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Natura Cosméticos S.A.
Interim Financial Statements for the
Quarter and Nine-Month Period Ended
September 30, 2006 and Independent
Accountants' Review Report





Deloitte Touche Tohmatsu Auditores Independentes
(Convenience Translation into English from the
Original Previously Issued in Portuguese)
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(Convenience Translation into English from the Original Previously Issued in Portuguese)
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Shareholders of
Natura Cosméticos S.A.
São Paulo - SP

1. We have performed a special review of the accompanying interim financial statements of
Natura Cosméticos S.A. and subsidiaries (Company and consolidated), consisting of the
balance sheets as of September 30, 2006, and the related statements of income for the
quarter and nine-month period then ended and the performance report, all expressed in
Brazilian reais and prepared in accordance with Brazilian accounting practices under the
responsibility of the Company's management.
2. We conducted our review in accordance with specific standards established by the Brazilian
Institute of Independent Auditors (IBRACON), together with the Federal Accounting
Council, which consisted principally of: (a) inquiries of and discussions with persons
responsible for the accounting, financial and operating areas as to the criteria adopted in
preparing the interim financial statements, and (b) review of the information and subsequent
events that had or might have had material effects on the financial position and results of
operations of the Company and its subsidiaries.
3. Based on our special review, we are not aware of any material modifications that should be
made to the interim financial statements referred to in paragraph 1 for them to be in
conformity with Brazilian accounting practices and standards established by the Brazilian
Securities Commission (C VM), specifically applicable to the preparation of mandatory
interim financial statements.
4. Our review was conducted for the purpose of issuing a review report on the interim financial
statements referred to in paragraph 1 taken as whole. The individual and consolidated
statements of cash flows, contained in the Attachment, for the nine-month periods ended
September 30, 2006 and 2005 are presented for purposes of additional analysis and are not a
required part of the interim financial statements. Such statements have been subjected to the
review procedures described in paragraph 2 and, based on our review, we are not aware of
any material modifications that should be made to these supplemental statements in order
for them to be fairly presented, in all material respects, in relation to the interim financial
statements for the nine-month periods ended September 30, 2006 and 2005 taken as a
whole.
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Natura Cosméticos S.A.
2
5. We have previously reviewed the individual and consolidated balance sheets as of June 30,
2006, and the statements of income for the quarter and nine-month period ended September
30, 2005, and the supplemental statement of cash flows for the nine-month period ended
September 30, 2005, presented for comparative purposes, and issued unqualified review
reports thereon, dated July 20, 2006 and October 20, 2005, respectively.
6. The accompanying interim financial statements have been translated into English for the
convenience of readers outside Brazil.
São Paulo, October 20, 2006
DELOITTE TOUCHE TOHMATSU
Edimar Facco
Auditores Independentes
Engagement Partner
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(Convenience Translation into English from the Original Previously Issued in Portuguese)
NATURA COSMÉTICOS S.A.
BALANCE SHEETS AS OF SEPTEMBER 30, 2006 AND JUNE 30, 2006
(In thousands of Brazilian reais - R$)
ASSETS
09/2006
06/2006
09/2006
06/2006
LIABILITIES AND SHAREHOLDERS' EQUITY
09/2006
06/2006
09/2006
06/2006
CURRENT ASSETS
CURRENT LIABILITIES
Cash and banks
34,853
33,105
54,331
53,783
Loans and financing (Note 14)
66,354
85,362
95,026
108,028
Cash investments (Note 5)
47,723
179,021
147,397
261,836
Domestic suppliers
38,917
29,008
187,672
136,945
Trade accounts receivable (Note 6)
291,295
272,855
309,492
287,289
Foreign suppliers
-
-
5,053
3,075
Inventories (Note 7)
11,008
952
263,125
184,411
Suppliers - related parties (Note 10)
137,843
106,345
-
-
Recoverable taxes (Note 8)
1,549
567
40,191
28,270
Salaries, profit sharing and related charges, net
37,445
29,405
95,930
73,580
Advances to employees and suppliers
6,001
3,420
9,796
7,733
Taxes payable (Note 15)
67,230
59,746
83,205
73,420
Related parties (Note 10)
7,597
7,088
-
-
Dividends (Notes 10 and 17.c)
58
112,155
58
112,155
Deferred income and social contribution taxes (Note 9.a)
18,675
24,312
26,040
33,249
Accrued freight
13,749
11,715
13,749
11,715
Other receivables
14,318
13,335
26,595
22,607
Sundry accruals
3,415
7,165
3,469
7,330
Total current assets
433,019
534,655
876,967
879,178
Other payables
16,193
16,455
18,108
19,749
Allowance for losses on swap contracts (Notes 20.b and 20.d)
2,283
2,630
2,820
3,886
LONG-TERM ASSETS
Total current liabilities
383,487
459,986
505,090
549,883
Receivables from shareholders (Notes 10.e and 17.b)
21
30
21
30
Advance for future capital increase (Note 10.d)
-
1,037
-
-
LONG-TERM LIABILITIES
Recoverable taxes (Note 8)
2,272
1,630
16,151
10,489
Loans and financing (Note 14)
195
2,275
79,468
78,882
Deferred income and social contribution taxes (Note 9.a)
19,638
19,137
34,389
32,184
Allowance for losses on subsidiaries (Note 11)
4,285
5,207
-
-
Escrow deposits (Note 16)
26,497
25,068
33,345
31,576
Reserves for tax, civil and labor contingencies (Note 16)
59,046
57,460
107,039
100,342
Other receivables
-
-
532
532
Other payables
2,218
2,122
3,842
3,750
Cash investments (Notes 5 and 16.i)
-
-
4,204
4,061
Total long-term liabilities
65,744
67,064
190,349
182,974
Total long-term assets
48,428
46,902
88,642
78,872
MINORITY INTEREST
-
-
4
8
PERMANENT ASSETS
Investments (Note 11)
677,441
556,329
5,669
5,751
SHAREHOLDERS' EQUITY (Note 17)
Property, plant and equipment (Note 12)
26,516
20,544
457,259
398,309
Capital (Note 17.a)
232,738
232,237
232,738
232,237
Total permanent assets
703,957
576,873
462,928
404,060
Capital reserves (Notes 17.b and 17.e)
131,702
128,018
131,702
128,018
Profit reserves (Notes 17.f e 17.g)
372,100
271,649
369,021
269,514
Treasury shares (Note 17.d)
(367)
(524)
(367)
(524)
Total shareholders' equity
736,173
631,380
733,094
629,245
TOTAL LIABILITIES AND
TOTAL ASSETS
1,185,404
1,158,430
1,428,537
1,362,110
SHAREHOLDERS' EQUITY
1,185,404
1,158,430
1,428,537
1,362,110
The accompanying notes and Attachment are an integral part of these interim financial statements.
Company
Consolidated
Company
Consolidated
3
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(Convenience Translation into English from the Original Previously Issued in Portuguese)
NATURA COSMÉTICOS S.A.
STATEMENTS OF INCOME
FOR THE QUARTERS AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
(In thousands of Brazilian reais - R$, except for earnings per share)
Company
Consolidated
7/1/2006 to
7/1/2005 to
1/1/2006 to
1/1/2005 to
7/1/2006 to
7/1/2005 to
1/1/2006 to
1/1/2005 to
30/09/2006
30/09/2005
9/30/2006
30/09/2005
30/09/2006
30/09/2005
9/30/2006
30/09/2005
Gross sales to domestic market
943,340
780,480
2,579,779
2,132,297
950,857
786,129
2,597,945
2,149,001
Gross sales to foreign market
-
-
-
-
34,258
23,415
89,945
64,017
Other sales
-
1
1
1
333
254
1,021
932
GROSS OPERATING REVENUES
943,340
780,481
2,579,780
2,132,298
985,448
809,798
2,688,911
2,213,950
Taxes on sales, returns and rebates
(211,551)
(179,498)
(578,353)
(491,462)
(289,493)
(238,417)
(784,715)
(657,716)
NET OPERATING REVENUES
731,789
600,983
2,001,427
1,640,836
695,955
571,381
1,904,196
1,556,234
Cost of sales
(275,884)
(233,419)
(786,878)
(654,517)
(203,805)
(179,673)
(586,737)
(499,214)
GROSS PROFIT
455,905
367,564
1,214,549
986,319
492,150
391,708
1,317,459
1,057,020
OPERATING (EXPENSES) INCOME
Selling
(208,975)
(152,106)
(528,772)
(413,468)
(228,599)
(180,883)
(605,431)
(491,077)
General and administrative
(103,405)
(78,344)
(301,397)
(244,834)
(92,723)
(69,227)
(264,069)
(210,394)
Management compensation
(3,375)
(1,707)
(7,478)
(5,805)
(4,608)
(4,220)
(10,814)
(9,568)
Equity in subsidiaries (Note 11)
13,063
(2,941)
26,628
(1,802)
-
-
-
-
Other operating expenses, net
2,402
(2,904)
(1,812)
(5,877)
2,402
(2,615)
(1,812)
(5,353)
INCOME FROM OPERATIONS BEFORE FINANCIAL EFFECTS
155,615
129,562
401,718
314,533
168,622
134,763
435,333
340,628
Financial expenses (Note 21)
(3,835)
(4,329)
(10,903)
(7,839)
(7,762)
(12,923)
(26,246)
(36,380)
Financial income (Note 21)
5,654
7,164
23,542
22,232
10,309
13,105
36,055
39,536
INCOME FROM OPERATIONS
157,434
132,397
414,357
328,926
171,169
134,945
445,142
343,784
Nonoperating (expenses) income, net
639
(91)
1,119
(1,154)
587
(208)
1,014
(2,387)
INCOME BEFORE TAXES ON INCOME
158,073
132,306
415,476
327,772
171,756
134,737
446,156
341,397
Income and social contribution taxes (Note 9.b)
(24,053)
(31,239)
(70,286)
(69,085)
(38,678)
(33,853)
(102,172)
(82,959)
NET INCOME BEFORE MINORITY INTEREST
134,020
101,067
345,190
258,687
133,078
100,884
343,984
258,438
Minority interest
-
-
-
-
-
-
(1)
(2)
NET INCOME
134,020
101,067
345,190
258,687
133,078
100,884
343,983
258,436
EARNINGS PER SHARE - R$ (Note 17.a) (*)
0.3140
0.2382
0.8088
0.6100
0.3118
0.2377
0.8059
0.6090
The accompanying notes and Attachment are an integral part of these interim financial statements.
(*) Earnings per share referring to the quarter and nine-month period ended September 2005 was calculated considering the effect of the stock split in March 2006, to allow for comparison with the quarter
and nine-month period ended September 30, 2006.
4
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(Convenience Translation into English from the Original Previously issued in Portuguese)
NATURA COSMÉTICOS S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (COMPANY)
Profit
Treasury
Share
Investment
Legal
retention
Retained
Capital
shares
premium
grants
reserve
reserve
earnings
Total
BALANCES AS OF DECEMBER 31, 2005
230,762
(1,265)
110,459
10,715
18,650
153,939
-
523,260
Sale of treasury shares by exercise of stock options (Note 17.d)
-
76
1,133
-
-
-
-
1,209
Payment of receivables from shareholders (Note 17.b)
-
-
1,998
-
-
-
-
1,998
Tax incentives
-
-
-
631
-
-
-
631
Net income
-
-
-
-
-
-
81,908
81,908
BALANCES AS OF MARCH 31, 2006
230,762
(1,189)
113,590
11,346
18,650
153,939
81,908
609,006
Sale of treasury shares by exercise of stock options (Note 17.d)
-
170
2,629
-
-
-
-
2,799
Payment of receivables from shareholders (Note 17.b)
-
-
56
-
-
-
-
56
Payment of capital
1,475
-
-
-
-
-
-
1,475
Tax incentives
-
-
-
892
-
-
-
892
Net income
-
-
-
-
-
-
129,262
129,262
Dividends - R$0.263 per outstanding shares (Note 17.c)
-
-
-
-
-
-
(112,110)
(112,110)
BALANCES AS OF JUNE 30, 2006
232,237
(1,019)
116,275
12,238
18,650
153,939
99,060
631,380
Sale of treasury shares by exercise of stock options (Note 17.d)
-
159
2,376
-
-
-
-
2,535
Payment of receivables from shareholders (Note 17.b)
-
-
159
-
-
-
-
159
Payment of capital
501
-
-
-
-
-
-
501
Tax incentives
-
-
-
1,147
-
-
-
1,147
Net income
-
-
-
-
-
-
134,020
134,020
Dividends - R$0.079 per outstanding shares (Note 17.c)
-
-
-
-
-
-
(33,569)
(33,569)
BALANCES AS OF SEPTEMBER 30, 2006
232,738
(860)
118,810
13,385
18,650
153,939
199,511
736,173
The accompanying notes and Attachment are an integral part of these interim financial statements.
Capital reserves
FOR THE QUARTERS ENDED MARCH 31, 2006, JUNE 30, 2006 AND SEPTEMBER 30, 2006
(In thousands of Brazilian reais - R$)
Profit reserves
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(Convenience Translation into English from the Original Previously Issued in Portuguese)
NATURA COSMÉTICOS S.A.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED SEPTEMBER 30, 2006 AND JUNE 30, 2006
(Amounts in thousands of Brazilian reais - R$, unless otherwise stated)
1.
OPERATIONS
Natura Cosméticos S.A. (the "Company") and its subsidiaries are engaged in the
development, production, distribution and sale, substantially through direct sales by Natura
beauty consultants, of cosmetics, fragrances, hygiene and health products. The Company
also holds equity interests in other companies in Brazil and abroad.
2.
PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The interim financial statements have been prepared in accordance with Brazilian
accounting practices and standards established by the Brazilian Securities Commission
(CVM).
The terminology and grouping of certain accounts in the statements of income and cash
flows have been changed from the prior year for better classification and presentation. Such
changes included the information related to 2005, in order to allow comparability between
the periods. Please note that such changes did not result in any change in the individual
account balances and total balances, except for the cash flow for the nine-month period
ended September 30, 2005 in which payments of swap and forward contracts were
reclassified from financing activities, changing the disclosed subtotals, although without
affecting the total change in cash and banks.
3.
SIGNIFICANT ACCOUNTING PRACTICES
a)
Results of operations
Determined on the accrual basis of accounting.
b)
Cash investments
Consists of highly liquid temporary investments stated at cost plus income earned
through the balance sheet dates.
c)
Allowance for doubtful accounts
Recognized based on an analysis of risks on realization of receivables, in an amount
considered sufficient to cover possible losses.
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Natura Cosméticos S.A.
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d)
Inventories
Stated at the average cost of acquisition or production, adjusted to market value and for
possible losses, when applicable.
e)
Investments
Investments in subsidiaries are accounted for under the equity method, plus goodwill on
acquisition of investments, as shown in Note 11.
f)
Property, plant and equipment
Recorded at acquisition cost, monetarily restated through December 31, 1995, plus
interest capitalized during the construction period, if applicable. Depreciation is
calculated under the straight-line method, based on the estimated economic useful lives
of the assets, at the rates shown in Note 12.
g)
Deferred charges
Represented by goodwill arising from the merger of shares of Natura Empreendimentos
S.A., into Natura Participações S.A., less the provision for maintenance of dividend
payment capacity, as described in Note 13.
h)
Current and long-term liabilities
Stated at known or estimated amounts, plus, if applicable, interest and monetary and
exchange variations incurred through the balance sheet dates.
i)
Income and social contribution taxes
The provision for income tax was recorded at the rate of 15%, plus a 10% surtax on
annual taxable income exceeding R$240. Social contribution tax was calculated at the
rate of 9% of taxable income. Deferred income and social contribution taxes recorded in
current and long-term assets result from expenses recorded in income, although
temporarily nondeductible for tax purposes. Additionally, deferred income and social
contribution taxes were recorded on tax loss carryforwards.
Pursuant to CVM Resolution No. 273/98 and CVM Instruction No. 371/02, deferred
taxes are recorded at their probable realizable values, as detailed in Note 9.
j)
Loans and financing
Adjusted based on exchange and monetary variations and interest incurred through the
balance sheet dates, as provided for by contract and mentioned in Note 14.
k)
Reserves for tax, civil and labor contingencies
Updated through the balance sheet dates based on the probable amount of loss,
according to their nature and supported by the opinion of the Company's attorneys. The
grounding and nature of the reserves fo r tax, civil and labor contingencies are described
in Note 16.
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Natura Cosméticos S.A.
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l)
Swap and forward contracts
The nominal values of swap and forward contracts are not recorded in the balance sheet.
Unrealized gains or losses on these transactions are recorded on the accrual basis of
accounting, as mentioned in Notes 20.b and 20.d.
m)
Financial income and expenses
Represented by interest and monetary and exchange variations on cash investments,
escrow deposits and loans and financing and swap and forward contracts as mentioned
in Note 21.
n)
Interest on capital
For corporate purposes, interest on capital is accounted for as allocation of income in
shareholders' equity. For tax purposes, interest on capital is treated as financial expense,
reducing the income and social contribution tax basis.
o)
Earnings per share
Calculated based on the number of shares at the balance sheet dates, excluding treasury
shares.
p)
Supplementary information
In order to permit additional analysis, the Company presents as supplementary
information the individual and consolidated statements of cash flows (Attachment).
q)
Use of estimates
The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, reserves for tax,
civil and labor contingencies as of the date of the financial statements, and the reported
amounts of revenues and expenses for the reporting periods. Since management's
judgment involves estimates of the probability of future events, actual results may differ
from the estimates.
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Natura Cosméticos S.A.
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4.
CONSOLIDATION CRITERIA
The consolidated financial statements have been prepared in accordance with the
consolidation principles established by Brazilian accounting practices and regulatory
instructions and resolutions established by the CVM, and include the financial statements of
the Company and its direct and indirect subsidiaries, as follows:
Ownership interest - %
09/2006
06/2006
09/2005
Direct:
Indústria e Comércio de Cosméticos Natura Ltda.
100.00
99.99
99.82
Natura Cosméticos S.A. ­ Chile
99.99
99.99
99.96
Natura Cosméticos S.A. ­ Peru
99.94
99.94
99.93
Natura Cosméticos S.A. ­ Argentina
99.82
99.82
95.00
Natura Brasil Cosmética Ltda. ­ Portugal
98.00
98.00
99.99
Nova Flora Participações Ltda.
100.00
100.00
100.00
Natura Inovação e Tecnologia de Produtos Ltda.
100.00
99.99
99.99
Natura Europa SAS
100.00
100.00
100.00
Natura Cosméticos S.A. - México
100.00
99.99
99.99
Natura Cosméticos C.A. - Venezuela
99.99
99.99
-
Indirect:
Natura Logística e Serviços Ltda.
99.99
99.99
99.99
Flora Medicinal J. Monteiro da Silva Ltda.
100.00
100.00
100.00
Ybios S.A. (proportional consolidation - joint control)
33.33
33.33
33.33
The consolidated financial statements have been prepared based on the financial statements
as of the same date and consistent with the accounting practices described in Note 3.
Investments in subsidiaries were proportionally eliminated against shareholders' equity and
net income of the respective subsidiaries. Intercompany balances and transactions and
unrealized profits were also eliminated. The minority interest in the Company's subsidiaries
was shown separately. The financial statements of foreign subsidiaries were translated into
Brazilian reais at the exchange rates in effect on the date of the related financial statements.
In relation to the nine-month period ended September 30, 2005, the Company resumed
operations of Natura Cosméticos C.A. ­ Venezuela (as of September 30, 2006 in
preoperating phase).
The shareholders' equity balances as of September 30, 2006 and June 30, 2006, reported by
the Company, differ by R$3,079 and R$2,135, respectively, from those recorded in the
consolidated financial statements due to the elimination of unrealized profits of subsidiaries.
For the same reason, net income balances reported by the Company as of September 30,
2006 and 2005 differ by R$1,207 e R$251, respectively, from the balances in the
consolidated financial statements.
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Natura Cosméticos S.A.
10
Net income
Shareholders' equity
09/2006
09/2005 09/2006 06/2006
Company
345,190 258,687 736,173 631,380
Elimination of unrealized profits of the
subsidiary Indústria e Comércio de
Cosméticos Natura Ltda. with other
subsidiaries
(1,207) (251) (3,079) (2,135)
Consolidated
343,983 258,436 733,094 629,245
The operations of the direct and indirect subsidiaries are as follows:
·
Indústria e Comércio de Cosméticos Natura Ltda.: engaged principally in the production
and sale of Natura products to Natura Cosméticos S.A. - Brazil, Natura Cosméticos S.A.
- Chile, Natura Cosméticos S.A. - Peru, Natura Cosméticos S.A. - Argentina, Natura
Cosméticos S.A. - Mexico and Natura Europa SAS, whose amounts are mentioned in
Note 10.
·
Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru, Natura Cosméticos S.A.
- Argentina, Natura Cosméticos C.A. - Venezuela (as of September 30, 2006 in
preoperating phase), Natura Brasil Cosmética Ltda. - Portugal (as of September 30, 2006
in preoperating phase): their activities are an extension of the activities cond ucted by the
parent company Natura Cosméticos S.A. - Brazil.
·
Nova Flora Participações Ltda.: holds equity interest in the subsidiary Flora Medicinal J.
Monteiro da Silva Ltda.
·
Natura Inovação e Tecnologia de Produtos Ltda.: its activities consist of produc t and
technology development and market research.
·
Natura Europa SAS: engaged in the purchase, sale, import, export and distribution of
cosmetics, fragrances in general, hygiene and health products.
·
Natura Cosméticos S.A. - Mexico: engaged in the purchase, sale, import, export,
distribution and storage of cosmetics, fragrances in general, hygiene and health products.
