Target Price - CFA Institute Insper.pdf · 30 35 40 45 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14...

30

35

40

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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 &


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 &


Seeking growth through change

+14.0% CAGR


16%

20%

6%

11%

5%

2009 2010 2011 2012 2013

Brazil’s Gross Revenue YoY Growth


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 &


Seeking growth through change

+14.0% CAGR


16%

20%

6%

11%

5%

2009 2010 2011 2012 2013

Brazil’s Gross Revenue YoY Growth


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 &


Reasons to Sell

SELL

Summary &

Overview

Increasing Competition

Reasons to Sell

Risky New Strategy

Expensive Valuation

Reasons to SellFinancial &


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 &


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 &



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 &


Store-based Retail E-commerce Direct Selling

O Boticário is moving faster

Reasons to Sell

Source: O Boticário’s franchisees

Summary &

Overview

Financial &



Store-based Retail E-commerce Direct Selling

O Boticário is moving faster

Reasons to Sell

Source: O Boticário’s franchisees

Summary &

Overview

Financial &



O Boticário reached ~500k consultants in 2 years

SELL


Reasons to Sell


Risky New Strategy

Expensive Valuation

Summary &

Overview

Financial &


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


Direct Selling is losing

importance in CF&T

Reasons to SellSummary &

Overview

Financial &


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



Overview

Financial &



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


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


Summary &

Overview


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


Cheaper Entry Fee

Equivalent Margin

Lack of Fidelity

BRL 180 30%

Summary &

Overview



SELL


Reasons to Sell

Risky New Strategy

Expensive Valuation

Summary &

Overview

Financial &


Rede Natura: Risky New Strategy

Product deliveryOrder and Payment


Overview

Financial &


Traditional Model


Increasing Competition30%

margin



Overview

Financial &


Traditional Model

Relationship

Rede Natura

21%

margin


30%

margin



Overview

Financial &


Relationship

Rede Natura


DangerousConsultant

Credit Risk

Market Risk

Operational Risk

Sales Rep



Overview

Financial &


Relationship

Rede Natura


DangerousConsultant

Credit Risk

Market Risk

Operational Risk

Sales RepSales Rep

?Employment

Relationship



Overview

Financial &


Relationship

Rede Natura


Source: Brazil’s Labor Law

CND as service provider

Commission-based

remuneration

Payment of fees and

vulnerability

Employment Relationship

Subordination

Hierarchy

Compensation

Natural Person


SELL


Reasons to Sell

Risky New Strategy

Expensive Valuation

Summary &

Overview

Financial &


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


Overview

Financial &


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


52%

48%20%

80%

Source: Company’s Data and Team’s estimates


Overview

Financial &


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


Consolidated Growth

-5%

0%

5%

10%

15%

20%

25%

2009

2010

2011

2012

2013

2014E

2015E

2016E

2017E

2018E


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


0.50%3.80%


New Hope for Growth

Growth Decomposition Productivity Growth

International Expansion New Consultants Strategy New Channel Strategy


Overview

Financial &


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 Source: Team’s estimates

Competition hurts

EBITDA Margin per Block

EBITDA Margin Decomposition 2013 EBITDA Margin Decomposition 2018


Overview

Financial &


979

554431

856

Source Team’s estimates

Operational Cash Flow Destination in 2013

(BRL mn)

OCF Dividend CAPEX Cash Burn

Shareholders hungry for money


Overview

Financial &



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


Overview

Financial &



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


Overview

Financial &


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


Long term growth rate (%)

Capturing Long-Term Growth



Overview

Financial &


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 (%)




Overview

Financial &




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


Target Price decomposition (BRL)



Overview

Financial &


Different Risks



33,00

-4,10

0,60

3,10

4,60

1,40

27,40

Target Price

Net debt

Aesop

Implementation

Consolidation

Rede Natura

Brazil


Target Price decomposition (BRL)



Overview

Financial &


Target 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.


