May 15, 2019
Operator
Good morning and welcome to the Arcos Dorados First Quarter 2019 Earnings Call. A slide presentation will accompany today's webcast, which will also be available in the Investors section of the company's Web site, www.arcosdorados.com/ir.
And as a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation.
And today's conference call is being recorded. At this time, I would like to turn the conference call over to Patricio Esnaola, Director of Investor Relations.
Please go ahead.
Patricio Esnaola
Thank you. Good morning, everyone, and thank you for joining our earnings call.
With me on today's call are Sergio Alonso, Chief Executive Officer; Marcelo Rabach, Chief Operating Officer; and Mariano Tannenbaum, our Chief Financial Officer. Please turn to slide two.
Before we proceed, I would like to make the following Safe Harbor statement. Today's call will contain forward-looking statements.
And I refer you to the Forward-Looking Statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.
In addition to reporting financial results in accordance with Generally Accepted Accounting Principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in the press release and audited financial statements filed today with the SEC on Form 6-K.
Our discussion today excludes the results of the Venezuelan operation, both at the consolidated level as well as for the Caribbean division due to the differences in the exchange rate and inflation in the country. For your reference, we include a full income statement excluding Venezuela with our earnings release.
I would now like to turn the call over to our CEO, Sergio Alonso.
Sergio Alonso
Thank you, Iñaki. Good day, everyone, and thank you for joining us today.
Please turn to slide three. Last year, we expanded our margin at a faster pace than we projected delivering 90 basis points of margin expansion.
Having built in significant operating leverage in our business, we turn our attention to top line growth particularly in our largest market Brazil. However, we have not lost sight of our commitment to deliver an additional 10 to 110 basis points of EBITDA margins within the next 18 to 24 months.
As you may recall, we committed to a 100 to 200 basis points expansion at last year Investor Day for a period. During the remainder of the year, we expect to expand our margin further as we accelerate sales growth.
At the end of the fourth quarter, we began executing strong marketing and promotional campaigns which continued through the first quarter. We indicated this will result in stronger comp sales beginning the year.
In fact, consolidated comparable sales grew 10% on top of 9.8% in the prior year's first quarter. Excluding Venezuela and Argentina, both had inflationary economies, comp sales would have been 1.6 times blended inflation, a healthy growth rate.
Our adjusted EBITDA in constant currency terms increased 6.5% in the first quarter. This growth was consistent throughout the quarter and in many of the market of its division.
Furthermore, we are maintaining this momentum in the current quarter and expect it to continue for the rest of 2019. Of particular note, in Brazil comp sales increased 6.8% well above inflation.
In SLAD, outside of Argentina, we are seeing significant improvements in each market. These are countries with stable and growing economies, and they're acting as a counterweight to our business in Argentina, which continues to face strong macroeconomic headwinds.
In Chile, for example, we have a very strong leadership position year after year, our results in these countries have been improving and we've been gaining share for some time now. We expect the counterbalancing benefit to continue this year.
In overall, we remain focused on increasing sales and guest counts. We delivered our eighth consecutive quarter of sales growth in Mexico despite the Easter holiday being outside the first quarter unlike last year.
Sustainable growth across the company is being driven by accelerators that include delivery, mobile, and DOTAs, which comprise our omnichannel approach in our markets, but delivery is now available to 45% of our restaurants and over approximately 70% of incremental sales. Our mobile channel combined with digital menu boards serve order kiosks and hands-free payment technology for drive-throughs represents a powerful technology ecosystem.
These channels significantly enhance the guest experience and strengthen the brand loyalty in addition to generating facelifts. The complete digital experiences embodied in our EOTF restaurants, not just the menu boards and customers ordering via kiosks, but digital cable entertainment, and our payments as well.
The McDonald's app plays an integral role in communicating with our customers in a way they want to engage with us with over 24 million downloads today, our app is by far the most downloaded in the entire food and beverage segment in the region. Earlier, I noted Chile and the growth were topping there, starting this year we began extending EOTF to the country, these most recent rollouts reflects our ability as a business and the flexible approach we take to capital allocation.
In other words, we direct our investments towards those markets within our vast geographic footprint that have the most growth potential. Marcelo will not review on our EOTF landscape today, but I would like to emphasize here that they generate safely beyond the first year operation in addition to strengthening our competitive position.
