M Dias Branco SA Industria e Comercio de Alimentos
BOVESPA:MDIA3
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M Dias Branco SA Industria e Comercio de Alimentos
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Good morning, and welcome to the conference call of for M. Dias Branco for the First Quarter 2021. Today, we have with us Mr. Gustavo Lopes Theodozio, Vice President of Investments and Controllership; Rômulo Dantas, Commercial Vice President; and Fábio Cefaly, Business and Investor Relations Officer.
We inform that this event will be recorded. [Operator Instructions] The audio is being also sent live via webcast at ri.mdiasbranco.com.br/en. We'd like to clarify that any statements that may be made during this conference call concerning the business perspectives of M. Dias Branco, projections and operational goals, financial goals are based on assumptions and beliefs of the company and also on information currently available. They involve risks uncertainties and assumptions because they relate 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 factors may affect the future of results of the M. Dias Branco and lead to results that may differ materially from those expressed.
Now I'd like to turn the conference over to Mr. Gustavo, who will begin the presentation. Sir, you may proceed.
Good morning. Welcome to our conference call. I would like to begin with special thanks to our team for the commitment and delivery during this year. Especially this year that is so challenging with COVID-19 and also with the problems in the world economies and Brazil. Demanding more dedication and work from the team. So we're very proud of all those who are part of our team.
In Q1, we observed that costs suffered pressure due to the exchange rate, U.S. dollar, continuing our currency country depreciating, we had to readjust our price list we observed. We have new price lists. This requires, especially in January and February, ending March with the new price list.
Internally, we continue making the necessary adjustments in our cost structure. And especially now with the restrictions, we began another important point the company continues investing strongly in its brands, with focus on expansion in the attack regions and also in the export market.
We closed the quarter with a strong balance sheet, leverage only 0.5% EBITDA and now with a longer debt and lower cost. This -- thanks to the first issuance for 7, 10 years. So BRL 110 million with the demand, 10x larger than our offer. Reminding you that the first issuance this year, the company continues searching for stability. Concerning the presentation, we would like to show the results of the quarter with the objective of detailing the things that the company passed during the first 3 years of the year, together with the actions, top-line and others.
I will pass the floor to Fábio, who will make the presentation, then we will be back with Rômulo for the Q&A session.
Good morning, Fábio; good morning, Rômulo. Once again, it's a pleasure to share with you the results, please access the presentation and let's begin with Slide #3. It's always important to talk about our strategy, a strategy of growth with profitability and growth based on 3 pillars.
The first current business, we divide Brazil in commercial areas, to the large areas, defense, where we have 60% market share in the attack area, which includes the South, Southeast, and Midwest, where we have only 20% market share. We're investing a lot in marketing.
The second avenue of growth is the export market. Exports, as we showed during the last quarters, have had a 3-digit growth year-over-year, and it is very promising. We have very good perspectives for the export market. And the third avenue of growth is the new categories. M. Dias Branco is going into new categories, as you saw, toast, snacks, so important launches in snacks that we will show in more detail, including the average price with good margins.
So basically, our growth strategy is anchored on these 3 pillars and supported by an efficiency productivity program last year, in a very difficult situation, already delivered BRL 180 million in gains in productivity in 2020.
Slide #4. Here, we observe on the left the performance of our revenue, we had a drop here, minus 8.9% with a 25% drop in volumes and an increase in the average price of 21.9% due to the current scenario of higher costs in commodities, both in U.S. currency and in real.
Here, we see double digits. For example, net revenue drop of 18.5% in cookies, minus 15.7% in pasta volumes. We see here the drops and in revenue, the drop of 18% and 15% in these 2 categories. In the next category, flower and brand. We -- it's a category that is very based on the price of commodities. We increased prices by 51.9% between '20 and '21, there was a drop in volume, but the increase in price was sufficient to compensate the drop in volumes and the revenue group margarine and vegetable shortenings, a very good performance. We increased prices by 20% to mitigate the price of palm oil. Volumes grew 4%, and revenue grew 30% in comparison with 2020.
Other products that represent 4% of our sales had a stability in volume, a small drop in average price and net revenue dropped 5.7%. Going on to the next slide, #5, beginning on the right, in the export market, we had a growth of 112.6%, 3-digit growth. In exports, as we saw in the last quarters. And in Brazil, in Attack, in the South, we had a drop in revenue, 16.8%. And in the Defense area, in the North, a drop of 6.7%. Later on, we will detail this per month as Gustavo mentioned in the introduction.
