Q4 2024 Grupo Bimbo SAB de CV Earnings Call

Speaker Change: [music].

Thats all, folks.

Operator: Thanks for Watching Good day and welcome to the Grupo Bimbo 4th Quarter 2024 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good day and welcome to the Grupo Bimbo fourth quarter 'twenty 'twenty four results conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. You ask a question you.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded.

Press Star then one on a touchdown falling.

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Rafael Pamea: I would now like to turn the conference over to Rafael Pamea, CEO. Please go ahead. Hello. Good afternoon, everyone. Thank you for joining us. Connected on the line today is our CFO, Diego Gagiola, Mark Bendix, Executive Vice President and several members of our finance team.

Rafael: I would now like to turn the conference over to Rafael <unk> CEO. Please go ahead.

Speaker Change: Hello, Good afternoon, everyone. Thank you for joining us.

Speaker Change: Connected on the line today is our CFO.

Speaker Change: Uh Huh March Bendix Executive Vice President and several members of our finance team.

Rafael Pamea: 2024 showcased our resilience, innovation, and unwavering commitment to excellence, as well as the importance of being a highly diversified global company. Our top line reached record levels, delivering an increase in our volumes throughout the year in a still complicated consumer environment in some of our markets. We were able to achieve this by a robust performance in Mexico and EAA regions. In Latin America, despite a tough start in some operations like Chile and Colombia, we managed to deliver strong growth by maintaining a competitive offer and adapting rapidly to market conditions throughout the second semester. And in North America, despite a continued challenging consumer environment, we embarked on an exciting project, which we expect to gradually yield benefits in the second half of 2025.

Speaker Change: 'twenty 'twenty four showcased our resilience innovation and unwavering commitment to excellence as well as the importance of being a highly diversified global company.

Speaker Change: Our top line reached record levels, delivering an increase in our volumes throughout the year in a steel complicated consumer environment in some of our markets.

Speaker Change: We were able to achieve these bay by a robust performance in Mexico and.

Speaker Change: EAA region in Latin America, Despite a tough start in some operations like Chile, and Colombia, we manage through the lever of strong growth by maintaining a competitive offer and adapting rapidly to market conditions throughout the second semester.

Speaker Change: And in North America. Despite a continued challenging consumer environment, we embarked on an exciting project, which we expect to gradually yield benefits in the second half of 2025.

Rafael Pamea: We made CapEx investments for $1.6 billion and completed five strategic bolt-on acquisitions focused on profitable and growing markets like Eastern Europe and North Africa to strengthen our global profile. As consumer shopping patterns continue to evolve in today's environment, we have been leveraging innovation to address our consumer needs and consumption occasions to further enhance our market position in key categories. We also leverage the strength of our beloved brands to provide differentiated products with a favorable value equation, like Bimbo Bread and Satterlee House Loaf offerings. Additionally, we are excited about Rustique and Artesano, our product offerings to capitalize on the growth in the premium artisan packaged bread sector.

Speaker Change: We made capex investment for $1.6 billion and completed five strategic bolt on acquisitions.

Speaker Change: Focused on profitable in growing markets like Eastern Europe, and North Africa to strengthen our global profile.

Speaker Change: As consumer shopping patterns continue to evolve in today's environment, we have been leveraging innovation to address our consumer needs and consumption locations to further enhance our market position in key categories.

Speaker Change: We also leverage the strengths of our beloved brands.

Speaker Change: We'll provide differentiated products with a favorable value equation like bimbo, Brad and sadly how slow offerings. Additionally, we are excited about <unk> cannot at this panel our product offerings to capitalize on the growth in the premium artisan packaged bread segment.

Rafael Pamea: Moreover, we are penetrating other emerging categories, such as flatbreads with our Rapiditas brand in some regions.

Speaker Change: Moreover, we are penetrating other emerging categories, such as flat bread sweet sour, but I believe that brand in some regions.

Rafael Pamea: Our adjusted EBITDA also reached a record level. Significant contribution came from our operations in Mexico and EAA, which busted historical margins at 20.3% and 9.4% respectively. We were able to create incremental deficiencies across our value chain that helped us to almost offset the long-term strategic investment we executed in North America.

Speaker Change: Our adjusted EBITDA also reached a record level significant contribution came from our operations in Mexico on EAA with busted historical margins at 23% and nine 4% respectively.

Speaker Change: We were able to create incremental efficiencies across our value chain that helped us to us to almost self said the long term strategic investments we executed in North America.

Rafael Pamea: I'm also pleased to share with you our significant progress towards our sustainability journey. We achieved 100% renewable electricity in one additional country, now encompassing 28 out of our 35 operating countries. This accomplishment has allowed us to reach 97% renewable electricity globally. With this progress, we are confident in our ability to meet our commitments of 100% renewable electricity, 100% recyclable, biodegradable, or compostable packaging. 100% reuse of treated water for 2025. and more than 200,000 hectares of wheat grown with Regenerative Agricultural Practice.

Speaker Change: I'm also pleased to share with you our significant progress towards our sustainability journey, we achieved 100% renewable electricity in one additional country now encompassing 28 out of our 35 operating countries.

Speaker Change: These accomplishments has allowed us to reach 97% renewable electricity globally.

Speaker Change: With this progress we are confident in our ability to meet our commitments of 100% renewable electricity, 100% recyclable biodegradable or compostable packaging.

Speaker Change: 100% reuse of treated water for 2025.

Speaker Change: And more than 200000, aktar, so we'd grown with dredging narrative agricultural practices.

Rafael Pamea: From a nutritional perspective, we were recognized with a fourth spot among food companies evaluated by the Access to Nutrition Initiative, ACNI, reflecting our firm commitment to global nutrition and health. This recognition underscores our efforts to offer products that contribute to balanced and accessible nutrition for all. We express our gratitude for the hard work and dedication of our associates, the trust of our customers, and the support of our stakeholders. Together, we have achieved remarkable milestones and laid a strong foundation for the future. As we start 2025, we remain optimistic about building on our legacy of success.

Speaker Change: From a nutritional perspective, we were recognized with a sore spot among food companies added weighted by the access to nutrition in each of these acne, reflecting our firm commitment to global nutrition and health.

Speaker Change: This recognition underscores our efforts to offer products that contribute to balance and accessible nutrition floor.

Speaker Change: We express our gratitude for the hard work and dedication of our associates the trust of our customers on the support of our stakeholders.

Speaker Change: Together, we have achieved remarkable milestones and laid a strong foundation for the future.

As we start 2025.

Speaker Change: We remain optimistic about building on our legacy of success, we will maintain a sharp focus on refining our ways of working and executing with excellence will navigate the complex and challenging political and macro environment.

Rafael Pamea: We will maintain a sharp focus on refining our ways of working and executing with excellence to navigate the complex and challenging political and macro environment.

Rafael Pamea: Now, looking into the quarter four results by region. In Mexico, sales improved by 1.7% mainly due to the continued volume growth across the region. We observe positive trends in all channels and most categories, with good performance in buns and rolls, cookies, cakes, and snacks. Adjusted EBITDA margin in Mexico reached a strong level at 21.6% reflecting the positive volume contribution, favorable mixed effect, and lower commodity cost. in North America, excluding FXFAG. Top line declined 5.7% primarily due to the continued weak consumption environment and the strategic exit of certain non-branded businesses. Consumption environment remains soft as consumers seek value as they have faced prolonged inflationary pressures.

Speaker Change: Now looking into the quite a full results by region.

Speaker Change: In Mexico sales improved by one 7%.

Speaker Change: Mainly due to the continued volume growth across the region.

Speaker Change: We observed positive trends in all channels and most categories with good performance in buns, and rolls cookies cakes and snacks.

Speaker Change: Adjusted EBITDA margin in Mexico reached a strong level at 21, 6%, reflecting the positive volume contribution favorable mix effect on.

Speaker Change: Lower commodity costs.

Speaker Change: In North America, excluding FX effect.

Speaker Change: <unk> declined five 7%, primarily due to the continued weak consumption environment and be a strategic exit of certain non branded business.

Speaker Change: Consumption environment remained soft as consumers seek value as they have faced prolonged inflationary pressures.