·
Natura Logística e Serviços Ltda.: engaged in the provision of administrative and
logistics services.
·
Flora Medicinal J. Monteiro da Silva Ltda.: engaged in the sale of phytotherapic and
phytocosmetic products of its own brand. As of September 30, 2006 it was dormant.
·
Ybios S.A.: engaged in research, management and development of projects, products and
services in the biotechnology area, and may also enter into agreements and/or
partnerships with universities, foundations, companies, cooperatives, associations, and
other public and private entities; provision of services in the biotechnology area; and
holding of equity interest in other companies.
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Natura Cosméticos S.A.
11
5.
CASH INVESTMENTS
Company
Consolidated
09/2006
06/2006
09/2006
06/2006
Bank certificates of deposit (CDBs)
37,109 168,775 140,987 255,652
Investment funds
10,614
10,246
10,614
10,245
47,723
179,021
151,601
265,897
Long term (Note 16.i)
-
-
4,204
4,061
Current
47,723
179,021
147,397
261,836
As of September 30, 2006, CDBs yield interest rates ranging from 100% to 101.8% (100%
to 109.5% as of June 30, 2006) of the interbank deposit rate (CDI), and the share in the total
investment portfolio is 93.0% (96.2% as of June 30, 2006). Investments funds yield interest
rates ranging from 100.5% to 107.5% of CDI (92.2% to 103.1% as of June 30, 2006).
6.
TRADE ACCOUNTS RECEIVABLE
Company
Consolidated
09/2006 06/2006 09/2006 06/2006
Trade accounts receivable
313,781 294,176 333,551 309,914
Allowance for doubtful accounts
(22,486) (21,321) (24,059) (22,625)
291,295 272,855 309,492 287,289
The changes in the allowance for doubtful accounts for the 3
rd
quarter of 2006 are as
follows:
Company
06/2006
Additions
(*)
Reversals
Write-offs
(**)
09/2006
Allowance for doubtful
accounts
(21,321)
(10,112) 358
8,589
(22,486)
Consolidated
06/2006
Additions
(*)
Reversals
Write-offs
(**)
09/2006
Allowance for doubtful
accounts
(22,625)
(10,381) 358
8,589
(24,059)
(*) Provision recognized according to Note 3.c.
(**) Refers to notes more than 180 days past due, written-off due to non-receipt.
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Natura Cosméticos S.A.
12
7.
INVENTORIES
Company
Consolidated
09/2006
06/2006
09/2006
06/2006
Finished products
10,479
1,111
169,793 120,299
Raw materials and packaging
-
-
74,917
62,681
Promotional material
675
38
23,459
9,842
Work in process
-
-
7,393
7,352
Allowance for losses
(146)
(197)
(12,437)
(15,763)
11,008
952 263,125 184,411
The changes in the allowance for inventory losses for the 3rd quarter of 2006 are as follows:
Company
06/2006
Additions, net
(*)
Write-offs
(**)
09/2006
Total of allowance for inventory
losses
(197)
(279) 330
(146)
Consolidated
06/2006
Additions, net
(*)
Write-offs
(**)
09/2006
Total of allowance for inventory
losses
(15,763)
(2,439) 5,765 (12,437)
(*) Refers mainly to the recognition of the reserve for discontinuance, expiration and
quality losses, according to actual need and the policy established by the Company.
(**) Refers to write-offs of products discarded by the Company.
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Natura Cosméticos S.A.
13
8.
RECOVERABLE TAXES
Company
Consolidated
09/2006 06/2006 09/2006 06/2006
ICMS (state VAT) on purchases of goods
808
2
20,384
10,258
ICMS (state VAT) on purchases of fixed assets
2,452
2,174
15,105
13,305
IVA ­ value-added tax (foreign operations)
-
-
6,765
4,365
COFINS on fixed asset acquisitions
426
-
4,588
-
CSLL (social contribution tax)
-
-
3,223
3,527
IRPJ (corporate income tax)
-
-
2,377
3,933
PIS/COFINS/CSLL ­ withheld at source
-
-
1,405
1,208
PIS on fixed asset acquisitions
92
-
996
-
PIS and COFINS (tax on revenue)
35
13
35
524
Other
8
8
1,464
1,639
3,821
2,197
56,342
38,759
Long-term
2,272
1,630
16,151
10,489
Current
1,549
567
40,191
28,270
The Company and its subsidiaries recorded, as of September 30, 2006, PIS and COFINS
credits on fixed asset acquisitions between January and September 2006, previously
classified in property, plant and equipment. The net effect on property, plant and equipment,
net of depreciation, arising from the recognition of these credits, was a decrease of R$4,795.
ICMS, PIS and COFINS credits on fixed asset acquisitions are offset at the rate of 1/48 per
month, pursuant to rules established in prevailing legislation.
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Natura Cosméticos S.A.
14
9.
INCOME AND SOCIAL CONTRIBUTION TAXES
a)
Deferred
Deferred income (IRPJ) and social contribution (CSLL) taxes recorded in the financial
statements result from temporary differences (Company and subsidiaries) and tax loss
carryforwards (subsidiaries). These credits are recorded in current and long-term assets.
in view of their expected realization based on projections of taxable income, considering
the limit of 30% for annual offset of tax loss carryforwards against taxable income,
pursuant to applicable legislation. The amounts are as follows:
Company
Consolidated
09/2006
06/2006
09/2006
06/2006
Current:
Tax loss carryforwards
-
-
-
40
Temporary differences:
Allowance for doubtful accounts (Note 6)
7,645
7,249
7,645
7,249
Allowance for inventory losses (Note 7)
50
67
4,229
5,359
Allowance for losses on swap and forward
transactions
(Notes 20.b and 20.d)
776
894
959
1,321
Other provisions
10,204
16,102
13,207
19,280
Deferred income and social contribution taxes
18,675
24,312
26,040
33,249
Long-term:
Temporary differences:
Reserves for
tax, civil and labor
contingencies
(Note 16)
18,616
18,077
33,330
31,087
Other provisions
1,022
1,060
1,059
1,097
Deferred income and social contribution taxes
19,638
19,137
34,389
32,184
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Natura Cosméticos S.A.
15
As required by CVM Resolution No. 273/98 and CVM Instruction No. 371/02,
management, based on projections of results, estimates that the recorded tax credits will
be fully realized within five years. The amounts recorded in long-term assets will be
realized as follows:
Consolidated
09/2006
06/2006
2007
24,454
22,466
2008
2,534
2,439
2009
5,713
5,530
2010
1,688
1,749
34,389
32,184
b)
Current expense
Reconciliation of income and social contribution taxes:
Company
Consolidated
09/2006
09/2005
09/2006
09/2005
Income before taxes on income
415,476
327,772
446,156
341,397
Income and social contribution taxes at the rate of
34%
(141,262)
(111,442)
(151,693)
(116,075)
Reversal of provision for maintenance of
dividend payment capacity (Note 13)
37,450
37,450
37,450
37,450
Technological research and innovation benefit ­
Law No. 11.196/2005 (*)
11,756
-
11,756
-
Tax incentives (donations)
1,069
555
1,347
670
Equity in subsidiaries and exchange variation on
translation of foreign investments (Note 11)
8,437
(2,611)
-
-
Permanent differences
(1,367)
(1,067)
(1,845)
(1,225)
Losses generated by subsidiaries
-
-
(12,299)
(11,920)
Interest on capital
11,413
8,069
11,413
8,069
Other
2,218
(39)
1,699
72
Income and social contribution taxes: net
expenses
(70,286)
(69,085)
(102,172)
(82,959)
Income and social contribution taxes: current
(74,516)
(77,583)
(107,260)
(93,186)
Income and social contribution taxes: deferred
4,230
8,498
5,088
10,227
Income and social contribution taxes: net
expenses
(70,286)
(69,085)
(102,172)
(82,959)
Effective rate - %
16,9%
21,1%
22,9%
24,3%
(*) Refers to the tax benefit established by Law No. 11,196/2005. which allows for the
direct deduction in the calculation of taxable income and the social contribution tax basis
from the amount corresponding to 60% of the total expenses on technological research and
innovation, observing the rules established in said law.
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Natura Cosméticos S.A.
16
10.
RELATED PARTIES
Receivables from and payables to related parties are as follows:
Company
Consolidated
09/2006 06/2006 09/2006 06/2006
Current assets:
Related parties:
Natura Logística e Serviços Ltda. (a)
3,729
2,924
-
-
Natura Inovação e Tecnologia de Produtos Ltda. (b)
3,035
3,331
-
-
Nova Flora Participações Ltda. (c)
833
833
-
-
7,597
7,088
-
-
Advance for future capital increase-
Nova Flora Participações Ltda. (d)
- 1,037
-
-
Receivables from shareholders (e)
21 30
21
30
Current liabilities:
Suppliers:
Indústria e Comércio de Cosméticos Natura Ltda. (f) 108,471
81,225
-
-
Natura Logística e Serviços Ltda. (g)
15,218
13,104
-
-
Natura Inovação e Tecnologia de Produtos Ltda. (h)
14,154 12,016
-
-
137,843 106,345
-
-
Dividends payable:
Shareholders
58 112,155
58 112,155
Transactions with related parties are summarized as follows:
Product sales
Product purchases
09/2006
09/2005
09/2006
09/2005
Natura Cosméticos S.A.
-
-
930,786
755,778
Indústria e Comércio de Cosméticos Natura Ltda.
967,394
778,753
-
-
Natura Cosméticos S.A. - Argentina
-
-
16,475
9,104
Natura Cosméticos S.A. - Peru
-
-
10,436
6,790
Natura Cosméticos S.A. - Chile
-
-
6,024
5,131
Natura Cosméticos S.A. - México
-
-
2,910
781
Natura Europa SAS
-
-
323
721
Natura Inovação e Tecnologia de Produtos Ltda.
-
-
440 448
967,394 778,753
967,394
778,753
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Natura Cosméticos S.A.
17
Product sales
Product purchases
09/2006 09/2005 09/2006 09/2005
Administrative structure: (i)
Natura Logística e Serviços Ltda.
181,909
126,592
-
-
Natura Cosméticos S.A.
-
-
128,147
91,340
Indústria e Comércio de Cosméticos Natura Ltda.
-
-
38,430
24,976
Natura Inovação e Tecnologia de Produtos Ltda.
-
-
15,332 10,276
181,909
126,592
181,909 126,592
Product and technology research and development:
(j)
Natura Inovação e Tecnologia de Produtos Ltda.
111,184
82,326
-
-
Natura Cosméticos S.A.
-
-
111,184 82,326
111,184
82,326
111,184 82,326
Lease of properties and common charges: (k)
Indústria e Comércio de Cosméticos Natura Ltda.
4,192
4,191
-
-
Natura Logística e Serviços Ltda.
-
-
2,429
2,428
Natura Inovação e Tecnologia de Produtos Ltda.
-
-
976
976
Natura Cosméticos S.A.
-
-
787
787
4,192
4,191
4,192
4,191
Total service sales and purchases
297,285
213,109
297,285 213,109
(a)
Refers to advances granted for provision of logistics and general administrative
services.
(b)
Refers to advances granted for provision of product and technology development and
market research services.
(c)
Amount receivable due to the capital reduction made on January 30. 2004, approved by
the shareholders' meeting held on the same date.
(d)
Cash contributions to Nova Flora Participações Ltda. mainly for maintenance of
working capital. The capitalization in Nova Flora occurred in August 2006.
(e)
On September 29, 2000, April 30, 2002, December 30, 2002 and January 5, 2004, under
a stock purchase and sale agreement, a financing in the total amount of R$6,174 was
made to two directors of the Company, with interest rate of 3% per year and maturities
between April 30, 2009 and September 30, 2010. This financing was granted to the
directors in order for them to acquire common shares in Natura Empreendimentos S.A.
and Natura Participações S.A. In the corporate restructuring completed in March 2004,
these shares were exchanged for common shares issued by Natura Cosméticos S.A. The
financing, in the amount of R$173 as of September 30, 2006 (R$341 as of June 30,
2006), is amortized with dividends and interest on capital paid by the Company to those
directors, based on the shares acquired by them and which are restricted.
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Natura Cosméticos S.A.
18
(f)
Payables for the purchase of products. Prices and terms are within normal market
conditions.
(g)
Payables for services described in item (i).
(h)
Payables for services described in item (j).
(i)
Logistics and general administrative services.
(j)
Product and technology development and market research services.
(k)
Rental of part of the industrial complex located in Cajamar and buildings located in the
municipality of Itapecerica da Serra.
The main intercompany balances as of September 30, 2006 and June 30, 2006, as well as the
intercompany transactions that affected the results for the period ended September 30, 2006
and 2005 refer to transactions between the Company and its subsidiaries, which were
substantially carried out under usual market conditions for each type of transaction.
11.
INVESTMENTS
Company
Consolidated
09/2006 06/2006
09/2006 06/2006
Investments in subsidiaries
677,441 556,329
-
-
Goodwill on acquisition of investment - Nova
Flora
-
-
8,015
8,015
Amortization of goodwill - Nova Flora
-
-
(8,015)
(8,015)
Goodwill on acquisition of investment - Natura
Europa
-
-
5,669
5,751
677,441 556,329
5,669 5,751
The goodwill on the acquisition made by the subsidiary Nova Flora Participações Ltda. was
fully amortized in 2005, due to the low expectation of profitability from 2006 onwards.
Liabilities related to this subsidiary are properly reflected in the consolidated financial
statements.
The goodwill generated on the purchase of a commercial location where Natura Europa
SAS operates is supported by an appraisal report issued by independent appraisers,
attributable to the fact that it is an intangible, marketable asset, which does not suffer any
decrease in value over time. The balance variation between June 30, 2006 and September
30, 2006 is basically due to the effects of the exchange variation for the quarter.
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Natura Cosméticos S.A.
19
Investments in direct subsidiaries are as follows:
Indústria e
Comércio de
Cosméticos
Natura
Ltda.
Natura
Cosméticos
S.A. -
Chile
Natura
Cosméticos
S.A. - Peru
Natura
Cosméticos
S.A. -
Argentina
Natura
Cosméticos
C.A. -
Venezuela
Nova Flora
Participações
Ltda.
Natura
Inovação e
Tecnologia
de Produtos
Ltda.
Natura
Europa
SAS
Natura
Cosméticos
S.A. - México
Natura Brasil
Cosmética
Ltda. - Portugal
Total
Shares of subsidiaries
526,155
52,194
2,277
10,163
2,842
3,450
5,008
41,913
24,594
111
Number of shares (common shares) held
526,155
52,188
2,276
10,145
2,842
3,450
5,008
41,913
24,594
109
Ownership interest - %
100,00%
99,99%
99,94%
99,82%
99,99%
100,00%
100,00% 100,00%
100,00%
98,00%
Capital
526,155
52,194
2,277
10,163
2,842
3,450
5,008
41,913
24,594
111
668,707
Shareholders' equity of subsidiaries
615,451
3,115
1,787
3,874
439
(4,284)
34,750
11,962
6,071
(1)
673,164
Share in shareholders' equity
615,451
3,115
1,786
3,867
439
(4,284)
34,750
11,962
6,071
(1)
673,156
Net income (loss) of subsidiaries, net of
exchange variation on translation of
foreign investments
21,782
(1,732)
(389)
(2,739)
(1,158)
(114)
5,949
(4,321)
(4,200)
(20)
13,058
Book value of Company's investment:
Balances as of June 30, 2006
500,014
1,732
1,528
4,178
979
-
28,801
12,392
6,682
23
556,329
Equity in subsidiaries
21,782
(1,732)
(389)
(2,734)
(1,158)
(114)
5,949
(4,321)
(4,200)
(20)
13,063
Exchange variation and other
adjustments on translation of foreign
investments
-
355
647
1,131
11
-
-
(15)
277
(4)
2,402
Recognition (reversal) of provision for
losses
-
-
-
-
-
(923)
-
-
-
1
(922)
Capital increase
93,655
2,760
-
1,292
607
1,037
-
3,906
3,312
-
106,569
Balances as of September 30, 2006
615,451
3,115
1,786
3,867
439
-
34,750
11,962
6,071
-
677,441
Provision for losses:
Balances as of June 30, 2006
-
-
-
-
-
(5,207)
-
-
-
-
(5,207)
(Recognition) reversal of provision for
losses
-
-
-
-
-
923
-
-
-
(1)
922
Balances as of September 30, 2006
-
-
-
-
-
(4,284)
-
-
-
(1)
(4,285)
_________
______
______
______
____
________
__ ____
__ _____
___ __
_ ___
_________
Net balances as of September 30, 2006
615,451
3,115
1,786
3,867
439
(4,284)
34,750
11,962
6,071
(1)
673,156
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Natura Cosméticos S.A.
20
12.
PROPERTY, PLANT AND EQUIPMENT
Company
Annual
09/2006
06/2006
depreciation
Accumulated Net book
Accumulated Net book
rate - %
Cost
depreciation value
Cost
depreciation
value
Vehicles
20 to 33
19,811
7,513
12,298
19,913
7,862
12,051
Software
20
6,222
2,728
3,494
5,875
2,413
3,462
IT equipment
20
4,187
2,660
1,527
4,204
2,581
1,623
Furniture and fixtures
10
2,893
1,582
1,311
2,420
1,543
877
Machinery and equipment
10
1,457
276
1,181
1,099
248
851
Leasehold improvements
20 to 33
5,276
258
5,018
1,039
209
830
Advances to suppliers
-
-
-
-
610
-
610
Construction in progress
-
1,687
-
1,687
240
-
240
41,533
15,017
26,516
35,400
14,856
20,544
Consolidated
Annual
09/2006
06/2006
depreciation
Accumulated Net book
Accumulated Net book
rate - %
Cost
depreciation
value
Cost
depreciation
value
Buildings
4
144,144
28,872 115,272 144,144
27,438 116,706
Machinery and equipment
10
165,617
53,612 112,005 149,978
49,845 100,133
Installations
10
69,627
30,956
38,671
69,228
29,086
40,142
Vehicles
20 to 33
29,984
10,337
19,647
29,143
10,431
18,712
Software
20
30,224
12,382
17,842
27,127
11,048
16,079
Molds
33
44,872
28,936
15,936
42,846
26,854
15,992
Land
-
33,662
-
33,662
15,910
-
15,910
IT equipment
20
36,325
18,243
18,082
31,658
17,006
14,652
Furniture and fixtures
10
17,897
5,915
11,982
14,926
5,513
9,413
Leasehold improvements
20 to 33
10,293
790
9,503
5,219
343
4,876
Construction in progress
-
36,536
-
36,536
23,038
-
23,038
Advances to suppliers
-
24,997
-
24,997
19,528
-
19,528
Other
10
6,210
3,086
3,124 6,058
2,930 3,128
650,388
193,129 457,259 578,803
180,494 398,309
13.
DEFERRED CHARGES
On March 5, 2004, Natura Participações S.A. was merged into the Company. Natura
Participações S.A. had recorded goodwill on the investment in Natura Empreendimentos
S.A., amounting to R$1,028,041, and a corresponding provision for maintenance of future
dividend payment capacity in the same amount. This goodwill arose from the merger of the
shares of Natura Empreendimentos S.A. into Natura Participações S.A. on December 27,
2000. This merger was approved by the Extraordinary Shareholders' Meeting held on that
date, and the amounts are supported by a valuation report issued by independent experts.
The amounts are as follows
:
Company
09/2006
06/2006
Goodwill on investments
648,645
685,360
Provision for maintenance of future dividend payment capacity
(648,645) (685,360)
- -
The provision for maintenance of future dividend payment capacity, as it is in the full
amount, will result in the recognition of the goodwill amortization tax benefits for all of the
Company's shareholders. The goodwill amount is being amortized over a seven-year period.
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Natura Cosméticos S.A.
21
14.
LOANS AND FINANCING
Company
Consolidated
Type
09/2006
06/2006
09/2006
06/2006
Maturity
Charges
Guarantees
BNDES - PROGEREN (Support
Program for Enhancing Employment
and Income Capacity)
55,782
74,032
55,782
74,032
June 2007
Interest of 3.5% p.y. + TJLP (long-
term interest rate)
Bank guarantee.
NCE (Export Credit Note)
-
-
35,481
34,218
April 2008
Interest of 104.7% of CDI
Promissory notes and guarantee of
Natura Cosméticos S.A.
FINEP (Financing Agency for Studies
and Projects)
-
-
24,412
27,029
December 2008
Interest of 3.0% p.y. + TJLP
Guarantee. promissory notes and
receivables of Natura Cosméticos
S.A.
BNDES (Brazilian Bank for Economic
and Social Development)
10,767
13,605
24,094
27,885
October 2007 and
April 2010
Interest of 4.0% p.y. and 4.5% p.y.
+ UMBNDES (*) or TJLP (long-
term interest rate)
Mortgage (**) and guarantee of
Indústria e Comércio de
Cosméticos Natura Ltda.
BNDES - FINAME (Government
Agency for Machinery and Equipment
Financing)
-
-
13,789
14,329 July 2006 to March
2011
Interest of 4.5% p.y. + TJLP
Chattel mortgage and guarantee of
Natura Cosméticos S.A. and
promissory notes.
FINEP II (Financing Agency for Studies
and Projects)
-
-
10,924
5,219
March 2013
TJLP (long-term interest rate)
Guarantee of Natura Cosméticos
S.A. and bank guarantee.
ACE (Advances on Export Contracts)
-
-
10,012
-
November de 2006
Interest of 5.4% p.y. + Exchange
Variation
Exports
Secured account
-
-
-
4,198
July 2006
Interest of 106.5% of CDI (***)
Promissory note and guarantee of
Natura Cosméticos S.A.
Total
66,549
87,637
174,494
186,910
Current
66,354
85,362
95,026
108,028
Long term
195
2,275
79,468
78,882
(*)
UMBNDES - BNDES monetary unit
.
(**) Financing in local currency from the BNDES is guaranteed mainly by the Cajamar unit.
(***) CDI - Interbank certificate of deposit
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Natura Cosméticos S.A.
22
Maturities of long-term debt are as follows:
Consolidated
09/2006
06/2006
2007
4,847
11,446
2008
53,911
52,553
2009
9,312
8,092
2010
5,326
3,882
2011
2,738
1,319
2012
2,667
1,272
2013
667
318
79,468
78,882
15.
TAXES PAYABLE
Controladora
Consolidado
09/2006 06/2006 09/2006 06/2006
ICMS (state VAT)
52,413
48,983
52,414
48,988
IRPJ (corporate income tax)
7,943
5,127
11,239
7,177
CSLL (social contribution tax)
3,247
1,916
4,345
2,482
COFINS (tax on revenue)
184
215
3,906
3,730
IRRF (withholding income tax)
1,701
2,024
3,406
3,881
PIS/COFINS/CSLL (Law No. 10,833/03)
1,626
1,385
2,213
1,942
IVA ­ value-added tax (foreign operations)
- -
1,932
1,411
ISS (tax on service)
75
52
859
765
IPI (tax on revenue)
-
-
829
1,108
PIS (tax on revenue)
41
44
823
785
Other
-
- 1,239
1,151
67,230
59,746 83,205
73,420
16.
RESERVES FOR TAX, CIVIL AND LABOR CONTINGENCIES
The Company and its subsidiaries are parties to certain tax. labor and civil lawsuits and to
tax proceedings at the administrative level. Based on the opinion and judgments of its
internal and external attorneys, management believes that the reserves for tax, civil and
labor contingencies are sufficient to cover probable losses.
The total of the reserves for tax, civil and labor contingencies are as follows:
Company
Consolidated
09/2006
06/2006
09/2006
06/2006
Tax
49,083
48,011
90,770
84,715
Labor
4,948
4,774
6,478
6,289
Civil
5,015
4,675
9,791
9,338
59,046
57,460
107,039
100,342
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Natura Cosméticos S.A.
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Tax Contingencies
The reserves for tax contingencies refer to the following lawsuits:
Company

