Good morning, everyone, and thank you for waiting. Welcome to the earnings call for our third quarter in 2023 at Assaí Atacadista. I wanna highlight that if you do need translation, we have this tool available on our platform. In order to do so, please select the interpretation button through the globe icon at the bottom part of your screen and choose your language of preference, Portuguese or English.
We'd like to let you know that this earnings call is being recorded and will be available on the IR website at the company, at ir.assai.com.br, where you can already find the earnings release. During the presentation, all participants will have their mics off. Soon after, we'll begin our Q&A session. To submit a question, please select the Q&A icon at the bottom part of your screen. Write your name, company, and language to enter the queue.
As you are announced, a request to activate your mic will appear on the screen. And then you should, activate your mic to submit your questions. We ask you to send all of your questions at once. We also want to highlight that the information in this presentation and possible statements that could be made during the earnings call, related to business perspectives, forecasts, and operational targets and financial targets at Assaí, represent beliefs and assumptions of the company's management, as well as information that's currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions as they refer to future events, and thus may depend on circumstances that could or not occur.
Investors must comprehend that general economic conditions, market conditions, and other operational factors may affect the future performance of Assaí and lead to results that differ materially from those listed in such future statements. Now we'll pass the floor on to Gabrielle Helú, our investor relations director at Assaí.
Hello, everyone. Good morning. Thank you for participating in our earnings call for the third quarter of 2023. Today we have Belmiro Gomes, our CEO, Daniela Sabbag, our CFO, Wlamir dos Anjos, our Commercial VP, and Anderson Castilho, our Operations VP. As normal, normally, we'll submit the floor to Belmiro for his initial remarks.
Thank you, Gabri. Good morning, everyone. Ladies and gentlemen, I want to thank you all for your participation during our earnings call for the third quarter. The third quarter of 2023 had this big highlight, which has been on the news and media, which is the fact that Assaí is the company in the food sector, that it has the greatest presence in Brazilian households. We reached 25% of all Brazilian households, so one in every four households visits an Assaí store.
This is a result of our value proposition and our expansion plan with a bigger amount of stores, but especially the business model that within our different projects that we're going to discuss up ahead in the conversions, this allowed us to reach this important milestone. Since above all, as a company that's in this major expansion project and will attract new customers, providing guarantee that this was determined in our project and it can be achieved.
Besides this, we also have the acknowledgement and recognition of cash and carry brand that's most admired in Brazil with an award that was granted by SuperVarejo. So before we begin the presentation, I want to thank all of our customers for this acknowledgement and recognition. We can move on to the first page. The third quarter is still in a market scenario that we all know is very challenging, with numbers that are very positive from the perspective of sales evolutions, and we reached a gross sales level of BRL 18.5 billion. We were able to reach, in the last 12 months, a total level of over BRL 70 billion in revenue. And as a consequence of strong expansion, 52 stores in the last 12 months, we have over 100 stores that were opened in the last 36 months.
Part of this, of these store openings come from the conversion project with the hypermarkets, which was necessary and required many different adjustments in our business model and even in our value proposition, adding on services, changing the assortment and the mix. So that this proposal, which is something we had already been developing through previous conversions or organic stores deployed in downtown areas, are really what we had already been developing. So I want to thank our team from different areas, almost 80,000 people. I want to thank them all for the results and numbers achieved in the third quarter. And in the third quarter, we also finished, as you all know, Assaí went through some shareholding structure changes with Casino's exit.
In the third quarter, we had the last change in our board with the exit of the last member that represented Casino, Mr. Philippe Alarcon , and Enéas Pestana coming in. I want to thank our board as well for the support in all of the work that has been performed within this new phase of the company as a non-controlling shareholder company with a true corporation profile. So our performance is very strong. We've been advancing in our expansion plan. We entered the third quarter with another state in Brazil, which is the state of Espírito Santo, with the store you can see on the screen. This is a store that was built and that and complete in Espírito Santo, continuing our expansion plan. Moving on to sales.
But besides the BRL 70 billion-BRL 80.5 billion in revenue in this third quarter, this represents an evolution when it comes to the second quarter of over BRL 1 billion. So we have a very strong base that is a bit complicated compared to last year, because we started opening these Extra stores at around August last year. So you have growth rates that are going to be adjusted over time, but we kind of call your attention to look at the total growth rates, and also look at the growth rates in the sequential evolution throughout the quarters in 2023. Within the third quarter, I think even with the amount of stores, as we had mentioned, an important achievement that the company reached the highest level of EBITDA margins in the year. We're bringing in this EBITDA margin in both views.
Although the IFRS standards mentioned that we should highlight this, we also believe that the pre-IFRS version reflects the company's numbers better and the analysis of the analysts. So we're also delivering an EBITDA margin of 5.4% in the pre-IFRS version, which is the same margin that we considered in the previous year before the beginning of this process. When we consider the amount of stores open in the period, the pre-operation costs and a lot of the stores that are still ramping up and other costs, we have an issue until the store is more productive, in our view, with positive numbers. So the same stores in the quarter have a series of different effects. The main point is that we're experiencing a moment of deflation in food prices.
Some categories that are very important in the food market, and some of them have a price regression as well. And so subproducts of milk as well as other commodities as beans and other categories. And so these are more connected to agricultural factors and external factors as well. But at the moment, when you have deflation that's concentrated into different categories, then normally these movements consider one or two categories. But then at this moment, we have at least five categories that are really important with deflation. And this kind of changes the dynamic of the business, especially in the individual legal entity public, because when there's a drop in prices, they're a little more careful in their volumes and the amount of stock.
This, of course, impacts the same stores, which is negative by 0.9%. There's also an impact besides the deflation, which is the group of stores that considers a bit of the cannibalization in this project, with the amount of almost 100 stores and also the conversions at Extra. At a moment where we closed Extra, we had some benefits in the amount of stores in last year, and so there was already a forecast, within the beginning of the project that we would have some cannibalization, compared to the base in 2021 and also throughout 2022, at the period where Extra was closed down.
