' assemblies. The group remains on track to close the acquisition as planned in the first quarter of 2020, creating the world's fourth-largest pure play beauty group and a leader in Direct-to-Consumer.
The past quarter also saw Natura &Co make new advances in sustainability: Natura's Carbon Neutral Program, which totally offsets the company's carbon emissions, received the 2019 United Nations Global Climate Action Award, the world's most important recognition of initiatives to fight climate change, while The Body Shop joined Natura in becoming a B-Corporation.
Natura &Co's consolidated net revenue reached R$3.5 billion, up 7.2% on a reported basis and up 10.1% at constant currency. Adjusted EBITDA was R$459.3 million and net income was R$68.6 million in Q3, reflecting a planned increase in investments at Natura in digitalization and the brand and non-recurring costs related to the Avon acquisition. In the nine months, net income rose by a healthy 6% to R$176.6 million.
Roberto Marques, Executive Chairman of Natura &Co, declared: "Natura &Co posted a remarkable sales performance in the third quarter, exceeding market expectations, with double-digit growth in constant currency. All our businesses and brands again contributed to growth despite a market that remains challenging in Brazil, where Natura continued to grow market share, and Hong Kong, which impacted The Body Shop and Aesop. Profitability notably reflected two effects that will contribute to strengthening our multi-brand group: A planned, phased increase in investments at Natura in its brand and digital operations to support its future growth, and non-recurring costs associated with the acquisition of Avon Products, Inc. This quarter was also marked by several highlights: Natura celebrated its 50th anniversary and entered a new country, Malaysia, leveraging The Body Shop's market knowledge. The Body Shop joined Natura in being certified as a B-Corp and inaugurated its new store concept in London, reconnecting with its activist heritage. And Aesop, while continuing its expansion, also stepped up its sustainability actions. All these Q3 achievements mark decisive new steps in the building of our multi-brand, multi-channel, purpose-driven group."
The Natura brand's adjusted net revenue in Brazil was up 8.1% in Q3, supported by innovative product launches. Productivity per consultant rose for the 12th consecutive quarter. Natura's digital platform now has 860,000 users in Brazil and online sales grew in double-digits. Latam also saw growth of 10.2% in adjusted net revenue in Brazilian Reais and a stronger 28.8% in constant currency. Argentina posted a strong performance despite a challenging market environment, and Mexico and Colombia also delivered growth.
The Body Shop continues to make headway in its transformation plan. Net revenue was up 1.1% in Reais and 3.8% in constant currency in Q3. Excluding events in Hong Kong, constant-currency growth would have reached 6.4% Like-for-like own-store sales grew 3.1% in the UK, underscoring the brand's attractiveness in its biggest market. Adjusted EBITDA of R$69 million, with margin of 7.4%, reflected the impact of events in Hong Kong. Excluding that impact, adjusted EBITDA margin was up 30 basis points to 8.0%.
Aesop delivered yet another quarter of solid growth. Revenue increased 10.8% in Reais and 10.2% at constant currency. Like-for-like retail sales growth was 9% in the quarter, and Aesop opened four new signature stores in the period, bringing the total to 240. Margin EBITDA was 12%, up 300 basis points.
Natura &Co's net-debt-to-EBITDA ratio stood at 2.98 times in Q3, decreasing from 3.27x in Q3-18. The group is on track to achieve its target of reducing the company's leverage to the pre-The Body Shop acquisition level of 1.4 times by 2021.
About Natura &Co
Resulting from the combination of Natura, Aesop and The Body Shop, Natura &Co consolidates the creation of a global, multi-channel and multi-brand cosmetics group that is driven by purpose. The three companies that form the group are committed to generating positive economic, social and environmental impact. 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.
