Jeronimo Martins — Interim / Quarterly Report 2011

Nov 23, 2011

INDEX

I – Consolidated Management Report

Message from the CEO – Pedro Soares dos Santos	3
1. Introduction	3
2. Sales Analysis	3
3. Results Analysis	4
4. Balance Sheet	5
5. Outlook for 2011	6

II – Consolidated Management Report Appendix

1. Stores Growth	7
2. Stores Network	7
3. EBITDA Margin Breakdown	7
4. Definitions	8
5. Information Regarding Individual Financial Statements	8

III – Consolidated Financial Statements

1. Consolidated Financial Statements	10
2. Notes to the Consolidated Financial Statements	14

I. CONSOLIDATED MANAGEMENT REPORT

Message from the CEO – Pedro Soares dos Santos

"In Poland, Biedronka, our top strategic priority, continued with its outstanding growth in sales and profits, confirming the Company's competitiveness, and strengthening further its leadership in the Polish market.

In Portugal, where the macroeconomic climate remains weak with negative impact in the general sentiment and in the consumption, Pingo Doce and Recheio continued to increase their respective market shares, proving the high resilience of their business models.

The strong performance in both countries confirms the Group's very positive outlook regarding growth in sales and profits for 2011.

I also would like to announce that at its meeting of the 25th and 26th of October, after analysing different options of geographical diversification, the Board of Directors of Jerónimo Martins decided to choose Colombia as the new market to enter."

1. Introduction

The Group's net profit grew by 32%, reaching Euro256 mn in the first nine months (9M) of the year and the third quarter maintained the positive trend of the first half of the year, with Biedronka, Pingo Doce and Recheio delivering sales and results growth above their respective sectors.

Consolidated sales, in 9M 11, grew by 15.6% to Euro7,320 mn and EBITDA increased by 19.5%, reaching 7.2% of sales (7.0% in 9M of 2010).

Consolidated net debt was reduced by 42% (Euro240 mn) compared to the same period of the previous year.

(Million Euro)		9M 11		9M 10		D %		Q3 11		Q3 10		D %
		% total		% total	Pln	Euro		% total		% total	Pln	Euro
Biedronka		4,328 59.1% 3,466 54.7% 25.3% 24.9% 1,483 57.8% 1,245 54.4% 23.0% 19.1%
Retail Portugal		2,312 31.6% 2,191 34.6%				5.5%		832 32.4%		790 34.5%		5.3%
Recheio	568	7.8%	542	8.6%		4.8%	215	8.4%	206	9.0%		4.2%
Madeira	119	1.6%	102	1.6%		16.3%	4 4	1.7%	4 0	1.8%		10.2%
Manufacturing	181	2.5%	188	3.0%		-3.9%	6 6	2.6%	7 1	3.1%		-6.7%
Mkt. Repr. and Rest. Serv.	6 4	0.9%	6 6	1.0%		-2.2%	2 3	0.9%	2 3	1.0%		1.5%
Consolidation Adjustments	-252	-3.4%	-223	-3.5%		13.3%	-96	-3.8%	-86	-3.8%		11.8%
Total JM	7,320	100% 6,333		100%		15.6% 2,568		100% 2,290		100%		12.2%
p.m. Retail Mainland (store sales)	2,097		2,010			4.3%	751		720			4.3%

2. Sales Analysis

Consolidated sales reached Euro7,320 mn, +15.6% than the first nine months of the previous year, as a result of the Like-for-Like (LFL) performance of 8.3% of the Group's sales and the contribution from new stores.

In Poland, the positive trend in food consumption in the previous quarters was maintained and food inflation remained stable at 5.8% compared to the same period of the previous year.

Biedronka grew its net sales by 25.3% in local currency, as a result of the strong LFL (+14.6%) and the 14.9% increase in the sales area compared to 9M of 2010.

In Portugal, the decline in the levels of consumption continued to impact the food market. In the first 9M of the year, food inflation was 1.2% compared to the same period of the previous year.

Pingo Doce continued to deliver results of its strong competitive positioning, with a growth of 4.3% in sales, helped by 6 more stores than in the previous year and the LFL performance of +1.1%. The Company's LFL reflected a growth in traffic, offset, to a certain extent, by the reduction in the average ticket that remained influenced by the trading down.

Recheio's sales posted a 4.8% growth as a result of the 1.8% increase in LFL sales and one new food service platform. It should be mentioned that in the two segments in which the Company operates – Traditional and HoReCa – it continues to increase its sales, despite the fact that there is a negative market trend in both segments.

In Madeira, sales for the first 9M of the year were up 16.3% as a result of the strong increase of 6.8% in LFL sales which benefitted from the re-opening of the Company's two main stores in June 2010, following total refurbishment.

In Manufacturing, the market conditions continued to be reflected on some categories performance, leading the sales in the 9M to decrease 3.9%.

Sales in Marketing, Representations and Restaurant Services posted a decrease of 2.2%, reflecting the impact of the economic context in some categories.

(Million Euro)	9M 11		9M 10	(*)	D	Q3 11		Q3 10	(*)	D
Consolidated Sales	7,320		6,333		15.6%	2,568		2,290		12.2%
Total Margin	1,661	22.7%	1,464	23.1%	13.5%	597	23.2%	541	23.6%	10.3%
Operating Costs	-1,134	-15.5%	-1,023	-16.1%	10.9%	-380	-14.8%	-350	-15.3%	8.8%
EBITDA	527	7.2%	441	7.0%	19.5%	216	8.4%	191	8.3%	13.1%
Depreciation	-157	-2.1%	-141	-2.2%	11.4%	-53	-2.0%	-48	-2.1%	8.6%
EBIT	370	5.1%	300	4.7%	23.3%	164	6.4%	143	6.2%	14.7%
Financial Results	-23	-0.3%	-31	-0.5%	-23.5%	-8	-0.3%	-9	-0.4%	-10.4%
Non Recurrent Items	-6	-0.1%	-2	0.0%	n.a	0	0.0%	0	0.0%	n.a
EBT	341	4.7%	268	4.2%	27.1%	156	6.1%	134	5.8%	16.4%
Taxes	-71	-1.0%	-58	-0.9%	21.6%	-32	-1.2%	-29	-1.3%	7.6%
Net Profit	270	3.7%	210	3.3%	28.6%	124	4.8%	104	4.6%	18.9%
Non Controlling Interest	-14	-0.2%	-16	-0.3%	-11.5%	-12	-0.5%	-12	-0.5%	0.0%
Net Profit attr. to JM	256	3.5%	194	3.1%	31.9%	112	4.4%	92	4.0%	21.4%
EPS (€)	0.41		0.31		31.9%	0.18		0.15		21.4%
Cash Flow per share (€)	0.70		0.57		23.8%	0.29		0.24		18.4%

