Companhia Brslra Dst Adr

Good morning, everyone, and thank you for holding. Welcome to the video conference to announce GPA's fourth quarter 2023 results. I would like to point out that for those who need simultaneous translation, we have this tool available on the platform. To do so, simply click on the interpretation button using the globe icon at the bottom of the screen. For those listening to the video conference in English, there is the option to mute the original audio in Portuguese by clicking on Mute Original Audio. We would like to inform you that this video conference is being recorded and will be made available. on the company's IR website where the complete earnings release material is available. You can download the presentation from the chat icon. During the company presentation, all participants will have their microphones disabled. We will then go on to the Q&A session. To ask questions, click on the Q&A icon at the bottom of the screen and type in your question to join the queue. When you are announced, a prompt to activate your microphone will appear on the screen. Questions should all be made at the same time. We underscore that the information contained in this presentation and forward-looking statements made during the conference referring to projections, goals, and financial and operational goals are based on the premises of the management as well as on information currently available. These forward-looking statements are no guarantee of They involve risks and uncertainties as they refer to future events and depend on circumstances that may or may not occur. Investors should understand that overall economic conditions and other market conditions could impact the results of GBA and differ materially from those expressed in these forward-looking statements. We have with us the CEO of GPA, Marcelo Pimentel, and the CFO and Director of IR, Rafael Hulsoski. I will give the floor to Mr. Pimentel to begin the presentation. Good morning to all and thank you all for attending our fourth quarter 2023 conference. Before we talk about our results, I would be remiss if I didn't comment on the unfortunate passing of Abelio Diniz. Few people had the power to personify an activity, and that is what Abilio was. He personified the retail market. He trained most of the great professionals who worked here and in retail, and the legacy and admiration of these people are for the great professional and the man that he was. Abelio was a tireless optimist for Brazil, a very firm manager and very close to everyone here at GPA. It is up to us to honour with great respect his history and everything that he built. On my behalf and on behalf of the board of directors, the management and the employees at GPA, we would like to thank him, to Jay-Z, his wife, his children, family and friends, our sincere condolences. You can count upon us to keep his memory alive here at GPA. Very well, let's go on to the results. This is a quarter that I am particularly happy to present to you as it shows the result of very sound and consistent work. More than that, We have had a positive evolution in operational and financial indicators that are very relevant to our business. This quarter, we closed the second year of GPA's turnaround project. We entered 2024 much better prepared. This will doubtlessly be the year of acceleration of earnings, consolidation of our position, and strengthening of the value proposition of our proximity and mainstream brands. In addition to Pão de Açúcar, on slide number four, we highlight the sequential evolution of margins and sales growth above the market and with market share gains. The great news here that I would like to highlight is our operating cash generation. We reached 907 billion BRLs in operating cash flow in 2023, representing an improvement of 1 billion reais vis-a-vis the year 2022. This is an enormous step forward and a clear signal that our business by itself, considering all the operational work that we are conducting, has great potential for cash generation. That's excellent news. This slide also shows other major highlights of the quarter and the year, with growth in all indicators, gross revenue in total, growth of 6.3% in the quarter and 11.3% in the year. Pound de azúcar revenue with a 6% growth for the quarter, revenue growth at around 19.3%, strong 20% growth, of our e-commerce both on a quarterly basis. In same store sales, we also evolved. It was 4.3% in the quarter and 5.9% in the year. This is the seventh consecutive quarter of positive evolution for the company. Our EBITDA margin grew 1.8 percentage points higher than the fourth quarter 22. with net debt falling by $700 million and our cash position with coverage of 3.1 times the short-term debt. Rafael will go into the details about financial indicators ensuing