Earnings Call: Q4 2019

Mar 6, 2020

Good morning, ladies and gentlemen. Thank you for waiting. At this time, we would like to welcome everyone to the Natura and Co. Conference Call on the 2019 Q4 and Full Year Results. Today, with us, we have Mr. Roberto Marquez, Executive Chairman of the Board and CEO of Natura and Co Mr. Jose Filippio, CFO of Natura and Co Mr. Joao Fiera, CEO of Natura Ms. Angela Kreitou, CEO of Avon Ms. Vivian Behar, Investor Relations Director of Natura and Co. This event is being recorded and all participants will be in listen only mode during the company's presentation. After Natura's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. We have simultaneous translation into Portuguese and questions may be asked normally by participants connect from abroad either in English or Portuguese. We have a simultaneous webcast that may be accessed through Natura's IR website, www.natura.net/investor. A slide presentation may be downloaded from this website. There will be a replay facility for this call on the website after the end of the event. This presentation may contain forward looking statements. Such statements are not statements of historical fact and reflect the beliefs and expectations of Netwitter and Co's management. This presentation also includes adjusted information prepared by the company for information and reference purposes only, which have not been audited. Forward looking statements speak only as of the date they are made, and the company does not undertake any obligation Relations Director of Natura and Co. Ms. Vivienne Behar, the floor is yours. Good morning or good afternoon to everyone. I am Vivian Behar, Natura and Co's Head of Investor Relations. Thank you for joining us today for this call to present Natura and Co's 4th quarter and full year 2019 earnings. Please note, Natura and Co and Avon have filed their respective Q4 and full year financials separately, considering that in this period the companies were independently managed and the acquisition was completed on January 3, 2020. As such, we will briefly comment on Avon's Q4 and full year financials, given that Avon will not host an earnings call of its own, but those numbers are not part of the 2019 consolidated accounts of Natura and Co that we are presenting today. I am joined here today by Roberto Marquez, Executive Chairman and CEO of Natura and Co Jose Filippo, CFO of Natura and Co as well as Jean Paulo Ferreira, CEO of Natura and Co Latin America and Angela Creto, CEO of Avon, who will both join us for the Q and A session. Our Investor Relations team of Natura and Co is also with us. The presentation we will be referring to during this call is available on the Natura and Co Investor Relations website. Roberto will start with an overview of our performance, Filippo will detail our financials for Natura and Coal. He will also comment on 2019 pro form a consolidated P and L combining Natura and Co. And Avon and provide a brief overview of Avon's Q4 and full year results. After that, Roberto will make concluding remarks, and we will open the floor to your questions. Let me now hand over to Roberto. Thank you, Viviani, and hello to everyone. Thank you for joining us. Let me begin on Slide 3 with an overview of our performance. 2019 was another year of profitable growth and transformation for Natura and Co as we continue to build what has now become the world's 4th largest pure play beauty company with a portfolio of iconic brands further enhanced by the acquisition now of Avon. Our 4th quarter performance demonstrates again the power of our multi brand, multi channel group. The strength of our results continues to show our ability to serve ever increasing number of customers across price points and distribution channels. Again, this quarter year, all of our business and brands contributed to a strong performance with consolidated net sales growth of 7.3% in the 4th quarter and 7.8% in the full year. Natura posted further growth in Brazil and LATAM while developing its relationship selling model and multichannel strategy. The Body Shop continued to successfully implement its ongoing transformation plan and expanded margin to achieve its guidance. And Aesop returned to strong double digit growth in sales and profitability and its store footprint continued to grow with 20 net openings in the year. This is all despite the challenges we continue to face with both a weak CFT market in Brazil and ongoing events in Hong Kong, an important market for both The Body Shop and Aesop. Our consolidated adjusted EBITDA grew in double digits by 12.2% in Q4 and by 7.5% in the full year. Our underlying operating income, which provides of our profitability without nonrecurring costs, rose by a strong 18.2% in Q4 and by a solid 5.7% in the year. Thanks to our strong cash generation, we also continued to deleverage the group to 2.41 times net debt to EBITDA from 2.71x at end of 2018. The past year was marked by the announcement of our acquisition of Avon, which we successfully closed ahead of schedule just after the New Year. With this transaction, we are taking another transformation step, creating a leading direct to consumer global beauty group with unparalleled reach in a unique portfolio of global brands. We recently announced a new organization structure to ensure a successful integration and leverage the full capabilities of the group. We also began trading on the New York Stock Exchange through ADRs in early January. We continue