Ladies and gentlemen, thank you for standing by, and I would like to welcome you to SMU's Q2 2023 conference call. At this time, all participant lines are on listen only mode. The format of the call today will be a presentation by the management team, followed by a question and answer session. Without further ado, I would now like to pass the line to Ms. Carolyn McKenzie, the Head of Investor Relations at SMU. Please go ahead, ma'am. Thank you. Thank you all for joining us today. I'm here with our CFO, Arturo Silva. As usual, we have some slides describing some recent business highlights as well as financial results for the first half and second quarter of the year. Arturo will be happy to take any questions at the end of the call. You can send questions by chat, or you can raise your hand and we can unmute you. An audio recording of this call will be available on our website later today. Also, please note that we may be making forward-looking statements today. As always, please remember to take a look at the caution regarding forward-looking statements on slide number 2 of our presentation. As usual, we'll start with the recent highlights from our three year strategic plan for 2023 to 2025, with its four key pillars, starting with omni-channel growth on slide 3. In the year to date, we've opened three Unimarc stores, one in Puerto Montt, one in Rancagua, and one in the Las Vizcachas sector of Puente Alto. We also opened a Maxiahorro store in Peru and inaugurated our fifth Super 10 store, which we converted from a Mayorista 10. We have a number of new store openings lined up for the third quarter of this year, including an Alvi and two or three Unimarcs. With respect to the Montserrat project, at our last earnings call, we had received the first two stores in conditions for us to start remodeling, and we have now received seven, with more on the way. The first five stores we received should be operating at year-end, and this includes two Unimarc stores, one Alvi, and two Super 10 stores. We expect to have five more Montserrat stores operating during the first quarter of next year, including a further two Unimarc stores, one Alvi, and two Super 10 stores. We will continue to receive more stores in the coming months. In order for a store to be received, it has to meet certain conditions, including having its permits in order, and the rental contract must be filed with the properties registered. With respect to our online business on slide 4, we've continued to grow sales, with online penetration reaching 2.6% in Unimarc stores with online operations. Most of our growth is coming from unimarc.cl, but our newer sales channels, such as alvi.cl and Mercado Libre, are also contributing to sales growth. Customers also respond well to promotional activities like the Cyber Day we ran in the second quarter with exclusive online discounts for a range of product categories. On slide five, we have the customer experience pillar of our plan. Our core commercial strategy is a high-low strategy with intense high-frequency promotional activity, and we have built up a deep expertise in designing and implementing promotions in a way that benefits both customers and participating suppliers. This year, we continue to see that customers are highly sensitive to price as they aim to maximize their family budget. Therefore, we continue to apply our expertise by innovating in our promotional strategy and also leveraging our multi-format strategy. We've been giving a lot of visibility to our Path to Savings or La Ruta del Ahorro campaign to help customers identify savings on basic products, and also adding category-specific promotions simultaneously at Unimarc and Mayorista 10. On slide 6, another element of our customer experience strategy is to continue growing our private label offering, providing customers with excellent quality at attractive prices. In the first half of the year, we added over 80 new products in different categories and under different specialty brands. On this slide, we included our new brand, My Way, which is a lifestyle brand that includes different products such as free-from foods. We also have San Justo, which targets Alvi's hotel, restaurant, and cafeteria customers. Below we have Como en Casa, which is our prepared food brand with a new line of frozen pizzas At right is Nuestra Cocina, one of our more established specialty brands, which has delivered consistent results in the dry goods section. On slide seven, the third pillar of our strategic plan targets efficiency and productivity. In the year to date, we've continued to make progress on different initiatives, including self-service modules such as self-checkouts. We've expanded coverage of our Blue Yonder automated demand planning tool, which uses artificial intelligence to provide more accurate forecasting, contributing to higher in-stock levels and lower shrinkage. We continue to roll out voice picking at additional distribution centers, reducing order picking time and thereby improving logistics efficiency. Our latest pilot project is digital shelf management using a robot that monitors stock outs and prices, connecting missing products to inventory systems to see if the product needs to be restocked from within the store or if it needs to be ordered. We have a picture of that robot on the slide. Now, slide 8, we have recent