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Ladies and gentlemen, thank you for standing by, and I would like to welcome you to SMU's Q2 2023 Conference Call. [Operator Instructions] The format of the call today will be a presentation by the management team followed by a question-and-answer session. So 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. And then 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. So as always, please remember to take a look at the caution regarding forward-looking statements on Slide #2 of our presentation.
As usual, we'll start with the recent highlights from our 3-year strategic plan for 2023 to 2025 with its 4 key pillars, starting with omnichannel growth on Slide #3. In the year-to-date, we've opened 3 Unimarc stores, 1 in Puerto Montt, 1 in Rancagua, and 1 in the Las Vizcachas sector of Puente Alto. We also opened a Maxiahorro store in Peru and inaugurated our fifth Super Diez store, which we converted from [indiscernible].
We have a number of new store openings lined up for the third quarter of this year, including an Alvi and 2 or 3 Unimarcs. And with respect to the Montserrat project, at our last earnings call, we have received the first 2 stores and conditions for us to start remodeling and we have now received 7 with more on the way.
The first 5 stores we received should be operating at year-end, and this includes 2 Unimarcs, 1 Alvi and 2 Super Diez stores. We expect to have 5 more Montserrat stores operating during the first quarter of next year, including a further 2 Unimarcs, 1 Alvi and 2 Super Diez stores, and we will continue to receive more stores in the coming months.
In order for our store to be received, it has to meet certain conditions, including having a permit in order and the rental contract must be filed with the property's register. 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 5, 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 insensitive 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 [indiscernible] campaign to help customers identify savings on basic products and also adding category-specific promotions simultaneously at Unimarc and Mayorista Diez. 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 [indiscernible]. We also have Santo Gusto, which targets Alvi's hotel, restaurant and cafeteria customers. And below, we have Como en Casa, which is our prepared food brand with a new line of frozen pizza. At right is Nuestra Cocina, 1 of our more established specialty brands, which have delivered consistent results in the dry goods section.
On Slide 8, it looks like Slide 7, sorry. The third pillar of our strategic plan targets efficiency and productivity. And in the year-to-date, we've continued to make progress on different initiatives, including self-service modules, such as self-checkout. 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. And our latest pilot project is digital shelf-management, not self 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 this slide. Now Slide 8, we have recent highlights and initiatives aimed at creating shared value for our stakeholders, one of which is small local suppliers. We're very proud of our -- of our [indiscernible] 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 raised 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 2 beneficiaries, [indiscernible] which provides shelter and dignified living conditions for senior citizens and [indiscernible] which operates rehabilitation centers for people with disabilities in the Matanzas region of Chile.
These activities are part of our diversity and inclusion model. Going on to the numbers on Slide #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. Whereas 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 & 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 2 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 is to say that these 2 line items, which are heavily impacted by minimum wage and inflation accounted for 2/3 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, 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 have 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 pretax effect of OK Market was CLP 18 billion last year, and the tax effect was CLP 2.5 billion for a toll of CLP 2.5 billion that we had last year and not this year.
If we exclude OK Market, pretax income would have been CLP 18 billion higher in 2023, which is also largely related to inflation since we had lower losses on inflation index liabilities this year. The higher pretax 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 pretax income, essentially because of lower losses on inflation index 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 could see in the graph below, and 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 full month to June of this year does not include that amount. However, we are still in the double digits.
On the next slide, 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 3.4x in June, remaining stable compared to December 2022. The same downward trend is true when we adjust for store rental, 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. And 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. And 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 flows 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 in bonds and bank debt without taking on new financing and also to cover higher levels of CapEx.
And even so, we ended the period with a balance of CLP 89 billion, 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.
Thank you very much for the presentation. We'll now be moving to the Q&A part of the call. [Operator Instructions] And we already acknowledged two text questions that came through already from [indiscernible] . 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, so we will unmute you.
Can you hear me? .
Yes.
Great. Yes. I wanted to ask about expenses. You talked about minimum wage increasing, inflationary pressures. So 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 going to 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? So that's the question.
