NTCO Natura and Co Holding SA

SIGNATURE

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

Date: November 13, 2020

Item 1

Earnings release of Natura &Co Holding S.A. for the period ended September 30, 2020. 

São Paulo, November 12, 2020

Q3-20: Natura &Co reports 32% sales growth, significantly outperforming the CFT market^1,2,

with strong margin improvement

Successful completion of a US$1 billion capital raise enables optimization of our capital structure through fast deleveraging and allows for key strategic investments that will accelerate growth over the next three years

¹ Cosmetics, Fragrance and Toiletries market performance: Company estimate based on global peers’ Q3 net revenue vs prior year of approximately -3.5% (in reported FX), as reported by the companies or estimates published on Bloomberg for those who have not yet reported.

² For comparison purposes, Q3-20 and Q3-19 results and analyses include: i) Q3-19 aggregated figures including Avon Products, Inc. results in IFRS; ii) Natura &Co’s results in Latin America, which includes the operations of Avon, Natura, The Body Shop and Aesop brands in the region; iii) the results of Avon International, The Body Shop and Aesop brands, except in Latin America; iv) Q3-20 results and analyses including the effects of the fair market value assessment as a result of the business combination with Avon as per the Purchase Price Allocation – PPA.

³ The cyber incident had a phasing effect that shifted R$ 450 million in revenue from Q2-20 to Q3-20, impacting Natura &Co Latam in R$ 390 million (R$180 million at Avon Brazil and R$210 million at Avon in Hispanic Latam) and Avon International in R$60 million.

⁴ Source: Kantar of approximately +8% and ABIHPEC of +21%.

⁵ Source: Kantar Household Panel.

⁶ Excluding effects that are not considered recurring nor comparable between the periods under analysis.

Roberto Marques, Executive Chairman, and CEO of Natura &Co, commented:

“Enabled by continued digitalization, our brands delivered strong results in the third quarter, with significant growth in sales and improved margin. In an environment that remained challenging throughout the world as a result of the Covid-19 pandemic, we outperformed the CFT market both globally and in Brazil. This performance attests to the strength of our fundamentals, our unparalleled Direct-to-Consumer reach and the resilience of our omnichannel, multi-brand model.

The Natura brand continues its very strong performance, with further adoption of social selling and consultant productivity gains for the 16^th consecutive quarter, while The Body Shop and Aesop managed to offset Covid-19’s impact on retail sales with a continued ramp-up in digital and e-commerce. Avon’s fundamentals showed improvement, with early positive signs in some key markets including Brazil, Russia and Turkey.

Avon’s integration is proceeding as planned. Synergies are on track and we made further progress in working together, including cross-company manufacturing, distribution and storage and combined logistics contracts. We have progressed in defining the Avon portfolio architecture in Latam and the organization in the region has been redesigned, with support functions servicing all brands.  We also initiated the pilot of our new commercial model in Brazil, in Mexico later this year and also in South Africa, capitalizing on learnings from Natura. The Avon brand relaunch began with the Watch Me Now campaign in mid-September, through online and digital channels in all Avon International markets.

We recently took another important step forward in our digital journey by announcing the launch of &Co Pay, our proprietary financial services platform. &Co Pay will help drive productivity to our consultants and representatives by allowing them access to key financial services, promoting digital and financial inclusion. Launching first in Brazil and Latin America, &Co Pay is a scalable model that we will roll out globally within the next couple of years.

We also advanced on our strategic aim of strengthening the group’s geographic footprint in key markets. The Body Shop’s acquisition of its business in Japan from a head franchisee closed on October 1^st and their At-Home direct sales channel, which recently launched in the United States, continued to expand.

Aesop has just received a major recognition, joining Natura and The Body Shop as a fully certified B-Corp, attesting to its sustainable business practices. In line with our 2030 Sustainability Commitments, we actively participated in the United Nations (UN) Climate Week and are partnering with the UN on two key initiatives, Ambition 1.5^oC and Target Gender Equality.   We also participated in Amazon Day with Natura, through its Ekos line, activating its Living Amazon cause through social media and events to warn about deforestation. And October is Breast Cancer Awareness Month, where Avon continues to lead the way with educational programs about breast cancer detection and awareness for millions of women in markets around the world.

