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Carrefour SA (CRRFY) Q4 2022 Earnings Call Transcript

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Carrefour SA (OTCPK:CRRFY) Q4 2022 Earnings Conference Call February 14, 2023 12:15 PM ET

Company Participants

Alexandre Bompard - Chairman and Chief Executive Officer

Matthieu Malige - Chief Financial Officer

Conference Call Participants

Izabel Dobreva - Morgan Stanley

Sreedhar Mahamkali - UBS

Clement Genelot - Bryan Garnier & Company

James Grzinic - Jefferies International

Andrew Gwynn - BNP Paribas

Xavier Le Mene - Bank of America Securities

Nicolas Champ - Barclays

Nick Coulter - Citi

Operator

Good day, everyone, and invited to nan Carrefour Full-Year 2022 Results Conference Call. Today's telephone is being recorded.

And now, astatine this time, I'd for illustration to move nan telephone complete to Mr. Bompard, Chairman and CEO; and Mr. Malige, CFO. Please spell ahead.

Alexandre Bompard

Good evening to each of you. Thank you for joining america for this position of our yearly results. Before diving into numbers, I would for illustration to make a fewer comments connected 2022. 2022 was an aggravated and captious year, marked by a difficult discourse for our manufacture pinch nan return of very precocious ostentation successful Europe, tensions successful proviso chains, and an accelerating ambiance crisis.

In this changing environment, Carrefour proved nan spot of its exemplary and lived up to its commitments. I would for illustration to stress this, because it demonstrates our awesome power complete our operations and nan aforesaid financial discipline, we person shown successful nan past 5 years. It is clear that 2022 has been a successful twelvemonth for us. We recorded sustained maturation successful income and we continued to summation marketplace stock successful each our cardinal markets, notably successful France, Spain, and Brazil.

I'd for illustration to attraction connected France for a moment, because these are not conscionable gains successful marketplace stock by worth for nan 2nd twelvemonth successful a row, but gains successful marketplace stock successful volumes. In terms of measurement gains, we are decidedly nan marketplace leader successful 2022. This inclination is captious successful nan existent context, arsenic it proves that our customer proposition, including formats, products, and prices, is nan astir attractive. In total, successful France alone, we gained 470,000 caller customers successful 2022.

Overall, we intimately managed our operations passim nan twelvemonth and completed yearly savings scheme of EUR1 billion. This enabled america to execute a beardown 8% maturation successful recurring operating income. Thanks to nan coagulated guidance of our financial model, we generated a grounds level of nett free rate travel astatine EUR1.26 billion, increasing for nan 3rd consecutive twelvemonth and keeping america connected way to scope our extremity of EUR1.7 cardinal by 2026. These results bespeak nan relevance of our exemplary and our expertise to execute good successful immoderate environment. This precocious level of capacity extends to our societal and biology actions.

In 2022, we again exceeded our yearly targets, pinch our nutrient modulation connected CSR scale opinionated astatine 109%. We person made peculiar advancement successful nan conflict against world warming by reducing our greenhouse state emissions, but besides successful packaging simplification and successful worker engagement. Beyond these results, 2022 was a awesome twelvemonth for our translator connected our strategy. After our Digital Day successful November 2021, we person further accelerated our translator arsenic a integer unit company.

First, we've taken a important lead successful nan usage of information pinch our solutions streamlining assortment, promotion connected personalized customer recommendations. We person besides accrued nan usage of our applications, which results successful higher customer depletion wrong our ecosystem and reached 15 cardinal omnichannel customers aliases 19% of our full customer base.

More broadly, we person outperformed nan e-commerce marketplace pinch 25% maturation and we've doubled successful size successful Brazil, pinch further maturation imaginable silhouette. In unit media, we've reached 450 progressive Carrefour-linked advertisers, and our revenues grew by 26%.

In 2022, we besides finalized nan optimization of our geographic portfolio pinch a stabilized footprint successful Europe and Latin America. We negotiated nan waste of our liking successful Carrefour Taiwan connected fantabulous terms.

So, I deliberation there's a problem pinch nan microphone. So, what do we person to do? Excuse me. Can you perceive us? Operator?

Operator

Yes, everyone is. You're coming successful done large and clear via nan audio lines.

Alexandre Bompard

I get messages from auditors saying that they perceive music.

Unidentified Company Representative

Yes. On your webcast, we person immoderate trouble. But connected nan convention call, it's moving fine. So, I counsel you to proceed for illustration that.

Operator

You proceed, yes.

Unidentified Company Representative

Yes. And we are going to cheque what's happening connected nan [Technical Difficulty]

Alexandre Bompard

Can you please springiness a connection to each nan group who are connected nan webcast?

Unidentified Company Representative

No. For nan moment, I cannot, because location are immoderate euphony and I don't cognize wherever it comes from.

Alexandre Bompard

Okay. Okay, we will proceed. Thank you. So, arsenic you see, we've go a integer unit company. So, successful 2022 we besides finalized nan optimization of our geographic portfolio pinch a stabilized footprint successful Europe and Latin America. We negotiated nan waste of our liking successful Carrefour Taiwan connected fantabulous terms. We besides refocused connected maturation operations that create important worth for our Group, notably, pinch nan eager cognition successful Brazil connected Grupo BIG, which consolidates our activity successful a accelerated maturation market.

Finally last, November, we initiated our caller plan, Carrefour 2026, pinch respective strategical initiatives. It defines our imagination from format and products to CSR, from nan statement of our office to our purchasing strategy. All this was achieved, acknowledgment to nan committedness of our teams and our franchising partners. I'd for illustration to [Indiscernible] pinch you to each nan word, particularly successful specified an uncertain context. These fantabulous results thief consolidate our beardown financial business and this allows america to measurement up our shareholder-oriented superior allocation argumentation by expanding nan commitments already made complete respective years.

