Thank you. Hello, this is Grzegorz Uraziński speaking. I would like to thank you for joining today's conference call, during which we will discuss Dino Polska's performance in Q3 2026 and year-to-date during the first nine months of the year. Yesterday evening, we published our financial report and presentation on our website. In a moment, we will kick off the recap of the progress we have made in executing Dino Polska's strategy. Michał Krauze, Dino Polska's CFO and Management Board Member, will address this topic. Alek Kalinowski is also participating in today's conference call to support us by translating into English. After we deliver our presentation, we will invite you to pose your questions. 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.
Having this in mind, please review the disclaimer at the beginning of our presentation. Thank you. I would now like to give the floor to Michał Krauze.
Thank you, Grzegorz. Welcome, everybody. Dino Polska is continuing its dynamic network growth. In Q3, we opened 108 stores, yielding 256 store openings on a year-to-date basis. At the end of September, we had 3,283 stores, up 12% from one year ago. We are systematically raising the number of secured sites, which enables us to gaze at upcoming quarters with optimism. In terms of sales during the first nine months of 2026, our like-for-like sales growth rate was 1.4%, while it was 0.1% in the third quarter alone. Dino's total revenue in Q3 was PLN 9.7 billion, while year-to-date, we posted sales of PLN 27.7 billion. One factor limiting the pace of sales growth was significant deflation in Dino stores. The food price deflation we have observed on our shelves has persisted for a longer period and is stronger than what we had assumed.
It deepened in Q3 compared to Q2 and has surpassed 5%. Fresh product, which account for roughly 40% of our revenue, were the clear leader in terms of falling prices. On average, we sold them for a nearly 7% lower price than one year ago. For that reason, the growth rate of total revenue in the first nine months of the year was 11.9%. Revenue rose by 10.8% in the third quarter alone. The EBITDA result was PLN 785.5 million in the third quarter. It was up 4.7% from last year. We have observed a similar pace of EBITDA growth during the first nine months of the year. EBITDA has been affected by operating expense inflation running at several percentage and by the relatively slow rate of revenue growth. Operating expense inflation has ensued from our employees' wage growth.
As a result, the EBITDA margin fell to 7.3% in the first nine months of the year and to 8.1% in Q3. Capital expenditures in Q3 totaled PLN 868 million, and year-to-date, they totaled PLN 1.85 billion. The vast majority of our CapEx was spent on store rollout, developing our logistics, and installing plastic bottle and can collection machines at Dino stores. Operating cash flow in Q3 was PLN 937 million and was up 12.5% over last year. Year-to-date, it has surpassed PLN 1.7 billion, signifying year-to-date growth of 6.2%. To recap, Dino is strengthening its position on the retail grocery sales market in Poland. New stores attract consumer attention, and our network is growing according to plan. Our key objective into growth sales volume and reverse the downward trend in the EBITDA margin. Thank you for your attention. I will now invite you to ask any questions you may have.
Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once you've been invited to ask your question, please unmute and ask your question. If you have dialed in by phone, please use star nine to raise your hand and star six to unmute. If you want to withdraw your question, please lower your hand using the raise hand function. Thank you, and we will allow a moment for the queue to form. Our first question will come from Frederick Wild at Jefferies. Please unmute yourself and ask your question.
Oh, good morning. Thank you so much for taking my first ever question on a Dino Polska call. Very excited to be here. My first question is, could you outline a bit more about the path of deflation, what you saw in September and October relative to Q3 as a whole, and where you expect this to go over the next few months? The second question, please, is could you help me with the moving parts of gross margin into Q4 and whether we can look forward to as substantial an increase in gross margin in Q4 as we saw in Q3? Thank you.
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We would like to welcome you, Frederick, amongst the analysts who are covering Dino. Welcome.
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If we think about deflation, we can say that it was increasing, and we had the highest level of deflation in September of this year.
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We can say that in Q3 it was, you know, it was on average, let's say, 5%, with the peak coming in September of this year.
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We see in October that it's, let's say, lower level of deflation, but, you know, it's still than what we saw in September, but it's still within the framework or on par with what we saw as the average for Q3.
