Earnings Call: Q2 2021

Jul 28, 2021

Ladies and gentlemen, welcome to the Carrefour Analyst Conference Call. As a reminder, the presentation will be available on Carrefour's website. I now hand over to Alexandre Bonpar, Chairman and Chief Executive Officer. Sir, please go ahead. Good evening to all of you. Thank you for being with Mathieu and me on this call to analyze our half year results. Before we get into numbers, I would like to step back for a minute and focus On the key value creation levers we activated for our shareholders over the half, we can sort them into 3 categories. 1st, our operating performance, which supported a Strong growth dynamic and translated into a consistent sequence of market share gains month after month across All formats. 2nd, our ability to seize emerging opportunities As evidenced by our quick expansion in growth formats such as convenience stores, discounts And cash and carry on our booming online sales. We most recently proved this ability with the launch of Carrefour Linx, our new retail media platform, which offers significant opportunities for value creation. Last, our disciplined capital allocation policy. Thanks to our transformation over the past 4 years, we have turned our model into a strong cash generative machine. This gives us all flexibility to reinvest In our core business and strengthen competitiveness. At the same time, we can reinforce our strategic market positions as we did with the acquisition of Grupo Big in Brazil, we can also reward our shareholders. This is how we drive our business, and we will carry on along these lines going forward. As a matter of fact, and in view of our strong cash generation prospects, we are announcing today an additional €200,000,000 share buyback program to complement our €500,000,000 program. This means that since the beginning of the year, combining the full cash ordinary dividend on our share buyback programs, we will return more than €1,000,000,000 or €8,300,000,000 of our current market capitalization. Coming back to our numbers. Once again, they are solid despite a mixed health on macroeconomic environment. Looking at our top line, we delivered steady structural growth in our retail activities. Q2 growth continued to be robust. And as a result, we posted a strong 3.9% like for like growth in H1 in the face of an already strong H1 2020 base. Interestingly enough, our growth is driven by what raised some concerns a few years ago, France, hypermarkets and especially French hypermarkets. In France, momentum is picking up again, and we report the best market share trend in at least 4 years With an increase of more than 50 basis points in market share over the quarter, driven by hypermarkets. But it is not this is not specific to France. Across our key geographies, hypermarkets are trending upwards on the gain market share when normalized for respective measures. This format presents positive prospects For the future, thanks to a renewed offer, a strong customer focus and a key role in our click and collect and home delivery activities. Looking at profits, our recurring operating income reached EUR740,000,000 this is an 11% improvement at constant exchange rates, reflecting our strong operational performance. Turning now to cash generation. We are well on track to meet our commitments As we have significantly improved our free cash flow, up more than €200,000,000 over the half. This increase follows 2 consecutive years of progress, and we are confident that at the end of 2021, we will land comfortably above €1,000,000,000 and set another record in terms of cash generation for Carrefour. This is a solid set of figures we are unveiling today. Allow me to say that they are the result of long standing decisions as well as great teamwork. The transformation journey we started 4 years ago is bearing fruit and still moving forward fast. And the prime example of this is our digital transformation. We were a brick and mortar business, but we have met the challenge to turn the digital revolution into a massive opportunity to grow our business. Our food e commerce sales dynamic has more than doubled over the past 2 years, We continue to experience frac growth at 26% in H1. In the fast changing online landscape, we are also making a new and exciting move. We were about to take we are about to take a significant stake in cashew, French Pioneer in quick commerce and daily grocery delivery in less than 15 minutes. As part of a larger partnership, we will help them optimize their model and continue their exponential growth. More globally, digital will be one of the strongest growth drivers for Carrefour over the midterm. We have set new ambitions for ourselves in digital, putting together new roadmaps for our tech, data and e commerce strategies. We will be happy to present them in detail to the investment community at our digital day that will be held in Paris on November 9, hopefully, Physically. All of this leaves me with one feeling, confidence for now and for the future. Looking at our prospect for H2, we know that despite the year from economic uncertainty of the period, our model is resilient, our financial situation is healthy and our balance sheet is strong. This provides us with the means to achieve our ambitions. I'm also very optimistic for Carrefour in the longer term. The crisis will strongly accelerate trends That has already been rising for a few years and we shall been anticipating for some time. An increase in work flexibility with more people consuming at home, the digital boom for which we are now well positioned, growing attractivity of proximity format in which we are expanding and a growing trend towards organic, healthy and environmentally friendly products that are our purpose. We are progressing rapidly on our ambitions As evidenced by our food transition index value for H1, which has reached a high 119%. Bearing all that in mind, we continue to capitalize on our strategy to create more value for our shareholders and for all our stakeholders. Thank you for your attention. I will now hand over to Mathieu. Thank you, Alexandre. Good evening to all of you. Let's start our H1 financial review with revenue on Slide 8 of the presentation. Like for like sales were up 3.6% in Q2, following a solid plus 4.2% in Q1. As a result, H1 like for like revenue growth reached 3.9%, which constitutes a solid performance on the back of a high comparable base. As a matter of fact, revenue was up 7% like for like in H1 last year In the particular context of the 1st lockdown measures. So in H1, we experienced an average like for like sales growth of 5.5% over 2 years. As you can see on this page, our sales growth momentum is strong at historic levels. This results from the dynamic market And from our continuous efforts on the ground to improve customer satisfaction, leading to consistent gains in market share. In more detail, on next slide, on Q2 revenue. Sales for the Q1 reached 19 point EUR 7,000,000,000 increasing by 8.3% at constant currency. Besides the satisfactory Factory like for like performance, expansion and M and A contributed for 1.3%. Petrol sales Picked up sharply with the rise in oil price and the easing of sanitary measures in Europe against a very favorable comparable base. In H1 last year, travel was vastly constrained by lockdowns, border closures and limitations on travel distance. However, please keep in mind that increases in petrol sales translate only marginally into profits. ForEx was a negative 3% over the quarter, primarily due to the erosion of the Argentine peso and the Brazilian real. In total, revenue was up 5.2% in Q2. Moving on to Slide 10. The group's recurring operating income for the half reached €740,000,000 up 11.2 percent or €81,000,000 At constant exchange rates. This increase is particularly satisfactory for 2 aspects. First, it compares to a Strong 29% increase last year, which implies close to 45% cumulated profit increase over 2 years. 