Companhia Brasileira de Distribuicao SA (CBD) 2012 Q1 法說會逐字稿

Good morning. Thank you for waiting. Welcome to the earnings presentation of Grupo Pao de Acucar's first-quarter 2012. This event is also being broadcast via webcast and it can be accessed at www.grupopaodeacucar.com.br/ir/gpa and www.globex.com.br/ir with the respective presentation. 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 are also available at their IR websites. This event is being recorded and all participants will be in a listen-only mode during the Company's presentation. After GPA's remarks are completed, there will be a question-and-answer session. At that time, 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. They involve risk, uncertainty, and assumptions and are based on economic conditions.

Forward considerations refer to future events and therefore depend on circumstances that may or may not occur in the future. 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 to Mr. Hugo Bethlem, Executive Vice President of the Company.

Good morning, everyone. First of all, thank you very much for participating in the call referring to the first-quarter 2012 results of the Grupo Pao de Acucar and guidances for 2012.

Here we have Mr. Abilio Diniz, Chairman of the Board of Directors; Eneas Pestana, Grupo Pao de Acucar's CEO; Raphael Klein from Viavarejo; Quiroga from Nova Pontocom; Jose Roberto Tambasco from Grupo Pao de Acucar Food; Caio Mattar from specialized businesses; in addition to Vitor Faga, Investor Relations Director; and CFO, Filippo and Claudia Elisa, and other officers who will participate in questions and answers.

Now, I pass the floor to Mr. Abilio Diniz, Chairman of the Board.

Good morning, everyone. Very quickly, our results are consistent. We believe they are very good, slightly above the market expectation. This has been a slightly more difficult year for sales and it's only natural. Everybody knows that there is a slight downturn in the economy, but we are confident in what the government is doing in Brazil. We do not see any dark clouds ahead.

We do not see families building up debt. We do not see any concerns concerning credit. The measures adopted by the government are meant to speed up growth and I believe we will get there. In the second half year, we will have better conditions. Right now, sales are a bit difficult, but the important thing is to snap up market share and this is what we are doing, we are snapping up market share.

Now, when the economy rallies, this extra share that we snapped will grow exponentially. This is important. And at the moment, we must cut expenses and gain market share and this is what we are doing. Once again, I'd like to congratulate the management of the Company, Eneas Pestana as the CEO and everybody who cooperates to the success of the Company. I think they are doing an excellent job.

Now, I pass the floor to Eneas Pestana, CEO of Grupo Pao de Acucar, to talk about the quarter results.

Good morning, everyone. It's a pleasure to be here with you to talk about the first quarter of 2012.

Let's look at the presentation on page 2, let's go straight to the point, and you will see that this will be a different core. And answering demand will be more objective and we will intend to go straight into questions and answers.

So, let's go to page 2 results of business from the first quarter, a very quick briefing of the results. Gross sales BRL7.4 billion, which in nominal terms was a growth of 11% despite the 9.3%. And Viavarejo, includes Pontocom, total sales were BRL6.3 billion (technical difficulty) growth of 9.3%, same store is 10%, consolidated BRL13.7 billion, growth of 10.4%.

Good gross profit in food, which represents 2.3% up or 2 percentage points up, 27% gross sales in non-food or Viavarejo, growth of 16.6%, 1 percentage point of growth in [LB]. Operating expenses in food were in line with last year at 18.6% of net sales. This year 18.5% in foods, 23% and last year 22.6%, there was a reduction of 0.6 percentage points. EBITDA in food is growing. We've had 7.4% against last year's of 7.1%; in non-food or Viavarejo 4.8%, last year 3.3%. And here we include the synergies expected for the year. This gives us profit before income tax of 43%.

Now, moving on to the next page, in the consolidated, it's important to say that the financial expenses were 2.8%. There was a reduction vis-a-vis last year of 0.2 percentage point and pre-tax profit grew by 152%, obviously including Viavarejo. Without Viavarejo, it would be 43% growth.

Now, relating to net sales, we had a net margin of 2% against 0.9% last year. In net profit, 1.4% after tax against 1.2% last year, so a growth of 25.8% since we had a tax credit in foods last year. This is why we have had a significant growth. So, despite anything else, the year starts with a very strong first quarter.

In terms of net debt, we reported BRL4.8 million against BRL3.8 million last year, so there was a growth of 1.2 times EBITDA to 1.5 times. So, it is absolutely normal. It's a seasonal effect for the first quarter, absolutely within what was expected, no surprises, no problems.

CapEx of BRL240 million were invested as follows, BRL190 million in foods and BRL50 million in Viavarejo and we opened a hypermarket, Assai, and we converted five stores to mini-market under the new brand. In the non-food, we opened 2 new stores.

