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Deutsche Bank Global Retail & Consumer Conference - 1
Deutsche Bank
Global Retail & Consumer Conference
June 12th ­ 13th 2006
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Introduction
Strategy
Medium Term Goals
Financials
Agenda
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Natura Cosméticos S.A.
Adherence to the "Novo Mercado" rules
CF&T target market : fragrances, make-up, skin care,
sun care and toiletries
Direct Sales Distribution
Operations in Brazil, Argentina, Chile, Peru, Mexico
and France
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Natura Cosméticos S.A.
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strategy
Back to Agenda
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Brand
Products
Innovation
Our strategy
Sales
Channel
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Natura brand:
Our greatest asset
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identity
essence
brand
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culture
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reason
being
for
create and sell products
and services that promote
well-being/being-well
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well-being
Is the harmonious,
pleasent relationship of
a person with oneself,
with one's body
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being-well
is the empathic, successful,
and gratifying relationship
of a person with others,
with nature and with whole
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well being well
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Our vision
Through our business practices, the
quality of our products and the
relationships we establish, we seek
to make Natura a brand
ultimately recognized worldwide
and identified with a community of
people who are committed to
constituting a better world, through
a better relationship with
themselves, with the others, with
nature and as a whole.
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Coherence
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Products
Quality of
relations
Environments
Communication
Corporate
Behavior
Others
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A system that promotes
education and
innovation.
Inspire and
oxygenate
the brand's evolution.
brand management system
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2005
71%
64%
2004
Source: Survey commissioned by Natura. Conducted with 1,200 people across different social classes in three
large Brazilian cities (São Paulo, Porto Alegre and Recife).
70%
68%
2005
56%
49%
2nd in rank
27%
25%
27%
Brand perception
Top of mind
Preference
43%
19%
42%
Innovation
Quality
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recognition
» The most admired company in
Brazil
» The best place to work for
women
(2nd year in a row)
» Benchmark company in Social
Responsability
» 4th most valuable brand in
Brazil
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Innovation
Strong investments in R&D -3% of net sales
Open Innovation ­ leverage of R&D investments
through a network of research partners
Biodiversity as a research platform
Product development based on the brand concepts
Brazil has one of the richest biodiversities in the world:
22% of all species on Earth
Encompasses a wide range of different ecosystems:
"
Amaz
ônia" (the largest rain forest in the world),
"
Pantanal
" (the largest flooded plain in the world),
"
Cerrado
" (steppe
-like vegetation),
"
Caatinga
" (desert
-like vegetation),
"Atlantic Forest" (tropical forest) and
"South Fields" (prairie
-like vegetation).
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Truly beautiful women
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Channel
mother-child bond
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refills
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165
91
117
182
213
Number of New Products
Innovation
2001
2002
2003
2004
2005
Number of New Products
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2001
2002
2003
2004
2005
44.9%
43.5%
48.8%
63.2%
69.8%
Total Innovation Index (innovation+improvements)
Innovation
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Itau First Annual Brazil Conference
Channel
Quality of relations : consultants are more than resellers
High quality of services: flexible and fast logistics
Training and proximity are key drivers
Our consultants are, firstly, consumers who sell our
products through their relationships and disseminate
our values (well being well).
Channel
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Natura´s
Consultants as
Our
Planet
Boost the
enrollments of
Youth and Adult
Education
Recognition and
elevation of the
role of
Consultants
Activity
Enviroment concern:
Refillable products
Agents of Change
in their
communities
Our
People
Our
Business
Movimento Natura
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CAGR (2001-2005) = 14.7%
(*) Number of consultants at Argentina, Brazil, Chile and Peru.
300
321
375
433
519
+19.8%
+17.7%
450
529
2001
2002
2003
2004
2005
1Q05
1Q06
Consolidated sales channel
Consolidated Number of Consultants* (thousand)
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CAGR (2001-2005) = 9.7%
8.5
9.0
10.5
11.5
12.3
2.53
2.54
+0.3%
2001
2002
2003
2004
2005
1Q05
1Q06
Consultant's productivity-Brazil
+6.6%
Productivity in Brazil
(R$ thousand per average active consultant per year)
*source ABVED
12,288
7,262
1.7 X
Natura´s consultants 2005
Direct sales except Natura 2005
Productivity in Brazil (R$ per average active consultant)
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Consultants Turnover
1
(Brazil)
(1) Number of consultants who stopped activity in relation to the average total consultants figures.
