Good morning and welcome to Cencosud Second Quarter 2025 Earnings Conference Call. Please note that all attendees are currently in listen-only mode. We will open the floor for questions after the presentation. Discussing the second quarter 2025 results today will be Rodrigo Larraín, Chief Executive Officer, Andrés Neely, Chief Financial Officer, and Andrés Guarda, Investor Relations Deputy Manager. We would also like to introduce our new Head of Investor Relations, Irina Axenova. As Irina takes the position of Head of Investor Relations, we thank Marisol for her contribution and impeccable work leading the IR team since 2010. We wish Marisol the best luck in her new position within Cencosud. Statements made today by the company may include forward-looking statements.
These statements are subject to risks and uncertainties and may be influenced by future events, including changes in macroeconomic conditions, political developments, legislation, and operational factors that may affect the Cencosud future performance. The company undertakes no obligation to publicly update or revise these statements except as required by law. Please note that no part of this call may be recorded or reproduced without the pre-agreed consent of the company. The earnings presentation accompanying the call, which includes additional information, is available on the company website in the Investor Relations section. Please note that this call is being recorded. With that, I will now leave you with our CEO, Rodrigo Larraín. Rodrigo, please go ahead.
Thank you, Sergio. Good morning, everyone. Thank you for joining us today. I would like to extend a warm welcome to Irina, to the IR team, and to Cencosud. We're pleased to be here with you today to discuss second quarter results. In a global context that remains volatile and uncertain, our team continued to execute our strategic priorities with discipline and focus, achieving notable progress across our businesses. This quarter, we saw a clear acceleration in revenues compared to the previous one, reflecting the continued strength and resilience of our business model. This performance comes despite the increased competition and challenging consumption trends in some markets. Notably, Argentina delivered revenue growth above inflation, even excluding our recent acquisition of Magro. In fact, all our businesses outpaced inflation this quarter.
We remain focused on portfolio optimization, advancing the sale of selected assets in Brazil and Colombia, while also continuing to drive organic growth by opening new stores in key formats in the U.S. and other markets. I would also like to highlight the significant improvements in our performance in Colombia and the encouraging progress in Brazil, two important markets in which we have been falling behind. With a reinforced leadership team and a sharpened business strategy, we are now beginning to see positive results. We achieved adjusted EBITDA margin growth in four out of six countries where we operate, and our distributable net income grew by over 10% year- over- year. We're building the Cencosud of the future, one that aims to set the global standard in retail while staying true to over 60 years of history and the DNA passed down by our founder, Mr. Horst Paulmann .
We remain firmly committed to the determined execution of our strategy, including strengthening our multi-format retail ecosystem. This commitment is deeply rooted in our corporate purpose to serve extraordinarily at every moment. In line with this commitment, we are pleased to have been recently recognized as number one citizen brand in Chile. This milestone reinforces our commitment to continuously enhance customer experience and actively contribute to the development of the communities in which we operate. I would like to extend my deepest gratitude to Cencosud's exceptional team, whose dedication and talent bring this purpose to life every day. Looking ahead to the second half of the year, we remain focused on executing our key initiatives across all markets, driven by a clear purpose and a long-term strategic vision. With disciplined execution and strong customer focus, we're optimistic about the growth and profitability opportunities we are creating for the future.
Thank you very much. I will now hand over the call to our CFO, Andrés Neely, to go over the quarterly financial results in more detail.
Thanks, Rodrigo, and good morning, everyone. Focusing on the highlights of the quarter, we have advanced key initiatives. First, we completed the refinancing of the deferred markets debt for $600 million. The loan was secured at a lower interest rate with an extended amortization profile and the elimination of a financial covenant, thanks to the solid financial situation of the company. Additionally, as part of our capital allocation strategy, and bearing in mind our long-term plans, we executed a share buyback transaction, resulting in the purchase of 1.5% of total shares outstanding, equivalent to over 42 million shares. This operation was carried out through a firm block offer, which allows all shareholders to subscribe to the share buyback program under equal conditions in terms of share price and on a pro-rata basis. The pro-rata factor for this particular operation was 37.6%.
In line with our strategy to optimize operations and enhance business profitability in Colombia, we reached an agreement for the sale of our service station business, comprising 37 sites to a local operator. The transaction remains pending final approval from the relevant authorities. We have also advanced our organic growth plan with the opening of five new stores in the region, including three DeFresh market stores in the United States, one Giga store in Brazil, and a new Jumbo in Colombia. We also expanded office space by 25,000 square meters at Gran Torre Costanera due to increased demand in the tallest building in Latin America, as our occupancy rate surpassed 90% before this addition. On the other hand, Cenco Portal La Dehesa renewed its tenant mix with the new gastronomic zone, driving solid results for the quarter for the shopping center division in Chile.
