Q4 2024 Arcos Dorados Holdings Inc Earnings Call
Good morning, everyone, and thank you for joining our fourth quarter and full year 2020-24 earnings webcast. With us today, Marcelo Rabach, our Chief Executive Officer, Luis Raganato, our Chief Operating Officer, and Mariano Tannenbaum, our Chief Financial Officer.
Today's webcast, which is being recorded, will consist of prepared remarks from our leadership team, which will be accompanied by a live presentation, also available in the investor section of our website,
To better follow the presentation, please note that you can set your views of full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the screen.
After we conclude our opening remarks, we will answer your questions.
Today's hall will contain four in looking statements, and I refer you to the four looking statements section, but are earnings released and reasoned finance with the FCC.
We assume no obligation to update or revise any forward-looking statements to reflect new or change advance or certain stances.
In addition to reporting of financial results and importance, with generally a set of accounting principles, we report certain non-GAAP financial results.
Investors are encouraged to review the reconciliation of these non-governmental results as compared with gap results which can be found in today's earnings press release and conference call presentation as well as the audited financial statements filed today with the SEC on formal 6K.
I will now turn the call over to our CEO , Marcelo Ralph.
Marcelo Rabach: Thank you, Daniel. Good morning, everyone, and thank you for joining us.
We have talked a lot about the resilience of the Arcos Dora of Business Bondle over the couple of years.
Marcelo Rabach: In my opinion, 2024 is the best example of how the company's geographic, economic and operating diversity allow us to outperform in just about any environment.
Marcelo Rabach: Last year's sales were strong, and profitability has never been higher, despite a more discerning consumer and challenging macroeconomic conditions in many of our last few markets.
Marcelo Rabach: Before this strategy of this is a delivery, drive-through and development leveraged our structural competitive advantages. And each pillar of this strategy still has a lot of attention to drive sales and operating efficiencies into the future.
Marcelo Rabach: All of this is supported by the strong and stable balance sheet, with the healthy leveraged ratio and no significant depth maturities in the next four years.
Let's get into the details of our resource.
Marcelo Rabach: 20 years, he's been by comparable sales grew 1.7 times blended inflation last year.
Marcelo Rabach: Excluding Argentina. Higher homicides were supported by low-impotals. Average check and get volumes in poor traditions.
Marcelo Rabach: Averachegis benefited from improved prologomies and increasing the number of items per order and pricing.
Marcelo Rabach: As of the end of 2024, Gulf Guestcount had a reason for the fourth consecutive year, boosting market share and providing future strategic flexibility, at we head into 2025.
Marcelo Rabach: At just an EBITDA for the full year, reach $500 million for the first time in Arcos Dora's history.
Marcelo Rabach: This is a notable achievement, given the challenge in market economic environment, especially in the second half of the year, when two of the most important currencies in our footprint they would have seen a real Mexican peso depreciated strongly.
Marcelo Rabach: Not to mention the material reduction in US dollar EBITDA generated in Argentina due to the country's significant economic correction.
We are very proud to have reached this important milestone.
Speaker Change: Poulier Ybidamar Singh also reached an all-time high for Arcos Dora Hlds in 2024.
Speaker Change: Fulam Pérez-Golz, Word Flap, or lower as the percentage of stress in all three divisions.
Speaker Change: Additionally, we generated operating efficiencies that recovered some expenses in Brazil, mostly related to federal contributions.
Speaker Change: Dr. Gianne, including corporate expenses, were also lower compared with 2023, benefiting from the natural hedge created by keeping most of our corporate finance and digital factory teams based in Argentina.
Speaker Change: All these factors, more than offset, tighter machines in no lab and lab, where macro economic conditions were more challenging.
Speaker Change: The DCL Delivery and Rise of Datphones built on the success of the last several years with even stronger results in 2024.
Speaker Change: Fully additional sales grew 18% in U.S. dollars versus 2023, made up of mobile app delivering
Speaker Change: Notably, mobile app sales were up 25 percent, including a growing contribution from the lawyer's program.
Speaker Change: Delivery sales continue to serve as expectations, rising 17% in U.S. dollars last year.
Speaker Change: An off-premise sales from the Liberty and Drive-through contributed above 44% of total sales last year, demonstrating how the industry has permanently changed since 2020.
Speaker Change: The 85th Experience of the Future, or EODA, restaurant openings, where we think the guidance range for 2024.
Speaker Change: This included 79 new free standing locations that together with more than 100 and 50 modernizations brought EODF restaurant penetration to 67% of the total footprint.
Speaker Change: We are working to reach at least 90% EODF penetration by ERN 2027.
