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São Paulo, April 26, 2006. Natura Cosméticos S.A. (São Paulo Stock Exchange: NATU3)
announces today its results for the first quarter 2006 (1Q06). The financial and operating
information below, except where otherwise indicated, is presented on a consolidated basis,
according to the Brazilian Corporate Law.
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FINANCIAL SUMMARY - CONSOLIDATED
1Q06
1Q05
%
Change
Units sold ­ items for resale
(in millions) - Brazil
1
50.8
45.7
11.2%
Gross Revenues
722.6
611.0
18.3%
Net Revenues
511.8
427.1
19.8%
Gross Profit
352.3
282.1
24.9%
Gross Margin (%)
68.8%
66.1%
-
Ebitda
2
113.3
95.1
19.1%
Ebitda Margin (%)
22.1%
22.3%
-
Net Income
81.7
69.7
17.2%
Net Margin (%)
16.0%
16.3%
-
Total consultants in Brazil
3
(in thousands)
491.7
422.4
16.4%
Total consultants in Latin America
37.7
27.2
38.5%
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Financial Summary ­ Consolidated (R$ million)
3
(in thousands)
4
1Q04
34.7
475.6
329.2
220.8
67.1%
82.3
25.0%
44.7
13.6%
356.2
20.0
1Q06
1Q05
%
Change
Units sold ­ items for resale
(in millions) - Brazil
1
50.8
45.7
11.2%
Gross Revenues
722.6
611.0
18.3%
Net Revenues
511.8
427.1
19.8%
Gross Profit
352.3
282.1
24.9%
Gross Margin (%)
68.8%
66.1%
-
Ebitda
2
113.3
95.1
19.1%
Ebitda Margin (%)
22.1%
22.3%
-
Net Income
81.7
69.7
17.2%
Net Margin (%)
16.0%
16.3%
-
Total consultants in Brazil
3
(in thousands)
491.7
422.4
16.4%
Total consultants in Latin America
37.7
27.2
38.5%
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Financial Summary ­ Consolidated (R$ million)
3
(in thousands)
4
1Q04
34.7
475.6
329.2
220.8
67.1%
82.3
25.0%
44.7
13.6%
356.2
20.0
(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.
(4) Position at the end of the period of the 4th sales cycle.
(5) Argentina, Chile and Peru.
1Q06 Earnings Release
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CONSOLIDATED GROSS REVENUES
Natura's 1Q06 gross revenues amounted R$722.6 million, up 18.3% over the same period of
2005 (R$611.0 million).
At the end of March 2006, the number of consultants in Brazil reached 491.7 thousand, a
growth of 16.4% over the same period of the previous year. Considering active consultants,
the average growth was also very expressive (18.2%), indicating that this channel remains
fully activated. However, Brazilian productivity per consultant grew only 0.3% in comparison
to last year.
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COST OF SALES
Item
1Q06
1Q05
RM/PM*
23.5
26.5
Labor
3.3
2.9
Depreciation
1.5
1.2
Others
2.9
3.3
Total
31.2
33.9
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Composition of Cost of Sales (% Net Revenues)
* Raw material and packaging material
Item
1Q06
1Q05
RM/PM*
23.5
26.5
Labor
3.3
2.9
Depreciation
1.5
1.2
Others
2.9
3.3
Total
31.2
33.9
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Composition of Cost of Sales (% Net Revenues)
* Raw material and packaging material
The cost of sales, as a percentage of net revenues, decreased due to a combination of the
following factors: (i) raw material and packaging material prices, together, remained stable
between 1Q05 and 1Q06, especially due to Real appreciation over Dollar; (ii) reduction of the
amount of samples to consultants; and (iii) slightly decrease of indirect taxes, as a percentage
of gross revenues.
Selling expenses changed from 31.6% in 1Q05 to 32.4% in 1Q06, in relation to net
revenues. Main contributors to this increase were the communication expenses growth and
sales channel expansion, which was partially offset by productivity gains from internal process
reengineering.
