A – Gabrielle Helú: Great. So now we can begin our Q&A session. So we’ll begin our Q&A session now. [Operator Instructions] Now, the first question comes from Maria Clara from the south side at Itaú. Maria will enable your audio, so that you may proceed. Please Maria.
Maria Clara: Hi guys. Thanks for the opportunity to submit a question. Belmiro a topic that always appears in our interactions with investors is the status of the competitive environment, especially in Sao Paulo. So I want to ask you to please talk about your perception on this. The second question is about numbers, specifically. In this quarter, we saw the net income growing a little more than the gross network revenue. So can you talk about the main drivers for this, please? Thank you.
Belmiro Gomes: Well, we have two important points here. First of all, the first quarter, besides everything else, we also had an important point here, which is highlighting the EBITDA. We had a lot of ICMS rates growing in different states, and we had an impact that’s quite relevant. We had 14 states at an expansion in the tax rates, and most of these are related to products that are subject to tax substitution, which makes the correlation of the net revenue versus the gross revenue take place. So they have an increase in the tax load, since the product is within this calculation, where most of the states had this kind of change. This generates a difference in the correlation between the net revenue and the gross revenue, because the product with a substitution considers a higher CMV.
As you increase the rate, so you have an increase in the cost, but you have a difference in the payment parcel which is added to the gross to the – net revenue instead of the gross revenue. But we did have an impact in this ray of 14 states that led to an increase of 2%, 3% and even 4% in some cases. So the competitive market, of course, considers now, we have this market accommodation process with the amount of stores we open and conversions, most of the hyper markets were in the central region. So we did see some changes in the market with macro leaving. But today we have about 105 stores in the state of São Paulo. The company is very strong, the biggest player in the state of São Paulo. And our size and scale and the strength of the brand especially, we’re actually waiting for – Assaí was considered the best cash and carry operation.
So it’s a proposal that’s a lot higher than what we had seen in other market players. But of course, you have a scenario with more competitiveness than what we had seen before. But when you consider the average sale per store that Assaí has been working, you can see how even in this scenario with more players in the market, more competitive advantages, you can see how the company can really stand out when it comes to comparing with other players. So I think then the best path is to look at this average sale with the 28 stores we opened last year.
Maria Clara: Okay. Thank you. That’s perfect.
Gabrielle Helú: Now, our next question is from Ruben Couto, the sell side at Santander. Ruben, please. We’ll enable your audio so you may proceed. Please, Ruben.
Ruben Couto: Okay, guys, good morning. How’s it going? Well, I have two questions here. In this quarter, we continue to see this gradual improvement in the like for like, but we had a smaller contribution in the volume growth versus last quarter. And I wanted to know how much of this is price per increase and the beginning of the trade-up. This was one of the thesis that could happen, and I wanted to get an update on this topic. And also when it comes to the income tax variations, I think this changed a lot, right, when you consider the reduction of income tax due to the ICMS subvention. So I wanted to understand why it’s there. Is it going to continue throughout this year and what we can consider for 2024? That would be great. Thank you.
Belmiro Gomes: Okay, thank you, Ruben. As you mentioned, we had this provisional measure, 11.5%, which reduced most of the subvention credits we had in other states. Now the ones that are still there should remain unless there’s some change in the legislation because most of them are presumed profit regimes or even products that are exempt, which are in the regimes of the regulations for the state. So within the regulation in the states, what’s valid to Assaí, but also to other companies. So this – unless there’s some big change in the law or in the states, we consider that this topic is a really strong topic. And so maybe this year we hope that there’s a little less surprises in the tax front, but this is a level that we do expect for the next quarters.
So in the first quarter, we searched for ways to be a little more balanced and we also wanted to balance out the margins. We wanted to bring this level of margins in the company to the period before the conversion. We still haven’t seen in the first quarter an effect of the trade up on behalf of the population. You can see that the population, although we did see a drop in unemployment, the level of debt among families is not allowing them to recover the same volumes of purchases. So we had a slight impact. It was more inflationary in the first quarter, but part of this comes from the actual increase in the income rates that also generates, as you reflect this, in the sales price, this increase in the rate also impacts the final prices. But we still have not seen this.
