Distribuidora Internacional de Alimentación, S.A. (DIA) Earnings Call Transcript & Summary

Welcome to DIA Group results presentation. [Operator Instructions] Stephan DuCharme, Executive Chairman of DIA Group; Ricardo Alvarez, CEO of DIA Spain; and Jesus Soto, CFO of DIA Group will be presenting this conference. I give the floor to the management of DIA Group.

Good morning. Welcome to DIA's full year 2021 results presentation. My name is Stephan DuCharme and I am the Executive Chairman of DIA Group. Thank you to all of you for joining us. Here with me today are Jesus Soto, Chief Financial Officer of DIA Group; and Ricardo Alvarez, CEO of DIA Spain. I would like to open this morning's conversation with you by expressing both in a personal and in a professional capacity, my strong dismay and concern for what we are witnessing in Ukraine. On behalf of the 37,811 employees and over 2,000 franchisee partners of DIA Group across 4 countries, we would like to send to the Ukrainian people a strong message of solidarity and support at this moment of heart-wrenching suffering, which is affecting millions of Ukrainians. We are working intensively with our colleagues to identify means by which DIA can support the Ukrainian people, particularly refugees, and we will inform about this separately in the coming days. Over the course of more than 40 years, the shareholder structure of DIA Group has reflected diverse nationalities and origins. At the current time, DIA's controlling shareholder LetterOne is an international investment company based in Luxembourg and the U.K. In reaction to the sanctions imposed yesterday by the Council of the European Union against Mr. Mikhail Fridman, I would like to transmit a message of stability. As for the other relevant information note communicated to the Spanish National Securities Market Commission last night, no shareholder of LetterOne, including Mr. Fridman, not individually nor pursuant to an agreement, holds the control of LetterOne. As such, LetterOne is not subject to any sanctions and neither is DIA. Moving on to the presentation of DIA Group's 2021 results. I will start by giving you a group strategic update. Ricardo will take a deeper dive into the significant advances made by DIA Spain last year. Jesus will then take you through the financial results of 2021. Following our presentation, we will open a Q&A session. Please feel free to send us your questions through the chat in English, Spanish or Portuguese so that we can address them fully. 2 years ago, DIA started on an important journey of rebuilding trust and fostering long-term relationships with all of the company's stakeholders. 2 years on, we have made significant progress on our strategic road map, creating and in the process of executing differentiated proximity and digital value propositions that distinguish DIA from its competitors in each of our 4 markets. Our ambition is to deliver long-term customer loyalty and sustainable positive financial results delivered in full alignment with all stakeholders' interests based on renewed community purpose and impeccable corporate governance. Throughout 2021, we made great advances in our customer promise. We have defined the proximity store we all want in each of our 4 geographies, a friendly neighborhood store with a human touch as distinct from large destination stores, focusing on refill missions, be the daily or weekly as opposed to stock up missions. We continue developing the ideal assortment, one that satisfies the maximum of consumer needs in a small store, one that focuses on fresh to drive the refill mission, one that features private label of the highest quality, decreasing the cost of the average basket for our customers and highlighting the DIA brand, and one that demonstrates a value-for-money philosophy. We have implemented a new franchise model, which reflects a spirit of true partnership between DIA, providing system processes and services on the one hand and the motivated store operators on the other hand. Operators who are small community impresarios, the 2 sides united in a long-term win-win relationship. All of this is accompanied by a relevant digital and technology presence, be it in-store processes, e-commerce, express delivery, services to franchisees or otherwise. On the financial side in 2021, we completed the consolidation of a stable capital structure in a landmark capitalization and the refinancing operation completed jointly with our financial partners. In short, we are building the company that all of our stakeholders want with relationships based on trust and transparency aimed at achieving superior and sustainable results for all. Jesus will comment in detail on the key operating and financial results of '21 later in our presentation. So I will continue with the operational updates on Page 8. Last year, we worked consistently and systematically to execute the commercial franchise, operational and