Logista Integral, S.A. (LOG.MC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Logista's Full Year 2025 Results Presentation. I'm Isabel Troya, Head of Investor Relations for Logista. And today, Inigo Meirnas, our CEO; and Pedro Losada, our CFO, will go through the results for the year. We'll conclude with a Q&A session at the end of the call, where we will answer the questions you have submitted through the platform. You can write your questions at any time during the presentation. Now Inigo will proceed with the results. Inigo, you may.

Thank you, Isabel, and good morning to all joining us today. During fiscal year 2025, we recorded a positive growth in economic sales across main segments in both Iberia and Italy, with particularly strong performance in tobacco and pharma in these 2 regions. This growth was further supported by a robust profit on inventory recorded in all 3 regions. In '25, profit on inventory reached a significant EUR 45 million, up from EUR 35 million last year, following changes in tax and retail prices in all regions. This marks the third consecutive year in which we have recorded a substantial profit on inventory driven by tobacco pricing movements. The Board of Directors will propose a final dividend for fiscal year 2025, which equals last year amount in line with our commitment to distribute at least the same dividend as 2024 despite the need to increase the payout ratio. In relation to our ESG commitment, we will update you with the KPIs for the period in relation to our '24-'26 sustainability plan. In the following pages, I will give you further details of these main highlights. During our 2025 fiscal year, we have recorded increases in economic sales in our main businesses in Iberia and Italy, completing the year with a total economic sales of EUR 1.8 billion, which represents a 3% year-on-year growth. In terms of the split per area, Iberia reached economic sales of EUR 1.1 billion. Italy recorded EUR 434 million and France, EUR 200 million. Adjusted EBIT for the year amounted to EUR 378 million, representing a 2% decline on last year figures. This includes EUR 45 million of profit on inventory recorded after changes in tobacco taxes and prices in all 3 regions. Net profit reached EUR 281 million, a 9% decline compared to last year, given, among others, the lower interest rates recorded for the period. During the year, we recorded a total of EUR 73 million of financial income, which is EUR 30 million lower than the EUR 103 million of last year. This shows a strong interest rate drops as we have had an average interest rate for this year of 3.54% compared to 4.85% last year. Later on, we will dive deeper into each of these regions. As previously mentioned, during the period, we recorded a total of EUR 45 million in profit on inventory. This was a result of change in tobacco excise taxes and retail pricing across all 3 of our key markets. In Spain, excise taxes increased significantly compared to the modest adjustments seen in '22 and '23. Particularly, the government introduced a new tax section on products containing nicotine but not tobacco, such as vaping devices and nicotine pouches. For traditional tobacco, the average tax increase was equivalent to approximately EUR 0.20 per pack to which manufacturers are responding by increasing retail prices by EUR 0.40 per pack. In Italy, we also saw tax and price increases. The average tax hike for traditional tobacco was around EUR 0.10 per pack with retail prices rising between EUR 0.10 to EUR 0.30 per pack. In France, the government continued its policy to increasing tobacco taxes to curb consumption, although at a slower pace than in previous year. This year, the average tax increase of EUR 0.25 per pack with manufacturers responding with price hikes at EUR 0.50 per pack. The resulting profit on inventory has helped to partially offset the impact of lower financial income and weaker performance in some of our transport businesses. Following our commitment to remunerate our shareholders, at the next Annual Shareholders Meeting in February 26, we will propose to distribute a total dividend of EUR 277 million, same figure as for 2024. This will include a final dividend for fiscal year '25 of EUR 1.53 per share, which together with the interim dividend of EUR 0.56 per share distributed last August will amount to EUR 2.09 per share. Total dividend represents a 99% payout ratio, increasing our distribution to maintain a stable dividend even though net profit has declined by 9%. Once the complementary dividend for '25 has been paid, we will have already distributed close to EUR 2 billion since our IPO back in 2014. This represents a total return for our shareholders since the IPO of 236%, considering all dividends paid and share price appreciation up to the end of the period. Moving on to our sustainability highlights. I will give you some details on the progress of our sustainability plan for '24-'26. In environmental matters, we remain firmly committed to decarbonizing our fleet, recognizing that transportation services account for 96% of our total emissions. A key part of this effort is increasing the number of kilometers traveled using Euro 6 vehicles, which are significantly more sustainable and emit less pollution than older models. This year, we have reached 85% of total kilometers with Euro 6 vehicles, keeping us on track to meet our 2026 target of 90%. In circular economy matters, we continue to advance our initiatives to recycle NGP devices by installing dedicated recycling boxes in tobacconists and overseeing the full recycling process. The program is now active in all 3 countries with Spain and France currently in the ramp-up phase. Across these markets, we have currently deployed recycling boxes in over 33,400 points of sales, having almost reached the 2026 target. In social matters, talent is a cornerstone of our success and competitiveness. To reinforce this, we have established a target to achieve 95% talent density rate in critical positions by 2026. At year-end, we reached 90%, and we continue to work on increasing this metric. Diversity is another key pillar of our social strategy. We have set a target to reach 30% female representation in upper and middle management by 2026, a milestone that we have already surpassed achieving 32% this year. We remain committed to maintaining this balance. In governance matters, we have renewed our ISO 37001, the ISO 37002 and the UNE 19601 certifications, reaffirming our commitment to the highest standards of corporate governance. Following the approval of our new data protection policy by the Board of Directors, we have launched a mandatory training for employees to raise awareness and ensure compliance with the critical area. Now I will hand over to Pedro, so he can give you more details for each of the regions and businesses.