Another important source of growth is our research centers. We are the leading research brand in the region with the most sales of ice cream in the broader food segment, along with bank affairs our research centers are also powerful brand extensions, Arcos Dorados proud to operate under the McDonald's brand which continues to strengthen in the region.
Based on our ongoing research, we remain the number one QSR brand in the vast majority of our territories. In April, Sao Paolo, one of Brazil's leading newspapers named McDonald's the top three restaurant brands in the State of Sao Paolo, this state is by far the most populous and represents a presumably one-third of Brazil's total GDP.
This was the second year in a row that our brand was ranked at the top and also the gap between us and their nearest competitor widened versus last year. Keep also in mind that we have multiple standalone brands not just a Big Mac, for example, these include Macquarie, the signature collection among many other leading products brands that are an important brand extension platforms.
Marcelo will also discuss how we are extending our signature collection brand, strengthening our brand is also being the most sustainable restaurant company in Latin America. Equally important, we are the most socially beneficial of the largest former an employer of youth in the region among other new important contributions to society.
This is a key brand differentiator across our markets and we believe that this kind of commitment will only become more important among future generations as they choose the brands that matter to them. In a vision of the future in sustainable business menus as well as other important food certifications, we maintain multiple sustainability problems in the areas of water and energy savings in our restaurants.
We're also piloting the minority projects where we like paper, plastic and waste. And most recently on the social front, the Global Council of Corporate Universities, the most prestigious entity in this field recognized Arcos Dorados for having one of the best corporate universities.
Each year, we host over 1000 managers and provide online courses to over 50,000 employees. Also for the second year in a row, we earned the number two spot as the best employer in Mexico as ranked by top companies.
Returning to our first quarter performance, it is sustainable with growing markets in each of our divisions counterbalancing countries that are currently facing headwinds. In Brazil, first quarter momentum continues with a strong marketing calendar, we have in place.
And we will also have easier comps. As you know, given the Truckers strike in the second quarter of last year, in SLAD, Argentina's market environment continues to be very difficult.
While our numbers are better than reports from the Association of medium size retailer, it is a challenging environment nevertheless. But we continue to do very well in the rest of the division and we also expect to maintain our services momentum in NOLAD particularly in Mexico.
In Panama and Costa Rica, we are seeing improved sales with implementation of a new affordability platform that is resonating strongly in these countries among others. Marcelo will also expand on this platform.
So with that, Marcelo the floor is yours.
Marcelo Rabach
Thank you, Sergio. Please turn to slide four, with digital tools and delivery now playing an increasingly important role in our business, our omnichannel approach to serving guests is contributing significantly more to growth, and technology enabled approach is no longer set about supporting our business, it is consistently driving incremental sales as well providing seamless customized experiences for our guests.
Our mobile app innovative payment system for drive-throughs in Brazil as well as digital menus and kiosks are among the modern service features that create memorable experiences with our brand, our EOTF restaurant environments are driving sustainable growth. Our EOTF restaurants in operation over twelve months average face lift continues to be in the mid single digits contributing to this lifts are self-order kiosks, which now represent around one-third of in-store transactions.
The higher level of average check generated by these kiosks is also consistent with increases across the McDonald system. As an investment, EOTF is delivering above our initial expectation.
That's why we are rolling out this for but in Chile this year. Chile is the first market in which we have introduced EOTF.
And as per the notice, we see strong growth opportunities in this country. At the end of the first quarter, we have 349 EOTF restaurants in operation and will remain on track to reach our target of 650 by the end of this year.
Delivery is another additive sales Channel, our dominant footprint, reach on scale, provide us with a substantial competitive advantage in this space. Because of these distinct advantages, delivery has been a highly successful initiative since we launched the service, but delivery is now available in 11 markets with almost a 1000 restaurants serving as a platform.
To give you an idea of the size of this business, on a run rate basis as of March delivery have reached the safe level of our business in Panama. We believe there is a lot more room to grow, to really shine.
And we are working with various partners such as Overeats, Ruby, high food and low to raise awareness of the service. Our reach includes the McDonald's app, which as Sergio said, is not only the most downloaded app in the food and beverage space, but it is now on some 7% of internet connected smartphones in Latin America.
The drive-through experience is also an important differentiator for McDonald's in the region. The partnership with [indiscernible], which we announced during our previous earnings call, has been extended to all of our freestanding units in the state of São Paulo, or approximately [indiscernible] of our freestanding restaurants in Brazil.
