30
35
40
45
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14
BR
L
SELLTarget Price
BRL 33.00Current Price
BRL 37.25 -11.4 %
Summary &
Overview
Recommendation
Financial &
ValuationRisks Conclusion
-11.4%
Reasons to Sell
Natura is the leader in the CF&T market
12.4
12.0
9.1
6.4
9.0
Market share in CF&T (%)
Source: Euromonitor
Cosmetics Fragrances Toiletries
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
MA
SSIV
EM
ASST
IGE
PR
EST
IGE
PR
EM
IUM
Natura is the leader in the CF&T market
12.4
12.0
9.1
6.4
9.0
Market share in CF&T (%)
Source: Euromonitor
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
International Footprint
85.1%
9.4%
3.8%
1.7%
Natura’s 2013 Gross Revenue
Source: Company’s data
USA
France
Australia
Brazil
Chile
Peru
Mexico
Colombia
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Seeking growth through change
+14.0% CAGR
Source: Company’s data
16%
20%
6%
11%
5%
2009 2010 2011 2012 2013
Brazil’s Gross Revenue YoY Growth
Source: Company’s data
MONO
Channel Brand Category
Direct Selling Natura CF&T
Consolidated Gross Revenue (BRL bn)
5,86,9
7,58,6
9,5
2009 2010 2011 2012 2013
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Seeking growth through change
+14.0% CAGR
Source: Company’s data
16%
20%
6%
11%
5%
2009 2010 2011 2012 2013
Brazil’s Gross Revenue YoY Growth
Source: Company’s data
MONO
Channel Brand
April 2013 Seabra, Passos and Leal step
down as Co-Chairmen
Setembro 2014Roberto Lima takes office
as CEO
Category
Direct Selling Natura CF&T
Online Retail Aésop Home
Fashion
MULTI
Rede Natura
Consolidated Gross Revenue (BRL bn)
5,86,9
7,58,6
9,5
2009 2010 2011 2012 2013
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Reasons to Sell
SELL
Summary &
Overview
Increasing Competition
Reasons to Sell
Risky New Strategy
Expensive Valuation
Reasons to SellFinancial &
ValuationRisks Conclusion
Saturated Sales Channel
+200
bps-230
bps
+150
bps
P&G
9.07.6
O Boticário
9.1
7.1
73
44
4339
19
17
CF&T market size (USD bn)
Source: Euromonitor
Brazil’s impressive figures: root of all evil
Summary &
OverviewReasons to Sell
Brazilian CF&T market size (BRL bn)
Source: Euromonitor
48,1 56,1 64,0 70,7 81,7 91,6
2008 2009 2010 2011 2012 2013
+13.8% CAGR
2010 2011 2012 2013
Natura
14.8
12.4
Unilever
12.010.4
Avon
6.4
8.7
-240
bps
+160
bps
Source: Euromonitor
Financial &
ValuationRisks Conclusion
Market Share in CF&T (%)
+200
bps-230
bps
+150
bps
P&G
9.07.6
O Boticário
9.1
7.1
73
44
4339
19
17
CF&T market size (USD bn)
Source: Euromonitor
Brazil’s impressive figures: root of all evil
Summary &
OverviewReasons to Sell
Brazilian CF&T market size (BRL bn)
Source: Euromonitor
48,1 56,1 64,0 70,7 81,7 91,6
2008 2009 2010 2011 2012 2013
+13.8% CAGR
2010 2011 2012 2013
Natura
14.8
12.4
Unilever
12.010.4
Avon
6.4
8.7
-240
bps
+160
bps
Source: Euromonitor
Financial &
ValuationRisks Conclusion
Market Share in CF&T (%)
Big Market
Solid Growth Pace
Intensified investments
Launched products lines
Launched opperations
Ajusted prices to Brazilian
consumer
Reasons to Sell
International Peers National Competition
International players joined the competition
Summary &
Overview
Financial &
ValuationRisks Conclusion
Store-based Retail E-commerce Direct Selling
O Boticário is moving faster
Reasons to Sell
Source: O Boticário’s franchisees
Summary &
Overview
Financial &
ValuationRisks Conclusion
International Peers National Competition
Store-based Retail E-commerce Direct Selling
O Boticário is moving faster
Reasons to Sell
Source: O Boticário’s franchisees
Summary &
Overview
Financial &
ValuationRisks Conclusion
International Peers National Competition
O Boticário reached ~500k consultants in 2 years
SELL
Increasing Competition
Reasons to Sell
Saturated Sales Channel
Risky New Strategy
Expensive Valuation
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Source: Euromonitor
Direct Selling participation in CF&T sales
72%
26%
2%Store-BasedRetailing
Direct Selling
Internet Retailing
CF&T sales breakdown by channel
12%
14%
23%
Direct Selling
Store-BasedRetailing
InternetRetailing
Market channels growth (CAGR2008-2013)
Source: Euromonitor
Source: Team’s estimates, Euromonitor
Saturated Sales Channel
Direct Selling is losing
importance in CF&T
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Mature channel Low Barriers to Entry
28,3% 28,2%
27,7%
27,3%
26,7% 26,3%
25,9%
25,9%
25,4%25,6%
25,0%24,8%
25,6%
26,3%
26,9%27,2%
27,0%
26,2%
2008 2009 2010 2011 2012 2013
Brazil Consolidation Implementation
Source: Euromonitor
Direct Selling participation in CF&T sales
72%
26%
2%Store-BasedRetailing
Direct Selling
Internet Retailing
CF&T sales breakdown by channel
12%
14%
23%
Direct Selling
Store-BasedRetailing
InternetRetailing
Market channels growth (CAGR2008-2013)
Source: Euromonitor
Source: Team’s estimates, Euromonitor
Saturated Sales Channel
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Mature channel Low Barriers to Entry
28,3% 28,2%
27,7%
27,3%
26,7% 26,3%
25,9%
25,9%
25,4%25,6%
25,0%24,8%
25,6%
26,3%
26,9%27,2%
27,0%
26,2%
2008 2009 2010 2011 2012 2013
Brazil Consolidation Implementation
Entry Fee Consultants’Margin
BRL 180 30%
BRL 60 30%
BRL 89 30%
BRL 145 30%
BRL 149 35%
BRL 260 15%
BRL 50* 21%Rede
Natura
Reasons to SellFinancial
AnalysisValuation Risks
Mature channel Low Barriers to Entry
Summary &
Overview
Saturated Sales Channel
Entry Fee Consultants’Margin
BRL 180 30%
BRL 60 30%
BRL 89 30%
BRL 145 30%
BRL 149 35%
BRL 260 15%
BRL 50* 21%Rede
Natura
Reasons to SellFinancial
AnalysisValuation Risks
Mature channel Low Barriers to Entry
Cheaper Entry Fee
Equivalent Margin
Lack of Fidelity
BRL 180 30%
Summary &
Overview
Saturated Sales Channel
Saturated Sales Channel
SELL
Increasing Competition
Reasons to Sell
Risky New Strategy
Expensive Valuation
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Rede Natura: Risky New Strategy
Product deliveryOrder and Payment
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Traditional Model
Saturated Sales Channel
Increasing Competition30%
margin
Rede Natura: Risky New Strategy
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Traditional Model
Relationship
Rede Natura
21%
margin
Product deliveryOrder and Payment
30%
margin
Rede Natura: Risky New Strategy
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Relationship
Rede Natura
Product deliveryOrder and Payment
DangerousConsultant
Credit Risk
Market Risk
Operational Risk
Sales Rep
Rede Natura: Risky New Strategy
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Relationship
Rede Natura
Product deliveryOrder and Payment
DangerousConsultant
Credit Risk
Market Risk
Operational Risk
Sales RepSales Rep
?Employment
Relationship
Rede Natura: Risky New Strategy
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Relationship
Rede Natura
Product deliveryOrder and Payment
Source: Brazil’s Labor Law
CND as service provider
Commission-based
remuneration
Payment of fees and
vulnerability
Employment Relationship
Subordination
Hierarchy
Compensation
Natural Person
Saturated Sales Channel
SELL
Increasing Competition
Reasons to Sell
Risky New Strategy
Expensive Valuation
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Financials &
Valuation
CAGR2009-2013
14.0%CAGR2014-2018
9.8%Slowdown in Growth
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
2012 2013 2014E 2015E 2016E 2017E 2018E
Brazil Consolidation Implementation Others
Heated Competition in Brazil
Channel Saturation
Revenues: far from a dream
Natura’s Historical Revenue (BRL bn)
Source: Team’s estimates, Company’s data
+9.8% CAGR
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
17,9%
20,2%
8,3%
13,7%
10,3%11,2%
9,2% 9,4% 9,5% 9,8%
-5%
0%
5%
10%
15%
20%
25%
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Consultants Growth Productivity Growth
Consolidated Growth
The last breath of Direct Selling
International Expansion New Consultants Strategy New Channel Strategy
Growth Decomposition Consultants Addition by block
0%
20%
40%
60%
80%
100%
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Brazil Consolidation Implementation
52%
48%20%
80%
Source: Company’s Data and Team’s estimates
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
17,9%
20,2%
8,3%
13,7%
10,3%11,2%
9,2% 9,4% 9,5% 9,8%
-5%
0%
5%
10%
15%
20%
25%
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Consultants Growth Productivity Growth
Consolidated Growth
-5%
0%
5%
10%
15%
20%
25%
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Consultants Growth Productivity Growth
Consolidated Growth
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Brazil Consolidation Implementation
0.50%3.80%
Source: Company’s Data and Team’s estimates
New Hope for Growth
Growth Decomposition Productivity Growth
International Expansion New Consultants Strategy New Channel Strategy
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
New Strategies
100%
20%
29%
51%
Net Revenues COGS SG&A EBITDA
24% 23% 21% 21% 20% 20% 20%
-10%
0%
10%
20%
30%
2012 2013 2014E 2015E 2016E 2017E 2018E
Brazil Consolidation Implementation Consolidated Margin
100%
23%
30%
47%
Net Revenues COGS SG&A EBITDA
-300 bps
Source: Company’s Data and Team’s estimates
Source: Company’s Data Source: Team’s estimates
Competition hurts
EBITDA Margin per Block
EBITDA Margin Decomposition 2013 EBITDA Margin Decomposition 2018
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
979
554431
856
Source Team’s estimates
Operational Cash Flow Destination in 2013
(BRL mn)
OCF Dividend CAPEX Cash Burn
Shareholders hungry for money
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Source: Company’s Data and Team’s estimates
Balance Sheet Headroom
0,78
1,17
1,371,45 1,50 1,50
1,46
0,5
0,75
1
1,25
1,5
1,75
2
2,25
2,5
2012 2013 2014E 2015E 2016E 2017E 2018E
Net Debt / EBITDA
Covenant 2.5
32%
68%
21%
16%
ROIC ROE
Natura
Peers
Source: Company’s Data
37.9%
31.8%
26.6%26% 26% 26.5%
27.5%
2012 2013 2014E 2015E 2016E 2017E 2018E
Still higher than peers, but deteriorating
ROIC Evolution Peers Comparison
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Source: Company’s Data and Team’s estimates
Operational Margin
Decrease
573647
756
882
1.0371.137
1.248
1.369
1.488
1.609
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
10 Year FCFF Projections
+11.5% CAGR
Free Cash Flow to Firm (BRL mn)
Source: Team’s estimates
Discounted Cash Flow
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
6.0%
7.5%
4.5%4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Brazil Consolidation Implementation Aesop
Real Perpetual growth Rate Long-Term inflation target
Different Growth Rates
Source: Team’s estimates
Long term growth rate (%)
Capturing Long-Term Growth
10 Year FCFF Projections
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Different Risks
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Brazil Consolidation Implementation Aesop
Risk Free Rate CRP Inflation Adj ERP Cost of Debt
WACC Decomposition (%)
Capturing Long-Term Growth
Source: Team’s estimates
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Different Growth Rates
10 Year FCFF Projections
SOTP Approach
33,00
-4,10
0,60
3,10
4,60
1,40
27,40
Target Price
Net debt
Aesop
Implementation
Consolidation
Rede Natura
Brazil
Capturing Long-Term Growth
Target Price decomposition (BRL)
Source: Team’s estimates
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Different Risks
Different Growth Rates
10 Year FCFF Projections
33,00
-4,10
0,60
3,10
4,60
1,40
27,40
Target Price
Net debt
Aesop
Implementation
Consolidation
Rede Natura
Brazil
Capturing Long-Term Growth
Target Price decomposition (BRL)
Source: Team’s estimates
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Target Price
BRL 33.00Current Price
BRL 37.25
-11.4% Downside
SELL
7% Discount
7% Discount
Multiples Valuation
1 Year Forward P/E
1 Year Forward EV/EBITDA
Source: Team’s estimates, Bloomberg.
