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Good morning, everyone, and thank you for waiting. Welcome to the earnings call for our second quarter in 2023 at Açaí Atacadiza. I'd like to highlight, if you need simultaneous translation, we have those two available on our platform. Thus, you must select the interpretation button through the globe icon on the bottom part of your screen and choose your language of preference, Portuguese or English. We'd like to let you know that this earnings call is being recorded and will be provided on the company's IR website at ir.asae.com.br, where you can already find the earnings release. During our presentation, all participants will have their mics off. Soon after, we'll begin the Q&A session. To submit a question, please select the Q&A icon on the bottom part of your screen. Write your name, company and language to enter the queue. As you are announced, a request to open up your mic will appear on your screen. Then you'll open up your mic to be able to submit questions. We'd like to instruct you that all questions should be submitted at once. We also want to highlight the information in this presentation and possible statements that could exist during the video conference related to business perspectives, forecasts, and operational targets and financial targets that I say represent beliefs and assumptions of the company's management, as well as information that's currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions because they relate to future events and thus rely on circumstances that could or not occur. Investors must understand that general economic conditions, market conditions, and other operational factors can affect the future performance at SAE and lead to results that differ materially from those presented in future statements. Now, we'll pass the floor on to Gabriel Hedo, the Investor Relations Director at ASAI. Thank you. Good morning, everyone. Once again, we'll be participating in this earnings call for the second quarter of 23 at SAE. I'm going to present the executives we have present, Belmiro Gomes, our CEO, Denis Sabaghi, our CFO, and our VPs, Lamy dos Anjos and Anderson Castillo with operations. Before we begin the presentation, I'll pass the floor on to Belmiro for his initial remarks.

Obrigado.