Speaker Change: I will now turn over to Luis for the look at fourth quarter stage performance in each division.
Thanks, Marcelo. Good morning, everyone.
Luis: The Brazil Division operates the country's largest freestanding restaurant portfolio by year after up to nearly all of which have been modernized to the E. L F for Mike.
Luis: Brazil's marketing initiatives included the November Makey Friday campaign that used mobile app promotions to drive digital and identified sales, while capturing new users and new loyalty program members.
Luis: We also have heartland with local celebrities who sang the famous big multilingual to show how iqos a recognizable even when we don't see them.
Luis: We brought back favorite in the Burger category with a relaunch of the safety Turbo platform.
Luis: And in the dessert category in collaboration with key K.
Luis: Finally, the happy meal offered attractive property set.
Luis: Such a sonic and will stop gap to support the family business.
Luis: No net total revenue in constant currency rose five 5% driven by 41, 1% higher comp sales in the quarter.
Luis: The division's mcallen sales growth was generated mainly through higher guest counts.
Luis: You have had on our revenue growth was negatively impacted by the depreciation of the Mexican peso in deepwater.
Luis: Digital channels accounted for about 40% of sales in the fourth quarter and full year 2024.
No land that currently have the lowest <unk> penetration of the three divisions.
Luis: As of the end of the year Eo T F restaurants accounted for 40% of the footprint in Mexico, and Java under 50% in Costa Rica and Panama.
Luis: This year, we will continue rolling out the loyalty program to these markets and over the next three years the pace of modernization will also pick up across the division.
Luis: This should boost digital sales penetration in the coming years, helping to drive engagement.
Luis: Frequency and average check with guests in these markets.
Luis: No less marketing and included the launch of the shared our Jalapeno campaign in Mexico.
Speaker Change: Offering a bowl of melted cheddar cheese with jalapeno together with menu favorite in the Burger and chicken category.
Speaker Change: Panama also innovating that he couldn't burger categories, with the Mac, which bill legend and <expletive> Mcmil to help drive strong traffic and sales growth.
Speaker Change: In Puerto Rico, we focused on brand strength with the introduction of the quarter pounder with some barbecue and value with a new chicken sandwich under my combo platform as well as a new burrito for the breakfast Baidu platform.
Speaker Change: Flat comp sales rose five 1% in the fourth quarter and nine 8% for the year excluding Argentina.
Speaker Change: The four year benefited from balanced average check and get volume growth.
Speaker Change: <unk> contribution to the total sales improved from 51%.
Speaker Change: End of 2023% to 57% at the end of 'twenty 'twenty four.
Speaker Change: <unk> penetration in the division stood at 55% at year end with the most modernize markets been Argentina.
Speaker Change: Chile.
Speaker Change: A year away.
Speaker Change: Argentina's performance improved sequentially throughout 2024 with the most pronounced improvement taking place over the course of the fourth quarter.
Speaker Change: In fact, Argentina U S. Dollar revenue was flat against the prior year period with volumes down only mid single digits in December.
Speaker Change: <unk> will give you the good news on what is demanded for profitability.
Speaker Change: Marketing initiative is focused on promotions and limited time offers to strengthen the uniqueness of the brand as well as attributes such as quality and taste perception.
Speaker Change: These included the launch of the macro crispy chicken legend sanguine, taking Chile as bitmap lab for the detection in Colombia, and the introduction of new cone or maxillary flavors in Argentina.
Speaker Change: He led Colombia, Peru and Venezuela.
Speaker Change: We also pay our special editions of the quarter pounder with their regional sponsorship of Formula one to strengthen the core menu.
Speaker Change: Finally, Argentina, and Colombia introduced a new affordability platform, bringing foreseen the value for money perception.
Speaker Change: Based on internal research for the full year 'twenty 'twenty four we added the most market share of the top three U S. Our operators on average across the region.
Speaker Change: According to third party research DC granted also has in Brazil, where we added more share than the main competitor, while the single largest competitor saw a decline in share.
Speaker Change: A focus on providing the most consistent guest experience and the best value proposition in the Qs our industry supported these share leadership.
Speaker Change: Which was one eight times the share of the nearest competitor on average in the region and two two times our nearest competitor in Brazil.
Over to you.
Speaker Change: Thanks, Louise and good morning, everyone.
Speaker Change: <unk> already told you that our full year EBITDA reached $500 million for the first time ever.
Speaker Change: The 11, 2% full year EBITDA margin was also the highest in our history.
Speaker Change: I think it is worth reinforcing the significance of this result.
Speaker Change: We knew it was going to be challenging to deliver U S. Dollar growth this year due to the deep economic adjustment in Argentina.
