Companhia Brslra Dst Adr

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For those who are listening the conference call in English, you also have the option of muting the original audio, which is Portuguese. We would like to inform you that this conference call is being recorded and will be made available at the company's IR site, where you will also see the earnings release. You can download the presentation through the chat icon. During the company presentation, all participants will be in listen-only mode. Ensuing this, we will go on to the question and answer session. To pose a question, please click on the Q&A icon at the bottom of the screen. When you are announced... There will be a request for you to turn on your microphone so that you can pose your question. All questions should be made at a single time. The information contained in this presentation and the forward-looking statements made during this video conference Referring to business outlooks, operational projections and goals of GPA are based on the beliefs and assumptions of the company management and on information currently available. These are no guarantee of performance as they involve risks and they depend on circumstances which may or may not occur. Investors should understand that overall, economic conditions and other operating factors could impact the future performance of GPA and lead to results that differ materially from those expressed in these forward-looking statements. With us today, we have the GPA CEO, Marcelo Pimentel, and the CFO, Guillaume Gra. I will give the floor to Marcelo Pimentel to begin the presentation. A good morning to all of you and thank you for joining us in this earnings call for the second quarter of 23. This is a very important quarter as we have concluded five periods of our turnaround work where we are based on six pillars and 12 strategic projects to recover our business. especially because we have recorded significant strides showing the assertiveness of the changes we have made during this period. These are actions that reflect long-lasting results for the company. In this opening slide, I would like to speak about our gross revenue with a double-digit growth of 14.7%. especially the strong growth of same-store sales that was 6.4 in the consolidated figures. The highlight is Pão de Açúcar with an evolution of 8.6% in the quarter, totaling five sequential periods of growth acceleration showing the consistency of the recovery work and the improvements carried out in the banner with a strategy focus on an increase of penetration of assortment and competitiveness. It is important to highlight the evolution of the EBITDA margin in 0.3 percentage points vis-a-vis the first quarter of 23 and our gross margin that reaches 24.8 0.4 percentage points higher vis-a-vis the first quarter. Regarding the financial indicators, Guillaume will explain them in greater detail. In this next slide, I would like to speak about our strides in each front. the top line has an increase in market share that follows a positive trends in september of last year according to the nielsen figures we have made strides in self-service and in the total market which includes the wholesale formats that shows our adherence of clients to this value proposition of our banner. The premium format was responsible for the greatest evolution of market share with 0.5 percentage points of growth, followed by the mainstream formats with an evolution of 0.3 percentage points. If we consider the evolution only of Pão de Açúcar We grew 1.9 percentage points in the period In the proximity stores, we have had significant market share gains. In the smaller supermarkets in this quarter, we had an advance of 2.6 percentage points. Once again, attesting to how assertive our expansion project is, where we are better positioned with this future vision of a resumption of consumption and an enhanced macro scenario. Other points of highlight are the revision project of the assortment. This has resulted in a reduction of 10% of the total number of SKUs exhibited in the store. We will now focus on the mainstream and proximity formats. This clusterization project has been concluded in 60% of the stores and is accountable for an increase of six percentage points compared to the stores that have not undergone review. Now, this project of availability of products on the shelves has reduced our rupture levels, and these are important to sustain the growth of our sales. We have had an increase in the penetration of perishable products in all of our businesses, which is a fundamental leverage to increase loyalty. Regarding NPS, all of our banners had a significant improvement, which shows that we are looking very judiciously towards the demands of our customers and ensuring that the purchase experience will be the best possible in all channels. This quarter, we had an evolution of 15 points in NPS vis-a-vis the same period in 2022. I would like to speak about the strides in the premium customer base. This is essential in our resumption strategy for Pound de Azúcar. This quarter, this base increased 10% when compared to the same period last year, leveraged by the relaunch of the Pão de Azúcar Mais loyalty program. To end my comments on NPS, we were