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Good morning, ladies and gentlemen, and welcome to the M. Dias Branco Second Quarter '20 Results Conference Call. Today, we have with us Mr. Gustavo Lopes Theodozio, Vice President of Investments and Controllership; Rômulo Ruberti Dantas, VP for sales; and Fábio Cefaly, New Business and Investor Relations Officer. We would like to inform you that this event is being recorded. [Operator Instructions] Today's live webcast may be accessed at www.mdiasbranco.com.br/ir.
Before proceeding, we would like to mention that forward-looking statements are based on the beliefs and assumptions of M. Dias Branco management and on information currently available to the company. They involve risks, uncertainties and assumptions as they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of M. Dias Branco and lead to results that differ materially from those expressed in these statements.
We will now turn the floor over to Mr. Theodozio, who will begin the presentation. You may proceed, sir.
Good morning to all of you. Welcome to the M. Dias Branco results conference call, and I hope that you are all well.
To begin the conference, I would like to acknowledge the endeavor and commitment of our 17,502 employees that are working arduously at our plants, our mills, our distribution centers or even at their own homes in all of the regions of the world to ensure the supply of food maintaining our quality standards. This is a very committed team that fight hard and that has brought about excellent results. And I would like to thank all of these people.
As we mentioned in the first quarter conference call, we are following the guidelines of the World Health Organization and the local authorities of Brazil. During the pandemic, we donated more than 400 tons of food and money to bank centers to incentivate the donation of blood. As I had mentioned in the previous conference call, we said that as a company, we would come out of this pandemic stronger than we had entered and the results of this quarter are consistent and aligned with our strategy. And we show that we're on the right path to continue a virtuous cycle of growth with profitability and attractive returns.
For the highlights, which will be presented by Fábio, our net revenue was a record, obtaining BRL 1.8 billion, with a growth of 2 digits and an increase in average prices and an expansion in our market share in cookies and pasta. In the attack area that is part of the South, Southeast and Midwest as well as in the different area in the North and Northeast, it's important to mention that we grew in share and value. We ended the quarter with a sound financial position. Cash generation of BRL 492 million was a record, and we reduced our leverage to 0.4x net debt over EBITDA, and we maintained our AAA rating by Fitch. With 51% increases in our net income, the investments made during the last year's introduction and investment are sustaining our growth strategy. We produced 17,000 tons of food, once again, a historical record. We report historical records in verticalization, reaching 99% in flour and 98% in vegetable shortening, thus guaranteeing a better cost structure.
We had significant actions in sustainability. We reduced our water consumption by 5.6% and the generation of residues that dropped 12% per ton produced. We have reached BRL 93 million in the second quarter. Now these results are the effective united work and consistent work steadily aligned with our strategic alignment, which has proved to be the right one.
Before giving the floor to Fábio, I would also like to present another highlight on Piraquê. This company was acquired in May of 2018. It works with high-added values, and we're preparing it to be a national brand. In invoicing, it is the second most important brand for M. Dias Branco, reaching 23.7% of EBITDA margin. And we're making the necessary adjustments in its cost and expense structure.
To conclude this part, I would like to reiterate that we're working tirelessly being very careful pertaining to the safety of our employees and the supply of very tasty and competitive priced food. We continue our strategy and the attack in different areas as well as in the foreign market. We have 19 brands, and we're working tirelessly and that calls for opportunity and productivity gains.
And I will now give the floor to Fábio to present the results, and then we will go on to the Q&A session.
Thank you, Gustavo. A good day to all of you. And if you could please go to the presentation that has been made available to be able to follow-up on the explanation. Few supplements on the main highlights of the quarter, and therefore, we will begin on Page #5 to present details on the sales for the second quarter.
Net revenue was BRL 1.89 billion, a growth of 22.2% of historical record for the quarter. The growth that you see in the graph is the result of our correct operational and commercial strategies put in place in 2019 and the strength of our 19 brands and the infrastructure that sustains this growth. And above all -- our team, a very focused and disciplined execution.
We now go on to Slide #6. Here, you can observe that growth took place totally aligned with our strategy. We grew throughout Brazil in both the defense and attack areas and factor in the defense area that includes the Southeast, Midwest and Southern areas. We also have steady growth in our export, thanks to the correct strategy that was set for 4 years ago, focusing on the market and creating exclusive products for export and the opening of new markets.
