Jerónimo Martins, SGPS, S.A. (OTCPK:JRONF) Q1 2023 Effects Convention Name April 27, 2023 4:00 AM ET
Corporate Contributors
Ana Luisa Virginia – CFO
Convention Name Contributors
Joao Pinto – JB Capital
William Woods – Bernstein
Jose Rito – CaixaBank
Nick Coulter – Citi
Nicolas Champ – Barclays
Ana Luisa Virginia
Just right morning, girls and gents and thanks for becoming a member of this name to Provide First Quarter 2023 Effects. In our company web page assessed fabrics is to be had. Comprising the discharge, a slide presentation and impact sheet.
Q1 figures certainly mirror a excellent begin to the yr. All banners leveraged the sturdy aggressive positions held at year-end to proceed fueling enlargement in 1 / 4 when meals inflation stays a key function of the efficiency. With customers regularly extra harassed, our strategic center of attention stays unchanged with worth competitiveness because the important software to force enlargement, give protection to volumes and mitigate up to conceivable buying and selling down results.
The result of this strategic choice was once in particular exceptional in Poland, the place regardless of the demanding situations Biedronka delivered an excellent efficiency. Workforce gross sales grew via 23.4% to achieve â¬6.8 billion. And you will need to flag that foreign money devaluation was once a headwind to enlargement. At consistent alternate charges, crew gross sales grew via 26.5%. The sturdy gross sales efficiency led EBITDA to develop via 20.1% to achieve â¬446 million. EBITDA margin declined 18 foundation issues to six.6%. Money waft technology was once adverse in â¬226 million, displays seasonal operating capital outflow of the trade within the first quarter.
Our monetary scenario stays extraordinarily forged. By means of the tip of March, web money place except capitalized running rentals, was once at â¬1 billion. We entered 2023 with continual top meals inflation additionally reflecting the comps as inflation sped up in Poland and Portugal from Q2 2022 onwards, when the warfare exacerbated the drive on meals and effort costs.
In face of emerging costs and better rates of interest, customers have change into regularly extra wary regardless of the toughen to family source of revenue in each and every of our 3 nations from the nationwide minimal salary will increase in January. In Portugal and Colombia, the buying and selling down in meals persevered to realize momentum. The primary quarter P&L displays a sales-driven efficiency.
Value funding via all retail banners and the consequences of buying and selling down, in particular in Portugal and Colombia harassed gross margin which declined from 21.5% to twenty.8%. Our bolstered worth competitiveness resulted in a excellent gross sales efficiency around the banners and stepped forward operational leverage, proscribing the have an effect on of value inflation.
All in all, EBITDA margin was once down whilst the nice gross sales development led EBITDA in absolute phrases to develop via 20.1% and reached â¬446 million. As up to now stated, money waft was once adverse in â¬226 million with Q1 being as standard, impacted via bills to business providers in particular when following a a hit Christmas season.
Our stability sheet stays very tough with a web money place of â¬1 billion, except capitalized running rentals at thirty first March. As a reminder, the AGM held in April 20 licensed dividends within the quantity of â¬345.6 million to be paid via subsequent Might ’17. I will be able to now information you thru gross sales efficiency in somewhat extra element.
This was once an overly sturdy quarter with all banners contributing to crew gross sales enlargement. Biedronka’s exceptional efficiency translated into â¬1 billion of extra gross sales in Q1 ’23 as opposed to Q1 ’22. Currencies devaluation impacted crew gross sales via greater than â¬170 million.
With the sure contribution from all banners, crew like-for-like reached 21.2% in Q1. Within the like-for-like graphs, at the right-hand aspect you’ll obviously see that comp will probably be much more difficult from Q2 onwards. Biedronka invested strongly to force gross sales enlargement, give protection to volumes and decrease buying and selling down tendencies within the context of softer shopper call for.
Over the duration, the Corporate widened the distance of its personal basket inflation to the marketplace’s meals inflation and obviously earned additional shopper desire. Within the like-for-like, volumes had been sure in each and every month of the duration regardless of the slowdown registered all through the quarter.
I might additionally love to flag that the early Easter duration in 2023 as opposed to 2022 is estimated to have contributed to the efficiency with one proportion level. Gross sales grew 28.3% in native foreign money and marketplace proportion within the first two months of the yr higher via 1.6 proportion issues in step with JFK on fast-moving shopper items.
