NYSE:ASAI Sendas Distribuidora Q2 2024 Earnings Report Earnings HistoryForecast Sendas Distribuidora EPS ResultsActual EPS$0.09Consensus EPS $0.07Beat/MissBeat by +$0.02One Year Ago EPSN/ASendas Distribuidora Revenue ResultsActual Revenue$3.43 billionExpected Revenue$3.60 billionBeat/MissMissed by -$171.55 millionYoY Revenue GrowthN/ASendas Distribuidora Announcement DetailsQuarterQ2 2024Date8/8/2024TimeN/AConference Call DateFriday, August 9, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Sendas Distribuidora Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 9, 2024 ShareLink copied to clipboard.There are 2 speakers on the call. Operator00:00:00Thank you all so much, and good morning, everyone. First of all, I want to thank you for your presence and welcome you all to our earnings call for the Q2 of 'twenty four. This is a quarter where we had opportunities to welcome over 2,000 new employees, which we hired now in the second quarter, and especially another 2,000,000 new monthly customers with an increase in the tickets. As you've seen in our presentation in Middle East, Assai was able to reach a milestone of 79,000,000 customers, an increase of 7,000,000 compared to what we achieved last year in the Q2. So 7,000,000 plus represents over 2,000,000 customers, almost 3,000,000 people visiting our stores, whether the new stores or the existing stores in the company. Operator00:00:51The 50th anniversary campaign we showed a video about and we plan to provide more details about because Assai traditionally has spectacular campaigns, not only when it comes to awards and activation, but also to keep loyalty active. And we're the company that's most present in Brazilian households. We're the company that has physical stores with the biggest amount of traffic and people visiting year over year, we have been overcoming expectations so the company can continue to innovate and be a reference in the market. Before we move on to the numbers, I want to talk about the environment in the market. We still feel consumers and the overall B2B customers quite pressured by debt, interest rates, some changes also in consumer habits that make us have a environment with a level of debt and purchase power that's below expectations for this moment in the year. Operator00:01:50The inflation in our perspective is in line with what's expected by us and the government with a variation level up or down, which is not maybe that relevant. Not such a big change from an inflation and deflation perspective. We also see a significant reduction in trade down that we had in the 1st 2 years of the pandemic. But also, we've been seeing that what's impacting the market as a whole is a movement with a reduction of the sizes of the packaging in certain categories of products. Since we came from an inflation period that was really high, where income didn't keep up and a lot of the movements that industries and suppliers had to keep their volumes of sales were really related to changing the size of packages. Operator00:02:42So within the strategy for the Q2 was really above all to preserve our cash position, keep up with our level of competitiveness and keep focused on store maturity, promoting a sequential increase of our gross profits and keeping up coherence and consistency, especially in our results. And we'll see this when I show you the slides, the evolution of the gross profit throughout the 3 years and keeping up coherence and keeping up the deadline periods as well. And so this could, of course, lead to something that maybe is not that healthy for the companies. So of course, discipline and expense controls maintaining the level of services in stores. The company continues to expand with over 10 stores. Operator00:03:35Now, we had already mentioned previously Sorry, guys. We had a small technical issue, but we'll be coming back in just a few seconds. Okay. We're back now. Could you repeat the last phrase, Palmeiro? Operator00:04:09Okay. Can you share the screen of the presentation? Sorry about that. We had a shutdown here. For some reason, now everyone fell off. Operator00:04:22I will be joining back in just a second. Can you share the screen again, please? And the team had already talked about the expansion traditionally, which is the focus in Assai when it comes to growth. The team has been ever since April, I understand, of course, I can give you some more info, but we had 80 new services deployed in the existing stores, which includes new services, battery, bakery and coke tots. And this makes the 2,000,000 new customers come from other formats in the food sector, also attracted by not only the location and execution of the stores, but also the new services. Operator00:05:07So I think that's the main highlight when we look at the 2nd quarter. And same stores was close to 3% with a balance in the growth of the same stores and also the growth of the expansion. So we had a growth of 11% compared to last year, 34% in 2 years, which represents in the last 2 years or 24 months, we've been anchoring this since Vitor will talk about the cash generation as well in these 24 months. But we had over $5,000,000,000 in additional amounts. So the Company is still working on its investments, growing and expansion, and we have important store openings in the 2nd semester, Guarulhos, which is something we could highlight the new unit in Guarulhos, San Jose de Hipreto. Operator00:05:52We're trying to open this year, beginning of next year and some markets and regions where SAI is not present with major opportunities. And we should also go over the milestone of 300 stores this year, probably by the end of the campaign when we are at the end of our anniversary campaign. So the EBITDA and the pre IFRS vision, as we all know, we have this trend with the purchase of the extra store in the extra stores, which increase the levels of rent in these locations. And we're really highlighting this and the best way to view this pre EBITDA is DKK 965,000,000 and a growth of 18% compared to the previous year, higher than the sales. And that highlights that Assai has 100% of the EBITDA, which is cash. Operator00:06:40And in the pre IFRS division, we have a margin that's 7.2% and LAIR evolution with profits before income tax. And we also had the impacts from the subversion that we had last year. We don't have this year. And then you see this ratio between the profits and the net income. But you can see the sufficiency operation in the company, and we have a financial expense that is due to the level of leverage that's pretty high due to the interest rates, but the company has been very focused on deleveraging. Operator00:07:18I'm not going to get into too much of the details here because Vite will cover this later on, but we really know the power of the cash generation in this business. So our leverage continues to be reduced, and we have an EBITDA that is more robust when you split this by the 12 months. And our focus is really this leverage projection. And so it's important to highlight that this level does not consider possible discounts on receivables, which are whether they're discounted or not, and the company has its projection for our net debt to EBITDA of 3.2 till the end of the year. But anyways, on the second slide, you can see how things have been evolving in stores and with the extra conversions that we already have sales of over 25% of the average in the company. Operator00:08:12And from the 10 main stores, when it comes to customer flows, 9 are convergence. The stores that are very well located, we're talking about the project and you can see the evolution of the EBITDA, especially of course, these stores are not mature. So you can have an idea that maybe the first store, which is like 2 years of ever since the opening, So most of the stores are going to continue with their 2nd year full of work. And then after, we'll be completing the 24 month cycle, and we've been working on some initiatives to balance out sales and EBITDA margin maturity. So the sales should reach $26,000,000 and the EBITDA margin pre IFRS without the impact of the leases, of course, you have the property tax impact, but it's about 5.4%, which means an EBITDA margin evolution of 1 percentage point if you already look at this from December onwards, so 6 months, December 23 to the end of June 24. Operator00:09:23The company has been really focused on improving the store network and the maturity ramp up when it comes to sales and margins, trying to balance out both of these points. And with this, we advance about 140 bps in margin compared to last year and a growth in our revenue in the 1st semester when we compare with December, which as we all know is a very typical month with a growth of revenue of about 5%. We can move on to the next slide now. As the process of conversions, as we all know, as I went through a very intense project for the expansion of the conversions. And in this slide, we brought in an evolution of the gross profit. Operator00:10:06So when you look at the amount of tickets, you can see the company more than doubled or tripled during this year and the last periods actually. And the gross profit keeps up with the same proportion. So if we take a look at this from our perspective, the positive results is that even when you go through such a big process with the conversion of the hypermarkets and the closings and during this period, we really evolved in this store format and we had 2 things that took place concurrently. We had the conversion and opening of the hypermarkets, but also the inclusion of the new services with the battery and other projects. So the first battery we opened was in the end of 2019 in Sinop, Mato Grosso. Operator00:10:48So these are different occurrences. But when you look at this due to our commercial dynamic and even with this evolution, we had a gross profit that was very stable, $16,700,000 to $16,500,000 now in the Q2 of 2024. So 2021, we still didn't we didn't start the conversions yet, but you can see gradually that the levels of gross profit get back to normality even with all of these changes as we enter new centers and include new services, we can advance. When we look at the expense perspective, the changes in the dynamics, there was always some skepticism in the market about the shift in formats. And this intends to provide better services to the population with higher income and also provide some possibilities to adapt for B2B and B2C customers with better locations that were very far off and it would be very difficult to be open in a cash and carry operation. Operator00:11:52So the changes in the assortment and the changes in certain units and other stores, when we look at the level of expenses, you can notice that the expenses in the post IFRS vision where you don't consider the lease is completely stable. So 9.7% we had seen as an SG and A percentage is prior to any conversion projects for Extra and prior to the inclusion of any services as well. So it's pretty stable, 9.7% to 9.5%. But when we look at the lease and include the lease in perspective, of course, these stores, as we mentioned in the beginning, they have a characteristic with the level of the property that's very different. But the increase in the margins and sales, when we look at those 25% more, more than offsets this. Operator00:12:41And in April, especially in our vision, there's a whole another possibility for growth in the company because when you consider the profile of regions where the cash and carry used to operate, you kind of had the situation where you could maybe not have a higher level of saturation or the capacity to penetrate in central regions. So I'd say it was a big innovation, which allowed for major movements even among competition to follow along behind us and the paths we pioneered. And as we wrap up here, I'm going to pass the phone to Vitor as he talks about the EBITDA and presents here. We still have some time for Q and A as well, but he's going to discuss the operational aspects the leverage aspects and after we get into the operational aspects. But great. Operator00:13:34But me to thank you. Good morning, everyone. But me to just described a bit of the gross profit dynamic and the SG and A. And we're going to show you here through these two metrics, look at the EBITDA and see an important evolution in the EBITDA. When it comes to the quarterly basis, we've seen evolution of $815,000,000 to $965,000,000 in the comparison quarter over quarter. Operator00:14:00And the growth of 18% that comes from an increase in sales, but also the margin expansions. And when you look at the evolution in the 6 months, you see that there's pretty much the same format, 27% growth and an increase in the margins of 0.6 percentage points. And so once again, as a basis for the success in the maturity of our stores so far as they've been converted, but also the deployment of services, as Bamideu explained. And no doubt, the control over expenses, which allows us to grow having an increase in our profitability when we look at the EBITDA line. So moving ahead and looking at a bit of the financial results, we also see positive evolution. Operator00:14:54In the comparison with the same period last year where we have stability when it comes to the representation or importance of this financial result compared to the revenue and the percentage or the ratio. But when you look at this and you compare the Q1 of this year with this quarter, you see a reduction a nominal reduction of the expense, dollars 5.10 to $468,000,000 but especially a dilution of these expenses. So as a percentage of sales, it goes from 3% of the sales to 2.6 percent of gross sales. So the evolution of gross profit and expense control generated an increase in EBITDA margin associated with the maintenance, if you look at the annual basis and the reduction, when you look at this in a sequential manner, we see a profit before income tax that had a very important growth rate, what they call the liar on the side in Portuguese. And when we look at this in the semester, this profit before income tax more than doubled from a $135,000,000 to $347,000,000 So this was an increase of 157 percent, which demonstrates we are on the right path when it comes to the strategies that the company has been adopting. Operator00:16:24What's also important to mention is when we look at the net income, it was impacted in the comparison with last year due to the significant reduction in the positive effects of the subvention in investments. But then when we look at the semester view, we have a growth of the gross the net profit. So we move on to BRL 258,000,000 in this period. Then moving on, here we have a comparison. But let me quickly show this in the presentation. Operator00:17:00We have a comparison and a number that we think we should share with you, which is the cash operational cash generation. We brought in this 2 year cycle, which really sets the beginning of the deliveries from the stores that were converted for the hypermarkets. And here we presented this comparison and analysis to show you clearly how the operational cash