background image
1
São Paulo - October 26, 2005 ­ Natura Cosméticos S.A. (São Paulo Stock Exchange:
NATU3) announces today its results for the third quarter 2005 (3Q05). The financial and
operating information below, except where otherwise indicated, is presented on a
consolidated basis, according to the Brazilian Corporate Law.
FINANCIAL SUMMARY - CONSOLIDATED
In R$ million
3Q05 3Q04
% change
9M05
9M04
% change
Units sold - items for resale (in
millions) - Brazil
1
54.1
43.6
24.1%
148.4
119.9
23.8%
Gross Revenues
809.8
645.7
25.4%
2,214.0
1,738.4
27.4%
Net Revenues
571.4
448.2
27.5%
1,556.2
1,205.9
29.1%
Gross Profit
391.7
306.3
27.9%
1,057.0
809.7
30.5%
Gross margin (%)
68.6%
68.4%
-
67.9%
67.1%
-
Ebitda
2
145.7
104.5
39.4%
369.6
289.0
27.9%
Ebitda margin (%)
25.5%
23.3%
-
23.7%
24.0%
-
Net Income
100.9
77.4
30.4%
258.4
200.9
28.7%
Net margin (%)
17.7%
17.3%
-
16.6%
16.7%
-
Total consultants
3
in Brazil (in
thousands)
475.1
392.1
21.2%
475.1
392.1
21.2%
Total consultants
3
in Latin America
4
(in thousands)
34.0
24.2
40.9%
34.0
24.2
40.9%
(1) Total consolidated number of Cosmetics, Fragrances and Toiletries products resold by consultants. Therefore, units sold exclude samples, gifts,
resale support material, Crer para Ver product, among others.
(2) EBITDA = income from operations before financial effects + non-operating income +depreciation/amortization
(3) Position at the end of the period of the 13
th
sales cycle.
(4) Argentina, Chile, Peru and Mexico.
3Q05 EARNINGS RELEASE
pdfMachine by Broadgun Software - a great PDF writer! - a great PDF creator! - http://www.pdfmachine.com http://www.broadgun.com
background image
2
COSMETICS, FRAGRANCE AND TOILETRIES (CF&T) SECTOR IN BRAZIL ­ NATURA'S
TARGET MARKET FIGURES (8 mos 2005 x 8 mos 2004)
According to data from sector associations Sipatesp/Abhipec
1
the CF&T target market
2
net
revenues grew by 17.1% on an eight-month basis in 2005 compared to the same period of
2004, reaching R$6,081.0 million (8 mos 04: R$5,193.6 million).
Natura's market share of this target market grew by 2.1 percentage points, from 18.9% in the
first eight months of 2004 to 21.0% in the same period of 2005.
(1)
Sipatesp/Abhipec ­ Brazilian Cosmetics, Fragrance and Toiletries Association.
(2)
Target Market: skin care, sunscreen, make-up, perfums, fragrances, hair care, shaving products and deodorants ­ does not include diapers,
nail polishes, sanitary pads, hair dyes and oral hygiene.
CONSOLIDATED GROSS REVENUES
3Q05 consolidated gross revenues were R$809.8 million, up 25.4% over the same period of
2004 (R$645.7 million). In the first nine months of 2005, gross revenues amounted to
R$2,214.0, 27.4% growth compared to the same period last year.
Natura's share in this market continued its consistent growth, as reflected in the previous item
with the CF&T target market figures.
At the end of September 2005, total number of consultants reached 509.1 thousand, up
22.3% Y-o-Y.
COST OF SALES
The cost of sales declined in relation to net revenues from 31.6% in 3Q04 to 31.4% in
3Q05.
Basically, all cost of sales items maintained their percentage over net revenues, in the periods
under comparison, as per the table below:
Composition of Cost of Sales (% of net revenues)
Item
3Q05
3Q04
9M05
9M04
RM/PM*
24.9
25.0
25.4
25.9
Labor
2.7
2.5
2.6
2.5
Depreciation
1.1
1.2
1.1
1.3
Others
2.8
3.0
3.0
3.1
Total
31.4
31.6
32.1
32.9
* Raw material/packaging material.
background image
3
Selling expenses, in relation to net revenues posted a slight reduction from 31.5% in 3Q04
to 31.2% in 3Q05. This reduction was primarily due to (i) decrease in expenses related to the
logistical process, mainly of collecting orders (call center), and the redesign of such process
already shows gains in productivity and (ii) lower marketing expenses, resulting from a
different distribution in media expenses over the previous year.
Administrative expenses in relation to net revenues changed from 14.8% in 3Q04 to 12.9%
in 3Q05. It is worth noting that the administrative expenses of these two quarters are not
entirely comparable, due to the inclusion of some non-recurring entries, both in 3Q04 and
3Q05. If these non-recurring entries had been excluded, administrative expenses would have
risen by 1.2% over 2004, in line with the company's strategy of intensifying its
internationalization and innovation efforts.