2nd, it means a solid outperformance compared to the 5.2% revenue growth at constant currency, Reflecting good operating leverage. Gross margin reached 21.4%, down 39 basis points. This is driven by the change in mix of integrated versus franchised stores, by price investments, By the negative comps effect related to the pause in promotions during lockdown last year and to a lesser extent By an increase in petrol sales, we generate lower margins. These effects were partly offset by purchasing gains. Distribution costs were down 32 basis points to reach 16.3% of sales. The decrease, thanks to the fast implementation of our incremental cost cutting plan, which offset costs related to expansion To the conversion of newly acquired stores as well as new services offered to customers in digital. The overall increase in recurring operating income relied on positive contributions from all business lines, retail operations, Financial Services, Other Services and B2B Sales in Europe, which all improved significantly. This was achieved despite a negative impact of minus €31,000,000 linked to the consolidation of recent acquisitions, Macron, Pierre Cebon, Supercell and Welcome, which are under conversion to Carrefour banners in H1. As you can see on Slide 11, France was particularly strong in Q2 with 4.7% like for like revenue growth And 5.4% over 2 years. Our market share increased by 0.5 points over the quarter Without performance in all formats, hypermarkets kept delivering sound revenue growth At plus 4.3 percent life of GLI driven by strong commercial performance based on the 555 method, Which supports customer satisfaction and operational excellence. Hiper's gained market share against their competitive set With plus 0.5 points and against the wider retail sector in the country. Supermarkets also delivered strong revenue growth with a 7% like for like increase in Q2, which comes after a solid 4.3% growth in Q2 last year. Superl's also consolidated their market share over the quarter. The situation was a bit more subdued for convenience stores, Down 3% like for like in Q2. This is on the back of double digit growth last year for the segment, Which was the main beneficiary of the strict lockdown measures. Over 2 years, top line Momentum remained high with a 9.4% like for like improvement versus Q2 'nineteen. In this proximity format as well, Carrefour Stores outperformed their peers during the quarter. As we said earlier, France was the main driver of the group's recurring operating income performance in H1. Operating profit grew by 45 percent and operating margin improved by 32 basis points at 1.1%. This was helped by strict cost discipline And comes despite the fact that we resumed promotions and catalog actions that were temporarily cut last year during strict lockdown. Moving on to Europe. As you can see, Spain and Belgium posted negative sales number in Q2 Due to high historicals of +9.8 percent and 15.9 percent, respectively, in Q2 2020, Both remain well oriented on a 2 year basis with plus 7.1% cumulated sales growth for Spain and plus 9.2 for Belgium. Poland and Romania faced the opposite situation with much easier comps as sales growth was negative last year. Business picked up clearly in Q2 with the progressive easing of sanitary measures and the reopening of shopping malls last May. Italy remains challenging, but our relative performance improves month after month. The new management team in place has put strong emphasis On customer satisfaction and operating excellence, this rapidly translated into steady improvement in NPS and price perception. Note that we delivered positive like for like revenue growth in Italy in June. Europe Recurring operating income improved by a solid 13% in H1, reflecting a 27 basis point increase in margin. This is a sound performance as it comes on top of a +59 percent increase in recurring operating income in H1 last year, over 2 years, recurring operating income in Europe has increased close to 80%. The situation showed contrast in Latin America. Our sales in Brazil remained at a satisfactory level with strong 18.3% growth cumulated over 2 years, supported by both Atacadao and Carrefour Retail. This solid 2 year trajectory reflects steady market share gains and a sound commercial dynamic in a difficult sanitary and economic context. On a year on year basis, APACADAO grew revenue by 10.2% like for like, its 4th consecutive quarter of double digit like for like growth. The brand enjoys strong reconnection across the whole country And today stands as the benchmark in the competitive cash and carry segment in Brazil. Carrefour Retail posted a 11.4% decrease in like for like sales, which is almost purely linked To a 25% drop in noncoons sales against a 52% increase in Q2 last year. Over H1, we completed the conversion of the 29 macro stores in Brazil. We're particularly pleased with the situation of macro At stores, we opened twice as fast as planned and experienced a much faster ramp up than anticipated. Revenue is now expected to double over the next 4 years versus the initial target of a 60% increase. And EBITDA will reach run rate breakeven as soon as this year, way ahead of initial schedule. This new evidence of our capacity to integrate acquisitions is very satisfying, even more so in the context of the upcoming Grupo Big Acquisition. As you know, we are currently in the antitrust review process. We expect closing to materialize next year. Argentine business keeps improving, gaining market share, growing volumes and recurring operating income In a tough market environment shaped around hyperinflation. Recurring operating income for the region was marginally negative, down 0.8 percent at constant ForEx in H1. It was primarily a function of the non food sales drop at Carrefour Retail in Brazil and the high comparable base As H1 recurring operating income was up 27% last year. A few words on Taiwan now. The country had