U.S. Markets closed

Edited Transcript of JMT.EP earnings conference call or presentation 24-Oct-19 8:00am GMT

Q3 2019 Jeronimo Martins SGPS SA Earnings Call

Lisboa Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Jeronimo Martins SGPS SA earnings conference call or presentation Thursday, October 24, 2019 at 8:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Ana Luísa Abreu Coelho Virgínia

Jerónimo Martins, SGPS, S.A. - Company Secretary

================================================================================

Conference Call Participants

================================================================================

* Alastair Birkby

Citigroup Inc, Research Division - Analyst

* Andrew Ian Porteous

HSBC, Research Division - Analyst, European Retail

* Andrew Philip Gwynn

Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail

* António Seladas

* Bruno Monteyne

Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst

* Cedric Lecasble

MainFirst Bank AG, Research Division - Research Analyst

* James Robert Grzinic

Jefferies LLC, Research Division - Equity Analyst

* João Calado

Banco de Investimento Global, S.A., Research Division - Analyst

* João Filipe Pinto

JB Capital Markets, Sociedad de Valores, S.A., Research Division - Associate of Equities Research Portugal

* José Manuel Rito

Banco Português de Investimento, S.A., Research Division - Analyst

* Maria Mickiewicz

Pekao Investment Banking S.A. - Deputy Head of Equity Research

* Maria-Laura R Adurno

Morgan Stanley, Research Division - Equity Analyst

* Maxime Mallet

Deutsche Bank AG, Research Division - Research Analyst

* Robert Joyce

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Xavier Le Mené

BofA Merrill Lynch, Research Division - Head of European Food Retail Equity Research and Director

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Jerónimo Martins First 9-month Results 2019 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Ana Luísa Virgínia, Chief Financial Officer of Jerónimo Martins Group. Please go ahead, madam.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [2]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen, and thank you for joining this call to present Jerónimo Martins 9 months 2019 results. As a reminder, all materials, including the release and the slide presentation, are available in our corporate website. Please remember that because we apply the IFRS 16 under the modified retrospective methods, according to which there is no restatement of historical data, the analysis of the performance will be made on a pre IFRS 16 basis, although in the appendix you can find our financial statements under this accounting standards.

The first 9 months of the year reflect a consistently good performance with all our banners growing sales and gaining market share. Food inflation increased significantly in Poland for most of the 9 months period, having slowed down slightly in September. This inflation had a positive impact in Biedronka's like-for-like growth.

On the contrary, in Portugal, food inflation has been notably low and turned slightly negative in Q3. This was due to price deflation in seasonal products that in Q3 '18 had registered material price increases.

In Colombia, Ara continued to deliver well on a more assertive commercial dynamic. Sales density is increasing and the company is further validating the store sales potential in light of current top line progression. Our strategic focus remains unchanged, a consumer-centric approach with primacy given to sales growth while preserving efficiency as the main drivers of profitability.

Looking at the key performance figures. Consolidated sales grew 6.7% to reach EUR 13.7 billion. At constant exchange rates, sales growth was 7.9%. Group EBITDA reached EUR 757 million, 6.7% ahead of 9 months of '18. At constant exchange rate, the growth was 7.4%. EBITDA margin was 5.5%, in line with previous year.

Net profit attributable to Jerónimo Martins was at EUR 302 million, showing an increase of 3.5% on 9 months of '18. Following strong cash generation, the group ended the period with a net cash position of EUR 60 million. This is the result of strong operational delivery, a favorable working capital calendar and lower CapEx payments.

Looking now at our Q3 P&L. Group registered a good 8.7% sales increase or 9.3% at constant exchange rates. This reflects the positive performance of all business areas. The evolution of the gross margin in the quarter results from the positive mix benefit in Poland and Portugal and the continuing margin increase in Colombia.

EBITDA in the quarter grew by 8.6%, with the respective margin coming at 6%, in line with the previous year. Attributable net profit amounted to EUR 121 million, 8% ahead of Q3 '18. 9 months of consistent good delivery led to a solid set of numbers for the period. There are a few things I would like to flag here.

Gross margin evolution from 21.6% in the 9 months of '18 to 21.9% in the 9 months of '19 reflects more effective margin mix management and trading up. Costs continue to be impacted by inflation in labor and energy. The focus to preserve efficiency is a common feature across all our businesses. This continuous effort, together with the consistently improved management of the margin mix, allowed us to invest on top line, address cost inflation and deliver a stable EBITDA margin.

In the period, the cash flow was EUR 356 million compared with negative EUR 60 million registered in 9 months of '18. On top of the increase in funds from operations, cash flow improvement comes mainly from working capital inflows, which as explained in previous calls, relate to the favorable movements at the start of the year compared with year earlier. Lower CapEx payments than in 9 months of '18 have also contributed to this performance.

The strength of the balance sheet stands unshaken, with a positive cash position at EUR 60 million. We invested EUR 405 million in these 9 months, of which 55% were allocated to Biedronka.

Moving now to the operating performance, I will start with sales. With good contribution from all businesses, group like-for-like reached 4.7% in the 9-month period, having been at 6.2% in Q3. The sound like-for-like, together with expansion, led to an increase in group sales to EUR 13.7 billion despite the 10 fewer trading days in Poland due to the Sunday ban regulations.

In Biedronka, sales grew 8.3% in zloty and 7% in euros to EUR 9.2 billion. Both expansion and like-for-like contributed to this performance. Like-for-like growth was 5.1% in the 9 months of 2019 after the impact of 10 fewer trading days. Throughout the period, Biedronka continue to focus on meeting consumer needs with well-craft campaigns that build up a positive mix and drive sales growth while preserving the efficiency of the business model.

In Poland, food inflation increased consistently through the period, averaging 4.4% in the 9 months and 6.7% in Q3. In our basket, inflation was 2.8% in the 9 months and 4.7% in Q3. Currently, we are seeing a moderation in price rises that is likely to lead to a decline in our basket inflation in the last quarter of the year.

In the execution of its investment program, Biedronka opened 46 stores in the 9 months, 32 net additions and remodeled 152. Up to August, market share increased by 0.5 percentage points year-on-year.

