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> 1Q07 Earnings Release
São Paulo, Brazil, April 25, 2007 ­ Natura Cosméticos S.A. (São Paulo Stock Exchange ­
Bovespa: NATU3) announces today its results for the first quarter 2007 (1Q07). The financial
and operating information included in this report, except where otherwise indicated, is
presented on a consolidated basis, according to the Brazilian Corporate Law.
> FINANCIAL SUMMARY
>
Consolidated Financial Summary (R$ million)
1Q07
1Q06
Change %
1Q05
Units sold ­ items for resale
(in millions)
1
53.0
12.5%
47.0
Gross Revenues
722.6
17.6%
611.0
Net Revenues
511.8
17.8%
427.1
Gross Profit
352.3
14.9%
282.1
Gross Margin (%)
68.8%
-
66.1%
Ebitda
2
113.3
9.8%
95.1
Ebitda Margin (%)
22.1%
-
22.3%
Net Income
81.7
-1.6%
69.7
Net Margin (%)
16.0%
-
16.3%
Total consultants
3
(in millions)
531.3
18.1%
59.6
849.6
602.9
404.8
67.1%
124.4
20.6%
80.3
13.3%
627.6
(1) Total consolidated number of Cosmetics, Fragrances and Toiletries products resold by consultants. Therefore, units sold exclude samples,
gifts, resale support material, Crer para Ver products, among others.
(2) EBITDA = income from operations before financial effects + non-operating income + depreciation and amortization.
(3) Position at the end of the period of the 4th sales cycle.

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> COSMETICS, FRAGRANCE AND TOILETRIES (CF&T) SECTOR IN BRAZIL -
NATURA'S CORE MARKET FIGURES
In accordance with data of ABEVD (Brazilian Association of Direct Selling Companies), the
total business volume of direct selling companies in Brazil grew by 9.7% in the first quarter of
2007 when compared to same period in 2006. Except for Natura, which had a 15.9% growth,
the business volume increased 6.6% in the period.
Therefore, our market share in direct sales increased 1.9pp, from 32.8% in 1Q06 to 34.7% in
1Q07, in accordance with ABEVD data (business volume).
> CONSOLIDATED GROSS REVENUES
Consolidated gross revenues in 1Q07 were R$849.6 million, a 17.6% increase compared to
the same period of 2006 (R$722.6 million). In the domestic market, gross revenues grew
16.2% and in the foreign market the growth was 59.4%. The percentage of revenues from the
foreign market in total revenues grew from 3.3% in 1Q06 to 4.4% in 1Q07.
Total consolidated consultants reached 627.6 thousand at the end of March 2007, an 18.1%
increase when compared to the same period of the previous year.
The growth in revenue keeps on being the Company's priority. The preference for the Natura
brand and the growth in the core market, which continues to be expressive, support this goal.
> COST & EXPENSES
The Cost of Goods Sold increased from 31.2% in 1Q06 to 32.9% in 1Q07 in relation to net
revenues. The main drivers that contributed to such increase were: (i) higher percentage of
promotional sales in 1Q07 versus 1Q06 in Brazil and (ii) continuity of the impact of overhead
costs due to the Company's larger structure, implemented during 2006. These effects were
partly mitigated by the slight average appreciation of the Brazilian real between the periods.
The following chart shows the breakdown of cost's main components:
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Item
1Q07
1Q06
RM/PM
1
24.6
23.4
Labor
3.2
3.3
Depreciation
1.4
1.5
Others
3.7
3.0
Total
32.9
31.2
>
Composition of Cost of Good Sold (% Net revenues)
(1) Raw material and package material
Selling expenses increased 2.5pp in relation to net revenues, from 32.7% in 1Q06 to 35.3% in
1Q07. This increase was mainly due to higher expenses related to communication with the
sales channel, the concentration of advertising expenses in the period and the planned
expansion of the international area.
There was also a small impact caused by the decentralization process of the distribution
centers, firstly with the expansion in Mathias Barbosa ­ MG in September 2006 and with the
beginning of activities in Jaboatão dos Guararapes ­ PE in 1Q07.
Administrative expenses decreased from 15.4% of net revenues in 1Q06 to 14.6% in 1Q07.
This decrease was due to the reversal of part of the reserve for profit sharing related to 2006,
recorded in 1Q07. This effect more than offset the increase of expenses related to
administrative structure adequacy.
Overhead expenses remained stable as to the 4Q06 position, as informed at the last
conference call.
> EBITDA AND NET INCOME
EBITDA reached R$124.4 million in 1Q07, a 9.8% growth when compared to 1Q06 (R$113.3
million). The EBITDA margin posted a decrease in the same period, from 22.1% in 1Q06 to
20.6% in 1Q07. This decrease was due to higher investments destined to promotions,
discounts and communication actions, as already mentioned before. These expenses are in
line with the Company's search for higher efficiency in its marketing actions, which results will
be gradually observed during the year.