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Q4 is a very important sales period in terms of the sales performance they're going to be able to generate. As is clear, it's a holiday period, holiday season, and as such, we can anticipate a higher concentration of promotions, more promotional activity. It's our intention at the same time to continue improving the purchasing conditions, but we have to be mindful of the deflation which continues to persist. That means that we're going to focus our intentions on basically spiking or increasing, you know, the sales volumes.
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It's our expectation that things will continue to move in an, let's say, improving trend, follow improvement. The trend will improve over this period, but perhaps the rate of improvement will not be as significant or as large as we've seen, let's say, in Q3.
Thank you so much.
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The next question comes from Gustavo Fratini of Barclays.
Hi, thanks for taking our questions, two from our side. The first one, could you walk us a little bit through what happened in terms of wage inflation in 3Q and how should we think about it in the 4Q? Could you also talk a little bit more about gross margin in terms of what you've seen for pork deflation, Christmas, and the summer benefit that you had in the 3Q? How should we think about gross margin improving in 4Q? Thank you.
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First, you know, beginning with, say, you know, payroll, so employee cost, the cost of employing employees, we can say that they were more or less flat in Q3. So they were at the same level, more or less, as we saw in Q2.
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What we see in terms of the wage increase, let's say, in Q3 of this year versus Q3 of last year, it is more of an effect related to the base, because the base was lower last year.
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If you look at average wages in Q4, they should be more or less similar to what we've seen in Q3.
Great. Next question. Sorry.
Thank you. If I may just do a quick follow-up. It seems like there could be strikes coming into, like worker strikes coming into Christmas. Anything to talk about that? Maybe if you could also mention a little bit in terms of the absolutes, because the increase year-over-year was quite substantial in wages. Thank you.
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Beginning with the question about wages, I mean, we had informed everybody, given the guidance that we had raised the wages at the turn of Q1 and Q2, and since that time, nothing has changed.
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In terms of your first question, I mean, it would be quite difficult to respond to every, you know, bit of information that appears, let's say, somewhere out there in social media.
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I can assure you that we expend enormous amount of effort to ensure that our employees have good working conditions, stable working conditions.
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On top of, let's say, the traditional wages, we're adding a lot of, let's say, conveniences to make it easier for our employees to perform their functions, to do their jobs.
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It's our hope that what we're doing to improve things is appreciated by our team. We do hear back a lot of opinions and voices from amongst the employees, that the staff, that they do in fact appreciate what we're doing.
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Coming back to the second question that you had previously asked about, let's say, the gross margin, I don't want to drill down to the individual categories of where improvement is being achieved, but I would like to say that in Q4, as I responded in the previous question, that it's our intention to continue focusing on increasing sales volume, so the volume of sales.
Thank you.
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Our next question comes from Richard Trainor of Bernstein.
Hello, good afternoon. Are you confident in your new stores target for this year? I think it was to increase new stores by a percentage in the teens. What level of growth in new stores do you expect next year? Finally, will you consider introducing a dividend at the end of this year? Thank you.
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First, in terms of your first question about the number of openings this year, I mean, as we had guided you last year, our intention was to grow this year the total number of new store openings at a pace higher than what we saw, let's say, last year. So the intention is to come in at around 400 stores, which is what we think is, you know, possible.
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Next year's target in terms of the number of new store adds is at a similar level.
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In terms of your question about the dividend, we continue to open at a vast pace a large number of new stores, so we have a lot of new store adds. We continue to buttress the logistics base to serve that number of new stores. But at the same time, I mean, we continue to do analysis on the subject of the dividend and the possibilities of doing so.
Thank you very much.
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Our next question comes from Michał Potyra of UBS.
Hi, good afternoon. I have two questions, follow-ups really. The first one on operating expenses, you touched on labor costs, but perhaps you could comment a little bit on transportation and energy going forward, how we should think about operating cost growth relative to sales growth. That's the first one. The second one is on sourcing and supply chain. Could you perhaps discuss the current sourcing environment, your relationship with suppliers, and do you believe you have still a meaningful potential to improve your purchasing conditions going forward? I'm just really trying to get a sense, are suppliers becoming more willing to offer some concessions that could support your gross margin and where that should lead us in terms of price deflation going forward? Thank you.