Thank you, Gabi. Good morning, everyone. I'd like to thank you all for your presence as you're participating in this earnings call today. And we'll begin by talking about our second quarter. The second quarter, of course, in 23 is a very challenging year. The numbers we're going to be presenting here, first of all, I want to thank our teams and everyone in our stores from different areas that have been working intensely throughout the first quarter to deliver the results that we have at this moment. It's very important for the company, considering the amount of the expansions and new stores that SA has been adding to its base. and even for this year, which should be the second biggest year when it comes to store openings historically in our acai trajectory. So I want to highlight the main points in the second quarter. It's a quarter that is a quarter that has been... Very important when it comes to deflation in some categories where you had a real big peak in prices in the beginning of the pandemic. And then there's this movement towards a drop in prices, especially for commodities, which impacts the sales and the same store sale base. As from the moment when you have this drop in prices, it is natural that our customers that are contractors, which represent about 40% of our sales, will reduce their level of purchases and stock as they see the prices. And a growing movement, just as we also perform some reductions whenever there's a drop in prices. When you have this contrary effect, you see consumers that are so very pressured with the payment of interest, their income levels are still very low. And so this is mainly due to the impact we had in same-store sales. in the second quarter and also the effect created last year with this movement that was done by SAE with the closing of the extra stores. At the end of the first quarter of 22, we had 105 hypermarket stores of the second biggest operator in this format in Brazil, which, of course, benefited most of the market, especially in Sao Paulo and Rio markets where you had the biggest amount of these stores. So, of course, there's a base effect that now we'll notice as we start reopening the extra stores. Besides this, in the second quarter, this is something very important. Due to many factors, we had a growth of 21%. We're adding, without the inflation, even with the deflation in food, we added a total volume of sales that represents almost 3 billion riyals, so a growth in total customer flow of about 25%, and we reached 70 million tickets sold. Within this quarter, they represent about 105, 110 million people going by the SAE stores. And this growth is mainly supported by the expansion and the conversions and transformations since 2009. One thing is if you convert from one format to another and the other is if you transform like from the hypermarket to the cash and carry, you need to have this heavy duty process for transforming the physical structure of the store. when it comes to construction, placing the equipment and really changing the entire concept that the store had so that it can have the necessary stock capacity, meet the needs of customers and also contractors. Sorry, also the small businesses, the B2B customers. So these are stores that are very well located. And as we had already mentioned initially, there was an expectation that there would be quick maturity in these stores and a drop or not very significant impact on results. But this is very visible when we look at the margins delivered in the second quarter, even with a huge amount of almost 35 percent of our sales area. with stores open for less than three years, we can still deliver a gross margin that's about 16%, with a variation of only 0.10% compared to what we delivered last year. Even with the impact of the provisional measure that started to be active in the 1st of May, that also had a marginal effect on our margin effect. So the margins have been very positive. An important highlight in this quarter is mainly in the expense lines, even with this amount of stores, Adding all these services, we have about 60 stores open last year, almost 100. When you look at the three-year period, expenses were extremely stable, with a variation of 9 to 9.3. So this is because we've already included in this percentage of expenses the cost of occupation in the stores that are still under maturity, personnel costs, and all of the trends and movements that are coming from this expansion process and maturity in the stores. So the expenses are a big highlight. And this variation diabetes is about 0.4 compared to the previous period, keeping up the delivery consistency and being able to grow sustainably. with our own cash generation and keeping up the levels of results even when submitted to a high growth rate. So Danny will highlight this a bit more in the EBIT and the net income, and we're going to be closing with margins even with the interest costs and the carryover costs and the level of debt and investments the company performed to be able to acquire the POSs And a real estate from the extra stores and also perform the transformations and conversions necessary. We are still able to deliver in this scenario. We believe there's going to be some changes in the interest rates. That will impact our costs and then that'll help us, of course, get back to the more normalized scenario. So we have strong cash generation capacity. We should also highlight this up ahead, which really makes the debt indicator drop compared to the first quarter, which is very close to 2.8 and now reaches 2.6. then moving on to the projects with the extra conversions we have at this moment a opening of 57 conversions we're still missing nine if you can go back to the previous slide we opened you can see a store in maca maca it has a store that was built it's a building that was built in 1988. Sorry, 1880. And we were able, so we had to do some renovation and restructuring. Now the company currently has 20 construction projects underway, which keeps us, allows us to have this estimate of approximately 30 new units this year. with an important participation also coming back through the organic expansion process since our land bank of projects is still being set up and the company really has a set of projects for organic store openings now in 2023 and 2024 and 2025. We can advance into the next slide, please. So the sales multiples and the performance of the extra stores, as I mentioned in the first quarter, we know how people are very anxious for the sales. But these are stores that have even less than eight months of full operation. So it's still a very new project. The first store openings were concentrated in August last year. Next month, we're still going to have like the first stores completing a full year anniversary of operations. And even with the impacts of deflation that we had, which, of course, will impact the same stores and the existing units as well in the new units, the stores already performed 2.5 in the sales multiples. And I think the main point here is that these stores continue to keep up their growth ramp up with an evolution of almost 10% compared to the second quarter, and especially delivering a EBITDA margin, which total EBITDA margin with a degradation of 0.4 in the total base, meaning that the expansion already came in very strongly with an EBITDA that's close to 6%, even with this short period of sales. So another topic we would like to also highlight within this group of stores that came around in the second batch of the hypermarkets, Açaí will start having a gross area. of 220,000 square meters, which represents probably this, it would be like the second biggest shopping in Latin America in total. It's 1,300 shop owners split between these units. And the focus in the company mainly was delivering, first of all, the a part that was from our operation. So this year we're completing this within the investments. We already have about half of these galleries complete. So this should help us when it comes to the revenue. And the revenue from these galleries in the stores are not considered in our lease line. So we received some questions about this. The company looks at the revenue coming from these galleries shops in the stores in our cash and carry stores and this revenue of the galleries come into the gross profit so these 1,300 small stores are going to help these stores with a bigger customer flow when it comes to maturity dilution of the rental costs and