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Credit Suisse2011 Brazil Equity Ideas ConferenceSao Paulo, Brazil | January, 2011
1969: A small laboratory and two passions: cosmetics and relationships.
1974: Direct Sales plataform
90‟s: Commitment with social/environmental responsibility
Current Moment:
Management model evolution
New growth cycle in LatAm
Increase leadership in Brazil
00‟s: Natura Ekos / Natura Cajamar / IPO / Follow On
Our History
2
ArgentinaEmployees: 329 (174 SF)
CNs: 54 thousand
Chile
Employees: 294 (132 SF)
CNs: 30 thousand
Peru
Employees: 281 (174 SF)
CNs: 46 thousand
Mexico
Employees: 341 (250 SF)
CNs: 36 thousand
Colombia
Employees: 172 (110 SF )
CNs: 18 thousand
Available Consultants (C12): 186 thousand
Employees: 1,465 (860 SF)
InternationalFrance
Employees: 48 (20 SF)
CNs: 2 thousand
7.4
3.0
1.4
1.7
2.9
Total CF&T MarketSource: Euromonitor 2009SF - Sales Force (3Q10)CNs – Natura Consultant (3Q10)
Where we are
3
28.4 BrazilEmployees: 4,821 (948 SF)
CNs: 984 thousand
Key Brands
Children Care
Body
Anti - Wrinkles
Deodorant
Hair
Men's grooming
Facial Make Up
Sunscreen
Fragrances
Oils
Soaps
Main Competitors
Johnson & Johnson Procter and Gamble
Avon NIVEA
Hypermarcas NIVEA
Avon O Boticário
Procter and Gamble Unilever
L‟Oreal Unilever
Johnson & Johnson NIVEA
Unilever Avon
O Boticário Avon
Colgate Unilever
Unilever Bertin4
Value Proposition
Social:› Wealth creation to consultants› R$ 60 million invested in CSR 1 in 2009› Benefits extended to extractives
communities
Economic:› Strong cash flow generation› Attractive growth and profitability› Consistent dividend payments
Environmental:› Carbon neutral operations › Utilization of refill packages› Sustainable extraction› Use of recycled and recyclable materials
6
Attractive market with differentiated growth profile
1 Corporate and Social Responsibility
Value Proposition
“Triple Bottom Line”
Channel Products
CorporateBehavior
Brand
7
Countries 2009 CAGR %„04- „09
United States 59 1.6%
Japan 40 0.7%
Brazil 28 14.1%
Mexico 7 7.4%
Argentina, Chile, Colombia and Peru
9 10.8%
Countries in which Natura operates 44 12.2%
World 351 5.1%
Size of CF&T market (in US$ billion)
Source: Euromonitor 2009
The markets in which Natura operates represent
12.5% of the global CF&T market and have a
growth rate of 2.4x that of the total market
Direct sales share in the CF&T Market
Region Direct Sales (%)
Latin America 27.3%
Brazil 24.4%
Argentina 23.8%
Chile 19.5%
Colombia 38.5%
Mexico 31.6%
Peru 28.0%
Asia Pacific 11.7%
North America 8.5%
Western Europe 3.2%
Australasia 9.2%
Africa / Middle East 2.3%
Source: Euromonitor 2009
Relevant market with differentiated growth
47 46
16 16
2008 2009
Natura 2nd place
8
Brand preference in Brazil
Source: Ipsos Brand Essence
CF&T brand by preference (%)
Ranking CompanyBrand value
(in R$ BN)
Mkt. Cap
(in R$ BN)
1º Petrobrás (Oil) 19.3 347.1
2º Bradesco (Bank) 14.9 103.2
3º Itaú Unibanco (Bank) 13.3 154.4
4º Banco do Brasil (Bank) 11.0 76.3
5º Natura (Cosmetics) 6.1 19.5
6º Skol (Beverages) 5.4 98.2
Most valuable brands among Brazilian public companies ¹
1 Source: BrandAnalytics and Millward Institute, 2009
2 Considers Ambev's Market Cap
Preferred Brand
Top 3 preferred
Intention purchase again
Purchased in last 6 months
Considers purchasing
Est. brand recognition 100%
92%
76%
72%
63%
46%
8
Source: Ipsos Brand Essence
