Sendas Distribuidora - Earnings Call - Q2 2025

Transcript

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Activate your mic will appear on the screen. You must activate your mic to submit questions. We would also like to instruct you that all questions be submitted at once. We want to highlight that information in this presentation and possible statements that could be made during the earnings call related to business perspectives, projections, and operational financial targets represent beliefs and assumptions of the company's management, as well as information that is currently available. Future statements are not a performance guarantee, and they depend on circumstances that could or not occur. Investors must understand that market conditions and other operational factors could affect the future performance of Sendas Distribuidora S.A., and they do result in deferred maturity from those listed in future statements. Now I would like to pass the floor on to Gabrielle Castelo Branco Helu, the Investor Relations Director.

Good morning, everyone, and thank you for participating in the earnings call for the second quarter. We want to present the executives present here. Belmiro de Figueiredo Gomes is our CEO, Aymar Giglio, our temporary CFO. Wlamir dos Anjos is our VP of Commercial and Logistics, and Anderson Castilho is in Operations. Now I'll pass the floor on to Belmiro so he can begin the presentation. Thank you, Gabi. Thank you, everyone for participating. It's a pleasure to be here, and thank you so much for this participation. I want to start by thanking our team for the work done in this quarter, and I'm going to also say that the numbers we're going to present today are also very important because we're going to provide also, of course, more context about the market opportunities and challenges we've seen now looking into 2025, especially in the second and third quarter.

We believe that the second quarter was very positive in our assessment when you look at the overall scenario in combination with the competitive environment and market environment, the purchase power of the consumer, and revenue reaches R$21 billion. The same-store sales is below the level of the food inflation, which has been internally around 7% or 7.5%. The objective of the company is to search for same stores at the level of the inflation, but what we see is a persistence of the trade-down movement of about 3.5% to 4%, and this has a variation according to the social levels and regions in Brazil.

This exchange and the swap for cheaper products and more economic products, trade-downs, and we've already talked about the causes of this: high interest rates, and the sports bets, etc., which has really made us keep up with a scenario where consumers are forced to buy cheaper products. This is a movement that not only affects Assaí because when you look at the share, it was completely stable, but when you look at the progression of the volumes in the quarter, excluding part of this, where we've seen a strong trend of part of the market with a real high concession of timing and deadlines that impacts reseller customers. Besides all that, we still have a stable volume. Within the scenario, the company has, as we've mentioned, working on store maturity, and I'm going to talk about this a bit more, especially for the converted stores.

I think maybe mentioning a number that could surprise a lot of people about the results of this project, which is still not at its final phase, but the company has searched for balance. There is an important balance that was made from an expense maintenance rate, and despite some expenses of projects that are really important considering the wave of innovation in the company. With this, we've been able to have a series of expansions in services and battery-sized cold cuts, bread, etc., and bakeries, which could lead to some effects and impacts on the expenses. The inclusion of these downtown stores, etc., could maybe pressure the EBITDA, but this demonstrates this as the company is delivering an EBITDA margin pre-IFRS of 5.7%.

This is an increase of 30 basis points compared to the previous year, reflecting the store maturity and innovation that was made despite this combination, of course, of strict expense controls, which helped us increase our EBITDA margin by 30 basis points. Now, when we look at the EBITDA pre-IFRS, we see that it is important if it leads to actual cash. In the second quarter, when we look at the LTM, Assaí has really been able to deliver a conversion rate of this EBITDA margin into free cash flow of about 90% of our EBITDA, which has been transformed into cash.

As the investment cycle is a lot lower than what we had in previous years, we present free cash flow before the payment of interest of R$2.7 billion, either in the evolution of the EBITDA and reduction of the investments, but also major discipline also in the working capital and the policy on receivables and granting of payment since we saw this relevant movement of increasing prices. The strategy of the company has proven to be quite assertive when we consider our leverage. The company is focused on deleveraging at this moment. This combination of this amount of half a billion plus the reduction of R$200 million in the net debt, at this moment, we were maybe at the peak when it comes to the SELIC rate at 15%, of course.