occupation costs that we have in the stores such as the property tax water sewer taxes and other fees so it's a really intense project with 220,000 square meters of rental space. And we received some questions even about this. And so it's important to highlight this point. Now I'll pass the phone to Denny and she'll talk about our EBITDA, our cost of debt results. And then after I'll come back a little more up ahead. Thank you so much. All right. Thank you, Bermudu. Good morning, everyone. And now, once again, moving on to slide five, where we're going to talk about EBITDA. We bring important evolution in RIAs quarter over quarter and also important evolution in the second quarter compared to last year and also in the quarter. In the semester, sorry, with 334 million reais and an EBITDA that already reaches 2 billion. So our margins have a little bit of pressure of about 7% compared to 7.4% last year. And this pressure is mainly due to the maturity gap. of the stores. So an important point to highlight here is that we have a store network with over one third of the stores and maturity. So 35% of these stores are in this maturity phase. So when we highlighted to you guys the evolution of the extra margins as an important point to highlight is that if we exclude the effects of the conversions and the margins of the conversions, then the EBITDA margin remains quite stable year over year. So here we have results that demonstrate the resilience of the company and This is a very important point, also reflects the maturity, and then we have a very stable margin year over year. So if we move on to the next slide, and I'm going to talk about our financial results, and here the results of 628 million, it's important to exclude some of the effects with the lease liabilities. So when we look at this parcel here, that's blue, we can see that there's a financial result pre-IFRS of 221 to 420. And this evolution of 200 million year over year is mostly related to the cost of debt and the biggest volume of debts as well. That's a result of the fundraising we performed in 2022 to be able to handle the expansion project at the company. to support our investments in expansion as well. So, to explain this variation, we can say that 7 million would be coming from these higher costs of debt, And the other 100 and some million are also related to the capitalized interest, which is already at a smaller amount than what it was before, since we already reached 90% of our conversion project for stores. So this kind of explains the variation in our financial results. So moving on to the right side of our slide, we have a lot of stability in our net debt and 7.9%. billion last year and strong cash generation as well which is an important point here in this slide where we end the last 12 months with a cash generation of 5.4 billion and improvement of 2.6 coming from especially from the management of the working capital. So for suppliers and stock, we have significant gains. And this strong generation is really what supported the investments of the company. So when we take a look at the first two lines of 3 billion riyals in these investments, that in the past 12 months represented almost 60 new stores and a sales area that grew significantly. and it's important to highlight that we grew 34% in our sales area and plus 1 billion which are the payments related to the acquisition of the purchase of the commercial real estate. So we supported this high level of investments besides the cost of debt that we bring in here with a total amount of 1.3 billion. So with this we have a net debt and going from 2.7 last year to 2.6. And if you remember, in the first quarter this year, we had a level of 2.8. So this is an important advance in the deleveraging of the company. And now I would like to also make another point here. Great, yeah, go back a bit. Okay, in this last little chart here, We would also like to highlight that we have the indicators and our ratios for depth. On the blue line, you can see how we present this and the release. We know that there are some analysts and investors that look at this indicator of 2.6, adding the payments up to GPA. We would be adding on maybe 0.8 on this indicator. But for the effects of contractual covenants that we have on our debt contracts, the A number for these contracts is the orange line. So we're taking a look at a difference of 1.8 to 2.6, and this 1.8 is what interacts with the three times covenant. So this slide basically and this graph is to present to you all that in regards to covenants, we are very comfortable with the levels that we have achieved at the moment. And when we look at the forecast in the future for deleveraging in a company and our commitments for payments to cash flows, we will have this deleveraging in a very gradual process, but also in 2024 and 2025 at levels that are a lot lower. So we're very comfortable with these numbers up ahead. Now, moving on to the next one, as we bring... Our net income, as we mentioned, the factors we presented during the presentation, so we have our financial results impacting our profits, stores under maturity, as I mentioned, and we'll end the quarter with 156 million. And evolution is very significant compared to the previous quarter because we end with a margin of 1%, and last quarter we had a margin of 0.5%. we have a revolution quarter-over-quarter and in the semester 228 million with a margin of 0.7 so these are the comments the main comments about these two slides now i'll pass the floor back to bow meter to talk about esg advances please okay thank you good danny and of course the company is the second biggest retailer in brazil with 76 uh employees 105 million people going through our stores and so that the equivalent to the Brazilian population comes to our stores in total. So we have an important target audience where stores are part. So this is a topic where there's always things you can improve and work with. But also within this quarter, with the exit of our former controller, our company became 100% fragmented capital. So With this, we become a full corporation and Açaí is recognized as a company that really focuses on ESG. We have 5.5% people with disabilities and we're above the legal quota. And some other important advances we've had, such as the reduction of our emissions in Scope 1 and Scope 2. And another interesting point is the Açaí Academy. to train small businesses and B2B customers. And so we've been able to train people and advanced a lot in these levels of reuse of the waste that reached 44%. We also had a special campaign to gather donations of... blankets and clothes as well for a special campaign for winter. And with the new board, ASAE also has two board members, two women board members in the board. We have a lot of work to do still because we have a total of nine members. Before we only had one woman, now we have Leila and Angiara. We have two now. And we also have important advances also when it comes to diversity, equality and opportunities. We have 43 people that are considered to be black or brown in leadership positions. This is a topic that we're also advancing constantly and in line with the concerns of the society and over 25% women in leadership positions. I also want to highlight that, I'm sorry, it's not on the presentation, but the company was once again signing up to the Great Place to Work, GPTW, as also among one of the 10 best retailers to work at. This is something we're super proud of. This is something where the company started being 60% fragmented, so the new board is really fully independent from the new board members. Five had never even been in contact personally or professionally. with me and so the company really has from a governance perspective some very recognized professionals highly qualified professionals that can support management and provide us comfort when it comes to governance especially for our shareholders so having said that uh we finished the presentation and we'd like to open up for q a thank you so much everyone now we'll begin our q a session We want to remind you that if you do have a question, you must select the Q&A icon on the bottom part of your screen, write your name, company, and language to enter the queue. As your name is announced, a request to open up your mic will appear on your screen. Then you must activate your mic to be able to submit questions. We'd like to ask that you please submit your questions all at once.

