This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear.

The machine-assisted output provided is partly edited and is designed as a guide.:

00:23 Good morning, ladies and gentlemen, and thank you for joining this call. Before, I invite you to go through the Jeronimo Martins 2021 full-year results, I will give the floor to our Chairman and CEO, Mr.

Pedro Soares. Mr.

Pedro Soares the floor is yours.

00:41 Good morning, ladies and gentlemen, we are here today to talk about Jeronimo Martins 2021 performance, and I cannot avoid feeling that in the life of the current war situation in Europe last year seems already too . The invasion of Ukrainian took place exactly two-weeks ago and it is still too early to foresee the full expansion of its impact and consequence.

01:13 Nevertheless, it is a fact that uncertainty is at a record high level. And we are witnessing a confluence of factors in Poland that is totally unknown to us in the 25-years, we have been operating in the country.

War in the neighbor country, over 1.2 million Ukrainian refugees’. The continuous raising pressure of inflation, particularly in basis and commodities and declining disposal income.

We do not have sufficient visibility on what tomorrow will bring, but one thing I’m sure our long-term commitment to Poland and the Polish is unquestionable. We will also keep contributing to the Polish admirable collective effort to support Ukraine and Ukrainians.

02:18 We will do it without hesitating standing by the Polish family in these difficult times. Even if this can be satisfying, our profitability track record.

As the Chairman of the Jeronimo Martins Group and also as a shareholder and member of the controlling family, I believe that is the right thing for us to do. After a decade of the extraordinary growth and value creation, this crisis finds Jeronimo Martins in a position of strength.

02:57 Since the beginning of 2021, as the Group we have opened nearly 3,000 stores, have more than EUR13.5 billion to consolidated sales, create around 70,000 new jobs more than double the net earnings. And we are able to do it, while investing EUR6.5 billion in our business, including starting Colombian operations from scratch and reducing net debt by around EUR1.6 billion.

In 2021 alone despite still a year impact by the pandemic context, we had EUR1.5 billion to total sales and all the times high performance. 03:52 Ana Luisa will now take you through the full-year results.

But before leaving, I ask you to bear this in mind. In highly uncertain times, the best investment for a long-term oriented company as we are is always in protecting the fundamental of the business.

In our case, we have no doubt that to protect position of our most value business, Biedronka. We need to allow further the necessary conditions to assure and disputable prices in the context of mounting inflation and extra social and economic challenging.

We are fighters. We have financial flexibility and we are determined not to fail Poland and the Polish.

04:47 Thank you for your attention, Ana Luisa the floor is yours.

04:52 Thank you, Chairman. As a reminder in our corporate website as usual, a set of materials is available, including the release, a slide presentation and immediate presentation adding a bit of color on our activities in the period.

The commitments to provide consumers with quality at low prices, together with the flexibility of our teams to quickly adapt to changes and overcome challenges with decisive drivers of our 2021 performance. 05:24 As numbers show, all banners registered excellent sales performance and profitability improvements, well beyond the effect on the one hand of favorable basis comparison in same periods of the year and on the other hand, of an increase in basket inflation that nevertheless stood always below food inflation in the respective countries.

05:47 As a result, Group sales grew 8.3% or 10.7% at constant exchange rate with a remarkable 8% like-for-like. This strong sales increase combined with positive margin mix effects and efficiency gains across businesses, allowed Biedronka to limit the material impact of the sales retail tax introduced in January 2021, Pingo Doce and Recheio to improve margins benefiting from enhanced operational leverage.

In Ara to post an outstanding evolution of its profitability, delivering for the first time positive EBITDA under IFRS-16 for the year. All in all, Group EBITDA grew 11.4% or 14.1% excluding foreign exchange effects and the respective margin increased from 7.4% in 2020 to 7.6% in 2021.

06:48 The impressive operational performance resulted in strong cash generation and the Group closed the year with a net cash position of EUR1 billion, excluding capitalized leases. The Group pre-tax ROIC evolved from 16.5% in 2020 to 21.5% in 2021 reflecting the improvement in capital turnover and EBIT margin in all business areas.

07:17 While managing day-to-day pressures, all our companies also reinforce their environmental and social performance to accomplish our corporate responsibility targets, remaining true to our purpose and long-term vision. In this Slide, we shall reduce some developments of the utmost importance to us covering all our pillars in this matter.

07:42 Jeronimo Martins inclusion for the first time in CDP, the Carbon Disclosure Project A List of the world's best performing companies with the maximum scores as A in both its climate change and water security programs. Also, the fact that Jeronimo Martins is for the 3rd consecutive year, the only food retailer in the world with A minus for palm oil, soy and beef highlights the external recognition of our efforts in filing the first session.

08:14 Finally, allow me to remind you that the support given to communities, both financial an in-kind donations to institutions was again central in our corporate responsibility actions as the effects of the pandemic are still affecting many families. This assistance is currently being reinforced in Poland to support the countries efforts to help the Ukrainian people.

08:41 In 2021, all countries where we operate registered economic growth over a very difficult 2020. Poland as expected was again the country with the most robust economic performance.

Portugal was the market facing more restrictions during the year, which together with still weak touristic activity impacted mainly HoReCa channels. In Columbia, the limitations related to COVID-19 were sporadic.

Nonetheless, economic recovery was still hampered by the effects of the previous year's strict and long welcome. 09:22 Food inflation increased progressively throughout the year in the three countries mainly driven by the rising prices of raw materials and commodities.

In Portugal, despite the rising trends throughout the year, food inflation was quite low, while in Poland and particularly in Colombia, it increased substantially after Q3. In this last country, inflation was also driven by the disruption of national supply chain after social protests registered in May and June 2021.