And in our vision, the first quarter was very positive, considering everything we highlighted so far. But we still don’t see like a very favorable external scenario with B2B customers buying big volumes because they don’t see any expectations for inflation at this point in time. We don’t either unless the currency continues to be super high pressure, then maybe we would have some kind of effect in the inputs or commodities that are exported. That would be a worldwide price that could lead to some inflation, depending on the currency. But it’s not what we’re looking at if we just consider the domestic market at this point in time.
Ruben Couto: Okay. Thank you, Belmiro.
Gabrielle Helú: Thank you. Our next question is from Vinícius Strano, sell side at UBS. Vinícius, we’ll enable your mic so that you may proceed. Please Vinícius, you may proceed.
Vinícius Strano: Okay. Good morning, everyone. Thanks for that. Just to explore a bit more about the B2B customers, if you could talk about what you’ve noticed when it comes to contribution among these customer sales and how you’re imagining this customer restocking, considering it’s not so relevant today? How are you thinking about this in the future? And more strategically, how do you plan to explore the offering of services to B2B customers? And do you imagine maybe structuring credit offering here.
Belmiro Gomes: Okay, I’ll pass the first part about B2B customers to Wlamir. He’s monitoring prices a little more and the behavior of these B2B customers. And Vitor will talk about the services issue later on.
Wlamir dos Anjos: Okay. Thank you, guys. Thank you for the question, Vinícius. When you look at the share of B2B customers about 40%, 45% of our revenue, we don’t see like a big stocking movement. So just as the interest rate and the working capital for this type of customer is really important, and they end up using our stores as a supply point and we don’t expect an inflationary movement that’s very different than what we mentioned in the beginning of the year with you inflation be about 3% to 4%, and that wouldn’t motivate anyone to build up stocks. So we don’t expect a stock up movement for B2B customers. We do have factors that could contribute to inflation that are not under control, such as the currency, petroleum, climate effects and external factors that could take place with some changes in the behavior of purchases and supply of these customers.
In the last quarters, we haven’t really seen much of a possibility for this to happen. We use this jargon which says B2B customers are going to continue to buy from mouth to hand without setting up really relevant stocks in-house.
Vitor Fagá: Well, Vinícius, as we talk about the service offering, yes, we are considering to increase this offering because we have this offering of services that are really connected to individuals, and we consider that increasing the supply of services to B2B will bring greater proximity to customers and also increase loyalty and purchase frequency, which is our final objective. So we expect to increase the service offering, especially for B2B customers.
Vinícius Strano: Well, great. Thanks, guys.
Gabrielle Helú: Our next question is from João Pedro Soares, sell side at Citi. João we’ll enable your audio so that you may proceed, please.
João Pedro Soares: Okay, thank you. Well, I want to take advantage of this service point here because we noticed a gross margin that’s a little healthier. And when we consider up ahead a bit more of this commercial dynamic, can we see effects that are more beneficial reflecting the gross profit, the gross margin. Sorry. And when we consider the gross margin, the EBITDA margin has also been a very positive point when it comes to expense discipline, which is something we’ve noticed. It’s very consistent ever since the last quarter. And there’s a magic number of an expansion the full year, about 10 basis points to 20 basis points in the EBITDA margin post-IFRS and I wanted to understand if you guys could maybe give us some perspective on this margin in the full year, are you more constructive?
Is this reduction of the leverage guidance reflect a more constructive vision compared to the full year? And so these two points. And then a final one, is just about the financial revenue of about R$43 million. And if we were to annualize this, it leads to a very low number, considering the average cash of R$5 billion. So why? And what is behind this number? So could you talk about this a bit? Thanks, guys.
Belmiro Gomes: Well, we want to do this backwards, forward, and then we’ll get back to the margins.
João Pedro Soares: Okay, thank you, Belmiro.
Belmiro Gomes: Now, the financial revenue of the cash position, it’s important to understand how the dynamic works in between months. So essentially, the company’s main payments take place on the first, the 11th and the 21st of each month. So our cash behaves in the month as if it were like a little mountain, right? So it drops and it goes up and recovers this and then drops again. So the final vision in the end of the month is what the average cash position? The cash position on average, is different than the final vision of each month because of this dynamic, which is why when you have this calculation from backwards forward, considering R$5 billion, you don’t reach the cash profitability. Of course, this is marginally lower or slightly lower than the cost of our debt.