Hebe persevered to accomplish neatly with gross sales enlargement at 31.9%. The web operations posted a 43% build up and represented 17% of the whole most sensible line regardless of the nonetheless marginal contribution of Czech and Slovakia. In Portugal, we noticed an acceleration of buying and selling down tendencies because the buying energy of customers deteriorated.
Being the ones saved making an investment in worth and promotions to give protection to gross sales and ship the expansion of 9.4%, with like-for-like at 8.4%, except gasoline. Recheio persevered to have the benefit of an making improvements to space sector and delivered sturdy gross sales enlargement of 29.2%, together with a 27.1% like-for-like. In Colombia, we noticed already early indicators of meals disinflation, regardless that inflation remained top at 24% and contributed to an overly tricky marketplace context.
Proceeding to concentrate on its worth competitiveness and promotional dynamics, Ara do gross sales in native foreign money via 50.8% with like-for-like status at 18.9%. The growth program stays a most sensible precedence and the banner opened 64 new retail outlets within the duration. Pushed via the sturdy most sensible line supply, EBITDA grew 20.1%, 22.7% at consistent alternate charges.
Following worth investments and in addition pronounced buying and selling down within the instances of Pingo Doce, all our retail banners registered gross margin aid as opposed to the similar duration of 2022. The sturdy gross sales supply, alternatively, allowed for operational leverage to mitigate this drive on EBITDA margin that reduced 18 foundation issues within the duration.
Biedronka’s EBITDA margin was once 22 foundation issues down with a powerful like-for-like gross sales enlargement, proscribing the have an effect on of inflation in exertions prices registered within the duration. It’s price highlighting that regardless of final unstable, value drive from power and gasoline eased in Q1 ’23.
In Portugal, EBITDA margin at Pingo Doce was once down via 13 foundation issues, harassed via worth investments whilst appearing sustained restoration allowed its margin to strengthen. At Hebe, margin reduced 16 foundation issues, reflecting the funding to release its world operations.
Ara EBITDA margin was once 25 foundation issues down in Q1 ’23 because of the combo of worth funding to force gross sales and numerous retail outlets with very low adulthood. Wrapping up, all banners proceed to ship neatly regardless of the deteriorating shopper surroundings.
The context remains to be unsure in terms of the evolution of the cost of the meals, power and gasoline and the development of rates of interest. Most of these elements will decide the extent of drive on shopper call for. We all know that the bottom of comparability will problem us much more any more, however we’re assured within the skill of our banners to navigate difficult instances and stay handing over on formidable targets.
Including to this, we keep an overly forged monetary place. As such, we can stay eager about making certain worth competitiveness to force gross sales. On the similar time, we can proceed to execute our CapEx program as deliberate, increasing and making improvements to our retailer networks within the 3 nations the place we function, no longer shedding sight of our long-term imaginative and prescient. Thanks to your consideration. Operator, I’m now in a position to take questions.
Query-and-Solution Consultation
Operator
Thanks. [Operator Instructions] We at the moment are going to continue with our first query. The questions come from the road of Joao Pinto from JB Capital.
Joao Pinto
I’ve 3, if I would possibly. The primary one, are you able to please quantify the Easter impact on Biedronka like-for-like? The second, meals PPI has decelerated materially in March, are you already seeing or are you able to watch for some decrease drive from COGS inflation for the following few quarters? And closing one on Slovakia. Are you able to give us some colour to your plans there? When do you are expecting to go into and we will do it organically or what number of retail outlets are you able to supply the use of the present logistics construction that you’ve got in Poland?
Ana Luisa Virginia
Just right morning, Joao. So relating to Easter and as I referred, we estimate the contribution of early Easter to were one proportion level in our like-for-like. As for meals CPI and the associated fee inflation, we have now noticed some aid within the inflation.
However we — I consider it is nonetheless untimely to in reality give a large number of colour or estimates in this as a result of, after all, we all know that a number of drivers can trade or make it other any more. So you’ll have — it’ll additionally rely at the prices of our personal providers. As , salaries were expanding, the minimal wages in all of the nations and this additionally impacts the providers.
So it is not only a query of commodities that we’ve got noticed whose costs have taking place, however additionally it is the opposite prices that must be considered that we predict it’ll mirror nonetheless and it’ll nonetheless drive the price of our providers.
Then at the recent merchandise, which accounts a fairly large waste on our gross sales, this may be a query mark as a result of it’ll rely. Now we have noticed some aid on inflation in March or even in April now. However we additionally know that this relies on the harvest and at the climate in reality. So, it is nonetheless a query mark. Our expectation, as we discussed in our outlook is that inflation will cut back and that is the state of affairs beneath which we’re operating and the Corporate has deliberate instructions any more.
