M&A Announcement

Jan 6, 2020

morning, ladies and gentlemen. Thank you for waiting. At this time, we would like to welcome everyone to closing of Avon Acquisition Presentation. Today with us, we have Mr. Roberto Marquez, Executive Chairman of the Port of Natura and Co and Natura and Co Company's CEO Mr. Giapalo Ferreira, CEO of Natura and Co Latin America Ms. Angela Greteu, CEO of Avan and Ms. Vivian Behar, Investor Relations Director, Natura and and Co. The event is being recorded and all participants will be in listen only mode during the company's presentation. We have a simultaneous webcast and may access to Natura's IR website, natur. Infoinvest.com. Bren, where a presentation may be downloaded as well as a replay facility for this call. This conference may contain forward looking statements. Such statements are not statements of historical fact and reflect the beliefs and expectations of NaturaCo's management. The words anticipates, wishes, expects, estimates, intends, forecasts, plans, predicts, projects, targets and similar words are intended to identify those statements, which necessarily involve known and unknown risks and uncertainties. Unknown certainties and risks include, but are not limited to, the impact of competitive products and pricing, market acceptance of products, product transition by the group and its competitors, regulatory approval, currency fluctuations, production and supply difficulties, changes in product sales mix and other risks. This conference may also include pro form a and adjusted information prepared by the group for information and reference purposes only, which has not been audited. Forward looking statements speak only as of date that are made, and the group does not undertake any obligation to update them in the light of new information or future developments. All information on Kohl's itineraries to be captured are targeted and should not be construed by investors at projections. Now, I will turn the conference over to Mr. Roberto Marquez, Executive Chairman of the Board of Natura and Co. Mr. Marquez, the floor is yours. Good morning to all of you, and thank you for joining us at a short notice on this call to update you on the latest news and the creation of the world's 4 largest triple A beauty group. Before I begin, allow me to wish all of you a very happy and successful New Year on behalf of all of us here at Natura and Co. We look forward to a year of productive exchanges with all of you. I'm joined on this call by Angela Crutto, the newly appointed CEO of Avon, who I'm delighted to welcome and by Jean Paulo Pereira, our new CEO for the Latin America of Natura and Co Jose Filippo, our Group CFO and Vivien Ibehar, our Head of Investor Relations are also with us. Their positions are all part of the new organization and leadership team that we have put in place and that I will present to you today along with main updates of what we have done since May of last year when we first announced the transaction. After that, we'll be happy to take your questions. So let's begin on Slide 3 with the key highlights of today's presentation. For us, 2020 certainly got off to an exciting start as we closed the acquisition of Avon on Friday, January 3, after having fulfilled all the required conditions and obtained all the necessary regulatory approvals. I'm so pleased to say these approvals came swiftly, allowing us to close the transaction ahead of schedule. With this, we are taking a new and major step in creating a multi brand, multi channel group of iconic brands. We welcome Avon to our family of companies, which also includes Natura, The Body Shop and Aesop. Together, we are creating a leading direct to consumer global beauty group with unparalleled reach. Our group, as you all know, are also purpose driven, united to nurture beauty and relationships for a better way of living and doing business and committed to making positive social, economic and environmental impact. To make the most out of the scale of our group, while preserving the autonomy and distinctive attributes of each company and brand, we have put in place a renewed leadership team and organization as we will present shortly, so that we can hit the ground running. And finally, our initial findings of the integration of Avon into our group allow us to raise our synergy target. And we now expect annual recurring cost synergies in the range of $200,000,000 to $300,000,000 as was mentioned in the material fact issued this morning. I will detail all of these points in today's presentation. Before getting into this highlight, let me quickly remind you on Slide 5 of the compelling strategic rationale that underpins this transaction. First of all, it's another step in consolidating a purpose driven group. Avon's strong heritage of social causes and commitment to the empowerment of women resonates with Natura and Co vision of making a positive social and environmental impact as part of our triple bottom line 2nd, we are taking another major step in building a portfolio of global brands in line with our strategy. Avon will be a strong pillar to Natura and Co, alongside Natura, Aesop and The Body Shop. With strong household penetration, brand awareness and likability as well as global expertise and capabilities to drive growth for the group. 3rd, the combination will focus on driving growth by investing mainly in 3 strategic areas, digital e commerce, R and D and brand marketing. Those investments will be enabled by important synergies between $200,000,000 $300,000,000 on an annual basis, which we targeted to achieve within 36 months. The synergies are principally across Brazil and Latin America. Also, the group that results from today's combination is a truly multichannel direct to consumer leader, able to reach more than 200,000,000 consumers through its network of 6,300,000 passionate consultants and representatives. It's more than 3,000 stores and it's growing digital platform. Finally, the new combined entity creates a strong platform to accelerate the group's internationalization, enhance its presence in core markets in Latin America and gain a strong household presence across key categories with a very the key numbers of the group on Slide 6. By joining with Avon, Natura and Co becomes the world's 4th largest pure play beauty company with combined gross sales of $10,900,000,000 Leveraging its iconic brands, common passion for relationships and its multichannel capabilities, the expanded group will bring