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Conference Call Transcription ≠ 04/28/06
First Quarter 2006 (1Q06)
Good morning ladies and gentlemen. At this time we would like to
welcome everyone to Natura's 2006 first quarter results conference
call. Today with us we have: Alessandro Carlucci, the CEO, Josť David
Uba, the CFO and 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 session. At that time, further instructions will be
given. Should any participant need assistance during this call, please
press *0 to reach the operator.
We have simultaneous webcast that may be accessed through Natura's
IR website:
. The slide presentation may be
downloaded from this website; please feel free to flip through the slides
during the conference call. There will be a replay facility for this call on
the website. We remind you that questions, which will be answered
during the Q&A session, may be posted in advance in 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
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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. Helmut Bossert, Investor
Relations Manager. Mr. Bossert, you may begin the conference.
SLIDE 1 - Cover
Good morning and welcome everyone! Let's begin our conference call on
the Company's Earnings of the first quarter of 2006. Let's move on to
the slides and then Alessandro, David and I will be available for any
question it should be considered necessary.
Let's move on to slide number 2.
SLIDE 2 ≠ Market Share CF&T Target Market
In the left side of the presentation we see that, with preliminary data,
the target market grew 9% in the first two months of 2006 when
compared to the same period of 2005.
In the right side of the slide, we have the Company's market share,
which increased to 21% in the first two months of 2006 from 18.6% in
2005, a increase of 240 bps.
Let's move on to slide number 3.
SLIDE 3 ≠ Cosmetics and Fragrances Brazil
In the left side we see that the Cosmetics and Fragrances market
increased 9.6% in the first two months of 2006 when compared with the
same period of 2005.
In the right side, Natura's market share increased from 33.3% in the
first two months of 2005 to 38.6% in 2006, which means a 530 bps
Let's move on to slide number 4.
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SLIDE 4 ≠ Toiletries Brazil
The Personal hygiene market increased by 8.7% between the first two
months of 2005 and 2006, as we see in the left side and;
Natura's market share increased to 10.3% in 2006, from 9.8% in 2005.
Let's move on to slide number 5.
SLIDE 5 ≠ Consolidated Gross Revenues
Natura's gross revenue increased 18.3% in the first quarter of 2006,
when compared to 1Q05. Despite the fact that it was below the average
growth reported in the previous years, is still an important performance
for the Brazilian scenario.
Slide number 6.
EBITDA reached R$ 113 million in the quarter, that is, 191bps higher
than the reported in the previous year.
In the next slide, we'll present EBITDA margin.
EBITDA margin has reached 22.1% when compared to 22.3% in the first
quarter of 2005.
In the next slide we will comment on the company's innovating
performance in the first quarter of 2006.
SLIDE 8 - Innovation
Innovating investments continued to grow expressively in 2006,
recording a R$ 15 million and representing 3.0% of net revenue.
Let's move on to slide 9.
SLIDE 9 ≠ Number of New Products
The Total Innovation Index decreased from 72% in the first quarter of
2005 to 63.9% in this quarter. The main reason for this reduction lies in
the index composition; it is calculated based on the products released in
the last 24 months. The number of releases in the first quarter of 2004
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was very high. In the calculation of the 2006 index, the releases of the
first quarter of 2004 are excluded, which produces a less impressive
number effect.
Let's move on to slide 10.
SLIDE 10 ≠ Consolidated Sales Channel
The number of consultant reported an expressive growth of 17.7% in
the first quarter of 2006. We have reached 529 thousand consultant in
consolidated terms.
In slide 11 we have the same data referring to Brazil.
SLIDE 11 ≠ Sales Channel in Brazil
By the end of March, there were 492 thousand consultants in Brazil, a
16.4% increase at the end of march 2006 compared with march 2005.
In the next slide, we'll see the productivity evolution.
SLIDE 12 ≠ Consultants Productivity in Brazil
The productivity grew 30 bps in the first quarter of 2006, reaching R$
2,540 by the medium consultant's average.
Let's move on to the channel evolution in Latin America.
