M. Dias Branco S.A. Indústria e Comércio de Alimentos (MDIA3) Q3 FY2025 Earnings Call Transcript & Summary

Good morning. Welcome to the video conference of M. Dias Branco with reference to the results of the Third Quarter of 2025. We have with us present today, Gustavo Lopes Theodozio, Vice President of Investments and Controllerships; and Fabio Cefaly, Director of New Business and Relations with Investors. We inform that this event will be recorded. [Operator Instructions] The transmission is also being done simultaneously in YouTube at www.youtube.com/rimdias. We'd also like to clarify that any declarations that may be made during this teleconference relative to the prospectus of business of M. Dias Branco, projections and operational goal -- operational and financial goals constitute beliefs and premises of the company -- of the management of the company based on information currently available. They involve risks and uncertainties and premises as they refer to future events, which may or may not occur. Investors should understand that economic conditions in the industry and other operational factors may affect -- materially affect the future results of M. Dias Branco  and generate results which are materially different than those mentioned in future considerations. I'd now like to pass the word to Gustavo, who will start the presentation. Gustavo, please go ahead.

Good morning, everyone. It's a pleasure to have you once again with us for the teleconference. First of all, I'd like to thank more than 17,000 employees of M. Dias Branco for the dedication and the commitment to the company in this quarter, especially when compared to the previous quarters. We had a growth of 16% in revenue, 73% in net revenue. So we are now going into this quarter, we're talking to you about this and with a focus on execution. And the results prove that we have the highest level of net revenue and with a high presence in the points of sale and aligned with the demands of our clients and investors. We reached BRL 2.8 billion in net revenue with a volume of 483 tons, growth of 15% versus the third quarter of the previous year, which totaled BRL 318 million of EBITDA, a growth of 39% in relation to the previous year with a margin of 11.4%. BRL 216 million of net revenue, a growth of 73% year-on-year and also showing the resilience in our results. The cash generation was very -- grew expressively with BRL 530 million, 8x higher than in the same quarter of last year, supported by the liberation of BRL 25 million in working capital. And we closed with BRL 2.5 billion, BRL 721 million in net cash. As you've seen particularly almost 70% on long-term debt, reaffirm once again for the eighth consecutive year. Looking at the ESG, we also advanced with the reduction of residues and diversity in the transparency portal of the impact growing with quality and increasing our competitiveness. I'm now going to pass this over to [ Fabio ] to give sequence to the presentation, and I'll be back for the question-and-answer session. Fabio, go ahead.

