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during the earnings call. Related to business perspectives, forecasts and operational targets at SAE represent assumptions and beliefs of the company as well as information currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they refer to future events that depend on circumstances that could or not occur. Investors must understand the economic conditions in the market and other operational factors could affect the performance in the future at our site and lead to results that utterly differ from those in such statements in the future. Now I'll pass the floor to Gabriele Alu, the Investor Relations Director at our site. Thank you, Rodrigo, and good morning, ladies and gentlemen. Thank you so much for participating in our earnings call for the first quarter of 23 at SAE. I'd like to present the executives present here. So we have Belmiro Gomes, our CEO, Dani Sabag, our CFO, Vladimir Desanjos, our Operational and Logistics VP, and Anderson Cachilho, our Operations VP. Before we start the presentation, I'll pass the word to Belmiro for his initial remarks. Belmiro? Thank you, Gabi. Good morning, everyone. I wanted to thank you all for your presence in the first quarter of 23. So, of course, this is a quarter that is super important considering the last general shareholders meeting where we had a shift in the controller and now the company has no defined control. So, true corporation now. And on the 8th now, we'll have the new board taking place, the the board was elected in the last general shareholders meeting. So we have very skillful professionals that are going to help and support the company during this transition period. So this, of course, helps us with the governance issues, but also contributing strongly to the business. And as I keep this history of growth that's so high, over 30% in the first quarter, a total growth of 33% with an important highlight to the same store, the sales base. And so we had important contributions with the expansion in the stores that were converted. And so

So we have some important share gains of almost 2.4.