First, we are proposing to summation nan dividend by 8% to EUR0.56 per stock for nan 2022 financial year. Second, we are announcing a caller EUR800 cardinal stock buyback for 2023. In total, this intends that we scheme to return much than EUR1.2 cardinal to shareholders this year, which implies a full output of 9.4% astatine existent stock price.

Turning to 2023 now. The discourse remains uncertain pinch immoderate unit connected volumes continuing, but we are very assured successful our expertise to intimately show our business and performances successful this challenging environment. We will besides support a abstraction successful nan integration of Grupo BIG, completing shop conversions by nan extremity of nan year. 2023 will beryllium nan first twelvemonth of our caller strategical plan, Carrefour 2026, and we will beryllium powerfully engaged successful respective of nan initiatives we announced past November.

Firstly, we will importantly summation nan stock of our backstage labels successful bid to scope 40% of our sales. Our backstage labels screen each nan customers' needs, acknowledgment to nan wide-range of products. Moreover, we person nan astir competitory connection connected nan marketplace pinch our Simpl brand, which is increasing accelerated successful revenues and expanding by astir 10% successful volumes. All this enabled america to reside nan changing depletion patterns of our customers.

Secondly, connected formats, we are accelerating nan maximization, peculiarly hypermarkets and supermarkets, acknowledgment to nan massification of purchases and greater productivity successful stores. We are besides continuing to deploy lease guidance and franchising each formats. And we will proceed nan description of Atacadao and Maxxi successful Latin America and nan continued integrated description of convenience stores and discount format successful Europe. Our connection and our formats are besides enhanced by digital.

First, we will accelerate nan digitalization of our stores, whether it beryllium shelf-tracking, inventory management, aliases checkouts, we will deploy our information solution for assortment successful each Group countries, and we will proceed to digitize our customer experience, notably done nan improvement of our integer applications and catalogs.

In unit media, this year, we'll spot nan first commercialized partnerships wrong our associated task pinch Publicis. At nan aforesaid time, we are putting successful spot our caller statement successful bid to beryllium moreover much reactive and agile and to return afloat advantage of synergies successful our 2 geographies, Europe and Latin America. As for nan stores, our caller statement will besides beryllium much businesslike and linear, acknowledgment to nan Maxxi meter.

Lastly, we will create caller businesses and our caller expertise. As you know, we are investing to deepen our expertise successful energy, some to trim our depletion and nutrient renewable electricity. In Spain, our extremity is to equip much than 100 stores by nan summertime of 2024 for a full accumulation imaginable of 75 megawatts. We are besides optimizing our existent property portfolio pinch nan upcoming creation of a existent property institution successful Latin America, which will beryllium a important root of worth creation for nan Group.

So arsenic you tin see, we look astatine nan early pinch confidence. Over nan past caller years, Carrefour has demonstrated its capacity to navigate successful each types of [risks] (ph). With this way record, pinch nan crisp improvements we've brought to our exemplary complete time, mixed pinch nan caller and eager initiatives that shape our Carrefour 2026 plan, we cognize nan way to success.

Therefore, we are assured successful our medium-term target of generating nett free rate travel of astatine slightest EUR1.7 cardinal by 2026. We intend to bully astatine foods, which will present dependable growth, starting pinch 2023, for which we corroborate that we person nan nonsubjective to turn EBITDA, operating profit, and nett free rate travel erstwhile again.

Thank you for your attention. I will now manus complete to Matthieu.

Matthieu Malige

Thank you, Alexandre, and bully day to everyone. I'm very pleased to beryllium pinch you to spell into greater item done our 2022 financial performance. Before we get into nan numbers, I'd for illustration to punctual you that Carrefour's operations successful Taiwan are now accounted for arsenic discontinued operations successful accordance pinch nan IFRS 5 accounting standard. As a reminder, each pro forma numbers for 2021 and H1 2022 are disposable successful nan finance conception of our website.

Let's commencement connected descent six of nan presentation, pinch a look astatine our sequential income dynamics. As expected, income maturation accrued materially done nan year, driven by increasing ostentation successful Europe, together pinch coagulated marketplace stock capacity for Carrefour. Q4 maturation came broadly successful statement pinch Q3 astatine 10.9%, like-for-like. France generated a 5.6% increase, pinch nutrient income up 7% and non-food down 3%, successful statement pinch erstwhile quarters. Please support successful mind that ostentation successful France was among nan lowest successful Europe, acknowledgment notably to fixed complaint mortgages, a higher stock of atomic powerfulness that has constricted rises successful power prices and authorities subsidies.

Europe, excluding France, generated a 6.2% summation successful like-for-like sales, pinch Romania and Poland starring nan performance, followed by Spain, Italy, and Belgium, each posting adjacent to mid-single digit growth. The European markets were marked successful Q4 by trading down and declining volumes.

Finally, Latin America delivered a 28% like-for-like increase. Brazil was up 11% complete nan quarter. This included a notable 14% like-for-like maturation astatine Carrefour Retail, driven by coagulated sales, some successful nutrient and non-food and 10% maturation astatine Atacadao. This maturation was achieved contempt immoderate slowdown successful ostentation complete nan quarter. E-commerce successful Brazil continued its very beardown momentum, pinch GMV doubling, compared to past year. Argentina was coagulated erstwhile again, pinch income [Technical Difficulty] supra ostentation and 102% like-for-like, reflecting sound marketplace stock momentum and affirmative volume.

Total reported income are shown connected descent seven. The 18% full maturation complete Q4 was driven some by like-for-like maturation I conscionable described and by description and M&A, notably nan integration of Grupo BIG. Petrol contributed a affirmative 0.5 points, while ForEx contributed for 1.9 points, driven by nan Brazilian existent appreciation.

As you tin spot connected descent eight, France delivered different beardown capacity successful 2022. Sales accrued 3.4% like-for-like successful nan full-year. As we will spot successful a infinitesimal successful much detail, we gained marketplace stock complete nan year, some successful position of worth and volume. This accomplishment was nan consequence of changeless attraction to our customers and a broad commercialized policy, which included grande pricing, businesslike promotional campaigns, and a beardown push connected backstage labels. E-commerce besides performed good successful France, pinch GMV up 13% year-on-year.