06/2006
Additio
ns
Reversals
Write-
offs
Monetary
restatement
09/2006
PIS (tax on revenue) - semiannual - Decree-laws
No. 2,445/88 and No. 2,449/88 (b)
13,555
-
-
-
358
13,913
Late payment fines on federal taxes paid in arrears
(c)
5,280
-
-
-
156
5,436
Deductibility of CSLL (social contribution tax)
(Law No. 9,316/96) (d)
6,140
-
-
-
105
6,245
Tax assessment - INSS (social security
contribution) (e)
5,200
-
-
-
118
5,318
Monetary restatement of federal taxes
(IRPJ/CSLL/ILL) according to the UFIR (fiscal
reference unit) (f)
4,877
-
-
-
28
4,905
IPI (federal VAT) - tax collection lawsuit (i)
3,975
-
-
-
90
4,065
Assessment notice ­ 1990 corporate income tax (j)
2,577
-
-
-
56
2,633
Attorneys' fees and other
6,407
-
-
-
161
6,568
Total reserve for tax contingencies
48,011
-
-
-
1,072
49,083
Consolidated
06/2006
Additio
ns
Reversals
Write-
offs
Monetary
restatement
09/2006
IPI - zero rate (a)
22,130
4,293
-
-
695
27,118
PIS (tax on revenue) - semiannual - Decree-laws
No. 2,445/88 and No. 2,449/88 (b)
15,178
-
-
-
401
15,579
Late payment fines on federal taxes paid in arrears
(c)
6,278
-
-
-
185
6,463
Deductibility of CSLL (social contribution tax)
(Law No. 9,316/96) (d)
6,140
-
-
-
105
6,245
Tax assessment - INSS (social security
contribution) (e)
5,200
-
-
-
118
5,318
Monetary restatement of federal taxes
(IRPJ/CSLL/ILL) according to the UFIR (fiscal
reference unit) (f)
5,002
-
-
-
28
5,030
IPI tax assessment - attorneys' fees (g)
4,550
-
-
-
17
4,567
IPI credit on purchases of fixed assets and
consumption material (h)
4,557
-
(227)
-
36
4,366
IPI (federal VAT) - tax collection lawsuit (i)
3,975
-
-
-
90
4,065
Assessment notice - 1990 corporate income tax (j)
2,577
-
-
-
56
2,633
Attorneys' fees and other
9,127
-
(50)
-
309
9,386
Total reserve for tax contingencies
84,714
4,293
(277)
-
2,040
90,770
(a)
Refers to IPI tax credits on raw materials and packing materials purchased at a zero tax
rate and with tax exemption. The Company filed for and obtained an injunction granting
entitlement to the credit, which was dismissed on September 25, 2006 due to an invalid
sentence. The Company filed an appeal for rehearing of merit, as well as the injunction.
The additions in the quarter ended September 30, 2006 refer to offset against IPI payable
generated in the same period.
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Natura Cosméticos S.A.
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(b)
Refers to the offset of PIS paid as per Decree-laws No. 2,445/88 and No. 2,449/88, in
the period from 1988 to 1995, against federal taxes due in 2003 and 2004. The appeal
filed by the Company was judged favorably to it on September 12, 2005 by the 1
st
Panel
of the 2
nd
Board of Tax Appeals that, by a majority of the votes, denied the alleged
lapsing of the offset right and unanimously recognized the unconstitutionality of the
Decree-laws determining that the calculation basis should be the billing of the sixth
month prior to the occurrence of the taxable event, without monetary restatement. The
decision was published and a notification was sent. The Federal Revenue Service filed a
special appeal, which is pending judgment at the Superior Chamber of Tax Appeals.
(c)
Refers to the levy of a late payment fine on the payment of federal taxes in arrears,
whose expectation of loss, according to the opinion of the attorneys, was changed to
probable, due to a recent decision by the Superior Court of Justice.
(d)
Refers to CSLL (social contribution tax) that was addressed by a mandate that questions
the constitutionality of Law No. 9,316/96, which prohibited the deduction of CSLL from
its own tax basis and the IRPJ (corporate income tax) basis. A portion of this reserve, in
the amount of R$4,145 (R$4,032 as of June 30, 2006), is deposited in escrow.
(e)
Refers to INSS (social security contribution) required by tax assessments issued by the
National Institute of Social Secur ity as a result of an inspection. The Company, as a
taxpayer having joint liability for tax payment, is required to pay INSS on services
provided by third parties. The amounts are discussed in court through a tax debt
annulment action and are deposited in escrow.
(f)
Refers to the monetary restatement of federal taxes (IRPJ/CSLL/ILL) related to 1991
based on the UFIR (fiscal reference unit), discussed in a mandate. The amount involved
is deposited in escrow.
(g)
Refers to attorneys' fees for the defense in the tax assessment notice issued in November
2005 by the Federal Revenue Service, relating to the tax basis of the IPI (federal VAT)
on intercompany transactions. The attorneys are of the opinion that the likelihood of loss
is remote.
(h)
The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. is discussing through
injunctions the right to the IPI (federal VAT) credit on purchases of fixed assets and
consumption materials. In view of Federal Regional Courts' former decisions, the
attorneys believe that the risk of loss changed to probable. The reversal in the quarter
ended September 30, 2006 refers to the lapse of the period for review begun in July,
August and September 2001.
(i)
Refers to a tax collection lawsuit seeking to collect the IPI (federal VAT) related to July
1989, when wholesale establishments began to be considered equivalent to industrial
establishments under Law No. 7,798/89. The lawsuit is in the Federal Regional Court of
3
rd
Region (SP) for judgment of the appeal filed by the debtor. The amounts invo lved in
this tax collection lawsuit are guaranteed by an affiliate's cash investment in the updated
amount of R$4,204 (R$4,061 as of June 30, 2006).
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Natura Cosméticos S.A.
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(j)
Refers to a tax assessment notice issued by the Federal Revenue Service requiring the
payment of income tax on profit from incentive-based exports made in base year 1989,
at the rate of 18% (Law No. 7,988. of December 29, 1989) and not 3%, as established by
article 1 of Decree-law No. 2,413/88, which supported the Company in its tax payments
at that time.
Labor contingencies
As of September 30, 2006, the Company and its subsidiaries are parties to 327 labor lawsuits
filed by former employees and third parties (255 as of June 30, 2006), claiming the payment
of severance amounts, salary premiums, overtime and othe r amounts due, as a result of joint
liability.
The changes in the reserve for labor contingencies for the 3rd quarter of 2006 are as
follows:
Company
06/2006
Additio
ns
Reversals
Payments
Monetary
restatement
09/2006
Total reserve for labor contingencies
4,774
17 (125)
(7)
289
4,948
Consolidated
06/2006
Additio
ns
Reversals
Payments
Monetary
restatement
09/2006
Total reserve for labor contingencies
6,289
17
(194)
(7)
373
6,478
Civil contingencies
The reserves for civil contingencies refer to the following lawsuits:
Company

