Q1 2025 Genomma Lab Internacional SAB de CV Earnings Call
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Nathan: Sure.
Nathan: Greetings, ladies and gentlemen, thank you for joining genome of labs first quarter 2025 earnings conference call.
Nathan: All participants will be in listen only mode.
Nathan: After todays presentation, there will be an opportunity to ask questions.
Nathan: As a reminder, this meeting is being recorded and will be available for replay on the Investor Relations section of genomes website following the call.
Christianity Banyas: I'll now turn the call over to Christianity, Banyas genomics <unk> head of Investor Relations. Please go ahead.
IMI: Thank you and welcome everyone on today's call IMI with IBD, Chief Executive Officer, and then Don you somewhat at Chief Financial Officer before we get started I'd like to remind me about the remarks today will include forward looking statements such as the company's financial guidance and excellent.
IMI: Including long term objectives and forecast Atlanta expectations regarding genomics business ethics credit strategy M Anne and Mike.
Speaker Change: Statements that are subject to risks and uncertainty that could cause actual results to differ materially are also based on assumptions as of today and the company undertakes no obligation to update them as a result of new information or future events and we now turn the call over to Mr. Medical it's about yeti.
Speaker Change: Good morning, everyone and thank you Chris.
Speaker Change: I would like to open the goal by announcing that we have identified 10 targeted projects, where we will invest excess cash and profits to accelerate sales growth.
We are confident that the successful execution of our growth projects will drive low teen sales growth over the medium term, while maintaining an average of 24% EBITDA margin.
Speaker Change: As part of our growth strategy, we have identified a set of focused initiatives across key categories and capabilities, where we believe targeted investments can unlock meaningful app site.
Speaker Change: In <unk>, we are working to expand distribution support its international rollout and enter a new segment to further scale. The brand in skincare, we aimed to rebate. The lies the category through the relaunch of our ships yet and she kept secure in hair care, we are repositioning.
Speaker Change: <unk> D on agile.
Speaker Change: <unk> lounging, Bernard and launching a new brand expanding them in the international markets in OTC.
Speaker Change: We continue to enhance our innovation pipeline to gain market share while in infant nutrition, we are preparing to introduce know Amit in Brazil and Argentina.
Speaker Change: We also see significant potential in supplements and we are building the capabilities needed to support our entry into this category.
Speaker Change: On the commercial front, we are intensifying efforts across high growth channels, including traditional trade convenience hard discounts on e-commerce, while building a dedicated digital capability to accelerate sellout.
Speaker Change: We are also elevating the in store experience by investing in coolers for swirl OTC draws for the traditional channel and strategic displays or pharmacies, leveraging our Easter us media, Michael stop shrinking, but we read this as a D V simulator driver.
Speaker Change: Lastly, we're pursuing deeper collaboration with our top five clients to strengthen execution and unlocked joint growth opportunities.
Speaker Change: Before turning to our first quarter results I would like to highlight that together. These initiatives represent at Aesop linked approach to capital deployment aligned with our commitment to sustainable profitable growth.
Speaker Change: Turning now to first quarter results genomics saline grew 5% in Q1, 'twenty 25, while sellout grew in the low teens.
Speaker Change: The sell in sell out GAAP is mainly attributable to the U S and Argentina in the U S. A weaker than expected flu season and related share loss in golf on gold impacted selling.
In Argentina, lower inflation led customers to reduce inventories to improve broke DVD reversing prior stockpiling behavior typical in a hyperinflationary environment.
Speaker Change: We delivered strong profitability this quarter with continued momentum across our P&L EBITDA grew.
Speaker Change: 12% outpacing sales and net income rose even faster while gross margin was impacted by a higher mix of beverage sales EBITDA margin expanded 149 basis points to 23, 8% driven by productivity gains Epa's increased 70.
Speaker Change: 17, 7% to fight to 50 cents.
Speaker Change: The cash conversion cycle increased by 13 days driven by a strategic inventory buildup for syrups and shorter payment terms as we transition to in house OTC manufacturing in Mexico.
Speaker Change: Cash flow reached 2670 $8 million over the trailing 12 months up 62, 4% year over a year, our business remains healthy with 72% of our sales maintaining or gaining market share and 86% of sales outpacing them.
Speaker Change: Inflation.
Speaker Change: Yes.
