Earnings call transcript: Jeronimo Martins reports Q4 2024 earnings beat

Jeronimo Martins SGPS SA reported its fourth-quarter 2024 earnings, surpassing market expectations with an earnings per share (EPS) of €0.2509 against a forecast of €0.2462. The company generated €8.7 billion in revenue, slightly below the anticipated €8.72 billion. Following the announcement, the stock price rose by 1.22% to €19.90 in early trading, reflecting investor optimism despite the minor revenue shortfall. According to InvestingPro data, the company maintains a GOOD overall financial health score of 2.85, with particularly strong profitability metrics. The stock has delivered an impressive 19% return over the past six months.

Key Takeaways

• Jeronimo Martins’ EPS exceeded forecasts, marking a positive earnings surprise.
• Revenue fell slightly short of expectations, but robust sales growth was observed.
• The company’s stock price increased by 1.22% in early trading post-announcement.
• Continued expansion in Poland and Slovakia is planned, with significant investments in new stores.
• Market conditions remain challenging, with food inflation declining and intense competition.

Company Performance

Jeronimo Martins demonstrated strong performance in Q4 2024, with total sales growing by 9.3% to €33.5 billion. The company’s strategy to expand its store network, particularly in Poland and Slovakia, has contributed to its robust sales figures. Despite facing a challenging market environment characterized by declining food inflation and cautious consumer spending, the company managed to increase its market share in Poland by 0.3 percentage points.

Financial Highlights

• Revenue: €33.5 billion, up 9.3% year-over-year
• Earnings per share: €0.2509, exceeding forecast
• EBITDA: €2.2 billion, a 2.9% increase from the previous year
• Net cash position: €726 million, excluding IFRS 16
• Proposed dividend: €370.8 million

Earnings vs. Forecast

Jeronimo Martins reported an EPS of €0.2509, slightly above the forecast of €0.2462, representing a positive earnings surprise. However, revenue came in at €8.7 billion, marginally below the expected €8.72 billion. This discrepancy is minor and did not significantly impact investor sentiment, as reflected in the stock’s positive movement.

Market Reaction

The stock price of Jeronimo Martins rose by 1.22% to €19.90, following the earnings announcement. This increase suggests investor confidence in the company’s ability to navigate a challenging market environment and continue its growth trajectory. The stock remains within its 52-week range, with a high of €21.24 and a low of €15.20.

Outlook & Guidance

Looking ahead, Jeronimo Martins plans to open 130-150 new Biedronka stores and aims to have 50 stores in Slovakia by the end of 2026. The company is focusing on efficiency improvements and productivity enhancements to drive growth amidst intense competition. The revenue forecast for FY2025 is €39,015.25, with an expected increase to €41,496.84 in FY2026. InvestingPro data shows that 2 analysts have recently revised their earnings downward for the upcoming period, suggesting potential headwinds. For comprehensive analysis of Jeronimo Martins’ growth trajectory and market position, access the detailed Pro Research Report, available exclusively to subscribers.

Executive Commentary

CEO Piers Swayze Duchenge emphasized the company’s growth strategy, stating, "What does not grow starts dying." This highlights the company’s commitment to expansion and innovation. Additionally, Anna, a key executive, remarked, "We are always open to grow," indicating potential future acquisitions.

Risks and Challenges

• Intense competition, particularly in Poland, may pressure margins.
• Declining food inflation could impact sales growth.
• Consumer caution and increased savings behavior may affect spending.
• Wage increases could lead to margin pressures.
• Supply chain disruptions may pose operational challenges.

Q&A

During the earnings call, analysts inquired about margin pressures from wage increases and the company’s deflation calculations in Poland. Executives also addressed capital allocation strategies and consumer sentiment, providing insights into the company’s approach to navigating current market dynamics.

Full transcript - Jeronimo Martins SGPS SA (JMT) Q4 2024:

Anna, Moderator/Presenter, Geronimo Martins: Good morning, ladies and gentlemen, and thank you for joining this call. Before I take you through the Geronimo Martins twenty twenty four full year results, I will give the floor to our Chairman and CEO, Mr. Piers Swayze Duchenge. Mr. Piers, the floor is yours.

Piers Swayze Duchenge, Chairman and CEO, Geronimo Martins: Thank you, Anna. Good morning, ladies and gentlemen. One year ago, on the occasion of the 2023 results disclosure, I told you we expected nothing to be easy for us in 2024. Why? Because we were seeing since the end of twenty twenty three, a very dangerous combination of cost inflation, mostly in labor and sharp decrease of food inflation.

And indeed, last year was a very tough one in all countries where we operated and particularly in Poland. I’m glad we were prepared to work hard and invest to fight for volumes and reinforce our market position. Contrary to 2023, when we recognized the help from inflation to our sales growth in 2024, our banners operated with basket deflation. This translated into a relevant slowdown in sales growth, which nevertheless headed with the help of the currency effect nearly EUR 3,000,000,000 to be to the 2023 consolidated turnover. Expansion and remodeling played an important role in feeding growth and has the group in the year we opened three ninety five new stores in average more than one store per day and remodel around three fifty.

