M Dias Branco SA Industria e Comercio de Alimentos

BOVESPA:MDIA3

Good morning. Welcome to the video conference of M. Dias Branco with reference to the results of the first quarter of 2025. We have with us here today, Gustavo Lopes Theodozio, Vice President of Investments and Controllership; and Fabio Cefali, Director of New Business and in relations with investors.

We inform that this event is being recorded, and during the presentation all participants will be just listening to the video conference. At the end, we will start the question-and-answer session only for analysts and investors. The translation is available clicking on the button Interpretation. For those listening to the conference in English, the original audio in English can be silenced clicking on Mute Original Audio on the bottom of your screen. The transmission is also being done simultaneously on YouTube on www.youtube.com/RIMDias.

We'd like to clarify that any declarations which may be made during this video conference relative to the perspectives of business of M. Dias Branco, projections, and operational goal and financial goals constitute premises based for the management of the company based on information currently available. They involve risks and uncertainties and premises as they refer to future events and therefore depend on circumstances which may or may not occur. Investors should understand that economic conditions of the industry as well as other operational factors may affect the future performance of M. Dias Branco and lead to results that differ materially from those which have been mentioned as future considerations. We'd like to pass this over to Senor Gustavo, who will start the presentation. Gustavo, please go ahead.

Thank you. Good morning to everyone. Welcome to our results call for the first quarter of '25. I would like to start off by announcing the -- thanking you for the effort and work of all of our team. We've had a very challenging period together with the continuous confidence of our investors. Going into the principal highlights, I would like to start off by saying that the strong operational cash -- operating cash of BRL 230 million (sic) [ BRL 280 million ] in the first quarter, which is an increase of 103% in relation to the previous period. We closed the first quarter with a solid cash position of BRL 2.3 billion, very robust amount, which is an important differential in the current macroeconomic scenario of very high interest rates.

Our revenue grew by 3.2% compared to the first quarter of '24, reaching BRL 2.2 billion. We had an excellent performance in our milling and oil refining and wheat milling units, with revenue growing by 17% compared to the previous year, leveraged principally by the foodservice channel, a strategy which is being adopted by Cefaly, our Investor Relations leader, and we'll give you more information as we go forward. And also growth of 11% year on year in the adjacencies revenues, which is the divisions of healthy food, cakes, and cookies, and compared to '24, which is a 5% of the total sales of the company. Also, we'd like to highlight that our control of ESG, which has grown below inflation -- SG&A below inflation, also relevant of ESG with the maximum of the CDP climate initiative for the second year in a row, pointing out the highlight of the position of the company, [indiscernible] by 5% of women in leadership, consumption of water in our production units, and other aspects, which Fabio will also share with you in detail as we go forward.

Beyond the financial results, we are advancing in the restructuring of our areas. We welcome our new Vice President, Mateus Alencar, for sales and [ vending sales ] and also our new Directors of Marketing, Ana Carolina. These hires are fundamental to guarantee the excellence of our expansion plan already defined for the company, reminding all of you that it was led up by Cefaly. It's also important to mention that in the environment of the corporate management, our administration as well as under Pedro Parente, ex-Minister and President of large companies, reinforcing our commitment with the best practices of governance and adding immense value to our management and our strategy.

To conclude, before passing it over to Fabio, I wanted to reinforce the following about our trajectory and our capacity to generate sustainable value. We are still -- we continue working hard with a complete team, a very high-quality team, conscious of the challenges that are still ahead of us and the adjustments which we still need to make -- still need to be made and which will be made. I'm going to pass it over to Fabio Cefaly to detail the results, and then I'll be back at the end for the question-and-answer session at the end of our presentation. Fabio, go ahead.

Gustavo, good morning. Thank you for the introduction. Good and well. Welcome to our call for the first quarter. We're here to illustrate some of the numbers, which Gustavo mentioned at the beginning. The net revenue of the quarter totaled BRL 2.2 billion net revenue, 3% above that of last year's -- the same quarter last year, with a fall of 11% compared to the fourth quarter of '24, in the volumes, which had a slight retraction of 1% compared to the same period of last year and of 9% compared to the fourth quarter of '24. Here it's important to point out that when we make this comparison with the first quarter and the fourth quarter, that there is a seasonality -- an implicit seasonality in these numbers.

Historically, we see a falloff in volume and our principal categories in cookies and pastas from the fourth quarter to the first quarter. This is in relation to school holidays, especially in the categories of cookies and crackers, and. And we see that the retailers start to reorder -- we're talking about sell-in for the retailers -- return to their purchasing gradually during January and February. So it's normal for us to see in fourth quarter and first quarter a retraction in volumes.