06/2006
Additio
ns
Reversals
Payments
Monetary
restatement
09/2006
Several civil lawsuits (a)
2,396
573
(269)
(72)
88
2,716
Civil lawsuits and attorney's fees - Flora
Medicinal (b)
2,279
-
-
-
20
2,299
Total reserve for civil lawsuits
4,675
573
(269)
(72)
108
5,015
Consolidated
06/2006
Additio
ns
Reversals
Payments
Monetary
restatement
09/2006
Several civil lawsuits (a)
2,552
608
(284)
(72)
111
2,915
Civil lawsuits and attorney's fees - Flora
Medicinal (b)
6,786
-
-
-
90
6,876
Total reserve for civil lawsuits
9,338
608
(284)
(72)
201
9,791
(a)
As of September 30, 2006, the Company and its subsidiaries are parties to 1,012 lawsuits
(913 as of June 30, 2006), at the civil court, special civil court and PROCON (Consumer
Protection Agency), filed by beauty consultants, consumers, suppliers and former
employees, mostly related to indemnity claims.
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Natura Cosméticos S.A.
26
(b)
The Company is a party to civil lawsuits filed by a former shareholder of the indirect
subsidiary Flora Medicinal, which seek the determination of any amounts and the
satisfaction of alleged liabilities due to the former shareholder's withdrawal. With the
end of the expert investigation phase in four of the five civil lawsuits, it was possible to
determine the amounts involved, although no decision, even by the lower court, has been
issued.
Escrow deposits
Escrow deposits, which represent the Company's restricted assets, refer to amounts
deposited in court until litigation is resolved. The balance of these deposits as of September
30, 2006 was R$33,345 (R$31,576 as of June, 2006) ­ consolidated, and is classified under
the heading "Escrow deposits", in long-term assets.
The change in escrow deposits, in consolidated, for the 3rd quarter of 2006 is as follows:
06/2006
Additio
ns
Reversals
Write-
offs
Monetary
restatement
09/2006
Tax escrow deposits
28,691
782
(2)
-
616
30,088
Civil escrow deposits
2,885
70
-
-
-
2,955
Labor escrow deposits
-
302
-
-
-
302
Total escrow deposits
31,576
1,154
(2)
-
616
33,345
Possible losses
The Company and its subsidiaries are parties to tax, civil and labor lawsuits, for which the
risk of loss is considered possible by management and its attorneys. These lawsuits, for
which the Company did not record any reserve, are as follows:
Company

