Ladies and gentlemen, thank you for standing by, and I would like to welcome you to SMU's Q4 2023 Conference Call on the 13th of March 2024. At this time, all participant lines are in listen-only mode. The format of the call today will be a presentation by the management and IR team, followed by a Q&A session. Without further ado, I would now like to pass the line to Ms. Carolyn McKenzie, Head of Investor Relations of SMU. Please go ahead. Thank you. Thank you all for joining us today. I am here with our CEO, Marcelo Gálvez, and our CFO, Arturo Silva. As usual, we have some slides describing some of our business highlights as well as financial results for the fourth quarter and full year 2023. After that, Marcelo and 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 two of our presentation. As usual, we'll start with recent highlights from our three-year strategic plan for 2023 to 2025, with its four key pillars, starting with omni-channel growth on slide three. With respect to our strategic plan, we made significant progress on omni-channel growth initiatives this year, opening a total of 14 new stores, including six stores from the Montserrat project, which we opened during the fourth quarter. New openings for the year included nine Unimarc stores, two Super Diez stores, and two Alvi stores, surpassing our expectations for the year for openings in Chile. We also opened a MaxiAhorro store in Peru. In addition, we carried out 15 store remodels and converted one Minis Diez store into a Super Diez. Continuing with the omni-channel growth pillar on slide four. On the e-commerce side, we had strong performance in 2023, with online sales growing 52%. The growth is being driven by unimarc.cl, which has increased its share in our online sales as customers have valued improvements to the platform and to their experience in terms of receiving orders that are complete with few product substitutions and on-time delivery. These improvements reflect the benefits of the micro-fulfillment center, which is our robotic distribution center for e-commerce that we started operating at the end of 2022. Online sales penetration in Unimarc grew from 2% in 2022 to 3% in 2023. On slide five, we have the customer experience pillar of our plan. In October of last year, we relaunched our loyalty program for Unimarc under the name Club Unimarc, focusing on delivering immediate benefits with no need to accumulate points. We've also added new partnerships that allow us to offer discounts on airfare, restaurants, and other attractive products and services as a way to continue providing benefits that make life easier for our customers. One of the defining trends of 2023 was the restrictive consumption environment, leading customers to seek savings wherever they could, and we worked to adapt our promotional activities to best serve our customers' needs. We adjusted the length of promotions, the product categories, and the discount mechanisms, and we also leveraged our multi-format strategy with the campaign Soft Discount Prices at Unimarc. Over 10 million customers visit our stores each year, and we have over 7 million customers with signed terms, conditions, and privacy policies, which means we are able to directly offer those customers personalized promotions that are better suited to their individual needs. These digital marketing efforts are more cost-efficient, and it's also easier to track the results of the campaigns. On slide six, another element of our customer experience strategy is to continue growing our private label offering, providing customers with excellent quality at attractive prices that help them optimize their budget. Last year, we launched nearly 200 new products, reaching a total of over 1,800 SKUs, as well as adding new specialty brands such as My Way, a brand for lifestyle products, and Cuatro Estaciones or Four Seasons for fresh fruits and vegetables. We ended the year with a total of 20 specialty brands. On the slide, we've included a selection for you to see. I got ahead of myself. Another part of our private label strategy is to increase the number of products with recyclable packaging. At the end of 2023, 19% of our assortment was certified with the eco-labeling seal for recyclable packaging, compared to 11% at the end of 2022, moving us closer to our goal of having 50% of private label products certified by 2025. Now, slide seven. The third pillar of our strategic plan targets efficiency and productivity. We've been consistently implementing different initiatives, tools, and technologies. For example, self-service modules such as self-checkouts. We've also expanded coverage of our Blue Yonder automated demand planning tool, which uses artificial intelligence to provide more accurate forecasting, contributing to better product availability and lower shrinkage, and enabling the company to help optimize inventory levels. We also continue to roll out voice picking at additional distribution centers, reducing order picking time and thereby improving logistics efficiency. Over the past couple of years, we've been implementing a new efficient operating model at our Unimarc stores, focused on efficient replenishment, higher frequency of deliveries from distribution centers, the use of roll containers that go straight from the truck to the sales floor without using a storage area, among other processes. As of December, we had implemented this model in 148 