Edited Transcript of MDIA3.SA earnings conference call or presentation 11-May-20 2:00pm GMT

Besides the issues relating to COVID-19, these multifunctional committees have suggested a series of initiatives with results that of course will go beyond the present day crisis. We are convinced that as a company, we will come out of this crisis stronger than when we went in.

Regarding the first quarter 2020, the results reflect our continued focus on execution with discipline and our strategic plan. As a result of this work, I would like to underscore some highlights: the EBITDA and the net income that has more than doubled; we generated BRL 67 million (sic) [BRL 77 million] in cash; we reduced our leverage. Our volumes had a 2-digit growth with the highlight for the cookies and pasta categories. We have maintained the leadership with cookies and crackers in the Brazilian market. We have grown our market share in cookies vis-à-vis the previous year.

Categories where we have the greatest margin, we have increased the wheat flour vertical integration that stands at 96.7%, thus contributing to an enhancement in our production costs. And we have positive evolution in our sustainability indicators, for example, a reduction of 15% in water consumption per ton per day. Other highlights have been our exports that totaled BRL 25 million, double the sales of the first quarter in 2019, thanks to the good performance of the sales to North America, South America, Africa and Asia.

To conclude this part, I would like to reiterate that we continue to work obviously, adopting all of the necessary steps to guarantee the health and safety of our employees and the supply of healthy, tasty food at competitive prices for our consumers. Thank you very much.

I would now like to give the floor to Fábio, who will speak about details. And soon, we’ll go on to the Q&A session.

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Fábio Cefaly de Campos Machado, M. Dias Branco S.A. Indústria e Comércio de Alimentos – New Business & IR Officer [3]

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Thank you, Gustavo, and a good day to all of you. Please go to the presentation that has been available on our site.

We will begin on Slide #3. We compare some of the (inaudible) quarter 2019. Our net income was 140% higher. Our net revenue is 24% higher. The total sales volume was 22.4% higher than in the first quarter, with a highlight for 25% growth in cookies and crackers and 27% in pasta. We have a sustained leadership in this category.

EBITDA was 103.8% higher. The production capacity utilization rate was also higher than the first quarter ’19. We have increased the level of verticalization of wheat flour, it reached 96.7%. We invested BRL 56.3 million in infrastructure. Exports grew 103%. And as Gustavo mentioned, we had a reduction of 15% in water consumption vis-à-vis the first quarter ’19.

Let us now go on to Slide #5. We can observe that net revenue of BRL 1.6 billion in the first quarter ’20 is 24.3% higher than last year, thanks to the growth of 22.4% in volume and 1.5% in our average price. A highlight for the 2-digit growth of volumes in all categories is that cookies and pasta that have greatest margins.

We will now go on to Slide #6 to speak about net revenue per region. We observed that the volumes had a 2-digit growth in our 2 commercial areas: in the attack area, that includes the North and Northeast; and then the attack area (sic) [defense area] with the South, Southeast and center west (sic) [Midwest] areas. In the attack [area], the growth was 34.5%. And we have a share in our total volumes very much in line with our strategy.

Let us now go on to Slide #7 to speak about exports. As Gustavo mentioned, exports were a special highlight this quarter, thanks to the work carried out since 2016 when we created an exclusive board for the foreign market. This quarter, we doubled the volumes with exports with a strong growth of volume. In the photo, you can see the ships loaded with M. Dias Branco products head towards South and Central America. We also had seen good results in the U.S.A. and Asia.

Let us now go on to Slide #8 and speak about discounts. As we had observed in the fourth quarter ’19, we continued to have a growth in volumes with adequate levels. And this is the result of the commercial measures put in place throughout last year, for example, the new pricing model, which is much more granular and efficient.

We will now go to Slide #9 to speak about inventory levels at our clients. As we have seen in the last 2 quarters, we had a growth in volume without having an overstocking in our clients. We see a highlight for the month of March 2020. Despite some increase in demand led by end consumers, we ended the year with adequate levels of stock coverage.

