Sonae, SGPS, S.A. ($SON)

Hello, welcome to the Sonae 2025 Full Year and Q4 results. My name is Joao. I'll be cornered for today's event. [Operator Instructions] Sonae's CFO, João Dolores Dolores to begin for today's conference. Please go ahead, sir.

Hello, everyone, and thank you for joining us for Sonae's results presentation for 2020. Besides myself and the Investor Relations team, I have with us [indiscernible] -- we have with us avanafil, Mealor from Sierra for the loan of Uslar from MC and policy line from North. I'll start with the main highlights from our portfolio management this year. In January, not agreed to acquire 100% of Claranet Portugal, with the aim of strengthening its ICT offering for the B2B segment, an important milestone in the company's strategy to extend its revenue streams. In May, we reached an agreement to sell more in Zippy, our fashion retail banners. That's how it's closing in July. This was a result of our active portfolio management, and this is a capital allocation approach during this year and NBO in which the management team basically got together with an investor to take over these brands. Later in August, Sierra announced an agreement to acquire Unibail-Rodamco-Westfield's real estate management division in Germany. So this makes ensure that Sierra is now the second largest shopping center property manager for third parties in Germany, and this acquisition was completed in October. In December, MC agreed to sell its pet retail business in Portugal Zu to Musti. And with this acquisition, mostly strengthens its position in the European market and expands to its seventh market. And also in December, Sierra agreed to sell its direct stake in [indiscernible], one of the largest shopping centers in Brazil. And this sale allows Sierra to streamline its presence in Brazil, exclusively to its investment in out. So quite an active year in terms of portfolio changes, which we believe are strong operations to enable us to face the future with more confidence. By being part of the Sonae Group, our companies benefit from value-accretive opportunities to collaborate. And this is true in a number of different areas, namely a stronger consumer value propositions and also the unlocking of meaningful synergies across the portfolio. And 2025 is a powerful year for Sonae in that regard. Just a few examples that you can see on this slide, [ Vartan Life ] was launched as [ Varco's ] loyalty program and with an integration with a broader continent loyalty card ecosystem, bringing clear benefits to consumers and a mutually beneficial partnership. As you recall, contingent card is the largest loyalty program in Portugal covering almost 5 million. So this provides immediate leverage to Worten's value proposition while also reinforcing the strength of the continent ecosystem. In the same context, Universo, our partnership with Anite, we launched the universal card, Universal Plus brings additional benefits to consumers and also a bigger -- a wider integration with the Sonae ecosystem, namely with MC and Barton. At the end of last year, continuing to announce together with Cal launched Covina. Covina is the largest discount ecosystem in Portugal. It may be cross-company discounts and further strengthening the value proposition of our businesses. And we have, as you know, brought Musti into the portfolio recently. There's a number of synergies that have been extracted between our existing businesses or our historical businesses in Musti. You can see on the slide, most of his own brand being sold in our continent stores, in terms of pet food. But there are also other areas of collaboration covering areas such as sourcing, supply chain, logistics, cybersecurity and sustainability, all of which are important areas for Musti and Musti will see us benefited from being part of the Sonae. So all of these initiatives, along with many others, I could cover, make Sonae companies more valuable than they would on a stand-alone basis. And this is a key driver of our superior performance in recent months. and we hope in years to come. So now we'll cover the results business by business, and then I will end with the consolidated figures for 2025. Starting with MC, the grocery segment delivered a remarkable performance in 2025. Turnover grew by 10% year-on-year, driven by a more than 8% like-for-like growth which was primarily volume driven. And also the impact of the expansion of the store network, we opened 13 new food retail stores during the year, mainly in the proximity format. And with these results continue to strengthen its market share, so we increased further our market leadership in the Portuguese market despite the very competitive market that we continue to face in the country. This top line increase combined with a continued focus on efficiency, led to a further improvement in profitability with the EBITDA margin increasing 60 basis points from 9.6% at the end of '24 to 10.2% in '25. In the health and beauty segment, all banners continued to deliver strong results, Wells anal and done. Turnover grew by 55%, but this growth implies the contribution of [indiscernible] for the full year for the first time. but we had solid like-for-like sales growth of 5.6% during the year and the opening of 42 stores, including 4 new drilling stores in Portugal. The underlying EBITDA margin improved from 12.5% to 13.1%, mainly reflecting [indiscernible] profitability and higher operational efficiency. So overall, if you look at MC's consolidated figures, revenue grew 16% year-on-year with a like-for-like of 8%. We reached EUR 9 billion, almost EUR 8.9 billion in the year, and the underlying EBITDA margin improved from 10% to 10.8%, an improvement of 80 basis points. This fantastic operational performance delivered solid cash flow generation, and this resulted in a reduction -- further reduction of net debt to EBITDA from 2.9x at the end of '24 to 2.3x at the end of 2025. As for Vorton, Vorton solid turnover increased by 7.5%, supported by a solid like-for-like growth of 6%. And this performance was driven by the increasing relevance of the digital channel that outperformed the physical channel. Online sales today weigh roughly 24% of total sales at Vorton. We saw strong performances in the core appliances and electronics categories and also a continued growth of the Services business line. Vorton reinforced its market share in '25, consolidating position across an omnichannel value proposition. And profitability was under pressure, if you recall, in the first 2 quarters of the year. But in the last quarter, we saw profitability already at the same level of 2024 with a 7.1% EBITDA margin, which reflects the impacts of many mitigating measures that were implemented throughout the year to counteract some of the cost pressures that we sawat the start of '25. Finally, worried to say that we've implemented a significant management change at working with the new CEO being brought in October, followed by adjustments to the company's executive committee and Board composition, which positions the company well to deliver solid results in 2026. Now regarding Musti, the company reported its results of the market in February -- in early February. -- and mostly has been strengthening its position in the Nordics and expanding geographically