Rafael Pamea: On the other hand, we saw market share gains across our snacking category, which includes sweet baked goods, salty snacks, and cookies. We continue to assess promotions and the overall value equation as we pursue innovation targeting key consumer demographics. We will remain competitive in the marketplace, balancing the right volume price equation, while driving consumer engagement and market penetration. We're also working to expand our distribution to meet consumers where they shop and deliver the right value through a price pack structure tailored to each channel. Despite lower commodity costs and productivity gains, our adjusted EBITDA margin contracted by 390 basis points, primarily due to strategic investments aimed at improving value chain capabilities and increasing saturation to enable growth as we more effectively serve our customers and consumers.

Speaker Change: On the other hand, we saw market share gains across our snacking category, which includes sweet baked goods salty snacks and cookies.

Speaker Change: We continue to assess promotions on the overall value equation as we pursue innovation targeting key consumer demographics.

Speaker Change: We will remain competitive in the marketplace balancing the right volume price equation.

Speaker Change: While driving consumer engagement and market penetration.

We're also working to expand our distribution to meet consumers, where they shop and deliver the right value through our price pack structure tailored to each channel.

Speaker Change: Despite lower commodity costs and productivity gains our adjusted EBITDA margin contracted by 390 <unk>.

Speaker Change: These points, primarily due to our strategic investments aimed at improving value chain capabilities and increasing saturation to enable growth as we more effectively serve our customers and consumers.

Rafael Pamea: These investments include one-time charges related to the closure of previously announced bakeries as well as efforts to optimize our go-to-market capability. Moving forward, we will remain focused on proactively seeking opportunities to improve productivity. expand distribution, and grow market share by connecting with consumers at every shopping opportunity.

Speaker Change: These investments include one time charges related to the closure.

Speaker Change: Our previously announced may increase as well as efforts to optimize our go to market capabilities.

Speaker Change: Moving forward, we will remain focused on proactively seeking opportunities to improve productivity.

Speaker Change: Expand distribution and grow market share by connecting with consumers at every shopping opportunity.

Rafael Pamea: Moving on to Latin America, excluding FX effect, net sales increased 13.8% mainly because of good sales performance throughout the three divisions, Latin Centro. Latin Sur, and Brazil, with very strong growth in some countries such as Argentina, Paraguay, El Salvador, and Panama. Brazil and Argentina continue to deliver strong sales growth and Chile and Colombia confirmed the changing trends in the third quarter due to our responsive revenue growth management strategy.

Speaker Change: Moving on to Latin America excluding.

Speaker Change: Excluding FX effects net sales increased 13, 8%, mainly because of good sales performance throughout the three divisions Latin Centro.

Speaker Change: Latin sued and Brazil.

Speaker Change: With very strong growth in some countries, such as Argentina, Paraguay, and El Salvador and Panama.

Brazil, and Argentina continued to deliver strong sales growth in Chile, and Colombia confirmed the changing trends in in the third quarter due to our response at revenue growth management strategy.

Rafael Pamea: Please be advised that we are still waiting for the authorization of the acquisition of Wikivolt in Brazil, which we expect in the course of the year.

Speaker Change: Please be advised that we're still waiting for the authorization of the acquisition of wiki bolt in Brazil, which we expect in the course of the year.

Rafael Pamea: In Europe, Asia, and Africa, excluding FX effect, sales increased 9.6%. This was mainly due to a strong performance in Bimbo QSR, double-digit growth in Romania, India, the UK, and Morocco, and the inorganic contribution from the three acquisitions we have completed in the region over the year. These acquisitions have accelerated our growth and improved our profitability very quickly. As all these past acquisitions have been accretive. in all front. The remarkable just-a-day-with-a-margin expansion of 270 basis points resulted from the solid sales performance. Lower cost of sales. efficiencies throughout the supply chain, and the positive contribution from the past acquisitions, which led to a record margin for a fourth quarter of 9.6%.

Speaker Change: In Europe, Asia, and Africa, excluding FX effect sales increased nine 6%.

Speaker Change: This was mainly due to our strong performance in <unk>.

Double digit growth in Romania, India, the UK and Morocco.

Speaker Change: And the inorganic contribution from the three acquisitions, we have completed in the region over the year.

Speaker Change: These acquisitions have accelerated our growth and improve our profitability very quickly as all of these past acquisitions have been accretive.

Speaker Change: On all fronts.

Speaker Change: The remarkable our adjusted EBITDA margin expansion of 270 basis points resulted from the solid sales performance.

Lower cost of sales.

Speaker Change: Efficiencies throughout the supply chain and the positive contribution from the past acquisitions, which led to a record margin for the fourth quarter of 9.6%.

Rafael Pamea: In this region, we are also still waiting for the regulatory approvals on the acquisition of Dondon in the Balkans. Once completed, we will expand our geographic presence to 39 countries.

Speaker Change: In this region. We are also still waiting for the regulatory approvals on the acquisition of Don Don in the Balkans. Once completed we will expand our geographic presence to 39 countries.

Diego Gagiola: With this, I would now like to turn over the call to Diego, who will walk you through our financials. Please, Diego, go ahead.

Speaker Change: With this I would now like to turn over the call to Diego, who will walk you through our financials. Please Diego go ahead.

Diego Gagiola: Thank you, Rafa.

Diego: Thank you.

Diego Gagiola: Good afternoon everyone and thank you for joining us. Our full year results were in line with our 2024 Guidance of Sales and Adjusted Activity. growing at a low single digit. Unfortunately, we were not able to reach the margin expansion. This is because of the tough consumer environment and the investments we're making in North America. including one-time expenses related to the bakeries we closed during the year, enabling long-term benefits.

Diego: Good afternoon, everyone and thank you for joining us today.

Diego: Our full year results were in line with our 2020 for guidance.

Diego: And adjusted EBITDA.

Diego: Growing at a low single digit.

Unfortunately, we were not able to reach the margin expansion.

Diego: These because of the tough consumer environment and the investments, we're making in North America.

Diego: Including one time expenses related to the bakeries, we closed during the year.

Diego: Ling long term benefits.

Diego Gagiola: I would like to reinforce the importance of being a highly diversified company. has more than 50% of our business.

Diego: I would like to reinforce the importance of being a highly diversified company.

Diego: More than 50% of our business.

Diego Gagiola: Deliver Outstanding Results. Helping to Minimize North America's Challenging Results. We are investing in our largest operation. to secure a sustainable and profitable growth in the long run. Maintaining an optimistic perspective about the positive impact these initiatives will have on the company in the coming future.

Diego: Deliver outstanding results.

Diego: To minimize north Americas challenging results.

Diego: We are investing in our largest operation.

Diego: Thank you, our sustainable and profitable growth in the long run.

Diego: Maintaining an optimistic perspective about the positive impact.

Diego: Initiatives wind problem the company in the coming future.

Diego Gagiola: Consistent with our capital allocation priorities. We executed $1.6 billion in capital. which was slightly below our guidance of $1.8 to $2 billion.

Diego: Consistent with our capital allocation priorities.

Diego: We executed one $6 billion in Capex.

Diego: Which was slightly below our guidance of $1 $8 billion to $2 billion.

Diego Gagiola: We completed five strategic acquisitions during the year. UNO in Turkey, which mark our entry into that country. One in Romania, one in Costa Rica, one in Uruguay. and our entrance to Tunisia. Additionally, we return to our shareholders 8.7 billion pesos from buybacks and dividends. As a result, we closed the year with a net debt-to-adjusted TV debt ratio of 2.9 times. Our total debt close at 151 billion pesos. The increase in our debt position when compared to 2023 was because of the financing for our capital expenditures, the strategic investment.

Diego: We completed five strategic acquisitions during the year.

Diego: Well no.

Diego: In Turkey, which mark our entry into that country.

Diego: One in Romania, one in Costa Rica, one little one.

Diego: And our aim to Michelle.

Diego: In Germany were returned to our shareholders $8 7 billion pesos from buybacks and dividends.

Diego: As a result, we closed the year with a net debt to adjusted EBITDA ratio of two nine times.

Diego: Our total debt.

Diego: 151 billion pesos.

Diego: The increasing our debt position when compared to 2023.

