M. Dias Branco S.A. Indústria e Comércio de Alimentos (MDIA3) Earnings Call Transcript & Summary

Good morning. Welcome to the video conference of M.Dias Branco with reference to the results of the fourth quarter of 2024. We have with us Gustavo Lopes Theodozio; Vice President of Investments and Controllership; and Fabio Cefaly; Director of New Business and Relations with Investors. We inform that this event is being recorded. [Operator Instructions] This transmission is also being done simultaneously on YouTube at www.youtube.ri.mdias. We'd like to also clarify that any declarations that may be made during this video conference relative to the perspectives for business of M.Dias Branco, projections and operational goals and financial goals constitute beliefs and premises of the management of the company as well as based on information currently available, involve risks, uncertainties and premises as they refer to future events and depend on circumstances which may or may not occur. Investors should understand that economic conditions of the industry and other operational factors can affect the future performance of M.Dias and lead to results which differ materially to those expressed here. I'd now like to pass the microphone to Gustavo, who will begin the presentation. Gustavo, please go ahead.

Good morning -- thank you. Good morning to everyone. Welcome to our results call -- earnings call. We count on the presence of all of you. Thank you for counting on all of your presence once again. I would like to start reinforcing the fact that at the same time that 2024 was a year, a very challenging year, principally in relation to the macro issues. We made a series of measures to improve the company. We increased the volume and increased our margins. Listing a little bit of these actions. I think it's important to mention the consolidation of the commercial team now under a single leadership, we have no more division of Defense and Attack. And it's already being -- we're seeing already better dynamism between the teams with this unification, capturing synergies and negotiations with clients in a much more consolidated way. The creation of a team of commercial excellence brought us new indicators and tools to accompany better company performance. And today, we know exactly what are the opportunities that we have at the point of sale and with the product mix, the number of stores, items per store, allocation of promoters and commercial factors as well. The allocation of the team, the revenue management team and the financial team as well as unlocking the commercial team with administrative team has also improved the controls and pricing as well as the management of the commercial budgets. The foodservice team, which is a giant market, was created with a strategy with zone marketing strategy for trade and pricing is already contributing to the growth of our business in flours, margarine and fats as well as with the conquest of new clients. It continues as a pillar -- important pillar of growth. It increases the profitability. And at this point in time, the idea is to focus on releases that are relevant. We have said internally that there are very few -- we want to make few and good releases more quality -- more focus on quality than quantity. The international businesses are in a very good point in time. We have margins in relation to 20% in relation to '23 as well as good news with the acquisition in Uruguay of Las Acacias, which continues to grow. We're also opening new channels, new sales channels, for example, in the U.S. with a business of our own brand. On other fronts, we have made important advances, which have helped us to increase profitability. In October, you accompanied as we did a structuring, the reduction of 150 people, employees and third-party workers in different levels of the company, trying to reduce fixed costs and transferring the production of pastas from Madureira in Rio to other units. In January of this year, we already stopped the production of cookies in the Lençóis Paulista factory in Interior Sao Paulo. Beyond that, since the beginning of 2024, we closed 3 distribution centers. All of this guaranteed improvements in our fixed costs and eventually in our SG&A. We continue in the discipline -- strong in the discipline of our cost management. In the fourth quarter of '24, as you saw, we had the return of the level of 20% in net revenue in our SG&A. This has already been executed with items that are already executed or are underway. We are continuing confident that we're on the right route. We're continuing to be prepared and involved for the challenges of 2025. The results of the fourth quarter of 2024 improves in almost every line compared to the previous quarter. This reinforces that we're heading in the right direction, and we closed the year with a net debt of zero, which is very important at this moment of high interest rates. At the same time, as we are prepared for investments which contribute to the realization of our strategies of growth with profitability. And finally, always attentive to the needs of our stockholders starting in April, we will pay dividends every month, BRL 0.03 per share as an anticipation as is different from the previous policy of BRL 0.06 per quarter. We will now pay BRL 0.09, which will be an additional of 50% over the previous level. We're the only company in the sector with this practice. I'd now like to pass this over to Fabio to go into the presentation and go into more detail on our results. And in sequence, I will be back for the Q&A session. Thank you very much.