This country payment technology, we are customers cars, tour buses, is a convenience that is increasing average check by more than 20%. Along with our EOTF restaurants, [indiscernible] continues to enhance the guest experience improving both customer and employee satisfaction levels.
Customer satisfaction scores have been improving across all categories, from speed of service to friendliness to accuracy of orders. In March, the percentage of customers who said they were very satisfied with their experience reach its highest level, which was 70% on a consolidated basis.
Employee satisfaction plays a crucial role in customer satisfaction, of course. In Brazil, for example, [indiscernible] has reduced turnover and absenteeism by nearly half over the last three years, which contributes to efficiency gains.
In addition to the overall guest experience, our menu plays a key role in what keeps bringing customers back to our restaurants. We recently extended our signature collection to over the sub menu with the initial launch in Argentina last month.
In addition to the revenue potential, we believe this will help us to extend our list as the top dessert brands in the region. Also, during the first quarter, we added core items to affordability platforms in most of our markets to make this menu more relevant to our customers.
This initiative is related to our efforts to drive top line growth, which Sergio discussed earlier. Evolving the menu and aligning our interests with those of our customers is fundamental to our relationship with them.
And so, we believe it is the right thing to do for McDonald's, to lead the way among QSR restaurants in Latin America to promote healthier eating habits. As a result of our efforts, we are gaining recognition and endorsements from key medical and health organizations throughout the region.
An example at the end of last year, the Inter-American Society of Cardiologists endorsed our adoption of a new nutrition policy for our children's menu, the happy meal. We look forward to updating you on these initiatives.
As we continue to make progress. Please turn to slide five.
To review our progress on restaurants and brand extension opens. Total restaurant openings during the last 12 months were 69 of which 25 were freestanding units.
In Brazil, we opened 44 restaurants. While in SLAD and NOLAD, we opened eight and 16 respectively.
We also opened 384 research centers across the region. Now, I'll turn the call over to Mariano to discuss the details of our quarterly financial and operating results.
Mariano Tannenbaum
Thanks, Marcelo. Please turn to slide six.
We had a strong start to the year, which gives us confidence in our ability to balance growth and profitability. As a result of our successful marketing strategy, in this quarter, we achieved comparable sales growth of 10% in line with our blended inflation, and also on top of a very strong first quarter 2018.
It is also important to highlight that if we exclude Argentina, which as you know continues to face significant macro headwinds and high inflation rates, comparable sales would have reached 1.6 times our blended inflation. This was mainly driven by solid performance in Brazil, Chile, Peru, Panama, and Mexico.
Well, that's reported revenues continued to be impacted by the sharp depreciation of our key currencies. We expect this trend to eat in the coming quarters, as the significant depreciation of the Argentinean peso and the Brazilian real took place in the second quarter of last year.
Additionally, analyst consensus estimates for the current macro effects projections for these countries supports our expectation. We also anticipate easier comps in Brazil, where a tracker strike in 2018 significantly impacted Q2 consumption across the board in that market.
Now, let's move to our cost structure and profitability on slide seven. Our marketing strategy, which boosted traffic and sales in our main markets, affected our product mix, during the quarter.
However, we work able to mitigate the impact in gross margin, with efficiencies in payroll and other fixed costs. Thus, we saw no impact in our adjusted EBITDA margin, which remain stable at 8.5%.
Adjusted EBITDA in dollar terms, decreased 9.2%, as already mentioned, impacted by the depreciation of our main currencies, and increased 65% in constant currency. Expanding on our cost structure, in addition to changes and mix, we faced some cost inflation pressures, primarily coming from need in Argentina.
Other expenses, as a percentage of revenues increased as we expanded delivery, and was also impacted by rising utility costs, primarily in Brazil, and Argentina. We achieved savings in payroll costs in all our division.
Increasing productivity continues to underscore our efforts in driving down payroll as a share of revenues. All of this is done when increasing customer satisfaction.
Finally, our G&A expenses decreased by $6.2 million in absolute terms, and remain stable as a percentage of revenues. Moving to the bottom line, on slide eight, we generated $14.5 million of net income during the quarter compared to $13.6 million in the same period last year.
net interest expense was $2.2 million dollars year-over-year, and we reported better non-cash foreign currency exchange results and the income tax expenses versus last year. Please turn to slide nine and 10 for more details on our divisional results.
