Carrefour SA (CA) Earnings Call Transcript & Summary

[Interpreted] Ladies and gentlemen, good morning. I'm delighted to have you this morning for our annual results. This morning, we will be discussing on the -- moving on, the fast of our -- the progress of our transformation plan, and it will take place as follows: following the video, which was just shown, I would like to take a brief glance at the group's current situation and prospects because they have been established on solid foundations 2 years into the plan. I'll then take a few moments to shed more light on a topic on which we'll focus our energy in 2020, which is customer satisfaction. This is a battle we want to win across the group. Matthieu Malige will then present the details of our performance over the year, and then together, we shall answer your questions. A few words on the group's current situation to start with. There is what you already know and which I already had the opportunity to tell you 1 month ago when I made a summary assessment of the first 2 years of our transformation plan. We have methodically corrected the weaknesses identified in January 2020 -- 2018. We've showed up our structure, we put the prices -- price competitiveness back at the heart of our commercial policy, and we revitalized our offer. These are all decisive issues to restore the group's ambition and capacity for action. But I shall not dwell on this today. I would like to focus on what some people do not know or do no longer see. There is growth in our sector, and there is growth in our models. But in an incredibly competitive sector, you have to go and win this growth, you need to seize it, capture it, and this is what we are doing right now. We have taken strong decisions in the past 2 years. We tore down some of our barriers, and we set the right priorities to build Carrefour 2022. We've activated the engines and unfold ourselves to capture all the growth opportunities. First, we are expanding at a rate that has no equal in our key geographies. In convenience stores, we have a growing and profitable model, and we have moved with greater velocity than the market. We are regularly gaining market share. The major example is France, where our overall market share has gained 10 basis points every month for the past 6 months. We are attracting franchisees from other banners, especially in France and Italy also, where we have changed scale with the joining of 2 master franchisees, and this is a sign that we are a partner creating value. And the momentum will continue as we are well on track to achieving our ambitious target for opening 2,700 convenience stores by 2022 across all the countries in which we operate. In cash & carry, we -- with Atacadão, we have a model, which is running at full speed. In this huge market, that is Brazil, we are already a leader, and we are widening the gap with competition. For the past 2 years, we have maintained a sustained pace of expansion with 20 Atacadão openings per year, and we have just accelerated this nicely with the acquisition of 30 Makro stores. In other words, 18 months of expansion, one move at an attraction -- at an attractive valuation for us. But beyond Atacadão, it is the whole of Brazil, which is more than ever, a territory of conquest for Carrefour. Second point, we are building our leadership in food e-commerce online with our target 2022. We have recorded growth of more than 30% per year for 2 years, and we are outperforming the market in most of our geographies. In terms of e-commerce, we have the logistics infrastructure, we have the expertise, we have the partners. In fact, we've been very active since the start of the year through our alliance with Google and our acquisitions such as Dejbox and Potager City. We will carry on devoting significant financial and human resources to e-commerce to maintain high growth rates, and we shall focus on operational excellence to improve profitability. Third, with the food transition for all, we have preempted a promising positioning, which energizes our entire offer. We are moving faster than the competition on organic in our key geographies with growth exceeding 25% a year. And this, for the past 2 years. The share of our private label has gained 2 points in our sales last year. And in France, it has grown at least 3x faster than our competitors. On organic, as well as on Carrefour branded products, we are moving at the right pace to reach the ambitious targets that we have set for 2022. Success of our initiatives allowed us to approach the rest of the plan with great confidence. Here again, I will only cite a few highlights. First highlight. Countries that faced major challenges 2 years ago have now reached a winning position, notably Latin America countries, Eastern Europe, Spain and Taiwan. The other European countries, which have started even further behind, are in an accelerated catch-up phase and are following a course, which is extremely clearly set. France illustrates all these dynamics by itself, that of reconquest and that of catching up. I'll let Pascal Clouzard, CEO for Carrefour France, share a few words with you now.

[Foreign Language]

