Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- InRetail Peru Corp (LIM:INRETC1, Financial) reported a 6.8% increase in adjusted EBITDA despite a minor revenue decline of 0.6%.
- The Shopping Malls segment showed solid performance with revenues and adjusted EBITDA growth of 4.8% and 8.4%, respectively.
- The Food Retail segment experienced a 1.1% increase in revenues and a 1.6% rise in adjusted EBITDA, driven by the hard discount format and recovery in non-food categories.
- The company continues to make significant ESG progress, being recognized as the leading sustainable company in Peru and achieving various sustainability milestones.
- InRetail Peru Corp (LIM:INRETC1) maintains a healthy consolidated leverage ratio and expects to keep it stable by year-end 2024.
Negative Points
- The Pharma segment faced a challenging quarter with a 3.3% decline in revenues, attributed to a contraction in demand and calendar effects.
- Net income declined by 18.8% due to a negative net FX loss, compared to an FX gain in the same period last year.
- The general slowdown in consumption and the absence of Holy Week negatively impacted demand across segments.
- The Food Retail segment experienced a negative same-store sales growth of -1.8%, influenced by low inflation and consumer budget constraints.
- Short-term debt increased significantly, primarily due to the reclassification of long-term debt, necessitating refinancing efforts.
Q & A Highlights
Q: On the pharma business, we saw an acceleration of store openings. Is this pace sustainable for the coming years? Are you also expanding outside of Lima?
A: (Marcelo Ramos Rizo Patron, CFO) The acceleration is due to a pipeline of openings from last year. We expect to close this year with around 100 gross openings, mainly catching up from last year. Going forward, we anticipate opening 50 to 70 stores per year. The expansion is nationwide, with a slight skew towards provinces.
Q: Regarding your comment on July, can you elaborate on the growth trends for food retail and pharma?
A: (Marcelo Ramos Rizo Patron, CFO) June showed positive same-store sales for food retail and malls, with pharma being flat. In July, all segments, including pharma, showed positive same-store sales, driven by the winter season and increased disposable income.
Q: On the Pharma division's gross margin performance, should we expect this improvement to continue?
A: (Marcelo Ramos Rizo Patron, CFO) The improvement is due to a shift in sales mix towards higher-margin products and private labels. This trend is expected to continue as consumers prioritize economical alternatives. However, we do not anticipate significant quarter-over-quarter margin improvements.
Q: Are you maintaining the guidance provided in the last call for each segment?
A: (Marcelo Ramos Rizo Patron, CFO) Yes, we expect mid-single-digit growth in food retail and shopping malls, and slight growth in pharma for the full year. Consolidated growth in revenues and EBITDA should align with previous guidance.
Q: Regarding the increase in short-term debt, are you planning a liability management exercise?
A: (Vanessa Danino Roca, Investor Relations Officer) The increase is due to the reclassification of long-term debt maturing in 2025. We are in the process of refinancing this debt, and we have significant availability of short-term lines with banks to manage this.
Q: Do you expect to issue a new bond to replace the maturing debt?
A: (Marcelo Ramos Rizo Patron, CFO) Issuing a new bond is one of the alternatives, but current discussions with local financial institutions are more tangible. We expect to complete the refinancing in the next few weeks.
Q: What caused the increase in food retail store openings in Q2 2024? Will you exceed the guidance of 300 stores by year-end?
A: (Marcelo Ramos Rizo Patron, CFO) The increase is due to a pipeline of locations from last year. We now expect to exceed the original guidance and open more than 300 stores by year-end.
Q: Can you provide more details on the performance of the Shopping Malls segment?
A: (Marcelo Ramos Rizo Patron, CFO) The segment saw a 4.8% revenue growth, driven by GLA expansion, increased contractual rents, and improved occupancy levels. Gross margin improved to 66%, and adjusted EBITDA reached PEN121 million with a net rental margin of 83.3%.
Q: How did the Food Retail segment perform in Q2 2024?
A: (Marcelo Ramos Rizo Patron, CFO) Revenues increased by 1.1%, with a negative same-store sales growth of -1.8%. The segment saw a recovery in non-food categories and stable gross margins despite higher participation of hard discount formats. Adjusted EBITDA grew by 1.6%.
Q: What are the key factors affecting the Pharma segment's performance?
A: (Marcelo Ramos Rizo Patron, CFO) The segment posted a 3.3% revenue decline due to a general contraction in consumption and a high comparison basis from Q2 2023. However, gross margin improved to 32.3% due to a shift towards higher-margin products and better inventory management.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
