Companhia Brasileira de Distribuicao SA (CBD) 2011 Q4 法說會逐字稿

Good morning and thank you for waiting. Welcome to Grupo Pao de Acucar's conference call to discuss the fourth quarter and full year of 2011 results. This event is also being broadcasted via webcast simultaneously and it can be accessed at www.grupopaodeacucar.com.br/ir/gpa and www.globex.com.br/ir where you can find the presentation. The slide selection will be managed by you. There will be a replay facility for this call on the website.

We inform that the Company's press releases are also available at their IR websites. This event is being recorded and all participants will be in listen-only mode during the Company's presentation.

After GPA's remarks have completed, 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 management and on information currently available to the Company. They involve risks, uncertainties and assumptions because they relate to future events and therefore they depend on circumstances that may or may not occur during the future. Investors should understand that general economic conditions, industry conditions and other operating factors may also affect the future results of GPA and may cause results to differ materially from those expressed in such forward-looking statements.

Now, I would like to turn the floor to Mr. Hugo Bethlem, Executive Vice President of the Company.

Good morning, everybody, welcome to the fourth quarter of 2011 and full year of 2011 earnings conference call. I would like to ask you all for your understanding. Please understand the focus of this call which will be the results. Any guidance for 2012 will be given only during GPA Day that will occur in late March on a date to be confirmed, and I would like to invite you all to participate in the GPA Day.

Today with us, we have Abilio Diniz, Chairman of the Board; Eneas Pestana, CEO of Grupo Pao de Acucar; Raphael Klein, CEO of Viavarejo, the new name of Globex; German Quiroga, CEO of Nova Pontocom; Jose Roberto Tambasco, CEO for Retail; Caio Mattar, CEO for business and specialized businesses; Vitor Faga, Investor Relations of GPA; and Padilha, CFO of Viavarejo. Together will be other vice presidents and the executives and they will all be able to help during the Q&A session.

Now, I would like to give the floor to Abilio Diniz.

Good morning, everybody. The results of 2011 can be considered as very good. And due to the year that we had with major difficulties around the world, especially abroad, and in spite of all the difficulties, Brazil was able to grow about 3% this year. So in spite of all these difficulties in which our major competitors lost sales and they had low profitability, we were able to grow in same-store sales and we grew also inaugurating new stores and organically as well. And we had a year that we can consider as very good.

The outlook for 2012 is the following. I think the outlook is even better than 2011 and I believe in the growth of the country, I believe that Brazil will be growing something like 4%. And in the economic model that the government is following, we have priority given to the social area, and this administration has the intention of putting an end to poverty in Brazil so that all the social classes may migrate upward gradually. And this model makes the country grow based on our domestic consumption without forgetting the need to look to the rest of the world in order to balance our current account with the other countries.

And looking at exports as well, but based on a growth and income distribution and improvement in income, improvement for the whole Brazilian population and therefore increase in domestic consumption. Of course, this model is favorable to us. We are distributors. We need a very full payroll, we need income, we need credit for our clients.

So I think we are going to have all that. We forecast a very good year. And in my opinion it will be an even better scenario because the overall economic scenario is better than the previous year. And in our Company, we wish to be this year even better than we were last year and certainly the next year we will be better than this year.

So following this route, I think that we can forecast a very good year with satisfactory results and that may add value to the Company and value to all our shareholders. This moment I would like to thank very much our team and the leadership of Eneas Pestana and all the vice presidents that are in this room with us. They are doing an outstanding job, an excellent job focusing on the Company, focusing on our bottom line, which is what we need. Thank you very much.

But now we will go ahead. If you have any questions, I will be here during the Q&A. Thank you.

(technical difficulty) very appropriately about Brazil, about our fundamentals. And I will be focusing more on a macro view, more internal ones (inaudible) and more focused on Grupo Pao de Acucar. I would like to highlight a few points that I believe in your considerations and your analysis they could be important for this purpose.

I think that 2011 was a landmark, a year that started with many stumbling blocks, but we had the capacity to overcome all of them. During this year, we focused on our people very much and we were able to work very much in the consolidation of our management model, which is very relevant. As Abilio said, we became the largest distribution group in the whole country and we had to adapt in terms of our managerial model in order to be able to tackle all that and manage all the businesses and all the formats and all the regions and we have been delivering all that.

During this year we further reinforced this and we also reinforced our values and our culture. You are all very familiar with our values, I understand, and we are very serious about our values in the Group's determination, discipline and emotional balance. These are very important values. This is not something just to be on paper or to live on paper. We have to live this in our lives and our daily routines every day.

Our assumptions continue to be the same, agility, empowerment with responsibility, with accountability, focused on results and returns to our shareholders. I think this has been further strengthened in the Group and we really live all these values. In this year of 2011, there was a huge total movement here focusing our whole base. We are a Group today that counts on 170,000 people, the biggest employer in the whole country.