Gustavo, thank you. Thank you all. It's a pleasure to be with you to count on all of your participation in our fourth quarter call for the year of 2024. I'm going to start the presentation with the end of the introduction from Gustavo in relation to the changes that we've made to improve our policy of dividends. And it's important, I think, to share with everyone the history of this. Up until 2020, we paid 40% of the distributable profit in dividends or in interest on capital. Remembering that the distributable profit is the total profit not including fiscal incentives and reserves. We maintain the same practice today in the definition of what is distributable net profit. In 2021, we increased the payout from 40% to 60% and created the quarterly payments of BRL 0.05 per share, which is in anticipation of that amount, which is paid during that same period of time, complementing to arrive at the 60% in the following year. In 2023 was another type of evolution. We went from 60% to 80% of the distributable payout and we've corrected this BRL 0.05 to BRL 0.06 per share. At this moment, we're making another structural change, which we're doing in our policy. We are maintaining the same 80% payout. Starting in April of this year, the payments will be monthly, BRL 0.03 per share per month, which will be 9% per share per quarter or 60% more than we paid in the previous policy. All of this since 2020 is looking at the investors with different profiles, both institutional investors as well as individual investors, and seeks to attract and retain investors in our base with a policy of remuneration, which is conducive to the balance of M.Dias and our perspective for results. Looking at the results of the quarter and the year, the principal highlight this year, as Gustavo mentioned in his speech, is in line with all of our challenges, the challenge which we faced in 2024, but also all of the evolution that we've done in our company, execution, both from the point of view, commercial point of view as well as logistics, industrial and back office areas as well, we've seen part of these benefits in the last quarter when compared to the results of the third quarter. So there has been an improvement in all of the lines of results. The net revenue in the fourth quarter was 4% that registered in the third quarter. And remembering that historically, we have a seasonality, an unfavorable seasonality from the third to the fourth quarter. And at this point in time, we actually had growth in revenue of 4%. This growth in revenue came both through the growth of volume as well as the growth of the average price, and the highlight of the average price from the third to the fourth quarter was principally from the product mix, which is very important, which we're working on for the improvement of the results in the medium and long term. Our EBITDA was 55% above that registered in the third quarter and the net revenue 42% above and the generation of cash was BRL 160 million -- 160% higher than what we saw in the third quarter. The numbers for the year are here in the lower boxes. There was a retraction in revenue, and a little bit of retraction in volume. But basically, this retraction was due to the falloff in average prices up until the third quarter of the year, and the volumes retracted by 2%. These are the EBITDA numbers, net profit and the BRL 592 million of generation cash in that period. Advancing to the chapter of market and net revenue. The first information that's important is in relation to the numbers of the market. Here, these are not numbers of M.Dias. These are numbers of the 2 principal markets in which we operate, the cookies and the pasta market. The cookie and pasta market, when we compare the fourth quarter of '23 to the fourth quarter of '24 and closed the full year of '23 versus '24, this market grew in revenue, total sales in the market in value. There was a growth in volume sold, so Brazilians in '24 consumed 2% more in volume measured in kilos or tonnes compared to '23 and the units sold grew by 4% compared to the quarterly comparison and annual comparison. And the average price remains stable in relation to the annual comparison and grew by 3% in the fourth quarter of '23 compared to the fourth quarter of '24. This growth of average price is related to direct relation to the increase in the cost of palm oil in dollars, in the same period and also with the devaluation of the real, things that we will approach in the next image. In the pasta market, we saw growth. We grew by 1% in the quarterly and in annually 2%. The volumes grew by 3% in the quarter and 5% in the year. And the units sold grew by 3% and 10%, and the average price fell by 2% or 3% in both comparisons. We believe that this retraction has a direct relation with the fall-off of the price of wheat in dollars, which happened over the length of 2024 and we'll be looking at this a little more closely in the rest of the presentation. Looking at net revenue, you open it by volume and average price. Here, we bring the evolution over the quarters from 2024. And as I've mentioned here in the comparison between the third and fourth quarter, there was a growth of 4% in net revenue. And in the comparison of the fourth quarter to the fourth quarter of '23, a retraction of 10%. This retraction in the vision of the quarter year-on-year is related directly to the fall in volume, which we see here in the graph in the central part of the graph. The slide in here it's important to remember that in the fourth quarter of '23, we supplied our clients or our retailers for a change in the operating system, which occurred in January of 2024. We commented about this in the first quarter of '24, which was a change in our system, a successful change. We did not lose any market share, and we guaranteed the supply of our clients, and this involved a sell-in, a sale by M.Dias to the retailers a little bit lower in the first quarter and a little bit lower in the fourth quarter, which created a base of comparison, which is a little more difficult for the volumes of the fourth quarter of '24. The average price here sequentially improved in the third quarter, principally due to the mix of BRL 5.7 per kilo to BRL 5.8 per kilo from the third to the fourth quarter. Here's the revenue following what we commented on the third quarter, the new model of the release of our results, where we published the net revenue in 3 product categories. The first remembering that involves the categories of cookies, pastas and margarines. The second, which is the refining of oils, [indiscernible] and industrial oils, this is a relevant part, which is the food service, as Gustavo mentioned, we created an area which is 100% dedicated to this channel and to these clients. And the third group, which is called Adjacencies, items which have brands Jasmine, FIT FOOD, Frontera and items of toasts, quick cake mixes, healthy cake mixes, sauces and seasonings, which have an average price higher than other categories and with potential growth, which is higher. Now from the third to the fourth quarter, we presented growth in the net revenue in all 3 of these categories, the first category in the grinding and refining of oils and in the adjacencies which grew by 5%. The numbers are already passed. The volume grew, average price grew and net revenue grew by 4%. Market share, here's the market share for the year 2024 compared to 2023. So the consolidated for these 2 periods, in cookies, which