719
850
1.034
2007 2008 2009
86
119
159
2007 2008 2009
632
731
875
2007 2008 2009
Channel strength
1 Source: Company, ABEVD (Brazilian Association of Direct Sales Companies)2 HAY Consultant annual opinion poll for consultants satisfaction
Available consultants (in thousand)
High productivity1
2.2 times higher than its peers
High satisfaction2
90% in 2009
Training583,000
consultants trained in 2009
Low turnover
36% on
average
› Consultants are Natura‟s first consumers
› Drive sales through personal relationships
› Channels disseminate Natura's values with consultants acting as agents of social transformation
Business model that generates
income and work
9
Brazil
3Q10: 984(+17%)
+19.8%
Int’l
3Q10: 186(+24% )
+33.9%
Total
3Q10: 1,170(+18%)
+21.8%
183
123113
88 75
56,7%
68,8% 67,6% 66,8% 67,0%
2007 2008 2009 9M09 9M10
Products and Innovation (R&D)
10
Innovation index¹ & new products
Source: Company
Note:1 Percentage of products launched in the last 24 months in
the company‟s revenues
* % of net revenue invested in R&D
2.6%*
Number of launches Innovation Index
› Products with functional, emotional and philosophical benefits
› Sustainable use of Brazilian biodiversity
› Open Innovation exceeded 50% of the projects
2.3%*
10
Natura EKOS
11
Natura Chronos
12
Natura Amó
13
Corporate behavior
15
»Evolution on relationship quality
»Systematic process of stakeholder engagement:
Consultants, employees, consumers, supplier communities and investors
»1,500 people involved
»Third company to be publicly listed on the Bovespa Novo Mercado
»First Latin American Company to adopt the 2001 Global Reporting Initiative (GRI)
»Part of ISE – Corporate Sustainability Index
»Best company 2009 (Exame); Most admired company 2010 (Carta Capital);
Sustainability Guide 2009 and 2010 (Exame)
15
16
On Going…
Brazilstill place for growth
Internationalmore local actionsnew growth cycle
PeopleLeadership and organization development
ProjectsLogistics for the future
17
On Going…
Brazilstill place for growth
Consistent market growth
GDP growth
Core market growth in real
terms
2002 2.7% 2.5%
2003 1.1% 7.0%
2004 5.7% 12.2%
2005 3.2% 9.6%
2006 3.8% 10.1%
2007 5.4% 8.3%
2008 5.1% 10.8%
2009 -0.2% 10.4%
CAGR ‘02- ‘09 3.4% 8.9%
2010E 7.5%
Core market growth in real terms vs. GDP in Brazil
Source: IBGE, Central Bank, Abihpec and FGV
18
11,1%
15,1%
42,4%
53,0%
16,4%
13,7%
30,2%
18,2%
2003 2004 2005 2006 2007 2008 2009
Brazil- Social Income Classes
Class AB Class C Class D Class E
› Increasing purchasing power of C and D income classes
› Greater participation of women in the labor market
› Cultural emphasis on personal and aesthetic treatments
Demand drivers in Brazil
> R$ 4,808 R$ 1,115 upto R$ 4,880
R$ 804 upto R$ 1,115
< R$ 804
Brazil
› 36 million people will move up to
Classes A,B and C (FGV) until 2020
› 20 million people left poverty since 2003
10,5
13,212,6
9,9
7,9
9,5
2,9
6,7
6,3 6,37,3
6,1
2003 2004 2005 2006 2007 2008 2009
Natura Unilever Avon
Procter & Gamble O Boticario Colgate
Natura leadership position in Brazil
Market Share Total CF&T (Euromonitor)(Percentage)
Natura Market Share per Segment
2009
13.2%
T: 8.9%
CF: 21.3%
Source: Euromonitor 2009
19
Brazil
¹ Number of households containing at least one product
Source: Kantar Painel
Still place for growth99,6
%
90,8
%
89,1
%
89,7
%
64,0
%
21,5
% 13,3
%
56,6
%
18,0
%
37,8
%
100,0
%
20
,7%
10
