M Dias Branco SA Industria e Comercio de Alimentos
BOVESPA:MDIA3
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M Dias Branco SA Industria e Comercio de Alimentos
Earnings Call Analysis
Q2-2024 Analysis
M Dias Branco SA Industria e Comercio de Alimentos
In the second quarter of 2024, M. Dias Branco reported robust performance despite facing significant commodity price fluctuations. The company achieved net revenue of BRL 2.6 billion, marking a 19.4% increase year-to-date, driven by a volume increase of 5%. The firm successfully sold 506,000 tonnes of products, yielding an 11.6% growth compared to the same period in the previous year. Notably, the gross margin improved to 34.9%, a nearly 2 percentage-point increase year-over-year.
Despite the overall growth in volume, average prices fell by 17% in the quarter and 15% year-to-date which adversely affected net revenue. For instance, the average price per kilo dropped to BRL 5.2 in June from BRL 6.3 last year. However, recent price adjustments in response to rising commodity costs are expected to enhance revenue in the upcoming months.
The company reported an EBITDA of BRL 336 million, achieving a remarkable margin of 12.8%, up from 3.2% year-over-year. This growth is attributed to operational efficiencies and controlled spending in selling, general, and administrative costs, which rose only slightly above inflation, tracking at 23.6% of the net revenue.
M. Dias achieved a strong cash generation capacity, generating BRL 212 million in cash, maintaining a net cash position of BRL 91 million, a significant turnaround from a net debt position of BRL 1.2 billion at the year-end. This achievement reflects improved operations and management of working capital, with supplier payments averaging 63 days, an advantageous position compared to prior periods.
Looking ahead, M. Dias aims to enhance market share, particularly in the cookies and pastas segment. The management anticipates a steady recovery in sales volume, bolstered by a strategic pricing approach and operational efficiency initiatives. The company's long-term vision includes enhancing its presence in the snack and healthy food categories, alongside international market expansions.
The executives indicated that the recently observed increase in wheat prices could create a favorable environment for the company given its proactive pricing strategies. Moreover, plans to control SG&A expenses will be pivotal in keeping margins intact, with management targeting SG&A ratios closer to 20% moving forward.
As the industry navigates through pricing volatility, M. Dias has successfully retained a competitive edge, achieving share stability in categories such as cookies and maintaining an overall healthy market share in pastas and flours. Management is also closely monitoring competitors’ pricing moves to ensure they remain proactive and responsive.
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[Audio Gap] quarter of 2024. We have with us Gustavo Lopes Theodozio, Vice President of Investments and Controllership; and Fabio Cefaly, Director of New Business and Investor Relations; and Mauro Alarcon, Executive Director of Technology and Information Technology. We inform that this event is being recorded. [Operator Instructions]
Any declarations that maybe done during this teleconference relative to the perspectives of business of M. Dias Branco, projections and operational goals, constitute beliefs of the company, the [indiscernible] of the company as well as based on information currently available. They involve risks, uncertainties and premises since they refer to future events and should depend on circumstances, which may or may not happen. Investors should understand that economic conditions of the industry and other operational factors can affect the future operation of M. Dias Branco and lead to results that are materially different than those expressed in these future considerations.
I'd like to pass the microphone to [indiscernible] Fabio, who will start the presentation. Fabio, please go ahead.
Good morning. This is Gustavo Theodozio. I want to welcome you and pass over to Cefaly to make the presentation. Good morning to everyone. I would like to welcome you all to our results with reference to the second quarter of '24.
Before entering into the highlights and passing the microphone to Fabio Cefaly, who will make the presentation, I would like to express our thankfulness to our workers and employees for their dedication and performance demonstrated in this first half of 2024. When you look at the cumulative of the year, the volume grew by 5%, net revenue by 19.4%, and EBITDA 11.4%. Even in a year, it was quite challenging with lots of oscillations in commodity prices and exchange rates, the company has been able to follow its trajectory with profitability.
Looking at the second quarter of '24, we delivered BRL 2.6 billion in net revenue, a volume sold of 506,000 tonnes, 11.6% bigger than the second semester of the previous year. We had a gain in market share and volume, both in past as well as in flours and then cookies and crackers area was stable with 32% market share, still has a very relevant market share. We increased our production capacity reaching 71.2% in the second quarter. We delivered a gross margin of 34.9%, growing in relation to the previous year by almost 2 percentage points.