to see significant growth opportunity and potential to unlock the planned synergies of $200,000,000 to $300,000,000 per year as we announced back in January. We are already working with Avon's teams to create a group committed to our triple bottom line, making positive social, economic and environmental impacts while having a stronger voice to advocate for causes that matters to us. Together, we have started our journey to build not the best beauty company in the world, but the best beauty company for the world. Before handing over to Filippo, I also would like to share with you that we are closely monitoring the situation regarding the business and financial impact of coronavirus situation. Fortunately, to date, we have not had cases with our employee base, which is the most important thing for us. And the group low overall sales exposure to China and Asia helped mitigate the initial current impact, although we are fully aware that the issue is evolving and becoming globally on a daily basis almost, unfortunately. I will return to this at the end of the presentation. Let me now hand over to Filippo to go into our financials in greater details. Thank you, Roberto, and hello to everyone. Before going into our financials, I thought it would be helpful to step back for a second and remind you of the adjustments that impact our numbers. In addition, the results presented today refer to the Natura and Co Holding SA, which replaced Natura Cosmetics SA as part of the corporate restructuring implemented to conclude the Avon acquisition. Throughout this presentation, we will refer to the adjusted EBITDA. And on Slide 5, we describe the principal adjustments that we applied to our reported figures to allow better understanding of our underlying performance. Q4 was marked by fewer non operational adjustments as we now have a comparable base for the effects of hyperinflation in Argentina and IFRS 15. And so, there are no adjustments in revenues. We continue to adjust EBITDA for nonrecurring items such as transformation costs related to The Body Shop and acquisition costs related to the Avon transaction. All results presented here exclude the effects of IFRS 16. That said, let's now look at our Q4 and full year performance. I will start this overview of our P and L with our consolidated net revenue on Slide 6. Our consolidated net sales grew by 7.3% to BRL4.6 billion in Q4. In constant currency, net revenue was up 6.1%. This solid increase in sales results from growth in all three of our businesses in Brazilian reais as we will shortly see. In the full year, consolidated net revenue grew by 7.8% in Brazilian reais and 7% at constant currency to reach BRL14.4 billion. On Slide 7, we turn our consolidated adjusted EBITDA, which stood at BRL816.7 million in Q4. This represents strong double digit growth of 12.2%. Adjusted EBITDA margin was very solid at 17.6%, a gain of 80 basis points. On a reported basis, Q4 EBITDA was BRL744.5 million, including BRL 37.5 million in Avon acquisition costs and two effects at The Body Shop. Transformation costs for BRL18.7 million and intangible write offs for BRL15.9 million. In the full year, adjusted EBITDA rose 7.5 percent to nearly BRL2 1,000,000,000 with stable margin at 13.8%. Reported EBITDA was a little over BRL1.9 million, up 3.2 percent with margin of 13.2 percent, reflecting Avon related acquisition costs for BRL141.3 million and The Body Shop transformation cost of BRL51.5 million. It also reflects the same intangible write off of BRL15.9 million at The Body Shop. Turning to Slide 9, we look at Natura and Co's underlying operating income in Q4, which accelerated by a very strong 18.2 percent to BRL641.2 million. This was driven by higher gross margin and well controlled SG and A expenses. It includes acquisition related expenses, transformation costs, financial expenses and income tax and therefore provides a cleaner vision of our operating performance, which as you can see reflects the strong sales and cost discipline. Q4 net income after these charges stood at BRL14.3 million. It reflects non cash, non recurring accounting effects of BRL206.6 million in tax linked to the corporate restructuring and net Avon related acquisition costs of BRL104.2 million. Underlying operating income in the full year was up 5.7%, solid gross profit helping offset slightly higher SG and A expenses. In the full year, net income was BRL190.9 million. This figure also includes the same non cash, non recurring accounting effect from tax from the corporate restructuring and net Avon related acquisition costs of BRL206.6 million. On Slide 11, we will look at our balance sheet items, beginning with cash flow. In the quarter, cash generation was strong at BRL802.6 million, up 13.2%. This was driven by improved working capital at Natura, supported by lower accounts receivable and improved inventory levels. In the full year, cash flow was down 15.2% to BRL397.8 million, impacted by Avon related acquisition costs. We continue deleveraging the company in line with our expectations. At year end, our net debt to EBITDA ratio stood at 2 point 41 times. After looking at our consolidated numbers, let me now comment on individual performance of our 3 businesses, starting on Page 13 with the key highlights of Natura. Total net sales were up 5.2% to BRL2.76 billion in Q4, with growth both in Brazil and Latin America despite challenging market conditions. In the full year, consolidated sales were up an even stronger 6.7%. In