Good morning, ladies and gentlemen. Thank you for waiting. At this time, we would like to welcome everyone to Natura &Co's third quarter 2021 Results. This event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After Natura &Co's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star then zero to reach an operator. This presentation may contain forward-looking statements. Such statements are not statements of historical facts and reflect the beliefs and expectations of Natura &Co's management. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligations to update them in light of new information or future developments.
This presentation also includes adjusted information prepared by the company for information and reference purposes only, which have not been audited. Now, I will turn the conference over to Mrs. Viviane Behar, Investor Relations Officer of Natura &Co. Ms. Behar, the floor is yours.
Good morning or good afternoon to everyone. I am Viviane Behar de Castro, Natura & Co's Investor Relations Officer. Thank you for joining us today for this call to present Natura & Co's third quarter and nine-month 2021 earnings. I am joined today by Roberto Marques, Executive Chairman and CEO of Natura & Co, and Guilherme Castellan, CFO of Natura & Co. João Paulo Ferreira, CEO of Natura & Co Latin America, will join us for the Q&A session. The Natura & Co investor relations team is also with us. The presentation we will be referring to during this call is available on the Natura & Co investor relations website, which was recently completely redesigned. Roberto will start with an overview of our performance and other announcements we made yesterday. Guilherme will detail our financials for Natura & Co.
After that, Roberto will discuss our business and financial outlook and make concluding remarks, and we will then open the floor to your questions. For the sake of timing, in order for us to accommodate questions from all of you, we'd like to ask you to please limit yourselves to one or two questions each in the Q&A session. Thanks for your understanding and cooperation on this. Let me now hand over to Roberto. Roberto, please.
Thank you, Viviane, and hello to everyone. Thank you all for joining us. As we flagged last quarter, we saw a deceleration and a contraction in our results during this third quarter. Two main reasons for that. First, we face the highest ever comparable base against 2020, when we posted a strong 26% growth, excluding the effects of the cyber incident last year, as we also successfully pivoted the businesses to digital channels, especially social selling, benefiting also from other channels that were more impacted during the second half of 2020. Second reason is more externally driven, with some still uneven pandemic recovery across key markets, rising inflation, and supply chain disruption.
This is reflected in our Q3 numbers for this year, which shows net revenue down 4.2% with adjusted EBITDA margin of 8.6% and net income achieving BRL 272 million. However, as Gui would explain in greater details, excluding a number of these exceptional effects from this challenging operating environment both in this year's Q3 and last year's, our adjusted EBITDA margin in Q3 2021 would have increased by 10 basis points. These effects includes a 500 basis points impact in margin from inflationary pressure, supply chain disruption, and FX effects, which were, for the most part, offset by the synergies already captured by the Avon integration process and also by the group's revenue management capability. That's the snapshot of Q3. However, if you look at the year-to-date basis, we see very strong sales growth of 14.4%.
In comparing our Q3 2021 to two years ago, prior to the pandemic, which we believe is a more reasonable comparison, sales then grew almost 21%. We outperformed the global CFT market over both periods, demonstrating the strength of our business and our multi-brand omni-channel approach. The net income in the first nine months reached BRL 352 million, reverting a loss of BRL 827 million in the same period last year. The growth in both periods were driven by all brands, with double-digit growth in reals at Natura &Co Latam, The Body Shop and Aesop, and also growth at Avon International. The group continued to make major advances on key strategic initiatives that will fuel future growth. A key highlight is the progress made on Avon's turnaround.
Indeed, total sales of the Avon brand, which combines both operations in Latin America and in international markets, showed growth of almost 11% in reais, equivalent to 3.4% at constant currency in the first nine months of the year versus the same period last year. This is the first time in five years that this has happened, underscoring that the transformational plan that we have embarked is showing its first results, and the planned synergies are fully on track. I'll return in greater details to the Avon's performance in the next slides. Let me also comment on two strategic initiatives that we are announcing today. First, we are launching a share repurchase program up to BRL 1.5 billion, highlighting our strong ability to generate cash and our commitment to return value to shareholders.
Second, for the holding group, we are evaluating a switch to a primary listing on a major U.S. exchange next year, while keeping the dual listing in Brazil through a BDR program. Among other benefits, this will allow Natura &Co to reinforce its position as a global company, amplifying its sustainability agenda, while at the same time accessing a broader investor base and increasing liquidity of its shares. Let me now look in greater detail at some of the key business highlights of the quarter and year-to-date performance. On the next couple of slides, we'll focus on initial positive indicators of Avon's turnaround, starting on slide four. In Latin America, Avon's new commercial model, a key pillar of its turnaround, has been fully implemented in Brazil, with initial impacts mirroring those seen in Natura back in 2017.
We also implemented in Ecuador, and the first results are very encouraging, pointing to improved productivity. Avon's e-commerce platform was also rolled out to some Hispanic markets, and digital adoption continues to increase. Digitalization of the business progressed, and the number of representatives now using the Avon On platform improved by 5 percentage points relative to Q3 2020, reaching now 19%. All of this has translated into a record level of representatives' satisfaction and sets the stage for further improvement in 2022, notably through the acceleration of the revenue second wave of cross-selling and upselling of both Natura and Avon. We are fully on track on the integration plan that we presented back in April at our Investor Day, with important progress in administrative, cost optimization, and procurement.
Synergies captured in Q3 accelerated to $61 million, helping to partially offset raw material inflation pressure and foreign currency headwinds. As a plan, we should achieve this year 40% of the total 2024 synergies of between $350 million-$450 million. On the following slide, we see major progress in Avon International transformations. Key markets, such as the U.K., South Africa, and the Philippines gained share this quarter and in the first 9 months of the year, showing that we are outperforming in those markets where we are seeing consumption contraction overall. Here, we're also pleased to report that a new commercial model that mirrors Natura's segmentation approach has been implemented across Avon International's top 9 markets after a successful pilot in both South Africa and the Nordics, resulting in improved productivity.
