Q1 2025 Kimberly-Clark de México SAB de CV Earnings Call
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Mhm.
Please standby your program is about to begin.
[music].
Speaker Change: Good day, everyone and welcome to today's Kimberly Clark de Mexico, One Q25 earnings conference call.
Speaker Change: At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session.
Speaker Change: Please note today's call will be recorded and I will be standing by should you need any assistance.
Speaker Change: It is now my pleasure to turn the conference over to CEO Pablo Gonzalez.
Speaker Change: Okay.
Pablo Gonzalez: Good morning, everyone. Thanks for participating on the call.
Speaker Change: We have a few things to share with you today.
Speaker Change: To begin we will go straight to the results and then we will make some brief comments about the quarter and our expectations going forward.
Speaker Change: As well as describe some important initiatives underway with that let me pass it on to Javier. Thank you Paolo good morning, everyone.
Speaker Change: During the quarter, our sales were $13 8 billion pesos, a 3% increase versus the first quarter of 2024.
Speaker Change: Total volume was down one 3% and price mix was up one 6%.
Speaker Change: Products and away from home decreased one, 4% and four 2% respectively.
Speaker Change: Exports were up 21% with double digit increases in both converted product and hot rolled since.
Speaker Change: Cost of goods sold increased seven 4% against last year, Sam and resins were favorable recycled fibers were relatively flat, while virgin fibers and fluff compared negatively.
Speaker Change: FX worsen significantly higher averaging 22% higher.
Speaker Change: Our cost reduction program. Once again had very good results and yielded approximately 450 million purchase of savings in the quarter.
Speaker Change: These savings are mainly at the cost of goods sold level and are generated by sourcing materials improvement and process efficiencies gross profit decreased nine 4% and margin was 38, 2% for the quarter.
Speaker Change: Mix was negatively affected by by lower margin hardware sales.
Speaker Change: SG&A expenses were 5% lower year over year and as a percentage of sales were down 94 basis points distribution expenses are down as our investments to improve our footprint and streamline our logistic operations are yielding positive results.
Speaker Change: Operating profit decreased 12, 5% and the operating margin was 21, 5%.
Speaker Change: We generated $3 5 billion pesos.
Speaker Change: A 10.9% decrease despite the 22% peso depreciation against the first quarter of last year.
Speaker Change: And we had anticipated even with the significant peso depreciate depreciation we were able to maintain our EBITDA margin within our long term objective at 25 point to 1%.
Speaker Change: Cost of financing was 295 million vessels in the first quarter compared to 315 million in the same period last year.
Speaker Change: Net interest expense was lower because of less depth.
Speaker Change: During the quarter, we had a 14 million peso FX gain which compares to a $1 million gain last year.
Speaker Change: Net income for the quarter was $1 8 billion pesos with earnings per share of <unk> 60.
Speaker Change: We maintain a very strong and healthy balance sheet.
Speaker Change: Cash position as of March 31st West 11, 8 billion pesos, we have no debt maturing in the next 12 months and maturities for the coming years are comfortable net.
Speaker Change: Net debt to EBITDA ratio is <unk> nine times and EBITDA to net interest coverage East 11 times.
Speaker Change: <unk>.
Speaker Change: Okay. So.
Speaker Change: Top line for the fourth quarter, but first quarter was in line with last year.
Speaker Change: Bottom line and margins were lower.
Speaker Change: Importantly, still within our target range, despite significant uncertainty raw material cost increases and negative exchange rate have yet this greg.
Speaker Change: As we've said before this reflects the strength and resiliency of kcl.
Speaker Change: On the top line.
Speaker Change: We're facing a challenging environment with our current economic indicators signaling a slowdown of the economy and private consumption.
Speaker Change: A key indicator for us is that volume growth in some of our most important categories is muted.
Speaker Change: The higher growth ones, we've seen a deceleration.
Speaker Change: This was our base case, although it's been slightly more pronounced and together with our client strict management of their inventories given the uncertainty meant we experienced headwinds for the quarter.
Speaker Change: We expect this trend to continue continued during the second quarter, given robust comparisons, but we see growth accelerating during the second half of the year.