remained something of a safe haven in the COVID world last year. But unfortunately, it started being affected At the beginning of this year, the local government took drastic actions to limit the impact with strict sanitary measures that affected our operation. In that context, like for like sales were down minus 1.4% in Q2. Total sales increased by more than 20% at constant exchange rate following the integration of the Wellcome convenience stores. They enjoy strong revenue and earnings growth As soon as they are converted to the Carrefour banner. The conversion process should be completed at the end of 2021, in line with the initial plan. Recurring operating income for Taiwan reached €47,000,000 in H1 versus €49,000,000 last year and €40,000,000 2 years ago. Moving on to the bottom part of the P and L on Slide 15. Nonrecurring charges reduced Significantly versus last year, they amounted to €41,000,000 in H1. On the positive side, the sale of 60% of market pay Generated a capital gain of €230,000,000 We also booked a capital gain on a real paid asset transaction in Brazil for €81,000,000 On the negative side, we provisioned €260,000,000 of restructuring costs, mainly as part of our plan to transform our head office in France. The net financial charge Reached minus €132,000,000 a lower number than last year, mostly thanks to efficient liability management, including Lower cost of refinancing. Taxes also decreased sharply, linked to the fall of the CVAE rate In France, under depreciation of the Brazilian real over the period. The normative tax rate Also decreased to 30.6%, thanks to the decrease of corporate tax in France and the geographical mix of earnings. Bottom line, our earnings per share for the half increased by 34% versus H1 last year to EUR 0.42 Net free cash flow on Slide 16 improved by more than EUR 200,000,000 in H1 Let me highlight the key variations. Gross cash flow improved by EUR 316,000,000 with the lower level of cash tax, as explained a minute ago, and a strong reduction in cash, cost of restructuring and exceptional items, as we had guided last February, change in working capital deteriorated by €139,000,000 This is due to the fact that inventories had reached a very low level last December on the back of a very full sales performance during the festive period. So we bought more inventory in H1 than last year. We also raised CapEx to €539,000,000 in H1 as planned. As I said before, we anticipate CapEx for the full year to increase versus last year and come back to normalized levels of €1,500,000,000 to €1,700,000,000 per year. We can confirm that CapEx would be in that range for the full year 2021. Over the last 12 months, we generated close to €1,260,000,000 of net free cash flow. We are satisfied with this performance. We are confident that the full year number will be comfortably above the €1,000,000,000 we had set as a target at the beginning of the year. A few words on net debt now. Our net debt stood at €5,500,000,000 on June 30, 2021 versus 5,200,000 a year ago. The change in net debt is explained by the following key elements: net free cash flow, which was €1,259,000,000 over the last 12 months as we just saw, The full cash dividend paid to our shareholders had an impact of €383,000,000 to which we add all dividends paid to minority shareholders in subsidiaries for a total dividend payment of €497,000,000 90% of the €500,000,000 share buyback program was completed by end June for €443,000,000 Net M and A, including acquisitions and disposals, represented a cash out of €426,000,000 This leaves Carrefour with a very solid financial situation and probably one of the strongest balance sheets in the industry. Our credit profile remains strong as acknowledged by Moody's and Standard and Poor's, which both reiterated their strong investment grade ratings. Moody's actually upgraded its outlook from negative to stable on its Baa1 long term rating. Before turning to questions, I would like to say a word on our capital allocation policy on which we've had many questions from investors since the beginning of the year. Over the past 3 years, we substantially improved our economic model. It is now highly cash generative, Thanks to operational excellence in servicing customers and rigorous cost discipline. We have been able to strongly optimize CapEx level over the past 4 years to a normalized level of €1,500,000,000 to €1,700,000,000 per year or roughly 2% of sales, which we believe is the right level To support and transform our operations. Going forward, incremental cash surpluses will be allocated between M and A And returns to shareholders. On the M and A side, our policy is very selective and focused on value creation. The BIG acquisition is a perfect example, a strategic move in Brazil, firmly consolidating our leadership in the key markets With high synergies expected and at a very accretive plus synergy acquisition multiple. As for return to shareholders, we completed our 500 EUR1 1,000,000 share buyback a couple of weeks ago. We acquired close to 29,500,000 shares or 3.6 percent of the share capital, This cancellation was approved by the group's Board of Directors today. We have confidence in our dynamics. We have ample liquidity and buying our own shares is a good allocation of our capital, hence the complementary BRL200 1,000,000 buyback program that we announced today, total cash returned to shareholders so far in 2021 amounts to more than 8% yield. Thank you for your attention. The floor is now yours for questions. We have the first question from Andrew Green from Exane. Sir, please go ahead. Yes. Good afternoon. Two questions, if I can. So first, just on the immediate grocery acquisition. I'm just wondering what the motivation is there. Just talk a little bit more about the partnership and whether or not you think actually it's going to be mass market or is it really So experiment at this stage. And then the second one, just coming back to the capital allocation. I've seen some reports in the press that you may The sale of assets, so that's a slight change to what you spoke about at the full year results. So I'm just wondering if you could elaborate a little bit more on that. Thank you, Andrew, and good afternoon. So you're right, we announced that we take we decide to invest in Caixou and to be a large investor in this asset. The logic is very simple. As you know, we have decided to put A strong focus for the last 3 years on home delivery. We wanted to be the leader on home delivery, and we are the leader in On home delivery, we have more than 25% of the market share. Consequently, we try to be present in all the segments of home delivery, delivery at that was 1 delivery day and today, that we express also with Carrefour own service. And we want also to be present in this new segment, which is Quick Commerce. It allows Carrefour to For sure, it's ambitions. It's a new step in this ambition. We do believe that Quick Commerce It's