Despite having lost 10 days of trading when compared with 9 months of '18, HeBe grew sales in zloty by 26.6%, with a like-for-like of 8% in the period. The banner opened 26 stores, having closed 1 and that it ended September with a total network of 255 locations, of which 29 are stand-alone pharmacies.

The online operation started in July, and it's running according to plan. Pingo Doce sales grew by 2.9% to EUR 2.9 billion, with a 2.4% like-for-like, excluding fuel. The basket inflation in Q3 was negative -- of minus 1.1%, adversely affecting the like-for-like performance, which also faced its toughest comparison in the year.

The banner opened 5 stores and remodeled 30, of which 9 were lifting. Recheio grew sales by 2.5%, with a like-for-like of 3.4% and overall good performance, particularly considering challenging comparison basis the company is facing every quarter.

In Colombia, Ara gave priority to growing sales densities as the key variable to pave the way for profitability. Improved commercial dynamics and reinforced price competitiveness led to an acceleration in Q3 sales growth to 40.7%, with a like-for-like of 20.1%. In the 9 months period, Ara opened 46 stores and improved sales in local currency by 34.8%.

Group EBITDA at EUR 757 million increased by 6.7% or 7.4% at constant exchange rate. Losses generated by ARA and HeBe reduced to EUR 56 million from the EUR 65 million registered in the 9 months '18. The reduction in losses was also helped by currency devaluation.

Group EBITDA margin was 5.5%, in line with previous year. If we exclude the impact from Ara and HeBe losses, EBITDA margin was 6.3%, flattish on the same period of the previous year.

At Biedronka, the positive margin mix continued to allow a stable EBITDA margin despite the intense commercial dynamics and cost inflation. EBITDA margin at the distribution businesses in Portugal was slightly up on the previous year, mainly due to the effect of good like-for-like on operational leverage over the period.

We entered 2019 with an unchanged strategic focus on profitable, sustainable growth. To get there, our banners share common operating targets, to pursue sales growth while preserving the efficiency of the business model. These were successfully met in the first 9 months of the year. All banners registered good sales growth, increased results and gaining market share.

In Colombia, Ara continue to perform well with sales responding to a more assertive commercial dynamic implemented from Q2. It was decided to further validate sales potential on a store-by-store basis as this is one of the key variables determining profitable growth. As such, the expansion calendar was adjusted, and as a result Ara is expected to open around 110 stores this year instead of the 150 initially planned. This adjustment does not change our breakeven plan, and we maintain the view that we should see EBITDA breakeven soon after 2020.

In this context, our estimated group CapEx program for 2019 is now at EUR 650 million, down from the EUR 700 million to EUR 750 million initially budget. All the remaining dimensions of the guidance provided at the time of the full year results announcement remain unchanged. Thank you for your attention.

Operator, I am now ready to take questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question comes from the line of José Rito from CaixaBank BPI.

--------------------------------------------------------------------------------

José Manuel Rito, Banco Português de Investimento, S.A., Research Division - Analyst [2]

--------------------------------------------------------------------------------

So my first question on Colombia. So we had a very strong performance in terms of like-for-like in Q3 based on the adjustments in terms of assortment and prices. Could we -- do we expect that these adjustments should continue in for the -- reason like-for-like should remain strong over the coming quarters? And related to these and related to the guidance in Colombia and looking at the low end of the guidance, so the 20% reduction on EBITDA losses in local currency, this will mean getting losses of around EUR 54 million in full year, which compares with EUR 51 million in the 9 months. This will imply very strong Q4. What should change in Q4 versus previous quarters? Is it that these year's openings helping this is because of the sales momentum that we start to see in Q3 that should gain momentum also in Q4? So basically, trying to get a little bit more color on the guidance that we have in place unchanged, but which will imply very strong evolution in Q4.

And also, I think that you mentioned that breakeven soon after 2020. I think that before you were saying not before 2020, so is it a little bit changed on the outlook that you have for Colombia? Are you more comfortable with the previous guidance? So this will be my first question.

Then I have a second question related to central costs. If you can help us to understand the quarter-on-quarter evolution of this cost. So the figure in Q2 included a Q1 bonus component and therefore it stood at EUR 60 million. In Q3, these losses still broadly flat versus the previous quarter, but only including supposedly 1 quarter of bonus. What has impacted Q3 for these losses to remain flat versus Q2?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [3]

--------------------------------------------------------------------------------

Good morning, Jose. So on Colombia, the like-for-like, as you saw, was quite strong. And at this point, we have no reason to consider that as sales are reacting to our commercial policy and to our investment in prices, we will continue pushing to test the elasticity of the prices, and we don't see any reason for this momentum to change at this moment. So we don't give guidance for like-for-like, as you know, but nevertheless we think that we are in a good position to continue to post quite good like-for-likes. And that is why we decided really to focus on the commercial policy and on the way that we are crafting the promotions in certain surgical and particular products to really make sure that we attract the clients to the store and they maintained, and we see really what is the sales density that we can take from the current network.

As to the guidance of the EBITDA losses. So we don't see -- we know that it's challenging. But at this point, we know that the team is working to really improve. And considering the sales increase that we are seeing and the margin increase that we are getting, at this point, we have no reasons to change the guidance. So we maintained the guidance with 20% to 25% decrease in the EBITDA losses.

On the breakeven guidance, there is no change. So I don't know if it's a question of semantic. So we said that breakeven would not occur before 2020. So it would be after 2020, in fact. So we didn't say that it would happen in 2020, at least I don't recall that.

--------------------------------------------------------------------------------

José Manuel Rito, Banco Português de Investimento, S.A., Research Division - Analyst [4]

--------------------------------------------------------------------------------

No. No. After 2020. But now the wording was soon after 2020. That's why I was wondering if there was...

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [5]

--------------------------------------------------------------------------------

I would say that there is no main change. So on that, it's probably a question of the timing. But no, there is no change in what referred -- our expectancy at least for the breakeven at EBITDA level.