Carrefour has reinforced its activity successful location delivery, nan fastest increasing segment, pinch much than 33% marketplace share. In 2022, we continued to toggle shape nan shop portfolio arsenic planned, pinch 43 conversions to these management, including 16 hypers and 27 supers. This move will proceed successful 2023, pinch 41 planned conversions, including 16 hypers and 25 supers. All these elements, mixed pinch strict costs subject and regular committedness from our teams and franchise partners connected nan ground, drove a 10% summation successful recurring operating income to EUR834 million.

Let's return a look astatine Carrefour marketplace stock gains successful measurement connected descent nine. Based connected nan Kantar information you tin spot here, Carrefour was nan undisputed marketplace stock victor of 2022, some successful H1 and successful H2, erstwhile ostentation started to go much material. We tie a fewer learnings from these numbers. First, and arsenic we've said for a fewer quarters, we've been gaining much marketplace stock successful measurement position than successful worth terms, which is grounds that Carrefour is giving retired much worth to customers than nan market.

Second, location are 2 clear winners for 2022, which hap to beryllium chiefly hypermarket operators. As you see, Carrefour is progressively becoming a preferred retailer for French customers, this gives america assurance for 2022.

Moving connected to descent 10 and nan operating separator trajectory for France. Carrefour France 2022 operating separator reached 2.2%, a 10-basis constituent summation versus 2021. This is intelligibly a satisfactory accomplishment successful nan inflationary discourse we face. As you tin spot connected nan graph, Carrefour France has been expanding its operating separator for nan past 4 years successful a statement successful each types of business environments. As presented successful our strategical scheme past November, we person galore much breathtaking initiatives ongoing aliases being launched. They will thief america scope our medium-term nonsubjective of EUR1 cardinal of 3% operating separator for France.

Let's move to Europe connected descent 11. European income were up 4.9% like-for-like successful 2022. Recurring operating income was down EUR112 cardinal pinch very different operating profit capacity from 1 state to another. While Spain had a bully commercialized capacity passim nan twelvemonth pinch marketplace stock gains, its profitability declined, affected notably successful H2 by nan summation successful power prices and a caller power taxation group successful July. It was besides impacted by an summation successful nan costs of consequence successful nan financial services business successful nan discourse of unit connected purchasing power.

Belgium was besides nether unit successful 2022, arsenic we already explained complete nan past quarter. After a difficult H1, we person seen first signs of betterment successful Belgium averaged. On nan different hand, Poland and Romania did reasonably good and generated net growth. Last, Italy kept improving passim nan twelvemonth and besides posted maturation successful recurring operating income.

Let's move to descent 12 to reason our location overview pinch Latin America. Carrefour Brasil ended nan twelvemonth pinch a 12.4% like-for-like income maturation and posted beardown marketplace stock gains of 80 ground points, excluding Grupo BIG, which demonstrates 2 elements. First, nan relevance of our strategy for Atacadao successful 2022, which was based connected partially absorbing ostentation to heighten our value activity and thrust customer preference.

And second, nan spot of our Carrefour brand, which attracts different customers from rate and transportation uses. Digital income besides accrued strongly, boosted by nutrient sales. GMV doubled complete nan year. Finally, our financial services delivered a bully year, pinch billings up 9.4% and nan in installments portfolio up 27%. Delinquency improved astatine nan extremity of nan year, acknowledgment to nan usage of information analytics. A speedy connection connected Argentina, wherever like-for-like income grew by 84% complete nan year. We support outperforming nan marketplace location pinch beardown marketplace stock gains and affirmative volumes.

In 2022, recurring operating income for nan region grew by 31% aliases 20% astatine changeless ForEx. In Brazil, recurring operating income was up 28% astatine EUR914 million. This demonstrates our sound commercialized momentum successful nan country, together pinch strict costs discipline. Operating separator successful Brazil decreased, owed to nan dilutive effect and nan costs of integration of Grupo BIG. Excluding Grupo BIG operating separator successful Brazil was down a marginal minus 6 ground points.

Let maine punctual you that each operating costs associated to Grupo BIG integration are accounted for successful recurring operating income. They notably see operating costs of nan stores during nan remodeling period, precocious discounts incurred to liquidate each Grupo BIG inventories, and trading campaigns upon shop reopening. Profit, EBITDA successful Argentina continued to amended strongly, pinch operating separator up 72 ground points astatine 3.1%, acknowledgment to continued outperformance.

Moving connected to descent 13, and a attraction connected nan integration of Grupo BIG. We've been acting accelerated since nan closing of nan transaction successful June connected galore fronts. At year-end, 59 stores were already converted, which is acold up of nan first plan. Converted stores outperformed aft reopening. The 14 stores sold arsenic antitrust remedies for nan transaction were disposed of, arsenic satisfactory conditions successful Q4. Synergies are being implemented successful statement pinch first plan. The integration of teams and strategy is progressing well. In that context, we are happy to corroborate nan synergy target of BRL2 cardinal by 2025.

Let's travel backmost to nan Group's P&L connected descent 14 pinch operating margins and recurring operating income. Gross separator decreased by 110 ground points successful 2022. This was shaped astir various elements, including important investments successful value and competitiveness, nan alteration successful operation of operating modes from integrated to much franchise and lease guidance and a beardown summation successful pet wholesales that generates very debased separator and, hence, weighed connected nan separator rate.

In nan beardown inflationary discourse of 2022, nan simplification successful distribution costs arsenic a percent of income is simply a bully accomplishment and a caller objection of nan Group's costs discipline. As targeted, we delivered different EUR1 cardinal of costs savings successful 2022. Recurring operating income reached EUR2.377 billion, up 8.3% against 2021. Recurring operating separator was down 20 ground points successful total, but unchangeable excluding nan effect of Grupo BIG.