Investments in digital made since the acquisition are resulting also in a steady ramp-up in social selling adoption at Avon International, which has reached 15% from 3% pre-pandemic. Our digital initiatives will converge into one platform named Avon On, and that will be scaled up in 2022. To enable the implementation of both the commercial model and the digital platform, significant advances in streamlining the operational model have been implemented across all markets. The standardization of campaign cycles optimize resource allocation, with key markets serving as hubs and a 20% reduction of non-strategic SKUs, generating an annual run rate in savings of over $100 million, which is already captured in our guidance. In 2022, further focus will be placed on Avon brands rejuvenation, focus on hero cult products and gifting strategy as part again of our key strategic initiatives and transformational plan for Avon.
On slide six, we look at the continued headway we are making on digital as part of our omni-channel transformation. Digital enabled sales, which include both online sales from e-commerce and social selling, as well as relationship selling using our main digital apps, reached 50% of total revenue. 6 percentage points above Q3 2020, which was already a high point for digital in the midst of the pandemic, and significantly above their pre-pandemic level of 37% in Q3 2019. As expected, there is now a rebalance of channels with the reopening of retail. Online sales accounted for 9.4% in Q3 2021, which is still 3x above pre-pandemic levels. At Natura, online sales grew 13.3%, and at Avon globally, sales were up by 14% compared to last year.
Aesop's total online sales and The Body Shop's online and at-home channels are twice above their pre-pandemic levels. Concerning relationship selling using apps, adoption of the Avon On app at Avon International has grown consistently over this last seven quarters, reaching 50% of total representatives, which is 5x higher compared to pre-pandemic levels. At Natura in Latin America, the average number of consultants sharing content is nearly 4x higher than it was two years ago. Orders through the 1.5 million-plus consultant online stores in the region have doubled compared to Q3 2019. As an example of advances in digitalization, the consultant brochure in Brazil and the customer brochure in Argentina have now become 100% digital.
Natura also launched an interactive platform in Brazil where consultants can now watch the live Christmas launch events online and shop exclusive offers without actually leaving the screen. By the way, a live shopping platform for customers is also being tested. Our digital payment system, &Co Pay, posted above target growth in both number of accounts, reaching nearly 300,000, and total payment volume, TPV, which is ahead of the BRL 4 billion annualized estimate. This gives us confidence in the implementation of our payment enablers across the brands in Latin America, and we are planning to accelerate that throughout 2022. On slide seven, we also feature some product innovation that we launched this quarter as part of our robust innovation pipeline, including some technological skincare breakthroughs across our brands. Chronos Super Serum Wrinkle Reducer at Natura that combines Brazilian biodiversity prebiotics.
Avon introduced a new renewal power serum containing its exclusive award-winning Protinol technology that smoothing lines and firm skins. Aesop launched Parsley Seed Anti-Oxidant Intense Serum with natural ingredients. Finally, The Body Shop launched a new hair repair line powered by new vegan silk protein, actually leveraging Natura's R&D with over 90% natural ingredients and 100% recycled packaging. Talking about natural ingredients and recycled packaging, let me now talk on slide eight, some of our advances on our ESG agenda. As you know, the world's eyes right now are on Glasgow in the COP26 conference on climate change. We see this as a defining moment for the future of our planet.
Natura & Co participated very extensively during these last two weeks in more than 30 events to spread out a key message that we should build an efficient global carbon market and also to protect nature, and more specifically Amazonia. We led a call to action to world leaders at the COP26 summit to address not just climate change, but to connect the importance of nature, recognizing that without the Amazon and forests like it, we will not reach net zero emissions or achieve the goals of the Paris Climate Agreement. To back up our words with action, Natura has launched PlenaMata platform, which aims to mobilize people, businesses, institutions, and communities to work together for forest conservation and to end deforestation in the Amazon.
We also launched the EcoBeautyScore Consortium, along with other global CFT peers, to create a common environmental impact assessment of our cosmetic products. That will help customer to have a common way to actually compare products on this promising scoring system. In addition to that, we made further progress on our 2030 commitment to life targets. For instance, we reach our target of full gender balance in the senior leadership team one year ahead of our plans. With that, I will now hand over to Gui for a closer look at our financial performance.
Thank you very much, Roberto, and hello to everyone. On slide 10, you see that as Roberto mentioned, Q3 was difficult as we came up against a very tough comparable base and faced a very challenging operating environment. Net revenue at BRL 9.5 billion was down 4.2% in reais and 4.5% at constant currency. The nine months performance is very strong, with 14.4% growth in reais and 8% in constant currency to BRL 28.5 billion, with growth in reais at all brands. Revenue growth versus the pre-pandemic period or versus 2019 is an even stronger 20.7%, which attests the remarkable resilience of our businesses.
Comparing Q3 2021 to Q3 2019, Natura &Co's net revenue was up by strong 18.2% in reais and 7.9% at constant currency. Avon International's net revenue was up 2.4% versus Q3 2019 in reais and down 22.1% at constant currency. The Body Shop's net revenue was up by strong 52.5% in reais versus Q3 2019 and also up 7.1% at constant currency. At Aesop, compared to Q3 2019, net revenue was up by a very strong 87.3% in reais and 36.8% at constant currency. On slide 11, we focus on reported and adjusted EBITDA, which reflect the challenging operational environment we have mentioned.