09:56 Our Q4 set of numbers confirmed the effectiveness of sales driven strategy with the top line reaching EUR5.6 billion, a growth of 11.5% or plus 13.7% as constant exchange rates. Gross profit margins that declined from 21.8% to 21.2% reflected the pressure from the retail tax in Poland and the commitments to price competitiveness of our three major businesses: Biedronka, Pingo Doce and Ara.

10:32 Nevertheless sales growth and the improved efficiency of the operations enabled for a lower waste of costs over sales from 14.1% to 13.5%. All in all, EBITDA grew 12% or 14.6%, excluding currency devaluation.

The other profit and losses headwind included a special and well deserved recognition to our teams at the stores and distribution centers in the amount of EUR19 million. The strength of the performance was consistent throughout the year, and it is reflected in the 12-months P&L down to the net profit attributable that was at EUR463 million, 48.3% ahead of 2020.

11:29 Also contributing to the bottom line growth is of course, the improvement in net financial costs. This headwind was minus EUR164 million having decreased, compared to the minus EUR180 million recorded in 2020.

This cost in 2020 included the foreign exchange loss on capitalized leases of minus EUR21 million, than in 2021 was reduced to minus EUR3 million. 11:59 Cash flow in the year reached EUR723 million, driven by stronger EBITDA and solid working capital inflows.

Working capital also benefited from the relevant numbers of stores opened by year-end, impacting stocks, but mainly increasing supplier’s accounts payable as inventories and also fixed assets. The excellent performance resulted in strong cash generation, which boosted our year-end net cash position to reach EUR1 billion, excluding capitalized operating leases.

12:35 Taking into consideration the strength of the balance sheet, the consolidated net earnings for 2021 and the financial stability to keep business momentum, the Board of Directors will propose to the AGM, a dividend payment of EUR493.3 million. This represents an exceptional payout of 100% consolidated net earnings, excluding the effects of IFRS-16, the double of the amount that would result from the Company's dividend policy.

13:09 Diving now into the operating performance. I will start with sales.

Sales need 10.7% at constant exchange rates with a like-for-like of 8%. This performance reflects the quality and effectiveness of all value propositions.

In an overall volume driven performance, Q4 like-for-like included a bit more inflation in all baskets in the three countries. Although Biedronka was the main contributor to the world’s registered, it is worth noting that Ara gained prominence in our Group's growth pace and Pingo Doce exceeded the EUR4 billion sales milestones.

13:51 Biedronka delivered strongly on the basis of price leadership, quality of promotions, innovative assortments and enhanced shopping experience, driving sales to grow by 11% losses and 8% in euros to reach EUR14.5 billion. The expansion of the store network with a net addition of 135 stores and the remarkable like-for-like of 8.3% contributed to top line growth.

14:22 Price competitiveness played a central role in the strategy and positive inflation although having increased in Q4 to circa 3.9%, remained below 1% for the year. As such, the banner further strengthen its market position by 1.6 percentage points to 27.3% market share.

Hebe sales recovered strongly, having increased by 16.7% in local currency, 13.5% in euros, excluding the pharma business, which was discontinued in July 2020, top line was up by 23.8% and like-for-like was at 17.5%, also including online sales. Online sales did well in double versus prior year, representing 13% of the banners’ total sales in 2021.

15:23 Pingo Doce sales surpassed the EUR4 billion mark, 4.6% up on 2020. The banner imprinted an intense commercial dynamics throughout the year having operated with negative basket inflation.

HoReCa recovered significantly over the weak base of 2020 performance, despite still being impacted by restrictions that affected restaurants until July and a poor terrific activity. 15:53 Moving on to Columbia now.

Ara did extremely well and ended the year with a reinforced price perception and adjusted offers and stronger presence in the market. Sales in local currency grew 36.1%, in euro terms sales increased by 29%, passing the EUR1 billion milestone.

Together, with the solid like-for-like growth, new stores contribution to top line growth was also an important driver of the performance. 16:26 The investment program plays an important role in the Group strategy.

Expansion and remodeling programs are sent through to this program and relevant contributors to growth. The highlights as the year was added execution of 157 store openings, instead of the 100 initially planned.

Our Colombian company is also prepared to accelerate the pace going forward. Biedronka opened a significant number of stores, including standard and smaller formats, a mix that is allowing the banner to take opportunities in less sizable markets in a profitable way.

17:06 In total, the CapEx program reached EUR690 million. Group EBITDA reached EUR1.6 billion, 11.4%, up on 2020, a 14.1% increase at constant exchange rates.

The EBITDA include EUR70 million of identified direct costs related to COVID-19 versus EUR41 million in 2020. Ara delivered a major shift at EBITDA level, reaching positive grounds at EUR26 million in 2021.

17:43 EBITDA margin for the Group increased from 7.4% to 7.6%. Biedronka proved to be able to remarkably limit the impact of the sales retail tax through competent margin mix management, and effective programs that adds to relevant initiatives driving sales growth.

Ara also has a healthy and important contribution to the Group’s EBITDA progression and Pingo Doce also improved margin, despite intense price and promotional strategy implemented throughout the year. 18:17 We were again able to do well in challenging times.

Our reinforced commitment to quality at low prices paid off, resulting in market share gains in all markets. Ara strengthened its price position and also its part perception among Colombian families.

This strategic approach has delivered and will continue to deliver, as Ara accelerates its expansion rhythm. We also kept progressing on our ESG target and took an important step by submitting to the science-based target initiatives, our commitment to define by the end of 2023 and emissions reduction targets aligned with climate science.

19:00 In 2021, the flexibility of our teams to adapt to very dynamic circumstances without moving sites of the priority was remarkable. And we will continue to be a key strength in light, as a very concerning recent events.

