SMU S.A. (SMU) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the SMU conference call to discuss their strategic plan for 2023 through 2025. [Operator Instructions] And the conference is being recorded. [Operator Instructions]. I would now like to turn the conference over to Carolyn McKenzie, Head of Investor Relations. Please go ahead.

Thank you. Thank you all for joining us today. I'm here with our CEO, Marcelo Galvez; and our CFO, Arturo Silva. This week, we launched our new 3-year strategic plan for the 2023 to 2025 period. And the purpose of today's call is to describe the key initiatives and targets associated with the plan. We have a lot of slides, but I'm going to try to keep the presentation as short as possible so we can leave time for Marcelo and Arturo to answer questions. The chat option worked really well on our last earnings call. So that is available again today. Please feel free to send your questions through at any time during the call. And we will try to get to all of them. If, for some reason, we don't get to your question, I will get in touch after the call. If anyone isn't using the webcast to follow the slides, the presentation is available on our website, smu.cl in the Investor Relations section under Presentations SMU Day 2020. An audio recording of this call will be available on our website later today. We will be making a lot of forward-looking statements today. So please remember to take a look at the disclaimer regarding forward-looking statements on Slide #2 of our presentation. We'd like to start today's presentation by providing some context. SMU is a leading food retailer in Chile. We are #3 by revenue, and we have been increasing our market share. We also have broad geographic coverage and a customer base of over 10 million people. Our multi-format strategy with a focus on food makes it especially defensive, which our results in recent quarters have demonstrated. Today, we want to show how we will use these strengths to continue to grow going forward. On Slide 4, we have the agenda for today's presentation. We're going to start with some highlights from our plan for 2020 to 2022, which we are wrapping up this month. We aren't doing this to brag about our accomplishments. There is a lot of continuity between the 2 plans. So we think that, that context will be helpful. On Slide 5, we have an overview of our strategic plan for 2020 to 2022. The plan was structured in 4 pillars: omnichannel growth, customer experience, efficiency and productivity and committed and sustainable organization with financial capacity and technology, providing support in order to implement all of our strategic initiatives. Just like the plan we are announcing today, the current 2020 to 2022 plan also built on the progress from the previous plan for 2017 to 2019. In 2017 to 2019, we have been focused on customer experience, efficiency, organizational excellence and sustainability. And the biggest change in the last 3 years was that we started to accelerate omnichannel growth. We have a few pictures on the next slide, illustrating how we started this new stage of organic growth with new store openings, even as we face challenges during the pandemic, which slowed us down in 2020. But we've picked up the pace since then. We have the numbers on the next slide. We opened 19 new stores, including 9 Unimarc, 3 Alvi's, 1 Super 10 and 6 Maxiahorro. We also converted 3 Mayorista 10 stores into Super10 stores, and we remodeled 36 Unimarcs and 7 Alvi's. So here, you can really see how we are building up our multi-format strategy. On Slide 8, you can see a new value proposition we've implemented at 2 Unimarc stores so far. Las Tranqueras, which we opened in September and Los Trapenses, which we remodeled this year. We call this value proposition premium affordable. As I mentioned at the beginning, one of our competitive advantages is our deep customer insight. We use our understanding of our customers' needs to make decisions about store clusters and assortments. And this new value proposition is a result of that analysis. Some of our Unimarc stores have a significant number of customers who are looking for a more sophisticated product assortment, but they're also looking for savings. These new stores meet those needs with a very strong offering of fresh products, fruits and vegetables, bakery, deli, meat and fish. And a very attractive look and feel, but with affordable prices. On the next slide, we have our Super10 soft discount format, which we launched last year, further strengthening our multi-format strategy. We have 4 stores operating today. These stores target end customers who are looking to face. We offer an efficient assortment of products covering all of the categories our customers need, including basic goods, bakery, fruits and vegetables, meats and others with a high percentage of private label products in the mix. These stores have a highly optimized operating model, which enables us to pass savings along to our customers. We have seen a boost of profitability in these stores. After being converted from Mayorista 10 to Super 10, their EBITDA margin improved between 70 and 250 basis points. On Slide 10, we have organic growth in Peru, where we just started opening new stores in 2020 after successfully making it to break even with our operation there in 2019. Our soft discount format, Maxiahorro, is a good fit for the Peruvian market, and our organic growth has been concentrated in the northern part of the country. We've opened 6 stores in the past 2 years. And on the whole, these stores are outperforming our projections with sales up 13% and EBITDA up 184%. Our omnichannel growth initiatives also include e-commerce, and we have defined a hybrid strategy for this business. Customers generally divide their online purchases between planned purchases and express purchases. We have decided to focus on planned purchases for our own platforms and to partner with third parties to cover express