Very well, now, being very brief, moving on to number 4, we had promise we would talk about the guidances for the year. So, let's do it. And as a single chart, talking about the Group as a whole, gross sales, obviously this is not a flat number. We are talking about guidances for the year. So, food, beyond BRL31.5 billion and non-foods BRL25.7 billion, which would give us consolidated in excess of BRL57.2 billion a year. EBITDA, we preferred to give you a range, obviously not to establish a number. In GPA Food, it was between 7.3% and 7.8%, and GPA non-food between 5.2% and 6.5% again incorporating Pontocom, consolidated between 6.4% and 7.2%.

Net expenses, which is a very important item for you to have an approximation of net income, we preferred not to mention it, but you have all the data for you to work it out. So, net expenses in GPA Food will be below 2.3% and in Viavarejo below 3.3%. Therefore, the consolidated will be below 2.7%.

As regards CapEx investments for the year, what we can say we have a cap value that was approved by February and announced of BRL1.9 billion, rounding up BRL2 billion, BRL1,976 billion for the year, but here we expect to invest BRL1.4 billion in food and BRL0.4 billion in non-food, which works out at BRL1.8 billion total investment for the year. This number can get to the cap that was approved by the shareholders meeting, but we expect to be around that.

Expansion, in terms of sales areas, with this investment of BRL1.4 billion will be between 6% and 6.7% growth of sales area, which will account in terms of number of stores between 70 to 80 new stores in food.

Obviously, we here include opening Minimercados and proximity stores and under Viavarejo we preferred not to mention the area talking to Raphael, because we believe there may be smaller and larger areas depending on the location, but in terms of store numbers which are very relevant to this segment, we are talking between 50 to 60 new stores within 2012.

Here, we have finished guidances and obviously if you have questions, IR is at your disposal to answer whatever questions you have. But most important is absolute trust on the team and support of shareholders and we want to exceed these guidances. Thank you very much and I turn the floor back to Hugo.

Okay. Moving on, we'd like to present to you for the first quarter of the year some of the outlook for 2012 in each of our larger businesses. So, I'd like to invite Jose Roberto Tambasco to talking about his expectations for GPA Food retail.

Good morning, everyone. GPA Food retail talking about supermarket and hypermarkets, like Abilio has said, we've had very sound performance not only in every format, but in every division where we operate. We've increased our market share. Sales have grown beyond what the market has shown.

Our focus for 2012 is to consolidate this model and to take it further, so that we can better meet the needs of our consumers. Under hypermarket, our focus is that of strengthening the multi-specialist concept, that is a one-stop shop, everything in a single store providing greater impetus to hypermarkets particularly in non-food where we've seen robust growth owing to stronger investments that we have made in these categories. For instance, we have done -- we have revisited this category approaching our assortment to fashion and this happened with the higher of renowned fashion stylists such as Marcelo this summer and new communication that was launched for this category with actress Camila Pitanga and therefore, textile is growing beyond market levels.

Still talking about hypermarket, our focus is to maintain the strength of communication. This has been a significant differentiator vis-a-vis the market. In addition, this investment is enabling us to streamline investments in advertising with all business models of the Extra brand and not only supermarkets and hypermarkets, but also filling stations and drug stores, et cetera. Extra supermarkets, which last year went through repositioning, the focus is consolidation of these stores and a great opportunity that we now have to expand this business to places where we already have the Extra hypermarket, therefore creating synergies with communication. This will enable us to move outside Sao Paulo and Rio de Janeiro state, where this model is stronger.

Another strength of our strategy is on assortment. Owing to the growing demand for a greater array of products, since consumers' income is increasing, we are expanding our assortment, particularly in categories such as organics imports, regional and exclusive brands, exclusive brands is already a strength at our stores, so that we can better cater to the needs of our consumers.

Add upon Acucar under these categories, we already report very strong growth and still talking about Pao de Acucar last year, our expansion was mostly focused on CompreBem. This year, we see more robust organic growth and throughout the year we expect to open another 7 to 8 stores.

Minimercado, now in the second quarter of this year, we will conclude converting the 700 stores of old model to this new model. We spoke to you about that. And we will resume the organic expansion of this model. And we already see growth beyond two digits.

Looking at all of these models and brands in retail, we have today a portfolio that enables us to have a presence in every region in the country with stores that are better adapted to the different needs of each population and still talking about the differentiators that we have been seeking. We are reinforcing our investments to develop our people, our teams, particularly in qualification and skilled enhancement to leaders in the technical training of the personnel and customer service levels at our stores which has already been a differentiator.

And lastly, we have a very strong focus on exploring multi-channel opportunities, particularly regarding call to call, which Quiroga is going to talk about.

Thank you very much. Good morning.

Thank you, Tambasco. Next, I would like to Belmiro Gomes, in charge off cash-and-carry, today under the Assai division to address perspectives for 2012.

Good morning, ladies and gentlemen. Over the year 2011, Assai generated positive results in the first quarter of '12 with strong results in growth. Vis-a-vis the first quarter of the previous year, we grew BRL25.2 million with net sales, from BRL827 million to BRL1.35 billion in the first quarter, out of which BRL28 million came from same-store sales concepts.

