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

Good afternoon, everyone, and welcome to Logista's H1 results presentation. I'm Isabel Troya, Head of IR for Logista. And today, Pedro Losada, our CFO, will walk you through the highlights and the results obtained during the first half of the year 2025. At the end of the presentation, we will have a Q&A session where we will answer the questions submitted through the platform. You may write your questions at any time during the presentation. Now, Pedro will go through the highlights of the period. Pedro, if you may, you can proceed with the results.

Thank you, Isabel, and good afternoon to everyone connected today for our results presentation. During the first half of 2025, we have achieved a robust set of results. Thanks to the growth of different business lines, backed by a strong profit on inventory recorded for the period after tax and retail price movements in all 3 regions. As we mentioned in our first quarter of 2025, the results in the transportation business, particularly in Transportes El Mosca and the frozen segment has suffered from macroeconomic situation, which, among others, has resulted in lower European demand. As part of our efforts to improve operations, we are in the process of implementing different measures and improvements in El Mosca and in Carbo Collbatalle. In relation to our ESG commitment, we will update you with the KPIs for the period in regard to our 2024-2026 Sustainability Plan. In the following pages, I will give you further details on these main highlights. Within the macroeconomic situation for the year, inflation has continued to improve alike during 2024, resulting in substantial interest rate cuts by the European Central Bank, ending the period with a reference rate of the ECB at 2.65% versus 4.5% during the same period for 2024. Looking into our results, we have recorded increases in most of our businesses. Economic sales increased by 6% year-on-year, reaching a total of EUR 916 million. In terms of the split per area, Iberia reached economic sales of EUR 606 million. Italy recorded EUR 213 million and France, EUR 101 million. Adjusted EBIT raised by 5% to EUR 202 million. This figure includes a relevant profit on inventory, even higher than the figure obtained for the full year 2024. For the period, changes in tobacco taxes and prices led to a total profit on inventory of EUR 46 million. Net profit reached EUR 151 million, a 5% decline compared to last year, given the lower interest rates recorded for the period. Later on, we will dive deeper into each of the regions. As I have just mentioned, during the period, we have recorded a total of EUR 46 million as profit on inventory. All 3 regions have had changes in taxes and in retail price. In Spain, excise tobacco taxes, has been raised significantly compared to the small changes made in 2022 and 2023. Furthermore, the government has imposed for the first time taxes on products, which have nicotine, but do not have tobacco, such as vaping products, or nicotine pouches. The average equivalent tax increase for traditional tobacco has been around EUR 0.20 per pack, to which manufacturers have responded with price increases up to EUR 0.40 per pack. In Italy, there has, also been increases in taxes and prices. The equivalent tax increase for traditional tobacco has been around EUR 0.10 per pack with a subsequent increase in retail prices of between EUR 0.10 and EUR 0.30 per pack. Lastly, in France, the government continued with its strategy to increase tobacco taxes to reduce consumption, although at a lower rate than previous years. This year, the equivalent tax increase for traditional tobacco has been around EUR 0.25 per pack with manufacturers increasing prices by EUR 0.50 per pack. The relevance of the profit on inventory for the year has partially compensated the lower financial income and lower performance of the long-haul transportation business. Since we acquired 100% of Transportes El Mosca, we have been putting in place different measures to optimize the company. Firstly, we put in place a new management to lead the company for the future. As a second measure, we have implemented logistics control measures and compliance procedures to safeguard daily operations and improved governance within the company. We have also worked on improving the quality of the analytical data, to allow for better informed decisions. Furthermore, following Logista's financial discipline, we are taking different actions to improve profitability of the company. Some measures include analyzing and optimizing the client mix, focusing on clients who demands international transportation. Within El Mosca, I would like to mention that we are working on completing the optimization between El Mosca's 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 free capacity of El Mosca to freight to optimize the use of the vehicles. I would also like to mention Carbo. As we said on our first quarter results, frozen transportation has suffered certain slowdown during the period. And here, we are also implementing measures to improve profitability and operations within the company. Moving on to our sustainability highlights. I will give you some details on the advancement of our sustainability plan 2024-2026. In environmental matters, we remained committed to decarbonizing our fleet, given that 97% of our emissions results from transportation services. We have continued to increase the kilometers roll by Euro 6 vehicles, reaching 85% of total kilometers on track to reach our 2026 target. In circular economy matters, we started an initiative