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Edited Transcript of EUR.WA earnings conference call or presentation 13-May-20 12:00pm GMT

Q1 2020 Eurocash SA Earnings Call

May 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Eurocash SA earnings conference call or presentation Wednesday, May 13, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jacek Owczarek

Eurocash S.A. - Financial Director & Member of the Management Board

* Luis Manuel Conceicao do Amaral

Eurocash S.A. - CEO & President of the Management Board

* Magdalena Kupiec

Eurocash S.A. - IR Director

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Conference Call Participants

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* Jakub Krawczyk

Raiffeisen CENTROBANK AG, Research Division - Financial Analyst

* Michal Potyra

UBS Investment Bank, Research Division - Director and Equity Research Analyst - Delta Coverage

* Michal Kuzawinski

JP Morgan Chase & Co, Research Division - Research Analyst

* Rafal Aleksander Wiatr

Citigroup Inc, Research Division - Director & Industrial Country Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the conference call of Eurocash S.A. At our customers' request, this conference will be recorded. (Operator Instructions) May I now hand you over to Magdalena Kupiec, who will lead you through this conference. Please go ahead, madam.

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Magdalena Kupiec, Eurocash S.A. - IR Director [2]

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Thanks, operator. Good morning to everyone. (inaudible) we have today on Eurocash side, Luis Amaral, our Chief Executive Officer; and Jacek Owczarek, our Chief Financial Officer.

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [3]

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Hello, everybody.

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [4]

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Hello, good morning -- good afternoon.

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Magdalena Kupiec, Eurocash S.A. - IR Director [5]

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So the plan for this conference is that Luis is going to start with executive summary, then I'll go real briefly through the presentation, and then we will have Q&A session.

So Luis, please start.

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [6]

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Okay, just looking at the first quarter, everything was going quite normal until the 10th of March. In 10th of March, all of us know what happened, and the business changed dramatically in different ways.

First, it was a stockup. Afterwards, lots of restrictions, were changing every week. So I will say that even if the quarter was quite okay, obviously it was pretty much affected by the business not being able to be managed in a constant way.

Since the situation started, we are basically living week-by-week because every week new rules appear or something new happens and we have to make changes.

Our wholesale business has kept growing quite nicely. On the retail (inaudible) starting with the 213 (inaudible) which started few weeks before because the COVID situation. I'll say that all our project resisted quite well to the situation of COVID, some going online, some keeping the business in the stores like Duzy Ben or abc on wheels. But all of them did quite well.

We had few accidents with few businesses that basically the sales was 0, or near to 0, which were the businesses which were depending on (inaudible) 248 side of alcohol. And the stores of Kontigo also suffered a lot because they were in shopping centers.

Well, I will say that the quarter was quite okay. And we feel that we are managing this situation in all aspects. Well, we don't have big accidents with COVID within our organization. We have until now in 25,000 people 5 cases and all of them were coming from outside. So not that people got it during work; it was more family connections or friendly connections. So nothing do with the work. We have very tough measures to protect our people and our clients since day 1, since the beginning of all this. And it seemed to work well from the economic point of view, as even with some businesses, which went near 0, the other business were able to recover, and we kept the results in a quite decent level.

So it's kind of everything new from the end of March, everything new in April. But in general, we are happy the way we are managing the situation. And we are quite optimistic that -- obviously this will affect everyone, obviously there will come a recession after this that will affect everyone, but we can navigate through the problems.

So, Magda?

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Magdalena Kupiec, Eurocash S.A. - IR Director [7]

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Okay. So thank you, Luis. And I'm going to keep track to the macro slide. And as you can see as per the National Bank of Poland Macro Research, Polish GDP in first quarter 2020 slowed down to 1.5%. What's very important for us, inflation was growing during the first 3 months of 2020, especially in 2 main categories for us, tobacco and alcoholic beverages.

