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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[Audio Gap] volume and growth of revenue. So it was truly a very good result from the standpoint of revenue, which is what we're looking at right here and also consistent, as we noticed, as we have signaled over recent quarters. In the accumulated for the year, it's the same vision. Net revenue grew by 21%, the volume by 7.9% and the average price, 12.7%. And the same vision of the growth of revenue by 2 digits -- double digits, with an increase in volume, 4.3% in cookies and 2% in pasta and the average price growing in at double-digit rates.
This growth in revenue happened in both regions, commercial regions of M. Dias, 14% in both regions in the comparison with last year. And in both regions, we've also had growth in average price and in volume -- we had the launch -- important launches in this quarter, aligned with our strategy of growth with profitability. We launched products with average prices well above the average price that M. Dias works, which is close to BRL 6. This is an example of snacks under the Piraque brand with BRL 31 per kilo price. Healthy Snacks, which is our second avenue for growth. We launched in granola under the Jasmine brand of BRL 21 per kilo.
Piraque, as we have done for several quarters, important launches in the category of cookies, which together with snacks, other principal categories of the Piracy brand the launch of black chocolate bulk of BRL 17.8 per kilo, which also increases our average price and our gross margin and consequently, our EBITDA margin as well and our return for the company. Continuing in the question of launches in cookies, the contribution of cookies for the last 24 months in the revenue of this quarter was BRL 74.3 million, 36% above than in the first quarter of this year and also higher than the second quarter of last year.
The average price, as I mentioned at the beginning, has been consistently improving from BRL 5.97 per kilo last year. BRL 6.17 in this year and now BRL 6.27 in the second quarter of '23, BRL 6.27, with the highlights in the cookies category, which has grown gradually over the last quarters due to several levers. We've had several pass-throughs from last year, which also generated an effect in 2023. We had the launch of products with higher added value, contributing positively to the improvement of our average prices and margins and also a series of initiatives in pricing, Remembering that in the last 12 months, we have structured an area of pricing, which has delivered results, favorable results and positive from the standpoint of revenue, both revenue and margin.
When I go into the market share chapter talking about, first about cookies and wheat flour, the 2 categories, both in market share and value, which is the -- and as well as market share, which is the bar on these graphs, we had increases in share on the year-on-year vision and for cookies and pasta and cookies and Wheat flour, the Finna brand, which is already the #1 brand in Brazil, we're talking about domestic wheat flour that were sold at retail. And in the vision quarter-to-quarter, we had a small fall up in market share, both in cookies as well as wheat flour, but in an interval of tolerance within a space where we tolerate it. In Pasta, the graph shows the same information, the same market share value and the economy is market share volume and we had a fall off year-on-year and a retraction quarter-on-quarter, both in the value as well as in the volume, basically due to 2 factors.
First, we had a reduction in the size of our packages and several SKUs and several items in the category of pastas going from 500-gram to 400-gram packages, which at the first moment, which is the transition period between 1 and first quarter and second quarter of '23, brings a small falloff in volume because these items need to be reregistered at the point of sale. So we have a situation here, which is from the agenda, which gives us a small loss in market share, temporary loss of market share due to this change. The second factor is that our price increase in the first quarter of '23 versus the first quarter of '22 was a little bit above the market prices. We increased our pastas. We had an increase in prices for pasta, close to 20%, while the market worked with 17.9% increase.
These 2 factors together explain this retraction of market share in the short term from the first to second quarter of '23 and also in the vision of the year-on-year from second quarter '22 to second quarter '23. We have participated in important fares, both in Brazil as well as outside of Brazil -- and we're now going to the chapter of costs and expenses. Here, an important point due to the growth, the consistent growth of our volume over the last months, we have increased the utilization of our capacity, which was 64.5% in the second quarter of 23% higher than the 55.5% in the first quarter and also higher than last year in the same quarter, which helped us to dilute more of our -- across our fixed cost and increase our gross margins. What we have observed in the next slide, our gross margin in the second quarter of '23 was 33%.