Speaker Change: Market shares are steady or increasing and we continue to be focused on accelerating our innovations and we'll have more.
Speaker Change: Saying that in a moment.
Speaker Change: <unk> investment behind our brands.
Speaker Change: Taking advantages advantage of the opportunities that we've identified and efficiently execute our commercial groups.
Speaker Change: With respect to cost the exchange rate for the quarter was 22% higher and at current rates would be approximately 23% higher for the second quarter.
Speaker Change: In addition, some of the expected re leasing pulp prices did not materialize, particularly in softwood pulp and fluff, we charge record levels.
Speaker Change: Going forward, we would expect higher dollar denominated costs in tissue tissue raw materials, that's pulp and recycled fibers and mixed on personal care ones higher fluff and resins lower Super absorbent cost.
Speaker Change: Having said that.
Speaker Change: It's clear that the lack of certainty many different moving parts, including tariffs for which we have not experienced cost increases so far.
Could change the outlook.
Speaker Change: Accordingly, we will continue to carry out selective price increases and we're on our way to achieving record savings for the year.
Speaker Change: During the quarter, we increased prices in various categories and channels and currently we are in the process of carrying out additional increases.
Speaker Change: As we've said before these are not across the board, but rather based on the consumer and competitive landscape.
Speaker Change: We will be closely monitoring the exchange rates and the impacts of tariffs or other policy changes the competitive dynamics and will adjust as necessary.
Speaker Change: On the other hand supported by <unk> continues active and aggressive cost reduction culture. We are on target to have record savings for the year ranging from one eight to 2 billion.
Speaker Change: Further we are working on additional opportunities for the 2026 32007 timeframe, which includes further manufacturing footprint optimization and supply chain efficiencies.
Speaker Change: Cost reduction culture will continue to yield important savings.
Speaker Change: Now, let me turn to innovation and something important initiatives to want to share with you today.
Speaker Change: As we've said before we're thinking about the medium term, we continue to project a base growth rate in the mid single digits consistent with our trajectory.
Speaker Change: <unk> by our core categories that are strong and accelerated innovation pipeline.
Speaker Change: With respect to innovation.
Speaker Change: This past quarter, we launched a super premium diaper huggies black label with a new absorption technology and software and hypoallergenic materials to protect the most sensitive baby skin.
Speaker Change: We improved almost all of our baby wipes lineup increased the dispensing area decisive some wipes as well as strength in.
Speaker Change: <unk> introduced the softest dependent among other product improvements for.
Speaker Change: For 2025, we will launch product improvements in every category in which we participate in the call.
Speaker Change: Coming years, we will bring to market technologies and products that we have no doubt will increase consumer brands for our brands.
Speaker Change: Very very excited about our plans on innovation.
Speaker Change: In addition to base growth rates in the coming years, we expect to grow spike one achieving double digit growth rates and increasing the participation in total sales categories.
Speaker Change: Categories with higher potential like wipes kitchen, towels facial tissue incontinence, wipers, and experts as well as through adjacencies or entries into new categories.
Speaker Change: With respect to Adjacencies. The recent integration of 40 global into the operation of the casein.
Speaker Change: We will create opportunities to strengthen our position and capabilities in the soap and toiletries categories as well as to participate in children.
Speaker Change: This currently account for little over $2 5 billion in sales and in the next three to four years could exceed 4 billion vessels.
Speaker Change: Now when it comes to new categories.
Speaker Change: We're excited to share with you today that we are entering the pet food business.
Speaker Change: Briefly talk about why and how and.
Speaker Change: Why.
Speaker Change: Following an important consumer trend.
Speaker Change: Food categories, not only a big category with an estimated retail value of 65 billion versus <unk>.
Speaker Change: But also a growing one.
Speaker Change: It is expected to have CAGR of 7% over the next five years.
Speaker Change: And although there are important players in the category.
Speaker Change: <unk> needs continue to evolve.
Speaker Change: Are considered family members and in many cases play a fundamental role in People's lives.
Speaker Change: There is still much to do for consumers in their beds. We're confident we can play an important role in meeting their needs.
