Natura Cosméticos (NATU3) Q1 2025 earnings summary

Executive summary

• Q1 2025 marked the merger of Natura & Co into Natura Cosméticos, consolidating management and simplifying the corporate structure, with new leadership and a focus on operational transformation.

• Net revenue reached BRL 6.7 billion, up 45.8% year-over-year, driven by strong performance in Latin America, especially from the Natura brand, partially offset by Avon's underperformance.

• Transformation and restructuring initiatives are underway, particularly for Avon International, including a 25% headcount reduction and aggressive cost-cutting.

• ESG initiatives remain a core focus, with recognition for ethical leadership and sustainability, and progress toward 2030 goals.

• Investor feedback has been incorporated into disclosures, with further updates planned for Investor's Day in June.

Financial highlights

• Group revenues reached BRL 6.7 billion in Q1 2025, with consolidated recurring EBITDA margin at 11.8% (down 140 bps YoY), and Latam recurring EBITDA margin improved to 15.0% (up 50 bps YoY).

• Net loss narrowed to BRL 151 million, with recurring EBITDA of BRL 790 million; underlying net income (excluding non-recurring items) was BRL 264 million.

• Free cash flow to firm was negative BRL 531 million, mainly due to working capital and Avon International's cash consumption, while Latam generated BRL 185 million.

• Gross margin in Latam reached 67.1%, up 90 bps year-over-year, supported by Wave 2 rollouts and pricing actions.

• Net debt at quarter-end was BRL 2.9 billion, with a net debt/EBITDA ratio of 1.43x and cash balance of BRL 3.7 billion.

Outlook and guidance

• Wave two implementation in Mexico to complete in Q2 and in Argentina in Q3, with transformation costs for 2025 not exceeding 2024 levels.

• Commitment to expanding recurring margins year-over-year and reducing EBITDA margin volatility across quarters, with strategic investments continuing.

• Restructuring of Avon International ongoing, with significant cost-cutting and job reductions; cash burn expected to decrease significantly by year-end but not reach zero in 2025.

• Efficiencies to be partially reinvested in marketing and strategic projects, aiming for recurring margin expansion in 2025.

• Strategic alternatives for Avon International continue to be explored.