Via Donc that represents 70% of the group’s sales, face very strong competition for volumes and invest to secure price leadership and volumes growth in a food retail market that decreased volumes. I am proud of the performance of the Polis Piazza team that on top of the outperforming weak market still managed to help shape the launch of the new operations in Slovakia that took place in the first week of this current plan. Regarding our Health and Beauty business, Heres post very positive sales growth, counting both on expansion with 39 open of each three outside of Poland and a very healthy like for like. I confess that in the future, I expect more contribution from the e commerce channel that represents now 20% of the total size. Profiting also from the group’s EUR1 billion CapEx program in the year, PingoDoce continued to roll out its all about food concept, which highlights the various differentiation factors, meal solution and fresh, and contributes to the improvement of the margin mix.

Also, Ara has been working on its mix, while being very assertive regarding competitiveness. Total sales grew at two digits and surpassed €2,700,000,000 in the year, despite the fact that poverty levels have not improved and the social economic environment remains very difficult, our Colombian operation evolution give us reason to believe that the potential we saw in the country is all there. We are deeply committed to Colombia and I’m proud also of the social investments we are making in the country to support the most vulnerable children and friends, an investment which was recognized by the portfolio newspaper with its social responsibility award. The destiny of companies is total dependent on the destinies of the society that we belong. Based on this belief and our solid net cash position at the year end, the Board will propose to the shareholders meeting the payment from the net earnings of EUR 40,000,000 as an endowment to Jerny Martinez Foundation.

I propose to pay dividends in line with our definite policy will also be made. Leading up to our responsibilities towards our stakeholders implies safeguarding our ability to deliver profitable and sustainable growth. In a very tough time such as the ones where our business are facing, that means keep pushing hard for sale and market share gains, while ensuring costs are under control to the maximum possible extent. We are aware that labor costs will continue to rise, and we will need to try to compensate for that both by growing sales and by increasing efficiency. We will keep investing in our business and securing the necessary conditions for the future growth.

It is my belief that in the business, what does not grow starts dying. And this is why we cannot afford entering to a replication mode. We need to protect and reinforce our leadership positions by behaving like the challengers that never take anything for granted. We need always bear in mind the reasons why we exist as a business to serve consumers better than our competition, to offer the best value for money in a shopping environment that reflects our respect for those who choose us. To do that is not small, but we can do it.

We did it before and we will do it again even if we know that 2025 will certainly not be a walking in the park. The teams are ready, focused and motivated and the game is on. I know we will take you through the full year results. Thank you for your attention.

Anna, Moderator/Presenter, Geronimo Martins: Thank you, Chairman. As a reminder, in our corporate website, you can find the results released, a slide presentation and a media presentation for the year. In 2024, all the risks and market dynamics that we’ve anticipated one year ago naturalized. Food inflation fell rapidly driving our banners to operate with basket deflation. Labor costs rose significantly and adding to this already very challenging combination, consumer demand was weak, particularly in Poland and competition amongst players was more intense.

We remain focused on serving our consumers, ensuring price competitiveness and enhancing our value propositions. As a result of the investments made, we delivered 9.3% sales growth, 4.9% at constant exchange rates, driven by volumes and a significant contribution from our store expansion program. As expected, EBITDA margin was pressured by the operational deleverage generated by the combination of basket deflation and significant cost inflation. Consolidated pretax ROIC was pressured was strong at 20% even if down on the exceptional levels registered in the past couple of years. And despite the EUR 1,000,000,000 of CapEx, we ended the year with a solid balance sheet and a net cash position excluding IFRS 16 standing at EUR $726,000,000.

Despite all the challenges and hard work to deliver growth, we also made good progress on our sustainability agenda. Later this month, we will publish our annual reports, which will provide detailed information on what the team delivered on all fronts of our corporate responsibility agenda as well as our targets going forward. For now, I would highlight a couple of achievements. First, on the social front, I would mention the newly established Roni Martins Foundation with an initial endowment of EUR 40,000,000. This foundation will from 2025 broaden the reach of the group’s social initiatives.

Its mission is to contribute to the work done among the group’s employees, their families and the community in general, especially in response to situations of socioeconomic vulnerability. Second, I also highlight the efforts made to get approval by the Science Based Targets initiative of our short term and long term targets to achieve carbon neutrality by 02/1950. Although our work in this area has begun years ago, much remains still to be done and we are making steady progress to achieve this important goal. One of the key challenges we faced in 2024 was the decline in food inflation, a sharp correction following the extraordinary price hike of the previous two years. However, food prices stood relatively high and despite increases in households’ real disposable income, consumers remained cautious and promotions oriented.

Sales growth was driven by increases in volumes and in number of clients as well as by expansion that limited the impact of basket deflation. Gross margins were supported by positive mix in Colombia and Pingo’s as all banners invested to maintain their price competitiveness. The impact of basket deflation coupled with significant wage increases brought greater EBITDA margin pressure and operational deleveraging. In total, group EBITDA reached EUR 2,200,000,000.0, an increase of 2.9% or a decline of 1.7% at constant exchange rates, with the respective margin 41 basis points lower than in 2023. Execution of our CapEx program resulted in higher depreciation charges, while net financial costs increased due to the capitalization of leases.

The financial costs also include the impact of a higher average debt level with increased interest rates in Colombian peso. Our losses and gains amounted to EUR 190,000,000, including the initial endowment of EUR 40,000,000 of the Gerani Martins Foundation, write offs resulting from refurbishment and restructuring costs. It also incorporates the payment of EUR 27,000,000 in bonuses awarded on an exceptional basis to our operation team in recognition of their high level of commitment in an incredibly demanding year and their tireless work to increase sales volumes and contain the impact of deflation also on the company’s profitability. Net earnings per share, excluding other losses and gains of a nonrecurring nature, fell by 14.5%. Overcoming the impacts of the slowdown in sales resulting from basket deflation across all our different banners, cash flow for the year before dividend payments was minus EUR 62,000,000.

