UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2022
Commission File Number: 001-39169
Natura &Co Holding S.A.
(Exact name of registrant as specified in its charter)
Avenida Alexandre Colares, No. 1188, Sala A17-Bloco A
Parque Anhanguera
São Paulo, São Paulo 05106-000, Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F | X | Form 40-F |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes | No | X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes | No | X |
NATURA &CO HOLDING S.A.
TABLE OF CONTENTS
ITEM
1. | Individual and Consolidated Interim Financial Information of Natura &Co Holding S.A. for the nine-month period ended September 30, 2022. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NATURA &CO HOLDING S.A. | |||
By: | /s/ Guilherme Strano Castellan | ||
Name: | Guilherme Strano Castellan | ||
Title: | Principal Financial Officer |
By: | /s/ Itamar Gaino Filho | ||
Name: | Itamar Gaino Filho | ||
Title: | Chief Legal and Compliance Officer |
Date: November 9, 2022.
Item 1
Individual and Consolidated Interim Financial Information of Natura &Co Holding S.A. for the nine-month period ended September 30, 2022.
Natura &Co Holding S.A. Individual and Consolidated Interim Accounting Information (ITR) For the nine-month period ended September 30, 2022 |
Natura &Co Holding S.A. Parent company and consolidated interim financial statements at 30 September 2022 and report on review
|
(A free translation of the original in Portuguese)
Report on review of parent company and
consolidated interim financial statements
To the Board of Directors and Stockholders
Natura &Co Holding S.A.
Introduction |
We have reviewed the accompanying interim statement of financial position of Natura & Co Holding S.A. ("Company") as at 30 September 22 and the related statements of income and comprehensive income for the quarter and nine-month period then ended, and the statements of changes in shareholders’ equity and cash flows for the nine-month period then ended, as well as the accompanying consolidated interim statement of financial position of Natura & Co Holding S.A. and its subsidiaries ("Consolidated") as at 30 September 22 and the related consolidated statements of income and comprehensive income for the quarter and nine-month period then ended, and the consolidated statements of changes in shareholders’ equity and cash flows for the nine-month period then ended, and explanatory notes.
Management is responsible for the preparation and fair presentation of these parent company and consolidated interim financial statements in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC), and International Accounting Standard (IAS) 34 - Interim Financial Reporting, of the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on these interim financial statements based on our review.
Scope of review |
We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the interim information |
Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company and consolidated interim financial statements referred to above do not present fairly, in all material respects, the financial position of Natura &Co Holding S.A. and of Natura &Co Holding S.A. and its subsidiaries as at 30 September 2022, and the parent company financial performance for the quarter and nine-month period then ended and its cash flows for the nine-month period then ended, as well as the consolidated financial performance for the quarter and nine-month period then ended and the consolidated cash flows for the nine-month period then ended, in accordance with CPC 21 and IAS 34.
PricewaterhouseCoopers Auditores Independentes, Avenida Brigadeiro Faria Lima, 3732, 16º andar, partes 1 e 6, Edifício Adalmiro Dellape Baptista B32, Itaim Bibi, São Paulo - SP, CEP 04538-132,T: (11) 3674-2000, F: (11) 3674-2000, www.pwc.com.br
Other matters |
Statement of value added
The interim financial statements referred to above include the parent company and consolidated statements of value added for the nine-month period ended 30 September 2022. These statements are the responsibility of the Company's management and are presented as supplementary information. These statements have been subjected to review procedures performed together with the review of the interim financial statements for the purpose concluding whether they are reconciled with the interim financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in the accounting standard CPC 09 - "Statement of Value Added". Based on our review, nothing has come to our attention that causes us to believe that these statements of value added have not been properly prepared, in all material respects, in accordance with the criteria established in this accounting standard, and that they are consistent with the parent company and consolidated interim financial statements taken as a whole.
São Paulo, 9 November 2022
PricewaterhouseCoopers
Auditores Independentes Ltda.
