Central Retail Corporation Public Company Limited (CRC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to CRC Investor Meeting for our Q2 performance update this morning. Today -- I'm Rangsirach Pornsutee, Head of IR, and I'll be your host for today's session. And as usual, we have Khun Panet Mahankanurak, our CFO, as our key speaker. And today, he will walk us through 3 main agenda, the business highlights, financial review and the updated financial targets for this year 2026. And now for the main presentation, we will switch to Thai, but we have the live translation available for those who need it so please switch your audio. [Operator Instructions] Let me pass on to Khun Panet.

So greetings, all the analysts and fund managers and all the investors. For this quarter, our performance is great. I hope there will not be that many questions today. So I want to firstly summarize. In the second quarter, we have the top line, core revenue grew by 3.6% and core EBITDA at 20%. We will have details in terms of the financial review later on. And for the Core NPAT to Owner, we closed at THB 2.1 billion grew by 124% year-on-year. This page is actually focusing on only in Thailand and Vietnam. So 124% is like-for-like for the 2 countries. For 2025 base with the Italy included, we grew by 57% -- 56% to 57%. From last year, Italy was also included. For the financial health, we will talk about it later on the last page for the financial report. And we would like to recap on the first half. So we can see some of the pictures and also the guidance that we will also talk about it at the end of the presentation. The core revenue in terms of the numbers, THB 126.6 billion grew by 2.4% and core EBITDA at THB 16 billion grew by 9.3% and Core NPAT to Owner, we closed at THB 5 billion, grew by 42.5%, including only the 2 countries. But with Italy, last year, is going to be around 31% growth. And the gap between the core NPAT this year, first 6 months and last year, we actually have significantly larger numbers by THB 1,200 million by including Italy. Next page. So this quarter, I would like to recap again for the great performance for this quarter. There are 2 parts. The external factors that also helped and also other businesses that also gained the benefit from the geopolitical tensions, but mostly are from what we have actually completed since last year. So this page, we would like to show what we have done last year and that it results in a good performance this year. Briefly, last year, we have divested Rinascente Department Store and Nguyen Kim Electronics. So we'd like to clean up the P&L. And for Rinascente is a big shift. Also, not only the 2 companies, but also other brands or other businesses that might not perform well, we also adapted. And we have recently launched the program in Vietnam. And we also have numbers that we will be discussing in the next page. We also renovated 2 flagship malls. And we have turned new businesses that we have innovated and we fine-tuned it into a proven business and ready to scale. In terms of the technology, we also included and also consolidated IT software. So this year is about people and last year was about the system, which allowed us to have a lot of cost saving efficiency. Last year, we have mentioned about this several times. Last year GP margin, we have strategically swallowed the GP margin in order to start this year for better GP margin, and we would like to decrease the debt ratio. The net debt has reduced from June 2025 to June this year. This has resulted in the performance of this year from what the management have taken the action with the revenue more high quality, we would consider it as a high-quality revenue that generated positive outcomes. So we have higher elements and portion of the high-quality revenue. And we have delivered the highest first half NPAT since IPO, also improved GP margin across all the segments from our initiatives and also what I have mentioned earlier, we -- after we have removed the Italy, we can focus more on the 2 markets and focus more on the strategic acquisition and our businesses in which we have acquired JD Sports Thailand and also taken over AEON Thailand. So we have already signed the contract, but we haven't fully completed the process. And our OpEx, operating expense to revenue are still in control. And lastly, the floating-fixed component of the debt, we will be talking about it later on in which what we have continuously working on for the past year. For the key business highlights in terms of Fashion, we have already mentioned about rolling out the new businesses and also fine-tuning the portfolios. Firstly, the KIS Beauty Store, I will also mention about LOOKS. So we've launched and also rolled out both renovations and also opening new stores and CMG, we have also added new brands, mainly AMUSE and Lacoste Thailand that we have already signed the contract and the distribution agreement with ICC as partnership agreement. In terms of tourist sales, it's continuously growing, even though the international tourist arrival is not as expected. And Hardline, AUTO1 is also another new business that we have succeeded that we launched earlier. Our target is around 40 to 50 stores -- new stores opening. So we continuously working on it throughout the year. And for Nguyen, we have already closed the transaction since 23rd April this year. For Food, the MaxValu, as everyone might have heard the news already, for Property, the rental income grew by 5% in Thailand and GO! Mall rental by 11%. And so overall, 7%. So for the deal that we have just recently announced, we have signed a contract to invest in the MaxValu. There are 23 supermarkets and 7 mini markets. So the reasons why we bought MaxValu is due to several reasons. We will firstly look at the strategic fit, which MaxValu is also under the core business of CRC, which is the Food Retail segment. Also that we have acquired 30 ready-to-operate stores also helped a lot, reducing the time taken to expand, which would normally take about 2 to 3 years to build organically. The branches are also -- some of them are freehold land and also available spaces, and we will look into the format and the time that will be suitable for investing