background image
This edition of Natura's Annual Report contains the
most recent version of the Global Reporting Initiative
(GRI) indicators, the GRI-G3. For the first time, the GRI
indicators were fully integrated into the main body of
the report, allowing joint analysis of the economic,
financial, social and environmental performance of
our activities.
Another important highlight was dividing the report
into chapters and referring to each of our public
relationship principles. In this way we highlight the
importance that we place on the establishment
and maintenance of quality relationships with our
public. In order to evolve in streamlining reported
information, we decided to involve them in preparing
this Annual Report.
In 2006, we started conferring with employees of
the Brazil operation, and we will gradually reach out to
other groups in the coming years. As a way to jumpstart
this more inclusive discussion, a response-card survey is
included at the end of this report, which is open to
everyone interested in expressing their opinion.
Scope of this Report
This Report contains information about the results
obtained in fiscal year 2006 for our operations in Brazil,
Argentina, Chile, Mexico, Peru and France. Since we
centralize our production activities in Brazil, all the
GRI-G3 indicators were considered for this part of the
operation. For the other operations, only the most relevant
indicators were considered. To facilitate location of the
indicators, each indicator's number appears in parentheses
right after the subject to which it refers (see GRI Index).
The criteria for selecting the information reported
in the printed version (relevance analysis) prioritized
the relevance of topics related to Natura's Socio-
Environmental Strategic Options (internal analysis) and
the existence of demand by any public with which it
has a relationship (external analysis).
To faithfully portray our performance, we adopted
domestic and international models of reference. To
describe our economic and financial performance, we
follow the standards of the Securities and Exchange
Commission (CVM), the Brazilian Association of
Listed Companies (ABRASCA) and the transparent
communication principles of the Brazilian Association
of Business Communication (ABERJE). We use the
GRI model for aspects of corporate responsibility
and sustainability.
The on-line version of this report can be found at
www.natura.net/relatorioanual and contains all the
GRI-G3 indicators. The team responsible for
preparing this report may be contacted at the
e-mail relatorioanual@natura.net.
Comparison of the Environmental Impact of Publications (%)
Version
Increase of the Impact 2006\2007
Shareholders
not used in 2006
Employees
0.0
Consultants
not used in 2006
Opinion Makers
-10.0
Financial Markets
-33.3
Vision Challenged and Braille
100.0
Total
-20.0
About this
Report
As of 2001, Natura began incorporating the Life Cycle Evaluation to quantify the
environmental impact of its actions. This methodology considers all the stages of
the production chain ­ from the extraction of raw materials until final disposal.
WE ARE AN ORGANIZATIONAL
STAKEHOLDER OF THE GLOBAL
REPORTING INITIATIVE (GRI),
AND WE SUPPORT ITS MISSION
TO DEVELOP GLOBALLY
ACCEPTED DIRECTIVES FOR
SUSTAINABILITY REPORTS BY
MEANS OF A PARTICIPATIVE
STAKEHOLDER PROCESS.
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/4/07 10:05 PM Page 1
background image
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 2
background image
Message from the President 4
Reason for Being 10
Vision 12
Beliefs 14
Organization Profile 16
Competitive Differences 24
Corporate Governance 28
Results 32
Strategies and Challenges 38
Quality of Relationships 40
Financial Statements 106
Global Compact Commitment 128
GRI Index 129
Credits 130
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 3
background image
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 4
background image
Message
from the President
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:26 PM Page 5
background image
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:27 PM Page 6
background image
OURCOMMONFUTURE
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:28 PM Page 7
background image
The year 2006 brought us many happy events. In addition to the excellent results achieved by
Natura, we must all celebrate a historical occurrence: throughout the world, awareness
expanded that global warming is a risk to the life of our planet. Thus, the seed planted in the
report Our Common Future, of the United Nations World Commission on Environment and
Development, whose 20
th
anniversary will be celebrated in 2007, is prospering. This awareness
increases the possibility of causing changes in behavioral, production and consumption
guidelines that will ensure that we fulfill our common responsibility toward future generations.
The company initiatives that promote development with economic, social and environmental
balance have ceased to be seen as "idealistic" and have
become "imperative." For those of us at Natura who
for many years have guided our actions by our
dedication to sustainable development, this change in
perception only reinforces our desire to advance further down this path.
The results obtained in 2006 are very good. Natura's gross revenues grew 19.9% over gross
revenues in 2005. International revenues grew 44.3%. Our EBITDA was R$ 654.5 million. The
distribution channel formed by our Consultants grew 16.2% in Brazil, climbing to 561,000 people.
In the other countries in Latin America where we are present, we already surpassed
56,000 Consultants. We generated more than R$ 1.6 billion in direct income for this universe of
617,000 people that is dedicated to social transformation and spreading our values.
In four years, Natura increased its Brazilian market share from 12% to 22.8%. The total number of
resale items jumped from 98 million in 2002 to 241 million in 2006, and in the same period the
number of employees increased from 2,800 to 4,300.
This trend of such significant growth fills us with pride, and at the same time demands our
redoubled attention to control the increased complexity, the pressures on the various systems
and processes, and the tensions that occur in the work environment. We are confident that the
measures taken in 2006 and scheduled for the coming years are solid and consistent, and will
eliminate any obstacles to our continued development.
True to our essence, we will continue to invest in innovative management, science and
technology. For Natura, technological development includes the mobilization of expansive social
networks that are capable of integrating scientific knowledge with the wisdom of traditional
communities, while simultaneously promoting the sustainable use of nature's resources. In 2006,
our investments in research and development were R$ 87.8 million, a 30.8% increase over
2005. We initiated the construction of a new Research Center in Campinas (São Paulo), which
should be inaugurated in 2008, and we opened an advanced technology center in Paris.
We continued to invest in the sustainable use of Brazil's biodiversity, despite insufficiency of the
legal framework that regulates access to genetic heritage and fair remuneration of traditional
knowledge. Despite the fact that this insufficiency represents an important impediment to
the country's development, we understand that the continuation of our transparent practices
and extended dialogue with all the social agents involved, assures us conditions to take advantage
of the huge competitive advantage provided by Brazil's rich biodiversity. In anticipation of
legislative development, in 2006 we became the first Brazilian company to sign agreements
regarding remuneration for widespread traditional knowledge, establishing pioneering
OURCOMMONFUTURE
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:28 PM Page 8
background image
partnerships with the Associação das Ervateiras do Mercado do Ver-o-Peso [Association of Herb
Producers of the Ver-o-Peso Market] and the Associação de Produtores de Boa Vista, of Acará
[Association of Producers of Boa Vista], both in Pará.
With the same innovative attitude, we also organized an undertaking in Pará intended to widen
and deepen our presence in the Amazon, and to expand our experience with sustainability.
The new soap factory in Benevides will substitute part of the African palm oil that is used as a raw
material, with native palm oil provided by agricultural and extractive cooperatives in the region.
Over the long term, the project may involve 2,500 families from 21 municipalities, implying social
and economic benefits for the communities and new challenges in learning, harmonious living
and management.
Our desire to spread the concept of Bem Estar Bem (Well Being Well), and the vision of turning
Natura into a globally important brand that is identified with the community of people who are
dedicated to building a better world through a better relationship with themselves, with others
and with the nature of which they are a part, require daring and determination on our part. It is
with this spirit that we define our strategy for strong growth.
In Brazil ­ the market that will still be responsible for generating the majority of the company's
results in the coming years ­ we will continue to grow, seeking efficiency and productivity gains.
In our other operations in Latin America, since acceptance of our proposal for value through
the direct sales channel is already proven, the challenge is to accelerate growth to attain critical
mass, thus increasing profitability. In other regions of the world where there are strong
indicators of acceptance of our proposal, we are evaluating and testing the best ways to
handle the opportunities.
Global expansion demands a company that is increasingly cosmopolitan and multicultural,
capable of understanding and interacting with different cultures, and able to express itself in
multiple languages. It also demands growing involvement in networking, and the capacity to
identify and attract leadership that identifies with our beliefs in the various countries in which
we are present. Thus, it is essential to encourage entrepreneurship and managerial autonomy so
that we will become a decentralized company, with more robust processes and better
knowledge management.
With the participation of everyone, including employees, consultants, shareholders, consumers,
suppliers and integral partners of the Natura community ­ whom we thank for their dedication to
achieving the successes of 2006 ­ we will build a company that is increasingly better, at the same
time contributing to our common future so that we will realize the ideal of a more prosperous and
fair society that is built on solidarity.
Antonio Luiz da Cunha Seabra
Co-President of
the Board of Directors
Alessandro
Giuseppe Carlucci
President and CEO
Pedro Luiz Barreiros Passos
Co-President of
the Board of Directors
Guilherme Peirão Leal
Co-President of
the Board of Directors
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 9
background image
razão de ser
Nossa Razão de Ser
é criar e comercializar produtos
e serviços que promovam
o bem-estar/estar bem.
bem-estar
é a relação harmoniosa, agradável,
do indivíduo consigo mesmo,
com seu corpo.
estar bem
é a relação empática, bem-sucedida,
prazerosa, do indivíduo com o outro,
com a natureza da qual faz parte,
com o todo.
Reason for Being
Our Reason for Being
is to create and sell
products and services
that promote
well-being/being well.
well-being
is the harmonious,
pleasant relationship of
a person with oneself,
with one's body.
being well
is the empathetic, successful,
and gratifying relationship
of a person with others,
with nature and
with the whole.
10
Natura Annual Report 2006
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 5:54 PM Page 10
background image
Melissa de Oliveira, hotel manager
Reason for Being 11
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 11
background image
12
Natura Annual Report 2006
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 12
background image
Vision 13
Because of its corporate behavior,
the quality of the relationships it
establishes and the quality of its
products and services, Natura will be an
international brand, identified with the
community of people who are committed
to the construction of a better world,
based on a better relationship with
themselves, with others, with nature of
which they are part, with the whole.
Vision
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 5:54 PM Page 13
background image
14
Natura Annual Report 2006
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:09 PM Page 14
background image
Life is a chain of relationships.
Nothing in the universe exists alone.
Everything is interdependent. It is our
belief that the appreciation of the
importance of relationships is the
foundation of an enormous human
revolution in the search for peace,
solidarity and life in all of its manifestations.
The continuous search for improvement
promotes the development of individuals,
organizations, and society.
Commitment to the truth
is the route to perfecting
the quality of relationships.
The greater the diversity,
the greater the wealth
and vitality of the whole system.
The search for beauty, which is the genuine
aspiration of every human being, must be free
of preconceived ideas and manipulation.
The company, a living organism, is a
dynamic set of relationships. Its value
and longevity are connected to its ability
to contribute to the evolution of society
and its sustainable development.
Beliefs
Mariana Freitas Machado, businesswoman, and Rosa Machado Hellmeister
Beliefs 15
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 5:54 PM Page 15
background image
Espaço Natura,
Cajamar, São Paulo
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:10 PM Page 16
background image
Organization
Profile
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:28 PM Page 17
background image
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:29 PM Page 18
background image
Employees at the lotion factory in
Cajamar, São Paulo
OURCOMMONFUTURE
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:30 PM Page 19
background image
608488_HISTORIA_PEQS.qxd:608488_HISTORIA_PEQS 4/2/07 4:30 PM Page 20
background image
Natura is proud not only because
of the positive evolution of its
financial results, but also because
of the application and diffusion of
socially responsible and environmentally sustainable company practices that
are part of our dream of contributing to the construction of a better world,
as stated in our beliefs. We are a company that is moved by our passion for
cosmetics as a vehicle of self-awareness and human relationships.
Headquartered in Cajamar in the state of São Paulo, with a modern center
that includes research, production and logistics facilities, we also operate
with administrative, industrial and commercial units in other locations in
Minas Gerais, Pará, Pernambuco, Rio de Janeiro, Rio Grande do Sul,
São Paulo and Brasília. Considering our presence in all the markets in which
we operate, we have more than 5,000 employees. In addition to Brazil, we
are present in Argentina, Chile, Mexico, Peru, Venezuela and France. More
than 617,000 Consultants distribute our products through direct sales.
A publicly owned company since 2004, our shares are listed on the
New Market of the São Paulo Stock Exchange (Bovespa). In 2006 our
consolidated gross revenues were R$ 3.9 billion, 19.9% higher than gross
revenues reported in 2005. In Brazil we are a leader in the cosmetics sector,
and our brand is among the most admired brands in the market. Over the
last four years, our share of the Brazilian market jumped 12% to 22.8%.
NATURA IS PROUD TO HAVE
ATTAINED A NOTABLE
POSITION IN THE BRAZILIAN
CORPORATE ENVIRONMENT IN
JUST UNDER FOUR DECADES
OF EXISTENCE.
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:10 PM Page 21
NATURA IS PROUD TO HAVE
ATTAINED A NOTABLE
POSITION IN THE BRAZILIAN
CORPORATE ENVIRONMENT IN
JUST UNDER FOUR DECADES
OF EXISTENCE.
background image
22
Natura Annual Report 2006
22
Natura Annual Report 2006
1974 Option for direct sales and creation
of Natura Consultants.
1979 Natura enters into the men's market
with the launch of the Sr. N line.
Sistema Natura is formed with the
creation of new companies.
1981 Entry into the make-up and perfume markets.
1982 Start of operations in Chile, the company's
first initiative outside of Brazil.
1983 Natura becomes a pioneer among Brazilian
manufacturers of continuous use goods in its
sales of refill products. Launch of the Sève line,
which opens the bath oils niche.
1984 Launch of the Erva Doce line.
1986 Launch of Chronos, an anti-aging treatment and
the first product in a line of facial moisturizers.
History
1995 Creation of the Crer para Ver Program,
with the objective of contributing to
improving public education in Brazil.
1998 Creation of the Board of Directors.
2000 Launch of the Natura Ekos line, with the
sustainable use of biodiverse Brazilian resources.
2001 Inauguration of Espaço Natura Cajamar in the
municipality of the Greater Metropolitan Region
of São Paulo. Natura publishes the first Annual
Report in Latin America that follows the Global
Reporting Initiative (GRI) model, which develops
voluntary models of reports on the social and
environmental impact of companies' activities.
1969 - ANTONIO LUIZ DA CUNHA SEABRA FOUNDS NATURA, AT THAT
T
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:10 PM Page 22
background image
Histor y 23
1989 Merger of the companies that formed
Sistema Natura.
1990 Natura outlines its Reason for Being and
its Beliefs: the importance of relationships,
the commitment to the truth, continuous
improvement, the encouragement of diversity,
valuing beauty without stereotypes or
manipulations, and the company as a promoter
of social enrichment.
1992 The Truly Beautiful Woman concept is created,
which expresses the idea that feminine beauty
does not depend on age, but on self-esteem.
1994 Launch of the Mother and Baby line, with the
goal of contributing to strengthening the bond
between parents and children. Natura innovates
by proposing the Integrated Massage Method
based on Shantala techniques to promote the
mother-child relationship. Natura initiates
operations in Argentina and Peru.
2004 The company goes public, listing its shares on
the New Market of the Bovespa. Natura obtains
NBR ISO 14001 certification.
2005 Inauguration of Casa Natura in Paris (France),
and the start of operations in Mexico. Launch
of Chronos Spilol, the first anti-aging cosmetic
that uses a native biodiverse Brazilian resource,
extracted from jambu (Spilanthes oleracea),
a plant from the Amazon. Natura obtains
NBR ISO 9001 certification.
2006 Elimination of animal testing.
Inauguration of the Technology Center and start
of direct sales in Paris.
Inauguration of the first Casa Natura do Brasil,
in Campinas (SP).
Start-up of operations of the soap factory in
Benevides (PA).
Pioneering profit-sharing agreement in Brazil
based on access to various types of traditional
knowledge with genetic heritage.
TIME CONSISTING OF ONE STORE AND A LABORATORY IN SÃO PAULO.
608488_HISTORIA_GDES.qxd:608488_HISTORIA_GDES 4/2/07 4:10 PM Page 23
background image
608488_diferenciais_pag24.qxd:608488_diferenciais_pag24 4/2/07 7:31 PM Page 1
background image
Competitive Advantages 25
Products and Concepts
Our products are important expressions of our identity.
They are developed as a tool for self-knowledge and as
a vehicle of our sustainable practices and beliefs.
An example of this was the 2006 launch of the Diversa
make-up line, which was unique in its use of refills for
unusual items, such as lipstick. This make-up line is
important in terms of minimizing environmental impact.
Its formulas, developed with advanced technology, are
comprised of biodiverse Brazilian ingredients that have
been obtained in a sustainable manner.
We also expanded the use of refills in other lines,
such as deodorants. We re-launched the packaging of
some products, which now have recycled resins in their
composition, thus improving the quality and attractiveness
of our portfolio. We also developed other packaging with
shorter life cycles and better biodegradability.
In the perfume category, in which we are leaders in the
Brazilian market, we have returned to a more intense
rhythm of innovation with the launch of the Natura
Humor line, whose theme is the day-to-day of
relationships. Other important launches complemented
the Ekos line: Essência do Brasil Breu Branco and
Essência do Brasil Priprioca.
Research and Development
Innovation is an essential factor for Natura's growth and
the continuation of its business. It plays a role not only
in our products, but in other important aspects of our
activities, such as the management of our brand, the
way in which we relate with our publics and the use of
traditional knowledge for product development. This last
aspect is an important advantage in fulfilling our strategic
directive to use biodiverse Brazilian assets and inputs
for the development of technologies, products and
concepts. Generating wealth for supplier communities
and promoting the adoption of sustainable practices in
the field allows us to progress in our commitment to
sustainable development.
Included in this directive are the use of biodegradable
formulations, recycled and recyclable packaging, expanded
use of refills, use of plant-based inputs, guarantee of
product efficacy and safety, implementation of the open
innovation model, and building partnerships with
universities and research centers.
By meeting these strategic objectives, we set ourselves
apart as one of the Brazilian companies in the cosmetics,
fragrances and personal hygiene products sector that
invests the most in research and development. In 2006,
allocations in the area corresponded to 3.2% of gross
revenues, compared to 2.9% the previous year, which
corresponds to an absolute value invested of R$ 87.8
million, a 30.8% increase over 2005. The result of this
investment was the launch of 225 new products in 2006,
versus 213 in the previous fiscal year.
This year, we began the construction of a research and
technology center in Campinas (SP) that is capable of
housing nearly 300 researchers and will be ready in 2008.
We also inaugurated an advanced research center in
France, whose main objective is to maintain a close
relationship with the development of new technologies
in cosmetics, and we decided to install a laboratory in
Benevides, in the metropolitan region of Belém (PA), for
the development of essential oils. This center will operate
in conjunction with the new soap factory, which is Natura's
first industrial unit outside the state of São Paulo. We also
advanced in our partnership with the Biotechnology
Center of the Amazon in the undertaking of a pilot project
for the development of fixed oils produced from Brazil's
biodiverse resources.
A step in the same direction was the launch of the new
version of the program Natura Technology Innovation
Campus, which involves scientific cooperation between
Natura and science and technology institutions in Brazil
and throughout the world. With these investments, our
strategy of network operation in the area of research is
clear. Currently, 20% of the technology budget is already
Competitive
Advantages
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:44 PM Page 25
background image
ANIMAL TESTING
In keeping with our beliefs and with the
evolution of the ethical standards of society, for
more than six years we have been searching for
alternatives for the total elimination of testing
on animals. During this time, we invested in
the search, validation and implementation of
alternative methods accepted worldwide, in
order to guarantee the safety of our products
used by consumers.
These technical-scientific advances set us
apart in terms of excellence in alternatives to
testing performed on animals. We maintain a
laboratory for in vitro analysis of raw materials
and products on artificially cultivated human
or animal cells. We also invested approximately
R$ 1.5 million per year in the development
of tests and professional training. Along these
same lines, in 2006 we inaugurated the
Advanced Technology Center in Paris, France
(GRI PR1).
Our commitment to ban animal testing
applies to the entire supply chain. We do
not purchase inputs tested on animals, even
during research and development stages of
new products exclusive to Natura. We also
encourage our suppliers to apply this ban to
their entire production system, even those
products intended for other companies.
26
Natura Annual Report 2006
directed outside our laboratories, and the objective is to
reach 50% in the coming years.
Brand
We continually invest in brand management so that
Natura's statements increasingly reflect our essence. In
2006, the Natura brand remained strong in Brazil and
evolved significantly in the markets of Argentina, Chile
and Peru, according to consumer perception studies
done at the end of the year.
In a Brazilian survey, 74% of consumers contacted gave
the highest mark to Natura in Global Brand Evaluation ­
14 percentage points above the second-place company.
Natura also appears as the leader in "loyalty" items: the
brand's products are the ones that the consumers who
were contacted used most at the time, that they would
repurchase the most, and that they would most
recommend to others.
Brand Preference (%)
Source: Brand Essence 2006 - Ipsos Insight ­ Brazil
Responsible Management
In Brazil and in our international operations, we behave
in accordance with responsible management principles.
Our decisions are guided by our respect for the rights,
values and interests of all those who are directly affected
by our operations. For Natura, responsible management
is based on the ethical and transparent relationship with
all our publics, and on our corporate goal of commitment
to sustainable development, i.e., one that promotes the
economic, social and environmental dimensions of all
human activities.
2006 COMMITMENT
TO COMPLETELY ELIMINATE
ANIMAL TESTING.
GOAL ACHIEVED
IN 2006, WE FULLY ACHIEVED THIS
OBJECTIVE BY COMPLETING THE
LAST 15 EXPERIMENTS THAT WERE
BEGUN PREVIOUSLY.
2006 COMMITMENT
TO COMPLETELY ELIMINATE
ANIMAL TESTING.
GOAL ACHIEVED
IN 2006, WE FULLY ACHIEVED THIS
OBJECTIVE BY COMPLETING THE
LAST 15 EXPERIMENTS THAT WERE
BEGUN PREVIOUSLY.
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 8:03 PM Page 26
background image
Thus, in recent years, we have adopted initiatives that
resulted in the strengthening and deepening of our
commitment to sustainability. In 2002, we created the
Sustainability Committee, which helped to define the
strategies and discuss the application of responsible
management in our business activities.
Another result of this initiative was that in 2004 the
company's balanced scorecard was created to reflect
the three dimensions of sustainability ­ economic, social
and environmental ­ resulting in our current strategic
map that includes goals associated with these dimensions
and, thus, influencing the actions of the entire company.
To incorporate our principles into strategic planning,
corporate goals and internal processes, we created the
Sustainability Management System.
Through methodology, processes and indicators,
the System helps us evaluate the company's socio-
environmental performance in conjunction with
strategic planning, guiding daily practices and permeating
the decisions of people in all areas of Natura.
To articulate the strategic objectives and concrete
accomplishments, we are moving forward with Movimento
Natura, which was launched last year. Movimento Natura
is a program that invites our Consultants to participate in
projects with social and environmental impact as mobilizing
agents for their customers and their communities.
In controversial issues on which there is no consensus in
the scientific community about the consequences to the
environment and on human beings from the use of certain
substances, Natura agrees to adopt, wherever possible, the
Principle of Precaution. We require that our fragrance
suppliers follow the guidelines indicated by the European
Cosmetics, Perfumery and Toiletries Association (COLIPA).
Moreover, to guarantee safety to human health and the
environment, we have policies eliminating or restricting the
use of some inputs from our portfolio of products, and
we prohibit the use of raw materials obtained from plants
that were cultivated using practices that involve Genetically
Modified Organisms (GMOs). We also continue to
analyze the life cycle of all our products, packaging and
materials used.
In recognition of the company's commitment to
sustainability, in 2006 Natura's shares continued to be
listed on the Corporate Sustainability Index (ISE) of
the São Paulo Stock Exchange (Bovespa). The index
was created in 2005, in accordance with methodology
developed by the São Paulo School of Business
Administration of the Getulio Vargas Foundation
(FGV-Eaesp), to identify the companies with the
best performance at all levels of corporate activity.
One tool that has proven to be useful in supporting
managers in planning and visualizing initiatives is the
Corporate Responsibility Investment Matrix. The matrix
allows us to assess how much Natura invests in actions
aimed at improving people's relationships and quality
of life. The amounts invested appear in the table below
and the descriptions of the actions are available throughout
the report. Please refer to the appropriate section.
