Koninklijke Ahold Del Ord

Good morning and welcome to the analyst conference call on the third quarter 2023 results of Aarhus Delhaize. Please note that this call is being webcast and recorded. Please note that in today's call forward looking statements may be made. All statements other than statements of historical fact may be forward looking statements. Such statements may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those included in the statements. Such risks and uncertainties are discussed in the interim report, third quarter 2023, and also in Aarhus Dalherza's public filings and other disclosures. Aarhus Dalherza disclosures are available on aarhusdalherza.com. Forward-looking statements reflect the current views of Ahoz al-Herza's management and assumptions based on information currently available to Ahoz al-Herza's management. Forward-looking statements speak only as of the date they are made and Ahoz al-Herza does not assume any obligation to update such statements as necessary. Such statements accept as required by law. The introduction will be followed by a Q&A session. Any views expressed by those asking questions are not necessarily the views of Aho Delherza. At this time, I would like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead, JP. Thank you.

Thank you, Sharon, and good morning, everybody. I'm delighted to welcome you to our Q3 2023 results conference call. On today's call are Franz Muller, our president and CEO, and Yolanda Putz-Bell, our CFO. After a brief presentation, we will open the call for questions. In case you haven't seen it, the earnings release and the accompanying presentation slides can be accessed through the investor section of our website, aholdeles.com, which provides extra disclosures and details for your convenience. To ensure everyone has the opportunity to get their questions answered today, I ask that you initially limit yourself to two questions. If you have further questions, then feel free to re-enter the queue. To ensure ease of speaking, all growth rates mentioned in today's prepared remarks will be at constant exchange rates unless otherwise stated. And with that, I hand over to Franz.

