REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
Indicate by check mark whether the registrant files
or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
NATURA &CO HOLDING S.A.
Natura &Co
Holding S.A. (“Natura &Co”) was incorporated on January 21, 2019, with the purpose of holding interests in other companies,
whose main business is in the cosmetics, fragrance and personal hygiene segments, through the manufacturing, distribution, and sale of
their products. Natura &Co is headquartered in Brazil, in the city of São Paulo, State of São Paulo, at Avenida Alexandre
Colares, no 1188, Vila Jaguará, CEP 05106-000. Natura &Co and its subsidiaries are hereinafter referred to as the “Company”.
Brands managed
by the Company include “Natura”, “Avon”, “The Body Shop” and “Aesop”. In addition to using
the retail market, e-commerce, business-to-business (B2B) and franchises as sales channels for the products, the subsidiaries highlight
the performance of the direct sales channel carried out by the Natura, The Body Shop and Avon Consultant(s).
| 2. | MANAGEMENT STATEMENT AND BASIS OF PRESENTATION OF THE INTERIM ACCOUNTING INFORMATION |
The Company’s
interim accounting information, included in the Quarterly Information Form - ITR for the nine-month period ended September 30, 2022, includes
the individual and consolidated interim accounting information prepared pursuant to Technical Pronouncement CPC 21 (R1) - Interim Statements,
approved by the Brazilian Accounting Committee (“CPC”) and equivalent to International Accounting Standard (“IAS”)
34 - Interim Financial Reporting.
The individual
and consolidated interim accounting information shows all relevant information specific to the interim accounting information, and only
these, which is consistent with that used by Management in its management.
The Company's
individual and consolidated interim accounting information was approved by the Board of Directors and authorized for publication at a
meeting held on November 7th, 2022.
The individual
and consolidated interim accounting information was prepared based on historical cost, except for derivative instruments and short-term
investments recognized in other current and non-current assets that were measured at fair value. The individual and consolidated interim
accounting information are expressed in thousands of Reais (“R$”), rounded to the nearest thousand, as well as the disclosure
of amounts in other currencies, when necessary, also made in thousands. The items disclosed in other currencies are duly identified, whenever
applicable.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The main accounting
policies applied in the preparation of this individual and consolidated interim accounting information are consistent with those applied
and disclosed in note 3 to the Company’s audited financial statements for the year ended December 31, 2021, issued on March 9, 2022,
except for the rules and changes effective as of January 1, 2022, which has not entailed any significant changes in the individual and
consolidated interim accounting information of the Company.
Additionally,
the Company adopted International Financial Reporting Standard (“IFRS”) 9, Financial Instruments, for hedge accounting on
January 1, 2022, replacing IAS 39, Financial Instruments (CPC 38), which the Company had elected to keep in force for hedge accounting
from the first-time adoption of IFRS 9 (CPC 48) on January 1, 2018. The transition to IFRS 9 was carried out prospectively and pre-existing
hedging relationships were treated as ongoing hedging relationships, without loss of effectiveness or designation in transition. The adoption
of IFRS 9 did not produce significant effects on the financial statements.
This individual
and consolidated interim accounting information should be read in conjunction with the latest annual financial statement.
The same accounting
policies are applicable for the nine-month comparative period ended September 30, 2021 (except for the aforementioned rules and amendments,
which did not have a significant effect on the Company's individual and consolidated interim accounting information).
| a) | Hyperinflationary Economy – Turkey |
As of June
2022, Turkey is considered a hyperinflationary economy. Thus, according to CPC 42 - Accounting and Disclosure in Highly Inflationary Economies
(IAS 29 - Financial Reporting in Hyperinflationary Economies), non-monetary assets and liabilities, equity items and income statement
of the subsidiary Avon Kozmetik Urunleri Sanayi ve Ticaret Anonim Siketi ("Avon Turkey"), whose functional currency is the Turkish
Lira, are being updated so that their values are stated in the measurement currency unit at the end of the period, which considers the
effects measured by the Cosumer Price Index (“CPI”) of Turkey. As a result, the results of operations of the subsidiary Avon
Turkey started to be disclosed as if they were highly inflationary as of January 1, 2022 (beginning of the year when the existence of
hyperinflation was identified).
Non-monetary
assets and liabilities recorded at historical cost and the equity items of Avon Turkey were updated based on the aforementioned index,
with the hyperinflation impacts resulting from changes in the general purchasing power as of January 1, 2022 are now presented in the
income statement.
Considering
that the Company does not operate in an economy that became hyperinflationary in the period (but its subsidiary indicated above), the
restatement of the comparative balances of previous periods is not carried out, in accordance with the provisions of CPC 02 (R2) Effects
changes in exchange rates and conversion of financial statements (IAS 21 - The effects of changes in foreign exchange rates).
The income
statement is adjusted at the end of each reporting period based on changes in the general price index for the period.
The net effect
of the 2022 inflation was presented in a specific account for the purpose of hyperinflation in the financial result (note 29).
For the purpose
of converting the accounting balances of subsidiary Avon Turkey into the presentation currency (reais R$) used in the Company's individual
and consolidated financial statements, the following procedures required by CPC 02 (R2) (IAS 21):
| · | the amounts of assets, liabilities and equity
items were translated at the exchange rate at the period end date (3.4235 Turkish lira per Brazilian Real in September 2022). |
| · | the amounts of income and expenses for the period
were translated at the exchange rate of the period end date (3.4235 Turkish lira per Brazilian Real in September 2022), instead of the
average exchange rate of the period, which is used in the currency translation of non-hyperinflationary economy. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Accumulated
inflation in the nine-month period ended September 30, 2022 was 47.3%, according to Turkish Consumer Price Index (CPI).
In the nine-month
period ended September 30, 2022, the application of CPC 42 / IAS 29 to the subsidiary Avon Turkey did not result in material impacts to
the Company's interim accounting information.
| 4. | CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS |
The areas that require a higher level
of judgment and have greater complexity, as well as the areas in which assumptions and estimates are significant for the interim accounting
information, were presented in note 5 of the Company’s financial statements for the year ended December 31, 2021.
The estimates and assumptions used
in the preparation of the interim, individual and consolidated accounting information for the nine-month period ended September 30, 2022,
have not changed significantly related with the as of December 31, 2021.
| 5. | FINANCIAL RISK MANAGEMENT |
The information regarding the general
considerations and polices of the Company was presented in note 6.1 of the Company’s annual financial statements for the year ended
December 31, 2021, and there are no changes for the nine-month period ended September 30, 2022.
| 5.1 | Risks associated with the conflict between Russia and Ukraine |
In February 2022, Russia launched a
full-scale military invasion and is now engaged in a wide-ranging military conflict with Ukraine. In response, governments, and authorities
around the world, including the United States, United Kingdom and the European Union, announced sanctions and export restriction on certain
companies, financial institutions, individuals and economic sectors of Russia and Belarus. In response, Russia announced countermeasures
aimed at punishing foreign companies for interrupt their activities. Such sanctions and other measures could adversely affect our business.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
So far, the conflict resulted in the
suspension of the operations of the subsidiaries The Body Shop and Aesop in Russia and of exports from the Russian manufacturing unit
to other countries in the region, which are now supplied by our unit in Poland. Avon, however, continues to supply its dealer network
in Russia. The administrative operations in Ukraine that were carried out within the Company's facilities have been idle since the beginning
of the conflict and it is currently expected that activities can be resumed during the third quarter of 2022. As of the date of this interim
accounting information, the Company confirms that the facilities, as well as the goods and stocks held therein, have not been damaged
and are in a suitable condition to be operated as activities resume.
As of the date of the interim accounting
information, there are no material impacts of the above matter on the Company's consolidated interim accounting information, due to the
Company's limited operations in Russia and Ukraine, which together represent less than 2% of consolidated net revenue.
Regarding operations of the subsidiary
Avon in Russia, as of the date of this interim accounting information, no significant impacts were identified that affect the business
model for managing financial assets or the classification of these assets. Additionally, there are no indications of a significant increase
in the expected credit loss associated with operations, considering the maintenance of receivables collection levels and the increase
in cash transactions (considering the reduction in credit operations as a result of restrictions imposed locally and of credit card processing
companies in the country).
During the six-month period ended June
30, 2022, the Company's Management decided not to continue the operations of subsidiary The Body Shop in Russia and the related impacts
are disclosed in note 28.
Considering the maintenance of collection
levels and sales operations for the local market in Russia, as well as the inexistence of significant restrictions that affect the Company's
ability to carry out the management and cash movement necessary to maintain its operations, there is no significant risk of liquidity
related to these events that affect this interim accounting information. Similarly, market risks associated with the transaction, including
interest rate, currency and other price risks, including raw materials, did not significantly affect the Company's financial assets, considering
the supply of production to the market. from the Russian manufacturing units and the expectation of recoverability of the amounts in the
normal course of business.
Regarding the operations in Ukraine,
the suspension of sales in March and the reduction in the collection of outstanding receivables resulted in an increase in the provision
for losses on accounts receivable on June 30, 2022, this effect, however, not being material for this consolidated interim accounting
information. Additionally, considering the absence of restrictions imposed on the movement of cash and cash equivalents, raising funds
in the normal course of business and making payments and receipts, at the date of the interim accounting information, there are no significant
impacts on the liquidity of the operations in that location.
As a result of the developments of
the conflict in the quarter and in the nine-month period ended September 30, 2022, there were still no impacts resulting from possible
breaches of covenants or losses related to derecognition and/or modification of financial instruments or reclassification of amounts of
cash flow hedge reserve as a result of loss of effectiveness of derivatives recognized by hedge accounting or the loss of expectation
that transactions evaluated as highly probable will actually occur.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The Company's Management is continuously
monitoring developments to assess any possible future impacts that may arise as a result of the ongoing crisis, including the impairment
of financial and non-financial assets, which the Company’s Management assesses based on the best information available.
| 5.2 | Market risks including foreign exchange risk and interest rate |
In order to hedge the current balance
sheet positions of the Company against market risks, the following derivative instruments are used and consist of the balances in the
following table, as of September 30, 2022, and December 31, 2021:
| Description |
Consolidated |
September 30,
2022 |
|
December 31,
2021 |
| Financial derivatives |
(878,778) |
|
516,386 |
| Operating derivatives |
30,024 |
|
251 |
| Total |
(848,754) |
|
516,637 |
As of September 30, 2022, and December
31, 2021, the financial derivatives balances are composed as follows:
Financial derivatives
| Consolidated |
Fair value |
Gains (losses) of fair value adjustment |
| Description |
September 30,
2022 |
December 31,
2021 |
September 30,
2022 |
December 31, 2021 |
| Swap agreements(a) |
|
|
|
|
| Asset portion: |
|
|
|
|
| Dollar purchased position |
5,454,273 |
6,881,981 |
(59,465) |
978,350 |
| |
|
|
|
|
| Liability portion: |
|
|
|
|
| Post-fixed CDI Rate: |
|
|
|
|
| Position sold in CDI |
(6,311,582) |
(6,348,442) |
(734,352) |
(823,887) |
| |
|
|
|
|
| Forward contracts and NDF: |
|
|
|
|
| Liability position: |
|
|
|
|
| Post-fixed CDI Rate: |
(3,355) |
(137) |
1,867 |
(137) |
| Short position at interbank rate |
(18,114) |
(17,016) |
(331) |
94 |
| Total derivative instruments, net: |
(878,778) |
516,386 |
(792,281) |
154,420 |
| a) | Swap transactions consist of swapping the exchange rate variation for a correction related to a percentage
of the fluctuation of the Certificate of bank deposits (post-fixed CDI), in the case of Brazil. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Below are the changes in net derivatives balances for the
year ended December 31, 2021, and for the nine-month period ended September 30, 2022:
| |
Consolidated |
| Balance as of December 31, 2020 |
1,846,777 |
| Gains from swap and forward derivative contracts in the result of the year |
441,554 |
| Receipt of funds due to settlement of derivative transactions operational activity |
(1,570,584) |
| Payment due to settlements financing activity |
9,040 |
| Losses in cash flow hedge operations (other comprehensive income) |
(210,150) |
| Balance as of December 31, 2021 |
516,637 |
| Losses from swap and forward derivative contracts in the result of the year |
(527,882) |
| Payment of funds due to settlement of derivative transactions operational activity |
230,250 |
| Receipt due to settlements financing activity |
(132,147) |
| Losses in cash flow hedge operations (other comprehensive income) |
(923,676) |
| Other movements |
(11.936) |
| Balance as of September 30, 2022 |
(848,754) |
For derivative financial instruments
held by the Company on September 30, 2022, and December 31, 2021, considering that the contracts are executed directly with financial
institutions and not through stock exchanges, there are no margins deposited as collateral of these operations.
| 5.3 | Financial derivative instruments designated for hedge accounting (hedge accounting) |
The positions of derivative instruments
designated as outstanding cash flow hedge on September 30, 2022, are set out below.
| |
Consolidated |
| |
Subject to hedging |
Notional currency |
Fair value |
Accumulated gains (losses) |
Gains (losses) for the nine-month period |
| Currency swap – US$/R$ |
Currency |
BRL |
(860,664) |
(909,629) |
(942,706) |
| Forward agreements (Aesop) |
Currency |
BRL |
557 |
557 |
557 |
| Forward agreements (The Body Shop and Avon) |
Currency |
BRL |
5,759 |
5,759 |
5,759 |
| Forward agreements (Natura Industria) |
Currency |
BRL |
8,701 |
8,701 |
8,693 |
| Forward agreements (Natura &Co) |
Currency |
BRL |
- |
- |
89 |
| Forward agreements and swap (Avon) |
Currency |
BRL |
6,842 |
6,842 |
3,932 |
| Total |
|
|
(838,805) |
(887,770) |
(923,676) |
| 5.4 | Operating derivatives - Consolidated |
As of September 30, 2022, and December
31, 2021, the Company maintains forward derivative instruments, with the purpose of hedging the foreign exchange risk of operating cash
flows (such as import and export transactions):
| Description |
Fair value |
September 30,
2022 |
December 31,
2021 |
| The Body Shop and Avon position |
18,194 |
(404) |
| Natura Position |
11,830 |
655 |
| Total of derivative instruments, net |
30,024 |
251 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The Company’s objectives in managing
its capital are to safeguard the Company’s ability to continue to provide returns to shareholders and benefits to other stakeholders,
in addition to maintaining an ideal capital structure to reduce this cost.