Brazil, sales rose 3% in Q4, which represents a very strong performance against a very challenging comparable basis. If you recall, Q4 2018 happened to be the strongest quarter since 2010 with growth of 11.2%, driven notably by Natura's best ever Christmas campaign. This year's Christmas was also strong and the gifts and fragrance category is performing well. In the full year, sales in Brazil were up 4% to BRL6.2 billion and we maintain leadership in the Brazilian CFT market. Natura's solid performance reflects the success of our relationship selling model, which is leading to higher productivity in Brazil. Consultant productivity increased for the 13th consecutive quarter, up by 0.5%. The average number of consultants was up 1.8% versus the same quarter last year to 1,100,000 consultants. Within the consultant base, we continue to see movement towards our top silver, gold and diamond segments, attesting to the good momentum of the model. Adoption of our digital platform by our consultants continue to increase as did the range of available digital solutions and services. The number of consultants using our digital platforms, which include the app and the web, rose to over 900,000. We are seeing good adoption of the Natura digital accounts. Reggi Natura, our online platform, ended Q4 with approximately 700,000 virtual stores in Brazil compared to about 400,000 1 year earlier. This contributed to double digit growth in online sales, and the quarter saw a significant increase in the number of visits. We also continue our multi channel expansion with 9 new stores opened in the quarter, all under the new concept, totaling 58 stores, which contribute to a near doubling the retail net revenue. Our consultant franchise stores totaled just over 400, doubling from last year and posted strong double digit like for like sales. In the quarter, we relaunched our premium Oona brand, which includes makeup, fragrances and nail polish. Our innovation index reached 58.4 percent in line with our expectations and reflects the innovation phasing and the focus on extending the lifecycle of existing hero products. The Latin America Q4 net sales grew 10.6% in Brazilian reais and 28.9% at constant currency. Sales in the full year were up 13.5% in reais and 23.9% at constant currency. The number of consultants grew 9.2% versus Q4 2018, and we are seeing very strong adoption of the mobile platforms, contributing to significant growth in consultant productivity. Volumes were up in the region by 29%. Highlights included Colombia, Mexico and especially Argentina, where despite the challenging economic environment, we are posting strong growth outplacing inflation. Natura became the leader in brand preference in Argentina and ranked 1st in 4 of our 5 countries in the region. I will conclude on Natura with its adjusted EBITDA on slide 14, which was BRL467.2 million in Q4, up 7% and up 2.7% in the full year to BRL1.4 billion. We saw growth both in Brazil and Latin America. In Brazil, EBITDA margin grew by a stronger 100 basis points to 20.5% in Q4, thanks to higher gross margin at 68.9% due to favorable category mix with strong sales of fragrances. In the quarter, adjusted selling, marketing, logistics expenses increased 30 basis points to 39.2% of net revenue, while adjusted G and A expenses also rose 30 basis points to 14.2% of net revenues to drive investment in innovation, IT and projects. In full year, gross margin was also up by 30 basis points to 68.8%. Adjusted selling, marketing and logistics expenses as well as adjusted G and A expenses rose 20 basis points to 41% and 14.5% of net revenue respectively, both broadly in line with 2018 as was already the case in the 9 months results. In Latin America, EBITDA was up by a strong 11.5% in Q4. EBITDA margin was 10.7%, up 10 basis points, driven by a strong top line performance and continued efforts to improve operational efficiency with SG and A down by 60 basis points. In the full year, EBITDA was up 8.9% and margin was 13%, down 60 basis points as a result of gross margin pressure linked to strong depreciation of the Argentine peso. Let's now move to The Body Shop on Slide 16. Net revenue in reais increased by 6.7% in Q4 and were down 1.2% at constant currency. This reflects the closure of 24 owned stores in the year and ongoing Hong Kong effect. Excluding Hong Kong, net revenue grew 0.4% at constant currency, driven by solid sales in Australia and the UK, supported by retail growth and double digit growth in the at home direct sales channel. In the full year, The Body Shop's net revenue was up 6.3% in reais and 0.7% in constant currency. Excluding Hong Kong, constant currency growth was 2.4% in the period. Sales were particularly strong in the U. K. But grew by 8.8% in the year, attesting the successful revival of the brand in its home market. The Body Shop continues to optimize its store footprint with 56 new net closures in 2019 and 170 since the launch of the plan. At the end of the year, it had 2,879 stores. On Slide 17, we show that The Body Shop's EBITDA in the quarter increased by 9.8%, reaching BRL229.3 million with a margin of 16%, up 50 basis points. In the year, EBITDA margin reached 9.7%, up by 180 basis points, achieving margin guidance of 10% to 11% for 2019. Nominal EBITDA was BRL 399.5 million, equivalent to £77,300,000 6% lower than 2019 nominal EBITDA guidance of £82,000,000 to £86,000,000 primarily due to the Hong Kong effects. Adjusted Q4 EBITDA, which excludes transformation