is our principal category in revenue, we presented growth of 0.2 percentage points; in pasta, a small retraction of 0.1%; and wheat flour, which has grown a great deal, we had growth above 1 percentage point from '23 to '24. Looking at the 3 principal categories of M.Dias, which are more than 70% of our business. In terms of sales, we have gained market share in 2 of the 3 categories, and we had a small retraction in pastas. Here, we'd like to point out some of the launches, some of the releases that we've done in 2024 and with which we have expectations which are very positive for the results of these items in 2025. The first in the category of pastas, which is a New Ramen, M.Dias Ramen with zero unfried with more flavor. It's less sodium. It contains vitamins and is being sold in some of our brands. The principal is the Adria brand. This is a launch which involves great deal of CapEx over 2023 and 2024. We made important investments in today's moment to supply the retailers and gain traction in these items. Piraquê, which is our second largest brand, which was acquired in 2018, a product which is the head of the Piraquê, which is Goiabinha, this cookie which you see in the middle of the slide. And we last year had cookies, for example, Goiabinha with flavored Goiabinha, the only one in the market. It's already available in the points of sale with a high price, an excellent price, excellent product with a very good margin. In the healthy foods category, we launched a product which is unique in the product in the market where it is called FIT FOOD, which is a cookie made out of rice, [indiscernible] milk chocolate and so forth. And the 2 extremities we have on the left and right, these are chocolate bars also the FIT FOOD brand, which were launched as well. There are several sweets which are not on this slide, which are also excellent products, which are already available in the points of sale, not only in supermarkets, but in other points of sale as well. And there's an expectation that there would be important sales of these items in other channels. In the line of healthy foods, Jasmine, which is a brand -- company which we acquired in 2022, a brand which is very relevant in the Brazilian market of granolas, gluten-free products, cookies and other items, always along the line of healthy foods. We launched these granolas in the unique portions, which also attends a different type of consumer, another moment of consumption and the premium granolas of Jasmine, both in salty as well as sweet. And here, one is based on cacao. It has a low carbohydrate corn. And these are products which converse with our strategy of sustainability. These are products which are carbon-neutral by [indiscernible]. Before going into the session of costs, EBITDA and profitability, and before getting to our cash position, it's important for us to share with everyone that this is a quarter in which we've had several extraordinary items in our results of EBITDA and our quarterly EBITDA and also our annual EBITDA numbers. We talked about this in the release which was filed on Friday. But it's important also to give visibility and recover these concepts. So beginning with this first line of the slide, in the fourth quarter, we had items which were very favorable and several unfavorable items. The favorable items improved our results and the unfavorable reduced our results. And the balance of those 2 categories was BRL 79 million of increase in results in the fourth quarter. BRL 131 million is made up principally by 2 subjects: credits related to taxes and subsidies that we received since 2024 and the return of the provision for PLR due to not reaching the goals which had been established for 2024. So these are 2 events which were accounted for in the fourth quarter. Unfavorable events, we also -- at the end of the third quarter, we communicated that in October, there was a process of restructuring involving the disconnection of 850 employees and some third-party workers. And normally, when this happens, we have expenses related to the [ disligament ] of these people, which fell in the month of October and this generated an impact which was unfavorable of BRL 52 million. For the year, looking at the annual results of the same BRL 52 million plus the stopped in January, which we communicated in the call of the first quarter, which involved a shutdown for the -- involved a loss of contribution margin of BRL 60 million. So these were the events, extraordinary events, which happened in the quarter and these also had an impact on the annual results. Looking at the section of costs and expenses and before we go into the EBITDA, there are 3 principal variables which impact our costs, our variable costs. First, wheat, which shows the evolution of the price of wheat in dollars per tonne from January '23 until December '24. The line below that shows palm oil dollars per tonne, and the third line which is the actual exchange rate, the real to the dollar exchange rate. So what we see in the wheat, which connects a little bit with what we saw in that first slide, the dynamic of the cookie and pasta markets, the [indiscernible] price over these months and ended the year at $223 per tonne below the $224 of December of '23. However, there was a period, especially in the second quarter, when wheat went up. As we explained in the call of the third quarter, wheat went up. We put a price on the market, but the market did not accompany it, and this put an unfavorable impact on our volumes, our sell-in, which is the sale to retailers in the third quarter. And at this moment, in the third quarter, at the end of the year, it was stable for several months and fell off a little more in the fourth quarter. Palm oil showed stability from January up until mid-March or April. And then, due to climatic questions in Asia as well as in South America, palm oil in dollars presented an important increase, but in the year and closing the year at $1,497 per tonne, the value well above the end of '23, which was $1,129 per tonne. These items are negotiated in dollars, so the exchange rate also had an important, relevant effect on our costs and also our results. And this devaluation of the real began here between April and May and gradually increased our costs until the exchange rate arrived at BRL 6.1 per dollar at the end of the year. When we translate these curves into what happened in the results in terms of gross margins, we closed the quarter with 33.5% of the gross margin. This percentage has an impact on items, extraordinary items, favorable items. When we remove those items, we get to a gross margin of 30.2%. Okay, why did it go down compared to last year? Basically due to a lower dilution of fixed costs due to lower volumes from the fourth quarter of '23 to the fourth quarter of '24. In terms of variable costs, they fell a little bit in the first quarter, and afterwards, they went up during the year and as palm oil and real went down in value. And so the other side of this equation, the average price had a retraction at the beginning of the year due to variable costs, but then it was recovered, and we saw that the entire industry, especially at the end of the fourth quarter, following the direction of doing gradual readjustments in prices. In relation to our logistics network to the point in which we mentioned in the third quarter which was one of the priorities for us looking. Looking at the year of 2024 and 2025, we increased in