Eroski reports €163.6m operating profit as it agrees a debt refinancing plan

Results were affected by changes in accounting standards introduced in 2018

Spanish retailer Eroski reported a 19.1% increase in operating profit to a total of €163.6m (£144.57m) for the year ending January 2019.

However, net profit for the group was down by 95% from €33.2m (£29.34m) in 2017 to €1.6m (£1.41m) in 2018. Eroski said that changes in accounting standards introduced in 2018 also affected its results, with €18m (£15.91m) allocated to covering risks.

In March, the co-operative, which forms part of the Mondragon Group, agreed a refinancing deal with five banks that account for 75% of its debt. The group has has paid almost €1.8bn (£1.59bn) in debts since 2010 and managed to reduce debt by €187m (£165.24m) over the 12 months ended January 2019.

At a press conference announcing the group’s performance, president Agustín Markaide highlighted that Eroski had reduced its debt to these financial institutions by €731m (£645.95m) over the last four years.

Earnings before interest stood at €250.7m (£221.53m), a €9m (£7.95m) increase from the previous year.

Over the same period, the retailer opened 58 new stores investing a total of €95m (£83.95m), some of which was spent on revamping existing stores. Of these new stores, 37 were franchises and 21 were its own stores, including five supermarkets, four petrol stations, four tourism agencies, eight sport stores and its new brand DOOERS.

Around 670 of its stores, which account for 70% of its sales, have now been given a fresh look.

Total sales reached €5.393bn (£4.77bn), a 2% decrease from 2017, which the co-op attributes to a reduction in perimeter after selling some supermarket type stores.

However, sales increased across stores that adopted the new “With You” (Contigo) format. In the Basque Country, Navarra, Galicia and Balearic Islands sales were up by 1.3%.

With six million customers members and 33,000 employees, Eroski has a 5.6% market share in Spain. In autonomous regions it holds a 14% market share, with 29% in the Basque Country.

Eroski’s parent co-operative Eroski S Coop closed the period with a net profit of €13.9m (£12.28), 6.6% more than 2017.

Another 14 financial institutions that also credited Eroski, need to agree to this refinance agreement by July.

As part of the agreement, Eroski needs to allow investment into its non-co-operative portfolio of businesses – a total of 40 subsidiaries such as petrol stations, travel agencies and sport stores. The group will be setting up a limited company which will group together all of its subsidiaries. Investors will be able to become shareholders in this company. The co-operative structure will remain separate from this company.

Mr Markaide confirmed the group would also have to sell strategic assets to write off some of its debt, particularly real estate property.

The agreement will see Eroski amortise €455m (£402.06) over the next five years.

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