Let's go on to Slide #6. Here, we begin to show the performance of revenue month after month, these first numbers are consolidated numbers with all the categories of pasta, also wheat flour, margarine, and brans. Here on the first graph on the left, in terms of volume 113,000 tonnes in January, 101,000 tonnes sold in February.
And in March, we had a recovery, a substantial recovery in volumes. So this drop, this lower performance in January and February, is the result of a change in the price list that we made in January, a new price list, 10% price increase.
There was a lot of resistance from clients especially in these 2 months. And in March, we noticed that clients already began to replenish their inventory with the new price lists. On the graph below, we have here a longer period to show average price since Q1 '20 until March '21, we see our average price went from BRL 3.4 per kilogram to BRL 4.3 per kilogram during all this period, and with an average price in March, higher than the end of the year, which was BRL 4.1.
So volume with average price, we see on the graph in net revenue, we see a substantial recovery in revenue. For -- in January, BRL 442 million. And in March, BRL 612 million. This helped us to dilute our fixed costs.
Going on to Slide #7. The rationale here is the same. But looking exclusively at cookies and crackers. In January, we had lower volumes, February low volumes due to the price increases, resistance on the part of clients. And in March, already a recovery and important recovery of volumes looking at the bottom of the slide, the same rationale in consolidated.
So in -- for example, in Q1 '20, BRL 6.3 and in March, BRL 7.3 per kilogram, much higher than the closing of 2020 when we had BRL 6.7 per kilogram. In January, we see BRL 192 million in net revenue and BRL 303.9 million in March, which shows clearly that there was an important recovery of revenue in the last month of the quarter.
Now going on to Slide #8. Once again, the same rationale now for pasta. In March, 30,000 tonnes superior to 20,000 sold in January and February when we have the price increase, average price, same rationale, BRL 3.6 per kilogram of pasta in Q1 '20 and now BRL 4.4 in March '21. This has an impact on net revenue, BRL 90 million in January, BRL 132 million in March.
So summarizing what happened in revenue. In January and February, these were months where we have numbers lower than our potential of growth, then we had a price readjustment that was necessary due to higher costs, due to the higher price of commodities in U.S. dollars, and also devaluation of the Brazilian currency.
So we had a drop in retail, but the situation became normal during the quarter, especially in March. Now going on to Slide #9. Talking about revenue. But now with focus on innovation in biscuits. Here, we show that the products launched in the last 24 months, contributed with BRL 47 million of our revenue in Q1 2021, 32% higher than in Q1 2020, showing that innovation is at a very good rhythm, delivering very positive results and with high value-added products, which is what we see also on the next Slide, #10.
Slide #10. Here, we have some examples of products that were launched in the last few months. Beginning on the left with Snacks, 2 snacks from Piraquê with average price of BRL 24.5 per kilogram, BRL 39 per kilogram, reminding you that I just showed you the average price of M. Dias close to BRL 4 per kilogram. So we're placing in our portfolio of products with higher value-added -- added value with higher margins and with potential for growth, bringing new avenues of growth. We had also the launch of -- a launch of Chocomax BRL 10.7, BRL 13.8 per kilo. Cookies too BRL 21.3 per kilogram and the last product on this line. The covered biscuits of Piraquê, mounted milk with chocolates we already talked about this product in the previous call, but it has had a very good performance in revenue, well above our expectations and has an average price that is higher than our category of biscuits.
Biscuits as a whole, we sell for BRL 7 per kilogram. This product sells for BRL 10 per kilogram with a very good margin. Slide #11. As of this slide, we will give more detail about the main brands of M. Dias beginning with Piraquê, which is our biscuit brand with higher price, higher margins, and high value-added products. We observe here that in terms of share volume in Brazil, Brazil had an increase of market share from 4% to 4.3%, maintaining the share value of 6.4%. The average price of Piraquê biscuits is close to BRL 15, while the price of M. Dias is BRL 7. So the more growth in Piraquê in São Paulo, Rio de Janeiro, the higher -- we will have higher prices and the higher will be also our gross margin in biscuits.
Now Slide #12. Here, we have a highlight for the Adria brands which was top of mind in 2020 in pasta, which continues making progress throughout Brazil. We observed the share volume of Adria in pasta, 5.1%, it went to 6.2%. Adria also increased its share value from 5.4% to 6.2%.