Reported EBITDA was BRL 953.9 million in Q3 2021, with margin of 10%, down 400 basis points versus Q3 2020. Adjusted EBITDA was BRL 819 million, down 47.1% with an adjusted margin of 8.6%, down 620 basis points. Over nine months, adjusted EBITDA margin stood at 9.1%, down 190 basis points. Reported EBITDA margin was 8.5%, down 50 basis points. On slide 12, we show the impact on EBITDA reflecting a challenging operating environment. As you can see, in Q3 2021, we incurred a 530 basis points impact from inflationary and foreign currency pressure that we're able to fully offset through 570 basis points in synergies and revenue management gains.
Other temporary business pressures, notably sales deleverage, reduced margin by an additional 280 basis points and higher investments to accelerate growth, lower margin by a further 90 basis points, consistent with our business plan. At the same time, it's important to recall the Q3 2020 adjusted EBITDA margin benefit from 300 basis points from pandemic-related one-off effects of cost containment and government support, as well as the phasing of sales from the cyber incident. If you exclude the effects of the challenging operating environment in both years, adjusted EBITDA margin would have actually increased by 10 basis points this quarter to 11.9%, which constitutes a solid underlying performance.
On slide 13, you see the net income was BRL 273 million in Q3, compared to BRL 302 million in Q3 2020, reflecting favorable PPA effects of BRL 88.7 million and unfavorable Avon acquisition related effects of BRL 140.7 million. Underlying net income was BRL 325 million compared to BRL 608 million in Q3 2020, mainly explained by lower EBITDA contributions due to the challenging operating environments, which was largely offset by lower income tax expense and one-time tax benefits, including tax credit recoveries in Brazil. In the nine-month period, net income reached BRL 352.6 million, reversing a loss of BRL 827.6 million in the same period last year.
While underlying net income reached BRL 867.3 million, up more than five-fold from BRL 153.1 million in nine months 2020. On slide 14, we look at our improved liquidity profile. In October, the company entered into a revolving credit facility in the amount of up to $625 million for a period of three years. This represents an additional source of liquidity, allowing a more efficient cash management while enhancing the company's liquidity profile. Q3 2021 versus Q3 2020 shows a deleverage in our consolidated net debt to EBITDA ratio down to 1.8x from 3x , including the effects of IFRS 16. We ended the quarter with a strong cash position of BRL 5.4 billion.
This strong liquidity position allows us to announce today a share repurchase of up to BRL 1.5 billion that demonstrates our strong confidence in the business fundamentals. The second graph provides you with our monetization schedule and shows that we have cash far in excess of the debt maturing over the next three years. Let's turn now to our performance by business unit, beginning with Natura &Co Latam on slide 16. Total net sales, excluding the cyber incident effects that shifted BRL 393 million in sales from Q2 2020 to Q3 2020, were down 2.4% in reais and 3.2% at constant currency in Q3 on the back of a very tough comparable base. Natura in Brazil faced the highest ever comparable, and Avon in Brazil is undergoing adjustments to its new commercial model.
In Hispanic Latam, on the other hand, sales were up in strong double digits at both brands, with Natura up 16.6% in reais and 20.5% in constant currency, while Avon was up 11.9% in reais and 10.7% at constant currency. Market share in the region was slightly positive in the year-to-date, despite significant gains of 0.7 percentage points last year. In the quarter, Natura's brand power reached its highest level, while the Avon brand continued to gain strength and was above its Q3 2020 level. Consultant and representative loyalty and satisfaction indices at both brands also reached their highest ever levels. In the nine-month period, Natura &Co Latam posted strong growth of 14.4% or 11.5% at constant currency.
Here, too largely driven by very strong double-digit growth by both brands in Hispanic Latam. Compared to Q3 2019, revenue was up 7.9% at constant currency. We turn now to slide 17 to Natura & Co Latam's adjusted EBITDA. At BRL 531.1 million, Natura & Co Latam's adjusted EBITDA margin stood at 9.6%, down 690 basis points. We managed to nearly offset an 830 basis points impact from raw material inflation and FX headwinds through 750 basis points of gains from synergies and revenue management. Other temporary business pressures, notably sales deleverage, reduced margin by an additional 390 basis points, and higher investments to accelerate growth lowered margin by a further 140 basis points consistent with our business plan.
In addition, it's worth recalling that Q3 2020 adjusted EBITDA margin benefited from phased sales from the cyber incident for 160 basis points, which partially offset one-off costs for 90 basis points. Excluding these effects in Q3 2020, adjusted EBITDA margin would have decreased by 10 basis points this quarter. Over the nine month period, adjusted EBITDA reached BRL 1.7 billion, while margin dropped 90 basis points to 10.8%. Let's now move to Avon International on slide 19. Excluding the cyber incident effect that shifted BRL 61 million in sales from Q2 2020 to Q3 2020, Avon International's Q3 net revenue was down 14.3% versus Q3 2020. At constant currency, revenue was down 13.5% excluding the cyber incident effect.
Categories such as fragrance, color, and skincare show growth, and key markets such as the U.K., South Africa, and Philippines gained market share this quarter and in the nine months. The new commercial model has been implemented in the top nine markets, and social selling adoption has been multiplied by five to reach 15%. We also saw improved representative satisfaction. Over a nine month period, net revenue was up by 6.3% versus the same period last year, and down 2.9% at constant currency. Adjusted EBITDA margin was 3.9%, down 350 basis points. We face a 570 basis points impact from inflation, FX pressure, and sales deleverage that we were able to fully offset through our 590 basis points benefit from synergies and revenue management gains.