Two months after the beginning of the year, the context has changed tremendously and is today more unpredictable than ever. All this on top of the consequences brought by the COVID-19 pandemic from which economies have not yet fully recovered.

19:35 As already referred, it is still too early to understand the full consequences of the conflict in Ukraine. Poland and Ukraine are enabling countries and Poland is at the forefront helping refugees that cross across its borders.

As a company, we have been supporting the efforts to help the Ukrainian people namely with the nation's institutions working on the ground and through direct supports to our Ukrainian staffs and to the populations on the border where we have stores. 20:07 In the current context, we also notice further pressure from rising foods and cost inflation.

Despite still expecting economic growth in the three countries where we operate, we acknowledge that the family’s disposable incomes will continue to be affected. The Group keeps strong competitive positions in all its markets and we have trusted brands and some financial situation that will help us to navigate the much stronger waters that may lay ahead.

20:38 Our long-term strategic vision remains unchanged, we will adapt its execution to the existing circumstances, always trying to speak to our key strategic objectives. In 2022, we’re mounting food inflation, which will be amplified by the current military conflict in Ukraine, maintaining price competitiveness and providing saving opportunities to consumers, will be even more critical in all our company's agendas and our number one priority.

21:10 In Poland, Biedronka’s key priority is to stand by the Polish consumers and live up to the banners claim in a moment of decrease in this disposable income. As such and despite being sufficient visibility at this moment over the full impacts of the recent events in Ukraine, particularly on the extension of cost inflation, Biedronka is prepared to further invest in prices to maintain competitiveness, which will increase pressure on margins.

At this point in time, Biedronka expects to be able to deliver its expansion plan for the year and open 130 stores and a new distribution center, as well as to remodel 350 locations in 2022. That being said the current situation remains for an even closer monitoring and even higher adoptability.

We will be continuously reassessing needs and priorities; making sure our number one goal in Poland is met. Partnering with our suppliers to overcome likely constraints in the food chain and work hard to keep being the Poles’ favorite food store, while supporting the Polish efforts to help Ukrainians.

22:20 In what concerns Hebe, the company has to-date two growth drivers, it’s store network and e-commerce platform. In 2022, growth will be pursued both by working to our 30 stores in the Polish territory and by continuing to increase the reach, quality and service levels as the online operation.

In Portugal, the recovery spirit will play a key role in the growth of the market. Pingo Doce will continue to put price and promotions at the center of its strategy, while leveraging on the well recognized differentiations has in the areas of fresh and ready-to-eat.

The expansion program is expected to have 10 new stores to the network and 30 remodelings are also planned for the year. 23:05 Recheio is well positioned to continue benefiting from the likely or active recovery.

In 2022, the banner expects to open a new store in an area of extreme relevant for this channel. Ara started 2022 from a division of strength, good sales momentum, strong price perception and an assertive offer.

For 2022, the plan is to reinforce all three of these dimensions. Again, price will be key to keep building relevance in the market.

Adding to the strengthening at its value proposition, Ara will also extend its footprints, aiming to close the year with more than 1,000 stores. 23:48 The investment program also includes the development of logistic projects to be concluded next year.

The good sales momentum and growing scale are expected to continue to drive profitability improvements, despite the necessary price investments. In 2020, we set our three-year targets for our corporate responsibility pillars.

We advanced well in 2021, and we intend to continue to take the right steps to deliver on each one of them, while always keeping an open dialogue with stakeholders that allow us to keep track of evolving circumstances and reinforce action if needed. 24:30 We have done it through our social response to the pandemic, and we will do it again in the context of a war unit.

Aware of the demanding challenges for 2022, we have confidence in our capacity to continue to deliver, we have strong teams that came through the last two years stronger, more resilient and audacious in the way they quest day-to-day solutions to advance the continuous changes in the context. We have strong business models that are value-oriented and with clear strategic priorities.

And finally, we have a strong balance sheet to support our execution. 25:09 I confirm that the capital allocation priorities remain unchanged.

At this point in time, we intend to proceed with our design investment plan estimated EUR850 million to grow and improve our stores and also to improve and grow our logistics capacity. We are prepared to pay the EUR493 million of dividends that will be proposed to the AGM.

Please remember, this is an extraordinary payout on the basis of the strength of the balance sheet and of our cash flow generation capabilities. 25:42 Despite being advisable to put on hold any ambition of extension outside our current portfolio, we do retain the financial flexibility to do so should the right opportunity comes.

We will protect the fundamentals of our businesses in our market position, and we will be focused on assuring our banners, the necessary conditions to keep performing even in extremely circumstances. 26:09 Thank you for your attention.

Operator, I now ready to take questions.

26:29 Hi. Morning.

Well, firstly, heads off, I think very impressive set of priorities. How should we think about profit in the coming year.

I know it’s incredibly difficult question to answer? Clearly, a lot of inflation, a lot of top line, but should we -- maybe be thinking about an absolute level of profits, so your EUR1 million amount?

26:49 And the second question, when we're looking across the portfolio, lots of brands with a very discount focus Ara for instance. The clear intention in Biedronka is very clear, but the intention I think within Ara, for instance, presumably, we would see significant pressure on a consumer there as well.

So should we expect other pockets of margin investment? Thank you very much.

27:18 Thank you. Thank you, Andrew, and thank you for your kind words.

And I really think that the teams are to be congratulated on the excellent performance. So, the way that we see it of course is that we’re more particularly in Biedronka, we have of course, very difficult circumstances as the Chairman said, there is a confluence of factors that are seeing that may of course and force us to be a little bit more prudent than usual.

27:53 But this thing said that doesn’t mean that, as we said, Columbia is not also under pressure, because we mentioned there. We think that disposable income, the families will be affected in all our geographies.

