Morning, everyone. Thank you all for being here. It is a great pleasure for me to see you again after a couple of quarters of not appearing in Warsaw. I'm here to present to you the quarter three results, the nine-month results of ASBIS Group, and discuss with you any future developments, and I would be very happy to take any questions from you, either in public or in person after the meeting. ASBIS, the last nine months did not change much. Obviously, we are the same company. We have been penetrating the markets like always.
The only thing I would like to share with you here is that with our Breezy, our trade-in business, where it is expanding nicely and it develops the way we want it to. We make significant steps forward, and it's already number one trade-in unit in all CIS countries. Hoping to see it and expecting it to see much better results going forward, given all the recent developments we've had with agreements signed with multiple providers recently with the Polish number one trade-in company, second-life product, sorry, company in the country. Also, you see here 34 Apple stores, six B&O stores.
We are, I think in a good shape to tell you that, we are moving into the other side of the Atlantic with Bang & Olufsen. They gave us the opportunity to check and penetrate two B&O stores in California. We start from West Hollywood and in Stanford in San Francisco. If we see that things are going well, then we might talk for more markets there. Now, what has happened the last couple of months with, like I said, Breezy, with its new development and with the RTV Euro AGD sign-off, we believe that we are in a good shape now to make things better in countries like Poland as well.
We expanded our product line portfolio of private labels with Lorgar in gaming segment, in gaming sector, where we believe and we see some very good potential. In September, we hosted a very big event in Czech Republic, in Prague, where multiple retailers and not only were present, and they were impressed actually with the quality and the product lines we managed to bring to the market. These are in a nutshell of what we have done together with yesterday's decision to pay a $0.20 interim dividend like we always do the last couple of years. Our dividend policy remains steady and remains firm to share the success with our shareholders, despite the challenges and despite the difficulties we have.
We believe it is the right strategy to follow. We all saw how the monthly estimated revenues, and we announced the revenues already. We saw a decline mostly in September since we had all these difficulties in Kazakhstan, and we will speak a bit more about them going forward. Also, the regulation in Ukraine didn't give us the opportunity we wanted to undertake. Other than this, the monthly results of July and August were more or less flat. Moving onwards to the financial results and what has happened, because the question we get multiple times is: What did you guys do in Kazakhstan? What is it? How is it looking? Are you fixing yourself? Is the situation getting better?
The answer is yes, it is getting better. We are trying, and we are doing multiple things to make it happen. Obviously, it is not easy because it is not in our hands to fix the overall situation. However, we try all possible ways, and we are working with all possible stakeholders to resolve the situation of illicit trading. Only recently, we have met with our suppliers and the local authorities, and they have taken significant steps towards controlling the importations in the country. A good example is what in August the U.S. announced, a donation to the Kazakh government in order to better control importations in the country. I had a question before during the press conference.
Okay, the service is one thing, but the program needs more time to be established and to bring results. This is the reality. However, we all need to start from somewhere, and the same issues and challenges we used to face in countries of Central Eastern Europe, but we know now that the majority has been fixed. We are participating in all working groups with our suppliers, mostly Apple, to make and find more ideas and ways to support the business. Obviously we are, from our hand, donating specific services, like extended warranty to people in order to attract more clients towards us. Now, the illegal importation is one thing.
The second thing of having the new Consumer Act which limited customers of purchasing products and exchanging their IT products as they used to do was also an issue. Therefore, there we work with financial institutions to find more solutions in that respect. At this point, I want to make a comment because we are a group of people that we meet every quarter and in the past, and there were questions whether this company was selling through Kazakhstan to Russia.
The fact that we suffer this time around so big declines proves that this company did not and is not selling into Russia, because there would be an easy way for us to move all these goods illegally to Russia, but this is not something that we do, never did, and will never be done from our side. Over to the financial highlights and looking at how the group performed, touching first the revenues of -6% and the gross profit margins of 7.64%. A gross profit margin which is considered lower than previous quarters, however, given how the situation is, we consider quite satisfactory.
We consider quite satisfactory because the push on the gross profit margin is extreme, and we believe that we can sustain to these levels at least for a couple of quarters. We will manage again to start increasing it. The 57% year-on-year minus on the net profit must be equally considered that during the quarter three of last year, there was a $6 million one-off profit emanating from the sale of the two properties of the group. Therefore, this -57% is closer to 39%, 38% as opposed to that number. We saw our EBIT numbers and we saw our net income, how they behaved. We believe that, given the circumstances, we have managed to retain our position in a lot of markets.
We have been able to retain our good profitability that give us the foundation to continue and deliver what we promised to the market despite the difficulties, and we are going to speak a bit later for that. We still believe that we are able to deliver what we have promised to the market. We have been able to deliver throughout the years what we have been promising, and this is our target for this year as well. We are doing the utmost to achieve it. Now, moving into the country per country. Sorry. We see that Kazakhstan is the big problem of the company. Obviously, somebody can say that Kazakhstan was your big success story the last couple of years. Indeed, it was.