generation was so strong, the company generated $7,600,000,000 in cash in this period coming from the EBITDA generation, dollars 6,800,000,000 in EBITDA generated, but also a positive evolution in our working capital. So it was a major evolution in the number of stores and 64 of them were conversions and 20 were organics. And this cash generation, if you look at the investments that were required for this expansion, and these investments were very significant when it comes to the acquisition of hypermarkets, the conversion of hypermarkets or even the opening of these 20 organic stores. Operator00:18:17But also when it comes to the refurbishing and implementation of the services, the company was able to generate the necessary cash to handle basically all of the investments. To be more precise, 88% of this investment was funded with operational cash generation in this period. And I want to remind you all that these stores are still maturing. So basically, this is an analysis we consider to be very important to share with you because it demonstrates the strength of the company and how solid it is and that we're really on the right path to continue to grow our results. But of course, we also have the payment of the interest rates in this period, about KRW 3,400,000,000, and that's a direct consequence of our debt levels, as Bommito mentioned, and the interest rates in this period that also reached levels that were a lot higher. Operator00:19:14So moving on, it's also worth mentioning that the about the a bit of the evolution of our leverage. This is an indicator we've been accompanying closely. This is one of our focuses in the company, as Vamilio has mentioned, and we see ongoing improvements and reduction in the leverage. If you look at the leverage by the end of the second quarter, which was at a level of 4.25 times. You can see a reduction of 0.6 times. Operator00:19:46And with that, if you compare with the end of the second quarter this year. And this was an evolution of 0.10 for the last quarter to now. So this is an indicator we monitor closely, and it's one of the company's focuses. Clearly, we've been looking at this, and we've been seeing the evolution of the EBITDA. The reduction of the leverage is happening and it will happen throughout 2024, mainly due to the evolution of the EBITDA. Operator00:20:15For 2025, we expect to have even greater contributions coming from the reduction of the net debt. Moving on to the next slide. You can see that there's some additional information that we were presenting, which is the total availability. So we've been working on a new interpretation on this breakdown, and we brought in what's considered cash equivalents and also the receivables that are not discounted. So the first point that I think is worth mentioning is that we had an issuance of debentures that was really well very successful, which led to a higher cash position in the end of the quarter, and that made us discount less receivables in this period. Operator00:21:13So that's why we see this significant growth in availability. That's a total, DKK6.9 billion, a sequential growth of 33% through 34%. But when we look at the breakdown with the non discounted receivables, which is substantially greater, and that's the fruit of this expansion, which is mainly it's another step we're taking to improve the profile of our debt. So first, reduce costs. We had the issuance considering CDI +125, which is substantially lower, which was CDI +149. Operator00:21:57And the extension of our average term of debt, which was 28 months, but now with this issuance, it becomes 32 months as an average term. So, and so I'll say we'll continue to search for new opportunities. And so, also, we want to consider the average cash in the period. So it went over to RMB 600,000,000, and it was RMB 640,000,000 in the Q1 of 'twenty four. And then in the last quarter, it was over BRL800 1,000,000. Operator00:22:51And then here, our practice is that we'll gradually increase this cash position, providing more liquidity and increasing the financial solidness in this period. That's what we wanted to share with you guys about the financial indicators. Now I will pass the fund to Sandra as she talks about sustainability as a strategic pillar for the company. Sandra, the floor is yours. Thank you, Peter. Operator00:23:18Good morning, everyone. So within our sustainability strategy, which intends to really lever prosperity for everyone. All of our initiatives are based on 3 pillars, which are efficient operations, developing people and communities, and the ethical and transparent operations. And so here, we're really focused on reestablishing, reusing waste and that these would be intended to landfills and this is all related to our the Shinu Serta program benefiting many organizations. And we continue to develop these initiatives so that we can create a more diverse work environment based on valuing differences and back differences. Operator00:24:21And also 40% of Black leaders in the company. And in this context, we were recognized among the companies in the EPO VESPA, the Brazilian Stock Exchange as one of the companies with the highest rates of Black leadership. And we also received some indications as the best companies for LGBTQ communities to work in, partnering with Ingestutumay Universitade. And through Inchitutu Assai, we are promoting the reduction donation of food and beds and different other materials to Rio Grande Dusou and so that we can also send this throughout all of Brazil. And I would also like to mention that we are highlighting some awards and recognition that we received in this quarter because it really values our performance and the relationship with our customers, which is really essential. Operator00:25:41So at the for the 4th time, Assai was recognized in the 1st place in the retail category for modern consumers. And we were elected as the for the 9th time as the best cash and carry operation in the city of Sao Paulo, which is based on the perception from people that live in Sao Paulo. And we're 3rd place in among the best companies in the investor play, and we were the only ones in the food retail on the podium. And Assai was considered the Brazilian brand that's most valuable in the food retail sector. So these are acknowledgments that really make us happy and confident so that we can continue to work to achieve a company that's more sustainable, more solid, and with greater prosperity for all of our stakeholders. Operator00:26:36So thank you all. That's it. And I'll pass the floor on to Bommito. Okay. Can you guys hear me? Operator00:26:54Well, thanks, Sandra. Thanks, Peter, for the presentation. We brought in a bit more of the campaign details for the 50th anniversary at Assai. And Assai with the amount of 77,000,000 tickets in the quarter, really represents a huge flow of people. It's about 38,000,000 and of people passing by our stores, and it's a company that's most present in Brazilian households with the biggest flow of customers in retail stores in Brazil, and the company operates in a continent really in the national territory. Operator00:27:31So traditionally, every year, we have very strong campaigns, and this is one of the decisive initiatives for this kind of expansion to make the brand really well known and famous in the national territory and generate loyalty among customers. So the 2,000,000 customers per month we conquered in the second quarter partially come from the promotion and mouth to mouth referrals, but also services based on the quality of our culture. And so this year, we have a campaign that's probably the strongest campaign in Brazilian retail, the strongest one we've ever had. And in all years, we decided to hire a full ship from MSC crews, and it's going to be in the Brazilian coast. And our customers will be able to win 1500 trips that are going to be it's going to be a raffle. Operator00:28:30So as customers buy, the more they buy, they can expand the chances of winning and being awarded. And also the more they buy from the participating brands, we had over 50 suppliers that are the sponsors of the campaign. And besides being highlights because if the customers buy their products, they can expand their chances to achieve this. And they have a bunch of benefits with the expansion of the product. So it's a campaign that really will affect our customers a lot and also will allow us to continue to move towards conquering new customers. Operator00:29:09So our first award is BRL 5,000,000 and then you have over 50,000 awards that they can use instantly of about BRL 100. So we'll have it's going to last for 4 months, and we're going to have strong promotion in different media sources and outlets. We also shifted our registration process so that we can capture as much data as possible, enriching the basis of our CRM in our digital strategy. And Assai has been working with future as well that we have, and especially want to keep our customer loyalty and conquer new customers. So an interesting data is that the company is made up of people. Operator00:29:56Above all, the main differential is in a company is its culture, right? So within this, we're going to be sharing this with all of the employees that have over 20 years of experience. They're all going to go regardless of the position they occupy in the company. So in this way, we'll also demonstrate to who is in the operation working with the 38,000,000 people that are in that being in SAE will lead to special awards and they'll be recognized. So, well, I'm getting too excited here, so I don't want to go over too much, but I want to thank everyone working on the campaign. Operator00:30:34It was fantastic. It was a joint effort, not only in the marketing, but also the commercial and operations area. We have a challenging period up ahead, but we have a beautiful campaign, and we believe it's gonna be really good acceptance. So to anchor this, we brought 5 personalities. Each of these represent a different region in Brazil. Operator00:30:54They're very popular. We have Xange Pilares, Michel Talaga, Gabriel Marrantos, and all of them represent a specific region in our country due to the diversity. They're very popular singers and artists, and we brought them on board for this campaign. Now we're going to show you the campaign video. It's very quick, and then we'll get into Q and A. Operator00:31:29It's great to say. At Assai's anniversary, you can join us on this 50 years, we're so happy to celebrate. 20,000,000 in prizes and awards. Come join us. Trips with a plus one, and you're on a side ship. Operator00:31:47Come on, let's navigate. 5,000,000 will change a life. As we have special sales. Everyone can win something. Come and join us. Operator00:31:57Get lucky. We are plans to become a millionaire and navigate. Anniversary, a great show of awards and low prices. Now we'll start off with our q and a session. Please remember that if you have a question, you should select the Q and A icon at the bottom part of your screen, write your name and company and language into the queue. Operator00:32:40As you're announced, the request to activate your mic will appear on the screen. Then you must activate your mic to submit questions. We'd like to ask you that all of the questions should be done at once. So, Joao, we'll open up your audio, so you may proceed. Okay. Operator00:33:05Good morning, everyone. I wanted to explore 2 points here. First of all, I wanted to discuss the competitive environment, Bomedo. I think we're going through this new discussion with the SKUs. And so now we're discussing this, and it would be good to get a perspective on your opinion about payments and sales with installments. Operator00:33:37Some regions don't have demand for this kind of purchase and payment in installments, but we want to get your perspective on this and also your vision about the growth dynamic. So we have a relatively constructive perspective when it comes to food inflation at the bank here, but I wanted to get your feel. Do you see there's going to be a short term acceleration? And what's your mindset? Have you seen something change compared to the messages in the last quarter? Operator00:34:07And finally, the capital structure bit and expansion for next year and how comfortable you guys are for this expansion plan? Pretty good. Thank you so much. Okay. Thank you, Jerome. Operator00:34:19Well, let's split this up. So yes, there's a shift in the market. And, of course, there's always a possibility for changes in the competitive environment. We've been one of the protagonists when we placed, services in stores. And in our perspective, services were just, to evolve in this model. Operator00:34:41And you can see there's so many differences in levels of, income, and so the model that's adequate for one region is not always adequate for all of them. So the solution in the model for the regions is, we requested that the the inclusion of these services is necessary, and this inclusion demonstrates that it was a very assertive process. And in the Q2 now, we saw a change in the pricing in the payment term conditions. So we've been watching this very carefully. You can search for sales with 2 things, margin and terms. Operator00:35:20So margin, which is what you're always going to work towards recovering, but what we saw in the dynamic, And so it's a lot more related to the actual wholesale operations because when you expand the terms, the B customers that have working capital, it's really pressured. And financial conditions, when you stretch out and double the terms for your B2B customers or even offer 3 installments, you have an increase in sales that should impact the market as a whole. But in our perspective, it's a strategy we don't expect because as buying with installments So even with a private they have a private we even have a private label to incentivize the use of the SA card. But at this moment, we're not going to shift in the sense in our policy because this did not actually reflect that much in the stores, but maybe it's more impactful for the distribution wholesale operation that our competitor has. So if you look at the total in the market when it comes to growth in the quarter, we're really in line with what the overall market has been saying in the 2nd semester. Operator00:36:42Besides the campaign, we have many adjustments we've been working on in the commercial dynamic, negotiation with suppliers, product mixes. Of course, the Q2 was slightly below expectations, but the expectation for the 2nd semester is that it should be a more positive period. So the company and all of its efforts to that are necessary to change to have a more positive second semester we're working on. But of course, this environment we were expecting or projecting in the end of last year for this year is not at the same level of purchases we expected. The expansion plan is pretty much kept. Operator00:37:23We haven't at this moment had any signs. It's always a process that we have to be reviewing because the expansion we have up ahead will be for organic stores. And with this, differently