We go on to Slide #10 to speak about client coverage. This is the only slide in the presentation that does not include Piraquê. The M. Dias Branco and Piraquê bases are being consolidated for this information. Now for M. Dias Branco, thanks to a broader go-to-market and also follow-up of the sales team and by including this metric in our (inaudible), we maintained client coverage above 70%, better than the first quarter 2019.

We will now go on to Slide #11 to speak about market share. We remind you that the market share is measured by Nielsen. Although we have our share lower than during the same period of last year in the comparison with the fourth quarter ’19, we record a market share with expansion of 1 percentage point in the cookies category. This is where we have the greatest margin.

So now go on to Slide #13 to speak about EBITDA. The EBITDA for the first quarter ’20 was at BRL 228.5 million, 103% higher than the first quarter ’19. This growth is mainly the result of an increase in volume of the ascertained wheat purchases and the strict follow-up of expenses [significantly] from other quarters than the first quarter ’20. It practically did not have nonrecurring effects in our results. We will now begin to explain to you what led to this increase, and that is besides that of volume.

We go on to Slide 14 to speak about verticalization. Here, we observe a significant increase in the level of wheat flour verticalization, thanks to the beginning of operations of the new mill of Bento Gonçalves. This also contributed to a margin improvement.

We go on to Slide 15 to speak about production. In the first quarter ’20, we produced 742,000 tonnes, 18.5% higher than the volume produced in the first quarter ’19. This enabled us to face demand, have greater dilution of discounts and improve our margin.

We go on to Slide 16 to speak about flour. The [ascertained] flour purchases at the end of 2019 and beginning of this year has contributed to reducing the cost of this input. As a percentage of net [revenue], it was 28% in the first quarter of ’20, vis-à-vis 31% in the first quarter ’19.

Let me now go on to Slide 17 and speak about our EBITDA margin. Here, we observe that the margin went from 8.5% in the first quarter ’19 to 14% in the first quarter ’20. This margin improvement results from the cost of the wheat, 1.9% (sic) [6.9%] lower in the first quarter of ’20 compared to the first quarter ’19, as mentioned in the previous slide, and also thanks to the dilution of fixed expenses and an increase in the volume sold.

We now go on to Slide 18 to speak about net income. We [recorded] net income of BRL 137 million in the first quarter ’20, 140% higher than last year due to a growth in volume and 100% increase in EBITDA.

We go on to Slide 20 to speak about our investments. Investments in the first quarter ’20 totaled BRL 56.3 million, with a highlight for: the acquisition of equipment, the Bento Gonçalves milling unit; a new distribution center to support growth, especially in the attack area; and installation of wheat flour silos in the state of Ceará, in Maracanaú unit. As we saw in the production slide, we are using 71% of our installed capacity. That enables us to fulfill demand, although at present, we do have a capacity reserve.

We now go on to Slide #22 to speak about our cash. The availability given by our [operations] totaled BRL 77 million during the quarter. We carried out fundraising to reinforce our cash. Our net debt remained stable, around BRL 678 million. And leverage, which is net debt to EBITDA was up 0.7, better than the first quarter ’19 and lower than the fourth quarter ’19. It is important to underscore that for the third consecutive year, M. Dias has a stable AAA rating from Fitch.

We now go on to Slide 24 to speak about innovation and our launch of a highlight for type 1 wheat flour in the 1 and 5 kilo packages as we saw better brand presence in the south of Brazil and for the (inaudible) tartlets. This is one of the launches of Piraquê, which is very strong in Rio de Janeiro, and we’re working on it so that it will become a nationwide brand for M. Dias Branco.

We now go on the Slide #25 to deal with some of our activities since the beginning of the health crisis. Once this crisis was onset, we devoted BRL 2.4 million to [blood donation and] hematology centers throughout Brazil. We have observed a significant drop in their blood inventory. For each blood bag, we will donate 500 products of one of our brands. All of these initiatives are additional to the donations that we carry out (inaudible) our industrial unit.