Moving connected to nan bottommost portion of nan P&L connected descent 15. Net non-recurring income and expenses turned to a affirmative EUR36 cardinal arsenic restructuring charges were very debased successful 2022. Financial expenses accrued importantly to EUR490 million, driven by a beardown summation successful liking rates and nan emergence successful nett debt, notably successful Brazilian existent related to nan Grupo BIG acquisition.

The normative taxation complaint came retired materially beneath 2021 astatine 28.8%. This comes from some nan alteration successful firm taxation complaint successful France and nan alteration successful geographical mix. Reported nett operating income, Group stock from continuing operations accrued 37%. Adjusted nett income accrued by 7.6% to EUR1.212 billion. Together pinch nan alteration successful nan number of outstanding shares pursuing past year’s EUR750 cardinal buyback program, this drove a 14% summation successful adjusted net per share.

As you tin spot connected descent 16, EPS has been increasing systematically successful nan past 3 years astatine a 14% compound yearly maturation complaint aliases positive 50% versus 2019.

Net free rate travel connected descent 17 accrued to scope a grounds EUR1.262 billion, comfortably supra nan EUR1 cardinal period arsenic guided past quarter. We person a coagulated multi-year nett free rate travel trajectory, which allows america to reiterate pinch assurance our nonsubjective to transcend EUR1.7 cardinal of nett free rate travel by 2026, pinch maturation each twelvemonth successful nan meantime, starting pinch 2023.

Let maine item nan cardinal drivers of nan 2022 rate travel maturation connected descent 18. As planned and arsenic nan ground of our mid-term trajectory, nett free rate travel increased, chiefly acknowledgment to EBITDA, which grew by EUR306 cardinal successful 2022. Cash-out from exceptionals accrued by EUR135 million. This was chiefly owed to an exceptional taxation costs astatine nan Bank successful Brazil for astir EUR110 million, pursuing nan nonaccomplishment of a lawsuit that Carrefour had initiated against nan section taxation authorities.

Working superior publication improved materially owed to a greater summation successful waste and acquisition payables than successful inventories and receivables successful nan discourse of inflation. This summation was generated contempt nan antagonistic effect from a debased successful Belgium, which reduced our costs position successful nan state successful 2022 pinch a antagonistic effect of astir EUR120 million.

CapEx came successful statement pinch expectations astatine EUR1.86 billion, of which astir EUR160 cardinal related to nan integration of Grupo BIG and EUR380 cardinal related to investments successful existent estate. The costs of nett financial indebtedness accrued by EUR164 million, driven by much indebtedness pursuing nan acquisition of Grupo BIG and higher liking rates, notably successful Brazilian real.

One connection astir plus disposals, which reached EUR379 million. It includes astir EUR100 cardinal of intangible assets, beforehand commerce and instrumentality sold to franchisees. The remaining EUR280 cardinal consists of existent property divestments arsenic portion of our existent property strategy. For example, successful 2022, successful Spain, we had nan opportunity to acquisition a portfolio of shopping malls, including Carrefour stores. We lowered nan rent of these stores and past sold nan portfolio backmost astatine nan extremity of nan twelvemonth pinch a superior gain. This transaction is included some successful CapEx and disposals complete nan period. All in, Carrefour was a nett investor successful existent property erstwhile much successful 2022.

Moving connected to our equilibrium expanse connected descent 19 pinch nan nett indebtedness evolution. Our nett financial indebtedness accrued by astir EUR800 million. As successful 2021, our nett free rate travel was mostly returned to shareholders done EUR380 cardinal of mean dividends and EUR750 cardinal of buyback. Dividend to minorities accounted for EUR101 million. M&A was driven by nan Grupo BIG cash-out, which amounted to EUR862 million. At year-end, Carrefour’s nett indebtedness reached EUR3.4 billion. Credit metrics stay strong, notably acknowledgment to nan summation successful EBITDA generated complete nan twelvemonth and expected proceeds from nan divestment of Taiwan.

Let's reason this position pinch a speedy connection connected superior allocation connected descent 20. In position of nan bully 2022 capacity and our coagulated equilibrium sheet, we will propose an yearly rate dividend of EUR0.56 to our shareholders astatine our AGM successful May. This is an 8% dividend maturation versus past year, which is accordant pinch our argumentation to turn nan mean dividend by astatine slightest 5% each year. In addition, we are continuing our buyback argumentation pinch a caller EUR800 cardinal buyback to beryllium completed earlier year-end.

I convey you for your attention. Alexandre and I are now fresh to return your questions.

Question-and-Answer Session

Operator

Great. [Operator Instructions] And we'll first perceive from Izabel Dobreva of Morgan Stanley.

Izabel Dobreva

Hello, bully evening. Thank you very overmuch for taking my question. Firstly, I would for illustration to inquire you a mobility astir your superior allocation policy. This is nan 3rd clip you person accrued nan buyback. And your guidance is that, for nan twelvemonth ahead, nett free rate travel should besides grow. So keeping that successful mind, should we expect that location is simply a anticipation nan buyback will besides turn a twelvemonth up if you meet your nett free rate travel objective? That is my first question.

And past my 2nd mobility is astir nan costs of your debt, which increased, fixed nan outstanding equilibrium and besides liking rates successful Brazil. My mobility is, really should we deliberation astir nan outlook for your liking costs and what guidance levers beryllium successful bid to power nan spike? So I'm funny to perceive what are your expectations for this statement for nan twelvemonth ahead. Thank you.

Matthieu Malige

Thank you very overmuch for your question. So first, connected nan superior allocation argumentation and nan buyback, we presented a superior allocation argumentation backmost successful November during our Carrefour 2026 strategical plan, which fundamentally prevail -- says that nett free rate travel will predominantly beryllium returned to shareholders done yearly recurring summation successful mean dividends and recurring yearly further returns done stock buyback. So I deliberation -- clearly, it will dangle connected nan capacity successful nan future, but I deliberation it's a adjacent presumption that arsenic nan nett free rate travel increases complete time, location should beryllium an summation of nan full remuneration to shareholders to travel that dynamic.

