Q1 2025 Natura &Co Holding SA Earnings Call
I'll start with a slide on revenue in Latin America. The first quarter of 'twenty. Five we reported then revenue growth up 12, 2% year on year in constant currency and four 1% when we exclude Argentina.
The mature brand in Brazil posted revenue growth of eight 2%, reflecting the better mix and price increases that were partially offset by a slight drop in the channel across the region. It is worth mentioning that despite this drop productivity March has improved and led revenues too.
Mid teens growth in demand and Hispanic America than that to the brand grew by 38, 4% or mid teens, when we exclude Argentina. It's also worth noting that this growth is similar to that filed in <unk>.
Q4 2024.
Even with the change from whats your level two by level that took place over the first quarter of 2025 in new Mexico.
I also mean, Max so they're dropping their channel due to the change in our commercial model was offset by an increase in productivity on the part of our consultants, which led to a growth rate in the first quarter vis vis fourth quarter of 'twenty for the Avon brand fell by 12% in Brazil.
Spike the positive evolution.
In the fragrance category and the brands performance was impacted by the lower number of launches in the period.
Especially in the makeup category.
Speaker Change: Hispanic America Avon.
Speaker Change: An improvement in performance in Argentina, Peru, and Mexico.
Speaker Change: Spite, Brazil.
Speaker Change: Persistent challenges in managing the combined portfolio across both brands through an Avon and in this quarter Avon grew by top line, 4% in the region, but fell by 6.4% when we exclude Argentina.
Speaker Change: Home and style category continued to fall year on year.
Speaker Change: Although less or to a lesser extent than the drop seen in the fourth quarter up in 'twenty for the drop.
Speaker Change: Was 15, 9% in Brazil, and 52% of Hispanic America.
Speaker Change: Turning to slide number six we see that lead times recurring EBITDA margin was 50% in this quarter, including 100 times.
Speaker Change: B piece on nonrecurring items.
Speaker Change: As already mentioned by John followed that show significant recovery when compared to Q4 'twenty four.
Speaker Change: One about 50 bps when compared year on year yeah.
Speaker Change: EBITDA margin for Q1 reflected unimproved went up 90 bps in gross margin driven by the expansion in wave two countries and the price increase implemented at the beginning of the year inhibition to that there was an improvement of 80 bps in admin expenses result of the operating leverage which more than offset the increase any better.
Speaker Change: Once in the period.
Speaker Change: On the other hand, there was a pressure, but I didn't think the bps on sales marketing and logistics expenses, mainly due to investments in marketing and in sales with the progress of digital products to support the channel, which led to an attenuation of logistical efficiencies obtained especially in Brazil and Argentina.
Speaker Change: No.
Speaker Change: Moving now to slide number seven which compares the group's revenue and EBITDA. It is worth mentioning that last year. The operation of Avon International was accounted for as a discontinued operation until December four when it was re consolidated along these lines a year on year comparisons polluted by the inclusion.
Speaker Change: One of our metrics.
Speaker Change: Avon International in the first quarter of the year, but not in Q4 of 24.
Speaker Change: Better year on year comparison, we have included a pro forma stay.
Speaker Change: Statement with a complete information, which can be found in the attachment for the press release, we're turning to the final numbers in Q1 2025 groups revenues totaled $6 7 billion. These are the 4.6 billion posted in the same period of 24. The results reflects the growth of 15, 5% in <unk> and <unk>.
Speaker Change: Well at times.
Speaker Change: In addition through a contribution from Avon International which reached one 4 billion in the quarter.
Speaker Change: Looking at the profitability, we see that the recurring EBITDA margin was 11, 8% in the quarter.
Speaker Change: Which led to a drop of 140 bps year on year, which can be explained by the dilution of margins from the Reconsolidation of Avon International.
Speaker Change: The other half as I mentioned before on the previous slide Latam showed an improvement in profitability why are they holding reduce expenses by 55% year on year wage.
Speaker Change: Which reflects the final stages of the simplification journey on the corporate structure and also takes into account the phase out of $11 million, which is expected to impact the next quarter.
On slide eight you can see the breakdown of our last line the bottom line in the first quarter, playing 35, we posted a loss of 151 million, reflecting recurring EBITDA of 790 million, which was more than offset by transformation expenses of 119 million.
