Jeronimo Martins Pe

Good day and welcome to Geronimo Martin's first nine-month 2024 results 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 Martin's group. Please go ahead, madam.

Thank you, Pete. Good morning, ladies and gentlemen, and thank you for joining this call to present our nine-month results. In our corporate website, you can find the results release, a slide presentation and a fact sheet for the periods. 2024 has been, so far, extremely challenging. As expected, the combination of a rapid decrease in food inflation and significant cost increases, together with weak consumer demands, are driving more intense competition and pressuring margins. Despite this demanding context, we have delivered on our key strategic targets to grow sales and strengthen market positions. Our banners maintain their price competitiveness and continue to improve value propositions, ensuring consumer preference, consistently growing volumes and gaining market share. Notwithstanding the strong volume performance, EBITDA margin for the first nine months was impacted by the operational deal average generated from basket deflation and significant cost inflation. Still, the balance sheet remains solid with net cash position, excluding IFRS 16, standing at 430 million euros by the end of September. In the first nine months of the year, our markets faced a substantially low food inflation compared with the extremely high figures of 2023. In Poland, Food inflation fell until March, then rose in April with the reintroduction of VAT on basic food products, and has continued rising since then. Despite the increase in real income, consumer demand kept shy and food retail sales remained subdued, further fueling price competition between the players. In Portugal, consumers continually highly focused on price opportunities and promotions in the food retail market. while the ORECA channel revealed a slowdown trend as it left a strong performance in the prior year comparatives. In Colombia, declining food retail volumes and trading down reflected the continued pressure over real household incomes in the country. In the first nine months of the year, and despite Piedronca and Pingdós operating with basket deflation, sales grew 10.3%. 4.7% at constant exchange rates due to the contributions from volume increases and networks expansion. The pressure on operational leverage largely reflects the headwind impact of basket deflation coupled with significant wage increases. All in all, EBITDA in euros increased 2.7%, a decline of 2.9% at constant exchange rates with a margin pressure of 49 basis points. Execution of our CAPEX program resulted in higher depreciation charges and increasing net financial costs due to the capitalization of leases. The financial costs also include the impact of higher average debt than in previous years and with increased ways of financing costs in Colombian pesos. Other profit and losses that were at minus 74 million euros include the initial endowments of 40 million euros to the Jorni Martins Foundation. It also incorporates the write-offs resulting from store remodeling projects and some restructuring costs. Net earnings per share, excluding other profit and losses of a non-recurrent nature, fell by 13.8%. In the Q3 P&L, we observed the same trends of the nine months. I want to make an important remark on the gross margin evolution. Despite the pressure on Biedronka's gross margin in Q3 from price investments, there were two positive effects that more than offset it at group level. The first relates to PINGDOS, which although continuing to invest in price, benefited from a positive margin mix as the company successfully expanded the meal solutions and perishables categories. The second came from ADA, which is executing an assertive and selective commercial strategy. By introducing changes to its promotional activity while guaranteeing a leading price position, the company delivered a positive margin mix of impact. Cash flow generated in the period was negative in 387 million euros, impacted to a significant extent by the slowdown in growth, as we transitioned from very high food inflation to food deflation. I also flagged that September this year, contrary to September 2023 and also to June 2024, ended on a weekday rather than on a weekend, which brought a negative calendar impact to both stocks and suppliers. Relying on a solid balance sheet, we ended September with a positive cash position 430 million euros i will now guide you through the detail of the performance starting with sales total sales grew by 10.3 percent 4.7 percent at constant exchange rates to reach 24.8 billion euros all banners contributed to the additional 1 billion euros of sales generated in the nine months of the year if we exclude the currency effect group life for like was at 3.0% with volume growth offsetting the important basket deflation of Biedronka. In Poland, price has been more than ever before the decisive shopping factor, and in this respect, Biedronka continues to lead the market, having even further reinforced its commercial strategy in face of a more intense competition. On top of its historically strong sales performance track record, the banner continued to deliver solid volume growth throughout the nine months. In the period, basket deflation significantly impacted like-for-like growth at a slightly