Margin also reflected 230 basis points in higher investments in digital and IT to accelerate the growth consistent with our business plan, which we fully offset with 230 basis points in temporary cost savings. Q3 2020 adjusted EBITDA margin benefited from pandemic-related one-off effects of cost containment and phased sales from the cyber incident for 380 basis points. Excluding the one-off effects in Q3 2020, adjusted EBITDA margin would have increased by 10 basis points this quarter. In the nine months, adjusted EBITDA was 4.1%, down 160 basis points. This is in line with transformation plan targets. On slide 21, we now move on to The Body Shop, where Q3 sales were up by 0.4% in reais and down 1.2% at constant currency.
The Body Shop saw growth across most regions and channel rebalancing as retail stores gradually reopen. Own stores accounted for 40% of sales this quarter versus 30% in Q3 of last year. Stores that feature the new store concept see a sales uplift of about 10%. Even with the reopening of stores, online and at home channels are still twice and 2.5x above pre-pandemic levels respectively. In the nine months, net revenue was up by 20.6% in BRL and 7.1% at constant currency. EBITDA was BRL 250.6 million, with margin of 18%, 430 basis points lower. This includes 310 basis points in one-off cost savings, which offset 60 basis points of higher investments to accelerate growth consistent with our business plan.
In addition, Q3 2020 adjusted EBITDA margin benefited from one-off pandemic-related effects, such as cost containment and government support for 570 basis points, as well as from the Japan business buyback for 100 basis points. Excluding these effects, EBITDA margin will have decreased by 10 basis points this quarter. Over nine months, EBITDA was BRL 601.9 million, with margin of 15.3% down 270 basis points. On slide 23, Aesop again recorded an excellent performance with net revenue growth of 12% in Q3 in reais and 14.2% in constant currency despite a tough comp. Revenue growth was particularly strong in Asia and in the Americas.
This was achieved despite challenging operating environments. Markets such as Australia, New Zealand, and European Union remain impacted by the pandemic, resulting in about 15% lost store days due to the store closures. In addition, the business experienced logistics and supply chain disruptions in certain markets. Retail accounted for 80% of sales in the quarter, with store sales up 26% at constant currency versus Q3 2020. Online sales were down from their peak as expected as the stores reopen, but are still twice their pre-pandemic level. Over nine months, net revenue was up 39.8% or 27.5% at constant currency. Q3 EBITDA margin was 19.6%, reflecting the impact of planned higher investments in digital, new categories, and geographic expansions to accelerate growth, representing 680 basis points and other business pressure for 170 basis points.
This was partially offset by 600 basis points in sales leverage. In addition, Q3 2020 EBITDA margin benefited from pandemic-related effects such as cost containment and government support of 910 basis points. Excluding these effects, EBITDA margin would have been stable this quarter. Over the nine-month period, EBITDA was BRL 382.5 million, while margin was 22.5% down 500 basis points. Let me now hand back to Roberto.
Thank you, Gui. In this section now, I'd like to focus on the key strategic initiatives for 2022 in the next cycle to drive growth and further advance the transformation of the Avon brand. In Natura &Co LatAm, we will roll out the new commercial model in Hispanic LatAm, as well as Natura social selling tools such as e-brochures, live shopping, and interactive launch events. We'll also be stepping up cross-selling and upselling of Natura and Avon. At Avon International, we'll continue to roll out the new commercial model based on a segmentation approach, and we will consolidate and scale up the Avon On single digital platform. We'll also be continuing to invest on the rejuvenation of the Avon brand with focus on core products and on gifting.
At The Body Shop, we'll continue rolling out the new store concept and refill stations, which results in double-digit sales uplift. We will accelerate the transformation of the Japan business after buying it back last year and continue to advance The Body Shop at home in the U.S. as well. As part of our initiatives to drive cross-sell and upsell opportunity between our brands, we are planning to pilot The Body Shop at home in Russia, leveraging now Avon's presence and market share leadership in that market. Finally, at Aesop, we continue to expand and grow with focus now to enter China with brand activation schedule and go to market estimated by second half of 2022.
We are advancing in product registration and obtaining good manufacturing practice certification for the plants that Aesop will be importing from. Investments in digital platform and CRM are being stepped up for the omni-channel strategy as well. As you can see, we remain bullish in our capacity to drive above-market growth. On slide 26, as I mentioned before, and as you saw in the material facts we published, we are launching a share repurchase plan up to BRL 1.5 billion, which reflects our capital allocation policy that aims to balance investments for growth and return to shareholders. Secondly, we are now evaluating a new step to underscore Natura &Co's holdings global profile by switching its primary listing to a major U.S. stock exchange. Over the past years, Natura &Co has developed itself into a major global business.
With the acquisitions of Aesop, The Body Shop, and more recently, Avon, Natura &Co has become the 4th largest pure-play beauty group worldwide, with operations in over 100 countries, and now more than 70% of its revenues outside of Brazil. Since early 2020, when Avon joined us and the pandemic struck, the group has consistently outperformed CFT market, as you see on the chart on the slide. At the same time, we still see significant upside relative to market in terms of multiples. As you know, Natura was born in Brazil. We'll remain in Brazil as a business, as a collective, and as a brand. We are very proud of our Brazilian heritage as part of the DNA of the group as well. They are part of our personality and culture, and also firmly rooted in our business.
We think that as we move to a post-pandemic world, and following the recent successful capital restructure, which positions the group to become investment grade in the future, the time might be right to consider a switch in the primary listing. This is part of the group's strategic planning to continue to access global markets and investors while remaining committed to the markets in which we operate via our business units and affiliates. Those will remain headquartered in their existing jurisdictions. In that regard, the holding company will likely be domiciled in U.K., where the group has a material part of its business and group resources as a key enabler to a primary listing on the NYSE. Let me now turn to slide 27 to our medium-term guidance, which we're slightly updating today.
