Welcome to the Dino Polska first half 2026 results call. Please note that the call will be recorded. If you would like to ask a question, you may do so by using the raise hand function at the bottom of your Zoom screen or by pressing star nine on your telephone keypad. Further instructions will follow at the time of the Q&A session. I would now like to turn the call over to Grzegorz Uraziński, Head of Investor Relations.
Thank you. Hello, this is Grzegorz Uraziński speaking. Thank you for joining our conference call, during which we will discuss Dino Polska's business results in the first half of the year. Our company's business results will be presented by Michał Krauze, Management Board Member and CFO. Alek Kalinauskas is also on the call to provide translation-related assistance. After our presentation, we will invite you to pose any questions you may have. Before I give the floor to Michał, I would like to point out that we may make general forward-looking statements regarding the business environment and our objectives during this conference call. They are not official forecasts, and there is a risk that they will not materialize. Having this in mind, please review the disclaimer at the beginning of our presentation. Thank you. I will now give the floor to Michał Krauze.
Thank you, Grzegorz. My name is Michał Krauze, and I would like to welcome and warm you. In Q2, we continued the geographic expansion of our network. We opened 86 new Dino stores. In the first half of the year, the number of new stores openings is 148. The latter half of the year should see the pace of new stores openings accelerate markedly. Our full-year target for new stores adds is unchanged. We assume that the number of new stores openings measured as a percentage figure will increase by a number in the teens compared to 2025. At the end of June, the Dino network numbered 3,176 stores, up 12% from one year ago. Photovoltaic panels are a well-known part of outfitting our stores, which provide us with a large volume of electricity from renewable sources.
Starting this year, plastic bottle and aluminum can recycling machines have become another standard part of outfitting Dino stores. The like-for-like sales growth rate was 2.2% in H1 and 0.3% in Q2. One factor that curtailed the pace of sales growth was significant food price deflation in Dino stores. Food price deflation depend to an average single digit level in Q2.
My apologies for the interruption. The slides aren't being shared. If you could re-share the slides.
I think you should switch from Holding Slide to my presentation. Maybe indeed we still see the holding slide on the screen. Operator?
The slides aren't being shared at the moment. I do apologize. You need to restart the sharing of the slides.
Well, give me a second, please. Is it better now?
They are visible now. Thank you.
I apologize for that.
Food price deflation deepened to an average single digit level in Q2 compared to the first three months of the year. In addition, the shift of the Easter holiday from the end of April in 2025 to early April in 2026 adversely affected the growth rate of sales in Q2. For that reason, the growth rate of total revenue in H1 was 12.5%. Revenue rose only by 10.5% in the second quarter. Having these factors in mind, we expect that we will observe acceleration in the pace of top-line expansion in subsequent quarters. The EBITDA result was PLN 665 million in the second quarter. It was up 2.2% from last year. EBITDA was influenced by the Dino network's pricing policy, focused on maximizing volumes. It was also affected by the relatively slow pace of top-line growth. As a result, the EBITDA margin fell to 7%.
Operating cash flow in the first half of the year totaled PLN 770 million and was at a similar level to last year. The Dino Group's total capital expenditures were PLN 980 million . To recap, the clear deflation in sales price adversely affected the growth rate of revenue. The knock-on effect is that it also has a negative impact on our profitability. Despite the fact that we started the third quarter with the same level of deflation as in the second quarter, we believe that the upcoming quarters will produce a higher pace of top-line growth. This will be important to reversing the negative trend of our profitability. Geographic expansion is firmly under control and continues to be an important driver of our growth. Thank you. I will now ask you to pose any questions.
We will now move to our Q&A session. If you would like to ask a question at this time, please do so by clicking the raise hand at the bottom of your Zoom window under the Reactions button. If you would like to ask a question, please ensure you have renamed yourself so that we may identify you. Once called upon, please unmute your audio to ask your question. If you have joined via a phone line, please press star nine to raise your hand and star six to unmute. Thank you. The first question comes from Richard Trainor from Bernstein. Richard, please unmute your line and ask your question.
Hello? Can you hear me?
Yes.
Great. Like-for-likes slowed to 0.3% in Q2. Can you comment on how much of that was driven by deflation vs volume trends? Or perhaps something about the mixture of volume and price or average baskets. Just some more detail on the like-for-like drivers, please.
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We can say that deflation in Q2 was twice as high as we had seen in Q1. We can say that if we look at fresh products, the deflation was 6 percentage points, whereas with respect to regular groceries it was 4.5%.
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We also had the Easter shift, so the shift in the timing of the Easter holiday. This showed that we were able to perform or deliver the volumes, and that's why we were able to keep the like-for-like figure in the black.
That's great. Thank you very much. Just one more if I may. How has trading evolved since the end of the half year? Can you comment on the like-for-like trend that you've seen in July and August?
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We can say that at present that situation hasn't changed.