Speaker Change: <unk> second largest EBITDA market.
Speaker Change: Fortunately, we realized expense recovery in Brazil, and that offset the decline of Argentina's U S. Dollar EBITDA this year.
Speaker Change: In other words, the roku there in this year's U S. Dollar EBITDA came primarily from underlying growth in the rest of the business, which more than offset the significant depreciation of the Brazilian real Mexican peso and Chilean peso to name a few.
Speaker Change: In the fourth quarter EBITDA grew more than 35% in local currency.
Speaker Change: But these were slower in U S dollars due to the currency depreciations I just mentioned.
Speaker Change: The quarter's results included $13 $6 million in credits for payroll tax contributions in Brazil.
Speaker Change: U S. Dollar EBITDA was the highest ever for a fourth quarter and the margin was up 40 basis points versus the prior year.
Speaker Change: Even excluding these credits.
Speaker Change: Importantly, net income was also up in the quarter.
Speaker Change: With a 40 basis point margin improvement delivering 28 cents per share.
Speaker Change: Whatever paper improved modestly and in payroll expenses were better with the payroll tax credits in Brazil.
Speaker Change: For nearly flat without them.
Speaker Change: Occupancy and other operating expenses were higher mainly in slab.
Speaker Change: Finally, G&A improved as a percentage of sales <unk>.
Speaker Change: Embarked into the natural hedge from Argentina, and lower long term compensation expenses versus the prior year period.
Speaker Change: All year, we focused on the factors we control.
Speaker Change: And leaned into the strength of the articles that Atlas business model.
Speaker Change: With the benefit of our diverse operating footprint, we were able to generate a solid EBITDA growth in U S dollars overcoming more significant external pressures than we expected when the year began.
Breakfast margin expanded by 290 basis points helped by the payroll tax credits.
Speaker Change: Excluding this credit is Brazil's margin was close to flat.
With higher food and paper costs offset by operating leverage in all other expense line items.
Speaker Change: Nonetheless margin contracted 20 basis points with lower food and paper and G&A as well as flattish payroll expenses.
Speaker Change: These were offset primarily by lower other operating income which included income from the formation of a joint venture in Mexico in the fourth quarter of 2020.
Speaker Change: Slots EBITDA margin expanded by 30 basis points with lower food and paper costs and payroll expenses.
Speaker Change: Partially offset by higher other operating expenses as a percentage of revenue.
Speaker Change: More importantly, <unk> generated U S dollar EBITDA growth after three consecutive quarters of contraction versus the prior year.
Speaker Change: These included growth in U S dollar EBITDA in Argentina for the first signed this year.
We run a complex business.
Speaker Change: Our growth out of that geography, and we are currently going through a relatively volatile period in the region's economic and geopolitical environments.
Speaker Change: However, we believe we are operating from a position of strength.
Speaker Change: Like no other kyocera breaker in Latin America, and the Caribbean.
Speaker Change: But clearly.
Speaker Change: Let's look at how digital delivery and drive performance in 2024.
Speaker Change: Digital sales were up 18% in U S dollars last year.
Speaker Change: The percentage of sales from digital channels increased throughout the year, reaching 58% in the fourth quarter, including 25% identified sales.
Speaker Change: The Mcdonald's App has been downloaded 147 million times since it was launched in the region with 99 million unique breakthrough users in the customer database.
Speaker Change: The beauty of the total is that even permeate the entire business contributing to sales growth in all sales channels.
Speaker Change: Delivery is by definition, a digital sales channel and its contribution to sales has been relatively stable all year.
Speaker Change: The same can be said for the contribution from sales and drive through.
Speaker Change: Other off premise channel, which remains popular among guests.
Speaker Change: Sales grew 42% in these channels combined since 2021 and together they account for almost 45% of system wide sales.
Speaker Change: No why that a restaurant operator in our region has a footprint to balance on premise with off premise channels and street facing with mall based restaurants.
Speaker Change: We view this as a structural competitive advantage that will last for the foreseeable future.
Speaker Change: The loyalty program added 12 6 million new members last year.
Speaker Change: Ending the year with $15 8 million registered members consistently driving higher guest frequency and average check growth among members.
Speaker Change: Available in Brazil.
Speaker Change: And you too wide at the end of 2024 are the program accounted for 18% of fourth quarter sales in those three countries.
Speaker Change: So far this year, we launched a program in Argentina, and Colombia with a strong guest response, and we will be rolling out loyalty wall article that I was market by the end of this year or beginning of next year.
Speaker Change: The most important metrics to monitor in these early days of the program.