Speaker Change: Financial expenses of 251 million and also tax expenses of 160 million BRL, It's worth noting that our financial result was impacted by the group's higher leverage, which we'll see later and my husband and 77 million in this quarter due to the mark to market effects.
Speaker Change: Noncash other derivatives that hedge the principal of our debt in U S dollars 2028 bonds and 2029 bonds. In addition tax expenses were impacted by.
Speaker Change: The expectation of a profit projected for the year, which generates a greater impact in <unk>.
Speaker Change: Seasonally weaker periods, which was the case F Q1.
Speaker Change: As you can see in the graph excluding EBITDA adjustments.
Speaker Change: The P P E and the mark to market noncash of our derivatives.
Net income for the quarter would have been 264 million.
Speaker Change: On slide number nine we present, our cash flow, which was negative by 675 million in the quarter.
Excluding the effects of interest on debt and foreign exchange, we calculated the firm's cash flow, which was a cash outflow of 531 million in Q1. This cash outflow reflects a gas generation at Latam of 185 million as disclosed and cosmetic financial statements. Despite.
Speaker Change: The seasonality.
Speaker Change: Q1. It also takes into account the outflow of 91 million.
Speaker Change: Holdings, and strategic projects and the consumption of Avon International which had yet another quarter with pressured margins as I have already explained.
Speaker Change: Looking at it on a consolidated basis, the 501 billion burn in the period is mostly explained by the reported EBITDA of 595 million in cash outflows of 437 million.
Speaker Change: Operating working capital and 574 million from <unk>.
Speaker Change: Other.
Speaker Change: Assets and liabilities.
Speaker Change: Slide number 10 shows the evolution of our debt. We ended Q1 with a cash balance of $3 7 billion and a net debt of $2 9 billion, bringing our net debt EBITDA ratio to 143 times.
Speaker Change: Our net that varied by approximately $500 million over the first quarter and reflects the negative free cash flow of 675 million that I just mentioned.
Speaker Change: In addition, it includes the buyback program with accounted for an outflow of $60 million during the quarter and a noncash benefit of around $250 million and our total debt.
Speaker Change: Due to the depreciation of the U S dollar against the reality in the period I will now turn the floor back over to Jerome Powell for his final remarks over to you is wrong.
Speaker Change: Got it.
Jerome Powell: To conclude today's presentation I emphasize our main messages on slide 12.
Jerome Powell: Number one we plan to complete the wave two implementation process in Mexico in Q2 this year.
Jerome Powell: In Argentina in Q3.
Jerome Powell: We will then conclude the transformation cost cycle.
Jerome Powell: Which in 2020 five will not exceed the amount incur.
Jerome Powell: Incurred in 2024.
Jerome Powell: Furthermore, I reiterate our commitment and confidence in our journey of expanding recurring margins year over year.
Jerome Powell: Wave two efficiencies will be partially reinvested in marketing innovation and strategic projects.
Jerome Powell: But more evenly throughout the year.
To reduce.
Jerome Powell: Quarter to quarter volatility.
Our second highlight refers to the simplification process.
Jerome Powell: Which remains a priority for the company.
Jerome Powell: We're moving fast with the restructuring of Avon International while our dedicated team continues to explore all strategic alternatives for this business unit.
Jerome Powell: And finally, the last message I would like to leave with you concerns.
Jerome Powell: The group's management adjustments.
Fabio: As Fabio.
Fabio: <unk> always pointed out we remain absolutely rigorous in capital allocation and in pursuing higher returns from our investments Amy or sustainable growth and value creation for our shareholders. That's it for me.
Fabio: Thank you very much and we will now have the Q&A session.
Fabio: Okay.
Fabio: We will now begin the Q&A session.
Fabio: Ask a question click the Q&A icon at the bottom of your screen and type your questions to enter the queue.
Fabio: <unk> announced a request to activate your microphone will appear on the screen and you must then enable you Mike to ask your question.
Fabio: Question.
Speaker Change: We kindly ask that all questions be asked at once.
Fabio: Don't do we need.
Dan: Thank you Dan.
Dan: Yeah lot Hager from <unk> asks.
Dan: The first question.
Dan: You may now enable the mic.
Speaker Change: Good morning. Thank you for taking my question I have two.
Speaker Change: Gross margin dynamics, if remains consistent but you've pointed out a couple of pressures.
