M. Dias Branco (MDIA3) Q2 2024 earnings summary

Executive summary

• Net revenue in 2Q24 was R$2.63 billion, down 7.7% year-over-year, but up 22.9% sequentially, driven by higher sales volumes and lower average prices due to commodity trends; 1H24 net revenue fell 10.6% year-over-year to R$4.77 billion.

• Sales volume in 2Q24 increased 11.6% year-over-year and 27.7% sequentially, with strong gains in pasta and wheat flour market share; cookies and crackers market share remained stable at ~32%.

• Net income for 2Q24 was R$189.9 million, a 12.8% decrease year-over-year but a 22.6% increase sequentially; 1H24 net income rose 19.8% to R$344.8 million.

• EBITDA in 2Q24 was R$336.8 million (margin 12.8%), down 10.6% year-over-year but up 21.5% sequentially; 1H24 EBITDA rose 11.6% year-over-year to R$614.1 million.

• Gross margin improved to 34.9% in 2Q24, up 1.9 p.p. year-over-year, reflecting lower commodity costs and improved capacity utilization.

Financial highlights

• Cash and cash equivalents totaled R$2.51 billion at quarter-end, up 107% year-over-year, maintaining a net cash position at 0.1x LTM EBITDA.

• Operating cash generation in 2Q24 was R$211.5 million; net cash from operating activities in 1H24 was R$349.5 million, down 38.5% year-over-year.

• Capex in 2Q24 was R$60.9 million, down 15.3% year-over-year, focused on machinery and non-fried ramen production.

• EBITDA margin in 1H24 expanded to 12.9% from 10.3% in 1H23; net margin in 1H24 increased to 7.2% from 5.4% in 1H23.

• 70.7% of debt is long-term, with AAA rating and stable outlook.

Outlook and guidance

• Price adjustments implemented in June 2024 to offset rising wheat costs and Real devaluation are expected to support margins in 2H24.

• Initiatives to optimize expense structure, including halting recruitment and reducing discretionary expenses, are planned for 2H24.

• Focus on profitable growth, efficiency, and productivity programs, with cross-selling and innovation as key drivers.

• SG&A expected to trend toward 20% of net revenue as cost control measures take effect.

• Management notes that future results depend on market conditions, Brazilian economy, and sector performance.