[Interpreted] Thank you, Pascal. This brings me to the second highlight for the future of our plan. The advances made in all our geographies were funded by strict financial discipline. Cost control, selectivity and productivity of investments have become second nature to Carrefour. We achieved EUR 1 billion in savings in 2019. And today, I am announcing that the objective of achieving EUR 2.6 billion in saving in the full year by '20, and it will not only be achieved but exceeded because we are raising this to EUR 2.8 billion, and we have enough to fuel the savings momentum in the coming years. Our goal of selling EUR 500 million in nonstrategic real estate assets having been reached a year ahead of plan, I am also announcing that we are extending it with a target of EUR 300 million in additional disposals by 2022. Third highlight. A consequence of the previous 2, we now have a profitable growth model. Our like-for-like sales grew by 3.1% in 2019 versus 1.6% in 2017. And our ROI is up sharply with an increase of EUR 145 million in 2019, i.e., plus 7.4% in 1 year. France is making a significant contribution with a 2019 ROI up by 15.6%. Net income group's share reached more than EUR 1.3 billion whereas it was negative by more than EUR 580 million last year. Free cash flow also increased by sort of 17%, thanks to growing results and a more productive CapEx policy. It stood at EUR 1.3 billion, excluding exceptional items. The group's current situation is thus that of a growing company whose economic model is under control with a solid balance sheet, one of the strongest in the industry, capable of supporting our M&A strategy with renewed self-confidence and with a clearly established road map. More dynamic, more creative, more ambitious. Carrefour is no longer the same company it was about 2 years ago. If Carrefour was a company that has managed to challenge itself and change, it is also because we are a deeply committed company. The half of these commitments, as you know, is a conviction so strong that we wrote it into our bylaws. It is to be the leader of the food transition for all. Two years ago, we went on a mission to ensure that everyone consumes better, better for themselves, better for those who produce, better for the planet. With the worldwide launch of Act for Food, we raised awareness. We have since been imitated by most of our competitors, which I welcome not only because it is the vacation of a leader to be followed, but above all, because the challenges to be met are so immense, so impactful that they are necessarily collective. But at a time when the word commitment is more often repeated than achieved, I would like to tell you the deep meaning we attached to it within our group to commit, to really commit, means to accept to be accountable, accountable for the commitments made and the results of the actions carried out, be concrete, precise, auditable. The first of these commitments, without the others -- without which the others have no meaning is, therefore, this to be sincere and transparent. It starts with acknowledging that we, Carrefour, have not always been exemplary. No one has been. That is the problem that leads us today to an ecological dead-end, but we are the first among our peers to have chosen not to shuck our responsibility then to act transparently. Our progress can be scrutinized by everyone through our CSR and food transition for all index. 17 annual and long-term objectives, quantified, audited and integrated into the compensation scheme for managers. We accept to submit to the judgment of third-party organizations, which welcome our progress in their ratings. The third successive year, we have been included in the Dow Jones Sustainability Index among the global top 5 in the sector. The CDP climate change gave us the maximum score of A in 2019, which places us among the top 2% of companies in the fight against climate change in the world. This requires a lot of determination and discipline, and we invite our competitors and partners to do the same. That is the meaning of the food transition pack that we are launching. We want to make our suppliers -- we want to take our suppliers with us by offering to engage with us on responsible products, the reduction of packaging, biodiversity and climate. The topics involved are incredibly complex, and we continue to make mistakes, of course. But 360,000 committed people make a difference. And in 2 years' time, we have built legitimacy and expertise. It is in the spirit of transparency and collaboration with all players in the food chain that we wish to go even further in our commitment. Here again, my past today is not to list them, but to highlight some of those that take a whole -- makes our whole model evolve. There are other commitments of our products, which directly transformed the content of our plate. For the years, after having been a pioneer on GMOs, Carrefour is leading the fight against endocrine disruptors from 2020. Products for babies and pregnant one will be guaranteed without endocrine disruptors. And by 2022, this will be the case for all Carrefour branded products. Then there are the commitments that involve each of our stores. We've launched major projects to remove plastic from fruit and vegetables by 2022 and to reduce food waste by half by 2025. Finally, there are the commitments, which are challenges launched to all sectors of our economy, and in which we play our part. I finally decided to take the leadership within the Consumer Goods Forum, which bring together the major global retailers and the main manufacturers of consumer products in this fight against deforestation. An issue that is decisive both for climate and biodiversity. Through Carrefour 2022, we are thus combining short-term requirements and a long-term horizon, the very one that are -- has all that aims for. Our transformation is visible in our financial results with the like-for-like growth, which has almost doubled in 2 years. And at the same time, our extra financial results exceed our objectives with a score of 114% achieved by CSR and food transition index in 2019. This is how we want to keep moving ahead. We are aggressive in all our geographies to promote our products and our values, and we shall continue to be -- and I confirm to you today all the targets of Carrefour 2022. Before concluding, I would like to put the spotlight on a great battle to be won on the way to Carrefour 2022. It is fought in all our geographies, in all our formats, in all our stores, and in fact, all the way into all our head offices. It is that of customer satisfaction, and we will devote a lot of energy to it in 2020 because we are ambitious for the future. And the customer satisfaction is what will allow us to achieve our ambitions. We want to make our customers the center of our world, the obsession of our daily jobs, the patterns of all our actions. For Carrefour, believe in me, this is a cultural revolution. This cultural revolution is not just wishful thinking, it is an extremely concrete reality. The one behind the 555, I suggest you let Rami Baitieh, our CEO in Spain, tell you about it.