purchases. On Slide 11, we have the platforms we launched over the past 1.5 years to cover planned shops. First is unimarc.cl, where our app has over 1 million downloads, and we have e-grocery operations in all 16 regions of Chile. We launched unimarc.cl in September of last year, and we have seen steady growth since then. In August of this year, we launched alvi.cl for our B2B customers that belong to our group Alvi loyalty program. These customers are mainly owners of mom-and-pops, hotels, restaurants and other small businesses. And by offering them an online solution, they are able to order and receive products without having to leave their places of business, which means they can continue to serve their own customers and ensure product availability at the same time. By offering new solutions, we help these customers grow their businesses, and we also build loyalty to Alvi. On Slide 12, we have the other part of our online strategy, which is partnerships with third parties to cover express shopping missions and also to easily extend our geographic coverage. We have tripled sales through last milers since 2019, and we also formed a new strategic partnership with the Marketplace Mercado Libre earlier this year. This is the most visited online marketplace in Chile. So it's been a great way to build visibility for unimarc.cl. After only 5 months, we are already the #3 seller in the food category, and we've been particularly successful in positioning private label products on this platform. And speaking of private label products, this is a great segue to the next pillar of our plan, customer experience, starting on Slide 13. One of the key customer experience initiatives has been developing private label products. And the central part of our efforts over this period has been a change in the branding strategy, decoupling private label brands from the banners. So instead of having Unimarc brand olive oil, for example, we have Nuestra Cocina brand Olive oil, which adds to the quality perception of the product and also means we can use the brand across all of our formats. To date, we have 14 specialized brands focused on different product categories. And we've launched about 1,500 SKUs. Sales growth for private label in 2022 has been 77% compared to 2021. So this strategy is definitely delivering results. Another achievement in our private label development has been increasing recyclable packaging. We had a goal to certify 150 products this year with the ecolabel for recyclable packaging. And we have already surpassed that goal with 162 certified products to date. Another customer experience initiative on Slide 14 is the focus on our fresh food offering, where we implemented a 360-degree methodology for product categories that are crucial for the customer experience. This methodology covers different dimensions from suppliers and supply chain model to quality, packaging, assortment and display and impact on customers. We started applying this methodology to the fruits and vegetables category, which is extremely relevant in the customer experience. Examples of achievements include the implementation of long-term purchase programs to help ensure product supply. These programs cover 28 product groups that account for 70% of sales. We also increased the frequency of deliveries from our distribution centers and implemented new technologies to improve the accuracy of demand planning. These initiatives had a measurable impact on customer experience. The Net Promoter Score for the fruits and vegetables dimension improved 14%. On Slide 15, we move on to the efficiency and productivity pillar where we focus on optimizing in-store processes and logistics processes. For in-store processes, a major initiative was the implementation of an efficient operating model in 109 Unimarc stores. This model features more centralized distribution with greater frequency of product deliveries from our distribution centers, as well as efficient restocking with rural containers and planograms and the addition of self-checkout modules. Stores with the model implemented showed an improvement in product availability with 1.5 percentage points of higher in-stock compared to the rest of the format and a significant improvement in customers' evaluation of their checkout experience. With respect to logistics processes, as I mentioned on the 360-degree methodology slide, we implemented new technology to improve accuracy and demand planning. The system is called Blue Yonder. And as we described on Slide 16, it uses artificial intelligence to generate highly accurate forecasts at the SKU, store and day level. Following the implementation for fruits and vegetables, we saw a 24 percentage point increase in our in-stock levels, and that higher product availability drives sales. We also had an improvement of 2.6 percentage points in shrinkage, which means we are reducing food waste. We've also expanded the use of voice picking technology in our logistics operations as described on Slide 17. We have voice picking implemented at 6 distribution centers, reducing order picking time by 21%. Other logistics optimization, such as the implementation of our transportation management system as well as the use of double-deck trucks and multi-temperature trucks, have allowed us to improve our load factor or the percentage of truck capacity we use by 13.2 percentage points, generating annual savings of PEN 4.7 billion and helping to offset other rising logistics costs. Different initiatives in this pillar have contributed to significant productivity gains as seen on Slide 18, where our sales per full time equivalent has improved 47% since 2019. During this period, we have also been laying the foundation to continue improving our energy efficiency performance by managing our consumption and our environmental impact, as we describe on Slide 19, through 3 focus areas. First, for our higher consumption facilities, we have negotiated unregulated customer tariffs leading to a 