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International Conference Call
Natura
4
th
Quarter 2011 Earnings Results
February 17, 2012

Operator: Good morning ladies and gentlemen. At this time we would like to
welcome everyone to Natura's 2011
4
th
Quarter Conference Call.

Today with us we have Mr. Alessandro Carlucci the CEO; Roberto Pedotti the
CFO; and Mr. Helmut Bossert, the Investor Relations. We would like to inform
you that this event is being recorded and all participants will be in listen-only
mode during the company's presentation. After Natura's remarks are completed
there will be a question and answer section. At that time further instructions will
be given.

Should any participant need assistance during this call please press star zero to
reach the operator.

We have simultaneous webcast that
may be accessed through Natura's IR
website at
www.natura.net/investor
. The slide presentation may be downloaded
from this website. There will be a replay facility for this call on the website.

Before proceeding let me mention that forward looking statements are being
made under the safe harbor of the Securities Litigation Reform Act of 1996.
Forward looking statements are based on the beliefs and assumptions of
Natura Management and on information currently available to the company.
They involve risks, uncertainties and assumptions because they relate to future
events and, therefore, depend on circumstances that may or may not occur in
the future.

Investors should understand that general economic conditions, industry
conditions and other operating factors could also affect the future results of
Natura and could cause results to differ materially from those expressed in such
forward looking statements.

Now I will turn the conference over to Mr. Alessandro Carlucci, the CEO. Mr.
Carlucci, you may now begin the conference, sir.

Mr. Carlucci:
... to discuss 2011 results. I would like to begin my comments by
recalling how over the last few years we have brought about profound
transformations at Natura. Between 2007 and 2007 we practically doubled in
size. Our consultants increased from 700,000 to 1.4 million; Ebitda went from
R$ 700 million to R$ 1.4 billion; the contribution from the international
operations rose from 4.4% to 9% and we will end from 9 million to 17 million
orders per year with over 50,000 orders per day and almost 500,000,000 units
sold last year.

To accompany this growth and prepare for the coming years in 2007 we made
the largest investment ever in our history of locating a round R$ 350 million in
Capex in production, logistics and technology projects. As we mentioned in the
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last year's call we recognize that simultaneously implementing new systems for
capturing orders and developing our logistics model with the inauguration of
new DCs lead to instability in our operations, which in turn affected the quality of
our services and led some products to be out of stock - especially in the second
half of the year.

Today both our system and logistics structure are stable and operating
normally. Although the number of products out of stock has decreased we are
still not at the levels we want and which we should achieve within the next few
months.

At the same time we face the drop in the efficiency of the promotional process.
The combination of these two factors impacted our results and required
adjustments to our planning during last year. Today we are dedicated to ensure
the success of our promotions by better balance the parts done, centralized and
regionally. We remain focused on capturing effic
iency gains in the company's
various processes which will generate the funds needed to operate in a more
competitive market.

We are certain that we are under the right path to taking our infrastructure to a
whole new level in order to ensure our products reach consultants faster, which
will allow service quality to reach a differentiated standard boosting the
competitiveness of our company.

In Brazil the strategy in recent years has been based on increasing our
penetration in order to take advantage of the fact that our markets was
expanding by a 15% to 20% per year, which was the correct strategy and was
well implemented. Now we have 1.2 million consultants and our penetration in
Brazil's households has reached 60% with around 100 million consumers.

Going forward our strategy will now seek to leverage these assets taking
advantage of our brand preference to increase the consumer purchase
frequency and the variety of products they buy. For this we are shifting our
marketing mix to support this evolution in our strategy, the results of which
should be seen gradually over the course of this year.

In parallel we also continue to invest in innovation, which is focused not only on
brands and products but also moving into new areas of the market where we
currently do not have a presence.

Another highlight was our international operations, which posted very strong
results. We remain confident and enthusiastic about Natura
's expansion in the
region, which is fast becoming a relevant business platform. At the same time
that we are promoting development of multiple fronts in the short term we are
also moving towards a new outlook for the business. We are motivated in
particular by the future of direct sales.

We have always believed in the interpreter it all and transformational capacity of
people who are engaged in a common purpose in the world even more
connected digitally in which the personalized treatment of each consumer gains
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greater relevance, direct sales have an excellent opportunity to continue
expanding. We see a future in which the relationship between consultants and
consumer will be supported by high technology and social networks and
services can evolve dramatically while leveraging the creation of value for all
involved.

