Companhia Brasileira de Distribuicao SA (CBD) 2011 Q2 法說會逐字稿

Good morning and thank you for standing by. Welcome to Grupo Pao de Acucar's conference call to discuss the second quarter of 2011 results. This event is being broadcasted via webcast and can be accessed at www.grupopaodeacucar.com.br/ir/gpa and www.globex.com.br/ir with the respective presentations.

The slide selection will be managed by you. There will be a replay facility for this call on the website. We inform you that the Company's press releases about the Company's results are also available at their IR website. This event is being recorded and all participants will be in listen-only mode during the Company's presentation.

After GPA's remarks there will be a question-and-answer session when further instructions will be given. (Operator Instructions).

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of GPA's management and on information currently available to the Company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of GPA and could cause results to differ materially from those expressed in such forward-looking statements.

Now I would like to turn the floor over to Mr. Vitor Faga, IRO of the Company.

Good morning. Thank you for participating in another call of Grupo Pao de Acucar, and we would like to clarify that this -- this is a call for the presentation discussion of the second quarter results and only matters related to that will be approached here. I would like to remind you that the Investor Relations of GPA is available to you for any further clarifications that you might need. Now I would like to give the floor to the chairman of the board of GPA, Abilio Diniz.

Good morning, everybody. This is a good year. However, the market is a little bit slower than last year. As months go by, we feel that there are more difficulties in terms of selling products and we see that the market as a whole is like that and our competitors especially are finding it even more difficult to maintain a good performance this year. And because of that we are very pleased with the performance of our Company in spite of the fact that we have a weaker market overall. In spite of that, we still have a hike in our sales taking into account the fact that in GPA Food we grew by almost 10% year on year. And if we consider that this is growth-on-growth on two-years-ago growth, we have to consider that the Company's performance is really very good.

And Globex also has a good sales growth. And our results are in line with our budget and may be slightly higher than our budget. And looking ahead, we believe that 2011 will be a very good year such as was the case in the last two years for the Company.

I would like to say that the Company's management is focused solely and fully on the results that we have to achieve and nothing external has brought any impact on the extreme dedication of our executive team and because of that we achieve very good results.

So the Company is very serene, very calm and everything is on track. And you have the results, you will see that the results are higher than the line that you yourselves have projected. Thank you very much.

Good morning, this is Eneas Pestana addressing you. Along the same lines of what Abilio said, this is a tougher year, it is tougher than last year because we do not have the same events that we had last year, especially during the first half, such as the exemption of the IPI tax on the white line and the issue of the World Cup. So it is a tougher year with more inflationary pressures and the IPCA being 6.7% in the last 12 months. And in spite of that, once again, the Company as Abilio has just said, is very focused and very well prepared to deal in this kind of environment.

We have real growth of 2.3% in Food. And another highlight is the consistent increase in the Selic rate and in the last quarter alone from 11.75% to 12.25%. And, of course, this has an impact on the capital structure at the first moment. However, we are reacting and we have this under control. And we are doing quite a lot of work in the reduction of our working capital needs in order to offset the increase in this cost. And also we are focusing in-depth on the control of our payment means in order to avoid an unnecessary increase in our financial expenses that are under control as you will be seeing in a moment. So there is already a downward trend for the third quarter in these expenses.

As Abilio said, the sales growth in spite of the scenario that I have just described it was quite good and GPA Food same-store growth, 9.3% increase and Globex, 17.6% increase. And, of course, this result stems from the application of efficiency gains on our margin and which drives an increase in our margin, however, always guaranteeing our competitiveness in all our businesses and especially in food retail where normally we have a very competitive market and the control of expenditures continues to be very tight and we have maintained our expenses control group and they do this in a transversal manner. We are not going to abandon this practice because -- because of that we have our expenses under control and which drives the EBITDA growth of about 20% in GPA Food which is a major growth, in fact.

