Recently, it was reported that Brazilian cosmetics manufacturer Natura &Co is in exclusive negotiations with asset management firm IG4 regarding the sale of its Avon brand’s operations outside of Latin America. According to the report, Natura’s stock price rose by 3.5% in response, reflecting investor optimism about the company’s efforts to simplify its portfolio and improve cash flow.
Public information shows that Natura &Co owns two major brands: Avon and Natura. In 2020, Natura &Co acquired Avon with the aim of revitalizing the struggling direct-sales giant. However, Avon has still faced challenges in adapting to shifting consumer preferences and digital trends.
At the beginning of last year, Natura &Co disclosed plans to consider splitting Avon into an independent, publicly traded beauty company. However, after Avon Products Inc. (API), its non-operating holding company based in the United States, filed for Chapter 11 bankruptcy protection, this plan was temporarily paused. By December of last year, Natura &Co announced it had resumed exploring options for its Avon business outside of Latin America, including possible sale, partnerships, or spin-offs.
JPMorgan analysts mentioned in a report, “This is a key part of our investment theory relying on business simplification. Our basic argument is that after the successful completion of API’s Chapter 11 process, Natura &Co should sell/strip down Avon International in the short term, bringing in strong free cash flow from Latin America and releasing more dividends.”
According to Natura &Co’s financial report, for the first three quarters of 2024, the company’s net revenue was 16.34 billion reais, representing an 8.3% year-over-year increase at constant exchange rates (CC). EBITDA (earnings before interest, taxes, depreciation, and amortization) reached 2.02 billion reais, reflecting a 41.3% year-over-year growth. However, following API’s voluntary bankruptcy protection filing, Natura &Co did not consolidate API and its subsidiaries’ performance for this quarter.
