Companhia Brasileira de Distribuicao (CBD) Q4 2021 Earnings Call Transcript

Companhia Brasileira de Distribuicao (CBD)
Q4 2021 Earnings Call
Feb 24, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

[Foreign language] [Operator instructions] We would like to inform that this video conference is being recorded and will be made available on the company's IR website where the complete material of our earnings release is available. You may download the presentation in the chat icon. [Operator instructions] Please note that the information in this presentation and forward-looking statements made during the video conference concerning the business outlook, projections, and operating and financial targets of GPA are beliefs and assumptions of GPA's management and information currently available. Future-looking statements are not guaranteed 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 operational factors may affect GPA's future performance and lead to results that differ materially from those expressed in such forward-looking statements. With us today are GPA's CEO, Jorge Faical; CFO and IR, Guillaume Gras and CEO of Grupo Exito, Carlos Mario Giraldo; and the CFO, Ruy Souza. Now I will give the floor to Guillaume Gras to initiate his presentation.

Guillaume Gras -- Chief Financial Officer and Investor Relations

[Foreign language] Good morning, everyone, and thank you for attending the GPA Group earnings results. And I am glad to present to you today the first results of what we call a new GPA, which has registered a positive growth in Brazil, while markets are taking a dive and presents solid profitability in a challenging environment. I will start the presentation talking about our financial performance and the evolution of the hypermarket transaction. Subsequently, Jorge will talk about the operational highlights of the period, strategy, and business perspectives.

Well, number one, on Slide 5, you can see the consolidated performance figures, which take into account all the GPA Brazil operations, including hypermarket and drug stores and the results of Grupo Exito. The consolidated sales totaled BRL 14.9 billion in Q4, growing 6.7% when compared to the last year and showing solid performance in a difficult macroeconomic context and despite the demobilization of hypermarkets in Brazil. Year to date, consolidated sales reached BRL 51.3 billion in line with 2020, even with the negative impact of the pandemic in the first half. In this challenging environment, we maintained our control of SG&A, improving our percentage of revenue by 0.5 bps and 30 bps in the year.

Our consolidated EBITDA totaled BRL 1.2 billion in Q4 and BRL 3.8 billion in 2021 and was impacted by the hypermarket activities in Brazil, which reinforces our assertive strategy of exiting this unprofitable format, selling this asset at a good price in order to deleverage our group and reinvest in more profitable formats. Well, finally, GPA'S net income totaled BRL 805 million in 2021, including the income tax gain on investment subsidies. Retracting this IR gain, the net profit amount is BRL 300 million, which is still two-fold last year's profit without tax credits. On Slide 6, we can see that the company ended the year with a low leverage level of 0.3 times net debt EBITDA.

We ended the year with a cash position of BRL 8.3 billion, which is 5.6 times our short-term debt, which guarantees an excellent liquidity. This level of liquidity is a result of a strong operational cash generation of BRL 1.8 billion, excluding the hypermarket and drugstore operations as shown on the slide with the debt evolution. In the discontinued perimeter, extra hyperstores, and drug stores, there is a neutral variation with the use of funds received with the first installment of BRL 1 billion to resize working capital to the new operation and to finance project costs. Now finally, in the next three years, we will have cash of BRL 4.2 billion regarding the transaction of the hypermarket.

On Slide 7, you may see the evolution of the hypermarket transactions announced in October '21, an announcement in which we announced the end of the hypermarket format operation in Brazil, with 70 commercial points to Assai and 33 stores to be converted to other formats and closing the rest of our assets. We set up a schedule for the demobilization of the stores that began in October and stopped the purchase of several nonessential and nonfood categories and continued with reduction in store size until their closure between December and January. During this period, we committed to our customers, especially in the supply of essential products. In December, 31 stores were closed and the remaining stores were closed in the first half of January 2022.

In the same period, we started the conversion of 28 stores in Pao de Acucar or Mercado Extra. These stores will be opened during the first half of this year. At the same time, we began the readjustment of the company to the size of the new GPA with the adaptation of our headquarter IT structure and network logistics. On Slide 8, we have our P&L and cash details of the transaction and its expected impacts.

In the fourth quarter's result, we had a net impact in other income and expenses of BRL 400 million where BRL 1.2 billion in capital gain, which represents approximately 23% of the total estimated capital gain of the transaction. BRL 0.8 billion in expenses corresponding to the dismissal of employees, cancellation of contracts, breakout of inventory, and other expenses regarding transactions. This net result before taxes of BRL 400 million recorded represents between 15% to 18% of the transaction. With this, we cannot yet determine the exact final amount, but the company expects to recognize something close to BRL 1.8 billion in the first quarter of 2022, already considering the operating losses expected for the transition period of the abandoned activities with the completion of the operation.

In terms of cash flow, the company had already received BRL 1 billion in 2021 and we'll receive an additional BRL 4.2 billion by 2024. From these funds between BRL 1.2 billion and BRL 1.5 billion will be used for project costs and taxes. BRL 500 million will be set aside for minimum dividends generated by the net profit transaction and between BRL 1.2 billion and BRL 1.5 billion to accelerate expansion capex, renovations, and conversions of stores and the remaining balance of BRL 1.7 billion to BRL 2.3 billion will be used to deleverage the company. Finally, after this operation that represents a gross sale volume of BRL 11.7 billion in '21, in which approximately will be assigned to Assai and 20% to store conversions.

The size of the new GPA is -- becomes BRL 20 billion against BRL 27 billion before the operation. And this is based on 2021. Now on Slide 9. You can see the financial performance of new GPA Brazil repositions as a premium, digital, and proximity food retailer.

This is including the 103 extra hypermarket stores and the 102 drugstores. It is important to emphasize that this result is a pro forma and already considers the approximate readjustment of the logistic network of our head work and other costs for the new area or perimeter. Thus, our new GPA presents a good recovery on Q4 with strong resistance from our premium e-commerce and proximity formats, which registered positive growth like for like with the self-service market, while the self-seller market was in decline. Tight control of expenses in an environment of accelerating inflation allowed us to improve our EBITDA totaling 8.4% in the quarter and 8.8% in the year.

Now moving to Slide 10. We -- you can see the result of total GPA Brazil, which was impacted by the demobilization process of the hypermarkets with the reduction in store size and the closure of 31 stores already in December. The EBITDA for the quarter totaled BRL 393 million, down 3.6 points. Everything concentrated on gross profit, which was impacted by the higher level of out of stock, lower industry investment, given the destocking process, the strong reduction in purchases, and the impact of the mix effect with the demobilization of hypermarket stores.