Second mobility connected nan liking expenses, truthful yes, arsenic I said successful my speech, summation successful nan liking rates expenses -- nan rate liking complaint expenses, excluding IFRS 16. This is owed to an summation successful nett debt. And this nett indebtedness -- fixed nan truth that Grupo BIG has been acquired by Grupo Carrefour Brasil, this indebtedness is denominated successful Brazilian real. So this indebtedness has been implemented done nan first half -- nan first four, 5 months of 2022, and we person seen Central Bank liking rates successful Brazil emergence done nan first half and past plateau from nan opening of nan summertime onwards.

So nan nett indebtedness astatine Group level will -- is not forecast to increase. We are anticipating a rate flow. We'll person immoderate proceeds from nan divestment of Taiwan. However, location will beryllium immoderate benignant of a full-year effect connected nan Brazilian real-denominated indebtedness and a full-year effect of liking rates -- of precocious liking rates successful Brazil, unless these liking rates alteration later successful nan year. Overall, I deliberation it's adjacent to presume that liking expenses will beryllium greater -- somewhat greater successful 2023 than they were successful 2022.

Izabel Dobreva

Thank you very much. And successful position of FUF, we should presume that nan apical extremity is nan first half of nan twelvemonth and past nan 2nd half, they commencement to travel down again?

Matthieu Malige

Yeah. I deliberation that's a adjacent assumption. Again, we person incurred that for nan acquisition. This is now down us, some Carrefour Brasil is rate generative, nan Group is rate travel generative. So we are connected a path, notably successful Brazil, of decreasing nan debt, which has a very precocious cost. So I work together pinch you. I deliberation we person this ramp-up effect successful H1, and past we should beryllium decreasing our debt.

Izabel Dobreva

Thank you very much.

Operator

Next, we'll perceive from Sreedhar Mahamkali, UBS.

Sreedhar Mahamkali

Hi, and bully evening. Thanks for taking my questions. I've sewage a couple, please. First one, I deliberation -- somewhat unusually, I deliberation you called retired for ROI growth, EBITDA maturation -- free rate flow, I deliberation we were expecting, astatine this early shape successful nan year. Normally, you remark a spot later successful nan year. The mobility past is, do you spot this coming pinch a operation of income and operating margins, aliases chiefly driven by sales? And wrong that, tin you springiness america immoderate comfortableness astir Europe margins who intelligibly deed a caller low, sub 3% for nan full-year? And if you tin isolate…

Alexandre Bompard

Sreedhar, nan statement is very bad. Do you mind repeating your mobility and speaking a small louder, if that's possible?

Sreedhar Mahamkali

Yes, yes. Absolutely.

Alexandre Bompard

That's overmuch better. Thank you.

Sreedhar Mahamkali

Okay, okay. Very good. Okay. No, nan mobility was, you’ve somewhat unusually talked astir ROI maturation this year, very early successful nan year. The mobility is, does this travel pinch income maturation only mainly, aliases do you besides spot operating separator progress? And wrong that, nan mobility besides past is, tin you springiness america immoderate comfortableness astir European margins and if we should expect them to progress? If you tin telephone retired nan effect of costs of consequence successful Spain, financial services, that will beryllium ace helpful. So that's nan ROI successful Spain and Europe question.

Secondly, successful position of France, we now spot immoderate headlines talking astir authorities involution connected immoderate 50 cardinal items connected pricing. Is location thing location that we should beryllium reasoning about? Those are nan 2 questions. Thank you.

Alexandre Bompard

Let's commencement possibly pinch nan 2nd one, astir nan negotiation. As you know, we are successful nan mediate of nan speech process pinch nan supplier. Suppliers person travel pinch requests sometimes for double-digit increases. Our domiciled arsenic a retailer is to discuss and make judge we limit nan summation arsenic overmuch arsenic we tin to protect customer purchasing power. We are successful nan mediate of this process, whereas successful nan aforesaid time, a rule that is discussed successful nan parliament, but nan measure is being discussed and it's very improbable to beryllium enacted earlier March 1. So meaning that it should not effect 2023 yearly negotiation. And additionally, it's very uncertain to spot what would beryllium nan last determination aliases nan last matter that would walk successful this law. So nary effect successful 2023, and galore uncertainties astir what would really beryllium successful this law, and we show that very, very closely.

Matthieu Malige

On your first question, Sreedhar, we're not going to beryllium very granular astatine this shape of nan twelvemonth connected nan outlook. However, successful Europe, I deliberation that if you return into relationship what I said astir nan countries, we person very affirmative dynamics successful Romania, Poland, and Italy, and that's very positive. And this is -- we deliberation this is really grounded successful very beardown commercialized and operating performance.

When we travel to Belgium, we commented nan difficult H1 backmost successful July. And arsenic I said, we person a amended inclination successful H2 and we deliberation nan caller guidance squad is doing a bully work. And so, we're constructive there. On Spain, truthful nan user in installments business, obviously, depends a batch connected nan macro environment. So we'll person to spot really that develops. Energy is cooling down, truthful should -- that should easiness nan pressure. I deliberation down nan unit is nan crisp acceleration of inflation, I deliberation if it benignant of normalizes and becomes much steady, I deliberation it will easiness some nan unit connected depletion astatine our customers and besides connected our operating model.

Sreedhar Mahamkali

Matthieu, very quickly, what was nan effect of costs of consequence unsocial successful Spain? Is location a number? Is it EUR20 million, EUR30 cardinal of benignant of magnitude?

Matthieu Malige

We're not getting into detail. The only constituent you person to person successful mind is it's really statistical provisions. You cognize that very well. So it doesn't mean that nan existent losses connected nan in installments portfolio is not expanding successful immoderate important way. It's chiefly statistical parameters owed to much unit connected purchasing powerfulness astatine our customers.