CRC 2SP000160/O-5
Leandro Mauro Ardito
Contador CRC 1SP188307/O-0
NATURA &CO HOLDING S.A. | |||||||
STATEMENT OF FINANCIAL POSITION AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021 | |||||||
(In thousands of Brazilian reais - R$) | |||||||
Note | Parent | Consolidated | |||||
ASSETS | September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | |||
CURRENT | |||||||
Cash and cash equivalents | 6 | 5,344 | 4,289 | 3,252,289 | 4,007,257 | ||
Short-term investments | 7 | 100,402 | 228,694 | 1,377,224 | 1,978,740 | ||
Trade accounts receivable | 8 | - | - | 3,368,184 | 3,476,359 | ||
Trade accounts receivable - Related parties | 32 | 44,616 | 190,522 | - | - | ||
Inventories | 9 | - | - | 5,410,536 | 5,403,526 | ||
Recoverable taxes | 10 | - | - | 974,053 | 973,269 | ||
Income tax and social contribution | 37,939 | 118,068 | 228,598 | 564,486 | |||
Derivative financial instruments | - | - | 185,323 | 81,159 | |||
Other current assets | 14 | 2,771 | 6,397 | 837,552 | 912,160 | ||
191,072 | 547,970 | 15,633,759 | 17,396,956 | ||||
Assets held for sale | 13 | - | - | 51,508 | 52,921 | ||
Total current assets | 191,072 | 547,970 | 15,685,267 | 17,449,877 | |||
NON-CURRENT | |||||||
Recoverable taxes | 10 | - | - | 1,366,292 | 1,349,624 | ||
Income tax and social contribution | - | - | 238,480 | 84,729 | |||
Deferred income tax and social contribution | 11 | 121,252 | - | 3,704,888 | 2,954,074 | ||
Judicial deposits | 12 | 13 | 13 | 475,458 | 585,284 | ||
Derivative financial instruments | - | - | 130,000 | 893,970 | |||
Short-term investments | 7 | - | - | 36,507 | 36,921 | ||
Other non-current assets | 14 | 843 | 848 | 1,463,006 | 1,763,051 | ||
122,108 | 861 | 7,414,631 | 7,667,653 | ||||
Investments | 15 | 22,914,485 | 28,281,178 | - | - | ||
Property, plant and equipment | 16 | - | - | 4,903,045 | 5,377,408 | ||
Intangible | 17 | 2,137 | 1,132 | 23,509,817 | 26,857,583 | ||
Right of use | 18 | 314 | - | 2,988,059 | 3,095,969 | ||
Total non-current assets | 23,039,044 | 28,283,171 | 38,815,552 | 42,998,613 | |||
TOTAL ASSETS | 23,230,116 | 28,831,141 | 54,500,819 | 60,448,490 |
Note | Parent | Consolidated | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | |||
CURRENT | |||||||
Borrowings, financing and debentures | 19 | - | - | 429,265 | 945,069 | ||
Lease | 18 | 115 | - | 854,716 | 1,005,523 | ||
Trade accounts payable and reverse factoring operations | 20 | 11,645 | 5,688 | 5,984,920 | 6,770,579 | ||
Trade accounts payable - Related parties | 32 | 691 | 60,171 | - | - | ||
Dividends and interest on shareholders' equity payable | 24 | 180,772 | 180,772 | 180,772 | 180,772 | ||
Payroll, profit sharing and social charges | 2,805 | 19,431 | 985,351 | 1,255,348 | |||
Tax liabilities | 21 | 586 | 654 | 676,183 | 766,430 | ||
Income tax and social contribution | - | - | 238,630 | 365,457 | |||
Derivative financial instruments | - | 89 | 1,164,077 | 458,492 | |||
Provision for tax, civil and labor risks | 22 | - | - | 321,152 | 230,097 | ||
Other current liabilities | 23 | 24,047 | 509 | 1,468,513 | 1,716,110 | ||
Total current liabilities | 220,661 | 267,314 | 12,303,579 | 13,693,877 | |||
NON-CURRENT | |||||||
Borrowings, financing and debentures | 19 | - | - | 13,278,745 | 11,771,763 | ||
Lease | 18 | 208 | - | 2,440,012 | 2,542,339 | ||
Payroll, profit sharing and social charges | 13,832 | 17,544 | 21,755 | 53,748 | |||
Tax liabilities | 21 | - | - | 116,501 | 114,797 | ||
Deferred income tax and social contribution | 11 | - | - | 895,244 | 994,041 | ||
Provision for tax, civil and labor risks | 22 | 1,044 | - | 1,522,357 | 1,768,744 | ||
Other non-current liabilities | 23 | 9,414 | 713 | 920,260 | 942,456 | ||
Total non-current liabilities | 24,498 | 18,257 | 19,194,874 | 18,187,888 | |||
TOTAL LIABILITIES | 245,159 | 285,571 | 31,498,453 | 31,881,765 | |||
SHAREHOLDERS' EQUITY | 24 | ||||||
Capital stock | 12,487,555 | 12,481,683 | 12,487,555 | 12,481,683 | |||
Treasury shares | (262,360) | (151,342) | (262,360) | (151,342) | |||
Capital reserves | 10,476,758 | 10,478,804 | 10,476,758 | 10,478,804 | |||
Legal profit reserve | 866,840 | 871,223 | 866,840 | 871,223 | |||
Accumulated losses | (1,969,592) | - | (1,969,592) | - | |||
Other comprehensive income | 1,385,756 | 4,865,202 | 1,385,756 | 4,865,202 | |||
Shareholders' equity attributed to the Company's shareholders | 22,984,957 | 28,545,570 | 22,984,957 | 28,545,570 | |||
Non-controlling interest in shareholders' equity of subsidiaries | - | - | 17,409 | 21,155 | |||
Total shareholders' equity | 22,984,957 | 28,545,570 | 23,002,366 | 28,566,725 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 23,230,116 | 28,831,141 | 54,500,819 | 60,448,490 |
*The accompanying notes are an integral part of the Interim Accounting Information.
