NATURA
&CO HOLDING S.A. (“Natura &Co” or “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 partner or shareholder, in Brazil or abroad (“holding
companies”). 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 “Avon”, "The Body Shop" and
"Aesop". In addition to using the retail market, e-commerce, 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 (TBS) 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.”
In
December 2019, the Company became the holder of 100% of shares of Natura Cosméticos S.A. (“Natura”), under the
ticker NATU3. Thus, since 18 December 2019, NATU3 shares have no longer been traded in B3, and trading with NTCO3 shares has started
in the “Novo Mercado” segment of B3. 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, on 6 January 2020, the Company started to trade American Depositary Receipts (ADRs) on the New York
Stock Exchange (“NYSE”), under ticker “NTCO”.
The
Company’s condensed interim accounting information, included in the Quarterly Information Form - ITR pertaining to the nine-month
period ending on 30 September 2020, encompasses the individual and consolidated interim accounting information prepared pursuant
to Technical Pronouncement “CPC 21 (R1) - 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 relevant information, is being
disclosed, and that 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 ending on 31 December 2019,
issued on 5 March 2020, except for (i) the presentation of information on segments (Note 25), which was changed as a result of
the acquisition of Avon (Note 4) and (ii) the application of the practical expedient regarding the benefits granted in lease agreements
that 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; this interim information must, therefore, be read jointly with the last
annual financial statement.
As
presented in the Company’s annual financial statements for the fiscal year ending on 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 September 2019, refer to the consolidated
information of the wholly-owned subsidiary Natura Cosméticos S.A., and was obtained from the Quarterly Information - ITR
pertaining to the third quarter of 2019.
Information
pertaining to the hyperinflationary economy was presented in the Company’s 2019 annual financial statements, in Note 3.2.1.a.
In
the nine-month period ending on 30 September 2020, the application of CPC 42 / IAS 29 resulted in: (i) a negative impact on the
financial results of R$ 9,116 (30 September 2019 R$ 9,552); and (ii) a negative impact on the net profit for the fiscal year of
R$ 41,111 (30 September 2019 R$ 51,177), 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$ 1,921 (30 September
2019 negative impact of R$ 12,357). Capital reserve and profit reserve also increased by R$ 42,931 and R$ 6,092, respectively.
Information pertaining to the
consolidation was presented in the Company’s 2019 annual financial statements, in Note 3.3. a), except for the movement chart
below:
The
information per business segment 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 the Natura &Co Holding S.A.’s Board of Directors.
Additionally,
the Company has a Group’s Operational Committee (GOC), which includes the CEOs of Natura &Co, Natura &Co Latam, Avon
International, 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), which advises the Board of
Directors, and 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.
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 the 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 leasing.
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, were presented in the Company’s 2019 annual financial statements in note 4.
There were no significant changes
in the estimates and premises employed upon preparing the interim accounting information for the nine-month period ending on 30
September 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 ending on 31 December 2019, issued on 5 March 2020, except for the fair value
estimates of the business combination (note 4), and analyses of the potential impacts of Covid-19 (note 5.3).
On 3 January 2020, after fulfilling
all conditions precedent, as disclosed in explanatory note 1(a) and as a subsequent event to note 35 in the the Company’s
2019 annual financial statements, issued on 5 March 2020, 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 amounted to approximately R$ 112 million.
The following table summarizes
the preliminary calculation of the fair value of the compensation transferred on 3 January 2020.
(a) Related to the effects of
replacements and settlements of share-based payment plans, of which the amount of R$ 80 million refers to the share-based payment
plans of Avon, in which it was substituted by Natura &Co, and R$ 91 million 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 a transferred compensation.
Natura &Co has yet to conclude
the process of allocation of the transferred compensation among 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 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.
Since the acquisition date,
Avon contributed R$ 12,882.9 million of net revenues and caused R$ 1,178.8 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 nine-month period ended on 30 September 2020 represent an impact on the Company’s net revenue and
profit as if the acquisition had been made at the beginning of the year.
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.
Below are the book and fair
values of the Company’s financial instruments as at 30 September 2020:
|
Consolidated
|
|
|
|
Book Value
|
Fair Value
|
|
Note
|
Classification by category
|
Fair value hierarchy
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Financial assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
6
|
|
|
|
|
|
|
|
Cash and banks
|
|
Amortized cost
|
|
3,415,585
|
3,110,220
|
3,415,585
|
3,110,220
|
|
Certificate of bank deposits
|
|
Amortized cost
|
|
765,532
|
211,261
|
765,532
|
211,261
|
|
Repurchase operations
|
|
Fair value through results
|
Level 2
|
878,751
|
1,192,101
|
878,751
|
1,192,101
|
|
|
|
|
|
5,059,868
|
4,513,582
|
5,059,868
|
4,513,582
|
|
Short-term investments
|
7
|
|
|
|
|
|
|
|
Government securities
|
|
Fair value through results
|
Level 2
|
1,491,154
|
221,900
|
1,491,154
|
221,900
|
|
Restricted cash
|
|
Fair value through results
|
Level 2
|
42,769
|
-
|
42,769
|
-
|
|
Financial letter
|
|
Fair value through results
|
Level 2
|
455,389
|
374,690
|
455,389
|
374,690
|
|
Mutual investment fund
|
|
Fair value through results
|
Level 2
|
606,875
|
407,928
|
606,875
|
407,928
|
|
Dynamo Beauty Ventures Ltd Fund
|
|
Fair value through results
|
Level 2
|
12,125
|
7,402
|
12,125
|
7,402
|
|
Certificate of bank deposits
|
|
Fair value through results
|
Level 2
|
294,788
|
21,327
|
294,788
|
21,327
|
|
|
|
|
|
2,903,100
|
1,033,247
|
2,903,100
|
1,033,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
8
|
Amortized cost
|
|
3,617,397
|
1,685,764
|
3,617,397
|
1,685,764
|
|
|
|
|
|
|
|
|
|
|
Court deposit
|
12
|
Amortized cost
|
|
602,502
|
337,255
|
602,502
|
337,255
|
|
|
|
|
|
|
|
|
|
|
Subleasing receivables
|
14
|
Amortized cost
|
|
394,875
|
-
|
394,875
|
-
|
|
|
|
|
|
|
|
|
|
|
“Financial” and “Operating” derivatives
|
|
Fair value – Hedge instruments
|
Level 2
|
2,269,586
|
737,378
|
2,269,586
|
737,378
|
|
“Financial” and “Operating” derivatives
|
|
Fair value through results
|
Level 2
|
21,223
|
-
|
21,223
|
-
|
|
|
|
|
|
2,290,809
|
737,378
|
2,290,809
|
737,378
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Borrowings, financing and debentures
|
19
|
|
|
|
|
|
|
|
Loans in local currency
|
|
Amortized cost
|
|
(15,865,919)
|
(7,412,443)
|
(15,482,699)
|
(7,445,672)
|
|
Loans in foreign currency
|
|
Amortized cost
|
|
(4,652,118)
|
(3,373,931)
|
(4,832,652)
|
(3,541,541)
|
|
|
|
|
|
(20,518,037)
|
(10,786,374)
|
(20,315,351)
|
(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
|
(166,926)
|
(1,648)
|
(166,926)
|
(1,648)
|
|
|
|
|
|
(166,926)
|
(11,806)
|
(166,926)
|
(11,806)
|
|
|
|
|
|
|
|
|
|
|
Leasing
|
18
|
Amortized Cost
|
|
(4,181,839)
|
(2,517,565)
|
(4,107,175)
|
(2,517,565)
|
|
Trade payables and reverse factoring operations
|
20
|
Amortized cost
|
|
(6,745,145)
|
(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.
To hedge the current positions
of the Balance Sheet of the Company and its subsidiaries against market risks, the following derivative financial instruments were
used and consist of the balances as follows, as at 30 September 2020 and 31 December 2019:
|
Description
|
Fair Value (Level 2)
|
|
Consolidated
|
|
09/2020
|
12/2019
|
|
“Financial” derivatives
|
2,131,884
|
725,060
|
|
“Operating” derivatives
|
(8,001)
|
512
|
|
Total
|
2,123,883
|
725,572
|
The Company and the subsidiaries
are exposed to the foreign exchange risk arising from financial instruments denominated in currencies different from their functional
currencies, and the operating cash flows in foreign currencies. To reduce this exposure, Natura Cosméticos implemented policies
to hedge against the foreign exchange risk by establishing exposure limits linked to these risks.
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 – NDF”. As at
30 September 2020, borrowings, financing and debentures in the consolidated balance sheet included accounts in foreign currency
which expose the subsidiaries of the Company to foreign exchange risks, representing, in the aggregate, total liabilities of R$
4,652,118 (R$ 3,381,960 as at 31 December 2019).
|
|
i)
|
Derivatives to hedge foreign exchange risk
|
The Company and its subsidiaries
classify derivatives into “financial” and “operating”. The “financial” derivatives are “swap”
or “forward” derivatives contracted to hedge the foreign exchange risk of borrowings, financing, debt instruments and
loans in foreign currency. The “operating” derivatives are derivatives contracted to hedge the foreign exchange risk
of operating cash flows of the business.
As at 30 September 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
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Swap agreements:
|
|
|
|
|
|
|
|
|
|
Asset portion:
|
|
|
|
|
|
|
|
|
|
Dollar purchased position
|
2,660,680
|
2,664,001
|
4,674,233
|
3,416,707
|
5,149,555
|
3,729,691
|
475,322
|
312,984
|
|
|
|
|
|
|
|
|
|
|
|
Liability portion:
|
|
|
|
|
|
|
|
|
|
Post-fixed CDI Rate:
|
|
|
|
|
|
|
|
|
|
Position sold in CDI
|
2,660,680
|
2,664,001
|
2,684,237
|
2,754,595
|
2,877,236
|
3,002,623
|
192,999
|
248,028
|
|
|
|
|
|
|
|
|
|
|
|
NDFs Forward Agreements:
|
|
|
|
|
|
|
|
|
|
Liability portion:
|
|
|
|
|
|
|
|
|
|
Post-fixed CDI Rate:
|
|
|
|
|
|
|
|
|
|
Position sold at the interbank rate
|
2,757,840
|
200,896
|
(478)
|
(1,848)
|
(140,435)
|
(2,008)
|
(139,958)
|
(160)
|
|
Total net derivative financial instruments:
|
2,757,840
|
200,896
|
1,989,518
|
660,264
|
2,131,884
|
725,060
|
142,365
|
64,796
|
For financial derivatives maintained
by the Company and its subsidiaries as at 31 December 2019 and 30 September 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
said transactions.
“Operating”
derivatives - Consolidated
As at 30 September 2020, the
Company and its subsidiaries maintained 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
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Net position - GBP and USD
|
1,838,003
|
-
|
(1,690)
|
-
|
|
Forward agreements
|
168,867
|
1,302,869
|
(6,311)
|
512
|
|
Total Derivative Financial Instruments, net
|
2,006,870
|
1,302,869
|
(8,001)
|
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 at 30 September 2020, as shown
in the following chart:
|
|
Consolidated
|
|
|
09/2020
|
12/2019
|
|
Loans and financing in Brazil in foreign currency (a)
|
(4,669,503)
|
(3,381,959)
|
|
Accounts receivables registered in Brazil in foreign currency
|
8,512
|
10,007
|
|
Accounts payable registered in Brazil in foreign currency
|
(11,771)
|
(10,543)
|
|
Fair value of the “financial” derivatives
|
5,149,555
|
3,729,691
|
|
Net asset exposure
|
476,793
|
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 assets
|
Dollar decrease
|
(94)
|
95,283
|
158,868
|
The probable scenario considers
the future rates of the U.S. dollar for 90 days, according to the quotations obtained at B3 on 30 September 2020 and aligned to
the first maturity dates of the financial instruments with foreign exchange exposure, R$(5.64/US$ 1.00). Scenarios II and III consider
an increase or decrease in the U.S. Dollar of 25% (R$ 4.23/ US$ 1.00) and of 50% (R$ 2.82 /US$ 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 said 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.
For the subsidiary Avon, the
sensitivity analysis is carried out based on the outstanding foreign exchange agreements on 30 September 2020, all of which were
engaged to protect foreign exchange exposures. This hypothetical analysis carried out by Avon does not consider different exposures
for the U.S. dollar. The hypothetical impact was calculated in the outstanding positions using forward rates on 30 September 2020,
adjusted by a presumed valuation or depreciation of 10%, 25% or 50% of the U.S. dollar in relation to these hedge operations. A
hypothetical valuation of the U.S. Dollar in relation to the foreign exchange agreements would reduce earnings in (R$ 235,140,
R$ 587,851 or R$ 1,175,702), respectively, and a hypothetical depreciation of 10%, 25% or 50% of the U.S. Dollar against our foreign
exchange agreements would increase the earnings in R$ 235,140, R$ 587,851 or R$ 1,175,702, respectively.