We now go on to Slide 26, still speaking about our donations. We participated in several lives and have contributed to the donation of food. As you can see on the screen, there were 5 tonnes of the Richester brand products donated.

Let us now go on to Slide #27. To make sure that our products get the — to the end consumers, we’re making partnerships with digital platforms in working, activating and distributing brands like Piraquê, Adria, Vitarella, Fortaleza, Treloso, Richester, Finna and Isabela with sales growing month after month. This is a very promising channel to market the M. Dias Branco products.

To close, we would now like to go on to Slide 29 and speak about social and environmental activities, which are a priority. We observed lower water consumption per tonne of minus 15%; lower waste recycling index, this is something that we have been working on to have an evolution; a lower generation of solid waste that dropped 7.8%, a very positive action; and a lower frequency of work accidents, there was a drop of 0.5 percentage points.

With this, we would like to close the — our (inaudible) and presentations, and we can go on to the question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Thiago Duarte from BTG Pactual.

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Thiago Callegari L. Duarte, Banco BTG Pactual S.A., Research Division – Analyst [2]

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I would like to touch upon 3 questions. First of all, understand better volumes, especially in cookies and pasta. I know that you showed us a graph with an increase in the volumes. And how would you describe the evolution of the volumes throughout the quarter, especially with the change mentioned by Fábio, the change in the consumption patterns that began in March once we had the onset of COVID-19? This would be interesting.

The second point, if you could speak about the dynamic of average prices. I think that the new pricing platform is more granular, more [assertive]. Average prices in cookies and pasta seemed to have a slight drop in the first quarter. Therefore, which is your outlook in terms of this indicator going forward, considering the need to transfer prices and then you change channels?

And the last question is a structural question. And what has been made very clear during this quarter is a growth of the wholesale retail sector, what we call (foreign language). We — especially in what you then described as the attack areas in Brazil, the Southeast of Brazil. I would like to know which is your understanding of how this will impact the structural margins of the company. When you look at the historic EBITDA margin of around [17%], how will these changes in channels and geography impact these changes when we think of mid- and long-term margins? I think this will be an interesting discussion.

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Fábio Cefaly de Campos Machado, M. Dias Branco S.A. Indústria e Comércio de Alimentos – New Business & IR Officer [3]

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Thiago, this is Fábio and I’m going to begin the answer. When it comes to volumes of cookies, crackers and pasta this quarter, when we compare it with the first quarter 2019 and the first quarter of 2018 and ’17, this was a quarter where we had the best distributed volumes month-after-month. When we look at the growth of volume for the first quarter 2020 period with the first quarter ’19 in month-after-month, January, February, February [which has been viewed], we have a 2-digit growth during all of the months. And yes, there was an increase in demand in the second part now in March. But in January, February and in the first [half] of March, our volumes were already growing by 2 digits in the year-on-year comparison. And this, of course, as we said during the presentation and during Gustavo’s speech, was all because of a better pricing model, the expanded go-to-market strategy. We have revisited the entire commercial factor in the South area. The center is South and Southeast. That is that the entire frame that will pervade and set in place throughout 2019, (inaudible) show results in the fourth quarter ’19 as well as in the first quarter 2020.

On the question on price, there truly was a slight drop in the average price. And what we observed then, there was a greater concentration at the end of March in the consumer opting for lower-priced products. As M. Dias Branco has a broad hallmark of products, we have put (inaudible) [19] different brands. And with probably more than 90% of the [products] available in the market, this enabled us to capture (inaudible), add volume in consumers that they do a trade-up or a trade-down. It’s easier to buy products with a lower price. And at this point in time, we see consumers selecting lower-priced products.

If we go the third part of your question, the structural question, we have observed an increase in volume in the cash and sales channel at present. And beginning with the crisis, the consumers have reduced the number of visits at supermarkets and have begun to make larger purchases. And we could stimulate this channel. Our growth in the attack area is due to what we think is the [most pervading] structure in the company during the last few years, and we have been able to capture volume.