the manufacture of pasta in Madureira to other units, we moved it to other units to obtain greater operational efficiency and greater agility in the logistics and delivery of these products. All of the expenses related to this movement were accounted for in the month of October, which is also one of the extraordinary items which we mentioned. In January 2025, we deactivated the production of cookies in the Lençóis Paulista factory in Interior of São Paulo, remanaging that production to other units. This is from the standpoint of manufacturing. When we look at the logistics, which is the delivery of our items to our clients, in January '24, we deactivated the distribution center in Belford Roxo in Rio de Janeiro. And in this January '25, we've deactivated these 2 cities in Aracaju and one in São Luís, both with a focus on the optimization of the logistics network and reduction of costs. Going through the SG&A, which are expenses that are administrative and general expenses. In nominal terms, we had a total in the fourth quarter of BRL 480 million. This number considers several extraordinary numbers, which are favorable, which added up to BRL 25 million. So even if we return this BRL 25 million to this value, we still have BRL 505 million of total SG&A in the quarter, below that which was registered in the third quarter and well below that which was registered in the fourth quarter of 2023. So this gave us 19.3% of net revenue, and adding that BRL 25 million would be a little bit above 20%, better than that which presented in the first, second and third quarters of 2024. And looking at the expenses for the year 2023, we had BRL 2.223 million in expenses. In '24, we had BRL 2.166 million in expenses. So even with inflation in that period, a large number of our line items and expenses are in a rigid continuous process of revisiting constantly and continuously all of our structural expenses to be able to have a value and expenses value below that which was registered nominally in 2023. EBITDA of the quarter was BRL 355 million. I passed over the nonrecurring items in the accounting presentation; we got 14.3% as an EBITDA margin, and we closed the year with BRL 1.198 billion, a margin of 12.4%. Net revenue of BRL 177 million in the quarter, better than the previous quarter with a net margin of 7%, and the net profit of the margin was below that of the previous year, totaling BRL 646 million. Going now to the chapter on cash generation, debt and investments. We had a generation of cash both in the quarter as well as in the year and a cash consumption of working capital in the year as well, which is here looking at the 3 principal lines of our working capital graph: suppliers, clients and stocks. Looking at the line of suppliers as well as we looked at our expenses at a lower amount of expenses. We also had a lower amount of purchases, and we financed a little bit less those suppliers in this comparison of these 2 periods. In the fourth quarter of 2024 and the line of receivables is stable, 60 days last year in the third quarter and in this year and our stocks represented a worsening result compared to the third quarter of '23, but better compared to the third quarter of '24. Comparison with the fourth quarter is explained by the movement which we did where we supplied our clients more in the third quarter and closed with a lower level of stocks. And the volumes sold in the third quarter of 2024 were below that which we wanted, and we went up with that quarter with a higher level of stock which was adjusted by the end of the fourth quarter with a positive evolution of volumes sold and consequently volumes produced. As cash in the perspective of leverage, we closed with a leveraging of practically 0 in the fourth quarter with a position of net debt of BRL 25 million. And for the seventh year in a row, we have the highest rating available by Fitch Ratings, which is AAA with a stable perspective, which was reconfirmed. Our gross debt, which is basically equal to our cash on hand, was BRL 2.390 billion, and more than half of that is in long-term debt, principally starting from 2028. Investments in the year in CapEx added up to BRL 304 million below that which was registered in 2023, only 17% and mentioning that the principal highlight were the investments for the changing of our ERP, switching over our ERP, which happened in January of '24 and a relevant part of the CapEx for this process happened during 2024 and -- 2022 and 2023, which is the principal reduction CapEx from '23 to '24. Remembering that everyone here our strategy which is a strategy of growth with profitability. Looking at 3 pillars of growth. One is a current and up-to-date business, looking at Brazil as one whole commercial area, but this director has a team which goes all the way down to the details of each point of sale from the macro to the micro in its most -- in the smallest details. The other categories that we saw grew by 5% from the third to the fourth quarter in the healthy food snacks and cake mixes and toasts. And international, as Gustavo mentioned, did very well in 2024 with growth in revenue, which was above 20% and also with growth in volume. This is all supported by a continuous program of productivity and efficiency, which is evident when we saw the SG&A of the fourth quarter. Reminding you that the actions underway, which were defined in the third quarter for the recovery of our results, both from the standpoint of commercial standpoint as well as from the point of view of profitability, consolidation of the commercial team into one director, as Gustavo mentioned in his speech, the optimization of our structure, which brought some expenses, momentary expenses and nonrecurring, which as we've opened and also started to present several benefits, especially in the most recent months, the final months of 2024. The creation of the team focused totally on foodservice, the adjustments in the logistics network, as I've mentioned previously, the question of pastas in Madureira, the factory in Lençóis Paulista in the interior of Sao Paulo and the DCs, which were closed. The Allocation of the management team or the management of revenue, the Vice Presidency of Investments and Controllership, which involves principally the processes of revision of prices, price adjustments and control of commercial budgets as well as campaigns and other budgets. And exportations grew by more than 20%. Consolidation of commercial excellence, as Gustavo mentioned, we have got excellent results for our day-to-day control, allocation of our budgets and the coordinated efforts for the reduction of our SG&A. To close here this part of the call, the chapter regarding ESG. These are our indicators, which are very detailed in the release, in the earnings release, caring for the planet, believing in people and strengthening our alliances. And we have a new indicator, which is in relation to the movement of 100% transparency, which is also detailed in the earnings release. And to close, we want to mention here and thank all of those of all the investors, analysts who accompany the company, other agents of the market as well and principally, our collaborators for recognition of all the hard work and dedication and all the challenges that they have given us going forward. These were some of the premiums and recognitions which we received during 2024. And with that we will close this part of the teleconference, and we will go over to the Q&A.