beauty to over 200,000,000 consumers across the world anytime, anywhere, every day. We are a leader in direct to consumer with multiple touch points on a daily basis through a truly multi channel network global footprint. Together, we have 6,300,000 consultants, over 3,000 stores and a presence in 100 countries, not to mention a growing digital presence. In line with our commitment to a better way of living and doing business, let me mention just two numbers. We have preserved over 1,800,000 hectares of rainforest and Avon Foundation for Women, which was founded in 1955 has donated more than $1,000,000,000 to women's causes. And as you see on the pie charts on the right hand side of the slide, the group has a more diverse revenue basis and with the transaction it gains a stronger presence outside of Brazil, which now represent less than 1 third of total sales from 44% previously. Conversely, we increased our share in Latin America outside of Brazil, where we see strong growth opportunity. And our footprint also becomes more global, with a significantly bigger share in Asia Pacific and Europe, Africa, Middle East. As you know, Natura and Co. And Avon are both purpose driven forces and united them will give us a stronger voice to advocate for our causes as shown on Slide 7. This notably includes taking action against the climate crisis, better and sustainable sourcing by building ties with local communities, female empowerment and ending animal testing in the beauty industry. In that respect, I would like to highlight here Avon's recent China to stop all animal testing across all its brands. These are initiatives that resonate strongly with Natura and Co and are closely aligned with our principal approach to business. Let's now look in greater details than what we have done since the announcement of transaction last May to ensure that the combination gets off to a fast start. Over the past few months, we maintained a strict arm's length relationship between Natura and Co. And Avon until the final regulatory clearances will obtain and closing was achieved, which happened this past Friday. But that did not prevent the integration planning team that was established for working hard so that we can keep the ground running and accelerate implementation from day 1. Slide 9 details some of those efforts and the positive outcomes they have produced. First of all, we create 2 integration planning work streams to identify efficiencies. The first focus specifically on Latin America and look at such areas manufacturing distribution, digital IT and sourcing. The second work stream was focused on group wide efficiencies in such areas as R and D, sustainability and organization design. This has allowed us to confirm and even again raise the synergies we identify as we will see shortly. At the same time, along with several other top executives, we conduct several market visits. This led us for instance to visit Avon's R and D facility in Sufford, New York as well as various aspects of the organization in Brazil, Latin America, Europe, Africa and Asia. This has given us a much clearer view of the strength of which we can build as integration gets underway in order to accelerate growth. And we also went through a very rigorous process of talent mapping and alignment of cultures with the support of a leading international consultancy. This has further strengthened my that we have a deep bench of top talent with industry knowledge of which we can rely for this next growth chapter. The first look under the hood, so to speak, allow us today to present a new increased synergy target, as you see on Slide 10. As I mentioned on May 23, when I presented the acquisition, synergies are obviously one of the catalysts of this transaction, driven by a powerful industrial logic, but they are not a goal in themselves. Rather, there are means to free up resources that can be reinvested in core capabilities that will accelerate our growth. For us, Uniting Natura and Avon is clearly a growth combination. At the time of the announcement of the transaction, we told you we had estimated synergies in a range of between $150,000,000 to $250,000,000 on an annual basis. Today, thanks to the initial work of our integration planning teams, I'm very pleased to report that we are raising that estimate to a range of between $200,000,000 $300,000,000 annually. The synergies will be largely achieved across the Brazil and Latin America footprint and can be broken down into 3 major buckets. The first of those is sourcing, which should generate annual synergies between $100,000,000 140,000,000 dollars As you know, procurement is already one of the main areas of synergies within Natura and Co and we see strong potential to enhance that through optimized purchasing of home materials, freight and warehousing, advertising and catalogs and also back office functions. The second bucket is manufacturing and distribution, where we see synergies between $40,000,000 to $70,000,000 We will achieve this by optimizing our distribution center footprint, reducing the complexity of our overall plant organization and consolidating such activities as cargo, thus improving service level to our consultants and representatives. And administrative expenses are another opportunity for cost savings of $60,000,000 to $90,000,000 to better integration of areas such IT, data centers and networks. Again, we expect those synergies to be fully captured within 36 months. We estimate a one time cost to achieve the synergies of about $125,000,000 which will be incurred between 2020 2022. The capture of these synergies will contribute to enhance our medium term profitability and most important allow us to reinvest in the strategic areas. Beyond the cost synergies that I had just detailed, we also see a number of top line catalysts that will allow us to unlock additional revenue in Latin America, as shown on Slide 11. The first one, of course, is a stronger consultant and representative base in Latin America, where the combined group will have more than 4,100,000 consultants and representatives in key markets where we both operate. Of that total, as you see on the graph on the left hand side of the slide, there are almost 500,000 consultants who had already bought into the combination before it was formalized by selling both Natura and Avon products. There is a strong opportunity to significantly increase the number of consultants and representatives who sell both brands. And the graph on the