And then -- and probably you are aware that in Colombia, we are now having double-digit inflation in food, which of course puts a lot of pressure on the families. This thing says -- this is why it is paramount to continue to provide opportunities to the consumers and to speak with them.

And I think that Ara is really now being recognized or in the market doing these efforts. And this was already foreseen, so the investment in prices also in Ara was accounted and planned for.

28:42 What was not planned for was a war at the borders of Poland, of course, and this is why we see and we know that this -- there is this extra pressure in the coming months. And basically, we are asking to have the full flexibility to further invest in prices, because we are seeing a margin inflation also in these countries.

So, food inflation is launching double-digit and the foreseen of inflation also overall in double-digit, and this is something that we want, of course, to tackle. And to tackle this we have of course to invest in prices to really contain this pressure and to provide the opportunities for the consumer.

29:31 This being said, we don't guide of course for a fixed number of profits we want of course the profits and we will refrain any pressure on the cash, which is for us king in this matter. So we always said there's more than margins what will be important for us?

What is the cash that was provided to really continue to invest and to really continue to be relevant to all our stakeholders. Being it the shareholders, our suppliers, our partners, the community that serve, our employees and our consumers.

And that is why, of course, we want of course to remain relevant, and this is paramount, and we think it will coincide at the top line, as we said continue to be in Portugal, in Colombia and particularly in Poland, where we have our main business, the most relevant store for the consumers.

30:35 Okay, it’s all very clear. Was clear as you can be, and just thinking about in the last couple of weeks, and also after this call, we've got to go back and think about our models, any sense of where trading has been in Poland?

I mean a lot of thing is going on, but maybe be just over the last couple of weeks or just over Q1 as a whole?

30:55 Okay, Andrew. Our business hasn't been affected in the last couple of weeks.

We even are seeing some increases in sales coming particularly from -- in the categories that lead us to think that this comes from the donations to the Ukrainian people. And this is not just in Poland, it’s also in Portugal, so we are seeing increases in some of the sales in some category, particularly in personalized chain food, et cetera that -- we think that this part of this growth is really to support the 1.2 million people that's already crossed the border to Poland and are coming now or being spread throughout Europe.

31:42 So this is basically the current trading and so not being really affected. What we see is really for the future all this pressure that was already -- we already foreseen -- have foreseen the pressure of inflation, we don't hide that energy, fuel, all these was already accounted for in our plans.

What we are seeing now is with the war an amplification of this inflation and this of course, the way that we see it is for the future, we think that -- we believe that on our gross margin we’ll have to invest more and of course, still to comply with all our obligations.

32:31 Okay, great. Thank you very much and hats off again to (ph).

Thank you.

32:37 Thank you, Andrew.

32:46 Yes. Thank you for taking my question.

Just on the back of what Andrew was mentioning, so for Biedronka, so you're talking about investing potentially more in prices, but I just want to understand whether it's also driven by the competitive landscape? Are you seeing actually the competition being reluctant pass on all the inflation to the consumers?

Or as you said, you just want to keep the flexibility, but so far nothing has really moved, so just to understand a bit that on the competitive landscape? 33:16 The second one you're talking about what you've got a significant increase of CapEx coming in, in 2022.

Obviously explained by the number of openings you're going to do on the logistics, but are you also seeing a higher cost overall when you've especially opening a new stores or refurbishing a new store? So is there also some cost inflation component in your CapEx guidance?

33:44 And just the last thing, can you potentially comment a bit of what would be the moving part in 2022 for your EBITDA to COVID costs? And potentially if you can quantify the kind of cost savings or efficiency plan you are going to develop this year?

34:05 Thank you, Xavier. So on the competition landscape in Poland, so we are not seeing a lot of investment for all players, because otherwise, we wouldn't see this mounting food inflation in the last months.

And even from December, the number for January was already quite high and we foresee really that this will increase probably to double-digit in February or almost that. So we are seeing a price increase, so it's not given the landscape, but what we think is that volumes risk to start being affected, so people are proceeding clearly this big increases in prices and it's not just in food, so we see it -- and we see it all in fuel, in energy, in heating and we continuously see even in our commodity.

So the last increases in the prices of cereals has been quite mounting and that will affect, bread, pasta, so things that are basic for the people. So there is the trend clearly for people to start refraining from buying more or starting to buy the less expensive or more basic products and this of course means that the margin mix has to be differently managed.

35:35 I believe that you know what I mean. So in this case, and that's why we’re saying is not really the landscape that forces too, it's really the relevant with the consumer and making sure that we maintain the relevant for the consumer for this to continue buying stores and continue to feel that the price is not that big on the food price.

36:02 On the CapEx. So yes, the growth in CapEx comes mainly from the increase in the number of openings and the logistic investments that we are doing in particularly in Colombia and also in Poland, and we still also have a slight increase in Portugal, we’re assuming that we will refurbish more stores.

But there is also a cost inflation here we don't hide, so there is an increase in the cost of some of the equipment and some of the materials that we are already accounting for, because we were seeing that already happening. And although we didn't see a major increase coming from the -- now with the war we saw as much more the pressure on the fuel and on the cereals as I said considering the geo situation of Ukraine and Russia.

But for the moment, we are also incorporating that already on the CapEx guidance, so the inflation on the material and on the equipment. 37:15 For 2022, so I think that really, Xavier, I think that the cost with COVID tend to already be assimilated by our stores.

So they've learned to operate under the COVID constraints, because we know that each time there is a new wave, we even have pressure on our working force, because they have to be confined et cetera. But these are costs that we have already incorporated and I don't think that the pressure -- that any pressure will come from that at least at this point.

The pressure came already from the fact that the COVID-19 left the economies where we operate and particularly they are more fragile ones, Colombia and Portugal in a situation. So the family situation was already tough.

And now we are adding the situation in Poland also, because of all the circumstances as I said. 38:19 On the cost saving, of course, this is already also in our DNA.

So we will do all possible to introduce all the efficiency programs that we have and that we are doing not only in Poland, but also in Portugal and in Colombia to really mitigate as much as possible the cost that we foresee at the cost savings, that include all heavy effects. So we have already increased salaries in our companies and we don't exclude having to do any other increase if we feel that we should do it.

And we also have all the other headings, so the energy as we said, all the other cleaning, safety, et cetera comes with the increase also in the wages and this will of course put pressure, but we will try as much as possible to mitigate that with our efficiency initiatives at the stores and logistic platform.

39:31 Okay. Thank you.

39:33 Thank you, Xavier.

39:44 Yes, hi good morning, so I have one question on OpEx inflation in Poland. So apart from wages, in which we have already some detail what will be the increases for this year?

What is the inflation expected for the main cost lines in 2022? And related with this, if you have any energy hedging for this year?

40:10 Secondly, on the margin outlook in Poland, and I think that's in the initial comments, you mentioned that the company could sacrifice margins. Just want to confirm if this is a possibility or something that the company believes will happen in 2022?

Thank you.

40:30 Hi, good morning, Jose. So on the cost inflation, as I said in the salaries, we've already flagged them, and you mentioned we don't -- as I said, we don't exclude to have to do any more adjustments.

But on the other hand, and particularly in energy, although knowing that it's not the main cost heading. And I can tell you that currently in the way and the most, let's say, unpredictable heading is really the cost of goods sold.

And this is why we say that we have to reinvest in prices. So we are seeing a major inflation in the -- in our purchases of the merchandise for the stores.

41:20 And on energy, it's not the major heading, but we are assuming a big increase of more than double-digit for our businesses particularly in Poland. So currently, we are working with that and negotiating that, but we don't have the positions fully hedged.

We haven’t hedged in Portugal, but only until July. After that, we haven't also fully hedged.

So there is pressure also from the energy and fuel particularly, because then you don’t have just a question of the energy at the level of the electricity et cetera, you also have the impacts of the fuel and on the transportation part, which is quite significant as you can imagine in all our businesses. 42:14 As to margin, so it's -- the question is when we say that this will put pressure, we see it and we flagged it, because of all the movements that we are seeing particularly at the level of the cost of goods sold.

And this means that we want really to contain and this may imply having to absorb part of these inflation that comes from our suppliers, but also being pressured all over by, of course, the fuel, the raw material, the scarcity. So we were counting on several of these factors already in our plan, but what we are feeling is that this is increasing this pressure.

And that's why we are flagging that we may have to invest more than we expected in our first estimates that as I said have already accounted for cost inflation, due to scarcity, due to the salaries increases and due to other inflation at cost level. 43:23 What we feel is now we did so much pressure on the cost of goods sold and we think that part of this may have to be absorbed by that.

This being said, if we manage, if the consumer react, if we have the right volumes and we don't exclude having a -- or stick to a stable margin, but what we foresee now is that there is the risk of not being able to keep that promise, okay?

43:56 Okay, understood. Just a final question on Ara, in terms of expansion for the new 100 or more than 180 new stores per year, is this something that could even further increase in the future?

Are you still in three regions and if yes, when is expected to enter in new regions in Columbia?

44:24 So Jose, yes, so the idea really is to take the opportunity while and I think that it was really for us -- it was critical and very important to prove that the formats work. I think that we mentioned it several times that we wanted to make sure that we could make money in Colombia.

And I think that currently with the current sales density that we are seeing in the stores even with the current situation of the consumer, and we think that we should take the opportunity to spread and to increase the footprint in Colombia. And what we are assuming is that as there are many current stores or players that we could use as an M&A opportunity, we will continue to open stores and you think that’s possible to accelerate this.

45:30 And we are already spreading, so in the surrounding of our logistics and taking advantage of logistic capabilities, we are entering other regions. So, we are approaching other cities, Cali, Medellin, although not with too many stores.

Then we will have of course to -- and that's why we are investing in also the logistics network. But we are entering other regions that besides the Bolivian, the Bogota and the coffee growing area.

46:03 Okay, understood. Thank you very much.

46:06 Thank you.

46:15 Hi, good morning, thanks very much for taking the question, and just to echo earlier sentiments, I'm sure one really appreciates all the efforts you're going through out there in Poland. And just three from me, and first one, just to kind of maybe try and help us understand numerically little bit more how you're thinking about things?

I think in Poland last year, you had about 15 basis points of EBITDA margin pressure, despite absorbing a sizable retail tax increase and holding that some that back from the consumer I guess? 46:50 And should we be is that the type of margin pressure you're thinking is possible this year that sort of 15 basis points?

Or is it potentially a lot more than that? I think biggest margin decline year-over-year I've seen is 100 basis points historically.

Just some idea to how you're thinking about the range of outcomes there? 47:07 And then secondly linked to that, I guess is the base case still that you mentioned cash is king EBITDA here?

Given the top line is probably still pretty resilient. Is the base case still that you can grow EBITDA in Poland this year?

And then thirdly, just on Ara, and clearly as you mentioned trajectory is good and you referenced improving profitability there. I wonder, if you can help us understand a little bit more how that's likely to improve?

I think you did, sort like, 500 basis points almost last year. If we look at this year, is that sort of a 100, 200, 300 type improvement in the margin there in the sort of base case?

Thank you.

47:51 Thank you, Rob. And thank you for your words also, and particularly to the teams in Poland that are really putting in place a lot of actions to really help and welcome the refugee.