And better than the 27% in the first quarter of '23 and is still a little below the 34% in the second quarter of '22. The small falloff from the second quarter of '22 to '23 is explained by the variable cost, as I showed here at the beginning. This BRL 3.3 per kilo had not yet been impacted by the increases in palm oil and wheat due to the conflict in Ukrainia which we observed here starting on the third quarter of '22. To look at a more challenging scenario here. And from there to here, we have has presented a tendency to -- for fall off. The fixed costs going from BRL 0.9 and BRL 1.1 per kilo and had a retraction from the first quarter to the second quarter of '23 due to the better utilization of our capacity -- of our productive capacity. At the same time, our average price has been improving.
Every quarter, we look at the blue line for these 2 graphs represents the average cost in our stock and the red line in our market price -- at the end of last year until June in wheat, we presented a small falloff in the middle of June, -- we had a price of our stocks -- much better than the market price, remembering that the market price at this moment in June was impacted by the factors in the Ukrainian conflict as well. The palm oil has shown a tendency of reduction both in the market as well as in the M. Dias numbers. So these 2 factors, oil, palm oil and wheat have contributed to an improvement in our variable costs and also, therefore, in our margins. And the expectation is that this will continue over the next few periods.
The expenses, administrative expenses was close to 20%, in line with our expectation. And remembering that 3 or 4 years, this level was approximately 24% or 25%, and we're able to reduce this structurally to a level close to 20%. The EBITDA margin for the quarter of 13.2%, improving since the end of last year from 4.4% in the fourth quarter, 7% in the first quarter and 13.2% in this quarter with sequential improvements closing the month with 15.6% in June. The net profit, we followed the same route and we closed the period with BRL 217 million in net profit, well above the first quarter and a little bit below the second quarter of last year.
The explanation for the falloff from last year to this year is a net debt, slightly higher in net debt and a higher level of interest rates, the CDI, which is the principal indicator of our debt, which is a little bit higher this year than last year. Going to the area of investments. We have an operational generation of cash of BRL 512 million, explained by 3 factors: both in the quarter as well as in the accumulated for the year.
The better improvement of our results, as we mentioned in the previous slides, growth in volumes, growth in average price, maintenance of our SG&A and falloff in fixed costs. This explains the improvement of the EBITDA year-on-year for the quarter and as well as this year for the accumulated for the year. And the accumulation of working capital, which we looked at the variation of all of our assets and liabilities, we saw BRL 156 million for the quarter and BRL 110 million for the accumulated for the year, both suffering the effects of these 3 items. It helps to explain the record generation of cash of BRL 512 million in this quarter.
An improvement in working capital but principally in the accounts of suppliers and stocks and inventories. This is a work that has been done since 2020 when we started with an area -- in the area of 20 days. And we closed this quarter with 44 days. receivables is stable between 54 and 58 days, and inventories in number of days went down in comparison year-on-year and also quarter-on-quarter, basically due to the fall off of commodities prices. With all this generation of cash for our net debt being reduced in the comparison with the first quarter from BRL 1.6 billion to BRL 1.2 billion. And consequently, our level of leverage from 1.6x to 1.2x EBITDA and our AAA rating having issued by Fitch.
The CapEx grew a little bit by 2% compared to last year, closing the accumulated for the year with BRL 117 million. And now to finalize the chapter of ESG. It's always looking at the 3 pillars of our sustainability strategy, care for the planet, believe in people and strengthen our partnerships. These results of this quarter and the consumption of water, reuse of water residues sent to landfills, loss of supplies and wasted products and purchases from local suppliers have an important evolution, both in the comparison quarter-on-quarter as well as in the year, accumulated year numbers.
Several highlights in the sustainability area for the second year in a row, M. Dias Branco was recognized in the Guia EXAME magazine as one of the best in ESG. We see various surprises. We participate in various events. We've got the certificate of international quality in the internal audit area and the governance. And we continue with our portfolio of the TEVA women's index -- women in leadership index, all the practices and goals for the year 2030, heading towards our goals in the year 2030. And so I'm going to close this first part and I'll pass it over to Gustavo and then we will begin the area of questions and answers. Thank you.
