28/07/2021 - Carrefour SA: Earnings Document

Q2 sales and H1 2021 results

July 28, 2021

Solid H1 2021 performance, driven by France

Strong increase in net free cash flow: +€203m

Full-year net FCF expected comfortably above €1bn

Additional €200m share buyback program

• Sustained commercial activity: +3.6% on a like-for-like basis (LFL) in Q2, on a high comparable base (+6.3% in Q2 2020);
  LFL in H1: +3.9%
• Strong growth in France: +4.7% LFL in Q2, of which +4.3% in hypermarkets, with continuous market share gains in each format(1)
• Continuous growth in e-commerce: +26% in H1 2021, +120% over two years
• Further improvement in profitability: Recurring Operating Income (ROI)(2) of €740m in H1, up +11.2% (+€81m) at constant FX(3) after +29.1% in H1 2020
  o France's ROI up +45.1% (+€58m)
• Further cost-reduction momentum (€430m in H1)
• EPS Growth of 34.3% in H1 2021, at €0.42
• Strong +€203m improvement in net free cash flow(4) to €(1,990)m in H1 2021
• Carrefour anticipates net free cash flow generation comfortably above €1bn in FY 2021
• Additional €200m share buyback program in 2021. Completion of the €500m program at end-July
• A Digital Day, presenting the Group's digital strategy, will be held on November 9, 2021

Alexandre Bompard, Chairman and CEO, declared: "Once again this half, Carrefour has delivered excellent results. This performance reflects both the relevance of our strategic plan and the effectiveness of its execution, thanks to the tremendous commitment of all employees. We continue our steady improvement in customer service and are gaining market share in all our key markets. Our organic growth is strong, while the value-creating acquisitions in recent periods are rapidly integrated. Finally, our new cost savings plan is quickly showing its first effects. While the sanitary and macroeconomic context remains uncertain, the Group is moving forward with great serenity towards achieving its objectives, both for full-year 2021, which will be another record year in terms of cash generation, and for the medium term. Hence, we are complementing the €500m share buyback completed at end-July with an additional €200m program. In addition, in the coming months, we will considerably amplify our digital transformation, whose main strategic drivers will be presented at a Digital Day to be held on November 9 in Paris."

Notes: (1) based on NielsenIQ RMS data; (2) ROI includes income and expenses related to COVID-19 effects. Exceptional bonuses and similar benefits to Group employees in 2020 (€128m, in H1) are accounted for under other non-current income and expenses ; (3) H1 2020 comparable base is restated for the IFRS IC decision on IFRS 16; (4) Net Free Cash Flow corresponds to free cash flow after net finance costs and net lease payments. It includes cash-out of exceptional charges

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Q2 sales and H1 2021 resultsJuly 28, 2021

FIRST-HALF 2021 KEY FIGURES

	H1 2020	H1 2021	Variation
(in €m)	restated(2)
Sales inc. VAT	38,079	38,319	+3.9% LFL
Recurring operating income (ROI)(1)	726	740	+11.2%, +€81m
(at constant FX)
Recurring operating margin	2.1%	2.1%	+3bps (+12bps at constant FX)
Operating income	485	689	+41.9% / +€203m
Net income, Group share	(25)	298	+€323m
Adjusted net income, Group share	250	337	+€87m
Adjusted EPS	0.31	0.42	+34.3%
Net Free Cash Flow	(2,193)	(1,990)	+€203m
Net financial debt (at June 30)	5,218	5,525	+€307m (incl. FX impact)

Notes: (1) ROI includes income and expenses related to COVID-19 effects. Exceptional bonuses and similar benefits to Group employees in 2020 (€128m, in H1) are accounted for under other non-current income and expenses; (2) H1 2020 comparable base is restated for the IFRS IC decision on IFRS 16

SOLID SALES MOMENTUM IN Q2 2021

Group sales increased by +3.6% LFL in Q2. This performance reflects a solid dynamic of market share gains in key countries and the relevance of our multi-format and omnichannel model, as it comes against a high comparable base. While not uniform across countries or formats, activity had grown strongly in Q2 2020 (+6.3% LFL), benefiting notably from the transfer to stores of out-of-home consumption and a wave of strong consumption after the first lockdown.

The sanitary environment was mixed in the second quarter of 2021: Restrictions linked to the pandemic were gradually lifted in most European countries, before the rapid progression of the Delta variant prompted the authorities to reinforce sanitary measures from June. Conversely, the sanitary situation deteriorated in Brazil.

In France, Q2 2021 revenue increased +4.7% on a LFL basis (+6.3% LFL in food, -6.5% LFL in non-food). Cumulatively over two years1, growth reached +5.4%. Market share improved by +0.5 point over the quarter; Carrefour once again outperformed in each of the reference channels: hypermarkets, supermarkets, convenience and Drive2.