43% reduction in tariffs for those facilities and also a guaranteed supply using renewable energy sources. These facilities account for 20% of our energy consumption in Chile. We've also implemented IoT or Internet of Things sensors to measure the energy consumption and temperature of equipment at 6 stores as part of a pilot program and also identify opportunities to improve energy management and also to detect temperature increases in our refrigeration equipment, generating an early warning to avoid the waste of refrigerated food. And finally, we've been implementing an energy management system, including certification under ISO-50001, starting with 3 facilities. Moving on to Slide 20 and the fourth pillar of our plan, committed and sustainable organization, one of our focus areas is the creation of shared value, where we have a long-standing commitment to developing small regional suppliers through our [100% Nuestro] program, which celebrated its 10-year anniversary in 2022. This program helps develop suppliers and it enhances Unimarc's product assortment and customer experience by offering locally sourced products. In the last 3 years, we've added 62 suppliers. And today, we have over 200 suppliers in the program. We also have a strong commitment to promoting diversity and inclusion with different stakeholder groups throughout our business activities. On Slide 21, we've put this information into numbers, showing that, for example, 52% of leadership positions at SMU are held by women. We partner with organizations that support our commitment to diversity and inclusion, making contributions of approximately CLP 4.5 billion over the last 3 years. And we also facilitate customer donations to these causes, collecting CLP 380 million at our store checkouts. With respect to suppliers, we aim to support them by offering training courses for best Practices, reaching over 500 different companies. Caring for the environment is another focus area on Slide 22. We've been measuring and managing our carbon footprint for the last 3 years, getting certified through a program called Huella Chile. And reducing food waste is a major initiative for us. We have quickly ramped up food donations from stores last year. And today, 100% of stores and DCs in Chile are equipped for food donations. We also have our Pronto Consumo program, where we reduced prices on products that are expiring soon, but are still in optimal conditions for consumption. Customers save and we avoid waste. These 2 programs have helped us avoid sending 8,750 tonnes of food waste to the landfill since 2020. That number includes 400 tonnes of food donations benefiting over 50,000 people. Implementation of new technological tools and the development of digital talent provide key support to help implement our strategy as described on Slide 23. We've made progress in 3 areas: new technologies, including several that I named on previous slides; digital organization, focused on internal talent and capabilities; and ongoing improvements, including new SAP modules, such as Ariba for supplier and purchasing management. We've also strengthened information security structures and practices. The other key support for our plan is financial capacity, where we have continued to deliver strong results and reach our targets as seen on Slide 24. For 2020 to 2022, we have set a goal of attaining double-digit return on equity. And as of September of this year, we are at 16.7%. In addition, in 2016, we set a goal of reaching an EBITDA margin of 9% by 2021, which was accomplished. And as of September, we were at 9.2%. We've increased EBITDA by 9.9% per year on average, and recurring net income, excluding the CLP 20 billion from the sale of OK Market has grown an average of 47.1% per year since 2019. The sustained operating and financial improvements described on the previous slides resulted in credit rating upgrades, where we improved 2 notches between December 2019 and today, going from A- to A+ with both ICR and Feller Rate. Over this period, we have also strengthened our ESG performance and transparency and reporting, which has led to a significant improvement in our third-party ESG scores, which you can see on Slide 26. In the S&P Corporate Sustainability Assessment, our score has increased from 13 points in 2019 to 54 points this year. And our MSCI ESG rating has improved from BB to A since 2019. On Slide 27, we have made it to the 2023-2025 portion of the presentation. In defining our plan for the next 3 years, we evaluated what we want SMU to look like as a company in 2025. And we wanted to make sure our corporate vision was aligned with that ambition. We decided it needed a little update, which you can read on Slide 28. The previous version was to be the food retailer that best understands our customers and meet their needs. And we decided that we need to include other stakeholders in our vision, so we added while sustainably generating shared value for all of our stakeholders. We think that this is a more complete reflection of what SMU is and where we want to go. Our corporate values, closeness, excellence, respect, collaboration and agility and our corporate sustainability model on Slide 29, are an essential part of our decision-making process. Our sustainability model has 8 pillars: governance, integrity and ethics, people, customers, responsible sourcing, commitment to society, environment and financial performance. And these elements are present throughout our strategy. And finally, a critical component of our strategic planning process is looking at customer trends, both in the countries where we operate and elsewhere. Customer trends in turn, tend to drive industry trends. And we think it's important to understand these trends and see what our strategic response should be. In the interest of time, I will just briefly describe them, but Slides 30 to 36 have a few more details. First off, omnichannel shopping, where hybrid customers use both physical and digital