06/2006
Additio
ns
Reversals
Write-
offs
Monetary
restatement
09/2006
Tax:
INSS debt annulment action (a)
4,996
-
-
-
114
5,110
Offset of 1/3 of COFINS - Law No. 9,718/98 (b)
4,078
-
-
-
77
4,155
Tax assessment - transfer pricing on loan
agreements with foreign related company (c)
1,295
-
-
-
25
1,320
Other
1,118
1,057
-
-
19
2,194
11,487
1,057
-
-
235
12,779
Civil
3,783
150
(18)
(31)
6
3,890
Labor
8,579
1,757
(189)
(188)
521
10,480
23,849
2,964
(207)
(219)
762
27,149
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Natura Cosméticos S.A.
27
Consolidated
06/2006
Additio
ns
Reversals
Write-
offs
Monetary
restatement
09/2006
Tax:
INSS debt annulment action (a)
4,996
-
-
-
114
5,110
Offset of 1/3 of COFINS - Law No. 9,718/98 (b)
4,078
-
-
-
77
4,155
Tax assessment - transfer pricing on loan
agreements with foreign related company (c)
1,295
-
-
-
25
1,320
Other
1,305
1,057
-
-
20
2,382
11,674
1,057
-
-
236
12,967
Civil
13,951
886
(98)
(395)
12
14,356
Labor
11,525
3,582
(280)
(399)
689
15,117
37,150
5,525
(378)
(794)
937
42,440

(a) Lawsuit filed by the Company seeking the annulment of the tax demanded by the INSS
through a tax assessment notice issued for purposes of collecting the social security
contribution on the allowance for vehicle maintenance paid to sales promoters.

(b) Law No. 9,718/98 increased the COFINS (tax on revenue) rate from 2% to 3%, and
allowed this 1% difference to be offset in 1999 against the social contribution tax paid
in the same year. However, in 1999 the Company and its subsidiaries filed for a
mandate and obtained authorization to suspend the payment of the tax credit (1% rate
difference) and to pay COFINS based on Supplementary Law No. 70/91, prevailing at
that time. In December 2000, considering former unfavorable court decisions, the
Company and its subsidiaries waived the lawsuit and enrolled in the tax debt
refinancing program (REFIS), for payment in installments of the debt related to the
COFINS not paid in the period. With the payment of the tax, the Company and its
subsidiaries gained the right to offset 1% of COFINS against social contribution tax,
which was made in the first half of 2001. However, the Federal Revenue Service
understands that the period for offset was restricted to base year 1999. This lawsuit is
awaiting ruling at the lower administrative court.
(c)
Refers to a tax assessment notice whereby the Federal Revenue Service is demanding the
payment of IRPJ and CSLL on the difference of interest on loan agreements with a
foreign related party. On July 12, 2004, an administrative defense was filed and is still
being judged.
17.
SHAREHOLDERS' EQUITY
a)
Capital social
On March 29, 2006, the Shareholders, at the Extraordinary Shareholders' Meeting,
approved the split of common shares, without par value, issued by the Company. in the
proportion of 5 shares after the split for each existing share. The purpose of this stock
split was to adjust the Company's share price to increase individual investor access to
the securities market, diversify the shareholder composition and increase liquidity of the
Company's shares.
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Natura Cosméticos S.A.
28
Due to this stock split, the subscribed and paid-up capital represented by 85,438,611
common shares without par value as of December 31, 2005 increased to 427,193,055
common shares without par value as of March 31, 2006. Likewise, the balance of
authorized capital represented by 2,823,414 common shares as of December 31, 2005
increased to 14,117,070 common shares as of March 31, 2006.
In May and June 2006, 477,377 common shares were subscribed, and in August and
September, 161,590 common shares, of the 1,702,250 common shares issued, as decided
by the Board of Directors, in a meeting held on February 21, 2006, at an average
contribution price of R$3.09 and R$3.10, respectively, for the exercise of options
granted to the management and employees of the Company and direct and indirect
subsidiaries, participating in the "Addendum to the purchase or subscription option plan
for common shares issued by the Company for calendar year 2003". Accordingly, the
number of subscribed and paid-up common shares went from 427,193,055 as of March
31, 2006, to 427,670,432 common shares as of June 30, 2006, and 427,832,022 common
shares as of September 30, 2006, and authorized capital went from 14,117,070 common
shares to 13,639,693 common shares as of June 30, 2006, and to 13,478,103 common
shares as of September 30, 2006.
As of September 30, 2006, the Company's capital is R$232,738 (R$ 232,237 as of June
30, 2006).
b)
Receivables from shareholders
In 2004, the amount of R$3,029 was reclassified from the heading "Receivables from
shareholders" to the heading "Treasury shares" until it is paid up. Details are disclosed
in Note 10.e.
c)
Dividend payment policy
The shareholders are entitled to receive every year a mandatory minimum dividend of
30% of net income. considering principally the following adjustments:
·
Increase in the amounts resulting from the reversal, in the year, of previously
recognized reserves for contingencies.
·
Decrease in the amounts intended for the recognition, in the year, of the legal reserve
and reserve for contingencies.
The bylaws allow the Company to prepare semiannual and interim balance sheets and
based on these balance sheets authorize the payment of dividends upon approval by the
Board of Directors.
On August 10, 2006, the Company paid dividends in the total amount of R$112,110,
referring to income earned in the first half of 2006 and interest on capital ­ net, in the
amount of R$28,534, referring to the months of November and December 2005 and
January to July 2006, as approved in the Board of Directors' Meeting on July 26, 2006.
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Natura Cosméticos S.A.
29
d)
Treasury shares
As of June 30, 2006, common shares in treasury, after the stock split, as described in
item a) above, which have been used in the exercise of options in the Stock Option
Programs for purchase or subscription of shares, totaled 1,017,587 (1,480,850 as of June
30, 2006), at a unit average cost of R$0.3583 (R$0.3535 as of June 30, 2006).
e)
Share premium
Refers to the goodwill generated on the issuance of 3,299 common shares resulting from
the capitalization of debentures in the amount of R$100,000, held on March 2, 2004.
f)
Profit reserve - legal
Since the balance of the legal reserve plus capital reserves exceeded 30% of the capital,
the Company decided, in accordance with article 193 of corporate law, not to recognize
a legal reserve on net income for 2005.
g)
Reserve for profit retention
As of December 31, 2005, this reserve was recorded in accordance with article 196 of
Law No. 6,404/76 for future investments, in the amount of R$77,915, in the Company.
The withholding referring to 2005 is based on a capital budget, which was approved in
the Annual Shareholders' Meeting held on March 29, 2006.
18.
STOCK OPTION PROGRAM
The Board of Directors meets once a year for the purpose of, pursuant to the terms of the
Program, establishing the Plan, indicating the directors and managers who will receive the
options and the total amount to be paid.
The Plans have a four-year time span for exercising the options, and the exercise rights are
50% at the end of the third year and 50% at the end of the fourth year. The deadline for
exercising options was two years after the end of the fourth year.
The balance of options as of June 30, 2006 is 7,407,150 (8,161,983 as of June 30, 2005) and
is composed by plan as follows:
Number of
call options or
subscription
(in shares)
Amount for the year
updated according to the
IPCA through September
30, 2006 - R$
2002
997,155
5.54
2003
2,742,860
3.10
2004
1,627,960
7.63
2005
941,485
16.38
2006
1,097,690
24.41
7,407,150
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Natura Cosméticos S.A.
30
As of September 30, 2006, had the Company's management opted to record the effects of
the plans based on the intrinsic value of the options (difference between market price as of
September 30, 2006 and the option value updated according to the IPCA) recorded over
their related vesting period, the pro forma consolidated net income for the nine-month
period ended September 30, 2006, would have been R$325,378 (R$252,775 as of
September 30, 2005), as shown below:
Consolidated
09/2006
09/2005
Net income for the period ­ Company
343,983
258,436
Effect of programs considering vesting period
(18,605)
(5,661)
Net income for the period - pro forma
325,378
252,775
The pro forma net income includes all estimated effects for the shareholders arising from
the probable exercise of the options.
As of September 30, 2006, the market price of the Company's shares, after the stock split,
was R$26.69 (R$20.59 as of December 31, 2005, already reflecting the effect of the stock
split occurred on March 29, 2006, to allow comparability between periods).
19.
PENSION PLAN
On August 1, 2004, the Company implemented a supplementary defined contribution plan
for all employees of the Company and its subsidiaries in Brazil. According to the terms of
this plan, the cost is shared between the employer and the employees, so that the Company's
share is equivalent to 60% of the employee's contribution according to a contribution scale
based on salary ranges from 1% to 5% of the employee's compensation. The plan is
managed by Brasilprev Seguros e Previdência S.A. and the Company's contributions for the
nine-month period ended September 30, 2006 totaled R$2,531 (R$2,001 as of September
30, 2005).
20.
FINANCIAL INSTRUMENTS
a) General conditions
The Company and its subsidiaries enter into transactions involving financial instruments,
all recorded in balance sheet accounts, to meet their own needs, and reduce exposure to
market, currency, and interest rate risks. These risks and the respective financial
instruments are managed through the definition of strategies, establishment of control
systems, and determination of exchange exposure limits.
Cash investments are mainly made at negotiated rates of return, since the Company
intends to hold these investments to redemption. These investments reflect market
conditions at the balance sheet dates.
Loans and financing are recorded at the contractual interest rates of each transaction.
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Natura Cosméticos S.A.
31
b) Exchange risk
The Company has entered into swap and forward transactions to hedge against exchange
variation on its liabilities resulting from financing agreements and operating activities.
According to the Company's policy, swap transactions must be contracted for all debts
that may expose the Company to exchange risks. These transactions consist of swaps
between two variable rates: foreign currency and CDI (interbank deposit rate).
As of September 30, 2006 and June 30, 2006, the Company had swap transactions with
financial institutions in the amounts of R$46,652 and R$50,858, respectively. Since
March 2006, the Company has been contracting transactions for imports of equipment,
purchase of inputs pegged to exchange variation, and investments in international
operations, resulting in a liability balance of R$2,820 and R$3,886, respectively,
recorded in current liabilities in consolidated. Foreign exchange exposure is mainly
indexed to the US dollar and the euro.
The Company and its subsidiaries do not use derivative financial instruments for
speculation purposes.
c) Interest rate risk
The Company and its subsidiaries are exposed to fluctuations in the long-term interest
rate (TJLP) due to the financing agreements entered into with the BNDES and FINEP.
d) Fair values
The fair values of cash and banks, temporary cash investments, and accounts receivable
and payable approximate the carrying amounts due to the short-term maturity of these
financial instruments. The fair values of loans and financing substantially approximate
the carrying amounts since these financial instruments have variable interest rates.
Regarding the swap and forward transactions the carrying and fair values are as follows:
Consolidated
09/2006
06/2006
Carrying
value
Fair
value
Carrying
value
Fair
value
Swap transactions
2,820
2,824
3,886
3,505
At the balance sheet dates the Company consults the financial market and updates the
fair value of financial instruments.
e) Credit risk
The Company's sales are made to a large number of beauty consultants. The Company
manages the credit risk through a strict credit granting process.
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Natura Cosméticos S.A.
32
21.
FINANCIAL INCOME, NET
Company
Consolidated
09/2006 09/2005 09/2006 09/2005
Financial income
Interest on cash investments
19,585
17,769
28,416
25,611
Gains on monetary and exchange variations
2,453
3,328
4,327
11546
Interest earned
23
144
699
944
Discounts obtained
1
4
647
119
Gains on swap and forward transactions
395
-
395
-
Other financial income
1,085
987
1,571
1,316
23,542
22,232
36,055
39,536
Financial expenses
Interest on financing
(5,816)
(3,722) (14,006)
(9,737)
Losses on monetary and exchange variations
(3,000)
(1,389)
(6,251)
(7,902)
Losses on swap and forward transactions
(1,222)
(1,183)
(3,212) (12,207)
Other financial expenses
(865)
(1,545) (2,777) (6,534)
(10,903)
(7,839) (26,246) (36,380)
Total financial income, net
12,639
14,393 9,809 3,156