On Slovakia, so I believe it is nonetheless early, however the concept, Joao as you discussed is to develop from Poland. So that you can take benefit at the first foundation. It is a nation that, after all, is far smaller than Poland. However the place we predict that there’s a possibility. I believe it is a little bit early to offer a large number of colour in this.
However the concept is to make use of the infrastructure and the sourcing and procurement capability from Poland to enter Slovakia. And — however in concept, to open and opening organically, it’ll no longer be this yr nonetheless. This may be to organize any access within the nation.
Operator
We at the moment are going to continue with our subsequent query. The questions come from the road of William Woods from Bernstein.
William Woods
My query is on volumes in Poland. It looks as if if you’re taking your 24% like-for-like and also you subtract inflation and your decrease basket inflation and then you definately have a look at the volumes available in the market being down adverse 5% against the tip of the quarter, it seems that that you just won important quantity proportion.
Do you notice important quantity proportion and quantity enlargement? And if this is the case, who’re you taking that proportion from? After which the second is only a follow-up on that. May just you simply give some context to your basket inflation? How a lot do you assume you’re underinflating the marketplace or how do you notice that delta converting.
Ana Luisa Virginia
So on volumes, as I discussed they had been sure within the 3 months for Biedronka. In step with our estimates, we have now grown 3% within the quarter in the case of volumes. And what we consider is that we’re gaining shoppers from different codecs. And so I consider that this quantity has come mainly from different banners that experience a unique worth proposition.
I might say that from principally the standard, the hypermarkets and the opposite phase, different supermarkets that experience — that don’t seem to be so worth aggressive. And that making an allowance for all of the evolution that Biedronka has accomplished remarkably in the case of collection and in the case of high quality of that collection, I consider that these days folks once they get started purchasing in Biedronka they prefer the layout, they prefer the banner and proceed to take action.
So I believe that one of the shoppers get used to shop for or store in different banners at the moment are buying groceries in Biedronka and lengthening their basket in Biedronka. And that’s the reason why we’re gaining proportion in the case of quantity. As to basket inflation these days or on this quarter, we have now widened the distance as I additionally discussed. So it was once on reasonable in 2022 round two proportion issues. It is now just about 3% within the general quarter and it was once quite upper in March in reality.
Operator
We at the moment are going to continue with our subsequent query. And the questions come from Jose Rito from CaixaBank.
Jose Rito
So I’ve two questions. So the [indiscernible] have an effect on, aside from the like-for-like, how a lot it helped in the case of profitability in Poland if it had any have an effect on? And likewise associated with profitability in Poland, aside from Easter what different elements have helped in Q1? You discussed power. How do you notice the shifting phase evolving? As a result of I believe that if Q1 run charge is maintained in the case of margin evolution, margins in truth may just pass up over the following quarters. Are you able to verify this?
Ana Luisa Virginia
In order for the Easter impact, I believe that is and the have an effect on on profitability which I consider it was once the query. In order I discussed, we predict that it was once — this one proportion level. However in profitability, what’s in reality vital for us and what is going to proceed to be vital as I additionally repeated is to proceed to realize momentum with gross sales and proceed to strengthen gross sales as a result of that is the principle motive force of profitability.
So I do not disguise that, sure, we had been helped via a lower cost in power. But when we have not grown gross sales, shall we no longer dilute our prices in power or our value in gasoline. So it is fairly vital to us that gross sales proceed to ship. And that’s the reason why we repeat like nearly a month or that we can must stay our competitiveness and our relevance for the patron.
So Easter impact must have helped, however I might say that the principle motive force of profitability was once in reality the truth that Biedronka proceed to provide to the Polish, the most productive worth proposition available in the market. So no longer in reality being simply proud of the present scenario and in reality making itself related via maintaining this hole to the inflation within the nation and via strongly making an investment in worth.
As to Power, it was once one — it was once diluted and we do not disguise that there was once a lend a hand there. However for the longer term as you assert, it is all the time tricky to mention. It is true that the costs proceed to head up in 2022. So this — we have now this tailwind in our profitability, however it in reality relies on how issues evolve.
So it is nonetheless somewhat bit early to mention. We predict that it should lend a hand and we do not disguise that we’re counting somewhat bit on that. However in what we depend in reality to give protection to our profitability is in reality proceed to force sturdy gross sales and having a powerful most sensible line enlargement.
