InRetail Perú Corp. (INRETC1) Earnings Call Transcript & Summary

Good morning, and welcome to InRetail Perú's Fourth Quarter 2024 Conference Call. [Operator Instructions] And please note that this call is being recorded. After the presentation, we will open the floor for questions. [Operator Instructions] Before we begin, I would like to remind you that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. Joining us today from InRetail Peru are Mr. Juan Carlos Vallejo, Chief Executive Officer; Mr. Marcelo Ramos, Chief Financial Officer; and Ms. Andrea Fabbri, Investor Relations Officer. They will be discussing the quarterly report distributed by the company yesterday. If you have not yet received a copy of the earnings report, please visit www.inretail.pe on the Investors section. There is also a webcast presentation to accompany the discussion during this call. If you need any assistance, please contact the Investor Relations team of InRetail Peru. Please be advised that forward-looking statements may be made during this conference call, and they do not account for economic circumstances, industry conditions, the company's performance or financial results. As such, these forward-looking statements are based on several assumptions and factors that could change causing actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the quarterly report, which was issued yesterday. At this point, I would like to turn the call over to Mr. Juan Carlos Vallejo, Chief Executive Officer of InRetail Peru for his opening remarks. Mr. Vallejo, please go ahead, sir.

Thank you, Rocco. Good morning, everyone, I'm Juan Carlos Vallejo. Thank you for joining InRetail Fourth Quarter Earnings Call and for being with us at this difficult time. Joining me today are Marcelo Ramos, our Chief Financial Officer; and Andrea Fabbri, our newly appointed Investor Relations Officer. First of all, as you might be aware, I would like to inform you that we had an unfortunate tragic event in Real Plaza, Trujillo this past Friday, where the ceiling of our food court area collapsed, the causes of which are yet under investigation. As a result of this, unfortunately, 6 customers passed away and multiple were injured. I want to reiterate our deepest condolence to the families of the victims and to all of those affected by this tragedy. We're extremely saddened by what happened. We are working hard on the ground since moment [indiscernible] to supporting the recovery efforts and to assist all involved; victims, relatives, employees and customers. We understand the relevance of this situation. We will not spare any resources to help those in need. In line with that, Real Plaza is creating a dedicated fund with a commitment of PEN 20 million to warrantee the effective and expedite coverage of medical and complementary expenses for all of those affected by this unfortunate event without affecting that the company will cover for our compensations. This fund will be managed by [indiscernible] a recognized and prestigious Peruvian trust company regulated by the Superintendencia del Mercado de Valores. In parallel, we have already started the investigation and are working hand in hand with the authorities and external independent experts. It is a process that will take some time, but we intend to get to the bottom of this. We are respectful and mindful of the victims and their families. We believe it will be premature even irresponsible on our side to venture any conclusion at this time. Given only a few days have passed, we are in the very early stage of this process and given the need to respect the legal proceedings that are taking place. We will not further comment on this topic in this call. As we continue to understand what happened and the potential impact to our operation, we remain committed to keeping you informed. Thank you for your understanding. Now I will continue with a brief executive summary of our results, and then Marcelo and Andrea will walk you through our earnings presentation. Overall, 2024 was another challenging year for the Brazilian economy with a very slow first semester combined with a slightly more encouraging second semester, affecting domestic consumption in general. Similar to prior quarter, during the first quarter, the Peruvian economy continued its cautioned recovery with inflation under control, interest rate gradually reducing and the former private labor market improving. This context did not hinder our progress in the execution of our strategic plans. I would like to stand out the execution of our expansion plan including the opening of our Mass and Makro stores as well as of our pharmacies and the opportunistic acquisition of Erbi in Chile. Also, we strengthened our logistic capacity including the progress made in the contraction of our Pharma Distribution Center and the advances in our digital platforms. As it relates to our financial results, InRetail increased 3.9% and 7.6% in consolidated revenues and adjusted EBITDA respectively, slightly above our initial guidance in terms of adjusted EBITDA. Our Food Retail segment on the one hand, grew 6.7% in revenues and 3.9% in adjusted EBITDA for the full year 2024. We saw positive same-store sales growth of 2.5%, continue gaining market share positions against peers. Adjusted EBITDA growth was affected by incremental expenses from our new store opening as well as by the increased representation of our emerging formats in our revenue mix. As anticipated in our previous earnings call, our Pharma segment experienced a more improving second semester from a low comparison basis from last year and a strong winter campaign. Our Pharma segment managed to recoup its performance for the year, with growth in revenues and in adjusted EBITDA of 0.2% and 8%, respectively. Finally, our Shopping Malls segment registered a 6.5% growth in revenues and a 9.2% growth in adjusted EBITDA. Looking forward in 2025, we're expecting InRetail to achieve on a consolidated basis, a high single-digit growth in revenues and a mid-single-digit growth in adjusted EBITDA. This does not include any potential direct or indirect impact from the unfortunate event mentioned before. With that, let me pass the word to Marcelo.