The EBITDA of this period was BRL 161 million, below that registered last year in the fourth quarter. Further ahead, I'm going to go into the explanations which motivated this retraction of EBITDA. Net revenue was BRL 69 million in the first quarter, following the same dynamics of the EBITDA. And as Gustavo mentioned, the cash generation was double that registered in the same period last year and also grew in relation to cash generation in the fourth quarter.

Speaking to the chapter of market and net revenue, starting with the market information. It's important to mention that these numbers are not M. Dias numbers. These are the numbers of the market of the cookie and pasta markets. The first point here is that both the cookie market as well as the pasta market presented growth in value compared to the first quarter of 2024. Any number that we look here in these graphs of sales value and sales volume compared to the fourth quarter presents a retraction due to this seasonality, as I commented.

The cookies market compared to last year in volume had a retraction of 2% and the pasta market grew by 1%. In unit sales, the cookies market was stable and the pasta market grew by 1%. In terms of average price, the cookie market grew 4% and the pasta market maintained the same levels of prices, stable. The principal message here is that we saw an increase in prices of the cookies market. This also has a direct relation to the devaluation of the real and the increase of palm oil in dollars in the market over the recent quarters. And the pasta market remained stable. Both markets showed growth in value, both cookies as well as pasta.

Going now to the M. Dias numbers. Our net revenue year on year grew by 3%. There was a retraction here basically due to the seasonality of the fourth quarter to the first quarter. The volumes totaled 394 tons, slightly below last year, and 9% below the previous quarter. And the average price year on year grew by about 4%. Here, we saw an increase of average price in almost all categories in which M. Dias operates. This retraction of 3% in the average price from the fourth quarter of '24 to the first quarter of '25 came from an effective mix factor. Our business of milling and oils-- refined oils, which are sold principally through the foodservice channel, had a performance, in terms of growth, above the growth in our cookie and cracker and pasta areas, which had slower growth. This mix factor had caused a retraction of our average price by of 3%. But individually, the categories showed average increases over that same period.

Going into the details of our revenue. As I mentioned previously, the volumes year on year had a fall of 1%, average price went up, and the net revenue grew by 3%. So when we look at these 3 groups of categories, which we're utilizing since the third quarter of last year, the principal products, which is basically cookies, pastas, and margarines, milling of wheat and refined oils, and adjacencies, here we have cakes, snacks, mixes, toasts, et cetera, among other products, which are in a market which has a higher level of investment, which grows by 10%. The principal products maintained stability in net revenue of BRL 1.686 billion year on year. The wheat milling and oil refining had a growth of 17% and the adjacency grew by 11%. So as Gustavo mentioned at the beginning of our presentation, I wanted to point out -- highlight the foodservice channel and the adjacencies, The foodservice is an important growth area, field for growth. As I commented earlier, it includes wheat mills, refining of oils and margarines, special margarines. Here, it's important to point out the state of our units -- of our production units, which have been permitted for a long time for very high-quality products.

At this point in time, since the middle of last year, with our foodservice team 100% dedicated, well structured, and trained for the realization of a consultative sale, were adding more value to our operation. The open door program, as was mentioned in the presentation, which our team has the pleasure of receiving clients in our installations, has been a very important tool to give visibility and value the work which has been done, above all to reinforce the quality of our products and of our productive process, beyond, of course, the investments in marketing and [ renewals ]. So we're very confident with the potential for growth of this sales front, both in revenue as well as in profitability, since M. Dias has capacity on reserve to attend growth.

Another front, which is already presenting promising results, is the area of adjacencies, which includes snacks, healthy foods, toasts, and cake mixes, among other items. As Gustavo mentioned at the introduction of the call, this front is being managed now as a separate business unit with a team which is 100% dedicated, [ without ] taking advantage, of course, all of the synergies with the principal business of M. Dias Branco, such as commercial and distribution. With that, we believe that we're going to leverage even more the growth of these products, which have very high added value and are inserted in markets that are growing by double digits. It's a business which last year represented 5% of our sales, with almost BRL 500 million of sales.

Entering into the chapter of costs and expenses, it's important to point out that the evolution in recent months of the 3 variables which most affect our costs, exchange rates, wheat in dollars, and the palm oil prices in dollars. Approximately, 60% of our costs are based on dollars. So with that, the exchange rate was -- the dollar at the first quarter of last year was at the level of BRL 4.95 per dollar. It devalued -- the real devalued and closed the year -- closed the first quarter of '25 at the level of BRL 5.7 per dollar. This devaluation had a direct impact on our costs, consequently on our profitability.