As already stated, despite having increased more than EUR 1,000,000,000, the group ended the year with a strong balance sheet and a positive cash position of EUR $726,000,000 when excluding IFRS 16. Considering the solid financial position and the consolidated and individual net earnings for 2024, the Board of Directors will propose to the annual general shareholders meeting the distribution of EUR 370,800,000.0 of dividends in line with the defined policy. Flexibility to pursue our expansion plans and to take advantage of potential non organic growth opportunities are therefore safeguarded. In accordance with the company’s articles of association, the Board of Directors also proposes allocating an endowment of EUR 40,000,000 to the Georani Martins Foundation from the 2024 net earnings. In 2024, of the EUR 1,000,000,000 investment program, expansion accounted for 40% with the opening of a total of three eighty five new stores or three fifty two net additions.

The Edronka continued to strengthen its market presence, having opened 186 new stores and refurbished two eighty locations, benefiting from its flexibility and know how to adjust the format in order to deliver the best performance in a given location. Hebe opened 36 new stores in the Polish market, 33 net additions and also two stores in Slovakia and another one in Czech Republic. Pingoos continue to roll out this differentiated all about food concept refurbishing 64 stores. Our food retail banner in Portugal also opened 10 new locations corresponding to seven net additions. Ara successfully implemented its expansion program, opening 150 new stores and ending the year with fourteen thirty eight locations.

To support our Colombian banners expansion, a new distribution center opened in early twenty twenty four and further investments in logistics facilities were made, notably in another DC that already started operating at the beginning of twenty twenty five. I will now guide you through the detail of the performance starting with sales, which grew by 9.3%, four point nine % at constant exchange rates to reach EUR 33,500,000,000.0. The basket deflation at Piazzontein PingoDoce slowed growth. However, good volumes and the ambitious expansion of our networks more than offset the deflation and drove market outperformance. Group like for like was at 0.6% with volume growth compensating for basket deflation in Biedronka and Pindros as referred.

Biedronka worked relentlessly to offer Polish families the best saving opportunities and maintained a stronger commercial dynamic, securing its price leadership and once again earning the presence of consumers. The basket deflation throughout the year pressured like for like growth, which was minus 0.3% in 2024. However, the Esdrunka drove sales volume growth amidst negative volumes in the food retail market overall and against its strong performance in 2023. It also increased its market share by 0.3 percentage points in the year. Total sales grew by 9.6% plus 4.1% in local currency to reach EUR 23,600,000,000.0 with a solid contribution from expansion.

In a context that became increasingly competitive, Heather recorded a successful year. It leveraged its competitive commercial strategy and quality assortment with many exclusive products, posting 24.3% sales growth, 18.1 excluding foreign exchange, including a life flight of 8.5%. Online sales also drove growth and represented around 20% of total sales. PINGLOS maintained an intense commercial dynamic and enhanced its popular promotional campaigns. The banner continued to expand its store concept, reinforcing its unique offer in meal solution and fresh products and delivered strong sales growth of 4.5%, surpassing the EUR 5,000,000,000 milestone when including fuel.

Like for like excluding fuel was at a healthy 4% despite deflation registered in the basket. Against the difficult comparable versus prior years and a fairly weaker consumption in the Oraca channel, notably in restaurants, Shell leveraged its customized value propositions and maintained a strong momentum, gaining new customers in all its segments. Sales grew 1.9% with a like for like of 2.1%. Ara executed its commercial strategy offering good saving opportunities to Colombian families and strengthened its market position. Sales grew 17% or 11.1% in local currency to reach EUR 2,900,000,000.0.

Like for like reflected the shy consumer demand together with falling basket inflation. I would like to highlight the strong contribution from expansion to growth. Consolidated EBITDA grew 2.9% to EUR 2,200,000,000.0, while at constant exchange rates, it reduced 1.7%. At EBITDA at Dierdronke, the EBITDA evolution reflects the impact of a very challenging combination of significant basket deflation, price investments and cost inflation. On the other hand, ARA did extremely well despite the context that significantly limited like for like growth.

The others heading in the graph includes the central costs that in 2024 benefited from some one off savings and the contribution of agribusiness, which also improves considering the valuation of its biological assets. It also incorporates the initial investment in our Slovakian business. Group EBITDA margin fell to 6.7% from 7.1%. At Piazzonka, the pressure on margin was mainly driven by lower sales growth due to basket deflation and by increased waste of costs essentially coming from the deliberate decision to significantly raise the wages of its operational teams. Hebe’s margin improved as a result of good sales performance and strict cost controls.

SINGROS, despite price investments, was able to protect margin due to positive mix and different initiatives to increase efficiency and productivity. In the case of Shai, the investment to drive volumes and increase customer base in the context of weak out of home consumption, coupled with cost inflation pressured EBITDA margin. And finally, Ara as planned improved EBITDA margin by 150 basis points. The banner is back to positive EBITDA on a pre IFRS 16 basis and will work to continue improving earnings. I will now wrap up on 2024.