Now we go now to Slide 11 with the results of Grupo Exito, which once again will present strong sales growth, reaching BRL 8.4 billion in the period with growth of 17.8% where 15.3% in the same store perimeter. This growth was driven through focus on innovation in Colombia, where innovative formats represented 33.3% of sales. Now strong omnichannel performance with sales penetration of 9.9% in 2021 and a GMV of BRL 771 million. And finally, higher contribution from complementary businesses benefited by the lifting of restrictions during the year in the countries of operation.

In addition to the rise in sales, our gross revenue improved 30 basis points over the quarter and 80 basis points over the year and our expenses grew below inflation across all the countries where Grupo Exito operates. That was because of the gain in efficiency of our stores operationally speaking. As a result of those effects, the Exito Group performed greatly financially with an adjusted EBITDA in Q4 '21 of BRL 802 million, up 18.1% versus Q4 '20. And over the year, the EBITDA -- adjusted EBITDA margin grew 0.5 percentage points versus 2020.

With that, I finish my presentation, and I'd like to turn the floor over to Jorge.

Jorge Faical -- Chief Executive Officer

[Foreign language] Thank you, Guillaume, and good morning, everyone. I will quickly go over a few of our highlights, the highlights of our operations here in Brazil with Grupo Exito, and also go over some of our future plans to give you an idea of where we are right now. [Foreign language] It's important to talk to you about the new term that we're using, Novo GPA, which is GPA without some of our old supermarkets. This is a term we will be using across the entire presentation.

The demobilization of Extra Hiper, as Guillaume said, gives us a lot of confidence that we made the right decision at the right time and did it the right way. This was something we did in record time. We emptied the store -- or pretty much emptied the over 70 stores that we had within that transaction and Guillaume has shown you some of the time line for that project. We expect to have all of those stores or as many as 28 stores converted and for extra market, which is a really grand strategy and very complex as well.

This was an extremely intense project for our team's management. So, I'd like to take the opportunity to thank our team because of what they did with this project. It really feels like flying a plane while building it. We are now at the last stretch with the empty stores, but really having some of the operations with Assai, but this is essentially a page that we've turned with our operation.

And we now have the entire team focused on Novo GPA or new GPA. With that, we redimensioned and streamlined the company significantly. This was a resizing that was proportionately larger than what we had with our revenue. Even thinking about the current times, it was a way of protecting us in terms of expenses.

And now it's time to look forward. We want to look at our profitable plans and our expansion plans. Just to give you some more details about our plan, we consider our expansion plans like a locomotive. It takes a while until it picks up speed.

Expansions often rely on or depend on licenses. There are a number of regulatory aspects, but I'd like to tell you that the strain this locomotive has started to pick up steam. Last year, we delivered 13 proximity stores, and especially with Minuto Pao de Acucar, in 2022, we expect to deliver around at least 50 additional stores. So, 13% in 2021 plus all of these this year, we have a number of stores on our pipeline, many of which are already in the last stretch headed toward delivery.

We also delivered a store within the state of Sao Paulo and the city of Limeira. And right now, we have 14 Pao de Acucar projects already in protocol at the several levels of government with the city or in negotiations with the landlords. And we have another 14 conversions underway. So, over the course of this period, we are not giving the exact date with Pao de Acucar, but we expect to, starting in the second half of the year to see some of these Pao de Acucar stores come out within our expansion plan, bearing in mind that our expansion plan through 2024 includes at least 100 proximity stores and 100 stores in the Pao de Acucar format.

It's good to remember that Pao de Acucar is also accounting for about 43% of our sales, not considering Minuto Pao de Acucar. Pao de Acucar already accounts for 43% and we expect it to account over 50% of our sales within the new GPA. On the digital front, I have two charts here, I will go over very quickly. We're very proud of the figures we've attained.

We came to BRL 107 billion in 2021. Bear in mind that in 2020, our base was already strong and we grew 53% over 2020. I'm really proud of that work. This is a transformation journey.

And we know that in the Brazilian market, the share of grocery and online sales is very low. So, I want to talk a little bit more about our partnerships and how we came to these figures last year. So let's finish this chart. I'd like to say that Novo GPA Brazil, as we said, had growth by 2.3%, which is below inflation with a decrease in volume with an external macroeconomic environment that's very challenging.

And it shows that we are going through a rebound and seeing figures that are much better than we had in the third quarter of 2021, especially with Pao de Acucar, which has clearly gained a market share that's very representative. Mercado Extra and Compre Bem in their markets of operation has consolidated with a double-digit growth in this fourth quarter of the year. So it really cemented itself in that period. So although low because of the challenging environment, this is a growth rate that's higher than that of other retailers that have released their results recently.

And with Pao de Acucar proximity, Minuto and Compre Bem, the new GPA stands as a neighborhood grocery business that provides services and is very strong in perishables and produce and has a good level of service and preserves the entire consumer journey. It's important to highlight that because neighborhood retailers or neighbor retail stores are more stable in services and consequently in results as well. Now a little bit about digital. In 2019, we sold BRL 360 million, give or take.

We had that really impressive tailwind coming to BRL 17 million sales. And now in 2021, we are already at BRL 1.7 billion. That BRL 1.7 billion represented about 8% of our overall sales and we reached an impressive milestone of about 1 million orders a month. And it's important to highlight that unlike other digital players in the Brazilian market, our order includes about 30 to 40 items per order.

So, if you multiply 10 million by 40 items, we're talking about over 400 million items that were shipped[Technical difficulty]figures, but still very on a baby steps stage. So we have a lot to do. Our current run rate is at about BRL 2 billion. So, we're coming into 2022, still growing over 2021 and our strategy is to continue on that trend.

Unlike the stability levels we're seeing on the market or even some of our competitors seeing a decrease in their digital sales. So, moving forward, our ecosystem, as we always say, is increasingly more focused, especially on our strategies that we call 1P. Our 1P currently accounts for 70% of our online sales. And it's important to highlight that.

When I say 1P, I mean paodeacucar.com, James Delivery, and [Inaudible], which really has allowed us to navigate market trends, and we want to take a leading role in a number of other trends. One of those trends is the Ultra convenience, which are deliveries completed before 30 minutes. We already have a few pilot products running with both James and Pao de Acucar. We are going into WhatsApp sales as well.