Speaker Change: The next chart highlights core category performance this quarter isotonic beverage are driving portfolio growth, while the steps you're Relaunching, Mexico is helping skincare returned to positive territory Derma OTC and analgesics remained strong performance while Gulf on gold reflects the.
Speaker Change: Impact of a weaker than expected flu season in the U S.
Speaker Change: And the same chart now shows country lever performance were key markets delivered growth in the low to high single digit range.
Speaker Change: Our strong profitability gains begin at the gross margin levels.
Speaker Change: <unk> has expanded by an impressive five nine percentage points with have improved gross margin from 57% to 63% over the past couple of years, a testament to the impact of our productivity initiatives and manufacturing capabilities on the business.
Speaker Change: Let's now take a closer look at the EBITDA margin improvements. The chart shows we have expanded EBITDA margin by $3 nine percentage points over the same two years periods.
Speaker Change: More than half of the gross margin gains translated into EBITDA growth.
Speaker Change: While the remainder was reinvested to accelerate top line growth in our core categories.
Speaker Change: Looking ahead, we will continue to strengthen core brands by reinvesting excess profits and gas into our growth projects, while maintaining at 24% average EBITDA margin.
Speaker Change: The following chart highlights.
Speaker Change: Our accelerating momentum down the P&L with the E. P S significantly outpacing sales and EBITDA growth at TV at 23% CAGR over the past five years.
Speaker Change: This is resulting in a higher free cash flow, where we have reached a 71% galer over the past five years, while returning a healthy dividend to our shareholders.
Speaker Change: Okay.
Speaker Change: All these efficiency has resulted in a much better rois fee.
Speaker Change: A variable that is becoming a central focus of our leadership team in the chart you can see the evolution of labs Aroid C. Over the past four years. Our current business model is delivering one poorest full 0.4 times more value or every investor peso than four years ago, our roissy will.
Speaker Change: Our key metrics throughout the investments in growth projects.
Speaker Change: Our cash conversion cycle increased in preparation for the high season, we have been building inventory of swaps and limited Brett aimed limited production capacity payable days also in Greece, as we transition to in house OTC manufacturing in Mexico.
Speaker Change: Hum.
Speaker Change:
Speaker Change: The new <unk> production line set for commissioning by the second half of 'twenty 'twenty, five we'll enhanced manufacturing efficiency and held reviews inventory days.
Speaker Change: The factory acceptance test has been successfully completed at the vendor site and shipment is in progress.
Speaker Change: We continue to capitalize progress in our productivity program and remain on track to reach 1.8 billion pesos in accumulated broke David the savings targeted by 2027 looking forward.
Speaker Change: We'll work, we will reinvest productivity gains in our growth project as we maintain EBITDA margin in a 24% average.
Speaker Change: I would now like to provide an update on the progress we have made in our growth projects a key pillar for genomics is the expansion of the traditional channels, where we have already made significant strides as you can see who have sustainably increase sales through this channel.
Speaker Change: Over the past few years today, we reach over seat, Kansas Towson points of sales across Mexico, and let them out of our $2 1 million stores addressable universe. Our goal is to scale. This to over 800000 within the next three years accelerating both reached.
Speaker Change: And impact.
Speaker Change: Our skincare turnaround is advancing well the acerb CRE lounge in Mexico is delivering encouraging sellouts results.
Speaker Change: The foundation for further domestic growth and international expansion as shown in this chart sellout has grown significantly since the relaunch.
Speaker Change: We're also increasing digital content to support the SFC or relaunched this chart highlights a snapshot of our social media campaign in the Mexican market.
Speaker Change: Turning to our OTC innovation pipeline, we are seeing strong momentum with many of the registrations have made it since 2023 now nearing approval as shown in the chart submitted registrations have increased significantly.
Speaker Change: Anthony and we remain focused on further strengthening the pipeline.
Speaker Change: In the U S. We are also focused on expanding our distribution points.
Speaker Change: Today, we have reached over 400000 distribution points with a three year target of more than 800000 within that $13 2 million addressable universe.
Speaker Change: The U S represents our strongest progress in E Commerce, where.
Speaker Change: Where we are focused on strengthening our core brand positioning and gaming market in the general market, we have a clear strategy to enhance our infrastructure and accelerate the expansion in this channel.
Speaker Change: Okay.
