SAO PAULO (Reuters) – Brazilian cosmetics maker Natura & Co (NTCO3.SA) on Friday posted a first-quarter net loss of 820.8 million reais ($140 million) as non-recurring costs related to its Avon acquisition overshadowed an increase in revenue, even as the coronavirus crisis was unfolding.
Excluding extraordinary and non-cash effects, the company’s net loss in the period was 284.8 million reais, it said in a securities filing, compared with a loss of 82 million reais a year earlier.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined by 20.9% to 571.5 million reais, while adjusted EBITDA margin fell to 7.6% from 9.8% in the first quarter of 2019.
Natura’s net revenue, however, grew by 1.9% year-on-year to 7.52 billion reais, driven mostly by Latin America’s operations and its Aesop brand.
“It’s a small growth, but a good one compared to our global competitors … Latin America is the most important region for us and the COVID-19 crisis arrived a bit later here,” Chief Executive Officer Roberto Marques told Reuters in a phone interview.
The cosmetics group has also stepped up efforts to boost digital platforms during the outbreak and has seen e-commerce sales grow over 250% in the last few weeks, he said.
But the coronavirus impact is expected to be greater in the second quarter, mainly in Latin America, which represents between 40% and 50% of Natura’s total revenue.
“It will be a tough second quarter, but we expect to see a gradual recovery as of the third quarter,” Marques said.
Natura had a cash position of 4.6 billion reais at the end of March and plans to raise between 1 billion and 2 billion reais through a private equity placement to be subscribed by controlling shareholders and select investors, he said.
Even with challenges brought by the novel coronavirus, he said, the business combination with Avon, which was announced in May 2019 and concluded last January, has been accelerating in some aspects.
As a result, Natura raised total expected synergies to between $300 million and $400 million on an annual recurring basis from $200 million-$300 million in January.
The new forecast is based on a currency exchange of 5 reais to each U.S. dollar and includes revenue synergies of $90 million to $120 million driven by Avon’s turnaround in Latin America, according to Marques. One-time costs to achieve such synergies are now projected at $190 million, up from $125 million.
Reporting by Gabriela Mello; Editing by Steve Orlofsky