In Brazil, as we anticipated, we are now starting to see the full impact of our shift towards driving strong top line growth. In this quarter, we achieved comparable sales growth of 6.8% well above inflation, and approximately double our segment as measured by the Food Service Institute of Brazil.
In addition to the strong marketing campaigns, we have been executing since the end of 2018. Profit growth was also driven by the rollout of EOTF, the expansion of our research centers and the continued growth of our delivery channel.
Moving to SLAD, comparable sales increased 23.6%. Below the division splendid inflation, traffic was impacted by the week consumer environment in Argentina.
By contrast, we are very encouraged by the results we are seeing in Chile, Ecuador, and Peru, all posting comparable, sales growth well above inflation. Particularly in Chile, in this quarter, we posted a record high in traffic, and we expect this trend to continue as we rollout our EOTF initiative in this country.
These markets are gaining more shares within the division, with 50% of the revenues now being generated outside Argentina. In NOLAD, we continue to report solid results with comparable sales growth of 3.9% well above blended inflation, and mainly driven by average check growth.
Both Panama and Costa Rica contributed to traffic growth. Momentum continuous in Mexico, where we delivered our eighth consecutive quarter of strong comparable sales growth, despite the impact of the Easter Holiday shift from March last year to April this year.
Top line growth in the Caribbean was affected by tough comparisons against last year. In the first month of last year, we experienced a boost in sales due to the blackout that affected a significant number of households following Hurricane Maria, resulting in increased eating out as electricity was restored eating habits went back to normal.
Finally, in terms of profitability, we achieved adjusted EBITDA margin expansion in Brazil and the Caribbean, which was offset by the performance of our SLAD and NOLAD divisions. Please turn to slide 11.
On the back of better results, and lower working capital needs, we continued to improve our operating cash flow. Due to this strong cash regeneration, we have been able to accelerate our CapEx program while keeping a strong balance sheet.
Along these lines, we ended this quarter with a net leverage ratio of 1.5 times adjusted EBITDA. This was well below our target range of 2 to 2.5 times.
As a reminder, our leverage ratios are calculated using consolidated as reported results. Finally, we remain totally committed to growing our top line that will drive additional margin expansion in the coming years.
Our geographic diversification along with our flexible capital allocation strategy is our key differentiators. This allows us to mitigate difficult macro headwinds in some of our markets by focusing on those with higher growth potential.
That concludes the review of our financial and operating results. Thank you.
Sergio has some additional remarks before the Q&A portion of this call. Sergio back to you.
Sergio Alonso
Thanks, Mariano. As you have heard, we remain on track to deliver the EBITDA margin expansion committed at our Investor Day and we are driving the gap in terms of market share across the region with sustainable top line growth.
We have the largest and most comprehensive omnichannel get experience and the leading brand in the QSR segment. Additionally, we have a natural capital allocation strategy that allows us to focus our investments on areas with the highest growth potential.
Taken altogether, we have strengthened our competitive position within our region. Equally important to gaining and retaining customer loyalty is our unmatched commitment with the QRS sector to the communities we serve.
We are extremely proud of our ability to use our [indiscernible] and believe this philosophy not only resonates with our current customers but would also resonate with future generations to come. So, thank you very much.
And operator, please open the call to questions.
Operator
[Operator Instructions] Our first question today comes from Robert Ford from Bank of America Merrill Lynch. Please go ahead with your question.
Robert Ford
Thank you. Good morning, everybody, and congratulations on the improvements.
Sergio, of the 349 experience [ph] of the future re-modelings or re-imagings, how many of those were in Brazil? And also on Brazil, there was some EBITDA margin expansion despite delivery and heavier promotional activity, can you expand on where are you are finding those opportunities to improve efficiency or lower food and paper cost?
And I am particularly curious about the efficiencies that you are generating from the EOTF concept.
Sergio Alonso
Sure. Good morning, Bob.
Marcelo, why don't you take the EOTF and let [indiscernible] take the margin?
Marcelo Rabach
Yes, good morning both. Out of the 349 restaurants, we already have running with ETOF, 274 are in Brazil.
