Natura Cosmeticos : Earnings Releases 1Q17

Earnings Release 1Q17

EARNINGS RELEASE 1Q17

São Paulo, April 26, 2017 Nat ura Cosméticos

S.A. (BM&FBovespa: NATU3) report s today it s result s for t he first quarter of 2017 (1Q17). Except where st ated ot herwise, t he financial and operating information in t his release is present ed on a consolidated basis, in accordance wit h International Financial Reporting St andards (IFRS).

Contents

Int roduction 1

1. social and environmental highlights 5

2. economic and financial performance 8

3. revenue 9

4. innovat ion and products 10

5. gross margin 11

6. operating expenses 11

7. ot her operating income and expenses 12

8. EBITDA 12

9. net income (loss) 13

10. cash flow 14

11. indebtedness 15

12. NATU3 performance 16

13. conference call & webcast 17

14. invest or relat ions 17

15. balance sheet 18

16. income st atement 19

17. st atement of cash flows 20

18. glossary 22

19. Introduction

    In t he first quarter of 2017, consolidated gross revenue amounted t o R$2,395.9 million (+3.3% vs. 1Q16). Consolidat ed EBITDA was R$364.6 million (+68 .0 % vs. 1Q16), net income was R$189.0 million (up R$258.1 million vs. 1Q16) and free cash flow was R$16.5 million (compared t o cash burn of R$167.7 million in 1Q16).

    All operations post ed gross revenue growt h. In Brazil, t he second st raight quarter of posit ive growt h caut iously suggests t he st art of a stabilizat ion phase, t hough wit h volat ilit y expect ed in t he near t erm. In Lat am, we cont inue t o post healt hy growt h (23.3% in local currency), wit h t he results in Brazilian real affected by currency t ranslation.

    The period results also were affected by non- recurring effects in Brazil, in particular t he reversal of t he provision for PISand Cofins t axes payable (due to t he inclusion of ICMS tax in t he PISand Cofins calculat ion base) and t he accrual of new provisions for ot her t axes payable.

    Excluding t hese non- recurring effect s, consolidat ed EBITDA st ood at R$20 9.8 million, down 3.3% from 1Q16, predominately due t o tax impacts and higher market ing invest ment s in Brazil. Adjusted on t he same basis, net income was R$28.2 million, increasing R$97.3 million on t he prior period. These effects are shown below:

    Consolidated EBITDA (R$ million)

    Consolidated Net Income

    (R$ million)

    - 154,8

    12,1%

    - 154,8

    12,8 %

    364,6

    20 9,8 217,0

    189,0

    - 88,8 82,8

    1,6 %

    28 ,2

    - 4 ,1%

    - 69,1

    1Q17 as report ed

    Non- recurring effect s

    1Q17 wit hout non- recurring effect s

    1Q16

    1Q17 as

    EBITDA Effect Financial

    Income tax

    1Q17 wit hout

    1Q16

    EBITDA Margin

    report ed

    Result Effect

    effect

    non- recurring

    effect s

    Net Margin

    Our consolidated results are summarized below:

    Pro- Forma

    Consolidated Net Revenue	1.728,6	1.689,7	2,3
    % Share International Net Revenue	33,0 %	33,6%	(0 ,7) pp
    Brazil EBITDA	318,9	156,3	104,0
    % Brazil EBITDA Margin	27,5%	13,9%	13,6 pp

    R$ million 1Q17 1Q16 Change (%)

    Brazil Gross Revenue	1.682,8	1.611,7	4,4
    International Gross Revenue	713,2	70 8,3	0 ,7
    Consolidated Gross Revenue	2.395,9	2.320 ,0	3,3
    Brazil Net Revenue	1.159,0	1.121,7	3,3
    International Net Revenue	569,6	568,0	0 ,3

    International EBITDA	45,7	60 ,7	(24,7)
    % International EBITDA Margin	8,0 %	10 ,7%	(2,7) pp
    Consolidated EBITDA	364,6	217,0	68 ,0
    % Consolidated EBITDA Margin	21,1%	12,8%	8 ,2 pp
    Consolidated Net Income	189,0	(69,1)	(373,4)
    % Consolidated Net Margin	10 ,9%	(4,1)%	15,1pp
    Internal cash generation	291,6	1,6	n/a
    Free cash flow	16,5	(167,7)	109 ,8
    Net Debt / EBITDA	1,31	1,30	n/a

    Consolidat ed EBITDA in t he quarter, which amount ed t o R$364.6 million, was adversely affected by non- recurring it ems. Excluding t hese effects, EBITDA in t he quarter was R$20 9.8 million, 3.3% lower t han in 1Q16, wit h t his variation explained by:

    _foreign currency effects on t he Lat in America result of R$17.3 million;

    _int ensification of advert ising actions and sales t eam incentives and t raining;

    _higher effective t ax rate in Brazil, wit h an impact of R$12.2 million.

    - 69,1

    Consolidated Net Income

    (R$ million)

    - 8,4 0,8

    116,3

    -7,2 -4,2

    160,8

    189,0

    Consolidat ed net income grew in t he quart er due t o t he following fact ors:

    _Non- recurring effects of R$160 .8 million: in addit ion t o t he effect s on EBITDA described above (R$154.8 million), t here was an impact of R$88.8 million due t o t he reversal of int erest accrual on t ax provisions writ t en off, net of financial expenses on t he new provisions accrued, as well as income t ax expenses of R$82.8 million result ing from t he aforement ioned effects.

    _Net financial expenses, excluding non- recurring effects in t he amount of R$101.4 million in 1Q17, compared t o R$217.8 million in 1Q16. This reduct ion was due t o effects in 2016 t hat did not recur in 2017, such as t he mark- t o- market adjustment of inst ruments t o hedge foreign- denominat ed debt and t he effect from t he provision for acquiring a minorit y interest in Aesop.

    Cash generation in t he period st ood at R$16.5 million, compared t o cash burn of R$167.7 million in 1Q16, driven by higher net income, lower invent ory coverage in Brazil and Latam, longer average payment term, and t he lower capit al invest ment - CAPEX.