In conclusion we have an excellent opportunity to expand our competitive
advantage by improving our service quality; redirecting our marketing mix to
increase buying frequency and shopping baskets taken advantage of Natura
's
high penetration and brand preference while continuing to execute our
expansion plan in Latin America.

Those were the main points I wanted to cover. I will not ask Roberto to give us
some details on the results.

Mr. Roberto Pedotte:
Thank you and good morning. Natura
's consolidated net
revenue of R$ 5.6 billion grew by almost 9% in 2011. In the first 10 months of
last year Natura achieved a market share in Brazil of 23.2% maintaining its
leadership position even though they share was down 36 basis points from
2010.

In the international operations we registered very strong growth of 14% in local
currency. Note that there was a significant improvement in profitability in
Argentina, Chile and Peru with Ebitda margin in the year expanding 12%. 2011
was marked by adjustments and a greater focus on managing in the company's
expenses.

The higher profitability in the last quarter was due to various factors which
included: first the adjustment expenses; second the favorable comparison base
in relation to 4Q last year; and third the nonrecurring impact of the recognition of
PIS and Cofins taxes from other periods.

We also took advantage of 2011 to improve our methodology for planning and
controlling costs with the implementation of a zero-base budget. We continue to
concentrate our efforts on capturing productivity gains in the various processes
throughout the company in order to generate the resources needed to ensure
our competitiveness.

Ebitda margin was 25.5% in the year, 100 bps higher than 2010. After excluding
the nonrecurring impact from other operating revenue expenses Ebitda margin
was 24.24%. Consolidated net income was R$ 131 million growing by 12% from
2010. Free cash flow was lower than last year reflecting the higher Capex and
higher consumption of working capital. This last factor was impacted by an
increase in inventory coverage due to the lower-than-expected sales and by the
higher recoverable taxes mainly due to PIS and Cofins tax credits I have
mentioned which should be converted into cash over the course of the first half
of this year.

We project significant improvement in working capital in 2012. Investments
reached 346 million in 2011. The projects were concentrated in our logistics and
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IT. For 2012 we estimate a Capex of 420 million. We continue to improve our
technology and logistics including a new distribution center in São Paulo. 2012
should also be marked by important investments in industrial capacity with the
expansion of our plant in Cajamar and our industrial unit in Benevides, State of
Pará. These investments will leave us ready for growth; increase the efficiency
of our logistics and production processes and take us to a whole new level in
terms of service quality.

We ended the year with a cash balance of R$ 516 million and that net debt
corresponding to 0.4 Ebitda.

On the 15th of this month the board of directors approved the payment of
dividend and interest of accuracy related to the results in fiscal 2011. This
dividend and interest on equity along with the amounts already advanced in
August last year represents dividends per share of R$ 1.89, 50% higher than is
the amount declared for fiscal 2010.

Thank you very much and let us go now to the Q&A session.
Q&A Session

Operator: Thank you. Ladies and gentlemen we will now begin the Q&A
session. If you have a question please press the star key followed by the one
key on your touchtone phone. If at any time you would like to remove yourself
from the questioning queue, press star two.

Excuse me. Our first question comes from Mr. Reinaldo Santana from Dutch
bank.

Mr. Reinaldo Santana: Yes good afternoon Alessandro, Roberto, Helmut. I
have one question regarding Capex for 2012 bid is higher than anticipated. I
was just wondering if you could give us some breakdown, approximate
breakdown of this in terms of how much would be for IT, production and was
logistics.

And also if you see a risk of distortion in terms of volumes as it seems that the
intensity of the projects continues this year. Thank you.

Mr. Pedotte: Reinaldo, basically what happened in 2012 is that we are still in
the end of the cycle, obvious logistics cycle. The logistics cycle started in 2010,
2011 and is in the last part of days in 2011 and we are starting investments in
production in 2012. Then we have like an overlap of two important cycles of
investment in the company in 2012.

I am not sure if I understood the other question; but if it is related to problems
we can have with the implementation of the projects...

Mr. Santana: That is correct, yes.
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Mr. Pedotte: We learned a lot last year. We did a lot of learning and we are
going to be much more conservative in the way that we are going to implement
projects and we are going to run less risks and we are planning all this future
implementation with this approach and then we expect to do in a much better
way the following projects.

Mr. Santana:
Ok great and also what sort of efficiency gains in terms of general
and administrative expenses were you able to achieve this quarter and if you
see that those are sustainable for 2012.