Thank you, Juan Carlos. Good morning, everyone. Thank you for joining us on this call. Today, we will review the main highlights of InRetail's fourth quarter and full year results for 2024. I would like to take the opportunity to introduce Andrea Fabbri, our newly appointed Investor Relations Officer. Prior to her appointment, Andrea worked in the Corporate Finance and Investor Relations teams at InRetail for 8 years, working in several of our strategic projects and prior earnings publications among other things. Now please turn to Page 4 in our earnings presentation to start reviewing our consolidated financial results. In the fourth quarter of the year, InRetail reported a solid growth in revenues of 7.5%. This growth results from a double-digit growth in our Food Retail segment, a high single-digit growth in our Shopping Mall segment and a moderate growth in our Pharma segment. In terms of adjusted EBITDA, we recorded a strong double-digit growth of 13% compared to Q4 '23, mainly explained by the growth in revenues, the improvement in gross margin and the increased fixed cost dilution despite incremental operational expenses from the stores -- the new stores opened, particularly in our Food Retail segment. As it relates to net income, we registered an 8.8% decrease in the quarter. This decrease is explained by 2 noncash and nonoperational effects, a mark-to-market effect in the evaluation of investment properties and a net FX effect. This quarter, we recorded a mark-to-market gain of PEN 28 million compared to a gain of PEN 82 million in Q4 '23. As it relates to the FX effect, during Q4 '24, that Peruvian sol depreciated around 1.5%, while during Q4 '23, it appreciated around 2%. Movements in FX generated noncash impacts in our P&L and are mainly related to our dollar-dominated store lease liabilities registered in our balance sheet under IFRS 16. Excluding these 2 effects, net income would have grown in line with our adjusted EBITDA. As anticipated in our previous earnings call, Q4 '24 ended being a quarter with similar trends to those observed in Q3 '24. The progressive recovery in consumer spending observed in June continued throughout the following months and extended into Q4 '24, although still partially explained by the temporary inputs in consumption for the pension fund withdrawals. Overall, 2024 was another tough year for the Peruvian economy as it combined a very disappointing first semester with a more encouraging second semester. Even in this context, our 3 segments managed to deliver growth, both in revenues and in adjusted EBITDA. We ended the year relatively in line with our consolidated guidance of mid-single-digit growth in revenues and slightly exceeded our initial guidance of mid-single-digit growth in adjusted EBITDA, achieving a high single-digit growth for the year. Looking forward to 2025, in terms of guidance for InRetail at a consolidated level, we are expecting a high single-digit growth in revenues and a mid-single-digit growth in adjusted EBITDA, resulting from slight pressures in margins in our Food Retail and in our Pharma segments from a change in revenue mix as well as some incremental expenses related to our expansion plans, all of this as part of our overall strategy. This initial guidance as Juan Carlos mentioned does not incorporate any direct or indirect potential impact related to the unfortunate event outlined before. Now please turn to Page 5 to review our financial and operational snapshot of our consolidated figures. In terms of contribution, our Food Retail segment gained participation in revenues against our Pharma segment relative to 2023. However, in terms of adjusted EBITDA, our Pharma segment gained around 100 basis points against our Food Retail segment for the same comparable period. Now please turn to Page 7 to continue with InRetail highlights for 2024. During 2024, our businesses once again proved the resilience in another tough year for the Peruvian economy, which affected general domestic consumption. InRetail delivered a moderate growth in revenues even with a very poor economic environment during the first semester and top of industry profitability, allowing us to attain a high single-digit growth in adjusted EBITDA. Our Food Retail segment posted a high single-digit growth in revenues with a lower growth in adjusted EBITDA, given a slight compression in margins consistent with the consolidation of our multi-format strategy and also impacted by incremental expenses from the new store opening. All of our formats posted positive same-store sales growth. We are the only food retail player in Peru with a sizable multi-format platform allowing us to serve distinct customer purchase missions with formats that offer strong growth fundamentals and cash return fundamentals as well. Our Pharma segment, on the other hand, registered a flattish growth in revenues, combining a very challenging first semester with a more encouraging second semester, given the strong winter campaign and the progressive improvement in consumption. In spite of that, our Pharma segment managed to post a high single-digit growth in adjusted EBITDA from an improvement in gross margin and continued operating leverage. Finally, our Shopping Malls segment registered a solid high single-digit growth, both in revenues and in adjusted EBITDA. During the year, we also continued investing in future growth, expanding our platform and strengthening our leadership position across segments in Peru. In Food Retail, we opened more than 360 Mass stores reaching a network of 1,250 stores nationwide and opened one new Makro store in Lima. In our Pharma segment, we resumed store openings after a few years focusing on nationwide store reconversions into our new formats in Mifarma Service and Mifarma Beauty ending the year with approximately 100 stores opened with 2,400 pharmacies as the country. To date, over 40% of our store footprint is already in the Pharma Self-Service and Pharma Auto Service or in Pharma Beauty. In our Shopping Malls segment, we initiated our expansion projects in 15 months. Finally, we acquired Erbi, an opportunistic purchase of a small operation that we see as a low-cost opportunity for us to explore, learn and potentially grow in a market of interest to us. As mentioned in our prior call, the amount paid was not material vis-a-vis our business and is a transaction similar in size and profile to some of the explorative transactions that we did in the recent past. On the logistics front, we executed initiatives to augment our capabilities. We implemented automated solutions in our Food Retail Distribution Center to enhance their operations, progress with the construction of our Pharma Distribution Center to be inaugurated during the second semester of 2025 and open dedicated distribution centers to support our hard discount format among other projects. These logistics projects will allow us to support future growth and improve our service levels nationwide. Additionally, we continue to advance with our omnichannel strategy, delivering growth, strong double-digit growth in our Food Retail and Pharma digital channels. Our Food Retail digital channel continued to grow anchored in our last-mile solution. Our Pharma digital sales, on the other hand, continued with their sustained and profitable growth across channels, including our app as well as our website. Finally, during 2024, we progressed in the execution of our capital structure strategy focused on improving the maturity profile of our financial liabilities and our overall liquidity without compromising our expansion plans. We generated PEN 2.8 billion of operating cash flow and managed to reduce our net leverage ratio by 0.4%, while investing in growth and distributing a dividend, ending the year with a solid cash position of PEN 1.5 billion including liquid investments at fair value. We will continue executing this capital structure strategy during 2025. Now please turn to Page 8 to briefly comment on some of our ESG highlights for the year. InRetail was included in the Dow Jones Sustainability Index MILA Pacific Alliance and the Sustainability Yearbook 2025 for the fourth consecutive year. We ranked fifth among the best companies in the food and staples retail industry globally, first among the companies in Latin America for the same industry and first in Peru among all the industries. On the social front, our flagship program went [indiscernible] continued growing. In 2024, we donated more than 18 million food rations equivalent to more than PEN 30 million, impacting over 90,000 people per week and benefiting around 5% of the population in extreme poverty in the country. We also conducted initiatives to promote good health and well-being. In 2024, we trained more than 120 future pharmacies in our education program for [indiscernible]. Thanks to Perú Pasión which generated SME sales of PEN 18 