Diego: Was because of the financing for our capital expenditures.

Diego: Peak investments.

Diego Gagiola: I don't know. to some extent because of the depreciation of the Mexican peso.

Diego: And also.

Diego: To some extent because of the depreciation of the Mexican peso.

Diego: Okay.

Diego Gagiola: Two weeks ago, we issued 15 billion pesos in Mexican bonds in two tranches. One for seven years and the other one for three years. It was a success issuance. It attracted a remarkable demand of 22 billion pesos. This strong demand underscores the confidence our investors have in our strategy and future goals. This issuance strengthens our financial position and enables us to continue advancing with our expansion strategy.

Diego: We put all we issued 15 billion pesos in Mexican bonds in two tranches.

Diego: 147 years and the other one for three years.

Diego: It was a success issuance you've attracted a remark come on demand of 22 billion pesos.

Diego: <unk> strong demand underscores the confidence our in Bristol, describing our strategy our future goals.

Diego: These each one it strengthens our financial position and enable us to continue advancing with our expansion strategy.

Diego Gagiola: As for our operating working capital. We saw an increase of $266 million. for 4.3 days when compared to 2023. mainly due to the behavior of supply. This was partially offset by an improvement of 1.3 days. in clients driven by a better accounts receivable manner.

Diego: As for our operating working capital.

We saw an increase of $266 million.

Diego: For three days when compared to 2023.

Diego: Mainly due to the behavioral golf suppliers.

Diego: This was partially offset by an improvement of one three days.

Diego: In client driven by our better accounts receivable management.

Diego Gagiola: I would like now to share with you our guidance for 2025. We anticipate an increase in net sales of low double digits. As we capitalize on our revenue growth management initiative.

Diego: I would like now to share with you our guidance for 2025.

Diego: We anticipate an increase in net claims of la.

Diego: Low double digit.

Diego: As we capitalize on our revenue growth management initiatives in.

Diego Gagiola: Innovation and Excellence at the Point of Sale. We also foresee a gradual and moderate improvement in the consumer environment, particularly in North America, along with a positive effect from the Mexican peso depreciation. Regarding adjusted EBITDA margin, we project a slight margin expansion. Driven primarily by operational leverage. and benefits from the project in North America is starting to gradually materialize in the second half of the year. As for our raw material costs, we expect stability throughout the year as some commodities have experienced decreases while others have increased. We anticipate. will remain, sorry, challenging due to ongoing investments in North America transformational projects.

Diego: Innovation.

Equivalents at the point of sale.

Diego: We also foresee a grotto and moderate improvement in the consumer environment, particularly in North America, along with a positive FX effect from the Mexican peso depreciation.

Diego: Regarding adjusted EBITDA margin, we project a slight margin expansion.

Diego: Driven primarily by operational leverage.

Diego: Benefits from the project in North America.

Diego: Starting to gradually materialize in the second half of the year.

Diego: As for our raw material costs, we expect the stability throughout the year.

Diego: There are some commodity some experienced decreases while others have increased.

Diego: Yeah.

Diego: We anticipate.

Diego: But the first half of 2025.

Diego: We will remain.

Diego: Sorry challenging due to ongoing investments in North America for measurement project.

Diego Gagiola: coupled with a strange consumer environment in the region.

Diego: Copel without strain consumer environment in the region.

Diego Gagiola: It's important to note that the majority of those investments second half of 2024, which means we will face a tough comparison. in this first semester. By the second half, we expect to see benefits from this project. improve industry conditions, and we'll have a lower rate of comparison.

Diego: It is important to note that the majority of both those investments.

Diego: It started in the.

Diego: Second half of 'twenty, 'twenty, four which means.

Diego: We will face a tough comparison.

Diego: In this first semester.

Diego: By the second half, we expect to see benefits from this project.

Diego: Improving industry conditions, I wouldnt from a lower base of comparison.

Diego Gagiola: Finally, we expect CAPEX to be lower than what we invested in 2024. We have a range between 1.4 to 1.5 billion dollars. This outlook does not factor in the potential effects of new executive orders that may impose tariffs on U.S. imports from Mexico. While this could present an additional challenge for the business. The timing remains uncertain. and it's changing quickly. making it hard to provide a reliable estimate of the impact in the year.

Diego: Finally, we expect capex to be lower than what we invested in 2024.

Diego: We have a range between one four to $1 $5 billion.

Diego: This outlook does not factor in the potential effects of new executive orders that may impose tariffs.

Diego: U S imports from Mexico.

Diego: While this could present, an additional challenge for the business.

Diego: The timing remains uncertain.

Diego: It's changing quickly.

Diego: Making it hard to provide a reliable estimate of the impact in the year.

Operator: We can now proceed with the Q&A session, so please go ahead. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Diego: We can now proceed with the Q&A session. So please welcome.

Diego: We will now begin the question and answer session to ask a question you May Press Star then one on that's how it's done fine yeah.

Diego: So youre using a speakerphone please pick up your handset before pressing the keys.

Diego: But anytime you have a question has been addressed and you would like to Italia question. Please press Star then two.

Operator: At this time, we'll pause momentarily to assemble our roster.

Diego: At this time, we'll pause momentarily to assemble our roster.

Ben Toyer: The first question comes from Ben Toyer with Barclays. Please go ahead. Yeah, good afternoon. Thank you very much for for taking my question Just two quick ones. So first Diego may be picking up on on the comments. You just made on the guidance The the question really is related as to the investments you're doing and the expected benefits from it So I get it obviously first half still very challenging, but as we move into the second half, are we still? Should we still expect investments to happen, but just because they come against the earlier stages It's going to be more favorable or do you also expect already to see certain benefits from these?

Ben Tulcher: Our first question comes from Ben until her with Barclays. Please go ahead.

Speaker Change: Yeah. Good afternoon. Thank you very much for taking my question.

Speaker Change: Just two quick ones. So first Diego, maybe picking up on the comments you just made on the guidance.

Speaker Change: The question really is related as to the investments you're doing and the expected benefits from it so I get it obviously first half is still very challenging but as we move into the second half are.

Speaker Change: Are we still should we still expect investments to happen, but just because the comp against the earlier stages, it's going to be more favorable or do you also expect already to see benefits from these initiatives to improve your operations.

Diego Gagiola: initiatives to to improve your operations Like kind of like what's balance in between what's just come versus what are the benefits?

Speaker Change: Like what's balance in between what's just comp versus what are the benefits that would be my first question I have a quick follow up.

Diego Gagiola: That would be my first question and I have a quick follow-up Yes, hi there. We will continue with the project. It's much more than ending on the first half. The thing is that for the first half, we have a very tough comparison, as we already have part of the structure for doing the transformation in place in our operations, which we didn't have in the first half of 2024. In the second half of 2024 that we started to have structural changes, some one-time expenses of the one that we recognize in the fourth quarter, as an example with the closing of the plan, This will play in our favor when we do the comparison on the expectation of 2025 versus 2024.

Yes, Hi, Ben.

Speaker Change: It does not we will continue with the project is much more of a lending on the first half.

Speaker Change: The thing is that for the first half we have a very tough comparison as we already have part of these structural affordable in the transformation in place in our operations, which we didn't have in the first half of 2024.

Speaker Change: In the second half of 2024 that we started to have a structural changes. Some one time expenses of the one that we recognized in the fourth quarter.

Speaker Change: As an example, with the closing of the plant.

Speaker Change: These will play in our favor when we lose the comparison on the expectation of 20 to 25 versus 2024 model.

Diego Gagiola: But on top of this timing of the execution, of course, we do expect to start to see benefits from these past investments. So it's both. It's seeing the benefits, but also seeing less impact from the investments in the transformation project in North America. Okay, understood. Very clear.

Speaker Change: Top of these.

Speaker Change: Timing of the execution of course, we do expect to start to see benefits from these past investments.

Bose: Bose, it's seen the benefits.

Speaker Change: <unk> also seen.

Speaker Change: A less impact from the investment in the growth of a major project in North America.

Speaker Change: Okay understood very clear and then my quick follow up and I know it is is that this is a tough one because opinions change every 24 hours on tariffs but.

Diego Gagiola: And then my quick follow-up, and I know this is a tough one because opinions change every 24 hours on tariffs, but as we think about the exposure just in general, how much of your Mexican operations have somehow exports to the U.S.? Because that is, I think, the one question we've been getting most from investors. So if that's something you can just give us maybe a rough idea how much of your Mexican business is exposed to potential cross-border activity, that would be appreciated. I agree with you, the situation is not completely clear and there are many unknowns, right?

Speaker Change: As we think about the exposure just in general how much of your Mexican operations have somehow exports to the U S. Because of that is I think the one question we've been getting most from investors. So if that's something you can just give us maybe a rough idea how much of your Mexican business.

Speaker Change: As exposed to potential cross border activity that would be appreciated.

Speaker Change: Maybe you wouldn't want me to take the silver Yeah. We can we can both maybe maybe I can start and.

Speaker Change: And I will begin by say that.

Speaker Change: <unk>.

Speaker Change: I agree with you the situation is not completely clear and there are many unknowns right. However, we are taking measures to prepare for any contingency.

Diego Gagiola: However, we are taking measures to prepare for any contingency. Before going into deeper and more specific response, I have to remind you that we have 114 bakeries across the city country. 60 bakeries in the U.S. which give us a certain margin of action that not all companies have. The products and the nature of it are being produced mostly locally in each country, allowing us to shift production if necessary and ensuring business continuity and minimizing the potential impact. So, definitely, we are planning or we have some scenario analysis with what would it mean a tariff effectively imposed and having an effect on our production and export to the US.

Speaker Change: Before going into deeper and more specific response.

Speaker Change: I have to remind you that we have 114 bakeries across the city countries 60 bakeries in the U S, which gave us a certain margin of action that not all companies have.

Speaker Change: The products and the nature of it.

Speaker Change: Make that are being produced mostly locally in each country, allowing us to shift production, if necessary and ensuring business continuity and minimizing the potential impact.

Speaker Change: So definitely we are planning or we have some scenario analysis with what would it mean, a parish effectively in post and having a effect on our production and exports to the U S are definitely we have in any way.

Diego Gagiola: But definitely, we have many ways to minimize the impact. And this will go in a combination of actions, maximizing local sourcing, as I said, and production, obviously, stressing productivities, having ready PPA initiatives. but most importantly, producing locally in the U.S. That is something that we're going to be doing, if that is the case. So we feel comfortable that we can mitigate the impact. You want to complete. Anything, Diego? Yeah, just probably to complement, I mean, to remind you that most of our production is local. given the nature of our products. We do have, in some specific categories, some exports from Mexico to the U.S., but just to give you context, it's less than 10% of the revenues in the U.S.

Speaker Change: To minimize the impact and this will go away in a combination of actions.

Speaker Change: Maximizing local sourcing as I said and production obviously.

Speaker Change: My stressing productivity DS, having ready PPA initiatives that.

Speaker Change: But most importantly, producing locally in the U S.

Speaker Change: It is something that we're going to be doing is that is the case.

Speaker Change: So we feel comfortable that we can mitigate the impact.

Speaker Change: You want a complete.

Speaker Change: And if and Diego.

Speaker Change: Yeah, Youre probably to complement our meetings to remind you that most of our production is lockups.

Speaker Change: The nature of our products, we do have enormous specific category some exports from Mexico to the U S.

But just to give you a context is less than 10% of the revenues in the U S.

Diego Gagiola: It's a high single digit. So, if we were to assume, and again, just to assume, not saying that it's something that we expect at 25% tariff, then the impact that we will have without doing nothing, as Rafa mentioned, there are many initiatives and alternatives that we can implement to offset the impact, but without doing nothing, the impact will be less than a percentage point on our EBITDA margin at the Group of Involvement. And from Canada to the U.S. Very little. We do have. Some products produced in Canada are going to the U.S., but it's no material.

Speaker Change: It's a high single digit so.

Speaker Change: We were to assume.

Speaker Change: And again just to assume no pain that is something that we expect a 25% tariff than the impact that we will have without doing nothing as Rafa mentioned there are many.

Speaker Change: Initiatives and alternatives that we can implement to offset the impact but without doing nothing the impact will be less than a percentage point on our EBIT.

Speaker Change: EBITDA margin at the group will be more living.

Speaker Change: And from Canada to the U S.

Barry: Barry literally rebuilt.

Barry: Some some probes producing in Colorado into the U S, but it's Uh huh.

Speaker Change: No material.

Ben Toyer: Thank you very much.

Barry: Thank you very much I'll pass it on.

Operator: I'll pass it on.

Lucas Moussey: The next question comes from Lucas Moussey with Morgan Stanley. Please go ahead. Hi, everyone. Thanks for taking my question. I have two quick ones. The first one is related to Mexico top line. From your initial remarks, I understood that volumes were the main drivers behind the 2% year-over-year growth on top line. But that also implies that unit revenue apparently was more flat issue over here. So I just wanted to get more color on how the quarter went as it pertains to unit revenue. If perhaps you discounted more due to perhaps a software consumer environment, or was it because of a mixed effect?

Speaker Change: The next question comes from Lucas Messy with Morgan Stanley. Please go ahead.

Lucas Messy: Hi, everyone. Thanks for taking my question I have two quick ones.

Speaker Change: The first one is related to Mexico topline.

Lucas Messy:

Lucas Messy: So in your initial remarks I understood that.

Lucas Messy: Items were the main drivers behind the 2% year over year growth on topline.

Lucas Messy: But that also implies that you wouldn't revenue apparently was more flattish year over year. So just wanted to to get more color on how the quarter went on as it pertains to unit revenue is perhaps you discounted more detour, perhaps a softer consumer environment or was it because of a mix effect so any additional.

Diego Gagiola: So any additional color on unit revenue and what is happening at the margin would be helpful. And my second question is, for the US on margins, I get that the first half should still be pressured due to tougher comps. but just wanted to see if you had more color on the path towards better margins in the second half. Is the fourth quarter of this year, sorry, of 2024, the bottom of margins? Or could we see additional investments that bring profitability perhaps a little bit more down in the first half of 2025? And lastly, very quick one, if you could clarify, what is the effects that you are using for your guidance that would also be helpful?

Lucas Messy: Color on unit revenue and what is happening at the margin would be helpful.

Lucas Messy: And my second question is.

Lucas Messy: The U S on margins I get that the first half shoes, she's still should still be pressured due to tougher comps.

Lucas Messy: But I'm.

Lucas Messy: I just wanted to see if you had more color on the path towards better margins in the second half is the fourth quarter of this year Oh, sorry of 2024, the board Arnaud if margins.

Lucas Messy: Or could we see additional investments that bring profitability, perhaps a little bit more down in the first half of 'twenty 'twenty five and lastly, very quick one if you could clarify what is the effects that you are using for your guidance that would also be helpful. Thank you very much guys.

Diego Gagiola: Thank you very much, guys.

Rafael Pamea: So, I'm going to take over the Mexican question. We have seen the acceleration across the channels. However, we continue to see some volume growth in Bimbo Mexico. It is also true that there was a high basis of comparison. and we have also been prudent in the pricing strategy. It has been mostly volume growth, right? We feel quite optimistic. It's been five quarters in a row that we have grown volumes and I am sure that we continue to be our focus in 2025 to grow volume through innovation programs that are coming quite robustly in the months to come.

Speaker Change: So I'm going to take over the Mexican question.

Speaker Change: We have seen deceleration across the channels.

Speaker Change: However, we continue to see some volume growth seen in Bimbo, Mexico.

Speaker Change: It is also true that there was a high basis of comparison.

Speaker Change: And we have also been prudent in the pricing strategy. It has been mostly volume growth right.

Speaker Change: We feel quite optimistic it's been five quarters in a row that we have grown volumes and I am sure that we continue to be our focus in 2025% to grow volumes through innovation programs that are coming quite robustly in the months to come.

Rafael Pamea: We have also seen a promising beginning of the year. So. We're hopeful to keep delivering very good results. of Mexico, like the accumulation of 2024. So to you, Mark.

Speaker Change: We have also seen a promising beginning of the year. So.