We already have 11% of sales with Grupo Exito on that front. And here in Brazil, we are launching a WhatsApp plan that's structured with a simplified navigation, not necessarily with a human being behind the scenes, but this is something we'll be launching between third and fourth quarter. WhatsApp is another frontier in digitalization and not all customers are skillful in building an app. So, WhatsApp will bring new digital customers to our stores.

OMS, for example, our order management system is also playing a part in the dark stores we're launching. Those will be launched in three different areas: Curitiba, Belo Horizonte, and Salvador. We also have a new initiative that unlocks the value in digital, which is what we call hub stores. In that case, customers will place an order in the Extra Club and a Pao de Acucar store will actually conclude that delivery.

That's our hub store project. So a number of initiatives always based on a flawless service level. We currently have over 90% of on-time full in that alternative and we tend to exceed 95% soon. Another one of our very successful initiative is with our partnerships.

We already have six partners already locked in. And our mission is to become the No. 1 seller of all our partners in food items. Our focus is to be wherever the customer is.

So, if the customer is seeking convenience with iFood, so we plan to be on iFood, providing a very high level of service compared to our competitors, all within the same app. One of these initiatives we're talking about, which is also an ultra-convenience plan that includes the ultrafast last mile, but also other fronts. We're negotiating new contracts and we will be releasing them very soon within this new initiative. Our 3P marketplace has seen a shift in route as opposed to working in a more generalist market.

We are planning to specialize in six different categories. So just as other retailers in Brazil are specializing in a market segment, we plan to specialize in seven market segments: wine, artisanal and special beers, distilled and other types of beverages. So, this is the specialties we are planning to enter in. Just one example to give you an idea, we want all manufacturers as small as they may be, maybe even domestic beer manufacturers, we want them to have the opportunity to sell their product on our website and within the platforms we're working.

That's one example of a complementary vertical within what we're talking about. Within our system, I have to mention our loyalty programs, our loyalty programs, they really account for 82% of our sales. This is a high -- this is very significant in our total revenue. We have an extremely good database of our consumer and we always use our database to monetize our business.

One of the highlights of the last quarter was the Stix program. We initiated it together with our partner, Raia Drogasil, and this started in the middle of last year and there was a redemption directly to checkout. Therefore, the customer can regain BRL 10, BRL 15, BRL 20 in the checkout and this provides discounts to their grocery shops. This initiative was very successful.

We and Stix during its first year of existence, presented a breakeven that we only expected for the second year. We were able to achieve this in the first year. It's a program that it has 10% of breakage for those that follow this market. This is very important.

Our philosophy is to have a Stix program -- to have a Stix program that fosters retail and not to make money because the points expire. And at the end of the month, we had over 1 million redemptions of premiums, awards, or discounts. This is extremely significant in volume of redemption. This is the biggest loyalty program in Brazil in redemption volume.

Our redemptions have a lower value, but this already provides momentum to this program. Now, the mission of Stix of 2022 is to increase the coalition ecosystem and not only work with GPA, Raia Drogasil, we want more partners. We want to broaden to other segments in the Brazilian retail and we want this to be a currency to be used all over Brazil. And this is one of the highlights of our quarters.

Next slide, please. Now the highlights. From Brazil, we registered 2.3% of growth in same-store sales. This is a clear recovery of trends.

Although within our challenging scenario regarding, well, the exit from the hypermarket shows how assertive we were in our decisions. Our main drivers, especially in Pao de Acucar would be an improvement in our assortment, a plan of retrofits in 2021. We carried out 50 retrofits during the second semester of last year in 2022, in addition to the conversion of 20 extra hyperstore. We will retrofit all our Pao de Acucar.

This is what we're going to do with the proceeds of our transaction. These are 130 stores refurbished using the G7 format. Now our expansion plan I already mentioned. These are 100 stores by the end of 2024 in all formats.

And we always strengthen Minuto Pao de Acucar that is a winning, profitable format and with great potential in Brazil. Now this is for the scale-up of the format, not only in Sao Paulo, but also in other regions of the country. Now going to Colombia's highlights, Grupo Exito's highlights. Number one, it is very important to talk about the significant recovery during the second semester of last year.

Grupo Exito, the Colombian, and their economy followed a different pace when you compare it to the Brazilian economy. It's economy grew more Grupo Exito surfed this wave. They didn't only gain together with all the Colombian market, but they gained in share, which is very important in this segment. This was a quarter with gains above inflation with an improvement of revenue, profitability, and this growth was leveraged by three main factors.

Number one was the growth through innovative formats like Exito WOW, Carulla Fresh and we've mentioned this in a number of quarters. The second pillar of growth was that they strengthened their omnichannel. The growth in digital was highly -- was very significant. And as a third point here, the recovery of the real estate businesses inside Colombia and Colombia is the biggest operator of real estate of shopping malls in the country.

Exito also is growing significantly in gross revenue, 2.1 times greater than last year and an increase of same stores was 15.6%. Moreover, we are talking about 57 stores that were opened or retrofitted in Colombia or Uruguay. During the last quarter, we made an important agreement of five stores with the Almacenes La 14 network in the Cali region. The Cali is the third biggest city in Colombia.

This is a region where Grupo Exito wasn't prominent. So with five stores in the region in addition to Bogota, [Inaudible] the second biggest country, we -- our interest -- we have an interesting representation and this is a city that has around 2.5 million inhabitants. This is a transaction that we would like to highlight to all of you during the last quarter. Now when we see the digital side, now here in sales share 9.9%, almost 10% of sales, reaching almost peaks of 12% of shares.

Now the apps, the Exito and Carulla apps reached more than 1.6 downloads and grew 22% when we compare it to 2020, driven by the partnerships with Tuya and Puntos Colombia and also encouraged by de Squanto app very similar to de Squanto in Brazil, which had more than 2.6 million coupons redeemed. The company in digital registered almost 8 million orders fulfilled together with Rappi. Now this is 36% of share of the logistics platform by Grupo Exito. And last year, they launched[Technical difficulty]which is highly accepted in Colombia.

As we see in Sao Paulo now the economic rebound in the country, the levels of real estate occupancy strengthened the business of the group, gains of market share, digital innovative formats and Exito continues being an excellent business because it generates cash, net profit. And in terms of debt, it is very important for our group. Now this week, the shares of Exito during the earnings release result, well, their shares were impacted. They grew significantly in the Colombian Exchange and the market cap is around BRL 8 billion, BRL 8.2 billion.