NATURA &CO HOLDING S.A. | |||||||||||||||||
STATEMENT OF INCOME | |||||||||||||||||
FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021 | |||||||||||||||||
(In thousands of Brazilian reais - R$, except for earnings per share) | |||||||||||||||||
Note | Parent | Parent | Consolidated | Consolidated | |||||||||||||
July 1, 2022 to September 30, 2022 | July 1, 2021 to September 30, 2021 | January 1, 2022 to September 30, 2022 | January 1, 2021 to September 30, 2021 | July 1, 2022 to September 30, 2022 | July 1, 2021 to September 30, 2021 | January 1, 2022 to September 30, 2022 | January 1, 2021 to September 30, 2021 | ||||||||||
NET REVENUE | 26 | - | - | - | - | 9,003,732 | 9,549,225 | 25,959,439 | 28,521,464 | ||||||||
Cost of Sales | 27 | - | - | - | - | (3,229,676) | (3,313,070) | (9,392,089) | (9,953,824) | ||||||||
GROSS PROFIT | - | - | - | - | 5,774,056 | 6,236,155 | 16,567,350 | 18,567,640 | |||||||||
OPERATING (EXPENSES) INCOME | |||||||||||||||||
Selling, Marketing and Logistics expenses | 27 | - | - | - | - | (3,968,732) | (4,068,015) | (11,360,431) | (12,120,851) | ||||||||
Administrative, R&D, IT and Project expenses | 27 | (35,124) | (38,764) | (252,861) | (96,945) | (1,555,264) | (1,790,778) | (4,818,006) | (5,234,795) | ||||||||
Impairment loss on trade receivables | 8 | - | - | - | - | (151,141) | (220,335) | (465,391) | (670,536) | ||||||||
Share of profits (losses) from subsidiaries | 15 | (459,984) | 297,938 | (1,657,460) | 439,072 | - | - | - | - | ||||||||
Other operating income (expenses), net | 30 | - | - | 12,326 | - | (131,742) | 132,505 | (228,869) | (188,144) | ||||||||
OPERATING (LOSS) PROFIT BEFORE FINANCIAL RESULT | (495,108) | 259,174 | (1,897,995) | 342,127 | (32,823) | 289,532 | (305,347) | 353,314 | |||||||||
Financial income | 29 | 27,012 | 19,598 | 45,338 | 30,781 | 876,748 | 874,568 | 4,191,482 | 3,138,965 | ||||||||
Financial expenses | 29 | (20,978) | (5,903) | (46,232) | (20,364) | (1,440,695) | (1,167,583) | (5,568,783) | (3,865,387) | ||||||||
(LOSS) PROFIT BEFORE INCOME TAX AND | |||||||||||||||||
SOCIAL CONTRIBUTION | (489,074) | 272,869 | (1,898,889) | 352,544 | (596,770) | (3,483) | (1,682,648) | (373,108) | |||||||||
Income tax and social contribution | 11 | (70,703) | - | (70,703) | - | 112,828 | 311,984 | (104,776) | 749,330 | ||||||||
NET (LOSS) INCOME FOR THE PERIOD FROM CONTINUING OPERATIONS | (559,777) | 272,869 | (1,969,592) | 352,544 | (483,942) | 308,501 | (1,787,424) | 376,222 | |||||||||
DISCONTINUED OPERATIONS | |||||||||||||||||
NET LOSS FROM DISCONTINUED OPERATIONS | - | - | - | - | (75,530) | (38,897) | (181,192) | (30,932) | |||||||||
NET (LOSS) INCOME FOR THE PERIOD | (559,777) | 272,869 | (1,969,592) | 352,544 | (559,472) | 269,604 | (1,968,616) | 345,290 | |||||||||
ATTRIBUTABLE TO | |||||||||||||||||
The Company´s shareholders | (559,777) | 272,869 | (1,969,592) | 352,544 | (559,777) | 272,869 | (1,969,592) | 352,544 | |||||||||
Non-controlling shareholders | - | - | - | - | 305 | (3,265) | 976 | (7,254) | |||||||||
(559,777) | 272,869 | (1,969,592) | 352,544 | (559,472) | 269,604 | (1,968,616) | 345,290 | ||||||||||
INCOME (LOSS) PER SHARE IN THE PERIOD -R$ | |||||||||||||||||
Basic | 31 | (0.4073) | 0.1981 | (1.4356) | 0.2560 | (0.4073) | 0.1981 | (1.4356) | 0.2560 | ||||||||
Diluted | 31 | (0.4073) | 0.1963 | (1.4356) | 0.2537 | (0.4073) | 0.1963 | (1.4356) | 0.2537 | ||||||||
*The accompanying notes are an integral part of the Interim Accounting Information. |
NATURA &CO HOLDING S.A. | ||||||||||||||||||
STATEMENT OF COMPREHENSIVE INCOME | ||||||||||||||||||
FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021 | ||||||||||||||||||
(In thousands of Brazilian reais - R$) | ||||||||||||||||||
Note | Parent | Parent | Consolidated | Consolidated | ||||||||||||||
July 1, 2022 to September 30, 2022 | July 1, 2021 to September 30, 2021 | January 1, 2022 to September 30, 2022 | January 1, 2021 to September 30, 2021 | July 1, 2022 to September 30, 2022 | July 1, 2021 to September 30, 2021 | January 1, 2022 to September 30, 2022 | January 1, 2021 to September 30, 2021 | |||||||||||
NET (LOSS) INCOME FOR THE PERIOD | (559,777) | 272,869 | (1,969,592) | 352,544 | (559,472) | 269,604 | (1,968,616) | 345,290 | ||||||||||
Other comprehensive income to be reclassified to income statement in subsequent periods: | ||||||||||||||||||
Conversion of financial statements of controlled companies abroad | 15 | (549,711) | 1,206,853 | (3,035,690) | 35,130 | (550,995) | 1,207,339 | (3,040,412) | 34,273 | |||||||||
Exchange rate effect on the conversion from hyperinflationary economy | 15 | (13,929) | (11,030) | (28,529) | 106,199 | (13,929) | (11,030) | (28,529) | 106,199 | |||||||||
Earnings (losses) from cash flow hedge operations | 5.3 | - | - | 89 | - | (269,284) | 44,579 | (923,676) | (198,765) | |||||||||
Tax effects on (losses) earnings from cash flow hedge operations | 11 | - | - | - | - | 91,442 | (14,619) | 315,188 | 68,372 | |||||||||
Equity in losses from cash flow hedge operation | 5.3 | (269,284) | 44,579 | (923,765) | (198,765) | - | - | - | - | |||||||||
