Companhia Brslra Dst Adr

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If you're listening to this conference call in English, you may mute the original Portuguese audio clicking on Mute Original IO. We'd like to inform you that this video conference is being recorded and will be made available on the company's investor relations website, where we also have our entire earnings publication. You can also download the presentation clicking on the chat button. During the company's presentation, all participants will be in listen-only mode. After that, we will begin the questions and answers session. If you'd like to ask a question, click on the Q&A button on the lower bar of the screen and write your question to join the queue. If your name is called, you will get a request to turn on your microphone. You may unmute yourself and ask your question. Please ask your questions all at once. We'd like to highlight that the information given in this presentation and any statements made during the earnings call about the company's business perspective, projections and operational goals are simply beliefs and assumptions of the company's administration based on currently available information. Remarks about the future are not a guarantee of performance. They involve risks and certainties and assumptions because they refer to future events and therefore depend on circumstances that may or may not come to pass. Investors should understand that the general economic conditions, market conditions, and other operational factors may affect GPA's future performance and lead to results that differ materially from those expressed in these forward-looking statements. We have with us today GPA's CEO, Marcelo Pimentel, and CFO and Investor Relations Director, Rafael Russovsky. I'll pass it over to Marcelo Pimentel, who will begin his presentation. Thank you. Good morning, ladies and gentlemen. Thank you for joining us for GPA's third quarter earnings call. I'm very pleased to present this quarter's results because they demonstrate our high quality and consistency Results which were due to all the improvements we saw in different operational indicators. They confirm the choices we made during the last 18 months since we started the company's turnaround process. I'm going to start with our main deliveries and talk about the progress we made in the last quarter. Starting with a 10% growth in our gross revenue compared to the third quarter of last year. We saw strong acceleration in our food e-commerce, up 15% in GMV compared to 2022, as a result of a solid strategy focused on increasing sales and gaining efficiency. We also posted significant growth in same-store sales, a total of 6.6%. with highlights for poncha sukuk and proximity, which I'll discuss in more detail on the next slide. The recurrent market share gains are also an important indicator that shows we're managing to deliver what customers want and need, and we're being recognized by them for it. This quarter, we gained 0.6 percentage points according to Nielsen data. To conclude on this slide, I can't forget to mention our EBITDA margin growth, both in comparison to the third quarter of 2022, but also in comparison to the previous quarter. We've reached 7%. I'll leave the rest of the financial indicators for Rafael to discuss afterwards. As I have done in our conference calls, I'm going to comment on our progress regarding the six pillars that make up GPA's strategic plan. Starting with the top line, Bung Jasuka's same-store sales went up 7.2%, maintaining growth since the first quarter of 2022. They were driven especially by a strong increase in volume, which has managed to significantly offset the high deflation of some food items, such as milk, meat, oil, and others. The proximity business also posted an increase of 7.7% in same stores, even in comparison with a strong third quarter of 2022. We should see an even sharper improvement in the Minuto and Mini stores as a result of the assortment review that is being done, which leads to a better selection of products in each store. This is something that has been done with Ponjasuka successfully. The increase in sales is also a consequence of an increased share of perishables, both in premium and mainstream brands, due to the revision made on this category focusing on quality and competitiveness, generating more traffic and recurrence in the stores. And as these efforts have positive outcomes on each other, the response we have received from our customers on their acceptance of our business's value proposition allowed us to advance for the fourth quarter in a row in market share gains across all formats, meaning both self-service and for proximity formats. Another important factor for our top-line growth is undoubtedly the control of out-of-stock rates. We've reached a historic low of 5.8% in this quarter. 