Speaker Change: We're hopeful to to keep delivering very good results.

Speaker Change: Both Mexico like the accumulation of 2024.

Mark: So to you Mark.

Diego Gagiola: I think Diego is going to take the margin question for the U.S. Yeah, great. Yeah, that's happily taken.

Speaker Change: I think Diego, who is going to take the margin question.

Diego: Yes, Greg.

Greg: How can we think.

Greg: Both the margin question and also the effects that we have considered and formulate forecast.

Diego Gagiola: Both the margin question and also the effects that we have considered for the four. So today, yes, I mean. It's the fourth quarter had several, uh... that I would say are non-recurring. So that will give us some confidence to say that it can be a bottom margin. On top of that, what we're seeing in the fourth quarter, as it was previously mentioned, it's a soft consumer environment. So we have a small top line, these extraordinary expenses, and still, as we're building the transformation, we're still not seeing the benefits or fully the benefits of the investments that were done during the quarter.

Greg: So, yes, I mean.

Greg: The fourth quarter had several others.

Greg: It impacts that I would say are non recurring.

Greg: So that will give us some confidence to say that it can be a bottom margin.

Greg: On top of that what we're seeing in the fourth quarter as it was previously measured it's a soft consumer environment.

Greg: We have.

Greg: Small top line.

Greg: These extraordinary expenses and we've seen as we're building the transformation, it's still not seeing the benefits or fully the benefits of the investments that were drawn during the quarter. So I would say.

Diego Gagiola: So I would say, although on a comparable basis, the first quarter is going to be tougher, in terms of sequentially, we feel confident that the first quarter of 2025 will be better than the fourth quarter of 2024, and we will continue to see some progress. And as I said, in the second half of the year, we want to see more a revamp on the margins in the region. In terms of the FX that we're considering, it's 21 pesos. That's the implied exchange rate that we have in the guidance. Very clear. Thank you very much for the answer, guys.

Speaker Change: Well no on that.

Speaker Change: Comparable basis, the first quarter, it's going to be tougher in terms of sequentially.

Speaker Change: We feel confident that the.

Speaker Change: First quarter of 2025 will be better than the fourth quarter.

Speaker Change: 2024.

We will continue to see some progress and as I said in the second half of the year, we will see more of a rebound on the margins in the region.

Speaker Change: Yeah.

Speaker Change: So hopefully I was clear.

Speaker Change: In terms of the effects that we're considering it's 21 pesos that the implied exchange rate that we have in the guidance.

Speaker Change: Very clear thank you very much for the answer guys.

Antonio Hernandez: The next question comes from Antonio Hernandez with Activer. Please go ahead. Hi, good afternoon. Thanks for taking my question. Just another follow-up on North America. You've already been providing some color there. We just wanted to get a sense on the competitive environment and whether you're seeing any change in trend in terms of the consumer environment. So far, the Thanks for the question. In the U.S., generally, we're seeing a bifurcation of consumers where economically stressed consumers are moving down the private label or other value offerings, so be it, while more affluent customers are moving towards more premium products.

Antonio Hernandez: The next question comes from Antonio Hernandez with vascular. Please go ahead.

Antonio Hernandez: Hi, Good afternoon. Thanks for taking my question just a follow up on North America.

Speaker Change: Or what do you mean, providing some color there, but just wanted to get a sense on the competitive environment and whether you're seeing any change in trend.

Terms of the consumer environment, so far this year.

Speaker Change: Great. Thanks for the question.

Speaker Change: In the U S G.

Speaker Change: Generally we're seeing a bifurcation of consumers where economically stressed consumers are moving down a private label or other value offerings. So be it well more affluent customers are moving towards more premium products.

Rafael Pamea: The benefit that we've seen at Grupo Bimbo is in our sliced Bimbo sliced bread was up 18%. So it's resonating with consumers. Artesano, our premium mainstream offering was up 3%. And Rustique, our newest premium bread offering is up 31%. The challenge here is that we're the largest player and we have an oversized exposure to the largest segment of the category in the middle, which is where the bulk of the category declines are occurring right now. And we've got to find a way to mitigate those because the businesses with momentum do not have sufficient enough size to offset those losses.

Speaker Change: The benefit that we've seen that Grupo bimbo is in our sliced bimbo sliced bread was up 18%. So it's resonating with consumers artesano, our premium mainstream offering was up 3%.

Speaker Change: And Rusty <unk>, our newest premium bread.

Speaker Change: <unk> is up 31%.

Speaker Change: The challenge here is that we're the largest player and we have an oversized exposure to the largest segment of the category in the middle.

Speaker Change: Which is where the bulk of the category declines are occurring right now and we've got to find a way to mitigate those because the businesses with momentum do not have sufficient enough size to offset those losses. So you're going to ask me what are we focused on now well.

Rafael Pamea: So, you're going to ask me, what are we focused on now? Well, we're focused on expanding our offerings in the value segment. We just introduced Sara Lee Half Loaves. We've got Bimbo Bread distribution, and it's not everywhere, but we expect it to go everywhere and expand that distribution. And Bimbo Buns are also for mainstream consumers. And in this premium segment, an expanded distribution of Rostique and the introduction of focused products on protein. We all know what's going on with the GLP-1 drugs. And you'll look to see in second quarter that we'll be introducing high-protein products in the bagel segment and also in sliced bread.

Speaker Change: Focused on expanding our offerings in the value segment.

Speaker Change: We just introduced thoroughly have logs.

Bimbo bread distribution and it's not everywhere, but we expect it to go everywhere and expand that distribution and nimble bonds are also for mainstream consumers and in this premium segment and expanded distribution of rustic and the introduction of <unk>.

Speaker Change: Focused products on protein, we all know what's going on with the <unk> one drugs.

Speaker Change: Youll look to see in second quarter that we'll be introducing high protein products in the <unk> segment and also on slide spread.

Operator: Okay, thanks for the call.

Okay. Thanks for Americold look have a good day.

Julio Cesar Martinez Castro: The next question comes from Julio Cesar Martinez Castro with Sura Investments. Please go ahead. Hi, Diego and Rafa. Thank you for taking the call. My question is regards to growth in North America.

Speaker Change: The next question comes from Julio Cesar Martinez cast sure. That's the right investment. Please go ahead.

Speaker Change: Hi, there I wonder if I. Thank you for taking the call.

Speaker Change: My question is regards to growth in North America could you. Please share your strategy for driving growth.

Rafael Pamea: Could you please share your strategy for driving growth in North America in 2025? And my second question is.

Speaker Change: In North America in 2025.

Speaker Change: And my second question is.

Rafael Pamea: Does the management team anticipate any plans for M&A activities in North America during this period? I'll take a swing at what we're expecting. What we're expecting in the U.S. is really a health and ingredient conscious. consumer. And then our changes in policies are reflecting the broader consumer demand for healthier options with the whole Make America Healthy Again initiative. So, you're going to see an increased demand for high-protein consumers, and they're prioritizing protein sources, including plant-based alternatives and high-protein snacks. So, we're looking to those areas for growth. We're also... As part of our transformation that we're working on and the investments that we're making, we're adding capacity and routes to increase household penetration and points of sale.

Speaker Change: As a management team anticipate any plants or M&A activities in North America. During this period.

Speaker Change: Okay.

Speaker Change: Oh I'll take a swing at what we're expecting.

Speaker Change: What we're expecting in the U S is really a health in the ingredient conscious.

Speaker Change: Sumer and then our changes in policies are reflecting the broader consumer demand for healthier options that the whole make America healthy again initiatives.

Speaker Change: So youre going to see an increased demand for high protein consumers.

Speaker Change: They are prioritizing protein sources, including plant based alternatives and high protein snacks.

Speaker Change: So we're looking to those areas for growth we're also.

Speaker Change: As part of our transformation that were working on and the investments that we're making we're adding capacity and routes to increase household penetration and points of sale, but also reconfiguring routes to simplify the customer experience.

Rafael Pamea: We're also reconfiguring routes to simplify the customer experience. We're adding capabilities to our bakery and our DC automation. We've got integrated systems and processes and alternative distribution methods. So we put those all together and then looking at rationalizing our asset base. We closed five older and CAPEX intensive bakeries last year. We didn't lose that volume, we actually just integrated it into the existing footprint that we had in other bakeries. So, that's where we're looking for growth. We're excited about the investments that we're making and our ability to get to all consumers everywhere in the U.S.

