Atacadao SA

BOVESPA:CRFB3

Earnings Call Transcript 2022-Q4

[Operator]

Good morning, everyone, and welcome to Group Carrefour Brasil's Q4 2022 Earnings Conference. [Operator Instructions]

Now I'd like to turn it over to the company's CEO, Stephane Maquaire, to begin the presentation. Mr. Maquaire, please proceed.

[Stephane Maquaire, executive]

Good morning, everyone, and thank you for joining us again as we disclose our Q4 and full year 2022 earnings results. 2022 was a transformative year for Group Carrefour Brasil. We joined the big group and consolidated our leadership position in the country's food segment. Our market share increased 2.8 percentage points during Q4, which reflects not only the progress we've made in integrating the big group within which we've concluded the conversion of 15 [indiscernible] stores, but also our organic growth initiatives conducted throughout the year, such as the opening of 20 new Atacadão stores that way in Q4 2022, our revenue came to BRL 31.5 billion, up 38.2% year-over-year and an adjusted EBITDA of BRL 2 billion, 12% more than in the same period last year.

We've also made significant progress in our digitalization front, steadfast in the purpose of becoming the greatest food e-commerce in Brazil. In the last quarter of 2022, our total GMV grew by 80%, most importantly on the GMV food GMV front, which increased twofold during the period. Bank Carrefour grew by 32% in its client portfolio. And we've also launched the new Sam's Club card paving the way for the realization of one of the acquisition's potential synergies. On the ESG front, we've also reaffirmed our commitment to diversity and inclusion with a footprint with over 40% of our collaborators in leadership positions being people of color and the launch of the program, Grupo Carrefour com mulheres, which supports and empowers our female employees.

On the environmental side, we've also conducted a trace -- origin traceability initiatives and recycling initiatives, which were the highlights on that front. In the next slide, let's talk a little bit more about grading the Group acquisition. The integration of the group to our operations and the creation of a new company with a unique culture has been our priority over the last few months. I'm very pleased to report the progress that we made in that sense. We already converted 59 of a total of 124 stores as compared to 37 initially expected stores for 2022. That acceleration in our predicted schedule was possible, thanks to the huge commitment and execution ability of our PMI team and our business teams as well.

Our conversion -- or our stores performance post conversion has been quite positive, which makes us excited about the growth prospects for the future. converted stores to the Atacadão format had like-for-like sales growth in Q4 2022 by 27%, whereas those converted to hyper Carrefour grew by 17% in like-for-like sales. We understand that the maturity curve for these stores is expected to advance as expected, coming to about 70% to 75% of their potential in -- by the end of the first 12 months and 100% by the end of its first 4 years. We also saw major progress in the realization of cost synergies, 100% of our IT fronts and our IT systems in the front office have been integrated.

Our headquarter strategy has been already streamlined by 23%, and our negotiations with suppliers have been concluded and its benefit is expected to reflect on the entire fiscal year 2023. Overall, we have BRL 160 million in synergies reflected in our P&L statement for 2022. We'd like to reiterate our -- we actually have reiterated our synergy guidance of at least BRL 2 billion a year by 2025.

On that note, I'd like to turn it over to David, who will talk about our financial data.

[David Murciano, executive]

Thank you, Stephane, and good morning, everyone. Because you've already had the opportunity to see our results in the release that we released yesterday, I will just briefly go over the presentation starting on Slide 6, where we talk about our sales performance. Our gross sales have exceeded BRL 31 billion, with strong growth of 38% over the previous year. We had a 280 basis points gain in market share in Q4, which confirmed the trend that we've seen over the course of the entire year. We continue to grow by 2 digits in like-for-like sales both in retail, which came to 14% and in Atacadão with 10%. That strong growth against the backdrop of rather volatile economic situation reinforces the quality of our operations. On Slide 7, again, we see the capacity to absorb the big group. Our gross -- consolidated gross margin increased by 108 basis points.

Our SG&A has been naturally impacted by the accelerated store conversion. But excluding the effect from BIG, we would have an increase by only 30 basis points as a percentage of net sales. Here, it's important to point out that we have seen the impact not only of stores that have already been converted, but from all stores involved in this wave, this accelerated wave of conversions that's in our plan. During the quarter, we had 78 stores being affected. Moving on to Slide 8. We see that our EBITDA has grown 12%, coming to BRL 2 billion in Q4. All our businesses had a contribution. In Atacadão we were able to keep the strong levels seen last year. In retail and banking. We saw strong growth.

