Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- M Dias Branco SA Industria e Comercio de Alimentos (BSP:MDIA3, Financial) reported a 19.4% increase in net revenue and an 11.4% rise in EBITDA for the first half of 2024, despite challenging market conditions.
- The company achieved a significant gain in market share and volume in both pasta and flour segments, with a stable 32% market share in cookies and crackers.
- Production capacity utilization increased to 71.2% in the second quarter, indicating improved operational efficiency.
- Gross margin improved by almost 2 percentage points year-over-year, reaching 34.9% in the second quarter.
- The company maintained a strong cash position, ending the second quarter with a net cash position of 0.2 times EBITDA over the last 12 months.
Negative Points
- Net revenue for the second quarter was 8% below the previous year, attributed to a 17% decrease in average prices despite volume growth.
- The company experienced a reduction in market share value in the cookies and crackers segment, particularly in the Southeast region.
- SG&A expenses increased to 23.6% of net revenue, partly due to a reduction in average prices and non-recurring expenses.
- The volatility in wheat prices and exchange rates posed challenges, impacting cost structures and necessitating price adjustments.
- Despite efforts to control costs, the company faced challenges in maintaining its gross margin due to rising commodity prices and exchange rate fluctuations.
Q & A Highlights
Q: Can you explain the impact of the mix in the cookie and cracker category on your market share and pricing strategy?
A: Fabio Cefaly, Director of New Business and Investor Relations, explained that there was a mix impact, particularly in the Northeast where market share is higher. The company lost some share in the Southeast during the price increase period. M Dias Branco adjusted prices ahead of competitors, which led to a temporary market share loss but expects competitors to follow suit, stabilizing the market dynamics.
Q: How does the mix effect between cookies, pasta, and flour impact your pricing and margins?
A: Fabio Cefaly noted that the mix effect accounted for about one-fourth of the decrease in average price. The company saw a recovery in the representativeness of the cookie and cracker category, which has higher margins. Price increases were more significant in pasta and flour due to commodity price rises.
Q: Is the current volume of flour and bran sustainable for the upcoming quarters?
A: Gustavo Lopes Theodozio, Vice President of Investments and Controllership, believes the volume is sustainable. The company anticipates growth in cookies and pasta volumes, which should balance out the mix distortion caused by flour and bran.
Q: How do you plan to maintain gross margins amid price volatility in wheat and other commodities?
A: Fabio Cefaly stated that the company has structured its pricing to handle market volatility, optimizing the balance between price and volume. M Dias Branco's hedging strategies and competitive pricing should protect margins despite fluctuations in wheat prices and exchange rates.
Q: What is the company's strategy for growth in the cookies and crackers category?
A: Fabio Cefaly emphasized that cookies and crackers represent 50% of revenue and are a key focus for growth. The company is investing in marketing, innovation, and expanding into new regions to drive higher growth in this category.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