After recent business updates, we remain confident in our ability to drive top-line growth and achieve our compound growth target in the high single digits over the next couple of years, above the CFT market. Synergies remain on track, but as explained before, some now are being used to offset the unexpected impact of the challenging and unforeseen operating environment, such as inflationary pressure, supply chain disruption, and further FX impacts. As a consequence of that, we will continue to see EBITDA margin progression over time, achieving mid-teens now at a group level by 2024 versus 2023, when we first communicated back at Investor Day in April. Let me now conclude on slide 28 with the key takeaways of this presentation. As you saw, Q3 was challenging in terms of the operating environment, but it also showed the underlying strength of our business.
In terms of key takeaways, first of all, as you have seen, we are strongly focused on executing our key strategic initiatives, even as we navigate in the short-term challenging operating environment. Second, the Avon turnaround is clearly gaining traction, with notable advances on the new commercial model and digitalization, translating into market share and representative loyalty gains. Third, we have multiple initiatives underway in 2022 that will drive future growth. Four, we have launched a share repurchase plan, and we are evaluating a potential switch in our dual listing, which are initiatives to drive value creation. Last but not least, we are on track to deliver our updated medium-term guidance that I just detailed. Thank you very much for your attention. Gui, JP, and I are now happy to take your questions.
Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press star then one on your touch tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. We'd like to ask you to limit yourself to one question each in the Q&A session. The first question comes from Helena Valero with Itaú. Please go ahead.
Hi, guys. Good morning, and thank you for taking our question. Our question is mostly related to the material facts published last night. If you could please share more details about the study being conducted about the listing outside Brazil and its benefits, and also why are you still confident about the revenue guidance for 2023, even with the headwinds faced by the company, since we understood that only the margin guidance was postponed and not the revenue, that would be great. Thank you.
Hi, Helena. Roberto is here. Thank you for the question. On the relisting, I think it's always important to clarify, right? We are already dual listing, right? We already have a listing in Brazil, primary listing, and a secondary listing to our ADR program, level two, actually, at NYSE in New York. We think that might be interesting to actually consider that switching, moving the primary listing to New York while keeping the listing in Brazil now through a BDR program that is advancing very nicely, for a couple reasons. One, it give us opportunity to access global markets as investors, as the group continue to gain traction as a global a group, while remaining committed to the markets with our business units and affiliates continue to operate.
We also think that there is an opportunity to increase the liquidity of our share and at the same time closing some of the gap in terms of our multiples. If you look at, Helena, our performance over the last, you know, year or the last two years, we've been consistently outperforming the global CFT market. Yet we are still with a multiple, you know, below, you know, our peers. We think that there is an opportunity to create value for our shareholders by being in that stage, by being able to really, you know, access those global investors, to continue to advance our ESG agenda, which is absolutely critical for us. Natura & Co. is playing more and more a global role in that space.
We think that there is a benefit, but we'd like to, you know, have more conversations with all of you, our shareholders, to make sure that this would make sense. Regarding the guidance on the top line, all of our, you know, analysis and continued update on our plans continue to indicate because of all the investments that we are doing, both in terms of the Avon integration, the turnaround of Avon, continued expansion of Natura, especially in Latin America, but also The Body Shop and Aesop, we still remain very confident in terms of our ability to drive superior top-line results again versus our global peers.
The margin, the adjustment, it is a very prudent one because of this unforeseen pressure that we started to see, from an inflation, from a supply chain disruption, that, you know, to be honest, we don't think that's gonna be just a quarter. We think that this is probably gonna continue for at least another, you know, six months. Therefore, we're just being prudent to make sure that all the modelings will adjust to that. We continue to see progression. We're still very confident we'll deliver that mid-teens, but we think that a year later is probably a more realistic approach. Hopefully that makes sense. Thank you for the question, Helena.
No, thank you. That was very clear.
The next question comes from Bob Ford with Bank of America. Please go ahead.
Thank you. Good morning, and thanks for taking my question. Roberto, given the cost pressures, but also the brand health, how are you thinking about price increases, particularly in light of your increased digital capabilities?
Hey, Bob, thank you for the question. Two things, right? We are doing a lot of revenue management in terms of how we can optimize our mix, our promotion, even in terms of our portfolio of offerings, in order to cope with some of those pressures, cost and inflationary pressures. We know that in some of our key markets, Brazil being one, we are somehow limited in the ability to increase pricing because of high unemployment, because we are seeing some pressure in terms of a drop in consumption. I think we've been doing the best we can to manage that. I would also, you know, comment that maybe different than a lot of the other companies, we do have the synergies.
The synergies are really helping us to mitigate some of that cost pressure. If you look at our gross margin, we are seeing across the board, especially in the consumer goods space, companies dropping their gross margin by as much significant amount than what we are seeing. The reason for that is, again, it is this integration that is progressing very well. It's the synergies that are happening this quarter, almost $60 million being captured in synergies that are helping us to navigate this challenging operating environment. Pricing is a component of that, but to your point, we are limited in our ability to increase pricing because, you know, we wanna be competitive. We are seeing, you know, some of the issues in terms of, consumption impact overall unemployment and therefore pricing is not a tool that we necessarily can use to mitigate all the cost pressure.
Roberto, just to follow up, as you move to an increasingly digital interface, you know, where are you in terms of really narrowing promotions and better understanding individual price elasticities? Is that something that, you know, maybe is on the horizon for Natura &Co.?
Yeah. I'm actually gonna invite JP to answer, because there are some things that are happening in markets like Argentina, which historically been, you know, very high inflation. The way I think we are thinking about digitalization, it becomes actually a good enabler to be even more agile on that. JP, if you don't mind sharing with Bob, you know, some of the examples in Argentina and now what we are starting to bring to Brazil, I think would, you know, be helpful.