a long term trend. Of course, it was born during the confinement, but we do think that it would be more and more rooted in consumer particularly in urban cities and as the leader in home grocery delivery, We want to be capable to take this trend. We joined with the team of Caixou. They are very good entrepreneurs. Of course, they remain the largest shareholder. We will try to combine with our sales to help them to Celebrate their development. And in the meantime, it's a great opportunity for us to be present at the beginning On this new trend, and that's the logic of this move. On your second question on disclosure on disposal, sorry. Obviously, as you know, we begin to think about the new strategic plan. And consequently, we view of assets is a normal process in this moment. We will think about the position of our international subsidiaries, what could be a What could be the type of alliances? Is there any divestments possible? We think about all that. We are at an early stage in this process. No decision has been made. We know that there are synergies and sharing of best practices with all these countries, but we want to have a global review of all these assets to have a complete overview and to have a very professional overview of all our countries. We are very pragmatic, very valued driven. There is no disposal on the agenda today. No decision has been made, But we are thinking in the logic of the building of the new strategic plan. Okay. That's very clear. And just on Caixa, could you just What's the value of the investment? Is it sort of tens of 1,000,000? Or is it even bigger, I don't know? Sorry. Yes. It's low tens of 1,000,000. It's a small amount, but we think it's a promising project. Okay, perfect. Thank you very much. Thank you, Alain. Thank you. We have now a question from Fabienne Caron from Kepler. Madam, please go ahead. Yes. Good evening, everyone. 3 quick ones from my side, if I may. At this time last year, I remember you were talking in France about a EUR 70,000,000 negative impact coming from bank travel and ticketing. I was wondering if you could shed some light on what has been the movement if we come back to normalized level for these divisions. The second question would be, can you remind us the weight of online in France and how profit has developed over H1. And the last question is more midterms regarding the law that is coming regarding 2. Could you share your view with us? And should we expect that this law may enable inflation to be passed through the system, which has always been an issue in France? Thank you. Hello, Fabienne. Thank you for your questions. I will take The first two ones. So you're right. Last year, we had quite different profiles of Profit evolution between retail and the other services, which you're right, include Ticketing include car rental, include travel agencies. And so we flagged these various trends. We also commented on these trends this semester. We have a progression of retail operations again on top of already a high growth last year, And that's a good news. We also have a rebound of our other activities that applies to the other activities like travel agencies, ticketing Jimmy and Solon, they are indeed rebounding, notably since the end of the quarter, I would say second half of the second quarter, When a number of sanitary constraints were lifted, we had an increase on travel. We had new events, Which were created and so that was positive. It is also the case for Financial Services, which also see their Profitability increased versus last year on the first half. We still have mixed Evolution of our portfolio of credits with a very strong dynamic, as you saw in Brazil, It is still more slow in Europe, but cost of risk is very well under control. We have some operating cost savings. Consequently, the profitability of the financial services is growing again In H1 and participates to the growth. On the online Activity in France, I have the number off top of my numbers, probably 4%, 5% of sales that are generated online now. As you saw, Strong growth on top of already strong growth last year. So we've been sharing with you that We thought that e commerce had made a quantum leap during the COVID crisis and that this market would just keep growing from where it was, keep growing on a very high base. And this is what we are delivering in France and actually in all the geographies. As we said already last year, and this is obviously reinforced As time passes, we now have a profitable dynamic of business In e commerce, meaning more volume, more profits, consequently, again, this semester, The online growth generates growth in profit and participates to the rock Growth that we experienced in the semester. On your first question, Fabienne, we are aligned now with the initial Spirit of the law, which is to protect farmers, and we are also in favor of More transparency, Plurier and Nualite, and we work on that with our Arcadite For a long time, I'm sorry, it's something we are very, very used to. But as you know, it's the I don't know, I think it's the TIM LO in 16 years. So we have had a new law every year or so for the past 15 years. So we had a very strong adaptability. The text is still in discussion. It has been voted by the French National Assembly, but it has not been examined by the CNAIDS. It will be in September this year. We, of course, don't know the final version. There could be some changes, probably because nobody knows how to Apply the law how it is today written. But let's hope that the legislative process would Able to have a more comprehensive, understandable text In order to fill the objective, which is the development of farmers, which is to produce transparency And which is to create a global ecosystem from the farmers to the retailers. And I think there's still work to do on the text, but I hope that the CNAIDS would highly contribute to that. Okay. Thank you very much. Thank you. We have now a question from Cedric Lescat from Stifel. Sir, please go ahead. Yes. Hello, gentlemen. I have 2, if I may. So first one is really about best practices. Maybe you could tell us what you are most Part of across in terms of synergies across borders, you were mentioning a potential review Of your countries going into the next plan, it would be interesting to know what is working best between the countries because that has been a structural weakness of Carrefour in the Maybe you can tell us what are the main achievements you are proud of and what is still missing. You were mentioning also some purchasing gains In your introduction, maybe it has something to do also with that. And the second one, in terms of online development, Could you maybe give us a road map of the countries? We have some ideas with Brazil and France, but the countries where you are still maybe a little behind and could accelerate pretty quickly with some Also some synergies potentially in the ways you carry the business and you're