It is always interesting to mention this because they are part of the company's assets and it's always good to update you regarding these facts. To end my presentation and to embark in our Q&A session, I would like to highlight our ESG. Well, ESG and GPA is not something new. These -- we for the past two decades have had a robust agenda as it should be with all Brazilian retailers that should mobilize a value chain to have a more sustainable and inclusive society.

Here, we have the main highlights of the fourth quarter. Here, solidly, we can show you figures and I want you to pay attention to these figures that are very important. One we're talking about our power consumption in Brazil is already -- 88% of our power is consumed through the free market, which allows us to help climate change. Now, the greenhouse gas effects dropped 7%.

This is very important as well. Now regarding diversion and inclusions: 30% of our leadership positions are occupied by women. We are very proud of these figures and there are a number of development programs, both in female leadership and also the development of black employees. I would like to thank the partnership with Zumbi dos Palmares University that has helped us a lot during the last quarter.

We had 131 graduations from our black population. Now regarding the social side. This was an important year. We ended 2021 with 5,000 tons of donations of foods.

This is around, if we would transform this in trailers, this would be over 200 trailers full of food during the entire year. And this is in partnership with our customers. Our customers donate to our stores and our operational team or logistic mobilizes themselves and they take this food to over 350 social institutions in Brazil. This is a significant figure and we're highlighting this today.

Exito, we had more than 20,000 tons of store-back waste recycled during 2021. Carulla Fresh also will have a carbon-neutral seal 21 stores were recertified in 2021 regarding diversity and inclusion. The number of women in leadership position is close to GPA, like around 36% and Exito consistently works through their foundation totaling around -- reaching more than 70,000 children benefited from the zero malnutrition program. We're very proud of this program and I would like to congratulate Exito for their commitment.

So now our final messages and our key points here. Now we've turned the page of the hypermarkets in Brazil. It is important that we are totally focused on the foundation of retail, neighborhood retail, a retail market that preserves the experience of the consumer, even improving it. Here we have recovered the RX but we have -- there's a rebound of our expansion.

We are strengthening the premium concept of this banner. This is a banner that strongly stands out. as soon as Brazil pulled out of a more sensible or sensitive economic downturn. Now here, you can see our results in e-commerce, proximity stores, or other stores.

Our structure is simplified. We practically have a level of expenses, which is adapted to the new GPA. This is the company that took a step backwards to take two steps forward. And Exito Group is a Group, not only this year, but has always taught us a lot, has provided us a lot of experience with a Latin American benchmarking of operation, an example of retail practices, not only for Latin America, but globally, together, not only with their practices, they have provided great results and excellent cash flow for the company.

That's what I had from my part, and I'll stay here for our Q&A session. Thank you.

Questions & Answers:

Operator

[Foreign language] [Operator instructions] Let's hear our first question. It comes from Danniela Eiger, sell-side analyst from XP. Danniela, we will open your microphone. Please, you may proceed.

Danniela Eiger -- XP Inc. -- Analyst

[Foreign language] I have a few of them actually. The first one, if you could please talk about the trend in the market probably this year? We heard calls from other players in the market with a different positioning than yours, but they incurred this start of the year has been better than the fourth quarter last year. So I wanted to hear from you how is the market? But also I want to hear, not only about the Pao de Acucar brand but also Compre Bem and other brands that didn't perform as well as those. So if you could talk about this, that would be great? My second question is, what do you guys see on the horizon in terms of normalized income for you, GPA [Inaudible]? You've mentioned or went over the [Inaudible] in 2021 but I wanted to hear what you guys see as a potential for 2022 after the extra source that were converted into Pao de Acucar? We want to just have an idea about that.

Jorge Faical -- Chief Executive Officer

[Foreign language] Thank you for your question, Danniela, I will cover part of the answers, and then I'll turn over to Guillaume, who will talk about the sales. So the start of this year is still very volatile and warrants a lot of caution. We are still facing the effects of high inflation and also consumers decreased income. So I would say that this is a slightly unstable or unsteady start of the year for us.

It's been improving in the -- in recent weeks. The start of January was a bit more challenging, but things have been improving in recent weeks. But as I said, still a quite volatile scenario. This is a week that includes a Carnival holiday, which will not involve parades or parties as usual, but it will be a holiday that's a holiday like we've had last year.

So we expect good results for this period. We will also have the Easter month, which is a very representative for our sales, but this is not a quarter where we're expecting significant recovery for the scenario in general. As I said before, we have already turned the page from an operational perspective with the Extra Group, and we're really focused on curtailing our expenses and paying close attention to the profitability challenge and controlled profitability within our neighborhood retail, as I mentioned, which includes extra -- Mercado Extra and Compre Bem. Extra has sort of fluctuated in its performance because this is a store that services people with lower income, it has a share of promotional sales that's higher, and it suffers from effects of the competition.

There are areas where the competition is really strong in their promotional sales and others where the competition is following more of a profitability step. So its performance is quite erratic. We have regions that are growing by two digits with Mercado Extra, with huge sales from clients that came from the hypermarket. There are areas where we did not have a hypermarket and those are struggling a bit more.

Now, Extra and Compre Bem are formats that are not very digitalized. And part of our strategy for Mercado Extra and Compre Bem is to make them distribution -- logistical distribution hubs. We had that in some of our stores, and it's our main strategy right now to have the digital sale warehousing focused on these stores and to place them on a different level of digital participation compared to what they had last year. Could you talk about the profitability side of the question, Guillaume, please?

Guillaume Gras -- Chief Financial Officer and Investor Relations

[Foreign language] Of course. We expect our EBITDA in the continued pyramid to stay above 90%. We've already signaled in our release what do we see as a pro forma result with an EBITDA of 8.1%. That's the early indication.

And for 2022, it's important to highlight that we'll be facing a transitional period in the first half of the year. We first need to finish readapting GPA in its logistical network and also IT structure. And we also have to conclude our program to convert 26 to 28 stores. So in 2022, we'll be going through this transitional period in the first half and starting in mid-year, we expect to see our profitability levels to go back to normal, which would be about 8%.

Danniela Eiger -- XP Inc. -- Analyst

[Foreign language] OK. Thank you.

Operator

[Foreign language] Our next question comes from Marcella Recchia, sell-side analyst from Credit Suisse. Marcella, we will now open your microphone so you can ask your question. Please, you may proceed.