• Hypermarkets(+4.3% LFL in Q2/+0.8% on a two-year stack) confirmed their good momentum, driven by improved customer satisfaction and operational excellence. Stores are gaining market share not only compared to their benchmark channel (+0.5 point in Q2) but also compared to the overall market
• Supermarkets(+7.0% LFL au T2/+11.4% on a two-year stack) maintained their very good momentum and continued to significantly outperform their benchmark channel
• Convenience(-3.0% LFL in Q2/+8.4% on a two-year stack) also outperformed its benchmark channel. Sales were down given a high comparable base (+11.4% in Q2 2020), as the first lockdown last year had particularly favored this segment

1. Sum of Q2 2020 LFL and Q2 2021 LFL
2. Market shares based on NielsenIQ RMS data for total food and non-food sales for the 13-week period ending 27/06/2021 for Carrefour Hypermarkets vs total Hypermarket banners, Carrefour Supermarkets vs total Supermarket banners, Carrefour Convenience vs total Convenience banners, Carrefour Drive vs total Drive banners in France (Copyright © 2021, NielsenIQ)

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Q2 sales and H1 2021 results

July 28, 2021

• Promocash's activities, while still penalized by restaurant closures over part of the quarter, were up compared to Q2 2020 and accelerated sharply at the end of the quarter after the reopening of bars and restaurants
• The performance in non-foodis solid given the increase of +10.7% LFL in Q2 2020. Cumulatively over two years, growth reached +4.2% LFL
• Food e-commercein France grew again in Q2 2021 (+11%), after growth of +63% in Q2 2020. Carrefour continues to deploy new initiatives; the Group has notably extended its partnership with Deliveroo in France and internationally, and announced the deployment of more than 400 automatic lockers in partnership with Pickup (a subsidiary of La Poste) in France. In addition, Carrefour announces today it has entered into exclusive negotiation to acquire a minority stake in Cajoo, a French pioneer in quick commerce

In Europe, like-for-like sales were down -1.9% compared to Q2 2020, but up +2.8% over two years. The trends vary considerably between countries, given very different comparable bases: in Q2 2020, Spain and Belgium had posted strong growth, outperforming markets that had benefited from the transfer of out-of-home catering. In Eastern Europe and Italy, the Group had been penalized by its exposure to stores located in shopping centers, which were temporarily closed.

• In Spain (-2.8% LFL/+7.1% on a two-year stack), Carrefour continued to outperform the market this quarter. The solid two-year growth illustrates the improvement in NPS® and price perception, which has continued since the start of the year. Supersol stores, whose acquisition was finalized in March, are gradually being converted to Carrefour banners
• In Italy (-3.2%LFL/-10.5% on a two-year stack), Carrefour's relative performance is improving month after month, under the leadership of the new management team, who has set customer satisfaction and operational excellence as priorities. This translates into continuous improvement in NPS® and price perception. LFL growth turned positive in June
• In Belgium (-6.7% LFL/+9.2% on a two-year stack), sales were down compared to the exceptionally high level of last year (+15.9% LFL in Q2 2020, the market having notably benefited from the closure of borders). It is still progressing strongly over two years
• In Poland (+7.1% LFL/+2.9% on a two-year stack) and in Romania (+8.4% LFL/+6.2% on a two-year stack), Carrefour benefited from the gradual lifting of sanitary restrictions, in particular the reopening of shopping centers in May

In Latin America, LFL sales increased by +10.5%, and by +31.4% over two years.

• In Brazil, sales increased by +10.7% at constant exchange rates in Q2, including LFL growth of +3.4% (+18.3% on a two-year stack), a contribution from openings and acquisitions of +6.5% and a positive petrol effect of +1.4%. The exchange rate was an unfavorable -8.0%. The performance was solid despite the high comparable base and the deterioration in recent months of the economic and sanitary situation, impacting consumers' purchasing power
  o Atacadão's sales were up +19.7% at constant exchange rates in Q2 2021 with like-for-like growth of +10.2% (+18.9% LFL over 2 years) as well as a contribution from openings and the Makro acquisition of +9.5%. In H1, Carrefour completed the conversion of 29 Makro stores twice as fast as planned. The Group thus anticipates run-rate EBITDA breakeven will reached at these stores by year-end. The fourth consecutive quarter of double-digit LFL growth at Atacadão illustrates the resilience of its model in the current pandemic context, as well as strategic decisions in favor of competitiveness
  o The sales decrease at Carrefour Retailin Q2 (-11.4% LFL/+18.9% on a two-year stack) was mainly linked to non-food, which had grown very strongly in 2020 in the context of COVID-19. Over two years, food and non-food sales posted double-digit growth, driven by the customer loyalty strategy that increases the frequency of visits and loyalty
  o Food e-commerce grew by +16% in the quarter and more than five-fold on a two-year stack

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Q2 sales and H1 2021 results

July 28, 2021

• 1. Financial servicescontinue to grow strongly and returned to their pre-pandemic level of credit production; billings are up +50% in Q2
• In Argentina (+45.1% LFL/+99.1% on a two-year stack), Carrefour continued to gain market share, with volumes increasing strongly in a declining market, marked by inflation that remains high

In Taiwan (Asia), Q2 sales were up +20.8% at constant exchange rates, thanks notably to the integration of the Wellcome convenience stores. The stores converted to the Carrefour banner this half strongly outperformed. Like-for-like sales were down -1.4%, impacted by the drop in traffic, particularly in hypermarkets, following the restriction measures put in place as part of the fight against the pandemic.