Speaker Change: We are adding capabilities to our bakery in our DC automation, we've got integrated systems and processes and alternative distribution methods. So we put those altogether and then looking at rationalizing our asset base.

Speaker Change: We closed five older and Capex intensive bakeries last year.

Speaker Change: Didn't lose that volume, we actually just integrated into the existing footprint that we had another bakeries.

Speaker Change: So that's where we're looking for growth we're excited about the investments that we're making and our ability to get to all consumers everywhere in the U S.

Diego Gagiola: Thank you so much for the So taking over the second question, we proactively review opportunities on the M&A horizon and analyze them thoroughly. within the guidelines we have. I think that we, our track record proves that we are quite curious about what is happening in the market. These transactions will continue to be focused on complementary acquisitions as it has been in the recent years to strengthen our profile across geographies. Just to remind you, we are entering interesting geos or we consolidate presence in existing ones or we even learn about processes and technologies. We keep looking in general in the market, also in North America, if things are interesting, but we cannot anticipate as of now.

Speaker Change: Thank you so much for the insight.

Speaker Change: So they're taking over the second question.

Speaker Change: We proactively review.

Speaker Change: Opportunities on the M&A horizon and analyze them separately.

Speaker Change: Within the guidelines we have.

Speaker Change: I think that we our track record proves that we are but curious about what is happening in the market.

Speaker Change: These transactions will continue to be focus on complementary acquisitions.

Speaker Change: It has been in the recent years to express in our profile across geographies just to remind you.

Speaker Change: We either entering interesting geos. So we consolidate presence in existing ones are we even learn about processors and technologists and.

Speaker Change: We keep looking in generally in the market also in North America, if things are interesting, but we cannot anticipate as of now.

Alvaro Garcia: The next question comes from Alvaro Garcia with BTG Pactual. Please go ahead. Hi, thanks for the space for questions. Uh, two questions on the U. S. Um, one, to what degree If you can comment on this, is your current volume weakness in the U.S. impacted by the transformational investments that you're undertaking in the U.S.? And sort of in a similar vein, I was wondering if you could maybe provide some longer-term guidance on margin expectations in the U.S. You now have an 8 in front of it. As of 2024, I recognize there's a lot of nonrecurring items this year and transformational investments going on.

Speaker Change: The next question comes from Al <unk> with BTG Pactual. Please go ahead.

al: Hi, Thanks for the space for your questions.

al: Two questions on the U S. One to what degree.

al: If you can comment on this as your current volume weakness in the U S impacted by the transformational investments that that you're undertaking in the U S.

al: Sort of in a similar vein I was wondering if you could maybe provide some longer term guidance on margin expectations in the U S.

al: You now have an eight in front of it the 'twenty 'twenty four I.

al: I recognize there's a lot of nonrecurring items this year and transformational investments going on so I was wondering if you could maybe comment on the long term margin potential of the U S. Thank you.

Diego Gagiola: So I was wondering if you could maybe comment on the long-term margin potential of the U.S. Thank you.

al: Yes.

Diego Gagiola: Mark, if it's okay, I can take it. On the first one, Alvaro, we didn't have any effect on volumes because of the transformation. is more In terms of the potential of margins, as you know, we do not provide that specific information. We already provided the guidance for Grupo Bimbo in 2025. So unfortunately, we are not going to be able to disclose a specific target either for North America or any other of the regions.

Speaker Change: Mark is it if it's okay I can take it.

On the on the first one.

Speaker Change: Well, we didn't had any effect on volumes because of the transfer ratio I mean the steel.

Speaker Change: It's more more on the positive side. Okay. So the decrease in volumes has nothing to do with the transfer of major new product without the transformation.

Speaker Change: The decline could have been a little bit more negative.

Speaker Change: In terms of the potential of margins as you know, we do not provide that specific information.

Speaker Change: Already provided the guidance for <unk> in 2025, so virtually we are not going to be able to disclose specific targets, either Ford North America or any other regions.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Felipe Ugros: The next question comes from Felipe Ugros with Scotiabank. Please go ahead. Thanks, Operator. Good evening, Daniel de Argentina. Thanks, thanks for the space.

Speaker Change: The next question comes from Philippe <unk>.

Speaker Change: With Scotiabank. Please go ahead.

Speaker Change: Thanks, operator, good evening <unk>. Thanks, Thanks for the space.

Felipe Ugros: Guys, I said Daniel Graja, sorry. The quarter we've, in Latin America during the quarter, we've seen some very impactful distortions from Argentine operations of companies across food and beverage.

Danielle: Oh, no I I cited Danielle drop I'm sorry.

Speaker Change: The quarter we.

Speaker Change: Latin America during the quarter, we've seen some very impactful distortions from Argentine operations of companies across food and beverage. Just wondering if you can give us an idea of how things would have looked like in Latin America. If you have if you have removed Argentina from the mix.

Felipe Ugros: Just wondering if you can give us an idea of how things would have looked like in Latin if you had removed Argentina from the mix, you know, kind of cleaning up all those distortions from end of year adjustments. And then the second one, on consolidation, you know, wondering if you can give us an update on Eastern Europe and Northern Africa. It's a region where you've been doing a lot of bolt-ons and entering new countries where you were not in recent years. So, I guess, where are you if we looked at Eastern Europe and North Africa as a puzzle, where are you versus where you want to be?

Speaker Change: In all kind of kind of cleaning up all those distortions from and end of year adjustments and then the second one.

Speaker Change: Consolidation you know.

Speaker Change: Wondering if you can give us an update on eastern Europe and Northern Africa.

Speaker Change: <unk> been doing a lot of bolt ons.

Speaker Change: And entering new countries, where you were not in recent years.

Speaker Change: So I guess where are you if we looked at eastern Europe, North Africa or a puzzle.

Speaker Change: Where are you versus where you want to be how advanced are you in the process of consolidating the presence in that region. Thank you.

Felipe Ugros: How advanced are you in the process of kind of consolidating depressants in that region?

Rafael Pamea: Thank you. Yes. Hello, Felipe. I'm going to start with Latam. We're actually filling. confident that we're on, we're going to be able to continue to see the positive trend, also in Argentina, as it started to happen in the second half of 2024 and that we already explained. If I move to Argentina, if you have been following us, in the last years we embarked ourselves on a transformation journey that we have already completed and we're profiting from it. We improved greatly our portfolio of bread, we developed further the premium segment, we became more leaner and meaner in the value chain and we enjoyed the great contribution of new talent.

Speaker Change: Yes.

Philip: Hello, Philip it I'm going to start with Latam.

Speaker Change: <unk>.

Speaker Change: We're actually feeling.

Confident that we're on we're going to be able to continue to see the positive trend also in Argentina.

Speaker Change: So it is starting to happen in the second half of 'twenty 'twenty, four and that we already explained.

Speaker Change: If I move to Argentina.

Speaker Change: If you have been following us in the last year as we embark ourselves on a transformation journey that we have already completed and we're processing.

Speaker Change: It.

Speaker Change: We improved greatly our portfolio brands, we developed further the premium segment.

Speaker Change: We became more leaner and meaner in the value chain.

Speaker Change: And we enjoyed the great contribution of talent so.

Rafael Pamea: So, when we take a look at how Argentina is performing over the last years and especially throughout 2024, it gives us a lot of confidence that we can keep growing and improving margin at the same time. So, I don't know if that answers you as for us, Argentina it is an important geography coupled with the also sustainable good results of Brazil and the turnaround of Colombia and Chile, four big geographies in LATAM. We feel comfortable that we're going to be waiving any headwinds and we're going to be taking advantage of tailwinds too.

Speaker Change: When we take a look at how Argentina is performing over the last few years and especially throughout 2024. It gives us a lot of confidence that we can.

Keep growing and improving.

Speaker Change: Margin at the same time.

Speaker Change: So I don't know if that answers you.

Speaker Change: For us Argentina. It is an important geography, coupled with the also sustainable good result of Brazil.