SLIDE 13 ≠ Sales Channel in Argentina, Chile and Peru
In Argentina, Chile and Peru the channel presented impressive 38.5%
growth, in March, in a Year-over-Year comparison.
In the next slide, we have the figures for the productivity in the
operations channel in Argentina, Chile and Peru.
SLIDE 14 ≠ Consultants Productivity in Argentina, Chile and Peru
The consultants' productivity in the operations of Latin America grew
300 bps over the same quarter of the previous year, reaching US$ 590
per consultant.
In slide 15, we present the evolution in the gross revenue of the
international operations.
SLIDE 15 ≠ Gross Revenues Argentina, Chile and Peru
As we can see operations in Argentina, Chile and Peru continued to
grow. In the first two months of 2006 Revenues growth was reached
51,2% over the same period of 2005.
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In slide 16, we present the result of these operations.
SLIDE 16 ≠ Operational Margin Argentina, Chile and Peru
The operating loss decreased to a negative margin of 19.5% in the first
quarter of 2006, from 24% when compared to 1Q05.
Let's move to slide 17.
SLIDE 17 ≠ International Expansion
International operations continue to receive the attention we pointed out
in the previous quarters. Net expenses in the first quarter of 2006
amounted to R$10.2 million and are expected to reach R$35.0 million in
2006, as previously announced.
On the next slide, we will talk about CAPEX.
CAPEX totaled R$26 million in the first quarter 2006, a 62.8% increase
over the first quarter of 2005.
I would like to remind you that CAPEX is estimated at R$180 million.
The main investments will be the following:
- New machinery
- New research and development
- Distribution Center
- IT
Let's move on to the next slide to comment on the cash flow in 1Q06.
SLIDE 19 ≠ Cash Flow consolidated figures
Gross cash generated in the first quarter of 2006 reached R$ 107
million, 12.3% higher than the created in the first quarter of 2005.
After the R$ 63 million invested in working capital and CAPEX of R$ 26
million, the free net cash created reached R$ 18 million, a 74%
decrease over the same quarter of 2005.
With this slide, I close this brief presentation. Let's move now to the
Question and Answers session.
Thank You
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Q&A Session
Operator: Thank you. Ladies and gentlemen we will now begin the
question and answer session. I f you have a question, please press the
star key followed by the one key on your touch-tone phone. If at any
time you would like to remove yourself from the questioning queue,
please press the pound key.
Our first question comes from Ms. Juliana Rozenbaum with Deutsche
Ms. Juliana Rozenbaum: Hi everyone again. Can you just help me
confirm the market share figure for cosmetics and fragrances at the end
of the year of 2005?
Mr. Uba: At the end of the year, Juliana, we don't have here but exactly
now, but I can send you by e-mail and I sent to everybody that is
Ms. Rozenbaum: OK, but was that around like 35%, 36%, right? Or
because I have like the 10 months but not really the year end. I was
just wondering if I get the right data, then it is a significant increase
from the end of the year to the 38.6 that you are reporting for the first
month of the year. So I would just like to understand if you see any
different competitive dynamics that would explain this jump?
Mr. Bossert: Juliana, the first to explanation we have is that this
market share is seasonal, so there are some differences between direct
sales in the first quarter compared with retail, the ordinary retail
system, so there is seasonality, specifically in the cosmetics and
fragrances category.
Mr. Uba: One of the reasons, Juliana, is that we have a higher sales
volume on the seasonal dates of the year, like mother's day and
Christmas. We sell relatively more on those periods than the retail.
Ms. Rozenbaum: Sure, but you increased the market share in a
seasonally weak couple of months, so I am just assuming that is a good
thing, because even in a seasonally weak, because there was no big day
like mother's day you still had a...
Mr. Carlucci: You know, Juliana - is Alessandro speaking - we should
take care about deep conclusions when we see only two months of
market share, because sometimes you have some campaigns from one
company or from other big companies that could change the market
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share if you take a look only in a two months basis. We should take
some care about some deeper conclusion about the market share, only
taking care the two months, or the first two months of this year.