highlights in initiatives aimed at creating shared value for our stakeholders, one of which is small local suppliers. We're very proud of our 100% Nuestro program, which helps support over 200 small and medium regional suppliers so they can sell their close to 1,000 products in our Unimarc stores all over the country. This program contributes to growth for these local suppliers while also providing our customers with an attractive assortment of locally sourced products. We recently joined an initiative called Mi Compromiso PYME or Committed to Small Businesses. This initiative is led by Unión Emprendedora or Entrepreneurship Organization and EY, and its objective is to continue to drive local supplier growth. In addition, we recently launched the latest version of our traditional Unidos campaign, through which we raise funds to help nonprofit organizations that have a positive impact on the community. We contribute 10% of the sales of Unidos gift cards for the duration of the campaign to two beneficiaries, Fundación Process, which provides shelter and dignified living conditions for senior citizens, and Club de Leones Cruz del Sur de Magallanes, which operates rehabilitation centers for people with disabilities in the Magallanes region of Chile. These activities are part of our diversity and inclusion model. Going on to the numbers on slide number 9, we have our revenue for the first half and second quarter of 2023. We had top line growth of 5.4% in the first half and 4.9% in the quarter. On the gross margin side, we had an increase of 130 basis points in the first half of 2023, and an increase of 140 basis points in the second quarter, reflecting improvements in commercial efficiency. On the next slide, we have our consolidated same-store sales growth for the first half and second quarter, where the high comparison base is very clear. Same-store sales growth for the first half of last year was 16.2%, and it was 3.8% for the same period this year. For the second quarter of 2022 it was 15.4%, and for the second quarter of 2023 we had 3.4%. This is particularly noteworthy in the cash and carry segment, which had same-store sales growth of 26.9% in the second quarter of 2022. On the next slide, we have operating expenses, which grew 13.1% in the first half and 12.6% in the second quarter. Operating expenses as a percentage of revenue increased 150 basis points in both periods compared to 2022. The two main drivers behind the increase are the higher minimum wage, which increased 16.7% year-over-year, affecting both personnel expenses and the cost of services, and accumulated annual inflation, which was 12.5%, and not only affects personnel expenses and the cost of services, but also leases and distribution costs. In fact, as you can see in the pie chart on the right of the slide, out of the total CLP 35 billion increase in operating expenses in the first half, 57% of that increase comes from personnel expenses. Service expenses account for an additional 10% of the overall increase in operating expenses, which indicates that these two line items, which are heavily impacted by minimum wage and inflation, accounted for two-thirds of OpEx growth in the first half of the year. Moving on to slide 12, we have EBITDA, which grew 3.4% in the first half of this year and 3.0% in the second quarter, despite the high comparison base and the pressure in OpEx. Our EBITDA margin for the first half was 9%, which is slightly below last year, but in line with our annual target of 9%. EBITDA margin for the second quarter was 8.5%, similar to last year and consistent with the seasonality of the business as the second quarter tends to have lower revenue and therefore lower operating leverage given our high percentage of fixed costs. The graph at the bottom of the slide shows all of the second quarter EBITDA margins in red. Generally, the second quarter is the lowest, as you can see, although there was an exception in 2021. On the next slide 13, we have net income. Just as we explained in the first quarter, net income for the first half of this year really isn't comparable to last year because in 2022 we had the effect of the sale of OK Market as well as much higher inflation which affected deferred taxes. Still, we've tried to illustrate the difference for both the half and the quarter. On the left, net income for the first half of 2022 was CLP 71.5 billion. The pre-tax effect of OK Market was CLP 18 billion last year, and the tax effect was CLP 2.5 billion, for a total of CLP 20.5 billion pesos that we had last year and not this year. If we exclude OK Market, pre-tax income would have been CLP 18 billion higher in 2023, which is also largely related to inflation since we had lower losses on inflation-indexed liabilities this year. The higher pre-tax income leads us to recognize a higher income tax expense of CLP 4.9 billion. In addition, since inflation was lower this year, we had lower inflation adjustments to our deferred taxes. This effect was about CLP 23 billion. Similarly, in the second quarter, we had higher pre-tax income, essentially because of lower losses on inflation-indexed liabilities, leading to a higher income tax expense and also lower inflation adjustments to deferred taxes. On slide 14, we continue to show a very attractive dividend yield of 9.6%, which is lower than the 2022 yield, partly because