Wheat in dollars maintained its same level. However, the impact on the results is the price of trigu in reais. So the devaluation of the exchange rates with the stability of the wheat prices in dollars brought an impact on our costs and consequently on our profitability. Palm oil, which is a material which is very important for the cookie and fats and margarines, went from a level of approximately $1,100 per ton, went up in prices during the recent years and closed our first quarter of '25 above $1,700 per ton. Palm oil both had a unfavorable impact, both in its price in dollars as well as its real price due to devaluation. And we look at all of this together with the variable costs, which is the first line here on this graph. In the first quarter of last year, our variable costs per kilo was BRL 2.6. And as the real fell in value during the year and palm oil started increasing in price, this variable cost went up, and we closed the first quarter of '25 at BRL 3 per kilo.

Fixed costs went up a little bit in both periods, BRL 1 per kilo last year. And then there was a level -- a change of levels which has direct relation to inflation, which happened during that period of salary increases, payment terms, and other variables. And we closed the first quarter of '25 with BRL 1.1 per kilo of fixed costs. The combination of these 2 factors had a direct impact on our gross margin, which went from 36.6% to 30.9% in the first quarter. It's also important to remember that to do any type of comparison with the fourth quarter, we must always remove the effects which were favorable in that quarter of approximately 3.3% in our gross margin.

The average price, as I mentioned previously, had an increase year on year of BRL 5.4 to BRL 5.6 per kilo and a retraction compared to the fourth quarter due to the category mix. Administrative expenses and sales expenses are controlled. We had BRL 516 million in the first quarter, slightly above the fourth quarter of last year. Remembering that here, in the fourth quarter, we had -- of last year, we had extraordinary effects -- positive extraordinary effects which lowered our expenses of approximately BRL 25 million. So any comparison between these 2 quarters should be done with the BRL 480 million plus BRL 25 million, which favored the expenses of that period. So looking again at division year on year, expenses with last year were BRL 512 million and BRL 516 million in this quarter, went up less than inflation of the period. So this corroborates our explanation over recent quarters that we are maintaining a discipline, very present in the management of all the expenses that the company faces.

Our EBITDA principally due to the increase in prices presented retraction, BRL 276 million last year, with a margin of 13% and BRL 161 million this year with an EBITDA margin of 7.3%. It's also important to highlight here that there was an effect -- an unfavorable effect, extraordinary effect in the first quarter of '25, which were the expenses with the interruption of our production of cookies in the [ Lencois ] business -- factory. This effect totaled approximately BRL 17 million. Basically due to the changes in the Lencois factory, which was totaled to BRL 161 million.

Net revenue summed BRL 69 million versus BRL 160 million in the first quarter of last year. And basically, this retraction was due to the same factors which explained the retraction in our EBITDA. Going to the chapter of cash generation, debt, and investments. We generated BRL 280 million in cash -- in operating cash in this period, double that which we generated in the same period last year. And here the highlight is the working capital. While last year we had a consumption of working capital, this year, we had a release of working capital, an increase in working capital. And here, the first point which we have to remember is that in the first quarter of last year was not a good reference for any type of comparison of the financial cycle in days, due to the fact that in that quarter we implemented our new SAP and had an atypical concentration of results and of production at the end of that quarter.

So going back to the reading of the first quarter of '25, we generated BRL 141 million. In nominal terms, our suppliers line was the same compared to the end of '24. In days, we closed with 59 days, the same as was seen in recent quarters, excluding the first quarter of '24. The release of working capital in the first quarter of '25 came principally in the account of receivables, which overcame the consumption of cash in our stocks and the seasonality of our sales between the end of the year and the first quarter.

Looking here at our -- the cash position of M. Dias. We closed the first quarter with a healthy balance and robust balance with a cash position, which was well above our debt and BRL 162 million with a deleveraging of 0.1% due to our EBITDA. And for the seventh year in a row, we have been considered AAA by Fitch. The BRL 2.3 billion of gross debt are principally in long-term debt and with due dates starting in 2028. Investments in this quarter totaled BRL 90 million. A good part of this is maintenance, remembering that we have an excess capacity, which is relevant, which will support our growth. And at the [ BRL 1 million ] beyond the maintenance costs, we also have certain investments in systems and improvements in our production facility in Eusebio, Ceara.