Sure. Thanks, Roberto and, Bob. In Argentina, we are facing a you know hyperinflationary environment for quite a while, as you know, and also restrictions in terms of the flow of goods and imports. There is a market where we shifted already to digital brochures, magazines, which is allowing us to react to changes in prices, in product availability almost in real time, and one of the reasons we're being so successful there. That practice is being spread across the region, though in Chile, Brazil with one of the magazines we issue for consultants has become fully digital as of the end of Q3 to allow us to adjust the offerings accordingly.
By the way, couldn't be more convenient at this time, where in the Brazilian market, we saw a shift of categories from beauty products to personal care products at lower tickets and also a trade-down within each category to lower price points. As we speak, we have been adjusting our broad portfolio so as to fulfill the new needs of consumers and the digital solutions are bringing much more flexibility for us to adjust faster. Thanks.
Thank you. That's very helpful.
The next question comes from Richard Cathcart with Bradesco. Please go ahead.
Hi, everyone. Good morning. Just back on the guidance, if I may. You know, obviously you shifted the margin guidance out by a year, maintained the revenue guidance. You know, what I was hoping is if you could just give us some help to understand how you expect EBITDA margin to evolve on a consolidated basis, you know, kind of perhaps over the next few quarters, a bit of bigger view on 2022. Within that, crucially, I'm assuming that eventually additional revenue from Avon will be necessary to drive operating leverage for you to get to that, to those margin targets. When can we expect to see that revenue coming through, particularly in Brazil, but also in LatAm and international? Thanks very much.
Hey. Hi, Richard, Roberto here. Listen, you know, even though we're not giving guidance per year, right? We still feel very confident. We're seeing gradual increase in margin over time, so over the next couple of years. Again, as I mentioned, we've been very prudent in terms of the margin guidance. Again, really taking into account this unforeseen pressure that I would say pretty much all sectors and globally, everybody's experienced from supply chain disruption from inflationary pressure. I think we all saw that, you know, U.S. just shared the highest inflation in 30 years over the last 12 months.
This issue of inflation, the issue of supply chain disruption that I think the world is really going through because of the backlog of the global pandemic is real, and I think it's gonna still have an impact over the next, I would say at least, you know, a quarter to six months. Hence, you know, us being prudent in terms of, you know, delivering the guidance a year later. You know, that doesn't mean that we're not gonna continue to see progression on margin. You're absolutely right. One key enabler of that, of course, is not just the synergies, the cost synergies and integration, but also the ability to drive top-line growth. As you know, one of the key drivers of synergies is what we call the revenue synergies in Latin America.
Specifically now, JP and the team are gonna really accelerate the wave two in Latin America, which is the cross-sell and up-sell between Natura and Avon. That will be accelerated in 2022, and that will produce, you know, revenue growth. At Avon International, I would just highlight one thing that is absolutely pivotal for the turnaround of Avon, which is the new commercial model. The new commercial model that follows all the learnings from Natura on the segmentation approach is being implemented as we speak in Q3 and Q4 of this year in the top eight markets at Avon International. That will be a key enabler for us to drive more retention with the representatives, to drive progression with the representatives and hence, you know, the top-line growth.
It's not gonna happen overnight, but it is something that we're very confident. The initial feedbacks that we are getting from the reps, we are seeing the highest level of satisfaction, both at Avon Latin America and Avon International from the reps. It's a very good indicator that it is moving in the right direction.
The next question comes from João Soares with Citibank. Please go ahead.
Hi, good morning. Thanks for taking my question. I just wanted to go to Brazil. I want to understand a few points. Just understanding a little bit more of the competitive pressure, you talk a lot about pricing and the difficulty to raise prices at this moment. How should we be monitoring? How should we understand this competitive landscape? Do you see the great trade-down towards mass beauty categories? Just understanding that competitive landscape will be helpful. In that same context, understanding the wave two, and Roberto just mentioned that GP is going to accelerate the wave two implementation. How should we be looking at what's the timeline for the revenue synergies to start reflecting here in the results? Appreciate it.
Hi, João. João Paulo here. Thanks for the question. Let me start with the competitive environment in Brazil. In the Brazilian market, there's been a very clear and abrupt change in consumption pattern as of roughly July, given the pressures coming from macro, as you mentioned. In our market, that's translated into a shift from beauty category products towards personal care products, which on average have a much lower ticket. Also, within each category, there's been a trade-down to lower price tiers. The beneficiaries of that change in Q3, for that same reasons, were the mass personal product brands, which are commercialized primarily through cash and carry, supermarket, and drugstores.
Now, we were not fast enough to adjust our offerings, but as you know, we have a broad portfolio which include, you know, lower priced tiers, high quality products at value products at lower priced tiers and also personal care products. We are adjusting as we speak that offering to adapt to the new context, and we are pretty confident we can do that, even more so having Avon in our portfolio, right? That is the key for your second question. That is an excellent moment for us to combine our strengths and cross-sell through our networks of consultants and representatives. You probably heard us before that we have been testing all those mechanics for a few months already.
We are accelerating, we are kicking off some of those mechanics still this year in Brazil, end of year. You won't see much of that in Q4. But you're gonna see that as of the beginning of the year in Brazil, and we are rolling that out throughout Hispanic Latin America during the year. That will help us combining the strengths of our businesses, brands and portfolios to adjust to the new reality of the markets. Thanks.
Thanks, JP. Thanks. Very clear.
The next question comes from Steph Wissink with Jefferies. Please go ahead.
Thank you. Good morning, everyone. We had a follow-up question on the change in the timeline for the multi-year guidance. I'm just curious if you can give us a little bit more context on if you want us just to stretch our assumptions out pretty equally over an additional year, or are you also suggesting that the realization of those midterm guidance points, particularly on EBITDA, might be more back-end weighted? Just wondering if there's been any change in cadence to the annual assumptions?