Speaker Change: To close I would like to share our short term and mid term outlook in the near term macroeconomic uncertainty around consumption.
Speaker Change: And bill on supply chains May result in softer growth, we'd say is expected in the low to mid single digits range. However, looking ahead, we see meaningful upside as our growth products gained traction we expect sales to accelerate so we're low teens levels in both scenarios, we remain confident in mind.
Speaker Change: Timing, a stable EBITDA margin around 24%.
Tonio: Before handing the call over to Tonio.
Tonio: I want to thank our team for our focus and dedication towards achieving our growth projects I have no doubt that we have a best in class team capable of taking genome up to the next level.
Tonio: I also want to thank our investors for your confidence trust and support we remain committed to delivering lasting value for all our stakeholders and we look forward to the opportunities had placed on your go ahead.
Speaker Change: Thank you Marco and thank you everyone for joining us today I'm pleased to report.
Tonio: Strong first quarter results and.
Speaker Change: Let's start by our first quarter financial review.
Speaker Change: Genomes that lever 4.406 billion pesos in consolidated net sales for the quarter.
Speaker Change: A 5% increase.
Speaker Change: 86% of our sales pacing ratio.
And 72% maintaining or increasing market share year on year.
Speaker Change: Sustained sales growth of our SWEATBOX isotonic beverage drove this increase which was partially mitigated by a weaker than expected.
Speaker Change: Blue season unrelated market share most of Cortlandt global brands in these markets.
Speaker Change: Gross profit.
Speaker Change: H, two William 767 billion pesos or 62, 8% of net sales.
Speaker Change: Collecting a moderate 1% increase.
Speaker Change: EBITDA for the first quarter over year reached $1 billion from 48 million.
Speaker Change: Pesos with a 23, 8% EBITDA margin.
Speaker Change: 12% year on year increase a substantial 149 basis points.
Speaker Change: Reflects our continuous results, we are seeing of productivity gains and cost efficiencies throughout all through our operations, which underscores the fact that our strategies are resonating.
Michael: The reservoir mating as Michael described earlier.
Michael: First quarter 2025, net income reached 499 million pesos, a 15, 4% year on year increase.
Michael: Resulting from higher operating income and a favorable FX during the quarter.
Michael: EPS or earnings per share increased by 17, 7% to 50 cents per share.
Michael: Benefiting from higher first quarter net income as well as enormous cancellation of 20 million shares in the second quarter 2024.
Michael: Our first quarter cash conversion cycle was 116 days, they're largely related to strategic sweater inventory buildup, which is very typical in the industry.
Michael: We do this ahead of the spring and summer season, as we described in last quarter's discussion.
Michael: And also by a decrease in payable terms, resulting from genomics transition to in house manufacturing production in Mexico.
Michael: Finally free cash flow in place increased 62% to reach 2.678 billion pesos during the trailing 12 months compared to the same period of the prior year.
Michael: We're moving to a brief overview of our results by region net service storage enormous Mexico operations increased by 3% year on year for the first quarter 2025.
Michael: They're very strong traditional Chattanooga, sweaters performance, which was partially offset by a milder winter season.
Michael: It's important to note that our OTC brands continue.
Michael: To gain share of market during the quarter.
Michael: The EBITDA margin for Mexico increased print increased to 24, 3% a significant 145 basis point expansion again due.
Michael: Due to the productivity gains we have noted.
Michael: As you can see in this slide the Mexican peso depreciated, 23% year to date at the end of the U S. Dollar remember last year, we have the so called Mexican peso not anymore.
Michael: No more.
Michael: Stable or normal range this year.
Michael: Turning to the U S first quarter net revenue increased by 1%, which.
Michael: Sure.
Michael: Had some favorable FX and sustained strength from soybean sales.
Michael: During the quarter. The 15, 2% of net sales decrease in U S. Dollar terms reflects a weaker than expected flu season also in the U S market.
Michael: And also a related market share of general mass Gulfstream programs.
Michael: EBITDA margin reached 16, 9% for the quarter. This represents a 282 basis points expansion again, reflecting productivity gains as well as favorable.
Michael: Forex.
Michael: Gentlemen, Latin America operation net sales improved by eight 2% for the QUADRA.
Michael: With notably strong performance in our Brazil, Peru.
In Central America markets and also we benefit.