The fact is we have probably one of the highest actual interest rates in the world, which leads to financial results that are quite strong, especially when you consider the net sales. When you pay, of course, paying off the investments the company made in the last few years. With this, leverage drops at about 50 basis points, closing at 3.17, dropping 0.48 in the ratio we've seen in the second quarter of last year. The net income also had an important evolution. Of course, the interest rates and the debt carryover costs are pretty high at this moment, but there's an important evolution in the net income, even when just part of it is a recognition of some credit that was made. You have all the information in the earnings release as well. We can advance to the next slide.

As we were saying, we bring in this page here, which is the Campinas store, a very important store. You can see this vision of how things were doing. We all know that this was one of the most challenging projects in Brazilian food retail, but also from the perspective of shifting paradigms, which was the objective of the company, to really place stores in downtown regions so that we could expand the target audience we had, right? Obviously, putting in stores in central regions like the store in Amarelo, if we consider Campinas, Abolição or SAE, these are stores that have a different rationale. They also bring in a higher interest rate and an expense rate that's higher, which was also requiring this gross margin that was more healthy in these stores.

When you look at the EBITDA margin pre-IFRS, discounting the rent for the lease, there's a leap of 4.1% to 5.5%. That was delivered in the second quarter and an average sale per store that's way above the average sale in the company of about R$26 million. They still don't have the same level of productivity if you look at the sales per square meter of the organic store network, but the stores are still in this maturity period. The first store opening just entered the third year. We still have stores with two years or one year of operation. They do have a store maturity higher up ahead. We can, of course, advance to the next slide. We bring in this research that we've done with over 19,000 respondents that was conducted by a bidding company, and they're helping us in important projects in the company.

After this conversion period, now Assaí has stores that are 1,400 square meters of sale there and 10,000 as well. There are stores that are located in the outskirts of the city, but there's also stores that are in regions that are downtown regions or important cities in Brazil, especially the big capitals, such as Brasília, Goiânia, Rio de Janeiro, São Paulo, and so on. What was the result we've seen? The strategic objective was to break down some stigmas there were with cash and carry because it used to be just limited to a specific type of public, right? Meeting the B2B public is challenging, right?

When we look at this research in the markets, as I was present, it's a penetration rate that's really high for class A, B, C, and maybe actually, this research was done by electronic means, but that demonstrates how now the company is really, within its portfolio of stores, has, especially based on its customer portfolio, a penetration and potential. When we look at the gender, which is 60% men, 61% women, when you look at age ranges, that's another important metric for us since each age range has a different purchase power, right? You also see a lot of stability in this, especially from the customers that are 18 to 24, 25 to 29, and with 61% penetration rate.

This is the split today of the more than half a billion people that go buy our stores, the 500 million customers today that Assaí services, and that's why the brand became the most valuable. This completeness also allows us to break down on some stigmas. It's not just about having this, it's really about what this is going to provide for us up ahead, right? In these last two years, the company has really been focused on delivering the conversions, the level of productivity, and EBITDA margin that we had in the organic network, and implement new store services that were also vital to this kind of model. The company has not stopped here.

The fact that we have this penetration in social levels, gender, age ranges, etc., really allows us to explore new product categories and really search for an increase in share of wallet, important projects in the company start. There's a very important project also starting off now where Assaí is going to start taking its first steps, which is exploring its private label products, especially in the southeast region of Brazil, and especially in São Paulo, where you have a logistical cost that's lower, and that's providing, of course, a broadness that's going to help us really improve the margins we have. There is a movement towards either in and out projects, or whoever has been watching us has seen our entrance into home appliances and electronics, which is like the air fryer, etc. There's this movement, and that's a very important process within the pharma channel.

That really has been evolving. We've been very vocal and participative. I believe that the project, in the way it was presented now, allows for greater potential to explore another product category and other categories that are correlated, just as the in-and-out project that, in our perspective, should bring in relevant gains. Also, financial services now with Assaí's credit card machine project bringing in another opportunity for the B2B customers as well. I think we've already seen this on the release that the pre-IFRS EBITDA goes from $965 million to $1.079 billion. After this, you have the cash for the company and the net income of $86 million in tax credits. It goes from $165 million to $264 million. I think Aymar is going to get into that as well, considering the impacts of some of our debt reprofiling work.