In the first nine months, these expenses remained stable representing 13.9% of net revenues
in 2004 and 2005.
EBITDA AND NET INCOME
3Q05 EBITDA amounted to R$145.7 million, up 39.4% compared to 3Q04 (R$104.5 million).
EBITDA margin changed from 23.3% in 3Q04 to 25.5% in 3Q05.
9M05 EBITDA totaled R$369.6 million, 27.9% growth over 9M04 (R$289.0 million). EBITDA
margin posted a slight reduction from 24.0% to 23.7% Y-o-Y.
3Q05 net income totaled R$100.9 million, up 30.4% compared to R$77.4 million posted in
3Q04. Lower net income growth compared to EBITDA growth resulted primarily from the
increase of the average rate of IR/CSLL (income tax/social contribution). This increase in the
average rate of IR/CSLL was mostly due to: (i) the lower proportion of goodwill amortization
on the income tax and social contribution calculation base and (ii) an increase in losses,
generated in the international operations as a result of the opening of new subsidiaries.
INVESTMENTS
Investments in the first nine months amounted to R$83.8 million. In September the third
automatic separation line (picking) was started. After stabilization of this third line, the
separation capacity of orders will rise to roughly 80 thousand orders a day, from 44 thousand
orders a day. R$34.0 million were invested in the acquisition of new machines and shapes.
background image
4
INTERNATIONAL OPERATIONS
Argentina, Chile and Peru
3Q05
3Q04 % change
9M05
9M04
% change
Units sold - items for resale (in
millions)
1.8
1.3
39.2%
4.8
3.2
47.3%
Net revenues
7.3
5.1
44.1%
18.9
12.7
48.9%
Income (loss) from operations
-0.7
-0.6
-
-2.4
-2.1
-
Operating margin
-10.2% -12.5%
-
-12.9% -16.3%
-
Financial Highlights - US$ million (Argentina, Chile and Peru)
Note: Figures shown on the table above do not include Mexico operations. Structuring expenses regarding new operations in
other Latin America countries were excluded (US$ 0.3 million and US$ 0.1 million in 3Q05 and 3Q04, respectively and US$0.7
million and US$ 0.2 million in 9M05 and 9M04, respectively).
3Q05 net revenues from Argentina, Chile and Peru operations grew, in dollars, by 44.1%.
Considering the growth in local currency weighted by the share in dollars of each operation,
the growth reached 36.9% in 3Q05.
The operating loss posted in the quarters under comparison went from US$0.6 million in 3Q04
to US$ 0.7 million in 3Q05. Despite an increase in losses, in absolute terms, the operating
margin improved under the compared periods. It is worth highlighting that the company
continued to invest heavily in the development of new sales sectors and in sales growth.
At the end of September, 2005, the number of consultants in Argentina, Chile and Peru grew
by 38.6%, Y-o-Y.
Other Operations
Operations in Mexico started up on August 1
st
, 2005, therefore do not account for a
significant share of the business yet. However, performance up to the end of 3Q05 is in line
with the company's expectations.
Operations in France are in accordance with the company's expectations, both related to the
store performance and the company's brand building.
background image
5
International Expansion Process
The international expansion process generated net expenses of R$9.9 million in 3Q05 (3Q04:
R$5.4 million). In 9M05 this amount totaled R$28.5 million (9M04:R$9.9 million), with a
highlight for the new operations (France and Mexico). For 2005, total net expenses estimated
for the expansion process is R$41.0 million (2004: R$12.2 million).
CASH FLOW
In the first nine months of 2005, gross cash generation
1
stood at R$327.9 million, 28.7%
higher than that posted in the same period of last year. Of this total, R$50.7 million were
allocated to working capital and to long-term assets and liabilities, in which inventories
represented the great majority.
It is worth highlighting that the balance of inventories at the end of 3Q05 increased by 43.3%
vs. 3Q04, whereas at the end of 2Q05 this increase stood at 71.6% over 2Q04, reflecting an
improvement in the management of this asset. By carrying larger inventories, the company
reduced the percentage of unfulfilled orders, which shows that the policy of adjusting the
dimensions of coverage was correct.
The amount invested in the purchase of property, plant and equipment amounted to R$83.8
million, resulting in a free cash flow
2
of R$193.4 million in the period.
Note 1: (Net income)+ (Adjustments to reconcile net income to net cash provided by operating activities).
