Natura Cosméticos (NATU3) Q2 2026 earnings summary

Executive summary

• Q2 2026 results were below expectations due to significant operational and macroeconomic challenges in Brazil, including severe product shortages, supply chain disruptions, and a temporary tax mismatch, leading to a consolidated revenue decline of 9.1% year-over-year.

• Hispanic markets delivered steady growth and margin improvement, with revenue up 7.2% in constant currency and strong performance in Mexico and mature markets, offsetting some of Brazil's weakness.

• Net income was BRL 35 million, down sharply from BRL 446 million in Q2 2025, mainly due to worsened net financial results, derivative settlement costs, and higher tax expenses.

• Net debt decreased sequentially to BRL 3.9 billion, supported by positive free cash flow generation of BRL 342 million.

• Strategic changes, including franchise contract migration, new digital pricing policies, and a refreshed operating model, were implemented to support future growth.

Financial highlights

• Consolidated net revenues were BRL 5,170 million, down 9.1% year-over-year; Brazil declined 14.8% and Hispanic Latam grew 7.2% in constant currency.

• EBITDA margin was 12.0% (down 200 bps YoY); excluding temporary tax effects, margin was 13.2% (down 80 bps YoY).

• Net income was BRL 35 million, down BRL 410 million YoY, mainly due to negative operating leverage, derivative settlements, and higher tax expense.

• Free cash flow to firm was BRL 342 million, with working capital improvements offsetting lower net income.

• Net debt ended at BRL 3.9 billion, leverage ratio at 2.06x, a sequential reduction of BRL 179 million.

Outlook and guidance

• Gradual recovery in Brazil is expected in the second half of 2026 as operational fixes and supply chain stabilization take effect.

• EBITDA margin ambition for full year 2026 is no longer targeting expansion over 2025 levels, with focus on long-term brand health and continued investment in innovation, marketing, and digital systems.

• Positive free cash flow and leverage within the target capital structure are expected for year-end.