Now going on to Slide #13, same rationale, but let's talk about Vitarella. One of the 10 most consumed brands in Brazil, our largest brand in terms of revenue, fourth place in the category of top national pasta in 2020 and Vitarella won market share in share volume in the categories of biscuits and pasta. This is what we see here in the numbers in biscuits. There was an increase of 0.4% in share volume, 8.8% to 9.2%, and in past 6.5% to 6.8%. And in terms of -- and in pasta, the Vitarella brand also gained market share and share value, and a small drop in biscuits in share value, practically stable.
Now Slide #14, please. Here, we see our mix of channels, channel mix, mix revenues, the percentages are not market share. And here, we see the distribution of our revenue per channel. So some comments. We observed that wholesale and cash and carry had a drop in terms of their share in our revenue. And these numbers agree with what I explained about our performance in revenue in January, February, March.
So these are the channels that had the greatest resistance in relation to price increases, new price lists, and had a drop in their shares in our total revenue. Now distributors increased its participation from 6% to 8%. And we are including more distributors in our network to increase our capillarity, especially in the South, Southeast, and Midwest, the Attack regions.
On the next slide, I will give you the details of these distributors. But just to close this slide, the line Others shows the performance of exports. Other represents exports, which represent a 3% and 5% in exports.
Slide 15. Now going back to distributors. We have 70 distributors with an increase of 24 new partners between Q1 2020 and Q1 2021. Thus, increasing a lot the capillarity of our distribution. We have arrived at small retails in sub regions in the South, Southeast, and Midwest of Brazil.
Now going on to Slide 16, our market share. On the left, we show the participation in Brazil. The volume in cookies and crackers, then pasta. Cookies and crackers. We see Q1 '20, Q1 '21, we had a small drop in market share 0.7 percentage points and a drop also between Q4 '20, Q4 '21. And we continue as a market leader with 1/3 of the market. On the other 1/3 was 5 competitors and Others 34.7%.
In pasta, we had an expansion in market share 0.9 percentage points in comparison with the previous year and an expansion of also 32.6% here in for example, in biscuits, we have 1/3 of the market, another 1/3 with 5 competitors, and another 1/3 that is very fragmented with smaller players.
Going on to Slide 17 to close revenue. Exports grew 112% at the end of this quarter, BRL 42 million in net revenue, close to 3% of total revenue. With a lot of focus on innovation in packaging, products adapted to the export market in Africa, South America, private label especially in the U.S. private label, developing new brands and focusing on the markets that have a high potential of growth for M. Dias.
Now going on to Slide 18. We would like to go into results. These 2 graphs, they show: The first, on the left of palm oil, vegetable shortening, and oil costs, and on the right, wheat and flour costs. So we see that oil went from 6.7% to 10.7%. So this increase in cost really had an impact on our results, together with the exchange rates and commodities, same with wheat from 27.9%, the cost of wheat to 33.5%.
Now going on to Slide 19. Here, we see wheat separating the impact of the devaluation of the Brazilian currency and the commodity in U.S. dollars. The first graph, devaluation of the Brazilian currency, it was below -- the exchange rate was below BRL 5 and above BRL 5, the exchange rate is 22.8% increase in the exchange rate. At the bottom, we see average quarterly variation in U.S. dollars, in blue, the price of commodity in dollars, in our inventory. And in green, the spot price in the market.
Since January 2020 to March 2021, M. Dias was able to be more competitive in relation to the market, but commodities went up in dollars, and this had a negative impact on our results, making it necessary to change -- make changes in the price list, as I mentioned in the beginning.
Now Slide #20. Same rationale of wheats. But now with palm oil, the exchange rate is the same, the effect of the exchange rate, 22.8% higher, and there was an increase of 33.4% between the 2 years, January 2020, January 2021. Between August 2020 and March 2021, M. Dias through its purchasing team with good negotiations and good purchasing, was able to be more competitive in the market, but still the price of the commodity went up, and this had an impact on our results.
Now going on to Slide 21. Here, we show the evolution of EBITDA nominal without any adjustments between Q1 2020, BRL 229 million, and Q1 2021, BRL 47 million. The first line, a negative of BRL 135 million represents the impact of the price effect, volume effect, the volumes dropped 25.2% and with a lower cost dilution due to lower volumes, production also dropped here and the 2 commodities that had price increases in dollars, 21.4% wheat; 31.4% oil.
