Jeronimo Martins Pe

Good day and welcome to the Geronimo Martins' first nine-month results 2023 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Ana Luisa Virginia, Chief Financial Officer of Geronimo Martins Group. Please go ahead, Madam. Thank you, Nadia.

Good morning, ladies and gentlemen, and thank you for joining this call to present our first nine-month 2023 results. As always, in our corporate website, you can find the results release, a slide presentation, and a fact sheet. Our consistent focus on price competitiveness drove the strong sales performance that limited the effects of high-cost inflation on a VTA margin in a context of declining food inflation. In the nine-month period, group sales increased by 22.1% to reach 22.5 billion euros. At constant exchange rates, sales increased by 21.2%. Our commitment to price leadership and top-line performance drove EBITDA to grow by 18% and to reach 1.6 billion euros, while EBITDA margin declined 24 basis points to 7.1%. Cash flow generation was at 159 million euros. the balance sheet remained very solid and our net cash position, excluding IFRS 16, was at 959 million euros at the end of September. High food inflation, even if on a slowdown trend, and low consumer demands have marked the operating context so far. In fact, although at different paces, food inflation has been gradually falling throughout the year in the three countries where we operate, while consumer confidence has remained frail, also with variable levels of pressure in each of the markets. In Poland, the consumer adopted a more cautious price-oriented and promotions-driven behavior pattern since the end of 2022, which resulted in negative volumes in the food retail markets in 2023. In Portugal, despite lower inflation, household income continued to be pressured by high interest rates. In Colombia, With almost three years of price hikes in foods, there is a clear impoverishment of the population, with families increasingly struggling to buy essential food products. Volumes were down in the market, and there was extensive trading down. Our results for the first nine months of the year, as well as in Q3, were driven by strong sales growth. The gross margin decline of around 65 basis points in both nine months and Q3 periods, was mainly a result of determined price investments across all banners. The trading down in Colombia and in Portugal was also a driver of this decline. The decision to invest in prices to boost volume growth delivered well, and the strong sales performance led EBITDA to grow 18%, reaching 1.6 billion euros in the nine months. Two notes on Q3 P&Ls. First note relates to the other profits and losses heading that were minus 18 million euros and include donations, indemnities, and write-offs resulting from the remodeling programs. Second note relates to net financial costs that in the quarter included a cost of 14 million euros reflecting value adjustments in the capitalization of operating lease liabilities in Poland denominated in euros. Cash flow generated in the period reached 159 million euros. Let me remind you that the change in working capital reflected the very strong 2022 year-end position in light of the outstanding Christmas season and other effects, including the implementation of a temporary zero VAT measure in Portugal and some changes in payment terms to support suppliers in a high-interest rate context. Our balance sheets remain solid and the net cash position by the end of the period was at 959 million euros. I will now guide you through our sales performance. All banners delivered well against the markets where they operate, having imprinted a strong commercial dynamic that earned consumers' preference. Reflecting the assertive strategic choices of our companies, Group Like for Like reached 15.8% in the first nine months. Despite declining food inflation in the three countries where we operate, which is reflected in the like-for-like slowdown, it is worth mentioning that food inflation was still a feature of the performance. Since the beginning of the year, Biedronka led in frequency and intensity the market's promotional activity. With this relentless dynamic, Biedronka continued to widen the gap between its basket inflation and the country's food inflation. As a result, the banner consistently delivered positive volume growth, clearly outperforming the market. Sales in the nine months grew 21.7% in local currency, including a like-for-like of 17.8%. In Q3, sales increased by 17.4%, with a like-for-like of 12.8%. Volume growth in like-for-like terms accelerated in the third quarter. According to GFK on fast-moving consumer goods, market share gain in the first eight months of the year was of 1.7 percentage points. The company opened 92 new stores over the period and concluded 270 remodelings, being on track to deliver on the plan for the year. Hebe delivered well throughout the nine months and sales grew 27.8% in local currency, with a like-for-like of 17.9%. The online operations gave a good contribution to growth, having