As to the central costs, I have to admit that I was a little bit confused with your explanation. But on that, we have to take into consideration, of course, that we are already provisioning for the bonus scheme that we are putting in place, as we have been saying and this of course affects. Comparing this quarter, as you can imagine, the -- we have a lot of projects going on at Jerónimo Martins. We are growing. We consider to continue growing. And of course, we can look at the quarter evolution to take any or at least conclusion on how it's going to evolve in terms of holding costs.

So as you know, any project that you may have cost money and it may alter EUR 1 million, EUR 2 million, the holding cost. So there is no novelty on that side besides the normal and usual projects that we have planned on the innovation, on the digital, on other projects that we are running.

--------------------------------------------------------------------------------

José Manuel Rito, Banco Português de Investimento, S.A., Research Division - Analyst [6]

--------------------------------------------------------------------------------

Okay. Understood. But I think that in Q1, there were no provisioning for these bonus. So that's why it increased in Q2. So my question is, previously, the quarterly losses were around 10, 11 now it increased to 16. In Q2, there were 2 quarters of provisions. And in this Q3, it was also 16. So should we assume 16 as a reference going forward per quarter, I mean?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [7]

--------------------------------------------------------------------------------

You can assume it. I don't -- at that I cannot give you really a proper guidance, but I don't think it will be very far from that.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

The next question comes from the line of Maxime Mallet from Deutsche Bank.

--------------------------------------------------------------------------------

Maxime Mallet, Deutsche Bank AG, Research Division - Research Analyst [9]

--------------------------------------------------------------------------------

A few from me. The first one is with regard to your comment about the decline in basket inflation that you're expecting in Q4. Can you maybe give us an idea of what was your internal inflation in Q3 in Poland and what's your view currently about what kind of inflation you expect you're going to achieve internally for Q4?

The second one is, we've seen from headlines recently with regard to watchdog investigations for Biedronka with regard to unfair practices on prices and negotiation with your players. If you had any comments or any updates to give us on that, that would be great. Same with regard to the retail tax.

My third one would be with regard to, well, your updated guidance on the openings with regard to Ara. My understanding is that in the past few years, the accelerated openings of stores for Ara triggered some start-up costs, which increased the losses that you've experienced. You are reducing quite materially the number of store you expect to open this year, which means you will have less start-up costs for those stores, and yet you are not upgrading your last guidance for the full year. So I was wondering whether it means that (inaudible) more on prices or you have some more (inaudible) that were higher-than-expected in other parts of this business.

Also, if it means that these openings are postponed to 2020, so does that mean that potentially you have sufficiently more openings in 2020 versus 2019 in Colombia and therefore potentially some additional pressure with regard to your margin. And the last one is a follow up on the earning cost question earlier. I was wondering if you still expect your earning cost for the full year to be roughly in line with the earning cost you had last year.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [10]

--------------------------------------------------------------------------------

Thank you, Maxime. So on Poland, the decline in inflation. So in the quarter, as I mentioned in my introduction, food inflation, internal food inflation was 4.7%. So lower than the food inflation in the country. And as I also said, the year-to-date inflation runs at 2.8%. The question here is, of course, we are seeing inflation in some of the categories. Some are a little bit more conjunctural, others, what we are seeing is some pick up in September. So if this -- if there is a slowdown in inflation and we don't think that it's sustainable to keep this level of inflation, it's not even good for us at a certain point because we want the consumer to continue to trade up. We want the consumer to continue to increase the volumes. So we don't want to just grow sales based on inflation. It's not really our aim.

So in this case, we are anticipating some slowdown in the -- at least in our internal inflation. But on that is really to also push and continue to craft the promotions and adjust the assortment accordingly to take the most out of our current stores.

On the (inaudible) investigations, so on UTPs, no update. So we hope that we will be able to clarify the investigation. As you know, the UTP law is quite recent. So it's not -- so it should not be a surprise that the biggest retailer in Poland should be investigating on that. But considering the process in itself, I think that we are in a very early stage and -- but we believe that we will clarify with the antitrust authority that we maintain long-term relationships with our suppliers.

We are talking about fresh products, so fruits and vegetables and in a long-term relationship it's not sustainable. Most of our suppliers work with us for more than 20 years. So if there would be any unfair practice, I don't think the relationship would be so sustainable and it's not our aim to hurt it nevertheless. So on that, probably to evolve, we'll have to answer and to clarify, but no big news on that front.

On the retailing tax. Again, no novelty. So the last news refer that the retail tax may continue to be suspended. So up to now, it is suspended until January 1, 2020. There is already news that it may continue suspended for 1 year more, but I don't have more clarity on that. It will really depend on the new government and of course on having all the legal procedure and on decision or not to wait for the decision of the European court on this.

On the openings of Colombia. So yes, your reasoning is right, in Colombia and contrary to -- particularly to Poland, when we open a store, it's not breakeven the first year. So it usually has some start-up costs, and this may also help, of course, with the Q4 performance. What we are doing really is, and we don't have -- we are slightly investing a little bit more than we were anticipating. But because we are seeing sales reacting to these price investments, so there is inflation in Colombia. Our internal inflation is lower than the food inflation in the country, and what we are seeing is that the investment that we are doing in very specific categories is answering very well from the consumer point of view and volumes are responding. So we will continue that into the Q4. But as I said, we don't think it will overall and considering all the moving parts, we are still expecting, the team is still convinced that it will take us to the target and the guidance that we have provided.

On the openings. So there is this review of the calendar, but that doesn't mean that we will open more stores in 2020. So there is this delay. Well, probably we'll in 2020 continue to open 150 or around that. But for now, we don't think that we will add the 40 that we are saying. We are not opening this year to really prove and see how the locations react to the new price and to the new commercial campaign.

On the central costs. So as I said previously, so no news on that. So the only thing is that, of course, central costs also vary depending on the projects that we are running. And I can tell you that we are running a lot of projects, too, that can be transversal to the businesses or are also to improve at our holding and corporate levels. So at this point, I don't see that there is any reason to consider any change or material change on that heading. So I think that you can assume this year-to-date. So the quarters may vary, but the year-to-date to be a normal level of central costs for Jerónimo Martins.