We will now go on to Slide #7. In the comparison with the first quarter '20, we increased our market share in cookies and pasta, 1.2 percentage points and 3.2 percentage points, respectively. It is important to highlight that we grew our market share both in the attack and defense areas. Once again, totally aligned with our strategy.
We now go on to Slide #8. We grew in our main product lines, cookies, pasta, bran, flower and margarine and vegetable fat. In terms of volumes, the growth was 2 digits in the main project lines. In margarine and vegetable short-term and an important part of sales is concentrated in food service, we had a volume retraction because of the closing down of restaurants and bars. Regarding average prices, we have an increase in all of our product lines.
We now go on to Slide #9 to speak about exports. We sold BRL 93.3 million, a historical record for a quarter. These results are based on the execution of a long-term plan that allowed us to quickly capture the opportunities that came about, especially in the sale of pasta to the Central American market. These are results that make us proud and confident in the long-term for the sales of M. Dias Branco in the foreign market.
We now go on to Slide #10. As mentioned for the fourth consecutive quarter, we're expanding our volumes with appropriate levels of discounts.
We now go on to Slide #11. Thanks to the strength of our brands and the quality of our products and launches, we have observed, for example, in the cookie category, a growing trend of share in other sales. It is important to mention that Vitarella, our largest brand is the #1 brand in the category of cookies in Brazil according to the Brand Footprint survey by Kantar, still speaking about our launches, we highlight Vitarella Cristal, a slightly sweet biscuit with crystal sugar that has been a full success.
We now go on to Slide #13. I'm sorry -- it's Slide #12. The present day market context has motivated to enhance our presence in e-commerce. This is part of our medium and long-term plans. At present, we have enhanced its priority. We thus restructured the area with dedicated resources and people, and we are present in some of the main platforms in Brazil.
[indiscernible] very strong and their traditional retail has also proven to be strong in the e-commerce channel.
We now go on to Slide #13. As mentioned by Gustavo, Piraquê, which we acquired in 2018 by BRL 1.5 billion, is a reference brand in Rio de Janeiro, 2 months prior to Santos. It is growing outside of this traditional market has maintained a gross margin of 46.8% and is constant in its products, it reached an EBITDA margin of 23.7% this quarter. Now this level of margin reinforces the correct investment we made in this brand.
We go on to Slide #15, and I would like to make some highlights before speaking about EBITDA. We reached record percentages in verticalization, 91% -- 99% in flour and 100% in vegetable short mix. This is important for availability with quality for our main inputs and for our margin.
We go on to Slide #16. We produced 817,000 tons of food, a historical production record, with a highlights of flour and bran. Most of this is due to the Bento Gonçalves mill in Rio Grande do Sul.
We now go on to Slide #18 to speak about flour. Now flour has become more representated in our cost when compared to the first quarter of '20 in the same quarter in 2019 because of the devaluation of real. We observed a 12% negative impact in gross margin. Because of this, in EBITDA, we had a growth of 64% when compared with the first quarter '19. For the entire year, we also had a margin expansion.
We can now go on to the following slide. In terms of the EBITDA margin variation between 2019 and the quarters of 2020, it clearly represents activity of the flour in our results 2 percentage points due to the devaluation of the real. This was offset with a reduction of fixed costs and fixed expenses, including logistics. Additionally, this quarter, we had 0.4 percentage points of nonrecurring effect in our recurring EBITDA margin.
In the second quarter '20, it is important to highlight that we had favorable effects of BRL 38.8 million in tax credit, mainly due to the exclusion of [ GMS ] and the PIS/COFINS calculation rate. We also had unfavorable effects, BRL 28.5 million of costs and expenses related to the pandemic and also some referring to the restructuring and integration of Piraquê.
We can go on to the next slide, referring to net income. Net income grew 46.4% during the quarter and 80.5% for the first half of '20, especially due to our gross sales and EBITDA.
We now go on to the following slide, referring to investments.
We invested BRL 44.8 million in the quarter and BRL 101 million for the half year with a focus on production and logistics.