For 2007, we continue to expect to reach the same EBITDA margin reached in 2006.
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Net income posted a 1.6% decrease, from R$81.7 million in 1Q06 to R$80.3 million in 1Q07.
The difference between the growth rates of net income and EBITDA was mainly due to the
following: (i) decrease in net financial revenues (R$6.3 million in 1Q06 and R$1.4 million in
1Q07); (ii) 32.5% increase in depreciation in 1Q07 versus 1Q06; and (iii) higher income tax
effective rate in 1Q07 compared to the same period of 2006.
> RESULTS BY AREA OF OPERATION
>> Brazil
1Q07
1Q06
Change%
Units sold ­ items for resale
(in millions)
56.6
50.8
11.3%
Net Revenues
2
Ebitda
2
Ebitda Margin
>
Financial Highlights ­ Brazil (R$ million)
Gross Revenues
2
812.8
699.8
16.2%
135.2
124.6
8.5%
23.5%
25.2%
Total Consultants
1
566.7
491.7
15.3%
574.2
494.0
16.2%
(1) Number of consultants by the end of cycle 4 of sales
(2) Pro-forma Revenues and EBITDA Brazil, excluding the transactions with foreign subsidiaries (gross revenue and cost).
In Brazil, the number of consultants reached 566.7 thousand at the end of 1Q07, with a
15.3% growth compared to the previous year. The productivity by average active consultant
was R$2.55 thousand, a 0.5% growth compared to the previous year (1Q06: R$2.54
thousand).
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>> Operations under consolidation - Argentina, Chile and Peru
1Q07
1Q06
Change%
Units sold ­ items for resale
(in millions)
2.7
2.1
31.9%
Net Revenues
Ebitda
Ebitda Margin
>
Financial Highlights ­ Argentina, Chile and Peru (US$ million)
Gross Revenues
15.4
9.7
58.5%
-1.3
-1.5
-13.1%
-11.1%
-20.3%
Total Consultants
1
54.6
37.7
45.0%
11.9
7.5
58.4%
(1) Number of consultants by the end of cycle 4 of sales
Gross revenue significantly increased in operations under consolidation, with a 58.5% growth
in US dollars in 1Q07 in relation to 1Q06 (57.5% in local currency). The operating loss
represented by EBITDA decreased by 13.1% in 1Q07 compared to 1Q06. EBITDA margin
presented recovery, increasing from -20.3% of net revenue in 1Q06 to -11.1% in 1Q07. The
total number of consultants grew by 45.0% and the productivity by average active consultant
grew by 10.6% between the periods.
>> Operations under implementation ­ Mexico, Venezuela and France
1Q07
1Q06
Change%
Units sold ­ items for resale
(in millions)
0.3
0.1
253.2%
Net Revenues
Ebitda
>
Financial Highlights ­ Mexico, Venezuela and France (US$ million)
Gross Revenues
2.0
0.7
167.1%
-4.5
-2.8
60.4%
Total Consultants
1
6.2
2.0
215.0%
1.7
0.6
169.0%
(1) Number of consultants by the end of cycle 4 of sales
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The area of operation under implementation reached gross revenues of US$2.0 million in
1Q07 versus US$0.7 million in 1Q06. The operation in Mexico keeps on expanding and has
been showing results as expected. The highlight in the quarter was the start of operation in
Venezuela.
>> International expansion process
Investments in the international expansion process, represented by the international
operations negative results deducted of the gross margin related to the Brazilian exports to
international operations, totaled R$11.6 million in 1Q07 (R$10.2 million in 1Q06). For 2007,
we estimate a total investment of R$48 million in this process, which increment is mainly due
to the increase of investments in the Mexican operation and to the start of the operations in
Venezuela and Colombia.
> CASH FLOW
1Q07 internal cash generation
1
reached R$97.7 million versus R$94.8 million in 1Q06 (3.1%
increase). Out of this total, R$55.8 million was invested for operating working capital
3
and
R$21.0 million in acquisitions of Capex (especially machinery, software and vehicles).
Consequently, the free cash flow generation reached R$20.6 million in 1Q07 with an 82.4%
growth compared to the same period of 2006 (R$11.3 million). CAPEX estimated for 2007 is
R$190 million.
1Q06
1Q07
Change%
Net income
80.3
81.7
-1.6%
(+) Depreciation and amortization
17.4
13.1
32.5%
Internal cash generation
1
97.7
94.8
3.1%
Operating working capital
3
-55.8
-50.6
Other assets and liabilities
4
-0.3
-7.3
Operating cash generation
41.6
36.9
12.8%
Capex
-21.0
-25.6
Free cash flow
2
20.6
11.3
82.4%
>
Consolidated cash flow ­ pro forma (R$ million)
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Note 1: (Net income in the period) + (depreciations and amortizations).
