Q2 2025 Kimberly-Clark de México SAB de CV Earnings Call
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Operator: Good day, everyone, and welcome to the Kimberly-Clark de Mexico 2Q25 earnings conference call.
Operator: 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. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star and 2.
Operator: Please note, this call is being recorded and I will be standing by if you should need any assistance.
Good day everyone and welcome to the Kimberly Clark. New Mexico, 2q 25 earnings conference call. 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. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star and 2.
Pablo Guajardo: It is now my pleasure to turn the conference over to Mr. Pablo Gonzalez, CEO. Please go ahead. Thank you. Hello, everyone. Hope you're having a good summer. Thanks for participating on the call.
Please note, this call is being recorded and I will be standing by if you should need any assistance.
Speaker Change: It is now my pleasure to turn the conference over to Mr. Pablo Gonzalez CEO. Please go ahead.
Thank you.
Pablo Guajardo: We'll go straight to results, and then we'll make some comments about the quarter and our expectations going forward, as well as update you on some important initiatives on their way.
Hello, everyone. Hope you're having a good summer. Thanks for participating on the call.
Speaker Change: We'll go straight to results and then we'll make some comments about the quarter and our expectations going forward.
Javier: So, Javier. Thanks, Pablo.
Javier: As well as update you on some important initiatives on their way. So Javier,
Javier: Good morning, everyone. During the quarter, our sales were 14.1 billion pesos, basically flat versus last year, 1.7% higher than the first quarter and an all-time quarterly record by a couple of million. Total volume was down 3.3% and price mix was up 3.3%. Consumer products and away from home decreased 2.2% and 7.8% respectively. exports were up 24.5% with double-digit increases in both converted products and hard-rolled sales. Cost of goods sold increased 7.2%. Against last year, salmon resins were favorable. Virgin fibers were mixed, while recycled fibers and fluff compared negative. The FX was significantly higher, averaging 17.3% higher.
Javier: Thanks, Pablo. Good morning everyone.
Javier: During the quarter, our sales were 14.1 billion pesos, basically flat versus last year, 1.7% higher than the first quarter and an all-time quarterly record by a couple of million.
Total volume was down 3.3% and price. Mix was up 3.3%. Consumer products are away from home decreased, 2.2% and 7.8% respectively.
Javier: Exports were up 24.5% with double digit increases in both converted products and hard roll sales.
Cost of goods sold increased 7.2% against last year. Salmon resins, were favorable virgin fibers were mixed while recycled fibers and fluff. Compared negatively.
Javier: Our Cost Reduction Program once again had very good results and yielded approximately 500 million pesos of savings in the quarter. These savings are mainly at the cost of goods sold level and are generated by sourcing, materials improvement, and process efficiency. Gross profit decreased 9.7% and margin was 38.2% for the quarter. Mix was negatively affected by an increase in lower margin hardware sales. SG&A expenses were 3.6% lower year over year and as a percentage of sales were down 60 basis Operating Profit decreased 13.9% and the Operating Margin was 21.7%. We generated 3.6 billion pesos of EBITDA, an 11.5% decrease.
Javier: The FX was significantly higher averaging 17.3% higher.
Javier: Our cost Reduction Program. Once again, had very good results and yielded approximately 500 million pesos of savings in the quarter.
Javier: Materials improvements and process efficiencies.
Gross profit, decreased 9.7%, and margin was 38.2% for the quarter.
Javier: Mix was negatively affected by an increase in lower margin hard. Roll sales.
Javier: Sgna expenses were 3.6% lower year-over-year and as a percentage of sales were down 60 basis points.
Javier: Operating profit decreased 13.9%, and the operating margin was 21.7%.
Javier: As we had anticipated, even with the significant peso depreciation, we were able to maintain our EBITDA margin within our long-term range at 25.4%. Cost of financing was $352 million in the second quarter, compared to $356 million in the same period last year. Net interest expense was slightly higher at 373 million pesos versus 319 million pesos last year. During the quarter, we had a $21 million foreign exchange gain, which compares to a $37 million pesos loss last year. Net income for the quarter was 1.9 billion pesos with earnings per share of 62 cents. We maintain a very strong and healthy balance sheet.
Javier: We generated 3.6 billion pesos of a and 11.5% decrease.
Javier: As we had anticipated, even with the significant peso depreciation. We were able to maintain our Evita margin within our long-term range at 25.4%.
Javier: Cost of financing was 352 million pesos in the second quarter compared to 356 million pesos in the same period last year.
Javier: Net, interest expense was slightly higher at 3,000 at 373 million pesos versus 319 million pesos last year.
Javier: During the quarter, we had a 21 million peso foreign exchange gain which compares to a 37 million pesos lost last year.
Javier: Net income for the quarter was 1.9 billion pesos with earnings per share of 62 cents.
Javier: Cash position as of June 30 was 11 billion pesos. We have no debt maturing for the rest of the year, and maturities for the coming years are comfortable. Net debt to EBITDA ratio is 1 and EBITDA to net interest coverage is 10 times Over the last 12 months, we have repurchased close to 50 million shares, more than 1.5% of the shares outstanding, which brings the total payouts to shareholders to 7.5%, including the cash dividend.
Javier: We maintained a very strong and healthy balance sheet.
Javier: Cash position as of June, 30 was 11 billion pesos.
Javier: We have no debt maturing for the rest of the year and maturity is for the coming year, for the coming years are comfortable.
Javier: Net depth to every the ratio is 1 and the Evita to net interest coverage is 10 times.
Javier: Thank you. As expected and mentioned in our prior call, the first quarter trend continued during the second quarter and resulted in top line basically flat versus last year, albeit a quarterly record. lower bottom line margin, but improving sequentially, and EBITDA still within our target range, despite significant uncertainty, consumption deceleration, raw material cost increases, and very negative exchange rates. Once again, this reflects the strength and resiliency of KCM. On the top line, we compared to a very strong second quarter of last year and we faced a challenging environment with leading indicators signaling a slowdown of the economy and private consumption.
Javier: Over the last 12 months, we have repurchased, close to 50 million shares, more than 1.5% of of the shares outstanding, which brings the total payouts to shareholders to 7.5% including the cash dividend. Thank you.
Javier: mentioned in our project called,
Javier: the first quarter Trend continued during the second quarter and resulted in Topline basically flat versus last year, albeit a quarterly record
Javier: Lower bottom line margin, but improving sequentially.
Javier: Within our target range, the spine significant uncertainty consumption.
Javier: Raw material cost increases and very negative exchange rate.
Javier: once again, this reflects the strength and resiliency of KCM,
Javier: On the top line, we compared to a very strong second quarter of last year and we faced a challenging environment.