So here, we don't have the exchange effect, commodities in dollars and prices and volumes of our sales. The second line is the Multiplique program under subtotal, we show the results of the Multiplique program in Q4 '20, 188 initiatives. They began to be captured efficiency and productivity program. They are initiatives that had recurring results. And in this quarter, once again, they repeated themselves and delivered here gains of BRL 85 million that we will detail later on.
In terms of exchange rates, BRL 136 million, the impact of the exchange rates due to 22.8% of the devaluation of the Brazilian currency. At the bottom here, we have some nonrecurring issues, gains with tax credits, BRL 27 million, expenses -- here restructuring expenses, BRL 14 million, Piraquê integration expenses, BRL 1 million related to the -- also to expenses with COVID-19.
Slide 22. Here, we will go back a little to what we mentioned in Q4. There was a demand to show more the Multiplique program, analysts and investors, thus, could place in their models. Here, we have the details of the BRL 188 million. Looking -- I'm looking at the details of the 188 programs in efficiency and productivity.
So here, we have -- there's a little in revenue, variable costs, raw materials, packing, driving force, fixed costs, sales expenses, logistics, management costs, and other revenues that are recurrent. Those that are nonrecurring are not here. So in revenue, we have prices, discounts. We looked at products that needed adjustments, prices that needed adjustments in raw materials, we used new mixes of wheat, flour, transport -- optimization in transportation also enter electricity consumption, packaging, also shortening from Rio de Janeiro to our plant in Fortaleza. We revisited the industrial structure also labor reduction in expenses with the shortening area in Rio de Janeiro.
So here, we have all the details. And the allocation of these numbers and what they represent in the results in 2020 and annual values, bearing in mind all these volumes from 2020. Slide 21, this slide deserves an explanation. Here the idea Slide 23. This is how we capture the efficiency and productivity program of Multiplique. And with the same structure of revenue, and the first, and this -- we -- this shows the impact of the productivity program, if we had sold the same volumes, BRL 103 million in gains.
On the second column, here we have the same rationale, but adjusting things for the lower volumes. So consequently, all the gains that are related to variable costs and expenses are here, BRL 72 million. And at the bottom, EBITDA. And what was captured in Q1 '21, BRL 85 million. And here in the details, we show the rationale. A decrease in discounts, reduction also in payment terms, also some products comparing the positioning of the SKUs with the competition. We made some adjustments. So here, we have the products that had a price increase and did not lose volume negotiation with suppliers, development of new suppliers and new technology for printing on films, productivity in Rio de Janeiro.
We reviewed a number of merchandising agents, supervisors, looking at efficiency, optimization of expenses with marketing, renegotiation with partners. We changed the delivery model for large clients, especially in key accounts and cash and carry. What we did here? The private goes directly from the plants to the client without going through a distribution center. So it's more efficient. We pay less freights -- less freight costs. Also, the increase in productivity by standardizing also the sizes, also improvement in vehicles.
Now the last quadrant, reduction in the number of suppliers of health plans from 11 health plans from 11 to 6, digital platforms for negotiating labor agreements. So 188 initiatives for efficiency productivity, and we wanted to show to you what we expected from this program in Q1, what we expected by adjusting to the volumes of Q1 and what we captured. And the main initiatives of these included in these BRL 85 million.
Now Slide #24. As Gustavo mentioned, a very difficult quarter with a challenging situation, a difficult situation. And we established an action plan that will be carried out during 2021. And M. Dias Branco will give you the results in every quarters for -- in all the quarters for these initiatives. They have focused on sales growth and productivity and efficiency.
Piraquê Green Wave a brand that is gaining market share. We are making -- signing partnerships, also looking more seriously at the export market, SKU optimization in industrial and logistics footprint. Reminding you that we made many acquisitions since 2003, we did -- we had the Multiplique program last year, but we have other opportunities to be captured.
Now Slide 25, to detail the issue of Piraquê, the focus, launching of Snacks products with higher added value like snacks that have an average price of BRL 39 per kilogram. Piraquê, here we were present in the Big Brother program, it is present on the main platforms. And we have now -- we are leveraging the presence of Piraquê, also packaging for each channel. Here, we show a multipack that fits well into a certain profile of a channel and also redesigned packaging to have a better presentation at clients.
So this is one of the examples. Many of these are already positioned in many stores in Brazil. Slide 26, new partnerships. This is an example of a partnership that was signed recently between M. Dias Branco and our best Brewery. Our products are already present in the marketplace of AMBEV, which is called Bees. So here, the idea of this partnership is to increase our capillarity, especially in small retail, focusing on items with higher value-added products and with Piraquê, we're evaluating also other brands to be included in this partnership like this 1 with AMBEV Brewery.