Jose Rito
K. Understood. However having a look on the profitability supply in Q1, however I believe it was once excellent making an allowance for the run charge that we noticed in Q3 and This autumn closing yr. My query is, was once this additionally a marvel for you? And for those who assume that is sustainable as a result of whether it is sooner or later margins can in truth business that over the following quarter.
Ana Luisa Virginia
Jose, I believe that we additionally within the outlet discussed this. We all know that it’ll be beneath drive as a result of if the inflation volumes and the combo is our drivers of our present efficiency. So we all know that buyers are extra worth delicate that they’re — the tendencies of buying and selling down also are going down in Poland because the marketplace efficiency displays.
So Biedronka has been in a position and I believe this is in reality exceptional, the group so that you can mainly being acting in opposition to a adverse marketplace enlargement in actual phrases. However the query now’s if there’s, after all, if the patron react a lot more strongly and if this inflation could be very quick, et cetera, those are all drivers that we need to take into accounts.
As I stated, one of the prices and relying at the degree of dilution might also lend a hand. However others, we all know that they have got already higher just like the group of workers prices and that is one thing that we will most effective dilute if we have now gross sales. So it is maintaining the most productive worth proposition as I stated to the marketplace, to in reality be sure that Biedronka is the person who the Polish households select as a protected harbor for them in nonetheless a top inflation context as a result of even supposing inflation reduces, it’s at the foundation that had an overly top meals inflation.
Operator
We at the moment are going to continue with our subsequent query. And the questions come from the road of Nick Coulter from Citi.
Nick Coulter
I do not incessantly say, however congratulations at the quarter. So if I would possibly, at the beginning, can I ask how you are moving the combo on this surroundings? I assume, I am seeking to perceive the restricted have an effect on to gross margin given the dimensions of the inflation hole that you are pushing thru or is that simply the advantage of the layout value construction? Simply seeking to get the maths to paintings.
After which secondly for Ara, we or not it’s conceivable to get a way of the shop adulthood have an effect on on margins and if we must be expecting this to persist as you still open retail outlets?
Ana Luisa Virginia
Thanks to your sort phrases. I believe that in reality the group has in reality carried out they usually earned all of the congratulations from our phase. As to the shift in combine and I am assuming since you spoke in regards to the hole that we’re speaking about Biedronka.
Nick Coulter
I believe [indiscernible] however obviously it is a restricted have an effect on.
Ana Luisa Virginia
What we predict is that — and as , when the consolidated gross margin decreases, after all, we all know that the large phase must be a contribution from Biedronka. So there’s in reality an overly sturdy no longer — so the fundamental or an important is in reality, after all, the cost investments, however there’s some combine impact, despite the fact that this combination results began to be noticed in February closing yr.
So we all know that persons are purchasing extra of the fundamentals, however it is not an important function within the — or that explains the aid in gross margin in Biedronka is in reality the cost investments. Despite the fact that as I stated we’re seeing some combine, however it is not — so we see a slight build up in personal manufacturers. It is not so important, for example because it occurs in Portugal.
So in Portugal, simply within the quarter was once greater than two proportion issues within the waste on gross sales. On the subject of Biedronka, it is quite lower than 1%. After which, after all, you might have most definitely a better weight of additionally the recent merchandise the place we’re staying fairly aggressive. However I might say that these days worth funding is the only drive in gross margins probably the most to in reality be sure that we, as I stated, take care of and even build up the distance to be extra related for the shoppers.
As for Ara and the shop adulthood, after all, we opened a large number of retail outlets this quarter additionally. As I discussed, we opened 64 retail outlets. Ultimate yr within the closing weeks of the yr, we opened greater than 140 retail outlets. So I believe within the quarter, the closing quarter it was once much more than that. They have got — so it takes some time to construct the gross sales density that we would like that can be purchased.
And naturally, we all know that we’re in opposition to an atmosphere this is very tricky for the Colombian households. These kinds of households are low source of revenue. We’re, for the second one yr with meals inflation above 20%. So accrued most definitely in 2.5 years, we’re speaking about nearly 60% build up within the costs of meals that accounts for the principle finances of the circle of relatives.
So I believe that is greater than the adulthood. We face a client that’s not greater than worth delicate. It in reality has its finances with a large number of constraints to shop for extra even supposing they would like it. This being stated, we predict that we’re construction in reality an excellent worth belief and are construction our long term in Colombia as a result of in reality — and that is the reason why we predict that it is a excellent alternative to speculate now to then when the rustic alternatives up and we all know that those cycles are standard in Latin The usa.