It was as expected extremely challenging after years of consecutive outperformance, particularly at Piedronka. Nevertheless, we kept a clear strategic focus on serving our customers with competitive prices and good value proposition. All banners executed accordingly. In fact, against muted markets and intense competition, on top of the exceptional performance of prior years and with no help from inflation at top line, our banners were able to increase their customer base, grow volumes, execute ambitious expansion and renovation programs and gain share. All in all, we closed the year with enhanced value proposition, stronger market positions and and a solid balance sheet.

As we started 2025, uncertainty about geopolitics, socioeconomic dynamics and consumer behavior in our three main countries remains very high. In light of this volatile context, we foresee that consumers will continue to be prudent and restrained and competition will keep being more intense at least in the first half of the year. As always, in times of low visibility, we will stick to our priorities, deliver the most competitive prices, a differentiated high quality offer and a good store infrastructure to the customers that choose our banners to shop. Once again, we are increasing salaries, following the rise in national minimum wages in each one of our markets. We will hence work to reinforce efficiency and cost discipline to manage this pressure.

Our investment program has been the top priority for capital allocation. And in 2025, we expect to invest around EUR 1,100,000,000.0 to continue expanding and improving our operations. Supported by the proven success of its different store formats, Biedronka will open another NASS one hundred and thirty to 150 stores and remodel two fifty to two seventy five locations. A new distribution center will also be inaugurated in the year. As you know, we have just started the Adronka’s operation in Slovakia, having today three stores on the ground and one distribution center.

By the end of twenty twenty six, we expect to have at least 50 stores in the country. However, our initial priority is to properly assess consumer reaction before sharing more on the plans for this market. Hebe will continue to strengthen its presence in Poland with the opening of 30 stores and to grow internationally by leveraging its e commerce operation. PINGODOSA’s remodeling program will remain at the center of its investment priorities and should cover 50 stores in 2025, while Shai will focus on improving its offer to the Orica channel and on expanding the MNCF partnership network that already comprises more than 700 stores. Finally, for Ara, expanding the logistics infrastructure and store network remains the key priority.

In addition to opening more than 150 new stores, the banner will also integrate more than 70 locations previously operated by Col Subsidio throughout the first half of the year. The local authorities have just cleared the transaction and we are happy to complement our expansion strategy with these high quality locations, particularly in Bogota. Thank you for your attention. Operator, I am now ready to take questions.

Conference Call Operator: Thank you. And the first question comes from the line of Frederick Wilds from Jefferies. Please go ahead. Your line is now open.

Frederick Wilds, Analyst, Jefferies: Good morning, Ana Luisa. Thank you, Nadeem, and thank you for taking my questions. First, could you give us a little bit more detail about trading in Biedronka in January and February? And whether we can see potentially Q1 like for likes in that banner being positive. Second, on the full year twenty twenty five margins in Biedronka, could you give us a sense of the scale of the moving parts you’ve identified?

And sort of more broadly, what sort of like for like would you need to achieve at Biedronka to offset the growth in minimum wages in 2025?

Piers Swayze Duchenge, Chairman and CEO, Geronimo Martins: Thank you.

Anna, Moderator/Presenter, Geronimo Martins: Good morning, Fred. So as you can imagine, we will not give details on current trading that will be for our May conference call. The only thing that I can share is that as we mentioned also, the consumer continues to be very cautious. We are not still seeing a pickup in food retail consumer demand and we keep working towards deflation. Of course, nothing compares with 2024, but still a very challenging context because as we mentioned, all this dynamic in the market pushes also for a different level of competition and of course that has an impact also on the trading.

As for margins, of course, as always, there is a lot of moving parts and Biedronka, of course, will do as always its best to deliver the best margin possible. As you know, salaries or the minimum wages in Poland increased more than 9%. We are working in a very tight labor market. We have already done also our salary revisions and that was higher than 9%, which is, of course, as you can imagine, very challenging considering the current consumer context. This being said, of course, this can all change particularly if consumer picks up.

We can’t of course have a much more solid like for like. Nonetheless, I call your attention that in Q4, we have a very tough calendar effects. So with sorry, in Q1, we’ll have a very tough calendar effects in all our banners, but particularly in Diodonka. So you have no Easter effect. Easter will take place on twenty April, which means that it will be very difficult to attain any like for like positive in Q1.

Also you have you will not have a leap year and that has also an impact and you have also the effects or some effects with the weekends and the Sunday. So all in all, we expect to have for all other banners the three percentage points impact and for Bjornke at least 4.5%. So I think it’s hard to say that we’ll post a positive like for like in Q1 taking that into consideration. So just to wrap up, on margins, yes, we will have a tough time. It’s not, of course, the same level that we saw in 2024 when we increased salaries on the double digits, so on a 20% basis according to the minimum wage progression.

But it’s going to be, of course, we don’t hide also a very tough time, but we expect that the market dynamics will also help and that we will be able to somehow ease the pressure on the margin. And as always, we will keep fighting for sales and to regardless of the pressure on margins, at least to protect our return on invested capital with an increased productivity of our infrastructure and invested capital.

Frederick Wilds, Analyst, Jefferies: Perfect. Thank you so much.

Anna, Moderator/Presenter, Geronimo Martins: Thank you, Fred.

Conference Call Operator: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of Mikhail Poitier from UBS. Please go ahead.

Your line is now open.

Mikhail Poitier, Analyst, UBS: Hi, good morning, everyone. Thank you for taking my questions. I have two questions, please. I want to challenge you a little bit on your statements. So you mentioned very cautious consumer, very high level of competition and yet your gross margin increased very nicely.

So I’d like to comment on that. So that’s the first question. The second is about the deflation in your basket. So I understand where you’re coming from. What kind of the market data, both the statistical office and some of the external trackers are showing pretty big increase in food inflation in Poland.

So I’d like you to also comment on that. And the last question is about the capital allocation. Just looking at your CapEx breakdown, if you could maybe help us understand why you keep on spending so much in Portugal, in PingoDoce. It’s in excess of 5% of sales, so kind of all your EBITDA goes into CapEx. That corresponds to less than 2% in Poland and only slightly more in Colombia.

So I’m just wondering what sort of return profile do you expect from Portugal from these investments and why wouldn’t you allocate more to the more growing or profitable markets? Thank you.

Anna, Moderator/Presenter, Geronimo Martins: Thank you, Michal. And thank you for challenging me. But on the gross margins, I flagged a little bit because you have different dynamics. In fact, what’s really contributed to the increase in gross margin at consolidated levels was really a big contribution from the improvement in Colombia. And this has all to do with mix.

So we had a different dynamic in the business there and we increased the weight of all categories, diluting a little bit the commodities category, which was dilutive on the margin on the gross margin. So in fact, the biggest contribution comes from Colombia without losing any price competitiveness, but really from margin mix effect. The same happens in Portugal, in fact, and particularly, imping those as Shail also has a pressure on the gross margin and has to do again with mix. So we are selling more fresh and more meal solutions. And these categories, although having also its contribution to costs, in fact have higher gross margin and that brings or adds a little bit to the improvement in percentage points without of course meaning that we are not investing in prices.

And so the dynamic is really on that and on that contribution from those particularly from those two businesses. On the deflation in the basket in Poland, in fact, it’s true that we have also some difficulties in understanding the difference that has increased quite significantly. So the gap of Biedronka deflation and the country inflation. Nonetheless, what we can tell is that, of course, we compute this in a very thorough way and we

Conference Call Operator: have

Anna, Moderator/Presenter, Geronimo Martins: to take into consideration several effects. One is that in the case of our internal inflation, we do not take into consideration VAT. So we have to give VAT to the tax authorities in the country. So for the consumer, there is an increase in prices versus VAT. But for the company, we do not consider that recorded in our inflation, because of course it’s not something that we appropriate.

It’s something that we collect to deliver. And so we can when we say that we have a 4.4% deflation, which was the case in Bierzonga for the year 2024. And this is very significant and very challenging. This really means and it’s excluding the VAT. Secondly, from what we were informed by both and we checked with them, apparently what they take is the shelf prices and they do not take into consideration the promotional that is done, let’s say, it’s not really on an just on an individual basis, but for instance, they do not consider the loyalty programs of the several operators.

And as you can and you probably are aware of that, in Poland, the most of the promotions are done through the loyalty cards. It’s the case of the Moyer of the Zonka cards, but it’s the case with all the other players that have this kind of apps or loyalty programs. And this, of course, has an impact also on the computed inflation. And finally, on capital allocation. So I think those is getting a big important part of our CapEx allocation.

And this was a strategy approved by the Board two point five years ago when we decided that it was time not only on a defensive move, but also as an offensive move in Portugal that we should not let the network to have an aging, which was quite extensive with more than fifteen years on the rollout of refurbishments because this was really hands brink the sales potential and hence the putting in danger the profitability of the company. So we decided to put all the stores up to standards and with the standard where meal solutions and fresh products have a higher importance for the stores. So you have different shopping experience than when you went to PingoDoce with very old stores and then you had marvelous shopping experience in some others. And this was very disappointing for the consumers. With capacity increasing in all by all players, we thought it was time really to invest not to let the company lose relevance in the market and with that losing even more its return on invested capital.

Now with the sales that we are having, yes, we are strongly investing and this pressures the invested capital. But from the numbers that we have and excluding the cycle of COVID and the higher inflation, we are still posting a return on invested capital with all this investment higher than in 2019. So I think that this choice was really because if we didn’t invest, we would let of course the company die and this legacy is something that we are not willing to give up. On the percentage of investment, of course, poles and gas and continues to invest quite significantly with the level of sales and with the level of productivity. Of course, the percentage is different, but we continue to invest into open, as you know, quite relevant number of stores.

So I think that all in all, we are investing in all our businesses to really take the most out of them. And as we used to say, to really get sustainable growth for the future because it’s the only way to be profitable.

Mikhail Poitier, Analyst, UBS: Thank you for the very comprehensive answers. Just one follow-up because I want to have clarity on the gross margin on the first question, right? So would you say there was, let’s say, zero improvement in Bionca gross margin? Because Colombia is just 8% of sales, right? PingoDoce is 15% from the top of my head.

So they would need to see like 100 bps or more to lift the total group by 30%. So I just want to understand that part. Thank you.

Anna, Moderator/Presenter, Geronimo Martins: Well, usually we don’t disclose gross margins. Claudia doesn’t like it, but I can let you know that in Colombia, we had more than 100 bps of margin gross margin improvements.

Mikhail Poitier, Analyst, UBS: Okay. Thank you.

Conference Call Operator: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of Rob Joyce from BNP Paribas. Please go ahead.

Your line is now open.