Slide 27, on exports, this is a very strong avenue for growth with good results. But with our current exchange rate and higher freight costs, international freight costs, our products -- we're accelerating the program, focusing in pasta and flour in Latin America, accelerating private label in the U.S. We are now are focusing on toast in the U.S. toast sales. And here on the slide, we see an increase in the number of clients. In 2020, we had 56 clients, now 65 clients, and also a number of countries from 23 to 30. As you can see in the pictures, the products are well positioned. These are pictures in Panama, Uruguay, a truck in Uruguay with the Isabela brand. So it is very promising and with good margins.
Slide 28. Here, we will talk about the 3 initiatives in productivity. The first is reduction in the number of SKUs in the next quarters. We will reduce 137 SKUs. We will have 137 SKUs less. So this reduction will decrease the complexity of the operation and will offer a better execution throughout the chain.
With a small impact on revenues because these 137 SKUs represents only 3% of the revenue. And this gap will be closed with similar products that are already in the market and have a better margin than the products that will be reduced from the portfolio during the next 2 quarters. So we will have no negative impact due to the drop in SKUs. We will have a more lean operation and with less complexity, we can expect even a better result due to this.
Slide 29. On the adequacy of our logistics and plant footprint, 3 initiatives already in progress. Concentrate our production of pasta and biscuits in less lines. So in the next few months, we will have these productions from 113 lines to 106 active lines.
So these lines will be -- continue available. It is very easy to react to the same. They will be available, but the production will be concentrated in less production lines to decrease fixed cost. We're renegotiating also with logistics operators, their rates, and we will close 2 of the 32 distribution centers without any -- without compromising our services.
And part of our distribution is being made directly from the plants to the clients without going through our distribution centers.
The last initiative is organizational -- adjustment of organizational structure. We signed a contract with Gradus consultancy. They will support the transformation, placing the company on the same level as the best references in the market. Many acquisitions were made since 2003. So it's important to revisit our structure, look at the details to make M. Dias Branco very close or better than the best benchmarks we have in the market.
Now going on to Slide 31. Here, we observe the evolution of our net margin, BRL 137 million to BRL 15 million. Here, the same explanation, BRL 137 million in Q1 '20 and BRL 15 million in Q1 '21, the problem was the exchange rate and less dilution of fixed costs. And this affected our profit.
Going to Slide 32. On the right, we show the main factors, the main variables in working capital: days of sales outstanding, days payable outstanding. What is under our control, days payable. We had -- we increased by 15 days and another -- 15 days, another 10 days, 35 days at the end of Q1 '21. Days of sales outstanding, stable, 51 days. Average storage time went from 82 days in Q1 '20 to 111 in Q1 '21 due to 2 factors. First, performance of volumes lower than last year, lower than what we expected, especially in January and February, and the higher price of commodities in U.S. dollars and also due to the devaluation of the Brazilian currency. This affected the average cost of the inventory.
Slide 33. Our investments in the period, BRL 40 million in Q1 '21, 27.7% in relation to last year. This does not compromise our growth. We have an adequate capacity reserve to be able to grow in the next quarters.
Now Slide 34, on leverage. So it was a difficult quarter in terms of leverage, especially due to the drop in volumes in January, February and the impact of the exchange rate on our results and the leverage due to volumes. A strong drop in EBITDA. But even with this, the company is recognized by its financial robustness. We closed 2020 with a strong year-end report and well below 0.7 of last year, the leverage. We had 0.7; now, 0.5. And for the third consecutive year, M. Dias has a AAA Fitch ratings.
Now this last slide, sustainability. We have some indicators that had a performance that was lower than Q1 2020, a drop in it Q2 -- for example, water consumption, we had a level of production lower than last year. This will come back. This will improve as our volumes recover as we observed in March, and M. Dias Branco continues working hard on sustainability. Right now, we're revisiting this agenda, looking at the next 5 years.
Well, I'd like to close the presentation. Now we can go on to the Q&A session, and I thank you all for your participation.
[Operator Instructions] Our first question comes from Marcel Moraes, Santander.
I'd like to congratulate the company for the transparency and quality of the information. You are a benchmark in the industry in terms of transparency. The first question, we saw inflation in the economy. Could you give us more color about the price increases? And the competition is probably also increasing the prices. So what is the rhythm of the price increases, the speed of the price increases? And what is the reaction of the consumers? Do you believe the consumers will switch products -- switch to other products? Do you believe they will consume more pasta? How do you see the reactions of the consumers with this inflationary pressure?