costs and intangible assets write off was BRL263.9 million with adjusted margin of 18.4%, up by 20 basis points. Adjusted 2019 EBITDA was BRL467 million with margin up 90 basis points to 11.3%. Excluding Hong Kong, the adjusted EBITDA margin would have been 18.9% in Q4 and 11.5% in the year. The Body Shop's transformation program is ongoing successful with costs and benefits in line with the plan. Transformation costs in the quarter was BRL18.7 million or £3,800,000 The costs we had announced at the launch of the plan have now been fully incurred and a total of £30,600,000 in line with our estimate. These costs went to such initiatives as soft footprint optimization, discount reduction and organizational redesign. And we are very pleased with the results to date. On Slide 19, we look at Aesop, which posted strong double digit growth in both sales and profitability in Q4 and the full year. Net revenue grew in realles by 25.7% in Q4 and by 13.4% at constant currency. Like for like growth in signature stores increased 7% in Q4, with strong growth in Americas and Asia, despite the deceleration in Hong Kong. Digital sales also grew strongly. Aesop continues to open signature stores and the total reached 247 with 20 net openings in the past 12 months, of which 7 in the past quarter. Profitability also grew in strong double digit in reals with EBITDA up 44.8% in Q4, resulting in an EBITDA margin of 27.5%, up 360 basis points. In the full year, Aesop's revenue increased 22.5% in reais and 12.3% in constant currency to BRL1.3 billion. EBITDA was up 40% to BRL 227.3 billion. Margin rose 210 basis points to 17.4%. As you may have seen this morning, Avon filed their 2019 full year results. In Slide 21, I will provide a brief overview of those numbers. Let me remind you that they are not part of Natura and Co's 2019 numbers as the acquisition was closed on January 3, 2020. But we wanted to give you a bit of color on the progress Avon made during that year. Avon continued to execute against its open up turnaround strategy in 2019 and recorded a number of key advances that all set a strong foundation for future growth. This includes improvement in price mix and average representative sales, cost reduction and cash flow. 2019 saw more innovation at higher price points, which is an encouraging sign of Avon's ability to upgrade its business model. For the year, revenue was down 6% in constant currency, with an expected deceleration in Q4. As anticipated, revenue declined as a result of shopper choices made to drive the healthier, more sustainable and profitable business. Average representative sales were up 4% and Avon worked to stabilize the number of active reps while restoring fire fundamentals and lowering bad debt. Free cash flow improved to $164,000,000 from a negative $1,000,000 in the prior year and adjusted operating margin was up by 100 basis points in the year. The rollout of digital tools were accelerated and the year end of Avon increasingly leveraged the use of influencers, bloggers and social sellers. All this paves the way for a smooth integration into the Natura and Co family of brands. Natura and Co will work with Avon's management team to continue to open up Avon's strategy, restore brand equity and return value to representatives and shareholders. As just mentioned, we completed the Avon transaction on January 3 and the company is therefore not consolidating our accounts for 2019. However, we thought it would be useful to provide you with the 2019 consolidated pro form a P and L of Natura and Co. And Avon, building the baseline to capture future value. We aligned Avon's P and L in U. S. GAAP, Punator's IFRS P and L to create a pro form a P and L in IFRS, and these numbers include IFRS 16. This implies 2 category of adjustments that are detailed on Slide 23. We also like to highlight the new segment reporting that we will be implementing this year. We'll have 4 P and Ls which reflect the group's new management structure. These are Natura and Colatan, which includes Natura, Avon, The Body Shop and Isopp for division Avon International, ex LATAM, The Body Shop, ex LATAM and Aesop, ex LATAM. So moving to Slide 24, we show pro form a consolidated net revenues, which accounted to BRL32.9 billion. On this, Natura and Cola Tom represents 56% of total revenues. Avon represents 27%, The Body Shop 13% and Aesop 4%. When the segment revenues by brand Avon represents 56%, Natura 27% and The Body Shop and Aesop continue with 13% and 4%, respectively. On Slide 25, we show consolidated pro form a adjusted EBITDA for 2019, which stands at nearly BRL3.6 billion, of which BRL2.46 billion from Natura and Co Holding and the remaining BRL1.13 billion from Avon. Margin is 10.9 percent and excluding acquisition costs of BRL 316.1 million would be 11.9%. Consolidated pro form a gross margin stands at 64.1%. SG and A expenses were 55.5 percent of net revenue. Corporate expenses represent 0.8% of net revenue. Slide 26 shows pro form a 29 net income and underlying operating income. As you see, our consolidated underlying operating income reached BRL 2,500,000,000, of which BRL 1 point 41,000,000,000 from Natura and Co Holding, Scope and BRL 1,120,000,000 from Avon. This excludes transaction costs and several other non recurring impacts, including Avon acquisition related costs of BRL 316.1 million, transformation costs of BRL 601.2 million and taxes on the creation of the holding company for BRL206.6 million. Net income including these non recurring costs was BRL173 1,000,000, of which BRL155.5 million came from Natura and Co. And BRL17.5 million from Avon. Slide 27 looks at the 2019 pro form a debt profile of the group, including Avon. Total debt is BRL1.89 million, which represents an indebtedness ratio of 2.6x EBITDA. Please note that this ratio is not comparable to Natura and Co's 2.41x reported at year end 2019 because that ratio excludes the impact of IFRS 16 as we previously stated. In the pro form a basis, in order to be comparable baseline from 2020 numbers, the impacts of IFRS 16 are included. The debt is 56% in dollars 42% in Brazilian reals, with the remaining 2% in other currencies. More than half of the debt, 56% is in bonds, 24% in debentures and 17% in promissory notes. Note that we do not have major maturities coming due this year and next year, with the main maturities coming in 20222023 when Avon and Natura bonds fall due. Between 2024 and 2,043, when the next Avon bond is due, there are no further maturities. Against these maturities, we currently have more than BRL8 1,000,000,000 in cash. Let me now hand back to Roberto for his closing remarks. Thank you very much, Filippo. Before concluding remarks, I would like to share with you what we know at this stage of the impact of coronavirus situation on our business on Slide 29. Let me begin by saying that the safety of our people is 1st and foremost. We are closely monitoring the situation and acting on several fronts such as limiting travel to essential business trips and mapping effect on the supply chain. The situation, as you all know, is evolving daily and has spread beyond Asia to other regions, as you know, and it's still too early to provide you with a complete view of the full impact. Concerning Asia, what we can say at this stage is while it's an important market for us, we have a smaller footprint there than many of the global peers. This is notably true in China, partly due to our long stand opposition to animal testing for cosmetics. Asia as a whole represents just under 10% of our pro form a revenue by geography. We have a presence in 23 countries in the region, of which the Philippines is the biggest with under 4% of the group sales. China accounts for 0.5% of the group sales. In terms of commercial exposure, Europe is the most exposed as Asia represents about 40% of its net revenue, while accounts for less than 20% for The Body Shop and less than 10% of Avon's. Our supply chain impact mainly involves some Christmas packaging sets and material sourcing from The Body Shop and the home and fashion products for Avon. Aesop is non impact as suppliers and manufacturing are based in Australia. And Natura is also not materially exposed. As part of our mapping process, we are working to mitigate any potential supply chain impact. We are obviously monitoring the situation continuously and looking at its impact beyond Asia, and we'll keep you updated. Let me now conclude on Slide 30 with the key takeaways. Let me mention 3 of them. First of all, Natura and Co. Posted a solid performance in Q4 and in the full year. Our strong revenue growth demonstrate the growth momentum of the global multibrandmultichannel group we are building. 2nd, we are managing to grow profitability with double digit growth in adjusted EBITDA and margin expansion and the strong growth in underlying operating income. And even as we invest in the future growth, we have strengthened our financial structure with our solid cash flow generation allowing us to continue deleveraging our balance sheet. And 3rd, after successfully completing the acquisition of Avon ahead of schedule, we created the world's 4th largest pure play beauty group. The integration is now underway. We are all very excited with the growth, the prospects and the synergies ahead of us. Thank you very much for your attention. We are now going to open the Q and A session with Angela, Filippo, JP and myself happy to take your questions. So the floor is now yours. Thank you, ladies and gentlemen. And we'll now begin the question and answer And our first question is from Reuben Goetel from Santander. Hi, guys. Good morning. First, can you talk a little bit more about the recent working capital improvement in Brazil? What we saw in the 4Q was something timely? Or should we expect further improvements in 2020? And I know it's 30, but can you guys share a little bit with us how was the 1st 2 months of operating Avon in Brazil? How consultants are reacting? Any sort of feedback on how these 1st 2 months would be quite interesting? And a second one on The Body Shop. The company achieved its margin guidance for 2019, but barely missed the target thinking about the absolute figures because of the soft sales performance. So thinking about the 2022 guidance that includes some sort of acceleration in top line growth, are you thinking about reviewing this guidance considering now the recent events in Hong Kong and now the coronavirus? Should we focus on the 12% to 14% EBITDA margin as a target instead of the absolute €130,000,000 target? Just to get a sense of your point here. Thank you. Okay. Hi, Luebron, JP speaking. So as regards to your questions on the Brazilian operation, there's been working capital improvement, both in inventories as well as in accounts receivable. So that should be the level going forward basically, if you want to project that. As regards Pingtan's operations, it's too early to say. Just can reassure that there is a lot of excitement in the company and in the field. So that should at least is setting the tone for the improvements that we want to introduce very soon. Hi, Ruben. Roberto here. I'll take you on The Body Shop. So one, again, right? I mean, we are super excited and happy with the progress on margin against the guidance, right? So let's just from context, when we acquire The Body Shop, they were operating around 8% EBITDA margin, and we are now, on an adjusted basis, finished the year over 11%. 