It was the biggest share ASE has ever had in all of its historical track record. And we add a volume of sales of 4 billion reais compared to the first quarter of the previous year. So I also wanted to highlight our special thanks to the store teams, that are in the day-to-day operations, working with almost 100 million people that go by all of our stores in this first quarter in many different operations. And the company had a significant increase in the flow with over 16 million tickets. And overall, these added up to 16.6 billion reais, the 33% growth, then a strong contribution in the expansion we had. So I want to highlight that we've been keeping up a balance point between our growth and sales and the administration or management of the same store sale part. And this is a relevant amount, so it's the biggest amount we've ever had of stores, new stores at the same time. We have 60 new openings that took place in 2022 and over 29 openings in 2021. So this balance point in the ramp up and the operation we believe was very strong and so the gross margin even despite this amount of stores continues to be super stable compared to the previous year with an increase of 0.1 so this represents uh the fact that the new units uh our new stores are not being detractors or confiscating margins another highlight is the discipline for these expenses so the cash and carry operation is a low cost business. So when we look at the variation of expenses that we've had compared to the previous period, it's a lot more related to this bigger amount of stores. So it's natural that a bigger amount of stores would have this during this ramp up period. a level of operational expenses that's higher due to the amount of personnel or the media that we work on or all of the different activations that take place in the store maturity. But in our perspective, we did have a balance point in these expenses. And with this, the operational aspects of the business has been extremely stable. The 33% growth in sales also brings an important increase in the gross profit and EBITDA margin that's relatively stabilized. with a 0.3% drop and a small variation, considering that most of our store network, about 40%, was already open with the recently opened stores in the last two years. So the net income has an impact, of course, due to the cost of the carryover of the debt. We're going through this period where you have a very dangerous combination of interest rates, the highest real interest rate in the world with food inflation at about zero, which generates pressure at a moment where the company's going through this growth and an important growth trend for growth. And so we opened up another three stores. These are three more conversions, adding up to a total amount of sales of 266 stores. in all of Brazil. And so we have another 28 stores under construction. We have 13 stores from the conversions of the hypermarkets that were acquired and 15 organics, which were already expected. And so they'll be opened throughout 2023, bringing in even more contribution or acceleration in this growth process for the company. And of course, completing the hypermarket conversion project as well. We can advance so now moving on to the project with the extra stress, it was the biggest conversion project. For stores and when we talk about these conversions from hyper markets into cash and carry stars, it is a conversion that's really impacting so it's different than when you convert. like a brand to another brand or cash and carry to cash and carry conversion from a hypermarket to cash and carry operation requires structural construction work and refurbishing the model of the acquisition of the commercial spots. We just bought the commercial spot. We have no liabilities or risks involved in the operation from a labor contingency perspective or personnel perspective. So the stores were emptied out and we didn't have any furniture left or anything else. They were completely remade. Others are still under construction and these stores have only like five months of operation, basically. So during the first quarter, we were mainly focused to the stores that were open in 22 that needed to complete this process with the ABL and galleries aspects of these stores. Just the extra stores, for example, that came from last year, they had about 727 shops and an ABL area. That's really big as well. And so the adhesion of stores and the shops in these stores is really big. We have 46% vacancy because we're just finishing the construction work now. But as these other businesses occupy these store areas in our store, this will attract more customers as well. So these stores are performing in line with what we estimate for this extra project at about 70% of this sales percentage. So even with less than five months of operation, these stores have already been delivering a sales level that's above the historical average in the entire Acai network. And they've performed close to about 22 million reais of monthly sales in the first quarter. which is a quarter that, as we all know, is a quarter that's very challenging. And the positive point was that, as we highlighted in the beginning of the project, these stores have a EBITDA margin that we never have in the organic stores. So this was already an important contribution to the five months of life in the first quarter after the opening cycle of 5% after the IFRS 16. perspective that we have in the other store park or network. So sales are at 2.2 times compared to what extra had before and 3.2 when we just compare the food perimeter since the hypermarkets as we all know have a real high sales of electronics and home appliances that the cash and carry operation normally doesn't work with. So We understand the anxiety towards this project. We understand the anxiety or the immediate approach that this project could maybe bring. But just as any other project for growth, first you need to invest, then you can reap. So just as all of the growth processes, you always have this investment phase and then the maturity. And our stores are recently opened, so they're still going through this curve. with a maximum and minimum levels expected. So we've been following this process and we reinforced our credibility and our different points and how these stores are going to contribute strongly to SAE and how they're going to be a very important differential in the future, considering that they are in regions that have high density. So, of course, with this kind of magnitude and this amount of stores, when we take a look at the tickets added in these stores. We have about almost four or five million custom tickets more per month. And of course, each store requires this kind of adjustment in its ramp-up curve. So adjustments when it comes to the margin assortments and competitive advantages, depending on the regions where these stores are part of, are included. So the maturity curves follow along. Of course, the difficulties in the market. We have a moment in the market that's more challenging. with consumers a lot more focused on basics. And so this, of course, this affects the overall store network in the company. So we can move on to the next slide. And I'll pass this to Tania as she can highlight the adjusted EBITDA and the net income. And then I'll cover this a little more up ahead. Thank you, Belmiro. Good morning, everyone. So moving on here to the presentation. When we see slide four, you can see the EBITDA graph and the analysis of important increases, 200 million year over year. And I wanted to mention three important points on this performance. So first, what Bermuda already mentioned that's important to highlight is the expansion. So a margin that we consider to be very resilient, considering this strong expansion in the past 12 months when we opened 59 stores. So we would expect a pressure that's even more significant, but the performance is really unique when it comes to the conversions that reach maturity quickly or even the quality of the organic stores we open. This really helps to keep up this level that we consider to be very sustainable up ahead. So about the pre-op expenses with this expansion, we always highlight that we have over 10 beeps in this quarter of expenses that are related to the stores that were open. So when we take a look at this from a recurring perspective, the EBITDA reported that would be a pressure of about 20 beeps and not 30 beeps. And when it comes to this pressure point in the margin, it's important to mention that in the second quarter, we had some margin pressures at about 50 beeps. And the third and fourth quarter. So what I want to say here is that the pressure in the margins in the first quarter from a sequential perspective, quarter per quarter is a lot lower than what we noticed in the second semester of 22. Moving on to the next slide. We understand the financial earnings and cash generation, so the earnings were 630 million, equivalent to 4.2% of the revenue, and then excluding the lease interest at about 200 million, we have a net expense of 4.28 million, representing this 2.78% of the sales. So this earning that's affected by the CDI, it went up 34% and we had a CDI in the quarter of $243. to 325, and this is the main impact, but we also have a significant volume of the average debt in the quarter, which is a little bit higher than the debt that we had in the first quarter of 23 and 22, sorry, due to the fundraising we had to implement to be able to fund So the debt position was 10.9, but now it's 12.7 besides the interest that's embedded here. So when we look at the net debt, we end the quarter with 8.1 already considering the credit card receivables and we have a leverage level of 278. And that's when we bring in this graph here at the bottom part so we can show you that This level is really in line with the levels we've observed in the second and third quarters of 22 and in line with the expectations we have for everything we projected. in this huge expansion project we've been delivering. So even in the next quarters and the second and third quarter of 23, we'll be noticing a level that's very similar to the first quarter of 23. Everything is kind of under control. Everything's within the covenants we have combined with and agreed upon with the banks. We've been reinforcing this with Gabi in the meetings with Palmito and myself, but we want to make it very clear that we don't have any risks of not fulfilling our covenant. The deleveraging process is really keeping up to date with the calendar of this entire conversion project and expansion of the company, and that we foresee some deleveraging in the fourth quarter, really in line with the levels we've reached in the fourth quarter of 2022. So it should be a very similar level. And we wanted to transmit this kind of comfort to you. And while we're speaking about the cash generation accumulated in the past 12 months, We had a cash generation of about 3 billion, and this made it possible for us to fund all of our investments, including the payments for the commercial real estate. And when it comes to debt and cash generation, it's really in line with our estimates. If we consider all of the maturity of the 59 stores and the stores that are being... that are reaching maturity, the organic stores as well. And we see that above all of this, we have to reinforce that we have 22 stores in construction phase. And finally, to end my part of the presentation, moving on to the next slide with the net income, as we highlighted during the presentation, we have operational results that are very resilient, but of course, they still reflect all of these high investments that we've had in the expansion. And with this, this maturity expected, we want to highlight that the net income is really impacted by all of the maturity process that's in progress. So as Bominu mentioned, I want to highlight the issue with the organic conversions and the sales levels, the margin levels. All of this has been translated into greater productivity of sales per square meter, but also profits that in the future will end up reaping the quality of this expansion. So amidst this context, we reached a quarter with 72 million reais of profit or net income, which is really impacted by the scenario with high interest rates that we've been facing in the country. These are my comments. Now I'll pass the floor back to Bill Meadom. so that he can talk about our app and ESG.

