Le Lézard
Subjects: Sales, Merger/Acquisition, Business Update

Increased 32.4% in 3Q22: Acquisitions in the United States and Brazil and good performance of the countries in the region, positively impact Cencosud's revenues.

Cencosud today reported solid financial indicators for 3Q22, during which it reached an Adjusted EBITDA margin of 10.5% and achieved a profit of US$190 million, as a result of a solid operating result and revenue growth of +32.4% over the previous year, which is explained by the outstanding performance of the Supermarkets business and the consolidation of The Fresh Market (TFM) and GIGA Atacado (Giga), the recently acquired Supermarket chains in the United States and Brazil.

Excluding the effect of TFM and Giga, Cencosud's revenues increased by 15.1%, as a result of the resilience in sales of the Supermarkets business throughout the region, gains in market share and the growth of the online channel, one of the holding company's growths focuses and strategic pillar.

The higher revenues were achieved in a scenario of slowdown in consumption, which mainly affected the Department Stores and Home Improvement businesses in Chile.

Matías Videla, CEO of Cencosud, highlighted the solid performance during the quarter: "Cencosud closed a new quarter characterized by significant progress in our profitability agenda, organic and inorganic growth and leadership in innovation. In a trend that began two years ago, the Company achieved its eighth consecutive quarter with double-digit EBITDA margin, all this in a complex macroeconomic scenario, with high levels of inflation, economic slowdown and exchange rate fluctuations, conditions that further highlight the strength of Cencosud's business model, its diversification strategy, and its ability to execute in different markets".

The CEO also highlighted that "the solid performance of our supermarket and shopping center businesses continues, coupled with a resilient Home Improvement operation in Argentina. Four of the six countries where we operate have achieved double-digit EBITDA margins, because of the deep operational transformation initiated in previous quarters, focused on the simplification, efficiency, and automation of technological processes. Likewise, margins are driven by the momentum of the online channel, a constant evolution in the mix of products offered to customers, and better working capital management, among other factors".

Results by country

Chile. 3Q22 registered revenue growth of 0.3% year-over-year, driven by double-digit sales growth in Supermarkets and Shopping Centers, partially offset by declines in Department Stores and Home Improvement revenues, given the high comparison base versus 3Q21 - high consumption driven by pension fund withdrawals and state aid. However, despite the more challenging environment compared to 2021, Supermarkets continues to demonstrate resilience and solid sales and market share growth.

Adjusted EBITDA fell 32.8% YoY, mainly impacted by high inflation, the devaluation of the CLP against the USD, logistics costs that remain above the historical average and higher promotional activity YoY.

Argentina. Revenues increased above inflation, 84.7% in local currency, and 59.5% in CLP, as a result of a high level of consumption, the resilience of Supermarkets and Home Improvement and a strong recovery of shopping malls. Adjusted EBITDA improved 154.6% in Argentine pesos and 119.6% in Chilean pesos compared to 3Q21, with an EBITDA margin expansion of 376 basis points, reaching 13.7% during the period. This is explained by a greater control of expenses in both stores and Shopping Centers, higher consumption levels compared to the previous year, and consequently a greater dilution of expenses over revenues.

United States. During 3Q22 the integration of The Fresh Market into the holding company was completed, representing at the end of 3Q22 11.3% and 12.7% respectively of Cencosud's revenues and Adjusted EBITDA. The Fresh Market achieved a double-digit Adjusted EBITDA margin, confirming that it is a highly profitable operation despite going through an unprecedented inflationary scenario in the last 40 years. The below-inflation growth in revenues reflects the challenging macroeconomic environment the country is experiencing, which impacts certain categories of fresh produce. In addition, some stores were temporarily closed, and there were power outages and minor damages because of the impact of hurricane Ian on the Florida coast in the United States.

Brazil. During the quarter, revenues increased 19.0% in Brazilian reals and 42.3% in Chilean pesos. This growth is explained by the acquisition of the new supermarket chain GIGA, added to the good performance of the Cash&Carry format and the boost in sales of the company's own online channel. This positive impact was partially offset by a slowdown in non-food category sales. Adjusted EBITDA increased 40.1% in BRL and 67.6% in CLP, and the EBITDA margin improved 94 bps to 6.2%, the 16th consecutive quarter of positive EBITDA margin for the country.

Peru. Revenues fell 0.1% in Peruvian soles but grew 24.6% in CLP due to the appreciation of the PEN against the CLP YoY. The result in local currency is explained by a reduction in sales in the non-food categories, partially offset by the recovery of Shopping Centers and growth in the Cash&Carry format.

Adjusted EBITDA grew 3.4% in PEN and 29.1% in CLP, with an Adjusted EBITDA margin expansion of 38 bps, explained by the recovery of Shopping Centers.

Colombia. During 3Q22, revenues increased 9.5% in local currency and 16.8% in Chilean pesos. This performance is explained by the growth of the Supermarkets and Home Improvement businesses, mainly in the food categories in the case of Supermarkets and the soft categories in the case of Home Improvement.

Adjusted EBITDA fell 28.8% in local currency and 23.9% in Chilean pesos, and the Adjusted EBITDA margin contracted 222 bps. This reflects the worsening of the inflationary situation, high logistics costs, increased energy costs and payroll adjustments due to the increase in the minimum wage. In addition, during the quarter, there was an effect on the costs of imported products, due to the devaluation of the COP against the USD and an increase in promotional activity.

About the Cencosud Group

Cencosud is one of the largest and most prestigious retailers in Latin America. It has operations in Argentina, Brazil, Chile, Peru, Colombia, and the United States - in addition to a commercial office in China - where it develops a successful multi-format strategy that today employs more than 122 thousand people. Its operations encompass several business lines, such as Supermarkets, Home Improvement, Department Stores, Shopping Centers and Financial Services. Additionally, it develops other business lines that complement its core operation, such as Cencosud Media and Cencosud Ventures. All of them stand out for their quality, excellent level of service and customer satisfaction.

More information at www.cencosud.com

News published on 10 november 2022 at 15:05 and distributed by: