M. Dias Branco S.A. Indústria e Comércio de Alimentos ($MDIA3)

Good morning, and welcome to the earnings call for M. Dias Branco for the earnings of the first quarter of 2026. Today, we have Mr. Gustavo Lopes Theodozio, the VP of Investor Investments and Controllership; and Fábio Cefaly, the Director for New Business and Investor Relations. This event is being recorded. [Operator Instructions] The transmission is also taking place simultaneously on YouTube at www.youtube.com/rimdias. We want to clarify that any possible statements that could be made during the earnings call about the business perspectives for M. Dias Branco projections and financial targets represent the assumptions and beliefs of the company's management and they involve risks, uncertainties and assumptions as they involve future events that could involve circumstances that could not occur and investors must comprehend that economic general conditions of the industry and other operational factors could affect future performance of M. Dias Branco and lead to results that differ materially from those listed in such considerations in the future. Now we are going to pass the word on to Mr. Gustavo as he begins the presentation. Please, Gustavo, you may proceed.

Thank you. Good morning, everyone. Pleasure to be with you guys in another earnings call. Getting into the numbers here, we start off 2026 with a quarter that reflects consistent evolution of the assessments even in an environment -- and we have families that are more indebted. We resulted a result that was -- we had better results with execution that was really important. The revenue reached BRL 2.2 billion, and that's the fifth consecutive quarter for growth in some categories. It's the seventh quarter with -- and so we have a sequential improvement that's consistent, especially in the market that we're experiencing. You don't expect any kind of spike coming in or any kind of chicken flight, but it's a consistent improvement that we've been delivering, right? So the total volume added up to 400,000 tons, and that increased 3.4%. We had market share in granola and flour. We became a leader in the Brazilian market, and that's an important milestone. You're probably seeing a lot of launches with more protein. And so we had one of salty with low carbon with 34 grams of -- and so we've been innovating this with our EBITDA also growing 22% almost our net income also reached BRL 106 million, growing BRL 56 million. The company has been following this and so we've been following the strategy. And then I'm going to pass this on to Fabio, and then I'll get back to the Q&A. Fabio, please.