Now these stores, naturally, as they, as we open these stores at Extra, we also have an impact in same stores, which also leads to an impact, when we consider the numbers, in 2023 and 2022. A big highlight is expansion, which allowed the company, even with deflation, negative price points, could advance in the BRL 3 billion in revenue, leading to a growth of 22%. This growth comes, supported by an increase in the amount of tickets and customers. We have 15 million tickets additionally in this, third quarter, compared to last year. When we consider the regularity of the purchases that customers perform at Cash & Carry, this shows the size of the dimension of the new customers that we've been able to attract into these new stores.
So this is what's going to make us the company that's most present in Brazilian households. Even with this big amount of stores, this project is still underway, and we were able to keep a gross margin that's very stable compared to last year. Demonstrating that our business model, whether the food sector and also the value proposition of Assaí is extremely resilient and resistant to all of this. Considering the very strong level of stability, even with all of the changes and challenging economic scenario, and even going through a very intense cycle of store openings, we're able to reach the highest level of EBITDA margin of 7.1, and as I mentioned, stability of 5.2, 5.4, sorry, in the pre-IFRS vision compared to the period before the beginning of the IFRS.
The net income is something that Dani will highlight up ahead, but of course, there's an impact in the investment levels that the company performed and the cost of the carryover in this debt. So we're gonna end with BRL 185 million in the quarter. An important highlight in our vision is the cash generation. Historically, Assaí has grown, generating its own cash, and we're gonna talk about this up ahead as well, about our cash generation that reaches BRL 4.9 billion in the last 12 months. Most of the biggest investments we performed in growth and expansion is really supported by the strong cash generation, which is a traditional factor for Assaí. When we look at this today, and Dani will give you the overview on the debt in the company.
When we look at even our current debt level, most of them, most of it comes from the split process of GPA. And what we want to highlight here is that the company is probably performing one of the biggest projects in the food sector, which is the acquisition of the commercial spots at Extra. And so when you add all of this to our organic expansion, this is part of our growth and our expansion that the company has been mentioning in the market. And so when we look at this overall period, we're bringing in a vision from the end of 2020 until the end of the third quarter. The end of 2020, we had a company with revenue of BRL 39 billion and 184 stores under operation.
At the end of September 2023, we have a company, and we still consider this as not stabilized because all of the benefits of the store openings and other conversions and also maturity ramp. So the company was capable of going from BRL 39 billion to BRL 70 billion, which is an add of BRL 31 billion in revenue. And just this additional revenue would already be the third player in the Brazilian food sector. So in order to do this, we had to perform investments, plus cash generation is really our important lever. We generate BRL 9.4 billion in this period, and this supported our investments in store conversions, organic expansion from BRL 6.8 billion. Part of this payments of the acquisition of the commercial spots as well.
Our CapEx also for maintenance is relatively stable, so about BRL 800 million that was invested in this period. It's not only the maintenance of the stores, but also some other areas and expansion. And so the company distributed BRL 400 million in dividends in this period. But we had a cost of debt, which is above what we mentioned, especially when we had the acquisition project for the hypermarket. There was another expectation about Selic. But even so, with these BRL 3.3 billion, we were able to have this variation in the cash flow of BRL 4.6 billion, highlighting the BRL 9.4 billion, and this was important to support all of the investments the company performed during this period.
So within these processes and the expansion that had been done, Assaí was a company that had 14 stores only when GPA purchased this in 2007, and the company has been generating cash and growing. But there was also a need to perform a movement that would be stronger with the acquisition of the hypermarkets. You can advance to the next slide. This movement is not only related to taking on the same model to a new region, but it's also related to modifying the cash and carry model, which is the channel with the biggest penetration in Brazilian households. Cash and carry today is a sector that really has the biggest volume of sales, and within the sector, we have the objective of always standing out and differentiating our operations, innovating.
So the conversion project with the hypermarket is not only about taking more of the same. We had already developed some important new projects and new stores and organic stores with a model that could allow us to enter the downtown areas in the cities, and also work with a different target audience, a different income level, and make B2B customers that are especially in the food service sector could have a quicker option for supplying their operations. Everyone knows about the difficulties and logistic challenges in big metropolitan centers in Brazil, and the cost of logistics in Brazil is so high that it makes it difficult for the industry to perform door-to-door deliveries. And so to be able to enter these new opportunities, we bought these spots that increased the level of leverage in the company.
But when it comes to execution, it's probably one of the most challenging projects, and we were converting to hypermarkets for the cash and carry operations. But I also believe that at this moment, as we perform this project with all of the different entities participating, we can really see a change and a shift in behavior in how the Brazilian families supply their homes and businesses as well. So we know about the importance of this project, and this project has been on a growing maturity curve. We highlighted this in our shareholding base with potential investors, analysts, about the company's expectations to triple the amount of sales. This multiple in sales reached in the third quarter 2.7x , even with the stores still on average 10 months of operation only.
So we still have a ramp up and maturity that is to be captured, adjusted according to each market and each store reality. These stores already deliver a gross revenue of 13% above average in the history of the company. And when we look at the 47 stores that were opened in 2022, the EBITDA margin in our pre-IFRS vision already delivers a historical level, as a company of 5.4, which is still strong with this ramp up to capture. So why is this vision of the pre-IFRS vision? Well, because of the dynamic of the behavior in the lease, which is different from what we had, where most of this was prospecting the spots, selecting and building the new locations. And so with this margin, we already go over 7%.