Michael: Favorable foreign exchange effects that we mentioned earlier the EBITDA margin for Latin America reached 24, 8%.
Michael: These risks are worth program 14 basis point decrease due to productivity gains and again a framework.
Michael: Forbes.
Michael: A few days ago, the normally issued a press release that billing the effects of prior year finance five on the company's audited financial.
Michael: Statements related to our non controlling stake in group windows.
Michael: And commercial milestone.
Michael: Which as everybody knows is classified as a discontinued operations.
Michael: I'd like to take this opportunity to briefly reiterate that my sales contribution to her normal labs consolidated figures is not material.
Michael: And does not contribute to genome or labs operational model.
Michael: Are you a virus requires on a single line item with the amount for the total of these continuing operations represented in the appropriate on loss statement separate from the continuous operations remember continuous operations is she had normal now discontinued.
Michael: <unk> is Muslim.
Michael: So no matter, who reported a noncash adjustment we have separate lines in discontinued operations on the scoring.
Michael: Recent events related to <unk> 'twenty to 'twenty four business performance as described in the press release.
Michael: But on the enormous net revenues.
Michael: I have no impact on general amongst every VA have no impact on genomics.
Michael: And what we see is a positive impact is.
Now for four months metrics, such as return on equity Roe.
Michael: Or.
Speaker Change: Return on invested capital Oh I see.
Speaker Change: We will show the true performance of the genome of these.
Speaker Change: Going back to two or a.
Speaker Change: Our results.
Speaker Change: General minded in first quarter of the year with a leverage ratio of just one one times net debt to EBITDA.
Speaker Change: It's important to note that although at the end of the quarter, 58% of the company's overall balance of that is related to.
Speaker Change: So long term liabilities, we are already in the process.
Speaker Change: Finance short term debt and we will provide.
Speaker Change: Information as it becomes available in the coming weeks and months.
Speaker Change: Finally, we've made our 11th consecutive dividend payment of 20 cents.
Speaker Change: Davidson.
Speaker Change: <unk> Mexican cents.
Speaker Change: Sure totaling 200 million pestles payable to shareholders.
Speaker Change: At the close of March 14, 2025.
Speaker Change: Our ongoing dividend payment further demonstrates our company's commitment to shareholder value and confidence in general mass continued progress.
Speaker Change: Before moving into <unk> I would like to close with some key takeaways from the financial results that I just shared with you.
Speaker Change: We are pleased to report that.
Speaker Change: We are investing in the areas that drive the most value which are the same.
Speaker Change: Strategic projects that Mark described earlier.
Speaker Change: Sensation.
Speaker Change: On the investment and strategies, we have implemented to vary, particularly our productivity and increase in efficiency projects.
Speaker Change: Which as everybody has seen are clearly gaining traction.
Speaker Change: This reflects our confidence in our plans and long term objectives, we continue to execute on our strategic roadmap with speed and agility in alignment with consumer trends.
Speaker Change: Further capitalizing on our objective of February is a growth segment and driving category leadership.
Speaker Change: Plans are yielding results with margin resiliency as Marco highlighted earlier.
Speaker Change: We will continue investing in future sales growth.
Speaker Change: Which we manage while we manage our costs to optimize our business.
Our strong balance sheet enables sonoma.
Speaker Change: An important capital allocation flexibility.
Speaker Change:
Speaker Change: With that.
Speaker Change: Let us turn to Q&A.
Speaker Change: Thank you Antonio we will now begin the question and answer session.
Speaker Change: To ask a question you may raise your hand, using the raise your hand icon located at the bottom of your screen.
Speaker Change: To withdraw your question press the same icon at any time this will be required in order to allow you to turn on your microphone.
Speaker Change: And ask your questions.
Speaker Change: One moment, please while we hold for questions.
Speaker Change: Yes. Thank you our first question comes from.
Alberto: Alvaro Garcia with BTG Pactual Alberto Please turn your microphone on and proceed with your question.
Alvaro Garcia: Hi, there. Thanks, so much for your questions very much.
Alberto: Yeah.
Alberto: A couple questions one of them.
Alberto: On the.
Alberto: Traditional channel medical open you could maybe expand on.
Alberto: Sort of how youre going to go about increasing points of sale is that through you guys through wholesalers and I'm interested in your power on assuming obviously.