We go on to the next slide on cash. Net availability generated by operating activities totaled BRL 492.4 million, a historical record. Despite a growth of 51.4% of net revenue, I highlight our working capital that results from initiatives adopted with receivables and suppliers. The reduction of 3 to twice a month for payment to suppliers. Formally, we paid our suppliers 3 times a month, we now do it twice a month, and the adoption of longer terms revenue purchases.
We now go on to the following slide, we'll speak about our net debt. We ended the quarter with BRL 232 million in net debt, 46.9% lower than in the second quarter 2019 and lower than in the first quarter 2020. Our results on balance reaffirm the solidity of -- towards maintaining its AAA Fitch grading.
We now go on to the sustainability information. We made significant and consistent pricing sustainability. We decreased our water consumption. We decreased our generation of solid waste. We have a lower frequency of accidents at work, and we're working hard to enhance the waste recycling index. As mentioned in the conference call of the first quarter, because of the pandemic, we adopted several measures to prevent the spread of COVID-19, we donated more than BRL 4 million bottles -- reals for blood donation. And on August 7, our management board has approved our sustainability policy. This policy will serve as a guidance for the positioning of M. Dias Branco in terms of sustainability governance with principles that are aligned with the global pact of the United Nations.
With this, we would like to end this part of the call, and we will now open the floor for questions and answers.Now before we offer the floor to analysts. I would like to read the first question that we received to from the Scotia Bank analysts, Juan and Felipe. There are 2 questions. One, referring to price and another on return to hedge that will be responded by Gustavo. Let us go on to the first question made by Juan and Felipe. With the level of devaluation of the real, the price trend is obviously becoming a very important to maintain your financial performance. If you could discuss your plans in terms of this, we see that you had some pricing increases in March. And we would like to know the consumers' reaction to these price increases.
I give the floor to Rômulo after responding to this question.
Our prices in the comparison of the second quarter '20 with the same quarter to '19, had an increase in all product lines. When compared with the first quarter of '20, we also had a price increase of 2.6% average price increase, with an increase in the main product lines.
I now would like to give the floor to Rômulo to give greater details on this response.
Thank you, Fábio. I think my audio is okay, so I will continue on. We carried out our first increase in the first quarter '20. Now we announced this during the first quarter, and we implemented this price increase at the beginning of the second quarter. Now referring to the question on our price strategy. We have a price or structure that is being developed. Once again, we can implement this price increase overnight. We have several factors involved in the brand construction, and the channel is also important. We are implementing this as planned. Now the pressure on cost has led us to having this price increase. We began to implement price increase at the beginning of July, but the true price increase will take place in August. Once again, we announced there's a number of different channels throughout Brazil, which is what we tend to do very commonly. Now this increase will be put in place throughout the third quarter. And this will begin at the beginning of August, and we do have a third plan that is underway of making some adjustments in terms of packaging as we announced product offer so that the consumers can take more products as well as some adjustments in the packaging that will allow the consumer to have a lower disbursement as well. So as you can see, this drop in prices -- well, I'm sorry, this increase in prices will take place during the coming months, and we will have these adjustments in packaging. And the price increase will be implemented in the part of Brazil with a difference in terms of the channel. And once again, this is a strategy because of the growth of our brands in Brazil. And all of these process is underway and will take place until the end of the year.
Basically, we will have 2 price increases announced and implemented. And a third version, which is an adjustment in the packaging as well as its prices.
Fábio, if you allow me to add something? This is Gustavo. Thank you for the question, Felipe and Juan, and to add to what was said by Fábio and Rômulo. The U.S. dollar at the beginning of the year had a devaluation of more than 30%. It began with BRL 4. At present, we are at BRL 5.40. Now because of this, we cannot transfer the price immediately. What we're doing with the market is to work jointly, Rômulo remarks on how we have made these price increases and transfer to the consumer, and this will continue until the end of the year. Now we had a productivity program that began at the beginning of the year, which is a way of neutralizing the effects of the real devaluation. We're working strongly on productivity enhancement to be able to deliver lower costs and increase, of course, and preserve the profitability of the company. Well, this is not the only project that we're working with internally.