right hand side of the slide shows the combination significantly expand our reach into Latin America households. Of the households currently penetrate either by Natura or by Avon in the region, 25% are Natura only and 40% are Avon only, while 35% are already reached by both brands. That means that 65% of households that we reach with only one brand today could be penetrated by both brands. In addition, Avon operates alone in another 10 markets in Latin America, representing further growth potential for Natura. This give us a very powerful growth opportunity in Latin America. Another major growth opportunity highlighted on Slide 12 is what we call up sell and cross sell opportunities also in Latin America. Our family of brands which is across a broad spectrum, both in terms of price positioning and channels. As you see on the left hand side of the slide, Avon has greater mass appeal. Body Shop and Natura are positioned in the mass teach segment and Aesop is clearly in the prestige segment with premium pricing. And we are able to reach consumers through multiple channels through direct selling, which represents about 25% of Latin America CFT market and online and physical stores, which accounts for the remaining 75%. This represents a great opportunity to continue the multichannel development of each brand of the group. The combination also builds on the respective strength of Natura and Co. And Avon to develop a complementary portfolio and better position the group for category leadership, enhancing value for consumers, consultants and representatives across Latin America. Indeed, the combined group will have leadership in fragrance and body care with Natura, a leading position in color and skincare with AIVRA. And alongside the SCORE beauty categories, the combination also take Natura and Co into fashion and home, a category with development potential. Beyond Brazil and Latin America, the group also enjoying very strong position in leading markets across the globe and in emerging markets and have upside opportunity in other key markets. In Slide 13, the chart shows you some of the markets in which the group holds top 3 positions and you see for instance that in fragrance we are number 1 in Brazil, Latin America, Russia, the Philippines and Turkey, number 2 in South Africa and Poland and number 3 globally. In skincare, we are number 1 in Brazil in Latin America, number 2 in Australia and number 3 in the Philippines. In color, we are number 1 in Brazil and the Philippines, number 2 in Latin America and number 3 in South Africa, Russia and Poland. The preceding slides has shown you that we already have quantified our target cost synergies and clearly identify some clear top line opportunities in Latin America. Now on Slide 14, you also see a number of additional growth opportunities across that we can benefit from over time and that have yet to be quantified. Just to name a few, this include use Avon platform to expand Natura brand internationally, leveraging Avon Industrial and Distribution platform to service our other brands as part of the group, developing our multichannel approach across all brands, gaining a greater foothold in the China market, creating value for our consultants and representatives, thanks to our more robust portfolio and value proposition, and improving consultant and represented productivity through enhanced technology and services. Let's now take a look at how we have organized ourselves to write Natura and Co's next growth chapter. We are building a powerful group of beauty companies, but we are doing this with a clear philosophy as presented on Slide 16. We strongly believe in 2 complementary concepts, autonomy and interdependency. These aren't just words. We walk the talk every day through an agile decentralized business model. We aim to empower each business and brand and preserve its identity, while getting the most out of the group to transfer of knowledge. We have already set up a lean network structure with what we call networks of excellence, bringing together representatives of each business to share best practice in areas like digital, retail, sustainability and innovation. Now with Avon, we tend to take this one step further, creating a new network of excellence in direct selling, sharing best practice on the commercial models between Natura, Avon and Alstom Body Shop. Fundamentally, what we aim to achieve is to have clearly differentiate brand identities and cultures within a group that shares common values. To achieve this fine balance and drive Natura and Co. Next growth chapter, we have put in place a new organization and management team that we present on Slide 17. I will continue to serve as Executive Chairman of the Board and now also as a Group CEO of Natura and Co, supported by a very talent group operating committee with vast international experience, including 4 CEOs for each one of our businesses. With the addition of Avon to the group, as announced in May, we have introduced a change in our organization and have put in place 4 businesses that reflect our group strategic priorities at this stage. 1st, Latin America, incompassence responsibilities for the P and Ls of Natura, Avon and The Body Shop in the region and Aesop in Brazil, as well as the responsibility for innovation and the stewardship of the Natura brand globally. 2nd, Avon, responsible for the P and L of all the market clusters in Europe, Africa, the Middle East and Asia. This role will also be responsible for Avon brand innovation and stewardship globally. Additionally, we see the potential for this unit to be responsible for the Natura brand international expansion outside of Latin America. 