And as Abilio mentioned, we have been achieving recurrent growth rates in the last few years. And even with Globex, we have an important growth in our EBITDA, 38% increase, and earnings per share as a consequence also with an expressive increase of 64%. And this is due to the serious and sustainable and consistent work done by the team of executives that is totally focused on development and efficiency gains and in -- on building a sustainable future for this Company.

The capital structure and indebtedness are also under control and with a slight drop in the last quarter, and we have been focusing our endeavors on actions related to our people, and as we have always said, this is a Company made by people, the right people on the right places and competent people. We have structured ongoing projects having to do with our people, motivation and retention of our talents of our professionals and because of that it does really make a difference mainly in moments such as the one we are living today when there is a slight slowdown in the macroeconomic scenario, and in times like that this becomes more and more important and this is the reason why we achieve such good results.

Now, talking a little bit about sustainability. We play our role as the largest retail company in the country. Recently we launched a partnership, an unprecedented partnership with AES Eletropaulo and the AKATU Institute regarding conscious consumption and the discard of fluorescent lamps. And in the last 10 years we have practiced recycling and we have recycling stations in, 238 stations in fact, all over Brazil, 10 years. So this is a responsibility that we are very conscious about, and this is a strategic pillar for the Company today.

I'm not going to take more of your time. We will continue the call by going more in-depth into the details but I can guarantee to you, such as Abilio has already done, that we are totally focused on the development and on our results and on the growth of the Grupo Pao de Acucar.

I would like to give the floor to Hugo Bethlem now.

Good morning, everyone and thank you very much for participating in our call about the second quarter of 2011 results.

On slide number 5, you can see on macro terms the consolidated results where our gross sales reached BRL12.6 billion, more than 61.3% year-on-year growth. And I would like to highlight the GPA Food growth, same-store growth of 9.1% and the growth of Globex same-store growth 14.1%.

Gross profit reached BRL3 billion, more than 82.8% increase and with margins in GPA Food of 25.2%, plus 04 bps (sic - see slide 5) and Globex 28.1%, plus 1.3 bps (sic - see slide 5), and we will be going into details, and the consequent positive result on our EBITDA, BRL641 million, a 66% growth year on year. And the margins of GPA Food had 6.7% increase of 0.5 percentage point year on year and Globex 4.5% (sic - see slide 5), 1 percentage point increase year on year, but the -- in fact, Globex, the first Q of '11 because the basis year on year are not comparable.

Now we are going to talk about the banners that we have. The result was very positive and same-store sales growth in the second quarter represent the second consecutive year, that is to say 12 consecutive quarters higher than the second player in the market and the first half of 2011, 7.4% increase and maintaining the same trend as in the previous quarters and growth higher than 15% in the Assai and the Extra supermarket stores model.

Gross profit, 12.3% increase, thanks mainly to the expansion of margins because of the better product mix that bring about a better margin by means of perishables and general merchandize products mainly in the conversion of the Extra superstores but also in all our banners or models. And the ongoing improvement in our negotiations with suppliers and the application of our two continue to bring good results.

On slide number 9, our operating expenses are kept in line, 18.5 percentage points even or in spite of the inflationary pressure as was already mentioned by Eneas regarding the IPCA index and because of that we saw the creation of the management control and with the administration of the expenses groups. The marketing expenses, for instance, in spite of the big competition in the marketed growth of 3.7% and electric energy which in spite of the tariff being transferred at 9% our expenses grows 7.4%, showing efficiency in the conscious consumption of electricity.

On slide number 10 we see our EBITDA margin, 6.7% in Q2 and it is important to say that there is a change in the accounting criteria because of the IFRS in the classification of profit sharing until the last quarter. In all historical basis that you have, it was classified below the EBITDA and now it is in -- it is on the -- it is higher than the EBITDA and the 6.7% in maintained. The reference numbers that you have for the previous years and quarters it would be 6.9%. And as a consequence the effect on the half year instead of 6.9% it would be 7.1%.

And it is important to draw your attention to the fact that in spite of the increase of the participation of the Assai in sales, and that brings a lower EBITDA margin, there is a significant increase in the EBITDA margin. This result comes from a sale that grows 10.4% and grows income 12.3% and general expenses growing only by 9.8%. And with that there is a consequence on the EBITDA that grows 20%.