Speaker Change: The 90 day active users and retention rates among members.
Speaker Change: Both remain very healthy across all markets currently running loyalty.
Speaker Change: Asia.
Speaker Change: The level of identified sales has increased steadily and we expect to continue making progress as the program reaches new markets. This year.
Speaker Change: Let's take a look at how we ended 2024 in terms of our balance sheet and capital investments.
Speaker Change: Total debt ending 2024 lower.
Speaker Change: Net debt rose as we invested excess cash to support capital expenditures last year.
The capital expenditures over the last several years are delivering solid returns.
Speaker Change: Nothing to January U S dollar EBITDA growth.
This cannot demand debt to adjusted EBITDA ratio of one one times nearly unchanged compared with the prior year over year end.
Speaker Change: In October 2024.
Speaker Change: Moody's upgraded our recourse debt rating to be a one with a stable outlook.
Speaker Change: In January of 2025, Fitch upgraded our debt rating to triple B minus with a stable outlook.
Speaker Change: This return to investment grade from Fitch combined with a one notch below investment grade rating from Moody's.
Speaker Change: Is the highest combined Raytheon in Rfps.
Speaker Change: In January 2025.
Speaker Change: We initiated the liability management transaction with the issuance of $600 million in new debt during 2032.
Speaker Change: With a coupon of six and three eights.
Speaker Change: Proceeds from these investment grade bonds were used to fund the tender offer for our outstanding $2027.
Speaker Change: Next month, we will also use the proceeds to fund the redemption of the other tenant or a portion of these notes.
Speaker Change: In other words why does the exercise is completed we will have two loans outstanding with about $335 million due in 2020 and island and.
Speaker Change: And the $600 million due in 2032.
Speaker Change: We expect the net debt to EBITDA ratio to end up at about one four times. After this transaction is completed.
Speaker Change: Which we don't see them to be at a very healthy level of financial leverage.
Speaker Change: And the company's average debt maturity will increase from two nine to $5 nine years with this new debt issuance.
Speaker Change: We also generated new money would be transaction.
Speaker Change: That will be used mainly to support growth in modernization over the next 18 to 24 months.
Speaker Change: While our cash flow generation.
Speaker Change: <unk> to our long term growth plans.
Speaker Change: As you already heard we met our restaurant opening and capital expenditure guidance for 2024, with 85 openings and almost $328 million invested respectively.
Speaker Change: This raised the penetration of <unk> restaurants to 67% of the total footprint, making it the most modern life restaurant portfolio in Latin America and the Caribbean.
Speaker Change: Although he has already been communicated.
Speaker Change: Four we are raising guidance for 2025.
Speaker Change: We expect to open between 90 and 128 restaurants this year.
Speaker Change: Total cost and expenditures for openings modernizations maintenance and other purposes is expected to be between 300 and $350 million in 2025.
Speaker Change: We have a clear path forward and we'll remain focused on the factors, we can control to drive consistent sales growth.
Speaker Change: <unk> and operating efficiencies and strong returns on investment to generate shareholder value over the next several years.
Speaker Change: Bye bye.
Speaker Change: Back to you.
Speaker Change: Thank you Mariano.
Speaker Change: We'll wrap up the presentation with some final thoughts before opening the call for Q&A.
Speaker Change: We are operating from a position of strength in Latin America.
Speaker Change: We believe a significant market share leadership across the region.
Speaker Change: We developed an industry benchmark of digital platform.
Speaker Change: It's just begun to scratch the surface in its ability to drive guest frequency and lifetime value.
Speaker Change: And we operated a modal modernized restaurant portfolio in the reassurance USR industry.
Speaker Change: This gives us the strategic flexibility to adapt to all kinds of operating conditions and changing consumer preferences.
Speaker Change: Mcdonald's in Latin America, the Caribbean of course, an unmatched array of restaurant formats sales channels menu options on salaries models.
Speaker Change: Although the range can be managed and adjusted to optimize sales growth and profitability consistently over time.
Our long term supportive partnership with Mcdonald's is an important competitive strength.
Speaker Change: We share a vision for the future of the brand in Latin America and the Caribbean.
Speaker Change: And we are aligned strategically in terms of how to best realize that vision.
Speaker Change: At least the next couple of decades.
Speaker Change: I will conclude my comments the same way I opened domain score by emphasizing the resilience of the article about <unk> business model.
Speaker Change: The combination over diversified operating footprint.
Speaker Change: The company's overall financial strength.
Speaker Change: And our experienced management team is demonstrating now more than ever that we are in a position to succeed in any environment.
John: Thank you for joining today's call John back to you.
