03.10.22
Natura & Co.'s net income in the fourth quarter more than tripled and it reached R$1 Billion in the full year despite short-term cost pressure.
The gains reversed a loss in the previous year.
The group's strong focus on cost discipline allowed it to post an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin gain of 90 basis points in the fourth quarter of 2021 despite a slight sales decline in the period.
In the fourth quarter, Natura & Co.'s consolidated net revenue was R$11.6 billion, down 3.0% compared with the prior-year period in Brazilian Reais (-5.3% at constant currency). Adjusted EBITDA margin stood at 13.3%, a gain of 90 basis points, reflecting financial discipline, structural changes primarily at Avon International and the faster-than-expected achievement of synergies, despite strong cost pressure. Net income reached R$695.4 million, an increase of 292.0% over the previous year's R$177.4 million.
In the full year, consolidated net revenue reached R$40.1 billion, up 8.8% in BRL and 3.8% at constant currency, driven by growth in Hispanic markets and at Avon. Digitally-enabled sales, which include online sales (e-commerce and social selling) and relationship selling using our main digital apps, reached 52% of total revenue. Adjusted EBITDA margin was down 110 basis points year-on-year to 10.3%. Net income was R$1 billion, reversing a net loss in the previous year of 650.2 million. The group ended the year with a strong cash position of R$6 billion, and the group has executed about 27% of its share repurchase plan through the end of February 2022.
In the midst of a challenging operating environment, Natura & Co. continued in the quarter to make major advances on key strategic initiatives that will fuel future growth. A key highlight is the progress made on Avon's turnaround, with the implementation of the new commercial model in several key markets, both in Latin America and at Avon International, with positive initial signs, and an acceleration in digital tools. Planned synergies are ahead of plan, with close to 50% of the overall target already achieved at year-end, helping Natura & Co. offset raw material inflation and foreign currency headwinds.
Natura & Co. Donates to Relief Organizations for Ukraine
Natura & Co. Donates to Relief Organizations for Ukraine
In the face of the Ukraine and Russia conflict, Natura & Co. has already made significant donations to relief organizations acting on the ground in Ukraine, mainly the Red Cross, and is also donating products to refugees. Both markets are important for Avon, but represent less than 5% of total revenue for the group. While the company is suspending operations in Russia for The Body Shop and Aesop via its head franchises, Avon is also suspending exports while continuing to support the social selling operations of its representatives via its local plant to provide them with financial support. The group will continue to assess the fluid and dramatic situation in the region.
"At a time when conflict is again impacting millions of people, our thoughts are with our teams in Ukraine and Russia, and with all those who find themselves in harm's way,” said Roberto Marques, executive chairman and group CEO. “The geopolitical situation adds new challenges to our businesses, beyond headwinds in supply chain, rising inflation, new pandemic restrictions and weak consumption in Brazil that has a strong effect on the continuous fiber thermoplastic (CFT) market. However, our focus on costs and continued transformational changes allowed us to significantly expand our EBITDA margin and net income in the fourth quarter of 2021. In the full year, we posted net sales growth and net income above R$ 1 billion, and ended the year with a strong cash position of R$6 billion. This performance reflects the remarkable mobilization of our teams to focus on profitability, but also the strength of our omnichannel model and the depth of the reinvention of the social-selling model through digitally-enabled sales.”
He continued, “At Natura &Co Latam, the Natura brand outperformed the CFT market, with strong growth in Hispanic markets in the fourth quarter that helped offset a tough environment in Brazil. Avon International delivered strong gains in EBITDA margin in Q4 as it accelerates the streamlining of its operating model and benefitted from year-end seasonality. The Body Shop demonstrated its ability to adapt through an enhanced multi-channel offer and the brand's growing appeal. And Aesop continues to post double-digit growth year-after-year, outperforming global luxury brands. As we expect to face continuing challenges especially in the first half of 2022, we are focused on delivering our priorities, implementing even stronger financial discipline to drive sustainable profitable growth this year and beyond.”