Speaker Change: We will build on the <unk> capacity to take care of that person who needs of people babies and now complete families.
Speaker Change: Kyle.
We are partnering with group or new to the market leader in pet foods sold through the specialty channel and return areas.
Speaker Change: <unk> World class technology and processes to determine what's best for pets.
Speaker Change: We have the commercial capabilities in the past.
Speaker Change: Sure.
Speaker Change: Together, we will be launching a premium on our mainstream brand prime Kurt.
Speaker Change: Respectively, each with clear and important differentiators versus current market offerings.
Speaker Change: We can't get into all the details in this call, but the team is ready to discuss with you further.
Speaker Change: I will only add that this is a project that will yield results in the medium term not immediately.
Speaker Change: That is eventually could provide opportunities outside of Mexico.
Speaker Change: Both diversifying our portfolio and geographic presence.
Speaker Change: Let me finish our prepared remarks, highlighting that our shareholders approved a dividend payment of two peso cents <unk>.
Speaker Change: A 10% increase from last year.
Stock repurchase plan 1000, $500 million versus a 50% increase from last year, which together yielded approximately 8%.
Speaker Change: This is consistent with our shareholders friendly distribution policy and we believe very attractive in any environment and particularly during this uncertain times with that let me turn to your questions.
Speaker Change: At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Draw yourself from the queue at any time by pressing star two.
Ben: We will take our first question from Ben <unk> with Barclays. Your line is open.
Ben: Yes, good morning, Pablo Javier Thank you very much for taking my question.
Ben: Quick follow up and then actually when I prepared but one was more of a surprise now on death announcement, you just made with group for New Tech and you said, it's obviously going to be more of a medium term thing how should we think about this is going to be somewhat like a 50 50, JV that youre going to consolidate who's going to lead.
Ben: <unk>, just maybe a little bit more detail as to as to what you. How you think about this evolving within the broader <unk>.
Ben: <unk> offering and leveraging and ultimately your customer relationship that would be the very first one and then the second one.
Ben: Can you remind us you had I think that for the first time hedges.
Ben: At a higher level than where we are right now so just help us what FX rate versus what is where is this the hedge we should use to assume for the rest of the quarter. Because you gave with like current rates, but just to understand a little bit the composition of your dose dose would be the two questions I have thank you.
Ben: I'll take the second one quickly.
Ben: We have.
Ben: Yeah, just for approximately 50% of our purchases.
Ben: Basically the remainder of the second quarter at a level slightly above 2017.
Ben: Okay perfect.
Ben: Half of it is 2017 and 1970 the other half would be 1970, that's how we should think about it is correct.
Ben: Alright.
Greg: Alright, Thank you Greg and then.
Ben: The first question Ben again very excited about this.
Ben: As I mentioned.
Ben: <unk> is the premier manufacturer of high quality pet food and nutritional components in Mexico, and the leader in the specialty and return area and channels. So of course, they have great knowledge.
Ben: Although the category, particularly in the processes to meet the needs of pets and are very simply and new tech will develop and manufacture and we will market and commercialize the product.
Ben: And together, we will invest to support this.
Ben: This launch and support this introduction of the products in the coming years.
Ben: So again very very excited with this and as I mentioned not something that will come in.
Ben: An impact early on but as we invest behind our brand and position in the market.
Ben: We believe in.
Ben: Going forward this will become a very relevant category for Kimberly Clark to Mexico.
Ben: Okay perfect. Thank you very much.
Speaker Change: Thank you Ben.
Bob Ford: We'll move next to Bob Ford with Bank of America. Your line is open.
Bob Ford: Thank you so much and good morning, everybody.
Speaker Change: Pablo just could you comment a little bit on the structure of the deal with <unk> Tec.
Speaker Change: First name.
Speaker Change: Whether or not there's a path to control and with respect to the price increases that you mentioned can you just give us a sense of the magnitude of the pricing that you're taking.
Speaker Change: And then lastly, with respect to tariffs.
Speaker Change: As Kimberly Clark Corp, thinking about international sourcing given.
U S tariffs on China, and the risk on Mexico.
Speaker Change: Yeah.