John: Thanks, Marcello we will now begin the Q&A session you can submit your questions using the Q&A function on the bottom of the screen.
John: Please limit yourself to one or two questions. So that I can read understand and convey them through our speakers.
John: We will now pause briefly to combine your questions.
Speaker Change: Our first question from one of our investors Max Joseph.
Max Joseph: If we can provide an update generally on the ROI on new freestanding stores built over the last few years.
Speaker Change: And we will start with you Mariano level.
Speaker Change: Thank you and good morning, everybody. Thank you for the question.
In general we target, 20% on a first year return on investments for the openings.
Speaker Change: And as in recent years, we remain.
Speaker Change: Or above this historical average on openings.
Speaker Change: And we will maintain a disciplined opening process to keep these strong electrons.
Mariano: Great. Thanks Mariano.
The next.
Speaker Change: Few questions actually came in from most of your <unk> from Bank of America. Good morning, Melissa. Thank you.
Mariano: So it's.
We report water will start with Marcelo.
Speaker Change: Most of this first question Marcelo Julius how are sales trending so far in the first quarter across markets. Okay. Thanks. Good morning, maybe some things for the questions are.
Mariano: We believe <unk> position.
Better than any other <unk> operator in our region, we expect comparable sales growth to be at or above inflation for the full year 2025 in most of our markets.
Mariano: Having said that in line with what <unk> heard from other consumer companies in Latin America.
Mariano: Is reasonable to think that the first quarter of this year will be a low low point for the year.
Mariano: For some obvious reasons are the oil companies are dealing with.
Mariano: We are lapping with the leap year, we generate obviously a tougher comparable say scenario for these starts border.
Mariano: Second one in most of our main markets. These first quarter 'twenty five is expected to have the weakest currency levels versus the prior year period.
Mariano: Thirdly, there is some uncertainty among consumers in some of our main markets due to ongoing geopolitical events, particularly Mexico I would say.
We will come over with the Holy week, we each was in the first quarter last year, but will be in the second quarter in 2025, and specifically the gates of U S operators in Mexico. This will have a negative impact in the first quarter and a positive impact in the second quarter in terms of comparable sales.
Mariano: We expect operating conditions to gradually brought MTV improve of the year will soon.
Mariano: We firmly believe that we have the right marketing and other investment plans in order to be bright growth.
Mariano: For the 48.
Okay great.
Mariano: So the second part or follow up to that question Mark Sellers are you seeing any impact from anti U S sentiment, particularly in Mexico.
Mariano: Not really not really I think that.
Mariano: We have the advantage.
Mariano: Mcdonald's is the most law goes all around in Latin America.
Mariano: We have worked hard to connect with local consumers.
Mariano: We're localized marketing of many operators and <unk>.
Mariano: We have been impacting positively the communities, where we operate through our EOC platform recipe for the future.
Mariano: In other regions, particularly Mexico Newpage, if you take a look in the case of Mexico we.
Mariano: Currently the highest ever brand reputation scores for the Mcdonalds brand in Mexico. So.
We are in a pretty good position to lead with any.
Mariano: Volatile scenario like the one you are mentioning.
Mariano: Great. Thanks.
Mariano: Second question for Melissa, which I'll.
Mariano: So you might be on them.
Your expectations for food and paper costs, this year, and where do you see potential offsets.
Speaker Change: Okay. Thank you Melissa for the question.
Mariano: In terms of food and paper.
Mariano: <unk>.
Mariano: Cost and pressures.
Mariano: What we are seeing instead is coming mainly from Brazil in terms of beef costs. This is something that we have mentioned in past calls.
Mariano: And there is where we see the main source of pressure and we are working to mitigate these pressure by managing menu pricing product mix of higher pricing and other efficiencies.
Mariano: One of the things that we mentioned and that we think is going to offset these is that we are not seeing the same pressures in the other two divisions were not seeing the same pressures in NOLA or flat and in fact in the fourth quarter, we have seen improvements in food and paper costs.
Mariano: Both divisions. This is one of the merits of diversification in articles, where some pressures that we have in <unk> is offset by others.
Mariano: In addition to that.
Mariano: We think that these pressures are coming to the whole industry and there is another point of strength for that of course, where we can benefit from our scale.
Mariano: And Ah.
Mariano: The negotiation power, we have with suppliers. So in terms of food and paper, we are seeing that pressure and what I just mentioned as well.
Mariano: Potential offsets in general we believe that we can keep the full year margin in that we saw in 2024 adjusted for the payroll tax credits and Thats, what we are seeing for 2025.
Mariano: Thanks Mariano.
Marcelo: And the next one is for you is excuse me. This one actually is for Marcelo.