than when we bought the extras, we had to open up as quickly as possible since we were already having the lease expenses. But with organic expansions, it's really a matter of decision. And you can decide the level of expansion versus debt, and we always monitor things like that. Operator00:37:49But at this moment, we have the 15 stores expected for 24 and the 20 stores for 2025. So a lot of the projects have already been expanding quite a bit and that this could be something we're really expecting, but it's what we see at this moment. But I do hope to have answered your question. So our next question is from Claro Lestaza, Southside and Itau Ber. Clara, we'll open up your mic, so you proceed. Operator00:38:26Please proceed. Thanks for taking my question. So more of a follow-up on the previous question, but I wanted to explore a bit of the same store sales and how that took place in the quarter, the evolution throughout the months and also maybe taking advantage of the payment term and payment conditions topic. You mentioned that maybe this is more attractive for the wholesale distribution business, but what was the performance throughout the quarter and the beginning of Q3 when you think about B2B? Do you think that they're being more attracted by other payment conditions provided by competitors? Operator00:39:10How have you guys been working on this? I think that's the first question, more of a follow-up. And the second question is really quick. It's like a working capital one. I think you made this very clear in the release that the level of suppliers in the Q2 last year had a one off effect. Operator00:39:25But if you could just go over a bit of how we should be looking at this level, maybe closer to 6 to 65 days. Eventually, so of course, offsetting some of these effects of the Q4. So Victor will talk about the dynamics of the working capital that we can see in the Q2 of last year. So about the timing dynamic, we can see the consumers always have a different dynamic. So as soon as you provide a bit higher payment term, you'll increase as purchases. Operator00:40:06But right now, the cost of cash, if you increase the level of limits, you could have higher delinquency rates. So that's something we have to be careful about and monitor and see if there's any like major modification. I want to remind you that we don't have the distribution wholesale channel. We only have the sales for cash and carry in the stores. So of course, these two channels, they do have a overlap. Operator00:40:2998% of the customers that buy for distribution also buy in the cash and carry stores. So they normally have like a product mix. So if you increase the terms, you also have an increase in sales initially. But if you don't increase the SLA, what happens is you'll perform the sales initially, but then you're going to go over, which could lead to delinquency up ahead besides the cost today of cash. So basically, I think we have to always analyze this and see how this policy will be. Operator00:40:58But according to our current policy, monitoring how we've been working on the Q2, even if this could lead to an impact on the sales for B2B. So of course, you have part of the B2Bs, which are the transformation public, those customers that work in food service, etcetera. But the resellers actually just want to know about payment terms and conditions and pricing, but it's hard to keep loyalty among this kind of customer, the resellers. So thanks for your question. Just about the working capital now. Operator00:41:41Yes, we did have a variation upon the working capital in the same period last year, which is a lot more marked or impacted by the difference and the fact that the working capital in the Q2 last year having performed in a very atypical manner with an account for suppliers that was relatively high. And when you look at the history, right, where we described this, I think, in greater detail on Page 7 on our release. But if you look at this from here forward, you see the working capital behavior is going to be very similar to what we've seen in the Q1 this year and what we're seeing in the Q2. The cash cycle is about 5 days basically. So that is what we've seen. Operator00:42:30And of course, there could be some change like 1 to 2 days up or down in supplier stock, etcetera. But when you look at the cycle, the cash cycle, we see this cash cycle that's a lot more similar to what the first and second quarters were. There's, of course, a seasonality effect in the last quarter of the year, and you have a shift in this parameter considering the high volumes of sales, but this is something that we know about in the industry and we won't behave very differently. Super Our next question is from Daniela Ager, Southside at XP. Daniela, we'll open up your mic so that you may proceed. Operator00:43:20Hi, guys. Good morning. Thanks for taking my question. My question is very quick. I think most of the topics were covered already, but it's just a follow-up on the food inflation dynamic point. Operator00:43:31So Bemidji, you mentioned there's not like major changes in the trends, but we've seen and even today, we saw the data on the inflation, surprising downwards. And that was really leveraged by categories that are really relevant like protein and dairy products. So how do you see this dynamic? I know you said you won't see too much of a change, but do you think this could be updated or changed considering the data today? But also what are the types of levers you have for possibly working on better profitability and cash generation in a scenario where you maybe have a food inflation that's still not helping that much when it comes to the same store sales dynamic? Operator00:44:12Thank you. Thank you, Dany, and thank you for the question. When I talked about the variation here and this year from a comparative perspective, looking at the turbines we had after the pandemic, from an inflation and deflation perspective, there were more sudden movements, but this year, it's a lot more stable. So yes, there are variations in the month to month comparison, but we have one component we should keep an eye open for, which is the dollar currency issue because even the proteins and other commodities are impacted by the dollar. So if you have the American currency higher, which is not the level we had expected or seen with the change in the consumer environment in the U. Operator00:44:55S. And so I think we all were kind of wondering if there could be an effect on the food inflation just as construction materials that are also impacted, right, with the new stores, especially when we're talking about steel. So there's also a reduction of the inflation, but that's a reinflation, as they call them in Brazil, where we have a reduction of the sizes of packaging, where you want to have industry keep the same pricing and at the same levels, but you have some occasional trends. So it's difficult to set because sometimes in the production reductions, considering climate conditions, we see the droughts and everything. And so it could be that in the second half, we'll have a different reality because of this. Operator00:45:41So we do expect some variations until we reach a higher stability point from a consumer perspective. And even some of the protein and commodities had some variations, but we don't see like major variations for the full year. I think that's the main point. I'm not sure if that's clear. Our next question comes from Eric Kwang, Southside at Santander. Operator00:46:07Eric, we'll enable your audio, so you may proceed. Please, you may proceed. Hey, good morning, everyone. Thanks for taking for questions. On our side, we have a quick follow-up from Danny's previous question. Operator00:46:22And Danny talked about the dynamic of the inflation. And just if you could talk about how you've been looking at the beginning of this Q3? And as we think about the same store sales, do you guys see this as an acceleration or not? Just so we can have a better feel on how this has been advancing. And then getting back to installments, just to understand more where your partnerships are. Operator00:46:46Today, you have this partnership with FICC. I'm not sure if you would like to maybe look into something where you guys can have more control. And even having some kind of a possible support for market changes if or should there be a prevailing situation with these payments conditions with installments. I think we were missing part of the answer. And basically, we have in retail as a whole been below expectation, but there are different initiatives in the company to try to offset these effects. Operator00:47:28And besides what I highlighted, we included another 80 new services, which was ever since April that we're here, which will contribute in the same stores. And other pilot tests also in product categories, depending on each region and store that also help. So we're not just, of course, stopped watching the market. We constantly look into finding more resources and taking advantage of this as we look into the customer flows we have today. I think our greatest heritage is customer loyalty. Operator00:48:02And of course, we're always searching for ways to work on this as long as this, of course, doesn't change the business model. In the Q3, as we've seen, we're really in line with the 2nd quarter. We don't expect significant variations. And then the payments and installments, as I mentioned, I think we need to separate this discussion, right? And so I don't know if you could maybe add on to this next point here. Operator00:48:37But what we noticed in this volume of sales in 3 installments is not coming so much from consumers, right? So, keeping up this will not make too much of a difference. And we have to look at this that the risk of delinquency could maybe be higher. So we're kind of following in the same direction. We're not going to be changing anything severely in the policies or restructuring a financial company or something like that will not really affect much of the dynamic now in my opinion. Operator00:49:13That's it, Bommidu. So, Eric, the our partnership with FICC, our financial services company, provides all of instruments we need to work with our customers. The SIE card allows us to perform to offer purchases in 3 installments, but it also, in certain items, allows the customer to buy a smaller amount of products with a wholesale price and not a retail price. So we also have in our stores, just to remind you, the same products have 2 prices, the retail and the wholesale prices, depending on the volumes the customer buys for each item. So the FEAC partnership would allow us to advance as we would like with this issue. Operator00:50:01And so the issue with the installments, as Romita mentioned, is more of a commercial decision to not keep up this way. Well, and I think just to add on here with the payments and installments, when you when we look at the numbers in the market, as we've seen in the competitive environment, the consolidated between the distribution wholesale and delivery wholesale operations. As we don't have disclosure or a breakdown of all this, it could give us an impression that you could a trend change, which is probably more of the wholesale and the sales volume. But by what we've been observing in the market and even the share measurements when we look at the comparables, which would be cash and carry, there's not pretty much any kind of effect there. So I don't know if that was clear, but as I saw this topic had 3 different questions. Operator00:51:06I think it's worth mentioning. Yes, that was very clear. Thank you, Belmiro. Thank you, Victor. So keeping up with our next question here from Luis Guanaiz, the sell side at BTG Pactual. Operator00:51:20Luis, we'll open up your mic, so you may proceed. Getting into a bit of the discussion on the productivity of the converted stores, I wanted to understand what the dispersion is like in these stores in different regions you've converted throughout the last 2.5, 3 years? And if you could also talk about the cannibalization effects in these stores upon the legacy stores at Assai? Thank you very much. Thank you, Louise. Operator00:51:53Yes, obviously, you have this dispersion, which is very much connected to the performance of what Extra had. So we already had this expectation that this would happen throughout the project. This was very close. Of course, there's some variations, right? Because in certain regions during this period, the closings and reopenings, you had some competitors that open up. Operator00:52:15But in some stores, the extra stores that were very strong, continue as strong SA stores and the ones that are weaker continue weaker. But it's more about the population potential, income levels and surrounding areas and then the actual store itself. There's not much very relevant impact in this. Of course, you have cannibalization. The lower the overlap between action, I'd say, any company where they we have presence in 25 states in Brazil, any operation you have will have a cannibalization level. Operator00:52:48And also because the offering in the environment of these stores is a lot more robust. But part of the stores that did have cannibalization, the stores, when you look at the sales per square meter that we see an average of in the assay performance, which is the best in the sector, about BRL 4,400 per square meter. We had organic stores that had BRL 7,000, BRL 8,000. So it was already like bad service for customers. And we mentioned this cannibalization would be about 2 percentage points. Operator00:53:18In our project, you'll probably remember it's about 3% to 4%. But on the other hand, we preferred to migrate or maybe lose an outside customer in an older store a new outside store than losing them to competitors. So we're opening up in regions where we already had stores. So some level of cannibalization would exist. Of course, the B2B public is willing to drive farther off and some consumers due to the practicality of the stores or parking or the level of offerings adjust because a lot of the stores we look at, the lowest indicator the best indicator is looking at the sales per square meter. Operator00:53:55You'll see our stores had a really high level of saturation. So it was slightly above what we expected in the beginning of the project, but it's not a variation that's going to change the fundamentals for the decision towards the project. And when you look at the fundamentals, of course, we're looking at same store sales, but it cannot be seen as an absolute indicator in the sector like cars, where you keep up with this major expansion. And naturally, you have this self cannibalization effect. If you look at the same stores, it would be like an absolute perspective if we hadn't had any expansion. Operator00:54:30But if you look at from 56,000,000 tickets in the Q2 of 2022 to 77,000,000 tickets now within the second quarter of 2024. And you can see there's an increase of almost 20,000,000 tickets, 7,000,000 per month. So that means almost 13,000,000 or 12,000,000 people. That's