Javier: A key indicator for us is that volume growth in some of our most important categories is muted, and even in higher growth ones, it spins slower. In addition, we continue to see clients aggressively manage their inventories, given the economic conditions and uncertainty. Plus, and this is very important, we intentionally reduced our support during the heavy summer promotional season. The strategic decision had an important negative effect on our volumes, but it's intended to protect the value of our brands, as well as reduce the negative pricing effects. And it means that both consumers and clients did not stock up on our products, which should translate into healthier volumes and prices during the second half of the year.
Javier: With leading indicators signaling is low down of the economy and private consumption.
Javier: A key indicator for us is that volume growth in some of our most important categories is muted. And even in higher growth ones, it's been slower.
Javier: In addition.
Javier: We continue to see clients aggressively manage their inventories, giving the economic conditions and uncertainty.
Javier: Plus and this is very important.
Javier: We intentionally reduced our support during the heavy summer, promotional season.
Javier: The Strategic decision had an important negative effect on our volumes.
Javier: But it is intended to protect the value of Our Brands, as well as reduce the negative pricing effects.
And it means that both consumers and clients did not stock up on our products.
Javier: Which should translate into healthier volumes and prices during the second half of the year.
Javier: This, together with our Accelerated Innovation Plan, and I'll have more on that in a moment. Increased investment behind our brands and execution behind the opportunities we've identified should translate in growth accelerating in the coming quarters. With respect to costs, the higher exchange rate plus the fact that the anticipated relief in pulp prices did not materialize, particularly in softwood pulp and fluff, which were at record levels, had a meaningful impact. Given sub-demand from China, we are finally seeing prices come down, but slowly. Going forward, we expect dollar-denominated costs on tissue-raw materials, that is, pulp and recycled fibers, to have a more modest impact.
This together with our accelerated Innovation plan, and I'll have more on that in a moment.
Javier: Increased investment behind Our Brands and execution behind the opportunities. We've identified
Javier: should translate in growth accelerating in the coming quarters.
Javier: With respect to costs.
The higher exchange rate plus the fact that the anticipated relief in Pope prices, did not materialize particularly in softwood Pulp and fluff which were at record levels had a meaningful impact.
Javier: Given soft demand from China. We are finally seeing prices come down but slowly.
Javier: Going forward. We expect dollar denominated costs on tissue, raw materials, that is Pulp and recycled fibers.
Javier: And we expect a mixed picture in personal care. Higher fluff, but lower resins and super-absorbent material. Having said that, it's clear that the lack of certainty and many different moving parts could change the outcome. Accordingly, we have carried out selective price increases, have put in place actions to support a richer mix, and are well on our way to achieving record savings for the year.
To have a more modest impact.
Javier: And we expect a mixed picture and personal care, higher fluff, butt, lower residents and super absorbent materials.
Javier: Having said that it's clear that the lack of certainty and many different moving Parts could change the Outlook.
Javier: Accordingly.
Javier: We've carried out selective price increases have put in place actions to support a richer mix.
Javier: Now let me turn to innovation and provide an update on our launch of the PET. During 2025, we will introduce product improvements in every category in which we participate. So far, we've introduced important innovations at the diaper, wipes, and incontinence categories, among others. And in the coming quarters, we'll continue to strengthen our offerings to consumers in bathroom tissue, incontinence pads, and feminine care.
Javier: On our well, on our way to achieving record savings for the year.
Javier: Let me turn to Innovation and provide an update on our launch of of the pet business.
During 2025, we will introduce product, improvements in every category in which we participate.
Javier: will be in a position to share more details on this in future calls. Also, continue to make progress to bring to market technologies and products that will increase consumer preference for our brands in the coming years. Finally, as we've discussed with you, in the medium term, we expect to accelerate our growth rate by achieving double-digit growth rates in categories with higher growth potential, like wipes, kitchen towels, facial tissue, and wipers, among others. as well as through adjacencies and entries into new categories. With respect to adjacencies, the recent integration of 4E Global into the KCM operation is creating opportunities to strengthen our position and capabilities in the soap and toiletries categories, as well as to participate in shampoos and other liquid-based product categories.
Javier: So far we've introduced important Innovations at the diaper wipes and incontinence categories, among others and in the coming quarters, we'll continue to strengthen our offerings to consumers in bathroom tissue incontinence pads and feminine care.
Javier: We'll be in a position to share more details on this in future calls.
Javier: Also continue to make progress to bring to Market Technologies and products that will increase consumer preference for your brands in the coming years.
Term. We expect to accelerate our growth rate by achieving double digit growth rates in categories, with higher growth potential, like wipes kitchen, towels, facial, tissue, and wipers among others.
Javier: As well as through adjacencies and entries into new categories.
Javier: We would respect to adjacencies the recent integration of, for Global into the KCM operation, it's creating opportunities to strengthen our position and capabilities in the soap and toiletries categories, as well as to participate in shampoos and other liquid-based product categories.
Javier: As we move ahead with our plans, we expect sales to accelerate in these categories during the second half of the year, and particularly during 2026 and 2027, as we bring our pipeline of innovations to market.
Javier: As we move ahead with our plans, we expect sales to accelerate in this categories during second half of the year and particularly during 2026 and 2027 as we bring our pipeline of Innovations to Market.
Javier: And when it comes to our entry into the pet food business, we're in the process of gaining distribution behind our brands and have started the commercial and marketing efforts to support them. We have received excellent feedback from consumers and will embark on an aggressive sampling program to get more consumers to try our superior products and start to position and grow our brand. We're in the first mile of a marathon, we are excited with the consumer's very positive reaction to our product. We'll keep you updated on our progress.
Javier: And when it comes to our entry into the Pet Food business, we're in the process of gaining distribution, behind Our Brands and have started the commercial and marketing efforts to support them.
Javier: we have received excellent feedback from consumers and will embark on an aggressive sampling program to get more consumers to try our Superior Products and start to position and grow Our Brands
Javier: We're in the first mile of a marathon. We are excited with the consumer's, very positive reaction to our products.
Operator: With that, let's turn to your questions. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question.
Javier: Keep you updated on our products.
Javier: With that, let's turn to your questions.
Alejandro Fuch: We'll take our first question from Alejandro Fuch with Itaú, please go ahead. Thank you, Operator. Hola, Pablo, Xavier. Good morning. Thank you for your questions. I have just one brief one on the top line. Maybe Pablo wanted to see if you can elaborate a little bit more into the volume pressure. I know you mentioned some macro slowdown and consumption slowdown that we have seen across the board in Mexico, but I wanted to see maybe you can also touch if you think this is also maybe competition. What are some of your competitors doing? Also, maybe you said that second half should be a little bit better, a little more growth, but also we continue to see the slowdown today and comps are a little more difficult for kinder in the second half.
