Credit Suisse Midsummer LatAm Conference New York l...
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Natura Credit Suisse Midsummer LatAm Conference New York l August 2011
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NATURA´S ESSENCE
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REASON FOR BEING
Our Reason for Being is to create and sell products and services that promote well-being/ being-well
WELL-BEING
is the harmonious, pleasant relationship of a person with oneself, with one’s body
BEING-WELL
is the empathetic, successful, and gratifying relationship of a person with others, with nature and with the whole
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Life is a chain of relationships nothing in the universe exists alone everything is interdependent.
It is our belief that the appreciation of the importance of relationships is the foundation of an enormous human revolution in the search for peace, solidarity and life in all of its manifestations.
The continuous search for improvement promotes the development of individuals, organizations, and society.
Commitment to the truth.
BELIEFS
The greater the diversity, the grater the wealth and vitality of the whole system.
The search for beauty, which is the genuine aspiration of every human being, must be free of preconceived ideas and manipulation.
The company, a living organism, is a dynamic set of relationships. Its value and longevity are connected to its ability to contribute to the evolution of society and it sustainable development.
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3.192
TIME LINE
657
170 5
70s 80s 90s 00s
1969: a small laboratory
and two passions:
cosmetics and
relationship
1974: decision to use
direct sales
Proposal to use natural
ingredients in formulas
Program Crer para Ver
(See to believe)
Strong growth, based on
regional expansion and the
product portfolio
Operation in Chile
Cosmetic products
with refill
Merger of companies that
formed the Natura System
Reason for Existence and Beliefs Operations in Argentina and Peru Board of Administration
Ekos Line (2000)
Natura Space Cajamar (2001)
Initial Public Offering Bovespa (2004) Follow on (2009) Carbon Neutral Program
Leadership in Brazil (2004)
Operations in Mexico and Colombia
Evolution of
management model
Revenue (USD millions)
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VALUE PROPOSITION
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VALUE PROPOSITION
Social
● Wealth creation to consultants
• R$ 70 millions invested in CSR1
• Benefits extended to extractives
communities
Economic
● Strong cash flow generation
● Attractive growth and
profitability
● Consistent dividend payments
Environmental
• Carbon neutral operations
• Utilization of refill packages
• Sustainable extraction
• Use of recycled and recyclabe
materials
1 Corporate and Social Responsibility
Channel Products
Corporate behavior
Brand Essence
Attractive market with differentiated growth profile
Delivery of “Triple Bottom
Line”:
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Countries 2010 CAGR % ‘05- ‘10
United States 60 1.1%
Japan 44 0.2%
Brazil 37 13.3%
Mexico 9 7.5%
Argentina, Chile, Colombia and Peru
10 10.9%
Countries in which Natura operates 56 11.8%
World 382 5.1%
Size of CF&T market (in US$ billion)
Source: Euromonitor 2010
The markets in which Natura operates represent 14.8%
of the global CF&T market and have a growth rate of 2.3x
that of the total market
RELEVANT MARKET WITH DIFFERENTIATED GROWTH
Direct sales share in the CF&T Market
Region Direct Sales
(%) 10x09 (pp)
Latin America 27.9% + 1.1
Brazil 27.0% + 1.6
Argentina 24.8% + 0.4
Chile 18.1% + 0.7
Colombia 28.9% + 1.4
Mexico 32.2% + 0.3
Peru 44.2% + 0.8
Eastern Europe 20.7% - 0.3
Asia Pacific 11.5% 0.0
Australasia 9.1% - 0.1
North America 8.4% - 0.7
Western Europe 3.4% 0.0
Africa / Middle East 2.5% 0.0
Source: Euromonitor 2010
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Market
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GDP growth
Core market growth in real
terms
2002 2.7% 2.5%
2003 1.1% 7.0%
2004 5.7% 12.2%
2005 3.2% 9.6%
2006 3.8% 10.1%
2007 5.4% 8.3%
2008 5.1% 10.8%
2009 -0.2% 10.4%
2010 7.5% 7.9%
CAGR ‘02- ‘10 4.0% 8.8%