increased by almost 52% to represent nearly 17% of total sales. In Portugal, the trading down in food persists since 2022, despite the reduction in food inflation. Household income remains pressured by higher interest rates. PINGDOS invested strongly in promotional activity while advancing in the execution of its remodeling program, enhancing the differentiation built by the venue in fresh products and meal solutions. Over the period, 36 stores were remodeled. PINGDOS opened eight new stores, having closed one location. Total sales in the nine months is grew 8.8%, with like-for-like standing at 8.4%, excluding fuels. In Q3, total sales were up by 9.3%, with like-for-like standing at 8.8%, well above basket inflation in the period. Rocher's good performance reflects the dynamic of the ORECA channel, as well as the banner's competitive strengths, with a value proposition carefully designed for each of its customer segments. Sales grew 18.1%, including a 16.7% like-for-like, to surpass, for the first time in a nine-month period, the €1 billion milestone. In Colombia, the long-lasting pressure over household income has been leading to negative volumes in the food retail markets and massive trading down. ARA has been strongly investing in price, working to consolidate its price positioning by offering value opportunities to the Colombian families, in a moment when many have serious difficulties in assessing essential food products. In the nine months, ADA grew sales in local currency by 48.7%, with like-for-like standing at 14.8%. In euros, sales increased by 35.5% to reach 1.8 billion. In Q3, sales in local currency grew 42.4%, with a 9.3% like-for-like. The execution of the investment program is progressing according to plan and ADA opened 151 stores over the period. At the consolidated level, the strong EBITDA increase reflects the good stop-line performance following the determination of our banners to keep prices low without neglecting the quality of both offer and shopping experience. Although aware that it would pressure gross margins, all banners maintain price competitiveness as a strategic priority to drive sales. Consumers' response to these enhanced price positions drove sales growth, limiting the impact on EBITDA margin of the high-cost inflation registered in the three countries. Group EBITDA margin fell to 7.1% from 7.3% in the nine months of 2022. The Edunca EBITDA margin was down in the nine-month period from 8.8% to 8.6%. The slowdown in like-for-like following lower food inflation raised challenges to cost dilution, particularly of labor, which has registered high inflation since the beginning of the year. In Portugal, EBITDA margin was broadly stable. At Pintos, the strong sales delivery is diluting the impact of higher costs. At Recheio, the margin improved as the banner fully recovered from the pressures driven by the pandemic crisis. At Hebe, margin increased from 8% to 8.2% following the good sales delivery and despite the investment to grow its international e-commerce operations. Aras EBITDA margin was down from 3.3% to 1.8%, reflecting price investment, strong trading down effects, and a large number of recently opened stores still with low sales maturity. Summing up, all companies share the same clear priorities, growing sales in difficult contexts while protecting profitability. Price competitiveness and the strengthening of our presence in the markets by expanding the operations and remodeling the stores have been instrumental to the delivery. Sales grew strongly, and so did EBITDA, despite the expected pressure on margins. With the ongoing war in Ukraine and the rising of the military tension in the Middle East, the extent of the impact on an already fragile consumer confidence is highly unpredictable. And we are conscious that our businesses will continue to be under pressure by the simultaneous reduction in food inflation and high inflation in costs. This says The nine months' performance shows that the competitiveness of our banners is in shape and that we continue to outperform our markets. We therefore believe that we are well prepared to continue to navigate an uncertain and challenging context while executing our investment program that is of strategic importance to our market position. We reiterate all the perspectives previously disclosed for each of our businesses and our intention to maintain investment as a priority, estimating it to be around 1 billion euros in the full year. Our confidence is reinforced by the strength of the balance sheet that gives us the flexibility to take the necessary actions to support our priorities. Thank you for your attention. Operator, I am now ready to take questions.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. and wait for your name to be announced. To withdraw your question, please press star 11 again. Lisa and Bob will compile the Q&A rules. This will take a few moments. Now we're going to take our first question. And it comes from Joao Pinto from JP Capital. Your line is open, please ask your question.