33%
30%
28%
26%
2002
2003
2004
2005
Channel
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Natura is aligned with
corporate social
responsibility
and
sustainable
development
principles
Based on the Triple Bottom Line
Social
Responsible
Financial
Results
Environmental
Concern
triple bottom line
In order to disclose its performance in the three sustainability
pillars, Natura has fully adopted the indicator model proposed by
the GRI since 2000
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Natura's sustainability: some
initiatives and results
EJA (Young and Adults Educacional Program)
Effective enrolments in 2005
66,600 students
Life Cycle Assessment (LCA)
Natura´s average environmental impact
2005
2004
10.1
10.6
100% of launched products under LCA packaging analysis
% of refills over total items sold
2005
2004
17.4
15.3
Sales of refills
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2600 families
Oil estraction
Model manufacturing
2600 families
Oil extraction
Soap noodle manufacturing
Natura
Exotic oils (special
soaps)
Palm oil
Start up in october/2006
·
ROI = 19,6%
·
Research and development based on
exotic oils
·
Up to 2600 families benefited
·
Present forested areas protected and
future recovering of degraded areas
Combination of innovation, sound
investment, strong social impact
and environmental protection
Soap noodle plant
project (Pará State)
Natura's sustainability: some
initiatives and results
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Medium term goals
Back to Agenda
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Medium term goals
Thoroughly explore the growth potential in
Brazil
- investment in R&D up to 3.5% of net sales
1.
Gains of scale and savings from higher
productivity transfered to:
- brand building
- channel support
- marketing
- IT projects
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Brazilian target market
2001
2002
CAGR( 2000-2005)
2003
2004
Sources: IBGE and Sipatesp.
(1) In real terms deflated by IPCA.
CFT market grows three times faster than GDP
2005
2.2%
7.4%
GDP
growth
1.4%
Target market
growth
1
4.7%
1.5%
5.7%
0.5%
4.6%
5.2%
12.3%
2.3%
9.7%
Growth drivers
Ageing population ­ CFT total consumers growing at
2,2% per year throught 2014
Increasing participation of women in workforce and
income
Strong investments in R&D throughout CF&T industry
Migration of consumers to higher classes (D to C and
C to B)
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14.3
14.5
2001
2002
17.1
2003
2004
19.2
Natura's Market Share ­ Target Market
1
(%)
(1)Target market: Skin care, sunscreen, make-up, fragrances, hair care, shaving products and deodorants - excludes
diapers, nail polishes, sanitary pads, hair dyes and oral hygiene. Source: Sipatesp/ ABHIPEC.
1B05
Market share CF&T target market - Brazil
2005
21.4
1B06
21.0
18.6
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Complete expansion in the main markets
in Latin America
- Venezuela ­ 2006
- Colombia ­ 2007
- Others Latin America countries ­ 2010
2.
Medium term goals
15
18
Natura's market share 2005 = 0.3%
2005
2009E
Source: Euromonitor (Cosmetics and Toiletries).
1. Real terms
CF&T market in Latin America (excluding Brazil)
Retail prices - US$ billion
CAGR
1
= 3.7
%
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Assess the potential of Natura's opportunities
in other CF&T markets
- Eastern Europe
- Western Europe and USA
Medium term goals
3.
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Financials
Back to Agenda
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Consolidated Gross Revenues (R$ million)
Our size
CAGR (2001-2005) = 29.1%
1,168
1,411
1,910
2,540
3,244
+27.7%
611
723
+18.3%
1Q05
1Q06
2001
2002
2003
2004
2005
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CAGR (2001-2005) = 42.7%
Our results
136
199
296
432
564
95
113
+19.1%
(*) Natura Empreendimentos figures.
1Q05
1Q06
EBITDA (R$ million)
+30.8%
2001*
2002
2003
2004
2005
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Our profitability
2001
2002
2003
2004
2005
16.6
20.1
22.2
24.4
24.7
1Q05
1Q06
22.3
22.1
-0.2pp
EBITDA Margin (%)
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CAPEX (R$ million)
83
2004
112
2005
180
2006E
1Q05
1Q06
16
26
+62.8%
CAPEX
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9
11
CAPEX breakdown
R$ Million
2005 2006E
Manufacturing and Logistics
69
90
Facilities
3
42
IT
20
33
Others
11
4
Total
112
180
Vehicles
Capacity (million of units)
manufacturing
2005
290
370
345
320
separation
2006E
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Cash flow consolidated figures
2005
R$ million
Net income for the period
(+) Depreciation and amortization
397
482
(+) Other non-cash expenses
(=) Gross cash flow
(-) Working capital
(-) CAPEX
314
(=)Free cash flow
Dividends + Interest on capital
% of free cash flow
95
44
42
35
112
336
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Payout (%) 2004 2005
Net income 72 81
Free cash generation 107 95
2005
314
216
2004
+48.0%
Total Dividends and Interest on Capital, net (R$ million)
Dividends
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This presentation 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 presentation 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.
www.natura.net/investor
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Glossary
Commercial cycles ­ 3 week period of sales where new products, campaigns
and promotions are developed.
Consultants ­ number of sales representatives who have placed at least one
order in the last 4 commercial cycles.
Active Consultans - number of sales representatives who have placed at least
one order in the last commercial cycle.
ABEVD ­ Brazilian direct sales association
Sipatesp/Abhipec ­ Brazilian syndicate of CF&T companies
IBGE ­ Official Brazilian statistics institute
IPCA ­ Official retail price index