Carrefour Sa

Good day, and thank you for standing by. Welcome to the Cal4 Half Year 2025 Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Alexandre Pompard, Chairman and CEO. Please go ahead, sir.

Thank you. Good evening, everyone. Thank you for joining today's call to review our performance for the first half of 2025. As mentioned in our press release, the second quarter marks an acceleration in our markets. and the good commercial performance in our three main geographies, France, Brazil, and Spain. In Europe, several factors are supporting the recovery in consumption. After two challenging years, market dynamics are clearly improving as purchasing power is up, supported by rising wages and lower inflation. This is a sign of a developing on more supportive trend with volumes improving. We believe this positive momentum will persist for the second half of the year. In France, we posted positive like-for-like sales across all formats in the second quarter, a first since 2023 and the end of hyperinflation. Our rebound in price competitiveness is recognized by customers as we gained market share in both volume and value. Returning operating income rose by 20% with operating margin excluding current match up to 1.9%. Spend showed the same positive momentum. Q2 was the third consecutive quarter of sales growth with an acceleration versus Q1. We improved our recurring operating income by plus 9.4%, driven by food retail and supported by a rebound in financial services profitability. In Brazil, the group delivered strong performance during key commercial moments, notably around the Easter season in April. Atacadero continues to gain traction despite high figures last year related to the consequences of May's floods. We delivered another strong semester. Returning operating income grew by plus 6.5% at constant exchange rate. Beyond the performance of our three core countries, the group is also advancing its strategic review in two main fronts. First, on capital allocation, we already took full control of Carrefour Brazil and sold a 7% stake in Carmilla. Today, we announced that we have entered into exclusive negotiations with New Princess Group regarding the sale of all our operations in Italy. When we launched our strategic review in February, our objective was to drive the company forward with radicality. This operation comes in the right line with this strategy. Despite a successful turnaround between 2020 and 2022, we only had the marginal market position in Italy. Over the past two years, market conditions deteriorated and so did our financials. These planned transactions will contribute positively to Carrefour's financial profile, including improved profitability and recurring cash generation. Second, purchasing power and price positioning remain top priorities. That's the rationale. behind our new European purchasing alliance, Concordis, launched on July the 7th with Cooperative U. This new alliance builds on the experience of our European platforms, Eureka and CBLT, and reflects our ability to structure partnerships that are both efficient and inclusive. Concordis will enhance our price competitiveness by pooling volumes and offering a platform for price negotiation and international service sales with multinational FMCG brands. It will be fully operational for the 2026 negotiation on an initial term of six years. Discussions are already underway with other potential retail partners in Europe. It's therefore a major project for the coming years. In parallel, Our operational initiatives are delivering results. 400 new proximity stores were opened in Europe in H1, reinforcing our leadership in this format. Store conversions to lease management are progressing as planned. The integration of Cora and Match is also advancing well. Transformation costs impacted our H1 results by 80 million euros, as expected, But synergy targets of €130 million by 2027 are fully confirmed. We continue to build on our core strengths, Carrefour branded products, e-commerce GMV rose by 29% in Q2. We run strongly by Boise and France. We delivered €610 million in cost savings and are fully on track to meet our €1.2 billion target for the full year. All in all, Our first half results are partially blurred by the integration of cohort match, but they remain fully in line with our expectations. EBITDA is up 1%. Retiring operating income is stable at constant rate despite the temporary impact of integration costs. As discussed in February, net free cash flow is down, reflecting an expected normalization of working capital contribution after the hyperinflation period in Latin America and the consolidation of CORA unmatched. On sustainability, we exceeded our CSR targets again, achieving a 107% score on our CSR index. We made significant progress on climate and plastic agreements, with major industry partners that we named Sustainability-Linked Business Plans. Looking ahead, we are fully focused on the new next steps of our strategic review, driven by the full engagement of our teams on close collaboration with the board. The planned sale of our operations in Italy illustrates the way we intend to proceed with speed, discipline, and a clear focus on value creation. We will keep you regularly informed as new decisions are made and milestones achieved. We are confident in our perspective for the second half of the year. We expect the positive market trends seen in Europe, especially in France and Spain, to continue. In Brazil, we expect the business to be well-oriented. In this context, we confirm our 2025 objectives. Slide growth in EBITDA, recurring operating income, and net free cash flow. We enter H2 with confidence, but also clarity and determination focused on what matters and ready to take bold decisions. One last word to tell you that the board of directors has decided to propose the renewal of my mandate at our group's next annual general meeting. I want to express my gratitude and pride at the opportunity to continue my mission at the helm of this great company. Over the past years, we have profoundly transformed Carrefour. We geared leadership positions in our core countries and strengthened our financial foundation. In a new environment that demands bold choices, my intention is to keep pushing to unlock the full value creation potential that Carrefour carries within. You can be certain that I will devote to this task all my energy and my patience for Carrefour. Thank you for your attention. I will now hand over to Mathieu for more detail on your financial performance.