And due to this relevance and the importance that we give to our people, and this Group is responsible for the winning group, that we have launched a movement, we want you to be happy here. And this movement tries to create the right conditions for people to be able to do their work with happiness, with joy and with optimism creating a virtuous circle in their professional and their private lives and they see that we really care for our people, that we care for our client, that we do what we have to do with full dedication. And with that the client is even more satisfied, the client comes back and we thereby create this virtuous circle.

We have been working on that in a serious manner, in a responsible manner creating sustainable solutions in order to reach this aim. We made great strides in this direction. We have a very skilled team, a team that's learns on an ongoing basis in a management model that we consider the technical aspects but also the connection among the fundamentals of the companies that we own.

We have a management model that is fully aligned with our organization with very clear responsibilities, all of them defined and consistent and aligned with this model and with the structure and where we define targets and indicators in a crystal clear manner. And these targets and indicators are fully aligned and are based on -- are the basis for the variable compensation for the executives. And our system of accountability is also fully aligned with the targets these indicators.

So all these connections make up a robust management model and which is necessary to manage this huge company, huge from the viewpoint of geographical footprint as well as the fact that we are multi-business and multi-format company. And I think we should also highlight that we have been making important investments in IT. We have our executive officer for IT and he has been doing a spectacular job.

In logistics as well major investments are being made in order to guarantee a supply platform that maybe efficient and effective that can really do its business because this is the core of retail and a capital structure that is sound with low indebtedness and that gives liquidity a very major importance. So we have this fixed synergy and we do our job in a very serious and responsible fashion, in a very competent manner by Marcelo. Our capital structure also guarantees a long debt with a long profile with a consistent reduction in our funding costs.

Filippo is the head of this area and he was able to close our income statements before the deadline. So I would like to pay tribute to the people in our financial department and they are the ones who do the consolidation and this is what allows us to be here holding this conference call.

In terms of our global strategy based on what Abilio said, we have a very bullish outlook. We trust that the future will be very good, this year will be very good, and I have extreme confidence not only in our Company but in the country and in the team that we have here around this table, that we will be able to continue to tap into the good performance of our country and to form them into good results to our Company.

Our strategy is strong. We have organic expansion based on the fact that we are a multi-format, a multi-business company. The synergies that we have among our businesses, this is what we have. So our strategic plan is very [rugged], it has been discussed in depth. We have our [node], we have our plan, we have our strategy and all our actions in the short run and also for the whole of 2012 come from a long-term strategic plan that is very well structured.

I should also mention some highlights, which were the restructuring of Assai conducted by [Luini Gomez] in a very competent fashion. It was necessary and I think we can tell you now that we have a cash-and-carry business, which is our Assai, ready to fight and ready to fight for the leadership in this segment in Brazil.

The conversion of stores for extra supermarket leaving the Sendas format and CompreBem which was a short-run job and we were able to do over 220 conversions, and today we already see a two-digit growth in this area. So the decision was right, and it was right because it was done in a very careful manner, doing all the math and with a very consistent execution.

The review of the Extra Facil model, the proximity store that now is called Mini Mercado Extra already has two-digit growth and it was also in that review and part of the demand on the part of our consumers, our clients for more perishable, for more services.

We -- because of that, we did this review and this shows how consistent this is with the requirement expressed by our clients for more convenience and this was brought about because of the need of more proximity and the Company as always is paying keen attention to all that and we are very agile when we see that we have to undertake a change. And we're also pay keen attention above all to the demand on the part of the Brazilian consumer, our clients.

The restructuring of Globex will be explained in a few minutes. The name now is Viavarejo. It was a very successful one and we were able to capture synergies as we estimated and you can see this in our figures. And it is conducted by Raphael and his team with a lot of dedication and a lot of effort.

So what I can tell you is that we have a very dedicated team that love the Company and that works with focus and -- under Abilio's guidance and my guidance which is keep focus on our business. We have major challenges ahead of us. We have to learn every single day in order to be able to grow a gradually stronger and stronger group prepared to face all the challenges that are there in the future. Once again, thank you very much for participating in our call. And now I would like to give the floor to Hugo.

Thank you very much for your words. And now I would like to give the floor to Vitor Faga, IR officer of Grupo Pao de Acucar. And he will be analyzing the figures for GPA Alimentar.

In the next four slides, I would like to talk about the results of Q4 in the year of 2011. I would like to start with slide number 5. With the operating performance of three different formats or banners, that really make the difference and that have been giving positive contribution to the result of the brand.