[Operator Instructions] The first question comes from Guilherme Palhares from Santander.

I want to hear from you a little bit about the reorganization capacity distribution centers that you commented. You've done a lot in the fourth quarter and I wanted to hear a little bit about what we can expect going forward in terms of fixed costs? What was the impact of these changes or these actions on the team, can you explain that a little bit because we're seeing investments which is being made [indiscernible] and I'm trying to understand a little bit how you see the return on these investments? And the second question, I wanted to understand a little bit more when we look at 2025, you commented that a lot of internal adjustments. As I understand Gustavo was speaking about having less launches, but launches that are more assertive, can you comment a little bit on investment in marketing and point of sale with commercial expenses for 2025? What we can expect looking at this growth with the changes in exchange rate? Can you speak a little bit about what you're seeing in the way of budgets for 2025 and the lines of commercial expenses?

Guilherme, thank you very much for your question. We start with marketing. At the beginning, the idea here is to focus more on the operations in which are relevant, so trying to do a lot of things all at once generates a distraction. So the prioritization is key in this process, especially in a moment in a difficult and challenging moment, which we're going through in Brazil. The same thing that we did in our strategic plan, Fabio presented the 3 main pillars: to grow more in Brazil, entrance into new categories and also the step towards internationalization. We have focused a great deal on organic growth in Brazil because in 2021, '22 and 2023, we were basically working on these 3 pillars: growth in Brazil with the Attack plan; investing in new categories, whether it be through research and development but also through acquisitions, for example, Jasmine, Latinex, FIT FOODS and Frontera and going to international markets such as the purchase of Acacias in Uruguay. So it was a total attack, which we had designed previously with several consultants. So it's good in the sense that we are able to amplify an event in these areas, but you also wind up not going ahead as much as we would have liked to in some of those levers, which was the case of the growth in Brazil. So the volumes were stable. What we're trying to do now is to through M&A and focusing more on Brazil and our vision where the biggest opportunities are. So we're doing this a little bit in our marketing. We spent a lot of time organizing these brands. We have a lot of brands in the company, and we visited several low-priced brands. We had a lot of work and we grew a little bit. This growth of brands did not convert into higher volumes. So the same size of investment in marketing and in revenue, the company will continue to do and continue investing. We're focusing more on trade marketing from the point of sale in detriment to those budgets which are more aimed at brand construction. Not that we want to end our project of construction, but trying to focus a little more on actions aimed at the point of sale, and therefore, more connected to growth in volume. Looking at the brand, as you mentioned, the company is attacking all the pillars that take us towards profitability. If we look at revenue, if we -- this work that's more aimed at the point of sale, marketing in the commercial area, accompanying these changes more aimed at the point of sale and also in the revenue management pricing, we unified these 2 regions Attack and Defense, strengthening our negotiating power with our clients. And there's been an important change underway in the commercial areas that we are able to seek these additional volumes. While these volumes are not yet a reality, what we're doing is reorganizing the company, looking at our logistics network and our manufacturing network so that we wind up with large reserved capacity. Since the volume did not come, we're going to change our structure, we're going to modify our structure, not closing units, but deactivating some. But when we see that the volumes have come back, these factories will reopen. Our plan is to not close factories, but to build more factories. We have capacity for investment for this. However, the Brazilian market is stopped with growth of the GDP below 2%. So at the moment like this, we have 2 options, either wait for the volume to grow or seek an optimization while this doesn't change. So that's what we've done. This is the fruit of this modification of our reserve capacity to make it more adequate for the needs. This also helps in the reduction of SG&A as well as in our costs. It increases the utilization of some factories to reduce our fixed costs. We're also doing a series of activities. There's no silver bullet here, but in SG&A restructuring, as Fabio mentioned, below the closing of our DCs, making more investments in marketing, we're freezing openings, we're reducing expenses with trips. We have more than 30 different levers in the company. We have a team oriented towards the company and looking at all these levers for the control of SG&A expenses. So while the company -- the economy does not take off, we're doing our homework here at home, maintaining our costs and expenses under control. In terms of strategy, that's it. Looking forward, we perceive that the exchange rate hit us greatly in our second quarter of last year, going above 6. But during a good deal of time, it was a little bit above or below 6, but this gave a strong pressure on our cost for the entire market. So it hit us all. For nothing that we start to see in 2025, a growth of inflation picking up. Everyone has been pricing this change into their products. You can see this in the most recent readings of the IPCA. These most recent readings at the moment, we're looking at practically almost every category. So if I'm not mistaken, Porto Alegre in the category of cookies, we had the biggest increases were in the regions in the Northeast. So we see that the companies are advancing their prices. M.Dias is following the same route because it's fundamental for us to protect our profitability so that our price movements, internal organizations, bigger investments in marketing in the trade, control of the optimization of our DCs and manufacturing plants and the optimization of SG&A. Putting this all together, even in a more difficult market, the company is very optimistic in relation to 2025. We do not expect -- we don't see any spikes in results, either in volume nor in profitability. It's a process. However, it will be a lot of hard work, but we do believe, we're not able to foresee that evolution will stop. It will be sequential, but it will continue. We saw this in the fourth quarter compared to the third quarter and should continue in 2025.

Just one quick follow-up. You spoke about 850 people computing these movements of 2025 or was that all in 2024?