Sreedhar Mahamkali

Thank you. Very, very speedy one, if I tin compression in. In position of rate outflow from restructuring charges, is location immoderate ones you tin springiness us? Also, connected immoderate planned plus disposals, if there's thing location connected those 2 lines [Technical Difficulty]. Thank you.

Matthieu Malige

Well, connected nan 2023 rate flow, I deliberation it's adjacent to presume that nan cash-out from restructuring should beryllium little than what it was successful 2022. As you saw successful nan non-recurring expenses successful nan P&L, we person announced very small restructuring successful 2022 and you cognize location is simply a lag effect for nan cash-out effect. So I deliberation it's adjacent to presume that we'll person little cash-outs from restructuring successful 2023.

Sreedhar Mahamkali

Thank you.

Operator

And past next, we'll perceive from Clement Genelot of Bryan Garnier & Company.

Clement Genelot

Good evening. Thank you. Just 1 from my side. You elaborated a small spot connected nan latest consumers' behavior. I mean, are they still trading down, and successful what measurement betwixt backstage labels, little fresh, little integrated and little volumes? Thank you.

Matthieu Malige

Yes, thanks. Yes -- truthful yes, location has been an acceleration successful trading down complete nan twelvemonth successful each our markets, peculiarly successful H2 pinch each nan ingredients of trading down connected much backstage labels, much introduction prices, much promotions, little fish, little integrated products, et cetera, et cetera, arsenic good arsenic a alteration successful volume, peculiarly successful H2. In parallel, we saw user behavioral alteration pinch little mean baskets connected higher shopping frequency. Customers came much often, but spent little per visit. Very difficult to cognize precisely what would -- what will hap successful 2023. It will beryllium a usability of ostentation -- connected nan level of inflation, connected its magnitude.

We expect successful nan adjacent weeks and months further signs of trading down connected unit connected volumes successful nan coming months arsenic nutrient ostentation should stay precocious successful nan first semester. But what is very important to statement is that successful this context, arsenic it was successful 2022, comparison our marketplace stock gains successful worth and successful volume, we person a very bully and differentiated connection pinch a beardown and broad connection of backstage label, some and connected introduction price, we are a beardown leader successful that successful position of marketplace share.

Our system of promotions connected loyalty programme are very efficient. Our discount formats, starting pinch Maxxi hypermarkets, activity very well. And so, this context, of course, is analyzable to manage. But we intelligibly spot that moreover if nan trading down continues and if nan measurement remains low, we person nan proposals to -- nan commercialized connection to pull our customers, to travel them. And that's why we are tin to outperform competitors, arsenic evidenced by marketplace stock data.

Clement Genelot

Very clear. Thank you.

Operator

And past our adjacent mobility will travel from James Grzinic of Jefferies International.

James Grzinic

Thank you, and bully evening, Alexandre and Matthieu and team. I had 2 speedy ones, nan first one, it looks for illustration location was astir a EUR300 cardinal rate effect betwixt OpEx and CapEx from integration of BIG successful Brazil successful ’22. I presume, fixed nan build successful synergies, nan scope and nan complaint of integration will beryllium akin successful ‘23 comparative to ‘22. So nan net-net dynamics should beryllium overmuch much adjuvant successful ‘23 and presumably erstwhile those costs of integration afloat vanish successful ’24, you've sewage different lucky instrumentality effect there. So nan first point I wanted to cheque is whether that rationale follows, whether nan logic is robust. And I person a 2nd one, but I'd conscionable fto you reside possibly nan first one?

Matthieu Malige

Yes. I deliberation you person a bully reading. As I said successful my speech, truthful obviously, nan CapEx -- EUR160 cardinal recorded successful nan CapEx statement and nan -- arsenic acold arsenic nan OpEx are concerned, each nan translator costs, discount connected nan waste of aged inventory, each that is booked successful nan P&L. So we started to grounds nan first synergies. It was very limited, fixed conscionable a fewer months. It represented BRL160 cardinal successful EBIT, a reasonably smaller number astatine this stage. And you're right, it was flooded by much costs relating to nan integration and nan conversion.

Obviously, arsenic clip passes, we person these stores, which are converted, will commencement ramping up and delivering synergies. We besides person progressed good connected nan negotiations pinch suppliers, beryllium they merchandise suppliers aliases GNFR suppliers, that has been implemented successful nan people of nan 2nd half. And so, we should person nan benefits of that, that will commencement kicking into 2023.

And still, complete nan year, we will still person to incur immoderate translator costs successful nan P&L, because we are astir halfway successful nan conversion. And so, we'll person much conversion costs and CapEx successful 2023. And past we will not have, starting from 2024 and possibly nan past fewer months of 2023, past we would not person this costs successful nan P&L anymore. And so, you will spot nan afloat effect of nan synergies.

James Grzinic

Okay. Thank you. And my different mobility was, Matthieu, I deliberation you -- did I understand it correctly that you reminded to usage nan Taiwan proceeds to discontinue immoderate Brazilian high-yielding debt? I mean, there's a rule that forced you by nan extremity of ‘23 and judging by nan Atacadao equilibrium expanse -- closing equilibrium expanse today.

Matthieu Malige

We've not commented aliases made immoderate announcements relating to nan proceeds of Taiwan. The process of support by nan antitrust authorities is still going connected arsenic planned, but still going on. So we still expect a closing astir nan summertime of 2023 and we've not fixed immoderate thoughts aliases made immoderate announcements arsenic to what would beryllium nan usage of nan proceeds.

James Grzinic

Great. Thank you, and good done connected a awesome year.

Operator

[Operator Instructions] We'll now perceive from Andrew Gwynn of BNP Paribas.

Andrew Gwynn

Hi, there. It's nan tail extremity of nan Q&A. So I'll conscionable support it to 1 and fto you get to your Valentine dinner. But conscionable going backmost to nan guidance, obviously, a maturation successful EBITDA, operating profit, nett free rate flow. But 1 number that's missing location aliases 1 metric missing location is nett income aliases EPS. So should we expect immoderate maturation successful nett income aliases EPS adjacent year? Thank you.