learning from already from France and Brazil In other countries like Spain, Italy, Belgium, etcetera, maybe you could tell us where you stand and where you want to go online in these countries. Thank you. Thank you, Cedric. When I joined the group 4 years ago, one of my main objective was to that the group behaves as a group, that the countries behave as a whole as a unique group, That we share this practice, that we partner, that we have the same ambition, that we try to develop common services. And it was my obsession Knowing that it was not the best point for Carrefour. The reality today, and I think that you measure that, is that it is the case. It's the case because we have a new generation of managers in all the countries. They are all obsessed with the customer satisfaction, with the 555, with operational excellence, with this willingness every day to serve and to improve the customer satisfaction. Of course, it's the case of family in France, Cristophe, Rafael in Italy, Stephane Maquier in Argentina, all the managers are really obsessed By the customer satisfaction by this 555. In the meantime, we have tried to put in common a certain number of services to Act as a global group. Of course, it's the case for the purchasing. You know that by heart, but it's also to have real Group expertise common for all the countries on data, on IT, on tech. We all know that a certain number of our countries Doesn't have the critical side to be expert on that. Now we have center of expertise. They are common for the whole group. We build global partnerships with strategic partners on tech, for example, and that's something which is which has become very natural for the group. All the managers contribute to that. The level of collaboration between the CEO of countries and the group is very, very strong. Each day, we have discussion. We have many workshops and many items in order to develop that. And the consequence is that the general level is growing. We all know that in a certain number of countries, we are better and we try to export best practices on every aspect and it's Really something that works. And I think it's a collective pride for the team to be or We act today as a group, as a unit team, and it's something that contribute to the good momentum we have today. On your second question, Frederic, regarding online, I think you know very well The philosophy of the plan, it was really a global plan that we launched. And so when we said in 2018 that we would Accelerate on digital, on commerce and would commit very high level of investments to that. We basically started a dynamic in all geographies. At that point in time, you had markets which had already started, I think France was 1 and Carrefour was clearly behind competition in terms of drive and e commerce activity. And you had other countries where the market was less mature and where we could start with the right timing. That puts us in position today, for instance, in Brazil, you mentioned Brazil, to have and in Spain, it's the same, to have a market Share in digital, which is above our brick and mortar market share. So in parallel to this, We've had a community and it is really impressive to see it work of leaders coming from all our geographies, which work in common to identify the new trends, To identify what's going on, we have discussions with partners locally and globally together In order to identify new trends and invest quickly in these new trends, we've become a leader In the home delivery in France, we launched the Dry Platin. We are now moving on quick commerce. I think it shows that this community is on top of all trends. We are now in the second Trend, which I think is about innovation, is about taking leadership. It's not about catching up and implementing We have a basic and working e commerce footprint. It's about taking innovations, taking leadership and capturing The value out of this e commerce market. So I think that's where we are, and there are some lines, Among many others that we will develop during the digital day in November. Thanks to both of you. Thank you. We have now a question from Shirdah Mahamkali from UBS. Please go ahead, sir. Hi, good afternoon. Thank you for taking my questions. I guess 3 from my side as well. Maybe first, slightly Need a question, perhaps for Alexander. I think the Carrefour 2022 is Sort of then, PIRDC is fast approaching. I guess, what should investors look forward to beyond This plan, you're clearly signaling a review of assets, which is likely part of that. What other aspects are you hoping to cover? And When will we get a glimpse of the sort of succeeding strategic plan? And I guess that's the first question. And second one is, if you can elaborate a little bit on EPS guidance, I'm sorry, it's from Matthew, a subtle change in guidance there. What do you see as comfortably above EUR 1,000,000,000 I guess? Is it should we be seeing the addition €200,000,000 buyback as a hint for that much better free cash flow? I guess any clarification now could help us think about what you might be able to do next year. And then Finally, just to quickly follow-up on Fabienne's question on non retail impact, please. I think in the second half, You had further impairing another $20,000,000 in France $90,000,000 in Europe. How should we think about recovery of those In the second half, was there any sort of sustained drag from the acquisitions you've referred to €31,000,000? I mean, should we be seeing Further similar drag of €30,000,000 and how should we think about that €20,000,000 in France €90,000,000 if there's a non retail impact? Thank you. Thank you for your first question. I try to be short because I can speak about For hours, and I'm sure we'll have many opportunities to discuss about that in the future. And it's a bit early to speak about the next plan. We still have to deliver all the ambitions of this plan. As you mentioned, we can be pleased With the level of performance we have, with the fact that we reached the objective that we behave as a group, that we are back In the ways that the customer satisfaction is increasing and all these conditions are essential to build the new strategic plan. On this new strategic plan, maybe you feel in our words In our announcement today that digital would be highly central. We have Huge ambition. We are back in the game. We have brick and mortar, and we use now technology as an asset. I think we are in advance on many aspects on retail. That's We have decided to give you a comprehensive view on this Digital Day in November Because we want to present you and to have a discussion with you about the maiden achievements, the ambitions, the view we have about our role on our new platform Carrefour Link On how we use the data to improve day after day the quality of the operations, on the role we can play, on the ambition we have on e commerce, On all these aspects, of course, the level of ambition we have is very