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company overview

company overview. our vision.

williamnmoore
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company overview

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  1. company overview

  2. our vision Through our business practices, the quality of our products and the relationships we establish, we seek to make Natura a brand ultimately recognized worldwide and identified with a community of people who are committed to constituting a better world, through a better relationship with themselves, with the others, with nature and as a whole.

  3. our principles to create and sell products and and services that promote being-well well-being/being-well is the concept of rewarding, empathetic relationships with the others, with nature and as a whole well-being is the harmonious, pleasant relationship with oneself and one´s body

  4. natura’sprofile With approximately 3,000 employees, net revenues of R$1.3 billion and EBITDA of R$296 million in 2003. • 97% of sales in Brazil and 3% in Latin America Markets • Creams, lotions, perfumes and fragrances, make-up and e personal care products • 510 different items Products • In 20031: • 12% of the total Brazilian CF&T sector and 17% within the categories it operates • more than 40% of cosmetic sales via direct sales in Brazil Market Share • Largest cosmetics R&D center in Brazil • State-of-the-Art facility in Cajamar • 142 million units sold in 2003 (1S04: 84.3 million) Operations • Direct sales, through 367,000 consultants reaching over 5,000 municipalities in Brazil • Around 22,000l consultants in Latin America Sales Channel Note: 1. Based on Sipatesp (“São Paulo State Cosmetics Industry Association”)

  5. Growth in the Brazilian Market • Brand strength as business driver • Brazil is the main expanding vector Direct Sales growth • Independent sales channel • Close relationship with independent sale representatives • Professional training and relationship programs • Loyal sales channel Ongoing Innovation • Focused on products and concepts that confirm the values of the brand • Sustainable use of the Brazilian biodiversity International Operations • Excellent growth opportunities in Latin America • Testing the Brazilian Biodiversity concept in Europe Focus on management efficiency • Improvement of existing infrastructure • Managing excellence Brand Recognition • Products, sales channel, marketing and business presence business strategy Natura’s business strategy is based on six main aspects:

  6. sales channel, innovation & brand

  7. Clinique Lancôme O Boticário L’Oréal Nivea Avon Johnson &Johnson Unilever P&G brand and market positioning in Brazil Solid market positioning and strong brand recognition Market Positioning Brand Strength1 Criteria O Boticário Avon Nivea Transparency Social Responsibility Preference for Brand Recommends Credibility Innovation Quality 51% 48% 35% 13% Premium 54% 43% 29% 11% 24% 17% 3% 41% 43% 47% 18% 60% 63% 54% 45% 18% Mass Consumption 47% 37% 12% 59% 70% 61% 45% 23% Source: TSB&B Note: 1 Survey requested by Natura in 2003, conducted with 2,200 people across different social classes in 6 large Brazilian cities Market Reach

  8. Number of Launchings Research and Development Investments % Net Revenue ongoinginnovation Investments in innovation are important to renew our product portfolio. The return on such investments is made clear by the share of new products in the Company’s total revenue. Number of launchings and Natura’s Innovation Index* Investments in Innovation (R$ MM) 3.3% 3.0% 2.9% 2.7% 2.6% 35.5 28.8 165 27.2 19.6 17.1 117 64 91 44 2001 2002 2003 1H03 1H04 2001 2002 2003 1H03 1H04

  9. our productlines

  10. Around 510 different items, including cosmetics, fragrances, hygiene and health products Main product lines Natura Ekos Mamãe & Bebê Make-up Chronos Fragrances products

  11. draw from the integration of Brazilian’s nature to each Brazilian human being’s own nature use of active ingredients obtained from Brazil’s biodiversity 61 items (bath, moisturizers and fragrances - keeping with the concept of sustainability) natura ekos

  12. Designed to meet the special needs of pregnant women and their babies 17 items mamãe & bebê

  13. Skin treatment options for the face designed for women over 30 affirms the beauty of women at every stage of their lives Aligns skin treatment technology with the rejection of stereotypes about beauty 24 items natura chronos

  14. Unique fragrances combining the wealth of the Brazilian forest and the tradition of its communities perfume do Brasil

  15. natura channel

  16. 389,000 independent sales representatives* 680 sales promoter 31 sales manager 6 regional managers Growth opportunities Being part of the community Search for success relationship with our independent sales representatives * Available independent sales representatives in Brazil and Latin America, in June/04.