Remembering, as we always do, our strategy, which is based on 3 avenues of growth: the first the current business, especially cookies and pastas, foodservice, which is also included in this strategy; the other categories, which are snacks, healthy foods, toasts, which are the categories which have presented a growth rhythm, quite accentuated and international, which has grown over recent years, both in exports as well as in the company which we acquired in '22, which is Las Acacias in Uruguay. All of this is based on a permanent program of increased productivity. These are the actions underway -- the principal actions underway currently, which look at the recovery of our results, principally our volume and always seeking to retaking of sustainable growth. And we organize these actions because these are managed by 2 major areas: growth and efficiency and productivity.

The team is dedicated to foodservice and adjacencies, is the commercial team under one director, under management team. It also has nationwide coverage and capturing all the synergies of our business and leveraging our volumes. The revenue management team since the second half of '24, is in the financial area, beyond having a more disciplined control focused on our commercial budgets, is using a more structured pricing mechanism, which creates -- again which creates conditions for the recovery of growth, the strengthening of our exports, seeking here new clients, and [ including in important quotes ] with international clients.

Here, as I mentioned previously, based on the effort -- the continuous effort for productivity and efficiency, always looking at the optimization of SG&A and our organizational structure. In fact, this is a continuous process of revisiting our logistics network and our production network in terms of the production of cookies in [indiscernible] Sao Paulo and Lencois and the adjustments which we did in the pasta in Madureira at the end of last year.

To conclude in the ESG chapter, a highlight is that the CDP, this is the fruit of our efforts and the dedication of our teams in the knowledge and involvement with the environmental questions. For the second year in a row, we have joined the select list, the A list of CDP climate focused on the issuance of greenhouse gases. This is the best score in climate change, and we have concrete solutions for emissions in line with our public commitments, which we formalized and which are long-term commitments. Other items mentioned by Gustavo at the beginning of this call, the consumption of water, whether it's a reduction, reuse [indiscernible], the increase of our participation of women in our leadership, and the increase of purchases from local suppliers.

With that, we'll close our --this step of our presentation. And now we'll go over to questions and answers.

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

Fabio, I have 2 questions that I wanted to ask you about. First is related to the pastas and cookies. In the presentation, you put the data in the market where the sell-out of the industry, both for pasta as well as cookies, was growing by 1% or 2%. And when we look at the top line of your top line for those principal products, it was flat or falling slightly year on year. That the base of the first quarter of last year had an impact of the transaction to your new SAP. It gives us this sensation that there may have been a loss of market share. So I wanted to examine with you is if there was a disconnection with sell-in and sell-out. And if you had a variation of market share in these 2 categories, taking into consideration all of the points which I mentioned.

And the second question is also linking with the question of market share and price. In the previous call, we talked about a new price list that you were going to -- that you had implemented at the end of last year or at the beginning of this year. I want to see how have you seen the acceptance of this during the first quarter. And if you can give us an idea how -- what was the reaction of your competitors? And how did that go around the industry? If you could highlight a little bit the geographic differences among the products or where you saw the biggest passthroughs in prices.

This is Gustavo. A very good question. First, it's important for us to make it clear that we pick up a market in general. We're looking at the only at merchandise market. The market grows in general, but it grows in value, but it's fallen in units and in volume. In our case, when we look at cookies, there has been a reduction and pasta has grown. There is an important effect. If you eliminate the calendar effect, I would say that the volume in sell-out is about basically stable. When you take out the calendar effect, you remember that the first quarter of last year, there were 2 events, which we did not have this year: one was, it was a leap year; and the second one is that we had Easter, which came fell in March, which is a big movement in retailing. Taking away these calendar effects, the volumes are basically stable, looking at the market.

I'm going to also enter into your question about market share and M. Dias specifically, the passthrough of prices, we did a passthrough in prices in the first quarter, which was not foreseen. We had foreseen -- we had decided to do this in the first part of the year. We made this passthrough -- price passthrough we had in the first quarter that fight, which is part of the negotiating process. And in this process, we looked at the volumes during this negotiation. The good news is that the entire market grew. There has been growth in the market in total value. And so we look at the new -- the volumes came back to normal. I would say, to answer your question, there was a fight -- obvious fight in terms of region. There was very little difference regionally. What we did was to scale up in relation to the other questions in the terminals, which are most important for pricing and to the less important. M. Dias, as a leader in several of these categories, came out ahead, very carefully analyzing week by week. So if we had 57.3% market share, Gustavo, in the category of [ Vitarella ] cream crackers.

So the company did not do that. We also did that Maizena cookies in the market -- in the national market. We have 46% of market share. So there was a small penalty at the beginning. The competitors came. We lost a tiny bit of market share, nothing relevant, in both categories, and we recovered it in April. So the entire market had passed their prices through to sales. We [ asserted ] with the trade and life goes on. This is the good news.

Looking at volumes, I think this also has to do with market share. Our commercial team made a big change last year. I was the Vice President of Marketing and Sales. We brought in Mateus Alencar from Ambev. He is very focused on execution. And we have said that very regularly that the game this year is much more connected to execution. We're making a bigger investment in trade marketing and marketing in general. And Mateus is very much involved and has this mentality. Beyond Mateus, we also hired a new Director of New Business, which is Fabio [indiscernible], also coming from Ambev, and recently a new Marketing Director from Mondelez, Ana Carolina, who is starting with us this week. So Mateus entered in March. He's been with us just a month, and we're already starting to see a lot of changes in our processes and our commercial routines and much more focus in the market at the point of sale, much more aimed at execution. Putting all this together, looking forward, I would say that the company is very hopeful looking at the third quarter, which is the time that we see for the effects to appear in this new commercial team. We've already seen a recovery, an important recovery in this third quarter compared to the first quarter.

Our next question comes from Lucas Ferreira from J.P. Morgan.

My first question, following up on Gustavo's question is I wanted to understand how do you see the competitive environment because looking at the numbers in Nielsen's numbers, seems that the prices in the industry have not changed from one quarter to the next. And at the moment, the industry needs to pass prices, pass through inflation to their prices. So the expectation, looking at prices that are solid in the first quarter, but that didn't happen. So Gustavo opened up, he said you have a new price list and how much is the average increase for pastas and cookies and how much we should see in the second quarter the average price improving for M. Dias. And the other question is that your cost basis to follow up on the questions of stock or however looking ahead in the next quarters, how we should see this -- you see that whether palm oil has come down, whether the exchange rates have improved, and how these benefits may affect your costs in the company.

I'm going to start off. Let me add, Lucas, one thing. The market did move. If you look at the average price from the fourth quarter to this quarter, cookies in the market grew by an average price per kilo and pasta grew by 3%. So we're not publishing these questions due to presence of competition. But from December until now, our increases were above 5% in both categories, cookies and pasta we placed in the first quarter. This means that the negotiation and protocols occurred in the first quarter, you're going to see -- but I would say that you'll see the passthrough of these prices more effectively in April when these negotiations finish up and the orders come in with the new prices. So beyond this growth in the first quarter, which made our volume fall a bit, you're going to see an improvement in prices in the second quarter. And that's what we should expect from M. Dias.

Costs cool off in terms of exchange, wheat prices, palm oil continues at a very high level. However, having said that, we expect, let's say, a positive impact on our results already starting in this next quarter, happening in a more important way in the third quarter of 2025. Just 2 add-ons to what you've just said. Lucas, you commented that prices have not changed from the fourth quarter to the first quarter. Perhaps you're looking at the M. Dias numbers because there was a retraction in our average price due to mix. The average price individually category by category, cookies and wheat flour and so forth have gone up a little bit since the end of December until the end of March. But since these prices of oils and margarines are being very much leveraged by the foodservice channel had a performance which was better and a faster recovery, these categories have an average price below the average price of cookies and pastas. So it had a mix effect -- unfavorable mix effect. The average price in the market for cookies and pastas presented an increase.

As far as the timing of this effect, which Gustavo mentioned in cost, it's important to remember that we have 4 months of stock in wheat and there's an average cost which will be renewed during that period. So we hope that in the short term, the impacts -- the favorable impacts of these changes, which we've seen in the prices of commodities in the market, also the appreciation of the real compared to the dollar.

Our next question comes from Thiago Duarte of BTG Pactual.

My question is -- following up on this question of mix, as Fabio mentioned, I wanted to hear a little bit about your efforts in the foodservice area, which, of course, pushed the sale of wheat flour and oils. I wanted to talk to you about the contribution margin of this channel, looking at this mix, which is less focused on the principal product and more focused on refined products. So I want to see how this margin compares to the average margin of M. Dias. I'm talking less about average price and more about contribution margin itself.