other initiatives of the business transformation road map announced in 2020. I am pleased with the significant progress the teams have made over the course of 2021, and I would like to take this opportunity to thank not only the senior leadership teams, but all of our 37,811 employees and over 2,000 franchisees for their hard work and dedication to building the new DIA. Based on new customer value propositions that we defined in each of our 4 geographies, we set out on a large scale store transformation program in 2021, initially in Spain, but then also including Portugal and Argentina. In total, we transformed over 1,000 neighborhood stores in Spain, Argentina and Portugal over the course of 2021. The customer response to the new value propositions and the refreshed stores has been very positive, and the sales uplift encouraging. We feel that we are on the right path towards differentiated proximity and digital offerings across our communities. We are, of course, closely monitoring the evolution of customer satisfaction metrics as well as sales densities down to every single refurbished store. This is also linked to stringent CapEx controls and monitoring of investment returns across the group. In Brazil, we are currently testing a new store concept with a view to starting a full-fledged store refresh program in late 2022. The continued evolution of an optimum assortment in '21, national, regional and even local, in accordance with each country's customer value proposition is at the core of what our teams are doing. This task of covering customer necessities and satisfying customer needs never ends. We are maintaining and even reinforcing our commercial focus on fresh products, which drive the neighborhood refill mission. The same applies to our next-generation private label. We refer to these products as DIA superbrands, and we launched 2,000 of them in 2021, which feature the highest level of quality and a fun, fresh and eye-catching packaging. Critically, at this time of higher economic uncertainty, the DIA superbrands offer significant value for money to our customers. Let us speak for a moment about the new franchise model, which we introduced in 2020. The purpose of the new model was to reset fundamentally the relationship, operating, commercial and human, between the DIA Group and its franchisees. The new model reflects a true partnership between DIA Group on the one side and motivated store operators on the other side, working hand-in-hand to better serve customers with a sustainable bottom line for both DIA and its franchisee partners. In 2021, we rolled out the new franchise model in Spain, Portugal and Argentina, and today close to the full franchise network in all 3 countries operates in accordance with the new model, which does differ from country to country. In Brazil, we reset the model in the second half of 2021 and are currently rolling it out. In addition, and based on the new model, 2021 has been an important inflection point in stopping the outflow of franchisees from the DIA system and expanding the presence of franchisees within the system. Both existing franchisees who are taking on additional stores as well as new franchisees attracted to the new DIA model. Based on the new model, we are now again converting company-operated stores into franchise-operated stores and expect to execute future new store openings exclusively under the franchise model. Finally, we have introduced regular measurements of the satisfaction of our franchisees and engage with them in a series of different forums in order to ensure the continued partnership nature of DIA's relationship with our franchisee partners. On the online and express delivery side, in 2021, we reinforced our presence in both channels now available in all of DIA's markets. E-commerce and express delivery complement the geographic proximity of our neighborhood stores with digital proximity, adding up to long-term and increasingly personalized omni channel customer relationships. In 2021, we made important strides in strengthening our technology and product leadership teams to accelerate the rollout of our digital offers -- of our digital offer. In terms of our loyalty programs, we took a conscious decision in 2021 to focus on fixing the basics first and on starting to assemble best-in-class data capabilities, including with the incorporation of a group chief data officer and the incorporation of customer and growth officers in each country. I hope this overview of DIA's Group's initiatives in 2021 gives you a sense of the progress made over the course of last year against the company's strategic roadmap across our 4 geographies. I am now very pleased to hand over to Ricardo Alvarez, CEO of DIA Spain, to share with you a deep dive of the main initiatives he and his team have been implementing in Spain and the excellent results these initiatives are delivering for the group. Ricardo, over to you.

