M. Dias Branco (MDIA3) Q2 2024 earnings summary

Executive summary

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

• EBITDA in 2Q24 was R$336.8 million (margin 12.8%), down 10.6% year-over-year but up 21.5% sequentially; 1H24 EBITDA rose 11.6% year-over-year to R$614 million.

• Net income for 1H24 was R$345 million, a 19.8% increase year-over-year; 2Q24 net income was R$189.9 million, down 12.8% year-over-year but up 22.6% sequentially.

• Sales volume in 2Q24 increased 11.6% year-over-year and 27.7% sequentially, with gains in pasta and wheat flour market share.

• Production capacity utilization rose to 71.9% in 2Q24, up 7.4 p.p. from 2Q23 and 11.4 p.p. from 1Q24.

Financial highlights

• Gross margin improved to 34.9% in 2Q24, up 1.9 p.p. year-over-year, driven by lower variable and fixed costs.

• Operating cash generation in 2Q24 was R$211.5 million; net cash position at 0.1x LTM EBITDA.

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

• Net cash position for third consecutive quarter; cash and equivalents at R$2.5 billion as of June 30, 2024.

• Net margin in 1H24 increased to 7.2% from 5.4% in 1H23.

Outlook and guidance

• Price adjustments implemented in June 2024 are expected to positively impact results from July onward.

• Initiatives to readjust expense structure and improve operational efficiency, including halting recruitment and reducing discretionary expenses, are planned for 2H24.

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

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

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