Good morning to everyone. This is Gustavo -- Thank you, Gustavo, for the introduction. I'm going to continue with the material and afterwards, we'll go back to the question-and-answer session. Starting off with the first slide summarizing the numbers as Gustavo already passed over some of them, I'm going to complement them. We're looking at the 2 first columns, which show net revenue and volume. We see there was growth in both variables in all of the comparisons. And so net revenue grew in relation to the third quarter of '24 and grew in relation to the second quarter of '24 -- '25. In the year-to-date, it's BRL 7.7 billion, which is a growth of 8%. Volume also grew in the quarter when compared to the previous same quarter last year and compared to the second quarter and also in comparison with the previous year and the year-to-date. This also demonstrates that all of our plan of recovery of growth with consistency and consequently with gain in market share are happening. Then going to the next 2 variables of profitability, EBITDA and net revenue. We see here that the EBITDA in the quarter grew 39% versus the same period last year and fell 8% compared to the previous quarter and is slightly below the year-to-date -- 2024 year-to-date number. Net revenue, as Gustavo mentioned, grew by 73% compared to last year, was stable compared to the second quarter and went up 7% in the year-to-date compared to the previous year. Strong cash generation, BRL 530 million generated in the third quarter, 8x more than in the same quarter of last year and 28% higher than the second quarter of this year. And in the year-to-date, 194% better than in the same period of last year. This cash generation, we'll go into more detail going forward was the result of the EBITDA generated in this quarter, plus [ BRL 700 million ] in capital -- in working capital. Looking at the chapter of the market and net revenue. I'm going to start with the information -- the market information, which is always important to point out that in this slide here, we are seeing information of the cookies and pasta markets and not the M. Dias numbers. The first message that we have here is that both markets, cookies and pasta have grown in value compared to last year and even compared to the previous quarter. Cookies grew by 3% in value compared to the last year and 5% in the previous quarter and pasta 6% and 2%, respectively. The pasta market shows growth in all comparisons. It grows in volume compared to last year, a growth in volume compared to the previous quarter and units sold also grew and the average price of pasta was 3% higher than last year and 1% below in the previous quarter. Why did it fall? Because the principal commodity that we use is wheat flour and wheat flour had a fall in price from the second to third quarter. Looking to the cookie market, we see that in the comparison with last year, there was a reduction in volume, a reduction in the number of units sold. And we understand that this fall in volume and units sold is related to the average price, which grew by 8%. So we look at the value sold, it's a product of price increase of 8%, which wound up generating a retraction of volume. But the reading in the short term is that from the second to the third quarter, we see that the market for cookies has grown 4% in volume for the second to third quarter. From our 2 principal markets is that they continue growing, especially the pasta market. Now the numbers for M. Dias overall. This was the third quarter -- consecutive quarter that showed growth in net revenue, always in the comparison year-on-year. So in the first quarter, it went up by 3%. The second quarter, it grew by 3% -- by 4% and in the third quarter by 16% compared to the third quarter of '24. Breaking this net revenue down into volume and average price, the volumes grew by 15% compared to last year. They grew 6% compared to the previous quarter. In the year-to-date, we grew by 1%. The average price went up compared to the previous quarter, when also grew in the year-to-year and showed a fall of 3% compared to the second quarter of 2025. This fall in 3% is largely explained by the retraction of EBITDA from the second to the third quarter. Looking here at the revenue column of M. Dias, looking at the details of the groups and categories, the first and most relevant in our results were the principal products, which is cookies, pasta and margarines, oil and wheat, which are the wheat flour and the other adjacencies, which are cakes, snacks, mixtures -- mixes, which are the newest parts of our portfolio with a possible growth that's higher. When we look at these different groups and categories, we see that in the comparison last year, there was growth of double-digit growth in both -- both in the principal products and in the refined oils and also in the adjacencies. Compared to the previous quarter, the principal products grew, wheat flour also grew and the adjacencies were stable. The positive highlight here was in healthy foods and snacks and mixes and cakes. And in the last column, all 3 categories grew 7%, 11% and 16%. Remembering here that the change that we've done in the beginning of the