In October, we completed a US$1 billion public capital raise, a strong vote of market confidence which attests to the strength and attractiveness of our group and validates our strategy. The capital increase optimizes our balance sheet, acknowledged by the recent upgrade from credit rating agencies, while allowing us to build on our current strong business momentum and accelerate our growth by advancing on our strategic priorities, which positions Natura &Co well for the future.

I would like to thank the teams across the purpose-driven group. Our strong performance in the challenging times that we face is the result of their efforts, resilience and dedication.”

As disclosed on May 7, Natura &Co raised its estimated synergy gains from the business combination with Avon Products, Inc by another US$100 million, bringing total expected synergies to between US$300 million and US$400 million on a recurring annual basis, including new revenue synergies at Natura &Co Latam and cost synergies at Avon International. These amounts are calculated at an exchange rate of US$1/R$5. The earlier calculation was made at US$1/R$3.87 and would be equivalent to between US$390 million and US$520 million, up from between US$200 million to US$300 million. These synergies are expected to be captured in full by 2024. The estimated one-time costs to achieve synergies over this period will be US$190 million, up from US$125 million.

Synergies estimates were discontinued on September 30, 2020 in the context of the Global Capital Raise concluded on October 14, 2020, and re-established on November 12, 2020, as per the Material Fact published on this date.

In Q3-20, we captured US$17.6 million in cost synergies, ahead of estimates for the quarter, on track for the year and in line with the plan announced in Q1. The synergies achieved this quarter primarily relate to administrative and procurement, incurring US$11.5 million in costs to achieve. In 9M-20 we achieved a total of US$47.8 million in accumulated synergies and incurred US$15.7 million in costs to achieve.

The Company is closely monitoring the evolution of the Covid-19 pandemic worldwide, particularly the recent lockdown or restriction measures adopted in parts of Europe. The Crisis Committee created in Q2 continuously analyzes the situation and acts to minimize impacts, ensure continuity of operations, protect cash, improve liquidity, and promote the health and safety of all, as we advance into Q4.

Key impacts on the business

impacted by Covid-19, but through continued significant growth in online and At Home channels, total net sales grew 8% at constant currency. At Aesop, retail like-for-like sales were down 16.0%, offset by growth of 264% in online sales. Uncertainty continues as some markets face new lockdowns or restrictions. In this environment, Natura &Co continues to be extremely attentive to the health and safety of its employees, consultants and representatives and customers. At Avon International, the acceleration in the adoption of digital assets helped to offset the Covid-19 impact on sales, despite strict lockdowns in certain markets. At Natura, all retail stores, including franchisee stores, reopened during the quarter, mostly with some restrictions.

For comparison purposes, Q3-20 and Q3-19 results and analysis include the following:

In addition, Q3-20 results and analysis include the effects of the fair market value assessment as a result of the business combination with Avon as per the Purchase Price Allocation – PPA.

^a Consolidated results include Natura &Co Latam, Avon International, The Body Shop and Aesop, as well as the Natura subsidiaries in the U.S., France and the Netherlands.

^b Natura &Co Latam: includes Natura, Avon, TBS Brazil and Hispanic Latam and Aesop Brazil 

^c Q3-20: Includes PPA – Purchase Price Allocation effects

^d Q3-19: Does not include PPA effects 

^e Expenses related to the management and integration of the Natura &Co Group

^f Avon-acquisition-related expenses 

^g Related to business separation at Avon North America

^a Consolidated results include Natura &Co Latam, Avon International, The Body Shop and Aesop, as well as the Natura subsidiaries in the U.S., France and the Netherlands.

^b Natura &Co Latam: includes Natura, Avon, TBS Brazil and Hispanic Latam and Aesop Brazil 

^c 9M-20: Includes PPA – Purchase Price Allocation effects

^d 9M-19: Does not include PPA effects 

^e Expenses related to the management and integration of the Natura &Co Group

^f Avon-acquisition-related expenses 

^g Related to business separation at Avon North America

Consolidated net revenue growth in Q3-20 and 9M-20

Q3-20 consolidated net revenue in BRL increased by 31.7% year-on-year (+11.6% at CC), driven by growth across all segments. In 9M-20, net revenue increased by 7.0% in BRL (-5.8% at CC) vs. 9M-19.