Javier: Your telephone keypad. You may remove yourself from the Queue at any time by pressing star 2 once again, that is star 1 to ask a question.
Speaker Change: We'll take our first question from Alejandro. Fuk with EO. Please go ahead.
Alejandro: Thank you for waiting. Good morning, thank you for the questions. I have just 1 brief 1 on the top line, maybe Pablo wanted to see if you can
Pablo Guajardo: What would be the drivers of growth in the second half of the year? Thank you. Thanks for the question, Alejandro, and for participating in the call. Yes, as you know, the Mexican private consumption and the economy as a whole has continued to slow down, and we are certainly feeling it in our categories, as I mentioned. It's a key indicator for us that volume growth in our biggest categories is muted. So we're seeing, for example, in diapers, bathroom tissue growth flat or ahead of last year. In higher growth categories, we are seeing them growing at a higher clip, but still not at the rates they were doing.
Into the bowling pressure. I know you mentioned some macro slowdowns and consumption slow and that we have seen across the board in Mexico but 1 or 2 maybe you can also touch if you think this is also maybe competition what are some of you know, your competitors doing and and also maybe you you said that second half should be a little bit better right more growth. But also you continue to see the slow 1 today and compare a little more difficult for for Kinder in the second half. So so maybe what what would be the drivers to of growth in the second half of the Year. Thank you.
Pablo Guajardo: So there's no doubt that the consumer is stretched and they're trying to make ends meet and really trying to stretch their budget. So we continue to see that. And the thing is that that's the sellout in our categories, but then you have the sell-in, and we're seeing a big difference between the sell-in and the sell-out because we see our clients being very, very aggressive in the way they're managing their inventories. So that whole, those two things are certainly having an important impact in volumes overall in sellout, but then even a higher impact in our case in sell-in as clients work through their inventories, given all of the uncertainty.
Alejandro: Thanks for the uh, for the question Alejandro and for participating in the call. Yeah, as as, you know, the uh, the uh uh, Mexican private consumption and the economy as a whole has has continued to slow down. Um, and uh, we are certainly feeling it in our categories. As I mentioned, it's a key indicator for us that the volume growth in our biggest categories, is is muted. So we're seeing for example in diapers, bathroom tissue, uh, growth, uh, uh, flat or just slightly ahead of of last year in higher growth categories. We are seeing them uh, uh, growing at a higher clip but still not at the rates. They were, they were doing so there's, uh, so there's no doubt that the consumer is stretched. Um, and they're trying to make ends meet on a, a really trying to stretch their budget.
So, uh we we continue to see that. Um, and the you the thing is that
Pablo Guajardo: Now, going forward, we currently see no big support for the domestic consumption to increase significantly in the coming quarters.
Alejandro: That's the sellout in our categories, but then you have the selling and we're seeing a big difference between the selling and the sellout because, um, we see our clients being very, very aggressive in the way they're managing their inventories. So that whole, uh, uh, uh, those 2 things are certainly having an important impact, uh, in volumes overall in sellout. But then, uh, even a higher impact in our case, in selling as, uh, uh, clients, uh, work through their inventories, uh, given, uh, given all of the uncertainty now going forward. Um, we, we currently see no big, um,
Alejandro: uh, uh, uh
Pablo Guajardo: The reason why we're a little bit more bullish on our end is because one, as I mentioned, we did not participate as aggressively as we have done in the past in the summer promotional season, and we did that to protect the pricing and the value of our brands. But what that means then going forward is that you don't have clients as inventoried as they have been in past years, and consumers as inventoried in our products as they were in past years. And I'm mentioning clients, not just client, because what happened in past years and still continues to do so with these promotions is that those who do the promotions, bringing a lot of product to their inventories before they go ahead and put the promotion in place, and then they sell that product both to consumers but also to other clients.
Alejandro: The uh domestic consumption to increase. Uh uh significantly in the coming quarters. Uh, the reason why we're a little bit more bullish on our end is, uh, uh, because 1, as I mentioned, we did not participate as aggressively as we have done in the past, in, in the summer promotional season and we did that to protect the pricing and the value of Our Brands. But what that means, then going forward is that you don't have clients, uh, as inventory as they had been in past years and consumers as inventory in our products as they were in past years. And I'm mentioning clients not just clients because uh uh what what happened in past years and and still continues to do. So, with this promotions is that uh, uh, those who do the promotions bringing a lot of product to their, uh, inventories before the they, they go ahead and and put the promotion in place and then they sell that product.
Pablo Guajardo: They do sell this product to the wholesale channel. So what would end up happening in past years is that during the third quarter, many clients were inventoried and many consumers were inventoried, plus the price would devalue. So now that we didn't do that, we're expecting going forward that our inventories are a little bit healthier out there, both with clients and consumers, and we expect that to translate into volumes increasing going forward. That's one, and certainly the other is all of our push we have behind our innovations. We are continuing to work on a multi-tier and multi-channel strategy that you know very, very well, and we will be strengthening that strategy so that we strengthen our differentiation at every level.
Both to Consumers, but also to other clients they do sell this product to the wholesale channel. So what would end up happening in past years? Is that during the third quarter, many clients were inventory. And many consumers, were inventory, plus, the price would, uh, the value. So, now that we didn't do that we're expecting going forward, um, that uh, uh, our, our, our inventories are a little bit healthier out there both with clients and consumers and
And uh, we expect that to translate into a volumes increasing going forward. Uh, that's 1 and certainly the other is the, uh, all of our, uh, uh, push. We have behind our Innovations.
Pablo Guajardo: We are adjusting counts, presentations, and the corresponding prices to make our products even more accessible to, as I said, stretched consumers. And also we are fine-tuning and strengthening our private label strategy where it makes business sense. So again, we're We think we're in a healthier position, plus the actions we're taking in innovation and strategy-wise, we believe over the coming quarters, it won't be quick, but over the coming quarters, we expect our volumes to start to pick up. Thank you very much and have a very good day.
Alejandro: Uh we are uh continuing to work on a multi-tier and multi-channel strategy that you know very very well and we will be strengthening that strategy so that we strengthen our differentiation at every level. Uh we are adjusting counts, press uh uh press presentation and uh the corresponding prices to make our products even more accessible to, as I said stretched consumers. And also we are fine-tuning and our private level strategy where it makes business sense. Um, so again, we're
Alejandro: We we we think we'll in a healthier position plus the actions we're taking in Innovation and strategy wise, We Believe over the coming quarters, it won't be quick, but over the coming quarters we should uh we expect our volumes to start to uh to pick up.
Alejandro: People, thank you very much and have a great weekend.
Alejandro: Thank you, also.