Derivative
instruments designated for hedge accounting
The positions of derivative
financial instruments designated as outstanding cash flow hedge on 30 September 2020 are set out below:
Cash flow
hedge instrument - Consolidated
|
|
|
Other comprehensive income
|
|
|
Hedged Item
|
Notional currency
|
Notional value
|
Curve Value
|
Fair value
|
Accumulated contract gain (loss)
|
Earnings in the 12-month period
|
|
Currency Swap – USD/R$
|
Currency
|
BRL
|
2,659,360
|
1,988,589
|
2,270,930
|
282,341
|
219,833
|
|
Forward Agreements (The Body Shop)
|
Currency
|
BRL
|
1,652,006
|
2,043
|
(1,937)
|
(1,937)
|
1,074
|
|
Forward Agreements (Natura Indústria)
|
Currency
|
BRL
|
26,172
|
-
|
593
|
593
|
(2,149)
|
|
Total
|
|
|
4,337,538
|
1,990,632
|
2,269,586
|
280,997
|
218,758
|
Movements in cash flow hedge
reserve recorded under other comprehensive income are shown below:
|
|
Consolidated
|
|
Cash flow hedge balance as at 31 December 2018
|
(27,706)
|
|
Change in the fair value of hedge instrument recognized in other comprehensive income
|
158,045
|
|
Tax effects on the fair value of hedge instrument
|
(53,085)
|
|
Cash flow hedge balance as at 30 September 2019
|
77,254
|
|
Cash flow hedge balance as at 31 December 2019
|
42,729
|
|
Change in the fair value of hedge instrument recognized in other comprehensive income
|
218,758
|
|
Tax effects on the fair value of hedge instrument
|
(73,671)
|
|
Cash flow hedge balance as at 30 September 2020
|
187,816
|
Sensitivity analysis
On 30 September 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. Below is the exposure to interest rate risks of transactions bound to
CDI variation, including derivative transactions (borrowings, financing and debentures in Brazil were considered at their full
amounts, since 98.9% of the sum is linked to CDI):
|
|
Controlling Company
|
Consolidated
|
|
Total loans and financing - in local currency (note 19)
|
(1,089,005)
|
(15,865,919)
|
|
Operations in foreign currency with derivatives bound to CDI
|
-
|
(4,652,118)
|
|
Financial investments (notes 6 and 7)
|
1,802,222
|
4,492,490
|
|
Net exposure
|
713,217
|
(16,025,547)
|
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
|
(4,545)
|
(36,519)
|
(68,494)
|
The probable scenario considers
the future interest rates for 90 days, according to the quotations obtained at the B3 on the dates set forth for the first maturity
dates of the financial instruments with exposure to the interest rates, appraised on 30 September 2020.Scenarios II and III consider
an increase in the interest rate of 25% (2.5% per year) and 50% (3.0% per year), respectively, over the CDI rate of 2.0% per year.
The result of the credit risk
management is reflected in line item “provision for doubtful accounts” under “trade receivables”, as demonstrated
in the 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.
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 chart:
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Total current assets
|
2,607,759
|
3,050,574
|
19,099,330
|
9,430,057
|
|
Total current liabilities
|
(1,109,955)
|
(3,080,906)
|
(16,717,348)
|
(7,518,423)
|
|
Total net working capital
|
1,497,804
|
(30,332)
|
2,381,982
|
1,911,634
|
As at 30 September 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 (“covenants”), are given 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
|
1,113,808
|
-
|
-
|
1,113,808
|
(24,803)
|
1,089,005
|
|
Leasing
|
-
|
446
|
-
|
446
|
-
|
446
|
|
Trade payables, reverse factoring and related-parties trade payables
|
12,114
|
-
|
-
|
12,114
|
-
|
12,114
|
|
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
|
4,662,365
|
15,799,846
|
1,148,211
|
21,610,422
|
(1,092,385)
|
20,518,037
|
|
Leasing
|
1,313,786
|
2,878,557
|
844,172
|
5,036,515
|
(854,676)
|
4,181,839
|
|
Trade payables and reverse factoring operations
|
6,745,145
|
-
|
-
|
6,745,145
|
-
|
6,745,145
|
As at 31 December 2019,
the Company and its subsidiaries have two credit facilities:
|
|
Ø
|
Up to seventy million
pounds sterling (£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 is used by the indirect subsidiary since the first quarter of 2020, to reinforce
working capital and liquidity.
|
|
|
Ø
|
Up to one hundred
and fifty million Reais (R$ 150,000), with no guarantee, which was terminated during the first semester of 2020.
|
The Company is closely monitoring
the evolution of the Covid-19 pandemic around the world, particularly the recent restrictive measures adopted in parts of Europe.
The Crisis Committee created in the second quarter
continuously analyzes the situation
and works to minimize impacts, guarantee the continuity of operations, protect the cash, improve liquidity and promote the health
and safety of all, as we move into the fourth quarter.
Main impacts in the business
|
|
Ø
|
Restrictions, blocking and closing of stores:
In the third quarter, Natura &Co’s businesses were less affected by the pandemic than in the previous quarter, as restrictions
decreased in most markets. The transition into a digital environment continued in all our brands, allowing us to widely offset
the impact of closing the stores, and the e-commerce sales for the entire Group increased by 115% in relation to the third quarter
of 2019. As an example, for The Body Shop, sales in company stores decreased 16.5%, because of Covid-19, but with significant continuous
growth in online channels and at home, the total net sales increased by 8% in constant currency. For Aesop, the retail sales decreased
15.0%, and were offset by the 264% growth in online sales. The uncertainty remains as some markets face new blocking or restrictions.
In this environment, Natura &Co continues to be extremely careful regarding the health and safety of its employees, consultants,
representatives and clients. Regarding Avon International, the acceleration in the adoption of digital assets helped offset the
impact of Covid-19 in sales, despite strict restrictions in certain markets. For Natura, all retail stores, including franchise
stores, reopened in the quarter, most of them with some restrictions.
|
|
|
Ø
|
Optimization of the capital structure:
Natura &Co is using part of the funds arising from the private raising of US$ 2 billion and, subsequently, the funds arising
from the capital increase in the amount of US$ 1 billion, to accelerate its investments in the digital operation, which were intensified
as a result of the Covid-19 pandemic. The management of costs continues, including regarding capex and discretionary expenses,
and the incentives from the Government were also used in the several places in the quarter. The Group ended the quarter with a
stronger cash position of R$ 8.0 billion, prior to the recent capital increase, resulting in a greater deleveraging and ensuring
compliance with our financial covenants.
|
In June 2020, Avon realized
that it was exposed to a cybernetic incident in its Information Technology environment, which interrupted some systems and partially
affected Avon’s operations. Avon hired specialists in cybersecurity and in information technology (IT) controls, starting
a comprehensive effort to contain and correct and a forensic investigation. By mid-August, Avon had already reestablished all its
central operating systems and resumed operations in all its markets, including all distribution centers.
The cybernetic incident had
a significant impact in the performance of Avon’s revenue in the second quarter of 2020, with the majority of this impact
(approximately R$450 million in sales) recovered during the third quarter of 2020, as Avon complied with all orders created. The
incremental expenses of this cybernetic incident were not significant.
Although we have no indication
that the accuracy and integrity of any financial information has been affected as a result of the incident and Avon has carried
out extensive procedures to validate such accuracy and integrity, we believe that, if the incident had occurred differently, it
could have had a material impact in Avon’s financial statements.
|
|
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
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Cash and banks
|
1,286
|
2,173,101
|
3,415,585
|
3,110,220
|
|
Certificate of Bank Deposits (a)
|
501,766
|
207,699
|
765,532
|
211,261
|
|
Repurchase operations (b)
|
-
|
-
|
878,751
|
1,192,101
|
|
|
503,052
|
2,380,800
|
5,059,868
|
4,513,582
|
|
|
(a)
|
As at 30 September 2020, investments in Certificate
of Bank Deposits (“CDB”) were remunerated at an average rate of 103.7% 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 own issuing banks
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 Agency for Custody and Financial Settlement of Securities
(“CETIP”). On 30 September 2020, repurchase operations were remunerated at an average rate of 100.0% 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
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Exclusive investment funds
|
1,300,456
|
669,769
|
-
|
-
|
|
Loan investment funds
|
-
|
-
|
606,875
|
407,928
|
|
Certificate of Bank Deposits (a)
|
-
|
-
|
294,788
|
21,327
|
|
Financial letters (b)
|
-
|
-
|
455,389
|
374,690
|
|
Government securities (LFT) (c)
|
-
|
-
|
1,491,154
|
221,900
|
|
Dynamo Beauty Ventures Ltd. Fund
|
-
|
-
|
12,125
|
7,402
|
|
Restricted cash
|
-
|
-
|
42, 769
|
-
|
|
|
1,300,456
|
669,769
|
2,903,100
|
1,033,247
|
|
|
|
|
|
|
|
Current
|
1,300,456
|
669,769
|
2,890,975
|
1,025,845
|
|
Non-Current
|
-
|
-
|
12,125
|
7,402
|
(a) On
30 September 2020, the investments in CDBs classified as short-term investments were compensated at an average rate of 100.0% of
CDI (106.9% of CDI on 31 December 2019). On 30 September 2020, related to the “Crer para Ver” line within the exclusive
fund is R$ 49,122 (R$ 38,018 on 31 December 2019).
(b) On
30 September 2020, the investments in financial letters are compensated at an average rate of 138.1% of CDI.
(c) On
30 September 2020, the investments in Government securities (LFT) are compensated at an average rate of 106.9% of CDI (100.4% of
CDI as of 31 December 2020).
The breakdown of securities
constituting the Essential Investment Fund portfolio, regarding which the Company holds 100% interest, on 30 September 2020 and
31 December 2019 is as follows:
|
|
09/2020
|
12/2019
|
|
Certificate of bank deposits
|
294,788
|
21,327
|
|
Repurchase operations
|
878,751
|
1,192,101
|
|
Financial letters
|
455,389
|
374,690
|
|
Government securities (LFT)
|
1,491,154
|
221,900
|
|
|
3,120,082
|
1,810,018
|
Information pertaining to trade
receivables was presented in the Company’s 2019 annual financial statements, in Note 8.
|
|
Consolidated
|
|
|
09/2020
|
12/2019
|
|
Trade receivables
|
4,053,620
|
1,793,759
|
|
Provision for doubtful accounts
|
(436,223)
|
(107,995)
|
|
|
3,617,397
|
1,685,764
|
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
|
|
|
09/2020
|
12/2019
|
|
To become due
|
1,989,274
|
1,501,958
|
|
Past due:
|
|
|
|
Up to 30 days
|
1,560,258
|
142,069
|
|
31 to 60 days
|
127,019
|
36,466
|
|
61 to 90 days
|
96,154
|
27,789
|
|
91 to 180 days
|
280,915
|
85,477
|
|
Provision for doubtful accounts
|
(436,223)
|
(107,995)
|
|
|
3,617,397
|
1,685,764
|
Movements in the provision for
doubtful accounts for the period ended on 30 September 2020 are as follows:
|
|
Consolidated
|
|
Balance on 31 December 2018
|
(129,242)
|
|
Additions
|
(152,645)
|
|
Write-offs
|
186,949
|
|
Exchange variation
|
(1,220)
|
|
Balance on 30 September 2019
|
(96,158)
|
|
|
|
|
Balance on 31 December 2019
|
(107,995)
|
|
Additions
|
(494,534)
|
|
Write-offs/Reversals
|
233,665
|
|
Exchange variation
|
(67,359)
|
|
Balance on 30 September 2020
|
(436,223)
|
Find below the balances of trade
receivables per exposure to the risk of doubtful accounts on 30 September 2020:
|
|
Consolidated
|
|
|
Trade receivables
|
Provision for doubtful accounts
|
|
To become due
|
1,989,274
|
(51,015)
|
|
Past due:
|
|
|
|
Up to 30 days
|
1,560,258
|
(74,711)
|
|
31 to 60 days
|
127,019
|
(43,416)
|
|
61 to 90 days
|
96,154
|
(46,544)
|
|
91 to 180 days
|
280,915
|
(220,537)
|
|
|
4,053,620
|
(436,223)
|
Information pertaining to inventories
was presented in the Company’s 2019 annual financial statements, in Note 9.
|
|
Consolidated
|
|
|
09/2020
|
12/2019
|
|
Finished products
|
4,085,867
|
1,253,145
|
|
Raw materials and packaging
|
1,109,687
|
253,063
|
|
Auxiliary materials
|
209,246
|
82,228
|
|
Products in progress
|
39,642
|
27,346
|
|
Provision for losses
|
(308,674)
|
(185,232)
|
|
|
5,135,768
|
1,430,550
|
Movements in the provision for inventory losses for
the period ending on 30 September 2020 are as follows:
|
|
Consolidated
|
|
Balance on 31 December 2018
|
(178,268)
|
|
Net additions
|
(109,879)
|
|
Write-offs
|
96,853
|
|
Exchange variation
|
3,360
|
|
Balance on 30 September 2019
|
(187,934)
|
|
|
|
|
Balance on 31 December 2019
|
(185,232)
|
|
Net additions
|
(233,961)
|
|
Write-offs
|
223,304
|
|
Exchange variation
|
112,785
|
|
Balance on 30 September 2020
|
(308,674)
|
Information pertaining to the
Company’s recoverable taxes was presented in the 2019 annual financial statements, in Note 10.