Do you want me to?

Thanks, Dani. And we launched our new app, Meu Açaí. I think a lot of people asked about our strategy and Açaí for all of the online resources, and we really believe in the digital strategy. We are one of the companies as the second biggest retailer in the country with a huge amount of people visiting, over 100 million people coming online. to our stores, and we believe that there are many opportunities. In the app, you have a CRM base with over 7 million customers registered. It was the fifth app that was most downloaded when we opened, with over 30% of the tickets identified. And this helps us identify improve the purchase experience in the physical environment of our stores. But we were also able to work with some other issues because since we work with end customers and also B2B customers in different types of sectors, we were able to offer special deals, special sales, customers that are registered can have some specific discounts. that are focused on their kind of profile. We also have our campaigns and other initiatives that are performed together with suppliers. We have a very strong digital resource and this has been very successful. This app will help us. when it comes to greater customer loyalty and also to help ramp up the new extra stores where you can also have a level of information and the behavior of the purchases of our customers and our different target audiences as we've never had before. So I want to thank our team working on this launch. We should be reaping some very positive results in this digital strategy that we've been advancing with. Now, on the next slide, when we get into ESG, obviously, due to the size of the company, 75, we have a very important role with social responsibility and SAE is always a reference and a benchmark when it comes to our relationship with society and ESG. So we have different initiatives now in the first quarter, of course, looking at the amount of store openings and the company has been very much aware of this and we were elected as the eighth best cash and carry operation in Sao Paulo. performing the assessments at the best in class. And even with such a big amount of stores here in Sao Paulo, you can see that the company is on the right path. I wanted to highlight the GPTW index among the 10 best companies to work at with people with disabilities. And Açaí is one of the very few people that have more than the minimum requirement. We have 5.4, even though the minimum requirement is only 5%, and a huge amount of employees that are over 50 as well, and other initiatives. So before we move on to Q&A, what we look at up ahead is that we see a challenging environment for all of the companies in Brazil. It's a lot more challenging. Consumers, as I mentioned, are a little more focused on basics and being more careful when they shop. We have an important slowdown in When we look at the earnings in the first quarter, in our perspective, the operational aspects are very well protected. But of course, as I say, since we're in this moment, we have the biggest investment growth kind of pays the cost of this process with the interest rate that's so high. In Brazil, we have the highest interest rate in the world. Basically, when you look at the food perimeter, it's still the highest in the world because our inflation is practically practically zero. and interest is so high. So when you have this mismatch and with the interest rate, we're going to continue to be pressured when it comes to leverage. So we keep up with our expansion plan. Most of this needs to be completed with the project, the extra stores. We did have some difficulties with obtaining licenses, but most of them are already under construction. But of course, now we're being more careful with this new project. so that it can really reflect the current interest rates versus the inflation that is existing at the moment in the sector. So this makes the company be more careful. Although we've announced the 40 stores this year, none of the projects were canceled yet, but the organic stores We can decide about when we're going to start building. And of course, we're going to have this new balance work to search for a drop in our leverage position. But of course, we want to balance this out with our growth rates. So the market as a whole has been working on this and high interest rates, costs that are very high. This makes us have to be more careful. So the company is really focused on the ramp up for the store maturity, keeping a healthy balance point between margins and the growth in sales. And our expectation is the stability. And we're going to be landing at the end of the year with this net debt to EBITDA ratio of 2.2 times, just as we highlighted. in some other moments. So these are the big challenges we're looking at up ahead. And having said that, I would like to end and open up to Q&A. Thank you all. Now we'll start our Q&A session. And I want to remind you that if you have questions, you must select the Q&A option at the bottom part of your screen, write your name, company and language, enter the queue. As you're announced,

You should activate your mic to submit questions.