There's also an occasional impact in the second quarter with the prepayment costs. Now I'll move on. We can advance to the next slide. IMR. We're going to talk about IMR and deleveraging this as well. Thanks, Belmiro. Good morning, everyone. Thanks for being here in our call. I'm going to talk about how, due to all of this operational context Belmiro mentioned, from a financial perspective, we ended up having as a main highlight in the quarter operational cash generation of $3.9 billion in the last 12 months, right? That demonstrates the capacity the company has to generate cash despite or even after paying the 12 months of CapEx at $1.2 billion, and the free cash flow generation was $2.7 billion. With this, after paying interest and everything, the net debt of the company ended up dropping by $200 million year over year.

You can just notice that before the adjustment of the discounted receivables, the variation of the net debt, the financial net debt was $700 million year over year. Another thing that we also observe in an interesting manner here, and we start observing more over time, is that on the left bottom chart, you can see that in the second quarter of 2025, our net debt drops at $1.3 billion in regards to the second quarter of last year. Of course, a reprofiling process and prepayment is, and then also an absolute reduction of the gross debt, as you have over time and over the years paid and refinanced a lot less than what we pay or what we have as debt maturities. With this and with this cash generation behavior, we had in the quarter a reduction of almost 0.5% of EBITDA.

There is still this important move towards reducing the leverage, now reaching half an EBITDA year over year. That allows us to imagine or state that the guidance of about 2.6 times net EBITDA will be reached at the end of the year. I think this is an important milestone, this number for the end of the year. When it comes to financial net debt, it's about two times leverage. When we consider the contractual covenants in the second quarter, we're at about 1.78 times against a maximum covenant of three times the EBITDA. That's what it is when it comes to the leverage and debt. On the next slide, we also have the information on the continuity of the debt reprofiling.

This process has been super important, and actually, it not only extended the timeframe, but it also reduced the average spread of our debt in a very important manner. As you can all see on the right side of this page, below the flow of maturities here, we have an average timing of 39 months. A year ago, it was 31 months. It's an increase of over 25% of the average term in one year. The average cost that was now at CDI plus 1.28 a year ago was CDI plus 1.46. It's almost 20 basis points of the spread reduction in a year. We understand that there is a possibility, considering the current fixed income market, and that our next transactions in regards to reprofiling of our debt will be able to even reduce the spread a little more.

To add on to the slide, besides all the movement we had in 2024, where we prepaid and postponed $3.6 billion with new fundraising of $3.6 billion, and that total amount of $6.6 billion. In this second quarter of 2025, we had another $1.5 billion fundraising to prepay debt of $2 billion. This already took place, and that's already been reflected in our balance sheet. Now we have this operation with opportunities that appear where we prepaid a commercial note from December of $500 million, and we refunded for basically at the same spread, CDI plus 0.95. This is an all-in cost and basically almost the same value, $50 million less, but a maturity in three years. This operation is already reflected here in this flow of maturities where, once again, I can highlight that in 2025, we'll already have finished all of the payments.

There's nothing else to be paid. In 2026 and 2027, the level of total maturities of the principal amounts $1.2 billion and $2.4 billion. When you compare with our potential EBITDA in those two years, you see it's going to be a value that is really non-concerning when it comes to payment capacity. That helps us state that we are relatively comfortable in going past these two years. That could be maybe continuity in the turbulence of the financial market without needing to have new fundraising for the company, at least in 2026. That's very probable. The maturities of 2028 and 2029 are a little greater. We have nothing else, basically, after 2030 and 2031. What that will consider is that we should remain throughout 2026 performing our prepayment movements and extensions of maturities in 2028 and 2029. I think that's it.