Source: Team’s estimates, Bloomberg.
19,8x
18,5x
17x
19x
21x
23x
2014E 2015E Multiple Output
Industry Natura
11,1x
10,3x
09x
10x
11x
12x
13x
2014E 2015E Multiple Output
Industry Natura
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
-3.1% Downside
-3.4% Downside
Multiples Valuation
1 Year Forward P/E
1 Year Forward EV/EBITDA
Source: Team’s estimates, Bloomberg.
Source: Team’s estimates, Bloomberg.
19,8x
18,5x
17x
19x
21x
23x
2014E 2015E Multiple Output
Industry Natura
11,1x
10,3x
09x
10x
11x
12x
13x
2014E 2015E Multiple Output
Industry Natura
SELL
BRL 36.00
BRL 36.10
TP – EV/EBITDA
TP – P/E
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
2.000
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
Scenario Analysis
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
+11.5% CAGR
Free Cash Flow to Firm (BRL mn)
Source: Team’s estimates
Base Case
8.3%
20.2%
2.5%
3.7%
BRL 33.00
-11.4%
Bull Case
10.3%
21.1%
3.5%
1.1%
BRL 40.50
8.2%
BRL
Depreciation
EBTIDA Margin
GDP Growth
BRL
Depreciation
Target Price
Revenue CAGR
Upside/
(Dowsnide)
Scenario Analysis
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Base Case
8.3%
20.2%
2.5%
3.7%
BRL 33.00
-11.4%
Bull Case
10.3%
21.1%
3.5%
1.1%
BRL 40.50
8.2%
BRL
Depreciation
EBTIDA Margin
GDP Growth
BRL
Depreciation
Target Price
Revenue CAGR
Upside/
(Dowsnide)
Favorable Macroeconomic Scenario
Natura doens’t Lose Market Share
Margins Won’t Suffer
Natura is at best, a HOLD
recommendation
Saturated Sales Channel
SELL
Increasing Competition
Reasons to Sell
Risky New Development
Expensive Valuation
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
Risks
Risks To Our ValuationIm
pact
Likelihood
Employment Relationship
International Competition
Inflation Bypassing
Rede Natura
Eco-friendly Regulations
Booming LatAm Economy
Economic Recovery in Argentina
Natura +
Investments Bearing Fruit
Innovation Trend
GDP per Capita Recovery
Interest Rate Play
Market Macroeconomic Legal Operational Political
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Income Gap per CND: BRL 11,600Annual Minimum Wage: BRL 13,200 CND Annual Income in 2018: BRL 1,600
9.061
22.619
40.838
63.837
2015E 2016E 2017E 2018E
Natura Digital Consultants
0
2
4
6
8
10
12
14
2014E 2015E 2016E 2017E 2018E
Employee Wage CND Income
Natura Digital Consultants: 64,000Penetration of Rede Natura: 5%Brazilian CNs in 2018: 1.4 million
Rede Natura: Legal Risk
Productivity vs. Brazilian Minimum Wage (BRL k)
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Source: Team’s estimates
Source: Team’s estimates
Total impact: BRL 1.4 bn
~10% of Natura’s Market Cap
Income Gap per CND: BRL 11,600
Annual Minimum Wage: BRL 13,200
CND Annual Income in 2018: BRL 1,600
9.061
22.619
40.838
63.837
2015E 2016E 2017E 2018E
Natura Digital Consultants
0
2
4
6
8
10
12
14
2014E 2015E 2016E 2017E 2018E
Employee Wage CND Income
Natura Digital Consultants: 64,000
Penetration of Rede Natura: 5%
Brazilian CNs in 2018: 1.4 million
Rede Natura: Legal Risk
Productivity vs. Brazilian Minimum Wage (BRL k)
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Source: Team’s estimates
Source: Team’s estimates
9,8%
3,3% 2,9% 2,9% 2,4%
0,9%
Argentina Colombia Brazil Peru Mexico Chile
The Argentine Situation
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Country Risk Premium (%)
Inflation – 2014 (%)
25,7%
6,5%4,2% 3,7% 3,3% 2,8%
Argentina Brazil Chile Mexico Colombia Peru
Difficulties in profit repatriation
Shrinking economy and CF&T market
Challenging inflation bypassing
0
200
400
600
800
1.000
1.200
25,2 26,1 27,0 27,8 28,7 29,6 30,5 31,4
F(x)
BRL 0
200
400
600
800
1.000
1.200
2,2 3,2 4,3 5,3 6,4 7,4 8,5 9,5
F(x)
BRL
0
200
400
600
800
1.000
1.200
2,8 2,8 2,9 2,9 3,0 3,0 3,1 3,1
F(x)
BRL 0
200
400
600
800
1.000
1.200
0,5 0,5 0,6 0,6 0,6 0,6 0,6 0,7
F(x)
BRL
Brazil Consolidation
Implementation Aésop
Monte Carlo Simulation
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Source: Team’s estimates
0
200
400
600
800
1.000
28,4 29,1 29,8 30,5 31,2 31,9 32,7 33,4 34,1 34,8 35,5 36,2 36,9 37,6 38,3
F(x)
BRL
Target Price - Consolidated
Mean BRL 32.33
Median BRL 32.26
Minimum BRL 28.07
Maximum BRL 38.65
Standard Deviation BRL 1.34
SOTP Target Price: BRL 33.00
Current Price: BRL 37.25
Monte Carlo Simulation
Consolidated
Reasons to SellSummary &
Overview
Financial &
ValuationRisks Conclusion
Source: Team’s estimates
Saturated Sales Channel
Increasing Competition
Conclusion
Risky New Development
Expensive Valuation
Summary &
Overview
Financial &
ValuationRisks ConclusionReasons to Sell
SELLTarget Price
BRL 33.00Current Price
BRL 37.25 -11.4 %
Income Statement (1/2).
In BRL Millions YE12 YE13 YE14 YE15 YE16 YE17
Gross Revenues 8,566 9,452 10,510 11,476 12,551 13,738
Deductions -2,220 -2,441 -2,730 -2,956 -3,203 -3,471
Net Revenues 6,346 7,010 7,780 8,520 9,348 10,267
COGS -1,868 -2,090 -2,272 -2,432 -2,656 -2,902
Gross Profits 4,478 4,921 5,508 6,036 6,629 7,288
G&A -883 -1,043 -1,102 -1,214 -1,345 -1,492
Selling Expenses -2,212 -2,471 -2,778 -3,067 -3,382 -3,724
Others -12 9 0 0 0 0
EBITDA 1,512 1,609 1,628 1,756 1,902 2,071
D&A -141 -193 -219 -240 -264 -289
EBIT 1,371 1,416 1,409 1,515 1,638 1,782
Finalcial Results -72 -158 -219 -281 -302 -315
Income Taxes -424 -415 -377 -394 -424 -463
Net Income 874 843 813 841 912 1,003
EPS 2.04 1.95 1.88 1.95 2.11 2.32
Source: Team’s Estimates and Company Data
Income Statement (2/2).