channels, and they seek consistent value propositions across these different channels. We also see a deceleration in e-commerce growth as brick-and-mortar stores recover following the pandemic. Next, widespread concerns about savings and budget relating to economic conditions and high inflation cause customers to be more sensitive to prices and promotions and also more willing to try new brands. We also see a growing interest in well-being and healthy eating habits. In addition, customers increasingly take into account the sustainability of companies and products when making purchase decisions. Emerging formats such as cash and carry and discounters are growing, while the hypermarket channel is declining. In the world of e-grocery, platforms continue to improve their user experience and user interface. And operators offer more flexibility to customers through click and collect options. Dark stores or micro fulfillment centers help respond more efficiently to online demand. Personalization and loyalty are trends that continue with the use of data and technology being key to understand customer needs and to deliver personalized offerings and experiences. And finally, private label growth is not just something that we are seeing in our own numbers. This trend is taking place in Chile and elsewhere. Given economic conditions and high inflation, customers are more willing to try new products. And there's also room to expand into new categories. On Slide 37, we have the overview of the strategic plan for 2023 to 2025. The structure may look familiar. We decided that the same pillars are the right framework for what we want to accomplish, but we have very clear quantitative and ambitious goals that also generate significant growth over these next 3 years. On the following slides, we have descriptions of some of the key initiatives. With respect to omnichannel growth, starting on Slide 38, the previous plan really left us in a strong position with a pipeline of projects and a well-developed, experienced team that will help us deliver on execution. And our multi-format strategy gives us flexibility as we grow because we get to choose the best format for each location. On the next slide, we have the breakdown of our plan in numbers, a total of 58 new stores, including 28 Unimarc, 9 Alvis, 6 Super10 stores and 15 Maxiahorro stores. We also plan to convert 14 Mayorista 10 stores into Super10 stores and remodel 75 Unimarcs and 3 Alvi's for a total of 78 remodeled stores. The store openings include our agreement with Montserrat. We've provided a little more information on Slide 40. Through this agreement, we will rent 21 locations that were previously operated by the supermarket chain Montserrat. Our multi-format strategy means that we can turn those 21 locations into 23 stores by including 2 combo locations for Unimarc plus Alvi. This is something we tried in La Serena with great results. Total sales were higher for both formats. There was very low cannibalization. And overall, we gained market share for SMU. These 23 stores will include 12 Unimarcs, 6 Super10 stores and 5 Alvis. The investment in these stores is expected to deliver a higher return than we would normally see for a new opening because we are starting with a store that was previously operated as a supermarket. So the investment is lower than for a brand-new store, but we get the incremental sales of a brand-new store. These stores are located predominantly in the Santiago Metro region as well as Valparaiso, which where we happen to have the lowest market share. So this project is great for us to increase our presence in those locations. Our organic growth plans will allow us to increase our store footprint from 409 stores in 2022 to 467 stores in 2025, broken down by format on Slide 41. We will be expanding our geographic coverage, adding 10 new municipalities in Chile where we don't have stores today. And more than half of the store openings in Chile will be in the underserved Santiago Metro and Valparaiso region. We will be adding approximately 60,000 square meters of selling space. On Slide 42, we have an overview of what we want to achieve in the e-grocery space with a focus on improving customer experience, including accurate and on-time orders and more delivery options and also profitability as we grow our customer base, take advantage of monetization opportunities and optimize costs. Last week, we announced the launch of our robotic fulfillment center or micro fulfillment center for unimarc.cl. On Slide 43, you can see a picture of our new robots. This center is the first of its kind in Latin America, and this allows us to absorb up to 5x more demand for e-grocery orders and offers a better customer experience through improved accuracy and order fulfillment with a 98% found rate. By using a goods-to-person system, picking times are 10x faster than having a shopper fulfill orders by going aisle to aisle in a store. The center is located next to our Unimarc [indiscernible] store which has an added benefit because the store has a larger assortment of products than the MFC. So we can take advantage of the full assortment of the store to complete online orders that include low rotation products, improving the customer experience. On Slide 44, we're also adding a click-and-collect option for customers who prefer to pick up their online orders at a store rather than having them delivered. We plan to focus on high potential locations where we think customers will really value and take advantage of this option. Our goal is for click-and-collect to account for 25% of online sales. We have our ambition for our E-Grocery business on Slide 45 through the different initiatives I just described, improving the shopping experience and increasing coverage. We hope to drive online sales and increase their share of total sales from 2% to 5%. Within the customer experience pillar on the next slide, today, we wanted to focus on our private label program initiative, although