If you allow me, Fabio, in terms of the second part of the question that refers to the consumer behavior or reaction. What I can highlight is that we clearly, our sales with an unfavorable macroeconomic situation and the consumer looks for different channels to be able to supply their home. And the issue of safety, of course, is one that consumers value ever more. The proximity retail markets have gained relevance as well as the traditional cash and carry because of the prices and the disbursement, what we are looking for is to have the correct assortment in these channels. Of course, we're concerned with the price issue and this is due to the macro economy that we live in. And as Gustavo mentioned in terms of protection, we're working and offsetting this increase in prices to an increase in productivity. And we're transferring, of course, the price increases that were necessary in cookies and pasta, I think these price trackers have been way below what would be necessary but we're attempting to continue to grow with the right margin and productivity, of course, will be very important to offset the price.
This is Fábio once again. We're now going to go on to the second part of the question of Felipe and Juan referring to our hedging policy. If you could discuss the hedging policy in greater detail to see, which is the raw material that you will protect. And in the case of need, what is it that you can protect? And which are the parameters for your hedging program? And which are the measures adopted so that the program will not face unnecessary risk?
Can you begin responding this, Gustavo, please? Gustavo, could you please respond to this question.
I'm back, I'm back. To speak about the exchange hedge, we created a hedge policy for all of the commodities, beginning, of course, with wheat, palm oil, sugar and everything that we purchase in foreign currency, I would like to remind you that all of the debt that we have raised in foreign currency are automatically swapped to the real at the moment of contracting the debt. All of the commodities, CapEx as well as the financing or funding loans, have been hedged as well as part of the export. But again, due to the commodities.
Gustavo, if you allow me to add to this. When we launched the hedge policy that was approved by the Board, we organized the hedge committee that needs periodically to be able to set for a direction for the teams that are directly involved in this. We have a hedge committee made up of the top management team, executive directors and technical associates from treasury supply areas.
And to address the second part of Juan and Felipe's question on the measures adopted to guarantee that the program will not run unnecessary very well, and all are good as Fábio that decides the in-house people as part of the committee. We also have independent members banks and consultancies that offer us guidance in terms of the commodities that M. Dias Branco works with.
That's corrects. Thank you, Gustavo. We can now ask the operators to go on with the rest of the questions, and we can offer the floor to the other analysts.
[Operator Instructions] Our first question comes from Luciana de Carvalho from Bank of Brazil.
I have 3 questions. The first question geared to volumes, you have had a volume increase in the year-on-year and quarter-on-quarter comparison. What is it that you expect from the second semester in terms of volume? And how much of that volume is a result of the small retail and supermarkets and if the resumption that we expect in the second semester will have an impact on this, so which is the volume going forward?
Secondly, the question on the synergy of Piraquê and the EBITDA margin of 23.7% that you mentioned. If you could give us greater color in terms of the synergy. What is happening in terms of positioning, verticalization and the sustainability of this margin. What is it that we can expect in the future in terms of profitability?
And the third question, the synergy was Piraquê, which is your latest acquisition and how this relates to net debt? What are you going to do going forward in terms of growth? Will it be organic growth? Or will you go back to that project acquiring a company and choose the products, which are the opportunities that may arise in the future?
Fábio, if we could get organized in terms of this, I will speak about volumes and organic and inorganic growth, and we'll speak about volumes at Piraquê if you agree.
Luciana, thank you for your questions. And I'm going to speak, not about future volumes, that's difficult, but we can say that demand remains very strong. With that forecast of a reduction in our GDP, we live in a more restrictive economy at present. And we truly can't give you very much guidance on future results. When it comes to organic and inorganic growth, we have growth that is strongly based on our plan of dividing the country in the attack on the defense areas. And of course, the result has been very positive. We also have the issue of internationalization with a special focus on exports. When we speak about inorganic growth. The company has been very attentive to M&A opportunities well, there is an economic situation that is typical, and this is when some opportunities arise. We're very focused on this. We do have some targets, and we're executing our plans on this as well. And we're also very attentive to inorganic growth.
Now we had planned to service markets where we have no shortfall Rio de Janeiro during the all of São Paulo. Now with the acquisition of Piraquê, we truly do need to have a presence. But for the time being, this project has been put on hold. We will leave this for another moment.
Once again, Fábio, if you wish to comment on the synergy with Piraquê.