Alberto: Your best actual appointed sales slight ups, but how you successfully cross sell into your other products to your portfolio that'd be helpful to hear that sort of.
Alberto: Strategy is from Europe.
Alberto: My second question's on on working capital.
Alberto: How should we think about working capital I think it's fair to assume maybe a slight cash burn this year.
Alberto: And it's just tough to wrap our heads around the transition.
Alberto: This transition to in house manufacturing in Mexico, how much longer.
Alberto: That might take.
Alberto: Payables here, but thank you very much.
Eduardo: Thank you Eduardo good to hear from you.
Speaker Change: Let me address a maybe.
Speaker Change: Maybe both questions and then have Daniel Adam our comments on the working capital piece.
Speaker Change: So on the traditional channel I think the strategies are focused on three.
Speaker Change: Dealers.
Speaker Change: That will allow us to aggressively expand distribution in the traditional channel number one is the portfolio.
Speaker Change: Today, we have a lot of work to be done in terms of sizes and price points.
Speaker Change: For the different brands.
Speaker Change: For brokers that can be sold in the traditional channel so.
Speaker Change: Today, we'll have successful grants like Dio natural that basically have no distribution in that channel.
Speaker Change: Or very low distribution and that's because we don't we still don't have the right size at the right price point.
Speaker Change: So the broken accelerate distribution in the channel. So we're working on developing the size or for <unk> to be sold in the in the channels.
Speaker Change: And the same goes for for most of the other brands. So what do we have them today.
Speaker Change: The traditional tenants, mostly with the sizes that you know we've historically had in the company, but we are now intentionally going to make a big effort to develop the right sizes for the channel.
Speaker Change: <unk>.
Speaker Change: We are going to be investing very intentionally in.
Speaker Change:
Speaker Change: Expanding our distribution capabilities throughout our distributors not wholesalers by distributors.
Speaker Change: Adding more routes of sale.
Speaker Change: In the <unk> distributors.
Speaker Change: We are reengineering our trade terms.
Speaker Change: For the for the channel as well.
Speaker Change: And and then fourth we are going to be investing in media that is more appealing to these channels.
Speaker Change: Say digital we're going to significantly increase.
Speaker Change: The investment that we're making in additional digital communication that goes for traditional channel I don't know if you that clarifies or you need more color on that.
Just one follow up there is it fair to assume that when you guys talked about reinvesting some of the recent margin gains into growth.
Speaker Change: Chad.
Speaker Change: That profile.
Speaker Change: Yes, we are going to reinvest excess margin over 24% and cash.
In in building these capabilities.
Speaker Change: Great. Thank you.
Speaker Change: And then on the working capital what is happening is that in the past the company.
Speaker Change: Used to contract manufacture all our probes.
Speaker Change: <unk>.
Speaker Change: The.
Speaker Change: Payment terms to our small quote unquote.
Speaker Change: Multilateral Otis.
Speaker Change: Okay.
Speaker Change: It's you know it was kind of easy to.
Speaker Change: Bae longer term periods to small multilateralists than now that we are you know starting production in our facility.
Speaker Change: We are negotiating with a peace api's, a suppliers very large suppliers around the world that.
Speaker Change: We didn't have a relationship established in the past so it's kind of harder to negotiate payment terms at the beginning but we believe that as we.
Speaker Change: Proved to be a reliable customer for them.
Speaker Change: And that will become bigger and more strategic for them, we're going to we're going to be able to negotiate better payment terms that that explains why.
Speaker Change: The payable days.
Speaker Change: Slightly decreased over the past quarters.
Speaker Change: I don't know Tony if you want add something on that.
Speaker Change: Thank you Marco just to.
Speaker Change: You can highlight.
Speaker Change: Marcos first question about expanding in the traditional time and as we said.
Speaker Change: As we have mentioned.
Speaker Change: And different one on ones in the call to Tetra, we are reinvesting the excess.
Margin beyond 24%.
Speaker Change: Two.
Speaker Change: So basically expand.
Speaker Change: This revision is one of the projects.
Speaker Change: When you start a new route to reach new points of sale initially.
Speaker Change: AUM reached breakeven it takes some time to reach breakeven we've seen that over the years when we started.
Speaker Change: Expand our presence in the traditional channel and this is something that other companies beverage companies.
Speaker Change: But there are always experience. They always know it takes some time for the new routes to mature to reach the breakeven point, but once they reach the breakeven point.