That's when we consider basically leveraging debt in the company. Okay. Thank you, Emma. To wrap up, we bring in the evolution of the targets and policies in the company and different initiatives from an ESG perspective. Sendas Distribuidora S.A. is recognized as one of the companies with many different initiatives when it comes to social inclusion and diversity. We highlight some important points. We went over 1,000 employees, including migrants and refugees. This is something our area has been working on when it comes to labor. We also had our solidary kitchen, 10 kitchens in over eight states around Brazil, over 530,000 meals, and more than 100% of our goal. The brand became, considering this, the most valuable brand in food retail, though 500 million customers demonstrate how the brand has become very strong, and we're ready to adopt different initiatives from now on.

Once again, within the GPTW research as one of the best places to work, especially the best in the segment in the retail, wholesale, and cash and carry categories when it comes to excellence in customer service, besides a series of other initiatives when it comes to climate impact reductions, reusing waste, and an increase of over 30% of the stores that have a composting project in place. I think when it comes to presentation, that's pretty much it. Now I'll close, and we can get straight into the Q&A process so we can value our time as much as we can. Thank you so much, everyone. Now we'll start our Q&A session. Please, if you do have a question, select the Q&A icon at the bottom part of your screen, write your name and company and language to enter the queue. As you're announced, a request will appear.

Please activate your mic and submit your questions. We would ask you to please submit all of your questions at once. We'll start off with our first question from João Pedro Ribeiro Soares at Citigroup. João, we'll enable your audio so you may proceed. Okay. Hi. Thanks, Rodrigo. Good morning, everyone. Belmiro, we're in the scenario of disinflation, and I think this is going to be important for the sector since the consumer's purchase power is really pressured and with the prices going up. I want to understand how you guys and the overall cash and carries have been positioned, right? We also see the price slowdowns in categories that should be a little less significant. If you could explain your expectations and if this could be beneficial to generate more volume. We also see this situation with the working capital, right? Could you explain a bit of this effect?

If we can exclude this, or how would this impact the third quarter, right? We talked about the closing of the stock after July, and we see the working capital, and we see this that the last half of June for the overall retail, as we've seen in all sectors, was way below expectations. This ended up making the stock in the quarter end up being a little higher than what it was stated in as our goal or objectives. When it comes to the stock and of our accounts receivable or accounts payable, our category that we work with also allows us to perform route adjustments when it comes to stock. The stock that we closed in June was already 100% normal. As we look at inflation, we should see some movements, like some categories of products that had high inflation.

You would imagine some normalization when you consider a batch that's very positive. Some of these impacts, of course, our expectation is that they should get part of the resources. When we consider trade-down, it's not only due to a brand substitution, right? In some of these, we also saw the size of the reduction of the packaging and consumers having shorter purchase periods, etc. This could, of course, generate a positive point for us. What we look at when we consider from now on is that the scenario for the second quarter would be relatively stable and not necessarily a repetition because the second semester, of course, is more important than the first. There's no big expectations from the perspective of a drop in volumes or so.

The company's focus at this moment has really been towards new projects, including new products, new categories, and assortments, as I highlighted in the presentation, maybe in a more broad manner. The commercial team has also been working on this daily in a granular manner in micro categories, and I hope to have answered your question. Yes, you did answer, but just a quick follow-up on trade-down. What do you guys see as trade-down, and do you think the trade-down itself, how much room do you have to improve in the second quarter? When it comes to volumes, that's clear, but I think this metric would be maybe a driver for acceleration, would you say? It should be. We have to be cautious, though, as we're careful with whoever's operating the market because the trade-down we've seen was not expected from last year and this year.

We've had quite tough food inflation years, but when you look at the unemployment rates or even the levels of social programs that we've seen, we shouldn't have the levels of trade-down we've had in such a category. We see there's another phenomenon which made companies with families with lower income lose even more of their available income. That becomes more visible when you see this, each region in Brazil. In the next season, we should have results disclosed in a more complete manner. This is quite visible in the Northeast due to other kinds of habits and activities that are forcing the population to do this. Should this get back?