Equity in tax effects on earnings from cash flow hedge operations | 11 | 91,442 | (14,619) | 315,188 | 68,372 | - | - | - | - | |||||||||
Comprehensive income for the period, net of tax effects | (1,301,259) | 1,498,652 | (5,642,299) | 363,480 | (1,302,238) | 1,495,873 | (5,646,045) | 355,369 | ||||||||||
ATTRIBUTABLE TO | ||||||||||||||||||
The Company´s shareholders | (1,301,259) | 1,498,652 | (5,642,299) | 363,480 | (1,301,259) | 1,498,652 | (5,642,299) | 363,480 | ||||||||||
Noncontrolling shareholders | - | - | - | - | (979) | (2,779) | (3,746) | (8,111) | ||||||||||
(1,301,259) | 1,498,652 | (5,642,299) | 363,480 | (1,302,238) | 1,495,873 | (5,646,045) | 355,369 | |||||||||||
*The accompanying notes are an integral part of the Interim Accounting Information. |
NATURA &CO HOLDING S.A. | |||||||||||||||||||||||||||
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | |||||||||||||||||||||||||||
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021 | |||||||||||||||||||||||||||
(In thousands of Brazilian reais - R$) | |||||||||||||||||||||||||||
Equity appraisal adjustment | |||||||||||||||||||||||||||
Capital Reserves | |||||||||||||||||||||||||||
Note | Capital stock | Treasury shares | Surplus on issue/sale of shares | Special reserve | Additional paid-in capital | Income from transactions with non-controlling shareholders | Legal profit reserve | Retained (losses) earnings | Other comprehensive income | Shareholders' equity attributed to controlling shareholders | Total shareholders' equity | ||||||||||||||||
Non-Controlling | |||||||||||||||||||||||||||
Tax Incentives | Retained earnings | Shareholders | |||||||||||||||||||||||||
BALANCES AS OF JANUARY 1, 2021 | 12,377,999 | (11,667) | 10,671,605 | 362,059 | 110,537 | (92,066) | 113,302 | 6,864 | (759,937) | 4,585,631 | 27,364,327 | 22,781 | 27,387,108 | ||||||||||||||
Net income for the period | - | - | - | - | - | - | - | - | 352,544 | - | 352,544 | (7,254) | 345,290 | ||||||||||||||
Exchange rate effect on the conversion from hyperinflationary economy | - | - | - | - | - | - | - | - | - | 106,199 | 106,199 | - | 106,199 | ||||||||||||||
Other comprehensive income | - | - | - | - | - | - | - | - | - | (95,263) | (95,263) | (857) | (96,120) | ||||||||||||||
Total comprehensive income for the period | - | - | - | - | - | - | - | - | 352,544 | 10,936 | 363,480 | (8,111) | 355,369 | ||||||||||||||
Share repurchase | - | (32,090) | - | - | - | - | - | - | - | - | (32,090) | - | (32,090) | ||||||||||||||
Loss absorption | - | - | - | - | (650,196) | - | - | - | 650,196 | - | - | - | - | ||||||||||||||
Transactions in stock and restricted shares option plans: | |||||||||||||||||||||||||||
Provision for stock and restricted shares option plans | 24 | - | - | - | - | 205,030 | - | - | (37,977) | - | - | 167,053 | - | 167,053 | |||||||||||||
Exercise of stock and restricted shares option plans | 24 | 102,421 | 34,438 | - | - | (172,209) | - | - | 22,469 | - | - | (12,881) | - | (12,881) | |||||||||||||
Reclassification of grant reserve - Natura Cosméticos | - | - | - | - | - | - | (113,302) | - | 113,302 | - | - | - | - | ||||||||||||||
BALANCES AS OF SEPTEMBER 30, 2021 | 12,480,420 | (9,319) | 10,671,605 | 362,059 | (506,838) | (92,066) | - | (8,644) | 356,105 | 4,596,567 | 27,849,889 | 14,670 | 27,864,559 | ||||||||||||||
BALANCES AS OF JANUARY 1, 2022 | 12,481,683 | (151,342) | 10,021,409 | 362,059 | 187,402 | (92,066) | - | 871,223 | - | 4,865,202 | 28,545,570 | 21,155 | 28,566,725 | ||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | (1,969,592) | - | (1,969,592) | 976 | (1,968,616) | ||||||||||||||
Exchange rate effect on the conversion from hyperinflationary economy | - | - | - | - | - | - | - | - | - | (28,529) | (28,529) | - | (28,529) | ||||||||||||||
Other comprehensive income | - | - | - | - | - | - | - | - | - | (3,644,178) | (3,644,178) | (4,722) | (3,648,900) | ||||||||||||||
Total comprehensive income for the period | - | - | - | - | - | - | - | - | (1,969,592) | (3,672,707) | (5,642,299) | (3,746) | (5,646,045) | ||||||||||||||
Share repurchase | 24 | - | (120,300) | - | - | - | - | - | - | - | - | (120,300) | - | (120,300) | |||||||||||||
Transactions in stock and restricted shares option plans: | |||||||||||||||||||||||||||
Provision for stock and restricted shares option plans | 24 | - | - | - | - | 205,056 | - | - | - | - | - | 205,056 | - | 205,056 | |||||||||||||
Exercise of stock and restricted shares option plans | 24 | 5,872 | 9,282 | - | - | (22,135) | - | - | 3,911 | - | - | (3,070) | - | (3,070) | |||||||||||||
Reclassification of hyperinflationary economy adjustment effect | 24 | - | - | (126,473) | - | (58,494) | - | - | (8,294) | - | 193,261 | - | - | - | |||||||||||||
BALANCES AS OF SEPTEMBER 30, 2022 | 12,487,555 | (262,360) | 9,894,936 | 362,059 | 311,829 | (92,066) | - | 866,840 | (1,969,592) | 1,385,756 | 22,984,957 | 17,409 | 23,002,366 | ||||||||||||||
*The accompanying notes are an integral part of the Interim Accounting Information.