That's great. Thank you very much.
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Our next question comes from Izabel Dobreva from Morgan Stanley. Izabel, please unmute your line and ask your question.
Hello. Thank you for taking my questions. I had two. My first question is on the outlook for your gross margin. Could you give us a sense of how much help you had in the gross margin from falling pig wholesale prices over the quarter? And to what extent that was reflected in lower shelf prices for pork? Then looking forward, how do you expect your gross margin to evolve based on your outlook for pig wholesale prices?
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Above all, as I indicated, we're focusing on maximizing volumes for the purposes of driving sales. We do see positive effects coming from improving purchasing conditions.
Thank you.
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Looking at the trend, we anticipate that this should act as support for improving overall profitability.
Our next question comes from Volodymyr Shkuropat from Kepler Cheuvreux. Volodymyr, please unmute your line and ask your question.
Hi, two questions from my side, if I may. First, if we take your shelf deflation in Q2 and compare it with 0.3% like-for-like, it seems that volume growth was around 5%-6%. Could you tell us what is driving this volume growth? Is it mainly more customer visits or are customers buying more items per basket because products are just getting cheaper? This is the first question.
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We can say that both of those phenomena are taking place.
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Basically what we are trying to do is be attractive to bring them in through the doors and then having the offering that we have in place, we are encouraging customers basically to buy more.
Okay, thank you. My second question, you just mentioned that the gross margin should be supportive for the profitability in the coming quarters. Is it because you are seeing some kind of lower competitive intensity or that customers are becoming less price sensitive? Why would that be the case, since in the first half you still got a slight decline and as I understand, your procurement benefits were basically reinvested into prices, so the effect was neutral broadly.
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I can say once again that what we are focusing on is delivering volumes. That is our number one goal, our top goal. Second, I can say that the consumer is and has always been price sensitive, and so the effect that we want to achieve is through improving purchasing conditions.
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What we are going to be grappling with, of course, is a smaller base, if we look at the gross margin.
Okay, thanks. The last question, if I may. You said that you are not currently seeing any turning point from the deflation that was in Q2 and which you are experiencing at the beginning of Q3. So the question is when you will see that the costs from the suppliers are starting to grow, how quickly would you expect this to be reflected in shelf prices? How much of the cost increases are you expecting to pass on to customers?
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There's no clear response to the question you've just posed, because it's all a matter of several factors taken together. It's linked to the volumes, it's linked to customer acceptance for price growth, and at the same time, it depends on what sort of competition we'll see in individual categories.
Thank you.
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Our next question comes from Matthew Clements from Barclays. Matthew, please unmute your line and ask your question. Matthew, you can unmute your line now and ask your question. Okay, we don't seem Matthew is unmuted now.
Can you hear me?
Yes.
You can hear me. Thank you for your time. Sorry about that. Two quick questions, if I can. First one, there's a few messages there on the second half outlook. In very basic terms, it sounds like you're expecting like-for-like to improve sequentially into the second half. Would you also expect profit growth in the second half to be better than the first half? The second question, you stepped up price investments in the second half of last year. What response have you seen from consumers and competitors in the first half of this year, and how much more do you need to do to get price positioning back to where you wanted? Thank you.
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With respect to your first question, in fact that is true. We do anticipate that like-for-like should improve. The performance in this area should improve over the latter half of the year. But we believe that this is going to be a slow, steady improvement because we have to remember, be cognizant that we started Q3 with the same level of deflation as we had in Q2.
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As I said, we see improvement, let us say at the level of a gross margin, but with, let us say top line growth or revenue growth being slow, they are slowly growing. There is a possibility that cost growth could outpace that revenue growth.
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In terms of how the competition, let's say, has responded or reacted, this is not something that we would like to make any comments about.
Okay. Thank you.
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Thank you. Our next question comes from Elena Jouronova from JP Morgan. Elena, please unmute your line and ask your question.
Hi. Hello, everyone. I have quite a few questions. I appreciate if I can ask them all. First, quickly, please, on the store openings, what should we expect for the second half? I understand that you plan acceleration, but what are we targeting for full year or second half standalone, please?
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I can put it this way, that if we look at openings last year, we opened some 340 stores. We want to achieve a growth in the teens with respect to last year's performance, where we'll see the bulk of those openings transpiring in Q4.
Okay, that's clear. Thank you. Now on operating cost growth, I do believe that your operating costs have gone up quite a lot and we have not yet seen the bulk of the store expansion. Is it fair to assume that in the second half, and especially in the fourth quarter, you may see even stronger pressure on your operating cost growth from new openings?
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I would say yes, but we have to remember that we've been opening stores for quite a long time on a regular basis. We did it last year, we did it the year before, and the year before. So we can say that that's somehow factored in the cost base.
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And so we can say, of course, the primary driver of these costs are employee benefits, wages which were raised at the beginning of the year. As we have additional store openings, new store ads, that means that the cost base due to, let's say, employee benefits will continue to grow.