this. Following the presentation, if we consider the top line, it is worthwhile mentioning that the growth in total sales and same-store sales was higher than the self-service food market we recorded an increase of 0.3 percentage points in market share, even with a strong comparison of the fourth quarter 22, a growth for the fifth consecutive quarter. And stock out continues to fall with very significant improvement of 3.2 percentage points compared to the same quarter in 22. December was a very strong month for us, even with a slower market. The same store sales increased, driven by the increase in volume. The perishables category was the highlight at Pau de Azucar and Extra. Our NPS pillar was once again positively impacted by the improvement of our customer satisfaction, which translates into greater flow and greater recurrence. NPS evolved 10 points vis-a-vis the same period in 2022. All of our banners recorded advances as a result of the improvement of service as a whole. the reduction of time at the checkout line, self-checkout stations, and improvement in price perception. It is important to mention the growth of cloth and black customers after we relaunched the MICE program last year, which led to a 9.5% increase in the number of premium and valuable customers. which are those with the highest frequency of purchases and highest monthly spendings. This is also a result of our investment and improving customer communication through the CDP tool customer data platform, which allows us to further personalize the customer experience and allows us to leverage our customer base as well as our e-commerce sales. Now to go into our digital pillar. In this quarter, we reached a 20% growth in e-commerce sales, the best rate in the last six quarters, with 12% penetration in total food sales. Both channels, both IP and 3P, showed strong double-digit sales growth. We also increased the share of perishables, reaching a 33% penetration and increase of 6.2 percentage points vis-a-vis the fourth quarter 22, driven by the migration of sales to the 100% ship from store model. And we continue to be models in digital food retail, both in the 1P and on our platform with partners. Our e-commerce has undergone an important process efficiency gain in recent quarters, allowing for a reduction of expenses without impacting sales growth, leading to a positive evolution of the contribution margin. On the next slide, we highlight our progress in the expansion pillar. Throughout 2023, we opened 61 stores. 56 of the proximity format with emphasis on Minuto Pão de Açúcar in the state of Sao Paulo and five stores of Pão de Açúcar, an important movement that has taken the brand's value proposition to regions with a great growth potential. This expansion led us to an incremental sale of 670 million in the quarter, I'm not going to dwell on the details of the profitability pillar, as Rafael will comment on it, but I can't help but talk about the evolution of our gross margin of 25.7 percentage points, an increase of 3.1 percentage points compared to the fourth quarter, 22, and 0.6 percentage points better compared to the previous quarter, demonstrating gradual and continuous improvement. And our EBITDA, as mentioned in the opening, reached 7.7 percentage points, also in continuous evolution with the best margin of the last eight quarters. As I said, I will allow Rafael to offer you the details on our progress and to Closed my opening results on the next slide we have our progress with the social and environmental initiative agenda as part of our sustainability strategy we continue to increase the number of women and leadership positions reaching 41% this quarter. Our sustainability strategy is committed to a circular economy agenda and actions focused on a low-carbon economy. Thus, we reduced Scope 1 and Scope 2 emissions by 10% as a result of the gas replacement and engine room retrofit projects. Among the transformation and impact actions of our value chain in November, we hold a multi-sectoral engagement event with all of our animal protein suppliers with the aim of aligning our guidelines and commitments on that front. And within the scope of social impact, we celebrate the six years of the project Malz na Masa, which trains people in situation of social vulnerability on basic baking and confectionery ideas through the GPA Institute. We ended the year with 207 new graduates who will now have more job opportunities. We additionally donated 1.760 tons of food to the program Parceria Contra Desperdizzo. There was more than 3 million meals complemented through this program. I am very proud of this, and this program will celebrate 30 years of operation the next year. I close now my initial comments and hand the floor over to Rafael Ramos, to comment on the financial performance.