94.2% in inventory. This was the result of a category management effort, which allowed us to reduce inventories and maintain a constant and more precise assortments in store shelves for our clients. Another point I'd like to give you an update on is that we've concluded all conversions from CompreBank stores to Extra Mercado, in line with our plan to unify the value proposition of the mainstream formats. This was a low-investment project which will allow us to capture benefits like expanding the assortment of our own brand products, especially Qualita, benefits from the Extra Card and the Extra Club app with tailored discounts, participating in the Stix loyalty program, and monitoring customers' NPS. The good news is that we can already see profitability bouncing back in converted stores this quarter. Continuing with our themes in the customers and NPS pillar, we saw an increase of 10 points compared to the same period last year. The main highlight was our service improvement with store team training, a focused effort to reduce queues, installing self-checkout kiosks, which were our main offender, and projects to improve price perception. We also posted significant growth in the premium and valuable customer base due to the modernization program for the Ponjasuka mice and a new customer segmentation based on consumption and frequency. We have also made efforts to recover Ponjasuka's value proposition. On the digital front, we recorded a 15% increase in GMV, the highest growth rate in the last five quarters, with double-digit growth in both 1P and 3P partnerships, where we maintained our leading position in supermarket sales on the main platforms. Over the last quarters, e-commerce has gone through an important process to increase efficiency, which has allowed for a significant reduction in expenses with no impact on sales growth as you were able to see. Among the actions we've taken, we migrated 100% of the online sales operations from distribution centers to the stores, which has allowed us to fully integrate on and offline, improving profitability with a significant reduction in cost structuring, which added to the store's margins. At the end of September, we also announced an investment in Adobe's CDP or customer data platform, a tool that will allow us to hyper personalize consumer experience at scale, boosting our premium customer base and boosting sales on digital and brick and mortar channels. Moving forward, we have an update on the expansion plan. This quarter, we opened 20 stores, of which 18 were proximity stores and two were new ponjasuka stores in the cities of Achibaya, where we opened our first store, and Sorocaba in the state of Sao Paulo. As a reminder, our expansion strategy is to focus on proximity stores, especially Minuto Ponja Sucre, which is a more mature format with high capillarity potential, focused on AB targets that can quickly achieve maturity and good performance. And to conclude on this slide, under the profitability pillar, I would like to highlight the gross margin indicators in our effort to improve expenses in EBITDA, which have reached 7% this quarter. Raphael will give you some more color on this shortly. And wrapping up this overview of our strategic pillars, in ESG and culture, we continue to deliver on our goals and action fronts. I'm very excited to announce that we've reached 41% of women in leadership positions, which came as a result of new hires and also promotions for women who participate in the company's development programs. Gender equality is a genuine commitment for all GPA leaders. Seeing these advances makes me personally very happy. With regard to combating climate change, we have cut Scope 1 and 2 gas emissions by 11%. This is the result of projects and actions carried out in our stores. Across our value chain, we continue to make progress on our commitment to animal welfare, especially cage-free eggs. We have already achieved 65% of sales of cage-free eggs in the Ponja Sucre stores in pursuit of our goal of achieving 100% of sales across all brands by 2028. And finally, on the topic of social impact and creating opportunities, we launched the Impulsiona Mice program to support the development of the GPA Institute's partner social organizations. We also supported the SHIPA project, which works on creating awareness on healthy eating habits and reducing waste by donating food to communities in need. Those were my main messages for you. Now I'll hand over to Rafael, who will discuss the company's financial performance.