[Foreign Language]

[Interpreted] I took away several key learnings from 555. Most important, its system that works in countries as diverse as Argentina, Spain, Poland or Taiwan, where we have already had the benefit of some insights in implementation when NPS increases traffic increase and sales increase. It is a very concrete, very complete system, which innovates and transforms the whole organization, it's an open and pragmatic system, which has no dogma or imposed tool like one objective to conquer customers locally and build a winning formula in each store square meter by square meter, brick by brick. We will focus our energy in 2020 on the deployment of 555 across the group, whether it's taking -- talking about the organization, process management, we will draw the implications for each group business unit, for each format, for each business from e-commerce and IT to merchandise organization is a project on which we have already advanced to gain agility, but we will do more to bring it into line with customers with a structure closer to ground level, more fluid, more reactive with a shorter chain of command, and overall, a simplified organization aligned from the front office to the back office stores, serving customers and headquarters serving stores. I'm setting an ambitious goal for our efforts. I, therefore, announced that we are making NPS and additional Carrefour 2022, excuse me, KPI and that will set a group level target of plus 15 points for 2022. [Audio Gap]

[Foreign Language]

[Interpreted] He is in great shape, and he has lost about 15 years for the last 2 years, it's very impressive, as Noël said. For Brazil, we have a schedule of 3 meetings this year to give you more granularity on what we are doing. These meetings will start by Brazil. Brazil will start. He has invited us to attend this Brazilian meeting, then we'll have a customer satisfaction meeting in June. In Spain, where we will gather group mergers that will present the deployment of 555 and on e-commerce and all other formats in France later, we will have a meeting during the second semester. In Brazil, France, Spain, single canal, food transition across the group 2 years after the launch of Carrefour 2020 groups, and we have those results. They are visible through all our strategic priorities, expansion on organic understrength. They are visible in our geographies, which are gaining competitiveness and leadership. They are visible to our customers through a dynamic of satisfaction that is well underway and which we will continue with determination. And they are, of course, visible in our performance growth. It almost doubled in 2 years. Our profitability is sharply increasing and our extra financial objectives have been exceeded. Of course, there is still a lot to do to achieve our ambitions. We have momentum, and we are going in the right direction. Thank you for your attention. And I now hand over to Matthieu Malige.