The EBITDA of BRL 336 million, and EBITDA margin of 12.8% with a strong generation of cash, delivering BRL 3.5 million. And ending the second quarter, net cash position of 0.2x EBITDA over the last 12 months.
I'm going to be back for the question-and-answer session together with Cefaly after the presentation, Cefaly, please take over.
Good morning to everyone. Thank you, Gustavo, for your introduction. Let me put the presentation up here. So as Gustavo passed through the big numbers, the principal highlights of the quarter and the year-to-date in net revenue, volume, EBITDA, net income and cash generation. So I'm going to start my presentation getting everybody on the same page about what was the context of this quarter in the context of the first half of the year as well.
The objective here of this slide is to show you that it was a trajectory of the commodity prices of wheat, which is our principal item we consume, the dollar and the 2 variables together. They oscillated a great deal over this period and over the first half of the year, and consequently, the respective impact on the average price. So the first line, the blue line is the price of wheat in dollars in the market. The green line is the price of wheat flour in reais, and the red line is the exchange rate from reals to dollars. And the lower column shows the average price of M. Dias in each one of those quarters. So from July last year until the middle of March or April, what we saw here was the price of wheat falling during these months. So it was a long period of falling wheat prices. And in reais, the same tendency. We started in July of 2020 in BRL 1,600 per tonne, dropping to 1,060 per tonne. And the exchange rate was practically stable during this period.
Starting in April, we see the price of wheat flour going up, due to seasonal factors, the most important, which was the drought in Russia, which is a large wheat producer. So this influences international prices. And the price of wheat also in reais also went up. In reals, it went up more than in dollars because the exchange rate was depreciated from 5% to 5.4% in June. Wheat prices fell both in dollars as well as in reais, we saw the prices of our products also falling 6.1%, 5.8%. And here, with the real per kilo in the second quarter of this year, an average price of BRL 5.2 June of this year. And these prices here are consolidated, but the price decrease was more accentuated in the lower value products such as wheat flour and pasta and less in cheap cookies and crackers.
So as the price of commodities has gone up, we made some readjustments in price, in almost all categories, the average price was going up during the quarter, but the readjustments really started to transit on our results starting in June. So the average price in June consolidated here was BRL 5.55, which was higher than in the first quarter and also above the average of the second quarter. So it's important to leave everybody here on the same page. What was the context of this quarter, which has the impact on the falloff of costs, reduction of costs in recent months, but at the same time, we saw costs going up at the end of the quarter. So it was a quarter we showed this transition from a commodity, which price was dropping to a commodity price increase and the respective impacts on our average price, which we saw increases starting in the month of June.
Starting passing to the section of revenue and market share, starting with the market information, it's important to say that in this slide here, we're talking about the markets for cookies and markets and not the M. Dias Branco numbers. So the first information in terms of units sold, both in the comparison year-on-year as well as in the quarter-on-quarter, the 2 markets, both cookies and crackers and pasta had growth in number of units sold. In the pasta market, it grew faster. And in terms of volume, year-on-year, the market for cookies and crackers was stable, and the pasta market had a growth of almost 2 digits. In terms of average price, and this information converses with the previous slide, which showed the tendency of fall of commodity prices until March. We also saw a lowering of average price, both in the cookies market as well as in the pasta market because this category is more related to the price of the commodity. However, the conclusion here, looking at this information that these are markets which have a demand which is at least stable in the case of cookies and crackers as well as a more overheated market in the case of pasta.
Now looking at the M. Dias numbers, as Gustavo mentioned at the beginning of the presentation, the net revenue of M. Dias in the quarter was 8% below last year. The accumulated year-to-date was 11% below last year. The volumes year-on-year grew by double digits from 454,000 tonnes to 507,000 tonnes this year. And in year-on-year, we saw an increase of 6% in volume sold, while average prices fell 17% in the quarter and 15% for the year. What explains this of the decrease in net revenue as well as in the year-to-date was the lowering of average prices because even as volumes grew. In the category, by category, we see 2 volumes. We had 11.6% of increase year-on-year and 27% quarter-over-quarter. I'm going to talk more about the year-over-year because [indiscernible] any seasonal effects in the first quarter when we had the implementation of the SAP, which impacted unfavorably the results of the volumes in the month of January. The category of wheat and flour and 200,000 tonnes and bran.
