Grupo Pão de Açúcar has just reported a first quarter slightly above consensus – but in Bottom lineaccounting effects caused the loss to be much higher than expected.
GPA’s total net revenue (including the operation of gas stations) rose 9.9% compared to the same quarter last year, to R$4.94 billion. The consensus Bloomberg predicted R$4.84 billion.
The company’s gross margin rose 1.4 points in one year and reached 25.8% – slightly higher than expected by the sellsidewhich was 25.6%.
EBITDA, in turn, rose 70% to R$380 million, while the consensus pointed to R$347 million. The EBITDA margin was 7.7%, a growth of 1.7 points year on year.
“We remain committed to delivering EBITDA margin guidance between 8% and 9% at the end of 2024, and starting the year at this level is great news,” CEO Marcelo Pimentel told Brazil Journal.
But the company’s consolidated loss came in at R$660 million, an increase of 166.5% and well above the forecast of R$175 million.
According to CFO Rafael Russowsky, this happened because the company needed to make provisions for the effects generated by joining the ICMS debt settlement program (in which GPA reduced 80% of its R$3.6 billion debt with the state of São Paulo ) and the impairment following the sale of the administrative headquarters announced at the beginning of the month.
“As we carried out operations before publishing the balance sheet for the first quarter, it is our rule to make provisions,” said the CFO.
Without this accounting effect, GPA’s loss would have been R$197 million – still, above the Bloomberg consensus.
Pimentel said that the increase in margins in the first quarter was “very positive” and in line with the company’s planning. turnaround of the company – and highlighted the eight-day improvement in inventory turnover compared to the previous year.
“The work that was done in stock management allowed us to invest less in markdowns and manage the process in a more optimized way,” he said.
He also highlighted the sixth quarter with gains of market share – an increase of 0.2 points compared to the same period last year.
The company also began to disclose pre-IFRS 16 financial leverage this quarter, which includes rental expenses.
In one year, leverage fell from 6.8x to 3x – and the CFO said that this number should fall even further in the coming quarters as the sale of the headquarters, which raised R$218 million, has not yet been accounted for.
Another decision by GPA is to place the operation of gas stations in the “discontinued operation” line from this quarter onwards. The retailer is looking for a buyer for the operation, which has 71 stations and earned R$356 million in the first quarter.
According to Pimentel, despite being a profitable operation, it no longer makes sense to maintain it: all stations are inside former Extra hypermarkets, which were sold to Assaí. The goal is to find a buyer by the end of the year.
“The role of gas stations for food retail is to attract traffic to stores. The operation itself does not add great value,” he said. To top it off, the sale will help in the deleveraging process.
Therefore, the company also highlights what its numbers would look like without the stations: the gross margin would rise to 27.2%, and the EBITDA margin would reach 8.1%.
André Jankavski