Good morning to everyone. The company continues in a trajectory of consistent and coherent growth, as we have mentioned, following our strategic plan, delivering results, leaving an EBITDA margin of 4.4% going to 7% and now giving only 3.2%. And as we have mentioned in terms of improvements, both in costs as well as operating improvements for the company. Looking at this quarter specifically, we delivered more revenue. And once again, we have shown that SG&A is under control, representing something close to 20% of our net revenue, which had been as high as 26% prior to the pandemic with more margin, more record cash generation -- and operationally as well, we are structurally more robust, improving our level of service, our control and management of the working capital, the complementing of the pricing policy, which is more granular, and we have evolved greatly in the execution at the point of sale with our program of -- perfect store program, Loja Perfeita.
And structurally working with a portfolio of products with higher added value, and this has come both through our launches of new products at the point of sale as well as the acquisition of new companies with higher margins than M. Dias has and an execution, which is totally alive with our strategic plan of the 3 pillars, which is Brazil, growing more in Brazil, growing in other categories and also in the process of internationalization where we took the first steps at the end of last year. The first was due to the increase of exports.
And then the second in November, we announced the acquisition of Las Acacias in Uruguay -- so finally, the company is on track evolving even after these periods, so challenging periods during the pandemic and 2 years in the pandemic and probably right after, the war, the Russian-Ukrainian war, and there's still some stability in the Black Sea, especially with the threats of bombardment of ships in Ukraine by the Russians and in Russia by the Ukrainians so we don't know exactly how that will be solved in this short to medium term, but it still requires attention. I'm going to pass now over to the Q&A section, and I'll come back with Fabio to answer any questions you might have.
[Operator Instructions] Our first question comes from Gustavo Troyano, of Itau BBA.
There are 2 points that I wanted to examine with you. First, in relation to the market share in the quarter, One thing that I saw in the release, the reduction of share volume and per share value is a little bit -- and I want to see a little more granularity in the presentation. But I also wanted to see if there was an increase in prices in relation to the rest of the industry as well as the reduction of the sizes of the packages? And of it is the driver in your share volume during the quarter? And also wanted to know if this question can be attributed to potential price increases in your price list and due to the volume -- the volume of the packaging?
Also I wanted to explore a little bit your perception about the rationality of pricing in the industry, and if it has been maintained over the quarter, and this dynamic of market share was related in any way with the fall off in margins from March to April since you opened up the price -- the margins month by month here?
The second point and more short is relation to cost deflation, especially the contribution of palm oil to this dynamic. If I'm not mistaken, it would be 1 of the drivers of margin growth over the quarter, starting in the second quarter. And if you saw any variable -- any events related to that variable cost? And how that would look on your P&L in the next quarters if that will help in the margin expansion going forward?
I'm going to start here, and then I'll pass it over to Fabio to add anything that he might want. First, market share is very much related to 1 specific category, which is pasta. And going into the detail, regional players in pastas in the Northeast is very concentrated in that area. And in truth, we understand that the market continues rational -- acting rationally. And this movement that we have done in cookies, M. Dias was even a little slower than our competitors due to the number of productive units to downsize. Here, in pasta is the opposite. The company started downsizing before our competitors, specifically.
And we started with the common -- the normal everyday pastas, which dynamics, as you know, phase in, phase out. We had to register, use up all of the stock on the shelf and then put a push to get on to the shelf the new items with the different weight and size of packaging, and so this is very concentrated in terms of that. We don't see any disruptions specifically in ordinary pastas and the lack of rationality in the market. We did not place prices relevant prices very little quarter-on-quarter.
What we captured really was in the supermarket where we had a bigger loss of share. The only category that had loss of share was due to the downsizing of the packaging, which began back in the second quarter. And this should continue during the next few months from March to April, it was a question of the market itself. We didn't make any big changes in relation to pricing.