This is Fábio. I will begin, then Gustavo and Rômulo can supplement. You mentioned many points. Concerning consumption habits, what we have seen since last year in the beginning of the pandemic, what the market calls trade down. Consumers migrating to a lower average price, reminding you that M. Dias in its portfolio covers all the price levels in pasta and biscuits and crackers because we have many brands. We cover 95% of the prices available in the market. But this trade-down is being observed since the beginning of the pandemic, since March last year.
Now concerning substitute products, there are some substitute products, especially in pasta. These products had a price increase that was very high in the beginning of the pandemic. In June, July, we began to observe a price increase of these items, and they still have a high price, higher than historical levels. What we see now, it is not a migration from our products to other categories. But within the categories, consumers are looking for products with a lower average price.
Now concerning price increases, we made 2 price increases last year, 3 in March last year and in January, a price increase of 10%. Last year, some competitors increased their prices, others did not. We're seeing from the beginning of January this year, apparently, we have a scenario of great rationality in the market due to the high cost of commodities, due to the devaluation of the Brazilian currency and the higher price of commodities in U.S. dollars. Rômulo, if you wish to supplement.
Now the explanation is perfect. What I would add, the difference between the Northeast where we have a greater share, we have a competition that is -- we have a stronger competition in the Northeast in crackers -- biscuits and crackers, and they make -- the competition makes it difficult to increase the prices as we should, and pasta suffers more. We have plans. We see more competition in pasta because of the higher number of competitors in the North. So there is a difference between pasta and cookies in the Southeast. We already heard the explanations.
A follow-up. You mentioned that there is a trade-down. How is the Piraquê brand -- we know it has a higher price, Piraquê, but higher than M. Dias, not in relation to the market. So how does the price of Piraquê behave in relation to its peers in order to understand how easy it will be to expand the Piraquê brand in the South and Southeast.
Okay. The difference here is that Piraquê is concentrated in the state of Rio de Janeiro. So in the Northeast, we are gaining leadership in the Northeast due to distribution and the presence of the products. So we're using the relevance of the brands to introduce it into Northeast, where you have a segmented portfolio. So for example, we have some brands that have a differentiation like [ Goya Binia ] multi-products, and they deliver a superior quality. Now the biscuits in the main points of sale, we can be present and then we have an incremental volume against the -- those that have a higher price, the competitors that have a higher price.
So gradually, we are making progress in introducing Piraquê in other regions too in the South, in the state of São Paulo, a very competitive market. But we have used this strategy of having the products at the point of sale, the main products, and merchandising that is superior with a great help in communication to have people try these products.
Marcel, I'd like to add, in the case of Piraquê, the challenge is greater. We have a stronghold, which is the state of Rio de Janeiro. So we are working to take this to the North and Northeast. But then we will have a price war with competitors. So we want to have a better district. We want to work through distribution and not price.
My last question has to do with the exchange rates. If you can give us some color, are there measures to improve -- are there other initiatives that can help on the return on capital invested, other measures?
Marcel, Fábio. As you mentioned, working capital, last year, we had an average of less than 20 days for payments, accounts payable. Similar companies pay with 44 days. So we're increasing the number of days for accounts payable. At the -- in the middle of last year, we began to operate more efficiently, and this has improved our payment terms.
Accounts receivable is stable. In inventory, we have opportunities, but we -- inventory had a great impact due to higher price of commodities in U.S. currency and in local currency due to the exchange rates. The accelerated growth improves ROIC. Piraquê was worth BRL 1.5 billion. So the more Piraquê grows, they have a better margin, a better EBITDA, superior to the rest of M. Dias. So what will make the ROIC grow apart from all the work being done in working capital is growing with these products, with more products with higher added value and also cost reduction, expense reduction. Gustavo, would you like to add something?
Marcel, we have growth brands in all the lines. And also in innovation, new products in -- now with snacks. So we have Escureto. We have an expansion plan for Piraquê. And here, we have the Multiplique plan for better productivity and efficiency. We are looking at expenses. We're looking at distribution, packaging. Many things being done. We began last year.
Working capital. We have been analyzing working capital. When you look at payments, we had a good improvement. Inventory, this -- the increase in inventory is good and bad. It demands working capital, but we use inventory also as a natural hedge to protect ourselves from the very high price increases, especially in wheats. So we have a capacity of storage, 4 months capacity. We were using inventory like flour to protect ourselves from price increases.