On slide number 11, our financial expenses are maintained in line in spite of the significant increase of the Selic during this period, 11.75% to 12.25%, 6% increase therefore in the Selic rate and it is kept at adequate margins, adequate levels for the Company, 2.7%.

On slide number 12, we will see the results having to do with Globex under these brands and I would like to give the floor now to Raphael Klein. He is the CEO of Globex.

Thank you very much and I thank you all for participating in this call. I believe that since June 2009 when we started all the integration process we have always said that the integration process would take about 18 months in order to bear fruit. Twelve months have elapsed, two-thirds, and we are already reaping some fruit. Commercial gains, for instance, we maintained the leadership of the market for Globex. We kept the control of non-interest-bearing sales and we recovered organic expansions. We opened 12 new stores in Rio, Sao Paulo, Minas, Santa Catarina and Parana.

And most -- more important we are delivering a company that delivers consistent results, consistent with our daily operations, we are according to our guidance and we are very enthusiastic about the last third of our integration to deliver more and more. And now I would like to give the floor to Quiroga from Nova Pontocom.

Good morning. I would like to talk about sales first. Another good quarter with a 58% growth year on year, in line with the guidance that we gave, that -- of growing at least 50%. Regarding the EBITDA, we more than doubled our cash EBITDA vis-a-vis last year and we are aligned with our budget margin between 6% and 7% a year, in line with our guidance.

Nova Pontocom in the second quarter and the half year had net earnings. And our SAC, our call center, we integrated our call center, our operations are located at one center by CBCC. Processes have been redesigned and human resources are fully dedicated to our operations with a more differentiated service to our clients.

Regarding logistics, already we have good news. We are giving a second step regarding the evolution of a logistics platform, the first one was last year, 100,000 square meters. Now two other distribution centers, Rio de Janeiro, Iraja and the other one, Guarulhos in Sao Paulo, and together with that we are working with GPA and Globex with a long-term view for 2020 in order to maintain a differentiated level of service to our client.

We have the market recognition, our clients give us their recognition, and we have the diamond classification, the top level of EBIT both for Extra and Ponto Frio brand. These are the two brands that we have and that are rated by the [EBIT Institute] . And I would like to thank the team that really delivers in this regard, it's very important to count on them. Now, I would like to give the floor to Hugo Bethlem to continue the explanation.

Okay, let's go now to slide number 15. It is important to talk about same-store sales growth. We will be referring to the same-store concept only for sales. In last year it did not include Casas Bahia neither Nova Casas Bahia neither Casasbahia.com. So it is very important for us to keep this in mind regarding the second Q we are talking about same-store growth. In all the other slides, we refer to the first quarter of 2011. That is to say the only quarter that we have and can be compared to the results that we will be presenting now for the second Q of 2011.

As we can see and I would like to correct some of perceptions that exist. There isn't a deceleration in the growth of e-commerce specifically. E-commerce grows by 39.4% and it represent in same-store the same objective that was being designated, that is to say 50% higher than the higher average growth of the market. And in brick-and-mortar stores, in spite of the period compared to the World Cup last year and control on non-interest-bearing sales and an increase in interest-bearing sales without losing market share, in spite of all that we have a sound growth, 8%.

Gross profits, slide number 16, BRL1.4 billion with a 28.1% margin, a significant growth vis-a-vis the first Q of '11. We got a commercial efficiency gain because of our better pricing policy, also a better commercial condition associated to a better product mix mainly in the Ponto Frio stores. And one of the areas where we already reap fruit and synergy is the reduction in logistics expenses.

Page number 17, we see that the operating expense is 23.7% of net sales, apparently at the same level of the previous quarter. However, with BRL25 million of non-recurring items because of adaptation of software, adjustment of benefits and charges and adjustment of provisions for profit sharing, and if we didn't have these non-recurring items it would be 23.2%. It is important to say that the synergy gains process, as Raphael said, continues consistently and sustainably, advancing through the second half of 2011.