In BRL Millions YE18 YE19 YE20 YE21 YE22 YE23
Gross Revenues 15,078 16,530 18,080 19,661 21,225 22,756
Deductions -3,771 -4,099 -4,446 -4,798 -5,144 -5,482
Net Revenues 11,307 12,431 13,634 14,863 16,081 17,274
COGS -3,177 -3,474 -3,786 -4,096 -4,390 -4,660
Gross Profits 8,036 8,842 9,707 10,595 11,480 12,355
G&A -1,658 -1,830 -2,018 -2,217 -2,426 -2,645
Selling Expenses -4,102 -4,520 -4,963 -5,411 -5,851 -6,273
Others 0 0 0 0 0 0
EBITDA 2,275 2,492 2,726 2,966 3,203 3,437
D&A -325 -354 -384 -412 -438 -471
EBIT 1,951 2,138 2,342 2,554 2,765 2,966
Finalcial Results -320 -315 -337 -360 -383 -408
Income Taxes -512 -572 -627 -685 -740 -792
Net Income 1,118 1,251 1,377 1,509 1,641 1,766
EPS 2.59 2.90 3.19 3.50 3.80 4.09
Source: Team’s Estimates and Company Data
Balance Sheet (1/2)In BRL Millions YE12 YE13 YE14 YE15 YE16 YE17
Cash and Equivalents 1,144 1,016 1,076 1,118 1,164 1,212
Receivables 651 807 899 983 1,083 1,204
Inventories 701 800 871 951 1,039 1,136
Other Current Assets 882 890 952 1,025 1,104 1,188
Current Assets 3,378 3,513 3,797 4,077 4,390 4,740
Net PP&E 1,012 1,440 1,720 1,959 2,149 2,282
Other Non-Current Assets 985 1,296 1,296 1,296 1,296 1,296
Non Current Assets 1,997 2,735 3,016 3,255 3,445 3,578
Total Assets 5,375 6,248 6,813 7,332 7,835 8,318
Accounts Payable 650 707 765 828 896 972
Short-Term Debt 999 693 791 879 961 1,035
Other Current Liabilities 765 927 1,027 1,112 1,204 1,305
Current Liabilities 2,415 2,327 2,583 2,818 3,062 3,311
Long Term Debt 1,325 2,201 2,510 2,792 3,052 3,286
Other Non Current Liabilities 330 552 552 552 552 552
Non Current Liabilities 1,655 2,753 3,062 3,345 3,605 3,839
Total Equity 1,306 1,168 1,168 1,168 1,168 1,168
Total Liabilities and Equiy 5,375 6,248 6,813 7,332 7,835 8,318
Source: Team’s Estimates and Company Data
Balance Sheet (2/2)In BRL Millions YE18 YE19 YE20 YE21 YE22 YE23
Cash and Equivalents 1,267 1,389 1,519 1,652 1,783 1,912
Receivables 1,351 1,523 1,712 1,912 2,119 2,332
Inventories 1,245 1,368 1,498 1,633 1,768 1,902
Other Current Assets 1,279 1,388 1,502 1,620 1,737 1,854
Current Assets 5,142 5,667 6,231 6,816 7,408 8,000
Net PP&E 2,342 2,400 2,454 2,502 2,544 2,568
Other Non-Current Assets 1,296 1,296 1,296 1,296 1,296 1,296
Non Current Assets 3,638 3,696 3,749 3,798 3,840 3,864
Total Assets 8,780 9,362 9,981 10,614 11,247 11,864
Accounts Payable 1,062 1,165 1,275 1,387 1,498 1,605
Short-Term Debt 1,098 1,181 1,270 1,361 1,453 1,544
Other Current Liabilities 1,415 1,545 1,684 1,824 1,961 2,093
Current Liabilities 3,575 3,891 4,228 4,572 4,912 5,241
Long Term Debt 3,485 3,750 4,032 4,321 4,615 4,902
Other Non Current Liabilities 552 552 552 552 552 552
Non Current Liabilities 4,037 4,303 4,584 4,874 5,167 5,454
Total Equity 1,168 1,168 1,168 1,168 1,168 1,168
Total Liabilities and Equiy 8,780 9,362 9,981 10,614 11,247 11,864
Source: Team’s Estimates and Company Data
Statement of Cash Flow (1/2)
In BRL Millions YE12 YE13 YE14 YE15 YE16 YE17
Net Income 861 848 813 841 912 1,003
D&A 141 193 219 240 264 289
Change in Working Capital 222 -411 -67 -90 -106 -126
Other Adjustments -117 -349 0 0 0 0
CFO 1,342 979 965 991 1,069 1,167
CAPEX -437 -554 -499 -479 -454 -422
Other Investments -528 98 0 0 0 0
CFI -966 -456 -499 -479 -454 -422
Dividends Paid -1,079 -856 -813 -841 -912 -1,003
Change in Debt -854 228 407 371 342 308
Other Financing 2,189 -25 0 0 0 0
CFF 255 -653 -406 -470 -570 -696
FX Effects -3 2 0 0 0 0
Change in Cash 629 -128 59 42 46 49
Source: Team’s Estimates and Company Data
Statement of Cash Flow (2/2)
In BRL Millions YE18 YE19 YE20 YE21 YE22 YE23
Net Income 1,118 1,251 1,377 1,509 1,641 1,766
D&A 325 354 384 412 438 471
Change in Working Capital -147 -169 -186 -200 -213 -224
Other Adjustments 0 0 0 0 0 0
CFO 1,296 1,436 1,575 1,722 1,867 2,013
CAPEX -385 -412 -438 -461 -480 -495
Other Investments 0 0 0 0 0 0
CFI -385 -412 -438 -461 -480 -495
Dividends Paid -1,118 -1,251 -1,377 -1,509 -1,641 -1,766
Change in Debt 261 349 370 381 386 377
Other Financing 0 0 0 0 0 0
CFF -857 -903 -1,007 -1,128 -1,255 -1,389
FX Effects 0 0 0 0 0 0
Change in Cash 54 122 130 133 131 129
Source: Team’s Estimates and Company Data
Brazil’s Income Statement (1/2)
In BRL Millions YE12 YE13 YE14 YE15 YE16 YE17
Gross Revenues 7,629 8,040 8,512 8,979 9,492 10,068
Deductions -2,018 -2,160 -2,311 -2,434 -2,567 -2,715
Net Revenues 5,611 5,880 6,201 6,545 6,925 7,353
COGS -1,640 -1,777 -1,828 -1,928 -2,036 -2,157
Gross Profits 3,972 4,103 4,373 4,617 4,889 5,196
G&A -740 -763 -810 -857 -912 -970
Selling Expenses -1,835 -1,968 -2,075 -2,210 -2,355 -2,515
Others -6 12 0 0 0 0
EBITDA 1,524 1,557 1,487 1,550 1,622 1,711
D&A -133 -173 -171 -181 -191 -203
EBIT 1,391 1,384 1,316 1,370 1,430 1,508
Source: Team’s Estimates and Company Data
Brazil’s Income Statement (2/2)
In BRL Millions YE18 YE19 YE20 YE21 YE22 YE23
Gross Revenues 10,728 11,416 12,133 12,880 13,652 14,450
Deductions -2,882 -3,063 -3,250 -3,445 -3,647 -3,854
Net Revenues 7,846 8,354 8,883 9,435 10,005 10,596
COGS -2,296 -2,442 -2,594 -2,752 -2,915 -3,084
Gross Profits 5,551 5,912 6,289 6,683 7,090 7,512
G&A -1,032 -1,099 -1,170 -1,246 -1,326 -1,412
Selling Expenses -2,695 -2,878 -3,069 -3,267 -3,470 -3,676
Others 0 0 0 0 0 0
EBITDA 1,824 1,935 2,050 2,170 2,294 2,425
D&A -225 -239 -254 -270 -286 -314
EBIT 1,599 1,696 1,796 1,900 2,008 2,111
Source: Team’s Estimates and Company Data
Consolidation’s Block Income Statement (1/2)
In BRL Millions YE12 YE13 YE14 YE15 YE16 YE17
Gross Revenues 650 887 1,191 1,474 1,774 2,077
Deductions -163 -228 -306 -379 -456 -533
Net Revenues 487 659 885 1,095 1,318 1,543
COGS -147 -187 -259 -321 -386 -452
Gross Profits 340 472 626 775 932 1,091
G&A -38 -45 -67 -92 -122 -155
Selling Expenses -224 -293 -378 -455 -533 -610
Others -5 0 0 0 0 0
EBITDA 78 139 180 228 277 326
D&A -5 -5 -31 -38 -45 -51
EBIT 74 134 149 190 232 275
Source: Team’s Estimates and Company Data
Consolidation’s Block Income Statement (2/2)
In BRL Millions YE18 YE19 YE20 YE21 YE22 YE23
Gross Revenues 2,399 2,747 3,110 3,450 3,743 3,982
Deductions -616 -706 -799 -886 -962 -1,023
Net Revenues 1,783 2,042 2,311 2,564 2,782 2,959
COGS -522 -598 -677 -751 -814 -866
Gross Profits 1,261 1,444 1,635 1,813 1,967 2,093
G&A -194 -222 -251 -278 -302 -321
Selling Expenses -691 -791 -896 -993 -1,078 -1,147
Others 0 0 0 0 0 0
EBITDA 377 431 488 541 587 625
D&A -58 -65 -71 -76 -80 -82
EBIT 319 367 417 465 508 543
Source: Team’s Estimates and Company Data
Implementations’s Block Income Statement (1/2)
In BRL Millions YE12 YE13 YE14 YE15 YE16 YE17
Gross Revenues 264 363 529 684 872 1,090
Deductions -37 -51 -74 -96 -122 -153
Net Revenues 227 312 455 589 750 938
COGS -73 -98 -142 -184 -234 -293
Gross Profits 153 215 313 405 516 645
G&A -27 -34 -53 -67 -85 -107
Selling Expenses -138 -177 -244 -304 -373 -451
Others 0 1 0 0 0 0
EBITDA -8 8 16 33 58 87
D&A -3 -4 -16 -21 -27 -34
EBIT -11 4 0 13 31 53
Source: Team’s Estimates and Company Data
Implementations’s Block Income Statement (2/2)
In BRL Millions YE18 YE19 YE20 YE21 YE22 YE23
Gross Revenues 1,338 1,619 1,923 2,213 2,460 2,645
Deductions -187 -226 -269 -310 -344 -370
Net Revenues 1,151 1,392 1,654 1,904 2,116 2,275
COGS -359 -435 -516 -594 -661 -710
Gross Profits 792 957 1,137 1,309 1,455 1,564
G&A -131 -158 -189 -217 -241 -259
Selling Expenses -536 -629 -727 -818 -894 -950
Others 0 0 0 0 0 0
EBITDA 125 170 221 274 320 355
D&A -41 -50 -58 -65 -71 -75
EBIT 83 120 163 208 248 280
Source: Team’s Estimates and Company Data
Margins, Profitability, CF Ratios and Solvency Ratios (1/2)
Key Financial Ratios YE12 YE13 YE14 YE15 YE16 YE17
Margins (%)
Gross Margin 70.6 70.2 70.8 70.8 70.9 71.0
EBITDA Margin 23.8 23.0 20.9 20.6 20.3 20.2
EBIT Margin 21.6 20.2 18.1 17.8 17.5 17.4
Net Margin 13.8 12.0 10.4 9.9 9.8 9.8
Profitability (%)
ROA 19.1 14.5 12.4 11.9 12.0 12.4
ROE 68.4 68.1 69.6 72.0 78.0 85.9
ROIC 37.9 31.8 26.6 26.0 26.0 26.5
Cash Flow Ratios (%)
CFO/Net Revenues 21.1 14.0 12.4 11.6 11.4 11.4
CFO/CAPEX 306.8 176.8 193.2 206.9 235.6 276.3
CFO/Earnings 153.5 116.2 118.7 117.8 117.3 116.3
Solvency
Net debt to Equity 0.9 1.6 1.9 2.2 2.4 2.7