The Company monitors capital based
on the financial leverage ratios. This ratio corresponds to the net debt divided by Earnings Before Interest, Tax, Depreciation and Amortization
(“EBITDA”). The net debt corresponds to total borrowing and financing (including short and long-term borrowing and financing,
as shown in the consolidated balance sheet), deducted from cash and cash equivalents and short-term investments (except for “Crer
para Ver” funds and Dynamo Beauty Ventures Ltd. Fund).
The Company’s financial assets
and liabilities substantially encompass assets and liabilities classified as level 2 in the fair value estimate hierarchy, the assessment
of which is based on techniques that use, other than the prices quoted in level 1, other information adopted by the market in a direct
(as prices) or indirect (resulting from prices) manner. To measure the fair value, the carrying amount represents an amount that is reasonably
near to the fair value, as described below:
| (i) | the balances of cash and cash equivalents, trade accounts receivables, accounts payable to suppliers and
other current liabilities are equivalent to their carrying amounts, mainly due to the short-term maturities of these instruments; |
| (ii) | the balances of the short-term investments measured at amortized cost approximate their fair values as
a result of the transactions to be conducted at floating interest rates; and b) measured at fair value through profit or loss based on
the rates agreed with the financial institutions considering the agreed rates among the parties, including market information that allows
for such calculation; |
| (iii) | the carrying amounts of borrowing, financing and debentures are measured at their amortized cost and disclosed
at fair value, which does not differ materially from the carrying amounts as the agreed interest rates are consistent with current market
rates; and |
| (iv) | the fair value of exchange rate derivatives (swap and forwards) is determined based on the future exchange
rates at the dates of the balance sheets, with the resulting amount being discounted at present value. |
There was no transfer between measurement
levels in the fair value hierarchy during the nine-month period ended September 30, 2022, for these assets and liabilities. Additionally,
there were no material effects in the quarter on the fair value of financial assets and liabilities as a result of the increase in price
volatility in markets affected by the conflict between Russia and Ukraine, counterparty risk in financial assets or inactivity of markets
considered in the valuation.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 6. | CASH AND CASH EQUIVALENTS |
| |
Parent |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
September 30,
2022 |
December 31,
2021 |
| Cash and banks |
5,344 |
4,289 |
2,236,650 |
3,349,398 |
| Certificate of bank deposits |
- |
- |
82,842 |
7,639 |
| Repurchase operations (a) |
- |
- |
932,797 |
650,220 |
| |
5,344 |
4,289 |
3,252,289 |
4,007,257 |
(a)
Repurchase operations are securities issued by banks with a commitment by the bank to repurchase the securities, and by the client to
resell the security, at a defined interest rate and within a predetermined term, which are backed by public or private securities (depending
on the financial institution) and are registered within the Central Agency for Custody and Financial Settlement of Securities (“CETIP”).
As of September 30, 2022, repurchase operations are remunerated at an average rate of 100.0 % of CDI (100.0% of the CDI as of December
31, 2021).
| |
Parent |
Consolidated |
| |
September 30, 2022 |
December 31, 2021 |
September 30, 2022 |
December 31, 2021 |
| Exclusive Investment fund(a) |
100,402 |
228,694 |
- |
- |
| Mutual investment funds (b) |
- |
- |
953,222 |
896,212 |
| Treasury bills (c) |
- |
- |
415,102 |
646,586 |
| Government securities (LFT) (d) |
- |
- |
8,900 |
435,898 |
| Dynamo Beauty Ventures Ltd. Fund |
- |
- |
36,507 |
36,921 |
| Restricted cash |
- |
- |
- |
44 |
| |
100,402 |
228,694 |
1,413,731 |
2,015,661 |
| |
|
|
|
|
| Current |
100,402 |
228,694 |
1,377,224 |
1,978,740 |
| Non-current |
- |
- |
36,507 |
36,921 |
| (a) | The Company concentrate most of its investments in an Exclusive Investment Fund, which holds interest
in shares of the Essential Investment Fund. |
The values of the shares held by the
Company are presented under the item “Exclusive Investment Fund” at the Parent Company. The financial statements of the Exclusive
Investment Fund, in which the group has exclusive participation (100% of the shares), were consolidated, except for the quotas of the
Instituto Natura, and the amounts of its portfolio were segregated by type of investment and classified as cash and short-term investments,
based on the accounting practices adopted by the Company. For the purposes of consolidated presentation, the exclusive investment fund
balance, as well as the positions of the other subsidiaries are presented according to the financial component.
The balance as of September 30, 2022,
related to the “Crer para Ver” line within the exclusive investment fund is R$ 96,857 (R$96,070 as of December 31, 2021).
| (b) | Mutual investment funds refer to the investments of some subsidiaries of the Company, which are concentrated
in the Natura entities of the Hispanic America mainly in Argentina, Chile, Colombia and Mexico. |
| (c) | As of September 30, 2022, investments in treasury bills are remunerated at an average rate of 116.9% of
the CDI (120.0% as of December 31, 2021). |
| (d) | As of September 30, 2022, investments in Government securities (LFT) are remunerated at an average rate
of 101.2% of the CDI (102.0% of the CDI as of December 31, 2021). |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The breakdown of securities constituting
the Essential Investment Fund portfolio, regarding which the Company holds 100% interest, on September 30, 2022 and December 31, 2021
is as follows:
| |
Consolidated |
| |
September 30, 2022 |
December 31, 2021 |
| Certificate of bank deposits |
1,476 |
- |
| Repurchase operations (cash and cash equivalents) |
721,491 |
569,349 |
| Treasury bills |
415,102 |
646,586 |
| Government securities (LFT) |
1,323 |
428,865 |
| |
1,139,392 |
1,644,800 |
These amounts are consolidated with
the other investments of the same nature of the Company in the consolidated.
| 8. | TRADE ACCOUNTS RECEIVABLE |
| |
Consolidated |
| |
September 30, 2022 |
December 31, 2021 |
| Trade accounts receivable |
3,797,168 |
3,930,340 |
| (-) Allowance for expected credit losses |
(428,984) |
(453,981) |
| |
3,368,184 |
3,476,359 |
Maximum exposure to credit risk on
the date of the financial statements is the carrying amount of each maturity date range, net of the allowance for expected credit losses.
The following table shows trade accounts receivable by exposure to the allowance for expected credit losses as of September 30, 2022 and
December 31, 2021:
| |
Consolidated |
| |
September 30, 2022 |
December 31, 2021 |
| |
Trade accounts receivable |
Allowance for expected credit losses |
Trade accounts
receivable |
Allowance for expected credit losses |
| Current |
2,696,285 |
(94,063) |
2,488,412 |
(80,087) |
| Past due: |
|
|
|
|
| Up to 30 days |
626,307 |
(56,715) |
937,227 |
(68,782) |
| 31 to 60 days |
129,791 |
(50,467) |
140,757 |
(56,784) |
| 61 to 90 days |
86,584 |
(44,260) |
97,713 |
(49,731) |
| 91 to 180 days |
258,201 |
(183,479) |
266,231 |
(198,597) |
| |
3,797,168 |
(428,984) |
3,930,340 |
(453,981) |
The changes in the allowance for expected
credit losses for the nine-month period ended September 30, 2022 and 2021 are as follows:
| |
Consolidated |
| Balance as of December 31, 2020 |
(432,108) |
| Additions, net of reversals |
(670,536) |
| Write-offs (a) |
643,706 |
| Translation adjustment |
2,237 |
| Balance as of September 30, 2021 |
(456,701) |
| |
|
| Balance as of December 31, 2021 |
(453,981) |
| Additions, net of reversals |
(465,391) |
| Write-offs (a) |
456,947 |
| Translation adjustment |
33,441 |
| Balance as of September 30, 2022 |
(428,984) |
| a) | Refers to accounts overdue for more than 180 days, which are written off when the Company has no expectation
of recovering the trade accounts receivable and sale of customer portfolios. |
| |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
| Finished products |
4,434,348 |
4,619,237 |
| Raw materials and packaging |
1,329,544 |
1,166,681 |
| Auxiliary materials |
189,380 |
195,364 |
| Products in progress |
65,384 |
38,189 |
| (-) Allowance for inventory losses |
(608,120) |
(615,945) |
| |
5,410,536 |
5,403,526 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The changes in the allowance for inventory
losses for the nine-month period ended September 30, 2022 and 2021 are as follows:
| |
Consolidated |
| Balance as of December 31, 2020 |
(602,314) |
| Additions, net of reversals (a) |
(275,350) |
| Write-offs (b) |
292,745 |
| Translation adjustment |
3,542 |
| Balance as of September 30, 2021 |
(581,377) |
| |
|
| Balance as of December 31, 2021 |
(615,945) |
| Additions, net of reversals (a) |
(303,801) |
| Write-offs (b) |
244,780 |
| Translation adjustment |
66,846 |
| Balance as of September 30, 2022 |
(608,120) |
| a) | This refers to the recognition of net allowance for losses due to discontinuation, expiration and quality,
to cover expected losses on the realization of inventories, pursuant to the policy of the Company. |
| b) | This consists of write-offs of products for which there is already an allowance for losses, where the
Company has no expectation of sales/realization. |
| |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
| ICMS on purchase of goods (a) |
762,000 |
732,853 |
| Taxes on purchase of goods – foreign subsidiaries |
207,368 |
313,214 |
| ICMS on purchases of property, plant and equipment and purchase of goods |
12,616 |
12,138 |
| PIS and COFINS on purchase of property, plant and equipment and purchase of goods (b) |
1,022,938 |
984,737 |
| Withholding PIS, COFINS and CSLL |
1,671 |
1,673 |
| Tax on Manufactured Goods - IPI (c) |
150,747 |
114,179 |
| Other |
183,005 |
164,099 |
| |
2,340,345 |
2,322,893 |
| |
|
|
| Current (*) |
974,053 |
973,269 |
| Non-current |
1,366,292 |
1,349,624 |
(*) The income tax balances originally
presented on December 31, 2021 in this group were reclassified to the income tax and social contribution group in current assets for better
presentation. This reclassification does not affect the total current assets, only reclassification between lines of recoverable taxes
and income tax and social contribution.
| a) | Tax credits related to the tax on the circulation of goods, interstate and inter-municipal transport and
communication services (ICMS) were generated mainly by purchases, whose tax rate is higher than the average of sales. The Company expects
to realize these credits during the ordinary course of business through offsetting with sales operations in the domestic market. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| b) | The accumulated tax credits of PIS and COFINS basically arise from credits on purchases of raw materials
used in the production and from purchase of property, plant and equipment, as well as credits arising out of the exclusion of ICMS from
the calculation basis of the PIS/COFINS. The realization of these credits normally occurs through offsetting with sales operations in
the domestic market. |
| c) | The balance will be used to offset IPI (Taxes over industrialized products) payable in future operations
of the Company. |
| 11. | INCOME TAX AND SOCIAL CONTRIBUTION |
The effective rate calculated
by the Company for the nine-month period ended September 30, 2022 was 6.2% negative. This percentage is based on a loss before tax of
R$ 1,682,648 and an income tax expense of R$ 104,776. The main components that cause the effective rate to deviate from the nominal income
tax rate of 34% are the different incomes by country, tax losses from certain jurisdictions that cannot benefit from the deferred income
tax asset, permanent effects related to withholding income tax arising on transactions between group companies that cannot be benefited
or offset by tax losses and credits in certain jurisdictions that can benefit and favorable net permanent items, including investment
subsidies and other incentives.
The effective rate calculated
by the Company for the nine-month period ended September 30, 2021 was 200.8%. This percentage is based on a loss before tax of R$ 373,108
and an income tax credit of R$ 749,330. The main component that causes the effective rate to deviate from the nominal income tax rate
of 34% is (i) the recognition of deferred tax assets referring to tax losses from previous years at Avon Luxembourg considering a new
scenario of recoverability of the balance, and (ii) The recognition of tax benefits in Brazil, in the subsidiaries Avon and Natura related
to investment subsidies in the amount of R$228,872, the reversal of deferred income tax liability on derivative operations in the amount
of R$554,500, besides the additional recognition of deferred income tax liability arising from the announcement made by the Government
of England that the nominal rate will increase from 19% to 25%.
11.1
Deferred Income Tax – Avon Luxembourg
As of December 31, 2020, the Company
had balances of deferred income tax assets on tax losses amounting to R$13.3 billion, which have not expired and had not been recognized
in accounting given the historical analyses of recoverability in the respective operations. Of these amounts, R$8.2 billion originate
from the subsidiary Natura &Co Luxembourg Holdings S.á.r.l ("Natura &Co Luxembourg" formerly "Avon Luxembourg").