Thank you, Stephan, and good morning, everyone. First, I will go over some key data about the business in the Spain. We currently operate almost 3,800 stores under different format. 71% of our stores are operated under a franchise model. We have over 23,000 employees. And in 2021, net sales in Spain represented close to 65% of group sales. As Stephan mentioned before, we are going through a deep transformation that started back in 2020. We communicated certain goals and initiatives that we are seeking to execution in the short and medium term. After 2 years of intense work, I would like to share some of the most relevant advances we've made this year. Based on these advances, we strongly believe that we are paving a consistent path for future growth. We have rolled out our new store concept in 800 stores. This rollout responds to one of the pillars in our customer value proposition to be the most comfortable, easy, fast and modern shopping experience. Later, I will give you some more details about the initial positive results we are seeing. Regarding to the assortment redefinition, we are reinventing all our own brand products, developing this year over 1,100 new SKUs. These new products are currently available in all stores in Spain. All our new products feature one of the highest quality level in Spanish market, offering to our customers an extraordinary value for money proposal. All of them represent the new DIA brand spirit with a great quality design and a very firm and modern image. In the context of this assortment improvement, we are rethinking all our freshness assortment, eliminating intermediaries, traders in purchasing processes, working directly with local suppliers and improving our whole supply chain, working currently with daily delivery frequency in all our freshness products. This way of working is key to warranty the highest quality for our customers and let us win this year, 1 point percent in sales share in freshness. To operate our new customer value proposition in this new store concept, we strongly believe in our franchise model. We created a new franchise model during 2020 and rolled it out in 2021 to our franchised network. This is our modern, focused in sales, cash flow protection and a better services offered to all our franchisees. Another key point in our CDP is to become DIA in a company with a clear customer orientation. According to this, we started a journey last year to advance in our future omni channel shopping experience reinforced with a strong loyalty club. We are starting to build a new technological platform to increase our e-commerce capabilities, which combines different services and experiences for our customers. And all of it based in our loyalty club. E-commerce growth in the Spanish market is a reality, and we want to grow within. This 2021, we increased 90% of our online sales compared to year 2019. And all of these mainlines, of course, in permanent operational improvements in the home supply chain, including inventory management, optimized logistics and lean operations. As told previously, we are optimizing our assortment, made of a mix of 50% brands and 50% of our DIA brand. In this DIA brand development, we have completed nearly the half of our goal, and we expect to achieve all the new products by the end of 2023. Frequency due to an excellent quality offer in our freshness products and trust and loyalty due to our new DIA brand products will generate the perfect balance to win and retain customers in the long-term. According to one of the main pillars in our customer value proposition, being the most comfortable, fast and modern shopping experience, we consolidated this year our new store concept, accelerating the rollout in another 300 stores and ended the year with 800 new concept DIA stores. We have currently 36% of the stores implemented with the new concept, achieving 70% this year and ending the transformation of the whole DIA network in 2023. The results we are seeing in terms of growth in sales are encouraging. To give you some metrics of the positive performance when we compare stores under the new model to the rest stores under group, new concept stores are achieving, on average 10% higher like-for-like growth. We truly believe that when all these stores are transformed to the new concept, we will be the wider player in proximity in Spain with 2,200 stores with a totally renewed store image and a reborn DIA brand. This will elevate the proximity shopping experience in all our customers and place us in a very competitive position in the Spanish market. Moving to Page 13 and the new franchise model. After 3 years of store network rationalization, we have reinvented our franchise model and started in 2021 to transfer stores back into DIA franchise model. 57% of the DIA network in Spain operates under the new franchise model. Practically, all the network is already operating under the new model, through which DIA is resetting the relationship with these franchisees, giving financial support, working together to solve problems, placing our customers at the heart of everything with them and offering them recruiting and training programs to develop their teams. We have 3 different sources to sustain the new model. Existing franchisees who want to become a multi-franchisee with 2, 3 stores. DIA employees who want to run their own business and new external profiles with entrepreneurial skills and management capabilities. Future growth will also come from new store openings. But in 2021 and 2022, we will be mostly focused on the reorganization of the store network. New openings will be offsetting only the closings of non-idea location. The new store concept that we are implementing is a 300-600 square meter business with a minimum sales density of EUR 4,000 per square meter. We require less than 4 years payback to an investment, but I want to remark that we do not plan accelerating the openings program before 2023-2024. And just to finish, year 2021 has been key for DIA to consolidate our new proximity model in Spain with outstanding results in all customer perspective attributes, totally aligned with the main pillars in our customer value proposition. Due to these good results in customer perception and sales, we will accelerate the new model rollout in order to have the whole network transform in 2023. I'd like also mention that as a result of the evolution and transformation that we are leading DIA as a brand. We recently obtained the third highest growth rate in Spain in brand value according to Kantar Brands with a 32% increase in the year. And this is all from my side. Before I finish, we have prepared a short video to show the new look and feel our new proximity concept. Thank you all for your attention. [Presentation]

