Good day, and welcome to Jerónimo Martins first nine months results 2022 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Miss Ana Luísa Virgínia, Chief Financial Officer of Jerónimo Martins Group. Please go ahead, madam.
Thank you, Nadia. Good morning, ladies and gentlemen, and thank you for joining this call. As a reminder, and as usual, in our corporate website, a set of materials is available, including the release, a slide presentation, and a fact sheet, adding a bit of color on our activities in the quarter. Whatever angle we choose to look at it, the nine months' figures are undoubtedly a strong set of results. In very challenging context with consumers more and more pressured by rapidly mounting prices on all fronts, we decided to stand by the families and make our best effort to contain price increases in our stores. This focus on price competitiveness underpins a sales-driven performance in all our banners' investments to protect volumes, pushed sales to grow by 21%, reaching EUR 18.4 billion.
Sales increased ahead of high food inflation in almost all business areas, driving an EBITDA growth of 17.8%. Surprisingly, EBITDA margin that reached 7.3% in the first nine months, down from 7.5% in the same period of the previous year, was further pressured by cost inflation, mainly related to electricity and transportation that has been escalating since May. The unwavering execution of our growth strategy is reflected in the progress we made in our expansion plan, which translates into a total of 172 new stores opened across all banners in the first three quarters of the year. Cash flow was driven by the good operational performance, and even with an increase in CapEx payments, it reached EUR 275 million in the nine months' period.
We therefore ended September with a strong balance sheet, net debt reaching EUR 1.7 billion. Excluding capitalized operating leases liabilities, our net cash position stood at EUR 763 million. As you all know well, the context in which the performance was attained is a really complex one. We have seen food inflation and cost inflation rising ahead of all expectations for this year. So far, the consumer reaction to these growing pressures has differed from country to country. In Poland, even if we noticed a reinforced price-oriented behavior, food consumption remained resilient. The measures implemented by the government to contain inflation have been supporting disposable income. This, together with a larger customer base made of Ukrainian refugees staying in Poland, have been contributing to protect consumption.
In Portugal, pressure on volumes and on increased trading downtrends marked food retail sales, with the consumer confidence level reaching in September the lowest value since the beginning of the pandemic in April 2020. In a very different trend, the upturn in tourism underpinned a strong recovery. Finally, in Colombia, disruption in the national supply chain continued to impose extra inflationary pressure on food items, and the consumer environment remained weak and marked by the family's struggle to face the real loss of purchasing power. Against this background, consumer confidence in the three countries continued its negative trend through the third quarter, strongly affecting price sensitivity and raising consumer expectations regarding the role played by retail banners in such difficult times. Looking now to the financial delivery in a bit more detail. Our retail reflects a sales-driven performance throughout the nine months of the year.
Price investment led to sales growth that limited the cost pressure. EBITDA reached EUR 1.3 billion in the first three quarters, 17.8% ahead of the previous year, or +20.5% if we exclude currency devaluation. EBITDA margin in the nine months was at 7.3%, down from the 7.5% registered in the same period as previous year. Focusing now on the third quarter. All banners kept investing to drive volumes while cost inflation accelerated significantly, particularly with respect to energy and transportation costs. Despite this increasing cost pressure, EBITDA grew 15.6% or 19.2% at constant exchange rates. The respective margin at 7.6% was down by almost 50 basis points on Q3 2021.
In the quarter, net financial costs were at EUR 50 million and included a loss of EUR 10 million related to currency impacts on euro-denominated lease agreements in Poland that in Q3 2021 had generated a loss of EUR 7 million. Other profits and losses totaled minus EUR 31 million and included indemnities and increased provisions for different contingencies. It also incorporates a special bonus that amounted to EUR 22 million paid by Biedronka to its employees in recognition of their commitment and delivery in a year so sadly marked by the invasion of Ukraine and the resulting war in the neighbor country, with all the consequences that already came with it. Cash flow was of EUR 275 million, reflecting strong generation from the operations, which more than covered the increase in CapEx payments.
