Inretail Peru Corp

Good morning and welcome to In Retail Peru's third quarter 2025 conference call. At this time all participants are in a listen-only mode and please note that this call is being recorded. After the presentation we will open the floor for questions. At that time instructions will be given as to the procedure to follow if you would like to ask a question. Also you can submit a Submit online questions at any time today using the chat function on the left side of the webcast platform, and they will be answered after the presentation during the Q&A session. Simply type your question in the box and click send. Before we begin, I would like to remind you that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. Joining us today from In Retail Peru are Mr. Juan Carlos Vallejo, Chief Executive Officer, Mr. Marcelo Ramos, Chief Financial Officer, and Mrs. Andrea Febre, Investor Relations Officer. They will be discussing the quarterly report distributed by the company yesterday. If you have not yet received a copy of the earnings report, please visit www.inretail.pe on the Investor Risk section where there is also a webcast presentation to accompany the discussion during this call. If you need any assistance, please contact the investor relations team of In Retail Peru. Please be advised that forward-looking statements may be made during this conference call, and they do not account for economic circumstances, industry conditions, the company's performance, or financial results. As such, these forward-looking statements are based in several assumptions and factors like a change causing actual results to materially differ from the current expectations. For a complete note on the forward-looking statements, please refer to the quarterly report which was issued yesterday. At this point, I would like to turn the call over to Mr. Juan Carlos Vallejo, Chief Executive Officer of In Resale Through, for his opening remarks. Mr. Vallejo, please go ahead, sir.

Thank you, Megha. Good morning, everyone. I'm Giancarlo Vallejo. Thank you for joining Enrique's third quarter earnings call. Today, we will discuss the main highlights of Enrique's third quarter results for 2025. Joining me today are Marcelo Ramos, our chief financial officer, and Andrea Favre, our investor relations officer. I will start with a brief executive summary, and then Marcelo and Andrea will walk you through our earnings presentation. During this quarter, the Peruvian economy continues experiencing a stable economic momentum, benefiting from the low inflation and a strong exchange rate. In spite of the latest presidential transition, country risk and volatility remain low, reinforcing Peru's position as one of the most stable economies in the region. In terms of consumption, This quarter was affected by the high comparison basis in 2024, even the pension funds and compensation time accounts withdrawals, which created a temporary increase in demand, particularly in the month of July. Although general economic conditions are gradually more favorable, consumption is experiencing only a caution recovery, even in the international context and the pre-election period. In this quarter, we move forward with determination in the execution of our strategic priorities, advancing in our expansion project, in reinforcing the value proposition of our different formats, and in the transformation of our logistic operations, further consolidating our leading multi-format platforms. In general, our businesses continue to show resiliency with the challenging comparison basin mentioned before. posting on a consolidated basis a positive growth in revenues of 3.5% and a slight decline in adjusted VBA of 0.7%. Our food reader segment had a moderate growth in revenues of 5.4%. Growth was mainly driven by mass and to a lesser extent by macro. Lazarea, on the other hand, was the most affected by extraordinary withdrawal mentioned before and by the general slowdown in the supermarket channel. Our pharma segment had a low growth in revenue of 0.8%, combining a steady growth in our pharmacy unit with an anticipated decline in our distribution unit in Peru. impacted by an important change in the use of oil that prioritized cash flow generation over top-line growth. Finally, as expected, our shopping mall segment was still affected by the extraordinary impact related to the incident in the Real Plaza Trujillo Mall. However, this impact had a lesser effect on the financial results of our segment in terms of adjusted VBA. compared to the prior quarters. Revenues and adjusted VDA declined 5% and 12.8% respectively. Based on the impacts already recognized and on the information we have today in terms of the guidance for INRITEC, we remain in line with the guidance given in the prior earnings call of mid-single-day growth in consolidated revenues and low single-day growth in consolidated adjusted VDA for 2025. Finally, I would also like to highlight that on October of this year, we successfully issued approximately $500 million of senior and secure notes at the retail shopping malls in two bond branches. The spreads were the lowest ever achieved by retail shopping malls. These new instances extend relevant debt maturity beyond 2030. With that, let me pass the word to Marcelo, and as always, we look forward to answering your questions by the end of this call.