Ms. Rozenbaum: Ok. On a similar subject, how about the reaction from
your ... I mean, did you see any reaction in terms of Avon's new
campaign, or new product line that appeals to the nature component of
the cosmetics as well? Did you get any sense of that?
Mr. Carlucci: You know that we are always aware about the
competition actions and strategy and they are doing their best effort to
increase their market share, so of course that they are fighting, but I
can't share with you some specific action that impact us in a different
way. They are developing nice marketing strategies; nice marketing
campaigns, we respect them, but I don't have any one specific to share
with you, to say we received a huge impact on this, or that action.
Ms. Rozenbaum: OK, so that alone is a good thing, right? If you had
perceived a huge impact that would not be a good thing, so that is
great. Just another quick question; can you more or less provide a
distribution of Capex throughout the year? Will it really be concentrated
on the second half of the year, or in the next three quarters should we
expect more or less a linear distribution?
Mr. Uba: Usually it is more concentrated in the second half of the year
and it should be the same for this year.
Ms. Rozenbaum: OK, that is perfect. Thank you.
Mr. Uba: OK, thank you.
Operator: Thank you. Our next question comes from Lori Serra, of
Morgan Stanley. Please go ahead.
Ms. Lori Serra: Good morning. I have a couple of questions, let me first
start out with the market growth. Taking your comments to be careful
about extrapolating from short periods of data, I guess I am inferring
from the market data you guys have presented that since, let's say,
November of last year through February, that the market has
decelerated fairly dramatically toward a rate of, I guess, around 9%,
10% from what had been through the start of 05 something more like
18% or even a low higher than that growth rate. So my question for you
is, I mean, that is a fairly sharp deceleration in the final months of the
year. As you think about that deceleration, is there something that you
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think ... I know the economic factors and I am sure the environment for
sure ion the terms of the consumer slowdown at the end of 05, but I am
wondering if there is anything else you would think that would help
explain that kind of a sharp deceleration?
Mr. Carlucci: Hi Lori, it is Alessandro, good morning to you.
Ms. Serra: Good morning.
Mr. Carlucci: The market growth in 2006 may be more volatile than
previous years in terms of market growth, as we will have presidential
elections and the soccer world cup. Credit availability has grown
considerably in Brazil recently and financial institutions and retail stores
have provided consumers with a substantial offer of credit lines, most of
it driven towards real estate and durable goods. 2006 will host the
soccer world cup and we are Brazilian, Brazilians become naturally
attracted towards TV sets and similar equipment. While this scenario
maybe affect the share of pocket of potential consumers, it is too soon
to conclude about future expectations, because so far we only have a
narrow figure - first two months - of what has happened in the market.
Those things we can share with you about what can happen in our
market this year, but is too soon to conclude something about the
market growth in this year.
Ms. Serra: But if I understood correctly when you reported the fourth
quarter you put 10 months of data and you didn't report the last couple
of months of the year and now is when you had started to talk about in
the fourth quarter conference call there was being a concern about the
slowdown and I guess you have that data now. So could you just, at
least fill us in
what do you think the market growth rate was in
November, December of last year? Because I am inferring from the data
that it is at that sort of 9% to 10% level, so you have four months at
that lower rate for the industry, but maybe that is wrong and you have
data ...
Mr. Uba: Lori, you are right. There is a deceleration of the growth rate
in the market during 2005, at the end of 2005 mainly, and still in this
first quarter of 06. We started 18% in the first bimester of 2005 and the
growth rate in the last bimester of last year was only 12% and now it is
around 10. So it is very clear a deceleration in the growth rate for the
The reason for that, that is more or less obvious, is also the decrease in
the growth rate of the GDP in Brazil last year. In 2004 it was 5% and it
dropped to a little bit above 2.5% in 2005.
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There is a length effect on the CFT market, but surely what we are
seeing now is a direct impact of a slower economy last year as
compared to 2004. As this year there are some strong expectations that
the economy should grow again at least at 4%, we might expect again a
higher growth rate for the CFT market, maybe starting in the second
half of this year, maybe. But the reason is a slowdown in the economic
growth last year - that is the main reason.
