Azzas 2154 (AZZA3) Q2 2026 earnings summary

Executive summary

• Gross revenue for 2Q26 was BRL 3.4 billion, down 7.1% year-over-year, mainly due to a 13.6% decline in higher-margin sell-in channels.

• Operational cash generation surged to BRL 356.5 million, over three times higher than 2Q25, driven by inventory reduction, working capital improvements, and a 31-day reduction in the cash conversion cycle.

• EBITDA for 2Q26 was BRL 379.6 million, down 29.1% year-over-year, with margin contraction due to operational deleveraging.

• Recurring net income was BRL 106.5 million, down 62.5% year-over-year, with a net margin of 4.0%.

• Strategic focus included inventory cleanup, franchisee health, brand strength, and ongoing turnaround efforts in Hering, with a strategic review of Farm Rio.

Financial highlights

• Net revenue for 2Q26 was BRL 2.66 billion, down 8.2% year-over-year; gross profit was BRL 1.52 billion, down 5.9%.

• Gross margin improved to 57.2% (+1.3 p.p. year-over-year); ex-Basic gross margin reached 60.6%, and Basic BU gross margin was 40.4%.

• Recurring EBITDA margin was 14.2% (-4.3 p.p. year-over-year).

• Net debt at quarter-end was BRL 2.13 billion, with leverage at 1.52x LTM recurring EBITDA (pre-IFRS 16); 82% of debt is long-term.

• Operational cash conversion reached 115% of EBITDA; post-CAPEX conversion was 90%.

Outlook and guidance

• Management expects normalized sell-in and sell-out in the second half, with focus on profitability, cash generation, and sustainable growth.

• Strategic review of Farm Rio is ongoing, with Morgan Stanley advising and new international collaborations planned.

• Hering's turnaround is advancing, with a strong order book for Summer, improved margins, and new product launches.