Start generating a lot of profits.
Speaker Change: You have built a new capability, our newest strength for the future.
Speaker Change: So that is why again it's.
Speaker Change: Reinforcing what Michael mentioned.
Speaker Change: It's another week call them.
Speaker Change: Record a higher than 24% EBITDA given the.
Speaker Change: The productivity projects and initiatives is that we are reinvesting that excess margin as you very well pointed out alone.
Speaker Change: In this kind of initial.
Speaker Change: The initiatives again it takes some time with once you reach the breakeven point.
Speaker Change: You have built a new capability that it stays there for the future and that is very hard to replicate by by competitors.
Speaker Change: On the working capital.
Speaker Change: Sure.
Speaker Change: Question, perhaps I just want to add.
Speaker Change: A little bit of additional color to what Michael mentioned, which I totally agree what he mentioned remember that we are also investing in the future investing in the infrastructure for future growth. We've mentioned I'm just going to give you. One example of.
Speaker Change: Why.
Speaker Change: Payables shouldnt be an issue and actually the strength of our balance sheet is.
Speaker Change: It's a capability we have we all know that there's been tariffs on steel and aluminum.
Speaker Change: I don't know that we're going to be investing in an expanded.
Speaker Change: Distribution center for the future right. So we decided to place a down payment.
Speaker Change: On the rocks.
Speaker Change: Basically made us steel before the new prices with the new guys.
Speaker Change: Take place one because we have strong balance sheet.
Speaker Change: It was the right thing to do or that we're working for the future, but when you put a down payment.
Speaker Change: Has any impact on your payables days of payoffs.
Speaker Change: Saving a lot of money by buying both racks that are very competitive.
Speaker Change: Very competitive terms.
Speaker Change: Besides the transition of having new guidance or suppliers for the manufacturing.
Speaker Change: The facilities, we're also gonna rethinking advantage.
Speaker Change: Yeah.
Speaker Change: This type of bank.
Speaker Change: Bulk trial opportunities that are there and given.
Speaker Change: The strength of our balance sheet.
Speaker Change: Our low financial leverage we can do that but again, we're investing our money for future growth, which is again very consistent with the term strategic projects that mark will describe.
Speaker Change: Beginning of this call.
Speaker Change: Great. Thanks.
Speaker Change: Thank you Laura.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question will be from Alejandro Fox from Ito.
Speaker Change: Please turn your microphone on and proceed with your question.
Speaker Change: Thank you.
Componentry 17: Componentry 17, thank you for the space for questions I have two quick ones from my side first.
Speaker Change: First wanted to talk about the top line.
Componentry 17: For this quarter.
Componentry 17: We saw that a benign most relevant categories around six of them were decreasing the like for like revenues during the quarter and you.
Speaker Change: You mentioned some of the weakness related to cough and cold right and some of the initiatives Michael your percentage for the medium term to regard these strengths, though I wanted to see what is driving some of the weakness in some of these kind of reflects skincare or Eric Eric Hospital attrition is salon in the short term and which trends you're seeing in April.
Speaker Change: Secondly, some gross margin we saw steep contraction on a year over year wanted to see maybe Tony if you could elaborate a little bit into what's driving the construction now in the short term as well. Thank you.
Speaker Change: Yeah. Thank.
Alejandro Fox: Thank you Alejandro.
Speaker Change: Listen let me.
Speaker Change: Bob provided very clear perspective on the top line okay.
Speaker Change: For everybody.
So.
Speaker Change: When you look at our sell out for the quarter we.
Speaker Change: We grew sell out in the low teens, so that'll lesions okay.
Speaker Change: And our selling.
Speaker Change: A R.
Speaker Change: Sorry, sellout sellout grew double digits in the low teens on our selling grew 5%.
Speaker Change: So that means.
Speaker Change: That.
Speaker Change: Our business in general.
Speaker Change: Our with a few exceptions remains pretty healthy from a sellout point of view, which is very important I mean.
Speaker Change: You know, it's much better to have.
Speaker Change: A problem, where the sellout is growing and selling was not.
Speaker Change: This quarter.
Speaker Change: Dan the other way around.
Speaker Change: So that's one point we.
Speaker Change: In the last few months.
Speaker Change: We've started to see.
Speaker Change: A lot of uncertainty.