Speaker Change: No one and then we.
Speaker Change: We've too.
Speaker Change: That would provide important gains market mix and other retailers pointed out that the environment is more favorable for price increases.
Speaker Change: What's your take.
Speaker Change: More price.
Speaker Change: <unk> more price increases, but how can we consider that.
Speaker Change: Gross margin increased from now on my second question is about wave two.
Speaker Change: The Mexico dynamics.
Speaker Change: Surprised me.
Speaker Change: Because we are now moving away from the multi level.
Speaker Change: Model.
Speaker Change: You have been able to mitigate.
Speaker Change: Those negative impacts.
Speaker Change: Well, having said that.
Speaker Change: There should be good to win.
Speaker Change: For wave two which connects to my first question.
Speaker Change: Can you give us an update on the.
Speaker Change: How the wave two in Mexico is playing out there.
Speaker Change: This assembly.
Speaker Change: The multi level system.
Speaker Change: What's the productivity of consultants are alike.
Speaker Change: Better distribution as a result, thank you.
Speaker Change: Good morning, Toni This is your own Paolo.
Speaker Change: Yes.
Speaker Change: The vacuum assist Sylvia and I will be fielding your questions. Let me address the part of your question related to Mexico.
Speaker Change: Now, let me share that with all of you.
Today may 13th we kick off the commercial integration.
Speaker Change: All migrations the systems.
Speaker Change: Adaptational everything has been.
Speaker Change: Smooth.
Speaker Change: No.
Speaker Change: Bumps along the road.
Speaker Change: And today, we have the kickoff of the combined commercial operation in Mexico.
Speaker Change: I can't address what happened in Natera.
Speaker Change: When we disassembled and multi level system. They have been productivity gains we are very.
Speaker Change: Pleased.
Speaker Change: With how the consultants come to this integration movement.
Speaker Change: Outlook is very promising I cannot address the combined productivity.
Speaker Change: We're at a very early stage in that sense.
Speaker Change: Okay.
Speaker Change: But actually it's better than expected if I can put it that way.
Speaker Change: Yeah.
Thank you.
Speaker Change: Q2, yes.
Speaker Change: Whoa.
Speaker Change: Reflect those changes before the integration.
Speaker Change: On the other hand further down the road.
Speaker Change: Mexico provides the best gross margin gains opportunities.
Speaker Change: Once the transition is completed.
Speaker Change: <unk> adjustments will have to be made but there will be opportunities for.
Speaker Change: Gross margin gains in Mexico.
Speaker Change: The last one will be in Argentina.
Speaker Change: We're still working on the preparation in Q2, but the integration will happen in the following quarter.
Speaker Change: Over to Sylvia to talk about the gross margin dynamics.
Sylvia: Good morning, Denny. Thank you for your question.
Sylvia: Let me now address the gross margin dynamics Q1, it was healthy we've expanded margins in all countries once again, emphasizing the potential of wave two.
Sylvia: Argentina had a slightly lower margin for the region fewer distortions than in previous quarters.
Sylvia: At a smaller scale there was a price increase the fact that anticipated the cost impact in working capital, which happens every year and then throughout the year addressing your question about prices, we will be making adjustments as they're needed depending on the market dynamics.
Sylvia: And looking forward in Q2 will may have impact a part of the costs.
Sylvia: Or the cost of Cogs.
Sylvia: And the impacts when we combine the businesses in Argentina and Mexico.
Sylvia: On the other hand.
Sylvia:
Sylvia: I'm, sorry on top of Argentina, and Mexico, There is another impact for Q2.
Sylvia: Which is the seasonality for the mother day of the mother's day campaign.
Sylvia: Yes.
Sylvia: Again Cogs cost.
Sylvia: Impacts of a combination of Argentina, and Mexico, and the seasonality for the mother's day campaign and the mix of full prisons.
Sylvia: On the more favorable front will still be reaping the benefits of wave two.
Sylvia: And Theres, a favorable brand mix for in a tumor which contributes to the gross margin dynamics, but the most important topic here.
Sylvia: Is that despite all of the volatility in gross margin.
Sylvia: Our goal is to reduce the volatility of EBITDA margins throughout the quarter. This is our number one goal.
Sylvia: Still that's very clear.
Sylvia: Just a follow up for you one question, let me go back.
As to the distribution of productivity of consultants and mix in Mexico.