In the current circumstances, having closed September with a solid balance sheet is pivotal for us to keep reinforcing competitiveness and expanding our networks with the quality we plan for. When looking at the top line in more detail, we proudly see that all banners managed to deliver strong sales growth, driving group like-for-like to be at 19% in the nine months, and 21.9% in Q3. In all countries, mounting food inflation was a material feature of the performance, and all banners successfully invested to contain pricing increases on the shelves and protect volumes. Ara kept price competitiveness at the center of its strategy, while continuing to guarantee the quality of the overall value proposition. The banner continued to secure consumer preference, and in the nine months, its sales grew 23% in local currency, including a like-for-like of 19.5%.
As a result, market share was reinforced. In euros, sales were at EUR 12.7 billion, 19.7% ahead of the first nine months of 2021, fueled by food inflation. The CapEx program is being executed as planned, and in the first nine months of the year, Biedronka opened 65 new stores, 54 in net additions, remodeled 252 locations, and added a new distribution center to the 16 already being operated by the company. Hebe opened its 300th store and maintained a strong sales performance that also reflected its recovery against previous years, which were highly impacted by the restrictions imposed by the pandemic management. Sales grew by 33.6% in local currency, including a like-for-like of 26.4%.
Pingo Doce maintained a strong focus on its commercial strategy, creating value opportunities for consumers and trying to limit the inflationary pressure on households. The banner has been largely able to protect volumes, but trading down has been an unavoidable feature during the period. All in all, the strength of the value proposition and an even sharper commercial strategy drove sales to grow 10.3% and to reach EUR 3.3 billion with like-for-like, excluding fuel, standing at 8.3%. Pingo Doce opened seven stores for a net addition and renovated 25 locations. Recheio delivered strong growth, albeit against the comparative that was still impacted by COVID-19 related restrictions. The banner is reaping the fruits of the work and investment done to protect its value proposition during the pandemic, which has positioned it to further benefit from the tourist-led recovery in Horeca.
Sales of our wholesale banner grew by 28.8% to reach EUR 850 million in the first nine months of the year. The company opened one new store in Cascais, Lisbon, during the period. Moving on to Colombia. Ara delivered consistently well throughout the nine months. The banner continued investing in its everyday lowest price policy and also in strong promotions in circumstances that are extremely challenging for the Colombian families. As a result, sales grew in local currency 66.2%, including like-for-like at 40.2%, with basket inflation also playing a non-negligible role. The banner opened 86 stores in the first nine months and closed one location.
Leveraging on its strong momentum, Ara is working to reinforce its expansion dynamics, raising the 2022 new openings target to the range of 230-250 stores instead of the 180 initially planned. The additional openings will be concentrated around the year-end and therefore the contribution to this year's top line will be minor. Group EBITDA grew 17.8%, 20.5% at constant exchange rates to reach EUR 1.3 billion. Biedronka remains as expected, the dominant growth driver for the group, while the contribution of Ara continues to gain relevance. In Portugal, the banner's determination and competitive strength are supporting the recovery against the comparison still impacted by the pandemic. All banners contributed positively to the group's EBITDA performance.
EBITDA margin for the group in the first nine months of the year was at 7.3%, down from the 7.5% attained in the same nine months of 2021. This evolution reflects price investments, trading down in Portugal and Colombia, and cost inflation in all three countries. Looking at Q3, the margin decline from 8.1% to 7.6% reflects the acceleration of cost inflation, particularly in Poland and mainly related to electricity and transportation, that led Biedronka's margin to compress by around 50 basis points despite the strong operational leverage. In Portugal, there was also pressure on EBITDA margin as we came to the end of the energy hedging program that was in place until the end of June. Ara and Hebe, in line with their own development cycles, improved their respective EBITDA margins.
