Companhia Brslra Dst Adr

click on the Interpretation button using the globe icon at the bottom of the screen and choose your preferred language, Portuguese or English. For those that are listening to the conference call in English, please mute the original audio in Portuguese. This video conference call is being recorded and it's going to be available on the company's RI website. where you can find the complete earnings release available. You can also download the presentation from the chat icon. During the company's presentation, all participants will have their microphone muted. Then we are going to start the Q&A session when further questions are going to be answered. To ask questions, click on the Q&A icon at the bottom of the screen and enter your questions to join the queue. When you are announced, a prompt to activate your mic will appear on the screen. and you must then unmute to ask questions. We recommend that you ask all your questions at once. We emphasize the information contained in this presentation and any statements made during this conference call regarding GPAs, business outlooks, projections, operating and financial goals are based on the beliefs and assumptions of the company's management and rely on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions because they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect GPA's future performance and lead to results that will be materially different from those in the forward-looking statements. Today with us we have CPA CEO Marcelo Pimentel and CFO and Investor Relations Officers Rafael Hrusovski. I'm going to hand the call to Marcelo Pimentel to start the presentation.

Good morning, everyone. Thank you so much for attending our first quarter 2024 earnings call. I am very excited about the numbers that we are going to present here today, the result of very solid and consistent work, which shows the continuous improvements and important operational and financial indicators for the completion of the last year of our turnaround project. I have mentioned to you on different occasions that 2024 will be the year of acceleration of the gains of what we have built over the last two years, to consolidate the value proposition of our brands and accelerate the gains of the strategy that we designed. On slide 4, you will find a summary of the main highlights of the first quarter. As I said, it was a very positive period for GPA, in which we presented a sequence of results with advances in margins, revenue, market share gains, and a very significant reduction in the company's net debt. This has been a quarter in which we achieved an adjusted EBITDA margin of 8.1%, which is the best ever in nine quarters. We also recorded again operating cash generation. There were 428 million BRL in the last 12 months that ended this quarter. an improvement of 736 million compared to the first quarter of 2023. Excellent news that indicates the potential of our business. This slide also shows other important highlights of the quarter, such as the evolution in all the indicators, net revenue, and in total stores with growth of 8.2 in the quarter, with emphasis on two Pão de Açúcar brand with a growth of 10.3, 22.8 in proximity stores, both compared to the same period in 2023, and a strong growth of 25.1 in our e-commerce, always remembering that this is profitable growth. Rafael will go into detail with you about the financial indicators shortly, including the most recent initiatives to reduce our net debt. but I would like to comment briefly on the last two announcements that we have made to the market last week. The first was the addition to the ICMS debt settlement program of the government of the state of São Paulo called Acordo Paulista, which allowed a reduction of about 80% for the settlement of contingencies that totaled 3.6 billion BRL, according to the discounts resulting from the agreement. we should congratulate the government of the state, together with the Attorney General's Office of the State of São Paulo, for the initiative that was made available to all interested taxpayers in an unprecedented and very positive action for both sides. We also had the announcement last week of the sale of properties that made up our administrative headquarters in a transaction of R$ 218 million, also as part of the initiatives to sell non-core assets focused on debt reduction. Rafael will comment later on about the details of the transactions. Following the presentation, we go to the top-line pillar, in which is worth mentioning the double-digit growth of Pão de Açúcar, 10.3% in a quarter, driven by the result of same-store sales, which recorded an increase of 9.3%, a significant evolution compared to the fourth quarter of 2023. This result was generated both by the increase in sales and by the increase in the average price and the flow of customers in the stores. As to extra, we also had an important advance in same-store sales segment, 7.2% in the first quarter, which is the highest growth in this indicator since Q2 2022 for this brand. In proximity stores, we delivered a strong growth in total stores of 22.8, leveraged by the accelerated ramp-up of new stores. In same-store sales, we had an increase of 4.9%, with a highlight of the stores that opened today. after 2021, which already have a double-digit same-store sales growth with sales per square meter, 8% higher than older stores. From this quarter on, we will also show in a segregated way the results of our direct sales in the proximity stores in the allies format, which we created in 2017. Today, we have more than then 2,200 small business partners and a sales volume around 219 million BRL in the last quarter. The low investment model, since we take advantage of the strong commercial and logistic synergies with the rest of the operation, and this year it's going through a process of readjustment involving the review of assortment mix, promotional efficiency, logistic costs, with a focus on greater profitability. It's also worth mentioning that we recorded another period of evolution in the market share, despite the strong comparable base of the first quarter of 2023. We had 0.2 percentage points compared to the self-service market and 0.9 percentage points for proximity formats compared to small supermarkets in Greater São Paulo. This is the sixth consecutive quarter of share gains according to Nielsen data. Our rupture continues to fall with an improvement of 1.7 percentage points in relation to the same period of 23. And the customer's