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
ICMS (Tax on Distribution of Goods and Services) on purchase of inputs
|
-
|
-
|
700,996
|
434,832
|
|
Taxes on purchase of inputs - subsidiaries abroad
|
-
|
-
|
215,398
|
39,475
|
|
ICMS on purchase of property, plant and equipment
|
-
|
-
|
9,653
|
10,628
|
|
PIS (Social Integration Program) and COFINS (Social Security Financing Contribution) on purchase of property, plant and equipment
|
-
|
-
|
15
|
3,826
|
|
PIS and COFINS on purchase of inputs
|
-
|
-
|
721,169
|
280,087
|
|
PIS, COFINS and CSLL (Social Contribution on Net Profit) - withheld at source
|
782
|
-
|
4,497
|
2,378
|
|
IPI (Tax on Manufactured Products)
|
-
|
-
|
72,303
|
30,190
|
|
Others
|
79
|
-
|
196,916
|
3,438
|
|
|
861
|
-
|
1,920,947
|
804,854
|
|
|
|
|
|
|
|
Circulante
|
861
|
-
|
1,064,246
|
395,640
|
|
Não circulante
|
-
|
-
|
856,701
|
409,214
|
|
|
11.
|
INCOME TAX AND SOCIAL CONTRIBUTION
|
The effective rate calculated
by the Company in the period from 30 September 2020 was -29.8% (21.7% as at 30 September 2019). This percentage is based on the
loss before taxes of R$ 646.6 million (R$ 170 as at 30 September 2019) and in the expense of income tax of R$ 192.8 million (R$
36,9 as at 30 September 2019). The main components causing the effective rate to be far below the nominal income tax rate of 34%
were the tax losses of certain jurisdictions which may not benefit from deferred asset income tax, permanent effects related to
income tax withheld at source arising from transactions among companies of the group which may not be used and the additional recognition
of deferred liability income tax due to the announcement by the British government that the nominal rate would not be reduced from
19% to 17%. Excluding the adverse effects of the conciliation of items that resulted mainly from tax jurisdictions in which the
Company currently cannot receive an income tax benefit, the actual tax rate of the Company would be approximately 24.8%.
Movements in deferred asset
and liability income tax and social contribution for the period ended on 30 September 2020 are as follows:
|
|
Assets
|
|
Liabilities
|
|
|
Controlling Company
|
Consolidated
|
|
Consolidated
|
|
Balance on 31 December 2018
|
-
|
398,400
|
|
(431,534)
|
|
Effect on results
|
-
|
58,031
|
|
5,133
|
|
Reserve for grant of options and restricted stock
|
-
|
26,845
|
|
-
|
|
Effect on other comprehensive income
|
-
|
(53,085)
|
|
-
|
|
Exchange variation on other comprehensive income
|
-
|
14,533
|
|
(6,443)
|
|
Balance on 30 September 2019
|
-
|
444,724
|
|
(432,844)
|
|
|
|
|
|
|
|
Balance on 31 December 2019
|
-
|
374,448
|
|
(450,561)
|
|
Effect on results
|
135,491
|
7,438
|
|
15,270
|
|
Control acquisition
|
-
|
667,034
|
|
(728,274)
|
|
Reserve for grant of options and restricted stock
|
-
|
41,696
|
|
-
|
|
Effect on other comprehensive income
|
-
|
(73,671)
|
|
-
|
|
Exchange variation on other comprehensive income
|
-
|
(57,594)
|
|
(327,137)
|
|
Balance on 30 September 2020
|
135,491
|
1,074,539
|
|
(1,490,702)
|
Information pertaining to the
Company’s judicial deposits was presented in the 2019 annual financial statements, in Note 12.
|
|
Consolidated
|
|
|
09/2020
|
12/2019
|
|
Unprovisioned tax proceedings (a)
|
297,208
|
203,403
|
|
Provisioned tax proceedings (b) (notes 21 and 22)
|
251,419
|
116,415
|
|
Unprovisioned civil proceedings
|
9,463
|
2,541
|
|
Provisioned civil proceedings (note 22)
|
2,370
|
426
|
|
Unprovisioned labor proceedings
|
13,779
|
8,683
|
|
Provisioned labor proceedings (note 22)
|
28,263
|
5,787
|
|
Total judicial deposits
|
602,502
|
337,255
|
|
|
a)
|
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.
|
|
|
b)
|
The tax proceedings related to these judicial deposits are mainly related to the sum of amounts
disclosed in note 22, item (a) and the amounts provisioned pursuant to note 21.
|
Below are the movements in the
balances of judicial deposits for the periods ending on 30 September 2020 and 2019:
|
|
Consolidated
|
|
Balance on 31 December 2018
|
333,577
|
|
New deposits
|
2,419
|
|
Redemptions
|
(2,492)
|
|
Monetary adjustment
|
10,552
|
|
Write-offs for expenses
|
(3,993)
|
|
Balance on 30 September 2019
|
340,063
|
|
Balance on 31 December 2019
|
337,255
|
|
Control acquisition
|
283,885
|
|
New deposits
|
13,333
|
|
Redemptions
|
(23,701)
|
|
Monetary adjustment
|
9,302
|
|
Payments
|
(14,150)
|
|
Foreign exchange variation
|
(3,422)
|
|
Balance on 30 September 2020
|
602,502
|
In addition to judicial deposits,
the Company and its subsidiaries have contracted guarantee insurance policies for some proceedings.
|
|
13.
|
NON-CURRENT ASSETS AVAILABLE FOR SALE
|
Assets classified as available
for sale were acquired in the process of the subsidiary’s acquisition Avon (Note 4). The following table shows the changes
in the balance for the period ended on 30 September 2020:
|
|
Consolidated
|
|
Acquisition by Avon on 3 January 2020
|
186,518
|
|
Transfer to property, plant and equipment(a)
|
(82,735)
|
|
Transfer from property, plant and equipment(b)
|
65,596
|
|
Sale(c)
|
(64,933)
|
|
Exchange variation
|
48,852
|
|
Balance on 30 September 2020
|
153,326
|
|
|
a)
|
During the first quarter of 2020, Avon has identified that new circumstances arose which were previously
considered as unlikely and, as a result, Avon decided not to carry on with the sale of two properties, one located in Brazil and
the other in Romania. 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 our consolidated financial statements,
was recorded.
|
|
|
b)
|
During the second quarter of 2020, Avon decided again to sale the asset located in Brazil, that
had been reclassified to property, plant and equipment during the first quarter.
|
|
|
c)
|
During the period of nine month ending on 30 September 2020, Avon executed the sale of two properties:
(i) distribution center located in Hungary; and (ii) plant located in China.
|
On 30 September 2020, the assets
available for sale included two Avon properties located in Brazil and in Spain.
|
|
14.
|
OTHER CURRENT AND NON-CURRENT ASSETS
|
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Marketing and advertising advances
|
-
|
-
|
116,928
|
28,669
|
|
Supplier advances
|
7,012
|
-
|
298,445
|
102,225
|
|
Employee advances
|
-
|
-
|
72,864
|
13,983
|
|
Rent advances and guarantee deposit (a)
|
-
|
-
|
137,944
|
96,202
|
|
Advance insurance expenses
|
-
|
-
|
157,442
|
29,647
|
|
Overfunded pension plan (b)
|
-
|
-
|
732,938
|
-
|
|
Customs broker advances - Import taxes
|
-
|
-
|
43,792
|
34,932
|
|
Subleasing receivables (c)
|
-
|
-
|
394,875
|
-
|
|
Carbon credit
|
-
|
-
|
4,007
|
3,508
|
|
Service provider receivables(d)
|
-
|
-
|
155,305
|
-
|
|
Others
|
-
|
-
|
239,668
|
39,868
|
|
|
7,012
|
-
|
2,354,208
|
349,034
|
|
|
|
|
|
|
|
Current
|
7,012
|
-
|
753,613
|
265,198
|
|
Non-Current
|
-
|
-
|
1,600,595
|
83,836
|
|
|
(a)
|
It substantially refers to (i) advance payments of rental agreements that were not included in
the initial measurement of lease liabilities and 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 lessor at the end of the rental agreements.
|
|
|
(b)
|
Pension plan arising from the acquisition of Avon on 3 January 2020 (Note 4).
|
|
|
(c)
|
It pertains to the sublease receivables from the office Avon has in New York.
|
|
|
(d)
|
It refers to receivables mainly from transportation and insurance companies.
|
|
|
Controlling Company
|
|
|
09/2020
|
12/2019
|
|
Investments in subsidiaries, net of losses
|
11,940,792
|
3,392,677
|
|
Goodwill Avon (Note 4)
|
11,027,510
|
-
|
|
Total
|
22,968,302
|
3,392,677
|
Information and movements of balances for the nine period ending
on 30 September 2020 and for the fiscal year ending on 31 December 2019:
|
|
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
|
6,864,260
|
(5,325,937)
|
(14,013)
|
1,524,310
|
|
Shareholders’ equity interest
|
6,864,260
|
(5,325,937)
|
(14,013)
|
1,524,310
|
|
Fair value adjustment of acquired assets and liabilities
|
-
|
10,416,482
|
-
|
10,470,519
|
|
Goodwill
|
-
|
11,027,510
|
-
|
10,973,473
|
|
Total
|
6,864,260
|
16,118,055
|
(14,013)
|
22,968,302
|
|
Net Profit / (Losses) for the period of the subsidiaries
|
698,331
|
(1,505,126)
|
(11,896)
|
(818,691)
|
|
|
|
|
|
|
|
Balances on 31 December 2019
|
3,392,677
|
-
|
-
|
3,392,677
|
|
Equity in subsidiaries
|
698,331
|
(1,505,126)
|
(11,896)
|
(818,691)
|
|
Exchange variation and other adjustments in the conversion of investments of the subsidiaries abroad
|
2,186,255
|
4,348,287
|
(2,174)
|
6,532,368
|
|
Effect of Hyperinflationary economy adjustment
|
49,023
|
-
|
-
|
49,023
|
|
Contribution by the controlling company for stock option plans granted to executive officers of the subsidiaries and other reserves net of tax effects
|
92,887
|
-
|
-
|
92,887
|
|
Hedge accounting, net of tax effects
|
145,087
|
-
|
-
|
145,087
|
|
Capital increase
|
300,000
|
-
|
-
|
300,000
|
|
Acquisition price
|
-
|
13,274,894
|
57
|
13,274,951
|
|
Balances on 30 September 2020
|
6,864,260
|
16,118,055
|
(14,013)
|
22,968,302
|
|
|
(1)
|
The investment balance in the direct subsidiary Natura Cosméticos S.A. includes goodwill
arising from the acquisitions of indirect subsidiaries TBS (R$1,971,001) and Aesop (R$142,989).