Corporate Responsibility Investment Matrix
(R$ thousands) (GRI EN30)
2004 2005 2006
Employees, family members
and third parties
6,248.6
8,231.7
11,637.5
Consultants
170.9
214.0
1,387.6
Consumers
-
194.1
380.0
Suppliers
102.1
158.7
130.0
Supplier Communities
745.0
896.3
1,141.7
Surrounding Communities
449.2
427.5
433.9
Government and Society
2,140.3
3,820.5
7,453.9
Environment
308.0
1,111.7
442.7
TOTAL Invested in the
Various Publics
10,164.1
15,054.5
23,007.3
Management Expenses
2,277.0
2,559.6
5,799.7
TOTAL Natura Resources
12,441.1
17,614.1
28,807.0
Percentage of Net Revenues
0.7%
0.8%
1.0%
Net resources collected
by Consultants in the
Crer para Ver
[Believe to See] Program
(1)
2,971.8
3,041.7
5,382.4
Tax incentives invested
Rouanet Law
1,591.2
1,726.9
1,936.3
Value-added tax on sales
and services in MG
-
996.9
1,500.0
1% Income Tax to CMDCA
(2)
347.0
-
160.2
1% Income Tax to CONDECA
(3)
-
-
388.0
OVERALL TOTAL
17,351.1
23,379.7
38,174.0
1. For more information, refer to the Company section.
2. CMDCA ­ Municipal Councils of Rights of Children and Adolescents.
3. CONDECA ­ State Council of Rights of Children and Adolescents.
Competitive Advantages 27
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:44 PM Page 27
background image
28
Natura Annual Report 2006
Corporate
Governance
In 2006, Natura continued to streamline its corporate
governance. Ongoing progress marks the history of our
governance, which began to take shape in the mid-1990s.
The company going public in 2004 and the trading of
company shares on the New Market ­ which is the
highest corporate governance level of the São Paulo
Stock Exchange ­ crowned a steady developmental
process, including the creation in the 1990s of the
Board of Directors and its subsidiary committees, which
remain active.
On the New Market, companies agree to issue only
voting shares and to keep a minimum of 25% of them
in circulation, in addition to guaranteeing minority
shareholders the same terms obtained by majority
shareholders in any transfer of control.
In 2005, it was named the first President and CEO from
outside the group of controlling shareholders. Thus,
separation of the management and ownership of the
company was completed. The founding shareholders
participate on the Board of Directors, which is comprised
of two more outside directors and is advised by four
committees: Audit, Risk Management and Finance,
Organization and People, and Corporate Governance.
In 2006, the Ethics Committee was created to hear
and evaluate specific cases that are beyond the scope
of the Ombudsman.
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:44 PM Page 28
background image
Corporate Governance 29
Heriovaldo Silva -
General Manager of the Peru Operation
Italo Flammia -
Information Technology Director
Joel Ponte -
Director of Development of Sub-brands
and Consumer Science
Jorge Casmerides -
Financial Director for Latin America
José Páez -
General Manager of the Mexico Operation
Marcello Rodrigues -
Director of Supplies
Marcos Egydio Martins -
Director of Sustainability
Marcos Vaz -
Director of Technical Services
Moacir Salzstein -
Director of Strategic Planning
Mônica Gregori -
Business Unit Director
Pedro Villares -
Director of Operations in Latin America
Renata Ribeiro -
Director of International
Business Development
Renato Abramovich -
Sales Director
Roberto Zardo -
Customer Services Director
Rodolfo Guttilla -
Director of Corporate Affairs
and Government Relations
Valéria Grossmann -
Business Unit Director
Victor Fernandes -
Director of Development
Members of the Executive Committee,
from left to right: Alessandro Carlucci,
Paulo Lalli, Mauricio Bellora, David Uba,
Moacir Salztein, Eduardo Luppi,
Cláudia Falcão and Pedro Vilares
Management Board
Alessandro Carlucci -
President and CEO
David Uba -
Vice President of Finance and Information
Eduardo Luppi -
Vice President of Innovation
Maurício Bellora -
Vice President of Brazil Operations
Paulo Lalli -
Vice President of Operations and Logistics
Andréa Sanchez -
Brand Director
Angel Medeiros -
Logistics Director
Antônio Siqueira -
Legal Director
Arno Araújo -
Sales Director
Cláudia Falcão -
Organization and People Director
Daniel Gonzaga -
Research and Technology Director
Denise Figueiredo -
General Manager of the France Operation
Denise Alves -
Business Unit Director
Eduardo Costa -
Product Marketing Director
Eduardo Zornoff -
Commercial Innovation and
Relationship Marketing Director
Fernando Mesquita -
Corporate Governance Secretary
Fernando Pantaleão -
Director of New Operations
Flávio Pesiguelo -
Human Resources Director
of the Brazil Operation
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:44 PM Page 29
background image
30
Natura Annual Report 2006
Risk Management
Our risk management system covers primarily financial
risks and risks regarding products, safety, information
technology, the environment and consistency between
values and practices. During this fiscal year, we initiated
procedures to place this management within a spectrum
of impact/probability. For very high-impact risks we
developed our own methodology of control and
management. For low- and medium-impact risks, we
continue with traditional processes, highlighting the role
of internal auditing and a tactical and operational risk
management policy that is being gradually improved.
We have a specific risk management area that is
coordinated by the Risk Management Committee,
which is an arm of the Board of Directors.
Financial Risks
We monitor exchange-rate risk by allowing limited and
minor impacts on the company's profit in the event of an
abrupt alteration of the correlation between the real and
strong currencies.
This evaluation may result in, for example, the decision
to purchase dollars on the Mercantile and Futures
Exchange (BM&F) as protection against the impact on
the company's results of an eventual, more pronounced
exchange-rate variation on raw materials, whose prices
follow the fluctuation of strong currencies. Such
operations are exclusively technical ­ in no event are
we trading on the BM&F in a speculative fashion.
Debts in foreign currencies are largely protected by
exchange-rate hedge operations that are consistent with
the policy of limiting any impact on profits.
Products
Natura has a product safety committee, which includes
participation of the office of the vice president of
research and development, scientists, physicians and
specialized consultants. The committee defines product
safety policies and monitors the toxicological assessment
of all the components used in the formulas (GRI PR1).
Information Technology
The entire information technology infrastructure is
outsourced. We have a Contingency Data Processing
Center to guarantee the continuity of business even in
the case of an accident. There are also processes and
infrastructure to protect against infiltration of our
information systems.
Environment
In 2006, we obtained re-certification according to NBR
ISO 14001, on the basis of which we maintain the Natura
Environmental Management System. With the system, we
monitor environmental risks.
Shareholder Structure
The year 2006 was marked by initiatives designed to
increase liquidity of the company's shares. In order to
increase the number of shareholders, at the Special
Shareholders' Meeting of March 29 a split of shares in
the proportion of 1:5 was approved, with the resulting
adjustment of the price of the master lot on the stock
exchange.
At the end of the fiscal year, the number of Natura's
shareholders totaled 9,705*, of which 89% are individuals.
Compared to 2005, the number of shareholders increased
by 258%, and individual shareholders increased by 290%.
*Excludes treasury shares and company shareholders holding more
than 5% of capital stock.
The increased financial volume of Natura's shares
traded over the last two years points to the increased
liquidity of securities, as shown in the table below. The
daily average volume of our shares traded increased
from R$ 5.5 million in 2005 to R$ 14.7 million in 2006,
reflecting an increase of 168%.
2005
2006
Total Volume Traded R$ million*
1,357.2
3,592.4
*Total financial volume traded with NATU3 shares on the Bovespa.
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:44 PM Page 30
background image
With the increased liquidity, Natura's shares, which were
already listed on the IBrX-100 (the index that lists the
100 most liquid shares on the Bovespa), the Special Tag
Along Stock Index (ITAG) and the Special Corporate
Governance Stock Index (IGC), were included on two
more stock indices of the Bovespa: the Ibovespa and
the IBrX-50 (which lists the 50 most-liquid securities on
the Bovespa).
Moreover, for the second consecutive year Natura's
shares continued to be listed on the ISE ­ Corporate
Sustainability Index of the Bovespa. Since 2005 the
company's securities have also been included on the
theoretical portfolio of the Morgan Stanley Composite
Index (MSCI), which is a reference index for foreign
investors.
Stock valuation during 2006 was another positive factor,
as shown in the following graph:
Natura Appreciation (Natu3) vs. Ibovespa Base 100
(5/25/2004)
On December 31, 2006, Natura's capital was
comprised of 428 million shares of common stock,
distributed as follows:
Shareholders
Number of Shares
Percentage
Controlling Shareholders
313,219,430
73.15%
Treasury Shares
679,317
0.16%
Managed shares
4,473,330
1.04%
Shares in Circulation
109,821,383
25.65%
Total Shares
428,193,460
100%
Remuneration to Shareholders
Natura's bylaws establish an obligatory minimum
dividend of 30% of adjusted net income. The company's
Board of Directors approved a dividend distribution
policy corresponding to 45% of adjusted net income.
Natura already paid 2006 dividends, plus interest on
equity capital in the amount of R$ 140.6 million.
The Board of Directors sent a proposal to shareholders
at the Regular Shareholders' Meeting on April 2, 2007,
for payment of additional dividends in the amount of
R$ 213.8 million, bringing the net total to R$ 354.4
million. These amounts correspond to 77% of
consolidated adjusted net income in 2006.
Investor Relations
Our tendency toward open dialogue with our publics
is also expressed in how we relate to shareholders and
potential investors in our attitude of availability to all
our publics.
We encourage shareholder participation in our meetings
and in the quarterly disclosures of results. On these
occasions, shareholders can dialogue directly with the
company's management, which always attends our events.
As it has been doing since the company went public,
this year Natura organized meetings with the Association
of Capital Market Analysts and Investment Professionals
(APIMEC), the National Investor Institute (INI), and it
participated in the Expomoney event, using both direct
communication as well as other instruments in its
communication with various markets, for example the
IR website (www.natura.net/investidor) .
In events with institutional investors, Natura attended
the major conferences of international financial
institutions, highlighting presentations it made to groups
of global investors in conferences in Paris (France) and
New York (USA).
Corporate Governance 31
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 6:37 PM Page 31
background image
32
Relatório Anual Natura 2006
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:44 PM Page 32
background image
Results 33
The historical growth trend of the markets in which
Natura operates continued in 2006 at rates much
higher than the average of other sectors in the Brazilian
economy. The nominal growth of the cosmetics,
fragrances and personal hygiene sector was 13.4%,
according to the Brazilian Association of the Personal
Hygiene, Perfume and Cosmetics Industry (Abihpec).
According to the Brazilian Direct Sales Association
(ABEVD), the direct sales sector posted growth of
18% in relation to 2005.
At Natura, we again reached the end of the fiscal
year with significant growth and profit indicators.
Our consolidated gross revenues were R$ 3.9 billion,
a 19.9% increase over 2005, which, as in the previous
year, exceeded the growth rate of our target market. In
Brazil, our market share climbed to 22.8%, versus 21.4%
in 2005. This growth was due in part to the efforts of
our Consultants, who this year totaled 561,000, 16.2%
more than in 2005. In international operations, gross
revenue increased 44.3% and the number of
Consultants exceeded 56,000, representing growth
of 49.7% over the previous year.
In 2006, our EBITDA totaled R$ 654.5 million, 16% higher
than in 2005. The net income of R$ 460.8 million grew
16.1% in the period. EBITDA and net profit margins
were 23.7% and 16.7%, respectively, slightly lower than
the 2005 numbers of 24.7% and 17.4%. This drop is
partly due to the planned increase of investments in
the company's internationalization, both in the internal
structure and in the start-up of new operations, and
partly because the sales performance of the last quarter
of 2006 was lower than our forecasts.
Results
Change in Consolidated Gross Income (R$ million)
CAGR (2004 - 2006) = 23.8%
Change in Market Share (%)
Change in EBITDA (R$ million)
CAGR (2004 - 2006) = 23.1%
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 8:03 PM Page 33
background image
34
Natura Annual Report 2006
This fiscal year we made significant investments in fixed
assets. The total was R$ 193.6 million, 73.4% greater than
the R$ 111.6 million reported in 2005. The funds were
used primarily to expand the productive capacity of
Cajamar, São Paulo, and in the new soap factory in
Benevides, Pará. They were also used in the start-up
of construction of the new research and development
center in Campinas (SP), and in Information Technology.
The Cost of Goods Sold (COGS) was 32.3% of net
earnings, slightly higher than the 32% of 2005. Sales and
administrative expenses also posted a growth in 2006,
going from 44.3% in 2005 to 45.5%.
One of the pillars of our company operation is the
integration of environmental and social results into
the financial results, some events in 2006 deserve to
be highlighted. In the environmental arena, we
progressed in several processes, such as the
implementation of a system to analyze emissions and
identify opportunities to reduce gases from the supply
chain to final disposal, and to manage action plans, with
the goal of becoming "carbon-neutral" by 2008, thereby
mitigating and offsetting the environmental impact of all
our operations.
The consumption of water per unit sold fell 7% and
the average water reuse index fell from 55% to 42%.
Our energy consumption per unit of product sold
decreased 1% in 2006.
The share of refills per items sold in Brazil rose from
17.4% to 19.8%, which represents a significant
reduction in the environmental impact of our products,
considering that the average mass of refill packaging is
54% less than that of regular product packaging. Also
because of refills, we achieved a 7% reduction in the
average environmental impact from our products sold
and support materials by declared content.
In the social realm, the voluntary sale of products in
the Crer para Ver program totaled R$ 5.4 million in
2006, a growth of 76.9% over 2005. These funds were
earmarked to various educational projects. The Youth
and Adult Education Campaign, developed in
partnership with the Ministry of Education, reached
the significant milestone of almost 79,000 enrollments
and re-enrollments nationwide.
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 6:37 PM Page 34
background image
Results 35
Main Events
Highlights
· Inauguration of an advanced research center
and the start of direct sale trials in France.
· Start-up of construction of a research
and technology center in Campinas (SP),
with capacity for almost 300 researchers.
· Elimination of animal testing.
· Inauguration of Casa Natura in Campinas (SP).
· Growth of 44.3% in gross revenues of
international operations.
· Expansion of distribution center in Matias
Barbosa (MG).
· Launch of the Natura Diversa line, with
sustainable use of biodiverse ingredients
and innovation in the use of refills. The
number of launches during the year was a
record 225 items.
· Reduced turnover in Brazil, from 7.6% in 2005
to 6.7% in 2006.
· Organization of Natura Mundi, a project
developed to guarantee efficiency in the
shared management system, even with the
large growth of employees on staff.
· Start-up of operations of the factory in
Benevides (PA). The new unit innovates in
the application of sustainable development
in directly acquiring fruits and seeds from a
network of local family-based farmers for the
manufacture of plant-based raw materials.
· Launch of Revista Natura, with 2 million copies
distributed each sales cycle in Brazil
and in international operations, published on
recycled paper and, in addition to the
catalogue of products, with conceptual
editorial content.
· Pioneering profit-sharing agreement in Brazil
based on access to traditional knowledge
associated with genetic heritage, signed
with the Herb-Producers Association of the
Ver-o-Peso Market of Belém (PA).
· 78,900 enrollments and re-enrollments in the
Youth and Adult Education program, promoted
by Natura Consultants.
Challenges
· The decline in the approval index in the
organizational climate survey in Brazil, from
70% in 2005 to 69% in 2006, indicates the
need for continuity of an effective action plan
in the medium and long term.
· Economic-financial results for the fourth
quarter were below expectations, indicating
opportunities to improve the company's
profitability.
· Increase in the number of terminated calls
to Natura's Customer Service Center (SNAC)
during the transition period to a new service
provider.
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 6:37 PM Page 35
background image
Awards and
Recognition
Natura's activities and its ethical and transparent
relationship with its various publics have
positively impacted society. In 2006, we received
the following awards and recognitions, among
others:
Best and Biggest
DCI Award
São Paulo ABERJE Award
The Best Companies of Dinheiro
Valor 1000 Award
Annual Balance Sheet Award
FGV Corporate Excellence Award
IR Magazine Brazil Awards
Best Companies to Work At
The Best Companies to Work at in
Latin America
MOST ADMIRED COMPANY
NATURA WAS ONCE AGAIN CONSIDERED
THE MOST ADMIRED COMPANY IN BRAZIL
BY 2,000 EXECUTIVES CONSULTED IN A
SURVEY OF CARTA CAPITAL MAGAZINE
AND THE INTERSCIENCE INSTITUTE.
WE BELIEVE THAT THIS RECOGNITION
IS PARTIALLY DUE TO THE FACT THAT
WE TAKE ADVANTAGE OF EVERY
OPPORTUNITY TO COMMUNICATE AND
DISSEMINATE OUR VISION OF THE WORLD,
IN ADVERTISING CAMPAIGNS, MARKETING
ACTIVITIES, SPONSORSHIPS AND
COMMERCIAL OR INSTITUTIONAL
PUBLICATIONS.
ON-LINE CONTENT
ON-LINE CONTENT
The complete list of awards and recognitions
received by Natura in recent years is available
in the on-line version of this report at:
www.natura.net/relatorio/reconhecimentos
36
Natura Annual Report 2006
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 6:39 PM Page 36
background image
Main Performance Indicators
2004
2005
2006 2007 Goals
Page
Economic-Financial Performance
32,106
Change in Consolidated Gross Income (R$ million)
2,539.6
3,243.6
3,890.0
Change in EBITDA (R$ million)
431.7
564.4
654.5
Change in EBITDA Margin (%)
24.4
24.7
23.7
Change in Net Revenues (R$ million)
1,769.7
2,282.2
2,757.0
Consolidated Business Volume (R$ million)
3,531.1
4,496.2
5,407.2
Net Profit (R$ million)
300.3
396.9
460.8
Distribution of Resources to Shareholders (R$ million)
(6)
(GRI EC1)
216.3
319.4
359.4
Employees
42
Distribution of Resources to Employees (R$ million) (GRI EC1)
247.3
306.4
379.7
Number of Employees
3,555
4,128
5,130
Percentage of Employees with Disabilities (%)
(1)
3.6
3.6
4.2
Investment in Education and Training (R$ thousand)
7,875
12,777
16,446
Climate Survey ­ Approval Index (%)
(1)
73
70
69 To reach 72% satisfaction

Consultants
54
Distribution of Wealth to Consultants (R$ million) (GRI EC1)
1,059.3 1,311.7
(5)
1,583.9
Number of Natura Consultants (thousands)
433
519
617
Number of Enrollments in EJA (Youth and Adult Education)
(1)(3)
N.A. 66,660
78,936
Net Proceeds from the Crer Para Ver Program (R$ thousands)
(1)
2,971.8
3,041.7
5,382.4
Satisfaction ­ Approval Index (%)
(1)
89
90
(9)
90
Quality of Relationships (%)
(1)
N.A.
(2)
90
89 To maintain 89% satisfaction
Consumers
62
Number of Products Launched
(1)
182
213
225
Investment in Innovation (R$ million)
47.4
67.1
87.8
Satisfaction ­ Approval Index (%)
(1)
96
98
97
Suppliers and Supplier Communities
70
Distribution of Resources to Suppliers (R$ million) (GRI EC1)
1,365.9
1,731.7
2,132.3
Percentage of Suppliers Self-Evaluated in Quality,
Environment and Social Responsibility (%)
(1)
N.A.
(2)
30
93 100%
Percentage of Suppliers Inspected in Quality, Environment
and Social Responsibility (%)
(1)
N.A.
(2)
15
24 35%
Satisfaction ­ Approval Index (%)
(1)
93
83
87 To reach 89% satisfaction
Surrounding Communities
80
Purchases from Cajamar Suppliers (R$ million)
8.87
23.94
25.69 To increase by 25%
Purchases from Itapecerica Suppliers (R$ million)
1.70
0.27
0.55 To increase by 100%
Purchases from Benevides Suppliers (R$ million)
N.A.
(8)
N.A.
(8)
0.44 To increase by 60%
Government and Society
88
Distribution of Wealth to the Government (R$ million) (GRI EC1)
547.80
727.20
817.14
Investment in Corporate Responsibility (R$ thousands)
(1)
(GRI EN30)
17,351.0 23,379.7 38,174.0
Investment in Sponsorships (R$ thousands)
(1)
3,290.9
5,438.0
6,976.4
Environment
96
Water
Consumption of Water per Unit Sold (L/un)
0.667
0.633
0.589 To consume a maximum of 150,042 m³
Percentage of Water not Included in Product (%)
90.2
89.1
88.5
Energy
Total Energy Consumed per Unit Sold (kjoules/un)
603.7
551.8
546.5 To consume a maximum of 129.3 x 10¹² joules
Waste
Total Weight of Waste per Unit Sold (grams/un)
(7)
25.7
27.7
28.3
Percentage of Waste Recycled (%)
73.4
81.1
84.1 87%
Greenhouse Gas Emission
Tons of CO2e Emitted (ton)
(4)
N.A.
(2)
107,525 120,492 To complete the emissions inventory in all
processes and implement a plan to be carbon-
neutral by 2008
Biodiversity
Number of Assets Certified (un)
8
16
22 26
Percentage of Total Species Certified (%)
23
46
63 74%
Impact of Products
Average Environmental Impact of Packaging -ACV (mPt/kg)
N.A.
(2)
89.3
83.2 To include a table with environmental data
of all products launched and new packages
starting from second half of year
Percentage of Refills of Items Sold (%)
(1)
15.3
17.4
19.8 20%
1. Indicators regarding the Brazil operation. 2. Indicator was revised in 2005. 3. Includes number of enrollments and re-enrollments during the year. EJA activities began in 2005. 4. The 2005
figure refers to emissions from the Brazil Operation. The scope was expanded in 2006.
5. The figure published in the previous report on pages 53 and 98 was incorrect. The correct amount
was published on page 138 of the same report.
6. The figure released in previous years referred to the total net income generated. We believe that the value of dividends and interest on equity
capital better reflect the resources distributed to shareholders.
7. The data reported in previous editions were incorrect due to problems in the data-collection system; now they are corrected.
8. The operation in Benevides began in 2006. 9. In last year's report this figure was published as 91%.
Main Indicators
Results 37
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:45 PM Page 37
background image
38
Relatório Anual Natura 2006
Members of the extractive community
of São Francisco do Iratapuru, Amapá
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:45 PM Page 38
background image
Strategies and Challenges 39
The excellent financial, social and environmental
indicators that we have obtained in recent years, as
well as the acceptance of our value proposition in Brazil
and abroad, lead us to believe that there are sufficiently
favorable conditions for Natura to continue growing. At
the same time, we need to move forward in consolidating
the investments and projects that have sustained our
vigorous growth of recent years. Thus, we will continue
to implement a strategy of growth and consolidation
based on the following guidelines.
Considering the positive results in Argentina, Peru and
Chile, which are the result of strong acceptance of our
brand and the direct sales channel, we will continue to
grow and more quickly seek the breakeven point in these
operations, demonstrating that we have a profitable and
reproducible business model. We will continue to invest
in the Mexican operation, since the strategy has proven
itself sound as evidenced by greater-than-expected
growth levels, and we will consolidate Natura's presence
in the region by starting operations in Venezuela and in
Colombia, also in 2007.
Moreover, we will continue to sound out new markets
and, as disclosed, we have begun planning to start
operations in the United States and in Russia in 2008.
Therefore, Natura's experience in France will continue
to be a great source of learning.
We will continue to grow in the Brazilian market,
maintaining the innovative spirit that defines our company.
As a result of increasing competition in this market and of
our relevance in it, we will need to be even more efficient
and creative in our marketing activities, with an increased
balance between short- and long-term operations. In
recent years we have invested in the expansion of our
administrative structure to more autonomously and
efficiently manage our operations ­ in Brazil, which will
continue to finance all our initiatives in the coming years,
and international operations, which represent the seeds
of our future growth. Beginning in 2007, we will maintain
this structure. We will incorporate gains of scale, and we
will also explore opportunities for productivity gains in
our main operating processes.
In terms of the environment, we will continue mitigating
and, where possible, eliminating harmful impacts to the
environment, with the goal of becoming "carbon-neutral"
by 2008. Keeping in mind our large-scale use of
biodiverse Brazilian resources, we will continue to dedicate
funds and the energy to use them in a sustainable fashion,
in strict partnership with the farming and extraction
communities with which we maintain relationships. In the
social realm, our focus will continue to be on improving
the quality of relationships and expanding the distribution
of resources to all the publics in our business chain.
Strategies
and Challenges
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:45 PM Page 39
background image
Glaucia Lima, consultant,
and Katia Mitiko, customer
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:45 PM Page 40
background image
Our reason for being is to create and sell products that
promote Well-Being / Being Well, which is the harmonious
relationship of the individual with himself, with others and
with the world of which he is a part.
Starting from this premise, we seek to establish ethical
and transparent relationships that promote open and frank
dialogue. This practice is what defines our activities in the
market and vis-à-vis society.
Reputation
With the press, we obtain positive, wide-ranging exposure in
publications and have a good relationship with professionals in
the media. In a survey conducted with 131 journalists in 2006,
the overall assessment of the Natura-press relationship was
considered excellent and good by 90% of those interviewed.
In the same year, 26 foreign journalists visited Natura and the
communities with which we have relationships, and wrote
articles in well-known publications, such as England's Financial
Times and France's Le Monde.
We are also developing our relationships with the
academic world. In 2006, we had cases created by Harvard
University, London Business School and by Institut Européen
d'Administration des Affaires (INSEAD), in addition to dozens
of others, accepted and studied at first-rate Brazilian and
international schools.