Mr. Pedotte: Reinaldo, as we mentioned we are approaching efficiency gains in
all areas of the company and not only in general and administrative. Even in
marketing, sales; all the areas of the company we are looking for more
efficiency. Then we are entering 2012 with a more optimized expense base all
across the company and we expect to continue to improve this process through
2012.

Mr. Santana: Ok great thank you.

Operator: Excuse me. Our next question comes from Ms. Margareth Kalvar
with Harding Loevner.

Ms. Margareth Kalvar: Good morning or afternoon there. I was wondering if
you could give me a little bit more detail about the whitespace is that you have
talked about going into in terms of increase in terms of the consumer's
frequency and the size of their basket, if you entered a new phase as you
basically highly penetrated in terms of initial purchase.

What kinds of products, particularly given the increase in modern retail
penetration in Brazil are you focusing? Are you continuing to focus on products
that are really more department store, channel rather than the hypermarket type
of purchase?

Mr. Carlucci: Here is already afternoon, 12:22. Let me talk a little bit about
white spaces. Maybe we are talking about two different things: the first one is to
offer new categories we are Natura is not present yet, like for example oral care
or other categories that we do not have any offer to the customer. The other
opportunity is to offer new price points with new value proposition in the
categories that we are already now.

So for example today we have only two offers in the hair care and as we
mentioned before we can offer more differentiated products, more expensive,
more professional like; and at the same time we can offer also some mustige
projects for hair care and both of those things we do not have today yet. So
these are two examples of initiatives that we should see in the next two years
happening in Natura.

And also adding to this only to repeat that an important part of this new strategy
to increase the frequency of the consumer purchase is to shift our marketing
mix to productivity, to frequency, adapting our promotional campaigns our
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communications; the recognition; the compensation of our sales force putting all
our marketing mix to support this strategy where the white spaces are one of
the initiatives but we must not forget that we have a very rich marketing mix
when they compare with retail consumer companies because we... in some
way "own" the channel and so we can drive the channel to look for productivity
while the typical consumer goods they cannot because they are not the owner
of the channel.

So that is why we have a very rich marketing mix and we are going to work on
this.

Ms. Kalvar: Ok. But at the same time oral care and hair care are two very
competitive areas globally in terms of multinational presence and penetration
and I have read that L'Oreal is starting up a research center in Rio and I am just
a little bit concerned that if you are planning on growing in those areas you may
have a somewhat more promotional environment than the basic CF&T
products.

Mr. Carlucci: You have a point; but on the other hand if you take a look of our
performance in the soap industry - that probably is the most commoditized
category in our industry typically, totally led by those companies that you
mentioned - Natura after three or four years of offering new price positioning
with innovation became the second largest soap industry in Brazil.

So I totally believe that we can do similar things in categories we are typically
consumer goods in retail other leaders and we can become maybe not the
leader; that is a relevant player. So this is our challenge, but we did before and I
really strongly believe that we can also be very well succeeded in categories
like hair care; like sun care; like deodorants; like oral care - a lot of categories
we are retail typically is the best channel but we can really become a relevant
player like we did in soap.

Ms. Kalvar: Ok thank you very much.

Mr. Carlucci: Thank you for your question.

Operator: Excuse me. Our next question comes from Ms. Lore Serra from
Morgan Stanley.

Ms. Lore Serra: Hi, I guess good afternoon and thanks for taking the question.
Let me ask a couple of questions but I will ask them one at a time. Can you just
put for us in contexts where you are in terms of the systems issues and the
stock outs? I think you mentioned in your opening comments that these
systems are stable but that you are still working on improving your level of
ability to deliver products and it will take a few months.

I just want to
understand what that means and what the implications or for...
what that means for the sales out looking into the first half of the year.
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Mr. Carlucci: Hi Lore how are you? Alessandro speaking. Well, as we
mentioned in the beginning we are in a very good situation now regarding the
stability of our IT systems and also our logistics. So all the problems that we
face in the last quarter now they were mostly solved.

On the other hand regarding the stock outs, even though we decreased
significantly the number of stock outs we are still far from the place we want to
achieve them mainly because we need to adjust all the suppliers and this
sometimes needs some months and so all the chain must be balanced and we
believe that we will meet probably two or three more months to really decrease
the number of stock outs and to reach the level that we want to reach to offer a
good service for our consultants. So this is the actual moment that we are living
and we are really sure that the worst is gone and now we have still some things
to be done but the worst part is already in the last year.

Ms. Serra: Ok I guess that is not clear to me: are you saying your supplier
issue? Because I would think that if you got your systems aligned it is just a
matter of making sure within your chain you have got the products in the right
place.