3. Results Analysis

(*) Restated – see Chapter III, note 2

Operating Profit

Consolidated EBITDA posted a 19.5% growth, reaching 7.2% of sales (7.0% in the same period of the previous year).

Note: Group and Biedronka EBITDA margin reclassified – detail in Chapter III – note 2

In Poland, the evolution of Biedronka's margin continued to reflect the benefits of scale of an operation which maintains its pace of sales growth above 20%. EBITDA generated in 9M of 2011 grew by 36.2%, in local currency (+35.7% in Euros) to 7.8% of sales (7.2% in 9M of 2010).

In Distribution in Portugal, the EBITDA margin reached 6.3% of sales (6.3% in 9M of 2010), the EBITDA generated having grown 4.1%. It should be noted that this performance is a good proof of the Company's great operational resilience.

In Manufacturing, the EBITDA margin drop in 9M of 2011 reflected a decision taken by the company, in previous quarters, to maintain its competitiveness even in the face of the increase in the cost of some essential raw materials.

Net Result

Net profit attributable to Jerónimo Martins grew by 31.9%, reaching Euro256 mn (+32.8% when excluding non-recurring items).

9M 11	2010	9M 10
715	747	746
2,262	2,309	2,270
-1,370	-1,425	-1,354
6 2	7 8	8 6
1,669	1,709	1,748
711	782	732
4 5	7 2	8 1
1 1	2 5	3 2
-436	-301	-273
331	578	572
299	287	287
629	629	629
410	216	260
1,338	1,132	1,176
24.7%	51.0%	48.6%

4. Balance Sheet

Consolidated net debt reduced by Euro240 mn to Euro331 mn. Gearing fell to 24.7% (48.6% in 9M of 2010).

Investment Programme

With regards to the Group's investment programme, which reached Euro225 mn in 9M of 2011, 66.6% was allocated to Poland. Being the Group's top strategic priority, Biedronka opened 54 new stores in Poland during 3Q.

5. Outtlook for 2011

Throughout the first 9M of the year, Biedronka strengthened its market leadership in Poland, both through double-digit LFL growth and the execution of its ambitious store-opening plan. In Portugal, Pingo Doce and Recheio, which are operating in a deteriorating macro-economic environment since last year, have shown remarkable resilience and both posted growth in sales and profits.

The Polish business already represents 59.1% of the sales and 64.1% of the EBITDA generated by the Group. In 2011, with the respective LFL expected at double-digit and further 200 stores (compared to the end of 2010), Biedronka will again contribute towards what is anticipated to be another year of significant growth. For 2011 the Group maintains the expectation of double-digit consolidated sales growth (at a constant exchange rate), with consolidated EBITDA growing ahead of sales.

It should also be mentioned that, notwithstanding the doubts regarding the trend in the Portuguese economy, the Group believes that Pingo Doce and Recheio are prepared to continue the increase of their market shares, as the result of their proven ability to respond to the change in food consumption habits.

The Group approaches the end of the year with confidence regarding the soundness that its formats have shown in the Portuguese market and essentially its execution capacity in the Polish market, where Biedronka's growth potential is keeping it at the forefront of the strategic priorities as Jerónimo Martins' main growth driver.

At its meeting of the 25th and 26th of October, after analysing different options of geographical diversification, the Board of Directors of Jerónimo Martins decided to choose Colombia as the new market to enter.

Lisbon, 25th October, 2011

The Board of Directors

II. CONSOLIDATED MANAGEMENT REPORT APPENDIX

1. Sales Growth

	Total Sales Growth					LFL Sales Growth
	Q2 11	H1 11	Q3 11	9M 11	Q1 11	Q2 11	H1 11	Q3 11	9M 11
22.8%	33.1%	28.1%	19.1%	24.9%
21.7%	31.4%	26.6%	23.0%	25.3%	11.7%	20.0%	16.0%	12.2%	14.6%
4.6%	4.0%	4.3%	4.3%	4.3%	* 1.8%	* 0.1%	* 0.9%	* 1.4%	* 1.1%
5.6%	4.1%	4.8%	4.4%	4.7%	1.7%	-0.2%	0.7%	1.4%	0.9%
-4.2%	3.5%	-0.2%	3.7%	1.2%	3.2%	2.9%	3.0%	1.1%	2.4%
3.7%	6.4%	5.2%	4.2%	4.8%	0.4%	3.3%	2.0%	1.4%	1.8%
15.9%	24.4%	20.3%	10.2%	16.3%	3.7%	5.3%	4.5%	10.2%	6.8%
-4.6%	-0.4%	-2.3%	-6.7%	-3.9%	-4.6%	-0.4%	-2.3%	-6.7%	-3.9%
-4.8%	-3.8%	-4.2%	1.5%	-2.2%	-7.9%	-7.3%	-7.6%	-1.5%	-5.5%
					0.1%	-0.9%	-0.4%	0.6%	-0.1%
Openings Number of Stores						Network
	Q1 11 2010				* Ex-petrol LFL

2. Stores Network

					Closings
		Q1 11	Q2 11	Q3 11	9M 11	9M 11	9M 10
Biedronka	1,649	1 9	4 4	5 4	1 0	1,756	1,559
Retail Portugal	349	0	4	3	2	354	348
Supermarkets	340	0	4	3	2	345	339
Hypermarkets	9	0	0	0	0	9	9
Recheio	3 8	0	1	0	0	3 9	3 8
Madeira	1 5	0	0	0	0	1 5	1 5
	2010	Openings			Closings *	Network
Sales Area (sqm)