Within the sphere of Non-Governmental Organizations,
our Annual Report appeared, for the second time,
among the 50 best in the world, taking 24th place in the
ranking conducted by SustainAbility, with the support of
Standard & Poor's.
The following is a list of commitments that illustrate how
Natura strives to establish and maintain good relationships
with its principal publics.
Quality
of Relationships
608488_Diferenciais.qxd:608488_Diferenciais 4/2/07 4:45 PM Page 41
background image
Sales promoters of Natura
in the Northeast Market
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:39 PM Page 42
background image
Employees
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 3:52 PM Page 43
background image
OURCOMMONFUTURE
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 3:54 PM Page 44
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 3:57 PM Page 45
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 3:57 PM Page 46
background image
"For me, Natura is a model and example of management and I am extremely
proud to work here. I recently had the opportunity to visit a public school in
the Metropolitan Region of Recife with my entire team, which was supported
by the Crer para Ver project.
It was impressive how the students and teachers welcomed us. They showed
off their new facilities equipped with resources generated by Consultants: a
library, a reading room, and a complete computer laboratory.
One of the things I learned at Natura is to practice what we preach: we are
encouraged to protect the environment. I changed, and I changed my family.
We save energy, we don't waste water, and we recycle. They're small steps,
but if everyone did the same, we would definitely live in a better world."
Odilon Guerra,
sales manager, Northeast Region
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:39 PM Page 47
background image
48
Natura Annual Report 2006
Organizational Climate
Our employees are essential to creating the Natura
brand. They shape internal culture and, along with other
publics, transmit our values. Despite the efforts made
every year to guarantee the organizational climate, since
2005 we have not been able to reverse the downward
trend in the approval index of the annual organizational
climate survey.
Survey of Organizational Climate in Brazil (%)
1. Percentage of employees who gave a score of 4 and 5 (top 2 boxes) on a scale of 5 points.
This was our greatest focus in 2006 and represents
a daily challenge that demands attention from all the
company's managers. This is a challenge that increases
in direct proportion to increases in the number
of employees.
Number of Natura Employees (GRI LA1)
2004
2005
2006
Brazil
3,177
3,575
4,361
Argentina
205
237
262
Chile
70
93
122
Mexico
(1)
0
70
141
Peru
103
133
179
Venezuela
(1)
0
0
35
France
(1)
0
20
30

Total
3,555
4,128
5,130
1. Operations in Mexico and France began in 2005, and in Venezuela in 2006.
2007 COMMITMENT
TO REACH 72% SATISFACTION IN
THE EMPLOYEES CLIMATE SURVEY.
2007 COMMITMENT
TO REACH 72% SATISFACTION IN
THE EMPLOYEES CLIMATE SURVEY.
Other Employment Contracts
(1)
(GRI LA1)
2004
2005
2006
Interns
39
41
60
Temporary Workers
259
679
321
Third-Party
(2)
1,051
1,209
1,797
1. Includes operations in Argentina, Brazil, Chile, France, Mexico and Peru.
2. "Third-parties" are residents assigned to company facilities.
Specific actions that will take effect in the short term
were designed to involve certain groups of people in
improving the organizational climate, including dialogue
with the company's own president and CEO. And, since
the climate usually deteriorates when there is not enough
space, the facilities at Itapecerica da Serra were expanded
and a new building was inaugurated in Alphaville.
On the other hand, the drop in turnover despite the
growth of employees on staff at Natura in Brazil is
a positive sign of our human resource management.
Another sign of improved management is the increase
in the number of applicants for vacancies opened by
the company, which increased 49% over last year.
Turnover Rate of Employees (GRI LA2)
Operation
2004
2005
2006
Brazil 7.8%
7.6%
6.7%
Argentina
16.0%
11.9%
19.7%
Chile
(1)
20.2%
25.4%
31.6%
Mexico
(2)
N.A.
7.1%
36.3%
Peru
15.5%
21.7%
15.0%
France
(3)
N.A.
N.A.
6.6%
1. The current management goal of the operation in Chile is to reverse the historically
high turnover of its sales team.
2. In Mexico operations, which began in 2005, turnover increased significantly due to
the high number of dismissals of Sales Promoters; an action plan is already under way
to reduce this figure, such as investment in the development of Sales Managers.
3. Operations in France began in 2005.
608488_Publ_colaboradores.qxd:608488_Publ_colaboradores 4/2/07 6:44 PM Page 48
background image
NATURA'S
RELATIONSHIP PRINCIPLES
AND OMBUDSMAN
Natura's Relationship Principles seek to inspire
our attitudes by bringing the essence of our
brand ­ Reason for Being, Vision and Beliefs ­ as
concepts to our day-to-day activities. In practice,
they act as a tool to support decision-making.
The Ombudsman is a new channel of dialogue
and relationship that handles issues directly
related to the Relationship Principles, as well
as those not covered in management models.
Its mission is to receive statements from the
various publics and identify opportunities for
improvement in internal standards, processes
and policies.
Like the Principles, in this first phase the
Ombudsman is geared toward employees,
interns and third-party residents of the
Brazil Operation. Due to the fact that the
Ombudsman was implemented in October
2006, it is still too early to report the number
of cases of discrimination and the measures
or responses to cases of corruption; these
indicators will be included in the next Annual
Report (GRI HR4 / GRI SO4).
Employees 49
2006 COMMITMENT
TO PUBLISH THE RELATIONSHIP
PRINCIPLES DOCUMENT AND IMPLEMENT
THE OMBUDSMAN FOR EMPLOYEES.
GOAL ACHIEVED
THE RELATIONSHIP PRINCIPLES AND
THE NATURA OMBUDSMAN WERE
INTRODUCED AT THE SAME TIME.
2007 COMMITMENT
TO EXTEND THE RELATIONSHIP
PRINCIPLES AND IMPLEMENT THE
OMBUDSMAN FOR ALL THE PUBLICS
IN BRAZIL WITH WHICH WE INTERACT,
AND IN INTERNATIONAL OPERATIONS.
Diversity and Equal Opportunity
In terms of diversity, the highlight was the progress
we made in hiring disabled individuals. Despite a 22%
increase in the total number of employees, we still did
not reach the goal of 5% of individuals with deficiencies
on staff; this number remained at 4.2%.
Mention should also be made of the Professional Basic
Skills program, developed in partnership with SENAI,
to train individuals with disabilities to fill vacancies at
Natura and in the market in general.
2004
2005
2006
Number of employees
with disabilities
114
128
185
Percentage of
total employees
3.6%
3.6%
4.2%
Number of
disabled trained
0
20
84
In terms of multicultural issues, we intensified the search
for individuals of other backgrounds to fill positions of
all levels, and for the Trainee Program. In 2007, in an
attempt to increase our number of employees of African
descent, we also intensified our efforts to promote
partnerships with NGOs and to find new sources of
recruitment and selection.
2006 COMMITMENT
TO INCREASE THE SHARE
OF INDIVIDUALS WITH
DISABILITIES ON STAFF TO 5%.
GOAL NOT REACHED
DESPITE THE INCREASE OF 44.5%,
WE ARE STILL 0.8% BELOW OUR GOAL.
608488_Publ_colaboradores.qxd:608488_Publ_colaboradores 4/2/07 6:45 PM Page 49
background image
50
Relatório Anual Natura 2006
Exercise at work promotes
integration of employees
608488_Publ_colaboradores.qxd:608488_Publ_colaboradores 4/2/07 11:04 AM Page 50
background image
Employees 51
Breakdown of Employees in Brazil Operation
(GRI LA13)
Group
2004
2005
2006
Individuals with disabilities
3.6%
3.6%
4.2%
Women
62.2%
63.1%
63.7%
Black and mixed-race women
(1)
20.3%
24.0%
21.9%
Black and mixed-race men
(1)
31.7%
29.4%
21.8%
Over age 45
11.0%
11.0%
10.3%
1. Employees provided their own racial classification based on IBGE criteria, which is
the only official criteria available in Brazil. Natura acknowledges that this classification
does not respond to the claims for reclassification made by various social movements.
Monthly Wage Average of the Brazil Operation (in R$)
(GRI LA14)
Group
2006
Women (total)
9,585.51
Men (total)
11,676.82
Black and mixed-race women
(1)
4,755.50
Other women (not black or mixed-race)
(1)
9,538.13
Black and mixed-race men
(1)
3,943.53
Other men (not black or mixed-race)
(1)
11,850.01
Under age 45
2,764.99
Over age 45
4,654.32
1. Employees provided their own racial classification based on IBGE criteria, which is
the only official criteria available in Brazil. Natura acknowledges that this classification
does not respond to the claims for reclassification of various social movements.
Education
Another high point of the year was the 28.5% growth
in investment in Education and Training in the Brazil
operation. Natura's policy is to provide technical training
to perform one's duties and to support the personal and
professional development of its employees. In 2006, we
reached the annual average of 111 hours of training per
employees, which was much higher than the minimum
goal of 40 hours.
Investment in Education and Training of Employees
(R$ thousand)
Operation
2004
2005
2006
Brazil
(1)
7,875
12,674
16,286
Argentina
N.A.
10.4
78.8
Chile
N.A.
10.9
10.6
Mexico
N.A.
81.9
45.6
Peru
N.A.
N.A.
24.8
1. The figure includes training the Sales Force (Managers and Sales Promoters)
Average Hours of Training per Year, per Employees, by
Type of Activity, in the Brazil Operation
(1)
(GRI LA10)
Group
2004
2005
2006
Production
78
122
164
Administrative
61
86
82
Management
86
77
61
Upper Management
68
22
38
Total 70
101
111
1. This indicator includes the training of Sales Promoters and the
Natura Education Program.
608488_Publ_colaboradores.qxd:608488_Publ_colaboradores 4/2/07 11:04 AM Page 51
background image
52
Relatório Anual Natura 2006
Marcela Martinelli,
employee of the
Pele Technology platform
608488_Publ_colaboradores.qxd:608488_Publ_colaboradores 4/2/07 11:04 AM Page 52
background image
Employees 53
For additional information about Natura's relationship
with its employees, go to:
www.natura.net/relatorio/colaboradores
See International Operating indicators at
www.natura.net/relatorio/"country", for example:
www.natura.net/relatorio/argentina
GRI EC3 Coverage of obligations of benefits plan ·
GRI EC5 Change in ratio of lowest wage compared
to minimum wage · GRI LA3 Complete list of benefits
offered · GRI LA4 Percentage of employees whose
contracts are covered by collective bargaining agreements ·
GRI LA5 Period for notification of operational transfers ·
GRI LA6 Percentage of employees represented on
formal health and safety committees · GRI LA7 Typical
job-related injuries and days lost and absentee rate ·
GRI LA8 Programs related to serious illnesses ·
GRI LA9 Issues related to health and safety covered
by formal agreements with unions · GRI LA12 Analysis
of career development and performance · GRI LA13
Representation of minorities on staff by hierarchical level ·
GRI LA14 Average monthly wage by hierarchical level ·
GRI HR3 Training in human rights · GRI HR5 Freedom of
association and collective bargaining · GRI HR6 and HR7
Child and Forced Labor · GRI SO3 Anti-Corruption
training · GRI HR8 Percentage of safety personnel that
received training in aspects of human rights · Recruitment
and selection · Volunteer program · Diversity guide ·
Relationship Principles.
Employees Benefits (GRI LA3)
Natura offers all its employees an end-of-year bonus,
family health and dental insurance, and an education
incentive program (aimed at employees and their
children up to 21 years old), "Natura Education." The
Quality of Life Program can be broken down into four
parts: Physical and Emotional Health; Social and Family
Integration; Work Environment; and Culture and Leisure.
In terms of Physical and Emotional Health, the highlight
is the Pregnancy Program, which offers a prenatal care
and guidance course with a gynecologist, nutritionist,
dermatologist and physical therapist. In regard to Social
and Family Integration, we offer daycare services to
children of employees between the ages of 4 months
and 3 years and 11 months ­ two years more than
legally required. The complete list of benefits offered
by Natura is available in the on-line version of this
report.
Brazil Operation ­ Natura Education Program
(GRI LA11)
2004
2005
2006
Scholarships Awarded
230
377
768
% Scholarships Awarded /
Enrollments
63.0%
58.5%
67.8%
Courses
2004
2005
2006
Technical / professional
35
74
132
Languages
90
82
245
University entrance examination
0
0
12
University
100
119
204
MBA and graduate level
0
90
175
International Operations
Natura has no formal policy for local recruitment
of upper-management positions. However, in its
international operations, most of these positions
are held by natives; for example in France, 83% of
upper-management employees are French (GRI EC7).
ON-LINE CONTENT
608488_Publ_colaboradores.qxd:608488_Publ_colaboradores 4/2/07 6:45 PM Page 53
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:39 PM Page 54
background image
Consultants
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 3:57 PM Page 55
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 3:58 PM Page 56
background image
OURCOMMONFUTURE
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:00 PM Page 57
background image
"I've been a Natura consultant for almost 30 years. I think I was the first
in Santa Maria. I'm very happy to see the state of Natura today, because
in addition to good products, Natura cares about human beings and the
environment. Natura encourages us to raise socio-environmental awareness
among consumers, in the family and among friends. People like this attitude."
Sarah Jeaneth Parode Vargas,
Natura consultant
"I started as a Natura consultant in 1985. My sister was already selling
Natura products, and I wanted to make a little more money. Natura helped
me to support and educate my three daughters in medicine.
Natura cares about human beings and protecting the environment.
I promise you it's not just talk when I say I'm excited to be participating in
what is happening, when I see Natura giving work opportunities to cashew
gatherers, reusing water in its factory, and providing so many people the
opportunity to sell Natura's products and improve their income."
Fátima Elizabeth Parode Viegas,
Natura consultant
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:00 PM Page 58
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:39 PM Page 59
background image
60
Natura Annual Report 2006
Consultants are Natura's primary link to the final
consumer, and because of the unique and very close
connection they establish, they take much more than
our products to an enormous universe of women
and men. It is through these professionals that a sale
is transformed into a moment of inspiration, and
self-knowledge and engagement become social and
environmental causes; in sum, disseminating the concept
of Well-being / Being well.
We distributed R$ 1.6 billion to this public, 17.2%
more than in 2005. Productivity per Consultant was
R$ 12,500, slightly surpassing last year's good
performance of R$ 12,300.
Annual Average Number of Consultants Available in
Brazil and in Operations (in thousands)
2004
2005
2006
Brazil
407
483
561
Argentina
13
18
24
Chile
5
6
9
Mexico
(1)
N.A.
1
5
Peru
8
12
18
TOTAL
433
519
617
1. Sales in Mexico began in August 2005.
As a signatory of the Direct Sales Code of Conduct
for Direct Sellers and between Companies of the
Brazilian Direct Sales Association (ABEVD), Natura
trains its Consultants in direct sales activities and to
act in accordance with the company's ethical standards.
Mobilization
Our Consultants also perform the important role of agents
of social transformation through Movimento Natura,
whose actions cover the three axes of sustainability that
are identified by Our Business, Our Planet and Our People.
On the economic axis, Our Business, Natura promotes a
series of initiatives designed to recognize and value the
activity of Consultants. Our Planet expresses our concern
for the environment, and its primary action is to encourage
the purchase of refillable products*.
In the social realm, Our People, we created a campaign
mobilizing Consultants to encourage individuals who
never completed basic education to return to school
by enrolling in the Youth and Adult Education (EJA)**
in public schools throughout the country. In 2006, in
addition to the goal of 15,000 enrollments of the general
public, we proposed an additional challenge: that of
enrolling 1,500 Consultants in EJA.
Still in the social realm, another important initiative is
the incentive for the voluntary sale of products in the
Crer Para Ver Program**, the revenue from which is
reinvested to finance public education projects.
*Also see the "Environment" section.
**Also see the "Society" section.
2007 COMMITMENT
TO MAINTAIN 89% SATISFACTION
IN CONSULTANT CLIMATE SURVEY.
2006 COMMITMENT
TO ENROLL 1,500 CONSULTANTS IN
THE YOUTH AND ADULT EDUCATION
CAMPAIGN (EJA).
GOAL NOT REACHED
ALTHOUGH WE CAME IN BELOW THE
GOAL, WE ARE SATISFIED WITH THE 721
ENROLLMENTS, AS IT WAS THE FIRST YEAR
OF THE COMPAIGN AIMED AT THIS PUBLIC.
608488_Publ_consultoras.qxd:608488_Publ_consultoras 4/2/07 5:12 PM Page 60
background image
Consultants 61
Daily Average of Calls Taken / CAN
In 2006 we invested in upgrading the service and
changed the technological platform. This will increase
the capacity to receive calls, as well as personalize and
reduce service time. This change involved replacing the
service provider, and the transition, involving more than
2,000 operators, did create some difficulties (GRI PR5).
Natura Consultants Satisfaction Survey (%) (GRI PR5)
Jan/2005
Jan/2006
Jan/2007
Quality of relationship
N.A.
90
89
Overall satisfaction
(1)(2)
89
90
(1)
90
1. In the 2005 report, the figure was 91%.
2. Percentage of Consultants satisfied and totally satisfied (top 2 boxes).
Channels of Dialogue
Natura's relationship with Consultants is cultivated
several ways, the most direct being Natura Meetings,
which are held with Sales Promoters once every 21-day
sales cycle. Information about promotions arrives in three
ways: the Natura Consulting brochure, the main channel
of communication with Consultants; the Consulting
website; and Revista Natura which, although aimed at
the final consumer, is an important relationship and
sales tool for Consultants.
In 2006, the Consultant website was revamped with
updated visuals and easier navigation. It can be used
to plan sales (result X products to be sold); manage
information about clients; and log personal alerts ­ in
addition to the traditional operations of on-line service,
and sending orders and information about promotions
and products.
Orders Made through the Consulting Website
Another important channel is the Natura Service Center
(CAN), a free telephone service that logs orders and
helps manage Consultant satisfaction. By means of a staff
trained to provide information and to receive claims,
suggestions and complaints, CAN handles all the reports
and follows processes until their resolution.
For additional information about Natura's relationship
with Consultants, go to:
www.natura.net/relatorio/consultoria
See International Operating indicators at
www.natura.net/relatorio/"country", for example:
www.natura.net/relatorio/argentina
GRI PR5 Consultants' Evaluation of Natura Service
Center · GRI PR8 Claims and Privacy Policy ·
GRI HR6 Child Labor · GRI HR7 Forced Labor.
ON-LINE CONTENT
608488_Publ_consultoras.qxd:608488_Publ_consultoras 4/2/07 8:20 PM Page 61
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:39 PM Page 62
background image
Consumers
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:00 PM Page 63
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:01 PM Page 64
background image
OURCOMMONFUTURE
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:01 PM Page 65
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:01 PM Page 66
background image
"Natura products are uniquely Brazilian and I like Brazilian things. I also like
Natura's socio-environmental policy. The responsible use of cashews and
Brazilian flora should serve as a model.
The environmental future of the planet is worrisome, but if each of us
does a little, it will get better. Each one of us has to take some responsibility.
I recycle my household garbage and I try not to waste water.
I also believe that everyone should contribute with some community-minded
work. I work with children with cancer in a public hospital in São Paulo. Just
like individuals, companies have to get involved. I think Natura, in this aspect,
is an example to be followed."
Maria Amélia Julião,
Natura consumer
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:39 PM Page 67
background image
Respect for the consumer is one of Natura's principles.
Safety and suitability in the use of our products is
guaranteed by a structured process that adheres to
international regulations. The process is coordinated by
the Product Safety Committee, which is comprised of
professionals from various areas.
Before reaching the public, all of Natura's new formulas
are tested, and the tests are monitored by dermatologists
or, in some cases, by multidisciplinary teams. Tests of
children's products, for example, are also monitored by
pediatricians, and tests for products that are used around
the eyes are monitored by ophthalmologists (GRI PR1).
Every year we conduct extensive research on satisfaction,
investigating aspects related to products, prices and time
periods, relationships with our Consultants, delivery, post-
sale, customer service, and communication materials and
channels. In 2006, the research increased the number of
markets studied in the five regions of Brazil and adopted
a new scale to measure satisfaction.
Consumer Satisfaction Survey (%) (GRI PR5)
1. In studies conducted up to January 2005, the data refers to the percentage of
consumers "satisfied" and "totally satisfied" (top 2 boxes). As of 2006, the data
refers to the percentage of grades 8, 9 and 10 (top 3 boxes).
Revista Natura [Natura Magazine]
The highlight of the year was the launch of Revista
Natura
, replacing the Vitrine catalogue, which, in addition
to products, also includes editorial material. Printed on
recycled paper with a total print run of 2 million copies,
Revista Natura is the main medium of communication
with consumers.
Another important launch was the magazine
Natura Homem [Natura Man], geared toward male
consumers. To approach this group, specific marketing
actions were established and Consultant training
was initiated.
Natura complies with the standards of the Self-Regulated
Advertising Council (CONAR), and the codes of conduct
of the Brazilian Association of Advertisers and the
Brazilian Association of Consumer Protection, and words
all its promotions clearly and correctly, always honoring
what was advertised, even if the published price is lower
than the correct price. The error rate, in any case, is less
than 1% of all the information in promotions published
annually (GRI PR6).
68
Natura Annual Report 2006
2006 COMMITMENT
TO INTRODUCE GUIDELINES FOR
COMMUNICATION MANAGEMENT,
FOLLOWING AESTHETIC PRACTICES,
ETHICAL PRINCIPLES AND PRINCIPLES
OF TRANSPARENCY.
GOAL ACHIEVED
THE GUIDELINES WERE INCLUDED IN THE
ADVERTISING MANAGEMENT SYSTEM. WE
ALSO RELEASED THE GLOBAL PLAN, THE
BOOK AND THE ADVERTISING MANUAL.
608488_Publ_consumidores.qxd:608488_Publ_consumidores 4/2/07 6:54 PM Page 68
background image
Consumers 69
For additional information about Natura's relationship
with its customers, go to:
www.natura.net/relatorio/consumidores
See International Operating indicators at
www.natura.net/relatorio/"country", for example:
www.natura.net/relatorio/argentina
GRI PR2 Cases of non-compliance ­ health and safety ·
GRI PR3 Labeling · GRI PR4 Non-compliance in product
labeling · GRI PR5 Consumer Evaluation of Natura
Consumer Service Center (SNAC) · GRI PR7 Cases of
non-compliance ­ marketing communications · GRI PR8
Privacy policy · GRI PR9 Cases of non-compliance ­
supply and use of products.
Channels of Dialogue
Natura strives for ongoing excellence in providing
services that increase consumer satisfaction. To ensure
direct contact with our consumers, we maintain the
Natura Consumer Service Center (SNAC), which,
besides providing information, receives praise, suggestions
and complaints. Natura guarantees the privacy of its
customer information in its contracts with the outsourced
companies that provide customer service.
Concern for safety also resulted in the creation of the
Cosmetic Vigilance System, which is a pioneering effort
in Brazil to catch possible adverse reactions to products
during the marketing phase. Complaints are received by
SNAC and, if necessary, sent on to a dermatologist.
SNAC ­ Natura Consumer Service Center
(calls in thousands) (GRI PR5)
2004
2005
2006
Total 1,950
1,885
2,204
Answered
1,905
1,791
1,664
Not answered
45
94
540
The number of calls not answered is outside Natura's
standard of relationship with its customers. The table
above reflects calls abandoned while waiting during
the second half of 2006, when we were transitioning
customer service providers and upgrading the
technological platform.
We are currently working to restore and improve our
historical average and ensure the quality of service.
ON-LINE CONTENT
608488_Publ_consumidores.qxd:608488_Publ_consumidores 4/2/07 6:54 PM Page 69
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 70
background image
Suppliers and
Supplier
Communities
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:01 PM Page 71
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:02 PM Page 72
background image
OURCOMMONFUTURE
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:03 PM Page 73
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:03 PM Page 74
background image
"In my opinion, one of Natura's main differentiating factors is its greater
presence in the supplier communities. While the dialogue between partners
and with the communities can still be improved, Natura's relationship model
with the supplier communities is very interesting. There is growing and
positive global sensitization to the question of sustainability, but the focus is
still centered on the environment. Natura, as well as Beraca, is focused
primarily on the human being."
Helene Menu,
project coordinator
for Beraca
"Natura's presence contributed not only to improvements in planting
techniques and developing priprioca, but to improving all other related types
of crops. We also have a leadership training program in partnership with
Natura. I haven't even mentioned the wonderful personal friendships that
people make with Natura personnel. They charm us and we them. And
together we have developed several social projects."
Adriana Maria Gomes de Lima,
administrative coordinator of
Movimento de Mulheres das Ilhas de Belém
[Women's Movement in Ilhas de Belém]
"Our relationship with Natura is a long-term commitment based on shared
values. Like Givaudan, Natura is a company dedicated to ethical and social
actions in its business activities. We also have our concern for the human
being in common. The partnership with Natura allows us to conduct our
business with excellence, it reinforces our values, and makes the dream of
a better and happier world come true."