to recycle NGP devices last year by installing recycling boxes in tobacconist and managing the entire recycling process. As you may recall, this initiative was first launched in Italy with an agreement with the Tobacconist Association and the Ministry of Health. And we started the same initiative in Spain and France at the end of last year. Among the 3 countries, we currently have more than 32,400 points of sales added to the initiative at the end of the semester. In social matters, we consider talent to be one of the key elements to achieve success and to secure competitiveness within the business. This is why we have set a target related to challenging with critical positions of the company. The target has been set to reach a 95% talent density by 2026, having reached 93% at the end of the period. Another key area within the social strategy is diversity in general and within our employees. This focus on diversity has led us to set a new target of reaching 30% of women within upper and middle management by 2026, which we are currently surpassed at 30.6%. And we continue to work to maintain the split. In governance matters, we implemented a new platform, which allow us to evaluate our suppliers on ESG and financial matters as part of our target to evaluate suppliers. And finally, we have approved a new data protection policy within the company, improving our business ethics and governance. Now, I will give you further details for each of the regions and businesses. Starting with Iberia, our largest market, economic sale has increased by 6% to EUR 606 million and adjusted EBIT has decreased slightly by 1% to EUR 107 million. Digging deeper into each segment in the tobacco and related products, tobacco volumes during the period remained stable, recording a slight increase of 0.3%. In particular, traditional tobacco volumes in Spain decreased by 0.4%, while in Portugal, volumes recorded an increase of 5%, while row and other increase in both countries. During the period, the manufacturers increased the tobacco retail price in Spain by EUR 0.40 per package, anticipating the announced tax increase, which was effective as of January 1. These movements has resulted in an estimated profit on inventory of EUR 34 million compared to the EUR 19 million for the first half of last year. In the Transport segment, economic sales reached EUR 455 million, recording a 3% year-on-year increase despite the slowdown in European demand, which affected long-distance transportation results. Logista Parcels business is performing well with sustained single-digit growth. Thanks to the higher volumes distributed in pharma and food sectors as per frozen food distribution at Carbo and long-haul at El Mosca. I already gave you information on those businesses in the previous slides. The good segment still records a healthy growth. Thanks to increases in deliveries and full consolidation of BPS within the period. In Pharma, economic sales increased by 13% to EUR 55 million by increasing services provided to existing clients and seeking new clients within both the pharmacy and the hospital sectors. We have continued to expand our service of providing medication to in-house patients, with a nursing team to administer the drugs. And finally, our Publications segment recorded a slowdown in economic sales with a 4% decline due to lower volumes distributed. Moving on to Italy; economic sales reached EUR 213 million after a 12% increase versus last year, and adjusted EBIT in Italy reached EUR 68 million after a 27% increase against the previous year. During the semester, total tobacco volumes fell by 2.3%. It's worth noting that this includes also a fall in HnB volumes given the fact that in April 2024, flavor HnB was banned in Italy. And sales increased substantially before the ban was enforced. So year-on-year data is not fully comparable. In Italy, manufacturers also increased the retail price of tobacco as a response to tax increase by the government. For the year, we recorded a total profit on inventory of EUR 9 million, given the manufacturers' reaction on price compensated by -- for the tax increases compared to a negative impact of EUR 1.5 million for the first half of 2024. As you may recall, during 2024, we started to distribute tobacco in the Netherlands on behalf of one of the large tobacco manufacturers. This business has continued to expand, consolidating the services offered to tobacco manufacturers. Looking to the convenience distribution in the recycling of NGP devices, we have already installed recycling boxes in 30,000 tobacconists throughout the country. Finally, in the Pharmaceutical Distribution segment, we have renegotiated contracts with existing clients and have grown organically, adding new clients to the portfolio. Furthermore, we are expecting to open a new pharma warehouse in the north of the country to help the pharma expansion in Italy. In France, economic sales recorded a decrease of 9% year-on-year to EUR 101 million, while adjusted EBIT for the period amounted to EUR 26 million after a 14% decrease, mainly due to a negative impact of the registering a lower profit on inventory against last year. In France, there was also an increase in taxes by the government like in Italy and Spain, which was followed by an increase in the selling price of tobacco by the manufacturers of EUR 0.50 per package. These changes in taxes and tobacco prices had an estimated positive impact of EUR 4 million on the value of our inventories compared to close to EUR 8 million for the same period of 2024. Looking into tobacco volumes distributed, France continued to show a faster pace in the decrease in volumes distributed than Spain or Italy with 12% less tobacco distributed during the period compared to the previous year. In the Convenience Products segment, we continue to register growth in the electronic transaction business, particularly on the recharge cash cards, which we call e-money. Furthermore, we continue to gain tobacconists, who includes our software and hardware as cash registers in the shops, adding a new personalized services space with a variety of tailor-made services and information embedded within the Strator machine. Lastly, in the NGP recycling business line, we have reached 1,250 tobacconists that have joined the initiative within the country. After giving you details of each region, we will move into the consolidated figures for the period. Total adjusted EBIT increased by 5% to EUR 202 million, supported by a positive performance of the activities, the strong positive impact of the inventory valuation and a continuous effort to contain costs despite the general inflationary pressures. Looking at the differences for the year per item, economic sales grew versus last year by EUR 49 million, backed by the good performance of the business in Iberia and Italy and the profit on inventory. Finally, reported EBIT reached EUR 174 million, representing a 4% increase on last year's figure after recording a similar restructuring cost, which was compensated by the capital gains on the sale of 2 assets in Spain. Bottom line: net profit decreased by 5%, mainly due to lower financial results for the period of EUR 29 million against EUR 48 million last year. This decrease of EUR 19 million in financial income is a result of the lower interest rates for the period. As you may recall, 2023 and 2024 were years with very high interest rates, finishing the semester of last year, with a reference rate of 4.5%, plus 75 basis points in an agreement with Imperial. The European Central Bank started to decrease interest rates back in June 2024 once inflation reached sustainable levels. Given this rate cut scenario, the first half of 2025 ended for Logista with a reference rate of 3.03%, plus 75 basis points on our credit line. The Imperial credit line balance during the period was EUR 1.7 billion versus EUR 1.9 billion in the previous year. Furthermore, the decrease in profit before tax translated into a EUR 3 million lower tax expenses, with a slightly higher corporate tax rate at 25.8% versus 25.6% last year. We concluded the period with an earnings per share of EUR 1.14 versus EUR 1.21 for last year. The positive business performance and profit on inventory for the last year has led to a 6% increase in EBITDA compared to the previous year. On the other hand, financial income collected decreased to EUR 33 million compared to the EUR 52 million in 2024, given the current interest rates. Restructuring costs paid during the period amounted to EUR 5 million and normalized taxes reached EUR 59 million. CapEx for the semester amounted to EUR 28 million. And it included, among others, investments made in warehouse improvements, sorters and automatic low intake. Leases recorded EUR 37 million, closing the period with normalized cash flow of EUR 164 million. We concluded the semester with a cash position of more than EUR 1.8 billion. Now, we'll move to our final remarks before opening to the Q&A session. I would like to mention as the first closing remark, the relevant profit on inventory recorded for the period after tax and price movements in all 3 regions. We continue to work on improving operating results on the acquired businesses with different measures in place, which I have already given you information on. On ESG matters, we have continued the execution of our '24 to '26 sustainability plan, with different targets set for each sustainability criteria. Finally, the diversification strategy continues to progress while maintaining the hurdle of 50% economic sales coming from nontobacco businesses, which we surpassed last year for the first time. Dividend continues to be a priority for Logista. And even though we continue to look for mid- to small-sized acquisitions in order to grow the company and execute our diversification strategy. We will continue to distribute dividends according to our policy. Furthermore, we would like to emphasize our commitment to distribute at least the same dividend during 2025 as in 2024, increasing the payout accordingly, if needed. We are aware of the importance of our dividend for our shareholders. In terms of outlook, after the already recorded profit on inventory, we expect adjusted EBIT, including POI to be in line with market expectations for fiscal year 2025. And given the current situation in the Transport segment already mentioned, we expect that our adjusted EBIT, excluding POI for 2025 will be slightly below 2024 figure. 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 by reading and answering the different questions that have been sent through the platform. The first question comes from Alantra. He's asking could you expect more POI for the rest of the year. Second question is relating to El Mosca. When do you expect the problems to be solved? In Carbo Collbatalle, is it losing money? What is the problem with the business? In terms of cash, why do the cash balances decreased during the year even though taxes have increased? Have the payment dates of taxes in the government changed? Is it in France? And last question is, despite the problems of Mosca and Carbo, do you think it still makes sense to buy logistic companies? And what is the return that you request on them?