On the next slide, you can see Polish food market growth. For small format it was a really good quarter. The small supermarkets grew by 8.5% year-on-year. But to be honest, on this slide, I would like to focus your attention of lower graph that might be very interesting for you regarding Polish COVID-19 restrictions and changes in shopping practice during last 4 months.

So the graph shows number of transactions, average value of transactions and average number of items in each transaction. So the moment schools in Poland were closed, all those metrics increased. In next weeks, new restrictions concerning number of clients in stores were introduced. Those were shopping more but less frequent. Now the situation seems to stabilize as some of COVID-19 regulations are softened in Poland.

Let's move to our business exactly to Wholesale segment. What's very important to underline here is the fact that year-on-year we've got more eurocash.pl platform users and we are very happy that many of them started to use our mobile apps.

1 billion of Wholesale segment sales was done via online channel. And regarding the standard channel, Cash & Carry also improved its sales like-for-like at the level of 8.5%, as you can see on the right-hand graph.

So regarding financial, it was very good quarter for us. For Wholesale segment, sales increased by 6%, EBITDA even more. Only food service business was affected negatively by COVID-19 and dropped by PLN 53 million.

So now Retail segment. As we announced on the last call, it's integrated already. We are still working to centralize all the operations. That means we are creating new price policy, we try to standardize assortment, and we are improving our promotion and communication. And thanks to all those actions, Delikatesy Centrum like-for-like in the first quarter 2020 reached 11.3%.

And regarding retail financial results, Immedio sales was affected by COVID-19 pandemic and reached such a small sales increase. Overall segment sales reached almost PLN 1.5 billion, and EBITDA remained at almost flat level year-on-year.

Next segment, Projects segment. Duzy Ben with 21 stores at the end of March 2020. Kontigo clients moved to online stores due to COVID-19 pandemic. Business on wheels ended the first quarter with 99 trucks. And nowadays trucking has really good time as people prefer shops to come to them rather than the other way around. So thanks to all former expansion in first quarter 2020, sales of the segment increased by 142%, and EBITDA decreased to minus PLN 14.2 million.

The last chapter of our presentation summarize our financial position. As we mentioned before, sales growth increased by 8%, EBITDA after IFRS 16 increased by 4.2%. And net profit dropped to minus PLN 62 million, and it was affected by currency effects of leasing contracts valuation due to IFRS 16.

And we've managed to improve our operating cash flow and keep the cash conversion at the stable level of 25 days. We also got stable net debt/EBITDA indicator after and before IFRS 16 that really meets all the bank covenants.

So I think that concludes the presentation, and now we can go to the Q&A session. Operator, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question received is from (inaudible) VTB Capital.

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Unidentified Analyst, [2]

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I have 1 question. It relates to your -- hello? Hello?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [3]

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Yes.

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Unidentified Analyst, [4]

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Can you hear me? Just have 1 question. It relates to your performance in April, May. If you could comment on your sales trends and perhaps the consumer behavior in these 2 months, it will be really helpful?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [5]

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Okay. So I can tell you what we are seeing. First, April is a good example because each week was different. As you know, the regulations that affect our business was changing basically every week. And these have different effects on the business itself week by week.

If I take your months, I will say that Easter was probably slightly worse than last year. And the weekend of May was more or less like last year. And these are the 2 big events during the month.

Couple of months, I will assume that demand was very similar to 1 year ago, but may be completely different (inaudible) in different categories in different kinds of stores, but we did notice a big market drop.

May just started. May for us is obviously very much influenced by weather. We had some very bad weather days. The combination of the holidays is different this year than the other years. So it's still very soon to understand how the month will finish. Started weak because coming this Majowka, which is very important for us, which was -- this year, it was just 2 days, when other years it's 5 days. And now we see some recovery but it's still early. But in general, I will say, I don't feel the consumption is still dropping.

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Unidentified Analyst, [6]

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Okay. What was the approximate growth rate of your revenue in this period?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [7]

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Obviously, we are not still talking about the second quarter. I will say that if you take out the businesses which went to 0 in April, which are the Gastronomia businesses, which are roughly PLN 190 million to PLN 200 million in a month, we will be probably very near to stable numbers compared with previous year.

