Good morning, ladies and gentlemen. Good morning. Welcome to the video conference of results for Sequoia Logística, reference the first quarter of 2023. We have with us today Armando Marchesan, CEO, Bruno Henrique, COO, Fernando Stucchi , Director of Relations with Investors. The presentation will be conducted by Armando. Afterwards, Bruno and Fernando will be available for the question and answer session. We inform that the presentation is being recorded and translated simultaneously. The translation is available clicking on the interpretation button. For those listening to the conference in English, the option of turning off the original audio in Portuguese, just click on Mute Original Audio. During the company's presentation, all participants will have their microphones turned off. Afterwards, we'll start the question and answer session.
To make a question, click on the Q&A quest icon and click on the name of your company, announce your name of your company. You will see on the screen. Then you should activate your microphone to make your question. We clarify that any declarations that may be made during this call, relative to the perspectives of business of Sequoia, its operations or financial issues are projections of the directors, which may or may not, macroeconomic or operational factors may affect the future of the company and bring us to results materially different than those expressed in the future considerations. To open the video conference of the first quarter, I will now pass it over to Armando Marchesan.
Good morning, everyone. We announce today the our results referring to the first quarter of 2023.
I would like now begin the presentation on page number four, bringing the principal factors that contributed to the first quarter, extremely atypical in the history of Sequoia. As we announced at the end of the third quarter of 2022, we're in the phase of implementation of the restructuring project of the categories of heavy products. An important part of the impact on our results in this first quarter is in due to this project. The reduction of 33.6% in gross revenue, total gross revenue, can be explained by the reduction, an intentional reduction and plan of 64% in the category of heavy freight associated with non-profitable businesses. In smaller scale, in the volume of e-commerce with a reduction of the volume of clients in the light category.
We had a contraction in the margin relevant due to this restructuring project. With reduction of volume and revenue, we had a quarter in the phase of demobilization, operating with unused capacity and routes and bases which could not be closed. Therefore, we have a difference in time between the reduction of revenue and the reduction of costs related to these expenses. Beyond that, the EBITDA margin was affected by costs, non-recurring costs of rescissions referring to this project of approximately BRL 8 million. The third point is with respect to the pressure on the working capital of the company due to two events. First, in the receivable, accounts receivable, we suffered with significant delays in payments and contracts related to the project, the restructuring project of heavy freight. The expected difference in the interruption of these contractual relations.
Secondly, after the event of the, with drawn risk event in January, we suffered abrupt reductions in the lines of these products by several banks who operated with us. As a consequence of all of these factors, we've had an increase in the leverage and consequently in financial expense of the company, affecting the results of the company. On the next page, as I'll explain in more detail, the above points, and also the detail, a plan of action which is already underway for the quick resolution of the situation confronted in this quarter. Going to page number five, we can see that we have had a fall off of 34% in the total gross revenue in compared to the first quarter of 2022.
On the graph in the upper right-hand corner, we show that the breakdown of the gross revenue in the categories which are intentionally being discontinued, with a reduction of 64% compared to the first quarter of 2022. We hope by the end of the second quarter, this revenue will be 100% discontinued. We remember that we continue to operate in the B2B business, focused on the light and express categories. On the graph below, we presented a comparison of the revenue of the category of light freight, which had a fall off of 24%. We attribute this volume to the deterioration general of e-commerce. According to Neotrust, had a 29% in volume of sales and 13% in revenue in this quarter.
It's also important to mention that in the 1st quarter of 2022, we had additional revenue from one of our marketplace clients, readings in our base in comparison to the period, as we mentioned in the 1st semester of last year. Going to page number six, we show the contraction of our margins impacted by the project, the restructuring of heavy freight. The intentional reduction of this freight, this revenue temporarily has generated a de-leveraging through of the unused capacity of routes and bases which cannot be closed.