Our next question will have Joseph Giordano.

And we'll open up your mic, please. Joseph, you can begin. Hello, everyone. Good morning, and thank you so much for taking my question. We would like to explore three main points here. The first one is maybe a positive surprise with the quarter with the working capital dynamic, especially on the account for suppliers with quite a bit of volatility. But could you give us a little more color on what has been done? uh to improve the terms with suppliers without leading to major impacts on the other side which would be the gross profit the gross margin so second point is the cost of occupation which has been growing a lot and so back then when we had the purchase of the extra stores you were mentioning something about like 1.5 of the revenue so um The first question is that if these 1.5 already considers the revenue of the renting out of these galleries or stores in the stores. And what would be the actual potential when it comes to revenue from rent coming from these gallery stores? Then we would get into the governance issue. We'd also mentioned the diversity of the board. We had a board member that was a related party in the company currently. So could you maybe talk about this? I want to hear from you guys about how the situation is with this board member. if they should continue to be in the company, and if this would also be used to improve the diversity in the board as well. Thank you, Joseph. And now we'll talk about the working capital aspects. But the occupation fees, yes, when we consider the rent, I already considered the net effect, which is how we look at this daily. So the rent of these properties the the store area um occupied by sae um and so these from the 220 000 square meters it's actually going to move on to almost 400 000 so this of course if you consider a match with this the focus last year was more like to finish the areas to reopen the stores of course there was an impact when it comes to licenses oh why didn't you open up everything at once well we It could take even longer to open some stores, which is why we waited, especially the stores that have a big area for rental of these extra stores in the galleries. But this year we have a huge effort from our construction team to complete these areas in the stores. So 220,000 square meters represent 40 organic acai stores basically in sales area. So it's a huge effort. we would not like to provide like an estimate for revenue yet but in the first semester although half of these galleries are ready we have a big effort till the end of the year to deliver the rest and they already did bring some revenue in the first period of 44 million riyals so there's a potential to at least double this amount of revenue but of course this is a situation that varies from site to site Of course, we can only look at the revenue from the galleries, but this also helps us with other costs, such as the cost of occupation, the property taxes, which is a very relevant weight when it comes to expenses, but it also helps when it comes to flows. Most of these store owners also benefit from our own store flows and traffic. But especially in the downtown regions where you have levels of service consumers and a whole other level of social level. So sometimes it's better to have an extra support like a cafeteria, a snack stand, a gym, etc. or other convenience stores. So, from a board perspective, we had the exit of the controller. This is a topic that, of course, we're still going to be discussing. We just had the ways. There was one position among nine. So, I don't think this is going to be that relevant, but if there are some changes that need to take place, it could be that they would happen on the next few months. But I'll pass the floor now to talk about the working capital. Vladimir will be with us now. Okay. Good morning, everyone. Thank you for the question, Joseph. When we talk about working capital, I think that for... There's been quite a while since we've been negotiating the increase of terms that are quite significant. And we just materialized and completed these negotiations now in the first quarter. And this, of course, reflected on this gain of greater terms with our suppliers. But the improvement in the working capital is not only coming in the detriment of the adjustment in the terms, but also the adjustments of the levels of stock. We had a period where We had the opening of many stores and we were structuring our stock and inventory, but now we're readjusting this. And so now we have a history of what the stores sell, especially the ones we recently opened. And now we can balance out the stock levels a little better. And we also had some contribution in the reduction of stock with a deflation issue, especially in commodities where we also reduced the levels of stock due to the deflation scenario. So up ahead, what could take place is some variations between the quarters with the opening of working capital, but nothing very relevant. Now, what could happen now, as we talk about the second semester with the working capital, is that we'll enter an accelerated process for expansion with 20 stores under construction, and we need to supply these stores. We also We even have the seasonality of the second semester. And we have the Black Friday campaigns as well and Christmas. But I can keep you at ease by saying that we always were very disciplined with the working capital. And this is going to be kept. We're not going to lose this. We're going to continue to work and look at these aspects and adjusting to the macroeconomic scenario. If we keep up at a deflation pace up ahead, then maybe the strategy will have to change. So we're going to adapt, but I can keep you at ease that the working capital will keep our discipline as always. I hope that answer was clear.

Yes, you did.

And just a quick follow up here with Bo Medo to understand why it would be the ramp up of these leases. So a lot of these stores are being open in the second semester last year, some now. And so how should we look at the rent in the future? Because this is going to lead to relevant impact in the next quarters when it comes to occupation costs. Well, our expectation is that some stores, even due to licensing, we will be completing now around November, December. So we should already have some evolution in the third and fourth quarter, but we should be capturing these effects in the first quarter of next year. for the leases. We always wait for the assay stores to be ready because of a certain level of activity. This helps us also negotiate the leases per square meter of these stores and stores in the galleries. Okay, thank you. Perfect. Well, the next question will come from Vinicius Estelano, our sell-side analyst. And Vinicius will open up your mic so you can proceed. Please, Vinicius, you may proceed. Well, hi, guys. Good morning, everyone. Thanks for taking my question. I wanted to discuss how you're imagining the ramp-up of the extra stores up ahead. And today, for example, how do you expect these stores to be close to their full potential? And so could you talk about what the cannibalization levels are that you've been noticing? And then also about this topic, if you could just mention a bit of the expectation of how you're imagining the same-store sales influencing this. Yes. Well, thanks, Vinicius. There's no way out. Cannibalization exists, especially when you look at the São Paulo and Rio markets, which is something I mentioned. And even in Brasilia, where you have a huge amount of extra stores. So a point we have been highlighting a lot is that we have to separate what's cannibalization. And what's just returning what was delivered last year. So in the north and northeast of Brazil, there wasn't extras. So there wasn't like a positive effect for whoever was operating that region. Differently than here in Sao Paulo and Rio, where us and the overall market have benefited with the closing of the extra stores as extras reopened. The stores that receive the store volumes will start having a bit of this as a return. There's also a bit of cannibalization as well where the consumers, if you see the stores in Congonhas, for example, we had customers there that would buy at Marginal Pinheiros. Now there's a newer store that's more modern, closer to where they live, and they're going to buy in that. They're going to switch. So there is a bit of cannibalization, but there's also a part which is just like the temporary effect of the closing of the extra stores. So to be honest, the best in Rio, Sao Paulo, Brazil, where you had the biggest concentration of these stores, the best thing would be to use the same store sales looking at two years because they're going to see the period where extra closed and also the period with the reopening of the stores. But of course, there is a kind of position effect. Part of this maturity and cannibalization, it was also a bit more contaminated by the deflation because as B2B customers become more careful and they're holding on to stock due to the visibility with the price. And so normally... B2B people, when they see the oil prices are dropping, they're not going to go out and shop for big volumes. So when you have store maturity, for example, of course, this is very like store to store based, but our expectation is that we'll have three times sales. We've already disclosed the number of the last quarter and the first quarter. quarter this was quite stable and now we're moving on to two and a half but of course we've been working on this as quick as possible we should of course be looking at the final numbers in the project in 2024 so the time to plant and a time to reap and now is when we're investing and we're starting this process with the activities where you have the biggest amounts of operational expenses, investments. But we're super satisfied and confident of beginning our work in these stores, even with the amount of time they have. If you look at this total amount of flow and this increase of 25% we highlighted, of course, this is going to be levered by the opening of these units. So they continue to follow this ramp with maturity. And this is some work that we do. month after month and week after week and so there's some stores with a potential to have a higher ramp up and of course there's stores where you have a reaction of competition also but I think this is super visible when we look at the public numbers for retail operation, and we can see how this has been affecting the opening of these new SIU stores. I hope that's clear. Thank you. Thank you, Bermuda. And just a quick follow up here. Do you already see any kind of evolution with the sales? And what's been the progression throughout the quarter? What have you been noticing? Thank you. So, yeah, we ended up, well, we know how the market's very anxious about these stores and they go from 2.2 with a sales multiple to 2.5. And so, of course, there's some evolution within the quarter ever since we look at this from the other period from March to June as well.