And lastly, we've already seen strong contribution from Sam's club with over BRL 100 million in EBITDA and a 7.7% margin. Now let's talk a little bit about each business separately, a little bit further ahead. Moving on to Slide 9. We see the result of increased indebtedness because of the acquisition of the Big Group, an increase in interest rates on our net profit, which came to BRL 550 million during the quarter. Our operating cash generation over the year is still very strong with an operating cash flow of $6.4 billion and a 16% increase in our free cash flow. In Slide 10, we see a significant improvement in our leverage level, which came to 1.2% EBITDA. Obviously, it's important to mention that there's a strong seasonal effect in Q4 in our business, but our performance during this quarter show our financial ability and our robustness.

Now I'd like to talk a little bit about the quarterly results of our business units, starting with Atacadão on Slide 12. Once again, we were able to meet our goal, keeping the pace of organic growth in 20 stores in 2022, despite the entire process of integrating the big group that's underway. Over the year, including conversions, we have reached the history of making Landmark of 58 new Atacadão stores. If we consider also Maxi stores, the growth of our Cash & Carry portfolio came to 93 new points of sales. Moving on to Slide 13. Gross sales in cash & carry came to BRL 20.7 billion in Q4 '22 with the contribution from our expansion and our like-for-like sales, which stood steady on 2-digit growth again.

On Slide 14, we see that cash & carry gross margin was still 2 digit -- at a 2-digit level, which is historical for Atacadão at 15.3%, reinforcing our ability to absorb the Maxi stores and to make progress in our operations since the integration. Our SG&A, which was naturally impacted by the convergence process, increased 132 basis points, standing at 9% of net sales. As a result, our adjusted EBITDA came to BRL 1.2 billion in Q4 2022. Now to conclude our Atacadão message, I'd like to point out the bridge we included on the left-hand side of the slide. you can see from it that virtually all that consolidated margin for the segment came from the conversion of stores and one-off effects. If we consider Atacadão alone, the EBITDA margin was virtually in line with the previous year at 7.8%.

On Slide 16, I'd like to go over retail. The results of this quarter and 2022 as a whole reflect the positive perception our clients have of our strategy and our initiatives to build loyalty over the long term as well as our integration of the BIG group. On the digital front. For example, we became leaders in food retail on the B2C market. In terms of private label, we reaffirmed our commitment to consumers and kept the prices of those items frozen in late 2022 and early 2023. As a result, our private label items are still at a very high sales level compared to previous years, totaling 19.2% of food sales in Q4 2022.

In addition to that, we had 17 hypermarket stores converted to the -- from the BIG label to the Carrefour label over the quarter, 20 over the year as a whole with consistent sales performance. Now on Slide 17, you see the strong performance in overall retail sales that we were able to maintain with 2-digit growth both on the food side and the nonfood side. Total sales grew 49.8% and like-for-like sales was 14% over the quarter. Converted stores saw overperform the average totaling 17% of like-for-like sales. Once again, our sales proved the importance of our format for our clients. On Slide 17, we see that the Carrefour label saw strong profitability and significant growth in gross margin with the effect of the integration of the BIG group, but also the improved performance of our e-commerce in the period.

Our SG&A expenses saw growth as expected. But excluding the group -- the BIG group we're virtually stable at 18.2% of net sales. Our EBITDA margin for the Carrefour Group, excluding BIG, increased to a strong 6.6% over the quarter, exceeding prepandemic levels recorded in 2018 and 2019. Now moving over to Slide 20. For the first time, we have a page devoted to our new club format. You can see on the left-hand side of the slide, the strong performance of this format's like-for-like sales over the previous period as a result of the initiatives we have been introducing since we closed the acquisition of the Big Group and the focus on growing the number of active members, which increased 22% over the period with those improvements in pricing and assortment in the industry.

We were able to reached a gross margin of 26.2%, whereas our SG&A expenses stood at 18.5% of net sales. Our EBITDA margin, therefore, was similar to that of Q3 at 7.7%. Although this is already an interesting level when compared to other food retail segments, we are confident in the potential for growth and profitability of Sam's Club as well as the generation of value over the long term. In Slide 22, we see that the digital channel has grew strongly. And in Q4, we become -- we became leaders in food e-commerce, both in total and in the B2C channel. Our total GMV grew almost twofold, coming to BRL 1.8 billion over the quarter or BRL 2 billion if we consider BIG as well. Our food GMV doubled most importantly on the digital channel for Atacadão, which accelerated over the previous period, accounting for 3.4% of sales in this business unit. 1P food operations grew 2.4x.