We see that the impact that we have in both revenues and profitability is quite significant. With the market, the secondary market of Ukraine, which could pick up, but still in war, makes it even more difficult. However, it's worth mentioning that there are countries that are growing, and leading the flagship is Poland with its very good performance and managing to reach position number five, something that we are very happy with and something that we have been expecting for some years to see now.
We believe that, apart from Poland, we saw some very good developments in countries like Czech Republic, like Romania, the Adriatic, which proves that the group is not only losing Kazakhstan, but it makes multiple other steps to grow where the environment is better. Looking at the regions, the same picture. Again, the majority of the lost revenue comes from the CIS countries. I will make a comment that I had a question before about Middle East and Africa, and it was absolutely valid. Since we entered South Africa, we didn't see too much there as a contribution, as a growth. The reality is that South Africa has grown significantly.
However, last quarter, Q3 of last year, we had some big projects in North Africa, in Algeria and Morocco, which did not repeat this year. That's why we only see a 3% growth in the region. Only to say that this $15 million of other relates mostly to the Far East. We had some couple of nice deals with ASUSTeK in Taiwan and Hong Kong. This is why we see this extra $10 million from that region. Product lines, we see smartphones again being the leader of the pile together with CPUs and laptops. We see decline in CPUs since we had very big server fulfillment projects last year, which did not repeat this year.
However, we still remain number one supplier of choice for CPUs and all components actually. Given the consolidation that happened in the market recently, ASBIS is holding number one position in both AMD and Intel across all the countries we operate. Even now, we became bigger in that segments in the whole Europe without having the franchise in Western European countries. Gross profit margin, I spoke before and I touch it once again. 7.64% this quarter. A quarter of multiple challenges, and there are people in this room that have been betting on the sustainability of gross profit margins. They have been questioning the sustainability of the gross profit margins. This started when we increased our margins from 6% up to 7% and then up to 8%.
A specific quarter two of 2022 reached also 9%, but we knew that it was not sustainable. A number closer to 8%, 7.5% between there, it is what we aim, it is what we see that it is our new reality given the difficulties we face. Given what we see today and how the big push and the pressure on specific markets is, we see that we can stay and we can sustain these levels. SG&A costs, another issue that the company is looking very seriously at, since there is an increased amount of expenses. That was a decision we made as a management team, given that we entered quarter four.
Given that we have all these challenges around us, we decided not to go harder on fixing our SG&A. Given that, if we give the opportunity in quarter four for people to deliver the numbers that we hope we will deliver, then we will be able to reach our forecast. Therefore, we took this risk as a management team not to go deeper and clean more of the SG&A in order to make the numbers. Because the foundations have been built, the expense nature has been made in previous quarters, and we didn't want us to go and don't allow the opportunity for us to deliver the numbers. It is good to mention that in the number you see of quarter three, there is a $ half million of extra redundancy costs embedded.
Taking this into account also makes the picture a bit lighter. Now, the overall income statement shows like we discussed and described. I want to touch in that in our taxation calculation ASBIS decided to take on to Pillar Two before the introduction, because the Cyprus government will decide whether they will be taking the Pillar Two from this year or from next year. Actually, there is a parliament vote in the coming month, where we will know whether we will be obliged to pay under the Pillar Two or not. In these calculations, we have it, all right? The provisions are there. If this is not undertaken by the government, we might be having an extra reversal from the numbers we see here.
There was a significant question from multiple investors, multiple people, what is the situation with the new investments you did? What you have done for this? We decided to show it to you. This is what we lost this year from Breezy and from AROS, but this is also what we have managed to deliver. We see clearly that Breezy is picking up. We see that Breezy give us the idea that it will be a success. On the contrary, with AROS, we need to significantly change our strategy.
It seems that what we had in mind, what we have done, it was a bit outside our reach. Not outside our reach, but maybe we haven't been able to penetrate the right segments with the right people, with the right skill set, but also it was a much more intensive in terms of human investment, in terms of money that we had to spend, especially on R&D, from what we initially estimated. This is for the investor community to understand, given the transparency that we always share with you. That's why we show this slide only to the investors actually, and we do not show it to the general public. The net working capital of the group at very good levels and looking forward to have a positive cash flow from operating activities.
The quarter three cash flow from operating activities was positive significantly in order to close the gap from what it used to be in the first six months. We are very much confident that we will turn the company positive during quarter four. Our net debt again at very safe levels. This company has never faced a gearing issue, has never faced a significant over-debt which has always been, especially the last three, four, five years, that we have been managing cash flows very tight. We believe that we are very good on that respect.