300 basis points improvement, which is way ahead of our guidance that we provided. Now moving forward, to your point, we still are projecting the improvement in terms of the margin. And of course, we are monitoring the impact in terms of the commercial side and the sales side because of the coronavirus as we articulated in the presentation. But we are still optimistic if you look at it long term about all the progress, If you look at the sales number excluding Hong Kong, the sales for the year grew 2.4%. In all the activities that David and the team are doing, we feel confident that we will drive the sales growth, but we remain committed to drive the to deliver the guidance, especially on the margin base. Base. Regarding the working capital that you have to ask, I think that we yes, at the end of the year, it's more related to inventories that happened. However, this is an improvement compared to 2018. If you recall that during 2019, we already mentioned that we are having better situation there. So I believe that the going forward, we still can expect some improvement, but more in a normalized way. I think that 2019 is something that we improved compared to the previous year, which we had a second higher level of improvement. So that's what I really expect That's clear. Thank you, guys. Our next question is from Thiago Cruz from Itau. Hi, guys. Actually, this is Elena here. We have just a follow-up on Huobi and Coutu question. So the thing is that we are talking here about The Body Shop, and we understand that the situation is a little bit harder and tougher than you imagined first. But we were just talking about when do you think that the company is going to show an acceleration of constant currency growth as already presented in 3rd Q? And actually, what's the main challenges here? What's the things that you're seeing that is the challenge and the main challenge for the company to start growing top line to start now to come back to growth in the top line. So that's the first thing. And the second thing, about Natura Brazil. So we saw improvement in gross margin due to the better mix, especially fragrances. And we just wanted to understand what was the difference in the fragrance strategy here because it's a very challenging market in Brazil. So we just wanted to understand this and if you have any kind of any future improvement in gross margin? Okay. Elena, Robespu here. On The Body Shop, again, right, excluding Hong Kong, if you look at the total year, we grew 2.4%, which is a pretty healthy growth. It's actually the highest that we had for The Body Shop in the last probably 5 years. But yes, to your point, we're still aiming for continuing to improve that. There are 2 things that are going to really drive that. 1 is the reset of the store layout. We have one right now in U. K. With a very good performance that we are planning to roll out in 2020. Also in terms of innovation and the new brand positioning, we're very bullish with the new position and really bringing back the leads, the causes that really made The Body Shop very strong brand and iconic brand. So those things will continue to roll out in 2020. But as you all know, we needed to monitor the impact that we are seeing globally in terms of coronavirus. So we needed just to be cautious about that, while we control what we can control, which is continue to drive the margin improvement, continue to roll out the new store layout. Elena, regarding the gross margin of our Brazilian business, we have indeed have been successfully moving our portfolio to more premium products, particularly in fragrances, which is good, helping to improve the gross margin. However, there is pressure building from exchange rate going forward, which we can we believe we can cope with. So I would expect gross margins to remain at current levels. Okay. That's very clear. And if you permit just a follow-up question about Aesop, we saw a very improvement in accelerating top line growth even with the Hong Kong situation. So we just wanted to be to understand a little bit more if you have any difference or any change of the strategic on Aesop. What's happened here for OVC, so we can see this acceleration on top line? Thank you. Yes. Thank you for the follow-up question. Again, we're very pleased with Aesop results, and those were driven primarily very strong performance in the U. S, which, again, very proud of the team in a very tough environment in retail, Aviso continued to outpace that in the U. S. Significantly. And also in North Asia, very strong performance in Japan and Korea. So the fundamentals of the business continues to be very strong and continues to be very bullish with Egypt. Okay. Thank you. Our next question is from Tobias Stingley from Citibank. Yes, thank you very much. I'm sorry, 6 questions was already made. But if you can just kind of just give us an update about your 1st month kind of looking into Avon from inside and in terms of kind of the short term and the medium term priorities