Good afternoon, everyone. My name is Adrian Skłodowski, and I would like to warmly welcome you to the Eurocash Investor Relations Conference Call for the Second Quarter 2025. I am here with our CEO, Paweł Surówka.
Hello, good afternoon.
Our CFO, Piotr Nowjalis.
Good afternoon.
We will provide you more details about the Second Quarter 2025 and share some insight into the business. Paweł, please go ahead.
Thank you very much, Adrian. And by the way, welcome on board, and we're very happy to have Adrian as our new Head of Investor Relations. So please meet Adrian and feel free to spam him and contact him directly if you have any questions or something that we didn't cover in this presentation. So, some highlights that you have maybe already seen in our presentation. Overall, obviously, it needs to be said, the market conditions were not favorable. It was a tough market, tougher than anticipated by us, by me, definitely, in terms of the development of the market in which we are in. So the overall Wholesale Relevant Market , so the market that we are operating with, that we are selling to, declined by 3.5% year-on-year. And that was mostly driven by our main categories, which are beer, alcohol, and tobacco.
I will develop it further, but the categories where we are the strongest in, we are by far the biggest beer distributor in Poland, have underperformed significantly, and that has led to the entire market to decline. In this respect, our own decline, 1.2%, looks relatively okay-ish compared to where the market is standing, and it shows that we are able to keep our ground and maintain our market share in the market. But obviously, it is still unsatisfying because it is a net decline, and it puts a lot of pressure on us in terms of working out our net income. In this context, obviously, we will want to highlight that even though our sales are declining, we've been able to work out a better EBIT, higher by 24% year-on-year on PLN 82 million for Q2.
We've also improved our overall EBITDA margin that went from 2.7%, 30 basis points, to 3% overall profitability. So that is all. This increase in profitability is mostly thanks to cost discipline. We will develop this further, but what we have been able, thanks to this cost discipline, we've been able to show you a higher EBITDA margin on lower sales with a stable commercial margin. Most of it is coming from better cost discipline. Then also what I will highlight later, bringing to break-even and profitability of our unprofitable companies. Next to cost, it needs to be highlighted that the working capital is very much under control. Piotr, who was made in charge here, will develop that further. That is mostly linked to inventory management, where we've already paid a lot of attention, and I think with good success.
What I already mentioned, one of the key highlights for us in this quarter is not only the very, I would say, strong sales performance of Frisco and Duży Ben when set into context on its market environment, but also that for the first time, actually, our growth platforms have reported an EBITDA net positive result. That is something that we are pretty proud of because, as you know, we've been working towards this moment for quite some time. We had a lot of questions also coming from you to the effect of, happy to see that you have also parts of your business that are actually on a growth path and that are growing. But when will we see those companies actually becoming profitable? Now we seem to be on the brink of that moment. This quarter brought us an EBITDA net effect.
And that is something that I think is here to stay, particularly Frisco, as I already mentioned a couple of times, is on its way to be fully profitable and I believe will be fully profitable in the next year. And we already see this happening in the second quarter and see confirmation in my thesis here. So very happy about the development of Frisco. And I will develop this further. Going down more into our core business, which is Retail, Wholesale, and then mostly working with our franchise clients, it is important for us to stress that even in a market that has declined by 3.5%, our franchise clients have actually shown a like-for-like of positive 1.1%. What's more, our sales to them have increased thanks to a higher loyalty to those clients.
Very importantly, we've been able to acquire new clients, new stores for those franchisees. Overall, the number of our franchise stores has increased by 428. These are important numbers for us because for some time already, you have heard me say that what we really want to focus on in Eurocash is to work together with our franchisees to, first of all, get more franchisees, get more stores to be part of our franchise network, to make those franchise partners buy more from us, so gain loyalty. Then most importantly, help them to be more competitive towards their retail competitors, which are Biedronka, Dino, and Żabka, particularly through common investments into pricing, into promotions, and to making those stores more attractive to consumers.
And I've talked a lot about what we're actually doing, working on POS systems, working on promotions, and also using all those tools to drive loyalty. And I believe that you can see all those measures actually taking effect in those numbers because on the one hand side, loyalty of our clients is increasing by over one percentage point year-on-year. So we can see that a higher share of what they sell comes from Eurocash. That shows that we are competitive on the wholesale market and we are an attractive partner to them and they trust us more and more. That's the first point. Second point, you can see that their like-for-like 1.1% when compared to the performance of the overall market, which declined 3.5%, is better than the average. So those stores are faring better than the stores outside of our franchise network.
You will also see in the next slide that they've been able to keep their market share in the overall total market, unlike the wholesale relevant market. As an effect of that, you can see that joining our franchise networks is actually attractive for independent stores. That's why over the last, or the first half of the year, we've been able to acquire new stores and we now have 428 more stores than we had last year. 428 increase over the first six months of the year. I think that's a very respectable number. It shows you that our franchise proposition is an attractive one and more and more stores see the need to integrate with us. They see that what we are doing in the franchise is working.
And this pressure that is coming from outside consumers and outside competitors is actually, in a certain extent, working in our favor when we're talking about integration of our franchise network. Taking all this together, I think it's important for us to stress as management that when we look at some of the parts of Eurocash, when we look at the Frisco Group, which, as I already mentioned, has shown an impressive streak of growth and is now on the brink of becoming a fully profitable company, which in the e-grocery space is actually quite uncommon and is the dominant player in the Polish market. That's a very important part of Eurocash Group.