Thank you, Inigo, and good morning to all connected today. Starting with Iberia, our largest market, economic sales increased by 3% to EUR 1,181 million, while adjusted EBIT declined by 5% to EUR 191 million. Looking into each segment. In the tobacco segment, total volume in Spain & Portugal decreased by 0.4% year-on-year after a decline in traditional cigarette volumes in Spain, minus 0.8%, which was offset by an increase in traditional tobacco and roll your own and NGPs in Portugal. We recorded a profit on inventory of EUR 34 million, driven by the increase in tobacco taxes and retail prices in Spain, which Inigo described previously. We also made progress in our recycling initiative, reaching 1,443 tobacconist in Spain, doubling the figure from last year. In the Transportation segment, we have been sharing throughout the different quarterly results, the low performance of the business of El Mosca and the frozen activity. Particularly long distance transport was impacted by the slowdown in European demand and various macroeconomic challenges, which I will describe a bit more in the following slide. The frozen business line has suffered also from macroeconomic headwinds and increasing competition, which has led to the loss of clients against competitors. We have implemented several cost control measures to improve the business, and we continue to seek further measures we can take while setting new sales plan to recover the lost income. However, industrial Parcel showed sustainable growth, supported by increased deliveries, which has offset the underperformance of Carbo. The Courier business has recorded a very good performance in the Spanish and Portuguese operations with a high single-digit growth rate, which has been completed by the full annual consolidation of Belgium -- Parcel Services in Belgium. Pharma economic sales grew by 10%, supported by new agreements with laboratories and expanded services to existing clients with a strong performance on the pharmacy channel. Other businesses recorded a reduction in distributed volumes, which has led to a decline in economic sales. As we have been explaining during the different quarterly results, Transportes El Mosca has had a challenging year. We acquired the company back in October 2022 to an initial stake of 60% and acquired the remaining stake at a different point in time, reaching 100% by August 2024. During the year 2023, first signs of a slowdown in transportation industry came to light with the Red Sea conflict and a strong inflationary pressure. This situation intensified during our fiscal year 2024 with turmoil in the industry and the first signs of demand weakness in Europe. The year 2025 has presented a significant challenge for the company. We faced sluggish demand across Europe and margin compression in the transportation sector, largely due to inflationary pressures, impacts that were particularly pronounced in the El Mosca business. Besides, this year's harvest was adversely affected by various weather events resulting in a reduced yield of fruits and vegetables, which is the largest business for Mosca's road transportation. Since we acquired 100% of the company, we have put in place certain measures to help revert the situation, such as changes in the management or the implementation of control and compliance procedures to safeguard daily operations and improve governance within the company. We have also worked on improving the quality of the analytic data to allow for better informed decisions. As a result of these measures, certain nonoperating one-off negative impacts have arisen, further worsening the annual results. Furthermore, we are taking different actions to improve profitability of the company. Some measures include optimizing the client mix, focusing on clients who demand international transportation and renegotiating clients conditions. Lastly, within El Mosca, I would like to mention that we are working on completing the optimization between El Mosca road transportation business and Logista Freight, where Logista Freight is taking over the fleet planification and route assignment, implementing further cross-selling actions with pharma business and allocating fee capacity of Mosca to freight to optimize the use of the vehicles. Moving on to Italy. Economic sales reached EUR 434 million, reflecting a growth of 8% compared to the previous year. Adjusted EBIT increased by 11%, reaching EUR 134 million. During the year, total tobacco volumes declined by 0.9%. This decline results from a 2% decline in traditional tobacco, which was partially compensated with an increase in roll your own and other categories, particularly HNV stick units recorded a healthy annual growth. In response to the government's tax increase, manufacturers raised retail prices for tobacco, which helped offset the impact of the tax hike. As a result, we recorded a profit on inventory of EUR 7 million compared to the EUR 6 million in the previous year. As you may recall, in 2024, we began distributing tobacco in the Netherlands on behalf of a major manufacturer. This business has continued to expand, consolidating the service we offered to tobacco