a huge increase in such a big amount like this just compared with the population in certain countries. So of course, you migrate customers from competition and you migrate like to an older SA store to a newer store. Operator00:55:01And I think you need to look at the total growth basis as well. Sometimes the same stores, of course, we know the indicator and the importance it has, but in an expansion process, it can't be the only indicator. Our next question comes from Felipe Hache, sell side at Goldman Sachs. Felipe, we'll enable your mic, so you may proceed. Hi, guys. Operator00:55:29Good morning. Go, Miru, Fagan, Gabi. I wanted to talk about the gross margin topic and then, of course, the competition. We talked about competition a lot, of course, regarding the sales, but maybe more towards the gross margins. The converted stores have a margin that's a little higher, so they probably have a positive effect in the mix. Operator00:55:50But I want to know what the dynamic was like if you exclude the mix effect. So how did the gross margin behave if you consider the same store criteria? And then adding on to this, in similar markets, did you feel competition was more aggressive or if the difference is really just in the sales level that was mainly considering the 3 installments and the dispersion of B2B as well? Thank you. Okay. Operator00:56:19So when you look at the gross margin and you exclude Extra, although the Extra stores, not all of them have the gross margin, gross profit that's higher than the companies, right? But we're really focused on the EBITDA margin, balancing this out in the stores. And we have organic stores as well that have gross margins as well. So obviously, we have the clusterization of the prices and the stores don't follow the same prices for each region and need. You have differences. Operator00:56:45But when you look at the same stores, even the same assortment, the margin was very stable. And I think part of the scale gains we had with this increase, as I had in the last 2 years, we're also reinvesting in pricing. So the company is really keeping an eye open towards investments and competitive advantages. And we're looking at the numbers and you're seeing the total numbers. And customers themselves, we saw this even with the card because sometimes they are afraid of getting taking on debt and paying in 3 installments, especially when it comes to food. Operator00:57:25And so of course, the market is competitive and we're following it's keeping up with a really strong level. So we have to continue to innovate and bring new products, new assortments and searching for the best pricing. So we don't have this kind of so we're not left behind. But when you look at the gross profit, I think you can see the stability the company has, right? When you see the 3 year highlights, you can see what happened, right, ever since Extra came into the base and the beginning of the inflation, deflation and the margin was still quite stable all this time. Operator00:57:58So at the end of the day, what guides our price policy is our role as a complementary distributor between customers and especially b to b. So we search for ways to be the lowest cost channel for industry. So this makes the margin be an important result to pay the operational costs and be more competitive when it comes from the distribution wholesale and industry itself? Yes, you did answer. Thank you so much, Bommito. Operator00:58:27Well, moving on, our next question comes from Vinicius Estrano, the sell side at UBS. Vinicius, we'll enable your audio, so you may proceed. You may proceed, Vinicius. Hey, good morning, Belmidu, Vitor, Gabi. Thanks for your question. Operator00:58:44Belmido, what's your perception in regards to the price elasticity for consumers? If we look this is a topic that people covered already a little bit before, but do you think it makes sense to be a little more aggressive with the price investments and try to win more on the volumes? And what have you noticed as well about the stock levels in B2B customers? And what's your growth perspectives between B2Bs and consumers up ahead? Thanks for the question. Operator00:59:17But when it comes to pricing, of course, the consumer is motivated by price, but that's not the only thing he considers. If you look at any surveys by Nielsen or other surveys. And even our internal surveys demonstrate that more and more the store location, level of service and service level in the store, store environment and store, it's all part of the decision making process, right, and especially good execution in the stores. So when we do one on ones with the investors, we invite them to visit a store and a competitor store, especially in downtown regions, so that they can see the level of service. So the company is still competitive. Operator00:59:57And by what we've observed at this moment, consumers are looking for products that have maybe a smaller product size. And if they're in a trade down period, they're also working on a consumption. So reducing margin would have to be a very destructive trend that could be bad for the overall market. But also like a big margin movement would maybe not lead to the expected result because you also have from the consumers a reality where they look at this, the wholesales the cash and carry is already a lower price channel. So normally the price difference is like 12%. Operator01:00:34We're already a search for low price. If it's 12%, you go to 13% or 14%. We don't know how much of a sales differential this would bring. If we were too aggressive, we could lose margin and we're going to sell pretty much the same amount that we would have been selling with the margins we currently have. So if you look at B2B, we're still very careful. Operator01:00:54And while you have this scenario with high interest rates and currency and this perception that we have where the economy is generally a little more jobs and some other indicators. But the overall perception still is that people are very cautious still with their expenses, especially with the last currency increases, the uncertainty about the interest rates of these customers. If they're really quick to adjust, we don't see like major stock up trends. So if we had such like a cataclysm in the market that could maybe lead to higher increases, they could invest. But the cost of investing in stock today versus an expectation for gains, we look at and we see that hasn't really happened in practical terms. Operator01:01:39Okay, perfect. Thank you, Bamidu. Well, moving on, our next question comes from Bob Ford, sell side at Bank of America. Bob, we'll enable your mic so that you may proceed. You may proceed. Operator01:01:52Okay. Thank you very much. Good morning, everyone, and thanks for taking my question. Tomiro, how are you looking at the differentiation and competitive advantage? And besides greater segmentation and regionalization, are there opportunities from a seasonal perspective for more of a treasure hunt in the stores? Operator01:02:14I don't know if I got this question, but about differentiation, more and more the company has been when you see like when we showed you the campaign, it demonstrates how we're really trying to adapt to each region in Brazil. It's a continent. We have huge differences from one region to another, and that happens in the micro regions. So if you look at Sao Paulo or Campinas or the Santos region, you can see dynamics that are very different. So Brazil is almost like one coffee brand per city. Operator01:02:46So our big bet on standing out is really at the level of services, the mix of products. And there are many other dynamics as well when it comes to activation at the stores and special festivities and campaigns and even the types of ads we put in the store to be able to stand out compared to other competitors. So I think another differential I'll say has presented in many areas is that among all cash and carries, we have the highest diversity in the store formats and network. We have stores of 2,000 square meters all the way to 10,000. So in order to do this, you shift all of the logistical patterns and supply. Operator01:03:29And so this makes the company very resistant and sorry, very consistent with the numbers when despite the financial issues and the interest rates, you look at the SG and A and the gross profit, then you see that consistency and continuity is pretty much the biggest milestone besides the cash EBITDA transformation. I hope to have answered. And just to ask you, how have you been thinking about like a treasure hunt approach or more like a seasonal approach to your mix. Bob wants to know if we have more opportunities for like treasure items, which are the in and out items, right, where you don't have like frequent free, frequent stock, right? It's just like a one off opportunity. Operator01:04:24So yes, there's many opportunities. We have different projects we're working on, and we have some news to share soon with some great opportunities we're trying to attract and bring in more resources and having a greater share on their pocket. And of course, we can't make a huge change from a strategic perspective so quickly because we have to preserve cash and also the maturity of the extra stores and really doing things well done is the biggest focus. But of course, we have different projects. And as soon as this is a little more mature, we'll be sharing this with you guys. Operator01:05:00But it's just putting yourself in our place and seeing a company that's going to start off with 300 stores with 38,000,000 people visiting in a month and you see so many opportunities. So ever since advances in the galleries now in the second quarter, all the way to other projects with course, you have a limit of sales and space in the stores. So now with more solid data soon, we'll be able to bring more information. We don't want to create any false expectations. But of course, there are opportunities for the in and out. Operator01:05:39Our next question comes from Thales Granado, Southside at Safra. Thales, we'll enable your mic. You may proceed. Well, good morning, Belmidu and Fagam and Gabi. I have a quick question here about leverage. Operator01:05:54I think when we think about 25, what has the company been seeing as leverage for the end of next year? And what are the levels of leverage that would make the company pay interest on equity or private capital to be able to have the fiscal tax benefits? Hi there, Thales. How's it going? On leverage, the company has been focusing on reducing the level of leverage, and we are looking for, in the midterm, a level of leverage that would be about 2x net debt to EBITDA. Operator01:06:30But what's most important, this of course relies on the interest rates. So we have to have a financial expense that can maybe compromise 15% or 20 percent of our EBITDA, but not more than that. So that's what we've been discussing. And the company is still really focused on deleveraging. So if we talk about a leverage level for the end of next year, it's still too early because of everything we're seeing in the market and the fact that we still have so much to evolve in from now all the way there. Operator01:06:58But what we can be more precise about is our leverage by the end of this year, which would be below 3.2x and our commitment to continue to deleverage the company throughout 2025. And especially about JCP, it's still a little too early to talk about that our focus is deleveraging, and it doesn't make sense to evolve into a discussion on JCP considering that we're really focused on deleveraging. So but then from next year onwards, then this discussion can be made in a more effective manner. Okay? Thank you. Operator01:07:47Our next question comes from Nicholas Lehiin, sell side at JPMorgan. Nicholas, we'll enable your audio. So you may proceed. Actually, most of the topics were already addressed, but I just wanted to maybe ask you something quickly here looking at the quarter. What was the progression of the same store sales throughout the quarter? Operator01:08:15Just to understand how you guys are looking at this now for the Q3? Thank you. Thank you, Nikolas. Actually, the quarters don't necessarily repeat because in the second quarter, you had this displacement due to the Easter period and we had April May stronger, but in the end of the quarter, it was a little weaker. But the line already demonstrates a different sign. Operator01:08:41Our estimates for the quarter are that are really in line with the second quarter. And even in our sector, the big changes in the quarter are not such relevant are not so relevant because, of course, that depends on the dynamics each company adopts. When you look at this, you see that there's levels that are very similar when you consider progression throughout the quarter. Okay, perfect. Very clear. Operator01:09:05Thank you, Bamido. Now we're going to head to our last question today. This is a English question from Andrew Rubin, Southside at Morgan Stanley. Andrew, we'll enable your audio. You may proceed. Speaker 101:09:20Hi. Thanks very much for taking the question. A bit more on mature stores, if I may. Where are we in terms of the planned cannibalization impacts you mentioned? Are they mostly in the past or should there be some go forward effects as the converted stores keep maturing? Speaker 101:09:36And then when we think about the normalized mature store growth, should it be at inflation, above inflation when considering the services and other improvements or maybe below inflation as the sales further spread out with the new store base? Thanks very much. Operator01:09:57Okay. Thank you, Ruben. Of course, we want to be above inflation always. The dynamics we have and the inclusion of new services and the cannibalization, this is and so we're buying an older SAE and now we're buying a new SAE. Now the Q and A session is officially ended, and we would like to pass on the word to the company for the final remarks for the company. Operator01:10:57I want to thank you all for your participation. I hope to see you on our ship in February 25, where you can shop at our stores and really have this incentive. So we're going to be heading towards the 3rd 4th quarters, which are the most important periods in the year. Thank you so much for your participation. The earnings call for the Q2 of 2024 at Assai is officially ended. Operator01:11:24The Investor Relations department is available to answer any possible statements and questions. Thank you all, participants, and have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSendas Distribuidora Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Sendas Distribuidora Earnings HeadlinesSendas Distribuidora SA (ASAIY)March 31, 2025 | investing.comSendas Distribuidora Reports March 2025 ActivitiesMarch 31, 2025 | tipranks.comNew “Trump” currency proposed in DCAccording to one of the most connected men in Washington… A surprising new bill was just introduced in Washington. Its purpose: to put Donald Trump’s face on the $100 note. All to celebrate a new “golden age” for America. April 26, 2025 | Paradigm Press (Ad)Sendas Distribuidora Files March 2025 SEC ReportMarch 26, 2025 | tipranks.comSendas Distribuidora S.A. Announces Remote Voting Procedures for 2025 AGMMarch 26, 2025 | tipranks.comSendas Distribuidora to Conduct Digital EGM with Remote VotingMarch 26, 2025 | tipranks.comSee More Sendas Distribuidora Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Sendas Distribuidora? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Sendas Distribuidora and other key companies, straight to your email. Email Address About Sendas DistribuidoraSendas Distribuidora (NYSE:ASAI) engages in the retail and wholesale sale of food products, bazaar items, and other products in Brazil. The company serves restaurants, pizzerias, snack bars, schools, small businesses, religious institutions, hospitals, hotels, grocery stores, neighborhood supermarkets, and individuals. It sells its products through brick-and-mortar stores, as well as through telesales. The company was founded in 1974 and is headquartered in Rio de Janeiro, Brazil.View Sendas Distribuidora ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 2 speakers on the call. Operator00:00:00Thank you all so much, and good morning, everyone. First of all, I want to thank you for your presence and welcome you all to our earnings call for the Q2 of 'twenty four. This is a quarter where we had opportunities to welcome over 2,000 new employees, which we hired now in the second quarter, and especially another 2,000,000 new monthly customers with an increase in the tickets. As you've seen in our presentation in Middle East, Assai was able to reach a milestone of 79,000,000 customers, an increase of 7,000,000 compared to what we achieved last year in the Q2. So 7,000,000 plus represents over 2,000,000 customers, almost 3,000,000 people visiting our stores, whether the new stores or the existing stores in the company. Operator00:00:51The 50th anniversary campaign we showed a video about and we plan to provide more details about because Assai traditionally has spectacular campaigns, not only when it comes to awards and activation, but also to keep loyalty active. And we're the company that's most present in Brazilian households. We're the company that has physical stores with the biggest amount of traffic and people visiting year over year, we have been overcoming expectations so the company can continue to innovate and be a reference in the market. Before we move on to the numbers, I want to talk about the environment in the market. We still feel consumers and the overall B2B customers quite pressured by debt, interest rates, some changes also in consumer habits that make us have a environment with a level of debt and purchase power that's below expectations for this moment in the year. Operator00:01:50The inflation in our perspective is in line with what's expected by us and the government with a variation level up or down, which is not maybe that relevant. Not such a big change from an inflation and deflation perspective. We also see a significant reduction in trade down that we had in the 1st 2 years of the pandemic. But also, we've been seeing that what's impacting the market as a whole is a movement with a reduction of the sizes of the packaging in certain categories of products. Since we came from an inflation period that was really high, where income didn't keep up and a lot of the movements that industries and suppliers had to keep their volumes of sales were really related to changing the size of packages. Operator00:02:42So within the strategy for the Q2 was really above all to preserve our cash position, keep up with our level of competitiveness and keep focused on store maturity, promoting a sequential increase of our gross profits and keeping up coherence and consistency, especially in our results. And we'll see this when I show you the slides, the evolution of the gross profit throughout the 3 years and keeping up coherence and keeping up the deadline periods as well. And so this could, of course, lead to something that maybe is not that healthy for the companies. So of course, discipline and expense controls maintaining the level of services in stores. The company continues to expand with over 10 stores. Operator00:03:35Now, we had already mentioned previously Sorry, guys. We had a small technical issue, but we'll be coming back in just a few seconds. Okay. We're back now. Could you repeat the last phrase, Palmeiro? Operator00:04:09Okay. Can you share the screen of the presentation? Sorry about that. We had a shutdown here. For some reason, now everyone fell off. Operator00:04:22I will be joining back in just a second. Can you share the screen again, please? And the team had already talked about the expansion traditionally, which is the focus in Assai when it comes to growth. The team has been ever since April, I understand, of course, I can give you some more info, but we had 80 new services deployed in the existing stores, which includes new services, battery, bakery and coke tots. And this makes the 2,000,000 new customers come from other formats in the food sector, also attracted by not only the location and execution of the stores, but also the new services. Operator00:05:07So I think that's the main highlight when we look at the 2nd quarter. And same stores was close to 3% with a balance in the growth of the same stores and also the growth of the expansion. So we had a growth of 11% compared to last year, 34% in 2 years, which represents in the last 2 years or 24 months, we've been anchoring this since Vitor will talk about the cash generation as well in these 24 months. But we had over $5,000,000,000 in additional amounts. So the Company is still working on its investments, growing and expansion, and we have important store openings in the 2nd semester, Guarulhos, which is something we could highlight the new unit in Guarulhos, San Jose de Hipreto. Operator00:05:52We're trying to open this year, beginning of next year and some markets and regions where SAI is not present with major opportunities. And we should also go over the milestone of 300 stores this year, probably by the end of the campaign when we are at the end of our anniversary campaign. So the EBITDA and the pre IFRS vision, as we all know, we have this trend with the purchase of the extra store in the extra stores, which increase the levels of rent in these locations. And we're really highlighting this and the best way to view this pre EBITDA is DKK 965,000,000 and a growth of 18% compared to the previous year, higher than the sales. And that highlights that Assai has 100% of the EBITDA, which is cash. Operator00:06:40And in the pre IFRS division, we have a margin that's 7.2% and LAIR evolution with profits before income tax. And we also had the impacts from the subversion that we had last year. We don't have this year. And then you see this ratio between the profits and the net income. But you can see the sufficiency operation in the company, and we have a financial expense that is due to the level of leverage that's pretty high due to the interest rates, but the company has been very focused on deleveraging. Operator00:07:18I'm not going to get into too much of the details here because Vite will cover this later on, but we really know the power of the cash generation in this business. So our leverage continues to be reduced, and we have an EBITDA that is more robust when you split this by the 12 months. And our focus is really this leverage projection. And so it's important to highlight that this level does not consider possible discounts on receivables, which are whether they're discounted or not, and the company has its projection for our net debt to EBITDA of 3.2 till the end of the year. But anyways, on the second slide, you can see how things have been evolving in stores and with the extra conversions that we already have sales of over 25% of the average in the company. Operator00:08:12And from the 10 main stores, when it comes to customer flows, 9 are convergence. The stores that are very well located, we're talking about the project and you can see the evolution of the EBITDA, especially of course, these stores are not mature. So you can have an idea that maybe the first store, which is like 2 years of ever since the opening, So most of the stores are going to continue with their 2nd year full of work. And then after, we'll be completing the 24 month cycle, and we've been working on some initiatives to balance out sales and EBITDA margin maturity. So the sales should reach $26,000,000 and the EBITDA margin pre IFRS without the impact of the leases, of course, you have the property tax impact, but it's about 5.4%, which means an EBITDA margin evolution of 1 percentage point if you already look at this from December onwards, so 6 months, December 23 to the end of June 24. Operator00:09:23The company has been really focused on improving the store network and the maturity ramp up when it comes to sales and margins, trying to balance out both of these points. And with this, we advance about 140 bps in margin compared to last year and a growth in our revenue in the 1st semester when we compare with December, which as we all know is a very typical month with a growth of revenue of about 5%. We can move on to the next slide now. As the process of conversions, as we all know, as I went through a very intense project for the expansion of the conversions. And in this slide, we brought in an evolution of the gross profit. Operator00:10:06So when you look at the amount of tickets, you can see the company more than doubled or tripled during this year and the last periods actually. And the gross profit keeps up with the same proportion. So if we take a look at this from our perspective, the positive results is that even when you go through such a big process with the conversion of the hypermarkets and the closings and during this period, we really evolved in this store format and we had 2 things that took place concurrently. We had the conversion and opening of the hypermarkets, but also the inclusion of the new services with the battery and other projects. So the first battery we opened was in the end of 2019 in Sinop, Mato Grosso. Operator00:10:48So these are different occurrences. But when you look at this due to our commercial dynamic and even with this evolution, we had a gross profit that was very stable, $16,700,000 to $16,500,000 now in the Q2 of 2024. So 2021, we still didn't we didn't start the conversions yet, but you can see gradually that the levels of gross profit get back to normality even with all of these changes as we enter new centers and include new services, we can advance. When we look at the expense perspective, the changes in the dynamics, there was always some skepticism in the market about the shift in formats. And this intends to provide better services to the population with higher income and also provide some possibilities to adapt for B2B and B2C customers with better locations that were very far off and it would be very difficult to be open in a cash and carry operation. Operator00:11:52So the changes in the assortment and the changes in certain units and other stores, when we look at the level of expenses, you can notice that the expenses in the post IFRS vision where you don't consider the lease is completely stable. So 9.7% we had seen as an SG and A percentage is prior to any conversion projects for Extra and prior to the inclusion of any services as well. So it's pretty stable, 9.7% to 9.5%. But when we look at the lease and include the lease in perspective, of course, these stores, as we mentioned in the beginning, they have a characteristic with the level of the property that's very different. But the increase in the margins and sales, when we look at those 25% more, more than offsets this. Operator00:12:41And in April, especially in our vision, there's a whole another possibility for growth in the company because when you consider the profile of regions where the cash and carry used to operate, you kind of had the situation where you could maybe not have a higher level of saturation or the capacity to penetrate in central regions. So I'd say it was a big innovation, which allowed for major movements even among competition to follow along behind us and the paths we pioneered. And as we wrap up here, I'm going to pass the phone to Vitor as he talks about the EBITDA and presents here. We still have some time for Q and A as well, but he's going to discuss the operational aspects the leverage aspects and after we get into the operational aspects. But great. Operator00:13:34But me to thank you. Good morning, everyone. But me to just described a bit of the gross profit dynamic and the SG and A. And we're going to show you here through these two metrics, look at the EBITDA and see an important evolution in the EBITDA. When it comes to the quarterly basis, we've seen evolution of $815,000,000 to $965,000,000 in the comparison quarter over quarter. Operator00:14:00And the growth of 18% that comes from an increase in sales, but also the margin expansions. And when you look at the evolution in the 6 months, you see that there's pretty much the same format, 27% growth and an increase in the margins of 0.6 percentage points. And so once again, as a basis for the success in the maturity of our stores so far as they've been converted, but also the deployment of services, as Bamideu explained. And no doubt, the control over expenses, which allows us to grow having an increase in our profitability when we look at the EBITDA line. So moving ahead and looking at a bit of the financial results, we also see positive evolution. Operator00:14:54In the comparison with the same period last year where we have stability when it comes to the representation or importance of this financial result compared to the revenue and the percentage or the ratio. But when you look at this and you compare the Q1 of this year with this quarter, you see a reduction a nominal reduction of the expense, dollars 5.10 to $468,000,000 but especially a dilution of these expenses. So as a percentage of sales, it goes from 3% of the sales to 2.6 percent of gross sales. So the evolution of gross profit and expense control generated an increase in EBITDA margin associated with the maintenance, if you look at the annual basis and the reduction, when you look at this in a sequential manner, we see a profit before income tax that had a very important growth rate, what they call the liar on the side in Portuguese. And when we look at this in the semester, this profit before income tax more than doubled from a $135,000,000 to $347,000,000 So this was an increase of 157 percent, which demonstrates we are on the right path when it comes to the strategies that the company has been adopting. Operator00:16:24What's also important to mention is when we look at the net income, it was impacted in the comparison with last year due to the significant reduction in the positive effects of the subvention in investments. But then when we look at the semester view, we have a growth of the gross the net