Another highlight with first [as distributor], something that we have already mentioned, what we (inaudible) in the Investor Day of 2019, a new channel for M. Dias. We began to work with this channel in the month of January, and we see increase in the [omnis] in this channel, especially in regions where we don’t have a strong presence of our sales force, differently from the Northeast. This is the channel that will bring us volume and contribute positively to our margins. We will be ever more efficient in capturing volumes. Therefore, this entire commercial strategy will not dilute the margin. There will be [potential] investment in logistics of course, where we’re enforcing our logistic structure with partners. We have been overlapping initially, but this is something that will be [diluted] during the coming months and quarters.

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Gustavo Lopes Theodozio, M. Dias Branco S.A. Indústria e Comércio de Alimentos – VP – Investments & Controllership, IR Officer and Member of Statutory Executive Board [4]

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Fábio, allow me to speak about a point referring to Thiago’s question. As a concept, it is important to make clear that despite the movement that Fábio mentioned of a choice for cash-and-carry when we look towards the future, we have a pricing policy described by Fábio and that we had mentioned in the last call. The assumption of course is a [search] for profitability, and this concludes the work of the (inaudible) areas. And it involves several levers: new channels, a portfolio with higher added-value products and a after-price transfer to increase our margins. This is a path we are following, new regions where we can sell with a different mix. And speaking conceptually, when we look at the structural margins, the company is heading towards a path that will allow us to increase this structural margin, while we observe that present is somewhat atypical because of the COVID-19 pandemic.

I’m going to continue here. We have a question that came from e-mail from [Juan] and [Felipe], they are analysts. And this is the question, “You have had very good result for exports. It grew more than your sales and [your stock]. And the question is if this is a result of an opportunity that arose because of the pandemic. Or is it a sign of new agreements including private labels in the United States?”

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Fábio Cefaly de Campos Machado, M. Dias Branco S.A. Indústria e Comércio de Alimentos – New Business & IR Officer [5]

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I’d just like to go back to what I said in the presentation. This is Fábio speaking. The value of exports that more than doubled year-on-year, so this is the result of the work that began way back in 2016 when we created a specific board for exports. We reinforced our team and where we have the involvement of several areas for M. Dias Branco, the innovation team, for example. We have the thermal (inaudible) in (inaudible) for Africa that does not have refrigerated transport, the logistics team (inaudible) carried out import for wheat flour and the involvement of the marketing team. In the month of March, we observed an increase in demand, but exports were already with an upfront to South America, to Central America. We had private label agreements that we have carried out in the United States. The Vitarella brand in the United States has had very good response. And the Piraquê brand as well is among the large wholesalers in New York, Massachusetts, California and other states.

This of course is the result of something that we built during the last few years. And this is the main message: M. Dias Branco has structured itself to be able to export, and results are beginning to appear.

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Gustavo Lopes Theodozio, M. Dias Branco S.A. Indústria e Comércio de Alimentos – VP – Investments & Controllership, IR Officer and Member of Statutory Executive Board [6]

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This is Gustavo, and let me complement this. We’re speaking of the long term here. We presented at (inaudible) yesterday that the international expansion process for the internationalization of the company is part of our strategic plan. It is one of the pillars. We have a pillar to occupy use cases with our present (inaudible) and the creation of new avenues.

Now when you think about this pillar of (inaudible), there is (inaudible) for internalization (sic) internationalization. It increases the customer base. We have the expansion of private label. We have campaigns. We have a commercial structuring.

This quarter, we hired a specific director to focus on the regions that are closer to the group, Uruguay, Paraguay and Argentina, and eventually to pave the way for our road towards the company’s internalization (sic) internationalization. This can be done through organic growth, which is what has happened, and also, perhaps not at this moment, an inorganic growth.