Thank you, Marcelo. Good morning, everyone, and thank you for joining us. First of all, I would like to point out that with the completion of Exito's spin-off process in August and the distribution of 83% of the shares we held in the company, our financial results now account for the remaining 13% stake at market value. Therefore, the result of discontinued operations presented in our financial statements includes one month of Exito's results, in addition to the impact of the discontinuation of hypermarket stores. The figures presented next represent continuing operations unless otherwise indicated. Starting on slide 9, we present the total turnover of Novo GPA Brazil, which reached 5.1 billion BRLs in Q3 2023, up 10% compared to Q3 2022. Excluding gas stations, the increase was 9.5%, driven by a significant same-store sales, increase of 5.7%, and the expansion plan with the opening of 49 new stores since the beginning of 2023, including 20 in the third quarter alone. The same store sales indicator, considering the entire perimeter of Novo GPA Brazil, grew by 6.6%, with the Pão de Açúcar brand standing out with an increase of 7.2%. As Marcelo commented, this growth was driven by a strong increase in volume, which significantly offset the impact of food deflation this quarter. This evolution reflects the consistency in customer delivery. which has strengthened the brand and brought more and more premium and valuable customers to our stores. Including the new stores, the sales increase in the brand remained strong at 11.6%. The proximity format showed an increase of 7.7% in same-store sales and strong growth of 21.7%, including expansion. The good performance of the proximity format can also be seen in the 2.2% point increase in market share compared to small markets in the greater Sao Paulo area. In the Extra Mercado brand, same-store sales growth reached 2.5%, similar to the increase in total sales. put deflation plays a more significant role in this format, but we managed to accelerate volume growth, especially in perishables, mitigating the deflationary effect. Moving on to the performance of gas stations, we saw strong growth of 18.2% in sales as volumes increased. And finally, we had a significant increase of 15% in e-commerce sales, totaling 47 million BRLs with both sales channel 1P and 3P showing double-digit growth. I would also like to point out that we have implemented significant initiatives in recent quarters to increase the efficiency of the e-commerce operations, in particular, the closure of the dedicated DC and consequently with sales starting 100% from the stores this quarter. This move allowed for a complete integration between e-commerce and store operations with incremental sales for the fixed structure, as well as a significant reduction in expenses related to the DC. On slide 10, we present the financial performance of Novo GPA Brazil, which excludes the effects of the international perimeter. Gross profit reached 1.2 billion BRLs with margin of 25.1%. As you can see in the chart at the top, we have seen a gradual improvement in margin over the last four quarters, which amounted to 1.3 percentage points. These results reflect the successful execution of the turnaround plan with emphasis on continued sales growth that is outperforming the market. gains in commercial margin, and reduction in losses. Adjusted EBITDA totaled 333 million BRLs with a margin of 7 percent, resulting in an increase of 0.7 percentage points compared to the previous quarter and 1.2 percentage points compared to the third quarter of 22. It's worth highlighting the work done on expenses through the implementation of zero-based budgeting, which enabled us to capture significant efficiencies. Moving on to slide 11, we come to the consolidated financial performance. The chart on the left shows our continued net income has reached 809 million BRLs compared to a loss in the same period last year. As the chart shows, we had a positive impact of 804 million BRLs this quarter related to CNOVA. This impact refers to the reversal of the non-cash provision for accumulated losses relating to the 34% stake we hold in Sinova. This reversal is due to Casino's intention to acquire our stake, as well as the absence of any current or future financial obligation of GPA towards Sinova and our intention to sell the asset. On the right is the net profit from discontinued operations. with a loss of 2.1 billion BRLs. Almost all of the loss is related to the conclusion of Exito's group's spin-off process, which generated a write-off of 2.1 billion BRLs, most of which refers to the recognition of the exchange rate devaluation of the Colombian peso against the Brazilian real during the investment period. Excluding these effects, the net loss would have been 22 million BRLs. Now on slide 12, on the left, we present the managerial operating cash flow. This quarter, we had a small operating consumption of 9 million BRLs compared to a consumption of 305 million BRLs in Q3 23. This evolution was due to the improvement in the operating result, as we mentioned earlier, as well as an important eight-day advance in merchandise working capital. The chart on the right shows net debt, which reached 3 billion BRLs at the end of the period, with a reduction of 507 million BRLs over the last 12 months. Leverage, measured by adjusted EBITDA, stood at 2.5 times compared to 3 times in Q3-22. It's worth highlighting that this advance in GPA's financial performance is the result of the rigorous operational management we are implementing. We're also rigorously implementing our financial deleveraging plan in order to achieve a capital structure that is in line with our operations. In this context, we had significant developments this quarter. We concluded the sale of the Barra da Tijuca site in Rio de Janeiro, totaling 247 million BRLs. We received 52 million from the sale of other non-core assets, and we announced an agreement of the sale of our remaining stake in Exito for around 790 million BRLs. These recent developments further increase our confidence that we are on the right path to delivery increasingly consistent and sustainable results. This completes my presentation and we can now move to the Q&A session.