,3%
9,5
%
22
,6%
16
,5%
3,8
%
5,2
%
25
,7%
2,5
% 11
,3%
52
,4%
Market Natura
20
Brazil
Categories Penetration¹
Regional Units
SPC
21
Brazil
09-2010 Cycle Central Brazil
09-2010 CycleSão Paulo,
São Paulo State, South
Cover Inside cover Back cover
09-2010 Cycle North/Northeast
22
Brazil Regional initiatives: different catalogs
Business Units
Categories and
Strategies
Key brands
Main goals
Inspiration
OilsSoaps
EkosAmor América
Sève
FaceMakeup
Sunscreen
ChronosUNA
AquarelaFaces/Faces ZIPFotoequilíbrio
Body, Hair, Beard and Deodorants
TododiaErva Doce
Natura HomemPlant
- Competition with retail products
- Daily use products
-Technological innovation (protection, sensations)
- “Beauty” products
Give new meaning to routines
Reveal beautyAppreciate diversity
- Use of natural ingredients
- Innovation in sensations and
textures- Sustainable and
recyclable packaging
FragranceChildren‟s
Vertical Strategies
AmóHumorKaiak
Natura ÁguasNaturé
Mamãe e BebêCPV
-Fragrance and sample innovation
- Regionalized fragrances
Strengthen relationships
B DCA
23
24
On Going…
Internationalmore local actionsnew growth cycle
INTERNATIONAL OPERATING PROPOSITION
To be among the leading brands in direct CF&T sales
in all Latin America countries where we operate in and to be
recognized for its leadership in sustainability
and with profitability.
International
25
Colombia Mexico Chile Peru Argentina Latam
LATAM
26
International
Natura Ranking Evolution2008 -> 2009
10º-> 8º 11º-> 6º33º-> 23º 30º-> 22º 10º-> 9º
Total CFT Market (USD)
(global ranking)
3.049 (20º)
7.399 (11º)
1.744 (25º)
2.948 (21º)
1.421 (28º)
Main competitorsRetail
•P&G
•Unilever
•Colgate •Colgate
Main competitorsDirect sales
•Avon
•Jafra
•Fuller
•Avon
•Natura
•Tsu
•Avon
•Belcorp
•Natura
•Avon
•Jafra
•Fuller
•Belcorp
•Unique
•Avon
•
•P&G
Unilever
•Colgate
•L´Oréal
•P&G
•Unilever
•P&G
•L´Oréal
•Unilever
•Unilever
•P&G
CFT growth 01-09 (%) CAGR
7%9% 21%8% 8%
Sales Natura (at retail prices)¹(US$ Million)
7.43%
Share Natura 2009
LATAM
245,9
Total
Source: Euromonitor 2009
More local actions – new growth cycle
» More efficient portfolio management, including the creation of dedicated
business units (based in Buenos Aires)
» Evolution in the commercial model: stimulate economic, social and
environmental entrepreneurship + accelerate growth
» Increase in advertising /sample: push and pull (critical mass)
» Improvement in cost structure and carbon emissions, including local third party
manufacturing
» Development of local leadership
» Create an identity that distinguishes our corporate performance
27
International
Mexico, Colombia
2011
Argentina, Chile and Peru
2012
EVOLUTION IN THE COMMERCIAL MODEL
28
On Going…
PeopleLeadership and organization development
Inspiring leadership
• Agent of change in all aspects life
• Mobilizes people in favor of the common good
• Shares Natura‟s beliefs and values
• Consonance between talk and action
• Builds quality relationships
• Innovation capacity
• Global perspective
• Constantly seeks high performance
Engaged Leadership
• Committed to Natura‟s purpose based on personal projects
• Responsibility for decision-making
• New challenges
• Successors trainning
• Delivers triple bottom line results
• Personal and professional growth
Well being Being well
Natura’s Leadership Development Program:
Leadership office (“Foco”) creation
