Metro AG (B4B0) Earnings Call Transcript & Summary

Ladies and gentlemen, we will now move on to the agenda for today. For agenda Item 1, I will first turn the floor to the Chairman of the Management Board, Dr. Steffen Greubel. He will explain the annual consolidated financial statements.

Ladies and gentlemen, dear shareholders, this year's Annual General Meeting is rather special in 2 respects. On one hand, this is the first Annual General Meeting or AGM with Roman Silha in his new capacity as Chairman of METRO AG Supervisory Board as a representative of EP Global Commerce GmbH. Roman Silha joined our Supervisory Board in 2021. Last year, he was elected to be Chairman. At this point, Roman, I'd like to extend a warm welcome to you, too. On the other hand, this is METRO's first AGM after its delisting. On the 16th of April 2025, trading in METRO shares within the regulated market of the Frankfurt Stock Exchange was stopped after nearly 20 years. Prior to the delisting, a joint agreement on the delisting was concluded between EPGC as our largest individual shareholder and the Board of Management of METRO AG, which was followed by a takeover bid to all other shareholders by EPGC. Why did we, the Board of Management of METRO AG support that move? Because we firmly believe that long-term stability and scope of maneuver was needed in order to transform METRO profoundly as is now the case. EPGC first bought a strategic stake in METRO in 2018. Ever since, EPGC has continuously shown that it has a long-term approach for METRO side-by-side with our anchor shareholders Beisheim and Meridian. Far-reaching commitments made by EPGC in connection with the listing agreement have underpinned this focus. The agreement is clearly in support of our growth strategy called sCore. Likewise, EPGC's commitments with regard to finance, HQ location, employees' rights, to name just a few, provide a reliable setting that enables us to implement our strategy in a consistent manner. The agreement also ensured that the company will be continuously managed like before. The Supervisory Board has already followed up on this, extending the contracts of all members of the Board of Management at an early stage in December 2025 until 2030. At this point, I'd like to thank you for your trust. Also on behalf of the entire Board of Management, thanks to the delisting and strong support from EPGC, which continuously grew its stake, METRO is now based on steady foundations. With all our force, we shall transform METRO into a pure wholesale company, growing sustainably over its 3 sales channels beyond short-term expectations of the capital market. In this respect, we've made visible progress during the past fiscal year. Let me move on to the balance sheet of the fiscal year 2024, '25. Let's start with the following key message. METRO keeps growing dynamically across all channels and with a positive impact on earnings. Our sCore growth strategy has been the driver of these positive trends, sCore combines 3 sales channels into multichannel model, wholesale stores, food service deliveries and an online marketplace. Such a combination offers major benefits. We stand out clearly among our peers, and we can harvest growth potential through multichannel customers. In order to steer our transformation, we have defined sCore KPIs to measure the proportion of sales to strategic customers, FSD, digital sales, our own brands plus product availability. These are the key levers for us to develop further. Our strategy can and will succeed if we define key priorities for investments. Here, we've been focusing on network optimization, digitalization, both internally and with our contact points with our clients and on sustainable efficient infrastructure. These activities add up to contribute to clearly defined growth objectives. Indeed, by 2030, we intend to hit the EUR 40 billion mark in sales, grow our EBITDA to more than EUR 2 billion and stabilize our free cash flow at a level of more than EUR 0.6 billion. What we've achieved in the past fiscal year with a view to these goals, priorities and KPIs is what I'd like to show you next. I'd like to begin with strong achievements in terms of sales and EBITDA. We increased our sales to EUR 32.4 billion. This means that adjusted for portfolio and exchange rate effects, we've grown by 6%, which is near the upper end of our guidance range. All segments and channels contributed to this success, which is even more remarkable since it has been the fourth consecutive year for us to grow even adjusted for inflation. This shows that we haven't just started a growth trajectory for your METRO, the trajectory continues to go on. This trend is also reflected by our operating result, which has exceeded our expectations. We had forecast only a slight increase. However, at the end of the past fiscal year, EBITDA came in at EUR 112 million more, reaching EUR 1.2 billion, exclusive of FX effects. During the same year, we recorded EUR 170 million in transformation costs announced at this meeting a year ago. They've been spent for a series of initiatives to increase productivity and cost efficiency. I shall explain them in more detail later. As expected, earnings per share amounted to minus EUR 0.6. The EPS decline is chiefly due to transformation-related expenses, which have a negative impact of EUR 0.40, so they exceed the operational earnings effect per share. In line with our current dividend policy, no dividend shall be paid for fiscal 2024, '25. But let me emphasize one thing, please. The positive EBITDA trend proves that we've chosen the right direction to go for, namely to fully focus on 2 things