Thank you, Alexandre, and good afternoon to everyone. It's a pleasure to be with you to cover our H1 2025 financial results in detail. Let's start on slide 9 of the presentation. As explained, we have seen a broad improvement in market trends in the food retail sector across most of our countries, with a particularly clear acceleration on volumes in the second quarter in France and Europe, together with some growth in prices. That comes after several quarters of restoration of purchasing power thanks to wage growth outpacing inflation. Moving to slide 10 and like-for-like sales. Our top line increased by 3.7% on a comparable basis in H1 with a marked acceleration in Q2 at plus 4.4% versus 2.9% in Q1. I will detail performance by region in a minute. Moving on to slide 11 and more details on Q2 sales. Total sales for the quarter reached 23.9 billion euros, increasing by 5.2% or by 10% at constant terms. Group like-for-like sales were up 4.4%. Expansion and M&A had a positive contribution of 5.5% over the quarter, mainly due to the consolidation of Koha and Match since July 1st, 2024. Petrol contributed negatively for minus 0.9%, and the calendar effect was a positive 1%, mainly reflecting the shift of Easter, which fell in April this year, versus March last year. Forex had an unfavorable impact on total sales growth of minus 4.8% over the quarter, essentially reflecting the depreciation of the Argentine peso and the Brazilian real against the euro. Moving to slide 12, the recurring operating income for the group in H1 amounted to 681 million euros, or 1.6% of sales. It was down versus 743 million and 1.8% last year. The first semester's recurring operating income is penalized by two effects. On one side, an exchange rate effect of minus 62 million euros and the effect of the consolidation and integration of COHA and MATCH, which represented a negative 80 million euros over the first half of the year. Excluding these effects, Recurring operating income would show growth in absolute terms and as a percentage of sales. Let's turn to slide 13 with more details on the performance of France. Like-for-like sales increased by 2.1% in Q2, with all formats growing over the quarter, reflecting improved market conditions in the country and careful, solid commercial performance. On a side note, non-food sales were stable in Q2. Over the quarter, Carrefour continued to reinforce its price competitiveness with new waves of price decrease and the reshaping of its loyalty program, Le Club Carrefour. We notably strengthened our price leadership in fresh products. Market shares kept increasing in volume terms over the period, excluding core hand match. At the recurring operating income level, the impact of Cora and Match was a negative €80 million, in line with the indications provided at the beginning of the year. The integration process is progressing perfectly, and we confirm our objective of €130 million of synergies by 2027. Excluding Cora and Match, the recurring operating income for the historical perimeter grew by a strong 20%, in the first half of the year, with a margin expansion of 34 basis points. This strong achievement is a confirmation that all the initiatives implemented in the frame of Carrefour 2026, namely on private levels, e-commerce, costs, franchise, are making their way to the bottom line while allowing for further price decrease. Moving on to slide 14, and our performance in Europe. We saw positive trends across our European markets in both volumes and value. This led to all countries accelerating like-for-like sales in Q2 driven by Spain, which showed a strong momentum. Italy and Belgium returned to growth, while Poland stabilized over the quarter. Recurring operating income for the semester was shaped around the strong performance of Spain, where recurring operating income grew by 9.4% year-on-year, as well as solid improvements in Belgium and Italy. On the other hand, we saw ongoing competitive pressure in Poland. Overall, recurring operating income was stable in the European region in each one. Let's move to slide 15 with a focus on Spain, where we continue to see a positive and dynamic market driven by both volumes and prices. We continue to invest in prices over the semester, which strengthened our competitive positioning against key competitors. This contributed to an accelerated like-for-like growth in sales in Q2, with a good performance of fresh products. We also saw momentum in non-food sales at plus 3.1% like for life. In parallel, Spain continued to expand its footprint with 68 new convenience stores open in the first half of the year. Another good news in H1 was the recovery of profitability for the financial services in Spain with a recurring operating income slightly up. Moving on to Latin America on slide 16. Carrefour posted solid growth in Q2 2025, with like-for-like sales up 9.7%. Despite an uncertain consumption environment in Brazil due to high inflation and record levels of interest rates, we continue to perform well, with sales growing by 4.4% on a comparable basis supported by Atacadao, up 5.4% like for life. In the retail segment, food sales remained strong, growing at plus 7.6% like for life. This was notably driven by our new commercial strategy towards B2B customers. In the meantime, we stabilized sales at Sam's Club and we continued to grow e-commerce business by 36% in Q2. Finally, Banco Carrefour continued to perform well. In Argentina, Carrefour delivered almost 39% year-on-year growth while increasing its market share both in value and in volume. Its performance was supported by ongoing growth of NPS in a context of decreasing inflation and volumes that remained negative in the market. In terms of profitability, we increased our recurring operating income by 2.5% at constant exchange rate in the region over 8 In Brazil, our profitability increased by 6.5% at constant exchange rate, led by solid profit growth at Atacadao and at Banco Carrefour. The published number for recurring operating income was affected by negative Forex. Moving