Yes, thank you very much, JP, and good morning, everyone. Of course, a special welcome to Yolanda, who is joining her first quarterly call as CFO of Alvarez. Yolanda has been on an extensive induction program that started in August and officially assumed the CEO role on October 1st. She will share some thoughts and take you through the financials in a few moments. As we head into the busy holiday season for our customers and associates, it's a good time to reflect on the environment we're operating in, as well as the important strategic and operational choices we are taking to drive long-term value creation. No doubt, times continue to be turbulent. The war in Ukraine already lasts almost two years, and in the Middle East we are facing another war between Israel and Hamas. In our markets, we also see firsthand some of the tragedies of the current political and social climate. On October the 25th, the city of Lewiston in the state of Maine, Hannaford's home state, experienced one of the darkest moments in its history. A mass shooting took the lives of 18 people and injured many more. We unfortunately know that mass shootings have become more frequent in the US, but this incident was particularly chilling because such events are unprecedented in Maine. Our thoughts are with our colleagues in Maine and everybody in Lewiston who will be dealing with this strategy for a long time. Reflecting on business trends, Many of the ones I outlined during our last quarterly call indeed materialized as expected. While inflation has passed its peak, customers' household budgets remain under pressure, as many of them are also experiencing higher interest rates, and in the case of the U.S., declining federal and state government assistance. With our strong portfolio of brands, we grew comparable store sales by 3.1% in the third quarter. We delivered an underlying operating margin of 3.8% and diluted underlying EPS of 58 cents. While both these metrics are lower year over year, from a margin perspective, around half of the decline is linked to insurance-related adjustments, with the other half resulting from lower margins in the U.S., which Yolanda will discuss in a few moments. Our formula for success, therefore, has continued to play an important role. First of all, being agile and adaptable to meet and exceed customer needs. Secondly, embracing transformation in an operating model. And third, continuing to advance our sustainability agenda. Today, I'm going to focus on the second point, embracing transformation. Here, there are four important moves I would like to highlight, each also underpinning our strong discipline focus on value creation. The first is the announcement of the planned addition of local Romanian supermarket chain Profi to our family, subject to approval from the regulatory authorities. Densing up existing markets is a tried and tested strategy of ours, where we have a proven track record of delivering highly accretive returns in a short space of time. This acquisition will more than double the size of our, the less existing Romanian business, which operates under the Mega E-Mice brand and has 969 stores, predominantly in urban areas. Profi operates 1,654 stores, mainly in rural areas and generated roughly 2.5 billion euro in sales for the 12-month ended 2023. Strong format fit and complementary propositions between the Profi and Mega E-Mice brands will allow them to better serve the Romanian customer, driving both sales and profitability. The combination with Profi is expected to be sales growth and EBIT margin accretive, post synergies and integration to Ahol de Les Europe and EPS accretive to Ahol de Les as a group in the first year after closing. The implied fully synergized acquisition multiple is approximately seven times on June 2023, last 12-month EBITDA basis, and that is in post-IFRS 16 number. Secondly, we thoroughly believe our strength lies in the seamless mix of in-store and online shopping, and that in our omnichannel strategy. To assess where we stand in this changing environment, we have done a thorough review and analysis as part of our Accelerate initiative. As customers' shopping preferences evolve in the U.S., one of the concrete outcomes is to orient our online fulfillment capabilities towards more efficient, less asset-intense same-day delivery models, such as Click and Collect. This has already led to the decision earlier this year to close the U.S. Jersey City and Hannover fulfillment centers, and focus on pick from stores and third-party partners. Based on the economics of the omnichannel business model and return on investment we are striving for, divesting fresh direct is an additional outcome of this analysis. This will enable us to focus on growth and investments in our broader based omnichannel businesses, where we have strong store density and online presence, leading market shares and a longstanding heritage of loyalty and deep relationships with customers. We believe Gatier, a pioneer in the tech industry and the ultra-fast online grocery delivery business, is the right company to carry FreshDirect forward. FreshDirect has been a trusted brand in the New York City area for more than 20 years, knowing for delivering the highest quality, freshest food, and deeply loyal customers who are passionate about the brand. We expect this legacy to continue under the new owner. The third, in Belgium, the Deles team continues to make excellent progress on the execution of its future plan. Today, Deles has announced that it signed agreements on 51 of its integrated stores to independent entrepreneurs, of which the first 12 stores have already opened their doors under the new entrepreneurs as of last Friday. and with a further three planned stores for conversions this week. I'm also pleased to report that impacts of Belgium on our Q3 results were rather minimal, with the market delivering positive comparable store sales and having only a minor 20 basis points impact on European sales and 10 basis point impact on European margins. Fourth, as you know, we have a long and strong track record of working hard with suppliers to mitigate price increases. and to swiftly reflect the price decreases where possible, ensuring our customers have access to affordable and healthy options. Ensuring we continue to provide fuel for our long-term safe for our customer program is another area where we invest time and energy. And to help tackle persistent price differences between European markets, Aho Deles has joined the European Retail Alliance, the joint venture Eurelec, which is a collaboration with Rewe Group and Leclerc Company. This is in addition to our already existing memberships in the AMS and Copernic Buying Alliances. But with this specific partnership, we aim to promote open and fair price negotiations with the largest FMCG brands across Europe, which ultimately benefits our customers. In the end, we owe it to our customers to keep our food affordable, especially during these challenging times. Speaking about things that are important to customers, let me spend a brief moment on health and sustainability. This area remains a priority for our brands with several examples from the quarter on slide 11. Albert Heijn and Bol were featured in a mini documentary powered by Kickstart AI. Albert Heijn explained how they are using artificial intelligence to reduce food waste using demand forecasting. This is a great proof point. of how they use innovation and technology to combine the reduction of food waste with providing customers access to affordable and healthy products, while at the same time reducing cost. Paul demonstrated how to use automatic packaging machines controlled by smart algorithms to ensure the use of less cardboard and smaller parcels. He also used AI to see if additional packaging is actually needed. And this results in less transparent movements and the use of smaller, more sustainable vehicles, like the bike couriers of Cyclone. Looking at reducing carbon emissions, every initiative, big and small, counts. For example, Deleuze and French fast-charging provider Elektra have plugged in the first six of a planned 1,200 fast-charging points. Food Lion, Hannaford, and The Giant Company were recognized for their programs to reduce emissions from the refrigerant systems. So as you can see, we have been very active over the past month, and I'm particularly excited by the building blocks for the future growth we are putting in place. More on that later, but let me now hand over to Jolanda to share your remarks on the financials.