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Operator [8]

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Next question received is from Michal Potyra of UBS.

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Michal Potyra, UBS Investment Bank, Research Division - Director and Equity Research Analyst - Delta Coverage [9]

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One question from me, please. I wanted to ask about the retail segment and the margin in particular because I understand some additional costs related to coronavirus, but one could expect that with such a strong top line performance, double-digit like-for-likes, you should see some positive operating leverage effect and also some integration effect and actually year-over-year the margin is slightly down. If you could please give more color to that? And also give some guidance what should we expect in the second quarter and in the second half of the year, please?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [10]

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I'll start by the second part. Guidance at this moment, I think, we should not give because, as I said, business is changing every day. And we don't have guidance to ourselves. We are pretty much ending this week by week, seeing what is changing and adapting ourselves.

I don't believe no one can give you guidance now of how it will be the rest of the quarter or the rest of the year. At least we cannot. We think it's too much of a guessing exercise.

First quarter, as I said, it's a mixed quarter. We started with new team from 1st of January. So we had some (inaudible) at the beginning because there were lots of new things because of the integration, which finished basically end of last year. So everything really started 1st of January, and this affected somehow the first part of the first quarter. And the second part of the quarter, there were positive effects and negative effects on both on sales and on margin. There was clearly stock-up which was made in the last few days of March, which obviously helped like-for-like. There was extra costs which was relevant on the retail side to protect people, our clients and our people. And things (inaudible) everything was new for us. We didn't know even where to buy the materials we need. So it was very atypical. We believe that is normalizing now. Quarter after quarter, you'll see normalization of the business.

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Michal Potyra, UBS Investment Bank, Research Division - Director and Equity Research Analyst - Delta Coverage [11]

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Okay. One more question from me, please. And also maybe you could comment a little bit on the receivable part. And do you see any stressed sector, any request for longer payment?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [12]

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No. I will say we were pretty much prepared even to give it because we want to support the clients that need it. Obviously, people are more stressed in the (inaudible) but we think the total number is quite small. It's a small business for us. On the wholesale side, so yet we don't feel big stress. As I said, we have the plan whoever had to close the store because of any case of COVID, to extend the payment periods is not material.

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Michal Potyra, UBS Investment Bank, Research Division - Director and Equity Research Analyst - Delta Coverage [13]

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Okay. One more question, if I may, please. Regarding your labor force. If I remember, especially in your logistics facility, you have a material portion of your employees were foreign immigrants. If you could please comment if there is any problems with the labor force with close orders, et cetera, please?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [14]

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No. No problems at all. By the opposite, we feel there is much more people now looking for a job than there was 3 months ago. Unfortunately, by one side because all of us know what (inaudible). But even with our part of (inaudible) we have no problems at all. And people appeared to work. We don't have absentees. (inaudible). Everything is perfectly normal. (inaudible) retention of people.

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Michal Potyra, UBS Investment Bank, Research Division - Director and Equity Research Analyst - Delta Coverage [15]

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Okay. Maybe one more, just maybe online. I'm not sure how much you can tell us, but if you maybe can give us a little bit of color on Frisco performance during that period. Would be interesting to hear how the business was performing and also...

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [16]

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I will just say like this. Frisco, as you know, we had a new warehouse which was programmed for the (inaudible) of 2021 and is into capacity since March 5th started. So obviously performance at Frisco is quite impressive. We don't know what this will stay or not because this performance is done in 2 things, much bigger sales per client and much bigger number of clients. At the moment, we have huge delays. And we have to wait a lot of time to get the delivery of Frisco because it was impossible to get slots. As I said, we went to full capacity still in March. We kept all the items in full capacity. In general, our digital part of the businesses, I would say, was quite good on Kontigo for the same thing. We recovered part of the stores at last year just (inaudible) 1 store. And on eurocash.pl obviously the performance is also good. So I will say that the fact that we have been changing to digital in most of our businesses has been helping us in the tough times.

