Fourth-quarter and full-year 2017 RESULTS MARCH,

Transcription

1 Fourth-quarter and full-year 2017 RESULTS MARCH,

2 DISCLAIMERS This presentation contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of Natura's management. The words "anticipates, wishes, expects, "estimates, intends, "forecasts, "plans, "predicts, "projects, "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties include, but are not limited to, the impact of competitive products and pricing, market acceptance of products, product transitions by the Company and its competitors, regulatory approval, currency fluctuations, production and supply difficulties, changes in product sales mix, and other risks. This presentation also includes pro-forma information prepared by the Company for information and reference purposes only, which has not been audited. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments. 2

3 Natura &Co: A transformational year Creation of a global, multi-brand, multi-channel Group comprising three purpose-driven brands A new corporate identity and governance structure to preserve brand autonomy while leveraging Group scale and know-how Significant achievements in sustainability Solid sales and profitability growth across the board, with net income nearly tripling ex-tbs Natura regaining strong momentum in Brazil on the back of a new Relationship Selling model, focus on key categories and strong online sales. Latam maintains momentum thanks to growing footprint and higher productivity Integration of TBS proceeding smoothly, turnaround underway Aesop growth accelerating, with strong store-network expansion and outstanding-same-store sales 3

4 Key financial highlights: Strong sales and profit growth in the year and quarter Robust increase in consolidated net revenue: +24.5% in the full-year and +62.7% in Q4. On a pro forma basis, revenue growth of 7.2% in the year and 7.8% in the quarter at constant exchange rates Strong improvement in profitability: Consolidated EBITDA up 29.6% in the full-year and up 36.0% in Q4. Consolidated net income up 117.5% in full-year and up 23.0% in Q4. Comparable net income up 183.5% in the year, and up 29.9% in the quarter Full-year free cash-flow generation of R$617.2 million, or R$859.7 million before settlement as part of a tax regularization program in Brazil. On a pro forma basis EBITDA up 9.7% in the year, and down 9.0% in Q4-17 in BRL. Comparable EBITDA was up 3.8% in 2017 and increase of 8.0% in Q4. Net-debt to EBITDA ratio of 3.0, ahead of target of 3.6. _ Pro forma includes TBS s figures, as if they were part of the consolidated accounts in the comparative periods 4

5 Consolidated Financial Performance

6 Solid increase in consolidated net revenue, supported by growth in all businesses (R$ million) th Quarter 24.5% 62.7% 7.2% 7.8% 9, , , , Q4-16 Q4-17 On a pro forma¹ basis, revenue grew by 7.2% in the year, and 7.8% in the 4th quarter Natura grew by a solid 7.8% in the year and 9.0% in the quarter Aesop s 2017 revenues rose 30.3% in the year, and 27.2% in the quarter TBS reported 2.2% growth in the year and 2.1% in Q4 _ 1 Pro forma includes TBS s figures, as if they were part of the consolidated accounts in the comparative periods 2 The performance change (%) for each business individually (Natura, TBS and Aesop) is always commented on a constant exchange rate basis in this report, unless stated otherwise. Natura Aesop The Body Shop Pro forma¹, constant FX 6

7 Robust improvement in EBITDA (R$ million) 1, th Quarter 29.6% 36.0% 9.7% -9.0% 20.1% 17.7% 17.0% 16.8% 1, Q4-16 Q4-17 Consolidated EBITDA up 29.6% in the year and 36.0% in the quarter On a pro forma basis, consolidated growth was 9.7% in the year and -9.0% in Q4 in BRL Comparable EBITDA +3.8% in 2017 and +8.0% in Q4 1 Natura Latam, Aesop and TBS all reported EBITDA increase in the year, on a comparable basis _ 1 Excludes effects that are not considered usual or are not comparable between the periods under analysis Natura Aesop The Body Shop Margin (%NR) Pro forma¹, constant FX 7

8 Strong consolidated net income growth on a comparable basis, in the year and fourth quarter (R$ million) As reported th Quarter 117.5% 23.0% Consolidated net income of R$873.8 million in the year, up 183.5%, before all TBS effects. In the quarter, comparable income grew by 29.9%, to R$271.2 million. Comparable net income 6.8% 8.8% 6.9% 3.7% % 29.9% Q4-16 Q4-17 Net Income Margin (%NR) Q4-16 Q4-17 * See waterfall chart on page 7 of the earnings release 8

9 Solid cash generation and deleveraging ahead of plan (R$ million) th Quarter Free cash flow of R$617.2 million in Before a tax settlement within a tax regularization program in Brazil (PERT), the group generated R$859.7 million in the year. Deleveraging ahead of plan: Net-debt-to-EBITDA ratio of 3.0x, vs guidance of 3.6x Rigorous working capital management, leading to improved operational working capital as a % of net sales, on the back of lower inventories relative to net sales Q4-16 Q4-17 Free Cash Flow Generation (reported) Net Debt / EBITDA ratio PERT disbursement 9

