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Natura Profit Rises 5.2% as Competition Increases, Economy Slows

Natura Cosmeticos SA (NATU3), Latin America’s largest cosmetics company, said profit rose 5.2 percent in the third-quarter, surpassing analyst estimates, amid stronger competition and slower economic growth in Brazil.

Net income rose to 201.6 million reais ($114.6 million) from 191.7 million reais a year earlier, the Cajamar-based company said in a regulatory filing yesterday. Profit was above the 195.9 million-real average estimate of nine analysts compiled by Bloomberg.

Natura sales are growing at a slower pace as the company faces fiercer competition from imported and local brands, and the expansion in Latin America’s largest economy slows from the fastest pace in more than two decades.

Net sales rose to 1.38 billion reais from 1.28 billion reais a year earlier, the company said. The 7.8 percent growth is the slowest since 2007 for the third quarter. The number of direct sellers grew 16 percent to 1.36 million.

“This year, Natura’s growth in Brazil is below last year’s and our expectations”, the company said.

Brazil’s economy is expected to grow 3.3 percent this year after expanding 7.5 percent in 2010, according to a central bank survey with economists published Oct. 24. Retail sales fell 0.4 percent in August, the biggest drop since March 2010, while the economic activity index shrank in August by the most in three years.

“A tougher competitive environment combined to the slower market growth may reduce the company’s level of sales growth with a negative impact over its shares,” Banco Fator Corretora analysts Renato Prado and Ronaldo Kansinsky wrote in an Oct. 20 report e-mailed to clients. They have a “hold” recommendation to the stock.

Natura fell 0.5 percent to close at 34.57 reais in São Paulo trading yesterday. The stock is down 28 percent this year, compared with a drop of 18 percent for the Bovespa benchmark index.

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

To contact the editor responsible for this story: Helder Marinho at hmarinho@bloomberg.net

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