So it’s much more than exports that happened during the quarter. It is something that is an inherent part of our long-term strategic plan. We already disclosed it [in February]. We have a goal of doubling our export business in 3 years. And the company is structuring itself to be able to comply with this goal that was agreed in-house. Once again, this is work that began at the end of 2019. We began to harvest the results now in the first quarter ’20, and the trend of sales (inaudible) continue improving.

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Operator [7]

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The next question comes from Luciana Carvalho from Banco do Brasil.

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Luciana de Carvalho, BB-Banco de Investimento S.A., Research Division – Senior Analyst [8]

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I would like to go back to speak about volume. You have presented an evolution, which is a result of your pricing strategy and the stock-up at client. What can we expect for the coming quarters? We see that with the [quarter] and time, we have had atypical movement. If you could speak about lower inventories among clients. In April, for example, you spoke about an inventory limit of 35 to 40 days. And (inaudible) what do you see going forward? Is there any strategic trend that you could see? This is my first question.

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Gustavo Lopes Theodozio, M. Dias Branco S.A. Indústria e Comércio de Alimentos – VP – Investments & Controllership, IR Officer and Member of Statutory Executive Board [9]

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If you allow me to begin answering this question, there are some details that are important. First of all, it’s important to highlight that we don’t give guidance [which we made] within the company. Now what can we say about this year? First of all, that the demand continues to be very strong, and the growth of the first quarter is not truly the effect of the pandemic. We got 10 or 12 days since the arrival of the first cases in Brazil. It is the result of our execution and of our strategy, commercial strategy. This was mentioned during the last call.

Now when we look forward, when we look towards the future, we have seen a forecast by (inaudible). We begin to see the [entry] points towards a recession, a drop of 3.5% up to 5%, which means that at some point in time, there will be a loss of revenue. And this was due to a retraction in consumption. What we believe is that as we will grow acceptable (inaudible) volumes, the pasta, Cream Cracker, the Maria biscuit — so could happen because of the problem with income, especially in the Brazilian market. (inaudible) difference in the mix, the population will choose lower added-value products. So we don’t think we will have specific volume losses.

Now notwithstanding this and as we think of the Brazilian economy this year, the company has protected itself. There is a great deal of uncertainty at present in terms of what is happening not only in Brazil but worldwide. And that is why we have (inaudible) our cash by working with special funding, making more investments, ensuring new hirings and investment latency that will happen. I think this is how we are thinking at present.

This is follow what we have seen (inaudible) increase in demand was caused by the end consumer. This does not involve an open stocking with clients. The inventory of M. Dias Branco among clients remains at 35% to [40%]. And this is what we continue to observe. The volumes are growing, all of this triggered by consumption of the end consumers. And we do have added for inventory levels. Now this is a metric that we began to follow up on since last year, and it has been very useful. We work client-by-client to identify opportunity.

Now to refer back to one of the question about demand being stronger, we are able to fulfill the [improvement]. And we have several [investment] units for this who operating at present using 71% of our capacity, which means that we have a (inaudible) to face this increase in demand.

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Luciana de Carvalho, BB-Banco de Investimento S.A., Research Division – Senior Analyst [10]

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Thank you, Gustavo. Now my next question refers to cost, if you could remark on your position about costs going forward. You did benefit from some purchases at more favorable prices. And we would like to gain an understanding of what has happened with the foreign exchange and the purchase of commodity (inaudible) in your cost line item.

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Fábio Cefaly de Campos Machado, M. Dias Branco S.A. Indústria e Comércio de Alimentos – New Business & IR Officer [11]

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Should I respond to that, Gustavo?

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Gustavo Lopes Theodozio, M. Dias Branco S.A. Indústria e Comércio de Alimentos – VP – Investments & Controllership, IR Officer and Member of Statutory Executive Board [12]

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Yes.