Okay. Thanks very much, Juan, for your questions. Let me go through all of them. There's a bunch of it. With respect to your first question on POI, the way it works, it 100% dependent on manufacturers decisions. But in terms of expectations, Logista is not expecting any additional changes on POI during the rest of the fiscal year 2025. To your question on when do we see the Mosca issues solved, well, obviously, we are working on it. We are, as explained in a plan where a sector at the European level and particularly on the long-haul transportation has suffered, from fluctuation demand, geopolitical tensions and probably also from an excess of capacity that results in more price pressures. To make a long round on your question, just to give more details on El Mosca, we said several times that, we were seeing some challenges on our sector. And we were needed to react more quicker than we did in the past. After we got the 100% of the control, we are really acting faster to adequate the reality of this demand in the market to the cost structure and profitability of the company. And with that full control, we impose management, our internal controls and systems and staffs and do several things with operations and putting more financial discipline. Again, to your question, how much time do we need? Definitely, we need for the rest of the year to put this more order in the place that we want in terms of that profitability, that more shifting to international and with a higher tariff type of clients, even make an analysis on whether it makes sense to be in certain areas or sector divisions or group age or parcels or other ones. So that will need a bit more time, but we have a plan. And we are positive that we could revert this situation sooner rather than later. With respect to Carbo, Carbo is basically a lack of a reduced reduction on demand. And in particularly in the frozen food sector, which is pretty much the focus on Carbo. That was acquired a couple of years ago or even more and is jointly operating with Parcel. And in particular, in the restaurants in Gourmet and high-quality restaurants; that part of this niche has been suffered a bit more over the last year. And what we are doing is implementing a plan also with Parcel to increase that profitability with integration in the distribution network of Carbo with Parcel and obtaining the synergies that we were expecting. But probably making more efforts to accelerate those synergies and working on increasing flexibility on distribution cost by subcontracting certain routes, extra commercial efforts and cross-selling with partial clients and doing that consistent with our strategic approach. And hopefully, again, we can revert soon the situation of Carbo. And hopefully, we will need sometimes not only during -- particularly during this part of the year. To your question on the cash position and whether there is any change on payment dates from the government or whether it's for France? The reasons of that declines is not, there's no any changes on payment days from the government. But yes, basically, I mean, despite we have seen the increase in taxes in some of the countries. The impact of the volume reduction from France has been the main contributor to this decrease on cash balances. And to your question on whether after these experiences and challenges that we are facing on El Mosca, Carbo, whether it'd makes sense to keep on going with our strategy of logistic companies and maintaining our growth on inorganic growth on Logista. I would say the answer is, yes. I mean, we did know that looking out your business and this inorganic growth, be some risks. And we are facing, and we are managing them. But that doesn't mean that with the cash situation and the size of the problem. We wouldn't be able to go on with the strategy. We have the cash. We have the strategy. We have some targets. And we have also some lessons learned. And that doesn't mean that we should stop from our standpoint, the strategic -- the Logista strategic approach for the near future.

