Natura Profit Misses Estimates on Higher Marketing Costs

Natura Cosmeticos SA (NATU3)’s first quarter earnings missed analysts’ estimates as the company’s higher investments in marketing outweighed faster sales growth.

Net income rose 0.7 percent to 151.5 million reais ($80.6 million) from 150.5 million reais a year earlier, the Cajamar- based company said yesterday in a regulatory filing. The result was below the 159.3 million reais average estimate for profit excluding some items of eight analysts surveyed by Bloomberg.

Latin America’s largest cosmetics company’s costs went up to 38 percent of its net revenue, 140 basis points higher than in the same quarter last year, due especially to higher marketing investment in Natura’s international operations, the company said in the statement.

Natura’s international operations are now responsible for 11 percent of the company’s net revenue, compared to 8.1 percent in the first quarter of 2011.

“In Brazil, we kept our strategy of optimizing our marketing investments and seeking efficiency in logistics processes,” according to the filing.

“Natura seems to have turned the page in terms of ongoing logistics and information technology systems problems, although some vestiges should negatively impact its results for the quarter,” Bradesco BBI analysts Ricardo Boiati, Alan Cardoso and Pedro Bueno wrote in a note to clients dated April 23.

Natura net sales rose 11 percent to 1.28 billion reais, from 1.15 billion reais a year earlier. The company sales went back to a double digit percentage growth after slowing down to an average 9 percent in 2011, less than half of the 21-percent expansion in 2010. The number of direct sellers grew 17 percent to 1.43 million.

Natura rose 3 percent, to close at 45.25 reais in São Paulo yesterday. The stock is up 25 percent since the beginning of the year, compared to an 8.8 percent gain for the Bovespa (IBOV) benchmark index.

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

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

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