When you look on the other side on companies like Eurocash Serwis, our tobacco company, which is also a growing and profitable company, we believe that those companies, when actually added together with our wholesale business, would be worth more than the actual market cap of Eurocash. That's why we still believe as Management Board that the company is undervalued. And we believe that the performance of companies like Frisco and Eurocash Serwis shows that. But let me develop further. So a couple of words about the market. Obviously, that is something that is one of our key concerns, the fact that the wholesale relevant market is currently strongly underperforming the total market.
As you can see, the total market in the first half of the year has grown by 6%, the same amount in the second quarter, while the wholesale relevant market has declined by 3%, and that was -3.5% in the second quarter. The total relevant market, obviously, driven mostly by discounters, to which I would also count Dino next to obviously Biedronka and Lidl. When we look at the wholesale relevant market and the reason why it is declining, I think you can, I would refer to the charts that you can see. Again, on the one hand side, in the left bottom corner, you can see that our market, the wholesale relevant market, is unfortunately underperforming the total market and also underperforming when compared to discounters. This underperformance, this trend is continuing from last year. It's actually also accentuating to a certain extent.
When you zoom in on the three key categories, that is alcohol, beer, and tobacco, you can see this decline, actually, where it mostly happened, which is alcohol, which was plus one in the total market, was minus five in the wholesale relevant market, beer, which was minus three in the total market, minus 13 in the wholesale relevant market, and tobacco, which is plus eight in total market, is only plus three in the wholesale relevant market. So on the one hand side, I think it needs to be said that all those categories are strongly underperforming their expectations. I think we hear it also from producers. We hear it from other market competitors, particularly beer has strongly underperformed its expectations because it is a net decline in volume being given the very strong price increase that we have experienced through excise tax.
The same needs to be said in tobacco, where excise tax has been over 17% increase. So an 8% nominal increase in value shows you an actual decline in the volumes. But when we ask the question, why is that so? Why is beer declining and why is it particularly declining in the wholesale relevant market? I think it's a pretty complex question. So on the one hand side, there is this factor that a lot of people use, but I don't believe can explain the entire decline, which is weather. Yes, it is true that weather in this quarter has been particularly bad compared to last year. We had a very lousy May weekend. We had a very lousy start in the summer.
We have also seen a lot of the stores, of the independent stores that we work with, are actually seasonal stores that are located in the areas where Poles are taking their summer break and then vacation and where they drive to on weekends, and those stores have definitely been impacted by bad weather. Some of them, clients just didn't show up. Some of them just consumed less beer, but I'm pretty sure that this is also a conflation of two other elements. One is a changing consumer behavior. It is true that we are seeing more Poles getting away from alcohol, particularly the younger generation. It's just consuming less alcohol. And I think this is a structural trend that we see kicking in in this effect as well. On the other hand, it clearly is also an element of price.
As already mentioned, excise tax has increased the price of those goods in this year quite strongly, which led to price inflation this year compared to price deflation on most of those goods, speaking of alcohol and beer last year. And so while there probably was an anticipation that consumers will take the price hike this year, as a matter of fact, they haven't. And a lot of consumers have just scaled down their consumption as a reaction to increasing prices. And probably the fact that those things came in tandem in the sense that a very strong increase in cigarettes, a very strong increase in beer and alcohol for somebody who consumes all three of those categories, there was just a lot more out-of-pocket expense and probably also leads to the fact that some consumers just simply dialed down on consumption.
That is one part of the explanation that we can see here, and we already see that some producers are reacting. We can see the price of beer having corrected down somewhere in the middle of the year, and volumes have already picked up. So we clearly see a correlation here, not only with weather, but simply a price effect, and that's why we believe that that trend will probably not, is not a fully structural one when it comes down, particularly to beer, which really looks quite unusual. But it's definitely difficult to anticipate where this is going when we're going to the second half of the year and particularly next year. Right bottom corner, you can see a chart that is quite important for us because it sets together the wholesale relevant market that we operate in and the franchise, our franchise business.
So the line represents the share of the wholesale relevant market in the total market. As you can see, the wholesale relevant market has declined in market share relative to total market from 29% in 2023 to 25% in 2025. So on average, losing 2 percentage points in market share per year over the last three years. In comparison to that, our franchise stores have more or less maintained their market share in the total market at around 8% of the total market, which is an effect, as already mentioned, on the one hand side, the fact that those stores represent just better stores. Their like-for-like performance is just better than the average of the wholesale relevant market.
And also the fact that we've been able to acquire new stores and that has offset the fact that some of those stores are closing and our franchise networks as such are developing. And so we would like to put a pin on these numbers because they are going to be actually pretty important as we are going to come to our strategy, how we want to evolve Eurocash going forward that we are going to announce at the end of the year. So that's it for the market overview so far. And I'll now ask Piotr to walk you a little bit more precisely through the numbers.
Yes, thank you, Paweł. As concerns the results, second quarter results, we are obviously not happy with what was achieved because of the decline in sales. The overall sales declined by 1.2%, which was driven mainly by the weak performance of the Cash & Carry stores and Delikatesy Centrum. The EBITDA on the normalized level was PLN 230 million . When we add up the non-recurring items, it's PLN 239 million compared to PLN 219 million in 2024. Net profit, well, as concerns continued operations, we managed to get to net profit, PLN 2 million , while the overall result of the company was minus PLN 4 million . Why we differ here? You probably may remember that we de-consolidate Inmedio from a company's result as an asset dedicated for sale. Just one more comment about the EBITDA profitability. The margin improved from 2.7% to 3%, which we are obviously happy with. That was driven by some cost savings. We would elaborate more in details in a few seconds.