that you have for the branches? Thank you so much. Tobias, Roberto here. So a couple of things. One is as we completed the acquisition in January, a couple of things already happened. So one is we already pretty much named all the management team, the leadership team, both at Latin America and Avon International. As you know, the name Angela, who is next to me here is CEO of Avon. So those things are already up and running. JP is already working and integrating the Latin America Organization. So we're feeling pretty good about that. Our first impressions, I would say, really the passion of the people of Avon about the purpose, the reason for being of the brand. It's something that's very, very important for Angela and her experience in direct selling, understanding the commercial model and working very closely with JP and the team here in Natura, I think is going to accelerate our competence and confidence in terms of really drive the right commercial model for Avon. I also would say that the level of innovation we visit suffering in New York is really state of the art. I think it is a facility that not only can help the innovation for Avon, but even beyond that at the group level. And some of the assets in terms of manufacturing, distribution centers are also something that will benefit the group. I don't know if, KP, you want to comment as well on that. I think I can only add that the more I learn about Avon from inside, the more confident I am on the size of the opportunity. Thank you, Roberto. And Jean, if I can just kind of follow-up, but what are the key challenges that you kind of identified in regards to the brand? And I know that you're changing kind of your disclosure policy going forward, but I think to some extent, it's also important for us to understand kind of how the brands are performing, how the kind of Avon is performing. So I don't know if you can just kind of send a sense to us if Avon right now, for instance, in Brazil, they are kind of stable if they are starting to grow, what should we expect going forward? This will be kind of just a follow-up. And then to Joao, I don't know if Joao can just give us a sense about what's happening in the Q1 in Brazil right now. So the Q4, we saw tough comps. So just want to get a sense about how we are starting the year. Thank you very much again for your time. Okay. Tobias, let me start with your last portion. You know that we made several adjustments in our operation during last year, merging the online, harmonizing promotional policies and so on and so forth. And actually, the second half was much healthier than the first half of the year. And we set ourselves for a strong start of 2020 as regards Natura. Now we are also seeing some initial excitement coming from Avon in Latin America. So it looks like a good start of the year. As regards the brand, rather than having me telling you about the brand, we have the pleasure of having Angela with us today. So I'll hand over to Angela to tell you a little bit about how the bank is going to be strengthened. Thank you. I would just like to give first a little bit of context of our open up and growth strategy to strengthen all our efforts to strengthening our core and how we plan to accelerate our growth going forward. As you all know, we are in the path of a multiyear transformation of man already opened up and currently we are looking to stabilize the core and accelerate our recoveries up into the resources, clear deals and the turnaround experience that we have from Natura and Co. As of this strategy, there are 3 main pillars. 1 is to create a compelling relationship sales framework. 2nd, it will really ignite our brand. So back to your question, this is an important pillar of our strategy. And then thirdly, it will be to multiply the access. Now back to the brand, we all understand that we require a strategic reset, really gaining relevance, consideration and then creating that instantly gratifying, exciting shopping choice for our consumers around the world. We do that by simplifying our brand architecture, by continuing innovating with a breakthrough formulas at all price tiers and create a new blend of purpose and brand positioning in each and every market where we operate. And our next question is from Bob Ford from Merrill Lynch. Hey, thank you and good day everybody and congratulations on the quarter. Filippo mentioned some big increases in app and digital store usage in the Brazilian consultant base. And I was hoping you could touch on efforts which were more successful in driving digitalization in the Brazilian and LatAm experiences and some of the opportunities and hurdles you face as you attempt to drive a more accelerated digitalization of Avon? And then just further to Avon and in Brazil, JP, how quickly can you begin running Avon to be more complementary to Natura in terms of price points, promotions and innovation schedules? Hi, Bob. So as regards to the utilization of our consultants, so we saw the acceleration of the adoption as mid last year as we integrated the model, the offline, the online, We introduced our e wallet as well. So that accelerated the adoption, which is now getting close to 90% of our consultants across Latin America actively using the digital mobile platform. Now the level of maturity with which they use varies quite a lot. So we are also tracking maturity in terms of usage of the various services, which are there. I don't see many obstacles in that path. It's a matter of