stores, and we will continue to roll it out in more stores this year. Targeting productivity while maintaining the level of service that we provide our customers has consistently been a key element of all of our strategic plans over time. Thanks to these initiatives, in August, we were able to carry out an optimization plan that has helped us to generate savings on operating expenses. Between 2022 and 2023, our productivity, measured as monthly sales per full-time equivalent, improved 3.8%. On slide eight, another component of our efficiency and productivity pillar is energy efficiency. Here, we implemented an energy management system in 100% of the facilities operated by SMU Utility, and we completed the internal and external audits required to move forward with certification under ISO 50001 in 2024. We also significantly increased the proportion of energy from renewable sources, increasing from 3% in 2022 to 12% in 2023. We incorporated electric trucks for 2% of shipments between distribution centers and stores. We have plans to increase the number of electric trucks in 2024 in order to reach our goal for 2025, which is to use electric vehicles for 10% of shipments. On slide nine, regarding our committed and sustainable organization pillar, one of our focus areas is creating shared value with suppliers and communities. One of our key initiatives is our Cien por Ciento Nuestro program, which supports the development of small local suppliers who ordinarily wouldn't have access to a massive retail channel. We provide them with training and mentoring programs in order to help them grow their businesses, and our customers benefit by having a differentiated assortment with local products from the different regions of Chile. In 2023, we gave the brand a new look and feel and also added exclusive display spaces for 100% Cien por Ciento Nuestro products in 110 stores, providing more visibility. We have supported over 400 small suppliers through this program since its inception. Last year, Cien por Ciento Nuestro was awarded the Conecta Prize by Global Compact Chile. This prize recognizes initiatives that contribute towards the 2030 agenda for sustainable development. On slide 10, another project within the committed and sustainable organization pillar is the human rights due diligence process, which we started in 2022. In 2023, we completed the process for all of our operations in Chile. We've also made efforts to be transparent in our disclosure of the process and its results in our integrated report, which led to us ranking very highly in the companies and human rights diagnostics that is carried out by the Corporate Sustainability Program at the Pontificia Universidad Católica de Chile's Law School in partnership with the World Benchmarking Alliance. We placed within the top five IPSA companies, and our score improved 27% compared to 2022. Finally, as a general overview of our ESG performance, we wanted to highlight the consistent improvements to our score in the S&P Corporate Sustainability Assessment, where last year we went from 56 points to 62 points, placing us in the 94th percentile, reflecting how both our ESG management and our transparency in reporting have been getting better over time. Going on to the numbers on slide number 12, we have revenue for the full year and fourth quarter of 2023. We had top line growth of 1.3% in the full year and a 3.5% decrease in the quarter. This is consistent with the challenging economic conditions which have affected consumer behavior. We've seen higher income elasticity from customers buying fewer quantities and substituting for cheaper products, which leads to a lower average ticket. However, the number of customers has increased across formats, and customers are visiting the stores more often. Therefore, we believe that once the consumption level starts to recover, we will be well-positioned to capture higher sales. The other thing to keep in mind with these numbers is that the 2022 comparison base is very challenging, as we will see on the next slide. On the gross margin side, we had an increase of 110 basis points in the full year of 2023 and an increase of 50 basis points in the fourth quarter, reflecting improvements in commercial efficiency. On the next slide, we have our same-store sales growth for the full year 2023 and the fourth quarter, where the high comparison base is very clear. Same-store sales growth for the full year 2022 reached 13% compared to 0... Negative 0.2% for 2023. For the fourth quarter of 2022, it was 8% with a decrease of 4.9% in the fourth quarter of 2023. The high comparison base is particularly relevant in the cash and carry segment, which had same-store sales growth of 20.9% in the fourth quarter of 2022, reflecting the very high demand for basic products. On the next slide, we have operating expenses, which grew 8.2% in the full year and decreased to 0.3% in the fourth quarter. Operating expenses as a percentage of revenue increased 140 basis points in the full year and 60 basis points in the quarter. The two main drivers behind the increase are the higher minimum wage, which increased 15.6% year-over-year, affecting both personnel expenses and the cost of services, and accumulated annual inflation, which was 10.2%, affecting not only salaries and the cost of services, but also leases and distribution costs. In fact, as you can see on the pie chart on the right, out of the total CLP 46 