year in our structure and our commercial structure, we created 4 units -- 4 business units. Each one has a commercial leader, 100% focused on that group. So there's a team that's looking at the principal products, one team looking at -- Daniel's team looking at foodservice, Guitti is with the healthy products and snacks and Cesar with international area and [indiscernible], who works with cookies, pastas and margarins. The next slide, I'm going to show you what happened in each one of these business units in the last quarter. Looking here at the principal products, which is the second consecutive quarter of growth in net revenue, 3% in the second quarter and 16% in the third quarter compared to last year. Several highlights of these were the actions underway. We're focused greatly on sell-out. The sell-in as a consequence of the sell-out. And as he mentioned at the beginning of the call, we're increasing our presence in the points of sale. We improved our commercial plan, which works quarter-by-quarter, which also is true of the interaction with the retailers, more marketing actions to increase the turnover of our products at the point of sale and also recover share. We recovered market share compared to the second to the third quarter in the 2 principal categories of M. Dias, which are cookies and pasta. Here are some examples of the actions which are underway. A lot of investment in the point of sale, examples with Piraque, a combination of Piraque and Adria, Piraque and Fortaleza, especially in the Northeast. We have our principal brands, which have all presented growth, plus more sampling at the point of sale where you were getting closer and closer to consumers, permitting an increase in the turnover in our stores and a highlight of one of our brands of cookies, which is Amori, which is a sub-brand of Richester brand, which has had a very important growth with very important growth and results. in the category -- food service category, the portfolio has grown specifically and is specific for the B2B clients, or exposure in fairs and events, which are dedicated to this type of channel -- of distribution channel, an approach which is segmented by channels, restaurants, pizzerias, restaurants and so we're increasing our participation with distributors -- specialized distributors in food service. We have a different approach, a group of action which has shown itself to be effective and which is what we see in the net revenue in the graph above. This is the third quarter -- third consecutive quarter in which this business unit has shown growth compared to the previous year, 17% in the first quarter, 3% in the second quarter and 15% now in the third quarter. In the international subject, we have a little more of a look at this quarter in Las Acacias, which is our pasta brand that we acquired at the end of 2022. Originally, it was a company -- a pasta company. And in this quarter, we increased the portfolio for cookies and toasts. As we can see here in the pictures of our products in the corner of the slide. These biscuits are produced in our unit in Bento Goncalves, and we see more synergy in this acquisition outside of Brazil with the business that we have here in Brazil. Just tell me that if the acquisition is giving us results, one of the metrics is market share. And we see that from the end of last year to September of this year, our market share in pasta in Uruguay was -- went from 21% to 24% and our cookies went from 10% to 15%. We already had in Uruguay other M. Dias brands such as Piraque. So these cookie products such as Las Acacias are added to the cookie business that we already had in Paraguay -- in Uruguay. The adjacencies are cakes, snacks, mixes, healthy products and sauces and spices. This was the third consecutive quarter that we had a growth of revenue, 11% in the quarter -- 13% in the third quarter. Besides being the third straight quarter of growth in revenue, it's the third quarter of double-digit growth. And here, I mentioned some of the products that have had permitted this growth, expressive growth, the Jasmine products and the granolas, the oats, Fit Food, chocolates, rice, et cetera, just to give you a few examples. And looking to the chapter of the costs and expenses, here, we see 3 important curves for our costs. And also remembering that these are information, this is market information. This is not M. Dias information. So the dollar -- the wheat price in dollars and palm oil is also in dollars, also by ton, price per ton. So I'm going to start with the 2 variables, the 2 lower variables. We saw that wheat had a reduction in price in the market, both in the comparison with last year as well as in the comparison with the previous quarter. On the other hand, palm oil, which is an important consumable for cookies and biscuits, showed growth of 17% and 10% compared to the previous quarter. The dollar exchange rate, which has been present in about 60% of our total costs. We see here that there was an appreciation compared to the real compared to last year in the previous quarter. And here it's also important that as M. Dias has a stock, an average stock, historical average stock of commodities