Speaker Change: The turnaround of Colombia, and Chile, four big geographies in Latam, we feel comfortable that we're gonna be waiving.

Speaker Change: Any headwinds and we're going to be taking advantage of a tailwind too. So we are we are quite happy with the resilience of our teams and how they reacted in certain geographies in the second.

Rafael Pamea: So, we are quite happy of the resilience of our teams and how they reacted in certain geographies in the second semester. So, when it comes to AEE. I would say that, um, We have embarked ourselves in an aggressive, somehow M&A activity that has proven to be quite a criticism. All the chosen companies, they have The same characteristics, number one, they are in countries where weed consumption is high. We're choosing companies that enjoy a big competitive advantage. Markets are still quite open in the sense that there is room for improvement. and their EBITDA margins are double-digit.

Speaker Change: Sonesta.

Speaker Change: So.

Speaker Change: When it comes to <unk>.

Speaker Change: E.

Speaker Change: I would say that.

Speaker Change: And we havent embark our sales in in a aggressive.

Speaker Change: An aggressive somehow M&A activity that has proven to be quite accretive.

Speaker Change: All the chosen companies and they.

Speaker Change: <unk>.

Speaker Change: The same characteristics number one they are in countries, where we'd consumption is high.

Speaker Change: We're choosing companies that enjoy a big competitive advantage.

Speaker Change: Markets are still quite open in the sense that there is room for improvement.

Speaker Change: And there are added their margins double digit.

Rafael Pamea: So... We have really identified and we have been successful in convincing. those companies to join the family. So We do believe that we're going to have a positive evolution in that area. It doesn't come from very positive challenges. We need to still. go there and make sure that we're benefit that they benefit from our scale and know how. But definitely, we're happy to also learn about branded and unbranded offer in the commercial and in the in-store bakery aisle. So we're learning a lot of things. We are contributing from a strong basis. Let me remind you that we are pending from the approval of our last acquisition, Dondon, that would give us a footprint in four additional countries.

Speaker Change: So.

Speaker Change: We have really identified and we have been successful in convincing.

Speaker Change: Those companies to join the family.

Speaker Change: So.

Speaker Change: We do believe that we're going to have a.

Positive evolution.

In that area.

Speaker Change: Ed.

Speaker Change: It doesn't come from very positive challenges, we need to still.

Speaker Change: Go there and make sure that we're benefit that they benefit from our scale and knowhow.

Speaker Change: But.

Speaker Change: Definitely we're happy to also learn about branded.

Speaker Change: And branded offer in the commercial and the in store bakery aisle. So we're learning a lot of things we are contributing from a strong basis.

Speaker Change: Let me remind you that we are pending from the approval of our last acquisition, Don Don that would give us a footprint in four additional countries.

Rafael Pamea: We do believe that this is a source of profitable growth and lots of learnings for our business model.

Speaker Change: Well, we do.

Speaker Change: <unk> believes that this is a source of profitable growth and lots of learnings for our business model.

Rafael Pamea: I mean, it took a lot of time, so I guess that I. I covered what you wanted to hear from us. Yes, thank you on the Eastern European, North African piece for sure.

Speaker Change: I mean, they took a lot of time, so I guess that I.

Speaker Change: I cover what you what you wanted to hear from us.

Speaker Change: Yes. Thank.

Andre: Thank you Andre on the eastern European and North African pop.

Felipe Ugros: On the first part, maybe if I could do a follow-up. So, you described what you've done in Argentina, but maybe I should have phrased my question better, but there are very positive effects because of the hyperinflation adjustments at the end of this year. So, I'm just wondering, if you looked at LATAM without Argentina, was the performance similar? Was it a little bit lower?

Speaker Change: For sure.

Speaker Change: First part maybe if I could do a follow up so you've described what you've done in Argentina, but maybe.

Speaker Change: Maybe I should've phrased my question better, but they're a very positive effect because of the hyperinflation adjustments at the end of this year. So I'm just wondering if you looked at Latam without Argentina, what the performance is similar or was it a little bit longer as you probably don't know the number right out of the top of your head, but anything directional on the rest of the business would be it would be.

Rafael Pamea: You probably don't know the number right out of the top of your head, but anything directional on the rest of the business would be great. First, let me give you a little bit of context. I think that the most relevant part is what Rafa mentioned, structurally in Argentina we're having a very good rise and seeing the benefits of the past investments that we did in the market. So structurally, we had a very solid margin expansion in Argentina. Now the effect on the consolidation, because of the inflation with the disparity of the exchange rate, and also remember that we need to actualize the numbers from the last year.

Speaker Change: Great.

Speaker Change: Yes. Thank you.

Speaker Change: Yeah, I can take that.

Speaker Change: Yes.

Speaker Change: And maybe just of context, I think that the most relevant parties, what Russell mentioned structurally.

Speaker Change: In Argentina, we are.

Speaker Change: Having a very good rise in seeing the benefits of the past and bedroom investments that we need.

Speaker Change: In the market.

Speaker Change: Structurally we had a very solid margin.

Speaker Change: Margin expansion in Argentina, the effect on the consolidation.

Speaker Change: Because of the pleasure with the disparity of the exchange rate.

Speaker Change: And also remember that we need to.

Speaker Change: Actualize the numbers from the <unk>.

Speaker Change: Last year.

Speaker Change: Uh huh.

Rafael Pamea: it's to some extent compensated as opposed to other countries in which we do not adjust to inflation the last year. So, it is, to give you some idea, it's a little bit more than 10% of the region. It's a market that structurally is doing very good. Of course, it did contribute in a positive way to the results of LATAM. Or even if we were to exclude Argentina, I don't have the exact math, but having all the detail on the performance and the results that we had, even in some other operations in the region, such as Brazil, Chile, Colombia, that also enjoyed very positive results in the quarter.

Speaker Change: It's to some extent compensated as opposed to other countries in which we do not adjust to inflation.

Speaker Change: The last year.

Speaker Change: So it is to give you some idea.

Speaker Change: I'll leave it.

Speaker Change: More than 10% of the region. It's a market that is structurally is doing very good.

Speaker Change: Of course, it did contribute it to in a positive way to the results of Latam, where even if we were to exclude Argentina I don't.

Speaker Change: The second month.

Speaker Change: We're having more of the detail on the performance and the results that we had even in some other operations in the region, such as Brazil, Chile co.

Speaker Change: Colombia that also enjoy very positive results in the quarter, so even excluding Argentina.

Rafael Pamea: So, even excluding Argentina, we were able to deliver a very solid top-line growth and a margin of error.

Speaker Change: We were able to deliver very solid top line growth and the margin expansion.

Rafael Pamea: Thanks Taylor, that's exactly what I was looking for. Yeah, I would compliment you, compliment you and compliment you Diego on Latin Centro also had extraordinary results. all year long. So, It's not only Argentina that was doing good. Great.

Dave: Thanks, Dave.

Speaker Change: The maintenance work.

Speaker Change: Yes, I would complement you.

Speaker Change: Complement you on complement you Diego on on Latin Central also had extraordinary results.

Speaker Change: Aldi alone so.

Speaker Change: It's not only Argentina that was doing.

Speaker Change: Good.

Speaker Change: And the second semester.

Speaker Change: Great. Thanks, so much guys.

Operator: Thanks so much, guys.

Fraulein Mendez: The next question comes from Fraulein Mendez with J.P. Morgan. Please go ahead. Hi, Jens, thank you very much for taking my question. I wanted to double-click a little bit on Mexico. Obviously, I guess you have seen the numbers that we're seeing on the retail side with very, let's say, weak consumption into the second half and expected to be a very weak first half. Could you explain to us what has driven the resiliency of your volumes in Mexico? What drives that differentiation between your volumes and what we are seeing in the rest of the industry? And in that sense, into 2025, I know you don't guide margins, but if most of the strength so far has been on the volume side and we are expecting a slower 2025, is there space for pricing into 2025 for us to expect these strong margins that we saw in the fourth quarter to be somewhat sustained into 2025?

Mendes: The next question comes from program Mendes with Jpmorgan. Please go ahead.

