Robinsons Retail Holdings, Inc. (RRHI) Earnings Call Transcript & Summary

The 2024 Annual Shareholders' Meeting of Robinsons Retail Holdings, Inc. will now start. Good morning, ladies and gentlemen. Present with us this morning are all members of our Board of Directors: Mr. Lance Gokongwei, Chairman, who will preside over the meeting; Mr. James Go, Vice Chairman; Mr. Robina Gokongwei-Pe, President and CEO; Mr. Scott Price; Mr. Choo Peng Chee; Mr. . Rodolfo Ang; Attorney Cirilo Noel; Mr. Enrico Cruz; and Mr. Cesar Romero. Also present are Robinsons Retail's COO, Stanley Co; Chief Financial and Risk Officer, Mylene Kasiban; Corporate Secretary, Attorney Rosalinda Rivera; General Counsel, Attorney Gilbert Millado, Jr.; Vice Presidents, Gina Dipaling and Gabriel Tagala III; and Treasurer, Graciela Banatao. We are also joined by representatives of our external auditors, SyCip Gorres Velayo & Co. We will now play the Philippine National Anthem.

Good morning, ladies and gentlemen. Thank you for joining this meeting. May I request the Corporate Secretary to please certify on the sending of notices to the shareholders and to the existence of a quorum for this meeting?

Mr. Chairman, I hereby certify that notice of this meeting had been sent to the shareholders of record as of April 5, 2024, through the following methods: by publication in the Manila Standard and Business World for 2 consecutive days in both online and print formats, by sending through electronic mail in accordance with the bylaws of the corporation, by posting on the website of the corporation and by disclosure to the Philippine Stock Exchange. Thus, the shareholders have been duly notified of this meeting in compliance with applicable rules and regulations. I hereby certify that there are present in this meeting, via remote communication or by proxy, shareholders entitled to vote representing 82.75% of the corporation's total outstanding shares and that this meeting is therefore competent to transact the business provided for in the agenda. A quorum is present, Mr. Chairman.

There being a quorum, the Annual Meeting of the Shareholders of Robinsons Retail Holdings, Inc. is hereby called to order. May I request the Corporate Secretary to share with us the rules and procedures for this meeting?

The following are the rules of conduct and procedures for the meeting. Shareholders may attend the meeting remotely through the link provided. Shareholders were requested to send an e-mail should they intend to participate in the meeting by remote communication and be included in the determination of quorum, together with shareholders who voted in absentia and by proxy. For items on the agenda for approval, the affirmative vote of shareholders representing at least a majority of the issued and outstanding capital stock is required. The voting results reported during this meeting will be subject to validation by SyCip Gorres Velayo & Co., and the final voting results will be reflected in the minutes of the 2024 Annual Meeting of the Shareholders. The meeting will be recorded in audio and video format, in accordance with SEC guidelines. Please refer to the definitive information statement for additional details on the rules and procedures for this meeting. For the information of the shareholders who are with us now during this live broadcast, the corporation has requested shareholders to send their comments or questions by e-mail. Questions which were received by April 30, 2024, have been collated and selected questions will be answered later on. The corporation will reply to the questions and comments not taken up during this meeting through e-mail.

Let us now proceed to the next item in the agenda, the approval of the minutes of the 2023 Annual Meeting of Shareholders. May I call on the Corporate Secretary to present the results of voting for this agenda item?

Mr. Chairman, copies of the minutes have been distributed to the shareholders by providing the link to the said minutes in the definitive information statement, by making a copy of the minutes available in RRHI's website and by showing the QR code on the screen prior to the meeting. The minutes have been approved as submitted by votes representing 82.75% of the total outstanding shares of the corporation.

Thank you. The minutes are hereby approved as presented. Moving on to the next item of the agenda. May I now call on Ms. Robina Gokongwei-Pe, President and Chief Executive of the corporation, to present her report, together with the audited financial statements for the year ended December 31, 2023? Ms. President?