of approximately 3 or 4 months of production, it takes a while in a scenario of lowering costs in the market for this reduction to enter into the results of M. Dias. Besides having to get rid of all of the current stock, we also have the finished products to sell. So there's a certain amount of time for us to see a natural time period to see this change in the market in our results. Looking here at gross margins. The gross margin for the quarter was 32.2%, similar to last year and below what was measured in the previous quarter. We met the curves above the variable cost per kilo and the fixed cost per kilo. We started to see an improvement in the variable cost per kilo and also an improvement in the fixed cost per kilo, which shows that our plan of growth of volume is working and has already started to show a dilution of fixed costs. On the other hand, something that also converses with this dynamic of prices in the market are that our average price went from BRL 6 to BRL 5.8. So what happens is that the price is changing faster than the cost of the inputs going into our cost. These numbers wind up meeting up and adjust the average EBITDA margin. At the accumulated year-to-date, the margin goes from [ 34% to 32% ]. The average price goes up because our costs also went up. This is more of a long-term vision. Our expenses start off with the year-to-date because quarter-to-quarter, there's always some initiatives, which winds up not being rebated in the following quarters. However, we see that in the total expenses in the year-to-date. Last year, we did [ BRL 1.686. BRL 1.698 billion, ] remembering that our volumes in the year-to-date have grown at a rate of 1%. And our total expenses grow less than 1%. So we've had a result of expenses below inflation in the period. In relative terms, comparing with net revenue of -- we went from 23% to 22% of net revenue. Looking at the analysis of the third quarter, we see here an increase of expenses in nominal terms from last year to this year, and this has to do with the increase in volumes, which was 15%. And in the comparison with the previous quarter from BRL 565 million to BRL 616 million, we have a growth in volume, which impacts the variable expenses. The volumes went up by 5% and the recovery of some of the initiatives of marketing, trade marketing that were not done in the second quarter or in the first or second quarters of this year. We have expenses that are more or less comparing one quarter to another. When we look at the year-to-date, the expenses are well under control. The EBITDA for the quarter was BRL 318 million, below the quarter -- the EBITDA of last quarter, well below that of the previous year. And in this year-to-date, it's 2% below the results of the same period last year. Net revenue winds up following the same dynamic and tendency of the EBITDA. We see here a small different tendencies going from the second to the third quarter to have a position where net cash winds up affecting us positively our results in terms of profitability. We have profit is also stable. Comparing year-on-year, the net revenue grows from BRL 470 million to BRL 502 million. Looking at cash generation, debt and investments, we generated BRL 530 million in cash. Last year was BRL 67 million. In the year-to-date, we had BRL 1.2 billion and last year was BRL 417 million. This cash generation has to do with the results themselves and also with the liberation of [ BRL 205 ] BRL 250 (sic) million in working capital. Working capital comes from the suppliers, which had an increase of 5 days, a favorable increase for cash generation, while the other 2 categories, clients and stocks were stable, clients and stocks. We closed the third quarter with a cash position of BRL 721 million net debt, more cash than debt and BRL 721 million. And for the eighth year in a row, we're AAA rating from Fitch, which is the highest Fitch rating. A large part of our debt is a long-term debt. Of the BRL 1.8 billion in debt, BRL 1.2 billion only comes due after 2028. In the year-to-date, we're investing 3% more than it was given last year, which also has variations quarter-by-quarter. It's more important to look at the vision of the year-to-date numbers with a highlight for information technology especially items aimed at artificial intelligence and the increase of efficiency and productivity in our factories and distribution centers. This is our strategy. The principal highlight of this moment is to recover volume, talking about this quarter of last year compared to the quarter last year. The 4 business units, we see them presenting growth -- consistent growth quarter after quarter. So we have a growth -- a volume growth plan, which is giving results. Looking at ESG, Here, we have our principal highlights of our 3 pillars: caring for the planet, believing in people and strengthening our alliances. And after that, we look at the question-and-answer session, recognizing M. Dias was one of the highlights often highlighted in the transparency trophy, which is organized every year by the Anefac. Thank you all for accompanied this first step of our call. And now we're going to the question-and-answer session.