We also see some positive movement from the financing cost. Therefore, we estimated to reach and below 10% in quarter four, given that we had several decreases on interest rates from multiple markets. Now, to the multi-million dollar question, will you make the forecast? Will you make the numbers you promised? The answer to you is that as we stand today, we still believe that we will do it. We are confident that if we fight till the end, we will manage to deliver the numbers we set to the market. This is why we still have not altered our forecast numbers.
We believe that delivering quarter four equally close to that of last year without obviously the one-offs which we will not have this year will make the numbers possible. November, for us, it is very crucial. It started quite well. We saw October revenue, which was a bit behind, but still the profitability was quite satisfactory. That's why we are fueled to keep the forecast. We are confident that we are doing the utmost on a daily basis. Actually, it's on an hourly basis that our general managers, our vice presidents around the group get messages to mobilize. We see the result coming in. Confidently, I say that we still have a good chance to make it.
I cannot guarantee that, but we have this belief, and we will have it until we see that it happened. The realization of forecast is a function of obviously good revenues, good profitability, but also the expense structure that needs to be fixed. We expect to see lower expenditure in quarter four. Therefore, altogether, it seems difficult, and it is difficult, but it's still doable. This is the message I convey to all of you, and this is the message I convey to the team, that the management of the company does the utmost to deliver this forecast, which is lower from last year, obviously. However, it is the forecast we gave.
We are one of the very few companies that dared to give a forecast at the early days of this year. It is who we are and always try to be open and transparent with the investor community. For the last 17, 18 years, we are in the capital market of Warsaw. We have never said or done anything which we didn't believe, and this is the case today. Some words although very premature for 2025, we will be optimizing, like I said, some private labels. We will look into how to fix ourselves in that respect, and deliver finally the results that we need. Deliver the results we hoped at the very beginning that we will have.
We do not plan to conquer the U.S., but we believe it will give us a good footprint if we manage to succeed with this project we are currently running. We want to plan 2025 growing gross profit margins and the continuation obviously of our dividend policy. That means that somebody should also expect a final dividend after, depending of course on how quarter four will perform. Our risks, our opportunities are there. We declare them on a daily basis and weekly basis. We are very much aware of the difficulties of the countries we operate in.
They have never been easy for us to be working there, but we believe that we have the expertise, the knowledge, and the experience now to deal with them. Sometimes the risks are higher from what we estimate, but yeah, we always say that the enemy of the good management is the better management, and this is what we will continue driving forward. The dividend, I said it before, it is expected. Yesterday we declared it. We decided during our board meeting, and one of our non-executives actually asked us whether we plan to increase the dividend. I repeat that this is subject and function of the overall performance of the year.
There was also a question whether we share the success of the company with shareholders only via dividend or also a buyback program. A buyback program is to be discussed during our next board meeting if necessary, and if we see that we need to stand again next to our company, next to our share price, and do something ourselves given how the market behaves and given our inability actually to dictate the market price of the company. This is the update I wanted to give you, and I'm very happy to take any questions you might have. Please.
Thank you. I've got two questions. The first one would be on operating cash flow, because this quarter the build, I mean, it's a great number and positive, but it's coming mainly from increase in payables, like $80 million. The second line is like inventories, which is
Decrease
Decrease in inventories which is positive for cash flow. My question would be on payables. Did you manage to renegotiate your contracts with the clients because payables are increasing and the factoring is decreasing year-over-year, actually? I mean, should we think that payables would be covering receivables going forward on the balance sheet or?
You see, that was traditionally we say that on a distribution company, if you manage to get payable days equal to receivable days, then you only have to finance your inventory. Things are changing though, especially when we penetrate more consumer product and the client or the consumer product requires higher payment terms. Therefore, answering your question, the first part of the questions, we are constantly negotiating with vendors, and especially with suppliers that they require us to take bigger inventories for a big project or for satisfaction of their own needs, we always get higher payment terms. However, there wasn't a specific negotiation. It's an ongoing negotiation, and I repeat that our aim is to have payable days equal to receivable days and then managing to reduce inventory days give you a positive cash flow.
I repeat that quarter four traditionally is always the best in terms of cash flow development. Given that there are shortages, there are multiple clients that require more products constantly, therefore, we are able to dictate less payment terms.
Okay, thanks. The second question is obviously on iPhone 16 and how the first weeks are going in terms of the sales. I was wondering, I mean, can you comment how Apple is doing in China and in Japan over the last few years? Because I was wondering whether simply Apple may be losing the market share there and maybe the export to Kazakhstan. I mean, the problems you have, maybe it's the problem of how I would say, more structural problems of Apple on those markets. Thanks.