profit. So we move on to BRL 258,000,000 in this period. Then moving on, here we have a comparison. But let me quickly show this in the presentation. Operator00:17:00We have a comparison and a number that we think we should share with you, which is the cash operational cash generation. We brought in this 2 year cycle, which really sets the beginning of the deliveries from the stores that were converted for the hypermarkets. And here we presented this comparison and analysis to show you clearly how the operational cash generation was so strong, the company generated $7,600,000,000 in cash in this period coming from the EBITDA generation, dollars 6,800,000,000 in EBITDA generated, but also a positive evolution in our working capital. So it was a major evolution in the number of stores and 64 of them were conversions and 20 were organics. And this cash generation, if you look at the investments that were required for this expansion, and these investments were very significant when it comes to the acquisition of hypermarkets, the conversion of hypermarkets or even the opening of these 20 organic stores. Operator00:18:17But also when it comes to the refurbishing and implementation of the services, the company was able to generate the necessary cash to handle basically all of the investments. To be more precise, 88% of this investment was funded with operational cash generation in this period. And I want to remind you all that these stores are still maturing. So basically, this is an analysis we consider to be very important to share with you because it demonstrates the strength of the company and how solid it is and that we're really on the right path to continue to grow our results. But of course, we also have the payment of the interest rates in this period, about KRW 3,400,000,000, and that's a direct consequence of our debt levels, as Bommito mentioned, and the interest rates in this period that also reached levels that were a lot higher. Operator00:19:14So moving on, it's also worth mentioning that the about the a bit of the evolution of our leverage. This is an indicator we've been accompanying closely. This is one of our focuses in the company, as Vamilio has mentioned, and we see ongoing improvements and reduction in the leverage. If you look at the leverage by the end of the second quarter, which was at a level of 4.25 times. You can see a reduction of 0.6 times. Operator00:19:46And with that, if you compare with the end of the second quarter this year. And this was an evolution of 0.10 for the last quarter to now. So this is an indicator we monitor closely, and it's one of the company's focuses. Clearly, we've been looking at this, and we've been seeing the evolution of the EBITDA. The reduction of the leverage is happening and it will happen throughout 2024, mainly due to the evolution of the EBITDA. Operator00:20:15For 2025, we expect to have even greater contributions coming from the reduction of the net debt. Moving on to the next slide. You can see that there's some additional information that we were presenting, which is the total availability. So we've been working on a new interpretation on this breakdown, and we brought in what's considered cash equivalents and also the receivables that are not discounted. So the first point that I think is worth mentioning is that we had an issuance of debentures that was really well very successful, which led to a higher cash position in the end of the quarter, and that made us discount less receivables in this period. Operator00:21:13So that's why we see this significant growth in availability. That's a total, DKK6.9 billion, a sequential growth of 33% through 34%. But when we look at the breakdown with the non discounted receivables, which is substantially greater, and that's the fruit of this expansion, which is mainly it's another step we're taking to improve the profile of our debt. So first, reduce costs. We had the issuance considering CDI +125, which is substantially lower, which was CDI +149. Operator00:21:57And the extension of our average term of debt, which was 28 months, but now with this issuance, it becomes 32 months as an average term. So, and so I'll say we'll continue to search for new opportunities. And so, also, we want to consider the average cash in the period. So it went over to RMB 600,000,000, and it was RMB 640,000,000 in the Q1 of 'twenty four. And then in the last quarter, it was over BRL800 1,000,000. Operator00:22:51And then here, our practice is that we'll gradually increase this cash position, providing more liquidity and increasing the financial solidness in this period. That's what we wanted to share with you guys about the financial indicators. Now I will pass the fund to Sandra as she talks about sustainability as a strategic pillar for the company. Sandra, the floor is yours. Thank you, Peter. Operator00:23:18Good morning, everyone. So within our sustainability strategy, which intends to really lever prosperity for everyone. All of our initiatives are based on 3 pillars, which are efficient operations, developing people and communities, and the ethical and transparent operations. And so here, we're really focused on reestablishing, reusing waste and that these would be intended to landfills and this is all related to our the Shinu Serta program benefiting many organizations. And we continue to develop these initiatives so that we can create a more diverse work environment based on valuing differences and back differences. Operator00:24:21And also 40% of Black leaders in the company. And in this context, we were recognized among the companies in the EPO VESPA, the Brazilian Stock Exchange as one of the companies with the highest rates of Black leadership. And we also received some indications as the best companies for LGBTQ communities to work in, partnering with Ingestutumay Universitade. And through Inchitutu Assai, we are promoting the reduction donation of food and beds and different other materials to Rio Grande Dusou and so that we can also send this throughout all of Brazil. And I would also like to mention that we are highlighting some awards and recognition that we received in this quarter because it really values our performance and the relationship with our customers, which is really essential. Operator00:25:41So at the for the 4th time, Assai was recognized in the 1st place in the retail category for modern consumers. And we were elected as the for the 9th time as the best cash and carry operation in the city of Sao Paulo, which is based on the perception from people that live in Sao Paulo. And we're 3rd place in among the best companies in the investor play, and we were the only ones in the food retail on the podium. And Assai was considered the Brazilian brand that's most valuable in the food retail sector. So these are acknowledgments that really make us happy and confident so that we can continue to work to achieve a company that's more sustainable, more solid, and with greater prosperity for all of our stakeholders. Operator00:26:36So thank you all. That's it. And I'll pass the floor on to Bommito. Okay. Can you guys hear me? Operator00:26:54Well, thanks, Sandra. Thanks, Peter, for the presentation. We brought in a bit more of the campaign details for the 50th anniversary at Assai. And Assai with the amount of 77,000,000 tickets in the quarter, really represents a huge flow of people. It's about 38,000,000 and of people passing by our stores, and it's a company that's most present in Brazilian households with the biggest flow of customers in retail stores in Brazil, and the company operates in a continent really in the national territory. Operator00:27:31So traditionally, every year, we have very strong campaigns, and this is one of the decisive initiatives for this kind of expansion to make the brand really well known and famous in the national territory and generate loyalty among customers. So the 2,000,000 customers per month we conquered in the second quarter partially come from the promotion and mouth to mouth referrals, but also services based on the quality of our culture. And so this year, we have a campaign that's probably the strongest campaign in Brazilian retail, the strongest one we've ever had. And in all years, we decided to hire a full ship from MSC crews, and it's going to be in the Brazilian coast. And our customers will be able to win 1500 trips that are going to be it's going to be a raffle. Operator00:28:30So as customers buy, the more they buy, they can expand the chances of winning and being awarded. And also the more they buy from the participating brands, we had over 50 suppliers that are the sponsors of the campaign. And besides being highlights because if the customers buy their products, they can expand their chances to achieve this. And they have a bunch of benefits with the expansion of the product. So it's a campaign that really will affect our customers a lot and also will allow us to continue to move towards conquering new customers. Operator00:29:09So our first award is BRL 5,000,000 and then you have over 50,000 awards that they can use instantly of about BRL 100. So we'll have it's going to last for 4 months, and we're going to have strong promotion in different media sources and outlets. We also shifted our registration process so that we can capture as much data as possible, enriching the basis of our CRM in our digital strategy. And Assai has been working with future as well that we have, and especially want to keep our customer loyalty and conquer new customers. So an interesting data is that the company is made up of people. Operator00:29:56Above all, the main differential is in a company is its culture, right? So within this, we're going to be sharing this with all of the employees that have over 20 years of experience. They're all going to go regardless of the position they occupy in the company. So in this way, we'll also demonstrate to who is in the operation working with the 38,000,000 people that are in that being in SAE will lead to special awards and they'll be recognized. So, well, I'm getting too excited here, so I don't want to go over too much, but I want to thank everyone working on the campaign. Operator00:30:34It was fantastic. It was a joint effort, not only in the marketing, but also the commercial and operations area. We have a challenging period up ahead, but we have a beautiful campaign, and we believe it's gonna be really good acceptance. So to anchor this, we brought 5 personalities. Each of these represent a different region in Brazil. Operator00:30:54They're very popular. We have Xange Pilares, Michel Talaga, Gabriel Marrantos, and all of them represent a specific region in our country due to the diversity. They're very popular singers and artists, and we brought them on board for this campaign. Now we're going to show you the campaign video. It's very quick, and then we'll get into Q and A. Operator00:31:29It's great to say. At Assai's anniversary, you can join us on this 50 years, we're so happy to celebrate. 20,000,000 in prizes and awards. Come join us. Trips with a plus one, and you're on a side ship. Operator00:31:47Come on, let's navigate. 5,000,000 will change a life. As we have special sales. Everyone can win something. Come and join us. Operator00:31:57Get lucky. We are plans to become a millionaire and navigate. Anniversary, a great show of awards and low prices. Now we'll start off with our q and a session. Please remember that if you have a question, you should select the Q and A icon at the bottom part of your screen, write your name and company and language into the queue. Operator00:32:40As you're announced, the request to activate your mic will appear on the screen. Then you must activate your mic to submit questions. We'd like to ask you that all of the questions should be done at once. So, Joao, we'll open up your audio, so you may proceed. Okay. Operator00:33:05Good morning, everyone. I wanted to explore 2 points here. First of all, I wanted to discuss the competitive environment, Bomedo. I think we're going through this new discussion with the SKUs. And so now we're discussing this, and it would be good to get a perspective on your opinion about payments and sales with installments. Operator00:33:37Some regions don't have demand for this kind of purchase and payment in installments, but we want to get your perspective on this and also your vision about the growth dynamic. So we have a relatively constructive perspective when it comes to food inflation at the bank here, but I wanted to get your feel. Do you see there's going to be a short term acceleration? And what's your mindset? Have you seen something change compared to the messages in the last quarter? Operator00:34:07And finally, the capital structure bit and expansion for next year and how comfortable you guys are for this expansion plan? Pretty good. Thank you so much. Okay. Thank you, Jerome. Operator00:34:19Well, let's split this up. So yes, there's a shift in the market. And, of course, there's always a possibility for changes in the competitive environment. We've been one of the protagonists when we placed, services in stores. And in our perspective, services were just, to evolve in this model. Operator00:34:41And you can see there's so many differences in levels of, income, and so the model that's adequate for one region is not always adequate for all of them. So the solution in the model for the regions is, we requested that the the inclusion of these services is necessary, and this inclusion demonstrates that it was a very assertive process. And in the Q2 now, we saw a change in the pricing in the payment term conditions. So we've been watching this very carefully. You can search for sales with 2 things, margin and terms. Operator00:35:20So margin, which is what you're always going to work towards recovering, but what we saw in the dynamic, And so it's a lot more related to the actual wholesale operations because when you expand the terms, the B customers that have working capital, it's really pressured. And financial conditions, when you stretch out and double the terms for your B2B customers or even offer 3 installments, you have an increase in sales that should impact the market as a whole. But in our perspective, it's a strategy we don't expect because as buying with installments So even with a private they have a private we even have a private label to incentivize the use of the SA card. But at this moment, we're not going to shift in the sense in our policy because this did not actually reflect that much in the stores, but maybe it's more impactful for the distribution wholesale operation that our competitor has. So if you look at the total in the market when it comes to growth in the quarter, we're really in line with what the overall market has been saying in the 2nd semester. Operator00:36:42Besides the campaign, we have many adjustments we've been working on in the commercial dynamic, negotiation with suppliers, product mixes. Of course, the Q2 was slightly below expectations, but the expectation for the 2nd semester is that it should be a more positive