Speaker Change:
Speaker Change: In the U S.
Speaker Change: Particularly in the U S are softening.
Speaker Change: Trend in Mexico.
Speaker Change: And.
Speaker Change: A situation in Argentina that has to do with the sell in where customers are starting a process of destocking and driving productivity behind lower inventories.
Speaker Change: Given that you know in Argentina.
Speaker Change: The inflation is.
Speaker Change: Slowing down significantly.
Speaker Change: So.
Speaker Change: We I think that.
Speaker Change: Because of the uncertainty we are seeing in the short term.
Speaker Change: I am being very cautious on what to expect in the next in the next few quarters in terms of selling.
Speaker Change: Now if everything goes great and we continue to see these sell out trend of double digits and you know things go great. We are going to exceed the numbers that I've just.
Provided us quote unquote guidance over the short term.
Speaker Change: But unfortunately you know.
Speaker Change: The last few months.
Speaker Change: We have seen a softening of the business in general.
Speaker Change: And a lot has to do with the uncertainty behind the tariffs in the U S. A.
Speaker Change: The economic uncertainty in Mexico and.
Speaker Change: In General you know the whole context of doing business.
Speaker Change: In some of the largest customers is not extremely favorable unfortunately, okay.
Speaker Change:
Speaker Change: So.
Speaker Change: That's kind of like the overall.
Speaker Change: Perspective that I have to share do you want some more.
Speaker Change: Clear perspective by category or is that good enough.
Speaker Change: No that's very clear thank you Michael sure.
Speaker Change: And then in terms of gross margin.
Speaker Change: What do you guys should expect.
Speaker Change: For this company going forward is a gross margin that gravitates in the range of our earnings.
Speaker Change: <unk> anything between 63% and 65% so a very healthy margin.
Speaker Change: If you look at one quarter like this past quarter than in the first quarter of the year.
Speaker Change: The slide in.
Speaker Change: On traction.
Speaker Change: Has to do with the loading and that within on syrups for the season are preparing.
Speaker Change: For the seasoning in the U S and in Mexico, particularly.
Speaker Change: But but you should be very comfortable.
Speaker Change: Expecting anything between 63% and 65% so like in the first quarter, we do the loading for the summer season, where <unk> plays a big role in the third quarter, we do a big loading of the OTC brands preparing for the flu season. So in the third quarter. The gross margin is going to be much better.
Speaker Change: Whereas in the first quarter, because we know that a lot of growth.
Speaker Change: For the summer season.
Speaker Change: The margins are a little bit.
Speaker Change: Smaller.
Speaker Change: That helps.
Speaker Change: Very clear thank you very much Michael sure.
Yes.
Speaker Change: Thank you.
Speaker Change: Our next question will be from them for anyone on this from acting there. Please turn on your microphone and proceed with your question.
Speaker Change: Hi, good morning, Congrats on the results just a quick follow up on Alexandros questions question regarding your overall performance how much.
Speaker Change: Most competition, a factor and in which categories.
Speaker Change: Was that a factor regarding the slowdown in sales.
Speaker Change: Yeah.
Speaker Change: Jim.
Speaker Change: It's a good question.
Speaker Change: In.
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: It really varies by category.
Speaker Change: So for example in <unk>, we grew market share.
Speaker Change: And some of the analgesics.
Speaker Change: Categories, we grew market share.
Speaker Change: In copper and gold for example, we lost market share in the U S. Even though we.
Speaker Change: Prepare ourselves.
Speaker Change: For a very strong season with you that very strong loading of product in the last quarter last year.
Speaker Change: We have you know a good.
Speaker Change: Good exhibitions in the point of sale.
Speaker Change: Had a good communication plan from a marketing point of view, we lost market share in the U S and cough and cold. So I would say that in general just rounding up numbers I would say that 60% to 70% of the slowdown has to do with mostly macroeconomics.
Speaker Change: And.
Speaker Change: Business environment in general.
Speaker Change: And then around 30% to 40% could be attributed to market share losses.
Speaker Change: Okay, that's from a consolidated level.
Speaker Change: Yes, as a whole as a company all markets all categories.
Jeff: Okay perfect. Thanks for the call are have a great day, yes, Jeff. Thanks.
Speaker Change: Thank you. Our next question will be from Froylan Mendez with Jpmorgan. Please turn on your microphone and proceed with your question.