Marcella Recchia -- Credit Suisse -- Analyst

[Foreign language] Good morning, Jorge and Guillaume. A few quick questions. The first one is about the pro forma results of GPA Brazil. Could you explain to us what's behind the 60 bps decrease in your gross margin that makes up for 20% of your EBITDA margin? And what are the main initiatives in terms of more efficiency and spending curtailment? How will that affect your EBITDA margin? That's my first question.

The second question is about same-store sales, also considering GPA Brazil ex hypermarkets and drug stores. We saw a performance that was even better than the rest of the industry considering a weaker economic period. And I'd like to hear from you what do you think that improved performance can be attributed to? And what can we expect for the next few months? Thank you.

Guillaume Gras -- Chief Financial Officer and Investor Relations

[Foreign language] Thank you, Marcella. Jorge, if you could take the first part?

Jorge Faical -- Chief Executive Officer

[Foreign language] Well, you could take that.

Guillaume Gras -- Chief Financial Officer and Investor Relations

[Foreign language] Well, the gross margin change that you saw within new GPA, which is 60 basis points is caused by two main effects. First of all, inflation, which was not 100% passed along to customers and the effect of emptying out hyper stores. To adjust the level of inventories in the stores, we had to make that change and that affected our profitability in other stores. So these are two points that we should recover over the course of the first half of the year.

Marcella Recchia -- Credit Suisse -- Analyst

[Foreign language] Perfect. Thank you.

Jorge Faical -- Chief Executive Officer

[Foreign language] Marcella, from the performance standpoint, our performance has slightly improved. Of course, we are not satisfied yet with how much we're losing in terms of volume, but the improvement has to do with a few elements. There was no bullet proof or there was no silver bullet that improved everything. But one thing was that with Pao de Acucar, we recovered a lot of our assortment -- a lot from our assortment that had been reduced.

So you're now once again finding a few items that we had removed from our shelves over the past few years. We also stabilized our logistical network a little bit better. Our disruptions were eliminated by about 30% with Pao de Acucar. This was because of a very technical program and a very technical work with our suppliers and also an increase in perishables, fruit, ready meals, this was the category that increased a lot with us.

Bakery, our bakery is seen as one of the best bakeries -- one of the best bakery lines in Brazil. And the fourth element has more to do with our digital operation. Our growth in digital is, obviously, we do not have a precise gauge of our online sales, our brick-and-mortar sales are what really deliver those products to customers. So the digital front is what helped us in that omnichannel strategy that we are adopting.

Marcella Recchia -- Credit Suisse -- Analyst

[Foreign language] That was perfect, Guillaume and Jorge. Thank you.

Operator

[Foreign language] Our next question comes from Eric Huang, sell-side analyst from Santander. Eric, we will now open your microphone so you can ask your question now. Please, you may proceed.

Eric Huang -- Santander Brasil -- Analyst

[Foreign language] Good morning, guys, and thanks for taking our questions. We have two. First, I would like you to talk about your Proximity format. This was an interesting highlight over the course of Q3.

So I'd like to hear from you what do you see as the main driver of those results? And what do you guys expect in terms of the competitive environment in this industry? We're seeing more networks, both local and international. So we wanted to hear what you expect on that front? And now with regard to Exito, the Exito WOW and Carulla FreshMarket added a significant incremental sales rate and also I wanted to hear about the expansion format. What you guys can tell us about these innovative models? Can we expect them to be more open? And what would conversions look like? If you could share something about the Exito Group as well, that would be great?

Jorge Faical -- Chief Executive Officer

[Foreign language] It's a pleasure. With regard to Proximity, we are now starting to scale our model. This is a model where our profit is near two digits in the EBITDA margin. This is a format that's performing a lot better with Minuto Pao de Acucar than with Mini Extra.

Minuto Pao de Acucar has a value proposition that was a really good fit with the proposition for customers. This is one that's more focused on supplying and replenishing stocks then to a convenience store model. So this is sort of the neighborhood grocery store as opposed to a convenience store that as those you see in gas stations. So this is a value proposition that's aligned with good profitability.

And we found the balance from the real estate standpoint, from the logistical standpoint, because the logistics for these formats is very complicated. And we have a very important brand recall that we rely on for growth on those lines. So these are distinguishing factors when compared to the competition. Obviously, we are paying very close attention to what the competition is doing.

We have great respect for all of those players, but granted, the profitability with this format is not something that's simple to achieve. We're mostly looking at them, but also focused on our expansion, looking at the main points that present a great possibility to grow in that front. Now, with regard to Extra, I'll turn over to Carlos Mario, who will answer your question.

Carlos Mario Moreno -- Director

Thank you, Jorge, and thank you for the questions. I would like to say that first format that is the innovation for the Exito hypermarket, now represents nearly 30% of total sales. And those stores, with more than 24 months, have grown 42% against 10% growth of the total brand. So really, it is having a great performance with an ROI of 31%.

What we expect for a while is to have a -- at full potential of 40 full WOW stores, that is big hypermarkets and 100 WOW economic stores, that is a new model that we are piloting for middle-class aspirational stores. That will be done, I would say, in a period of five years. And for the moment, this year, we're going to do 15 of the full-sized Exito WOW stores, including the six stores -- hypermarkets that we are receiving from La Catorce. In Carulla, Carulla now the FreshMarket represents 45% of the total brand sales.

It has an ROI of 10%. And sales of those stores that have opened more than 24 months ago have grown 30% against 16% of the full growth of the Carulla brand. Our full potential for Carulla is around 80 stores that will also be done in four, five years. Of those, we will be doing around 12 this year and -- between 10 and 12.

And here, we include those that we call Full Fresh that is big stores of more than 1,000, 1,200 meters. And the other half of the Carulla FreshMarket would be midsized Carullas, but that -- really our drive[Technical difficulty]in growth and are driving market share in Colombia.

Eric Huang -- Santander Brasil -- Analyst

[Foreign language] Thank you very much. Your answer was very clear.

Operator

[Foreign language] Our next question from Joao Soares, he is an analyst from Citibank. Joao, we will enable your microphone so you can pose your question. You may go on.

Joao Soares -- Citi -- Analyst

[Foreign language] Well, good morning. Faical, could you elaborate on the digital channel, which is extremely significant for you and you're evolving in a number of friends, partnerships, dark stores. When we see things in the mid run, how representative will the channel be and now that you have the funds after selling your hypermarkets, I believe that you will accelerate your investment on this front? You will invest in CIC. How do you see the evolution of the channel? And what about the profitability on this channel now that there are the higher number of clicks? Could you elaborate on this?