And then in my second question, I wanted to ask -- also ask about a discussion which we've had several times over the years about balanced margins or long-term margins of your business. I wanted to hear from you a little bit, Gustavo. In the previous times in previous calls, you always or sought long-term margins, if I'm not mistaken, between 15% and 20% -- beat the long-term EBITDA margin of 15% to 20%. So I'd like to hear if you understand that in the current circumstances, market circumstance, with all the changes that you're implementing, you talk about several members driving the management team, if you understand that this perspective will change for any reason, whatever the reason might be. Those would be my 2 questions.

Thiago, thank you for your question. It's a pleasure to speak with you. Let's start with the second question first, talking about the mix of flours and mix in margins. It's not a strategy. We had a negotiation prior to the end of the quarter for cookies and pastas. The flour did well. We did well on flour. The pricing is a little different. It's more connected to commodities pricing. We had a reduction in wheat prices, and it entered more easily into our negotiations. So we should see an adjustment in the mix starting in April, with higher relevance for biscuits for cookies and pastas. We should grow in the area of flours.

We're looking at the cookies and pastas. We're looking at the profitability of these flours. And further looking at the future in relation to margins, we're talking about EBITDA margin, our historic margin since the IPO, if we look in 2006 until now, it's already oscillated in between 15% and 19% with 16% of EBITDA margin. Last year, we had about 13% margin. When I look at the company today, starting in 2018 with the acquisition of Piraque with more added value, Jasmine healthy foods and these adjacencies growing still represent a very small amount, only about 5% of our income, but they have been growing faster than the pasta and cookie markets.

So over time, this mix will have an effect and we have a portfolio that's more qualified, which also will bring more advantages. Currently, a lot of the profitability is affected by the lack of dilution of our expenses. It's a very large company, 26 units. If the volumes -- if we're looking at below capacity, this dilutes you more than others [ and could or ] your market. Looking at the white space in the market and looking at our deficiencies in execution and operational, we are convicted that we have a capacity to grow in volume, an important way internal processes and better -- so improving our execution and diluting our fixed costs, I can't see this company delivering EBITDA equal to or better than the historical average of 16%. So we still believe that this should be our target.

When we look at our plans, internal plans in the long term, after discussing with several consultancies, we spoke with [Indiscernible] and we did with Accenture, all of our levers bring us to these historical margins. So I think the discussion -- internal discussion here is much more the velocity of reaching these levels of profitability. We tried one. We tried -- we changed our sales team, but we have levers and they are mapped out, and now we have to work on it and work on the execution. So it's a little bit of -- I'm going to pass it over for Fabio to talk about the margins -- profit margins for flours and grains.

Thank you for your question. We don't open up the details of these margins, both in the level of gross margins as well as contribution margins. But qualitatively, I think it's possible that we have a direction I can give you some orientation. The best margins are in cookies and pastas and the adjacencies. These are prices which have a higher average price and a greater appeal for consumers by a lot of greater brand loyalty on the part of consumers. Looking at the food service in flour and grains and margins and fats, it's not exploding -- explosive growth when we compare to the growth of the other categories.

Both the principal business as well as the food service area bring more EBITDA more -- they bring more money into the company, and they help us to dilute our fixed costs. So this dilution of fixed cost is important for the business overall. But here, it's important to remind you that the process -- the productive process of M. Dias is verticalized, both in the production of wheat flour as well as in the production of vegetable oils. So while the more we grow our business in the food service area, the greater will be the benefits for the cookies and pastas because I'm going to have costs that are more competitive because I'm going to be diluting more my fixed costs of the refining -- oil refining units and diluting the fixed cost of the 7 mills, which are operating all over Brazil.

So looking at the contribution margin is important. However, if we don't look at this only in an individual way because it is a contribute -- mutual contribution among all the categories of businesses of M. Dias. But to answer objectively your question, and again, from the standpoint of qualitative, the biggest margins are in cookies and pastas and the adjacencies.

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

Two questions. First one adds on to the discussion about the price increases, which was done in these recent 3 months. We had understood in the call from the third quarter -- from the fourth quarter that mentality was much more aimed at following the competition in the majority of periods and focus more on the recovery of volume. As I understood, Gustavo, you went beyond the competition, the average of the market and the size of your average price increases for the quarter, and you got a little bit ahead. We were the first movers in several categories in which you're very relevant. So I wanted to conciliate the strategy of price increases. I think going forward, what we should expect from you if you'll continue to be leaders, we continue to lead the price increases or no, if we -- that's just a one-off. If you could refresh us what you're considering I think that's very valid.

