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

Good morning. Welcome to the earnings call M. Dias Branco related to the earnings for the fourth quarter of 2025. Today, we have Mr. Gustavo Lopes Theodozio, the VP of Investments and Controllership; and Fabio Cefaly, the Director for New Business and Investor Relations. We'd like to let you know this earnings call is being recorded. [Operator Instructions] The transmission is also taking place simultaneously on YouTube at www.youtube.com/rimdias. We'd like to let you know also that possible statements that could be made during the earnings call related to business risk factors at M. Dias Branco, projections and operational and financial targets represent beliefs and assumptions of the company's management as well as are based on information currently available. These involve risks, uncertainties and assumptions as they refer to future events and therefore, rely on circumstances that could or not occur. Investors must understand that economic general conditions in the industry and other operational factors can affect the future performance of M. Dias Branco and lead to results that differ materially from those in future statements. Now we would like to pass the floor to Mr. Gustavo as he begins the presentation. Please, Mr. Gustavo, you may proceed.

Hi. Good morning, and thank you, everyone. It's a pleasure to have you with us once again for one more earnings call. We ended the year '25 with relevant advances that are structural and that reinforce the company's resilience and the strength of our brands and the company's financial discipline, even in a challenging environment from a consumer and income perspective. Starting off with the consolidated results, we have to reach a net revenue of BRL 10.4 billion, growing 8% in regards to the previous year, which is basically sustained by the recovery of our volumes that grew 3% in the year. In the fourth quarter, our revenue grew 9.3% reflecting the consistency of our growth throughout the entire quarter of all the quarters of '25. This performance reflects the profound transformation of our commercial area with the deployment of four clear initiatives for growth. I'm going to get into this a little more up ahead with more execution discipline, absolutely focused on sell-out consumer and [indiscernible]. The perfect store format you already know has gained scale and recovered and that already reflects on the gradual market share gains in the main categories we're operating in. In regards to profitability and cash positions despite the relevant pressure of costs during the year, we're able to reach a net income of BRL [indiscernible] million and an operational cash generation that's an all-time high of BRL 1.4 billion, an increase of 138% compared to 2024. This result reflects important gains when it comes to working capital gains, operational efficiency and greater financial discipline. With this, we reached the end of the year with BRL 1.9 billion in cash, cash position net BRL 550 million, and our leverage is negative 0.5x net debt to EBITDA and 95% of our debt at long term, keeping our rating as AAA with stable perspectives defined by Fitch for the 8th consecutive year. From an operational perspective, results 1.8 billion tonnes in 2025 was an important highlight for the fourth quarter of '25 with a growth of 10% in volume, showing you all that the recovery is consistent. And the use of the utilization level went up, 64% was an important highlight for cookies, snacks and food service with important roles in this evolution. Looking at our stock value, valued at 26%. And that also reinforced our policy for compensation to shareholders with monthly dividends. We distributed a total of BRL 439 million last year, leading to a dividend yield of 6.5% in the year. We also continue to advance consistently in our ESG agenda, with an evolution in water efficiency, reusing rainwater, zero landfill policy, strengthening leadership and important recognition and acknowledgment with trophies and awards of transparency and the GPTW CO as well for the 30 year consecutively. So 2025 was a year of recovery in our growth, strengthening our basis and strong cash generation, strengthening our financial performance. And we start off in '26 with a more efficient company that's closer to consumers with brands that are even stronger in a financial position that is extremely solid. We want to thank everyone for their trust and the effort of all of our employees, and we continue to be committed to the creation of value that is sustainable in the long term. Now I'll pass this on to Cefaly, so he can get into the specific presentation of the quarter and full year, and I'll come back later on for the Q&A session. Fábio?