that is implementing sCore and implementing initiatives to lower our cost base. In a moment, I shall describe our strategic direction in more detail. But let's first have a closer look at the results. All segments contributed to sales growth. In Germany, we grew slightly to EUR 5 billion in turnover, not least thanks to our acquisition of the GVS Group. In the Western segment, our sales grew by 4% to EUR 13.4 billion. Our HoReCa countries, France, Italy and Spain and our FSD subsidiaries contributed most to this achievement. In Russia, our sales grew by 6% to EUR 2.6 billion. Adjusted for foreign currency, the Eastern segment grew by as much as 10% to EUR 11.2 billion, especially thanks to Turkey, Romania and Ukraine. The segment we refer to as other, comprising, for example, sales by METRO MARKETS and digital solutions grew by 4% to EUR 300 million. To sum things up, METRO keeps growing dynamically across all channels, wholesale stores, FSD and digital. Among these, FSD deserves to be emphasized because we have been able to grow this channel by 14% in terms of sales. In actual figures, this means that we hit the EUR 1 billion mark in sales growth in this particular field, totaling EUR 9 billion, FSD already accounts for just under 30% of our total sales. This implies that our investments in extending our FSD capacities by way of acquisitions or through optimizing our own network have borne fruit. This channel has become a strong driver for METRO to grow. Likewise, we were able to grow by digital sales generated by METRO MARKETS and rounded off by sales via DISH Solutions, M.Shop and M.Companion by [indiscernible] 16% thus increasing our result to EUR 358 million. Such trends illustrate that we were leveraging the potential of our multichannel model. In this way, we've been creating sustained growth, which is also now reflected by our operating results. We increased our adjusted EBITDA to EUR 1.2 billion, which was a huge step forward. In this respect, 2 factors played a major role. Firstly, sales growth. This is most striking in our West and East segments, where the EBITDA increase was sustained by top line growth, namely by EUR 30 million in the West segment and by as much as EUR 52 million in the East segment. Secondly, our attempts at reducing our cost base have been crown by first success. Last year, we outlined our Cost Leadership Programme to you at the Annual General Meeting. This is a program encompassing 5 global productivity savings initiatives to lower our cost base by EUR 300 million per year from fiscal 2027, '28 onwards. As mentioned previously, we spent EUR 170 million on transformation for this purpose last year. I shall speak about the program in more detail in a moment. For now, I'd like to illustrate our progress by quoting one figure. Last year alone, we already saved EUR 100 million by implementing some of the first activities. This is reflected by an EBITDA increase within the other segment to EUR 91 million. Such earnings were mostly possible by saving money within the holding company. Transformation will always require investments. This is particularly true for Germany. Here, our EBITDA declined to EUR 79 million. And because of political context, we also had to invest in separating [ RIG ] in Russia, which was an additional burden in this disconnection. This takes me to our political and economic environment. So it's important for us to stay aware of the global context in which METRO operates. Here, 4 dynamic factors have become important for both sales and earnings. Firstly, geopolitical tension has risen significantly. This trade and tariff policies have become unpredictable even vis-a-vis partners like the EU. The economic performance of major industries has come under pressure, which is a burden on global economic climate. Secondly, crisis and conflicts have impacted on our operational surroundings. Russia's war on Ukraine hits METRO directly as we have operations in both countries. But even beyond this war, crises and conflicts have grown. Not only do they affect regions, but also routes with reverberations for our supply chains in terms of availability, forwarding time and pricing. As an upshot, our procurement staff have consistently reduced strategic dependency on suppliers and regions, in order to ensure we have sufficient products available to serve our customers. Thirdly, sluggish economic growth in many European countries, especially Germany, has led to subdued consumption. In turn, this affects our clients within the catering industries. At the same time, costs have remained on a high level, whereas restaurant guests have become highly sensitive to prices. We're supporting our customers with private label and pricing strategies so they can stay competitive. Fourthly, the weak economic situation has led to more political interventions in the private sector. Food retail and wholesale has become a focus when it comes to burdens for the population. In this context, measures such as limiting the margins or introducing new types of tax directly impact on sales and earnings. As you can see, what's happening in the world is not just white noise for METRO, but has direct consequences for our business on suppliers, prices, availability and demand. But you can also see that we're paving the way to contain risks. In this highly volatile environment and in this day and age, our balance sheet shows that the sCore is resilient. We continue to strengthen this resilience even more by tackling our cost base systematically. So let me return to our Cost Leadership Program. The program consists of 5 initiatives to raise our productivity and cost