lower rate in Q3 than in Q2. In a market that is experiencing negative sales volumes, Viadronca ended the period with a strengthened position. Having again guaranteed the preference of its vast consumer base, our main banner continued to outperform the market and increased its respective market share by 50 basis points year-to-date August. Total sales grew by 10.4% plus 3.9% in local currency to reach 17.5 billion euros. In the nine months period, Viadonca opened 104 stores, 90 net additions and refurbished 156 locations. performed well across the period, and sales grew by 20.6% in local currency, including a like-for-like of 11%. E-commerce continued to develop and being a strong growth driver for our health and beauty banner. Pingzos increased sales by 4.7% to reach 3.7 billion euros, including a 4.4 like-for-like without fuel, driven by strong performance in volumes. The banner also operated with basket deflation in the nine-month period. Pink Loose kept an intense promotional activity while reinforcing its drivers of differentiation, meal solutions, and perishables through the ongoing rollout of the All About Food store concept. In the nine-month period, 50 more stores were refurbished to this new concept, and six stores were opened, a net increase of three. Recheio grew sales by 1.8% to reach €1 billion. The Oreca channel in Portugal continued to be impacted by a weak domestic out-of-home consumption. However, Recheio intensified its commercial dynamic to protect sales performance and grew clients in all segments. Ada adjusted its promotional activities to match the consumers' needs. maintaining an intense commercial dynamic and providing good saving opportunities to the Colombian families. The pressure on Like for Like reflects an extremely weak consumer demand in light of persistently high food prices. Nevertheless, ARA continues to advance the expansion of its network according to plan, taking advantage of the market opportunity to reinforce its presence in the neighborhoods. So far, 87 stores were opened this year. The banner remains on track to achieve its target of 150 new stores in 2024, with Q4 being typically the busiest quarter in terms of new store openings. In the period, sales increased by 10.9% in local currency, a 21.5% growth in euros to reach 2.1 billion euros. Consolidated EBITDA grew by 2.7% in euros, a reduction of 2.9% at constant exchange rates, reaching 1.6 billion euros. I would like to flag a couple of things here. At Piedronka, EBITDA evolution reflects the impacts of the very challenging combination of significant basket deflation and cost inflation. Reinforced price leadership adds to the pressure. The good work being done by Ada's team allowed for solid ABTA improvement despite soft top-line performance. And on the central costs that in Q3-24 were below the same period of 2023, please take note that this was only partially due to savings, as there are also some cost headings affected by calendar mismatch that can still take place in Q4. Group ABTA margins. fell to 6.6% from 7.1% in the nine months of 2023. At Biedronka, the pressure on margin was mainly driven by lower sales growth due to basket deflation and increased waste of costs, essentially coming from the decision to significantly raise the wages of operational teams. Gross margin, though resilient in this context, was also down following price investments. Hebi's margin slightly improved as a result of good sales performance. In Portugal, despite the positive margin mix effect at Pingdós, price investment was a constant feature and was reinforced in Q3, particularly in the case of Recheio. And finally, in Colombia, as planned, Ara has been able to improve EBITDA margin by 127 basis points in the nine months. In summary, We have operated under challenging circumstances that combine basket deflation, high-cost inflation, price investment, and unresponsive consumer contexts. Our teams have their strategies clear and are working relentlessly to deliver on their priorities by continuously enhancing our value propositions, pushing for sales in volumes by expanding the customer base, reinforcing market shares, and executing the expansion strategy as planned. There is also a lot of work being undertaken to protect the efficiency of our business models and help mitigate the pressure from operational deleveraging. Our banners did well and are well prepared to continue to deliver as we enter the last months of the year and get ready for the Christmas season and the context that still face a lot of uncertainty and that show no signs of softening. Our outlook remains largely unchanged though we now expect CAPEX to be just over 1 billion euros for 2024, down from the 1.2 billion previously given as guidance, reflecting some timetable adjustments, namely on remodeling projects. Store expansion programs will be delivered as expected. Thank you for your attention. Operator, I am now ready to take questions.

Thank you. This time we will conduct a question and answer session. As a reminder, to ask a question on the phone, you'll need to press star 11 on your telephone keypad and wait for the name to be announced. To withdraw your question, please press star 11 again. We're going to take our first question from the queue. And our first question is coming from Hoao Pinto from JB Capital. You're live, please go ahead.