Marcelo: Power's traffic in Argentina, Argentina evolving and is there.
Marcelo:
Marcelo: A lower tax.
Marcelo: Tax factor is the is the lower by effects of factor in Argentina.
Marcelo: Okay.
Marcelo: Lowe consumption in Argentina was down for most of 2024.
Marcelo: With a strong recovery at the end of the year, so the momentum with which we entered this year was.
Marcelo: Pretty good one.
Marcelo: <unk> volumes were resilient oil.
Marcelo: Or are you willing to do to look for donor bulk up the country's consumption decline.
Marcelo: I think that our local team did an excellent job of remaining close to consumers by offering the best value proposition in the countries. We are starting with you as a result, we gained market share during last year and we further strengthened our brand attributes which have positioned us very well for the beginning of this year, notably asthma.
Marcelo: Liana mentioned during the opening remarks, we were able to generate U S. Dollar EBITDA growth in Argentina in the last quarter of 2024, compared with the fourth quarter of 2023, and unfortunately, the inflation continuously client. So we are cautiously are cautiously optimistic that Argentina's economic stabilization will.
Marcelo: Continuous year supporting continued improvements in operating conditions as the year progresses, and we are very very well positioned to capture this rebound these recoveries.
Marcelo: Argentina and economy in order to growers our business in this very important market for us.
In terms of the.
Marcelo: Buy stock.
Marcelo: Remember that we import very few things I would say the only important thing that we informed of Argentina, our happy meal toys.
Marcelo: So the impact of the reduction in the bile ducts.
Marcelo: Not that relevant in terms of the improvement in margins in Argentina. The main reason why isn't the business improving its modestly as our therapy in this lab division to improve these margins is the recovery in sales on Big Island work done by the local team in order to look for efficiency.
Marcelo: Season opportunities and efficiencies in all the P&L on G&A lines.
Marcelo Rabach: Thanks, Marcelo and the last piece of <unk>.
Speaker Change: Melissa's question I'll turn it back to you. She is asking what is driving slab market expansion. Okay. Argentina is part of the explanation as I mentioned before but on top of that we have on other important markets that are doing extremely well I would mention on Chile us one of the main ones, but on top of that Colombia Uruguay.
Marcelo Rabach: Hum.
Marcelo Rabach: Very strong results in the fourth quarter currently planned before and we expect very strong results coming from those markets, we see Europe as well.
Marcelo Rabach: Perfect. Thank you.
Speaker Change: The next question comes from Eduardo Silveira <unk> BBA.
Speaker Change: Everyone. Congrats on the results just a quick question from our side.
We wanted to better understand the four 1% same store sales from NOLA.
Speaker Change: We'll start with you lose.
Speaker Change: Alright, Thank you Eduardo for the question.
Speaker Change: In Panama, we had a great 2024.
Speaker Change: With a very strong affordability platform that helped us keep on gaining market share.
Speaker Change: Brand is stronger than ever and our expectations are positive for the for the months to come.
Speaker Change: In the case of Mexico, we are very pleased with the country's performance.
Speaker Change: Mexico sales have been the fastest growing inadequate levels for the last few years running this.
Speaker Change: <unk> in particular as Marcelo mentioned in the first quarter, we'll see at the race calendar if any.
Speaker Change: Because as you know last year was a leap year and also during the first quarter.
Speaker Change: Of 'twenty 'twenty, four we had Holy week, which is very important for Mexico.
Speaker Change: But even though we're seeing a more discerning consumer we are convinced that we are in a solid position because the Mcdonald's brand is very strong in the country our market share continues to grow and.
Speaker Change: And we had a solid marketing plan that is based on our four these before these are delivery drive through digital and develop development and this is allowing us to deliver on our restaurant portfolio, which is becoming more digitalized.
Speaker Change: Today, we have 40% of our stores with Mexico, our modernized so we're going to see a positive impact in the coming years over that too.
And that leaves us in a real position of strength to face any situations that may arise in the country.
Speaker Change: Great. Thanks, I'll stay with you for a lot of them because.
Speaker Change: Follow up question is how are you seeing construct consumption trends, particularly in Mexico and in parallel.
Speaker Change: The consumption trends are hey, Ted.
Speaker Change: It's going to be slowing down.
Speaker Change: Yes, because we have.
Speaker Change: In general I would say.
Speaker Change: A concern about the weakening currency and higher than expected inflation.
Speaker Change: Yeah.
Speaker Change: Even though we see that as I said, we we have this situation of a more discerning consumer.
Speaker Change: We have as I said, a a brightest furnished a strong strategy to face installation great.