The market as a whole is -- basically was stalled in April and took over again in March and April. It seems to be a structural question, which we saw a fall off in volume a little bit below in -- between March and April, even so it recovered in May and June -- in relation to palm oil, winds are favorable, yes. And we'll see more clearly in the coming quarters. You can see our curve. We had an average cost a little higher than the market compared to last year when we had a better price than the rest of the market. So these 2 lines will tend to do -- to meet each other. And at some point in time, we'll be better than the market. So we see favorable wins in palm oil as well as in wheat, a little bit better than our competitors. We see this due to all these dynamics in the Black Sea and the growth of the price of wheat.
And we understand that our competitors are suffering on their next purchases, and M. Dias, because of the protection that we have of our hedges on our stock, we will be able to naturally have to increase prices due to the cost of -- increasing the price of wheat, But we maintain our stock at an average cost, which is very interesting, which will be utilized, especially in the next quarter. So the favorable wins in terms of palm oil and favorable wins also on the side of wheat.
Fabio, any comments?
I just wanted to make -- add to the first point. In relation to the pasta market to illustrate a little bit what Gustavo mentioned. We observe in this market is that the market has demand -- a strong demand this year, in line with the historical levels, close to single digits. A mature market with growth in volume, which winds up growing with the population growth, and that's what we've seen this year. And from the standpoint of value, the market also grows both in the division of quarter-on-quarter from the first to the second quarter of this year, as well as in the -- risen year-on-year where the market value has grown by double digits.
Our next question comes from [ Leonard Alankar ] from Ship from XP Investments.
I would like to make a little follow-up in relation to the previous point. It's evident that your pass-through in the price and in the categories of wheat, which was strategic and favored you in the environment of your competitors. But I wanted to understand a little bit more about how this was done in the channel. I see that there was a strong growth in cash and carry and distributors, which may have sacrificed part of that effect, and also passed the necessary time to reregister these products could impact that.
But another point, understanding this narrative, we see that the production capacity has fallen, but there was increases in efficiency. So there was an increase in production in the pasta category. But with the increase in production, did you have this loss of market share and going into more the cash and carry and distributors? At the same time, you had price increases. Can you close these numbers a little bit better for us, so I understand, even with the reduction in your overall stock and your overall inventories and how are you going to the next quarter?
And if this process of reregistry of new products, how long will it take? Because we understand that it's a very strategic variable to be able to adjust the size of your packaging to catch this market effect? I just want to know how long this will take to get these new products reregistered?
So 2 questions. The first 1 is about the question of the working capital for the next quarters. There was a better -- an improvement in this quarter. Can we expect that in the next quarter with the question of the commodities? And the other lines also what else can we expect on these other lines as well.
Thank you, Leonardo. This is Fabio. Good morning -- let's go in relation to the time to reregister these products at the -- usually it takes 1 quarter. So we imagine that the moment for the reregistration was in the second quarter and the dynamic channel by channel, we don't see anything different -- very different from that. You may have observed or seen in our release that the channel -- the cash and carry channel and the distributor channel have gained a little more relevance in our channel list. But our distributors are in line with our strategy of gaining capillarity outside of the Northeast, but every channel has grown.
When we look at the value and volume year-on-year and quarter-on-quarter, we've had growth of revenue in every channel. However, in the cash and carry and the distributors wind up growing a little more, which is explained by our strategy even from the standpoint of the biggest channels obviously have a bigger impact because they have more -- they buy more volume. But as I mentioned earlier, it's an agenda that winds up happening basically during 1 quarter.
Perfect -- in relation to working capital?
Yes, we hear you.
In relation to the working capital, this release that happened in our inventories was principally due to the price of commodities, and we have the expectation of having the -- freeing up during the next few periods, both in volumes -- The commodities have gone up both in reals as well as in dollar, and we also increased the volume of our inventory of raw material and finished products to increase our level of service. The [indiscernible] is a way to improve space to improve, but it's already doing much better than when we started to measure this key point. And so we have the expectation of continuing liberating working capital and inventory during the next few months. And for suppliers, another line, which has opportunities for the creation -- for the freeing up of working capital.
Our next question comes from Isabella Simonato of Bank of America.