And as I mentioned before, we had a significant improvement on the e-commerce platform for Carrefour. Our nonfood e-commerce continue to recover significantly both on the 3P channel and the 1P channel as well. Now moving over to Banco Carrefour on Slide 24. We see that our bank continued to grow its earnings by 9% and despite a more conservative credit approach, the office channel and cross-sell channel continued to present solid results. And I'd like to underscore what Stephane has already mentioned early on, which is the penetration of our acquisition via digital channels, which increased by 31.9% over the quarter as well as APG Atacadão paying machine, which has increased almost threefold it's TPV versus Q4 '21.

By mid-December, we also launched the Sam's Club card offering benefits to the club's members. On Slide 25, we see strong improvement in delinquency, again, underscoring our data analysis capacity. -- the mediation -- the revenue from financial mediation increased 36% because of the stronger propensity of clients to fund themselves and also seasonal effects from the quarter. After a more volatile Q3, we saw adjustments in a few lending levers and NTL levels saw a decrease.

The -- over 30 sites saw a 0.7 percentage points improvement over the previous period coming to 17.5%. And the over 90 which also benefited from the increased portfolio improved 0.6 percentage points over the previous period. coming to 13.3%. In Slide 26, we confirm the expectations we relate over to you throughout 2022 and ended the year with over BRL 1 billion in EBITDA in keeping with the results of 2019 before the pandemic. In Q4, our profitability was still strong with a greater revenue and diluted SG&A reflecting on a BRL 431 million EBITDA and profit of BRL 234 million.

I'd like to conclude my statements here and turn back to Stephane for his final remarks.

[Stephane Maquaire, executive]

Thank you, David. The message I'd like to leave with you for 2023 is that we will remain committed to the quality and speed of integration of our operations with BIG. We still have a long way to go, but the results we've obtained so far have been very exciting. 2023, is a year where we'll continue to perform our organic growth strategy by opening Atacadão stores, seeking to consolidate even more our leadership in the cash and carry industry. We are very optimistic about the potential for growth of this business throughout the next year. Leslie, I would like to take this opportunity to say a huge thank you to our entire new Group Carrefour Brasil's team for their tireless work and amazing energy and the flawless result that we've obtained was only possible thanks to the unshakable commitment that you all shown.

Thank you very much, everyone, for joining us, and we will now move on to the Q&A session.

[Operator]

[Operator Instructions] So our first question comes from Thaigo Macruz sell-side analyst with Itau.

[Thiago Macruz, analyst]

So guys, I would like to ask something about the integration of BIG. What I've taken from our last conversations with you, there are questions about where this can come. And this has been a consistent question from us. On the other hand, I've been surprised by near-term challenges, at least for our -- from our standpoint here with Itaú from this cash burn standpoint, for example, it's been more challenging. So I'd like to ask about the speed of your gains in margin with this operation. Do you think that this will maybe take place any more in a slower pace than you expected? And a more objective question. You had a significant revenue from the bank in renewed rights. And this takes place every year in Q4, if I understand it correctly. Would you care to confirm that?

[Stephane Maquaire, executive]

Well, I will start by answering your first question. In store conversions, we are exactly at the level we expected and wanted. Obviously, we have to see that -- the majority of these stores have only 2 or 3 months of performance after their conversion. So many of these newly converted stores are -- have been included only after the end of Q4, but we are exactly where we expected and at the right level to meet our targets, both our 12-month targets and our 4-year targets. Now excluding those converted stores, it's true that the big group, excluding converted stores presents a challenging scenario for us. We've said it before that we received the big group after an over 15-month weight -- so it was right at the curve for Sam's Club, for example. -- with a very poor growth before that.

So it took a lot of work to reverse the situation, which we did, as you can clearly see with Sam's Club and all the big group labels that we are not converting converted such as Bon Preso and Omdia. On the Maxi side and the big hypermarket, there have been a lot of changes going on. These are huge brands on the IT system side and price positioning. And obviously, we have been investing a lot on these stores before conducting any conversions. So for us, it's natural to see some impact from these stores before were able to convert them. So before we conclude the conversion process of these 124 stores, we continue to see this impact, and we expect to have concluded the process by Q3 of this year. which is also before what we initially expected. So Q1 and Q2, we'll see -- will show the same impact as we've seen in Q4. David?

