Aesop sale to L’Oréal greenlit; good news for Natura&Co

Natura&Co, the parent company of Brazilian cosmetics giant Natura, Avon, and other brands, informed the market today that it has received all necessary regulatory and antitrust approvals to proceed with the sale of its Australia-based brand Aesop to L’Oréal for more than USD 2.5 billion.

First announced in April this year, the deal was cleared by Brazil’s antitrust authority, Cade, in May. The move will allow Natura&Co to deleverage its balance sheet, which is crucial for the company to reverse the losses it has posted since last year. 

Its revenue generation was hit hard by the inflationary crisis in Latin America and especially in Europe, which reduced the revenues of its subsidiaries The Body Shop and Avon International. The latter was also affected by the recent sanctions against Russia, its largest consumer market.

The company managed to reduce its net loss by 4.5 percent in this year’s second quarter compared to the same period last year, to BRL 731.8 million (USD 146.8 million), but still faces a difficult scenario.

Net revenue fell 4.2 percent on the same basis of comparison, to BRL 7.77 billion, and in all business units: Natura’s revenue in Latin America dropped by 1.7 percent, Avon’s retreated 8.1 percent, and that of The Body Shop decreased 12 percent. 

At the same time, the company’s operating expenses rose slightly (2 percent) and its net debt increased by 8.1 percent to BRL 5.48 billion. The company’s leverage, measured by the net debt to Ebitda ratio, is 2.19 times, up from the 1.83 times reported a year earlier.

Analysts believe that the sale of Aesop will help Natura&Co reduce its leverage and move forward with its “wave 2” plans, which consist of integrating operations of Natura and Avon in Latin America. As priorities, Natura&Co Group CEO Fábio Barbosa also told investors this week that the organization will continue to “work on simplifying and turning around its international assets while delivering its ESG agenda.”

Aesop was the only Natura brand to post revenue growth in 2022, up 4.65 percent to BRL 2.7 billion, representing 7.5 percent of the holding company’s annual net revenue, hence why L’Oréal saw the company as a good deal — this and the brand’s growth potential in Asia.

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