Matthieu Malige

Yes. Thank you, Andrew. Well, yes, we instrumentality to nan messages that we passed during our strategical plan. But I deliberation it's adjacent to, indeed, presume maturation successful EPS. We will person further buybacks to substance that. And again, maturation which is anticipated successful EBIT.

Andrew Gwynn

Okay, great. That's very clear. Thanks very much. Good evening.

Operator

Our adjacent mobility comes from Xavier Le Mene of Bank of America Securities.

Xavier Le Mene

Yes, bully morning. Thank you for taking my question. First 1 connected nan gross margin, actually, it was rather importantly down successful 2022, and I'm guessing nan affirmative blocks and antagonistic ones. So tin you elaborate a spot much connected nan income mix, imaginable effect of value finance you are making? And should we expect you to proceed nan value finance you were making successful 2022, aliases do you judge that you are coming successful a bully position -- and you will have, of course, to show what nan title is doing, but location is nary incremental value finance perchance heading into 2023? So that's my first question.

The 2nd one, backmost possibly to Andrew's question, you were saying that you look astatine nan early pinch confidence. So tin you perchance please stock a spot much of this assurance and thief america for nan 2023 guidance? So are you capable to remark perchance nan statement number, which is, if I'm right, EUR2.628 cardinal for nan underlying EBIT?

And nan past question, conscionable connected nan free rate flow, possibly conscionable a method one, but is Taiwan included successful nan nett free rate travel guidance for 2023? And nan 2nd one, what do you expect perchance for nan moving superior successful 2023, fixed nan bully capacity successful 2022?

Alexandre Bompard

First mobility astir nan context, trading down connected antagonistic volumes are not perfectly their conditions successful which to operate. But arsenic you've seen, nan Carrefour exemplary useful well, gains marketplace share, and we are tin to besides present increasing profits, acknowledgment to beardown costs cutting initiatives and bully monitoring of our expenses. And for 2023, we are preparing nan Group to look trading down aliases antagonistic volume. And we are reinforcing our initiatives to beryllium commercially attractive, while reducing our costs base.

We -- since I took over, our strategy is ever nan same, is to amended our operations, reenforce our competitiveness successful bid to make marketplace stock gains. And we did it and we proceed to do, fueled notably by important costs savings. This strategy is working. We present marketplace share. We present marketplace stock successful value, present marketplace stock successful volume, and we are tin to amended nan profitability and to make nan EBITDA turn also. So it's precisely nan aforesaid type of cognition and maneuver and strategy we will person successful 2023. So of course, we don't remark statement astatine this infinitesimal of nan Europe, but we tin reenforce nan assurance we person successful our capacity to make EBIT, EBITDA dissimilar connected nan free rate travel extremity successful 2023.

Matthieu Malige

Your 2nd mobility relating to nan consensus, truthful we won't remark astatine this shape of nan year. And conscionable connected moving cap, your past question, conscionable to -- obviously, it is depending connected inflation. So we'll person to spot really ostentation plays retired successful 2023. Please support successful mind that we had a antagonistic one-off from Belgium, EUR120 million, arsenic I said successful my reside earlier.

Xavier Le Mene

Thank you. And conscionable connected Taiwan, if I may, truthful is it -- is nan proceeds portion of your free rate travel nett guidance?

Matthieu Malige

No, no. The proceeds are not included successful nan nett free rate flow. The nett free rate travel is an equity of free rate flow, arsenic you saw successful nan span to -- of nett indebtedness successful nan presentation. And so, M&A is connected a very abstracted line, which is not portion of nan nett free rate flow.

Xavier Le Mene

Okay. Thank you.

Operator

Our adjacent mobility comes from Nicolas Champ of Barclays.

Nicolas Champ

Hi, bully evening. Thanks for taking my questions. I person two. The first 1 is coming backmost to your maturation target for this year. One is besides missing. Could you please elaborate connected wherever you spot your operating separator successful France germinate this year? Do you deliberation it is still achievable to summation operating separator successful France successful 2023?

And nan 2nd 1 is, could you please update america connected your project? You opened nan first Atacadao shop successful France. Given nan -- that nan property has precocious reported your position by city, are you still assured to unfastened nan first Atacadao shop this year? And possibly could you stock immoderate description targets for this caller and breathtaking concept? Thank you.

Alexandre Bompard

Yes, convey you. On nan first question, we maintain, of course, our mid-term nonsubjective to…

Nicolas Champ

I'm sorry, but I don't…

Alexandre Bompard

Sorry.

Nicolas Champ

Yes, convey you.

Alexandre Bompard

On your first mobility of Carrefour France, we support our mid-term nonsubjective of a level of profitability of 3% aliases EUR1 billion. We stay assured that we tin return to these levels. In 2022, we accrued EBIT by EUR77 million. We reached EUR834 million, compared to EUR465 cardinal successful 2018. So you see, nan betterment is impressive, and we are getting person and closer. We are assured successful nan dynamics, because arsenic you spot successful nan presentation, nan maturation is built connected nan marketplace stock gains successful parallel to cost-saving inaugural and financial discipline.

We are improving nan exemplary -- this exemplary pinch a number of strategical initiatives, including increasing penetration of our Carrefour branded products, nan Maxxi meter, nan further transportation to franchise, improvement of caller business specified arsenic unit media. So we are highly assured successful our capacity to scope nan nonsubjective we person fixed successful mid-term for France.

Concerning Atacadao, you cognize nan occurrence it is successful Brazil. The nonsubjective is to unfastened a first shop successful France astatine nan extremity of this twelvemonth aliases opening of 2024. We are moving connected that. We are successful nan process of identifying nan first location to hole precisely nan model, to really accommodate it to nan French market. The activity is tremendous by nan team, and we will travel backmost to you soon pinch nan first location and nan almanac of nan opening.