Net debt to EBITDA 0.8 1.2 1.4 1.5 1.5 1.5
Current Ratio 1.4 1.5 1.5 1.4 1.4 1.4
Interest Coverage Ratio 18.9 8.9 6.4 5.4 5.4 5.7
Cash Coverage Ratio 20.9 10.2 7.4 6.3 6.3 6.6
Source: Team’s Estimates and Company Data
Margins, Profitability, CF Ratios and Solvency Ratios (2/2)
Key Financial Ratios YE18 YE19 YE20 YE21 YE22 YE23
Margins (%)
Gross Margin 71.1 71.1 71.2 71.3 71.4 71.5
EBITDA Margin 20.1 20.0 20.0 20.0 19.9 19.9
EBIT Margin 17.3 17.2 17.2 17.2 17.2 17.2
Net Margin 9.9 10.1 10.1 10.2 10.2 10.2
Profitability (%)
ROA 13.1 13.8 14.2 14.7 15.0 15.3
ROE 95.7 107.1 117.9 129.2 140.5 151.2
ROIC 27.5 28.6 29.6 30.6 31.4 31.9
Cash Flow Ratios (%)
CFO/Net Revenues 11.5 11.6 11.6 11.6 11.6 11.7
CFO/CAPEX 337.0 348.9 359.8 373.5 388.9 406.5
CFO/Earnings 115.9 114.8 114.4 114.1 113.7 114.0
Solvency
Net debt to Equity 2.8 3.0 3.2 3.5 3.7 3.9
Net debt to EBITDA 1.5 1.4 1.4 1.4 1.3 1.3
Current Ratio 1.4 1.5 1.5 1.5 1.5 1.5
Interest Coverage Ratio 6.1 6.8 6.9 7.1 7.2 7.3
Cash Coverage Ratio 7.1 7.9 8.1 8.2 8.4 8.4
Source: Team’s Estimates and Company Data
Market Ratios, and Asset Management Ratios (1/2)
Source: Team’s Estimates and Company Data
Key Financial Ratios YE12 YE13 YE14 YE15 YE16 YE17
Market Ratios
P/E 28.9 21.2 19.8 19.1 17.6 16.0
EV/EBITDA 18.3 12.9 11.9 11.2 10.6 9.8
P/BV 19.4 15.3 13.8 13.8 13.8 13.8
P/Sales 4.0 2.5 2.1 1.9 1.7 1.6
Dividend Yield 4.3% 4.8% 5.0% 5.2% 5.6% 6.2%
FCFF Yield 1.6% 3.5% 3.6% 4.0% 4.7% 5.5%
Asset Management
Inventory Turnover 2.7 2.8 2.7 2.7 2.7 2.7
Days of Inventory 136 131 134 137 137 137
Receivables Turnover 7.9 7.7 7.4 7.5 7.5 7.5
Days of Receivables 46 48 49 49 48 49
Payables Turnover 2.9 3.0 3.0 2.9 3.0 3.0
Days of Payables 86 107 127 123 123 124
Operational Cicle 182 179 183 186 185 186
CCC 55 55 60 61 62 64
Market Ratios, and Asset Management Ratios (2/2)
Source: Team’s Estimates and Company Data
Key Financial Ratios YE18 YE19 YE20 YE21 YE22 YE23
Market Ratios
P/E 14.4 12.8 11.7 10.6 9.8 9.1
EV/EBITDA 9.1 8.4 7.8 7.3 6.9 6.5
P/BV 13.8 13.8 13.8 13.8 13.8 13.8
P/Sales 1.4 1.3 1.2 1.1 1.0 0.9
Dividend Yield 6.9% 7.7% 8.5% 9.3% 10.2% 10.9%
FCFF Yield 6.5% 7.1% 7.8% 8.5% 9.3% 10.0%
Asset Management
Inventory Turnover 2.7 2.7 2.6 2.6 2.6 2.5
Days of Inventory 137 137 138 140 141 144
Receivables Turnover 7.3 7.1 7.0 6.9 6.8 6.7
Days of Receivables 50 51 52 53 54 55
Payables Turnover 3.0 3.0 3.0 3.0 2.9 2.9
Days of Payables 123 122 122 122 123 124
Operational Cicle 187 188 190 193 195 198
CCC 65 66 67 69 71 73
SOTP Approach : Brazil.In BRL Millions YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
NOPAT 818 851 888 936 992 1,052 1,114 1,178 1,244 1,307
D&A 171 181 191 203 225 239 254 270 286 314
CAPEX -406 -371 -331 -286 -236 -252 -268 -284 -301 -319
Change in Working Capital -39 -51 -65 -83 -101 -112 -124 -135 -146 -157
FCFF 544 610 684 769 879 927 977 1,029 1,083 1,144
PV of FCFF - 610 607 606 615 575 538 503 470 441
Per Share (BRL) - 1.41 1.41 1.41 1.43 1.33 1.25 1.17 1.09 1.02
Risk Free Rate 3.1%
Target Debt to Equity Ratio 10.0%
Levered Beta 84.0%
Equity Risk Premium 6.0%
Cost of Debt 11.7%
Country Risk Premium 2.6%
Inlfation Adjustment 2.5%
Corporate Tax Rate 34.00%
WACC Brazil 12.7%
SOPT - Brazil
WACC Breakdown
Terminal Value in 2023E (BRL mn) 17,147
PV of Terminal Value (BRL mn) 7,437
Per Share (BRL) 17.30
Terminal Value Analysis
Long Term Inflation 4.5%
Real Market Long Term Growth 1.5%
Perpetual Growth Rate 6.0%
Perpetual Growth Estimates
Source: Team’s Estimates and Company Data
SOTP Approach : Consolidation Block.
Risk Free Rate 3.1%
Target Debt to Equity Ratio 10.0%
Levered Beta 84.0%
Equity Risk Premium 6.0%
Cost of Debt 11.7%
Country Risk Premium 4.8%
Inlfation Adjustment 4.1%
Corporate Tax Rate 31.6%
WACC Consolidation Block 16.1%
SOTP - Consolidation Block
WACC Breakdown
Terminal Value in 2023E (BRL mn) 3,493
PV of Terminal Value (BRL mn) 1,230
Per Share (BRL) 2.90
Terminal Value Analysis
Long Term Inflation 6.1%
Real Market Long Term Growth 1.5%
Perpetual Growth Rate 7.6%
Perpetual Growth Estimates
In BRL Millions YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
NOPAT 92 118 145 172 199 230 261 293 320 344
D&A 31 38 45 51 58 65 71 76 80 82
CAPEX -62 -71 -78 -85 -90 -95 -99 -101 -101 -100
Change in Working Capital -35 -31 -32 -32 -34 -37 -39 -36 -32 -26
FCFF 26 54 80 107 134 162 194 231 266 300
PV of FCFF - 54 69 79 85 89 92 95 94 91
Per Share (BRL) - 0.13 0.16 0.18 0.20 0.21 0.21 0.22 0.22 0.21
Source: Team’s Estimates and Company Data
SOTP Approach : Implementation Block.In BRL Millions YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
NOPAT -6 1 12 25 43 65 92 120 146 168
D&A 16 21 27 34 41 50 58 65 71 75
CAPEX -32 -38 -45 -51 -58 -65 -71 -75 -77 -76
Change in Working Capital 25 -1 -1 -1 -1 -2 -2 -2 -1 -1
FCFF 3 -17 -7 6 24 48 77 109 139 165
PV of FCFF - -17 -6 5 17 31 44 56 64 68
Per Share (BRL) - -0.04 -0.01 0.01 0.04 0.07 0.10 0.13 0.15 0.16
Risk Free Rate 3.1%
Target Debt to Equity Ratio 10.0%
Levered Beta 84.0%
Equity Risk Premium 6.0%
Cost of Debt 11.7%
Country Risk Premium 2.9%
Inlfation Adjustment 1.0%
Corporate Tax Rate 31.1%
WACC Implementation Block 11.6%
WACC Breakdown
SOTP - Implementation Block
Terminal Value in 2023E (BRL mn) 2,306
PV of Terminal Value (BRL mn) 1,067
Per Share (BRL) 2.50
Terminal Value Analysis
Long Term Inflation 3.0%
Real Market Long Term Growth 1.5%
Perpetual Growth Rate 4.5%
Perpetual Growth Estimates
Source: Team’s Estimates and Company Data
SOTP Approach : Aesop
Risk Free Rate 3.1%
Target Debt to Equity Ratio 10.0%
Levered Beta 84.0%
Equity Risk Premium 6.0%
Cost of Debt 11.7%
Country Risk Premium 2.9%
Inlfation Adjustment 1.0%
Corporate Tax Rate 31.1%
WACC Implementation Block 11.6%
WACC Breakdown
SOTP - Implementation Block
In BRL Millions YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
NOPAT 18 22 28 34 42 51 63 77 95 117
D&A 11 14 17 21 26 32 39 48 59 73
CAPEX -21 -26 -32 -38 -47 -58 -69 -86 -105 -128
Change in Working Capital -7 -8 -10 -12 -15 -19 -23 -28 -34 -42
FCFF 2 2 2 4 5 7 10 12 15 20
PV of FCFF - 2 2 3 4 5 7 7 9 11
Per Share (BRL) - 0.00 0.00 0.01 0.01 0.01 0.02 0.02 0.02 0.02
Terminal Value in 2023E (BRL mn) 481
PV of Terminal Value (BRL mn) 233
Per Share (BRL) 0.50
Terminal Value Analysis
Long Term Inflation 2.5%
Real Market Long Term Growth 1.5%
Perpetual Growth Rate 4.0%
Perpetual Growth Estimates
Source: Team’s Estimates and Company Data
SOTP Approach : Rede NaturaIn BRL Millions YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
NOPAT 0 5 17 37 61 82 106 132 159 187
D&A 0 0 2 4 7 10 13 17 21 26
CAPEX 0 -1 -3 -6 -7 -10 -14 -18 -22 -26
Change in Working Capital 0 -7 -18 -35 -53 -63 -73 -83 -93 -103
FCFF 0 -2 -3 1 7 19 33 48 65 84
PV of FCFF - -2 -2 1 5 12 18 23 28 29
Per Share (BRL) - 0.00 -0.01 0.00 0.01 0.03 0.04 0.05 0.06 0.07
Risk Free Rate 3.1%
Target Debt to Equity Ratio 10.0%
Levered Beta 84.0%
Equity Risk Premium 6.0%
Cost of Debt 11.7%
Country Risk Premium 2.6%
Inlfation Adjustment 2.5%
Corporate Tax Rate 34.00%
WACC Brazil 12.7%
SOPT - Brazil
WACC Breakdown
Terminal Value in 2023E (BRL mn) 1,331
PV of Terminal Value (BRL mn) 513
Per Share (BRL) 1.19
Terminal Value Analysis
Long Term Inflation 4.5%
Real Market Long Term Growth 1.5%
Perpetual Growth Rate 6.0%
Perpetual Growth Estimates
Discount in P/E
P/E 2015E EPS CAGR2013-2017
NATU3 18.9x 4.5%
HYPE3 19.8x -
AVP 12.6x 8.6%
973 20.3x -
OR 19.9x 7.3%
CL 20.3x 8.0%
EL 20.4x 14.1%
MC 16.1x 9.8%
PG 17.7x -
ULVR 18.1x 6.3%
BEI 22.4x 9.8%
REV 14.4x -
Industry 19.8x 9%
Discount to Peers -4.4% -51%
Output P/E 2015E 18.5x
Discount Applied -7%
EPS 2015E 1.95
Target Price 36.00
Source: Team’s Estimates, Bloomberg.
Discount in EV/EBITDAEV/EBITDA 2015E EBITDA CAGR2013-2017
NATU3 10.6x 7%
HYPE3 11.2x 12%
AVP 7.4x 16%
973 10.1x -
OR 12.9x 5%
CL 12.9x 11%
EL 11.2x 12%
MC 8.8x 5%
PG 12.2x 8%
ULVR 11.5x 6%
BEI 13.2x 9%
REV 9.4x -
Industry 11.2x 9%
Discount to Peers -5% -29.8%
Output EV/EBITDA 2015E 10.3x
Discount Applied -7%
EBITDA 2015E (BRL m) 1,756
Net Debt 2015E (BRL m) 2,554
Target Price 36.10
Source: Team’s Estimates, Bloomberg.