Attilio Pisa Neto,
vice president of fine perfumes
for Givaudan in Latin America
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 75
background image
76
Natura Annual Report 2006
Our suppliers are essential to the construction of the
sustainable business model that we are pursuing. That
is why we look for partners that share our beliefs
and values, and agree with our sustainability policies.
Therefore, in 2004, we created the QLICAR Program
(Quality, Logistics, Innovation, Cost, Contractual Terms,
Service and Traceability), which establishes relationship
principles guided by economic and socio-environmental
aspects that suppliers must follow to get certified.
Percentage of Suppliers Self-Evaluated
and Inspected in Quality, Environment
and Social Responsibility (GR1 HR2)
2004
2005
2006
Suppliers Self-Evaluated
0%
30%
93%
Suppliers Inspected
0%
15%
24%
In 2006, in continuation of the Program, we developed
a classification system based on innovative and logistical
aspects that is designed to better understand the supply
chain and implement specific training plans. With
equipment manufacturers, for example, we made an
effort to heighten their awareness so that they will
produce machines that consume less water, energy,
and refrigerant gas, and so that they will use recycled
materials in their manufacturing and packaging processes.
2007 COMMITMENT
TO GUARANTEE THAT 100% OF THE
SUPPLIERS EVALUATE THEMSELVES
REGARDING QUALITY, THE ENVIRONMENT
AND SOCIAL RESPONSIBILITY.
TO INSPECT 35% OF SUPPLIERS,
ESPECIALLY IN CASES OF POTENTIAL
SOCIO-ENVIRONMENTAL RISK.
2007 COMMITMENT
TO GUARANTEE THAT 100% OF THE
SUPPLIERS EVALUATE THEMSELVES
REGARDING QUALITY, THE ENVIRONMENT
AND SOCIAL RESPONSIBILITY.
TO INSPECT 35% OF SUPPLIERS,
ESPECIALLY IN CASES OF POTENTIAL
SOCIO-ENVIRONMENTAL RISK.
Outsourcing
The policy of industrial outsourcing requires taking
advantage of the productive skills and capacities of
suppliers, both domestic and foreign. The result of
this entire process will be to make outsourcing a
competitive advantage through the development
of lasting partnerships.
For every outsourcing activity we will guarantee the
correct and constant analysis of technical, strategic,
financial, social and environmental impacts. We have
already begun monitoring our main suppliers' indicators
for energy and water consumption. The main products
whose manufacture we currently outsource include our
lines of bar soaps, some of our liquid soaps, shampoos
and conditioners.
Evolution of Relationships with Suppliers
608488_Publ_fornecedores.qxd:608488_Publ_fornecedores 4/2/07 6:42 PM Page 76
background image
Suppliers and Supplier Communities 77
Supplier Communities
Natura's supply areas are selected on the basis of a
diagnosis that considers criteria such as current and
potential sustainable production, local development,
logistics and supplies, and institutional, regulatory and
legal issues. Once selected, we establish a transparent
relationship with the local communities and encourage
their development. In supplier communities with
biodiverse Brazilian assets, we support the development
of projects with funds that come from profit-sharing for
access to Brazilian biodiversity.
In communities that are considered to be priority
communities, we undertake the creation of a sustainable
development plan, which is contracted out through a
bidding procedure. The plan is solely to make access to
resources of the Natura Sustainable Development Fund
viable, and it must include a strategy that prevents the
community from developing medium- or long-term
dependence on Natura (GRI SO1).
Human Rights
All service contracts signed by Natura contain specific
clauses to prevent the practices of child or forced labor.
In 2007, the suppliers with a historically significant risk
of this type will be formally inspected. (GRI HR6 and
GRI HR7).
Channels of Dialogue
There is an ongoing effort to improve our communication
and relationships with our suppliers. We are investing in
improving internal processes to guarantee agility in the
registration and preparation of contracts, punctuality in
payments, and transparency and speed in communicating
the results of competitive bidding processes.
To accomplish this, in 2006 we created the Supplier
Liaison Office, which has already had positive results,
as shown in the graph below.
Overall Satisfaction ­ Approval (%)
(1)
1. Percentage of suppliers satisfied and totally satisfied (top 2 boxes).
2007 COMMITMENT
TO ACHIEVE 89% APPROVAL IN
THE SATISFACTION SURVEY.
2007 COMMITMENT
TO ACHIEVE 89% APPROVAL IN
THE SATISFACTION SURVEY.
608488_Publ_fornecedores.qxd:608488_Publ_fornecedores 4/2/07 6:43 PM Page 77
background image
78
Relatório Anual Natura 2006
608488_Publ_fornecedores.qxd:608488_Publ_fornecedores 4/2/07 9:45 AM Page 78
background image
Suppliers and Supplier Communities 79
In 2007, we will extend the QLICAR certification
program to these areas, and we will start periodic
evaluations to monitor the physical, human, natural,
social and financial capital ­ as well as the other features
evaluated in suppliers in general. This will be a formal
evaluation conducted during meetings in the presence
of all parties involved.
We are also investing in establishing an industrial facility
in Benevides in the Metropolitan Region of Belém, our
first facility outside the state of São Paulo. There, a soap
factory and an oil extraction factory will acquire oilseeds
and fruit from approximately 2,500 small producers
throughout 23 municipalities of the state for the
production of oils used in our products (GRI EC6 and
GRI EC9).
We will continue investing in the sustainable use
of Brazilian biodiversity, as we believe that it
represents a great competitive advantage for Brazil.
In 2006, we created the Supplier and Surrounding
Communities Liaison Office, whose main work during
the year was the negotiation of nine profit-sharing
contracts for presentation to the Genetic Heritage
Management Council (CGen), in accordance with
Provisional Measure 2186-16/2001.
We genuinely and intensely believe that "a good forest
is a standing forest," and that it is our duty to bequeath
a world that is ecologically balanced, economically
prosperous and socially just to future generations.
For additional information about Natura's relationship
with its suppliers, go to:
www.natura.net/relatorio/fornecedores
See International Operating indicators at
www.natura.net/relatorio/"country", for example:
www.natura.net/relatorio/argentina
Requirements of Natura Regulatory Integrated System for
suppliers · GRI HR1 Contracts that include human rights
clauses · GRI HR9 Indigenous rights · Water and energy
consumption of primary suppliers.
NATURA AND VER-O-PESO
MARKET
To nurture our technological platform, which is
based on the sustainable use of forest assets,
Natura invests resources in research and seeks
inspiration from many sources, such as
academic and popular literature, raw materials
suppliers, farming and extractive communities,
and local markets. With the goal of learning
about the management practices and cultural
traditions associated with developing essential
oils from priprioca, Natura has gone on many
missions, such as to Ilha de Silves in the state
of Amazonas, and the research center at
Universidade de Campinas (Unicamp) in
the state of São Paulo. We also visited the
Ver-o-Peso Market in Belém, Pará.
In October 2005, research conducted by
Natura was called into question by the
Brazilian Bar Association/Pará Division. Using
that as a springboard, and in keeping with our
transparency practices, we initiated dialogue
with all the social agents involved in the matter
and made our position public regarding the
inadequacy of legislation regulating access to
genetic heritage and fair compensation for
traditional knowledge.
In anticipation of legislative development, in
2006 Natura became the first Brazilian
company to sign agreements for remuneration
of widespread traditional knowledge,
establishing pioneering partnerships with
the Association of Herb Producers of the
Ver-o-Peso Market and the Association of
Producers of Boa Vista, both in Pará.
We have been a part of the life of Pará for
several decades now, and have contributed
to generating income for the many groups
of people with which we have relationships ­
including almost 20,000 Natura Consultants ­
and for society as a whole. In 2007 we will
sign a professional training agreement for
R$ 560,000 with the Association of Herb
Producers of the Ver-o-Peso Market that is
designed to improve the handling of herbs
(GRI EC8).
ON-LINE CONTENT
608488_Publ_fornecedores.qxd:608488_Publ_fornecedores 4/2/07 6:43 PM Page 79
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 80
background image
Surrounding
Communities
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:03 PM Page 81
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:05 PM Page 82
background image
OURCOMMONFUTURE
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:08 PM Page 83
background image
Rosemeire Anastácio de Jesus,
an inhabitant of Cajamar, embraces Mariluce Varalda
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:08 PM Page 84
background image
"Natura is very important, both to Cajamar and to the existence of our
organization. Mata Nativa [Native Forest] was the result of Natura coming
to Cajamar.
Natura is our oldest and most important partner. Natura gives us free
rein and really listens to us. We rely on Natura for the development of
our projects that spread our values, such as respect for diversity, solidarity
and the importance of citizen participation.
The way to reverse the deterioration of living conditions on the planet
is precisely that of investing in citizenship and in citizen participation in
community issues. It is even a question of need, because if the planet's
wealth is in the hands of a few, then everyone is in the same boat."
Mariluce Varalda,
founder and director of the
NGO Mata Nativa, in Cajamar
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 85
background image
86
Natura Annual Report 2006
Natura wants to be a part of the communities where it
is present, and in addition to increasing economic and
social development, it searches for measures that mitigate
the socio-environmental impact caused by its operations.
We try to have a positive influence on development in
the communities where this impact is stronger, as agents
searching for solutions for the future.
This is the case in the municipalities of Benevides in
Pará, of Cajamar and Itapecerica da Serra in São Paulo.
These are communities in which we develop and
support the introduction of Agenda 21 - the action
plan for sustainable development defined in the 2
nd
United Nations Conference on Environment and
Development, ECO-92.
Purchases from Suppliers of Surrounding
Communities (R$ million)
2004
2005
2006
Cajamar
8.87
23.94
25.69
Itapecerica da Serra
1.70
0.27
0.55
Benevides
(1)
N.A. N.A.
0.44
1. The operation in Benevides started in 2006.
2007 COMMITMENT
TO INCREASE PURCHASES
FROM LOCAL SUPPLIERS:
· 25% FROM CAJAMAR
· 100% FROM ITAPECERICA DA SERRA
· 60% FROM BENEVIDES
Cajamar, São Paulo
In Cajamar, the adoption of Agenda 21 is under the
leadership of a three-part group, comprised of
representatives from private business, civil society and
local government. In 2006, the group's main task was to
heighten the community's awareness of the importance
of its participation in forming the city's master plan, and
then to mobilize that plan.
For nine months, in a process coordinated by the local
Town Hall and with the support of the managing group,
information and ideas were collected, organized and
debated in all the districts. Approximately 1,300 people
participated in the process, with countless suggestions.
The result was a diagnosis of the demands of all the
districts that should be included in preliminary drafts
of the master plan, to be discussed in 2007.
Also worth note is the financing of a diagnosis of
the municipal education network undertaken by the
Education Planning and Research Laboratory of Unicamp,
which defined the municipal education indicators to be
used. In 2007, these indicators will be posted in high-traffic
public locations so that the community can track them
and suggest changes.
Another project that took shape in 2006 was the training
of local entrepreneurs to eventually become suppliers for
Natura. Three of them were already identified as potential
suppliers: a taxi cooperative, a motoboy [delivery boy on
motorbikes] cooperative, and a bakery of the Sítio Agar
agency, which takes in HIV-positive children (GRI EC6).
2007 COMMITMENT
TO INCREASE PURCHASES
FROM LOCAL SUPPLIERS:
· 25% FROM CAJAMAR
· 100% FROM ITAPECERICA DA SERRA
· 60% FROM BENEVIDES
608488_Publ_entorno.qxd:608488_Publ_entorno 4/2/07 6:42 PM Page 86
background image
Surrounding Communities 87
Itapecerica da Serra, São Paulo
In Itapecerica da Serra, Natura's activities take place
in the Potuverá neighborhood where its facilities are
located, with almost 10,000 inhabitants. There, we
invest in social leadership training courses, in order
to disseminate concepts from Agenda 21.
In cooperation with the Municipal Office of Planning and
the Environment, we support the technical training of
municipal managers of the municipal selective collection
program, and the creation of the group that will make
up the cooperative for door-to-door collection. In 2006,
we also supported the training of 39 of the city's public
schools that, monitored by a consulting firm specializing
in the field, implemented selective trash collection and
sustainable consumption projects.
Benevides, Pará
In 2006, we opened the Benevides Industrial Facility in
Pará, housing a soap factory and an oil extraction factory.
That facility will produce a good part of the plant-based
raw materials that we have used since 2005 to
manufacture all our soap lines.
The Benevides soap factory has innovated in
implementing sustainable development by choosing
a business model that supports relationships with the
communities, cooperatives and small-scale farmers
that produce the resources it uses. This benefits close
to 2,500 local producers in 21 of the surrounding
municipalities. As the project progresses, we will gradually
begin to directly acquire the fruits and seeds used in the
manufacture of the plant-based raw material (GRI EC6).
Its establishment supports our belief in sustainability and
shows that it is possible to generate business in which all
the parties benefit. The sustainable exploitation of native
species will increase their cultivation and contribute to
the preservation of these areas.
Good for the environment, good for our community
and good for our business.
608488_Publ_entorno.qxd:608488_Publ_entorno 4/2/07 9:21 AM Page 87
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 88
background image
Government
and Society
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:08 PM Page 89
background image
OURCOMMONFUTURE
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:11 PM Page 90
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:13 PM Page 91
background image
608488_Aberturas_PEQ.qxd:608488_Aberturas_PEQ 3/31/07 4:13 PM Page 92
background image
"Our partnership with Natura is less than one year old, but it has been very
productive and synergetic. We're learning with Natura and helping Natura
better understand the social transformation processes of youths in the
favelas [slums] and surrounding areas, which is our focus throughout Brazil.
Natura is the private company that seems most like an NGO in Brazil, and
as we want to transform AfroReggae into a socially minded company, we are
sensing that Natura's model, even though it is for-profit and ours isn't, is the
best model for us.
The violence that ravages our country is a reflection of the lack of investment
in the lives of individuals and communities. By investing in people and
communities, Natura does its part to make things better."
José de Oliveira Júnior,
executive coordinator of AfroReggae
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 93
background image
Government
Natura maintains an ethical and transparent relationship
with all spheres of power, and is a signatory of documents
and agreements that promote ethics in relationships
between business and government. In 2006, we released
our Corporate Policy of Financial Contributions to Parties
and Candidates, which prohibits the destination of any
financial resource or the like to parties or candidates,
during and outside the electoral period. Instead, we
decided to use funds to create and promote citizenship
programs such as the Responsible Vote campaign, which
targets employees, consultants and other publics with
which we have relationships (GRI SO6).
Although we have not yet published our policies on
corruption, graft and lobbying, we operate strictly within
current legislation. In 2006, no complaints or incidents
involving corruption, receipt or payment of bribes,
misconduct or conflict of interest in the exercise of
influence by any governmental entity were filed in
relation to Natura (GRI SO4 and GRI SO5).
The Governmental Relations area is the established
channel of dialogue, and our agenda includes topics of
both direct interest and large-scale social interest, such
as the sustainable use of biodiversity and the distribution
of profits resulting from its use.
This year we maintained our excellent relationship with
the Genetic Heritage Management Council (CGen),
which is an important agent in creating the regulatory
framework on biodiversity, and we made our perspective
regarding Brazilian legislation on this issue clear: it is still
inconsistent and important changes remain to be made.
Natura upholds the principles of the Biodiversity
Convention and specifies its position in favor of legislative
changes in its dialogues with the government and
with society.
To increase industry and sector competitiveness, we
participated in discussions of specific issues that are
related to our business through our associations with
sector entities, such as the Brazilian Association of the
Cosmetics, Toiletries and Fragrance Industry (ABIHPEC)
and the Brazilian Direct Sales Association (ABEVD).
94
Natura Annual Report 2006
Society
Natura believes that the value and longevity of
companies is related to their ability to contribute to
the evolution of society and its sustainable development.
In 2006, in fulfilling our role of an agent of social
transformation, we continued to develop several projects
that have social impact.
Education
The major highlight was the Youth and Adult Education
campaign (EJA)*, which was developed in partnership
with the Ministry of Education, and which reached
the milestone of more than 140,000 enrollments and
re-enrollments in public schools nationwide in the last
two years. The success of this mobilization led to the
development of another program, the Incentive to
Read Project.
Developed in partnership with the NGOs Ação
Educativa and Alfabetização Solidária, and Centro de
Estudos e Pesquisas em Educação, Cultura e Ação
Comunitária, through the PIL this initiative made 50
literary titles available to 1,500 public schools attended
by students enrolled in the EJA.
Mention should also be made of two teacher-training
projects. "Em Cada Saber um Jeito de Ser" is developed
by the Regional Institute for Appropriate Small Farming
and Animal Husbandry. It directly benefits 160 teachers
and indirectly benefits more than 3,700 students in the
Bahian cities of Sento Sé, Senhor do Bonfim and Filadélfia.
2006 COMMITMENT
TO OBTAIN 15,000 RE-ENROLLMENTS
IN YOUTH AND ADULT EDUCATION
(EJA) BY MEANS OF THE CONSULTANT
MOBILIZATION CAMPAIGN.
GOAL ACHIEVED
WE EXCEEDED ALL EXPECTATIONS AND
OBTAINED 21,847 RE-ENROLLMENTS AND
57,089 NEW ENROLLMENTS, FOR A TOTAL
OF 78,936.
608488_Publ_governo.qxd:608488_Publ_governo 4/2/07 5:33 PM Page 94
background image
Government and Society 95
"Roda Gaúcha" is developed by the Center for
Protection of Children's and Adolescents' Rights of Ijuí,
directly benefiting 235 teachers and indirectly benefiting
2,200 students in the state education network of Ijuí (RS).
In the field of higher education, the highlight is Natura's
support of the Ecological Research Institute (Ipê) in
creating and implementing a school to train leaders in
environmental conservation and sustainability. Located
in Nazaré Paulista, in São Paulo, the institution will offer
Masters degree-level courses in the areas of conservation
of biodiversity and sustainable development.
*See also the Consultants section.
Crer para Ver [Believing is Seeing]
The voluntary sale of products under the Crer para Ver
Program reached R$ 5.4 million in 2006, growth of
76.9% over 2005. Aside from the EJA projects, funds
were invested in primary and middle school teacher-
training projects, including the "Chapada Project."
The project directly benefits 378 education directors,
supervisors and coordinators in primary and middle
school education, who disseminate this knowledge to
a network of 5,000 teachers and 118,000 students in
the public schools in 27 municipalities of the Chapada
Diamantina region in Bahia.
Also within the scope of Crer para Ver, the second
edition of the "Crer para Ver ­ Inovando a EJA" award
was launched, which recognizes initiatives that help
improve the quality of the EJA. Of the 84 projects
submitted from various parts of the country, the
following were awarded: "Leitura e Informação" from
Tocantins; "Ler para Ver" from Paraná; and "O Tema
Gerador no Ensino de EJA" from São Paulo.
Sponsorships
In the cultural arena we chose to support initiatives that
provide visibility to Brazil's musical heritage. Natura Musical
is a cultural sponsorship program that identifies, supports
and highlights actions that represent the quality and
diversity of Brazilian music. This is the music that is sent
out to the world, valuing our roots and our way of being.
Sponsorships occur with the use of funds coming from
tax incentives, and projects are selected by means of
public bidding procedures, which are overseen by an
independent commission. In 2006, 23 projects were
sponsored, bringing to 60 the total number of projects
included since the start of the program.
Sponsorship of the tour "Nenhum Motivo Explica a Guerra,"
of the group AfroReggae, was the main highlight during the
year. The project traveled through seven Brazilian capital
cities, and in addition to the shows, it included workshops in
percussion, theater, street basketball, graffiti and a circus for
the police, needy and middle-class children.
In the area of sustainable development, we prioritize
initiatives that stimulate the creation of jobs and income,
and that promote the protection of degraded areas
and threatened species. In 2006, Natura signed a
program sponsorship agreement with ARPA to protect
500,000 square kilometers of the Amazon forest in
Brazil through actions to expand the infrastructure of
already-existing conservation units and to create new
conservation units.
Created in 2003, ARPA is a program of the Ministry of
the Environment (MMA) that was implemented by the
Brazilian Environmental Institute and Renewable Natural
Resources (Ibama) and by the state and municipal
governments of Amazônia, with support from the
Global Environment Fund (GEF), the World Bank, KfW
(German Development Bank), WWF-Brasil, the Brazilian
Biodiversity Fund (Funbio), GTZ (German Cooperation
Agency) and from civil society organizations.
For additional information about Natura's relationship
with the government and society, go to:
www.natura.net/relatorio/governoesociedade
See International Operating indicators at
www.natura.net/relatorio/"country", example:
www.natura.net/relatorio/argentina
Other projects sponsored and supported by Natura
in 2006 · Representations in entities of distinction and
associations ·
GRI EC4
Significant financial aid received from
government ·
GRI SO7
Unfair competition ·
GRI SO8
Non-compliance with laws and regulations · Relationships
with Society ­ Conferences held in 2006 · Natura
Campaign Donation Policy.
See additional information at www.natura.net/patrocinio
ON-LINE CONTENT
608488_Publ_governo.qxd:608488_Publ_governo 4/2/07 5:33 PM Page 95
background image
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 96
background image
Environment
608488_Aberturas_GDES.qxd:608488_Aberturas_GDES 3/31/07 3:40 PM Page 97
background image
98
Natura Annual Report 2006
Biodiversity
The sustainable use of biodiversity, based on reducing the
imbalance between the degree of exploitation of natural
resources and their regeneration capacity, is one of the
guiding environmental principles of Natura. To guarantee
that the inputs coming from Brazilian flora are extracted
in an environmentally correct and socially just way in the
locations of origin of each raw material, we created the
Asset Certification Program, which promotes sustainable
forest management and cultivation in the areas of native
forests and plants, in accordance with standards of
excellence approved worldwide.
Forest management is certified in accordance with
the principles and criteria of the Forest Stewardship
Council (FSC). Agricultural management is certified
in accordance with the principles and criteria of the
Sustainable Agriculture Network (SAN) and of the
Biodynamic Institute. The certification process for
the latter has three phases.
In addition to acting as a reliability indicator for the market,
the Certification Program is an important mechanism for
creating citizenship by valuing the inclusion of groups of
family farmers and traditional communities in the chain of
partners and suppliers. Thus, we create alternatives for
inclusion of this public in the business chain, generating
income and stimulating local organization (GRI EN12).
2006 COMMITMENT
TO INCLUDE SIX ASSETS IN PHASE 3
OF THE CERTIFICATION PROCESS.
GOAL ACHIEVED
THE FOLLOWING WILL GO TO PHASE 3:
LEMON GRASS, CHAMOMILE, BURITI,
COFFEE, CUMARU AND PRIPRIOCA.
WE NOW HAVE 22 ASSETS THAT HAVE
BEEN CERTIFIED, OR 63% OF THE TOTAL
OF 35 NATIVE OR EXOTIC SPECIES THAT
WE USE.
2007 COMMITMENT
TO INCLUDE FOUR MORE ASSETS IN
PHASE 3 AND OBTAIN CERTIFICATION
FOR 74% OF THE BIODIVERSE ASSETS
THAT WE USE.
As an environmentally responsible company, Natura
seeks to minimize its activities that could potentially
harm the environment, and to disseminate the practices
and knowledge it has acquired in the experience of
environmental management to other companies. Our
environmental policy includes responsibility toward
future generations, environmental education, and
management of the life cycle of products and services,
inputs and waste.
Inside our factories and offices, management of quality
and the environment is handled jointly by the Natura
Regulatory Integrated System (SINN). The system includes
aspects of management that were developed based on
ISO 9001:2000 and ISO 14001:2004 standards, in criteria
of excellence of the National Quality Foundation (FNQ),
and on best market practices. In 2006, our ISO 9001 and
14001 certifications were maintained.
In its use of biodiverse Brazilian assets, as one of its
business strategies Natura opted to invest in a platform of
products based on the sustainable use of natural resources
and on valuing regional and local cultural traditions ­ the
Ekos line. It was using this approach that in 2006 we
signed ground-breaking agreements with the Association
of Herb Gatherers of the Ver-o-Peso Market and the
Association of Producers of Boa Vista, of Acará, both in
Pará, and we became the first Brazilian company to offer
remuneration for widespread traditional knowledge.
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 98
background image
Environment 99
These partners are distributed throughout various
regions of Brazil. Some live in areas protected by
the National System of Conservation Units, such as
two extractive communities in the Amazon, namely
São Francisco, in the Iratapuru Sustainable Development
State Reserve in Amapá, and the communities of the
Médio Juruá Extractive Reserve in Amazonas
(GRI EN13).
In order to guarantee that suppliers honor these
sustainability principles, Natura supports the development
and introduction of organic and biodynamic production
models, sustainable agriculture and agroforest systems.
All of them use techniques that can help increase soil
fertility and preserve biodiversity, such as the ecological
management of plagues and diseases, crop rotation,
traditional management, use of green fertilization and
intercropping (GRI EN14).