This is Fabio. Just as you commented here and complement what Gustavo said, in values, these movements which were done in the manufacturing plants, annualizing these costs and just considering the values amount needed for these movements, we get close to BRL 30 million of fixed costs in reductions, looking at the question of manufacturing in Madureira and Lençóis Paulista. In relation to the DCs which were closed, we have another BRL 10 million in reduction of logistic costs. So if this happens, starting from the moment that we no longer have these expenses for these changes. With the effect of this model, I think we said this in the past, all the work when we look at SG&A by internal work independent of numbers, we have to maintain that relation of SG&A to net revenue of close to 20%. We had important growth last year. Our SG&A represented approximately 26% of our net revenue, which was not -- did not happen due to a lack of control, but happened due to a revenue in terms of prices since net revenue fell but when you look at in absolute numbers, the absolute which was in 2023 and the amount of SG&A [indiscernible] for '24, even with the inflation that we've seen, for which motive which is why the interest rate is so high and inflation is high, the company reduced in absolute numbers reduced its SG&A numbers. So it's very much connected to net revenue. But even so, no matter what the scenario is, all of our efforts will be aimed at maintaining this level of close to 20% of our [indiscernible]. These costs of firings related to the 850 people were accounted for in 2024, in the fourth quarter of '24, already been included.

Next question comes from Gustavo Troyano from Itau BBA.

I just wanted to add on to this question about the gradual improvement for 2025 and try to make this relative to your competitive capacity and capacity for pricing you see in the first quarter. And according to the IPC as was commented, we've seen increases in pastas and cookies, but how do you see these price increases in the competition and yourselves being a relative analysis of how are your prices compared to the industry overall, if there have been price increases -- price list increases and talk a little bit about this point? And how has been the reaction on this line of the potential increases with competitors? This would be the first question. And the second question, adding -- talking about the efficiencies and SG&A efficiencies, looking at it from another angle. Some years, we talk a lot about the multiplique problem from efficiency, which you delivered successfully 2 or 3 years ago. But it seems to me looking at this fourth quarter is that the nominal SG&A is relevant as the program which we saw a few years ago however in one quarter. So with the same volume going up, so I wanted to understand from you due to the cuts that were made in SG&A, where do you see any point, any risk to the performance, the top line performance due to the magnitude of adjustments in such a short period of time? I wanted to understand if you see any point which demands more attention looking at this efficiency, this general efficiency? Those are my questions.

Okay, Gustavo, thank you. In relation to the price increases, we put, yes, a new price list by the end of last year. It went into effect in the end of January. We're doing it in a different way, which will define our strategy, but we're not publishing which channels will come first. We're doing it in a way that is more structured and not just once, but not in all markets and not in all regions. It's very clear to us that our clients were expecting our movement since it's something that's more unified, looking at this increases that were lower. So we're trying to not publish too much the strategy of pricing, but there is a new price list. We haven't any relevant pushback from the clients. We started with the principal channel, the most relevant channels for M.Dias. And we understand that the trade is clearly understanding the motives of these increases due to the numbers from the end of '24 and beginning of '25 that pressure our costs. And so now we see things have calm down a little bit, but there's still strong pressures on costs. So I would say it's going well. We haven't any relevant pushback. The changes that we've done here of SG&A are various. We're talking about factories, effect on the top line is zero on the contrary. Finally, we have a lot of capacity in other factories. What we've been able to do is rebalance this without any volume -- without any loss of volume with the optimization of our production lines without loss of volume. So we haven't had any impact on our top line. The other evolutions that we've seen in our vision not generate any impact on our top line growth, especially the DCs, which were in markets that we were accompanying very closely in Maracanau, Sergipe, we were able to attend very well even without these DCs. So we have the manufacturing plants very close to those regions. And so in our vision, all of those changes were made and discussed with our clients. So we don't have any type of loss of level of service or that would affect our top line. It's a process which we're constantly analyzing. It doesn't end here. And eventually, these volumes will come back and the market will improve. These DCs can return to being reactivated. So if there's any relevant impact which was not foreseen, we're not imagining that, you can reactivate these factors. In my vision, no reduction or cost reduction has any impact on the top line. There are 5 agencies of sales promoters for trade. We made an important bid with them. We picked up the 2 best and closed with the best, one of the 2 best. So they're getting our bigger contract and level Brazil wide. We have better bargaining power, and we've been able to make a very good negotiation with them, both for M.Dias as well as for the agencies. So things like this has generated an effect and improvement of our expenses, SG&A, but in our vision do not impact our top line because they don't generate any gap in work or investment for the commercial area. Basically, it's just renegotiation exchanges. We're very optimistic that it won't have any effect on our top line.

Gustavo, I just wanted to add one quick thing. The question of the manufacturing network and the distribution network. The heavy investments made in recent years in technology and sustainment and processes that has wound up permitting these movements, which have occurred at the end of last year and the beginning of this year. As Gustavo mentioned, we closed 2 DCs, but we've been able to attend the demand through other units. There was never an important evolution in the process of planning and demand, allocation of stocks in the different units and SOP and improving the level of service, these movements will not compromise in any way our growth plan.

Your next question comes from Leonardo Alencar from XP.