we also have other projects in this pillar. We have seen that customers value our private label offering. Private label customers spend 40% more on average than other customers, and they visit our stores 31% more frequently. Our strategy of offering high-quality products at attractive prices is also paying off as customers continue to buy the products after trying them out. The repurchase rate for private label is higher than the category average by as much as 12 percentage points. And as I mentioned before, when I was describing customer trends, people are very mindful of budget and cost given the higher inflation. So there is greater willingness to try new brands and products that are more affordable. On Slide 47, we have an example of how customers value the price quality ratio of our private label products. Our Nuestra Cocina brand has achieved excellent positioning with the top ranking in a recent survey comparing the price quality ratio of different brands of oil, rating them on a scale of 1, which is bad to 4, which is excellent. Nuestra Cocina came out on top with a score of 3 points. On the next slide, we've outlined some of our focus areas for development. We're looking to develop new products that meet customer needs. We want to increase the use of recyclable packaging, and we want to take advantage of synergies with Peru by rolling out private label products there. Our quantitative goals for private label are set out on Slide 49. We want to launch 1,000 new products, add 6 specialty brands to our existing portfolio of 14 brands. We're aiming for average annual growth in sales of 30%, and we're going for a more ambitious goal in terms of recyclable packaging. Today, about 10% of our assortment is certified with the ecolabel for recyclable packaging, and we want to reach 50% of the assortment by 2025. On Slide 50, we have an overview of the focus areas for our efficiency and productivity pillar, where we aim to improve customer experience and control operating expenses through optimization and innovation with initiatives for in-store efficiency, logistics efficiency and energy efficiency. Part of our in-store efficiency initiatives include expanding coverage of our operating model. As I mentioned before, this model has improved product availability and customer experience in the first 2 groups of stores, and we want to finish implementing the model in 100% of Unimarc stores by 2025. On Slide 52, we also want to expand the use of self-service equipment, such as self-checkouts and scales by 65%. Customers really appreciate this technology, and it contributes to productivity. We're also always looking for new ways to optimize processes. And in fact, we set aside a CapEx budget for innovation every year. One of the successful innovation projects in 2022 was a pilot program testing a digital treasury system. This technology optimizes cash management by making it possible to use the same equipment to both withdraw and deposit cash, which today are separate processes and equipment. We can eliminate manual cash accounting processes with time savings of 6% and also reduce the frequency of armor transportation services to stores with potential cost savings of 30%. Next year, we want to roll out this technology in 30 stores. On Slide 53, you can see that we have plans to grow our distribution network in order to continue supporting our organic growth and multi-format strategy. In Chile, we plan to grow by 40% in terms of logistics operating space, reaching 224,000 square meters. We are also adding a new DC in Peru to support our organic growth in the Piura area and this will more than double capacity in the country. In addition to expanding our logistics network, we will also continue to implement technology in our supply chain on Slide 54. As I mentioned before, in 2020 to 2022, we implemented the Blue Yonder tool for automated replenishment of fruits and vegetables, using artificial intelligence for more accurate demand planning. This generated benefits for product availability, which translates to more sales and also for shrinkage, which means we reduce food waste. By 2025, we want to extend the use of Blue Yonder from fruits and vegetables to all perishable categories. We're also going to expand the use of voice picking, which allows us to reducing picking time by 21%. Today, we only use the system for dry goods. But between now and 2025, we will implement it for refrigerated products as well, which means we will be able to cover about 90% of the volume of boxes we move through our DCs. We are also updating our SAP warehouse management system to the extended version, which, among other benefits, allows us to manage inventory for multiple formats within the same distribution center. This will allow us to add a new multiformat distribution center that will use robotics to automate processes covering 21% of the estimated [CD]. On Slide 55, by optimizing and expanding our logistics network, we add capacity, which allows us to improve inventory management and product availability in our stores. This will lead to a higher rate of centralization, which is a percentage of sales that come from products that go through our distribution network. By 2025, we want to reach 66%, which we believe is the optimal level. With respect to energy efficiency on Slide 56, we have quantitative targets to reduce our energy expenses and environmental impact. We want to increase the percentage of renewable energy sources for our operations in Chile from 20% to 40% by increasing the number of facilities with unregulated rates. This will also generate savings on energy costs. We want to expand the use of IoT sensors to monitor energy consumption implementing this technology at stores that account for 17% of our energy consumption in Chile by 2025. We want to achieve ISO-50001 certification for 100% of our operations in Chile. And we want to incorporate electric vehicles in our supply chain with a target of using electric trucks for 