further. And what consumers are admired about the MaxValu is the ready-to-eat food. So we are still keeping this in terms of the people and also the facilities, which will enhance our top fresh food offer. Also, there are 900,000 members under MaxValu that will also enter into our loyalty ecosystem. In terms of the synergy, we already have existing distribution center, also the logistics network to save the cost and also the power. So we can successfully create a synergy in this part. So these are the main reasons that we would like to share with all the analysts and fund managers in terms of MaxValu. And for the KIS and LOOKS that I mentioned earlier, so skip to the next page. For Vietnam, there is only this highlighted part that I would like to share. So for the renovation updates on the stores in the fourth quarter is the opening target, which also has the malls attached as well and also groundbreaking for Pho Yen, which will be opening in the third quarter next year. For The 1 memberships, just briefly, we have launched in the Food business in Vietnam around 8 to 9 months. So the penetration is currently 80%. The customers within the The 1 program has already have higher ticket size likewise. So we are also starting to expand to have The 1 program in the nonfood into the Fashion segment as well in Vietnam. So far, we have just recently launched, but we have already the sales penetration by 60%. And the spending per head is increasing gradually. For the first 2 months, they are good numbers and showing good signs. And so we still need to continuing to fine-tune. So we are focusing on the powerful data that we will be using -- that we have been using in Thailand. And for the recognitions and awards, I would just like to share in terms of the divestment of Rinascente. So this deal also received the best cross-border M&A deal of the year in Thailand last year. So we didn't hunt for the award. The important part is not about the award that we received, but many people might have seen that there is actually benefits received for CRC, which given the management more focus and also it enables the deleverage of CRC for the past years from divesting this business without having to monitoring the FX. So we have always been having to focus on the FX and also the investment we spent on Rinascente. So for the financial review, this number, there are quite a few numbers showing on. So if we look into the numbers for the Core NPAT to Owner with Rinascente included grew by 56.7% and the gross profit by amount grew by 9%, while the cost to serve only 3%. So the operating profit expand by around 60%. There are also share profits of 12% that also helped. So we can gain the benefits from the joint ventures causing our EBIT to have significant growth. So for the interest expense, we saved by 17%. So the tax increases together with the businesses. So the Core NPAT to Owner grew by 124%. So if we look in terms of the GP expand by 170 basis points in the second quarter. So for the first half is 110 basis points. By segment, if we look into Thailand and Vietnam, we grew by 2% and 6% in terms of the total sales. But if included NK, it would be 6%, minus 3% and 6%, driven from the same-store sales growth in this quarter, which is showing good signs, 3% for Food, Hardline 0 and Fashion slightly negative. The SG&A expenses in the second quarter is 27.4%, which is a typical quarter for us that the percentage of the expenses compared to the revenue will be the highest for this quarter. So every year, we are trying to manage to be under the guideline. The expenses that we have done is the personnel expense that grew only 1%. So we have driven the sales and the utilities grew by the rate that it has to increase. Marketing and promotion, we would like to make it lower. But for this quarter, we have launched new brands and also bring up some brands within our business unit in CRC. So it's an intended spending that we wanted it to be lowered, but it's not part of our concern. For this quarter, this is the first quarter that we have reallocated our brand business in Vietnam from Food, it was really small in the past, and now we can see the gradual growth. Now, it's in the Fashion segment and most -- some of the brands from Food to Fashion. So this peak would change a little, but the trend remains similar. For the Food, core EBITDA margin is 7.5%, grew by 18 basis points. If we're not taking the Fashion Vietnam, it will be around 7.4%, but it's insignificant. And for Hardline grew by 60 basis points and for Fashion grew by around 1% in terms of the core EBITDA margin. So it's a very good 6 months for CRC. Everyone has seen our net debt for this quarter, we closed by THB 64.4 billion comparing to the same period last year in June 2025, we have able -- we have managed by THB 20 billion. So for this quarter, we have cash outflow that is a little bit higher than regular due to the seasonality and also special dividends from divestment of Rinascente, THB 3,500 million. And we have also paid for the taxes for the capital gain from Rinascente. So we are really careful and very concerned on the CapEx and also focusing on the returns to all the stockholders. But we are trying to keep our leverage ratio to be healthy. So we are moving to longer and more fixed. From last year, we had long-term 32% and now we have increased to 46% and float reduced from around 90% to 60% in June this year. And the blended interest expense in the second quarter is 1.85% in terms of the cost of fund and our debt structure. So next page, for the guidance, I would like to share from last year, I have already shared, but I would like to recap once again for this year, top line, we would like to revise down to be more realistic estimations. For this full year, the revenue would be around 2% to 3% and the GP sales margin would expand around 60 to 70 basis points comparing to last year. And the expenses, we are trying to control to be within 26.3%, which is maintaining the same guidance and the EBITDA growth expected to be slightly higher than the previous guideline to be 6% to 8% and the CapEx to around THB 12 billion to THB 14 billion. So this would be our guideline during this period that we would like to [Audio Gap].