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Natura Profit Rises 5.2% Amid Competition, Slowdown

Natura Cosmeticos SA, 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 exceeded the 195.9 million-real average estimate of nine analysts surveyed 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.

“We expect these results to have a neutral to negative impact on share performance”, Banco Santander SA analysts Joaquin Ley and Tobias Stingelin wrote in a report today. “We believe it will still take a couple of months for top line growth to meaningfully accelerate, while competitive challenges remain high and visibility relatively low.”

Natura rose 1.7 percent to 35.16 reais in São Paulo trading at 9:17 a.m. New York time. The stock is down 26 percent this year, compared with a drop of 15 percent for the Bovespa benchmark index.

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