Robert Ford: Our next question comes from Robert Ford with Bank of America. Your line is open. So far, shielded by the USMCA. Yeah, thanks for the question, Bob. Look, there's, of course, a lot of uncertainty as to where all this will end. But there's no doubt that there's going to be higher tariffs on China and many other countries. And we believe that, relatively speaking, Mexico will be in a much better position versus all those countries to continue to integrate further with the US. Our partner is looking at this very, very closely. And we're having very productive conversations with them to understand where the opportunities are, so that we can increase our exports of finished products to them.
Robert Ford: Our next question comes from Robert. Ford with Bank of America, your line is open.
Hey, thank you so much. And good morning everybody. Um,
Robert Ford: are your exports, uh, to the US impacted by the incremental Trump tariffs, or are they shielded by the usmca?
Robert Ford: Uh, so far shielded by the usmca bomb.
Fantastic. And I was just curious. How
How are the the tariffs on China, kind of impacting Casey's sourcing out of China? And and how are you thinking about the export opportunity into the US?
Pablo Guajardo: I think we'll see this certainly come to bear in the fourth quarter and through next year.
Pablo Guajardo: And it's not only with KCC. We're doing this with quite a few other players that are, they believe they're going to be impacted with what's happening. And we're certainly trying to take advantage of that, since we believe we're not only well positioned right now, but as I say, we're confident we'll continue to be better positioned than the rest. So we're exploring all the opportunities. As you know, it takes a little bit of time. But we do believe that many of this will bear fruit in the coming quarters and certainly to 2026. So it's a good opportunity for us.
Speaker Change: Yeah, thanks for the question, Bob. Look, there's, of course, a lot of uncertainty as to where all this will end, but there's no doubt that there's going to be higher tariffs on, on, on China and many other countries. And we believe that relatively speaking Mexico would will be in a much better position, uh, versus all those, uh, countries to continue to, to integrate further with the US. Um, our partner is, uh, looking at this very, very closely and we're having a, a, very productive conversations with them to understand where the opportunities are so that we can, uh, increase our Experts of finished products to them. Uh, uh, I think we'll see this certainly come to bear in the, uh, fourth quarter and and through, uh, next year and it's not only with KCC, uh, we're doing this with quite a few other players, uh, that are they
Speaker Change: I believe they're going to be impacted with, uh, what's happening. And we are certainly trying to take advantage of that. Uh, since we believe we're not only well positioned right now, but as I say, uh, uh, I'm we're confident, we'll continue to be better positioned than the rest. So we're we're exploring all the opportunities, uh, as you know, it takes a little bit of time, but we do believe that many of this will be uh uh uh will bear fruit in in the coming uh quarters and certainly to 2026. So it's a it's a good opportunity for us Bob.
Speaker Change: It's great to hear and with respect to the discipline that you showed in the summer, promotional campaigns did did competition shows similar discipline or, you know, was it the the classic? Um,
Pablo Guajardo: I think competitors pretty much approached the summer promotional season as they've done in the past. So when the promotions did go into effect for those four or five days when they do them, we were certainly at a big disadvantage. But again, we believe that for the long run, this is the right thing to do. It hurt us during the quarter, but it positioned us very, very well going forward. And we'll continue to be very, very diligent in how we approach this to protect the value of our brands and to bring the best value possible to consumers and clients.
It's almost like a game theory problem, right? So it's I'm not sure I'm just curious what you're seeing in terms of the competitive environment.
Speaker Change: I think a competitor is pretty much approached the summer promotional season as they've done in the past.
Speaker Change: Uh, so, uh, when uh, the promotions did go into effect for those, uh, 4 or 5 days when they when they do them. Uh, uh, we were certainly at a big disadvantage. Uh, but again, we, we believe that for the long run. This is the right thing to do. It. It hurt us during the quarter, but it positioned us, uh, very, very well, uh, uh, uh, uh, going forward. Um, and, uh, we'll continue to be very, very diligent in how we, uh, uh, approach this to protect the value of Our Brands, and to bring the best value possible to Consumers and clients.
Pablo Guajardo: That makes sense.
Pablo Guajardo: And one last question, if I could, please, and that is… Sure. Sure. We'll be able to share more in the coming quarters, Bob, because we're going through the whole analysis. What I can tell you right now is that we already participate in the shampoo category, particularly when it comes to, certainly, toddlers and kids, but also in adults. We have some specific brands that we sell through different clients, and they sell pretty well. So we're just taking a look at the market. We're taking a look at the strategy to participate in that market, so that we can do it in a way that we can grow, but grow profitably.
Speaker Change: You touched on.
Speaker Change: Food category and I was just curious. If you could, you know, is do you plan to extend a scoot on to the shampoo category? Are you thinking about a different branding campaign? I'm just kind of trying to understand the the addressable Market the positioning of the product and and maybe the the margin profile?
Pablo Guajardo: Otherwise, it's something that we have no interest in. So we've made inroads so far with a couple of clients, and we're finding a way, but I don't think you'll see, let me just put it this way, I don't think you'll see a national brand and a big, big push behind a national brand. It's really niche, and the way we're playing with certain clients, with certain brands, that they're supporting very aggressively.
Speaker Change: Sure. Um, we'll be able to share more in the coming quarters, Bob, because we're going through the whole analysis. What I can tell you right now is that we already participate in, in, in the shampoo category, particularly when it comes to, uh, certainly toddlers, uh, uh, and kids, uh, but also in adults we have some specific brands that we sell through different, uh, uh, clients and and they sell pretty well. So we're just taking a look at the, uh, at the market. We're taking a look at the participants and figuring out, what would be your best strategy? Uh, uh, to participate in that market so that, uh, we can do it in a way that, uh, we can, uh, we can grow, but grow profitably. Uh, otherwise it's something that, uh, we have no interest in. So, uh, we we've been, we've made inroads so far with a couple of clients and, uh, uh, we're finding our, we're finding our way, but I don't think you'll see. Let me just put it this way. I don't think you'll see a a national brand and a big big push behind a national bound brand. It's really Niche. And, and
Pablo Guajardo: But again, we'll be able to share more on this and some other very interesting and important initiatives for us in the coming quarters. Thank you, Bob.
Speaker Change: The way we're playing with certain clients uh uh with certain brands that they're supporting very aggressively. Uh, but uh, again we'll be able to to to share more on this and uh some other uh very interesting and important uh uh initiatives for us in the coming quarters.
Speaker Change: Thank you so much.
Speaker Change: Thank you, Mom.
Antonio Hernandez: Our next question comes from Antonio Hernandez with Activer. Please go ahead. Hi, good morning. Thanks for taking my question. Just, could you provide a little bit more light on how was it training during the quarter? I mean, was it a soft start and then you finished stronger or was it all right? And maybe you could provide more light also in terms of, of course, your man away from home within this...
