1 1 company overview. 2 2 our vision through our business practices, the quality of our products and...
TRANSCRIPT
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company overview
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our vision
Through our business practices, the quality of our
products and the relationships we establish, we seek to
make Natura a brand ultimately recognized worldwide
and identified with a community of people who are
committed to constituting a better world, through a
better relationship with themselves, with the others, with
nature and as a whole.
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our principles
to create and sell products and and services that promote
is the harmonious, pleasant relationship with oneself and one´s body
is the concept of rewarding, empathetic relationships with the others, with nature and as a whole
well-being
being-well
well-being/being-well
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natura’sprofile
Products
Market Share
Operations
Sales Channel
Creams, lotions, perfumes and fragrances, make-up and e personal care products
510 different items
In 20031: — 12% of the total Brazilian CF&T sector and 17% within the
categories it operates— more than 40% of cosmetic sales via direct sales in Brazil
Largest cosmetics R&D center in Brazil
State-of-the-Art facility in Cajamar
142 million units sold in 2003 (1S04: 84.3 million)
Direct sales, through 367,000 consultants reaching over 5,000 municipalities in Brazil
Around 22,000l consultants in Latin America
Markets 97% of sales in Brazil and 3% in Latin America
With approximately 3,000 employees, net revenues of R$1.3 billion
and EBITDA of R$296 million in 2003.
Note: 1. Based on Sipatesp (“São Paulo State Cosmetics Industry Association”)
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business strategy
Natura’s business strategy is based on six main aspects:
Growth in the Brazilian Market
Brand strength as business driver
Brazil is the main expanding vector
Direct Sales growth
Independent sales channel
Close relationship with independent sale representatives
Professional training and relationship programs
Loyal sales channel
Ongoing Innovation
Focused on products and concepts that confirm the values of the brand
Sustainable use of the Brazilian biodiversity
International Operations
Excellent growth opportunities in Latin America
Testing the Brazilian Biodiversity concept in Europe
Focus on management efficiency
Improvement of existing infrastructure
Managing excellence
Brand Recognition Products, sales channel, marketing and business
presence
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sales channel, innovation & brand
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Solid market positioning and strong brand recognition
Market Positioning Brand Strength1
Source: TSB&BNote:1 Survey requested by Natura in 2003, conducted with 2,200 people
across different social classes in 6 large Brazilian cities
Transparency
SocialResponsibility
Preference for Brand
Recommends
Credibility
Innovation
Quality
Criteria
Mass Consumption
Premium
Market Reach
Johnson &Johnson
Unilever P&G
L’Oréal Nivea Avon
O Boticário
Clinique
Lancôme
AvonO
Boticário Nivea
35%
29%
48%
43%
13%
11%
51%
54%
45%
37%
45%
54%
47%
61%
18%
12%
23%
63%
59%
70%
17%24% 3%41%
47%43% 18%60%
brand and market positioning in Brazil
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ongoing innovationInvestments in innovation are important to renew our product portfolio. The return on such investments is made clear by the share of new products in the Company’s total revenue.
Investments in Innovation (R$ MM)Number of launchings and Natura’s Innovation Index*
165
4491
117
2001 2002 2003 1H03 1H04
17.119.6
35.5
28.827.2
2.6%
3.0%2.9%3.3%
2001 2002 2003 1H03 1H04
2.7%
64
% Net Revenue Research and DevelopmentInvestments
Number of Launchings
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our product lines
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• Around 510 different items, including cosmetics, fragrances, hygiene and health products
• Main product lines– Natura Ekos– Mamãe & Bebê– Make-up– Chronos– Fragrances
products
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– draw from the integration of Brazilian’s nature to each Brazilian human being’s own nature
– use of active ingredients obtained from Brazil’s biodiversity– 61 items (bath, moisturizers and fragrances - keeping with
the concept of sustainability)
natura ekos
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mamãe & bebê
– Designed to meet the special needs of pregnant women and their babies
– 17 items
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natura chronos
– Skin treatment options for the face designed for women over 30– affirms the beauty of women at every stage of their lives– Aligns skin treatment technology with the rejection of
stereotypes about beauty– 24 items
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perfume doBrasil
Unique fragrances combining the wealth of the Brazilian forest and the tradition of its communities
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naturachannel
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• 389,000 independent sales representatives*• 680 sales promoter• 31 sales manager• 6 regional managers
• Growth opportunities
• Being part of the community
• Search for success
relationship with our independent
sales representatives
* Available independent sales representatives in Brazil and Latin America, in June/04.