Sylvia: <unk> integration they were very concentrated in very low productivity numbers may be distorted to the left.
Sylvia: In other regions is more normal have you seen that change happen.
Sylvia: Do you believe that will happen that can be even more productive as they transition.
There has been an increasing productivity, which can be seen in this first quarter. This assembly you started back in December so we have a whole quarter, where you can already see an increase in productivity on average across our consultants the experience in other countries.
Sylvia: Leads us to believe that productivity tends to grow. It's also true that the combined channel will shrink a bit just as a reminder.
Sylvia: But the range. The short answer is yes. Your conclusion is correct then Ella. Thank you. Thank you so much.
Speaker Change: Moving on our next question comes from Ruben Couto from Santander.
Sylvia: Cuban.
Speaker Change: They proceed.
Speaker Change: Good morning, everyone.
Speaker Change: My question for about Avon, Brazil, It became quite clear.
Speaker Change: Come on line in fact.
Speaker Change: The makeup launches in the quarter, but can you help us understand a little bit the trend you expect to see going forward throughout the year.
Speaker Change: Based on the relief.
Speaker Change: You mentioned that.
Speaker Change: The year has started at a slow pace until new launches materialize.
Speaker Change: But can we expect more stability in terms of revenue or should we expect further drops.
Speaker Change: As we've seen in the first quarter.
Speaker Change: And along the same lines as for makeup do you see any shift or a higher consumption of natural brands make up as opposed to Avon or you expect to lose share to other brands.
Speaker Change: Yes.
Speaker Change: Leading to a change in the basket.
Speaker Change: That consultants work with.
Speaker Change: Thank you.
Speaker Change: Hi, Reuben.
Speaker Change: Cool.
And it is clear now we can we have not been able to resume growth and the Avon brand, which is our objective of course we.
Speaker Change: We have also prioritized profitability and cash generation for Avon.
Speaker Change: But still.
Speaker Change: We would like.
Speaker Change: Ooh to see this brand growing again.
Speaker Change: Q1 here in Brazil.
Speaker Change: Okay.
Speaker Change: So that was what.
Speaker Change: Okay.
Speaker Change: Pressure because the channel was less active which affects both brands of course, but.
Speaker Change: In essence.
Speaker Change: <unk> came from a more modest innovation pipeline, if you will after a tough and we.
Speaker Change: Started managing Dave on brand in Latin America.
Speaker Change: Last last quarter Q4, basically that's something that we really got our hands down and we are now.
Speaker Change: Addressing.
Speaker Change: The portfolio base.
Speaker Change: Opportunities in B C.
Speaker Change: And that does not happen overnight.
Speaker Change: So I cannot.
Speaker Change: Now that we do have expectation in terms of change.
Speaker Change: Of course that will have an overnight no but that is our objective and that's what I can tell you.
Speaker Change: Okay.
Speaker Change: And this was especially felt and makeup fragrances performed well, but makeup products, which is Avon sketch call fell.
Speaker Change: Fell short.
Speaker Change: Let's go to see a C suite between Avon and maintain a pool that because they have very different price points Avon performed well Avon to makeup also performed well but.
Speaker Change: There is no change that there was a switch across brands when you look at the market.
Speaker Change: Thank you John no problem. Thank you.
Speaker Change: Our next.
Speaker Change: Question comes from we slipped iguana some V P J.
Speaker Change: Thank you.
Speaker Change: You make every answer.
Speaker Change: Good morning, everyone.
Speaker Change: A question about the free cash flow if you could tell us how you see the company's working capital policy for the coming quarters.
Speaker Change: This was a factor that for this specific quarter was it represents a pressure on cash generation from the part of your funding of consultants, but also on the <unk>.
Speaker Change: The inventory management, you did mentioned that March improved or not too long in Brazil. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Hi, Louise. Thank you for your question. This is Sylvia as far their working capital dynamics for Latam.
Speaker Change: For the year.
Speaker Change: We expect to see variations across the receivables accounts.
Speaker Change: To monitor market moves in line with our credit management, we do not expect other relevant moves in that space and this quarter. We had we saw a better performance out of stock management.
Speaker Change: Right.
Speaker Change: And our commitment is to improve cash conversion throughout the year. That's the journey, we have embarked on for the for the coming quarters.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Sorry, just as a compliment and important to say that now in Q1, which is a seasonal quarter. We did generate cash for a long time just to be sure.