Hey, Stephanie, Roberto here. We don't anticipate a change on the curve, to be honest. Again, we're not, you know, providing guidance for a year. Again, as I said, we still remain pretty confident that we'll see sequential improvement on margin. It's not gonna be totally backloaded just on year four. Again, as I said it before, being prudent, taking into account this unforeseen cost pressures, supply chain disruptions, and again, we don't see that going away just after a quarter. I think, you know, and, you know, we are seeing this potentially remaining for a longer period of time. You know, we still very bullish on our synergies. The synergies are actually on track.
Again, you know, some of them are being used to mitigate some of that impact while we're still, you know, gonna use part of the synergies to invest for growth. That's why we continue to be bullish on our top line, high single digit growth over the stated period. Hopefully that helped, Stephanie.
That's very helpful. Actually, that was my follow-up question was related to the investment, the reinvestment cycle. Your plan is also to continue to execute what you had previously planned by year, which would've then ultimately result in a slightly lower EBITDA in the shorter term, but then the realization a bit over the medium term. The investment cycle is still planned to be very consistent with what you had communicated six or seven months ago.
Correct. The cycle will remain the same. Again, we're still very bullish in some of the investments like, you know, Aesop continue to expand, you know, to enter in China, continue to again investing in the wave two of the, you know, top line growth in Latin America between Natura and Avon, that JP mentioned. As well as, you know, the brand rejuvenation of Avon International that we wanna start investing more. We have some good early indication, positive from a higher media spend in South Africa, that we can potentially roll out, and we wanna take advantage of that in the coming years. Yeah. We are not planning to change where we are investing our priorities. Again, just being cautious about the margin based on this cost pressure that we see, you know, kind of short term, but probably throughout first half of 2022.
The next question comes from Eric Huang of Santander. Please go ahead.
Hi, good morning, everyone, and thank you for taking the question. From our side, we would like to explore a little more about Avon's entry in China, more to understand if there's any upside in terms of the expected timing, and also to understand a little more about the roadmap for this entry process and the main investment impacts on margins and also if you can give any more color on how this should go on from now. Thank you.
Hi, Eric. Roberto here. Again, as I said to Stephanie before, we continue to move forward, especially with the priority of Aesop, you know, getting into China. We are very bullish, you know, based on the results of Aesop, especially in North Asia. If you look at the results in Japan and Korea, they are really encouraging. We are in the process of registering, you know, the products. We recently obtained the GMP, the Good Manufacturing Practice, certification, which is a key aspect of the process of the sites that we are gonna be importing the products from, which is a major accomplishment.
There is a process, and we are following the process with the regulatory agencies in China to be able to enter Aesop. When we are planning to do that, I think, probably, you know, second half of 2022. Some of those things are based on, you know, the regulatory approval. There is a lot of companies going through the same process, registering SKU by SKU. We have people on the ground. We are leveraging, again, capabilities that we have with the presence of Avon in China that provide support for us as a group. Things are progressing well. We are very optimistic about it. We're, you know, making the right steps.
I think, again, hopefully, by end of next year, we'll have besides Avon, you know, Aesop, and then after that, The Body Shop with a bigger presence in China as a group. As you know, is one of our few opportunities for geographic expansion, and we are very, you know, encouraged by the opportunity.
The next question comes from Irma Sgarz with Goldman Sachs. Please go ahead.
Yes, hi. Thank you very much. I was hoping you could just briefly comment on the inventory position that, if I did the math correctly, your inventory days went up, and I'm sorry if I missed any comments that you may have already made on that. Is that strategic inventory that you're building considering the supply chain bottlenecks or was there also maybe a little bit of excess inventory given that the consumption environment deteriorated a little bit more rapidly than maybe initially expected, especially in Brazil? I was curious what drove the increase in this quarter and what you expect going forward in terms of inventories?
Maybe in terms of free cash flow generation, given that you announced buyback program and you obviously committed to your growth plans, I was just curious, like, whether you felt that free cash flow generation year to date and what you see as an outlook for the year was still on track with what you're expecting, or if there's areas where you feel there can still be quite significant improvements. Thank you.
Thank you, Irma. It's Guilherme here. Let me take that question, and I will start talking a little bit about the inventory position. As you mentioned, it has of course an impact in the cash flow of the quarter, right? Inventory was one of the main offenders in working capital for the quarter. I think you raised the correct two points, right? Again, the first one is it was a strategic decision from the businesses to increase inventory at the end of Q3 as, of course, Q4, which is our biggest quarter, right, approaches and of course we want to deliver a very good service level, right?
There is a strong component of planning embedded in this inventory increase, which of course you can assume that is phasing, right? There is an impact of course in a few markets that as you correctly mentioned as well, that was a result of a slowdown in sales in September. That also impacted a high number of inventories for the end of the quarter. We expect though that inventory is a phasing component. We expect that of course, probably in the short term, given the uncertainties in the market.
We may remain with a level above average in terms of inventory, but of course, this should be a short-term impact in our cash flow as we, of course, continue to resume our cash flow priorities, which one of the key pillars of that is to improve working capital and one of the key pillars in that is of course to tackle the inventory days as you mentioned, right? As the cash flow question that you asked, Q3 is a quarter that we usually it's an outflow of cash, right? It's a quarter that we prepare ourselves for the biggest quarter, as I mentioned.
Q3 is a quarter that it is usually an outflow of cash and of course, as expected, this quarter was not different. Of course, if you look historically, Q4 is the quarter that we generate the most cash in the year, right? It's the quarter's playing seasonality here, and this year is not gonna be different. Q3 as expected was a cash disbursement. To your point on the buyback, as Roberto mentioned at the beginning, right, we're always evaluating ways to maximize value to our shareholders, right? When we look at our capital allocation priorities right now, we remain extremely focused on our organic growth and we're investing in it.