Rob Joyce, Analyst, BNP Paribas: Hi, good morning. Thanks very much for taking

Mikhail Poitier, Analyst, UBS: the

Rob Joyce, Analyst, BNP Paribas: questions. So start with a couple of clarifications. Thanks for your answers before on the EBITDA margin. I just want to clarify, when you talk about easing the pressure on Bea Dranca EBITDA margins, is that pointing to a increase in EBITDA margins potentially this year? Or are you saying less of a decrease than we had in 2024 is a good sort of starting point?

In terms of the questions, I know you don’t want to comment too much on 1Q, but I guess the market got pretty excited about that kind of 6% food retail sales growth in January. I just wanted to understand if what your view of the market is materially different to that and maybe give us an indication of the sort of levels of deflation we’re seeing right now. And then the final one is just thinking about cash flow, bit of a swing there this year from a sort of traditionally positive free cash flow balance to a negative free cash flow balance. Just wondering what we should be expecting for this year. Maybe you can help us in terms of what sort of working capital we should think about for 2025?

Thank you very much.

Anna, Moderator/Presenter, Geronimo Martins: Thank you, Rob. So on EBITDA, what I meant really is the I would meant, although, of course, as I usually say that the company will do all its best to take part of that pressure, including increasing its efficiency. What I was saying was less of a decrease than mentioning really a high probability of an increase. I think that, of course, this will depend on the market dynamic, as I mentioned, not only for growth, but also for this pressure, because of course, if the market picks up and sales here are going to be key on the level of margin that we will attain in all our businesses and particularly in Biersdongen. So if the market picks up and it’s true that in January the number that we had was the 6%, But of course, this is one month.

And as I mentioned, we are seeing levels of a very slight deflation only in this beginning of the year. And that of course is also helping because as you can imagine in this business working with deflation is really tough on the teams and on the businesses.

Mikhail Poitier, Analyst, UBS: Okay. Sorry. Sorry. No, you go ahead please. Sorry.

Anna, Moderator/Presenter, Geronimo Martins: Okay. Sorry. On the cash flow, yes, it was negative this year and this had a lot to do with all the dynamics and particularly had to do with the slowdown in growth that hit us not only at the level of cash generation at the EBITDA level, but particularly and also at the working capital level. And there you have several effects, not only the different dynamics and construction of even of the margin, but also the fact that when you have a slowdown in inflation and even when you work in deflation, of course, the working capital that was very high at a certain point, even the invoices from the suppliers with inflation also have a higher amount. And then of course, in the first year when you do or when you have that inflection point in the growth of prices, that also has an impact on working capital.

Meanwhile, we also corrected some payment terms because we mentioned the pressure on our suppliers and that has an impact that we do not foresee at least with the same level or in the same amount in 2025. So I do not expect to have the working capital playing against us this year. Of course, we will use the working capital also if we need to in our negotiations with suppliers because we really want to have alternatives in our supply chain to get the best conditions possible to deliver the competitive prices to our clients.

Rob Joyce, Analyst, BNP Paribas: Okay. Very clear. Sorry, I’m not sure I missed the first bit. On EBITDA, you said less of a decrease was what you were thinking?

Anna, Moderator/Presenter, Geronimo Martins: I said less of a decrease, yes.

Rob Joyce, Analyst, BNP Paribas: Thank you very much. Appreciate it.

Conference Call Operator: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of William Woods from Bernstein. Please go ahead.

Your line is now open.

William Woods, Analyst, Bernstein: Hi, good morning. Two questions for me. Obviously, you’ve highlighted that competition will remain tough in H1 at least. Are you seeing any concrete signs of any improvement? And I suppose is your base case that that competition improves in H2?

And I suppose why do you think that is? And then the second one is just on consumer confidence in Poland. Obviously, you said that the consumer remains prudent and cautious. I suppose when you look versus last year, do you think the consumer is more cautious than last year? Or do you think there is some underlying improvement?

Thanks.

Anna, Moderator/Presenter, Geronimo Martins: So on competition, William, I think that’s of course, we cannot as the markets as I mentioned, as the market dynamics haven’t changed, of course, competition cannot ease because of course everybody is fighting for sales and this is everywhere, but particularly in Poland where the market, it may seem to have picked up, but in fact and I will just remember that the 6% growth in general was in line with inflation. So in fact from an underlying point of view, we still didn’t see the pickup. As I mentioned, that will be very important not only to our to the market sales performance will be very important not only to set the level of like for like that we will have as always the level as also the level of margin. So for now, as I mentioned, we think that competition in principle at least in this first half of the year where we’ll have a very tough comparison with last year, even in terms of volumes, it’s going to be or continue to be tough. On the consumer sentiment or behavior, for the moment, we do not see really a pickup or a trade up or so people continue to be quite cautious.

And from the numbers, we don’t still have the numbers totally for the these couple of months in 2025. But from what we see, it’s the consumer is spending a little bit on durables, but not really on foods. And the main impact is really that it continues to increase the level of savings. So that for us it’s a sign of caution. I think it’s a little bit to wait and see with this turmoil from a geopolitical, but also the economies that are on the border with Poland, I think that influences.

So we’ll see what comes from the German

Piers Swayze Duchenge, Chairman and CEO, Geronimo Martins: one Uh-huh.

Conference Call Operator: Please continue to stand by. The speakers will join shortly.

Anna, Moderator/Presenter, Geronimo Martins: Sonia? Hello. Hello, Sonia. Sorry.

Conference Call Operator: No problem. You are back on.

Anna, Moderator/Presenter, Geronimo Martins: Can you please confirm that you heard my last answer to William?

