Consolidated net revenues totaled R$ 3.6 billion, 17.7% higher than in 2007. Net income of R$ 542.2 million was 17.3% higher than in the previous year and EBITDA totaled R$ 859.9 million, growing 22.5% in relation to 2007. The EBITDA margin of 23.8% was above the guidance for the minimum of 23% disclosed at the beginning of the year, and which remains for 2009 and 2010. At the end of 2008, our cash balance amounted to R$ 350.5 million and our net indebtedness corresponded to 0.11 times EBITDA for the year.

Consolidated Net Revenues

In the fourth quarter of 2008, consolidated net revenues totaled R$ 1.145 billion, growing 22.0% in relation to 2007. In Brazil, net revenues increased 20.1%, and abroad the increase was 63.6% in Brazilian reais (43.5% in weighted local currency).

In 2008, consolidated net revenues totaled R$ 3.618 billion, growing 17.7% in relation to 2007. In Brazil, net revenues increased 16.3% and abroad, the increase was 45.9% in Brazilian reais (45.9% in weighted local currency). The share of revenues from the foreign market in total revenues increased from 4.7% in 2007 to 5.9% in 2008.



Costs and Expenses

The Cost of Sales dropped from 32.3% in 2007 to 31.9% in 2008 due mainly to a better management of manufacturing costs, lower incidence of losses of products and promotions, and lower average income tax rate in the Brazilian operations.

Selling expenses, as a percentage of net revenues, were stable at 33.8% in the fourth quarters of 2008 and 2007. Expenses increased due to the expansion of the sales force in foreign operations and the regionalization process of the commercial area in the Brazilian operations. These expenses were offset by productivity gains in the provision of services to customers in Brazil and by the reduction of the unit cost of the magazine, which is our sales catalogue.

Selling expenses, as a percentage of net revenues, increased from 31.5% in 2007 to 32.5% in 2008, due to the increase in marketing expenses in Brazil, as planned and disclosed in our action plan, in addition to the strong growth of the sales force in the foreign operations.

Administrative expenses, as a percentage of net revenues, dropped 210 percentage points from 13.1% in the fourth quarter of 2007 to 11.0% in the fourth quarter of 2008. This reduction, influenced mainly by events in the Brazilian operations, was partially offset by higher expenses with foreign operations, which is a reflection of the expenses with the structure established to support the studies and planning for the United States and a higher provision for profit sharing
in 2008.

In the year, administrative expenses, as a percentage of net revenues, dropped from 12.7% in 2007 to 11.6% in 2008, basically due to the same factors mentioned above.

EBITDA and Net Income

Consolidated EBITDA totaled R$ 259.6 million in the fourth quarter of 2008 compared with R$ 199.4 million in the fourth quarter of 2007, a growth of 30.1%. The EBITDA margin grew from 21.3% in the fourth quarter of 2007 to 22.7% in the fourth quarter of 2008. In 2008, EBITDA totaled R$ 859.9 million, up 22.5% from the R$ 702.0 million seen in 2007. The margin was higher than the minimum we established as guidance for the three years between 2008 and 2008, totaling 23.8% in
the year.



Part of Natura’s risk management policy is to keep its results, projected for a period of at least six months, as independent as possible from foreign exchange variations. Our hedging model, which takes into consideration foreign exchange variations on the inputs, foreign investments, and balances in other currencies, has positively influenced net financial income and expenses in the fourth quarter of 2008 and 2008 as a whole.

Consolidated net income totaled R$ 162.6 million in the fourth quarter of 2008 compared with R$ 135.6 million in the fourth quarter of 2007, a growth of 20.0%. The lower growth rate in net income in relation to EBITDA in the fourth quarter of 2008 is mainly due to higher income tax expenses, which resulted from the linearization methodology of the annual effective rate, which was higher than projected.

In the year, consolidated net income was R$ 542.2 million compared with R$ 462.3 million in 2007, representing a growth of 17.3% and a net margin of 15.0% in both years.