Here, we see the highlights in the wheat flour, industrialized flour, which is the flour that we sell in large volumes for bakeries, pizzerias and other industries, principally in the area of the attack area and which covers the centers South and Southwest, Southeast sections. We've been able to leverage the potential of the Pentagon service mills. The cookies and crackers had a growth of 133,000 to 134,000, pasta went for more faster growth from 90,000 tonnes to 98,000 tonnes. We're more than accompanying the growth of the market in the pasta market and margin is shortening in the same direction. And the others, which are snacks, healthy snacks such as the Jasmine brand, a growth of 7,000 to 8,000 tonnes.
Average price, putting everything on the same page, year-on-year, prices have fallen due to the reduction of commodity prices, as we saw in the previous slides, from BRL 6.2 to BRL 5.55 for the average price at the end of the first quarter and the end of the second quarter, and we see an expansion from the average in the second quarter to the average to end of June, an expansion of 6.9%, which shows with the increases that have been practiced during the second quarter are actually showing up on our results only in the last month of that quarter, while in the month of April and May, the average price was still impacted by the tendency of the lowering of prices in the commodities market, which began last year.
Looking at our market share, we have a market share of value in the upper part of this and also then market share volume. In the area of cookies and crackers, we see a small retraction in market share in the value of market share and a retraction in new volume happened here, which we'll talk more about in questions and answers. It was much more reduction of prices, but this is still an adequate level for M. Dias, something close to 32%.
In pastas, quarter-on-quarter, we saw stability in market share value in value and growth in market share in volume, and with flour, we had growth both in share value in value and in volume share. So these 2 categories of pastas and flours and in cookies and crackers are small retractions. The behavior by region was similar, a fall in revenue of 9% in the defense area and 7% in the attack areas. The behavior of prices and volumes followed basically the same tendency.
Saving the chapter about revenue and share and looking at the cost and expenses area. The first information here is relevant. We diluted the fixed costs in the second quarter. There was growth in volumes and in production. So consequently, there was a higher dilution of fixed costs measured per real per kilo was at BRL 1 since the beginning of last year and in the second quarter went to BRL 0.9, and in the year-to-date, it's stable. However, the reason of this fall, we sold nice products and better utilized our capacity. We're operating above 70% using 71.9% of our production capacity. Even the consolidated capacity looking at all of the lines for flours, cookies and crackers and pasta, there was an increase of capacity in every category. With some utilization of commodities prices, as we saw previously, the red line shows the spot prices in the market, all in U.S. dollars. And the blue line is the average cost of M. Dias' stock, both for wheat flour as well as for palm oil. The palm oil had a behavior which was more stable over the year, so both in the market as well as in our stocks.
Wheat in the market fell during the year, has started to rise starting in April, opened a gap in relation to the cost of our M. Dias because we have a hedge in wheat, which is executed principally through our stock of 3 or 4 months of wheat on hand. So our cost of this stock is more competitive than the spot price in the market during that period.
Now I'm looking at gross margins percentages in the lower part of the slide. We had a gross margin of 33% last year. This year, in the quarter, 34.9%. And here's a few highlights. The favorable effects for our gross margins, lowering our variable costs, principally the costs of wheat and palm oil in this period, which brought us to 30.7%. And the fixed cost, which I brought from 1 out to 0.9 is more than enough to compensate the lowering our average prices from BRL 6.3 to BRL 5.2.
Now looking in the short term, which looks at [ '23 with '22 ], we see there has been a retraction of gross margin because we start to see in our commodity costs, principally due to devaluation of the real, we saw that it annulled our gains through the fixed costs at this moment in time, with the reduction of the average price of BRL 5.4 to BRL 5.2, remembering that the average price in June was BRL 5.55, but it still wasn't enough to make a relevant contribution in the quarter, but we'll have a relevant impact starting in July, the relative effects of the variable costs compared to fixed costs and the reduction of average prices. However, there was still a margin improvement to 35.7%, 34.92%, 35. 7%.