Mr. Carlucci: The problem is not the suppliers; we had problems in the IT
solutions and the IT solutions help us to integrate all the supply chain and the
supply chain reaches the supplier. The IT solution is ready but that planning to
the suppliers was wrong because the IT had some problems and to adjust, to
rebuild all the supply chain we need now some months to be well-balanced
again all the chain.

So the problem is not in the supplier; it is in the connection and in the planning
for the suppliers that now are adjusting their production also to supply us.

Ms. Serra: Ok and maybe a can ask a little bit about your perspective for
growth this year. I know typically you guys do not like to give a growth outlook;
but I guess given... it is difficult to separate how much of last year's lower
growth both for you and the market was related to each using the economy
versus issues specific to the execution of challenges that both you and your
primary competitor faced.

So can you give us a sense of how you think this year in terms of growth? I
guess it is a bit difficult for the organization to plan, you will do not know if you
are really going to grow this year at whatever pace, right? But what is your
perspective, what is your best thoughts on how much you and the industry will
grow this year and how much should we expect the system seen to continue to
be a dragon to the far end of the year in terms of achieving what you think is
your potential growth that the market will support.

Mr. Carlucci: Ok Lore. Without giving you any guidance I can share with you
some of our expectations. First of all talking about the market we believe that
this year (2012) the market should grow between the levels of 2011 and 2010
(so between the 15 of 2010 and 7 of 2011). So something around 11, maybe
12. This is our expectation for the market this year.
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And regarding our strategy is totally focused to recover growth in our company
and that means that we are putting our efforts to speed up the growth of the
company - but this is going to happen gradually during the year. So you
probably are not going to see suddenly and one quarter by huge change; but
you should see during the year a gradual recovery in sales growth.

Ms. Serra: Ok and I am sorry to ask too many questions; but I appreciate the
opportunity. The consultant base continues to grow at a very fast pace despite
all of the issues you had last year and it was still a growth of 14% out of a high
base and it is growing very fast and what you are talking about shifting the mix
to productivity which makes a lot of sense.

I wonder if I could give me your perspective on where the channel is right now. I
mean, how much did you grow this year? What is driving that growth despite all
the executional challenges? How concerned are you that... when we saw the
10% decline in rep productivity this quarter I understand that you had issues but
that is like the highest drop I had ever seen.

I would like to understand the perspective on both the growth and health of the
channel.

Mr. Carlucci: It is a very good question lore and in some way the answer of
your question is supporting the change in the strategy that we are implementing
now. We realized that we are going to have much more efficiency improving the
efficiency of the consumer purchase then increasing penetration because we
already reached a very high penetration (60% for brand is very high).

So marginally speaking the prophets and the gains of the increasing penetration
are going to be lower and lower and I wait to see this is the decrease in
productivity.

And on the other hand the opportunity is that is put effort and investment to
increase productivity; to use this new capacity of the penetration, the assets of
the penetration, and also getting advantage of the fact that we are the preferred
brand. So that is why we are moving from one strategy to the other and we
believe it was the right strategy until now because the market was growing
between 15% and 20% and when the market grows so fast I think the rule of the
game is that us penetrate, let us occupy all the places.

And now we, as I mentioned before, our expectation is that the market is
growing. It is going to keep growing but lower levels and so this is a time to use
this penetration and to increase productivity - productivity a mean not only the
consultant productivity but especially the consumer purchase frequency.

Ms. Serra: Great and my last question I just wanted to ask two things on the
innovation. What is that... it seem
s to me that most of the innovation you have
done in the last couple years at least, this sort of breakout kind of innovation
has been more in the high end and I am thinking about... some of your fragrant
launches... I wonder if you could tell us two things or
give us some color on two
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things about your innovation this year: one is when you are talking about filling
in white spaces and launching new things should we think about the tilt being...
continuing to be in that sort of upper income states? And I know this strategy;
but it seems that you have not this much recently into some of the middle to
lower points or maybe the lower points? Can you give us some sense of were
you will tilt this year?

And if she could also give us a sense of timing and in terms of when we can see
some interesting innovation from you guys - and that is it thank you.

Mr. Carlucci: Lore, our strategy to occupy the white spaces is based on both
sides: we are going to keep offering some higher-priced products but also
lower-priced produ
cts. So you are going to have... you are going to see both
things happening. So it is difficult to say which one is going to be more
important. Depending on the category, if we have opportunities down or up.