We will now begin the questions and answer session. As a reminder, if you'd like to ask a question, please click on the Q&A button on the lower part of the screen and write your question down to join the queue. When your name is called, you will get a request to unmute your microphone, which you should do to ask your question. We'd kindly request you to ask all your questions at once. We'll start with the first question from Dunny, an analyst from XP. Dunny, you may unmute your microphone. Go ahead. Good morning, everyone. Thank you for taking my question. I have two on my side. The first one is about your margin expansion lever for the future. If you could give us some color, I know that magnitude is what we always want, but if you could break it down, into the main buckets when it comes to relevance. Where would your gross margins come from? From what you said, there were still investments to come ahead of us, but I'm not sure how many, how much expenses are going to be reduced and how much of it will depend on operational purging or revenue growth. If you could give us some guidance on how we should think about these three levers for your future expansions, it would be great. My second question is, what are you thinking about equalizing the cost of debt in your P&L when it comes to timing? I know that you mentioned some timing. of disinvestments, right, in cash. I know that this is for the new future, but even including that in the calculation, your cost of debt is still very significant. You're still making some investments. So if you could help us to understand the company's strategy with regard to that, how much profit on the bottom line and how much cash do you think you will be able to generate in this operation? Thank you. Thank you, Danny. I'll answer your first question and I'll let Raphael answer the second one about debt equalization. So concerning expanding the business's gross margins, as we said before, we are on a growth path and our expectation is that we still have some space to improve. It's important to highlight that we've been working to solve some structural issues. Last year, we started by structuring our head office, which reduced our expenses by 130 million. This year, our focus on expenses has been on the base zero budget project, which gives us 230 million in addition to this amount. And 60% of it has been captured. the remaining value will be captured now during the fourth quarter. We've also started this project for 2024. So we believe that when it comes to expenses, we can continue to dilute them. As sales continue to recover, our expansion will help us to dilute these expenses and we will continue to optimize things. There are two more points here that I think are important to mention. The first of them is related to commercial negotiations. Our commercial team has been tirelessly working to get closer to the industry, ensuring that we can provide better and better gross margin structures. So we've seen some improvements this quarter of 25% or more, and we believe that there are still opportunities to continue improving, especially as we reduce our inventory. There's a very relevant point here, which is achieving a reduction in seven days inventories reaching a record level of product availability on the shelf. So the utilization of these products means that we're going to get the right product at the right store at the right time, which removes that need to reduce our expenses with out-of-stock products. With every quarter, we've reduced this percentage. We believe that at least 5% or 7% reductions can still be made for 2024. We continue to make a strong effort on reducing inventories. which provides the company with more capital and makes our turnover more positive for the business. So, therefore, we're working with an expectation on focusing on expenses, having negotiations, commercial margin, and also we're working on some significant pillars that will continue to allow us to optimize our results for the next quarter and for 2024. Over to Raphael. Good morning, Dunny. Thank you for your question. So about the timing to rebalance our debt, I think that was what your question drove at. From this quarter, we've started implementing some measures concerning that. For example, we have a lot of liquidity still, and there are some structural debts that obviously, because of our high C.D., carry a large burden. So it doesn't make sense to keep that much debt in our balance if we have that liquidity. So what we've done this quarter is to replace some structural long term debts to some shorter term debts related to working capital. So this is just a recent example of how we're approaching this issue. So as we continue to deleverage the company, which is basically based on selling assets, we expect that for the next quarters, and this assumes that this spin out from AZ2 will conclude by the end of the year, as we said, and also taking into account some of the other assets that we can demonetize in the next weeks or months. we will probably be able to pay off some of the structural debt that we have. We don't want to sit on a truckload of liquidity. Our intention is really to start reducing the company's structural debt level to... something that is more comfortable in capital infrastructure. And also, we want to reduce the structural