Extra supermarket is the first one. Extra supermarket was recently created and most of the stores come from the conversion of CompreBem and Sendas stores and these conversions were made in order to increase the offering of perishables and reformat the stores and the offer of perishables. According to the new needs expressed by our consumers, which are the focus of this brand, the adjustments made in the model, and in the Assai model and which Eneas referred to very briefly, have the intention of improving the assortment of products and services offered to the two target audiences of this brand and a conversion that is underway, which is the conversion of the Extra Facil to Extra Mini Mercado model, very much aligned with the movement that we did in Extra Supermercado in order to increase the offer of perishables and adjust the assortment of products to the new demand and desires on the part of our consumers. And these three formats gave a significant contribution to our sales performance.

And now going to slide number 6, we can see that in Q4, we had an evolution in same-store sales of GPA Food of 8.7%, which is an acceleration vis-a-vis the previous quarters. And because of that, we were able to reach BRL28.4 billion revenues which means about 10% increase year-on-year. And more than that, same-store sales in the period reached 2% increase higher than inflation.

And now looking at the competitive environment, we have a performance for the 14th consecutive quarter, a performance higher than the second player in the market. If we consider the categories that are performing best Non-food, 13.6% in the period also because of an innovation by Grupo Pao de Acucar, a pioneer initiative to implement in Brazil a promotion that we call Black Friday. And, of course, our view are familiar with the Black Friday promotion in the US markets. And this year we were the pioneers and we implemented this in our brick-and-mortar stores.

All these initiatives reflected into an increase in our net earnings also. As you can see, the impact of the conversion and the adjustments that I referred to, and in the last quarters, it was higher than 26%. For the whole year it was very close to this level, 25.9%, which also means a major growth quarter-over-quarter. And I would like to stress that this growth happened with a higher participation of the Assai format which structurally has lowered gross margins.

So you can see that this result is considered by us as very satisfactory. If we consider the EBITDA line, it is important to stress that the increase in gross income has to do with a control of our expenses. And we were able to have a relative reduction in expenses in the last quarter, 17.1% as a percentage of sales vis-a-vis 17.8% in the same period last year.

So this control, a very active control, of our expenses associated with the increase in gross income led GPA Food to a record EBITDA in the quarter. 9% EBITDA margin was delivered, which undoubtedly is the result of that must be celebrated for the full year, 7.6% EBITDA which is 0.4 percentage points increase year-on-year. And once again, it is important to mention that even with a higher participation of the Assai model of the cash-and-carry model, that structurally has a lower EBITDA.

Now, I would like to give the floor to Raphael Klein who will be talking about the results of Viavarejo, the former Globex Company.

Good morning everyone and thank you for participating in the Viavarejo call. It is a great pleasure for me to be here today. In the year of -- the year was a year of restructuring but with a lot of celebration. The year of 2011, it was a year of restructuring, but with a lot of celebration. We started a very tough year, needed to integrate both companies always giving priority, the lowest possible impact, to our clients. And this has always been a guideline of our Board of Directors in order to guarantee sustainable growth, both of Pontofrio and Casas Bahia and minimizing impact to our clients. And this brought about 11% real growth.

We had a slight deflation in our sector. And besides all the restructuring and all the integration that Eneas has already referred to, we were able to get an aggressive expansion, 20% Casas Bahia and 6% Pontofrio and already with a new concept, a concept which we trust will be very successful. And we have a rule out project for this new concept of stores and also freshening up the Casas Bahia model. And this will be done over this year.

We have greater challenges for 2012. The construction of a Company with a strong and unique team, the management of the Company continues to focus on sustainable long term result. And we have the target to expand for 2012 an addition of 60 stores, which means more than one new store per week. And we also see some opportunity to tap into new synergies in our results and some of them depend on ourselves and some of them still depend on the [Tarje] decision to be made.

We are working with Tarje always and they have been flexible of meeting our expectations and we are working with Tarje in order to be able to capture as many synergies as we can for 2012. The most important thing is to realize the dreams of our clients. This is a challenge that we have now. In order to talk about the figures, I would like to give the floor to our friend Quiroga from Pontocom.

Good morning, everyone. I'll be focusing on the three main highlights of Nova Pontocom over 2011; growth, profitability and the acknowledgement of several market segments. As to growth, this year we had an increase in our consolidated sales and the guidance for the market 41% B to C year-on-year and the market estimate shows growth in our segments between 18% and 21% depending on the source.

In order to do that, we have our conversion. We changed our mix with seven other categories in 2011 with better margins in our point of sales closing with 24 categories by year end. We have several improvements in CRM interface, control platforms, processes that ended by leading to a growth of 41% year-on-year.

The second highlight is profitability. We closed 2011 with BRL27 million as net income logistics for instance. And we also had an increase in our net margin of 1 percentage point. So this is the guidance for the market.

As to reputation we increased, our time to market. We had a series of evolution in our logistic platform for customers. And that was acknowledged by our customers. In terms of return to our website, increased conversion as mentioned before, and also according to some market institutes. For instance, we had a site, a website that is used by customers so they can make complaints. And we are rated as the first company in terms of response time and quality of the answers. And we are also rated in the diamonds category by E-bit and agency that checks performance of the players in our segment.

Lastly, we were also awarded a very interesting award when it comes to social aspects by trying to use this channel so that we can use our commerce platform. And we have very good results in our company. And lastly, I would just like to say that the combination of these three highlights and factors altogether; growth, profitability and reputation are providing more value to our Group simultaneously highlighting our trust in the team, our teamwork and also our directions. I would like to thank the whole team for all the efforts over the years and partnership with Grupo Pao de Acucar and Globex that has helped us to come to our results. Thank you.

Next, the results of Orivaldo Padilha, IR officer and CFO of the retail lines to analyze the figures.

Good morning, everyone. Once again thank you for the opportunity. I'll be making comments on the consolidated results for Viavarejo that includes Nova Pontocom results.

Highlights for gross sales over the quarter, we've reached BRL7.1 million, growth of 23.8% vis-a-vis the fourth quarter and over the year totaling BRL24.2 million in total sales. In terms of growth in the fourth quarter, 8.40% in same-store sales highlighting the operation of e-commerce growing 40.4% which is approximately double of the growth over the period for the market.

For the year, as mentioned before, ever since the beginning of our period, we began to pinpoint deflation, particularly in electro electronics categories. And that changes our performance indicator for same-store sales. For bricks-and-mortar stores which had a nominal growth, same-store sales of 7% considering deflation and inflation rates. The growth, the actual growth, was 11% for e-commerce; Nova Pontocom, 25.10% on the nominal basis, and 32.30% in actual terms. Therefore the Company from 10.10% nominal closes the year with 14.80% on an actual basis.

Another highlight is the growth in these stores in our gross margin, consolidated gross margin, already in the year 26.90% closing the year in the fourth quarter with 30.20%. And consolidated basis 28.8%, significant growth to our business as you can see.

On the next slide. Another highlight is the EBITDA margin of 7.2% in the fourth quarter reaching BRL446 million. For the year, close to BRL1.93 billion, 5.20%. And another highlight on this slide is that we were close to the cap of the guidance which was between 4% and 5.5% reaching 5.15%, 5.20%. And it comes from the increase capture of synergies coming from the integration process of the companies throughout 2011.

Another focus of the Company on the next slide. Financial expenses, they remain a priority to us. We were below the guidance between 4.5%, 3.5% closing at 3.30%, with a slight variation downwards in the fourth quarter. And that comes from all the operational effort to put priorities on turnover costs and improving our billing system. Closing some operations that were non-interest bearing and increasing interest bearing installment plans, not to mention all the process to improve funding costs and including all the efforts very well integrated with Grupo Pao de Acucar.

On the next slide. That's one of our guidelines. We want to be driven by EBITDA results considering the receivables discount cost. We show the result of the deflation in the last quarter. We had already mentioned that before. And now we show the evolution chart. The EBITDA result, net of receivable cost in the first quarter of 2011 was close to 0% and then grew to 0.60%, 1.30% in the second and third quarter, closing the year at a level of 3.60%. So all this process comes from priorities. On this operation the integration and all the changes made to the Company, we never lead second place or income second place and priorities to achieve our goals.

On the last slide we have our net income. The growth on a quarterly basis or adjusted net income. Over the year we had BRL153 million expenses with the integration process out of which BRL43 million are not cash. They are assets written off. BRL119 million are cash reimbursement. And if we adjust P&L of the year and integration cost will come to BRL215 million as net income with a margin of 1%, 2.70% under the same concept in the fourth quarter.

(technical difficulty) consolidated net growth, as mentioned before, continues to be very well under control. Net debt EBITDA ratio was close [1.2] therefore we are improving our trend in the fourth quarter.

As mentioned before by Eneas and within our values of humility, determination and perseverance, discipline and emotional balance (technical difficulty) growth brought us to a near level in which we added in square meters of selling area something equivalent to more than 350 soccer fields. And over the same period considering all the hindrances domestically and abroad (technical difficulty) have changed position and taken leadership for 8 quarters out of the 18 we're all together keep on playing in the future. I would like to thank you all and invite you for the Q&A session on the Company's earnings in 2011.

Thank you. Now we open the floor to the Q&A session. We kindly ask you to ask all the questions at once reading the Company's results. (Operator Instructions)

[Lucas], BTG Pactual.

Good morning, everyone. I would like to talk about retail EBITDA margin. It was very strong this quarter. And I'd like to better understand the potential considering gaining out particularly related to gross margin. I would like to understand what's the percentage of total synergies of G&A that you believe that were achieved in the fourth quarter. Thank you.