This demonstrates that we're on the right path and that the customers came in and gave back, and we before the return on capital, we have to deliver the project. We have to guarantee that the customers like the value proposition and also come back and give back to one of the Assaí stores, right? So that's the return on invested capital as well. And so here we have both views on the pre and post IFRS, because you have this dynamic with different aspects. But in our vision, both of the EBITDA margins, even in this phase, and the adjusted EBITDA, it's still not what we would imagine in a mature store network, 'cause there's many stores that are still in this maintenance phase.
I also want to highlight the discipline with our expense control, because at the end of the day, we have a deflation in the top line for the same volumes as negative pricing, and a lot of the expense lines still follow an inflation level with the payroll and a series of other expenses. There's a lot of discipline among the team to keep these levels of EBITDA and really thank everyone for the efforts in the operational areas that have been very careful with this, keeping the operational costs so that we could deliver the EBITDA level that we had seen in the third quarter in the pre and post vision. So this is a bit lower than what we expected, but considering the amount of stores, we consider this to be very positive as an evolution.
We can move on. And here I wanna move on to Danny. We also mentioned the aspects on the company's obligations, adjustments in the debt, considering this transition as well, where the company stops being just a subsidiary of the controller, but also a true corporation. And so, Dani, the floor is yours.
Thank you, Belmiro. Thank you, everyone. Good morning. And now we're going to talk about the financial results in the quarter. And this is a result that added up to about BRL 737 million. It's an increase very significant, 77%, impacting the company's results and an increment of almost BRL 300 million. So when we talk about this, blue part here in this bar, and we mention the financial expenses coming from the cost of the net debt, we have a level of BRL 506 million, an increase of 61% compared to the previous year, and it represents 3% of our net sales.
So this is a super important level, and these results in the period were, of course, impacted by the high level of interest, but also considering the higher level of debt, because we have almost BRL 2 billion additional in the debt. And so this will also mention. We even talked about this in the second quarter, where we had an issuance of a CRI, and we had already announced this in the third quarter. We completed this fundraising initiative of BRL 1.1 billion, with a CDI + 26, at a cost of the debt, which is actually lower than the cost in the company.
So in this quarter, we also have an accounting effect that's important to mention, that we should mention the reduction of the capitalized interest. So at this quarter, the effect is only BRL 53 million, and this is because last year, this impact was BRL 247 million. So this is, of course, interconnected, to the advances in the expansion project. So now we're already at the final phase, and we have these values dropping more and more. Now, moving on to the second part of our slide as we talk about cash generation.
Belmiro has already mentioned the highlight here, but in the last 12 months, the cash generation in the company has reached almost BRL 5 billion, so very relevant growth of BRL 1.7 billion year-over-year. This comes from greater EBITDA in the company from the pre-IFRS version, and also has been growing over BRL 373 million, and of course, due to better cash working capital management. So this strong cash generation, when you look at this, it was essential for this important level of investments. And so we have a total of BRL 4.7 billion. So this is basically paying off the level of investments. And on the other hand, we have the negative effect, considering the level of the interest that increased the cost of the net debt.
So the variation we see here in this net debt, going from BRL 7.3 billion to BRL 8.6 billion, is basically due to the effect of the interest rate that negatively affected our debt. So this is why when we consider this concept, we, we reach 2.7x the EBITDA. And in this quarter, we bring in this new concept, where we add up all of the receivables and the balance payable from this acquisition. And in this concept, we can reach 4.4x EBITDA. So that's where we see this reduction.
Before we move on to the next slide, where we're going to be discussing this concept and an important highlight with the reduction of these 4.4x EBITDA, which in the previous year was 0.2x net debt to EBITDA. So we can move on to the next slide. Here we can see this vision of the leverage. As you can all see, and you're used to seeing us present these BRL 8.6 billion. We also go back to the non-discounted receivables, and we can also add up the total receivables and the total balance. And this concept, as I mentioned previously, reached 4.4x the EBITDA, and this reduction is already considering the previous year of 0.2.
We can bring the view and the history of this leverage. And so we can also bring these elements. We can also mention the seasonality of the fourth quarter in 2022, and we see this level that is very similar, ever since the second quarter of 2022. So the fourth quarter, of course, has a seasonality, and the other quarters as well seem to be very similar. And then in the third quarter of 2023, these 4.4 are very comparable to the 4.67 in the third quarter of 2022. So I think here it's worth mentioning that we are mentioning the closing of the conversion project, and here we see growing cash generation, which we've highlighted a lot.
The cash generation grew about 54%, BRL 1.7 billion, and this is really what's going to add speed to the deleveraging of the company, at an even greater speed than this drop of 0.2 that we noticed here in the last 12 months. So of course, along with this, we have a lower cost of debt coming from the interest, and all of this leads to greater deleveraging, which we will, of course, notice in the next quarters. So I think these are the main highlights on this slide. And now we'll pass the floor back to Belmiro for his comments on profit and of course, the final slides. Right, Belmiro?
Yeah, thanks for that. Well, the net income, of course, is impacted by the carryover cost of the debt, but in our vision, the project was very significant and the determining factor, although there are some impacts now. At this moment, we are building this company when it comes to the value proposition and customers, and it's a company that's growing very strongly. So in the quarter, one of the biggest impacts is not in the sales or performance, but this still, of course, reflects higher level of debt among consumers and interest rates that are higher than what we expected, of course, in the beginning of the project.
But it also demonstrates that the resilience of our business model, even with all of these factors, even with high interest, even deflation, and even with the environment for purchases still being a little cautious on behalf of the consumers, the company continues to deliver positive results. And in this third quarter, we have an impact of a renegotiation that we had to perform with the controllers XP. We had two topics that are very relevant, and the only two topics that were pending. We have no other aspects related to Casino, but with Casino stopping to be the shareholder of the company, we had to redo the contracts for a batch of stores since they had a clause that considered the contracts would be canceled if the controller left.