3rd, we'll continue the focus with The Body Shop transformation. And finally, Aesop, remaining our fastest growing business within the group. By grouping together, the Brazilian and the Latin American operation of all of our brands and businesses, we'll be able to leverage in Natura's deep knowledge of the region to accelerate growth. And of course, we have put Juan Paulo Ferreira, who you all know as the Head of this important business as the CEO, Latin America of Natura and Co. JP has been CEO of Natura since 2016, and he has been instrumental in driving the company's growth, the revitalization of its relationship selling model and the digital transformation. I'm very pleased to be able to count on his proven execution capabilities in this next phase. And now I'm happy to pass the floor to him for a few comments. Thank you, Roberto, and good morning to everyone. Natura and Co is taking another decisive step in creating a leader in the diver to consumer space. And Latin America is the perfect place to leverage the strength of our combined businesses. As you know, over the past few years, Natura has successfully revitalized its relationship selling model with a strong advance in digitalization combined with the development of a multichannel approach and a strong product innovation pipeline. As a consequence, we have built leading position in the main markets of the region, which makes Latin America, our so to speak home market, a very strong platform on which to build and grow all of our brands. Our 4 companies have a broad and complementary product portfolio in core categories and operate across all channels in the region. So working together, we will be able to use Natura's vast market knowledge and footprint to combine our strengths and accelerate growth. I very much look forward to working with Avon, The Body Shop and Aesop to consolidate and grow our already very strong presence in Latin America. Let me now hand back to Roberto. Thank you, JP. We have also appointed Angela Crutto as CEO of Avon. Angela has been with Avon for over 20 years and has extensive experience in senior executive roles. Most recently, since 2016, she was Group VP of Central Europe, responsible for over 18 countries. I'm very pleased to welcome her to our management team, and I know she will be a terrific CEO for Avon. Building on the efforts in the past year and a half to modernize the model and value proposition, driving pricing and productivity improvements and puts representatives back at the heart of everything Avon does. Her recognized management skills, international perspective and industry experience will be a major asset to take Avon and Natura forward outside of Latin America. Please welcome Angela and give her a very warm welcome to our group. Now let me pass to Angela to say a few words. Thank you so much, Roberto, and hello to everyone. I'm thrilled to be with you today and be joining Natura and Co at this exciting time in its history. Avon has an extraordinary legacy on which to build, and I have a true passion for Avon, its employees, representatives and customers built to over more than 2 decades at the company in a broad variety of roles and countries. This is an incredible company, which makes a positive impact on the lives of our representatives and customers through the power of beauty. And we have so much potential ahead, I'm convinced the best is yet to come. Avon is on a transformation journey, and I'm greatly looking forward to working with its talented teams to continue Avon's open up strategy and deliver the next set of growth, while also driving the international expansion of Natura and furthering our combined purposes of promoting economic empowerment of women around the world. It's an honor to help lead the organization in this new chapter, which we believe will provide enhanced growth opportunities for our employees and representatives as well as improving the lives of our millions of customers. I feel privileged to be part of the team that is building a leading direct to consumer group. Like our new family, Natura and Co, we are purpose driven at heart. And together, we will build the best beauty company for the world. Thank you very much. I look forward to exchanges with you in the future as we progress in on this journey. Roberto, back to you. Thank you so very much, Angela. Great to have you with us. David Boyden will remain CEO of The Body Shop, where he has driven its transformation since its acquisition and has made excellent strides in rejuvenating and modernizing the brand while enhancing efficiency. Michael O'Keefe, CEO of Aesop since 2003 also remain in his current position, driving the high growth of these unique and prestigious brands and with the support of the rest of the group, transforming it into a true triple bottom line business. The group leadership team will also include a newly created position. Gilgo Leggaro has been appointed sustainable growth offer and will drive the group's portfolio stewardship, R and D and innovation, long term digital and IT platform, as well as sustainability and communication. Sylvia was until recently Global Chief Marketing Officer and Executive Vice President of McDonald's. And she has also been a Board member of Natura for the past 4 years, a position from which she's now stepping down. Her appointment to the executive team will be effective as of February of this year. The group operating committee is completed by Giuseppe Filippo, who is with us on the call as Chief Financial Officer. Paolo Fellerfeld, who becomes the Chief Human Resources Officer Jose Romero is appointed Chief Operations Officer responsible for the Latin America supply chain as well as global manufacturing, International Logistics, Global Procurement, Share Service and Back Office Itamar Geno, who becomes Chief Legal and Compliance Officer Robert Chatwin, who continues to be our Chief Transformational Officer for the group And also a very warm welcome to Kei Namoto, who will become the Chief of Staff of this group operating committee reporting to me. This is a very talented, diverse and international team, and I'm super proud and privileged to be working with them on this exciting next step in a Tur and Co journey. To help guide this next chapter in the Natura growth story, we have also expanded our Board of Directors adding and welcoming 3 new members who were previously part of Avon's Board as shown on Slide 18. The new directors are Nancy Killefer, who served as a senior partner at McKinsey and Company until her retirement in August 2013. She has been a member of Avon Board since 2013. Andrew Macaster Jr, who served as Deputy Chief Executive Officer and Vice Chairman at the Lloyd Companies from 2,002 until his retirement in May 2015. He has been the Chair of Audit Committee of Avon Product Board since 2018. And Don Cordwell, former Chairman and Chief Executive Officer of Granite Broadcasting Corporation and Chief Operating Officer for the Corporate Finance Department at Goldman Sachs. He joined Avon Board of Directors in 2,002 and has been acting as Lead Independent Director since 2016. As I mentioned before, Sylvia Lejada will be stepping down from our Board to take up the executive position as sustainable growth officer and her replacement will be announced in the near