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Companies & industry

Cosmetics industry remains on track to meet annual forecasts despite deceleration

The cosmetics industry in Brazil showed a slowdown in the first half of 2014, but is still expected to meet annual sales goals. According to the Brazilian Association of Cosmetics (ABIHPEC), the industry is likely to end the year with a turnover of R$ 42.6 billion (ex-factory), against R$ 38.1 billion in 2013, which represents an increase of 11.8%.

João Carlos Basilio, president of ABIHPEC

João Carlos Basilio, president of ABIHPEC

In the first half of 2014, the industry recorded a turnover of R$ 19.5 billion in sales, with a 12.6% increase compared to the same period last year. In terms of sales volume, the growth was 7%. Despite the positive figures, industry giants such as Natura did not have their best period, causing concern to the market.

The Brazilian-based multinational company recorded net turnover of R$ 1.802 billion in the second quarter of 2014. Between April and June of this year, it also reported net earnings of R$ 175.8 million and EBITDA (earnings before interest, taxes and amortization) of R$ 352.3 million. Compared with the same period last year, the figures showed a modest growth of 5.1%.

According to the company, the performance was affected by a quarter with 10% fewer working days than a year ago, mostly due to the World Cup in Brazil. The drop in profitability was also impacted by increased operational costs as well as a rise in default rates.

Even in view of Brazil’s uncertain economic environment, Natura remains confident in medium-term strategies, such as the expansion of its digital platform ‘Rede Natura’, in that each consultant has its own webpage to market their products. In the first half of 2014, Natura also inaugurated a sustainable industrial complex in the Amazon. With an area of 172 hectares, the so-called ‘Ecoparque’ will concentrate the production of soaps and oils, and is expected to generate around 250 direct and indirect jobs by December 2014. Natura has maintained its forecast of R$ 500 million investment in capital expenditure by the end of the year.

"Despite a second quarter that fell below expectations, I am confident that our activities underway, associated with a more balanced calendar of working days in Brazil, will enable us to recover Natura’s growth and profitability in the second half,” says Roberto Pedote, vice president of Finance and Institutional Relations of Natura. “We believe in the implementation of our strategy, and at the same time, we are looking at a more challenging scenario in the short term, increasing our focus on innovation, productivity gains and evolution of the current model."

Natura's plant in Cajamar

Natura’s plant in Cajamar

ABIHPEC also remains optimistic about the year-end figures. According to the association, the contribution of the cosmetics industry to national economy activity should increase from 1.8% to 2% of GDP by 2016. "The industry growth is in line with our year-end forecast. Brazil is currently the world’s third largest consumer of toiletries, fragrances and cosmetic products, behind only the US and China," said Joao Carlos Basilio, president of ABIHPEC.

He also highlights that beauty companies should invest R$ 14.1 billion in 2014, which is 5.2% higher than the amount recorded in 2013. This sum will be directed to brand investments (R$ 9 billion), assets (R$ 3.5 billion) and R&D (R$ 1.6 billion). One of the main reasons for growth in investments is the increasing competition. "Competitiveness in the industry has risen significantly. It is no longer enough for a company to simply offer a service; its brand must be promoted and recognized,” says Basilio.

Aline Quezada

Portfolio

© 2014 - Brazil Beauty News - www.brazilbeautynews.com

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