Thank you for the question. You understand that I cannot speak on behalf of Apple to start with. I will speak on our experience as a company working with Apple for so many years and respecting that, it is a relationship that changed the company to a very positive way. Now, Apple is placing big efforts in China and Japan. This is why we saw Tim Cook traveling to China recently a couple of times. The fact that, they are dropping sales, I believe it's temporarily. I believe that the Apple and the iPhone has a uniqueness in terms of, hooking the client towards to that, operating system first and then the device itself.
I do not believe that any efforts that the big competitors like the Chinese Xiaomi, Huawei, and all these new ones that are appearing on a daily basis. It is periodic, and Apple has a specific market share in this market that it will remain theirs. Now, moving to your question about Japan and whether the Japanese inability to sell hits us. Today's Japanese yen, you know, you understand that, in each market, Apple is selling in local currency to the local big distributors. If the Japanese yen gets lower, it gives an advantage to these people that they have a better pricing. Therefore, the international trader will buy in Japanese yen and will import in Kazakhstan or anything else.
This is the arbitraging where, on the contrary, if it moves on the other side, they lose that advantage. Currently, they have the advantage because of their own currency. However, if it's not Japan, it will be in Poland. If it's not in Poland, it will be from Middle East. The illicit trading and all these people that are doing this cross-border trading will find their way. Okay? It hit the door of Kazakhstan because for us it was a huge market. It is so much shown on us because for us, Kazakhstan took a boom, all right? We were able to fulfill that. The biggest problem in Kazakhstan for us is the Consumer Credit Act that changed in April as opposed to the illicit trading. There it stopped this overheating of spending, and it is a matter of spending there.
We saw it and we felt it in a very harsh way because it was done, let's say, with the market not being prepared. Okay? That's my answer to you. I hope I satisfied your question. Any more questions?
What's the situation in Kazakhstan regarding iPhone 16?
iPhone 16 has been taken quite well in our markets at least.
Do you see the same problems with?
No
with this?
No, no. You see, Apple prices in September across the globe, the same price. When the new product comes in, everybody have the same pricing. There are no price advantages. It will take some time for these goods to appear in our markets, and it will take some reason. What the reason would be is that these products in these markets will appear cheaper in order for someone to make sense to buy it there and bring it to another market. The biggest problem of illicit trading is not this actually pricing. It's that they do not pay customs duties and VAT. All right. That's why the illegality. Because you can buy in Poland and sell in Slovakia, you can buy in Slovakia and sell in Czech Republic. This is not a problem. The problem is that you import illegally. All right.
Even if you buy it not cheaper, you become immediately, and you have a price advantage since you don't pay the taxation in the country. The iPhone 16 in Kazakhstan today does not have a disadvantage from illicit trading.
Where is the source of selling iPhones without VAT? Because officially, it is impossible, however, but Apple is selling to-
No.
any country without.
It's not coming from Apple. No, no. The illicit trading has nothing to do with Apple. It has to do with the open trading. All right. Apple will sell only to authorized distributors.
Sure.
Authorized distributors will sell to dealers. The dealers will sell to other people that will buy and import it. You know, cross-border, there is no VAT involved. If you export the goods outside the country, there are no obligations for VAT because the VAT is an end taxation which is paid by the consumer. To answer your question, if somebody is selling from Japan to Kazakhstan company, he's not obliged to pay VAT.
In theory, when the market will be full of iPhone 16, they can do the same.
Exactly. They can do the same if the conditions allow them. Meaning, what are the conditions? That they bought cheaper. Okay?
They still have this edge of VAT that.
They do have, but they also have the burden of delivery.
Okay.
Yes. Which will add on to the price of each device. If you sell, bring it in, and to bring goods in Kazakhstan, you don't bring it to the airport, obviously. You bring it around, and this costs money. The advantage there is not that big.
Okay.
There must be good price advantage that they buy cheaper, and I then take advantage of the no taxation.
What is the VAT tax in Kazakhstan?
21%.
21%. Okay. I have a question about AROS and Breezy. What are the levels of sales in these companies? Next year, will you forecast that both of these projects will break even?
Okay. I can tell you that for AROS, the revenues were insignificant to mention, meaning that we didn't manage to hit the markets with the products we estimated to. For Breezy, the situation is much better. Breezy has managed to refurbish and resell more than $9 million of revenue in terms of getting them and refurbishing them products, plus another $35 million of products that have been traded as a second life product through Breezy. We understand that our Breezy is well ahead from AROS. Now, we definitely will not plan any losses for them, especially for Breezy. I can tell you with confidence that we are moving into a positive territory from quarter one last year next year. For AROS, we will rejudge ourselves.
We will make our budgets, and we will come back to you to tell you what finally we are keeping from AROS, and on what terms we are keeping them, and whether we will continue to invest only to this. We believe that they will be delivering profit finally.
$9 million of sales.
Yes
of refurbished products. $9 million, yes?
Yes, dollars. All this.
$40 million
Yeah
From just selling the used products.
That's data. Yes. Yes, yes.
Okay. Which is low margin probably.
Yes, that's much lower margin. Yes.
Can we expect some write-offs that you have some costs activated in AROS?
No. No.
Okay.
What you can expect is, if we decide finally to cut specific teams of people.
Mm-hmm
there will be redundancy costs. Not because we don't have too much of inventories that we will need to write off.
Some research, I don't know.
The research and all these things, most of them has been expensed.
Okay
as opposed to, capitalized.
Okay. The cost of redundancy is the only risk for the next year.
Yes. Yes
Theoretically. Okay.
Always.
The question regarding the level of the gross profit margin this last quarter, what is for me interesting, the decrease of this level, does it result from the different mix of products that some profitable categories were not so strong in quarter three, or is it the market and the push for the prices?
It is mostly the market. I mean, in Kazakhstan, we had significantly lower gross profit margin because we had to fight for revenue. We had to sacrifice some of the gross profit margin as opposed to anything else. Yes. Our product mix ensures that we are in a much better position to deliver higher gross profit margin on consumer products, on Logitech, on Bang & Olufsen, or even on traditional IT components. Our gross profit margins are much better than it used to be five years ago. I refer to CPUs, to hard disk drives. We have a good product portfolio, and this is what has driven actually the gross profit margin to the levels of 8% and 8.5%, several quarters ago.
It is mostly affected by our inability to compete in pricing.
How many layoffs are you planning in Q4 in nominal terms?
You refer to absolute number of
Employees
dollars?
Uh-
I estimate to see another $0.5 million To $600,000 extra there.
In terms of number of employees?
It might reach 100.
Just quarter-over-quarter?
Quarter-over-quarter, we will be below by 200 people because we already came down.
Mm-hmm.
The peak of our hirings was quarter three last year.
Um,
No problem.
I have a question regarding 2025. Are there markets that you are certain that will grow, and markets that you are certain that will decrease in terms of revenue?
We are not certain that everyone will decrease. I am certain that Poland will increase.
Okay. On our other markets in Poland.
On other markets, we see that the foundation we have in markets like the Czech Republic and Slovak Republic, the markets like Romania and Bulgaria that had a very slow start this year should pick up next year. We believe that markets like Greece and Hungary that didn't do well this year at all, next year should be much better. In quarter one, I might expect Kazakhstan to fall, but from quarter two, I expect Kazakhstan to start growing again. Ukraine remains to be seen. Hopefully, what the new global master decided to resolve the war, it will become true, and we will have finally, first of all, for the Ukrainian people, a resolution of the war and finalization of the war actually. I expect Ukraine to grow.
I expect Azerbaijan to grow with Georgia and with Armenia around them. All these countries we expect to see growth, and we are going to predict growth.
Most of the markets are expected to grow.
I never come here.
From Q2 to today.
I never come here to give you a lower number for next year.
Okay. It's due to the more sales or more number of devices or just the price increase as well?
It is a combination of our ability to gain more market share. All right? It's a combination of more products that we offer to the market. We see inflation going up also, but it's not that much in our industry that will affect and make a difference on your revenue stream.
Basically the inflation should improve your revenues.
It will-
More or less.
It will improve the revenue, but not necessarily if there is a huge inflation, not necessarily the end result though.
Okay.
Because inflation will boost also expenditure and stuff.
Can you give us some information about your M&A plans?
Yes. We are looking very actively on M&A. We are looking on multiple segments. First of all, what are we looking for? We are looking to improve country by country. If a country has an issue with consumer products, we will go and get involved into a transaction that will give us consumer contracts. The same applies. We are not gonna buy revenue for the sake of buying revenue. We are going to buy a company, or we are going to enter into negotiations to buy a company in order to make a big synergy. We are in discussions with multiple companies.
We are in discussions within multiple territories, and we are not talking about huge transactions, but we are talking about transactions that will change our ability in specific countries to sell more products that we currently are lagging behind. Currently, we don't have something solid to share, but we are working multiple projects.
Could you comment maybe a little bit on the South Africa development, how it performs this year? Does it break even already? How does it perform versus your plans?
Second half of the third quarter, they were picking up significantly, and we see that in quarter four they started very promisingly to cover the losses of the first half. We see that this market is huge, and the potential is huge. I was saying before in a discussion I had that the South African distributor of Apple is a company 40 years old there. It's well established, and it's quite difficult to get customers away from them. However, there is such a big market, and there was such a big, let's say, underperformance in terms. This is why we were appointed.
We believe that with a nice reshuffling of the team, 'cause now we started attracting better people from competition as well, we will be able to penetrate the market in much better way, and we feel very confident for 2025 for South Africa. Obviously it is estimated and we are going to see a profitable South Africa in 2025 from the beginning.
Could you give us some light maybe on the Breezy and AROS, what was the loss last year for the same time?
I don't recall the number, but it was bigger.
Thank you.
Hello. Could you elaborate more on the extension of guarantees that you mentioned at the beginning of the conference? I wonder if oh, who would bear the cost of extended guarantee, you or the providers of-
We will bear.
... of the equipment?
We will.
Okay.
We will have the cost there and the aim there is to make a differentiation in the consciousness of the consumer that I buy something from a legal source, and I get also a benefit from this legal source. This is the underlying logic of us increasing the warranty. Combined with Breezy in Kazakhstan, we want to also offer a solution that you will buy from a legal source, we guarantee you buy, we buy it back at this specific price, at this specific category. This is an overall and a long, let's say, process and effort for us to attract the consumers to us.
Are you not afraid that your competitors from Kazakhstan will follow you in other countries, in Azerbaijan, Georgia, Arab countries?
These are not competitors. These are not ordinary competitors. You understand that we are talking about illicit importations that mostly these are opportunistic. These are opportunistic, and they have to have ground and ability to do it. It is not a competitor that starts and finishes at the same level with you, okay? It's a competitor that became a competitor only because he had this opportunity. In another occasion this might appear in Poland, everywhere. Okay. The question is, aren't we afraid? We are always afraid of illicit trading. We had it in the past in Ukraine. We had it in the past in Poland, in Slovakia. We cannot stay and think that, "What if they will come?" We need to do what we have to do.
We need to do what we do best in order to avoid and protect our market share from these people. We are not afraid to work with them because we have been used to work with them big time.
Do you hope that new products with artificial intelligence can make a big step for ASBIS?
You refer to the iPhone?
Not only.
Okay.
First of all, iPhone, but also computers.
The iPhone, the AI feature of the iPhone is not working in our markets as yet. It is only for the U.S. currently. It will appear in our markets only if and when the markets will undertake these changes in legislation to allow this feature. Now, AI obviously came to stay. AI is an interesting and very important tool in our everyday lives now. It is being used widely, all right? We believe that AI and we as a technology company is a good thing. Yeah, we are an IT distributor. If AI is IT, we will distribute AI as well. We are confident that the technology evolution will give the consumer better usability. Already we see that AI is helping significantly in education sector.
Yeah, there are other sectors that are following, and we believe that it is a good thing happening around us. Only, when it is being used for not the right reasons, AI can be dangerous.
Can it be dangerous for ASBIS?
The same way it can be dangerous for every single company, it can be also for ASBIS. I mean, I don't know what and how this can be real.
I have a question regarding the ASBIS. So you have sold $9 million of refurbished products and $40 million of just used products in Breezy. You don't have the capacity to refurbish these products or?
No, they didn't need refurbishment.
They didn't need?
They didn't need refurbishment because the Breezy project is a project that refers to all services of second life products. Yes?
Mm-hmm.
Because the majority of these second life products that we sold through Breezy without being refurbished were sourced from either the U.S. or from Far East, that's because our markets need it, all right? They didn't have it there, so we have to trade it, let's say.
Okay.
They didn't need-
The margin shouldn't be bad, on this trade, but are you saying-
Shouldn't be bad, but I repeat, it cannot be as ordinary like the brand new for the time being, especially now that refurbished products have been significantly wanted and been traded by multiple distributors now. It's not something that we only do. Multiple distributors do this. They become more like a commodity now. However, the important and the value of Breezy is on the undertaking, the grading, the refurbishment, and then the resale of the product. This is where we are going to be focusing, and this is where we aim to increase going forward in 2025, and we see already now that this is happening.
The grading, let's say, how it can improve sales because, I don't know, big companies want to have this product graded or.
Yes, everyone wants it to be graded. Yes.
Mm-hmm.
The higher the grade, the higher the price it is, yes? But understanding that, there is a specific segment that buys Grade D, Grade C, Grade B, that because there are people that don't care to buy-
Mm-hmm
... a EUR 200 iPhone that will not be so valuable next year, but it will satisfy and it will serve the purpose if it's a Grade C. Right? But a Grade A, you understand that it can be very much traded next year and has an intrinsic value going forward. It has to do also with what value the product will have in what period of time.
Okay. Well, I try to understand your competitive advantage, so that you will have this grading and refurbishing more efficient.
The competitive advantage is that we build Breezy system that you can do it online. We have application.
Okay.
We have grading system, and this is unique for us.
That the customer can do it online?
Bravo. Bravo, yes.
Okay, they grade it at home and sell it to you?
They will send it, they will text it, they will send it to us.
Okay.
It will come here in Poland, but everything will happen through the application. One significant amount of cost with Breezy came also from there.
Okay.
From the fact that we are building the overall system to support this.
Okay. This big resellers that you have the contract with, I don't remember, it was in Poland you have the contract?
Yes.
They will also use the system but in the stores, let's say. Yeah?
That is correct.
Okay. The system, it assesses it visually.
It assesses it visually. I think you make a picture. I'm not an expert, yes, on that.
Mm-hmm. Mm-hmm.
I'm not using it still because I always get a brand-new product. Thank God we have enough still. Yes, the agreement we have with the Polish company relates to the sourcing of products, gathering, and for us to do the rest of the job. I think, and don't take me for granted for that.
Mm-hmm. Mm-hmm
You picture it, and then you store it, and then the system recognizes and starts doing the job. Don't take me now for granted.
Okay. I understand.
for granted. We can check it out and give you all the information later on.
Okay.
Okay?
You think this application is your main competitive advantage?
I think, yes, this is our differentiation.
Mm-hmm.
I think this is our key point of succeeding because the remainder of the competition do not have such a system.
Okay.
Okay? Next time I come, I bring the Breezy general manager to give you a full.
Okay
Full-fledged presentation on that.
Okay. The last thing, do you buy also from, let's say, Orange or this big-
Yes
companies, so that you are big, it's the difference between the small resellers and so on?
That is also correct.
Mm-hmm
We currently signed an agreement with Etisalat in Emirates.
Okay
that we will be taking on their refurbished, let's say, products, which is
Okay
This is a very big key success factor for us if we manage to convince T-Mobile or.
Okay
Plus here in Poland to hook into that program, and give us their refurbished products.
Okay, now the last question. Do you have some significant competition, let's say, in Western or Europe or in our region, that also want to buy back this product?
There are multiple companies that are doing this business. I know that there is another Polish company.
Mm-hmm
Does it. The very big ones are U.S., Indian.
Okay.
There is also some German company that does it. I was remembering also some names, but now maybe I should not say them because I'm not sure about exactly them, but there are some very big companies.
Okay
In there. Again, in our territory, though, in CIS.
Mm-hmm
Not so much.
Okay.
This is why the focus stands there.
Okay. Thank you.
Maybe another question?
One question regarding AROS, 'cause you mentioned starting the plant in Greece.
Athens.
Till now, I always thought that you are focused on projecting and selling and the production will be made by third party, and does it mean that you are starting to produce this equipment in-house?
This is going to be an engineering center of robotics outside Athens. This team of people that we managed to gather came from the industry, came from a company that was designing robotic solutions, custom made, meaning that you wanted to make a milk factory here in Poland, and you wanted to robotize it, and you call this team from the beginning, they make you the design, they make you the solution, and they do it in-house. This has the, let's say, advantage that first you sell and then you manufacture. Cashflow-wise, it requires a significant amount of prepayment, it requires a significant amount of investment from the client before you enter into any engagement and to any commitments.
The answer is yes, the team will do the solution, and will deliver the solution, and will install the solution. There will be a whole team that will be doing this, and we elected the six countries, including Poland, because the team there will be designing this, but they will be coming here to fix and install. Recently, they have signed an agreement with the largest Halcor. Halcor is a copper manufacturer. It's a Greek company, but it has a manufacturing plant in France, in Italy, in Romania, and they signed an agreement that they will make a project together with us for automation of specific processes in their factories. This is the underlying logic of it, and this is where we believe that we could control better.
First of all, we believe that we reached and we found the right people to do the job. Okay. Second, we believe that we found the niche and the segment that we can have a good value because the third-party distribution of robotics, which we engaged very early, didn't work out for us. Didn't work out for us because not only it required significant amount of investment in people, in commercial people everywhere, we didn't have the skill set to go out and sell it. We didn't have the market, actually. Then some Chinese obviously decided to come directly to the clients here or everywhere, and this went sour for us. Now, when it comes to robotic kiosks, they are developing very well. They are developing nicely.
They are very good ideas, and not only ideas, but they are very good for us to showcase. The problem is that you need huge markets. You need huge orders. The amount of investment is so high that, yeah, it's good to have, it's not a necessity. When it comes to a factory, robotization of a factory becomes a necessity because lately people cannot find hands to work in factories, therefore, they want to replace it. Having a very nice beer kiosk or let's say any other coffee machine kiosk, it is a good to have thing as opposed to. This is what we have realized right now, that we didn't. It's not that we didn't build nice products or we didn't build nice.
We didn't have nice ideas, it is the commercialization that became extremely difficult. All right? Okay.
Well, I believe that it is a much better direction than a beer kiosk or coffee kiosk, but I wonder if it means that you will need some additional CapEx and new hirings.