Carry out the chain of succession for critical positions
Increase the number of leaders developed in-house
Inspiring and engaged leadership development
Leadership DevelopmentPeople
29
30
On Going…
ProjectsLogistics for the future
› Expansion of Espaço Natura, Cajamar
› 4 new DCs in Brazil: Castanhal (PA), Uberlândia (MG), Curitiba (PR) and São Paulo, in addition to the expansion of DC in Canoas (RS)
› 2 new Hubs in Brazil (Belém and Salvador) and 3 abroad (Colombia, Chile and Mexico)
› Outsourced international production: Argentina, Colombia, Mexico
› Expansion of DCs in Argentina, Chile, Peru, Colombia and Mexico
Our Network in 2011
31
Logistics
Triple Bottom Line Results
599552
447
2007 2008 2009
53
55
60
2007 2008 2009
4,02
3,82
3,63
2007 2008 2009
Social and Environmental Results
33
CO2 emissions(CO2 emitted / Kg of
product sold)
Power consumption per product sold
(Kjoules / unit)
» Carbon Free since 2007
» Ekos 10th anniversary: Sustainable use of biodiversity and cultural heritage.
Engagement with 26 communities, benefiting 2,084 families
» Crer Para Ver program – improvement of brazilian public education: 7.1% of
the consultants joined the voluntary product selling
CSR Investments(R$ million)
1 Corporate and Social Responsibility
706
860
1.008
713
899
2007 2008 2009 9M09 9M10
Economics
34
Net Revenues (R$ million)
Source: Company
CAGR „07-„09 = 17.5%
EBITDA and Margin (R$ million)
CAGR „07-„09 = 19.5%
3.073
3.576
4.242
2.923
3.579
2007 2008 2009 9M09 9M10
23,0%
24,1%
23,8% 24,4%
25,1%
+ 22,5% 23,0%
24,1%
23,8% 24,4%
25,1%
0,2
0,1
0,2
2007 2008 2009
124
103
141
250
2007 2008 2009 2010E
415
500
598
89,0%
96,0%
87,0%
2007 2008 2009
Economics
Dividends paid and pay-out ratio(in R$ million)
CAGR „07-„09 = 20.0%
Capex
(in R$ million)
Source: Company
35
Leverage
(Net Debt/EBITDA)
(28)
(38)
(42)
(32)
(25)
2007 2008 2009 9M09 9M10
22
44
66
49
68
2007 2008 2009 9M09 9M10
(5)
(1)
9 10
5
2007 2008 2009 9M09 9M10
121
164
219
158
182
2007 2008 2009 9M09 9M10
Economics – International operations
Net revenues (R$ million)
EBITDA (R$ million)
Opera
tions in c
onsolidation (
R$ M
illion)
(A
rgentina, Chile, Peru
)
Opera
tions in im
ple
menta
tion (
R$ M
illion)
(Mexic
o a
nd C
olo
mbia
)
36
+ 30.4% in local currency
+ 73.6% in local currency
Because of its corporate behavior, the
quality of the relationships it establishes and
the quality of its products and services,
Natura will be an international brand,
identified with the community of people who
are committed to building a better world,
based on better relationships among
themselves, with others, with
nature of which they are part,
with the whole.
Vision
37
IR Team +55 11 4196-1421
www.natura.net/investor
Roberto Pedote
Helmut Bossert
Patricia Anson
Bruno Caloi
Back Up
39
Reason for beingOur reason for being is to create and sell products and services that promote well-
being/being well.
Well-beingis the harmonious, pleasant relationship of a person with
oneself, with one's body.
Being wellis the empathetic,
successful, and gratifying relationship of a person with others, with nature
and with the whole.
40
41
Beliefs
Life is a chain of relationships. Nothing in the universe exists
alone. Everything is interdependent.
We believe that valuing relationshipsis the foundation of an enormous
human revolution in the search for peace, solidarity, and life in all of its
manifestations.
