Sonae, which owns Portugal's largest food retailer Continente, said that its third-quarter net profit fell 4.2%, despite a solid increase in sales, as record energy and transport costs dented its margins.
With businesses ranging from food retail to telecoms, Sonae earned €92 million from July to September, down from €96 million a year earlier.
Net income at its food retail unit Sonae MC, which runs about 300 hypermarkets and large supermarkets, dropped 41% to €61 million in the quarter, even though sales rose 16%, as it focused on keeping prices low to mitigate the impact of inflation on families, it said in a statement.
Consolidated sales rose 15% to €2.04 billion in the third quarter.
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) fell 5.4% to €224 million in the quarter, and the EBITDA margin fell by 2.4 percentage points to 11%.
Profit Margin Impact
"Profit margins were naturally depressed, driven by record energy and transport costs, higher supplier prices and by customer migration movements to low-end and low-price products," said chief executive Claudia Azevedo. "Nevertheless, consolidated results showed a strong level of resilience, and we continue to have a very solid financial position."
Net debt increased year-on-year by €164 million to €1 billion by September and the company said it had more than €1 billion in cash and unused credit facilities in its vaults. It is fully financed until early 2024 at a cost of about 1%.
"I am confident that, despite the macroeconomic headwinds, we remain well prepared to react rapidly to changing circumstances and capture opportunities that lie ahead," Azevedo added. "Sonae will continue to pursue its mission, always investing with a long-term view and in the best interest of our people, our communities, and our customers.”
Portuguese rival Jerónimo Martins reported an increase of 14% in third-quarter net profit two weeks ago.