So, we are in a pretty good shape in those markets. We have been rolling out for the last year and a half on the results that we are seeing in terms of sales lead [ph] are pretty solid and are improving and something important is that in those restaurants with more than 12 months of operation, we continue to see mid single digit sales lead, which is there is production and bring forth the idea this is the right strategy for us to be as apsirational as possible in Brazil and in the whole region.
Maybe, Mariano, can add something around the margin part of the question.
Mariano Tannenbaum
Yes. Good morning, Bob.
How are you? Yes, regarding margins, well, you first mentioned about despite delivery please always keep in mind that delivery is accretive in our EBITDA margin for us even though we have a cost and we always mention that in terms of revenues the line of other expensive increases actually as I mentioned delivery is accretive for us because we have a whole fix cost structure that actually doesn't change with delivery.
And at the end of the day, it's a very profitable segment for us. Going to the general margin question, actually we [indiscernible] and as I mentioned before with some pressure in the gross margin, but we were very efficient in keeping our food and paper cost under control and growing in line or even below inflation and also we have some leverage as well in the payroll line.
So actually that's where we are seeing this margin expansion and that also allowed us to grow sales in the way we had during the first quarter with some pressure in the mix, but with benefit and leverages on the other lines that I just mentioned.
Robert Ford
Fair enough. Thank you.
Sergio Alonso
You are welcome.
Operator
Our next question comes from Richard Cathcart from Bradesco. Please go ahead with your question.
Richard Cathcart
Hi, good morning, everyone. Just a couple of questions from me, firstly, I just wanted to talk about your expectations for cogs going forward particularly around the food prices as a result of kind of price increases that we're seeing from African swine fever.
Just what are your expectations are around not for the second quarter and perhaps more significantly into the second half of the year? Thanks.
Sergio Alonso
Richard, good morning, let me give you a flavor on the first part of the question regarding what do we expect in terms of sales in Q2 and going forward, and then Marcelo you can comment in that and also really strong period as well. Let me give you some more color and going back a little bit.
When we released our third quarter 2018 results, we mentioned at that time that they were clearly below our expectations in terms of concepts and cost saves in region primarily in Brazil obviously of only 1%. We said back abroad obviously expecting an economic scenario that didn't happen particularly right after the strike and then after the World Cup and obviously made us getting results that they were clearly below our expectations.
So we chose the work and we changed the approach to marketing actions towards the end of last year and entering this year unless anticipated that the impact of the change would be in place at the beginning of community. It is exactly what will happen and then what's going to happen in Q2, well we see this momentum continued in fact accelerating a little bit.
Additionally during the easier comps that we know we're going to have this quarter because of the Trucker strike that we haven't seen. So far we are very pleased with the results we're getting and the important thing perhaps I believe also appropriate to mention that it took us totally few weeks more than expected change but the reality is we always see long term sustainable decisions.
So in other words we didn't want to just keep it changed margin expansion of sales, volume increase we are doing sustainable way because we still get all results and we need to generate the margin need to support drill. So in summary was very pleased the momentum in Q2 and we expect this to continue towards the end of the year.
Marcelo?
Marcelo Rabach
Yes, going to Swine Fever on how we are seeing this situation well in fact, we are not seeing many. But so far obviously we are keeping a close eye on this issue.
But it's important to mention that the thing is extremely low portion of our spend around 2% of our film paper costs. So this is not a big issue in terms of the participation of this percent in our mix of products.
In most of our markets, prices that are mine locally, local currencies based on local supply on demand deep dynamics. So this is not an issue.
However, guarantees based on a local supply and demand dynamics. So this is not an issue.
However, should international supply tighten due to limited availability in Asia, we could be facing cost increased pressure with this pertain in markets where there are sanitary agreements in place because in many of our markets that the local production can be exported to Asia. So I think that this is not a big issue for us.
We're keeping a close eye on this subject, but so far no impacts to mention. I will let Mariano to talk a little bit about the cost type of integration.
Mariano Tannenbaum
Yes, hi Richard. How are you?
In terms of costs, as I mentioned in the previous question regarding the food cost, we have been able so far with some exceptions to keep our food and paper costs under control growing nine or below inflation. Another important thing to mention is our hedging strategy is that we had 50% of our food and paper imported costs every year.
So far in 2019, we have we're almost done with the hedging program because we hedged two or three quarters in advance. We only have a small portion of the fourth quarter fees to hedge.