					Closings *
		Q1 11	Q2 11	Q3 11	9M 11	9M 11	9M 10
Biedronka	938,218	11,989	29,017	35,318	3,739	1,010,803	880,066
Retail Portugal	437,317	0	4,488	3,150	3,512	441,433	436,317
Supermarkets	359,036	0	4,488	3,150	1,009	365,665	358,036
Hypermarkets	78,281	0	0	0	2,513	75,768	78,281
Recheio	123,532	0	2,000	0	-65	125,597	122,901
Madeira	14,253	0	0	0	0	14,253	14,253

* including changes of sales area due to remodellings

3. EBITDA Margin Breakdown

(% of sales)	9M 11	(*) 9M 10
Distribuiton Poland	7.8%	7.2%
Distribution Portugal	6.3%	6.3%
Manufacturing and Services	10.0%	12.3%

(*) Restated – see Chapter III, note 2

4. Definitions

Like For Like (LFL) sales: sales made by stores that operated under the same conditions in the two periods. Excludes stores opened or closed in one of the two periods. Sales of stores that underwent profound remodelling are excluded for the remodelling period (store closure);

Cash Flow per share: (Net Profit + Depreciation – Deferred tax – Non-recurrent items) / Number of Shares;

Gearing: Net Debt / Shareholder Funds;

EBITDA Retail Margin in Portugal - Reclassification of Fees to Shareholders: Retail Portugal's EBITDA margin was subject to reclassification, having excluded from the EBITDA, the costs with services from Shareholders. This allows a more accurate analysis of business area performance aligning the information provided to the market with that used internally for assessing the business area's performance. The part of these costs not eliminated in the consolidation process is now included in the Group's Holdings and continue to affect the consolidated EBITDA.

5. Information Regarding Individual Financial Statements

In accordance with number 3 of article 10 of the Regulation number 5/2008 of the Portuguese Securities Market Commission (CMVM), the Quarter Individual Financial Statements of Jerónimo Martins SGPS, S.A. will not be disclosed as they do not include significant information.

III. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS FOR SEPTEMBER 2011 AND 2010

				Euro thousand
	Notes	9 Months 2011	9 Months 2010(*)	rd Quarter 3 2011	rd Quarter 3 2010(*)
Sales and services rendered	3	7,319,767	6,333,148	2,568,263	2,289,858
Cost of sales		(6,007,139)	(5,127,311)	(2,096,562)	(1,848,207)
Supplementary income and costs	5	348,735	257,834	124,767	98,938
Gross profit		1,661,363	1,463,671	596,468	540,589
Distribution costs	6	(1,148,162)	(1,032,004)	(384,470)	(355,136)
Administrative costs	6	(142,820)	(131,288)	(48,359)	(42,785)
Exceptional operating profits/losses	9.1	(4,683)	(1,370)	(29)	(62)
Operating profit		365,698	299,009	163,610	142,606
Net financial costs	7	(23,714)	(30,985)	(8,170)	(9,126)
Gains in associated companies		271	321	174	206
Gains/Losses in other investments	9.2	(1,500)	(149)	-	-
Profit before taxes		340,755	268,196	155,614	133,686
Income taxes	8	(70,953)	(58,352)	(31,732)	(29,493)
Profit before non-controlling interests		269,802	209,844	123,882	104,193
Attributable to:
Non-controlling interests		14,126	15,958	12,053	12,050
Jerónimo Martins Shareholders		255,676	193,886	111,829	92,143
Basic and diluted earnings per share- Euros	15	0.4068	0.3085	0.1779	0.1466

To be read with the attached notes to the consolidated financial statements

(*) Restated – see note 2

CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2011 AND DECEMBER 2010

			Euro thousand
	Notes	2011	2010
Assets
Tangible assets	10	2,154,502	2,192,824
Investment properties	10	50,602	52,047
Intangible assets	10	822,958	863,368
Investments in associated Companies		830	1,213
Loans to joint-ventures		170	-
Available-for-sale financial investments	12	6,277	7,015
Trade debtors and deferred costs		67,203	71,716
Derivative financial instruments	11	190	46
Deferred tax assets		55,314	67,360
Total non-current assets		3,158,046	3,255,589
Inventories		391,592	368,711
Taxes receivable		30,992	48,947
Trade debtors, accrued income and deferred costs		221,296	181,848
Derivative financial instruments	11	3,446	-
Cash and cash equivalents	13	438,494	303,927
Total current assets		1,085,820	903,433
		4,243,866	4,159,022
Total assets
Shareholders' equity and liabilities
Share capital		629,293	629,293
Share premium		22,452	22,452
Own shares		(6,060)	(6,060)
Fair value and other reserves	14.1	2,372	63,433
Retained earnings		391,580	135,988
		1,039,637	845,106
Non-controlling interests		298,777	286,706
		1,338,414	1,131,812
Total Shareholders' equity
Borrowings	16	584,778	634,182
Derivative financial instruments	11	11,875	16,649
Employee benefits	17	31,172	30,839
Deferred profits- state grants		916	935
Provisions for risks and contingencies	17	20,081	22,907
Deferred tax liabilities		93,319	96,928
Total non-current liabilities		742,141	802,440
Trade creditors, accrued costs and deferred income		1,887,127	1,895,411
Derivative financial instruments	11	465	7,763
Borrowings	16	171,178	219,217
Taxes payable		104,484	102,308
Deferred profits- state grants		57	71
Total current liabilities		2,163,311	2,224,770
Total Shareholders' equity and liabilities		4,243,866	4,159,022