future. With the designation of the 3 new members of the new appointment to come, Natura and Co Board of Directors will count 13 members, 9 of them independent, combining global diversity, broad experience and industry expertise. The 3 founders of Natura will remain as co chairmen of the board and we will continue to benefit from their vision and knowledge. Slide 19 shows you the new shareholding structure. Avon current shareholders will have about 27.3% of the combined company, while Natura and Co. Shareholders will hold the reminder. It's important to note that this ratio is slightly different from that which we communicated last May of 20 Fourseventy 6. This is because the holders of the preferred class shares decided to exercise their rights to convert their holding into ordinary shares. This has a beneficial effect both on liquidity as it increases free float and on the company's capital structure and balance sheet as we do not have to raise debt to acquire this preferred class shares. The company's free float will increase to about 57% from 41% previously. And Natura Controller shareholders will hold a stake of close to 43%. As you might know, we'll have a very exciting moment in a couple of hours when we do the bell ringing ceremony on the New York Stock Exchange as we list our ADRs in addition to our listing on the Sao Paulo B3 market. In the final part of the presentation, let me focus on the key takeaways of the new group we have built on Slide 21. First of all, we have 4 empowered businesses and iconic brands, each with a clear growth trajectory. 2nd, we have a global balanced direct to consumer and increasingly multichannel footprint. 3rd, we have a robust and fast growing digital platform. 4th, we'll generate efficiencies by leveraging the group scale and know how through our agile model. 5th, we have a unique product portfolio across several segments and price points. And 6th, we have strong CAGRs compared to global peers. Now for your benefit on Slide 22, we provide a timeline of upcoming events for our group. Following today's call and bell ringing ceremony on the New York Stock Exchange, our next appointment with you is on March 5, where we'll present Natura and Co. Q4 and full year 2019 earnings. Natura and Co. And Avon still will be reporting separately, but we will provide a combined 2019 pro form a financials. We then on April 24, we will hold our Annual Shareholders Assembly and an Investor Day in Sao Paulo, doing which we'll update you on the synergies and integration and provide guidance. On May 7, as you see on the slide, we'll disclose our Q1 earnings with our first combined results. And in the Q4, in October or November, we'll hold an Investor Day in New York to present the group strategic planning for the next 5 years. So again, we'll have several opportunity to speak with you in the coming months. So let me conclude on Slide 23 by emphasizing a few key highlights of today's presentation. We are building a group that is purpose driven at heart, a group that has unparalleled direct to consumer reach in a group that balances autonomy and interdependence to get the best of both worlds, preserving each company's unique features and culture, while at the same time leveraging the scale and knowledge of the group. And we have a clear ambition. We are creating the best beauty group, not in the world, but we are trying to create the best beauty group for the world. Thank you very much for your attention. And now together with Angela, JP and Filippo, we are happy to take your questions. And our first question comes from Macros from Mizuho. Hi, guys. Good morning. In the presentation, you touched based on several potential revenue synergies. You've mentioned consultants selling both brands, the potential increase in household penetration and even the upsell of the portfolio itself. But you did not quantify it. Is it reasonable to assume that this could be more relevant than the costs and SG and A savings you described? And if yes, when do you think is the timing to generate these revenue synergies? Thank you. Marcos, Roberto here. Good morning. Happy New Year and thanks for the question. Yes, I would say those are pretty real and we are quantifying as we speak. We're not ready to disclose that. We think at this point, the team felt pretty good about increasing the guidance on the synergies that comes from the cost opportunities in the way we're going to operate in Latin America. I'll turn to JP to talk about some of the concepts again to clarify on the potential value creation on the revenue side, but that's an ongoing work right now with the teams, which of course now with Avon coming on board and with the new organization in Latin America, we're going to be able to refine. And in due time, we're going to be able to share some of those numbers with all of you. But I'll ask JP to make further comments here. Hi Thiago. Well spot. I mean, we are pretty excited with the top line synergies opportunities. As Roberto said, we are refining those calculations and moreover the path to achieve them. It's not trivial. It requires a combination logic that we're still developing. Hopefully, we're going to be able to share some of those details with you by our Investor Day late in April, right? But the concept behind as you said has to do with the fact that consultants and representatives already work with multiple brands. So we would rather have them working with our brands rather than our competitors. So that's one. And the fact that through this network, we already enter significant number of households across Latin America, but not necessarily with our both brands or even our 4 brands. So there are opportunities to use the fact that those doors have already been opened to the group to introduce another category or another brand. So more to come in a few months. Thank you. Thank you, JP. But just conceptually speaking, I know you guys still don't have an estimate for the size of the synergies, but they could be as relevant as the other ones, right? I mean, the size of it could be significant. This is my final question. Thank you very much. Definitely Thiago, definitely very significant. Our following question comes from Robert Ford from Merrill Lynch. Hey, good morning everybody and congratulations on the transaction. JP, how do you think about leveraging the consultant footprint across both the Natura and Avon brands? And in Hobartville, how quickly can hedging it sort of be configured for and