And they have projects especially this year and next year where we are going to
offer both things. So it is not based only on UNA or high-priced products. We
are going also to launch cheaper ones.

Of course as we like to mention excluding the lower price points of the market
because in this area we are not going to compete because we cannot offer the
level of quality of our brand, and also we are excluding the luxury price point
because as a positioning of our brand we are not a luxury brand.

But excluding those two extremes we have opportunities in both parts of the
market and we are going to launch products in 2012 and 2013 to occupy those
spaces.

Ms. Serra: Ok and any color in terms of the timing of your innovations?

Mr. Carlucci:
The color? Sorry. Maybe...

Ms. Serra: Not the color, sorry, maybe should we expect to see some important
innovation in the first half of 2012 or is this mostly going to be in the back of the
year into 2013?

Mr. Carlucci:
Lore sorry, this I cannot answer. So the color is... I cannot sense
it to you.

Ms. Serra:
Ok I appreciated, thank you.

Mr. Carlucci: Thank you for your question.

Operator: Excuse me. Our next question comes from Ms. Andrea Teixeira from
JP Morgan.

Ms. Andrea Teixeira: Hi good afternoon everyone, thank you for taking the
question and I am sorry to insist on this innovation; but I guess this is one of the
few, one of the couple of things I believe people are going to be focusing on and
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I understand you have easy comparisons for sales in 2012 and in some sense
you have some tailwind to invest more in money and innovation, so correct me
if I am wrong; can you help us reconcile how much you invested? I remember
something around 5% would be the kind of historical number.
Given that you have been... you sorted out your DCs and your distribution, I
remember 2011 was a year where you had a lot of investments and your
prepared comments, Alessandro, suggested that you were pretty much done
with that process, the stock outs and distribution seems to be similar now.

Is that a year where you just discussed in the previous answer that you are
going to be investing more? Should we see some reinvestment in margins or
the level of margins that you have right now are probably recurring into 2012?

Mr. Carlucci: Hi Andrea, this is Alessandro. Would you mind to repeat the
question? Because we missed the last part.

Ms. Teixeira: I am sorry, it was along the question.
But just as... the last portion
of the question is to help reconcile the innovation spending in 2012, if that is
what you mean that you were being increasing as a percentage of sales and if
that could have an impact on their margins, so in other words how should we
project your margins into 2012 and by the same token I kind of like more the
strategic side, if you are pushing more into innovation vis-à-vis what you spent
in 2011.

Mr. Carlucci: Ok thank you, now we understood. So the level of investment
innovation is going to be around or between 2.5 and 3% of net revenue and this
is what we have been investing in the last 3 to 5 years and we are going to keep
this level of investment.

I did need to keep in mind that those investments are not only for the projects
that we are launching in the year but a relevant part of this investment is for
basic research for projects that we are going to launch in three years. So it is
not totally correlated with the impact or their relevance or the quality of the
innovation in the year. So it is more a long-term, medium to long-term strategy
and that is why we do not want to change so much in the level is going to be
always around 2.5%, 3%.

Ms. Teixeira:
And it seems
... I am sorry Alessandro, I do not want to interrupt
you.

Mr. Pedotte: And Andrea, related to the overall Ebitda margin of the company
2011 the 25.5% has an advantage of other operating revenues and expenses of
around 1%. I think you should look for us excluding this 1% extra from 2011. I
think it is a good base to look for us.

Ms. Teixeira:
So roughly around 24.5 would be the...
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Mr. Pedotte: This is the basis for us and then we always manage in a way that
we are always looking for opportunities to productivity gains in other areas of
the company and to invest part of that in competitiveness in the market.

Ms. Teixeira: Many thanks Pedotte, but just one back to the point where
Alessandro... I thought it was very interesting what
Alessandro said lastly when
he was talking about innovation, given that it sounds to me that you are
launching more new categories, right? Oral care and potentially some other
lines in hair care. Should we think about a different mix of innovation that...
embodying what you just said will be more of a long-term investment would you
think that is... is it fair to say that you are going to be having a bigger, longer
-
term investment? Because the low hanging fruits of the categories you are
already in are... obvious
ly there are still a lot of light spaces but you are taking
new categories and so it would be more of a long-term effect of this innovation
investment...

Mr. Carlucci: I think it is a good question Andrea - but there is one thing that is
important to share with you: that the investment in innovation is also dedicated
to improve the actual brands and the actual price points on the categories
where he are already.