CTO Hernandez: Our next question comes from CTO, Hernandez with actinver, please go ahead.
Hernandez: Hi, good morning. Thanks for taking the question. Just, uh, could you provide a little bit more light on how we're safe training during the quarter? I mean, USA, a soft start, and then you can stronger or with it. Otherwise,
Pablo Guajardo: Sure. Just, Antonio, to make sure I got your question, because you didn't come out very clear, but you're asking about during the quarter, how we progress, right? Exactly, how you're seeing the start of the third quarter. Okay, I'm going to say that it was, again, given economic conditions, we didn't see, in our case, very big differences, April, May, or June. Again, our competitors who were more aggressive during the particularly June promotional season probably saw a difference. In our cases, we managed it differently. It was pretty consistent, and we're seeing the same thing with the start of July.
Hernandez: And maybe we could provide more light. Also in terms of consumer away from home within this respective. Thanks sure. It just Antonio to make sure I got your question because you didn't come out very clear but you're asking about uh during the core how we progress, right?
Hernandez: Exactly how you're seeing the this start of of the third quarter.
Hernandez: Okay. Um, I'm
Pablo Guajardo: So, again, unfortunately, at this point, we see no big catalysts for domestic consumption to really accelerate. Hopefully that changes in the near term, but there haven't been any catalysts for that to change. So, it's really more about us putting a strategy that allows us to get closer to the consumer, to our clients, and gaining some shares so that we can get growth in the second half of the year.
Hernandez: I didn't see in our case, very big differences. Uh, uh, April May uh, or June. Again, our competitors who were more aggressive during the particular June promotional season season probably saw a difference. In our cases, we managed the differently. It was pretty consistent and and we're seeing the same thing with with the start of July. So, uh, again we we
Pablo Guajardo: Now, when it comes to professional, yeah, we saw an important decrease in sales in our professional business this quarter, and it was mainly driven by volume. Our price mix was slightly positive, and it really has to do with the same economic conditions that we're seeing. And as we talk to our distributors and we talk to our end clients, particularly outside of Mexico City, both hotels, restaurants, etc., they're seeing a sharp, sharp slowdown versus last year. I mean, double-digit slowdowns when it comes to tourism in Cancun and many other places. And it's just much, much slower than it was.
Unfortunately at this point we see no big catalysts for domestic consumption to to Really accelerate hopefully that changes uh uh uh in the near term but uh but there haven't been any catalysts for that to uh to change. So it's really more about us uh uh putting a strategy that allows us to get closer to the consumer to our clients and gaining some, uh, some shares. So, we can get growth in the second half of the year. Now, when it comes to professional, uh, yeah, we saw an important decrease in, in in sales, uh, in our professional business, this quarter. And it was mainly driven by volume our price makes was, uh, slightly, uh, positive. Um, and it really has to do with uh, uh, the same uh, uh, uh, uh, economic conditions that we're seeing. And and as we talked to or Distributors, and we talked to our end clients, particularly outside of Mexico City. Both, uh, uh, hotels restaurants, Etc. They're seeing a sharp sharp slowdown versus last year. Uh, I mean,
Pablo Guajardo: And when you put that together with the distribution system we have for that business, which is through distributors, and distributors in this case tend to have quite a bit more days of inventory than, say, in the consumer product side. So they just have been, they needed to bring down those inventories. So again, it's a combination of a slower economy and our distributors needing to bring down inventories because of the uncertainty and the slower economy. And we'll see if that picks up here in the coming quarters, but everyone I've talked to so far says that Mexico City particularly seems to be doing well, but outside of Mexico City things seem to be quite a bit slower when it comes to services, and that's certainly hitting us on that business.
Hernandez: When you put that together with the, the distribution system, we have for that uh, uh, business which is through Distributors. And distributors, in this case, tend to have quite a bit more days of inventory than uh uh, say in the consumer product side. Um, so they they they just have been
Pablo Guajardo: So doing the same as we're doing in consumer products, making sure we have the right products for this moment in time, that we're working with our distributors to get those products to market, and that we're talking to clients to make sure we understand their needs and we can get those products to them as quickly as we can. But certainly it's low market at this point. Okay, thanks. I appreciate the call. Thank you, Antonio.
Hernandez: Have been, uh, they needed to bring down those inventories. So again, it's a combination of a slower economy and, uh, uh, our Distributors needing to bring down inventories because of the uncertainty and is lower economy. Um, and, uh, we'll see if that picks up here in the coming quarters. But everyone, I've talked to so far, says that Mexico City particularly seems to be doing well. But outside of Mexico City, things seem to be quite a bit slower when it comes to, uh, uh, services and that's certainly hitting Us in on that business. Uh, so doing the same as we're doing in consumer products. Making sure we have the, the the right products for this moment in time that we're working with our Distributors, to get those products to Market. And that we're talking to clients to make sure we understand their needs and we can get to those products to them as quickly as we can. Uh, but uh, certainly is no Market at this point.
Hernandez: Okay, thanks, I appreciate the caller. Have a nice weekend.
Pablo Guajardo: You too.
Thank you Antonio, you too.
Ryan Lavin: Our next question comes from Ryan Lavin with Barclays. Your line is open. Hey, this is Ryan on for Ben. Thanks for taking my question. So focusing on consumer behavior a little bit here, are you guys seeing any trade down amid the price increases you took during the quarter and lower remittances coming to the country as well? And going on that a little bit with the value proposition for KCM, what do you think in the third quarter, fourth quarter, as you talk about potential volume increases, is going to have customers choosing your products over competitors, especially with the larger price?
Speaker Change: Our next question.
Comes from Ryan Lavin with barklay, your line is open.
Hey, this is Ryan on for Ben, thanks for taking our, uh, my question. So focusing on consumer Behavior a little bit here. Are you guys seeing any trade down amid the price increases you took during the quarter and lower remittance? This means that the country as well. And going on that a little bit, with the value proposition for KCM. What do you think in the third quarter, fourth quarter, as you talk about potential volume increases is going to have customers choosing your, uh, your products over competitors. Especially with the larger price Gap? Now,
Pablo Guajardo: Thanks, Ryan. Thanks for the question, a very important one. Yeah, no doubt, we are in the market. We're no doubt seeing consumers trade down. And I'm being very cautious in saying in the market, because in our case, we have a richer mix, because we've supported many of our upper tier products, and they've performed very, very well. So you've got a dichotomy, a market where consumers that have a little bit more to spend continue to do so. But the majority of the population is stretched, and they're certainly trending or trading down to lower priced products and lower count products.
Speaker Change: Thanks. Alright, thanks for the question. A very important 1. Um, yeah, no doubt.