into other countries, and then leave the Baltics and more recently, fortunate. And as you can see, the company saw strong growth in 25, 14% on a comparable basis with a solid like-for-like growth of 3.2%, with particularly strong performances in Norway and Finland and also in Zu, in Portugal, although Zu does not consolidate into most of these accounts until the very last stretch of the year. Profitability has been registering a progressive recovery we had 12.2% of EBITDA margin in -- at the end of '25, but with a growing performance throughout the year. Gross margin improved from 43.6% to 44%. And we are seeing costs becoming more under control as months go by as we expect the EBITDA margin to continue to increase going into 2026. Regarding Sierra, Sierra had important here in terms of milestones, strategic poles I mentioned before, we had some important portfolio moves, namely the acquisition of REM in Germany and also the sales that directs at the end of the year. But if you look at the operational performance of the shopping centers, we saw very, very positive results during 2025. Our shopping centers maintained an occupancy rate of 99%, almost full occupancy, tenant sales were up by almost 5% on a like-for-like basis, and we saw robust rent collections from the tenants in our shopping malls. The company also advanced in key strategic expansions and refurbishments in shopping centers while continuing to recycle capital throughout the year. And overall, Sierra generated EUR 114 million in total value and NAV actually only went up by 66 million, but that's because the company paid dividends to Sonae in the delta between those two values. But overall, it was a very positive year for Sierra not only in terms of operational performance but also in terms of strategic milestones that were achieved throughout the year. Now moving on to North, has also already published its results, as you know, is continuing to deliver a very solid operational performance despite a very competitive telecom environment in Portugal, particularly in the B2C segment. Overall, turnover increased by 2% to EUR 1.8 million while EBITDA after leases grew by 4% to 680 million, leading to a margin improvement of 90 basis points to 37.3%. This performance reflects the diversification of revenue streams as the additional pressure on B2C has been countered by a higher growth in the B2B segment, mainly given the strong growth in ICT services following the acquisition of Palmetto in early 2025. And this strong top line performance, coupled with strong operational discipline as well and very strong efficiency gains has led our margins to increase this year once again. Net income reached EUR 246 million in a year. This was actually a decrease versus 2024, but only due to very positive one-off effects we had in 2024 from asset sales, tower sales to Cellnex and also some one-off cash proceeds from regulatory purposes from Anacom. Excluding these, net income actually increased by EUR 55 million on a comparable basis. And in Sonae consolidated accounts, NOSH contributed EUR 92 million in our equity method results in the full year. As for bright pixel, the company ended 2025 with more than 50 companies, and the portfolio was a record year in terms of investments, EUR 68 million deployed in existing follow-on investments, but also new companies. In total, we added 11 new companies to the portfolio. NAV stood at EUR 318 million. slightly down in some investments driven by exchange rate fluctuations, portfolio valuations and some portfolio reconfigurations. Moving on to the consolidated view. Overall, our consolidated turnover grew 14% to EUR 11.4 billion, driven by the strong performances of our retail businesses, which more than offset the deconsolidation of Zippy, which contributed to our full year turnover last year. On a comparable basis, excluding the impact of M&A activity, turnover growth would still have been 9%. So quite solid for the size of the group. Underlying EBITDA grew by 24%, mainly reflecting the stronger operating performance at MC and also the accretive contributions from the recent acquisitions. By year-end, underlying EBITDA margin rose from 9.1% to 9.9%, an improvement of 75 basis points. Consolidated EBITDA increased by 18% year-on-year, supported by the solid underlying EBITDA performance and also higher contributions from equity-accounted businesses, particularly Sierra and Universo had a very strong year in terms of operating performance and operating profitability. This growth came despite the overall lower contribution from NOSH due to the extraordinary results that we had last year, and also despite some one-off costs that we had at the end of 2025 including EUR 13.5 million linked to a price adjustment in the acquisition of Duni FMC. And so we had a small price adjustment for the acquisition of Duni because a year has passed since the original investment, we had to register that as a one-off cost in the P&L; and also some restructuring costs at Worten that we also accounted for at the and M&A-related costs at Sierra given the 2 transactions that Sierra executed at the end of the year. I would like to stress again that these are all one-off costs, which we do not expect to be repeated in the future. All in all, in 2025, our net results grew by 11% in the year to EUR 247 million. This result would have been higher, if not for the impact of some unfavorable FX trends, namely the U.S. dollar euro FX evolution as well as some prudent year-end asset revaluation decisions. Again, these impacts are all one-offs, but we do not expect any significant negative impacts in the future. The strong operational performance generated EUR 265 million of operational free cash flow. This, together with a more limited impact from M&A activity compared to last year, which included major acquisitions at the time, such as Musti, DCF and drilling enabled further progress in our deleveraging path reduced our net debt by more than EUR 100 million at the end of and our loan-to-value reduced from 15.9% at the end of 2024 to 13.7% at the end of '25. And we expect this deleveraging path to continue in 2026. In total, our net asset value grew by 15% in '25, reaching more than EUR 5 billion at the end of the year. This is an achievement we are very proud because it translates very clearly the value creation that we have been able to achieve in several assets in the portfolio as a result of consistent, solid operational results quarter after quarter and also a reflection of the quality of our assets than we are real estate assets at Sierra that continue to appreciate. On a per share basis, NAV reached EUR 2.62 per share. And with the appreciation of Sonae's share price in 2025, the discount between NAV per share and the share price narrowed significantly from 60% at the end of 2024 to 38% at the end of 2025. And today, that discount is even lower, but there is still room to grow, and we are still committed to reducing this gap going into the next few months. The Board of Directors will in compliance with Sonae dividend policy, proposed at the Shareholders' Annual General Meeting a dividend of [ 6.2 ] per share. so a 5% increase year-on-year as is normal in our dividend policy. And basically, this is all for now. Thank you, and you can now open the session to Q&A.

[Operator Instructions] Our very first audio question is coming from Louise Colaco of JB Capital.

Yes. Good afternoon. Thank you very much for your time and congrats for the great set of results. I have two questions, if I may. The first one is regarding the like-for-likes in Sonae MC, namely the grocery part. You exit -- you have an exit rate of 8.4 in the quarter. Given where we are seeing now the food retail sales in Portugal, do you think that your guidance, I would say, that you provided is of low single-digit like-for-likes going forward? Isn't that conservative, given where we are at this stage? And my second question is also regarding the grocery part of Sun IMC. The EBITDA margin increased year-on-year, but still the expansion was lower than we saw in the previous quarters. Any reason for this? And last question, of course, in terms of the indirect results, can you provide us some more color on what happened over there?

Sure. Luis, in terms of the like-for-like, as you mentioned, we had a like-for-like last year of around 8%. What we have mentioned in previous calls is our view in terms of midterm growth for the grocery market is about as you mentioned, low single digits. What we are seeing is mainly driven by the increase in disposable income as well as population growth is clearly over the last year and the beginning of this year, we are seeing a higher growth compared to what we see as our long -- medium, long-term perspective. And so I would say that looking at the first months, we have there is a slight acceleration on the like-for-like, but not clearly to the levels of the midterm of the 3%, 4%. So we are not so decent from what we have seen in 2025 in the first 2 months of 2026. Regarding the EBITDA margin, you are correct. So we have a lower expansion of margin in Q4 versus Q3 of 2025. And the main reason was the majority of the in we are capturing within the business. They started to accelerate in Q4 2024. And therefore, what we expect -- what we have seen in Q4 '25 and what we expect going forward is a lower expansion in terms of margin -- EBITDA margin compared to Q4 2025, for example.

Okay. I can take the indirect results question. And so basically, in the right results in the quarter, we had two major impacts. I would say. one related to Brightpixel. And as I said, a bright things that we continue to see negative impacts from the FX, the U.S. dollar versus the year, and we have several investments in dollars, which translates that delta in the quarter. But we also registered in terms of prudence, some write-offs in a couple of assets in the portfolio. And then we had an impact in Spark food, but this was mainly a correction of a value that we had registered in the middle of the year. So if you recall, we had a positive impact in our indirect income line midway through the year from a transaction that we did at Spark, but we decided to be prudent and to basically counter that positive impact at the end of the year to make sure that we have a conservative approach to valuations at Spark food. If you look at the indirect income line at the end of the year, as all is practically flat, so the value is residual, and I think you should take a look at the year as something more meaningful than the value -- the variations between the quarters.

[Operator Instructions] We will now go to Antonio Seladas of AS Independent Research.

Just [indiscernible] the call now. So I don't know if some questions were answered. So first 1 is for MC and the EBITDA margin in the fourth quarter despite still very, very strong, it went down from the third quarter. So was an adjustment about 100 basis points, which is not normal at least when we look in the past? That is the first question. And second question, if you can provide some color or some -- I'll not say guidance, but some color about the performance in grocery in 2026. Thank you very much.

I think I already addressed the first question, but I'll it again briefly. So what we have seen in the fourth quarter was actually a deceleration of the expansion of EBITDA margin versus Q3. And the main reason is we have seen an acceleration on efficiencies in Q4 2024. And so we shouldn't expect the same level of expansion of margin that we have seen in Q3 2025. That being said, please bear in mind that in Q4 '25, we increased the EBITDA margin by 0.4 and on a pro forma basis during the year, we increased the margins by 0.5%. So that's not a huge gap. That being said, that was the reason. In terms of performance, 2026 on the grocery part, we are seeing a slight deceleration on the like-for-like, but I wouldn't say it's very material. So we continue to see the market in a very good performance, and MC is continuing to get -- gaining market share in the first 2 months of the year.

So a follow-up question on [indiscernible]. There are some problems with the private market debt and equity. And some of them are related with software companies I don't know if you want to add some -- well, color or some information on this issue.

Thank you, Antonio. I can give you a little bit of color, but it's more or less the same that I've been sharing. So the private market is a little bit better in the last quarter of 2025. but only it's M&A part, not on the IPO market. So the liquidity is still very limited because the M&A operations that we have been seeing are done at lower multiples, which is not enough to give the liquidity that the market is needing to full. But having said that, we have been seeing an increase on the M&A part, and we have, of course, done some transactions, as we have mentioned in result. So we have recycled more or less EUR 30 million, and we have been able to do it every year. So we will try every year to do our best and to maximize the value that we have. We were expecting a better year for 2026. But as you can see, the geopolitical parts and the uncertainty that we live in the market, it's very difficult to predict in the short term opening of the market and the [indiscernible] that we would like to have.

Maybe just a final question on Sierra. A very strong investment, some capital spending on the quarter. And I don't know if you want to provide some information on this.

And I can hand it over to Miguel to give you more detail, but it's also -- it's fair to mention that it's true that Sierra has been investing in its strategy, but it has also been recycling capital and generating cash proceeds from asset sales. And the most important transaction that we did in that regard was the agreement and the sale of [indiscernible] where you -- we only saw the initial down payment at the end of 2025, about 10%, but we will get the additional cash proceeds in the first semester of 2026. So that -- those cash proceeds will be flowing in. And Sierra has always the strategy of recycling capital that we deploy in its growth at, but I will let Miguel comments a little bit more.

Antonio, thank you for the question. As Jean mentioned, is mostly related with operations that we made at the end of the year. And as already mentioned, we made an investment on REM, a property management company in Germany. And we also made some investments in our development projects that we have in pipeline and we keep investing to make the projects going forward. So a significant amount at the end of the year, most of them one-off investments related to M&A operations.

[Operator Instructions] Another question an on audio is coming from Rita Bello of CDI.

I just wanted to ask Fernando, in the Food Retail segment. How has MC managed to keep margins significantly above the sector quarter after quarter? And is this mainly related to your product mix, pricing strategies? Or does this result from supplier agreements and operational cost management?

Thank you very much for the very challenging question. So good question. What we have seen over the years was that our cost program has been quite successful. Obviously, it's very difficult to compare between retailers and especially between discounters and full-line supermarket. And so it's very hard to do that comparison. But when we look at our cost structure, I would say what has been and allow us to increase our EBITDA margin over the years has really been the efficiency measures. On the commercial margin, as you know, we have been relatively stable for a couple of years now. So we haven't seen an improvement or a deterioration on the gross margin. What we have seen is with the growth of the market in Portugal, which has been clearly above the medium to long-term average over the last couple of years, that's obviously helped on the dilution of the fixed costs. But on top of that and more important, what we have seen is a very significant cost-to-serve program where I would say there are a couple of areas where we have been quite successful: One is around the productivity in store, so the cost -- the personnel cost over the sales we have been able to optimize it significantly. I would say, on the energy part and on the indirect costs, we have also, I would say, important programs to improve our efficiency, and I think that's really the the thing that we have been able to do well as well as obviously leveraging the growth in the sector and especially the increasing market share of MC over the last couple of years.