|
|
|
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
reversal
(provision)
|
Transfers
|
Exchange
variation
|
09/2020
|
|
Cost
value:
|
|
|
|
|
|
|
|
|
|
|
Vehicles
|
2
to 5
|
45,578
|
25,789
|
696
|
(8,270)
|
-
|
2,173
|
11,024
|
76,990
|
|
Templates
|
3
|
192,556
|
-
|
202
|
(19,713)
|
-
|
5,140
|
8,081
|
186,266
|
|
Tools
and accessories
|
3
to 20
|
11,974
|
52,410
|
9,351
|
(163)
|
-
|
2,784
|
7,280
|
83,636
|
|
Facilities
|
3
to 60
|
309,772
|
1,431
|
61
|
(3,663)
|
-
|
8,223
|
(20,362)
|
295,462
|
|
Machinery
and accessories
|
3
to 15
|
866,451
|
746,734
|
9,650
|
(1,903)
|
-
|
67,846
|
163,052
|
1,851,830
|
|
Improvement
in third-party property
|
2
to 20
|
615,103
|
58,548
|
16,040
|
(3,453)
|
(8,416)
|
33,772
|
232,326
|
943,920
|
|
Buildings
|
14
to 60
|
386,957
|
1,168,836
|
5,464
|
1,640
|
330
|
29,159
|
324,301
|
1,916,687
|
|
Furniture
and utensils
|
2
to 25
|
397,727
|
32,566
|
17,181
|
(4,576)
|
(7,802)
|
6,413
|
129,165
|
570,674
|
|
Lands
|
-
|
35,157
|
568,470
|
57
|
75
|
-
|
4,186
|
214,867
|
822,812
|
|
IT
equipment
|
3
to 15
|
297,228
|
112,369
|
9,632
|
(4,783)
|
-
|
19,177
|
92,019
|
525,642
|
|
Other
assets
|
-
|
-
|
40,090
|
-
|
-
|
-
|
-
|
15,716
|
55,806
|
|
Projects
in progress
|
-
|
156,011
|
78,965
|
151,399
|
(867)
|
-
|
(148,461)
|
44,447
|
281,494
|
|
Total
cost
|
|
3,314,514
|
2,886,208
|
219,733
|
(45,676)
|
(15,888)
|
30,412
|
1,221,916
|
7,611,219
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
value:
|
|
|
|
|
|
|
|
|
|
|
Vehicles
|
|
(16,924)
|
-
|
(18,962)
|
3,580
|
-
|
(2,093)
|
(1,640)
|
(36,039)
|
|
Templates
|
|
(175,938)
|
-
|
(7,557)
|
19,684
|
-
|
-
|
(187)
|
(163,998)
|
|
Tools
and accessories
|
|
(3,255)
|
-
|
(31,527)
|
-
|
-
|
10
|
4,515
|
(30,257)
|
|
Facilities
|
|
(167,362)
|
-
|
(15,835)
|
285
|
-
|
1,096
|
7,549
|
(174,267)
|
|
Machinery
and accessories
|
|
(416,736)
|
-
|
(149,164)
|
176
|
-
|
(1,267)
|
28,502
|
(538,489)
|
|
Improvement
in third-party property
|
|
(267,371)
|
-
|
(94,976)
|
2,663
|
(4,892)
|
(4,013)
|
(96,884)
|
(465,473)
|
|
Buildings
|
|
(101,785)
|
-
|
(78,578)
|
-
|
-
|
-
|
4,736
|
(175,627)
|
|
Furniture
and utensils
|
|
(193,973)
|
-
|
(67,538)
|
3,716
|
(20)
|
4,012
|
(66,995)
|
(320,798)
|
|
IT
equipment
|
|
(197,281)
|
-
|
(72,726)
|
3,971
|
(34)
|
-
|
(30,873)
|
(296,943)
|
|
Other
assets
|
|
-
|
-
|
(10,579)
|
-
|
-
|
-
|
(1,179)
|
(11,758)
|
|
Total
depreciation
|
|
(1,540,625)
|
-
|
(547,442)
|
34,075
|
(4,946)
|
(2,255)
|
(152,456)
|
(2,213,649)
|
|
Overall
Total
|
|
1,773,889
|
2,886,208
|
(327,709)
|
(11,601)
|
(20,834)
|
28,157
|
1,069,460
|
5,397,570
|
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
|
09/2020
|
|
Cost value:
|
|
|
|
|
|
|
|
|
|
|
Software
|
2.5 to 10
|
1,313,090
|
291,239
|
113,964
|
(6,934)
|
-
|
153,412
|
176,825
|
2,041,596
|
|
Trademarks and patents (Definite useful life)
|
24 to 25
|
116,805
|
517,592
|
-
|
-
|
-
|
-
|
252,370
|
886,767
|
|
Trademarks and patents (Indefinite useful life)
|
-
|
2,171,585
|
1,893,224
|
-
|
-
|
-
|
-
|
1,540,997
|
5,605,806
|
|
Goodwill Avon (Note 4)
|
-
|
-
|
11,027,510
|
-
|
-
|
-
|
-
|
4,301,703
|
15,329,213
|
|
Goodwill Emeis Brazil Pty Ltd.
|
-
|
100,237
|
-
|
-
|
-
|
-
|
-
|
42,752
|
142,989
|
|
Goodwill The Body Shop International Limited
|
-
|
1,434,369
|
-
|
8,155
|
-
|
-
|
-
|
528,477
|
1,971,001
|
|
Goodwill acquisition of The Body Shop stores
|
-
|
1,456
|
-
|
-
|
|
|
|
-
|
1,456
|
|
Relationship with retail clients
|
10
|
1,987
|
-
|
-
|
-
|
-
|
-
|
832
|
2,819
|
|
Goodwill (indefinite useful life)
|
-
|
17,801
|
-
|
-
|
-
|
-
|
7,294
|
2,873
|
27,968
|
|
Goodwill (Definite useful life)
|
3 to 18
|
12,447
|
-
|
-
|
-
|
1,890
|
(3,559)
|
4,098
|
14,876
|
|
Relationship with franchisees and sub franchisees
|
14 to 15
|
602,958
|
1,876,169
|
-
|
-
|
-
|
-
|
956,504
|
3,435,631
|
|
Developed technology (by acquired subsidiary)
|
-
|
-
|
1,131,573
|
-
|
-
|
-
|
-
|
443,587
|
1,575,160
|
|
Other intangible assets
|
2 to 10
|
110,288
|
-
|
66,631
|
(15,020)
|
-
|
(149,473)
|
16,705
|
29,131
|
|
Total cost
|
|
5,883,023
|
16,737,307
|
188,750
|
(21,954)
|
1,890
|
7,674
|
8,267,723
|
31,064,413
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization value:
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
(649,347)
|
-
|
(270,355)
|
43
|
-
|
(3,643)
|
(32,816)
|
(956,118)
|
|
Trademarks and patents
|
|
(44,108)
|
-
|
(28,436)
|
-
|
-
|
-
|
(16,945)
|
(89,489)
|
|
Goodwill
|
|
(2,197)
|
-
|
(387)
|
-
|
-
|
(750)
|
(2,735)
|
(6,069)
|
|
Relationship with retail clients
|
|
(1,939)
|
-
|
(183)
|
-
|
-
|
-
|
(679)
|
(2,801)
|
|
Relationship with franchisees and sub franchisees
|
|
(95,772)
|
-
|
(229,200)
|
-
|
-
|
-
|
(60,613)
|
(385,585)
|
|
Developed technology
|
|
-
|
-
|
(212,416)
|
-
|
-
|
-
|
(23,647)
|
(236,063)
|
|
Other intangible assets
|
|
(13,159)
|
|
(6,021)
|
15,020
|
-
|
-
|
(4,094)
|
(8,254)
|
|
Total accrued amortization
|
|
(806,522)
|
-
|
(746,998)
|
15,063
|
-
|
(4,393)
|
(141,529)
|
(1,684,379)
|
|
Net total
|
|
5,076,501
|
16,737,307
|
(558,248)
|
(6,891)
|
1,890
|
3,281
|
8,126,194
|
29,380,034
|
|
|
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.
|
|
|
Consolidated
|
|
|
Useful life range (years)
|
12/2019
|
Control acquisition
|
Additions
|
Write-offs
|
Transfers (a)
|
Exchange variation
|
09/2020
|
|
Cost value:
|
|
|
|
|
|
|
|
|
|
Vehicles
|
3
|
40,018
|
42,466
|
58,340
|
(431)
|
-
|
12,835
|
153,228
|
|
Machinery and equipment
|
3 to 10
|
15,578
|
14,034
|
3,199
|
-
|
-
|
11,236
|
44,047
|
|
Buildings
|
3 to 10
|
784,900
|
489,740
|
112,121
|
(12,811)
|
-
|
263,951
|
1,637,901
|
|
IT equipment
|
10
|
283
|
18,429
|
5,187
|
-
|
-
|
7,147
|
31,046
|
|
Retail stores
|
3 to 10
|
2,350,377
|
-
|
267,458
|
(8,660)
|
(3,734)
|
945,525
|
3,550,966
|
|
Tools and accessories
|
3
|
2,803
|
-
|
-
|
-
|
-
|
1,032
|
3,835
|
|
Total cost
|
|
3,193,959
|
564,669
|
446,305
|
(21,902)
|
(3,734)
|
1,241,726
|
5,421,023
|
|
|
|
-
|
|
|
|
|
|
|
|
Depreciation value:
|
|
|
|
|
|
|
|
|
|
Vehicles
|
|
(8,109)
|
-
|
(39,409)
|
188
|
-
|
(3,774)
|
(51,104)
|
|
Machinery and equipment
|
|
(4,317)
|
-
|
(10,733)
|
-
|
-
|
(2,943)
|
(17,993)
|
|
Buildings
|
|
(97,190)
|
-
|
(217,238)
|
11,283
|
-
|
(39,648)
|
(342,793)
|
|
IT equipment
|
|
(214)
|
-
|
(15,820)
|
-
|
-
|
(1,859)
|
(17,893)
|
|
Retail stores
|
|
(463,332)
|
-
|
(462,510)
|
4,213
|
759
|
(221,919)
|
(1,142,789)
|
|
Tools and accessories
|
|
(936)
|
|
(702)
|
-
|
-
|
(437)
|
(2,075)
|
|
Total accrued depreciation
|
|
(574,098)
|
-
|
(746,412)
|
15,684
|
759
|
(270,580)
|
(1,574,647)
|
|
Net total
|
|
2,619,861
|
564,669
|
(300,107)
|
(6,218)
|
(2,975)
|
971,146
|
3,846,376
|
|
|
(a)
|
Regarding the goodwill paid in store rentals,
transferred to intangible assets when a new commercial agreement with the lessor is signed.
|
|
|
Consolidated
|
|
|
09/2020
|
09/2019
|
|
Values recognized in the income statement during the nine months period ending on 30 September 2020 and 30 September 2019
|
|
|
|
Financial expense on lease
|
178,939
|
98,185
|
|
Amortization of right of use
|
746,412
|
412,448
|
|
Appropriation in the result of variable lease installments not included in the measurement of lease liabilities
|
27,727
|
20,546
|
|
Sublease revenue
|
(24,516)
|
(2,063)
|
|
Short-term lease expenses and low-value assets
|
68,355
|
68,735
|
|
Advantages granted by lessor related to Covid-19
|
(35,097)
|
-
|
|
Other expenses related to leases
|
27,660
|
15,642
|
|
Total
|
989,480
|
613,493
|
|
|
|
|
|
Values recognized in the financing cash flow statement
|
|
|
|
Payment of lease (principal amount)
|
574,000
|
373,162
|
|
Values recognized in the operating cash flow statement
|
|
|
|
Payment of lease (interest)
|
187,649
|
108,702
|
|
Variable lease payments not included in the measurement of lease liabilities
|
7,674
|
11,400
|
|
Short-term lease payments and low-value assets
|
56,402
|
55,709
|
|
Other lease-related payments
|
32,242
|
26,934
|
|
Total
|
857,967
|
575,907
|
|
|
Consolidated
|
|
|
09/2020
|
12/2019
|
|
Current
|
1,129,212
|
542,088
|
|
Non-Current
|
3,052,627
|
1,975,477
|
|
Total
|
4,181,839
|
2,517,565
|
The following table shows the changes in the leasing
balance for the nine-month period ended on 30 September 2020:
|
|
Consolidated
|
|
Balance on 31 December 2019
|
2,517,565
|
|
New agreements
|
430,263
|
|
Control acquisition
|
777,200
|
|
Payments - principal amount
|
(574,000)
|
|
Payments - interest
|
(187,649)
|
|
Financial charges appropriated
|
178,939
|
|
Write-offs (i)
|
(4,776)
|
|
Exchange variation
|
1,044,297
|
|
Balance on 30 September 2020
|
4,181,839
|
|
|
i)
|
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
|
|
|
09/2020
|
12/2019
|
|
2021
|
446,611
|
374,746
|
|
2022
|
434,284
|
361,688
|
|
2023
|
431,158
|
358,274
|
|
2024 onwards
|
1,740,574
|
880,769
|
|
Total
|
3,052,627
|
1,975,477
|
|
|
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
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Local Currency
|
|
|
|
|
|
Financing Agency for Studies and Projects (FINEP)
|
-
|
-
|
80,343
|
101,988
|
|
Debentures
|
-
|
-
|
4,010,017
|
4,251,231
|
|
BNDES (Brazilian Economic and Social Development Bank)
|
-
|
-
|
8,982
|
35,390
|
|
BNDES – FINAME (Industrial Machinery and Equipment Acquisition Financing Fund)
|
-
|
-
|
31
|
183
|
|
Promissory Notes
|
1,089,005
|
2,883,382
|
1,342,923
|
2,883,382
|
|
Working capital – Operation Mexico
|
-
|
-
|
23,214
|
31,802
|
|
Working capital – Operation Peru
|
-
|
-
|
23,830
|
|
|
Working capital – Operation Aesop
|
-
|
-
|
75,017
|
100,438
|
|
Working capital - Operation The Body Shop
|
-
|
-
|
517,670
|
-
|
|
Working capital – Operation Avon
|
-
|
-
|
170,133
|
-
|
|
Notes - Avon (1)
|
-
|
-
|
9,613,759
|
-
|
|
Total in local currency
|
1,089,005
|
2,883,382
|
15,865,919
|
7,404,414
|
|
|
|
|
|
|
|
Foreign Currency
|
|
|
|
|
|
BNDES (Brazilian Economic and Social Development Bank)
|
-
|
-
|
4,721
|
8,029
|
|
Export Credit note (NCE)
|
-
|
-
|
113,145
|
81,210
|
|
Notes (1)
|
-
|
-
|
4,250,406
|
3,090,490
|
|
Resolution No. 4131/62
|
-
|
-
|
283,846
|
202,231
|
|
Total in foreign currency
|
-
|
-
|
4,652,118
|
3,381,960
|
|
Overall total
|
1,089,005
|
2,883,382
|
20,518,037
|
10,786,374
|
|
|
|
|
|
|
|
Current
|
1,089,005
|
2,883,382
|
4,535,614
|
3,354,355
|
|
Non-Current
|
-
|
-
|
15,982,423
|
7,432,019
|
|
|
|
|
|
|
|
(a) Debentures
|
|
|
|
|
|
Current
|
-
|
-
|
2,137,930
|
246,017
|
|
Non-Current
|
-
|
-
|
1,872,087
|
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 on 30 September 2020 and 2019 are presented below:
|
|
Controlling Company
|
Consolidated
|
|
Balance on 31 December 2018
|
7,840,758
|
7,994,145
|
|
Funding
|
1,780,816
|
2,151,239
|
|
Amortizations
|
(2,031,202)
|
(2,219,318)
|
|
Financial charges appropriated
|
379,020
|
383,301
|
|
Payment of financial charges
|
(498,707)
|
(496,578)
|
|
Exchange variation (unrealized)
|
195,221
|
195,361
|
|
Exchange variation (realized)
|
1,392
|
4,295
|
|
Effects of the conversion (other comprehensive income)
|
-
|
1,189
|
|
Balance on 30 September 2019
|
7,667,298
|
8,013,634
|
|
|
|
|
|
Balance on 31 December 2019
|
2,883,382
|
10,786,374
|
|
Control acquisition
|
-
|
7,250,735
|
|
Funding
|
500,000
|
1,356,643
|
|
Amortizations
|
(2,323,777)
|
(2,815,881)
|
|
Financial charges appropriated
|
51,078
|
824,394
|
|
Payment of financial charges
|
(21,678)
|
(1,153,705)
|
|
Exchange variation (unrealized)
|
-
|
1,317,297
|
|
Exchange variation (realized)
|
-
|
5,320
|
|
Effects of the conversion (other comprehensive income)
|
-
|
2,946,860
|
|
Balance on 30 September 2020
|
1,089,005
|
20,518,037
|
Maturities of the registered installment of non-current
borrowings, financing and debentures liabilities are as follows:
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
2021
|
-
|
-
|
12,054
|
-
|
|
2022
|
-
|
-
|
5,684,470
|
2,279,759
|
|
2023
|
-
|
-
|
6,844,496
|
527,596
|
|
2024 onwards
|
-
|
-
|
3,441,403
|
4,624,664
|
|
Total
|
-
|
-
|
15,982,423
|
7,432,019
|
A description of the main bank borrowings and financing
agreements in the nine-month period ending on 30 September 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 Promissory Notes, related to the first series, in the amount of R$1,830 million.