--------------------------------------------------------------------------------

Maxime Mallet, Deutsche Bank AG, Research Division - Research Analyst [11]

--------------------------------------------------------------------------------

That's very clear. And my first question, just to clarify, was with regard to what kind of magnitude of a slowdown you expect in Q4.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [12]

--------------------------------------------------------------------------------

For the inflation?

--------------------------------------------------------------------------------

Maxime Mallet, Deutsche Bank AG, Research Division - Research Analyst [13]

--------------------------------------------------------------------------------

For inflation. Yes.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [14]

--------------------------------------------------------------------------------

Inflation is very much concentrated in meat, in fruits and vegetables, in sugar, so in some commodities and also depending on the harvest. So we know that there may be some changes and some adjustments, of course, even considering what has going on. And so what we say is that in September we saw some slowdown even because the market didn't grow so much as it was expected, and this may be a reaction even to the strong increase of inflation. And the way that we see the dynamic of the sector is really to not push into higher inflation because then that may start to hamper on the volumes, and that's why we think that there may be some slowdown for the fourth quarter.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

The next question comes from the line of Andrew Porteous from HSBC.

--------------------------------------------------------------------------------

Andrew Ian Porteous, HSBC, Research Division - Analyst, European Retail [16]

--------------------------------------------------------------------------------

A couple for me, if I could. Firstly, on Colombia, the -- you've sort of changed the strategy there and focused on like-for-like. I was just wondering, what it was you saw in the business operations that prompted you to make that change and prioritize like-for-like over the openings. .

And then just to clarify on the openings going forward, is 110 more like the number that we should be expecting just because that's what is needed to find the right sort of locations or should we expect that to step back up again?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [17]

--------------------------------------------------------------------------------

Okay. Thank you, Andrew. So on Colombia, yes, the focus on the like-for-like, as I said, is really for us paramount because we saw sales reacting to this new price and not only to all the operations changes that we made because we are really focusing on each of the region and see how they are reacting to our price investments in certain categories. And as I mentioned earlier, there is a cycle of sales in our stores. And we try to check even in the Bogotá region how would the consumer react if we really invested in this kind of categories and if we change really and be more focused on the assortment. And the fact is that it shows that there is a lot of elasticity to price and it is worthwhile to invest, so not to increase so much the margin, invest part of the gains that we are getting from the increased volumes with suppliers, invest it and give it back to the consumer because it compensates in terms of volumes and justifies the quite strong like-for-like double-digit that we have posted.

On the calendar of openings. So as I mentioned, we are now expecting 110 openings this year. But as I also said, answering to the -- a previous question from Maxime, we think that in principle we will be able to get back to the 150 more or less, on average, for the future years.

--------------------------------------------------------------------------------

Andrew Ian Porteous, HSBC, Research Division - Analyst, European Retail [18]

--------------------------------------------------------------------------------

And just one follow up, if I may, in Colombia, then one quick one around Poland as well. Have you seen any competitive response to those price investments or nothing yet? And then just on Poland, could you make a quick comment on minimum wage increases next year? Obviously, the new government talked quite a bit about that as part of its manifesto. They're clearly quite sizable increases and how are you planning for that and would that have a material impact on your profitability going forward?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [19]

--------------------------------------------------------------------------------

So Andrew, on the competitors' reaction, of course, the market is quite dynamic, but it's also hard to change sometimes some of the strategies that we have in place. So we know that as for the discounters, we are talking about the different assortment than ours. So what we see is, of course, all the players reacting and trying to push for sales. But as we see, inflation in Colombia is higher than our internal food inflation, which means that at least on that front the price investments by our competitors has been at least lower than ours.

On Poland. So the minimum wage is a double digit. This is what we are considering in our plans, our current plans. But I think that this also has the positive upside. And if we manage to continue as we did up till now to compensate and to try to be relevant for the consumer, if they have more available income, again, and we are talking of minimum wages, so people that usually have lower income, so households with low income, this is good for us, of course. If you -- we are strengthening the middle class. And if we are able to really provide and adjust our offer to the consumer, I think that it will affect the cost inflation again and we are expecting that, but it will also bring us the upside on the top line.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

The next question comes from line of Cedric Lecasble from MainFirst.

--------------------------------------------------------------------------------

Cedric Lecasble, MainFirst Bank AG, Research Division - Research Analyst [21]

--------------------------------------------------------------------------------

I have some follow-ups on the Colombia. Could you please, Ana Luisa, you gave a very useful figure with 20% like-for-like in (inaudible) and Q3. Could you remind us what the trends were in Q2 and Q1, just to have an idea of the momentum? And maybe help us with volume growth in this figure.

So second, the second question would be on, just to be sure, given the new sale densities, you assume breakeven around 2021. And what kind of level of stores would you expect? We used to believe that 900 to 1,000 stores. Should we consider 150 per year from 2020 until 2025, let's say, with a regular number of openings, just to be sure how the math works.

And also, the last question is to better understand what you're doing in terms of commercial proposition. You said that you were changing the assortments, fine-tuning things, what have you done to make the stores more attractive to consumers beyond investments on pricing?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [22]

--------------------------------------------------------------------------------

Thanks, Cedric. So in Colombia, we came from high single digits in the first quarter, then in the second quarter was around 15% and then now we are posting 20% for the like-for-like. Basically, what we have been doing in terms of the commercial proposition, and I'm jumping, but I will get back to the breakeven question and the volumes, what we have done basically is really set and check where are the more -- to which products and which categories the consumer is more sensitive to really show that maintaining quality, we are able to deliver much better value to our consumer. And the fact is that we have been, as I said, investing in categories that are relevant for the Colombian consumer in each of the regions. So -- and this is something that as we really adapted our operations to be much more local, it was really a move that was implemented in April this year and it was paramount to really understand and to follow very closely each of the offers at the several regions, the 3 regions that we have. And as I said, also, it was very important to see how the consumer was reacting to our price investments. And so volumes are going up more than, the -- of course, the 20% that we are seeing.