billion increase in operating expenses in the full year, 37% of that increase comes from personnel expenses and 20% comes from service expenses, where we have higher rates on electricity as well as security and cleaning services. All of these accounts are affected by the higher minimum wage and inflation. Moving on to slide 15, we have EBITDA, which decreased 1.4% in the full year and 5.5% in the fourth quarter due to lower revenue growth and reduced operating leverage. Our EBITDA margin for the full year was 9.2%, and in the fourth quarter it was 9.4%, which is below 2022, but in line with our long-term target of 9% despite the challenging macro environment. This was possible due to commercial discipline that allowed us to improve the gross margin by 110 basis points as well as the operating expense reductions that we executed. On the next slide, we have our non-operating results, which we have broken out separately because there are several one-offs that affect the comparison. In 2022, we had a gain on the sale of OK Market of approximately CLP 18 billion before tax. That was a positive effect we had in 2022 and not in 2023, making for a higher loss in 2023. In August of 2023, we implemented an optimization plan, giving rise to a loss of approximately CLP 8 billion. In the fourth quarter, there were two non-recurring items. First, we reached a compensation agreement to settle class action lawsuits with two consumer associations, incurring a loss of approximately CLP 3 billion. Second, we reached an agreement with the insurance company for the payment of the insurance claim that dates all the way back to 2019. At the time, we had made a conservative estimate of the amount receivable, so we had provisioned about CLP 40 billion. The agreement was for a higher amount, CLP 53 billion, which means that we recognized a pre-tax gain of about CLP 13 billion in the fourth quarter. All told, these one-offs had a negative impact of about CLP 17 billion when we compare 2022 and 2023. This was offset by lower losses on inflation index liabilities as inflation was lower in 2023, which had a positive impact of about CLP 38 billion. We also had lower financial income in 2023 as interest rates have come down with respect to 2022, and there is also an effect from the consolidation of the financial services businesses. That was a negative impact of about CLP 3 billion. On the next slide, we have net income, which was down compared to 2022 in the full year, but increased in the quarter. If we break it down, we can see that in both periods, operating income was lower in 2023, which is mainly due to higher depreciation as we have been investing more over the last several years, essentially in new stores, which take an average of three years to mature. That is combined with the lower EBITDA in both the full year and the quarter. However, this is largely offset by improved non-operating income, as I explained on the previous slides. In the end, practically the entire decrease in net income is because of taxes. In 2022, the higher levels of inflation had a significant positive non-cash impact on our deferred taxes in both the full year and the fourth quarter, which we don't have in 2023. On slide number 17, we can see the impact of taxes on net income more clearly. Pre-tax income grew 13.2% in the full year and 45.7% in the quarter. On slide 18, we have our dividend yield of 6.7% for the last 12 months, which is lower than 2022, partly because of the lower net income, largely due to the lower income tax benefit, as I just explained, and partly because of the very strong share price performance over the past year. On the graph, you can see that we outperformed the IPSA. The return on equity was 10.7% for the year 2023, similar to 2021 and lower than 2022, again, because of the lower net income. On the next slide, we have financial ratios, including as-reported figures as well as figures that are adjusted for store rental expenses. On the left, net financial liability to EBITDA, including store rentals, has improved from 3.9x in 2021 to 3.7x in December 2023. When we adjust for store rentals, we went from 2.7x in 2021 to 2.4x in 2023. On the right, net interest coverage as reported is up from 4.9x in 2021 to 5.9x in December 2023. When we adjust EBITDA and interest expense for store rentals, we started with coverage of 9.5x in 2021, up to 14.4x in December 2023. The decrease compared to 2022 is mainly because we have lower financial income. Gross interest expenses remained flat, but net interest expenses increased 7% year-over-year. In any case, we are well above the covenant level of 2.5 x, as we can see on the next slide, which is slide number 20. As I was saying, we have our bond covenants here, where we continue to have plenty of flexibility. Net financial debt to equity is at 0.53 x, well below the 1.03 limit, and interest coverage is up to 5.9 x, well above the 2.5 x requirements. On slide 21, we have a summary of our cash flows for the full year 2023. We started the year off with a cash balance of CLP 125 billion, significantly higher than the minimum we'd like to have on hand, which is in the neighborhood of CLP 45 billion-CLP 50 billion. Our operating cash generation for the period was CLP 286 billion. We were able to comfortably cover all of our cash needs, including lease payments, interest payments, dividends, and CapEx, which was significantly higher than CapEx for