Thank you, Ricardo, for the comprehensive explanation of the excellent work you and your team have been doing for us in Spain. Moving now to our other geographies and starting with Portugal. The road map implementation is on track, driven by similar transformation initiatives to those applied to Spain. Portugal is a highly competitive marketplace where we want to be present and where we can be profitable and self-financed with no support from the parent company. 112 stores were refurbished in Portugal in accordance with the new customer value proposition and store concept in late 2020 and over the course of 2021 with even better results than in Spain. We are seeing an even stronger sales uplift than initially expected, always compared to a control group of stores and in any case, exceeding market performance. In terms of assortment optimization, and particularly in relation to our own brand, we developed over 400 SKUs in Portugal during 2021, prioritizing quality and good value for money. Over the month of January 14 superbrand products were awarded with the "Sello sabor Do ano 2022" flavor the year 2022 Seal, a top award in the retail industry, which reinforces the quality of our superbrands in Portugal. Based on the adaptability shown in response to COVID-19 last year, we have accelerated our online offering in Portugal with a very positive response from customers. According to the DECO Survey, Minipreco is considered as the best online food option in Portugal by customers. Finally, in terms of the new franchise model, a great effort has been made by the Portuguese team to roll out the model to 100% of the franchise network. Let us jump now to the other side of the Atlantic. DIA, Argentina is a profitable and self-funded business for DIA Group. The business and its results reflect a historically strong DIA brand value equated with excellent price perception and reinforced by high-quality owned brands at good prices. All of these brand attributes were incorporated into a modern DIA value proposition and store concept defined in 2020 and expanded to include a strong fresh offer and a digital presence. Our colleagues in Argentina rolled out the refreshed value proposition and store concept to 168 stores in 2021 with very positive customer reactions as reflected by increased customer frequency, higher fresh participation and a robust improvement in NPS. We expect to maintain the same pace in 2022. In addition, our team in Argentina has demonstrated significant flexibility and capability of adapting the DIA offer to a continuously changing macro environment and to keep DIA customers close to ourselves in a fairly volatile context. Regarding Brazil, this market represents a great opportunity for DIA where we think we can make a difference as the leading formal proximity and digital player. In 2021, we have been focused on assortment optimization and fresh produce improvement. What we call the "Projeto Pereciveis" Perishables program is already implemented in 85% of the store network. In relation to our own brand program, we have developed approximately 450 private label superbrands during 2020 and 2021 in Brazil. Brazil is currently testing the new store model for implementation in late 2022 based on a refreshed value proposition and the new franchise model is now fully developed and ready for rollout in 2022. Jesus will touch on cost efficiencies, excuse me, and streamlining operations as part of the financial update as well as DIA's current stable capital structure. Allow me to move to Page 27 and the DIA Group's Board of Directors. I have the pleasure and honor for sharing a Board of Directors, which features 8 talented and experienced members with a strong commitment to DIA Group and the achievement of our strategic and financial objectives. In 2021, Luisa Delgado and Vicente Trius joined us, Independent Directors who bring with them a strong track record of excellence and success in the consumer goods space and retail sectors. We work together as a team and hand-in-hand with the company's management Board. 5 of the 8 Board members, 62.5% of the Board are independent with one Board member classified as other due to the fact that he previously served as Executive Chairman of DIA Brazil. In terms of ESG, in 2021, we have defined what sustainability means for us and how it translates into the relationship with our stakeholders. These reflections have been captured in the first ESG strategy plan for DIA Group based on 15 essential issues covering our core value chain activities. The plan not only ensures that key risks are tackled, but also that unique competencies are levered to create value for all of our stakeholders. Based on our strong proximity business model, we believe we can have a differential impact in the communities where we operate by facilitating access to a high-quality diet for everyone regardless of their budgets or where they live. We can also make a difference by creating employment and self-employment opportunities for a diverse group of individuals across our 4 geographies. ESG is a top priority for us, and we will be reporting to you regularly about our ESG initiatives. I will now hand over to Jesus who will take you through our financial results for the year. Jesus, over to you.