So in Poland, as you can imagine, I cannot give you the total amount that may have to be invested. What we think is that, if we were talking about the 15 basis points were in fact absorbed or compensated, with the dilution of the cost, although without so.

If we take off the IRFS impact, we posted a flat margin without IFRS-16, so this was really we manage and we mentioned that, that we managed through the margin mix and taking advantage of the trade up of the consumers that we're seeing in Poland and increasingly available income. We really manage to craft things in a way where, basically in terms of margin mix, we only invested partially and absorbed a great part of the retail tax and by becoming relevant and with the sales growth, we diluted the costs enough to compensate and to provide a stable margin.

49:25 In this case, what we are seeing is the risk that volumes will be hampered. And there is of course, with the reduction of available income that people will send the way usually that it happens.

So it's not that we are already seeing that very significantly, but what we expect is if people see their disposable income reducing, because of all the confluence and all the costs in their households. Yes, there will be some trade down, and this trade down means that they will buy products that have lower margins and so this -- that this also means that probably on some of the products that are today a little bit more expensive, even if they are not.

So basically we will also start to do some adjustments and absorb parts of the cost of the inflation that is being seen on the cost of goods sold, as I said. 50:27 And so I think that's the company and the base case is of course that we will grow sales.

No doubt about it. As to EBITDA and here I will speak just in zloty, we will still think that it will increase, because sales will increase what we saying that probably margins, may not be exactly the same or may not stable because of that.

But in zloty, the companies relevance is -- and the way that we foresee even in terms of sales is of course to continue to grow. 51:06 On Ara, what I say is and we are sure that we will reach and we will surpass breakeven with IFRS-16, so already improving for the rent payment, which as you know, we are quite significant, because all our stores are rented.

This year, the way that we see it, although there are some strengthen. We see the pressure also on the Columbian consumers.

Again, our company was already expecting this and they are continuing also to invest in prices and absorbing and we are not accelerating our gross margins, mainly to make sure that we cope with the price perception that we build and we were able to confirm last year and to maintain the flow as new consumers that are coming and choosing Ara, because the prices are lower than in any other chain in Colombia. 52:14 And the consumers are feeling that, so with this increase in the number of tickets, it’s not really that we see a big jump in volumes or in the way that people buy.

But they are buying from Ara and this allows us to dilute our costs, and we think that we will be having this year, a profitable EBITDA even considering rent, so excluding IFRS-16.

52:43 Thank you, Ana Luisa, very clear. Just very quick one, I mean, have the lowest priced operator in the markets you operate in?

Would you also expect to see some increase in tickets number of just customers, if there is a trade down, would you expect people to trade into your format as well?

53:02 That's what we will be working for, definitely.

53:07 Okay. Thank you very much.

53:11 Thank you, Rob.

53:19 Hi, good morning, everyone. Just a follow-up on OpEx, OpEx inflation, and sorry to come back to this.

But regarding those OpEx lines that are very difficult to predict, mainly fuel and energy, could you give us some color how relevant they are as a percent of OpEx for sales?

53:39 Hi Joao. So in the case of the fuel, it really depends on the logistic cost.

It's a big part of that. I assume that you are talking about mainly Biedronka.

So the cost -- logistic cost in Biedronka are very efficient when it comes to logistics of course. So I would say that energy probably selling the two, it's probably below two percentage points of sales.

But I will ask Claudia to confirm that.

54:14 Thank you very much.

54:16 Thank you.

54:27 Hello, good morning, I have the question regarding the CapEx. The part of CapEx, I mean, the revampings complement.

Is that you are in -- for many years, you are in the process of remodeling all the Biedronka to the new concept. And we should expect some drop of this CapEx component or its continuing process?

And we should expect maintaining it? And could you tell what amount of CapEx is on the revamp and what is on the growth for the 2020 year.

55:23 So on the revamping component, this is -- for us is paramount to continue to refurbish stores and to improve the shopping experience, particularly in all our businesses, but particularly in Poland as you are referring. So if everything at present, our intention is really to move on, if there aren’t any constraints support of course, caused by the war is to continue with our CapEx program as we mentioned in our release.

And revamping is -- so in Poland will receive more than 50% of our total CapEx, I think it's 55% that we mentioned, and as these more or less 40% is for revamping. 56:16 So this is an important part of our CapEx and as we mentioned is really paramount for growth, because usually, when stores are refurbished, not only we get the growth, because of the better shopping experience and the better exposure of products, the layoff are really prepared even to carry the product in a more efficient way and that's also reflecting more efficiencies.

So for us, it is really important to continue to revamp stores and to refurbish the stores. I don’t know if I --

56:53 Yes, so I shouldn’t expect a drop of this component of CapEx, yes?

57:00 No, no. At this point, I don't expect and even for the next year, if every everything goes according to plan and if there are any other big constraints we keep refurbish stores, yes.

57:15 Okay. Because for example, for the last 10-years, you have revamped more than 2,000 of stores and 10-years ago, you have like 2,500 of Biedronka stores.

So I was wondering whether you are close to the point where all of them are in the format you wish? Or it's the continuing process of improving even of some stores built in for example, two or three years ago?

57:52 Michal, it’s an ongoing process in our business, because after 10-years, you have to refurbish the stores that we refurbished or opened 10-years ago. So it's really an ongoing process, not to decrease the shopping experience for our consumers, so this is something to be taken into consideration.

58:14 Okay. Thank you.

That's clear.

58:17 Thank you, Michal.

58:27 Yes, good morning, Ana Luisa and team, Cedric Lecasble from Stifel. I have a clarification question on the impact of the war.