Ms. Serra: OK. So I guess this is a question that is going to be hard to
ask as you don't want to give specific thoughts in terms of growth, but
the idea that there is a certain range of thoughts about what you should
do in terms of growth this year that the people like myself have. Do you
think that those rates of growth are realistic? If the market growth
decelerates to the extent that it has?
Mr. Uba: You are right when you said that it is a very tough question
for us, very difficult to answer. What can I say? Let me give you some
elements of the scenario and then make some discussions. The CFT
market might grow again at higher rates in the second half of this year.
Let's not forget that is a very volatile year because of the World Cup,
because of the presidential elections at the end of the year. We probably
will be an increase in government expenses also this year that might
drive consumption a little bit. We are now changing for 2.5 GDP growth
to probably 4/ 4.5 again. All this combined results in a very volatile,
unstable scenario for the CFT market. Although we should not have real
growth, real I mean after inflation below 5% this year. This year it will
be a little bit harder to estimate our sales growth as compared at least
to the last two years, but there is nothing else that we can give to you
to help you.
Ms. Serra: Ok that is helpful. Then let me ask you a bit more tangible
question that you probably can answer. The first quarter we saw a big
increase in your administrative expenses on a year-on-year basis and I
guess what hasn't been clear to me is that I guess when we look at your
numbers on a quarterly basis we see a lot more fluctuations on a
quarterly basis than maybe a lot of other companies. As we think about
the higher expense levels on admin in the first quarter, should we think
about now you are evening out to R$ 80 million a quarter and so the
first quarter was the last quarter of, maybe, catch up ≠ I don't know if
that is the right way to say it ≠ or should we think about the admin cost
continuing to build over the course of 06?
Mr. Uba: Let me see how can I answer this question to you. First of all,
large portions of our administrative expenses are discretionary expenses
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that fluctuate along the year according to the intensity of our projects,
R&D activities and also IT investment. So they can fluctuate along the
year - that is right.
What I can tell you is that they will be a little bit higher than 2005
because there is a strong impact on these expenses from our strategic
drives as R&D expenses; IT investment and the international expansion
strategy for the company. They will be higher than in 2005, but
probably they will fluctuate from quarter to quarter, as we did in the last
Ms. Serra: OK, thanks very much.
Mr. Uba: Thank you, Lori.
Operator: Thank you. Our next question comes from Robert Ford, of
Merrill Lynch. Please go ahead.
Mr. Robert Ford: Good day everybody. I wanted to ask a question that
was completely unrelated to financials and Alessandro, when I look at
the fragrance category for example, it just seems to be kind of
impossible to really innovate it. But then this Humor launch looks really
intriguing and I know I am not the average Brazilian consumer, but
when I look at the positioning and the little bit yet behind the products it
just appears incredibly compelling in terms of the proposition.
Can you talk a little bit about what the take up has been on Humor in
initial sales and what the innovation pipeline looks like in terms of
potentially offsetting not just the seasonal factors that are at play in this
next quarter, but also some very successful innovation that you had last
year, like Spilol or the elimination of animal fats in hand soaps?
Mr. Uba: Just hold a second, Bob.
Mr. Carlucci: Hi Bob good morning, how are you? Nice to hear you, let
us talk about the recent launch that we had in the fragrance area that is
Natura Humor.
Even though we are not sharing specific numbers I can say to you that
we are really happy with this new launch. It is a new way to develop
fragrances with concepts; with history; with a nice marketing campaign.
Even though the large part of this launch is not included in the first
quarter, because it was launched in March 12, so the most part of
Natura Humor is going to be in the second quarter of the year. Even
though we are really happy, it is a launch with a lot of success in our
opinion. Of course that we are talking about the first impressions, a
product should develop, should be developed in the first six months, not
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only in the first month, so it is soon to conclude, but are happy.