Natura has various inputs and assets in its product lines
that come from Brazil's biodiverse assets, including the
Brazil nut and maté, which are on the list of species
threatened with extinction by IBAMA and by The World
Conservation Union (IUCN). Both species are acquired
by Natura in areas certified by the FSC that comply with
legal requirements, company and worker relationships
and environmental impacts. Moreover, we developed
a specific project to study the conservation of these
species, in partnership with the Brazilian Agricultural
Research Corporation (EMBRAPA) (GRI EN15).
Certifications
2005
2006
Total Assets Certified
16
22
Percentage of total
species certified
46%
63%
Greenhouse Gases
In fulfillment of our commitment stated in the last
Annual Report, in 2006 we implemented the Natura
Greenhouse Gas System. The system records emissions,
identifies opportunities to reduce gases from the supply
chain to final disposal, and manages action plans. This gives
us one more tool to continue to reduce impacts from
our operation. Thus, we have taken on the commitment
to make Natura's operations carbon-neutral by 2008.
A multidisciplinary group prepared the annual emissions
balance sheet. The principal results appear below
(GRI EN16 and GRI EN17).
2004
(2)
2005
2006
Total CO
2
e emissions (tons)
(1)
N.A. 107,525 120,492
1. CO
2
e (or CO
2
equivalent): measurement used to compare greenhouse gas
emissions based on each one's global warming potential.
2. Natura's Inventory of Greenhouse Gas Emissions was formulated in 2005;
thus, data from 2004 are not available.
The increase of emissions in 2006 is primarily due to
the expanded scope of the inventory, which started
including suppliers not inventoried in 2005, new facilities
operating in Brazil and international operations. The
increase is also due to the 17% growth in number of
units sold ­ which increases both the emissions of the
productive processes and the final disposal of products.
However, some suppliers implemented improvements
in their processes, which helped to reduce emissions
from the supply chain.
2006 COMMITMENT
TO IMPLEMENT THE NATURA
GREENHOUSE GAS SYSTEM.
GOAL ACHIEVED
SYSTEM IMPLEMENTED BASED ON
THE SCOPE OF THE 2004 GREENHOUSE
GAS PROTOCOL.
2007 COMMITMENT
TO COMPLETE THE INVENTORY OF
EMISSIONS IN ALL OUR PROCESSES AND
IMPLEMENT A PLAN FOR US TO BECOME
CARBON-NEUTRAL BY 2008.
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 99
background image
100 Natura Annual Report 2006
Percentage of CO2e ­ by Activity
(*) Fixed sources, exportation, business trips, treatment of effluents
Environmental Impact of Products
Since 2003, Natura has analyzed the environmental
aspects of its packaging by means of an assessment that
considers all the life-cycle stages (ACV) of packaging
materials, from the extraction of natural resources to
final disposal. In 2006, we progressed in how we monitor
the indicator: we started dividing the environmental
impact of packaging by its content.
In 2006, with the help of the entire supply chain,
we gathered a great deal of information about the
raw materials used by Natura. With this information
we were able to calculate new environmental
performance indicators for all the items in our
portfolio, complementing the life cycle analysis in
the product development process.
We are also committed to decreasing environmental
impacts calculated by the weighted average of products
sold. The average environmental impact of packaging by
quantity of product dropped 7% compared to 2005. In
this analysis we considered all the products sold in 2006
and our principal support materials, such as Revista
Natura
, Cardboard Boxes and Samples. (GRI EN26)
2004
2005
2006
Environmental impact of
packaging by quantity
of product (mPt/kg)
N.A.
89.3
83.2
Also in 2006, we created a pilot project to encourage
Consultants to start collecting packaging from their
clients in 2007, and to send it to recycling cooperatives
on collection trucks that have partnered with Natura.
Thus, in addition to reducing environmental impact, we
will foster social inclusion and the generation of income
(GRI EN27).
Refills
In yet another ground-breaking initiative, in 1983
Natura began to sell refills, whose average mass is
almost 54% less than that of regular packaging. Since
that time, 2,200 fewer tons of packaging have been
placed in the market. Consultants were extremely
committed to the refill sale campaign, which is part
of Movimento Natura, and is an important incentive
for the purchase of these products.
2007 COMMITMENT
STARTING IN THE SECOND HALF OF
THE YEAR, INCLUDE A TABLE WITH
ENVIRONMENTAL DATA ON THE
PRODUCTS IN ALL LAUNCHES AND
NEW PACKAGES.
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 100
background image
Refill Percentage on Items Sold (%)
2004
2005
2006
Brazil
15.3
17.4
19.8
Argentina
14.3
14.8
17.1
Chile
2.2
4.4
9.0
Mexico
(1)
N.A.
5.8
7.9
Peru
7.9
12.5
15.5
France
(1)
N.A.
8.2
19.5
1. Operations in Mexico and France began in 2005.
2006 COMMITMENT
TO INCREASE THE PERCENTAGE
OF REFILLS ON ITEMS SOLD IN
ALL OPERATIONS.
GOAL NOT REACHED
DESPITE THE INCREASE IN ALL THE
OPERATIONS, CHILE AND MEXICO DID
NOT REACH THE GOALS ESTABLISHED.
2007 COMMITMENT
TO INCREASE THE PERCENTAGE
OF REFILLS ON ITEMS SOLD IN THE
BRAZIL OPERATION TO 20%.
Environmental Impact of Transport
Because of the environmental impact from our
logistical processes, Natura decided to certify its
carriers to monitor their emission of greenhouse
gases. Through QLICAR, carriers are assessed and
scored on several aspects, such as the upkeep of
vehicles and fuel use.
In 2006, we implemented a project to convert the
fuel in the fleet of Transportadora Dias, our partner
servicing the region of the capital of São Paulo. The
fuel of its small-capacity vehicles was converted from
gasoline to natural gas (95%) and alcohol (5%)
(GRI EN29).
Environment 101
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 101
background image
102 Natura Annual Report 2006
Use of Water and Effluents
Natura's management of water use is based on
systematic measurements taken by water meters, mass
balance and weekly reports to the parties responsible for
usage. Despite the commitment by the user areas and the
monitoring of action plans by upper management, we did
not achieve the goals established.
This discrepancy is partially due to factors such as the
3.2% growth of the production volume, changes in the
mix of products and the learning curve for the factory's
new water purification system. These same factors also
contributed to our not reaching the goal of reducing
the volume of water not included in the product.
The measures adopted to reduce consumption include
not only the installation of more water meters to
monitor use more closely, but also several projects to
obtain optimum use of water in sanitary and factory
equipment cleanings. During the year we established
the reuse water project in Itapecerica da Serra, and we
obtained authorization to water the gardens of Cajamar
with recycled water.
2006 COMMITMENT
TO ACHIEVE TOTAL WATER USE
OF 138,540 CUBIC METERS.
GOAL NOT REACHED
TOTAL WATER USE REMAINED
2.4% ABOVE THE GOAL.
2006 COMMITMENT
TO REDUCE THE PERCENTAGE OF
THE VOLUME OF WATER NOT USED
IN THE PRODUCT TO 87%.
GOAL NOT REACHED
THE VOLUME OF WATER NOT INCLUDED
IN THE PRODUCT REMAINED 1.5% ABOVE
THE GOAL.
2007 COMMITMENT
TO USE A MAXIMUM TOTAL VOLUME
OF 150,042 CUBIC METERS OF WATER.
Water Use (m³) (GRI EN8)
2004
2005
2006
Total water use
116,367
136,677
141,883
Note: An increase of 52 m
3
/day to 160 m
3
/day was authorized at the
Itapecerica site.
Total Water Reuse and Recycling (GRI EN10)
2004
2005
2006
Recycled and reused water (m³)
29,065
48,760
40,209
Percentage of total reused
water treated in effluent
treatment station
39.5%
55%
42%
2004
2005
2006
Water not included
in the product (%)
90.2%
89.1%
88.5%
Significant Discharges in Water (m³) (GRI EN21)
2004
2005
2006
Total volume of effluents treated
82,786
93,402
101,740
Energy
Using specific software, the energy use management
system consolidates data gathered from various
measurement methods. In addition to energy use
itself, there is also information on demand, power and
voltage, among others. With this tool, data on energy
use can be given to the responsible parties to achieve
the goals. The use of LPG and diesel are also monitored
by meter readings.
2007 COMMITMENT
TO CONSUME THE MAXIMUM TOTAL
VOLUME OF 129.3 X 10¹² KJOULES
OF ENERGY.
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 102
background image
In 2006, actions to reduce energy use included the
installation of solar energy equipment in Cajamar for
heating water in the factories' restaurant and dressing
rooms. For 2007, we will develop studies and projects
for the use of liquefied natural gas in various internal
services, as well as biodiesel in generators and firewood
in furnaces (GRI EN5).
Direct Energy Consumption, Broken Down by Sources
(Joules)
(1)
(GRI EN3)
2004
2005
2006
Primary-source
electricity
79.0 x 10¹²
89.6 x 10¹²
99.4 x 10¹²
Self-generated
electricity
(diesel generator)
0.29 x 10¹²
0.44 x 10¹²
1.51 x 10¹²
Diesel oil used
in generators
0.99 x 10¹²
1.51 x 10¹²
2.48 x 10¹²
LPG consumption
24.6 x 10¹²
28.1 x 10¹²
29.8 x 10¹²
Use of solar
energy (GRI EN5)
-
13.68 x 10
9
19.96 x 10
9
1. Consumption by facilities in Itapecerica da Serra and Cajamar, Brazil.
Energy Breakdown ­ Natura Group (%)
Waste
In waste management, Natura assesses its performance
in accordance with quantitative and qualitative goals.
The indicator of the quantitative goal is the percentage
of material loss in relation to the total waste discarded
in the environment. The qualitative goal is linked to the
percentage of waste recycled.
In 2006, we focused efforts on internal manufacturing
processes to minimize the creation of waste at the
source, with a focus on the reduction of four-fold
materials, such as boxes from suppliers. We also
replaced the assembly system and the type of box
we use to send products to Consultants; with this
measure, we reduced the use of material and thus
waste by 10 tons/month.
Total Quantity of Waste by Type (ton)
(1)
(GRI EN22)
2004
2005
2006
Class I
815.14
1,151.27
1,323.05
Class II-A
(2)
3,145.64
4,000.57
4,556.84
Class II-B
494.26
824.09
951.52
1. According to NBR 10,004/2004: Class I Waste: hazardous waste (obsolete cosmetic
products, medical and laboratory waste and alcohol); Class II ­ A Waste: non-inert
waste (physico-chemical and biological sludge from ETS, paper, cardboard, sweeping
waste, organic waste and household waste); Class II ­ B Waste: inert waste (glass,
metals, plastics and debris).
2. The figures for 2004 and 2005 reported in previous editions were incorrect due to
measuring problems, but have now been corrected.
2006 COMMITMENT
TO ACHIEVE A SOLID MATERIAL LOSS
PERCENTAGE OF 8.5%.
GOAL NOT REACHED
EVEN WITH AN INCREASE OF 3.2%
ABOVE THE GOAL IN THE VOLUME OF
FACTORY PRODUCTION IN CAJAMAR,
WE OBTAINED A REDUCTION OF 8.2%
IN MATERIAL LOSSES COMPARED TO
THE PREVIOUS YEAR.
2006 COMMITMENT
TO INCREASE THE WASTE RECYCLING
RATE TO 85%.
GOAL NOT REACHED
THE RATE ACHIEVED WAS 84.1%.
2007 COMMITMENT
TO INCREASE THE PERCENTAGE
OF WASTE RECYCLED TO 87%.
Environment 103
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 8:22 PM Page 103
background image
104 Natura Annual Report 2006
For additional information about Natura's relationship
with the environment, go to:
www.natura.net/relatorio/meioambiente
See International Operating indicators at
www.natura.net/relatorio/"country", for example:
www.natura.net/relatorio/argentina
Environmental Policy · GRI EN28 Environmental
Compliance · Certification phases for biodiverse assets ·
GRI EN11 Areas owned, leased or managed with
biodiversity-rich habitats · Official stance on being carbon-
neutral · GRI EN18 Initiatives to reduce gas emissions ·
GRI EC2 Risks and opportunities of climate changes ·
GRI EN19 Emissions of ozone-depleting substances ·
GRI EN20 NOx, SOx and other significant air emissions ·
GRI EN2 Percentage of materials used that are recycled ·
GRI EN9 Water sources affected · GRI EN23 Number
and volume of spills · GRI EN25 Biodiversity of bodies of
water · GRI EN4 Indirect energy use · GRI EN7 Initiatives
to reduce indirect energy use · GRI EN6 Initiatives to
provide energy-efficient products and services · GRI EN24
Waste transported.
The reduction of waste incinerated and taken to landfills
has been an ongoing focus of our actions to improve
waste management. We have been searching for
waste recycling alternatives that include not only waste
processing, but also its reuse in other processes, including
composting and co-processing.
Final Destinations (%)
(1)
2004
2005
2006
Incinerated
5.43
2.82
1.88
Disposed of in landfill
21.20
16.09
13.99
Recycled
73.41
81.09
84.13
1. The drop in waste incinerated and taken to landfills has been the ongoing
focus of actions to improve waste management, involving the search for waste
recycling alternatives that include not only waste treatment but also its reuse
in other processes.
In 2007, in addition to Cajamar and Itapecerica da Serra,
we will bring solid waste management to all of Natura's
facilities.
Percentage of Solid Material Loss
(1)
2004
(2)
2005
2006
Percentage of
solid material loss
N. A.
9.5%
8.7%
1. The percentage of solid material loss is the relative quantity of the total of solid
materials that the company acquires and that is considered to be waste at the end
of the production process.
2. This indicator was recently monitored.
Total consumption of materials by type (except water)
(GRI EN1)
Consumption of materials
2004
2005
2006
Kilos
19,776,023 25,005,092 19,025,330
(1)
Liters
7,956,295
8,860,798 9,286,746
(2)
1. The drop in kilos in the consumption of materials despite an increase in sales
was due to outsourcing part of the production at the shampoo factory.
2. The increase of consumption in liters is due to the growing increase of sales,
especially of perfumes.
Non-Business Initiatives
In 2006, we introduced the management plan to
reestablish natural vegetation in Itapecerica da Serra
and Cajamar. In the forest reserve of Itapecerica da
Serra, 15,000 square meters (m
2
) in size, we replaced
eucalyptus and pine trees with native trees of the region,
such as pepper trees, jatobá trees (hymenaea courbaril),
cedar trees and yellow ipê trees.
Hoping to re-establish the original composition of the
Atlantic Rain Forest, we began to replace exotic trees
and eucalyptus trees with native vegetation on the
130,000 m
2
reserve that we maintain in Cajamar.
ON-LINE CONTENT
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 104
background image
2006 Relatório Anual Natura 105
608488_Meioambiente.qxd:608488_Meioambiente 4/2/07 5:30 PM Page 105
background image
106 Natura Annual Report 2006
Balance Sheets
As of December 31, 2006 and 2005
(In thousands of Brazilian reais - R$)
ASSETS
Company
Consolidated
2006
2005
2006
2005
CURRENT ASSETS
Cash and banks
43,176
38,882
65,293
56,198
Cash investments (Note 5)
90,186
237,084
209,863
330,241
Trade accounts receivable (Note 6)
356,181
302,688
374,168
316,264
Inventories (Note 7)
28,659
835
237,091
152,307
Recoverable taxes (Note 8)
1,517
508
38,687
23,967
Advances to employees and suppliers
9,939
3,312
12,705
5,331
Related parties (Note 10)
7,140
4,850
-
-
Deferred income and social contribution taxes (Note 9.a.)
17,860
16,404
32,236
25,757
Other receivables
8,462
8,160
20,535
14,799
Total current assets
563,120
612,723
990,578
924,864
NONCURRENT ASSETS
Long-term assets:
Receivables from shareholders (Notes 10.f. and 19.b.)
20
130
20
130
Advance for future capital increase (Notes 10.d. and 10.e.)
590
1,007
-
-
Recoverable taxes (Note 8)
1,990
1,432
20,981
9,574
Deferred income and social contribution taxes (Note 9.a.)
20,692
17,680
35,809
29,324
Escrow deposits (Note 16)
193
-
250
-
Advances to suppliers
1,639
-
2,715
-
Other receivables
-
-
557
526
Cash investments (Notes 5 and 16.i.)
-
-
4,336
3,968
Permanent assets:
Investments (Note 11)
707,422
516,929
630
8
Property, plant and equipment (Note 12)
26,190
14,415
471,901
348,911
Intangible assets (Note 12)
3,550
3,259
25,034
22,126
Total noncurrent assets
762,286
554,852
562,233
414,567
TOTAL ASSETS
1,325,406
1,167,575
1,552,811
1,339,431
Natura Cosméticos S.A.
Financial Statements for the Years Ended December 31, 2006 and 2005
and Independent Auditors' Report
In compliance with legal and statutory rules, we are submitting the balance sheets and financial statements for the years ended
December 31, 2005 and December 31, 2006 for your review. In addition to the information contained in the explanatory notes,
company management is available to provide any further clarifications.
Financial
Statements
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 4/2/07 5:47 PM Page 106
background image
Financial Statements 107
LIABILITIES AND SHAREHOLDERS' EQUITY
Company
Consolidated
2006
2005
2006
2005
CURRENT LIABILITIES
Loans and financing (Note 14)
45,052
44,942
75,888
68,309
Domestic suppliers
48,679
38,070
208,739
148,045
Foreign suppliers
-
-
5,518
4,869
Suppliers - related parties (Note 10)
168,927
124,241
-
-
Salaries, profit sharing and related charges (Note 17)
34,229
30,074
88,718
72,328
Taxes payable (Note 15)
80,490
75,536
95,672
89,125
Dividends (Notes 10 and 19.d.)
213,813
195,070
213,813
195,070
Interest on capital (Notes 10, 19.c. and 19.d.)
-
17,699
-
17,699
Accrued freight
18,805
13,786
18,944
13,786
Sundry accruals
2,726
8,863
3,739
9,026
Other payables
17,130
12,780
18,522
13,564
Allowance for losses on swap and forward transactions (Notes 22.b. and 22.d.)
1,993
2,703
2,185
2,703
Total current liabilities
631,844
563,764
731,738
634,524
NONCURRENT LIABILITIESE
Loans and financing (Note 14)
28
44,290
127,077
119,156
Allowance for losses on subsidiaries (Note 11)
4,565
4,202
-
-
Reserve for tax, civil and labor contingencies (Note 16)
34,775
30,253
49,093
61,122
Other payables
3,219
1,806
4,348
3,232
Total noncurrent liabilities
42,587
80,551
180,518
183,510
MINORITY INTEREST
-
-
4
8
SHAREHOLDERS' EQUITY (NOTE 19)
Capital (Note 19.a.)
233,862
230,762
233,862
230,762
Capital reserves (Notes 19.b. and 19.f.)
134,867
120,678
134,867
120,678
Profit reserves (Notes 19.g. and 19.h.)
282,480
172,589
272,056
170,718
Treasury shares (Note 19.e.)
(234)
(769)
(234)
(769)
Total shareholders' equity
650,975
523,260
640,551
521,389
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
1,325,406
1,167,575
1,552,811
1,339,431
The accompanying notes and attachments are an integral part of these financial statements.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:39 PM Page 107
background image
108 Natura Annual Report 2006
Statements of Income
For the Years Ended December 31, 2006 and 2005
(In thousands of Brazilian reais - R$, except for earnings per share)
Company
Consolidated
2006
2005
2006
2005
GROSS SALES
Domestic market
3,731,862
3,127,462
3,754,968
3,149,654
Foreign market
- -
133,604
92,616
Other sales
1 1 1,388
1,341
GROSS OPERATING REVENUES
3,731,863
3,127,463
3,889,960
3,243,611
Taxes on sales, returns and rebates
(837,107)
(721,114)
(1,132,973)
(961,447)
NET OPERATING REVENUES
2,894,756 2,406,349
2,756,987
2,282,164
Cost of sales
(1,161,087)
(960,012)
(891,317)
(731,134)
GROSS PROFIT
1,733,669 1,446,337
1,865,670
1,551,030
OPERATING (EXPENSES) INCOME
Selling
(730,986)
(606,509)
(885,749)
(722,474)
General and administrative
(442,924)
(316,767)
(330,845)
(260,545)
Employees profit sharing (Note 17)
(11,866)
(11,209)
(37,353)
(28,577)
Management compensation
(8,569)
(7,467)
(12,385)
(12,289)
Equity in subsidiaries (Note 11)
28,229
(6,741)
-
-
Other operating expenses, net
(1,514)
(3,640)
(388)
(5,535)
INCOME FROM OPERATIONS BEFORE FINANCIAL EFFECTS
566,039 494,004
598,950
521,610
Financial income (Note 23)
26,707
31,470
43,391
54,714
Financial expenses (Note 23)
(13,239)
(11,800)
(33,453)
(43,453)
INCOME FROM OPERATIONS
579,507 513,674
608,888
532,871
Nonoperating income (expenses), net
688
(212)
909
(1,242)
INCOME BEFORE TAXES ON INCOME
580,195 513,462
609,797
531,629
Income and social contribution taxes (Note 9.b.)
(110,869)
(116,105)
(149,023)
(134,747)
NET INCOME BEFORE MINORITY INTEREST
469,326 397,357
460,774
396,882
Minority interest
-
-
(1)
(1)
NET INCOME
469,326 397,357
460,773
396,881
EARNINGS PER SHARE - R$
(*)
1.0978 0.9349
1.0778
0.9338
(*) Earnings per share for the year ended December 31, 2005 were calculated considering the effect of the stock split occurred on March 29, 2006, as detailed in Note 19.a.
The accompanying notes and attachments are an integral part of these financial statements.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:39 PM Page 108
background image
Financial Statements 109
Statements of Changes in Shareholders' Equity (Company)
For the Years Ended December 31, 2006 and 2005
(In thousands of Brazilian reais - R$, except for the dividends and interest on capital per share)
Capital reserves
Profit reserves
Treasury
Share
Investment
Retained
Capital
shares
premium
grants
Legal
Retention
earnings
TOTAL
BALANCES AS OF DECEMBER 31, 2004
230,762
(3,655) 105,673
9,998 18,650
76,024
- 437,452
Sale of treasury shares by exercise
of stock options (Note 19.e.)
-
337
4,537
-
-
-
-
4,874
Payment of receivables from shareholders
(Note 19.b.)
-
2,053
249
-
-
-
-
2,302
Tax incentives
-
717
-
717
Net income
-
-
-
-
-
397,357
397,357
Allocation of net income:
Dividends - R$0.6714 per outstanding
share (Note 19.d.)
(*)
-
- -
- -
-
(285,237)
(285,237)
Interest on capital - R$0.0801 per outstanding
share (Notes 19.c. and 19.d.)
(*)
-
- -
-
-
(34,205)
(34,205)
Profit retention reserve (Note 19.h.)
-
-
-
-
-
77,915
(77,915)
-
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 19.e.)
-
541
8,039
-
-
-
-
8,580
Payment of receivables from shareholders
(Note
19.b.)
- -
2,272 - - - -
2,272
Capital increase through subscription
of shares (Note 19.a.)
3,100
-
-
-
-
-
-
3,100
Tax incentives
-
-
3,872
-
-
3,872
Net income
-
-
-
-
-
-
469,326
469,326
Allocation of net income:
Dividends - R$0.7630 per
outstanding share (Note 19.d.)
-
-
-
-
-
-
(325,866)
(325,866)
Interest on capital - R$0.0787 per outstanding
share (Notes 19.c. and 19.d.)
-
-
-
-
-
-
(33,569)
(33,569)
Profit retention reserve (Note 19.h.)
-
-
-
-
-
109,891
(109,891)
-
BALANCES AS OF DECEMBER 31, 2006
233,862 (724)
120,770 14,587 18,650
263,830
-
650,975
(*) The dividends and interest on capital - gross per share for the year ended December 31, 2005 are adjusted according to the stock split on March 29, 2006, to allow the comparison with the year ended December 31,
2006, as detailed in Note 19.a.
The accompanying notes and attachments are an integral part of these financial statements.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:39 PM Page 109
background image
110 Natura Annual Report 2006
Statements of Changes in Financial Position
For the Years Ended December 31, 2006 and 2005
(In thousands of Brazilian reais - R$)
Company
Consolidated
2006
2005
2006
2005
SOURCES OF FUNDS
FROM OPERATIONS:
Net income
469,326 397,357
460,773
396,881
Items not affecting working capital:
Depreciation and amortization (Note 12)
6,966
4,989
54,601
44,035
Monetary and exchange variations, net, except those
referring to tax, civil and labor contingencies
(506)
3,130
(73)
4,087
Reserve for tax, civil and labor contingencies, including
monetary variation on those reserves (Note 16)
8,547
14,074
12,998
31,040
Deferred income and social contribution taxes (Note 9.a.)