Speaker Change: <unk> no subprime lending on.
Speaker Change: <unk> from Goldman Sachs is up next.
Speaker Change: You may enable you Mike.
Speaker Change: Good morning folks. Thank you for taking my question. My question is about gross margin and I have another question.
Speaker Change: Does it make sense that the smaller gains <unk> seen in Q4.
Speaker Change: Remained this quarter ranked.
Speaker Change: When should you go for.
Speaker Change: For margin.
Speaker Change: What is the impact year over year.
Speaker Change: This has been offset by price increases and a better.
Speaker Change: Brand mix is this the dynamics.
Speaker Change: I just want to make sure we could you understood.
Speaker Change: My other question is about Avon International.
Speaker Change: Cash burn was relevant in Q1.
Speaker Change: You've announced that you are taking measures to cut costs.
Speaker Change: How much do you expect to cut down.
Speaker Change: After these measures.
Speaker Change: Are you going to do even more.
Speaker Change: Despite all the changes you've made in the past.
Speaker Change: It's important to know what the topline impact should be in that case.
Speaker Change: Yes.
Speaker Change: Can you.
Speaker Change: Rephrase your first question please.
Speaker Change: Lewis, though this is a rush it I'm sorry.
Speaker Change: My question is about it's a follow up from Denny's first question gross margin.
Speaker Change: Q4, there was a relevant impact in inflationary gains in Argentina.
Speaker Change: Due to the inventory the appreciated from the moment you purchased it and then when you so did we.
Speaker Change: We discussed it at length.
Speaker Change: This gains dynamics is no longer true this quarter is that right.
Speaker Change: And the improvement of gross margins per se.
Speaker Change: Especially sequentially is that all of them.
Speaker Change: Came from price increases in Q.
Speaker Change: One does that make sense is that right.
Speaker Change: Yeah.
Speaker Change: Thank you now now it's clear.
Speaker Change: Here's what happened in Argentina in this quarter.
Speaker Change: We've seen economic scenario in which inflation and FX are walking hand in hand, there contributes.
Speaker Change: In our capacity to better manage prices to offset these impacts.
Speaker Change: And we expect if this scenario remains the same.
Speaker Change: Argentina will be both.
Speaker Change: <unk>.
Speaker Change: Gross margins are little below that of the region Inc.
Speaker Change: In Q1, more specifically, let me point out that we had a benefit in margins there.
Speaker Change: So there we do not have a tax incurred that would impact the same quarter of last year.
Speaker Change: Bob.
Bob: Thank you that was clear.
Speaker Change: Okay.
Speaker Change: Let me address the Internet Avon International Pardon me.
Speaker Change: Feel free to jump in at any time to you.
Speaker Change: Well, so when you see all of the restructuring.
Speaker Change: Started at the chapter 11 process that was the first and most important step.
Speaker Change: In the restructuring process when we came back from it.
Speaker Change: We started.
Speaker Change: Reducing costs very aggressively as we said.
Speaker Change: Yes.
Speaker Change: On a midterm basis, it's not going to happen overnight, we would do away with cash burn there are implementation costs no doubt about it.
Speaker Change: Of course when you.
Speaker Change: Layoff people there are severance related costs I cannot give you any ballpark figure at this point in time.
Speaker Change: But on a midterm basis, the operation will no longer consume cash.
Speaker Change: Perfect. Thank you very much.
Speaker Change: No.
Speaker Change: Joseph Giordano from JP Morgan is going to ask the next question.
Speaker Change: You May now proceed Hello, good morning, Jerome Paolo Sylvia.
Speaker Change: I'd like to address two topics about to restructuring, but looking at the holding point of view.
Speaker Change: When will those gains will phase out throughout the year.
Speaker Change: What would be the most.
Speaker Change:
Speaker Change: Can you hear me.
Speaker Change: Oh geez.
Speaker Change: Yes, yes, we can hear you.
Speaker Change: My question is about the holding.
Speaker Change: What would the phasing of those gains from the incorporation of the holding taking into account expenses as well and tax benefits.
Speaker Change: What can you unlock what kind of potential could you unlock in terms of premium.
Speaker Change: Or accrued.
Speaker Change: Losses, and the second question is what the stage.