Continuously striving for improvement
develops individuals, organizations,and society.
Commitment to the truthis the route to perfecting the quality
of relationships.
The greater the diversity,the greater the wealth and vitality of the
whole system.
The search for beauty, which is the genuine aspiration of
every human being, must be free of preconceived ideas and manipulation.
The company, a living organism, is adynamic set of relationships
Its value and longevity are connected to its ability to contribute to the evolution
of society.
41
Presti
ge
Massti
ge
Massiv
e
42Source: Booz & Company research, 2009
Democratic and aspirational brand
NATU3 Performance
43
P&L Natura
R$ million 3Q10 3Q09 9M10 9M09
NET REVENUES 1.281,2 1.054,9 3.579,2 2.922,8
Cost of sales (364,4) (314,2) (1.076,2) (877,6)
GROSS PROFIT 916,8 740,7 2.503,0 2.045,2
Operating expenses (608,6) (492,6) (1.655,3) (1.405,4)
Financial income (expenses), net (15,5) (18,0) (34,9) (30,8)
Other operating income (expenses), net (1,0) 4,8 (14,1) 5,4
INCOME BEFORE INCOME TAX
AND SOCIAL CONTRIBUTION 291,8 234,9 798,7 614,4
Income tax and social contribution (100,1) (44,9) (274,0) (117,3)
NET INCOME 191,7 190,1 524,7 497,1
44
R$ 4.95 /each3 unit package
R$ 2.94 each5 unit package
R$ 10.50 /each1 unit package
45
Commercial model - CNO
CNO ModelOld Model
GR
CN
CNCN
CN
CN
CN
CN
CN
CN
CNO
CNO CNO
CN
CNCN
GR
CN
CN
CN
1 CNO : up to 150 CNs
1 GR: 600 CNs
46
1 GR: up to 15 CNOs
1 GR: up to 2,250 CNsHired under CLT regulations
• Platform for channel growth
• Stronger and more productive relationship with our consultants
• Greater emphasis on training
Brazil (2010)
1 GR 12 CNOs
1 CNO 96 CNs
1 GR 1,112 CNs
By the end of the 13h cycle. (3Q10)
GR – Relationship ManagerCNO – Natura Super ConsultantCN – Natura s Consultant
Brazil
Argentina
Brazil
Chile
Peru
Mexico
Colombia
France
DC
Production
› Plants: 4 (3 Cajamar + Belem)› Hubs: 1› Distribution Centers: 11› Delivery Points: 1 million› Billed units: 384 million› Total km traveled per year: 1.6 million› Total orders/year: 12.8 million› SKUS: 1,200› Employees: 6,260› Raw material and packaging suppliers: 200› Outsourced (co-producers): 20
*Data as of 2009 – source: Natura Annual Report 47
Our current networkLogistics
48
Our network in 2011Logistics
Production
International Production
Hubs
Argentina
Brazil
Chile
Peru
Mexico
Colombia
França
› Product Availability
› Orders 48-hour
› Orders 24-hour
› Consultant Cycle (days)
› Consumer Cycle (days)
› Cost per Order (R$/order)
› Non-Conformities
› OEE
› PPM
› Supply Productivity
› Gross Margin
› Planning Cycle
› Supplier Satisfaction
› NC/EC Satisfaction
› Operational Climate
› Inventories (%NR)
› Suppliers Terms (%NR)
› Accidents w/ absence
› Innovation OTIF
› Communities
48
Order Cycle21 days
Distribution1,170 thousants
points of sale
Customer ServiceCAN, SNAC, Credit and Collection
SeparationOrder picking
400 million units year
ProductionPlants
Suppliers› Botanic assets extracted
sustainably
›66% of the portfolio is renewed in less
than 2 years
›Promotions: around 50% of the sales
volume
›Leverage of the promotional mix: ›8 to 15 times
Order Cycle
49
Logistics
40%
Free FloatOwners
60%
50
O W N E R S H I P
S T R U C T U R E
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