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Beginning with the transportation costs, we can say that we do have higher fuel prices and that is a major component or a major driver of costs.
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At the same time, we are improving the logistics base by opening new stores, which increases the overall density, enhances the density of our store network, and that has a positive impact, let's say, on the costs. But at the same time, the sheer magnitude of the price growth in excess of 40% does have a notable impact.
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With respect to energy, we continue to expand our solar panels, so the photovoltaic side of things, achieving energy savings across the board, and we are buying, you know, energy using spot prices.
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When it comes to, let's say, cultivating the relationships we have with our suppliers, we always endeavor to foster and forge the best possible relationships with those parties. I really wouldn't want to, let's say, dig too deeply into that subject here, but what I can tell you is that what we do propose and offer to these suppliers is consistent growth in sales volumes, and that's an argument we always strive to, let's say, utilize or benefit from that, leverage that in the course of our discussions as we talk about, you know, achieving purchasing conditions.
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When it comes to, let's say, volume growth, we're always trying to do that by creating, let's say, enhanced effectiveness for both parties, so kind of a win-win situation. Basically, all parties win on those increased volumes.
Thank you. If I may just follow up on the supplier question. When you sit down with suppliers, you know, to negotiate purchasing terms for 2027, like, what should we think about the pricing environment looking into next year? Are you hearing demands of higher prices, or can you keep the price unchanged? Like, what's the dynamic there? Thank you.
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My apologies, but that would be too sensitive a topic to discuss at this point in time.
Thank you.
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Our next question will come from Volodymyr Shkuropat of Kepler Cheuvreux.
Yes. Hi, everyone. I have three questions. I'll go one by one. First, on the basket deflation, just to follow up, could you be more precise? You said around 5% basket deflation in the quarter. In the second quarter, you had 4.5%. Is the third quarter, like, slightly above 5%, or is it broadly comparable to the second quarter?
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When it comes to inflation, it is as I said. I mean, we had, you know, across the quarter, it was 5% on average, with the peak of deflation, let's say, taking place in September, in the single month of September.
Okay, clear. Then two questions on the gross margin. First, on the sales mix in the third quarter. Last year, you said the summer mix was less favorable because of weather, for example, in ice cream. How did sales mix affect gross margin in the third quarter this year, including the effect of the deposit system on beverages?
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We can say that in Q3 we did benefit from some of, let's say, what I would call the summer-related categories, including, let's say, ice cream this year. But at the same time, if we look at beverages, the introduction of this bottle and can collection system did have a slightly downward impact on the total sales of beverages.
So overall impact of mix was rather positive or slightly negative?
[[Non-English content] So it was beneficial. We can say it was a favorable, let's say, mix.
Okay, thanks. My last question. In the costs by nature disclosure, COGS as a share of sales was almost flat year-on-year in the third quarter, after the increase of 1.6 percentage points in the second quarter. Last year you invested in price attractiveness in the summer, you said, so the base was easier this year. Which factor was the most important for this improvement in COGS? Was it the easier base, better purchasing terms or maybe a change in price investments?
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So we do not actually create, let's say, kind of a grading system or, you know, which is more important, which is less important. We focus our attention primarily on sales volume. So mix, of course, is at play as well as improved purchasing conditions.
Great. Thank you.
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Next question will come from Michał Stopka of Investors TFI.
Hello. Thank you. I have a question. What is the main reason for so big deflation? You told us that in September that was even more than 5%. In general, because of the war, the prices of transportation, fuel, diesel, energy, salaries is going up and in general we see on the market deflation. Is that of, for example, Mercosur or something else? Could you explain that? Thank you.
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I mean, it would be really difficult to point out one single root cause. As we mentioned previously, the main category where we see this transpiring is in, let's say, fresh products. So I imagine one contributing factor here could, in fact, be, let's say, a glut or a large supply of products.