(3,012)
(5,056)
(6,485)
(8,023)
Equity in subsidiaries (Note 11)
(28,229)
6,741
-
-
Proceeds from sale and disposal of property, plant and equipment
and intangible assets
2,141
559
3,881
3,056
Minority interest
- - (4)
1
455,233 421,794
525,691
471,077
FROM SHAREHOLDERS:
Capital increase through subscription of shares (Note 19.a.)
3,100
-
3,100
-
Sale of treasury shares by exercise of stock options (Note 19.e.)
8,581
4,887
8,581
4,887
Payment of receivables from shareholders (Note 19.b.)
2,272
2,288
2,272
2,288
FROM THIRD PARTIES:
Reclassification of recoverable taxes from property, plant and equipment
to current and noncurrent assets
-
-
10,536
-
Increase in noncurrent liabilities
830
25,007
31,570
119,016
Tax incentives
3,872
717
3,872
717
TOTAL SOURCES
473,888 454,693
585,622
597,985
USES OF FUNDS
Acquisition of property, plant and equipment and intangible assets (Note 12)
21,165
9,991
193,596
111,636
Increase in investments (Note 11)
163,423
149,425
-
-
Increase in noncurrent assets (long-term assets)
1,925
1,639
14,232
7,291
Decrease in noncurrent liabilities
1,274
-
29,119
-
Transfer from noncurrent to current liabilities
44,348
-
20,740
78,783
Dividends proposed and paid (Note 19.d.)
325,866
285,237
325,866
285,237
Interest on capital proposed and paid (Notes 19.c. and 19.d.)
33,569
34,205
33,569
34,205
TOTAL USES
591,570 480,497
617,122
517,152
(DECREASE) INCREASE IN WORKING CAPITAL
(117,682)
(25,804)
(31,500)
80,833
REPRESENTED BY
(Decrease) increase in current assets
(49,602)
168,867
65,714
268,425
Increase in current liabilities
68,080
194,671
97,214
187,592
(DECREASE) INCREASE IN WORKING CAPITAL
(117,682)
(25,804)
(31,500)
80,833
The accompanying notes and attachments are an integral part of these financial statements.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 110
background image
Financial Statements 111
Notes to the Financial Statements
For the Years Ended December 31, 2006 and 2005
(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 FINANCIAL STATEMENTS
The financial statements have been prepared and are presented inconformity
with Brazilian accounting practices and standards established by the Brazilian
Securities Commission (CVM). These financial statements reflect the changes
introduced by the following accounting standards: (i) Accounting Standards
and Procedures - NPC No. 27 - "Presentation and Disclosures", issued by
the IBRACON - Brazilian Institute of Independent Auditors on October 3,
2005, approved by CVM Resolution No. 488 on the same date; and (ii) NPC
No. 22 - "Provisions, Liabilities, Contingent Liabilities and Contingent Assets",
issued by IBRACON on October 3, 2005, approved by CVM Resolution No.
489 on the same date. Certain reclassifications have been made to the
financial statements for the year ended December 31, 2005, presented for
comparative purposes, to conform them to the aforementioned Resolutions
and allow comparison with the year of 2006. The main changes resulting from
applying these Resolutions are as follows:
· Presentation of the group "Noncurrent" in assets and liabilities.
· Presentation of "Intangible Assets" in the "Noncurrent" group.
· Reclassification of escrow deposits, previously classified in assets, to liabilities
as a reduction of the account "Reserve for tax, civil and labor
contingencies", where applicable.
Certain account captions and groups in the statements of income, changes in
financial position and cash flows have been changed in relation to the prior
year, for better classification and presentation. In the statement of income,
administrative expenses were reclassified to selling expenses, although
without changing total operating expenses. The changes made include the
2005 information to allow comparability between years. These changes did
not affect the group balances or the grand totals, except for the cash flows for
the year ended December 31, 2005, in which payments of swap and forward
contracts were reclassified from operating activities to financing activities,
changing the subtotals previously disclosed, although without changing the
total variation in cash and cash equivalents.
The information presented referring to 2005 is already adjusted to reflect the
effects of the stock split on March 29, 2006. The details are disclosed in
Note 19.a.
Until December 31, 1995, the generally accepted accounting principles in
Brazil established a simplified methodology for the recording of inflation
effects determined to that date. This methodology, named monetary
restatement of the balance sheet, consisted of the restatement of
permanent assets (investments, property, plant and equipment, and deferred
charges) and shareholders' equity accounts at the indexes disclosed by the
Federal Government. The net effect of the monetary restatement was
accounted for in the statements of income in a specific account under the
heading "Monetary restatement of the balance sheet". This monetary
restatement was prohibited by Law No. 9,249, of December 26, 1995,
effective January 1, 1996.
3. SIGNIFICANT ACCOUNTING PRACTICES
a) Results of operations
Determined on the accrual basis of accounting.
b) Cash investments
Consists of highly liquid temporary investments, except for the long-term invest-
ments, 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.
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, as
shown in Note 11.
f) Property, plant and equipment and intangible assets
Recorded at acquisition cost monetarily restated through December 31,
1995, plus interest capitalized during the construction period, when
applicable and goodwill on acquisition of investment and business lease.
Depreciation and amortization are 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 noncurrent 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 noncurrent 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 natures and supported by the opinion
of the Company's attorneys. For purposes of the financial statements,
they are presented net of related escrow deposits. The grounding and
nature of the reserve for tax, civil and labor contingencies are described
in Note 16.
l) Swap and forward transactions
The nominal values of swap and forward transactions 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 22.b.
and 22.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 23.
n) Interest on capital
For corporate purposes, interest on capital is accounted for as allocation of
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 111
background image
112 Natura Annual Report 2006
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 I) and value added (Attachment II).
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, disclosure of contingent assets and liabilities 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.
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 - %
2006
2005
DIRECT:
Indústria e Comércio de Cosméticos Natura Ltda.
99.99
99.82
Natura Cosméticos S.A. - Chile
99.99
99.96
Natura Cosméticos S.A. - Peru
99.94
99.93
Natura Cosméticos S.A. - Argentina
99.91
95.00
Natura Brasil Cosmética Ltda. - Portugal
98.00
99.99
Nova Flora Participações Ltda.
99.99
100.00
Natura Inovação e Tecnologia de Produtos Ltda.
99.99
99.99
Natura Europa SAS
100.00
100.00
Natura Cosméticos S.A. - México
99.99
99.99
Natura Cosméticos C.A. - Venezuela
99.99
99.00
Natura Cosméticos Ltda. - Colômbia
99.99
-
INDIRECT:
Natura Logística e Serviços Ltda.
99.99
99.99
Flora Medicinal J. Monteiro da Silva Ltda.
100.00
100.00
Ybios S.A. (proportional consolidation -
joint control)
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.
The shareholders' equity balances as of December 31, 2006 and 2005,
reported by the Company, differ by R$10,424 and R$1,871, respectively, from
those recorded in the consolidated financial statements due to the elimination
of unrealized profits in the inventories of subsidiaries and the Company. For
the same reason net income balances reported by the Company as of
December 31, 2006 and 2005 differ by R$8,553 and R$476, respectively, from
the balances in the consolidated financial statements.
Shareholders'
Net income
equity
2006
2005
2006
2005
COMPANY
469,326 397,357 650,975
523,260
Elimination of unrealized profits
of the subsidiary Indústria e
Comércio de Cosméticos
Natura Ltda. with the Company
and other subsidiaries
(8,553)
(476)
(10,424)
(1,871)
CONSOLIDATED
460,773 396,881 640,551
521,389
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 Brasil Cosmética Ltda. - Portugal (as of
December 31, 2006 this company has no activities currently), Natura
Cosméticos C.A. - Venezuela (as of December 31, 2006 currently in the
preoperating stage) and Natura Cosméticos Ltda. - Colombia (as of
December 31, 2006 currently in the preoperating stage): their activities are an
extension of the activities conducted 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
product 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. Since 2005 this
company has had no activities.
· 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 com-
panies.
5. CASH INVESTMENTS
Company
Consolidated
2006
2005
2006
2005
Bank certificates of
deposit (CDBs)
79,338 228,106
203,351 325,231
Investment funds
10,848
8,978
10,848
8,978
90,186 237,084
214,199 334,209
Noncurrent (Note 16.i.)
-
-
4,336
3,968
Current
90,186 237,084
209,863 330,241
As of December 31, 2006, CDBs yield interest rates ranging from 100.0% to
102.0% (100.0% to 102.5% as of December 31, 2005) of the interbank deposit
rate (CDI), and the share in the total investment portfolio is 94.9% (97.3% as of
December 31, 2005). Weighted-average yield of investment fund investments is
98.3% of the CDI (Interbank Deposit Rate) (101.3% as of December 31, 2005).
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 4/2/07 5:47 PM Page 112
background image
Financial Statements 113
6. TRADE ACCOUNTS RECEIVABLE
Company
Consolidated
2006
2005
2006
2005
Trade accounts receivable
379,023 322,228
399,209 337,104
Allowance for
doubtful accounts
(22,842) (19,540)
(25,041) (20,840)
356,181 302,688 374,168 316,264
The changes in the allowance for doubtful accounts for the year ended
December 31, 2006 are as follows:
Company
2005 Additions (*)
Reversals Write-offs (**)
2006
Allowance for
doubtful accounts
(19,540)
(40,091)
1,286
35,503 (22,842)
Consolidated
2005 Additions (*)
Reversals Write-offs (**)
2006
Allowance for
doubtful accounts
(20,840)
(40,990)
1,286
35,503 (25,041)
(*) Provision recognized according to Note 3.c.
(**) Refers to notes more than 180 days past due, written off due to nonreceipt.
7. INVENTORIES
Company
Consolidated
2006
2005
2006
2005
Finished products
23,280
814
155,733
88,471
Raw materials and packaging
-
-
77,176
66,162
Promotional material
5,525
21
14,847
7,976
Work in process
-
-
7,300
6,037
Allowance for losses
(146)
-
(17,965) (16,339)
28,659
835
237,091 152,307
The changes in the allowance for inventory losses for the year ended
December 31, 2006 are as follows
:
Company
2005
Additions,
Write-offs
2006
net (*)
(**)
Total of allowance for
inventory losses
-
(476)
330
(146)
Consolidated
2005
Additions,
Write-offs
net (*)
(**)
2006
Total of allowance for
inventory losses
(16,339)
(17,942)
16,316 (17,965)
(*) 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 and its subsidiaries.
(**) Refers to write-offs of products discarded by the Company and its subsidiaries.
8. RECOVERABLE TAXES
Company
Consolidated
2006
2005
2006
2005
ICMS (State VAT) on purchases of fixed assets
2,653
1,918
16,838
11,581
ICMS (State VAT) on purchases of goods
811
22
13,382
6,946
IVA - value-added tax (foreign operations)
-
-
8,089
2,914
COFINS (tax on revenue) on fixed asset acquisitions
-
-
10,858
420
PIS (tax on revenue) and COFINS on purchases of goods
35
-
325
2,185
IRPJ (income tax)
-
-
1,868
3,580
PIS/COFINS/CSLL - withheld at source
-
-
1,782
860
PIS on fixed asset acquisitions
-
-
2,357
91
IPI (Federal VAT)
-
-
895
-
CSLL (social contribution tax)
-
-
725
3,091
Recoverable INSS (social security contribution)
8
-
170
72
IRRF (withholding income tax)
-
-
-
776
Other
-
-
2,379
1,025
3,507
1,940
59,668
33,541
Noncurrent
1,990
1,432
20,981
9,574
Current
1,517
508
38,687
23,967
The Company and its subsidiaries recorded in 2006 PIS and COFINS credits on fixed assets acquisitions made between December 2002 and December 2006,
previously classified in property, plant and equipment. The net effect on consolidated property, plant and equipment, net of depreciation, arising from the recognition
of these credits, was a decrease of R$13,825.
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.
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 noncurrent 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.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 4/2/07 5:47 PM Page 113
background image
114 Natura Annual Report 2006
Company
Consolidated
2006
2005
2006
2005
CURRENT:
Tax loss carryforwards
-
-
-
1,089
Temporary differences:
Allowance for doubtful accounts (Note 6)
7,766
6,644
7,766
6,644
Allowance for inventory losses (Note 7)
50
-
6,108
5,555
Effects of unrealized profits in the inventories of the Company (Note 4)
-
-
5,370
-
Allowance for losses on swap and forward contracts (Notes 22.b. and 22.d.)
678
919
743
919
Other provisions
9,366
8,841
12,249
11,550
Deferred income and social contribution taxes
17,860
16,404
32,236
25,757
NONCURRENT:
Tax loss carryforwards
-
-
-
375
Temporary differences:
Reserves for tax, civil and labor contingencies (Note 16)
19,554
16,847
34,635
27,809
Other provisions
1,138
833
1,174
1,140
Deferred income and social contribution taxes
20,692
17,680
35,809
29,324
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 noncurrent assets will be realized as follows:
Consolidated
2006
2005
2007
-
19,850
2008
26,774
2,146
2009
6,168
5,571
2010
2,867
1,757
35,809
29,324
b) Current expense
Reconciliation of income and social contribution taxes:
Company
Consolidated
2006
2005
2006
2005
Income before taxes on income
580,195
513,462
609,797
531,629
Income and social contribution taxes at the rate of 34%
(197,266)
(174,576)
(207,331) (180,753)
Reversal of provision for maintenance of dividend
payment capacity (Note 13)
49,933
49,933 49,933
49,933
Technological research and innovation benefit - Law No. 11,196/05
(*)
15,370
- 15,370
-
Interest on capital (Notes 19.c. and 19.d.)
11,413
11,630
11,413
11,630
Tax incentives (donations)
2,564
2,147 2,957
2,268
Equity in subsidiaries and exchange variation on translation
of foreign investments (Note 11)
9,084
(3,530)
-
-
Permanent differences
(2,049)
(1,700)
(2,843)
(1,932)
Losses generated by subsidiaries
- -
(23,091)
(15,952)
Other
82
(9)
4,569
59
Income and social contribution taxes -
net expenses
(110,869)
(116,105)
(149,023) (134,747)
Income and social contribution taxes -
current
(115,337)
(125,367)
(161,987) (146,897)
Income and social contribution taxes -
deferred
4,468
9,262 12,964 12,150
Income and social contribution taxes -
net expenses
(110,869)
(116,105)
(149,023) (134,747)
Effective rate - %
19.1 22.6 24.4
25.3
(*) Refers to the tax benefit established by Law No. 11,196/05, 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.
and tax loss carryforwards (subsidiaries). These credits are recorded in current and noncurrent 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.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 114
background image
Financial Statements 115
10. RELATED PARTIES
Receivables from and payables to related parties are as follows:
Company
Consolidated
2006
2005
2006
2005
CURRENT ASSETS:
Related parties:
Natura Logística
e Serviços Ltda.
(a)
3,209
2,806
-
-
Natura Inovação e Tecnologia
de Produtos Ltda.
(b)
3,098
1,211
-
-
Nova Flora Participações Ltda.
(c)
833
833
-
-
7,140
4,850
-
-
Advance for future capital increase:
Nova Flora Participações Ltda.
(d)
162
1,007
-
-
Natura Cosméticos Ltda.
- Colômbia
(e)
428
-
-
-
590
1,007
-
-
Receivables from shareholders
(f)
20
130
20
130
CURRENT LIABILITIES:
Suppliers:
Indústria e Comércio
de Cosméticos Natura Ltda.
(g)
132,221 106,470
Natura Logística
e Serviços Ltda.
(h)
16,615
9,259
Natura Inovação e
Tecnologia de Produtos Ltda.
(i)
20,091
8,512
168,927 124,241
-
-
Dividends payable-
Shareholders
213,813 195,070 213,813 195,070
Interest on capital payable-
Shareholders
- 17,699
-
17,699
Transactions with related parties are summarized as follows:
Product
Product
sales
purchases
2006
2005
2006
2005
Natura Cosméticos S.A.
-
- 1,381,926 1,111,577
Indústria e Comércio
de Cosméticos Natura Ltda. 1.435,844 1,144,178
-
-
Natura Cosméticos
S.A. - Argentina
-
-
22,842
13,403
Natura Cosméticos S.A. - Peru
-
-
14,523
9,623
Natura Cosméticos S.A. - Chile
-
-
9,103
6,112
Natura Cosméticos
S.A. - México
-
-
6,138
1,865
Natura Europa SAS
-
-
817
923
Natura Inovação
e Tecnologia de
Produtos Ltda.
-
-
495
675
1,435,844 1,144,178 1,435,844 1,144,178
Service
Service
sales
purchases
2006
2005
2006
2005
Administrative structure:
(j)
Natura Logística
e Serviços Ltda.
261,776
172,383
-
-
Natura Cosméticos S.A.
-
-
184,186
124,082
Indústria e Comércio
de Cosméticos Natura Ltda.
-
-
55,209
34,264
Natura Inovação
e Tecnologia de
Produtos Ltda.
-
-
22,381
14,037
261,776
172,383
261,776
172,383
Product and technology
research and
development:
(k)
Natura Inovação
e Tecnologia de
Produtos Ltda.
152,781
113,596
-
-
Natura Cosméticos S.A.
-
-
152,781
113,596
152,781
113,596
152,781
113,596
Lease of properties
and common charges:
(l)
Indústria e Comércio
de Cosméticos Natura Ltda.
5,588
8,575
-
-
Natura Logística
e Serviços Ltda.
-
-
3,238
5,695
Natura Inovação
e Tecnologia de
Produtos Ltda.
-
-
1,301
1,831
Natura Cosméticos S.A.
-
-
1,049
1,049
5,588
8,575
5,588
8,575
Total of service sales
and purchases
420,145
294,554
420,145
294,554
(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. In
August 2006, cash contributions made in prior years were capitalized.
(e) Refers to remittances made to Natura Cosméticos Ltda. - Colombia, necessary for the start-up of
activities in Colombia in 2006.
(f) 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$112 as of December 31, 2006 (R$2,493 as of
December 31, 2005), 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.
(g) Payables for the purchase of products. Prices and terms are within normal market conditions.
(h) Payables for services described in item (j).
(i) Payables for services described in item (k).
(j) Logistics and general administrative services.
(k) Product and technology development and market research services.
(l) 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 December 31, 2006 and 2005, as well as
the intercompany transactions that affected the results for the years, refer to
transactions between the Company and its subsidiaries, which were substantially
carried out under usual market conditions for each type of transaction.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 115
background image
116 Natura Annual Report 2006
Natura
Natura
Indústria e
Natura
Natura
Inovação
Brasil
Natura
Comércio de
Natura
Natura
Cosméticos
Cosméticos Nova Flora e Tecnologia
Natura
Natura
Cosmética
Cosméticos
Cosméticos Cosméticos Cosméticos
S.A. -
C.A. - Participações
de Produtos
Europa Cosméticos
Ltda. -
Ltda.
Natura Ltda. S.A. - Chile S.A. - Peru
Argentina
Venesuela
Ltda.
Ltda
SAS S.A. México
Portugal
Colômbia
Total
Shares of subsidiaries
526,155 53,167
2,277
20,314
4,999
3,450
5,008
48,929 32,601
113
1
Number of shares
(common shares)
526,154 53,161
2,276
20,296
4,999
3,450
5,007
48,929 32,599
111
1
Ownership interest
99.99% 99.99% 99.94%
99.91%
99.99% 99.99%
99.99% 100.00% 99.99% 98.00%
99.99%
Capital 526,155 53,167
2,277
20,314
4,999
3,450
5,008
48,929 32,601
113
1 697,014
Shareholders' equity of subsidiaries
635,542
2,714
1,347
8,197
1,421 (4,541)
35,855
12,676
9,683
(1)
(23) 702,870
Share in shareholders' equity
635,541
2,714
1,346
8,189
1,421 (4,541)
35,852
12,676
9,683
(1)
(23) 702,857
Net income (loss) of subsidiaries,
net of exchange variation on
translation of foreign investments
67,188 (5,205)
421 (11,884)
(3,277) (1,376)
13,723 (17,948)(14,245)
(25)
(24) 27,348
Book value of Company's investment:
Balances as of December 31, 2005
473,827
1,453
947
83
245
-
22,130
13,400 4,808
28
- 516,921
Equity in subsidiaries
67,188 (5,205)
421 (11,874)
(3,277)
(505)
13,722 (17,948)(14,245)
(24)
(24) 28,229
Exchange variation and
other adjustments on
translation of foreign investments
-
(127)
(22)
(770)
(64)
-
-
316
(843)
(5)
1 (1,514)
Change in investments in subsidiaries
(nonoperating income)
871
-
-
-
-
(871)
-
-
-
-
-
-
Recognition of provision for losses
-
-
-
-
-
339
-
-
-
1
23
363
Capital increase
93,655
6,593
-
20,750
4,517
1,037
-
16,908 19,963
-
- 163,423
Balances as of December 31, 2006
635,541
2,714
1,346
8,189
1,421
-
35,852
12,676
9,683
-
- 707,422
Provision for losses:
Balances as of December 31, 2005
-
-
-
-
- (4,202)
-
-
-
-
- (4,202)
Reversal of provision for losses
-
-
-
-
-
(339)
-
-
-
(1)
(23)
(363)
Balances as of December 31, 2006
-
-
-
-
- (4,541)
-
-
-
(1)
(23) (4,565)
Net balances as of
December 31, 2006
635,541
2,714
1,346
8,189
1,421 (4,541)
35,852
12,676
9,683
(1)
(23) 702,857
11. INVESTMENTS
Company
Consolidated
2006
2005
2006
2005
Investments in subsidiaries
707,422
516,921
-
-
Others
-
8
630
8
707,422
516,929
630
8
Investments in direct subsidiaries are as follows:
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 116
background image
Financial Statements 117
12. PROPERTY, PLANT AND EQUIPMENT
Company
2006
2005
ANNUAL DEPRECIATION
ACCUMULATED
NET BOOK
ACCUMULATED
NET BOOK
RATE - %
COST
DEPRECIATION
VALUE
COST
DEPRECIATION
VALUE
PROPERTY, PLANT AND EQUIPMENT
Vehicles
20 to 33
19,598
8,357
11,241
16,412
6,022
10,390
Leasehold improvements
12
7,874
558
7,316
900
185
715
IT equipment
20
4,810
2,792
2,018
3,832
2,353
1,479
Furniture and fixtures
10
3,087
1,633
1,454
2,403
1,453
950
Machinery and equipment
10
1,646
311
1,335
1,064
191
873
Construction in progress
-
2,371
-
2,371
8
-
8
Advances to suppliers
-
455
-
455
-
-
-
39,841
13,651
26,190
24,619
10,204
14,415
2006
2005
ANNUAL ACCUMULATED
ACCUMULATED
NET BOOK
ACCUMULATED
NET BOOK
AMORTIZATION - %
COST
AMORTIZATION
VALUE
COST
AMORTIZATION
VALUE
INTANGIBLE ASSETS
Software
20
6,702
3,152
3,550
5,179
1,920
3,259
6,702
3,152
3,550
5,179
1,920
3,259
Consolidated
2006
2005
ANNUAL DEPRECIATION
ACCUMULATED
NET BOOK
ACCUMULATED
NET BOOK
RATE - %
COST
DEPRECIATION
VALUE
COST
DEPRECIATION
VALUE
PROPERTY, PLANT AND EQUIPMENT
Machinery and equipment
10
181,046
56,563
124,483
131,819
41,811
90,008
Buildings
4
144,684
30,309
114,375
144,140
24,618
119,522
Installations
10
79,547
33,065
46,482
67,884
27,040
40,844
Lands
-
33,662
-
33,662
15,910
-
15,910
IT equipment
20
38,763
19,516
19,247
28,772
15,050
13,722
Vehicles
20 to 33
30,196
11,124
19,072
24,694
8,325
16,369
Molds
33
47,868
30,637
17,231
36,521
22,428
14,093
Furniture and fixtures
10
18,876
6,313
12,563
13,789
5,009
8,780
Leasehold improvements
12
12,694
1,380
11,314
1,028
204
824
Construction in progress
-
42,652
-
42,652
8,569
-
8,569
Advances to suppliers
-
26,764
-
26,764
16,813
-
16,813
Other
10
6,463
2,407
4,056
5,364
1,907
3,457
663,215
191,314
471,901
495,303
146,392
348,911
2006
2005
ANNUAL DEPRECIATION
ACCUMULATED
NET BOOK
ACCUMULATED
NET BOOK
RATE - %
COST
AMORTIZATION
VALUE
COST
AMORTIZATION
VALUE
INTANGIBLE ASSETS
Software
20
32,735
13,561
19,174
24,885
8,571
16,314
Patents
10 to 25
941
941
-
1,056
997
59
Goodwill on acquisition
of investment - Nova Flora
(a)
10
8,015
8,015
-
8,015
8,015
-
Business lease - Natura Europa
(b)
-
5,860
-
5,860
5,753
-
5,753
47,551
22,417
25,034
39,709
17,583
22,126
(a) 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.
