merrill lynch global emerging markets conference - 1 merrill lynch global emerging markets...

Merrill Lynch Global Emerging Markets Conference - 1

Merrill Lynch

Global Emerging Markets Conference

June 6th – 8th 2006


Introduction

Strategy

Medium Term Goals

Financials

Agenda


Natura Cosméticos S.A.

Adherence to the “Novo Mercado” rules

CF&T target market : fragrances, make-up, skin care,

sun care and toiletries

Direct Sales Distribution

Operations in Brazil, Argentina, Chile, Peru, Mexico

and France


Natura Cosméticos S.A.


strategyBack to Agenda


Brand

ProductsInnovation

Our strategy

SalesChannel


Brand

Product design based on the Well being Well concept

Sustainable exploration of natural resources and creation

of value to all stakeholders

Transparency and factual communication building stronger

relationship with consultants and consumers

Premium products and high value

Essencial attributes of our brand


2005

71%

64%

2004

Source: Survey commissioned by Natura. Conducted with 1,200 people across different social classes in three large Brazilian cities (São Paulo, Porto Alegre and Recife).

70%

68%

2005

56%

49%

2nd in rank

27% 25%27%

Brand perception

Top of mind

Preference 43% 19%42%

Innovation

Quality


Life celebration


sustainable development

refills


Innovation

Strong investments in R&D -3% of net sales

Open Innovation – leverage of R&D investments

through a network of

research partners

Biodiversity as a research platform

Brazil has one of the richest biodiversities in the world:

22% of all species on Earth

Encompasses a wide range of different ecosystems:

“Amazônia” (the largest rain forest in the world),

“Pantanal” (the largest flooded plain in the world),

“Cerrado” (steppe-like vegetation),

“Caatinga” (desert-like vegetation),

“Atlantic Forest” (tropical forest) and

“South Fields” (prairie-like vegetation).


165

91

117

182

213

Number of New Products

Innovation

2001 2002 2003 2004 2005

Number of New Products


2001 2002 2003 2004 2005

44.9%43.5%

48.8%

63.2%

69.8%

Total Innovation Index (innovation+improvements)

Innovation

Merrill Lynch Global Emerging Markets Conference - 14Itau First Annual Brazil Conference

Channel

Consultants are provided with:

Marketing support

Flexible and fast logistics services

Full Portfolio available 100% of the time

Transparent rules with freedom of choice


CAGR (2001-2005) = 14.7%

(*) Number of consultants at Argentina, Brazil, Chile and Peru.

300321

375

433

519

+19.8% +17.7%

450

529

2001 2002 2003 2004 2005 1Q05 1Q06

Consolidated sales channel

Consolidated Number of Consultants* (thousand)


CAGR (2001-2005) = 9.7%

8.59.0

10.5

11.512.3

2.53 2.54

+0.3%

2001 2002 2003 2004 2005 1Q05 1Q06

Consultant’s productivity-Brazil

+6.6%

Productivity in Brazil (R$ thousand per average active consultant per year)

*source ABVED

12,288

7,262

1.7 X

Natura´s consultants 2005Direct sales except Natura 2005

Productivity in Brazil (R$ per average active consultant)


Consultants Turnover1 (Brazil)

(1) Number of consultants who stopped activity in relation to the average total consultants figures.

33%

30%28%

26%

2002 2003 2004 2005

Channel


Natura’s sustainability: some initiatives and results

EJA (Young and Adults Educacional Program)

Effective enrolments in 2005 66,600 students

Life Cycle Assessment (LCA)

Natura´s average environmental impact

20052004

10.110.6

100% of launched products under LCA packaging analysis

% of refills over total items sold

20052004

17.415.3

Sales of refills


2600 families

Oil estraction

Model manufacturing

2600 families

Oil extraction

Soap noodle manufacturing

Natura

Exotic oils (special soaps)

Palm oil

Start up in october/2006

•ROI = 19,6%

•Research and development based on

exotic oils

•Up to 2600 families benefited

•Present forested areas protected and

future recovering of degraded areas

Combination of innovation, sound

investment, strong social impact

and environmental protection

Soap noodle plant project (Pará State)

Natura’s sustainability: some initiatives and results


Medium term goalsBack to Agenda


Medium term goals

Thoroughly explore the growth potential in

Brazil

- investment in R&D up to 3.5% of net sales

1.

Gains of scale and savings from higher productivity transfered to:

- brand building- channel support

- marketing- IT projects


Brazilian target market

2001

2002

CAGR( 2000-2005)

2003

2004

Sources: IBGE and Sipatesp.(1) In real terms deflated by IPCA.