deployed across Avon? Hi, Bob. JP speaking. Well, harmonizing the IT technology infrastructure will take some time. This is one of the work fronts. We have people dedicated to at this right at this moment. So hopefully sometime in the next certainly next year we're going to be able to start leveraging that, but we'll try and shorten that period. So as soon as we have more details, I'll share those with you. Hey, Bob, Roberto here. In regardings to some of the international expansion of the Natura brand, As you know, we just started a pilot in Malaysia, where we want to make sure that we find the right positioning, the right go to market, validated the brand portfolio with Natura. But then the idea is to work with between Angela, JP and Silvianal, the growth officer, to really quantify what are the key markets, what are the opportunities, the complementarity that you can see in terms of price positioning and reach and household penetration and then define some of the markets that we believe there might be opportunity to accelerate the launch of the Natura brand. And by the way, not just the Natura brand, right? I mean, we also want to include it into this strategic conversation even The Body Shop. As you know, The Body Shop has a presence in direct selling in 2 markets, U. K. And Australia, is doing extremely well in those markets in direct selling. So there might be an opportunity even from a portfolio perspective to look at it not only at Avon and Natura, but Avon, Natura and The Body Shop. All right. That's very helpful, Robert. And when it comes to social selling and maybe enabling Avon consultants to some of the social selling tools, how quickly can that be rolled out? So good question, Bob. The good news is that again, if you look at the Open Up Avon and the work that Jan has started with the team over the last 2 years, there's a lot of focus on this idea of the multi channel and increasing digitalization. We believe now leveraging already the capabilities of Natura and where Natura is, our goal is actually to accelerate that, the social selling. And use now not only the 1,700,000 consultants from Natura in Latin America, but actually the 6 point 3,000,000 consultant representatives making them become micro influencers and using our social selling tools really to create this very powerful network. As you and I always talk about it, it becomes like a dream coming true now with this enormous amount of people globally that we can reach out. That's very helpful. Thank you. Your next question comes from Tobias Singleton from Citigroup. Yes. Thank you very much. Happy New Year. Congratulations again for closing so early. The first question is just to kind of understand, you raised the synergy guidance on the cost front and you kept your expenses guidance unchanged. Can we just have a good view about how we expect to see this evolving over the next 30 6 months? So should we see kind of the expenses front loaded and the synergy back loaded? I don't know if you can elaborate a little bit on that just to allow us to understand a little bit how it will happen. That's the first question. The second question, I would like to take the opportunity, we have Angela on the call, just to get a sense about what will change, what will be different, what are the key challenges that you see for the business? I know that the area is pretty wild, but maybe if you can speak a little bit about the challenges or where we should be focusing on over the next few months? And the final question is just I think it's a good news that the conversion did not take place. So the debt at the end of the day should be the same, no incremental debt. The leverage story should be on track as well. So should we also assume even if the company kind of remains on track with the deleverage, should we assume that there will be no M and A over the next few months? I would say you have a lot on your place. So just want to confirm that, please. Thank you. Hi, Tobias. Roberto here. I will start and then I'll invite Angela to make some comments about her perception and experience. So in regards to the cost to achieve, I mean, we still feel pretty good about the numbers that we communicated. And you're right, to some extent, it is a little bit more front loaded. Not the entire number will happen in year 1, but I think we're going to see a little more heavy capture of those costs to achieve the synergies in year 1 year 2. And then the benefits really as we communicated really fully capture in 36 months. We feel pretty good about that. And again, the good news is that this work has been validated now with a cross team between both companies, Natura and Avon, that gave us the confidence to actually increase the guidance on the synergies. On the M and A side, we have our hands full now, right? So we want to make sure that we properly do this integration that we deliver on the expectations kind of the same way we did at The Body Shop. And right now that's our focus. We want to make sure that we have flawless execution in the elements that we are communicating. That's the way it kind of drove this organization design. And again, we are thrilled that we have Angela here and I will invite her to make some of the comments regarding Avon. Sure. Thank you, Roberto. So the Open Up strategy is a very strong platform for us to build our next chapter of growth. It's a multiyear transformation and we have already seen significant positive shift into the economic value added. Going forward now, we need to focus on the growth. So by creating a meaningful social selling framework, empowering our representatives not only with better tools for them to connect with their customers in a multichannel environment, but equally creating a better earnings for them through the power of the brands that we build and the power of our portfolio. And sharing best practices in between the brands, I think that will be a tremendous value added. And the other pillar of growth for us is brand relevance and digitalization. So for the brand relevance, it's time for us to re excite, reignite the customers' love for Avon and bring back the soul of the company, creating again an exciting personal gratifying social shopping experience for the customers around the world. So we do see a tremendous potential together by leveraging our assets, leveraging our synergies, refueling the brand and earning model and get a winning growth chapter ahead. Perfect. Thanks so much. If I can just follow-up, to what