debt with the costs underlying it. So that's the idea behind it. In other words, we're selling assets and that will little by little pay off the structural debt that we have, especially the most expensive ones. Great, thank you. The next question will be asked by Victor from Santander. Please unmute your microphone and ask your question, Victor. Hi, good morning. Thank you for taking my questions here from Santander. So I'd like to explore this issue of leveraging that was asked during the last question. But I'd still like to know what kind of leverage you expect to have in 2023 and 2024. I understand that you are renegotiating your debt and there will be some operational expansions in the next quarters. So what is your expectation for leverage? I'd also like to ask about sales and how they will behave in the fourth quarter. Thank you. Good morning, Victor. So here, obviously, we can't give you a guidance on leverage. What we can say is, and this refers to what Rafael has just mentioned, is that we're committed to deleveraging the company. Our focus, and I gave some interviews yesterday underscoring this, Our focus for use of proceeds for our asset sales and other capital raising as it to itself has been redirected to the company's leverage. We're seeing operational improvements every quarter, and we're convinced that we also need to work on reducing leverage so that the company can becomes more and more self-sufficient and prepared for its operational recovery. So I don't mean to give you a guidance, but I'm just reinforcing our commitment to deleveraging the company as a part of our strategy. We don't have any doubts about this. We're not going to make any outlier investments, right? all of our projections for 2024, even considering the expansion that we will continue to make will not put in risk or compromise the use of proceeds for the new resources that will come in. They will be used directly for the company's deleveraging process. I want to make this very clear so that you have no doubts in your mind. Considering operational improvements, I think we will continue to see them despite the challenges that we're facing. I'm referring here especially to deflation in commodities. I believe that poncha sugar will be more resilient than average. especially our premium brands, Ponja Sucre and Minuto. They both benefit from having a wealthier audience, which has higher or above average disposable income with a more variable basket. So, these commodities are not so relevant for Pão de Açúcar and Minuto in comparison to mainstream retail. This will allow us to maintain robust growth, and it will also protect the quality of our results, as we saw during this quarter with some gross margin improvements that we posted. We will continue to see these in the next quarters. It's still early for the fourth quarter, but looking at October, it seems to be going well. Things, of course, will happen in November and December because that's when we see the biggest seasonal trends. In November, we have three extended holidays, which is very important for retail, and also Black Friday, which is a very relevant date. We're very prepared for these two seasonal dates. And in December, of course, we have the holidays. So we're prepared. We believe that the company will continue to grow consistently based on our efforts. And we expect that these results will continue over the next quarters. That was clear. Thank you. The next question will be asked by Nicholas. Please unmute yourself and ask your question. Nicholas is an analyst from J.P. Morgan. Go ahead, sir. Good morning, Marcelo in our file. Thank you for taking my question. We have two here. First, about your assortment revision process that you mentioned that you've done for BOEM. When do you expect to conclude it in the proximity brands? I know that you have the guidance for new stores in the next two or three years, but I know that the market has also changed in the last quarters. So what opportunities do you see for 2024? My last question is about Ezito. if you could tell us about the main milestones that you hope to achieve on the short term for this negotiation to take place. Thank you. Thank you, Nicolas. I'm going to answer the first two, and then I'll pass it over to Rafael, who will give you an update on EZTUM. Considering the assortment review, we concluded the first stage on Pongja Sukkuk, and this allowed us to deliver... several things very successfully. We also saw some inventory improvements, improvements in sales margins, and we also had good alignment with our suppliers, which is very important for us right now. Because it shows the duration of our business and our impact will go far beyond what clients see on the shelf. They impact our supply chain and logistics strategies because we give our business more predictability. And it also reduces stock out, as I mentioned before. Concluding Ponjasuka, we've started the project for the proximity brands and also Mercado Extra. We have practically concluded 50% of the sales equivalent. That has been reviewed. We're complementing it and we're working intentionally on that first. We like to tackle... the most relevant categories first. And we'll conclude the second part with this for less representative categories. We hope to conclude this by 2024 so that we can enjoy