We have.
at the factory.
All the team has been hired, so what you see in quarter three expenditure is still it is included. The overall CapEx is EUR 340 thousand, which has been already committed for this factory. It's not a big, huge investment that we need to.
Another question regarding financial statement. What was the redundancy costs that you booked in the first quarter?
half million.
half million. Next question regarding Apple and iPhone 16. What is the initial response of customers on new markets to the new product lines?
I had the discussion before. It is quite satisfactory. The iPhone 16 was considered to be a good one. However, the most sellable and the most demanded products are the very, very expensive ones, iPhone 16 Pro or Max and all this kind, which gives again the overall sentiment towards Apple that the people that will change to the new technology are always the people that are ready to spend big money, and this is the difference between other brands compared to Apple.
Answering your question, we are satisfied with what we have seen with iPhone 16, and I can declare to you that recently we have faced and we are facing shortages in the market because there has been a fire in one of its factories in the Far East. I think it was in Vietnam. They already announced that they won't be able to meet the demand for iPhone 16 until February next year.
Okay, I understand that we won't see it in the October numbers, regarding sales, only since the November, yes?
Yes.
Okay. The last question regards the changing revenue mix, I mean, like country mix. It should give you better financial cost because the cost of debt is much lower on the market that you are increasing your sales and, on the other hand, you are decreasing your sales on the markets with the higher financial cost. Should we see it to bigger extent than in the third quarter, in the fourth quarter?
This is a correct assumption, and this is an expectation we also have. This is where we count that we will make the numbers because our financial cost will also be lower. Not only that, apart from selling more in territories with lower financial cost, we see that the tendency of interest rate is to come down further.
Okay, thank you very much.
I would like to know whether you as executives are satisfied with current level of share price.
All right. You know me many years. Yes. I never comment on share price because it is not obviously my job. My job is to deliver to you the opinion of the company and the satisfaction of the company as a management team. What I can tell you, though, is that ASBIS traditionally has been judged in a very unique way when it comes to investors. ASBIS has been traditionally considered as a very risky company, which we understand because it's the territories we are into. However, ASBIS has proven the last 18 years that it is listed on this exchange that has never failed on its promises and has always been delivering to its investors.
Now, what the share price looks like, it's not up to me to judge, but for the investment community, to you, to the investor managers that they do market. Yes. We don't do the market. We do our job.
In Polish law it is a necessity to present also the number of shares which belongs to executives, and always there were executives, not only Sergei. Just now I am watching this list and I see nobody. Is it means that the rest of executives sold shares?
I think you're looking to the wrong number.
Maybe.
I think you are looking to the wrong numbers, to the wrong reports. I still have the same shares I had a year ago.
Congratulations.
Marios, Jurij Lazovic and the team also.
Well, I am happy.
Any more questions?
Yes. The last question about reporting. Can we expect reporting of AROS, Breezy and the South Africa results on more regular basis?
We will do that. It was also, Piotr, a matter of time, management time. We decided last minute to put this for you because I knew that it's important and I knew that we discussed it with Marios, with Bartosz, that we needed to give you a flavor of where we stand. Now, whether we are going to change the overall reporting for South Africa, maybe it makes sense when it will join the top ten. You will be seeing it anyway. But for Breezy, AROS and the overall private labels, maybe we will do one line which will be split by brand. We are under consideration, we are thinking how to better manage all these brands together under one umbrella.
Okay. You could add South Africa on the regional split, 'cause I believe that it's not only,
I take the comment.
South Africa.
Mm-hmm
which is included in that number, but also the other countries from that region.
I heard you, and I take that recommendation with me.
Which takes me to really last question about Nigeria, 'cause you once mentioned that it is obviously the biggest market in Africa and still not penetrated by ASBIS. Did you make further steps to-
We have two sales.
Enter this market?
We have two sales representatives in Nigeria, and we tried to establish a warehouse, a local warehouse, which was extremely difficult. As opposed to that, we tried with some countries neighboring where there are some kind of common, let's say, not common understanding, but common regulations in terms of importation. It is extremely difficult. It is super risky and whatever we tried and whatever we managed to sell into Nigeria were mostly our private labels which made more sense for us. It is one thing talking and discussing about the big market. It's another thing penetrating such difficult markets because there it's not only a matter of corruption, but it's also.
You know, one of the colleagues we had there suffered some attack also, which made us think twice whether this is something we want to penetrate and whether this worths the headache. Same applied to our South African general manager, where people got into his house midday and kidnapped his child just like that. Not because he was our colleague, but because they do that constantly. We're talking about totally different animals. We're talking about markets that we do not know, markets that we have to be extremely careful, and first and above all, about our colleagues.
Sure.
We're done? Thank you very, very much. Yeah, looking forward to see you in February with better news.