[Operator Instructions] Our first question comes from Thiago Duarte from BTG Pactual.

Good morning to everyone. A pleasure to speak with you, Fabio and Gustavo. I wanted to touch on 2 points. First, in relation to the dynamic of revenue, especially in what you call the principal categories, I wanted to understand and qualify a little bit better the evaluation quarter-by-quarter. Remembering that in the previous quarter, the average price apparently had been helped by a question of mix with an increase in biscuits with a higher -- cookies with a higher price. And we look at the average prices quarter-by-quarter, specifically looking at categories, the core categories, if there was in any way a reversion of this effect -- this mix effect on the average price or if there was, in fact, promotional activities. We spoke about the one-offs and onetime costs. And what was the cost of these things, the weight of these things when we look at the average price? And the second question is about costs. Looking at the evolution of the principal raw materials, the unit cost, which you mentioned in this quarter, my question is, if you see space for a more relevant cost of unit cost in the next quarter in relation to the third quarter? And if you imagine that this fall may not be so high in this quarter due to a question of strategy of hedges or stocks if it makes sense to imagine a fall that you have already contracted and more lowering of costs in the fourth quarter. Those are my 2 questions.

Thiago, this is Gustavo. Thank you for your question. Speaking with the second part, yes, you understood well our capacity to stock. And in terms of a hedge, the price fell prior to the -- so there's a cost fell, but not in the same proportion as prices due to our capacity for storage and our position -- our hedge positions. But yes, you can expect a fall in cost in the next quarter, aligned with proportionately with this price reductions. We've always been a company that came out first in pricing. And at some moments, we have -- we're poorly positioned in relation to the market. Question has more to do with pasta. Cookies has a more elastic base and the wheat influences more the price of pastas. So even though it's not in the same proportion, we wanted to follow the reduction in prices in the market, even though the costs fell a little bit afterwards. Just as we have a spike in a commodity, the company suffers a little bit after the rest of the market because of our hedge position. But that was it. There was a disconnection, especially in pastas. That's a point, yes, you can expect a higher fall in the wheat prices.

Our next question comes from Gustavo Troyano of Itau BBA.

First of all, I wanted to thank -- go back to the first question and to Thiago's question and look a little more your vision for the rationality of prices in the industry. It's clear that your costs should go down in the fourth quarter. And when you compare that with the level of stocks -- historical level of stocks of your competitors, which usually is smaller than your stocks, it helps us to understand that the deflation in cost in the industry is already happening. While we see the average prices of sell-out for the industry has considered -- has continued quite resilient due to the competitor, which shows a rationality in the third quarter. I wanted to hear from you if it makes sense this analysis. And if you understand that the industry continues rational, even though there is a deflation in costs and looking at the fourth quarter, it would be good to hear from you a little bit about this perspective, how this has evolved when we look at the fourth quarter and at this price level in the industry, it will maintain relatively stable as happened in the third quarter. That's my first question. And the second question is regarding the allocation of capital. I believe you published a position of net cash -- a relevant net cash position in the third quarter. It's natural that the questions will arise regarding dividends and how do you -- how are you thinking about the capital structure? Is it good? And if there's any opportunity for growth, inorganic growth, perhaps in some region or category that you might be able to point out to us that would make sense. And if we can take a look at where this cash will be going since this great amount of cash that you reported in the third quarter.

I'm going to start here, Fabio. Yes, the industry is quite a bit more rational than we saw last year. These reductions in prices in pasta specifically has followed the falloff in costs. And you'll see that this proportion with great deal of profitability for the third quarter. But looking at the market in general, the industry is rational. Prices are going down the same proportion as costs. M. Dias has been following the market, maintaining our prices lines independent of our stocks. We're showing -- in the short-term, we're having a gain in market share, both in pastas as well as in cookies through our pricing, which is closely united with the market, but there is some irrationality. We don't see irrationality. Everyone is very -- following the commodities and exchange rate changes in a form that's quite rational.

Gustavo, this is -- just to add to what Gustavo said, beyond the information in the market that we presented in this material, when we look at the most recent results of [ IPCA ], we see the two categories which are most related to the price of wheat, the pasta and the other flowers have shown reductions, sequential price reductions in line with the movement of that commodity. While the category of cookies, which beyond the wheat has also as palm oil and palm oil has recently increased in price has shown a slight increase in price in the month of September. These movements, this information corroborate our reading that the competitive environment is rational. We're not in any type of irrational -- irrationality in the market. In relation to the allocation of capital, you touched on two subjects, eventual inorganic movements. This we see from the standpoint -- the strategic standpoint, the company is always attentive to any type of opportunity. So we don't have any new regarding that. In relation to any eventual increase in distribution, it's important to remember that in recent years, our payout went from 40% of our distributable profit and went to 80% -- so just in this change is an increase -- a distribution increase that's relevant and the increase in profit year-on-year should also cause an increase in distribution of profits. In the month of September, we made a distribution -- an extraordinary distribution of approximately BRL 30 million. So we're constantly monitoring this situation, the facts regarding what happens in the market. And if there's any decision different from that, we will communicate.