To be read with the attached notes to the consolidated financial statements

CONSOLIDATED STATEMENT OF GAINS AND LOSSES RECOGNISED IN EQUITY

9 Months 2011 9 Months 2010 3 rd Quarter 2011 3 rd Quarter 2010 Currency translation differences (68,450) 15,075 (65,134) 18,927 Fair value of cash flow hedging 2,258 (5,717) (3,057) 1,501 Fair value of hedging instruments on foreign operations 6,757 (3,456) 6,322 (3,931) Fair value of available-for-sale financial investments (738) (402) (438) 37 Gains/losses directly recognised in equity (60,173) 5,500 (62,307) 16,534 Net profit 269,802 209,844 123,882 104,193 Total gains/losses recognised 209,629 215,344 61,575 120,727 Attributable to: Non-controlling interests 15,014 14,118 11,157 12,533 Jerónimo Martins Shareholders 194,615 201,226 50,418 108,194

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

					Shareholders' equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A.
	Notes	Share Capital	Share Premium	Own Shares	Fair value and other reserves	Retained Earnings	Total	Non controlling Interests	Shareholders' Equity
Balance Sheet at 31 December 2009		629,293	22,452	(6,060)	55,184	77,189	778,058	287,636	1,065,694
Equity changes in 2010
Currency translation differences in the Nine Months of 2010	14.1				15,075		15,075		15,075
Fair value of cash flow hedging	14.1				(3,877)		(3,877)	(1,840)	(5,717)
Fair value of hedging instruments on foreign operations	14.1				(3,456)		(3,456)		(3,456)
Fair value of available-for-sale financial investments	14.1				(402)		(402)		(402)
Gains/losses directly recognised in equity					7,340		7,340	(1,840)	5,500
Net profit in the Nine Months of 2010						193,886	193,886	15,958	209,844
Total gains/losses recognised during the year					7,340	193,886	201,226	14,118	215,344
Dividends						(89,866)	(89,866)	(14,804)	(104,670)
Balance Sheet at 30 September 2010		629,293	22,452	(6,060)	62,524	181,209	889,418	286,950	1,176,368
Balance Sheet at 31 December 2010		629,293	22,452	(6,060)	63,433	135,988	845,106	286,706	1,131,812
Equity changes in 2011
Currency translation differences in the Nine Months of 2011	14.1				(68,450)		(68,450)		(68,450)
Fair value of cash flow hedging	14.1				1,370		1,370	888	2,258
Fair value of hedging instruments on foreign operations	14.1				6,757		6,757		6,757
Fair value of available-for-sale financial investments	14.1				(738)		(738)		(738)
Gains/losses directly recognised in equity					(61,061)		(61,061)	888	(60,173)
Net profit in the Nine Months of 2011						255,676	255,676	14,126	269,802
Total gains/losses recognised during the year					(61,061)	255,676	194,615	15,014	209,629
Dividends	14.2							(2,686)	(2,686)
Non-controlling interests acquisition	4					(84)	(84)	(257)	(341)
Balance Sheet at 30 September 2011		629,293	22,452	(6,060)	2,372	391,580	1,039,637	298,777	1,338,414

To be read with the attached notes to the consolidated financial statements

Euro thousand

Euro thousand

CONSOLIDATED CASH FLOW STATEMENT FOR SEPTEMBER 2011 AND 2010

			Euro thousand
	Notes	9 Months 2011	9 Months 2010 (*)
Operating Activities
Cash generated from operations		575,885	578,668
Interest paid		(22,157)	(35,792)
Income taxes paid		(50,849)	(31,213)
Cash Flow from operating activities		502,879	511,663
Cash flow from investment activities		(242,353)	(278,498)
Cash Flow from financing activities		(102,163)	(185,737)
Net changes in cash and cash equivalents		158,363	47,428
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		303,927	223,501
Net changes in cash and cash equivalents		158,363	47,428
Effect of currency translation differences		(23,796)	5,344
rd Quarter Cash and cash equivalents at the end of 3	13	438,494	276,273

To be read with the attached notes to the consolidated financial statements (*) Restated – see note 2

CONSOLIDATED CASH FLOW STATEMENT FOR THE INTERIM PERIOD

				Euro thousand
	9 Months 2011	9 Months 2010	rd Quarter 3 2011	rd Quarter 3 2010
Cash Flow from operating activities	502,879	511,663	273,120	295,687
Cash Flow from investment activities	(242,353)	(278,498)	(81,853)	(110,278)
Cash Flow from financing activities	(102,163)	(185,737)	12,534	(107,423)
Cash and cash equivalents changes	158,363	47,428	203,801	77,986

Index to the Notes to the Consolidated Financial Statements	Page
	Activity 15 Accounting policies 15 Segments reporting16 Businesses acquisitions and changes to the consolidation scope17 Supplementary income and costs 18 Distribution and administrative costs 18 Net financial costs 18 Income tax recognised in the income statement19 Exceptional operating profits/losses and gains/losses in other investments19 Fixed assets and investment property19 Derivative financial instruments 20 Available-for-sale financial investments20 Cash and cash equivalents 20 Capital and reserves21 Earnings per share 21 Borrowings22 Provisions and adjustments to the net realisable value22 Contingencies 22 Related parties23

1 Activity

Jerónimo Martins, SGPS, S.A. (JMH), is the parent Company of Jerónimo Martins Group (Group) and has its head office in Lisbon.

Jerónimo Martins Group is essentially devoted to the production, distribution and sale of food and other fast moving consumer goods products. The Group operates in Portugal and Poland.

Head Office: Rua Tierno Galvan, Torre 3, 9º, J- 1099-008 Lisbon

Share Capital: 629,293,220 euros

Registered at the Commercial Registry Office of Lisbon and Tax Number: 500 100 144

JMH has been listed on Euronext Lisbon (ex-Lisbon and Porto Stock Exchange) since 1989.

The Board of Directors approved these consolidated financial statements on 25th October 2011.

2 Accounting policies

All amounts are shown in thousand euros (EUR thousand) unless otherwise stated.

The amounts presented for quarters, and the corresponding changes are not audited.

The JMH consolidated financial statements were prepared in accordance with the interim financial reporting standard (IAS 34), and all other International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB) and with the interpretations of the International Financial Reporting Interpretations Committee (IFRIC).