pillar, the indicator that measures satisfaction of our customers, NPS, continues to evolve, reaching 77 points, with a growth of 13 points in the last 12 months of the year, with an evolution in all brands. We also had an increase in premium and valuable customer base by 5.9% compared to last year, an important point in a strategy of loyalty and consequently adding value to the business. We also recorded a 12% growth and achieved a 21 penetration as compared to total sales in private label products. Customers who consume our private label products are highly loyal and have a 2.4 times higher frequency compared to others. Now going to our digital pillar, this quarter we had a growth of 25.1%, In e-commerce sales, with 2% penetration in total sales, an increase of 1.C as compared to the year before. Both channels, 1P and 3P, have shown a strong growth in sales. It's worth mentioning the increase in sales in the IP channel, getting to 34% of total sales. On the next slide, we'll talk about our expansion. We opened nine stores, seven Pão de Açúcar Minute and two Mini Extra. So we have opened 64 stores in the last 12 months, keeping focus on the proximity format with the brand Minuto Pão de Açúcar brand in the capital of São Paulo. Rafael will comment with you the details of the profitability pillar. I just would like to emphasize the important expansion of the gross margin, which reached 27.2%, an increase of 1.5 percentage points compared to Q1-23 and 0.2 versus the previous quarter, demonstrating the acceleration and gradual and continuous improvement. The adjusted EBITDA margin... got to 8.1, the best margin in the last nine quarters. On slide seven, I will talk about the agenda of social, environmental, and cultural initiatives. In the pillar of promoting diversity and inclusion, we started the third class of the internship program dedicated to black and brown people, which had 30 new participants who started their journey with us in February. As to the permanent agenda to fight climate change, we reduced by 8% emissions 1 and 2 as compared to 1Q23. This is a result of the gas replacement projects and retrofitting of the engine rooms of our stores. As to transformation and impact actions in our value chain, we continue to advance in the commitment of animal welfare projects and we closed the period with 44.5% of cage-free egg sales. In the social impact, we have a new partnership with the NGO Gerando Falcões, which launched a new social product, and the total sales are reverted to the entities project, which fully meets our purpose of feeding dreams and lives. It is important to mention that next week, we are going to publish GPA's annual sustainability report for 2023 fiscal year, a complete report that will shed more light and visibility to each one of the pillars that I have mentioned before, in addition to the business strategies and the transformations that the company has been going through with regard to corporate governance and the publication of sustainability indicators. The document can be accessed in the GPA and investor relations website. Before giving the floor to Rafael for the financial performance, I would like to highlight on slide 8 two important events that happened in the beginning of this year. The first was the completion of the company's follow-on with the completion of the public offering of primary distribution of shares on March 13th. in which we issued 220 million new shares, totaling a volume of 704 million BRL, which had 100% of the proceeds used for the payment of debts as part of the process of accelerating the reduction of the company's financial leverage level. Between 2Q2023 and 1Q24, we totaled 1.5 billion BRL with the sale of non-core assets thereby reducing GPA's net financial debt from a leverage of 9.8 times to 3 times the adjusted debt before IFRS 16. So, also as a result of the follow-on, Casino Group announced on April 2nd the reduction of its stake in the company to 22.5%, a result of their leaving the control of GPA. A new board of directors was established in April with nine members, of which six are independent, two members from Casino, and one member from the management chair that I occupy. The new chairman of the board, Renan Bergman, an independent member. We also have two women in the board, Marcia Mello, with all her experience in financial technology services, and Rachel Meyer will add a lot with her background in issues of diversity inclusion in addition to her trajectory in premium companies. This new board of directors is a very important step forward in the governance of the new company that we have designed as of the follow-on. I now end my participation and give the floor to Rafael for his comments on the financial performance of Q1.

Thank you, Marcelo. Good morning to everyone following us at the conference. Before I begin my presentation, I'd like to inform you that as of the first quarter of 24, the gas station business has been treated as accounting as a discontinued operation according to the rules described in IFRS 5 and CPC 31. As a result, the income state for the year and the explanatory notes have been adjusted retroactively. This accounting initiative is due to the fact that in February we announced to the market our intention to sell the gas station operation as part of the sale of non-core assets with the aim of reducing the company's financial leverage. Therefore, the figures presented below represent continuing operations unless otherwise indicated. I'm going to start in slide 10, where we show GPA's total turnover, which reached 4.9 billion BRLs in the first quarter of 24, a growth of 8.2% over the first quarter of 23. The increase was driven by a same-store increase of 8.1% or 5.4%, excluding the calendar effect, and the progress of the expansion plan, with the opening of 6-4 new stores in the last 12 months, including 9 in the first quarter this year. As I have just mentioned, we had a significant calendar impact in the first quarter 24, which also impacts the same-store sales analysis. This effect was positive by 2.7 percentage points in the quarter, and is mainly due to the Easter holiday, which last year took place in the second quarter, And we had an additional days of sales in February due to the fact that 24 is a leap year. Ponte Sucre grew 9.3% in same-store sales or 6.7% ex-calendar effect, showing growth in volume and average sales prices. Highlights for FLV, fishmonger, and complementary groceries, the two last performing strongly. in the