efficiency. First, transforming our IT with a clear AI-first approach. Two, extending our METRO Global Solution centers in Poland and India with the aim to centralize and standardize our processes. Three, optimizing our non-HR spend via NPEX projects. Four, transforming our procurement up until joint buying initiatives; and five, streamlining our organization, especially with a view to sound staffing. In year 1, we already saved as much as EUR 100 million, which is substantial and shows the potential inherent to digitalization, standardization and harmonization. Let me quote 2 cases in point to illustrate this. In connection with our IT transformation, we intend to harmonize our systems all over the world. We want to optimize operational processes and accelerate digital transformation. We have a clear focus on AI first. Whether in sales and distribution, store operations or our assortment, we're leaving no stone unturned to identify relevant productivity increasing applications. Solutions are developed accordingly. I In order to optimize our non-HR expenses, we're using the sheer scale of our group. Last year, we were already able to improve some terms and conditions, Ts and Cs of our purchases in connection with a number of different projects. For example, by placing a centralized tender for our logistics services, we managed to save 3% to 5% for total volume in excess of EUR 200 million. These are the levers that can only take effect within an international network. Our transformation towards more digitalization, standardization and harmonization is in full swing. Initial results have shown us that there has a high potential for increasing productivity and cost efficiency. However, we can only increase your METRO'S profitability if we're just as target oriented and growing our sales figures. Let us therefore take a look at our operations now and talk about the progress we've made with the implementation of sCore. We measure our transformation to a multichannel wholesaler by 5 sCore KPIs, which you can see here. In all the areas, we see invariably strong momentum and a fast move towards the respective targets for 2030. Let me show you what we've launched within these priorities and what we've already accomplished. Let me begin with our priority #1, our customers in the hospitality sector and wholesaling, our strategic customers. Here, we increased the sales share from 66% in the baseline year 2020, '21 to 77%. This brings us already to the final stretch for our 2030 ambition. Our growth potential stems primarily from our multichannel customers. This is because our sales grow disproportionately when customers buy more than one channel, which is why we strive actively to convince customers of all the channels and quite successfully so. Last year, we increased the number of multichannel customers by 11% versus the year before in the HoReCa segment alone. The basis to strengthen our position among strategic customers is an assortment specifically tailored to their needs in conjunction with attractive wholesale prices. Last year, we actively consolidated this basis further. We've radically optimized our assortment for relevance. In doing so, we did not shy away from delisting. Since we started the assortment transformation in 2023, we delisted about 450,000 items. This has been backed up by continuing the rollout of our volume discount price initiative buy more, pay less. It is our aim to offer our customers competitive volume-related prices also in order to gradually move away from just short-term sales of promotion campaigns. Buy more, pay less has meanwhile been introduced in all the METRO countries. At present, almost 165,000 items form part of the price initiative so that we offer the volume discount for about 25% of our store assortment. Volume discount sales already account for 28% of our store sales. This is equivalent to a sales increase of 17% versus the year before, clearly highlighting the importance of this pricing strategy. We have strengthened the relevance of our assortment as regards offer and price for our strategic customers, also with a positive impact for us. Less assortment, larger volumes and stable price models also mean less complexity for METRO. We've also made very good headway in expanding our delivery business. Delivery has become a strong sales driver with a strong channel growth of 14%. The FSD share of total sales has also increased accordingly. We've meanwhile reached 28% and are close to the 33% target. We keep increasing our delivery capacities by 2 thrusts in which we keep investing continuously. First, by transforming our network of stores and depots; second, by developing our portfolio of acquired FSD specialists. The transformation of our network is essentially about expanding the delivery capacities of our stores. Here, we combine the store-based business with wholesale logistics and delivery, always based on principles of multichannel fulfillment centers. 