We also established a new regional transformation office, reporting directly to the CEO. This office is responsible for accelerating the implementation of multiple strategic initiatives with a regional scope and a company-wide vision. Finally, during July, we received approval from the Antitrust Authority in Brazil to complete the sale of the remaining 22 Bretas stores in Minas Gerais, following the investment announced in the first quarter of 2023. Turning to consolidated results for the quarter, our revenue increased over 7% year- over- year, excluding the effect of hyperinflation in Argentina, accelerating revenue growth compared with the previous quarter. This performance reflects revenue growth in Chile, Argentina, the United States, Peru, and Colombia, with the supermarket division leading the recovery through its enhanced value proposition and improved online sales across the board. Adjusted EBITDA increased below single digit year- over- year, excluding the effect of hyperinflation.
The adjusted EBITDA margin in the United States, Brazil, and Peru expanded, while in Colombia, it improved across all business units, marking three consecutive quarters of margin expansion. Chile maintained a double-digit EBITDA margin for the seventh consecutive quarter, whereas Argentina showed a margin contraction attributable to the lower year-over-year inflation, as well as the incorporation of Macro, that is still in the integration phase. Distributable net income for the first half of 2025 reached CLP 170 billion, representing a 494% increase compared to the same period last year. This result is largely explained by the lower impact of hyperinflation adjustment in Argentina and a cumulative gross profit improvement of 4.9% year- over- year. Our gross leverage remained at 3.6x , and we remain committed to our long-term target of 3x . Cash position at the end of the quarter stood at $727 million.
As previously mentioned, the debt refinancing of the deferred markets debt provides a more flexible amortization schedule for the upcoming years. This provides ample time to plan ahead for the upcoming maturities in 2027. Finally, we maintain a limited exposure to foreign currency financial liabilities. 67% of our debt is U.S. dollar denominated, and after accounting for currency hedging and our investment in the U.S., effective exposure is reduced to 14.7%. I will now turn over the call to Andrés Guarda for a discussion on the results by country and our sustainability initiatives.
Thank you, Andrés. Good morning, everyone. Starting with Chile, our main market, where revenue grew 4% year- over- year, driven by growth across all business divisions, especially department stores and shopping centers. Supermarkets' online sales increased double digits, leading to a total e-commerce growth of 6%. Adjusted EBITDA once again reached double digits for the seventh quarter consecutively. Although it declined 2% year- over- year, this was mainly due to higher electricity tariffs and the increase in labor costs. We also highlighted an 8% increase in Jumbo price subscribers and a strong performance in department stores with a 9.9% sales increase. In Argentina, revenue increased in local currency and in Chilean pesos, with all business units expanding above inflation. Supermarkets increased market share by 107 bps, while private label gained 159 bps in penetration, significantly contributing to sales growth. We highlight the 13.8% sales in supermarkets above food inflation.
Adjusted EBITDA grew 14.1% in local currency but declined 11.2% in Chilean pesos due to gross margin contraction and expenses still catching up to inflation of the previous quarter. In the United States, The Fresh Market posted a high single-digit revenue growth in U.S. dollars and double digits in Chilean pesos compared to the second quarter of 2024. This revenue growth represents its highest growth since its acquisition in 2022. This performance is explained by the opening of 13 stores in the last 12 months, including three in the second quarter of 2025, and a 25% increase in online sales, reaching an 8.5% penetration. Adjusted EBITDA grew double digits in both local currency and Chilean pesos, reaching an EBITDA margin of 9.6%. This result includes an extraordinary impact from insurance reimbursements related to the hurricanes at the end of 2024.
In Brazil, revenue decreased year- over- year, mainly explained by the exit of 32 Bretas stores in Minas Gerais. However, sales improved sequentially from - 12% in the first quarter of 2025 to -5%, reflecting a gradual recovery in sales growth. However, adjusted EBITDA decreased in local currency and Chilean pesos. The adjusted EBITDA margin expansion is explained mainly by profits received from the sale of the 32 stores in Minas Gerais. In the supermarket business, adjusted EBITDA tripled compared to the first quarter of 2025 as a result of improved performance of our store portfolio. Additionally, a new GIGA Atacado store was opened, marking a milestone in the format value proposition with services such as bakery and butchers. In Peru, revenue increased compared to the second quarter of 2024, with sales above food inflation and a 35.5% increase in online channel, reaching a 7% penetration.
Adjusted EBITDA grew 7% in local currency and double digits in Chilean pesos, reaching an EBITDA margin of 11.8%, the highest recorded by Peru in the second quarter. This strong performance was driven by EBITDA expansion in shopping centers and financial services. We also highlight a 19% private label penetration. Finally, in Colombia, revenue grew in local currency and in Chilean pesos, supported by growth across all business units. This was also driven by the improved e-commerce, 6% year- over- year, and a recovery in financial services. In June, we opened a new Jumbo store with more than 1,200 square meters. Adjusted EBITDA improved significantly with a 357 bps year- over- year margin expansion due to the higher profitability in supermarkets, home improvement, and financial services. This marked the third consecutive quarter of margin improvement.
Moving on to our strategic pillars, during the second quarter, we reached a strong private label penetration of 18%, with consolidated sales of $717 million, a 12% year-over-year growth. Among the highlights, we launched a Hacks and Wracks new exclusive brand of organizational solutions, now available in Easy Chile, Argentina, and Colombia. In addition, Cuisine & Co was recognized as the number one emerging brand in Chile, according to the current study. These advances reinforced the importance of our private label in Cencosud's value proposition. Speaking of organic growth, during the first half of the year, we added a nice store and more than 15,000 square meters of sales area. As mentioned earlier, in the second quarter, we opened five new stores, including three in the United States, one Giga Atacado store in Brazil, and a new Jumbo in Colombia.
In real estate, since June 2024, we have added approximately 30,000 square meters, including 25,000 square meters in office space and nearly 5,000 square meters in shopping centers. Turning to innovation and customer experience, during the quarter, we implemented several initiatives focused on improving efficiency, operational control, and the shopping experience. In Chile, we introduced automated gates in sales checkout areas, ensuring that only customers with completed purchases can exit, reducing losses and improving flow. We also rolled out AI-powered self-service scales to automatically identify fruits and vegetables, along with an avocado scanner that determines ripeness in real time, supporting better purchase decisions. Additionally, at Jumbo Costanera, we piloted a machine learning-based takeout plan, a meal management system to optimize forecasting and reduce wait times. In Jumbo Chile, we are testing a smart camera solution for real-time shelf inventory control.
In the U.S., The Fresh Market completed the nationwide rollout of electronic labels combined with AI-powered cameras. This technology enables automatic price updates, store monitoring, and improved planogram compliance, all contributing to greater operational efficiency and a more seamless shopping experience. Now, let's talk about the progress across sustainability initiatives. In Chile, we launched a leadership program for store managers, which will be rolled out with John, and we continue implementing the pomo c ambio program, now present in 25 schools and benefiting over 5,000 children. In the United States, The Fresh Market partnered with Chef Carla Ho and the Alzheimer's Association in a solidarity campaign, donating a portion of sales from exclusive products to support people with Alzheimer's. In Peru, we launched the Good Ideas for Better Nutrition platform through Metro Supermarkets, reaching over 1,500 people with workshops and community partnerships.
On page number 24, under the planet pillar, we implemented an energy management platform to monitor consumption in over 300 Jumbo, Santa sabell, and Paris stores as a part of our decarbonization strategy. We also received TEP certification for our participation in a circular model with reusable pallets, which helped avoid the use of over 10 million cubic decimeters of wood and reduced more than 3 million kilograms of carbon dioxide. Finally, EC delivered 22 tons of unused pallets to Harmony, a company that will reuse them as substrates for gardening and other purposes, promoting circularity in our stores. To conclude, we would like to highlight the multiple recognitions obtained during the quarter, which reflect the ongoing work of our teams and the positive impact of our initiatives.
We would like to highlight that in Chile, Cencosud was recognized as the best citizen brand according to Cadence, and Cuisine & Co ranked number one in the emerging brands category. With this, we conclude our prepared remarks and will now begin the Q&A session.
We will now open the microphone and chat box for questions to our management team. If you would like to ask a question, please use the raise hand feature. First question in the queue comes from Melissa Vine from Bank of America. Melissa, you can ask your question now.
Hi, I'm sorry. I was having some trouble with the mute function. Can you provide an update on the macro integration process? What is your appetite for further M&A in Argentina? Is Carrefour an asset that you would consider? Also, in Brazil, can you quantify the gain on?