face of the quarter's seasonal effect. The proximity format showed growth of 4.9% in same-stem soils, or 2.3% ex-calendar effect, and a strong increase of 22.8%, including expansions. The highlight of the performance is in the new stores opened after 21, which showed the double-digit same-source sales growth and already have sales per square meter, on average, 8% higher than those of older stores. The performance is explained by the adjustment made to the expansion process in recent years, with better demographic positioning of stores, a focus on the premium Minuto Ponjasuka banner in the more upper-end neighborhoods in the city of Sao Paulo, better positioning of perishable categories, among others. It's also worth mentioning that in first Q24, as in previous quarters, we gained a 0.9 percentage point of market share compared to small supermarkets in the greater São Paulo area. In extra mercado, same-store sales growth reached 7.2%, or 4.5% ex-calendar year, which was the best same-store sales performance since the second quarter 22. In 1Q24, we continue to advance the customer experience with improved NPS and the implementation of the category management project and assortment and price review, whose positive impact on the banner sales is expected in the coming quarters this year. we had significant 25.1% increase in e-commerce sales, reaching 503 million euro on the quarter, with both sales channels 1 and 3P showing double-digit growth. Among the highlights of the quarter is the increase in the penetration of perishables in the 1P channel, up 6.3 percentage points versus 1Q23, to 34% of channels 2. channel sales, which is a crucial pillar for the differentiation of our value proposition. In addition, we have managed to make digital channels increasingly profitable, reaching a high single-digit contribution margin this quarter. On slide 11, we show profitability measured by gross profit adjusted a bit directly. With the discontinuity of the service station's activities, which are classified as assets available for sale, we will show, for comparison, the gross margins and adjusted beta in the views without and with the inclusion of service stations. Gross profit and adjusted beta reflect deprivation excluding service stations. In the first quarter, 24, we showed effectiveness and consistency of initiatives implemented throughout 2013. as well as the strong execution of operations and commercial teams to deliver the main projects in the turnaround plan context. As can see in the top chart, gross profit reached 1.2 billion BRLs with a margin of 27.2% or 25.8% including service stations, an increase of 1.5 percentage points compared to 1Q23, and 0.2 percentage points compared to the fourth quarter of 2023, which was favored by the seasonality of the end of the year. I would also like to highlight the 16.6% growth in gross profit compared to the first quarter of 2023. Adjusted EBITDA totaled 372 million, with a margin of 8.1% or 7.7%, including service stations, reflecting a strong increase of 1.8 percentage points versus the first quarter 23. Also, the growth in adjusted EBITDA year-on-year, which amounted to 41.4%. Slide 12 shows our consolidated financial performance. In view of the one-off and non-operational effects that took place in the first quarter 24, we'll show the adjusted result or net income from continuing activities. As can be seen in the chart on the right, the first quarter 24 had three non-operational, non-recurring effects that impacted negatively the result, 86 million related to the provision for the ICMS settlement agreement with the state of Sao Paulo, 25 million related to the write-off of fixed assets related to the company's administrative headquarters, following the sale of those assets as part of the initiative to reduce financial leverage. And 99 million related to the non-activation of income tax and social contribution credits related to the loss for the period, which we adjusted for comparison with the same period last year when these credits were activated. Adjusting for these effects, the continuing net loss would go from 407 million to 197 million, thus showing an improvement of 107 million in comparison with the adjusted continuing net loss for the first quarter 23. Finally, in the first quarter 24, net loss from discontinued operation was 253 million, mainly impacted by 175 million, in the discontinued part of the provision for the ICMS debt settlement agreement with the State of São Paulo. Slide 3 shows the management cash flow for the last 12 months. We generated free operating cash flow of 428 million, an improvement of 736 million compared to the last 12 months 1Q23. As you can see, The better result is mainly due to the growth in operating income and lower capex. Cash flow after the sale of assets reached 2 billion BRLs in the 12-month period, mainly impacted by the sale of non-core assets, which amounted to 1.5 BRLs, and the following, which raised 704 million BRLs. Finally, we had the 183 million BRLs improvement in net financial costs mailing as a result of the reduction in the net debt along the quarter. Slide 14 shows more color on the reduction of our debt. As you can see in the chart, we had the reduction of 1.3 billion BRLs in net debt between the first quarter, 23 and 24. This is the result of the positive effects I mentioned on the previous slide, with a positive variation of 428 million BRLs in operating free cash flow and a strong execution connected to the sale of non-core assets and the funds raised in the follow-on. The lower financial leverage was also very significant. We went from leverage considering pre-IFRS 16 adjusted beta of 9.8 times, to three times in first Q24. The result puts the company on the path to an increasingly healthy leverage, since we have equalized the capital structure with the sale of assets and follow-on, and continue to show evolution in our operating results. It's important to remember that the sale of headquarters for 218 million BRLs took place after the closing of this quarter and therefore does not contribute to the cash in the first quarter 24. I would like to draw your attention to the fact that in addition to the successes achieved in the context of the plan to sell non-clear assets, the better financial performance as a result of our discipline that we are implementing in the turnaround project, the progress of which was once again confirmed this quarter. I close our presentation of financial results, and now we should open for the Q&A session.