[Interpreted] Thank you, Alexandre. Good morning to all of you, and thank you for being with us. Today I hope to be as interesting as guacamole with my figure slides. Before I walk you through the key financial highlights of the full year, I would like to step back for a second to remind you how much has been achieved across the group in the past 3 years. As you will see, the successes of transformation already translated in our 2019 numbers, I would like to do this by focusing on 3 key metrics that speak for themselves. Like-for-like sales, to begin with, have accelerated through our stores from 1.6% growth in 2017, Carrefour grew in 2019 by 3.1%. This growing momentum reflects the efficiency of commercial initiatives that have been implemented. Second, recurring operating income. The group's ROI dropped by EUR 400 million at constant exchange rates in 2017. In 2019, it increased by EUR 145 million. This reflects our improved sales dynamic, the relevance of our strategic choices, our sharply improved cost structure and our strict financial discipline. Third, aggregate. The net financial debt, it has decreased by almost EUR 1 billion in 2019, combined with EBITDA growth. This resulted in a significant improvement in our indebtedness ratio. These numbers illustrate a more competitive commercial model, control over the economic model and healthy financial situation. Let's turn now to -- take you through the key financial highlights of 2019 for the sake of comparison with 2018, unless otherwise indicated, I will comment figures as pre-IAS 29 and pre-IFRS 16 basis. Carrefour FY gross sales in total reached EUR 80.7 billion in 2019, up 3.1% on the like-for-like basis, which represents a sharp acceleration from 1.8% in 2018. This is Carrefour's strongest full year performance in several years. Sequential acceleration in LFL growth can be observed in most geographies. Like-for-like growth accelerated through Latin America where commercial investments are bearing fruit in all formats in Europe, Spain, Eastern Europe; accelerated with a good level of competitiveness in France, Belgium, and Italy, where markets were difficult and showed declines at year-end. Carrefour is investing, and will continue to invest in its competitiveness. Let's now look in greater details at the various currency impacts in the year. The currency effect on sales was negative in 2019 at minus 2.4% is negative. ForEx impact is mainly due to the depreciation of the Brazilian real and the Argentine peso versus the euro. This translate into negative impact of EUR 36 million in financial year. Recurring operating income reported recurring operating income standards at EUR 2.88 million as announced on January 24. At constant exchange rate and comparable accounting standards, it increased by EUR 145 million or 7.4% versus 2018. Recurring operating margin is up by 16 basis points to 2.9%. Price investments in 2019 weighed on gross margin. This effect was largely offset by purchasing gains, lower logistic costs and better performance of financial services. Overall, gross margin slightly decreased by 9 basis points to 22.3%. In parallel, Carrefour continued its financial discipline in all geographies with distribution costs at 17.5% of net sales, so an improvement of 21 basis points. They benefited from the cost reduction plan and including costs related to new stores and customer services, notably in digital. As you can see, Carrefour is strongly investing in its future growth, while maintaining strict financial discipline. Let's now concentrate on the cost reduction plan. The group maintained a strong pace of cost reduction in 2019 and has generated EUR 1,030 million in growth savings coming on top of this EUR 930 million already delivered in 2019. Momentum is strong with almost EUR 2 billion in cost cuts to date, the group is ahead of our initial plan. Carrefour has pulled its purchasing between countries and also benefited from gains from purchasing alliances, notably with Tesco internationally and with Système U in France. The group has developed real know-how with the recruitment of experts in purchasing protocols and process simplification. It has put in place a network within the countries, which makes it possible to pull and sustain an industrialized approach to cost management. As you can see, reducing costs, being more efficient, while improving the customer experience in our part of the daily life of Carrefour teams in all countries. It's one of the today's announcement. Given the strong cost reduction momentum, the cost reduction target is being raised by EUR 2.8 billion by 2020, and we are confident that the cost savings dynamic will continue beyond 2020. Let's now turn to our performance by geography, starting with France. With recurring operations income, operating income in 2019 of EUR 539 million, growing by a very strong point -- no, excuse me, strong 15.6% and a margin up to 24 basis points, Carrefour France has reserved the trend of -- has reversed the trend of the past years. In detail, this ROI improvement reflects strong momentum in cost reduction, allowing us to finance investments in price competitiveness and in the attractiveness of Carrefour's offer of new services and more digital. Carrefour France has improved its commercial competitiveness in 2019 through the launch in February 2019 of the loyalty premium strengthened in January 2020 by the new market loyalty premium in supermarkets and the launch of unbeatable prices since June 2019. Turning to other European countries. The region's recurring operating income amounting of EUR 647 million in 2019 compared with EUR 664 million in 2018. This reflected a strong performance in Spain and Eastern Europe, where the model's attractiveness is confirmed significant investments in competitiveness, particularly in Italy and Belgium. Investments that were offset by more significant cost reductions in the second half, including the completion of voluntary departure plans in these 2 countries. In Latin America, 2019 ROI increased by plus EUR 44 million or plus 10% at constant exchange rates. This profitability increase was driven by very strong sales growth and successful commercial initiatives in Brazil. The successful commercial initiatives, translating into a strong acceleration in like-for-like sales growth and improvement of ROI in all store formats. 