[David Murciano, executive]

Let's talk about the earnings of the bank. I can confirm that this is something that will take place every year. when you use the seasonal effects for the bank, we always have a Q4 with a much higher result than other quarters. So you're right, we do have this one-off effect during this time. But this year, it was stronger than before, which is also natural because we've had a significant growth within the bank in the last few years and also integrated the big group, which also helps to boost our negotiations with our partners. So in short, the answer to your question is yes, but this is something we should see every year.

[Operator]

So our next question comes from Felipe Rached, sell-side analyst with Goldman Sachs.

[Felipe Rached, analyst]

I'd like to go over the performance of our retail operations in areas affected by your competitors. Apparently, your operations performed really well. But could you give us more detail about what was the customer traffic in these stores? And if you could also give us some more detail about the gross earnings from these stores that would also [indiscernible].

[Stephane Maquaire, executive]

You're right when you say that the growth curve for hyper markets and retail on the nonfood segment of supermarkets has increased. On the other brands, the curve has been very steep throughout the year. And we've talked in the release for the first quarter. We have worked hard on that aspect for these stores, and we were able to obtain a very positive curve even on the gross margin side for all of these stores. So we saw a very steep curve without a significant impact, and we showed that in Q3 of last year. showing our competence on the hypermarket side. And the breakdown of that conference I mentioned, we do not see a significant impact. So -- the development of our retail arm has also been accelerated as you saw in the last quarter. I will let David complement my answer.

[David Murciano, executive]

Yes. Well, about the margins of these stores, we did- not see a stronger impact on those stores, as Stephane mentioned, we didn't see any impact in sales. So we -- it didn't require any additional effort in terms of more investment or more promotional sales. Sales stand at a healthy level. So we see them at the same level of other stores. And that also shows the strength of our supermarket model where customers look for the pure supermarket model as opposed to a hybrid model. So here, we have a hypermarket model, which is what these customers who do not have the store that they have before are now coming to us to have that shopping experience, which is a very particular one for those customers.

[Operator]

Our next question comes from Felipe Cassimiro sell-side analyst with Bradesco BBI.

[Felipe Cassimiro de Freitas, analyst]

like to talk a little bit about the competitive cash and carry industry. We saw a strong trend of consolidation and mergers and acquisitions in the industry, especially from your main competitors. So if you guys could talk a little bit about what the dynamics will be in these first months in terms of gross margin in the legacy Cash & Carry stores that will help us understand how things -- things will look like, especially seeing as it was slightly better than we expected year-over-year. So I think we can have an idea about where your heads are at in terms of legacy cash and carry stores.

[Stephane Maquaire, executive]

Granted the competitive environment on the cash and carry side has been very heated with a lot of competition, consolidation and new stores being opened we saw in the last quarter another increase in like-for-like sales on the digital side, and we're now seeing the same thing over the last few weeks -- we are preparing strong commercial initiatives for this first half of the year. We remember the 60-year anniversary of our Atacadão operations.

So we have a very strong basis, but we're working to exceed this really high bar that has been set considering the levels that we had in the last few quarters in like-for-like sales on Atacadão so we are very positive and optimistic. Yes and about the margin levels, as we always say, the Atacadão model is one that needs to keep its historical margin levels with everything that we can deliver to customers -- so margin levels that improved because of better conditions and better prices that will be reversed to reverted to like-for-like sales levels. That's what we can say about the trend on the Atacadão side, which is a very robust level and whose EBITDA levels have been maintained.

[Felipe Cassimiro de Freitas, analyst]

And just a follow-up. I'm sorry for not asking this before about delinquency levels. I remember that our prospects at least were of a peak in Q3, but the delinquency has already gone down in Q4, but the risk load has continued to go up compared to the previous quarter. So what can we expect in terms of a risk level in terms of delinquency for the bank in the first half of this year.

[Stephane Maquaire, executive]

Well, the risk level has also increased because of the integration of BIG. So from the accounting standpoint, we have this low risk low because of the new clients that we're integrating. But if I were to forecast, I would leave it at the same level as what we have today. I think that's reasonable to expect, considering the macroeconomic context, which is challenging, and we are aware of that. We are being cautious about our lending practices, but the entire system that we rely on that allows us to -- allows us to anticipate the risk. That also allows us to improve the level of delinquency and also our participation in the market. But we are being careful and we believe that we can maintain the level that we've attained in both cases.