We would ask you that all of your questions be submitted at once. So let's move on to the first question from João Pedro Soares, the South Side Analyst at Citi. João, open up your audio so you can proceed.

Thank you guys.

And Domino, I wanted to explore two topics. First, you had a clear guidance for 2024 of sales and the conversion assumptions and also the macro assumptions. on price and volumes, but it seems like the conversion is moving in line, but maybe this level of the slowdown in the inflation could harm this guidance, right, for 2024. So I wanted to hear your opinion on this and also understand the uplift targets, right, if you keep those three times uplift with the margins above the legacy source. And the second topic is about the trade-off between the opening and the deleveraging. It's a recurring topic and it seems like you guys are super confident that you have to review the store openings even with this level of leverage. So I wanted to know if we can see some alternatives to reduce the leverage. We understand this and Danny talked about this as well. But are there alternatives maybe that we could consider through like a sales lease back to reduce this leverage and maybe anticipate the deleveraging process? These are the questions. Thanks, guys. The first quarter and extra demonstrates that we're on the right path, although these points are really strong. We never had, for example, in the historical period of openings, we never had stores that already started the first quarter with a level of margin or sales. that we had seen so even with this amount of almost 80 new stores with less than two years we didn't have a degradation of the gross margins and there was a big concern also about this because the stores have an operational model it's very different and the expense variation is really in line and actually very low in regards to the amount of stores so um see that there's this trend considering the amount and magnitude, and you always have some competitive reactions that end up making you adjust this. But the guidance for 2024 has a inflation component. We're going to wait on the second quarter to see how this ratio behaves. And actually, since we went through this process, the population had a trade down, had a drop in volumes, and there's an expectation for the recovery. But of course, this is subject to macroeconomic scenarios, depending on the inflationary rates. If you have a deflation, considering the currency issues and other commodities, this could create a climate of uncertainty. But it's still too early to review this. The second and third quarters actually could indicate this a bit more. So we didn't take our feet off the accelerator when it comes to conversions with the extra. But for the organic stores, we're being a little more careful. So if we have this scenario... If we already had some signs from the coupon accounts at the central bank, we would maybe feel more confident. But overall, we have almost 40 projects besides the ones that are already under construction for the organic stores. We're waiting for some legal authorizations and approvals, but also due to this concern with the lab rate situation. So the... we want to do leverage a little quicker. There's one part that there's no way out of, right? We need to open up the stores and the stores need to open cash. So at the beginning of the approach, we warned people that we would have a higher leverage position eventually. But of course, we have an interest rate. And well, in our case, just as in any other company, we're always going to compare the interest rate that we have now and the fundraising costs versus the inflation. So you can see that we've already noticed that the highest interest rate in the world in the food perimeter, it's almost the biggest, I think. And so this makes you have to have a little more care concern. So we could be affected in the guidance for 2024. But in our vision, it's not that significant because even with the organics that could be impacted for 23 and 24 they also didn't have such a significant contribution and so this will lead to a more clear measurement and so we don't see an increase of the interest rate at this moment it's already at its maximum limit so what we see as a limit at this moment is when you're going to have this trend downwards, right? So considering that the food prices stopped going up, reducers have reduced this volume even more, and so there's always going to be another alternative, right, which is being a little more careful, as I mentioned that, because my last presentation was maybe misunderstood, but any kind of movement with deleveraging can be assessed, right, either as sales, leaseback, exchanging, Organics have a BTS. So what we don't have at this radar is that we don't have any expectation to have a primary operation in the market. I just want to be very clear and very transparent about this at this point in time. So super clear, Bomido.

Thank you.