(b) The business lease 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
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
2006
2005
Goodwill on investments
611,929
758,792
Provision for maintenance of future
dividend payment capacity
(611,929)
(758,792)
-
-
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.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 117
background image
118 Natura Annual Report 2006
14. LOANS AND FINANCING
Maturities of noncurrent debt are as follows:
Consolidated
2006
2005
2007
-
61,895
2008
55,534
49,107
2009
53,120
6,276
2010
7,409
1,878
2011
4,824
-
2012
4,743
-
2013
1,447
-
127,077
119,156
Company
Consolidated
Type
BNDES - EXIM
BNDES - PROGEREN (Support
Program for Enhancing Employment
and Income Capacity)
NCE (Export Credit Note)
FINEP (Financing Agency for Studies
and Projects)
BNDES (Brazilian Bank for Economic
and Social Development)
FINEP II
BNDES - FINAME (Government
Agency for Machinery and
Equipment Financing)
Banco do Brasil (Brazilian Bank) -
FAT Fomentar (Employee Shelter
Fund)
ACE (Advances on Export
Contracts)
Loans - Argentina
Total
Current
Noncurrent
2006
-
37,141
-
-
7,939
-
-
-
-
-
45,080
45,052
28
2005
-
69,890
-
-
19,342
-
-
-
-
-
89,232
44,942
44,290
2006
53,070
37,140
36,635
21,747
20,258
17,623
12,938
2,568
986
-
202,96.5
75,888
127,077
2005
-
69,890
31,641
32,050
34,994
-
12,115
-
-
6,775
187,465
68,309
119,156
Maturity
April 2008
June 2007
April 2008
December 2008
October 2007
and April 2010
March 2013
October 2006
to April 2011
November 2013
January 2007
January 2006
Charges
Interest of 2.6% p.y. + TJLP
(long-term interest rate) for
80% of the financing and
interest of 10.2% p.y. +
exchange variation for 20%
of the financing
Interest of 3.5% p.y. + TJLP
Interest of 104.7% of CDI
(*)
Interest of 3.0% p.y. + TJLP
Interest of 4.0% p.y. + TJLP
+ UMBNDES
(**)
for the
maturity in October 2007
and interest of 4.5% p.y. +
TJLP + UMBNDES
(**)
for
the maturity in April 2010
TJLP
Interest of 4.5% p.y. + TJLP
Interest of 4.4% p.y. + TJLP
Interest of 5.4% p.y.+
exchange variation
Interest of 9.5% p.y. +
exchange variation
(Argentinean pesos)
Guarantees
Exports and guarantee of
Natura Cosméticos S.A.
Bank guarantee
Promissory notes and guaran-
tee of Natura Cosméticos S.A.
Guarantee, promissory notes
and receivables of Natura
Cosméticos S.A.
Mortgage
(***)
Guarantee of Natura
Cosméticos S.A. and bank
guarantee.
Chattel mortgage, guarantee
of Natura Cosméticos S.A.
and promissory notes.
Chattel mortgage, guarantee
of Natura Cosméticos S.A.
and promissory notes.
Exports
Guarantee of Natura
Cosméticos S.A.
(*) CDI - interbank certificate of deposit.
(**) UMBNDES - BNDES monetary unit. Financing in local currency from the BNDES is guaranteed mainly by the Cajamar Unit.
(***) Financing in local currency from the BNDES is guaranteed mainly by the Cajamar unit.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 118
background image
Financial Statements 119
15. TAXES PAYABLE
Company
Consolidated
2006
2005
2006
2005
ICMS (State VAT)
65,151
58,163
64,789
58,184
IRPJ (income tax)
7,374
10,438
8,916
12,229
IRRF (withholding income tax)
2,074
1,570
5,726
4,235
COFINS (tax on revenue)
517
74
3,740
2,166
CSLL (social contribution tax)
3,082
4,118
3,662
4,718
PIS/COFINS/CSLL (Law No. 10,833/03)2,085
1,093
3,011
1,606
IVA - value-added tax
(foreign operations)
-
-
1,970
1,557
ISS (tax on service)
94
-
1,162
553
PIS (tax on revenue)
113
17
779
826
IPI (Federal VAT)
-
-
-
2,081
Other
-
63
1,917
970
80,490
75,536
95,672
89,125
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 opin-
ion 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 reserves for tax, civil and labor contingencies, net of the escrow deposits,
are presented as follows:
Company
Consolidated
2006
2005
2006
2005
Tax
25,046
22,247
35,969
49,944
Civil
5,130
4,077
7,316
6,060
Labor
4,599
3,929
5,808
5,118
34,775
30,253
49,093
61,122
Tax Contingencies
The changes in the reserves for tax contingencies for the year ended
December 31, 2006 are presented as follows:
Company
Monetary
2005
Additions
Reversals
Write-offs
restatement
2006
PIS (tax on revenue) - semiannual - Decree-laws No. 2,445/88 and No. 2,449/88
(b)
12,740
-
-
-
1,488
14,228
Late payment fines on Federal taxes paid in arrears
(c)
4,926
-
-
-
646
5,572
Deductibility of CSLL (social contribution tax) (Law No. 9,316/96)
(d)
5,901
-
-
-
437
6,338
Tax assessment - INSS (social security contribution)
(e)
4,944
-
-
-
477
5,421
Monetary restatement of Federal taxes (IRPJ/CSLL/ILL)
according to the UFIR (fiscal reference unit)
(f)
4,851
-
(12)
-
91
4,930
IPI (Federal VAT) - tax collection lawsuit
(i)
3,773
-
-
-
370
4,143
Assessment notice - 1990 (corporate income tax)
(j)
2,448
-
-
-
235
2,683
IRPJ and CSLL tax assessment - attorneys' fees
(k)
-
1,469
-
-
-
1,469
Attorneys' fees and other
6,254
313
(421)
(62)
765
6,849
Total reserve for tax contingencies
45,837
1,782
(433)
(62)
4,509
51,633
Escrow deposits for tax contingencies
(23,590)
(939)
34
-
(2,092)
(26,587)
Total reserve for tax contingencies, net of escrow deposits
22,247
843
(399)
(62)
2,417
25,046
Consolidated
Monetary
2005
Additions
Reversals
Write-offs
restatement
2006
IPI - zero rate
(a)
15,814
9,497
-
-
2,603
27,914
PIS (tax on revenue) - semiannual - Decree-laws No. 2,445/88 and No. 2,449/88
(b)
14,267
-
-
-
1,663
15,930
Late payment fines on Federal taxes paid in arrears
(c)
5,859
-
-
-
766
6,625
Deductibility of CSLL (social contribution tax) (Law No. 9,316/96)
(d)
5,901
-
-
-
437
6,338
Tax assessment - INSS (social security contribution
(e)
4,944
-
-
-
477
5,421
Monetary restatement of Federal taxes (IRPJ/CSLL/ILL)
according to the UFIR (fiscal reference unit)
(f)
4,976
-
(14)
-
94
5,056
IPI tax assessment - attorneys' fees
(g)
5,717
-
-
(1,265)
164
4,616
IPI (Federal VAT) credit on purchases of fixed assets and consumption material
(h)
4,325
-
(225)
-
337
4,437
IPI (Federal VAT) - tax collection lawsuit
(i)
3,773
-
-
-
370
4,143
Assessment notice - 1990 IRPJ (corporate income tax)
(j)
2,448
-
-
-
235
2,683
IRPJ and CSLL tax assessment - attorneys' fees
(k)
-
1,469
-
-
-
1,469
Attorneys' fees and other
8,765
530
(618)
(205)
1,368
9,840
Total reserve for tax contingencies
76,789
11,496
(857)
(1,470)
8,514
94,472
Escrow deposits for tax contingencies
(26,845)
(28,590)
77
-
(3,145)
(58,503)
Total reserve for tax contingencies, net of escrow deposits
49,944
(17,094)
(780)
(1,470)
5,369
35,969
(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. On
September 25, 2006, a sentence was rendered dismissing the injunction, judging the Company's request invalid. The Company filed an appeal for review of the merit and reestablishment of the injunction's effects.
The additions made in the year ended December 31, 2006 refer to offset against IPI payable computed in the same period. To suspend the collectibility of the tax debt, in October 2006, the Company made an
escrow deposit in the amount of R$27,362.
(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 1st Panel of the 2nd 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 with the Superior Board of Tax Appeals, which did not grant the appeal. The decision is pending formalization and publication.
(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.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:40 PM Page 119
background image
120 Natura Annual Report 2006
(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 (income tax) basis. A portion of this reserve, in the amount of R$4,245 (R$3,787 as of
December 31, 2005), is deposited in escrow.
(e) Refers to INSS (social security contribution) required by tax assessments issued by the National
Institute of Social Security 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. In June 2006, the subsidiary was notified of the decisions rendered by the 2
nd
Panel of
the Federal Revenue Service Judgment Office in Ribeirão Preto, which cancelled, by unanimous vote,
the tax requirements related to IPI on these transactions. There was a mandatory appeal, which is
pending judgment at the 4
th
Chamber of the 2nd Board of Tax Appeals of the Federal District. 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 2006 refers to the lapse of the period for review begun between July and
December 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 involved in this tax collection lawsuit are guaranteed by a
subsidiary's (Natura Inovação e Tecnologia de Produtos Ltda.) cash investment in the updated amount
of R$4,336 (R$3,968 as of December 31, 2005).
(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.
(k) Refers to attorneys' fees for defense against the tax deficiency notices issued against the Company
in August 2003 and December 2006, by the Federal Revenue Service, in which income and social
contribution taxes (IRPJ and CSLL) are demanded related to the deductibility of the yield of the
debentures issued by the Company in 1999 and 2001. The attorneys' opinion is that the likelihood of
unfavorable outcome is remote.
Civil contingencies
The changes in the reserves for civil contingencies for the year ended
December 31, 2006 are presented as follows:
Company
Monetary
2005 Additions Reversals Payments restatement 2006
Several civil lawsuits
(a)
1,811 2,557 (1,152) (478)
206 2,944
Civil lawsuits and attorney's
fees - Flora Medicinal
(b)
2,266
-
(15)
-
83 2,334
Total reserve for civil lawsuits
4,077 2,557 (1,167) (478)
289 5,278
Escrow deposits for
civil contingencies
- (148)
-
-
-
(148)
Total reserve for civil
contingencies, net of
escrow deposits
4,077 2,409 (1,167) (478)
289 5,130
Consolidated
Monetary
2005 Additions Reversals Payments restatement 2006
Several civil lawsuits
(a)
2,043 2,769 (1,326) (579)
250 3,157
Civil lawsuits and attorney's
fees - Flora Medicinal
(b)
6,649
-
(66)
-
421 7,004
Total reserve for civil lawsuits
8,692 2,769 (1,392) (579)
671 10,161
Escrow deposits for
civil contingencies
(2,632) (151)
1
-
(63)(2,845)
Total reserve for civil
contingencies, net of
escrow deposits
6,060 2,618 (1,391) (579)
608 7,316
(a) As of December 31, 2006, the Company and its subsidiaries are parties to 1,164 lawsuits (760 as of
December 31, 2005), 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.
(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.
Labor contingencies
As of December 31, 2006, the Company and its subsidiaries are parties to 414
labor lawsuits filed by former employees and third parties (267 as of December
31, 2005), claiming the payment of severance amounts, salary premiums,
overtime and other amounts due, as a result of joint liability.
The changes in the reserves for labor contingencies for the year ended
December 31, 2006 are presented as follows:
Company
Monetary
2005 Additions Reversals Payments restatement 2006
Total reserve for
labor contingencies
3,929
761 (705)
(43)
953 4,895
Escrow deposits for
labor contingencies
- (301)
5
-
-
(296)
Total reserve for labor
contingencies, net of
escrow deposits
3,929
460 (700)
(43)
953 4,599
Consolidated
Monetary
2005 Additions Reversals Payments restatement 2006
Total reserve for
labor contingencies
5,118 1,084 (1,029)
(72) 1,238 6,339
Escrow deposits for
labor contingencies
- (536)
5
-
-
(531)
Total reserve for labor
contingencies, net of
escrow deposits
5,118
548 (1,024)
(72) 1,238 5,808
Escrow deposits
Escrow deposits, which represent the Company's restricted assets, refer to
amounts deposited in court until litigation is resolved. The balance of escrow
deposits for which there is no recognized reserve for contingencies, as of
December 31, 2006, totals R$250 - consolidated, and is classified under the
heading "Escrow deposits", in noncurrent assets.
Possible losses
The Company and its subsidiaries are parties to tax, civil and labor lawsuits,
for which there is no reserve for losses recorded, because the risk of loss is
considered possible by management and its attorneys. These lawsuits are
presented as follows:
2006
2005
2006
2005
TAX:
INSS debt annulment action
(a)
5,209 4,750 5,209 4,750
Offset of 1/3 of COFINS -
Law No, 9,718/98
(b)
4,223 3,902 4,223 3,902
Tax assessment - transfer pricing on loan
agreements with foreign related company
(c)
1,342 1,239 1,342 1,239
Tax debt notification - GFIP (FGTS payment
and social security information form)
(d)
673
-
673
-
ICMS Tax Substitution deficiency notice
(e)
608
-
608
-
Request for offset of taxes of the
same type - IRPJ (income tax)
and IRRF (withholding income tax)
(f)
406
-
406
-
Other
1,310
459 1,500
663
13,771 10,350 13,961 10,554
Civil
4,496 1,542 15,235 9,489
Labor
15,249 2,878 20,551 5,388
33,516 14,770 49,747 25,431
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:41 PM Page 120
background image
Financial Statements 121
(a) Lawsuit filed by the Company seeking the annulment of the tax demanded by the INSS (social
security contribution) 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. On September 11, 2006 the Company was notified that the offsets made were
not approved, and timely filed the applicable appeal. 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.
(d) Demand of fine for failure to complete the GFIP (FGTS payment and social security information
form), an accessory social security obligation, for independent contractors' social security
contributions and indemnities. The Company is discussing the collection at the administrative level.
(e) Tax deficiency notice for ICMS Tax Substitution, demanded by Goiás State, due to supposed
underpayment by the Company. The Company has presented its defense at the administrative level
and is awaiting judgment.
(f) Refers to the nonapproval of the offset of IRPJ credits related to the fourth quarter of 1999 against
IRRF debts for the second quarter of 2000. The Company has presented its defense at the
administrative level, for which a partially favorable judgment has been rendered. On July 12, 2006,
an annulment action was filed, and an escrow deposit was made, to challenge collection of the
balance of offset not approved by the Federal Revenue Service.
Contingent Assets
The Company and its subsidiary Indústria e Comércio de Cosméticos Natura
Ltda. are challenging in court the constitutionality and legality of the increase
in the tax basis for the PIS and COFINS contributions established by Law
No. 9,718/98. The amounts involved in the lawsuits, updated as of December
31, 2006, total R$12,171. The lawsuits are awaiting judgment. The attorneys'
opinion is that the likelihood of favorable outcome is probable. As a final and
unappealable decision has not been rendered, the Company and its subsidiary
have not recorded the contingent assets, as established by CVM Resolution
No. 489/05.
17. MANAGEMENT AND EMPLOYEES PROFIT SHARING
The Company and its subsidiaries pay profit sharing to its employees and
managers, tied to the achievement of operational targets and specific
objectives established and approved at the beginning of each year. As of
December 31, 2006, the following amounts were recorded as profit sharing:
R$13,850 (R$13,506 as of December 31, 2005) and R$39,260 (R$35,171 as
of December 31, 2005), Company and consolidated, respectively, under
the heading "Salaries, profit sharing and related charges" in current liabilities,
with contra entry to "Employees profit sharing" and "Management
compensation" in the statement of income for those years.
18. COMPENSATION OF MANAGAMENT AND EXECUTIVES
a) The total compensation of the Board of Directors and Officers of the
Company and its subsidiaries is as follows:
2006
Stock Options Program
Compensation
Stock option balance Average exercise
Fixed Variable(*)
Total
(quantity)(**)
price (***)
Board of Directors
2,572
1,049 3,621
-
-
Officers
3,070
1,878 4,948
528,326
12.81
Total
5,642
2,927 8,569
528,326
2005
Stock Options Program
Compensation
Stock option balance Average exercise
Fixed Variable(*)
Total
(quantity)(**)
price (***)
Board of Directors
3,608
- 3,608
-
-
Officers
2,592
1,267 3,859
188,940
6.28
Total
6,200
1,267 7,467
188,940
b) The compensation of the Executives of the Company and its subsidiaries is
as follows:
2006
Stock Options Program
Compensation
Stock option balance Average exercise
Fixed Variable(*)
Total
(quantity)(**)
price (***)
Executives
12,711
4,594 17,305
3,120,859
10.02
2005
Stock Options Program
Compensation
Stock option balance Average exercise
Fixed Variable(*)
Total
(quantity)(**)
price (***)
Executives
12,423
4,562 16,985
5,220,570
6.29
(*) Refers to profit sharing.
(**) Refers to the balance of unexercised vested and unvested options as of the balance sheet dates.
(***) Refers to the weighted-average exercise price of the option at the time of the Stock Option Grant,
updated by the inflation calculated based on the IPC-A (extended consumer price index) through the
balance sheet date. Note 20 presents the pro forma net income as of December 31, 2006 and
2005, should Company's management opt for recognizing the effects of the plans in the accounting
records, considering the vesting period and using the intrinsic value method (difference between the
market price obtained on December 31, 2006 and 2005 and the value of the option updated based
on the IPC-A, for the years then ended).
19. SHAREHOLDERS' EQUITY
a) Capital
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
shareholders' composition and increase liquidity of the Company's shares.
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; in August and
September 2006, 161,590 common shares; and in October, November and
December 2006, 361,438 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, R$3.10 and R$3.11, 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 428,193,460
common shares, as of December 31, 2006. The authorized capital went from
14,117,070 common shares, as of March 31, 2006, to 13,116,665 common
shares, as of December 31, 2006.
As of December 31, 2006, the Company's capital is R$233,862 (R$230,762 as
of December 31, 2005).
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 4/2/07 5:47 PM Page 121
background image
122 Natura Annual Report 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.f.
c) Interest on capital
At the Board of Directors' Meeting on July 26, 2006, the Company's
management proposed the payment of interest on capital, according to the
terms of the bylaws, CVM Resolution No. 207/96 and Law No. 9,249/95. As
of December 31, 2006, the recorded gross amount of interest on capital is
R$33,569 (R$34,205 as of December 31, 2005) and was calculated within
legal limits, including as to the mandatory minimum dividend of 30% according
to article 202 of Law No. 6,404/76 and the bylaws.
Withholding income tax in the amount of R$5,035 (R$5,131 as of December
31, 2005) was withheld and paid by the Company.
d) 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.
Dividends and interest on capital - gross, relating to income for 2005, in the
amounts of R$285,237 (R$0.6714 per share) and R$34,205 (R$0.0801 per
share), respectively, were approved by Annual Shareholders' Meeting on March
29, 2006 and corresponded to 80.5% of the 2005 consolidated net income.
On February 28, 2007, the Board of Directors' Meetings approved a proposal,
to be submitted to the Annual Shareholders' Meeting to be held on April 2,
2007, for the payment of dividends and interest on capital - gross, relating to
income for 2006, in the total amounts of R$325,866 (R$0.7630 per share)
and R$33,569 (R$0.0787 per share), respectively, corresponding to 78.0% of
the 2006 consolidated net income. Of these amounts, the Company paid, on
August 10, 2006, dividends and interest on capital - gross in the amounts of
R$112,110 and R$33,569 (R$28,534, net of withholding income tax),
respectively.
Dividends were calculated as follows:
Company
2006
2005
Net income
469,326 397,357
Profit reserve - legal
(item g. of this Note)
-
-
Calculation basis for minimum dividends
469,326 397,357
Mandatory minimum dividends
30%
30%
Annual minimum dividend
140,798 119,207
Proposed dividends
325,866 285,237
Interest on capital - net of withholding income tax
28,534
29,074
Withholding income tax
5,035
5,131
Total dividends and interest
on capital - gross
359,435 319,442
Amount exceeding the mandatory minimum dividend
218,637 200,235
Dividends per share - R$
0.763
0.671
Interest on capital per share - net - R$
0.067
0.069
Total dividends and interest on capital,
per share - net - R$
0.83
0.74
e) Treasury shares
As of December 31, 2006, common shares in treasury, which have been used
in the exercise of options in the Stock Option Programs for purchase or
subscription of shares, totaled 679,317 (2,160,075 as of December 31, 2005), at
a unit average cost of R$0.3350 (R$0.3560 as of December 31, 2005).
f) 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,
occurred on March 2, 2004.
g) 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 and 2006.
h) Reserve for profit retention
As of December 31, 2006 and December 31, 2005, the profit retention
reserve was recognized pursuant to article 196 of Law No. 6,404/76 for use
in future investments, in the amounts of R$109,891 and R$77,915,
respectively. The retention referring to 2006 is based on the capital budget,
which will be submitted for approval in the Annual Shareholders' Meeting to
be held on April 2, 2007.
Article 199 of Law No. 6,404/76 sets forth that the balance of profit reserves,
except for the reserve for contingencies and unrealized profit reserve, may
not exceed capital. Upon reaching this limit, the Shareholders' Meeting will
decide on the use of the excess amount in a capital contribution or increase,
or in the payment of dividends.
After distribution of profits for the year ended December 31, 2006, the profit
reserves exceeded capital by R$48,618.
In light of the aforementioned, on February 28, 2007, the Board of Directors
approved the proposal to be submitted to the Annual and Extraordinary
Shareholders' Meetings, to be held on April 2, 2007, for capitalization, without
issuance of shares, of the profit reserves. The proposal consists of capitalization
in the amount of R$153,939, referring to the profit reserves recognized in the
years ended December 31, 2004 and December 31, 2005, which were fully
utilized for investments in property, plant and equipment and working capital,
in 2005 and 2006.
20. STOCK OPTION PROGRAM
The Board of Directors meets once a year for the purpose of, pursuant to
the terms of the Program, establishing the Plan, indicating the directors and
managers who will receive the options and the total amount to be paid.
The Plans have a four-year time span for exercising the options, and the
exercise rights are 50% at the end of the third year and 50% at the end of
the fourth year. The deadline for exercising options was two years after the
end of the fourth year.
The balance of options as of December 31, 2006 is 6,701,732 (8,226,050 as
of December 31, 2005) and is composed by plan as follows:
Amount for the year updated
according to the IPC-A
Number of call options
(extended consumer price index)
or subscription (in shares)
through December 31, 2006 - R$
2002
658,885
5.60
2003
2,381,422
3.14
2004
1,627,960
7.72
2005
941,485
16.57
2006
1,091,980
24.69
6,701,732
As of December 31, 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 December 31, 2006 and the value updated based
on the IPC-A) recorded over their related vesting period, the pro forma
consolidated net income for the year ended December 31, 2006 would have
been R$435,470 (R$364,152 as of December 31, 2005), as shown below:
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:41 PM Page 122
background image
Financial Statements 123
Consolidated
2006
2005
Net income
460,773
396,881
Effect of programs considering
vesting period
(25,303)
(32,729)
Net income - considering the
exercise of the options
435,470
364,152
As of December 31, 2006, the market price of the Company's shares was
R$30.15 (R$20.60 as of December 31, 2005).
21. 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
Company 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 year ended December 31, 2006 totaled R$3,397
(R$3,037 as of December 31, 2005).
22. 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.
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 and/or
forward 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 December 31, 2006 and 2005, the Company had swap and forward
transactions with financial institutions in the amounts of R$30,410 and
R$7,242, 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$2,185 and R$2,703, respectively, recorded in current
liabilities in consolidated. Foreign exchange exposure is mainly indexed to the
U.S. 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 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
2006
2005
Carrying
Fair
Carrying
Fair
value
value
value
value
Swap and forward transactions
2,185 2,860
2,703 2,775
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.