On 29 April 2020, the 2nd issue
of Promissory Notes by Natura Holding took place, in a single series in the amount of R$500 million and the 4th issue of Promissory
Notes, in a single series in the amount of R$250 million. The Promissory 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
increase.
On 29 June 2020, there took
place the total optional early redemption of the 1st issue of Promissory 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 of nine months ended 30 September 2020 was R$22,589 (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$4,737 as of 30 September 2020 (R$20,962 as of 31 December 2019).
ii) Working
capital – The Body Shop
As presented in the note 5.2.e,
The Body Shop had, on 31 December 2019, a credit facility of up to £70 million, guaranteed by Natura Cosméticos S.A.,
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 $15 million of soles, approximately R$22 million,
with annual interest rate of 4.24% and maturity on 2 December 2020.
iv) Notes
- Avon
The controlled company Avon has
issued the following notes:
|
Notes – Avon
|
Principal (USD)
|
Principal (R$)
|
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$ 720,675 as at 30 September
2020.
|
|
19.2
|
Restriction clauses of agreements
|
The contractual restriction
clauses (“covenants”) related to the Company and controlled entities’ s debt contracts establish the maintenance
of financial indicators defined by the quotient of the division of net treasury debt by EBITDA for the last 12 months. The Company
and its controlled companies were in compliance with such clauses as at 30 September 2020.
|
|
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
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Domestic trade payables
|
11,922
|
-
|
5,401,165
|
1,581,759
|
|
Foreign trade payables
|
638
|
-
|
1,057,605
|
105,073
|
|
Subtotal
|
12,560
|
-
|
6,458,770
|
1,686,832
|
|
Reverse factoring operations
|
-
|
-
|
286,375
|
142,924
|
|
Total
|
12,560
|
-
|
6,745,145
|
1,829,756
|
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
12/2019
|
09/2020
|
12/2019
|
|
Ordinary ICMS
|
-
|
-
|
120,231
|
120,300
|
|
ICMS - ST (a)
|
-
|
-
|
77,868
|
72,423
|
|
Taxes on sales result – subsidiaries abroad
|
-
|
-
|
398,385
|
145,992
|
|
Social Security Tax (INSS) - suspension of the enforceability
|
-
|
-
|
-
|
50,147
|
|
Taxes withheld at the source
|
-
|
987
|
112,477
|
48,593
|
|
Other taxes - subsidiaries abroad
|
-
|
-
|
43,224
|
1,180
|
|
Income Tax (IR)
|
-
|
63
|
6,896
|
1,207
|
|
INSS and ISS (Tax on Services)
|
-
|
-
|
51,993
|
3,218
|
|
Others
|
435
|
-
|
105,799
|
399
|
|
|
435
|
1,050
|
916,873
|
443,459
|
|
|
|
|
|
|
|
Judicial deposits
|
-
|
-
|
(55,456)
|
(62,356)
|
|
|
|
|
|
|
|
Current
|
435
|
1,050
|
806,593
|
320,890
|
|
Non-Current
|
-
|
-
|
110,280
|
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 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
|
|
|
09/2020
|
12/2019
|
|
Tax
|
884,299
|
127,842
|
|
Civil
|
238,615
|
30,653
|
|
Labor
|
258,873
|
61,571
|
|
Total
|
1,381,787
|
220,066
|
|
|
|
|
|
Judicial deposits (note 12)
|
(226,598)
|
(60,272)
|
|
|
|
|
|
Current
|
183,021
|
18,650
|
|
Non-Current
|
1,198,766
|
201,416
|
|
|
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
|
93,352
|
(198)
|
168,794
|
(5,707)
|
32,710
|
(7,110)
|
|
Reversals
|
(46,203)
|
10,216
|
(26,292)
|
1,340
|
1,853
|
4,209
|
|
Payments
|
(53,890)
|
-
|
(15,681)
|
4,445
|
(38,772)
|
7,751
|
|
Monetary adjustment
|
3,508
|
(3,736)
|
3,799
|
(19)
|
5,110
|
(129)
|
|
Exchange variation
|
102,379
|
2,444
|
26,109
|
317
|
30,669
|
444
|
|
Other movements
|
(336)
|
4,589
|
(30)
|
2,578
|
1,641
|
(313)
|
|
Balance on 30 September 2020
|
884,299
|
(195,963)
|
238,615
|
(2,370)
|
258,873
|
(28,264)
|
|
|
(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 whose expectation of loss,
as 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
|
|
|
09/2020
|
12/2019
|
|
Tax
|
8,742,286
|
3,503,392
|
|
Civil
|
106,321
|
61,532
|
|
Labor
|
217,309
|
77,295
|
|
Total contingent liabilities
|
9,065,916
|
3,642,219
|
|
Judicial deposits
|
(221,583)
|
(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
September 2020, the total amount under discussion classified as possible loss was R$1,958,256.
|
|
|
(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 September 2020, the amount under discussion was R$1,593,346 (R$389,017 as at 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 September 2020, the total amount under discussion was R$1,490,259 (R$406,002 as at
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 a 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 September 2020, the total amount under discussion
classified as possible loss was R$1,393,960 (R$1,379,189 as at 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 September 2020, the total amount under discussion classified as possible loss is R$528,416 (R$521,903 as at 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 September 2020, the total amount under discussion was R$298,041 (R$218,204 as at 31 December 2019).
|
The
main civil cases are the following:
|
|
i)
|
Avon was named defendant in several proceedings for personal damages filed in U.S. courts, claiming
that certain powder products that Avon sold in the past were contaminated with asbestos. Many such actions involve several co-defendants
of a range of different industries, including cosmetics manufacturers and manufacturers of other products that, unlike the Company’s
products, were designed to include asbestos. On 30 September 2020, there were 143 individual proceedings pending against the subsidiary.
During the nine-month period ending on 30 September 2020, 17 new proceedings were shelved and thirteen others were shelved, settled
or otherwise concluded. The amount of our records in this area so far has not been significant.
|
The claims against us in such
cases have no grounds. We are defending ourselves against these claims and until this date, the subsidiary has not been sued in
any case filed against it and there were 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 is 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
to 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 the 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 US$14.5 million (approximately R$79 million). Approximately US$3 million (R$16 million), of the settlement
will be paid by the Company (that represents the remaining franchise under the applicable insurance policies of the Company) and
the remainder of the settlement will be paid by the Company’s insurers. Some documents related to the settlement still have
not been finalized and the settlement is subject to court approval. If the settlement is not approved by the court, that is, it
is rescinded before it is finalized, the Company will not be able to predict the result of this case. In addition, in this case,
it is reasonably possible that the Company will incur in a loss related to this matter, which the Company cannot reasonably estimate.
|
The
updated amounts involved in the restitution requests of the PIS and COFINS installments paid with the inclusion of ICMS in their
tax bases, not registered until 30 September 2020, amount to R$ 133,042 (R$26,933 as of 31 December 2019).
Information pertaining to other liabilities was presented
in the Company’s 2019 annual financial statements, in Note 22.
|
|
Consolidated
|
|
|
09/2020
|
12/2019
|
|
Post-employment medical assistance plan (a)
|
789,128
|
98,792
|
|
Carbon credit
|
7,281
|
4,519
|
|
Exclusivity contract
|
3,600
|
5,400
|
|
Crer para Ver
|
65,191
|
51,543
|
|
Deferred revenue from performance obligations with customers
|
383,877
|
76,250
|
|
Provision for sundry expenses
|
281,004
|
156,895
|
|
Provision for rentals
|
39,618
|
26,568
|
|
Provision for apportionment of benefits and partnerships payable
|
7,982
|
7,860
|
|
Long-Term Incentive
|
52,447
|
3,022
|
|
Provision for restructuring
|
97,803
|
3,401
|
|
Provision for store renovation
|
109,074
|
15,997
|
|
Provisions for incentives to consultants (c)
|
268,334
|
-
|
|
Other provision
|
318,660
|
67,846
|
|
Discontinued operations (b)
|
108,151
|
-
|
|
Professional fees
|
85,852
|
-
|
|
Total
|
2,618,002
|
518,093
|
|
|
|
|
|
Current
|
1,496,559
|
396,391
|
|
Non-Current
|
1,121,443
|
121,702
|
|
|
(a)
|
On 30 September 2020, there was R$684,454 regarding the pension plans assumed in the acquisition
of Avon on 3 January 2020 and R$104,674 regarding Natura’s pension plans (R$98,792 as at 31 December 2019).
|
|
|
(b)
|
On 17 December 2015, Avon entered into agreements resulting in the splitting of operations in the
United Stated, Canada and Puerto Rico. These transactions were terminated on 1 March 2016. From this date, the contingent liabilities
prior to this transaction and related to the operations in the United States, Canada and Puerto Rico are treated as discontinued
operations. During the period ending on 30 September 2020, Avon registered R$ 73,435 in administrative expenses pertaining to this
provision.
|
|
|
(c)
|
Provision for incentive and recognition programs for consultants.
|
Information pertaining to the shareholder’s
equity of the Company was presented in the 2019 annual financial statements, in Note 23.
As at 30 September 2020, the
Company's capital stock was R$6,972,228, composed of 1,253,618,140 registered common shares, without par value.