getting more used, seeing the relevance of the services, our sales force are helping and educating consultants towards that end. And so I think we are on track of as we got the digitization of the sales force. When it comes to combined strategy between Avon and Natura across Latin America, We have already a draft version of that strategy, which we are refining as we speak, right? We can we do believe that we can use many of our existing assets, digital assets to shortcut their development. We have the leadership team now in place. Towards the end of this month, we're going to have the next layer of organization appointed. So I would expect that towards the second half of this year, you're going to see already results of a combined strategy being implemented. And if I could just one other question and it's an unrelated topic, but the growth rates of Body Shop in the UK and Australia were impressive. And I assume that a big part of that or a substantial part of that was the at home business. And I was wondering how you're thinking about developing that at home or direct sales business within those markets for The Body Shop, but across all Body Shop markets? Bob, Roberto here. Thanks for yes, and you're absolutely right. So we are very pleased to see the performance of both U. K. And Australia as the 2 fastest growing markets for The Body Shop. And you're right, there is absolutely a direct link with the at home, the direct selling component. Interesting also that we are seeing that the like for like, the strongest markets in retail are actually U. K. And Australia, which shows a very nice complementarily between their at home and the retail business. And to the point that you mentioned, David and the team, we are working now, of course, with the help of Avon to potentially accelerate at home at The Body Shop in some other markets. So hopefully, by the Investor Day, end of April, we're going to be able to show you a road map what that might look like. That's very helpful. Thank you very much. And again, congratulations. Thank you. Our next question is from Olivia Catronano from JPMorgan. Hi, guys. Thank you for taking my question. I have two questions actually. You guys talked a little bit about the variation in FX. I just wanted to understand what is the expectations you guys have with these new levels of FX, especially in Natura for gross margins? How should that impact your COGS? What you guys can do to cope with the new FX? And in this topic, still talking a little bit about the price dynamics, what you're seeing from competition? Are you seeing a better environment for passing through prices? Because I think in the results, we saw lower volumes, which is a mix effect, but definitely higher prices. And a little bit about Avon, not on the operating side, but looking on the debt side, do you guys expect to refinance the debt or any of those bonds that we currently listed? That would be that on my end. Thank you. Olivier, it's Unifin. So regarding FX, I think first of all, we have of course, we've been dealing with this. Yes, we have the situation of increasing our revenues coming from other sources of other currencies. So this year is not different. I think now we have to see the company as more like a durable footprint, where we have participation of currencies different than we used to have historically. Regarding cost, it's going to be something that will be happening. I believe that this is we only live with that in other situations. So we can pay the debt through like managing the situation, through maybe anticipating inventory some opportunities. Other than that, our contracts are dollar denominated. The ones that are dollar denominated, they have a parenthetical form which amortizes that quite like gradually. So again, we see that this is something that we already need. So should we be a concern in the short term. Regarding debt, of course, there is an opportunity for us to go through now that we have a new situation of a new portfolio of debt. The liability management is something that we talk and we consider. There are opportunities that we see. But in good time, we're going to be dealing with that and sharing with you some of those opportunities. But I believe there are definitely some upside and opportunity going forward for that. Yes. And one last point on that. Again, we are in a very strong cash position, over BRL8 1,000,000,000. And the first real important debt maturity that we have is only 20 22 and 2023. And by that time, we're going to be able to capture a lot of the synergies that we already communicated to the market. So I think in terms of managing cash, I would say we're in a very strong position. Thank you. This concludes today's question and answer session. I would now like to invite Mr. Roberto Marquez to proceed with his closing remarks. Please go ahead. So again, thank you everybody for joining us today. As you saw from today's results, again, we are very proud and very happy with the results that we show again strong momentum with our Natura and Co business. And of course, we are very excited about welcoming and working with Avon to accelerate our growth. So thank you very much for your attention, and I hope I can see some of you or most of you at our Investor Day that we're planning to be end of April and wish you all a good day on behalf of all of us. So thank you. This concludes Donator and Co. Audio conference for today. Thank you very much for your participation and have a good day.