If we split the sales and overall performance of the company into segments, the Wholesale segment brought us a decline of 1.4%, and out of the Wholesale segment, we identify Cash & Carry distribution and our impulse and tobacco distributor, Eurocash Serwis, and out of these three units, only Eurocash Serwis managed to increase the sales in the respective period from PLN 2.7 billion to PLN 2.868 billion , which is the increase of 5.7%, which unfortunately was not enough to offset the decline of sales in the Cash & Carry business, -11%, and Distribution business, -5%. In the Retail segment, we also posted the decline of sales, -2.3% from PLN 1.75 billion to PLN 1.71 billion. However, I must stress that in our own stores, our like-for-like sales was positive. It was up 3%, which is to some extent a positive news.
Paweł already mentioned kind of a success we are happy to inform you about, and it will be elaborated in details in a second. The Growth Platforms of Eurocash first time ever posted a positive EBITDA. The sale itself grew by 9%, driven mostly by increase in sale of Frisco, 25% in the second quarter of the year. If we take a deeper dive into the EBITDA profitability, we'll see still healthy and sound results of our wholesale business. In the second quarter, we managed to post PLN 198 million EBITDA compared to PLN 186 million last year. Retail EBITDA declined from PLN 74 million last year to PLN 66 million, while, as I mentioned, first time ever positive EBITDA in the growth platforms business, mainly driven by increase in Frisco. But the overall performance is satisfactory and promising. And I will kindly ask Paweł in a second to provide you with more details on this.
Yes, thank you, Piotr. So just a couple of words about Frisco. Duży Ben, we already mentioned that we were very proud that as a segment of the growth platforms, they have posted a positive EBITDA number. That is mostly on the back of a very strong sales growth in Frisco, 25% increase from second quarter to second quarter, despite the fact that now we do not have this boost that we had last year of Barbora getting out of the Polish market. So this is actually a very strong organic growth on the back of very strong consumer acquisitions. As I've mentioned already before, we are very strongly focused right now to mostly utilize as much as possible of our automated warehouse in Warsaw that we've built and invested in a year ago.
Bringing this warehouse to full utilization is now the biggest lever to making sure that Frisco becomes profitable as a whole company because this is fixed cost that simply gets diluted with every additional million of sales that we can generate. Overall, as you can see, every single number in Frisco is positive. We are adding consumers. We are adding orders. Basket is up. Very happy about the overall trajectory in which the company is. As already mentioned, I see the company as really on the path of not only being the by far dominant and number one player in e-grocery in Poland and profiting from the overall penetration of digital and online sales in the food business in Poland, but also being a profitable company that is present in all of the Polish biggest cities or developed it a little bit further.
When it comes down to Duży Ben, on the face of it, you could say 2% of sales growth is a little bit less impressive compared to Frisco and compared to its own growth still last year. That is true, but let me put this into context. On the one hand side, as you can see, like-for-like of Duży Ben is now up, is higher, is 6% up. And that is because, as already announced on our last results call, we have reviewed the entire portfolio and we decided to close some stores just to make sure that we really focus on those stores that we think can attain full profitability within a foreseeable time future. So that's why we have reviewed the network. And by now, Duży Ben has slightly less stores than it had last year.
That's why you have this discrepancy between overall sales and like-for-like. And then also the 6% like-for-like needs to be set into context. On the one hand side, it's the same like-for-like number that Duży Ben's main competitor, Żabka, has posted. But on the other side, Duży Ben is much more reliant and focused on this one main category that it specializes in, which is alcohol and beer. And as you remember from my previous slide, alcohol and beer have had a very bad quarter in the last in the total market. So alcohol up only by 1%, beer declining by 5% in the total market. So the 6% like-for-like is actually a quite impressive number.
And we believe that with alcohol and beer coming back to what I would consider a little bit more normal growth, we also think that Duży Ben will profit from that. And we will also update on a strategy of how we see Duży Ben in our group strategy that we will announce at the end of the year. As mentioned, one more word about Frisco. You heard me say that for us, the most important element right now, both strategically, but also financially, is to fill the automated warehouse that we've invested in Warsaw. And this additional capacity that we've created in Warsaw actually allowed us to do one thing that we've been working on for some time right now, which is to add another city to our network, and that is Łódź.
Łódź, that is kind of from our point of view, should have been and would have been an obvious candidate. It's a very big Polish city just next door to Warsaw. For the time being, with our previous model, which was to operate in the other cities from Warsaw manual warehouses, we didn't think that Łódź was a viable location. Now with our new model, which is to use the Warsaw warehouse as the main hub and then just transport out the goods to a city like Poznań, Łódź became much more feasible, so in exactly that operating model, which is using simply the warehouse from Warsaw and transporting to Łódź, we've now launched Łódź, which means that all consumers in Łódź have exactly the same assortment, the same service, and the same user experience as people in Warsaw.
We believe that it's actually a very promising location added to our network with relatively minimum cost and with high potential because Łódź, as a city that is very close to Warsaw, is something like an extended bedroom of Warsaw. You have a lot of commuters, a lot of people who work in Łódź, live in Łódź, but work in Warsaw. So a lot of people in Łódź already know Frisco. They've seen it in Warsaw. The brand recognition is very good. We believe that having launched the product in August, we will see a very nice pickup of our orders in Łódź. That would add to consumer acquisition and that would add to our growth numbers. Again, to the utilization of our warehouse and our investment in Warsaw. That again should allow us to maintain the sales trajectory that we've already shown you here. Again, sales up by 19% for the first half of 2025.
As Paweł mentioned, we had to face tough market conditions. Tough market conditions and tough times require tough measures. Such measures were introduced and implemented in the stock management. As of the end of December 2024, our value of stock in the whole Eurocash Group was above PLN 2 billion. We managed, thanks to operational measures and strict control of stock, to reduce it to PLN 1.4 billion. That allowed us to reduce the cash conversion cycle by another three days compared to Q2 2024, from negative 22 days to negative 25. The other measures of the working capital remained stable and as we used to show to investors in the previous quarters.
So receivables turnover measured in days 14 to 15 days, that's our standard. Liabilities turnover 56, that's highly comparable to second quarter 2024, where we posted 57 days. As concerns the net financial expense, of course, it was driven by high stock in the first half of the year, especially in the first quarter. We expect financial expense to go down significantly in third and fourth quarter. Please keep in mind that also lower sales result in higher indebtedness of the company, which is pretty obvious, but I was, well, I preferred to say it out loud to be on the same side. As concerns the debt, as you see, our net debt to EBITDA level is exactly on the same level we showed last year in the interim results. It's 0.89 net debt to EBITDA compared to 0.87. And the net debt itself is PLN 368 million pre-IFRS 16.
That's sound and solid, even in tough times, even with the decline of sales and overall weak performance of the company on different lines of P&L. We are still a cash company. Our cash flow remains good and stable. In the first half of the year, our free cash flow was PLN 250 million. When we adjust the number by one investment in the subsidiary, in the Rogala company, that cost us PLN 52 million. With this adjustment, the free cash flow is exactly on the same level we had last year after the first six months. And just to sum up the key financials for the second quarter, sales down by 1.2%, gross profit on sales also down by 1.63 percentage points, EBITDA up by 5% to PLN 229 million, adjusted PLN 239 million, EBIT PLN 82 million, that's increased by 23%. Gross profit Earnings before taxes, it was almost PLN 10 million. On continued operations, PLN two million profit. On discontinued, minus PLN 6 million, the company I mentioned with which we deconsolidated already in Q4. The overall result of the company in the second quarter was minus PLN 4 million.
Just a couple of words about the first half. I will not linger too long on it because at the end of the day, it's the same story as Q1 and Q2 that you already know. To sum it up, it's declining sales. Overall, we are down by 4.3% for the first half of the year compared to the year before. Despite sales decline, EBITDA is up. Our EBITDA margin has improved from 2.3% to 2.5%. EBITDA nominal has increased, particularly if adjusted for the non-recurring items that we have incurred, particularly linked to the closure of the stores, Delikatesy Centrum and Duży Ben that we've already told you about. Unfortunately, that has not translated to the net results where we are even slightly below last year's net result accumulated for the first half. Obviously, it needs to be said that this is not a result that we are satisfied with. I mentioned that we believe that the fact that we are able to post a better EBITDA margin despite strongly falling sales is something that we see a certain justification on the measures that we've done over the last quarters, which is mostly linked to increasing the cost efficiency of the company. Then Piotr will develop that a little bit more in a couple of slides.
But obviously, it is not our ambition to show this kind of net result level, even though here we have a couple of one-offs with the closures combined and then with the exchange rate elements. It is our ambition to improve overall results. And we want to do so this year. We want to show not only better EBITDA, we want to show better net income. We still believe it's going to be possible. It's definitely not going to be easy being given what the market is and how sales are developing, but we believe that continuing what we're doing, which is focusing on cost efficiency, focusing on making unprofitable companies profitable, and focusing on maintaining and even developing our margin is exactly what we want to do.
And strategically focusing on our franchise stores and on the part of our business that is the most stable, the most sustainable, and the most profitable, which is our franchise business. So that's something that we will continue doing. And in this respect, we remain confident, and so am I, that we will still be able to deliver on our commitment to deliver an overall better year-end result in 2025 than what we've posted in 2024 on EBITDA and on a net result level.
In the low-margin business we operate, strict control of cost is necessary and required for the overall success of the business. You may be surprised looking at the numbers we provide here and the split because we posted significant increase of third-party services on one hand. That was kind of a PLN 58 million increase. On the other hand, PLN 84 million decrease in the cost of salaries. That's the result of the partial change and shift of the business model in Delikatesy Centrum, from owned stores to agent stores, and it transferred, obviously, into the overall cost effectiveness of the company in the first half of the year because we managed to decrease the cost by PLN 52 million . Without depreciation, that was the difference by 2.9%. With depreciation, it was 2.7, which we find quite an impressive result, especially given the challenging market conditions and the pressure on costs and increases of wages and salaries, and just to sum up very quickly, the key financials of the first half of the year, the decline of sales by 4.2%, the decline of gross profit on sales by 2.4%, so the margin, the commercial margin we posted was below PLN 2 billion, PLN 1.95 billion . Last year, it was exactly PLN 2 billion .