Pablo Guajardo: So what are we doing about it? And we have been doing it, and we have very important plans in the second half of the year to strengthen this. Again, we're working on our multi-tier strategy, making sure that we have the right prices for every tier and the right product for every tier. As you know, we have products in the economy tier also and value at premium. And many or most of the times when people are trading down, they trade down from one of our brands in value to one of our brands in economy, because we lead in value economy and premium.
Speaker Change: Consumers, uh, trade down. Uh, and I'm I'm being very cautious and saying in the market because in our case, we have a, a richer mix, uh, because we've, uh, We've supported many of our upper tier products and they performed uh, very, very well. So, you've got a, a, a, a dichotomy, a market where, uh, uh, consumers that, uh, have a little bit more to spend continue to do so, uh, but the majority of the population is stretched and there's certainly, uh, uh, trending or trading down, uh, uh, to uh, uh, lower price, uh, uh, products and lower count products.
Pablo Guajardo: But we need to continue to strengthen that proposition, because there's certainly more competition out there. So we are strengthening that proposition, and we're seeing in many instances some very good results. The other thing we're doing, and this is not just for the economy products, but for all of our portfolios, we're making sure at this moment in time we have the right counts, the right presentations, and the right prices out there to make sure our products, again, notwithstanding the tier, are even more accessible to consumers. And we're putting in place quite a few things in the coming quarters to that respect.
Speaker Change: So, what are we doing about it? And, and we have been doing it, and we have a very important plans in the second half of the year to strengthen this. Again, we're working on our multi-tier, uh, uh, strategy making sure that we have the right prices for every tear and the right product for every tear as you know, we, we have products in the economy, tier also, uh, uh, and value, and premium, and many, or most of the times when people are trending trading down, they trade down from a, uh, um, from 1 of Our Brands and value to 1 of Our Brands in economy because we lead in value economy and premium. Uh, but we need to continue to strengthen that proposition because there are certainly more competition out there. So we, we are strengthening that, uh, uh, that proposition and, uh, uh, we're seeing in, uh, many instances. Some, some very good results. The other thing we're doing and this is not just for the economy products, but for all of our portfolio is we're we're making sure at this moment in time we have the right counts, the right presentations and uh and the right
Pablo Guajardo: And finally, as I said, we're fine-tuning and strengthening our private label strategy where it makes business sense. We've always said that we analyze this, and wherever we see an opportunity that we believe makes sense, we pursue it, and we continue to fine-tune that strategy. And you'll probably see us be more aggressive on it in the coming quarters. So I would say those are the key areas behind our push for higher growth in the coming quarters. Again, it won't be fast, because it's slow out there, but we continue to believe that we're well-positioned, and with the actions that I've just described, we'll be even better positioned to take advantage of or to serve our clients and our 2026 be in a much, much better place.
Speaker Change: Right prices out there to make sure our products eat again, notwithstanding the tear or even more accessible to uh, to Consumers, uh, and we're putting in place, quite a few things uh, in the coming quarters and uh, to that respect.
Speaker Change: And finally, as I said, we're we're fine tuning and our our private label strategy, uh, where it makes business, uh, business sense. We've always said that, uh, uh, we could we analyze this and wherever we see an opportunity that we believe makes sense. We pursue it and we continue to fine-tune that strategy, and you'll probably see us be more aggressive on it in the coming quarters. Um, so I would say those are the the, the key areas behind our push for higher growth in the uh, uh, in the coming quarters. Um, it won't be again, it won't be fast because the it's it's slow out there. But we we continue to believe that we're well positioned. And with the, uh, uh, actions that I've just described will be even better positioned to take advantage of, uh, uh, uh, or to serve our clients and our consumers. Uh, and certainly in the coming quarters, I mean to 2026 be in a much much better place.
Ryan Lavin: That's perfect. Appreciate the dollars, everyone. Thank you.
Speaker Change: Yes, thank you. Thank you.
Fraulein Mendez: Our next question comes from Fraulein Mendez with J.P. Morgan. Your line is open.
Froland Mendes: Our next question comes from froland Mendes with JP Morgan. Your line is open.
Pablo Guajardo: Hola, Pablo, Javiera, Salvador, ¿cómo están? Thank you for taking my question. Pablo, I just want to make sure I understand because you mentioned that second half should see better volume and even growing volumes. But when I hear more of your comments and your deeper dives into the dynamics and specific categories, et cetera, the only lever that I can hear from your speech is the fact that you are probably with less inventory at the different channels that will allow for the sell-out, sorry, for the selling to be more, let's say, more robust into the second half, not really that the consumer is actually willing to buy more.
Thank you for taking taking my question uh, probably just want to to make sure I understand because you you you mentioned that second half should see better volume and even growing volumes. But when I hear more of your comments and your your deeper dive into the Dynamics and specific categories, Etc,
Pablo Guajardo: So in that sense...
Pablo Guajardo: Second Half Outlook on Top Line. Is it really not a game-changer, but an inflection point? And if it is the case, what should we expect for margins? Because there you do have some levers, right, better effects. You mentioned about input costs coming down. In that sense, with the combination of top line plus cost, do you feel more comfortable to end up the year in the higher range of the guidance? Thank you so much. Thanks, Ferdinand. Thanks for the question. Let's see if I can provide a little bit more clarity. Let me put it this way.
The only lever that I can hear from your speech, is the fact that you are probably with less inventory at the, at the, at the different channels that will allow for the sellout. Uh, sorry for the, for the selling to be more more, let's say more robust into the second half, not really. That the consumer is actually willing to buy more. So in in that sense,
Speaker Change: The second half outlook on Top Line. Is, it, is it really a a game to not a game changer but an inflection point. And if it is the case, what should we expect? Expect for margins? Because there, you do have some levers, right? To better effects. You mentioned about uh uh input costs coming down, uh, in that sense with the combination of Top Line plus costs, do you feel more comfortable to end up the year in the higher range of the guidance? Thank you so much.
Pablo Guajardo: When we think of top line in the short term, we've got a couple of headwinds. One is, as we've mentioned, the economic slowdown, and two, the inventory reduction we're seeing from our clients. And we're still experiencing that, but again, we believe we're in a better position, so we'll be healthier, certainly, through this than many other competitors. So, those two things are headwinds. Now, when we think of tailwinds, as you mentioned, we certainly, I think the strategy we put in place, protected volumes, protected prices, very importantly, prices also. So, that should certainly help. And as I was just mentioning to Ryan, very importantly, the adjustments we're making in this second half to our portfolio and strategies, which we are confident will be able to aid our volume growth.