Speaker Change: Great. Thank you.
Speaker Change: Next couple questions from your own auto Chrome Obama.
Speaker Change: His first question.
Speaker Change: I'll start with <unk>, how much of your net income margin pick up in the fourth quarter of 2004 versus the fourth quarter of 'twenty three is attributable to operating leverage.
Speaker Change: Perfect. Thanks for the question, but in fact, if you if you analyze the fourth quarter of 2024, there was a 160 bps EBITA margin expansion.
Speaker Change: And from there that includes 120 bps benefits from the Brazil payroll tax credit debt.
Speaker Change: As mentioned by go into each of the lines, we see an expansion in payroll of around 80 bps.
Excluding the benefit from.
Speaker Change: The tax credits in Brazil would have been kind of flattish.
Speaker Change: Then we see an expansion in G&A of 90 bps.
Speaker Change: And Larry how the natural hedge that we have with corporate expenses.
Expenses in Argentina words, another of the merits of diversification in the company and our footprint we.
Speaker Change: We have also <unk> also seen.
Speaker Change: An improvement in the food and paper cost line of 20 bps.
Speaker Change: They are the improvements and the enhancements and no evidence that offset the higher food and paper Ian.
Speaker Change: Firstly on.
Speaker Change: On the other hand, we have seen a contraction.
Speaker Change: <unk> de leverage in the other occupancy and other operating expense.
Speaker Change: We had higher costs in slab and no led mainly due to delivery fees utilities expenses back of course on the other hand, the delivery fees are part of increasing sales and.
Speaker Change: This segment is gaining.
Speaker Change: <unk> is continuing its dynamic growth within an.
Speaker Change: Our our company.
Speaker Change: And I think I had thank you.
Speaker Change: Associated with that Darren also asked about the continued success of the loyalty plan, our loyalty program and our board. The strategy I think that is one way to address those.
Speaker Change: Alright.
Speaker Change: Okay about before the strategy is.
Speaker Change: A PDR is a pillar of our <unk> our plan.
Uh huh.
Speaker Change: For the year that just passed after the pandemic and the years to come.
Speaker Change: It's very important because they allow us to take advantage of our restaurant portfolio, we have a drive through on delivery with a similar trends up the rest of the channels.
Speaker Change: And then he ran in driving digital grow in a few a few heard surpassing our expectations and when we talk about development. We are going to we have an opportunity to modernize we have Brazil with a moderate level of modernization that is over 90% and for example.
Speaker Change: No.
Speaker Change: I already mentioned with modernization of 40%, so we're going to start to accelerate.
Speaker Change: And in those markets.
Speaker Change: We will see a positive impact in that too and about the loyalty program. The program continues to evolve and we continue to learn from it we are seeing an increase in visit frequency.
Speaker Change: In deep.
Speaker Change: Yes.
Speaker Change: Customers have a 30% higher RPC frequency and we are being able to enhance the lifetime value. Another benefit is that to help us increase the identified sales penetration in the fourth quarter loyalty sales represented 18% of total sales in Uruguay Costa Rica in Brazil.
Speaker Change: With almost 16 million members and we have just launched the program in Argentina and Colombia.
Speaker Change: Electrical appearing in the main markets by the end of the year in terms of margins. We expect to have a positive impact since redeemed products have on average higher margins because they tend to be incremental or associated with annual sale. So so far what we're seeing is an increase in BT frequency 30.
Speaker Change: A higher average check between 10, and 20% depending on the market and increased redemption rates.
Speaker Change: Sure.
Speaker Change: Thanks, Bruce the next question comes the other priority and apologies if I'm not pronouncing your last name correctly can dream investors group Alright.
Speaker Change: Alright. Thank you for the presentation could you give me some color on how raw materials prices have been over the past year Flash outlook I think Mariano has addressed that already.
Speaker Change: And then the other question from Stella is also if you could expand on whether price increases are on the menu going forward.
Speaker Change: I'll turn it back to you Marcello Okay. Thank you Dana Thank you Stella.
Speaker Change: We have been and we will continue to be very prudent in terms of price increases across our menu board.
Speaker Change: In especially in times, we are more determined GAAP consumer onward.
Speaker Change: And disposable income for consumers is under pressure, it's very important to offer the best value proposition in each market.
Speaker Change: All across all remaining that's why you will see that we are offering video relevant affordability platforms in all of our markets.
Speaker Change: Being very broad in terms of price increases our gross our core menu.
Speaker Change: The classic Mcdonald's products on it.
Speaker Change: Same time, we have a very relevant variables approach to our.
Speaker Change: So part of the menu board.