There is still an impact marginally in the third quarter with the waivers achieved with the financial institutions that also considered changes in the contracts if the controllers left. So as we notice, considering that the conversion project is a project that has a beginning, middle, and end. So this project is now reaching its final phase, and we still have two payments that are very relevant, one now in the fourth quarter and another one to be made in the first quarter of 2024, in regards to the commercial spots from Extra stores. But we still have a big amount of stores to open.
We have opened another conversion in Rio, which in October, we also opened up a store in Foz do Iguaçu, an organic store, and another one in São Luís, Maranhão, as well as another store in Fortaleza, in Ceará. Now we're finishing a total of 19 stores opened this year, and we still have a challenge in the fourth quarter. We have some expenses, even from an administrative front, that also reflect a bit of the preparation for the opening of another 11 or 12 units we should be opening in the fourth quarter.
So that we can complete that conversion project for the hypermarket, and from then on, the company will of course have cash generation from the current store network, the growing amount of new units, and along with the existing interest rates, should definitely lead to a readjustment in the levels of investments, which will help us deleverage and reach the levels of net income that the company had before. Now, when it comes from an operational aspect, that's pretty much it. And I want to move on to the next slide, where we have some important ESG advances. ASAI is a big reference for investors and an important benchmark. When you look, if you can talk to our IR team and sustainability department, you'll see how much we've advanced in this.
Now in the third quarter, the company is the only company in food retail that's within the B3 indicator called the EG5. So with over 25% of women in leadership positions and 43% of leadership positions occupied by Black people. So this is a constant initiative, and it's an ongoing effort when it comes to inclusion. But the company is very proud of being promoting within our social responsibility pillar, these different aspects, and not only considering our employees, but also considering the fact that we're a company with the biggest presence in Brazilian households, with diversity in our stores with employees and customers, which really helps us achieve this social responsibility.
So we have different highlights in ESG, but we also have two important achievements in the Assaí Institute, where we launched a call for purchases that, that through our institute and through our My School Cart, which is a project we started in Santarém, in the Amazon region. Now in the third quarter, that will benefit over 2,000 families within the Amazon region and in other areas as well with major poverty, with financial resources as well, that can be used for food, for buying food. So we have important advances also with waste, achieving the gold seal and certification in the Brazilian program, and also a reduction of scope one and two emissions.
And of course, if you're interested in getting to know more about ESG with greater details, look at our sustainability report and see how many different initiatives the company has been implementing in this role of social responsibility. I would like to end by, before I move on, and pass the floor to Gabi, so that we can discuss some Q&A as well. Thank you.
Okay, now we can move on to Q&A, as we follow on with the queue of questions. Now we'll begin our Q&A session, guys. I want to thank you all, and if you do have a question, please select the Q&A icon at the bottom part of your screen, write your name, company, and language, so you can enter the queue. As your name is announced, a request to open up your mic will appear on your screen.
Then you should activate your mic and submit your question. We'd ask you to please submit all of your questions at once when you present them. As we begin, our first question comes from Dani Eiger, our sell-side analyst at XP. Dani, we'll open up your mic so that you may proceed. Please.
Good morning, Belmiro, Dani, and Gabi. Thank you for taking my question. I have two questions, actually. The first one is more of a perspective, mixing the short and midterm, which is, I would like you guys to give us a little color on how the dynamic with the evolution of same store indicators and volumes has behaved in October. And we would mention this, if this would mention an inflection on the consumer perspective when it comes to deflation, that has been pressuring results over time.
And also, when it comes to the renegotiation of leases, and how we can think about the impact in the profitability of the company as a whole. Because there's only 28 stores, and by what I understand, we have 10-20 bps on pressure. And so we just wanna know if you would imagine a more relevant impact in the company as a whole. And then the second point is, as you mentioned, the issue with the deleveraging and this expectation to accelerate this after the first quarter.
You also talked about the readjustments and the level of investments, and I would—I think it's interesting if you could also mention some discussions on this point and what this would be, when it comes to the adjustments in the store formats. You even talked about the stores that are under construction that are expected for 2024. But I wanted to understand what would be this readjustment and possible levers as well, that you're looking at, what, if you consider the scenario with a drop in interest rates, it's a little more gradual, and that we could imagine, of course, depending on other dynamics in the Makro scenario. I think these are the main points.
Thank you, Dani. As we move on to this a bit, I think September was a very positive month. We started off with the 49-year campaign, and this was very strong adherence. So what we've seen so far is the same levels in regards to the third quarter. So we noticed that there's not a big change in the dynamic when it comes to the perspective of stability in pricing, but you have the same concern with, and consumers also keep their standards of consumption.
So what we've seen so far is very similar to what we've seen in the third quarter. Of course, there is an expectation when you are a little more positive, when you consider the impact of the pandemic, that would affect some of the purchases as well. There is a bit of an expectation for December, but we want to be a little more cautious and conservative. So what we've seen is that consumers are keeping up their levels of purchases. B2B customers are also very careful and cautious because they're also pressured when it comes to working capital.
We see pretty much a similar dynamic as at third quarter. But the lease with Península Fund was an impact that in this group of 28 stores, when we look at, of course, these stores are very relevant stores, but when you look at the total base in the company, it's a very marginal impact. There is an impact, but the 0.10 or 0.20 is maybe going to go to 0.2 or something like that. So it's not that relevant when you look at the overall numbers in the company and when you look at the future. Now, when it comes to investments, there is a drop, which is already going to be natural.
We're closing and ending the major project with the conversion of the hypermarkets, which allows us to get back to the organic projects and some stores in 2024 are already being constructed now. So throughout the fourth quarter, we should balance this out to understand exactly what the level of investments for 2024 will be. But there's a big focus in the company to deleverage, so we can reduce our debt if interest rates continue to be kept high.
But even though interest rates continue to be high, I think the main point is really our cash generation capacity that makes the business solid, with the cash generation of the legacy stores and also all the new stores. Really, in the pre-IFRS EBITDA vision, you can see that historically, our conversion rate from EBITDA to cash is 100%. So we've always been able to convert the EBITDA into cash. And if you look at our balance of accounts, of taxes to monetize, these are dropping as well. So the new stores also come in with strong cash generation, which is, above all, the strength that will allow us to deleverage the company. I hope that answered your question.
Yes, you did answer. Thank you so much, Belmiro.
Thank you. Now, moving on. Our next question comes from Maria Clara Infantozzi, the sell-side analyst at Itaú. Maria, we'll open up your mic. You may proceed.
Hi, Belmiro. Hi, everyone. Thank you for taking my question. On our side here at Itaú, we wanted to understand how your mindset is in regards to the perspectives for growth and the revenue in 2024. On one side, the food deflation should prevail in the first semester of the year. The competitive environment is a little more complex, but on the other hand, the conversions are doing really well, and the ramp-up has been evolving quarter-over-quarter with the uplift in sales.
And I wanted to understand how we could consider the buildup of the productivity versus the daily expansion. And I even want to mention the issue with the organic expansion as well. If you guys could mention a bit of the main locations that you're looking at when it comes to opening up this new store in Espírito Santo as well.
Okay, thank you, Maria Clara. And about the organic expansion, as you mentioned, we already have some stores that are under construction. We also will have some completion in this, expansion part for the next year. We already have some regions in certain areas that, where you see Assaí divided into many different regions. We have construction projects in the north, in the northeast, in the southeast as well.
We just opened up, an initiative in the south, in Foz do Iguaçu, so there's not a specific region. But even in areas we're already present, there are many different cities where, for example, in Rio, we have one of our biggest market shares. And in Angra dos Reis, it's a very big city where we don't even have any store yet in that region, and other areas in São Paulo, like cities like São José do Rio Preto, we're starting our first store there.
So we still intend to enter cities that have 300,000-400,000 inhabitants that are very relevant but don't have an Assaí store yet. So when it comes to revenue for 2024, of course, this is gonna depend on how many of these stores and organic stores we're going to be able to add to our base in 2024. I think in 2024, the deflation scenario, and the prices in our perspective, I think, Wlamir can even talk about this a little more, right? Do you expect that we're, we're gonna have prices dropping more, or are we already at a plateau? I'll ask Wlamir to pop in right now.
Hi there, Maria Clara. Good morning, everyone. Also, I think just about the inflation aspect, our expectation really is we have. When we talk, take a look at commodities, for example, these variations in prices are really a perfect combination, really, as we've seen in the last quarter that we ended. So we had, at the same time, many different commodities dropping in pricing. So we don't expect or imagine that this is gonna happen with the price reduction up ahead, but it's really volatile because now we have currency issues. We also have issues with the war, petroleum, oil costs, and even the impacts in the petroleum costs. So there are many other factors, and sometimes it's a little difficult to expect what or foresee what will happen. But what we've monitored throughout the quarters and months is the normalization, the average price.
When you see the overall basket, and, you know, there are pressure, soy going up or, going back at 29%, then you have sugar going up a bit as well. And so there's a bit of a balance, but we don't see that much room for big peaks in prices or a bigger reduction in pricing, of commodities. But on the other hand, we've seen an impact in all of the rest of the assortment, where you leave dairy and you see the basic commodities with a small inflation that comes, along. But we see more stability in the average price, sales up ahead. So we're not seeing maybe... Well, there could be maybe some, factor related to the war that's happening in Ukraine and the Middle East that could maybe even impact the commodity prices.
But this is very uncertain and difficult to foresee anything in this sense when it comes to inflation. So it's a topic that's very complex, but we had imagined that at this point in time, we wouldn't have the impact of the deflation. And so we were expecting the deflation in the first quarter, in the first semester, but now it happened in the second semester. But we do imagine a price stability from now on. Okay, great. Very good. We're clear. It's clear that we still haven't closed the guidance for the expansion in 2024, but now, how many openings are you expecting for this year? In 2023, it's gonna be about 30 stores, and then in 2024, we're gonna expect the fourth quarter. We're gonna wait on this and see.
We have, like, seven under construction, but we're gonna wait for the fourth quarter to close this number. But of course, we have the opening of new organic stores, many different initiatives and work that needs to be done with the approvals and the licenses. The company has a big amount of projects in the land bank, but we have to balance deleveraging as well, and the amount of stores that are going to be open. And we're gonna have to wait for the fourth quarter to be able to disclose the definite number of new stores.
Okay. Thank you.
Well, moving on. The next question is from Vinicius Strano, the sell-side analyst at UBS. Vinicius, we'll open up your mic so you may proceed. You may proceed, Vinicius, please.
Good morning, everyone, and thank you for taking my question. Here on the dynamic of working capital, could you guys talk about what you're seeing when it comes to levers that could improve our working capital up ahead? And also, if you could talk about what would be a more normalized timing for stocks and suppliers, I think that would be great. And another point also would be if you could discuss the mix between individual and legal entity customers in the converted stores at Extra, and how this mix is gonna evolve up ahead. And also, when it comes to the converted stores, if you could discuss a bit of the gross margin in this store network of 47 stores you mentioned. Thank you.
Thank you, Vinicius, and I think I'm gonna start from, backwards, forward, and I'm gonna talk about. I'll also maybe talk about the working capital level, stock, supplier level, and what the expectation is from now on. So for the converted stores, they already have a gross margin that's greater, and we had already expected this. We highlighted this in the beginning of the project. When you consider the product mix and the purchase price, it's a little different, but they do work with a margin that's higher than what we expected.
So then, of course, you have greater participation from the consumers in these stores, but their stores are still ramping up, so we do expect to continue to advance with them a little longer to see what the level of stability will be in certain stores. And then, of course, you have this aspect with a lot of the stores that are not standard or homogeneous. There are some stores in regions that we already expected that are more downtown or central regions have higher adherence, especially for B2B customers, and also utilizes that have stores that are very close to ours and use our store for supplying their own stores.