Gross margin

Including PPA effects in Q3-20 at Natura &Co Latam and Avon International 

^a Q3-20 includes PPA – Purchase Price Allocation effects

^b Q3-19 does not include PPA – Purchase Price Allocation effects

Higher consolidated gross margin in Q3 of 64.5% (+60 bps). Excluding PPA effects on COGS of R$9.2 million (R$7.3 million at Natura &Co Latam; R$1.9 million at Avon International), adjusted consolidated gross margin reached 64.6% in Q3-20 (+70 bps), as shown below:

Without PPA effects in both periods

Consolidated EBITDA

Reported EBITDA was R$1,457.0 million in Q3-20 with margin of 14.0% (+10 bps vs. Q3-19). Adjusted EBITDA was R$1,547.3 million, with an adjusted margin of 14.8% (+330 bps), excluding transformation costs and acquisition expenses, supported by improved gross margin and cost discipline across all businesses. In 9M-20, reported EBITDA was R$2,254.2 million, with margin of 9.0% (-200 bps), and adjusted EBITDA was R$2,733.7 million, with margin of 11.0% (-60 bps). See reconciliation below:

Financial income and expenses

Net financial expenses were R$290.4 million in Q3-20, an increase of 89.5% vs. Q3-19, mainly due to interest income recorded in Q3-19 as a result of non-recurring tax recoveries at Avon in Brazil (item 2 below), and higher interest expense on higher average debt outstanding, partially offset by net gains on swaps and derivatives.

The following table details the main changes in our financial income and expenses:

Underlying Net Income (UNI)

Underlying Net Income was R$587.1 million in Q3, up 2.6% vs. last year, before Avon acquisition-related costs of R$205.4 million, which include: i) transformation costs of R$90.3 million and ii) PPA amortization expense of R$115.1 million. Reported net income in Q3 was R$381.7 million, driven by higher EBITDA and lower income tax expense of R$112.3 million vs. Q3-19, partially offset by higher depreciation of R$153.3 million and higher financial expenses of R$201.1 million vs. Q3-19. Lower income tax expense was driven mainly by tax offsets against Avon’s losses in the UK and tax provision reversals. In 9M-20, underlying net income was R$88.5 million and reported net income was R$(827.6) million.

a) Non-controlling interests and discontinued operations

b) Net income attributable to controlling shareholders

Free cash flow and cash position

We ended the quarter with a very strong cash position of R$8.0 billion (R$5.1 billion in cash, and R$2.9 billion in short-term deposits), in line with projections and well above our minimum thresholds.

Strong cash flow generation in Q3-20 of R$792.7 million, compared to R$161.4 million in Q3-19 (on an aggregated, estimated and non-audited basis), mainly driven by strong operational results, lower capex and significant improvement in working capital, principally supported by extended payables at Natura &Co Latam and deferred store lease payments at The Body Shop.

^a Attributable to the owners of the Company

^b Includes the effects of deferred income tax, fixed and intangible assets write-offs, FX on translation of working capital, fixed assets, etc.

Capital structure and liquidity

In the quarter we made a partial prepayment of R$156.2 million (US$27.7 million) of Avon’s 2043 unsecured bond, and the outstanding amount at quarter-end was US$216.1 million.

On October 14 the Group concluded a successful SEC-registered global follow-on offering of US$1 billion (R$5.6 billion), represented by 121.4 million common shares, subscribed by existing shareholders and new investors, with partial placement in the form of American Depositary Shares (ADSs), adding liquidity to the program.

On November 2^nd, we prepaid the US$900 million Avon 2022 bonds in the amount equivalent to 101.969% plus accrued interest until that date.

Strong deleveraging at both Natura Cosméticos and Natura &Co Holding

Natura &Co Holding’s, consolidated net debt-to-EBITDA stood at 3.00x, down from 3.63x in Q2-20 and 3.93x in Q1-20, including IFRS 16 effects (excluding IFRS 16: 3.92x in Q3-20 vs. 4.83x in Q2-20 vs. 4.91x in Q1-20). Considering the execution of the equity follow-on offering and prepayment of Avon’s 2022 bonds on November 2nd, the Q3 pro forma net debt-to-EBITDA ratio would be 1.38x.

Excluding IFRS 16 effects, net debt-to-EBITDA at Natura Cosméticos stood at 1.33x in Q3-20, from 2.98x in Q3-19, returning to pre The Body Shop acquisition levels of 1.4x.