to the top part of our global P&L on slide 17. As you see, all ratios are impacted by the consolidation and the integration of Cora and Match. If we exclude Cora and Match, you see the continuation of trends we had in the past. A decrease in gross margin rate of 12 basis points reflecting price investments and more stores and franchise. A decrease in SG&A as a percentage of sales of 30 basis points reflecting cost savings and switch to franchise. Operating margin increased by 10 basis points excluding core and match. Moving on to the bottom part of our P&L on slide 18. Non-recurring expenses increased to 529 million euros, reflecting the impairment of Carrefour Italy for 460 million euros. Reversely, we had lower restructuring costs in H1 versus last year. Our cost of debts remained stable. We reduced our other financial expenses versus last year, primarily on the back of high historicals from Argentina. As we said last year, H1 2024 was impacted by a strong negative forex effect following dividend distribution from Argentina and by a significant negative impact from the application of IAS 2019. The normative tax rate increased over the semester, mainly due to the geographical mix of profits before taxes within the group. Bottom line, net income, group share, excluding discontinued operations and exceptionals, reached €210 million compared to €313 million in H1 last year. Excluding core and match, it amounted to €275 million. Now turning to net free cash flow on slide 19. As expected, H1 net free cash flow is down versus last year on the back of the consolidation of Koha and Match, representing minus 180 million euros, lower real estate asset rotation for minus 81 million euros, and lower contribution for working capital on high historicals, notably due to high inflation in Argentina in H1 2024. Let me highlight the key moving parts. EBITDA is up by 21 million euros. Our financial results normalized after a negative H1 2024 in Argentina, as I explained earlier. We reduced the cash out linked to restructuring plans. As expected, working capital had a lower contribution in H1 this year. It was impacted by the consolidation of Cora and Match on the negative side of the annual cycle for 80 million euros. Besides, we face high historicals in both Argentina, which experienced higher inflation last year for 170 million euros, and Brazil, which had an acceleration of sales last year following the flooding at Rio Grande do Sul for 130 million euros. And finally, capex were slightly lower than H1 2024, which is primarily due to seasonal effects expected to reverse in H2. As we now systematically do, we provide on slide 20 net free cash flow, excluding real estate, capex and disposals. Carrefour generated net real estate proceeds of 32 million euros in H1 2025, down from 112 million euros in H1 2024, mainly due to a decrease of disposals. Excluding real estate, net free cash flow totaled minus 2.1 billion euros in H1, down 300 million euros versus last year. On slide 21, we have highlighted the profile we expect for H2 and full-year net free cash flow versus previous periods. For H2, we expect growth in EBITDA as we expect to benefit from the more supportive market environment and to maintain our good commercial and operational dynamics. Coherent match shall not weigh on profits versus last year anymore in H2. We anticipate a stable financial result and much lower outflow on restructuring costs on high historicals in H2 2020. Working capital contribution should be closer to historicals in H2. CapEx should increase EBIT in H2, pointing to a stable amount for the full year. Last, our pipeline points to a higher level of real estate asset disposals in the second semester after a low H1. So this points to a stronger net free cash flow in H2 versus historicals in line with our objective of slight growth in the full year 2025. Moving on to net debt on slide 22. Net debt amounts to close to 7 billion euros on June 30, 2025. It is up versus June last year, primarily due to the cash out for the acquisition of Cora Unmatched, which occurred on July 1, 2024, for 1.1 billion euros. Net free cash flow over the last 12 months amounted to 1.1 billion euros, and covered dividend payments for 826 million euros and share buybacks for 258 million euros. A few words now on the refinancing of local debt in Brazil, as you can see on slide 23. Following the acquisition of the minority shareholders of Carrefour Brazil, we decided to simplify our debt structure and refinance most of the 1.5 billion euros of BRL-denominated debt. This local debt has variable and very high interest rates, with the SELIC rate at 15%. We intend to refinance this debt through a net investment from Carrefour Group, which will allow us to benefit from the Group's lower cost of debt in euros. We expect that most of this refinancing shall be finalized by year-end, with first steps starting soon. We believe that this refinancing could lead to a positive impact of around €100 million on net income and net free cash flow on an online basis as soon as 2026 with a few benefits already in 2025. I will finish my presentation with a few words on the disposal of the Italian business that we announced today on slide 24. Firstly, Italy is a highly competitive and fragmented market dominated by strong local players with increasing pressure from discounters. As you can see, Carrefour Italy accounts for around 4% of group sales. In 2024, the business posted negative recurring operating income and negative net free cash flow, confirming challenges despite recovery efforts. As you understand, divesting this activity will particularly improve the financial profile of the group going forward. The estimated net impact on the transaction on the group's treasury is minus 240 million euros, taking into account Carrefour's financial contribution to support the transaction. We expect to close the operation by year-end 2025, pending regulatory approvals. On that note, I thank you for your attention. Alexandre and I are now available to take your questions.