these results for the last part of 2024. Considering opening stores, we are still committed to expanding We believe that especially for the Minuto Ponja Sucre model, here in the city of Sao Paulo, what we've seen when it comes to performance is that despite the challenges we have in the current scenario, these are the stores that are performing very well. Their maturity is reached before we expect it and Again, it's earlier than what we expect. So we continue to be committed to that. As you saw in our results, this is a segment of Brazilian retail that is growing fast. The convenience for clients to walk to these stores throughout the week for their shopping and then shopping in the largest stores during the weekend makes these strategies complementary, these brands complementary. The work that we've done with Pão de Açúcar also benefits Minuto Pão de Açúcar. So, obviously... We have a very rigorous process. We have an expansion committee assessing each location. We're not going to be opening stores without a reason. We want to ensure that it will have quality. We're not just being driven by the numbers. We're not trying to reach these numbers quickly, neglecting quality. Our focus here is to continue to seek the best locations for Minuto Pão de Açúcar while looking occasionally at some opportunities for pão de açúcar. This year, as I've mentioned, we've opened two pão de açúcar stores and in the fourth quarter, we expect to open one more. So despite these advances in proximity, we will have opened three pão de açúcar stores. So this is our commitment. We hope to continue finding the best opportunities and locations for our business and for our expansion. I'll pass it over to Rafael, who will talk about the EC2 process.

So this topic is a bit tricky because I cannot tell you much more than we have already told you in the material fact conference. So what we said is that an offer should be made to ADRs and to shares, an offer in Colombia and one in the U.S., And we expect to be able to have this offer by the end of the year. That's the information we shared in our material fact conference. So the concrete information I can give you is about the main steps of an offer process within the context of our Columbia So we expect the buyer to request authorization from the regulators. And once the regulators analyze and approve the offer, the offer is presented and deposited, and then the tender period starts. And just like in Brazil and other markets, when the tender period starts, or better saying, it can only start when the buyer has the funds and the cash and warranties necessary to complete the offer. So once the tender period is open, it will last 30 days. Then after those 30 days, then the offer is settled a few days later. So this is the whole process and we expected to be completed, as we said in our material fact call, by the end of the year. Great. Thank you, Marcelo. Thank you, Rafael. Our next question is by Irma, sell side analyst at Goldman. We will enable your mic so you can ask your question, Irma. Go ahead. Good morning. Thank you for taking my question. I would like to hear your take on consumer behavior in the different store formats because you have the advantage of reaching different audiences. So you have already commented that deflation helped you recover volumes in perishables mainly, but now looking ahead to the end of the year, What do you see in terms of consumer behavior in the different brands? And I know it's hard to project, but what is your vision on inflation or deflation of food items? And what are the moments that you're taking into account during the crop season or planning? And just another clarifying question, if you had more flexibility in the balance sheet, would you be interested in opening more stores in the Pondia Sucre full format? Or you want to be more selective, even if you had more flexibility there from the investment side and in terms of leverage as well? Thank you. Thank you, Irma, for your question about consumer behavior. So starting with the first part of your question, we benefit from having the greatest loyalty program in Brazil. And this gives us a close contact with consumer and we can have an eye on their behavior. When it comes to premium consumers, we have seen an enhancement in the share of perishables. And at Pão de Açúcar, this has already exceeded 50% of the total sales in this format. So more than 50% coming from perishables, which is really important for us because perishables means loyalty. And we have gained market share in all perishable segments. We have the best baker in the market. the best butchery department, and this has achieved strong double-digit growth, and we expect it to remain like that. We have been investing a lot in the relationship with our suppliers, and we have also invested a lot in training of our staff to make sure that the experience will continue amazingly. Now, about deflation, we know that commodities impact deflation rates, and the advantage of the premium brands is that they are less impacted by this category. But there is an important point here. Since we started the turnaround process, one of the points that we identified back then was that ponja sugar customers were coming to our stores regularly, Our poncha sugar stores just to buy indulgency categories. They would