Macroeconomic Assumptions (1/2)
Brazil YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
GDP Growth (%) 0.3% 1.0% 1.5% 2.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Inflation Rate (%) 6.5% 6.3% 5.7% 5.1% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%
BRL/USD 2.4 2.5 2.6 2.7 2.7 2.8 2.9 3.0 3.0 3.1
FX Chg (%) 11% 4% 4% 3% 2% 2% 2% 2% 2% 2%
Argentina YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
GDP Growth (%) -2.1% -3.0% 3.0% 3.1% 3.4% 3.4% 3.4% 3.5% 3.5% 3.5%
Inflation Rate (%) 25.7% 23.1% 20.4% 17.7% 15.0% 12.4% 9.7% 9.7% 9.7% 9.7%
USD/ARS 8.1 9.8 11.6 13.4 15.1 16.7 18.0 19.4 20.9 22.5
BRL/ARS 3.4 3.9 4.5 5.0 5.5 5.9 6.2 6.6 6.9 7.2
FX Chg (%) 11% 16% 14% 12% 10% 8% 5% 5% 5% 5%
Chile YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
GDP Growth (%) 1.9% 3.5% 4.6% 4.5% 4.4% 4.3% 4.3% 4.2% 4.1% 4.0%
Inflation Rate (%) 4.2% 2.9% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
USD/CLP 536 540 546 551 557 562 568 574 579 585
BRL/CLP 223 216 211 206 203 200 197 194 192 189
FX Chg (%) -8% -3% -3% -2% -1% -1% -1% -1% -1% -1%
Source: Team’s Estimates, Bloomberg, World Bank, Central Bank Data
Macroeconomic Assumptions (2/2)
Peru YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
GDP Growth (%) 4.4% 5.5% 5.8% 5.5% 5.1% 4.8% 4.5% 4.2% 3.8% 3.5%
Inflation Rate (%) 2.8% 2.3% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
USD/PEN 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8
BRL/PEN 1.2 1.1 1.1 1.1 1.0 1.0 1.0 1.0 0.9 0.9
FX Chg (%) -9% -4% -4% -3% -2% -2% -2% -2% -2% -2%
Mexico YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
GDP Growth (%) 2.59% 3.80% 3.80% 3.76% 3.71% 3.67% 3.63% 3.59% 3.54% 3.50%
Inflation Rate (%) 4% 3% 3% 3% 3% 3% 3% 3% 3% 3%
USD/MXN 13.3 13.5 13.6 13.7 13.9 14.0 14.1 14.3 14.4 14.6
BRL/MXN 5.5 5.4 5.2 5.1 5.1 5.0 4.9 4.8 4.8 4.7
FX Chg (%) -8% -3% -3% -2% -1% -1% -1% -1% -1% -1%
Colombia YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 YE23
GDP Growth (%) 5.0% 4.8% 4.7% 4.5% 4.4% 4.2% 4.0% 3.8% 3.7% 3.5%
Inflation Rate (%) 3.3% 3.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
USD/COP 1,952 1,975 1,995 2,015 2,035 2,056 2,076 2,097 2,118 2,139
BRL/COP 813 790 770 754 743 732 721 711 700 690
FX Chg (%) -8.8% -2.8% -2.6% -2.0% -1.5% -1.5% -1.5% -1.5% -1.5% -1.5%
Source: Team’s Estimates, Bloomberg, World Bank, Central Bank Data
Stress Test (1/3)
USD/BRL
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) 35.20 33.90 33.00 32.20 30.90
USD/BRL
Change in Forecast -25% -10% 0% 10% 25%
Downside -5.5% -9.0% -11.4% -13.6% -17.0%
BRL/ARS
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) 33.70 33.30 33.00 32.80 32.50
BRL/ARS
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) -9.5% -10.6% -11.4% -11.9% -12.8%
Stress Test (2/3)
BRL/CLP
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) 33.30 33.10 33.00 32.90 32.80
BRL/CLP
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) -10.6% -11.1% -11.4% -11.7% -11.9%
BRL/PEN
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) 33.40 33.20 33.00 32.90 32.70
BRL/PEN
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) -10.3% -10.9% -11.4% -11.7% -12.2%
Stress Test (3/3)
BRL/MXN
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) 34.40 33.50 33.00 32.60 32.10
BRL/MXN
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) -7.7% -10.1% -11.4% -12.5% -13.8%
BRL/COP
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) 33.40 33.20 33.00 32.90 32.70
BRL/COP
Change in Forecast -25% -10% 0% 10% 25%
Target Price (BRL) -10.3% -10.9% -11.4% -11.7% -12.2%
Working Capital Turnover (in BRL), CCC (days)
83
55 55
60 61 62 64 65 66 67 69 7173
0
500
1.000
1.500
2.000
2.500
3.000
2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Receivables Inventories Payables CCC
WACC, and Country Risk Premium Value (%) Description
Risk Free Rate 3.07% Current 30-Year U.S Treasury Bond Yield (As of 10/20/2014)
Unlevereda Beta 79.00% Peer Group Average Unlevered Beta
Target D/E Ratio 10.00% Company's Current Debt To Equity Ratio
Pre-Tax Cost of Debt 11.66% Last Debt issue cost (107,5% of CDI)
Equity Risk Premium 6.00% Source : Ibboston
CRP (%) Inflation ADJ (%) Tax Rate (%) Block Contribution (%)
Brazil 2.64% 4.0% 34.00% Brazil 100%
Argentina 8.4% 7.9% 35.00% Consolidation 50%
Chile 0.9% 1.0% 20.00% Consolidation 18%
Peru 1.4% 0.0% 30.00% Consolidation 32%
Mexico 1.5% 3.0% 30.00% Implementation 82%
Colombia 1.6% 3.0% 25.00% Implementation 18%
Australia 0.7% 0.5% 30.00% Aésop 100%
CRP (%) Inflation ADJ (%) Tax Rate (%)
Brazil 2.6% 4.0% 34.0%
Connsolidation Block 4.85% 4.2% 30.8%
Implementation 1% 3.0% 29.1%
Áesop 0.7% 0.5% 30.0%
WACC, and Country Risk Premium Value (%) Description
Risk Free Rate 3.07% Current 30-Year U.S Treasury Bond Yield (As of 10/20/2014)
Unlevereda Beta 79.00% Peer Group Average Unlevered Beta
Target D/E Ratio 10.00% Company's Current Debt To Equity Ratio
Pre-Tax Cost of Debt 11.66% Last Debt issue cost (107,5% of CDI)
Equity Risk Premium 6.00% Source : Ibboston
CRP (%) Inflation ADJ (%) Tax Rate (%) Block Contribution (%)
Brazil 2.64% 4.0% 34.00% Brazil 100%
Argentina 8.4% 7.9% 35.00% Consolidation 50%
Chile 0.9% 1.0% 20.00% Consolidation 18%
Peru 1.4% 0.0% 30.00% Consolidation 32%
Mexico 1.5% 3.0% 30.00% Implementation 82%
Colombia 1.6% 3.0% 25.00% Implementation 18%
Australia 0.7% 0.5% 30.00% Aésop 100%
CRP (%) Inflation ADJ (%) Tax Rate (%)
Brazil 2.6% 4.0% 34.0%
Connsolidation Block 4.85% 4.2% 30.8%
Implementation 1% 3.0% 29.1%
Áesop 0.7% 0.5% 30.0%
BRL 61M
BRL 158M
BRL 298M
BRL 488M
0.2%
0.5%
1.0%1.1%
2015E 2016E 2017E 2018E
Channel Revenue Productivity Gain With RN
Channel Expansion
Rede Natura Projections
Rede Natura Impact
9K
23K
41K
64K
0,7%
1,7%
3,0%
4,6%
2015E 2016E 2017E 2018E
Rede Natura Consultants Channel Participation
Return on Invested Capital
22%20%
18% 18% 18% 17% 17%
1,5
1,8
2,0
2,3
2,5
2,8
3,0
2012 2013 2014E 2015E 2016E 2017E 2018E
Capital Turn Over Operational Margin
ROIC Decomposition
38%
32%
27% 26% 26% 26%28%
2012 2013 2014E 2015E 2016E 2017E 2018E
ROIC Evolution
Cash Destination
0,69 0,74 0,750,79
0,82 0,87
0,00
0,50
1,00
1,50
2,00
2,50
3,00
2013 2014E 2015E 2016E 2017E 2018E
DPS CFO / (Capex + Dividends)
Dividends Distribution
Dividends
81%87%
48%
123%
102% 100% 100% 100% 100% 100%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Dividend Yield Payout
1,17
1,371,45
1,50 1,501,46 1,42 1,39 1,36 1,34 1,32
1,00
1,20
1,40
1,60
1,80
2,00
2,20
2,40
2,60
Net Debt / EBITDA
Net Debt / EBITDA Covenant
Covenant Situation
EBITDA Margin Covenant
23,0%
20,9%
20,6%
20,3%
20,2%
20,1%
20,0%
20,0%
20,0%
19,9%
19,9%
12%
14%
16%
18%
20%
22%
24%
EBITDA Margin
Covenant 15%
Covenant 2.5
Healthy Position Considering Covenant Level
1,17
1,371,45 1,50 1,50 1,46
1,120,97
0,80
0,59
0,35
2013 2014E 2015E 2016E 2017E 2018E
Net Debt / EBITDA - 100% Payout Net Debt / EBITDA - 50% Payout
Balance Sheet Headroom
Aggressive Growth Approach
R$ 4.9 bn in Potencial Leverage
50% Payout StrategyCovenant 2.5
Growth Opportunities
Assumptions
Retail Channel Estimations
Canib
alizati
on
Eff
ect Average Perpetual Growth Rate
3.5% 5.0% 6.0% 7.0% 8.5%
50.0% 24.5% 24.8% 25.0% 25.1% 25.4%
65.0% 19.0% 19.5% 19.8% 20.1% 20.6%
75.0% 16.1% 16.7% 17.1% 17.5% 18.2%
85.0% 13.8% 14.5% 15.0% 15.5% 16.4%
100.0% 11.3% 12.2% 12.8% 13.5% 14.5%
Lower Margins Canibalization
R$ 2.2 mn / store
R$ 4,796 / m^2 - Capex
Retail – 25.5% EBITDA
Direct Selling – 26.7%
100% Substitution
TIR = 12.8% x WACC =
12.7%
Complementary Geographic
Presence
Different Products Segments
Market Cap: R$ 4.3 bn
Channel Diversification
Potencial Target for Acquisition: Revlon
Reinforce Presence in C and D
Classes
Recover Market Share in
Hair Care
Estimated Deal Value: R$ 1 bn
Access to Store Base Retail
Lost Opportunity in Brands: Niely
Consultants Numbers
0
500
1000
1500
2000
2500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Brazil Consolidation Implementation
Consultants Evolution (in thousands) Productivity
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Brazil Consolidation Implementation
Growth per Block
Margins per Block
Other Indicators
Lower Brazilian Multiples
23
3 Reasons to explain the discount
2 Brazilian Higher Country Risk Premium
10x
12x
14x
16x
18x
S&
P 5
00
FTSE
MSCI W
orl
d
DAX
Sto
xx
CAC
AEX
Hong K
ong
IBEX
Ibovesp
a
Major Exchanges P/E Ratio
Lower than average growth3
Brazilian Higher Country Risk Premium
3 Reasons to explain the discount
Lower Brazilian Multiples
10
60
110
160
210
260
BRA SPA EUR FRA HK HOL UK GER US
10 year CDS Swaps (in bps)
Lower than average growth
Brazilian Higher Country Risk Premium
9% 9%
7%
4%
EBITDA EPS
Industry Natura
3 Reasons to explain the discount
EBITDA and EPS CAGR2013-2017
Lower Brazilian Multiples
Football Field
22.4x12.6x 19.8x19.1x
Discount to Peers: -3.5%
P/E YE15
13.2x7.4x 11.1x10.6x
Discount to Peers: 4.5%
EV/EBITDA YE15
27.7x1.4x2.1x
13.7x
Premium to Peers: 552.4%
P/B YE15
3.6x0.8x 2.1x2.2x
High Low Industry NATU3
Premium to Peers: 4.8%
P/B YE15
Scenario Analysis
BRL 24.70
Bear Case
BRL 33.00
Base Case
BRL 40.50
Bull Case
37,25
33,00
40,50
24,70
Current Price YE15 Price
Base Case Bull Case Bear Case
+ 8.7% Upside
- 33.7% Downside
Scenario Analysis – FCFF (in BRL mn)
-
500
1.000
1.500
2.000
2.500
2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Bear Case Bull Case Base Case
Debt BreakdownDebt Description Debt Amount in BRL millions Cost of Debt
FINEP 121.82 4.3%
Bonds 620.72 11.6%
BNDES 200.94 11.5%
Working Capital/NCE 251.76 9.8%
BNDES-FINAME 20.61 3.0%
Lesing 324.94 11.7%
FINEP Grant 1.65 0.0%
Domestic Debt 1,542.43 10.6%
BNDES 24.77 2.1%
Resolução nº 4.131/62 1,946.95 3.2%
International Operation - PERU 10.55 4.9%
International Operation - México 37.97 4.27%
International Operation - Australia 11.11 7%
Foreign Debt 2,031.36 3.2%
Total Debt 3,573.79 6.4%
Marginal Cost of Debt (%)
Historical 1 year P/E Forward Ratio.
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
2004A
2005A
2006A
2007A
2008A
2009A
2010A
2011A
2012A
2013E
2014E
2015E
2016E
Industry Natura
Historical 1 year EV/EBITDA Forward Ratio.
0.0x
3.0x
6.0x
9.0x
12.0x
15.0x
18.0x
2004A
2005A
2006A
2007A
2008A
2009A
2010A
2011A
2012A
2013E
2014E
2015E
2016E
Industry Natura
Historical 1 year EV/Sales Forward Ratio.
0.0x
3.0x
6.0x
9.0x
12.0x
15.0x
18.0x
2004A
2005A
2006A
2007A
2008A
2009A
2010A
2011A
2012A
2013E
2014E
2015E
2016E
Industry Natura
Historical 1 year P/BOOK Ratio
0.0x
4.0x
8.0x
12.0x
16.0x
20.0x
2004A
2005A
2006A
2007A
2008A
2009A
2010A
2011A
2012A
2013E
2014E
2015E
2016E
Industry Natura
Porter’s Fiver Forces I
0
1
2
3
4
5
Threat ofSubstituteProducts
BargainingPower ofSuppliers
Threat of NewEntrants
BargainingPower of
Customers
CompetitiveRivalry within
Industry
Average Competitor Natura
Natura’s average: 2
Peer’s average: 2.4
1. Threat of Substitute Products (Rate 2):
• Products are relatively similar, Natura
increases product through its value
proposition.
2. Bargaining Power of Suppliers (Rate 4):
• High number of suppliers;
• Strong brand, being highly viewed by
partners;
• Requires highest standards of sustainability.
3. Threat of New Entrants (Rate 1):
• Natura trains CNs with very elaborate
courses, hence allowing competitors not to
invest in such need;
• The direct sales channel is easily imitated;
• Natura does not have a strong know-how in
other sales channels, hence providing
competitors a wide range of ways in which
to enter the CF&T market and reaching
Natura’s final clients
Porter’s Fiver Forces II
0
1
2
3
4
5
Threat ofSubstituteProducts
BargainingPower ofSuppliers
Threat of NewEntrants
BargainingPower of
Customers
CompetitiveRivalry within
Industry
Average Competitor Natura
Natura’s average: 2
Peer’s average: 2.4
1. Bargaining Power of Customers (Rate 2):
• In the direct selling channel, Natura’s main
consumer is the CN and since they are the
company’s main force of sales, Natura is kept
hostage;
• In Rede Natura, the company has a slight
advantage, since prices are fixed. However,
with the recent loss of market share, Natura
needs to understand the client’s demand,
making it more dependent on consumer’s
opinions.
2. Competitive Rivalry within Industry (Rate 1):
• O Boticário is growing at a very fast rate,
gaining market share in Natura’s main
segment (Fragrances);
• International companies are observing how
sexy the Brazilian market for CF&T is and are
investing largely on their entrance in the
country;
• Natura’s price mix is unclear and has not
been able to be strongly positioned in
particular segments, hence allowing
competitors to come in strongly.
Direct Selling I
10%
15%
19%
30%
29%
29%
41%
61%
86%
90%
28%
37%
70%
36%
21%
38%
23%
30%
8%
19%
6%
20%
10%
15%
24%
9%
17%
10%
13%
23%
10%
38%
28%
20%
1%
4%
4%
33%
12%
9%
22%
59%
34%
35%
30%
25%
24%
33%
18%
6%
24%
27%
12%
25%
France
Germany
US
UK
Korea
Japan
Mexico
Argentina
Brazil
Chile
Asia/Pasic
Europe
LatAm
Global Average
CF&T Household Goods Wellness Others
CF&T penetration in the Direct Selling market
Source: WFDSA
32.670
17.901
14.46914.188
8.473 8123 7.2535.312
3.334 32861.903 1863 1391 870 525 340 91
US
Japan
Kore
a
Bra
zil
Germ
any
Mexic
o
Mexic
o
Fra
nce
UK
Colo
mbia
Arg
enti
na
Peru
Venezu
ela
Ecuador
Chile
Bolivia
Uru
guay
Direct Selling II
CF&T penetration in the Direct Selling market
Source: WFDSA
According to WFDSA, direct selling moved around USD 178 bn in 2013 with more than 96 m of
consultants around the world. Overall three main categories (CF&T, Household Goods and
Wellness products) accounted for 75% of this channel’s total sales.
Brazil is the biggest direct selling market in the Latin America and also one of the biggest in
the world, when compared to its peers, the is also the second direct selling market most
indexed to CF&T with 80% of its total sales right behind Chile, which has 90%.
Direct Selling III
CF&T sales channels’ size and growth
44%
32%29%
25% 25%
19% 18%15%
9%7%
4% 3% 2% 2%
13%
28%
21%
12%9% 8%
3% 3%
Peru
Mexic
o
Colo
mbia
Bra
zil
Arg
enti
na
Russ
ia
Chile
Japan
Unit
ed S
tate
s
Italy
Unit
ed K
ingdom
Germ
any
Spain
Fra
nce
Glo
bal
Lati
n A
meri
ca
Asi
a P
acif
ic
Nort
h A
meri
ca
East
ern
Euro
pe
West
ern
Euro
pe
Aust
rala
sia
Afr
ica/M
iddle
East
Source: WFDSA
Brazil ranks 4th in DS penetration in CF&T Natura’s footprint covers the main countries
Direct Selling IV
1374
9805
1484516220
2217724101
23%
10%
16% 16%14%
12%
InternetRetailing
Hypermarkets Drugstores BSR* Supermarkets Direct Selling
Size (BRL mn) CAGR 2008-2013
CF&T sales channels’ size and growth
Source: WFDSA
Direct Selling is per se the major
channel
Internet and Drugstores are the
fastest growing channels
Macro – Growth Drivers I
Brazil’s GPD per capta
22.185 21.88223.296 23.702 23.725 24.100
2008 2009 2010 2011 2012 2013
2.66%
251 290 327 358 410 456
2008 2009 2010 2011 2012 2013
12.7%
CF&T Expenditure per capta
Source: World Bank, Team’s estimates
Source: World Bank, Team’s estimates
Brazil ranks 4th in DS penetration
in CF&T
Macro – Growth Drivers II
GDP per capta
22.185 21.88223.296 23.702 23.725 24.100
2008 2009 2010 2011 2012 2013
2.66%
251 290 327 358 410 456
2008 2009 2010 2011 2012 2013
12.7%
CF&T expenditure per capta
Source: World Bank, Team’s estimates Source: World Bank, Team’s estimates
CF&T expediture per capta has grown faster
than GDP per capta
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2005 2009 2013
GDP Growth Deflated CF&T Growth
GDP growth vs. CF&T growth
CF&T Growth has been outperforming GDP
Growth
Macro – Growth Drivers III
90
100
110
120
130
140
150
2007 2008 2009 2010 2011 2012 2013
General Price Index Hygiene Price IndexBeauty Price Index
Inflation among sectors
Inflation in CF&T products was
constantly below average Inflation
Source: Fipe, IBGE and ABIHPEC
Real Wage appreciation in the last
decade323,6
525,9
2004 2013
+5.5% CAGR
Source: IBGE an BTG Pactual
LTM Real Wage Mass (BRL bn)
Product Pricing
20
210
10
90
Avon O Boticário
220
30
Natura
707
378
398
358
364
198
Rothenberg Belocap LVMH
Consumers may upgrade
to global brands
Consumers may look for
higher cost-benefit ratio
CF&T players pricing positioning in Fragrances
Source: Team’s estimates
CF&T Market I
73,3
44,2 43 39,1
19,1 16,9 16,8 14,2 12,2 10,8
USA
Chin
a
Bra
zil
Japan
Germ
any
UK
Fra
nce
Russ
ia
Italy
Mexic
o
1.9%
0.9% 0.8% 0.7% 0.7% 0.6% 0.6% 0.5% 0.5% 0.4%
Bra
zil
Mexic
o
Japan
Russ
ia UK
Fra
nce
Italy
Germ
any
Chin
a
USA
CF&T Size (USD bn)
CF&T Market to GDP
Source: Euromonitor
Source: Euromonitor, World Bank
Consultants by Block
730
880
1029
11761268 1290 1314
90 114 130 157 191 225 260
26 44 60 86 111 140 153
2008 2009 2010 2011 2012 2013 2014*
Brazil Consolidation Implementation
15%20%
17% 14%8%
2% 2%
30%26%
14%21% 22%
18% 16%
84%71%
36%42%
30%26%
9%
2008 2009 2010 2011 2012 2013 2014*
Brazil Consolidation Implementation
Consultants breakdown by block
Consultants growth by block
Marketing Expenses
BRL m 2008 2009 2010 2011 2012 2013 CAGR
P&G 65 151 296 372 395 257 32%
Beiersdorf 26 26 33 59 74 93 29%
Boticário 61 86 103 129 167 205 27%
Hypermarcas 201 287 217 209 363 455 18%
L'oreál 119 82 185 200 234 254 16%
Unilever 786 793 797 995 1146 1546 14%
Natura 88 100 123 140 182 149 11%
Colgate-Palmolive 186 142 183 218 234 185 0%
Avon 124 129 153 116 103 38 -21%
Average 184 199 232 271 322 354 14%
TV Advertisement expenses
Source: IBOPE Monitor, Meio & Mensagem
CF&T MarketsNatura’s moves in the CF&T Markets
13,614,2
14,8
13,713,0
12,4
10,6 10,5 10,4 10,5
11,9
12,0
6,5 6,77,1
8,0
9,09,5
6,9 6,87,6
9,0
9,1
8,8 9,0 8,7
7,87,1
6,4
2008 2009 2010 2011 2012 2013
Natura Unilever O Boticário Procter & Gamble Avon
SegmentSize
BRL bnMarket Share
Δ Market Share
p.p.Position
Hair Care 19 3.6% +0.1
Fragrances 15 27.7% -7.6