  17. who is who? Commercial Director Regional Manager Regional Manager 6 regional managers Sales Manager Sales Manager 31 sales managers Sales Promoter Sales Promoter 680 sales promoter Employees 367,000 independent sales rep. Independent Sales Representatives Independent Sales Independent Sales

  18. sales channel in Brazil size & productivity growth The brand equity combined to the relationship kept with Natura Consultants develop the sales channel, both in size and productivity. Productivity Growth (R$ thousand per active consultant) Growth in the Number of Natura Available Consultants in Brazil (thousand) +16% CAGR 01-03 10% CAGR 01-03 11% 367 355 10.4 316 9.0 307 8.6 287 +10,1% 5.3 4.8 2001 2002 2003 1H03 1H04 2001 2002 2003 1H03 1H04

  19. social responsibility

  20. our belief “For Natura, Corporate Responsibility is a management skill based on an ethical and transparent relationship towards all parties involved in the business as a way to create solutions for building a sustainable world. It believes the development of this skill is part of a continuous process, which involves the whole company, as well as, the society.” Extract from the text Corporate Responsibility Strategic Options

  21. human resources Natura seeks to create ideal conditions to attract and retain creative and talented employees, standing among the best companies to work for in Brazil Employees Profile (2003) Organizational Climate 1 Men 38% 76 70 58 Women 57 62% Best Company for Women toWork in Brazil Exame Magazine - 2003 1st 2001 2002 2003 Market in 2003 Top 10 Companies to Work Forin Brazil Exame Magazine - 2003 Source: HayGroup, 2003 Note: 1 Independent research requested by Natura Top 100 Companies to Work Forin Brazil Exame Magazine - 2000 and 2002

  22. our experience Some examples: • Development of relationships with communities that supply Brazilian biodiversity assets  Encouragement to local sustainable development • Quality when communicating with consumers  Positioning against beauty stereotypes • “Crer para Ver” Program  Mobilization of Consultants

  23. nº Area Assets Andiroba 1 Médio Juruá - AM Murumuru Castanha 2 Copaíba 2 Iratapuru - AP 3 Breu 1 11 Branco 6 3 Entorno de Belém - PA (3) Priprioca 4 4 RECA - RO Cupuaçu 5 Guaraná 5 Ilhéus - BA Cacau 10 6 Palmeira do Piauí - PI Buriti 9 7 Ervateira Putinguense - RS Mate 8 8 Chamel - PR Camomila 7 9 Fazenda Alpina - SP Pitanga Brazilian ecosystem 10 Flora do Brasil - MG Maracujá 11 Mil Madeireiras - AM Louro Rosa Brazilian biodiversity assets: suppliers chain

  24. our experience Iratapuru - State of Amapá Certified by the Forest Stewardship Council for cropping Brazil Nut, after performing a three-year jointly job with local communities.

  25. Boa Vista: 26 families Formalization of the community association Training in organic culture Campo Limpo: 16 families Culture diversification Use of income provided by “priprioca” for remodeling houses Cotijuba: 8 families Formalization of the community association (“Movimento de Mulheres” – Women Motion) Income resulting from images used to purchase the Motion headquarters our experience Entorno de Belém – State of Pará

  26. High standard communication process our experience

  27. Natura Consultants voluntarily sell products whose proceeds are allocated to projects aiming to improve the public education (in an association with Abrinq Foundation) Results since its implementation, in 1995: 147 projects supported 3,600 public schools in 21 states involved 900 thousand children participating R$ 15 million raised 2004: Launching of the campaign “Crer para Ver EJA” our experience “Crer para Ver” Program

  28. The more incorporated actions are to business strategy the more relevant they get Greater integration with related parties Positive impact on the competitive environment Broader condition for business growth social responsibility

  29. financial performance overview

  30. consistent growth Consistent revenue growth, as a result of a solid market positioning, brand strength and optimized distribution system Gross Revenues (R$ MM, nominal) 1,910 Nominal CAGR 95-03: 21% Real CAGR 95-03: 12% 1,411 1,168 1,016 833 806 688 587 429 1 1 1995 1996 1997 1998 1999 2000 2001 2002 2003 Note: 1 Data refers to Natura Empreendimentos

  31. operational performance Sales volume has exhibited strong growth, driving net revenues Net revenues(R$ MM, nominal) Sales volume (million units) CAGR 01-03: 14% CAGR 01-03: 28% 142 1,329 116 110 993 +28% 1 813 83 +35% 758 65 562 2001 2002 2003 1H03 1H04 2001 2002 2003 1H03 1H04 Note: 1. Pro forma

  32. cost and expenses The new plant has led to a significant dilution of fixed costs, enhanced by an efficient expense control by management Costs and Expenses Breakdown as a % of Revenues 1 85% 82% 82% 79% 77% 14% 16% 15% 14% 13% 31% 33% 32% 30% 30% 37% 36% 35% 34% 34% 2001 2002 2003 1H03 1H04 COGS Sales Expenses General and Administrative Expenses Note: 1. Pro forma

  33. EBITDA Increasing EBITDA and EBITDA margins due to the consolidation of market position and significant productivity gains EBITDA (R$MM, nominal) EBITDA Margins(%) 296 24% CAGR 01-03: 48% 22% 20% 20% 1 199 17% +67% 184 1 136 110 2001 2002 2003 1H03 1H04 2001 2002 2003 1H03 1H04 Note: 1. Pro forma