Well, good morning, everyone. Gustavo, thank you for the introduction and the overview. I'm going to follow along with the presentation of our earnings for the year and for the quarter. I want to start off with a summary, a general summary. Some of these numbers were already mentioned by Gustavo in the opening speech. But just so we can see this in a more visual and consolidated manner here. So we had a growth in our revenue in the full year, but also in the specific quarter, closing at 8% growth compared to last year, 9% in the quarter. And this drop compared to the third quarter is normal, considering the seasonality that's historical between the third and fourth quarter when it comes -- and this is something that happens every year. We had growth in volumes also in the annual view and also in the quarterly view. The EBITDA had a bit of a slowdown compared to last year, in the full year and in the quarter. And this is mainly due to the impact of the costs and also when you compare quarter-over-quarter, the fourth quarter of '25 versus 2024. It's really important to remember that there was a payback of profit sharing that created a bigger comparison basis. And in the profit, this comparison basis factor also compromised a bit of the net income view when we look at the fourth quarter of '25 versus '24. On the other hand, the net income in the year of 2025 was 2% higher than 2024. And when it comes to our cash position, we grew as a quarterly view, but also in the annual view, ending the year with a cash generation of BRL 1.4 billion. So advancing here, we will start with a view of how the cookies and pasta markets behave. So it's important to highlight that these numbers on Slide 5 are not M. Dias numbers. These are markets numbers from the market. And so the first information is that both markets grew in value in 2025 versus '24. The cookies market grew 3% and the pasta market grew 2%. There was an increase in the average price in both markets, pasta 2% positive and cookies 7% positive. And when it comes to units sold and volumes, the pasta market had a growth of units and volumes were stable year-over-year. And then in the cookies market, we saw a setback of 3% in units sold, but also in volume sold. And our interpretation of this information is that due to the fact that the market had an increase in price of 7%, which is higher than the inflationary index. This led to a retraction in volumes and units sold, which didn't happen in the pasta market. And I also want to highlight our plan where we bring a bit of what was communicated during the second quarter call in the last column, generally here, what we are pursuing, some concrete initiatives. And then on the right side, the concrete results or earnings of things that already happened. So the plan is based on five main pillars. We have a commercial plan that must be clear, searching for growth and profitability simultaneously as well as a series of different initiatives with the evolution of commercial capacity as we had a significant change in our team as well and in our structure that we're going to get into a little more details and also an ongoing process of searching for productivity and efficiency when it comes to expenses, costs and manufacturing productivity and an ongoing search for agile culture that is already part of our DNA. So we've been working a lot on the sell-out side. This is something we've been talking about a lot with you and searching for ways to have sell-out and the sell-out really being a consequence of the sell-out, improving our presence in the POS and also a commercial plan that intends to really focus on the quarter. So this provides more visibility and more space so that we can have other types of negotiations with our customers, evolution in the market routes and go-to-market routes. And this is something that we started working on stronger from 2024 onwards, accelerating productivity programs and improving management indicators. So all of this is what we communicated to you in the second quarter, and these are some examples of things that already happened. We created four different growth initiatives. We strengthened our presence at POS through the Perfect Store program. This is currently present in more stores, and we were able to recover our results in key markets such as the state of Sao Paulo, where we've been improving profitability and revenue. We recovered market share from the second semester of 2025 onwards in the two main categories, cookies and pasta, and we've had our revenue results been really consistent. We had a growth in revenue in all of the different quarters in 2025 compared to 2024. So the commercial team is organized with these four different growth initiatives. Each of these has a leader that is 100% dedicated. So the main products include cookies, pastas and margarine. Food service here is basically a B2B channel that we have flour, meal and industrial flour, healthy products and snacks. We have the Jasmine, Fit Food, Frontera and Piraquê. This is a growth store that's very important because these are markets that are growing double digits. And our expectation is that this market growth should continue over the next years. And then international, which would be considering all of our exports to almost -- to more than 40 countries. And Las Acacias, which was a company we acquired in Uruguay in 2022. So throughout the presentation, we'll get into more details about the results of these four initiatives for growth and the main facts and details of what happened in the last 12 months. First of all, as I mentioned in the beginning, we had growth in our revenue in all of the different quarters, 3% in the beginning of the year. Second quarter already started to demonstrate a level of growth that was more accentuated, double-digit growth in the third quarter, and we ended the fourth quarter with 9% growth in our revenue. Now starting off with some growth initiatives with the main products. The beginning of the year was a little more challenging. We have stability in our revenue in the first quarter. But then after the second quarter, we already started to have a growth that was a bit more consistent, growing 3% in the second quarter and double-digit growth in the third and fourth quarters. Then we recovered our growth in Sao Paulo with an improvement in profitability when it comes to relative terms, but also nominal terms. We recovered our market share for cookies in the Southern region. We kept the consistent growth of our Piraquê brand, which is among our three main brands at M. Dias, and that places our cookies at a more premium price level. These are cookies with more added value, and we had relevant advances in the states of Bahia and Pernambuco, replicating the excellent results we were able to achieve throughout the years, especially in the state of Ceará. The Piraquê brand came from Rio, but it was acquired by M. Dias back in 2018. Then we also increased our market share when it comes to cookies, and that includes the items with more added value in the cookies and personal cracker categories. Then our brands as a result of all of the investments in marketing that have been done in the past years are among the main consumer brands in Brazil, gaining positions in when it comes to presence in the Brazilian households. The Vitarella brand is the 10th when it comes to position considering consumer brands and even other categories as well and the first when it comes to the cookies and pastas category. Piraquê went up 6 positions and Richester went up 5 positions last year. We had a program that was really significant and important to bring our teams closer to consumers and our presence at the POS. We had over 800 employees participating, call those like the POS heroes. So these are the stores where we have our products exhibited and -- this idea was to show employees what's going on at the POS, creating a close connection with consumers