Speaker Change: That typically competes with other four months down the line and so we think that we will continue this way we will continue to be very prudent in terms of prices ideally going in line or even below general inflation. That's our goal we are managing cost ratios in order to.
Speaker Change: <unk>.
Speaker Change: Profitability margins.
Speaker Change: In recent years.
Speaker Change: We have a huge advantage in terms of scale and in terms. So the way the tools that we use to.
Speaker Change: <unk> set prices across our markets, we are working with a very sophisticated system.
Speaker Change: Mcdonald's is using in many markets across the world. So we are very confident that we have the right tools underwrite approach in terms of pricing in order to grow the business going forward.
Speaker Change: Thanks Marcella.
Speaker Change: The next question from Jack <unk> of J O Hambro out as Argos with digital strategy compare to convert so its competitors and I'll give it back to you Louis.
Speaker Change: Alright, Thank you Josh.
Speaker Change: We began the journey.
Speaker Change: Way before the pandemic.
Speaker Change: We're the leaders in the sector. The digitalization is core in our strategy and it has been.
Speaker Change: Important driver to our results.
Speaker Change: <unk>, whether it's customer facing or back office is driving important operational efficiencies and is increasing and customer engagement.
Engagement it is an impact there.
Speaker Change: Product itself impacts development and the modernization of our restaurants that impacts the our marketing strategy and Dx periods of our customers and our employees too and we believe that is just the beginning even though we were leading in the sector is the beginning.
<unk>.
Speaker Change: We think that is going to contribute to sales growth and profitability.
Speaker Change: Yes.
Speaker Change: Thanks Bruce.
Speaker Change: We have a couple of questions here from Shovelboard Codeshare Goldman Sachs. The first one will startup Marcello of your could you. Please share some color on how comp sales how was the comp sales breakdown between traffic and ticket in Brazil. Okay.
Speaker Change: Thanks for.
Speaker Change: For joining us.
Speaker Change: For the full year, we have contributions in the case of Brazil coming from both traffic and check growth in order to get into the comparable sales that we get in Brazil.
Speaker Change: Specific and ended the fourth quarter.
Our electric growth growth in Brazil will be flat guest counts in the quarter, we are monitoring very closely.
Speaker Change: Consumer environment, and the competitive landscape landscape in order to gain traction to continue gaining market share and to continue to grow our volumes in Brazil, which is the <unk> way to build our long term results on shareholder value.
Great. Thanks, Mark So the second question from Charterers.
On how was performance in Brazil by channel and that question goes to you lose.
Speaker Change: Right.
Chantal: Yes, Thank you Chantal.
Speaker Change: With.
Speaker Change: Regarding specifically strong counter we saw positive performance during the fourth quarter.
Speaker Change: We're seeing that trend in the first months two deliveries surpassing our expectations.
Speaker Change: With a strong growth in volume and.
Speaker Change: And sales.
Speaker Change: And regarding specifically drive through we saw a moderation in volume after hitting a peak a huge peak during the pandemic between 2022 'twenty three but what we're seeing is that customer habits are still evolving.
Speaker Change: And we believe that we still have the room to improve our service and not only maintained to keep on increasing that sales channel.
Speaker Change: Thanks, Bruce and the last question from Charterers, some are related to I think it.
Speaker Change: I've already addressed but just in case.
Speaker Change: How much additional cost pressures do you think is still to come.
Perfect finish CMO for.
Speaker Change: The question.
Speaker Change: As I mentioned at the beginning of the call.
We think that the main pressure is coming from Brazil beef costs Besides that we.
Speaker Change: We've seen that we haven't seen already.
Speaker Change: Cost increases in Brazil. During 2024 that were as I mentioned offset by.
Speaker Change: Improvement in NOLA and slabs. So in 2025, we are working to offset this beef cost increases in Brazil with improvements in the other two divisions and also trying to.
Speaker Change: In Peru, our supplier.
Marcelo: Icing menu pricing as Marcelo mentioned <unk>, specifically in Brazil.
Marcelo: Brazil and of course looking into all the cost lines that we have in our P&L and try as always to look for efficiencies and getting the lowest cost.
Speaker Change: Possible. So I think that if that's the answer.
Speaker Change: Great. Thanks, Mariana and we actually have no more questions in the queue. So this is the end of the Q&A session. Thank you once again for your interest in Arcos <unk> for joining todays webcast.
Speaker Change: We look forward to speaking with you guys again in the middle of May on our first quarter 2025 earnings webcast and until then stay safe and have a great data.
Speaker Change: Okay.
Okay.
Speaker Change: Right.
Speaker Change: Okay.