We have de-leveraged significantly in the last 12 months. You can see the difference in our gross debt is almost BRL 6 billion in the last 12 months. Of course, one of the ways to remunerate shareholder is through the buyback, and that's why we announced right now that the buyback program hence we have a lot of confidence in the plan. Thank you.
The next question comes from Andrew Ruben with Morgan Stanley. Please go ahead.
Hi. Thanks very much for the question. Most of the items have been answered. Just talking on capital allocation, could you provide an update where you stand in terms of your leverage targets and within this context, the announcement of the share repurchase, how that fits into your overall capital allocation plans? Thank you.
Thank you, Andrew. Let me take that one as well. Our capital allocation priorities, they remain the same, right? Organic growth is a key component of that, and of course, followed by remunerating value to our shareholders as our leverage ratio continues to be low. As you probably noticed, there was no change in our leverage guidance, even with the announcement of the share buyback, right? We continue to foresee the guidance of net debt with EBITDA 1x or lower than that by the end of 2023. No significant changes on that. As Roberto mentioned, the only change was on the EBITDA margin postponement from 2023 to 2024.
The next question comes from Joseph Giordano with JP Morgan. Please go ahead.
Hi, good morning, everyone. Hi, Roberto, JP, and Guilherme. Thanks for taking my question. My question goes like into the CapEx investments, right? Guilherme asked about the cash flow trends. I would like to understand what would be the new CapEx level going forward if like what we're seeing today in terms of maybe percentage of sales should be the new recurring level going forward. Thank you.
Thank you, Joe. Hope you're doing well. As you correctly mentioned, the CapEx in Q3 of this year was above Q2 of 2021 and also above Q3 of 2020, right? When you look at the percentage of sales was likely above 3%. However, if you look at the year-to-date numbers, it's still lower than 3%. We're at 2.7% as a percentage of net revenues, right? Again, even though that is significantly higher than last year, I think it's basically what we have been saying for the year. It's a result of our organic investments, right? We continue to invest in the business. As Roberto mentioned before, our top-line guidance is unchanged. Of course, part of that is a result of our investments that we're making here, both in OpEx and CapEx, right? We don't give a specific guidance in terms of CapEx, but you shouldn't assume anything significantly different than that going forward.
Ladies and gentlemen, as a reminder, if you would like to pose a question, please press the star key followed by the number one on your touchtone phone now. The next question comes from Danniela Eiger with XP Investimentos. Please go ahead.
Hi, thanks for taking my question. I have just one follow-up on the performance of the guidance. Something that caught my attention is actually obviously the key drivers behind the performance are exogenous variables that you don't have control over. Actually you have been doing a very good job in offsetting that part of that with a both gain. What caught my attention is the fact that you are postponing for only one year given the strong hit that you're having in the short term. Just wanted to understand if you're seeing additional opportunities on Avon or maybe from other initiatives such as China to help improve this profitability and deliver this guidance with only one year of late.
The other question that I have is on the new commercial model on Avon. You mentioned that it should stabilize in the short term. I just wanted to see if you could provide more color on that and also on your expectations regarding Q4, as obviously the macro deterioration weighs on demand, but as well the social gathering helps on the makeup category. That's all. Thanks.
Hi, Daniela. Roberto here. Thank you for the question. On the guidance, again, I wanna reiterate that we've been very prudent on that, right? I mean, our track record has been to always deliver and sometimes over-deliver. The only reason why we pushed back for a year is, again, this very significant unforeseen supply chain disruption, pressure, inflationary pressure across many, many markets, right? Commodity prices increased. We think that, again, as I stated, we don't foresee that this is staying for three months, but probably throughout at least first half of 2022.
Having said that, because of our synergies are actually progressing very well, because some major initiatives of the transformation of Avon already being implemented as we speak, then we're gonna be able to really deliver on this revised guidance, with level of confidence, on the execution of those plans. To link to your second part of the question, a key component of that is this new commercial model, earnings model that's being implemented both in Latin America and also at Avon International. This was always something that we talk about it from day one of the acquisition of Avon, that without that, we wouldn't really be able to turn around Avon. The good news is that even in a very short period of time, some of the early indicators in terms of rep satisfaction in changing that earnings model are encouraged.
Now, also, let's be clear, the learning from Natura when Natura implemented that a couple of years ago is that you don't do that overnight. It takes a little bit of time to make the necessary adjustments. That period is what we are going through with Avon Brazil. We are going through now on the top eight markets at Avon. But we have confidence that on the early indications of rep satisfaction, on the feedback on those new segmentation commercial model, that we're gonna really be able to drive the top line growth that we're expecting for Avon.
Again, my last point is despite all of that, one thing that we didn't talk much is in our release, is that if you take a look at the first nine months of the year, you know, Avon as a total brand is already showing growth, which hasn't happened over the last five years before. Again, I'm very encouraged and very proud of the teams being able to implement that still in the middle of a global pandemic, right? That give us also confidence about the plans moving forward. Thank you for the question. With that also, guys, I wanna just wrap up the call. I wanna think you all for staying a bit longer.
I know that we actually had a lot of information this quarter, so we gave you guys a little bit more time for the questions. Hopefully we were able to answer all of them. Of course, if there is any other follow-up, Vivian and the IR team is here to help you all. I hope you stay well. I hope you continue to stay safe. Thank you very much, and have a great rest of the day and good weekend. Thank you, everybody.
That concludes Natura &Co audio conference for today. Thank you very much for your participation. Have a great day.