Slide number 18, we have the positive consequence of the EBITDA. I would like to make a remark to the market, we cannot think that the EBITDA is only 4.4% EBITDA. In fact, at the levels that were disclosed in the guidance of October last year already amount to 5%, they go to 4.4% during a change in the accounting criteria, representing 0.6% of the margin. With that the guidance has already been achieved and ratified. And considering the reclassification of the profit-sharing by the IFRS, we ratify a new guidance of 4% to 5.5% EBITDA when the one submitted in October was 4.5% to 6%.

Financial expenses, on slide 19, are in line with the objectives that we had. We had a guidance of staying between 3.5% and 4.5% and for two consecutive quarters we have 3.4% of net sales without risking any of the sales that we have on our business. We know that according to what was said by Eneas, the significant increase in the Selic rate and the maintenance of our average payment term and the higher use of the FIDC with the inclusion of Nova Pontocom in the discount line. And it is important to say that in both cases we have an increase in the share of our interest-bearing sales in our overall sales.

Now, let's talk about our consolidated results and all our brands together or our -- slide 21, a highlight for FIC, our partnership with Itau, what has to do with our card. It is important to show that in Globex we are talking about Ponto Frio and Pontofrio.com and [Extra.com]. It is already the preferred payment means because it has the best payment terms for the client and for us it has the lowest fee cost, and we can discount the receivables at FIDC cost or even better than the FIDC costs. And the result of the equity income was BRL2.7 million. One information that is extremely important in line with our guidance and with the request by the market, the non-interest-bearing sales of Globex in the second quarter already represent a percentage that is lower than 50% of total sales.

On slide 22, the consolidated net result goes up from BRL93 million in the second quarter of last year to BRL158 million in this year. In accounting terms, from BRL56 million to BRL91 million, that is to say 64%, which is the same percentage mentioned by Eneas regarding the increase in our earnings per share.

And the difference between the accounting earnings and the adjusted earnings is explained on our press release. But in order for us to go back to the BRL91 million you have to add the adjustments of REFIS and the adoption of the IFRS of BRL28 million. And the integration processes with Globex on the Globex side and the GPA Food side BRL47 million and the net result income tax and minority minus 18 which conciliates BRL91 million and BRL158 million.

And lastly, our responsibility with the debt service and net -- consolidated net debt is under control. And we see a slight decrease in the debt-EBITDA ratio. And in our guidance we should stay below and go from 1.05 in the first Q to 0.81 time in the second quarter.

And finally, slide 24 shows the investment in this period. Where in GPA Food we invested BRL209 million in the quarter and BRL470 million in the half year and Globex BRL64 million.

What is the main difference? GPA Food, this half year was specifically a half year of transformations and conversations of all CompreBem and Sendas stores. Already we have converted 148 stores. And we have an additional 66 stores that are being converted, and this will be concluded by the end of the third Q of 2011. Besides, we didn't stop investing in organic growth. And in the second half of 2011 we will have an additional five extra hypermarket, two Assai, three Pao de Acucar stores and two additional Extra supermarkets.

On the Globex side this is the year of resuming organic growth in which in the first half we have already had 12 traditional stores, being three Ponto Frio and nine Casas Bahia. And we will be continuing this organic growth plan in the second half of 2011. Now, I would like to give the floor to Vitor so that we may open for questions.

Well, we've finalized the presentation of our results for the second quarter and now we would like to open for questions. Now, we would like to open our q-and-a session.

And we would like to ask you to ask all your questions at once and wait for the Company's answers. (Operator Instructions)

Fabio Monteiro, BTG Pactual.

I have two questions. The first question, could you elaborate and give more details on the kinds of improvement, particularly in terms of the reduction of terms for the integration of Casas Bahia? And also having to do with non-interest-bearing sales and what you expect as improvements, more specifically on the expenses line, what will be more relevant regarding expenses in the next few quarters?

And the second question has to do with the FIC, what about delinquency for the FIC? What is the level of delinquency right now? And do you see any deterioration in -- on a monthly basis do you see any deterioration?