Gustavo, good morning. Thank you for the introduction. I'm going to get into the details here. And our net revenue for the quarter was BRL 2.2 billion with a growth of 0.4%. And so the volumes grew 3%. EBITDA grew 22%. And so this also grew 52% with BRL 106 million. Cash generation despite this retraction versus last year. And we had -- the comparison of the fourth quarter of '25. And this has a direct ratio with seasonality that is unfavorable between the fourth quarter and the first quarter. And getting into the market conditions, as Gustavo mentioned, we're facing a scenario of consumption retraction. And besides the food inflation, and so we've noticed that retail is more conservative, and that was evident in the first quarter and in the first 2 months of the year. And so when you look at the information in the market, it's important to highlight that over here, we're talking about numbers in the market. And these are not MGA's numbers specifically, right? So on the left side here, you can see the volume sold for cookies in Brazil, which had a setback of 4% between the first quarter of '25 and the first quarter of '26. And then for pasta, this is the same case. And at the end of the quarter, we had a bit of recovery in pasta, and then we still had a setback. And the average price of cookies in the market went up 7%, but the volumes dropped 4%. And so we also saw a drop in volume, and that has a direct ratio or connection to income levels because of the different reasons we explained previously. So basically, over here, you have this consumer environment that is demonstrating a bit of retraction. And if you look at this, you'll see it's the same information we've already gone through in the beginning, but you can see the evolution throughout the quarters and that includes the revenue volume and average price. Here, you can see the consolidated numbers. And when you look at details here of the 3 categories and groups that MG is, you'll see the main products that have the cookies, pastas and margins and the wheat mill and refining of vegetable oils. This is basically for the food service channel and the adjacencies, which are like the newest products in our portfolio like snacks, so, healthy snacks, sauces and seasoning, et cetera. And we saw some growth in the comparison with the previous year. The wheat and refining of vegetable oils at 3% plus. We've seen the businesses growing in some quarters. We had double-digit growth. And the adjacencies, I want to remind you here that you have a higher average price and margins that are higher. And as Gustavo mentioned here in the beginning, it's the seventh quarter consecutively with growth of double digits. So over here, you can really contribute to the idea that we're on the right path. We can invest in our main business, which are the cookies and pastas. And in parallel, invest in categories that had a potential for growth. But the retraction of 1% in the main products is mainly due to two factors, right? The retraction of cookies when it comes to volumes, we gained share, and we have a market that had a retraction a bit. And so the drop in the price of the pasta, which is related to this drop in commodities, right, from the first quarter of '25 and '26. And starting off with the main products. We're doing this ever since the beginning of this year with major campaign in all of national retail with -- awards, we had over 800 awards distributed 5,000 stores activated for these promos, special sales, growth of 20% of the participating stores. And we're trying to activate our volumes here at the sales point. And so there's a lot of marketing being allocated for this purpose, and that has been helping us to gain market share, which is what happened throughout the last quarters. In the comparison of the first quarter, we gained 1.9 percentage points of market share in the category of cookies. And I want to highlight the Piraquê brand where we have the biggest added value in our cookies category, and we had a share gain of 1.1 percentage points and the revenue grew 10% in the same period. So this demonstrates that it makes sense to invest in marketing on these brands like Citarella, Piraquê and Aria, and there's major potential for growth. So we had important launches in this group of products. We launched the homemade pasta product line with new formats. There is a higher average price and there's another texture that absorbs more of the sauce and the special flower used. So this launch is focused, especially in the Adria brand and the Isabella brand. These are products that are already available in retail. With Piraquê, we launched the malted milk caramelized cookies. Then we have a limited addition in the personal cracker with garlic bread taste or flavor. And so there's a bunch of initiatives in marketing and innovation to activate these brands. And these are just a few examples of what happened in the last quarters. And so now when you look at the wheat mills, refining of vegetable oils, I want to remind you, especially the food service, the flowers, the mill and industrial fat, we added 22 new distributors that are specialized and have been very relevant for the growth of our revenue in this group of products. And some other items, just to give you some examples, doubled their revenue such as vegetable fat, wheat and flour for tried pastries. -- and we look at flower for the end consumer, which is especially the packages of 1 kilo, we gained 1.3 percentage points in market share between the first quarter of '25 and the first quarter of '26. Then the adjacencies, we also had a very positive results. And for some items in the fit food brands such as the rice cookies with chocolate, peanut butter doubled their revenue in the period. Granola for the Jasmine brand grew 2 digits with an increase in the market share of 6.7 percentage points in this period. And so that reinforced the leadership of the brand in the granola category that operates in the group of healthy product categories. It's a market that's been growing with an attractive price and margins. We had important launches, as Gustavo mentioned, with the