extent is different from what you have been doing before? So just want to get a sense if, let's say, the plan that was on place until a few weeks or months ago, I would say, It's still the same plane, our plan, is it working? I'm just kind of trying to understand to what extent something might change. We do keep the same direction. So the Open Up strategy is a very solid platform. It's just that it takes many years for us, first of all, to simplify, synergize, fuel, find resources to fuel the growth going forward. And right now, we are properly equipped to start working on our front end strategy and enable our representatives and customers to reconnect with the brand, with the portfolio through better digital tools and equally better brand proposition. Perfect. Thanks again. Our next question comes from Richard Kartikar from Bradesco. Hi, guys. Good morning. Thanks for the conference call. So just a couple of questions. The first one around Avon had some guidance that they issued, I think it was in November financial guidance about how they were expecting the Open Up strategy to impact revenue, profits, etcetera. Just wondering if you're kind of maintaining that guidance and kind of building it into the group financials. And then the second question is just around the accumulated tax losses at Avon. Just wondering if you can comment about the potential use of that kind of can you use it, how much can you use kind of when could that be realized? Thank you. Hey, Richard, good morning. Roberto here. So your first two questions, so again, as Angela said, one of the things that got us excited about this deal is that we felt the direction of Open Up Avon is the right direction. And to Angela's point, one of the things is that if nothing else, we're going to be able to accelerate some of that plan that probably would be a multiyear plan by now having the fuel for growth that comes from the synergy, that have the expertise and the acceleration of the digitalization, the social selling and the multichannel that comes from the experience of Natura in Latin America. So again, I would say the direction is probably the right one. It now, I would say, gets turbocharged and gets accelerated by this combination, both in terms of being able to get the funds and the fuel for the growth, but also some of the capabilities that we can accelerate coming in the areas like multichannel and digitalization. But in terms of the targets, again, as I think we put it on the slide, we want to make sure that now we can have a deep dive into the plans, into the budget, and we'll come back with some of that guidance in the April conversation at the Investor Day. Our next question comes from Irma Skars from Goldman Sachs. Irma, do you mind please restate your question? Yes. Hi, good morning. Can you hear me? Yes, we can. Please proceed. Yes, the question is regarding the opportunities that you have laid out for cross selling and filling out white spaces. Do you think about the aligning or separation of commercial strategies as well as product development across specifically the Avon and Natura brand in the markets where those 2 brands are overlapping or competing, for example, in Brazil and other Latin markets? How do you think about separating those commercial strategies? And then the second question, which is sort of connected to that is, if can provide a little bit more detail to the extent that you have it on how you're thinking about sort of the next step of communicating with your consultant base where you have overlap on the benefits of the merger and how the commercial structure is going to be handled going forward? Hi Irma. Hopefully you guys can hear us. Sorry for some of the technical difficulties, but we'll keep trying at least to try to finalize some of the Q and A here. So in terms of overlap, hopefully, again, on the Slide 12, we try to provide some good sense in terms of the complementarity. Avon tends to be a brand that penetrates more households, has a different price positioning than Matura and also The Body Shop, which tends to be a little more Mastiche versus Avon. So we think that there is different targets, different potential consumers. And the ability for us to penetrate more households is very clearly and as we are mapping especially in the Latin America. Internationally, again, it's going to be a work between both organizations also with the help now this newly created role of sustainable growth officer under Silvia's leadership to really try to map what are the right opportunities from a portfolio perspective in terms of helping the representatives and the consultant from a NERMEs perspective, but also in terms of complementarity. Let me invite JP also to make some comments more specific about Latin America. Hi, Irma. Well, let me remind all of you that all the commercial structures, brand management, product development functions will remain separate. The brands are different and should remain different. Having said that, to be able to achieve those synergies you referred to, it will require a combined strategy. It will not happen by chance, which means that we need to be much sharper on the role of each brand and on the incentives given to the different sales forces and consultants and representatives. So that is the element we are currently working on. It's going to take a few months to be able to have clear combined strategy that we will allow each of the brands to be much stronger in the position they are to occupy. Great. Thank you. Our following question comes from Ruben Couto from Santander. Good morning, everyone. Can you talk a little bit more on the cross category opportunities? You have like a clear dominance in free ingrates in emerging markets and is the 3rd player in the world. But in color, it seems that you face like a stiffer competition outside LATAM. So can you share with us your initial assessment of the situation? Is it a matter of product, sales channel strategy? Just the addition of like Natura brand products to the rest of the world could be enough to contain for the top three position? As you expect an increased focus on the category compared to the others going forward? Thank you. Hi, Ruben. Roberto here. When we look at the slide 13, I think the one they're referring to, I think the good news is that we have a very strong foothold in some of the categories, especially in Brazil and Latin America. And it's always important to have a strong region where you have an important dominant