and customers. And this program was a full success to give our team more energy and really help create this feeling of cohesion and closeness to consumers. Then moving on to the brand investments here. This is just one example of an investment with Vitarella brand, [indiscernible] some special dates and celebrations in the Northeast. Some initiatives as well of limited editions of products. This is an example of Amori, the Richester brand, we created a limited edition called Mystery. And then in this case, we create an experience for consumers to discover what was the flavor in each of these packs, the mystery packs, this is a success and was present on TV media with influencers, et cetera. And when it comes to pastas, we performed a reality show called the war on pasta or pasta war or pasta battle. And this is focused 100% on Adria, one of the pasta leaders in Brazil. So the full success is over 5 million views on YouTube. The Piraquê brand, which has been gaining relevant investments in marketing. And it's a brand that is super important when it comes to the cookie and cracker category, and it represented a share volume gain that was very relevant going from 5.4% to 5.7%. This is market share considering the volume nationally. Then our presence in big trade fairs like APAS with our team receiving awards and prizes that are very relevant in this trade fair. Then when it comes to launches, one example was a personal cracker from Piraquê, reinforcing the brand's presence in different subcategories of cookies and crackers. Piraquê is in salty snacks, cookies that are filled, covered, coated, sesame crackers, et cetera, and even other Goiabinha other flavors that are very popular. Then moving on into other growth initiatives, which is food service, including meal, flours and industrial fat, which also represented a lot of consistency during 2025. We had growth in our revenue in all of the different quarters in the year, 17% in the first quarter, 3% in the second quarter, 15% in the third quarter and 7% in the fourth quarter. These are new categories and the growth initiative has a new leadership team. The execution is supported by different programs that really bring our customers closer to our teams and our industrial units. So this program really embraced about 98 customers. We had over 200 training sessions, over 700 technical services participating in trade fairs and a distribution that is a lot more supported by the indirect channel, which is super important for this segment. So moving on, this gives us a lot more geographic presence and footprint into our items. We've created the M. Dias Branco Professional brand, which is present in all different items of this initiative upfront. We also created a platform, a digital platform with over 225,000 users with a virtual assistant over 43 videos with recipes and tips and over 3 million views. So the idea of demonstrating all of this and showing you all this is we really added this growth initiative at a whole new level. And when it comes to bringing customers closer technology and go to market. So Daniel is also the leader in this initiative here, working on strengthening the execution commercially, participating in trade fairs, creating the [indiscernible] program and embracing all of these other initiatives. New products, so the Gold Medal for confectionery adjustments in Puro Sabor Especial Gold Metal, the [indiscernible]. So there's a lot of opportunities for growth in the flour category and also the margarine and fat categories, creating products for some other specific uses as these that appear here on the slide. Then in the growth for products that are healthy products, as I mentioned in the beginning, it's really important for the next years at M. Dias Branco due to the growth of these markets and the average price and the margins that are structurally higher. And we have a new team that is really engaged with a new relationship with customers, and this is all demonstrated very consistent results with growth of double digits in all quarters in the year, 11% again, 13%, wrapping up the fourth quarter with 14% growth in revenue versus last year. So we relaunched the Frontera brand, which was really important for snacks, focus on tortillas, a new commercial distribution model, generating more speed to customer service in the market and a broad portfolio, including granola, gluten-free bread, cookies with the Jasmine brand and some chocolates also with the Fit Food brand as well. This is our new package for the Frontera brand. This is a product that originally was imported. We installed this production line in one of our factories, and we're producing in Brazil, which has been allowing us to operate with a level of competitiveness that's a lot greater, and it's contributed a lot to accelerating the growth of this brand. And when it comes to the products that are more geared to healthiness and natural ingredients, at this moment, we're launching this new item by Jasmine, which is the premium granola with 38 grams of protein for every 100 grams of product. And these two items are part of a portfolio that already exists of other Jasmine items as well that are focused on proteins, such as this one here on the left side and the Fit Food snacks as well, such as the potato chips, which is -- so this is -- it's oven and not fried. And so M. Dias is really focused on these trends that has a really big portfolio of products and brands as well. And so when it comes to the international growth front, where we consider the exports and our unit in Uruguay also, Las Acacias in a consolidated manner when it comes to revenue, we had a slight slowdown in 2025 versus 2024, which is completely related to the rates that were placed -- the tariffs set by the U.S. in 2025, which kind of compromised our sales to this market. But we were able to, in some way, offset the situation by exporting more to other countries and accelerating our strategy in Uruguay. And one of these examples was the introduction by the end of 2025, the cookies with the Las Acacias brand. These are cookies that are produced in one of our production units in Brazil. So we've been able to capture synergies that are very significant in this first acquisition that was international. Now today, we're the #1 in cookies in Uruguay, of course, adding up to the Las Acacias brand, but also other M. Dias brands that were already present in this market. And M. Dias is #2 in pastas in Uruguay. Here on this photo, you can see César. He's our leader in our initiative, international front. He's always traveling around the world all year long, prospecting new customers and selling more to the current customers. So when you look at all of this together and you see the revenue starting off this year, we grew our volumes by 3%. The average price went up 5%. And our net revenue in total, which added up to about BRL 10.4 billion had a growth of 8%. And there was growth also in the three biggest groups of products. The main products, cookies, pasta and margarines and refining of vegetable oil, which is basically food service and in the adjacent areas of growth of double digits. And the same situation is also seen in the evolution of the net revenue for the fourth quarter of 2024 to the fourth quarter of 2025, versus the third quarter, it's normal to have a bit of a setback in revenue 2% volume, 1% average price. Considering the seasonality, it is a bit more unfavorable in the fourth quarter versus the third quarter. Now the market share, no doubt is one of the highlights for this result when we consider the full year. So we've seen from the second semester on in 2025, we started this journey to recover market share. The cookies market share went from 29% to 30%, 31.8%. And we ended 2025 at a level that was higher than 2024. The pasta category had the same trend going from 25.4% to 27.5%. And there's still something here that needs to happen to reach what we