Conference Call Operator: Dear William Woods, can you confirm you had the last answer?

William Woods, Analyst, Bernstein: I think I lost out when you started talking about consumer confidence and things like that. So I think it’d be helpful to repeat it, if that’s okay.

Anna, Moderator/Presenter, Geronimo Martins: Okay. So apologies for this technical issue. So I was saying that in terms of consumer confidence, we didn’t have still signs of it. So we thought that it continues to be cautious. From the two first months of the year, we continue to see at least consumer demand not picking up and higher increase in savings.

So for us, it’s a sign that the consumer continues to be cautious. And I mentioned that in fact there is a turmoil still on the geopolitical front and on the economic front, particularly in Germany. Let’s see what happens after now the elections, because this is very important for the Polish economy, being one of the countries with which Poland has more economic relationships. And of course, also what will happen in Ukraine can also pick up the or make a more positive sentiment with Polish consumers. For now, all the disposable income that’s increased has gone mainly to savings.

William Woods, Analyst, Bernstein: Understood. And can I just clarify on the competitive environment? I suppose when you look at the level of promotion or the number of promotions in the market now versus Q2 last year, do you think there are fewer promotions in the market or do you think it’s affecting? Thanks.

Anna, Moderator/Presenter, Geronimo Martins: I think to be honest that there are more promotions in the market because of course not only now you continue to have the pressure on the cost side, but you have also the comparative effects versus the prior year and that makes it quite tough, particularly as I mentioned in Q1, when you will have a very tough comparisons with the calendar effect. And as I mentioned in Poland the calendar is more than 4.5 percentage points in terms of growth, which of course leads all the consumer or all the competitors to even be more aggressive. So quite a very tough market still in Poland.

Mikhail Poitier, Analyst, UBS: Understood. Thank you.

Anna, Moderator/Presenter, Geronimo Martins: Thank you, Willem. And again, sorry for this technical issue.

Conference Call Operator: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of Isabelle Dobreva from Morgan Stanley. Please go ahead.

Your line is now open. Open.

Isabelle Dobreva, Analyst, Morgan Stanley: Hello, good morning. I hope you can hear me well. I have a couple of questions. So the first one is just coming back on the beer drunker margin and your comments of competition. So are we to understand that you expect the decline in the EBITDA margin, which is going to be less than last year to be concentrated in 1H and then sort of a flattening?

Or are you guiding for a potential slight decrease in the EBITDA margin for the full year as as a whole. I just wasn’t sure based on your comments on competition whether you were referring to 1H or the year as a whole. Then my second question is on the productivity and the efficiency programs. If you could comment a little bit on what the sources of these are and how should we think about the divisional allocation? And the context of the question is that we have observed a very strong level of improvement in ARA and also the group costs.

So could you comment a little bit on whether we should expect another level of productivity gains in those two businesses and continued improvements in the margin there? And then my final question is again on Poland. Of course, you are adding stores organically, but would you be open in buying a portfolio of supermarkets or hypermarkets if one became available? So would you be open to buying an external portfolio of assets in Poland?

Anna, Moderator/Presenter, Geronimo Martins: Hi Isabelle. So I would probably start by the last question. Of course, we are always open to grow and we still see some white space in some areas and in some particularly in smaller villages. I think for us, as I usually say, we of course, we would look to all the opportunities, but I think it’s going to be very difficult to have an acquisition in Poland considering, of course, that Jesolko already has a quite relevant market share. But nonetheless, of course, we do not exclude looking at any opportunity, but it would be very difficult to be, of course, a very it’s going to be on a location base more than really having a change that would have, for instance, a national or a national presence.

On the margins, so of course, as with all that I mentioned, of course, the raises in salaries and it is the raises in salaries is not just in Via Zonti, of course, all the service providers having a very tight labor market in Poland. The pressure is on other headings that depend on labor. But it’s going to pressure the whole year. But what we think is that the first half, of course, not only the calendar effect that of course will make sales grow sales growth more difficult. We think that, of course, the pressure may be higher in the first half, we mentioned this in our release, that probably in the second half.

Of course, this will depend, as I mentioned, and the level of pressure, because we may post a different margin, but that will depend really on the market dynamics and on the market picking up. So if we continue to have a market that doesn’t grow in volumes as we had in the last couple of years, in Poland, of course, if this becomes more difficult regardless of course of all the effort that we will continue to do to be more efficient on the cost front. Picking up now on the efficiency programs, this is so this is being done in all the businesses and this is a continuous task by all the teams of course. We may use not only of course all different levers that we have and one thing is increasing productivity, Another thing is, of course, using technology or using to try to not having to rely so much on labor, which we know that unavoidably, we will have to be linked somehow to the minimum wage increases. It’s not that we pay the minimum wage is that that affects of course all the salaries of the country and the levels that we have to consider.

So for all the businesses, we will be pushing of course for productivity gains and for more efficiency and that goes for the energy with the solar panels and even the targets that we have on carbon emission reductions. So all moving parts to on the logistics also to be the most efficient possible. But this being said, more important it is because we never had our costs out of control. I mentioned that several times during the year. So one thing is we did a deliberate increase in our salaries.

We didn’t increase so we did really a lot of savings in terms of the consumptions on energy, on the different headings. But of course, this wasn’t able to compensate for the price increases at cost level. So it’s not that we are not doing all the best already. So what will be paramount to really deliver our return on invested capital, which is our main KPI here, it’s really on the top line. And this is where we are going to push to continue to be competitive to, of course, have the best performance possible considering still very challenging circumstances.