[Operator]

Our next question comes from Danniela Eiger, sell-side analyst with XP.

[Danniela Eiger, analyst]

I have 2 questions, actually, one of which is actually a follow-up on previous question. But one thing that caught my attention is to talk about the upturn and inflation in Q3. And looking at this year, how do you guys see the trend for inflation over the course of the first quarter? And what do you expect for the entire year? And another question has to do with volumes. You've shown in advance in the volume growth. The chart doesn't show the vertical axis, I just wanted to make sure that this is an acceleration in volume in Cash & Carry in Q3.

But it's actually pressured going down in retail because of competitiveness. So if you could talk about what you're expecting and what the dynamics between inflation and volume will play out, especially for Q3. So one thing that catches our attention is when you look at the balance, I think that 75% of your debt is a short-term question, meaning it has to be negotiated this year. So I wanted to understand what this negotiation is like and considering the more conservative banks, -- how do you guys stand considering a potential increase in interest rates and lending costs. So I wanted to understand how you see that and deal with regotiation for this year.

[Stephane Maquaire, executive]

Thank you for your questions, Danniela. I will quickly answer your question and then let Duffy talk about the rebalancing considering inflation we have to look at what happened in the first quarter of last year. March and April, it was really, really steep. We had food inflation that was very substantial. So we'll start from that point and can consider how it has performed over the last 12 months. So we should have -- we saw that already in January. The first data from IBGE show that inflation has gone down from 13.3% to 12.3% which happened last year.

Obviously, for our customers, what they are seeing is the reality of inflation month by month. So over the last 4 years, including January, we were around 0.4%, 0.5% a month, so inflation under control, at least on the food side. So Inflation will support the growth and volumes in the first half of this year. And all our teams are working for that in retail with the possibility to grow even more, for example, in our private label and naturally in cash and carry. -- with the negotiations with our suppliers during this time of slowdown in inflation. So we are very confident in our ability to seek positive volumes in the first half of the year because we expect to have inflation that is more subdued.

[David Murciano, executive]

All right. So about leveraging, first of all, we need to understand that we have -- we are running a business that generates a lot of cash. Both Atacadão and Carrefour and the bank branded operation that allows us a huge level of cash and that helps us to reduce the leverage for the company and allows us also to go back to the leverage levels that we've had historically. We also had the synergies that we seized with the integration of big -- we always talk about the synergy and EBITDA, but we also have synergies on the cash side, which will also help us to lower our leverage. Now another point in this case is that one thing we communicated that will take place in 2023 and will also have an impact on our leverage.

So first of all, to both the leverage performance in context from the standpoint of negotiating with banks -- we have been in a very, very positive position. We have been talking to banks, both here in Brazil and internationally. And the market is showing appetite. The Carrefour Bank's balance is very positive. We're AAA. So we are seeing a very good appetite for that. We do not know yet whether the cost of our debt is going to go up. We hope not. We're doing everything in our power for that not to happen. But we also have a backup for a group with the controlling shareholders, the Carrefour Group, which, if needed, may also chip in as they have before in our debtedness. So we have no major concern about our indebtedness level. And either for -- about the appetite of banks to finance our debt. There's no concern there at all. David?

[Danniela Eiger, analyst]

Okay. And if I could follow up with the last question about your nonrecurring expenses that you mentioned when talking about your margins. I just wanted to understand how recurrent they are within the integration/adjustments for the big group, looking at a longer horizon. I just wanted to understand whether we should expect for that to continue to pressure your results until those synergies are stabilized, so to speak.

[Stephane Maquaire, executive]

Yes. Here, when we talk about one-off, we mean a one-off and not recurring. This took place during store conversions. So we do not expect it to happen again. Once the store has been converted, we do not expect it to have to occur again. As we said, 50% of the big stores that we needed to convert have already been converted. The other 50% are expected in early 2023, especially the first half of the year. And after that, we shouldn't see the effect anymore. When we closed the operation, we confirmed the one-off figures and conversion figures, and we are precisely where we expect it to be back then. I do not want to talk about where we are right now in terms of synergies, but we should have good news in that sense very soon. And we're also in keeping with what we had projected. And if we look at the figures we just reported, you can only multiply that by 2, and you will have precisely the same figures we mentioned when we started integrations with BIG.