Speaker Change: On the products and processes, which were sourced in China.
Speaker Change: Which make the most sense, possibly to consider shifting to Mexico.
Speaker Change: Thank you.
Bob Ford: Hey, Bob.
Bob Ford: Thanks, Thanks for the question, so so pet prices and tariffs.
Bob Ford: Let me, let me take them in that order.
Bob Ford: <unk> again.
Bob Ford: Right now what we have is a relationship.
Bob Ford: Like I said, we'll where they develop and manufacture the product.
Bob Ford: <unk> market and commercialize the product.
Bob Ford: And together, we invest to support the brands. So it's a very simple structure at this point going forward, we'll see because again, we have a we believe that as we position the brand.
Become a relevant player in the category in Mexico. This could provide opportunities outside of Mexico. So both diversifying our portfolio and geographic presence and then our relationship could take a different.
Bob Ford: A different form right now with this is very very simple.
Bob Ford: Simple they manufacture resale.
Bob Ford: And.
Bob Ford: We both together support the brands when it comes to prices.
Bob Ford: I mean.
Bob Ford: As I mentioned, we implemented some price is not across the board the first quarter somewhat little more we'll start to be reflected here in the second quarter, it's going to take a little longer for them to reflect because we're catching up and by that I mean that late in last year.
Bob Ford: And some of our categories decreased given the softness of the market. So we're catching up to two <unk>.
Bob Ford: Prices over the first quarter of the first half of last year.
Bob Ford: But we will see something in the second quarter and further we are in the process of implementing.
Bob Ford: Some other price increases against selectively but.
Bob Ford: But we believe that when it's all fully reflected and we will see that in the second half of the year, we'll see a net impact of about 3% to 4%.
Bob Ford: With respect to pricing.
Bob Ford: Then when it comes to tariffs.
Bob Ford: As I mentioned, so far we have no impact from tariffs beyond the externalities, mainly in terms of volatility and uncertainty.
Bob Ford: Nevertheless, we have been preparing ourselves to reduce our exposure to countries, where we think theres more risk.
Bob Ford: On the one hand, and we have a clear plan on that.
Bob Ford: But on the other hand, there is there's also a positive side to this there could be opportunities for additional volume to replace some.
Bob Ford: Some product coming into Mexico that may be from China uncertainty. Some further increases in our exports are we support are.
Bob Ford: Our partner so we continue to talk to them and work with them in different areas and opportunities.
Bob Ford: And we hope that that will translate in further export sales to our partner.
Bob Ford: I don't know if this quarter, but certainly by second half of next year and again working on strengthening the supply the north American supply chain together with them. So some challenges because of tariffs, but also some approaching opportunities that we're moving fast to take advantage of.
Speaker Change: Pablo Your partners right now that's one question.
Speaker Change: It it does Pablo did just one little follow up on that as your partners today, if I understand correctly or importing about 20% of their needs.
Speaker Change: In the U S and Canada is that fair and Thats, the magnitude and maybe the opportunity that.
Speaker Change: The exists if.
Speaker Change: If not a little more.
Speaker Change: Yes.
Speaker Change: From what I understand above about 20% of our raw materials.
Speaker Change: Come from outside the U S and there are certain importing some finished product.
Speaker Change: Wouldn't say that that the.
Speaker Change: Magnitude of the opportunities.
Speaker Change: That whole.
Speaker Change: Part of the Pie if you will when it comes to finished product because they certainly have some other options around the world to source from.
Speaker Change: But we have continued to work with them and continue to grow our business with them in becoming a very reliable and cost efficient.
Speaker Change: Supplier to them and again as we think is the over the overall north American supply chain.
Speaker Change: We believe that this very uncertain situation.
Speaker Change: Certainly brings about some very interesting opportunities for Casey's in Mexico on KCG to work together even further.
Speaker Change: Thanks, so much good luck with that.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Antonio Hernandez with Act.
Speaker Change: <unk>.
Speaker Change: Your line is open.
Speaker Change: Hi, Good morning. Thanks for taking my question just could you provide a little bit more light on how well it seems to have been doing this longer we'll see.
Speaker Change: Start of the quarter, but that would.
Speaker Change: It would be stronger, but how are they trending.
Speaker Change: Thanks.
Sure Antonio.
Speaker Change: I mean January was.
Speaker Change: Now let me put it this way we saw a somewhat soft January.
Speaker Change: A very soft February which of course has one less day and that also has that always has an impact but February was particularly soft and then we saw improvement in March.
Speaker Change: Now hard to say whether that will be the trend as you said, we do expect the second quarter or two to continue to be challenging because.
Speaker Change: We are seeing softening of the consumer demand.
Speaker Change: Given all the uncertainty that we're going through.
Speaker Change: And notwithstanding what category look into theirs, we're seeing that the softness of course this whole comparisons with a very strong first half of last year not only for us, but economically it was a stronger first half given.
Speaker Change: Remittances salaried mass.
Speaker Change: All of the social programs and of course, all of the investment behind the elections. So you've got that comparison going but there's no doubt the economy has been softening.
Speaker Change: Hard to say again, whether the improvement in March is a trend we expect second quarter to continue to be tough and hopefully we will see better conditions in the second half of the year.
Speaker Change: Sure.
Speaker Change: Okay. Thanks, Thanks for the color and just a quick follow up I believe you already provided the volume versus price mix.
Speaker Change: Yes.
Speaker Change: Alright. Thanks.
Speaker Change: Sure, particularly on consumer products.
Speaker Change: As we said.
Speaker Change: The sales decreased one 4% overall volume was down one 4% while price mix was flat now when you look at it sequentially consumer products grew one 4%, but that was mainly due to prices which were up 3%.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: We will take our next question from Joseph Giordano with Jpmorgan. Your line is open.
Hi, good morning, everyone and thanks for taking my question, so going back to the <unk>.
Speaker Change: Uh huh.
Speaker Change: Partners group I'd like to understand like what.
Speaker Change: It would be like the potential capex needs or capacity expansion into this investment and I know, it's more of a midterm.
Speaker Change: Things have been looking at what happened in Brazil with sort of like this.
Speaker Change: This is actually scaling up very fast.
Speaker Change: And gaining a lot of market share.
Speaker Change: My question to you is like when.
Speaker Change: Need to meet them like just try to tie that into the model we should be assuming.
Speaker Change: This contributes to revenues last but not least our thinking on the working capital side.
Oh like does it sound like you see any incremental room to improve there. Thank you very much.
Speaker Change: Great. Thanks for the question.
Speaker Change: Joseph.
Speaker Change: We don't expect the early on of course that there would be any need for additional capacity by our partner.
Speaker Change: No.
Speaker Change: We've been working with them for about a year and a half and they've got.
Speaker Change: Enough capacity for what we believe will be the early stages of this.
Speaker Change: Yes.
Speaker Change: So as we as we position our brands and on growing we do expect that.
Speaker Change: They will need additional capacity on the ready to bring it on.
Speaker Change: Onto market.
Speaker Change: Hard.
Speaker Change: Hard to say again this is a medium term.
Speaker Change: Plan it.
Speaker Change: It'll take up.
Speaker Change: It'll take a little while for us to get into the market to position our brands and for us to have.
Speaker Change: Scale to be meaningful.
Speaker Change: For our results.
But we do expect that let's say in five years or so it'll be a more meaningful part of Kimberly Clark to Mexico, and maybe within our top five.
Speaker Change: Our top six businesses.
Speaker Change: Within KC de Mexico, and then when it comes to working capital of course, Theres always opportunities too.
Speaker Change: To improvement as you know, we've always been very efficient in finding and executing behind them, but I don't know if you want to add.
Speaker Change: There.
Speaker Change: Just that.
Speaker Change: I have one thing on the Capex.
Speaker Change: New Tech as Paolo said. This is this is an evolving process right now our partner suppliers of the product and if there is capex needs that could invest behind that so we think it would not represent capex requirements for us.
Speaker Change: As of.
Speaker Change: As the partnership is set up today.
Speaker Change: And no no nothing else on working capital as you said there is definitely.
Speaker Change: We see opportunities there.