As you look at the graph on the left, with the gross profit of BRL 27 million was a fall of 67%. The EBITDA for the quarter, affected by the smaller gross profit related to this, the restructuring project, reached BRL 0.7 million, while adjusted EBITDA with the expenses from the project hit BRL 9 million. On the approximate page, as you see on the upper corner, we had an increase of BRL 80 million in our accounts receivable, principally due to the slowing down in the payment of contracts for the closing of the project, the restructuring. The provision of improvements with the normalization of these receivables periods will be during the second half of the year. In the lower graph, we show the suppliers and the drawn risk accounts.
As we mentioned previously, in 2023, the event of drawn risk, we suffered restrictions by diverse banks in lines of drawn risk, generating an impact of approximately BRL 90 million in the working capital of the company, and the balance of these drawn risk accounts was BRL 55 million currently. On page eight, we can see on the graph on the left the evolution of our net debt and the level of leverage, financial leverage. To deal with the pressure suffered on this working capital, we had an increase in our debt and our rate of leverage reached 3.3 x. Due to the increase in leverage, we had a chronogram for the amortization of this on long-term.
At the end of 2022, we showed a capital structure adequate for the year, however, hurt by the event in the beginning of January with the general credit crisis, due to the event of a large retailer in Rio de Janeiro. Passing to page nine, we present the general vision of the impact suffered in the quarter. First, a reduction of BRL 38 million in the operational results due to the fall in revenue and the same structure of costs and expenses, non-recurring expenses from the restructuring project. Secondly, a reduction of BRL 57 million in the re-financial results due to an increase in debt with the high interest rates currently in effect. Third, the impact of BRL 60 million with receivables which were delayed due to the reduction in our drawn risk lines.
With this, we've had new captors of credit of approximately BRL 85 million, BRL 66 million by the end of the quarter, and a cash on hand of BRL 66 million to face the current challenges. In relation to revenue, we expect for a recovery that'll be slower and an average ticket of the heavy tickets, heavy freight, six to seven times larger than in the light category. The majority of these are companies who already operate with us, especially in regions where we have an excellent competitive advantage. In the beginning of April, we communicated to the market that we gained three of these bids, which could bring with them BRL 8 million per month in their mature phase.
With the conclusion of the project, the restructuring, we can see it's almost automatic on the contribution margins, and we have a bigger return, which the company has greatest expertise, such as B2B to small sellers, express first mile, middle mile, and logistics. In relation to our working capital, we expect to improve our cycle, cash cycle, with the liberation of BRL 60 million held up in the accounts receivable, as well as focusing on segments with better receivables, such as PMEs. We expect in the that our by the end of this year, that our receivables will be normalized. The impact of the Risco Sacado operations will still be seen in the second half of 2023, as we've had a reduction in April and May. A significant reduction in April and May.
We consider at this point is already normalized going forward. In relation to the capital structure, as we announced in 24th of April in 2023, the council, the administration council of the company authorized the realization of a increase in private capital of BRL 100 million. The company has already signed with stockholders and investors in its current base a minimum quantity of shares for this subscription in the value of BRL 50 million. We hope that this amount will be available in the first 15 days of June. We evaluated the sale of various assets, non-strategic, to generate additional cash with the expectation of the conclusion of these negotiations in the third quarter of this year. We expect to present operational improvements and financial improvements starting in the second half of the year.
On page 12, we present the P&L, management P&L of the first quarter, the reductions which are still pending to conclude the project of a restructuring of heavy freight. With this, we can see we plan to reduce both revenues as well as costs over the course of the second half. The reduction of the revenue is basically for heavy freight, is approximately BRL 50 million in a quarter. The reduction of variable costs of BRL 40 million is due to the direct reduction of the cost of freight. We expect a reduction of approximately BRL 7 million per quarter of total costs in building costs and indirect costs, the conclusion of the DCs and operational bases.