When it comes to volumes, Luciana, there is no doubt whatsoever that this COVID effect has helped us to accelerate some of our planning, especially during the week when the pandemic was declared and there was a peak, people ran to the super markets, has emptied down our inventory, that has to be replenished through time.
And what we have done in a very structured way is to follow-up on this. We follow-up on our categories and the main networks and getting this movement, we have the strategy that you are already aware of. We have a go-to-market model and a distribution model that are sustaining these volumes in a very planned way and in a very strategic fashion. As you know, we don't offer guidance on this and whatever we can do, we are executing. When it comes to Piraquê, Piraquê has a synergy that presently we are expanding. We have expanded the volumes at Piraquê in a very sustainable weight and in accordance with the structure of M. Dias Branco in a smart and strange way. And Piraquê is a brand that comes from a different origin. It's different from the cookie category as a whole. And we're extending this to Brazil as a whole, using the existing structure of our business to be able to work with that expansion of synergy and to attain better margins.
And I would like to add to this part referring to Piraquê and the margin. When we acquired Piraquê, Piraquê had a net margin of 14% and gross margin of 46%. This quarter, Piraquê ended with 24% EBITDA margin and a gross margin of 46%. Now this work on the EBITDA margin took place in the last 10 years on several fronts. In the verticalization of wheat flour, 99% of the flour obtained at Piraquê is produced by M. Dias Branco from Rio Grande do Sul and Bahia. We have also reduced expenses at the plant as well as in distribution. We have factored in important synergies in the ad and mix part and in the commercial part, which is the company's DNA.
So all of the line items are results for Piraquê have captured synergy. This is not a process that took place from one quarter to the other. It has been built in a highly sustainable way throughout the last 2 years.
The next question comes from Lucas Ferreira from JPMorgan.
I would like to remark on the change of channels. This draw the attention during this quarter. And what happened with distribution? How much greater can distribution become especially in the attack area? And if you could comment on this, if it had an impact on our margins in the quarter. If having this broader distribution, this reduces your margin or not?
Fabio, I'm going to insist a bit more on Piraquê. We heard you making remarks that Piraquê should have a similar margin to M. Dias, which was 17%, 18%. Now this margin now has surprised us the EBITDA margin, reaching 24%. I think this margin perhaps is much greater than what you had when you bought this asset, and if you were positively surprised with some of the lines because of the better performance and this margin of 24%. It can become even greater if there is room to improve the portfolio and to improve your expenses at Piraquê.
Now towards -- does not hold the answers, Rômulo and Gustavo, I will begin with Piraquê and then take the floor to Rômulo.
Very well. Look at -- we're extremely satisfied with the margin of Piraquê. As I mentioned to Luciana, it is important to observe so this is not an improvement that happened in 1 or 2 quarters. This is work that has been ongoing since May of 2018. And structurally, Piraquê should have an EBITDA margin that is higher than M&A deals because of its gross margin. The gross margin is 46%, 47%. The average part of Piraquê cookies is double that of the mix of M. Dias. These are high added-value products. What we have observed and confirmed in the last year is the potential of Piraquê, not only in its traditional markets, but throughout the country, it is growing in São Paulo and in Madera, we have been selling this brand in the Northeast for more than a year with good results, maintaining the average price and the margin. So there has been a positive impact, and we're surprised and very satisfied with these results and this margin is recurrent. And yes, there is the possibility of enhancing it further.
Very good. I will now respond the part of your question, Lucas, that refers to channels. We have gone back to growing in all of the channels. And there is a difference among the channels, but this is due to planning to enhance our share in the other channels. As I mentioned, we supply multi channels and what we have to do was create a better balance between brands and regions, and we have done this. And I believe that we presented to you a theme of which were the right brands for these channels. And once again, this is working very well, and it is growing. And we are growing once again with our traditional brands in these channels.
Now when we look at this expansion effect through marketing, this year, we opened up a large number of distributors in the attack areas but also in the defense areas with strategic positions to defend ourselves. This model is working well. And when you look at the attack area where we work more with distributors, we expected this expansion goes through a very interesting effect there is no cannibalizing between one channel and the other without several opportunities to increase the channel either to volume or value and the distributor channel in Brazil is very important, besides increasing our distribution volumes with important categories such as crackers and Maria biscuits that are like brand biscuits, we're now selling other categories. And we have a very representative share as it should be the part of cookies, for example. And this is going to help us with this strategy, not only to generate volume, but gradually improve the value of some categories, so they will have a better margin.