In the nine-month period ended
September 30, 2021, the Company approved and initiated a plan to restructure its operations, including the establishment of Avon Luxembourg
as a financial subsidiary (FINCO) to the other entities in the Group. From this restructuring, a deferred income tax asset in the amount
of approximately R$823 million was recognized, the management's conclusion is that the realization of these amounts is probable in the
normal course of Natura &Co Luxembourg's activities and should occur within a period not exceeding 20 years.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Changes in deferred income tax
and social contribution asset and liability for the nine-month period ended September 30, 2022 and 2021, are as follows:
| |
Consolidated |
| |
Assets |
Liabilities |
| Balance as of December 31, 2020 |
1,339,725 |
(1,288,045) |
| Effect on income statement (a) |
1,427,635 |
289,099 |
| Reserve for grant of options and restricted shares |
(37,977) |
- |
| Other comprehensive income impact |
68,372 |
- |
| Translation adjustment |
(46,922) |
66,236 |
| Balance as of September 30, 2021 |
2,750,833 |
(932,710) |
| |
|
|
| Balance as of December 31, 2021 |
2,954,074 |
(994,041) |
| Effect on income statement (b) |
636,336 |
(59,831) |
| Transfer between deferred income tax and social contribution liabilities and assets |
16,486 |
(16,486) |
| Reserve for grant of options and restricted shares |
6,076 |
- |
| Other comprehensive income impact (c) |
315,188 |
- |
| Translation adjustment |
(223,272) |
175,114 |
| Balance as of September 30, 2022 |
3,704,888 |
(895,244) |
| a) | Refers mainly to deferred tax from Avon Luxembourg, as mentioned above, and realization of deferred income
tax liabilities on derivative transactions and recording of deferred taxes on investment grants. |
| b) | Includes the impacts related to exchange variation on the Company's financial derivative instruments and
changes in the balance of temporary differences. |
| c) | Refers mainly to the impacts related to exchange variation on the Company's unsettled derivative financial
instruments. |
Management monitors the performance of all its entities and assesses
whether the deferred income tax asset can be realized from four sources of use: potential for offsetting tax losses, reversal of taxable
temporary differences, tax planning opportunities (which may include corporate changes) and projection of future taxable income. The Company
has no record of deferred income tax assets that cannot be supported by one or more of these sources of realization.
Judicial deposits represent restricted
assets of the Company and are related to the amounts deposited and held in court until the resolution of the disputes to which they are
related. The judicial deposits held by the Company as of September 30, 2022 and December 31, 2021 are as follows:
| |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
| Unaccrued tax proceedings(a) |
264,336 |
273,295 |
| Accrued tax proceedings (b) |
172,957 |
266,828 |
| Unaccrued civil proceedings |
6,549 |
8,212 |
| Accrued civil proceedings |
2,161 |
2,821 |
| Unaccrued labor proceedings |
11,715 |
11,970 |
| Accrued labor proceedings |
17,740 |
22,158 |
| Total judicial deposits |
475,458 |
585,284 |
| a) | The tax proceedings related to these judicial deposits refer, substantially, to ICMS-ST. These are part
of the contingent liabilities - risk of possible loss disclosed in Note 22. |
| b) | The tax proceedings related to these judicial deposits refer, substantially, to the sum of the amounts
highlighted in Note 22, and the amounts provisioned according to Note 21. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Changes in judicial deposits balances
for the nine-month period ended September 30, 2022 and 2021 are as follows:
| |
Consolidated |
| Balance as of December 31, 2020 |
566,190 |
| New deposits |
27,975 |
| Redemptions |
(21,101) |
| Inflation adjustment and interest |
8,793 |
| Payments / write-offs for expenses |
(10,913) |
| Translation adjustment |
(173) |
| Balance as of September 30, 2021 |
570,771 |
| |
|
| Balance as of December 31, 2021 |
585,284 |
| New deposits |
18,867 |
| Redemptions |
(82,405) |
| Inflation adjustment and interest |
26,846 |
| Payments / write-offs for expenses |
(70,637) |
| Translation adjustment |
(2,497) |
| Balance as of September 30, 2022 |
475,458 |
In addition to judicial deposits, the
Company has contracted insurance policies for certain lawsuits.
| 13. | NON-CURRENT ASSETS HELD FOR SALE |
The changes in the balance for the
nine-month period ended September 30, 2022 and 2021 are as follows:
| |
Consolidated |
| Balance as of December 31, 2020 |
181,279 |
| Transfer from property, plant and equipment |
9,294 |
| Transfer from assets and Liabilities |
156 |
| Transfer to property, plant and equipment (a) |
(1,528) |
| Transfer to assets and Liabilities (a) |
(18,253) |
| Sale b) |
(83,106) |
| Translation adjustment |
(18,256) |
| Balance as of September 30, 2021 (b) |
69,586 |
| |
|
| Balance as of December 31, 2021 |
52,921 |
| Transfers from property, plant and equipment, other assets and liabilities |
16,080 |
| Impairment (c) |
(12,510) |
| Translation adjustment |
(4,983) |
| Balance as of September 30, 2022 (d) |
51,508 |
| a) | During the nine-month period ended September 30, 2021, transfers occurred due to the resumption of activities
in the Avon's subsidiary Saudi Arabia unit. |
| b) | In September 2021 occurred the sale of operating assets of the subsidiary Avon in Spain. |
| c) | On September 30, 2022, it was necessary the provision for impairment of the asset held for sale located
in Poland, since its fair value less costs to sell was confirmed to be lower than its cost value. This asset was sold in October 2022. |
| d) | As of September 30, 2022, assets held for sale included property of the subsidiary Avon located in Poland
in the Warsaw city and land in the United Kingdom in the Corby city. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 14. | OTHER CURRENT AND NON-CURRENT ASSETS |
| |
Parent |
Consolidated |
| |
September 30, 2022 |
December 31,
2021 |
September 30, 2022 |
December 31,
2021 |
| Marketing and advertising advances |
- |
- |
69,212 |
80,078 |
| Supplier advances |
2,077 |
6,215 |
359,647 |
350,830 |
| Employee advances |
29 |
187 |
23,210 |
17,402 |
| Rent advances and guarantee deposit (a) |
- |
- |
159,315 |
172,465 |
| Advance insurance expenses |
- |
- |
111,869 |
160,911 |
| Overfunded pension plan (b) |
- |
- |
861,811 |
1,043,799 |
| Customs broker advances - Import taxes |
- |
- |
58,703 |
60,739 |
| Sublease receivables (c) |
- |
- |
287,066 |
347,174 |
| Carbon credits |
- |
- |
10,065 |
11,479 |
| Receivables from service providers (d) |
- |
- |
132,987 |
162,268 |
| Other |
1,508 |
843 |
226,673 |
268,066 |
| |
3,614 |
7,245 |
2,300,558 |
2,675,211 |
| |
|
|
|
|
| Current |
2,771 |
6,397 |
837,552 |
912,160 |
| Non-current |
843 |
848 |
1,463,006 |
1,763,051 |
| a) | Mainly related to: (i) advances for lease agreements that were not included in the initial measurement
of lease liabilities / right-of-use of the subsidiary The Body Shop, in accordance with the exemptions of IFRS 16 / CPC 06(R2); and (ii)
security deposits for the rental of certain stores of the subsidiaries The Body Shop and Aesop, which will be returned by the landlord
at the end of the lease agreements. |
| b) | Pension plan arising from the acquisition of Avon. The variation in the period is due to the Brazilian
real appreciation in the period. |
| c) | Refers to the sublease receivable from the New York office owned by the subsidiary Avon. |
| d) | Refers to receivables mainly arising from damage that occurred with carriers and insurance companies. |
| |
Parent |
| |
September 30,
2022 |
December 31,
2021 |
| Investments in subsidiaries, net of losses |
22,914,485 |
28,281,178 |
Information and changes in the balances
for the nine-month period ended September 30, 2022 and 2021 are as follows:
| |
September 30, 2022 |
| |
Natura
Cosméticos S.A. (a) |
Avon Products,
Inc. |
Natura &Co International S.à r.l. |
Total |
| Percentage of interest |
100.00% |
100.00% |
100.00% |
|
| Shareholders’ equity of the subsidiaries (unsecured liabilities) |
5,571,165 |
(5,482,440) |
5,754,654 |
5,843,379 |
| Shareholders’ equity interest (unsecured liabilities) |
5,571,165 |
(5,482,440) |
5,754,654 |
5,843,379 |
| Fair value adjustment of acquired assets and liabilities |
- |
4,088,089 |
- |
4,088,089 |
| Tax benefit from income tax of subsidiaries (b) |
- |
266,124 |
- |
266,124 |
| Goodwill |
- |
12,716,893 |
- |
12,716,893 |
| Total |
5,571,165 |
11,588,666 |
5,754,654 |
22,914,485 |
| Net income (loss) for the period of subsidiaries |
(39,895) |
(1,634,957) |
17,392 |
(1,657,460) |
| |
|
|
|
|
| Balances as of December 31, 2021 |
7,816,896 |
14,034,994 |
6,429,288 |
28,281,178 |
| Share of profit (loss) of equity investees |
(39,895) |
(1,634,957) |
17,392 |
(1,657,460) |
| Translation adjustment |
(1,736,126) |
(602,216) |
(697,348) |
(3,035,690) |
| Effect of hyperinflationary economy adjustment |
77,541 |
(106,070) |
- |
(28,529) |
Contribution
by the controlling company for purchase option plans granted to executive officers of the subsidiaries and other reserves net of tax
effects |
65,258 |
25,186 |
- |
90,444
|
| Hedge accounting net of tax effects |
(612,509) |
(1,390) |
5,322 |
(608,577) |
| Write-off of the tax benefit arising from the determination of income tax of subsidiaries |
|
(126,881) |
|
(126,881) |
| Balance as of September 30, 2022 |
5,571,165 |
11,588,666 |
5,754,654 |
22,914,485 |
| a) | The investment balance in the direct subsidiary Natura Cosméticos S.A. includes goodwill arising
from the acquisitions of the indirect subsidiaries The Body Shop R$ 1,572,769 (R$ 2,011,304 as of September 30, 2021) and Aesop R$ 121,830
(R$ 139,194 as of September 30, 2021), according to note 17. |
| b) | Refers to a tax benefit provided for in the United Kingdom where entities with taxable income can use
credits from companies with tax losses as long as they are part of the same economic group and are in the same jurisdiction. This credit
originated in the business combination and is expected to be realized from the operations of the indirect subsidiaries Aesop and The Body
Shop in the United Kingdom. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
September 30, 2021 |
| |
Natura
Cosméticos S.A.(a) |
Avon Products,
Inc. |
Natura &Co International
S.à r.l. |
Total |
| Percentage of interest |
100.00% |
100.00% |
100.00% |
|
| Shareholders’ equity of the subsidiaries (unsecured liabilities) |
7,187,700 |
(4,908,242) |
6,156,330 |
8,435,788 |
| Shareholders’ equity interest (unsecured liabilities) |
7,187,700 |
(4,908,242) |
6,156,330 |
8,435,788 |
| Fair value adjustment of acquired assets and liabilities |
- |
5,051,258 |
- |
5,051,258 |
| Tax benefit from income tax of subsidiaries (b) |
- |
462,906 |
- |
462,906 |
| Goodwill |
- |
13,497,129 |
- |
13,497,129 |
| Total |
7,187,700 |
14,103,051 |
6,156,330 |
27,447,081 |
| Net income (loss) for the period of subsidiaries |
311,647 |
(853,551) |
980,976 |
439,072 |
| |
|
|
|
|
| Balances as of December 31, 2020 |
6,929,074 |
14,373,448 |
5,641,757 |
26,944,279 |
| Share of profit (loss) of equity investees |
311,647 |
(853,551) |
980,976 |
439,072 |
| Translation adjustment |
65,279 |
727,436 |
(591,603) |
201,112 |
| Capital increase - investment by parent company |
- |
- |
150,000 |
150,000 |
| Unrealized losses on conversion of intercompany balances in foreign currency |
- |
(129,805) |
(24,800) |
(154,605) |
| Effect of hyperinflationary economy adjustment |
115,651 |
(20,829) |
- |
94,822 |
| Contribution by the controlling company for purchase option plans granted to executive officers of the subsidiaries and other reserves net of tax effects |
65,034 |
- |
- |
65,034 |
| Hedge accounting net of tax effects |
(130,375) |
(18) |
- |
(130,393) |
| Dividends and interest on own capital |
(168,610) |