  34. indebtedness After BNDESPAR converted debentures amounting to R$ 34.4 million and cash generation in the period, Natura ended the semester with net cash of R$ 84.6 million. Net Debt /(Cash) Evolution (R$ MM) Indebtedness Breakdown 205 2.8-year average maturity IFC 35% 119 65% 1.8-year average maturity BNDES Finep 22 2003 2Q04 2001 2002 1Q04 (19) R$104 MM (85)

  35. international operations

  36. LATAM Replication of the commercial model used in Brazil Argentina Peru • 11,459 independent sales representative • 7,001independent sales representative Chile • 3,583independent sales representative Commercial presence Bolivia

  37. internationalpresence Natura has been achieving strong growth in Latin America, a market with total size of around US$10.7 billion in 2002 Sales Volume - Argentina, Chile and Peru (million of units) Gross Revenue vs. Operating Income (US$MM) CAGR 01-03: 15% CAGR 01-03: 48% 15.8 +57% 2,318 11.9 9.9 +62% 9.4 1,514 1,445 6.3 1,060 932 -1.5 -2.8 -1.4 -3.4 -7.7 2001 2002 2003 1H03 1H04 2001 2002 2003 1H03 1H04 Gross Revenues Operating Income Replicable business model in other Latin American countries

  38. ekos internationalproject Main goal is to test the Brazilian biodiversity concept and brand expansion abroad Ekos International Personal Care, Natural Market Value (US$ billion) • Initial focus on Ekos product line • Brazilian biodiversity • Opening of the first store in Paris expected by early 2005 • Expected investments of US$16 million in 3 years CAGR 01-06E - Europe: 17% CAGR 01-06E - Global: 20% 10.9 7.5 4.4 2.9 3.4 1.5 2001 2006E Europe Others The natural products market has a promising growth profile Source: Datamonitor, “Natural Beauty Revolution”

  39. manufacturing & logistics

  40. theorder cycle PICKING ~35% TELEMARKETING ~65% SHIPPING BILLING PRODUCT PROCESS DELIVERY TO SALES REPRESENTATIVE Full capacity = 42,000 boxes/day Municipalities covered = more than 5,000

  41. cajamarfacility Offices Picking Training rooms Vertical Automatic Warehouse Factory Club

  42. logistics • More than 5,000 municipalities covered • 7 shipping companies representing 87% of the deliveries • 20,000 to 30,000 orders per day • 98% of orders are shipped within 24 hours

  43. suppliers % of total Number of Raw materials 2003 suppliers Plastic packaging 24% 29 Fragrances 17% 8 Glass packaging 12% 9 Spray tops 11% 7 Packaging labels and boxes 8% 13 128 Others 28% 194 Total 100% approximately 95% of our expenses for raw materials are from Brazilian suppliers and only 5% are imported

  44. CAPEX Capital expenditures in fixed assets reached R$ 22.7 million in the first half of 2004. Most of it was concentrated on the construction of the new Vertical Storehouse. CAPEX - R$ MM 2004 Estimated CAPEX 21% Maintenance 38.8 25.2 23.9 22.7 Expansion 65% 24% 61% Process Improvements 14% 15% 2003 1H04 2001* 2002 R$ 75 MM * Natura Empreendimentos in 2001

  45. expansion of capacity production Capacity ( million of units) Manufacturing Storage Picking Current 170 140 150 200 300 150 Early 2005 Mid 2005 220 300 290 • By mid 2005, we estimate an investment of R$300 million (at current prices) in order to reach 450 million units in three stages of the process • 2003 : production of 136 million of units Capacity Utilization (million of units) Manufacturing Storage Picking 2003 80% 101% 95%

  46. financial summary EBITDA margins of 24.3% in 1H04 Net indebtedness close to zero (post-dividends) Low Capex - state-of-the-art facility allows 200% growth Strong dividend distribution policy - by-laws: 30% pay-out - 45% is the minimum pay-out approved by the Board

  47. corporate governance

  48. corporate governance Commitment to the highest corporate governance standards, reaffirmed with the Novo Mercado listing Novo Mercado Listing 100% tag along rights One class of shares with voting rights Management Reports HumanResources Committee Board ofDirectors ExternalAuditors 1989 1991 1998 1999 2001 2003 2004 “Best Annual Report Issued by a Private Company” (ABRASCA)1 Audit andRisk Management Committee Beliefs andValues Note: 1. Brazilian Listed Companies Association

  49. operatingcompaniesstructure Shareholders NATURA COSMÉTICOS S/A 99.99% 99.99% 99.76% 99.93% 99.99% Natura Inovação e Tecnologia de Produtos Ltda. Indústria e Comércio de Cosméticos Natura Ltda. Natura Cosméticos Soc. Anônima Peru Natura Cosméticos Soc. Anônima Argentina Natura Cosméticos Soc. Anônima Chile 99.99% Natura Logística e Serviços Ltda.

  50. shareholderstructure Shareholder Number of shares Percentage Controllers 62,637,886 73.9% Float 22,112,876 26.1% Total shares* 84,750,762 100% * Not considering 687,849 treasury shares.

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