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

Good morning, and welcome to M. Dias Branco Earnings Call regarding the second quarter of '26. We have with us here today Mr. Gustavo Lopes Theodozio, Vice President of Investments and Controllership; and Fábio Cefaly, New Business and Investor Relations. We would like to inform you that this event is being recorded [Operator Instructions] The webcast is also being broadcast simultaneously on YouTube at www.youtube.com/rimdias. [indiscernible] forward-looking states made during the earnings call regarding the beliefs and assumptions of the M. Dias Branco as well as our financial projections involve risks and uncertainties [indiscernible] operating factors could also affect future results at M. Dias Branco [indiscernible] from those expressed in such forward-looking statements. Now I will pass the call to Mr. Gustavo. Mr. Gustavo will begin the presentation. Please, Mr. Gustavo.

Thank you for coming to our second quarter of [indiscernible] market given the high level market, family high interest rates in the market and also some changes in the customer[indiscernible] results of demonstrated. We restructured our commercial and sales department created dedicated sales front and implemented the model that's focused on sell-out with more campaigns being executed at points of sale. We went from the [ Saline ] model and broadened and diversified our portfolio in almost all of the company's brands in France. This quarter was also marked by the growth of our dependencies. So we have invested in new categories. We entered the snacks market, healthy snacks as well and healthy foods and have been maintaining this strong solid growth, expanding and growing at 2-digit numbers for the eighth consecutive quarter. Snacks and healthies -- health food have increased in relevance in the portfolio. We opened in 3 categories. You can see that we also grow in different areas. And even though [indiscernible] still represents a limited amount in terms of the company's top line, it still shows that we're moving in the right direction when we look to the future, more contribution of higher added value products and detriment of the lower added value. In terms of profitability even with the reduction of average prices in categories that are directly correlated new commodities, we still see the growth of volume together with the reduction of costs and a sale -- a better sales, which results in the expansion of our gross margin that I mentioned as well as increases profits year by year. Besides this, we have also moved forward with important initiatives to improve our operational efficiency to optimize our infrastructure process, which will continue solidly throughout the next quarters. Fabio is going to share with you through the presentation what we have done to better control SG&A, I'll also go back. We continue to invest in our lands, you saw the increase in CapEx, total focus on operational efficiency through automation, modernization of industrial park. And as a consequence, gains in efficiency regarding the financial position of the company has maintained important competitive advantage. We are closing another quarter with strong cash generation and broadening the position net cash. We kept our the AAA rating for the ninth consecutive year, even in this very challenging environment. And these factors together allow the company to keep investing. I'm going to now pass the word to Fabio and will go into our PowerPoint, and then we'll come back to Q&A. Thank you all for coming for sitting with us today, and we'll see -- we'll talk to you soon.