DISCLAIMER:
NO OFFER OR SOLICITATION
This communication is for informational purposes and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is being made in respect of the proposed transaction involving Natura Holding S.A. (collectively with Natura Cosmeticos S.A., "Natura") and Avon Products, Inc. ("Avon"). In connection with the proposed transaction, Natura will file with the Securities and Exchange Commission ("SEC") a registration statement on Form F-4 that will include a proxy statement of Avon and a prospectus of Natura. Natura and Avon also plan to file other documents with the SEC regarding the proposed transaction and a joint proxy statement/prospectus will be mailed to shareholders of Avon. This communication is not a substitute for any proxy statement, registration statement, proxy statement/prospectus or other documents that Natura and/or Avon may file with the SEC in connection with the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE FORM F-4 AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The Form F-4 and the joint proxy statement/prospectus, as well as other filings containing information about Natura and Avon, will be available without charge at the SEC's Internet site (www.sec.gov). Copies of the joint proxy statement/prospectus can also be obtained, when available, without charge, from Natura's website at www.NaturaeCo.com. Copies of the joint proxy statement/prospectus can be obtained, when available, without charge from Avon's website at www.AvonWorldwide.com.
PARTICIPANTS IN THE SOLICITATION
Natura and Avon, their respective directors, executive officers and other members of their management and employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of proxies in connection with the proposed transaction, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the joint proxy statement/ prospectus and other relevant materials when they are filed with the SEC. Information regarding the directors and executive officers of Natura is contained in Natura's Reference Form for 2018, version 15, which was filed with the Brazilian Securities Commission on April 24, 2019. Information regarding the directors and executive officers of Avon is contained in Avon's definitive proxy statement for its 2019 annual meeting of shareholders, filed with the SEC on April 2, 2019. These documents can be obtained free of charge from the sources indicated above.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
Statements in this communication (or in the documents it incorporates by reference) that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Among other things, these forward looking statements may include statements regarding the proposed transaction involving Natura and Avon; beliefs relating to value creation as a result of a proposed transaction involving Natura and Avon; the expected timetable for completing the transaction; benefits and synergies of the transaction; future opportunities for the combined company; and any other statements regarding Avon's and Natura's future beliefs, expectations, plans, intentions, financial condition or performance. In some cases, words such as "estimate," "project," "forecast," "plan," "believe," "may," "expect," "anticipate," "intend," "planned," "potential," "can," "expectation," "could," "will," "would" and similar expressions, or the negative of those expressions, may identify forward-looking statements. These forward-looking statements are based on Natura's and Avon's expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Natura's and Avon's control. Forward-looking statements in this communication or elsewhere speak only as of the date made. New uncertainties and risks arise from time to time, and it is impossible for Natura or Avon to predict these events or how they may affect Natura or Avon. Therefore, you should not rely on any of these forward-looking statements as predictors of future events. Except as required by law, neither Natura nor Avon has any duty to, and does not intend to, update or revise the forward-looking statements in this communication or elsewhere after the date this communication is issued. In light of these risks and uncertainties, investors should keep in mind that results, events or developments discussed in any forward-looking statement made in this communication may not occur. Uncertainties and risk factors that could affect Natura's and/or Avon's future performance and cause results to differ from the forward-looking statements in this communication include, but are not limited to, (a) the parties' ability to consummate the transaction or satisfy the conditions to the completion of the transaction, including the receipt of shareholder approvals and the receipt of regulatory approvals required for the transaction on the terms expected or on the anticipated schedule; (b) the parties' ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction; (c) the possibility that any of the anticipated benefits of the proposed transaction will not be realized or will not be realized within the expected time period; (d) the risk that integration of Avon's operations with those of Natura will be materially delayed or will be more costly or difficult than expected; (e) the failure of the proposed transaction to close for any other reason; (f) the effect of the announcement of the transaction on customer and consultant relationships and operating results (including, without limitation, difficulties in maintaining relationships with employees or customers); (g) dilution caused by Natura's issuance of additional shares of its common stock in connection with the transaction; (h) the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (i) the diversion of management time on transaction-related issues; (j) the possibility that the intended accounting and tax treatments of the proposed transactions are not achieved; (k) those risks described in Section 4 of Natura's Reference Form for 2018, version 15, which was filed with the Brazilian Securities Commission on April 24, 2019; and (l) those risks described in Item 1A of Avon's most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.
(For purposes of comparison, the results in this press release exclude the IFRS 16 new accounting standard for lease agreements. The reported results, including the impacts of IFRS 16, are disclosed in the company's financial statements. Adjusted results exclude effects that are not considered recurring not comparable between the periods under analysis.)
CONTACT: Brunswick Group, + 55 11 3076-7620, gkivitz@brunswickgroup.com
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