Note 2: (Internal generation of cash) +/- (variations in working capital and long term assets and liabilities) ­ (acquisitions of property, plant and
equipment).
Note 3: Assets ­ Accounts receivable, inventories and short-term recoverable taxes. Liabilities ­ suppliers, salaries, profit sharing and social
charges, tax liabilities, provisions and freights payable.
Note 4: Assets ­ Advance to employees and suppliers, short-term deferred income tax and social contribution, other credits and long-term assets.
Liabilities ­ short and long-term other accounts payable and provisions for tax, civil and labor risks.
> CONFERENCE CALL & WEBCAST
CONFERENCE CALL IN PORTUGUESE:
Friday, April 27, 2007
09:00 a.m. US EDT / 10:00 a.m. Brasília
CONFERENCE CALL IN ENGLISH:
Friday, April 27, 2007
11:00 a.m. US EDT / 12:00 p.m. Brasília
Participants in Brazil: +55 11 4688-6301
Participants in the USA: Toll Free +1 800 860-2442
Participants in other countries: +1 412 858-4600
Access code: Natura
Live webcast will be available on Natura's IR website at
www.natura.net/investidor
> INVESTOR RELATIONS TEAM
Phone: +55 11 4196-1421
Helmut Bossert,
helmutbossert@natura.net
Ricardo Capella,
ricardocapella@natura.net
Adriana Pires,
adrianapires@natura.net
Liliane Mathias,
lilianemathias@natura.net
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> Annex 1 - Statement of income for the year (Consolidated)
(in R$ million)
1Q07
%NR
1Q06
%NR
% change
Gross sales to domestic market
811.8
95.6
698.8
96.7
16.2
Gross sales to foreign market
37.5
4.4
23.5
3.3
59.4
Other sales
0.3
0.0
0.3
0.0
(16.7)
GROSS OPERATING REVENUES
849.6
100.0
722.6
100.0
17.6
Taxes on sales, returns and rebates
(246.7)
(29.0)
(210.8)
(29.2)
17.0
NET OPERATING REVENUES
602.9
100.0
511.8
100.0
17.8
Cost of sales
(198.1)
(32.9)
(159.5)
(31.2)
24.2
GROSS PROFIT
404.8
67.1
352.3
68.8
14.9
OPERATING (EXPENSES) INCOME
Selling
(212.7)
(35.3)
(167.6)
(32.7)
27.0
General and administrative
(88.0)
(14.6)
(78.7)
(15.4)
11.8
Management compensation
(1.9)
(0.3)
(2.4)
(0.5)
(20.4)
Other operating expenses, net
4.9
0.8
(3.5)
(0.7)
(238.5)
INCOME FROM OPERATIONS BEFORE
FINANCIAL EFFECTS
107.0
17.8
100.0
19.5
7.0
Financial expenses
(7.3)
(1.2)
(9.6)
(1.9)
(23.5)
Financial income
8.7
1.4
15.9
3.1
(45.0)
INCOME FROM OPERATIONS
108.4
18.0
106.3
20.8
2.0
Nonoperating income (expenses), net
0.0
0.0
0.1
0.0
(83.0)
INCOME BEFORE TAXES ON INCOME
108.4
18.0
106.4
20.8
1.9
Income and social contribution taxes
(28.1)
(4.7)
(24.8)
(4.8)
13.3
NET INCOME BEFORE MINORITY INTEREST
80.3
13.3
81.7
16.0
(1.6)
Minority interest
(0.0)
(0.0)
(0.0)
(0.0)
(62.1)
NET INCOME
80.3
13.3
81.7
16.0
(1.6)
Depreciation
17.4
2.9
13.1
2.6
32.5
EBITDA
124.4
20.6
113.3
22.1
9.8
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Annex 2 ­ Balance Sheet (03/31/07 and 12/31/2006)
ASSETS
03/31/2007 12/31/2006 LIABILITIES
03/31/2007 12/31/2006
CURRENT ASSETS
CURRENT LIABILITIES
Cash and banks
73.3 65.3 Loans and financing
85.7 75.9
Cash investments
179.4 209.9 Domestic suppliers
161.0 208.7
Trade accounts receivable
297.5 374.2 Foreign suppliers
2.4 5.5
Inventories
288.2 237.1 Salaries, profit sharing and related charges
63.8 88.7
Recoverable taxes
45.3 38.7 Taxes payable
102.5 95.7
Advances to employees and suppliers
6.0 12.7 Dividends
213.8 213.8
Deferred income and social contribution taxes
25.7 32.2 Accrued freight
14.7 18.9
Other receivables
29.4 20.5 Sundry accruals
2.2 3.7
Total current assets
944.8 990.6 Other payables
18.2 18.5
Allowance for losses on swap and forward
transactions
2.5 2.2
Total current liabilities
666.9 731.7
NONCURRENT ASSETS
Long-term assets:
NONCURRENT LIABILITIES
Recoverable taxes
21.2 21.0 Loans and financing
94.1 127.1
Deferred income and social contribution taxes 36.8 35.8 Reserve for tax, civil and labor contingencies
63.4 62.2
Escrow deposits
18.4 13.4 Other payables
5.0 4.3
Advances to suppliers