But what explains this difference is the fact that we have this movement in between months that makes the cash on position on average be different than the cash position at the end of the month. Well, as we get into the information about the EBITDA, then afterwards talk about the expectations for the gross margin, but the EBITDA still. What we’re presenting here is a shift in the guidance for the debt. I think we need other quarters because we got back to this level of EBITDA before the conversion project, and we can consider this now as sustainable. But for the full year, we don’t want to take on any other assumptions or indications of the EBITDA margin. We’re going to monitor this in the second quarter, but I think in the first quarter we get a pretty good indication of this, and then I’ll pass this on to Wlamir to talk about the margins a bit.
Wlamir dos Anjos: Well, about the margins, our expectations for the maintenance of the margin. So especially the commercial team and operations that take care of the purchase and sale, we’re always searching for ways to improve the margins, but we understand that there’s also a competitive scenario, and we have to keep some correlation between gross margin and competitiveness within the market. And of course, with our value proposition. So we’ve been very assertive when it comes to this balance point of the gross margin. When we consider our sales dynamic, for example, in this quarter we had 30 bps on the same-store base of share even with this very challenging scenario and competitive scenario, we don’t expect to have an improvement in the margins up ahead, but to have the maintenance of this margin in these levels.
João Pedro Soares: Perfect, guys. Thank you so much.
Gabrielle Helú: Our next question is from Felipe Rached with sell side at Goldman Sachs. Felipe, will enable your audio so you can proceed, please. Felipe, you may proceed.
Felipe Rached: Hi, guys. Good morning. Thanks for taking my question. I wanted to follow up on this. I think it was Ruben asked about this, but you mentioned the ticket and I wanted to explore the issue. I understand that the growth of 0% to 4% [ph] does not consider the adjustments in the calendar fact. So if we exclude this, it would probably two drop in volumes in the first quarter. So I want to understand two points here. First of all, I think Belmiro even talked about this in his final remarks. But I want to understand what you’re looking at, how you’re considering this health of the consumer and if this could impact demand in some way in the next quarters? And then the second point is understanding a bit more of this dynamic with the volume and tickets, of course, with what you can talk about in the converted stores, considering the legacy stores. And anything you guys can talk about in this sense would be really interesting. Thank you so much.
Belmiro Gomes: Thanks, Felipe. Yes, you’re right, we had an increase in volumes with the final consumer, even in the legacy store network. And of course, the stores in under maturity, considering the progression in the sales. But when we look at reduction in the volume, which was also expected where we had this part in the B2B customers, where sometimes we have to have more aggressive pricing. For example, last year we had a lot of customers that were businesses and that take advantage of the prices during the opening periods and some special prices we have in the first quarter. But we look at this very separately. So the recurring customers and the B2B customers that are also considered in the stores and the opportunity purchases as well, where they take advantage of a bigger expansion period.
When you look at the delta for all of us, you reach a legacy that’s slightly negative but very positive for consumers, which is what we consider the recurring public. So when you isolate this effect, which is something that happens in all of the openings, it’s something that’s relatively normal in the sector where you have the elasticity that’s a lot higher. So I hope to have answered your question.
Felipe Rached: So, Belmiro, can you talk about how you’re looking at this dynamic with the consumers being pretty much leveraged, how you’re looking at this demand environment for the next quarters as well? That would be really interesting.
Belmiro Gomes: Well, we’ve been working with a scenario of maintenance. We see consumers at a level that’s the same as what we had seen in the fourth quarter, but maybe slightly a little better. But there’s still a lot of caution on our side. So we need to have another quarter come along. And we do notice that in the research we’ve been doing and even in the vision from our team in the day to day activities of the store, that consumers are still pressured by other expenses with shifts and behaviors, as we’ve already discussed this in other earnings calls, but really pressured by the interest. And most of the improvement we have is related to our efficiency and the store maturities. And also, although our sector is one of the most significant in the food sector in Brazil, you still have a lot of purchases done in other formats.
So as I mentioned, there’s a flow of receipts daily. And we’ve been focusing on this public a lot, which helps us to continue to advance. But we don’t have any trade up movements. They continue to be very cautious, and we can see there’s even a deflation in prices. But this year, the drop in inflation is something that, when you consider the possible gains and we consider the pandemic prices increased more, we can notice that this generates an environment with low consumption. So it’s slightly better in this first quarter, but we’re still very cautious about this. I hope to have answered.
