By Brazil Stock Guide — Natura B3: NATU3) reported a R$186 million net profit from continuing operations in 4Q25, marking a sharp turnaround from losses a year earlier, as margin expansion and cost efficiencies more than offset a double-digit decline in revenue.
The quarter underscores a company increasingly driven by profitability rather than top-line growth, following a year of structural simplification and integration across Latin America.
Margins Over Growth
Net revenue fell 12.1% year-on-year to R$6.2 billion, reflecting weaker demand in Brazil, operational disruptions in Argentina, and adverse currency effects. In constant currency, the drop was more modest at -3.4%, highlighting that FX and hyperinflation played a significant role in the headline contraction.
Yet profitability told a different story. Recurring EBITDA rose 57.2% to R$978 million, with margin expanding 700 basis points to 15.8%, driven by a combination of gross margin gains, SG&A efficiencies, and lower variable compensation. The Latin America operation alone delivered a 16.1% margin, reinforcing the strength of the core business even amid revenue pressure.
Brazil Holds, Hispanic LatAm Volatile
Brazil — still Natura’s anchor — saw revenue decline 4.8%, weighed by lower consultant activity and a softer fragrance category. Still, EBITDA margin expanded to 21.7%, highlighting strong cost control and resilience.
In Hispanic markets, performance was more uneven. Revenue plunged 21.5% in reais, largely due to Argentina’s macro instability and integration effects from the “Wave 2” rollout. However, profitability improved sharply, with EBITDA turning positive at R$182 million, reflecting deep cost synergies from the Natura-Avon integration.
One-Offs Mask Stronger Core
Reported profit was dragged by a non-cash R$434 million provision related to The Body Shop divestment, without which net income would have reached roughly R$620 million, up R$321 million year-on-year.
This adjustment reinforces management’s narrative: the core business is now structurally profitable, with simplification efforts — including the sale of Avon International and Russia — largely complete.
Deleveraging and Outlook
Natura ended the quarter with net debt of R$3.5 billion, down sequentially, and leverage at 1.57x, or 1.31x excluding one-offs, firmly within its target capital structure.
Looking ahead, management is betting on a return to growth in 2026, supported by the Avon relaunch, normalization in Argentina, and a more integrated, data-driven operating model. The company expects EBITDA margins to exceed 2025 levels, signaling that the next phase of the turnaround will hinge less on restructuring — and more on execution.
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