in leadership position that becomes like a catalyst for the expansion. Outside of Latin America, as you pointed out, we do think that there is opportunity to better manage the category, both from a product development, but also as JP and Angela mentioned, in terms of how we play with the different brands, the strength of the brand, especially in colors and skincare in a couple of markets. And we are very bullish that our opportunity, especially with the representatives of Avon to potentially bring some of those portfolios, some of the brands to enhance that presence, the penetration, provide more earnings opportunities at a different price level in different categories, especially as we think about skincare and color. And again, I would not forget to bring The Body Shop into that equation because they bring a lot of expertise and great products in skincare, for example. So it will be a combination. Again, to JP's point, it's going to take a couple of months for us to sort it out exactly the role of those brands in each one of the geographies. But we feel pretty bullish about increasing some of those presence and participation in some of those geographies, while continuing to enhance our presence in Latin America. That's clear. Thank you. And a second, a quick one. Do you have any update on that potential relocating of the company's tax domicile like an opportunity here to optimize the company's combined tax structure? Thank you. Yes. Listen, this is always something that our team will continue to look at. And at this point, we are very much committed to where we are. But as part of continue to see what's the right footprint for us now that we became more global, will be an ongoing work and work stream that the team will continue to carry on. But we don't have anything at this point to share. Perfect. Thank you, everyone. Our last question comes from Joseph Giordano from Bank Morgan. Hi, good morning everyone. Thanks for taking my question. Happy New Year. So I have like the first one is a question on the cultural aspect, right. So how are you guys going to tackle the challenge of uniting 2 companies that have historically been like enemies, right? The second one is I think goes to Angela as well. It's on the revenue turnaround for Avon. So looking back at the open app Avon plan, we would expect revenues to start stabilizing in 2019, but apparently this was not what happened. So what was your diagnostics and how can Natura help to change this going forward? Thank you. Jose, Roberto here. I'll invite them, JP and Angela, to talk about the culture and the integration. One is, again, those two companies were born with a lot of the same values, right? Purpose driven, a lot of respect, leaders in direct selling. So we think this is much more a complementary companies that are actually add to one another than eventually enemies. Yes, we were competing in a couple of geographies, but at the same time, we think that the combination will actually enhance each company's different culture and be able to learn from one another. But let me invite here perspective from JP and then Angela on that as well. Okay, Joseph. Let me start just telling you that we have not been enemies. Natura has admired Avon for whole life. I mean, this is where we learned direct selling from. And We've been working together in many countries and the association, direct selling associations, beauty associations. So many professionals of one company have migrated to the other throughout the years. So it's a case of historical admiration to start with. Then when you talk about culture, I mean, let me step back and talk about values as Roberto mentioned. And including in this deck, we are stating the values of the Naturian Co. For our companies, right? So we all work towards those values, which are expressed manifested in different ways using the strength of each brand of each channel and our global footprint, right? Now when it comes to specific behaviors, you should expect different behaviors for the different companies given the business imperatives. Avon has a couple of things to do at this point in time. The Body Shop is facing the other challenges. Natura is in the new phase of transformation, Aesop as well. So you should expect different behaviors. What you shouldn't expect is that we follow different values. And yes, when you think about Latin America in a few months' time, perhaps more than 50% of our associates will be working for all the 4 brands, which makes this idea of United Nations of Companies pretty exciting. So we are pretty confident this is going to work. All right. And about the Open Up strategy, the challenges and how we go forward. So please mind that this has been one of our most, most intense transformations of all time, end to end multifaceted transformation, trying to rebooting the direct selling, open up value, open up access, creating the simpler lean organization. So all these changes with this high intensity, obviously, have given us on one hand side a much more solid profitability, on the other hand side, challenged revenue growth. Now our aim is to stabilize after all these changes that have already given us such, such a stable foundation and step by step start growing back the number of representatives and accelerate the growth of the This concludes today's question and answer session. I would like to invite Mr. Roberto Marquez to proceed with his closing statements. Please go ahead, sir. Thank you. And again, thank you all for joining. So we'll now end I just again want to thank everybody for joining the call this morning. Appreciate all the questions and the interest. I want to just say again, we are super excited about this combination, about creating this 4th largest pure play beauty group in the world. But what really excited us is this potential and inspiring goal not just to be the best beauty group in the world, but trying to create the best beauty group for the world combined with causes that direct to consumer and really trying to make and create this positive social, economic and environmental impact. So I look forward to continue to have the dialogues with all of you over the next couple of months, welcoming again JP, Angela and the entire leadership team, and wish you all a Happy New Year. It's going to be a great year for all of us and thank you so much again. Have a good day. This concludes the Natura and Co audio conference for today. Thank you so much for your participation. Have a good day.