Speaker Change: Yeah.
Speaker Change: Let me just say, they're not going to be significantly meaningful we're not expecting working capital to be.
Speaker Change: A big source.
Speaker Change: Our use of cash in the near future.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Youre welcome.
Speaker Change: Okay.
Speaker Change: We'll move next to Eugenia Cavallero with Morgan Stanley. Your line is open.
Eugenia Cavallero: Hi, everyone. Good morning. Thank you for taking my question I would like to know if you could explore a bit more the dynamics in the competitive landscape that you're seeing particularly in the consumer products.
Speaker Change:
Speaker Change: Sector in Mexico. So if you could give us a bit more details on how competition has been behaving in.
Speaker Change: How are you being able to pass along the price increases et cetera that would be great. Thank you.
Speaker Change: Yes. Thanks.
Speaker Change: For your for your question.
Speaker Change: I would say, we havent seen much more promotional activity that we saw late last year.
Speaker Change: It's still.
Speaker Change: Similar to what has happened certainties that as we've moved on pricing competitors have lagged.
Speaker Change: So far we haven't seen them move along so it's taking them a little bit longer and we suspect that has to do with.
Speaker Change: Against the soft consumer environment.
Speaker Change: Now, it's going to be a niche is going to be interesting to see what happens here in the coming quarters. As you know as we get into the heavy summer promotional season and see.
Speaker Change: <unk>.
Speaker Change: What the what they come up with on our end.
Speaker Change: Going to be less aggressive than we were last year, because what we're seeing is that the demand.
Speaker Change: Demand is not necessarily there again, it's pretty soft and when you promote the.
Speaker Change: The pickup in sales is not is it.
Speaker Change: We're not seeing a strong pickup in sales.
Speaker Change: So we're going to be a little bit more careful in how we approach it and also to take care of the.
Speaker Change: Value.
Speaker Change: The health of the category is going forward, but we will see how they react and of course, we will be ready to respond to this.
Speaker Change: Necessary, so so far no big changes on the promotional side.
Speaker Change: Competitors holding back on price increases so far.
Speaker Change: Very helpful. Thank you.
Juan Guzman: Well take our next question from Juan Guzman with Scotiabank. Your line is open.
Speaker Change: Hi, Good morning, Javier Javier then all the timing there. Thanks for taking my question just a quick follow up here regarding the deal with a partner.
Speaker Change: So it sounds to me basically does this distribution agreement right that youre, starting to piloting and maybe youll find some optionality in the future to invest directly in this business. So correct me if I'm wrong in that.
Speaker Change: Capital rising Dave So first of all.
Speaker Change: When do you plan to implement this.
Speaker Change: This first pilots and you mentioned that in five years, we will see some more relevant fitness. So what's incremental revenue are you expecting from it if you can share that.
Speaker Change: And how aggressive do you see this business and in addition, obviously you wont be producing the manufacturing the product so.
Speaker Change: But would you need to make some additional investments to your distribution and go to market platform to commercialize these products and time Lus you're entering in this kind of this drug remains are you exploring on finding other distribution agreements with other partners in the future sorry.
Speaker Change: So many questions that there'll be information. Thank you very much.
Speaker Change: No no. Thanks, thanks for the interest really really appreciate it.
Speaker Change: Let us let us try and answer them, if we Miss one of your questions. Please let us know because as you said there were quite a few in there but.
Speaker Change: I think initially yes, what you what you mentioned is.
Speaker Change: Almost correct in the fact that they will be manufacturing, we will be commercializing.
Speaker Change: But the additional.
Speaker Change: I think we got going is that we will both be investing.
Speaker Change: To position the brands and to support this business going forward when it comes from.
Speaker Change: From a promotional.
Publicity standpoint, so from A&P standpoint, so very simple a combination but they do have let me put it this way not only skin in the game in terms of manufacturing the right product, but they're also investing to make sure we position the products correctly now this early on.
Speaker Change: As you mentioned.
Speaker Change: This is a launch in Europe.
Speaker Change: We will be participating in this category.
Speaker Change: And product should be reaching the shelves in the next.
Speaker Change: Weeks.