So the next question is from Tiago Macruz, the sales head analyst at Itaú. Tiago will open up your mic so that you may proceed. Please, Tiago. Okay, thanks, guys. My question is about lease. So we saw that there was a value that was a bit higher than what we expected in the period. And so we also had a sequential growth versus the fourth quarter. Could you give us a little bit more color on this topic? Was there any temporary impact or a one-off impact that justified this kind of sequential increase? That's my question. Thanks, guys. Yes, Tiago. Some contracts we pay over the year considering the minimum value. So some of these contracts have like the minimum and variable value. And so what we do normally is you pay the minimum year over year. and then you have to pay this complement. So although this already affected the results in this month, with the cash exit in the first quarter, if you wait till the end of the year, with the arrival of these stores from extra, you have more contracts with this payment modality, which exceptionally makes you have this kind of effect with the lease value it's a little higher. So it's nothing more than just the variable on the amounts that are paid. Okay, thank you. Very clear. The next question is from Luis Felipe Gualaes, the sell-side analyst at BTG. We will enable your audio so you may proceed. So If you could maybe just clarify what we could expect as a working capital dynamic in the next quarter as we saw some deterioration in this first quarter. And the second point is just to mention the issue that's We always talk about competition in the food retail, and I wanted to understand what your vision is about this. Do you think this should favor you over the years when it comes to the trade-off between price and margins? And also, could you talk about competition in this second question? So the working capital, there is an effect when you look at the first quarter, and then maybe you have to go back to look at 2021 and 2020. Last year we had a shift in our change. It was right at the beginning of the first quarter, so we had this objective of having a payment term that was a little greater, and this brought in beneficial effects. But since we have the same payment system, this was null. And then you also have this factor with such a big amount of stores. So the new stores, for the first time, we are opening up with such a relevant amount of stores. And so they have... stock above the average store network. So when you have this initial store maturity, you have to balance out the volume of stock and the product mix. And so you have this occasional effect, right? And then you'll notice that in 21 and 2020, the working capital volume is really in line. We've been searching for improvements and especially in our case where you have relevant growth so we have 20 30 or 28 stores so it's really a relevant volume and this allows us to search for improvements in our terms with our suppliers so when you go back to this basics, to the pressured scenario, this favors cash and carry, right? But maybe this is not as visible, but we did have a big store opening. So with either opening the extra stores or even our competitors working on this conversion process. So although the sector does have a strong capacity to attract new customers, it's also not completely instant, right? So, especially when you get into the high-income area, so this pressure combination of these factors and some fiscal issues that could also impact the price of the product, you always increase the relative advantage in our channel. So, savings can be important for the entire Brazilian population, and whenever they can save with basic food is in our sector. So, This is another point also. And there is a sector-related factor, and there's also each of the players. And players are not like a... faithful copy, right? So there's huge differences when you look at the operational models, the services, just look at the average billing for the stores in each of the players, and you'll see that there's a difference in the sales per square meter. Sometimes people say, oh, but then it's the sector. Okay, well, but we compete with other competitors. So there are regions where we don't even have stores. So there are the retailers and cash and carry stores, but this doesn't keep us from entering these regions. Expansion was not always done. in new grounds only so uh when you take advantage of the fact we have almost 600 people listening just i always say that look if you're curious just look at the uh abba's uh ranking get the revenue divided by the amount of stores and you see a big difference right so the sector has is a lot more heterogeneous in its value proposition than people imagine So when we look at the space for growth and future space for growth and the capacity that the company has for penetration, we are not only looking at the format, but we're also looking at how our business model and experience is very different compared to our competition working in the same sector. So I just wanted to take advantage of this opportunity to make this comment. Excellent. Thank you for the answer. Well, the next question is from Vinicius Estrano, the sell-side analyst. Vinicius, we will enable your audio so you may proceed. Thanks. Good morning, everyone. And just a question about the consumers. Since you have a mix that's a little bigger, through B2C with the extra store openings. Maybe this could mitigate the de-inflation effect up ahead through better volumes or even like a trade up. And could you also talk about the performance here at the stores in April since you should have some comparison basis that are a little more difficult to cover right now? Okay, thank you, Vinicius. There is a bit of an expectation. Even the stores that are already opened, besides the fact that they're still ramping up, there's still certain things from a logistical and physical perspective that needs to be considered. And some other news as well that intends to accelerate the maturity of these stores. There's room for capturing this. And of course, when we look at the level of expenses and costs, and that we still carry in these stores. So it is possible because we have a population with a higher income. But generally, when we see the market and consumers, they are at a level of prices. And so you don't have any kind of movement where you have a search for savings, but no stock up. So there is an expectation that this ramp will also help us offset the de-inflation aspects that we've seen up ahead. So we've seen that the month of April is, if you look at the IPCA on 15th of March, you're going to see something very similar. So we are working towards the second quarter with the expectations to have inflation that's really low. Some initiatives should be implemented to eliminate this effect, especially when it comes to volumes, because we know that from an inflationary perspective, there's no gains. There are also some other initiatives to rebalance the expenses. And so over the last decade, we've been going through