Pablo Guajardo: So, putting those strategies and portfolio in place doesn't happen overnight. So, July might be a little bit slower, but we're certain that by the end of this quarter, we'll see a very different picture, and certainly by fourth quarter. Some of these things we've done already, and they're showing great, great progress, and we are confident that many of the other adjustments we're making will also provide us with an advantage and bring volume to our site. So, might still be a little slower start of the third quarter, but certainly picking up throughout, and we believe we'll be in a much better position in fourth quarter.
Speaker Change: Thanks for holding. Thanks, thanks for the question. Let's see if I can, I can provide a little bit more clarity. Uh, let me put it this way when, when we think of Top Line, uh, uh, in the short term, uh, we've got a couple of headwinds 1 is, as we've mentioned, the economic slowdown, uh, and 2. The inventory reduction, we're seeing, uh, uh, from our clients, uh, and we're still experiencing, uh, uh, is experiencing that, but again, we believe we're in a better position, so, we'll be healthier certainly, uh, uh, through this, uh, than many other, uh, uh, competitors. So, those 2 things are headwinds. Now, when we think of Tailwind as you mentioned, we certainly, I think the strategy we put in place protected volumes protected prices, uh, very importantly prices also so that, uh, that should certainly certainly help. And as I was just mentioning, uh, uh, to Ryan very importantly, the adjustments we're making in this second half to our portfolio and strategies, which we are confident will be able to Aid our volume growth.
So, um, putting that those strategies and portfolio in place, doesn't happen over overnight. Uh, so July might be a little bit slower, but we're we're certain that, uh, by the end of this quarter, we'll see a very different picture and certainly by fourth quarter, uh, uh, some of these, uh, things we've done already and they're, they're showing great, great progress. Um, and uh, we are, uh, uh, confident that many of the other adjustments we're making.
Speaker Change: Will also, uh, provide us with an advantage and and bring volume to uh, to our site. So uh, might be might still be a little slower start of the third quarter but certainly picking up throughout and in We Believe will be in a much better position in fourth.
Pablo Guajardo: certainly in 2026. So that's on the top line and I hope that provides a little bit more clarity.
Pablo Guajardo: On the bottom line, which you mentioned, also some headwinds and some tailwinds, and let me go through that very quickly. On the headwind side, a couple raw materials still are pressuring our cost, but we believe the impact will be more moderate than it's been this past quarters, which has been pretty aggressive between the increase in prices, for example, in pulp and fluff plus the exchange rate. So going forward, that's pulp starting to change. As we said, recycled fibers might provide a little bit of a more moderate impact. Fluff will continue to but super absorbent materials, resins will be a positive.
Speaker Change: Certainly in 2026. So that's on the top line. And I hope that provides a little bit more clarity on the bottom line, which you mentioned, uh, uh, also some headwinds and some Tailwinds and let me go through that, uh, uh, very quickly, um, on the headwind side, a couple ra
Pablo Guajardo: So we're starting to see a different picture of raw materials that have a more moderate impact, those that are still higher, and some that are coming down. So that's one headwind. The other one is that, of course, we've got some inventories in our balance sheet, given the prices that we've seen in the past couple of quarters, our inventories are higher, not in volume, just in price because of how prices went up. So we have to go through that inventory. But we'll do that here in the coming month, month and a half, and get through that.
Speaker Change: Still, uh, uh, are pressuring our cost. But, uh, we believe the impact will be more moderate than it's been this past. Uh, quarters which has been, uh, pretty aggressive between the increase in prices, for example, in bulb, uh, and fluff plus the exchange rate. So, uh, uh, going forward that's bulb starting to uh, change. Uh uh, as we said recycled fibers. Might provide a little bit of uh uh uh uh are more moderate, uh, uh impact. Uh, flop will continue to impact but uh uh super absorbent materials, uh, resins will be a positive. So we're starting to see a different picture, uh, of, uh, uh, raw materials that have a more moderate impact to those that are still higher and some that are coming down. So that's 1, uh, 1 headwind the other 1, is that, of course, we've got, uh, some inventories in our
Pablo Guajardo: So those are the headwinds. And then the tailwinds, very important, as I mentioned, some raw materials have certainly turned around. The exchange rate will be in a much, much better place during the second half of the year. And our savings plan continues to bring about great savings. And we're working hard to bring even more in this year and working into 2026 and 2027 already. So headwinds and tailwinds in both cases, top line and bottom line. But as we move through this second half of the year, we're very, very confident that the tailwinds will be much stronger than the headwinds.
Pablo Guajardo: And our results will continue to improve. Hope that that provides clarity.
Will be in a much, much better place during the second half of the year and our savings plan continues to uh, bring about, uh, great, uh, great savings. And we're working hard to bring even more in this year. And, and uh, uh, uh, working into 2026 and 27, uh, uh, already so headwinds and and Tailwind in both cases, Top Line, and bottom line. But as we move through this second half of the year we have, we're very, very confident that the Tailwind will be much stronger than the headwinds and, uh, uh, our results will continue to improve hope that, uh, that provides clarity.
Pablo Guajardo: Perfect. So thinking about the margin guidance, ending in the lower end or in the higher end or in the middle, as you see it today, where do you feel more comfortable? It's uncertain with all of the things happening, but you've seen that we've been able, even with all of the pressure, we've been able to keep our margins strong. And again, if this tailwinds, particularly towards the end of the year and into 2026, go our way, our margins should continue to improve. Excellent. Very, very, very helpful. Gracias, Pablo. Gracias, Fred.
Speaker Change: Perfect. So thinking about the margin guidance uh, ending in the lower end or in the higher end or in the middle as you see here today, where where do you feel more comfortable?
Speaker Change: On March, it's it's it's uncertainty uncertainty with all of the things happening, uh, Friday. Then, but you've, uh, you've seen that we've been able even with all of the pressure. We've been able to keep our margins strong. Uh, uh, and again, if if this uh, Tailwind particularly uh towards the end of the year and into 2026, uh go our way, our margins should continue to improve,
Excellent. Very very, very helpful.
Speaker Change: Gracias.
Juan Guzman: Our next question comes from Juan Guzman with Scotiabank. Your line is open. Hi, good morning, Pablo, Javier, Salvador, and all the team there. Thanks for the straightforward questions, and congrats on the results. Quick one here, and as a follow-up to your previous answer. Regarding expenses, we have seen some improvements in operating leverage along the year, although SDNA's percentage of sales is still a bit above your SOICAR levels. So, my question here is, how sustainable do you see these gains, and how much room do you see for further improvements over the next quarters? And aside from the positive effect of a higher top-line growth in the future, what measures are you taking on this front?
Speaker Change: Your line is open.
Javier: Thank you very much.