[Operator]

Our next question comes from [ Vinícius Preto ], sell-side analyst with Bank of America.

[Unknown Analyst]

The first one is a follow-up on Macruz's question. You talked about the speed of margin gains and the conversions. When you presented the conclusion of the acquisition of Group BIG, you presented average sales projections and now seeing -- having seen the first results of those projections with more visibility of a BIG legacy, what's your expectation about those levels that you first reported and how do they compare to your presentation?

And my second question is, you added a disclaimer, a legal disclaimer saying that ERP is not totally integrated. And therefore, not all accounting lines have been integrated. Could you talk a little bit more about that? What lines are these? And what's the magnitude of these figures that we're not seeing? And you also said that the margins of the big group cannot be compared to those that they had before the acquisition. Could you please talk a little bit more about that difference?

[Stephane Maquaire, executive]

Vinicius will take your first question, and I'll let David talk about the second and third questions. So the margins for the stores that have been converted have been really encouraging. We have been very quick in seizing those additional margin levels for the stores that have been converted. The ramp-up for those stores in terms of sales in a 4-year period, we see an additional more gross margin that's growing a lot faster than expected. Once again, this is too short a time to have a firmer conclusion. We haven't converted most of those stores. So we -- it will take a few more months to be able to confirm the trend, but it looks -- it's really looking up right now. Well, about the disclaimer, it's simply about not the accounting lines but more about reporting.

I can give you 2 examples. The 2 main examples would be logistics costs and the cost with the big matrix. If you look at the figures that we're reporting before, these logistics costs for the supply chain and their headquarters were not allocated into each business unit, which is something we do. When you look at our P&L statement for Atacadão or the P&L statement for retail, you see the cost -- the headquarter costs and all of that within the same statement. So these are the adjustments we're already doing.

The figures that you see already include our approach, but we are still working to perfect that because especially for logistics costs were we need to fine-tune to allocate very precisely the logistics costs per business unit. So it may change a little as we refine our calculation of those risk calculations for each business unit. So you may see marginal changes from one business unit to another or from line to another, but the bottom line should not change. That's all the disclaimers about.

[Operator]

Our next question comes from Joseph Giordano, sell-side analyst with JPMorgan.

[Joseph Giordano, analyst]

Just 2 questions. The first, going a little bit more into the retail side. I have 2 points I'd like to discuss with you on the operational side. The first of them, you talk a little bit about Cash & Carry moving closer to the hypermarket model. So how do you see the price gap between Carrefour hypermarkets and the cash and carry operations from the competition. maybe on retail, we have this proximity offering more opportunity than you had in the past, considering that a major player in the market is facing challenges in that sense. Do you see an opportunity to buy points or even to accelerate this model considering the potential challenges your competition is facing? And also, in terms of balance, we see the first time the group having a fiscal incentive line. So I wanted to understand from you what's inherent to this Q3, these gains? And how should we think about this line moving forward?

[Stephane Maquaire, executive]

As I said before, our hypermarkets have been repositioned -- they were repositioned at the beginning of last year, and we are moving forward with that until right now. Now the difference in prices between the Carrefour hypermarket and Cash & Carry in general, we see 11 to 12 points and our Atacadão but if you look at the competition, we're talking about 8 to 9 points -- an 8 to 9 point gap -- so it's important to see that this positioning makes sense because we are growing a lot in the food segment since the beginning of last year. It's also important to remember that when we talk about an 8- to 9-point gap between supermarkets, from the competition in retail, we also have products and offerings that are very specific in private label products that's 20% to 30% lower in terms of price when compared to brand A or brand B in the national market.

So we also have products which are very well positioned in our hypermarkets. So we can see -- we can't see hypermarkets only considering the well-known brands. We also have the Carrefour brand, which is very well positioned, sometimes better than in cash & carry stores. About your second question, we understand that the competition is facing more trouble in that sense. And we are integrating the BIG group. That's first and foremost on our minds. But we do see some opportunities there. And we are looking at them right now. David?

[David Murciano, executive]

Yes. Thank you, Joseph, for your question about the rate effect on the tax side. Here, we're talking about the BRL 270 million of ICMS waiver. This is something we had been studying since 2018, which has now been recognized. Here, what we have as a recurrent effect is a share of about BRL 50 million, which is what you can expect to see moving forward. Now also importantly, the results of previous years between 2018 and 2021 have not been adjusted. So you also need to keep that in mind. We didn't adjust it before. We are doing it now, which is important to keep those proportions when looking at the record over time. But it's about BRL 50 million.