Good morning to all of our shareholders, Board of Directors, partners, customers and friends from the media. Today, I am pleased to discuss our 2023 financial performance, corporate developments and sustainability initiatives. Allow me to begin with Robinson's Retail's financial performance. RRHI currently stands as one of the largest multi-format retailers in the Philippines, operating across 5 business segments, encompassing 10 formats and 22 banners. Consolidated net sales rose by 7.4% in 2023 to PHP 192.1 billion, supported by same-store sales growth of 3.9% and store expansion initiatives. Gross profit surged by 7.8%, surpassing revenue growth, driven by assortment shifts and sustained penetration of private label brands. Our improved gross profit contributed to a 1.5% increase in core net earnings to PHP 5.6 billion. Our core net earnings exclude onetime and noncore items. However, net income attributable to equity holders of the parent company declined to PHP 4.1 billion, primarily due to ForEx losses and equitized losses from start-up investments. The primary drivers of revenue growth in 2023 were our core staple businesses, namely food and drug stores, accounting for around 77% of net sales and close to 80% of EBITDA. In 2023, we expanded our footprint by opening 84 new stores, bringing our total store network to 2,393 company-owned stores in addition to 2,127 franchise stores under TGP. Our store portfolio includes 757 food segment stores, 1,054 drugstores plus 2,120 franchise stores of TGP, 50 department stores, 230 DIY stores and 302 specialty stores. Now allow me to update you on our first quarter results for 2024. Net sales rose by 2.9% to PHP 45.9 billion, driven by incremental revenues from new stores and sustained demand in the food and drug store segments. SSSG normalized to 0.9% due to an unusually high base in the last 2 years and the impact of temporary store closures during the holy week. Gross profit increased by 3.6%, exceeding revenue growth, which we attribute to expanding private labels and imported product sales. Core earnings increased by 8.5% to PHP 1.9 billion. Net income for equity holders surged to PHP 5.1 billion, largely due to a onetime gain from the BPI-Robinsons Bank merger. Now let me discuss some of our key corporate developments. On January 1, 2024, the merger between BPI and Robinsons Bank with the former a surviving entity officially took place. We now effectively own 6.5% of BPI and entitled to a Board seat in the bank. With the merger, BPI should be able to provide our various suppliers with wider working capital funding options to service our needs. In addition, we can cross-sell our retail products and services to a much wider bank customer base. We celebrated our 10th anniversary as a publicly listed company last November 13, 2023. To mark the occasion, we had a bell-ringing ceremony at the Philippines Stock Exchange on November 23 with the directors and officers of the PSE and RRHI. In collaboration with the DFI Group, we formally launched the official entry of the Meadows brand in the Philippines at Shopwise in Parañaque City last December. Meadows is DFI's multi-awarded private label brand of high-quality food and drinks, home and kitchen essentials and health and beauty products sourced from all over the world and sold at great value for money. Robinsons Retail has once again been recognized by the Institute of Corporate Directors with a Golden Arrow Award for continued efforts in improving our corporate governance standards and practices. RRHI was acknowledged as one of the top employers in the Philippines. This recognition stems from a survey conducted by the Philippine Daily Inquirer and Statista, which gathered insights from approximately 16,000 employees. In November 2023, we extended our share buyback program by an additional PHP 1 billion, bringing the total allotment to PHP 7 billion. As of end of April, we have already repurchased approximately PHP 6.5 million worth of shares. We are pleased to announce the declaration of cash dividends of PHP 2 per share with a 71% payout ratio. The record date for this dividend is May 27, and the payment date is June 10. Enhancing shareholder value remains a top priority for us, demonstrated by initiatives such as our share buyback program and our ongoing commitment to consistent dividend declarations. Moving on to our sustainability updates. One of our main goals is to embed sustainability in the way we do business. We have recalibrated our ESG strategy and have come up with 3 key areas: responsible retailing, relationship with our people and communities and robust environmental action. Our 3 Rs of sustainability. In 2023, we worked with over 2,000 MSMEs and over 2,200 small-hold farmers, reduced over 30% of our direct greenhouse gas emissions intensity since 2021 by transitioning away from high-carbon refrigerants and system and facility upgrades, collected over 20,000 kilos of plastics as part of our plastic neutrality campaign and donated around 23,000 kilos of food, which have been converted to over 95,000 meals for indigent communities. To ensure accurate and reliable reporting, we have undertaken external assurance for our sustainability report. We completed our first-ever ESG external assurance in 2023, covering 2022 data, reflecting our dedication to corporate responsibility and transparent business practices. Our external assurers, SGV & Co., thoroughly review data, policies and procedures to ensure alignment with global ESG standards. The second external assurance of 2023 data is undergoing finalization. This ends my presentation. Thank you, and happy shopping.

Thank you. May I call on the Corporate Secretary to present the results of voting for the approval of the audited financial statements for the preceding fiscal year?

Mr. Chairman, we are pleased to report that shareholders representing 82.73% of the total outstanding shares of the corporation have approved the audited financial statements of the corporation for the year ended December 31, 2023, as presented. The report of the President is hereby also duly noted.

The report of the President is accordingly noted, and the audited financial statements for the preceding fiscal year are hereby approved as presented. We now go to the election of the members of the Board of Directors. May I request the Corporate Secretary to read the names of the incumbent members of the Board of Directors?

The incumbent members of the Board of Directors are: Mr. James L. Go, Mr. Lance Y. Gokongwei, Ms. Robina Gokongwei-Pe, Mr. Scott Price, Mr. Choo Peng Chee and the independent directors are Mr. Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero.

Thank you. May we now have the list of nominees for election to the Board of Directors and the voting results?

Mr. Chairman, in accordance with the nomination process stated in the bylaws of the corporation, the following have been nominated as members of the Board of Directors: Mr. James L. Go, Mr. Lance Y. Gokongwei, Ms. Robina Gokongwei-Pe, Mr. Scott Price, Mr. Choo Peng Chee and, as Independent Directors, Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero. There being no other nominations, the affirmative votes in favor of those nominated have been tabulated, and the following are the duly elected members of the Board of Directors of the corporation for 2024: Mr. James L. Go, Mr. Lance Y. Gokongwei, Ms. Robina Gokongwei-Pe, Mr. Scott Price, Mr. Choo Peng Chee and, as Independent Directors, Rodolfo P. Ang, Mr. Cirilo P. Noel, Mr. Enrico S. Cruz and Mr. Cesar G. Romero.

Let us move on to the next item in the agenda, which is the appointment of the external auditor of the corporation. May I call on the Corporate Secretary to present the results of voting for this agenda item?