We are approaching the year-end, and adding to the very concerning geopolitical instability, there is still a high level of uncertainty about the evolution of crisis in food and energy. These factors, coupled with interest rate hikes, further increase pressure on household disposable incomes and are expected to keep impacting consumer behavior. Our strategic choice to stand by the consumer and try to limit price increases in our stores drove the solid performance recorded so far this year, and enabled us to end the nine months with stronger market position as well as a solid financial situation. Therefore, despite the uncertainty and the challenges that most certainly lie ahead, we remain confident that our banners are both ready and willing to continue deserving the presence of our consumers.
As we consistently work to reinforce price competitiveness, we acknowledge that this effort, together with cost inflation, will further pressure our banners' EBITDA margins. As we see it is particularly when times get really tough that food retail companies must do their very best to live up to the, to consumers' needs. A final word on investments. We remain fully committed in executing our strategy. To reflect Ara's most ambitious expansion plan and the higher cost of construction and equipment in the three countries, this year's investment program is updated to EUR 950 million. Thank you for your attention. Operator, I am now ready to take questions.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. Now we're going to take our first question. The first question comes from the line of João Pinto from JB Capital. Your line is open, please ask your question.
Hi, good morning, everyone. Three questions, if I may. On the EUR 100 million that relate to CapEx, can you give us some color on the drivers? How much of it is for higher store openings? How much of it is related to other investments or CapEx inflation? And if you could give us some color on what is the average investment per store in Colombia and Poland, currently, it would be great. Also, related to this, can we consider that this 230-250 annual openings in Colombia, can we consider it as a run rate for the next couple of years? And finally, regarding this news on a potential windfall profit tax in Portugal, do you have any information on how it can affect supermarkets? Many thanks.
Hi, good morning, João. From the EUR 100 million increase in CapEx, I would say that it's more or less 50/50. Coming from the increase in the number of stores that we will open and prepare even to open in Colombia and the inflation on construction and equipment. Regarding the average investment per store in Colombia, we are talking more or less EUR 500 thousand. The equivalent in Colombian pesos. Regarding the runway, of course, we think that we can accelerate, and we'll probably can keep this pace. We have already identified more locations to open in Ara.
This being said, of course, our idea is to keep accelerating our growth, so it can be a good proxy. I would say that for the moment, you should wait for the guidance that we will give for the full year in March. On the profit tax in Portugal. We have the highest corporate income tax in Europe already here in Portugal. We don't know how the law will come in terms of the computation of the so-called unexpected profits. Certainly we don't see, unfortunately, in Portugal, the progression in profits that probably would allow to say that we are having an extraordinary or exceptional profit gain.
We'll have to wait to see what will be the impact depending on how the law will be published and enter into force.
Thank you very much. Could you just provide the average investment per store in Poland as well?
João, depending on being an own store or a rented store, but I would say on average, we are talking about EUR 600,000 for the equivalent for the zloty.
Okay. Thank you very much.
Okay, thank you.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from the line of José Rito from CaixaBank. Your line is open. Please ask your question.
Yes. Hi, good morning. The first question on Poland, in terms of margin evolution, if the decline seen in Q3 is the bottom, so the minus 30 basis points ex IFRS 16, if this could be a good reference going forward, taking into account the overall moving parts.
Jose?
Yes.
I don't know if there is a problem in the line, but I hardly can hear you.
Is it better now? Hello?
Hello, José.
Hello. Is it better?
I can hear you. Apologies, can you repeat? José?
Excuse me, José, your line is open. Please, can you repeat your question?
Hello, are you hearing me now?
Yes, much better, José. Apologies.
Okay.
We were not able to hear you.
No, fine. The question on Poland, margin evolution, if the decline seen in Q3 is the bottom. The minus 30 basis points that we saw in Q3 at IFRS 16 could be a bottom considering all the moving parts that we are seeing. Second question on the windfall in Portugal, just a follow-up. If you can remember, what is the percentage of the group profit before taxes coming from Portugal? If 10% could be a good reference. A third question on Ara, an overview of the competitive landscape. If you are seeing any improvement post what happened with Justo & Bueno.