2019 proved again that Brazil is a strong engine for Carrefour sales and results. Carrefour retail and Atacadão, very strong commercial momentum continues, while financial services are rolled out at a brisk pace. The recently announced acquisition of 30 Makro stores allow for further acceleration in cash & carry and value creation in Argentina. The successful implementation of the transformation and commercial recovery plan continues to bear fruit and the country now contributes positively to the group ROI. The Asia zone now corresponds to Carrefour Taiwan's activity. Recurring operation income was up 8% at constant exchange rates to reach EUR 85 million, reflecting an improvement of plus 19 basis points in operating margin at 4.3%, thanks to good growth momentum and tight cost control. After this geographic review, let's now move down to consolidated P&L. Net income from continuing operations group share grew strongly and returned to positive territory at EUR 193 million in 2019 versus a negative EUR 208 million in 2018. Adjusted net income, group share, adjusted for exceptional items increased by 13% to EUR 905 million. This year was marked by nonrecurring charges of EUR 920 million. This also reflects the costs related to our organization transformation plan in various countries for an amount of EUR 550 million. It also includes EUR 308 million of other nonrecurring items, mainly related provisions for tax litigation in Brazil already booked in the first half. Carrefour net financial expenses decreased by EUR 43 million and include a capital gain from the sale of Argan shares. The normalized tax rate is broadly stable. Net income from discontinued operations reached EUR 1.1 billion, mainly reflecting the capital gain from the sale of our operations in China. Let's now look at the free cash flow. In 2019, the group posted a growth of EUR 186 million in free cash flow adjusted for exceptional items or plus 17%. Before adjustments, free cash flow fell slightly by EUR 53 million, taking into consideration, very significant cash outs related to organizational transformation projects in 2019. They represent EUR 719 million compared to EUR 478 million in 2018. Free cash flow benefited from an improvement of EUR 69 million in EBITDA, an increase in trade payables, given a higher volume of activity. Conversely, social debt has followed as a result by a decrease in the workforce, while stocks rose temporarily in December linked to more difficulty -- difficult activities than expected. On average, again, they fell in 2019 as a whole. Finally, CapEx increased by plus EUR 160 million compared to the low point in 2018 at EUR 1,725 million. This investment not only reflect the launch of new strategic projects, in particular, new commercial concept, digital and the expansion of format -- growth formats continued to benefit from selectivity and productivity measures. The increase in CapEx is cash neutral and is offset by the favorable evolution of fixed assets, working capital requirements. Net financial debt benefited from better results in 2019 and was positively impacted by the cash in -- from the closing of disposals of Cargo and Carrefour activities in China. Excluding the foreign exchange impact of EUR 70 million, net financial debt decreased by almost EUR 1 billion to EUR 2.6 billion at year-end in 2019. I would like now to concentrate on Carrefour's solid balance sheet and enhanced liquidity. In 2019, Carrefour continued its management of liquidity and refinancing operations were very successful. In June 2019, Carrefour amended and extended, until 2026, 2 credit facilities for a total amount of EUR 3.9 billion, incorporating an innovative corporate social responsibility component, CSR. This is the first operation in European retail sector. The group ambitions to be the leader in a full transition for all this, thus this is also reflecting in the financing policy. Carrefour group does benefit from a solid balance sheet, this is an important asset in the context of fast-changing food retail sector. Let's move to the dividend. The Board of Directors decided to propose a stable dividend for 2019 at 46% share -- EUR 0.46 per share. It will be offered in cash or shares at the shareholders' choice, and this will be submitted to the approval of the General Meeting, May 29. The proposed discount on dividend paid in shares would be 5% versus 10% as in conclusion. Carrefour posted a solid performance in 2019, with growth in like-for-like, ROI and free cash flow. These figures reflect the good execution of the Carrefour 2022 plan. On the back of these results, the objectives of our plan have been all confirmed or revised upwards. The group is notably targeting EUR 2.8 billion in cost reduction on an annual basis by the end 2020, which compares to EUR 2.6 billion previously. It also plans new disposals of nonstrategic real estate assets for an amount of EUR 300 million in -- by 2022. For 2020, customers will be even more at the heart of group's priorities. The teams will work constantly to increase their satisfaction to make these commitments very concrete. We have set a target of improving NPIs by 15 points over 2020 to 2022 period. This currently end up improvising attention to the customer, we will now foreshadows an improvement in like-for-like growth. We have seen it, particularly in Poland, Argentina, Brazil and Italy. We will now be happy to answer all your questions. [Eight] works.