Now the return is linked to the impact from commodities, the Brazilian currency, the U.S. dollar depreciation. And we haven't been able to increase the prices as we would like. So we want to neutralize these effects on costs due to the higher price of commodities in U.S. dollars and the exchange rates. These are the main challenges of the company.
Our next question comes from Andre Hachem, Itaú.
The first has to do with the sales in March. I know that there was the replenishment of inventory in retail. Could you explain why there was an increase in consumption and your -- the perspective for Q2? Also debt, so what are -- what can you say about finances, the debt? And how could you reduce the cost of debt?
Looking at the first item, we always measure sell-in and sell-out. What happened in January, February was a reduction in orders from trade. This drop is not related to the drop in inventory on the shelves. As we mentioned in the call, it was due to the resistance on the part of the trade. So we don't see reduction in consumption on part of consumers in January, February. It was resistance from the trade to buy.
I believe this when you have instability in the government, the trades was -- the trade wanted to understand what would happen to the consumption in January and February. So industry increased prices for obvious reasons, and the trade became resistant and use their inventories. That's why we look at the sell-out. The sell-out continued as it was. In the last quarter, there was a drop in the sell-out, so they began to consume their inventory. They used their inventories. And in March, we have a more normal behavior because there was rupture due to this decision on the trade to resisting new prices. So March is more of a normal situation. Also, there was the government program to give aid to the population. This also helped to -- in a nutshell, it's this.
Now on the second part of your question on new issuance. These were to -- we began to access the CRA markets. We were in the equity markets. So the company of this size needed access to this market. So this helped us in terms of cost and also maturity, these bonds. These resources will be used for the business, for the acquisition of raw materials, especially wheat in Brazil, in Paraná and Rio Grande do Sul. We have the regions that produce wheat, but we will also use this for other investments. The company is ready to take advantage of market opportunities and maybe going into new categories. We have a robust cash position, adequate for the protection of M. Dias Branco.
You talked about green bonds. We have the desire -- we don't see a new issuance in the short term. The new issuances will depend on M&A opportunities. So we will be connected with M&A opportunities. Also outside Brazil, we're looking at M&A opportunities. Outside Brazil, we want to increase our exports, get to know the markets and then maybe make an acquisition outside Brazil.
These projects outside Brazil are frozen for some time. 95% of our revenue is in Brazilian currency, and this makes acquisitions more expensive. So we are looking at opportunities, but we will issue -- we will get new loans if we have opportunities for M&A in Brazil or in the international markets through bonds or green bonds that are a source that we have. It will depend on the opportunities of M&A.
Our next question comes from Isabella Simonato, Bank of America.
I'd like to know about the prices and increased -- price increases. We saw that these price increases had an important impact in volume, resistance on the part of trade to accept the new price list and also reactions from consumers. What is the strategy in terms of price increases from -- maybe smaller price increases to avoid this negative impact on volume and volatility within the quarter, as you show, January, February and March. So why this was not done in 2020 in a more gradual way to avoid the volatility in volume?
Now in relation to costs, what can you do differently in relation to the purchase of raw materials and hedging of raw materials? Maybe some other type of protection without physical inventory since we don't see commodity prices having lower prices in the short term.
Rômulo, would you like to begin with the first part?
So we began to have price increases last year. The costs continued to suffer pressure. So we have a problem in relation to raw materials in Brazil. We want -- we have increased prices in a strategic way by channel. Looking at price index of competitors, we have looked all these things. So we increased prices, looking at the macroeconomic model. So we have done this, the market as a whole.
And the pressure on cost, the prices did not increase in the market last year as they should have increased today. It takes 30 to 60 days to implement new prices. And with the worsening of the economy, this became even more difficult. We have adjusted prices per region, per brand. We're trying to sophisticate more our model, trying to increase granularity in implementing these prices as necessary due to the macroeconomic scenario we have.
So we are continuing to evaluate things, evaluate products by region. And thus, we have analyzed the impact also on volume to avoid peaks or valleys in volume because this could affect our fixed costs. And logically, we look at each category with different price increases. Due to elasticity, as Fábio said, we have seen a trade-down in pasta and biscuits and crackers. So we bear in mind, we take into consideration all these points when increasing the prices. We will continue with these price increases, trying to minimize the effects on volume. We believe all companies will have to increase prices, not only us. The costs -- well, did we answer the question?