Gustavo, good morning. Good morning to everyone who is here with us following our second Q '26. To give you some of the numbers in Gustavo's opening remarks, we closed this quarter with BRL 2.7 billion in level revenue. So that's lower than last year, but higher than the last quarter. And the accumulated series, we revenue remained in line. Second quarter, we increased in [indiscernible] 447 million tonnes this quarter, so higher than last year, higher than the first quarter, also with the growth when we look at year-by-year, EBITDA of BRL 284 million for this quarter, good recovery when compared to the quarter -- for this quarter, a good recovery when compared to the first quarter and below what we saw in '25 for the second quarter. Net income followed the same trend as EBITDA and cash flow also was strong. So this is historic from for M. Dias Branco of our outliers, more than BRL 322 million for the quarter and BRL 0.5 billion for the accumulative of the year. So this underscores our dynamic of being a company that generates a healthy cash flow and a healthy financial organization. We look at market and talk specifically about biscuits and pasta, will go into cookies, crackers and pasta, will go into other markets. But when we look at our net revenue here, like we always do in our earnings calls, we share the information of the cookies and pasta market. So this is not [indiscernible]. This is Nielsen results. What are our highlights here. First, we look at 2 different markets. Cookies and pasta year by year, second quarter '26 versus second quarter '25. Both markets retracted in consumption, less than [indiscernible]. What we see in general is a consumer market that has become more challenging. There is a retraction in consumption even for categories that are basic needs -- terms of value. The cookies market increased 5%. This was because of the increase of the average price to get for the market, while pasta maintained a stable pricing, which speaks very well with the weak dynamics this year and last year, causing the market to retract 1% value. When compared to the first quarter, we see growth for cookies price-wise as well as volume-wise, obviously, volume is related to seasonality. Usually, second quarter is stronger in terms of demand when compared to the first quarter. But we did see a recovery in prices in this category. So while the pasta market increased 2 digits, grew 2 digits versus the first quarter and prices remained stable. We look at M. Dias' results for the same market. I can highlight an increase in the volumes we sold. So 4% when compared to last year, 4% increase compared to last year. For the accumulated of the year, we also keep a 4% increase quarter perspective wise, this is the fourth consecutive quarter in which we grow in volumes. This drop in average price regarding when compared to last year is directly connected to the items that are more commodity centers, so closer to weak products, we drop from last year to this year. So we did see a drop in prices for pasta and wheat. So when we combine these factors has caused a drop in 1% in revenue. This is the dynamic we see in the last minus 2% for the main products, cookies and pasta, for wheat flour as well, and while the other products grew 12%. So this is the eighth consecutive quarter where we have 2-digit growth in the other sectors. To remind you, this is an important growth sector, which is connected to our medium and long-term goal. These are products and markets that grow with higher prices and higher margins versus the first quarter, averaging growth, volumes grow, thanks to execution as well as seasonality. And I think that the main highlight here is the increase of average price and 4% from the first to second quarter, which is directly related to the mix improvements. We saw the cookies and pasta market growing more than wheat flowers. So this generated a growth in the mix directly affecting the average price, which is what you can see here more approximately an increase of 4% from 1 quarter to the next. If we look at volumes and REIT at the short term, so this is a rating of what was accumulated in 12 months. So from left to right, we have accumulated in second quarter '25-'26. We see that every quarter when we look at the accumulated 12 months of volumes, there was growth. So from 1 point to the next, volumes increased 8.3%. So even in a consumer market, which has demonstrated itself to be more difficult, even retracting at some moments. This is few of our execution. And these are the main points that we understand have become -- have the enablers of this growth, as Gustavo mentioned in the introduction, allowing us to maintain consistent growth in quarters -- consistent growth quarter-by-quarter. We have made different activations first quarter and second quarter in the sales points. And in all of Brazil, we showed this. We called this campaign big promo. So it involved all of the states in Brazil, over 7,000 stores retailers were activated over 1,000 prices or distributed in coupons, cars, motorcycles. So we think it was a very successful campaign, campaign that worked that increased results that brought in the results that were expected, given we saw growth in volumes and increase in market share and the environment that is -- the consumer environment that's retracting. We have also campaigned in order to strengthen MGs [indiscernible]. So the highlight for this quarter is Vitarella with some celebrities involved and focusing on traditional brands in the market, cream crackers, [indiscernible] wafers, crystal crackers. So a big campaign focused on the Northeast region of Brazil. We also innovate -- saw that innovation was very present during [indiscernible] festivities. The San Juan our June festivities are very important in the Northeast of Brazil. So we launched focus programs. So basically special additions. There was [indiscernible], Sundry meat, peanuts and chocolate. So