We also grew 30.8% in gross income and also gains in the margin. It came particularly from expanding protocol in Assai and adapting product assortment. The margin evolution came as a result in improved margin with a new mix, lower cost spread, higher inventory levels in Assai, and also lower breakage. Also closing, bakery and butcher's, these changes allowed us to have more competitive prices compared to what we did previously and we also had an increase in our margins.

Lower costs led by increase in sales, not to mention addition of expenses, generated 1.9 percentage points, also highlighting employee sales from 35,000 to 45,000 on a quarterly basis growing 28.4%. As a result, there was an evolution of 262% in the EBITDA amount from BRL1.3 million to BRL3.8 million in net sales. We also had significant improvement in our inventory turnover and more cash sales with a lower need of working capital. And therefore, the net financial result for Assai moved from BRL17 million negative to 8 million negative improving BRL1.28 compared to net sales, from BRL30 million negative to BRL21 million positive, but BRL15 million net income with BRL9 million net losses compared to the same quarter of last year.

In 2011, we also had a new store format for Assai, an upturn to expand the business. The new units, now, we have larger selling area with larger inventory capacity allowing us to further dilute expenses and improve the level of inventories. For 2012, we are very much focused on expanding organically.

We still opened 12 new stores under the new format. And to ensure expansion over the next three years, we'll try to open 60 new stores over the next three years accounting for approximately additional 300,000 square meters in selling areas or 256% increase compared to what we have today.

For the next quarters, our expectation is still to maintain improved results compared to the previous quarter improving gains coming from internal adjustments, when it come to lower expenses. The market has proved to be very receptive to cash-and-carry. Successive restrictions having [trucks] regulations in several capital cities have improved logistics when it comes to door-to-door delivery favoring the model vis-a-vis the traditional delivery model.

We also have attractive prices, very well accepted by end users and particularly small merchants. The increase in the [income produced] channel as a fast supply channel, therefore, optimizing the working capital and grow inventory needs, good acceptance by end consumers, and also growing demand through other channels brings an extremely favorable scenario to Assai both in years to come and also to improved results this year.

Thank you. Good morning to everyone.

Belmiro, thank you for sharing your outlook. And next to share about the next division starting with brick-and-mortar's I would like to invite Raphael Klein to address the outlook for the second-half 2012.

Good morning, everyone. I am here speaking on behalf of the evaluation of brick-and-mortar stores under out of new tablets by your division. We believe that first quarter of 2012 has proved to be good. We manage -- well, last year, we had losses this quarter and in the first quarter we already have some profit, some income within our expectations and our plan. We are growing in same-store sales, where we believe this is satisfactory for us.

However, we also believe we have a lot of room to improve and grow organically. Therefore, we have been focusing both the Casas Bahia division and Ponto Frio with organic growth, very aggressively will be moving from 50 to 60 or opening 50 to 60 stores focusing in the northeast of the country under our Casas Bahia division and increasingly focusing in malls with Ponto Frio. We have a new store format and we believe this new concept is close to be concluded with a natural evolution.

We firmly believe this new concept and at the same time, we have a special app for street stores for Casas Bahia and this will be rolling out over 2012. And this will help us to increase same-store sales area strongly and also with strong organic expansion focus in the northeast and also in malls in the Ponto Frio division.

We are processing to capture synergies, and over 2012, we'll be able work on these synergies on an annual basis, constantly focusing on new synergies both in Ponto Frio and also Casas Bahia divisions working hand-in-hand with Quiroga, our colleague from Pontocom trying to get or to find out how we can improve and make use of our resources in the Group as a whole.

In the funding or capture curve, we've been evolving. In some processes, we believe that the new distribution centers will be hybrid under the hybrid model and this will further help us to dilute our expenses and you will keep on focusing very strongly in gross income as we could see the evolution in the first quarter into --- or compared to the previous quarter in 2011. We also have a big project for Viavarejo as a whole. It is a culture project. The culture project is focused on profitability. The culture is extremely important for the company. However, we believe it also should add value and bring more profits. Therefore, we are speaking of personnel and culture and we are also speaking of the reason that way of the evaluation, so we can issue growth satisfactory not only in the first half of the year, but also for the Company for the future as a whole. So, that's the mid to long-term basis project.

We believe the first cycle is about to be concluded in November, and then later, we can expand the culture cycle for the next two years. So, we are speaking of 2013 and 2014 and with its culture process we can make sure we have the right people at the right place and ensuring the business over longevity of the Company. In 2012, we are focusing on cash generation. This is really helpful for the business. This strengthens the business and we can perfectly lower our financial expenses once we have a very challenging guidance to achieve.

Now, CADE or CADE, just to give you a timeline, we are in the 28 month ever since we started a process of CADE. One of our competitors was very or join after the merger and the process was already approved and this gave signs that CADE is working on our case and we are very bullish in terms of having CADE's approval as fast as possible. So far, we don't have a deadline for CADE's approval, but we are confident that we are very much in compliance and submitting reports as required by CADE.