Speaker Change: Hi, good morning. Pablo have you heard and all the team there? Thanks for the space for questions, and congrats on the results. Quick 1 here. And as a follow-up to, to your previous answer regarding expenses, we have seen some improvements in operating leverage along the year, also, is a percentage of sales is still a bit above your store card levels. So my question here is, how sustainable do you see these gains? And how much room do you see for further improvements over the next quarters and aside from the positive effect of uh of a higher Topline growth in the future? What measures are you taking on this front? Uh, thank you very much.
Javier: Hello Juan. I'll take the first one in terms of SG&A. Yes, as you noted, this quarter and the first quarter of the year, we made significant efforts to curtail some of our expenses due to the situation we're facing. Some of these, and for the most part, we will continue to have going forward, although we will also ramp up our investment behind the brands. So I would probably say that going forward, we will pretty much be in line with what we've seen on average on the past few quarters. One opportunity and one area where we've reduced expenses, and this one will continue to provide benefits going forward, but again, it's going to take time, is distribution.
Speaker Change: Hello Juan, I'll take the first 1 in terms of hna. Uh, yes, as you noted this quarter and the first quarter of the year, we made significant efforts to curtail some of our expenses, due to this, to the situation, we're, we're facing uh,
Speaker Change: Some of these and for the most part we will continue to have going forward although we will also ramped up our investment behind the brands. So I would probably say that going forward, we will pretty much be in line with what we've seen on average on the past few quarters, 1 opportunity and 1 area where we've reduced expenses and this 1 will provide will continue to provide benefits going forward. But again it's going to take time is distribution expenses.
Javier: That's Juan on what's happened and what we believe will be in the near term.
Javier: Longer term, going forward, I mean, we're living in a very different environment. And even though we've always been a very lean and efficient company, we're working very hard and have exciting plans to make sure we stay as lean and efficient as possible. And that hopefully in the future will mean that even the current scenario we can improve upon. Because again, it's a different competitive environment. It's a different economic environment. That's the way we see it. And we're approaching it in the sense that we need to continue to evolve with it and transform ourselves and make sure we are the most efficient and leanest company out there.
Speaker Change: That's, uh, that's 1 on the what's happened and and what we believe uh uh uh, where we will be, uh, in the near term. Uh, but longer term going forward. I mean, uh, we were living in a very different environment and even though we've always been a very lean and efficient company, uh, we're working, uh, very hard on have, uh, uh, uh, exciting plans to make sure we stay as lean, and, and efficient as as possible. And that, uh, hopefully in the future will mean that even the current scenario we can improve upon? Uh, because again, it's a, it's a different competitive environment. It's a different economic environment. That's the way we see it. And, and we're approaching it, uh, uh, in the sense that we need to continue to evolve with it and transform ourselves, and make sure we are,
Juan Guzman: And we've got plans for that to continue to be the case going forward. Got it. That's pretty clear. Thank you very much. Thank you.
Speaker Change: Are the most efficient uh uh leanest company out there and uh uh uh we've got plans to for that to continue to to be the case uh going forward.
Speaker Change: Got it. Uh, that's pretty clear. Thank you very much.
Thank you.
Operator: As a reminder, to ask a question, that is Star 1.
Renata Cabral: We'll take our next question from Renata Cabral with Fifth Third Bank. Please go ahead. Hi. Hi, everyone. Hi, Pablo, Javier, Salvador. Thank you so much for taking my question.
Speaker Change: Monica brawl with Fifth Third Bank, please go ahead.
Renata Cabral: My question is a follow-up regarding SG&A. We know that other industries are more labor-intensive, but there is the discussion of gradual reduction of labor hours in discussions in Mexico. Just to understand, how do you see this impact in the company if there is any ongoing? and similar tour or initiative to mitigate this impact if the law passes in the future.
Speaker Change: Hi, hi everyone. Hi Pablo Javier, thank you so much for taking my question. Uh, my question is a follow-up regarding sgna. Um, we we know that other industry, uh,
Labor hours. Um, in discussions in Mexico, just to understand. How do you see these impacts in the company? If there is any ongoing
Pablo Guajardo: Thank you. Hello Renata, the analysis that we've done so far Point to two things. Number one, any impact would be not on SG&A, in our case, but on cost of goods sold, because these labor changes could affect a union and a workforce. There's some impact. But I'd probably say two things there. Again, this is what we've identified so far. Number one, the size of the impact is not that significant. If you recall. label represents about 8% of our cost of goods sold, but out of that, a significant proportion comes from profit sharing and that would not be affected.
Speaker Change: Um similar to or initiative to to mitigate this impact to if the law passes in the future. Thank you.
Hello Renata. The analysis that we've done so far.
H point to to things number 1 any impact could be not on sgna in our case but on cost of goods sold because this labor
Speaker Change: changes could affect a union and Workforce.
There's some impacts.
Speaker Change: But I probably say 2 things there again. This is what we've identified so far. Number 1,
the size of the impact is not that significant if you recall.
Speaker Change: Label represents about 8% of our cost of goods sold. But out of that a significant proportion is
Pablo Guajardo: The other part, which is directly related to salaries, would be impacted in a proportion, but again, it's only on 5% of our costs.
Pablo Guajardo: Number two, having identified these risks, we have put in place several teams, several initiatives to see where we can offset these increases, where we can add automation, improve efficiencies, so that over the long term it doesn't have a significant effect on our costs. Thank you so much for the call, I'm very happy. Thanks, Renata.
Speaker Change: Comes from profit sharing, and that would not be affected. The other part, which is directly related to salaries would be impacted in, in a proportion. But again, it's only on 5% of our cocks. Number 2, having identified, these risks, we have put in place, several
Speaker Change: Teams several initiatives to see where we can, uh, offset this uh, increases where we can add automation improve efficiencies. So that over the long term, it doesn't have a significant effect on our on our costs.
Speaker Change: Thank you so much for the call very helpful.
Speaker Change: Thanks.
Operator: It appears we have no further questions at this time.
Pablo Guajardo: I'll turn the program back to the speakers for any additional or closing remarks. Thank you, Raisa. Thanks for your help. And thank you, everybody, for participating in the call. Again, I hope you have a wonderful summer. We're ready to take your call if you have any further questions. And as you know, always happy to discuss further with any of you. Thanks again. Talk to you soon.
Speaker Change: Appears. We have no further questions at this time. I'll turn the program back to the speakers for any additional or closing remarks.
Thank you. Thanks for your help. But, uh, thank you everybody for participating in the call again. I hope you have a wonderful, uh, summer. Uh, we're ready to take, uh, uh, your call, if you have any any further questions and, as you know, always happy to, to discuss further with any of you. Uh, thanks again, uh, uh, talk to you soon.
Operator: This does conclude today's program. Thank you for your participation and you may disconnect at any time.
Speaker Change: This does conclude today's program, thank you for your participation and you may disconnect at any time.