It should, but if part of this is not due to a lack of income, but because of new habits such as the sports bets with R$270 million, even if you have more cash come in, this could actually make more money going to the bets market. We have to be very careful about how we consider this, right? If there's a drop in prices in that, we're going to have a resuming in trade-down because what we see is sometimes the behavior is different. It's not what it should be or how it should be. Was that clear? Yes, very clear. Thank you, Belmiro. Now our next question comes from Tales Granello at Safra. Tales, we'll enable your audio so you may proceed.

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Good morning, Belmiro and everyone. I have two questions here on my side. I want to understand why you have a higher tax rate, and this was a bit higher than what we expected in last year, etc. I also want to understand a bit more about if you guys are still noticing a reduciflation or a reduction in packages, right? Sizes, which would be like this package reduction inflation. About the tax rates, if I may talk about this also with the smaller packaging for products, the difference of this net and gross sales is related to the movement towards the tax substitution process because of the tax reform. In Rio de Janeiro, they actually removed some of the products from the tax substitution process.

As this takes place, you have a bigger part of these taxes that would be in the cost, and that doesn't really change the gross sales. Just to switch the sale to net sales, you can see the complexity of this tax system in Brazil. At the end of the day, these are shifts, changes that the states have with the inclusion of categories and removals also in the tax substitution. Then you get into the credit-debt regimes. At the inflow and outflow, you have more products paying ICMS tax, and then this tax impacts the correlation of the net and gross sales and not necessarily reaching the COGS. I hope that's clear. Belmiro, if you could maybe talk about this a bit and the reductions of the sizes of the packaging. Good morning, everyone. Thanks for the question, Thales.

Just to talk about the reduction of packaging, this was a movement we imagined in a softer manner in 2025. To our surprise, the industry continues to try to search for ways to make the products fit into the consumer's pocket. Besides this, although it's not as strong as what it was in the pandemic or in other periods, it continues to be an important movement. Besides this, we also see that the prices, the modification in the chemical composition of the products, like products like chocolate or juices and cream and condensed milk, etc., you have modifications in the actual formulas of the products that keep prices stable, but basically have a reduction in the quality of the products. The industry has been moving in this direction with the reduction of packaging and a shift in the composition of the products so it doesn't impact consumers anymore.

I hope to have answered. Great. Very clear, Belmiro and Belmiro. Now, just to follow up on all of this and this entire scenario you mentioned in the beginning of the presentation and even in the release, having said all of this and considering the fact that maybe a price accommodation in the second quarter, do you guys think it would be possible to accelerate this level and recover a bit of the same store sales as we had in the first quarter, or should it be like a slower second quarter? There is an expectation for recovery. Of course, there are economic scenario factors that could impact this, but the company's focus is to recover. You always focus, of course, on having the same store sales be above the inflation, not below, right?

When you look at most of what we have as bets to recover this, we can see a possibility of an increase in share of wallet. Over 70% to 80% due to the new projects the company has, considering the customer base we have at the moment. Also imagining there's a bit of reversals when it comes to behaviors or trade-downs. This is a lot more connected to the competitive advantage we have between us and the cash and carries and other retail channels as well. The biggest bet that we see up ahead is from a new project perspective and an increase of the share of wallet.

That was already the strategy when we had the acquisition of Vectra and breaking down a bit of the stigma that cash and carries are just for poor people, but to add this format into all of the customer classes and levels because that allows you to enter new products, selling new categories of products, and generating a positive pressure on the same store sales. Great. That's fine. Thank you very much, Belmiro and Wlamir. Our next question comes from Lucca Biasi, UBS. Lucca, we'll enable your audio so that you may proceed. Please. Hi, guys. Good morning. Thanks for taking our questions. We have two, actually. First, on the product mix, if you could talk about the demand you've seen breaking this down into individuals and B2Bs and if this changed in the third quarter. The second point is about price elasticity.

Could you talk about how you imagine this in the current scenario and if you guys think it makes sense to maybe have a little more competitive advantage in pricing to gain volume? Thanks for the question. There hasn't been any big change in the product in the customer mix. About 42% of the sales are made to B2Bs. What we've seen ever since last year is that we had our competitor with a policy to search for volumes, right? There are two ways to achieve this, right? Reducing price or increasing terms, right? Payment terms. It is very relevant, especially for the reseller public. Looking at the numbers you've seen and the company has already disclosed that expanded even more, they burnt a lot of cash. That doesn't seem like such a good strategy because the reseller public is really focused on pricing and terms.