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Operator [17]

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(Operator Instructions) And the next question is from Jakub Krawczyk of RCB.

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Jakub Krawczyk, Raiffeisen CENTROBANK AG, Research Division - Financial Analyst [18]

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Congrats on the figures. I just have 3 questions, if I may. First of all, can you -- I'll just say them all one by one, I guess, and in one set.

First question is on the dividend. What -- if you could give us any guidance or any points how you will go about this topic?

Second of all, Cash & Carry, very strong like-for-like. I think, if I am not mistaken, strongest ever. And I would just like to understand maybe if you could give us some color on what exactly happened? Is it simply the stocking up for the small shops, et cetera?

And the third question, I have (inaudible) the situation. I think I believe we might not have all the information to correct the inaccurate growth estimates, the effects of foreign exchange fluctuations in the future. Can you maybe give us some color on how we can make it significantly better in the next set of results?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [19]

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Okay. So I'll answer first 2 and after that give to Jacek. So dividends, the reason we delayed is the general assembly [due to the COVID] didn't decide yet. And the reason they didn't decide is because it's kind of unforeseen how things go.

Obviously, everyone knows that we like to pay dividend, we usually pay dividend. Personally, I'm always very (inaudible) that we pay dividend. But there is too many things I don't know in front of us. So I want to take this decision of proposing dividend at last possible minute, when we know better how this -- today, we know more than 2 weeks ago and expect in a few weeks we will know much more than today. So I'm reserving my proposal to shareholders to know as much as possible before proposing the dividend.

So it's just being cautious. There is no reason. We have no liquidity issues. Our lines are perfectly normal. We don't see big stress for the moment. But it's too many unknown things in front of us. I prefer to be conservative and decide in last moment what I will propose.

Cash & Carry. Cash & Carry, as you probably see, is not just because of COVID, it has been the tendency. Cash & Carry was improving the performance nonstop in the last 2 years. And that's what we see. In March, obviously like everyone, there was this stockup at the end. But in April, they kept performing quite okay. So it's not because they sold stocks to clients in last week of March that they performed well. The performance was good all the quarter and keeps going quite okay. So I'll say Cash & Carry, as you know, 4 years ago, we had some problems. We made big change on the management team and on the operating. And nowadays this is one of our businesses that goes smoothly without any big issues.

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [20]

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Yes. And Jakub could you be so kind and repeat your question? I'm not sure I understood correctly due to some noise on the line. So can you just repeat it?

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Jakub Krawczyk, Raiffeisen CENTROBANK AG, Research Division - Financial Analyst [21]

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No, no. No problem. Can you hear me more or less?

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [22]

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Yes. Right now, it's now much better. Much, much better.

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Jakub Krawczyk, Raiffeisen CENTROBANK AG, Research Division - Financial Analyst [23]

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Okay. Perfect. I was just asking about the IFRS 16 revaluation of the leases that was in your financial cost and basically...

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [24]

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Okay. So yes, I understood correctly. I was not sure. So you should -- part of the lease contract are in euros, generally speaking. And then due to fact that zloty was depreciated strongly in March, as we know, we had negative foreign exchange difference, which we booked against income statement and (inaudible) long-term debt, which is a little bit higher than the cost in the income statement.

Just a reminder (inaudible) situation in Q3 last year (inaudible) 7 million. It was not such a big number because (inaudible) depreciating like right now, which because of this was revised in Q4. So in reality, that's normal recalculation of foreign exchange compared to the Polish zloty depending on the closing rate of the reporting period. So there's no bigger magic behind.

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Jakub Krawczyk, Raiffeisen CENTROBANK AG, Research Division - Financial Analyst [25]

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Of course. The question is, I mean can you tell us how much -- how many of your leases are in euros? And -- because...