So we know how it's become more complex and expensive to perform door-to-door distribution, and I think it's valid. You probably saw some of the changes in the laws and rules in Brazil for transportation that will make logistics even more expensive, which is the new driver law. That will make it even more difficult for the distribution door-to-door by industries and delivery wholesalers. And so especially in the downtown areas, which has made this store format and this model really be a quick supply format for this B2B customer.
They don't have to have, like, a minimum purchase. They can buy the quantity they need, and they have access to different brands, qualities, and types of products, especially for perishable goods, which allows us to have strong adherence. But of course, they do, and we did, we did, of course, expect that there would be a bigger participation from end customers. And there's a ramp-up process to attract consuming customers and also B2B customers. And I'll pass the floor on to Wlamir, so he can talk about the working capital aspects as well.
Thank you, Vinicius . About the working capital, if you notice, this is even on our release in the third and fourth quarter last year, we were operating with eight or nine days more in our stock due to the amount of stores and the stock structuring. But as we were able to balance this out a bit more, the amount of stores has been a lot smaller than what we've seen last year. And if you look at this historically, we reduced by eight or nine days the working capital, sorry, in our stock, and this has been kept at about 44, 45. And so this is the trend from now on.
So we want to keep the stock levels at these levels, but also the negotiations for deadlines, which take place monthly and quarterly as well, so we can keep a very healthy relationship with this and also a strong discipline in our working capital. And so when it comes to the expansion, we won't see many variations. And so we should imagine a trend in this sense, and this should be expanded as well now in the fourth quarter, with the expansion in the level of stock.
And this is a normalization in the amount of days as well, that we should be looking at quarter-over-quarter without too much of a variation. So the team has been able to work on this with the commercial logistics and operation area, with a lot of discipline and a rigorous approach towards stock levels without harming sales, with rupture levels at normal levels and within what we expect for the company. And so the stock issue is pretty much stable in Assaí. I hope that answers your question.
That's fine. Thank you, Wlamir. Thank you, Belmiro. Thank you.
Moving on now, the next call is from Joseph Giordano, the sell-side analyst at JP Morgan. Joseph, we'll open up your mic so you may proceed. You can proceed, Joseph.
Hi there. Good morning, everyone. Good morning, Belmiro, Dani, and Wlamir. Thanks, everyone. Thanks for taking my question. I want to explore this issue with the CapEx a bit. When it comes to deleveraging the company, what would be a level, a CapEx level for these new 30 stores? I know that this is a guidance that's not that strong yet in these 30 stores, but what would be a CapEx level that the company believes is reasonable for 2024? And then going back a bit to the working capital issue, I would like to explore a bit of what is possible to improve, even in this initiative.
Thank you, Joseph. I think maybe there was a misinterpretation, because when we talked about 30 stores, we're talking about the 30 stores in 2023, which considers conversions and organic stores. For 2024, we have seven stores that are under construction, and we're still going to define during the first quarter what will be the amount of stores and then, of course, the amount of CapEx we'll consider. But for 2024, it wouldn't be 30 stores.
We were considering a maximum of 20 units or 25 units at most, but throughout the fourth quarter, we're going to review this. I think when we talked about 30 stores, we're talking about 2023. We have seven for 2024 that are already under construction that we need to open, especially in remote locations, Manaus, Macapá, and other regions that are very far, that are under construction already. But the total amount for 2024 will be defined now throughout the fourth quarter, as we look at expansion and we look at the spots and locations that have the best returns on investments, but of course, also considering the company's level of leverage.
From a working capital perspective, as we mentioned, we've already performed many improvements. Of course, we're always searching for bigger changes and improvements, working capital, improvement of terms with our suppliers. But at this moment, we're just presenting to the market that there will be stability in our working capital at the levels we've seen in the third quarter. And if I could also contribute, I think it's important to say that we have a big concern, Joseph, with.
Of course, you consider, you want to try and increase in the terms with suppliers, so that could interfere in your competitive advantage, reduce stocks, and even harm sales, maybe, depending. So we try to find a balance between a ratio between the stock and terms, and if we can keep this balance point, we're going to be in a very healthy position in the company from now on. So it's more about maintenance than actually gaining any differences. Of course, we always want to improve our conditions and our terms with our ratio of days in stock, but I think we're at a level that's very healthy right now.
Okay, perfect. Thank you so much. Thank you. Moving on, our next question is from Eric Huang, the sell-side analyst at Santander. Eric, we'll open up your audio so you can begin. Please, you may proceed.
Good morning, everyone, and thank you for taking our questions. So on our side, I think we have two questions that are pretty much in line. One, you mentioned you entered the state of Espírito Santo, so it's more about understanding what the level of receptivity is in the state, the competitive environment, and also understand potential expansion for more stores there and how you're looking at this environment.
And on the other hand, when you consider organic expansions, we want to understand what we can expect when it comes to the sales levels in these stores. Are they going to be more in line with what we had seen in the legacy stores, or maybe more in line with the expansion stores? I think we want to understand a bit more about the economics in these ex-organic expansion stores. Thank you so much.
Thank you, Eric. Well, Espírito Santo, we should have already entered this market a long time ago, but we opened our first store in Serra, and I want to talk about this a bit, the receptivity at Serra has been, and also what we've been doing in Espírito Santo, and then we'll get back on discussing the level of sales. Hi there. I think in Espírito Santo was very positive. We were very anxious to enter the community there. Customers welcomed us very well there. And the value proposition there for our store, whether when it comes to services, level of service, the mix of products, which is something we're very careful about, we always talk about this issue with the regionality. To give you an idea, we started a unit there where we added about 1,500 new SKUs registered.