On the on Ara, in terms of improvement, of course, we will be opening stores and we will be integrating also some stores. So we are adding capacity to the market. Of course, presumably, if we are now on the positive, excluding IFRS 16 on positive ground with margins, of course, this will bring as always and this is the most important for us, we will keep growing our EBITDA in absolute terms. So not looking so much at the percentages. I’m not saying that the increases will come.

It will depend on the dilution. But in principle, yes. Definitely, in absolute terms, we will improve our EBITDA margins. On others, of course, others, we will report here not only the corporate costs at the heading, but as you know also the Slovakian, Viedronka business will be reported here. We expect it to be dilutive during the first years, But so it’s probably that increases a little bit, but we do not expect it to grow much also.

So it will depend on the number of projects. I think that we are quite efficient still on our corporate structure. But of course, this will depend on a number of projects and on how dilutive the Solvakent venture will be. We expect, of course, that at least in the beginning with the opening of so many stores that we want in the country that will pressure, but not something completely different from what it was. And I think that’s all.

Isabelle Dobreva, Analyst, Morgan Stanley: Thank you very much. And could I ask a quick follow-up? Out of your store openings for the year, how many of those or what percentage do you plan to be in these smaller areas and the smaller villages?

Anna, Moderator/Presenter, Geronimo Martins: We will keep more or less fiftyfifty allocations, Isabelle. So we still have some white spaces also in more urban areas. Thank you.

Conference Call Operator: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of Rob Joyce from BNP Paribas. Please go ahead.

Your line is now open.

Rob Joyce, Analyst, BNP Paribas: Sorry, I have one last quick one. Just in terms of Slovakia, I’m just thinking what type of investment should we be thinking in terms of EBITDA and CapEx in 2025 for that one? Thank you.

Anna, Moderator/Presenter, Geronimo Martins: Rob, I will not disclose that. So we’ll have some dilution as an investment, of course, as a startup for the business, but nothing really material on the overall group results. On the CapEx, I think that we can assume that it will not weigh on the $1,100,000,000 that we are expecting to spend. Of course, more than 50% will continue to be in Polish via Donke, not really in Slovakia. So we are talking about some stores.

So it’s minor. Even if we say that we will be open to half or we will be opening half of what we say that we will open until the end of twenty twenty six, so it’s the 50 openings. This will not wait on our CapEx for the year also.

Rob Joyce, Analyst, BNP Paribas: Okay. Thank you.

Conference Call Operator: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of Matthew Clements from Barclays. Please go ahead.

Your line is now open.

Matthew Clements, Analyst, Barclays: Good morning. Thanks for taking my question. Quick question on Columbia. Very significant expansion in the network plan for next year with the over 150 stores plus those 70 required. Interested just in any color on that acquisition?

Are we expecting more opportunities like that to come up? And any details on that acquisition would be useful? And also just any color on what you’ve budgeted for interest costs next year, very significant kind of over 50% increase in interest expense last year, partly related to the financing of the Colombian business. So just any color on what you might expect on that line would be appreciated. Thank you.

Anna, Moderator/Presenter, Geronimo Martins: Good morning, Matt. So on Colombia, yes, as the Chairman mentioned, we think that the opportunity for the Colombian market is still there despite some challenges and some setbacks. We got this opportunity. So we think that there aren’t many opportunities in Colombia. Fortunately for us, this Coso Silvi is not a normal player, so they are kind of a social welfare entity in Colombia.

So they decided to really close the locations and they offer the locations to us. So it was really an assignment of the lease agreements that we got. I don’t think that there will be much opportunities as this one. But of course, we will keep looking at any opportunity in the market that it may exist. So you have also as you may remember, the Justi Bueno left the market a couple of years ago and there is was now this opportunity, but we will keep expanding and we were expecting and had already identified the locations to keep expanding for the next years and in principle that’s what we will keep doing.

On the interest costs, so we took really a decision to not take any exchange risk for the Colombian venture. So we it’s true that we are paying a high price for interest in Colombia, but we will keep financing the Colombian venture that whose receipts are in pesos with Colombian peso loans. And this means that in principle, the costs the interest costs will not decrease or we do not expect it to decrease in this year because although we will have be having a positive EBITDA and we count on a positive effect of the working capital, we also have a heavy investments program for Colombia and so on that we expect it not to decrease. So I think that the stable estimates can be a good proxy.

Matthew Clements, Analyst, Barclays: That’s very helpful. Thanks very much.

Anna, Moderator/Presenter, Geronimo Martins: Thank you, Hermann.

Conference Call Operator: Thank you. As there are no further questions, I would like to now hand back to Missana Virgenia for any closing remarks.

Anna, Moderator/Presenter, Geronimo Martins: So I would like to conclude here by reiterating that the set of results presented today required a lot of determination to protect market share and grow volumes overcoming the challenge of once again outperforming the markets in which we operate. We are already two point five months into 2025, still facing relatively staked consumer context despite minimum wage increases and a more intense competition. Therefore, we are prepared to continue working with discipline and efficiency to ensure competitiveness and consumer preference as the only way to deliver profitable growth while addressing the environmental and social challenges that come with the business. Thank you for your questions and for attending this conference call. I wish you all a nice day.

Conference Call Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

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