Deodorants 10 9.7% -4.4
Skin Care 9 22.7% -4.5
Color Cosmetics 7 12.8% +0.7
Bath and Shower 7 15.0% +0.2
Total 92 12.4% -2.4
Natura’s moves within each category
Increasing Competition
Saturated Sales Channel
CF&T Markets
Natura’s segments market share, size and growth
Source: Euromonitor, Team’s Estimates
CF&T Markets
Natura’s segments market share, size and growth
Source: Euromonitor, Team’s Estimates
Natura’s Market Share Market Size (BRL m) CAGR2009-2013
Sun Care 5% 3493.4 19.2%
Men’s grooming 7% 9755.5 18.5%
Sets/Kits 23% 1664 17.5%
Deodorants 10% 10337.8 16.4%
Baby and Child 17% 4029.4 16.3%
Colour Cosmetics 13% 7313.2 15.1%
Fragrances 28% 15042.3 14.3%
Hair Care 4% 18927.6 11.8%
Skin Care 23% 9470.8 10.4%
Bath and Shower 15% 6991.6 10.3%
CF&T Markets
22,4 23,7 24,3 25,227,5 28,8
31,534,0 35,3
29,7 29,627,7
12,7 12,1 12,110,3 9,7 8,4
2008 2009 2010 2011 2012 2013
Boticário Natura Avon
24,7 25,227,2
26,024,1
22,7
18,1 18,0 17,214,4
13,1 12,7
5,6 5,7 6,17,8
9,911,5
7,57,2
7,4 7,5 7,5 7,5
2008 2009 2010 2011 2012 2013
Natura Avon Boticário Beiersdorf
FRAGRANCES
Market Size: BRL 15.0 bn
O Boticário has launch of its direct
selling operations and brand
1. Quem disse, Berenice?;
2. The Beauty Box;
3. Eudora;
SKIN CARE
Market Size: BRL 9.5 bn
Natura loses bps though remains in the
leadership;
O Boticáro close the gap to second
place.
CF&T Markets
HAIR CARE
Market Size: BRL 18.9 bn
Unilever and P&G opened R&D center to
adapt products to Brazilian consumer’s
preferences.
L’oréal acquire Niely, though this deal is
under Brazilian regulator’s review.
DEODORANTS
Market Size: BRL 10.4 bn
Unilever is flying solo;
Natura recently launched its own
Aerosol Deodorants line, though the
company has lost ground due to taking
too long developing its own Aerosol
tech.
19,00 18,700 18,100 17,600
21,800 21,700
15,200 14,700 14,600 14,900 15,500 15,400
8,500 8,2009,200
10,10011,600 11,600
0 0
6,600 6,600 6,500 6,9005,300 5,600 5,900 6,100 5,800 6,300
3,00 3,200 3,500 3,900 3,300 3,600
2008 2009 2010 2011 2012 2013
Unilever L'Oréal Procter & Gamble
Niely Phitoteraphia Natura
14,40015,600
14,10012,700
11,2009,700
28,900 28,800
32,100
36,700 39,100 38,500
5,500 5,900 6,8008,200 9,00 9,600
3,900 3,700 3,800 4,600 5,200 5,300
9,200 9,3007,600
6,100 5,200 4,300
2008 2009 2010 2011 2012 2013
Natura Unilever Beiersdorf Boticário Avon
CF&T Markets
COLOR COSMETICS
Market Size: BRL 7.3 bn
Avon in free-fall: 8 pp
O Boticário, which gained 1.5p.p. last
year due to the success of its new
brand “Quem disse, Berenice” and its
new Make B product line.
BATH AND SHOWER
Market Size: BRL 7.0 bn
Natura increased its market share from
14.8%;
Sou pulled Natura’s results.
12,600 13,00 12,100 13,00 13,200
33,00 33,700
30,50029,400
27,50025,900
6,600 7,200 7,90010,00
11,90013,400
2008 2009 2010 2011 2012 2013
Natura Avon Boticário Hypermarcas L'Oréal
12,500 13,10014,800 14,700 15,00 15,00
23,800 23,80025,400 25,400
29,200 29,100
11,100 10,800 11,80013,00 12,800 12,300
2,300 2,300 2,700 2,800 3,600 3,700
2008 2009 2010 2011 2012 2013
Natura Unilever Colgate JBS Boticário
Mexico
14,9 14,7 14,9 15,1 15,2 15,3
10,8 10,9 10,8 10,8 10,8 10,9
7,5 7,6 7,98,7 8,8 8,7
0,3 0,4 0,7 0,9 1,1 1,3
2008 2009 2010 2011 2012 2013
P&G CP Unilever Natura
Sustainable Relations Network
Market Share in CF&T (%)
CF&T Market Size (2013): USD 10,815 mn
8 levels of career progression
17,0 17,0 17,3
19,7 20,0 19,9
11,1 11,3 10,6 11,110
8,9
9,8 9,9 9,78,8 8,6 8,6
2,1 2,5 2,9 3,6 3,95,0
2008 2009 2010 2011 2012 2013
Unilever Avon P&G Natura
Argentina
Sustainable Relations Network
Market Share in CF&T (%)
CF&T Market Size (2013): USD 5,762 mn
Single-Level Model
Natura Consultants
Relationship
Managers
CF&T Market Size (2013): USD 4,052 mn
Advising
Natura
Consultant
Natura Consultants
Colombia
Business Model
9,9 9,910,6
12,3 11,9
10,8
10,2 10,1 10,3 9,9 9,9 10
11,9 11,8 12,1
11,610,5
9,1
0,2 0,5 0,91,4 1,7 2,0
2008 2009 2010 2011 2012 2013
Belcorp CP Avon Natura Bi-Level Model
Market Share in CF&T (%)
Chile
14,614,0 13,7
15,8 15,8 15,7
10,6 10,6 10,5
11,312,4 12,511,6 11,1 10,8
10,8 10,7 10,7
2,02,8
3,44,1
5 5,5
2008 2009 2010 2011 2012 2013
Unilever L'Oréal P&G Natura
Advising
Natura
Consultant
Natura Consultants
Business Model
Bi-Level Model
CF&T Market Size (2013): USD 2,953 mn
Market Share in CF&T (%)
Peru
14,1 13,714,2
13,6 13,2 12,8
13,1
11,5 11,3 11,110,7 10,3
9,1 9 9,1 9,1 9,2 9,4
2,04,7 4,7 4,8 4,9 5,0
2008 2009 2010 2011 2012 2013
Belcorp P&G Unique-Yanbal Natura
Advising
Natura
Consultant
Natura Consultants
Business Model
Bi-Level Model
CF&T Market Size (2013): USD 2,246 mn
Market Share in CF&T (%)
SWOT Analysis
Positive Negative
Inte
rnal
STRENGTHS WEAKNESSES
1. Sustainable operations are clearly translated into the value
proposition, as the company portrays a very ecofriendly
production that appeals to the consumer as a product concern
with the well being of the country and its nature as well as the
client's
2. Natura is a very strong brand in Brazil, being recognized by a
very large percentage of the population as it is one of the
biggest companies in the country
3. Because of this brand strength and the fact that it has
around 5,000 partners, the company maintains a strong
bargaining power towards the suppliers
1. Operations are very concentrated in the Brazilian market (85% of Gross
Revenue), hence leaving the company exposed to the dangers of the market
2. Because direct-sales is Natura's core business, it becomes extremely
dependent on the consultant, requiring the figure in all sales channels in
operation. The happiness of the CNs is a major concern and must be kept at a
high level
3. Being one of the companies that led the way in direct sales, Natura has
focused its know-how and weakened knowledge on other channels
(especially e-commerce)
Ext
ern
al
OPPORTUNITIES THREATS
1. The Brazilian market is very sexy, since women are
increasingly concerned with appearance
2. Since Natura is not fully consolidated in other markets in
LatAm, the increasing CF&T market in the rest of the continent
is a very good opportunity for growth
3. The undeniable demand for e-commerce provides an
opportunity for a new sales channel that might reach out to
new consumers
1. Strong international companies have identified Brazil as a sexy investment
and have been entering the country taking advantage of the low barriers to
entry of the sector. Moreover, national companies, such as Boticário, have
developed new products and brands to strongly compete with Natura
2. The Brazilian government has been having difficulties controlling inflation,
hitting the highest level of the interval set as appropriate, hence, the high
levels and instability might be of danger once the company is not fully
capable of passing it through to the final price
3. Because the company is structured in a way in order to mitigate tributary
costs, the risk of fiscal reform is alarming to Natura
Market Profile
Source: Bloomberg and Team Estimates
Market Profile
Market Capitalization (BRL m) 16,064
Shares Outstanding (m) 431.2
52w Price Range (BRL/share) 34.3-48.9
Average Daily Volume (BRL m) 27.8
Júlio Moura
Director, 62
Guilherme Leal
Director, 64
Marcos Lisboa
Independent Director, 49
Luiz Gemignani
Independent Director, 67
Board of Directors - 2013
Plínio Musetti
Chairman, 61
Antonio Seabra
Director, 72
Raul Roth
Director, 61
Pedro Passos
Director
Source: Company’s Data
Executive Board - 2013
Source: Company’s Data
Erasmo Toledo
International VP
Gerson Valença
Innovation VP
Josie Romero
Supply Chain VP
Lilian Guimarães
HR VP
Robert Chatwin
New Business VP
Roberto Lima
CEO, 63
João Ferreira
Com. VP, 47
Roberto Pedote
IR Director, 47
José Marino
CMO, 48
Agenor Leão
IT VP
Executive Profile – Antônio Luiz Seabra
• Founder and controlling shareholder of Natura.