Thank you.

Moving on, the next question is from Daniela Eger, a Southside analyst from XP. Dani, please, you may proceed. Good morning, everyone, and thank you for taking my question. These guys are starting to place their first questions before me. People are moving quicker than I am. I always used to be the first one in the queue. But anyways, a follow-up here on Vinicius' question, just to expand a bit to the broader store base. So... You talked about how in the release, the same stores were already positive and there is an important evolution throughout the quarter. But this calls our attention because the food inflation is quite weak and actually has been slowing down. So if you could maybe talk about this and show us a bit of the vision on July for the total base, not only the conversions, and also some color on what the volume dynamic has been. Have you noticed any kind of recomposition or trade-ups? And then finally, going back to the conversions and talking about profitability a little bit, the 6% seems to be very strong. So I don't know if this is already in line with your expectation towards the ramp-up or if this is overcoming expectations of what you had planned.

And...

If you could talk about if this is in line or above and where you're headed. So this is if it's really those 150 beeps and above average or if there's room to be even better than this. Thank you. So thank you, Danny. I thought you weren't on the call. I was missing your name, but great to hear from you. Anyways, the ramp up of 6% is in line with the project. We highlighted this in the beginning that there would be a ramp up. It's a little more accelerated compared to organics. considering the location of these stores and even the level that they have with the category and public surrounding these stores with a whole nother level of income with a higher average ticket. And this, of course, helps to reduce expenses. And so I wanted to highlight this because when we worked on the conversion project, you're going to remember that a lot of people criticized the issue with services and adding other items that were kind of modifying the cash and carry model. This could, of course, impact the costs. And we look at the expenses and we see that they were actually very stable if you consider the amount of stores we had. And if the store is not good, then it's not going to start off with good expenses. This, of course, would impact the maturity curve. So it's in line with what we expected. But the same stores, of course, in April, we had some competition effects, which also impacted this. And then we had major effects when we look at this from a perspective of sales. But now the same store. sales with deflation should be a little shallow. But when we look at this internally, the effect of extra with cannibalization is also something you have to discount. So you're concerned with the same sort of sales, but you don't have any of the movements that would explain the reason why it's dropping. Fortunately, we haven't noticed a recovery in volumes when it comes to consumers. So the difficult choices that trade downs customers did during the pandemic to face the food inflation that didn't keep up with their increase in income. Now their purchase choices remain. So we haven't seen, I mentioned that there would maybe be an expectation that with the stability of food prices or even consumers could maybe go back to their original habits, but we haven't seen this. So we've noticed that there were some new expenses that in the pockets of these consumers so these are consumers that are really pressured due to interests high interest so you also have a big market for sports bets that really rob a lot of income from these consumers and so they haven't been able to resume their purchase volume so this is totally stable basically and we have this expectation That's actually a lot more positive for the third quarter because naturally, the third quarter is stronger when it comes to this. We can see this in July. And we should see the market as a whole with same-store sales kind of pressured.

And also, when you look at the movement...