[Joseph Giordano, analyst]

Would that be for the entire year or for the quarter?

[David Murciano, executive]

That's BRL 50 million per year.

[Joseph Giordano, analyst]

Okay. So it's a lot lower than what you see for the competition at this point, right?

[David Murciano, executive]

Excuse me?

[Joseph Giordano, analyst]

The figure is much lower than what we see for the competition?

[David Murciano, executive]

Well, I'm not aware of what the figure is for the competition, so I can't speak to that.

[Operator]

Our next question comes from Vinicius Strano, sell-side analyst with UBS.

[Vinicius Strano, analyst]

A little bit about B2B. Could you guys talk about what the performance of this industry was specifically? And what do you expect maybe from same-store sales, but on the B2B side in a scenario of a stronger slowdown in food inflation. And if I may follow up something that was asked before, -- could you give us an idea about the timing as to when the project will be concluded? And what do you expect in terms of proceeds from the sale of your real estate operations? And how could that eventually impact your lease and rent operations seeing as this is not some [indiscernible]. And what do you expect to unlock the operations of the real estate side.

[Stephane Maquaire, executive]

The B2B in our Atacadão stores have seen the same growth curve that we saw globally for the Carry & Cash segment of our business. We are seeing good opportunities right now at this time when food inflation is slowing down. Especially for the first and second quarter of this year. We also have the integration of all our B2B operations with the Maxi store operations -- so the opportunities to grow even in this time of disinflation have been very encouraging for our B2B operations and the entire leadership of our Atacadão unit. Well, about the real estate project -- what we want to do Vinicius to crystallize the value. And what we're doing is to restructure all our real estate assets within a single purchase entity.

And the goal later on is to have a partner which will come in later to invest with us, and this is a project to add value. Most -- which is similar to what we did before, and we have a portfolio of projects that we can also develop along the same lines. And another very significant potential with Atacadão. So this type of project in property development, can be developed across all 3 banners of the group, the 3 brands of the group, which is why if you look at the company's P&L statement, you see no impact from the rent because this is not a cell and spec, what we're doing. We will keep the real estate unit. It will be consolidated. It will have an impact in the minority interest.

We'll have to pay dividends to those investors that come along with the project. But in terms of P&L, we will continue to control our real estate units, our rentals, our shopping malls so there will be no impact on the consolidated results. What you will have is a negative effect on each business unit. But with the income that will affect the real estate entity positively. And in terms of timing, the idea is to conclude the entire project in 2023.

[Operator]

Our next question comes from João Pedro Soares, sell-side analyst with Citigroup.

[Joao Pedro Soares, analyst]

2 quick questions. First of all, about your financial operations. Just to make it clear, when we look at delinquency levels improving and even coverage, which seems to stand at a very healthy level, I just wanted to make it clear. This level of profitability for the bank is expected to improve over time. Just to understand, considering that we are seeing this positive development in your readings. I just wanted to understand with regard to leverage, what's the ideal level of leverage after those conversions? What can you share with us? Because before this operation, you were operating with a very -- with a very conservative leverage level, even considering IFRS 16, this was a level that was below 1x. So I wanted to understand whether that's the level we should expect moving forward.

[Stephane Maquaire, executive]

Thank you, João. I will let David answer your questions.

[David Murciano, executive]

Well, with regard to delinquency, I've talked about whether it's expected to improve. We expect it to at least remain steady. It may improve. But for now, considering the current scenario, we expect delinquency to stay flat. In terms of provision, we have already provisioned applying the IFRS rules, which requires us to apply in anticipation. So if we close all right now, we won't grow. But because we're growing -- we are looking at more clients on the big side, which are not coming into the portfolio that's expected to continue, which will lead to a larger provision. But what we expect is to continue on the same trend we're on right now as a bank.

The bank has shown a robustness going through even sharper crisis than what we're facing right now. The bank has shown how robust it is and how able it is to anticipate things in this context. So we are very confident on the profitability trend for the bank. As for the leverage levels, -- that will depend. It will depend on the level where interest rates will be. At this point, it is high because of our acquisition of the big group. We're confident of that. But as we said before, we've also generated a lot of cash. The company generates a lot of cash. So the idea is to make cash with the net debt.