Talking about the pipeline, we are developing our pipeline as well. In the
first quarter we had less new products than we had in the first quarter
of 2005. First of all because in 2005 we had maybe and atypical big
number of new launches and probably in this year we have a fewer one
than we would like to have, but nothing structural and nothing that can
be a problem in the future. Our pipeline is developing well and we are
sure that we can launch new products in the last part of the year.
Mr. Ford: And then just lastly if I might Alessandro, can you talk a little
bit about what the response has been to the change in the Vitrine? I
have got your number 6 cycle, the Revista. Is it fair to assume that from
this point forward the Vitrine is kind of gone, you have gone to the new
magazine approach? Can you talk a little bit more about the circulation
changes that you made in terms of the quantities? I understand the one
I am holding probably had a double in terms of the circulation in the
launch, your not going to be printing that many every cycle, but my
sense is that you are bringing up, or beating up
the distribution. Is that
Mr. Carlucci: Yes Bob. First of all, again as you said, we launched the
magazine - Natura Magazine, we are calling like this - 20 days ago, so it
is too soon to conclude again. But we are receiving well comments, our
sales force is very happy.
Some clients are saying that this new magazine represents more our
brand and our value proposition so we are really happy with the first
results more in a qualitative way than in a quantitative way, because it
is a little bit soon to conclude how this magazine is going to impact our
sales in the short term.
Personally, I believe that the evolution of our magazine is going to
impact in the medium term, not in the short term, because it is going to
help us to build the brand.
You are right then in the first cycle, in the first campaign, we increased
the quantity, but again we didn't finish this cycle, the number 6, to
conclude if we are having more or less impact in the sales. Again, this
action is more based on the fact that we believe that it is going to help
the brand construction than to increase in the short-term sales.
Mr. Ford: And just one last question and this is completely ridiculous,
but when I look at this magazine am I seeing a lot more subliminal
advertising or am I just becoming completely neurotic?
Mr. Carlucci: I don't know really how to answer your question. We
don't intend to do some subliminal advertising. What we really intend to
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do is to share some values; to share some opinions and to help people
to try to build a better world; taking care of the nature; taking care of
themselves; to their families; to the society. So it is not subliminal, it is
directly objective opinion and value proposition about our brand.
Mr. Ford: OK, I will e-mail David some page numbers and some
remarks and he can be my benchmark on my level of neurosis. But
thank you very much.
Mr. Carlucci: You are welcome. Thank you too Bob, bye.
Operator: Thank you. Our next question comes from Jose Jordan, of
UBS. Please go ahead.
Mr. Jose Jordan: Hi, good morning everyone. My question goes back a
little bit to the growth in the market. When you look at the productivity
domestically, the items per reseller and even the number Reais per
reseller there is a market slowdown in the first quarter. My question was
do you think this is all related to the slowdown in the market, or do
think that the quality of the additional consultants is beginning to come
down and it is something that is more structural, of a structural concern,
or is this just a temporary issue with the market growth? How do you
think about, you know, what the cause of this decline is?
Mr. Carlucci: Hi Jordan, good morning, is Alessandro speaking. We are
not seeing a bad quality of the new consultants and we don't think that
there is something structural in the productivity. In fact there are some
combined effects that I can share with you. We must first consider that
we have been growing the number of consultants and the market share
at very substantial rates in the last three years. So it is not obvious to
expect that the average productivity will grow at similar rates when
compared to recent years. This is the first point.
Secondly, we grew more than 40% in the last two years the number of
Natura consultants, we are talking about 140 thousand consultants
more than two years ago and we know that newer consultants have less
productivity than old ones. That doesn't mean that they are bad and the
old ones are good, that means only that they sell less than the old ones
because they have less clients and they know less about Natura and our
value proposition.
Finally, a certain frustration from lower sales in this quarter may have
caused some impact on productivity as well. So there is not a structural
problem in the productivity, it is a combined effect probably of those
things that I mentioned.