period. So the company and all of its efforts to that are necessary to change to have a more positive second semester we're working on. But of course, this environment we were expecting or projecting in the end of last year for this year is not at the same level of purchases we expected. The expansion plan is pretty much kept. Operator00:37:23We haven't at this moment had any signs. It's always a process that we have to be reviewing because the expansion we have up ahead will be for organic stores. And with this, differently than when we bought the extras, we had to open up as quickly as possible since we were already having the lease expenses. But with organic expansions, it's really a matter of decision. And you can decide the level of expansion versus debt, and we always monitor things like that. Operator00:37:49But at this moment, we have the 15 stores expected for 24 and the 20 stores for 2025. So a lot of the projects have already been expanding quite a bit and that this could be something we're really expecting, but it's what we see at this moment. But I do hope to have answered your question. So our next question is from Claro Lestaza, Southside and Itau Ber. Clara, we'll open up your mic, so you proceed. Operator00:38:26Please proceed. Thanks for taking my question. So more of a follow-up on the previous question, but I wanted to explore a bit of the same store sales and how that took place in the quarter, the evolution throughout the months and also maybe taking advantage of the payment term and payment conditions topic. You mentioned that maybe this is more attractive for the wholesale distribution business, but what was the performance throughout the quarter and the beginning of Q3 when you think about B2B? Do you think that they're being more attracted by other payment conditions provided by competitors? Operator00:39:10How have you guys been working on this? I think that's the first question, more of a follow-up. And the second question is really quick. It's like a working capital one. I think you made this very clear in the release that the level of suppliers in the Q2 last year had a one off effect. Operator00:39:25But if you could just go over a bit of how we should be looking at this level, maybe closer to 6 to 65 days. Eventually, so of course, offsetting some of these effects of the Q4. So Victor will talk about the dynamics of the working capital that we can see in the Q2 of last year. So about the timing dynamic, we can see the consumers always have a different dynamic. So as soon as you provide a bit higher payment term, you'll increase as purchases. Operator00:40:06But right now, the cost of cash, if you increase the level of limits, you could have higher delinquency rates. So that's something we have to be careful about and monitor and see if there's any like major modification. I want to remind you that we don't have the distribution wholesale channel. We only have the sales for cash and carry in the stores. So of course, these two channels, they do have a overlap. Operator00:40:2998% of the customers that buy for distribution also buy in the cash and carry stores. So they normally have like a product mix. So if you increase the terms, you also have an increase in sales initially. But if you don't increase the SLA, what happens is you'll perform the sales initially, but then you're going to go over, which could lead to delinquency up ahead besides the cost today of cash. So basically, I think we have to always analyze this and see how this policy will be. Operator00:40:58But according to our current policy, monitoring how we've been working on the Q2, even if this could lead to an impact on the sales for B2B. So of course, you have part of the B2Bs, which are the transformation public, those customers that work in food service, etcetera. But the resellers actually just want to know about payment terms and conditions and pricing, but it's hard to keep loyalty among this kind of customer, the resellers. So thanks for your question. Just about the working capital now. Operator00:41:41Yes, we did have a variation upon the working capital in the same period last year, which is a lot more marked or impacted by the difference and the fact that the working capital in the Q2 last year having performed in a very atypical manner with an account for suppliers that was relatively high. And when you look at the history, right, where we described this, I think, in greater detail on Page 7 on our release. But if you look at this from here forward, you see the working capital behavior is going to be very similar to what we've seen in the Q1 this year and what we're seeing in the Q2. The cash cycle is about 5 days basically. So that is what we've seen. Operator00:42:30And of course, there could be some change like 1 to 2 days up or down in supplier stock, etcetera. But when you look at the cycle, the cash cycle, we see this cash cycle that's a lot more similar to what the first and second quarters were. There's, of course, a seasonality effect in the last quarter of the year, and you have a shift in this parameter considering the high volumes of sales, but this is something that we know about in the industry and we won't behave very differently. Super Our next question is from Daniela Ager, Southside at XP. Daniela, we'll open up your mic so that you may proceed. Operator00:43:20Hi, guys. Good morning. Thanks for taking my question. My question is very quick. I think most of the topics were covered already, but it's just a follow-up on the food inflation dynamic point. Operator00:43:31So Bemidji, you mentioned there's not like major changes in the trends, but we've seen and even today, we saw the data on the inflation, surprising downwards. And that was really leveraged by categories that are really relevant like protein and dairy products. So how do you see this dynamic? I know you said you won't see too much of a change, but do you think this could be updated or changed considering the data today? But also what are the types of levers you have for possibly working on better profitability and cash generation in a scenario where you maybe have a food inflation that's still not helping that much when it comes to the same store sales dynamic? Operator00:44:12Thank you. Thank you, Dany, and thank you for the question. When I talked about the variation here and this year from a comparative perspective, looking at the turbines we had after the pandemic, from an inflation and deflation perspective, there were more sudden movements, but this year, it's a lot more stable. So yes, there are variations in the month to month comparison, but we have one component we should keep an eye open for, which is the dollar currency issue because even the proteins and other commodities are impacted by the dollar. So if you have the American currency higher, which is not the level we had expected or seen with the change in the consumer environment in the U. Operator00:44:55S. And so I think we all were kind of wondering if there could be an effect on the food inflation just as construction materials that are also impacted, right, with the new stores, especially when we're talking about steel. So there's also a reduction of the inflation, but that's a reinflation, as they call them in Brazil, where we have a reduction of the sizes of packaging, where you want to have industry keep the same pricing and at the same levels, but you have some occasional trends. So it's difficult to set because sometimes in the production reductions, considering climate conditions, we see the droughts and everything. And so it could be that in the second half, we'll have a different reality because of this. Operator00:45:41So we do expect some variations until we reach a higher stability point from a consumer perspective. And even some of the protein and commodities had some variations, but we don't see like major variations for the full year. I think that's the main point. I'm not sure if that's clear. Our next question comes from Eric Kwang, Southside at Santander. Operator00:46:07Eric, we'll enable your audio, so you may proceed. Please, you may proceed. Hey, good morning, everyone. Thanks for taking for questions. On our side, we have a quick follow-up from Danny's previous question. Operator00:46:22And Danny talked about the dynamic of the inflation. And just if you could talk about how you've been looking at the beginning of this Q3? And as we think about the same store sales, do you guys see this as an acceleration or not? Just so we can have a better feel on how this has been advancing. And then getting back to installments, just to understand more where your partnerships are. Operator00:46:46Today, you have this partnership with FICC. I'm not sure if you would like to maybe look into something where you guys can have more control. And even having some kind of a possible support for market changes if or should there be a prevailing situation with these payments conditions with installments. I think we were missing part of the answer. And basically, we have in retail as a whole been below expectation, but there are different initiatives in the company to try to offset these effects. Operator00:47:28And besides what I highlighted, we included another 80 new services, which was ever since April that we're here, which will contribute in the same stores. And other pilot tests also in product categories, depending on each region and store that also help. So we're not just, of course, stopped watching the market. We constantly look into finding more resources and taking advantage of this as we look into the customer flows we have today. I think our greatest heritage is customer loyalty. Operator00:48:02And of course, we're always searching for ways to work on this as long as this, of course, doesn't change the business model. In the Q3, as we've seen, we're really in line with the 2nd quarter. We don't expect significant variations. And then the payments and installments, as I mentioned, I think we need to separate this discussion, right? And so I don't know if you could maybe add on to this next point here. Operator00:48:37But what we noticed in this volume of sales in 3 installments is not coming so much from consumers, right? So, keeping up this will not make too much of a difference. And we have to look at this that the risk of delinquency could maybe be higher. So we're kind of following in the same direction. We're not going to be changing anything severely in the policies or restructuring a financial company or something like that will not really affect much of the dynamic now in my opinion. Operator00:49:13That's it, Bommidu. So, Eric, the our partnership with FICC, our financial services company, provides all of instruments we need to work with our customers. The SIE card allows us to perform to offer purchases in 3 installments, but it also, in certain items, allows the customer to buy a smaller amount of products with a wholesale price and not a retail price. So we also have in our stores, just to remind you, the same products have 2 prices, the retail and the wholesale prices, depending on the volumes the customer buys for each item. So the FEAC partnership would allow us to advance as we would like with this issue. Operator00:50:01And so the issue with the installments, as Romita mentioned, is more of a commercial decision to not keep up this way. Well, and I think just to add on here with the payments and installments, when you when we look at the numbers in the market, as we've seen in the competitive environment, the consolidated between the distribution wholesale and delivery wholesale operations. As we don't have disclosure or a breakdown of all this, it could give us an impression that you could a trend change, which is probably more of the wholesale and the sales volume. But by what we've been observing in the market and even the share measurements when we look at the comparables, which would be cash and carry, there's not pretty much any kind of effect there. So I don't know if that was clear, but as I saw this topic had 3 different questions. Operator00:51:06I think it's worth mentioning. Yes, that was very clear. Thank you, Belmiro. Thank you, Victor. So keeping up with our next question here from Luis Guanaiz, the sell side at BTG Pactual. Operator00:51:20Luis, we'll open up your mic, so you may proceed. Getting into a bit of the discussion on the productivity of the converted stores, I wanted to understand what the dispersion is like in these stores in different regions you've converted throughout the last 2.5, 3 years? And if you could also talk about the cannibalization effects in these stores upon the legacy stores at Assai? Thank you very much. Thank you, Louise. Operator00:51:53Yes, obviously, you have this dispersion, which is very much connected to the performance of what Extra had. So we already had this expectation that this would happen throughout the project. This was very close. Of course, there's some variations, right? Because in certain regions during this period, the closings and reopenings, you had some competitors that open up. Operator00:52:15But in some stores, the extra stores that were very strong, continue as strong SA stores and the ones that are weaker continue weaker. But it's more about the population potential, income levels and surrounding areas and then the actual store itself. There's not much very relevant impact in this. Of course, you have cannibalization. The lower the overlap between action, I'd say, any company where they we have presence in 25 states in Brazil, any operation you have will have a cannibalization level. Operator00:52:48And also because the offering in the environment of these stores is a lot more robust. But part of the stores that did have cannibalization, the stores, when you look at the sales per square meter that we see an average of in the assay performance, which is the best in the sector, about BRL 4,400 per square meter. We had organic stores that had BRL 7,000, BRL 8,000. So it was already like bad service for customers. And we mentioned this cannibalization would be about 2 percentage points. Operator00:53:18In our project, you'll probably remember it's about 3% to 4%. But on the other hand, we preferred to migrate or maybe lose an outside customer in an older store a new outside store than losing them to competitors. So we're opening up in regions where we already had stores. So some level of cannibalization would exist. Of course, the B2B public is willing to drive farther off and some consumers due to the practicality of the stores or parking or the level of offerings adjust because a lot of the stores we look at, the lowest indicator the best indicator is looking at the sales per square meter. Operator00:53:55You'll see our stores had a really high level of saturation. So it was slightly above what we expected in the beginning of the project, but it's not a variation that's going to change the fundamentals for the decision towards the project. And when you look at the fundamentals, of course, we're looking at same store sales, but it cannot be seen as an absolute