10% of shipments from distribution centers to stores. Overall, we are looking to reduce our energy consumption per square meter by 8%. On Slide 57, we have the fourth pillar of the plan, committed and sustainable organization. Through this pillar, we will continue to drive initiatives that promote sustainable practices across our operations. Diversity and inclusion remain an essential part of our core brand identity, and we will continue to work in partnership with organizations that support these initiatives. In addition, by 2025, we want to certify our gender equity management system for all of our operations in Chile, building on our existing certification for our central office operations. With respect to our human rights commitment this year, we carried out our first human rights due diligence process, covering our central office in Chile, Unimarc and the logistics department. Our target for 2025 is to extend the process to the other formats in Chile and to our operations in Peru. And as I mentioned before, we're also looking to increase the use of recyclable packaging in our private label products. On Slide 58, we have our shared value initiatives, where we will continue to build on our commitment to the development of local suppliers, aiming to increase the number of suppliers in our [indiscernible] program by 35%. In addition, as part of our good neighbor policy where we work to identify needs and create action plans for the communities to which we belong, we plan to implement a new program to promote healthy eating and exercise habits in schools and communities. On Slide 59, with respect to for the environment, we aim to reduce our carbon intensity by 8% between the 2021 base year and 2025, through the different initiatives that we have described elsewhere in the presentation, especially energy efficiency and reducing food waste. On Slide 60, we will continue to use new technological tools and to improve our existing assets in order to support the needs of our customers and our operations. Technology is an integral part of many of the initiatives that I've described today, including the micro fulfillment center, the digital treasury system, multiple automation initiatives and others. We will also continue to build our digital capabilities as well as making updates to SAP, such as the extended version of the warehouse management system, which will allow us to manage inventory for multiple formats in the same warehouse. And information security will remain an ongoing focus. On Slide 61, we have a summary of our financial performance over the last 3 years to show the jumping off point for the new plan. We've had a compound annual growth rate in revenue of 7.1% since 2019, with gross margin in the range of 29%, whereas operating expenses have grown an average of 5.3% and OpEx margin reached 19.8%, which allowed us to achieve average EBITDA growth of nearly 10% per year and an EBITDA margin of 9.2% for the last 12 months to September, which, as we have said before, is within a range that we consider sustainable for the long term. Compound annual growth for net income is 55.5% when we include the sale of OK Market this year and 47%, excluding OK market. On Slide 62, we have our financial targets that we expect to have as a result of all of our strategic initiatives. Our EBITDA for the last 12 months reached CLP 254 billion, and our target for 2025 is to reach CLP 350 billion, a compound annual growth rate of around 10%, assuming we finish 2022 with EBITDA over CLP 264 billion, which should be the case. On Slide 62, we have our financial targets that we expect to have as a result of all of our strategic initiatives. Our EBITDA for the last 12 months reached CLP 254 billion and our target for 2025 is to reach CLP 350 billion, a compound annual growth rate of around 10%, assuming we finish 2022 with EBITDA over CLP 254 billion, which should be the case. The growth in EBITDA and amortization of a portion of our financial debt will lead to a reduction in our net financial liabilities to EBITDA, which is at 3.6x in September. And we believe should end in the range of 2 to 2.5x. Total CapEx for the 3-year period will be CLP 265 billion, and that is fully financed with operating cash. We will not increase debt to finance CapEx. On Slide 63, we have a breakdown of CapEx. 50% will go towards omnichannel growth initiatives, 25% will be for productivity initiatives and the remaining 25% will be maintenance CapEx. And out of the total, 33% will be spent on digital and technology projects. As I mentioned before, CapEx is fully financed with operating cash. On Slide 64, we've provided an illustrative example of what cash flow could look like on average during the period. Given that we're starting with EBITDA of CLP 254 billion for the last 12 months, and we have a target of CLP 350 billion. We take an average of CLP 300 billion and also take average expected interest expense of around CLP 50 billion, lease payments of CLP 50 billion, CapEx of CLP 90 billion and dividends of CLP 90 billion, which is reasonable based on the net income that these levels of EBITDA should generate. We end up with excess cash of CLP 20 billion that we can use to pay down debt. In summary, cash generation provides flexibility to meet financial obligations, finance CapEx and pay dividends. In addition, we are already starting off with a strong cash position because our internally defined minimum cash balance is CLP 50 billion, and we ended the third quarter with CLP 130 billion. Okay. We made it to the end. This final slide is a summary of everything I just said, so I won't repeat it all. But in conclusion, we feel that we have designed a very solid, ambitious road map for the next 3 years with bold operating and financial goals that are backed up with robust initiatives that will drive revenue growth and profitability. That's it for our presentation. Thank you very much for listening. Marcelo and Arturo will be happy to take your questions.