H1 2021 INCOME STATEMENT1

H1 2021 gross sales increased by +3.9% on a like-for-like basis. The Group's gross sales stood at €38,256m pre- IAS 29, an increase of +5.2% at constant exchange rates.

Net sales amounted to €34,462m.

Gross margin stood at 21.4% of net sales, down -39bps. This evolution reflects:

• The evolution of the integrated/franchisee mix
• Investments in competitiveness
• The resumption of promotional activity, which had been virtually stopped during the first lockdown in 2020
• The restart of petrol sales, which carry lower margin
• And purchasing gains that partly offset the above-mentioned factors

Distribution costs were down -32bps to 16.3% of net sales, compared to 16.6% in H1 2020. They benefited from cost savings plans and include costs related to new store openings, ongoing conversion of recently acquired stores and new services offered to customers, notably in digital.

Group Recurring operating income (ROI) reached €740m, up +€81m (+11.2%) at constant exchange rates (the currency effect was negative at -€67m, notably due to the depreciation of the Brazilian Real). Operating margin was stable (+3bps) at 2.1%.

The strong improvement in H1 reflected:

• • The increase in profitability of retail activities, despite the resumption of promotional and marketing activity
  • The improvement in the contribution of financial services, other services (travel, ticketing, etc.) and sales to professionals (HoReCa) in Europe (including France). Financial services benefit from good control over the cost of risk, while other activities resumed gradually during the second quarter with the easing of sanitary constraints
  • These items were, as expected, partly offset by a negative impact of around -€31m linked to the consolidation of recently acquired perimeters (Makro, Bio c 'Bon, Supersol, Wellcome) under conversion to Carrefour banners in H1
• In France, ROI was up a strong +45.1% (+€58m) to €187m. Operating margin increased by +32bps to 1.1%. This evolution reflects the excellent dynamics of distribution activities, combined with good cost reduction dynamics
• In Europe (excluding France), ROI increased by +13.0% (+€25m) to €225m. Operating margin improved by
  +27bps to 2.2%, driven in particular by Spain

1 H1 2020 comparable base is restated for the IFRS IC decision on IFRS 16

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Q2 sales and H1 2021 results

July 28, 2021

• In Latin America, ROI reached €309m; it was broadly stable (-0.8%) at constant exchange rates, after a strong +27.5% increase in H1 2020. Operating margin in H1 2021 was down -76bps to 5.0%. The impact of the application of IAS 29 is -€10m
  o In Brazil, ROI decreased by -€20m at constant exchange rates due to the drop in non-food, on a high comparable base. The Group kept investing in competitiveness in a deteriorated economic and sanitary environment
  o In Argentina, ROI continued to improve noticeably thanks to excellent commercial dynamics and a constant attention to costs
• In Taiwan (Asia), ROI in the half stood at €47m vs €49m in H1 2020

Non-recurringincome and expenses stood at €(41)m, vs €(239)m in H1 2020. It notably includes:

• The capital gain on the sale of 60% of Market Pay for c.€230m
• The capital gain following a contribution of real estate assets in Brazil (Pinheiros project) for €81m
• Provisions, within the framework of organizational transformation projects, for c.€(260)m

Net income, Group share stood at €298m vs €(25)m in H1 2020. It includes the following items:

• Net financial expenses of €(132)m, an improvement of €53m compared to H1 2020 following refinancing operations carried out under more favorable conditions. They also include a positive impact of +€16m from the application of IAS 29.
• An income tax charge down to €(187)m vs €(237)m the previous year, linked to the decrease in the CVAE rate in France and the depreciation of the Brazilian Real over the period. At the same time, the normative tax rate improved to 30.6%1 vs. 32.1% in H1 2020, reflecting in particular the evolution of the geographic mix and the drop in the Corporate tax rate in France
• Net income from discontinued operations, Group share of €23m vs €3m in H1 2020

Adjusted net income, Group share improved by +34,7% (+€87m), to €337m compared to €250m in H1 2020. Adjusted EPS improved by +34.3% to €0.42 vs €0.31 H1 2020.

1 Excluding non-current income and taxes not assessed on pre-tax income

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