Basically filling the gap left by Justo & Bueno, and if this acceleration in terms of store expansion is one of the consequences of the problems that we saw with Justo & Bueno? Thank you.
Thank you, José. On Poland, what you mentioned 30, but I think that I mentioned 50 basis points of margin decrease. Again, this is very hard to predict and we are not going to give any guidance on this. We think that the most important now is really to stay competitive because as I usually say, the best way to protect our profitability is through sales growth.
As we are seeing, the way things are progressing and people really feeling the families feeling the weight of all the inflation and all the several movements even in interest rates, weighing on their disposable income, of course, they will tend to further trade down to decrease the volumes. Although we know that we have some tailwinds with unfortunately probably also the fact that Ukrainian refugees will have to stay in Poland longer due to the way that the war is progressing. The fact is that the company has to stay competitive, has to stay with the consumers to continue to provide sales growth, and by that, protecting the fact that we are assuming that all cost headings will continue to grow for the future.
This being said, I cannot give you, of course, or say that if the 50 basis points will be a good proxy or not. We'll do our best, of course, to try to dilute costs and/or to have savings opportunities on that. Of course, it's going to be challenging. On the windfalls, we have several businesses in Portugal, as we you know and we cannot say that in the last years their profitability has increased, as you know also. COVID-19 in the case of Portugal highly affected the profitability either of Pingo Doce, either of Recheio. In the case of Recheio was of course even more noticeable taking into consideration the restrictions.
This being said, I don't know if the windfall really will have any effect on us because it's, as I said, it will depend on how they will put it in terms of a calculation. I don't see any exceptional profits in here. The percentage of our total net earnings is, or the contribution at the net earnings level is very limited for the total Portugal. On Justo & Bueno, of course, the fact that there was one main competitor that went into trouble is something that we are taking also the opportunity. We didn't have that much overlap with Justo & Bueno.
I would say that most of our gain is not really coming from a transfer of clients from Justo & Bueno, although in some locations that will also happen. From our like-for-like, we don't expect more than, I don't know, 3%-5% being from a possible transfer of consumers from Justo & Bueno. For the store extensions, at this point, it's very limited. Our operational team has already identified stores even before the closure of Justo & Bueno. These expansions and these 230 stores are totally from the expansion of the operational teams that we have in Colombia.
Okay. Understood. Thank you.
Thank you, José.
Thank you. Now we're going to take our next question. Please stand by. The next question comes to line of Andrew Gwynn from Exane BNP Paribas. Your line is open. Please ask your question.
Hi. Good morning. Two questions, if I can. Firstly, just help us understand, are the cost pressures accelerating sequentially in Q4 versus Q3? I appreciate you're not gonna give us guidance on the margin, but just help us understand the cost story. Second question on the consumer. You mentioned obviously some signs of trading down. Just wondering if you could elaborate a little bit more on what you're seeing and perhaps actually also the impact that it has on gross profit. Presumably more private label, but yeah, just any color would be very helpful. Thank you.
Thank you, Andrew. So the way that we see it, of course, for Q4, it's currently we don't see any, let's say, ease from the energy and from the fuel costs. That of course will continue throughout Q4. As you know, we performed very well in Q4 last year. So we are facing a very tough comparable, which means that with higher costs and probably lower or more difficult base to grow from, the dilution can be quite challenging in this. So that's why we say that there will be further pressures on margins in terms of the consumer trade downs.
What we see and this is particularly in, at this point, particularly in Portugal and Colombia, as I mentioned, although in late Q3, we also slightly noticed that in Poland, people are starting to private label is increasing. The A-brands sales decrease versus the weight of our private brands, which is usually a very good quality proposition but at a lower price, on one hand. I can tell you that for instance, in Ara, the private brand on average grew more than or around 3 percentage points in terms of the weight on sales. In Pingo Doce just on the grocery, it's more than 6 percentage points just on the basic products, year-on-year.