The administrative and selling expenses here consolidated in SG&A represented 23.6% of net revenue. And in nominal terms, the growth was almost in line with inflation of something similar to 2% above inflation. We also had increase in volumes, which explains in the line of selling expenses also in relative terms from 20.2% to 23.6% was due to the reduction of the average price. This percentage is total of administrative expenses and sales by the net revenue in the period. This net revenue fell due to the fall in average prices. This is an increase of the year from [ BRL 23.8 million ]. Due to this change in context as a whole and M. Dias as well is operating with prices below last year because of the relevant reduction in the cost of commodities during the first months of the year. So due to this context, we have structured some actions and initiatives to line up our structure with our expenses. These relations have started with to be executed in the second half. And the expectation is that we'll see the results during the second half of the year. This involves a series of initiatives, the idea is to bring only a few examples. This does not represent all of what we're doing 100% and what we're doing. Just a few examples. For example, in the standpoint of structure halting requirement reduced over time, more rigid control of discretionary expenses and several initiatives which can offer gains in operational efficiency.
So combining the dynamic which we saw of revenue with costs and expenses will come to an EBITDA both in nominal terms as well as in relative terms. The margin went from 3.2% to 12.8%. The nominal results was BRL 337 million for BRL 337 million. What explains this reduction in margin nominal EBITDA was a reduction of the average price of the products sold. The net revenue saw the same tendency, both in relative terms as well as in nominal terms from BRL 218 million to BRL 190 million here, we had year-on-year growth in the first half of '24 versus '23. The same thing to our EBITDA, which went from BRL 551 million last year to BRL 614 million with the expansion of this margin, both in EBITDA as well as in net revenue.
Now looking at the cash generation and debt and investments. Here we start with the quarter and year-on-year. We generate cash, BRL 212 million in cash, principally due to the results. There was also a consumption of BRL 128 million, basically related to the recent increase in costs. which had an impact in the balance of our stock of our inventories. Same for the accumulated year-to-date numbers. In a number of days, looking at our working capital from suppliers, clients and stock. Suppliers, we improved year-on-year from 44 to 63 days and quarter-on-quarter, a reduction of 12 days to explain mainly because of a favorable impact, a calendar effect, which happened in the first quarter since the last day of the month was not a business day, so several payments wound up being made in the following month, which was April.
In terms of clients, a stability from 58 to 60, but a relevant reduction in the quarter-by-quarter from 70 to 60. We mentioned in the conference in the first quarter that we're making a great effort for the recomposition of stocks and our clients after the implementation of SAP, which happened in January and in stock in inventories, a slight increase compared to last year, but also a reduction in the number of days compared to the previous quarter.
In terms of leverage of the company, for the third quarter consecutively, we have a net cash position which shows that the company has more cash on hand than debt. So we wound up with a net position of BRL 91 million in this semester versus a position of net debt of BRL 1.2 billion at the end of last year. And for the 6th year we were rated AAA by Fitch ratings with a stable perspective going forward. 70% of our debt is long-term debt, principally starting in 2027, where we have BRL 1.2 billion of debt coming due. We had BRL 61 million invested in this quarter, and a total of BRL 113 million year-to-date, 4% of which was done last year with a highlight of machines and equipment. Giving you an example for non-fried ramen had a very good performance.
Remembering our strategy has 3 pillars of growth: one, to leverage our current business, especially cookies and pastas in the areas of attack, entering other categories such as snacks and healthy snacks and grow internationally through exports and the company that was acquired in Uruguay, which is Las Acacias. All of this included in the continuing program of productivity and efficiency. The plan for this year is growth, involves levers and ability, so the levers are these 3 enablers, cross-selling to leverage these 4 brands, Jasmine, Piraque in cookies, we had Vitarella which is the biggest brand of cookies in Brazil in M. Dias and the Finna brand of flour, which is for consumers. Innovation is here with with the Piraque brands and the ramen has not yet produced results and the reduction in the cash and carry exclusive brands. These are the enablers and continuing investment in marketing, commercial excellence, especially at the point of sale, which is where things happen. The GPB, a joint business plan with the retailers, which has a horizon of time, a longer horizon of the process of pricing and implementing service levels and the digital transformation, which is underway.