And remembering in 2014, when there was ban on Russia, it was a different situation, because Crimea is not a Ukraine and Ukraine you mentioned cereals, bread impact that's very obvious. But I remember there had been some deflation on some produce that could not be exported to Russia anymore and I was thinking of apples for instance, that was an example at this.

And you said so we were in a completely different situation with some deflationary pressure on produce. So on terms mitigation factors and maybe offsetting part of the inflation on cereals or things like that?

That would be my first question. 59:20 And my second is pretty straightforward in your managing Polish operations today, is our commitment kind of moral commitment to produce consumers, leading you to go beyond what rational economics would suggest in terms of margin sacrifice, for instance, or action to help the Polish consumers?

Or is it purely the equation is economics-driven only? Thank you.

59:53 Thank you, Cedric. So on the inflation, so it’s a completely, of course, it's a completely different scenario in 2014 and let's say that there was also a confluence, but completely different.

And as you probably recall, because this is important on the decision that we are taking now not just morally, but I think it's a mixture, it’s more on economic, the idea of -- because we have an interest that the consumers continue to prefer our stores and that we do not lose relevant, because this really hampers the long-term, and this was a lesson that we also took from 2014, when we lost relevance with the consumer, when we allowed the drive gap to be very narrow and because we were very happy with our own EBITDA margins, and we left room for our competitors to approach their prices to us and to gain relevance. 60:58 I think that's now we are in a different situation, also challenging it's not deflation, but it's an excessive inflation that really makes for instance, certain promotions or in certain products do not have the same effect.

So there is a behavior of the consumer that's with the trading down as I mentioned, really starts to help also the sales mix and particularly the margin mix and that's why we are flagging this. 61:30 So this being said, we had inflation on apples with -- and on foods and vegetables, probably I don't know how the hardest will be.

But we are seeing now, because the question is the cereals is not just a cereals, is the food for the -- for instance for the animals, which will increase the cost of need. So there is a systemic effect here and of course on the future prices of cereals, they are assuming that the war will look long that will be, so even if you have and you will continue to have cereals, because they are the sources of supply, of course a lot of pressure demand will make prices higher.

62:18 And that's how we are making our own equation. So it's the systemic effect that this will have on all the prices, particularly on the food prices, which we are now for now the most relevant one for us.

And so we think that if we always promise and we said that, that we work consumer-centric, that the consumer was important to us that we don't need, we want to lose (ph) that we didn't want to give room for our competitors to approach our price positioning. In fact, is the mixture of moral in the difficult situation, when the Polish really are welcoming more than 1 billion refugees, that we will probably stay in Poland with their families and not and as refugees really.

And also with the Polish consumer that trust, that Biedronka has the best price and so we think that Biedronka should continue to have the best prices.

63:19 If I may, Ana Luisa just comparing your basket inflation in Poland versus general food inflation, you provided the numbers in ’21. Should we expect the gap to increase in terms of high in ’22?

63:37 Yes, I think that we look for sure maintain the gap and this will mean containing part of the inflation, because we are a relevant player in Poland. The amount or if it's going to be high, if we are able to, I'm sure that we will even increase the gap, but this of course will depend on a lot of moving parts and on the reaction of the consumer, particularly as I said on the volumes and all the trade down.

64:09 Thank you very much.

64:12 Thank you, Cedric.

64:29 Thank you. Yes, good Ana Luisa climbing although.

I just had a couple of quick ones, the first one just to confirm Ana Luisa, it sounds like mix was about 100 basis points benefit last year to Biedronka on the margin side. And I guess first point is could you confirm that?

And I presume the extension of that is, it also feels like you already seen changes in consumer behavior in Poland, so people going from trading up to trading down? And are you ready subsidizing part of those input price rises, the lag between input and output costs?

65:12 And secondly, it feels like the worst case is the group margins to be flat this year and not notwithstanding the uncertainty in Poland. If I triangulate all of the things you told us this morning, is that a fair conclusion as well?

65:31 Hi, James. So as I confirm that the mix was an important driver in the -- and probably around what you mentioned, so the 100 basis points.

We also have other benefits we decreased shrinkage, so that's of course also at the gross margin level helps Biedronka. But the main factor, as you said, was really to compensate the retail tax was the margin mix, no doubt about it.

And on what we are seeing in the current trading, it’s difficult to say, but I don’t for the current trading, we are not still seeing people trending down, but what we foresee is that for honest what we see is people starting to buy less on their -- with the exception of the donations categories. 66:33 So because this is also influencing our self, but if we exclude these categories, what we see is people buy less products at the same -- so less the items of the same product are less and so volumes are starting to be hampered that we are seeing.

66:58 Great, thank you.

66:59 On the margin, as well as, because you’re also saying that if it would be possible. So it probably there wouldn’t be a war in Ukraine with other -- and this let's say, this amplification.

Probably, I would be here more or less telling you not writing a guidance in the release and probably saying that it would be possible and that the company would do everything to maintain the margins stable, because even if we have gains, we would be reinvest in price, that's what we do and it's the mechanics how it goes in most of our companies and particularly in Biedronka, where we are still relevant. 67:47 The question now and the way that we are seeing things mounting, as I said currently at the level of the prices of our suppliers, we cannot assure for that.

But of course, we will do everything possible to still stick with that possibility. But this being said, what we are assuming is that it's too much moving parts to do that compromise.

So we are trying to be as honest as possible, not for you to be surprised that, yes, we were doing fine, and suddenly, we cannot cope with the level of extra cost inflation that comes with the war and the cost inflation, as I said, at the goods level, so at the gross margin.

68:39 Understood. Thank you.

And of course, I echo also Rob’s and your (ph) in terms of -- you are putting the right product in these times.

68:48 No, thank you. Thank you, James.

68:59 Good morning, everyone. Most of my questions have already been answered, but I have a couple of smaller ones, if I may, please?