manufacturers in the region. In the Convenience Distribution segment, our Recycle-Cig initiative has gained traction with 30,700 tobacconist across Italy now participating in the recycling program for NGP devices. Finally, in our Pharmaceutical division, we have achieved double-digit growth in economic sales through organic expansion with new contracts with laboratories and renegotiations with existing clients. We have also opened a new pharma warehouse in Northern Italy, which will accelerate our expansion in this business in Italy. In France, economic sales declined by 7% year-on-year, reaching EUR 200 million, while adjusted EBIT fell by 15% to EUR 53 million, mainly due to a lower contribution from profit on inventory, which amounted to EUR 4 million compared to EUR 8 million in full year fiscal year 2024. As in Spain and Italy, the French government implemented tax increases, followed by EUR 0.50 per pack price hike by tobacco manufacturers. These changes had a positive impact on inventory valuation, though much lower than in the previous year. Tobacco volumes distributed in France saw a 9% decline, continuing the trend of faster volume contraction compared to Spain and Italy. In the Convenience Products segment, we also have continued growth in electronic transactions, particularly in E-Money recharge cards. Additionally, more tobacconist are adopting our Stratos software and hardware as a point-of-sale system, enhancing their service offering with personalized features. Finally, our NGP recycling initiative in France has expanded with 1,300 tobacconists now participating. After giving you the details of each region, we will move into the consolidated figures for the period. Total adjusted EBIT for the year amounted to EUR 378 million, reflecting a 2% decrease compared to 2024. This decline was primarily driven by the underperformance of certain businesses within the transport activity and the volume contraction in France despite positive contributions from tobacco and pharma in Iberia and Italy. Economic sales grew by 3% year-on-year, supported by strong activity in pharma and tobacco in Spain and Italy and relevant profit on inventory, which helped offset the mentioned underperformance from some transport business lines. Reported EBIT reached EUR 318 million, also down 2% from the previous year. This figure includes restructuring costs of EUR 5 million, slightly higher than the EUR 4 million recorded last year and was partially offset by capital gains of EUR 6 million from the sale of certain assets in Spain. At the bottom line, net profit decreased by 9%, reaching EUR 281 million, mainly due to the lower financial results for the period. Financial income dropped to EUR 73 million compared to EUR 103 million last year, EUR 30 million decrease because of the decline in interest rates throughout the year. As you may recall, 2023 and 2024 were marked by exceptionally high interest rates with last year ending at a reference rate of 4.1% plus a margin of 75 basis points. The European Central Bank began cutting rates in June 2024 once inflation stabilized. Consequently, full year 2025 closed with a reference rate of 2.71% plus margin of 75 basis points on our credit line with Imperial brands. The average credit line balance during the period was EUR 1,985 million, slightly below the EUR 2,048 million in the previous year. Additionally, the decline in profit before tax led to a EUR 10 million reduction in tax expense with a slightly lower corporate tax of 26.3% compared to the 26.5% last year. We concluded the period with earnings per share of EUR 2.3 versus EUR 2.34 of fiscal year 2024. EBITDA for the year remained flat at EUR 495 million, consistent with the previous year, reflecting a solid business performance and the contribution from profit on inventory. Financial income collected amounted to EUR 72 million, down from EUR 101 million last year due to the impact of lower interest rates during the period. Restructuring & other costs paid totaled EUR 7 million, while normalized taxes reached EUR 114 million. CapEx for the year stood at EUR 54 million, including investments in warehouse improvements, sorters and automatic loading deck and maintenance. Lease payments amounted to EUR 76 million, and we closed the period with a normalized cash flow of EUR 315 million. We concluded the year with a free cash flow of EUR 483 million, significantly above the EUR 225 million recorded in fiscal year 2024, thanks to the positive working capital movements. Lastly, our final cash position for the year amounted to EUR 2.6 billion, reinforcing our financial strength and flexibility. Looking into our stock performance for the year, Logista delivered a total shareholders' return of 9% for 2025, reflecting the strength of our business fundamentals and our continued commitment to shareholder value. Our share price increased by 7% over the period, closing the fiscal year at EUR 28.9 per share of a market cap of EUR 3.8 billion. During the year, we reached our maximum share price of EUR 31 per share in May. Now I will hand over back to Inigo, so he can go through the final remarks and outlook for the next year. Inigo?