Thank you for your question. I'll give the floor to Lucas. What is your last question, so you want to know how much of the expense is of G&A, right? How much was captured in the synergies and there can be a recurring item.

So, the first half on the gross margin will be answered by Roberto Fulcherberguer, Vice President of Operations in the commercial area of Viavarejo.

Good morning, Lucas, thank you for your question. In terms of gross margins, we have been having a strong growth over 2011. In our DNA, we have a constant search for margin improvement on a sales basis. That's part of our gain.

When it comes to the continuity of the revolution, I can tell you that our current level is very aggressive. That doesn't prevent us to keep on constantly seeking improvement in our business, be in terms of pricing or any occasional negotiation.

So, we do understand that we are on the right track and we are also seeing constant growth in the business. Now, I'd like to give the floor to Padilha, so he can answer the second part of your question.

Thank you for your question, Lucas. In terms of expenses over the fourth quarter, the main accounts that contributed to improve our expenses in addition to gross margin were the whole integration process under the same system platform for logistics. We also had IT gains. And particularly in the fourth quarter, we also had positive impact. Thanks to the seasonal impact of the fourth quarter, we had higher sales compared to the average of the three other quarters. That's what you can see in the fourth quarter.

We're not given synergy values -- synergy amounts. I think we can expect to provide more details on the whole integration and synergy process during the Investors Day. New amounts are being disclosed so far.

Can we assume that the amount captured so far is very low compared to the whole amount?

No, Lucas. This is Raphael. We believe that the bulk of the synergy has already been captured. So what will really remain for 2012 is a stronger adjustment; however, there are a couple of things that can still be further improved, considering [CA, GP, TAD].

So we could have captured synergies, but because of TAD the couple of things will remain for 2012. Just to remind you, we had some flexibility of capital the agreement, and that really helped us over the year. If you ask us to what extent we have synergy for 2012, well, the bulk already happened in 2011.

Lucas, just to highlight, this is Hugo. When it comes to new synergies or effective current synergies, all you have to do is to check EBITDA curve over the quarters and annualize figures for the results. There is a lot of consistency.

Thank you.

Daniela Bretthauer, Raymond James.

Good morning, everyone. Before I ask my question, let me just make a comment. Analysts, well, they always ask a lot of information that can be very annoying to the Company. But I'd like to give us some compliments because the full quarter release on both sides provided us with a lot of details, a lot of explanation on nonrecurring items and growth of the lines.

So I'd like to begin by praising you, but what I'd really like to know is the income statement of Nova Pontocom. But I believe that you'd be disclosing that to us in the future. Now, let me ask you my question.

First question to Quiroga. You've mentioned that Nova Pontocom had BRL27 million, that was the result in 2011. And I'd like to know if that was earnings, Quiroga, or did you have any tax credit or anything that led you to this figure BRL27 million. So my question is, could you comment and tell us what the EBITDA margin was in order to provide these results because we already know the sales. It was in the release.

Daniela, thank you for your question. Let me try to address your top things. First, results, okay, you're right. Even when it comes to tax opportunities that we would have over the year, it was related to that quarter. So, there are no tax figures that improve results.

So several analysts ask this question. They want to know more about the income, profit in this scenario, but we both would have seen that it's very unique, and that's why our results were so consistent. So, we did have good results, good profitability, and strong growth last year.

We're not disclosing some indexes, yet -- or listed company, but we are celebrating because we are improving our margin. Our margin has been on a continuous improvement process. And this is also being held by synergies with the Group. We still have a lot of synergies to be capped into in the future, marginalized, but our margins are --

Gross margins. Quiroga, gross margins.

Over 25%, just to give you some time, but another cool thing is that we have improved several categories. We started 3 years ago with Ponto Frio in four categories and today we already have 24 categories. We added several categories of high margins just last year, books and furniture, and we are beginning to work with Casas Bahia and we are learning to work with furniture the master's of this category in Brazil. So there are plenty of opportunities in new categories, improving margins, stronger synergies, but great achievements.

Okay, now I have two additional questions and I'm focusing on the Viavarejo because Grupo Pao de Acucar's good whose performance was just outstanding and there are no so many questions to ask, as I see it. So, Viavarejo has spend BRL153 million in the integration between Ponto Frio and Bahia. I'd like to know if there will be further expenses and what is the order of magnitude for 2012 or the priority, and what do you expect to use as CapEx to open these additional 60 stores?

Daniela, thank you, this is Padilha speaking. We decided to provide details on expenses in the release, BRL153 million and BRL119 million were disbursements and that would -- well, we heavily focus our integration expense like the migration process simplifying our operations, unifying the back offices, IT and logistic consolidations.

We think this is the whole process in 2011. In 2012, we believe there will be there -- well, low expenses. Obviously, there will be something but nothing compared to what we had in 2011. So I'm not going to give you any figures, but there will be a significant reduction. And to call for an expansion, I'll give the floor to Jorge, the Vice President of the Company to make his comments.