Thank you, Pedro. Next set of questions come from Kepler Cheuvreux from Pablo Colorado. There's a first question relating to POI, which was already answered. Then the second question is, if I'm right in the calculation, the adjusted EBIT, excluding POI is dropping by 7% during H1 versus last year, which is a sizable figure. Is this all drop linked to the Transportation segment? And third question, historically, you have always guided for low or mid-single-digit adjusted EBIT growth. This year seems more challenging. But when do you think, you can get to the historical reference? Do you think next year you might reach the historical reference? Fourth question is relating to the different actions we've taken in transportation, which has already been answered. And the last question is do you have any M&A alternative under final stages or consideration at the moment?

Thanks, Pablo, for your questions. The first related to the 7% decrease in adjusted EBIT, excluding POI, whether it is right, your calculation? The answer is yes. And related to that, whether the decrease is only related to transportation segments or other areas, tobacco books and pharma, is that your question? Well, we are explaining in the presentation also the main facts on this decline. Tobacco Spain, tobacco Italy, all the transportation areas or other businesses are evolving quite well. But yes, I mean, transportation and this part of El Mosca Carbo is the one more -- like more the results as well as the decline on results for France. That's the main reason behind that POI decline. And to your question on the mid-single-digit guidance and when we are going to recover that, let's stack on the guidance for 2025, this is the one that we are care of. We are trying to give based on these circumstances the better guidance for the market. But it's too early to give any other additional guidance further than fiscal year 2025. So your final question is related to M&A alternative and the final stages of consolidation from our side. We have different M&A targets. We are keep on doing a very hard work in the identification of alternatives that could create value for Logista in the different sectors, in the different countries that we have mentioned several times, so Spain, Portugal, Benelux, France, Italy. Those are the areas where we have presence and where we believe that we can find attractive targets and with synergies for combined with Logista that is much more easy to reach that level of returns that we are asking. So we remain the same on that. Whether there is some final stages, I think the quick answer is no. There's some advanced transaction that has been evolving over the last few months, but nothing really so in those final stages that you are asking. We have had some transactions in the final stages that for several reasons. We drop out the process. But as of today, we keep on working on that, but nothing in real final form.

Thank you. Next question comes from Jorge Ore. In November, Logista said, it was considering a big acquisition in Europe in 2025. Given the decrease of net profit and the intention to keep dividend, do you consider such an acquisition would be viable?

Sorry, I didn't push the bottom. Thanks, Jorge. I don't know exactly when you say a big acquisition that we said by 2025. What we were saying is that we keep on maintaining the small, medium-sized target acquisitions. And we remain the same. Whether we can go more to, medium rather than small, is probably what we -- let's try to explain. I think that we have mentioned several times that we were not looking at any transformational deal and we remain the same. But again, despite the dividend and as you mentioned, an acquisition will be viable, yes. And as I mentioned, we maintain a strategic approach with the inorganic growth as the backbone of our strategy apart from the organic growth. So we believe it's viable. But again, the number big or transformational is not part of our aim.

Next question from BNP Paribas, Francisco Ruiz. There's a question on POI, which was answered already. Then as margins in Iberia in Q2 has gone below Q1 figure despite slightly better figures in transport. What is this due? How do you expect this margin ex-POI to evolve? What is your best estimate for net financial income for the year at current Euribor?

Okay. Thank you, Francisco. Again, on POI, I think that we said before. With respect to the margins, I'm not sure about your figures with -- because Q2, we see both ex-POI and with POI, which is pretty much in line with Q1, even a little bit higher in Q2 rather than in Q1. And with respect to the net financial income for the year at current Euribor, well, we mentioned that the average that we have had, it's 3.03. We need to include that the margin that we received from our agreement with Imperial -- the mathematics are -- you can do it. I mean, it's like around 3% plus 75 basis points with maintaining that average cash of roughly EUR 2 billion. So something in the area of EUR 65 million to EUR 70 million should be the figure.

Next question comes from Alantra Equities. You said, you expect adjusted EBIT in line with market expectations. What is this figure?

Yes. Thank you, Juan. Yes, we mentioned this also in the Q1, the market expectation comes basically from screens. And what we see is the consensus of different analysts reported and published from the traditional press experts on this. And what we said is that we are in that adjusted EBIT in line with that market expectations that we see. And related to the figure, but definitely what we have seen that you can check in those screens that probably something close to what we have in 2024.

Next question comes from Bestinver, Beatriz Rodriguez, there's a first question on M&A, which I believe Pedro already gave you the view of what we're looking at currently. And then is how is the new tobacco business in Netherlands developing? Do you have any news about new manufacturers interested in the distribution? And the next question is, is there any news on the potential new tax regulations in Spain and the potential impact on your figures?

Okay. Thank you, Beatriz. Yes. Well, we actually have started to work with a second tobacco manufacturer, probably close to reach less a very basic 3PL logistics services for a third one. It was part of the plan. We are still in very early stages in our steps in the country, distributing now close to, I think, roughly below 800 points of sales. But including new manufacturers and new logistics services is part of the plan for the coming future. To your question on the potential new tobacco tax regulation in Spain, I would say it's no potential. It's already since January or implemented with only a waiver related to nicotine products with nontobacco. So that includes some vapors, nicotine pouches and e-cigarettes that moves to April 1, but pretty much everything related to that tax regulation has already implemented in Spain. So you can see the impacts.

Next question comes from Kepler. Can you detail the adjusted EBIT contribution from the tobacco distribution in Netherlands included in the Italian vertical?

Thank you, Pablo. Well, we do not disclose these specific numbers in particular on adjusted EBIT. It's true that is embedded in the Italian vertical. What we can say is that, as I said, we are in very early stages. We are in a positive contribution from the Netherlands. And we keep on growing from a not material impact in the Italian numbers yet, but really positive with the evolution and the agreements that we are having with the manufacturers.

There are some questions from Santander, which relates to the situation in Mosca and M&A, which I believe they have already been answered. Next question is from Dunas Capital. Within the long-distance business, have you seen any particular sector showing signs of weakness in recent months? Can you provide more details in the cost reduction program you're implementing in the segment?

Thanks, Juan. Well, definitely, long-distance business, we have seen signs of weakness in the recent months and not only 6 to 8 months, even more. That's why we -- when we started to explain to the market that we were seeing some weaknesses in that long-haul business. We were also trying to get, as I explained, the measures faster, not only related to cost reduction that for sure, we do have. It's also, as I mentioned, related to profitability, generally speaking. That means how we do need to face new businesses, current or future clients, the level of hurdle rates that we are asking, whether we should be -- we should have more strategic exposure to international transport or national? Whether we should be focused on certain specific areas or we should leave them whether -- how is our approach due to circumstances and geopolitical tensions with respect to maritime business and stuff? So it's pretty much what we explained and what we are focused, also understanding that part of that profitability has been reached by cost reductions with -- related to the warehouses, trying to manage the trucks and vehicles and transportation in a wisely way. But I think that, I already answered this part of the question. Thank you.

The rest of the questions have already been answered throughout the different ones we have received. And there are no new further questions. Thank you very much, everybody, for joining our presentation. If you have any questions, we're available at Investor Relations to answer them at any time. Thank you. Goodbye.