On the breakeven. So now at this point and if things go according to plan, also with a like-for-like progression, so with the sales density progression, we may not need 1,000 stores to reach the breakeven. This was already flagged, I think, in one of our last calls. So we think that, of course, it will be between 700, 1,000 stores. At this point, we don't have any reason to change the pace of openings that I mentioned, so the 150 after that.

Of course, we may have to adjust depending on any progression also on the like-for-like. But at this point, I don't see any harm in considering that from 2020 onwards the 150 can be a good number to continue the openings as will be, of course, densifying more, even the Bogotá region and other regions.

--------------------------------------------------------------------------------

Cedric Lecasble, MainFirst Bank AG, Research Division - Research Analyst [23]

--------------------------------------------------------------------------------

Ana Luísa, if I may, just to end, is it easy to find the locations to sustain 150 openings per year?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [24]

--------------------------------------------------------------------------------

At this point, of course, there is -- I think I mentioned that. In Colombia, you don't have, let's say, a developed real estate market so you have to build it in a certain way to negotiate. So the fundamentals are not so easy as in other places, like in Poland, for instance, but we think that we are able to sustain this kind of openings, yes.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

The next question comes from the line of Bruno Monteyne from Bernstein.

--------------------------------------------------------------------------------

Bruno Monteyne, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [26]

--------------------------------------------------------------------------------

I'd like to follow-up a little bit more on the Colombia information from before. So in quarter 1 to quarter 3, your profit was quite flattish in Colombian pesos, so all the improvement comes in quarter 4. Would it be fair enough to assume that most of the improvement in quarter 4 will be from the reduction in store openings? Is that the biggest driver of profit improvement? Then the second question is if next year you're going back to 150 store openings, the drag of store openings should increase again. I just want to make sure I understood that correctly.

Next, the EBITDA breakeven that you're referring to, is it on a pre IFRS 16 basis that you're talking about EBITDA breakeven after 2020? And on Poland, there's a few times in the last quarter that you referred to compensating for the increase in cost by making consumers trade up into higher gross margin products, compensating by more promotions. How far or how much leeway do you still think in Poland to add more promotions and making people trade up before the difference to your old discounting model becomes too big for the consumers in their perception? Or you think you're far away from that?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [27]

--------------------------------------------------------------------------------

Thank you, Bruno. So it's not just from the store openings, of course. What we think is that the third quarter usually also will bring more sales density at the store level. Of course, we have all the operating leverage that comes from higher sales on the current network. So basically, yes, store openings also helps a little bit. It's true that in terms of the openings of the DCs, we won't see any major change coming from that affecting the P&L. We will probably just be opening at year-end, and the main impact would come from depreciation, so not at the EBITDA level even.

But the main driver of profitability more than the delay in openings is really the fact that we are having sales growth and taking advantage of the operating leverage. And in fact, in the first regions, I could say that probably we are already in breakeven according to our P&L. It is a P&L based on pre IFRS 16 because, otherwise, it would be easier. So if we would be speaking before rents, it would be easier. It's not the case. So we are talking about a breakeven at EBITDA level on a pre IFRS 16.

On the openings going forward, so I think that it's -- we are able to cope, of course. With this number of openings and more on some of the dilution that it brings, the fact that an opening does not breakeven at the first year, contrary to Portugal or Poland -- or at least in Poland. But the fact that we are improving, as I said, the sales on a like-for-like basis is, of course paramount in the equation, and it really helps us in being confident that we will reach the breakeven after 2020, as mentioned.

On Poland, of course, this is a continuous work. The fact that -- and I wouldn't say that we will increase the level of promotions. I think that what we will do is really to fine-tune, as we have been doing, the assortment to respond and to answer to also the evolution and the needs of the Polish consumer. So if the Polish consumer is willing to buy a better quality product, doesn't mind to pay a higher price, but if Biedronka continues to offer the lowest price in the market in the more value-added products, that, as we always said, helps with the sales mix and with the margin mix and really compensates for any cost inflation that we may have, namely from the labor heading.

--------------------------------------------------------------------------------

Bruno Monteyne, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [28]

--------------------------------------------------------------------------------

You did mention the increase in depreciation from opening up the depots in Colombia. How material would that increase in depreciation be for next year?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [29]

--------------------------------------------------------------------------------

Well, I think that it will be really material because it will dilute on, I would say, the sales and the other depreciations of opening the stores. But I would say that the big chunk, of course, of depreciations will happen from January onwards.

--------------------------------------------------------------------------------

Bruno Monteyne, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [30]

--------------------------------------------------------------------------------

Okay. So we should expect a few million euros more of depreciation for next year for that?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [31]

--------------------------------------------------------------------------------

According to our depreciation rates, yes.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

The next question comes from the line of Robert Joyce from Goldman Sachs.

--------------------------------------------------------------------------------

Robert Joyce, Goldman Sachs Group Inc., Research Division - Equity Analyst [33]

--------------------------------------------------------------------------------

I've got 3. So the first one, I'm sorry if I missed it, did you say what your internal inflation rate is running at in Poland now in the first month of the quarter? Second one is just if you could update us on how the Polish market share progressed in the third quarter. Value and volume will be great on that one. And then finally, just in terms of the -- your relative price gap now in Poland. Could you update us on how that is progressing, how wide that is versus Lidl and versus your other mainstream competitors?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [34]

--------------------------------------------------------------------------------

So on internal inflation, I mentioned that year-to-date, so up to 9 months, not until today, it's 2.8%, and in Q3, it was 4.7%. Of course, at this point, we will not be disclosing any of the internal inflation during the month of October.

For the Polish share, I apologize, I mentioned that we increased 0.5 percentage points year-to-date, and I said August but it's also already incorporating the September sales. So up until now, until the 30 September, we increased our market share by 0.5 percentage points. And...

--------------------------------------------------------------------------------

Robert Joyce, Goldman Sachs Group Inc., Research Division - Equity Analyst [35]

--------------------------------------------------------------------------------

Could you remind us what that was in the first half? Was it 20 bps in the first half?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [36]

--------------------------------------------------------------------------------

I think it was 0.2 or 0.3. So we accelerated that, Rob. I'm now hearing you very badly. I don't know if it's the line. Hello?

