Cosmetics maker Natura&Co estimates it will be able to deliver an improvement in its results this year, after posting a fourth-quarter loss and declining revenue, company executives said on Tuesday.
Shares of the company that owns brands including Natura, Avon, Aesop and The Body Shop were down about 16% around 11:55am, leading losses in Ibovespa, which climbed 0.4%.
“I want to reinforce my total confidence in our path towards recovery of profitability,” said the managing director, Fábio Barbosa, in an English-language conference with analysts.
The executive did not make precise projections, but said the actions the company took over the past year, including overhauling The Body Shop’s presence, adjusting pricing and integrating brand operations, should pay off. fruits in 2023.
The company is focused on improving profit margin before interest, taxes, depreciation, amortization (EBITDA) and cash flow generation in 2023, after ending 2022 with a nearly 24% decline in Adjusted EBITDA and seeing the margin decline from 10.3% to 8.7%.
Company executives said Natura&Co still sees room for product price hikes in some countries. In Latin America, Natura brand revenues increased 17.5% in the fourth quarter year-over-year, while Avon grew 2.2% in the region, driven by the brand’s negative performance outside the Brazil.
Company executives said the Avon brand is having a positive performance in some regions such as the Middle East and Asia Pacific. But in Central Europe the brand suffered from the war in Ukraine, while Western Europe and developed markets posted weaker results.
“Our business in Brazil is doing very well and Avon has improved profitability. In Latin America we are facing headwinds…but the Natura brand has proven itself in the region and the whole restructuring has begun at Avon to improve profitability,” said Barbosa.
Analysts at BTG Pactual viewed Natura&Co’s fourth-quarter results as weak, saying the company’s difficult recovery makes them more cautious of the company. Barbosa mentioned in his comments that 2023 will be another “busy” year.
Luiz Guanais and BTG’s analyst team said in a report to clients that they see high leverage in a high interest rate environment and problems reformulating their Avon operations – in Latin America and abroad – and The Body Shop as the main challenges.
During the conference, Natura&Co executives said the company is “working on its capital structure” but did not provide details on possible future actions.
Natura&Co closed 2022 with net debt of 7.44 billion reais, up almost 25% on the previous year. The leverage measured by Ebitda on net debt increased from 1.52 to 3.49 times.
Source: Terra
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