very satisfied with the award of a GPA in the e-commerce retail and loyalty programs. showing the recognition of customers on the work that is being carried out. In the digital pillar, we have had a growth of almost 10% in our GMV during the period, with a continuous enhancement of profitability. driven by the work of reducing expenses, the close of the James operations, and the sales through the distribution center. We have also reduced the number of non-profitable players in the marketplace. I would like to underscore the double-digit growth in our 3P partnerships, where we are leaders in the supermarket vertical and the main platforms. The result of enhancement of the customer journey in the app that we have worked on in the last quarters now is reflected in an increase of visitors by 65%. I would like to update the expansion project that continues to be underway. We inaugurated 23 stores this quarter, all in the proximity format, And we have 101 stores that we inaugurated last year that have brought in 1.7 billion reais of incremental sales. We also have 81 stores in the inauguration pipeline. To conclude this slide in the profitability pillar, we have had a continuous enhancement of profitability reaching 8.9%. This is the result of the recovery of formats and the new steps we are taking in our formats. In this slide, I would like to speak about ESG and culture, highlighting that gpa reached the goal of having 40 of women in leadership positions this was something we were supposed to reach in 2025 an important stride that shows the commitment of the entire company leadership with gender equality actions and our classification for the second year in the Bloomberg Gender Equality Index as the only national retail sector among 480 companies in the world. When it comes to fighting against climate change, we continue to work with a reduction of scope one and scope two emissions with a 5.8 increase compared to last year. Our goal is to reduce the CO2 emissions 10% compared to 2022. As part of this responsible work to enhance the value chain, we have launched a new line of special products with our brand Qualita that is 100% traceable in the chain. And to conclude, an update on our social impact activities. This quarter, we had 701,000 meals with the addition of fruit, vegetables, and others, and we also carried out a campaign along with the Salvation Army. To conclude this initial moment, I would like to remark on the decision that we have made of repositioning the Comproben stint. 100% of these brands will be transformed. And they will undergo not only a layout change in the facade, but also in terms of their commercial positioning. With this change, we are adapting and enhancing assortment that will now be the same as the extra banner with a focus on our own brand qualita that is responsible for more than 30% of the market share in other markets. and we end the dynamic of sticks and several others, something we had not done before. These conversions will allow for the possibility of making this banner ever more profitable recalling the importance of the extra brand the relationship it have with customers and enhancing the performance of the stores in the eight stores that have undergone this transformation we could already observe a significant improvement not only in NPS but also in sales, which motivates us in terms of the results of this process that should be concluded until the end of the month of August. I would like to conclude my presentation and I will give the floor to Guillaume Gras to speak about the financial indicators for the quarter.

Thank you, Marcelo. Good morning, everyone. Thank you for participating in our earnings call today. First of all, I'd like to highlight that as it happened in the fourth quarter of 2022 and the first quarter of 2023, the results from the exitos groups are accounted for as a discontinued operation. This way, the figures presented below will not show impact from the discontinued operations, except where otherwise stated. Exito will release its results on July the 31st, and the information relative to that can be accessed on Exito's IR website and through the CVM portal as well. Starting on the slide number 10, where we have our total sales for the new GPA Brazil that reached 5.1 billion in Q2 2023, maintaining a strong growth of 14.7%. Considering only the supermarket formats and excluding, therefore, gas stations, revenues were 4.7 billion, resulting in an increase of 16.7%, driven by a robust same-store increase and also by the expansion plan, with the opening of 101 new stores since the beginning of 2022. The same store sales indicator grew by 6.4%, with an emphasis for the Pão de Açúcar brand, which grew by 8.6%, showing steady growth for the fifth consecutive quarter. The effectiveness of the strategy has been proven with a gain in market share since September 2022, and more recently, with the acceleration of these gains in relation to the market. If we include the new stores and also the conversions, the sales increase for Pão de Açúcar reached the strong level of 19.6%. The proximity format, as we call it, showed an increase of 15.5%, maintaining its strong total double-digit growth. driven by the good performance of the new stores. The