We have a gross debt, but the net debt with the cash generation has to go down to a lower level. I don't know if that will be the same level of 5 years ago, which was certainly too low. We have now grown too much. So maybe something between where we were 5 years ago and 2 years ago. That's more or less the goal here. But I do not expect us to keep the level where we're at right now for very long. It should improve and very quickly. That's our prospect. We expect to improve very quickly. Even if you consider the proceeds from real estate, right?

[Joao Pedro Soares, analyst]

Yes, absolutely.

[David Murciano, executive]

We are considering those proceeds evidently.

[Operator]

Our next question comes from Ruben Couto Sell-side Analyst with Santander.

[Joao Pedro Soares, analyst]

Just a quick question. On your release, you mentioned a market share gain of 1 percentage point in Q3, excluding BIG, I wanted to understand what that share market share performance was like specifically in the state of Sao Paulo, do you have that figure? Was it bigger than that, smaller than that?

[Stephane Maquaire, executive]

Well, our market share gain, excluding the big group was pretty much flat throughout the year, which shows the strength of ours. So we're very happy that we were able to keep that. I don't know if we have the breakdown specifically for the state of Sao Paulo right at hand. Well, I can tell you that for Sao Paulo, it remained relatively flat as well. when you compare it to the rest of the country, we have a few areas where we're growing a lot more. We have one region where we are facing a greater challenge from a local competitor. But in Sao Paulo, I can say that we were virtually flat as well.

[Operator]

Our next question comes from [ Tales Branello ], sell-side analyst with SoftBank.

[Unknown Analyst]

My question is, what do you expect in terms of EBITDA margin for the Sam's Club operation? You mentioned that you expect it to improve. And also, I have a question about the non food Electronics segment. You had like-for-like sales that were very healthy. But in this case, there was a competitor that's struggling. I wanted to understand what you see -- what you guys see in that area.

[Stephane Maquaire, executive]

Thank you, Tales, for your questions. We cannot give you any guidance about the potential profitability with Sam's Club. What we can tell you is our sales are growing. So a very good profitability level. We see our best stores moving to an even better level. So I think there is room to grow here. But that is something we will build over the course of the next few months and quarters. Anyway, again, I'd like to reinforce our encouraging prospects for the Sam's Club format and also store conversions to this format. -- in addition to organic store openings that we may conduct as well. We also expect growth in the future in those stores, which are strong and like-for-like sales good margins with more assets and greater anticipates for those assets as well.

So we have a very long road ahead of us with the launch of the new Sam's Club Card and a great opportunity to grow over the next few years and months in this format. On the topic of electronics, we have been growing a lot in the last few months since April or May of last year. This is an area we were [indiscernible]. This year, we see the possibility to grow significantly versus the previous year. But we're already working on the next steps to grow over what we had last year.

We are obviously looking at what's going on in the market and negotiating and making calls to all our suppliers, which are suppliers for the segment in general and understanding how we can better support them to improve our performance even more in this market segment. So I believe that there's a great opportunity for us to grow even more in this segment this year, both in our brick-and-mortar stores and on the digital side. we can't forget that we have all these steps in our ecosystem as we do in the Sam's Club segment as well. David?

[David Murciano, executive]

Yes. I just wanted to add to the Sam's Club question talking about the EBITDA margin. Of course, we can't give you any guidance, but you can see for yourself that, we have a number of projects underway right now with a strong gain in number of customers. You can see the increase in number of engaged customers. We already have 60% to 70% of our EBITDA margin in Sam's Club that's larger than what we have on the Atacadão side. So if I were to simulate that, I would consider a very high EBITDA level, even higher than for Atacadão. But this is what I would do if I were in your shoes.

[Operator]

With no further questions, we now conclude our question-and-answer session. And I will now turn the floor back to the company for their final remarks.

[Stephane Maquaire, executive]

Thank you so much for all your questions. We will continue to answer them if you have them. And I would like to reiterate our commitment to have progress in all that we do. It's already doing really well across all our teams and this progress to integrate the big group stores. We already see that we are at a level that we didn't think possible 1 year ago. Of course, we still have a lot of work to do over the course of this year, and we hope that we'll be able to say at the end of this year that we have concluded the process to integrate BIG, obviously, with a curve of sales that's going over until 2025. Thank you all once again for joining us. Have a great day.

[Operator]

The Q4 2022 earnings conference of Group Carrefour is now concluded. The IR department is available for any further questions you may have. Thank you so much to everyone who joined us, and have a great day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]