million, representing an important growth versus 2023. Finally, on the environmental front, we generated energy savings of PEN 3.2 million within our 3 businesses, representing a 5% reduction in energy in line with our rental and efficiency goals. Now we will go over our operating results by segment. Please turn to Page 10 to review our fourth quarter results for our Food Retail segment. Our Food Retail segment recorded a strong double-digit growth in revenues this quarter, benefited by the progressive recovery in consumption, still, as mentioned before, partially explained by the temporary inputs from the pension fund withdraws further improving our market position in the sector. Same-store sales grew 5.3% with a double-digit growth in non-food categories built by electronics and textile products given the low comparison base from last year. On the other hand, our food categories experienced a positive mid-single-digit growth in same-store sales this quarter, which combines a strong double-digit growth in fresh food categories from an improvement in assortment and pricing strategy with a lower growth in dry food categories. In terms of performance by format, all of our formats posted a positive same-store sale growth in the quarter. Growth was mainly driven by our Mass format, posting a double-digit same-store sales growth benefited from consumers increasing preference for price and proximity-based channels and also by the Plaza Vea format favored by the growth in non-food categories. Revenues were also favored by the contribution of the new stores opened in the last 12 months, which added 84,000 square meters of additional sales area. In Q4 '24, we opened 108 Mass stores and one Makro store in Lima. Our gross profit increased 7.4% with a gross margin of 23.5%, below Q4 '23, mainly due to the higher participation of our emerging formats with our hard discount format now representing 17% of our revenue mix as of Q4 '24. This is an effect that has been occurring over the last periods as our emerging formats continue to gain traction relative to our traditional supermarket formats. Nonetheless, in prior periods, the changing category mix from a pronounced decline in electronic categories compensated the margin compression from the change in the mix of formats. This is an anticipated tendency as a result of our multi-format strategy as our emerging formats operating with lower margins in line with the pricing and operational strategies. However, with more favorable cash conversion cycles and fewer capital requirements than our traditional supermarket formats, in particular, our hard discount format. In terms of adjusted EBITDA, Food Retail's adjusted EBITDA grew 6.2% in Q4 '24, driven the growth in revenues and by the increased fixed cost valuation offset by the lower gross margin and by the incremental operational expenses related to the new stores opened over the last 12 months. Now please turn to Page 11 to review our fourth quarter results for our Pharma segment. As anticipated in our prior earnings call, the second half of the year was more encouraging for our Pharma segment, evidencing the gradual recovery experienced in June given the low comparison basis and improved winter campaign. Our Pharma segment posted an increase in revenues of 2.5% in Q4 '24, combining a strong growth in our pharmacies unit, with a decline in revenues in our distribution unit. Same-store sales for our pharmacies unit increased 3% with a moderate growth in both pharma and non-pharma categories. Pharma category benefited from a low comparison basis and a strong winter campaign that consolidated through the second semester of the year. Growth in non-pharma categories on the other hand, was driven by an increase in consumer categories, in particular, beauty care, personal care and derma. Nutrition and wellness categories also recovered from a low comparison basis with important increases in vitamins and supplements. In 2024, we opened 91 net new pharmacies for the year. As outlined in prior calls, until 2023, our pharmacies unit focused on consolidating its category diversification and multi-format strategy, through store conversions. Since 2024, we have resumed our store openings, catching up with an existing pipeline of prior years focusing in zones with suboptimal presence. Our distribution unit instead posted a decline in revenues. In Peru, revenues were conversions as a result of a change in our commercial strategy aimed to prioritize cash generation and collections over top line growth, applying stricter collection terms across clients in all channels. This new commercial strategy started during the second semester and since has liberated substantial trapped capital in an already-low margin business. In terms of gross margin, we registered a gross margin of 33.3%. The improvement in gross margin was driven by the higher representation of our pharmacies unit in the revenues mix, which operates with higher margins than our low-margin distribution unit. Additionally, this quarter, our gross profit includes extraordinary income registered towards the end of the year as part of an improvement in commercial negotiations as well as lower shrinkage favored by the comparison basis from Q4 '23. Our Pharma segment recorded an adjusted EBITDA growth of 20%, mainly explained by the growth in revenues, the improvement in gross margin, the increased fixed cost dilution and the very low comparison basis from Q4 '23, which included extraordinary provisions resulting in a 6.3% decline relative to Q4 '22. Despite a difficult start of the year, our Pharma segment manager to gradually recuperate during the second semester and delivered a slight growth in revenues of 0.2% for the full year. In terms of adjusted EBITDA we provided a solid growth of 8% due to an improvement in gross margin and continued operating leverage. Please now turn to Page 12 to review our fourth quarter results for our Shopping Malls segment. Our Shopping Malls segment registered a growth in revenues of 7.8% versus Q4 '23. This growth was mainly explained by the increase in rental income due to the contracted adjustments in rent and a raise in publicity income by the improvement in occupancy levels of about 45 basis points compared to Q4 '23 and the higher income from management services from an increase in tenant consumption. Our tenants registered a same-store sales increase of 6.8% during the fourth quarter, with growth in both anchor and non-anchor tenants. Department stores, cinemas and supermarkets posted a strong same-store sales growth, evidenced in the progressive recovery in consumption with a low comparison basis in Q4 '23 and the stronger end-of-year campaigns. Moreover, non-anchor tenants also posted a positive same-store sales growth, particularly in technology, beauty and astronomy categories. Our gross margin was 66.6% this quarter above Q4 '23, mainly explained by the low comparison basis, which included an extraordinary provision in most services related to a supplier of parking lot services in our malls and by the improvement in publicity and energy margins, the latter from an incremental consumption. In terms of adjusted EBITDA, we reached PEN 137 million with a higher net rental margin of 82.4%. The increase in net rental margin is primarily due to the higher gross margin with lower provisions from doubtful accounts and the continued fixed cost dilution from a solid top line growth. Now please turn to Page 13. This slide summarizes our openings and same-store sales performance for each business segment. First of all, we would like to highlight that 2024 resulted in 2 different halves of the year, with a very difficult first semester and a more encouraging second semester as evidenced with improvements in same-store sales in all of our segments. Additionally, we already surpassed 3,800 locations nationwide enabling to reach a broad customer base, strengthening our leadership position across segments. Please turn to Page 15 to review our consolidated net income results. InRetail registered a net income of PEN 293 million in Q4 '24, an 8.8% decrease compared to Q4 '23. As mentioned before, the decrease in net income is explained by a lower mark-to-market gain than in Q4 '23 and a net FX loss compared to a net FX gain in Q4 '23, despite the improvement in performance in all of our segments. Both are noncash, nonoperating accounting effect. Excluding the impacts from the exchange rate and from the mark-to-market of investment properties, net income for the fourth quarter would have been PEN 285 million, a 15.3% growth versus Q4 '23, in line with improvement in operating performance. Similarly, for the full year 2024 excluding the 2 effects outlined before, net income for the year would have increased over 14%. With that, let me pass the word to Andrea who will discuss our CapEx, cash flow generation and consolidated financial debt.

Thank you, Marcelo. Now please turn to Page 16. During the fourth quarter of 2024, we invested PEN 384 million in CapEx for our 3 business segments. CapEx was mainly invested in the expansion of our physical network and improving our logistics platform and in scheduled maintenance. In our Food Retail segment, CapEx in Q4 '24 was invested in the opening of 110 new Mass stores and one new Makro store in Lima as well as the scheduled maintenance of existing stores. In our Pharma segment, CapEx was mainly invested in the construction of our new distribution center and in scheduled maintenance of existing stores. Finally, in our Shopping Malls segment, CapEx this quarter was invested in expansion projects in existing malls and in scheduled maintenance. For the full year 2024, we invested approximately PEN 1 billion in CapEx for our 3 business segments, of which close to 50% was invested in our Food Retail segment and around 40% in our Pharma segment. In 2024, we invested a higher amount than in 2023, mainly explained by the acceleration of our expansion plans in Food Retail and in Pharmacy and by the incremental investment in our new Pharma Distribution Center which still requires some residual CapEx investments during 2025. In terms of cash balance, we ended the fourth quarter with approximately PEN 1.5 billion of cash higher than the end of last year's cash balance of PEN 1.1 billion. This reflects our focus on improving cash flow generation through an increase in adjusted EBITDA as well as to proactive working fetal management among other initiatives, despite the higher CapEx investment and the dividend distributed in May of last year. Now please turn to Page 17 to discuss our consolidated financial debt. As of December 2024, InRetail had a consolidated net debt of PEN 5,880 million with a net debt to adjusted EBITDA ratio of 1.9x. Our net leverage continued with its downward trend in the year. The evolution of our net leverage compared to December 2023 is given by increases in financial debt of approximately PEN 50 million from exchange rate increases in value, offset by a decrease in financial debt from scheduled amortizations related to our medium-term loans, mainly in our Food Retail and Shopping Malls segment as well as by a considerable improvement in cash flow generation. Now I will pass the word back to Marcelo, who will further comment on our debt by segment and CapEx guidance.