Jorge Faical -- Chief Executive Officer

[Foreign language] Thank you for your question. Number one, this business represents around 10% of our BRL 1 billion accounts for nine-point-something currently, and many times, I am asked. But how much does this account for in GPA? Well, we still do not know exactly the future share. Nonetheless, we know that in Brazil, the sale represents 1.5 approximately, give or take of our grocery in Brazil and in Brazil, around 6.5% to 7%.

The U.S. five times more share in grocery and digital than in the Brazilian market. There is no doubt that our share will be similar to that of the U.S. in four or five years, give or take.

So this market will fourfold or fivefold. Well, it's not by chance. We have to -- of course, there are many investors that want part of this pie. But here, we see a multiplication of last mile or companies that want to embark in grocery.

No, Joao. This is not easy to manage groceries, logistics. It's not easy to work with fresh products that have a short expiration day. It's not easy to do the last mile logistics.

You need an infrastructure of distribution centers that are close to the consumer. And three, picking is very important to work with the picking of a product for the consumer is not simple science. Now, we are strongly investing in technology. We are strongly investing in management so that we become -- so we differentiate ourselves in these three front with picking, with technology, where things are done in an agile way, in a simple way, and in a productive way.

Point No. 2, the location of our fixed assets, physical assets, I'm one step ahead of all of these companies that are growing in the country because we already have this, when I see the multiplication of dark stores in Brazil, we have our brick-and-mortar stores that are totally prepared to be distribution centers and acquisition costs. Well, there is always -- there is a complex logic. Many times the acquisition cost is taken by -- is assumed by GPA and when we create partnership of these companies, part of the cost goes to the last mile, or not to -- many times, we share the acquisition cost -- the cost of acquisition goes to the platform.

And to us, there is an entire dynamic for that -- for the time being is providing a good profitability. Our profitability was one digit, which is high in e-commerce. This is an incremental profit. This is why there's no reason not to scale.

Our digital scalability will go through all the points that I've mentioned in the past, and we will rapidly scale. Of course, within our authority, boundaries that would be food, right?

Joao Soares -- Citi -- Analyst

[Foreign language] Faical, just a quick follow-up on the question. As you recognize the multiplication of last-mile platforms and dark stores coming from abroad, creating their operations in Brazil. Don't you -- aren't you bearing in mind some M&As to accelerate a number of capabilities?

Jorge Faical -- Chief Executive Officer

[Foreign language] OK. We have James, right? And we purchased James. And James is an important platform in our revenue, and James would be like "a strategic reserve" for us because the learning curve that we have in this segment in this market is applied to James and is also applied to our 1P platform. Now, what we're doing on our end – our M&As, what we are doing, what we're creating are sound strategic partnerships with these last milers.

It will -- it is more advantageous for these companies to use GPA as a retailer, as a service instead of spending money and leasings with dark stores, all have, for example, potatoes that spoil in their inventory. We have a partnership with HomeRefil. They sell through their platform to the consumer by GPA sells the product to HomeRefil and also is in charge of the logistics operation for HomeRefil. This is an interesting example of our positioning as retailer, as a service.

So we're following more or less the path of strategic partnerships instead of M&As.

Joao Soares -- Citi -- Analyst

[Foreign language] Thank you, Faical, for your answer.

Operator

[Foreign language] Our next question from Joseph Giordano from J.P. Morgan. Joseph, we're going to enable your microphone so you can pose your question. So you may go on, Joseph.

Joseph Giordano -- J.P. Morgan -- Analyst

[Foreign language] So good morning, Jorge. Good morning, Guillaume, Carlos Mario. Thank you for taking my question. These are three blocks that I would like to explore together with you.

Number one would be within the strategic alternatives of the Group. We've seen a certain relevant movement from the purchaser in order to simplify the operations. So I'm talking about cross operations, on one side we have a buyback announced by Exito, but we have an Exito and a [Inaudible] that are under GPA. So what do you expect from here on now that the leverage that was a concern that the Brazilian holding had -- has been approached by the cash that you will receive from Assai? Another question would be, if it makes sense within the entire market context and all the changes, the receivable of Assai.

I would like to know about the consolidation as well. You've talked about the competition, and I would like to know if it would make sense to carry out an M&A to accelerate more? So I would like to know if an M&A would make sense so that your operation becomes a more national operation? I know that we have lots of stores, but this is mostly focused in Sao Paulo. And going back to consolidators apps, I would like to understand how you see the profitability of the business in the long run because customers are migrating more to apps and platforms and they are no longer loyal to these banners. Although you -- we have companies that have a good assortment, I believe that there could be a shrinkage of your margin.

I would like to know how you see this?

Jorge Faical -- Chief Executive Officer

[Foreign language] Guillaume, would you like to answer and talk about the simplification side?

Guillaume Gras -- Chief Financial Officer and Investor Relations

[Foreign language] Joseph, thank you for your question. Number one, it is important to answer in order here. Our first stage would be to end the hyper transaction and to exit this format that will deleverage the Group and this prepares us for the upcoming steps. Therefore, we're focused on this currently, and we expect to end this movement at the end of -- by the end of Q1, after all of this.

Now, obviously, we, today, have nothing to share with you. We have no projects to announce. But as a matter of fact, the hyper stage is the first foundation to think about the future. We want to sell our share in Cnova, and we are waiting for better market conditions to sell our share at a good price.

Therefore, I do not have a timeline regarding these actions, but we continue with these -- with this intention to sell our share of Cnova. Now, regarding Exito, well, there is a possibility of future actions in our share, but nothing -- but we can't communicate or disclose anything right now regarding this point. Now, what about the anticipation of accounts receivables of Assai? We have analyzed this possibility, and I would like to remind you that in our financial results, we recognize interest rates in the installments that have been agreed upon with Assai. So the impact of the financial result for here, we've already captured the interest rates of this transaction.

Joseph, I didn't understand your question regarding how you posted a question regarding Pao's expansion. You are properly capitalized and I would like to know if it would make sense to accelerate more and to bear in mind an M&A. This is a national operation but strongly focused in Sao Paulo. We do not set aside M&As, but there is nothing on our horizon.

Currently, we are following the organic expansion path for this premium format that has to be located in premium neighborhoods with properties that are more expensive. This is a slow pathway, but is more solid from the financial point of view. And the returns are more guarantees through organic growth. We are going to grow organically, not only in the state of Sao Paulo.

There are a number of projects outside of the state of Sao Paulo, nonetheless, as I said, our main expansion area would be to saturate the existing cities. We are now sometimes in talks with small networks with two, three, or four stores. We believe this type of M&A could be simpler, and we could advance on that front. But major regional networks are not on part of the conversation currently.

Now, with regard to profitability with e-commerce, that's interesting because unlike other business, e-commerce is one part of the business where we will revise and review our plan six years -- every six years or even less. One year ago, for example, essentially, no one was working on the last mile within the country, and now you have over 20 companies. What we do believe in is, first of all, these are assumptions. These are golden rules we adopt within our business when looking into the future.

Two of them are profitability within e-commerce and a high-level of service or a high-level service. These are two golden rules. So how do you have profitability when competition is increasing, which was your question. Well, we will play alongside these players.

We will work through them as well or with them, which is our -- plays into our partnership proposal. But we know that many of these platforms have a sustainable plan because of their venture capital, but with a very challenging P&L. So they have to generate a large customer base with a very high COGS. But once these companies switch the key to positive P&L rates, then the industry will go -- will undergo a consolidation process.

These companies are playing the month-by-month game. And currently, we've been very successful in the game we're playing with them.

Operator

[Foreign language] Our next question comes from Vinicius Strano, sell-side analyst with UBS. Vinicius, we will now activate your microphone so you can ask your question. You may proceed.

Vinicius Strano -- UBS -- Analyst

[Foreign language] Hi. Good morning, everyone, and thank you for taking my question. Could you guys give us more details about the economics of the stores that were converted to the G7 model? How do you see store productivity, sales by square meter, and margins for this model compared to the margins for other models? And with regard to Exito, how can we think about their margin trend moving forward, perhaps thinking about the more accelerated growth for low- or narrow margin models?

Jorge Faical -- Chief Executive Officer

[Foreign language] Thank you for your question, Vinicius. Once we convert our stores to G7, they see an increase by six to seven points over a comparable base. Speaking, obviously, from a sales standpoint, that reflects -- or that mirrors the sales by square meter. We use essentially the same base for the two.

Now, from a margin perspective, it has a higher share of perishables, which is a category with margins that are above average. So their margins are higher than what the same category had before, virtually one to two points higher in gross terms, but it also brings an increase in expenses by about one to two points. So in percentage terms, it sort of stabilizes. But because it gains six to seven points in sales, it obviously gains five to seven points in cash.

So this is something that really stimulates us and really helps us to bring corporative costs down. And it has quite fast return on investment. I'll let Carlos answer the rest.

Carlos Mario Moreno -- Director

[Foreign language] Margins in the company, and that is the mix of the first increase in the low-cost brands, especially our cash and carry with lower margin, increasing last mile, which is improving a lot the margin but has lower margin than the average. But on the other side, we have a very strong conversion plan in WOW and Fresh which have the best margin of the brands, and also we have the positive contribution of our complementary businesses, which is in a very good trend of improvement. That is our Tuya financial business and our real estate business to only speak about two of the most important ones.

Vinicius Strano -- UBS -- Analyst

[Foreign language] That was perfect, guys. Thank you.

Operator

[Foreign language] Our next question comes from Bob Ford, sell-side analyst with Bank of America. Bob, we will activate your microphone so please proceed.

Bob Ford -- Bank of America Merrill Lynch -- Analyst

[Foreign language] Thank you. Good morning, and thank you for taking my question. Jorge, could you talk about the effects caused by the competition and also the level of elasticity that you're seeing at your construction work? And could you also talk about your figures with Mercado Livre and any of the benefits that translate to your operations outside that channel as well?

Jorge Faical -- Chief Executive Officer

[Foreign language] Thank you for your question, Bob, and pleasure speaking with you. Well, we work with relatively more stable competition levels than the rest of the market, both with Extra and Pao de Acucar, we are now seeing a stability in our promo share levels. That share is about 25% in each one of these businesses, which for the current time period is a significant and healthy rate for the Brazilian market. In the past, Pao de Acucar had promo share levels of 15% to 20%.

We are now working with about 25%. And we work with a competitiveness level versus self-service and regular prices at around 103% to 105%. But it's always interesting to have a broader view of our portfolio and thinking about our generosity toward customers because Pao de Acucar has its 105% in competitiveness level. It's regular promotional sales, but to our most loyal customers, we have what we call My Discount, which adds an incremental discount.

So the more loyal the customer is to Pao de Acucar, the higher the discounts they have. The more loyal they are, the more sticks they receive, for example, and those tickets are reverted into discounts on purchases. So I'd say that this level of competitiveness at about 100% is more -- or serves more to customers who are only occasional buyers of our product. The most loyal customers have a significant level of discounts, which also help them to continue to be loyal to our brand.

Now, about Mercado Livre, this is one partnership we're very satisfied, very happy with. We're still working in a grocery environment with dry foods. We have about 1,000 to 2,000 SKUs with them, and we are poised to start very soon a movement to include our fresh products as well. We have started to run a few pilots as well, and we plan to start selling fresh food with them as well over the next few months.

I can't tell you exactly when. But there are some interesting things about this. One is, about 80% of our sales with Mercado Livre take place in areas outside of where we have our stores. One example is the city of Belo Horizonte.

We have a very interesting level of sales in Belo Horizonte, where we have no Pao de Acucar stores. So it's a learning curve and mutual learning in this case, but this is proving to be a very much of a win-win partnership.

Bob Ford -- Bank of America Merrill Lynch -- Analyst

[Foreign language] That's very interesting, Jorge. Thank you.

Operator

[Foreign language] Our next question comes from Gustavo Fratini, sell-side analyst with Goldman Sachs. Gustavo, you may proceed.

Gustavo Fratini -- Goldman Sachs -- Analyst

[Foreign language] Good morning, guys. Thank you for taking my question. Just following up on a previous question. It was clear to me that this effect that has pressured your gross margin over the quarter was a one-off, but I'd like to understand how you see your bargaining power as compared to the competition moving forward? And how can we think about your growth margin prospects moving forward? And if you could also address your working capital issue? Looking at this maybe lower scale in the near-term, how could that affect your working capital, especially your accounts payable? Thank you.

Jorge Faical -- Chief Executive Officer

[Foreign language] That was a very interesting question, Gustavo. Thank you. Well, with regard to our bargaining power, we've talked about this a lot before announcing our transaction. Obviously, we are keeping a close eye on that.