Core market growth in real terms vs. GDP in Brazil
Source: IBGE, Abihpec, FGV and Celetem (BNP Paripas Group)
Demand drivers in Brazil
• Increasing purchasing power of C and D income classes
• Greater participation of women in the labor market
• Cultural emphasis on personal and aesthetic treatments
R$ 2.983 R$ 1.338 R$ 809
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INDUSTRY WITH A HIGH GROWTH RATE Market
51%
25%
34,0%
53,0%
15,0%21,0%
2005 2010
Brazil- Social Income Classes
Class AB Class C Class DE
Average Income:
Macro Economic Drivers in Brazil
• 36 million people will move up to Classes A, B and C (FGV) until 2020
• 20 million people left poverty since 2003 (FGV)
• Only in 2010, almost 19 million people left classes D and E (Celetem)
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Natura is the leader in Brazil Market Share Total CF&T (Euromonitor)
(Percentage)
Natura Market Share per Segment
2010
14.4%
T: 8.1%
CF: 23.1%
Source: Euromonitor 2010
CF: Cosmetics and Fragrances
T: Toiletries
BRAZIL
10,5
14,4
12,6
9,8
7,9
9,7
2,9
6,8
6,36,57,3
6,25,0
2003 2004 2005 2006 2007 2008 2009 2010
Natura Unilever Avon
Procter & Gamble O Boticário Colgate
L'Oréal
10
4,7
Market
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INTERNATIONAL OPERATIONS
¹Argentina, Chile and Peru ²Mexico and Colombia
1,0%
3,5%
0,1%
0,7%
2003 2004 2005 2006 2007 2008 2009 2010
Operations in Consolidation¹ Operations in Implementation²
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Market Share Total CF&T (Euromonitor)
(Percentage)
Source: Euromonitor 2010
Market
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BRAND PREFERENCE1
2008 2009 2010
46 47
49
International operation:
We strengthened brand awareness in all countries
Argentina and Peru: we are among the top three preferred brands
CF&T Brand Preference in Brazil (%)
1 Source: Brand Essence / Ipsos
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Brand
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Enjoyment
Brazilian-ness
Naturalism
Quality
Innovation
Biodiversity
Philosophic Attributes
Linked to the our Essence
Emotional Attributes
Linked to human relations
and affecting emotions
Functional Attributes Linked to the concrete offer
of the brand in the market
Sustainable
development
Development
Opportunity
Take care of
relationships
Raise
Awareness Commitment to
truth
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BRAND ATTRIBUTES
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Brand
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2008 2009
PRODUCT INNOVATION
68
.8
67
.3
65
.7
2010
123 113 191
2.8% NR 2.6% NR 2.8% NR
Number of products launched
Innovation index1
1 Percentage of products launched in the last 24 months in the company´s revenue
• Products with funcional, emocional and philosofical benefits
• Open Innovation exceeded 50% of the projects
• Sustainable use of Brazilian biodiversity - Ekos, Chronos, Una
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Products
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2009
2008
2010
+ 17.5%
+ 19.8% + 33.9%
+ 20.8%
731
875
1,0
29
119
159
192
849
1,0
34
1,2
21
+ 21.8 %
+ 18.0%
• high productivity
• focus on training
Growth of CNs in Brazil (thousands) 2Q11: 1,079 (+15,6%)
Growth of CNs in IOs (thousands) 2Q11: 217 (+24,0%)
Total (thousands) 2Q11: 1,296 (+16,6%)
OUR CHANNEL
• Consultants are Natura´s first consumers
• Driver sales through personal relationship
• Channel disseminate Natura´s values with consultants acting as
agents of social transformation
• high satisfaction
• low turn over
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Channel
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Triplle Bottom Line Results
Generating value for all steakholders by transforming social and
environmental challeges into business opportunities
Sustainable management model
CORPORATE BEHAVIOR
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Corporate Behavior
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SOCIAL AND ENVIRONMENTAL RESULTS 2010
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CO2 emissions (CO2 emitted / Kg of
product sold)
Corporate Behavior
3,82 3,55
3,30
2008 2009 2010