Speaker Change: Of the negotiations.
Speaker Change: Okay.
Speaker Change: Of the possible spin off.
Speaker Change: Or a more definitive.
Speaker Change: Definitive solution for Avon International Youre working on to reduce costs very intensively, but what would be a possible spinoff or sale of the company. If you can address that please.
Speaker Change: Sure.
Joseph Giordano: Hi, Joseph spin off let.
Speaker Change: Let me address this spinoff.
Speaker Change: Cannot comment on beyond what we've already said before.
Speaker Change: In our release.
Speaker Change: The separation of those assets is a strategic decision that has been pointed out before it is our priority there is a dedicated team.
Speaker Change: Considering these alternatives.
Fabio: Of course, I monitor it but fabio.
Fabio: Is closely overlooking.
Fabio: This process.
Fabio: I cannot give you a definite.
Fabio: Our response as.
Fabio: To win and how it will happen.
Tony: This is Tony this is what I can say for now.
Tony: Sylvia will address the holding costs.
Speaker Change: Joseph for the question Scott.
Speaker Change: As to the simplification process for the holding.
The process is moving on according to plan and we expect to completed in Q3 there.
Speaker Change: There is an important step which is the reverse incorporation of holding within cosmetics.
Speaker Change: It will allow us to have an additional simplification for both structures and processes.
Speaker Change: And about the other question you asked.
Speaker Change: After the incorporation.
Speaker Change: We do have a profitable company cosmetic goes that's a profitable this will be the new holding company.
Speaker Change: And there are possibilities to capture several benefits.
Speaker Change: Yeah.
Speaker Change: We can make.
Speaker Change: Future dividend payments and on top of that will be.
Speaker Change: Pursuing an optimization of capital structure, and considering opportunities to move financial assets to <unk>.
Speaker Change: Capture those benefits.
Speaker Change: You very much.
Speaker Change: Our next question comes from Mr. Soares from Citibank.
Speaker Change: But you may carry on.
Speaker Change: Okay. That's helpful.
Speaker Change: Hello can you hear me, yes, okay.
Speaker Change: I have two quick follow ups number one.
Speaker Change: You did mention that Latam is now generating cash and it's in a quarter, which is seeing a seasonably weaker so how can we.
Speaker Change: I understand there's seasonality in terms of cash generation for all of time should we expect important evolutions given.
Speaker Change: The number of important opportunities youre not capturing.
Speaker Change: How do you see this potential improvement in cash conversion and JP. When you talk about in the mid term, having international Avon not burning cash anymore.
Speaker Change: You did mention <unk>.
Speaker Change: Jordan just mines being done across Avon International can we see some change this year or should we expect major changes in the mid to the long run.
Speaker Change: What's the timeline for those changes.
Speaker Change: And at what pace can we expect those changes to unfolds. Thank you.
Speaker Change: Hello.
Speaker Change: From I'm going to start by the last one what we expect to see is that the pace of cash consumption cash burn.
Speaker Change: I expect it to drop until the angle there, we want to see that number going down.
Speaker Change: Our cash burn.
Speaker Change: It's not very likely to break it down to zero. This year of course, but we expect to see it.
Speaker Change: Dropping significantly this year Sylvia over to you. Thank.
Sylvia: Thank you joelle.
Sylvia: About gas generation fall Etame in Q1.
Sylvia: We had a very good performance in terms of cash generation, because everybody larger inflow of receivables due to a strong Christmas campaign, we had and also due to a better management of our stock.
Sylvia: These were offset by payments by supplier and by also taxes looking forward.
Sylvia: Our commitment as I mentioned is to improve gas generation into your but we couldnt have some volatility going forward.
Sylvia: Throughout the quarters, especially in what's your first two.
Sylvia: Transformation moves in Mexico and Argentina.
Sylvia: Wage my end up are weighing down on the coming quarters in terms of cost of transformation, but.
Sylvia: As you know.
Sylvia: Those will activate several other combinations coming out of the combination.
Speaker Change: Okay, you did mention something important feel there in terms of transformation costs.
Speaker Change: Should we see this as.
Speaker Change: S going Dow phasing out in the second half, what's the timing for that transformation costs to diminish but transformation cost.
Speaker Change: There continue to be around us for the coming quarters.
Speaker Change: What we did was to have a better balance across quarters in other words, we're not going to see any concentration of those costs as we saw in Q4.