[Interpreted] Who would like to raise the first question at this point? This is the Q&A session. We are all in great shape. Thank you.

[Interpreted] Okay, why are you still remaining in Taiwan for EUR 2 billion turnover? I mean it's not because of time, but such a small activity for the group. Is it interesting when this would be very valuable on the market? Second point, could we have more information on the formats in France because, of course, behind the evolution in France, global evolution, you've got the formats, but there could be different evolutions? And then -- okay, 2 little things. You said that you wanted e-commerce -- food e-commerce to become profitable, which means it is not profitable. Could you tell us more about this? And second point, micro for France, where are you for Supeco in France? Do you believe you're going to have a new brand for France?

[Interpreted] Well, EUR 88 million results -- euros in results. This is good for me, even for Carrefour. Taiwan, well, the question was raised for Taiwan because we left China. And so since because geography, Taiwan is close to China, why stay in Taiwan when we leave China. But in reality, there were very few synergies between Taiwan and China. So no impact because of the fact that we're not operating in China anymore. In Taiwan, we have a very good model. We've got a good team. We've got a good dynamics. We have a very high level of NPS and customer satisfaction. We have a very healthy situation over there, very sound situation. We are increasing in growth, profitability, capacity to generate free cash flow. And though we would be quite mistaken if we deprived ourselves from the Taiwan motor. The format in France. Okay. The French figures, of course, high -- high because everything is public, but reality that can defer from one format to another. We have a motor, which is very powerful, which is convenience stores. This is the very powerful motor, but you shouldn't take this as it's the continuity of a motor, which was already up and running, no. It is now extremely powerful and market share gain over the last 12 months is extremely high. We are both a very clear leader in convenience stores, and we are increasing our market shares with a profitable model and something new for Carrefour, which is the fact that we have people from other brands, franchises from other brands, which are, as you know, I'd like to join Carrefour. So when it's possible, we talk. And -- but it proved that we have the right approach to write profitability and the right value creation for them and for us. And therefore, we are carrying on to speed up today the convenience store approach, which is wonderful. Supermarkets, Pascal touched upon this. This is a format where we have a lot of transformations to be done because there was a gap in competitiveness. I mean you know this by heart. We really lost in competitiveness where most investments we made were not made in supermarkets as regards to competitors, we were lagging behind. So first priority when Caroline joined and when she took over was to bring competitiveness back into this model. And this is what we did straight away. You probably remember this had slightly impacted our results in H1 2018, if I'm not mistaken. And we had invested -- reinvested straightaway in supermarkets. And then, of course, the plan is more global. And therefore, there is an in-depth transformation. And then Caroline had to work on our offer, our organization, using more and more franchises. And this year, we'll be speeding up moving on to franchises because we can see that we have a wonderful momentum here. And there is a very strong link between -- very strong ties between center head office and local stores. So we believe in this, and we believe this could be one of the wonderful event of the year, and then there is hypermarkets. I'm told we'll get more questions, so I'm not going to dwell on this right now. Structures, Pascal said it, we accepted to bite the bullets and transforming radically. If we hadn't transformed radically, we wouldn't -- it wouldn't have been so painful. And in terms of like-for-like, it would have been more comfortable, but we would have condemned the future. And therefore, we're here for the future, and therefore, we accept to bite the bullet and put on with this pain. And we have an offer, which is more adapted in food and in nonfood, and we gave up certain number of categories, we give up certain number of assortments. We reorganized certain number of things, which cannot be seen from the outside, but this means more versatility. It means the hypermarket also contributed to the 16.5% of profitability for France. And this shows that we are stepping in like-for-like, but we are improving the profitability of our model, including hypermarkets, and therefore, this is a moment where structural reforms are there. We have also brick-by-brick reforms that we are implementing in a great number of stores. They were mentioned in the film, but also by Pascal. A few words about Supeco. We were convinced and we are still convinced that there are a certain number of geographies where traditional market format is not adapted to our customers. This is not a French conviction, by the way, because you know this is a format which we master extremely well in a different entity, which is a country, which is Romania. This is a problem that we solve progressively in Spain, which is now profitable, and Pascal decided to start this in France. You know him. You've met him reducing assortments, what is the target where we will have a shrinked assortment. But then we don't want to touch this anymore because we want a more reduced assortment, lower logistic costs. We want more operational efficiency because the bottom of the P&L is extremely important for our capacity to be able to deploy more massively Supeco. We are satisfied with the first effects -- we have first result. We still have a few adjustments that need to be made. We are fairly out, are in the deployment of this format. And we do believe that we've got a format -- I mean, no, it's a new format, but it's an adjustment of the market format for a certain number of geographies where the traditional formats were not adapted anymore. E-commerce, yes. Well, nothing new here. Food e-commerce is not profitable. It is profitable for nobody. It's not profitable for anyone. This is a reality. We decided to bet on -- which is not profitable in our sector. We decided to -- I mean, today, can we say -- I mean, in order to preserve 2 years of profitability -- global profitability because the market is still limited, I'm not going to e-commerce, no, of course, not. When you want to be a leader, you need to go for e-commerce. We did -- we produced an awful lot of work, hiring new teams, building partnerships, Google and others working on our industrial organization, our logistics and changing the front office. I mean, this is a huge amount of work that was produced. Some of you know where we were coming from. I'm quite impressed by the work achieved. We have the right level of growth. We have 4x faster than the market. So shows that when there's growth in food e-commerce, we make the most of it. We are at 30%, which is a good level. Now we are in the second phase, which is not more difficult. It's not as nice. But we need to get everything into shape, check line by line how we can improve operational performance. This is a series of actions, which are extremely concrete because we are not here to lose money on the long-term and -- at least in e-commerce, and this is something we've been working on over the last few weeks trying to adjust the model of food e-commerce, make it more profitable. The more the volumes are important, the more we will get closer to this balance and breakeven, and we are getting closer. And I'd rather suffer now having the right front office, the right team, the right partners rather than being in a situation where we were when Marie took over this function and passed it on to Amélie where we had a model where we had absolutely -- in fact, no model for food e-commerce. Now we've got one. We know very clearly what we're heading for and now we just need to keep the course.

I have 3 questions, please. It's very helpful to see the Net Promoter Score targets. And I presume that catching up with competitors is quite an important element of that. So my question is, are you at a stage today where you are closing the gap to competitors like Leclerc? If I look at external data like Kantar, I see customer perception improving for both of you. So can you maybe give us some color on the kind of the relative NPS trends? My second question is on, can you maybe give us some more color on the different moving parts for the French profit growth, the 15% profit growth? Notably the acceleration in H2, can you give us some color on what's driving that? Is it more cost savings-driven? Is it more price investments falling away? And then my final question is, again, on France. Clearly, in the year just past, you've had a lot of good cost savings, a lot of margin improvement. Some of these cost savings, well, I guess, you could say, one-offs in nature, moving from 2 head offices to 1. So thinking about 2020, do you expect your new cost savings to allow you to accelerate the French margins as well as you have done in the past year?