The second question is in relation to the discussion of capacity of the company to increase volumes and dilute costs further. You did this movement in the Lencois factory. I understand that you have a lot of things, internal things to grow value, but that -- perhaps there's a relevant gap in capacity, unutilized capacity. Can we expect a movement of downsizing of the footprint -- industrial footprint and logistics footprint? Or is your mentality to try and recover volumes over time? And along those lines, all of these improvements, operational improvements, which you have mentioned, which you sought out and with the new team now, a little bit of what you -- what is the period -- the internal period of time for you to see this profitability growing? Do you think that the company will be able to grow the question between the directors and the controllers and the CEO, of course, who is an important part of these 2 teams. What is your -- the urgency in the internal period of time for the company to be heading towards these levels of profitability? Fabio?

Thank you, Isabella, for your question. In relation to the first question, pricing and price increases, in fact, it's not that we follow the competition. As I mentioned, the company will always be attentive to always be poorly positioned in the market. We do not have our prices -- none of our prices are above the competitors. We came out ahead in certain periods of time, especially in the categories where we are more relevant. But in the other categories, we had increases very synchronized with the rest of the market.

We're very well positioned when we look at the price increase, the consumer price index with our competitors. So that problem of being out of sync with the rest of the market, you won't see that this year, so much so that looking at April, we've had a negotiation which has passed. The price is aligned with the market and the volumes grew. So I would say it's much more a falloff in the trade area rather than talking about pricing or being out of fully positioned in relation to our competitors. You're not going to see a relevant fall in market share, and you'll see a recovery going forward. That's the point.

And then we have the problem of being a loss of scale for our channel, prioritizing several categories, and that's our logic, not that we had a price above our competitors. Looking at item 2, capacity -- utilized capacity and the reserve of -- capacity reserve, we're betting heavily on the increase of volume because when we look at the market, when we look at the sales -- point of sales in Sao Paulo and in the Southeast, we see lots of opportunities. There are brands that are leaders in this market, but we still have an execution in the service, which is not perfect, which still has room to improve.

So we've made changes. We're betting on new models, new methodologies, new routines and a lot of execution at the point of sale to recover our volumes. Downsizing of our manufacturing plan, no, we don't have any expectation of making new changes as we did in Madureira and also in Lencois Paulista. You're going to see some optimization of certain lines perhaps. But we really want to do is all of the focus of the company and all of our decisions of our Board to the arrival of these new members point in the direction of growth of both -- not closing factories, but rather growing volumes.

We don't control the future. But in 6 months, things aren't going, the company isn't going to sit here waiting for the world to change. We're going to have to rethink things and make some run the numbers. And it is necessary, we'll go back to the downsizing plan. But looking at the scenario, the current scenario, we have in the way of levers going forward, the arrival of the new team the diagnosis, which has been done for this new team has a lot of opportunities to grow in volume. This is happening.

We're going to have to think much more about efficiency than about downsizing. We're going to have to have machines to produce more with less and not new closings.

And just to ask one more question about the timing. a little bit about the -- what is the sense of urgency or timing in your internal discussions regarding this recovery of profitability. In 6 months, things aren't going. We may revisit these strategies. Just to have an idea of a sense of what is tolerable for you in the implementation of this turnaround.

Our mentality is, first of all, profitability is more complicated because it's a huge change in exchange rates with the consumer market. You can't pass through at the same that we saw in the Ukrainian scene or in the pandemic. And all for 2025, we see a growth in volume, which will depend on an improvement in commercial execution, which is a diagnosis which is done internally by some consultants. There are internal questions, planning, levels of execution and service that depend basically on adjustments of our in-house adjustments.

This type of lever should generate changes in the curve and growth in volume for the third and fourth quarter, and this has been our bet. The timing that this new gang will want in this process of change, internal and methodology and so forth and in the management of the business. So to be objective, volume in the third and fourth quarter. And obviously, if we don't have any other adverse change as we saw last year, exchange rates am going to go back to FX being at an acceptable level.

Remembering in January, the dollar went above 6. And that type of thing complicates any type of prediction about when we'll get back to a better level of profitability. Our execution has to show signs of improvement in 2025. This is our mentality to give you a little bit of our vision of the discussions that we've had in the Board.

Our next question comes from Guilherme Palhares from Santander.

I want to take a minute to make a follow-up on Isabella's question in the sense of restructuring of personnel. I'd like to know what are the principal metrics that you expect, of course, aside from volume growth and going forward, looking at the future, what are the metrics that you would like to have seen evolve, as Gustavo mentioned in the last call about improving the execution of new releases, new products and that product which is being proposed as a good market fit. So I'd like to hear a little bit about this. And also to hear a little bit about the -- in relation to the previous questions, you commented that you probably won't have any further closings of capacity. These assets continue being under M. Dias' control. Is there anything else to be done? And what do you think about this capital which is employed in these current assets?