- 7,0% • Carbon Free since 2007
• Relative Greenhouse Gases reduction since 2006: - 21%
• Reduce of water consume at the units in 2010: -10%
• R$ 13 million of “Crer pra Ver” products selling
• Distribution of resources with our Consultants : R$ 2,738
per consultant per year
• In 2010, our network of relationships involved 25 supplier
communities comprising 2,301 families
• Distribution of resources with supplier communities: R$
8.44 million (57% up 2009)
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ECONOMICS
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Net Revenues (R$ million)
Net Income and Margin (R$ million)
EBITDA and Margin (R$ million)
CAGR `08 -`10 = 19.8% CAGR `08 -`10 = 20.9% CAGR `08 -`10 = 19.8%
3,576
4,242
5,137
2,298 2,539
2008 2009 2010 6M10 6M11
860
1,008
1,257
575 591
24.1% 23.8%24.5% 25.0%
23.3%
2008 2009 2010 6M10 6M11
518
684 744
333 339
14.5% 16.1% 14.5% 14.5% 13.3%
2008 2009 2010 6M10 6M11
10.5%
2.8%
1.7%
21.1%
24.6%
8.8%
Consolidated
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(1)
9
13
2
9
2008 2009 2010 6M10 6M11
ECONOMICS
20 20
Operations in consolidation (Argentina, Chile, Peru)
Net revenues (in R$ million) EBITDA (in R$ million)
164
219
256
114 137
2008 2009 2010 6M10 6M11
+30.4 % in local currency
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(38)
(42)
(32)
(13) (13)
2008 2009 2010 6M10 6M11
ECONOMICS
21 21
Operations in implementation (Mexico and Colombia)
Net revenues (in R$ million) EBITDA (in R$ million)
44
66
98
43
66
2008 2009 2010 6M10 6M11
+56.2 % in local currency
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ECONOMICS
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Capex (in R$ million)
Dividends paid and pay-out ratio (in R$ million)
500
598
719
96.0%
87.0%
95.0%
2008 2009 2010
103
141
237
300
2008 2009 2010 2011E
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LOOKING AHEAD
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Management Model • Organizational culture
• Leadership
development
Latin America (excluding Brazil) • Ambition to be among the top brands in
the market
• Leverage current “infrastructure” with
innovation in the channel , category
strategy, local production and corporate
behavior
Ongoing investment
in infrastructure:
• IT (commercial and
logistical process)
• Logistical model
• Production capacity
Brazil
• Expand market leadership through
new value proposals in white spaces
• Intensify regional activity and
customization of consumer
experience
Innovation
• Products and concepts
• Commercial models
• Digital technologies
LOOKING AHEAD
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Presti
ge
Massti
ge
Massiv
e
Source: Booz & Company research, 2009
DEMOCRATIC AND ASPIRATIONAL BRAND
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99.5
%
90.8
%
89.1
%
89.7
%
66.4
%
58.4
%
37.8
%
100.0
%
Market Natura
23
.9 %
10
.9%
11
.1%
25
%
20
.9%
3.0
%
6.3
%
21.5
% 25
.7 %
3%
18.0
%
10
.8%
54
.8%
21.5
%
¹ Number of households that purschase at least one product in the last 12 months
Source: Kantar Panel Research 2010
Categories Penetration¹
BRAZIL: STILL PLACE FOR GROWTH
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INTERNATIONAL OPERATIONS
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Natura Ranking Evolution 2009 -> 2010
8º -> 8º 6º -> 6º 23º -> 17º 23º -> 22º 8º -> 8º
Total CFT Market (USD)
(global ranking)
3,381 (22º)
8,650 (11º)
2,059 (35º)
3,426 (21º)
1,699 (37º)
Main competitors Retail
P&G
Unilever
Colgate
Colgate
Main competitors Direct sales Avon
Jafra
Fuller
Avon
Amodil
Avon
Belcorp
Oriflame
Avon
Belcorp
Unique
Belcorp
Unique
Avon
P&G
Unilever
Colgate
L´Oréal
P&G
Unilever
P&G
L´Oréal
Unilever
Unilever
P&G
CFT growth 05-10 (%) CAGR
8% 7% 20% 8% 10%
Source: Euromonitor 2010
Colombia Mexico Chile Peru Argentina
Tsu
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INVESTMENT IN INFRASTRUCTURE
Investment in Distribution Centers (DCs): Brazil:
• New DCs in Uberlândia and Castanhal municipalities
• Doubled the capacity of the Canoas distribution center
• Two new Hubs in Brasil (Belém and Salvador)
International Operations:
• expansion in Chile and Peru • modernization of picking lines in
Argentina and Colombia.