had in the end of 2024. And then the flour category ended with 12.2% market share above the closing in 2024. So I think all of the initiatives that were presented here in different business fronts are already starting to demonstrate concrete results when it comes to the growth of volume and revenue, but also when it comes to the sell-out because it becomes one of the main measures when you consider the market share as it's one of the main sell-out measures. And wrapping up here on the revenue part and heading to costs and expenses. These are the curves in the market. Considering the dollar -- the wheat in dollars and palm oil, just to highlight that these numbers are not from M. Dias, these are numbers from the market. And these are the main factors that impact our variable costs. So when we look at the full year, the real lost value, about 4%, palm oil went up 9% in dollars and wheat dropped 6% in dollars. So in the overall scenario, there was a bit of cost pressure. in the full year of '25 versus '24. But at the end of the year of '25 versus the end of the year of '24, we had a drop in costs in the market. And part of this is already present in our results, in our earnings for the fourth quarter, but one part still didn't achieve this because of our stock positions, our hedge positions for commodities and for currency. When we look at our gross margins for the year, it was 32.2% in the year, 34.4% last year. There was an increase in variable costs due to these factors I mentioned in the slide above and the fixed costs went up a bit. but this considers a relationship with the adjustments in payroll, which is quite normal. And the average price went up from BRL 5.5 per kilo to BRL 5.8. And in the comparison of the quarter and the year-over-year, the gross margin was 33.5% to 31.6%. And it's just important to remind you that in 2024 in the fourth quarter, we had a return on the profit sharing provision and this generated a positive impact that increased results in that quarter. And when you perform the adjustments, the margins would be close to the 30%. So when you look at this adjusted margin, it would be an evolution of 30.2% to 31.6%, considering that there was a profit sharing provision in the fourth quarter of '25. And so when we -- a topic that analysts and investors really talked about a lot in the last quarter, we understood it would be important to provide a little more visibility and evolution of the gross margin. So here, you have more of a sequence view of the third quarter to the fourth quarter of 2025. So the gross margin was -- went from 32.4% to 31.6%. So here, you have 1 percentage point that is favorable considering the reduction in cost of the raw materials in the market and the gain in value of the real. But as I mentioned before, this represents capturing one part of what's already gone on in the market. And there's some stuff still going on considering the hedge positions and physical stocks we have for some of the commodities. So a little less subvention in investments since our main subvention is related to wheat consumption and since wheat prices dropped in the market and at M. Dias, this creates an unfavorable impact from the third to the fourth quarter due to the seasonality that was unfavorable in the sales and considering a smaller demand in the fourth quarter versus the third quarter. Our production level was also consequently lower, and that leads to a lower dilution of the fixed costs, which impacted our gross margin at 1 percentage point. Then we have some other combined factors that also represented about 0.1 percentage points. And another important highlight from 2025 was the increase of our capacity utilization 50.1% to 60.4%, which is related to the growth of 3% in volumes. So gradually, we're going to be increasing our utilization rate, diluting more of the fixed costs, and that will generally improve our margins. Then the expenses that are administrative and sales, which is the SG&A starting off here with the year. We -- in nominal terms, it went from BRL 2.1 billion to BRL 2.3 billion. And in relative terms, it's basically stable. And I want to remind you all that in 2024, there was the payback of the profit sharing, the PLR. With this adjustment, we would have a growth of the SG&A in the annual vision, which is actually lower than the inflation in that period. And in the quarterly view, we had BRL 480 million. This year, BRL 619 million. And we considered a little more detail here in the titles here of the slide, but the summary is that there was -- the payback in profit sharing provisions were really relevant, especially for administrative expenses. And with this adjustment, we would have administrative expenses year-over-year growing basically at inflation, right? So when we look at expenses with sales, yes, there was a growth, but it was a growth that was completely related to the 10% growth in volume since we have logistics included in expenses with sales and the recovery of marketing investments to generate sell-out and to reinforce and build our brand. The year's EBITDA was BRL 1.1 billion versus BRL 1.198 billion last year, margin from 12.4% to 10.6%. The view -- the quarterly view with the same adjustment in the gross margin would be an EBITDA of BRL 277 million to BRL 279 million. But this payback in the profit sharing provision that took place in the fourth quarter last year kind of created a comparison that's a little different in this result analysis. So then the net income grew BRL 646 million to BRL 660 million. And in the year -- in the quarter actually from BRL 177 million to BRL 158 million. And this quarter, the comparison is impacted by the same reasons for paybacks and profit sharing, as we already mentioned for EBITDA and gross margins. So going back to cash generation, debt and investments, we generated cash and -- about BRL 1.4 billion, which was the result of the EBITDA of BRL 1.1 billion and the release in working capital of BRL 240 million. The release intends to -- maybe as the main highlight would be the suppliers lines. And so in the fourth quarter of 2025, 65 days. So it's a journey that started off between 2019 and 2021 when our suppliers line was below 20 days. So this is a process that's going on in a very gradual manner, in a diligent manner, and this is allowing us to have this increase in cash generation. We ended the year with a AAA assessment by Fitch for the 8th consecutive year and a net cash position of BRL 555 million. Over 90% of our debt is long term and that -- especially in the year 2029. So M. Dias ended the year once again with a very solid balance sheet position and good very net. And we invested BRL 291 million in the year, close to the investments that were made in 2024 with an important highlight for logistical planning and information technology. As Gustavo mentioned, our stock gained value, 26% in the year. Our dividend yield was 6.5% in 2025 with the total payment. Here is a cash dividend yield that was effectively paid was BRL 439 million in dividends paid in 2025. Our strategy really searches for the growth of this business in Brazil and accelerating the growth of other categories, especially snacks and healthy snacks and international exports and the Las Acacias brand. Some of our initiatives for ESG in different M. Dias units in [indiscernible], Jaboatão, Bento Gonçalves, and Ceará as well, the sustainability indicators that are really well explained here at the earnings release. And before we get into the Q&A session, our special thanks to investors and market analysts. We were recognized for the second consecutive year as the Best Investor Relations program for food and beverage and in Latin America and in mid-cap. Then the transparency trophy for the 8th consecutive year. And as Gustavo mentioned also in the beginning, the [indiscernible] award. So with this, we are wrapping up our presentation, and now we can get into the Q&A session.

[Operator Instructions] Our first question comes from Mr. Pedro Fonseca at XP.

The first one is if you guys could talk about what you've seen in the consumer environment in the beginning of the year. We've seen some categories suffering a bit more, and I think this high interest issue also impacting. So it would be interesting if we could understand your reading on this and your mindset for beginning of the year in 2026. And also if you could share a breakdown between regions, this would be very important. The second point is on cost. So as Fabio mentioned a bit in this favorable cost scenario, whether this is for dollar for commodity. And I want to understand how the company has been thinking about the hedge strategy and stock creation and how this should influence the company's margin in 2026. And this movement with the costs you're seeing today and if this would change how the company would be operating and how they're creating their stock and hedge. And so the third point that's really one-off. Fabio talked about the subvention issue. This is a little bit below what we had and the issue we had as well. Fabio explained this, but I wanted to know if there's something that was more like a one-off situation and if we should see this kind of offset in the next quarter. So these are my points.

Thank you for your questions. This is Fabio. I'm going to start off with the topic on the subvention. There was nothing that was structurally different. The subvention for investments was based on wheat consumption for the production of flour and cookies and pasta. And so when we have a drop in wheat, it's normal to see a reduction in the subventions. And then in relative terms, this kind of creates an unfavorable impact in the gross margin. And the opposite is also applicable, right? So the drop in the wheat prices in the market impacts this subvention before actually then our costs, right? Because this transitions in the results with the increase of production. So this is actually a sign that the price drop in the wheat we've seen in the market is already at M. Dias looking at the stock and subventions. And then finally, it appears in our gross margin reducing costs, right? So there's nothing that's very atypical or structurally different. It's just the result of the drop in the wheat prices. And there's another factor also, which is the fourth quarter, there's a lower production level due to a lower level of demand coming from seasonality factors. So nothing is structurally different, right? But from a consumer environment perspective...

This is Gustavo. Let me just take advantage of this topic here on costs and just get into the second question, which is related to the hedge as well. Pedro, when we look at our cost of acquisition and we compare this with the market, over the period, what we've seen is a cost of acquisition and average internal price that is better than the market, which leads us to believe that our policy for hedge and through stocks is functioning well. We have already seen -- we've already seen the 18 months forward. We have a monthly committee. We have trading companies and banks participating, and our positions are really efficient. Now when we look at the costs, we just need to be careful because kind of what Fabio mentioned at the end due to all of the strategies, sometimes this better cost of acquisition takes a little while to transition and pass through the P&L due to volumes and stocking. So what we've seen in the fourth quarter is basically this. We broke down a bit of the costs here to demonstrate that we are at 1% gains in the cost of raw materials. But since the volume of the fourth quarter is still lower, this gain in cost is still going to happen throughout '26. We've already seen this in January, right? So -- but this is a matter of timing, right, from the stock going into the results. So we don't -- but we don't see any reason to think about changing our hedge policy or stock up considering the cost of acquisition that we've been able to have at M. Dias versus market costs, right? So you can move on, Fabio.

Okay. Thank you, Gustavo. Pedro, just to get into the consumer environment topic, I think just to remind you of some points, our categories like cookies, pasta, flours, margarine and fat are categories that are resilient. Some of these items are actually part of the cesta básica, and so we see very little variation quarter-over-quarter, of course, adjusting this for seasonality, right? But what we've seen in 2025, and I mentioned in the beginning for pasta is there was an adjustment in the pricing in the market that was a little bit below inflation. And that also kind of interacts with the price of the wheat and increase in value of the real throughout the year. And so the market was pretty stable when it comes to volume, and it grew a little bit in units sold, which is in a normal scenario, if you look at the history of this category. But in the cookies category, considering that the market as a whole increased prices by 7%. We've seen an impact that's unfavorable in the total volume, which dropped 3%, right? So it's difficult to set a trend for 2026, starting off from January, right -- sorry, starting off from the month of January because this is a month that is always a bit weaker when it comes to volumes and due to holidays. But I think our expectation for 2026 is that we should continue to see resilient categories with some factors actually that could be positive even, such as an increase in the exemption level for income tax. We see a big part of the population, especially in the Northeast regions that are going to be benefited directly by this change in the rules of the income tax charges. And we believe that a lot of the resources that are going to be implemented and released for income should be used for consumption, right? So I think we need to be careful with the pricing processes since in the last years, food inflation ended up being a little bit above general inflation. But on the other hand, these are resilient categories that have some factors that could be positive even throughout 2026.

So just to add on here, I think a bit of what Fabio mentioned, we had the exemption of the income tax for people making up to 5,000. Just to give you an idea, 85% of the families in the Northeast make less than the 5,000. So they're going to be benefit, which is our main market. That's one thing. And then there's another factor, which is the election, the World Cup that also helps snacks a lot. So when you look at '26 and these issues in the market, along with internal issues, better execution, changes in the team, et cetera, and evolution of the marketing campaigns. When you look at '26, the company is really optimistic in regards to volumes.

Our next question comes from Mr. Thiago Duarte, BTG.

I wanted to get back to the cost and expenses topic, but not so much about the commodities and phasing out of the hedges and carryover cost policies. This seems to be very clear, but it's more about other lines when it comes to costs and expenses, right? So what we start seeing from the second semester of last year is that this design or this positioning, right, that's more sort of at the POS and in marketing as well as an attempt to recover volumes and space in the gondolas are also starting to bring effects in costs, right, and marketing costs, cost of service, even other lines of costs such as gas for manufacturing, labor, et cetera. So I wanted to understand if my interpretation and my reading of this is correct in some way. And if these increases in some of these lines represent an increase, in fact, that is in alignment with this policy, this commercial policy that is different and that you guys started from last year onwards. So we see exchanges in volumes but also in cost and expenses. So then a second question, which is not exactly separate from this would be depending on the effectiveness of these bigger efforts in the recovery of capacity and volume gains, how feasible more long term would you consider this to be for the company to get back to gross margins above 35% or closer to 40%? And actually, even before the acquisition of Piraquê back then. So I wanted to hear a little bit from you guys about this as well.

Thanks for your question. I'll start off here and then you can add on. Okay. So when -- I know your point was not commodities. But when you look ahead, what we see is a little bit of stability, right? Wheat seems to have stabilized. There's a trend of an increase that's more up ahead and currency has helped a bit. Palm oil, that's a little different, but I'd say we are experiencing a moment of stability that really facilitates consumption issues as well. So when we look at these two categories, especially for pasta, the discussion is really price oriented, right? The elasticity of these two categories, you increase prices and it drops for. And so since we haven't seen this need, we tend to believe -- now when we look at the cost of transformation in the SG&A, especially the S, we've been investing more on for marketing. And in regard to last year in the quarter, this is really related to the timing. In the fourth quarter of last year, it was -- remember, we had the changes in the commercial team in October, then we started -- we had a period without VP and -- marketing VP. And so naturally, a lot of the investments were suspended back then. And in this year, I'd say that from June on, we took on with greater intensity. So when you look at the year, at least for now, we're not going to run away from that index. We've been talking about close to 2%. We're talking about marketing here, right? So when you look at this more ahead, the trend is that this would increase and this needs to be funded by cost transformation better and G&A that's also better. So this is what we've agreed upon with the Board and all of the commercial team. This is going to have to be done gradually though. I increased my investments in marketing, and I gain efficiency in production either through volume or through a series of changes we've been working on in industry. And at the right moment, we'll be communicating because there's changes in the type of machine, the capacity of production, there's changes in machines that are going to help us with different matrix of -- that's more economical, and we're going to be able to fund greater marketing expenses with better costs in our industrialization and transformation. So this is a bit of our mindset thinking of this up ahead.

Thiago, just to add on to this with the numbers here. I'd imagine you're probably referring to the margins we have up until 2018, 2019, and that was the moment where our capacity utilization was about 75%. And in 2025, it was about 60%; 2024, 58%, right? But this entire journey, Gustavo mentioned is anchored by this new commercial team and all of these initiatives, growth initiatives. And as this presents results in volumes, we're going to start seeing gradually an improvement in capacity utilization and a gradual improvement in the gross margins as well, just considering the bigger dilution of the fixed cost.

Our next question comes from Mr. Lucas Ferreira at JPMorgan.

Well, some follow-ups here. If you could give us some more information on this salary adjustments. And at least for me, this was a surprise in the quarter. There's a retroactive factor. If you could explain this a little bit, because this led to relevant impact in fixed costs? And then a follow-up here on the prior question, Thiago. I'm not sure if I understood this correctly, but as part of the plan is funding marketing investments that are going to lever volume and efficiencies in costs. We're considering a horizon of a short term and that could impact the margin evolution for the company. And is it still going to be far from reaching that horizon in the short term? And then when it comes to volume, I can see from the Nielsen numbers that categories are not growing that much, actually, nothing practically, right? So maybe you'll have a variation that's a little better or worse. But these are very mature categories. You already have a market share, you've recovered. So if you could talk about where the opportunities for shared growth are especially in markets that are more mature, if you guys think there will be space and where you're going to see this kind of growth since the company already reconquered share and industry is not growing. And if you could talk about this growth and if in your opinion, this is in some way considering GLP drugs as we've already heard people from -- some of the main retailers in Brazil are starting to see movement in the categories, proteins growing a little more. Since you got into this topic, I think it would be great to get your view on this as well.

Thank you, Lucas, and thank you for the question. I'm going to start off with the last part. We saw some retailers already talking about how price dropped 10% due to the GLP-1 drugs. But I think this is a topic we've been closely watching. And -- this has been a topic for the Board. But of course, we don't want to overestimate this. In our view, this is something that's growing, but there's still very little penetration. There are some challenges that we have to have more clarity about while sustaining this treatment. A lot of studies are showing that after 7 months, the treatment is interrupted. We don't know what the impact will be like collateral effects. There's a lot of other uncertainties still, and so -- about the future, right? But we're not going to be waiting for this to happen, right, to then take on the necessary measures, right? So first, in a pragmatic manner, there's some current effect is noted in 2025 and in 2026 that's relevant for the company? No. No relevant effects. Now what is the company doing? Well, the company has been developing itself even before the discussion of the GLP-1s with this healthy lifestyle trend, right? This is not something that's happening only with the pens, right? We see the company starting off with the gluten and then sodium, sugar. And now with GLP and the loss of muscle, a lot of people are geared towards protein. And then in '22, we acquired Jasmine, which is also a company that looks at these healthy diet conditions. And internally, when we look at our pipeline for R&D development, the company is really geared towards the development of categories and products that address this new demand from consumers. So we have an innovation committee every 2 months. The next committee will be now in March, and it's just going to be products that can address a bit of the demand that although they're small in the Brazilian market, it could be greater among users of the GLP-1 drugs and pens. So the company is really keeping an eye open and looking at all of the studies. But the effect, they're still very small, I'd say. And when we start talking about efficiency, actually, we're looking at funding marketing in a more efficient manner. And this is exactly because we don't want to have any penalties in our margins. We really want to get back to the levels before. Of course, it's difficult to foresee the timing for this, but volumes are already advancing. We've had fourth quarter constant recovery in volumes. And when we look at pasta and cookies, I agree with you, Lucas, these are categories that grow a little less. But when we look at this internally, we see the category I mentioned of the snacks and healthy snacks, it's growing a lot like double digits. And our -- so our healthy foods area has also been growing at double digits and of course, with better margins. So the company has been trying to offset these lower margins in the overall category of cookies and pasta with the entrance of these new categories as part of the strategic plan back then. So I think this is an important point. Now we also had a bit of a deficiency operationally. We had important changes. We understand there's a lot of operational opportunities in some regions we have no presence in. And so that's about 1%, 2%, 3% market share. And with a good team and the correct investments, et cetera, and the mobile system for sales reps, et cetera, and the shift in the mindset of the negotiation, sell-out perfect store, et cetera. Regardless of the growth in the category, M. Dias tends to recover this market that it already had in the past. And all of these changes were made in order to achieve this so that the volumes can grow more than market levels. This has been our mindset. If you look at our budget for this year, regardless of what the market is, our budget is geared towards higher growth than the market, right, with market share gains. So we've seen good opportunities in the market with this new team that arrived and has already done things in a very different manner.