Speaker Change: The amount will not go above that close in 2024 and it should be over this year and the coming quarters. Okay. Thank you.
Speaker Change: Okay.
Rob: Thank you Rob for it for it from Bank of America.
Rob: Sure.
Speaker Change: Except the Mic now please and you May proceed.
Speaker Change: Pablo Silvia, Alex you've got to put that necessity.
Speaker Change: Good morning, hopefully them. Thank you.
Speaker Change: What was the size of the retraction.
Speaker Change: Got it and in Brazil, and how much of the inventories when you finance buying it for and how long do you still need to bring that to a normal level.
Speaker Change: And he also mentioned that March sales went up by 15% in Brazil or mid teens I believe.
Speaker Change: Is that a fair comparison when we include Easter.
Speaker Change: And how are sales in April and early may Thank you.
Speaker Change: Tom can you. Please repeat the beginning of your first question sure.
Speaker Change: What was the magnitude of the slowdown in crowded in Brazil, or consultants for consultants and what's the.
Speaker Change: The size of the inventory being financed by you at this point.
Speaker Change: Okay.
Speaker Change: We started to slow down on credit.
Speaker Change: In late October early November last year.
Speaker Change: Looking to adjust our policies to keep default levels under control.
Speaker Change: Our numbers are quite low in terms of default.
Speaker Change: Very comfortable level I have to say.
Speaker Change: As we restricted credit.
Speaker Change: Of course that also reduces the number of active consultants.
Speaker Change: Yes.
Speaker Change: As well as even though only too well so part of that reduction of that slow down.
Speaker Change: When you see a drop in the number of consultants and Brazil year on year consultant numbers.
Speaker Change: Basically.
Speaker Change: Half of that drop which was slightly which was relatively small right.
Speaker Change: The small fluctuations after stabilization, but half of that drop and consultants is due to a credit restriction move okay restriction move.
Speaker Change: In terms of inventory.
Speaker Change: Our network of consultants has a very limited capacity to increase inventory.
Speaker Change: Yes.
Speaker Change: That's really the the larger ones.
Speaker Change: I always try to find opportunities to put our malls to buy goods products acquire good products and good terms and then sell later, but that's a very small number of consultants believe they're really big once that's why when we have <unk>.
Speaker Change: Even a slow a small a small slowdown in the economy consumption levels. This will affect the activity that accounts for about the other half.
Speaker Change: Of that dropped and active consultants, but because that capacity is very limited.
Speaker Change: The dynamics is quickly restore it.
Speaker Change: That's why in March as I said, we see the dynamic or dynamics resuming prior levels.
Speaker Change: I hope I haven't been helpful to you, Okay I'll follow but the comparison for March is it fair, but when we had Easter and if you could comment a bit about early may and late April please symbol of sales.
Speaker Change: Well the calendar effects were only marginal this year Tom.
Speaker Change: What really affects this affects us is when we start our mothers day campaign and then we see a fluctuation of a few days a year on year.
Speaker Change: Nothing really major not enough to explain this.
Speaker Change: A pickup in performance for March Okay. Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: That finishes Britto from Ito BBA asks the next question.
Speaker Change: Oh, yes, good morning.
Speaker Change: Thank you for taking our question.
Speaker Change: This is a follow up on the question about growth.
Speaker Change: Can you elaborate on that trend in both April and May.
Speaker Change: No.
Speaker Change: My other question is about Avon International the cash burn was surprised.
Can you give us more color of what the main drivers were for the cash burn.
Speaker Change: What is from the restructuring effort and what is.
Speaker Change: Recurring business.
Speaker Change: And lastly.
Speaker Change: The breakdown for margin ex Argentina.
Speaker Change: We estimate we have about 12% EBITDA in Argentina around 23.
Speaker Change: What is the sustainability expectations on that yet.
Speaker Change: Forward looking forward and what explains that higher number for Argentina.
Speaker Change: Yes.
Speaker Change: So you asked many questions and issues can you.
Speaker Change: So down a bit.
Speaker Change: Elizabeth.
Speaker Change: The first question is about the growth.
Speaker Change: Growth level at 15%, what's going to happen in April or May I cannot talk about it.
Speaker Change: What I can say.
Speaker Change: Both January and February were unusual.