Thank you, Stephan, and also thank you, Ricardo. Good morning, all. I think the important topics of those that has been mentioned by Stephan and Ricardo, therefore, I'm going to do a quick overview of the group's financial results of the year. The financial results show the resilience of adjusted EBITDA margins in the context of increased energy and raw materials costs and decrease in net sales, driven fundamentally by an extraordinary 2020 in terms of sales due to COVID-19 numbers [ talking ]. Our net losses were reduced by 29% during 2021 compared to 2020, supported by the operational improvements and better financial results driven by actions taken to mitigate foreign exchange risk in LatAm economies. Sales evolution during 2021 was impacted by a complex and challenging 2020 comparison base due to mobility restrictions during COVID-19 lockdowns in all 4 markets where [ regularly ] present. We saw a positive 5% increase like-for-like when comparing 2021 sales with the peak pandemic levels of 2019. Net sales evolution was also affected by a rationalization of our store network with 230 less stores compared to December 2020, which represents a 3.8% drop in the total number of stores. If we compare sales surface values, the experience -- we experienced a reduction of 3% compared to 2020. Net sales suffered from 9% devaluation of the Brazilian real and 11% of the Argentinian peso. Operational improvements allow us to reach a gross margin of 22.4% in 2021, increasing 60 basis points from 20.8% level of 2020, thus offsetting the 3.6% decrease in net sales. Adjusted EBITDA margin reached 1.9%, 10 basis points higher than the levels seen last year in spite of disproportionate rise in energy prices and the impact of one-offs OpEx costs incurred by the stores been remodeled. We will analyze this in passing, in more detail later. The resiliency and broadness of the operational improvements and the cost discipline initiatives we are carrying out can be better seen in absolute terms. Adjusted EBITDA, as the mostly flat, increasing by EUR 1.4 million to reach EUR 124.3 million, but more than offsetting the EUR 235 million drop in net sales and EUR 10 million drop in gross profit. We believe this is a clear sign that we are creating the right foundations for our recovery and long-term profitability. On Page 32, you can see the evolution of gross sales under banner and its different elements. The figure of comparable gross sales under banners, when we adjust it with internal price inflation in Argentina, dropped by 11.8% during the year. 3.6% of this is explained by like-for-like sales evolution, 2.2% by store openings and closings and 6% by foreign currency devaluation. If we analyze a 3.6% like-for-like decrease, Spain and Portugal where the countries were more affected by the challenging 2020 comparison, showing minus 5.2% and minus 4% like-for-like drops, respectively. When compared to 2019, pre-pandemic levels, we can see good improvements with plus 4.9% in Spain and plus 2.3% in Portugal. Brazil and Argentina showed a resilient performance in challenging macroeconomic environment with like-for-like sales similar to those of 2020. In terms of adjusted EBITDA, the group reached 1.9% margin during 2021, which means a slightly increase compared to 1.8% in December 2020. But as you can see on the right side of the Slide 32, the margin in 2021 is negatively impacted by additional energy cost of near EUR 40 million and one-off OpEx related to transform the stores of EUR 16 million. Isolating these effects, the adjusted EBITDA could have reached EUR 180 million, which represents a 45% increase compared to 2020, an improvement of the adjusted EBITDA margin of 110 basis points, reaching 2.7% of net sales. I think that this figure show the progress of our work to improve growth profitability after it was penalized by issues affecting comparability of figures between this year and the past one due to the additional energy cost and OpEx incurred in the stores transformation. If we see the net sales breakdown, we can see the first effect of franchising process initiative at a group level. The weighted franchise DIA store sales increased 1.2%, which lead us to be confident that the new franchising model is moving in the right direction based on our win-win model with the partnership of our franchisees, as mentioned before by Stephan and Ricardo. Today, online sales are down 2.3% of our total net sales, a slight increase compared to 2020 when they