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who is who?
CommercialDirector
Regional Manager
Regional Manager
Sales Manager
Sales Manager
SalesPromoter
Sales Promoter
Independent Sales
Independent Sales
Employees
Independent Sales Representatives
6 regional managers
31 sales managers
680 sales promoter
367,000independentsales rep.
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sales channel in Brazil
size & productivity growth
The brand equity combined to the relationship kept with Natura Consultants develop the sales channel, both in size and productivity.
Growth in the Number of Natura Available Consultants in Brazil(thousand)
Productivity Growth (R$ thousand per active consultant)
CAGR 01-03 11%
+16% CAGR 01-03 10%
+10,1%287307
355
316
367
2001 2002 2003 1H03 1H04
8.6 9.0
10.4
4.85.3
2001 2002 2003 1H03 1H04
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social responsibility
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“For Natura, Corporate Responsibility is a
management skill based on an ethical and
transparent relationship towards all parties
involved in the business as a way to create
solutions for building a sustainable world. It
believes the development of this skill is part of
a continuous process, which involves the whole
company, as well as, the society.”
Extract from the text
Corporate Responsibility
Strategic Options
our belief
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human resources
Natura seeks to create ideal conditions to attract and retain creative and talented employees, standing among the best companies to work for in Brazil
Employees Profile (2003) Organizational Climate 1
1st
Source: HayGroup, 2003Note:1 Independent research requested by Natura
5870
76
57
2001 2002 2003 Market in 2003
Men38%
Women62%
Top 100 Companies to Work Forin BrazilExame Magazine - 2000 and 2002
Best Company for Women toWork in BrazilExame Magazine - 2003
Top 10 Companies to Work Forin BrazilExame Magazine - 2003
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Some examples:
• Development of relationships with communities
that supply Brazilian biodiversity assets
Encouragement to local sustainable development
• Quality when communicating with consumers
Positioning against beauty stereotypes
• “Crer para Ver” Program
Mobilization of Consultants
our experience
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Brazilian biodiversity assets:suppliers chain
nº Area Assets
1 Médio Juruá - AMAndiroba Murumuru
2 Iratapuru - AP
Castanha Copaíba
Breu Branco
3 Entorno de Belém - PA (3) Priprioca
4 RECA - RO Cupuaçu
5 Ilhéus - BAGuaranáCacau
6 Palmeira do Piauí - PI Buriti
7 Ervateira Putinguense - RS Mate
8 Chamel - PR Camomila
9 Fazenda Alpina - SP Pitanga
10 Flora do Brasil - MG Maracujá
11 Mil Madeireiras - AM Louro Rosa
4
1 11
2
3
6
5
10
9
8
7
Brazilian ecosystem
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Iratapuru - State
of Amapá
Certified by the
Forest Stewardship
Council for
cropping Brazil
Nut, after
performing a
three-year jointly
job with local
communities.