Mendes: Hi, Gents. Thank you very much for taking my question I wanted to double click Mexico, obviously, I I I guess you have seen the numbers that we're seeing on the retail side with very let's say, we consumption to the into the second half and expect it to be a very very weak first half could you.

Mendes: You explained to US what is driven what has driven the resiliency of your volumes in Mexico, what what drives that differentiation between your volumes and what we are seeing in the rest of the industry and in that sense.

Mendes: 2025.

Mendes: I know you don't guide margins, but it is most of the strength. So far has been on the volume side and we are expecting a slower 10 to 25 is there space for pricing into 2025 for us to expect the strong margins that we saw in the fourth quarter to be somewhat sustained.

Mendes: Into the into 2025, thank you.

Rafael Pamea: Thank you.

Rafael Pamea: Yep, I will take this one. I would say that we have enjoyed... Long volume growth for five quarters in a row in Mexico, and we do expect to continue having a positive volume rise. and the reasons for that are threefold. The first one is that we have a continuous pipeline of innovation. representing I-TEAM. in as a percentage of growth. The innovation, it is strong in our mix year over year. Also, we keep expanding our commercial footprint. Our go-to-market keeps expanding. And number three, We are stronger on point-of-sale activation, first positions, impactful arrangements at the point-of-sale.

Mendes: Yes, I will take this one.

Mendes: I would say that we we have enjoyed.

Mendes: Strong volume growth for five quarters in a row.

Mendes: In Mexico, and we do expect to continue having a positive volume price.

Mendes: And the reason for that are three three fold. The first one is that we have a continuous pipeline of innovation.

Speaker Change: Representing <unk>.

Mendes: Hi teams.

Mendes: As a percentage of growth innovation. It is strong in our mix year over year.

Mendes: Also we keep.

Mendes: Spending our.

Commercial footprint, our go to market keeps expanding.

Mendes: And number three.

Mendes: We are stronger on point of sale activation.

Mendes: First positions.

Mendes: Impactful.

Mendes: Thoughtful arrangements at the point of sale.

Rafael Pamea: So on that side, I would say that the Mexican teams keep delivering news and keeps being closer and closer where the transactions are taking place. We also have very strong brands that have been enjoying consumers' favors over years. on our efforts on pricing, pricing increases going forward. I would say that would definitely usually make price increases in line with inflation. So, it is too early to say that, but I think that we have the capability to keep up with the opportunities in volume of existing products, innovation or price tag architecture. We keep all our options open.

Mendes: So on that side I would say that the Mexican teams keep delivering news and keeps being closer and closer where the sections are taking place.

Mendes: We also have very strong brands that have been enjoying.

Mendes: I enjoy in consumers' favour over years.

Mendes: Yeah.

Mendes: On our efforts on on pricing pricing increases going forward I would say that.

Mendes: We are continually analyzing our <unk>.

Mendes: Revenue growth management strategies.

Mendes: We're focusing mainly on the right price pack architecture.

Mendes: So we find that there are a lot of opportunities within our portfolio, which is plenty of categories for much portions that we can play around on on a win win scenario.

Mendes: Yeah.

Mendes: We're definitely usually make price increases in line with inflation.

Mendes: So.

It is too early to say that but I think that we have the capability to keep up with the opportunities in volume of existing products innovation or price pack architecture.

Mendes: We keep all our options open.

Rafael Pamea: Understand.

Speaker Change: Understand and if I may a follow up on a different subject.

Rafael Pamea: And if I may follow up on a different subject, you mentioned having exited some private label businesses in the U.S.

Speaker Change: You mentioned, having exited some private label businesses in the U S.

Rafael Pamea: I would love to hear your mindset around how to think about the balance between serving this market versus competing against it on the private label side in the U.S. Great question. Just to give you a little texture on the exits that we had, they were diluted to our overall P&L. And a third of the volume loss that we saw was those strategic exits of non-branded business. It doesn't mean that we don't pursue non-branded business, but when they don't match up with our price demands and our strategy in the market, we will exit. So, We will continue to look for volume in all facets, including private label, but only if it is accretive and not dilutive to our P&L.

Speaker Change: I would love to hear your mindset around how to think about the balance between serving this market versus competing against it on.

Speaker Change: On the private label side in the U S.

Speaker Change: Great Great question.

Speaker Change: Just to give you a little texture on the exits that we had they were dilutive to our overall P&L.

Speaker Change: Third.

Speaker Change: <unk> loss that we saw was those strategic exits of non branded business. It doesn't mean that we don't pursue non branded business, but when they don't match up with our price demands and our strategy in the market we will exit.

Speaker Change: No.

Speaker Change: We will continue to look for volume in all facets, including private label, but only if it is accretive and not dilutive to our P&L.

Rafael Pamea: Very clear.

Speaker Change: Very clear thank you so much guys.

Rafael Pamea: Thank you so much, guys.

Fernando Corvera: The next question comes from Fernando Corvera with Bank of America. Please go ahead. Hi, good evening, and thanks for taking my question. Just a quick one, can you comment what explains the 26% tax rate of the quarter? And if you have any guidance for this year regarding also your tax rate? Thank you. Yes. Hi, Fernando.

Fernando Olvera: The next question comes from Fernando Olvera with Bank of America. Please go ahead.

Speaker Change: Hi, good evening and thanks for taking my question and just a quick one can.

Fernando Olvera: Can you comment.

Fernando Olvera: Comment what explains the 26% tax rate, though of the quarter.

Fernando Olvera: And if you have any guidance at all for this year regarding also your tax rate. Thank you.

Fernando Olvera: Yes, Hi, Fernando.

Diego Gagiola: Well, as you know, I would probably say first, take a look at the effective tax rate more on a yearly basis. What typically happens is that when you're in the closing process of the year, several times you need to adjust more to the reality on some tax provisions that were created. Of course, sometimes it can go the other way around and you feel that you're running short of what you need to recognize during the full period. Of course, we always try to minimize the volatility on a quarterly basis. But more with a very big focus on a yearly basis.

Fernando Olvera: Well as you know I would probably say first.

Fernando Olvera: Take a look at the effective tax rate more on a yearly basis.

Fernando Olvera: What typically happens is that when.

Fernando Olvera: You are in the closing process of the year.

Several times Youll need to add more to the reality of some tax provisions that were created of course, sometimes it can go the other way around.

Fernando Olvera: You feel that you are running short of what you will need to recognize during the full period.

Fernando Olvera: Of course, we always strive to minimize the volatility on a quarterly basis.

Fernando Olvera: But more with a very big focus on a yearly basis.

Diego Gagiola: So the effective tax rate was 32.3% in the year, slightly lower than the 33 that we had in 2023. So it was like 80 basis points less, very consistent. There are no extraordinary effects either on the positive or the negative side in our tax rate. So going forward, we do not expect any material movements. We continue to expect the tax rate to be between the low to mid 30s, which is basically around the level that we have been the last three, four, five years.

Fernando Olvera: The effective tax rate was 32, 3% in the year.

Fernando Olvera: Slightly lower than the 33 that we had in 2023.

Fernando Olvera: Our threat like 80 basis points less.

Fernando Olvera: Very consistent.

Fernando Olvera: No there are no extraordinary.

Fernando Olvera: FX either on the positive or the negative sizing our tax rate so going forward, we do not expect any material movement.

Fernando Olvera: We continue to expect the tax rate to be between the low to mid thirties.

Fernando Olvera: Is basically around the level that we have been the last.

Fernando Olvera: 345 years.

Diego Gagiola: Great. Thank you, Diego.

Diego: Great. Thank you Diego.

Operator: This concludes our question and answer session.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to wrap up on the Asps for any closing remarks. Please go ahead.

Rafael Pamea: I would like to turn the conference back over to Rafael Pamiers for any closing remarks. Please go ahead. Yes, hello. Thank you all for your time today. Please do not hesitate to contact us with any further comments or questions you might have. Have a good day. Bye-bye.

Speaker Change: Yes Hello.

Speaker Change: Thank you all for your time today.

Speaker Change: He's not hesitate to contact us with any further comments or questions you might have.

Speaker Change: Have a good day bye bye.

Speaker Change: Okay.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Uh huh.

Speaker Change: Yeah.

Speaker Change: [music].