Good morning. Good morning, Fabio. Thank you for your question. This is Padilha speaking, Globex, Globex CFO. Now, I'll be answering specifically your question on the improved working capital at Globex ever since the beginning of the integration process. Well, we had improvement in inventory days, very significant, about 10 days. When it comes to our customers we managed to reduce approximately 1.5 month our average term of financing to customers and clients.

Another action there is very much in line with the commercial area in order not to miss selling opportunities was a reduction in the share of non-interest-bearing credit cards in total sales for less than 50% as mentioned before. So we had three actions that led to improvement in Globex working capital. Now I'd like to give the floor to our colleagues to answer your other questions.

Fabio, good morning, this is Filippo, speaking. In terms of CBD what happened to the working capital, we had improved term conditions, slightly shorter, something around 15 days on average term. However, it is not in the same ratio of non-interest at Globex but we also had improved sales with interest-bearing sales. It is lower because sensitivity of CBD is weaker in that aspect. We increased our supplier terms, it has an impact on working capital but consolidated results actually came from Globex.

As to FIC, delinquency is slightly higher compared to last year but the trend is common to all portfolios, Itau portfolios, it manages several companies. So nothing new about it. We have the benchmark we've maintained, and it is within the expectations. This increase is very, very small, it's not significant, it's a normal market trend. But no impact on FIC results expectation. We keep on working with the same expectation so the small or slight increase in delinquency might not have a significant impact on FIC.

Thank you, Filippo. More specifically about FIC, I think you had this non-recurring expense for credit card purposes. If we make adjustments can we consider this as a normal result considering the slightly higher level of delinquency?

We might expect something between BRL12 million to BRL15 million over the quarter.

Okay, thank you.

Tobias Stingelin, Banco Santander.

I have a question about FIC again. So did we have losses in the consolidation of Pao de Acucar but it was profitable with Globex, am I right to assume that?

Tobias, this is Filippo, you're right. We had a specific effect at Globex. They are related to CDB products that were appropriated by Globex, that's why we had this gap.

Okay, next question. I'm not sure about receivables discount. The receivables discount that you posted for Globex was BRL121 million and in the second quarter you posted BRL169 million. So very significant growth. However, apparently, you also rated it used to be BRL121 million and now you say it's BRL164 million, can you explain what really happened?

Tobias, this is Padilha again. Once again thank you for your question. During the first quarter within this BRL121 million we only made reference to discount with credit cards. The scenario we show right now has credit cards and also installment sales. So I think this scenario is more useful for you to have a better understanding and correctly analyze our expenses with receivable discounts.

Now, adding to this explanation, so you posted BRL121 million originally and now you have BRL164 million. So the difference come from installment sales?

Correct.

Now, what about BRL164 million, can you break down into cards and installment sales? Considering you want to have the financial operation and decide whether you'll sell it or not it would be important to think about what you expect for the future.

Thank you. I don't have the open figures right now. Tobias, maybe later on we can give you an answer together with Vitor. We don't have the data right now, but we can give you some feedback later.

Thank you.

Last question. You really emphasize and Hugo mentioned again your expectation vis-a-vis not only the guidance but the lower expense level at Globex. Considering you have the integration, can you give us some additional information? What about gains in the future?

And as a follow-on question, what about expenses with IT and outsourcing? I assume this is recurrent and not only for the quarter, was it?

Hi, Tobias, this is Herzog. Thank you for your question. In terms of gains and expenses posted so far basically they come from the main lines we already had planned in our integration process. So we have gains in direct or purchases and procurement on non-salable products and we have gains in logistics, IT and also shared services.

In our forecast for integration, these areas may keep on bringing benefits, allowing us to meet the guidance that we had earlier this year. So we are very confident with the integration process. As Raphael mentioned very well, it is in line with our plans, slightly higher, and our expectation is to keep on having that recovery in gains at least by the end of the second half of the year.

Okay, so what about the gross margin, over 28% or higher than any guidance given previously, way higher what you had before. So would you say that we still have room for improvement or are we beginning to see improvement in expenses as well?