Our next question comes from Lucas Ferreira from JPMorgan.

As far as expenses, what should we expect in the fourth quarter and for 2026? I see that you explained that there are some activities that are basically held back in trade. But I remember that in the past, you spoke about SG&A as a percentage of revenue getting closer to 20%. My question is at the level of expenses, I imagine for the fourth quarter, if there will be any calendar effect or anything that's worth calling our attention to? And also, what should we think about for 2026? Also one more question, a follow-up on your costs. My question is if this is a question -- it's only a question of stock or if this is some type of a hedge play, especially in palm oil, which has a longer period of time to be loaded into your prices. What should we expect in terms of the loss of [ English ] these vehicles in the third quarter -- fourth quarter?

And answering your first -- second question has more to do with the capacity of stock and inventory that we have talking about in terms of especially in pastas. We know how much we have in stock, and you already know how much we have in stock. It's a hedge position, which is very healthy. So we can consider that this question of stocks and not as [indiscernible] of hedge. Looking at SG&A, we had a question of seasonal question -- so in the first half, we had very little investment in marketing. We had important changes in the team, both in the sales team as well as the marketing team. In February and March, we had these changes. And now we're recovering these investments in a more intense way. So the expenses that didn't happen in January and February are now being happening in the third quarter and should also reoccur in the fourth quarter. Lucas, it's a question of timing. But from '23 to '24, the amount of investment will be roughly the same. We're investing approximately 2% of our net revenue. We've had -- tried to maintain SG&A controlling inflation. In absolute numbers, it has grown very little year-on-year. As far as the percentage of revenue, we have a flat movement and revenue falls and the price is passed through the price of pasta and other commodities. And it's just fall -- a little bit in relation to SG&A in terms of net revenue. It's very close to our target to 20%. But due to revenue which is retracted, it could -- for a short period of time, this percentage could be slightly above 20%. But 20% continues to be our target.

Our next question comes from Henrique Brustolin from Bradesco BBI.

I would like to, first of all, look at the question of the volume and the gain of market share that you commented and if you could qualify a little bit between the principal categories of cookies and pastas? How was this gain in share that you saw at the end of the line? And if you could comment that if this gain -- if the pricing is better or if there's anything better in terms of commercial execution, which could continue to signal a recovery going forward. When we look at the data of the market, the sell-out data, for pasta and cookies quarter-on-quarter, it was higher than your selling. So we should think that this is a margin for you to continue accelerating your volume in the fourth quarter sequentially? That's the first question. And the second question is a follow-up of the average price. It's clear the discussion of price increases in pastas. If there was any mix effect that was important in this quarter. When we look at these categories, especially cookies and any discussion of channels, which has affected volume and eventually impacted this line. These two questions.

This is Fabio. I'm going to start with your second question. There was no mix -- relevant mix factor involved in this between the categories or within the categories in this quarter. And looking at the next point of your question, what we see in this recovery of market share, which is very consistent, which is very consistent. We've seen an evolution over the months. And at the same time, this coverage. So this share gain, which is happening both in cookies as well as in pastas in practically every region of Brazil. We're not -- there's not any big concentration region-by-region or by channel or by region or by subcategory of product. What is -- what does this represent? What does that mean? It shows that our plan for the recovery of our growth and the recovery of our market share is working. And [indiscernible] on one channel or another or one subcategory or another. Just to give you an idea, an idea of what we're doing. These things that we mentioned in the second quarter, we increased our investments in marketing and trade marketing to give more turnover to our products, and this involves extra points, samples, a series of things that happen at the point of sale. This process of pricing is more robust, which accompanies the prices, the market prices and in several -- there are some moments at some places where M. Dias is the first to make these movements because of its important representatives in certain regions and other regions, less so. However, in general, we are accompanying the market movements, which shows that the price levels is very controlled. So this winds up creating conditions for us to recover the retaking of these volumes. So here, what you mentioned here about an eventual disconnect between sell-in and sell-out, your affirmation is correct.