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Mr. Jordan: But in a way what you are saying is that as the number of
consultants grows, that there is basically more saturation of consultants
and there is just fewer opportunities for them to exploit over time? Is
there any way... what is your estimate of penetration? Is this wall, let's
say, going to be hit in the next two, three years or is it something that
could be much further out in terms of when consultants start knocking
on doors, will they more increasingly get the answer "I already do
business with someone else, thank you very much"?
Mr. Carlucci: You are welcome. Marginally, of course that the more
consultants you have, more saturated is going to be the market. I have
difficulty to share with you how long can we increase the number of new
consultants and grow or maintain the productivity. This is difficult to
share with you; this is not something mathematic to share.
There are two points to share with you that in my opinion are important:
first of all, we strongly believe that we are far from a saturation point,
that means that we cannot have a new one consultant that all the new
sale is going to be stolen, to stole from an older one. We believe that we
are far from this point.
The second one is the fact that a main competitor in Brazil, Avon, they
have more than 1 million reps, so we believe that we are far from a
saturation point, even though, as I said, marginally more consultants
you have, more they are going to share the market and probably
compete with another one. But we are far from the saturation point.
Mr. Jordan: OK, thanks a lot.
Mr. Carlucci: You are welcome.
Operator: Ladies and gentlemen, as a reminder, if you would like to
pose a question, please press star one.
The next question comes from Celso Sanchez, with Citigroup. Please go
Mr. Celso Sanchez: Hi, good morning. Just following on that theme a
little bit about saturation and consultants. Can you update us on any
thought you have on the orientadora strategy that we have heard
about? I know it was a little limited trial basis, have you seen better
results that make it more encouraging that you might move up the
implementation of that or if you have a horizon for what you might see
more markets on trial for that structure? That is the first question,
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Mr. Uba: Celso, this is Davi speaking. What we are doing now is running
a project on this experiment, a pilot project on this experiment. It is too
soon for announcing any results.
We are very, very careful with any experiment affecting the structure of
our sales distribution. We are careful in the relationship with our
consultants, with our sales force and therefore we want to be absolutely
sure that the model that we are redesigning, that we are testing, are
absolutely strong and seamless before we start to spread it throughout
the market.
We do not expect to have any final conclusion on this model in the short
term, we might have it by the end of this year or first half of next year,
but right now we are working in improving it, testing the new versions
of it, before we can announce the final conclusions or even start
spreading it, ok?
Mr. Sanchez: That is great, thank you, that is helpful. Then the second
question just on Avon results this morning, they mentioned a doubling
of advertising spent in the region, I will start to be more specific on that.
I know that you remarked that you have seen a lot more activity from
them over the last few months. Is there any thought to, if it stays at
this level, is there something that you think might change the
communication strategy at all and I guess in a bigger picture sense, is
there something that you think is more heavily concentrated perhaps in
Brazil or do see it in Mexico, and perhaps even in Venezuela, where you
are ramping up, I suppose?
Mr. Carlucci: Celso, we really don't know if it is more concentrated in
Brazil or in other countries in Latin America. In Brazil we saw a bigger
effort the advertising campaign, but I don't believe that this is
individually an important point to us, because, as you know, for a direct
selling company like Natura advertising is a part of our marketing effort.
We invest a lot in training; we invest a lot in recognition; we invest a lot
in the magazine, the new one. This is the most effort that we are doing
in the beginning of this year and we spend some money in advertising.
Different from the retailers, the advertising is a part of our marketing
effort, is not as important as for the traditional channel. So I don't
believe that this effort specific in advertising from the competitors
should affect so much our strategy or our results.
Mr. Sanchez:
OK, thanks very much.
Mr. Carlucci: You are welcome.
Operator: Our next question comes from Ms. Juliana Rozenbaum, with
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Deutsche Bank.
Ms. Rozenbaum: Hi, just a follow-up question. You mentioned
previously that you were slightly disappointed with sales growth in the
quarter and that was one of the reasons behind the increase in
inventories. Can you give us some color on if that was concentrated in
any specific product line or things like high ticket items instead of low
ticket, I mean, any color so to help us understand why you were
disappointed, why you were expecting something higher than the actual
growth that you saw?