these were all special flavors were super successful also in the Northeast as they pay homage to the [indiscernible] in the month of June, successful campaign there. Given these investments in marketing in this Gulf focused investments, not only in the first quarter and second quarter of this year by investments that have been made over the last few years, we received with a lot of satisfaction and joy that news the counter, which relates the 50 most consumed markets in the Brazilian homes. And we have Vitarella and 2 MG's brands, Vitarella is the main cookie brand in Brazil, not only MGs in Brazil, the most important cookie brand, which also occupied the 12th position and those weren't in all the brands. And [indiscernible], which was acquired in 2018 and today is in the 26 position in terms of the most consumed brands in Brazilian homes. In our food servicing channel where we have spoken to you a lot about this in the last few quarters, this sector has been under intense transformation in the way we approach the market, the clients the leadership. So today, for this price -- for the growth, Daniel has joined the team about 2 years ago and is doing a great job there. He has really been transforming the way we sell flour, vegetable oils and -- we just launched also a wheat Farella brand which is a sub product from the wheat mill process, but it's an important feed for animals. So we launched the Grand Flarelo brand, which has a different packaging, facilitating clients' lives. And we have seen that it has been a success in terms of bills. Just to discuss surrounding brands like food service and the adjacencies, we also have been leading the way 100% dedicated to this business. Snacks and healthy products, the new markets in terms of net revenue, is doing more than BRL 500 million already. [indiscernible] heads up that business. He joined the team also about 2 years ago. And along the same lines of accumulated revenue over the last 12 months, looking at the last few quarters, we see growth in all quarters for these sectors or adjacencies, which shows that we're consistently executing well here. From one end to the next, it's a 2-digit growth market, 12.5%. Healthy products is worth highlighting, especially our granolas. The granolas have -- we're leading that market. Our market share is double the competitors. And when we compare to last year, we increased market share in 6 percentage points. So we have gained share consistently and also been growing share consistently. Snacks is something we're betting on. It's more -- it's an over BRL 10 million market. We have been acting with corn snacks, potato snacks, the frontier lines also [indiscernible] brand has also been very important. We have invested in marketing for those products, and it's a 2-digit growth also for those quarters. There has been an important effort to activate and brand during the World Cup, we focused on snacks because there are products that dialogue well with the World Cup. So focusing on Piraque, the Frontera brand. We also activated lament with some different flavors of countries that went to the World Cup. So also focusing on Adria and Isabella Besides Piraque, just to remind you some of the snacks that we have in this Frontera category, these are the flavors we recently launched. So we did [indiscernible] and also potato chips in the Frontera brand. So it is a brand that today has tortilla as well as potato chips as well as wheat snacks. The wheat corn and potato. Gustavo just reminded me that we have the wheat snacks as well. They're in one of the airline companies in Brazil. So if you fly with them or have the opportunity of seeing our snacks while you're in the air on a national flight. Moving revenue market and now going to costs and expenses, so we can go through some of expenses with you. We usually start with this slide here. And you can see that the real appreciated in the last few months. So when the real appreciates, wheat has been assessed and hasn't demonstrated an increase in terms of global issues and news. So I think everyone is following this -- following this as well as palm oil, which has demonstrated an increase in the last 12 months. Palm oil in the last 12 months also [indiscernible]. So when we look at joint price demands as well as the dilution of fixed costs and variable costs, we see in this graph that from last year, and what we see this year in this quarter perspective, this year, we are being able to have a clear perception between cost and price that is much better than last year. So we have spoken to you a lot about the fact that there has been a great effort in terms of team and people to improve the way we're executing pricing. So we're piloting the shift better, piloting pricification better, and we see that the variable cost has dropped and fixed cost has dropped, so -- or be left aside. So price also drop from 1 year to the next. This is directly related to weight in reals, decreasing in price. But the relation between this last year and this year was better, so our margin went from [ 3.3, 3.4, which 34 ]. So this also demonstrates an increase from last quarter. So besides the consistent growth in volumes, we have also seen a positive highlight this quarter. We are working to maintain this strong expansion of our gross margin. So when we look at the years accumulated as well, we see an expansion of the gross margin from 32% to 34%. Expenses, and then we need to focus on SG&A. SG&A, our expenses with sales and administrative expenses, we did see growth from 1 quarter to the next in nominal and relative terms from 14.3%, it's growth that increased inflation. And we can explain a good part of this growth above inflation according to these points here. There was an increase in volumes of 4.4% A big part of expenses of sales was this [indiscernible]. We also had expenses, nonrecurring expenses of [indiscernible] with the seller project, which I'll tell you about soup. And so basically, it's a process where we outsource our services, our administrative processes, and there was a cost for implementing that which totaled BRL 12 million, but it's nonrecurring. The increase in diesel prices given the conflicts in the Middle East also brought instant impacts to our business. So when diesel went from BRL 6 to BRL 7 isolating other factors, if we look just at the increase of diesel prices that in itself brought an impact of BRL 5.6 million in the next quarter. So we had also some other impact expenses related specifically to the World Cup regarding commercial activations, which we won't see next year. They were directed to that campaign. Some millions were directed to those campaigns and also partnership of timing and the unfavorable impact of BRL 4.5 million from the annual wage adjustments in different periods. So this year, annual wage adjustments happen every year. But last year, it was implemented in the third quarter of '25, and this year, they brought it to the second quarter of '26. So that's why you'll see the unfavorable impact of BRL 4.5 million from wage adjustments. Besides inflation and growth in volumes, we have these other external factors, which contributed to the growth or an increase in SG&A of 14.2%. Gustavo wisely mentioned at the beginning of the call that the consumer market is more challenging. We need to revisit our structure and expenses, so we can readequate the structure to the context. So we have 3 big initiatives that are already being implemented and are underway. The first moving left to right is the Acelera project where we created a center for shared services, and we are then transferring our more transactional activities like tax receivables, accounts payable and other processes to an outsourced service supplier, and this brought us an implementation cost of BRL 12 million recognized in the second quarter. And this process involves a reduction of 314 of our positions. This year, we may have gains, but I would say it's probably going to be stable, and we will see these effects more in the future. We have the games, but we have the cost of implementation. And then starting next year, the expectations are that we will have net responses from this project. Besides the Acelera project, we are revisiting the entire structure. So employees, the team and making changes to all departments. These changes took place in August '26 and we reduced 300 positions, thanks to those changes, also recombining the management positions. So healthy and snacks with international business was revamped. And so today, international business is now under [indiscernible] responsibility, and he is responsible for the adjacencies with healthy and snacks. Besides that, the third initiative here is that we revisited our entire structure of expenses. Besides expenses related to people, this was very detailed and involved all of the areas of the company. We mapped and committed to internally reducing BRL 37 million. This involves consulting, projects, events and other discretionary expenses. So we saw an increase from 1 quarter to the next versus last year. Even with the improvement in gross margin, EBITDA was still a bit below and that is because of the factor of expenses, but a lot of this has already been addressed, and we'll certainly optimize the cost structure starting quarter 3, same dynamic for the accumulated results of the year. The EBITDA dynamics are what we see is the net profit. So without any novelty direction. So in terms of cash and investments, we have cash generation during the quarter and be accumulated for the year as well as cash flow. When we look at cash flow, the main lines, the 3 main lines, you can see that while we were able to grow volumes in 4%, the work in -- with working -- with cash conversion was effective, and we were able to reduce our cash conversion cycle when compared to first quarter and last quarter last year. So we ended this quarter with the net position of about BRL 767 million. This means that M. Dias Branco has more cash than debt. So when we compare to EBITDA, it would be 0.7% of EBITDA in the last 12 months. For the ninth consecutive year, Fitch reaffirmed our rating, AAA is the highest Fitch rating. Ever since 2018, we have the exact same meeting and have been keeping it year-by-year. So thanks to M. Dias Branco strong market position, our leadership in cookies and pasta, our biscuits and pasta, our history of cash generation and also net revenue, which is clearly dollar in our business. Our debt is -- gross debt of [ BRL 1,400 billion ] is almost all long term, especially starting [indiscernible]. Investments for the quarter totaled BRL 274 million. But for the quarter, BRL 112 million, which is almost double what we did last year. For the last quarter, we already discussed that MGS is probably in another cycle investment cycle. In terms of our infrastructure and logistics of the factories, searching for automation, modernization, gains and productivity -- when we look at all of the regions in Brazil, there is some highlight to the categories of pasta in the north and northeast and cookies in the south. This is our strategy, as we always comment, focused on current business, cookies and pasta, other categories, which Philippe is working and have grown 2 digits for the eighth consecutive quarter and our international business. To close our presentation, we can end with ESG. ESG, these are our main indicators, which we follow here on a monthly basis internally quarterly with you, some of them also components our individual goals, and we see that, in general, results were very good. The arrows are all in green, the point of view of water, residue, the use of renewable energy and Scope 2 and women in leadership, totaling 31% and an increase when compared to last year of 3 percentage points. With this slide, I would like to close this call and say that we can go to questions and answers. Thank you.

[Operator Instructions] Our first question is from Gustavo Troyano from Itau BBA.

We have 2 points to explore here the top line dynamics. Mainly, I would like to discuss -- start by discussing your top line for your main products where you have already signaled share gains and shares, probably there's also a gain in terms of price versus industry. So we could discuss in a more granular way along these lines, what do you understand was a sequential gain in pricing? And what was the mix in products? I think that -- we've already understood what happened in the quarter and maybe you can keep telling us what's happening in terms of the gains in shares in the market, also pricing moving forward. So the pricing strategy is moving forward. Historically, you have a higher stock and competition. So I imagine you're probably still not had an inflationary cost similar to what competition has. So my question is, are you seeing competition raising prices? And also, if you could also join this with the consumer environment, especially in the Northeast. And understanding that there may be space for increasing prices moving forward in this environment of consumption. But it would be good to hear what you think about this, okay?

Thank you. Gustavo, this is Gustavo as well answering you. So let me start with your second question, then Fabio will take your first one. So the market, the competitive market in general for pasta as well as cookies is probably, I would say not changing very much in terms of the next quarter -- the last quarter. Price is always the leverage that companies have available for competing, right? But I think more and more Gustavo, it has become more difficult to just pull that lever, let's say, in terms of margin expansion. So given this risk we have seen in the food market, according to ever we've seen in the past, so indebtedness, et cetera, interest rates and all of that. So what we have tried to do is not count with price too much, except for state any effective gains in costs. So this has always been a main direction. Let's not bet on gains above internal inflation because consumer market is more reduced at the moment, so we can't really move in that direction. Another tool that companies used a lot in the past is packaged downsize and it moved -- it's at its limit. The consumers are more and more considering the packaging and that became pricing in the end. So pricing is not the only -- it's not the easiest tool for gaining margin expanding revenue. We've gone much more along the lines of we do at points of sale and I would say that, that can be broken down into 2 different points. So when we talk about execution, we're talking about gains and volume, and we haven't used the price leveraging down, let's say, but it's much more things, for example, occupying more space. So for example, having promoters that are more efficient in the way they are filling the shelves and opening new points of sale. So there's the pricing which is also very connected to our sales structure and marketing strategy. So this changes, the operational routine, the logic changing at stores or instead of doing big negotiations for selling were basically not using that model anymore and are really focused on the [indiscernible] with big sell out with big brands, big stores and also making a bigger effort with retailers to assure that sales to consumers happens and not only sales just to trade or store owners. So this is one of the leverages volume through a better execution and planning. And the other mix we gained more or less, let's say, in terms of growth, 3% in the mix. So the mix has been something relevant. And we have launched a lot of products in all of the brands. Some in -- ins and outs our products that have their life cycle to find. So the amount of launches for the Northeast. I think you're concentrated more in Sao Paulo. And so this year, for example, the Northeast, the amount of new SKUs that we launched for the regional markets in the Northeast was immense, and it was immensely popular. So a super successful campaign. This leverage -- our mix very well. And we brought our chocolate -- chocolate wafers, we put peanuts, which is a flavor of that season. And also, we did the [indiscernible] with chocolate coverage, but also with peanuts. So [indiscernible], which is the corn cereal, that's each and also in the season. So [indiscernible] also, especially flavored corn. So all of that expansion was very success and popular as well as those adjacencies, which usually would take longer to ramp up. Now things that took longer than we wish, but now with the changes with the team that's dedicated, basically an MDS department totally focused on distributors regardless of MDS so that we could, in fact, have focus on the focus and assure that the channels and the categories. So now new launches as well as marketing and the growth of these categories that we invested in on volume. So I apologize for this long explanation and taking so much of your time, but I really wanted to share with you or be very objective of you, Gustavo. Price on its own, just pricing as a leverage has not been MG as focused in terms of the way we're evolving. Our margins. We're much more interested in volume through execution and mix through the investments in R&D.

Gustavo, good morning. If we look at cookies and pasta for the second quarter of '26 versus 25, which is what you asked about, in terms of market share, we increased the position of market share volume in these 2 categories. So in the year by year, for almost all regions in Brazil. So expressive gains in market share and which is not concentrated in 1 region, which corroborates what we have told you about our focus on execution on sell-out and sell-in as a result of sellout. So this is what we have seen generating results -- generating impact on our results. If we look at sell-in and it's also something you asked about, if we look here from 1 year to the next in the category of pasta, we have seen more pressure on pricing, which is normal in a moment in which we have a drop in wheat, which is the main commodity of this category. So short term, from the first to just second quarter, especially in the category of cookies, we were able to reach a very positive equation of increasing average pricing, increase in volume, strong increase in revenue, and all of this together ended up joining -- creating a positive mix and our average price, which was 3% of the 5% price increase that we saw from the first to second quarter.

Our next question is from Henrique Brustolin from Bradesco BBI.

I have 2. Very much along the lines as the last 2 questions about main product. So I would like to ask you to understand -- ask you to help us understand performance when we look at the revenue of these categories year-by-year because -- as you mentioned in the release, the market volume has dropped 1%. I understand MGOs has performed better in terms of market share gains and we also see the revenue of MGS falling 2% per year, while cookies was very -- and pasta was very stable. So when we look at performance, value versus revenue in terms of the mix and your categories, which are more indexed to commodities, [indiscernible] did this -- did these months also help you see some adjustment in the base, which explains the performance and revenue of what we see for new? Also, that's the first question. The second question also about market share, Fabio. There were lots of information that you shared with us in terms of volume and consistency. So could you tell us a bit about APIs, the commercial indicators, how you see the evolution of your main indicators throughout the last year to help us give us some base in terms of the share gain you've been delivering?