huge, and that's why we continue To make any acquisitions such as Caixo today. So of course, it will be a central element in the next plan. And for the rest, we have many ideas. We work a lot. We will try to be ready at due time, and we will have a global discussion about all that with you. On your second question, Sreedhar, hi. Well, I think you I understood the message behind the complementary €200,000,000 share buyback program. It's It's a message of confidence. I think on after this first half, sales trends is positive, profitability is going in the right direction, In particular, in France, cash generation is posting strong growth versus last year. So we are confident. In terms of capital allocation, I don't think we've changed or I think we've kept the same line. But probably as quarters pass, you Yes, implementing this capital allocation policy. And so it's clear. Once we have implemented our CapEx program, it's a permanent arbitrage between M and A, selective M and A, as I said in my speech, and buybacks. So it's a permanent arbitrage. So yes, let's be clear that one should expect further share buybacks in the future. I think it's a fair assessment. On the other activities and the building of the profits, Yes. The other activities, as I said to Fabienne, are contributing positively to the EBIT growth. It really depends on the sanitary environment and constraints associated to that. We know that with the delta variance, we have volatility in the situation. So we'll see how H2 evolves. In terms of M and A, we've had a number of acquisitions that started to be consolidated in this first half. I think it is quite typical. And the number of stores that we bought It had been very limited or no activity. It was the case of the macro stores. It was basically an asset deal. So we had to pay the rent. We had to hire the teams. We had to make a launch campaign. And then only after that, We opened the stores and started to generate turnover. So we have the sort of launch our first Consolidation and relaunch and transformation dynamic in H1, clearly, it would decrease over time as Products, I see that the stores are converted and they ramped up in terms of sales and profitability. Should we be looking for substantially smaller headwind from this in the second half? Yes, I'm pointing then we'll see how the second half develops. But I think it's been particularly Important in the first half because we consolidated all these acquisitions in 1 semester. So now they're all being converted and so it should reduce over time. Thank you. Thank you. We have now a question from Nicolas Chen from Barclays. Please go ahead, sir. Hi, thanks for taking my questions. I have 3 actually. The first one, you so your working capital variation is slightly deteriorated in Juan, and you explained why. How do you explain expect, sorry, working capital will Try in the second half, do you expect this to revert in the second half? So do you expect a positive working capital for the full year? Second question is that you mentioned price investment also to explain your gross margin contraction in H1. Could you elaborate on which countries you invested in prices? I think I You mentioned some price investment, but are there any other countries than Brazil where you're also investing in prices, I mean, For instance, in France. And last question, I think also you mentioned during the presentation some provisions, Restriction provisions regarding your headquarter in France, I mean, could you elaborate a bit on this? Because I saw that You already implemented a layer plan in France at the hypermarket, but also at quarter level as well. So Is there a need to further restructure your central operation in your headquarters? Thank you. I will start with your second question, Nicolas, on the provisions on the headquarter, your raft, I think it was back in 2018, we had a transformation plan for the head office in France. It was successfully implemented. We have left actually across the first semester the new social plan for the head office in France, one knows that Andrew, this question was very big 4 or 5 years ago, and we've identified opportunities To optimize, to gain efficiencies, to have more fluidity among the teams, And this is why we are going through this process. I think you got it perfectly right. It's the 2nd time we are taking actions on that area. On fresh investments, Nicolas, in fact, we are Investing everywhere, the objective is to improve our competitiveness quarter after quarter in all our geographies. So as you know, in a certain number of countries, we were lagging behind the competition. We were in better position, but we expect to Continue to work on our competitiveness, on our pricing strategy in all the countries. We have made great improvements. We are capable today to use efficiently data analytics to adapt our pricing strategy with much more granularity based on the elasticity. That was not the case 4 years ago, listening, we have we've listened to customers in all our geographies. We identified many levers to improve price perception. We don't today where we have to It's already emphasized in the different countries. So we have professionalized our price policy. We continue to use more and more data. And it's the case in all the geographies, knowing that our starting position was not exactly the same. That's for example, of course, in France, we continue to invest. We continue to develop new initiatives, try to be close To the expectations for our customers, that's the way we'll continue in the future to fuel our price image, which is absolutely Sounds good for us. And I did not address your working capital question, Nicolas, coming on it now. So you're right. So you perfectly understood the H1 situation. As far as H2 and medium term trend is Concern for working capital, I will let me repeat what I said in the full year results. I said that for this year and for the medium term, working capital should be a positive It contributed to our cash flow. We have grown the business. We have the ability to maintain on that service Under a very strict control and we use them all the time. So I have much sense that will be the direction that I think we have a specific situation that we explained to you here, but no change in the medium term. Okay. Maybe one very last question, if I may, for you, Mathieu, pretty Technical, but so your restructuring charges have declined quite significantly in H1. There is also a decline in net financial charges also in the first half. Can we extrapolate this H1 trend to the full year? I mean, Could you help us or could you guide us a bit regarding the evolution of restructuring charges and net financial charges for the full year? Thank you. Well, exceptional is exceptional. So I'm not going to be very precise here. You'll What happens in H2, what it sure is what has been what occurred in H1 is here. I don't see that Being reverted, we have some