- |
- |
(168,610) |
| Other effects of investments |
- |
6,370 |
- |
6,370 |
| Balance as of September 30, 2021 |
7,187,700 |
14,103,051 |
6,156,330 |
27,447,081 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 16. | PROPERTY, PLANT AND EQUIPMENT |
| |
Consolidated |
| |
Useful life
range
(in years) |
December 31,
2021 |
Additions |
Write-offs |
Transfers |
Translation adjustment |
September 30, 2022 |
| Cost: |
|
|
|
|
|
|
|
| Vehicles |
2 to 5 |
38,902 |
1 |
(9,211) |
10,396 |
(550) |
39,538 |
| Tooling |
3 |
191,840 |
- |
(2,124) |
1,066 |
(222) |
190,560 |
| Tools and accessories |
3 to 20 |
110,998 |
11,282 |
(1,983) |
3,134 |
(33,640) |
89,791 |
| Facilities |
3 to 60 |
303,452 |
60 |
(2,232) |
3,937 |
(8,540) |
296,677 |
| Machinery and accessories |
3 to 15 |
1,959,943 |
21,685 |
(40,212) |
76,170 |
(157,334) |
1,860,252
|
| Leasehold improvements |
2 to 20 |
1,128,504 |
28,830 |
(37,978) |
59,719 |
(129,079) |
1,049,996 |
| Buildings |
14 to 60 |
1,982,245 |
6,708 |
(349) |
(30,964) |
(113,712) |
1,843,928
|
| Furniture and fixtures |
2 to 25 |
660,126 |
44,767 |
(38,794) |
20,385 |
(68,511) |
617,973
|
| Land |
- |
628,373 |
- |
- |
10,095 |
(14,063) |
624,405 |
| IT equipment |
3 to 15 |
634,580 |
17,614 |
(74,862) |
(54,738) |
(80,538) |
442,056
|
| Other assets |
- |
31,636 |
- |
(532) |
- |
4,958 |
36,062 |
| Projects in progress |
- |
561,488 |
339,250 |
(2,107) |
(328,323) |
(64,876) |
505,432
|
| Total cost |
|
8,232,087 |
470,197 |
(210,384) |
(229,123) |
(666,107) |
7,596,670 |
| |
|
|
|
|
|
|
|
| Depreciation value: |
|
|
|
|
|
|
|
| Vehicles |
|
(9,457) |
(8,591) |
8,397 |
(18) |
5,131 |
(4,538) |
| Tooling |
|
(174,164) |
(5,622) |
2,124 |
- |
143 |
(177,519) |
| Tools and accessories |
|
(65,740) |
(11,026) |
129,793 |
- |
(105,050) |
(52,023) |
| Facilities |
|
(183,420) |
(13,410) |
1,866 |
276 |
4,606 |
(190,082) |
| Machinery and accessories |
|
(728,408) |
(130,678) |
33,902 |
(2,217) |
96,759 |
(730,642) |
| Leasehold improvements |
|
(602,622) |
(98,151) |
34,548 |
566 |
68,719 |
(596,940) |
| Buildings |
|
(298,327) |
(58,179) |
195 |
13,160 |
55,462 |
(287,689) |
| Furniture and fixtures |
|
(369,610) |
(64,345) |
32,663 |
2,245 |
33,331 |
(365,716) |
| IT equipment |
|
(392,095) |
(69,409) |
76,041 |
67,761 |
59,969 |
(257,733) |
| Other assets |
|
(30,836) |
(1,729) |
535 |
- |
1,287 |
(30,743) |
| Total depreciation |
|
(2,854,679) |
(461,140) |
320,064 |
81,773 |
220,357 |
(2,693,625) |
| Net total |
|
5,377,408 |
9,057 |
109,680 |
(147,350) |
(445,750) |
4,903,045 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
Consolidated |
| |
Useful life range
(in years) |
December 31,
2020 |
Additions |
Write-offs |
Write-offs
Impairment
|
Transfers |
Translation adjustment |
September 30, 2021 |
| Cost: |
|
|
|
|
|
|
|
|
| Vehicles |
2 to 5 |
79,227 |
4,907 |
(36,576) |
- |
6,694 |
3,023 |
57,276 |
| Tooling |
3 |
187,852 |
360 |
- |
- |
168 |
(88) |
188,292 |
| Tools and accessories |
3 to 20 |
85,678 |
15,224 |
(2,685) |
- |
3,762 |
(2,634) |
99,345 |
| Facilities |
3 to 60 |
293,471 |
207 |
(3,283) |
- |
11,773 |
979 |
303,147 |
| Machinery and accessories |
3 to 15 |
1,819,693 |
19,700 |
(75,833) |
- |
60,029 |
57,285 |
1,880,874 |
| Leasehold improvements |
2 to 20 |
963,957 |
40,122 |
(32,705) |
(4,050) |
51,346 |
6,076 |
1,024,746 |
| Buildings |
14 to 60 |
1,899,176 |
6,816 |
(13,401) |
- |
(6,162) |
48,150 |
1,934,579 |
| Furniture and fixtures |
2 to 25 |
566,548 |
58,258 |
(23,030) |
- |
11,198 |
(642) |
612,332 |
| Land |
- |
661,613 |
- |
(1,203) |
- |
(2,259) |
(18,357) |
639,794 |
| IT equipment |
3 to 15 |
543,772 |
34,882 |
(30,833) |
- |
61,058 |
8,823 |
617,702 |
| Other assets |
- |
36,687 |
- |
(1,915) |
- |
- |
(30) |
34,742 |
| Projects in progress |
- |
408,385 |
352,557 |
(19,887) |
- |
(293,739) |
(777) |
446,539 |
| Total cost |
|
7,546,059 |
533,033 |
(241,351) |
(4,050) |
(96.132) |
101,808 |
7,839,368 |
| |
|
|
|
|
|
|
|
|
| Depreciation value: |
|
|
|
|
|
|
|
|
| Vehicles |
|
(33,042) |
(14,457) |
27,428 |
- |
(5,735) |
1,813 |
(23,993) |
| Tooling |
|
(166,536) |
(6,036) |
- |
- |
- |
38 |
(172,534) |
| Tools and accessories |
|
(39,159) |
(25,311) |
663 |
- |
3,109 |
4,905 |
(55,793) |
| Facilities |
|
(176,726) |
(12,325) |
3,247 |
- |
(2,661) |
(18) |
(188,483) |
| Machinery and accessories |
|
(578,762) |
(145,656) |
72,913 |
- |
9,150 |
(20,957) |
(663,312) |
| Leasehold improvements |
|
(480,554) |
(101,541) |
25,652 |
- |
(5,499) |
(2,654) |
(564,596) |
| Buildings |
|
(179,729) |
(62,205) |
12,732 |
- |
2,768 |
(24,394) |
(250,828) |
| Furniture and fixtures |
|
(318,611) |
(64,315) |
13,627 |
- |
(347) |
13,408 |
(356,238) |
| IT equipment |
|
(311,856) |
(82,538) |
29,782 |
- |
(8,679) |
(3,532) |
(376,823) |
| Other assets |
|
(26,027) |
(14,778) |
- |
- |
- |
10,221 |
(30,585) |
| Total depreciation |
|
(2,311,002) |
(529,162) |
186,044 |
- |
(7,894) |
(21,170) |
(2,683,185) |
| Net total |
|
5,235,057 |
3,871 |
(55,307) |
(4,050) |
(104,026) |
80,638 |
5,156,183 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
Consolidated |
| |
Useful life range (in years) |
December 31,
2021 |
Additions |
Write-offs |
Transfers |
Translation adjustment |
September 30, 2022 |
| Cost: |
|
|
|
|
|
|
|
| Software |
2,5 to 10 |
2,492,616 |
99,001 |
(28,661) |
419,249 |
(251,501) |
2,730,704 |
| Trademarks and patents (defined useful life) |
20 to 25 |
889,834 |
- |
- |
- |
(140,495) |
749,339 |
| Trademarks and patents indefinite useful life) |
- |
5,888,623 |
- |
(43) |
- |
(1,202,292) |
4,686,288 |
| Goodwill Avon |
- |
13,381,191 |
- |
- |
- |
(652,446) |
12,728,745 |
| Goodwill Emeis Brazil Pty Ltd. |
- |
143,180 |
- |
- |
- |
(21,350) |
121,830 |
| Goodwill The Body Shop |
- |
2,063,672 |
- |
- |
- |
(490,903) |
1,572,769 |
| Goodwill acquisition of The Body Shop stores |
- |
1,456 |
- |
(290) |
- |
- |
1,166 |
| Relationship with retail clients |
10 |
2,880 |
- |
- |
- |
(319) |
2,561 |
| Key money (indefinite useful life) |
- |
24,985 |
- |
(123) |
- |
(2,949) |
21,913 |
| Key money (defined useful life) |
3 to 18 |
14,363 |
- |
(4,655) |
- |
(2,442) |
7,266 |
| Relationship with franchisees and sub franchisees and sales representatives |
7 to 15 |
2,990,558 |
- |
- |
- |
(315,726) |
2,674,832 |
| Technology developed (by acquired subsidiary) |
5 |
1,580,808 |
- |
- |
- |
(257,738) |
1,323,070 |
| Other intangible assets and intangible under development |
2 to 10 |
277,776 |
128,220 |
(1) |
(220,871) |
(16,899) |
168,225 |
| Total cost |
|
29,751,942 |
227,221 |
(33,773) |
198,378 |
(3,355,060) |
26,788,708 |
| |
|
|
|
|
|
|
|
| Accumulated amortization: |
|
|
|
|
|
|
|
| Software |
|
(1,369,767) |
(301,773) |
27,290 |
(64,504) |
170,022 |
(1,538,732) |
| Trademarks and patents |
|
(143,186) |
(27,745) |
- |
- |
20,315 |
(150,616) |
| Relationship with retail clients |
|
(3,218) |
(43) |
- |
- |
314 |
(2,947) |
| Key money |
|
(16,517) |
- |
4,581 |
- |
2,466 |
(9,470) |
| Relationship with franchisees and sub franchisees |
|
(729,049) |
(198,896) |
- |
- |
80,449 |
(847,496) |
| Technology developed |
|
(632,326) |
(205,118) |
- |
- |
109,754 |
(727,690) |
| Other intangible assets |
|
(296) |
(2,038) |
- |
(48) |
442 |
(1,940) |
| Total accrued amortization |
|
(2,894,359) |
(735,613) |
31,871 |
(64,552) |
383,762 |
(3,278,891) |
| Net total |
|
26,857,583 |
(508,392) |
(1,902) |
133,826 |
(2,971,298) |
23,509,817 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
During the nine-month period ended
September 30, 2022 the slower economic recovery observed in the markets resulting from the economic disruptions caused by the Covid-19
pandemic and the developments in the conflict between Russia and Ukraine resulted, in addition to a retraction in the economic perspectives
of cosmetics sector, in inflationary pressures and increase in interest rates practiced in several jurisdictions. These events affect
significant assumptions used in the impairment test of goodwill for future profitability recognized from business combinations in previous
years, especially in determining the discount rate (WACC) and in the projections of future results calculated based on the value methodology
in use.
In response to changes in these assumptions,
on which the recoverability of goodwill for future profitability is more sensitive, the Company's management recalculated the recoverable
amount of the groups of Cash Generating Units (CGUs) for which the goodwill is monitored, involving the operations of Natura &Co Latam,
Avon International, The Body Shop International and Aesop International. The recoverable amount of these groups of CGUs was determined
based on value in use calculations, consistent with the methods used on December 31, 2021, disclosed in note 18 to the financial statements
on that date.
As a result of this assessment, the
need to recognize impairment losses on goodwill or other assets belonging to the group of CGUs as on that date was not identified. On
September 30, 2022, the Company reviewed the scenario and concluded that there was no change in the scenario assessed on June 30, 2022,
and therefore concluded that a new assessment was not necessary. We will continue to monitor potential indicators of goodwill impairment,
as well as factors that impact the significant assumptions used in the goodwill impairment test for future profitability, as changes in
such assumptions may have a significant effect on the impairment of goodwill.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
Useful life range (in years) |
December 31, 2020 |
Additions |
Write-offs |
Transfers |
Translation adjustment |
September 30, 2021 |
| Cost: |
|
|
|
|
|
|
|
| Software and others |
2,5 to 10 |
2,059,150 |
33,236 |
(28,649) |
164,591 |
101,426 |
2,329,754 |
| Trademarks and patents (defined useful life) |
20 to 25 |
894,578 |
- |
- |
- |
(12,016) |
882,562 |
| Trademarks and patents undefined useful life) |
- |
5,747,057 |
- |
- |
- |
56,691 |
5,803,748 |
| Goodwill Avon |
- |
13,299,849 |
- |
- |
- |
197,305 |
13,497,154 |
| Goodwill Emeis Brazil Pty Ltd. |
- |
142,090 |
- |
- |
- |
(2,896) |
139,194 |
| Goodwill The Body Shop |
- |
1,946,741 |
- |
- |
- |
64,563 |
2,011,304 |
| Goodwill acquisition of The Body Shop stores |
- |
1,456 |
- |
- |
- |
- |
1,456 |
| Relationship with retail clients |
10 |
2,785 |
- |
- |
- |
(2) |
2,783 |
| Key money (undefined useful life) |
- |
26,769 |
- |
- |
- |
(82) |
26,687 |
| Key money (defined useful life) |
3 to 18 |
10,860 |
2,500 |
- |
(5,555) |
8,957 |
16,762 |
| Relationship with franchisees and sub franchisees and sales representatives |
7 to 15 |
2,959,519 |
- |
(444) |
|
28.428 |
2,987,503 |
| Technology developed (by acquired subsidiary) |
5 |
1,595,041 |
- |
- |
- |
(19,907) |
1,575,134 |
| Other intangible assets and intangible under development |
2 to 10 |
108,275 |
181,764 |
(511) |
(72,126) |
(41,030) |
176,372 |
| Total cost |
|
28,794,170 |
217,500 |
(29,604) |
86,910 |
381,437 |
29,450,413 |
| |
|
|
|
|
|
|
|
| Accumulated amortization: |
|
|
|
|
|
|
|
| Software |
|
(1,022,498) |
(275,973) |
27,335 |
3,796 |
(52,966) |
(1,320,306) |
| Trademarks and patents |
|
(100,043) |
(35,052) |
- |
- |
4,484 |
(130,611) |
| Key money |
|
(8,871) |
(185) |
(5,960) |
1,667 |
(455) |
(13,804) |
| Relationship with retail clients |
|
(2,839) |
(214) |
- |
- |
2 |
(3,051) |
| Relationship with franchisees and sub franchisees |
|
(419,061) |
(230,949) |
444 |
- |
(3,065) |
(652,631) |
| Technology developed |
|
(319,009) |
(240,368) |
- |
- |
8,079 |
(551,298) |
| Other intangible assets |
|
(4,721) |
(745) |
511 |
- |
3,495 |
(1,460) |
| Total accrued amortization |
|
(1,877,042) |
(783,486) |
22,330 |
5,463 |
(40,426) |
(2,673,161) |
| Net total |
|
26,917,128 |
(565,986) |
(7,274) |
92,373 |
341,011 |
26,777,252 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 18. | RIGHT-OF-USE AND LEASE LIABILITIES |
| |
Consolidated |
| |
Useful life in Years (a) |
December 31, 2021 |
Additions |
Write-offs |
Translation adjustment |