Okay. Alonso, indeed we suffered the pressure of -- in expenses in the second quarter. We keep this situation in Q3 and Q4 basically for the minimum salaries -- minimal salaries is increasing in August and an additional CLP 20,000. The effect of this increase in our expenses will be CLP 130 million per month.
And also, we have another possible impact in services connected with the minimum salary as well. We are working in the -- with idea to mitigate this impact with that plan of reduction expenses for the second half of this year with the idea to compensate or offset part of this increases and with the idea to keep our EBITDA margin in line with our plan over of plus 9% for this year. I think will be possible through the gross margin improvement and reduction plan of expenses to compensate this impact.
Okay Arturo and following up on your last comment on the 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 year? Or do you see some pressure on.
9.5% probably because always in the second half, the EBITDA margin is better because the dilution of expenses is higher, especially in Q4.
We have another 2 questions.
Also, we have a question from [indiscernible] .
Can you hear me?
Yes.
My question is in regards to the gross margin expansion. And 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? So in other words, is this gross margin expansion endangering at all your relative competitive position in the industry? Or it's just a matter of cost under commercial conditions?
It is to keep our level of gross margin improving in comparison with 2022 in the second half of this year because our promotional activities are 90% financed from suppliers. And our idea is 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 sales is not the same impact in the last year for the contraction of the market. And 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. Therefore, the -- and we see the similar level of gross margin for the next month.
But again, that means that the expansion in the gross margin is purely better commercial conditions and increased supplier support on your promotion activity and not necessarily that you're expanding the price gap versus competition, right?
Right. You're right.
We have also a couple of questions that we've got in through the chat. We have a couple of questions. We -- Arturo 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 as a percentage of revenue going forward?
Yes. Any sign of consumer environment improving. No sign of consumer improvement until now. The contraction of the market is in July and August. Probably could be better in the next months for the reduction of the interest rate or improving the consumption, but 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. But however, we think that it's possible to compensate to offset the lower dilution expenses through the gross margin improvement with the idea to keep our EBITDA margins coming before.
In other question about the -- any delay in our organic plan of growth. No, we are in plan because we opened 3 new stores in the first month of the year, but always the plan considered the additional 9 stores in the Q3 and Q4, 5 Montserrat stores and another 4 stores included in our 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 credit level in your sales for different formats?
Yes. We have -- the private level is more -- the portion of private level is higher in Mayorista Diez and Alvi than Unimarc, but in average, we have 13% of the total sales. But Unimarc is close to 10%, but in another format, it's more like 15%. It is higher in the price formats. The idea is to reach of 20%, 25% in the price format and in Unimarc, 50% the next years. In terms of the gross margin, we are not seeing the improvement in the gross margin due to market private labels. Because in this step, we are improving the sales private labels, but not margin because the idea in the next year include more sophisticated private label in sophisticated categories improving our gross margin. But this year, the idea is to improve the sales through the private label in 2023 given the similar margin of the national brands.
Yes. We have one more question here.
Can you hear me?
Yes.
So my question is a little bit to understand maybe the payback of your new CapEx plan. So given that now you're going to 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? Yes. So that will be my first question. And 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. So what's your, let's say, assumption in terms of same-store sales to get to that level and how much is going to be basically explained by investments?
Yes. The first question in terms of payback, in average level of 6 or 7 years openings in general, in this level, 5 or 7 years payback. And in line with the previous year, not especially high or lower for this strategic plan. And in terms of the target for EBITDA for 2025. or sales of -- but 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 or estimate this number because it depends on the food inflation in the next year, but in general, it should be 1% or 100 basis points more than the food inflation? But today, it's very difficult to project the food inflation.
But the food inflation in the next year should be in 200 basis points more than general inflation that will be 3%, will be 4% or 5% food inflation and in that case, we can grow the 4%, 5%, 100 basis points more than food inflation, but that's in general our estimation.
I think that's all of the questions. But of course, as always, feel free to get in touch with us if you have any follow-up questions 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.