divestments, capital gains That's behind us, and so we will keep that for the year. In terms of net financial expenses, we have a number of we have structural aspects, which is the reducing of the cost of financing, which is a trend that we've been implementing for now 4 years, we've also had a number of Specifics in H1, a number of small capital gain, ForEx gains and I mean small things. So I think it's probably a strong decrease in net financial And fees in the first half probably stronger than on a recurring basis. So that's what I see. Okay. Thank you. Thank you. We have now a question from Williams Wood from Bernstein. Please go ahead, sir. Hi, thank you very much for taking my questions. I've got 2. It'd be great to kind of understand a little bit more around Cost cutting, the €430,000,000 that you achieved in the half, where is it coming from? Is it from kind of COGS or SG and A? And I suppose, do you expect to kind of have to continue to have some provisions, like the restructuring provisions that we just discussed, To achieve consistent cost cutting into the future. And then the second one is on the stickiness of the hypers post pandemic. Do you still see that long term growth sticking? And if you stripped out some of the online growth that's in those Tycho, what would your commentary be on the underlying performance of the stores? Thanks. Yes. Thank you, William. On the cost cutting, Well, it's pretty much the same dynamics as we've had for now close to 3.5 years. This new cost savings program is really the continuation of the previous cost savings program. So we have about half of the cost cuttings, which are coming from cost. The other half is coming from SG and A. As far as SG and A are concerned, we have a number of improvements, which do not need any exceptional provisions, exceptional cash outs to be implemented, namely Changes in processes, renegotiations with suppliers that's that will need a one off cost to be done. We have some improvement of organizations that we implement regularly. I think we have a big A plan today in France, as we discussed earlier, which is not in the savings yet. We have the provision, but we don't have the savings. That that will be implemented a little bit in the second half, probably much more in 2022 and the best in In 2023, so we're still engaging actions so that this cost cutting dynamics On your question on hypermarkets, you probably know that we have the conviction The hypermarket has a real future. We believe a comprehensive transformation plan on the hypermarket Because for having this future, we have to think and to work on every aspect of the hypermarket, Which means to work on the offer in the hypermarket. We knew that we have a huge potential for Moving the quality of on food and fresh and on vegetables, we have the capability to improve the quality of food offers we have. We also to think about the role we should play on the not food, we did believe that we were not at all relevant from not food, That there was room for improving the attractiveness of our offers. That's why we have worked on the seasonable products. That's why we have worked on the in and out that we have widespread in all Europe, we have also and we have the conviction that the organization of our auto market should be improved. We have lead different processes, AOS, before and now the top project under RANDAIT leadership, we think also that the link between hypermarket and digital could be improved, Could be professional laps. That's why we use our dense stores network As fulfillment days for both Click and Collect and Home Delivery. So you understand that we work on all CapEx and we had a new element Since last year, which is the obsession of operational excellence and customer satisfaction, The obsession of the NPS, the obsession of the 555. And Raki and all his team I've worked a lot for you in order to be closer to the customer, to understand, to listen to the customer and to improve Every aspect of our operations, which means pricing execution, Cleanliness of stores, readability of the assortment, freshness of food and vegetables, healthfulness of the teams, waiting time at the checkout This plan is working. That's why we are now capable for almost all year To gain market share, we probably analyzed that we gained market share against all our competitors today in hypermarkets. That is the sign that we are back in the game, that we have good potential due to this operational excellence. On that, the combination of these two elements, the structural transformation of the hypermarket on the offer and the organization and the link to the internal and The operational excellence and the customer satisfaction, that is the combination for We're winning for that for our hypermarket. That's why we believe in the future. That's why we demonstrate now quarter after quarter That the performance of the hypermarket is better. It's the case in France. It's the case in Spain. It's the case in the majority of our countries Because this policy is widespread in all our countries. Thank you. We have now a question from Xavier LeMeney from Bank of America. Sir, please go ahead. Yes. Good evening. Thank you for taking my questions quite late already. Just on Europe actually, can you provide us with a bit more Color on the profitability. So you mentioned already Spain and you said that you had quite a strong improvement in Spain. But can you give us also a sense of what's Happen in Italy, Belgium, Poland and Romania are just in the trajectory of the profitability for these countries, which will be quite helpful. The second one actually is on Brazil. If I look at the retail performance, excluding Atacadaro, I understand that non food was Challenging, you had tough comps, but given the strong food inflation, is there any explanation why the performance in Q2 was so weak, I would say Caso for non food. Can you potentially explain a bit more what happened there in Q2? And what are you expecting going forward? And last question, I will have a try, but is there any consensus that you would be willing to share, especially on the recurring operating profit that would be helpful too? Thank you, Xavier. Well, we're not going to detail The profitability by geography, just highlighting that I think 2 ideas. The first one is that Spain, which is a very core and important country For us, it has a very positive trend. Although it had very high historicals, we have positive dynamics in terms of sales over 2 years. Market share is we're improving. We have a good cost dynamics. The financial Two operations are also performing well. So overall, it's a country that keeps going in the right direction. Then the other countries, it's really about where they were last year and what was the growth. So I think you can refer here to my Comments on the top line that I made on my speech that the main trend that then it's small countries. So I think the most important item is in Spain. In Brazil, You're right. So leaving at Acadao aside, so non food, I don't think we can say it's underperforming. We had a 52% growth last year. We're minus 20 something, so it's a fantastic growth over 2 years. We had a fantastic growth in non food before COVID. You may remember that because we've done a very good job on working on the categories, on changing the assortment, on changing The level of service, that is working and that is also working over 2 years. Coming on the food market, you're right that the food dynamic is quite low at Carrefour. 