[Interpreted] I believe this is a conference where I can answer in French and English. But I'll be answering in French, apologies. First question was a question on the NPS and the fact that yes, quite rightly so you mentioned it. We introduced it into our indicators. We are committed to 15 points -- to improving by 15 points our NPS by 2022. So there are categories. I mean, our countries are not homogeneous. And in terms of the level of NPS or in absolute figures or in positioning on the markets, very clearly, there are countries where we are in a leading position. We are starting from better position. But right now, we are clearly a leader in customer satisfaction. This is the case in Argentina. It's the case in Spain. It's the case in Poland, where we really have these dynamics where in absolute figures and in relativity because we are comparing with competitors, we are in a good position. France has a totally different situation. We had a low added value. And compared with our competitor, we weren't very good. I mean, customer satisfaction, when we questioned our clients, 2 years ago, they told us very clearly that they preferred other brands, and they would give us a fairly mediocre mark .So we've improved this. An awful lot of work has been done in 2019. There was a strong improvement, but from a much lower starting point. So when the starting point is low -- and well, it meant that the impact on flows and sales is limited because you are not yet back to the relative competitiveness than where the client says, "Well, between the 2 leading brands, I prefer Carrefour." We're not there yet. I do not know what the level for Leclerc is exactly. I mean, it's always very difficult to have an idea of the NPS at Leclerc. But relatively speaking, we have an awful lot of work that needs to be done. Pascal is focused with his team with Marie in order to improve this NPS. And we are not at the level where the NPS is competitive enough for the customer to say, "Okay, things have changed. Now I have a net preference for this brand." And a lot of work needs to be done. But the fact that this is a group commitment, France. Part of the manager's remuneration package -- this is going to bear fruit, and this is going to speed up. I am fully convinced of this. 15% improvement of the French results as Matthieu said -- explained clearly. Why? Because last year, we have carried out 2 major efforts to speed up our economical cost reduction from EUR 930 million to EUR 1.3 million (sic) [ EUR 1.3 billion ], France has played a major role in cost savings. So we have a number of kind of cost saving plans, which have reached their goal at H2 last year. The transformation plan we've done at head offices, which have led us to more cost savings, but we did not want to have overlook. Productivity and competitivity -- price competitivity indicators show that we are investing strongly on prices we are cutting, filling the gap with our main competitors. We have 2 major parallel efforts, cost-cutting that was very high last year, investment in terms of price competitiveness and a better dynamic of our growth engines, and we have shown that. Do you want to say a few words?

[Interpreted] For the future, you're right, for the second semester, we have an acceleration of cost reduction on prices in France. You're right there. What is interesting, it's going to be the third year in a row where we have reached a good level of confidence in terms of cost reduction. It's interesting. You're right to say our ability to find new productivity pockets and opportunities and transformation opportunities. I do believe we've done our D&M control to challenge control, to make sure that we are consistent with each business unit. We have set up a specialized team -- specialized in non-merchant coming from the automotive industry to become purchasing experts, and we have started doing better negotiation. We have realized we are buying the same thing in all geographies. So we have started to pool our purchasing through all these countries in Europe, and we are going 1 step further. We have recruited a team in charge of transforming processes, lean teams to review the operating methodology of our group to be faster, more flexible, cost cutting, while improving customer satisfaction. We have a lot of targets, objectives, a lot of different themes. That's why today we claim to return to a level of confidence in terms of cost-cutting and cost balance beyond 2020. Next question, over there. Next question.

[Interpreted] I have 3 questions for you. The first question is expected the impact of coronavirus on all your businesses, we might say the fact that you left China could be an opportunity, but you have 18,000 employees in Italy. How do you anticipate all this, first off? Alexandre, you have mentioned the fact that you have the strongest result in the industry. It's going to help you to carry out M&A operations you want to go for. So where could it be? Is it going to be geographical operations or in terms of activity can we expect a new step in Brazil? Last question is CDP climate change. CDP, you have announced your good position in CDP climate change. There is another crack around, which is a good citizen, Danone. And you are interested about what -- Emmanuel Faber to announce the cost of carbon reduction in his results and results of them. Do you intend to do that in terms of food transition? Is it going to be your next step towards food transition?