Thank you, Andrea. Please turn to Page 18. Supermercados Peruanos, our Food Retail segment ended the fourth quarter with net debt of PEN 2.730 billion. Net debt to adjusted EBITDA stood at 2.4%, a 0.2% below Q4 '23 and below the previous quarter as well. As we anticipated, our Food Retail segment cyclically incurred increased working capital needs in the second and third quarters in preparation for the end-of-year campaign and then strongly deleveraged towards the end of the year. Total net debt decreased by approximately PEN 130 million compared to Q4 '23, explained by scheduled amortizations related to our medium-term loans. InRetail Pharma ended the fourth quarter with a net debt of PEN 1.812 billion and a net debt to adjusted EBITDA ratio of 1.3x, slightly below Q4 '23, even with the pickup in CapEx related to the construction of our new distribution center. InRetail consumer ended the fourth quarter with a net debt to adjusted EBITDA of 1.7%. For 2025, InRetail consumer should maintain a stable leverage, considering the expansion plans in our Food Retail and Pharma segments and the continued investments in our new Pharma Distribution Center until its opening in the second semester of 2025. We would also like to highlight that earlier in 2025, Moody's improved the outlook for InRetail consumer from negative to stable. This action reflects improvement in market conditions and the successful execution of our capital structure strategy focused in extending the maturity profile of our financial debt and improving our liquidity. Finally, InRetail Shopping Malls ended the fourth quarter with a net debt of PEN 1.412 billion, resulting in a net debt to adjusted EBITDA ratio of 2.6% below Q4 '23. We continue to have active conversations with local and international banks as well as with other creditors to refinance part of the maturities that we have during the following years, given the improved credit market conditions and a more favorable interest rate environment. We will remain active in our liability management efforts in all of our segments in 2025. In terms of our 3-year CapEx guidance for the period 2025 to 2027, in total, we plan to invest around PEN 2.6 billion in our 3 business segments over the next 3 years. Our Food Retail segment will account for nearly half of our total CapEx budget. During 2025, we expect to open one new Plaza Vea store and around 300 Mass stores. Medium term, we anticipate to open on average 2 big boxes per year and maintain a similar pace for our hard discount format. Our Pharma segment will incur in around 20% of our CapEx budget. In 2025, we expect to open approximately 80 new pharmacies, continuing with our expansion plan. Additionally, in 2025, we expect to invest in finalizing our new distribution center and logistics platform. Post 2025, we should return to a normalized CapEx levels in our Pharma segment given the culmination of our main logistics project. Finally, our Shopping Malls segment will represent the remaining of our total CapEx budget. In 2025, we will open one new power center outside of Lima, adding approximately 14,000 square meters of GLA. As demonstrated in prior years, our CapEx budget is discretionary, allowing us to quickly react and diligently postpone or increase CapEx investments, if being necessary, depending on market conditions and other situations. In summary, despite a difficult start of the year, we managed to recover in the second semester and deliver a moderate growth in revenues and a solid growth in adjusted EBITDA. We have a diversified multi-format platform with resilient business models and with formats that have high growth potentials, combined with low and competitive pricing strategies. This covers our presentation, and now we will be glad to answer any questions you may have.