When the rustic alternatives up, I believe that the patron will be mindful we take care of costs low in meals and we can pick out up all of the leverage from this as a result of, after all, any trade in family source of revenue will pass to meals and we predict that it’ll pass to the shop that has the most productive worth and the most productive high quality, so the most productive worth proposition for the Colombian circle of relatives.
So sure, it is a waste. However I believe that is what that is right here greater than a value build up is in reality the truth that we face a hard context for the households that even supposing they would like it, they might no longer purchase greater than they’re doing this present day.
Operator
[Operator Instructions] We at the moment are going to continue with our subsequent query. The following questions come from the road of Nicolas Champ from Barclays.
Nicolas Champ
I’ve 3. The primary one is ready Poland. May just you please quantify your marketplace proportion achieve on this nation in Q1? And the way did this marketplace proportion achieve developed as opposed to when compared with the former quarters? 2nd query additionally relating to Poland. You mentioned decrease power prices this quarter, however may just you explain in regards to the different value build up in Poland?
I imply, minimal salary, salary are anticipated to extend considerably this yr. How a lot did your personnel value build up in Q1. In a similar way, the rent fees also are anticipated to extend fairly considerably in Poland this yr. Once more, what’s already incorporated to your value construction in Q1, must we predict further rent build up over the approaching quarters?
And the 3rd and closing query is ready Colombia. So that you stated CPI was once 24%. May just you tell us your basket inflation on this nation additionally in Q1? And the way has the cost differential as opposed to CPI evolve additionally in Q1 as opposed to earlier quarters?
Ana Luisa Virginia
As for Poland available in the market proportion, so the numbers that we’ve got from JFK and naturally, we discussed the supply as a result of, after all, it may be quite other. However the use of the similar foundation, we discussed that February year-to-date we won 1.6 proportion issues in marketplace proportion.
To be very easy, I consider that with the numbers that we noticed from the markets nonetheless this week for March, I might say that we’ve got additional higher marketplace proportion with the type of efficiency that we’re handing over and with the ability to achieve even in volumes. In order for — as we have now been rising on most sensible of the closing yr enlargement, I believe that even supposing we’re going at the line, so we grew quite under two proportion issues in closing yr in the case of marketplace proportion.
And so I believe that is — on this case, we’re proceeding to end up or Biedronka is proving that it remains to be related for the patron. As for the associated fee will increase, so, sure, we have now — in January, we — or mainly all our prices have integrated the wage will increase, the salary will increase that we make. There weren’t most effective the — alongside the strains of minimal salary, however we higher the salaries to take care of competitiveness additionally on that for the reason that exertions marketplace in Poland remains to be fairly tight. The unemployment charge is fairly low.
And so we predict that we must take care of competitiveness on this and we have now already accomplished that. So it is already integrated within the quarter numbers and the rent fees additionally. So in the case of hire, many of the CPI is the proxy for the hire build up in terms of Poland this yr. And maximum of it’s already mirrored in our money place as a result of, after all, in step with IFRS 16, you do not see in reality this build up.
So what we’re seeing mainly is a rise in our running bills alongside the strains of 20%. Those rents are quite decrease as a result of it is in step with the overall CPI, no longer the meals CPI as for the longer term. So I believe that we take care of or we predict that, after all, this may impact as opposed to closing yr alongside this sort of line. However it’ll rely, after all, the burden on gross sales, it’ll rely on profitability. As I already discussed, it’ll rely on how the highest line will evolve. And that’s the reason why it is so vital that we stay eager about our relevance for the patron.
As for the — for Colombia, so our basket inflation may be under the 24%. We now have maintained roughly than alongside the strains of closing yr round or close to two proportion issues distinction.
Operator
We haven’t any additional questions right now. I will be able to now hand again to Ms. Ana Luisa Virginia for ultimate remarks. Thanks.
Ana Luisa Virginia
Thanks all to your questions and for attending this convention name. In spite of the demanding situations we had a excellent begin to 2023 and we will proceed to paintings laborious to maintain shopper’s desire whilst we toughen our marketplace positions going ahead. The context will indubitably stay difficult, however we have now our technique and precedence is apparent and our codecs are in excellent form to ship. Thanks as soon as once more and I want you all a pleasant time.
Operator
Women and gents, this concludes as of late’s convention name. Thanks for collaborating. Chances are you’ll now disconnect your strains. Thanks.