The higher income tax expense in 2008 was mainly due to: 1) non-declaration of interest on capital; 2) increase in the losses of subsidiaries in relation to income before income tax; and 3) lower representativeness of the reversal of the provision
for goodwill.

Investments (Property, plant and equipment)

Investments in property, plant and equipment in 2008 totaled R$ 102.7 million and were mainly in the expansion of the production capacity, logistics, and information technology. For 2009, the planned investments total R$ 140.0 million.

Pro Forma Results per Operation Block

Since the second quarter of 2007, we have been presenting the pro forma results in Brazilian reais of the following blocks: Brazil, operations under consolidation, and operation under implementation. The profit margin accrued from the exports from Brazil to foreign operations was deducted from the Cost of Sales of the respective operations, showing the real impact of these subsidiaries on the company’s consolidated result. Accordingly, the pro forma Statement of Income Brazil shows only total sales in the domestic market.

As from the first quarter of 2008, we began to present the pro forma results of foreign operations when we started having results from Latin American (LATAM) operations and other markets. In the LATAM operations, we highlight two operation blocks: under consolidation (Argentina, Chile and Peru); and under implementation (Mexico, Colombia and Venezuela).



In France and the United States, we had operating losses (EBITDA) of R$ 16.6 million in the fourth quarter of 2008 compared with R$ 6.6 million in the fourth quarter of 2007, influenced by the expenses of the analysis and planning project in the United States and the still negative results in France. In 2008, these losses amounted R$ 42.8 million for the same reasons mentioned above.



In the operations under consolidation (Argentina, Chile and Peru), net revenues were R$ 55.6 million in the fourth quarter of 2008, showing a weighted growth of 34.7% in local currency (55.7% in Brazilian reais) from the fourth quarter of 2007. In 2008, these operations show net income of R$ 164.4 million, representing a weighted growth of 39.6% in local currency (35.6% in Brazilian reais) from 2007.

EBITDA from these operations broke even again in the fourth quarter of 2008 at R$ 0.6 million (positive) compared with R$ 2.9 million (negative) in the fourth quarter of 2007. In 2008, EBITDA also practically broke even (R$ 1.4 million negative) with a significant increase in the margin from -4.2% in 2007 to -0.9%. The increased gross profit from these operations was used in marketing expenses and increasing the sales force. There were 90,000 consultants in these operations at the end of the year, showing a strong increase of 29.6% in relation to the same period the previous year.



In the operations under implementation (Mexico, Venezuela, and Colombia), net revenues were R$ 15.0 million in the fourth quarter of 2008 compared with R$ 7.5 million in the same period the previous year. In 2008, net revenues from these operations were R$ 44.0 million compared with R$ 21.7 million in 2007. There were 28,200 consultants in these operations at the end of the year.



Cash flows

The generation of free cash totaled R$ 499.1 million in 2008 compared with R$ 171.3 million in 2007. Internal cash generation in 2008 amounted to R$ 630.2 million, up 17.3% from 2007. This total includes R$ 29.7 million of operating working capital.

For a better understanding of the reduction in the working capital for 2008, it is necessary to take into consideration the events that took place in 2007: 1) extraordinary reduction in accounts receivable of R$ 122.0 million at December 31, 2007, due to the more flexible credit policy adopted for Christmas sales; and (2) effect of R$ 25.0 million in the balance of inventories due to lower-than-estimated revenues for
that period.

There were also temporary effects of R$ 24.0 million in taxes recoverable (net of temporary effects of taxes payable), arising from the change in the tax substitution system in some states, in addition to the structural effects of: 1) R$ 15.0 million in taxes payable due to the extension in the period for the payment of ICMS in the state of São Paulo; 2) R$ 32.0 million in inventories due to the physical decentralization and better coverage of Foreign Operations; and 3) R$ 28.0 million in salaries payable arising from the change in the variable compensation policy. Including these effects, working
capital evolved in line with the company’s growth and
business strategy.

Investments in property, plant and equipment in 2008 totaled R$ 102.7 million and were mainly in the expansion of the production capacity and logistics and information technology. Investments in property and equipment in 2009 will total R$ 140.0 million.