Speaker Change: Maybe month.
Speaker Change: And again, it's two two different products, a mainstream product called <unk>, which will have.
Speaker Change: The dog food as its main component and then.
Speaker Change: Brian.
Speaker Change: So the Super premium.
Speaker Change: Offering which is prime care.
Speaker Change: Which will have both cat and food offerings out there and again, we will we.
Speaker Change: We will launch this way and we'll see how it evolves and certainly the relationship with new Tech can also.
Speaker Change: Evolve going forward.
Speaker Change: But we believe this is the easiest most efficient way to start and then as we as we get into it.
Speaker Change: Again positioned to brands and grow we will see where the relationship it takes us now.
Speaker Change: Hard to say, we wouldn't want to say quite frankly at this point in terms of vessels.
Speaker Change: We will be selling in five years term or.
Speaker Change: The profitability of this will be of course profitability initially.
Speaker Change: We will be hampered because of the investments we're going to make but we believe over time profitability can be in line.
Speaker Change: Margins, we haven't Kimberly Clark, the Mexico, but again it will be evolving it will be evolving all I can say is we're very serious about this we think we have the right partner.
Speaker Change: And again their processes together with our commercial expertise. We believe is a powerful combination and we'll have more to more to bring to the market and we will continue to build on this relationship going forward additional investments with other companies.
Speaker Change: Companies sure I mean, we have been exploring quite a few things.
Speaker Change: This we've been exploring for at least a year and a half and we finally came to the conclusion that we had again the product that partner and never seen greater to go.
Speaker Change: But we'll continue to look for additional opportunities that might be out there. So that we can strengthen our growth capabilities.
Speaker Change: Profitability.
Speaker Change: In the medium to long term.
Speaker Change: Great. Thank you very much for for answering my questions that was premium tourist and just a quick follow up. So obviously there will be an investment phase in the in the short term do you see it impacting your results are decisive steel.
Speaker Change: So negligible to see a real material impact in your results in the next few quarters.
Speaker Change: Let me put it this way it wont be negligible because were serious about investing behind those brands, but it won't be material.
Speaker Change: Some great. Thank you very much for answering my questions and congratulations.
Speaker Change: Good luck.
Speaker Change: And if you have got towards dogs by the product.
Speaker Change: And once more for your question that is star one we'll move next to.
Speaker Change: Hum.
Juan Guzman: Our Nemo that Guseman with Inca investments your line is open.
Speaker Change: Hi, Good morning, I had a just a bunch of follow up questions from what you've said in terms of new Tech.
Juan Guzman: The new.
Speaker Change: No agreement.
Speaker Change: Just wanted to understand so does <unk> have any brands right now or are they just a producer of pet food and then kind of what you bring is that you'll have that expertise in brand building and distribution.
Speaker Change: They've got branch in the specialty channel and they will continue to sell directly to the specialty channel and veterinarians, which we don't have any reach to those so they'll continue to sell there and we'll be selling until of modern trade and wholesale.
Speaker Change: We have different brands with different brands correctly.
Speaker Change: Okay, Okay got it.
Speaker Change: So you said that you don't expect as much opex.
Speaker Change: Pressure going forward have you already had some opex pressure from this kind of over the last year.
Speaker Change: No no we haven't had any opex pressure from this again.
Speaker Change: Sure.
Speaker Change: Over the past year, we've just been.
Speaker Change: Working with them to put together the plan, but we are just launching at this stage.
Speaker Change: Okay.
Speaker Change: Okay. Okay. Thanks, and then so.
Speaker Change: In terms of the.
Speaker Change: I guess im trying to get to ultimately kind of how youre seeing the margins.
Speaker Change: Going forward.
Speaker Change: So youre still kind of within in the first quarter within your target range kind of on the low end of your targeted range.
Speaker Change: But theres a lot of moving pieces right in terms of the.
Speaker Change: Pricing being a little bit less like being a little bit more cautious on that the opex. It did look better so wanted to kind of see how that continues but then at the same time, though.
Speaker Change: Perfect. So a lot of moving pieces. So I just wanted to hear your thoughts on how you see the margins evolving.
