Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sonae SGPS SA (STU:YSON, Financial) reported a total turnover growth of 11% year-on-year to EUR4.3 billion, driven by strong performance in key segments.
- The company successfully completed significant acquisitions, including the integration of Mostkey and the acquisition of a majority stake in BCX Life Sciences, enhancing its portfolio.
- MC's underlying EBITDA margin improved by 10 basis points year-on-year to 9.3%, reflecting solid operational performance and efficiency gains.
- Worten achieved a 6.5% growth in total turnover, with a notable 14% increase in online sales year-on-year.
- Sierra's shopping center portfolio showed strong performance with tenant sales increasing by 5%, high occupancy rates above 98%, and footfall surpassing pre-pandemic levels.
Negative Points
- The company experienced a slight decrease in NAV this quarter due to lower market multiples in the ambient food retail sector.
- Worten's profitability was pressured in Q2, with underlying EBITDA remaining flat at EUR25 million and a 4.1% margin.
- Mostkey faced a challenging market context with a slowdown in demand, particularly in Finland, impacting its performance.
- Increased financing costs and higher taxes partially offset the positive operational performance, affecting the net result.
- The holding LTV reached 16%, slightly surpassing the desired cap of 15%, indicating a temporary increase in leverage.
Q & A Highlights
Q: Can you give us some color on the main drivers behind the recent slowdown in demand for Mosty? Also, do you expect pressures on gross margin to stay in the second half?
A: The slowdown in demand is due to a global slowdown in the pet care retail sector, which we believe is temporary. Specifically, Finland is facing a tougher macro context due to the impact of the war in Ukraine and the cessation of commercial relations with Russia. We expect the market to rebound by 2025. Regarding gross margin, the company has been more aggressive in pricing and promotional activities due to the slowdown in private consumption. However, we are seeing positive signs of recovery in July and expect normalization by the end of the year. (Joao Pedro Magalhaes da Silva Torres Dolores, CFO)
Q: Can you give us some color on gross margin evolution in the second quarter and how the competitive environment is evolving, especially in what relates to promotional activity?
A: The level of promotions has been relatively stable in the first half of 2024. We continue to see a very competitive market with a strong focus on price leadership. The penetration of private labels has stabilized, and gross margin has remained broadly stable in percentage terms compared to the first half of 2023. (Fernando Guedes De Oliveira, CEO)
Q: When the company decided to buy Mosty, was the slowdown in demand expected?
A: We were expecting a slowdown in 2024, but not to the extent we have seen in the last quarter. Despite this, we believe the investment case remains solid, and the company is well-positioned to rebound in terms of profitability in the next few quarters. (Joao Pedro Magalhaes da Silva Torres Dolores, CFO)
Q: Is there any plan to reorganize the portfolio given the recent acquisitions?
A: We do not have any short-term plans to reorganize the portfolio. We believe we have a good structure in place with strong management teams and good governance. Our focus is on driving growth and value creation in each asset. (Joao Pedro Magalhaes da Silva Torres Dolores, CFO)
Q: Can you explain the volatility in Worten's profitability and the impact of the EuroCup on sales?
A: The second quarter saw lower profitability due to mild weather impacting seasonal sales, a small Easter effect, and a decrease in the independent market due to lower PS5 sales. The EuroCup had a positive impact on TV sales, but it was not enough to offset other factors. We also faced growth costs from international expansion and new store openings. We expect profitability to normalize in the following quarters. (Fernando Guedes De Oliveira, CEO)
Q: How do you plan to increase visibility on the recent investments in retail companies?
A: We will report separately on the health and wellness and beauty division from the Food Retail division. We also plan to provide more detailed information on Spark Foods going forward. (Joao Pedro Magalhaes da Silva Torres Dolores, CFO)
Q: Why is there no executive member from Sonae Sierra on Mosty's board?
A: The acquisition was done in partnership with three individuals from Mosty's management team, who are well-incentivized to generate value. We have regular interactions with the management team to discuss strategy and key decisions, and we have established synergies between Mosty and our retail businesses. (Joao Pedro Magalhaes da Silva Torres Dolores, CFO)
Q: Can you provide more color on the volume growth in the Portuguese food market?
A: We have seen a positive evolution in volumes, with around 3% growth in the first half of 2024. This growth is partly due to lower food inflation compared to last year, which had a negative impact on volumes. We do not expect the same level of growth in the second half. (Fernando Guedes De Oliveira, CEO)
Q: How is the pet food category performing in your stores, and is it affecting Mosty's performance?
A: The pet food category is performing well in our stores, with strong volume growth. However, the dynamics in the Portuguese market are different from the Scandinavian market. We believe the underlying trends in the pet care sector are positive for specialty retail, and we expect the market to rebound. (Joao Pedro Magalhaes da Silva Torres Dolores, CFO; Fernando Guedes De Oliveira, CEO)
Q: What is your estimate of the grocery market share in Portugal for MC?
A: Our best estimate for the grocery market share of MC in Portugal is around 27%. We have seen a positive market share evolution in the first half of the year, reinforcing the strength of our value proposition and strategy. (Fernando Guedes De Oliveira, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