Looking at the highlights of ESG. These are the principal indicators for the year of the year-to-date and for the quarter, a reduction in the consumption of water, reuse of water, women in leadership, which has improved, the lowering of the frequencies of labor accidents and strengthening our relationships with local suppliers. We have all of the explanations for these indicators. Before going into the question-and-answer section, we want to talk about the management of M. Dias. I want to thank the trust and the presence and the participation of all of our investors in our program of IR, especially this year, when we were positively recognized, and so now we can now go to questions and answers. Thank you.
We'll now begin the question-and-answer session for investors and analysts. [Operator Instructions] Our first question comes from Gustavo Troyano of Itau BBA.
Two things I wanted to ask you right now. One is about the cookie and cracker category. We saw that your market share value fell a little more than the volume market share when compared to the first quarter, even though you have increased prices, as you mentioned, the price in June is above the average price of the quarter. And even though we also see a small sequential fall in prices, as Fabio mentioned, I just want to understand from you, as a component of mix in the cookie and cracker category, which could explain part of this impact in your performance on the mix quarter-on-quarter, perhaps in the Southeast, the premium brands losing more than the portfolio overall. This dynamic quarter-on-quarter in the biscuit and cookie and cracker area. And as far as the industry, which historically, we have a higher propensity for the pricing when there is an inflation in costs in the scenario, which we're seeing right now, which we have not yet seen happening in the industry. So I want to understand a little bit about the dynamic of the industry and from June until now, if you comment a bit, and then afterwards, if you've seen any reaction of the market in this sense. So you can compare the magnitude of what you have implemented during the quarter.
This is Fabio. On your first point, yes, there really was an impact, a mix impact in the rationale, as you mentioned. In the cookies and crackers, we wound up losing a little more share value compared to share volume. It was not a question of between categories of cookies and crackers or pastas, it was much more due to the results shares having gained some share in the Northeast and lost a little bit of share in the Southeast during the price increase period. Remembering that in the Northeast, our market share is above 50%. And in the Southeast, is something closer to 20%. So this changes the timing of when this re-pass of prices can be done. So this is by region.
Looking forward at the competitors, M. Dias came out with a price ahead of our competitors. The competitors raised their prices with lowering prices increases than M. Dias is actually much less in cookies and crackers. We came in with a 9% and some came between 5% or 6%, but this increase in the dollar, it generated a certain concern on the part of the market. And they made a second increase, yes, bringing them closer to us between 7% and 8%. We saw that in July, this will be even more evident in August. The recent IPC of [ Julio ] and it becomes very clear. Wheat flour went up by 2, cookies and crackers, 7-point something and pasta, which is still stable with actually a small falloff. But this appears even in the inflation of our categories in July. Part of this protocol happened previously. But the realization of these things started in July, and we came totally fully impacted in August. So when you see August, we also to see a year ahead to inflation of some inflation in these categories.
Next question is from Thiago Duarte, BTG Pactual.
I want to examine a little more of this information that you've passed along about the average price in June. Trying to stratify what is the effect mix I'm thinking about the mix inside of pastas or booked cookies, but in the M. Dias overall and how much is passed through in fact? The reason I'm asking is, when we look at the average price in the company during the second quarter, this is an important effect on the relevant growth in the volumes of flour, which lowered average prices of wheat, flour and bran, which has an effect on the mix effect. This mix effect between cookies and pasta and flour and bran and margin, how does that impact the numbers from June, looking at the numbers for the quarter overall. Finally, to know, how much is the price increases, and how much is the mix effect on your prices in the quarter and in June?
This is Fabio, I'm going to start here with your answer. We've had 2 factors. I'm going to use the rationale that you placed, the average price in the second quarter of '24 compared to the month of June. Remembering that the prices are still rising, as Gustavo mentioned, and we have an expectation in the month of August or even a higher average price. So we see on the mix side of this question, the category of cookies and crackers gained relevance when we look at the month of June as a whole for the second quarter, which is again positive because the category in which we have the highest prices and the highest margins. And there was also an increase in price or expressive price increase in the categories of pasta, flour and bran. These are more closely tied to commodities, and we saw that commodities have gone up substantially starting in the month of April, and especially at the end of the quarter with the devaluation of the real. When we look at this going forward, instead of back, the mix effect will be responsible for something like 1/4 of our lowering average price, when we started to lose a little bit of representativeness in cookies and crackers in the overall results. Against that comparison in the second quarter of '24 and with the month of June, there was a recovery of the representativeness of the cookie and cracker category. At the same time that there was a more relevant increase in the other categories.