Thank you very much, Marcelo. Good morning to everyone who is here with us. The following figures represent continued operations, unless otherwise noted. I'm going to start from slide 9, where we represent GPA's total revenues, which reached 5.6 billion BRL in the fourth quarter of 2023, representing growth of 6.3% over the fourth quarter of 2022. This increase was driven by same-store increase of 4.3% and also advancement of our expansion plan, with opening of 61 new stores since the beginning of 2023, out of which 12 were in the fourth quarter. Pão de Açúcar grew 4.2%, driven by a strong increase in volume, with significantly mitigated the still-present impact of full deflation in some important categories in the quarter. As mentioned by Marcelo, this was the seventh consecutive quarter of same-store growth, We believe that this evolution reflects the consistency in delivery to the customers. It has strengthened the brand and brought more and more premium available customers to our stores, including new stores. The banner sales increase was 6%. For the year, same store growth was 7.2% and total growth was 13.3%. The strong increase resulted in increase of 0.8 percentage points in share of Pondia Sucre sales in total sales of GPA. Proximity format. It has observed 5.6% growth in same store and strong increase of 19.3%. growth, which included expansion. That very good performance of this format can also be evidenced by the 2.9 percentage point increase in market share versus small supermarkets in greater Sao Paulo. In the year, proximity grew 8.2% in same store and 19.8% when it also included expansion. In extra mercado, same store sales growth reached 2%, Food deflation played a very relevant role in this format, but we were able to accelerate the growth in the volume of perishables, mitigating the deflation effect. In the year, Exxon Mercado posted the same store increase of 3% and total store of 7.9%, driven by new stores which were converted from the hypermarket model in 2022. Now let's move on to the performance of gas stations. We achieved significant growth of 14.6% in sales today. especially with increasing volumes. Finally, we had significant increase of more than 20% sales of e-commerce, reaching 538 median BRL in the quarter with both sales channels, IP and 3P, showing double-digit growth. The speed up in growth was observed thanks to 100% ship front store model which we implemented in the second quarter of 2023. This model allowed us to advance even further in the order quality and meeting our delivery time to our customers. in addition to accelerating the increase in the share of perishables in e-commerce sales, which is a fundamental pillar for recurrence of purchase and increased profitability of the model. In the fourth quarter of 2023, we achieved 33.2% penetration of perishables, 6.2 percentage points higher than the previous year. Slide 10, we can see GPA's financial performance, excluding the effects of international perimeter. Please bear in mind that with sales of Sinova in the last quarter and the conclusion of sales of Exito in January 24, we are a company focused on 100% Brazilian food retail. Regarding profitability, 2023 was characterized by the reversal in the margin compression process we had observed in 2022. The initiatives we implemented in our context of turnaround plan were critical, and they have begun to show results as of the last quarter of 2022. Since then, the company has been reporting sequential expulsion in our growth margins and adjusted EBITDA, evidencing effectiveness and consistency of our initiative implemented. Gross profit reached 1.3 billion, 25.7% margin, as we can see on the chart above. We've seen gradual improvement in margins since the fourth quarter of 2022, with gains of 3.1 percentage points in the comparison between the fourth quarter of 2023 and the same period of 2022. Adjusted EBITDA total 404 million BRL, margin of 7.7%, showing an increase of 0.7 percentage points over the previous quarter and 1.8 percentage points compared to the fourth quarter of 2022. Now, following to slide 11, we come to consolidated financial performance. On the left, we can see net income from continuous operations improved by 185 million BRL compared to previous year. As previously indicated, the reduction in losses is mainly due to improvement in operating results. The chart on the right, we can see the net income of our discontinued activities. in the fourth quarter of 2023, where there was improvement of 615 million BRL compared to previous year, with net loss of 216 million. The positive change reflects primarily the reduction of negative impacts on the discontinued operation of hypermarkets. Now let's move on to slide 12. On the left, we can see managerial operating cash flow. In this quarter, we had strong operating generation of 1.1 billion, which is a progression compared to the fourth quarter of 2022. On the right, we can see cumulative view in 2023 of operating cash flow. We had operating generation of 907 million BRL, strong positive results of 1.4 billion based on operating cash consumption over the comparison with 2022. The results generated from significant improvement in our operating result, as well as significant four-day improvement in our working capital resulting from higher inventory turnover after the implementation of our project for review of assortment and the category management in Pão de Açúcar. Slide 13 