[Operator Instructions] First we will take questions from the conference call and then the webcast questions. [Operator Instructions] And our first question today [indiscernible] with Jefferies.

Thank you to address the tragic accident and the solid results of 2024. I'm sorry to ask, but I think in this kind of situation, it's very important to be clear with the market. So I have a couple of questions. None of these are about the accident itself, which you -- on which you said you would not comment, and I'm happy to repeat. First question would be in terms of liquidity, could you please discuss in greater detail for both InRetail Perú Corp where you mentioned the PEN 1.5 billion of total liquidity and then specifically for InRetail shopping subsidiary, the PEN 638 million, just more details there on the cash, the mutual funds, but also available credit lines and potential sources of liquidity to face the liabilities that will come from this accident? Second would be when we think about the group here, I think it's a very important highlight that it's a strong group. It's not just InRetail shopping and that's evident in you holding this call for InRetail Perú Corp with both subsidiaries. Can you talk a little bit more about this relationship, right, between InRetail consumer and InRetail shopping? In the past, there have been intercompany loans to fund M&A or support during COVID. So what kind of support can we expect for InRetail Shopping from the Intercorp Group? And then the last question before I go back to the queue would be in terms of current operations, there have been reports that 7 of the 22 malls are currently facing some sort of operating interruptions. Could you give us more information about the current status, which malls, the percentage of appraised value or GLA, EBITDA, is there any business interruption insurance? How much of a hit this can be for rents?