Guilherme, I'm going to talk with you and then add on. There's no idea of alienation, perhaps buildings, we internally discussed the sale of buildings, but not of machines. We have no plans to sell our production equipment to not give opportunities to our competitors. The metrics won't change much. What will change is the focus. When we look at the sell-in, these metrics of positivization, multiple opportunities for cross-selling. We have more than 1,100 SKUs. We have several points of sale that don't have 1 to 3 or 5 or 6 SKUs when our portfolio is much bigger. If we sell Cream Cracker, why can we also sell Maizena and why can we sell our filled crackers, this type of thing increases the frequency.

We have the challenge of new points of sale, but selling with more frequency, those points of sale, which we already do as well as cross-selling. In general terms, the KPIs don't change. What will change is the search for these KPIs. When you look at sellout, it's that same logic. The logic is perfect, the assortment, the mix, the ideal mix, the space on the shelf, shelf space on the point of sale, prices, the correct price. The merchandising and adequate material at the point of sale, pointing out the attributes of each product, the logic of sell-in, sellout, I would say, won't change much. The focus now is to guarantee that this execution -- these KPIs, which will be determined are reachable, depending on this and on the speed with which these things should happen.

I think it's a little bit of that. Just to complement that the indicators, the success of these launches the non-fried lemon, which was launched last year, which involved a large investment in marketing is a product which has a differential -- very clear differential in the market, the level of services measured here by the delivery and the correct quantity of SKUs, correct SKUs and in the right time, agreed to with our clients, our growth principally in cookies and pastas outside of the Northeast region, where we see the biggest opportunities for growth, as Gustavo mentioned previously, and obviously, all of the measures of sellout, which are converged for the numbers of market share.

Very well. If you could allow me just one last follow-up question regarding the restructuring of the teams. As of now, the restructuring of the management has -- the mid-level management has been changed in the company or we will see more changes so that we have a completely new total but a redirectioning of management. The marketing and sales, in principle, no. I would say that the people that we have on the team right now see more details. But also we've had several changes during these 6 months. However, naturally, when we look at these new people, especially at the level of Vice Presidents and directors, it's natural that during this trajectory, these people will talk to us about the need to change the structure or the model. The marketing instead of being by channel, could be by category, I san example, but we have to wait for people to sit down and get used to their jobs and do a diagnosis.

In principle, what we have done with those who have been with us for more than a month, no more radical changes. We don't foresee any more radical changes. What we may have is a slight corrections as we go forward.

Next question is from Henrique Brustolin of Bradesco BBI.

I have 2 questions. The first one, you commented about the performance of volume with all of the different projects of restructuring and a lot of this has to do with the Southeast. But there's also a discussion that I remember that in the Northeast, part of the performance was due to relative pricing. This was clear that in 2024, but it's been going -- perhaps it would be a subject which would be easier to see this recovery, which is an adjustment in the price list -- in your price list compared to the competitors. And let's see how this price is going and how that you've seen this in the results that you see, both in the second quarter volume in the Northeast relative pricing? And also the second point is a quick follow-up to understand in the discussion of prices for the year, if you still see the need for another price increase to think about the recovery of your gross margins during 2025 or the discussion is based only on recovery of volumes, market share and the operating leverage that this would bring. Henrique, these relative prices, you're correct. We had a problem in the past in the Northeast with the common pastas. There was a very specific point to our more simple pastas, which has been corrected over this quarter. We've seen a recovery of this which is sequential to the volumes of this category starting in the second quarter. So I would say that this subject -- I can't say it's resolved because it's dynamic if there is a challenge on the part of the competitors every day. So -- but theoretically, the principal prices have been solved and life goes on. The questions which were placed by us in the first quarter and the market in the first quarter, that's the idea. We're going to company on the evolution of the market, commodities, exchange rates and so forth. But in principle, no, our prices increases for the time are done. Thank you all very much.

Thank you. The question-and-answer session is now closed. We'd like to pass the microphone back over to Gustavo for the final comments.

Thank you all for participating in our call and our results call, and we're at your service, myself, Rafal, Rodrigo and the entire IR team to discuss a little more in detail and going forward. So once again, thank you, maybe all have a good day. Thank you very much.

The video conference for MGS Branco is now closed. We thank you all for the participation. Please have a good day. Thank you.