shows the change in net debt, which reached 2.3 billion in the end of the period. In the fourth quarter of 2023, there was a reduction of 721 million in net debt, mainly due to operating cash generation of 1.1 billion. This cash generation was partially consumed by 164 million in CapEx and 174 million in net financial costs. It's important to emphasize that the progression in our GPA financials performance is the result of discipline in operating management that we've been implementing as part of turnaround plan. We are also very rigorous in the execution of our financial deleveraging plan to have a capital structure that is in resonance with our operation. Therefore, in the end of the fourth quarter, we completed the sales process of our remaining stake in Exito with financial settlement on January 23, 2024. It resulted in cash inflow of $789 million BRL, not included in the end of 2023. Considering this additional cash, the net debt would have been $1.5 billion. These recent developments confirm the effectiveness of our initiatives that we've been implementing and further increase our confidence that we are on the right track to deliver increasingly consistent, sustainable results. I close now our initial presentation and I would like to open for the Q&A session. Thank you. Let's start now with our Q&A session. Please let me remind you that to ask a question, please select Q&A on the lower portion of the screen and write down your question. When your name is called, you'll see a note to open the microphone. Please activate it and ask your question. We would like questions to be asked all at the same time. Let's see our first question by Gustavo Sendai of XP. Please unmute your microphone. Gustavo, please. Good morning, everyone. Thank you very much for taking my question. I have two questions. First, you said in your release in 2024 will be an year of acceleration where you're going to benefit from your own changes. Can you please tell us a bit more about that, thinking about all the KPIs, so product availability, assortment review or busy project can you just share some of those insights with us and secondly same store dynamic something that attracted my attention what have you been observing in the beginning of this year in terms of same store thank you gustavo when i joined In April 22, together with my team, we've created a strategy for the first three years focused on turnaround plan. We informed you at that time that everything would be based on our six strategic pillars and based on them, focusing on picking up more sales, growing over inflation rate, regaining market share, improving customers' experience measured through NPS, then gaining really the leadership in e-commerce, increasing the penetration in digital channel, organic expansion, just focused on our premium banners, especially Minuto and Pongia Sucre, and really resuming profitability. One of the merits of this process that we've been experiencing is that we've been just very compliant with our strategy since 2022, and we are going to take it consistently till the end of 2024. Speaking of that, In 2022, we implemented consolidated results in the upcoming year, as you've seen, but we want to move ahead. We don't think we've achieved our full potential yet. For all different metrics, we are going to keep on moving ahead, and I'm going to give you a few examples. Our category management, for example, which has brought the results for Ponte Azucar, and that's something we did last year. In the last quarter, 23, we've started putting into action first for proximity banners. And now in the first quarter, we've also started that for extra banners. And we have high expectations of start seeing results that we obtained in Pão de Açúcar also to be present in the other banners. We are also focusing on management of generosity, so to speak, with our promotional campaigns and also the retail programs. All of that taking us to improvement gross margins. Therefore, you can see that we are improving our NPS. We've reached 75, 76, but we want to keep on having higher NPS, and we want to really move on with that. Concerning digital growth, Our expectation is that once we have consolidated our ship from store operations at a 100% rate in our stores, we are going to gain scale and improve profitability. We launched in the end of the quarter a model of one to two hour delivery through our proximity store. It's a new channel. In terms of expansions, we are going to stick to the original plan, expanding the model of proximity stores in the city of Sao Paulo with Minuto Pão de Açúcar. It has expanded sales, but it has also increased the margins to our business at large and also improved profitability. We've begun 2024 much better position than we used to be in 2023. And with operating improvements, as Rafael has shown you, we are going to keep on growing and maintaining our guidance of delivering EBITDA between 8 and 9 months. percent for 2024. Part of that also results from the fact that we have started quite well the year. We cannot give you any guidance now or details about that, but what we can assure you is that January was a very strong month to us. we have very important presence in the coast of Sao Paulo. So Pão de Açúcar, thanks to our store portfolio, we had a very positive position. So we've just completed the seasonality of Carnival, which was also very good to us. So we are very optimistic for the year of 24.