In Poland, as I said, we see the first signs of it. The other point is of course people tending to buy within the categories that do not have even the fresh ones, trying or buying the products that have lower price or replacing more value-added products by cheaper ones, really. This is what we are seeing in each category. Apologies.
Sorry.
You mentioned the gross profit. The effect on the gross profits.
Yeah, just yeah, sorry.
I can of course not give you very detailed among all the businesses, but I can tell you that all our retail businesses have decreased their gross margin quite significantly. That's why at consolidated level, we are posting a 60 basis points decrease in our gross margin.
Okay. That's fine. Thank you very much. Just on the cost point, any sort of increment on the wage side? I know we've got the big minimum wage coming through in January. Any help on Q4?
For Q4, one thing that is important for us is of course to maintain competitive versus the market, because unfortunately we are also seeing a challenge on having labor offer. We don't hide that. This is throughout and particularly in Poland. That also happens in Portugal, which means that we have to stay competitive and it's going to be a challenge, as you mentioned, in at least the references or the proxies in the different countries point to, as you know, 20% minimum wage increase in Poland, probably between 10% and 15% in Colombia and around 8% in Portugal.
We want to stay competitive, which means that we'll take these reference costs into consideration. For Q4, at this point, we never excluded, of course, the possibility and we are always taking into consideration the context, but we usually don't make any sales readjustments in Q4.
Okay. All super clear as always. Thank you very much.
Thank you. Now we're going to take our next question. Please stand by. The next question comes to line of James Grzinic from Jefferies. Your line is open. Please ask your question.
Yes, good morning. Thank you, and good morning, Ana Luísa. Let me just ask in terms of balance sheet. In the immediate aftermath of the Ukraine invasion, you talked about feeling, you know, very conservative about given the overall risks out there, understandably. How do you feel now about the need to have considerable buffers on balance sheet? At the end of the day, we've had much better performance than you would've hoped for or presumed post invasion. Be really curious to hear about that. Secondly, can you perhaps go a little bit more into the specifics of consumer behavior changes in Poland besides mixed trading down? Are you seeing higher frequency?
Are you seeing a trading down from branded to own label, but also own label to opening price points? Just trying to get a little bit of a better take on that, please.
Thank you, James. On the balance sheets, I think that probably, as you may remember, we have been cautious or been warning of this kind of outlook since March this year. The moment that the war happened and the first signs that on top of the inflation that was being driven mainly from the disruptions in the supply chains, which didn't finish, on the contrary, I think currently. The COVID-19 has imprinted a new path in terms of inflation and availability, even of some of the commodities or some of the products. On top of that, of course, the invasion didn't help. This was something that we flagged since the
From the first moment. This being said, we, of course, were able, I think that we were very good positioned in the three countries where we operate because we are low price players in all markets, and we really kept the competitiveness versus what was happening in the market, trying to contain the price increases in the purchases that we made to suppliers. This was really paramount to have the performance that we have at the P&L levels. As you know, with a kind of business like our own, which is highly operational leverage, the fact that you keep growing at the top line really helps with the balance sheet.
This being said, I think that we have more reasons to continue to be very conservative on what the balance sheets refers, because we know that, of course, any intervention that we have we may be able to do, even to help our business partners, our suppliers, et cetera, will have an impact on cash. I think that currently, we have a buffer in our solid balance sheet and I don't think that we will want to take that buffer away. I think that we will want to keep that, or we have more reasons even to continue to have that. In terms of-
Oh, sorry.
Oh, sorry. I was just going to. I mean, I shouldn't be taking the step-up in CapEx that you should be seeing as we exit this year as an indication that you are a little bit more willing to be prone to risk and taking more risks from a balance sheet perspective, 'cause that's not the case here.