For 2012, we believe that the first quarter give us very good signs and we are heavily focused on sustainable results for the Company as a whole being very realistic. And we know that the market has given us signs that we have to be closer and closer to our business lifecycle. So, we'll do everything in our power to deliver the guidance for 2012.

And now I'd like to give the floor to Hugo Bethlem.

Raphael, thank you very much for sharing this outlook and in order to close this presentation and conclude with non-foods, I'd like invite Quiroga in charge of non-foods through e-commerce.

Good morning. When it comes to another protocol, I'd like to give five highlights. First, consistent work in order to categories. We are in three domains, Ponto Frio, Casas Bahia, and then keep focusing our sales of the main five categories, electronics, [wide line], telephony, IT and furniture. Please note that this move happens in parallel as we maintained leadership in these categories. Second, we have deep actions with other groups -- companies of the Group as Tambasco and Raphael said we want to have best multi-channel group in the country in order to deliver an increasingly better purchase experience.

Third, we want to grow higher than the market with profitability. That's a very challenging promise considering the market conditions, but last year we doubled the market pace with profitability.

Fourth, we want to reaffirm our commitment with customer satisfaction, that's a constant focus since the beginning of our operations fully aligned with our brands DNA or has the peak of customer satisfaction concerning our services in the first quarter, not only when it comes to purchase frequency, but also several market indicators, EBITDA, for instance. We were awarded as the best service, customer service [protocol]. We are not listed in higher complained rates.

And lastly and fifth, I'd like to show our focus on our personnel for GPA. We are trying to retain our talents and we have a new compensation model. This is focused in adding value and generating cash.

Please note that we managed over time to attract many talents to our Company, people who are passionate about e-commerce and I'd like to thank them and congratulate them for the great job. Basically that's it.

Thank you, Quiroga. And now I'd like to give the floor to our investors and analysts, so they can ask -- may ask questions now.

We will be opening the floor to the Q&A session. (Operator Instructions) Daniela Bretthauer, Raymond James.

Congratulations on the Company's results. I would like to have more details on CapEx. Some of the formats for the new stores, so 7 new stores for Pao de Acucar, 12 new stores for Assai, but maybe you could also add information for GPA Foods. How many stores by format? And then I have another question, a follow-on question when it comes to -- related to the evaluation.

Daniela, good morning. Thank you for your questions. Tambasco will answer your question, so he can give you a breakdown for EBIT, Supermercado Extra, and Minimercado.

Daniela, for hypermarkets, we have basically 4 stores to open this year. One is already opened and we have 3 others to open. I already mentioned Pao de Acucar totaling 7 stores. For Extra supermarket, we have 8 stores. That's the forecast. And from Minimercado, our proximity stores, 50 additional stores.

And just another piece of information. What about geographies or geographical expansion of the divisions, will they be related to existing markets or do you have any plans to strengthen your footprint in specific regions? Could you elaborate on that? It would be great. Thank you.

For hypermarkets, well, last year we had two new markets, Cuiaba, (inaudible). We were not present before in those areas and we are also strengthening our footprint with an additional store close to Cuiaba, in Varzea Grande city, which is a neighboring city and are also moving to our cities in the Hinterland of Sao Paulo. (inaudible) for instance, we did not have a hypermarket there at that time. So we are also strengthening our footprint in Fortaleza. We have already opened our fifth hypermarket store in that market.

The hypermarkets not only are we strengthening our current market, but you're also keeping an eye on other more new capital cities like [Theresina] and Cuiaba had a lot of success and also other markets as prospects to operating markets. For Extra Super, as I said before, we are opening or we have a new perspective for growth moving away from Sao Paulo. In this case, we are already using the strength of Extra brands with smaller stores that we can improve our footprint. I mean, forecast recovery also getting stronger in markets in which we are not strong yet. (Inaudible) our share is not significant there or is still very little with a Pao de Acucar division. So, we are strengthening our position before we move into new markets.

Thank you. That's very clear. Now, I'd like to ask the same question to Viavarejo. I previously understood that while we were waiting for CADE's approval and maybe there were some restrictions to open new stores, and I was surprised when I heard of this number between 50 to 60 stores. So, my question is does that number depend on CADE's approval or you will be opening these stores anyway? Thank you.

Daniela, thank you for your question. No, this number does not rely on CADE's approval. CADE's initiative was related to closing stores and this has been -- we are respecting that very stringently. So now we will be focusing on our organic expansion opening from 50 to 60 stores over 2012.

What about geographies, can you elaborate of that, where you will be opening these stores?

Overall speaking, we will be growing with Bahia to the northeast with the three lines. We have already expanded previously. We opened new stores in Salvador and also Fortaleza. We are also expanding and we opened Bahia stores in the north region in Tocantins. And Ponto Frio will be increasingly focusing in malls under the new format or concept of Ponto Frio stores in order to provide a more pleasant business atmosphere to the stores. But Ponto Frio will be focused in the south, southeast malls and by year in the northeast and we opened the new store in the northeast in Tocantins.