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [26]

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No, big part of the big distribution centers is in euros. So -- I'm sorry, we need to come back to this with the precise number. But the only ones which I'm recalling as big numbers is big distribution centers. Part of them are -- at least from guys like Panattoni and Prologis and then they are in Europe.

So if you can be so kind to take it offline and reconfirm exactly the percentage. But for sure it's a minority. So that one I think we can state here without any risk.

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Operator [27]

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(Operator Instructions) And the next question is received is from Mr. Kuzawinski of JPMorgan.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [28]

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It's Michal Kuzawinski. Sorry, I joined the call late, so I'm not sure if this was discussed. But if you could give some trading updates on what are you seeing in Q2? There was store restrictions imposed at the start of the quarter, which may have benefited your small store clients. How has that situation impacted you in Q2? What are you seeing now? Any feedback would be welcome.

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [29]

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Okay. So I'll repeat what we said. Every week was different because the restrictions were changing week by week. Also it was a special month because we had 2 big events, which are Easter, which obviously this year was not a family Easter, it was kind of private Easter, so probably less consumption. And we saw slightly less consumption on Easter market-wise. And Majowka, which is the long weekend on the beginning of May, which always, from our side, is very important for the (inaudible)

Majowka from the retail point of view, I'd say, was better than we expected in terms of sales. It was very similar to last year, which we didn't expect. And Easter was slightly worse.

If we are benefited, in generally, I would say that smaller stores are performing. We don't know still numbers of the bigger stores because we don't have them. And so we only have started to 500 meters, and our clients are also on these stores. But in general, they are all with positive performance, the groups we analyze. And we analyze almost all the franchise networks we have. And in general, the -- in small [format] 500 meters, the performance is positive.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [30]

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Okay. And the jump in tobacco inflation, do you know if there's any specific factor behind this jump? Is it temporary? Or do you think this is something nondurable?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [31]

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It's difficult. There was completely different price strategies of suppliers from the other side. There are also some fresh products which are changing quite fast the pricing. So at the social time we still don't have a clear analysis of the inflation. We will need more data to have it. But you have 2 manufacturers. Obviously, people try to speculate (inaudible) prices at the beginning of the stress, mainly in fresh products. There are people that simply just got promotions. When they get promotions, the price goes up. So I don't see this as a phenomenon that will stay with this inflation for the rest of the year. But I also cannot assure because it's very difficult for us with so many moving parts in so short time to understand clearly.

But part is just stopping promotions that people stopped a lot at the beginning, and they started doing around Easter. So there was kind of last 2 weeks of March and first 10 days of April where we noticed much less promotion from producer side.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [32]

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Okay. And have you quantified maybe the cost impact related to the pandemic in Q1 in terms of the protective equipment, in-store...?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [33]

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Cost is around PLN 9 million. We have saving of about PLN 3 million because, as you know, we did buy some (inaudible) on the shopping centers. So cost was PLN 9 million, the saving was PLN 3 million, and lost margin on the businesses that simply didn't exist on the last 20 days of the quarter was around PLN 7 million, PLN 8 million.

So we have 3 effects that appears during the last few days of the quarter.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [34]

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So the PLN 6 million (inaudible)

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [35]

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Michal, sorry, if I can add, we're reporting this direct one-off costs connected with COVID around PLN 9.7 million, like Luis is telling, but 80% of this in Q1 was in reality connected with the labor cost.

Because your question was specific about some hygienic products. Yes. So it was not majority in Q1.

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [36]

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Now Q1 what happened is that for people to pop into work we had to give bonus to everyone basically because people are in panic and we have to put in place a bonus system to be sure that we have people in the stores. By the other side, the revision on shifts, also lower productivity because we were shifted in a way that people don't contact between themselves, which is less efficient than will happen normally in the stores. These are the big costs in the first quarter.