represented 2% of sales. This is a positive trend, considering that 2020 was extraordinary in terms of offline sales to mobility restrictions. Focusing on the performance by country, we can see that the net sales in Spain were 6.6% down, impacted by 3.3% fewer stores. But compared to 2019, the evolution of like-for-like sales shows a positive 5% increase, as mentioned before, reflecting the benefits of the transformational business initiatives that also Ricardo has mentioned before. Adjusted EBITDA margin was stable at 2.2%. But if we isolate extra energy cost and OpEx related to 800 transformed stores, the adjusted EBITDA margin will be 3.4%. In Portugal, net sales dropped 5.9% with 11.7% fewer stores. Portugal closed 8 stores in 2021, but also closed a Clarel business in the country with 71 stores. EBITDA was penalized by 70 basis points reaching 2.7% margin due to lower sales, EUR 3.6 million extra energy cost and EUR 0.4 million OpEx for remodeling of 112 stores. Excluding these effects, the EBITDA margin would have reached 2.7% when compared with 2020. In Brazil, net sales decreased by 13.7% following the strategic closure of underperforming stores, which entails a drop of 5.4% in the number of stores during 2021. Additionally, a 9% devaluation of the Brazilian real must be added to these closures. Brazil still shows negative adjusted EBITDA, but improved by EUR 3.2 million compared to 2020. The business was able to offset the negative effect of legacy franchise issues that were already solved to reset the relationship with franchisees. As mentioned also before, Argentina showed an extraordinary performance in 2021, increasing net sales by 28% on the back of the operational and commercial initiatives put in place and inflation levels higher than currency devaluation. In terms of EBITDA margin, it increased 50 basis points compared to the year 2020, up to 2.9%, driven by a disciplined cost reduction initiatives. Regarding adjusted EBITDA breakdown by country and the impact that one-off items had on each of them. During 2021, we focused on protecting margins despite the decreased experience in net sales. To summarize, DIA Group reached an adjusted EBITDA of EUR 124 million which means 1.9% margin over net sales, keeping 2020 level in a context of increasing price of raw materials and electricity. Excluding these extra costs, adjusted EBITDA margin would increase 80 basis points. This extra operating costs were more noticeable in Spain with the amount to EUR 50 million of which 70% were related to additional energy costs. These impacts caused a drop in 120 basis points in adjusted EBITDA margin in Spain. If we see the cash flow evolution for 2020 and 2021, we ended 2021 with EUR 361 million of cash and cash equivalents, near -- EUR 14 million more than last year. Cash flow from operations amounted to positive EUR 74 million, with a positive working capital inflow of EUR 35 million due to better payment conditions and despite a decrease in sales. As we announced during the capital increase process, proceeds coming from the transaction has been allocated to the execution of the transformation plan with CapEx investments of EUR 245 million during the year. This increase in CapEx is the result of the store transformation program deployed where the company has invested near EUR 140 million to transform more than 1,000 stores, EUR 56 million related to ongoing CapEx and EUR 35 million related to new openings. As mentioned before, we are very focused on accelerating investment on store transformation, especially in Spain, but keeping a disciplined CapEx control to ensure that the company maintains appropriate cash levels. In terms of available liquidity, we ended up with more than -- more than EUR 500 million as of this end of 2021, 70% in cash and cash equivalents. As you know, and as Stephan has mentioned earlier, in September, we have closed debt refinancing agreements with the lenders. As a result, we reduced its net financial debt by 68%, and we have closed the year with EUR 400 million of net financial debt compared to EUR 1.3 billion in December 2020. Current net financial debt adjusted EBITDA ratio dropped from 10.4x to 3.2x, which translates into stable capital structure to overcome this transformation. At the end of the year 2021, DIA complied with the covenants included in the syndicated financing, leverage ratio, CapEx and restructuring covenants. And with that, I now hand back to Stephan for some concluding remarks. Thank you.