Yes.
Concerning costs, we have a hedge policy. We have been learning a lot with the hedge policy. We have looked at the price of commodities. We use our storage capacity to do hedging. We have storage capacity for 4 months of wheat and other raw materials. Our -- we are buying wheat and flour at a lower price than the price of the market. We have been able to deliver through the hedge policy vis-a-vis the storage capacity we have. What happens is that for more than a year, we have seen the growth of the prices of commodities. We've seen increases in wheat, palm oil, sugar, cocoa. We've seen this in the international market, higher prices. And with hedging, we minimize -- when you have higher prices for such a long period, it's more difficult.
One of the levers we have in 2021 is by revisiting our footprint, where there are opportunities in reducing our footprint, looking at our plants, opportunities to join production lines to have a better productivity, optimizing the process. This is a new project. It began this year. It's in its second month now, the studies, but we trust that we can obtain value from decreasing the footprints.
One more detail when we talk about price, there are strategies that we are using. The -- also, we have worked on packaging, optimizing packaging. So also introducing products with higher price, higher margins, selling products that have -- are more value added. This can help us to grow and can contribute to recover our numbers. So we have decreased the number of SKUs, simplifying our portfolio.
Our next question comes from Thiago Duarte, BTG Pactual.
I'd like to go back to prices. You mentioned the difficulty with the resistance from the trade. Rômulo mentioned this. Can you talk about the price index in general of your brands in relation to the competition? When you show the evolution of share in volume and in value, we see that share volume grows more than share value. So we have the impression that the competition increased prices more than M. Dias Branco. Could you talk more about this?
The second question. New price increases, can you talk -- do you intend to increase prices again? And last of all, with this volatility, can you tell us what were the volumes in April? Do we continue with volatility in April?
Thiago, Rômulo. I will comment, when you look at M. Dias Branco as a whole in the Brazilian markets, we look at many brands in many categories. Since M. Dias has a great volume concentrated in crackers and biscuits in the Northeast, if you look at the price index, it's at 85%, 90%. Then you will say, "Oh, you can increase prices by 10%". When you -- when we look at crackers and biscuits in the Northeast, we are at 100% or 105%. So we have an overprice because we're very strong as the market share we have.
Now when you go to other categories where you don't have the same strength, we cannot do this. We look at the average price, and we work with 90%, 95% price index, depending whether it's pasta or biscuits and crackers. So we look at the main factors of price index to adjust this.
In the presentation that we made, we show the effect of the Multiplique program for greater efficiency. We have -- we worked with some -- we analyzed the brands where we could catch up in terms of price depending on market share and the strength we have in the region. We made a survey in brand equity to see where we are strong.
So when we look at Brazil, we are aligned in terms of what we can charge. For example, we have brands with higher prices. Piraquê in Rio de Janeiro has a higher price index. So it's difficult to talk about the company as a whole because we have -- we are some of brands and regions. But we are positioned according to the competition in order to sell volume with margin. In the Northeast, we are very strong, Ceará, Pernambuco, and we are working on the price index. So as I said, it depends on the region, we have to make individually valuations according to the region. So in the next presentations, we will include this information about price index.
You asked about future increases, price increase. The answer is yes, because we continue to see a growth in the price of commodities. So we have new price lists that we'll reinforce in 45 days. I can't talk about the percentage. It depends on the region and the category. Commodities continue to have price increases. April is in line with March.
Very clear. Rômulo, how well was the effect of the price index on the industry? But it was clear.
Gustavo said that in the next quarter, we will give you more details about the price index showing the competition. I'll give you an example, biscuits. When we look at the closest competitor, they grew a lot. We lost market share because this competitor, since they are coming into the market, they have had aggressive prices. So they are dropping their prices while we are increasing our prices. So it's important to look at each brand by region. We are working with this, and we will give you more details about this, this universe of brands we have. So we have to look at everything per category, per region, per brand.
Since there are no more questions, I'd like to pass the floor to Mr. Gustavo for his final comments.
Thank you. We'd like to conclude saying that the company continues with its commitment with its shareholders, working on organic growth, going into new categories, also increasing exports and maintaining the discipline in lowering prices and costs and expenses. So we are available to clarify any other points. Please contact our Investor Relations department. We have the RI team available. Good morning. Thank you for participating.
Thank you. The conference call of M. Dias Branco is concluded. Please disconnect your lines.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]