22.
INSURANCE
The Company and its subsidiaries contract insurance based principally on risk concentration
and significance, at amounts considered by management to be sufficient, taking into
consideration the nature of its activities and the opinion of its insurance advisors. As of
September 30, 2006, the insurance coverage was as follows:
Items
Coverage
Insured
amount
Industrial complex/inventories
Any material damages to buildings,
installations and machinery and equipment
578,397
Vehicles
Fire, theft and collision for 1.344 vehicles
40,172
Loss of profits
Nonrealization of profits arising from
material damages to installations, buildings
and production machinery and equipment
797,981
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(Convenience Translation into English from the Original Previously Issued in Portuguese)
ATTACHMENT
NATURA COSMÉTICOS S.A.
STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005
(In thousands of Brazilian reais - R$)
09/2006
09/2005
09/2006
09/2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
345,190
258,687
343,983
258,436
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (Notes 12 and 13)
4,702
3,454
40,882
31,321
Monetary and exchange variations, net
6,740
6,606
13,052
2,969
Reserve for losses on swap and forward contracts (Notes 20.b and 20.d)
1,222
1,183
3,211
12,049
Reserves for tax, civil and labor contingencies (Note 16)
5,728
12,552
8,857
23,074
Allowance for inventory losses (Note 7)
146
-
(3,902)
1,995
Sundry accruals
-
1,309
-
2,299
Deferred income and social contribution taxes (Note 9.a)
(4,230)
(8,499)
(5,348)
(10,226)
Proceeds from sale and disposal of permanent assets
719
1,157
1,702
6,256
Equity in subsidiaries (Note 11)
(26,628)
1,802
-
-
Minority interest
-
-
(3)
-
333,589
278,251
402,434
328,173
(INCREASE) DECREASE IN ASSETS
Current assets:
Accounts receivable (Note 6)
11,393
9,765
6,773
11,249
Inventories (Note 7)
(10,319)
672
(106,916)
(62,091)
Other receivables
(8,878)
(6,685)
(8,027)
(7,370)
Long-term assets:
Escrow deposits (Note 16)
(1,209)
(432)
(1,710)
(1,574)
Recoverable taxes (Note 8)
(840)
(612)
(6,577)
(4,847)
Other receivables
1,159
(3,981)
(91)
(2,656)
Subtotal
(8,694)
(1,273)
(116,548)
(67,289)
INCREASE (DECREASE) IN LIABILITIES
Current liabilities:
Suppliers
14,422
(7,635)
40,531
1,234
Salaries, profit sharing and related charges, net
4,683
5,943
18,344
7,828
Taxes payable, net (Notes 8 and 15)
(9,347)
16,216
(25,840)
3,277
Other payables
(1,867)
11,524
(323)
13,941
Long-term liabilities:
Other payables
414
-
8,195
1,037
Subtotal
8,305
26,048
40,907
27,317
NET CASH PROVIDED BY OPERATING ACTIVITIES
333,200
303,026
326,793
288,201
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (Note 12)
(14,994)
(8,807)
(134,872)
(83,788)
Investments (Note 11)
(135,613)
(139,299)
-
-
NET CASH USED IN INVESTING ACTIVITIES
(150,607)
(148,106)
(134,872)
(83,788)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans (Note 14)
(29,353)
(12,663)
(76,142)
(173,070)
Fundings - long-term loans (Note 14)
-
68,159
47,592
220,319
Payments of swap and forward contracts (Notes 20.b and 20.d)
(1,642)
(2,367)
(3,094)
(14,794)
Payment of dividends (Note 17.c)
(307,121)
(203,818)
(307,121)
(203,818)
Payment of interest on capital (Note 17.c)
(51,268)
(28,559)
(51,268)
(28,559)
Payment of capital (Note 17.a)
1,976
-
1,976
-
Other
2,669
141
2,669
141
Sale of treasury shares by exercise of stock options (Note 17.d)
6,543
2,159
6,543
2,159
Payment of receivables from shareholders (Note 17.b)
2,213
2,233
2,213
2,233
NET CASH USED IN FINANCING ACTIVITIES
(375,983)
(174,715)
(376,632)
(195,389)
NET (DECREASE) INCREASE IN CASH AND BANKS
(193,390)
(19,795)
(184,711)
9,024
Cash and banks at beginning of period
275,966
185,287
386,439
231,612
Cash and banks at end of period
82,576
165,492
201,728
240,636
CHANGE IN CASH AND BANKS
(193,390)
(19,795)
(184,711)
9,024
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income and social contribution taxes paid (Note 9)
71,753
55,743
91,039
60,995
Consolidated
Company
33
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34
>
FINANCIAL SUMMARY - CONSOLIDATED
3Q06
3Q05
%
Change
Units sold ­ items for resale
(in millions) ­ Brazil
1
60.9
54.1
12.6%
Gross Revenues
985.4
809.8
21.7%
Net Revenues
696.0
571.4
21.8%
Gross Profit
492.1
391.7
25.6%
Gross Margin (%)
70.7%
68.6%
-
Ebitda
2
183.3
145.7
25.8%
Ebitda Margin (%)
26.3%
25.5%
-
Net Income
133.1
100.9
31.9%
Net Margin (%)
19.1%
17.7%
-
Total consultants
3
in Brazil
(in thousands)
546.7
475.1
15.1%
Total consultants in Latin America
4
50.2
34.6
44.9%
>
Financial Summary ­ Consolidated (R$ million)
(in thousands)
9M05
148.4
2,214.0
1,556.2
1,057.0
67.9%
369.6
23.7%
258.4
16.6%
9M06
169.2
2,688.9
1,904.2
1,317.5
69.2%
476.9
25.0%
344.0
18.1%
%
Change
14.0%
21.5%
22.4%
24.6%
-
29.1%
-
33.1%
-
546.7
475.1
15.1%
50.2
34.6
44.9%
3Q06
3Q05
%
Change
Units sold ­ items for resale
(in millions) ­ Brazil
1
60.9
54.1
12.6%
Gross Revenues
985.4
809.8
21.7%
Net Revenues
696.0
571.4
21.8%
Gross Profit
492.1
391.7
25.6%
Gross Margin (%)
70.7%
68.6%
-
Ebitda
2
183.3
145.7
25.8%
Ebitda Margin (%)
26.3%
25.5%
-
Net Income
133.1
100.9
31.9%
Net Margin (%)
19.1%
17.7%
-
Total consultants
3
in Brazil
(in thousands)
546.7
475.1
15.1%
Total consultants in Latin America
4
50.2
34.6
44.9%
>
Financial Summary ­ Consolidated (R$ million)
(in thousands)
9M05
148.4
2,214.0
1,556.2
1,057.0
67.9%
369.6
23.7%
258.4
16.6%
9M06
169.2
2,688.9
1,904.2
1,317.5
69.2%
476.9
25.0%
344.0
18.1%
%
Change
14.0%
21.5%
22.4%
24.6%
-
29.1%
-
33.1%
-
546.7
475.1
15.1%
50.2
34.6
44.9%
(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 products, among others.
(2) EBITDA = income from operations before financial effects + non-operating income + depreciation and amortization.
(3) Position at the end of the 13
th
sales cycle period.
(4) Consultants in Argentina, Peru, Chile and Mexico at the end of the 12
th
sales cycle period.
>
HIGHLIGHTS
- Inclusion of Natura's shares in the Bovespa Index - Ibovespa ­ Since September 2006,
Natura's shares (NATU3) have been included in Ibovespa Theoretical Portfolio.
3Q06 EARNINGS RELEASE
background image
35
- Casa Natura Campinas ­ The first "Casa Natura" in Brazil was opened in September 2006, in
the city of Campinas, State of São Paulo, reflecting the "Casa Natura" located in the City of
Mexico. Built to put together and strengthen the relationship among Natura, its sales force,
consultants, consumers and the community, the "Casa Natura" will be a place for the expression of
the brand and as well as its beliefs.