We have several questions on the chat. Do we have more questions on the voice side?

We have nobody on audio, so we'll pass over to the web.

I'll cover some of the questions we're getting on the chat and if there's any more audio questions, we'll take them afterwards. But we have a question from Juan Ros from Santander. And 2 questions actually. What explains the negative indirect results in Q4? I think I already answered that question. And the second 1 was why was Sierra's EBITDA in Q4 lower than in previous quarters? Mika, do you want to take that one?

Yes, I can take that one. Part of that was already explained. And this is the other side of the M&A activity in some parts. Those are all one-off adjustments that we have in the accounts. and the value that you can see on the numbers that we published are -- that's the sum of several things. The two main points and the two key impacts on this number are the M&A movements that we have done with REM, as I talked before. And probably, as you know, we bought 100% of the company. So we have to recognize all the costs of the transaction in our P&L. And the other one is the selling process of [indiscernible]. We also have several costs with that operation, and we are recognizing that already on the accounts of [ 2025 ]. There are a lot of different other small topics that are not material for explanation, but those are the key adjustments that we have on the account.

Yes. So Sierra's underlying recurring EBITDA, it maintained its growth trends. The one explanation for this evolution is are these one-off impacts that Miguel was talking about. . We have a second question from Julian about the potential higher energy costs against the current backdrop. So what's the percentage of energy costs that are hedged? Overall, we have a bit over 60% of our energy costs that are either we have own production or we have some sort of hedging strategy and that's fixed for the remainder of the year. So we are only exposed to 38% of our energy bill to the existing markets. We have another question from Samuel, asking if the group is considering a direct entry into the insurance sector to replicate the insurance got model so as to have a permanent low-cost capital source to fuel the growth of new book verticals, while reducing reliance on external net as a persistent high cost of capital environment? It's a good question. The answer is quite straightforward. So we do not have any intentions to enter the insurance sector. We are, nevertheless, quite comfortable in our debt position. Our cost of funding right now is very low. We refinanced over EUR 1 billion in debt in the last few months at very low cost of spreads of roughly 55 to 60 basis points. And so we are quite happy with our cost of debt, and we expect net debt net levels to come down further in the next few months. And so we are in a deleveraging path which is going to be quite consistent over the next few quarters. And then we have another question from Alexandre. Could you give some color on the potential impact of the Iranian war on MC? I don't know, do you want to take that?

Alexander, thank you very much for your question. I think Drew have already addressed it partially. So in terms of top line and obviously, inflation being a key factor, we are not seeing yet any impact on the inflation in our sales prices. So as Joao mentioned this morning, we have an inflation of around 3% year-to-date at MC. This 3% is actually mainly driven by some fresh categories due to the scarcity of some products. So even when we look at the FMCG products, we are very close to the 2%, which is, as you know, our medium term when you look backwards average. And so no impact there. When we look at the energy costs, yes, so what -- there might be an impact. Just to give you some metrics. AMC energy represents less than 1% of our sales. out of that deal, we have, as we mentioned, more than 60% hedge. And then you have multiple variables such as the excess tariffs and all other charges. So if you want to have a very I would say, high-level value, our hedge part of energy is about EUR 10 million for this year for 2026. So the direct impact on the LNG -- but shouldn't be that high. Obviously, when you look at other variables that might be impacting such as logistics and other costs is very difficult to predict at this stage. So the impact yet is quite limited in the business. Let's see how the things progress and what measures we need to implement.

Okay. I'm not sure if we have further questions.

Not on the audio, sir.

Okay. I think we covered all the questions on the chat as well. So thank you very much for listening in. I think the key points that we would like to stress in the call are that we are very happy with the 2025 results. They show very strong performances from all our businesses. Basically, all our businesses improved their competitive positions and their market shares in their respective markets. We are quite happy not only with the growth level but also with the operating profitability that we were able to achieve throughout the year. And we are also quite confident on what lies ahead in 2026, given the start of the year that we already have. So thank you very much for listening in, and we'll see each other in May when we present our Q1 results for 2026. Thank you.

Thank you, sir. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance and disconnect. Have a good day and goodbye.