88 multichannel fulfillment centers have been remodeled since 2023, including 30 in the past fiscal year. Another 125 are planned until 2030. This means that we are remodeling our traditional stores step-by-step into 2 multichannel fulfillment centers. The development does not only comprise the infrastructure itself, but also the logic of how a store is organized. In so doing, we respond to the aspirations of our multichannel business in a capital-saving way. Our network transformation also includes the opening of delivery depots, whenever the delivery demand exceeds the capacities of the stores. Last year, we opened 8 depots. The second delivery thrust comprises the FSD specialists, which we acquire whenever they offer clear added value for the strategic development of this channel. This was last the case with the GVS Group in Germany. By taking them over in May 2025, we acquired additional skills in delivering to the food service industry with the aim of developing this growth field. GVS supplements our portfolio of meanwhile 8 FSD companies operating in Western Europe, Asia and the MENA region, thereby expanding our delivery skills with a wide-ranging profiles. Let's move on to the ambition for our own brands. Our own brands benefit equally customer retention and profitability. This is why we want to raise their sales share to 35%. At currently 26%, we keep approaching the target. How important our own brands are for reaching our growth targets is demonstrated by the fact that last year sales of own brands already accounted for 60% of our sales growth. This is why we consistently expand our brand assortment. Over 1,000 new products specifically tailored to HoReCa and traders were developed last year. At the same time, we are now shifting the focus towards proactive sales. And here, we are moving full steam ahead. With the year of own brands, we launched our first global sales initiative designed to proactively position our own brands towards our customers in the past fiscal year. The result is EUR 1 billion worth of more revenues, the highest sales volume ever achieved with own brands in METRO's history. Motivated by this success, we are directing all the spotlights this year to Ultra Fresh assortment. These products are of utmost relevance for our key customers and are hence a field in which we can grow on a long-term basis. Our ambition for this is the year of the big fresh this year. The ambition remains high again. No less ambitious is our target for the digital sales share, 40% by 2030. And we are moving forward here, too. 16% of total sales were generated digitally last year. But let us take a closer look. METRO MARKETS, our online marketplace for non-food items has grown its sales by 11% to EUR 182 million. At present, a particular focus is on developing strategic customers and quite successfully so. Within the platform's total volume of EUR 300 million, that is including trader sales, HoReCa sales grew by 40% last year. DISH, our provider of digital solutions for restaurants is growing, too. Sales have increased by 20% versus the year before on the back of a growing customer base. 400,000 caterers use DISH solutions, 15% more year-on-year. This development is also reflected by the momentum with which our tools are gaining reach. Last year, 69 million seats were reserved online via the DISH reservation system, an impressive growth of 76% versus the year before. And DISH POS, our cloud-based POS solution for the hospitality industry has meanwhile convinced 21,000 customers equivalent to 80% growth year-on-year. DISH Pay, our payment solution launched in 2023 was extended in February 2025 to include a mobile option. DISH Pay Now currently available in 6 countries. All in all, DISH Pay Now has 15,000 customers, including 8,000 already using the mobile solution. This demonstrates how we leverage additional sales potential with this solution. M.Shop and M.Companion are also part of our digital sales. With M.Shop, we enable our FSD customers to order easily from their computers at home or while on the roof via the M.Companion app. Convenient ordering is the precondition for our FSD growth. Last year, 12.5 million orders were handled via M.Shop generating sales of EUR 4.7 billion, 15% more year-on-year. That's a strong message. The digital sales share has risen by 10 percentage points since the launch of sCore. Now it is important to continue expanding the existing solutions and platforms strategically. We are thus creating a powerful channel, significantly improving the quality of our multichannel model. In conclusion, the product availability should not go unmentioned because this is also a visible feature of our business quality and hence, a key element of sCore. At 98% product availability, we have already reached our target here and keep working continuously to maintain this ratio. Sustainable economic management also increases the quality of our company, which is why we invest in efficient energy infrastructure, EUR 77 million last year, and we keep optimizing processes along the supply chain. In the past fiscal year, we updated our climate targets and linked them time-wise to sCore. For more transparency and in compliance with new regulations, we've opted for absolute reduction targets for the first time. These are currently being validated by the science-based targets initiative. For our own business operations, we have committed ourselves to cutting our absolute emissions by 42% versus 2019, '20 by 2030. We are well on track with a minus of 26% in the past fiscal year. However, the bulk of our emissions arises in the value chain of our assortment. We intend to cut these emissions together with our suppliers by 2030, for agricultural production by 30% versus '21, '22, for the other indirect emissions by 25%. Initially, we are facing a 3% plus here, which demonstrates the challenge posed by reconciling growth and lower emissions in an economically sustainable manner. We intend to meet this challenge together with our partners in the supply chain. We've also tightened our target for the reduction of food waste. By 2030, we want to cut our food waste by 30% versus 2021, '22 in absolute terms in tonnes. We've gotten off to a good start with a minus of 11%. To this end and apart from food donations, we are relying on innovative approaches and AI optimized