the share price went up over 20% since December, as you can see in the graph below. also because the dividend for the last 12 months doesn't include the extraordinary amount from the sale of OK Market. In the 12 months between July 2022 and June 2023, our share price grew over 60%. The return on equity was 12.8% for the 12 months to June 2023, also due to the fact that net income for 2022 includes the one-off from the sale of OK Market, whereas the 12 months to June of this year does not include that amount. However, we are still in the double digits. On the next slide 15, we have financial ratios, including as reported figures as well as figures that are adjusted for store rental expenses. On the left, net financial liabilities to EBITDA, including store rentals, has improved from 3.9x in 2021 to 3.4 times in June, remaining stable compared to December 2022. The same downward trend is true when we adjust for store rentals, but in this case the ratio was 2.7x in 2021 and is now down to 2.3x. On the right, net interest coverage as reported is up from 4.9x in 2021 to 6.4x in December 2022 and 6.5x in June 2023. When we adjust EBITDA and interest expense for store rentals, we started with coverage of 9.5x in 2021 up to 18.4x in June. On slide 16, we have our bond covenants where we continue to have plenty of flexibility. Net financial debt to equity is at 0.49x, well below the 1.03 limit and also below the 0.54x we had in December. Interest coverage is up to 6.5x, well above the 2.5x requirement and slightly better than December. On slide 17, we have a summary of our cash flow for the first half of 2023. Our operating cash generation was CLP 132 billion, which, when combined with our strong opening balance, enabled us to pay financial debt maturities for CLP 47 billion pesos in bonds and bank debt without taking on new financing, and also to cover higher levels of CapEx. Even so, we entered the period with a balance of CLP 89 billion pesos, CLP 36 billion below December, but well above the minimum cash balance we like to have on hand, which is CLP 50 billion. This solid cash position means that we are very comfortable with our debt maturity profile, which we have also included on the same slide. That's it for our presentation. Thank you very much for listening. If there are any questions, Arturo will be happy to take them now. Thank you very much for the presentation. We'll now be moving to the Q&A part of the call. If you have any voice questions and dialed in via the telephone, please press star two on your keypad. That's star two on your keypad if you are dialed in via the telephone. If you are dialed in via the web, you may also ask a voice or a text question. We already acknowledge the two text questions that came through already from Compass and Putnam. I'll pass the line back to the company to moderate the Q&A. Great. Thank you. Okay, it looks like we have a question from Alonso. We will unmute you. Go ahead, Alonso. Hi. Can you hear me? Yes. Okay, great. Yeah, thank you. Thank you for the call. Yeah, I wanted to ask about expenses. You talked about minimum wage increasing, inflationary pressures. Now with inflation starting to come down, moderating, I mean, do you think this level of growth of expenses around 12%-13% is what we're gonna see also in the second half of the year? Or is there any additional pressures that we may see in the next few months that may move that higher or maybe even lower? That's the question. Okay. Hi, Alonso. Indeed, we suffered the pressure of expenses in the second quarter. We keep this situation in Q3 and Q4. Basically for the minimum salaries is increasing in August, an additional CLP 20,000. The effect of this increase in our expenses will be CLP 130 million per month. Also we have another possible impact in services connected with the minimum salary as well. We are working in the with the idea to mitigate this impact with an important plan of reduction expenses for the second half of this year with the idea to compensate or offset part of these increases and with the idea to keep our level of EBITDA margin in line with our plan of +9% for this year. I think it will be possible through the gross margin improvement and reduction plan of expenses to compensate these impacts. Okay. Thank you, Arturo. Following up on your last comment on EBITDA margin. Your EBITDA margin in the second half of last year was around 9.6%. Is that the level you see in the second half of this- Yeah. of this year or this is some pressure on. Yeah. 9.5% probably because always in the second half the EBITDA margin is better because the dilution of expenses is higher. Especially in Q4. Okay. Thank you. Thank you, Alonso. We have another two questions. Also, we have a question from [Joaquín Ley]. We will unmute you. Hi, Joaquín. Hello. Can you hear me? Yes. Hi. Hi, good morning, and thank you for taking my question. My question is in regards to the gross margin expansion. I'd like to hear you on how do you think that your competitive positioning is evolving in line with this gross margin expansion and how your pricing compares to those of your competitors. In other words, is this gross margin expansion endangering at all your relative competitive position in the industry or is just a matter of cost and very commercial conditions? The idea, Joaquín. Hi, Joaquín. Excuse me. It is to