The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and with the same standards and accounting policies adopted by the Group on the elaboration of the annual financial statements, including mainly an explanation of the events and relevant changes for the understanding of variations in the financial position and Group performance since the last annual report. Thus, some of the notes from the 2010 annual report are omitted because no changes occurred or they are not materially relevant for the understanding of the interim financial statements.

As mentioned in Corporate Governance chapter of 2010 Annual Report, the Company, as a result of its normal activity, is exposed to several risks which are monitored and mitigated throughout the year. During the first nine months of 2011, there were no material changes in addition to the notes discriminated in this annex, that could significantly change the assessment of the risks that the group is exposed to.

In relation to 2010, the European Union issued the Regulation no. 149/2011, which adopted some improvements to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13. Its implementation is mandatory for financial years beginning on January 1, 2011, having no material impact on the Group's Financial Statements.

In May 2011 the IASB issued IFRS 10 – Consolidated Financial Statements IFRS 11 – Joint Arrangements, IFRS 12 – Disclosures of Interests in Other Entities, IFRS 13 - Fair Value Measurement, in June 2011 were issued amendments to IAS 1 - Presentation of Financial Statements and IAS 19 - Employee Benefits.

All these standards are still waiting to be endorsed by the European Union, and its mandatory implementation should occur for annual periods beginning on January 1st, 2013.

The most relevant impacts of its implementation regard, changes in consolidation method for joint ventures as well as changes in the presentation of financial information. Their application will not result in changes to the Group's Equity.

Changes in Basis for Preparation (Reclassifications)

Over the past years, with the development observed in the Polish market's operations, the Management has privileged the establishment of long-term relationships with its suppliers, namely through the negotiation of prices, volumes, packages and payment terms.

In this sense it has agreed with the majority of its suppliers, to extend payment terms, bearing, in compensation, financial expenses, thereby obtaining greater flexibility in the management of its working capital.

Respecting their accounting nature, these financial expenses have been, until now, classified in the Net financial costs line. However, this value has been gaining relevance with the growth of Biedronka's operations and the management sees this flow as part of its cash flow generation and dependent on the evolution of its activity, as such, the Group decided to classify this amount as Supplementary costs which contribute to the total margin.

In order to have comparable financial information, we have restated the financial statements of the previous year, as shown below:

Notes to the Consolidated Financial Statements 30 September 2011 and 2010

	9 Months 2010				rd Quarter 3 2010
	Published	Reclassification	Restated	Published	Reclassification	Restated
Sales and services rendered	6,333,148	-	6,333,148	2,289,858	-	2,289,858
Cost of sales	(5,127,311)	-	(5,127,311)	(1,848,207)	-	(1,848,207)
Supplementary income and costs	278,590	(20,756)	257,834	105,931	(6,993)	98,938
Gross profit	1,484,427	(20,756)	1,463,671	547,582	(6,993)	540,589
Distribution costs	(1,032,004)	-	(1,032,004)	(355,136)	-	(355,136)
Administrative costs	(131,288)	-	(131,288)	(42,785)	-	(42,785)
Exceptional operating profits/losses	(1,370)	-	(1,370)	(62)	-	(62)
Operating profit	319,765	(20,756)	299,009	149,599	(6,993)	142,606
Net financial costs	(51,741)	20,756	(30,985)	(16,119)	6,993	(9,126)
Gains/Losses in associated companies	321	-	321	206	-	206
Gains/Losses in other investments	(149)	-	(149)	-	-	-
Profit before taxes	268,196	-	268,196	133,686	-	133,686

2.1. Transactions in foreign currencies

Transactions in foreign currencies are translated into Euros at the exchange rate prevailing on the transaction date.

On the balance sheet date, monetary assets and liabilities expressed in foreign currencies are translated at the exchange rate prevailing on that date and exchange differences arising from this conversion are recognised in the income statement. When qualifying as hedges on investments in foreign subsidiaries the exchange differences are deferred in equity.

The main exchange rates applied on the balance sheet date are those listed below:

	Rate on 30 September 2011	Average rate for the 9 Months 2011
Polish Zloty (PLN)	€ 0.2270	€ 0.2489
US Dollar (USD)	€ 0.7561	-

3 Segments reporting

Management monitors the performance of the business based on a geographical and business nature perspective. Due to the fact that the business units in the distribution area in Portugal share a set of competences, the Group analyse, on a quarterly basis, its segments in an aggregate performance perspective. In addition, the Group also separate the distribution business unit in Poland. Apart from these, there are also other businesses, but due to their minor materiality they are not reported separately.

Business segments:

• Portugal Distribution: comprises the business unit of JMR (Pingo Doce supermarkets), the wholesale business unit Recheio and Madeira business unit (Pingo Doce supermarkets and Recheio Cash & Carry);
• Poland Distribution: the business unit using the brand Biedronka;
• Others, eliminations and adjustments: includes i) the business units with minor materiality (Unilever Jerónimo Martins, Gallo Worldwide, Marketing Services and Representations, Restaurants and pharmacies in Poland), ii) the Holding companies and iii) the Group's consolidation adjustments.

Management evaluates the performance of segments based on the Earnings Before Interest and Taxes (EBIT). This indicator excludes the effects of non-recurrent results.

		Portugal Poland Distribution Distribution			Others, eliminations and adjustments		Total JM Consolidated
	2011	2010	2011	2010 (*)	2011	2010	2011	2010 (*)
Net Sales and Services				2,787,563 2,658,350 4,327,874 3,465,940 204,330				208,858 7,319,767 6,333,148
Inter-segments	195	270	441	452	(271)	(345)	365	377
External Customers	2,787,368	2,658,080	4,327,433	3,465,488	204,601			209,203 7,319,402 6,332,771
Operational Cash-Flow (EBITDA)	175,179	168,221	337,673	248,830	14,348	24,059	527,200	441,110
Depreciations and Amortisations	(81,287)	(74,579)	(71,678)	(62,336)	(3,854)	(3,816)	(156,819)	(140,731)
Operational Result (EBIT)	93,892	93,642	265,995	186,494	10,494	20,243	370,381	300,379
Financial Results							(24,943)	(30,813)
Net Result Attributable to JM							255,676	193,886
TOTAL ASSETS (1)				2,210,455 2,248,883 1,698,069 1,660,500 335,342				249,639 4,243,866 4,159,022
TOTAL LIABILITIES (1)				1,539,918 1,615,821 1,066,500 1,147,527 299,034			263,862 2,905,452 3,027,210
Investments in Fixed Assets	71,447	94,119	149,678	190,148	3,615	3,416	224,740	287,683

Detailed Information by Segment at September 2011 and 2010

(1) The comparable amounts of total assets and liabilities are reported to 31 December 2010

(*) Restated – see note 2

Reconciliation between EBIT and the Operational Result of the Income Statement by Functions

	September 2011	September 2010 (*)
EBIT	370,381	300,379
Non recurrent results	(4,683)	(1,370)
Operational Result	365,698	299,009

(*) Restated – see note 2

Information by Geographical Segments at September 2011 and 2010

	Net Sales and Services
	2011	2010
Portugal	2,985,471	2,862,444
Poland	4,334,296	3,470,704
Total	7,319,767	6,333,148

4 Businesses acquisitions and changes to the consolidation scope

On March 15th 2011, 51% of the share capital of the company Caterplus – Comercialização e Distribuição de Produtos de Consumo, Lda., were acquired by the company Jerónimo Martins – Distribuição de Produtos de Consumo, Lda., which now owns 100% of the share capital of that company. The difference between the price paid and the value of the non-controlling interests acquired, were recognized directly in equity as the Group had already control over the acquired company.

5 Supplementary income and costs

	September 2011	September 2010 (*)
Supplementary gains	363,839	269,187
Cash discount received	30,859	29,256
Cash discount paid	(2,473)	(2,684)
Electronic payment commissions	(12,890)	(12,087)
Other supplementary costs	(29,905)	(25,361)
Provisions for debtors suppliers	(695)	(477)
	348,735	257,834

(*) Restated

Supplementary gains concern to profits obtained by the Group through the distribution of goods, namely, rental of spaces, participation in birthday events, rental of shelf's, etc. Supplementary costs concern to the same nature of supplementary gains mentioned, paid by subsidiaries operating in the manufacturing and services segments, as well as financial expenses incurred by Poland Retail (see note 2 - changes in Basis for preparation).

6 Distribution and administrative costs

	September 2011	September 2010
Supplies and services	271,844	239,338
Advertising costs	49,600	54,515
Rents	152,632	135,098
Staff costs	558,315	502,943
Depreciations, amortisations and assets profit/loss	155,460	139,762
Transportation costs	97,769	84,390
Other operational profit/loss	5,362	7,246
	1,290,982	1,163,292

7 Net financial costs

	September 2011	September 2010 (*)
Interest expense	(24,436)	(28,473)
Interest received	6,025	2,897
Dividends	19	56
Net foreign exchange	(1,563)	(328)
Investment property:
Changes to fair value (note 10)	(14)	(14)
Other financial costs and gains	(3,762)	(4,977)
Fair value of financial investments held for trade:
Derivative instruments	17	(146)
	(23,714)	(30,985)

(*) Restated

The interest expense heading includes the interests regarding loans measured at amortized cost, as well as interests on fair value and cash flow hedging instruments (note 10).

As explained in note 2, financial expenses related to the extension of payment terms from suppliers in the retail segment of Poland were restated to Supplementary costs.

Other financial costs and gains include costs with debt issued by the Group.

8 Income tax recognised in the income statement

	September 2011	September 2010
Current income tax
Current tax of the year	(60,540)	(52,591)
Adjustment to prior year estimation	100	147
	(60,440)	(52,444)
Deferred tax
Temporary differences created and reversed	(12,514)	(7,283)
Change to the recoverable amount of tax losses and temporary differences from previous years	2,001	1,375
	(10,513)	(5,908)
Total income taxes	(70,953)	(58,352)

9 Exceptional operating profits/losses and gains/losses in other investments

9.1 Exceptional operating profits/losses

	September 2011	September 2010
Losses with businesses disposals	-	(1,218)
Losses related to natural disaster in Madeira	-	(1,008)
Indemnities related to termination of lease agreement	(4,907)	-
Losses with organizational restructuring program	(173)	-
Impact of actuarial assumptions changes	723	-
Reimbursement of notary fees resulting from court decision	119	1,379
Impairment of assets	(496)	(402)
Others	51	(121)
	(4,683)	(1,370)

9.2 Gains/Losses in other investments

	September 2011	September 2010
Impairment of investment properties	(1,500)	-
Losses with the disposal of available-for-sale financial investments	-	(149)
	(1,500)	(149)

10 Fixed assets and investment property

	Tangible assets	Investment property	Intangible assets	Total
Net value at 31 December 2010	2,192,824	52,047	863,368	3,108,239
Foreign exchange differences	(90,902)	-	(40,091)	(130,993)
Increases	211,578	19	13,162	224,759
Disposals and write-offs	(8,073)	-	(7,128)	(15,201)
Transfers	(916)	50	916	50
Depreciation and impairment losses	(150,009)	(1,500)	(7,269)	(158,778)
Fair value changes	-	(14)	-	(14)
Net value at 30 September 2011	2,154,502	50,602	822,958	3,028,062

As a consequence of the currency translation adjustment of the assets in the Group's business in Poland, the Goodwill related to this business, totalling PLN 1,282,278 thousand, was updated negatively in EUR 31,490 thousand.

No valuations were made on the land allocated to operational activities, which are recognised at their market value.

From the disposals and write-offs made in the 2st Quarter 2011, an amount of EUR 496 thousand were recognised as a loss in the profit and loss.

11 Derivative financial instruments

		September 2011				December 2010
	Notional		Assets	Liabilities		Notional		Assets	Liabilities
		Current	Non Current	Current	Non Current		Current	Non Current	Current	Non Current
Derivatives held for trading
Interest rate swap	10 millions EUR	-	-	-	388	10 millions EUR	-	-	-	448
Currency forwards (USD)	1.9 millions USD	24	-	-	-		-	-	-	-
Fair value hedging derivatives
USD loan hedging	96 millions USD	-	190	-	-	180 millions USD	-	-	6,776	1,243
Cash flow hedging derivatives
Interest rate swap (EUR)	441.2 millions EUR	-	-	465		11,199 524.1 millions EUR	-	-	987	14,783
Interest rate swap (PLN)	189 millions PLN	-	-	-		288 229.5 millions PLN	-	46	-	175
Foreign operation investments hedging derivatives
Currency Forwards (PLN)	375 millions PLN	3,422	-	-	-		-	-	-	-
Total derivatives held for trading		24	-	-	388		- -	- -	- -	- 448
Total hedging derivatives		3,422	190	465	11,487		-	46	7,763	16,201
Total assets/liabilities derivatives		3,446	190	465	11,875		-	46	7,763	16,649

In September 2011 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 1,596 thousand.

12 Available-for-sale financial investments

Regarding the financial assets available-for-sale, the reduction of EUR 738 thousand respects to changes in the fair value of listed equity holdings, at the reporting date of these financial statements.

13 Cash and cash equivalents

	September 2011	December 2010
Bank deposits	308,184	131,609
Short-term investments	127,406	169,445
Cash and cash equivalents	2,904	2,873
	438,494	303,927

The short-term investments include short-term bank deposits and other negotiable funds for which provisions were booked to reduce it to the realizable value (note 17).

14 Capital and reserves

14.1 Fair value and other reserves

	Land and buildings	Cash-flow Hedging reserve	Available-for sale financial investments	Currency translation reserve	Total
Balance as at 1 January 2011	83,116	(6,781)	(455)	(12,447)	63,433
Fair value adjustment of financial investments: - Gross value - Deferred/current tax - Non-controlling interests	- - -	3,062 (804) (888)	- - -	9,194 (2,437) -	12,256 (3,241) (888)
Fair value adjustment of available-for-sale financial investments: - Gross value	-	-	(738)	-	(738)
Currency translation differences: - In the year - Deferred tax	(2,411) 458	130 (25)	- -	(70,392) 3,790	(72,673) 4,223
Balance as at 30 September 2011	81,163	(5,306)	(1,193)	(72,292)	2,372

	Land and buildings	Cash-flow Hedging reserve	Available-for sale financial investments	Currency translation reserve	Total
Balance as at 1 January 2010	84,931	(4,985)	58	(24,820)	55,184
Fair value adjustment of financial investments: - Gross value - Deferred/current tax - Non-controlling interests	- - -	(7,760) 2,043 1,840	- - -	(4,626) 1,170 -	(12,386) 3,213 1,840
Fair value adjustment of available-for-sale financial investments: - Gross value	-	-	(402)	-	(402)
Currency translation differences: - In the year - Deferred tax	671 (127)	(13) 3	- -	16,251 (1,710)	16,909 (1,834)
Balance as at 30 September 2010	85,475	(8,872)	(344)	(13,735)	62,524

14.2 Dividends

Dividends distributed in 2011 in the amount of EUR 2,686 thousand, were paid to non-controlling interests in the Group companies.

15 Earnings per share

	September 2011 September 2010
Ordinary shares issued at the beginning of the year	629,293,220	629,293,220
Own shares at the beginning of the year	859,000	859,000
Shares issued during the year	-	-
Weighted average number of ordinary shares	628,434,220	628,434,220
Diluted net result attributable to ordinary shares	255,676	193,886
Basic and diluted earnings per share – Euros	0.4068	0.3085

16 Borrowings

In June 2011 the seven years issue of the Bond Loan in the amount of USD 84,000 thousand placed by JMR – Gestão de Empresas de Retalho, SGPS, S.A., on the US market (Private Placement), was reimbursed. In September 2011 the four years issue of the bond Loan in the amount of EUR 35,000 thousand placed by Jerónimo Martins, SGPS, S.A. , was reimbursed.

On the third quarter 2011 Jerónimo Martins has renegotiated a commercial paper program on what maturities, amounts and pricing concerns.

16.1 Current and non-current loans

	September 2011 December 2010
Non-current loans
Bank loans	78,004	175,746
Bond loans	485,098	419,228
Financial lease liabilities	21,676	39,208
	584,778	634,182
Current loans
Bank overdrafts	13,294	7,671
Bank loans	99,915	80,536
Bond loans	35,000	98,643
Financial lease liabilities	22,969	32,367
	171,178	219,217

16.2 Financial debt

Since the Group entered several foreign exchange rate risk and interest risk hedging operations, as well as shortterm investments, the net consolidated financial debt at the balance sheet date is as follows:

	September 2011	December 2010
Non-current loans (note 16.1)	584,778	634,182
Current loans (note 16.1)	171,178	219,217
Derivative financial instruments (note 11)	8,704	24,366
Interest on accruals and deferrals	2,010	821
Bank deposits (note 13)	(308,184)	(131,609)
Short-term investments (note 13)	(127,406)	(169,445)
	331,080	577,532

17 Provisions and adjustments to the net realisable value

	Opening balance	Set up and reinforced	Unused and reversed	Foreign exchange difference	Used	Closing balance
Doubtful debtors	21,825	2,752	(312)	(354)	(650)	23,261
Inventories	15,679	372	(2,299)	(779)	-	12,973
Financial Investments (note 12)	2,571	738	-	-	-	3,309
Short terms investments	57	-	-	-	-	57
Total fair value adjustments	40,132	3,862	(2,611)	(1,133)	(650)	39,600
Employee benefits	30,839	2,237	(742)	-	(1,162)	31,172
Provisions for risks and contingencies	22,907	1,286	(1,365)	(637)	(2,110)	20,081
Total of provisions	53,746	3,523	(2,107)	(637)	(3,272)	51,253

18 Contingencies

Following the contingencies mentioned in the 2010 Annual Report, changes occurred on the headings a), h), l), o), and p), as well as a new contingency described bellow:

• a) In 1999, as a result of the acquisition of two companies that held establishments previously owned by former franchisees of ITMI Norte-Sul Portugal – Sociedade de Desenvolvimento e Investimento, S.A., which together with Regional de Mercadorias – Sociedade Central de Aprovisionamento, S.A., filed a case against various Group companies, holding them liable for those ex-franchisees' alleged noncompliance with the contract they had signed with ITMI, demanding an indemnity payment of EUR 14,600 thousand. The court ruled in favour of the defendants, denying the plaintiff's claim. Meanwhile the plaintiff appealed to the Court of Appeal, which is still pending. The Board of Directors maintains its belief that the amount requested will probably not be granted, and so as referred to in the Group's affiliates annual reports of previous years, no provision has been set up for any indemnity;
• h) The Portuguese Tax Authorities assessed Feira Nova Hipermercados, S.A. (merged into Pingo Doce Hipermercados, S.A.) and Pingo Doce – Distribuição Alimentar, S.A. the amounts of EUR 2,966 thousand and EUR 2,324 thousand, respectively. These additional assessments are related to the amount booked by these companies as shrinkage (loss of inventory through crime or wastage), which was not accepted as a tax deductible cost, for CIT purposes and also the associated VAT, since there are no evidence that the goods were not sold. These assessments respect to the years of 2002, 2003 and 2004. Feira Nova and Pingo Doce's Management, supported by their lawyers and tax consultants, have challenged these assessments, believing that the Tax Authorities have no arguments to request these payments. In consequence, Feira Nova was notified by the Lisbon Tax Court that the judicial claim filed against the Portuguese tax authorities assessment, regarding Value Added Tax (VAT), for the tax year 2002, an amounting to, approximately, EUR 1,200 thousand, was ruled in favour of the company. Since the tax authorities did not react against it, this Court decision is final;
• l) The Tax Authorities assessed JMR Gestão de Empresas de Retalho, SGPS, S.A. for the amount of EUR 16,078 thousand due to the fact that JMR should restate the dividends received, in 2003 and 2004, from its subsidiary in the Madeira Free Zone, considering them as interest for tax purposes. According to the Portuguese Tax Authorities the said income should be subject to Corporate Income Tax in opposition to the dividends received that are exempt. JMR's Management, supported by their tax consultants and legal advisors, consider that the report issued by the Tax Authorities does not have any legal basis or validity, and will use all the resources at its disposal to challenge it. The judicial claims presented were ruled in favour of the Portuguese tax authorities, therefore JMR's Management, supported by its lawyers and tax advisors' opinion, still believing that those decisions are not valid nor have any legal grounds has challenged and opposed to any consequences that they may cause. Moreover, no changes will be introduced to its financial statements;
• o) The Fiscal Authorities claimed from Unilever Bestfoods Portugal Produtos Alimentares, S.A., the amount of EUR 4,343 thousand for non-acceptance of withholding tax exemption carried out by the company, regarding the payment of dividends in 2002. The Management of the company, supported by its lawyers and fiscal consultants, has contested these charges, believing that the Fiscal Authorities are not justified in requesting this payment. By decision dated on March 24th 2011 the court has decided in favour of the Company. This decision has become final, and this matter is definitively closed.
• p) The Tax Authorities assessed JMR Gestão de Empresas de Retalho, SGPS, S.A. and Jerónimo Martins, SGPS, S.A for the amounts of EUR 507 thousand and EUR 480 thousand, respectively, both for the year 2008. The assessments concern swap payments, treated as interest in that year, which the tax authorities consider that should have been subject to withholding tax. Both JMR and Jerónimo Martins, supported by its tax consultants, have challenged these assessments, believing that the tax authorities have no grounds to request the payment of such amounts;
• s) In the beginning of September Néstle filed a lawsuit against Unilever Jerónimo Martins, Lda., claiming an indemnity payment of EUR 2,100 thousand for alleged similarity and confusion in the packaging of competing products. The lawsuit was contested within the deadline established thereto, and now awaits further development. This lawsuit follows the injuction proceeding filed by Néstle, which was decided in its favour and appealled by Unilever Jerónimo Martins, Lda. to the Court of Appeal.

19 Related parties

56.13% of the Group is owned by the Sociedade Francisco Manuel dos Santos and no transactions occurred between this Company and any company of the Group in the first nine months of 2011, neither were there any amounts payable or receivable between them on September 30th, 2011.

Balances and transactions of Group companies with related parties are as follows:

	Sales and services rendered		Stocks purchased and services supplied
	September 2011	September 2010	September 2011	September 2010
Joint-Ventures	699	719	62,549	71,405
Associated companies	-	40	603	857

	Accounts payable		Accounts receivable
	September 2011	December 2010	September 2011	December 2010
Joint-Ventures	699	734	20,118	8,565
Associated companies	-	2	302	757

Balances and transactions with related parties not eliminated in the consolidation process, were as follows:

	Sales and services rendered		Stocks purchased and services supplied
	September 2011	September 2010	September 2011	September 2010
Joint-Ventures	365	377	34,402	39.273
Associated companies	-	40	603	857

	Accounts payable		Accounts receivable
	September 2011	December 2010	September 2011	December 2010
Joint-Ventures	361	388	11,064	4,710
Associated companies	-	2	302	757

All the transactions with the jointly controlled companies (joint ventures) and associate companies were made under normal market conditions, i.e., the transaction value corresponds to prices that would be applicable between non related parties.

Outstanding balances between Group companies and related parties, being a result of a trade agreement, are settled in cash, and are subject to the same payment terms as those applicable to other agreements celebrated between Group companies and their suppliers.

The amounts receivable are not covered by insurance and no guarantees are given or received, as the Group holds a relevant influence over these companies.

There are no provisions for doubtful debts and no costs were recognised during the year related with bad debts or doubtful debts with these related parties.

Lisbon, 25^h October, 2011

The Certified Accountant The Board of directors