1st, the level of inflation that you see is ready for raw materials. So we have, in So much lower inflation on packaged goods, which is more what Carrefour sells. And then we have a market which is negative food market which is negative in Q2 on the back of Very high historicals as well. But what we know is that in food, the FMCG, we are gaining market share in Chart Four banners in Q2 in Brazil. So we're satisfied with the performance and have really No worry on that part. On the then your last question on the full year consensus. Well, obviously, we are in a trend where we have a lot of So volatility, notably due to the cemetery situations. I think overall, we are comfortable with the full year recurring operating income consensus as it stands. We understand the transformation is powerful. The performance is solid. So, Olin, we are confident in the context that we all know. Thank you. That's helpful. Thank you. We have now a question from Clement from Brian Garnier, sir, please go ahead. Yes, thanks. I've got 2 questions From my side, if I may. The first one is on food inflation. Actually, I've also the manufacturers already flagged the Coming prices are increases. Do you have to food and freight inflation? William, Carrefour will pass this price hikes on the My other question is more on the Caixo. You have a good option to, let's say, fully acquire the account, Avani. And what's your view on the Quick Thomas, is it really complementary to the Deliveroo and also you over its partnerships? Or is it, let's say, an appointment of these partnerships? Thanks. Thanks for your question. Considering the inflation, As you know, we see very different trends depending on geographies. In Latin America, we have very strong food inflation starting in Q2 last year. It remains above general inflation. And of course, it has a consequence On volume, but that's really limited to Latin America. It's not what we see In France and Europe, we see limited food inflation in Europe. If we focus on France, FMCG prices are, as you will, negotiated within the framework of annual negotiations From November to February, so prices are therefore effective for the year, which gives us some visibility of the probably different inflation that Good afternoon, Arthur. We are starting to see a little bit of pressure For more industrial improvements with prices, there may be a little bit of inflation at some point of time, But we see that as a limited phenomenon. And at a limited phenomenon, it could also be positive We're in the industry, but we really see that as a limited sentiment for Europe and For France. The second part of your question on Ca We see, of course, a multiplication of way of delivery. We see many players entering the market. You mentioned Everitt with whom we partner. You mentioned So there have been many questions. And the objective for us since the beginning is to be present With a personal talk on all the services. That's why we put the emphasis That's why we were the first and we are the leader on pedigree in rice. That's why we decided to put the emphasis on delivery, working from automated production But also today, more and more from eco fulfillment centers linked to our store by the market or submarkets. And that's why we take the decision also to try to have a careful investors on Express, Delivery Express, but also now Quick Commerce. You know that Quick Commerce is now around 15 minutes. And we see in many geographies, when you see the importance of this market in some big cities, that this market Our small assortment in less than 15 minutes is growing. We don't know exactly, and it's impossible and it couldn't be honest to say we see the market at least in 6 or 11 or 12 months, but we see this market growing. And more important for us, we want to be capable to say to our customers and to our best customers in the Carrefour Party step, we have the answers to your needs And to your expectations, we have created the capabilities to work performance services On all these expectations, on that strategy of the partnership with Caixou, the manager of Caixou remains the first The shareholders, we don't have any call. We want them to be perfect on top of us. We want them to act as on top of us. And I think we have time for our last question. Yes. The last question is from Maria Laura Agunno from Morgan Stanley. Madam, please go ahead. Thank you very much for taking my questions. I'll try and make it as short as possible. Just 2 on my side. The first one, and apologies if I missed it from the press release, but from the provisions that you took associated with financial services last year, is there has there been any unwinding in the first half of this year? That's my particularly given that you said that the cost of risk was She's quite strong in terms of management. So that's my first question. And then the second question, so impressive amount of cost savings achieved in the first half. Just if you have any comments you can make with respect to input cost inflation and how you're managing this? Thank you very much. Sorry, can you repeat your second question on inflation and IRR? Input cost inflation, so across the different types commodities but also cost logistics. So if you have any if it's something that you've been dealing with and what type of comments you can make on the back of this? Okay, clear. So first question on the cost of risk in the Financial Services. Well, slight taking back of provisions, but very, very limited. The we had booked, as I said in the full year release, that we had booked the right level of provisions. We think that the environment is still uncertain. So we did not take any Any big position, we see absolutely no weakening of the credit quality, hence The position, which is more a wait and see, I would position to see exactly how the market evolves. On the cost inflation, we well, we see a little bit of Tensions, but it's fairly limited. As you saw in our cost line, the cost is Decreasing as a percentage of sales. So it's not a big thing as we Peak, we'll see how that develops in the second half. But so far, it's fairly limited. Thank you so much For your question and for the discussion, I wish you a good summer and see you at the and talk to you at the next Q3 We end after at our Digital Day on November 9. Thank you very much. Bye bye. Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.