I just wanted to come back to the discussion of prices. You brought some important information about the performance during the quarter. You mentioned that there was no sequential increase in prices that was relevant during this -- from the first to second quarter. Can you open for us what was the effect of mix, if there was any mix effect with the consumer eventually beyond the innovations that you've launched having products with a slightly higher average ticket or if the essence of this increase of 3% quarter-on-quarter was a movement more in line with the reduction of the packet size and increase in average price due to these initiatives? That's the first question in relation to pricing.
The second is looking forward. And you mentioned this that the environment continues quite rational. What do you imagine in the way of an environment for a sequential increase in prices. We see the margins in the tractor continuing to improve. The idea is to continue to pass through these prices in line with inflation or to work margin mix? What do you imagine as the behavior of the competitors in these circumstances?
Isabella, thank you for your question. I'm going to start here, and then I'm going to let Fabio add anything he has. I would like to mention that no relevant pricing. Where we see growth and growth was really the downsizing of the packaging of the pastas, starting with the common pastas, the day-to-day pastas, and a little bit more in prices of other categories and mix. We have a -- we launched a new price list in the first quarter approximately 7% higher. And depending on region and category, this price list, due to the prices of commodities, especially wheat, was no longer viable. So we maintained these tables, these price tables, but we added discounts. And in this -- and part of these discounts, we're gradually and surgically being diminished. So it contributed a little bit to this increase. However, it was the downsizing of packaging for pasta carried forward from last year and a little bit of this capture, which we mentioned of the price list at the beginning of the year. We started giving discounts and these discounts have now diminished during this quarter.
Looking at the -- looking forward, our expectation is not betting on new protocols for pricing. What may happen is that we reduce even more of these discounts that I mentioned earlier. The situation is still quite difficult to read. The relationship with the Black Sea and the conflict between Russia and Ukraine is extremely unstable. There are some conversations happening so we have to see that situation improve greatly so that wheat prices can also improve to be able to make better decision in relation to pricing.
The advantage is that we've already registered our new prices and we're able to continue offering discounts. I don't believe in new price lists unless, in the case of wheat flour, which, last week, as we mentioned here, because this year [indiscernible] is more connected of the commodities. But in the other categories, looking forward -- so there's no programming for new prices in this period.
Our next question Jose Rizzardo Pereira.
I want to continue with this discussion of revenue and breaking down the 2 questions. First, when we think about cookies, which is where you have marketed, more efforts in innovation and launching new products with higher average prices, you give this interesting information about the percentage of gross revenue coming from innovations, et cetera. I would like to know in this point, if you're able to open for us what is the impact when we look at year-on-year or any other variation about -- over time? The impact that you intend to understand that these innovations will have on the average price of cookies in particular, and if possible, the average price -- the average price for the company.
The second question is about market share to understand a little bit how you're reading. I think it's very clear especially with the pastas. What you understand has been the impact of the size of the packaging, the changes -- the weight of packaging and the registration effect and that this should be a temporary effect. But we also, at certain moments, in recent years, when the company suffered some type of falloff in market share, you already mentioned that part of this loss of share that we understand was even healthy as a way for you to preserve your margins. But at other moments, you also said this can't keep losing share forever. So we wanted to hear from you a little bit about at what point does loss of share starts to bother you, especially in pastas, which is where the falloff was a little more important in this quarter? But I want to hear what you had to say also in relation -- we should imagine the perception of the company going forward when we talk about market share?
And finally, a follow-up of a comment that Gustavo made when we discussed this follow -- the monthly EBITDA margin from March to April, you mentioned that the market was basically holding steady at that time. I wanted to understand in what sense? Was it a question of demand? Was it a question of mix, a question of channels? Just to understand what type of risk we should be considering so that the volatility of margins -- similar volatility of margins do not happen again in the second -- in the third and fourth quarter of this year? We can have an expectation of margins -- effective margin that is very strong as well.