19,8x

18,5x

17x

19x

21x

23x

2014E 2015E Multiple Output

Industry Natura

11,1x

10,3x

09x

10x

11x

12x

13x


Industry Natura


Overview

Financial &


-3.1% Downside

-3.4% Downside

Multiples Valuation

1 Year Forward P/E

1 Year Forward EV/EBITDA



19,8x

18,5x

17x

19x

21x

23x


Industry Natura

11,1x

10,3x

09x

10x

11x

12x

13x


Industry Natura

SELL

BRL 36.00

BRL 36.10

TP – EV/EBITDA

TP – P/E


Overview

Financial &


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


Overview

Financial &


+11.5% CAGR

Free Cash Flow to Firm (BRL mn)


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


Overview

Financial &


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


SELL


Reasons to Sell

Risky New Development

Expensive Valuation

Summary &

Overview

Financial &


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


Overview

Financial &


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)


Overview

Financial &




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)


Overview

Financial &




9,8%

3,3% 2,9% 2,9% 2,4%

0,9%

Argentina Colombia Brazil Peru Mexico Chile

The Argentine Situation


Overview

Financial &


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


Overview

Financial &



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


Overview

Financial &





Conclusion

Risky New Development

Expensive Valuation

Summary &

Overview

Financial &


SELLTarget 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).


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


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


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


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


Statement of Cash Flow (1/2)


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


Statement of Cash Flow (2/2)


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


Brazil’s Income Statement (1/2)


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


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


Brazil’s Income Statement (2/2)


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


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


Consolidation’s Block Income Statement (1/2)


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


Consolidation’s Block Income Statement (2/2)


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


Implementations’s Block Income Statement (1/2)


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


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


Implementations’s Block Income Statement (2/2)


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


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


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


Margins, Profitability, CF Ratios and Solvency Ratios (2/2)


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


Market Ratios, and Asset Management Ratios (1/2)



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)



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


SOTP Approach : Consolidation Block.

Risk Free Rate 3.1%


Levered Beta 84.0%


Cost of Debt 11.7%




WACC Consolidation Block 16.1%

SOTP - Consolidation Block

WACC Breakdown









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


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


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%


Levered Beta 84.0%


Cost of Debt 11.7%




WACC Implementation Block 11.6%

WACC Breakdown

SOTP - Implementation Block










SOTP Approach : Aesop

Risk Free Rate 3.1%


Levered Beta 84.0%


Cost of Debt 11.7%




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


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








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%


Levered Beta 84.0%


Cost of Debt 11.7%




WACC Brazil 12.7%

SOPT - Brazil

WACC Breakdown


PV of Terminal Value (BRL mn) 513







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


Downside -5.5% -9.0% -11.4% -13.6% -17.0%

BRL/ARS


Target Price (BRL) 33.70 33.30 33.00 32.80 32.50

BRL/ARS


Target Price (BRL) -9.5% -10.6% -11.4% -11.9% -12.8%

Stress Test (2/3)

BRL/CLP


Target Price (BRL) 33.30 33.10 33.00 32.90 32.80

BRL/CLP


Target Price (BRL) -10.6% -11.1% -11.4% -11.7% -11.9%

BRL/PEN


Target Price (BRL) 33.40 33.20 33.00 32.90 32.70

BRL/PEN


Target Price (BRL) -10.3% -10.9% -11.4% -11.7% -12.2%

Stress Test (3/3)

BRL/MXN


Target Price (BRL) 34.40 33.50 33.00 32.60 32.10

BRL/MXN


Target Price (BRL) -7.7% -10.1% -11.4% -12.5% -13.8%

BRL/COP


Target Price (BRL) 33.40 33.20 33.00 32.90 32.70

BRL/COP


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%

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


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


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



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


EBITDA and EPS CAGR2013-2017


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


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*


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*


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



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


Natura loses bps though remains in the

leadership;

O Boticáro close the gap to second

place.

CF&T Markets

HAIR CARE


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


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


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


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


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



Single-Level Model

Natura Consultants

Relationship

Managers


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


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



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



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


Executive Board - 2013


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







• 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







• 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


Employees - 2013

Total 6655

Turnover Fired Hired

7.1% 488 460


5339

465197 126 245 232

Brazil Argentina Chile Peru Colombia France

Stock Participation - 2013

Natura Cosméticos S.A. %ON Main ShareholderIndividual

Participation


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


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


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


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


Main Suppliers

5.000 comercial partners

Terminated products

Inputs – 1.762

• 283 = 70%


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


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


Business Division - 2013


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


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


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


Target Price - Aésop

Mean BRL 0.59

Median BRL 0.59

Minimum BRL 0.52

Maximum BRL 0.66


Target Price - CFA Institute Insper.pdf · 30 35 40 45 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14...

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