No, I think it's that considering even our own performance and the way that we see the different businesses and the opportunities in the countries, at this point, we didn't have reasons to refrain in what the CapEx is concerned. Of course, this, if there is a disruption in consumer demand, if we see a very different progression in terms of next year, we will probably have to revisit. We will keep monitoring what is happening in the market. For the moment, and considering our balance sheet, we saw no reasons to refrain the expansion and to grab the opportunities in the current businesses. On the consumer behavior in Poland. What we...
Of course, the main driver of our like-for-like is the number of tickets. It's not the average ticket. Despite the very high food inflation. If we also take the information from our Moja cards, on the consumers, what we think really is that we are increasing the number of clients. Of course, the refugees from Ukraine will probably weigh on that also, but we don't have the clarity on that weight. We think there is this weight on the current consumers, or the clients that were used to go to Biedronka and continue to go to Biedronka, what we see is loss of volume in some cases on the average ticket.
Buying less products and in some cases already, as I mentioned, lately this quarter, already also doing trading down. We are seeing also a slight regression in Q3 on our private labels. In this case, what I think is, as I mentioned, is we have the pressure from higher inflation and from probably more trade down from now on. But we have also the positive of having more customers in the stores.
Great. Yeah. Thank you.
Thank you.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from the line of António Seladas from AS Independent Research. Your line is open. Please ask your question.
Hi, good morning. Thank you for taking my question. Just one related with Ara. If you can provide more color, what were triggers for the decision to accelerate your investment? Because the environment from our understanding remains challenging. You mentioned, I think, trading down. Why do you think is now time to or why did you decide to accelerate your investment in Ara? Thank you very much.
Thank you, António. Well, unfortunately, sometimes when the markets are tougher, the ones that are better positioned should take the opportunities to grow. I think that the fact that Jerónimo Martins had a strong balance sheet and the fact that was confirming the opportunity that it had created consumers in Colombia really make it important, of course, to speed up having the opportunity to do so. We know that some of our competitors went into trouble, but we also know that the market will recover, probably not next year, as families, as we mentioned, are struggling.
We want to be prepared when it recovers, and we think that as Ara is really proving that is a successful format in Colombia, we think it's the best moment to really accelerate. The opportunity exists, the locations exist. We have the financial means to do it. We have more and more customers coming into our stores and really confirming that there is savings opportunities in our stores. We think that it would be a good moment to expand.
Okay. Could you provide a figure of your market share now in Colombia? Just a rough figure.
António, I think that at this point, we don't have much information. As I usually say, the biggest competitor in Colombia is really the traditional retail, and particularly in times of trouble where when people really have to go to their shopper and ask for credits, that is even more important. I think it's very difficult to say what is the market share or have at least reliable figures. This being said, of course, what we see is a big progression when we look at the country's food retail growth. Ara is growing while the food retail market is decreasing. We must be growing a lot of market share.
This being said, giving you a number, I think it's a little bit extemporaneous considering that there is no reliable figure, and it's very different from region to region, in fact. I would presume that, for instance, our market share would be much higher in the Eje, so in the coffee growing region, than in Bogotá, for instance.
Okay. Thank you very much.
Thank you, António.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes through the line of Nick Coulter from Citi. Your line is open. Please ask your question.
Hi. Good morning. Thanks for taking my questions. Apologies if they've been asked already. My line isn't great. Firstly, please could you comment on your market share evolution in Poland, I guess particularly from a volume perspective, would be helpful. Then secondly, on your promotional participation at Biedronka, whether it's more or less the focus in this environment. Thank you.
Thank you, Nick. In terms of market share in Poland, as I mentioned, we reinforce market share. We keep, so it's slightly below one percentage point, but we maintain this market share gain. For the future, of course, we have a very tough comparable, as I mentioned. If we maintain this progression, it really will depend.
I think that we are one of the best positions, as I mentioned, in the market, because we stay as the most competitive with a price gap for the other players that we keep. For this has been very important, the price, the shelf price, and the fact that it's true that the weight of promotions, as I already had flagged, in the six months, has slightly go down. This of course has to do with the relevance of the promotion. Sometimes we don't have the total amount of product available to do big and very relevant promotions. But promotions continue to be very important, and I think that they will continue particularly to manage the balance with the A-brands.