September 30, 2022 |
| Cost: |
|
|
|
|
|
|
| Vehicles |
3 |
168,062 |
22,238 |
(21,436) |
(11,886) |
156,978 |
| Machinery and equipment |
3 to 10 |
33,629 |
5,555 |
(8,837) |
(5,706) |
24,641 |
| Buildings |
3 to 10 |
1,543,018 |
289,038 |
(143,757) |
(117,794) |
1,570,505 |
| IT equipment |
10 |
31,803 |
1,127 |
(3,970) |
(1,305) |
27,655 |
| Retail stores |
3 to 10 |
3,417,595 |
596,811 |
(281,434) |
(451,952) |
3,281,020 |
| Tools and accessories |
3 |
1,053 |
- |
(396) |
(182) |
475 |
| Total cost |
|
5,195,160 |
914,769 |
(459,830) |
(588,825) |
5,061,274 |
| |
|
|
|
|
|
|
| Depreciation value: |
|
|
|
|
|
|
| Vehicles |
|
(91,509) |
(32,731) |
20,358 |
8,376 |
(95,506) |
| Machinery and equipment |
|
(17,133) |
(6,740) |
8,837 |
2,946 |
(12,090) |
| Buildings |
|
(507,045) |
(221,164) |
115,629 |
66,635 |
(545,945) |
| IT equipment |
|
(24,410) |
(5,024) |
3,968 |
3,016 |
(22,450) |
| Retail stores |
|
(1,458,512) |
(438,675) |
278,640 |
221,569 |
(1,396,978) |
| Tools and accessories |
|
(582) |
(167) |
396 |
107 |
(246) |
| Total accrued depreciation |
|
(2,099,191) |
(704,501) |
427,828 |
302,649 |
(2,073,215) |
| Net total |
|
3,095,969 |
210,268 |
(32,002) |
(286,176) |
2,988,059 |
| |
Consolidated |
| |
Useful life in Years (a) |
December 31, 2020 |
Additions |
Write-offs |
Transfers (b) |
Translation adjustment |
September 30, 2021 |
| Cost: |
|
|
|
|
|
|
|
| Vehicles |
3 |
157,867 |
26,883 |
(22,264) |
- |
(2,195) |
160,291 |
| Machinery and equipment |
3 to 10 |
53,048 |
3,669 |
(22,376) |
- |
589 |
34,930 |
| Buildings |
3 to 10 |
1,616,833 |
176,085 |
(360,386) |
3,082 |
(23,058) |
1,412,556 |
| IT equipment |
10 |
30,000 |
3,527 |
(1,939) |
- |
2,593 |
34,181 |
| Retail stores |
3 to 10 |
3,338,104 |
344,538 |
(419,702) |
3,888 |
45,724 |
3,312,552 |
| Tools and accessories |
3 |
3,187 |
255 |
(2,532) |
- |
119 |
1,029 |
| Total cost |
|
5,199,039 |
554,957 |
(829,199) |
6,970 |
23,772 |
4,955,539 |
| |
|
|
|
|
|
|
|
| Depreciation value: |
|
|
|
|
|
|
|
| Vehicles |
|
(63,422) |
(42,214) |
19,830 |
- |
1,515 |
(84,291) |
| Machinery and equipment |
|
(21,045) |
(9,434) |
13,488 |
- |
126 |
(16,865) |
| Buildings |
|
(399,765) |
(209,593) |
145,082 |
(3,082) |
9,821 |
(457,537) |
| IT equipment |
|
(19,161) |
(6,506) |
1,898 |
- |
(515) |
(24,284) |
| Retail stores |
|
(1,291,346) |
(470,749) |
407,065 |
- |
18,568 |
(1,336,462) |
| Tools and accessories |
|
(2,253) |
(548) |
2,448 |
- |
(88) |
(441) |
| Total accrued depreciation |
|
(1,796,992) |
(739,044) |
589,811 |
(3,082) |
29,427 |
(1,919,880) |
| Net total |
|
3,402,047 |
(184,087) |
(239,388) |
3,888 |
53,199 |
3,035,659 |
| a) | The useful lives applied refer to the term of the contracts in which the Company is sure that it will
use the assets underlying the lease contracts according to the contractual terms. |
| b) | Refers to key money related to store rentals. This amount is transferred from “right
of use” to "intangible assets” when a new commercial agreement with the lessor is not yet signed. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
Consolidated |
| |
September 30,
2022 |
September 30,
2021 |
| Amounts recognized in the statement of income for the nine-month period ended September 30, 2022 and 2021: |
|
|
| Financial expense on lease |
143,205 |
151,310 |
| Amortization of right of use |
704,501 |
739,044 |
| Appropriation in the result of variable lease installments not included in the measurement of lease liabilities |
45,524 |
45,816 |
| Sublease revenue |
(18,930) |
(22,850) |
| Short-term lease expenses and low-value assets |
60,514 |
62,116 |
| Benefits granted by lessor related to Covid-19 |
(14,565) |
(59,576) |
| Other lease-related expenses |
45,586 |
42,815 |
| Adjustment to recoverable value of right-of-use assets - impairment |
356 |
- |
| Total |
966,191 |
958,675 |
| |
|
|
| Amounts recognized in the financing activities in the cash flow statement: |
|
|
| Lease payments (principal) |
820,859 |
850,424 |
| Amounts recognized in the operating activities in the cash flow statement: |
|
|
| Lease payments (interest) |
85,994 |
159,803 |
| Variable lease payments, not included in the measurement of lease liabilities |
46,104 |
28,888 |
| Short-term and low-value assets lease payments |
50,127 |
52,582 |
| Other lease-related payments |
71,812 |
67,856 |
| Total |
1,074,896 |
1,159,553 |
| |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
| Current |
854,716 |
1,005,523 |
| Non-current |
2,440,012 |
2,542,339 |
| Total |
3,294,728 |
3,547,862 |
Below are the changes in lease liability balances for the
nine-month period ended September 30, 2022 and 2021:
| |
Consolidated |
| Balance as of December 31, 2020 |
3,858,455 |
| New contracts and modifications |
518,834 |
| Payments (principal) |
(850,424) |
| Payments (interest) |
(159,803) |
| Appropriation of financial charges |
151,310 |
| Write-offs (a) |
(90,434) |
| Translation adjustment |
67,857 |
| Balance as of September 30, 2021 |
3,495,795 |
| |
|
| Balance as of December 31, 2021 |
3,547,862 |
| New agreements and modifications |
882,521 |
| Payments (principal amount) |
(820,859) |
| Payments (interest) |
(85,994) |
| Appropriation of financial charges |
143,205 |
| Write-offs (a) |
(1,054) |
| Translation adjustment |
(370,953) |
| Balance as of September 30, 2022 |
3,294,728 |
| |
|
| a) | Mainly related to termination of agreements related to lease
of stores. |
The amount
of lease liability payments, including interest payments due to maturity, is as follows:
| |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
| Less than a year |
1,040,919 |
1,154,697 |
| One to five years |
2,066,239 |
2,086,269 |
| More than five years |
852,049 |
829,511 |
| Total expected cash flow |
3,959,207 |
4,070,477 |
| Interest to be incurred |
(664,479) |
(522,615) |
| Total balance |
3,294,728 |
3,547,862 |
| 19. | BORROWING, FINANCING AND DEBENTURES |
| |
Ref. |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
| Local currency: |
|
|
|
| Financing Agency for Studies and Projects FINEP |
|
24,251 |
44,193 |
| Debentures |
A |
1,768,376 |
1,922,732 |
| Promissory Notes |
B |
501,009 |
- |
| Working capital – The Body Shop Operation |
C |
426,367 |
526,743 |
| Working capital – Avon |
|
13,433 |
164,491 |
| Working Capital - Natura &Co Luxembourg operation |
D |
810,990 |
- |
| Notes – Avon (1) |
E |
1,471,084 |
4,255,958 |
| Notes – Natura &Co Luxembourg |
F |
3,277,964 |
- |
| Total in local currency |
|
8,293,474 |
6,914,117 |
| |
|
|
|
| Foreign currency: |
|
|
|
| Representative debt securities (“Notes”) |
G |
5,414,536 |
5,523,287 |
| Resolution nº 4131/62 |
|
- |
279,428 |
| Total in foreign currency |
|
5,414,536 |
5,802,715 |
| Grand total |
|
13,708,010 |
12,716,832 |
| |
|
|
|
| Current |
|
429,265 |
945,069 |
| Non-current |
|
13,278,745 |
11,771,763 |
| |
|
|
|
| Debentures |
|
|
|
| Current |
|
33,124 |
350,145 |
| Non-current |
|
1,735,252 |
1,572,587 |
| (1) | Balances recognized at fair value in the business combination with subsidiary Avon and subsequently measured at amortized cost. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Reference |
Currency |
Maturity |
Charges |
Effective interest rate |
Guarantees |
| A |
Brazilian Real |
By August 2024 |
Interest of 1.00% + CDI 1.15% + CDI and 1.65% + CDI, with maturity dates in August 2024 and July 2027. |
CDI + 1.0%,
CDI + 1.15%, CDI +1.65%
|
None |
| B |
Brazilian Real |
September 2025 |
Interest of 1.55% + CDI, with maturity date in September 2025. |
CDI +1.55% |
None |
| C |
Pounds |
April 2024 |
Sonia + interest of 2.9% p.a. |
Sonia + interest 2.9% p.a. |
“Corporate” guarantee from the subsidiary Natura Cosméticos until December 2021 and “Aval” guarantee from Natura &Co from January 2022. |
| D |
US Dollar |
By October 2024 |
Sonia + 1.65% p.a. |
Sonia 1.65% p.a. |
Guarantee Natura &Co and Natura Cosméticos |
| E |
US Dollar |
March 2023 and March 2043 |
Interest of 6.45% p.a. and 8.45% p.a. |
Interest of 6.45% of p.a. and 8.45% of p.a. |
None |
| F |
US Dollar |
April 2029 |
Interest of 6.00% p.a. |
Interest of 6.125% p.a. |
Guarantee Natura &Co Holding and Natura Cosméticos |
| G |
US Dollar |
May 2028 |
Interest of 4.125% p.a. |
5.79% |
Guarantee Natura &Co Holding. |
Changes in the balances of borrowing, financing and debentures
for the nine-month period ended September 30, 2022 and 2021 are as follows:
| |
Parent |
Consolidated |
| Balance as of December 31, 2020 |
515,966 |
13,822,913 |
| New borrowing and financing (a) |
- |
6,323,642 |
| Repayment (b) |
(497,879) |
(7,609,157) |
| Appropriation of financial charges and funding costs |
7,918 |
481,861 |
| Financial charges payment |
(26,005) |
(657,049) |
| Exchange rate variation |
- |
130,756 |
| Translation adjustment |
- |
200,855 |
| Balance as of September 30, 2021 |
- |
12,693,821 |
| |
|
|
| Balance as of December 31, 2021 |
- |
12,716,832 |
| New borrowing and financing (c) |
- |
6,051,116 |
| Repayment d) |
- |
(4,591,262) |
| Appropriation of financial charges and funding costs |
- |
532,028 |
| Financial charges payment |
- |
(573,042) |
| Exchange rate variation |
- |
(207,821) |
| Translation adjustment |
- |
(219,841) |
| Balance as of September 30, 2022 |
- |
13,708,010 |
| a) | The fundraising carried out within the nine-month period ended September 30, 2021 basically refer to the
offer carried out by subsidiary Natura Cosméticos S.A. of the notes liked to the sustainability goals in the approximate amount
of US$ 1 billion and the new credit facility in the amount of up to £100 million (one hundred million pounds) obtained by subsidiary
The Body Shop. |
| b) | The amortization carried out in the nine-month period ended September 30, 2021 mainly refer to the early
redemption of debt securities of subsidiary Natura Cosméticos S.A. (“Notes”) in the amount of US$750,000, carried out
in May 2021. |
| c) | Funds raised in the nine-month period ended September 30, 2022 refer basically to: (i) utilization of
a revolving credit facility in the principal amount of up to US$ 625.0 million by the subsidiary Natura &Co Luxembourg; (ii) issuance
of debt securities by the subsidiary Natura &Co Luxembourg maturing on April 19, 2029 in the principal amount of US$600 million (approximately
R$2,809 million), subject to interest of 6.125% per year, which are guaranteed by Natura &Co and by the subsidiary Natura Cosméticos
S.A.. The funds are intended to refinance certain short and medium-term debts of the Company, including the redemption of the senior notes
due in March 2023 issued by the subsidiary Avon, and (iii) issuance of promissory notes by the subsidiary Natura Cosméticos in
the amount of R$500.0 million due in 2025. |
| d) | The amortizations made in the nine-month period ended September 30, 2022 refer mainly to the early redemption of debt securities of
the subsidiary Avon ("Notes"). |
Issuance of debentures
by the subsidiary Natura Cosméticos S.A.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The subsidiary Natura Cosméticos
S.A. celebrated its 11th issue of debentures in July 2022, where 826,030 simple, non-convertible debentures were issued, all nominative
and book-entry, without issuance of certificates or certificates, with a unit par value of R$ 1 (one thousand reais), totaling R$ 826,030
with the maturity on July 21, 2027. The debentures earn interest corresponding to 100% (one hundred percent) of the accumulated variation
of the average daily rates of Interbank Deposits (“DI”) of one day, "over extragroup", plus spread or surcharge
equivalent to 1.65% per year.
The subsidiary Natura Cosméticos
carried out the optional acquisition and the respective cancellation of (i) 16,280 debentures of the third series of the 9th (ninth) issue
and (ii) 66,323 debentures of the 10th (tenth) issue of the subsidiary of simple debentures, not convertible into shares, of the unsecured
type; acquired on July 25 and 26, 2022 at their respective updated nominal values, with all the funds raised within the scope of the 11th
issue of debentures.