NATURA &CO HOLDING S.A. | |||||||||
STATEMENT OF VALUE ADDED | |||||||||
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021 | |||||||||
(In thousands of Brazilian reais - R$) | |||||||||
Note | Parent | Consolidated | |||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||
INCOME | 12,326 | - | 32,395,686 | 34,659,951 | |||||
Sale of goods, products and services | - | - | 32,460,330 | 35,127,653 | |||||
Provision for doubtful accounts, net of reversals | 8 | - | - | 24,997 | (24,593) | ||||
Other operating expenses, net | 12,326 | - | (89,641) | (443,109) | |||||
GOODS ACQUIRED FROM THIRD PARTIES | (212,769) | (24,590) | (21,151,322) | (21,995,188) | |||||
Cost of products sold and services rendered | - | - | (10,760,418) | (10,406,739) | |||||
Materials, electricity, outsourced services and other | (212,769) | (24,590) | (10,390,904) | (11,588,449) | |||||
GROSS VALUE ADDED | (200,443) | (24,590) | 11,244,364 | 12,664,763 | |||||
RETENTIONS | (1,083) | - | (1,901,254) | (2,051,691) | |||||
Depreciation and amortization | 16, 17 and 18 | (1,083) | - | (1,901,254) | (2,051,691) | ||||
VALUE ADDED PRODUCED BY THE COMPANY | (201,526) | (24,590) | 9,343,110 | 10,613,072 | |||||
TRANSFERRED VALUE ADDED | (1,612,122) | 469,853 | 4,191,482 | 3,138,965 | |||||
Equity in subsidiaries | 15 | (1,657,460) | 439,072 | - | - | ||||
Financial income - including inflation adjustments and exchange rate variations | 29 | 45,338 | 30,781 | 4,191,482 | 3,138,965 | ||||
TOTAL VALUE ADDED TO DISTRIBUTE | (1,813,648) | 445,263 | 13,534,592 | 13,752,037 | |||||
DISTRIBUTION OF VALUE ADDED | (1,813,648) | 445,263 | 13,534,592 | 13,752,037 | |||||
Payroll and social charges | 28 | 39,009 | 77,445 | 5,412,324 | 5,864,665 | ||||
Taxes, fees and contributions | 70,703 | - | 4,493,742 | 3,669,666 | |||||
Financial expenses and rentals | 46,232 | 15,274 | 5,597,141 | 3,872,416 | |||||
Minority holders' share in retained profit | - | - | 977 | (7,254) | |||||
Retained earnings | (1,969,592) | 352,544 | (1,969,592) | 352,544 |
*The accompanying notes are an integral part of the Interim Accounting Information.