Thank you very much, Jesus. In concluding our presentation this morning, 2 years ago, DIA has started on an important journey of rebuilding trusts and fostering long-term relationships with all of the company's stakeholders. 2 years on, we have made significant progress on our strategic road map, creating and in the process of executing differentiated proximity and digital value propositions that distinguish DIA from its competitors in each of our 4 markets. Our ambition is to deliver long-term customer loyalty and sustainable positive financial results delivered in full alignment with all stakeholders' interests based on our renewed community purpose and impeccable corporate governance. Thank you for your attention. With this, we would like to open up our session, our discussion today with a Q&A session. Thank you.

Thank you, Stephan. Let's see, first question we got is about the online market. Online market share growing, how is it growing compared to last year and what measures are to be taken in the future to provide good service to e-commerce customers?

We, at DIA Group believe that our 6,000 stores provided with a capillarity and starting point to be an important player in this space. We are active in these channels in all 4 countries with slightly different digital offerings that combine regular e-commerce, express delivery and third parties in combination with our proximity stores in the neighborhood to provide exactly what the customer wants, which is either a small purchase delivered or available in store very quickly or a larger purchase, which is available later in the day or next day. The offering depends on the specific market as we are there to serve local customers. I think with respect to Spain, it would be only right to ask Ricardo to touch on his e-commerce and digital offering in Spain.

Yes. In Spain, talking about the Spain, we increased 90% online sales this year compared to 2019. And our plan is to grow in this speed for the next year. For this, we have started to build a new technological platform. And with this, we wait for -- we expect to increase our capabilities, combine different services as you say, as a [ BigBasket ] and express delivery, and of course, accounting with our partnership, for example, with this express delivery companies as Minipreco.

Thank you. In Spain, you've already remodeled 800 stores and target to reach 2,200. How the rest of the network in Spain?

Yes, we finished this year 800 stores. The plan is to continue with this transformation plan to our new concept. This year, we plan to reach another 800 stores and for 2023 the rest. So we could say that at the end of 2023, we will have finished all our network stores and transformed to the new concept. This is the plan.

In Spain, are you seeing competitors passing cost pressures through prices? And how do you see the competitive environment?

This is a real really difficult question, but world is changing in speed never seen before. So in this context, all our production costs are increasing and due to the inflation of raw materials and the situation with extra energy cost, and all the competitors are doing great work as well with us. And we are committed to our customers and working really, really hard as a company to be more efficient in cost as a company and to absorb as much as possible this production cost increasing and not to pass to our customers. And I think that the key is to be more and more efficient as a company is just trying to absorb this and don't pass to the customer. So we are really struggling really hard to contain the situation.

Can you give us more color on the newer store format that you want to roll out in Brazil?