The maturities of non-current portion of borrowing, financing
and debentures liabilities are as follows:
| |
Consolidated |
| |
September 30, 2022 |
December 31, 2021 |
| 2023 |
- |
2,812,260 |
| 2024 |
1,132,876 |
2,249,609 |
| 2025 onwards |
12,145,869 |
6,709,894 |
| Total |
13,278,745 |
11,771,763 |
The contractual covenants associated
with the debt contracts of the Company establish the maintenance of minimum financial indicators resulting from the ratio of the division
of the net treasury debt by the EBITDA of the last 12 months, as well as non-financial indicators according to each contract. As of September
30, 2022 and December 31, 2021, the Company was in compliance with such covenants.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 20. | TRADE ACCOUNTS PAYABLE AND REVERSE FACTORING OPERATIONS |
| |
Parent |
Consolidated |
| |
September 30,
2022 |
December 31,
2021 |
September 30,
2022 |
December 31, 2021 |
| Domestic trade accounts payable |
1,455 |
3,537 |
4,763,030 |
5,248,462 |
| Foreign trade accounts payable (a) |
10,190 |
2,151 |
847,847 |
1,104,189 |
| Subtotal |
11,645 |
5,688 |
5,610,877 |
6,352,651 |
| Reverse factoring operations (b) |
- |
- |
374,043 |
417,928 |
| Total |
11,645 |
5,688 |
5,984,920 |
6,770,579 |
| a) | Refers to imports mainly denominated in US dollars, Euros and British pounds. |
| b) | The Company has contracts signed with Banco Itaú Unibanco S.A. to directly structure a reverse
factoring operation with the Company’s main suppliers. |
| |
Parent |
Consolidated |
| |
September 30, 2022 |
December 31,
2021 |
September 30, 2022 |
December 31,
2021 |
| ICMS (ordinary) |
- |
- |
130,750 |
150,396 |
| ICMS-ST provision (a) |
- |
- |
60,213 |
58,188 |
| Taxes on invoicing abroad |
- |
- |
276,047 |
340,648 |
| Withholding tax (IRRF) |
- |
- |
126,835 |
148,081 |
| Other taxes payable - foreign subsidiaries |
- |
- |
127,593 |
138,461 |
| Income tax |
- |
446 |
16,071 |
7,062 |
| PIS and COFINS payable |
412 |
144 |
412 |
144 |
| INSS and service tax (ISS) payable |
112 |
64 |
39,873 |
29,359 |
| Other |
62 |
- |
14,890 |
8,888 |
| Total |
586 |
654 |
792,684 |
881,227 |
| |
|
|
|
|
| Current |
586 |
654 |
676,183 |
766,430 |
| Non-current |
- |
- |
116,501 |
114,797 |
| a) | The Company has discussions about the illegality of changes in state laws to charge ICMS-ST. Part of the
amount recorded as tax payable but not yet paid is being discussed in court by the Company, and in some cases, the amounts are deposited
in court, as mentioned in Note 12. |
| 22. | PROVISION FOR TAX, CIVIL AND LABOR RISKS |
The Company is involved in certain
legal issues arising in the normal course of its business, which include civil, tax, social security, labor, business and other proceedings.
The Company’s Management believes
that, based on the elements existing on the base date of these financial statements, the provision for tax, civil, labor, commercial and
other risks is sufficient to cover possible losses on administrative and legal proceedings, as shown below.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
22.1
Contingencies assessed as probable risk of loss
| |
Consolidated |
| |
Tax |
Civil |
Labor |
Contingent liabilities (business combination) |
Total |
| |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
| |
|
|
|
|
|
|
|
|
|
|
Balance as of
January 1 |
862,092 |
931,771 |
305,690 |
219,373 |
233,474 |
251,339 |
597,585 |
797,693 |
1,998,841 |
2,200,176 |
| Additions |
142,851 |
82,193 |
206,470 |
102,159 |
73,916 |
60,585 |
- |
1,587 |
423,237 |
246,524 |
| Reversals (1) |
(47,783) |
(77,240) |
(12,060) |
(17,817) |
(24,963) |
(23,365) |
(193,497) |
(153,187) |
(278,303) |
(271,609) |
| Payments |
(35,062) |
(9,537) |
(126,809) |
(46,674) |
(48,242) |
(32,656) |
- |
- |
(210,113) |
(88,867) |
| Inflation adjustment |
33,067 |
5,669 |
16,410 |
677 |
4,569 |
5,959 |
13,022 |
26,889 |
67,068 |
39,194 |
| Translation adjustment |
(118,541) |
(22,611) |
3,574 |
140,773 |
(26,053) |
2,530 |
(8,763) |
(9,179) |
(149,783) |
111,513 |
| Transfers (2) |
(6,473) |
(12,439) |
(965) |
12,976 |
- |
(1,270) |
- |
- |
(7,438) |
(733) |
Balance as of
September 30 |
830,151 |
897,806 |
392,310 |
411,467 |
212,701 |
263,122 |
408,347 |
663,803 |
1,843,509 |
2,236,198 |
| |
|
|
|
|
|
|
|
|
|
|
| Current |
51,545 |
- |
258,048 |
- |
11,559 |
- |
- |
- |
321,152 |
65,616 |
| Non-current |
778,606 |
- |
134.262 |
- |
201,142 |
- |
408,347 |
- |
1,522,357 |
1,886,772 |
The changes
in the provision for tax, civil and labor risks and contingent liabilities are presented below:
(1) Reversals
of contingent liabilities (business combination) refer mainly to the adhesion to state tax amnesty programs, and change in estimates for
civil and labor lawsuits, which took place in the first and third quarter of 2022.
(2) The
business combination amounts as of September 30, 2022, are segregated between tax (R$378,136), civil (R$9,732) and labor (R$20,479) proceedings.
| a) | Disputes related to talc (Civil) |
The
subsidiary Avon International was named a defendant (along with other manufacturers of cosmetics and other products that, unlike those
marketed by Avon, were designed with asbestos) in personal injury lawsuits brought in the US courts. As of September 30, 2022, there were
211 individual cases pending against Avon International and during the nine-month period ended September 30, 2022, 89 new cases were started
and 28 were closed or settled. The value of the settlements was not material, individually or in the aggregate, for the operating results
of the Company or the subsidiary Avon International.
| b) | Adherence to state tax amnesty programs |
During
the first and third quarter of 2022, the Company adhere the tax amnesty programs of the states of Ceará, Paraná and Amazonas,
where exposure arising from existing judicial discussions were reduced by obtaining discounts for payment with the respective tax authorities.
As a result of this adhesion, contingent liabilities recognized in the context of the business combination with Avon were extinguished
with the respective tax authorities, and the excess of provision in relation to the amounts due was reversed in the total amount of R$
86,979.
Other contingent
liabilities associated with these amnesties that had not been recognized because they were not part of balances arising from business
combinations were recognized in the accounts to the extent of the amounts due, in the net amount of R$20,492. The adhesion to the tax
amnesty processes terminated legal disputes in the amount of approximately R$ 123,266, which had probability of loss considered as possible
by the Company's Management.
22.2.
Contingencies assessed as possible risk of loss
The Company
has administrative and judicial contingencies for which the expectation of loss, evaluated by Company Management and supported by its
legal advisors, is classified as possible and, therefore, no provision has been recorded. As of September 30, 2022, the contingencies
classified as possible loss totaled R$ 8,451,029 (R$ 10,913,858 as of December 31, 2021).
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
Consolidated |
| |
September 30, 2022 |
December 31,
2021 |
| Tax |
8,105,836 |
9,884,541 |
| Civil |
167,079 |
128,479 |
| Labor |
179,041 |
180,838 |
| Total contingent liabilities |
8,451,956 |
10,193,858 |
On July 5,
2022, the National Congress overrode veto nº 58 of the President of the Republic, as a result, the law project nº 2110/19 was
converted into Law nº 14,395/2022 to interpret that "plaza" corresponds to "municipality" for the purposes of
defining the minimum taxable amount for calculating the IPI. Therefore, based on the opinion of the Company's legal advisors, the tax
assessment notices issued by the Federal Revenue Service of Brazil that require IPI tax debts, due to the alleged failure to observe the
minimum calculation basis, in the case of sales operations aimed at interdependent wholesale establishments, previously classified as
possible risk of loss, were reclassified to remote. As of September 30, 2022, the total amount under discussion reclassified as remote
loss is R$ 2,472,645 (R$ 2,009,562 as of December 31, 2021).
22.3
Recognition of assets previously assessed as contingent
In
June 2022, the subsidiary Avon concluded the negotiation of a settlement agreement to resolve a breach of contract dispute in Japan. As
a result, Avon received cash compensation in the amount of R$136,200, of which R$16,762 is related to settlement of historically recognized
revenues, and the remaining of R$119,438 recognized as other operating income in the nine-month period ended on September 30, 2022. See
explanatory note 30.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| |
Parent |
Consolidated |
| |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
December 31, 2021 |
| |
|
|
|
|
| Pension and post-employment health care plans(a) |
- |
- |
663,852 |
673,458 |
| Deferred revenue from performance obligations with customers (b) |
- |
- |
325,485 |
393,046 |
| Provision for incentives to consultants |
- |
- |
200,890 |
286,791 |
| Provision for operating expenses (marketing / technology, etc.) (c) |
- |
- |
603,664 |
601,841 |
| Provision for store renovation |
- |
- |
106,701 |
105,165 |
| Crer Para Ver (d) |
- |
- |
90,429 |
90,655 |
| Provisions for rentals (e) |
- |
- |
9,443 |
55,500 |
| Provision for restructuring (f) |
26,948 |
- |
165,237 |
103,760 |
| Long-term incentives (g) |
5,498 |
- |
10,974 |
6,302 |
| Insurance payables |
- |
- |
76,565 |
127,413 |
| Other Liabilities(h) |
1,015 |
1,222 |
135,533 |
214,635 |
| Total |
33,461 |
1,222 |
2,388,773 |
2,658,566 |
| |
|
|
|
|
| Current |
24,047 |
509 |
1,468,513 |
1,716,110 |
| Non-current |
9,414 |
713 |
920,260 |
942,456 |
| a) | As of September 30, 2022, there is R$ 419.190 (R$ 445,804 as of December 31, 2021) referring to pension
plans, and R$36.092 referring to post-employment plans (R$ 34,774 as of December 31, 2021) of subsidiary Avon, and R$ 133.567 (R$124,649
as of December 31, 2021) referring to post-employment assistance plans of the subsidiary Natura Cosméticos and R$ 75.003 (R$ 68,230
as of December 31, 2021) referring to post-employment assistance plans of the subsidiary Natura &Co International. |
| b) | Refers to the deferral of revenue from performance obligations related to loyalty programs based on points,
sale of gift cards not yet converted into products and programs and events to honor direct sales consultants, of which R$ 225.563 (R$
235,308 as of December 31, 2021) is referring to subsidiary Avon, R$ 80.814 (R$ 121,341 as of December 31, 2021) referring to the consolidated
subsidiary Natura Cosméticos and R$ 19.108 (R$ 36,397 as of December 31, 2021) referring to subsidiary Natura &Co International. |
| c) | Refers to the Company's operating provisions arising mainly from expenses with the provision of technology,
marketing and advertising services. |
| d) | Contribution of the social program to the development of the quality of education. |
| e) | Refers to the (grace period) granted by the lessors to start paying the rent of certain retail stores,
for the lease agreements that were not included in the initial measurement of the lease liability / right of use of subsidiary The Body
Shop, in accordance with the exceptions allowed by CPC 06 (R2) / IFRS 16. |
| f) | Provision for costs directly related to the integration plan and changes in the organizational structure
substantially of the subsidiary Avon. |
| g) | Substantially refers to the variable compensation plans of the subsidiary Avon's executives. |
| h) | Refers to miscellaneous provisions such as indemnities and non-current contractual obligations. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
On September 30, the item “Treasury
shares” has the following composition:
| |
Number of shares |
R$ (in thousands) |
Average price per share - R$ |
| Balance as of December 31, 2020 |
316,701 |
11,667 |
38.04 |
| Used |
(754,719) |
(34,438) |
45.63 |
| Acquired |
631,358 |
32,091 |
50.83 |
| Balance as of September 30, 2021 |
193,340 |
9,320 |
48.21 |
| |
|
|
|
| Balance as of December 31, 2021 |
4,899,540 |
151,342 |
30.89 |
| Used |
(377,585) |
(9,282) |
24.58 |
| Acquired |
5,391,900 |
120,300 |
22.31 |
| Balance as of September 30, 2022 |
9,913,855 |
262,360 |
26.46 |
The minimum and maximum cost of the
balance of treasury shares on September 30, 2022 are R$ 21.11 and R$ 24.07, respectively.
As of December 30, 2021, dividends
were proposed for the year ended December 31, 2021 in the amount of R$ 180,772, equivalent to the remuneration of R$0.1315 per share based
on earnings in the period. According to the Company’s bylaws and the article 197 of law no. 6,604/76 the amount of R$ 133,616 referring
to the portion of minimum mandatory dividends exceeding the realized net income for the year was submitted for approval in the Annual
General Meeting held in April 2022 and was classified as unrealized profit reserve.
| 24.3 | Reclassification of effects between equity accounts |
As of January 1, and December 31, 2021,
the balance referring to predecessor adjustment presented in goodwill on the issuance/sale of shares in capital reserve in the statement
of change in equity was reclassified to special reserve in capital reserve, also a component of the Company's equity, for a better consolidated
presentation of this impact in this statement. This reclassification in the amount of R$ 303,059 does not have any effect on the equity
and financial position presented by the Company in these periods.
As of January 1, 2021, the balances
referring to the effects of the conversion of balance sheets of subsidiaries in hyperinflationary economies presented in retained earnings
in earnings reserve in the statement of changes in equity were reclassified to Other comprehensive income, also a component of the Company's
equity, for a better consolidated presentation of these impacts in this statement. This reclassification in the amount of R$ 202,677 does
not have any effect on the equity and financial position presented by the Company in that period.