--------------------------------------------------------------------------------

Robert Joyce, Goldman Sachs Group Inc., Research Division - Equity Analyst [37]

--------------------------------------------------------------------------------

Sorry, sorry. Is that any better?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [38]

--------------------------------------------------------------------------------

No, there is some popcorn like -- but okay. On the related price gap, so no change on that. As you can see, we are having -- despite having internal inflation below the market. And we keep the same kind of gap, so between 1.5% to 2%, to the other discounters. At least [we're much lower] to the supermarkets or the hypermarkets.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

The next question comes from the line of James Grzinic from Jefferies.

--------------------------------------------------------------------------------

James Robert Grzinic, Jefferies LLC, Research Division - Equity Analyst [40]

--------------------------------------------------------------------------------

I had 2 very brief questions. The first one is can you perhaps clarify the drivers behind that like-for-like performance in Colombia? So what was the footfall transaction numbers and what was basket size? And the second one, it feels like you had very specific and very concentrated investments in specific product categories. I would assume there would be commodities. Please correct me if I'm wrong. And would it be fair to conclude that the volume growth would have been particularly strong in those commodity areas, beans, et cetera, and there might be a negative mix impact from a margin perspective from that?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [41]

--------------------------------------------------------------------------------

Okay. Thank you, James. So on the drivers behind it, as I said, it was really the way that we communicated and the most important, of course, the kind of local offer and the investment in prices. As we did the investment in prices, the main driver was the number of tickets. So in Colombia, it continues to be -- the progression on the like-for-like is really the number of visits that we are having. At this point, I cannot tell you if it's just the same consumer repeating the buy. But probably, there is also a big part, which is the consumer going back to the store. Because -- and as you say, of course, it's not just commodities, but it plays a big, an important role because, of course, we are talking about a consumer that is very -- not only very price sensitive, but is low income -- or lower income consumer. And considering our offer in the stores, of course, commodities play an important role here, but it's not only commodities. Even in some of the fresh categories, we saw the consumer reacting very strongly to the price investments that we have made and the fact that we are more competitive on the regions where we are operating.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

The next question comes from the line of Maria-Laura Adurno from Morgan Stanley.

--------------------------------------------------------------------------------

Maria-Laura R Adurno, Morgan Stanley, Research Division - Equity Analyst [43]

--------------------------------------------------------------------------------

Yes. So the first question that I have, given the price investment that you've been doing in Colombia, maybe if you can quantify or provide us more context in terms of like how -- when did those price investments started. And maybe what is the current price gap versus the -- your competitor -- versus your competitors and in particular versus the other discounters present on the Colombian market? So that would be my first question.

The second thing, from what you've been saying during the call, it does look like those price investments are going to continue into next year. And so from that standpoint particularly, if you are comfortable staying with the 150 store openings and the cash drag associated with those, then what gives you the confidence that you can actually achieve breakeven after 2020? You mentioned the strong momentum in sales growth, but maybe, yes, any further clarity around this would be helpful.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [44]

--------------------------------------------------------------------------------

Thank you, Maria. So as I said, we are not just investing in price and investing in price at the expense of our margins. So as I also said, our total margin is increasing, our gross margin. What we are really doing is, of course, not increasing it so much because we are seeing the benefits on the turnover with the sales increase. And so we keep -- of course, this is a quite good job that has been done by the commercial and operational teams of Ara that really looked at each of the regions, so on a local basis, and see how we react to very surgical changes in the offer and this price investment or at least price increase that is not so big as in the other chains considering that we are having inflation -- also a quite high inflation, around 6%, in the country.

And so for this, we maintain, of course, a gap from the other competitors and particularly also from the traditionals, which are usually our main competitor in Colombia. But in this case -- so we think and we believe that if we continue to have this attention to each one of the regions, that we can bring and really prove and validate that we can increase the sales density. And this is very important for us to -- of course, even considering a quite low margin at EBITDA level, to then have an increase or the operational leverage kicking in and posting the positive EBITDA after 2020.

So at this point, I think that we will keep that even, as I said, with a slight acceleration of the number of openings versus our adjustments this year. So these changes were mainly done or started in April, as I've already mentioned and -- these main changes in the commercial and operational changes. And up until now, what we are seeing give us confidence to even disclose. As you saw, it's the first time that we are disclosing the like-for-likes on a systematic basis for our Colombian venture.

--------------------------------------------------------------------------------

Maria-Laura R Adurno, Morgan Stanley, Research Division - Equity Analyst [45]

--------------------------------------------------------------------------------

And just one last question on the back of this. From a cost standpoint, the price policy, have you had to make changes in the way the stores are run?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [46]

--------------------------------------------------------------------------------

Not really the way that the stores are run, but the whole operation, the way that they look at the store and they manage and measure the impact of any change that we introduced in the -- at store level.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

The next question comes from the line of Ali Birkby from Citi.

--------------------------------------------------------------------------------

Alastair Birkby, Citigroup Inc, Research Division - Analyst [48]

--------------------------------------------------------------------------------

Two, if I may. Firstly, following up on a previous question. You mentioned phrasing Colombia's EBITDA breakeven on a pre IFRS 16 basis. Will you continue to also report pre IFRS 16 numbers from next year onwards? And then also on Colombia, please, could you provide an update on the evolution of sales densities over the past couple of quarters? And what is the scope for further improvement here? And then lastly, in terms of financing. To what degree can future store expansion be funded by working capital inflows? And how does this balance against the need for incremental investment capital?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [49]

--------------------------------------------------------------------------------

So thank you, Ali. So the EBITDA, as I said, it's -- we are mentioning it on a pre IFRS 16 as to continue to report pre IFRS 16 numbers. So our idea really is until these accounting standards be completely stabilized -- and this is the first year when it is mandatory basically on the listed companies in -- at least in Europe. And we think that until this is stabilized in terms of the rules, we will have an interest in maintaining -- for historical reasons and for you even to be able to compare the performance with the past accounts, we will, in principle, maintain both of the reporting. So we will -- we'll have -- it's mandatory to report on IFRS 16, so we will do it, of course. But in principle and to keep this kind of comparables or being able to compare performance with last year's, in principle, we will keep -- for at least the next couple of years, we will keep -- report the numbers on a pre IFRS 16 basis.