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Fábio Cefaly de Campos Machado, M. Dias Branco S.A. Indústria e Comércio de Alimentos – New Business & IR Officer [13]

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Luciana, I think it is important to see what happened in the first quarter, and then we’ll go on to the other scenario. We carried out the right purchases that we began [at] the end of ’19, the beginning of 2020. And we compare the price of wheat (inaudible) it was 7% lower the first quarter vis-à-vis the first quarter ’19. Part of this (inaudible) is yet to be delivered because this is a very gradual month. [Business and] our cost provided the decreases. There are other commodities that have a lower price at present, and we have to see them as a whole.

We are assessing price readjustment to recompose our margin in January of this year. We have a productivity problem that is called multifleet that goes through all areas. And now with our cost packages in the company, there’s a great opportunity to capture new opportunities. Some have already been captured. We’re working very stringently on our expenses, which means that we could have the impact of foreign exchange. It’s at BRL 5 50 (inaudible), but we’re also assessing opportunities in price that do not include or maybe readjustment in our [price mix] (inaudible) new pricing dynamics that began last year and has also given us good results.

And in expenses, we have a very encompassing program with great details so that we capture opportunities. So we believe that as a whole, we will have very positive results in the coming period [reported].

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Luciana de Carvalho, BB-Banco de Investimento S.A., Research Division – Senior Analyst [14]

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One more question referring to your CapEx. There was a reduction of almost 20%. If you could give some more color, which was the decrease that we can expect for the year as a whole? And which are the investments that you have for (inaudible)?

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Fábio Cefaly de Campos Machado, M. Dias Branco S.A. Indústria e Comércio de Alimentos – New Business & IR Officer [15]

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Now year-on-year and for the coming quarters then, because in 2019, we still have relevant investments that have been (inaudible) new. In the first quarter, we purchased some equipment for the Bento Gonçalves mill, but that amount is much lower than those of last year. As I mentioned previously, we do have a capacity with this to be able to face demand and in a scenario of crisis. The priority are investments in CapEx. It does make sense to consider that the (inaudible) this year will be lower than that of 2019.

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Operator [16]

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The next question is from Lucas Ferreira from JPMorgan.

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Lucas Ferreira, JP Morgan Chase & Co, Research Division – Analyst [17]

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My first question in truth is a follow-up (inaudible) of a first (inaudible). Fábio and Gustavo, do you already have an outlook or a budget for the noncommodity part of your revenue? And this of course includes expenses. How much lower will it be vis-à-vis 2019 or what you already have? You have already made a review of your x commodity prices. And I would like to gain a better understanding in terms of prices, Fábio, of the [consumers] that did not have the same opportunities, that’s why that you did must already be suffering from foreign exchange rate. So besides that price increase that you had in March that was announced before the [foreign done] is there still any room to make adjustments in this category?

We talked about this some time ago about the decision and the formula that you use in your calculation in Ceará to know which will be the impact on the company — on net income, and if there is a retro [offsetting] that could (inaudible).

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Unidentified Company Representative, [18]

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Let me begin with the expenses, and then you can respond to the other 2 questions, (inaudible) prices and the issue of Ceará. (inaudible) again with expenses, and thank you for your question. The answer is yes, we have reviewed our budget. We get this at the end of 2019. And despite the review of expenses, we are working quite extensively. We have 200 initiatives in the most diverse areas and with a focus on total execution. And with our total hands on, we’re trying to catch all opportunities for this year. We have also intensified our follow-up on the meetings, the virtual meetings on expenses in the company. We have [redivided] the packages. We’re putting (inaudible) people from the company to come up with (inaudible) package-by-package in the company. And we should have a new revised budget at the end of this month. And all of this because of the more difficult times, because of the change in the Brazilian economic scenario, we tend to feel that this is something that we cannot control. And we cannot control the price of commodity either. So we have to make sure that we can focus on cost and expenses. This is something that we can control, and this is what we are doing.

Now (inaudible) that we (inaudible) in terms of [thinking] coming from this revision, we already have several initiatives coming up from this project. We still do not have a reduction in expenses. And we’re making great efforts in how to neutralize the effects of this potential economic crisis because of the pandemic.