During the nine-month period ended
September 30, 2022, the balance referring to the effects of the conversion of balance sheets of subsidiaries in hyperinflationary economies
presented in capital reserves (goodwill reserve on the issuance/sale of shares and additional paid-in capital) and in profit reserves
(retained earnings) in the statement of changes in equity was reclassified to other comprehensive income, also a component of the Company's
equity, for a better consolidated presentation of these impacts in this statement. This reclassification in the amount of R$ 193,261 does
not have any effect on the equity and financial position presented by the Company in this period.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 25. | INFORMATION ON SEGMENTS |
There was no change in the composition
of the operating segments and information by geographic area in relation to that disclosed in the financial statements for the year ended
December 31, 2021.
Net revenue by segment is as follows
for the nine-month period ended September 30, 2022:
| Ø | Natura &Co Latam – 61.9% |
| Ø | Avon International – 19.8% |
The following tables summarize the
financial information related to the nine-month period ended September 30, 2022 and 2021 and the year ended December 31, 2021:
| |
September 30, 2022 |
| |
Reconciliation to net income (loss) for the period |
| |
Net
Revenue
|
Performance assessed by the company |
Depreciation and
amortization
|
Discontinued operations |
Financial
income
|
Financial
expense
|
Income
tax
|
Net income
(loss)
|
| Natura &Co Latam |
16,084,095 |
1,486,418 |
(659,802) |
- |
2,626,501 |
(3,663,553) |
(33,571) |
(244,007) |
| Avon International 1 |
5,133,340 |
149,134 |
(507,849) |
(181,192) |
652,084 |
(1,099,743) |
(42,913) |
(1,030,479) |
| The Body Shop 1 |
2,902,874 |
120,735 |
(511,349) |
- |
113,300 |
(166,038) |
95,712 |
(347,640) |
| Aesop International 1 |
1,839,130 |
304,881 |
(222,214) |
- |
59,047 |
(95,569) |
(17,417) |
28,728 |
| Corporate expenses |
- |
(465,261) |
(40) |
- |
740,550 |
(543,880) |
(106,587) |
(375,218) |
| Consolidated |
25,959,439 |
1,595,907 |
(1,901,254) |
(181,192) |
4,191,482 |
(5,568,783) |
(104,776) |
(1,968,616) |
| |
September 30, 2021 |
| |
Reconciliation to net income (loss) for the period |
| |
Net
Revenue
|
Performance assessed by the company |
Depreciation and
amortization
|
Discontinued operations |
Financial
income
|
Financial
expense
|
Income
tax
|
Net income
(loss)
|
| Natura &Co Latam |
16,271,104 |
1,853,610 |
(638,504) |
- |
2,745,357 |
(3,236,076) |
(103,744) |
620,643 |
| Avon International 1 |
6,621,199 |
23,967 |
(635,225) |
(30,932) |
310,631 |
(448,591) |
121,522 |
(658,628) |
| The Body Shop 1 |
3,927,882 |
601,931 |
(571,614) |
- |
27,930 |
(90,800) |
(189,966) |
(222,519) |
| Aesop International 1 |
1,701,279 |
382,520 |
(214,298) |
- |
11,334 |
(37,549) |
(43,049) |
98,958 |
| Corporate expenses |
- |
(449,069) |
- |
- |
43,713 |
(52,371) |
964,567 |
506,836 |
| Consolidated |
28,521,464 |
2,412,959 |
(2,059,641) |
(30,932) |
3,138,965 |
(3,865,387) |
749,330 |
345,290 |
| |
September
30, 2022 |
December
31, 2021 |
| |
Non-current
assets |
Total
assets |
Current
liabilities |
Non-current
liabilities |
Non-current
assets |
Total
assets |
Current
liabilities |
Non-current
liabilities |
| Natura &Co
Latam |
17,746,678 |
29,499,856 |
7,961,649 |
10,072,157 |
18,060,879 |
29,580,551 |
7,462,550 |
8,794,843 |
| Avon International
1 |
12,054,821 |
14,618,554 |
1,979,080 |
2,197,393 |
14,286,498 |
17,512,750 |
2,783,907 |
5,100,109 |
| The Body
Shop 1 |
6,441,728 |
7,985,630 |
1,333,621 |
1,843,070 |
8,166,363 |
10,813,064 |
1,690,622 |
2,485,200 |
| Aesop International
1 |
1,609,552 |
2,396,779 |
540,030 |
756,854 |
1,520,514 |
2,542,125 |
610,451 |
648,695 |
| Corporate
expenses |
962,773 |
- |
489,199 |
4,325,400 |
964,359 |
- |
1,146,347 |
1,159,041 |
| Consolidated |
38,815,552 |
54,500,819 |
12,303,579 |
19,194,874 |
42,998,613 |
60,448,490 |
13,693,877 |
18,187,888 |
1 The operations of these segments located in
Latin American countries (Latam) are presented in the Natura &Co Latam segment.
| 25.2 | Net revenue and non-current assets by geographic region |
| |
Net revenue |
Non-current assets |
September 30,
2022 |
September 30,
2021 |
September 30,
2022 |
December 31,
2021 |
| Asia |
2,463,460 |
2,632,429 |
1,166,214 |
1,216,942 |
| North America |
4,108,622 |
4,501,868 |
6,474,831 |
6,459,026 |
| Mexico |
2,633,802 |
2,914,665 |
3,698,660 |
3,640,644 |
| Other |
1,474,820 |
1,587,204 |
2,776,171 |
2,818,382 |
| South America |
12,735,824 |
12,564,682 |
13,952,383 |
14,250,548 |
| Brazil |
7,941,767 |
7,574,369 |
12,094,548 |
11,953,325 |
| Argentina |
2,383,295 |
2,049,476 |
730,240 |
1,036,205 |
| Other |
2,410,761 |
2,940,837 |
1,127,596 |
1,261,018 |
| Europe, Middle East and Africa (EMEA) |
6,029,682 |
8,298,193 |
15,614,830 |
19,276,178 |
| United Kingdom |
1,950,245 |
3,060,763 |
9,530,164 |
12,162,597 |
| Other |
4,079,437 |
5,237,430 |
6,084,665 |
7,113,581 |
| Oceania |
621,851 |
524,292 |
1,607,294 |
1,795,919 |
| Consolidated |
25,959,439 |
28,521,464 |
38,815,552 |
42,998,613 |
No individual or aggregate customer
(economic group) represents more than 10% of the Company’s net revenue.
| |
Consolidated |
| Gross revenue: |
September 30,
2022 |
September 30,
2021 |
| Direct Selling |
25,421,369 |
26,975,861 |
| Retail |
3,865,520 |
4,865,886 |
| Online |
2,042,483 |
1,953,417 |
| Other sales |
2,277,638 |
2,494,839 |
| Subtotal |
33,607,010 |
36,290,003 |
| |
|
|
| Returns and cancellations |
(428,411) |
(421,889) |
| Commercial discounts and rebates |
(718,269) |
(740,461) |
| Taxes on sales |
(6,500,891) |
(6,606,189) |
| Subtotal |
(7,647,571) |
(7,768,539) |
| Total net revenue |
25,959,439 |
28,521,464 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| 27. | OPERATING EXPENSES AND COST OF SALES |
| |
Parent |
Consolidated |
| Classified by function |
September 30,
2022 |
September 30,
2021 |
September 30,
2022 |
September 30,
2021 |
| Cost of sales |
- |
- |
9,392,089 |
9,953,824 |
| Selling, marketing and logistics expenses |
- |
- |
11,360,431 |
12,120,851 |
| Administrative, R&D, IT, and project expenses |
252,861 |
96,945 |
4,818,006 |
5,234,795 |
| Total |
252,861 |
96,945 |
25,570,526 |
27,309,470 |
| |
|
|
|
|
| Classified by nature |
|
|
|
|
| Cost of sales |
- |
- |
9,392,089 |
9,953,824 |
| Raw material/packaging material/resale |
- |
- |
8,509,593 |
8,987,747 |
| Employee benefits expense (note 28) |
- |
- |
415,418 |
421,890 |
| Depreciation and amortization |
- |
- |
133,380 |
170,768 |
| Other |
- |
- |
333,698 |
373,419 |
| |
|
|
|
|
| Selling, marketing and logistics expenses |
- |
- |
11,360,431 |
12,120,851 |
| Logistics costs |
- |
- |
1,719,444 |
1,929,901 |
| Personnel expenses (note 28) |
- |
- |
3,243,578 |
3,346,570 |
| Marketing, sales force and other selling expenses |
- |
- |
5,437,230 |
5,853,846 |
| Depreciation and amortization |
- |
- |
960,179 |
990,534 |
| Impairment |
- |
|
- |
|
| |
|
|
|
|
| Administrative, R&D, IT and project expenses |
252,861 |
96,945 |
4,818,006 |
5,234,795 |
| Innovation expenses |
- |
- |
150,111 |
190,812 |
| Personnel expenses (note 28) |
48,019 |
84,005 |
1,909,014 |
2,245,682 |
| Restructuring expenses |
125,933 |
- |
128,993 |
- |
| Other administrative expenses |
77,826 |
12,820 |
1,822,193 |
1,907,912 |
| Depreciation and amortization |
1,083 |
120 |
807,695 |
890,389 |
| |
|
|
|
|
| Total |
252,861 |
96,945 |
25,570,526 |
27,309,470 |
| |
Parent |
Consolidated |
| |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
| Payroll, profit sharing and bonuses |
31,289 |
20.111 |
4,113,902 |
4,388,799 |
| Pension Plan |
- |
- |
190,760 |
186,157 |
| Share-based payments and charges on restricted shares, net of tax |
3,924 |
54,486 |
82,730 |
236,093 |
| Health care, food and other benefits |
2,602 |
1,216 |
519,332 |
524,765 |
| Charges, taxes and social contributions |
1,194 |
1,632 |
505,600 |
528,851 |
| INSS |
9,010 |
6,560 |
155,686 |
149,477 |
| Total |
48,019 |
84,005 |
5,568,010 |
6,014,142 |
Information regarding share-based payments
was presented in the Company's financial statements for the year ended December 31, 2021, in note 29.
The (income) / expense related to stock
options, restricted shares and performance shares, including social security charges, recognized in the nine-month period ended September
30, 2022, was R$ 16,424 and R$ 120,308 for parent company and consolidated level (R$36,176 and R$205,030 as of September 30, 2021), respectively.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
During the period ended on September
30, 2022, there was an expense related to purchase options, restricted shares and performance shares in the total amount of R$84,748,
which is recorded under restructuring expenses in the group of Administrative, R&D, IT and projects.
In April 2022, 2,295,698 restricted
shares and 6,485,063 performance shares were granted under the “Co-Investment Plan” and the “Long-Term Incentive Plan”.
These awards will be settled in Company shares. The amount of premiums and fair values in this note are presented using B3 equivalents
to ensure consistency, although some premiums are settled in the Company's American Depositary Receipts.
The restricted shares have grant date
fair values of R$24.91 to $R24.99 and vest in three tranches over 1 to 3 years, subject to the participants remaining in employment over
the vesting period.
The performance shares have grant date
fair values of R$18.66 to R$24.99 and vest at the end of a 3-year period, subject to the participants remaining in employment and certain
performance conditions being met. The number of performance shares is disclosed assuming achievement of performance conditions at target,
whereas the (income) / expense recognized reflects the latest reassessment of the number of awards expected to vest.