Thank you, Pedro. To close, I'd like to highlight 4 key takeaways from this fiscal year. First, our annual financial performance was solid, supported by good performance for tobacco and pharma in Italy and Spain and a strong profit on inventory, which helped offset lower interest rates, volume declines in France and the underperformance of El Mosca. Second, we continue to seek excellence in our business, aiming to improve our operating results for our businesses and countries. Third, our ESG commitment remains cornerstone of our strategy. Through the execution of our 2024-2026 sustainability plan, we have made meaningful progress in environmental, social and governance initiatives. And finally, we are increasing our payout during 2025 to distribute a stable dividend, reinforcing our long-standing commitment to shareholder returns. Logista remains focused on delivering sustainability growth, operational excellence and long-term value creation. Looking ahead for 2026, we expect adjusted EBIT, excluding profit on inventory to grow at mid-single-digit rate, supported by the continued strength of our core businesses and disciplined cost management. We remain committed to our diversification strategy, actively seeking small and midsized acquisitions that enhance our geographical footprint and expand our business portfolio. We reaffirm our commitment to remunerate our shareholders. Hence, we intend to distribute during 2026 at least the same dividend as in 2025. Now we will proceed with the Q&A session. Isabel, please, if you may.

Many thanks for the presentation. We will now continue with the Q&A session going through the questions that we received. The first question comes from Alantra Equities. We have a few questions. First is the impact of Mosca and Carbo on the 2025 results. Is there more restructuring to be done in full year '26? Or are you done? What level of contribution at EBIT level could we expect from those companies going forward? And then another question on regulatory update on tobacco distribution and the EU plans to regulate tobacco directly.

Thanks, Juan. This is Pedro Losada -- thanks for your question. Let me take the first 3 related to El Mosca and Carbo and answer you in once. As you know, we do not disclose the level of results provided by each of the specific businesses in our results. It's true that once we explained during the presentation that apart from Mosca and Carbo and the results in France, everything goes as expected during the year. So you can make some proxy with the results versus 2024 that has been lower. We mentioned during the presentation, the measures, particularly on El Mosca and -- but also, as you can imagine, in Carbo, it's becoming more and more difficult to provide any numbers around an impact since we are getting a faster integration with freight in the case of El Mosca and with Parcel in the case of Carbo. It's also important to mention that the years have been challenging in Mosca and recorded losses during the year And these losses and the new business plan, a more conservative one from the initial, would made up the view that resulted in an impairment recording Logista Integral individual accounts. We didn't mention this in the presentation because it only has an impact on the individual P&L of Logista Integral and not any impact at all in the consolidated figures, neither on the dividend payment. So the last part of your question is when this is recovering? We are speeding up, as I mentioned, with the integration with Freight on one hand and Parcel in the case of Carbo. And we will probably need the whole 2026 to turn this around. In the case of Carbo, maybe we can speed up the process. But probably during 2026, we are going to still see some restructuring in both companies.