Speaker Change: Outflow rhythm is back to normal when you look at the market size our.
Speaker Change: Important market share gains.
Speaker Change: The first numbers.
Speaker Change: For the year indicate that market share improvement.
Speaker Change: So January and February.
Speaker Change: Should not be used as a benchmark for the rest of the year. That's what I can say what was what was the second question.
Speaker Change: That came with the main drivers of cash burn for Avon International.
Speaker Change: What it is because of that restructuring process and how much is from recurring businesses. Thank you for your question Vinicius.
Speaker Change: That cash consumption.
Speaker Change: For Avon International in Q1.
Speaker Change: I mean it happened.
Speaker Change: As expected, we have a very high capex consumption for the quarter.
Speaker Change: It had been withheld.
Speaker Change: By chapter 11, and its a non recurring.
Speaker Change: In fact.
Speaker Change: As we said in our release.
Speaker Change: Given the restructuring will have a peak of costs in both Q2 and Q3.
Speaker Change: To support the benefit capture that will contribute to less cash consumption throughout the year.
Speaker Change: You had a third question Ray.
Ray: The third question is about EBITDA margin.
Speaker Change: When you break that down between Argentina, and ex Argentina.
Speaker Change: When you talk about the hyperinflation EBITDA.
Speaker Change: It's about a 12% margin former Latam accidents in 'twenty three for Argentina, Okay.
Speaker Change: I'd like to better understand why there's that difference in levels.
Speaker Change: Okay.
Speaker Change: What.
Speaker Change: Made Argentina have a higher performance level.
Speaker Change: And are they sustainable.
Speaker Change: Oh I see.
Speaker Change: Over to you Sylvia.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: When we exclude Argentina, our margin was three points for a 20 bps.
Speaker Change: Expansion therefore.
Speaker Change: But this way of looking at things is not fair.
Speaker Change: The margin ex Argentina of 3.4, we know most investments are in Brazil.
Speaker Change: And Argentina is the largest market in the Hispanic Latin America.
Speaker Change: Even when you exclude Argentina, we do have that expansion.
Speaker Change: Okay.
Andrew: Thank you Andrew.
Andrew: Andrew Ruben from Morgan Stanley.
Andrew: The next question here.
Andrew: You May proceed now Sir.
Andrew: In the movie.
Andrew: While the procedure.
Andrew: Mr. Andy Rubin.
Andrew: Inner Rubens.
Andrew: Neither to have worked by procedure, Mr. Andrew Roubal perfect. Yes, Mike has been in April Thank you.
Speaker Change: Thank you I just had a question on consultant counts me fabric buying furniture, Ryan both Brazil and Hispanic Latam I'm curious when you think we would see the consultant counts stabilize and just any update on what you think the right number of consultant counts are also light considering the greater cross sell underway two thank you.
Andrew: Yeah.
Andrew: Yeah. Thank you I Wonder if Andrew this should I answer a Portuguese I'm, sorry, Andrew Ob replying in Portuguese. Thank you for your question.
Andrew: Yes.
Andrew: Here's how the dynamics play out.
Andrew: When you you integrate.
Andrew: Avon and Natura, we reduced the number of consultants, then that number flat south or flattens out.
Andrew: And there is a marginal growth later on this is how things usually play out.
Andrew: When you look at integrated countries.
Andrew: This is what usually happens there may be some minor fluctuations throughout the year up 2% down 2%.
Andrew: This will be impacted by the economic activity of those countries.
Andrew: So in those integrated countries, we see that dynamic play out.
Andrew: Theres, a small 4% decrease in the quarter in Brazil, but we expect that number to stabilize throughout the year.
Andrew: However, in Argentina and Mexico.
Andrew: That integration Hasnt happened.
Andrew: We will see the new.
Andrew: Because combined consultant space.
Andrew: There will be some reductions.
Andrew: And the first.
Andrew: Three to four months.
Andrew: And then it will stabilize.
Andrew: And year's end.
Andrew: We have we will have a new healthy and stable base of medical action, which will be the number of consultants firm for Latin America. Thank you. Thank you.
Andrew: As a soldier before the Q&A session is now over.
Andrew: So because of the meeting.
Andrew: Q1 results car results call furniture Banko is now over.
Andrew: The company's I R remains available for other comments or questions. You may have thank you for joining and have a nice day everyone everyone.