[Operator Instructions]. Carolyn, it's back over to you for questions from the webcast.

Great. Thank you so much. All right. We have the first question that we got over the -- in the chat is can you talk about your expectations for the economy next year and how economic conditions will affect your plan?

Our expectation about the economy for 2023 is in terms of the growth from 0 or minus 1% as Central Bank is projecting. And with inflation in the level of 5% or 6%, high inflation for Chile. Therefore, we are expecting the high prices and with the impact in our customers. Therefore, we are expecting that the -- as Carolyn comment in the sense of the industry, the customer will find good prices and service, of course. And therefore, our format with low prices of Mayorista 10 and Super10 will have a good performance. And also Unimarc with the promotions -- or attractive promotion in terms of prices for them, we'll have a good performance as well.

Okay. And then we've got another question about the Montserrat stores, what performance are you expecting from the Montserrat stores compared to other stores?

In the Montserrat projects, of course, the main possible asset will be the maturity before than other regular opening because the Montserrat stores had [indiscernible] in the previous year at supermarket stores. Therefore, the maturity of the demand of the sales in this store should be better than regular openings to us. And for this reason, we're expecting better performance. We anticipate a good performance than regular stores.

Great. And then we also have a question about cash flow and dividends. When you presented the expected cash flow, what dividend policy are you considering there?

We are considering the current dividend policy, 75% of the net income.

And a question about recent performance, if you can provide an update on the recent performance during the fourth quarter?

The performance in the fourth quarter is in line with the performance of good level of sales and a similar -- a little bit better margin than the first half of this year. And we're expecting for December seasonality, good performance in sales with more dilution of fixed cost. Therefore, our EBITDA margin should be better projecting the Q4 margin EBITDA better than Q3.

We've also had a question, if we're planning to have to issue any debt in the short term?

In the short -- the idea is to finance this strategic plan with the company, as Carloyn comment, it's possible to pay dividend, finance the CapEx of the company for the next 3 years and also to pay the interest expenses. And it's something in terms of debt. Therefore, the need to reduce a little bit the debt every year. For this reason, we are not expecting more indebtedness in the next 2 years, but will be necessary to refinance some debt. And probably in the next year, we will issue some bonds to refinance our commitment -- financial commitment.

Great. All right. I don't see any more questions here in the chat. So if anybody has any follow-up, please feel free to get in touch with me. I'll be happy to schedule a call. Thanks, everybody, so much for listening to this very long presentation. I hope it was helpful. And again, feel free to get in touch. Thanks so much, and thanks, Dalen for the call.

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