Okay. That was clear. If I could ask one more question. When we look at this volume of flour and bran, in the second quarter, do you understand that this is a level of volume that is sustainable looking into the third quarter and fourth quarter? Or is this number for some reason, a little bit unaligned because actually it's a much different level than in the quarterly sales in these categories that you have been reporting.
This is Gustavo speaking. I think, yes, it's sustainable. And if you look at the quarter, the biggest problem in our vision here internally was not in the sale of these volumes of flour. They were relevant. But the biggest point here is the weaker sales of cookies and pastas because we had seen due to the international transactions for flour or for wheat, and we expected an increase in wheat and we took advantage and bought. We had decreased the value of the dollar also, when they started to accompany the change of prices of M. Dias Branco. This going out ahead of time, running out ahead of time when this pricing gave us an increase in the volume of cookies and crackers. And in March, and in May, we understand should happen now going forward with everybody raising prices, that the volumes of cookies and pasta should go up. And importantly, and the idea of balancing all of this out with the wheat flour. So this distortion on mix due to the prices of flour and bran should not happen again, not because those 2 items are falling but because of the growth in volume of cookies and pasta. This is our understanding looking forward.
Next question comes from Pedro Fonseca of XP.
I wanted to just touch on 2 questions. One is about channels. During the last call, that the cash and carry recovered more quickly due to a market question rather than a plan of the company. These were large closed truckloads and it was something that the company took advantage of sooner. There was a representative events in the cash-and-carry market. And my other question along those lines is the rationale that we've been looking at in the first quarter. This is to make sense. And in this sense, can we also imagine that there is a repressed demand in the other channels. That's my first point.
And my second point is when we look at the question of the flour, look, talking about market share for cookies and pasta 1/3, which the company understands is rationale. Is there a target we could expect for market share for flour? Those are my questions.
This is Fabio. I'm going to start with the answer. Let me start off with the cash and carry question. Cash and carry represented 30.4% of the revenue in the first quarter and 27.1% of revenue in the second quarter. So there's a reduction in the importance of cash and carry in our sales. When we commented in the first quarter was that after the month of January, where we had an operational stop to migrate into the SAP. The channel came back quicker due to the large volumes was cash and carry. Second quarter has already been a quarter that was normalized in terms of channels dynamics. So with this reduction of 30.4% to 27.1%. In comparison with the previous year, there is an increase in participation from 24% to 27.1%. Here, there are a few factors at work, but it's important to mention 2 of these factors. One is the faster growth of the channel, not only for M. Dias' [indiscernible] for the company in general, in the consumption teams, the area that grows the most. The second factor is we reintroduced brands that are more economical brands in the cash & carry market at the beginning of this year. So Predileto [indiscernible] to these 2 principal brands. So this also has had an effect. And this question is more internal charge that we made to reintroduce these brands and a structural question of these channels.
In relation to wheat flour where we have a market share close to 12%, gaining share as over the last couple of quarters. When you think about this business, especially in the South and Southeast, it's a new business. It's only happened only a few years ago. especially because of the mill development, Southeastern mill, which we are inaugurated between '16 and '17. So this structure has a lot of unused volume [Technical Difficulty] only represents domestic cookies and flours in retail. So if you look at in terms of the importance or representativeness is the B2B, the sale of wheat flour to pizzerias and restaurants, to bakeries and restaurants is 60% of our business. So this has not been affected. It's difficult to hit a target for business of flour as a whole, where we look at it is growth year-on-year and productive capacity. And for now, we're able to grow in relation to our current capacity. It's not a targeted market share because it's difficult to measure and 60% is B2B, and we don't have really measuring instruments as we do with the retail outlets.
Next question comes from Lucas Ferreira of JPMorgan.