On Colombia, on quarter-on-quarter, so I mentioned that we have been building up momentum with like-for-like sales. So as I mentioned, it was a strong single digits in the first quarter but then it started to be double digits. And now we have it in the -- in this last quarter, the 20% like-for-like. So at this point, we think that, as I mentioned early in the call, that it's possible to sustain this because we are seeing the reaction of the consumer to what we have been doing in the different regions at store level.

In Colombia, working capital is already negative. So we don't hide that, of course, having higher sales or sales growth will also help on that fundamental KPI. And so for that -- but we know that we will be continuing to invest in expansions, and so we, for the moment, we are not saying that we will decrease the kind of financing that we will need for Colombia. So we will continue to invest quite strongly in the country to really poise for growth. But working capital will help, of course, in the equation in terms of financing.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

The next question comes from the line of João Calado from BIG.

--------------------------------------------------------------------------------

João Calado, Banco de Investimento Global, S.A., Research Division - Analyst [51]

--------------------------------------------------------------------------------

Maybe please just update us regarding the openings in Biedronka. How many do you still expect to open in this quarter? And possibly how many small stores and how many big stores? And the second question, it's regarding the like-for-like in Portugal. It has decreased. Do you have any specific strategy for this? Or how do you see this trend going from here on?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [52]

--------------------------------------------------------------------------------

Okay. Thank you, João. So for the openings in Biedronka, we don't change the guidance. So we know that there will be a high number and a lot of openings concentrating in Q4. But for the moment, we have no indication from the team that we will not cope with more or less 110 that we flag as new openings. Of course, then we have some closures also. But for now, no change on that front. So we'll be having more than 3,000 stores in 2019.

As to the like-for-like in Portugal, as we said, it was really very much influenced by the prices of fresh products. We had deflation particularly on fruits and vegetables and on fish. As you know, for Pingo Doce, these are the most important categories for the company so this really affects -- has a direct effect in the impacts on the like-for-like. I think that the company will, of course -- and this usually has to do, of course, with the crops and with the previous year prices, which contrary to this year, for instance, in 2018, as we said, we had inflation helping. So it was really a tough comparison for Pingo. But I don't think that there is any issue in terms of the performance of Pingo Doce and of Recheio, and the company has continued to do a really good job to make sure that they have the proper prices and the proper commercial also strategy in place to continue to grow sales. And so I think that they really have a comparison effect.

Also for Recheio, we -- there was a slowdown in tourism, as you know. We didn't have a great summer, and that also has an impact. But we think that there is, in no way, a trend of slowing down in terms of the growth of the company.

--------------------------------------------------------------------------------

Operator [53]

--------------------------------------------------------------------------------

The next question comes from the line of António Seladas from AS Independent.

--------------------------------------------------------------------------------

António Seladas, [54]

--------------------------------------------------------------------------------

Most of my questions are already answered. Just one related with Pingo Doce. And so I'm assuming -- from the answers that you gave previously, I'm assuming that it doesn't seem that you lost market share on Pingo Doce on third quarter. Because volumes have been doing well in Portugal. The economy is doing well despite deflation or lack of inflation. The performance of the economy is doing well and your performance on Pingo Doce was modest.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [55]

--------------------------------------------------------------------------------

Well, according to our numbers, we didn't lose market share. In Pingo Doce, we didn't grow much. But I'm assuming that we grew around 0.1 percentage points in Pingo Doce. This was on a cumulative basis. So I don't think that -- the volumes have reacted, of course, to the deflation. But as I said, even on the operating margins that we got, we had a quite favorable mix that has to do not only with the fresh but even with the takeaway and all the other in terms of the mix -- the sales mix that really helps the margin mix. So for that point, I don't think that Pingo Doce is really slowing down. I think it had a setback with the fact that it had deflation and deflation in their main categories compared with other competitors.

--------------------------------------------------------------------------------

Operator [56]

--------------------------------------------------------------------------------

The next question comes from the line of Andrew Gwynn from Exane.

--------------------------------------------------------------------------------

Andrew Philip Gwynn, Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail [57]

--------------------------------------------------------------------------------

I did have 3 questions, but in the interest of time, I'll just keep it to one. Just on the prospect of a new market, I'm just wondering what the latest thinking is.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [58]

--------------------------------------------------------------------------------

Andrew, if you want to, you can have the other 2. As for the new markets, so when we have news, we will give them. At this point, of course, I don't have anything to say and no news on that front, which doesn't mean that -- of course, as we always said, that we don't monitor all the opportunities and that we don't have -- as we have a balance sheet that is quite strong and we have the wheels and the ambition to continue to grow even on a nonorganic basis. So this is something that we monitor. But for now, no news on that front.

--------------------------------------------------------------------------------

Andrew Philip Gwynn, Exane BNP Paribas, Research Division - Senior Food Researcher & Analyst of Food Retail [59]

--------------------------------------------------------------------------------

Okay. Well, if you're being kind, then just on the other -- one of the other questions at least. On Poland, obviously, you've seen Tesco closing some space. Is that being particularly significant for you? Do you think that's helped your relative momentum?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [60]

--------------------------------------------------------------------------------

Well, yes, but I don't think that Tesco was performing that well before. So I think that the market is performing very well. The economy is going well. The families have more income. And that is the main driver for the performance of Biedronka more than the situation. Because it's true that Tesco has some setbacks and they announced that they would probably either close or decrease the sales area of most of their stores, but we are seeing also other players increasing the number of stores very significantly. So I would say that on the competitive front, it continues to be a very competitive market with Dino, Lidl, Stokrotka opening a lot of stores and other players even. So we cannot -- as I usually say, we cannot take the foot off of the pedal and lose relevance with the consumer regardless of having one player in a less good moment.