- Direct Sales Model and Laboratory in Paris-France
­ The operation in Paris, city where a
flagship store has been operating since April 2005, will also have, as of this October, a research
laboratory, whose main objective will be the maintenance of a close relation with the development
of new technologies in the European cosmetics industry.

Additionally, in October 2006, as part of a continuous learning process, we introduced the direct
sales model in France. This model will have a different format compared to the one adopted in other
countries. It will count on the strong technological support of the Internet improving the
relationship between the consultants and Natura and, also, between the consultants their clients,
with the possibility of direct delivery to final consumers.

- International Consultants ­ At the end of September 2006, we surpassed 50 thousand
consultants outside Brazil (Argentina, Peru, Chile and Mexico).
>
COSMETICS, FRAGRANCE AND TOILETRIES (CF&T) SECTOR IN BRAZIL -
NATURA'S TARGET MARKET FIGURES (6M06X6M05)
According to information of Sipatesp/Abhipec
1
, the nominal growth of the target market was
12.1% for the period comprising January up to June 2006, in comparison with the same
period of 2005. In real terms, excluding the 4.0% IPCA (Amplified Cons umer Price Index) for
the period, the growth reached 7.8%.

It is important to highlight that target market growth rates have been systematically
increasing bimonthly (1B: 9.0%; 2B: 11.6% and 3B: 14.3%) during 2006.

The table below shows the breakdown of the target market
2
in two segments: Cosmetics and
Fragrances, and Toiletries, and Natura's market share in these segments.
background image
36
Target Market (R$ million)
Natura's Market Share (%)
6M05
6M06
% growth
6M05
6M06
% points
percentage
Cosmetics & Fragrances
2,132
1,821
17.1
36.2%
38.5%
2.3
Personal Hygiene
2,656
2,889
8.8
10.3%
11.2%
0.9
Total
5,020
4,477
12.1
20.8%
22.8%
2.0
>
CF&T Target Market Net Revenues Breakdown and Natura's Market Share in Brazil
Source: Sipatesp/Abhipec
Target Market (R$ million)
Natura's Market Share (%)
6M05
6M06
% growth
6M05
6M06
% points
percentage
Cosmetics & Fragrances
2,132
1,821
17.1
36.2%
38.5%
2.3
Personal Hygiene
2,656
2,889
8.8
10.3%
11.2%
0.9
Total
5,020
4,477
12.1
20.8%
22.8%
2.0
>
CF&T Target Market Net Revenues Breakdown and Natura's Market Share in Brazil
Source: Sipatesp/Abhipec
Natura increased its market share in the target market in 2.0 p.p., from 20.8% in 6M05 to 22.8% in
6M06.
(1) Sipatesp/Abhipec ­ Brazilian Association of the Cosmetic, Toiletry & Fragrance Industry
(2) Target Market ­ Cosmetics and Fragrances (Skincare, Make up, Fragrances and Sun Protection) and Toiletries (Soaps, Hair care,
Deodorants and Shaving products)
>
CONSOLIDATED GROSS REVENUES
Natura's 3Q06 gross revenues were R$985.4 million, up 21.7% over the same period 2005
(R$809.8 million). In 9M06, consolidated gross revenues were R$2,688.9 million, a growth of
21.5% when compared to the same period of 2005 (9M05: R$2,214.0 million).

By the end of 3Q06, the consolidated number of consultants reached 596.9 thousand, a growth of
17.1% over the same period of previous year.
>
COST & EXPENSES
The Cost of goods sold (COGS) went from 31.4% of the net revenue in 3Q05 to 29.3% in 3Q06.
The main drivers that contributed to such decrease were: (i) average readjustment of raw materials
and packing material prices practically null in the 3Q05-3Q06 period, primarily due to the
appreciation of the Brazilian real in relation to the US dollar; (ii) smaller volume of losses caused
by both discontinuance and validity of products in 3Q06; and (iii) low mix effect.
background image
37
Item
3Q06
3Q05
RM/PM*
22.0
24.9
Labor
2.8
2.7
Depreciation
1.1
1.1
Others
3.3
2.8
Total
29.3
31.4
>
Composition of Cost of Goods Sold (% Net Revenues)
*
Raw material and packaging material
9M06
9M05
23.7
25.4
2.9
2.6
1.2
1.1
3.0
3.0
30.8
32.1
Item
3Q06
3Q05
RM/PM*
22.0
24.9
Labor
2.8
2.7
Depreciation
1.1
1.1
Others
3.3
2.8
Total
29.3
31.4
>
Composition of Cost of Goods Sold (% Net Revenues)
*
Raw material and packaging material
9M06
9M05
23.7
25.4
2.9
2.6
1.2
1.1
3.0
3.0
30.8
32.1
In 9M06, COGS also declined from 32.1% in 9M05 to 30.8% in 9M06. The reasons for that
reduction are the same presented above.

Selling expenses increased from 31.6% in 3Q05 to 32.9% in 3Q06 in relation to net revenue. This
1.2 p.p. growth was primarily focused on marketing and international operations expenses. On the
other hand, logistics expenses maintained their downward trend in the quarter.

In 9M06, selling expenses remained practically stable, slightly increasing from 31.6% in 9M05 to
31.8% in 9M06. The gains provided by logistics expenses reduction were offset by the growth in
marketing expenses occurred in 9M06.

Administra tive expenses rose from 12.1% in 3Q05 to 13.3% in 3Q06 in relation to net revenue.
The 1.2 p.p. increase derived from both the growth of the management structure to support the
internationalization process and the increase of expenses with research and development of new
products.

In 9M06, administrative expenses increased from 13.5% in 9M05 to 13.9% in 9M06. This slight
increase mainly occurred due to the intensification of IT expenses.
>
EBITDA AND NET INCOME
3Q06 EBITDA amounted to R$183.3 million, up 25.8% compared to 3Q05 (R$145.7 million).
EBITDA margin climbed from 25.5% to 26.3% in 3Q06. In 9M06, EBITDA reached R$476.9
million, up 29.1% compared to 9M05 (R$369.6 million). EBITDA margin increased from 23.7% in
9M05 to 25.0% in 9M06.
background image
38

3Q06 Net Income posted a 31.9% growth, from R$100.9 million in 3Q05 to R$133.1 million in
3Q06. Net margin also increased, from 17.7% in 3Q05 to 19.1% in 3Q06. In 9M06, net income
amounted to R$344.0 million, up 33.1% over the same period last year. Net margin grew from
16.6% in 9M05 to 18.1% in 9M06.
>
CAPEX (FIXED ASSETS)
9M06 capital expenditures (CAPEX) totaled R$134.9 million, mainly allocated to the amplification
of the production capacity (machinery and equipment), IT and to the new Research & Development
Center, as planned. For the whole year, we maintain an estimated CAPEX of R$210 million.
>
RESULTS BY AREAS OF OPERATION
Aiming to better compare the financial performance of the operations in Brazil and in other
countries, as of this quarter we will present the results divided into three areas of operation:
-
Brazil;
-
Operations under consolidation ­ consolidated results of operations in Argentina, Peru and
Chile; and
-
Operations under implementation ­ consolidated results of operations in Mexico, Venezuela
and France.

The table below shows the gross revenue breakdown in 9M06 for the three areas of operation.
Brazil
(1)
Argentina, Chile and Peru
Mexico, Venezuela and France
Total
>
Gross Revenues by Areas of Operation
9M06
%
2,601.0
96.73
81.3
3.02
6.6
0.25
2,688.9
100.0
Brazil
(1)
Argentina, Chile and Peru
Mexico, Venezuela and France
Total
>
Gross Revenues by Areas of Operation
9M06
%
2,601.0
96.73
81.3
3.02
6.6
0.25
2,688.9
100.0




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39
>>
Brazil
3Q06
3Q05
Units sold ­ items for resale
(in millions)
60.9
54.1
12.6%
Net Revenues
(2)
Ebitda
(2)
Ebitda Margin
>
Financial Highlights ­ Brazil (R$ million)
Gross Revenues
(2)
951.5
786.8
20.9%
9M05
9M06
169.2
148.4
14.0%
2,601.0
2,151.9
20.9%
192.9
151.0
27.7%
503.2
391.4
28.5%
28.8%
27.3%
27.4%
26.0%
Total Consultants
(1)
546.7
475.1
15.1%
546.7
475.1
15.1%
(1)
Position at the end of the 13
th
sales cycle period.
(2)
Brasil Revenues and Ebitda pró-forma, exclude transactions with the subsidiaries abroad (gross revenues and COGS).
669.8
553.5
21.0%
1,836.1
1,508.2
21.7%
%
Change
%
Change
3Q06
3Q05
Units sold ­ items for resale
(in millions)
60.9
54.1
12.6%
Net Revenues
(2)
Ebitda
(2)
Ebitda Margin
>
Financial Highlights ­ Brazil (R$ million)
Gross Revenues
(2)
951.5
786.8
20.9%
9M05
9M06
169.2
148.4
14.0%
2,601.0
2,151.9
20.9%
192.9
151.0
27.7%
503.2
391.4
28.5%
28.8%
27.3%
27.4%
26.0%
Total Consultants
(1)
546.7
475.1
15.1%
546.7
475.1
15.1%
(1)
Position at the end of the 13
th
sales cycle period.
(2)
Brasil Revenues and Ebitda pró-forma, exclude transactions with the subsidiaries abroad (gross revenues and COGS).
669.8
553.5
21.0%
1,836.1
1,508.2
21.7%
%
Change
%
Change
The sales channel in Brazil posted a 15.1% growth, from 475.1 thousand consultants at the end of
3Q05 to 546.7 thousand at the end of 3Q06. Taking into account the active consultants, a 15.8%
average growth was registered in the same period. In 3Q06, productivity by active consultant in
Brazil reached R$3,087.00
(1)
, a 4.1% growth compared to 3Q05.
(1) Estimated consultants' sales at final prices to consumers.
>>
Operations under consolidation - Argentina, Chile and Peru
3Q06
3Q05
Units sold ­ items for resale
(in millions)
Net Revenues
Ebitda
Ebitda Margin
>
Financial Highlights ­ Argentina, Chile and Peru (US$ million)
Gross Revenues
9M05
9M06
Total Consultants
(1)
(1)
Position at the end of the 12
th
sales cycle period
3.0
1.8
66.9%
10.9
7.3
48.6%
14.3
9.5
50.1%
-1.2
-1.0
12.9%
-10.7%
-14.0%
45.9
34.0
34.9%
7.5
4.8
57.1%
28.5
18.9
50.8%
37.3
24.6
51.7%
-3.4
-3.1
11.6%
-12.0% -16.2%
45.9
34.0
34.9%
%
Change
%
Change
3Q06
3Q05
Units sold ­ items for resale
(in millions)
Net Revenues
Ebitda
Ebitda Margin
>
Financial Highlights ­ Argentina, Chile and Peru (US$ million)
Gross Revenues
9M05
9M06
Total Consultants
(1)
(1)
Position at the end of the 12
th
sales cycle period
3.0
1.8
66.9%
10.9
7.3
48.6%
14.3
9.5
50.1%
-1.2
-1.0
12.9%
-10.7%
-14.0%
45.9
34.0
34.9%
7.5
4.8
57.1%
28.5
18.9
50.8%
37.3
24.6
51.7%
-3.4
-3.1
11.6%
-12.0% -16.2%
45.9
34.0
34.9%
%
Change
%
Change
background image
40
The growth pace of operations in Argentina, Chile and Peru is still strong, as evidenced by gross
revenue evolution (growth of 50.1% in US dollar in the quarter and 53.9% in weighted local
currency).

A 34.9% growth in the total number of consultants was registered, increasing from 34.0 thousand at
the end of September 2005 to 45.9 thousand in September 2006. Average active consultants posted
a 43.7%-growth when comparing both periods. Productivity by average active consultant was
US$720.6 in 3Q06, 4.5% superior to 3Q05. In weighted local currency, productivity
(1)
posted a
7.1%-growth in the period.
(1) Estimated consultants' sales at final prices to consumers.
>>
Operations under implementation ­ Mexico, Venezuela and France
3Q06
3Q05
Units sold ­ items for resale
(in millions)
Net Revenues
Ebitda
>
Financial Highlights ­ Mexico, Venezuela and France (US$ million)
Gross Revenues
9M05
9M06
Total Consultants
(1)
(1)
Position at the end of the 12
th
sales cycle period
0.17
0.01
1.1
0.2
1.4
0.3
-4.2
-2.4
4.2
0.6
0.35
0.01
2.7
0.5
3.1
0.5
-11.3
-6.7
4.2
0.6
3Q06
3Q05
Units sold ­ items for resale
(in millions)
Net Revenues
Ebitda
>
Financial Highlights ­ Mexico, Venezuela and France (US$ million)
Gross Revenues
9M05
9M06
Total Consultants
(1)
(1)
Position at the end of the 12
th
sales cycle period
0.17
0.01
1.1
0.2
1.4
0.3
-4.2
-2.4
4.2
0.6
0.35
0.01
2.7
0.5
3.1
0.5
-11.3
-6.7
4.2
0.6
In October 2006, we started the direct sales model in France, which will have a different format
compared to the sales model adopted in other countries. It will count on the strong technological
support of the Internet, improving the relationship between the consultants and Natura and, also,
between the consultants and their clients, with the possibility of direct delivery to final consumers.