23. FINANCIAL INCOME, NET
Company
Consolidated
2006
2005
2006
2005
FINANCIAL INCOME:
Interest on cash
investments
21,989
25,738 33,722
36,648
Gains on monetary and
exchange variations
3,008
4,092
5,835
13,639
Interest earned
23
183
825
1,145
Gains on swap and
forward transactions
37
-
91
-
Other financial income
1,649
1,453
2,918
3,282
26,707
31,470 43,391
54,714
FINANCIAL EXPENSES:
Interest on financing
(7,114)
(5,910) (18,677) (14,665)
Losses on monetary and
exchange variations
(3,424)
(2,530)
(7,541)
(8,817)
Losses on swap and
forward transactions
(1,622)
(1,230)
(4,114) (12,223)
Other financial expenses
(1,079)
(2,130)
(3,121)
(7,748)
(13,239) (11,800) (33,453) (43,453)
Total financial income, net
13,468
19,670
9,938
11,261
24. 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 December 31, 2006, the insurance coverage
was as follows:
Items
Industrial complex/
inventories
Vehicles
Loss of profits
Insured
amount
575,152
48,055
797,981
Coverage
Any material damages
to buildings, installations
and machinery and
equipment
Fire, theft and collision for
1,255 vehicles
Nonrealization of profits
arising from material
damages to installations,
buildings and production
machinery and equipment
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 4/2/07 5:48 PM Page 123
background image
124 Natura Annual Report 2006
25. SUBSEQUENT EVENT
On February 28, 2007, the Board of Directors approved a proposal to be
approved at the Extraordinary Shareholders' Meeting, which will be held on
April 2, 2007, for the:
a) Private placement of 1,514,750 common shares, without par value, by the Company, within the limit
of authorized capital, as set forth in article 6 of the Company's by-laws, which will be designated for
subscribing and paying up the common shares, without par value, issued by the Company,
corresponding to the shares granted to the Company's Management and Employees, as well as to
the direct or indirect subsidiaries' Management and Employees, participants in the: "Amendments to
the Stock Option Plans of Purchase or Subscription of Common Shares Issued by the Company
Related to Calendar Years 2003, 2004 and 2005" and "Amendment to the Stock Option Plan of
Purchase or Subscription of Common Shares Issued by the Company Related to Calendar Year 2006",
excluding the preferential right to subscription by the Company's other shareholders in view of the
specific designation mentioned above, under the terms of paragraph 3, article 171, of Law No.
6,404/76. The prices for paying up the shares issued and to be subscribed, under the referred terms,
set according to the "Amendments to the Stock Option Plans of Purchase or Subscription of Common
Shares Issued by the Company Related to Calendar Years 2003, 2004 and 2005" and to the "Stock
Option Plan of Purchase or Subscription of Common Shares Issued by the Company Related to
Calendar Year 2006", corresponds, on February 28, 2007, to R$3.15, R$7.75, R$16.64 and R$24.80,
respectively, subject to monetary adjustment based on the IPC-A, calculated and released by the
Brazilian Institute of Geography and Statistics (IBGE), through the subscription date, and must be paid
in cash, upon subscription.
b) Purchase of 1,000,000 common shares, without par value, representing the Company's capital, to be
held in treasury for subsequent sale, in order to fulfill the exercise of the options granted to the
Company's Management and Employees, as well as to the direct or indirect subsidiries' Management
and Employees, participants in the "Amendments to the Stock Option Plans of Purchase or
Subscription of Common Shares Issued by the Company Related to Calendar Years 2003, 2004 and
2005" and "Amendment to the Stock Option Plan of Purchase or Subscription of Common Shares
Issued by the Company Related to Calendar Year 2006.
The purchase of 1,000,000 common shares, without par value, representing
the Company's capital, will be in effect from February 28, 2007 until May 31,
2007 and will be intermediated by the brokerage company Pactual CVTM S.A.
located at Avenida Brigadeiro Faria Lima, 3,729, 6º andar, City of São Paulo,
State of São Paulo, and the Company's Directors are authorized to practice any
acts necessary for the repurchase of the shares approved under the
aforementioned terms.
The 1,514,750 registered common shares, without par value, issued by the
Company, in accordance with item (a) above, will be subscribed and paid up
only after the sale of all the registered common shares, without par value, to
be purchased by the Company and held in treasury. This sale will result from
the exercise of the options granted to the Company's Management and
Employees, as well as the direct or indirect subsidiaries' Management and
Employees, participants in the "Amendments to the Stock Option Plans of
Purchase or Subscription of Common Shares Issued by the Company Related
to Calendar Years 2003, 2004 and 2005" and the "Stock Option Plan of
Purchase or Subscription of Common Shares Issued by the Company Related
to Calendar Year 2006."
In compliance with CVM (Brazilian Securities Commission) Regulatory
Instruction No. 358, of January 3, 2002, the Company disclosed on the CVM's
site (in the Periodic and Special Financial Statements - IPE), on February 28,
2007, a significant event notice related to the above events.
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:41 PM Page 124
background image
Financial Statements 125
Statements of Cash Flows
For the Years Ended December 31, 2006 and 2005
(In thousands of Brazilian reais - R$)
Company
Consolidated
2006
2005
2006
2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
469,326 397,357
460,773
396,881
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortizations (Note 12)
6,966
4,989
54,601
44,035
Monetary and exchange variations, net, except those referring
to tax, civil and labor contingencies
7,339
7,800
14,529
6,312
Reserve for losses on swap and forward contracts (Notes 22.b. and 22.d.)
1,585
1,231
4,022
12,064
Reserve for tax, civil and labor contingencies, including monetary variation
on those reserves (Note 16)
8,547
14,074
12,998
31,040
Allowance for inventory losses (Note 7)
146
-
1,626
1,943
Deferred income and social contribution taxes (Note 9.a.)
(4,468)
(9,262)
(12,964)
(12,150)
Proceeds from sale and disposal of property, plant and equipment and intangible assets
736
(204)
2,476
2,242
Equity in subsidiaries (Note 11)
(28,229)
6,741
-
-
Minority interest
- - (4)
1
461,948 422,726
538,057
482,368
(INCREASE) DECREASE IN ASSETS
Current assets:
Accounts receivable (Note 6)
(53,493)
(66,235)
(57,904)
(66,198)
Inventories (Note 7)
(27,970)
800
(86,410)
(32,289)
Other receivables
(2,528)
(7,750)
(2,317)
7,152
Noncurrent assets (long-term assets):
Escrow deposits (Note 16)
(1,467)
(888)
(29,369)
(2,688)
Recoverable taxes (Note 8)
(558)
(556)
(8,019)
(5,726)
Other receivables
(1,051)
(4,252)
(2,575)
4,111
Subtotal
(87,067)
(78,881)
(186,594)
(95,638)
INCREASE (DECREASE) IN LIABILITIES
Current liabilities:
Suppliers
49,383 42,816
54,736
41,849
Salaries, profit sharing and related charges, net (Note 17)
3,376
2,574
15,545
9,125
Taxes payable, net (Notes 8 and 15)
3,944
25,261
(4,366)
19,794
Other payables
4,054
12,799
6,233
9,589
Noncurrent liabilities:
Other payables
1,414
(556)
8,491
(4,380)
Subtotal
62,171 82,894
80,639
75,977
NET CASH PROVIDED BY OPERATING ACTIVITIES
437,052
426,739
432,102
462,707
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangible assets (Note 12)
(21,165)
(9,991)
(193,596)
(111,636)
Investments (Note 11)
(163,423)
(149,425)
-
-
NET CASH USED IN INVESTING ACTIVITIES
(184,588)
(159,416)
(193,596)
(111,636)
CASH FLOW FROM FINANCING ACTIVITIES
Decrease in current loans (Note 14)
(52,207)
(12,907)
(116,005)
(75,104)
Fundings - noncurrent loans (Note 14)
-
65,342
111,322
120,366
Payments of swap and forward transactions (Notes 22.b. and 22.d.)
(2,295)
(3,072)
(4,540)
(15,499)
Payment of dividends (Note 19.d.)
(307,123)
(203,812)
(307,123)
(203,812)
Payment of interest on capital (Notes 19.c. and 19.d.)
(51,268)
(30,129)
(51,268)
(30,129)
Payment of capital (Note 19.a.)
3,100
-
3,100
-
Tax incentives
3,872 717
3,872
717
Sale of treasury shares by exercise of stock options (Note 19.e.)
8,581
4,929
8,581
4,929
Payment of receivables from shareholders (Note 19.b.)
2,272
2,288
2,272
2,288
NET CASH USED IN FINANCING ACTIVITIES
(395,068)
(176,644)
(349,789)
(196,244)
NET (DECREASE) INCREASE IN CASH AND BANKS
(142,604)
90,679
(111,283)
154,827
Cash and banks at beginning of year
275,966
185,287
386,439
231,612
Cash and banks at end of year
133,362
275,966
275,156
386,439
CHANGE IN CASH AND BANKS
(142,604)
90,679
(111,283)
154,827
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income and social contribution taxes paid
112,978
103,859
143,276
111,605
Interest paid on loans and financing
4,073
2,484
9,902
6,645
The accompanying notes and attachments are an integral part of these financial statements.
ATTACHMENT I
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:41 PM Page 125
background image
126 Natura Annual Report 2006
Statements of Value Added
For the Years Ended December 31, 2006 and 2005
(In thousands of Brazilian reais - R$)
Company
Consolidated
2006
2005
2006
2005
REVENUES
3,686,217 3,088,611 3,842,193 3,201,561
Sales of goods, products and services
3,724,334
3,119,889
3,880,988
3,234,980
Allowance for doubtful accounts -
recognition (Note 6)
(38,805)
(31,066)
(39,704)
(32,177)
Nonoperating 688
(212)
909
(1,242)
INPUTS PURCHASED FROM THIRD PARTIES
(2,321,827)
(1,860,261)
(2,132,303)
(1,731,670)
Cost of sales and services
(1,347,257)
(1,110,075)
(1,274,736)
(1,046,472)
Materials, energy, outside services and other
(974,570)
(750,186)
(857,567)
(685,198)
GROSS VALUE ADDED
1,364,390 1,228,350 1,709,890 1,469,891
RETENTIONS
(6,966)
(4,989)
(55,625)
(44,035)
Depreciation and amortization (Note 12)
(6,966)
(4,989)
(55,625)
(44,035)
VALUE ADDED GENERATED BY THE COMPANY
1,357,424 1,223,361 1,654,265 1,425,856
VALUE ADDED RECEIVED IN TRANSFER
54,936 24,729 43,391 54,714
Equity in subsidiaries (Note 11)
28,229
(6,741)
-
-
Financial income (Note 23)
26,707
31,470
43,391
54,714
TOTAL VALUE ADDED TO BE DISTRIBUTED
1,412,360 1,248,090 1,697,656 1,480,570
DISTRIBUTION OF VALUE ADDED
(1,412,360) 100% (1,248,090)
100%
(1,697,656)
100% (1,480,570) 100%
Payroll and related charges
(144,832)
10%
(118,907)
10%
(379,669)
22%
(306,416)
21%
Taxes and contributions
(781,410)
56%
(714,503)
57%
(817,140)
48%
(727,181)
49%
Financial expenses and rents; includes exchange variation on
translation of foreign investments (Notes 11 and 23)
(16,792)
1%
(17,323)
1%
(40,073)
3%
(50,091)
3%
Dividends (Note 19.d.)
(325,866)
23%
(285,237)
23%
(325,866)
19%
(285,237)
19%
Interest on capital (Notes 19.c. and 19.d.)
(33,569)
2%
(34,205)
3%
(33,569)
2%
(34,205)
2%
Minority interest
-
-
-
-
(1)
-
(1)
-
Retained earnings
(*)
(109,891)
8%
(77,915)
6%
(101,338)
6%
(77,439)
6%
(*) Unrealized profit from subsidiaries is eliminated.
Supplemental information to the statements of value added:
Of the amounts recorded under "Taxes and contributions" in 2006 and 2005, the amounts of R$467,418 and R$412,131, respectively, refer to ICMS (State VAT)
under the taxpayers' substitution regime levied on the estimated profit margin defined by the State Finance Secretariats obtained from sales made by Natura beauty
consultants to final consumers.
In order to analyze this tax impact on the statements of value added, these amounts should be deducted from the amounts recorded under "Sales of goods, products
and services" and "Taxes and contributions", since sales revenue does not include the estimated profit attributable to Natura beauty consultants upon the sale of
products, in the amounts of R$1,583,938 and R$1,311,672 in 2006 and 2005, respectively, considering an estimated profit margin of 30%.
The accompanying notes and attachments are an integral part of these financial statements.
ATTACHMENT II
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:41 PM Page 126
background image
Financial Statements 127
Independent Auditors' Report
To the Board of Directors and Shareholders
of Natura Cosméticos S.A.
São Paulo - SP
1) We have audited the accompanying individual (Company) and consolidated balance sheets of Natura Cosméticos S.A. and
subsidiaries as of December 31, 2006 and 2005, and the related statements of income, changes in shareholders' equity (Company),
and changes in financial position for the years then ended, all expressed in Brazilian reais and prepared under the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial statements.
2) Our audits were conducted in accordance with auditing standards in Brazil and comprised: (a) planning of the work, taking into
consideration the significance of the balances, volume of transactions, and the accounting and internal control systems of the
Company and its subsidiaries, (b) checking, on a test basis, the evidence and records that support the amounts and accounting
information disclosed, and (c) evaluating the significant accounting practices and estimates adopted by management, as well as the
presentation of the financial statements taken as a whole.
3) In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the individual (Company)
and consolidated financial positions of Natura Cosméticos S.A. and subsidiaries as of December 31, 2006 and 2005, and the results
of their operations, the changes in shareholders' equity (Company), and the changes in their financial position for the years then
ended, in conformity with Brazilian accounting practices.
4) Our audits were conducted for the purpose of forming an opinion on the basic financial statements referred to in paragraph 1
taken as a whole. The accompanying statements of cash flows and value added, individual (Company) and consolidated, for the
years ended December 31, 2006 and 2005, are being presented in Appendixes I and II, respectively, for purposes of additional
analysis and are not a required part of the basic financial statements in conformity with Brazilian accounting practices. Such
information has been subjected to the auditing procedures described in paragraph 2 and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements for the years ended December 31, 2006 and 2005 taken as a whole.
São Paulo, February 28, 2007
DELOITTE TOUCHE TOHMATSU
Independent Auditors
CRC 2 SP 011609/O-8
Edimar Facco
Engagement Partner ­ CRC 1 SP 138635/O-2
608488_DFs 19_03_07C_EN.qxd:608488_DFs 19_03_07C_EN 3/31/07 4:41 PM Page 127
background image
128 Natura Annual Report 2006
Global Compact Commitment
The company endorses the Global Compact, a United Nations (UN) initiative that brings together companies,
workers and society in general to provide a global structure that promotes sustainable growth and citizenship,
by means of committed and innovative corporate leadership.
For additional information on this initiative, consult the websites www.unglobalcompact.org and www.ethos.org.br.
Natura's commitment to Global Compact principles is detailed in the following table.
Global Compact Principles
GRI Indicators
GRI Indicators
Relevant
Indirectly Relevant
Human Rights Principles
Principle 1 ­ Respect and protect human rights.
HR1; HR2; HR3; HR4
LA4
HR5; HR6
LA13
HR7; HR8
LA14
HR9
SO1
Principle 2 ­ Prevent human rights violations.
HR1; HR2; HR8
Principles of Working Rights
Principle 3 ­ Support freedom of association in the workplace.
HR5; LA4; LA5;
Principle 4 ­ Abolish forced labor.
HR7
HR1; HR2; HR3
Principle 5 ­ Abolish child labor.
HR6
HR1; HR2; HR3
Principle 6 ­ Eliminate discrimination in the workplace.
HR4; LA2; LA13; LA14
HR1; HR2; EC5; EC7; LA3
Principles of Environmental Protection
Principle 7 ­ Support a preventive approach to
environmental challenges.
Responsible Management Chapter EC2
Principle 8 ­ Promote environmental responsibility.
EN2; EN5; EN6; EN7;
EC2; EN1; EN3; EN4; EN8;
EN10; EN13; EN14; EN18;
EN9; EN11; EN12; EN15;
EN 21; EN22; EN26; EN27;
EN16; EN17; EN19; EN20;
EN30
EN23; EN24; EN25; EN28;
EN29; PR3; PR4
Principle 9 ­ Encourage environmentally friendly technologies.
EN2; EN5; EN6; EN7;
EN10; EN18; EN26; EN27
Anti-Corruption Principle
Principle 10 ­ Fight against corruption in all its forms, including
extortion and bribery.
SO2; SO3; SO4
SO5; SO6
608488_global compact.qxd:608488_global compact 3/31/07 4:48 PM Page 128
background image
Performance
Aspect
Indicator Chapter
Page
Economic
Economic
Performance
EC1
Organization Profile
37
EC2
On-line
EC3
On-line
EC4
On-line
Market
Presence
EC5
On-line
EC6
Suppliers and
Supplier Communities
79
Surrounding
Communities
86, 87
EC7
Employees
53
Economic
Impacts
EC8
Suppliers and
Supplier Communities
79
EC9
79
Environmental Materials
EN1
Environment
104
EN2
On-line
Energy
EN3
Environment
103
EN4
On-line
EN5
Environment
103
EN6
On-line
EN7
On-line
Water
EN8
Environment
102
EN9
On-line
EN10
Environment
102
Biodiversity
EN11
On-line
EN12
Environment
98
EN13
Environment
99
EN14
Environment
99
EN15
Environment
99
Effluent
emissions
and waste
EN16
Environment
99
EN17
Environment
99
EN18
On-line
EN19
On-line
EN20
On-line
EN21
Environment
102
On-line
EN22
Environment
103
EN23
On-line
EN24
On-line
EN25
On-line
Products
and services
EN26
Environment
100
EN27
Environment
100
Compliance
EN28
On-line
Transportation EN29
Environment
101
General
EN30
Competitive Advantages
27
Organization Profile
37
Labor
practices and
decent labor
Employment
LA1
Employees
48
LA2
Employees
48
LA3
Employees, On-line
53
Relationship
between
workers and
governance
LA4
On-line
LA5
On-line
Occupational
health and
safety
LA6
On-line
LA7
On-line
LA8
On-line
LA9
On-line
Training and
education
LA10
Employees
51
LA11
Employees
53
LA12
On-line
Performance Aspect
Indicator Chapter
Page
Labor
practices
and decent
labor
Diversity
and equal
opportunity
LA13
Employees
51
On-line
LA14
Employees
51
On-line
Human
Rights
Investment
practices in
purchasing
process
HR1
Suppliers and
Supplier Communities
79
On-line
HR2
Suppliers and
Supplier Communities
76
HR3
On-line
Non-
discrimination
HR4
Employees
49
Freedom
of association
and collective
bargaining
HR5
On-line
Child labor
HR6
Suppliers and
Supplier Communities
77
On-line
Forced or
slave labor
HR7
Suppliers and
Supplier Communities
77
On-line
Safety
practices
HR8
On-line
Indigenous rights HR9
Suppliers and
Supplier Communities
79
On-line
Society
Community
SO1
Suppliers and
Supplier Communities
77
Corruption
SO2
On-line
SO3
On-line
SO4
Employees
49
Government and Society
94
Public
Policies
SO5
Government and Society
94
SO6
Government and Society
94
Unfair
Competition
SO7
On-line
94
Compliance
SO8
On-line
Product
Occupational
health and
safety
PR1
Competitive Advantages
26
Corporate Governance
30
Consumers
68
PR2
On-line
Labeling of
products and
services
PR3
On-line
PR4
On-line
PR5
Consultants
61
Consumers
68,69
On-line
68
Marketing
Communications
PR6
Consumers
68
PR7
On-line
Compliance
PR8
On-line
Compliance
PR9
On-line
GRI Index
In its full commitment to Global Reporting Initiative (GRI) guidelines, Natura included the GRI Index in its 2005 Annual
Report, pursuant to the recommendations of that organization. In addition to facilitating access to information and
indicators, the Index is designed to assess the company's level of commitment to the GRI guidelines. Additional information
about the GRI model may be obtained at www.globalreporting.org.
See additional information and
international operating indicators on our website.
GRI Index 129
ON-LINE CONTENT
608488_remissivo.qxd:608488_remissivo 4/2/07 8:46 AM Page 129
background image
Art Direction: Wilson Spinardi Junior
Graphics: Modernsign Design e Inovação
Text: Antônio Félix and José Paulo Kupfer
Review: Clara Ywata and Ruth Cordeiro
Translation: Lionbridge
Pre-printing: Arizona
Printing: Globo Cochrane Gráfica e Editora
Photography:
Front cover:
Luiz Braga;
Back cover:
Rafael Quintino;
Pages 2 to 9:
JR. Duran;
Pages 10 and 11:
Willy Biondani;
Pages 12 and 13:
Wilson
Spinardi Junior;
Pages 14 and 15:
Arnaldo Pappalardo;
Pages 16 and 17:
Arnaldo Pappalardo and Willy Biondani;
Pages 18 and 19:
Wilson Spinardi
Junior;
Page 21:
Arnaldo Pappalardo and Willy Biondani;
Pages 22 and 23:
Luiz Braga;
Pages 28 and 29:
JR. Duran;
Page 32:
Rafael Quintino;
Page 34:
Rafael Quintino;
Page 38:
Pedro Martinelli;
Pages 40 and 41:
Arnaldo
Pappalardo;
Pages 42 to 47:
JR. Duran;
Page 50:
Arnaldo Pappalardo and
Willy Biondani;
Page 51:
Rafael Quintino and Fred Busch;
Page 52:
Marcos Suguio;
Page 53:
Arnaldo Pappalardo;
Pages 54 to 59:
JR. Duran;
Pages 62 to 67:
JR. Duran;
Pages 70 to 75:
JR. Duran;
Page 77:
Arnaldo
Pappalardo;
Page 78:
Luiz Braga;
Pages 80 to 85:
JR. Duran;
Page 87:
Eduardo Delfim;
Pages 88 to 93:
JR. Duran;
Pages 96 and 97:
Luiz Braga;
Page 101:
Fred Busch;
Page 105:
Arnaldo Pappalardo.
Project Management: Officina Projetomodelismo
Research and Verification of Indicators and Help
in Identifying Content: Sustainability Division and
Vice President of Finance and Information
General Coordination: Corporate Issues and Governmental
Relations Division
Credits
This Report was written in GillSans and printed on recycled paper consisting of
240 g/m
2
on the front cover and 120 g/m
2
in the interior. This Report was printed as
follows: 7,000 copies in Portuguese, 2,300 copies in English, 3,200 copies in Spanish
and 1,000 copies in French.
THE USE OF MORGAN STANLEY CAPITAL INTERNATIONAL INC.'S ("MSCI") TRADEMARKS AND INDEX
NAMES DOES NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION BY MSCI, ANY OF
ITS AFFILIATES, ANY OF ITS INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR
RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX. THE MSCI INDEXES ARE THE
EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE TRADEMARKS OF MSCI OR ITS
AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY NATURA.
The natura annual report 2006 was printed on 100% recycled paper.
Its composition is 75% from pre-consumption clipping (recycled material
from the paper factory) and 25% post-consumption. The choice to
use recycled paper, which has less environmental impact, meets Natura's
obligation regarding environment-related questions.
RA2006_expediente_g.qxd:Layout 1 4/2/07 8:37 AM Page 130
background image
The Annual Report is a vehicle of communication between Natura and the various publics with which it interacts. Through
it, Natura communicates its beliefs and its economic, social and environmental performance. Your opinion is very important
in helping us continue to improve our Annual Report.
1. Into which of these
Relationship Groups
do you fall?
Mark all that apply.
Shareholder
Supplier
Financial Analyst
Employee
Surrounding Community
Press
Consultant
Government
Academic (Student/Teacher)
Consumer
NGO
Other. Describe: ____________________
3. In your opinion,
what are the most relevant issues
to be shared in the
Natura Annual Report
?
Rate each topic below from 1 to 5, with
1 indicating Not at all Relevant,
and
5 indicating Very Relevant.
Economic impacts
Relationship with suppliers and supplier communities
Relationship with employees
Relationship with surrounding communities
Training and education
Investments and projects benefiting society and the environment
Benefits for employees
Biodiversity
Diversity and equal opportunity
Use of energy
Relationship with consultants
Use of water and effluents
Relationship with consumers
Greenhouse gases
Consumer health and safety
Waste management
Human rights
Environmental impact of products
Government relationships
Environmental impact of shipments
2. How would you rate the following features of the
Annual Report 2006
? Rate each feature below from 1 to 5, with
1 indicating Very Poor
and
5 indicating Excellent.
Visual appearance / format
Transparency in reporting information
Organization / data distribution
Clear and easy-to-understand information
Comprehensiveness of the information reported
Credibility and reliability of the information reported
Is there any
subject not reported
in the
Natura Annual Report 2006
that you consider to be very relevant? Describe:
Of the topics listed above, is there any content you
were not satisfied with
? Why?
Do you have any suggestions or comments about the
Natura Annual Report 2006
?
naturaannualreport
2006
OURCOMMONFUTURE
OURCOMMONFUTURE
OURCOMMONFUTURE
OURCOMMONFUTUREOURCOMMONFUTUREOURCOMMON
608488_Cartaresposta.qxd:608488_Cartaresposta 3/31/07 4:29 PM Page 131
background image
FOLD AND SEAL HERE
REPLY-PAID / RÉPONSE PAYÉE
BRAZIL / BRÉSIL
AGÊNCIA CENTRAL
01009-999 - SÃO PAULO - SP
Fold
Fold
SENDER
ADDRESS
NO STAMP RECLAIMED
NE PAS AFFRANCHIR
BY AIR MAIL
PAR AVION
0000/2002
DR/XX
Postage will be paid by:
Le port sera payé par:
608488_Cartaresposta.qxd:608488_Cartaresposta 3/31/07 4:29 PM Page 132