10 Natura s Performance

11 Natura: Top line increase in the year and quarter (R$ million) Natura Natura Brazil Natura Latam th Quarter th Quarter th Quarter 7.8% 9.0% 7, ,9 7, ,7 4.5% 6.5% 5, , ,9 5, % 17.5% 2, ,6 2, ,7 1, , ,6 1, , ,2 2, Q4-16 Q Q4-16 Q Q4-16 Q4-17 Brazil: Market share leadership in core categories, with market share gains since Q2-17 on higher volumes, new Relationship Selling model, improved productivity, greater share-of-wallet and better innovation index. Digital transformation progressing. Latam: Strong 18.0% growth in the year, and +17.5% in Q4 at constant rates, on higher productivity and Direct Sales channel expansion. Average number of Consultants* (thousand) -7.5% -9.6% 1,303 1,206 1,266 1,145 Productivity (R$ by average available Consultant **) 10.8% 15.2% 5,953 6,597 2,589 2,982 Average number of Consultants* (thousand) 7.2% 8.0% Constant exchange rates

12 Natura: EBITDA growth in the year; Stable comparable margin (R$ million) Natura Natura Brazil Natura Latam th Quarter th Quarter th Quarter 23.1% -8.5% 21.8% -14.5% 27.6% 24.2% 17.1% 1, % 19.7% 1, % % 1, % 1, % 18.7% % % % 12.0% Q4-16 Q Q4-16 Q Q4-16 Q4-17 Constant exchange rates EBITDA Margin (%NR) Robust EBITDA growth in the year with higher margin In Q4, investments in preparation for the new expansion cycle resulted in higher expenses. Continuous margin improvement from operational leverage and budget control Stronger performances in Argentina, Mexico and Colombia 12

13 Natura: Notable achievements in sustainability Natura included for the 13th consecutive year in the ISE, the B3 - São Paulo Stock Exchange s Corporate Sustainability Index. Natura elected Company of the Year by 2017 Exame Sustainability Guide, the only company to win this distinction twice. Crer pra Ver reached record high penetration in Brazil: 28.5% of Beauty Consultants engaged in the sales of the Crer Pra Ver product line, whose profits are invested in education programs. 13

14 Natura s 2018 priorities Strengthen the business in Brazil and maintain the healthy momentum in Latam; Continue revitalization of direct selling; Repositioning of the Natura brand; Strategic review of brand architecture; Expansion to developed and developing markets; Omnichannel buying experience. 14

15 Aesop s Performance

16 Aesop: Accelerating sales growth (R$ million) th Quarter Sales up by 30.3% in the year and 27.2% in Q4 30.3% % Outstanding same-store-sales of 14.8% Total of 308 owned retail doors signature stores (+33 since Dec/16) 99 stores-within-department- stores (+14 since Dec/16) New markets: Austria and UAE Q4-16 Q4-17 Constant exchange rates 16

17 Aesop: full-year EBITDA up before one-off and retention plan* (R$ million) th Quarter 19.8% 2.2% 15.7% 29.0% 24.3% 27.5% Comparable EBITDA in the year (excluding inventory one-off adjustment in 2016 of R$8.7 million and acquisition related retention plan) is up by 24.1% Q4-17 EBITDA 24.3% higher than Q4-16, already including exec. retention plan Q4-16 Q4-17 Constant exchange rates *introduced by late 2016 and effective until mid

18 Aesop s 2018 priorities Develop a strong omnichannel presence that provides high levels of customer service; Cash generation to finance expansion and development of back-end capabilities to support the growing business; Continue to build and reinforce culture and develop a strong learning organization; Strengthened social and environmental activities. 18

19 The Body Shop s Performance

20 Further signs of recovery 2.2% Pro forma net sales up 2.2% in the year and 2.1% in the quarter, at constant exchange rates Growth in online sales and franchise Solid growth in North America and APAC Net reduction of 35 owned-stores (75 closures) Net increase of 2 franchised-stores (120 closures) Total stores 3, Constant exchange rates 20

21 EBITDA rise in the year and margin uplift 7.8% 8.3% 7,8% 8,3% EBITDA Margin pp 0.6 pp 0.1 pp -0.5 pp Gross Margin Cost saving Non-recurring Integration saving costs EBITDA Margin 2017 Full-year pro forma EBITDA margin up 0.5pp, to 8.3% In Q4-17, EBITDA margin of 18.0%, impacted by non-recurring separation and integration costs as well as costs linked to the implementation of the first transition program 21

22 TBS 2018 priorities Rejuvenate the brand; Optimize retail operations and strengthen relationship with franchisees; Improve operational efficiency; Enhance the omnichannel experience; Redesign of organizational structure. 22

23 Natura &Co 2018 priorities Roll out the priorities in each brand, backed by: Improved synergies between all three businesses; Financial discipline to bring net-debt-to EBITDA ratio back to pre-acquisition level by 2021; Overall improved profitability. 23

24 THANK YOU. 24