As we always want to look at the regional population characteristics. So we want to reach the region, delivering a value proposition that is really unique, working with customers that have a better level of service, but also providing local products, and this is always very positive. So the store has been very successful. We have already been working in this process for organic expansion, and next year we'll have another store in Vitória as well. That's all we're already starting to build now. So this is going to strengthen our brand presence a lot more. And when we look at Serra, how this region, Espírito Santo, I think the store opening was fantastic. We got it right. We had a great start.
The market understood Assaí's entrance as a very strong differential, and now we're not just the Assaí from the southeast, but an Assaí from Espírito Santo. So it's strong. With the second store in Vitória, it's going to strengthen our position even more. And also this regionalized perspective, which was very important, with a local brand, local culture, local team. And so this caution, which has really been important, and so this has been a very careful process we've been doing.
So, w e also had a complimentary point, which is, o f course, we can't mention all of the stores. We have some organic projects as well in downtown regions that are also connected to the conversion stores as well. So we have a conversion spot from a former Makro store into the Maria that has high expectations. It's in the northern region of São Paulo and some other organic stores. But overall, organic stores should lead to, we have, more revenue expected from the legacy stores, maybe one or another exceptions in the more downtown regions that could have, exceptional levels of revenue.
Well, thank you. Perfect. Thank you for your answers, Belmiro.
So moving on, our next question is from Alexandre Namioka, the sell-side analyst at Morgan Stanley. Alexandre, we'll open up your mic, so you may proceed, please.
Good morning, and, thank you for taking our question. When we get back to the point on the openings and when we talk about more of a long term, we want to understand how you're considering expansion when it comes to stores and also when it comes to markets where there are not other cash and carry formats that are not necessarily Assaí brands, but compared to other locations where you already operate with at least one brand, especially when it comes to the city level. I think that would be interesting to look at. Thanks.
Okay. Thank you, Alexandre. I think at the end of the day, there's nowhere in Brazil where there's no cash and carry brand present. So of course, there's always some kind of competition level that's pretty high in most cases, and we see a big amount of players operating in the sector in Brazil. So in our expansion projects, we have regions that are very significant, such as São José do Rio Preto or other places where, in the state of São Paulo and Rio, where we don't even have stores in yet.
And another example is Foz do Iguaçu. We just opened a store in the southern region. We already have stores in Paraná, but our closest store is Maringá. That's 400 kilometers away. So the company has been continuing to work with a big amount of stores in cities that are actually big cities with 300,000 inhabitants. Sometimes we don't even have a store yet, or we have a city with 600,000 or 700,000 inhabitants, and we only have one single store.
So within this pipeline of organic stores, we've been looking at costs of deployment, returns on investments, et cetera, and defined which are the priority projects. So it's difficult to balance this out because we can't say, "Look, it's going to be this region or this city." But just as the store networks, the new stores, we always also, we consider it's pretty fragmented and spread around all regions in Brazil. Of course, we have a bigger focus in becoming, very established in states we're already in and in big cities where we're not present in yet, such as, São José and Angra dos Reis, which would be good examples. I hope I answered your question. Thank you, Alexandre.
Okay, yeah, that's perfect, Belmiro. Thank you so much.
So moving on, the next question is from Irma Sgarz, a sell-side analyst at Goldman Sachs. Irma, we'll open up your mic so you can proceed. You may proceed, please.
Good afternoon, or actually good morning. I have a question, a follow-up here from Joseph's question about CapEx. Theoretically, I understand it's only seven stores that you have under construction, and we'll still have maybe a definition more specifically on the plan for organic openings. So what's the CapEx levels that we should expect, even if just for those seven stores? I understand it's a very specific store network. It's a little smaller. Maybe there's some points out of the curve.
But generally speaking, I think this is one of the main reasons for this question, which is due to the strong inflation in the costs of the stores in the last few years, due to many different external factors. I think it's very important to get some alignment on this, and have this kind of clear in the minds of the investors. From the logistics perspective, do you think that today you already have the necessary infrastructure for DCs and, logistical network you need to continue to support this new batch of store openings? Or do you have other projects that you're looking at as well up ahead to expand this capacity, not only for 2024, but for the next two or three years?
Well, I'm gonna pass the floor on to Wlamir, on logistics, and then I'll get back to CapEx.
Well, Irma, good morning. About our logistics, what we did is if we look at 2021 and 2022, considering this movement with the expansion that we had in the acquisition of the commercial spots from hypermarkets, we've already prepared the logistics. We performed investments in Pernambuco, São Paulo, Rio, Pará, and in the last two years. But what we've been doing with logistics is according to as we grow our operation and the amount of stores are expanded, then we adjust our logistical structure. So to give you an idea, we have a model where the stores operate as a mini DC. So we have stores that operate 100% directly from the suppliers and industry.
So this is a big advantage in our model because it's different than other operations with other retail operations, where, in supermarkets or hypermarkets, where you rely on logistics to be able to operate. In our format, we can open up a store anywhere in the country, and we don't depend on logistics. But as we grow, we'll invest, of course, and we do have some things we're looking at as potential opportunities in the Midwest region, but we're still studying this. Nothing defined yet. And as the operation grows, we invest gradually. So the investments are very low. CapEx is normally very low because we normally lease DCs, and we don't have to perform major capital investments in our logistics operation. But we look at the operation as it grows in each region, and we structure the necessary support.
But for 2024, we should have some kind of investment in the Midwest region, where we grew a lot, and we didn't have any major investments there. We have a small DC in Goiânia. We'll maybe expand it a bit in that region, but we still don't have anything else. We're still performing the studies. Just as we haven't defined the amount of stores, we also haven't defined the investments for logistics in 2024 and 2025. But we will have this a little more up ahead. And so the logistics grows as the operation grows. So, to give you an idea, what makes us very comfortable with all of this is the fact that we can grow and open up stores anywhere in the country without depending on the logistical structure. So this is the biggest strong point in our business.