Thank you for your question. I'm going to start with your last question first. This slowdown in April in prices was clearly related to the sell-in and then the sellout. We don't see any change -- relevant change in the behavior of the consumer. Our vision is that there was a certain control -- higher control on the days of stock of the -- days of inventory of the large sellers due to financial costs. In the month of April, we had several interactions with several large clients showing, in fact, that the risk that we were running out of stock on the shelves, and we were able to revert part of that in May. It makes sense for you to have better inventory control as long as you don't lose sales. So it is an important work of our team, changing the focus and talking to the responsibles of several stockouts and purchases that were recovered so that there will be no risk, no relevant risk.
What concerned us the most is when we see a deceleration of the sellout. So going back to April, that wasn't the case.
Talking a little bit about share. Yes, pasta share, we have to -- this level that we [indiscernible] is a level that generates a certain amount of concern. We know where it came from. As I mentioned, local competitors in the Northeast, in every day pastas, daily pastas, trying to minimize the effect which should help us with the downsizing effect. We are adding investments, especially at the point of sale for trade marketing. We have a plan underway, which, in the month -- last month and our expectation is that this share that we lost in pasta will be recovered by the end of the year. If we don't see any changes in [indiscernible] marketing or sales, which is underway, due to this change in packaging side, none of these items will be totally registered both in the question of pastas. As Fabio mentioned, it takes a quarter for you to get in to get everything reregistered under the new packaging, new size. You're right, it calls attention, but we have addressed this question, and we don't see any risk to not recover this market share. And I now pass over to Fabio.
So question about cookies. You're right. Cookies, we have given more emphasis because it's half of our business, half of our revenue, 50% comes from cookies. It's going to pass it over to Fabio for him to add.
Certainly our launches have contributed positively to the increase in average prices and the evolution -- sequential evolution of our margins especially when we highlight the volatility, which gives us a little more visibility to the launches in the cookies market along with the snacks, the healthy snacks, which are more important for this improvement. And also the principal lever during the last quarters has been the Piraque brand, which is our major brand, is the brand, which grows the fastest, which has the highest average price. And it's a brand that has the highest gross margin closest to 40% in this quarter compared to M. Dias overall, which had a 33% margin. Piraque delivered a margin of 38%. So Piraque has received the highest investments in marketing and also in innovation with snacks that we gave a little more concentrated this year -- this quarter as well as the molted chocolate snacks, which have performed very well in terms of volume and sell-in volume and sellout.
Our next question comes from Lucas Ferreira where of JPMorgan.
Two questions. One is a follow-up and 1 question. About the question of this favorable winds, which was mentioned about the costs and the inputs, which will continue in the next few quarters. But I want to see how much of this favorable wind has already been captured in June since you said you had a -- from 10% to 15.5%? If you think that there's still from -- still at this level, if there's no big changes in prices, which doesn't seem the question, if there's any upside for margins in these -- on these June levels?
And also a point which was not commented was the exchange rates. You have a strategy of hedge. The average was well above 5%. And I don't know how your average exchange rate is aimed at the second -- end of this second quarter. Do you have any upside in the area of having a more favorable exchange rates in your costs and also something that you discussed last year, and we spoke a little bit more about just to be certain, how do you see this decision from the Supreme Court at the end of last week in relation to benefits and subsidies and the base of calculation of the income tax -- in the case of income M. Dias, how do you see this subject from the standpoint of the investments that you have in different states, If your understanding is the same? Or is there any other company that has perhaps already, to your knowledge, has made some provision for this subject? But just to get an update, the latest update from you guys.
Fabio here. Based on what I have -- making reference to the graphs that we presented in the quarter, which show an average price of our inventory. So looking at these graphs, we're able to -- it's clear that there's a reduction in cost in both of the principal commodities, which are contracted for at least through the third quarter. And our expectation is that we should have some upside on margin, as you mentioned, due -- just due to this favorable evolution in costs. In relation to the benefits, if I understood your question correctly, our principal benefits are connected with our costs.
So we monitor this constantly. So far, we don't really have an opinion made yet about this subject.