^a Gross debt excludes PPA impacts of R$720.7 million and excludes lease agreements

^b Foreign currency debt hedging instruments, excluding mark-to-market effects

Natura &Co Latam¹: Strong double-digit growth at Natura both in Brazil and Hispanic Latam; Avon Brazil returns to growth

Net revenue at Natura &Co Latam increased by 29.5% in Q3-20 in BRL (+20.1% at CC), driven by the Natura brand‘s significant 41.2% growth (+30.5% Brazil, +65.7% Hispanic Latam), while the Avon brand was up 19.3% (+24.9% in Brazil, +15.7% in Hispanic Latam). Excluding the cyber incident effect that shifted R$390 million in sales to Q3, Natura &Co Latam’s net revenue increased by 21.2% (+12.6% at CC), while Avon was up 3.3% (+6.1% in Brazil, +1.4% in Hispanic Latam in BRL). The strength of our digital social selling model was again proven by the performance of the Natura brand, both in Brazil and in Hispanic Latam, and improving trends at Avon, notably in Brazil, with growth reported for the first time since Q4-18, while the digital transformation in the region continues to advance. The satisfaction index for Avon reps in Brazil and Mexico reached the highest levels in the last 10 years, driven by aligning commercial practices and improving communication. Natura consultant loyalty also improved in Brazil. The Avon brand rose 10 positions in Merco’s ranking of the most reputable companies in Brazil.

The Avon integration in Latam is on track, with important progress in manufacturing. Avon bar soap production initiated at Natura’s Ecoparque facility and Natura fragrances are now beginning to be produced at Avon plants in Mexico and Argentina. We are also working on producing certain Natura product lines at Avon’s Interlagos plant, merging distribution centers and combining logistics contracts. We have progressed in defining the Avon portfolio architecture in Latam and identified SKUs to be discontinued. Our Latam organization has been redesigned and we completed the integration of teams, with support functions already servicing all brands.

Avon’s net revenue in Brazil grew 24.9% in Q3-20 vs. Q3-19. Excluding the effect of the cyber incident, which shifted R$ 180 million in sales to Q3, Avon returned to growth in Brazil for the first time since Q4-18, up 6.1% in Q3, supported by higher activity level, a 5.9% increase in the average number of representatives, higher productivity and larger volumes both in beauty and Fashion & Home categories. Avon resumed media investments in Brazil with the launch of the Power Stay color products campaign, featuring Brazilian female athletes.

The Natura brand in Hispanic Latam posted revenue increase of 65.7% in Q3-20 in BRL (+32.7% at CC), supported by strong growth in all markets, notably Argentina, Chile and Mexico. The average number of consultants increased by 13.2% vs. Q3-19, to 759,000.

The Avon brand in the Hispanic Latam countries posted revenue increase of 15.7% in Q3-20 in BRL (-3.3% at CC). Excluding the cyber incident phasing effect of approximately R$210 million, revenue increased 1.4% in BRL (-14.9% at CC). The region saw improving trends towards the end of the quarter, despite an 8.7% reduction in average number of representatives, an improvement over previous quarters (-22.7% in Q2, -13.6% in Q1), with key markets such as Argentina, Mexico and Chile posting strong growth in September.

In the retail channel, all our stores, including Natura and The Body Shop stores, owned and franchised, gradually reopened towards the end of the quarter but with continued restrictions.

1 Natura &Co Latam is comprised of the Latin American operations of all the Group’s brands: Natura, Avon, The Body Shop and Aesop. For comparison purposes, 2019 results include aggregated and adjusted (unaudited) information in IFRS to reflect this new segment.

The use of digital assets was fundamental for our business and consultants. The number of Natura consultants trained on digital tools continued to increase vs. last year, and, as a result, there has been a continuous increase in adoption. The interactive e-brochure continued to gain penetration and has allowed us to significantly grow sales through our digital platforms, notably in Argentina. At the end of Q3 we crossed the 1 million mark of Natura consultant online stores, 75% more than in Q3-19, with a significant year-on-year increase in the number of orders (over 45%) and visits (nearly 60%). Avon’s e-brochure gained relevance and continued to post significant sales growth in Latin America. Net sales through the e-brochure doubled vs. the beginning of the year and the number of consumer visits to the e-brochure reached an average of 2.8 million visits per month. Total online sales for Avon in Brazil and Hispanic Latam grew 134.3% vs. Q3-19.