Thanks you once again and congratulations for the results.

Thank you.

Tobias Stingelin, Santander.

I'd like to have a better understanding, for the [evaluation of sales] guidance. If we use around BRL27 billion -- BRL27.6 billion, would you be speaking of 6% growth for the top line of Casas Bahia? I know that greater than BRL27 billion with a simple math, I mean, we only have 600 in top line?

Roberto will answer your question about the guidance, but the dividend guidance obviously we work in order to sell more and more and exceed or overcome all the guidances, but Roberto will be giving you more details how we get to that figure.

Good morning Tobias, thank you for question. Actually, the guidance is the minimum. If you follow the first half of the year for the better reality, the minimum amount of the guidance this year, obviously, we also go for more.

What about same-store sales, how much of same-store sales is included in figure?

Same-stores sales in the first quarter -- this is Claudia. The first quarter of the guidance, the guidance for the year, sorry I'm just thinking about how much would be implicit in the 600 as top line low range, 5% of same-store sales is the guidance for the year.

Okay. Now, more specifically what about CADE in your protections in terms of margins? Do you assume business as usual? How can we have a better understanding to check if there is any upside depending on what happens with CADE?

Tobias, in this figure -- Tobias, this is Raphael. CADE, over the year we requested some flexibility for APRO and CADE. Well, they responded to us in order to change our stores. CADE has been working on that and we'll be working hand-in-hand with CADE in those initiatives and I can tell that many synergies have been captured. So, we do have some synergy, particularly for logistics. And I believe that's the main challenge we have in order to capture synergies. And this is part of APRO, so we are just expecting CADE's approval in order to have logistic synergies. But the bulk had already been captured in 2011.

Thank you. Can we have the EBITDA breakdown for the first quarter to see what was retail, what was financial services, so that we can sort of understand the evolution of earnings of Casas Bahia?

Tobias, I am going to pass on to Vitor and he can contact you to give you a better explanation.

Tobias, we do not have this breakdown -- this formal breakdown but we can debate the main areas that make up EBITDA.

Well, last question, I think we do not have the income tax guidance, because it has been very volatile. Can you give us a reasonable tax credit by business or consolidated for the year?

Tobias, hi. Just to give you a position, the trend is for us to continue with 34%. What happened was that we -- owing to the restructuring, we had a breakdown of expenses. We have number of stores that closed down and we incurred a few non-deductible expenses and we had to revisit our accounts. So this affected the income tax, but this is localized. It's not a trend and there is no trend for our volatility. So, we could use 34% for the year, around 30% would be reasonable. Well, remember that for the consolidated, we are talking about 28% into this benefit year.

Well, thank you very much. Congratulations.

[Droma Maeja], BTG Pactual.

Well, the first one is about net expenses vis-a-vis revenue, we see a reduction -- very strong reduction, but this was partially offset by an increasing Viavarejo. I'd like to understand even with lower interest rates this came about, was this merely an increase in the discount of receivables or is there anything else that you would like to point out? This is the first question.

And the second is I'd like to take the opportunity that Belmiro is here to talk about the medium- and long-term strategy of Assai. I'd like to better understand what sort of representativeness of the business does Assai carry? Does he have any study about that the productivity of the store? What can even improve in terms of sales per square meters? Anything that you can talk about the future of Globex, because it was -- Globex had a very important performance in this quarter, so if you could talk about that, that will be great.

I understand. Sure, I understand that your question -- the first part is about Viavarejo and the second is about Assai.

Exactly.

Okay, Claudia Elisa is going to talk about Viavarejo.

Good morning, Droma. This is Claudia Elisa. So, specifically when you look at financial expenses, we see a drop here from 2010 -- 2011 to 2012, but in fact you are correct, the impact that we had in the first quarter 2012 compared with the first quarter of 2011, which impacted the percentage of the net result vis-a-vis the net revenue is owned to the greater discounts of receivables owned to the participation of cards, you will see here a chart, slide 12, in which we show the participation of net sales and credit card sales and you will see from one quarter to the next to this year, credit card sales increased by 5 percentage points. This is -- this impact the first quarter last year against first quarter this year. Okay?

Okay, great. Thank you.

So, I'll pass the floor to Belmiro.

Hi Droma. Thank you for your question. So, talking about productivity, we have already come a long way in terms of sales per square meters of 18% vis-a-vis last year and this had an impact on sales per employee, so there was a strong adjustment within Assai as we removed a few sectors that were specifically directed at end consumers and we increased productivity in terms of expansion.

Also adding to what Daniela said of the 12 stores that we projected strong growth in the northeast and southeast. The model has experienced great success and there are difficulties in logistics, for example, the traffic of vehicles has really dropped the cost of door-to-door delivery up. And the other people I have acted as distributors and in Sao Paulo, Greater Sao Paulo, Rio de Janeiro and Salvador, this has happened where various -- the small merchants around and they do the supply and lot other urban centers, which are far away, where the delivery cost is higher.