This is also pressured a bit. So, anyways, I hope that the Disney Hollow will also help consumers as well. Okay, thank you. Yeah, our expectation is that this government program will help. We've been monitoring this closely, and we see that the population is still suffering a bit. But some categories where there was an expectation, we still haven't seen happen, actually. So, as in just drop? This is going to release a significant amount of cash in the market that could also be used for food. So basically, the good news is that we have a population that is not consuming what it should be consuming or would like to be consuming. So as soon as there's any kind of improvement in income or with other expenses such as interest or debt, then this cash should go back to the food market. Great. Thank you. The next question is from Ruben Couto, sell side analyst from Santander. Ruben, we'll open up your audio so that you may proceed, please. Hi, good morning, everyone. Thank you for taking my question. Could you give us an update on what the expectation is for CapEx in the year? Most of the conversions have already come through, but could you help us? As we see, there's a lot up ahead still. So what's the dynamic like for inflation in the... universe of construction? Has this also been reducing along with the inflation headlines? Well, I wanted to hear from you about this topic. Thank you, Ruben. The CapEx expectation is pretty much kept. So it's about three or three. The costs of construction are very similar to food. They went up a lot in the pandemic, then they stabilized. There's a little bit of deflation now in some products. But then I think the actual trend or movement towards having 60 constructions or transformations of stores also generated an increase in demand. market prices and so when we kind of held on to this a bit to be able to handle the cost of debt 40 stores to 30 we held on to some organic stores which helped us with some negotiations but the cost of construction is still at a real high level just as the food prices so we haven't seen any signs or room for increases but they did stick around still have high increases, especially when we look at steel and metal costs, and it is possible that we will have a reduction. We did have some optimization when it comes to project perspectives to search for ways to reduce costs. This is going to be even more visible in our organic stores, but there's no big expectation for an increase in capex volumes compared to what we had projected. This is pretty much kept. Thank you, Ruben. I hope I answered your question. Thank you. Yes, you did. Thank you very much. The next question is from João Soares, Southside Analyst at Citibank. João will open your mic so that you may proceed. João, you can proceed. Thank you, everyone. Good morning. I have a question about expenses. I think it's really clear that you mentioned that the margins of the converted unions are in line with the plan. When you look at the operation as a whole, it seems like there's been quite a bit of work to reduce at least when we look at the GNA year over year dropped 8% and I wanted to understand if there's any kind of broader plan to cut down on expenses and gain efficiency or maybe you can even revisit the soft guidance you guys provided about stable margins stable EBITDA margins for the year well It's a huge effort, as I mentioned twice, the expense factor. There's an effect of the dilution. I don't know if Anderson wants to maybe talk about the huge efforts to hold costs. And so Anderson has been caring for this. Yeah. Well, good morning, everyone. And thank you so much for this question, Jerome. I think that... I always talk about expenses just like nails. You have to be cutting down all the time. And then there's a general line, especially in the operations team, which is store to store each detail when it comes to power, water, safety, security costs, et cetera. It's something that we really go down in a very detailed way, especially when we look at our operation, our day-to-day activities. So we have been monitoring this from a general perspective. And we always say that any type of of a thousand real saving is a lot of money when you look at 270 stores right so we're very careful detail over detail and we have we have a team it's very focused on expenses we're a low cost operation and our cheap prices need to be based on lean expenses so this is just the discipline of our team our team is very careful when it comes to this topic. And we have a major effort when it comes to administrative, operational, and store levels in our operation, also in our logistics when it comes to freight costs. So the sum of all these factors really makes us have these adjustments. So a lot of small factors or topics that all together make a difference. And regardless of any new topics we add to the business, it's really the expense control is the focus. I hope that's clear. Thank you. So it's really about our day-to-day discipline. Well, and for the year, do you have any expectation when you think about, I don't know if there's like a magic number you can share with us that you think these projects could deliver when it comes to savings? I think it's still quite early to estimate this, but of course it's an effort to reduce expenses. Part of this, you also saw that we have a dilution of administrative expenses because last year we were prepared to open up 60 stores. So the amount of temporary workers we had also were quite significant. This year we're opening up 30. So naturally you have a dilution due to the actual growth. But as Anderson mentioned, we're going to be always working towards reducing expenses But I think mentioning a guidance at this point is not what we would like to do. But believe that we'll be working to operate with the lowest expenses. From an expense perspective, going back a bit, and I think it's important to highlight that we had many changes in our model. We had a lot of curiosity or anxiety about how this could maybe generate greater expense pressure, but this is not what we've seen. Just visit one of these stores and you'll see that there's a better purchase experience keeping low costs, which is such an important characteristic of our business model. Great, Palmeiro. Thank you so much. Thank you, Anderson. Next question is from Luis Guanais, the sell-side analyst at BTG Pactual. Luis, please, we'll open up your mic so that you may proceed. Please, Luis, you may proceed. Good morning, Danny. Good morning, Gabby, Belmedo. I think two questions here on my side. The first one is if you could talk about this breakdown at the converted stores from price and volume throughout the quarter and help us understand how this has been evolving. I know that there's a ramp up of the store and you had also talked about the performance in June, which was better performance. And the second question still in line with the working capital point. After the conversion process of the stores, could you maybe talk about the differences in the working capital performance processes and dynamics in the converted stores versus the legacy stores. Well, Gwenaes, 100% of the growth that comes when you look at this from a sequential perspective is volume and traffic. Because the price we measure, and they've been stable for about 12 months, the price on average of what you're selling compared to last year is actually dropping about 2%, which is what we see as deflation. So you have to operate with 2% more volume to be able to have the same sales value. So the abolition in the stores, it comes due to volume and customer flows or traffic. So deflation also affects the ramp-up curves. And if we had a food inflation, which is what we had expected, the project would be about 4% or 5% only. And then it would be 4% or 5% more in sales. So then when it comes to working capital, yes. there will be an improvement, which is not related to the fact that it's a conversion, but it's just because of the location they're in. So since most of these are in the big urban centers and major states where the stock time for supply is a lot shorter than what we see in stores that are in the north of Brazil, in the Amazon region or other remote locations where... you see we're present all over brazil and it's really about a geographic aspect which makes them deliver a stock supplier ratio that's better than what we have compared to the legacy park that we had highlighted before i hope that's clear yes thank you thank you for the answers the next question is from peter pini the cell site analyst at safra peter will open up your mic so that you can proceed please be there you may proceed

Good morning, everyone.