Mr. Carlucci: Juliana, hi, is Alessandro again. When you take a look
deeply in the frustration, you are right, is concentrated in some products
or categories, but not because of their characteristic, but because they
were involved on those marketing campaigns that didn't reach the
results that we expected. So yes, are concentrated, but not because of
lower ticket or because we are talking about make up and colors, but
only because they were involved on those marketing campaigns. But
unfortunately we are not sharing which one are they, because this is
strategic information. The most important thing to share with you is the
fact that we know where are the opportunities and we solve them for
the future.
Ms. Rozenbaum: Ok, thank you. But if I am not wrong, this is actually
the first time when you are disappointed, I mean is there any reason
why your marketing campaign ... because they didn't really change, so
why your marketing campaigns didn't provide you with the results that
you were expecting? Could you at least identify what happened, what
was different in this quarter?
Mr. Uba: Well Juliana, I would start saying that we are not free of
mistakes; sometimes you can make some mistakes. Part of the
explanation is that we made some mistakes.
A second one, which is not very important, but also might explain a little
bit is that we are undergoing right now some structure changes in the
company because of the growth; because of our strategy of
international expansion; so there is a lot of different processes; some
changes in the organization; so this might also have increased a little bit
the probability of making some mistakes, but you know we have tens of
different initiatives in our marketing effort. It is absolutely possible that
we make some mistakes sometimes. We are not so desperate because
of that; we regard that as a natural aspect of the business. We identified
the mistakes, we corrected them and we might have some in the future,
we are not infallible.
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Mr. Carlucci: And adding something, Juliana, even though we are a
little bit disappointed, we consider that we had a good result in the first
quarter, especially when you compare with the market growth. So we
are here to look for all the opportunities, but we are not sad with the
results. We believe that we could do better, but when you compare our
growth with the market growth we are not sad.
Ms. Rozenbaum: Absolutely, don't take me wrong on that; that was
not what I was trying to imply, but thank you anyway. It was very
Mr. Carlucci: Thank you.
Operator: Thank you. Our next question comes from Celso Sanchez, of
Citigroup. Please go ahead.
Mr. Sanchez: Hi. Sorry, just a quick follow-up on the Paris operation,
the France operation. I understood that there might be demand for a
broader selection of products, that you are getting positive feedback on
that. If that is correct, would you consider a larger number of SKUs for
the Ekos line, or do you think other product lines might even be useful
in that operation? Thanks.
Mr. Carlucci: Celso, you are right. We are being demanding and we
want to increase the number of SKUs in our France operation, not only
in Ekos line, but probably launching new lines and sub-brands of Natura,
even though we don't have a specific, defined time to do it but we, yes,
we want to increase the value proposition of Natura in the France
operation. Let me share with you something important. Two months ago
we launched an extension of Ekos line, an important extension, a skin
care line in Ekos and this is very important for the France operation. It is
the first time since we opened the store that we are offering skin care
products under the Ekos line.
Mr. Sanchez: Great. When you said new line that you would like to
launch there, I would assume that are lines that already exist in Brazil,
or would there be potentially entirely new lines, specific for the French
Mr. Carlucci: Sorry, could you repeat, Celso?
Mr. Sanchez: Sorry, you said that obviously you would like to grow
beyond just perhaps Ekos in France. Would you consider launching
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entirely new lines or will they be lines from Brazil that now will be
represented in France?
Mr. Carlucci: We are planning to launch new lines, probably existing in
Brazil, with some kind of adaptation for the French market, but we are
planning to launch existing lines in Brazil, completely new for the French
Mr. Sanchez: OK, thank you.
Mr. Carlucci: You are welcome.
Operator: This concludes today's question and answer session. I would
like to invite Mr. Bossert to proceed with his closing statements. Please
sir, go ahead.
Mr. Bossert: Thank you very much. I think it was a very good
conference call today and I hope to see you in the next conference call
again. Thank you, have a good day.
Operator: That does conclude the Natura audio conference call for
today. Thank you very much for your participation and have a good day.