So, we have this outlook of 30 new stores and they will be larger. That's a different format from what we had worked in. The outlook is very optimistic not only for the next three years, but longer, because the model has been very well accepted. Demand is growing particularly among small merchants that have been supported by (inaudible) and they have improved their use of working capital of inventory turnover and this is important for them for the small merchant.

Thank you very much, Belmiro. Perfect.

Andrea Teixeira, JPMorgan.

I'd like to understand -- better understand what Claudia Elisa said. I really liked what she said first of all. Congratulations on the change with the evaluation in the case of the CFO. So I'd like to talk to you, Claudia, about what you said about the increase in receivable securitization. So, I'd like to understand the mix, because you've had a very good efforts to cut the percentage duration of non-interest bearing sales. And I'd like to understand to behavior year upon year.

And another question about this is the behavior and I've seen in the press of the behavior of credit and I'd like to understand what happened with the FIC, if you could give us some idea of what you are thinking about credits from now on?

Hi, Andrea, how are you? Thank you for your question. Well, there are several parts to your answer. When I spoke quarter against quarter, I spoke about the amount of the portfolio and this in terms of money of financial expenses, a greater impact quarter upon quarter. But when we look at our credit card sales total and understand what bears interest and what doesn't, there was no change.

If you look at quarter upon quarter, we've moved up about 13 percentage points in interest-bearing. So, it's important that you record that. And this, I believe, that partially explains this doubt whether you had any doubt about the flexibilization of number of installments.

Could you pass those numbers to us, because in the past, I don't know whether you can reveal that?

I'm going to talk to Vitor. The best way for us to organize this is to get the information. And I understand that in the previous calls, I do not participate as CFO, but I participated as in my other position, so I will speak to Vitor and he will have a one-on-one with you.

Okay. And then as regards the outlook for credit or concern is that the press is showing default, particularly Viavarejo is very, very susceptible to this condition. We do not have any impact of default on our managing portfolios, either as regards what we monitor the FIC partner or default is absolutely under control. There has been no variation, no fluctuation whatsoever. So, I believe this is a piece of good news and it's important that you record that. Since the press is talking so much about that, it might stir some concern among analysts.

And as regards what we see in the government measures and likability side of the opening, we understand that these openings will help to boost employment, available income, and lower interest rates will cause income to be better used to pay installments. And obviously, there will be more income available to consumption and our vision is very positive regarding this aspect. I don't know whether I have answered your question. Tambasco wants to add.

Well, about financial expenses, it's important to remember that the slight increase that we have had in the rate in the percentage of sales is also a result of other accounts in the release. For example, we have other assets and other liabilities where we have had a variation of 30 basis points when we look at the last quarter last year. Most important, this is not a trend. We do not expect to see this over the year so much further these guidances talk about the net expenses below 2.3, below last year's number.

Okay, perfect. I understand. And I think Claudia, for her explanation. I understand that in credit cards, you do not have any credit risk, but I was really surprised that FIC decided to increase the provision might be a slight impact. And I'd like to understand because there is -- there are people talking about the overall increase in default, this decision by the FIC, but I'd like to understand whether there is any impact on your managed portfolio of private label or is it just conservative position for the future?

Andrea, Filippo, I think you have answered the question. It is mostly a matter of management, internal management by the bank. What you see on the press is very specific and it does not affect retail and we do not expect this to change. So, it's exactly what you said. It's an overall management of the portfolio and it was a --

And the CapEx expansion of 1.6 and 6.6 area expansion, so how much has been invested in expansion and how much in systems and logistics, so that we can reconcile here our numbers.

Hugo speaking, Andrea. Investment in terms of land bank and expansion is around BRL600 million and the balance went to renovation of data stores, back office IT, logistics, et cetera.

Perfect. Thank you very much. Thank you for answering my questions.

Gustavo Oliveira, UBS.

I have a few questions. The topics are recurring, which is the operating leverage of the Company. The first question regarding administrative expenses, in GPA Food, we saw the dilution of this line, in the greater dilution, even greater under Assai. So it's proving that you are doing an excellent job in operation that conceptually is much harder, because already you have a much better management basis.

On the other hand, SG&A of (inaudible) exceeded sales revenues. So you do not have any leverage quite the opposite lack of leverage. So, I'd like to understand what happened in this quarter, because both companies experienced wage increases beyond inflation. At least this is what the release carries. Perhaps you had something non-recurring in Viavarejo segment. And still in the same question, SG&A of Viavarejo is 20%, beyond that of GPA Food. So, you have 20% margin of gains that you are leaving on the table. I'd like to understand whether this rationale is correct and why this is happening? This is the first question.