--------------------------------------------------------------------------------

Operator [61]

--------------------------------------------------------------------------------

The next question comes from the line of Maria Mickiewicz from Pekao.

--------------------------------------------------------------------------------

Maria Mickiewicz, Pekao Investment Banking S.A. - Deputy Head of Equity Research [62]

--------------------------------------------------------------------------------

I have one question regarding the recent news flow we've been seeing in Polish press regarding a franchise of formula offering in Biedronka. We've seen some comments regarding the target of 100 stores within a year, that it should be slightly smaller format targeting smaller towns with a fresh meat counter and so on, also a slightly new concept, new format. So my question would be, first if these targets that we saw in press of around 100 franchise stores within a year, is it anything new additional to the store openings target that you've just mentioned? Or is it included in this 110 that we've heard previously? So that would be the first part of the question. And the second one, what could be the economics of such a store? What would be your target in terms of midterm profitability of such as stores in a franchise formula?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [63]

--------------------------------------------------------------------------------

Thank you, Maria. So it's true that we have some stores already that are run by -- for Biedronka, and we are now slightly considering to adjust the model to a franchise. But -- so we don't mind. This is because we see opportunity for current retailers to take the advantage of using the Biedronka brand. But of course, this will never be the core of our business. This is really to take the opportunity on smaller villages, instead of entering with Biedronka and of course, competing with the local retailer, to have the local retailer joining the Biedronka chain and be able to operate it. And so this is really included in our expansion as a normal evolution of the business, just as I said, to seize the opportunities in much smaller towns.

In terms of the financials, usually, we want this to be, as always, a sustainable relationship. So we don't want to impose much higher fees to the franchisee. What we want really is, of course, for him to be part of the investment and get part of the margins that the store has to be able to run and have a profitable business for both parts, for JM Polska, Biedronka's owner; and the entrepreneur.

--------------------------------------------------------------------------------

Operator [64]

--------------------------------------------------------------------------------

The next question comes from the line of Xavier Le Mené from Bank of America.

--------------------------------------------------------------------------------

Xavier Le Mené, BofA Merrill Lynch, Research Division - Head of European Food Retail Equity Research and Director [65]

--------------------------------------------------------------------------------

It's quite late already, but I will focus only on 2. Can you give us a bit more color about the mix in Poland and where you are in terms of promotions actually just to understand how helpful it was in Q3? And the second one, you've got a strong balance sheet. It seems that, as you said, there is no news on potential acquisitions. So do you think that your balance sheet -- or you could have actually a better use of your cash on your balance sheet by potentially returning cash to the shareholders, in a way, than others? So any ideas on that.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [66]

--------------------------------------------------------------------------------

Thank you, Xavier. So on the promotions in Poland, no big news. It's slightly lower than the last year. We are running now, considering in&out and promotions, around 37% of sales on a year-to-date basis. So this continues. Again, what we really -- the mix in terms of assortment, the new launchings that we do, of course, also help and taking advantage of the trade up. And the remaining is really creating this excitement with the promotions and with the in&out even to test new products for the regular assortment based on the Polish commercial dynamic.

On the possibility of raising the dividends and return more to the shareholders, this, of course, is something for the Board to decide. Up to now, the only thing that we can let you know is that the dividend policy is kept the same. And for those who may have the doubt, it's the 50% -- around the 50% on the net earnings pre IFRS basis -- IFRS 16 basis. So if by April or by -- sorry, by February, the Board decides that it should increase the payout, it will be the Board's decision. But up until now, I cannot commit with any extraordinary dividends or any increase in the payout of the dividend besides the one that is set in the dividend policy.

--------------------------------------------------------------------------------

Operator [67]

--------------------------------------------------------------------------------

The next question comes from the line of João Pinto from JB Capital Markets.

--------------------------------------------------------------------------------

João Filipe Pinto, JB Capital Markets, Sociedad de Valores, S.A., Research Division - Associate of Equities Research Portugal [68]

--------------------------------------------------------------------------------

Just a follow-up in Colombia. If sales continue to respond strongly to your changes in price strategy, what prevents you from being more aggressive in terms of rollout in 2020? Is there any sales density targets you could provide that you want to reach in order to accelerate the rollout again? And just a quick question on market share. What's your current market share in Colombia?

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [69]

--------------------------------------------------------------------------------

So on Colombia, so we think that this, of course, and the reaction of the consumer really depends on the consumer. So we have to validate this, and this is something that we have really to focus on. So it's very difficult to do or to have the whole company focused on taking the most out of the current network and really validating each of the marketing mix fundamental KPIs and, at the same time, to accelerate expansion. And that's why we are giving it a little bit of -- in terms of the adjustment of the calendar.

Of course, the fact that we can go faster or not, it will depend on the availability and on the -- even on the economy. As you know, Poland has been giving stimulus to the economy, which is not the case with Colombia. So it may be a little bit harder to take a bold decision and say we are going just to accelerate because this really depends on the consumer and on how the economy performs. This being said, we think that things are improving in Colombia. We are already with growth of above 3% contrary to the last years. And this, we think, it will help, but it doesn't mean that we are going to accelerate expansion on that point.

So in terms of the market share, it's still very small because, of course, the country is quite big. So we are probably talking about not even 5% of market share. For -- the important thing is, of course, the local market share. And that -- I can tell you that we are probably -- if we consider the banner, we are already leaders in the coffee growing region. On the other ones, we are targeting to become also the leaders, but not yet.

--------------------------------------------------------------------------------

Operator [70]

--------------------------------------------------------------------------------

(Operator Instructions) Dear speaker, there are no questions at this time. Please continue.

--------------------------------------------------------------------------------

Ana Luísa Abreu Coelho Virgínia, Jerónimo Martins, SGPS, S.A. - Company Secretary [71]

--------------------------------------------------------------------------------

Thank you all for your questions and for attending this conference call. Considering the performance in the first 9 months of 2019, our banners are well prepared for Q4, and we are confident that we will deliver another good year in terms of growth and profitability. Thank you once again, and I wish you all a nice day.