This will continue to be important. This being said, as I mentioned, it's going to be tough, but I think that we are in terms of the market, in relative terms, we will keep gaining.
Right. Presumably on a volume basis, you're taking more than that, just less than 100 basis points.
In terms of volumes?
Yeah.
We are growing more than one percentage point, yes.
Market share or volumes?
No, they're right. That's fine. Thank you so much.
No, thank you.
Thank you. Now we'll proceed to the next question. Just give us a moment. The next question comes from the line of Rob Joyce from Goldman Sachs. Your line is open. Please ask your question.
Hi. Thanks very much. It's actually Rob Joyce here from Goldman. I got a couple. Just to help us understand this, the CapEx sort of evolution from here, Ana Luísa. How long do you think, in terms of years, you have the runway to continue adding a sort of net 130 stores in Poland? And how many stores do you need to have before you add an incremental distribution center? The second one is just on the energy cost side of things. I think you said on the last call that in 2021 energy costs were around 1% of your sales. Can you tell us where that now is in the third quarter?
Just help us understand why the sort of pretty severe fall, I think, in the spot prices of energy isn't helping in the fourth quarter in terms of that evolution of the cost base. Thank you very much.
Thank you, Rob. So as we've been mentioning, of course, this is not a guidance, but we think there is room in the next couple of years to continue to add around 100 stores in Poland. We still see opportunity, particularly in smaller towns. Of course, depending on how things progress, I think that it could be a good basis to grow. On energy costs, or sorry, on the DC, so we added one DC this year.
I think that, probably, in the future we'll add another one, but I think that we have a very strong base in terms of logistics to serve the stores currently in Poland. Probably we'll have to do some improvement in some of the flows of the logistics, some more automation, et cetera. For the moment, we have very good infrastructure from the logistic point of view. If we have the ability to really have a good service from our suppliers, and probably will not have any issue from that side on the supply.
On energy costs, yes, I mentioned that more or less on the consolidated level, we had energy accounted for one percentage point. I would say it's more or less, probably it's not totally because usually it's computed with other utilities. But I would say that it's probably 50 basis points increase on the quarter for the total consolidated level with a little bit more weight on or slightly on Poland. On the spot prices, I will not elaborate on that, of course, Rob. I think that nobody, even the experts, will dare to do it at this point in time. We are not assuming as a base case that we will have a softer spot prices for.
I think that there will continue to be a lot of volatility around the energy issue.
Okay. Thank you.
Thank you, Rob.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from the line of Michal Potyra from Allianz. Your line is open. Please ask your question.
Hello. Good morning. A couple of questions from my side. First is about the case you have lost with UOKiK in the appeal. Do you plan to appeal further or rather to pay this fine? If you have any further proceedings with UOKiK. Second question is related to energy price and this your legal argument with Polenergia. Do you demand PLN 40 million from them? Does it mean that they have broken the agreement for the fixed price and now you are fully exposed to the spot prices in Poland? Does this amount cover your losses in 2020 or maybe in 2023? How much do you expect to lose on energy prices?
Third question is on the capital allocation, because you have reached the breakeven point in Colombia. You have a lot of net cash on your balance sheet. The question is, do you plan to enter maybe a new country organically, maybe do some M&A as I think the multiples are more favorable than a year ago, for example? Or do you rather think about some special dividends maybe to shareholder? Fourth question is about Sundays in Poland. There are some press rumors that you are trying to make some initiatives to open your stores on Sunday, like some libraries for kids. I don't know. Could you confirm or deny it?
How important is this Sunday trading for you, taking into consideration that you probably provoke the watchdog with these activities? Last question about the windfall in Portugal. I know that it's a fresh issue. It was already, you know, been questioned twice during this call. I would like to understand the main idea behind this tax, because we have this pan-European solution comparing 2020 profits to 2021 and 2020, but for example, you will be punished for the COVID-19. The base is very low. Does the regulation take it into consideration? What would be, simply speaking, the construction of this tax? Thank you.