There were some equipments obviously we started to buy. Apart from this, as I said, was this part of businesses which simply stopped selling, which was mainly the (inaudible) businesses.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [37]

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Yes, yes. And in Q2, what should we expect in Q2? Probably still elevated costs related to labor, some extra also costs in terms of protective gear?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [38]

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No, protective gear is (inaudible) getting to normal, not still truly normal, but it's normalizing. And we keep having this part of margin loss of the businesses which are not selling to restaurants.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [39]

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Okay, okay. So is it too early? Or are you able to give some guidance, some statement what can we expect in terms of the direction of EBIT or EBITDA for the year?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [40]

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It is not a question of where or why. It's simply because things are changing so fast that any guidance I give you maybe is not true in 2 days. So I don't want to -- ourselves here, nowadays the Board is meeting every day or every other day to analyze what happened in last day or 2 days because that's the fact how we are running the company during these events. Things are changing very fast. We have to do decisions fast. So giving guidance now means zero, as I said. So we prefer to not give any. Just the only thing is, obviously we are having the stress like everyone else, but we believe we are navigating this quite well and that our clients are operating their stores without big issues. We have no single problem on our supply chain. We had now 1 or 2 products which were not available for a period of time, but nothing (inaudible).

Our level of service always kept over 95%, which is what we have normally. We are just probably in (inaudible) because of cut in the middle of the change. So there's no disruption on the business. We feel we are getting market share. We don't feel we are losing market share by the numbers we see from the stores (inaudible) only ones you can have at this short notice. We feel we are getting market share.

We have the businesses of the restaurants which has stopped. But this for us is 10% of our total business or less. So it's not something that is a game-changer for us. And we are able to operate normally under these conditions. So what will happen on the market and what is the impact (inaudible) situation getting worse on Silesia, will this impact us or not? Don't know. It was our discussion at 8 o'clock but 2 days ago this discussion didn't exist. And this is the fact which is going now.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [41]

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Okay. And you had a plan to give a bit more color on the store opening strategy in the latter part of the year that was before the COVID pandemic. Is it still the plan to update the market on the store expansion strategy? Because you have been busy consolidating the retail assets. Now that they are in one piece, are you thinking about coming up with the store expansion agenda?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [42]

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No, we will come obviously -- obviously, we have new people working on these sites. But during this last 2 months, simply there is no negotiations. Nobody wants to hit no one. So even if we send our people to do, there is no meetings. So it's quite -- because this is not meeting daily with our conference, it's (inaudible). So basically, we are moving, but we have -- everything which is putting people on the field is an issue now, even for our area managers to visit stores, and we are being very careful.

As I said before you joined, we had almost no cases in the company. We had kind of 5 cases since this started and they were quite mild, and no coming from outside. We think there's no single case coming from the organization because we have been very careful.

So everything which contacts with outside world we limited it a lot. But probably second quarter we'll be -- end of the second quarter, we'll be in position to give some more feedback depending on how things go.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [43]

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And finally, from me, you will be soon consolidating Frisco, if you can remind me, is that from Q3? And are you perhaps planning to update the market on your strategy in groceries as, in particular, in my view, now it could be an interesting time to do this given the shift to home delivery

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [44]

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Yes. For us digital is much more than Frisco, as you know, because the wholesale part has tried to be digital part. Obviously, on retail, it's got a lot of importance in the last few weeks, and we keep -- we believe that will keep being important because basically we see that people change (inaudible) that they just bought because they had no other alternative, if they bought and they got a new experience, they will be back. So obviously we believe all the online strategy it will be more and more important.

Anyway, (inaudible) that's why we bought Frisco before this happened because Frisco was part of our strategy for retail. And yes, we are ourselves working now on this taking in consideration the numbers. And during this year, we'll update the market on both sides, also on retail, on the digital side.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [45]

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And from when do you start consolidation of Frisco?