Okay. Very well, let me go on to the price issue. We had a price increase of about 6% that was announced in February before the crisis with a focus was on [reconsolidating] our margins. And from then on, we have not had any price adjustment, and we are taking a new price increase because of the foreign exchange scenarios. As we had good purchases at the end of 2019 and the beginning of this year, we can’t carry out this assessment that is the right time, but yes, we are assessing that.

Now when it comes to Ceará, we already have the assessment of our attorneys, and there will be no impact. There will be no impact on this issue of Ceará.

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Operator [19]

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The next question is from Luca from Goldman Sachs.

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Luca Cipiccia, Goldman Sachs Group Inc., Research Division – Equity Analyst [20]

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And for the first quarter, this is a general question. This is not the first time where the company has benefited from a trade-down with consumers. And you have had an increase in net income. The question is which are your references from the past or the benchmarks so that we can understand this evolution. Is there going to be an evolution? And which are the differences in portfolio that you have at present or other strategies that could help you navigate through this new period? And to conclude, it is happening with the competitive [segment] results? Is there present-day scenario changes in demand in channel and foreign exchange? (inaudible) because of the present but also make concepts with the past. How long you can make a comment, Fábio? That is important because you have touched upon a very important topic, which is an economic recession and for consumer goods (inaudible) trade-down, something we observed in M. Dias. Obviously, M. Dias has a consolidated leadership in the (inaudible) space and an expansion plan that is called an attack area focused on the South and Southeast. And we have some important movements there to be able to put in place our expansion plan in the attack area.

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Unidentified Company Representative, [21]

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First of all, we have (inaudible) that we purchased 2 days ago a part of a very rich portfolio. When we compare this with the portfolio of (inaudible), (inaudible) greater added value. It is also a brand that we (inaudible) to greater value in the mind of the consumer, so we’re focused on that idea of mix. And our growth is happening more from (inaudible), where the purchasing power of consumers is higher. We perceived that the trade-down is being neutralized because of the regional expansion of Piraquê in the South and Southeast. (inaudible) Dias and also because of an increased capacity of the Bento Gonçalves mill that will increase our production capacity. So it — this offsetting, the trade-down in the Northeast with the growth in the — in Southeast where there is greater purchasing power and where consumers buy higher added-value products. So I think that we have referred to all of the questions.

We also have quantitative data when we speak about Piraquê, when we look at the cookies category that represents more than 50% of our sales. Nowadays, we [cover] more than 90% of all of the prices available in the market. (inaudible) lower products in terms — the price products from the higher price profit at higher added value. Since the acquisition of Piraquê covers 70% of those prices of Piraquê, has increased the breadth of our price offer. And M. Dias Branco has a good performance in terms of trade-off. We have a broader portfolio. And also when consumers are wanting to trade down off to pay cheaper products. And to add (inaudible) points among the different networks that we are assessing in terms of price, the portfolio review channel. We also have important work that the company has [balanced] to transform our packaging and to make possible a reduction in what consumer spend in this neutralized scenario. This has been one of the levers that will enable us to maintain our products in the consumers’ mindset.

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Operator [22]

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Thank you. I would now like to give the floor to Gustavo for the closing remarks. You may proceed, sir.

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Gustavo Lopes Theodozio, M. Dias Branco S.A. Indústria e Comércio de Alimentos – VP – Investments & Controllership, IR Officer and Member of Statutory Executive Board [23]

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I would like to thank all of you for your participation. The company is at your entire disposal (inaudible) Fábio and the (inaudible). I am also at your disposal. Through this crisis, we are trying to have a closer communication with greater transparency. We have material facts to speak about how the company is working with the pandemic and how it is working with the community. And we’re quite confident that we will overcome this crisis stronger than when it began. Thank you very much.

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Operator [24]

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Thank you. The earnings or this conference call for M. Dias Branco ends here. Please disconnect your lines.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]