Report of Foreign Issuer (6-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2020

Commission File Number: 001-39169

Natura &Co Holding S.A.

(Exact name of registrant as specified in its charter)

Avenida Alexandre Colares, No. 1188, Sala A17-Bloco A

Parque Anhanguera

São Paulo, São Paulo 05106-000, Brazil

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ☐ No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ☐ No ☒

NATURA &CO HOLDING S.A.

TABLE OF CONTENTS


ITEM

1.		Quarterly Information (ITR) at June 30, 2020 and report on review of quarterly information (Free translation of version filed by Natura &Co Holding S.A. with the Brazilian Securities Commission).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


NATURA &CO HOLDING S.A.

By:		/s/ José Antonio de Almeida Filippo
Name:		José Antonio de Almeida Filippo
Title:		Principal Financial Officer

By:		/s/ Itamar Gaino Filho
Name:		Itamar Gaino Filho
Title:		Chief Legal and Compliance Officer

Date: September 30, 2020

Item 1

Quarterly Information (ITR) at June 30, 2020 and report on review of quarterly information (Free translation of version filed by Natura &Co Holding S.A. with the Brazilian Securities Commission).

Natura &Co Holding S.A.

Quarterly Information (ITR)

at June 30, 2020 and report on

review of quarterly information

F-1

LOGO

(A free translation of the original in Portuguese)

Report on review of quarterly information

To the Board of Directors and Shareholders

Natura &Co Holding S.A.

Introduction

We have reviewed the accompanying parent company and consolidated interim accounting information of Natura &Co Holding S.A. (“Company”), included in the Quarterly Information Form (ITR) for the quarter ended June 30, 2020, comprising the balance sheet at that date and the statements of operations and comprehensive income for the quarter and six-month period then ended, and the statements of changes in equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory information.

Management is responsible for the preparation of the parent company and consolidated interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC) and International Accounting Standard (IAS) 34, Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and ISRE 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently did not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on the interim information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company and consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil, 05001-903, Caixa Postal 60054,

T: +55 (11) 3674 2000, www.pwc.com.br

F-2

LOGO

Natura &Co Holding S.A.

Emphasis of Matter

Reissuance of Quarterly Information Form (ITR) and review report

On August 13, 2020, we issued an unqualified review report on the Quarterly Information (ITR) for the quarter ended June 30, 2020. We call your attention to Note 2.1(b) of the Quarterly Information (ITR), which describes that the ITR originally issued by the Company on August 13, 2020 is being reissued to include a reconciliation in Note 25.3, consequently, the predecessor auditor reissued its unqualified previously issued report dated August 14, 2019. Our conclusion is not qualified in relation to this matter.

Other matters

Statements of value added

The quarterly information referred to above includes the parent company and consolidated statements of value added for the six-month period ended June 30, 2020. These statements are the responsibility of the Company’s management and are presented as supplementary information under IAS 34. These statements have been subjected to review procedures performed together with the review of the quarterly information for the purpose of concluding whether they are reconciled with the interim accounting information and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in the accounting standard CPC 09—Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that these statements of value added have not been properly prepared, in all material respects, in accordance with the criteria established in this accounting standard, and consistent with the parent company and consolidated interim accounting information taken as a whole.

Audit and review of the corresponding amounts

prior year and period

The Quarterly Information (ITR) mentioned in the first paragraph includes accounting information corresponding to the statements of operations, comprehensive income for the quarter and six-month period ended June 30, 2019, to changes in shareholders’ equity, cash flows and value added for the six-month period ended June 30, 2019, presented for comparison purposes. The corresponding accounting information of the Company, for the periods of three and six months ended June 30,2019, was prepared by management based on the procedures described in Note 2.1(a).

The review of the Quarterly Information (ITR) for the quarter ended June 30, 2019 of Natura Cosméticos S.A. (currently, a wholly owned subsidiary of the holding Natura &Co Holding S.A.) was conducted under the responsibility of other independent auditors, who issued an unqualified review report dated September 30, 2020.

F-3

LOGO

Natura &Co Holding S.A.

The Quarterly Information (ITR) mentioned in the first paragraph also includes accounting information corresponding to the balance sheet as of December 31, 2019, obtained from the financial statements as of December 31, 2019, originally prepared before the reclassifications described in Note 25.3, which were performed in connection with the acquisition of Avon Products, Inc., and are presented for comparison purposes. The examination of the financial statements for the year ended December 31, 2019, as originally prepared, was conducted under the responsibility of other independent auditors, who issued unqualified audit opinion dated March 5, 2020.

As part of our review of the ITR for the quarter ended June 30, 2020, we reviewed the aforementioned reclassifications as they relate to assets and liabilities as of December 31, 2019, described in Note 25.3. Based on our review, nothing has come to our attention that such reclassifications are not appropriate or have not been correctly performed, in all material respects. We were not engaged to audit, review or apply any other procedures on the Company’s 2019 other financial information, and, therefore, we do not express an opinion or any form of assurance on the financial information for that year.

São Paulo, September 30, 2020

PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

Leandro Mauro Ardito

Contador CRC 1SP188307/O-0

F-4

NATURA &CO HOLDING S.A.

BALANCE SHEET ON 30 JUNE 2020 AND 31 DECEMBER 2019

(All amounts in thousands of Brazilian reais - R$)


	Explanatory note	Controlling Company				Consolidated
	Explanatory note	06/2020		12/2019		06/2020		12/2019
ASSETS
CURRENT
Cash and cash equivalents	6		499,247		2,380,800		4,820,116		4,513,582
Short-term investments	7		1,583,045		669,769		2,570,204		1,025,845
Trade receivables	8		—		—		2,644,601		1,685,764
Trade receivables - related parties	31.1		506,876		—		—		—
Inventories	9		—		—		4,481,347		1,430,550
Recoverable taxes	10		—		5		1,045,201		395,640
Income tax and social contribution			2,196		—		328,974		113,478
Derivative financial instruments	5.2		—		—		179,302		—
Other current assets	14		—		—		799,222		265,198

			2,591,364		3,050,574		16,868,967		9,430,057

Assets non-current available for sale	13		—		—		195,557		—

Total current assets			2,591,364		3,050,574		17,064,524		9,430,057

NON-CURRENT
Recoverable taxes	10		—		—		893,406		409,214
Income tax and social contribution			—		—		333,983		334,671
Deferred income tax and social contribution	11		71,868		—		975,892		374,448
Judicial deposits	12		—		—		600,340		337,255
Derivative financial instruments	5.2		—		—		2,019,871		737,378
Short-term investments	7		—		—		11,326		7,402
Other non-current assets	14		—		—		1,601,593		83,836

Total long-term assets			71,868		—		6,436,411		2,284,204

Investments	15		21,686,515		3,392,677		—		—
Property, plant and equipment	16		—		—		5,350,765		1,773,889
Intangible assets	17		—		—		28,431,249		5,076,501
Right of use	18		—		—		3,809,973		2,619,861

Total non-current assets			21,758,383		3,392,677		44,028,398		11,754,455



TOTAL ASSETS			24,349,747		6,443,251		61,092,922		21,184,512


	Explanatory note	Controlling Company						Consolidated
	Explanatory note	06/2020			12/2019			06/2020			12/2019
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT
Borrowings, financing and debentures	19		1,073,162			2,883,382			2,631,068			3,354,355
Lease	18.b		—			—			1,081,059			542,088
Trade payables and reverse factoring	20		13,799			—			5,709,969			1,829,756
Trade payables - related parties	31.1		330			—			—			—
Payroll, profit sharing and social charges			15,265			—			1,111,576			560,376
Tax liabilities	21		504			1,050			614,839			320,890
Income tax and social contribution			—			196,474			189,748			388,238
Dividends and interest on shareholders’ equity payable	28.b)		—			—			—			95,873
Derivative financial instruments	5.2		—			—			75,247			11,806
Provision for tax, civil and labor risks	22		—			—			127,825			18,650
Other current liabilities	23		—			—			1,322,558			396,391

Total current liabilities			1,103,060			3,080,906			12,863,889			7,518,423

NON-CURRENT
Borrowings, financing and debentures	19		—			—			18,035,031			7,432,019
Lease	18.b		—			—			3,026,116			1,975,477
Payroll, profit sharing and social charges			1,082			—			20,904			—
Tax liabilities	21		—			—			108,808			122,569
Deferred income tax and social contribution	11		—			—			1,413,471			450,561
Provision for tax, civil and labor risks	22		—			—			1,185,943			201,416
Other non-current liabilities	23		—			—			1,165,297			121,702

Total non-current liabilities			1,082			—			24,955,570			10,303,744

TOTAL LIABILITIES			1,104,142			3,080,906			37,819,459			17,822,167

SHAREHOLDERS’ EQUITY
Capital stock			6,917,037			1,485,436			6,917,037			1,485,436
Treasury shares	24.2		(13,955	)		—			(13,955	)		—
Capital reserves			10,945,096			1,210,924			10,945,096			1,210,924
Legal profit reserve	24.4		2,364			(149,020	)		2,364			(149,020	)
Retained losses			(1,209,296	)		—			(1,209,296	)		—
Equity appraisal adjustment			6,604,359			815,005			6,604,359			815,005

Shareholders’ equity attributed to the Company’s controlling shareholders			23,245,605			3,362,345			23,245,605			3,362,345

Non-controlling interest in shareholders’ equity of subsidiaries			—			—			27,858			—

Total shareholders’ equity			23,245,605			3,362,345			23,273,463			3,362,345

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			24,349,747			6,443,251			61,092,922			21,184,512

*	The explanatory notes are an integral part of the interim financial statements.

F-5

NATURA &CO HOLDING S.A.

STATEMENT OF INCOME

FOR THE THREE - AND SIX-MONTH PERIODS ENDED ON 30 JUNE 2020 AND 2019

(All amounts in thousands of Brazilian reais - R$, except for earnings per share in the period)


	Explanatory note	Controlling Company					Controlling Company					Consolidated						Consolidated
	Explanatory note	01/04/2020 to 30/06/2020			01/04/2019 to 30/06/2019		01/01/2020 to 30/06/2020			01/01/2019 to 30/06/2019		01/04/2020 to 30/06/2020			01/04/2019 to 30/06/2019			01/01/2020 to 30/06/2020			01/01/2019 to 30/06/2019
CONTINUING OPERATIONS
NET REVENUE	26		—			—		—			—		6,987,180			3,403,709			14,505,174			6,318,859
Cost of products sold	27		—			—		—			—		(2,375,507	)		(964,555	)		(5,254,229	)		(1,773,727	)

GROSS PROFIT			—			—		—			—		4,611,673			2,439,154			9,250,945			4,545,132
OPERATING (EXPENSES) INCOME
Selling, Marketing and Logistics expenses	27		—			—		—			—		(3,171,808	)		(1,552,309	)		(6,448,997	)		(2,875,375	)
Administrative, R&D, IT and Project expenses	27		(13,992	)		—		(23,970	)		—		(1,337,544	)		(567,221	)		(2,603,635	)		(1,104,252	)
Impairment loss on trade receivables			—			—		—			—		(228,964	)		(42,609	)		(452,946	)		(118,037	)
Shareholders’ equity in subsidiaries	15		(424,550	)		—		(1,136,652	)		—		—			—			—			—
Other operating income (expenses), net	30		(30,024	)		—		(177,848	)		—		74,676			8,087			(277,874	)		22,332

OPERATING (LOSS) PROFIT BEFORE FINANCIAL RESULT			(468,566	)		—		(1,338,470	)		—		(51,967	)		285,102			(532,507	)		469,800

Financial income	29		14,802			—		65,884			—		665,538			414,057			2,225,722			792,159
Financial expenses	29		(6,603	)		—		(8,578	)		—		(934,079	)		(618,459	)		(2,721,858	)		(1,161,816	)

(LOSS) PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION			(460,367	)		—		(1,281,164	)		—		(320,508	)		80,700			(1,028,643	)		100,143
Income tax and social contribution	11		71,868			—		71,868			—		(44,853	)		(24,777	)		(139,656	)		(30,746	)

NET (LOSS) INCOME FOR THE PERIOD CONTINUING			(388,499	)		—		(1,209,296	)		—		(365,361	)		55,923			(1,168,299	)		69,397

DISCONTINUED OPERATIONS
NET LOSS OF DISCONTINUED OPERATIONS	23		—			—		—			—		(26,722	)		—			(48,723	)		—

NET LOSS FOR THE PERIOD			(388,499	)		—		(1,209,296	)		—		(392,083	)		55,923			(1,217,022	)		69,397

ATTRIBUTABLE TO
The Company´s shareholders			(388,499	)		—		(1,209,296	)		—		(388,499	)		55,923			(1,209,296	)		69,397
Non-controlling shareholders			—			—		—			—		(3,584	)		—			(7,726	)		—

			(388,499	)		—		(1,209,296	)		—		(392,083	)		55,923			(1,217,022	)		69,397

(LOSS) EARNINGS PER SHARE IN THE PERIOD - R$
Basic			(0.3211	)		—		(1.0190	)		—		(0.3211	)		0.0649			(1.0190	)		0.0804

Diluted			(0.3211	)		—		(1.0190	)		—		(0.3211	)		0.0645			(1.0190	)		0.0800

*	The explanatory notes are an integral part of the interim financial statements.

F-6

NATURA &CO HOLDING S.A.

STATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE- AND SIX-MONTH PERIODS ENDED ON 30 JUNE 2020 AND 2019

(All amounts in thousands of Brazilian reais - R$)


	Explanatory note	Controlling Company					Controlling Company					Consolidated						Consolidated
	Explanatory note	01/04/2020 to 30/06/2020			01/04/2019 to 30/06/2019		01/01/2020 to 30/06/2020			01/01/2019 to 30/06/2019		01/04/2020 to 30/06/2020			01/04/2019 to 30/06/2019			01/01/2020 to 30/06/2020			01/01/2019 to 30/06/2019
NET (LOSS) INCOME FOR THE PERIOD			(388,499	)		—		(1,209,296	)		—		(392,083	)		55,923			(1,217,022	)		69,397
Other comprehensive income to be reclassified into income of the period in subsequent periods:
Earnings in the conversion of interim financial statements of controlled companies abroad	15		1,291,448			—		5,640,486			—		1,299,477			(208,714	)		5,648,515			(147,351	)
Exchange rate effect on the conversion from hyperinflationary economy	15		104			—		(4,247	)		—		104			(584	)		(4,247	)		393
Earnings from cash flow hedge operations	5.2		—			—		—			—		(19,728	)		70,475			228,956			159,698
Tax effects on earnings from cash flow hedge operations			—			—		—			—		7,960			(22,773	)		(75,842	)		(53,701	)
Equity in earnings from cash flow hedge operation			(19,728	)		—		228,956			—		—			—			—			—
Equity in tax effects on earnings from cash flow hedge operations			7,960			—		(75,842	)		—		—			—			—			—

Comprehensive income for the period, net of tax effects			891,285			—		4,580,057			—		895,730			(105,673	)		4,580,360			28,436

ATTRIBUTABLE TO
The Company´s shareholders			891,285			—		4,580,057			—		891,285			(105,673	)		4,580,057			28,436
Noncontrolling shareholders			—			—		—			—		4,445			—			303			—

			891,285			—		4,580,057			—		895,730			(105,673	)		4,580,360			28,436

*	The explanatory notes are an integral part of the interim financial statements.

F-7

NATURA &CO HOLDING S.A.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX-MONTH PERIODS ENDED ON 30 JUNE 2020 AND 2019

(All amounts in thousands of Brazilian reais - R$)


								Capital reserves																					Equity appraisal adjustment
								Surplus on					Additional			Income from transaction with non-			Legal profit reserve							Retained			Other			Shareholders’ equity attributed						Total
	Explanatory note		Capital stock		Treasury shares			issue/sale of shares		Special reserve			paid-in capital			controlling shareholders			Legal		Tax incentives		Retained earnings			(losses) earnings			comprehensive income			to controlling shareholders			Non-Controlling Shareholders			shareholders’ equity
BALANCES ON 31 DECEMBER 2018 - Natura Cosméticos S.A. (Note 2.1(a))				427,073		(19,408	)		72,216		—			257,114			(92,066	)		18,650		82,072		1,336,293			—			492,158			2,574,102			—			2,574,102

Net income for the period				—		—			—		—			—			—			—		—		—			69,397			—			69,397			—			69,397
Exchange rate effect on the conversion from hyperinflationary economy				—		—			—		—			—			—			—		—		—			—			393			393			—			393
Other comprehensive income				—		—			—		—			—			—			—		—		—			—			(41,354	)		(41,354	)		—			(41,354	)

Total comprehensive income for the period				—		—			—		—			—			—			—		—		—			69,397			(40,961	)		28,436			—			28,436
Capital increase				24,242		—			—		—			—			—							—			—			—			24,242			—			24,242
Transactions in stock and restricted shares option plans:
Provision for stock and restricted shares option plans				—		—			—		—			40,285			—			—		—		—			—			—			40,285			—			40,285
Exercise of stock and restricted shares option plans				—		12,717			2,998		—			(17,857	)		—			—		—		—			—			—			(2,142	)		—			(2,142	)
Effect of Hyperinflationary economy adjustment				—		—			—		—			34,145			—			—		—		71			—			—			34,216			—			34,216

BALANCES ON 30 JUNE 2019 - Natura Cosméticos S.A. (Note 2.1(a))				451,315		(6,691	)		75,214		—			313,687			(92,066	)		18,650		82,072		1,336,364			69,397			451,197			2,699,139			—			2,699,139
BALANCES ON 31 DECEMBER 2019				1,485,436		—			1,096,398		206,592			—			(92,066	)		—		—		(149,020	)		—			815,006			3,362,346			—			3,362,346

Net loss for the period				—		—			—		—			—			—			—		—		—			(1,209,296	)		—			(1,209,296	)		(7,726	)		(1,217,022	)
Exchange rate effect on the conversion from hyperinflationary economy				—		—			—		—			—			—			—		—		—			—			(4,247	)		(4,247	)		—			(4,247	)
Other comprehensive income				—		—			—		—			—			—			—		—		—			—			5,793,600			5,793,600			8,029			5,801,629

Total comprehensive income for the period				—		—			—		—			—			—			—		—		—			(1,209,296	)		5,789,353			4,580,057			303			4,580,360
EGM 30 April 2020		24.3		—		—			—		(147,592	)		—			—							147,592			—			—			—			—			—
Subscription of shares through the Board of Directors’ Meeting held on 3 January 2020		24.1		3,397,746		—			9,877,148		—			—			—							—			—			—			13,274,894			27,555			13,302,449
Subscription of shares through the Board of Directors’ Meeting held on 30 June 2020		24.1		1,995,107		—			—		—			—			—							—			—			—			1,995,107			—			1,995,107
Share repurchase				—		(54,936	)		—		—			—			—							—			—			—			(54,936	)		—			(54,936	)
Transactions in stock and restricted shares option plans:																																—			—			—
Provision for stock and restricted shares option plans				—		—			—		—			33,944			—			—		—		—			—			—			33,944			—			33,944
Exercise of stock and restricted shares option plans				38,748		40,981			—		—			(56,007	)		—			—		—		—			—			—			23,722			—			23,722
Effect of Hyperinflationary economy adjustment				—		—			—		—			26,679			—			—		—		3,792			—			—			30,471			—			30,471

BALANCES ON 31 JUNE 2020				6,917,037		(13,955	)		10,973,546		59,000			4,616			(92,066	)		—		—		2,364			(1,209,296	)		6,604,359			23,245,605			27,858			23,273,463

*	The explanatory notes are an integral part of the interim financial statements.

F-8

NATURA &CO HOLDING S.A.

STATEMENT OF CASH FLOWS

FOR THE THREE-MONTH PERIODS ENDED ON 30 JUNE 2020 AND 2019

(All amounts in thousands of Brazilian reais - R$)


	Explanatory note	Controlling Company					Consolidated
		06/2020			06/2019		06/2020			06/2019
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income for the period			(1,209,296	)		—		(1,217,022	)		69,397
Adjustments to reconciliate net income for the period with net cash generated by operating activities:
Depreciation and amortization	16, 17 e 18		—			—		1,329,717			536,700
Interest on short-term investments			(12,350	)		—		(50,546	)		(37,445	)
Provision (reversal of provision) from swap and forward derivative contracts			—			—		(1,254,269	)		116,485
Provision (reversal of provision) for tax, civil and labor risks			—			—		97,703			10,450
Inflation adjustment of judicial deposits			—			—		(6,216	)		(7,447	)
Inflation adjustment of contingencies	22		—			—		8,629			5,125
Income tax and social contribution	11		(71,868	)		—		139,656			30,746
Income from sale and write-off of property, plant and equipment and intangible assets	16 e 17		—			—		8,342			12,970
Equity in subsidiaries	15		1,136,652			—		—			—
Interest and exchange rate variation on leases	18.b		—			—		121,425			64,137
Interest and exchange rate variation on borrowings and financing	19		38,363			—		1,658,428			166,350
Restatement and exchange rate variation on other assets and liabilities			(130,263	)		—		690,246			1,505
Provision (reversal of provision) for losses from property, plant and equipment and intangible assets	16 e 17		—			—		16,144			(11,084	)
Provision (reversal of provision) for stock option plans			(16,796	)		—		(24,930	)		26,903
Actual losses and provision for losses with trade receivables, net of reversals	8		—			—		397,409			118,037
Provision (reversal of provision) for inventory losses, net	9		—			—		190,763			72,980
Provision (reversal of provision) for post-employment health care plan	28.1		—			—		(6,008	)		3,971
Effect from hyperinflationary economy			—			—		26,468			29,423
Other provision (reversals)			—			—		(114,286	)		(129,469	)

			(265,558	)		—		2,011,653			1,079,734

VARIANCES IN:
Trade receivables			(5,802	)		—		217,048			22,826
Inventories			—			—		(445,220	)		(352,862	)
Recoverable taxes			—			—		(205,187	)		5,993
Other assets			—			—		466,271			(71,429	)
Domestic and foreign trade payables			14,110			—		(2,126,571	)		(64,499	)
Payroll, profit sharing and social charges, net			16,347			—		385,026			(24,366	)
Tax liabilities			(546	)		—		(75,973	)		(74,947	)
Other liabilities			(60	)		—		(594,700	)		139,536

CASH (USED IN) GENERATED BY OPERATING ACTIVITIES			(241,509	)		—		(367,653	)		659,986

OTHER CASH FLOWS FROM OPERATING ACTIVITIES
Recovery (payment) of income tax and social contribution			(198,664	)		—		(411,768	)		(224,691	)
Release (payments) of judicial deposits			—			—		27,016			3,564
Payments related to tax, civil and labor lawsuits	22		—			—		(84,585	)		(12,911	)
Payments due to settlement of derivative transactions			—			—		4,040			(33,308	)
Payment of interest on lease	18.b		—			—		(133,695	)		(64,137	)
Payment of interest on borrowings, financing and debentures	19		(21,678	)		—		(531,679	)		(257,284	)

CASH (USED IN) GENERATED BY OPERATING ACTIVITIES			(461,851	)		—		(1,498,324	)		71,219

CASH FLOW FROM INVESTING ACTIVITIES
Cash from acquisition of subsidiary	4		—			—		2,636,108			—
Additions of property, plant and equipment and intangible assets	16 e 17		—			—		(308,576	)		(217,440	)
Proceeds from sale of property, plant and equipment and intangible assets			—			—		53,982			8,454
Short-term investments			(1,957,878	)		—		(5,972,283	)		(3,547,736	)
Redemption of short-term investments			1,048,283			—		4,548,629			4,038,578
Redemption of interest on short-term investments			8,670			—		29,886			38,717
Investment in subsidiaries	15		(300,000	)		—		—			—

CASH (USED IN) GENERATED BY INVESTING ACTIVITIES			(1,200,925	)		—		987,746			320,573

CASH FLOW FROM FINANCING ACTIVITIES
Amortization of lease - principal	18		—			—		(380,902	)		(284,803	)
Amortization of borrowings, financing and debentures – principal	19		(2,326,905	)		—		(2,485,231	)		(594,912	)
New borrowings, financing, lease and debentures	18 e 19		500,000			—		1,341,538			294,842
Acquisition of treasury shares, after receipt of option strike price			(54,936	)		—		(13,955	)		(2,142	)
Payment of dividends and interest on equity for the previous year	31.2		—			—		(133,937	)		(152,979	)
Receipt of funds due to settlement of derivative transactions			—			—		82,194			1,874
Acquired company’s liability incurred by acquiror			(370,791	)		—		(370,791	)		—
Capital payment			—			—		—			24,242
Capital increase			2,033,855			—		2,033,855			—

CASH (USED IN) GENERATED BY FINANCING ACTIVITIES			(218,777	)		—		72,771			(713,878	)

Effect of exchange rate variation on cash and cash equivalents			—			—		744,340			(10,287	)

DECREASE IN CASH AND CASH EQUIVALENTS			(1,881,553	)		—		306,534			(332,373	)

Opening balance of cash and cash equivalents	6		2,380,800			—		4,513,582			1,215,048
Closing balance of cash and cash equivalents	6		499,247			—		4,820,116			882,675

DECREASE IN CASH AND CASH EQUIVALENTS			(1,881,553	)		—		306,534			(332,373	)

*	The explanatory notes are an integral part of the interim financial statements.

F-9

STATEMENT OF VALUE ADDED

FOR THE THREE-MONTH PERIODS ENDED ON 30 JUNE 2019 AND 2018

(All amounts in thousands of Brazilian reais - R$)


	Explanatory note	Controlling Company							Consolidated
	Explanatory note	06/2020					06/2019		06/2020					06/2019
INCOME			(177,848	)				—		15,937,371					7,930,410

Sale of goods, products and services			—					—		16,414,006					8,019,386
Provision for doubtful accounts, net of reversals	8		—					—		(86,717	)				20,550
Other operating expenses, net			(177,848	)				—		(389,918	)				(109,526	)
INPUTS ACQUIRED FROM THIRD PARTIES			(5,755	)				—		(11,064,226	)				(4,614,161	)

Cost of products sold and services provided			—					—		(5,674,891	)				(2,608,360	)
Materials, electricity, outsourced services and others			(5,755	)				—		(5,389,335	)				(2,005,801	)
GROSS VALUE ADDED			(183,603	)				—		4,873,145					3,316,249
RETENTIONS			—					—		(1,329,718	)				(536,700	)

Depreciation and amortization	16 and 17		—					—		(1,329,718	)				(536,700	)
VALUE ADDED PRODUCED BY THE COMPANY			(183,603	)				—		3,543,427					2,779,549
TRANSFERRED VALUE ADDED			(1,070,768	)				—		2,225,722					792,159

Equity in subsidiaries	15		(1,136,652	)				—		—					—
Financial income - including inflation adjustments and exchange rate variations	29		65,884					—		2,225,722					792,159
TOTAL VALUE ADDED TO DISTRIBUTE			(1,254,371	)				—		5,769,149					3,571,708

DISTRIBUTION OF VALUE ADDED			(1,254,371	)	100	%		—		5,769,149		100	%		3,571,708		100	%

Payroll and social charges	28		18,215		-1	%		—		3,065,697		53	%		1,452,056		41	%
Taxes, fees and contributions			(71,868	)	6	%		—		1,184,713		21	%		875,746		25	%
Financial expenses and rentals			8,578		-1	%		—		2,735,761		47	%		1,174,509		33	%
Retained losses			(1,209,296	)	96	%		—		(1,209,296	)	-21	%		69,397		2	%
Minority holders’ share in the retained profit			—		—			—		(7,726	)	0	%		—		—

*	The explanatory notes are an integral part of the interim financial statements.

F-10

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INDEX OF EXPLANATORY NOTES


1. GENERAL INFORMATION
2. SUMMARY OF THE MAIN ACCOUNTING PRACTICES
3. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
4. BUSINESS COMBINATION
5. FINANCIAL RISK MANAGEMENT
6. CASH AND CASH EQUIVALENTS
7. SHORT-TERM INVESTMENTS
8. TRADE RECEIVABLES
9. INVENTORIES
10. RECOVERABLE TAXES
11. INCOME TAX AND SOCIAL CONTRIBUTION
12. JUDICIAL DEPOSITS
13. ASSETS AVAILABLE FOR SALE
14. OTHER CURRENT AND NON-CURRENT ASSETS
15. INVESTMENTS
16. PROPERTY, PLANT AND EQUIPMENT
17. INTANGIBLE ASSETS
18. RIGHT OF USE AND LEASE
19. BORROWINGS, FINANCING AND DEBENTURES
20. TRADE PAYABLES AND REVERSE FACTORING OPERATIONS
21. TAX OBLIGATIONS
22. PROVISION FOR TAX, CIVIL AND LABOR RISKS
23. OTHER LIABILITIES
24. SHAREHOLDERS’ EQUITY
25. BUSINESS SEGMENT INFORMATION
26. NET INCOME
27. OPERATING EXPENSES AND COST OF PRODUCTS SOLD
28. EMPLOYEE BENEFITS
29. FINANCIAL INCOME (EXPENSES)
30. OTHER OPERATING INCOME (EXPENSES), NET
31. TRANSACTIONS WITH RELATED PARTIES
32. COMMITMENTS
33. INSURANCE COVERAGE
34. ADDITIONAL INFORMATION TO THE CASH FLOW STATEMENTS
35. SUBSEQUENT EVENTS
36. APPROVAL FOR ISSUE OF THE INTERIM ACCOUNTING INFORMATION

F-11

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1.	GENERAL INFORMATION

NATURA &CO HOLDING S.A. (“Natura &Co” or the “Company”) formerly referred to as Natura Holding S.A., was incorporated on 21 January 2019 with the purpose of holding interest in other companies, as a partner or shareholder, in Brazil or abroad (“holding company”). The purpose of the Company is to manage shareholding interest in companies that operate mainly in the cosmetics industry, fragrances and personal hygiene sector, through the development of manufacturing, distribution and commercialization of its products. The group’s main brand is “Natura”, followed by the brands “Avon”, “The Body Shop” and “Aesop”. In addition to using the retail market, e-commerce, business to business (“ B2B”) and franchises as sales channels for the products, the subsidiaries stand out for the work of the direct sales channel carried out mainly by Natura, The Body Shop and Avon Consultant(s).

The Company is a publicly-traded corporation, domiciled in São Paulo, registered in the special trading segment called “Novo Mercado” in the B3 S.A. – Brasil, Bolsa, Balcão (B3), under ticker “NTCO3.”

After several restructuring activities which took place for the process of acquiring Avon Products, Inc. (“Avon”), completed on 3 January 2020 (Note 4), the Company became the holding company for the Natura group. Additionally, in December 2019 it became the holder of 100% of shares of Natura Cosméticos S.A. (“Natura”), under ticker NATU3. Thus, since 18 December 2019, NATU3 shares have no longer been traded in B3 S.A. – Brasil, Bolsa, Balcão, and trading with NTCO3 shares has started in the “Novo Mercado” segment of B3. On 6 January 2020, the Company started to trade American Depositary Receipts on the New York Stock Exchange (“NYSE”), under the ticker “NTCO”.

2.	SUMMARY OF THE MAIN ACCOUNTING PRACTICES

2.1	Declaration of compliance and preparation basis

The Company’s condensed interim accounting information, included in the Quarterly Information Form - ITR pertaining to the quarter ended 30 June 2020, encompasses the individual and consolidated interim accounting information prepared pursuant to Technical Pronouncement “CPC 21 - Interim Statements”, approved by the Brazilian Securities Commission (“CVM”) and the “International Accounting Standard (“IAS”) 34 - Interim Financial Reporting”, issued by the International Accounting Standards Board (IASB).

The Management confirms that all relevant information in the interim accounting statements, and only this information, is being disclosed, and it corresponds to the information used in the development of its business management activities. The interim accounting information was prepared based on the historical costs, except for certain financial instruments measured by their fair value, as described in the accounting practices.

The main accounting practices applied upon preparing this individual and consolidated interim accounting information are disclosed in explanatory note No. 2 of the Company’s financial statements, pertaining to the fiscal year ended 31 December 2019, issued on 5 March 2020, except (i) for the presentation of information on segments (Note 25), which was changed as a result of the acquisition of Avon (Note 4). The same policies apply for comparison of the six-month period ended 30 June 2019, and (ii) practical expedient application to rent concessions in lease contracts which occurred as a direct consequence of the Covid-19 pandemic.

The information on explanatory notes did not go through significant changes in comparison to 31 December 2019, which is why it is not fully presented in this interim accounting information and must, therefore, be read jointly with the last annual financial statement.

Presentation basis for the Company’s consolidated accounting statements before the corporate restructuring presented in the Company’s annual financial statement in Note 1

As presented in the Company’s annual financial statements for the fiscal year ended 31 December 2019, the Company’s consolidated accounting information presented in this financial statement that is prior to the corporate restructuring for the acquisition of Avon was prepared pursuant to the accounting practices of the preceding costs. Thus, the comparative and consolidated historic information presented herein for the statements of income, comprehensive income statement, statement of changes in net equity, cash flow statement and added value statement for the comparative period ended on 30 June 2019, refer to the consolidated information of the entire subsidiary Natura Cosméticos S.A., and were obtained from the Quarterly Information - ITR pertaining to the second quarter of 2019, except for earnings per share and share-based payments that were restated as a result of the share bonus shown in note 24.1.

F-12

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Restatement of the interim financial statement – 30 June 2020

On 13 August 2020, the Company issued the Quarterly Information of 30 June 2020. On this date, the Company’s Management is reissuing the interim information originally issued due to the inclusion of segment reconciliation in Note 25.3, with the consequent reissue, by predecessor auditor, of his previously issued report.

2.2

Hyperinflationary economy

Information pertaining to the hyperinflationary economy was presented in the Company’s 2019 annual financial statements, in Note 3.2.1.a.

In the six-month period ended 30 June 2020, the application of CPC 42 / IAS 29 resulted in: (i) a negative impact on the financial results of Brazilian Real (“R$”) 5,556 (30 June 2019 R$ 5,864); and (ii) a negative impact on the net profit for the fiscal year of R$ 22,221 (30 June 2019 R$ 29,888), which includes the effect of the conversion of the income statement by the exchange rate on the year’s end date, instead of the average monthly exchange rate, positive impact in the sum of R$ 4,247 (30 June 2019 negative impact of R$ 393). The capital reserve and profit reserve also increased R$ 256,679 and R$ 151,384, respectively.

2.3

Consolidation

Investments in subsidiaries

Information pertaining to the consolidation was presented in the Company’s 2019 annual financial statements, in Note 3.3. a), except for the movement in the table below:


	Interest - %
	06/2020		12/2019
Direct interest:
Avon Products, Inc		100.00		—
Natura Cosméticos S.A.		100.00		100.00
Natura &Co International S.à r.l.		100.00		—

The activities of the direct subsidiaries are as follows:

•

Natura Cosméticos S.A.: is a publicly held corporation organized in accordance with the laws of the Federative Republic of Brazil on 6 June 1993, with an indefinite term. Created in 1969 in São Paulo, Brazil, it is among the top ten direct sales companies in the world. Under the Natura brand, most of the products have a natural origin, developed with ingredients from the Brazilian biodiversity and mainly distributed by means of direct sales by independent beauty consultants. It also sells through e-commerce and an expanded own store chain, composed of 43 stores in Brazil and nine stores abroad (in the USA, France, Argentina and Chile), 256 franchise stores, as well as presence in approximately 3,500 drugstores on 30 June 2019.

•

Avon Products, Inc.: Global manufacturer and trader of beauty products and other consumer products, with operations starting in 1886, and constituted pursuant to the laws of the State of New York on 27 January 1916. Its businesses are conducted in the beauty industry and other consumer goods. A direct sales company for the creation, manufacture and trade of beauty and other unrelated products. Its business is held mainly via the direct sales channel.

•

Natura &Co International S.à.r.l.: a company organized in 2020 with the purpose of acquiring, managing and selling interests in national and foreign companies, other than raising and borrowing funds for other consolidated entities of the Company.

2.4

Presentation of information per segment

Information per operating segment presented in note 25 is consistent with the internal report provided to the chief operating decision maker.

The main decision-making body of the Company, which is responsible for defining the allocation of resources and for the performance assessment of the operating segments, is Natura &Co Holding S.A.’s Board of Directors, which is assisted by the Group’s Operational Committee (“GOC”).

The GOC, which includes the Chief Executive Officers (“CEOs”) of Natura &CO, Natura, Avon, The Body Shop and Aesop, in addition to representatives of key business areas (Finance, Human Resources, Business Strategy and Development, Legal, Innovation and Sustainability, Operations and Corporate Governance), is responsible for, among other things, monitoring the implementation of short and long-term strategies and making recommendations to the Board of Directors regarding the management of the Group, from the perspective of results, allocation of resources among business units, cash flow and talent management.

F-13

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3.	CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of the individual and consolidated interim accounting information requires the Management to employ certain assumptions and accounting estimates based on experience and other factors considered relevant, which affect the value of assets and liabilities and may present results that differ from actual results. The effects resulting from accounting estimate reviews are recognized in the review period.

The significant judgments made by the Company are related to the recognition of revenue and lease.

The areas requiring a greater level of judgment and which are more complex, as well as the areas in which the premises and estimates are significant for the financial statements, are disclosed below.

There were no significant changes in the estimates and premises employed upon preparing the interim accounting information for the quarter ended 30 June 2020, or in the calculation methods used, in relation to the ones presented in explanatory note No. 3 of the Company’s financial statements pertaining to the fiscal year ended 31 December 2019, issued on 5 March 2020, except for the fair value estimates of the business combination (note 4), analyses of the potential impacts of Covid-19 (note 5.3) and impairment evaluations (note 17.a).

F-14

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4.	BUSINESS COMBINATION

Acquisition of Avon Products Inc. (“Transaction”)

On 3 January 2020, after fulfilling all conditions precedent, as disclosed in the Company’s 2019 annual financial statements, issued on 5 March 2020, explanatory note 1(a) and as a subsequent event to note 35, the Transaction was completed, and the effects of the merger of Nectarine Merger Sub II into Avon, with the latter being the surviving entity, came into force. Subsequently, Nectarine Merger Sub I was merged into Natura &Co, with the latter being the surviving entity. As a result of the mergers, on 3 January 2020, Avon became a full subsidiary of the Company, and Avon’s former shareholders became shareholders of the Company.

As a result, Natura &Co acquired control of Avon and the acquisition was accounted for under the acquisition method.

Transaction costs incurred by the Controlling Company until the completion of the transaction on 3 January 2020 amount to approximately R$ 112 million.

The following table summarizes the preliminary calculation of the fair value of the compensation transferred on 3 January 2020.


	In millions of R$, except for the number of shares
Number of Avon outstanding common shares as of 3 January 2020		536,383,776
Multiplied by the exchange ratio of 0.600 Natura &Co Holding Shares per each Avon common share		321,830,266
Multiplied by the market price of Natura &Co shares on 3 January 2020		41,00

Compensation in the issuance of shares		13,195
Adjustment to the transferred compensation (a)		171

Fair value of the compensation to be transferred		13,366

(a)

Related to the effects of potential replacements and settlements of share-based payment plans, of which the amount of R$ 80 thousand refers to the share-based payment plans of Avon, in which it was substituted by Natura &Co, and R$ 91 thousand refers to the stock option plans liquidated as a result of the conclusion of the transaction. These are pre-combination installments that were regarded as transferred compensation.

Natura &Co has yet to conclude the process of allocation of the transferred compensation among the identified assets and liabilities acquired for their fair value. The table below shows the preliminary allocation prepared by the Company and the goodwill resulting from the non-allocated part. Differences between the preliminary estimates and the final recognition of the acquisition may occur and they may be relevant. Accounting standard “CPC 15/ IFRS 3 - Business combination” allows the Company to finalize this process of allocation of the transferred compensation among identified assets and liabilities within up to 12 months counted from the acquisition date. Natura &Co is analyzing the allocation of the transferred compensation to the identified assets and liabilities acquired for their fair value.

F-15

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	*In millions of R$*
Total estimated compensation to be transferred:		13,366
(-) Fair value of acquired assets:
Cash and cash equivalent		2,636
Accounts receivable⁽¹⁾		1,135
Inventories		1,942
Other current assets and restricted cash		1,056
Assets available for sale		187
Property, plant and equipment		2,886
Income tax and deferred social contribution		667
Assets of right of use		565
Other non-current assets		475
Judicial deposits		284
Recoverable taxes		518
Employee benefit plan		553
Intangible assets ⁽²⁾		5,710
(+) Fair value of liabilities assumed:
Current liabilities		6,267
Provision for contingencies ⁽³⁾		724
Long-term debt		7,078
Long-term lease		588
Deferred income tax ⁽⁵⁾		728
Other liabilities		809

(-) Net assets		2,420
Interest of non-controlling shareholders		28

Goodwill ⁽⁴⁾		10,974

(1)	On the acquisition date, the fair value of the accounts receivable is equal to their accounting value, net of provision for expected losses in the amount of R$ 270.2 million.

(2)	The fair value of intangible assets includes intangible assets acquired and registered by Avon prior to the fair value allocation in the sum of R$ 291, added to the effects of allocation of the fair value of the following items:


	Nature	Estimated fair value (in millions of Reais)		Estimated useful life
Trade name “Avon”	Represents the fair value of trade name “Avon”		1,893		Indefinite
Main brands	Represents the fair value of “Main brands”		518		20 years
Developed technologies	Represents the fair value of all technology required to develop Avon products, including product formulas, labeling data, manufacturing processes, regulatory approvals, packages of products and designs.		1,132		7 years
Sales representatives	Represents the fair value of Avon’s relationship with its sales representatives.		1,876		14 years

Total			5,419

(3)

The provision for contingent risks demonstrated in the chart above by the sum corresponds to the historic value recorded by Avon, given that the Company is still assessing the fair value estimates, and also identifying additional contingencies which fit the recognition requirement established in paragraph 23 of CPC 15 (IFRS 3). That is, contingencies that: (i) represent a present obligation arising from past events, and (ii) can be reliably measured, regardless of the loss probability.

(4)

Goodwill pertaining to the strong market position and geographic regions that will result in a more diversified and balanced global portfolio, as well as future expected profitability and operational synergies, such as supply, manufacturing, distribution and efficiency of the administrative structure and revenue growth. This goodwill arising from the transaction is not expected to result in a tax benefit or to be deductible for tax purposes.

(5)	Consists of net operating loss deferred tax assets of approximately R$311 million and other net deferred tax liabilities of R$1,039 million.

F-16

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Since the acquisition date, Avon has contributed R$ 7,510.7 million of net revenues and R$ 1,041 million of losses in the consolidated results of Natura &Co.

Since the acquisition was concluded on 1 January 2020 and there was no significant transaction of the revenue results until 3 January 2020, the consolidated net profit and net revenue of the six-month period ended 6 June 2020 represents an impact on the Company’s net revenue and profit as if the acquisition had been made at the beginning of the year.

5.	FINANCIAL RISK MANAGEMENT

5.1

General considerations and policies

The information pertaining to the general considerations and policies of the companies of the Natura group, TBS and Aesop is presented in the 2019 annual financial statements in Note 5.

The book and fair values of the Company’s financial instruments as of 30 June 2020 are presented in the table below:

Book Value

Fair Value

Controlling Company

Note

Classification by category

Fair value
hierarchy

06/2020

12/2019

06/2020

12/2019

Financial assets

Cash and cash equivalents

Amortized cost

Cash and banks

113

2,173,101

113

2,173,101

Certificate of bank deposits

499,134

207,699

499,134

207,699

499,247

2,380,800

499,247

2,380,800

Short-term investments

Exclusive investment funds

Fair value through results

Level 2

1,583,045

669,769

1,583,045

669,769

Trade receivables - related parties

32.1

Amortized cost

506,876

—

506,876

—

Financial liabilities

Borrowings in domestic currency

Amortized cost

(1,073,162

)

(2,883,382

)

(1,073,162

)

(2,883,382

)

Trade payables, reverse factoring and related parties

Amortized cost

(14,129

)

—

(14,129

)

—

Book Value

Fair Value

Consolidated

Note

Classification by category

Fair value
hierarchy

06/2020

12/2019

06/2020

12/2019

Financial assets

Cash and cash equivalents

Cash and banks

Amortized cost

2,872,297

3,110,220

2,872,297

3,110,220

Certificate of bank deposits

Amortized cost

766,703

211,261

766,703

211,261

Repurchase operations

Fair value through results

Level 2

1,181,116

1,192,101

1,181,116

1,192,101

4,820,116

4,513,582

4,820,116

4,513,582

Short-term investments

Government securities

Fair value through results

Level 2

1,486,999

221,900

1,486,999

221,900

Restricted cash

Fair value through results

Level 2

58,764

—

58,764

—

Financial letter

Fair value through results

Level 2

377,033

374,690

377,033

374,690

Mutual investment fund

Fair value through results

Level 2

376,538

407,928

376,538

407,928

Dynamo Beauty Ventures Ltd Fund

Fair value through results

Level 2

11,326

7,402

11,326

7,402

Certificate of bank deposits

Fair value through results

Level 2

270,870

21,327

270,870

21,327

2,581,530

1,033,247

2,581,530

1,033,247

Trade receivables

Amortized cost

2,644,601

1,685,764

2,644,601

1,685,764

Court deposit

Amortized cost

600,340

337,255

600,340

337,255

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“Financial” and “Operating” derivatives		Fair value – Hedge instruments	Level 2	2,163,255		737,378		2,163,255		737,378
“Financial” and “Operating” derivatives		Fair value through results	Level 2	35,918		—		35,918		—

				2,199,173		737,378		2,199,173		737,378
Financial liabilities
Borrowings, financing and debentures	19
Borrowings in domestic currency		Amortized cost		(16,097,706	)	(7,412,443	)	(15,981,649	)	(7,445,672	)
Borrowings in foreign currency		Amortized cost		(4,568,393	)	(3,373,931	)	(4,420,002	)	(3,541,541	)

				(20,666,099	)	(10,786,374	)	(20,401,651	)	(10,987,213	)
“Financial” and “Operating” derivatives		Fair value – Hedge instruments	Level 2	—		(10,158	)	—		(10,158	)
“Financial” and “Operating” derivatives		Fair value through results	Level 2	(75,247	)	(1,648	)	(75,247	)	(1,648	)

				(75,247	)	(11,806	)	(75,247	)	(11,806	)
Lease	18	Amortized Cost		(4,107,175	)	(2,517,565	)	(4,107,175	)	(2,517,565	)
Trade payables and reverse factoring operations	20	Amortized cost		(5,709,969	)	(1,829,756	)	(5,709,969	)	(1,829,756	)

5.2

Financial risk factors

Information pertaining to the financial risk factors is presented in the Company’s 2019 annual financial statements in Note 5.2.

Market risks

To hedge the current positions of the Balance Sheet of the Company and its subsidiaries against market risk, the following derivative financial instruments were used and consist of the following balances as of 30 June 2020 and 31 December 2019:


Description	Fair Value (Level 2)
	Consolidated
	06/2020		12/2019
“Financial” derivatives		2,121,287		725,060
“Operating” derivatives		2,639		512

Total		2,123,926		725,572

Foreign exchange risk

As of 30 June 2020 and 31 December 2019, the Company and its subsidiaries are primarily exposed to the risk of fluctuation of the US dollar, euro, pound sterling and emerging market currencies. In order to hedge foreign exchange exposures in relation to foreign currency, the Company and its subsidiaries enter into transactions with derivative financial instruments of the “swap” type and forward purchase of currency named Non-Deliverable Forwards (“NDFs”).

As of 30 June 2020, borrowings, financing and debentures in the consolidated balance sheet include accounts in foreign currency which expose the subsidiaries of the Company to foreign exchange risk, representing, in the aggregate, total liabilities of R$ 4,568,393 (R$ 3,381,959 as of 31 December 2019).

i)	Derivatives to hedge foreign exchange risk

The outstanding derivative agreements present maturity flows between January 2020 and February 2023. The derivative agreements in The Body Shop were entered into with represented counterparties and mature within up to 12 months.

The Company and its subsidiaries classify derivatives into: “Financial” and “Operating”. The “Financial” ones are “swap” or “forward” derivatives, contracted to hedge the foreign exchange risk of borrowings, financing, debt instruments and loans in foreign currency. The “Operating” ones are derivatives contracted to hedge the foreign exchange risk of operating cash flows of the business.

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As of 30 June 2020, the balances of derivatives are as follows:

“Financial” derivatives

Consolidated

Principal
(Notional) amount

Curve value

Fair value

Gain (loss) of adjustment
at fair value

Description

06/2020

12/2019

06/2020

12/2019

06/2020

12/2019

06/2020

12/2019

Swap agreements:

Asset portion:

Dollar purchased position

2,661,494

2,664,001

4,603,592

3,416,707

5,102,622

3,729,691

499,030

312,984

Liability portion:

Post-fixed CDI Rate:

Position sold in CDI

2,661,494

2,664,001

2,729,070

2,754,595

2,942,841

3,002,623

213,770

248,028

NDFs Forward Agreements:

Liability portion:

Post-fixed CDI Rate:

Position sold at the interbank rate

5,442,792

200,896

1,882

(1,848

)

(38,494

)

(2,008

)

(40,376

)

(160

)

Total net derivative financial instruments:

5,442,792

200,896

1,876,404

660,264

2,121,287

725,060

244,884

64,796

For financial derivatives maintained by the Company and its subsidiaries as of 31 December 2019 and 30 June 2020, due to the fact that the agreements are directly entered into with the financial institutions and not through stock markets, there are no margin calls deposited as guarantee of these transactions.

“Operating” derivatives - Consolidated

As of 30 June 2020, the Company and its subsidiaries maintain derivative financial instruments of the “forward” type, with the purpose of hedging the foreign exchange risk of operating cash flows (such as import and export transactions):

Description

Principal (Notional) amount

Fair value

06/2020

12/2019

06/2020

12/2019

Net position - GBP and USD

1,093,241

5,898

—

Forward agreements

119,851

1,302,869

(3,259

)

512

Total Derivative Financial Instruments, net

1,213,092

1,302,869

2,639

512

Sensitivity analysis

For the sensitivity analysis of the foreign exchange exposure risk, the Management of the Company and its subsidiaries understands it is necessary to consider, in addition to the assets and liabilities with exposure to the fluctuation of exchange rates recorded in the balance sheet, the fair value of the financial instruments contracted by the Company to hedge certain exposures as of 30 June 2020, as shown in the following table:


	Consolidated
	06/2020			12/2019
Loans and financing in Brazil in foreign currency^(a)		(4,587,578	)		(3,381,959	)
Accounts receivable registered in Brazil in foreign currency		11,727			10,007
Accounts payable registered in Brazil in foreign currency		(11,686	)		(10,543	)
Fair value of the “financial” derivatives		5,102,622			3,729,691

Net asset exposure		515,085			347,196

(a) Excluding transaction costs.

This analysis considers only financial assets and liabilities registered in Brazil in foreign currency, since foreign exchange exposure in other countries is close to zero due to the strength of currencies and the effectiveness of their derivatives, and considers that all other variables, especially interest rates, remain constant and ignore any impact from purchase and sale forecasts.