PLN 350 million , adjusted PLN 355 million compared to exactly PLN 355 million last year. On the EBIT level, on the operational level, in the first six months of the year, it was PLN 53 million compared to PLN 54 million last year. And the overall loss of the company for the whole period was on the very similar comparable level to last year, to six months of 2024. It was PLN 91 million loss compared to PLN 87 million loss last year. Obviously, the Management Board is not, as Paweł mentioned, happy with the results. Even given the tough market conditions and change in consumer sentiment, we will work very hard to increase the full year 2025 results compared to last year.
Absolutely so. And last slide from our side, an outlook on what is to come in the second half of the year for us. One very important element that you probably hear a lot of retailers in Poland talk about is the rollout of the deposit return system. Obviously, a big deal for the entire market, Polish consumers, and also for the independent market. This becomes a new mission in its own right. We reverse trade and trend traffic. We want to make sure that our stores, the stores that we cooperate with, get as big of a pie of that transactions that they can. Let's not forget our stores are the closest stores to the households that they work on, and they normally have the biggest transactions. They should be a natural place to return returnables, and hopefully, they will also get something out of that in terms of their own sales.
That's why we've invested heavily in making sure that as many as possible of our stores are actually in that system. As you might know, the Polish law actually foresees that only stores bigger than 200 sq m are obliged to be part of the returnable system. However, smaller stores can but do not have to be part of that system. And it was our firm belief from day one that actually, no matter their size, all stores should be accepting returnables because, again, it is a mission that they want to serve their clients. And that's why we've invested both in an information campaign and then also in actual hardware and software to make sure that all of our stores work with us and that want to can actually accept returnables.
For the bigger stores that we are working on, we've, in collaboration with banks, that is, thanks to Piotr's work as our CFO, we've set up a dedicated leasing program for our franchisees where we are helping them to acquire returnables machines. That obviously is the most efficient way to return to collect bottles and packages for the biggest stores. We are helping them with better conditions to acquire and lease those machines. For clients, for our most loyal clients, we are also subsidizing their lease rate to attract, to make it also a loyalization tool and to also support our clients. For the smaller stores, those where actually putting a machine into place is not really a sustainable solution and maybe doesn't even work space-wise.
We've invested in a manual system, and we are giving them for free in cooperation with our technological partner, Comp, an add-on to our POS system, what we call Europlatform. So as you might remember, a lot of stores, more than 11,000 stores in Poland, are in our POS system. And for those stores, we've worked out an add-on that is a scanning machine and then obviously a software attached to it, which allows even small stores to accept returnables in a manual collection system. But it all works seamlessly. They can scan the goods. They are automatically accounted for. And the system has a particularity that it is fully integrated with all operators currently working on the Polish market.
So a pretty big infrastructure investment from our side, but we believe one that will pay dividends because it will make sure that our stores stay competitive, that they can take advantage of that additional mission, and they will not be overtaken by our other competitors in the market. And we believe, and we are absolutely certain that we are the only ones actually doing that in the wholesale relevant market. And that speaks to our advantage and is part of that strategy that we want to launch, which is we, as a franchise organizer, are actually giving a concrete value to our clients. And therefore, we want to add to their competitiveness, but then also show that being part of our franchise network is actually attractive and they attract more clients to our network because this is what we believe in.
Another element that we think should be key in building the competitiveness of those stores and also should be a key component of what we are giving our franchise clients is own brands. Now, a lot of you have rightly asked about price competitiveness of the stores, particularly when compared to the discount market. And obviously, when you still look at consumer service today, you can see that consumers definitely perceive discounters to be much cheaper than the independent stores because they are, and obviously, in an environment where price is still a very important factor, how consumers choose their store, that has become a pretty big liability. Now, we have decided that the best way to answer that is through own brands. That is exactly the business strategy that discounters are driving.
We have decided to invest in a solution that we see all major supermarket chains all over Europe have already deployed a long time ago. In that respect, maybe we've been a little bit being behind, but we are now already catching up in a big way. We've launched, and officially, they are now in the stores, our Codziennie brand. Codziennie means every day. This brand fulfills the mission of being really suited to our proximity supermarkets that clients, as a matter of fact, a lot of those clients are actually visiting every day, hence that connotation, but the positioning of this own brand, umbrella brand concept is to be a first-price solution for those supermarkets. The way it is priced, it is actually priced on full discount price.
So the idea is to really match discount prices on a broad spectrum of SKUs with a consumer promise, which is you get discount prices with at least the same quality of products that you would get in discounters, a lot of the time better quality. And so the story and the promise to the consumer is easy. You do not have to go to discounters to get the best price on some of your favorite products. You can get them in your local supermarket without actually having to drive to the discounter. And we guarantee you that the price is going to be the same that you are going to find in the discounters. So we have launched this product. We already have it in 90% of the stores that we have enlisted for this program. And we are working on the entire spectrum. It's full modules.
Supermarkets like the total concept that we have, which spans a couple of different categories and a couple of different needs. We're now launching over 50 SKUs by year-end. That will be over 100 SKUs. We believe that this will give a crucial competitive edge to our stores, to our franchise stores. On the one hand side, we'll help them compete better with their competitors, but also we'll make our franchise proposition even more attractive to those stores, to those many independent stores that are not yet part of our network. Last but not least, I'd like to already invite you all to join our strategy publication that will take place at the end of November 2025. In a couple of months, we as Eurocash are currently very strongly engaged in finalizing the strategy. It is going to be the learning of our last three years.
Particularly, it's going to be the answer to the question of how we want to really drive the profitability part of our company that is so important to me. As I mentioned already a lot of times to you, Eurocash, I believe, does not really have a growth problem being given the scale that we have. We have a profitability problem being given that we've not been able to manage to have enough margin and net income margin from the scale that we already have. Now, getting there, increasing the profitability and improving the net income margin on the volume of sales that we have, or even on lower volume, will require simplifying the company, focusing it more on its core, focusing on what we are best in doing, what is sustainable, and what is the most profitable. That is exactly how we think of in our strategy.
As a board, we are very much aligned and working towards nailing down the last details. And we shall be very happy to present it to you by the year-end as our investors. So please know that this is coming. And for the time being, that would be all in terms of our Q2 results presentation. And we're now happy to take questions.
Okay. Thank you, Paweł. Thank you, Piotr, for the deep insights. Right now, we can jump to Q&A. We have lots of questions. Maybe I will start from the Frisco. When the Frisco will reach the break-even point on the net profit level? And the second one, does Frisco plan to expand into new cities?
So as I already mentioned, we believe that for the entire 2026, I believe Frisco will already be profitable as a standalone unit. That is both on EBIT and net profit level. In terms of new cities, that is something that we will want to announce in the new strategy. For the time being, we've already put a pin in another city. When it comes down to the growth plans, we'd like to keep this for the strategy.
Okay. The next one comes to more cost discipline and working capital. Do you expect to continue to maintain the cost discipline in the second half of 2025 as well? Also, do you expect working capital to continue improving in the second half?
Yes, of course. Obviously, the cost discipline and the overall effectiveness and efficiency measures will play the key role not only in the second half of the year, but also in our three-year strategy. As concerns working capital, we still have something to do on the receivables side and liability side, obviously. As concerns stock, which was most visible and spectacular in the first half of the year, there are some areas to improve. I could mention two or three of them. They are already identified, and we have a deep dive on further measures. Yes, we should go below 1.4 as of the end of the year on the normalized level of stock as of the end of the year, PLN 1.4 billion.
Also from our end, so as you have already seen, we've done, I think, a good job in bringing down overall costs. I cannot stress enough that in an environment where cost is still in an inflationary environment, particularly when we're speaking about labor costs, minimum wages in Poland this year still have been increasing. We've been actually able to decrease our overall cost structure. And we continue doing so, absolutely. We have also been working with two outside advisors, one Bain that we are currently working on and reviewing all of our cost items, particularly head office, and also reviewing some of our non-FTE spend. That is an exercise that we are still doing. And in another very big element, we are also reviewing our logistics cost together with our outside advisor, Miebach. And we will probably speak more about that in a strategy session, but we also see quite a lot of cost-saving potential in the logistics part. And just to mention this again, I don't think that cost efficiency is, for our case, something that we consider as working around the edges.
It's actually pretty core in what we're doing because when we ask ourselves the question, why is it that traditional trade is losing market share to organized trade, as you have seen in the discrepancy in the growth rates between total market and wholesale relevant market? I believe the biggest part of it is cost, is just that independent market has a much more heavy cost structure, starting with the wholesalers and distributors going further to the stores with their FTEs, their way to buy, the way to do everything themselves, and the way how those stores operate.
And being given the entire cost structure and the labor force that it requires and the labor force cost that we have incurred in the last couple of years in Poland, the independent market has just become less cost-efficient, much more less cost-efficient than the organized trade, which is able to provide better prices to consumers at comparable commercial margins and therefore giving back competitiveness to the independent market, which has a lot of consumer appeal. These are stores that are closer to clients. They are a lot of times more local. They are more friendly. They are more personalized. They are run by people that they actually know. They have more fresh produce. There's a lot of elements why those stores are around and are actually beloved by consumers. Their biggest liability right now is prices. And those prices, I believe, are very much linked to cost efficiency.
That's why, unfortunately, we think that cost efficiency is a topic that is here to stay for us and is probably the key lever we have to work on if we want to make the traditional market as such become more sustainable compared to the outside market. It starts with us. That's why you can see us really working a lot on becoming leaner ourselves so that we can give better prices to our clients. It extends to working with our clients. That's why we're so much believers in franchise because by being an integrated franchise organizer, we can just work hand in hand with our stores more efficiently and also take down their costs.
As we are able to progress to take out costs from the entire chain and make just cooperation with each other simpler and leaner, every percentage point that we gain here, we can invest in price and then bring back the competitiveness of those stores.
Okay. The next one, what is driving the decline in Cash & Carry business? And also related to the Retail, why was there such a significant decline in EBITDA in Retail? And what actions do you plan to take to improve this? What in Retail in EBITDA? EBITDA.
Starting with Cash & Carry. On the one hand side, Cash & Carry obviously as a sales channel is more exposed than, for example, our Distribution business where we actively distribute goods. Cash & Carry as such is a sales channel dedicated to smaller stores. It is the smaller stores that have been experiencing the toughest times in the last quarters because they are convenience stores that have a pretty high price. So higher price index than other stores. So they have been hit by stronger price sensitivity business of consumers. That's for first. Second, let's remember that smaller stores, particularly here in Poland, and particularly in the summer, have been always one of the key channels to sell beer in Poland. It's just around the corner store where you can go for a bottle of beer on a hot May weekend. So the decline that you have seen in those categories has hit smaller stores proportionally the strongest. They have also been the ones who closed most.