So for example last year we relaunched all of the EKOS Line that is one of the
most important lines in our company and we put a lot of money in innovating
because we are using recyclable plastic bottles; we increased the percentage of
natural ingredients extracted from the local communities; whole new formulas -
and this is innovation investment.

So when you see those 2.5% to 3% we are not only talking about to feel the
white spaces; but also to renew and to improve the actual brands and value
proposition of the company. So you are going to see also the low hanging fruits
knocking whitespaces because you are right, when you feel like spaces you
have less; but you are going to see other important launches are renewing and
improving the actual brands and actual projects of the company.

Ms. Teixeira: Perfect, thank you very much and lastly on the international
operations - and I am sorry if you answered this question before the Portuguese
call and I am reading the summary - but the international operations you
expect... I mean you had an excellent year for the international operations and I
know you are st
ill... the last couple of years organizing the structure of there.

What should we see like the pace of growth or do you think we will actually
accelerate to 2012 or you think it is going to be possibly the same kind of level
in 2011 and given that some of t
he countries are still growing... actually many
countries are growing much faster than Brazil?

Mr. Carlucci: Of course that is because we are becoming more relevant in the
markets we should expect lower growth rates; but in the short time, Andrea, we
are expecting something similar for the best years. So we are doing a lot of
investment to support this level of growth in the region - as you know we now
have a team dedicated to Latin America, excluding Brazil and Buenos Aires -
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that they have the responsibility to localize all the marketing initiatives,
communication, category strategy and also logistics and other things - and we
are doing this investment to support and to maintain the actual level of sales
growth.

So in the short-term we expect to keep the same levels but you are right that
five years and had probably we are going to have lower sales growth.

Ms. Teixeira: Perfect thank you very much again.

Mr. Carlucci: Thank you.

Operator: Excuse me. Our next question comes from Mr. Bob Ford from Bank
of America.

Mr. Bob Ford:
Good day everybody and call regulations on the quarter it was
nice to see a recovery if not in the top line but certainly in terms of profitability. I
had a few questions to get some colors. Specifically when you talk a little bit
about your efforts to maybe improve the frequency, Alessandro, can you talk a
little bit more specifically - and I know you went into this briefly in the
Portuguese call - but if you talk a little bit about the incentives that you are
providing CNOs today to grow the network or maybe in the past and how those
are slowly migrating and what you are doing to drive greater frequency that
would be very helpful.

Mr. Carlucci: Hi Bob, thank you for your comments and let me share with you
some things that we are planning to do and answering your question specifically
speaking about the way that they compensate the CNOs, today they are mostly
compensated and rewarded by the number of consultants they have and also
how active those consultants are and what we would like to do is to decrease
the relevance of those two indicators and to increase and add a way to
recognize and to reward them for productivity.
In other words say to them that "look, now more than increasing the number of
consultants we would like you to improve their earnings and their productivity;
the size of the basket; the different number of categories that they buy. So there
are ways to sign allies and to drive the sales force more to productivity than to
penetration.

And another thing, probably we will decrease a little bit the number of new
CNOs because when you start a new CNO they starts to grow off the channel
and now my relationship manager needs to coach the new CNO. And also for
our internal people we want them to develop the actual ones (CNOs) instead of
recruiting new ones.

So these are two examples of things that we are going to introduce and
together with the new promotion plan; motivating more cross category
promotions; different level of communication and other things regarding
samples for example, also, we can really shift our marketing mix to penetration
to productivity.
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Mr. Ford:
Ok. It sounds as if you are going to put a little bit more markings
behind samples... just to strive trial if nothing else; is that a bit of interpretation
of that comment?

Mr. Carlucci: Yes but it will depend on the category, because for example that
is used only as an example the oral care. The oral care is a category where we
will probably not need samples because it is not a very expensive project and
so the customer is probably open to try a Natura product or a product we offer
different from skin care for example.

In skin care people are worried; maybe I have some allergy or I do not know if
my skin is going to accept well this moisturizing and so in this category the
samples are really more important as also in fragrance.

So depending on the category we will spend more and depending on the
category we will not need to. We can use the promotional planning to increase
the number of customers trying the product.

Mr. Ford:
Ok and it sounds as if... as part of the frequency will be improving the
service levels. Is that fair and... introducing some of the fulfillment times
- and I
know you have worked very hard to make some big strives in logistics. Can you
tell us a little bit about where you are today and where you think you can go
over time? And I suspect this kind of ties in perfectly to this big biosphere vision
of the company.

Mr. Carlucci: Ok Bob, let me see if I understood your question: today I think
that is an average we need five days. The total lead time to deliver an order to
the consultant is between 6 to 5 days and we have a plan to decrease to 2 days
especially in the main cities - and this is going to happen within the next two
years.

And this is of course a way to leverage all the biosphere project, even though
an important part of the biosphere project is not only decrease the delivery time
but also to offer a new way for consumer to put in order for the consultant -
digitally and at the same time in order that we can see because today, as you
know, the relationship between the consultants and the consumer belongs only
to the consultant. We do not know what is happening today between them. We
know as average, we now doing research; but we do not know individually
speaking.

And if we can know who is the customer, what the customer is buying, we can
help the consultant to offer a better service, better promotions and increase, in
our view significantly, the productivity. But the biosphere is a project that if in
one hand is going to probably transform our business model on the other hand
it will happen in the medium term, medium and long-term.

In the short-term even though we are going to start a pilot in the next two
months we do not expect that before two years this is really going to impact our
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14
business. But we are sure that it is not going to impact, but more in the medium
and long-term.

Mr. Ford:
When you look at fulfillment times... because you are running a two
-
week cycle and most consultants are placing a single order in the cycle - are
you looking at ways to further shorts and that fulfillment from the actual client
need by changing the pricing may be a little bit for fulfillment or fulfilling
regionally more frequently within a cycle?

Mr. Carlucci: Yes. Talking about the actual model - not talking about biosphere
- all the logistics new footprint was designed to decrease significantly the lead
time. So for example today with the distribution center closer to the main cities
we can deliver to those cities in two or three days instead of last year where we
needed to shift from São Paulo.

So even without biosphere we are decreasing this lead-time and as I mentioned
we believe within two years we can reach an average of 90% of the orders are
arriving in two days (in 48 hours) and this will help this increase in frequency for
consumer.

Mr. Ford: Another question I had - and maybe this is my feet into (inaudible
50:36) but you made some big strives in terms of the customer. I know that are
some one-offs and part of that was some variable (inaudible 50:44) I hope it will
come right back this year. But when you look at the cost structure can you give
us a sense of maybe the order of magnitude that you have in terms of some
efficiency that you may be able to redeploy in higher service levels when it
comes to logistics or having market spent in some of the new samples or just
general equity investments and when you might be able to return it to the
consumer... to the shareholder in terms of higher margi
ns?

Mr. Carlucci: Hi Bob. We are implementing in the last years - and we improved
in the last quarter - the implementation of those productivity programs where
one of them is the zero-bas budgets and you will see this happening in different
lines of the P&L (not only the G&A line) and we believe that we still have
opportunities in this year and also in the next year to have productivity gains.

But on the other hand we believe that we will need those resources to increase
the level of competitiveness of our company - not only innovation, marketing;
but also the investments in IT and all the things that are going to allow us to
implement for example the biosphere project.

In other words what I am trying to say is that we are going to have productivity
gains but you should not expect a better margin because of this because we
have... this is going to be a source of funds to invest in things that are going to
keep Natura being competitive and keep growing the market.

Mr. Ford: Great and I think that leads me to my next question which is the
dividend. When you look at the big Capex number that you are putting out this
year... I mean last year can you sustain it? Because you are paying out almost
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all the net income and given the heavy investments that you are making do you
plan to may be turned back the dividend a little bit this year?

Mr. Pedotte:
Bob, we have... we finished the year with a net debt/Ebitda of 0.4.
This is a very comfortable level and we expect to have for 2012 very good
working capital. Some part of the bad working capital that we had in 2011 was
due to invent reasons in the countries we will decline, inventory coverage, in the
time. We just need really to adjust all the system.

And also we had some tax issues or tax opportunities that was in profit but not
in cash and so far will be converted in cash early in the beginning of this year.
Then for 2012 we can continue to invest in Capex. Probably we will have a
good benefit of working capital and we can maintain a very low leverage as we
have today (0.4, 0.5) and continue in principle with this magnitude of dividend.

Mr. Ford: And as you mentioned if I recall it is just a big improvement you had
in payables, right? I think that is where a lot of the working capital benefit came
from despite higher inventory levels in 4Q and looks as if he were pushing
suppliers little bit; but that is cash margin improvement in every market and I
was curious as to what of that is sustainable and now you are generating both
improvements in gross margin as you push out those payables.