indicator in the sector like cars, where you keep up with this major expansion. And naturally, you have this self cannibalization effect. If you look at the same stores, it would be like an absolute perspective if we hadn't had any expansion. Operator00:54:30But if you look at from 56,000,000 tickets in the Q2 of 2022 to 77,000,000 tickets now within the second quarter of 2024. And you can see there's an increase of almost 20,000,000 tickets, 7,000,000 per month. So that means almost 13,000,000 or 12,000,000 people. That's a huge increase in such a big amount like this just compared with the population in certain countries. So of course, you migrate customers from competition and you migrate like to an older SA store to a newer store. Operator00:55:01And I think you need to look at the total growth basis as well. Sometimes the same stores, of course, we know the indicator and the importance it has, but in an expansion process, it can't be the only indicator. Our next question comes from Felipe Hache, sell side at Goldman Sachs. Felipe, we'll enable your mic, so you may proceed. Hi, guys. Operator00:55:29Good morning. Go, Miru, Fagan, Gabi. I wanted to talk about the gross margin topic and then, of course, the competition. We talked about competition a lot, of course, regarding the sales, but maybe more towards the gross margins. The converted stores have a margin that's a little higher, so they probably have a positive effect in the mix. Operator00:55:50But I want to know what the dynamic was like if you exclude the mix effect. So how did the gross margin behave if you consider the same store criteria? And then adding on to this, in similar markets, did you feel competition was more aggressive or if the difference is really just in the sales level that was mainly considering the 3 installments and the dispersion of B2B as well? Thank you. Okay. Operator00:56:19So when you look at the gross margin and you exclude Extra, although the Extra stores, not all of them have the gross margin, gross profit that's higher than the companies, right? But we're really focused on the EBITDA margin, balancing this out in the stores. And we have organic stores as well that have gross margins as well. So obviously, we have the clusterization of the prices and the stores don't follow the same prices for each region and need. You have differences. Operator00:56:45But when you look at the same stores, even the same assortment, the margin was very stable. And I think part of the scale gains we had with this increase, as I had in the last 2 years, we're also reinvesting in pricing. So the company is really keeping an eye open towards investments and competitive advantages. And we're looking at the numbers and you're seeing the total numbers. And customers themselves, we saw this even with the card because sometimes they are afraid of getting taking on debt and paying in 3 installments, especially when it comes to food. Operator00:57:25And so of course, the market is competitive and we're following it's keeping up with a really strong level. So we have to continue to innovate and bring new products, new assortments and searching for the best pricing. So we don't have this kind of so we're not left behind. But when you look at the gross profit, I think you can see the stability the company has, right? When you see the 3 year highlights, you can see what happened, right, ever since Extra came into the base and the beginning of the inflation, deflation and the margin was still quite stable all this time. Operator00:57:58So at the end of the day, what guides our price policy is our role as a complementary distributor between customers and especially b to b. So we search for ways to be the lowest cost channel for industry. So this makes the margin be an important result to pay the operational costs and be more competitive when it comes from the distribution wholesale and industry itself? Yes, you did answer. Thank you so much, Bommito. Operator00:58:27Well, moving on, our next question comes from Vinicius Estrano, the sell side at UBS. Vinicius, we'll enable your audio, so you may proceed. You may proceed, Vinicius. Hey, good morning, Belmidu, Vitor, Gabi. Thanks for your question. Operator00:58:44Belmido, what's your perception in regards to the price elasticity for consumers? If we look this is a topic that people covered already a little bit before, but do you think it makes sense to be a little more aggressive with the price investments and try to win more on the volumes? And what have you noticed as well about the stock levels in B2B customers? And what's your growth perspectives between B2Bs and consumers up ahead? Thanks for the question. Operator00:59:17But when it comes to pricing, of course, the consumer is motivated by price, but that's not the only thing he considers. If you look at any surveys by Nielsen or other surveys. And even our internal surveys demonstrate that more and more the store location, level of service and service level in the store, store environment and store, it's all part of the decision making process, right, and especially good execution in the stores. So when we do one on ones with the investors, we invite them to visit a store and a competitor store, especially in downtown regions, so that they can see the level of service. So the company is still competitive. Operator00:59:57And by what we've observed at this moment, consumers are looking for products that have maybe a smaller product size. And if they're in a trade down period, they're also working on a consumption. So reducing margin would have to be a very destructive trend that could be bad for the overall market. But also like a big margin movement would maybe not lead to the expected result because you also have from the consumers a reality where they look at this, the wholesales the cash and carry is already a lower price channel. So normally the price difference is like 12%. Operator01:00:34We're already a search for low price. If it's 12%, you go to 13% or 14%. We don't know how much of a sales differential this would bring. If we were too aggressive, we could lose margin and we're going to sell pretty much the same amount that we would have been selling with the margins we currently have. So if you look at B2B, we're still very careful. Operator01:00:54And while you have this scenario with high interest rates and currency and this perception that we have where the economy is generally a little more jobs and some other indicators. But the overall perception still is that people are very cautious still with their expenses, especially with the last currency increases, the uncertainty about the interest rates of these customers. If they're really quick to adjust, we don't see like major stock up trends. So if we had such like a cataclysm in the market that could maybe lead to higher increases, they could invest. But the cost of investing in stock today versus an expectation for gains, we look at and we see that hasn't really happened in practical terms. Operator01:01:39Okay, perfect. Thank you, Bamidu. Well, moving on, our next question comes from Bob Ford, sell side at Bank of America. Bob, we'll enable your mic so that you may proceed. You may proceed. Operator01:01:52Okay. Thank you very much. Good morning, everyone, and thanks for taking my question. Tomiro, how are you looking at the differentiation and competitive advantage? And besides greater segmentation and regionalization, are there opportunities from a seasonal perspective for more of a treasure hunt in the stores? Operator01:02:14I don't know if I got this question, but about differentiation, more and more the company has been when you see like when we showed you the campaign, it demonstrates how we're really trying to adapt to each region in Brazil. It's a continent. We have huge differences from one region to another, and that happens in the micro regions. So if you look at Sao Paulo or Campinas or the Santos region, you can see dynamics that are very different. So Brazil is almost like one coffee brand per city. Operator01:02:46So our big bet on standing out is really at the level of services, the mix of products. And there are many other dynamics as well when it comes to activation at the stores and special festivities and campaigns and even the types of ads we put in the store to be able to stand out compared to other competitors. So I think another differential I'll say has presented in many areas is that among all cash and carries, we have the highest diversity in the store formats and network. We have stores of 2,000 square meters all the way to 10,000. So in order to do this, you shift all of the logistical patterns and supply. Operator01:03:29And so this makes the company very resistant and sorry, very consistent with the numbers when despite the financial issues and the interest rates, you look at the SG and A and the gross profit, then you see that consistency and continuity is pretty much the biggest milestone besides the cash EBITDA transformation. I hope to have answered. And just to ask you, how have you been thinking about like a treasure hunt approach or more like a seasonal approach to your mix. Bob wants to know if we have more opportunities for like treasure items, which are the in and out items, right, where you don't have like frequent free, frequent stock, right? It's just like a one off opportunity. Operator01:04:24So yes, there's many opportunities. We have different projects we're working on, and we have some news to share soon with some great opportunities we're trying to attract and bring in more resources and having a greater share on their pocket. And of course, we can't make a huge change from a strategic perspective so quickly because we have to preserve cash and also the maturity of the extra stores and really doing things well done is the biggest focus. But of course, we have different projects. And as soon as this is a little more mature, we'll be sharing this with you guys. Operator01:05:00But it's just putting yourself in our place and seeing a company that's going to start off with 300 stores with 38,000,000 people visiting in a month and you see so many opportunities. So ever since advances in the galleries now in the second quarter, all the way to other projects with course, you have a limit of sales and space in the stores. So now with more solid data soon, we'll be able to bring more information. We don't want to create any false expectations. But of course, there are opportunities for the in and out. Operator01:05:39Our next question comes from Thales Granado, Southside at Safra. Thales, we'll enable your mic. You may proceed. Well, good morning, Belmidu and Fagam and Gabi. I have a quick question here about leverage. Operator01:05:54I think when we think about 25, what has the company been seeing as leverage for the end of next year? And what are the levels of leverage that would make the company pay interest on equity or private capital to be able to have the fiscal tax benefits? Hi there, Thales. How's it going? On leverage, the company has been focusing on reducing the level of leverage, and we are looking for, in the midterm, a level of leverage that would be about 2x net debt to EBITDA. Operator01:06:30But what's most important, this of course relies on the interest rates. So we have to have a financial expense that can maybe compromise 15% or 20 percent of our EBITDA, but not more than that. So that's what we've been discussing. And the company is still really focused on deleveraging. So if we talk about a leverage level for the end of next year, it's still too early because of everything we're seeing in the market and the fact that we still have so much to evolve in from now all the way there. Operator01:06:58But what we can be more precise about is our leverage by the end of this year, which would be below 3.2x and our commitment to continue to deleverage the company throughout 2025. And especially about JCP, it's still a little too early to talk about that our focus is deleveraging, and it doesn't make sense to evolve into a discussion on JCP considering that we're really focused on deleveraging. So but then from next year onwards, then this discussion can be made in a more effective manner. Okay? Thank you. Operator01:07:47Our next question comes from Nicholas Lehiin, sell side at JPMorgan. Nicholas, we'll enable your audio. So you may proceed. Actually, most of the topics were already addressed, but I just wanted to maybe ask you something quickly here looking at the quarter. What was the progression of the same store sales throughout the quarter? Operator01:08:15Just to understand how you guys are looking at this now for the Q3? Thank you. Thank you, Nikolas. Actually, the quarters don't necessarily repeat because in the second quarter, you had this displacement due to the Easter period and we had April May stronger, but in the end of the quarter, it was a little weaker. But the line already demonstrates a different sign. Operator01:08:41Our estimates for the quarter are that are really in line with the second quarter. And even in our sector, the big changes in the quarter are not such relevant are not so relevant because, of course, that depends on the dynamics each company adopts. When you look at this, you see that there's levels that are very similar when you consider progression throughout the quarter. Okay, perfect. Very clear. Operator01:09:05Thank you, Bamido. Now we're going to head to our last question today. This is a English question from Andrew Rubin, Southside at Morgan Stanley. Andrew, we'll enable your audio. You may proceed. Speaker 101:09:20Hi. Thanks very much for taking the question. A bit more on mature stores, if I may. Where are we in terms of the planned cannibalization impacts you mentioned? Are they mostly in the past or should there be some go forward effects as the converted stores keep maturing? Speaker 101:09:36And then when we think about the normalized mature store growth, should it be at inflation, above inflation when considering the services and other improvements or maybe below inflation as the sales further spread out with the new store base? Thanks very much. Operator01:09:57Okay. Thank you, Ruben. Of course, we want to be above inflation always. The dynamics we have and the inclusion of new services and the cannibalization, this is and so we're buying an older SAE and now we're buying a new SAE. Now the Q and A session is officially ended, and we would like to pass on the word to the company for the final remarks for the company. Operator01:10:57I want to thank you all for your participation. I hope to see you on our ship in February 25, where you can shop at our stores and really have this incentive. So we're going to be heading towards the 3rd 4th quarters, which are the most important periods in the year. Thank you so much for your participation. The earnings call for the Q2 of 2024 at Assai is officially ended. Operator01:11:24The Investor Relations department is available to answer any possible statements and questions. Thank you all, participants, and have a great day.Read morePowered by