different variations of the peaks and inflation and drops, and we've been keeping up this discipline. So some of these expenses, optimizations, we can also perform in a de-inflation period. So I hope I answered your question. No, that's super clear. Thanks. Ruben will open up your mic please you may proceed well i have a follow-up question here really about working capital so Here, specifically in the suppliers line, I understand that there was a seasonal aspect, right, versus the fourth quarter. But throughout the year, should we expect a supplier flow that's more similar to what we had in the fourth quarter? I wanted to understand a bit of the comments in the last call where you did mention that there were some gains, right? And this supplier's line that we're recurring, does this continue? Anyways, I just wanted to understand the dynamics. Yes, in the second quarter, you'll see a more favorable ratio. We also rebalanced the levels of stock and we held out to these a lot more. So this will balance the ratio with our suppliers. So the gains that were achieved, of course, we had this effect in the past where we changed the calendar. But we're going to see that this is a lot stronger from the second quarter onwards now. Okay, thank you. Continuing, the next question is from Daniela Eger from the XP Sales Site Analyst. We'll enable your audio so you may proceed, Daniela. Okay, thank you, Belmiro and Dani. Thanks for taking my question. First, just a quick follow up on the issue with reviewing organic growth. Do you think that maybe these are guaranteed while others are being reassessed or postponed in this scenario? And so I wanted to understand a bit more about what we can think about when it comes to this level in the next quarters for financial results. So do we see a worsening quarter over quarter, even with this interest stable? And I wanted to understand a bit of what your mindset is towards the drivers and evolution up ahead do we see an anticipation of the receivables we also mentioned this issue with negotiations of with suppliers is there any kind of exchange on your side also from a financial perspective could you give us a little more color on these points and also when it comes to taxes benefiting the quarter up ahead and Another point also about interest capitalization and how we should be managing this with the financial results and earnings. And a last follow-up about the comment that we made on April. You mentioned inflation should be a little bit lower, pressured, but could you mention what your performance has been like. Should we expect some performance that's similar to this when it comes to growth? Well, Danny, I think it was strange that you weren't the first one to submit a question, but you're always the first one. But anyways, for organic stores, we haven't canceled any stores. We're just taking advantage of some projects, right, considering the maintenance and level of leverage pressure. So maybe some of them would have already been started, but we're waiting. We're not canceling projects, though. We're just taking advantage of this time to also renegotiate the prices of equipment and construction work. Of course, you have pressure. The issue with holding on to these projects is related to the level of leverage, and we expect to reduce this level in the company. And what we've seen is that there's a slowdown in the openings and the projects in the market as a whole. So there was this moment where you have the maintenance of the interest with the de-inflation, and that affected everyone. All the players were investing strongly in growth in the last few years. So this trend is not a concern. So the project remains. Now it's just about being a little more careful. And in the beginning of the construction work, we've been assessing the balance point. Each one has its own characteristic and this is the effect of the interest rates. So with the level of interest we have and interest rates at 1375, although it's a cash and carry and it's resilient, you need to be careful and wait to see these clear signs of a beginning of a drop in interest rates that has been affecting. As I mentioned in the beginning, when you look at this from an operational perspective and the performance in our perspective could be better, but you have this carryover of the debt at the moment that the company is in, and so you require a little more care and a little more discipline. So I'll pass the floor on to Dani so she can answer the other question. Well, thanks, Dani, for the question. On the financial results, when we look at the seasonality and we look at the payments that we have, they are a little more concentrated in the second semester. So we should have a behavior that's very similar from the second quarter. to the first one and a bit bigger in the second semester due to the exits for cash. But it's natural because when you look at the forecast from the analysts and the consensus for 2023, it's really in line. So we didn't expect like a financial result that's super different than what is in the general consensus in the market. So Gabi will be available to share this average we're looking at, but it's very similar to the consensus overall. On the capitalized interest, it's important to mention that since we open up a lot of stores in the fourth quarter of 2022, the capitalization base is probably the smallest we've ever noticed in the last four quarters. So it drops a lot. And I want to remind you that the store started to arrive in a more significant way in the second quarter. And so I think this is a good reference at this moment with the peak of the stores that are present. in this full quarter because in the first quarter you'll remember that we had received a parcel of the stores but not all of them so when we look at that and we see the numbers we see 183 million in the second quarter 169 and now 60 so we're saying that we have a significant drop 183 so now it's like one third of this value and it tends to drop more and more So I want to take advantage of your questions. I need to reinforce a bit of what we've already mentioned in other calls, which is we are following this accounting guideline. And according to this, the companies must capitalize the costs of loans that are directly attributed to the construction of this asset so it's not like a new practice or something new we're doing if you look at our histories and if you look at our releases way before the extra project you'll see a line with capitalized interest which is this guideline that we're working on here. And we've been doing it as presented in the manual, right? So I think these are the main points I wanted to highlight. If there's anything missing, just let me know. For income tax and for BOMID also in April. So for income tax... Yeah, so the basis of this subsidy actually is considering the tax benefits. And so this, of course, depends on the sales in the company, but it's pretty much the level we expect. Of course, there's some variations as you have more sales coming from this tax benefit, the ICMS.