Thank you very much Gustavo for your question. Inside of Viavarejo, we have a business model that has affected us by a number of aspects. We've had collective bargaining that was slightly above our expectation and owing to deflation you see electro had a deflation of 6.85 on the IBG basis. This puts pressure on the Company, because we have to make more deliveries. We have to operate stores more efficiently and keep the team motivated, having deflation in main sectors, and this actually brings an efficiency challenge, but this is part of the business and we are seeking efficiency as a whole under both brands Ponto Frio and Bahia.

There is also the roadblock of the CADE and part of the expenses I believe that was Tobias question part of the expenses. We will have a reduction in expenses according to what CADE says particularly in logistics, which is where we are sort of suffering the consequences of deflation in electro. I am going to pass to Jorge who is going to talk about that.

Adding to what was said of the 20% above I think we must understand that this is our very different businesses. Electro, the electro business is -- has some situations, which impact expenses and expenses are usually higher. First point that I can tell you is delivery, so virtually most of our sales require delivery and this is an additional expense. All our sales teams work on a commission basis, so there is a growth in staff expenses. And we have another situation, which is assembling of furniture which adds.

I am sorry, but shouldn't these expenses come in the sales expense line?

Well, part of that is in sales expenses, but another part is under general expenses. We have both situations. So, we must take into consideration that the electro business expense should be 20% below that of GPA Food. It's not a correct rationale.

Adding to what Raphael said, we still have a number of opportunities, particularly after the CADE issues its resolution and in logistics. However, it would not be 20% to get to the same level of GPA Food.

Okay, it's clear now. The second question I have in regards to EBITDA guidance, the GPA Food margin is at 7.3%, 7.8%, last year was 7.6%, but in first quarter, you had a very strong margin growth in every business. So, couldn't you have a bottom of 7.6% perhaps trying to reconcile with Abilio's initial remarks that you intend to snap up market share? So, the correct sentence was it's important to gain market share while the market is difficult and you have these opportunities. So, would you be sacrificing your growth margins to try to gain some market share and the EBITDA would not be 7.6% perhaps lower because of that, because I am trying to understand the EBITDA guidance please?

Well, Gustavo thank you very much for your question. Guidance is a guidance like Eneas himself said. It's not a established number. And a few factors are important, first of all last year we had exceptional results, particularly in the fourth quarter, because it was a year as we said focused on introspection. We worked very hard on the conversion of stores that is existing stores, mature stores that had full sales and expenses, et cetera. This is the year of expansion. We are going back to an expansion plan and consequently the only certainty that we have at the startup is that the expense will be there and sales will come over time. So, this has this impact.

Second, if we look at the numbers of 2010 and 2011, we'll see a significant difference in the participation of Assai, even though we did not open too many stores last year. This year we'll have 12 new stores. So, the sales participation will grow.

And how much it will represent?

Well, it should move to the current 15% to 18%, so there is a dilution effect. What Abilio said is that this is a harder year and as a market leader our obligation is to keep the existing market share expanded. And we believe we have the results that we need to go chasing after this number.

Okay, thank you very much.

Juliana Rozenbaum, Itau BBA.

I have two questions. The first question is about Assai. The so-called theoretical change in the format going back and concentrate stores for processors, is there any implicit reading that you cannot be that profitable in the format, once you are working with the end consumer or any reading that this growth be cannibalizing other formats and therefore failing to meet their needs? If that's the reason, which format in Extra Supermercado would be meeting the needs of this consumer that's being orphaned by Assai?

This is Belmiro, Juliana. Thank you for your questions. The changes made to Assai were made mainly in order to seek higher volume of merchants. I guess for the end user, when you close some sector like bigger in [blue curves], that's because we believe that wholesale with the end user would not need all the buying at times, but end users are important especially with large volumes, festivity celebrations, barbecue weekend or a barbecue over the weekend that wholesale is knocked by bread, for instance, or daily groceries. So -- but the main target public is always corporations. Corporations give you a higher selling volume and you can see the results of the first half of the year and they also dilute expenses.

When you check EBITDA margin for wholesale, usually it is lower compared to retail, but you don't have too many expenses, because credit card is lower and you don't have to consider so many time sales. So, from EBITDA, I mean, you only have depreciation, you don't have so many expenses compared to wholesale and we are very strongly partnering with retail, particularly related to our formats and sometimes wholesale can be a good option for end consumers.

The second question about Viavarejo, I know that you don't disclose this information, but on a qualitative basis, I wonder if you could elaborate on the margin expansion this quarter. Does it effectively come from better profitability of the retail operation of Viavarejo operation or better profitability from financial product sales? On a qualitative basis, I wonder if you could breakdown these two trends. Thank you

This is Roberto. Actually, Juliana, this is within the pricing. Several things make a pricing -- product price, interest rates, the number of times or payments. So, pricing as a whole went to this improvement in margin.

What about changes for consumer assignment in terms of provisioning criteria or any kind of supply or product pricing, anything that would give a more explicit explanation through the change in profitability?

No, that's business as usual in retail. January was just outstanding and our pricing could also be different as a result and this also helped us to meet our goals.

Great. Just a final question, any chances of having this breakdown figures, is this part of your planning, I mean, improve the disclosure or should we stick to the consolidated figures?

Juliana, that's the pricing breakdown and that's the strategy of the Company. It wouldn't make so much sense to us to breakdown how we makeup the pricing. That's a strategy of the Company's figures.

Thank you.

Alan Cardoso, Bradesco.

My first question --?

Alan, could you speak louder please?

Is it better now? The first question I wonder if you could make comments --

No, no, we cannot hear you, I am sorry. Your line is not good.

Okay, let's start again. My first question, could you make some comments on the competitive environment supermarkets, retail, and to what extent, the competition in Pontocom affected sales in the first quarter?

Let me briefly raise your question just to see everybody if everybody got your question, okay. So, you want to know about the competitive environment right now, but for food retail and also non-food, right, and more specifically at Nova Pontocom, am I right?

Perfect.

Jose Roberto Tambasco will answer your question.

Alan, good morning. Alan, for hypermarkets and supermarkets, what has been feeling very clearly is stronger competition so much so that last year we had very strong market gains and losses by many competitors. So, today we can see a stronger power in terms of communication. However, over the quarter, we also improved our communication strengths. And I made some comments before. We expect to keep on investing in communications, investing in creative promotions because we are having good results. And it was no different in the first quarter despite our slightly more fierce competition compared to last year.

And now more specifically, I'm referring to our major competitors. So, there is nothing that new in the market. We know that some competitive strategies did not prove to be right and we are benefiting from their witness allowing us to gain more market share. And we expect it to be even stronger in our communication abilities.

Alan, this is Quiroga from Nova Pontocom. In terms of e-commerce, the competitive environment is really very strong. Last year, we had strong growth in sales vis-a-vis the previous year in terms of market share and it puts more pressure on competitors. This year competition has a very aggressive pricing attitude. In our opinion, this attitude does not make ends meet.

In this game, we are being as rationale as possible. This kind of game maybe we can have more breadth compared to our competitors together with a group. We are above anything here in the market when it comes to our sales performance. So, if you want to bring the game to our field, we can bring in for a long time, but we don't particularly like this kind of the field, but that's where we are right now. We are very being rationale in this field.

And last year with the same strong competitiveness, we managed to be competitive, positively competitive. And this year, our commitment is to keep on growing above the market with profitability. So, the market can be aggressive but will be rationale, try to address the circumstance and keep on growing as we have been doing above the market with positive profitability at year end.

Alan, good morning. This is Roberto from Viavarejo. As it goes for brick-and-mortar, I mean, competition is really fierce. We are working on our mix -- product mix in order to be more interactive and fight for the market and keep on growing our market share at Viavarejo.

Moving to the second part of your question now concerning Viavarejo, in terms of operating expenses, even if we exclude the gain from trucks, the line is lower compared to the whole year.

What is the trend, any forecast?

I am sorry, so do you want to know about other revenues in the quarter with a breakdown on truck sales? Would it have been better this quarter compared to last year?

I want to know predictability?

Predictability for this year? Congrats. Alan, considering the benefits of revenues from truck sales, well, whenever we have opportunities, we try to renovate our fleet. And the forecast is that we can have some thing down the road. And when it comes to any potential expenses no recurrent effects, maybe this will be lower again or compared to previous quarters.

Thank you.

Irma Sgarz, Goldman Sachs.

My question has to do with Extra Minimercado. If I got your answer correctly, you mentioned that you will be opening about 50 stores this year. I'd like to have a better understanding on how many of these stores have already been contracted or at least with a percept fight. So how far are you in entering into the agreement and when should we expect to see them opening? And I believe this will be more focused on the third and fourth quarter, right, could you confirm that? And just give us another feel on the experience with the format, do you feel this is working out or what are the areas you are particularly focusing on?

Irma, good morning. This is Jose Roberto. Irma, today, of the 50 stores to open, we have 19 ready to open. So, we are trying to convert the 60 stores, but we already opened 19 stores that have been previously contracted. And our plan is that over the third and fourth quarter, we want to open all the stores. So, this is within our schedule.

As to the experience, we worked on this conversion in the majority of the stores for the new model. This model is more attractive to this kind of purchase proximity stores, I mean and also stronger for perishables or daily groceries. And from the previous model to the current model, this will increase about 20% in terms of customer flow and we also increased the average ticket around 20% of both as well. Compared to other models, the increase will be approximately 40% is the revenues from these stores. So not only will it make our existing stores stronger, but we can also have a good perspective for expansion, because if you have higher revenues, you can also go for better sights.

Thank you. So, just to confirm 19 openings scheduled for this year, right?

No, 19 already contracted. So, we have scheduled 50 stores.

Thank you.

Grupo Pao de Acucar's conference call is closed. The Group's Investor Relations team is available to answer any other questions you may have. Thank you all for taking part in our call and have a nice day.