If you eliminate this public, you can see there are really low levels of elasticity because consumers have low levels of elasticity. All of the tests we've been working on since we're in 25 states allow us to have Belmiro de Figueiredo Gomes and Anderson Castilho adopt different initiatives. What we see is there's no price elasticity. The movement of reducing margins, imagining that it'll lead to positive aspects, is really not what we've seen at this moment. That is why we've been working on the maturity and services brought in this improvement in margins. If this were the strategy, maybe we could say, "Okay, that would be stable in the margin to deliver 27 basis points, but with the same store sales of 7%, 8%, or 9%." That would not happen. You only see this when you look at the share effect, which is rigorously stable.

The best combination, or that's least worse, is the company's strategy. The market has not had elasticity when it comes to customer mix. We haven't seen any big movements in this sense. I hope that was clear. You did answer. Thank you. Our next question comes from Vitor Jun Fuziharo. Vitor, we'll enable your audio. Good morning, guys, and thanks for taking your questions. The first one is a follow-up for the deflation segment and B2B. I just wanted to understand if you already see some of the slowdown in B2B with this dynamic. The second one is if you also looked into different points about the stores maturing. Since you still have this small gap, I wanted to understand if there should be a sales per square meter that's above what we imagined.

Vitor, starting off with the last one, there's an issue with the size of the stores, right? The average square meters, considering that the hypermarkets were bigger stores, there is a potential to operate with a sales per square meter that's greater than the organic store network. Part of this is also due to other projects. The objective was really to be enabled to enter new categories of products and expand our scope. Some new projects the company has, I've imagined, understand this. Of course, the deflation movement, we don't see any loss of stock because B2Bs don't have highest levels of stock with the interest rates, the levels they were at, and with the level of purchasing because the consumer that performs trade-down, it's a reflex of the entire population.

Even for the B2Bs, whoever's from food service, they already operate with minimum stock levels, but the resellers didn't really stock up. Our vision is that they should react according to their sales. Their sales will determine the purchase more than a purchase or acquisition movement would determine. That's because of the frustrations. It's possible to trade down or a lower consumption level that impacted everyone in the sector. I think there's a real clear vision on this, and that's probably why the company created this strategy to expand or increase payment terms. Great. Belmiro, thank you. Moving on to our next question from Pedro Granvilla at XP. Pedro, we'll enable your audio so you may proceed, please. You can proceed, please. Hi, guys. Thanks for this.

Belmiro, I wanted you to talk about the private label implementation project, and if you could talk about the main impacts this could lead to when it comes to margins and the potential relevance also for other brands, please. Obviously, within the limits of what we can discuss, what we see is one of the main reasons for this private label project is that private label around the world is about 20% of the food sector. In Brazil, it's like 2% to 3%. Why does this happen? You don't want to fall into the same mistakes, right? This is really related to the logistical costs and volumes and the tax issues, and the objectives are really to try to improve the levels of margin the company has due to the volume. When you look at the food service, we have over 60% or 50% of the consumption in Brazil.

There are products where we have like 40% share. When you look at the city of São Paulo and Rio de Janeiro, the share is really relevant. If you consider the phase where the company was focused on the conversion of hypermarkets and deploying services, and the implementation of this private label market process, we really intend to have a more competitive price for the B2Bs, and it's also an option for consumers. Also, considering the pressure with some suppliers as well, considering the size we have, and we hit almost 50% of our revenue. This makes us now really be able to implement a project without having such high logistical costs or being subject to tax issues that maybe force you to produce a product with private label, but then you maybe have to face different scenarios than a regional brand, right?