Hello, Daniela, this is, Herzog. In terms of the investment and the guidance, well, everything will be disclosed in GPA Day, but I will tell you right now is that we have the forecast for to open 70 stores this year. In addition, there will be something in terms of renovations and store conversions. As Raphael said before, that's for the new Ponto Frio model. So, during GPA Day, we'll be providing the tool to investment and guidance.

Last question, if you allow me to do that. Herzog, what about the geographic footprint of these stores? Will they be more focused on existing markets? Of the new stores opening in 2011, I believe half of them were in Ceara or the North East. So can you give us some flavor when it comes to the geographic footprint of the new stores?

Daniela, our store opening half this year with focus in the South East and Midwest and the other half in the North East, but we also will be introducing our investment plan and expansion plan during GPA Day. Just bear with us.

Thank you, thank you. I try to live up with this curiosity.

Gustavo Oliveira, UBS.

I have three questions. The first question has to do with depreciation for GPA Food. There was a significant increase over quarter. I'd like to know if that's a new level of depreciation or if there was any non-recurring effect?

Second question, it has to do with the food factor or productivity index. There is a charge in the release at the very end showing gross sales by square meter. And clearly we can see that Extra Supermercado sales improved almost 15% per year, may be the effect of conversions that are very positive. However, when it comes to Extra Hipermercados productivity was virtually stable. And in Assai there was a slight drop. If possible I'd like you to comment on what is driving productivity or why is it too stable and not increasing if we consider high inflation rates, particularly for Assai?

And the third question, a more global question may be more targeted to Viavarejo. Could you believe that the financial expense as a percentage of revenue could go down compared to the current level?

Gustavo, good morning. This is Filippo. Thank you for your questions. Answering your first question. Actually we had an increase in depreciation as a result of intangibles that were recognized related to this association of business with Casas Bahia. For the last quarter this was longer because the review of the business was made 12 months in the last quarter and full year acknowledging the last quarter BRL130 million.

And I think we should have this for three additional years. But that's an annual figure, not something considered on a half year basis or quarterly basis. So considering the amortization of these intangibles, I don't think we have to go deeper during this call. But please feel free to contact us later on. Thank you.

Gustavo, this is Tambasco. The huge gain this year is actually in Extra Supermercado and we improve these stores to better meet our customer's needs. And we do not see the same in supermarket. In supermarkets we have maintained productivity in indicators. That's not a drop that shows [pinches] in supermarket sales performance, quite the opposite is just that the markets have share gain particularly the vis-a-vis our main competitor.

Obviously, in this sector competitiveness is stronger. This too have the challenge to go deeper into our performance and improve our performance, particularly for non-food, that it's the market level, and that is when we find great opportunities to make a difference and a higher impact to meet our customer's needs.

In addition, I also think we are very well structured in these stores. And perhaps our model today is even more compact for this kind of store and that allows us in the future to have improved performance in the index that you mentioned, sales by square meter.

Gustavo, this is Hugo. Just to the comment, because [Donito] is not with us, in highlighting what he mentioned before about hypermarket, this is for total stores. We have --- we opened more five hypermarkets last year that are still in the maturity process. As for Assai more specifically, the new model that we're opening is significantly greater than the average of our current Assai and it's still in the maturity process. So when we check same store sales results are very different, but very positive.

This is Padilha, I'm going to answer your third question about financial expenses in Viavarejo.

Of course, it continues to be one of our top priorities. And in general terms, we have been able to reload and extent the cost of our debt and this will be done together with the GPA staff, and this gives a major contribution to the drop in interest expenses, financial expenses. [Selici] everything points to a drop from the two digits down and this should bring about a major benefit to us as we continue to reduce our non-interest-bearing installments and increasing our interest-bearing installment sales and the market should bring opportunities to 2012. And if we put together the three points, it seems to me that it is either a maintenance or a downward trend for this cost for 2012. But it depends on all these factors occurring at the same time.

Could you adopt a more aggressive commercial policy to increase your market share and may be sacrificing a little bit on the financial side of it with any market share. Could you do something like that?

I am going to talk about the financial view point, okay. Whenever we work we never re-interfere with our commercial policy. The financial area works correctly with the commercial area so that we may not have any negative impact for the client and vis-a-vis competition that Roberto will be talking out, Gustavo.

The financial department had to do with the pricing of the product to a certain extent, but we do not find any reasons whatsoever so far to waste or to sacrifice our profitability in order to gain market share. We have been gaining market share preserving our profitability. Thank you.

Thank you, Gustavo.

