Magazine Luiza U/Adr

Good morning, everyone, and thank you for waiting.

Welcome to Magalu's conference call regarding the quarterly earnings. For those who need simultaneous translation, click the interpretation button. via the globe icon at the bottom of the screen and choose your preferred language, English or Portuguese. We want to inform you that this event is being recorded and will be made available on the company's IR website at ri.magazineluisa.com.br. The earnings release and presentation are already available in Portuguese and English. The link to the presentation in English is also available on the chat. During the presentation, our participants' microphones will be disabled. Then, we will start the Q&A session. If you have questions, please click on the Q&A icon at the bottom of your screen and enter your name, company and question of language. Upon being announced, a request to activate your microphone will appear on the screen. You must then enable your microphone to follow up with the question. Questions received in writing will be answered later by the Investors Relations team. Now I would like to give the floor to Fred Trajano, Magalu's CEO. Fred, please, you may go ahead. Good morning, everyone. Thank you for attending our conference call on Magalu's earnings of the second quarter of 2025. I'd like to begin by by emphasizing that this was yet another period with consistent execution, with important efficiency gains, growth in strategic front and resilience of our main categories. Without question, the main highlight of our quarter, once again, was our profitability and our financial discipline, we reached the beta of 727 million BRLs in the second quarter of 2025, noting that this is in a context where interest rates, the SELIC rate, reached 15, so a huge increase compared to the interest rates of last quarter. So that implies a series of challenges in terms of P&L for the company, top line, bottom line. So in this context, we maintained our discipline as we had in previous quarters to improve margins and increase our operational profit. So in that sense, the main highlight to reach margins was the control of expenses with SG&A well under control, as well as our capacity to manage them. There are things that are out of our control. The interest rates are not on our hands, but our expenses, our costs are, and we've been working efficiently, even considering an inflation of five, and the costs of any Brazilian company is indexed by inflation, and we've been able to control our expenses and reach this 8% margin. I would also like to point another emphasis that's been important to our results, which is the discipline in cash management. We had a good quarter in terms of cash generation, 497 operating cash. Roberto Bellissimo will detail this further in his presentation. A big highlight, I think two top highlights, is the reduction of $150 million in inventories in this quarter and monetization of taxes. That is another line that we monitor in our cash committees and working capital. It's one of the most important committees in the company, and we have full control Fabricio can also talk a little bit about the inventory formation, and since we're getting into the third quarter now, I'd just like to let you know that we formed the inventory of the second quarter at a higher U.S. dollar. That was at the beginning of the year, so it got close to 6%. at the beginning of the year. So the inventory formation was at a higher dollar value, and we believed it was good to reduce this inventories now. So we had a clearance sale in the middle of the year to reduce inventories, and Fabrizio can detail this. We formed the inventories of the third quarter at a lower US dollar. So when we negotiated, it was lower, and we're confident we have good negotiations to be more competitive, especially in 1P and websites and stores. for the third quarter. So I think this inventory reduction was important in the long run for the negotiation conditions. And that makes us, we will get to the third quarter definitely with better competitive conditions than we had in the second quarter for those channels that we have. Not only Magalu, we did the same for Kabum and other companies in the group.

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