Note 2: (Net cash provided by operating activities) ­ (net cash used in investing activities)
background image
6
CONFERENCE CALL & WEBCAST
Portuguese:
Friday ­ October 28, 2005
08:00AM ­ US EST
In Brazil: 11-4613-0501
International: 1-412-858-4600
English:
Friday ­ October 28, 2005
10:00AM ­ US EST
In Brazil: 11-4613-0501
International: 1-412-858-4600
Live webcast will be available at: www.natura.net/investor
background image
7
ANNEX 1 ­ STATEMENT OF INCOME (CONSOLIDATED)
Natura Cosméticos S/A - Consolidated
(in R$ million)
3Q05
%NR
3Q04
%NR
% change
9M05
%NR
9M04
Gross sales to domestic market
786.1
97.1%
628.6
97.4%
25.1%
2,149.0
97.1%
1,688.8
Gross sales to foreign market
23.4
2.9%
16.9
2.6%
38.5%
64.0
2.9%
49.1
Other sales
0.3
0.0%
0.2
0.0%
46.0%
0.9
0.0%
0.5
GROSS OPERATING REVENUES
809.8
100.0%
645.7
100.0%
25.4%
2,214.0
100.0%
1,738.4
Taxes on sales, returns and rebates
(238.4)
-29.4%
(197.5)
-30.6%
20.7%
(657.7)
-29.7%
(532.5)
NET OPERATING REVENUES
571.4
100.0%
448.2
100.0%
27.5%
1,556.2
100.0%
1,205.9
Cost of sales
(179.7)
-31.4%
(141.8)
-31.6%
26.7%
(499.2)
-32.1%
(396.1)
GROSS PROFIT
391.7
68.6%
306.3
68.4%
27.9%
1,057.0
67.9%
809.7
OPERATING (EXPENSES) INCOME
Selling
(178.3)
-31.2%
(141.0)
-31.5%
26.5%
(488.5)
-31.4%
(371.5)
General and administrative
(73.5)
-12.9%
(66.5)
-14.8%
10.7%
(215.7)
-13.9%
(168.0)
Management compensation
(2.5)
-0.4%
(2.2)
-0.5%
12.6%
(6.8)
-0.4%
(6.2)
Othe operating expenses
(2.6)
-0.5%
-
0.0%
n/a
(5.4)
-0.3%
-
INCOME FROM OPERATIONS BEFORE FINANCIAL
EFFECTS
134.8
23.6%
96.7
21.6%
39.4%
340.6
21.9%
264.0
Financial expenses
(12.9)
-2.3%
(9.1)
-2.0%
42.7%
(36.4)
-2.3%
(29.6)
Financial income
13.1
2.3%
10.8
2.4%
21.6%
39.5
2.5%
31.0
INCOME FROM OPERATIONS
134.9
23.6%
98.4
22.0%
37.1%
343.8
22.1%
265.5
Non-operating income
(0.2)
0.0%
(0.9)
-0.2%
-77.7%
(2.4)
-0.2%
(0.8)
INCOME BEFORE DEBENTURES PARTICIPATION
134.7
23.6%
97.5
21.8%
38.2%
341.4
21.9%
264.6
Debentures participation
-
0.0%
-
0.0%
n/a
-
0.0%
(7.2)
INCOME BEFORE TAXES ON INCOME
134.7
23.6%
97.5
21.8%
38.2%
341.4
21.9%
257.5
Income and social contribution taxes
(33.9)
-5.9%
(20.1)
-4.5%
68.4%
(83.0)
-5.3%
(56.6)
NET INCOME BEFORE MINORITY INTEREST
100.9
17.7%
77.4
17.3%
30.4%
258.4
16.6%
200.9
Minority interest
-
0.0%
-
0.0%
n/a
(0.0)
0.0%
-
NET INCOME
100.9
17.7%
77.4
17.3%
30.4%
258.4
16.6%
200.9
Depreciation
11.2
2.0%
8.7
2.0%
27.9%
31.3
2.0%
25.8
Ebitda
145.7
25.5%
104.5
23.3%
39.4%
369.6
23.7%
289.0
%NR
% change
97.1%
27.3%
2.8%
30.3%
0.0%
90.2%
100.0%
27.4%
-30.6%
23.5%
100.0%
29.1%
-32.9%
26.0%
67.1%
30.5%
-30.8%
31.5%
-13.9%
28.3%
-0.5%
10.8%
0.0%
n/a
21.9%
29.0%
-2.5%
23.1%
2.6%
27.5%
22.0%
29.5%
-0.1%
191.1%
21.9%
29.0%
-0.6%
-100.0%
21.4%
32.6%
-4.7%
46.6%
16.7%
28.7%
0.0%
n/a
16.7%
28.7%
2.1%
21.3%
24.0%
27.9%
background image
8
ANNEX 2 ­ BALANCE SHEET (09/30/2005 AND 06/30/2005)
NATURA COSMÉTICOS S/A - R$ million
ASSETS
Sep/05
Jun/05
LIABILITIES
Sep/05
Jun/05
CURRENT ASSETS
CURRENT LIABILITIES
Cash and banks
47.5
33.4
Loans and financing
33.7
36.5
Temporary cash investments
193.2
209.5
Domestic suppliers
77.6
93.1
Trade accounts receivable
238.8
241.9
Foreign suppliers
5.3
9.2
Inventories
182.1
168.7
Payroll and related charges
76.5
54.6
Recoverable taxes
29.6
22.9
Tax payable
76.6
58.9
Advances to employees
7.1
4.8
Dividends
0.3
91.8
Related parties
0.0
0.0
Interest on capital
8.8
11.4
Deferred income and social contribution taxes
26.6
22.1
Freights payable
11.6
10.4
Other receivables
