Natura &Co posted another strong performance in the fourth quarter of 2019, with revenue growth in all three of its brands, Natura, The Body Shop and Aesop, and a 12.2% increase in adjusted EBITDA.
The fourth-quarter performance caps another transformational year for Natura &Co as it announced the acquisition of Avon Products, Inc. in May 2019, creating the world's fourth-largest pure play beauty group and a leader in the Direct-to-Consumer space, with a portfolio of iconic brands. That transaction officially closed on January 3, 2020.
Natura &Co's consolidated net revenue reached R$4.7 billion in Q4, up 7.3% on a reported basis and up 6.1% at constant currency. Adjusted EBITDA was R$816.7 million, up by a strong 12.2%. Underlying Operating Income (UOI), which excludes one-off items, was up in Q4 by a very strong 18.2%. Net income, at 14.3 million Reais, was impacted by Avon-related acquisition costs and taxes related to the creation of the Natura &Co Holding company.
In the full-year, consolidated net revenue grew 7.8% on a reported basis and 7.0% at constant currency to 14.4 billion Reais. Adjusted EBITDA was up 7.5% to 2.0 billion Reais and UOI increased 5.7%.
The quarter also saw Natura &Co make new advances in sustainability: Natura became the first beauty company in Brazil to obtain the Green Patent from INPI, the National Institute of Intellectual Property, for the use of residue assets from Brazil's biodiversity as production inputs, while The Body Shop won Ethical Corporation's Plastics Innovation award for its Community Fair Trade program.
Roberto Marques, Executive Chairman of Natura &Co, declared: "2019 was another year of profitable growth and transformation for Natura &Co, as we continued to make significant progress in building a multi-brand, multi-channel, purpose-driven group. Our results continue to demonstrate our ability to serve an ever-increasing number of customers across price points and distribution channels.
Natura posted further growth while evolving its Relationship Selling model and multichannel strategy; The Body Shop continued to successfully implement its ongoing transformation plan and expanded margin; and Aesop's business picked up strongly in the fourth quarter, resulting in another year of solid double-digit growth.
The year 2019 was of course marked by the announcement of our acquisition of Avon, which we successfully closed ahead of schedule just after the New Year. We continue to see major growth opportunities and potential to unlock significant synergies. With Avon we are creating a group even more committed to making positive social, economic and environmental impact, with a stronger voice to advocate for causes that matter to us. Together, we have started our journey to build not the best beauty company in the world, but the best beauty company FOR the world."
The Natura brand's adjusted net revenue in Brazil was up 3.0% in Q4, a very strong performance as it came against a very challenging comparable base. Productivity per consultant rose for the 13th consecutive quarter. Natura's digital platform now has over 900,000 users in Brazil and online sales grew in double-digits. Latam also saw growth of 10.6% in net revenue in Brazilian Reais and a stronger 28.9% in constant currency. Argentina posted a strong performance despite a challenging market environment, and Mexico and Colombia also delivered growth. EBITDA and margin increased in Q4 both in Brazil and in Latam. In the full year, sales were up 4.0% in Brazil and 13.5% in Latam (+23.9% in constant currency).
The Body Shop continues to make headway in its transformation plan. Net revenue was up 6.7% in Reais in Q4. Sales grew 5.4% in the UK, underscoring the brand's attractiveness in its biggest market. Adjusted EBITDA was up 7.8% with margin up 20 basis points. Full-year sales rose 6.3% and Adjusted EBITDA was up 15.5%, with margin up 90 basis points.
Aesop delivered an exceptional performance. Revenue increased 25.78% in Reais and 13.4% at constant currency. Like-for-like retail sales growth was 7% in the quarter, and Aesop opened seven new signature stores in the period, bringing the total to 247. EBITDA grew 44.8% in the quarter, with margin growing by 360 basis points. In the full year, sales rose 22.5% in Reais and 12.3% at constant currency, while EBITDA was up 40.0%, with margin expansion of 210 basis points.
Natura &Co's net-debt-to-EBITDA ratio stood at 2.41 times at year-end, decreasing from 2.71x in Q4-18, helped by solid cash-flow generation. The group is on track to achieve its target of reducing the company's leverage to the pre-The Body Shop acquisition level of 1.4 times by 2021.
About Natura &Co
Natura &Co is a global, purpose-driven, multi-channel and multi-brand cosmetics group which includes Avon, Natura, The Body Shop and Aesop. Natura &Co posted net revenues of R$ 13.4 billion in 2018. The four companies that form the group are committed to generating positive economic, social and environmental impact. For 130 years Avon has stood for women: providing innovative, quality beauty products which are primarily sold to women, through women. Founded in 1969, Natura is a Brazilian multinational in the cosmetics and personal care segment, leader in direct sales. Founded in 1976 in Brighton, England, by Anita Roddick, The Body Shop is a global beauty brand that seeks to make a positive difference in the world. The Australian beauty brand Aesop was established in 1987 with a quest to create a range of superlative products for skin, hair and the body.