Thank you, Tobias, this is Roberto, thank you for your question, good morning. We do have some gains in the future. We are still fine-tuning the process, but we still have -- we will have benefits in terms of pricing and expense management. Thank you.

Tobias, it's Filippo, again. Just to add something for FIC, your question, we always have to consider shipping and the load and the burden was on GPA so I think it is better to give you analysis when you break down among different partners.

Thank you.

Andrea Teixeira, JPMorgan.

Thank you. My questions goes as follows, if we look deeper into the segment in different categories I realize there was significant improvement particularly in the food margin. And this applies to the first quarter as well. I know you have already explained that but at the same time there is some slowdown because you mentioned that you're being more cautious now maybe regarding the economic scenario, but my first question is could you give us a better idea of the main categories. I have the feeling you have very good performance in general merchandise and categories that are very relevant. So maybe you can elaborate and give us a better sense of what is happening.

And the second question is more technical, maybe Filippo can help us. It has to do with provisions. As I see it, some provisions were not included in adjusted figures. How can we tell what was recurrent or not? Based on calculations we have about BRL100 million that had a positive impact on results in the first half of the year. So what generated these provisions? And I wonder if now we will no longer have these amounts. So what is the source of this reversal? Thank you.

Hi Andrea, good morning. This is Tambasco speaking. Let me address the selling mix. Hugo mentioned that one of our highlights has been growth in the food retail, Extra supermarket. And that has to do with a transformation of CompreBem and Sendas into this new format. The new format favors perishables categories. These categories not only generate more flow to the store but at the same time also provide a far more interesting margin mix. And the same goes for general merchandizing.

We have at display, a higher or larger display area for these categories. And something else that we have been realizing ever since last year is that categories of the so-called basic groceries or rice, beans, oil, sugar, these categories have dropped consumption due to improved access to new categories from lower socio income brackets.

So you have a slight drop in basic categories and there is an increase in ready-to-eat or ready-to-prepare foods or products. And they generate better margins for the business compared to commodities. So this product mix has led to possibilities to improve your margin and at the same time maintain or even increase your price competitiveness.

Perfect. So you don't believe inflation or fast inflation rates might have a late or a delayed effect on your margins, right? So you won't have to transfer part of this or these gains probably on a timely basis for the inventory. I assume you won't have to transfer that to cost.

So in terms of inflation, it might be lower compared to what was observed. So could you give a sense of how your internal inflation? In the past, you used to share these data of CBD food staples. So maybe that would be helpful for our same-store sales forecast.

Andrea, for foods I can say we are very much in line with IPCA, no significant changes. We've been following all these figures very stringently. At the same time, over time we've been managing to improve our competitiveness, particularly with these categories that have a stronger impact on price image.

Now, when we analyze non-foods, and I think Globex can give you a better sense, but we have changes and sometimes even price deflation. And that's because we had a reduction in price of technology products, IT products. And as time goes by, there is a drop in price that becomes very significant.

So for retail purposes in our mix and if you consider food is in line with IPCA and non-foods are slightly lower, today we run with our price increase that is lower than 6.7%.

Perfect. Great, thank you, Tambasco.

Now, the next question has to do with provisions, right?

Okay, Andrea, as to provisions, basically the bulk of that difference is related to installments. And that's something small. That's not something we expect to have for other years' adjustments in provisions that were related to effective tax payments.

Right. So for other operating expenses do you have any kind of credit? Could you quantify this credit?

I assume there is no impact. No impact, but there is some effect on results, particularly when we think about income.

No, no impact on income. Andrea, maybe we can go deeper into that later on. This is too specific. We don't have these data right now, but so far we have not found anything significant in that sense. So maybe we can go deeper into that. So -- and then I can give you the explanatory note, the corresponding explanatory note. Thank you.

Gustavo Oliveira, UBS Company.

My question has to do with a previous comment, a slowdown in the market and also growth and the area that you foresee for the rest of the year. Hugo mentioned some higher results. So what is your estimate for CapEx and area growth for the year? And how do you envisage or what are your plans for next year?

Gustavo, thank you for your question. In terms of CapEx, organic growth is as we stressed before, this is a year of investments in remodeling and also to convert CompreBem and Sendas stores into Extra supermarket, Pao de Acucar and Extra hypermarket, and that has generated very positive results in our -- or supporting our decision.

So this is a year of organic growth, around 4% of expansion in terms of additional square meters for foods. For non-foods, I would like to turn it over to Padilha, so he can talk about Globex.

Gustavo, thank you for your question. Over the quarter we decided to expand again. We opened 12 stores, that's something very significant, accounting for 1% growth in our selling area. And we are maintaining the guidance, the consolidated guidance previously informed with Nova Pontocom of BRL150 million for the year. And this quarter we also ended up by investing heavily in IT.

So we can speed up the integration process, particularly for Ponto Frio and Casas Bahia. So that was a major investment in technology over this quarter in new stores. And over the following quarters we may keep on investing in new stores.

Thank you, right. What about Ponto Frio?

So for this year we would -- should consider CapEx BRL150 million.

And for GPA Food, what is the CapEx?

According to the guidance for the year, BRL800 million.

Okay. It has been maintained. My second question has to do with logistics. Quiroga made some brief comments on his slide, the logistics plan for 2020 and e-commerce. E-commerce is growing at very fast rates. Do you still have more capacity to sustain this growth over the next six months or do you have any plans of renting any additional distribution centers that might affect cost on a short-term basis?

Thank you for your question. As to the next six months and particularly for this year, we follow the same lines. We have our DCs ready for us, one is in Sao Paulo, and these DCs are very interesting, each one has 30,000 meters of very good location, close to urban centers already remodeled and refurbished for our operation. So we're very happy with these DCs.

And perhaps we'll be growing strongly this year so we might need an additional DC, we're not sure yet. We're working on that. But we have one available if necessary. But for the moment we have confirmed these two DCs, each one 30,000 meters in the regions I mentioned.

On a long-term basis, together with Grupo Pao de Acucar and also with Globex, we're trying to identify further opportunities for expansion.

Now I'd like to turn it over to Herzog to mention a couple of more comments on expansion.

Gustavo, this is Herzog. Just to add to what was said before and add to Quiroga's question. In the integration process we already envisage these DCs at the Company. Please bear in mind that APRO provides for maintaining DCs that were already active. So the two DCs that were transferred to dotcom are still at the company fully in line with the APRO.

And as Quiroga mentioned, today we work together, Globex Nova, dotcom and GPA in the future analysis so that in our next expansion for Globex we take into account each and every operation of the Group making it easier not only to invest but also to have easier operations at the DC level.

And what about these DCs, have they already been integrated in the process of Nova Pontocom? Is it simple and is it more complex to have all the systems integrated?

We feel very comfortable. We are active in 6 DCs. Last year we started with Extra, and Casas Bahia. It was very fast and smooth. No problem. We are comfortable. Once again thank you for your question. Thank you.

(Operator Instructions) Julia [Bezo], [S. Company].

I would just like to know what we can expect in terms of seasonality for the next quarter. So far we don't know the figures of Casas Bahia. So in terms of sales the second half of the year usually sales are higher compared to the first half, margins tend to be better or worse. So I wonder if you could also give us a sense of same-stores sales growth considering the older stores of the banner? And if possible, Raphael, could you mention on Casas Bahia growth compared to the previous year?

Good morning, Julia, this is Roberto speaking. Let me mention a little bit about Globex seasonality. Usually the second half of the year tends to be slightly stronger than the first half of the year but not that much. Obviously we have Christmas. But to our business but we also have Mother's Day in the first half of the year which is also very significant and virtually the same strength, not to mention the sales in January, that is also very important to us. So not so much change in terms of seasonality. I would say it's very much in line with the first half of the year, slightly higher maybe.

As to Casas Bahia banner growth I would like to turn it over to Raphael now.