| 29. | FINANCE INCOME (EXPENSES) |
| |
Parent |
Consolidated |
| |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
| FINANCE INCOME: |
|
|
|
|
| Interest on short-term investments |
14,071 |
15,759 |
330,376 |
199,149 |
| Gains on monetary and exchange rate variations |
12,556 |
3,640 |
2,143,308 |
1,452,753 |
| Gains on swap and forward transactions |
- |
- |
1,530,217 |
1,385,452 |
| Gains on swap and forward derivatives mark to market |
- |
- |
13,398 |
12,308 |
| Reversal of the monetary correction of the provision for tax risks and tax liabilities |
3,353 |
- |
3,353 |
- |
| Hyperinflationary economy adjustment (Argentina and Turkey) |
- |
- |
121,103 |
58,070 |
| Other finance income |
15,358 |
11,382 |
49.727 |
31,233 |
| Subtotal |
45,338 |
30,781 |
4,191,482 |
3,138,965 |
| |
|
|
|
|
| FINANCE EXPENSES: |
|
|
|
|
| Interest on financing |
- |
(7,918) |
(519,111) |
(481,861) |
| Interest on leases |
(20) |
- |
(143,205) |
(151,310) |
| Losses from monetary and exchange rate variations |
(7,108) |
(333) |
(2,243,756) |
(1,566,810) |
| Losses on swap and forward transactions |
(5,266) |
- |
(2,054,518) |
(1,149,871) |
| Losses on swap and forward derivatives mark to market |
- |
- |
(16,978) |
(20,182) |
| Adjustment of provision for tax, civil and labor risks and tax liabilities |
- |
- |
(70,421) |
(51,057) |
| Appropriation of funding costs (debentures and notes) |
- |
- |
(12,917) |
(22,872) |
| Interest on pension plan |
- |
- |
(2,878) |
(7,334) |
| Hyperinflationary economy adjustment (Argentina and Turkey) |
- |
- |
(258.585) |
(65,133) |
| Other finance expenses |
(33,838) |
(12,113) |
(246,414) |
(348,957) |
| Subtotal |
(46,232) |
(20,364) |
(5,568,783) |
(3,865,387) |
| Finance income (expenses), net |
(894) |
10,417 |
(1,377,301) |
(726,422) |
| |
|
|
|
|
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The breakdown set forth below is intended
to better explain the results of the foreign exchange hedging transactions contracted by the Company as well as its related items recorded
in the financial income (expenses) and shown in the previous table:
| |
Controladora |
Consolidado |
| |
30/09/2022 |
30/09/2021 |
30/09/2022 |
30/09/2021 |
| Financial expenses (debt interest) |
- |
(7,918) |
(519,111) |
(481,861) |
| Financial investments and others income |
14,071 |
15,759 |
330,376 |
199,149 |
| Exchange variations on financial activities, net |
- |
- |
207,821 |
(102,069) |
| Gains (losses) with derivatives on exchange rate variations on financial activities, net |
- |
- |
(212,874) |
121,036 |
| Gains (losses) on derivatives on interest payments and other financial activities, net |
(5,266) |
- |
(311,427) |
114,545 |
| Adjustment of provision for tax, civil and labor risks and tax liabilities |
3,353 |
- |
(67,068) |
(51,057) |
| Leases expenses |
(20) |
- |
(143,205) |
(151,310) |
| Other financial expenses |
(18,480) |
(731) |
(216,062) |
(355,804) |
| Other gains (losses) from hyperinflation and exchange rate variation on operating activities |
5,448 |
3,307 |
(445,751) |
(19,051) |
| Net financial income (expenses) |
(894) |
10,417 |
(1,377,301) |
(726,422) |
| 30. | OTHER OPERATING EXPENSES, NET |
| |
Consolidated |
| |
September 30,
2022 |
September 30,
2021 |
| Other operating income, net |
|
|
| Result on write-off of property, plant and equipment |
- |
17,584 |
| Tax credits (a) |
60, 731 |
201,417 |
| Tax benefit from amnesty program (b) |
102,469 |
66,333 |
| Revenue with sale of customer portfolio |
6,587 |
- |
| Revenue with royalties (c) |
119,438 |
|
| Other operating income |
3,383 |
3,204 |
| Total other operating income |
292,608 |
288,538 |
| |
|
|
| Other operating expenses, net |
|
|
| Result on write-off of property, plant and equipment |
(8,092) |
- |
| Crer para Ver (d) |
(37,260) |
(34,008) |
| Impairment |
(12,510) |
- |
| Expenses with sale of customer portfolio |
- |
(1,627) |
| Transformation and integration plan (e) |
(366,124) |
(420,498) |
| Restructuring Expenses (f) |
(49,819) |
- |
| Tax contingencies |
- |
(3,910) |
| Other operating expenses |
(47,672) |
(16,639) |
| Total other operating expenses |
(521,477) |
(476,682) |
| Other operating income (expenses), net |
(228,869) |
(188,144) |
| a) | Refers mainly to PIS and COFINS credits. |
| b) | Refers to tax benefits in Brazil arising from the adhesion to state tax
amnesty programs by the subsidiaries Natura Cosméticos and Avon Cosméticos Ltda. |
| c) | Refers to royalties received by the subsidiary Avon from its representative
in Japan, after a judicial dispute as mentioned in note 22. |
| d) | Refers to appropriation of operating income obtained on the sales of the
non-cosmetic product line called "Crer Para Ver" to the Natura Institute, specifically earmarked for social projects aimed at
developing the quality of education. |
| e) | Refers to expenses related to the execution of the transformation plan
of the subsidiary The Body Shop and integration of the subsidiary Avon Products Inc., which is based on five pillars, as follows: (1)
rejuvenate the brand; (2) optimize retail operations and direct sales; (3) improve the omni-channel; (4) improve operational efficiency;
and (5) redesign the organization. |
| f) | Refers to the expenses incurred to close the operations of the subsidiary
The Body Shop in Russia, the main expenses being indemnities to employees and fines for termination of store lease agreement. |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The basic earnings per share are calculated
by dividing the profit (loss) attributable to the Company’s shareholders by the weighted average number of outstanding common shares,
excluding common shares purchased by the Company and held as treasury shares.
| |
Consolidated |
| |
September 30,
2022 |
September 30,
2021 |
| (Loss) net income attributable to the Company’s controlling shareholders |
(1,969,592) |
352,544 |
| Weighted average of the number of issued common shares |
1,381,559,530 |
1,377,337,254 |
| Weighted average treasury shares |
(9,632,014) |
(434,366) |
| Weighted average of the number of outstanding common shares |
1,371,927,516 |
1,376,902,888 |
| Basic (loss) earnings per share – R$ |
(1.4356) |
0.2560 |
Diluted earnings per share is calculated
by adjusting the weighted average number of common shares outstanding, assuming the conversion of all potential common shares that would
cause dilution. Considering that the Company recorded a loss for the nine-month periods ended September 30, 2022 and 2021, any adjustment
would have an anti-dilution effect and, therefore, the diluted loss per share is equal to the basic loss per share.
| 32. | TRANSACTIONS WITH RELATED PARTIES |
In the course of the Company’s
operations, rights and obligations are generated between related parties, arising from administrative expenses and provision of services.
| 32.1. | Receivables and payables with related parties |
The Company had transactions with related
parties recognized as presented below:
| |
Parent |
| |
September 30,
2022 |
December 31,
2021 |
| Current Assets: |
|
|
| Natura Cosméticos S.A. (b) |
- |
153,656 |
| Avon Products, Inc (a) |
23,849 |
20,223 |
| Natura Cosméticos S.A. – Argentina (a) |
4,168 |
4,302 |
| Natura Cosméticos S.A. – Chile (a) |
- |
609 |
| Natura Cosméticos S.A. – Perú (a) |
519 |
567 |
| Natura Cosméticos S.A – Colombia(a) |
366 |
377 |
| The Body Shop International (a) |
12,909 |
7,416 |
| Aesop UK (a) |
2,805 |
2,836 |
| Natura Dist de Mexico(a) |
- |
536 |
| Total |
44,616 |
190,522 |
| |
|
|
| Natura Cosméticos S.A. (a) (a) (c) |
37 |
1,882 |
| Indústria e Comércio de Cosméticos Natura Ltda. (a) |
654 |
188 |
| Avon Products, Inc (c) |
- |
37,784 |
| The Body Shop International (c) |
- |
19,959 |
| Aesop UK |
- |
358 |
| Total current liabilities |
691 |
60,171 |
| a) | Refers to the allocation of expenses related to the purchase options and restricted shares plans. |
| b) | On December 31, 2021 refers to interest on own equity. |
| c) | Refers to the transfer of shared expenses. |
In the nine-month period ended September
30, 2022 and 2021, there were no transactions of the parent company with related parties that passed through the income statement, as
the transactions that occurred in the period refer to the transfer of expenses related to the stock option plans and shares restricted.
| 32.2. | Uncontrolled and unconsolidated transactions with related parties |
Instituto Natura holds shares in the
Essential Investment Fund. As of September 30, 2022, the balance is R$ R$ 11,060 (R$ 3,835 as of December 31, 2021).
On September 5, 2012, an agreement
was entered between Indústria e Comércio de Cosméticos Natura Ltda., and Bres Itupeva Empreendimentos Imobiliários
Ltda., (“Bres Itupeva”), for the construction and leasing of processing center to distribution and warehousing of products
(HUB), in Itupeva, State of São Paulo. In 2019, Bres
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Itupeva granted its credits to BRC
Securitizadora S/A, to which Natura makes monthly payments. Messrs. Antônio Luiz da Cunha Seabra, Guilherme Peirão Leal and
Pedro Luiz Barreiros Passos, members of the Company’s controlling group, indirectly control Bres Itupeva. This agreement was amended
on February 10, 2021, with Natura Cosméticos becoming the lessee. The amount involved in the transaction is recorded under item
“Right of Use” of “Buildings” value was R$ 66,418 in the nine-month period ended September 30, 2022 (R$60,998
under “item Buildings” of Property, Plant and Equipment as of December 31, 2021) and in the nine-month period ended September
30, 2022 the amount paid as lease was R$ 11,791 (R$ 14,094 as of December 31, 2021).
On January 8, 2021, a related-party
transaction was carried out between the Company, as lessee and owner, the subsidiary Indústria e Comércio de Cosméticos
Natura Ltda. and Natura &Co Holding S.A., as guarantors, and a special purpose company (Bresco IX) indirectly held by Messrs. Antônio
Luiz da Cunha Seabra, Guilherme Peirão Leal and Pedro Luiz Barreiros Passos, as lessor and surface-right owner (Co-Chairmen of
the Board of Directors of the Company and shareholders members of the controlling group parent Company). This transaction was entered
into with the purpose of expanding the Company’s distribution network and increasing its logistical efficiency through the installation
of a new distribution hub in the State of Alagoas. This is a build-to-suit lease in which the property has not yet been delivered and,
therefore, there was no disbursement during the nine-month period ended September 30, 2022, and 2021.
On May 12, 2021, a transaction was
entered between the Natura Cosméticos S.A., as lessee, and Bresco Logística Fundo de Investimento Imobiliário, as
lessor, indirectly held by Messrs. Antônio Luiz da Cunha Seabra, Guilherme Peirão Leal and Pedro Luiz Barreiros Passos. (Co-Chairmen
of the Board of Directors of the Company). This transaction had the purpose of keeping the Company’s distribution hub activities
in the city of Canoas, State of Rio Grande do Sul. The amount involved in the transaction is recorded under item “Right of Use”
of “Buildings” in the amount of R$ 5,384 and the total amount paid as rent was R$ 1,600.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
In the nine-month period ended September
30, 2022, the Company transferred to Instituto Natura as a donation associated with the net income from sales of the Natura Crer Para
Ver product line in the amount of R$ 35,000 (R$29,000 for the nine-month period ended September 30, 2021).
The Company has a structure of internal
controls to support the identification, monitoring and approval of transactions between Related Parties.
| 32.3. | Key management personnel compensation |
The total compensation of the key management personnel is
as follows:
| |
September 30, 2022 |
September 30, 2021 |
| |
Compensation |
Compensation |
| |
Fixed |
Variable |
Total |
Fixed |
Variable |
Total |
| Board of Directors |
10,605 |
147,413 |
158,018 |
11,244 |
56,395 |
67,639 |
| Executive Board |
26,045 |
40,608 |
66,653 |
38,714 |
65,430 |
104,143 |
| |
36,650 |
188,021 |
224,671 |
49,958 |
121,825 |
171,782 |
The totals in the table above include
the employer's social security charges.
The amounts include increases and /
or reversals of the cumulative expense recognized in the previous years due to reassessments of the number of awards expected to vest
and re-estimation of the social security charges expected to be payable by the Company on vesting.
Amounts for the nine-month period ended
September 30, 2022, include termination benefits for certain key management employees related to the review process of Natura &Co's
corporate structure.
33.1
Contracts related to supply
Total minimum supply payments, measured
at nominal value, according to the contract, are as follows:
| |
Consolidated |
| |
September 30, 2022 |
December 31, 2021 |
| Less than one year |
378,606 |
929,288 |
| One to five years |
155,933 |
460,081 |
| Above 5 years |
16,078 |
10,738 |
| Total |
550,617 |
1,400,107 |
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
The Company adopted an insurance policy
that mainly considers risk concentration and its materiality, considering the nature of their activities and the guidance of their insurance
advisors. As of September 30, 2022 and December 31, 2021, insurance coverage is as follows:
| Item |
Type of coverage |
Amount insured |
September 30,
2022 |
December 31,
2021 |
| Industrial complex and administrative sites |
Any damages to buildings, facilities, inventories, and machinery and equipment |
5,659,709 |
6,008,031 |
| Vehicles |
Fire, theft and collision for the vehicles insured by the Company |
214,444 |
261,953 |
| Loss of profits |
No loss of profits due to material damages to facilities buildings and production machinery and equipment |
1,962,509 |
1,962,509 |
| Transport |
Damages to products in transit |
100,006 |
103,857 |
| Civil liability |
Protection against error or complaints in the exercise of professional activity that affect third parties |
2,141,605 |
2,445,664 |
| Environmental liability |
Protection
against environmental accidents that may result in environmental lawsuits |
30,000 |
30,000 |
| 35. | ADDITIONAL INFORMATION RELATING TO THE STATEMENTS OF CASH FLOWS |
The following table presents the investment
and financing transactions that do not involve the use of cash and cash equivalents and are therefore presented separately as additional
information to the cash flow statements:
| |
Parent |
Consolidated |
| |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
| Non-cash items |
|
|
|
|
| Hedge accounting, net of tax effects |
89 |
- |
(608,488) |
(130,393) |
| Net effect of acquisition of property, plant and equipment and intangible assets not yet paid |
- |
- |
59,550 |
132,825 |
| a) | Issue of debentures by the subsidiary Natura Cosméticos S.A. (12th issue) |
On October 6, 2022, the subsidiary
Natura Cosméticos carried out the 12th (twelfth) issue of simple debentures, not convertible into shares, unsecured, in three series,
with an additional fiduciary guarantee by the Company. This guarantee was previously approved by the Company's Board of Directors on August
30, 2022. The debentures issued have a total value of R$ 1.05 billion, maturity between 2027 and 2032 and are remunerated at 100% of CDI
+ 0.8% (1st series), 6.8% and 6.9% for the 2nd and 3rd series, respectively. They are backed by an operation to issue a Certificate of
Real Estate Receivables (CRI).
The net proceeds obtained by the subsidiary
Natura Cosméticos with the issuance of the Debentures will be used to pay rents not yet incurred and to reimburse expenses with
rents already incurred in the 24 (twenty-four) months prior to the issuance date.
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
| b) | Research and development unit’s relocation of the subsidiary Avon |
Direct subsidiary Avon is currently
evaluating the costs associated with closing its research and development unit in Suffern, United States, and relocating research and
development activities to Brazil and Poland. The direct subsidiary Avon expects to incur non-recurring restructuring costs related to
the closure and relocation in the amount of approximately US$39 million, to be incurred in the fiscal years ended December 31, 2022 and
2025 and capital expenses related to infrastructure and facilities in Brazil and Poland totaling approximately US$10 million, to be incurred
in the fiscal years ended December 31, 2022 and 2023, the amounts of which will be offset by a reduction in recurring costs as a result
of the restructuring. Direct subsidiary Avon is also carrying out an impairment analysis on fixed assets and, as a result, expects to
record a potential impairment expense of approximately US$35 million to US$40 million.
***