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Administrative expenses changed from 13.4% in 1Q05 to 15.7% in 1Q06. This evolution was
due to the increase of the following expenses: (i) internationalization; (ii) innovation; and (iii)
IT.
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EBITDA AND NET INCOME
1Q06 EBITDA amounted to R$113.3 million, up 19.1% compared to 1Q05 (R$95.1 million).
EBITDA margin remained at the same level of 1Q05, from 22.3% to 22.1% in 1Q06.
1Q06 NET INCOME
totaled R$81.7 million, 17.2% growth over 1Q05 (R$69.7 million). Net
margin remained stable, from 16.3% in 1Q05 to 16.0% in 1Q06.
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INVESTMENTS
1Q06 additions to fixed assets (CAPEX) totaled R$25.6 million with special highlight on the
machine acquisitions aiming at the increase of manufacturing capacity. 2006 estimated
investments total R$180 million.
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INTERNATIONAL OPERATIONS
>>
Argentina, Chile and Peru
1Q06
1Q05
% change
Units sold ­ items for resale
(in millions)
2.1
1.3
55.9%
Net Revenues
7.5
5.0
50.9%
Income (loss) from operations
-1.5
-1.2
-
Operating margin
-19.5%
-24.0%
-
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Financial Highlights ­ Argentina, Chile and Peru (US$ million)
Gross Revenues
9.7
6.4
51.2%
1Q06
1Q05
% change
Units sold ­ items for resale
(in millions)
2.1
1.3
55.9%
Net Revenues
7.5
5.0
50.9%
Income (loss) from operations
-1.5
-1.2
-
Operating margin
-19.5%
-24.0%
-
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Financial Highlights ­ Argentina, Chile and Peru (US$ million)
Gross Revenues
9.7
6.4
51.2%
The results of Argentina, Chile and Peru operations continue growing at the same pace stated
in previous periods, as observed in the gross revenues evolution (growth of 51.2% in dollar
and 52.8% in local currency weighted) and in the operational loss reduction in relation to net
revenues.
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The number of consultants grew 38.5%, from 27.2 thousand in 1Q05 to 37.7 thousand in
1Q06.
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International expansion process
In 1Q06, the international expansion process generated investments of R$10.2 million (1Q05:
R$5.2 million). This increase was fundamentally due to Mexico operation started in August,
2005. For the year we estimate investments amounting R$35.0 million in this process.
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CASH FLOW
1Q06 gross cash generation
1
reached R$106.6 million, up 12.3% over the same period last
year. Out of this, R$63.1 million were allocated to working capital, long-term assets and
liabilities and R$25.6 million to CAPEX.
The working capital increase was superior than expected for the period due to: (1) increased
balance on the supplier account in December, 2005, as a result of sundry material and service
volume purchases concentration; and (2) increase in the inventories in March 2006, when
compared to March, 2005; this balance was higher than sales increase between the periods
due to: (i) amendments to the inventories policy in 1Q06 when compared to 1Q05; and (ii)
5.0% surplus up the aforementioned policy.
The free cash generation
2
reached R$17.9 million in 1Q06.
Note 1: (Net income) + (Adjustments to reconcile net income to net cash provided by operating activities).
Note 2: (Net cash provided by operating activities) - (net cash used in investments activities).