So when you see the store closure numbers, you can see that it is mostly the smallest stores that closed in the Polish market. And that is hitting the Cash & Carry market stronger than the Cash & Carry channel stronger than the other channels. And also Cash & Carry as a logistical concept is the best channel and the most efficient channel to distribute beer and alcohol. And so when you have dynamics in beer and alcohol like the ones we've seen, also this channel is proportionally stronger affected than the other channels. We know that Cash & Carry is kind of a more exposed channel here. That's why already two years ago, we've decided to integrate the two companies, Cash & Carry and Distribution. So we're now operating towards our clients as a omnichannel wholesaler, which means that we are treating clients holistically.
If clients do not wish to buy from Cash & Carry stores anymore, they can actually get distributed and logistical service from us where we actually deliver to their stores within the same client relationship using their same client number, using the same app, using the same rebates that they have so far. So that's something that we've done in anticipation that the Cash & Carry channel will probably over time become less and less important to our overall business compared to the Distribution business, which simply is better suited for stores that are bigger, more profitable, and a little bit more modern to say it out loud.
As concerns the second part of this question, I mean, because of the EBITDA decline, well, we mentioned this during this call. It was cost of closures of unprofitable and unprospective stores. It was PLN 20 million in the first half of the year. The vast majority of this cost is to be attributed to the Delikatesy Centrum.
Let's also mention that this one-off cost that we've incurred will translate to an overall PLN 20 million higher contribution in the next year because this is pretty much the negative contribution of the stores that we've just closed.
Okay. The next one is related to our new strategy. Could you outline what the key pillars of the strategy are likely to be? We'll touch it.
Yeah, I mentioned it very broadly. I wouldn't want to announce the strategy before the strategy. As mentioned, we're working on it. The Supervisory Board needs to approve it. I think that the broad strokes of it, you've already understood. I think I'm pretty consistent in trying to outline them is that we believe that in order to make the market that we operate in more competitive and actually sustainable compared to the other players in the market like Dino, Biedronka, Żabka, we need to make them on the one hand side more attractive to consumers, build more missions and occasions that they serve, and then also more cost-efficient to allow to give them more prices, which is linked to higher integration. Higher integration with the stores means better logistical operations, higher efficiency in terms of cost, better cooperation in terms of marketing, building consumer positioning, building price perception, and also building solutions like the ones that you can see on the screens like an own brand that gives them a tool to fight in terms of prices.
So that's why we believe that our future as Eurocash is as an integrated franchise organizer. And this is the direction that we want to go. And what that means, what that concretely means for our company, how we are going to look like, what we are going to invest in, what we want to build, and what those stores are going to be about, and what the numbers are that we think we can achieve through doing this is really something that I would like to give you in more detail in the strategy.
How do you see the future rollout in Duży Ben? What's the target for the Duży Ben? And also related to the Delikatesy Centrum, how many stores you already closed in the second quarter? And what are you planning in the second half of 2025?
In terms of Duży Ben, we've been reviewing the concept quite strongly, also in line with, in light of our new strategy. As a matter of fact, and that might be ironic to say in a quarter like this where we've seen pretty strong decline in overall sales numbers for the alcohol market. But as a matter of fact, and we've looked at the client base once again, we actually still see a quite big space in the Polish market for an alcohol pure player. And we believe that this is a space that is not really served well yet. It's a space that is very fragmented and very unorganized. And so it is still a very big portion of the Polish FMCG market. A lot of consumers are consuming those goods. And they actually do this on a lot of missions where they actually look for alcohol.
We believe that there is actually a potential and need for a more organized alcohol store in Poland. We believe that there's space for that. Duży Ben for us is the format to address that need. Now, over the last couple of quarters, we've been working quite a lot to fine-tune that concept and to ask ourselves the question whether we still see this as only an urban concept or also something that would expand that could cover the entire country. We are going to give you a very precise update during our strategy session. Generally, our idea is that Duży Ben as an alcohol market convenience concept has a real consumer appeal. We want to develop it, particularly as a more integrated form of alcohol market.
We believe it is actually a solution for those many small stores that I mentioned when you asked about Cash & Carry that are out there in the market. And they are out there in the thousands who are struggling and who are looking for a concept who have great locations, who have a pretty loyal client base, but they're looking to differentiate themselves because most of them today are general grocery stores. And they find it difficult to differentiate in a market where there's many, many alternatives in the Polish market. And that's why we believe that Duży Ben could be an alternative for those stores. But more of that during the strategy, please.
Let me jump in once again because there was a second part of this question related to closures of the Delikatesy Centrum owned stores. We closed down 35 stores, 19 and 16 in respectively first and second quarter of the year. The owned stores network is still being assessed. Any new developments will be communicated in Q3 during Q3 conference call.
As you might have followed and seen, we have a new head of Retail, a highly experienced manager, former board member of REWE Group in Germany, Janusz Kulik, who has joined us. Janusz is currently reviewing the entire positioning and operations of our own stores and the Delikatesy Centrum itself and the Retail business. This review is still ongoing. We already have great discussions with Janusz and I think a lot of insights. I hope this is going to yield results very soon.