The expansion of our multichannel model has offered consumers a superior shopping experience, increasing touch points and consequently increasing the number of new consumers. We have been collecting more consumer data which allows us to increase the number of customized offers to help build frequency and loyalty.

Following the announcement of three strategic partnerships in Q2, we took another decisive step in our already successful digital journey. We announced the launch of &Co Pay, a proprietary financial services platform for our 3.8² million consultants and representatives in Latin America, which will help drive productivity by allowing them to make or receive payments and transfers through a digital account, while benefiting from many other financial services, including debit and credit cards, loans, microcredit and loyalty programs. &Co Pay is also an enabler to promote digital and financial inclusion to our consultants and reps. This is a scalable model in which we orchestrate the payment platform supported by four licensed partners. Roll-out begins in Brazil at Natura, then comes Avon followed by Latin America in 2021 and the rest of the world in the next 3 years.

Product launches in the period included Natura’s bodycare Tododia Mango and Coconut Water with prebiotic nutrition, and men’s fragrance Kayak Oceano that uses ocean-retrieved plastic in its cap. Avon fragrance launches included the Aquavibe limited edition offering and Black Suede with improved packaging. In color, Avon launched the Powerstay Concealer in Hispanic Latam.

Natura &Co Latam: Financial analysis

Reported EBITDA was R$972.1 million with margin of 16.0% (-140 bps). Adjusted EBITDA, excluding transformation costs, was R$1,002.8 million vs. R$511.4 million in Q3-19, with adjusted EBITDA margin of 16.5% (+560 bps), thanks to strong revenue growth and operational leverage at both Natura and Avon. In 9M-20, EBITDA was R$1,652.9 million and EBITDA margin was 11.6% (-50 bps), adjusted EBITDA was R$1,663.7 million and adjusted EBITDA margin was 11.7% (+160 bps).

A reconciliation between EBITDA and adjusted EBITDA is presented below:

Excluding PPA effects, selling, marketing & logistics expenses represented 35.8% of net revenue (-460 bps), largely driven by the strong net revenue growth and reduced discretionary spend in light of Covid-19 at Natura, as well as improvement in bad debt at Avon in Brazil on the back of improved credit control and collection processes.

Excluding PPA effects, administrative, R&D, IT and project expenses reached 12.1% of net revenue (-30 bps) in the quarter. Also excluding the non-recurring gain on Avon asset sale in Q3-19 of R$59.3 million, on a comparable basis these expenses decreased by 150 bps vs. Q3-19, largely driven by net revenue growth at both brands.

Avon International: Strengthening fundamentals, continued progress on integration and digital

In the third quarter, Avon took action to strengthen fundamentals and the business started to show improvements, notably in Western and Central Europe. Key markets such as Russia and Turkey reported growth vs. Q3-19, offset by markets still impacted by strict lockdowns, such as South Africa and the Philippines.

2 Net of overlapping available consultants and representatives shared by Natura and Avon

We initiated the new commercial model planning to be piloted in South Africa, capitalizing on learnings from Natura. Five markets, including the UK, have moved to monthly campaign cycles vs. shorter cycles, which will simplify the structure, harmonize planning and reduce costs. Avon’s new brand campaign, Watch Me Now, premiered in September across more than 30 countries. Early engagement has been positive, with almost 70% increase in branded content sharing by reps, 350 million people reached through earned media and Avon Worldwide website traffic up nearly 60%. The Watch Me Now manifesto video is the best performing content on most Avon social media channels. The campaign aims to reintroduce Avon to the world as a purpose-driven, surprising, exciting and democratic brand. Weekly content has been designed so that representatives can easily share it and they are also being trained to build their own stories and content. In partnership with Vayner Media, scalable media models are being built in the UK and in South Africa to inspire representatives to share content. In the UK, market share increased for two consecutive quarters vs prior year and representative satisfaction levels improved in key markets such as the Philippines and Turkey, for the first time in several years.

In terms of progress on integration, there are now multiple examples of Avon’s supply chain to be leveraged by the group, beyond the rapid retooling of operations that took place during Covid-19 to produce essential products for the group. Avon’s Poland manufacturing facility is piloting the production of Body Butter, one of The Body Shop’s most iconic products. The Body Shop has begun to use Avon’s Corby warehouse in the UK to reduce third party costs.