Now this action is based to on having an expansion in all of the channels. And we have a very good relationship and a very representative share, and we're growing once again through these channels that are one of the choices of the Brazilian consumers.
The next question comes from [ Vladmir Falazon from Quantica ]
My question refers to capital allocation going forward in the company. At the end of the year, you will have net cash. And what can we expect more investments in organic projects, more issuances or the payout of dividends? What is it that you expect in terms of capital allocation? Of course, with a lower sellout rate, perhaps the projects will become ever more interesting.
Gustavo. Would you prefer to begin?
It is important to remember so the gross debt has increased considerably, not the net debt especially because of the protection issues that come about because of the COVID context, especially in March and April. And we made sure that this pandemic did not reach our plant. We had a minor impact. And most of these actions were adopted at the beginning of the year, there has been investment in production lines to increase capacity, of course. There is important work being done at present. For the short term, a issue of our capacity line -- per line and once again, that issue of the M&A. This is permanently part of our radar. We're extremely attentive to new opportunities that are in market, given, of course, this is an important part that we will take into account. We have launched a buyback program that will extend for 18 months. That was done last year. And at some point, the company will do this again.
Our next question comes from Isabella from Bank of America.
My question refers to profitability in the long term. We see a constant inflation, and this makes cost trackers are actually favorable. And considering the tax incentive, perhaps the company could go back to a level of 16% or 17%.
Now how do you view this as you already have productivity products underway and SG&A that is reduced quarter-on-quarter? What can we think about your long-term margin because of this?
This is Gustavo. Well, this year, revenues were done according to the exchange rate reducing the revenues of the company. Now for the long year, we have productivity programs. We have the hedge program that extends into the future, a significant plan for revenues and a campaign to enhance the equity branding of our brands, which means the more equity branding, the higher the prices. We will have stronger domestic brands and this will have an impact on pricing. Of course, we have an improvement in our portfolio. Our portfolio has been enrichened side by side with revenue. We can minimize macroeconomic issues, but we cannot neutralize them.
Now SG&A has decreased considerably. We have to do more with less. We have a very robust project called [ Multiplite ]. And these are not the margins that we expect in the future. We cannot speak about the margins in our strategic plan, but doubtlessly, they will be higher margins.
Now we're not happy, we're not satisfied with that margin, and I think we have the capacity to grow the margin significantly. We're doing everything we can within this context and all the drivers are properly addressed, especially to cost and expenses.
Rômulo, any remarks on this?
I think I refer to the main brands last year, and we have 19 brands and each of these brands plays a strategic role in our portfolio. Now inside of the brands, we're building value, and this requires investment. Why are we investing? Because we want to gain in terms of value. Now this value construction requires several initiatives. Some are already underway. We're doing this to Piraquê, as remarked. And main brands within that, Vitarella, which is an important cookie brand. Now this brand is expanding, and we have to ever more enhance its value, and we're focusing on important brands. And as part of this planning and looking forward, we're going to create value. This will come through planning, through innovation, distribution gains for the sector. We will expand our business gradually and enhance the value perception of our brands. And of course, this will enable us to transfer new prices because we do have an impact on commodities. And we want to give to consumers a product that they truly value in terms of quality and our differentiation.
Looking forward, therefore, that part of value creation will come for those brands that we have chosen that we have selected for differentiation. And in the field of productivity, we will enhance productivity. So that all of this will be coherent for the end consumer. And these are the plans that will enable us to add and gain value.
Our next question comes from Thiago Duarte from BTG Pactual.
I have 2 questions. So first -- and we go back to the discussion on average price. We know that you have had a drop in discount, and you began to implement price increases in market are not mistaken. I'm under the impression that the average price could be even higher when I look at the cookie category, for example. Perhaps you could remark more about this. Last time, you spoke a great deal about mix. And this quarter, you spoke a great deal about price.
Now could you speak about the impact of the mix channel as part of the component to build this average price for this quarter. You've talked about the drop of discount. The second question. There's some information that you offered in previous quarters. That you did not present this quarter. And if you could speak about volume qualitatively and the volume of inventory in the channels that we should imagine due to this change in the profile of channels and end consumers. If there's a relevant difference in sell-in and sell-out? And if you foresee any volatility in the monthly sales that you had worked with very well last year? I would like to know if this is maintained from speaking about volumes. Thank you.
Rômulo, if you could speak about prices and inventory and allow me to make a comment on mix, which is important.
Thank you, Tiago, for your question. Well, the price transfer was higher. And I think this has become very clear to everybody. And this is due to 2 relevant effects, the mix and the channels we have increased exports considerably. The prices are lower but the margins are higher. We don't have the taxes. We have a reduced commercial input, which means that the prices are lower and the margins are higher. Now the same happens when we work with distributors, if we have a significant regional distributor with small sales, and I give the example of the Midwest and perhaps São Paulo. We have a very small share there. We have better prices because these products are sold in the retail market, but we don't have the cost of distributing them. The margins are better. The -- when we look at prices in terms of top line, we see the prices perhaps could be higher.
Now these 2 developments had a significant impact. And what happened with the same intensity with the trade down, we see a higher growth. And in the mix it also generates a price effect with an impact. Now if we withdraw these effects, the price increase would have had more impact than it truly did. And perhaps you could complement on the inventory, Fabio.
I think you practically answered the entire question. Now the trade-down effect, Thiago accentuates these differences somewhat in terms of the average price. When you look at our net revenue, it grows more than the volumes when we think net-net. So we are transferring those prices, and we had a significant increase in crackers and the Maizena or Graham-type cookies, excellent, but this does have an impact on the average price. We're selling more Tostines and other categories with a higher average price. Now this trade-down is an economic effect among consumers and it attempts to generate value.
What has generated value is that cracker with the crystal sugar. But it does have a better differentiation. And this is a way of capturing this opportunity in the cracker category with an added value product that you offer to consumers. And as Gustavo mentioned, in the distribution channel, when you compare it to other channels, you have that feeling that you're making less but when you look at the EBITDA, because of the lower fixed cost, this offsets that difference. Now these are the movements that are taking place. That explains that price transfer, the investments.
And on the other hand, your question on inventory, the sell-out continues to be very speedy. And the inventories in trade are fully under control. We have been extremely cautious with this situation. We're seeking this sell-out. And so this equation has been maintained as we had in previous quarters, and the sell-out has been more accelerated at present, but we do have a balance. Rômulo simply to complement this question.
Thiago, you spoke about volatility month after month. The second quarter of 2018 since the fourth quarter of 2019, we no longer have that healing of volatility. The volumes have been growing consistently month after month without a volatility. And of course, this is the effect of productivity, and this generates efficiency in the process as a whole. And this is what we are focusing on. Of course, it doesn't have an additional cost and it has no impact on our margin.
Excellent. If you allow me a follow-up from the 2 questions. You speak about the growth of revenue, both in the attack and defense areas, which is very interesting. Would you be able to comment, as you have an important mix in the channels in these 2 areas, if you could mention them qualitatively, which it is a difference in terms of the contribution margin and the gross margin and net margins as well?
Rômulo, would you like to take that question?
No. You can respond to this. He's asking about margin.
What we perceive, Thiago, is that we did not have a relevant distribution channel. Now this channel gains importance in this plan, which is the retail, but it is highly concentrated in the Midwest, South and Southeast. In the North and Northeast, this is a channel that is not very relevant. And in export, the situation is different. And this has no interference in the attack and defense areas. Margins don't change very much among these channels. The -- in the attack and defense areas, what we do perceive is a more qualified mix, a more qualified portfolio in the South and Southeast because of a higher purchasing power. I think this is a great differentiation.
TAs we have no further questions, we will return the floor to Mr. Theodozio for the closing remarks. You may proceed, sir.
I would like to thank all of you. We continue with your disposal. Should you have any additional doubts on this conference call. Once again, our team, Fabio de Machado are at your entire disposal. And there are many clear opportunities ahead of us, we continue strongly and arguably working as a team to be able to deliver good results in the future. Thank you all very much.
Thank you. The results conference call for M. Dias Branco ends here. You can disconnect your lines, and have a good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]