This is Andrea Teixeira from JPMorgan. Thanks for the very detailed explanation. I have three questions. You company --- do you see an acceleration of sales in the first quarter because of minimum wage and tax incentives in the white line? But do you expect these incentives to be renewed next month and do you see a slowdown in white line sales, or maybe the increase in credit? Maybe by the end of the year you had a reduction maybe in Viavarejo. Because of acceptance of the first credit line, I would like to know if you have resumed the same proportion of Credit granting that you had before?

And is there any risk of having pressure because there is a minimum wage, so there is collective bargaining. And maybe you could update us how would that impact your results, CBD's results. And I would like to have your guidance. I think you said that you will only give guidance in your Investor's Day. But in the last call you said that it would be 6% to 7% for food. So could you give us an idea at least for food for CapEx?

This is Roberto. I will start by answering the tax part of your question, the IPI. Regarding the beginning of the year first as Viavarejo, the beginning of our year is aligned with our objectives. We are reasonably satisfied with January regarding the IPI tax. Whether it will be renewed or not, of course, this a decision that depends exclusively on the government and we expect it to be renewed. However, this is not under our control.

You want to know whether there is an increase in demand for white line? Yes, the reduction of the IPI has brought about an increase in demand. However, things are rather balanced, the white line versus consumption of other categories. And I would like to give the floor to Padilha now. He's going to talk about credit in Viavarejo.

The demand for credit is unstable. The three instruments for financing that we have at Viavarejo which are the Ponto Frio card and the Casas Bahia card and CDCI have been kept stable with no limitations, major limitations whatsoever. And the variation is due to seasonality. During the last half of the year, there was a growth and it is proportional to sales. And this is rather seasonal. So we don't have any problem in this area at all.

Are you more aggressive? Are you more -- because I remember that you were more competitive than the competition even when you charged interest. And now it seems to me that you are keeping the same commercial policy your credit policy for new credits, of course, for new credits but you have been maintaining this policy.

We intend to be more aggressive because of the drop in interest rates. This is Roberto again. This is part of pricing management and we have the same level of competitiveness that we had over the year. So we see no major variation in pricing management. Some retailers need more sales but we have been dealing with this in a very natural manner that is to say this is not affecting our profitability or our pricing.

In your first answer you said that you're not giving any guidance mainly for the IR people for Hugo and Vitor, non-food growth for this year. Are you giving any guidance yet?

Andrea, good morning. This is Hugo, thank you very much for your question. As we said right at the beginning of this call, we will give guidance during the GPA Day which will be held in March for all the areas. During the last board meeting that we had with FIC, a partnership with Itau Banks we had no slow down in credit operations at FIC and neither did we see any increase in delinquency. We saw rather a drop in delinquency and we're going back to level similar to 2010, which is a very positive trend for us to continue to approve credit.

But Eneas had already talked during the call and but I would like to reinforce. It's the Group's position regarding the credit granting policy is that should be balanced. Balance between interest-bearing and non-interest-bearing installment sales and talking about payroll expenses. What we see is the minimum wage bringing about a positive impact on consumption something like BRL65 billion and BRL80 billion coming on board in the Brazilian economy with these resources.

And regarding pressure on our expenses. It's important to say that for three years already our salary increases are real around 1% or 2% every year. And you do not see any debt our expenses. Thanks to the hard work that all our businesses are doing in the sense of increasing productivity. And this will continue to be strengthened during 2012.

And lastly, about the CapEx guidance. Also during the GPA Day we will be giving guidance. But as announced before this is a year that we are resuming growth. And this is what Eneas said during his opening remarks. And we intend to keep growth over 7% in terms of square meters in the food area.

Thank you very much. And thank you for the explanation. And I will be looking forward to GPA Day.

Tobias Stingelin, Banco Santander.

Good afternoon. I know you're not going to give us any guidance today. But I would like to understand the following. The margin achieved by Viavarejo in 2011 was because of the high end that you mentioned in terms of the range. And it was rather different from what we thought it would be at the beginning when you had the first Investor day to talk about Globex. The gross margin went up quite a lot and operating expenses not necessarily dropped as much as we expected. The results is good. It doesn't change things very much. But conceptually speaking has this changed, has -- should we forget about the possibility of a slash in your expenses or could that still happen as a consequence of the synergies that you're going to talk about and after the project's approval? Thank you very much.

We did -- the Investors Day of Globex in October 2010 and we didn't give any guidance for our expenses. We gave a guidance for our gross margin, for EBITDA and for financial expenses. These were the guidance's given and they were all exceeded. And now I give the floor to Raphael.

Thank you for the question. I'm going to answer important and I will give the microphone to Jorge Herzog. In about the expenses, Viavarejo has two different business models. We have Porto Frio with FIC, in a partnership with FIC where some expenses and revenues go there. And then with Casas Bahia we have the credit model. That is to say both these revenues and the expenses stay under Casas Bahia. We have these two different models.