The composition of this capital
is demonstrated in the chart below:
|
Date
|
Description
|
Number of shares
|
Value in R$
|
|
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 01/07/2020
|
Capital increase
|
62,500,000
|
2,000,000,000
|
|
27/07/2020
|
Capital increase
|
507,706
|
14,723,474
|
|
30/09/2020
|
Capital increase
|
394,918
|
18,863,206
|
|
02/07/2020 to 30/09/2020
|
Issue of new stock for stock option plans and restricted stock
|
1,322,847
|
16,711,958
|
|
30/09/2020
|
Total paid-up capital stock
|
1,253,618,140
|
6,972,228,410
|
On 3 January 2020, 321,830,266
common shares were issued at the average price of R$32.24, amounting to R$3,397,746. On 30 June, 62,500,000 common shares were
issued at the average price of R$32.00, amounting to R$2,000,000. On 27 July, 507,706 common shares were issued at the average
price of R$29.00, amounting to R$14,723. On 30 September, 394,918 common shares were issued at the average price of R$47.76, amounting
to R$18,863. The new shares issuance costs incurred were R$ 30,537.
After the changes described,
the Company's stock capital on 30 September 2020 is R$ 6,972,228, composed of 1,253,618,140 registered common shares, without par
value.
On 30 September 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
|
(807,759)
|
(43,269)
|
53.57
|
|
Acquisition
|
1,114,460
|
54,936
|
49.29
|
|
Balance on 30 September 2020
|
306,701
|
11,667
|
38.04
|
The minimum and maximum treasury
share balance on 30 September 2020 was R$25.00 and R$49.71, respectively.
The Avon acquisition resulted
in the issue of Natura &Co shares for the total subscription value of R$ 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 ratification of the Private
Capital increase in the amount of R$2,000,000, approved on 30 June 2020, allocated the value of R$1,118 to the creation of the
capital reserve.
The capital reserve decreased
in the amount of R$147,592 due to the destination to profit reserve and an increase of R$ 42,931, due to the effects of CPC 42/IAS
29 - Financial Reporting in Hyperinflationary Economies and decrease of R$ 16,428 regarding the movement of stock option and restricted
stock plans.
The capital reserve amounted
to R$11,000,957 as at 30 September 2020 (R$1,210,924 as at 31 December 2019).
On 30 September 2020, the profit
reserve increased R$ 153,684, related to (i) R$ 6,094, due to the effects of “CPC 42 / IAS 29 - Financial Reporting in Hyperinflationary
Economies” applied to the balances up to 30 September 2020 and (ii) R$147,592 regarding the reclassification arising from
the capitalreserves.
The balance on 30 September
2020 amounted to R$4,664 (negative R$149,020 on 31 December 2019).
|
|
25.
|
BUSINESS SEGMENT INFORMATION
|
The setup of the Company’s
operating segments is based on its Corporate Governance structure, which splits the
business for 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:
|
|
Ø
|
Operation Natura &Co Latam –
all operations of Natura, Avon, Aesop and TBS located in Brazil and Latin America;
|
|
|
Ø
|
Avon International – all Avon operations,
except those located in Brazil and Latin America;
|
|
|
Ø
|
TBS International – all The Body
Shop operations, except those located in Brazil and Latin America; and
|
|
|
Ø
|
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 nine-month period ending on 30 September 2020:
|
|
Ø
|
Avon International – 25%
|
|
|
Ø
|
TBS International – 13%
|
|
|
Ø
|
Aesop International – 5%
|
The accounting practices for
each segment are described in note 3 of these financial statements of the Company for the year ended on 31 December 2019.
The tables below present summarized
financial information for the segments and the geographic distribution of commercial operations of the Company as at 30 September
2020, 31 December 2019 and 30 September 2019. Furthermore, as described above, as a result from the acquisition of Avon in 2020,
the Company changed the Corporate Governance structure, and consequently the segment disclosure. Thus, the comparative amounts
originally disclosed in the 2019 financial statements are presented so as to reflect the current Corporate Governance structure.
|
|
09/2020
|
|
|
Reconciliation to net profit (loss) for the period
|
|
|
Net income
|
Performance assessed by the Company
|
Depreciation and
Amortization
|
Financial income
|
Financial expense
|
Income tax
|
Net Profit (Loss)
|
|
Natura &Co Latam
|
14,221,703
|
1,652,906
|
(699,979)
|
2,631,285
|
(2,958,353)
|
(305,532)
|
320,329
|
|
Avon International
|
6,228,871
|
155,604
|
(589,821)
|
628,130
|
(1,063,566)
|
(12,807)
|
(882,460)
|
|
TBS International
|
3,257,045
|
586,927
|
(554,948)
|
51,953
|
(104,981)
|
(70,912)
|
(91,961)
|
|
Aesop International
|
1,217,085
|
334,984
|
(195,996)
|
18,323
|
(49,603)
|
(30,248)
|
77,460
|
|
Corporate expenses
|
|
(549,660)
|
(109)
|
224,819
|
(164,496)
|
226,738
|
(262,708)
|
|
Consolidated
|
24,924,704
|
2,180,761
|
(2,040,853)
|
3,554,510
|
(4,340,999)
|
(192,761)
|
(839,340)
|
|
|
|
|
|
|
|
|
|
|
|
|
09/2019
|
|
|
Reconciliation to net profit (loss) for the period
|
|
|
Net income
|
Performance assessed by the Company
|
Depreciation and
Amortization
|
Financial income
|
Financial expense
|
Income tax
|
Net Profit (Loss)
|
|
Natura &Co Latam
|
6,315,092
|
1,106,516
|
(261,860)
|
1,236,537
|
(1,748,373)
|
(103,005)
|
229,815
|
|
TBS International
|
2,629,507
|
452,483
|
(426,323)
|
28,630
|
(69,802)
|
14,023
|
(989)
|
|
Aesop International
|
848,055
|
187,895
|
(131,359)
|
8,496
|
(20,661)
|
(13,241)
|
31,130
|
|
Corporate expenses
|
-
|
(192,114)
|
-
|
-
|
-
|
65,319
|
(126,795)
|
|
Consolidated
|
9,792,654
|
1,554,780
|
(819,542)
|
1,273,663
|
(1,838,836)
|
(36,904)
|
133,161
|
|
|
09/2020
|
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
|
9,234,257
|
19,672,996
|
9,330,263
|
8,359,042
|
4,574,087
|
9,328,858
|
3,116,454
|
8,235,679
|
|
Avon International
|
26,406,196
|
30,172,263
|
3,599,048
|
12,015,939
|
-
|
-
|
-
|
-
|
|
TBS International
|
8,178,454
|
10,492,328
|
2,080,819
|
1,957,524
|
6,146,960
|
7,369,250
|
1,065,447
|
1,477,148
|
|
Aesop International
|
1,402,390
|
2,136,481
|
590,326
|
643,006
|
1,033,408
|
1,435,830
|
255,616
|
590,917
|
|
Corporate balance
|
-
|
1,846,559
|
1,116,892
|
1,634
|
-
|
3,050,574
|
3,080,906
|
-
|
|
Consolidated
|
45,221,297
|
64,320,627
|
16,717,348
|
22,977,145
|
11,754,455
|
21,184,512
|
7,518,423
|
10,303,744
|
|
|
25.2
|
Net income and non-current assets by geographic region
|
|
|
09/2020
|
09/2019
|
|
Net income
|
Natura &Co Latam
|
Avon International
|
TBS International
|
Aesop
International
|
Natura &Co Latam
|
TBS International
|
Aesop International
|
|
Asia
|
-
|
1,097,557
|
164,544
|
609,551
|
-
|
196,445
|
349,554
|
|
North America
|
2,785,532
|
-
|
443,979
|
183,314
|
529,741
|
467,497
|
136,729
|
|
Mexico
|
2,218,252
|
-
|
-
|
-
|
527,638
|
|
-
|
|
Others
|
567,280
|
-
|
443,979
|
183,314
|
2,103
|
467,497
|
136,729
|
|
South America
|
11,432,118
|
-
|
-
|
-
|
5,781,358
|
-
|
-
|
|
Brazil
|
7,790,994
|
-
|
-
|
-
|
4,356,601
|
-
|
-
|
|
Argentina
|
1,378,877
|
|
-
|
-
|
537,148
|
|
|
|
Others
|
2,262,247
|
-
|
-
|
-
|
887,609
|
-
|
-
|
|
Europe, Middle East and Africa (EMEA)
|
4,053
|
5,131,314
|
2,364,993
|
261,488
|
3,993
|
1,777,412
|
160,122
|
|
United Kingdom
|
-
|
637,863
|
1,908,618
|
141,595
|
-
|
1,355,128
|
81,635
|
|
Others
|
4,053
|
4,493,451
|
456,375
|
119,893
|
3,993
|
422,284
|
78,487
|
|
Oceania
|
-
|
-
|
283,529
|
162,732
|
-
|
188,153
|
201,650
|
|
Consolidated
|
14,221,703
|
6,228,871
|
3,257,045
|
1,217,085
|
6,315,092
|
2,629,507
|
848,055
|
|
|
09/2020
|
12/2019
|
|
Non-current assets
|
Natura &Co Latam
|
Avon International
|
TBS International
|
Aesop International
|
Natura &Co Latam
|
TBS International
|
Aesop International
|
|
Asia
|
-
|
258,234
|
157,439
|
305,328
|
-
|
140,760
|
227,670
|
|
North America
|
1,102,750
|
-
|
609,600
|
367,139
|
185,646
|
523,351
|
272,676
|
|
Mexico
|
619,802
|
|
-
|
-
|
183,250
|
|
|
|
Others
|
482,948
|
|
609,600
|
367,139
|
2,396
|
523,351
|
272,676
|
|
South America
|
8,120,675
|
-
|
-
|
-
|
4,378,676
|
-
|
-
|
|
Brazil
|
7,044,204
|
-
|
-
|
-
|
4,197,259
|
-
|
-
|
|
Argentina
|
258,525
|
-
|
-
|
-
|
63,050
|
|
|
|
Others
|
817,946
|
|
|
|
118,367
|
-
|
-
|
|
EMEA
|
10,832
|
26,147,962
|
6,911,058
|
245,373
|
9,765
|
5,105,903
|
190,442
|
|
United Kingdom
|
-
|
24,443,413
|
6,214,297
|
103,854
|
-
|
4,602,066
|
76,073
|
|
Others
|
10,832
|
1,704,549
|
696,761
|
141,519
|
9,765
|
503,837
|
114,369
|
|
Oceania
|
-
|
-
|
500,357
|
484,550
|
-
|
376,946
|
342,620
|
|
Consolidated
|
9,234,257
|
26,406,196
|
8,178,454
|
1,402,390
|
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.
|
|
25.3
|
Reconciliation of the segments presented again
|
Considering the new information
on the segments, as a result of the Avon acquisition in 2020 as described above, the changes in the reformulated segment information
are as follows:
|
Submitted in the financial statements of 31 December 2019
|
|
31 de 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 other (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 Natura &Co Latam segment.
|
|
|
(b)
|
Amounts related the Aesop operations located in Brazil and Latin America, represented per non-current
assets (R$ 2,024), total assets (R$ 6,384), current liabilities (R$ 18,923) and non-current liabilities (R$ 1,614) included in
the new Natura &Co Latam segment.
|
|
|
(c)
|
Amounts related to The Body Shop located in Brazil and Latin America represented per non-current
assets (R$ 28,943), total asset (R$ 92,885), current liabilities (R$ 106,475) and non-current liabilities (R$ 7,193) included in
the new Natura &Co Latam segment.
|
|
Submitted in the financial statements of the period ending on 30 September 2019
|
|
30 September 2019
|
Net Income
|
Performance assessed by
the Company
|
Depreciation and Amortization
|
Financial Income
|
Financial Expenses
|
Income Tax
|
Net profit (loss)
|
|
Natura Brasil (a)
|
4,314,819
|
860,554
|
(200,479)
|
1,204,688
|
(1,690,366)
|
(49,663)
|
124,734
|
|
Natura LATAM (a)
|
1,928,898
|
284,736
|
(38,998)
|
31,848
|
(52,603)
|
(53,244)
|
171,739
|
|
Natura outros (a)
|
6,096
|
(26,046)
|
(10,471)
|
-
|
(325)
|
-
|
(36,842)
|
|
Aesop (b)
|
850,368
|
187,066
|
(131,959)
|
8,495
|
(20,791)
|
(13,241)
|
29,570
|
|
The Body Shop (c)
|
2,692,473
|
440,584
|
(437,635)
|
28,632
|
(74,751)
|
13,925
|
(29,245)
|
|
Corporate
|
-
|
(192,114)
|
-
|
-
|
-
|
65,319
|
(126,795)
|
|
Consolidated
|
9,792,654
|
1,554,780
|
(819,542)
|
1,273,663
|
(1,838,836)
|
(36,904)
|
133,161
|
|
|
(a)
|
Amount included in the new Natura &Co Latam segment.
|
|
|
(b)
|
Amounts related the Aesop operations located in Brazil and Latin America, represented per net income
(R$ 2,313), performance assessed by the Company (R$ 830), depreciation and amortization (R$ 600), financial expenses (R$130), and
net profit (loss) (R$1,560) included in the new Natura &Co Latam segment.
|
|
|
(c)
|
Amounts related to The Body Shop located in Brazil and Latin America represented per net income
(R$ 62,966), performance assessed by the Company (R$ 11,898), depreciation and amortization (R$ 11,312), financial expenses (R$
4,949), income tax (R$ 98) and net profit (loss) (R$ 28,256) included in the new Natura &Co Latam segment.
|
|
|
Consolidated
|
|
Gross income:
|
09/2020
|
09/2019
|
|
Domestic market
|
10,930,396
|
6,155,912
|
|
Foreign market
|
21,125,942
|
7,077,996
|
|
Other sales
|
378,969
|
41,617
|
|
Subtotal
|
32,435,307
|
13,275,525
|
|
|
|
|
|
Returns and cancellations
|
(440,856)
|
(50,705)
|
|
Commercial discounts and rebates
|
(659,446)
|
(765,555)
|
|
Taxes on sales
|
(6,410,301)
|
(2,666,611)
|
|
Subtotal
|
(7,510,603)
|
(3,482,871)
|
|
Net income
|
24,924,704
|
9,792,654
|
Substantially, the income from
brands Natura and Avon refers to direct sales, whereas the income from brands The Body Shop and Aesop refers to retail sales.
|
|
27.
|
OPERATING EXPENSES AND COST OF PRODUCTS SOLD
|
|
Breakdown by function
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
Cost of products sold
|
-
|
-
|
8,949,669
|
2,740,866
|
|
Expenses with sales, marketing and logistics
|
-
|
-
|
10,611,388
|
4,454,489
|
|
Administrative, R&D, IT and Project Expenses
|
45,585
|
-
|
4,170,824
|
1,710,006
|
|
Total
|
45,585
|
-
|
23,731,881
|
8,905,361
|
|
Breakdown by nature
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
Cost of products sold
|
-
|
-
|
8,949,669
|
2,740,866
|
|
Raw material/packaging material/resale
|
-
|
-
|
7,519,977
|
2,304,460
|
|
Personnel expenses (note 28)
|
-
|
-
|
459,755
|
221,073
|
|
Depreciation and amortization
|
-
|
-
|
151,185
|
43,072
|
|
Others
|
-
|
-
|
818,752
|
172,261
|
|
|
|
|
|
|
|
Expenses with sales, marketing and logistics
|
-
|
-
|
10,611,388
|
4,454,489
|
|
Logistics costs
|
-
|
-
|
1,758,479
|
540,436
|
|
Personnel expenses (note 28)
|
-
|
-
|
2,953,759
|
1,210,737
|
|
Marketing, sales force and other sale expenses
|
-
|
-
|
4,916,482
|
2,133,189
|
|
Depreciation and amortization
|
-
|
-
|
982,668
|
570,127
|
|
|
|
|
|
|
|
Administrative, R&D, IT and Project Expenses
|
45,585
|
-
|
4,170,824
|
1,710,006
|
|
Innovation expenses
|
|
-
|
179,138
|
60,739
|
|
Personnel expenses (note 28)
|
37,103
|
-
|
1,767,369
|
883,291
|
|
Other administrative expenses
|
8,482
|
-
|
1,317,317
|
559,633
|
|
Depreciation and amortization
|
-
|
-
|
907,000
|
206,343
|
|
|
|
|
|
|
|
Total
|
45,585
|
-
|
23,731,880
|
8,905,361
|
Information pertaining to employee
benefits was presented in the Company’s 2019 annual financial statements, in Note 27.
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
Payroll, profit sharing and bonuses
|
19,691
|
-
|
3,826,718
|
1,703,957
|
|
Supplementary Pension Plan
|
-
|
-
|
143,185
|
67,791
|
|
Share-based payments (note 32.3)
|
8,263
|
-
|
104,865
|
42,051
|
|
Charges on restricted stock (note 32.1)
|
4,242
|
-
|
49,182
|
36,563
|
|
Medical care, food, and other benefits
|
-
|
-
|
456,457
|
181,357
|
|
Charges, taxes and social contributions
|
144
|
-
|
460,065
|
154,256
|
|
INSS - Brazilian Social Security Institute
|
4,763
|
-
|
140,411
|
129,126
|
|
Total
|
37,103
|
-
|
5,180,883
|
2,315,101
|
|
|
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
in 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 will 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 3rd 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 will 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)
|
-
|
1,994
|
|
Granted
|
0.01
|
117
|
|
Expired/Cancelled
|
21.35
|
(178)
|
|
Exercised
|
15.79
|
(2,121)
|
|
Balance on 30 September 2020
|
16.60
|
17,380
|
|
|
Restricted stock
(thousands)
|
Performance shares
(thousands)
|
|
Balance on 31 December 2019
|
3,092
|
688
|
|
Granted
|
1,482
|
-
|
|
Cancelled
|
(24)
|
(51)
|
|
Exercised
|
(1,136)
|
-
|
|
Balance on 30 September 2020
|
3,414
|
637
|
Out of the 17,380 thousand options
existing as at 30 September 2020 (17,568 thousand options as at 31 December 2019) 3,547 thousand options (604 thousand options
as at 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 nine-month period
ended on 30 September 2020, according to the period elapsed for the acquisition of the right to exercise of options and restricted
shares, was R$104,865 in the consolidated.
The options to purchase outstanding
stock and restricted stock at the end of the period have the following maturity dates and exercise prices:
As at
30 September 2020 - Stock option plan
|
Grant date
|
Conditions for acquisition of a right as from the grant date
|
Exercise price
(R$)
|
Fair value
(R$)
|
Existing options
(thousands)¹
|
Remaining contractual life (years)
|
Exercisable options
(thousands)
|
|
18 March 2013
|
4 years of service
|
37.60
|
6.05
|
370
|
0.5
|
372
|
|
17 March 2014
|
4 years of service
|
25.16
|
4.27
|
96
|
1.5
|
96
|
|
16 March 2015
|
2 to 4 years of service
|
13.60
|
4.85 to 5.29
|
184
|
2.5
|
186
|
|
28 July 2015 (Strategy acceleration)
|
4 to 5 years of service
|
12.90
|
6.20 to 6.23
|
1,130
|
2.9
|
1,020
|
|
15 March 2016
|
2 to 4 years of service
|
12.84
|
7.16 to 7.43
|
192
|
3.5
|
190
|
|
11 July 2016 (Strategy acceleration)
|
4 to 5 years of service
|
11.41
|
6.84 to 6.89
|
1,926
|
3.8
|
606
|
|
10 March 2017
|
2 to 4 years of service
|
12.59
|
6.65 to 6.68
|
624
|
4.5
|
298
|
|
10 March 2017 (Strategy acceleration)
|
4 to 5 years of service
|
12.59
|
6.87 to 6.89
|
2,100
|
4.5
|
-
|
|
12 March 2018
|
2 to 4 years of service
|
16.96
|
7.96 to 8.21
|
1,880
|
5.5
|
522
|
|
12 March 2018 (Strategy acceleration)
|
3 to 5 years of service
|
12.16 to 16.96
|
8.21 to 9.67
|
3,800
|
5.5
|
-
|
|
12 April 2019
|
3 to 4 years of service
|
23.54
|
11.71 to 11.82
|
1,636
|
6.6
|
-
|
|
12 April 2019 (Strategy acceleration)
|
4 to 5 years of service
|
23.54
|
11.51 to 11.71
|
1,900
|
6.6
|
-
|
|
From 31 December 2002 to 9 May 2017
|
1 year of service
|
0.01
|
19.80
|
65
|
-
|
65
|
|
From 14 March to 17 December 2018
|
1 to 3 years of service
|
0.01
|
19.70
|
295
|
1.2
|
55
|
|
From 13 March to 16 December 2019
|
1 to 3 years of service
|
0.01
|
19.58
|
1,065
|
0.4 to 2.2
|
33
|
|
8 June 2020
|
1 year of service
|
0.01
|
16.86
|
117
|
0.7
|
104
|
|
|
|
|
|
17,380
|
|
3,547
|
As at
30 September 2020 - Restricted stock
|
Grant date
|
Conditions for acquisition of a right as from the grant date
|
Existing shares
(thousands)2
|
Fair value
(R$)
|
Remaining contractual life (years)
|
|
10 March 2017
|
2 to 4 years of service
|
208
|
11.69 to 12.51
|
0.4
|
|
12 March 2018 – Plan I
|
2 to 4 years of service
|
470
|
15.18 to 15.9
|
0.5 to 1.5
|
|
12 March 2018 – Plan III
|
1 to 3 years of service
|
74
|
15.54 to 16.27
|
0.5
|
|
12 March 2018 – Extraordinary Plan I
|
1 to 3 years of service
|
4
|
15.54 to 16.28
|
0.4
|
|
13 August 2018 – Extraordinary Plan VI
|
1.6 to 3.6 years of service
|
50
|
12.24 to 13.13
|
0.5 to 1.5
|
|
12 April 2019 – Plan I
|
2 to 4 years of service
|
814
|
21.62 to 22.53
|
0.5 to 2.5
|
|
12 April 2019 – Plan II
|
1 to 3 years of service
|
312
|
22.14 to 22.85
|
0.5 to 1.5
|
|
27 March 2020 - Co-Investment Plan
|
1 to 3 years of service
|
862
|
29.00
|
0.5 to 2.5
|
|
29 September 2020 - Long-Term Incentive Plan
|
3 to 4 years of service
|
620
|
73.46
|
3 to 4
|
|
|
|
3,414
|
|
|
As at
30 September 2020 – Performance shares
|
Grant date
|
Right acquisition conditions
|
Existing shares
(thousands)
|
Fair value
(R$)
|
Remaining contractual life (years)
|
Shares not delivered
(thousands)
|
|
21 May 2019
|
From 3 to 4 years of service as from the grant date and if the performance conditions are met
|
637
|
23.10 to 45.70
|
1.5 to 2.5
|
-
|
|
|
|
637
|
|
|
-
|
As at 30 September 2020, the
market price was R$ 51.13 (R$ 38.67 as at 31 December 2019) per share.
|
|
29.