our experience
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our experience
Boa Vista: 26 families
Formalization of the community association
Training in organic culture
Campo Limpo: 16 families
Culture diversification
Use of income provided by “priprioca” for remodeling houses
Cotijuba: 8 families
Formalization of the community association (“Movimento de Mulheres” – Women Motion)
Income resulting from images used to purchase the Motion headquarters
Entorno de Belém – State of Pará
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High standard communication process
ourexperience
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Natura Consultants voluntarily sell products whose
proceeds are allocated to projects aiming to improve the
public education (in an association with Abrinq Foundation)
Results since its implementation, in 1995:
• 147 projects supported
• 3,600 public schools in 21 states involved
• 900 thousand children participating
• R$ 15 million raised
• 2004: Launching of the campaign “Crer para Ver EJA”
“Crer para Ver” Program
ourexperience
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social responsibility
The more incorporated actions are to business strategy the more relevant they get
Greater integration with related parties
Positive impact on the competitive environment
Broader condition for business growth
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financial performance overview
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consistentgrowth
Consistent revenue growth, as a result of a solid market positioning, brand strength and optimized distribution system
Gross Revenues (R$ MM, nominal)
Note:1 Data refers to Natura Empreendimentos
429587
688
1,0161,168
1,411
833806
1,910
1995 1996 1997 1998 1999 2000 2001 2002 2003
Nominal CAGR 95-03: 21%
Real CAGR 95-03: 12%
1 1
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110116
142
65
83
2001 2002 2003 1H03 1H04
813
993
1,329
562
758
2001 2002 2003 1H03 1H04
operational performance
Sales volume(million units)
Net revenues(R$ MM, nominal)
CAGR 01-03: 14%
CAGR 01-03: 28%
1
+35%+28%
Note: 1. Pro forma
Sales volume has exhibited strong growth, driving net revenues
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37% 34%
31%30%
14%13%
36% 35% 34%
33% 32% 30%
16% 15% 14%
2001 2002 2003 1H03 1H04
COGS Sales ExpensesGeneral and Administrative Expenses
cost and expenses
Costs and Expenses Breakdown as a % of Revenues
85% 82% 79% 77%82%
Note: 1. Pro forma
1
The new plant has led to a significant dilution of fixed costs,
enhanced by an efficient expense control by management
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184136
199
296
110
2001 2002 2003 1H03 1H04
EBITDA
1
CAGR 01-
03: 4
8%
+67%
EBITDA(R$MM, nominal)
EBITDA Margins(%)
24%
17%
20%22%
20%
2001 2002 2003 1H03 1H04
1
Note: 1. Pro forma
Increasing EBITDA and EBITDA margins due to the consolidation
of market position and significant productivity gains
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indebtedness
After BNDESPAR converted debentures amounting to R$ 34.4 million and cash generation in the period, Natura ended the semester with net cash of R$ 84.6 million.
Net Debt /(Cash) Evolution (R$ MM)Indebtedness Breakdown
R$104 MM
2.8-year average maturity
1.8-year average maturity
(85)
22
(19)
119
205
2001 2002
2003
1Q04
2Q04
BNDESFinep
IFC
65%
35%
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international operations
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LATAM
• 3,583 independent sales representative
• 7,001 independent sales representative
Replication of the commercial model used in Brazil
Peru
Chile
• 11,459 independent sales representative
Argentina
Bolivia
Commercial presence
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11.99.4
15.8
6.3
9.9
-7.7
-3.4 -2.8 -1.4 -1.5
2001 2002 2003 1H03 1H04
Gross Revenues Operating Income
internationalpresence
Natura has been achieving strong growth in Latin America, a market with total size of around US$10.7 billion in 2002
Sales Volume - Argentina, Chile and Peru (million of units)
Gross Revenue vs. Operating Income(US$MM)
Replicable business model in other Latin American countries
CAGR 01-0
3: 48%
+62%
CAGR 01-03: 15%
+57%
1,060
1,445
2,318
932
1,514
2001 2002 2003 1H03 1H04
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ekos internationalproject
Main goal is to test the Brazilian biodiversity concept and brand expansion abroad
The natural products market has a promising growth profile