Just a follow up here about the gallery issue. I wanted to understand if the 50% that are already complete have already been operating full and the other 50 that are in construction work. So how long they'll take to be ready? And could you give us any guidance about the expectation for sales? With these 44 million that you had in the first quarter, you can already expect some kind of proxy or if there's a big ramp up still compared to what's under operation. Well, the guidance, of course, we have been avoiding. The proxy is very good, in my opinion. The other 50% have been delivered at this point, and they should follow the sequence as you have the store openings and we'll be finishing the galleries until the end of the year, but we want to be careful about this. We'll bring some updates probably quarter over quarter. Okay, perfect. Thank you. Our next question is from Vitor Trevisan. He's a Southside analyst at Itaú BBR. Vitor, we'll open up your mic so that you can proceed. Please, Vitor, you may proceed. Hey, guys. Actually, this is my cruise. So I wanted to understand this a little better. We have noticed some very interesting stability in the gross margin and the industry as a whole. We saw that we've been receiving some feedback from regional players as well. It seems that the suppliers are quite good partners at this moment, but With the deflation scenario, this kind of keeps up. So how I've been looking at this dynamic, if we look at the next quarter, is there room for suppliers to continue to be partners in regards to this? And is the stability of the gross margin something that we should look at as long-lasting? I think that's pretty much the question. Thank you, Macruz. Well, the margins, of course, are a consequence. And in our model, we price this based on costs and the margin needs. So in the companies, we're always going to be searching for a way to be stable with our margins. So unless you have any big effects from a competitive perspective, but it is necessary to make the sector continue to be healthy and generate cash. So the company will always be searching for stable margins. So especially when you have an inflation process or deflation process. So that's how they control the stock. is so important within the stability of the margins. There could be an occasional situation where you have to invest, but the price of the cash and carry overall, especially for us, as we have a lot of stores in new locations and people that are starting to buy in this format, it's a really advantage-filled price compared to these other retail channels. So this allows us to have margin stability. So, of course, you can vary a little more with deflation, But what we've seen is we can have a volume of the B2B customers. So when you have a growing price, they're going to set up a stock, right? And when you have a movement where you have a price drop, they're going to reduce their stock levels. And there's no point in having like a special offer because it's going to look at the quantity and say, look, soil went down, it's going to go down even more. So there's no point in organizing like it's big purchase. And the offering could even bring in more volume. So this kind of explains the very good control of the margins. But of course, when you look at the margins and we have to keep our eye open, You can see this from an expense perspective. So if the store is not a store that has good performance expectations, the expenses are going to start off a lot higher than they should be. That's why we're being very careful with the efficiency and discipline of our expense controls. Well, excellent, Belmedo. Thank you for the answers. Well, now the next question is from Irma Gass, the sell-side analyst at Goldman Sachs. Irma, we'll open up your mic so that you may proceed. Please, Irma, you may proceed. Well, good morning and thank you for taking my question. Just one more point here on my side from the converted stores that you're already operating with at a margin of 6% based on the comments you guys made before in the release. Could you maybe talk about how this margin would be if we were to take a look at the EBITDA in the pre IFRS level? considering the cost of occupation in these converted stores already in the margins, just so we can get a feel and also how you would compare this with the organic stores that are just as old. I think this was very interesting and this kind of comparison is very useful. But just another question then about the market gains. Of course, a bit of this also comes from the expansion in the store networks. But when you look at the stores that are mature, do you also feel that there's a bit of a gain in these new converted stores maybe that have gains from the competitors? Or maybe there's some market share source that you feel or some segment in the market where you guys think you guys are gaining more market share, either from the stores or regions where you're making more of a market share. I think that would be very interesting to have this extra information. Thank you, Irma. Thank you for the question. And we had some opening also of our EBITDA in a pre-IFRS vision. And that demonstrates this variation in the pre and post IFRS, which is 0.4. So it's basically the same. And the converted stores, of course, they're on a maturity ramp. So they have, they're still going to have the gallery revenues coming in. So of course, the the pre-EBITDA is more pressured. So today we would have these 6.3 that would drop to maybe 4.5. So I'm going to confirm this later. And it's important to mention this. We can talk about this number a little more. But even in a pre-IFRS vision, the conversions are very positive. So in our model, it's an important cash we generated. They already started contributing with this perspective. So we wouldn't be able to operate in this EBITDA margin prior for us, but the rent differently, it's all being paid now. So you already have a dilution of this expense as there's a ramp up of two and a half to three. But most of the galleries that we also wanted to highlight are in these stores. So most of these galleries, 80 or 90% come from the conversion stores now that we recently worked on the big stores that actually used to operate with the hypermarket format. So there's still like a normalization that needs to be done in pre-IFRS vision. So we still have this vision in a post-market. And in the pre-vision also, they have to deliver, of course, the pre-EBITDA, which is bigger than our organic store network. So very, very useful. Thank you. And the second question was about the market share. Oh, well, about the market share. It really depends on the store region, so we highlighted this throughout the project, but the fact that SAE is part of this where we were avoiding, before we used to avoid open stores close to Ekstra, and I think I would avoid to open close to Kaifu, but now we're entering the central areas where a lot of our competitors were very strong for quite a while. So there's important gains within these expansion stores, but most of them, have been coming from retail. So there's an important part that I always remind the market about, which 40% of our market is retail. So this is very strong, and you don't have a very clear vision also about how these stores also provide these services. So they have some gains in different aspects, but there's also a big variation from store to store. Some, most of the gains come from other competitors in cash and carry, and in others, most of them come from retail operations. So I hope that was what you wanted to share. And that question was clear. So the next question is from Vinicius Preto, the South Side Analyst from Bank of America. Vinicius, open up your mic so that you may proceed.

Thank you very much.

