Wednesday, February 28, 2024

Portugal’s Sonae profit buoyed by one-off gains despite retail margin squeeze

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Q4 net profit 132 million euros

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Helped by 142 million euro one-off capital gain

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Shares down 0.6%

(Adds detail, share price)

By Sergio Goncalves

LISBON, March 16 (Reuters) – Sonae, owner
Portugal’s largest food retailer, on Thursday reported a 21%
jump in fourth-quarter net profit as one-off capital gains more
than offset the impact of high inflation and energy costs on its
supermarkets business.

The conglomerate, which has businesses in sectors from
retail to telecoms, made net profit of 132 million euros
($139.74 million) in the three months to Dec. 31 after booking
142 million euros in one-off capital gains, mainly from asset
sales.

Excluding these gains, the company had a quarterly loss of
10 million euros, as a result of discounting, higher operating
costs and devaluation of assets.

The squeeze on margins from soaring inflation and energy
costs meant that net income at Sonae MC, which runs about 300
hypermarkets and supermarkets, fell 16% to 56 million euros
despite a 14% increase in sales to 1.68 billion euros.

Food prices rose 19.5% in the quarter, Sonae said.

“To avoid a greater burden on family budgets, our retail
businesses bore part of the inflationary pressure at the expense
of their own profitability,” Chief Executive Claudia Azevedo
said in a statement.

Underlying consolidated earnings before interest, tax,
depreciation and amortisation (EBITDA) rose 4.9% to 195 million
euros in the quarter. However, the underlying EBITDA margin – a
key measure of profitability – fell to 8.7% from 9.3% a year
earlier.

Finance Minister Fernando Medina said on Tuesday that the
food and economic security authority ASAE was investigating the
profit margins of large food retailers, such as Sonae and
Jeronimo Martins, as officials suspect they were taking
advantage of rising inflation to boost margins.

Sonae’s shares were down 0.6% at 1.027 euros in early
trading.

Sonae said uncertainty remains high as “high inflation and
sharp rise in interest rates will continue to impose constraints
on the economy, namely to households’ disposable income, with
negative impact on private consumption.”

($1 = 0.9446 euros)
(Reporting by Sergio Goncalves; editing by David Goodman and
Jason Neely)

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