What are the implications of the improved working capital dynamics for short‑term liquidity and dividend policy?

Liquidity outlook – The “improved working‑capital dynamics” highlighted in Natura’s Q2 release signal a faster conversion of sales into cash, driven by tighter inventory management and a more efficient receivables/payables cycle in the Wave‑2 integration markets. Coupled with the “positive cash generation” from mature Natura‑Avon synergies, the company now has a clearer, near‑term cash‑flow runway. For traders, this reduces the short‑term liquidity risk premium that the market typically prices into Latin‑American consumer stocks, opening the door for a modest re‑rating of the stock’s valuation multiples (e.g., a tighter EV/EBITDA spread). Expect the bid‑ask spread to narrow and the stock to hold better on any near‑term pull‑backs, especially if the broader market sentiment softens.

Dividend policy implications – With a more predictable cash‑flow profile and the prospect of a “probable sale of Avon International” within the next 12 months, Natura’s board will likely have greater flexibility to either sustain or modestly lift its dividend payout ratio. The company’s net income of BRL 445 million—up from the prior quarter—combined with the cash‑generation upside, should enable a dividend per‑share (DPS) that meets or exceeds the market’s 3‑4 % yield expectations for a consumer‑goods firm in Brazil. From a trading perspective, any dividend‑increase announcement or a clear guidance on a higher payout will act as a bullish catalyst; a “dividend‑first” signal could trigger short‑term buying pressure, especially in the 20‑day moving‑average zone where the stock has been trading near its 200‑day trend line.

Actionable take‑away – Keep the stock on a watch‑list for a dividend‑policy update in the next earnings cycle (Q3). A confirmed dividend hike or a forward‑looking payout guidance would likely push the price toward the upper end of the current 20‑day channel (≈ BRL 12.5–13.0). If the price pulls back to the lower 20‑day band without a fundamental change, consider a modest long‑position with a stop just below the 20‑day moving average, as the improved liquidity reduces downside risk and supports a more generous dividend outlook.