not buy the whole basket in those stores. They went somewhere else for commodities and perishables. But then our commercial team, the marketing team and the operation teams have been working really hard to give us the opportunity. to work on ideal assortment and pricing, making sure these customers will buy other categories as well. So we're not feeling the pressure as much as the rest of the market because the volume of commodity products is offsetting the deflation rates that we are experiencing now. Having said that, we have seen a slowdown in the deflation process. We believe it will continue at least in the first half of 2024, but there are already some categories that have been experiencing some price stagnation, especially in the butcher department. So a reduction of the drops we have been seeing in recent months and quarters. However, when you go to the extra market brand stores, it's a different strategy, a different type of customer, and a different value proposition and assortment plan. Here, we're working on having the right product with the right price. So we want to offer a great cost-benefit ratio to customers here. We continue focusing on the presence of perishables as a whole in the sector. And in specific categories and products, we're working on our value perception when it comes to pricing. It's worth highlighting that in spite of this huge challenge, our operations team has been working hard on store productivity for extra market stores, which enabled us to grow and to improve the profitability of the brand in spite of the deflation challenges that we have been facing. When it comes to the ponja sukkur format and expansion, We should be cautious, Irma, and it's not a matter of having enough money or not, but we want to focus on our business model. One of the things we learned was that it's no use just opening a store in a location that seems to be good. We have improved our ponja sugar expansion process last year and this year with stores being open. with sales that are at least 50% above the average of recent years, of recent waves, because we're not just opening stores anywhere. Ponjasucar already has the best real estate, especially in the city of Sao Paulo, and we have to be very careful when choosing the location and defining the ideal assortment, the neighborhoods we want to be based in, the responses we want to give to the needs of that neighborhood or that city. An example of the success of this strategy was the opening of the store in Atibaia. We opened the store and we achieved the targets for the whole year right away. So this shows the hard work of our expansion team and all of the other teams that have been providing support to this project. So yes, we want to open new stores, but for the Ponja Sucre brand, we believe that we need to focus on refining the opportunities. So with a lower volume of stores. On the other hand, we see a great opportunity to continue growing and expanding the Poncha Sucre brand in the city of Sao Paulo. Let me just add something to this Irma. I believe Marcelo covered the main points regarding our strategy to define whether we will open new stores or not. But an important point is that in the new poncha suker stores, we have chosen a build-to-suit strategy. So the capex that is used for opening a new store is invested by the landowner. This is actually a joint action. This has been our choice for now. So we don't have that balance sheet pressure that you mentioned to continue advancing in our expansion of the Pondya-Sukur full format. We have the space. We're opening new stores because of the rigorous analysis that we have been carrying out to choose the new sites, locations, assortment, and then open the new stores. Okay, that was very clear. Thank you very much. Our next question is by Tali, sales site analyst from Safra. Tali, we're going to unmute your mic. Go ahead and ask your question. Good morning, Rafael and Marcelo. Thank you for taking my question. My question is about that level of 5.8 that you mentioned in your report. So when do you expect to reach the end of those projects? And what about working capital? You said 45 days of stock and 54 for suppliers. Can you give us more color? about the projects to reduce out of stock problems in the different brands? Sure. Thank you, Thales, for your question about the out of stock issues. That is an obsession we have. We want to be able to meet customer needs. I remember when I joined in April 2022, one of the main complaints that we had from customers regarded the lack of assortment consistency in our stores. The customer came, bought a product, and when they came back another day, the product was no longer there available for them. So this was quite erratic. So I would say that 95% of product availability on the shelves consistently, because it's important to highlight here that this number that we are sharing is not a snapshot of the last week of the quarter. This is a consistent weekly number that we track in our stores. And when we look at the delta difference here, when we see reduction of out-of-stock items and increase in sales, I think these two things are closely related. I would even say that in 2025, we would reach a best in class rate here in England. When I worked at Walmart, our metric was 97%. So I believe we can still improve