Natura Cosméticos (NATU3) Q3 2024 earnings summary

Executive summary

• Achieved 18.5% year-over-year sales growth in constant currency, or 11% excluding Argentina, with over 50% recurring EBITDA growth and a 340 basis point margin expansion, driven by operational leverage and innovation.

• Non-cash, non-recurring loss of BRL 7.0 billion from API deconsolidation and Chapter 11 neutralized positive net income from continuing operations, resulting in a consolidated net loss of BRL 6.7 billion.

• Underlying net income reached BRL 524 million, compared to BRL 1,135 million pro forma in Q3-23.

• Celebrated 10 years as a B Corporation, advancing climate transition plans and launching new circular packaging initiatives, including a partnership with Nestlé Nespresso.

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

Financial highlights

• Net revenue rose 18.5% year-over-year in constant currency, with Natura Brazil up 19.4% and Avon Brazil up 14.4%; recurring EBITDA margin expanded to 14.6% (+340 bps YoY).

• Gross margin expanded to 67.3% (+340 bps YoY), driven by operational leverage, improved pricing, and a richer country mix.

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

• Corporate expenses reduced by 43% year-over-year.

• Free cash flow improvement attributed to better working capital, lower interest outflow, and reduced Capex.

Outlook and guidance

• Wave 2 operational integration and margin expansion initiatives are ongoing, with completion in Mexico and Argentina expected by 2025.

• Management remains focused on simplification, channel diversification, digital transformation, and innovation to sustain growth and profitability.