Local production through partnerships: 2010 in Argentina and 2011 in Colombia and in Mexico; Increased investments in Information Technology.
Argentina
Brazil
Chile
Peru
Mexico
Colombia
France
DC
Production
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A B C D
São Paulo
Mid West1
North/Northeast
South
Regio
nal U
nit
Channels
Business Units Management by Category and Brands
A B C D
Argentina
Chile
Colombia
France
Mexico
Peru
Regio
nal U
nit
Channels
Business Units Management by Category
and Brands
Brazil Int´l
• Consolidation of process management;
• Development of leaders;
• Strengthening of the organizational culture.
MANAGEMENT MODEL
29
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Because of its corporate behavior, the
quality of the relationships it establishes
and the quality of its products and
services, Natura will be an international
brand, identified with the community of
people who are committed to the
construction of a better world, based on
a better relationship with themselves,
with others, with nature of which they
are part, with the whole.
Vision
30
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Investor Relations
Roberto Pedote
Helmut Bossert
Patrícia Anson
Bruno Caloi
Bruno Compagnoli 31
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Employees: 294 (132 SF)
CNs: 31 thousand
Source: Euromonitor 2010
Chile
8.6
3.4
1.7
2.0
3.4
37.4
Argentina
Employees: 329 (174 SF)
CNs: 53 thousand
Mexico
Employees: 341 (250 SF)
CNs: 41 thousand
Colombia
Employees: 172 (110 SF )
CNs: 19 thousand
Available Consultants (C12): 197 thousand
Employees: 1,465 (860 SF)
International France
Employees: 48 (20 SF)
CNs: 3 thousand
Brazil
Employees: 4,821 (877 SF)
CNs: 1.029 thousand
Employees: 281 (174 SF)
CNs: 46 thousand
Peru
Total CFT Market
Our Operations
15,7
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Key Brands
Children Care
Body
Anti - Wrinkles
Deodorant
Hair
Men's grooming
Facial Make Up
Sunscreen
Fragrances
Oils
Soaps
Main Competitors
Johnson & Johnson Procter and Gamble
Avon NIVEA
Hypermarcas NIVEA
Avon O Boticário
Procter and Gamble Unilever
L’Oreal Unilever
Johnson & Johnson NIVEA
Unilever Avon
O Boticário Avon
Colgate Unilever
Unilever Bertin
1º 2º
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CONSOLIDATION OF THE CNO MODEL IN BRAZIL
1 CNO : up to 150 CNs
1 GR: up to 15 CNOs
1 GR: up to 2,250 CNs
Brazil (2011)
1 GR 13 CNOs
1 CNO 90 CNs
1 GR 1,111 CNs
By the end of the 8h cycle.
GR – Relationship Manager CNO – Natura Super Consultant CN – Natura´s Consultant
• CNO model in Brazil: first complete cycle of operations in 2010
• Focus on training and welcome programs for new consultants
• Reduction in turnover - both total turnover and consultants who have been with the
company for less than a year
CN CN
CN
CNO
CN
CN CN CN
CN
CN
CNO CNO
GR
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Commitment to truth
Be authentic and ethical, committed to yourself and others.
Defend your beliefs and act in accordance with them.
Take care of relationships
Doing things together is better, open up to each other with generosity and empathy, creating an environment of trust with quality connections.
Recognize that others are different from you, listen without judging, respect others’ opinions, combining differences to better the whole.
Continuous improvement
Keep improving, evolve in all dimensions: material, emotional, intellectual and spiritual.
Keep seeking self-knowledge, admitting your own talents and limitations.
Create an environment that promotes learning, continuous improvements and recognize high performance.
Do things well
Focus on doing everything with simplicity, but with beauty and quality, paying attention to detail.
Be disciplined and honor your commitments.
Innovation
Engage, lead and do what has never been done before. Take risks.
Constantly question the old and be stimulated by seeking the new.