Mr. Pedotte:
Bob I did not understand the relation. I can mention about gross
margin. In the international operations like gross margins today are affected by
doing a better price management in the companies that the fact that we put the
team in Buenos Aires much more closer to the country helped in categories and
sub brands in the country and helped us to do better pricing in the company.

The second is that they are taking advantage of a very good program of cost
management that today is based in Brazil in our raw materials and all of this;
and also we are beginning the local production in that countries. The good
effects of local production we still do not have because they are not relevant.
But we are producing in Argentina; we are producing in Colombia and this year
we will be producing in Mexico and then I think that they have an opportunity to
sustain and improve margins and international operations in terms of gross
margin.

Mr. Ford:
And I promise you that this is my last question and that is that what I
understand is you are only doing fragrances in Argentina and you are only
doing soaps and Venezuela. When you look at the percent of what you can do
in outsourced international marketplaces where are you right now and where do
you think you can get and what is this contributing in terms of how much
(inaudible 56:29) cost in those categories and how much of an impact is that
having in terms of your working capital because of inventory needs?

Mr. Pedotte:
We are in the beginning...

Mr. Ford: I said Venezuela by the way, I meant Colombia.
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Mr. Pedotte: Colombia, yes. We are in the beginning of this process and this
will be relevant because we want to be relevant players in these places and
there is no relevant player in any of these countries that does not have a local
facility there. I think that during the next two, three years we are going to be
30%, 40% something in this range that we are going to be more locally driven in
terms of production.

Mr. Ford: Ok and can you give me a sense of in categories that you are looking
at, just an order like a level of magnitude in terms of what it means for reducing
our cost of goods sold.

Mr. Pedotte:
You are talking about fragrance, you are talking about soaps, you
are talking about hair care and I think body care also.

Mr. Ford: Are we talking about 1000 basis points of margin when you look or
more when you look at a fully landed cost exported from Brazil versus
domestically produced or is it more than that?

Mr. Pedotte: Well I think it varies across categories. Of course the categories
that we are choosing to put there are the categories that you have most the
benefits. But it changes; I cannot really give a figure to you. And also like the
margin management - and I think that is what is happening there that is very
good - we are looking not only for costs; they are looking for price; they are
looking for the value of the brand; as much as the brand gets better preference
they are we have opportunities to manage in a better way; how much we are
placed against our competitors. We are doing a whole work on this.

In the short-term what will really influence the margins is the exchange rate of
the country versus Brazil because most of the production today came from
Brazil. Then in the short term we are still subject to some changes about the
relative exchange rate of Brazil and the countries and in the middle term it will
be much less exposed to this.

Mr. Ford: That is great, thank you very much.

Mr. Carlucci: Thank you Bob.

Operator: Excuse me. Our next question comes from Ms. Margareth Kalvar
from Harding Loevner.

Ms. Margareth Kalvar: Hi thanks for taking another question from me. I just
wanted a little bit more clarity on the Ebitda margin because you had
mentioned... and then going through the numbers here... it is really appears
that most of the increase was because of the other income and the declines in
employee profit sharing.

So how much percentage in terms of basis points can you attribute to the
efficiency gains coming from the investments that you have made or are we
really going to see that in 2012 and was the increase that to sign 2011 really
based on these other factors?
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Mr. Pedotte: Margareth, 2011 we had this 25.5 that I mentioned that if I exclude
these other expenses this is 24.5. You are right that there is a lower variable in
2011 because (inaudible 1:00:31) internally all the targets that we had.
I think that the second... this part you should not take into consideration looking
forward because this is normal in years that we have a better year we can pay
more; in the years that we do not have what can pay less. These will be self
financed by good years or bad years. I think that this is there.

We had in 2011 similar margins in a year that we made adjustments during the
year because we started with a higher expectation of sales and then we were
able to manage to run in similar margins. This is what I can mention. I cannot
give any guidance for 2012; but I think that is excluding these other expenses
this is a good base to think about our business and our ability to manage
productivity gains and more competitiveness in the market and this is a good
basis to think about 2012.

Ms. Kalvar: Ok thank you.

Mr. Pedotte: Thank you Margareth.

Operator: Excuse me. Ladies and gentlemen this concludes today's question-
and-answer session. I would like to invite Mr. Carlucci to proceed with his
closing statements. Please sir go ahead.

Mr. Carlucci: I would like to thank you once again for participating in this
conference call and I look forward to talking with you again in April when we will
discuss the results for 1Q12 and I wish you a good carnival to everyone. Good
day.

Operator: That does conclude the Natura audio conference for today. Thank
you very much for your participation and have a good day.