Thank you, for the question. I think there were 3 questions, and I'll try to answer all and if I forget, you can ask it again. So first in terms of liquidity, I think we're well positioned there. As I mentioned in the call, in 2024 and in 2023, we focus on a capital structure strategy at the InRetail level, consolidated for all of the segments that prioritize a couple of things. One is the expansion of the maturity of the liabilities that we had, and the second one was the -- to increase the liquidity in all of the segments. And if you look at the financial results for the last couple of years, not only 2024, that has been the case, both -- all the segments, including Pharma, Shopping Malls and including our Food Retail segment, which, as I mentioned on the call has been the one that has invested the most CapEx over the last couple of years has improved the liquidity, correct? So in terms of liquidity, I think that right now, as of the close of December 2024, we feel very comfortable with position. And as I mentioned as well, one of the focuses that we have in 2025 is to continue executing this capital structure strategy. As we relate specifically on Shopping Malls, as you've seen in the financial results, we ended the year with approximately PEN 600 million in cash. All of it is liquid. It's liquid assets at the end of the day, which includes available cash, includes investments in short-term mutual funds that can be liquidated at any time, and finally, it includes a position of shares, treasury shares that Shopping Malls has in Retail, which again can be easily executed if liquidity requires, correct? So all in all, we believe that we're in very good liquidity position both in Retail and in Shopping malls. As it relates to the second question on Intercorp and whatnot, I think based on the information that we have today, again, it's very early stage and whatnot, we don't envision any major liquidity issue on Shopping Malls, specifically, which would entail requiring any support from InRetail or from InRetail consumer. It's correct that in the past, we've done intercompany loans in extraordinary situations. However, in this case, we don't envision having to draw those alternatives this year. And then for the last question for the malls, it's been a series of malls that have had temporary closures, correct? Again, this is something expected. We anticipated that situations like the one we're living right now, of course, will lead to excessive closings and temporary closings of the malls. Right now, it's been, I believe, in 9 malls that we've had temporarily closed, which represent approximately 20% of our rental income. The expectation, though, is that these are going to be temporary closings. The Real Plaza team is doing all they can to try to fix whatever observations there was, and we don't see any major issue in opening those in the short term. And also, just to mention that it's not only these closures and what's going on is not only on our malls, it's also been on our competition and retailers in the industrial as well, including malls, supermarkets and whatnot.

