Natura & Co has reported a net loss of R$2.7bn for Q4 2023 as the business continues to “deleverage and simplify its corporate structure”.
The Brazilian beauty brand owner suffered a R$1bn hit to its bottom line “associated with discontinued operations”, as well as an R$664m impairment related to its Avon business.
Natura & Co shedded two global assets last year – Aēsop and The Body Shop – as it turned its focus to Latin America, where it has been integrating the Avon International and Natura brands.
This fourth quarter loss is in stark contrast to the R$890m loss Natura & Co reported in Q4 2022.
The group stated that tax expenses were also higher for the quarter compared to the previous year, given a mix of profitable and unprofitable countries.
Natura & Co's net revenue for the quarter fell 17.4% to R$6.61bn.
Avon International reported a 6.1% decline in revenue for Q4 2023 in constant currency, compared to a “generally stable top-line delivered in the last couple of quarters”, said the company.
It was impacted by portfolio streamlining and adjustments, especially to its Home & Style category, as the group continues to optimise its offering.
However, beauty only showed a small decline at -2.6% for the quarter in constant currency.
Despite the decline, Avon International reported an adjusted Ebitda margin of 11.3%, up 550 basis points year-on-year.
Natura & Co Latam revenues soared 8.5% year-on-year in constant currency thanks to “strong growth” in Latin America.
Natura Brazil was the strongest performer, with sales up 8.6% in Q4 compared to the same period in the previous year.
However, there was a 18.9% decline year-on-year from Avon Hispanic markets (ex-Argentina) amid the business’s Wave 2 roll-out in the region.
"2023 marked a pivotal chapter in the company's history, setting the stage for the ambitious horizons we aim to reach in 2024,” said Fabio Barbosa, Group CEO of Natura & Co.
“Notwithstanding a volatile macro environment in Latin America, we kicked-off Wave 2, our most important strategic project aiming to combine Avon and Natura brands in the region.
“Progress in Brazil, Peru and Colombia is underway, and the lessons learned allowed us to implement a softer integration in Chile in early 2024.”
However, Natura & Co delivered a consolidated net revenue of R$26.7bn for 2023, increasing 3.5% in constant currency but down 8.5% year-on-year in Brazilian reais.
Net income reached R$3bn – up from a net loss of R$2.8bn in 2022 – boosted by the group’s sale of Aēsop to French beauty giant L’Oréal in August 2023.
Proceeds from the $2.8bn deal contributed to the company's end net cash position of R$1.7bn and a reduced debt-to-ebitda ratio of -0.79x – which was 3.5x at the end of 2022.
To further reduce debts and boost its future profitability, Natura & Co also offloaded The Body Shop to Aurelius Group for £207m after several quarters of declining sales.
Barbosa said the company’s strategy to divest non-core assets so it can deliver a “leaner holding structure” is starting to pay off.
“Our simplification agenda has progressed markedly, thanks to the divestments of Aēsop and The Body Shop, which allowed us to pay our debt and end the year with a strong net cash position,” commented Barbosa.
“The positive free cash flow to firm, alongside our much stronger balance sheet, allowed us to start moving to a more optimal capital structure.
“And as a result we are announcing R$979m in dividend payments for this year.”
Natura & Co’s gross margin also expanded 63.8% – up 410 basis points compared to the previous year.
Effective pricing strategies, product mix enhancements, portfolio optimisation and reductions in administrative expenses are cited as key drivers for the growth.
As part of its objective to “simplify operations”, Natura & Co has also confirmed its plans to delist on the New York Stock Exchange (NYSE).
The declining volume of trades in its American Depositary Shares (ADSs) is said to have led to the decision.