Sustainable development
Always deliver superior results and significant economic, social and environmental value.
Manage the short term with the commitment to build the company’s future.
Pleasure and Joy
Face daily challenges with optimism, lightness and good spirits.
Celebrate achievements, nourish enthusiasm and energy that encourage us to evolve and keep doing more and better.
Be realized by your work, which should have an affinity with your purpose in life, and find meaning in everything you do.
Foundations for next years CULTURE DRIVERS
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INNOVATION PLATAFORM
Senses and experience
designs
Integrality Sciences
Classical Sciences
Sustainable technologies
Integrality
Actio
n V
iew
Sense 37
Foundations for next years
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Financial Results Consolidated Results (R$ 000)
2008 2009 2010 10x09 CAGR 6M10 6M11 10x11
Net Revenue 3,576 4,242 5,137 21.1% 19.8% 2,298 2,540 10.5%
Gross Margin 68.9% 69.5% 69.7% 69.0% 70.2%
EBITDA 860 1,009 1,257 24.6% 20.9% 575 591 2.8%
EBITDA Margin 24.1% 23.8% 24.5% 25.0% 23.3%
Net Income 518 684 744 8.8% 19.8% 333 339 1.7%
Net Margin 14.5% 16.1% 14.5% 14.5% 13.3%
CAPEX 102.7 140.6 236.9 68.5% 51.9% 63.0 100.7 78.9%
Leverage 0.1 0.2 0.1
Dividends 500 598 719 20.3% 19.9%
Pay-out ratio 96% 87% 95%
Free Cash Flow 484.4 418.6 716.3 71.1% 21.6% 383.9 160.9
Brazil 2008 2009 2010 10x09 CAGR 6M10 6M11 10x11
Net Revenue 3,364 3,949 4,765 20.6% 19.0% 2,133 2,327 9.1%
Gross Margin 69.3% 69.9% 70.4% 69.8% 71.1%
EBITDA 860 1,086 1,335 23.0% 24.6% 611 629 2.9%
EBITDA Margin 25.6% 27.5% 28.0% 28.6% 27.0%
International Operations
Operations in Consolidation 2008 2009 2010 10x09 CAGR 6M10 6M11 10x11
Net Revenue 164 219 256 17.0% 24.7% 149 180 20.8%
EBITDA (1) 9 13 1.8 9.5 414.9%
Consultants (000) 90 114 130 14.1% 20.0% 124 143 15.3%
Operations in Implementation
Net Revenue 44 66 98 47.8% 49.5% 43 66 52.7%
EBITDA (38) (42) (32) (12.8) (13.4) n/a
Consultants (000) 28 44 60 36.3% 46.1% 52 71 36.9%
Other International
Investments (43) (44) (59) (24) (33)
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Operating Data
39
Consolidated Results 2008 2009 2010 10x09 CAGR 6M10 6M11 10x11
Consultants (000) 850 1,034 1,221 18.0% 19.9% 1,112 1,296 16.6%
CO2 emissions (CO2 emitted/Kg of product
sold)
3.82 3.63 3.30 -9.1%
CSR Investments 55 60 77
Brazil 2008 2009 2010 6M10 6M11 10x11
Brand Preference 47% 46% 49%
Market Share (ABIHPEC/SIPATESP)*
21.8% 22.9% 24.0%
CF Market Share 33.1% 33.7% 34.9%
T Market Share 11.5% 12.9% 13.3%
Core Market Growth 16,2% 14,4% 13,5%
CF Growth 18.1% 15.8% 16.8%
T Growth 14.5% 13.2% 10.4%
Market Share (Euromonitor) 12.9 13.9% 14.4%
Innovation Index 68.8% 67.6% 65.7% 68.1% 61.1%
Launches 123 113 191 38 40
Consultants (000) 731 875 1,029 934 1,079 15.6%
CNO (000) 5.8 9.1 11.2
International Operations
Operations in Consolidation 2008 2009 2010 6M10 6M11 10x11
Consultants (000) 90 114 130 124 143 15.7%
Operations in Implementation
Consultants (000) 28 44 60 52 71 36.9%
Other International
Consultants (000) 0.7 1.4 2.5 1.8 3.0 63.9% 39