Natura focused on 'disciplined allocation' after Aesop sale; shares rise

SAO PAULO (Reuters) -The chief executive of Brazilian cosmetics maker Natura &Co Holding SA said on Tuesday the company was now focused on a disciplined capital allocation and deleveraging after it agreed to sell luxury brand Aesop to L'Oreal.

Welcomed by analysts, the deal announced on Monday sent shares in the Brazilian firm up as much as 10% in morning trading, making it the top gainer on the country's benchmark stock index Bovespa.

Fabio Barbosa told reporters Natura's financial leverage was "practically going down to zero" following the transaction, considering both debt repayments and the cash raised, but added it was time for "discipline".

He said the company was not considering further divestments or fresh acquisitions following the $2.53 billion deal, whose main goal was financially deleveraging Natura amid high interest rates.

The firm, which grew through high profile acquisitions in recent years before an organizational shakeup that saw Barbosa taking the reins last year, is now looking to improve operations in Latin America as well as Avon International and The Body Shop operations, he said.

Analysts expect the Aesop deal to open additional room for that, although some still see difficulties ahead amid pressured results as Natura grapples to improve margins and profitability.

"We welcome efforts to simplify its structure amid the adverse scenario, but in terms of fundamentals, the short term should remain challenging," said analysts at BTG Pactual, "Neutral" rated on the firm.

JPMorgan took a more optimistic tone, dubbing the deal transformational for Natura as it would allow management to fully focus on operating results and move faster, without re-thinking important decisions due to cash limitations.

"Also, it can potentially position Natura back as a solid dividend play," JPMorgan said. "Overall, we remain Overweight on Natura, which is our LatAm retail top pick."

(Reporting by Gabriel Araujo; Editing by Steven Grattan)