Thank you, Juan Carlos. Good morning, everyone. Thank you for joining us on this call. Today, we will review the main highlights of NVIDIA's third quarter results for 2025. Now, please turn to page four. As anticipated in our previous earnings call, Q3-25 had an overall challenging comparison basis given the pension fund and compensation time account withdrawals, which created a temporary increase in consumption during the initial weeks of the quarter. Even in this context, InVital delivered revenue growth across most segments, resulting in a mid-single-digit growth in consolidated revenues of 3.5%. This growth results from a moderate growth in our food retail segment, and a slight growth in our pharma segment. Our shopping mall segment, to the contrary, registered a decline in revenues, mainly explained by the closing of the Real Plaza Mall in Trujillo. In terms of adjusted EBITDA, we recorded a slight decline of 0.7% compared to Q3-24, explained by the decrease in gross margin, the increase in operational expenses from the new stores opened, and remaining extraordinary impacts arising from the incident in the Real Plaza Trujillo Mall. affecting mostly our shopping mall segment. As it relates to net income, we registered a 12.7% decrease in the quarter, explained by the decline in adjustability and the increase in net financial expenses despite a higher net effects gain. In summary, in spite of a challenging comparison basis, our food vehicle and pharma segments showed their resiliency. while our shopping mall segment experienced lingering impacts related to the incident earlier this year. As evidenced by our financial results, these impacts are dissipating towards the end of the year. Overall, based on the information we have to date, we remain in line with the guidance given in the prior earnings poll of mid-single-digit growth in consolidated revenues and a slight positive growth in consolidated adjusted results for 2025. Now, please turn to page 5 to review a financial and operational snapshot of our consolidated figures. In terms of contribution by segment, these have remained similar to recent quarters. Our food retail segment continues to gain more participation in revenues relative to the last 12 months, while our pharma segment has gained a share in adjusted EBITDA. Now, please turn to page 7 to give you a brief update on our continued ESG progress during this quarter. First of all, we are extremely proud that our food retail segment obtained its fourth carbon footprint start from Minam in recognition of its progress in reducing emissions. On the social front, our flagship program, Bueno Por Dentro, donated more than 4 million food rations, equivalent to 17 million soles. On the environmental front, we managed to save over 1 million soles in our food retail stores by implementing best practices in energy management and recycled over 3,000 tons of waste. Additionally, thanks to Peru Pasión, we generated over 10 million solids of SME sales through all our channels. Finally, during this third quarter, we released our annual sustainability report with additional and valuable information about our sustainability strategy and projects, which is available on our website for review. Now, we will discuss the results by segment. Please turn to page 9 to review our third quarter results for our food retail segment. Our food retail segment registered a top-line growth of 5.4% in Q3-25, with a same-store sales growth of 1.5%, despite the temporary closure of stores, including the Plazarella store in the mall in Trujillo and the high comparison basis mentioned before. Growth in revenues were mainly driven by a strong growth in our mass format, with a same-store sales growth of around 15%, and a moderate growth in our macro format, with a same-store sales growth of about 2%. Our Plaza Bea format, on the other hand, posted a low single-digit decline in same-store sales, affected by the short-term boost in disposable income from the pension fund and time deposit withdrawals on the comparison basis, impacting the supermarket channel in general. In terms of categories, our food categories experienced a low stem cell growth, with a moderate growth in fresh food and a slower growth in dry food. On the other hand, our non-food categories registered a slight decline in stem cell growth. Revenues were also favored by the contribution of the new stores opened in the last 12 months, including 325 new mass stores and one new macro store. During Q3 25, we opened 53 net new mass stores, reaching a total of 1,467 hard discount stores. Next week, we will inaugurate our 1,500 stores. Our gross profit increased 3.7% with a gross margin of 23.4, below Q3 24 due to the change in format week. Our emerging format accounts for approximately 50% of our food retail revenues, with mass already represented more than 20%. In terms of adjusted EBITDA, food retail's adjusted EBITDA grew 2.3% in Q3 2025, with a reduction in margin of 28 basis points. This reduction is mainly explained by the decrease in gross margin and by the incremental expenses new stores opened, the new minimum wage, and the increasing logistic expenses associated with additional warehouse space rented for eight new dedicated distribution centers for mass, and with a greater presence of our hardest-count stores in provinces. Overall, despite the challenging comparison basis, we showed progress in our multi-format strategy, refining our formats and their value propositions. As already mentioned, and in line with our strategy, the change in format mix, The progress made in our organic expansion plans and the investments made in our logistic platform involve incremental investments and expenses that affect our short-term results. However, we are confident