Thank you, Henrique. I'm going to then go to Fabio looking at top line of the main products drop is very much related to -- the point that Fabio mentioned before, in terms of price -- price rate. Pasta price retracted, very much aligned to the commodities retraction. So when we look at that drop, it's connected to that. Commodity drop price drop. Cookies moved up, mix wise also moved up. So the price of the -- lower price for pasta, when we look at commodities and you look at the price index, you're not going to see a relevant change. So it wasn't a behavior that was specific to MTS. The market behaved the same way. Some states adjusted some things, and we understood that we could go a little bit lower with the price index there by as an example. But in general, our price index -- our average price index doesn't change in a very significant way throughout the quarters. So if you look at, for example, pasta, MGS Pasta for the second quarter of '26, we ended the quarter [indiscernible] brands together, 94% of price index. First quarter was 95%. So very little. If you also take our second competitor, and also from [indiscernible], you know who that is, their price index is that 90% just so you can see what we're talking about here. So 4 points less than [indiscernible] this price point reflection is much more connected to commodities than to a strategic change in our -- in dropping prices or mix price. So that's a movement of the market in general.

I hope you're doing well today. some KPIs, I think to give you a first example. There is an indicator that we call perfect store indicator, [indiscernible]. We've talked to you about this indicator and some other opportunities, and it's actually a goal now our team, one of -- our team's goals is the perfect store indicator. So that indicator consolidates other indicators the assortment in stores, pricing, correct pricing of items, the availability of items. This is an indicator that we follow frequently and it's also part of the group of indicators and management. Another indicator, which also dialogues with the dynamic of having [indiscernible] sell-in as a resolve sellout is the stock level at our clients. So we follow this weekly. And the main stores that MGs is present at. SKUs for PDVs are important KPIs. And things that consolidate some KPIs. So level of execution in the Southeast, for example, performance in the Southeast. This is a region MGS is relevant and also has a lot of opportunities for growth. So we see this as an internal project -- treated as an internal project. And it's something that we're also -- that's on our radar -- on the management's radar. And another point that we saw more in the first and second quarters this year was the campaign, the big campaign I mentioned in the presentation that we called the big promo. And that campaign, that sales campaign was launched in over 7,000 stores in Brazil. So we started -- we finished gathering a survey on what were the results of the big promo and the results were really very positive. So just starting there, you can see some examples of indicators that we follow management indicators that we follow frequently.

Next question comes from Isabella Simonato from Bank of America.

If you could go back to the discussion on the dynamics of pricing and costs. So I understood Gustavo that all of your initiatives are focused on leveraging margins that the company is implementing. But possibly, you are facing an increase in costs for the next 6 to 12 months that may be relevant, given that we are talking or we're seeing a recent depreciation of exchange rates. What I understand now is that we continue to go through what you hear -- what you say as internal inflation of the company. How does this dialogue with your consumer environment where it doesn't seem that there is a drastic change or a drastic improvement moving forward. So I understand that from the point of view of positioning competition, you're not using pricing to gain margin in function of a better competitive execution of your -- point of sale. But once you come to a point where the whole industry has to adjust pricing because of this, I have a question about how you perceive this in terms of the elasticity and the capacity of the category to absorb this type of pricing or price adjustments and index adjusted?

Thank you, Isabella. Thanks for the question. You're right, this increase in cost -- we were already talking about this internally for the last 2, 3 months. So when we say this is more difficult than it is more difficult in general, it's more challenging in general. So we haven't tried to pass this on these costs. But the cookie market absorbed price differences better, so prices were up. They increased for the whole market and only I'm just. So what we have done is we have improved our search for not losing margin and having a efficiency in terms of price and cost. So we are focused on, for example, the margins, the flowers, home flowers, industrial flowers and we have a weekly dynamic where we are defining pricing, and I think that's a bit of what we are working towards. So that's elasticity is better for pasta. We perceive that changes in pricing of pasta and volume have a pricing that is less intense, but cookies less, given what you just mentioned, we already saw this happen eventually, even with had positions that the company has. We saw this happen in July. And it's not relevant yet, but it starts pointing upwards, so you can see that this conflict -- well, Ukraine started bombing Russia and even though Russia had a production, which was spectacular this year. It's also demonstrating some trouble in the Black Sea. So the Russia's production also is not able to also move. So because of the conflict, we're starting to see that El Nino is coming probably with a lot of drought in the north and more rain in the South. So these are tension points we have already adjusted the tables because you know that between capture and pricing, there is a timing. There is a protocol by contract and the big network between [indiscernible] we already protocoled some tables in the past, which should start capturing some part of this pricing in August. So this has in our head and we believe that the industry as a whole wall also move in this direction.

Next question comes from Arthur Devitt from XP.