Did Natura (NTCO3) get it wrong when buying an Avon?  The result scares the market and melts stocks by 10%.

Did Natura (NTCO3) get it wrong when buying an Avon? The result scares the market and melts stocks by 10%.

Closed in 2020, for US$2 billion, the operation has created the world’s fourth largest cosmetic group. However, two years later, the market still has difficulties in integration

The temper nature (NTCO3) I reported another result that the market considered badwhile shares closed down by 10.36%, at 14.28 Brazilian riyals, while shares closed Ibovespa It increased by 2%.

The company announced last Thursday evening a loss of 766 million Brazilian reais, an increase of 99.5%, worse than expected.

according to EnergeticHowever, the cosmetics company achieved poor results in line with estimates.

Analysts remember that net revenue reflects an increasingly challenging scenario in the markets.

Gross margin was 63% (down 2.2 percentage points), impacted by higher commodity and freight prices, as well as unfavorable currency effects.

Avon, more problem than solution?

Analyzers Energetic Note that the brand operations temper nature In Latin America, the main positive points were and Avon International The process was most affected by the effects of declining purchasing power in Europe.

Closed in 2020, for US$2 billion, the operation has created the world’s fourth largest cosmetic group. However, two years later, the market is still struggling to integrate.

In Latin America, the brand saw its revenue fall 12.8%, impacted by lower volume.

In both Brazil and Latin America, it was a highlight of fashion and home, mainly due to the reopening of retail stores, which offered other options to the consumer.

in Avon Internationalnet revenue decreased 25.4% in Rais, mainly affected by the conflict in Ukraineand inflation in Europe And fewer reps.

The XP Investment He says that the conflict between Russia And the Ukraine It continues as a challenge to perform Avon International And the TBS.

a Itaú BBA He also rated the brand as a ‘challenge’.

Avon
As a determinant, analysts note that sales are 3% above estimates (albeit down 9% year over year) and growing on a consistent currency basis (Photo: Facebook/Avon)

Not everything was bad

In addition to the integration Avona temper nature He also faces problems in the economy. to me Bradesco BBIThe company reported results with volatility.

As a notable feature, analysts point to sales 3% above expectations (albeit down 9% year over year) and growing on a consistent currency basis (albeit very marginally) after four consecutive quarters of declines.

a EBITDA R$694 million (15% annual decrease) was 7% higher than estimates, driven by revenue
Stronger in Latin America and a significant reduction in corporate headquarters expenses.

“We can describe the results as a ‘ roller coaster ‘, because there are great positive advantages (with sales Natura Brazil Avon Brasil sales grew 14% higher 5% in the cosmetics category and Hispanic markets are growing well under constant exchange rates), but there are also some major disappointments (with gross margin contraction and EBITDA margin contraction) Painfully low by only 3% in TBS and Avon International weak, albeit with limited deterioration when we exclude Ukraine and Russia) ”, highlights.

Bad macro prevents better recommendation

to me Energetica temper nature It mentioned weak numbers that were already expected by the market, which reflects a difficult scenario that characterizes it inflation High, disruptions in the supply chain and uncertainties at the macroeconomic and geopolitical level, as well as structural problems of the holding company.

Although considered that Executive Director It should be able to improve its organizational structure in the long run, for the upcoming quarters, the company is still expected to face a difficult period in terms of profitability with the continuous increase in the prices of the company’s main inputs.

“Thus, due to such factors outside the company’s control, we still did not see a turning point in its results,” he says.

a Bradesco It highlights that the CEO’s comment that “margins will remain under pressure in the short term” is likely to cause some concern and perhaps lower consensus estimates.

While there are definitely new releases on Avon Braziland the temper nature Continuing to perform well as a brand across Latin America, we believe the results likely did not bring relief in estimates and the conviction of the second-half-22 recovery that investors have been looking for.

a BBI target price cut temper nature From 30 reais to 29 reais, with a neutral recommendation.

a Goldman They also reaffirmed his neutral recommendation, noting that although there are certain trends (Natura Brazil And the Aesop) and management’s focus on accountability and cost reduction is encouraging, “We also recognize that NTCO ​​is vulnerable to demand and margin challenges in key markets where brand positioning and pricing power may not be strong enough to offset these overall headwinds.”

Already BTG charter Recognizes the overall challenges of temper natureBut he considers that the ongoing digitization of sales representatives, cross-selling opportunities with Avon, and potential synergies could give the company a boost.

Recommendation to buy.

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a times money It publishes media articles of a journalistic nature. This publication does not constitute an investment recommendation.

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