Thank you, Juan, for your second question regarding the regulatory update. I think that there are 2 different dimensions on that. The first one is the draft of a new anti-tobacco law in Spain that you know there is one approval by the ministers in Spain and need to follow the legal processes. But in any case, at the end, we have to do something there, as we are assuming that the final approval, if any, of this new regulation will be approval by the -- probably by summer or by the end of summer time 2026, which is -- that means that it's not affecting this coming fiscal year. Let's see what happens with '27. But with the new measures, if at the end, the new law is approved with the current draft, probably is affecting the tobacco volumes in Spain, but our first view on that is not a dramatic negative impact in the tobacco volumes in Spain. The second one is what happens with the European Union plans to regulate tobacco directly, which means to impose extra tax other than at a national level. Well, this is something that is at the very beginning stage, and we have to assume that if any go live, probably the final approval should come to the market by the end of '28 or '29, which means this is at least we need to -- they need to run for a process of more than 3 years. And this is why as today, we believe that this is not a clear risk short term for the business and for the sector as well. Let's see what happened there. And in between, as you know, at the European level, a new tax at European level for tobacco need the approval of the members of the European Union of the states. And as you know, there are at least 5 or 6 countries that they are not agreed even to go ahead with this discussion and the beginning stage as they are today.

There's another question as well from Alantra. Is there a reason for financial income in Q4 being higher than in precedent quarters beyond the higher average cash balance?

No, no, there's no reason beyond the average cash balance. Bear in mind that typically, this is the seasonality of the cash in Logista business, particularly in tobacco. So when you take the 9 first months, average cash used to be lower in the last quarters. Just to give you a sense on 2024, we are year-to-date in the first 9 months of EUR 1.9 billion, where on the Q4, we had EUR 2.4 billion. So more or less same trend on 2025 with EUR 1.8 during the first 9 months and 2.5% in Q4.

Next question is from Grupo Santander. There's a first question on Mosca, which I believe has already been answered. Then is outlook for POIs in 2026. Are you expecting further significant price increases? And then the next question is, any acquisition opportunities currently on your radar? Could you clarify what types of segments are you looking forward?

Hi Ricardo, Inigo speaking again. Regarding the outlook for POI in 2026, as you know, this is not in our hands. But in any case, I think that we can be positive with the current trend, let's say, in the 3 markets, which means that you probably see some tax increases and price increases by the tobacco manufacturers will imply a positive impact for POI, but we don't have a clear estimation for next year. And then regarding the acquisition opportunities, if we have something or not in our radar? Yes, I think that today, we are following 3 or 4 opportunities, okay? At least in the first half of the year, we are following an opportunity in the pharma sector in Italy, bigger than the previous one was pharma [indiscernible] but this is not difficult because pharma [indiscernible] was only to acquire a small platform in Italy. In any case, it's not a very big one, but we believe that this is a good opportunity for us if at the end, we arrive an agreement with the sellers. We are in discussion with them on a bilateral basis, and it's quite complementary with our current regional presence in Italy because we are mostly focusing on Rome and from Rome to the South and Northern Rome area. This new acquisition can add to us a national presence in Italy. Other sectors than pharma in Italy, I think that we are considering a new opportunity in the tobacco sector, but mostly driving because it's a company that is mostly focused on the new generation products and more than in traditional tobacco. And as far as we see there is a growth in that sector, we are analyzing that [indiscernible] can fit well or not with our current strategy, taking into account that as I always say, the strategy of the company is to try to move the core business from tobacco to nontobacco without any pressure in terms of timing. But if in between we find an opportunity like that, we have the idea to analyze in retail, and this is something for this 2026. Because in the transport sector, as Pedro already mentioned, the thinking by the management company is to be focused into the restructuring and integration of mostly El Mosca, but Carbo as well and because of that it is not a priority for the time being.

The next question is from Bestinver. Could you give us more details on the current demand situation in Europe? When do you expect the measures taken to bear fruit? Are you maintaining your strategy of growth in the segment? And then there's a question on M&A. Is new M&A viable considering that the payout will have to be increased to maintain the dividend level?