Net revenue grew 22.5% in Q3-20 (-7.3% at CC), or +19.5% (-9.6% at CC) excluding the R$60 million positive phasing impact of the cyber incident, with most markets showing signs of recovery from the impact of Covid-19. Active representatives declined 9% as activity continues to gradually recover from the impact of prior quarter lockdown restrictions on representatives’ ability to sell. Actions were put in place to recover representatives with results visible in improved additions, activity and ending representative counts vs the prior year. Units sold declined 8%, showing a sequential improvement to earlier quarters pre-Covid.

Engagement across the suite of Avon digital tools increased vs the prior year, as measured by revenues, traffic and adoption. During the third quarter, order enhancements to the digital brochure were rolled out to 11 additional markets and 15 markets were given Net Promoter Score functionality, allowing them to capture valuable customer insights. The rollout of the direct delivery functionality was extended to Poland this quarter, giving representatives more opportunity and customers greater delivery choice. In September, the UK and Russia piloted tailored customer content to improve relevance and conversion. Representative tools were updated to improve social sharing capabilities, allowing them to share both Avon content and their own, including frames and other content bearing the new Watch Me Now branding.

Adoption of digital assets in the UK exceeded 70% in the quarter. Q3-20 Avon International sales via the digital brochure more than doubled vs Q3-19, with growth of nearly 300% in the UK. Avon International also remained focused on driving e-commerce, where sales increased nearly 80% vs Q3-19.

Fragrance performance in the quarter was supported by local innovation, including the launch of the Summer in Italia fragrance, with package design featuring popular Italian destinations. Important color launches in the quarter included Loaded Lip Lacquer in Eastern Europe, Unlimited Mascara in Central Europe featuring an exclusive new brush and formula to provide up to 24 hours of lifted hold and Dual Glow Eye Shadow shade additions in UK, Italy and the Mediterranean.

Net revenue of the Avon brand, including Latin America and Avon International, grew 20.7% in Q3 (10.6% ex-cyber).

Avon International: Financial analysis

Avon International’s EBITDA was R$135.9 million in Q3-20 and adjusted EBITDA was R$183.0 million. EBITDA margin was 5.5% and adjusted EBITDA margin was 7.4% (-200 bps), due to the impact of lower revenue (-7.3% at constant currency), foreign currency impacts as well as higher sales leader and field investments to accelerate revenue recovery and IFRS conversion adjustments in G&A. In 9M20, EBITDA was R$217.3 million and EBITDA margin was 3.5%. Adjusted EBITDA was R$358.2 million and adjusted EBITDA margin was 5.7% (-620 bps).

A reconciliation between EBITDA and adjusted EBITDA is presented below:

Excluding PPA effects on SG&A expenses, selling, marketing & logistics expenses reached 40.7% of net revenue (+130 bps), largely due to the impact of higher sales leader and field investments to accelerate revenue recovery as well as lower revenue. Administrative, R&D, IT and project expenses reached 15.5% of net revenue (+620 bps) in the quarter, mainly due to a non-recurring gain on an asset sale in Q3-19 of R$47.1 million, foreign currency impacts and accounting adjustments related to IFRS conversion. Excluding these items, G&A expenses would be down 1.1%.

The Body Shop: Return to growth in Q3 and continued advances in the strategic plan

In Q3-20, The Body Shop posted net revenue of R$1,384.6 million, up by 51.9% in BRL (+8.2% at CC), primarily driven by growth in the UK and significant growth in At-Home (direct sales) and e-commerce. The consumer shift to e-commerce and At-Home that began in Q1 continued in Q3. E-commerce sales grew by 103%, with Australia growing 302% and the UK growing 167%, while At-Home sales growth accelerated to an exceptional +333% in the quarter vs. Q3-19, supported by 261% growth in the number of At-Home consultants. The UK At-Home holiday season campaign got off to a strong start with sales of the Advent calendar more than double those in Q3-19 (including a record level in the first 24 hours). Own-stores like-for-like sales decreased 16.5%, still impacted by Covid-19.

As part of our global strategy of expanding our geographic footprint in North America and Asia, the Company reached 6,000 consultants across all states in the US, where At-Home was recently introduced. In Japan, the Company completed the acquisition of its business from a head franchisee on October 1^st.