Things might change when compared to our prospects, but we're still a $20 million company when it comes to sales. We are bigger than the retail side of our main competitor. We are much bigger than the No. 3 in the Brazilian market and incomparably bigger when we talk about regional competitors.

So this is why one of the arguments we believe we will not lose bargaining power. We work with very high volumes in sales and across all categories, whether there -- whether it's a more commoditized product or a more structured, more of a modern trade category, so to speak. Another important factor is, as I showed you before, if you add Minuto Pao de Acucar, and Pao de Acucar, the Pao de Acucar brand accounts for over 50% of our business today. And the Pao de Acucar brand is a huge trend setter in consumer goods, groceries in Brazil.

It is sort of a flagship in branding for our competitors and our customers. So we've helped launch a number of new brands in the market. And we do not expect that to change. So our strength with the share of Pao de Acucar is going up, which may even increase our bargaining power with some suppliers in some categories.

We're building a very close relationship -- we're in a very close partnership with many of our suppliers, and this is something I'm very thankful for. I'm thankful for their partnership during this transition period. This one-off result that we had. Our partners really accepted our offers, and we know we can build very interesting business into the -- going into the future.

Now, about our working capital, we feel we're in a very comfortable position. It's interesting to understand that, although we have reduced the company from BRL 29 billion to BRL 20 billion in earnings at the end of 2021. We moved out of a few major categories that generated a very negative impact on working capital, especially electronics, our non-food categories, our fashion and textile category, where we had 115 to 120 days to cover the stock. So, although we've reduced about 30% in terms of revenue, our inventories are about 50% smaller than or 50% lower than what we had previously, which allows us a more comfortable working capital -- level of working capital, not that comfortable, but certainly more comfortable than what we have before when negotiating with our suppliers.

I don't know if you have anything to add, Guillaume?

Guillaume Gras -- Chief Financial Officer and Investor Relations

[Foreign language] Of course. Well, with regard to payment terms to our suppliers on the food side, they remain the same. We've seen no deterioration in payment terms to suppliers. Now, on the inventory level, we have started to readjust our inventory levels and the expected impact on our working capital in 2022 is about minus BRL 500 million because of the positive working capital we had, thanks to our hypermarkets and which we are now concluding their demobilization.

So it will be about minus BRL 500 million.

Gustavo Fratini -- Goldman Sachs -- Analyst

[Foreign language] Thank you. That was very clear.

Operator

[Foreign language] Our next question comes from Joao Paulo Andrade, a sell-side analyst with Bradesco BBI. Joao Paulo, we will activate your microphone so you can ask your question. Please, you may proceed.

Joao Paulo Andrade -- Bradesco BBI -- Analyst

[Foreign language] Good morning, and thank you for taking my question. This is a very quick and simple question. When we think about the expansion outside of Sao Paulo, what are the main challenges regarding logistics and customer experience and even margins, could you give us qualitative numbers or quantitative numbers? What is your expectation here?

Jorge Faical -- Chief Executive Officer

[Foreign language] Joao, thank you for your question. Quantitatively, I'm not going to mention a lot because there's a lot of -- there are a lot of things in our pipeline. Our expansion outside of Sao Paulo in cities where we already have operations. This is our first strategy.

The saturations, therefore, we have interesting operations in Brasilia. We also have good operations in Rio. We have operations in Recife, Fortaleza, where we already have distribution centers and a logistic network to increase the amount of cities opened in these cities in these regions. I would say that this is our main strategy now to open operation where we still do not have a logistic network is more complex, and this would be a second stage, actually, and we will start thinking about this as of 2023.

So basically, this is it. I don't know if I missed part of your question. If I did, please. I do apologize.

Joao Paulo Andrade -- Bradesco BBI -- Analyst

[Foreign language] This – you're right. It's excellent. Thank you.

Operator

[Foreign language] The Q&A session has come to an end. Now, I would like to hand it over for the final remarks from our company.

Jorge Faical -- Chief Executive Officer

[Foreign language] Well, once again, I would like to thank all of you for your attention. We have an hour of -- and half of conversations. Our business as it is a Brazilian and multinational business. Well, it is more complex, right? Therefore, I do thank you for your time and your attention.

Brief comment. We are going through a low sales scenario despite our recovery or rebound, we are reacting as a new GPA. The macroeconomic scenario presents more inflation. The inflation continues high.

The income of our population is recovering baby steps. We have presidential race ahead of us. This is a year full of volatility until we can interpret the electoral year, we will continue among oscillations. There are also factors that hinder our debt that would be high interest rates, selling interest rates are around 11%, 12%.

Therefore, these are factors with a challenging environment in the short run. Now, this is valid for GPA and for the market. This is not something that only affects us. This affects the entire market.

Now, internally, we are undergoing a transition, and we intend to go through this transition, the quickest possible. We had an excellent delivery from our team when we closed the Extra, but we still have 28 and 30 stores to be converted until the first half of the year. The transition, the redimensioning of the company, reducing our logistic network represents challenges internally. Therefore, we are going through a moment of external and internal challenges.

Now, in the mid run, when we start thinking about the second semester, where transition is left behind where we will have a more clear electoral situation and the recovery or rebound of the population income, we are reassured with our business model, and we're building together with our partners and shareholders. This is a value proposition, which is robust, focused and profitable business, focused on value to our consumers, and we are absolutely sure that as soon as the economy recovers, well, GPA will launch in -- itself in the forefront. Together with all of our foundations, we will be valued something that we consider fair. I would like to thank everyone, thank the GPA team.

I am grateful for all of your efforts and there is still a lot to do from here on. Thank you very much.

Operator

[Operator signoff]

Duration: 82 minutes

Call participants:

Guillaume Gras -- Chief Financial Officer and Investor Relations

Jorge Faical -- Chief Executive Officer

Danniela Eiger -- XP Inc. -- Analyst

Marcella Recchia -- Credit Suisse -- Analyst

Eric Huang -- Santander Brasil -- Analyst

Carlos Mario Moreno -- Director

Joao Soares -- Citi -- Analyst

Joseph Giordano -- J.P. Morgan -- Analyst

Vinicius Strano -- UBS -- Analyst

Bob Ford -- Bank of America Merrill Lynch -- Analyst

Gustavo Fratini -- Goldman Sachs -- Analyst

Joao Paulo Andrade -- Bradesco BBI -- Analyst

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