keep our level of gross margins improving compared with 2022 in the second half of this year. Because our promotional activities are 90% financed from suppliers. Our idea is to not sacrifice margin with the idea to improve sales, because the impact in the gross margin is higher than the improvement in the sales because the contraction of the market is important and the answer of the customer in terms of sales is not the same impact in the last years for the contraction of the market. Therefore, our purpose is to keep our level of gross margin, because the bottom line for us is much better to bet in lower prices, sacrificing gross margin. I don't know, we see the similar level of gross margin for the next months. Again, so that means that the expansion in the gross margin is purely better commercial conditions and increased supplier support on your promotional activity, and not necessarily that you're expanding the price gap versus competition, right? Right. You're right. Okay. Thank you. Thank you, Joaquín. We have also a couple of questions that we've gotten through the chat. We have a couple of questions. I think we kind of answered this already. We have a couple of questions about the outlook for cost growth, and there's a related question in terms of what we expect SG&A to be as a percentage of revenue going forward. Yeah. Like for any sign of consumer environment improving? No sign of consumer improvement until now. The contraction of the market is keeping in July and August. Probably could be better in the next months for the reduction of the interest rate or improving the consumption. We have a delay in the consumption of this improvement of the financial conditions in the market. Therefore, we are not very optimistic in the fast improvement in the consumption. However, we think that it's possible to compensate to offset the lower reduction of expenses through the gross margin improvement with the idea to keep our EBITDA margins as before. Another question about any delay in our organic plan of growth. No, we are in plan because we opened three new stores in the first months of the year. Always the plan consider the additional 9 stores in the Q3 and Q4. 5 Montserrat stores and another four stores included in our strategic plan for 2023. Therefore, we are in line with our plan. We don't have any delay. Another question about. Can you please elaborate on the share of private label in your sales for different formats? Yeah. We have. The portion of private label is higher in the hard discounters and Aldi than Unimarc. On average, we have 13% of the total sales. In Unimarc is close to 10%, in another format is more or like 15%. Therefore it's higher in the price formats. The idea is to reach 20%-25% in the price format and in Unimarc 15% in the next years. In terms of the gross margin, we are not seeing the improvement in the gross margin due to private labels. Because in this aspect, we're improving the sales due to our private labels, but not margin. Because the idea in the next years include more sophisticated private labels in sophisticated categories, improving our gross margin. In this year, the idea is to improve the sales through the private labels in 2023. I think it was- Giving the similar margin of the National national brands. Mm-hmm. We have one more question here. Alfredo? Yes. Hello, can you hear me? Yes, hi Alfredo. How are you? Hi, Carolyn. Good, thanks. My question is a little bit to understand maybe the payback of your new CapEx plan. Given that now you're gonna be focused more on growth, what do you expect that payback to be and how does it compare to the previous investments that were more focused on efficiencies? Yeah. That will be my first question. Then the second one is on your corporate presentation, you mentioned that you're expecting to reach an EBITDA level of CLP 350 billion by 2025. What’s your, let’s say, assumption in terms of same-store sales to get to that level? And how much is gonna be basically explained by investments? The first question, in terms of payback, on average is level of six or seven years. Openings in general is in this level, five or seven years payback. In line with the previous year, not especially high or lower for this strategic plan. In terms of the target for EBITDA for 2025 or same-store sales. The target for EBITDA is similar in the level of CLP 350 billion. We keep this target for the end of 2025. In terms of the same-store sales, now it's more difficult to project the To estimate this number because it depends on the food inflation in the next years. In general it should be 1% or 100 basis points more than the food inflation. Today it is very difficult to project the food inflation. That is the target in general. The food inflation in the next year should be 200 basis points more than general inflation. That would be 3%. That would be 4%-5%, the food inflation. In that case, we can grow 4%-5%, 100 basis points more than food inflation. That's in general our estimation. Okay. Thank you, Arturo. Great. Thank you. I think that's all of the questions. Of course, as always, feel free to get in touch with us if you have any follow-up questions for anybody. Thank you so much for joining us today, and hopefully we'll have you with us next quarter. Have a great day. Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you and goodbye.