EBITDA in Q3-20 reached R$308.3 million, with EBITDA margin of 22.3% (+430 bps; adjusted: +360 bps). The adjusted margin increase resulted from revenue growth, lower discounts, reduced discretionary spend and Covid-19-related government support. SG&A expenses decreased 260 bps in relation to net revenue.

A reconciliation between EBITDA and adjusted EBITDA is presented below:

The quarter ended with 959 own stores and 1,702 franchise stores, with 69 net store closures (own and franchise) since Q3-19. The chart below shows the store count evolution:

Aesop: Remarkable results driven by continued expansion of multi-channel platform

Aesop posted net revenue growth of 67.2% in Q3-20 in BRL and +19.9% in constant currency, driven by another quarter of strong growth in digital sales that contributed to offsetting ongoing partial retail closures related to Covid-19 in major markets such as the US and Australia. Retail like-for-like sales were down 16.0%, offset by growth of 264% in online sales. They accounted for more than 20% of revenue, triple what online represented in Q3-19. Aesop sustained digital growth in Q3 by continuing to replicate its unique in-store customer experience online, including online chats. The company saw strong double digit-growth in markets in Asia (notably Japan, Korea and Taiwan) and Europe, while sales in Australia/New Zealand declined due to ongoing Covid-19 restrictions. The company continued to progress on its strategic priorities: Deliver a meaningful, personalized shopping experience; further plans for the Chinese customer by expanding sales online with Tmall while planning product registration to sell locally; and deepen its commitment to sustainable business practices. Aesop became B-Corp certified on November 9 and released its first annual Sustainability Report in the quarter. In 9M-20, net revenue was up by 43.5% in BRL (+10.1% at CC).

Q3-20 EBITDA stood at R$154.4 million, up 121.6%, with EBITDA margin of 31.3% (+770 bps), driven by top line sales growth, targeted cost reduction and utilization of government support programs to mitigate the impacts of Covid-19. In 9M-20, EBITDA margin stood at 27.5% (+530 bps).

Signature stores totalled 245 in the quarter, 5 more net since Q3-19 and net 2 stores down in the quarter. There were 90 department stores in Q3-20, 5 fewer since the same quarter last year and 2 fewer than the previous quarter on a net basis. A store count table is provided below:

(all actions refer to Natura &Co Group, unless stated otherwise)

Natura 2020 Ambition KPIs:

In 2014, Natura brand launched its 2050 Sustainability Vision, a long-term social and environmental commitment. It guides the entire business to generate positive impact and contribution for the protection and regeneration of the ecosystem to which we belong. The first milestone of this plan is the 2020 Ambition, a set of targets that Natura aims to deliver by the end of this year.

Beyond the 2020 Ambition, Natura will combine its strengths with Avon, the Body Shop and Aesop to generate and share value, guided by the recent release of the 2030 Sustainability Vision, Commitment to Life. The current 2020 Ambition KPIs are presented in the table below, in line with the three pillars of the new Natura &Co 2030 Vision.