|
FINANCIAL INCOME (EXPENSES)
|
|
|
Controlling Company
|
Consolidated
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
FINANCIAL INCOME:
|
|
|
|
|
|
Interest on financial applications
|
21,220
|
-
|
119,652
|
55,981
|
|
Earnings on monetary and exchange rate variations (a)
|
7,576
|
-
|
945,038
|
483,490
|
|
Earnings on swap and forward transactions (c)
|
-
|
-
|
2,218,768
|
694,522
|
|
Earnings on market value adjustment of swap and forward derivatives
|
-
|
-
|
3,821
|
1,629
|
|
Reversal of the monetary adjustment of the provision for tax risks and tax obligations
|
-
|
-
|
42,378
|
-
|
|
Debt structuring revenues for acquisition of Avon
|
186,511
|
-
|
186,511
|
-
|
|
Other financial income
|
3,744
|
-
|
38,342
|
38,041
|
|
Subtotal
|
219,051
|
-
|
3,554,510
|
1,273,663
|
|
FINANCIAL EXPENSES:
|
|
|
|
|
|
Interest on financing
|
(11,549)
|
-
|
(857,429)
|
(389,273)
|
|
Interest on lease
|
-
|
-
|
(178,939)
|
(98,185)
|
|
Losses on monetary and exchange rate variations (b)
|
(7,617)
|
-
|
(2,038,412)
|
(661,466)
|
|
Losses on swap and forward transactions (d)
|
-
|
-
|
(952,904)
|
(571,007)
|
|
Losses on market value adjustment of swap and forward derivatives
|
-
|
-
|
(9,389)
|
(1,352)
|
|
Adjustment of provision for tax, civil and labor risks and tax liabilities
|
-
|
-
|
(12,487)
|
(11,782)
|
|
Appropriation of funding costs (Debentures/Notes)
|
-
|
-
|
(8,452)
|
(9,682)
|
|
Pension plan interest
|
-
|
-
|
(22,973)
|
-
|
|
Adjustment for hyperinflationary economy (Argentina)
|
-
|
-
|
(9,116)
|
(9,552)
|
|
Debt structuring expenses for acquisition of Avon
|
(112,277)
|
-
|
(112,277)
|
(49,490)
|
|
Other financial expenses
|
(17,205)
|
-
|
(138,621)
|
(37,047)
|
|
Subtotal
|
(148,648)
|
-
|
(4,340,999)
|
(1,838,836)
|
|
Net financial income (expenses)
|
70,403
|
-
|
(786,489)
|
(565,173)
|
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
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
(a) Earnings on monetary and exchange rate variations
|
7,576
|
-
|
945,038
|
483,490
|
|
Earnings on exchange rate variation on borrowings
|
-
|
-
|
259,963
|
348,689
|
|
Exchange rate variation on imports
|
-
|
-
|
23,998
|
7,843
|
|
Exchange rate variation on export receivables
|
-
|
-
|
60,884
|
17,804
|
|
Exchange rate variation on accounts payable to subsidiaries abroad
|
7,576
|
-
|
290,188
|
109,154
|
|
Exchange variations of bank accounts in foreign currency
|
-
|
-
|
310,005
|
-
|
|
|
|
|
|
|
|
(b) Losses on monetary and exchange rate variations
|
(7,617)
|
-
|
(2,038,412)
|
(661,466)
|
|
Losses on exchange rate variation on borrowings
|
-
|
-
|
(1,370,647)
|
(544,913)
|
|
Exchange rate variation on imports
|
-
|
-
|
(53,345)
|
(28,394)
|
|
Exchange rate variation on export receivables
|
-
|
-
|
(20,264)
|
(13,552)
|
|
Exchange rate variation on accounts payable to subsidiaries abroad
|
(7,617)
|
-
|
(286,557)
|
(74,335)
|
|
Monetary variations on financing
|
-
|
-
|
(307,599)
|
(272)
|
|
|
|
|
|
|
|
(c) Earnings on swap and forward transactions
|
-
|
-
|
2,218,768
|
694,522
|
|
Income from swap exchange coupons
|
-
|
-
|
150,576
|
137,004
|
|
Earnings from exchange variations on swap instruments
|
-
|
-
|
2,068,192
|
557,518
|
|
|
|
-
|
|
|
|
(d) Losses on swap and forward transactions
|
-
|
-
|
(952,904)
|
(571,007)
|
|
Losses on exchange rate variation on swap instruments
|
-
|
-
|
(231,513)
|
(362,602)
|
|
Financial costs of swap instruments
|
-
|
-
|
(715,171)
|
(208,405)
|
|
Losses on exchange rate variation on forward instruments
|
-
|
-
|
(6,220)
|
-
|
|
|
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
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
Other operating income, net
|
|
|
|
|
|
Result on write-off of property, plant and equipment
|
-
|
-
|
9,911
|
2,438
|
|
ICMS-ST
|
-
|
-
|
16,156
|
42,441
|
|
Income with the sale of clients’ portfolio
|
-
|
-
|
-
|
15,980
|
|
Tax credits
|
-
|
-
|
101,473
|
44,034
|
|
Exclusion of ICMS from PIS/COFINS base (g)
|
-
|
-
|
-
|
52,028
|
|
Other operating income
|
-
|
-
|
8,231
|
-
|
|
Total other operating income
|
-
|
-
|
135,771
|
156,921
|
|
|
|
|
|
|
|
Other operating expenses, net
|
|
|
|
|
|
Crer para Ver
|
-
|
-
|
(36,829)
|
(25,862)
|
|
Expenses with the sale of clients’ portfolio
|
|
-
|
(5,838)
|
-
|
|
Expenses related to the acquisition of Avon (a)
|
(168,486)
|
-
|
(303,916)
|
(93,866)
|
|
Transformation Plan
|
|
-
|
(169,719)
|
(32,812)
|
|
Tax contingencies
|
|
-
|
(11,181)
|
(3,518)
|
|
Other operating expenses
|
(723)
|
-
|
(15,467)
|
(273)
|
|
Total other operating expenses
|
(169,209)
|
-
|
(542,950)
|
(156,331)
|
|
Other operating income (expenses), net
|
(169,209)
|
-
|
(407,179)
|
590
|
Refers to expenses related to
the acquisition process of Avon, of which the following deserve special mention: expenses with financial structuring (R$115,696),
legal expenses (R$17,281) and regulatory expenses (R$18,030) and executive plans (R$152,909).
|
|
31.
|
TRANSACTIONS WITH RELATED PARTIES
|
Information pertaining to transactions
with related parties was presented in the Company’s 2019 annual financial statements, in Note 31.
|
|
31.1
|
The balances receivable and payable per transaction with related parties are demonstrated below:
|
|
|
Controlling Company
|
|
|
09/2020
|
12/2019
|
|
Current Assets:
|
|
|
|
Avon Products, Inc. (a)
|
516,145
|
-
|
|
Natura Cosméticos S.A. – Argentina (b)
|
1,798
|
-
|
|
Natura Distribuidora de México (b)
|
595
|
-
|
|
Natura Cosméticos S.A. – Peru (b)
|
512
|
-
|
|
Natura Cosméticos Ltda – Colombia (b)
|
381
|
-
|
|
Natura Cosméticos Ltda – Chile (b)
|
327
|
-
|
|
The Body Shop International (b)
|
2,702
|
-
|
|
Aesop HK (b)
|
327
|
-
|
|
Aesop UK (b)
|
2,077
|
-
|
|
Aesop USA (b)
|
300
|
-
|
|
Emeis Costmetics (b)
|
163
|
-
|
|
Natura Luxembourg (c)
|
268,855
|
-
|
|
Total Current Assets
|
794,182
|
-
|
|
Current Liabilities:
|
|
|
|
Natura Cosméticos S.A. – Brazil (a)
|
3
|
-
|
|
Total current liabilities
|
3
|
-
|
|
|
(a)
|
Pertains to the allocation of expenses related to the merger process.
|
|
|
(b)
|
Pertains to the allocation of expenses related to the stock option and restricted stock plans.
|
|
|
(c)
|
Loan between related parties.
|
In the nine month period ending
on 30 September 2020, Natura &Co reimbursed the amount of R$ 148,270 of expenses regarding the transaction costs for the acquisition
of Avon paid by its subsidiary Natura Cosméticos. This reimbursement affected the result in line item “Other income
(expenses)”.
The Natura Institute holds shares
in the Essential Investment Fund and on 30 September 2020, its balance was R$2,204 (R$3,766 as at 31 December 2019).
On 5 June 2012, an agreement
was entered into between Indústria e Comércio de Cosméticos Natura Ltda. and Bres Itupeva Empreendimentos
Imobiliários Ltda., (“Bres Itupeva”), for the construction and lease of processing, storage and distribution
of merchandise (HUB) in the city of Itupeva/SP. In 2019, Bres Itupeva granted its credits to BRC Securitizadora S/A, to which Natura
makes monthly payments. Mr. Antônio Luiz da Cunha Seabra, Mr. Guilherme Peirão Leal and Mr. Pedro Luiz Barreiros Passos,
members of the group of controlling shareholders of Natura Cosméticos S.A., indirectly hold a controlling interest in Bres
Itupeva. The amount involved in the registered transaction is recorded under “right of Use” of "buildings"
in the amount of R$ 40,577 (R$44,244 under “buildings” of “property, plant and equipment “as at 31 December
2019).
In the period ending on 30 September
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 in the Natura Crer Para Ver line, in the amount of R$27,000 (R$19,500 as at 30 September 2019).
|
|
31.2
|
Compensation of the Management’s key personnel
|
The total compensation of the key personnel of the
Company’s Management is as follows:
|
|
09/2020
|
09/2019
|
|
|
Compensation
|
Compensation
|
|
|
Fixed
|
Variable
|
Total
|
Fixed
|
Variable
|
Total
|
|
|
(a)
|
(b)
|
(a)
|
(b)
|
|
Board of Directors
|
11,379
|
35,260
|
46,639
|
15,613
|
24,697
|
40,310
|
|
Executive Office
|
32,485
|
66,393
|
98,878
|
23,826
|
35,007
|
58,833
|
|
|
43,864
|
101,653
|
145,517
|
39,439
|
59,704
|
99,143
|
|
|
a)
|
The item “executive office” includes the amount of R$ 765 pertaining to the amortization
of the nine-month period ending on 30 September 2020 (R$ 29 in the nine-month period ending on 30 September 2019), of the Confidentiality
and Non-Compete Agreement (“the Agreement”).
|
|
|
b)
|
It 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
|
|
|
09/2020
|
09/2019
|
|
|
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
|
12,855,751
|
8.47
|
16.60
|
13,081,029
|
8.41
|
16.64
|
|
|
Restricted stock
|
|
|
09/2020
|
09/2019
|
|
|
Balance of the shares (quantity)2 (a)
|
Average fair value2 - R$
|
Balance of the shares (quantity)2 (a)
|
Average fair value2 - R$
|
|
Executive Office
|
1,566,143
|
25.13
|
1,054,641
|
19.13
|
|
|
|
|
|
|
|
|
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 General 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 General Meeting held
on 17 September 2019.
|
|
|
(a)
|
It 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)
|
It 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.
|
|
|
32.1
|
Contracts related to supply of inputs
|
Subsidiary Indústria
e Comércio de Cosméticos Natura Ltda. has commitments arising from electric power supply agreements, with an actual
physical delivery, for its manufacturing activities, as described below:
|
|
Ø
|
Agreements that started in 2018 and effective
up to 2020, with the value of Megawatts/h between R$265 and R$363.
|
|
|
Ø
|
Agreements that started in 2019 and effective
up to 2022, with the value of Megawatts/h between R$155 and R$305.
|
|
|
Ø
|
Agreements that started in 2020 and 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:
|
|
09/2020
|
12/2019
|
|
Up to one year
|
5,521
|
17,918
|
|
One to five years
|
1,610,362
|
13,160
|
|
Total
|
1,615,883
|
31,078
|
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 at 30 September 2020, insurance coverage is as follows:
|
Item
|
Type of coverage
|
Amount insured
|
|
09/2020
|
12/2019
|
|
Industrial complex and administrative sites
|
Any material damages to buildings, facilities, inventories, and machinery and equipment
|
5,754,609
|
2,322,801
|
|
Vehicles
|
Fire, theft and collision in vehicles insured by the Company and its subsidiaries
|
264,609
|
212,027
|
|
Loss of profits
|
Loss of profits due to material damages to facilities, buildings and production machinery and equipment
|
1,894,813
|
1,582,000
|
|
Transport
|
Damages to products in transit.
|
100,862
|
32,309
|
|
Civil liability
|
Protection against errors or complaints in the exercise of professional activity that affect third parties
|
1,418,058
|
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
|
|
|
09/2020
|
09/2019
|
09/2020
|
09/2019
|
|
Non-cash items:
|
-
|
-
|
145,087
|
|
|
Hedge accounting, net of tax effects
|
-
|
-
|
59,195
|
104,960
|
|
Net effect of the additions to the property, plant and equipment/intangible assets still not paid
|
13,366
|
-
|
-
|
32,349
|
Acquisition
of entity
On 30 June 2020, The Body Shop
International Limited signed a purchase and sale agreement for the acquisition of Aeon Forest Co., Ltd in the amount of R$133,275
(¥2,632,000), and the operation was carried out on 1 October 2020 through bank settlement with subsequent acquisition of control.
Global
Offer
On 14 October 2020, the amount
of R$ 5,614,750 of the Global Offer described in the material facts disclosed on 30 September and 8 October 2020 was received by
the Company.
Within the scope of the Global
Offer, the capital increase of the Company was approved by the Board of Directors within the limit of the authorized capital, upon
subscription of new shares, under article 6 of the Company’s bylaws, through the issue of 121,400,000 new common shares,
observing that 96,331,000 shares will be allocated in the Restricted Offer and 25,069,000 Shares under ADSs, represented by ADRs
abroad, will be allocated in the International Offer.
On 21 October 2020, the company
made a cash contribution to its subsidiary Natura &Co International S.à.r.l, in the amount of US$ 1,033,200 (R$5,786,540),
and (ii) a cash contribution of a loan receivable (principal interest accrued and not paid by 22 October 2020) of the Company owed
by Natura &Co Lux (“Loan Receivable”) to Natura &Co Lux, in the amount of USD 47,793 (R$267,669) as capital
increase.
Transfer
of funds to the subsidiary and repurchase of bonds
On 2 November 2020, Natura &Co
International S.à r.l. entered into a loan agreement with Avon International Operations Inc, an affiliated entity of Avon
Products Inc. in the amount of US$ 960,000 (R$ 5,540,928). The loan agreement will have interest at an annual rate of 3.13% and
maturity on 2 November 2021.
In order to continue the financial
remittance process mentioned above, subsidiary Avon Products Inc entered into repurchase of the remaining principal amount of its
Bonds issued in 2016 with maturity on 15 August 2022 and the remaining principal amount of the 2019 Bonds with maturity on 15 August
2022. In relation to the 2016 notes, the aggregate repurchase price was equal to the remaining principal amount of US$ 500,000
(R$2,885,900), plus a premium of US$ 9,800 (R$ 56,564) and accrued interest of US$ 8,400 (R$ 48,483). In regard to the 2019 Notes,
the aggregate repurchase price was equal to the remaining amount of US$ 400,000 (R$2,308,720), plus a premium of US$ 7,900 (R$
45,597) and accumulated interest of US$ 5,600 (R$ 32,322).
|
|
36.
|
APPROVAL FOR ISSUE OF THE INTERIM ACCOUNTING INFORMATION
|
These interim financial statements of the Company
were approved for disclosure by the Board of Directors at the meeting held on 12 November 2020.