Thank you very much for the answers. Our next question is from Fernanda. We will unmute your audio so that you can pose your question. You may proceed, Fernanda. Fernanda, you may proceed with your question, please. Perhaps we should go on to the next question and then return to Fernanda. Following the order of the questions, the next question is from Gustavo Fraccini from Goldman Sachs. Gustavo, your audio is unmuted. You can continue on with your question, please. Good morning. Congratulations for your results. I would like to speak about the topic of expense control. You had very high gross margin this quarter. Nevertheless, this had a slight negative impact, which was an increase in expenses. Selling had a significant growth of almost 19%, and you remarked that this refers to enhancing the customer experience in store. Could you give us more detail in terms of which line items have grown most, the hiring of personnel, increase in marketing expenses? Well, thank you, Gustavo, insofar as possible, insofar as we can share these details. In fact, the growth came from the stores itself. I remind you that we began working strongly in 2023 as well as in 2022, always with a focus on the reduction of back office items. For many years, the store had had service that was deteriorating and throughout this entire period, We set forth to do what we wanted to do in terms of enhancements in our warehouse and our head offices and headquarters, always being extremely cautious to preserve the in-store activity. Yes, we did invest in personnel for the stores. We remind you that we were facing problems with lines. This was a great detector of our NPS. we carried out a diversity of other investments in stores. It's difficult to specify where it is exactly where we had this impact. We invested very generally in stores to offer support to the client pillar, the NPS pillar, which of course is our focus, which is the core of our turnaround plan. Everything that we do here has a view on the client pillar. and the return of our operations, which we have seen once again, all of this stems from this initiative focused on the client. It is about investments in stores. Of course, we have personnel involved in this process, but we're referring to more general investments and scores. What I would like to back up here is I will give you special examples so that you understand the type of investment we made. We took the decision of changing e-commerce from the distribution center to stores. This led to structural changes in the stores. For example, what we call the click and pick up system and the last mile with partners. Now, this wasn't one-off investment at this point, but which has allowed us to benefit throughout this entire year. We also made investments in some of the older stores, especially when it comes to maintenance. It was important to do this in preparation for the summer season and the rainfall that we have every year. It was important to work with the roofing and air conditioning in some of our markets. And these are very practical issues that we worked with and we will continue to work with, perhaps in a parsimonious way, but working constantly on enhancements. What I would like to underscore, I don't know if these are investments or expenses. When we look at investments, we made an expressive investments in the premium circuit stores. These are the main stores that we have. These stores are, of course, outperforming the average of the company by at least seven percentage points, whether it is in sales or profitability. And of course, it is interesting for us to continue making investments for the entire base of stores, beginning in the state of Sao Paulo, raising the bar of our stores as we have had a very good response of the clients. Now, we make investments wherever we deem we will have the necessary return for our business. Thank you. Thank you very much. Our next question is from Fernanda from UBS. Fernanda, we're going to unmute your audio. You can pose your question. Perhaps Fernando has a problem with her audio. We're going to continue with another question. Next question from an analyst from Bradesco BBI. Once again, we will unmute your audio. Felipe, you may proceed with your question. Good morning, and thank you for taking my question. Good morning, Pimentel and Rafael. I would like to gain a better understanding of the same-store sales for the Pão de Azúcar banner. We had a sequential slowing down during this quarter. What is the cause of this? Is it the impact of deflation or has the competition environment become tougher? Now, of course, we understand the need to invest, to enhance the customer experience, especially in the city of Sao Paulo. My second question, if I could understand better from Rafael, the Capex line and the adjustments, how does this operate for the company? It was not very clear for us. And the last question refers to the closing of 11th Whereas if this is a one-off situation, is it due to the profile of the stores, the location, or if it truly is a one-off situation? Well, thank you, Felipe. When you look at the same store sales, I don't think of this as a slowdown. I think that it is a reality with a market. that in the first quarter, 24, we have stronger