The tables below show the projection for incremental loss that would have been recognized in the subsequent period, assuming that the current net foreign exchange exposure remains static and based on the following scenarios:

Consolidated

Description

Company’s Risk

Probable scenario

Scenario II

Scenario III

Net exposure

Dollar decrease

(2,481

)

101,032

170,041

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The probable scenario considers future US dollar rates for 90 days, as of 30 June 2020. According to quotations obtained at B3 on the expected maturity dates of financial instruments with foreign exchange exposure, it is R$ 5.45 / USD 1.00. Scenarios II and III consider a drop in the US dollar of 25% (R$ 4.09 / USD 1.00) and 50% (R$ 2.72 / USD 1.00), respectively. Probable scenarios II and III are being presented in compliance with CVM Ruling No. 475/08. The Management uses the probable scenario in the assessment of possible changes in the exchange rate and presents this scenario in compliance with IFRS 7/CPC 40 - Financial Instruments: Disclosures.

The Company and its subsidiaries do not use derivative financial instruments for speculative purposes.

Derivative instruments designated for hedge accounting

The positions of derivative financial instruments designated as outstanding cash flow hedge on 30 June 2020 are set out below:

Cash flow hedge instrument - Consolidated


											Other comprehensive income
	Hedged Item		Notional currency		Notional value		Curve Value		Fair value		Retained Earnings (Loss) of the agreement		Earnings in the 12-month period
Currency Swap – USD/R$		Currency		BRL		2,659,360		1,872,141		2,157,449		285,308		223,672
Forward Agreements (The Body Shop)		Currency		BRL		883,167		4,339		5,613		5,613		(198	)
Forward Agreements (Natura Indústria)		Currency		BRL		39,713		—		193		193		5,482

*Total*						3,582,240		1,876,480		2,163,255		291,114		228,956

Movements in cash flow hedge reserve recorded under other comprehensive income are shown below:


	Consolidated
Cash flow hedge balance as of 31 December 2018		(27,706	)
Change in the fair value of hedge instrument recognized in other comprehensive income		159,698
Tax effects on the fair value of hedge instrument		(53,701	)

Cash flow hedge balance as of 30 June 2019		78,291

Cash flow hedge balance as of 31 December 2019		42,729

Change in the fair value of hedge instrument recognized in other comprehensive income		228,956
Tax effects on the fair value of hedge instrument		(75,842	)

Cash flow hedge balance as of 30 June 2020		195,843

Interest rate risk

Sensitivity analysis

On 30 June 2020, there were borrowings, financing and debenture agreements in foreign currency attached to swap agreements, changing the indexation over the liability to the variation of the Certificate of Interbank Deposit (“CDI”). Therefore, the risk of the Company and its subsidiaries becomes the CDI variation exposure. The exposure to interest rate risk of transactions bound to CDI variation, including derivative transactions is set out in the table below (borrowings, financing and debentures were considered at their full amounts, since 98.42% of their sum is linked to CDI):


	Controlling Company			Consolidated
Total loans and financing - in local currency (note No. 19)		(1,073,162	)		(16,097,706	)
Operations in foreign currency with derivatives bound to CDI		—			(4,568,393	)
Financial investments (explanatory notes 6 and 7)		2,082,179			4,459,259

Net exposure		1,009,017			(16,206,840	)

The tables below show the projection for incremental loss that would have been recognized in the subsequent period, assuming that the current net liability exposure remains static and based on the following scenarios:

Consolidated

Description

Company’s Risk

Probable
scenario

Scenario II

Scenario III

Net liability

Rate increase

4,574

(29,406

)

(63,386

)

The probable scenario considers the future interest rates according to quotations obtained at B3 on the expected maturity dates of financial instruments with exposure to interest rates appraised on 30 June 2020. Scenarios II and III consider an increase of 25% (2.6% p.a.) and 50% (3.1% p.a.) on the interest rate, respectively, based on a CDI of 2.1%. p.a.

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d) Credit risk

The result of the credit risk management is reflected in line item “Provision for doubtful accounts” under “Trade receivables”, as demonstrated in explanatory note 8.

The Company and its subsidiaries consider the credit risk for transactions with financial institutions to be low, as these are considered by the Management as first-rate.

e) Liquidity risk

The Management monitors the consolidated liquidity level for the Company and its subsidiaries considering the expected cash flows against unused credit facilities, as shown in the following table:


	Controlling Company						Consolidated
	06/2020			12/2019			06/2020			12/2019
Total current assets		2,591,364			3,050,574			17,064,524			9,430,057
Total current liabilities		(1,103,060	)		(3,080,906	)		(12,863,889	)		(7,518,423	)

Total net working capital		1,488,304			(30,332	)		4,200,635			1,911,634

As of 30 June 2020, the book value of financial liabilities on the date of the balance sheet, measured at amortized cost, considering interest payments at a post-fixed rate and the value of debt securities reflecting the forward market interest rates, may be changed as post-fixed interest rates change. Their corresponding maturities, considering that the Company and its subsidiaries are in compliance with contractual restrictive clauses, are set out below:


Controlling Company	Less than one year		One to five years		Over five years		Total expected cash flow		Interest to be accrued			Book value
Borrowings, financing and debentures		1,115,106		—		—		1,115,106		(41,944	)		1,073,162
Lease
Trade payables, reverse factoring and related-party trade payables		13,799		—		—		13,799		—			13,799



Consolidated	Less than one year		One to five years		Over five years		Total expected cash flow		Interest to be accrued			Book value
Borrowings, financing and debentures		2,554,860		19,329,476		—		21,884,336		(1,218,237	)		20,666,099
Lease		1,272,171		2,883,814		1,014,375		5,170,360		(1,063,185	)		4,107,175
Trade payables and reverse factoring operations		5,709,969		—		—		5,709,969		—			5,709,969

As of 31 December 2019, the Company and its subsidiaries had two credit facilities:

•

Up to seventy million pounds sterling (GBP 70 million), with no guarantee, that could be withdrawn in installments to meet short-term financing needs of The Body Shop International Limited. This facility was used by the indirect subsidiary during the first quarter of 2020 to reinforce working capital and liquidity.

•

Up to one hundred and fifty million Reais (R$ 150,000), with no guarantee, which was terminated during the first semester of 2020.

5.3

Impacts of Covid-19

Despite the level of uncertainty, the Company is closely monitoring the evolution of the pandemic caused by Covid-19 worldwide. To this end, Crisis Committees were created on several fronts, with the participation of key people in the organization, with the function of monitoring, analyzing and deciding on actions to minimize impacts, ensure the continuity of operations and promote the safety and health of all people involved.

Since the beginning of the virus spread and the consequent restrictive measures imposed by governments, such as closing non-essential trade and restricting the movement of people across borders, the Company has implemented some measures in all its operations, in line with the official measures:

Incentive to work remotely and adoption of essentiality criteria to limit industrial and logistical operations;

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LOGO

Adoption of new safety measures for operational workers, such as the use of masks and procedures to distance people between processes;

Closure of stores, where required by the authorities;

Re-planning of sales cycles, prioritizing personal care items;

Speeding up the digitization of sales channels;

Wide dissemination of the digital magazine;

Change in the minimum order criteria, start kit and increased deadline for payment of consultants; and

Daily monitoring of suppliers to ensure supply.

In addition to these measures, there is a Crisis Committee focused on finance which monitors the Company’s financial health, with a focus on cash, covenants and results, proposing actions to minimize the inevitable reduction in sales. Among these actions, we find:

•

Reduction of discretionary expenses (consultancies, events, etc.);

•

Freezing of contracts and salary increases;

•

Reduction in marketing expenses;

•

Reductions in travel expenses;

•

Investment reduction (Capex);

•

Negotiation with suppliers to increase payment terms; and

•

Adherence to stimulus plans announced by the governments of some of the countries in which the Company operates.

During the period ended 30 June 2020, the impacts on the Company’s business were as follows:

•

Closing of stores: the Company and its subsidiaries have own stores and franchised stores distributed across its different brands and geographies that were impacted by lockdowns throughout the second quarter of 2020. At The Body Shop, lockdown restrictions led to the closure of 87% of retail stores at the end of April 2020, progressing to 16% of stores closed at the end of June 2020 with the restrictions flexibility. The Company and its subsidiaries were able to offset approximately 90% of the Covid-19 impact on sales through significant growth in online and At-Home channels and the gradual reopening of stores. At Aesop, during most of the second quarter of 2020, up to 90% of stores were closed across most markets. Nearly all of the Covid-19 impact on sales was offset with remarkable growth in digital sales and progressive reopening of stores. At Natura, all shopping mall stores were closed during most of the second quarter of 2020, and by the end of June, approximately 60% of all retail stores, including franchisee stores, were reopened, mostly with restrictions.

•

Production: In the beginning of the second quarter of 2020, Natura &Co quickly retooled operations across brands to step up production of essential products (such as soap and hand sanitizer) by over 30% of essential products capacity, by optimizing available capacity at Avon plants.

•

Cash and liquidity: the Company took steps to address liquidity concerns. R$2 billion was raised in a private placement, subscribed by Company’s controlling shareholders, selected investors and non-controlling shareholders. Also, R$750 million in new financing was raised, with maturity in May 2020, to increase liquidity with no impact on net debt. Strict cost discipline was adopted, including over capex and discretionary spending. The Company ended the second quarter of 2020 with a very strong cash position of R$4,820, resulting in further deleveraging and ensuring compliance with the financial covenants.

It is worth mentioning that the actions, decisions and the impacts mentioned in the financial statement are under constant review, according to the evolution of the global scenario.

5.4

Cyber incident

In June 2020, the Company became aware that it was exposed to a cyber incident in its Information Technology environment which interrupted some systems and partially affected operations. We engaged leading external cyber security and IT general controls specialists, launched a comprehensive containment and remediation effort and started a forensic investigation. As of the date of this report, the Company has re-established all of its core business processes and resumed operations in all of its markets, including all of its distribution centers. The Company continues to investigate and evaluate the extent of the cyber incident, while working diligently to mitigate its impacts and re-evaluate our IT general controls.

F-22

LOGO

The cyber incident had a significant impact on our revenue performance for the second quarter of 2020, with the majority of the impact being shifted to the third quarter of 2020 as the company fulfills the order backlog created. The incremental expense incurred as a result of the cyber incident in the second quarter of 2020 was not material.

6.	CASH AND CASH EQUIVALENTS

Information pertaining to cash and cash equivalents is presented in the Company’s 2019 annual financial statements in Note 6.

Controlling Company

Consolidated

06/2020

12/2019

06/2020

12/2019

Cash and banks

113

2,173,101

2,872,297

3,110,220

Certificate of Bank Deposits ^(a)

499,134

207,699

766,703

211,261

Repurchase operations ^(b)

—

1,181,116

1,192,101

499,247

2,380,800

4,820,116

4,513,582

(a)	As of 30 June 2020, investments in Certificate of Bank Deposits (“CDBs”) are remunerated at an average rate of 102.7% of CDI with daily maturities redeemable with the issuer itself, without significant loss of value.

(b)

Repurchase operations are securities issued by banks with a commitment by the bank to repurchase them, and by the client to resell them, at defined rates and within a predetermined term, backed by public or private securities, depending on bank availabilities and registered with the Central for the Custody and Financial Settlement of Securities (“CETIP”). On 30 June 2020, repurchase operations are remunerated at an average rate of 103.8% of CDI (106.9% of the CDI on 31 December 2019).

7.	SHORT-TERM INVESTMENTS

Information pertaining to short-term investments was presented in the Company’s 2019 annual financial statements in Note 7.


	Controlling Company				Consolidated
	06/2020		12/2019		06/2020		12/2019
Exclusive investment funds		1,583,045		669,769		—		—
Loan investment funds		—		—		376,538		407,928
Certificate of Bank Deposits^(a)		—		—		270,870		21,327
Financial letters		—		—		377,033		374,690
Government securities (LFT)		—		—		1,486,999		221,900
Dynamo Beauty Ventures Ltd. Fund		—		—		11,326		7,402
Restricted cash		—		—		58,764		—

	1,583,045		669,769		2,581,530		1,033,247

Current		1,583,045		669,769		2,570,204		1,025,845
Non-Current		—		—		11,326		7,402

(a)	As of June 30, 2020 the CDBs classified as short-term investments are remunerated at an average rate of 103.8% of CDI (106.9% of CDI as of 31 December 2019). The balance on 30 June 2020 related to the “Crer para Ver” line within the exclusive fund is R$ 35,423 (R$ 38,018 on 31 December 2019).

The breakdown of securities constituting the Essential Investment Fund portfolio on 30 June 2020 and 31 December 2019 is as follows:


	06/2020		12/2019
Certificate of term deposits		270,870		21,327
Repurchase operations		1,181,116		1,192,101
Financial letters		377,033		374,690
Government securities (LFT)		1,486,999		221,900

	3,316,018		1,810,018

8.	TRADE RECEIVABLES

Information pertaining to trade receivables was presented in the Company’s 2019 annual financial statements in Note 8.


	Consolidated
	06/2020			12/2019
Trade receivables		3,109,500			1,793,759
Provision for doubtful accounts		(464,899	)		(107,995	)

	2,644,601			1,685,764

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LOGO

Maximum exposure to credit risk on the date of the financial statements is the book value of each maturity date range, net of the provision for doubtful accounts, as shown in the chart of receivable balances per maturity date:


	Consolidated
	06/2020			12/2019
To become due		1,632,884			1,501,958
Past due:
Up to 30 days		928,674			142,069
31 to 60 days		182,119			36,466
61 to 90 days		83,788			27,789
91 to 180 days		282,035			85,477
Provision for doubtful accounts		(464,899	)		(107,995	)

	2,644,601			1,685,764

Movements in the provision for doubtful accounts for the period ended 30 June 2020 are as follows:


	Consolidated
Balance on 31 December 2018		(129,242	)
Additions		(118,037	)
Write-offs		138,116
Exchange variation		471

Balance on 30 June 2019		(108,692	)

Balance on 31 December 2019		(107,995	)
Control acquisition		(270,187	)
Additions		(397,409	)
Write-offs		371,004
Exchange variation		(60,312	)

Balance on 30 June 2020		(464,899	)

The balances of trade receivables per exposure to the risk of doubtful accounts on 30 June 2020 are set out below:


	Consolidated
	Trade receivables		Provision for doubtful accounts
To become due		1,632,883		(46,358	)
Past due:
Up to 30 days		928,674		(63,254	)
31 to 60 days		182,119		(67,201	)
61 to 90 days		83,788		(53,795	)
91 to 180 days		282,026		(234,291	)

		3,109,500		(464,899	)

9.	INVENTORIES

Information pertaining to inventories was presented in the Company’s 2019 annual financial statements in Note 9.


	Consolidated
	06/2020			12/2019
Finished products		3,847,372			1,253,145
Raw materials and packaging		1,030,020			253,063
Auxiliary materials		211,372			82,228
Products in progress		34,690			27,346
Provision for losses		(642,107	)		(185,232	)

		4,481,347			1,430,550

F-24

LOGO

Movements in the provision for inventory losses for the period ended 30 June 2020 are as follows:


	Consolidated
Balance on 31 December 2018		(178,268	)

Net additions		(72,980	)
Write-offs		60,743
Exchange variation		2,139

Balance on 30 June 2019		(188,366	)

Balance on 31 December 2019		(185,232	)

Control acquisition		(332,350	)
Net additions		(190,763	)
Write-offs		166,520
Exchange variation		(100,282	)

Balance on 30 June 2020		(642,107	)

10.

RECOVERABLE TAXES

Information pertaining to the Company’s recoverable taxes was presented in the 2019 annual financial statements in Note 10.


	Consolidated
	06/2020		12/2019
ICMS on purchase of inputs ^(a)		671,227		434,832
Taxes on purchase of inputs - subsidiaries abroad		214,702		39,475
ICMS on purchase of property, plant and equipment		10,024		10,628
PIS and COFINS on purchase of property, plant and equipment ^(b)		179		3,826
PIS and COFINS on purchase of inputs		802,466		280,087
PIS, COFINS and CSLL - withheld at source		3,779		2,378
IPI (Tax on Manufactured Products)		83,828		30,190
Others		152,402		3,438

		1,938,607		804,854

Current		1,045,201		395,640
Non-Current		893,406		409,214

a)	Accumulated Brazilian tax on the circulation of goods, interstate and intercity transportations and communication services (“ICMS”) tax credits.

b)	Brazilian tax for the Integration Program Tax on Revenue (“PIS”) and Social Security Funding Tax on Revenue (COFINS).

11.

INCOME TAX AND SOCIAL CONTRIBUTION

The effective tax rate calculated by the Company for the period ended June 30, 2020 was negative 13.0%. This percentage is based on the loss before taxes of R$ 1,077.4 million and the resulting income tax expense of R$ 139.7 million. The main components causing the effective tax rate to differ from the statutory income tax rate of 34% are the losses of certain jurisdictions which cannot be benefited, permanent effects related to income tax withheld at source arising from transactions among companies of the group which cannot be applied as an income tax credit and the additional recognition of deferred tax liability due to the announcement by the British government that the statutory income tax rate will not be reduced from 19% to 17%. Excluding the adverse effects primarily caused by these noted components, the Company’s effective tax rate would be approximately 31.1%.