granolas, with proteins. Here, you have some examples of flavors. We relaunched the gluten-free bread with the Jasmine brand and other formulas, new packaging and new flavors of snacks in the Frontera brand for the tortilla snacks and the potato chick snacks with the ocean salt flavor. So when you see salt flavor and when you wrap up this recipes and revenue in the market, when you see the market taking a retraction of consumption in some categories such as cookies, our execution has been working and has been evolving. And it's some evidence is the market share gains in the cookies categories, flour and granola categories. Now on the next chapter with costs and expenses here, the 3 curves that are very important for our variable cost, the dollar, the wheat in dollars and the palm oil as well, that's dollarized -- in these are market data. In the comparison with the last year, the real was appreciated and what dropped in dollars and the palm oil went up 8%. And the short-term view also demonstrates that the real gain more -- was appreciated more. We had the cutoff in March to talk to you guys about the first quarter. And we already had a slight peak of 3% from the fourth quarter of '25 to the first quarter of '26 and palm oil 6%. Now this demonstrates all of our numbers here that are in reais per kilo. On the first line, we have the variable costs, and you have the fixed costs. And what you can see in this cycle here are the average price and the gross margins in the different bars. Another topic that was discussed with you guys during the last quarter was that we received a bunch of questions and the costs are dropping in the market, but not at MGS. And at that moment, we explained that costs would drop. They didn't drop as quick because of our stock and some hedge positions we have, but we already saw a retraction in the variable cost in the first quarter and below what it was last year and below what it was in the fourth quarter of '25 as well. So the average price demonstrated a setback year-over-year, and we have some categories that are presenting a price reduction and then interacting also with the drop in variable costs in the market, especially for pasta and flour. From the fourth quarter to the first quarter, we -- only the flower category had a reduction in the average price. And here, we're talking about the drop in wheat in reais. In the other categories, we haven't seen a reduction in prices. So here, it was a lot more about like an unfavorable mix effect because our flower and margin business kind of moved a little more than the cookies business, considering the retraction of the cookies and pasta that I already mentioned previously. So then when you look at the expenses here of the first quarter of '25 and the first quarter of '26, which are maybe the comparisons or what's most comparable, considering that there is some seasonality among the quarters, there was growth at a nominal level of the SG&A of 6.6%. And that is a combination of the growth in the volumes of 3.4% since some expenses are variable, such as the freight costs when you deliver to retailers. And then you also have inflation in the period that impacts most of the expense lines. So when it comes to nominal levels, expenses with sales went to BRL 454 million. And these are basically three factors that you have the growth of the volumes, inflation in the period and some other marketing initiatives such as this special sale we resumed. Then you have administrative expenses that went from BRL 93 million to BRL 97 million. But here, basically, we're talking about inflation effect. Then the EBITDA between the first quarter last year and this year went up BRL 160 million, BRL 196 million, and the margins also went up. The same dynamic applies to the net income and the net margins and nominal values as well. And now moving on to cash generation, debt and investments. We had the release of our working capital, which are the green numbers here. The 3 main lines for working capital suppliers had increased 65 days to 82 days. And so it's a journey that's like long term and it start off in 2020 when we had about 20 days of average term for payment and investors have been improving this line the supply team also with the support of other areas in the company and negotiating really well with suppliers and with expenses as well as some commodities. And so we have a very positive perspective in regards to this line. For customers, we had an increase of 3 days. But of course, everything is within normality and stocks are in line with last year and above the previous quarter. But as a comparison that is more recurring, it would be something closer to the 100 days. And we ended this quarter with a net cash position, which represents having more cash than debt by BRL 688 million and the negative leverage at 0.6. considering the EBITDA in the last 12 months, keeping a rating that was AAA with a stable perspective by Fitch for the eighth consecutive year. So we've been keeping up with a solid balance and the company is financially very solid. All of our debt almost is in the long term and so a good -- and basically, this is the CRA financial sales issued 6 years ago. And so this is an important agenda, focusing on efficiency initiatives for energy efficiency, optimization of production. So it is an important agenda to capture productivity gains in the mid- to long term. And our strategy, which is everyone is already aware of the 3 different areas we operate in, the current business and other categories, which had growth of the net revenue of 2 digits for the seventh consecutive quarter and our international business that involves the exports of the Lazacasas unit in Uruguay. And finally, there are some indicators for ESG. You can see all of these are in green, some are up, some are down, but that really depends on the dynamics for each of the indicators. But I think here it demonstrates that we were able to deliver a quarter that was higher than the previous years from an economic perspective, and in a balanced way, also looking at ESG indicators. So from now on, we can get into the Q&A session.

[Operator Instructions] The first question comes from Mrs. Renata Cabral from Citi.

My question is in regards to what you guys are seeing up ahead in regards to this result. And as a bit of a backdrop here, we can see MG is gaining space in the gondola. Bob, you mentioned the issue with the costs, and we have this in mind. But we wanted to understand what are the steps you're seeing to gain more room on the shelf and also gradually gain profitability within the company. So what do you think would be opportunities when it comes to a possible mix of pricing, but also when it comes to costs?

Gustavo, thank you for your question. And when you look up ahead, we see a lot of opportunities in the adjacencies. And it's a category we've been investing in for the past 4 years. We've been talking about this for a while. And the main categories are -- have been over penetrated in the Brazilian market, 97%, 93% penetration. And so that's why it's a part of the strategic plan that Fábio mentioned. And so it could have relevant growth and not only grow at the same level as the populations growth, right? But we've been reporting this growth of about 10%. And if we were to stratify this with the different categories, we would see growth that's even greater. And so I think entering new categories is relevant. And so I think you have two initiatives. First, we have this healthiness aspect, which has been in discussed with all of the population, the population searching for healthier food with less sodium, less calories and more protein. So we've been working strongly on developing new products and trying to address this topic in Brazil, but also globally, right, with the consumer searching for this. So I think this is -- we brought in a person that can look at this exclusively. And now this business is starting to ramp up, right? The second pillar that's there is the snacks pillar, right? We don't provide too much visibility, but it is an important category for M. Dias. And you're going to remember there were some important brands. We already would sell a lot with the brand. You've probably already seen our products being used at the -- in the airline companies, but we've also invested a lot in the Jasmini brand. We started off with the Dertillas. Initially, they were imported from Belgium with quality that was a lot higher than that of our competitors. Then we bought the machine a while back and this was installed and ramping up. And now we're already making the tortillas in Brazil, keeping the same formula and quality, but of course, with more flexibility now for the packaging because the initial packaging we had from Belgium that would come were too full or too big, and that would make the cost for Brazilian consumers too high. And at the moment with more income limitations, we noticed that it was with this flexibility, there was smaller packaging, improving these payouts and launching new flavors as well. And we've also gone through the production of corn snacks, but also potato snacks with the Frontera brand with new flavors like sour cream, et cetera. And they start going off to the gondolas, and that will also g consumption now with the World Cup, right? So there's a big connection between snacks and the World Cup. And so we also had some changes in some packages. We were leaders during a long time with gluten-free and bread and then we lost leadership and we changed our package a package, you wouldn't be able to reuse after you open, but now you can keep the product if you're not going to consume it all at once and it preserves the product for longer. And so we've already started to ramp up with this. There's a lot going on in this world of adjacencies and for the healthy products and snacks. So when you look up ahead, there's a lot in this direction that brings us to 2 points, right, growth at a double-digit level with margins that are better than the average margins for our MGS for pasta, cookies and flower. So that's an important point. Having said that, there's also a big work and effort for the execution and how to commercialize our products, right? So there's a relevant shift in the team, and the new team has already been with us for a year. And we've already started to notice significant changes through market share. Even with the cookies market, as Fábio presented, right, retracting a bit because of income, but M. Dias has been gaining market share. So there's an execution topic that's going on and ramping up and the commercialization model changed significantly with other -- that joint business plan and other retailers. So we left that sell-in model with big negotiations, et cetera. And if I have work done with a retailer, with space in the gondola, correct pricing and assortment and execution at the store with MGs and with our promoters to make the products leave, naturally, the sell-in will come in. This is an important change as you avoid those negotiations with big discounts and volumes. And then the model of negotiation is a lot more efficient and effective. And it's a lot more directed to consumers, right? So that changes the logic of the company. And I'd say that the execution even in more mature categories pastas, et cetera, we've had some -- we're going to show you some kits. We just launched the homemade pasta that was very different with the capacity for absorption of sauces that has special flower and more delicate texture. And you can understand -- and even in the existing category, when you see cookies, for example, you can see -- we saw the Goyapinha cookies, a malted milk cookies, carmalized with a special with the flavors and some other innovation, we're going to launch a big campaign as well. We're getting back to some basic items because when the category drops since MGS is 1/3 of this market, it suffers a bit more, right? So we believe we can encourage consumption also of items that are maybe a little more basic in the cookies category, right? It's been a while since any Brazilian company has been working on advertising campaigns for this. So we think these campaigns are going to help bring in some important support for marketing as well to help with the execution at the POS. So sorry, I gave you kind of a long answer here, but we have a lot going on. And we -- you see the market is what it is when you look in-house. And you can see the consecutive deliveries and this has been growing in a consistent manner really gives us the confidence that we're on the right path. And so if we talk too much more, I'm going to take up all the time from other analysts as well. But I think Fabio, do you want to add on with anything else?

Just to add on briefly to what Gustavo mentioned, this change in the logic from the sell-in to the sellout besides the market share gains bring other benefits to the margin because as we have an execution that is more focused on the sellout, we can have more predictability in the demand and that also becomes more regular in the operation from a manufacturing perspective and logistics, and we avoid peaks and valleys. We can see the benefits in the revenue and also the margin. And another point we also discussed is the pricing we are going through this process that maybe delivers a pricing that is more connected to what's happening in the market and what is more balanced between volume and margins, right? So we're always going to be looking at the market, the context and variables involved, right? So it's a process that's really well balanced. And so if you look at the marketing as well, besides what Gustavo mentioned with a big campaign that intends to reactivate some subcategories and with big branded MGs, but there's also a lot of marketing going on at the sales at the POS, right? So there's a lot going on. And improve the margins from a percentage perspective and even the returns in the company. We quickly went over this in the presentation, but there's a lot of investments, CapEx investments, right, that are taking place with a productivity perspective, right, considering automation and updates in the products. And of course, this won't bring in returns in the super short term. But in the mid- to long term, we could see this return in the margins and MGS returns overall.

If you'd allow me to have a quick follow-up about the market share. you gained that was really impressive in the cookies category. Could you give us a little more color on where you found -- where you saw this opportunity. I think Fabio already mentioned the sell-in and sell-out issue. And the idea is to understand the maintenance the opportunity to see this with some color also about the regionals. And if this was more in the Northeast, or if there was an improvement in the execution in the Southeast. And any kind of info you can give us will definitely help us a lot.

Renata, I think here, the good news is there's been an increase in market share in the main regions where MGS operates in the region where we started and also in the region that's the biggest opportunity for growth, which is the Southeast. So there was not a major concentration of this market share. It was more like all around Brazil. And all of these topics, whether it is execution that Gustavo mentioned and I added on to apply to all of the country, right? So of course, there are some different adaptations in the North, Northeast and South, but we saw market share gains in cookies in all regions.

So I just wanted to add on here. Fabio talked about investments in CapEx that are connected to modernization and optimization. But in this quarter, we had an important increase of CapEx due to an expansion in the product lines of categories that are specific. And I don't want to mention this specifically here because of our competition, but in our production plant in Kuemaos Rio de Janeiro, there was a lack of capacity there in the specific category. Here in Sao Paulo, where in the Southeast, et cetera, there started to be a ramp-up in a more aggressive way than what we expected, and that has been requiring investments for the expansion of the capacity and product line expansion due to the improvement in execution. So we start seeing things really ramping up. It's a pity that the market as a whole, as Fabio mentioned, is more restrictive, especially with the cookies market because of income, right? But if you look inwards and you see these changes in the negotiation and execution, we've seen this actually make us invest in capacity expansion for some categories, even in Sao Paulo because of the growth for these categories.

Our next question comes from Gustavo Troyano, Itau BBA.

We have two points here. First, focusing on the cost. You probably already mentioned we were waiting for deflation. And finally, it came. So now the narrative is -- should be like up until when should we expect this to go through your P&L? And also considering the commodity dynamics for prices and freight and packaging that we've seen that maybe will push this price dynamic upwards, right? So my question is, do you guys have any expectation for a reversal in this inflation cost and pass along and if you've also seen any movement with the pricing or announcement for an increase in price chart at competition. So just to understand how you guys see industry reacting to this, right, considering the cost of competitors is probably going to react a lot to the spot curve than you are. And so now if you look at this stock carryover that's a little bit higher versus competition. I want to hear from you guys and understand how you've been assessing this strategy for many years in the company and how you see the benefits, right? And how you've been taking advantage of this to kind of surf the wave in commodities once again with competition operating in a stock that is a lot lower, right? So how you've been assessing the strategy and how it's been adding value over time, right?

And so I'm going to start off here, but then Fábio can add on as well. Well, for cost, we've seen that there's an increase in commodities overall. We've seen an increase that's significant in fuels as well. I was at our DC in talking to the logistics guys there. The last month, we had a relevant increment also in the cost of diesel. So I'd say we can expect there's an increase in cost for the second quarter that hasn't come in yet. But what's helping on the other side is the loss of value of the dollar, and that helps a lot at MGA. So it kind of helps compensate this. So the increase of commodities have been pretty flat and the real appreciated a bit. So that helps, but we can increase -- we can expect a slight increase for the second quarter. When we look at our forecast, we kind of see this cost increase. But due to this, we've already communicated this through some new charts, but our pricing model is something we look at weekly considering our market tools and -- we also consider how our competitors are reacting for cookies. I'd say everyone kind of moves along. And we're talking about the category and not only MGS here for pasta, maybe a little less -- and for -- but we see that with this confusion in the U.S., Israel and Iran, we have some important impacts with the whole story of the fertilizers, et cetera. So if you look at wheat production here in Parana and Grande do Sul, the consumption of kind of fertilizer is irrelevant, right? In Argentina, there's more production, but the soil there requires less fertilizer, right? So -- but it does generate an impact in a significant way. On the other hand, you have climate issues. So there's a lot of production. You have in Russia, favorable plantation conditions. And so there should be some kind of compensation. But overall, looking at the data we have today, we've already seen pressure in costs in the second half. And therefore, we've been announcing some price charts and so that we can also monitor this and also see what our competitors are up to, right? So about the second question, the only strategy we mentioned was the pricing strategy, fractioning this a little more and having a lot more data and speed as well to get back and forth with the prices, doing this at a weekly level. So I'd say the pricing policy is a lot more agile than what it was previously. And in regards to the stock and the hedge looking up ahead, we understand that we're on the right path, and we don't intend to modify this, keeping the and we understand we're on the right path.

Next question here is from Mr. Thiago Duarte from BTG Pactual.

Well, before I get into the questions, I wanted to clarify one point. In the presentation, when we talk about average prices and volumes of the product category, Fábio suggested that it would be like a sequential drop of 20.6%. I did not have a relevant price component. It was just volume. Is that it? Wanted to confirm this point before I share my question.

Yes.

Well, you're talking about the fourth quarter to the first?

Yes.

Then once this is confirmed, yes, that's a mix issue, okay, which would be mainly the volume, right? The flower business had better performance than cookies. And then that kind of generates an unfavorable mix effect that interferes in the average price. Well, my question is about the sequential drop in the net revenue. Does that mean the main products? Yes, in that case, it's more volume oriented. And with this perception, we would be talking about a sequential drop, although there may be historical seasonality, it's very high for volumes compared to what we historically saw in the sequential drop. And that becomes even more interesting when you consider market share gains in the cookies category. So is this because there is a significant difference between your sell-in and sellout, which is what's going to measure your market share? Or is this because of the slowdown, which I think was also very significant in the volumes of the category for cookies and drills and pasta?

Well, this is more evident when you compare December with the numbers in the market. the market numbers we've also presented drop, but drop a little bit less than this. An element of the drop in our sell-in and another one is the seasonality and another is a bit of a mismatch in the sell-in and sell-out. There was a higher supply of retail in the end of '25 and lower, especially in January, where there was a gradual increase from February to March. So this issue with the sell-in and the sell-out and the supply of retail in December and comparing to what happened that kind of generates part of this difference. as we consider the internal dynamic and the market dynamics. And so this issue structurally, there has been an increase in price in the category. So considering income, this market has been dropping. If you compare this to seasonality, it's a significant drop. Then you have seasonality, et cetera. And so the market drops. And there's not -- it's not that MGS is growing, it drops less, and that helps us gain market share. But if you think about this structurally, the cookies market has been suffering a bit even more than the pasta market, right, where you get the volume and that's pretty stable. but cookies have been suffering more.

Okay. That's very clear. And if I can just bring in a second point, which is about the market share gains. Could you guys please give us an idea of how much this market share gain is -- what's the level of market share that this brings to you, right? Because it also kind of gives us the impression that it's a market share that's already getting very close to the 30%, 35% that you've always discussed as a market share you would consider to be like a balance point. And so something you guys would consider to be reasonable, right? But I'm asking this because I want to know if this would already make it possible to have a price policy that is a little bit less aggressive. in the category.

And so our price policy and the market share gains -- and so if you look at our pricing, it doesn't change too much. And I think it's a lot more connected to all of the changes in the negotiation approaches, execution and investments in the POS, et cetera, instead of just an aggressive price policy. And so since it's not this because price really makes a difference and moves the needle. Since we are not doing this and our market share gains are getting into that line of gradual growth, -- and so it hasn't gone from 30% to 35%, right? But it has been kind of geared to the right direction, but not that market share gain of 30% to 35% like it was before. So it's like a more gradual sequential growth pattern.

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

I have two here. I wanted to hear more from you on the SG&A dynamic, especially for the marketing line. And so the marketing line grows about 10% and that was one of the main factors for the EBITDA margin to not keep up with the expansion of the gross margin. And I wanted to understand how we should consider this up ahead. I remember the discussion in the beginning of last year that had a the marketing expense setback. And so the question was, should we see this level of growth at a nominal level slowing down throughout the year and then maybe bring greater dilution or the expense level would maybe be greater with all the campaigns being done. And then we wanted to discuss this performance in cookies and pasta, sorry, and the discussion of how it should be advancing and how we should consider this share gain year-over-year such as cookies growing in cost being pretty stable. And what are we missing for this share to accelerate, right?

So the comparison with the marketing between the first quarter of '25 and '26, I think part of the answer you've already given us. And last year, we really held on the expenses of marketing with the launches in the first quarter because we were receiving most of our team was new, right? So like VPs, management -- and let's hold us a bit as the guys arrive. And then gradually, we started reactivating some of these initiatives. And then in '25, we had a greater concentration of marketing in the second semester. And so it's not going to be completely leveled out there. So we have some different concentration in the month -- or one month or another, but it should be a little bit more regular than what we saw in 2025. Now structurally, -- and we've even talked to you about this at the moment. And so it should be maybe closer to about 2% of the net revenue and the expectation that this won't change. I'd say about between 2% and 2.5%. Another point you also mentioned, Henrique about the market share issue we had a volume of cookies and pasta kind of had a setback, but we didn't have a setback in pasta share. Actually, it was pretty stable. We gained market share for cookies. And then we kept this market share of about 0.1% with the maintenance of pastas. So just to not give you the impression that with pastas, MG is going to lose, right? 0.1%. And if you see no one is gaining the 0.1 and who's gaining this is more like in the Southeast and the South. So it's really subtle and there's not a relevant market share loss.

Okay. Gustavo. On the share, the question was like why pasta wasn't having the same level of growth that you're having in cookies? I think Cookies has a share growth curve -- and for pasta, not really, right?

So in the cookies case, this increase in price did not occur. So if you consider the current condition of the population, there is a lot of volatility in regards to price. And so pasta didn't follow along with the price and there is a greater impact. So it's not even like a market dynamic as a whole, right? And so that's why we haven't seen a growth in pasta. And so -- well, just to add on here, when we consider this, it's the national share. So for the pasta category, if you look at this per region, we've seen a share gain in some regions, but the thing is the Northeast region due to an income effect and other aspects with inflation and debt, et cetera, we've had a bit more of a difficulty. And our business actually with pasta, is more concentrated in the Northeast. So our core region is a little more challenging, and this is a matter of mathematics and impacting a bit of the national share as well. So that's maybe not a good -- is not as good, right? But in regions where you have less sensitivity to income, if you think about consumption, we've seen market share gains. And I think that's a positive sign that the execution is really working.

Our next question is from Ricardo Boiati, J. Safra.

But I wanted to a little more on the average price topic. I think a lot was already mentioned, but we're trying to kind of merge things together with in the Mosaic with the information you have and focusing especially in cookies, right, since the industry had an average price that was going up at about 7%. And MGS gained share upon a market that dropped maybe about 4%, right? So MGS was a drop in volume. And we consider this positive kind of moving sideways and flowers also grew a little bit more than the volume with the drop in prices. And so adjacencies also with the growth in the volume of prices. So unless there's been something that's very out of normal, let's say, we wanted to -- we reached a conclusion that the average price of MGS for cookies should be a lot more rest of industry, right, maybe about 1% or 2% in this quarter. And so you mentioned the company hasn't been very aggressive in pricing. But does that mean that the company is not lowering prices? Or does it exclude the possibility of an increase in the average price as well maybe a little bit below what it is at the industry. And so that's the first. Also when it comes to the cost of labor, we had this impression that the print there of the fourth quarter had something that could be like a nonrecurring effect or like a retroactive effect. But in this quarter, there was also a level that was a bit higher if you look at the cost per kilo. And so I wanted to understand is this a more pressure dynamic with the labor costs or if you guys expect any kind of dilution ahead.

Ricardo, thank you for your question. When we talk about the market share and price, you mentioned like, oh, there was an increase and those may be smaller than the market and maybe weren't that aggressive, but the increase quarter-over-quarter was actually greater than both of what you mentioned, right, specifically with MGS. And so that was an increase. And I think we captured an important increase year-over-year and even in the fourth quarter compared to the first quarter, right? So we've already seen an increase in prices from December all the way here. And so I'd say that it was not only about like what I mentioned with Thiago, this growth is not being that relevant and simple are relevant because our policy is we're not going to drop the pricing and buying market share, right? We understand the best way to build this future is by heading to execution, greater closeness to customers and not only lowering prices, right? So we have more than both of these, and we really improved the execution.

Ricardo, this is Fábio. On the labor issue. In the first quarter of last year, we had just interrupted the production there of the La Pala factory. And so it was a labor cost that was almost 0. that kind of appeared in the cost line and all of the termination expenses and cancellation expenses went to other expenses. So this factory was kind of partially reopened in the month of August. So we have one additional factory basically when you compare the first quarter of '25, right? And so there was like one or another headcount increase to meet the volumes. And then there was also the inflation and that appears here on these -- at these lines and there's an inflation of the health plan that's greater than IPCA. So it's kind of like this collection of factors here, but there is no like nonrecurring factor or seen different than the base of the first quarter of '25, where we didn't have like a fact. I think that's it.

Our next question comes from Ms. Laura Hirata at Santander.

I wanted to explore two points. The first one is about the mix. And you guys have been increasing your stake in the market. And I wanted to understand how this growth could influence your profitability, considering the dilution of the unit cost and it's a product that ends up having lower added value. And then my other question is about the competitive scenario, right? So we saw -- and so how do your competitors react in a scenario like this, right, where we can already see price pass along and in which categories this is maybe being more significant?

Thank you for the question. I'll start off here and then Rafael can add on. It's great to sell flower and to know that our area is advancing a lot. And so the volume of the categories, especially represent 50% of our business did not grow at the same proportion. So now if you look up ahead and -- we understand that the other categories when you consider healthy products and snacks that have higher margins, if you look at the long term, we'll see the company that has been a lot more profitable. And so this is a category that already has a relevant penetration in Brazilian households and the change in behavior is a lot more related to the way we're operating now than the market itself, right? But it's a very well-penetrated category. And I don't see a substantial drop in profitability. Actually, I see MG is looking up ahead with a margin growth, better categories execution, pricing adjusted, a lot of innovation, adding more value. And I think that would be in regards to the flower. So Fabio here, just to add on, we're not going to improve the mix by slowing down the flower business, right? We want to accelerate the cookies business. But as we mentioned before, the market for cookies became a little more challenging at this moment. So each category has a dynamic, but we want all of the categories to grow in a healthy and consistent manner with profitability. And about the competitive scenario, I think we covered this topic a bit, and we haven't seen any irrational movements. So the costs went up due to commodity issues, diesel issues. And at this moment, everything is connected also to the war topic, and we see some slight movement in the market about the price increases. But of course, everything taking place in a rational and balanced manner.

Our next question comes from Mr. Pedro Fonseca at XP.

The first point I wanted to explore here is you mentioned the cookies market, but I wanted to insist a bit more on the pasta market as well. We've seen a weak sellout even in a pretty positive for pricing. We understand the affordability of consumers and how this is really challenging. But I wanted to explore if you guys see any other catalysts that is specifically related to the pasta market that has been suffering a little more. In our view, I think the cookies issue is really clear, prices up and hinders volume. But I wanted to see if you guys see anything that's kind of out of your radar for pasta. And eventually, if we maybe consider some other consumer affordability scenario -- and if you'd imagine that this market would recover at the same intensity? And then that's the first question. The second question is, we see performance in foodservice has been very positive and greater growth in margins and industrial fat, et cetera. So having said that, does it make sense to wait for the company to now have more exposure to other oils, especially soy oil. Does that make sense? And then if this does make sense, would you be able to explain if the hedge strategy would in some way be a little bit different than palm oil. These are my questions.

Well, the pasta category is a category that is extremely elastic. And there's extremely absurd sensitivity when you look at the more basic pastas, right? And so when you look at the Northeast, this elasticity is even greater, right? So if you see '25 versus '26, we see a bunch of Bolsa Familia, which is a government program in reais that's a little -- that's a bit lower than you have the election year and you have a distribution of resources that is greater. So that should encourage consumption. I think for pasta, it's very sensitive to pricing and the economy overall, and it kind of moves in line with what happens in the country overall with income and all of that. So I think there's a bit of that. But I don't see any other type of levers that would hinder the performance for process. we saw all the pens, the GLP-1 pens made consumption drop 10%. No. But in our case, it's like zero. Well, of course, the future is different. But right now, what we see in all of our studies kind of demonstrate that there's a debt situation coming from a lot of different factors, the economy, high interest and so many other factors, which are a lot more impactful than anything else, right? So economic improvements and improvement in income and the category recovers quickly.

Well, just to add on to Gustavo's point here and bring this into the execution plan. Last year, we restructured the company, especially in the commercial areas and building the different business units and then execution got better and started delivering results, but the results did not come in at the same speed for all of the categories, right? So we saw food services move quickly adjacencies as well, but now we start seeing something that's a little more consistent in cookies and pasta came along a bit later. There was actually a pricing issue back in 2024 and beginning of '25, where we had the adjustments. And now we have this other more balanced pricing in pasta, right? So our expectation is positive if you think about MGS, right? And now if you think about the improvement of our execution the launches and the marketing of the POSs and everything. So there's a whole set of initiatives that should improve our position in the pasta market, right? And what we can't control is the size of the market, right, because then you have interferences and all these other variables Gustavo mentioned. But then your second question is because of food service, we could have more or less exposure to certain type of oil. Well, I don't think we should have substantial changes because our unit for refining oil in Sierra has a lot of flexibility also to work with different types of oil.

The Q&A session is officially ended. Now I'll pass the word back to Mr. Gustavo for his final remarks.

Well, I want to thank you all for your participation and say that in our team, me, Fábio and our IR team are all available, and you can count on us for any other questions you may have. Have a great day and a great weekend.

The earnings call for M. Dias Branco is officially ended, and we want to thank you all for participating. Have a great day.