Will the corporate streamlining initiatives lead to cost reductions or margin expansion in upcoming quarters?

Fundamental outlook

Natura’s Q2 results already show the first tangible benefits of its “corporate‑streamlining” plan. The announced probable divestiture of Avon International (targeted within the next 12 months) will remove a non‑core, low‑margin segment and cut overheads associated with duplicate functions across the two brands. Moreover, the company highlighted “greater visibility into Latin America’s results” and “positive cash generation” driven by the more mature Wave‑2 integration of Natura and Avon. These points signal that the streamlining is moving beyond a paper‑work exercise to real, operational efficiencies—chiefly lower SG&A spend, tighter procurement, and a leaner head‑count. As a result, we can expect a modest but measurable cost‑reduction trajectory that should translate into a margin expansion in the next two quarters, even before the Avon sale is booked.

Trading implications

The market has only priced in the short‑term cash‑flow boost (the stock is up ~5 % on the earnings beat). The upside from a cleaner cost base and the upside of a higher gross‑margin profile is still under‑appreciated. Assuming the divestiture proceeds on schedule and integration synergies materialize, Natura’s adjusted EBITDA margin could rise by 150–200 bps YoY in Q3‑Q4. This would support a re‑rating of the stock toward a 12‑month forward EV/EBITDA multiple of ~7.5× (vs the current ~6.8×), implying a price target in the BRL 30–32 range.

Actionable steps

1. Buy on dips – if the price falls back below the 20‑day EMA (≈ BRL 28.5) on volume‑light days, it offers a low‑risk entry ahead of the margin‑expansion catalyst.
   
2. Monitor margin trends – watch the upcoming Q3 earnings call for the “adjusted EBITDA margin” guidance; a beat of the consensus will likely trigger a short‑to‑medium‑term rally.
   
3. Watch the Avon sale – any material deviation (delay or lower‑than‑expected proceeds) could cap the upside, so keep a stop‑loss around 5 % below the entry level.
   

Overall, the streamlining moves are poised to deliver cost savings and a healthier profit profile, making Natura a bullish play for the next two quarters.