this number. This is a solution. That comes from an internal work that we do and also work that we do with our suppliers. And the main challenge to exceed this figure of excellence is to be able to improve these rates in more distant capital cities, especially in the northeast region of Brazil. We're working hard to improve are out of stock numbers in the Northeast because when we compare the numbers of the Northeast to the numbers of Sao Paulo and Rio, they are not at the levels we want, although it's already considered an excellent rate considering the Brazilian standard, but we expect this number to improve in 2024. Now about working capital, you saw that last year we reduced five days as compared to 2021. And in 2023, when we look at the quarterly numbers, we have reduced this by seven days. This is fruit of hard work and the management of categories at Ponja Sucre. We reduced our assortment at Ponja Sucre by 10%. And as you know, we're now working on this for Mercado Extra and the proximity format brands. Even so, we'll still have the opportunity to reduce assortment. Not as much as we were able to reduce in the first two years because the levels were higher. But now we're going to focus on the detail and make sure that the assortment in the Mercado Extra stores will bring improvement in sales and margins and work in capital. Would you like to add anything here, Marcelo? I think you said it all. The opportunities are in the work that will be done and the stores that are left for the category management work. And this can give us another two to three days of additional gains. These are our estimates. But as Marcelo said, the hard work has been done. And so we might have some few days to improve our working capital only.

Okay, thank you. The next question will be asked by Alessandri. from OMS. Please unmute yourself, Alexandre. Go ahead. Good morning, Marcelo and Rafael. Thank you for taking our question here. So referring to leverage, I understand that you're not providing any guidance on what level of leverage you will be at, but can you share anything about how much cash you think you'll be able to get from additional sales of non-core assets, excluding, of course, Exido, which you've disclosed about. How much do you expect from Sinova's sales and the other assets that you intend to sell? Another question, looking at the different brands and how they're performing. In your release, you mentioned conversions from Comprebang to Mercado Extra. So what kind of performance have you been seeing after these conversions? Thank you. Thank you, Alexandre. I'll go straight to your point. Of course, we can't give any guidance, but what we can say is that the main element that we expect to sell and monetize on has been announced, our participation of 3.3% in Exito. Besides that, we also have about 500 million additional BRLs. This includes assets that we have that will be sold in the next quarters. So I'd say that's pretty much how we should consider it. So about 500 million besides what we have in Esito, the other assets that we can still monetize. Concerning Comprebank, it's still early to say because as a reminder, when it comes to assortment, when we transform this banner into Mercado Extra, this allowed us to add a lot of assortment to Mercado Extra. And it also allowed us to include our own brand, which is now becoming more relevant. So we're starting to see some performance improvements, but more than sales, we are definitely seeing contributions to our margins. Some categories and different departments have been unified. Things that were done separately before and that now have been able to be piggyback on Mercado Extra's performance. So that includes meat products, grocery products, and so on. So clients will understand a new value proposition. They'll recognize the improvement in assortment proposed for these formats. And they'll also see an improvement in pricing, especially in perishables. And just as we've done in other formats, we'd like to reinforce these. On the other hand, the main point here is not only sales growths, but also optimizing results. And this has been seen significantly. Great. Thank you, everyone. This concludes our questions and answers session. We'll now pass it over to Marcelo Pimentel for the company's closing remarks. Once again, I'd like to thank everyone for being here for our call. I'm very pleased. I'm very happy and confident with the results we've presented, which validate the consistent work and business strategy that we've had. In April 2022, we started a turnaround process that was set to last three years. We're in the second stage of this project and we're starting to be rewarded for our work, which focused on operational and structural improvements so that their results would be long lasting and sustainable. I'm confident that we're fully capable of continuing to deliver on these fronts. I'll close by thanking the team for their dedication and commitment. They really have believed in our project. So thank you to the stores team, the distribution center team, e-commerce, everyone who's making a difference to make our business turn around. Thank you and have a great day. This concludes our conference call. The Investor Relations Department is available to answer any outstanding questions. Thank you and have a great day.