Natura &Co 2030 Vision	Scope	Indicator	Unit	2020 ambition	Results
					Q1-20	Q2-20	Q3-20	Status	Highlights Q3-20
	Natura: Brazil	Accumulated Amazon business volume¹	R$ billion	1	1.86	1.93	2.02		The 2020 ambition has been exceeded. Q3-20 up by 10% vs previous quarter due to increase in Amazon inputs.
To address the Climate Crises and protect the Amazon	Natura: Brazil	Consumption of Amazon Inputs	% (R$ Amazon Inputs /R$ total inputs purchased)	30	13.3	12.8	14.3		Result improved this quarter, but remain below our 2020 ambition. Exchange rate effects on our raw materials total spend pose a significant risk to achieving our ambition, but we continue working to increase our positive impact in the region.
	Natura: Brazil + Latam	Relative Carbon Emissions (Scopes 1, 2 and 3)	kg CO2e/kg billed products	2.15	3.31	3.09	2.95		Positive results mainly due to strong performance of Global Products, such as basic hygiene products, with lower carbon footprint. Refill sales increases were also a highlight this period, contributing to the optimized relative performance. There is still a great challenge in achieving the 2020 ambition for both processes and products emissions with 3Q results +37% vs 2020 ambition.
	Natura: Brazil	Crer Para Ver	R$MM	-	8.7	19.2	36.1		Positive results, showing growth of this sales category and highlighting engagement of the consultants for the cause of education. Results improvement in Latam vs 2Q, mainly because of ARG’s and COL’s positive performance.
To defend Human Rights and be Human-Kind	Natura: Latam	revenues		-	3.8	7.2	12.4
	Natura: Brazil + Latam	Women In Leadership Positions Index (Director Level and Above)	%	50	43	43	48 3		Our strategy to guarantee gender equality of finalist candidates in recruiting processes has been effective, and results are fast approaching the target.
	Natura: Brazil	Eco-Efficient Packaging ²	% (eco-efficient packaging units billed/total units billed)	40	20	19	18		In line with previous quarter. To work toward our ambitious goal, we seek packaging evolution, with the Eco Design Committee, prioritization of recycled and renewable materials, and refill options. We highlight the expansion of refills to other categories (a project in execution), which will certainly push this KPI forward.
To embrace Circularity and Regeneration	Natura: Brazil	Packaging equivalent	%	50	50	32	41		Result higher than Q2-20, although lower than 2020 ambition, due to the severe impact of the pandemic on cooperative activities and reverse logistics processes. In Latam, we launched the Mexico reverse logistics program. As the program is gradually implemented, we expect to reach our 2020 ambition.
	Natura: Latam	collected (Reverse Logistics)	(in ton eq. of generated packaging)	-	15	13	23
All three pillars above	Natura: Brazil + Latam	Sustainability Vision Index 20204	%	100	71	70	81		Results are +16% vs previous quarter.  Highlights are performance improvements in Relative Carbon Emissions, Women's Leadership and Amazon Inputs. We expect to continue managing our targets to achieve our 2020 ambition.

^¹ Accumulated Amazon business volume since 2010

² Ecoefficient packagings are those with at least 50% less weight compared to the regular / similar packaging, or comprising 50% post-consumer recycled material and/or renewable non-cellulosic source material, that do not increase mass.

³ Data include Natura &Co Latam due to the companies integration

⁴ The index includes other indicators of the Sustainability Vision, in addition to those reported in the table above

Subsequent Event post reporting period:

On October 14, 2020, the Company successfully concluded its global SEC-registered capital increase in the amount of R$5.6 billion (approximately US$ 1 billion), which resulted in the issuance of 121,400,000 common shares, at a price of R$46,25 per share. The issuance included 25,069,000 shares in the form of American Depositary Shares, at a price of US$16.46 per share, increasing the liquidity of our ADR program. The Company’s capital totalled 1,375,018,140 shares as per the Material Fact published on October 8, 2020.

At the end of Q3-20, the Company’s capital was comprised of 1,253,618,140 common shares (vs 431,964,355 on September 30, 2019). NTCO3 shares traded at R$51.1 on the B3 stock exchange, an increase of 28.1% in the quarter. The Company’s market capitalization on September 30 was R$64.0 billion, with Average Daily Trading Volume (ADTV) of R$303.7 million in the quarter, an increase of 157% vs Q3 in the prior year.

NTCO traded at US$18.2 at the end of Q3-20 on NYSE, +25.5% vs. June 30, 2020.

Below is the performance of NTCO3 and NTCO in the quarter:

In the quarter, we made a partial prepayment of Avon’s 2043 unsecured bond in the amount of US$27.7 million (R$156.2 million), and the outstanding amount at quarter-end was US$216.1 million.

Subsequent events post reporting period:

On November 2, we prepaid the Avon 2022 bonds in the principal amount of US$900 million, with a redemption price equivalent to 101.969% (expressed as a percentage of the principal amount of the Bonds to be redeemed), plus accrued and unpaid interest.

On October 14, 2020, S&P Global Ratings upgraded Natura Cosméticos S.A. to 'BB' from 'BB-' on global scale and to 'brAAA' from 'brAA+' on national scale, including all debt ratings. At the same time, S&P upgraded Avon to 'BB-' from 'B+' and revised the outlook to stable.

On November 4, Fitch Ratings upgraded Natura and Avon’s Issuer Default Rating (IDR) to ‘BB’ with an outlook revised to Stable, from Negative.

Below is a table with details of all public debt instruments outstanding per issuer as of September 30, 2020:

(1) Principal and interests fully hedged (swapped to BRL). For more information, see the explanatory notes to the Company’s financial statements.

(2) Coupon based on current credit ratings, governed by interest rate adjustment clause

Below is a table with our current credit ratings: