J.Martins CEO sees profitability in Poland recovering despite deflation

LISBON, April 30 (Reuters) - Portuguese retailer Jeronimo Martins had an encouraging start of the year in its main market Poland despite food deflation and it projects that profitability there will be higher for all of 2015 than in the first quarter, its CEO said.

“We expect that food deflation in Poland will continue and are therefore prepared for it,” Pedro Soares dos Santos wrote in an e-mailed reply to questions from Reuters.

Customers were buying more after an expansion of the product range and the company was working to contain costs, he said.

Jeronimo Martins on Wednesday posted an unexpected near 4 percent increase in quarterly net profit as same-store sales at its Polish division Biedronka rose nearly 3 percent. Sales in Portugal also rose. Jeronimo stocks rose 7 percent after the results.

Soares dos Santos also said market research showed Biedronka had “important market share gains in January and February”.

“We have reasons to believe we’re on the right track to meet our objectives... We maintain our forecast that Biedronka EBITDA margin will not fall below 6.5 percent for the whole of this year,” the CEO said.

The margin, a key measure of profitability, slipped to 6.3 percent in the quarter from a year earlier. For all of 2014 the margin fell one percentage point to 6.8 percent.

The company hopes to hit 11 billion euros in Biedronka sales by 2017 after last year’s 8.4 billion.

In Portugal, Soares dos Santos said the company was focused on increasing sales “even if it means sacrificing some of the margin”.

He said the return of positive food inflation in the first quarter after deflation in the last quarter of 2014 was “a timid but positive sign,” but did not expect any easing of discounts in the market where price competition is heavy. (Writing by Andrei Khalip, editing by Axel Bugge)