sales than when we began. We have began to observe a gain, not only in sales, but also in volume. We continue to grow volume. And here I would like to underscore that there is a deflation in several categories. We see inflation in some of them, but relevant categories in Pão de Açúcar where we have gained share, we have gained in terms of volumes, such as the butchery where the price of meat still does not enter any deflation. And we have to compare this with what is happening in the market. None of the market players will have a growth in same-store sales. At the level that we have been able to deliver in a market scenario in general, we are performing better than the average of the market, of course. When it comes to the closing of the 11 stores, and then I will give the floor to Rafael to speak about CAPEX, all of this is part of two different issues. Some of these closings are merely temporary, but we do need to report the closing. We have three or four stores in this store pool that are to be incorporated in residential areas where predicting a period of three and a half to four years with a store at the bottom of residential buildings. So these are merely temporary closings. We will re-inaugurate the stores. Another group of stores is part of a process of a revision of our performance. We're in the midst of the turnaround process. And as one of our practices, this is something that we do every month to revise the store performance and sales, of course, with all of the efforts that we have set forth. These stores perhaps will not have positive recovery, therefore we prefer to make the decision to close them down. And there is a part of the stores that after the entire year of 23, where we work towards their recovery, they still did not show any signs of improved performance. And that is why we decided to close down the operations. something that we do in a very natural fashion without changing our growth and profitability planning. Quite the contrary, we understand that by closing these stores, as the stores are relatively close one to the other, the surrounding stores can end up capturing the sales nevertheless. And there is no detriment in terms of closing of stores, no detriment in performance and profitability. We have made this adjustment to make it very clear for you what our investments are about. And I will explain to you why we have proceeded as we did. The Pond de Azúcar stores that we opened, well, the last five stores that were opened this year were opened through a new format. We have a contract with an investor who will make the investments for the store opening. We opened the store. Once these investments are made with a third company, party investor. From the accounting viewpoint, this is presented in a somewhat different way. In accounting terms, in the CAPEX, what you will see is the cost, the investment as part of the CAPEX. And in the bottom line, you will see this as a sale of the investment. So the end result is a net result, but it does appear as CAPEX. as we don't truly have to disimburse money, but in terms of accounting, this appears as an investment and a sale in Capex. We decided to show you this vision because in truth, we have invested in the opening of stores. And of course, we have other investments throughout the year of 2023. It's as simple as this. Well, thank you, thank you very much, Rafael and Pimentel. The question and answer session ends here. We would now like to return the floor to Marcelo Pimentel for the closing remarks.

Well, thank you all very much for taking part of this earnings release call for the last quarter 23. The year of 2023 was a year of consolidation and confirmation of our turnaround strategy. We have maintained focus and consistency on our strategic plan, and we have really progressed very positively our business. We are going back to basics, but doing it well, taking the company back to its leadership position in food retail in Brazil. We've overcome significant challenges such as the change of model of hypermarket, category management issues, Actions to reduce expenses and out-of-stock store just to improve our profitability indicators. And we've defined new guidelines and our multi-channel initiative. We've resumed our organic expansion of stores and we've decided to place customers in the center of our decisions. We've made important actions to reorganize our capital structure. The achievements in 2023 really confirm that we have evolved very firmly, consistently, transparently, with discipline and focus. We've started 2024 in the third and last year of the turnaround plan. I'm confident that it's going to be a year of acceleration and consolidation of our strategy, expanding the gains, focusing on strengthening our mainstream banners and expanding proximity and Pão de Açúcar. We are better positioned with a lighter, simplified company with a value proposition that's very clear. I would like to take the opportunity to thank the best efforts of our all our team and we just move on together. Thank you all very much. Have a great day. Well, thank you. With that, we close our earnings calls and the investors relation team is available to answer any further questions. Thank you all very much. Have a great day.