And I will add one thing. Just to add, Henrique, I think that if the sell-out is higher than the sell-in, this shows that the market had stock or the market will be making bigger purchases in this coming quarter. This has a lot to do with what I mentioned in the last call is due to the different way of negotiating less transactional with each one of our clients. Looking at the group of sell-out, the biggest execution in the store with promoters, with music and much less depending on -- you look at this greater danger and I don't have my product in stock or it's getting old, reaching its sell by date. So these movements wind up showing a little bit of this change of our logic. Negotiations made much more in that sellout and for sales to the consumer rather than sales to trades with no guarantee of sellout. This change of our mentality brings us this type of situation, a sell-out that's higher, a gain in market share when compared to sell-in. So that's the reason.

Our next question comes from Pedro Fonseca of XP.

I wanted to make a follow-up regarding several questions already answered about the performance of the Q3, but this looks at the -- we've seen other segments having a lot of -- when we look at the data here in the market data here and the comments from the companies, it looks that these categories are even serving relatively well or if you're seeing some difference in performance region-by-region that the company used to call it defense and attack regions. You see additional investments in trade or pricing might be different thinking about the old breakdown that the company had. That's my first question. The second question is regarding taxes. We see that one more quarter is lowered due to punctual onetime questions. But in Q2, when we spoke about the level of normality, it would be 15% and that should be what we expected for the year as well. So that's my doubt. I imagine that 15% for the New Year doesn't make sense. Please let us know what we can expect for the next year.

Thank you, Pedro. I summarize a bit. We don't see any great variations. The growth is very, very well studied. This number is almost exactly the same. Our region growth by region by the same amount. So we don't see any change, the need for any change, significant change compared to what's happening. What's happening in the Northeast is what's happening in the rest of the country. Nothing that calls our attention. We didn't have any mix by region. So it's the same -- I think you're looking at that correctly. You also mentioned in the U.S. we could absorb some of the margin. That's true. But when we look at Brazil, growth it's very similar region-by-region. Talking a little bit about the rate, we should wind up with a rate slightly below what we had suggested during next year for 5% to 6%. And this is -- these numbers are a little bit below the accumulated inflation. [Indiscernible], you had two events expected rate of 15% down to the rate of 5.5% in this quarter by any event -- the idea of making results and results using swaps, which generates results. Beyond that, we also had the recognition of some credits, some one type credits, which are up involving us and subsequently to the effective rate. So these are questions that several quarters help and several other quarters don't help as much. Perhaps the best way would be to use a rate -- a base rate of 15% in the past. But due to the taxation of this could increase. So we see that could happen in the previous quarters. There are some in this third quarter.

Our next question comes from Isabella Simonato from Bank of America.

I wanted to come back a little bit to the discussion about price and margins, especially from the side of cookies. You spoke quite a bit about strategy of prices for pastas due to an increase in margins with the competitors, and you want to maintain a position of relative price relationship. When we look at cooks and the spot costs, it seems that it should have supported prices in the industry a little bit higher than the 5% that you show of the market compared to the second quarter due to the dynamic of palm oil over the year and especially the acceleration that it had in this last quarter. If you could explain a little bit more how you understand -- prices over the quarter, also looking at the fourth quarter, the price of oil has gone up. Just to understand if this convergence of prices and margins that will also apply to cookies -- cookies and crackers.