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I think that there's a veritable plethora of contributing factors here. And certainly, the overall market environment, consumer sentiment, and many others are contributing to the overall, let's say, market deflation, as I said, the glut of products or the oversupply.
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What we do is we chiefly focus our attention on selling as many products as possible to our customers at the best possible prices.
Thank you.
Our next question comes from Janusz Pięta of mBank.
Hello. I've got a question, let's say, on your medium-term strategy. There was some media coverage on you introducing self-checkouts to some of your stores. Is it something that you are planning to introduce on a larger scale? And if yes, what's the impact on the CapEx and what cost benefit do you expect from this?
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First, I would confirm that we are testing the solution in several stores, and we have some intentions to extend or expand the testing, the number of stores included in these tests.
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We have two goals in mind. One is to make it easier for our employees to do their jobs, and secondly, to enable customers to be able to buy more products more easily.
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When it comes to CapEx and where we are in this process, it's a little premature, or it would be premature for us to make specific CapEx calculations related to that.
Thank you. Maybe one more question regarding your EBITDA margin. We, I guess, should expect gross margin to improve year-on-year in Q4, and the base, let's say, was less favorable for Q3 on a year-on-year for the operating expense. I guess we should not see that reoccur in Q4. Is it like a base case that we should see EBITDA margin increase year-on-year in Q4?
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I mean, I don't think this is an obvious scenario. I mean, deflation continues to be persistently high, and that does give some hindrance or hinders, let's say, management on the cost side.
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When it comes to our price strategy, we have to be mindful of the fact that we are primarily informed by our goals to expand volumes and then offer our products, the best possible products at the best possible prices to our customers. So we have to factor in all of those things.
Thank you.
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Next question is from Maria Kolesnikova of Millennium.
Hi, good afternoon. Thanks very much for the opportunity to ask a question. Can I please clarify your comment about gross profit margin into Q4? You mentioned that most likely it will improve on a year-on-year basis, but then we also know that last year you are starting a very low base on GP margin. Your EBITDA margin was, as a result, also very low. I am trying to understand, all the initiatives which you have done so far this year, they are likely to continue into Q4. Why are you being a little bit conservative on Q4 margin improvement? That is my question. Thank you.
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That is true, but I mean, let us be mindful of what I said a moment ago, that we function in a deflationary environment, and that is not something that underpins or is conducive to improving margins overall.
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We also have to have in mind that we're now moving into, let's say, a period of heightened holiday-related activity. That means there's going to, in this holiday period, we, you know, focusing on bringing customers through the doors, offering, you know, good promotions and things like that. I mean, all of this has to be factored into our thinking on that subject.
Thank you very much.
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We have one more question here. It will be from Michał Stopka of Investors TFI.
Thank you. I have one question. You told us that you increased your volumes because of deflation. I wonder, that means that people in general, they bought more products because of lower prices and big deflation, mainly in fresh products, or because of that you saw more clients? Because I wonder, especially in the not in the short, but in the a bit more longer time, do you see, because of Polish demography, do you see that people are buying more, but more or less the same number of people? Or do you see that because of that demography, that is not a problem for you and the number of clients increase quarter over quarter as it used to be, let us say, one, two, three, four years ago? Thank you.
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I think there are a number of factors that feed into what's happening overall. I would say at first, at the outset, you know, that we're doing both. We're increasing the numbers of clients and we're also increasing the number of products per basket within an individual client. There are some things that feed into that or underpin that ability to do that, is that one, our format is very attractive. I mean, it's a convenient place to shop. We're close to people's homes. At the same time, the offer, the product offering that we've put in place matches the things that they want to buy. Then this is all topped off with attractive prices. So good products at good prices.
Those are the things that are enabling us to, as I said, raise the number, increase, grow the number of clients, consumers, as well as grow the number of products per customer.
Thank you.
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There are no further raised hands at the moment.
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If there are no more questions, I would like to thank you for your participation. Please feel free to contact Grzegorz Uraziński, our Head of IR, if you need any more information. I hope to hear you next quarter. Goodbye.