In Mexico, in light of the brand good acceptance, we have decided to anticipate to the beginning of
2007 the development of new geographical sectors. In Venezuela, the operation is now in its pre-
operational phase.
>>
International expansion process
In 9M06, investments in the international expansion process, represented by negative operational
results, totaled R$25.4 million (9M05: R$24.1 million). For 2006, we estimate total investments of
R$35.0 million in this process.
background image
41
>
CASH FLOW
Internal cash generation
(1)
in 9M06 reached R$384.9 million, a 32.8%-increase over same period
last year (9M05: R$289.8 million). Out of this total, R$79.0 million were used in operational
working capital, other current assets and liabilities and long term receivables and payables, and R$
134.9 million in fixed assets acquisitions. As a result, free cash flow generation
(2)
in 9M06 was
R$171.0 million, posting a 4.9%-reduction when compared to same period last year (9M05:
R$179.9 million).
9M05
9M06
%
Change
Net income
344.0
258.4
33.1%
(+)Depreciation and amortization
40.9
31.3
30.5%
Internal cash generation
(1)
384.9
289.8
32.8%
Operating working capital
(3)
-68.3
-24.4
Other assets and liabilities
(4)
-10.7
-1.7
Operating cash generation
305.9
263.7
16.0%
Capex
-134.9
-83.8
Free cash flow
(2)
171.0
179.9
-4.9%
>
Consolidated Cash Flow pró forma ­ R$ million
9M05
9M06
%
Change
Net income
344.0
258.4
33.1%
(+)Depreciation and amortization
40.9
31.3
30.5%
Internal cash generation
(1)
384.9
289.8
32.8%
Operating working capital
(3)
-68.3
-24.4
Other assets and liabilities
(4)
-10.7
-1.7
Operating cash generation
305.9
263.7
16.0%
Capex
-134.9
-83.8
Free cash flow
(2)
171.0
179.9
-4.9%
>
Consolidated Cash Flow pró forma ­ R$ million
The increase in operational working capital registered in 9M06 was primarily do to (i) a larger
concentration of invoicing in the end of September 2006 that caused an atypical growth of
receivables, (ii) stronger purchase of material and hiring of services occurred by the end of 2005
and respective payments settled in the beginning of 2006 and (iii) change in the inventory policy to
meet Christmas sales strategy and the expansion of the distribution center located in the city of
Matias Barbosa, state of Minas Gerais, these factors have impacted the inventory balance in
September 2006 (such effect was parcially offset by the growth in raw material and packing
material supply account posted by the end of September).
Investments in fixed assets also played an important role, totaling R$134.9 million in 9M06. The
amount spent in this period is in line with the Company's expectations for 2006 (R$210 million).
Note 1: (net income in the period)+ (depreciation and amortization)
Note 2: (internal cash generation) +/- (changes in working capital and long term receivables and liabilities) - (capex)
Note 3: Assets ­ accounts receivable, inventories, recoverable taxes short terms. Liabilities ­ suppliers, salaries, profit sharing and related charges,
taxes payable, provisions and accrued freight.
Note 4: Assets ­Advances to employees and suppliers, short term deferred income tax and social contribution, other credits and long term receivables.
Liabilities: other short and long term payables and reserve for contingencies.
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42
This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs
and expectations of the Natura's management. The words "anticipates", "wishes", "expects", "estimates", "intends", "forecasts", "plans",
"predicts", "projects", "targets" and similar words are intended to identify these statements, which necessarily involve known and
unknown risks and uncertainties. Known risks and uncertainties include, but are not limited to, the impact of competitive products and
pricing, market acceptance of products, product transitions by the Company and its competitors, regulatory approval, currency
fluctuations, production and supply difficulties, changes in product sales mix, and other risks. This press release also includes pro-forma
information prepared by the Company for information and reference purposes only, which has not been audited. Forward-looking
statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new
information or future developments.
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43
>
ANNEX 1 - STATEMENT OF INCOME (CONSOLIDATED)
(in R$ million)
3Q06
%RL
3Q05
%RL
Change%
9M06
%RL
9M05
%RL
Change%
Gross sales to domestic market
950,9
96,5
786,1
97,1
21,0
2.597,9
96,6
2.149,0
97,1
20,9
Gross sales to foreign market
34,3
3,5
23,4
2,9
46,3
89,9
3,3
64,0
2,9
40,5
Other sales
0,3
0,0
0,3
0,0
31,1
1,0
0,0
0,9
0,0
9,5
GROSS OPERATING REVENUES
985,4
100,0
809,8
100,0
21,7
2.688,9
100,0
2.214,0
100,0
21,5
Taxes on sales, returns and rebates
(289,5)
29,4
(238,4)
29,4
21,4
(784,7)
29,2
(657,7)
29,7
19,3
NET OPERATING REVENUES
696,0
100,0
571,4
100,0
21,8
1.904,2
100,0
1.556,2
100,0
22,4
Cost of sales
(203,8)
29,3
(179,7)
31,4
13,4
(586,7)
30,8
(499,2)
32,1
17,5
GROSS PROFIT
492,2
70,7
391,7
68,6
25,6
1.317,5
69,2
1.057,0
67,9
24,6
OPERATING (EXPENSES) INCOME
Selling
(228,6)
32,8
(180,9)
31,7
26,4
(605,4)
31,8
(491,1)
31,6
23,3
General and administrative
(92,7)
13,3
(69,2)
12,1
33,9
(264,1)
13,9
(210,4)
13,5
25,5
Management compensation
(4,6)
0,7
(4,2)
0,7
9,2
(10,8)
0,6
(9,6)
0,6
13,0
Other operating expenses, net
2,4
0,3
(2,6)
0,5
-191,9
(1,8)
0,1
(5,4)
0,3
-66,1
INCOME FROM OPERATIONS BEFORE
FINANCIAL EFFECTS
168,6
24,2
134,8
23,6
25,1
435,3
22,9
340,6
21,9
27,8
Financial expenses
(7,8)
1,1
(12,9)
2,3
-39,9
(26,2)
1,4
(36,4)
2,3
-27,9
Financial income
10,3
1,5
13,1
2,3
-21,3
36,1
1,9
39,5
2,5
-8,8
INCOME FROM OPERATIONS
171,2
24,6
134,9
23,6
26,8
445,1
23,4
343,8
22,1
29,5
Nonoperating income, net
0,6
0,1
(0,2)
0,0
-382,7
1,0
0,1
(2,4)
0,2
-142,5
INCOME BEFORE TAXES ON INCOME
171,8
24,7
134,7
23,6
27,5
446,2
23,4
341,4
21,9
30,7
Income and social contribution taxes
(38,7)
5,6
(33,9)
5,9
14,3
(102,2)
5,4
(83,0)
5,3
23,2
NET INCOME BEFORE MINORITY
INTEREST
133,1
19,1
100,9
17,7
31,9
344,0
18,1
258,4
16,6
33,1
Minority interest
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
NET INCOME
133,1
19,1
100,9
17,7
31,9
344,0
18,1
258,4
16,6
33,1
Depreciation
14,1
2,0
11,2
2,0
25,9
40,9
2,1
31,3
2,0
30,5
EBITDA
183,3
26,3
145,7
25,5
25,8
476,9
25,0
369,6
23,7
29,0









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44
>
ANNEX 2 - BALANCE SHEET (09/30/06 AND 06/30/06) ­ R$ million
ASSETS
sep/06
jun/06
LIABILITIES
sep/06
jun/06
CURRENT ASSETS
CURRENT LIABILITIES
Cash and banks
54,3
53,8
Loans and financing
95,0
108,0
Cash investments
147,4
261,8
Domestic suppliers
187,7
136,9
Trade accounts receivable
309,5
287,3
Foreign suppliers
5,1
3,1
Inventories
263,1
184,4
Salaries, profit sharing and related charges
95,9
73,6
Recoverable taxes
40,2
28,3
Taxes payable
83,2
73,4
Advances to employees and suppliers
9,8
7,7
Dividends
0,1
112,2
Deferred income and social contribution taxes
26,0
33,2
Accrued freight
13,7
11,7
Other receivables
26,6
22,6
Sundry accruals
3,5
7,3
Total current assets
877,0
879,2
Other payables
18,1
19,7
Allowance for losses on swap contracts
2,8
3,9
LONG-TERM ASSETS
Total current liabilities
505,1
549,9
Receivables from shareholders
0,0
0,0
Recoverable taxes
16,2
10,5
LONG TERM LIABILITIES
Deferred income and social contribution taxes
34,4
32,2
Loans and financing
79,5
78,9
Escrow deposits
33,3
31,6
Reserves for contingences
107,0
100,3
Other receivables
0,5
0,5
Other payables
3,8
3,8
Cash investments
4,2
4,1
Total long-term liabilities
190,3
183,0
Total long-term assets
88,6
78,9
MINORITY INTEREST
0,0
0,0
PERMANENT ASSETS
Investments
5,7
5,8
SHAREHOLDER'S EQUITY
Property. plant and equipment
457,3
398,3
Capital
232,7
232,2
Total permanent assets
462,9
404,1
Capital reserves
131,7
128,0
Profit reserves
369,0
269,5
Treasury shares
(0,4)
(0,5)
Total shareholders' equity
733,1
629,2
TOTAL ASSETS
1.428,5
1.362,1
TOTAL LIABILITIES
1.428,5
1.362,1













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45
>
ANNEX 3 - STATEMENT OF CASH FLOW (CONSOLIDATED)
(in R$ million)
9M06
9M05
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
344,0
258,4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortisation
40,9
31,3
Monetary and exchange variations, net
13,1
3,0
Reserve for losses on swap and forward contracts
3,2
12,0
Reserves for contingencies
8,9
23,1
Allowance for inventory losses
(3,9)
2,0
Sundry accruals
0,0
2,3
Deferred income and social contribution taxes
(5,3)
(10,2)
Proceeds from sale and disposal of permanent assets
1,7
6,3
Resultado equivalência patrimonial
0,0
0,0
Minority interest
0,0
0,0
402,4
328,2
(INCREASE) DECREASE IN ASSETS
Current assets:
Accounts receivable
6,8
11,2
Inventories
(106,9)
(62,1)
Other receivables
(8,0)
(7,4)
Long-term assets:
Escrow deposits
(1,7)
(1,6)
Recoverable taxes
(6,6)
(4,8)
Other receivables
(0,1)
(2,7)
(116,5)
(67,3)
INCREASE (DECREASE) IN LIABILITIES
Current liabilities:
Suppliers
40,5
1,2
Salaries, profit sharing and related charges
18,3
7,8
Taxes payable
(25,8)
3,3
Other payables
(0,3)
13,9
Long-term liabilities:
Other payables
8,2
1,0
40,9
27,3
NET CASH PROVIDED BY OPERATING ACTIVITIES
326,8
288,2
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(134,9)
(83,8)
NET CASH USED IN INVESTING ACTIVITIES
(134,9)
(83,8)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease - short-term loans
(76,1)
(173,1)
Increase - long-term loans
47,6
220,3
Payment of swap and foward contracts
(3,1)
(14,8)
Payment of dividends
(307,1)
(203,8)
Payment of interest on capital
(51,3)
(28,6)
Payment of capital
2,0
0,0
Other
2,7
0,1
Sale of treasury share by exercise of stock options
6,5
2,2
Payment of receivables from shareholders
2,2
2,2
NET CASH USED IN FINANCING ACTIVITIES
(376,6)
(195,4)
NET (DECREASE) INCREASE IN CASH AND BANKS
(184,7)
9,0
Cash and banks at the beginning of period
386,4
231,6
Cash and banks at the end of period
201,7
240,6
CHANGE IN CASH AND BANKS
(184,7)
9,0
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Income and social contribution taxes paid
91,0
61,0