Going forward.
Speaker Change: Sure No Thats a great question, because only one let me put it this way with what we see right now and let's say very important caveats.
Speaker Change: For the year and that's another important caveat, we should have margins within our target range.
Speaker Change: If things.
Speaker Change: Given the uncertainty change.
Speaker Change: An important way then we'll have to see about that but given what we see right now for the year, we should be between the.
Speaker Change: In the range, which quite frankly, we believe as I mentioned as it shows the resiliency of the company because given the cost scenario and the exchange rate scenario. The uncertainty scenario of the fact that we can maintain our high margins.
25 to 27 range, we believe speaks volumes as to the ability of the company to produce results.
Speaker Change: For the year, we do expect that to continue.
Speaker Change: Absolutely and then just more on those details.
Speaker Change: Opex did look a tighter this quarter just wanted to see if there was anything in particular that helped and kind of how you see that going forward, especially what you might have a little bit more pressure from from the launch of <unk>.
Speaker Change: Food category.
Speaker Change: You said the Opex was higher this quarter.
Speaker Change: Tighter sorry, lower like you had a much yes. It was it was it was not it was.
Speaker Change: It was lower.
Speaker Change: Let's see mainly because.
Speaker Change: The results that we are seeing.
Speaker Change: On distribution and logistic expenses.
Speaker Change: And hopefully not hopefully.
Speaker Change: Those will continue yielding results.
Speaker Change: Expect any pressure on Opex and let me be very clear.
Speaker Change: I Couldnt expect pressure.
Speaker Change: Pressure on Opex on the launching because even though we will be investing.
Speaker Change: Behind the new brands number one if you put together, what we will be investing.
Speaker Change: What we bet.
Pablo Gonzalez: In the rest of the businesses as Pablo said.
Pablo Gonzalez: <unk> is not going to be negligible, because it's important but it's not going to change the equation and second.
We're going to be investing, but we're also going to be selling and having some profits. This year. So so so I wouldn't factor any any significant opex pressure from the launching this year.
Pablo Gonzalez: Okay. That's that's helpful. And then on pricing you mentioned, 3% to 4% in the second half is that kind of year on year in the second half or the average that you expect for the year for the pricing.
Pablo Gonzalez: Yeah.
Pablo Gonzalez: That's probably what we'll see.
Pablo Gonzalez: For the second half.
Pablo Gonzalez: Okay got it okay.
Speaker Change: Okay, and sorry, one more question on competition, just given kind of what you're seeing in volumes still being weaker how are you seeing market share trends are you are you seeing kind of you're losing some market share in some.
Pablo Gonzalez: <unk> to any other competitors or to private label or anything like that that we should be aware of.
Pablo Gonzalez: No no and thanks for asking that because.
Pablo Gonzalez: As I mentioned the growth of our categories and many is muted in some has decelerated, but our shares continue to be strong we've seen no for the most part we're even or higher than last year at this point. So our shares are strong they're fine.
Speaker Change: And are you seeing that's great to hear I know are you seeing any shifting within the kind of within the price points are within the category.
Pablo Gonzalez: Any down trading anything like that.
Pablo Gonzalez: Not not not in an important way.
Pablo Gonzalez: Really I.
Pablo Gonzalez: So far the effect of the mix movements has been negligible.
Pablo Gonzalez: We have observed in some categories some shift from value to economy products, while premium segment remains strong, but only in some categories overall.
Pablo Gonzalez: <unk> was actually actually positive for the quarter.
Pablo Gonzalez: Okay.
Speaker Change: Great well. Thank you. Thanks for all your answers thank you.
Speaker Change: And it does appear that there are no further questions. At this time I would now like to turn it back to Pablo <unk> for any additional or closing remarks.
Speaker Change: Okay.
Speaker Change: Nothing more to say just thank you all for participating in the call are again the team is ready to answer any further questions you might have and the results are in.
Speaker Change: Our launch of <unk>.
Speaker Change: All of our business into the pet food category and looking forward to talking to you again.
Again, thanks for participating.
Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful afternoon.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Oh.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change:
Speaker Change: Okay.