And our next question today comes from Nicolas Larrain with JPMorgan.

I wanted to ask one on the Pharma division. Could you maybe give us some color on the margin trends for the MDM division and also for the truck retail, how have those evolved throughout the year? And particularly on drug retail, if they are close to the levels we've seen -- I mean, we saw when they were reported separately?

Thank you, Nicolas, for the question. So the trends that we've seen in the margins in Pharma business, if you look at the margin that we ended in 2024 compared to 2023, margins on a consolidated basis have increased. And that has been for a couple of reasons, some of which we will mention in the quarter. One is there's been a change in the revenue mix, correct, in terms of channels, meaning pharmacies gaining more share than the MDM business or unit in the consolidated figures. And as you know, the pharma unit has higher margins than distribution unit. The distribution unit is a low-margin business that operates with around 10%, 11% gross margins. And the trend that we've seen through the year, particularly in Peru, this is in the second semester, the margins have been relatively stable. There's been a little bit of a drop in the distribution margins in Peru. So that has to do entirely with what I mentioned in the call, which is a change in the commercial strategy. Started in the second semester of the year, the company changes its commercial approach, prioritizing the generation of cash, correct, and collections as opposed to top line growth. And they did some initiatives like discounts for payments with cash upfront and whatnot, which impacted, of course, the gross margins. But on the other hand, it liberated a lot of cash and trapped cash in the business. As it relates to the pharmacies unit, I would say that the margins are probably already know at top of the cap. We don't expect margin improvement in the Pharmacies unit going forward. And as I mentioned in the call, for 2025, we're expecting on a consolidated basis, some margin pressures as it relates to the gross margin, which again should be partially offset through operating leverage.

[Operator Instructions] At this time, we will take the webcast questions.

Okay. Our first question is, regarding the bonds issue, will they be able to continue paying until maturity or what measures will be taken?

Sure. Thank you for the question. I think the question is pretty similar to what Nicolas mentioned at the beginning. As I said, we feel very strongly with the liquidity position of our Mall segment right now, and we don't envision any issue at all with the maturities, the coupon payments or anything related to the Mall.

Next question on the acquisition of the Erbi operation, any comments on the market and its competitions?

Thank you for the question. So the Erbi acquisition, as we mentioned, is a smaller acquisition. It's an opportunistic acquisition that we made to explore and learn about a market that's of interest to us. This is not necessarily going head-to-head so far against the market leaders. As we've mentioned, the scale of Erbi and the type of stores that they operate are not at competing at the large market leaders. As I said, the objective is to explore the Chilean market, gather learning applicable for our growth plans and assess the format offering that today serves a different client need from what the leading players cater to.

Okay. Thank you. At this time, I'm showing no further questions. I would like to turn the call over to the operator.

Thank you. There appear to be no further questions at this time. So I'd like to turn the floor back over to Mr. Vallejo for any closing remarks.

Thank you all for participating in our fourth quarter earnings call. As a final remark, I just wanted to underline that 2024 ended up being another good year for InRetail, considering it was yet another challenging year for the Peruvian economy and domestic consumption in general. We continue to operate in a challenging local and global setting. However, continued signs of a progressive recovery in economic growth and in construction give us confidence in our ability to continue delivering growth. If you have any follow-up questions, please do not hesitate to contact any of us.

Thank you. This concludes today's conference call. You may now disconnect your lines, and have a wonderful day.