Okay. Piotr, I have a few questions to you. Details related to financial costs in the second quarter, especially reverse factoring and reverse factoring costs. And are Frisco shares used as a collateral for the loans or other financial liabilities?
Second question, no. First question, I think that I need to provide the detailed information to the person who asked because it will be split into several numbers. Costs of, well, the overall cost, of course, I have in mind. In the first half, sorry, first quarter, the post-IFRS financial cost was PLN 18.7 million in the second quarter, which was PLN 18 million. And utilization of reverse factoring lines increased slightly in the second quarter. That's true throughout the quarter. But the general level of indebtedness is, as we showed, similar to second quarter 2024 and slightly lower than first quarter this year.
Okay. And do you expect gross profit margin improvement in the second half of 2025?
That's the question of more than philosophical nature and strategic nature. So I will gladly pass it to you, Paweł, if you don't mind.
No, I don't think we can give a guidance at this point. It's obviously depending on a lot of factors. We are very well prepared to improve our profitability, and our profitability would be much higher hadn't our sales declined, and so in a certain way, that all hangs on sales. And where our sales are very much depends on how the market is going to evolve. And as I already mentioned, there's so many factors currently working on that that it's very difficult for us to forecast. Again, September is now forecasted to be a pretty mild month compared to the last year.
So we don't really know which of the factors have been the ones that have mostly weighed on the alcohol market, which is probably right now what drives our sales numbers strongest. So really difficult question being given that we have so much uncertainty. And quite honestly, the numbers that we've presented to you for the market and for some of the key categories have really surprised everybody. I mean, we were talking to competitors. We're talking to producers, and none of them have seen this kind of decline coming. And so that's why I think we wouldn't really want to speculate on the outlook for the market and our sales numbers.
And that is probably what is going to be most affecting on our overall profitability because at the end of the day, again, we've done a lot to improve our cost efficiency and to drive our companies to break even. But obviously, having a lot of fixed cost sales is something that is a key element here. Having said that, we've committed ourselves as a management this year to improve the overall net income and EBITDA of the company in 2025 versus 2024. And we still very much maintain this commitment. And we pretty much still believe that it is possible. But it's definitely not going to come about easy.
It's going to require a lot of efficiency from us and really working day in, day out on making sure that we do what we've been doing for the last time, which is being extremely disciplined on cost and then also making sure that our commercial margin stays stable or grows because that is also obviously something that is quite challenging in a market where competitiveness and competitiveness is very high.
Let me add just one more comment. We, as Management Board, would be highly disappointed if 2024 results were to be repeated. We deeply hope for improvement of overall profitability and net profit compared to last year.
Okay. How is the sale of the Inmedio going? Are there any potential buyers? The first question. And the second question, please give us more color about the lost sales in May related to the bad weather.
Let me comment on Inmedio. In progress. I'm afraid I cannot tell you anything more about it. We are in the middle of the process. As soon as we have anything to announce, you may be sure the company will not hide any information and will reveal it as soon as possible.
In terms of the sales structure, what more can I tell you? I can tell you that, again, the biggest drivers of our sales decline have been two categories. That is beer and strong alcohol. The channels where we have lost out the most, so on the one hand side is Cash & Carry. But then when we look at client segmentation, it has been mostly independent and institutional clients.
Overall, our sales performance has been actually pretty solid and even positive sales dynamics when we look at our franchise segment, which is a big portion of our sales. That is mainly a factor of two elements, which I've already shown you. On the one hand side, the franchise stores have actually maintained the positive like-for-like. That's why they were able to continue buying from us. On the other side, we've increased year-on-year their loyalty towards us. That means that they have bought a bigger share of what they have been selling from Eurocash. In the franchise segment, our sales is actually growing. The decline we've seen in independent and institutional clients, which is some other. It's the independent markets that are not part of our stores, of our franchise stores. It is also, particularly in the alcohol space, other wholesalers.
We can see that this market has bought less. That is also partially our own decision. We have introduced a new revenue management unit that is very much looking at our profitability of sales and maximizing our gross margin. Over the last year, particularly last year, our new revenue manager has shown us that some of our alcohol transactions with other wholesalers have simply not built enough value to maintain them. We have quite deliberately been less aggressive in that space, let's say it this way. This decline has come. Again, it shows, on the one hand side, obviously, that there's weakness in the market. It is definitely linked to store closures in the market. It is definitely linked to less consumer demand in that market and also probably linked to the fact that everybody in the system is optimizing their working capital.
So wholesalers, other wholesalers are also not stocking and that kind of stuff. But on the other hand, we can see that our core business, which is the franchise business, is actually keeping up. So I think that that's about as much color as I can give.
Okay. We are almost done. Two last questions. Do you consider sale or IPO of Frisco, the first one? And the second one is to provide any trading update for the third quarter until now?
So I'm afraid the two questions where we will be relatively restrained. So on Frisco, we do not rule out any option, but we do not want to. We have not taken any decision here. So I have nothing to communicate other than we have not taken any decision, but do not want to rule anything out.
The second element is, as you know, we normally don't give any revenue or trading guidance. So for the time being, what we can say is that sales trends, as we can tell now, have not really materially changed. Weather has not really been better in July and August. Let's see about September, but that's pretty much as much as I can say.
Okay. So we do not have any significant questions. So I would like to thank you all for this participation within the conference call and see you next time in November. Thank you so much.
Thank you very much. Thank you.