No, thank you, Michal. Starting with the UOKiK and the case or the proceedings on the prices. It's true that the first instance was not favorable to us. Of course, we are totally convinced of our case, and we really believe that our case is strong, so we are going to appeal and we are not going to pay the fines. We hope that in second instance, as this is subject that of course has some technicalities that have to be taken into consideration, that it will be favorable to us.
Sorry about that. If I understood correctly, you have lost in the second instance, yes?
No, no, in the first.
Only the highest appeal court is left.
No, we just lost all on first instance. We are now going to appeal. We lost in first instance, Michal. Okay?
Okay. I'm based on the press release, so maybe it was mistake by the journalist. Okay.
On the energy litigation that we have, of course, I will not elaborate on that. It's, of course, unfortunately, we usually only litigate if we have to. In this case, we are exposed. We never hide that we are exposed to the spot price in the case of Poland. We were exposed throughout the year. I don't think that it would be fair here to be elaborating on the case that we have against this energy provider. On the capital allocations.
Yes, as I mentioned, we are quite conservative and we carry net cash position in our balance sheets if we exclude, of course, the operating capitalized leases. We continue not to exclude an M&A operation. I would say it's a little bit more difficult for the short term, considering the current context. I mentioned that in our previous calls. I think it will be, but we don't exclude, of course. If the opportunities come, we will take a look at it. We think that we are in a context where we should be careful the way that we may jump into a deal position. On the special dividends.
Again, this is of course a decision for the board. Currently, our dividend policy is 50% of our net earnings, excluding the impact of IFRS 16. This is the policy that we have to assume unless the boards decide otherwise. The way that I see it in the current context, as I mentioned, I think that we want to really be prepared to cope with any operational deleverage that we may face in the short term. Currently, we face a lot of uncertainty on that. Our main priority really is for the current businesses and is really to protect those businesses. Having a strong balance sheet is pivotal to us, as I mentioned.
On the Sunday openings, we don't hide that since the beginning, we thought that the best for the consumers would be to maintain the opportunity to continue buying, even on Sundays, even since COVID-19. This being said, of course, currently we are not opening on Sundays, and I don't think that any player is opening on Sundays. It's something that we think it would be good for the consumer if there is an opportunity, but we will always abide by the law. This is something that we think a non-issue or something that sometimes is escalated with no reason.
On the windfalls, it's true that at European levels that there is this recommendation to have a solidarity contributions, particularly on energy levels. In Portugal yesterday, it was announced that this would be extended not only to energy companies but also to the distributors. It was the one mentioned, but I don't know even what would be the base. If it's going to be the last four years, you are absolutely right. Of course, as I mentioned already, the years of COVID in Portugal, for our two main businesses, were not easy. This being said, I'm not seeing any special or any exceptional profits and no speculation being done by our banners.
I will have to wait for the law and for the letter of the law to understand really if this will have an impact or not, Michal.
Okay, thank you. Could you remind, there is mentioned this competitor with troubles, Justo & Bueno. Is it in Portugal or Colombia?
It is Colombia, Michal. It is Colombia.
Colombia. Okay. Thank you very much for your answers.
Thank you, Michal.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Dear speaker, there are no further questions. I would now like to hand the conference over to our speaker today, Ana Luísa Virgínia, for closing remarks.
Thank you all for your questions and for attending this conference call. This has been a challenging nine-month period that all companies prove to navigate well. We have therefore reinforced confidence in all our banners' competitive strength, the best expression of that confidence being the decision to step up Ara's expansion capabilities and consequently imprint a new pace of growth in Colombia. We will stick to our strategic focus and continue to work to protect top-line volume growth while living up to our values and actively acting responsibly, standing by our teams and our customers, business partners. Thank you once again, and I wish you all a nice day.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.