ordering processes to mitigate potential waste early on. Ladies and gentlemen, you've heard now what we did in the past fiscal year to expand our position as multichannel wholesale. However, all these actions will only lead to growth if we succeed in transforming METRO into a passionate sales engine. This requires employees who are close to our customers with a multichannel mindset who connect their channels and take our customers with us on this journey. This is why our sales team continues to grow. At present, 8,500 colleagues, that is 30% more than the year before, work every day to safeguard the loyalty of our customers and attract new customers. Customer proximity is not only a sales function, of course, quite on the contrary, it is the DNA of METRO. We're also demonstrating this beyond our operations. It is with passion that we stand by our customers' side, safeguard their interests and strengthen their visibility in society. After all, our successful performance is closely linked to how the hospitality industry, in particular, meets its challenges. There is hardly any other industry impacted so much by high cost pressure and strong price sensitivity at the same time. The limited economic leeway is increasingly squeezing many businesses to the wall. It is therefore absolutely the right step to finally introduce the VAT rate of 7% for restaurants in Germany on a lasting basis. This does not only bring about fair taxation and fair competition, 7% for meals is a significant financial relief. The 7% are a key lever for the survival of this diverse and lively industry. This is why, and I personally have taken an active role in this debate. The federal government has kept its word even in light of the daunting challenges that this country is currently up against. The 7% are therefore also a token of appreciation for the hospitality sector whose importance for our community life, cities, neighborhoods and regions still tends to be underestimated and still does not always receive the appreciation it deserves. These are the issues that keep us busy and drive us. For this reason, we support and initiate formats that strengthen the trade, diversity and visibility of the hospitality industry in all METRO countries from Bocuse d'Or in France to Squeezita in Italy on to Taste Hungary in Hungary. We are particularly committed to the hospitality industry at our home base. We want to turn Dusseldorf into Germany's hospitality capital. Working closely with EMEA, we want to demonstrate that a good hospitality landscape pays off to its location and benefits it. To this end, we are taking the lead with initiatives of our own. This includes Chefs in Town, a format that brings together top-ranking chefs with local restaurants and for a weekend turns Dusseldorf into a showcase of culinary delights and diversity. For the third time in 2026 last year, 100 restaurants created an exceptional culinary setting and atmosphere in the city with over 200 events, a success attracting attention even beyond Dusseldorf. Also at the group's headquarters, the METRO campus, we are demonstrating that we are serious about the hospitality capital. Now that the atrium, the very heart of our campus was reopened in the summer of 2025, there are now 4 versatile restaurants ranging from fine dining to pizza located at the main entrance of METRO AG. A meeting place and culinary cuisine venue has thus been created for the whole city impressively demonstrating what we mean by customer proximity. The atrium has become a place of transformation and hence, also an epitome of the transformation of our METRO. Dear shareholders, this brings me to the conclusion of my speech, and let me wrap it all up. It is with great momentum that we are approaching our 2030 targets, and we are growing across all channels. This demonstrates again that sCore is the right path. Second, a sales rise over 4 consecutive years proves that our course is sustainable. For fiscal 2025, '26, we expect 3% to 6% growth. Third, in combination with a strong sales result, our initiatives to enhance cost efficiency and productivity have resulted in an EBITDA exceeding our expectations. We will consistently keep pursuing this course. For fiscal 2025, '26, we expect an adjusted EBITDA rise of EUR 50 million to EUR 150 million. Fourth, we will keep investing in our growth drivers while at the same time, driving digitalization, harmonization and standardization of our processes. This will enhance METRO's profitability. We have defined concrete projects for this. This will also help us improve the free cash flow significantly. And fifth, sCore will remain our course for the years ahead. This has also been confirmed by EPGC in the delisting agreement. This provides us with a strong foundation to continue the transformation rigorously. Ladies and gentlemen, we have demonstrated that sCore is leading and keeping METRO on a growth course. This remains our aspiration also for 2026. I would like to thank our 84,000 employees for this successful performance. It strengthens our confidence in the strategy and our skills to take the transformation forward with energy and vigor. Thank you very much for your attention.

Yes. Thank you very much indeed, Dr. Greubel for these deliberations. This was highly interesting, I think, and highly motivating to listen to. Dear Sirs and madams, this concludes the public broadcast of the Annual General Meeting on the Internet. I would like to thank everyone who followed the Annual General Meeting via the public live stream for your interest. [Statements in English on this transcript were spoken by an interpreter present on the live call.]