increase in same-store sales when compared to the strong comparison basis for Q2 2022 reached 5.8%. It is also worth mentioning the significant gain of 2.3% in market share for the format when compared to small-sized supermarkets. showing the relevant competitive edge of our business model. In the mainstream, Mercado Oeste and CompriBank, total sales growth was 15.7%, driven mainly by the conversions performed in 2022. The same store sales increase reached 3.5% with different performances across the different brands that make up our format. The extra brand remained consistent and posted solid same-store growth of 7.1%. This progress with a gaining market share occurs despite this environment of greater direct competition in this mainstream format, stressed by the cooling and the deflation of the price of basic products. which also shows the excellent acceptance by customers of our brand's value proposition. CompreBain showed a decline of 11.5% in same-store sales, impacted by the reduction in volumes after the start of its commercial repositioning, which aims at improving its profitability. As already presented by Marcelo, we started the conversion of the Comprebank stores into Extra Mercado, which should bring a larger and more profitable flow of customers. We will also benefit from a better assortment, from an introduction of the exclusive Qualita brand and a participation in the Club Extra and Stix loyalty programs. As for gas stations, we saw a recovery in volume, with a 25% same-store growth. Due to the reopening of hypermarket stores, which were closed after the transaction with Asahi, in the same-store revenue comparison, we had a decrease of 3.5%, which can be explained by the 24% decrease in the average fuel price when compared to Q2 2022. Finally, in e-commerce, our GMV was 453 million BRLs, a growth of 9.8%, reaching an online penetration of 11.1% of total sales. I would also like to highlight that this growth happens along with a series of initiatives as we search for improved profitability, which includes the closure, of the James platform operation, the reduction of unprofitable sellers in our marketplace, and also the closure of operations that came from our distribution center in Q2 2023. The combination of all these initiatives resulted in a dilution of 5.8 percentage points in our SG&A for this operation when compared to the previous period. On slide number 11 now, we present the financial performance of the Novo GPA Brazil, which excludes the effects of the international scenario. Gross profit reached 1.2 billion with a margin of 24.8%. As can be seen in the upper part of the chart, we presented a margin improvement when compared to the last three quarters. Starting the expected capture of gradual margin gain, with implementation of our strategic plan. These figures reflect store growth, same store growth, mainly in the premium formats, a progress of commercial negotiations as well, also an increase in perishables penetration, as well as a reduction in shrinkage. GPA Brazil's adjusted EBITDA totaled 299 million with an adjusted margin of 6.3%, leading to an increase of 0.3 percentage points when compared to the first quarter of 2023. When we compare with Q2 2022, we presented a dilution of 0.6 percentage points in SG&A, partially offsetting the effects that pressured our gross margin in the year-on-year comparison. following on the presentation on moving on to slide number 12 we come to the consolidated financial numbers ongoing at income saw a decrease of 117 million to a net loss of 322 million although profit before financial results and taxes having remained in line with q2 of 2022 The financial results had a greater negative impact, mainly due to a decrease in financial revenues related to the monetary restatement of receivables from the sale of the hypermarket operation. On the right-hand side of the slide, we present the consolidated net debt that reached 2.9 billion at the end of the period, with a drop of 1.5 billion in the past 12 months and 100 million vis-a-vis the previous quarter. We remain focused on the company's financial deleveraging plan. And in the second quarter, we concluded the sale of 11 units through a sale and leaseback operation, which led to a receipt receipt of 330 million of which 140 million already part of our cash in the second quarter and another 190 million will be part of the cash in the early part of the third quarter. The company continues to have a high cash position at 3.2 billion equivalent to twice the short-term gross debt. On slide 13, we have more details on the evolution of our timeline to segregate the operation of Exitu Group, which is an important step in our deleveraging plan. As can be seen on the slide, since September 2022, we have been moving forward in the process of segregation. And in this week, with the completion of the registration process with the SEC, we made Exitu a publicly traded company in the US. With this, Exitu now becomes a listed company in the three countries where we will list its shares, Colombia, Brazil, and the US. From now on, for the conclusion of the operation with the distribution of shares to GPA shareholders, we only need the approval from Colombian regulators. We expect to complete, remains