The effective rate calculated by the Company in the period ended June 30, 2019 was 30.7%. This percentage is based on the profit before taxes of R$ 100.1 million and the resulting income tax expenses of R$ 30.7 million. The main components causing the effective rate to differ from the statutory income tax rate of 34% are the tax incentives and the subvention of investments.

F-25

LOGO

Movements in deferred asset and liability income tax and social contribution for the period ended 30 June 2020 are as follows:


	Controlling Company		Assets			Liabilities
	Controlling Company		Consolidated			Consolidated
Balance on 31 December 2018		—		398,400			(431,534	)
Effect on results		—		44,859			3,298
Reserve for grant of options and restricted stock		—		13,380			—
Effect on other comprehensive income		—		(53,701	)		—
Exchange variation on other comprehensive income		—		4,615			13,649

Balance on 30 June 2019		—		407,553			(414,587	)

Balance on 31 December 2019		—		374,448			(450,561	)

Effect on results		71,868		(22,022	)		(28,630	)
Control acquisition		—		667,034			(713,199	)
Reserve for grant of options and restricted stock		—		2,865			—
Effect on other comprehensive income		—		(75,842	)		—
Exchange variation on other comprehensive income		—		29,409			(221,081	)

Balance on 30 June 2020		71,868		975,892			(1,413,471	)

12.

JUDICIAL DEPOSITS

Information pertaining to the Company’s judicial deposits was presented in the 2019 annual financial statements in Note 12.


	Consolidated
	06/2020		12/2019
Unprovisioned tax proceedings ^(a)		296,529		203,403
Provisioned tax proceedings ^(b) (notes 21 and 22)		249,576		116,415
Unprovisioned civil proceedings		6,570		2,541
Provisioned civil proceedings (note 22)		2,505		426
Unprovisioned labor proceedings		14,330		8,683
Provisioned labor proceedings (note 22)		30,830		5,787

Total judicial deposits		600,340		337,255

c)	The tax proceedings related to these judicial deposits are mainly related to ICMS-ST, highlighted in note 20 (a) - contingent liabilities - possible risk of loss.

d)	The tax proceedings related to these judicial deposits are mainly related to the sum of amounts disclosed in explanatory note 21, item (a) and the amounts provisioned pursuant to explanatory note 20.

Find below the movements in the balances of judicial deposits for the periods ended 30 June 2020 and 2019:


	Consolidated
Balance on 31 December 2018		333,577

New deposits		1,367
Redemptions		(1,362	)
Monetary adjustment		7,447
Write-offs for expenses		(3,569	)

Balance on 30 June 2019		337,460


Balance on 31 December 2019	337,255

Control acquisition	283,885
New deposits	7,911
Redemptions	(21,186	)
Monetary adjustment	6,216
Payments	(10,070	)
Write-offs for expenses	(3,671	)

Balance on 30 June 2020	600,340

In addition to judicial deposits, the Company and its subsidiaries have contracted guarantee insurance policies for some proceedings. Details of these insurance policies are presented in explanatory note No. 3.2.

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13.

ASSETS AVAILABLE FOR SALE

Assets classified as available for sale were acquired by Avon (Note 4). The following table shows the changes in the balance for the period ended 30 June 2020:


	Consolidated
Acquisition by Avon on 3 January 2020		186,518
Transfer to property, plant and equipment^(a)		(39,186	)
Transfer from property, plant and equipment^(b)		16,210
Sale		(22,287	)
Exchange variation		54,302

Balance on 30 June 2020		195,557

Avon has identified new circumstances which arose which were previously considered as unlikely and, as a result, Avon decided not to carry on with the sale of two properties. As a result, the subsidiary reclassified the properties available for sale into property, plant and equipment. During the reclassification, a real depreciation, resulting in a non-property impact to the consolidated financial statements, was recorded.

b)	Decision to sell one more property, which was previously classified as property, plant and equipment.

On 30 June 2020, the assets available for sale include two Avon properties at the sum of R$ 195,557.

14.

OTHER CURRENT AND NON-CURRENT ASSETS


	Consolidated
	06/2020		12/2019
Marketing and advertising advances		99,545		28,669
Supplier advances		224,335		102,225
Employee advances		79,882		13,983
Rent advances and guarantee deposit ^(a)		133,448		96,202
Advance insurance expenses		170,277		29,647
Overfunded pension plan^{( b)}		711,526		—
Customs broker advances - Import taxes		38,592		34,932
Subleasing receivables ^(c)		395,605		—
Carbon credit		3,799		3,508
Others		543,806		39,868

		2,400,815		349,034

Current		799,222		265,198
Non-Current		1,601,593		83,836

This substantially refers to (i) advance payments for rental agreements that were not included in the initial measurement of lease liabilities/right-of-use of the subsidiary The Body Shop International Limited, in accordance with the exceptions permitted under CPC 06(R2) / IFRS 16; and (ii) guarantees for renting properties of certain stores of subsidiaries The Body Shop International Limited and Emeis Holdings Pty Ltd., which will be returned by the lessor at the end of the rental agreements.

b)	Pension plan arising from the Avon’s acquisition on 3 January 2020 (Note 4)

c)	This pertains to the sublease receivables from the office Avon had in New York.

15.

INVESTMENTS


	Controlling Company
	06/2020		12/2019
Investments in subsidiaries, net of losses		10,713,042		3,392,677
Goodwill Avon (Note 4)		10,973,473		—

Total		21,686,515		3,392,677

Information and movements of balances for the period ended 30 June 2020 and for the fiscal year ended 31 December 2019:

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	Natura Cosméticos S.A. ⁽¹⁾			Avon Products, Inc.			Natura &Co International S.à r.l.			Total
Percentage Interest		100.00	%		100.00	%		100.00	%
Shareholders’ equity of the subsidiaries		5,740,749			(4,911,624	)		(214	)		828,91,
Shareholders’ equity interest		5,740,749			(4,911,624	)		(214	)		828,911
Fair value adjustment of acquired assets and liabilities		—			9,884,131			—			9,884,131
Goodwill		—			10,973,473			—			10,973,473

Total		5,740,749			15,945,980			(214	)		21,686,515

Net Profit/(Losses) for the period of the subsidiaries		182,712			(1,319,077	)		(287	)		(1,136,652	)
Balances on 31 December 2019		3,392,677			—			—			3,392,677
Equity in subsidiaries		182,712			(1,319,077	)		(287	)		(1,136,652	)
Exchange variation and other adjustments in the conversion of investments of the subsidiaries abroad		1,646,060			3,980,018			16			5,626,094
Effect of Hyperinflationary economy adjustment		30,470			10,145			—			40,615
Contribution by the controlling company for stock option plans granted to executive officers of the subsidiaries and other reserves net of tax effects		35,713			—			—			35,713
Hedge accounting, net of tax effects		153,117			—			—			153,117
Capital increase		300,000			—			—			300,000
Acquisition price		—			13,274,894			57			13,274,951

Balances on 30 June 2020		5,740,749			15,945,980			(214	)		21,686,515

(1)	The investment balance in the direct subsidiary Natura Cosméticos S.A. includes goodwill arising from the acquisitions of indirect subsidiaries TBS (R$ 1,832,248) and Aesop (R$ 133,601).

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16.

PROPERTY, PLANT AND EQUIPMENT

Information pertaining to the Company’s property, plant and equipment was presented in the 2019 annual financial statements in Note 15.


	Consolidated
	Useful life range (years)		12/2019			Control acquisition		Additions			Write-offs			Impairment			Transfers			Exchange variation			06/2020
Cost value:
Vehicles		2 to 5		45,578			25,789		128			(4,519	)		—			2,171			12,042			81,189
Templates		3		192,556			—		8			(19,713	)		—			4,690			8,065			185,606
Tools and accessories		3 to 20		11,974			52,410		4,362			(158	)		—			(876	)		12,721			80,433
Facilities		3 to 60		309,772			1,431		23			(3,428	)		—			3,298			10,922			322,018
Machinery and accessories		3 to 15		866,451			746,734		7,352			(925	)		—			45,638			171,314			1,836,564
Improvements in third-party real properties (a)		2 to 20		615,103			58,548		11,653			(1,177	)		(8,650	)		5,618			177,970			859,065
Buildings		14 to 60		386,957			1,168,837		3,484			1,590			324			20,246			293,891			1,875,329
Furniture and utensils		2 to 25		397,727			32,566		10,622			(1,012	)		(8,883	)		7,545			95,387			533,952
Lands		—		35,157			568,470		—			73			—			4,060			191,749			799,509
IT equipment		3 to 15		297,228			112,369		4,691			(494	)		—			12,550			85,224			511,568
Other assets		—		—			40,090		—			—			—			—			14,086			54,176
Projects in progress		—		156,011			78,965		104,602			(526	)		—			(89,486	)		11,155			260,721

Total cost				3,314,514			2,886,209		146,925			(30,289	)		(17,209	)		15,454			1,084,526			7,400,130

Depreciation value:
Vehicles				(16,924	)		—		(12,932	)		2,174			—			(2,093	)		(3,524	)		(33,299	)
Templates				(175,938	)		—		(4,824	)		19,684			—			—			(172	)		(161,250	)
Tools and accessories				(3,255	)		—		(20,769	)		—			—			10			(2,451	)		(26,465	)
Facilities				(167,362	)		—		(11,582	)		282			—			900			(3,269	)		(181,031	)
Machinery and accessories				(416,736	)		—		(95,836	)		157			—			(1,072	)		(16,382	)		(529,869	)
Improvement in third-party property				(267,371	)		—		(60,425	)		450			—			25			(68,175	)		(395,496	)
Buildings				(101,785	)		—		(51,515	)		—			—			—			(4,847	)		(158,147	)
Furniture and utensils				(193,973	)		—		(44,342	)		612			—			(26	)		(43,546	)		(281,275	)
IT equipment				(197,281	)		—		(47,588	)		37			—			—			(30,091	)		(274,923	)
Other assets				—			—		(6,841	)		—			—			—			(769	)		(7,610	)

Total depreciation				(1,540,625	)		—		(356,654	)		23,396			—			(2,256	)		(173,226	)		(2,049,365	)

Overall Total				1,773,889			2,886,209		(209,729	)		(6,893	)		(17,209	)		13,198			911,300			5,350,765

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17.

INTANGIBLE ASSETS

Information pertaining to the Company’s intangible assets was presented in the 2019 annual financial statements in Note 16.


	Consolidated
	Useful life range (years)		12/2019			Control acquisition		Additions			Write-offs			Reversal (provision) of impairment		Transfers			Exchange variation			06/2020
Cost value:
Software		2.5 to 10		1,313,090			291,239		65,382			(1,492	)		—		112,649			153,649			1,934,517
Trademarks and patents (Defined useful life)		24 to 25		116,805			517,592		—			—			—		—			220,524			854,921
Trademarks and patents (Indefinite useful life)		—		2,171,585			1,893,224		—			—			—		—			1,255,816			5,320,625
Goodwill Avon (Note 4)		—		—			10,973,474		—			—			—		—			3,855,691			14,829,165
Goodwill Emeis Brazil Pty Ltd.		—		100,237			—		—			—			—		—			33,364			133,601
Goodwill The Body Shop International Limited		—		1,434,369			—		8,039			—			—		—			388,384			1,830,792
Goodwill acquisition of The Body Shop stores		—		1,456			—		—														1,456
Relationship with retail clients		10		1,987			—		—			—			—		—			656			2,643
Goodwill (Indefinite useful life)		—		17,801			—		—			—			—		6,996			2,697			27,494
Goodwill (Defined useful life)		3 to 18		12,447			—		—			—			1,065		(3,414	)		(1,043	)		9,055
Relationship with franchisees and sub franchisees		14 to 15		602,958			1,876,169		—			—			—		—			822,215			3,301,342
Developed technology (by acquired subsidiary)		—		—			1,131,573		—			—			—		—			397,595			1,529,168
Other intangible assets		2 to 10		110,288			—		41,452			—			—		(100,153	)		18,071			69,658

Total cost				5,883,023			16,683,271		114,873			(1,492	)		1,065		16,078			7,147,619			29,844,437

Amortization value:
Software				(649,347	)		—		(179,508	)		43			—		(3,634	)		(39,399	)		(871,845	)
Trademarks and patents				(44,108	)		—		(18,303	)		—			—		—			(12,810	)		(75,221	)
Goodwill				(2,197	)		—		(242	)		—			—		(4,634	)		1,213			(5,860	)
Relationship with retail clients				(1,939	)		—		(114	)		—			—		—			(531	)		(2,584	)
Relationship with franchisees and sub franchisees				(95,772	)		—		(147,980	)		—			—		—			(41,555	)		(285,307	)
Developed technology (by acquired subsidiary)				—			—		(137,361	)		—			—		—			(15,419	)		(152,780	)
Other intangible assets				(13,159	)				(1,042	)		—			—		—			(5,390	)		(19,591	)

Total accrued amortization				(806,522	)		—		(484,550	)		43			—		(8,268	)		(113,891	)		(1,413,188	)

Net total				5,076,501			16,683,271		(369,677	)		(1,449	)		1,065		7,810			7,033,728			28,431,249

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18.

RIGHT OF USE AND LEASE

Information pertaining to the Company’s right of use and lease is presented in the 2019 annual financial statements in Note 17.

Right of use


			Consolidated
	Useful life range (years) ⁽ⁱ⁾		12/2019			Control acquisition		Additions			Write-offs			Transfers (a)			Exchange variation			06/2020
Cost value:
Vehicles		3		40,018			42,467		46,577			(219	)		—			11,435			140,278
Machinery and equipment		3 to 10		15,578			14,034		610			—			—			8,958			39,180
Buildings		3 to 10		784,900			489,739		90,560			(4,380	)		—			211,050			1,571,869
IT equipment		10		283			18,429		1,447			—			—			5,751			25,910
Retail stores		3 to 10		2,350,377			—		180,059			(8,309	)		(3,582	)		767,063			3,285,608
Tools and accessories		3		2,803			—		—			—			—			761			3,564

Total cost				3,193,959			564,669		319,253			(12,908	)		(3,582	)		1,005,018			5,066,409

Depreciation value:
Vehicles				(8,109	)		—		(25,316	)		150			—			(2,236	)		(35,511	)
Machinery and equipment				(4,317	)		—		(7,142	)		—			—			(2,036	)		(13,495	)
Buildings				(97,190	)		—		(144,715	)		2,852			—			(27,349	)		(266,402	)
IT equipment				(214	)		—		(10,320	)		—			—			(1,100	)		(11,634	)
Retail stores				(463,332	)		—		(300,558	)		4,016			4,634			(172,458	)		(927,698	)
Tools and accessories				(936	)				(462	)		—			—			(298	)		(1,696	)

Total accrued depreciation				(574,098	)		—		(488,513	)		7,018			4,634			(205,477	)		(1,256,436	)

Net total				2,619,861			564,669		(169,260	)		(5,890	)		1,052			799,541			3,809,973

a.	Regarding the goodwill paid in store rentals, this transferred to intangible assets when a new commercial agreement with the lessor is signed.

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	Consolidated
	06/2020			06/2019
Values recognized in the income statement during the periods ended 30 June 2020 and 30 June 2019
Financial expense on lease		119,398			64,137
Amortization of right of use		488,513			271,591
Appropriation in the result of variable lease installments not included in the measurement of lease liabilities		15,013			14,023
Sublease revenue		(16,033	)		(1,331	)
Short-term lease expenses and low-value assets		38,274			78,774
Advantages granted by lessor related to Covid-19		(12,685	)		—
Other expenses related to leases		17,497			9,933

Total		649,977			437,127

Values recognized in the financing cash flow statement
Payment of lease (principal amount)		426,154			273,681
Values recognized in the operating cash flow statement
Payment of lease (interest)		88,443			75,259
Variable lease payments not included in the measurement of lease liabilities		4,448			8,100
Short-term lease payments and low-value assets		30,699			978
Other lease-related payments		20,174			15,985

Total		569,918			374,003

Lease


	Consolidated
	06/2020		12/2019
Current		1,081,059		542,088
Non-Current		3,026,116		1,975,477

Total		4,107,175		2,517,565

The following table shows the changes in the balance of lease for the period ended 30 June 2020:


	Consolidated
Balance on 31 December 2019		2,517,565
New agreements		324,878
Control acquisition		777,200
Payments - principal amount		(380,902	)
Payments - interest		(133,695	)
Financial charges appropriated		119,398
Write-offs (i)		(3,863	)
Exchange variation		886,594

Balance on 30 June 2020		4,107,175

Mainly related to termination of agreements related to lease of stores.

The maturities of the balance of non-current lease liabilities are shown below:


	Consolidated
	06/2020		12/2019
2021		441,760		374,746
2022		428,033		361,688
2023		422,877		358,274
2024 onwards		1,733,446		880,769

Total		3,026,116		1,975,477

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19.

BORROWINGS, FINANCING AND DEBENTURES

Information pertaining to the Company’s borrowings, financing and debentures was presented in the 2019 annual financial statements in Note 18.