Well, this is Fabio, and I wrap up here with Gustavo's speech. The first point you mentioned on labor. Here, we basically had a bigger concentration in 2025 in the second semester. And so that kind of weighed a bit more in the fourth quarter and caught your attention a bit, but that's pretty much it. However, there was nothing very structural.

Our next question comes from Gustavo Troyano at Itaú BBA.

We have two points here that I think would be good to discuss with you all. First, I want to get back to the raw material costs. We talked about the hedge strategy a lot and deflation expectations up ahead. But I wanted to hear from you guys about the mix in costs, right, between palm oil and wheat, which was information you had access to, and with the peak of palm oil and the reduction of wheat and the growth of snack and maybe this mix dynamic will help us model this cost per tonne up ahead. So it would be great to get a feel if we saw any modifications with oil getting more relevant in the cost mix and all the prices are going up, there should be some of a volume gain as well. And the second question would be getting back to the fixed cost point here. You also mentioned in the presentation a bit. We had a peak in fixed cost per tonne in 2025 against 2024, and we had -- this is a discussion we had a lot, which is one of the pillars of expanding profitability of that, right? And so we saw an improvement in capacity utilization. Volumes grew, as Gustavo mentioned, but we still haven't seen a reduction in the dilution of this fixed cost, maybe at the magnitude we had suggested, right? So I wanted to understand how we could model this up ahead and if this could be explained by the variation in prices that Fabio just mentioned and how we can -- what would the granularity be and what we can do from now on? That would be great.

Gustavo, this is Fabio here. And I'm going to start off with the cost of raw materials and mix issue. You're right, there was a bit of a shift in mix. The palm oil impacted a bit more of the total cost of M. Dias. And this is related to the good food service performance, right? So food service has wheat, flour mill margin and fat. And these last two categories really had good performance. So growth of volume that was really strong. And considering that palm oil had a peak in 2025 versus 2024. This generated a mix effect that was slightly unfavorable in our costs. But on the other hand, it brought in more revenue. So when you look at our margin analysis, you have this mismatch. And when you look at the numbers, it was...

Sorry, Fabio, just to provide a little more color here on what Fabio is mentioning. With the creation of the food service area, we started reviewing go-to-market, but also the portfolio. And so our main sale of margin here is for the Puro Sabor brand. We had a bucket of 5 kilos of 70% fat where most competitors were operating with 60%. And so basically, we had a price that was bigger than competitors, even with a better product and better fat when you consider margin or frying, it doesn't become water. So the more fat, the better. And so we were able to adjust this, and we were able to review our portfolio and the formulas. And so the simple change in our main SKU, even by reducing the volume of fat in the SKUs, we improved sales a lot, adjusting the product to our competitors and that generated sales about 20% in the B2B margin, which is bigger margins, right, not the small little buckets, the big ones that we send to bars, restaurants and hotels. And so yes, there was a bit of this effect. While when you look at other categories for like B2C consumption, volumes ramping up, right? So you had a growth in volume this issue would like maybe didn't dilute that much. But I'd say the -- so this is a very optimistic perspective. But when you look at the year, it wasn't that relevant, right? So that's it, Gustavo, thanks. I think we reached -- we wrapped it up here.

Our next question is from Isabella Simonato at Bank of America.

So in working capital, you talked about the days of suppliers. You had an important peak there. And in this year, if you could give us a little more details about how this is taking place. Which competitors and if there's some exchange with this extension in the terms, I think that will be interesting.

Thank you for this question. We also had an important change in the supplier area. And this is an area that became very relevant in the company. We started working with renegotiations with suppliers. We created our strategy -- strategic sourcing actually through the creation of new companies as well. We have like energy and power farms with Omega. So there's a lot of things coming up with our suppliers. And so this is not only related to negotiations of purchase and sale, right? So first, we had negotiated a lot of the G&A issues. And now this team is actually already negotiating and coming into discussions with the agencies, communication agencies and this phase of 2025, which was a reflects of your question, was a moment where supply really shifted to negotiations of commodities. We didn't have -- since it was always an area that is more sensitive. But this year, they started really focusing on this issue with the payment terms, which was always really high -- which were always really high and basically cash and with the suppliers. So where did this gain come from? Basically from this round of negotiations of commodities. And we hadn't seen that ever since the beginning of the -- these were the categories that are most focused on by the team in this year, 2025.

Well, this renegotiation of commodities and the extension of these terms, can we consider in some way such as cheaper commodities like wheat, et cetera, and the reflects of the currency situation would kind of get into your -- would impact your profitability maybe, I don't know.

Well, that was done slowly actually finding other ways of funding for our suppliers, et cetera. But no, it's not related to value, for instance, it's an internal target that they have. And this year, the -- this is always very sensitive considering the volume, right? So we need to be very careful, right? We also don't -- we're not going to have better terms or worse pricing, right? So this was a topic that we left for later actually because we wanted to be sure that part of these gains and the terms along with suppliers were not come in as price, right? But it was -- it's really a negotiation between the price environment and currency situation as well.