Hi, good morning, everyone. Thanks for taking our question. When you look at the performance of the extra stores that were already converted for a longer period, what surprised you guys when it came to the original plan? And what was the expectation for returns? And how do you see this comparing with the acquisition period for these stores? And also, if you could give us some color of those almost 1 billion of drawn risk and how we should imagine the payment of this in the next quarters. Thank you. Well, the extra stores, as Danny mentioned, the issue, basically what surprised us when it comes to flow adherence and about 25%, it's quite easy to perform this calculation, right? So we have to see how many people were added to the store. So although we already had a series of projects, of course we have some fear from the customers to accept this kind of model but we noticed this strongly so we had some surprise that were positive in this area and also when it comes to customers that use the store but then after also for like shopping process and this project is very new so This, of course, demonstrates how strong we have been in bringing in the cash and carry in this downtown region. So a lot less than really fulfilled our expectations and with having a lot of work. And this has been demonstrating the project overall with stores that have better performance and stores that have more work to be done. There are some other competition processes as well. but the project has been achieving this within expectations. So yeah, so basically about this risk issue, I think this is important because non-rarely we have questions about this and if we should add the debt or not. So our understanding is that the operations are quite normal for discounts and the anticipation of the supplier. So The drawn risk operations are in this bill and they're part of our cash flow for payments. And we have expected these payments just as the suppliers in CapEx. So the criteria is exclusively to these ones. This level of the capex drawn risk should be at a regular normality level, about 300 or 500 million. That's our estimate. But it's important to mention that when you look at this guideline from the central bank, you can see that this is done by the suppliers. And we sometimes find out because we look at this, but what's the criteria once again, considering that it's an exclusive criteria for these suppliers and they manage their cash flow with their financial partnerships. So we don't always have this supplier asking for this. So what I would like to say is that we should have a drop in the 500 million, the levels you see. But if you look at the history of the company, you'll see that there's always a percentage of merchandise that's quite regular in the business. So if you want to clarify any points on this, I'm super willing to help with more details. Okay, great. Thank you. So this always existed and, but of course this is just a matter of, the suppliers. So even from a CapEx perspective, we see some work that we're already having expenses for now. So besides what we highlighted, there's some construction work that's going to be open in 2024 that already started. So you have services with like groundwork and other preparation work. And so suppliers, since they had a bigger level of this drawn risk, it's going to be keeping up with a bigger level of investments due to the 60% stores last year and the amount of stores that we're going to have for 2024. Thank you very clear. Well, moving on, we're going to head to our last question. It's a question in English and it came from Andrew Rubin from Southside Analyst from Morgan Stanley. And Andrew, we'll open up your mic so you may proceed, please. You may proceed.

Thank you. You mentioned the land bank and just mentioned some plans for 2024. I'm curious what kind of visibility you have for the organic openings, your latest thoughts on what the pace of new stores might be over the next couple of years. Thank you.

Thank you for your question, Andrew.

We would still not like to disclose this number for 2024. As I mentioned in the first quarter, we held on to some openings within our land bank, and we have a project for about 50 new organic stores. But part of this level of leverage that the company is at expecting a drop in the interest rates, the management of these debts were done holding on to these investments. So we're still going to assess this a bit so that by the end of the year, we can provide information on the exact numbers for 2024. But there's still a lot of units in many regions still that we need to penetrate. So next week, we're going to open our first store in the state of Espirito Santo. Tomorrow, we're going to have an organic store opening in Limera, a market where we only had one store. So I say it's continuing to expand. There's some cities where we're going to have our first store still. Sometimes they're big cities with almost like half a million inhabitants. So there's still a big amount of cities to enter. But we would like to wait and analyze this before we can disclose this information about the expectations for stores in the next years.

Very clear. Thanks, Mamira.

The sessions for Q&A have been officially ended. Now I'll pass the floor on to the company for their final remarks. First of all, I want to thank you all at the team, not only the directors that are present with us in this earnings call, but all of our assay team, 76,000 employees. We went through a challenging period in the past with the amount of store openings, not only with the 60 units that we highlighted, but we wanted to bring these 230,000 employees meters of galleries, the amount of certain new services, butchery, emporium or cold cuts. So we're really at this investment phase and we know that this is what's going to guarantee relevant positions when it comes to the growth that the company has up ahead. So the expectation now is that We already survived the most challenging period in the first semester. The second semester always has a more positive perspective when it comes to income and stability in the economy, which is an important factor. So, of course, the companies like Asahi that have a leverage, there's a bit of a weight when it comes to results. So there's a very positive expectation. And most of these conversions already were performed. So we have another conversion in Guarulhos with a very important opportunity there. And I want to thank the team a lot. Besides this, I want to highlight that this quarter is an important milestone for the full transformation of the company with the controller leaving and We were an integral subsidiary and it stopped being a subsidiary. We started to be reporting to the controller that sold their positions and the company started to be a publicly held company that's really fragmented. and so the company continues to generate cash and so we want to thank the members of the new board for the support that they've been giving us within this transition process and also for some shareholders that have been monitoring us and uh subsidized us with information. So I want to thank our team, especially that's been really making a big effort. And it's a company that's made by 76,000 people that together delivered these results and that have been working tirelessly to continue to deliver this in the third, fourth and fifth quarters with excellent performance. This is what I want to thank you all. Have a great day.

A videoconference of results referring to the second quarter of 2023 of Açaí is closed. The Department of Relations with Investors is available to answer any other questions. Thank you very much to the participants and have a great day.