	Controlling Company				Consolidated
	06/2020		12/2019		06/2020		12/2019
Local Currency
Financing Agency for Studies and Projects (FINEP)		—		—		87,617		101,988
Debentures		—		—		4,171,432		4.251,231
BNDES		—		—		17,451		35,390
BNDES – FINAME		—		—		46		183
Promissory Notes		1,073,162		2,883,382		1,322,889		2,883,382
Working capital – Operation Mexico		—		—		24,219		31,802
Working capital – Operation Peru		—		—		23,271
Working capital – Operation Aesop		—		—		98,559		100,438
Working capital – Operation The Body Shop		—		—		477,770		—
Working capital – Operation Avon		—		—		154,198		—
Notes – Avon (1)		—		—		9,720,254		—

Total in local currency		1,073,162		2,883,382		16,097,706		7,404,414

Foreign Currency
BNDES		—		—		4,721		8,029
Export Credit note (NCE)		—		—		110,148		81,210
Notes ⁽¹⁾		—		—		4.179,182		3,090,490
Resolution No. 4131/62		—		—		274,342		202,231

Total in foreign currency		—		—		4,568,393		3,381,960

Overall total		1,073,162		2,883,382		20,666,099		10,786,374

Current		1,073,162		2,883,382		2,631,068		3,354,355
Non-Current		—		—		18,035,031		7,432,019
(a) Debentures
Current		—		—		164,555		246,017
Non-Current		—		—		4,006,877		4,005,214

⁽¹⁾	Balances recorded for their estimated fair value resulting from business combination with Avon (Note 4).

Changes in the balances of borrowings, financing and debentures for the periods ended 30 June 2020 and 2019 are presented below:


	Controlling Company			Consolidated
Balance on 31 December 2018		—			7,994,145

Funding		—			294,842
Amortizations					(594,912	)
Financial charges appropriated		—			253,304
Payment of financial charges		—			(260,098	)
Exchange variation (unrealized)		—			(86,954	)
Exchange variation (realized)		—			2,814
Effects of the conversion (other comprehensive income)		—			583

Balance on 30 June 2019		—			7,603,724

Balance on 31 December 2019		2,883,382			10,786,374

Control acquisition		—			7,250,735
Funding		500,000			1,341,538
Amortizations		(2,326,905	)		(2.485,231	)
Financial charges appropriated		38,363			557,122
Payment of financial charges		(21,678	)		(535,568	)
Exchange variation (unrealized)		—			1,101,306
Exchange variation (realized)		—			3,889
Effects of the conversion (other comprehensive income)		—			2,645,934

Balance on 30 June 2020		1,073,162			20,666,099

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Maturities of the registered installment of non-current borrowings, financing and debentures liabilities are as follows:


	Controlling Company				Consolidated
	06/2020		12/2019		06/2020		12/2019
2021		—		—		2,253,221		—
2022		—		—		5,450,177		2,279,759
2023		—		—		6,644,547		527,596
2024 onwards		—		—		3,687,086		4,624,664

Total		—		—		18,035,031		7,432,019

A description of the main bank borrowings and financing agreements in the period ended 30 June 2020 is as follows:

19.1

Description of the main movements of bank borrowings and financing

i) Promissory notes

On 14 January 2020, there was a partial optional early redemption of the Commercial Notes related to the first series in the amount of R$ 1,830 million.

On 29 April 2020, there was the 2nd issue of Commercial Promissory Notes by Natura Holding, in a single series in the amount of R$ 500 million, and the 4th issue of Commercial Promissory Notes, in a single series in the amount of R$ 250 million. The Commercial Notes were publicly distributed with restricted placement efforts, pursuant to CVM Ruling No. 476 of 16 January 2009. The allocation of funds went to the reinforcement of cash and liquidity.

On 29 June 2020, there was the total optional early redemption of the 1st issue of Commercial Notes by Natura Holding of the first series in the amount of R$ 370 million and the partial optional early redemption of the 1st issue of Commercial Notes of the second series in the amount of R$ 140 million.

The appropriation of costs related to the issuance of promissory notes during the period ended 30 June 2020 was R$ 19,461 (R$ 11,135 as of 31 December 2019), recorded monthly in the financial expenses, in accordance with the effective interest rate method. Issuance costs to appropriate totaled R$ 7,866 as of 30 June 2020 (R$ 20,962 as of 31 December 2019).

ii) Working capital – The Body Shop

As presented in the note of financial liquidity risk management (5.2.e), The Body Shop had, on 31 December 2019, a credit facility of up to seventy million pounds sterling (GBP 70 million), with no guarantee, that could be withdrawn in installments to meet short-term financing needs of The Body Shop International Limited. This facility was used by the indirect subsidiary during the second quarter of 2020, to reinforce working capital and liquidity, with annual interest payment of Libor + 2%.

iii) Working capital – Operation Peru

On 5 June 2020, the Company’s subsidiary raised, for reinforcement of working capital and liquidity, an amount of Peruvian soles 15 million, approximately R$ 22 million, with annual interest rate of 4.24% and maturity on 2 December 2020.

iv) Notes - Avon

Avon has issued the following notes:


Notes – Avon	Principal (USD)		Principal (R$)		Annual interest rate			Maturity
No guarantee		461,883		2,529,271		5.00	%		15 March 2023
No guarantee		243,847		1,335,306		6.95	%		15 March 2043
With guarantee		500,000		2,738,000		7.88	%		15 August 2022
With guarantee		400,000		2,190,400		6.50	%		15 August 2022

To the Notes issued by Avon, add the effects of allocation of fair values from the business combination (Note 4), which amounted to R$ 779,497 as of 30 June 2020.

19.2

Restriction clauses of agreements

The contractual restriction clauses establish financial indexes arising from the quotient of the net treasury debt division by the earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the last 12 months, which should be equal to or lower than what was established. The Company and its subsidiaries comply with such clauses as of the base date.

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20.

TRADE PAYABLES AND REVERSE FACTORING OPERATIONS

Information pertaining to the Company’s trade payables and reverse factoring operations was presented in the 2019 annual financial statements in Note 19.


	Controlling Company				Consolidated
	06/2020		12/2019		06/2020		12/2019
Domestic trade payables		1,875		—		4,593,288		1,581,759
Foreign trade payables		11,924		—		861,849		105,073

	13,799		—		5,455,137		1,686,832

Reverse factoring operations		—		—		254,832		142,924

	13,799		—		5,709,969		1,829,756

21.

TAX OBLIGATIONS


	Controlling Company				Consolidated
	06/2020		12/2019		06/2020			12/2019
Ordinary ICMS				—		120,393			120,300
ICMS-ST (a)				—		61,926			72,423
Taxes on sales result – subsidiaries abroad				—		296,430			145,992
Social Security Tax (INSS) - suspension of the enforceability				—		—			50,147
Taxes withheld at the source		403		987		110,084			48,593
Other taxes - subsidiaries abroad				—		2,987			1,180
Income Tax (IR)		101		63		101			1,207
INSS and ISS				—		54,371			3,218
Others				—		77,355			399

	504		1,050		723,647			443,459

Judicial deposits				—		(54,909	)		(62,356	)

Current		504		1,050		614,839			320,890
Non-Current		—		—		108,808			122,569

(a)

The Company’s subsidiaries have been discussing the illegality of changes in the state legislation for the payment of ICMS - ST. Part of the unpaid amount has been discussed in court by the Company and, in certain cases, the amounts have been deposited with the courts, as mentioned in explanatory note 12.

22.

PROVISION FOR TAX, CIVIL AND LABOR RISKS

Information pertaining to provision for the Company’s tax, civil and labor risks was presented in the Company’s 2019 annual financial statements in Note 21.

This provision is broken down as follows:


	Consolidated
	06/2020			12/2019
Tax		876,036			127,842
Civil		180,491			30,653
Labor		257,241			61,571

Total		1,313,768			220,066

Judicial deposits		(228,002	)		(60,272	)

Current		127,825			18,650
Non-Current		1,185,943			201,416

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22.1

Contingencies with probable losses

The movement of the provision for tax, civil and labor risks and contingent liabilities is presented below:


	Consolidated
	Tax						Civil						Labor
	Provision			Deposits			Provision			Deposits			Provision			Deposits
Balance at beginning of year		127,842			(54,059	)		30,653			(426	)		61,571			(5,787	)
Control acquisition ⁽¹⁾		657,647			(155,219	)		51,263			(4,898	)		164,091			(27,329	)
Additions		78,727			(198	)		99,774			(2,648	)		21,388			(5,362	)
Reversals		(29,946	)		10,208			(24,371	)		1,022			1,105			2,546
Payments		(52,412	)		—			(10,703	)		3,549			(21,470	)		5,244
Monetary adjustment		2,274			(2,516	)		2,802			(10	)		3,553			(92	)
Exchange variation		92,145			2,533			31,103			344			26,166			263
Other movements		(241	)		4,584			(30	)		562			837			(313	)

Balance on 30 June 2020		876,036			(194,667	)		180,491			(2,505	)		257,241			(30,830	)

⁽¹⁾	Balances recorded for their estimated fair value resulting from business combination with Avon (Note 4).

22.2

Contingencies with possible losses

The Company and its subsidiaries have contingencies of a labor and social security, civil and tax nature, which expectation of loss assessed by the Management and supported by the legal advisers is classified as possible and, therefore, no provision has been constituted. The total sum under discussion rated as possible, due to the nature of the claims, is evidenced below:


	Consolidated
	06/2020			12/2019
Tax		8,715,657			3,503,392
Civil		144,151			61,532
Labor		208,062			77,295

Total contingent liabilities		9,067,870			3,642,219

Judicial deposits		(242,817	)		(136,258	)

The main tax cases are the following:

(i)

Infraction notices in which the Brazilian Federal Revenue Office collects IPI tax debts for the supposed lack of compliance with the minimum calculation basis set forth in the legislation, upon the sales transactions directed to interdependent wholesale establishments. Currently, judgment of the proceedings is awaited at the administrative level. On 30 June 2020, the total amount under discussion classified as possible loss is of R$1,951,431.

(ii)

Court decisions which discuss the equivalence to industrial set forth in Decree No. 8,393/2015, which started requiring IPI in exit operations carried out by interdependent wholesale establishments of the products mentioned in said legal provision. On 30 June 2020, the amount under discussion is R$ 1,533,078 (R$ 389,017 as of 31 December 2019).

(iii)

Administrative and court proceedings discussing the illegality of changes in the state legislation for the payment of ICMS and ICMS—ST. On 30 June 2020, the total amount under discussion is R$ 1,458,918 (R$ 406,002 as of 31 December 2019).

(iv)

Infraction notices where the Brazilian Federal Revenue Office collects IRPJ and CSLL tax debts, in order to question the tax deductibility of goodwill amortization in the context of a corporate reorganization among related parties. Currently, there is discussion in the Judiciary Branch regarding the lawfulness of administrative decisions which rejected the motion to clarify, submitted to question the dismissed special appeals. On 30 June 2020, the total amount under discussion classified as possible loss is R$ 1,390,597 (R$ 1,379,189 as of 31 December 2019).

(v)

Infraction Notice in which the State of São Paulo Treasury Office enforces the ICMS-ST collection, fully paid by the destination of the goods, the distributing establishment. Judgment of the proceedings is awaited at the administrative level. On 30 June 2020, the total amount under discussion classified as possible loss is R$ 526,933 (R$ 521,903 as of 31 December 2019).

(vi)

Infraction notices in which the Brazilian Federal Revenue Service collects IPI tax debts due to disagreement with the tax classification adopted for some products. Judgment of the proceedings is awaited at the administrative level. On 30 June 2020, the total amount under discussion is R$ 296,898 (R$ 218,204 as of 31 December 2019).

The main civil cases are the following:

Avon was named defendant in several proceedings for personal damages filed in US courts, claiming that certain powder products that Avon sold in the past were contaminated with asbestos. Many such actions involve several co-defendants from a range of different industries, including cosmetics manufacturers and

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manufacturers of other products that, unlike the Company’s products, were designed to include asbestos. On 30 June 2020, there were 139 individual proceedings pending against the subsidiary. During the six-month period ended 30 June 2020, 11 new proceedings were shelved and 20 others were shelved, settled or otherwise concluded. The amount of our records in this area so far has not been significant, whether individually or jointly. Similar additional cases deriving from the use of the subsidiary’s powder products are reasonably predicted.

We believe that the claims against us in such cases have no grounds. We are defending ourselves against these claims and to date, the subsidiary has not been sued in any case filed against it and there have been no findings of enforceable liability against the subsidiary. However, the results of testing throughout the country in similar cases filed against other manufacturers of cosmetic powder products vary from direct employment terminations to very large jury-led indemnifications for compensatory and punitive damages. Due to the uncertainties inherent to litigation, we cannot predict the results of all individual cases pending against the subsidiary, and we may only make a reasonable estimate for a small number of individual cases that have progressed to the later stages of court proceedings. For the remaining cases, we supply an aggregate and continuous exposure estimate, which considers the historic results of all cases we have settled so far. Any additions currently recorded in the subsidiary’s balance sheet in relation to these cases are not relevant. Other than those, currently, we may not estimate our reasonably possible or probable losses. However, any adverse results, whether in an individual case or jointly, may be relevant. The future costs to litigate such cases, which we fund when incurred, are unknown, but may be significant, although some costs are covered by insurance.

ii)

On 14 February 2019, an alleged class action complaint of the shareholder (Bevinal v. Avon Products, Inc., et al., No. 19-cv-1420) was filed in the Southern District of New York against the Company and some of its former officers. On 3 June 2019, the court appointed a main plaintiff and a class attorney. The complaint was subsequently changed on 28 June 2019, retitled “In re Avon Products, Inc. Litigation over Securities” on 8 July 2019. On 24 July 2019, the plaintiffs presented a new changed complaint. The changed complaint was submitted on behalf of a new class, supposedly comprised of all purchasers or acquirers of Avon common shares between 21 January 2016 and 1 November 2017, including the latter date. The charge claims violations of Sections 10 (b) and 20 (a) of the 1934 Securities Exchange Act, based on supposedly fake or misleading statements and supposed market manipulation with relation to, among other things, changes made in Avon’s credit terms for Brazilian Representatives. On 26 July 2019, Avon and the individual defendants submitted a motion to dismiss. On 18 November 2019, the court denied this motion. Subsequently, on 16 December 2019, Avon and the individual defendants submitted an answer to the changed complaint. On 14 February 2020, the plaintiffs submitted a motion for class certification. The parties reached a settlement on the solution of this class action. The terms of the settlement include releases from class members of the complaints against the Company and the individual defendants and payment of USD 14.5 million (approximately R$ 79 million). Approximately USD 3 million (R$ 16 million), of the settlement shall be paid by the Company (that represents the remaining franchise under the applicable insurance policies of the Company) and the remainder of the settlement shall be paid by the Company’s insurers. Some documents related to the settlement still have not been finalized and the settlement is subject to court approval. If the settlement is not approved by the court, that is, it is rescinded before it is finalized, the Company will not be able to predict the result of this case. In addition, in this case, it is reasonably possible that the Company will incur in a loss related to this matter, which the Company cannot reasonably estimate.

22.3

Contingent assets

The updated amounts involved in the restitution requests of the PIS and COFINS installments paid with the inclusion of ICMS in their tax bases, not registered until 30 June 2020, amount to R$ 132,653 (R$ 26,933 as of 31 December 2019).

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23.

OTHER LIABILITIES

Information pertaining to other liabilities was presented in the Company’s 2019 annual financial statements in Note 22.


	Consolidated
	06/2020		12/2019
Post-employment medical assistance plan ^(a)		777,228		98,792
Carbon credit		6,386		4,519
Exclusivity contract		4,200		5,400
Crer para Ver		52,427		51,543
Deferred revenue from performance obligations with customers		349,470		76,250
Provision for sundry expenses		275,147		156,895
Provision for rentals		40,363		26,568
Provision for apportionment of benefits and partnerships payable		5,426		7,860
Long-term incentive		286,595		3,022
Provision for restructuring		101,212		3,401
Provision for store renovation		85,469		15,997
Other provision		313,310		67,846
Discontinued operations ^(b)		94,840		—
Professional fees		95,782		—

Total		2,487,855		518,093

Current		1,322,558		396,391
Non-Current		1,165,297		121,702

(a)	As of 30 June 2020, there is R$674.514 related to pension plans assumed in the Avon’s acquisition on 3 January 2020 and R$102.714 related to Natura’s pension plan (R$98.792on 31 December 2019).

(b)

On 17 December 2015, Avon entered into agreements resulting in the splitting of operations in the US, Canada and Puerto Rico. These transactions were terminated on 1 March 2016. From this date, the contingent liabilities prior to this transaction and related to the operations in the US, Canada and Puerto Rico are treated as discontinued operations. During the period ended 30 June 2020, Avon registered R$ 48,723 in administrative expenses pertaining to this provision.

24.

SHAREHOLDERS’ EQUITY

Information pertaining to the shareholder’s equity of the Company was presented in the 2019 annual financial statements in Note 23.

24.1

Capital stock

As of 30 June 2020, the Company’s capital stock is R$ 6,917,037, composed of 1,251,239,759 registered common shares without par value.