that they are essential to building a solid and sustainable foundation for strong and profitable growth starting next year. Now, please turn to page 10 to review our third quarter results for our pharma segment. Our pharma segment posted an increase in revenues of 0.8% in Q3-25, combining a positive growth in revenues of 1.9% in our pharmacies unit with a decline in revenues in our distribution unit. Same-store sales growth for our pharmacies unit reached 1.2%. Pharma categories were favored by the winter season, driving demand for cold, flu, and respiratory-related products. Non-pharma categories posted a slight positive sense of growth. And during the quarter, we continued to see growth in consumer-related categories, in particular personal care, driven by the successful execution of our category diversification strategy. During Q3-25, we continued innovating with our formats, looking to increase productivity per store. we implemented certain modifications in some of our Mi Pharma beauty stores to enhance the experience and increase focus on personal care and beauty care categories. This new format aims to exploit niche categories with high growth potential where our market penetration is still low. Additionally, in our pharmacies unit, we progressed with our expansion plan, opening 48 new pharmacies, and in the last 12 months, we've opened 87 new pharmacies. In relation to our distribution unit, we posted a decrease in revenues of around 3%, combining its light growth in Ecuador with a decline in Peru. As mentioned before, our distribution business in Peru is going through an important change in its business model that started late last year, prioritizing cash flow generation and returning invested capital, implementing stricter collection terms, and focusing on our main channels, aligned to our core competencies in the pharma segment. Although these changes have resulted in a drop in revenues, they have also created substantial efficiencies in working capital and in operating expenses. We expect these trends to persist in the near term as we continue to simplify structures, streamline processes, and focus on our core categories and competitive capabilities. In terms of gross margin, We registered a gross margin of 32.5% below Q3-24, mostly explained by the global gross margin in our pharmacies unit, given the high comparison basis of last year, which included an extraordinary reversal of provisions related to shrinkage costs. Gross margin was also affected by the decline in margins in our distribution unit. These effects were partially offset by the higher participation of our pharmacies unit in the revenues mix. Our pharma segment recorded an adjusted growth of 1.1%, driven by the growth in revenues and operational efficiencies, despite the lower gross margin. Overall, our pharma segment continues to deliver a positive growth, supported by the steady performance in our pharmacies unit, despite the changes in business model in our distribution unit in Peru, maintaining profitability and enhancing cash flow generation in the segment. Please turn to page 11 to review our third quarter results for our shopping mall segment. As anticipated in our previous earnings call, the financial results in Q3-25 for our shopping mall segment still experienced some impact arising from the incident in the Real Plaza Trujillo Mall, although to a lesser extent compared to prior coverage. Our shopping mall segment registered a decline in revenues of 5%, impacted by the income lost from the continued closure of the mall in Trujillo and by the extraordinary discounts granted to tenants of the mall. Additionally, revenues were hindered by the decrease in variable rent in several tenants from the high comparison basis in Q3-24. These effects were partially offset by the improvement in performance in other malls. Our handouts registered a negative same-store sales of 2.3% during the quarter, impacted by the high comparison basis mentioned before. Our gross margin was 65.6% this quarter, lower than Q3-24, mainly explained by higher marketing and maintenance costs due to the phasing in the curse of these expenses, in addition to the higher rental costs. In terms of adjusted EBITDA, we reached 109 million soles, a drop of 12.8%. This decline is mainly explained with the external impact arising from the incident earlier this year, the lower gross margin, and the increase in other operating costs. As anticipated, the impacts from the incident are gradually easing towards year-end, as evidenced by the lower decline in adjusted EBITDA compared to prior quarters. Now, please turn to page 12. During Q3-25, we advanced in our organic expansion strategy. opening new mass stores and new pharmacies, together with the expansion of our Real Plaza Primavera mall. In terms of same-store sales, Q3-25 presented a more challenging consumption environment, driven by a more demanding comparison basis, particularly during July, resulting in lower same-store sales growth across every segment. Now, please turn to page 14 with your consolidated net income results. In Britain registered a net income of 241 million soles in Q3 25, a 12.7 decrease compared to Q3 24. As mentioned before, the decrease in net income is explained by the decline in the and the increase in net financial expenses, despite the higher net effects gain. The increase in net financial expenses comes from the larger IFRS 16 related financial expenses associated with the opening of masks and pharmacy stores, and from higher financial debt interest rates related to the liability management strategies executed over the last 12 months in all segments. Now, I will pass the word to Andrea, who will discuss our CAPEX, cash flow generation, and consolidated financial debt.