And as I usually mentioned this is not a speculative strategy we just want to have visibility and predictability in our cost structure. But the good news so far is that the hedging we have in place for this year are at this point fall below the spots that we are seeing in the main market.
Just as a reminder, we have hedges in place for Brazil, Colombia, Chile, Argentina and Mexico and these hedges are almost then for 2019 in a successful way, that will give the company predictability in the cost that we will face in at least in 2019.
Richard Cathcart
Okay. Thanks very much for the color.
If I may just one very quick follow-up, you talked about the pork prices, so, I kind of take from your comments that you haven't seen any increase in pressure on beef, protein yet. Just as a consequence of kind of tighter supply dynamics feeding through from other proteins into beef et cetera?
Mariano Tannenbaum
Yes, that's right. Obviously, we have pricing protocols in place with our suppliers depending on the market on the supplier that are updated quarterly, semi-annually or annually but for this year based on the current information, we do not foresee any pressure coming from the basket that we are buying.
So again we are monitoring the situation but as of today, we are comfortable with the position we have with our suppliers in our main markets.
Richard Cathcart
Okay. Thank you very much.
Mariano Tannenbaum
You're welcome.
Operator
And our next question comes from Marcel Moraes from Santander. Please go ahead with your question.
Marcel Moraes
Hi, good morning everyone and congratulations on the results. I'm going to stick to the same subject, the swine fever and the potential impact on COGS, so going forward and more over I think when it comes to Argentina because the government implemented kind of price controls or agreement with key food suppliers and in this, do you have any kind of impact in your Argentinian operations, is it good for you the fact that the government is trying to set up fixed prices for I don't know hamburgers or meat in general.
So what do you think about this price control in Argentina and when it comes to the swine fever and I'm sorry, I couldn't hear all of your last answer but do you think it's, it would be -- I mean if you could detail a little bit more that way you have been setting up conflicts with suppliers right, I heard about the hedging strategy but I don't know if you also have a three-month cap contract with the meat packing companies or something like that. If you could detail, it would be more, it would be very helpful.
Thank you very much.
Sergio Alonso
Sure. Let me start with the strong [indiscernible] I mean there is no much you can say addition to what Marcelo said, I mean we had obviously plans at the beginning every time, we plan following year we sit down with our main supplier, the beef suppliers obviously would be most relevant in terms of spend their money and obviously these project volumes and we negotiate the conditions for the next cycle.
Well, everything that happened so far, we did not foresee any major issues in this matter. But to say apart from the thing that Marcelo said, pork is a protein that is not relevant for us and our product range is different from what it is in the U.S.
or in some other markets. So our heavy consumers of pork meat, it is not our case.
But we soon were following up with as best as we can, we have our supply chain team monitoring the situation. But as of today, we don't have any particular factor that is concerning us, okay.
But from the swine issue and then from Argentina because it did not cause any price controls, they did it in a number of products from several suppliers but those products are on a super market level, not full restaurants or any of our categories and this is new evolving something that just taken back. An idea that was actually launched by the previous government and there's no way to provide some predictability into it.
What's going to happen with pricing from some essential products? No, some cuts of beef, beef is very popular in Argentina, so the price generators and bread those things that are not impacting our product or pricing policy at all.
Marcel Moraes
Okay. Thank you, thank you very much.
Sergio Alonso
Yes, welcome Marcel.
Operator
[Operator Instructions] Our next question comes from Robert Schweich from RMB Capital. Please go ahead with your question.
Robert Schweich
Good morning. How important do you imagine that delivery will be in your system particularly in Brazil?
Sergio Alonso
Remember I will let Marcelo to take that question.
Marcelo Rabach
Yes, good morning. But as you may recall we introduced delivering last year.
We began to rolling out the service mainly in the second quarter of 2018. On the company as a whole, we are in the 1000 restaurants range of restaurants which are offering this service delivery.
In the case of Brazil, we are around 450 restaurants. So it's a little bit lower than the half of the restaurants we have in the country.
Still the proportion of sales of delivery from the total sales is low, it's in the low single digits as a proportion of sales, but obviously we are working with several partners in different markets. In the case of Brazil, we are working with the three main players in the market, iFood, Uber Eats and [indiscernible] and we are very confident that this could be a venue of building healthy taste going forward as Mariano mentioned, it is an accretive segment for our business.
We have some plans, some plans to weather the segment in the near future. And this will come both from adding additional restaurants to the service and at the same time low income sales in the segment at a higher base than the rest of the segment.