When we talk about expenses, we are working we are in a process of restructuring as was said that happened over 2011. But we must understand that Viavarejo is made up of two different business models. So Jorge will be answering your question.

Tobias, this is Herzog. Just first I want to say what Raphael said. First of all the comparison basis that we had for Globex was a Ponto Frio operation which is rather different from Casas Bahia so you have to take into account that we didn't have this credit of model and the furniture model and this is rather different between the two formats.

During 2011 we had a major integration process and the integration process was based on our trying to tap into synergies and that were implemented over the whole year of 2011. As part of the synergies we still capture in 2012 as well as new synergies that might emerge and that will give us a possibility to advance in some aspects that we are not doing it because we depend on the current decision in this respect. So we have been having an improvement in our expenses.

We still see opportunities, yes. However, they will not be of the same magnitude that we had in 2011. However, they will still happen in 2012. And, of course in our GPA day, we will be giving you guidance and talking about our expectations.

Thank you very much. And I would like to take the opportunity to talk about some other things. In the past it was said that this consumer finance company of Casas Bahia could look for a partner and then that you were going to have a committee formed in order to discuss that. I would like to know how things stand. Do you intend to operate the business as it is now or should we see this as part of the Casas Bahia business? We know that this is rather relevant first. And I would like to understand the terms installment, interest-bearing installments and non-interest-bearing installment sales.

This is Raphael again. In order to talk about the credit model of Casas Bahia, our board created a specific committee to debate this. And we wanted the Company to reach a cruising altitude. And we are not right now working with the possibility of sales in installments at Casas Bahia because we think this is part of the model of Casas Bahia. This is a model that is already there, well established, 57 years of history. And we believe it is important to start considering this as part of a business model for the specific format.

And now I would like to give the floor to Padilha about the financial results.

Basically what happens in the year when we talk about the reduction of non-interest bearing, non interest-bearing went from 57% to 47% on average. The average term of the non-interest-bearing, besides dropping by 10 percentage points in participation, it went from 10 times to 8 installments, from 10 installments to 8 installments on average.

Now, on the other hand, the interest-bearing sales went up from 25% to 35% share or sales. And on the other hand, we see a share of sales like -- with instruments like CDCI around 30%, direct instrument credit and about 59% is on credit card and the CDCI or the credit, around 15%. We have these three instruments for financing and the current Ponto Frio and Casas Bahia cards, we have over 6 million cards in total almost 4 million active cards and 10 billion in credit already approved for this volume of cards. I don't know whether we have answered it.

Yes. I didn't get all the figures here or the numbers, but I will ask you later. But just a follow up question. As the consumer finance company is core of Bahia, is it already operating at the efficiency level that you expect or maybe would benchmarking with other operations don't you think there would opportunity to further increase this productivity and help G&A in general?

This is Raphael. Are you talking about the CDCR or the model as a whole.

Well, the model as a whole as far as I understand, the message now is the following. Well, in the past we only thought about selling. And now this is a credit and we are going to take it ahead. So I would like to know whether this became a priority in discourse, and whether you have already reached the efficiency level or if you have a higher target are you going to raise the bar?

The CDCI has always been a major focus of the Company. Of course, the Company adapts to the market needs. Some years ago, the Casas Bahia format didn't even accept credit cards in Casas Bahia and Ponto Frio, Viavarejo as a whole is adapting to the new realities of the market.

In the past, you had the booklet, the installment booklet and now cards and but this is a focus that we have on our credit granting operation from quite some time. And even when we talk about whether we should remain with this credit operation or not, we were already operating at full steam in this modality.

Okay. Thank you very much. So I believe you have already reached the level of efficiency.

[Hakeel Hodricki], Goldman Sachs.

I would like to have more details about the shutdown of the Ponto Frio stores. I understand they were stores that were not performing according to your expectations, but maybe you could give us a profile of these stores. Were they low income stores or were they street stores, is this part of the repositioning of the brand, and what do you expect from now on. Are you going to further close other stores or that's it.

This is Roberto, Hakeel. Thank you for the question. In fact the shutting down of stores is not linked to the format. It is linked to the profitability of the stores, the stores with very low performance, with high cost. So it was totally separate from our target. So we did a salvage plan for these stores. And we try to improve the performance of these stores, but many of them were not -- didn't have a good location or even the Street was not inactive. But Street was another kind of stores. So we shut them down.

There was a very low impact on our sales with a significant impact, a positive impact, on our profitability because they were really draining our results. In regarding additional stores shut down, we have to evaluate all the stores on a regular basis, but on our rater screen we don't have anything estimated in this regard. Thank you.

The Grupo Pao de Acucar earnings conference call is closed. And the Investor Relations Department will be available to you to answer any further questions that you might have. We thank you very much for your participation and wish you all very good afternoon.

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.