NATURA &CO HOLDING S.A. | |||||||||
STATEMENT OF CASH FLOWS | |||||||||
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021 | |||||||||
(In thousands of Brazilian reais - R$) | |||||||||
Note | Parent | Consolidated | |||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||
CASH FLOW FROM OPERATING ACTIVITIES | |||||||||
Net (loss) income for the period | (1,969,592) | 352,544 | (1,968,616) | 345,290 | |||||
Adjustments to reconciliate net (loss) income for the period with net cash (used in) generated by operating activities: | |||||||||
Depreciation and amortization | 16, 17 and 18 | 1,083 | 120 | 1,901,254 | 2,051,692 | ||||
Interest and exchange variation on short-term investments | (14,071) | (15,759) | (330,376) | (149,834) | |||||
Earnings (loss) from swap and forward derivative contracts | 5,266 | - | 527,882 | (400,762) | |||||
Provision for tax, civil and labor risks | 989 | - | 144,934 | (63,979) | |||||
Inflation adjustment of judicial deposits | - | - | (26,846) | (8,793) | |||||
Inflation adjustment of provision for tax, civil and labor risks | 22 | 55 | - | 67,068 | 39,194 | ||||
Income tax and social contribution | 70,703 | - | 104,776 | (1,716,734) | |||||
Income from sale and write-off of property, plant and equipment, lease and non-current assets held for sale | 13, 16 and 17 | - | - | (80,900) | 211,535 | ||||
Share of profits (losses) from subsidiaries | 15 | 1,657,460 | (439,072) | - | - | ||||
Interest and exchange rate variation on leases | 18 | 20 | - | 143,205 | 151,310 | ||||
Interest and exchange rate variation on borrowings, financing and debentures, net of acquisition costs | 19 | - | 7,918 | 324,207 | 612,617 | ||||
Inflation adjustment and exchange rate variation on other assets and liabilities | 170 | (550) | 2,025 | 23,820 | |||||
Reversal for losses from property, plant and equipment, intangible and leases | 16, 17 and 18 | - | - | - | 4,050 | ||||
Provision for stock option plans | 194,348 | 36,176 | 194,348 | 205,030 | |||||
Provision for losses with trade accounts receivables, net of reversals | 8 | - | - | 465,391 | 670,536 | ||||
Provision for inventory losses, net of reversals | 9 | - | - | 303,801 | 275,350 | ||||
Reversal for the provision for carbon credits | - | - | (8,278) | (6,449) | |||||
Effect from hyperinflationary economy | - | - | 123,204 | (43,392) | |||||
Other adjustments to reconcile net (loss) profit | - | - | 12,510 | (54) | |||||
(53,569) | (58,623) | 1,899,589 | 2,200,427 | ||||||
(INCREASE) DECREASE IN ASSETS | |||||||||
Trade accounts receivable and related parties | (7,599) | 109,114 | (344,077) | (563,201) | |||||
Inventories | - | - | (284,136) | (1,627,628) | |||||
Recoverable taxes | - | (3,676) | (19,964) | (240,764) | |||||
Other assets | 21,254 | (69,271) | (131,799) | 171,533 | |||||
Subtotal | 13,655 | 36,167 | (779,976) | (2,260,060) | |||||
(DECREASE) INCREASE IN LIABILITIES | |||||||||
Domestic and foreign trade accounts payable and related parties | (53,844) | (10,720) | (450,406) | (445,651) | |||||
Payroll, profit sharing and social charges, net | (20,338) | (9,538) | (296,898) | 1,860 | |||||
Tax liabilities | (68) | (12,687) | (87,660) | (183,743) | |||||
Other liabilities | (56,439) | 118,646 | 151,606 | 45,887 | |||||
Subtotal | (130,689) | 85,701 | (683,357) | (581,647) | |||||
CASH (USED IN) GENERATED BY OPERATING ACTIVITIES | (170,603) | 63,245 | 436,256 | (641,280) | |||||
OTHER CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
Payment of income tax and social contribution | (2,568) | (3,676) | (499,383) | (425,904) | |||||
Release of judicial deposits net of withdrawals | - | (13) | 134,174 | 4,039 | |||||
Payments related to tax, civil and labor lawsuits | 22 | - | - | (210,113) | (50,902) | ||||
(Payments) proceeds due to settlement of derivative transactions | (934) | - | (230,250) | 91,638 | |||||
Payment of interest on lease | 18 | (20) | - | (85,994) | (159,803) | ||||
Payment of interest on borrowings, financing and debentures | 19 | - | (26,005) | (573,042) | (657,049) | ||||
NET CASH (USED IN) GENERATED BY OPERATING ACTIVITIES | (174,125) | 33,551 | (1,028,352) | (1,839,261) | |||||
CASH FLOW FROM INVESTING ACTIVITIES | |||||||||
Additions of property, plant and equipment and intangible | (2,031) | (1,432) | (768,150) | (883,358) | |||||
Proceeds from sale of property, plant and equipment, intangible and non-current assets held for sale | - | - | 4,070 | 98,023 | |||||
Application of short-term investments | (174,700) | (584,460) | (8,005,899) | (8,679,745) | |||||
Redemption of short-term investments | 301,833 | 542,879 | 8,613,685 | 8,867,105 | |||||
Redemption of interest on short-term investments | 15,230 | 19,025 | 85,636 | 100,803 | |||||
Receipt of dividends from subsidiaries | 32 | 153,656 | 168,610 | - | - | ||||
Investments in subsidiaries | - | (150,000) | - | - | |||||
NET CASH GENERATED BY (USED IN) INVESTING ACTIVITIES | 293,988 | (5,378) | (70,658) | (497,172) | |||||