Our next question is from Mr. Ricardo Boiati from Banco Safra.

My question here is about the commercial dynamics. And I think this is really interesting for the company with this recovery trend in the share in the main categories. But when we look at price, the average price was kind of moving in the opposite direction as the market did, right? So my question here is if there was like a mix effect that should be considered here or part of the company's strategy also to focus on sell-out and market share gains and how this could be maybe translated into a greater price aggressive approach than competitors? And correlated to this, how are you imagining the competitive environment as you enter into 2026? Do you notice any changes in the market? And even taking advantage of this cost and commodity and currency scenario, it looks like a favorable win, so to say, helping our cost base, right? And if the market is starting to take on a posture that is a little more aggressive maybe when it comes to prices and then maybe continuity in market share gains could become a little more challenging when you look at the year of 2026, right? So that's from my side here.

This is Fabio, and I'm going to start off with an answer here. And in sequence here, we can see the results of prices and there was no aggressive movements on our side. And this is, of course, considering the relative price at Nielsen, of course, there was no change from the third to the fourth quarter. But the focus here is really in execution and market share recovery, especially in these two main categories, right? When it comes to the mix, then yes, I think you have a valid point. We've seen over the last quarters that the food service business of flour, meal, margarine and fat. And of course, there an -- average price is a little bit below and this generates a bit of a mix effect. But when you look at the commercial dynamic and pricing dynamics for each of these businesses and -- so cookie is one business and pasta is another, there's no aggressive approach in the pricing really.

So just to add on also about the competitive environment and if the market -- since you're already starting to see some signs maybe of the market taking advantage of this cost dynamic with more favorable raw materials, maybe being a little more aggressive in pricing in the beginning of 2026, or is this not expected?

Actually, I'm going to use even the IPCA information, which is also disclosed by the categories. But what we see is a rationality environment, right? So the categories that are maybe more connected to like wheat. And of course, we had a drop in prices in the last month represented a slight setback in pricing, especially flour, but all of this is in line with normality in the cookies category besides wheat. You have other inputs like palm oil and cocoa. So we even saw a slight increase in the month of January and also in the IPCA-15 that was disclosed. And that's market numbers, right? And so what we see is an environment of rationality from a pricing perspective.

Our next question comes from Mr. Henrique Brustolin from Bradesco BBI.

I wanted to ask you guys to qualify a bit of the market share performance throughout 2025. And we saw that drop was significant in the second quarter. And if you could explain a little bit more about what was behind that and what kind of pulled this recovery later on and how this interacts with this relative price recession and gross margins as well. So the impression we get is that part of the recovery that came in was that mismatch of relative prices compared to competition. But this seems to have some consequence in the gross margin, right? So if this interpretation makes sense? And looking up to 2026, what are the factors you're seeing that give you conviction about this process, right, this ongoing recovery in the market share?

Well, just to remind you here, the market share always has a delay. And so what we present as the market share for the third quarter, for example, has a direct relationship with the sell-in of the second quarter, right? And so this result in the market share in the second quarter is more related to the sell-in of the first quarter. And in the second quarter, we already start seeing a bit of recovery in our numbers, basically because of execution matters, as Gustavo mentioned in the other questions, right? So that was reflected in the market share from the third quarter on, and that's what we saw in the fourth quarter, right? So there was no change in prices from our side. Actually connecting this a bit to the prior question from Ricardo. This market share gain is basically coming from a better execution level, presence in the POS, better balancing of marketing investments. And so this is all a result, a direct result of an improvement process in our execution. And all of this that happened in 2025 is what creates the conditions that gives us the conviction that we're on the right path. So we can continue this growth in volumes and, of course, in the market share gains.

Our next question comes from Laura Hirata at Santander.

I wanted to explore two points. First is a follow-up here. And we noticed in the last 3 quarters that you have a reduction in stock days, especially when it comes to raw materials. So you guys have been carrying over less days, specifically in this line. I wanted to understand what the rationale is, right, behind this change and how this can interact with the hedge strategy you guys have, right, considering that you're carrying over the physical stock and that was all part of this. And so that was something that M. Dias had as a difference, right? And another point is about the channel mix. And I wanted to understand how this volume performance took place. And we wanted to explain -- understand more about this origin. And as you're moving a lot in flour and B2B, et cetera, I want to understand this dynamic a little better.

And so this is Fabio from a perspective of stock. I think there was no change in policies. And this reduction we've seen in the stock base is directly related to a price of commodities in the market and also the value of the real. So -- then we also had some receipts of wheat that went from one quarter to another that impacted volumes a little bit. And -- but exactly during the closing of the quarter, right? So that's completely a scenario based and not structural, right? So what we can see is structural is really the drop of the price of the commodities. And so no major changes in policy. But in regards to the distribution channels, when you look at our business, our main business, which are the cookies and pastas, 0 changes really in the channel mix in the last quarters. But of course, when we look at the different growth fronts, we could have some kind of a different mix because maybe the food service moved more than the others, right? But these are different businesses, and they could lead to some kind of a difference in the mix of the channels, but nothing very structurally different on our side or on the market side.

The Q&A session is officially ended. We would now like to pass the floor back to Mr. Gustavo for his final remarks.

I want to thank you all for your presence, and I want to say that our IR team and Fabio, me, Rodrigo, Breno, Lucas were all available and we'll be with you all in the next call. Have a nice day and a great weekend as well.

The earnings call is officially ended, and we want to thank you all for your participation. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]