On the line of fixed cost and direct and indirect costs, we expect to have net savings of BRL 6.6 million in the quarter, coming principally from the reduction of headcount in the bases and sending that are being demobilized. Finally, we estimate a reduction of BRL 9 million in the quarter for SG&A, with the reduction of personnel costs and technology. In this way, we expect to incorporate the pending reductions and demonstrate a reduction in fixed costs of approximately BRL 8 million per month. Going to page 13, bringing our expectation of the conclusion of the fronts underway for the reinforcement of our cash position. At the end of second half, second quarter 2023, we'll have the entrance of the increase of capital of approximately BRL 100 million.
We expect to conclude the initiative of the non-strategic sale of non-strategic assets in this quarter. We already received offers, non-binding offers which are under valuation. The project is within the expected chronogram. Finally, by the end of this quarter, of the third quarter of 2023, we expect to normalize the accounts receivable with the receipt of values that are late payments and with the drawn risk operation normalizing in this way our average periods for receipt of payment for the cash cycle, for the conversion of cash cycle. To close our presentation, we pass to page 15, the synthesis of our plan of recovery. As we mentioned, we've had several initiatives to resolve each one of the questions presented previously.
With the exclusion of deficitary contracts, also the operation which runs in a way which is completely integrated and normalized. With the country on the light and B2B, D2C, with scale, we're bringing scale and efficiency for all of the regions in which we operate, with additional benefit of the focus on management and structure of back office, which will be more agile. To reinforce our cash flow with the increase of capital, we have the expectation of the conclusion in the beginning of June. For the sale of assets, we have the expectation of the conclusions in the third quarter.
Even though this perfect storm, which we're currently confronting at this beginning of the year, we're confident that this is a period of transition, important transition period for the company, with defined and clearly defined new strategies already being implemented, and we expect a second semester, which will be much more positive, and especially in 2024, with an operation that will be lean, efficient, and with margins already equalized. I'd like to thank you all for your participation in this call, and we're now open for questions and answers. Thank you.
Thank you. We'll now begin the session of questions and answers. Remembering that to make questions, please click on the Q&A icon and mention your name and company. To activate your company... Well, actually activate your microphone to make questions. Our first question comes from Lucas Marquiori of BTG Pactual.
Lucas, please, your microphone is open.
Thank you. Thank you very much. Morning, everyone. Thank you for the call and for the disclosure of the information, the subsequent information, which is an important point for the market to give comfort in your turnaround. Two topics that I wanted to hear from you about. First is regarding this capital structure.
Armando, you said in the presentation that you had the expectation of a conclusion in the 2nd half of the year. I wondered if you could mention, comment on, due to the eventual size of your capital and what you're looking at, with the improvement of e-commerce as a whole and the dynamic of new bids and so forth, if you think that the increase in capital in this scenario will, perhaps better by the end of the year in the industry, will be enough to help the capital structure of the company. What I wanna know is if you think that you'll need more capital than that. Also, if this will be enough to get through this period. The 2nd question is, if you could mention, explain a little bit the demobilization of non-strategic assets, which shall be...
Have an impact and what it can pass to us, the size of the impact of these assets, non-strategic assets, so that we can help try to anticipate a little bit the impact on your balance. These two topics. Thank you very much.
Good morning, Lucas. Thank you for your questions. Can you hear me? Is everybody hearing me okay?
Yeah, it's normal. Go ahead.
Thank you. Your first question that you mentioned, I hope that we can have to go back a little bit to the end of 2022, in December of 2022, when we looked at the question of leverage and the chronogram for amortization of our debt.
We had a situation with the closing of 2022. In the beginning of January, was a situation which was well-planned and controlled, where the debts were long-term debts, especially the debenture that we did in the beginning of December of last year, with a two-year series of non-payment on the principal and an additional period for repayment. This gave us a comfortable situation. In the material of the call, this changed quite a bit after the crisis. The credit crisis was intensified in January after the case of Americanas and other things which happened in the month of January. This increase in the credit problem brought us a need for working capital in the short term, which we did not have and had not planned for.