[Interpreted] Thank you so much. Coronavirus, of course, it's a major concern over the last few weeks for us with 2 major concerns or different concerns, 1 from the other. The main concern is the health condition of our staff and for our customers we are working, we have set up a crisis cell for the territories and geographies which have been impacted over the last few weeks in the areas, which have been impacted by the virus. We are strictly complying with the orders of health authorities. The goal is to strictly stick to health recommendations in terms of quarantine, health protection of our staff, health protection of our customers. So we have very accurate, very precise action plans, which have been deployed actively in a number of crisis areas in Italy. But the crisis team is beyond Italy because recommendations have been given group-wide -- preventive recommendations in terms of trips, travels. Regarding these practices, we must avoid crisis team under the management of our HR manager, Jérôme Nanty, with a daily review, with special care given to Italy and beyond, but especially Italy and Europe. Another concern is the securitization and the control of our supply chain. Over the last few weeks, we have been involved in -- following the consequences of the logistical flows, we have a number of products coming from China to us. And over the past few weeks, we have imagined alternative solutions, alternative road maps. And this type of work is done by all the merchandise teams and the work is being carried on following several scenarios adjusted to the daily development of the virus. The solid results, as we said 2 years ago, it was our top priority to return to solid results, P&L. I have the -- have had the opportunity 2 years ago and I said so there are opportunities on this market, too much competition. Some partners are not very healthy and they want to get better and return to good health. So when you have a solid health, you become more offensive. We are in the second category getting better improvement of sequential free cash flow. When you show the figure, it seems simple, but a lot of work -- hard work has been done by the financial divisions include -- under Matthieu to improve the free cash flow year after year, helps us to grab new opportunities year after year. We have grabbed new opportunities after -- over the last few weeks. We have mentioned Brazil we have made 2 major moves, one on Ewally, a fintech, because we have a strong position in terms of financial services in Brazil, with both growth and profitability. And we are convinced we can become stronger. So we have made a beautiful acquisition in Brazil for Makro. Over a few weeks, we have convinced the shareholders of Makro to sell the 30 stores to have 2 years of growth ahead of us at very attractive conditions in France. We have made 2 acquisitions with Dejbox and Potager, other M&A movements. I never understood how we can announce M&A movements. We cannot announce that before they're done, but we are in a position to announce new opportunities. I can tell you we want them to be growth drivers. I want them to be growth drivers to speed up our growth -- profitable growth. So we are highly selective. We have this ability to move ahead acquire, but we must be careful with choices, and we were not in a position to do that a year ago. Thank you for your question on CDP climate change. If you're not familiar with it, it's extremely important. It's a global rating agencies, CDP climate change, managing a strong, high -- strong asset portfolio, grading all companies for their contribution to biodiversity and climate. It's quite interesting when we look about France and talking about Emmanuel Faber, my colleague at Danone. You are aware that some French players that communicate strongly on TV commercials and posts. But they cannot even enter this category, this rating of CDP climate change. It's quite interesting. I'll have to win it with the guy who plays tennis and say I don't play games, but I play very well. So let's be part of this global rating. It's quite important the global rating today as it is because the advertising -- the ad when you are a major independent player and when you want to become a strong, stronger player, customers don't understand if there is no rating customers cannot compare what they claim and what they do and compare. I want to use these rating agencies to tell our customers where we are at. We are going to keep doing it strongly, certifying, auditing. CDP climate change audits and certifies, it doesn't mean we are good, but Danone, of course, is a very strong source of inspiration. There are many orders among the other industries and players, are growing in terms of food transition. We have made a slightly different choice. Probably today we did not insist too much on food transition. Danone, for them, it's more important. We have 17 commitments. It's stronger. It's clear, highly certified. We concentrate on this because today we have very specific actions. In the future, it doesn't mean we are not going to use -- introduce new indicators as we go into our food transition effort.

[Interpreted] Nicolas Champ from Barclays. Let me return to the coronavirus issue. Since quarantine periods were studied into that, how does this translate on the profits of your stores? Have you seen that people are storing food? Or did you see a decrease of traffic inside? Could you tell us more about the CapEx levels we can expect in 2020 and the level of [ 2 tiers ] and financial costs, expenses? The third question is wider. You gave us medium-term objective costs over the last 2 years, you have started this new strategy and plan. Nevertheless, there is 1 objective, missing I find, operating margin objective that was communicated by some other retailers like Tesco. Operating income objectives when Tesco had announced their strategic plan, but also Fnac Darty Group has done it. If you have EBIT margin objective for medium term, you probably don't have it because it's not part of your latest presentation. Why don't you want to share operating margin objectives for Carrefour Group by 2020? Why not?

[Interpreted] Thank you. I wanted to avoid -- not want to avoid commenting our sales in Italy. We don't have stores in this area. Well, we have stores in the area and they have contradictory development in Italy in that area. Some days you have precautionary purchasing and other days where people stay at home and don't go shopping. So giving you a general trend would not make sense. I did not want to avoid talking about this. Today, we don't have enough feedback. Things are changing from day-to-day. What about CapEx and our CapEx policy and the amount of CapEx? We have realized there was an amount of CapEx that was too high for 2 reasons: unbearable to build free cash flow -- reliable free cash flow model, not selective enough; no possibility to manage them at the right level. So Matthieu and his teams have worked hard to look into the ideal CapEx level amount to cover all our priorities and you have realized that the number of priorities we have today is big, high, helping us to be productive, selective and to -- and lead an ambitious progress growth policy. In 2019, we've done it, and we think the standard level is changing and it's quite satisfactory. It helps us to cover these huge food transition program and level to modify our industrial system, to supply our stores, our logistical flows and support our development to invest in the logistical flows of our stores, to invest into our stores, to invest into back office, was necessary to improve the back office logistics. Our CapEx is good. It is the right level to ensure the future development of the group. Matthieu, first question?