Yes, that was actually my next question on the employee cost growth. So you have increased salaries by PLN 300 from April. Is there currently any plan to increase average salaries further? Maybe along the same lines, you could comment on the different demands or quote-unquote demands we're hearing from unions about further salary increases?
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So we wouldn't like to, let's say, comment in such a detailed fashion in response to that question. I can say, however, that since the beginning of this year, we've added another more than 5,000 new people, new hires, and we continue to receive new apps, new applications, work, job applications, and continue hiring people.
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We're highly engaged in creating an attractive working environment with attractive pay conditions. We believe that the vast majority of our staff members appreciate what we do in this respect.
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We can see that demonstrated by their commitment on the jobs. We of course, express our gratitude to them for that.
But on the average wage increases above the PLN 300 , anything planned?
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We do basically a review on an annual basis, rolling annual review. The next time for the annual rolling review of, let's say, wages and salaries will take place at the beginning of next year. Those are our plans.
Okay, that's clear. I had just a few questions on inventories and gross margins and that's it. There is some inventory build out towards the end of the second quarter. Is this mainly inventory related to your pork processing facility, so raw materials for the pork processing plant or is this goods that have not been unsold and are at the distribution centers?
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This doesn't have anything to do with, let's say, what you call the pork processing or the meat plant, plants whatsoever. Basically, this is a result of the build out or the expansion of the store network. As we add new stores, we have to stock or put inventory in those stores that goes through the distribution centers.
Okay, that's very clear. The final one, gross margin. A lot has been asked, but I'm wondering if it's possible to comment on the gross margin dynamics excluding the meat category?
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We don't give, let's say, specific breakdown information about, let's say, the gross margin because it's highly variable depending on basically seasonality factors, what's happening within a given category. It's moving across the year. It's very dependent on those things. We don't give individual breakdowns or structures or mixes of that, compositions of that.
No, but it's not about the structure. It's more about the year-on-year dynamics of gross margin, same season vs same season last year. You have reported a certain average number, right? Year-on-year dynamic and what would it have been excluding the meat category, at least qualitatively? Is it down, up vs the group average?
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I understood your question, but as I said, at this point in time, we're not prepared to, let's say, give such a detailed commentary.
Okay. Thank you.
Okay.
Our next question comes from Michał Majerski from Pure Alpha Investments. Michał , please unmute your line and ask your question.
Hello, can you hear me?
Yes.
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I have a follow-up question concerning the, let's say, the cost of salaries in terms of, I'm looking at the growth rate and I've looked at the last six quarters and I see that the pay is growing faster than when tracked against, let's say, the selling area. The question is, are you actually hiring more people per store? Do you have more people in distribution centers in Agro-Rydzyna? So what actually is happening here?
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Above all, what we see is the annual average increase in wages or salaries.
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We do have some seasonal effects as a result of opening, let's say, some distribution centers at a given point in the year, or let's say deboning facilities being opened. But those are seasonal effects.
Thank you, Michał . Our next question comes from Michał Potyra from UBS. Micha ł , please unmute your line and ask your question.
Hi, can you hear me, please?
Yes, we can hear you, Michał.
Great. Thank you. I have two questions, please. The first one is really what is driving the strong increase in depreciation and amortization, and should we expect this growth to continue? The second question is if you could please comment on the regulatory investigation into the truck drivers' remuneration and what could be the potential implications for your business. I am thinking both in terms of potential penalties, but also future costs, inflation of that category? Thank you.
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In terms of, let's say, depreciation and amortization. Accumulated depreciation, basically we've done a review of the rates and this was described in the annual financial statements. This is why we've seen an increase and we'll have another review done for the full year financial statements.
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In terms of the regulatory investigation or proceedings run by the Office of Competition and Consumer Protection, UOKiK, unfortunately, there's nothing more I can say at this time than what we've actually written in the interim report as published. We don't know what's going to specifically transpire. We're cooperating with the authorities here. We're responding to the questions and we're lending an ear, of course, to what they're interested in.
Thank you.
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Our next question comes from Anastasia Tikhonova from JP Morgan. Anastasia, please unmute your line and ask your question.
Yes. Hello. Thank you for the opportunity to ask questions. I actually had one with regards to whether you see any effect of warm weather on your results in the third quarter so far, as we remember that July last year was a very cold month? Thank you.
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Of course, we do see categories that have grown as a result. I can give the example of, let's say, ice cream. But we also have to remember that the deposit system went into place for bottles and cans. This has had an impact on the volume of sales.
Thank you, Anastasia. There are no more raised hands at this time, so this concludes the Q&A. I'll now hand back to management for closing remarks.
Thank you for your participating in this conference call. If any new questions come up, please contact Grzegorz Uraziński, our Head of Investor Relations. Goodbye.