I wanted to come back a little bit to one of the initial questions of Guilherme in relation to the question of operational efficiency, which you've discussed a great deal or operation of the manufacturing plant. If you could comment a bit due to these adjustment which should all be positive from the standpoint of productivity and efficiency, increasing volumes in our factory, closing [indiscernible] which was more expensive, perhaps we put this in perspective with the dynamic of looking forward, the price of [indiscernible] has come down a little bit. Palm oil has gone up quite a bit at the beginning, there's a lot of volatility, exchange rate volatility. However, we lowered a bit the pressure on prices from the exchange rate. These new factories in these conditions in the cost of -- are all these being captured, all these in this work against you, do you think? For example, increasing your exposure to palm oil prices is all being done in the dynamic of innovations in the portfolio. If there's any lack of operational efficiency, innovation because when we look at this in the most recent numbers, it could hurt your gross margin, but increase your EBITDA and this might appear in your results? These 2 points.

Fabio going to mention, okay. Leonardo innovation that we've seen, we've discussed for years, something close to 150 launches. It's a lot of launches. I'm talking about in all categories in pastas, cookies and so forth. It could be even a change in packaging. However, this is an internal process. It's a lot of things. So a lot of these launches, we perceive that these did not go to the market as they should have. And so it's a question of execution. It's very difficult to manage 150 launches at once during 1 year. So the change in this area has a lot to do doing fewer and better launches and with our capacity to do a good introduction of these launches in the market because just doing it doesn't solve the problem, just to increase the number of SKUs and the execution is not well done at the point of sale, we're not going to capture this in volume or results. So we started continue with these launches. The company is not doing any type of launches, does not have added value that we mentioned, better than the M.Dias averages, and we'll continue. The problem is we are going to try and reduce a little bit the number of launches so that this can be better. In terms of palm oil, as you mentioned, the exchange rate improved a little bit, which was unfavorable at the end of the year. It was favorable, going up a little bit. And palm oil really has been the big offender in terms -- there were several questions. We had the limitation of exports from Indonesia, Malaysia, the principal producers, Latin America also, especially in Brazil, Colombia has pressured a bit prices. But all of these changes in DCs and factories do not impact the level of exposure of these commodities. We continue maintaining the same policies and capacities for storage. The company did not deactivate any silo or capacity for storage of commodities. It was basically on the operation, which was trimmed down to logistics or in production line in some ways. In the case of Rio for pastas and in the case of Sao Paulo for cookies. So there hasn't been any impact on our commodities or in the exposure to commodities. In terms of operational efficiency that you mentioned, we have monitored very well or very closely all the indicators of services, TIFs to guarantee that these changes have not generated any type of trauma on our clients. We've seen that this migration has been done in a way that was very, very soft with no impact on our lines of [indiscernible].

This is Fabio. The BRL 30 million talking about what Gustavo was talking and the BRL 30 million I commented earlier is directly related to labor costs, energy costs and has no relation to the variable costs in terms of commodities, wheat, cacao, palm oil, sugar and/or exchange rates. These are amounts -- these are gains that are expected and to be annualized, which does not depend at all on the volatility of commodity prices whether they go up or down.

Very well. Just one quick follow-up on the palm oil question. Due to the capacity for arbitrage with margarine have a restriction when you think about the segments of cookies. When you think about 2025 with a higher level of palm oil due to exchange rates and other items such as in Asia as well as other factors that are mitigating, which has pressure on your costs.

This is on the account of parity, we do this every day. We have capacity even also to use cotton oil, cottonseed oil and palm oil. We are constantly making these calculations to see which commodity has the best relation of cost benefit and the production is done after that calculation being made. To mitigate this type of increase we have no other beyond this question of this change or substitution in raw material. But when the price is so relevant as it has been in the question of palm oil, I think it is very relevant and it continues at a high level. Now, there's no way to mitigate 100% of this without pricing it into your -- building it into your prices. So leveraging your prices in this process can be substituted. So we don't -- we hang on to that -- use that tool. Also, as we mentioned in the slide at the beginning of the presentation that there was an increase in the average price in the market and a retraction of average prices in the pasta market. Masses, the principal ingredient is wheat -- wheat flour. And in cookies, we have wheat flour and the vegetable oils, especially for the fillings of those cookies.

Your next question comes from Lucas Ferreira from JPMorgan.

Two questions. First, what makes you believe that you don't have any pushback on these prices? What makes you think that this time the price list will be able to be effectuated and complied with considering that when these prices last year, looking at the competitive market and what happened in the third quarter, if I'm not mistaken, you talk about the price of wheat went down, but the exchange rate went up. And so, what makes you believe that this time, there won't be any more -- the same effect? And the second question is if this price increase in the first quarter, is it more to maintain your level of profitability at the levels at which you're operating? Or do you think that it will be an increase that will recompose your margins of some -- and some of your margins are below that which you would like to see? Is your cost lines to your stock 4 or 5 months depending on the raw material, I imagine the exchange rate of 6 to 6.20 at the end of the year must have hit your results very strongly. So this increase in prices, are you able to imagine an increase in margins in the first half of the year as you mentioned in the fourth quarter or just a recomposition of the profitability -- to maintain your profitability at a similar level?