last year, as we've been making progress with our omni-channel growth strategy. We also had net debt amortizations of CLP 40 billion, and the final cash balance was CLP 105 billion, only CLP 20 billion below the opening balance. As I mentioned before, in November of last year, we reached an agreement with the insurance companies for the payment of CLP 53 billion. In December, we received a small part of the payment, around CLP 1 billion, but we received the remaining CLP 52 billion in January of this year, which means that that amount is not reflected in the closing cash balance as of December 31, and it will be reflected in the first quarter of 2024. The solid cash position means that we are very comfortable with our debt maturity profile, which is on the bottom half of the slide. We should refinance some of the upcoming maturities and pay down the rest as we have done in the last couple of years. On slide 22, we have a couple of financial highlights for the year. First of all, at the end of August, both of our local credit rating agencies, Feller Rate and ICR, upgraded our rating from A+ with a positive outlook to AA- with a stable outlook. They had both assigned a positive outlook to our rating back in March and April, and we met the expectation of continuing to maintain consistent financial and operating indicators for additional periods which led to the upgrade. Also in September, we placed bonds for $1.5 million or around CLP 54 billion with a bullet structure maturing in 10 years at a placement rate of 4.44%, which was a spread of 179 basis points over the benchmark. Demand for the transaction was nearly double the placement amount. This issuance allowed us to flatten out our debt amortization schedule by refinancing some of our upcoming maturities. Finally, we had the agreement with the insurance companies, which I explained on the previous slides. That's it for our presentation. Thank you very much for listening, and if there are any questions, we'll be happy to take them now. Thank you very much for the presentation. We will now be moving to the Q&A part of the call. If you are dialed in via the telephone, please press star two on your keypad. That's star two on your keypad if you're dialed in via the phone. If you're dialed in via the web, feel free to ask a voice or text question. We acknowledge the text question from Impar Capital, which we'll be getting to shortly. Great. Thank you. Okay. Our first question comes from Mr. Javier Toledo from Itaú Asset Management. Please go ahead, sir. Your line is open. Hi, everyone. Thank you for taking my question. I have two on my side. First, regarding the 2025 EBITDA target of CLP 350 billion, EBITDA should grow approximately 15% in 2024 and 2025, which seems a little aggressive given current consumption scenario. My question is if you still maintain that medium-term target, or should we expect a little adjustment for it? Second, I heard a lot during January and February that tourist traffic was pretty depressed along all regions in Chile. The question is if during these first months of 2024, you saw a lower seasonality effect given your regional presence and this phenomenon during the summer. That's it on my side. Thank you. First question about the CLP 350 billion EBITDA target. Of course, with the macroeconomic scenario, the increase in the sales in 2023 was lower than our expectation. Probably in the first half of this year, the economic situation will be weak. Probably the consumption improvement will be lower than in the second half of this year because the PIB is not improving so fast. For the same reason, we are not expecting to reach the CLP 350 billion in 2025. Probably will be in the next year, but will depend on the improvement in the consumption, but will be very difficult to reach the number. The most important issue for us is to keep our level of 9.0%-9.5% EBITDA margin, to be ready to receive the improvement in the consumption in the next quarters. With the idea to reach this number, if it's not possible in 2025, will be in 2026 or 2027. Will depend on the improvement in the consumption. The second question about the traffic in 2024. In 2023, the company had a very good level of frequency and transactions in the stores. The problem was the average ticket, essentially for the high food inflation that was higher than general inflation. In general, it is 200 basis points higher, but in the last years, the food inflation was 7% or 4%, and the food inflation was double digits in two years. Today, the food inflation is in the level of twelve months, in the level of 5.5%, and the general inflation is a level of 4%. Therefore, it is in the level of the long-term difference that we saw in the past. Therefore, we are very optimistic that this situation will be more or will be better to improve the average ticket because the pressure in prices will be lower and will be possible to increase the number of units in the basket. The traffic about of in store in the regions in the summer period. In January and February and the first days in March, the sales in 2024 has been in the similar level of the first quarter of 2023, considering the seasonality. In February, the sales were better than January, in spite of that February has one day less than January. In the first days of March, the sales have been better than February. Therefore, that's a positive news for us. We're expecting that in the next months or the next quarter with more improvement in the economy, the consumption should show better numbers as well, and the sales numbers in our sales too. In general, independent of the sales, our level of gross margin and the EBITDA margin will be in the same level above 9% in the first quarter. That's our expectation. Perfect. Thank you very much. Appreciate it. Okay, thank you very much. Our next question comes from Mr. Alonso Aramburú from BTG Pactual. Please go ahead, sir. Your line is open. Yes. Thank you. Thank you for the space to ask questions. I have just one question. I was positively surprised about the expense growth in the fourth quarter. I'm just wondering how we should think about expenses in 2024. Do you think you can keep the growth below inflation? Thank you. The pressure in personnel expenses was very important in 2023, for the minimum salary grew a lot more than inflation. The very important inflation affecting the salaries and also wages, and also the, as Carlos will comment, other services like in cleaning services and security services. In 2024, we are not expecting more increase of minimum salary than by CLP 500,000. That was the target for June or July. The company developed in 2023 the optimization plan of expenses, especially in August. The benefit of this plan of optimization, reducing the headcount in 1,000 people, the positive effect will be a full year in 2024. This effect will allow to compensate or offset the pressure in inflation that will be lower, fortunately for us. A lower than food inflation by 200 basis points. Therefore, we will have a gap between expenses and revenues to keep our EBITDA margin. Also, we're expecting better sales in the second half of this year with a more chance to dilute more expenses that is regular in this industry because we are opening new stores because the maturity of the new stores that we opened in the last two years will be better in 2024 and 2025. Therefore, the chance to dilute more expenses will be higher, especially with lower inflation allowances. Thank you. Okay. Thank you very much. Our next question comes from Carolina Ratto from Itaú BBA. Please go ahead, ma'am. Your line is open. Hi. Thank you. Thank you very much. I would like to know a little bit more about the competitive dynamics. Some investors have been saying actually that Walmart has been gaining a little bit of market share. I'm not sure if this is related to the Cornershop app, you know. And specifically, the difference between the same store sales of SMU and their competitors, where do you think that difference lies? Thank you very much. Okay. Hi, Carolina. Yeah, of course, in the comparison with the competitors, I think it's very important to analyze the factors. You have a lot of factors. Not only the growth in revenues, because it's very important to consider the behavior of the gross margin because we are not investing in promotional activities. And of course, investing in gross margin, we can impel the sales, but with the final result in EBITDA should be low, should be worse finally. That is not the idea because our discipline in gross margin and to keep the level of EBITDA margin was very important in 2023. Because the promotional activities not always produce the elasticity effect that produce in the regular macroeconomic scenario. That's one very important thing that we need consider in analysis of revenues. It's important to see also the gross margin. About the market share, we are expecting to recover part of the market share in the first quarter of 2024. It's not our main target. Our target is profitability, improve or to keep the EBITDA margin. It's not our target to attain one specific market share. Also it's very important the comparison about the same store sales. Consider that the comparable base for us in 2022 was very demanding because in Mayorista 10, Super Diez and Alvi, the growth was very high in 2022 because the most of the customer demand for basic products and the growth was very important in the level of 24%-25% in some quarters. Therefore, the comparable base was much more exigent or demanding than our competitors. Okay. Thank you. Thank you very much. Just once again, a reminder, star two for any additional questions. In the meantime, I'll read the text question from Ms. Ganze Al Farhoubi from Impar Capital. There are two questions. Thank you for the presentation. What is the percentage of private labels in goods sold in value? Is there a target? This is the first question. Second question is, what will be your CapEx guidance for 2024 and 2025? The penetration of the private label in 2013 was 13%, and the target is to reach the level of 17% penetration in total sales. About the CapEx guidance, the 2024 and 2025, we keep the level of the total CapEx that we include in our strategic plan, but in 2024 will be in the level of CLP 120 billion. In 2025, it's the level of CLP 95 billion. Okay. Thank you very much. We'll give another minute or so for any additional questions to come through. Star two for any questions or voice or text question if you're dialed in via the web. Okay, it looks like there's no further questions at this point. I'll be passing the line back to the IR and management team for the concluding remarks. Yes. Thank you so much, everybody, for joining us today. Have a great day, and I hope you join us next quarter. Bye-bye. Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you.