Regional brands, of course, represent an opportunity that could come from the private label brand. This is going to start off now in the second quarter, in the second semester, sorry, but there is a major potential for this. Moving on, our next question is from Rodrigo Gastim at Itaú BBA. Rodrigo, we'll enable your audio so you may proceed, please. Good morning, Belmiro and everyone. Two quick questions here. First, everything you mentioned so far, trade-down and deflation and even the base effect you mentioned in June to understand how the third quarter started. One question I had was when I read the release and the supplier financing that got better in July, matching this with what you mentioned and the improvement in the stocks. Was this due to a recovery in the levels of days in stock, or was it a nominal stock difference, right?

To match, this would be important. The second question is what you just mentioned about some of the gross margin projects. I wanted to detail this a little more, right? How much do you imagine would still be the gross margin issues? What you can still, you can already capture from the pricing project. Could you share a few of the details about this? Some things, yes, but others you can't. When you look at the second quarter and you see, obviously, it's better, if not, we wouldn't have adjusted this as quickly. This correction is really related to the number of days. Of course, we have to be careful with this because the second quarter really demonstrated this, right? The performance in April and June was pretty weak, especially the last half of June compared to what we had seen in April and May.

July, our positive month, August is starting now. We have to be careful, right? Because you could have July positive and then August positive and September being more challenging, right? The phenomenon in June had happened last year as well. We had seen last year that June was weaker, and then July was getting back to back-to-school phase. That was stronger as well. We are going to wait on the third quarter to get a little more details on how this is going to behave, right? When you see the margin evolution and the levels we've been operating with, you'd probably imagine that it would be impossible a while back. Of course, now keeping the competitive advantage, the company has been searching for improving margins. Once again, I want to highlight that especially what we believe in strongly is the project.

Since once this has been completed, you've had the deployment of this service, and then you also have, of course, the self-checkout of 9%. Why am I highlighting this? Obviously, in a scenario with higher prices, this would be our objective, right? To keep up this as one of the biggest solutions for bulk shopping, but also for smaller day-to-day shopping. This is also behind or backing up different projects we've been working on in the company. When we think about why we share that slide with the penetration per age range or social level, it's really just to show you that there are opportunities for the company still. If you look at the gender factor, the social level effect, and especially the age range effect, it's not very common to see what we have in that slide, right?

It's not common for a company or one specific brand to achieve this, right? It's either very well positioned for B or CDE or one specific customer profile. Assaí has probably the most complete penetration rate because of this diversity and being able to work with many different formats and people. If we want to sell a new category or this other person, this other product, then we have people in the stores that are faithful to our brand and that can buy. I think that's what we really bet on, and that's why we've been highlighting this point a lot. Excellent. Super clear. I have a quick point of curiosity here just to understand here on our side how or what happened in June in your perception with consumers. Was it more like from B2B or B2C?

Or is it also something difficult for you guys to understand month by month? Just a point of curiosity. Is there a highlight? No, to be very honest, it's really difficult. We looked at the market, Nielsen and everything else, and we see that the market overall, and when you consider this movement in the next month, it tends to be stronger. The next month tends to be fuller, or the next month would tend to be stronger. Excellent. Belmiro, thank you so much. Thanks for the question. Our next question comes from Irma Sgarz at Goldman Sachs. Irma, one at Boiardo, you may proceed, please. Hi. Good morning, everyone. I just have a question about the potential drugstore in-store. I just want to get an update. I know that this is still a legal issue in Parliament. It still hasn't been approved as a law.

I want to get your mindset on how this format has been evolving and understand how this has been going on. Of course, not polluting the ticket of the existing store. I wanted to understand better about what the mix would be, the level of profitability as well. Maybe you don't even have a pilot yet, but I just want to understand your mindset on this. Yeah, thanks, Irma. As you mentioned, it's a project that is still under discussion. We've been accompanying this discussion and the way that this new project has been presented. There was a demand to sell over-the-counter drugs, but now we're working on having a complete pharmacy or drugstore with the pharmacist and with all the bonuses and performing the segregation required since we would have a controlled or prescription-only product area.

We see that there are challenges, but probably it's not more complex than a butchery that we already have, for example, with refrigerated goods and specialists. Once this is approved, the advantage we would have is that most of the expenses or costs are already in-house. These are costs like safety, lease, power, and all of this would already be available. We would have the possibility to be even more competitive in this category. I don't believe that customers are going to come into Assaí to just go to the drugstore specifically. If they know they're going to Assaí and they know they can find certain drugs, like ongoing chronic purchases where people have scheduled purchases and people already know about what they need to buy, we don't expect them to leave the hospital with a prescription to come into Assaí.