The first question is a follow-up about the cost question. The graph that you showed the first one shows that the price wheat in reais is up by 50% from March till now. While your prices has gone up not even 2%. I understand you still have this increase to be in practice. Order has not yet come online. But my first follow-up question is the price of wheat under graph is increasing, the Chicago price did very well. But it came back closer to [ 5 ], and the spot wheat you buy more from Argentina, but the price is even higher, the prices dropped. And I want to ask you if this increase of 9%. It's enough to maintain your margins at the levels of profitability that you were looking at earlier, 15% or more in that range for the longer term. Do you have this perspective that this margin you'll be able to deliver this margin again in this semester?
And then the other question in terms of the question of volume, if you think that the level of SG&A that's happening today above what we used to see, is that a higher level? Do you think you still have a ratio falls a little bit. My question is, if what you've done is working with the mix of volume that's higher, how these products with average prices will slightly lower, that Is probably somewhat higher than the 20% that we saw in the past.
Let me start here. [indiscernible] add on. The main thing here was volume, revenue. I said net revenue, I should say. This expected a great deal, the representative in SG&A. It grew a little more than inflation, but nothing relevant. We had some expenses that we were not able to activate due to this quarter, which impacted us, which are nonrecurring expenses, so structure there's nothing here that makes the company think that there's any risk of not going to look back to these levels of 20% to 25%. It's much more in terms of revenues and in control of costs, but still reversion in June and July with price is already in effect. and having a better margin year-on-year, it's better. And the expenses are under control. Even so since we had an impact on revenue important more than we expected year-on-year. We've already passed through a process of revisions in the last month. Looking at all the lines of the packages that we have in a mature process of matrix budgeting and so forth, we revised everything we could to economize and reduce costs for the year to go until December and brought something close to BRL 200 million leaving the industry until we have the adjustment of the [indiscernible] reduction in the use of chillers for the cooling of water, travel in over time and so forth for the company and work. I have a series of things on this front. So we have, first of all, the revenue recovering the levels that we consider normal. And so therefore, we cover the expenses, which we understand are important for growth. However, I will return to saying that our result of 21% of SG&A of revenue and net revenue. It's something that's in our vision is very structural and we should see this happening by the end of the year. That's our perspective. And the revenue factor also has a great influence over this. So what was the second question, Fabio? Fabio, would like to answer the second question.
I wanted to add to complement the SG&A point. This is the principal, the average price for revenue, the mix of products impacts on SG&A, yes, there is an impact on combined flour, when it gains relevance in the mix, you have to deliver the flour, you have the freight costs, the freight can be more expensive than in the other products. So this affects our SG&A, we normalize the mix and get back to the question of Thiago when we compare what was the month of June compared to the second quarter, consolidated, we should have a positive effect on this with the normalization of this mix. In relation to wheat is volatile. It fell during the year and then started to recover strongly. When you look at Thiago, these are Chicago, these are dollar prices. However, it's important to look at them in reais, because here, we pay in reais, M. Dias or our competitors. So the price is still high. So we can't offer any guidance on margins, which is our practice. But on the pricing that's being done is for the margin expansion at the best equation possible between price and volume.
One experience that we have here is that the increase in wheat prices winds up helping us because we usually are in the head. And when this happens, this generates a concern on the part of our competitors who are less protected. They wind up pricing together when they have an increase in wheat, they come with a higher increase. The Chicago prices is not necessarily the price that we have because we have payments for freight and other things. We've been buying a lot from Russia as well. The point is that all of the entry of wheat into Brazil, our wheat price is equal to or better than our principal competitors, even the big trading companies. I think in gross margins we've shown a good level of execution even with the increase of wheat and exchange rates. We have been able to expand our margins. I don't see any risk of losing gross margin. I think on the contrary as a reflection of this what we saw in the beginning, M. Dias going out first protecting our margins, our gross margins and suffering a little bit with the net revenue, with a stable margin growth, and recovering volume with prices already at the correct level. The SG&A is going to control with some plans for reduction, which will take it to a level closer to 20% in this next quarter.
Next question is from Isabella Simonato from Bank of America.
My questions are still along lines of top line growth. First of all, following up to Fabio's question about the dynamic of volume going forward. When we look at the volume of flour, which is the level that is above the level that you normally sell, it doesn't seem at the bottom of cookies and crackers was so low was pressured downward. Obviously, it recovered sequentially, has some growth year-on-year. But what would make this contribution of cookies and crackers and pastas be so different going forward than the whole share of the company? So that's what I wanted to ask. What's going to force these cookies and crackers and pastas to go up to compensate for this higher volume of flour? This is my first point.