So I would like to have answered your question. So there was an inflation in the construction work. The peak was probably last year and the beginning of this year, but we did see some materials, especially like steel and cement, keeping up at high levels. But today, when you look at the cost of square meters for an organic store compared to the past, there's already a drop of about 8% compared to what this would be in the same period last year. So it's not like the prices are cheap.
Of course, they went up just as food items also went up during the pandemic period. But from the seven that are underway, they have a total investment of about BRL 450 million-BRL 500 million. This, of course, is not coming into the CapEx of 2024, but we have to mention, of course, the maintenance costs, and we have to consider the services we're working on. But there's also a carryover of the stores in this year that's gonna drop in 2024. So we'll see the amount of stores, and this will probably mention the amount of investments the company will perform in 2024.
Okay, got that. Thank you.
Okay, thank you.
Now, moving on to our next question. It's from João Soares, a sell-side analyst at Citi. João, we'll open up your mic, so you may proceed.
Okay, thank you, guys. Two points here on my side. First, Belmiro, I feel like your discourse is a little more cautious on store openings for next year. I could be wrong in my interpretation, but what, if I'm right, what would be keeping you from having a more clear perspective on the store openings for next year? Is this related to some kind of restriction in a balance sheet, or are processes a little more difficult to map out store openings?
Anyways, if I'm right here, what could be in some way harming or hindering your visibility? And the second point is really quick. It's just when you look at the G&A, there's a very interesting control level. In the last quarter, it dropped 8% year-over-year. This year, it's flat. So can we imagine that this quarter, the BRL 200 million could be annualized at a stable level, looking at the SG&A up ahead?
Well, when you look at the, I think the SG&A is something we've been able to keep controlled. When you look at the operational level, this has, of course, had the impact of the stores and conversions and the administrative front. There's a drop when you look at the proportional results compared to the sales, of course, with the exit of the controller, costs with the board and the cost-sharing agreements. Of course, the company always has the need to enter new areas or start new projects. But of course, we do expect a dilution in administrative costs, and this is an important point because as we grow, administrative costs are not gonna keep up the same level of growth in the sales.
Then for 2024, our caution is just because we're gonna define this during the fourth quarter. Considering that the company now is at this True Corporation phase, we're being a little more cautious with how we present information in a more precise manner. The fact is really that we haven't made this decision yet. We have many projects in our land bank, but what we're looking at in 2024 is really finding a balance point between expansion and leverage. When you have uncertainty in the interest rates and the drops of the interest rates, that also generates uncertainties about investments and expansion. How are we accelerating this? Well, one of the levers is holding on investments.
So within the scenario of interest rates, we see the interest rates, while we have a very certain interest rate drop, then we could be a little more optimistic. But the investments in the organic expansion are really a decision that depend on us. So the major costs come from when we decide to perform a construction project. Once we start a project, we have to keep it up till the end. So, and then we just have to define what's gonna be the target of the amount of stores for the next year. So about competition, we've seen some markets that became a lot more saturated in some way, and we even saw that some players changed their expansion plans. So this is not in any way influencing your decision, is it? No, I think the biggest decision really is the level of leverage.
Take advantage of your plan on saturation. If you can imagine that cash and carries are all the same, then you're gonna say, "Oh, we're saturated," but that's not the case. We don't have one-fourth of the stores in Brazil. We have about 8% of these stores, and we have one-fourth penetration among the Brazilian population. So there is a big differential when it comes to the proposal advances and, of course, in a market with a bigger amount of players. But actually, the main decision point is really the leverage. We also had impact, as Irma mentioned, with the cost of construction, that we've been able to also reduce gradually, and we do hope to disclose this number now in the fourth quarter as well.
Okay, perfect. Thank you so much, guys.
Well, thank you, all.
We've ended our Q&A session at this point in time, and now we would like to pass the floor back to Belmiro for his final remarks.
Well, thank you. I think that, first of all, I just want to thank you all for your participation, those of you who have participated on this call. I want to thank my team as well. Since 2023 and 2022, due to the amount of stores and the new units created, it's been a big challenge involving different areas and departments. When we look ahead, we see a scenario that still does not have that much visibility when it comes to changes in purchasing power.
But if you separate the fact of the general context and scenario, the company has continued to keep up with a stability level, and I think, we would even expect to have higher impacts considering the expansion project or the impact and deflation. But the company continues to be very resilient, very strong and stable, very predictable when it comes to the sequence perspective. This is how the group and the company as a whole, with all of its members and employees, are working to keep this up.
And so we want to continue to advance, gain market share, and open new stores, generate job opportunities, and then, of course, completing this process, which was, as I mentioned a few times, before, was one of the projects that it has been most challenging for execution within the Brazilian food sector due to the amount of square meters involved, the galleries and the stores, and the stores, the amount of people we had to have, working on this. But of course, now we start seeing the results and reaping these fruits and contributions from sales, cash generation perspectives. And this allows the company to be more solid, stronger, to face the year 2024, 2025, and 2026, 2027, and 2028. So we always look at the long term.
Historically, an organic store takes maybe two, three, four, five years even to approve the project, and so between the point where we make the decision and actually open up the store. So looking at the long term, when you look at the positive numbers, you can see that there is a very positive expectation for the company in the mid or long term. So I think these are the main comments, and I want to thank my team, as they were with me in this earnings call. And I want to thank all of the board members as well that have really supported and worked hard in this transition phase, with all of these different changes that took place with Casino's exit.
But, but we're really on the right path now, to have a company that is, a stronger cash generator with a bigger volume of sales, conquering more and more households in Brazil. So on my side, that's it.
Thank you all. The Assaí earnings call for the third quarter of 2023 is officially ended. The Investor Relations Department is available to clarify any questions.
Thank you all so much, participants, and have an excellent day.