13.0
12.9
Reserve for losses on swap contracts
3.4
3.1
Total current assets
737.7
716.2
Insurance payable
1.8
0.4
Advances to employees
5.9
4.7
LONG-TERM ASSETS
Other payables
33.3
29.3
Receivables from shareholders
0.1
0.2
Total current liabilities
334.7
403.5
Temporary cash investments
3.8
0.0
Deferred income and social contribution taxes
26.6
25.1
LONG-TERM LIABILITIES
Recoverable taxes
8.7
7.2
Loans and financing
150.4
138.6
Escrow deposits
27.7
26.9
Reserve for contingencies
82.6
76.6
Other receivables
0.6
2.1
Other payables
2.9
2.4
Total long-term assets
67.5
61.4
Total long-term liabilities
236.0
217.7
MINORITY INTEREST
0.0
0.0
PERMANENT ASSETS
SHAREHOLDER'S EQUITY
Investments
6.2
7.3
Capital
230.8
230.8
Property, plant and equipment
344.0
327.4
Capital reserves
117.9
116.9
Total permanent assets
350.2
334.7
Profit reserves
93.3
93.3
Retained earnings
144.3
53.7
Treasury shares
(1.5)
(3.5)
Total shareholders' equity
584.8
491.2
TOTAL ASSETS
1,155.4
1,112.4
TOTAL LIABILITIES
1,155.4
1,112.4
background image
9
ANNEX 3 ­ STATEMENT OF CASH FLOW (CONSOLIDATED)
Natura Cosméticos S/A - Consolidated - R$ million
9M05
9M04
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
258.4
200.9
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortisation
31.3
25.8
Monetary and exchange variations, net
1.9
7.6
Reserve for losses on swap and forward transactions
12.0
3.0
Reserve for contingencies
16.6
0.6
Reserve for obsolete inventories
2.0
6.9
Other reserves
9.8
0.0
Deferred income and social contribution taxes
(10.2)
(11.8)
Disposal of permanent assets
6.3
0.8
Debentures participation, net of taxes
0.0
5.7
328.2
239.5
(INCREASE) DECREASE IN ASSETS
Current assets:
Accounts receivable
11.2
(9.2)
Inventories
(62.1)
(53.1)
Other receivables
(1.2)
(1.5)
Long-term assets:
Escrow deposits
(1.6)
(9.0)
Other receivables
(2.7)
(12.0)
Subtotal
(56.3)
(84.8)
INCREASE (DECREASE) IN LIABILITIES
Current liabilities:
Suppliers
(4.6)
20.2
Payroll and related charges
11.1
21.2
Taxes payable
(1.6)
(25.0)
Other payables
(4.5)
(10.0)
Long-term liabilities:
Other payables
1.0
25.6
Subtotal
1.5
31.9
NET CASH PROVIDED BY OPERATING ACTIVITIES
273.4
186.6
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(83.8)
(44.1)
NET CASH USED IN INVESTING ACTIVITIES
(83.8)
(44.1)
CASH FLOW FROM FINANCING ACTIVITIES
(Decrease) Increase in current and long-term loans
47.2
(41.6)
Payment of dividends
(203.8)
(130.0)
Payment of interest on capital
(28.6)
(11.4)
Investment grants
0.1
0.0
Sale of treasury share
4.4
0.0
NET CASH USED IN FINANCING ACTIVITIES
(180.6)
(183.0)
Merger of Natura Empreendimentos S.A. and Natura
Participações S.A., net assets
0.0
43.9
NET INCREASE IN CASH AND BANKS
9.0
3.3
Cash and banks at the beginning of year
231.6
136.1
Cash and banks at the end of year
240.6
139.5
CHANGE IN CASH AND BANKS
9.0
3.3
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Income and social contribution taxes paid
61.0
46.3
Interest on paid on loans and financing
5.2
9.3
Swap and forward contracts paid
14.8
9.2
background image
10
INVESTOR RELATIONS
Phone: 5511-4446-2180
Helmut Bossert,
helmutbossert@natura.net
Manager
Ricardo Capella,
ricardocapella@natura.net
Sandra Matsumoto,
sandramatsumoto@natura.net
Coordinators
This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the
beliefs and expectations of the 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 press release 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.