We anticipated this problem with Americanas or other problems that came along, and this credit crisis, which we've had. This brought to the company a working capital with a very strong period. The first measure the council approved, which we have good visibility and it, and it's well, well set up for the end of the month in June, and it will have a raising this capital. Beyond this, we have, in fact, focusing on the categories which are profitable with a better working capital cycle, and this will help us in the second quarter. In the second half, we don't have any new changes in categories in which we do not operate, but these are operates which we dominate. These are categories in which we operate for a long time and with a good structure of costs and margin.
This all will bring us to us an improvement in this cycle. Beyond that, it's obvious that we expect a better scenario on the credit side from the banks. I think that the worst is over. We've heard this from other players and from the market itself, that the worst in the credit crisis has passed, and that with the working capital, short-term working capital which we focused in the company in the first quarter, we'll be able to have a long lengthening of our credit profile and equalize this part of working capital. This will bring us a better scenario for the second half of the year.
This, together with the decision which we made to evaluate the sale of these assets, which is part of your second question, we see that it would be enough to equalize the short-term needs of the company. As far as the assets that are being sold, we have three assets. Two of them we're evaluating the demobilization. These are assets which together the book value of these is close to BRL 50 million. Summing these, adding these two assets together. We feel that we imagine that even though it's in an initial phase of the process, that, with a lot of study and certainty, that we'll be able to bring between BRL 50 million and BRL 100 million from the sale of these assets. This is our expectation for the second half. As far as the...
If we sell just one of them, looking at this, approximately BRL 50 million, will help us to, in the short term, to equalize our situation. We'll also have other sources of financing which should appear, the worst of the credit crisis in the first quarter is behind us. This will help us to be able to recover and come back to growing. As we mentioned, the action plan, we already see various bids which we've already received. Some of them have already been successful and had confirmation, and part of them we already look, communicated to the market. We have, we see an important recovery for the second half of the year. Unfortunately, the first half of the year will be impacted and have been very impacted by this problem, unexpected problem from the Risco Sacado operation.
All of this operation, the exit of the Risco Sacado and these short-term cash problems brought us a very relevant problem in the operation. For that, we're gonna carry this impact forward. In the second half of the year, we believe that with these measures, we will be successful. Beyond that, we continue to evaluate other projects, strategic projects such as which can bring better structure of capital to the company, which are under evaluation, M&A projects and other projects which continue being evaluated by us as opportunities for the near future.
Thank you, Armando, for your explanation.
Reminding to make any questions, please click on the Q&A icon. Our next question comes from João Pedro Franco dos Santos from Morgan Stanley. João Pedro, your microphone is open.
Can you hear me okay?
Yes. Hi, João. Yes, we're hearing you fine.
Thank you for taking my question. On our side, actually, we have two questions. The first is if you could give us a little more color in relation to the bids that you mentioned in the release. As you mentioned, these are from clients that are already in your base. Just wanna understand what's the profile of these bids and if we can expect anything in the next few months, how long this will take and if anything is already set up? That would be great to know more about that.
Secondly, what you see in the market today, since the volume of the sector as a whole went down 29% and revenue by 13%, wanted to understand on our side how you close this gap, how do you see this gap, and what do you see the scenario for the sector as a whole. Are these two questions from our side. Thank you.
Thank you, João, for your question. As far as the bids, we have communicated to the market the bids that we received, and they are related to exactly to the focus of our operation, which is in the ecosystem of e-commerce. This comprises all the steps.
We operate since the first mile, which is our services for the marketplaces, for products for sellers, picking up products from sellers, which have developed this since 2020, when the company realizing our SFx platform and looking at the operations that we have, which are now mature. Today, during the e-commerce model, we see this operation together with the sellers for the sale in the marketplace with, we've been able to advance in due to our characteristic of working greatly in the interior of the country. 70% of our volume is in the interior of the country and not the capitals, differently from the GDP of e-commerce.
We have a great deal of capillarity, and we're able to maintain this flexibility in the operation, in the so-called first-mile operation, which is the collection from the sellers. Part of the bids are in relation to this service. Another part of the bids that we gained is referring to the operations of the last mile deliveries in several modes. Modes which can leave from the DC of our clients or our own DC when we operate the cross-docking together with them. The bids that we have underway are bids that can buy with all these steps. An important step in which we have expertise, different expertise than the market, is the middle-mile operation, the operations of express operations for entry between our distribution centers of our clients.