Perhaps what makes us think this is that this time, we didn't come out first, the company -- we accompanied the market, weren't the first ones to jump in and raise prices. We looked at this price increase in 2025, we did market research and we saw that there was a movement not just of M.Dias, but also of our competitors. So there was this change in strategy, as I mentioned back in the beginning. We didn't want to just do a big bang in what we're doing region by region, channel by channel, one channel at a time in a way that is less linear, changes the strategy. This first increase in the quarter is in fact is to maintain our margins, current margins. We're not looking to increase the margins in this first quarter. What we expect is to see an evolution due to the pricing of our price lists, but these changes which will be done inside the company, whether it be the changes in our manufacturing plants, logistics, SG&A that you're looking at these 2 levers together [ shouldn't ] bring us to an increase -- sequential increase in the margin of the company, not just the price lever. So that's for sure.

Your next question comes from Thiago Duarte of BTG Pactual.

I'd like to continue the discussion in the dynamic of revenue, volumes and prices and not in costs. The first question, if you could help us talk a little bit about the dynamic of market share based on the data which you shared, when we look at this data of sell-out, sell-in, shared -- when we look at the volumes, the added value that you -- the volume -- added volume that you made available in the company which becomes a little bit surprising the resilience of your market share reported by the company, especially looking at the second half of the year when volumes were smaller, which fell off a little bit more sensibly in a more accentuated way. I would like to ask you if this is a matter of difference between sell-in and sell-out. Because that'd be good news that we show that at some point, the chain will have to restock with your products since the market share is resilient or if you understand that the sell-out is falling off more quickly than those Nielsen numbers suggest with the deceleration of the company? I imagine that this will have some relationship. So that's my first question. And the second question, following along this last comment that Gustavo made about the recomposition of prices for the preservation of margins. In recent years, we've seen a lot of the discussions that you've had we jumped a little bit in the perception that you had prioritized a little bit more recovery of margins at some time and a little bit more recovery of volumes or market share in other points in time. I would like to know if you could situate us about where we are right now in that process. How happy are you with that market share compared to last year, make it possible to have or accentuated margin in these years with all the initiatives that we are here discussing or if we should look more at volumes, we had these discussions in recent years?

I'll start here with your first question. There was a decided 2 options, and it was the first. There was a disconnect between sell-in and sell-out in 2 moments during 2024 due to 2 events. The first is, at the beginning of the year in January, the implementation of the SAP ERP, when there was no loss in market share at that moment, but there was a slower sell-ins in the month of January. Why? Because the sell-in wound up happening in the third quarter of '23 when M.Dias supplied our clients to avoid any type of stockout or lack of products during the month of January, hence we were several weeks without making any sales or with a level of sales below that which would normally happen. So at that moment, there was an impact on sell-in, but there was no impact on the sell-out. Another moment was when we -- in the month of July, as I showed in the graph of the wheat prices in dollar, which fell. It showed a direction of fall January '23 to December '24. But at the same time, at the end of the first half of '24 in which price of wheat went up in dollars. And as Gustavo mentioned, we went ahead of the market. The market did not accompany our price, and there was a retraction in our volumes sold to retailers. But the retailers were well stocked with M.Dias Branco's products. So that didn't have much impact on our market share. So as things started to adjust, improvements in execution and pricing and recomposition of our stocks. In retailers, our sell-in improved as we saw in the third to the fourth quarter, and we're talking about cookies and pastas, and we didn't really have any important loss of share. So basically, it was 2 events in 2024, which did cause a change between sell-in and sellout.

I'm accompanying BTG conference here. Are you satisfied in relation to market share?

We have another level of market share. We had a level of market share, which was higher than that. But we've always been, as you mentioned, at the moment, more challenging moment, we have to protect our profitability and the recomposition of prices. So this market share is close to 30%. When we look at the recomposition of margins, a comfortable position without -- not caring about these details. So our market share has been basically with cookies and pastas is stable and went down in an important way in flours. During the year, and analyzing the year as a whole with all of these fluctuations, this price movement within June ending with a stable market share, I would say that at this -- on this question, we're satisfied. As for the dichotomy and the question between, wow, I think you're looking for profit -- one time you're looking for profitability and one time you're looking for volume. We do not really have this change in strategy because the market is dynamic and you put -- you make our prices to recover margins and you have to correct it afterwards to not lose market share. So it's a dynamic process. You have to be accompanying the process looking at the market. In the recent meeting, the same thing as asking, it's impossible to choose. There's no determination of the company's part or by its controllers or by its Board to go, no, now we're only going to go after margin and forget about market share or vice versa. We're going to look for market share and increase margin. We don't have this dynamic. This is not our strategy. It's very clear. As Fabio mentioned, growth with profitability. It's not just growth and it's also not just profitability. It would be good if we were able to have a mandate we look only for one or the other to be able to look at the internal goals. But it's not like that. These variations in market share and profitability that you've seen over the year due to the market dynamics, it's not a choice or option of the company.

Okay. That's very clear. If I can just make one quick question. In the last quarter, when you changed the opening of some information that you were discussing in the discussion about the lowering of volumes -- fall in volumes, you said that the fall in volumes was in the different categories with the principal products of flours and adjacencies that these are all being reasonably similar to the consolidated volume. So have you been able -- would you be able to qualify for us these variations looking at the fourth quarter?

Thiago, in general terms, yes, they were all in the same direction.

Session of question-and-answers is now closed. We'd like to now pass the microphone back to Gustavo to make his final comments.

Thank you all for participating in our conference. We continue here of the RI team be at your service. Thank you all, and have a good day.

The video conference of M.Dias Branco is now closed. We thank you all for your participation, and please have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]