Absolutely.

Eventually. Sorry, Denny, I missed part of your question, but in April, it's really similar to the first quarter, so very similar to March. We haven't seen any big relative differences, but maybe there's a bit of a difference in the new stores. where you have like a natural ramp up, but generally where the difficulties we saw in the month of May remain in April. If we look at the second quarter, it's really going to be in line or maybe a little better when we look quarter over quarter, maybe not compared to the basis of last year where we had comparisons a little different, but we should have a second quarter that's really in line with the first quarter. Excellent, guys. Thank you so much. Moving on, the next question is from Joseph Giordano, the sell-side analyst from JP Morgan. Joseph, we'll open up your audio.

You can proceed, please. Okay.

Thank you, Bomir. Thank you, Dani. I want to explore. Some growth avenues that maybe are not very well covered by the company yet. And I want to understand how you guys consider these possible opportunities today. When you look at distribution wholesale and maybe this de-inflation moment. could be a good lever to improve the turnover of these stocks. So getting back to the conversion and competition, I wanted to explore and understand if you guys are seeing some kind of a CPF trend with individuals that go from the more mature stores and get into the newer stores. So I wanted to understand the cannibalization aspects. And getting back to the last point with the incentives for the ICMS, within all of the discussions that have been going on in the last few days, I want to understand what you consider to be the risks of these chips in your understanding of this subvention or incentive. So I think starting with the incentives here, when you see the incentives for the ICMS to consider this kind of benefits that we consider with some companies and some regions in Brazil, we don't have these kind of benefits. So this, of course, creates difficulties in competition compared to other wholesalers or cash and carry players that have a lot lower tax load than we do. So I think the objective is that we'll be able to regulate these issues so that they can be more fair. And so whatever is applicable to one can be applicable to the other. And so we see this as something positive in some states, and we even have some initiatives from an institutional perspective to have a more fair isonomic structure when it comes to tax incentives. And this could help us with the wholesale distribution that have products that have a tax load difference of almost 13%, which makes us, even though we have scale and good proposals, sometimes due to tax issues you don't you're not competitive so wholesale distributors are so important lever for distribution um if you consider our main competitor they have this operation so um if you um consider asai ever since the first time we had our main competitor uh because we didn't have this distribution so We were focused on this. We wanted to complete this. And of course, it is something that the company has been focusing on. It's one of the possible levers. And so it's a business model that requires very little investment, but it does require some disciplines and credit granting. And this could impact the cash positions. at the moment when you begin the operation. So I think in the fourth quarter we're going to have a little less pressure from investments and the payments we need to implement now during the second and third quarter. And we could start maybe some projects, but it is one of the levers. And there's another important lever also that we consider, especially in the stores in the downtown region. So we didn't just add the same store model we had historically, In the outskirts in the downtown regions we already performed many adjustments, some are very well known. And so we even increased the revenue per store to show to show that even with these adjustments it's still very resilient model, but still when it comes to the categories and. costs as I mentioned the new app also has some objectives so the segmentation of these offerings and some initiatives with the suppliers to increase our distribution and give us a greater strength which is an important lever so I think the cannibalization also impacts the other players especially regional players that were in these central regions where you only had the hypermarkets So as I mentioned, we had created this kind of exclusion zone because we were avoiding to compete with our own supermarket since Acai was a subsidiary of GPH. But there's some cannibalization, of course, with other sectors and our stores that even had a bit of a disservice, right? So stores that had 7,000 or 8,000 reais and the store has some kind of a closer store sometimes as expected in the project. So we calculate this effect by 2% or 3% within the store network that we opened up in 2022. But this was also part of our positioning with the brand positioning. And so it was preferable that we would be in this point so it was also part of this process with the subvention so do you want to move on yeah um so Joseph we one of the points we wanted to highlight here is that the benefit the company recognizes today Is based on or in alignment with the existing tax laws, so when it comes to this specific benefit. i'll say is not a beneficiary of any favorable decision that's exclusive to the company so. It's based on that law that you see and that you all know about. So what the government has been talking about is something that we're going to be assessing and monitoring, but we don't have like a risk with what we're fulfilling today. We are convinced about what we do. And in the way the law is structured, we're fulfilling this. But we understand that the discussions can be extents. So we've been keeping up with all of these different initiatives. The government's talking about economic feasibility. We've been fulfilling this. the investments this kind of subvention right so ever since 2017 we've been working on investments above 10 billion and so we're going to monitor and reassess this according to the different guidelines that the government has been sharing but we're super in tune with this topic as well So another point that maybe wasn't as clear as it could be when I talk about the second quarter compared to the first quarter, we expect that it should be growing compared to the first quarter due to the seasonality in the quarters. But what I mentioned is that the total growth rate in the same stores, considering that the inflationary composition is probably different, it might not be totally the same or totally different. equal, but we do expect some growth due to the composition of the seasonality, regardless of the stores also that are going to be opening now. So there's a big amount of stores that are going to be open now in the second quarter as well. Okay, guys, thank you so much. Moving on, the next question is from Irma, Southside Analyst at Goldman Sachs. Irma, we'll open up your mic so you may proceed, please. Well, good morning, everyone. Almost good afternoon, but thank you for taking my question. I just wanted to go back. to discussing the expectations for your margins in the year when it comes to the gross margins and the EBITDA margins. I understand it's a really important moment to have this kind of conversion and expansion project. So these movements in the first quarter were really well explained. And how should we look at these movements in the rest of the year? Since the gross margin has some offending factors with special sales done during the openings, but I imagine that there are also some negotiations going on with suppliers in regards to these volumes to be able to stock up a new store. or of course with the expenses you may have some other issues in the beginning that are then diluted so if you add all of this how do you look at the margins in the year should we expect margins that are pretty stable year over year or are there points that will require better expansion or more pressure thanks Well, I think you mentioned that pretty well. Within this, we have offending factors and then we also have positive factors. So even the ramp up for maturity, the fact that the new stores that come from conversions already started entering activity with a higher level margin and a possibility for an expansion in a scenario where the industry is also going through difficulties. So we're still opening up new stores and this helps us with some negotiations. On the other hand, we should see some pressure when it comes to competitive aspects. So we're searching for a null scenario with these effects, and we should keep some stability in their margins. So this quarter is normally the most challenging, the first quarter, which is where we have the complex period. We had variations of 0.3%, but the objective, when you look at these impending factors and the detractors, and the positive aspects that we're going to have this stable margin compared to the previous year. Very clear, thank you. Moving on, now we're going to go to our last question, which is in English. It's from Andrew Rubin, our sell-side analyst at Morgan Stanley. Andrew, we'll open up your mic so you may proceed. Please, Andrew.