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CONFERENCE CALL & WEBCAST
BRAZILIAN CONFERENCE CALL:
Friday, April 28, 2006
09:00 a.m. US EDT / 10:00 a.m. Brasília
In Brazil: 11 4613-0501
International: 1-412-858-4600
INTERNATIONAL CONFERENCE CALL:
Friday, April 28, 2006
11:00 a.m. US EDT ­ 12:00 p.m. Brasília
In Brazil: 11-4613-0501
International: 1-412-858-4600
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Live webcast will be available at IR website:
www.natura.net/investor
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INVESTORS RELATIONS
Contacts: +55 11 4446-2180
Helmut Bossert,
helmutbossert@natura.net
Ricardo Capella,
ricardocapella@natura.net
This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the
beliefs and expectations of the Natura's management. The words "anticipates", "wishes", "expects", "estimates", "intends",
"forecasts", "plans", "predicts", "projects", "targets" and similar words are intended to identify these statements, which
necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties include, but are not limited to, the
impact of competitive products and pricing, market acceptance of products, product transitions by the Company and its
competitors, regulatory approval, currency fluctuations, production and supply difficulties, changes in product sales mix, and
other risks. This press release also includes pro-forma information prepared by the Company for information and reference
purposes only, which has not been audited. Forward-looking statements speak only as of the date they are made, and the
Company does not undertake any obligation to update them in light of new information or future developments.
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(in R$ million)
1Q06
%NR
1Q05
%NR
%
Change
Gross sales to domestic market
698.8
96.7%
592.7
97.0%
17.9%
Gross sales to foreign market
23.5
3.3%
18.1
3.0%
29.9%
Other sales
0.3
0.0%
0.2
0.0%
44.2%
GROSS OPERATING REVENUES
722.6
100.0%
611.0
100.0%
18.3%
Taxes on sales, returns and rebates
(210.8)
-29.2%
(183.9)
-30.1%
14.6%
NET OPERATING REVENUES
511.8
100.0%
427.1
100.0%
19.8%
Cost of sales
(159.5)
-31.2%
(145.0)
-33.9%
10.0%
GROSS PROFIT
352.3
68.8%
282.1
66.1%
24.9%
OPERATING (EXPENSES) INCOME
Selling
(166.0)
-32.4%
(134.8)
-31.6%
23.1%
General and administrative
(80.3)
-15.7%
(57.1)
-13.4%
40.6%
Management compensation
(2.4)
-0.5%
(2.4)
-0.6%
3.3%
Other operating expenses, net
(3.5)
-0.7%
(1.1)
-0.3%
213.2%
-
INCOME FROM OPERATIONS BEFORE FINANCIAL EFFECTS
100.0
19.5%
86.7
20.3%
15.4%
Financial expenses
(9.6)
-1.9%
(8.6)
-2.0%
11.6%
Financial income
15.9
3.1%
14.2
3.3%
11.3%
-
INCOME FROM OPERATIONS
106.3
20.8%
92.3
21.6%
15.1%
Nonoperating income, net
0.1
0.0%
(1.1)
-0.3%
-113.0%
-
INCOME BEFORE TAXES ON INCOME
106.4
20.8%
91.2
21.4%
16.6%
Income and social contribution taxes
(24.8)
-4.8%
(21.6)
-5.0%
14.9%
-
NET INCOME BEFORE MINORITY INTEREST
81.7
16.0%
69.7
16.3%
17.2%
Minority interest
(0.0)
0.0%
-
0.0%
-
NET INCOME
81.7
16.0%
69.7
16.3%
17.2%
EARNINGS PER SHARE - R$ (*)
0.1920
0.1643
16.9%
Depreciation
13.1
2.6%
9.5
2.2%
37.8%
EBITDA
113.3
22.1%
95.1
22.3%
19.1%
(*) Net earnings per share adjusted by the split approved by the extraordinary shareholders' meeting held on March 29, 2006
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ANNEX 1 - STATEMENT OF INCOME (CONSOLIDATED)
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ANNEX 2 - BALANCE SHEET (31/12/05 AND 31/12/2004)
ASSETS