the same, for the middle of the third quarter. And I close my presentation of the financial numbers. And we can start our Q&A session. We'll now start the Q&A session. Once again, to ask a question, you should click on the Q&A icon in the bottom part of your Zoom screen and then write your question to get in line. As you are announced, a prompt will appear on your screen, and then you can unmute your mic to ask your question. Please, we kindly ask that you ask all the questions at once. Let's have our first question then from Daniela Agne, a sales site analyst from Maxpeak. Daniela, we now unmute your mic for you to ask your question. Go ahead, please. Good morning, everyone. Thank you for taking my question. I have a couple of questions, actually. The first one is about the profitability dynamics. We see a margin under pressure when compared with your track record, especially for gross margin. But you say that this evolution has been happening gradually. And with that, some efficiencies have been captured on the expense front. which help mitigate the effect on the EBITDA margin. So I'd like to understand a little more, how can we think about those margins looking forward? Do you have any initiatives in place? You talk about a zero budget or zero base budget, but I'd like to know what other adjustments are you doing? I know that the company bank will be working with the conversions, so I expect to see some pressures on short-term expenses. You're also revisiting assortment for the Minuto network. What kind of pressure will that bring? So overall, I'd like to understand how can we reconcile all those one-off pressures coming from your strategic adjustments and what can we see in terms of gains going forward in the short term? And a second question has to do with divestment. Can you give us some color on the sales and leaseback operation or a potential sale of gas stations. And also the Exito Group, it caught our attention, their interest in the asset, but then the board rejected that approach. Maybe that's a strategy as you wait for the spinoff to be concluded. So any update on that front will be very, very helpful. Thank you. Well, thank you for your question, Daniela, or questions. I'll do my best here. As for our expectation in terms of gradual improvement in margins, both gross and EBITDA margin, our expectation as we have been announcing every quarter is to continue to improve sequentially. It's important to say and to highlight to all of you that our focus remains on having a turnaround based on a long-lasting approach. We do not want to have peaks and valleys in performance where we have no consolidation or lasting consolidation of all of our strategic plans. So, capture gains should remain with us. With that, we have three important aspects. We continue to focus on those three main aspects since early on. Number one, the first, improving our commercial negotiations, which have been improving quarter on quarter with a stronger partnership with our suppliers, our commercial teams. Also, the conclusion of the assortment work also brings about an expectation that those relationships, those negotiations will improve Even further, because once you have an assortment well-established for Pondia Sucre specifically, we are concluding the sale of those quote-unquote deleted programs. And at the same time, you have products which are more permanent, taking on a leading role on the shelves and becoming consistent sales leaders. And that has to do with the work we did with the supply side. The historic reduction and inventory we've conducted is directly linked to an increase in sales. As we move forward along those lines, we are able to improve that equation. Number two, in terms of margin improvement, comes from an improvement in our rupture performance in our shrinkage performance in 2022, that number was very high. We have gradually improved that shrinkage number as well. And with that, in the last quarter, we launched a new tool, which has already been rolled out across all stores to automate that shrinkage problem. That has brought us a significant improvement of 0.6%. and we expect to be able to reach our target of 1%, which will have a strong and direct impact on our margins. So we continue to wait and expect, and we've seen that happen in the past few months, and we expect, as I say, to continue moving forward in the coming quarters. As for the base zero budget, It's all in line with our plans. We have concluded the personnel restructuring process. That number has actually improved better than we expected. We had talked about a decrease of 100 million in personnel. That number has already exceeded that. We are expecting to reach 130 million, which of course translates into a an improvement in productivity, and of course, also preserving customers' experience at the store level. We do not want to compromise that journey of the customer at the store with the brand. But also at the same time, we have moved forward across all the other expense items within the company. So we continue to be in line with expectations on that front as well. We have no expectation, no of seeing expenses deteriorate. Quite the contrary, we expect to continue to show improvement in performance in terms of expenses.