Okay. Beatriz, thank you for the 2 questions, and I will take the 2. Regarding the first one, which is in terms of the fruit sector, I think that the strategy at the beginning was to get some exposure to this segment. But as today, we are happy with the exposure that we have through the acquisition of El Mosca. [indiscernible] something then it's organically, but we don't see an opportunity to grow more in that sector through an inorganic growth or through an acquisition. And regarding the market, now it's starting the peak on the Fruit segment. Let's see what happened, but we are a little bit more positive than last year. In terms of M&A versus payout, I think that we already said before during the presentation, the dividend policy is a priority for the company, and it's a cornerstone in our strategy. But the right answer is to say, yes, that I think that we can manage the current payout level and to take action and to be more active on M&A opportunities for the time being as far as we are looking for small or midsized companies.

Next question is from BNP Paribas. We still see some deterioration in Iberia margins at similar levels than Q3 despite the measures taken to solve the issues with El Mosca. Could you detail the initiatives taken and you expect to turnaround in Iberia margins in the coming quarters? And then there's another one regarding M&A is how is the M&A situation after several years without big activity? Does the performance of El Mosca make you more cautious on what to acquire?

Pedro, will take the first one. The main deterioration -- reason of the margin deterioration in Iberia is coming from El Mosca and Carbo. So further details, we have already mentioned most of them in El Mosca, looking for full integration with freight, changing new management, simplifying the company's structure, revenue optimization, trying to find more -- shift to more international transport where the optimization of the tariffs is even higher. Many things that we have a little bit explained further in the presentation with El Mosca. When it comes to Carbo, we are even accelerating more of that integration with Parcel that both Parcel and Carbo has had healthy growth during 2025, but we have a lot of work to do in that integration. We also changed the leadership of -- to lead that Carbo-Parcel integration, integration of the distribution network in Carbo, obviously, cost control, but more flexibility on distribution costs, subcontracting certain routes, extra commercial efforts, so putting a lot of effort on the top line, keep on increasing and gaining more clients in a profitable way and also through the integration and optimization of routes and use of the warehouses and rents of those warehouses, trying to find the appropriate cost structure to make the final turnaround.

Okay. Paco, this is Inigo speaking regarding the M&A. I think that I already mentioned, we have the idea to be more active or more focused on M&A in '26 because as I mentioned to you before, during '25, we decided to be more focused on the integration of restructuring of El Mosca and Carbo. And then regarding the performance of El Mosca, we have to be more cautious or not in the acquisitions. The fair answer is to say, yes. I think that in the transport sector, we have to be more cautious on that, taking into consideration our current experience with El Mosca.

Next question from Kepler Cheuvreux. Are you seeing further improvement in Q1 2026 in France tobacco distribution volumes after a better Q4 2025? And another question is, Logista said it was considering a relevant M&A operation in 2025. Why is that being delayed?

Well, Inigo speaking, Julian, regarding the French tobacco volumes, I think that you are right. And the Q4 was better than the trend coming from the previous quarters. Let's see what happens in France. I think that now French government when the price of a pack that is over EUR 13 per pack is less aggressive in tariff increases [ in Peru ], we see some stabilization on the volumes in France. But we are not sure. And in the budget regarding the French unit, we are being very conservative. Already said that for last fiscal year '24, '25, we took a decision to be more focused on the integration of the companies. And because of that, more than a delay it, we put on hold a couple of opportunities, and this is -- but now on '26, if I already said we have the idea to be more active on that and to reactivate any operation that we had in the pipeline in the past.

Next question comes from CaixaBank. Why the slowdown at economic sales in Pharma division in Iberia during Q4, plus 4% in Q4 versus plus 12% in the 9 months. And the next question is, what nonrecurring costs do you expect for 2026 relating with the restructure of El Mosca?

Filipe, this is Pedro speaking. The slowdown has -- on pharma has pretty much calendar effects. So when you compare with 2024, we are in an advanced campaign of solar products in Q3, so that it compares different. And then there has been a delay in the vaccine campaign in Q4. So we are going to see later. But overall, when you see different growth on 9 months versus Q4 2024, 2025, could look different, but the overall growth, as you can see, remains the same. Okay. Sorry, on the one-off, yes, the one-off is linked to nonoperating matters, which we are currently reviewing in depth. We can give much more information other than confirming that this is only applicable to fiscal year 2025 and will not roll over to '26.

Thank you very much. The rest of the questions that came in have been answered throughout the other questions that we have received, and we have no new questions coming. Thank you, everybody, for joining us for our full year presentation, and we are available at Investor Relations whenever needed. Thank you.