Ekos InternationalPersonal Care, Natural Market Value (US$ billion)
Initial focus on Ekos product line— Brazilian biodiversity
Opening of the first store in Paris expected by early 2005
Expected investments of US$16 million in 3 years
Source: Datamonitor, “Natural Beauty Revolution”
CAGR 01-06E - Europe: 1
7%
CAGR 01-06E - Global: 2
0%
1.53.4
2.9
7.5
4.4
10.9
2001 2006E
Europe Others
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manufacturing & logistics
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theorder cycle
TELEMARKETING
PICKING
PRODUCT PROCESSBILLINGSHIPPING
DELIVERY TO SALES REPRESENTATIVE
Full capacity = 42,000 boxes/day
Municipalities covered = more than 5,000
~35%
~65%
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cajamarfacility
Vertical Automatic Warehouse
Picking
Factory
Offices
Training rooms
Club
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logistics
• More than 5,000 municipalities covered
• 7 shipping companies representing 87% of the deliveries
• 20,000 to 30,000 orders per day
• 98% of orders are shipped within 24 hours
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suppliers
approximately 95% of our expenses for raw materials are from Brazilian suppliers and only 5% are imported
Raw materials% of total
2003Number of suppliers
Plastic packaging 24% 29
Fragrances 17% 8
Glass packaging 12% 9
Spray tops 11% 7
Packaging labels and boxes 8% 13
Others 28%
Total 100%
128
194
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CAPEX
Capital expenditures in fixed assets reached R$ 22.7 million in the first half of 2004. Most of it was concentrated on the construction of the new Vertical Storehouse.
CAPEX - R$ MM 2004 Estimated CAPEX
38.8
25.2 23.9 22.7
2001* 2002 2003 1H04
Maintenance
Expansion
Process Improvements 14%
65%
21%
* Natura Empreendimentos in 2001
R$ 75 MM
15%
61%
24%
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Capacity ( million of units)
Current 170 140
Early 2005 200 300
Mid 2005 220 300
expansion of capacity production
150
150
290
Manufacturing PickingStorage
• By mid 2005, we estimate an investment of R$300 million (at current prices) in order to reach 450 million units in three stages of the process
• 2003 : production of 136 million of units
Capacity Utilization (million of units)
Manufacturing Storage Picking
2003 80% 101% 95%
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financial summary
EBITDA margins of 24.3% in 1H04
Net indebtedness close to zero (post-dividends)
Low Capex - state-of-the-art facility allows 200% growth
Strong dividend distribution policy
- by-laws: 30% pay-out- 45% is the minimum pay-out approved by the Board
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corporate governance
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corporategovernance
Commitment to the highest corporate governance standards, reaffirmed with the Novo Mercado listing
Beliefs andValues
ExternalAuditors
1989
1991 1999
Audit andRisk
Management Committee
2001
Management Reports
HumanResources Committee
2003
“Best Annual Report
Issued by a Private
Company” (ABRASCA)1
20041998
Board ofDirectors
Novo Mercado Listing
100% tag along rights
One class of shares with voting rights
Note: 1. Brazilian Listed Companies Association
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99.99%
operatingcompanies structure
NATURA COSMÉTICOS S/A
NaturaInovação e
Tecnologia deProdutos Ltda.
Indústria eComércio deCosméticosNatura Ltda.
NaturaCosméticos
Soc. AnônimaPeru
NaturaCosméticos
Soc. AnônimaArgentina
NaturaCosméticos
Soc. AnônimaChile
NaturaLogística e
Serviços Ltda.
99.99%
99.76% 99.93% 99.99% 99.99%
Shareholders
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shareholder
structure
Shareholder Number of shares Percentage
Controllers 62,637,886 73.9%
Float 22,112,876 26.1%
Total shares* 84,750,762 100%
* Not considering 687,849 treasury shares.
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dividend policy
Dividend Policy
Minimum dividend pay-out : 45% of annual net income
Frequency: semi-annual
Interest on Capital
Maximize tax efficient use of interest on capital
In 1H04, Natura distributed the amount of R$ 86.8 million in dividends and interest on capital (70% pay-out)
Strong free cash generation allows for an aggressive dividend policy
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This presentation 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 presentation 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.