The composition of this capital is set out in the table below:


Date	Description	Number of shares		Value in R$
31/12/2019	Total paid-up capital stock		865.659.942		1,485,436,464
03/01/2020	Capital increase		321,830,266		3,397,745,864
15/03/2020	Issue of new stock for stock option plans and restricted stock		780,808		21,936,005
05/05/2020 to 30/06/2020	Issue of new stock for stock option plans and restricted stock		621,653		16,811,439
01/06/2020 to 30/06/2020	Capital increase		62,347,090		1,995,106,880

30/06/2020	Total paid-up capital stock		1,251,239,759		6,917,036,652

On January 3, 2020, 321,830,266 common shares were issued at an average price of 32.24 totaling R$ 3,397,746. On June 30, 62,347,090 common shares were issued at an average price of R$32.00 totaling R $ 1,995,107.

The Extraordinary Shareholders Meeting held on September 17, 2019 unanimously approved an increase in the Company’s capital by R$1,242,165, from R$468,973 to R$1,711,138, through a bonus share issue by capitalizing a portion of the balance in the earnings reserve, in accordance with article 169 of the Brazilian Corporations Law, with the issue of four hundred thirty-two million, five hundred seventy-one thousand, two hundred twenty-eight

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(432,571,228) book-entry, registered common shares with no par value, distributed to the shareholders of the Company as bonus shares in the proportion of one (1) new share for one (1) common share held. Thus, the number of shares increased from 432,571,228 to 865,142,456, all book-entry, registered common shares with no par value. This change in the proportion of Natura Cosméticos common shares changed the comparative information on earnings per share and share-based payments in this Company’s interim financial information.

24.2

Treasury shares

On 30 June 2020, the item “Treasury shares” had the following composition:


	Number of shares			R$ (in thousands)			Average price per share—R$
Balance on 31 December 2019		—			—			—

Used		(740,697	)		(40,981	)		55.33

Acquisition		1,114,460			54,936			49.29

Balance on 30 June 2020		373,763			13,955			37.34

The minimum and maximum treasury share balance on 30 June 2020 is R$ 29.75 and R$ 49.71, respectively.

24.3

Capital reserve

Completion of the Avon acquisition resulted in the issue of Natura &Co shares for the total subscription price of R$ 13,274,894. Of this total, the amount of R$ 3,397,746 was allocated to the capital stock account and the rest, in the amount of R$ 9,877,148, was allocated to the Company’s capital reserve. This share merger was approved at a meeting of the Board of Directors on 3 January 2020.

The capital reserve also decreased due to the allocation of the special reserve to the profit reserve (R$ 147,592), an increase of R$ 26,679, due to the effects of CPC 42/IAS 29—Financial Reporting in Hyperinflationary Economies and decrease of R$ 22,063 regarding the movement of stock option and restricted stock plans.

The capital reserve amounts to R$ 11,037,162 as of 30 June 2020 (R$ 1,302,990 as of 31 December 2019).

24.4

Profit reserve

On 30 June 2020, the profit reserve increased R$ 151,384 due to: (i) the effects of “CPC 42/IAS 29—Financial Reporting in Hyperinflationary Economies” applied to the balances up to 30 June 2020, and (ii) R$ 147,592 regarding the reclassification arising from the special reserve.

25.

BUSINESS SEGMENT INFORMATION

The setup of the Company’s operating segments is based on its Corporate Governance structure, which splits the business for the purposes of decision-making and management analysis.

Since 3 January 2020, as a result of acquiring Avon (Note 4), the Management has the following Corporate Governance structure:

•

Operation Natura &Co Latam – all operations of Natura, Avon, Aesop and TBS located in Brazil and Latin America;

•

Avon International – all Avon operations, except those located in Brazil and Latin America;

•

TBS International – all The Body Shop operations, except those located in Brazil and Latin America; and

•

Aesop International – all Aesop operations, except those located in Brazil and Latin America.

In addition to the analysis per segment, the Company’s Management also assesses its revenues at several levels, mainly through sales channels: direct sales, operations in the retail market, e-commerce, B2B and franchises. However, segregation by this type of operation is not yet considered significant for disclosures by Management.

Net revenue by segment is as follows in the six-month period ended 30 June 2020:

•

Natura &Co Latam – 56%

•

Avon International – 26%

•

TBS International – 13%

•

Aesop International – 5%

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The accounting practices for each segment are described in explanatory note 3 of these financial statements of the Company for the year ended 31 December 2019.

The tables below present summarized financial information for the segments and the geographic distribution of commercial operations of the Company as of 30 June 2020, 31 December 2019 and 30 June 2019. In addition, as described above, because of the Avon acquisition in 2020, the Company changed the corporate governance structure, and consequently the segment disclosures. Thus, the comparative figures originally disclosed in the 2019 financial statements are being presented to reflect the current corporate governance structure.

25.1

Operating segments


	06/2020
	Reconciliation to net profit (loss) for the period
	Net Income		Performance assessed by the Company			Depreciation and Amortization			Financial income		Financial Expenses			Income tax			Net Profit (Loss)
Natura &Co Latam		8,138,082		680,802			(458,872	)		1,749,654		(1,932,291	)		(207,473	)		(168,179	)
Avon International		3,771,535		40,361			(390,836	)		356,290		(676,915	)		(12,223	)		(683,323	)
TBS International		1,872,436		278,581			(356,197	)		43,491		(75,346	)		(57,290	)		(166,761	)
Aesop International		723,121		180,574			(123,813	)		10,403		(28,729	)		(10,018	)		28,416
Corporate expenses		—		(431,830	)		—			65,884		(8,577	)		147,348			(227,175	)

Consolidated		14,505,174		748,488			(1,329,718	)		2,225,772		(2,721,858	)		(139,656	)		(1,217,022	)


	06/2019
	Reconciliation to net profit (loss) for the period
	Net Income		Performance assessed by the Company			Depreciation and Amortization			Financial income		Financial Expenses			Income tax			Net Profit (Loss)
Natura &Co Latam		4,048,390		728,909			(167,260	)		769,227		(1,102,304	)		(79,148	)		149,425
TBS International		1,717,823		286,527			(286,141	)		18,140		(46,057	)		12,983			(14,548	)
Aesop International		552,646		118,183			(83,299	)		4,792		(13,455	)		(7,802	)		18,419
Corporate expenses		—		(127,120	)		—			—		—			43,221			(83,899	)

Consolidated		6,318,859		1,006,499			(536,700	)		792,159		(1,161,816	)		(30,746	)		69,397


	06/2020								12/2019
	Non-current assets		Total assets		Current liabilities		Non-current liabilities		Non-current assets		Total assets		Current liabilities		Non-current liabilities
Natura &Co Latam		9,204,837		17,876,818		5,937,239		10,281,619		4,574,087		9,328,858		3,116,454		8,235,679
Avon International		25,758,269		29,338,889		3,415,813		12,056,797		—		—		—		—
TBS International		7,726,417		9,828,551		1,989,604		1,885,255		6,146,960		7,369,250		1,065,447		1,477,148
Aesop International		1,338,875		1,954,858		418,223		730,817		1,033,408		1,435,830		255,616		590,917
Corporate balance		—		2,093,806		1,103,010		1,082		—		3,050,574		3,080,906		—

Consolidated		44,028,398		61,092,922		12,863,889		24,955,570		11,754,455		21,184,512		7,518,423		10,303,744

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25.2

Net income and non-current assets by geographic region


	06/2020								06/2019
Net income	Natura &Co Latam		Avon International		TBS International		Aesop International		Natura &Co Latam		TBS International		Aesop International
Asia		—		653,102		101,024		356,245		—		137,196		225,245
North America		1,650,053		—		269,200		113,706		345,507		305,852		88,129
Mexico		1,328,100								343,888		—		—
Other		321,953				269,200		113,706		1,619		305,852		88,129
South America		6,485,785		—		—		—		3,700,224		—		—
Brazil		4,533,315		—		—		—		2,776,153		—		—
Argentina		690,221								355,098		—		—
Others		1,262,249		—		—		—		568,973		—		—
Europe, Middle East and Africa (EMEA)		2,244		3,118,433		1,351,971		154,393		2,659		1,157,888		100,838
United Kingdom		—		371,923		1,083,032		82,005		—		881,543		48,801
Others		2,244		2,746,510		268,939		72,388		2,659		276,345		52,037
Oceania		—		—		150,241		98,777		—		116,887		138,434

Consolidated		8,138,082		3,771,535		1,872,436		723,121		4,048,390		1,717,823		552,646


	06/2020								12/2019
Non-current assets	Natura &Co Latam		Avon International		TBS International		Aesop International		Natura &Co Latam		TBS International		Aesop International
Asia		—		245,854		170,999		298,185		—		140,760		227,670
North America		699,318		—		626,188		365,465		185,646		523,351		272,676
Mexico		602,043								183,250
Others		97,275				626,188		365,465		2,396		523,351		272,676
South America		8,495,351		—		—		—		4,378,676		—		—
Brazil		6,985,784		—		—		—		4,197,259		—		—
Argentina		355,420								63,050
Others		1,154,147		—		—		—		118,367		—		—
EMEA		10,168		25,512,415		6,452,367		234,424		9,765		5,105,903		190,442
United Kingdom		—		23,781,822		5,780,380		97,827		—		4,602,066		76,073
Others		10,168		1,730,593		671,987		136,597		9,765		503,837		114,369
Oceania		—		—		476,863		440,801		—		376,946		342,620

Consolidated		9,204,837		25,758,269		7,726,417		1,338,875		4,574,087		6,146,960		1,033,408

No individual or aggregate customer (economic group) represents more than 10% of the Company’s net income.

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25.3

Reconciliation for recast segments

Because of the new segment information as a result of the Avon acquisition in 2020, described above, the changes in the recast segment information previously disclosed is according to the following:


Presented in the financial statement for the year ended 31 December 2019
31 December 2019	Non-current assets		Total assets		Current liabilities		Non-current liabilities
Natura Brasil ^(a)		4,181,261		7,618,551		2,207,944		8,119,890
Natura LATAM ^(a)		349,698		1,592,912		774,521		105,423
Natura others ^(a)		12,161		18,126		8,591		1,558
Aesop ^(b)		1,035,432		1,442,214		274,539		592,531
The Body Shop ^(c)		6,175,903		7,462,135		1,171,922		1,484,342
Corporate		—		3,050,574		3,080,906		—

Consolidated		11,754,455		21,184,512		7,518,423		10,303,744

(a)	Amounts included in the new segment information Natura &Co Latam.

(b)	Amounts related to the Aesop’s operations located in Brazil and Latins America, representing non-current asset (R$ 2.024), total assets (R$ 6.384), current liabilities (R$ 18.923) and non current liabilities (R$1.614) included in the recast segment Natura &Co Latam.

(c)	Amount related to The Body Shop’s operations located in Brazil and Latins America, representing non-current asset (R$ 28.943), total assets (R$92.885), current liabilities (R$106.475) and non current liabilities (R$7.193) included in the recast segment Natura &Co Latam.


Presented in the financial statement for the period ended 30 June 2019
30 June 2019	Net revenue		Performance assessed by the Company			Depreciation and amortization			Financial income		Financial expenses			Income tax			Net income (loss)
Natura Brasil ^(a)		2,750,169		588,399			(130,112	)		749,538		(1,071,733	)		(54,149	)		81,943
Natura LATAM ^(a)		1,253,535		162,932			(28,027	)		19,689		(27,504	)		(24,900	)		102,190
Natura outros ^(a)		4,292		(15,780	)		(1,093	)		—		(121	)		—			(16,994	)
Aesop ^(b)		554,090		117,590			(83,761	)		4,792		(13,520	)		(7,802	)		17,299
The Body Shop ^(c)		1,756,773		280,479			(293,707	)		18,140		(48,938	)		12,884			(31,142	)
Corporate		—		(127,120	)		—			—		—			43,221			(83,899	)

Consolidated		6,318,859		1,006,500			(536,700	)		792,159		(1,161,816	)		(30,746	)		69,397

(a)	Amounts included in the new segment information Natura &Co Latam.

(b)

Amounts related to the Aesop’s operations located in Brazil and Latins America, representing net revenue (R$ 1.444), performance assessed by Company (R$ 593), depreciation and amortization (R$ 462), financial expense (R$65), and net income (loss) (R$1.120) included in the recast segment Natura &Co Latam.

(c)

Amount related to The Body Shop’s operations located in Brazil and Latins America, representing net revenue (R$ 38.950), performance assessed by Company (R$ 6.048), depreciation and amortization (R$ 7.566), financial expense (R$2.881), income tax (R$99) and net income (loss) (R$16.594) included in the recast segment Natura &Co Latam.

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26.

NET REVENUE


	Consolidated
Gross income:	06/2020			06/2019
Domestic market		6,317,607			3,927,472
Foreign market		12,274,126			4,616,739
Other sales		242,336			26,306
	18,834,069			8,570,517
Returns and cancellations (a)		(270,994	)		(31,947	)
Commercial discounts and rebates (a)		(409,895	)		(507,871	)
Taxes on sales (a)		(3,648,006	)		(1,711,841	)

		(4,328,895	)		(2,251,658	)

Net revenue		14,505,174			6,318,859

Substantially, the income from brands Natura and Avon refers to direct sales, whereas the income from the brands The Body Shop and Aesop refers to retail sales.

(a)

The comparative amounts for the period ended 30 June 2019, presented in the interim financial statement 30 June 2020, previously issued in 13 August 2020, were reclassified to ensure consistency with the information originally disclosed in the interim financial statement of 30 June 2019. The reclassifications were made between lines with no modification in the subtotals and totals.

27.

OPERATING EXPENSES AND COST OF PRODUCTS SOLD

Breakdown by function

Controlling Company

Consolidated

06/2020

06/2019

06/2020

06/2019

Cost of products sold

—

5,254,229

1,773,727

Expenses with sales, marketing and logistics

—

6,448,997

2,875,375

Administrative, R&D, IT and Project Expenses

23,970

—

2,603,635

1,104,252

Total

23,970

—

14,306,861

5,753,354


Breakdown by nature	Controlling Company				Consolidated
	06/2020		06/2019		06/2020		06/2019
Cost of products sold				—		5,254,229		1,773,727

Raw material/packaging material/resale				—		4,365,991		1,485,379
Personnel expenses (explanatory note 28)				—		285,508		145,572
Depreciation and amortization				—		98,639		28,028
Others				—		504,091		114,748

Expenses with sales, marketing and logistics				—		6,448,997		2,875,375

Logistics costs				—		1,063,015		344,782
Personnel expenses (explanatory note 28)				—		1,839,299		805,518
Marketing, sales force and other sale expenses				—		2,884,442		1,367,657
Depreciation and amortization				—		662,241		357,418

Administrative, R&D, IT and Project Expenses		23,970		—		2,603,635		1,104,252

Expenses in innovation				—		115,977		33,277
Personnel expenses (explanatory note 28)		20,908		—		1,031,894		585,142
Other administrative expenses		3,062		—		886,926		334,579
Depreciation and amortization				—		568,838		151,254

Total		23,970		—		14,306,861		5,753,354

28.

EMPLOYEE BENEFITS

Information pertaining to employee benefits was presented in the Company’s 2019 annual financial statements in Note 27.


	Controlling Company				Consolidated
	06/2020		06/2019		06/2020		06/2019
Payroll, profit sharing and bonuses		11,629		—		2,312,050		1,146,868
Supplementary Pension Plan		—		—		89,581		43,605
Share-based payments (note 32.3)		4,131		—		76,387		26,903
Charges on restricted stock (note 32.1)		2,381		—		11,475		15,670
Medical care, food, and other benefits		—		—		291,956		120,311
Charges, taxes and social contributions		74		—		284,248		98,699
INSS - Brazilian Social Security Institute		2,693		—		91,004		84,176

Total		20,908		—		3,156,701		1,536,232

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28.1

Share-based payments

Options granted in 2020

On 27 March 2020, the Company’s Board of Directors approved the new long-term stock-based incentive plans of the Company named the “Co-investment Plan” and “Long-term Incentive Plan” for 2020.

The “Co-Investment Plan” consists of the grant of common shares of the Company to a group of employees that may invest part of their profit participation (up to 50%) in the purchase of shares so that the Company will assign the same number of shares for the amount invested by the beneficiary. The rights of the participants regarding the “Co-Investment Plan” shall only be fully acquired, to the extent that the participant remains continuously linked as an employee of the Company and its subsidiaries up to the third anniversary of the date of the grant.

The “Long-Term Incentive Plan” consists of granting common shares of the Company to a group of employees and, unless otherwise determined by the Company’s Board of Directors, participants’ rights regarding the Performance Shares shall only be fully acquired, to the extent that: (i) the participant remains an employee of the Company and its subsidiaries until the 3rd anniversary of the grant date; and (ii) certain performance conditions are met. For certain participants, there is a special condition for item (i) above, in which 50% of the Performance Shares granted will be acquired on the 3rd anniversary of the grant date and the remaining 50% on the 4th anniversary of the grant date.

The variations in the number of outstanding stock options and their related weighted-average prices, as well as variations in the number of restricted stock, are as follows:


Stock Option Plan and Strategy Acceleration Plan
	Average exercise price per option - R$		Options (thousands)
Balance on 31 December 2019		16.51		17,568
Related to Avon subsidiary – Business Combination (Note 4)		0.01		1,994
Expired		21.35		(72	)
Exercised		26.35		(727	)

Balance on 30 June 2020		16.29		18,763


	Restricted stock (thousands)			Performance shares (thousands)
Balance on 31 December 2019		3,092			688
Granted		862			—
Cancelled		(22	)		—
Exercised		(1,046	)		(40	)

Balance on 30 June 2020		2,886			648

Out of the 18,763 thousand options existing as of 30 June 2020 (17,568 thousand options as of 31 December 2019) 2,312 thousand options (604 thousand options as of 31 December 2019) can be exercised.