Mar/06
Dec/05
LIABILITIES
Mar/06
Dec/05
CURRENT ASSETS
CURRENT LIABILITIES
Cash and Banks
12.1
56.2
Loans and financing
94.9
68.3
Cash Investments
180.5
330.2
Domestic suppliers
103.5
148.0
Trade accounts receivables
247.9
316.3
Foreign suppliers
6.5
4.1
Inventories
189.9
152.3
Payroll and related charges
50.7
73.1
Recoverable taxes
28.6
24.0
Tax payable
78.8
89.1
Advances to employees
6.1
5.3
Dividends
0.1
195.1
Deferred income & social contribution taxes
24.3
25.8
Interest on capital
-
17.7
Other receivables
23.7
14.8
Freights payable
11.4
13.8
Total current assets
713.0
924.9
Other provisions
9.3
9.0
Other payables
15.5
13.6
Reserve for losses on swap contracts
2.8
2.7
Total current liabilities
373.6
634.5
LONG-TERM ASSETS
LONG TERM LIABILITIES
Receivables from shareholders
0.0
0.1
Loans and financing
95.2
119.2
Recoverable taxes
11.3
9.6
Reserve for contingences
92.8
90.6
Deferred income & social contribution taxes
30.1
29.3
Other payables
3.5
3.2
Escrow deposits
30.3
29.5
Total long-term liabilities
191.5
213.0
Other receivables
0.5
0.5
Cash investments
4.1
4.0
MINORITY INTEREST
0.0
0.0
Total long-term assets
76.4
73.0
SHAREHOLDER'S EQUITY
Capital
230.8
230.8
PERMANENT ASSETS
Capital reserves
124.4
120.7
Investments
5.5
5.8
Profit reserves
252.4
170.7
Property. plant and equipment
377.0
365.3
Treasury shares
(0.7)
(0.8)
Total permanent assets
382.5
371.0
Total shareholders' equity
606.9
521.4
TOTAL ASSETS
1,171.9
1,368.9
TOTAL LIABILITIES
1,171.9
1,368.9
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ANNEX 3 - STATEMENT OF CASH FLOW (CONSOLIDATED)
(in R$ million)
1Q06
1Q05
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
81.7
69.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortisation
13.1
9.5
Monetary and exchange variations, net
0.2
(0.2)
Reserve for losses on swap and forward transactions
0.6
3.2
Reserve for contingencies
3.7
9.5
Reserve for obsolete inventories
1.3
2.2
Other reserves
5.0
-
Deferred income and social contribution taxes
0.7
(2.0)
Proceeds from sale and disposal of permanent assets
0.4
3.0
Minority interest
(0.0)
106.6
94.9
(INCREASE) DECREASE IN ASSETS
Current assets:
Accounts receivable
68.4
43.2
Inventories
(38.9)
(21.4)
Other receivables
(2.7)
(0.1)
Long-term assets:
Escrow deposits
0.1
(0.8)
Recoverable taxes
(1.7)
(0.8)
Others receivables
(0.0)
0.3
Subtotal
25.1
20.3
INCREASE (DECREASE) IN LIABILITIES
Current liabilities:
Suppliers
(48.7)
2.3
Payroll and related charges
(23.2)
(26.3)
Taxes payable
(14.5)
5.5
Other payables
(0.7)
(13.3)
Long-term liabilities:
Other payables
(1.2)
(0.0)
Subtotal
(88.2)
(31.8)
NET CASH PROVIDED BY OPERATING ACTIVITIES
43.6
83.5
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(25.6)
(15.1)
NET CASH USED IN INVESTING ACTIVITIES
(25.6)
(15.1)
FINANCING ACTIVITIES
Decrease - short-term loans
(19.1)
(43.0)
Increase - long-term loans
16.2
60.9
Payment of dividends
(194.9)
-
Payment of interest on capital
(17.7)
-
Others
0.6
-
Sale of treasury share
1.2
0.2
Payment of receivables from shareholders
2.0
-
NET CASH USED IN FINANCING ACTIVITIES
(211.7)
18.0
NET INCREASE IN CASH AND BANKS
(193.8)
86.4
Cash and banks at the beginning of quarter
386.4
231.6
Cash and banks at the end of quarter
192.6
318.0
CHANGE IN CASH AND BANKS
(193.8)
86.4
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Income and social contribution taxes paid
24.1
6.0
Interest on paid on loans and financing
1.9
0.8
Swap and forward contracts paid
0.4
5.7