Why don't I take that question? And as with all of our geographies, the store -- the new store format starts with a new value proposition, and that is what was completed in Brazil last year. As part of that, we did significant work around the assortment, the "Projeto Pereciveis", as I mentioned earlier, rolling out fruits and vegetables, other fresh products to the stores. And with that having rolled out, yes, we are currently testing a new store concept, which brings everything together -- the value proposition the assortment, a different look and feel in the store, the hardware, the software, the linkage to our express delivery proposal, and we have approximately 10 stores in test mode at this point. We are pleased with the results. We are measuring the results daily. And should whoever is asking the question, be in Brazil, I recommend they go see the store in [indiscernible] in Sao Paulo and speak with Bruno, the franchisee. That is my favorite store amongst the test stores at this point.

In terms of CapEx, how much do you intend to spend in 2022? And how much of it in Spain and Brazil?

Thank you, Miren. As we are willing to do the same amount of transforming stores than in 2021. The amount of CapEx is going to be initially similar that we have had in 2021. But of course, as I have mentioned before, managing the CapEx according to the cash flow coming from the operations, managing liquidity of the company. And as I mentioned before, it's going to be mostly in Spain. That's a transformation of CapEx.

And in your opinion, and with the huge restructuring of the stores that is taking place, when do you think the net result will start to be positive?

Well, as soon as possible, I would say. I think it's not going to happen in 2022, but as soon as possible.

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Currently, that is not under our plans.

Sorry, one more question regarding -- do we have a contingency plan in case LetterOne investment holdings is considered fit for asset freezing in the European Union, especially since both Fridman and Aven are part of the founding members and Board of LetterOne?

As I said in my introductory comments, no shareholder of LetterOne, including Mr. Fridman and including Mr. Aven, not individually nor pursuant to an agreement, holds the control of LetterOne, and as such LetterOne is not subject to any sanctions and neither is DIA.

One technical question. [Foreign Language]

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Some shareholders claim that that they don't have visibility on the strategic plans and future growth targets for the company. Could you explain some of the 2022 and beyond targets?

Why don't I take that one? I think it goes without saying that we have been living and we are currently living in extremely volatile times be it COVID or otherwise, and therefore, to be making detailed forward-looking forecasts is not particularly productive for anyone. In terms of our strategic objectives, as we have said in the past, our objective as a management team, as a Board of Directors is to create the preferred proximity and digital shopping experience and with that creating leading food retail players in all 4 of our geographies. Our plans are structured with that in mind. We are systematically working through each of geographies to achieve that objective sooner rather than later. And what I would say is we will be sharing those results with you in real time as possible to take you with us on this journey, as I said creating that preferred proximity and digital experience and overall customer experience and a leading presence in the 4 countries. We will take you on that journey with us.

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Yes, we are having this idea in mind. So of course, our franchisees are a key partners for us. We are really business partners. We are thinking that the model. I think that we have now a very strong solid concept just to work together and to improve together. And of course, next steps will be to extend the e-commerce and the express delivery options and services for our customers through our franchises, and they are really, really interested. We are finishing the concept, and we will have it ready in this year or next.

If I can add to that in the other 3 geographies, I mean, given that we have a real partnership with the franchisees, they are asking us about this. They would like to be part of this. And we will do it jointly with them in all of the geographies as soon as we can.

Do you feel comfortable with current headroom available in working capital lines for the growth of business expected for this year? Or would it be necessary to ask for the higher credit limits?

Yes. Currently, we are comfortable with the current lines. So we are managing our business with that line. And for the next year, we don't expect to increase that lines. If we consider at any moment that that would be necessary, we will talk with our financial partners to work on that.

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Now with that, we would like to close today's 2021 results presentation. Our Investor Relations team remains at your disposal at any time to take further questions. We look forward to engaging in further dialogue with you going forward. And if I could spontaneously suggest that we will find an opportunity to take you to visit our new stores, be it in Spain or in one of the other countries, that would be a pleasure for all of us here. Thank you very much for your attention.