It's mostly on Poland, so the first question is about the VAT reduction, we have seen in February. I wonder, if you can comment if -- does it have any impact on your margin trading or not all?

And what proportion of basket is impacted? So that will be question number one.

69:27 The second one, a short one, if you could give us some more insight of how your prices compare with your closest competitors. So what that gap actually is?

The third one is about rents or leases in Poland. But what kind of, if you could give us the proportion is euro denominated, please?

And the last bit, I know it’s a very small part of the business, but if you could give us some update on the Q-commerce, on the BIEK that you run with Global in Poland? Thank you.

70:06 So thank you on the -- so let me say, I think that at least the first one -- it’s a VAT reduction apologies. So on the VAT reduction, of course, this didn't affect our margin, because, of course, we passed that all to the consumers.

This is not -- the question is that besides -- although there was a VAT reduction, there is a lot of cost inflation coming, particularly on the commodities and on the more basic products. So we see bread for instance, if you look at bread in Poland, the prices increase very significantly, even though the VAT was reduced to zero.

So this is something that it goes beyond the measures that are being implemented. 71:02 And so I think that the government is trying to do its part, but we’ll have to do also our part, making sure that price do not increase and as I said that we can think somehow this inflation on the most basic products.

And as to the percentage, so I don't have it by hear here the ones that were affected by VAT reduction, but we can try to check it and let you know. 71:32 On the prices comparison, so into 2021, I can assure and then -- until very recently it’s the numbers of shopping that we have that we maintain the gap for our main competitors.

So Biedronka continues to bet on the promotion in and out to create saving opportunities for our consumers. As to lease, so we have a notional of more or less EUR300 million as capitalized leases that are denominated in euros in Poland, and I probably just to help, because this is technical, but it's quite materially in terms of the numbers.

So for each EUR0.10 P&L versus the euro, it's more or less almost EUR7 million of exchange difference when we compare the year-end position with the periods and positions, so that's the amount that's usually due. Was it clear?

72:42 Yes, it was clear. Last question was about Q-commerce.

72:49 Yes, yes. So, we are working as you know, with -- since October.

So we didn't -- I think that's the -- we didn't expect of course, this to be a big part of Biedronka sales. Nonetheless, we are performing -- we think that we are performing well and we are even surpassing the first target that we set for BIEK.

So for now, we will keep this and see how things will evolve even in -- under the current circumstances. But for now, we maintained the partnership.

And in this particular case, we are quite happy with the partnership and with the fact that we are providing a different service for the Polish consumer, as I said although not having a very well of an impact on our sales and on our P&L.

73:50 Thank you very much for the answers. If I may just follow-up on the VAT, I mean, I understand the message I think all the retailers are like saying everyone passed on everything.

I think publicly stating otherwise would be asking for trouble. So, maybe perhaps reverse the question, because that cut is assumed to be temporarily.

I don't know if it's going to be six months or 18-months, it’s hard to say. So my question is, do you know what is your plan once this is reversed?

Will you also pass on the higher VAT immediately? Or you would absorb this?

Thank you.

74:29 Thank you. Of course, this will depend when we say that we are going to invest, if by any chance, the government doesn't prolong and it will reverse.

Of course parts probably will be passed, but it will depend and we will want, of course, that the consumer to feel the least as possible, this kind of impact. That is our main goal to really make sure, because some of the products, of course are paramount for the consumer.

But it will depend on the circumstances, of course, probably will not absorb everything, but we will again want to keep the best drop price possible for the consumer and the least impact. But the containment can probably not be total, but we will do our part to try to minimize this impact on the family.

75:25 Thank you.

75:29 Thank you, Michal.

75:37 Hi, Good morning. Most of my questions have been answered, but I have a couple.

The first one is will be possible to share with us the latest number in terms of your internal basket inflation in Poland, since the start of the year, and versus, if possible the general food inflation in the country? And the second question is that you have seen a very positive working capital inflow last year.

Do you expect the working capital to contribute to the same amount this year also? Or was it more kind of a bumper year in 2021?

Thank you.

76:16 Thank you, Nicolas. So probably by starting with the last one, of course the working capital as you know, it's quite seasonal.

I think that we have been managing the working capital in a very active and assertive way. It's true and we don’t hide that, of course, there are certain circumstances that the fact the number that is published at year-end.

And in this case, we have of course the fact that we did a lot of openings in the last month of the year. This means that you have not only the purchases and that we do to suppliers that are accounted for, but also the invoices from the fixed asset suppliers for the construction of the stores they are accounted here in others, and as you don't have the sales, the whole sales of these stores usually, this means that you increase slightly the number of days that is posted as in relative terms for the supplier.

77:22 So there was no change on the country, we have been even decreasing the payment terms to suppliers even to abide to the UTP directive. And this being said, it will depend, but on average, if we continue to grow.

Nicolas of course, we will continue to play a benefit role when it comes to cash generation for the Group, this is our idea. As for food inflation in Poland, so the food inflation in the country in January was almost 9% and what I can tell you is that we maintained the gap at least, so I think that’s a good assumption that we have maintained the gap in January for this food inflation.

78:19 Okay understood. Thank you.

78:21 Thank you.

78:30 So if there aren’t any more questions. Thank you all for attending this conference call.

Considering the extra challenges we believe lay ahead of us in the current war and socioeconomic context, competitiveness in price and promotional activity gains, even -- are even more relevant in all banners agendas. We will protect our market positions by standing by our consumers, while continue to work on reinforcing value propositions and efficiency even at the expenses of profitability.

We rely on our strong models, our clear long-term vision and our strong balance sheet as we go forward. Thank you once again, and I wish you all a nice day.