CFT market grows three times faster than GDP

2005

2.2% 7.4%

GDP growth

1.4%

Target market growth 1

4.7%

1.5% 5.7%

0.5% 4.6%

5.2% 12.3%

2.3% 9.7%

Growth drivers

Ageing population – CFT total consumers growing at 2,2% per year throught 2014

Increasing participation of women in workforce and income

Strong investments in R&D throughout CF&T industry

Migration of consumers to higher classes (D to C and C to B)


14.314.5

2001 2002

17.1

2003 2004

19.2

Natura’s Market Share – Target Market1 (%)

(1) Target market: Skin care, sunscreen, make-up, fragrances, hair care, shaving products and deodorants - excludes diapers, nail polishes, sanitary pads, hair dyes and oral hygiene. Source: Sipatesp/ ABHIPEC.

1B05

Market share CF&T target market - Brazil

2005

21.4

1B06

21.0

18.6


Complete expansion in the main markets in Latin America

- Venezuela – 2006

- Colombia – 2007

- Others Latin America countries – 2010

2.

Medium term goals

15

18

Natura’s market share 2005 = 0.3%

2005 2009E

Source: Euromonitor (Cosmetics and Toiletries).1. Real terms

CF&T market in Latin America (excluding Brazil) Retail prices - US$ billion

CAGR1 = 3.7%


Assess the potential of Natura’s opportunities in other CF&T markets

- Eastern Europe

- Western Europe and USA

Medium term goals

3.


FinancialsBack to Agenda


Consolidated Gross Revenues (R$ million)

Our size

CAGR (2001-2005) = 29.1%

1,168

1,411

1,910

2,540

3,244

+27.7%

611

723

+18.3%

1Q05 1Q062001 2002 2003 2004 2005


CAGR (2001-2005) = 42.7%

Our results

136

199

296

432

564

95113

+19.1%

(*) Natura Empreendimentos figures.

1Q05 1Q06

EBITDA (R$ million)

+30.8%

2001* 2002 2003 2004 2005


Our profitability

2001 2002 2003 2004 2005

16.6

20.1

22.2

24.424.7

1Q05 1Q06

22.322.1

-0.2pp

EBITDA Margin (%)


CAPEX (R$ million)

83

2004

112

2005

180

2006E 1Q05 1Q06

16

26

+62.8%

Itau First Annual Brazil Conference

CAPEX


9 11

CAPEX breakdown

R$ Million 2005 2006E

Manufacturing and Logistics 69 90

Facilities 3 42

IT 20 33

Others 11 4

Total 112 180

Vehicles

Capacity (million of units)

manufacturing

2005 290

370 345

320

separation

2006E


Cash flow consolidated figures

2005R$ million

Net income for the period

(+) Depreciation and amortization

397

482

(+) Other non-cash expenses

(=) Gross cash flow

(-) Working capital (-) CAPEX

314

(=) Free cash flow

Dividends + Interest on capital

% of free cash flow

95

44

42

35

112

336


Payout (%) 2004 2005

Net income 72 81

Free cash generation 107 95

2005

314

216

2004

+48.0%

Total Dividends and Interest on Capital, net (R$ million)

Dividends


This presentation contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the Natura's management. The words "anticipates", "wishes", "expects", "estimates", "intends", "forecasts", "plans", "predicts", "projects", "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties include, but are not limited to, the impact of competitive products and pricing, market acceptance of products, product transitions by the Company and its competitors, regulatory approval, currency fluctuations, production and supply difficulties, changes in product sales mix, and other risks. This presentation also includes pro-forma information prepared by the Company for information and reference purposes only, which has not been audited. Forward-looking statements speak only as of the date they are made, and the

Company does not undertake any obligation to update them in light of new information or future developments.

www.natura.net/investor


Glossary

Commercial cycles – 3 week period of sales where new products, campaigns

and promotions are developed.

Consultants – number of sales representatives who have placed at least one

order in the last 4 commercial cycles.

Active Consultans - number of sales representatives who have placed at least

one order in the last commercial cycle.

ABEVD – Brazilian direct sales association

Sipatesp/Abhipec – Brazilian syndicate of CF&T companies

IBGE – Official Brazilian statistics institute

IPCA – Official retail price index

merrill lynch global emerging markets conference - 1 merrill lynch global emerging markets...

Documents

brand slide

innovation quality slide

france slide

strategy sales channel

life celebration slide

freedom of choice slide

brand products innovation

innovation strong investments