The ongoing day-to-day shopping is really like when you consider the amount of customers we have today. I believe we do have a potential to address this opportunity as well and include this department into the store because that becomes more than just a department, right? That is the drug sales that would place Brazil at the same level as other markets that are mature, such as Europe or other countries where this already happens. When you look abroad, it gives us a good idea of what should happen within the Brazilian market. It is a category that is so important. It gives us the opportunity to reach other subcategories with vitamins, supplements, and as you start having some space for items geared towards health, right? Once this is approved, I believe it's going to be very relevant for our industry as well. Great. Thank you so much.

Our next question comes from Nicolas Larrain at JPMorgan Chase & Co. Nicolas, we'll enable your audio so you may proceed. Perfect. Good morning, and thanks for taking my question. Belmiro, thanks. I have two points here. You talked about new categories of projects, but could you share how much this category is representing today for Assaí Atacadista sales and maybe some categories that the company wasn't selling a year ago or two years ago? Also, getting back to Irma's question, what's the working capital structure now with this potential sale of pharmaceutical products and drugs? What would be the structure change in the company when it comes to stock of the suppliers, etc.? Thanks. Thanks, Nicolas. I think from drugstores, it's really early to talk about this.

We still need to have approvals, and whoever operates with drugs would basically have a sum when it comes to sales and results. Also, when it comes to working capital, of course, although you sell, it's not maybe such a relevant volume to change the fundamentals when it comes to working capital. We're just going to reflect on what whoever is already in the sector operating considers, right? About the new categories, some projects we already discussed now are at the initial phase. Others we've already shared at the offsite last year, such as tires. Assaí Atacadista became one of the biggest sellers of tires in Brazil. We had over 4% of the tire market in Brazil and over 5% of air fryers. In the offsite now, we should have more visibility about share and even more.

I think probably the other bigger point is going to be captured up ahead, considering that a lot of the projects are still starting off. Of course, the company will provide more speed. Perfect. Thank you, Belmiro. Now moving on to our last question. It's going to be in English, and it comes from Andrew Ruben at Morgan Stanley. Andrew, we'll enable your audio so you may proceed. You may proceed, please.

Hi. Thanks very much for the question. I'm curious if you could provide some more detail on the converted stores. I think you said they've reached a bit over 90% of the organic and some narrowing of the EBITDA margin gap. If you could refresh us a bit on the targets for those figures and how far along you think you are for full converted store maturity. Thanks again.

Thank you, Andrew. In fact, the numbers we shared demonstrate their performance, but there still is maturity up ahead. Most of these projects, especially some of them from an operational improvement level, intend to continue with the store maturity. There is still some maturity to be hired. It's not a standard procedure because the competitiveness also in the region, etc., but you have a similarity among these stores, and they're split into different regions. Of course, getting back to this, this was the project that allowed for that penetration rate in classes A and B. That brings us a few different opportunity windows, let's say, to be able to really explore this more and add on more gains and opportunities in the next semesters or years ahead of us.

Makes sense. Thank you.

Our Q&A session has officially ended, and now we will pass the floor back to the company for their final remarks. Thank you, Rodrigo. I just want to thank everyone once again and thank the team. We've seen the market has a lot of challenges from a competitiveness perspective. Previously, we would never expect the same store sales at this level, but the company's not stopped. The company has a series of projects and innovations, and it's really been the brand that has been a protagonist in changing the sector. There was a lot of stigma saying that it was geared towards a lower-income public, and that brings us a lot of opportunities. With a lot of hard work, I'm sure we'll make it. Thank you so much, everyone, and let's hope for a great third quarter. The earnings call for the second quarter of Sendas Distribuidora S.A.

at 2025 is officially ended. The Investor Relations department is available to clarify any other questions or issues. Thank you so much for participating. Have a great day and weekend.