So we are very confident and we are very encouraged by the results we are getting. We would see in the next, in the coming quarters how fast we can grow this business and take advantage of our footprint because at the end of the day, we are present in most of the theories which are key for the service in the field and we have that footprint of a competitive advantage.
We have a lot of freestanding unit or units which are key and very important for this kind of service. So that's mainly the situation around delivery in Brazil and in general in the 11 countries we are already operating the segments.
Sergio Alonso
And those will have some benefits I would say in terms of the volume across the day, the delivery tends to be [indiscernible] late afternoon and night and boost volumes times in the day particularly towards lunch. So those helps mostly to better balance the production capacity, we have in our restaurant and also it's something that is just happening in the market and we have to be very careful and Marcelo said, it's mostly incremental, so either you play the game and we have to be in the game and take our share.
Marcel Moraes
Thank you. My follow-up question is on a different subject and that's the macro picture in Brazil, the political situation, is it currency still is not going in the right direction.
It's reasonably stable but still at a less favorable rate than for your first quarter. I'm wondering how confident you're in the current administration moving forward and improving the economic environment in Brazil?
Sergio Alonso
So, let me take a bit brief [indiscernible] and then Mariano talk about the effect and indications and the results above where just like anybody else in the country, we are obviously, looking with optimism, what's going to happen basically the reforms that have been going through in the economy and particularly the pension reform that should be released and right after June or beginning of July, we believe just like most people in Brazil that could be a landmark and that will create another momentum positive momentum with the economy. In the meantime, I have to say that we are pleased with the results we are having so far in the market, I mean, we are clearly -- I've been in the market and most of our competitors and [indiscernible] situation that we followed.
So it's -- I would say the we didn't [indiscernible] taken considering the current situation and we are open of course we have the second half of the year should be more clear and better in terms of the ambience and the optimism that is an exciting. Apart from that Mariano you could leave the FX.
Mariano Tannenbaum
Yes. Good morning, Bob.
Regarding the FX, of course, when you convert or translate our EBITDA results in Brazil into U.S. dollars, it has some pressure on our numbers, just to give you the average [indiscernible] value SD FX rate for the Q1 2018 was till 20 and during this quarter was of this year, of course, created.
So I think our results for the first you are more remarkable considering that. Looking forward, now, this topic around four, as I mentioned in a question that both questions come at the beginning, we have hedges in place regarding the full-year in Brazil at rates that are below the current spot; also, remember that our debt, half of our debt is converted into BRL that also reduces pressure on our leverage ratios, because when the Brazilian Real depreciate, then the whole amount of this that we have in place goes down.
But on the research, yes, we're looking at the reality, look at all analysts' estimates everybody is forecasting a real or almost all analysts are estimating a real below four today at four. So, we are looking at number very carefully but there's not much that we can do with the FX besides all the policies and the risk management that I already explained, we are looking this number carefully.
We think and we expect that that we will not go far beyond the figure it is now that is around four and I think that's in line with almost all analyst expectations, and for that.
Marcel Moraes
Would you convert your debt into dollars, if you felt that the Brazilian currency was well did stabilized?
Mariano Tannenbaum
No, no. The slots that we have in place are already there are for the long-term.
That converts the user a bit into Real, but not -- we're not speculating with that. What we want to do is too much.
The outflow, the cash outflows with the cash inflows as the majority of our cash is generated in Brazilian reals we want and we prefer to have part of our liability expressed in the same currency. So that's the strategy that we have and it's not going to change according to the movement in the FX rate.
Operator
[Operator Instructions] And ladies and gentlemen at this point I'm showing no additional questions. We will conclude today's question and answer session.
I like to turn the conference call back over to Sergio Alonso for closing remarks.
Sergio Alonso
Yes, thank you. Before we finish, I would like to point out that we launched today a new corporate Web site, one that we believe is more user-friendly and better conveys the essence of our brand, and our strong company culture.
So, thank you again for participating in today's earnings call. We are pleased with the momentum we have built going into 2019, and we certainly look forward to updating you in our monthly second quarter earnings call.
So, in the meantime, please contact our Investor Relations team if you have any additional questions, and enjoy the rest of your day.
Operator
Ladies and gentlemen, that does conclude today's presentation. We do thank you for joining.
You may now disconnect your lines.