This will -- this is Fabio. What we've seen in the market, there is a higher pressure on prices of pastas since this is a category which is totally connected to the price of wheat and the price of wheat has fallen over the last few months. However, the cookie price also has wheat and also palm oil and other inputs, which are related to palm oils. These have gone up in price in recent months. So as you mentioned, this puts a price -- higher pressure on the prices of these commodities. However it's important to remember that the price of biscuit cookies in the market went up substantial increases in recent years. We also saw in the slides that we showed of the market that year-on-year, the market has gone up 8%. In terms of the average price of these volumes have also risen as well. This could also be a signal that at this point in time, there's less space to add price to the cookie category. So the question now is how all of these variables will behave. We made some -- we recovered some of these prices, as Gustavo mentioned at the beginning of the presentation to maintain this relative price of the cookies at the correct level and which creates conditions for the recovery of growth of volumes and a growth in market share, which is what we have been able to see in the comparison year-on-year and also compared to the previous quarter.

Understood. And in relation to oil, how can we expect this relief from the palm oil in your margins?

Oil has gone up. There could be a falloff in recent -- in the last few days in the beginning -- in the recent days the last -- beginning, we may expect a little bit more to see if this reduction in costs will continue or if we want to have another change in [ tendencies ]. It's a little bit early to affirm that the market will reprice cookies due to this recent reduction in costs. We need a little more time to analyze that.

Our next question comes from Lucas Ferreira from JPMorgan.

It's more of a conceptual question. M. Dias is a company which historically follows costs and exchange rates with the dollar going up and has always benefited greatly by the cycles of contraction of costs as well as the expansion costs much bigger than last year, also had a big impact on the margins of the company. But as I understand, you have a strategy of looking more -- if I can put it this way, looking at a little bit more -- more price takers in the market, some categories when you spoke about pastas, this will make this dynamic a little bit more flexible. So my question is more along the lines of the long-term -- the medium-term, long-term, two years going forward, if you believe that the question of margins, the targets of 20% is still reachable, still realistic due to the strategy of being closer to spot prices because, of course, the market is growing, the category which grows very little, these are categories that don't -- that grow slowly. Your portfolio that you have today, increasing and adjusting your strategy, perhaps something here or there not recurring in expenses, do you think it's able to get at the 15% margins that are reachable? Is that viable?

Hi Lucas, this is Gustavo. Looking at your first question -- conceptually, we made mistakes in the past in regarding to pricing and cost with the definition that we -- the company always had a -- to lead the market, and we had that role and we continue to have that role. But at some point in time, the company insisted a great deal in the question of or either holding things down or going up before other people do in an incremental way, which made the market share to be very -- made a big difference. But pastas makes a big difference. However, several -- there's no way to say this, but in other regions looking at the -- exclusively at the question of the cost of commodities. But looking at a movement that is more in the market, looking at the market in a less radical way. However, the logic doesn't change in the regions, we have a very important, very relevant participation in the market. That's the first point. Looking at profitability, our vision -- it doesn't make sense for the company to generate a higher EBITDA than we had in the past. We look at that with great deal of conviction due to the investments which are being made with the brand, the Piraque brand is the brand -- the fastest growing brand in Brazil and has the biggest portfolio that has the highest average price, and we've invested a great deal in these items. We launched the lamens -- the unfried lamens and other more healthier products. So looking at people that are concerned about those, looking at these numbers that way, both -- it's a gigantic market. So the company is structuring itself in this direction of having more added value and less and less dependent upon these more basic products such as common pastas. However, this is a plan, it's a transitional period. Looking at our portfolio and the type of categories in which we invest, it helps us to believe that we have to deliver margins that are higher than we had delivered in the past. That's our conviction. And these are the motives, the reasons for that.

The session of questions and answers is now closed. I'd like to pass the microphone back to Gustavo for his final considerations.

Thank you, everyone, once again for participating in our call. IR team, Fabio and myself at your service for all of you. Please feel free to contact us on this channel. Thank you very much and have a great day.

The video conference of M. Dias Branco is now closed. We thank you all for your participation. Have a great day.