• Member of the company’s board of directors.
• Economics graduate,
• Superintendent in Remington Rand do Brasil and manager at Laboratórios Bionat.
• He founded Natura in 1969 at the age of 27.
• Strongly committed to ethics, quality relations and sustainable development.
Executive Profile – Guilherme Leal
• Graduated in Business Administration from the University of São Paulo (USP) and
attended the Advanced Administration Program from Fundação Dom Cabral/INSEAD.
• Businessman and social entrepreneur
• Member of the Board of Directors and one of the founders of Natura Cosméticos.
• Ran for Vice-President of the country under the slate of Marina Silva. Together, they
received approximately 20 million votes, or some 20% of Brazilian voters.
Executive Profile – Pedro Passos
• Graduated in Business Administration from the University of São Paulo (USP) and
attended the Advanced Administration Program from Fundação Dom Cabral/INSEAD.
• Businessman and social entrepreneur
• Member of the Board of Directors and one of the founders of Natura Cosméticos.
• Ran for Vice-President of the country under the slate of Marina Silva. Together, they
received approximately 20 million votes, or some 20% of Brazilian voters.
• Member of Natura’s Board of Directors and co-founder
• Chairman of the Board of Directors of Totvs since 2013
• Graduated in Production Engineering from the Polytechnical School (USP); extension in
Business Administration from the FGV
• Since 2009, he has been President of IEDI and in 2013 became President of Fundação
SOS Mata Atlântica
• Member of the Board of Trustees of National Quality Foundation (FNQ); Instituto
Empreender Endeavor; the Technological Researches Institute (IPT); the Dom Cabral
Foundation (FDC); Member of the Bus. Engagement for Innovation (MEI).
Executive Profile – Roberto Lima
• Graduated in Business Administration from the University of São Paulo (USP) and
attended the Advanced Administration Program from Fundação Dom Cabral/INSEAD.
• Businessman and social entrepreneur
• Member of the Board of Directors and one of the founders of Natura Cosméticos.
• Ran for Vice-President of the country under the slate of Marina Silva. Together, they
received approximately 20 million votes, or some 20% of Brazilian voters.
• Member of Natura’s Board of Directors and co-founder
• Chairman of the Board of Directors of Totvs since 2013
• Graduated in Production Engineering from the Polytechnical School (USP); extension in
Business Administration from the FGV
• Since 2009, he has been President of IEDI and in 2013 became President of Fundação
SOS Mata Atlântica
• Member of the Board of Trustees of National Quality Foundation (FNQ); Instituto
Empreender Endeavor; the Technological Researches Institute (IPT); the Dom Cabral
Foundation (FDC); Member of the Bus. Engagement for Innovation (MEI).
• Bachelor’s degree in Public Administration and graduate in Accounting and Financial
Management from FGV
• Graduate in Strategic Planning from Institut Superieur des Affaires de Jouy in Josas,
France.
• Career at: Saint Gobain, Rhodia and Accor.
• 1999-2005: Chairman and CEO of the Credicard.
• 2005-2011, CEO of Vivo,
• Boards member: Edenred in France, Naspers Holdings and Telefonica/Vivo, Grupo Pão de
Açucar, Rodobens and Natura. Chairman of the Publicis Group Worldwide.
Remuneration - 2013
Board of Directors
Workforce (25% best remunerated)
TMT
Year Fixed Bonus Benefits
2013 82.4% 17.2% 0.4%
2012 70.3% 29.3% 0.4%
2011 54.09% 42.77% 1.3%
Year Fixed Bonus Benefits
2013 71.3% 28.1% 0.6%
2012 54.0% 45.6% 0.4%
2011 36.57% 35.61% 1.3%
Bonus (Up to 10% of Profits)
Economical
Social
Environmental
Supply
Consolidated
EBITDA
Org. Climate Survey
Consultant Loyalty
Carbon Emission
Non-delivered
product index
Option Subscription/Stock Purchase
Minimum
Option Time
Frame
50% of bonus
3y vesting (50%)
4 – 8y
Benefits and Rewards
Pension Plan
Rewards
Up to 5% of wage
+ 60% of that value
14 wages
Reward every cicle
• Medical (family)
• Life inssurance
• Restaurants/VR
• Transport
• Baby care
• Gym
Others Bonus
Managers: Equal to
above + Individual
Goals
Operators: Op.
Result + Indv. Goals
Source: Company’s Data
Employees - 2013
Total 6655
Turnover Fired Hired
7.1% 488 460
Source: Company’s Data
5339
465197 126 245 232
Brazil Argentina Chile Peru Colombia France
Stock Participation - 2013
Natura Cosméticos S.A. %ON Main ShareholderIndividual
Participation
Source: Company’s Data
Distribution Centers and Factories
Distribution Centers
Factories
Cajamar (85,000m2)
• Administration
• 3,500 workers
• Creams, Make-up, Fragrances
Benevides (1,172,000m2 – 10% Natura)
• Soap and extraction of vegetable oil
• 150 M/year capacity
Source: Company’s Data
Main Brands
Mai
n B
ran
ds
Cosmetics Fragrances Toiletries
Source: Group’s Assessment
Brand Timeline
Source: Company’s Data and Groups Anaysis
C/F/T/O MarcaData de
ConcessãoC/F/T/O Marca
Data de
Concessão
F Seve Sep-85 C
Natura Foto
Equilibrio Apr-06
T Natura Erva Doce Sep-92 F Sintonia de Natura Aug-06
C Chronos Jun-93 F Aguas de Natura May-07
F Biografia Jun-94 F Natura Humor Mar-08
T Mamãe e Bebê Jun-94 CT Natura Naturé May-08
F Essencial de Natura Apr-97 F Kriska Jan-09
F Kaiak Apr-97 T Natura Plant Jun-09
F Sr N Jul-97 C Aquarela Dec-09
FT Natura Homem Oct-97 F Natura Amó Jan-10
F Sol de Natura Dec-99 T Natura Sou Jan-11
F Lua de Natura Oct-00 F Natura Una Jan-13
CT Natura Tododia May-03 C Faces Natura Apr-13
CFT Natura Ekos Oct-03 CT Natura Vovó Apr-13
F Revelar de Natura Oct-03 O Crer para Ver Feb-14
F Horus Dec-03 T Natura Higeia Feb-14
Brand Timeline
Source: Company’s Data
Sustainability
Goal of originating 30% of the inputs from local communities in the Amazon
region
Industrial complex to attract partner companies that wish to aid in the
development of the Amazon region
One of Natura’s main products, developed with green technology to
conserve biodiversity
70% less plastic in its packages, in order to avoid a harmful environmental
footprint
ECOPARQUE SOU
INPUTS EKOS
Reduced 33% of CO2 emission since 2006
CO2
Sets high standards of production: CO2
emission, water consumption, residual generation, investments in education
and others.
SUPPLIERS
Source: Company’s Data
Supplier Requirements
CO2 EmissionWater
Consumption
Waste Generation
Investment in Education
Employee Training
Rate of Accidents at Work
Social Inclusion
Social Investment
SUPPLIERS
QQualidade
LLogística
IInovação
CCusto
AAtendimento
RRelacionamento
Source: Company’s Data
Main Suppliers
5.000 comercial partners
Terminated products
Inputs – 1.762
• 283 = 70%
Source: Company’s Data
Supplier Field Supplor Field
Provider Indústria e Comércio Ready Cosmetics and Personal hygiene
Companhia Refinadora da Amazônia
Biochemical Oil
Aptar B&H Embalagens Ltda. Design and development of Packages
Wheaton Brasil Vidros Ltda. Glass and Utensils
Albea do Brasil EmbalagensLtda.
Packages Sinter Futura Ltda. Soap
Higident Brasil Indústria e Comércio Ltda.
Soap and Personal Hygiene = Solev do Brasil Ltda. Paint
SG Indústria e Comércio de Frascos Ltda.
Plastics and Bottles Klabin S/A Paper and Packages
K&G Indústria e ComércioLtda.
Chemicals and Fragrances Usina São Francisco S/A Sugar and Alcohol
IFF Essências e FragrânciasLtda.
Fragrances and Essences A.W. Faber Castell S/A Pencils
Givaudan do Brasil Fragrances and Essences JBS S/A Food and Beverages
Razzo Ltda. Personal Hygiene and Cleaning Globalpack Indústria eComércio Ltda.
Bottles and Packages
Lipson Cosméticos Ready Cosmetics Grupo Box Print Packages
BASF S/A Chemicals
Inputs - 2013
Inputs % of Costs Number of Suppliers
Total 100% 220
Source: Company’s Data
Aesop
Skin Care Hair Care Body Care
Fragrances Home
Products
Stores
Online
Channels
Premium
Sustainable
Positioning Expertise
Australia
Switzerland
Countries FranceHong Kong
Taiwan
Singapore
Malaysia
Japan South Korea
Germany
UK
Source: Company’s Data
Business Division - 2013
Source: Company’s Data
Risk Variable Distribution
Increase in revenues GDP per Capita Growth (%) Normal
Increase in margins Exchange Rate - BRL/USD Lognormal
Increase in revenues Inflation (%) Normal
Monte Carlo Simulation I
0
200
400
600
800
1,000
1,200
28 29 30 31 31 32 33 33 34 35 35 36 37 38 38
Freq
uen
cy
Fair Value (BRL)
Sell: 60.7% Hold: 36.9% Buy: 2.4%
Monte Carlo Simulation II
0
100
200
300
400
500
600
700
800
900
1,000
25.2 25.6 26.1 26.5 27.0 27.4 27.8 28.3 28.7 29.2 29.6 30.1 30.5 31.0 31.4
Freq
uenc
y
Fair Value (BRL)
Brazil
Target Price - Brazil
Mean BRL 28.12
Median BRL 28.11
Minimum BRL 24.95
Maximum BRL 31.65
Standard Deviation BRL 0.88
Consolidation
0
200
400
600
800
1,000
1,200
2.2 2.7 3.2 3.7 4.3 4.8 5.3 5.8 6.4 6.9 7.4 7.9 8.5 9.0 9.5
Freq
uenc
y
Fair Value (BRL)
Target Price - Consolidation
Mean BRL 4.78
Median BRL 4.67
Minimum BRL 1.90
Maximum BRL 9.78
Standard Deviation BRL 1.02
Monte Carlo Simulation III
Implementation
Aésop
0
200
400
600
800
1,000
1,200
2.8 2.8 2.8 2.9 2.9 2.9 2.9 2.9 3.0 3.0 3.0 3.0 3.1 3.1 3.1
Freq
uenc
y
Fair Value (BRL)
0
100
200
300
400
500
600
700
800
900
1,000
0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.7
Freq
uenc
y
Fair Value (BRL)
Target Price - Implementation
Mean BRL 2.95
Median BRL 2.95
Minimum BRL 2.76
Maximum BRL 3.14
Standard Deviation BRL 0.05
Target Price - Aésop
Mean BRL 0.59
Median BRL 0.59
Minimum BRL 0.52
Maximum BRL 0.66
Standard Deviation BRL 0.02