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [46]

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Yes. Michal, regarding the consolidation, it's exactly like you said. So we are closing last days of June. So we'll start to consolidate from July.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [47]

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Okay, from July. And given the perhaps strong growth this business has been enjoying since probably mid-February, is there a chance for a kind of faster breakeven? When can we see this business breaking even, in your opinion?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [48]

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If -- with the numbers we have now, we'll be very near breakeven, but I don't think this is sustainable because simply the average basket is too good to be true. If it will be right now, I will be very happy. I think it is not going to happen like this. We are going to stay somewhere before where we were before and where we are now. As I said, the average basket, which has a big impact on the cost, now is simply too good.

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Michal Kuzawinski, JP Morgan Chase & Co, Research Division - Research Analyst [49]

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And do you think -- just the final one for me, do you think that the start of cooperation with global from the (inaudible) could create some potential competitor in Warsaw for Frisco?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [50]

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No, we have a very different vision about this. I'm not criticizing or giving opinions about the strategy of my competitors. But we have, I will say [180 degrees] different opinion about (inaudible) and about what's the role of the (inaudible) . We believe our clients should be ours, not from someone else. So we -- our solutions are always depending on us.

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Operator [51]

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(Operator Instructions) And the next question we received is from Rafal Wiatr from Citi.

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Rafal Aleksander Wiatr, Citigroup Inc, Research Division - Director & Industrial Country Analyst [52]

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This is Rafal Wiatr from Citi. Kind of like a general question on the back of what you said on the call, please correct me if I'm sort of wrong on that. Assuming that nothing much would not change versus last year for the remainder of the year in terms of revenue growth, is it fair to say that given the social distancing, given the fact that you have to introduce special measures to be safe, plus buy special disinfectants and really protective stuff, is it fair that running the business is much more difficult under current circumstances and more costly?

And if that is the case, then it would be hard to improve the numbers at all or visibly versus last year?

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [53]

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No. As I said, I'm not giving projections to the year-end (inaudible) business now is more difficult, it's different. Because, as I said, when things change every day, you have to adapt yourself every day.

If this is an advantage or disadvantage for us, I only know what the competitors did. So it's quite difficult for me to say that it's going to be good effect for us. We feel very comfortable on this (inaudible) I will say. We are able to decide fast. We are able to change things fast. Our core businesses have not been too much affected until now. There are more costs on the operation, yes, but also the mix is different. So it's not probably for me to say that because you have more costs, the year will be worse than last year. Sincerely, I have no idea. Until now, it's quite okay, but things can change. That's why I'm not giving any kind of guidance.

But in generally, we don't believe it's an issue just because we have to buy some more protection material or take decisions faster, that the business will get worse.

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Operator [54]

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(Operator Instructions) We received no further questions, so I hand back to the speakers.

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [55]

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So I will just close and pass to Magda. As I said, it's different, very different than it was 2 months ago. I don't say that we feel uncomfortable. We think we can manage on these conditions, even being a big company, very diversified (inaudible) on different sides, they take decisions fast, we also think we can decide fast.

We are quite a digital company if you're comparing also with any of our competitors, which we see big advantage for the future as we are positioned.

On the retail side, we are probably also one of the most digital companies, even still far than what we should be. So we don't feel that the world is going to finish tomorrow. We feel that new opportunities are appearing in front of us, and that's what we are dealing nowadays. And we are solving the problems as soon as we can. And that I say kind of (inaudible) in the company (inaudible) on the day after and so everything which has happened today.

Magda, Jacek, you want to do any more comments?

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Magdalena Kupiec, Eurocash S.A. - IR Director [56]

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Thank you. So I think that concludes our call today. If you have any further questions, please contact me and we wish you stay safe. Bye-bye.

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Luis Manuel Conceicao do Amaral, Eurocash S.A. - CEO & President of the Management Board [57]

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Thank you very much.

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Jacek Owczarek, Eurocash S.A. - Financial Director & Member of the Management Board [58]

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Thank you. Bye-bye.

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Magdalena Kupiec, Eurocash S.A. - IR Director [59]

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Thank you.

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Operator [60]

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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.