Hi, thank you. I just had one quick follow-up. You mentioned not canceling any organic openings, but what about conversions? Has the number changed and can you update the timing now for completing this project? Thank you.

Obrigado, Andrew. Das orgânicas, sim.

Thank you, Andrew, from the organics. Yes, this is actually in our decision process, whether we're going to begin the construction work or not. But for the conversions, our focus is to end this. And this is, of course, a lot more connected to some complex projects of stores that remain in central regions and the approvals of these licenses than from the perspective of holding on to this conversion. So the conversion has expenses with rent pre-op expenses that consume cash in the company. So the focus is going to be to complete the conversions within the second quarter, and we should be paying off most of them. There are two or three stores that were already having a bit of a difficulty from a legal perspective, although these are some commercial existing POSs and These are approvals or licenses to renovate or refurbish. And so all of these can be a little more time consuming, which is different than when you have a conversion of a cash and carry store to another cash and carry store. So it's a lot more related to this, but the company is completely focused on finishing this as soon as possible.

Thank you. Very helpful.

The Q&A session has officially ended, and now we'll pass the floor back to the company for their final remarks.

Thanks to everyone participating.

Of course, we discussed the main points and covered them in a very transparent way with the questions, concerns, and advantages we've been able to achieve. there is a challenging environment the companies at this really on the right track um and so we're based on growth we're looking at the future we want to invest and we want to reap these results up ahead so we know that this moment is a moment that has a combination of high interest We're opening up most of the new stores, and this is going to lead to a stronger company that's going to be better positioned. So we have good things. We need to have patience and work on this maturity of the stores we open up in the first quarters. And there's some other factors that we need to look at. that go beyond the company's interest when it comes to interest rates. We all expect this interest rate can be a little softer. And in our perspective, it was a lot more positive. The earnings call for the first quarter of 2023 at ASAI is officially ended, so the Investment Relations Department is available to clarify any other questions. Thank you so much for all of your participation and have a great day.