When we need to do an express delivery, we can make this connection quickly between one point and another. This is an operation that we do for some time now, and we are gaining space in this operation due to our capacity, the operational capacity and the influence that we have in our operations. That's one of the points. In relation to the market, your second question, in fact, everybody saw the results of the majority of the major marketplaces in e-commerce in Brazil and the big retailers. We see a scenario with this interest rate and the restricted credit scenario, that everybody has felt the impact, bigger or smaller, but everybody's had impact from this.
The results were affected, earnings were affected, this will never end, with a commercial aggressivity, with less free freight, less cancellations, which winds up dropping revenue in general. Due to that, the volume of sales in the market has fallen greatly due to this scenario, more challenging of credit and interest rates. It's a cycle. We've been through this a few times already. We know that e-commerce is a market which is huge and there's lots of space to grow, and we think that this will start to have a recovery already in the second half of this year. This is our expectation. Beyond that, we've also seen other markets in which we operate already with signs of recovery in the second half of the year.
Markets which were not as affected as the these other products, and with demand divided payments and free freight as well. We have a better expectation in that case. The most important for us, João, is that what we see, what's in our pipeline right now, in our commercial pipeline, the bids that we've already won, and these are categories in which we already operate for a long time. We operate with stability and services and controlled costs and image and image. I don't think we have any additional challenges in relation to new products or creation of new products or services. These are categories in which we participate and which we operate, and which we've gained market share and from winning other bids. These are products and services in which we operate in these verticals.
First mile, middle mile, and last mile for e-commerce, fleet services for B2B, for services, financial services, as well as services for machines and delivery of POS, POSs, and express deliveries, which is another operation very important for us, where we operate services of high complexity and time. These are operations that we have here in-house with an experienced team. These bids that we are seeing for the second half of the year, we have a good capacity for a conversion.
Great. Very clear. Thank you for your details. Thank you very much. Have a good day.
Thank you.
Remembering that to make questions, please click on the Q&A icon and type your name and company. Please wait while we collect additional questions.
Again, please click on the Q&A and please read our, and please mention your question. Our next question comes from Arlindo Souza.
Good morning. Could you please comment a little bit more about the increase in your receivables?
Good morning, Arlindo. Thank you for the question. This is Stucchi speaking. As Armando mentioned, during the presentation, it's a natural phase. We're in this process of demobilization of contracts. It's a phase, retention on the part of our clients, and we have until this entire project is done. We expected this for our plan. It's well-aligned with the plan we're following, and we expect in the next quarters to regular, regulate these receivables as we close the cycle with our clients. We're very optimistic about the next quarters. Thank you very much for your question.
Remembering that if you wanna make a question, please click on the Q&A icon and type your name and company. Thank you. Please wait while we collect any additional questions. To make a question, please click on the Q&A icon and type your name and company. We have another question.
Arlindo Souza, does the company plan to renegotiate its liabilities through equity swaps? Can you give more details about the liquidation of this liability?
Thank you, Arlindo, again for your question. Yes, we have already conclude this operation with the bank. We wrote down 50%. We paid 50% what we had, the other 50% we have renewed till the end of the year. We already renegotiated this with the bank, is everything adequately ready for the company. This will be reflected in the company's reports going forward.
Again, to make a question, please click on the Q&A icon and type your name and company. Please wait while we collect. The question and answer session is now closed. Let me pass to Armando so that he can make any final comments. Thank you.
Thank you very much for the participation of all in the call. We remain through our Department of IR to answer any additional questions or doubts that may come up. Thank you very much, and have a good day and a good week. The video conference of results for Sequoia is now closed. In case you have any questions or doubts, please send your questions to the IR team through the email, ri@sequoia.com.br. Thank you for participation, and have a good day.