The expense related to the fair value of the options and restricted stock, including the charges related to restricted shares, recognized in the six-month period ended 30 June 2020, according to the period elapsed for the acquisition of the right to exercise of options and restricted shares, was R$ 81,350 in the consolidated.

The options to purchase outstanding stock and restricted stock at the end of the period have the following maturity dates and exercise prices:

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As of 30 June 2020 - Stock option plan


Grant date	Conditions for acquisition of a right as from the grant date	Exercise price (R$)		Fair value (R$)	Existing options (thousands)¹		Remaining contractual life (years)		Exercisable options (thousands)
18 March 2013	4 years of service		37.60	6.05		386		0.2		386
17 March 2014	4 years of service		25.16	4.27		102		1.7		102
16 March 2015	2 to 4 years of service		13.60	4.85 to 5.29		210		2.7		210
28 July 2015 (Strategy acceleration)	4 to 5 years of service		12.90	6.20 to 6.23		1,296		3.1		196
15 March 2016	2 to 4 years of service		12.84	7.16 to 7.43		286		3.8		284
11 July 2016 (Strategy acceleration)	4 to 5 years of service		11.41	6.84 to 6.89		2,640		4.1		—
10 March 2017	2 to 4 years of service		12.59	6.65 to 6.68		696		4.8		372
10 March 2017 (Strategy acceleration)	4 to 5 years of service		12.59	6.87 to 6.89		2,210		4.8		—
12 March 2018	2 to 4 years of service		16.96	7.96 to 8.21		1,998		5.8		642
12 March 2018 (Strategy acceleration)	3 to 5 years of service		12.16 to 16.96	8.21 to 9.67		3,800		5.8		—
12 April 2019	3 to 4 years of service		23.54	11.71 to 11.82		1,636		6.8		—
12 April 2019 (Strategy acceleration)	4 to 5 years of service		23.54	11.51 to 11.71		1,900		6.8		—
From 31 December 2020 to 9 May 2017	1 year of service		0.01	19.80		65		—		65
From 14 March 2018 to 17 December 2018	1 to 3 years of service		0.01	19.70		334		1.2		55
From 13 March 2019 to 16 December 2019	1 to 3 years of service		0.01	19.58		1,204		0.4 a 2.2		—

						18,763				2,312

As of 30 June 2020 - Restricted stock

Grant date

Conditions for acquisition
of a right as from the grant date

Existing shares
(thousands)²

Fair value
(R$)

Remaining
contractual life
(years)

10 March 2017

2 to 4 years of service

206

11.69 to 12.51

0.7

12 March 2018 – Plan I

2 to 4 years of service

470

15.18 to 15.9

0.7

12 March 2018 – Plan II

0.4 to 2.4 years of service

15.76 to 16.49

0.1

12 March 2018 – Plan III

1 to 3 years of service

15.54 to 16.27

0.8

12 March 2018 – Extraordinary Plan I

1 to 3 years of service

15.54 to 16.28

0.7

13 August 2018 – Extraordinary Plan VI

1.6 to 3.6 years of service

12.24 to 13.13

0.7 to 1.7

12 April 2019 – Plan I

2 to 4 years of service

814

21.62 to 22.53

0.7 to 2.8

12 April 2019 – Plan II

1 to 3 years of service

312

22.14 to 22.85

0.7 to 1.7

27 March 2020 – Co-Investment Plan

1 to 3 years of service

866

29.00

2,886

As of 30 June 2020 – Performance shares


Grant date	Right acquisition conditions	Existing shares (thousands)	Fair value (R$)	Remaining contractual life (years)	Shares not delivered (thousands)
21 May 2019	From 3 to 4 years of service as from the grant date and if the performance conditions are met	648	23.10 to 45.70	3.0 to 4.0	—

		648			—

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As of 30 June 2020, the market price was R$ 39.90 (R$ 38.67 as of 31 December 2019) per share.

29.

FINANCIAL INCOME (EXPENSES)


	Controlling Company					Consolidated
	06/2020			06/2019		06/2020			06/2019
FINANCIAL INCOME:
Interest on financial applications		13,450			—		74,306			37,445
Earnings on monetary and exchange rate variations ^(a)		—			—		394,807			410,393
Earnings on swap and forward transactions ^(c)		—			—		1,634,968			318,873
Earnings on market value adjustment of swap and forward derivatives		—			—		3,020			1,003
Reversal of the monetary adjustment of the provision for tax risks and tax obligations		—			—		42,378			—
Debt structuring revenues for acquisition of Avon		52,434			—		52,434			—
Other financial income		—			—		23,809			24,445

		65,884			—		2,225,722			792,159

FINANCIAL EXPENSES:
Interest on financing		(4,757	)		—		(539,671	)		(257,764	)
Interest on lease		—			—		(119,398	)		(64,137	)
Losses on monetary and exchange rate variations ^(b)		—			—		(1,529,458	)		(311,015	)
Losses on swap and forward transactions^(d)		—			—		(431,567	)		(455,352	)
Losses on market value adjustment of swap and forward derivatives		—			—		(5,170	)		(786	)
Adjustment of provision for tax, civil and labor risks and tax liabilities		—			—		(6,410	)		(8,080	)
Appropriation of funding costs (Debentures/Notes)		—			—		(5,653	)		(6,452	)
Pension plan interest		—			—		(15,512	)		—
Adjustment for hyperinflationary economy (Argentina)		—			—		(5,556	)		(5,864	)
Debt structuring expenses for acquisition of Avon										(29,360	)

Other financial expenses		(3,821	)		—		(63,463	)		(23,006	)

		(8,578	)		—		(2,721,858	)		(1,161,816	)

Net financial income (expenses)		57,306			—		(496,136	)		(369,657	)

The objective of the breakdowns below is to explain more clearly the foreign exchange hedging transactions contracted by the Company and the related balancing items in the income statement shown in the previous table:


	Controlling Company				Consolidated
	06/2020		06/2019		06/2020			06/2019
(a) Earnings on monetary and exchange rate variations		—		—		394,807			410,393

Earnings on exchange rate variation on borrowings		—		—		(393	)		313,365
Exchange rate variation on imports		—		—		15,746			6,541
Exchange rate variation on export receivables		—		—		46,580			7,322
Exchange rate variation on accounts payable to subsidiaries abroad		—		—		183,468			83,165
Exchange variations of bank accounts in foreign currency		—		—		149,406			—
(b) Losses on monetary and exchange rate variations		—		—		(1,529,458	)		(311,015	)

Losses on exchange rate variation on borrowings				—		(1,089,680	)		(228,287	)
Exchange rate variation on imports				—		(43,774	)		(9,791	)
Exchange rate variation on export receivables				—		(7,901	)		(8,483	)
Exchange rate variation on accounts payable to subsidiaries abroad				—		(192,414	)		(64,220	)
Monetary variations on financing				—		(195,689	)		(234	)
(c) Earnings on swap and forward transactions				—		1,634,968			318,873

Income from swap exchange coupons				—		112,090			86,811
Earnings from exchange variations on swap instruments				—		1,522,878			232,062
(d) Losses on swap and forward transactions				—		(431.567	)		(455,352	)

Losses on exchange rate variation on swap instruments				—		(5,892	)		(314,136	)
Financial costs of swap instruments				—		(425,585	)		(141,216	)

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30.

OTHER OPERATING INCOME (EXPENSES), NET

Information pertaining to other operating income (expenses) was presented in the Company’s 2019 annual financial statements in Note 29.


	Controlling Company					Consolidated
	06/2020			06/2019		06/2020			06/2019
Other operating income, net
Result of write-off of property, plant and equipment		—			—		8,620			142
ICMS-ST		—			—		14,345			39,722
Income from the sale of clients’ portfolio		—			—		—			10,125
Tax credits		—			—		101,473			96,062
Other operating income		—			—		7,764			—

Total other operating income		—			—		132,202			146,051

Other operating expenses, net
Crer para Ver		—			—		(19,720	)		(16,771	)
Expenses from the sale of clients’ portfolio		—			—		(2,967	)		—
Expenses related to the acquisition of Avon^(a)		(166,416	)		—		(304,057	)		(67,497	)
Transformation Plan		—			—		(79,558	)		(26,374	)
Tax contingencies		—			—		(3,774	)		(3,926	)
Other operating expenses		(11,432	)		—		—			(9,151	)

Total other operating expenses		(177,848	)		—		(410,076	)		(123,719	)

Other operating income (expenses), net		(177,848	)		—		(277,874	)		22,332

(a)	Related to expenses associated with the Avon acquisition process, which include: financial structuring expenses (R$ 115,696), legal expenses (R$ 17,281), regulatory expenses (R$ 18,030) and executive plans (R$ 152,909).

31.

TRANSACTIONS WITH RELATED PARTIES

Information pertaining to transactions with related parties was presented in the Company’s 2019 annual financial statements in Note 31.

31.1

The balances receivable and payable per transaction with related parties are set out below:


	Controlling Company
	06/2020		12/2019
Current Assets:
Avon Products, Inc. ^(a)		501,074		—
Natura Cosméticos S.A. – Argentina ^(b)		1,798		—
Natura Cosméticos S.A. – Mexico ^(b)		527		—
Natura Cosméticos S.A. – Peru ^(b)		454		—
Natura Cosméticos Ltda. – Colombia ^(b)		338		—
Natura Cosméticos Ltda – Chile ^(b)		290		—
The Body Shop International		2,395

Total Current Assets ^(*)		506,876		—

Current Liabilities:
Natura Cosméticos S.A. – Brazil ^(a)		330		—

Total current liabilities		330		—

(a)	Pertains to the allocation of expenses related to the merger process.

(b)	Pertains to the allocation of expenses related to the stock option and restricted stock plans.

In the period ended 30 June 2020, Natura &Co reimbursed the amount of R$ 147,486 related to the transaction costs of the Avon acquisition paid by its controlled company Natura Cosméticos. This reimbursement impacted the result under “Other income (expenses)”.

The Natura Institute holds shares in the Essential Investment Fund, and on 30 June 2020 its balance was R$ 3,395 (R$ 3,766 as of 31 December 2019).

On 5 June 2012, an agreement was entered between Indústria e Comércio de Cosméticos Natura Ltda. and Bres Itupeva Empreendimentos Imobiliários Ltda. (“Bres Itupeva”), for the construction and lease of processing, storage and distribution of merchandise (HUB) in the city of Itupeva/SP. In 2019, Bres Itupeva granted its credits to BRC Securitizadora S/A, to which Natura makes monthly payments. Mr. Antônio Luiz da Cunha Seabra, Mr. Guilherme Peirão Leal and Mr. Pedro Luiz Barreiros Passos, members of the group of controlling shareholders of Natura Cosméticos S.A., indirectly hold a controlling interest in Bres Itupeva. The amount involved in the registered transaction is recorded under “Right of Use” of Buildings in the amount of R$ 41,809 (R$ 44,244 under “Buildings” of Property, Plant and Equipment as of 31 December 2019).

In the period ended 30 June 2020, the Company and its subsidiaries transferred to the Natura Institute, in the form of a donation associated with maintenance, the amount of R$ 692 corresponding to 0.5% of net income for the prior fiscal year, and a donation associated with the net sales of products of the Natura Crer Para Ver line in the amount of R$ 21,000 (R$ 12,500 as of 30 June 2019).

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31.2

Compensation of the Management’s key personnel

The total compensation of the key personnel of the Company’s Management is as follows:

06/2020

06/2019

Compensation

Fixed

Variable

Total

Fixed

Variable

Total

(a)

(b)

(a)

(b)

Board of Directors

7,591

20,619

28,210

10,230

15,782

26,012

Executive Office

22,661

39,574

62,235

19,963

30,153

50,116

30,252

60,193

90,445

30,193

45,935

76,128

a)	The item “Executive Office” includes the amount of R$ 510 pertaining to the amortization of the six-month period ended 30 June 2020 (R$ 29 in the six-month period ended 30 June 2019), of the Confidentiality and Non-Compete Agreement (“Agreement”).

This refers to profit sharing, the Restricted Stock Plan and Strategy Acceleration Program, including charges, as applicable, to be determined in the period. The amounts include additions to and/or reversals of provisions made in the previous year, due to final assessment of the targets established for statutory and non-statutory board members and officers in relation to profit sharing.

31.2.1

Share-based payments

Breakdown of the compensation of the Company’s executives:

Grant of options

06/2020

06/2019

Balance of
the
Options
(quantity)¹
^(a)

Average fair
value of the
options¹ -R$

Average
exercise
price¹
- R$ ^(b)

Balance of
the
Options
(quantity)^{1 (a)}

Average fair
value of the
options¹ -R$

Average
exercise
price¹ -
R$ ^(b)

Executive Office

13,723,236

8.39

16.29

14,203,364

8.24

16.43

Restricted stock

06/2020

06/2019

Balance of the
shares (quantity)^2 (a)

Average fair value²
- R$

Balance of the
shares (quantity)^2 (a)

Average fair value²
- R$

Executive Office

1,564,143

25.15

1,069,642

19.05

¹	The number of stock options granted, expired and exercised and their respective fair values is shown already considering the stock split approved at the Extraordinary Shareholders’ Meeting held on 17 September 2019.

²	The number of restricted stock and performance shares granted, expired and exercised is shown already considering the stock split approved at the Extraordinary Shareholders’ Meeting held on 17 September 2019.

(a)	This refers to the balance of the vested options and restricted stock and non-vested options and restricted stock, not exercised, at the balance sheet dates.

(b)	This refers to the weighted average exercise price of the option at the time of the grant plans, adjusted for inflation based on the Extended Consumer Price Index (IPCA) until the balance sheet dates. The new Stock Option Program implemented in 2015 includes no monetary adjustment.

32.

COMMITMENTS

32.1

Contracts related to supply of inputs

Subsidiary Indústria e Comércio de Cosméticos Natura Ltda. has commitments arising from electric power supply agreements, with effective physical delivery, for its manufacturing activities, as described below:

•

Agreements that started in 2018 and are effective up to 2020, with the value of Megawatts/h between R$ 265 and R$ 363.

•

Agreements that started in 2019 and are effective up to 2022, with the value of Megawatts/h between R$ 155 and R$ 305.

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•

Agreements that started in 2020 and are effective up to 2022, with the value of Megawatts/h between R$ 204 and R$ 238.

The amounts are shown based on electric power consumption estimates in accordance with the contractual period, the prices of which are based on volumes, also estimated, resulting from the subsidiary’s continuous operations.

The total minimum supply payments, measured at nominal value, according to the contract, are:


	06/2020		12/2019
Up to one year		10,206		17,918
One to five years		2,552,017		13,160

Total		2,562,223		31,078

33.

INSURANCE COVERAGE

The Company and its subsidiaries adopt an insurance policy that mainly considers risk concentration and its relevance, taking into consideration the nature of their activities and the opinion of their insurance advisors. As of 30 June 2020, insurance coverage is as follows:


Item	Type of coverage	Amount insured
Item	Type of coverage	06/2020		12/2019
Industrial complex and administrative sites	Any material damage to buildings, facilities, inventories, and machinery and equipment		5,511,760		2,322,801
Vehicles	Fire, theft and collision for 347 vehicles (818 in 2019)		259,004		212,027
Loss of profits	Loss of profits due to material damage to facilities, buildings and production machinery and equipment		1,582,000		1,582,000
Transport	Damage to products in transit.		97,086		32,309
Civil liability	Protection against errors or complaints in the exercise of professional activity that affect third parties		1,392,756		532,510
Environmental liability	Protection against environmental accidents that may result in environmental lawsuits		30,000		30,000

34.

ADDITIONAL INFORMATION TO THE CASH FLOW STATEMENTS

The following table presents additional information on transactions related to the cash flow statement:

Controlling Company

Consolidated

06/2020

06/2019

06/2020

06/2019

Non-cash items:

Hedge accounting, net of tax effects

—

153,114

105,997

Net effect of the additions to the property, plant and equipment/intangible assets still not paid

—

46,778

31,638

Consideration per acquisition of the subsidiary*

13,366

—

*	in millions of Reais

35.

SUBSEQUENT EVENTS

Entity acquisition

At 30 June 2020 The Body Shop International Limited signed a purchase and sale agreement to acquire Aeon Forest Co., Ltd for the amount of R$133.275 (¥2,623,000). Until the date of this financial statement issuance, The Body Shop have not acquired control over the purchased entity, which will occur after the issuance of this financial statement.

Resource remittance to subsidiary

On 2 July 2020, the Company remitted to its subsidiary Natura &Co International S.à r.l. the amount of R$ 252,334 (USD47,000), aligned with the purpose of the subsidiary, which is raise and borrow funds by the Company to other consolidated companies (Note 2.3).

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36.

APPROVAL FOR ISSUE OF THE INTERIM ACCOUNTING INFORMATION

The Company’s interim accounting information was approved for disclosure by the Board of Directors at the meeting held on 30 September 2020.

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