CASH FLOW FROM FINANCING ACTIVITIES | |||||||||
Repayment of lease - principal | 18 | (48) | - | (820,859) | (850,424) | ||||
Repayment of borrowings, financing and debentures – principal | 19 | - | (497,879) | (4,591,262) | (7,609,157) | ||||
New borrowings, financing, and debentures | 19 | - | - | 6,051,116 | 6,323,642 | ||||
Acquisition of treasury shares, net of receipt of option strike price | (120,300) | (32,090) | (120,300) | (32,090) | |||||
(Payment) receipt of funds due to settlement of derivative transactions | (4,332) | - | 132,147 | 1,566,160 | |||||
Capital Increase | 5,872 | - | 5,872 | - | |||||
NET CASH (USED IN) GENERATED BY FINANCING ACTIVITIES | (118,808) | (529,969) | 656,714 | (601,869) | |||||
Effect of exchange rate variation on cash and cash equivalents | - | - | (312,672) | 171,028 | |||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,055 | (501,796) | (754,968) | (2,767,274) | |||||
Opening balance of cash and cash equivalents | 6 | 4,289 | 505,699 | 4,007,257 | 5,821,672 | ||||
Closing balance of cash and cash equivalents | 6 | 5,344 | 3,903 | 3,252,289 | 3,054,398 | ||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,055 | (501,796) | (754,968) | (2,767,274) |
*The accompanying notes are an integral part of the Interim Accounting Information. |
INDEX OF EXPLANATORY NOTES
1 | GENERAL INFORMATION | 11 | |
2 | MANAGEMENT STATEMENT AND BASIS OF PRESENTATION OF THE INTERIM ACCOUNTING INFORMATION | 11 | |
3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 | |
4 | CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS | 13 | |
5 | FINANCIAL RISK MANAGEMENT | 13 | |
6 | CASH AND CASH EQUIVALENTS | 18 | |
7 | SHORT-TERM INVESTMENTS | 18 | |
8 | TRADE ACCOUNTS RECEIVABLE | 19 | |
9 | INVENTORIES | 19 | |
10 | RECOVERABLE TAXES | 20 | |
11 | INCOME TAX AND SOCIAL CONTRIBUTION | 21 | |
12 | JUDICIAL DEPOSITS | 22 | |
13 | NON-CURRENT ASSETS HELD FOR SALE | 23 | |
14 | OTHER CURRENT AND NON-CURRENT ASSETS | 24 | |
15 | INVESTMENTS | 24 | |
16 | PROPERTY, PLANT AND EQUIPMENT | 26 | |
17 | INTANGIBLE ASSETS | 28 | |
18 | RIGHT-OF-USE AND LEASE LIABILITIES | 31 | |
19 | BORROWING, FINANCING AND DEBENTURES | 32 | |
20 | TRADE ACCOUNTS PAYABLE AND REVERSE FACTORING OPERATIONS | 35 | |
21 | TAX LIABILITIES | 35 | |
22 | PROVISION FOR TAX, CIVIL AND LABOR RISKS | 35 | |
23 | OTHER LIABILITIES | 38 | |
24 | SHAREHOLDER’S EQUITY | 39 | |
25 | INFORMATION ON SEGMENTS | 40 | |
26 | REVENUE | 40 | |
27 | OPERATING EXPENSES AND COST OF SALES | 41 | |
28 | EMPLOYEE BENEFITS | 41 | |
29 | FINANCE INCOME (EXPENSES) | 42 | |
30 | OTHER OPERATING EXPENSES, NET | 43 | |
31 | EARNINGS PER SHARE | 44 | |
32 | TRANSACTIONS WITH RELATED PARTIES | 44 | |
33 | COMMITMENTS | 46 | |
34 | INSURANCE | 47 | |
35 | ADDITIONAL INFORMATION RELATING TO THE STATEMENTS OF CASH FLOWS | 47 | |
36 | SUBSEQUENT EVENTS | 47 |
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)
1. | GENERAL INFORMATION |
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.
11
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. |
12
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.
13
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.
14
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. |
15
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 |
16
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)
5.5 | Capital Management |
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).
5.6 | Fair value estimate |
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.
17
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).
7. | SHORT-TERM INVESTMENTS |
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$96,070 as of December 31, 2021).
(b) | Mutual investment funds refer to the investments of some subsidiaries of the Company, which are concentrated in the Natura entities of the Hispanic America mainly in Argentina, Chile, Colombia and Mexico. |
(c) | As of September 30, 2022, investments in treasury bills are remunerated at an average rate of 116.9% of the CDI (120.0% as of December 31, 2021). |
(d) | As of September 30, 2022, investments in Government securities (LFT) are remunerated at an average rate of 101.2% of the CDI (102.0% of the CDI as of December 31, 2021). |
18
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, 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. |
9. | INVENTORIES |
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 |
19
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. |
10. | RECOVERABLE TAXES |
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. |
20
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$823 million was recognized, the management's conclusion is that the realization of these amounts is probable in the normal course of Natura &Co Luxembourg's activities and should occur within a period not exceeding 20 years.
21
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
Changes in 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.