2.5 2.7 Total noncurrent liabilities
162.5 193.6
Other receivables
0.7 0.6
Cash investments
4.5 4.3 MINORITY INTEREST
0.0 0.0
Permanent assets:
Investments
0.6 0.6 SHAREHOLDERS' EQUITY
Property, plant and equipment
449.0 445.5 Capital
233.9 233.9
Intangible assets
49.9 51.4 Capital reserves
135.4 134.9
Total noncurrent assets
583.5 575.3 Profit reserves
352.4 272.1
Treasury shares
(22.8) (0.2)
Total shareholders' equity
698.9 640.6
TOTAL ASSETS
1,528.3 1,565.9 TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
1,528.3
1,565.9
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> Annex 3 ­ Statement of Cash Flow (Consolidated)
1Q07
1Q06
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
80.3
81.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortizations
17.4
13.1
Monetary and exchange variations, net, except those referring to tax, civil and labor
contingencies
3.6
5.3
Reserve for losses on swap and forward contracts
1.1
0.6
Reserve for tax, civil and labor contingencies, including monetary variation on those
reserves
2.6
3.7
Allowance for inventory losses
(1.7)
1.3
Deferred income and social contribution taxes
5.6
0.7
Proceeds from sale and disposal of property, plant and equipment and intangible assets
0.7
0.4
109.6
106.6
(INCREASE) DECREASE IN ASSETS
Current assets:
Accounts receivable
76.6
68.4
Inventories
(49.5)
(38.9)
Other receivables
(12.8)
(2.7)
Noncurrent assets (long-term assets):
-
-
Escrow deposits
(7.9)
0.1
Recoverable taxes
(0.2)
(1.7)
Other receivables
0.1
(0.0)
6.3
25.1
INCREASE (DECREASE) IN LIABILITIES
Current liabilities:
Suppliers
(45.5)
(48.7)
Salaries, profit sharing and related charges, net
(23.5)
(23.2)
Taxes payable, net
7.3
(14.5)
Other payables
(6.0)
(0.2)
Noncurrent liabilities
-
-
Other payables
0.6
(1.2)
Subtotal
(67.2)
(87.8)
NET CASH PROVIDED BY OPERATING ACTIVITIES
48.7
44.0
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangible assets
(21.0)
(25.6)
NET CASH USED IN INVESTING ACTIVITIES
(21.0)
(25.6)
CASH FLOW FROM FINANCING ACTIVITIES
Decrease in current loans
(30.4)
(19.1)
Fundings - noncurrent loans
3.0
16.2
Payments of swap and forward transactions
(0.7)
(0.4)
Payment of dividends
(0.0)
(194.9)
Payment of interest on capital
-
(17.7)
Payment of capital
0.1
0.6
Acquisition of treasure shares
(22.7)
-
Tax incentives
0.7
-
Sale of treasury shares by exercise of stock options
(0.1)
1.2
Payment of receivables from shareholders
0.0
2.0
NET CASH USED IN FINANCING ACTIVITIES
(50.2)
(212.2)
NET (INCREASE) DECREASE IN CASH AND BANKS
(22.5)
(193.8)
Cash and banks at beginning of year
275.2
386.4
Cash and banks at end of year
252.6
192.6
CHANGE IN CASH AND BANKS
(22.5)
(193.8)
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income and social contribution taxes paid
12.9
24.1
Interest paid on loans and financing
3.4
1.9
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This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the
beliefs and expectations of the Natura's management. The words "anticipates", "wishes", "expects", "estimates", "intends",
"forecasts", "plans", "predicts", "projects", "targets" and similar words are intended to identify these statements, which
necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties include, but are not limited to, the
impact of competitive products and pricing, market acceptance of products, product transitions by the Company and its
competitors, regulatory approval, currency fluctuations, production and supply difficulties, changes in product sales mix, and
other risks. This press release also includes pro-forma information prepared by the Company for information and reference
purposes only, which has not been audited. Forward-looking statements speak only as of the date they are made, and the
Company does not undertake any obligation to update them in light of new information or future developments.