panhia Brasileira de Distribuicao(CBD) - 2022 Q4 - Annual Report

Capital Structure and Shareholder Rights - As of December 31, 2022, the company had a subscribed and paid-up capital of 270,139,069 common shares, with a potential increase to 400,000,000 common shares authorized[60]. - The company is required to distribute a minimum of 25% of its adjusted net profit as mandatory dividends, which may include dividends or interest on shareholders' equity[65]. - The legal reserve must be maintained at 5% of net profit until it reaches 20% of the company's share capital[65]. - The company has the authority to suspend mandatory dividend distribution if it deems it incompatible with its financial condition, subject to management's justification[65]. - Shareholders holding at least 5% of shares can call a meeting if management fails to do so within eight days after a justified request[84]. - The quorum for shareholders' meetings is at least 25% of total voting shares, with a higher requirement of two-thirds for bylaw amendments[88]. - Dissenting shareholders have the right to withdraw and receive book value for their shares if certain actions are approved, such as changes in corporate purpose or mandatory dividends[90]. - A public tender offer must be launched by any acquirer of more than 25% of equity interest to ensure equal treatment of all shareholders[96]. - The company must pay 80% of the book value of shares immediately after a resolution that triggers withdrawal rights, with the balance due within 120 days[95]. - The company’s bylaws require a tender offer for minority voting shares at a price equal to at least 80% of the control price upon a sale of control[99]. - The affirmative vote of shareholders representing more than half of outstanding shares is required for significant corporate actions, including mergers and changes in corporate purpose[88]. Financial Performance and Results - The company reported net operating revenue of R$17.321 billion for the year ended December 31, 2022, compared to R$16.298 billion in 2021, reflecting an increase of approximately 6.3%[265]. - The company incurred a loss from operations of R$69 million for the year ended December 31, 2022, compared to a profit of R$111 million in 2021[265]. - Financial expenses for the year ended December 31, 2022, totaled R$1.528 billion, up from R$943 million in 2021, indicating a significant increase in financial costs[265]. - The company attributed a net income of R$132 million from discontinued operations for the year ended December 31, 2022, compared to R$691 million in 2021[265]. - The company recognized share-based payment expenses of R$10.9 million, R$10.1 million, and R$15.0 million in 2022, 2021, and 2020, respectively[113]. Business Operations and Strategy - The company discontinued its hypermarket business under the Extra Hiper banner and completed the conversion of all remaining hypermarkets to Pão de Açúcar or Mercado Extra supermarkets by September 2022[109]. - In 2022, the company converted 25 Extra Hipermercado stores into Pão de Açúcar and Mercado Extra stores, and opened 49 new stores, including 38 Minuto Pão de Açúcar[122]. - The company has implemented a digital transformation plan to enhance e-commerce capabilities and improve customer experience[109]. - The company is focusing on the Brazilian food retail segment in premium and proximity formats under the banners Pão de Açúcar, Minuto Pão de Açúcar, and Mercado Extra[226]. - The company aims to enhance its private label portfolio, focusing on quality and price competitiveness, with ongoing improvements to its Qualitá and Taeq brands[258]. Market Environment and Competition - The Company faces intense competition in the Brazilian food retail industry, particularly from cash-and-carry sectors and online retailers, which may adversely affect market share and financial performance[152]. - The company is exposed to risks related to customer financing and loans, which could impact financial stability[154]. - The economic environment in Brazil, including inflation rates and consumer purchasing power, significantly affects the food retail industry[153]. - The company anticipates that the trend of increasing online retail sales will continue, posing challenges to traditional retail operations[152]. - The company faces significant competition from internet food retailers, which may adversely affect market share and net income[175]. Regulatory and Compliance Issues - The company must disclose material acts or events to the CVM and B3, including changes in shareholding exceeding 5%[60]. - The company is prohibited from issuing shares without voting rights or with restricted voting rights under its bylaws[62]. - The Brazilian General Data Protection Law imposes penalties of up to 2% of revenue for non-compliance, limited to R$50 million per infraction[182]. - The company is subject to extensive regulation as a financial institution, and changes in the regulatory framework may adversely affect its operations and profitability[204]. - The company is subject to environmental regulations that may increase capital expenditures and operational costs if compliance becomes stricter[187]. Economic Indicators and Financial Outlook - Brazil's GDP growth rates were 2.9% in 2022, 4.6% in 2021, and (4.1)% in 2020, indicating a slow recovery from the recession following the COVID-19 pandemic[200]. - The unemployment rate in Brazil decreased to 9.3% in 2022 from 11.1% in 2021 and 13.9% in 2020, reflecting improvements in the labor market[203]. - Brazil's annual inflation rates were 5.5% in 2022, 17.1% in 2021, and 23.1% in 2020, with the SELIC rate at 13.75% as of December 31, 2022[194]. - The SELIC rate was decreased to 13.25% as of August 2, 2023, impacting the cost of indebtedness for the company[194]. - A recent decision increased the tax rate on net profits by 9%, which may impact the company's financial results[109]. Transactions and Investments - The Éxito Segregation Transaction is expected to unlock value for shareholders through a capital reduction of R$7,133.4 million, delivering approximately 83% of Éxito's common shares to shareholders[162]. - Following the completion of the Éxito Segregation Transaction, the Company will retain a minority stake of approximately 13% of Éxito's common shares, while Casino will retain a voting stake of approximately 47%[163]. - The company completed the acquisition of the remaining equity stake in Cheftime in August 2022, making it a wholly-owned subsidiary focused on ready-to-eat meals[252]. - The Extra Hiper Asset Sale included the transfer of commercial rights of 66 stores for R$3.9 billion and the sale of 17 real estate properties for R$1.2 billion[227]. - As of December 31, 2022, the company had received all expected amounts from the Extra Hiper Asset Sale, which included asset write-offs of R$1.0 billion and expenses of R$1.3 billion[251].