Julia, thank you for your question. Casas Bahia banner is more consolidated, so it is better-structured. I think it's important to focus on the company as a whole. We have more opportunities at Ponto Frio now but Casas Bahia as a banner is within the guidance. It is always important to work on a consolidated basis for the Group so that's what has to be tackled in our guidance.

Just to add to what he said I think it's interesting to say that, well, we did not break that down by banners. But Casas Bahia, Pontocom has been growing surprisingly well in the first half of the year at three digits. And it does help and contribute to our total volume. BRL1.5 billion sales in the first half of the year Nova Pontocom as a whole and Casas Bahia is fantastic at the web.

Thank you. And for the food group what about seasonality? Isn't it that relevant for the second half of the year?

Julia, I don't think it changes so much. For foods maybe the best selling month for us obviously is Christmas. But as Roberto mentioned before for foods the impact of the first half of the year is also very strong.

So in the second half of the year we have the anniversaries of our different banners with very strong actions not to mention Christmas. But definitely it is higher and stronger compared to the first half of the year.

10%, would it be a reasonable to assume that?

Well, maybe that's not the figure I have, the accurate numbers I have, but sales are higher, they have a lot of movement. But it is very strongly concentrated over two or three weeks in December. And that's where we have this striking difference. But that's not so significant when it comes to the business performance.

Julia, just to add to what he said, this is Vitor Faga. Because we have seasonality in both businesses we can leverage this effect when it comes to results and EBITDA. There is a dilution of expenses when we have top selling months. So the seasonality fact as described both for Globex and GPA Foods when it comes to sales it's leveraged by lower expenses.

So the order of magnitude, would it be 5% to 10% sales higher in the second half of the year compared to the first one or slightly lower than that?

Julia, this is Hugo. Seasonality in December, well, Tambasco just mentioned that. We concentrate the birth of the anniversaries of our banners in August, October and November. And this makes things stronger. And at Globex we also have Mother's Day and we also have Easter in the first half of the year. So overall speaking, what happens is that the second half on average is half month stronger compared to the first half of the year.

Thank you, Hugo.

Sorry I got lost. Is this just for foods or everything?

Foods.

What about Globex? Is it slightly longer than half a month?

This is Roberto again. I would say it's slightly less. The first half of the year is very stronger thanks to Mother's Day and the sales in January. For some years this is very strong.

What about the product mix? Does anything change?

We have more promotions in the second half compared to the first one, except for the peak of seasonality. At Christmas we have some categories but the same goes for Mother's Day.

Thank you.

Julia, just to add a comment on foods. All seasonal products are treated differently in order to have an open and certain margin. Thank you.

Marina Braga, Raymond James.

A quick question having to do with the non-recurrent expenditures, having to do with the BRL21 million of the association with Casas Bahia. So could you please more -- could you please be more specific about that? And what do you expect for the future regarding this kind of expense?

Marina, this is Padilha from Globex. Basically these are expenditures that derive from the integration process. Most of that is payment to consultants, part of that with IT. And we believe that by September they will be much lower as the first integration phase which has to do with organization, et cetera, comes to an end. So they will continue to exist until September, and after that will be a slowdown.

Marina, this is Filippo. And BRL21.4 million that you referred to, in fact this number is positive in the adjustment because it was a net expenditure in our result, so it's being reverted in order to show the recurrent earnings. So it has an effect not only of -- it has to do with the amortization of the combination of the business, about BRL15 million. And CBD, as it captures this variation, it adjusted to inform the figure net of this effect. This is why we show BRL21.4 million, and it is positive in the statement. But in fact it is an expenditure in the result because it's being reversed here, okay?

This is Hugo, Marina. When I mentioned in the consolidated results the consolidation of the accounting earnings to BRL158 million from BRL91 million we talk about BRL47 million. If you add up to two figures BRL21.4 million and BRL25.7 million which was mentioned by Padilha, okay?

The Grupo Pao de Acucar results conference call is closed. The Group's Investor Relations team is available to answer any other questions that you might have. Thank you very much for participating in this call and have a very nice day. Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.