And the second point, also along this line of price of wheat. In fact, it seems that the highest part was at the end of May, the increase. We look at the future curve, Chicago's prices are not necessarily the best number to use, but the future curve is for lower prices, the real has different prices, has different opinions, but it doesn't seem that you're going to have a big effect to increase prices going forward. So we've seen more erratic movements in the sector as a whole, you come out ahead, but the sector doesn't necessarily accompany you. This volatility shows that. So I want to understand what's your strategy to protect your gross margins at a moment when you don't have the help of inflation to support your price increases. How do you think about that?
The company as a whole because we have a lot of price volatility with the products, but your product is a little bit above what we expected, and consequently, gross margins as well. These 2 questions.
Speaking is Fabio. Your 2 questions actually flow together. But let me start with your initial point in relation to mix with the highlight to cookies and crackers. Quarter-on-quarter, all of our categories had expressive growth above 20% in volume sales. But it's important to remember that we still have an effect of seasonality with the first quarter being a little weaker due to holidays, and it comes back online in February and March. And first in the first quarter, we had a slowdown due to the migration of our system to SAP. In terms of volume, the quarters are comparable. When you look at the relation second quarter of '24 compared to the second quarter of '22, these are more comparable. The total volumes grew 12%. Wheat flour grew by 20% and cookies grew by 1%. However, one growth [indiscernible] is not much, but it's still within what we expected. All of our growth plans of the company from the standpoint of investments in marketing, innovation, higher levels of service, pricing were designed so that we could have a superior growth above 5%, what we saw in the first quarter, and this came out in [indiscernible] with price increases. This is normal. It has an unfavorable impact on volume when you come out first, but at some point in time, things start to fall together. And this coming out first, we saw the impact slightly unfavorable in market share. starting right now [Technical Difficulty] delivery volume growth, which is higher even better than we delivered in the second half. So this should help us to gross margin in cookies is higher than in pasta and flours and also the average price. We don't want to sell less flour. We want to sell more flour, but we want to sell more cookies and crackers. Looking at both, this mix effect could be favorable or unfavorable. However, it's important that we look for growth of cookies and crackers with our principal category above 1%.
One point is about cookies represents 50% of our revenue. It's by far the category in which we have most invested as far as added value. If you look at the launches and Fabio can talk to you about these numbers. I want to tell you the majority of our launches in recent years have been in the cookies and crackers category. And we talked about the expansion into the South, Southeast and Central West, which we still haven't seen important growth. We have a team set up for that, we're going a slower rhythm than we would like to, but it's part, majority of it is to sell more cookies and crackers. It makes sense to improve our operations there, but that's not the level of work that we need for our future, our future growth in the category of cookies and crackers, we look for bigger growth in the cookies and crackers categories.
This is Fabio. The question of wheat, which you mentioned, this winds up being a challenge every day for us. We see the Chicago price goes up or down, exchange rates. We would like to know where it's going, but this is a challenge. So every new process for manufacturing has been set up to answer this question of volatility in the market. So I can't tell you where will we be at the end of the year. Where will be exchange rates at the end of the year? But it is possible to affirm that the structure today from classification explained this volatility of the market arriving, optimizing the [indiscernible] of price and volume.
Prices have stabilized at a slightly higher level than at the beginning of the year. At the same time, costs have been more competitive. [Technical Difficulty] In July. And then going forward, new life, we don't see this risk on the horizon, at least for now.
So understand July is the reflection of the price increases that you implemented in June. Not a new attempt.
No, it's a carry forward of those price increases.
The questions and answers is now closed. We'd like to pass the word to Gustavo for him to make his final considerations.
Thank you all for your participation. that you know that our IR team is at your service for any questions you might have. Mail me or Cefaly for any additional information. The company continues on its trajectory of growth with profitability. Even though we've had a very challenging year with variations in exchange rates and wheat, dollar, [indiscernible], we're still here in the execution with the higher levels, highest level of services, launching products with higher added value and a great deal of optimism in relation to the future. continuing a trajectory of our strategic plan, and we continue to add to your service. Thank you all very much.
The video conference of M. Dias Branco is now closed. We thank you for your participation. Have a good day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]