12. | JUDICIAL DEPOSITS |
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. |
22
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. |
23
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. |
15. | INVESTMENTS |
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. |
24
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$, except as mentioned otherwise)
September 30, 2021 | ||||
Natura Cosméticos S.A.(a) | Avon Products, Inc. | Natura &Co International S.à r.l. | Total | |
Percentage of interest | 100.00% | 100.00% | 100.00% | |
Shareholders’ equity of the subsidiaries (unsecured liabilities) | 7,187,700 | (4,908,242) | 6,156,330 | 8,435,788 |
Shareholders’ equity interest (unsecured liabilities) | 7,187,700 | (4,908,242) | 6,156,330 | 8,435,788 |
Fair value adjustment of acquired assets and liabilities | - | 5,051,258 | - | 5,051,258 |
Tax benefit from income tax of subsidiaries (b) | - | 462,906 | - | 462,906 |
Goodwill | - | 13,497,129 | - | 13,497,129 |
Total | 7,187,700 | 14,103,051 | 6,156,330 | 27,447,081 |
Net income (loss) for the period of subsidiaries | 311,647 | (853,551) | 980,976 | 439,072 |
Balances as of December 31, 2020 | 6,929,074 | 14,373,448 | 5,641,757 | 26,944,279 |
Share of profit (loss) of equity investees | 311,647 | (853,551) | 980,976 | 439,072 |
Translation adjustment | 65,279 | 727,436 | (591,603) | 201,112 |
Capital increase - investment by parent company | - | - | 150,000 | 150,000 |
Unrealized losses on conversion of intercompany balances in foreign currency | - | (129,805) | (24,800) | (154,605) |
Effect of hyperinflationary economy adjustment | 115,651 | (20,829) | - | 94,822 |
Contribution by the controlling company for purchase option plans granted to executive officers of the subsidiaries and other reserves net of tax effects | 65,034 | - | - | 65,034 |
Hedge accounting net of tax effects | (130,375) | (18) | - | (130,393) |
Dividends and interest on own capital | (168,610) | - | - | (168,610) |
Other effects of investments | - | 6,370 | - | 6,370 |
Balance as of September 30, 2021 | 7,187,700 | 14,103,051 | 6,156,330 | 27,447,081 |
25
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, 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 |
26
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 |
27
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)
17. | INTANGIBLE ASSETS |
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 |
28
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.
29
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 | 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 |
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)
18. | RIGHT-OF-USE AND LEASE LIABILITIES |
a) | Right-of-use |
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. |
31
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 |
b) | Lease liability |
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. |
32
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$500.0 million due in 2025. |
d) | The amortizations made in the nine-month period ended September 30, 2022 refer mainly to the early redemption of debt securities of the subsidiary Avon ("Notes"). |
Issuance of debentures by the subsidiary Natura Cosméticos S.A.
33
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, 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 |
19.1 | Covenants |
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.
34
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. |
21. | TAX LIABILITIES |
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.
35
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).
36
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$119,438 recognized as other operating income in the nine-month period ended on September 30, 2022. See explanatory note 30.
37
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
23. | OTHER LIABILITIES |
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. |
38
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$, except as mentioned otherwise)
24. | SHAREHOLDER’S EQUITY |
24.1 | Treasury shares |
On September 30, the item “Treasury shares” has the following composition:
Number of shares | R$ (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.
24.2 | Dividends |
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.
39
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% |
Ø | The Body Shop – 11.2% |
Ø | Aesop – 7.1% |
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:
25.1 | Operating segments |
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.
26. | 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 |
40
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 |
28. | EMPLOYEE BENEFITS |
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 |
28.1 | Share-based payments |
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$205,030 as of September 30, 2021), respectively.
41
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, 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) |
42
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. |
43
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$, except as mentioned otherwise)
31. | EARNINGS PER SHARE |
The basic earnings per share are calculated by dividing the profit (loss) attributable to the Company’s shareholders by the weighted average number of outstanding common shares, excluding common shares purchased by the Company and held as treasury shares.
Consolidated | ||
September 30, 2022 | September 30, 2021 | |
(Loss) net income attributable to the Company’s controlling shareholders | (1,969,592) | 352,544 |
Weighted average of the number of issued common shares | 1,381,559,530 | 1,377,337,254 |
Weighted average treasury shares | (9,632,014) | (434,366) |
Weighted average of the number of outstanding common shares | 1,371,927,516 | 1,376,902,888 |
Basic (loss) earnings per share – R$ | (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
44
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.
45
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$29,000 for the nine-month period ended September 30, 2021).
The Company has a structure of internal controls to support the identification, monitoring and approval of transactions between Related Parties.
32.3. | Key management personnel compensation |
The total compensation of the key management personnel is as follows:
September 30, 2022 | September 30, 2021 | |||||
Compensation | Compensation | |||||
Fixed | Variable | Total | Fixed | Variable | Total | |
Board of Directors | 10,605 | 147,413 | 158,018 | 11,244 | 56,395 | 67,639 |
Executive Board | 26,045 | 40,608 | 66,653 | 38,714 | 65,430 | 104,143 |
36,650 | 188,021 | 224,671 | 49,958 | 121,825 | 171,782 |
The totals in the table above include the employer's social security charges.
The amounts include increases and / or reversals of the cumulative expense recognized in the previous years due to reassessments of the number of awards expected to vest and re-estimation of the social security charges expected to be payable by the Company on vesting.
Amounts for the nine-month period ended September 30, 2022, include termination benefits for certain key management employees related to the review process of Natura &Co's corporate structure.
33. | COMMITMENTS |
33.1 Contracts related to supply
Total minimum supply payments, measured at nominal value, according to the contract, are as follows:
Consolidated | ||
September 30, 2022 | December 31, 2021 | |
Less than one year | 378,606 | 929,288 |
One to five years | 155,933 | 460,081 |
Above 5 years | 16,078 | 10,738 |
Total | 550,617 | 1,400,107 |
46
NATURA &CO HOLDING S.A.
NOTES TO THE INDIVIDUAL AND CONSOLIDATED INTERIM ACCOUNTING INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
(Amounts in thousands of Reais - R$, except as mentioned otherwise)
34. | INSURANCE |
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 |
36. | SUBSEQUENT EVENTS |
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.
47
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.
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48