Nicolas Champ

Thank you.

Operator

Our adjacent mobility comes from [Erika Ive] (ph) of MetLife.

Unidentified Participant

Hey, bully afternoon. Thank you for taking my question. I would for illustration to spell backmost to nan waste and acquisition negotiations. So if nan rule is implemented from adjacent year, you said, what is nan effect that you foresee connected nan business, connected volumes aliases margins? So do you expect a deviation from your outlook? And also, would you person immoderate contingency scheme successful place? Thank you.

Alexandre Bompard

You cognize nan rule is discussed. So it's rather difficult to perfectly cognize what would beryllium nan last point. The opening constituent of nan rule was not affirmative for nan industry, and it was not realistic and probably, it doesn't comply pinch European regulation. But now, nan existent penning of nan law, wherever we are exactly, is much acceptable. And immoderate way, you don't person to beryllium worried astir nan effect it could person connected our business. We will beryllium tin to show each that. No interest for our capacity to show nan business successful this caller regularisation discourse that would return spot if nan rule passed successful nan adjacent weeks.

Unidentified Participant

And I would person besides different question. I mean, I admit that you don't want to disclose really you deploy nan proceeds from nan waste of nan Tai business. However, going back, fixed that gross indebtedness wide has accrued rather importantly year-on-year, putting it successful different way, do you stay committed connected Moody's ratings, fixed that this standing is based connected gross debt?

Alexandre Bompard

So again, nan Taiwanese divestment process is underway. So we deliberation it's premature to talk astir nan usage of proceeds. Let's person it move guardant a fewer steps and erstwhile we scope to closing, obviously, we will beryllium very, very precise. Our committedness is to person a -- and that's portion of our superior allocation argumentation that we shared pinch you backmost successful November, is to support a coagulated investment-grade rating. This is wherever we are today. And so, we want to support this type of rating. That's very important.

We deliberation that having a coagulated equilibrium sheet, fixed nan environment, fixed nan translator that we are going through, nan very differentiating and competitory assets, which allows america to instrumentality our translator pinch a medium-term view. So we want to support these assets.

Unidentified Participant

Thank you. That's each from me.

Operator

And our last mobility for coming will travel from Nick Coulter of Citi.

Nick Coulter

Good evening. Thanks for taking my questions, and sorry to support Mr. Gwynn from [Indiscernible]. One connected free rate flow, please. Could you punctual america of nan full level of restructuring costs for Grupo BIG complete nan people of nan integration, please? And past presumably, whilst you person efficiencies being delivered crossed [Technical Difficulty]. I'm conscionable trying to get a consciousness for why shouldn't proceed to spot immoderate restructuring costs coming done nan rate flow?

And secondly, do you deliberation you person nan correct operation betwixt ain explanation and promotional finance arsenic you spell into 2023? And I guess, do you time off nan doorway ajar aliases unfastened for much promotional offers to return share? Thank you.

Matthieu Malige

Thank you, Nick. I'm going to effort -- nan statement was not very bully connected your first one. I'm going to effort to reply that. My comments connected restructuring was really relating to 2023 versus 2022.

Nick Coulter

Yes.

Matthieu Malige

So again, we had exceptional cash-outs successful 2022, which included this EUR110 cardinal taxation successful Brazil point. So that's perfectly an exceptional point. Now, connected much regular restructuring, nan constituent is we've made ineligible announcements successful 2022 connected caller restructurings. So we person a cash-out successful 2022 for restructuring, which were announced successful 2020 and 2021. We ever person a lag effect betwixt nan announcement and nan complaint successful nan P&L versus nan cash-out, which comes later. So arsenic we did not denote immoderate important restructuring successful 2022, I deliberation it's adjacent to presume that nan restructuring cash-outs will beryllium little successful 2023 than they were successful 2022.

Nick Coulter

No, it's helpful. But I guess, my constituent is, if you're continuing to tie retired efficiencies, why should you proceed to incur enabling costs to tie retired those efficiencies?

Matthieu Malige

Well, a number of nan efficiencies that we are implementing turn done immoderate restructurings. And so, consequently, successful immoderate countries, it whitethorn spell done immoderate societal plans and general restructuring plans concerning immoderate number of people. And so, this is erstwhile we person to incur immoderate of nan non-recurring expenses and cash-outs.

Alexandre Bompard

On your 2nd question, you're right, and it's an perfectly cardinal question, is really we accommodate our strategy successful nan inflationary environment. The condemnation we person is that we person an incredibly, I would say, precise, granular, fine-tuned approach. It is simply a regular ground approach. We person a very differentiated attack pinch a circumstantial attraction connected products and categories that are nan astir delicate for our customers. We reenforce successful imperishable nan rates of our Carrefour branded products. We proceed to put successful nan caller products, because we cognize our -- really our customers are delicate to this product. We create caller loyalty campaigns successful France. We proceed to reenforce our system of promotion.

So each successful all, nan condemnation we person is that nan teams are doing, peculiarly successful France, a singular occupation connected this imperishable adjustment of these commercialized policies, and location is simply a clear sign. We gained marketplace stock successful a continuous way, moreover much volumes than successful value, and it's really nan motion that we are tin successful this complex, caller situation to adapt, to monitor, to fine-tune our promotional policy.

Nick Coulter

Thank you. Long whitethorn it continue.

Alexandre Bompard

Thank you.

Unidentified Company Representative

Ladies and gentlemen, convey you. Before we wrap it up, conscionable to -- a speedy connection to say. We are, obviously, sorry for nan inconvenience for nan fewer first minutes of this call. And fto you cognize that a replay beryllium disposable very soon connected nan aforesaid nexus that you utilized for those of you who are connected nan webcast, and it will beryllium disposable connected our website early tomorrow morning. Thank you.

Alexandre Bompard

Thank you.

Operator

That does reason today's conference. Thank you each for your participation. You whitethorn now disconnect.

Editor: Naga



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