Gustavo, you wanted to ask about the exchange rate? I would say that in my read, our lawyers, none of them don't see any risk that is -- or our auditors that deserves a reevaluation of our provisions. The company is looking at the question of -- from this specific points. Looking at costs, yes, both the wheat as well as oil should have important falloffs from a high 1 digit to 2 digits. I can't really give you guidance on that, but it should be a more -- and add to our profitability still in this growth as we mentioned to you. Part of the company, which has connected to between 15% and 20% on this trajectory. The tendency is that we will have a better profitability than in the second quarter than in the first.
The exchange rates we've been saying that due to the cost of these hedges, we were working with shorter hedges not so much in the long term. All of our hedges are below -- the average cost below BRL 5.
Looking at the short term, I would say that it's a good position for the fourth quarter, hitting at BRL 4.72 on the spot market without the hedge costs. I think that, for 2023, we're well productive. For the rest of '23 were well protected as you had noticed there. Basically, that's it.
Our next question is from Rodrigo Reis from Santander.
I wanted to ask another question about we're looking at a moment of a lot of cash. You get at the level in which you're operating, you have, you have approximately BRL 2 billion in cash in this quarter. If you have a good quarter, there'll be more generation of cash in the next quarter. How should we think about in terms of the allocation of this capital? What are the opportunities that you see? If you could explain that to us?
In this context, you have a contingent payment for the end of the year, if I am not mistaken, an amount close to BRL 200 million. If you could explain how this payment works with your allocation of capital that you expect to do, or if you foresee the payment of dividends or even in anticipation of a payment of dividends during the second half, what's your perception on this area of -- and looking at the minimum cash needs of the company, we see the company running with a tremendous amount of cash in the second quarter.
So I want to understand from you a little bit more about this side of the leverage and the net debt situation of the company.
Thank you, Rodrigo. Before mentioning about cash and minimum cash needs, we wanted to say, looking forward with the internal plans for each 1 of the directors of the company. We have several operational captures to be made both in the level of suppliers as well in the level of inventories. We have margins for improvement. -- clients, not so much because the trade is very pressured. We've seen even several opportunities to extend our payment periods and so forth, not for free, but due to more volume or more actions at the point of sale, more space, so this robustness in our cash position makes it possible to have this exchange with the trade -- in the trade world as long as it generates more business more profitability and more P&L. It's an important route for us to take.
Due to the cash situation we're doing -- we're paying 100% of our debts. This month, we will be paying more than BRL 300 million to be paid down this month. By the end of the year, as you mentioned, we're just not paying more because some of our debts have very have early cancellation fees. And so we wanted to take -- to lower our financial payments, but we are paying 100% at their maturity, all of our debts. We have several debts, which do not have the repayment fee. We're negotiating the anticipation of these.
And we can't forget that even though it's a year in which we need to do our homework, we have to make it clear that part of this cash has to be separated for opportunities, eventual M&A opportunities as well. So it's a little bit -- so our minimum cash needs close to BRL 1.2 billion. We have a high cash position, but these expenses should be coming up for payoff debt and several opportunities in the trade and marketing world, several opportunities, which will be interesting for us. And so this cash will be very useful for us in these opportunities -- facing these opportunities.
The question-and-answer session is now closing -- we'd like to pass the microphone to Gustavo for his final considerations.
Thank you all. very much for your participation. Once again, we place ourselves at your disposal, Fabio and all the IR team. All of the -- we're on track with the route of growth that we have been talking to you about -- these questions -- operational questions have evolved internally, -- and we're in a part of revising our plans, internal plans. We don't see any big risks looking forward, whether it be operational or market risk, which is not -- which is unknown to us in the short term, which worries us is focused on the execution, which we have done.
We have several opportunities to level of service, execution our expansion plan, which is underway, which is very relevant. We have to qualify and scale up these companies, which are bringing more margin and a stronger portfolio. And so we go forward in this line of qualification and delivering more and the best what we've seen over the recent quarters, and we expect with the expansion of margin that picks in the coming quarters as well. So once again, thank you all for your participation, and we are at service for any questions you might have, at your service.
The video conference of M. Dias Branco is now closed. We thank you all for your participation. And have a great day.