Froylan Mendez: Hello, Thank you for taking my question.
Froylan Mendez: You mentioned 10 projects I would love to hear them, which are the ones that you're most excited about outerwear that should yield the.
Froylan Mendez: Uh huh.
Froylan Mendez:
Froylan Mendez: The most significant impact to your results in the English short term and in that sense could you give us a sense of the size of the investment that these growth projects will entail and if this should be entirely funded from free cash flow.
Froylan Mendez: Would be my two questions. Thank you so much.
Froylan Mendez: Yeah.
Paul: Thank you Paul.
Froylan Mendez: Yeah.
Froylan Mendez: I mean I'm excited about all all the 10 projects I mean, just to provide a little bit context on how we got oral graley dated to selecting these 10 projects. We started with a very large list of more than 50 ideas and we have worked.
Froylan Mendez: Doing financials and understanding it.
Froylan Mendez: Like all the specifics on each of the Ibs.
Froylan Mendez: And then over the past three months during the first quarter. We started the selecting the largest one in the more meaningful ideas for the company and that's how we ended up with this 10.
Froylan Mendez: Very very strong projects.
Speaker Change: I am obviously very final fassler Oaks or sub brands I think that you know there's a lot of potential there.
Froylan Mendez: Growing the traditional channel I am very excited about.
Speaker Change:
Speaker Change: The whole new ideas that we have put in place for.
Speaker Change: Communicating more in digital and driving traction to grow sellout in digital I'm very excited about that as well I'm very excited about the alliances or strategic alliances with a top five customers we already have meetings.
Speaker Change: We'd like FEMSA Pharmasset, we are very advanced in the process with Walmart in Mexico. So I'm very excited about that I'm really excited about what we're doing.
Speaker Change: The assets yeah.
Speaker Change: Brands you guys saw how we are growing market share on our glorious allowed significantly behind the relaunch. So I'm very excited about that work.
Speaker Change: Im very excited about the new brands that we are going to launch in the hair care category the repositioning of the on agile.
Speaker Change: So in general.
Very excited about the 10 of them, obviously have more passion for some but you know in general the 10 projects are very very meaningful for the company.
Speaker Change: And the funding.
Speaker Change: As you.
We have been sharing with the group.
Speaker Change: We've put together a very strong productivity program that will deliver in the range of one eight to 2 billion million pesos.
Speaker Change:
Speaker Change: And that is more than the 24%.
Speaker Change: Mark.
Speaker Change: <unk> margin that we are co meeting.
Speaker Change: And that excess profit and cash is going to go directly to lease them top 10 projects. So it's going to be funded from within.
Speaker Change: Thank you Michael if I can just try to understand which would be the one that yields impact.
Speaker Change: The impact in the more in the in the shorter term lets say where should we start seeing these are projects.
Speaker Change: Yeah, I mean lies in the shorter term that's a great question. We are already in the process of executing on deploying some of these projects. So for example at assets yet hopefully you guys will will see stronger results in the very short term you are seeing results in the short term in fact.
Speaker Change: Ah.
Speaker Change: <unk>.
Speaker Change: Traditional channels.
Speaker Change: You guys have seen how we have been expanding the market in this channel over the past years, but you will see rapidly.
Speaker Change: The company rapidly expanding and accelerating that growth.
Speaker Change: In the very short term.
Speaker Change: The digital capabilities that we're building we have already put in place some of that with mixed results for now.
Speaker Change: But there are some good things that we're seeing.
Speaker Change: In that sense.
Speaker Change: Alliances with top customers. We have started to work on this is the beginning of the year. So that's also for the short term I think for more like in the long or midterm.
Speaker Change: A you need to think about <unk>, which is a very complex initiatives too.
Speaker Change: To relaunch the brand. It's you know it really has some.
Speaker Change: As you know.
Speaker Change: Important complexity that we need to figure out.
Speaker Change: The repositioning of D. On agile is more for the midterm.
Speaker Change: Lounge of the new hair care brand is more for the medium term.
Speaker Change:
Speaker Change: The and entering the supplement category, that's more for the near term.
Speaker Change: The expansion of our mill in Brazil that should be happening very fast as we have already agreed.
Speaker Change: To do that.
Speaker Change: We have.
Speaker Change: You know pretty advanced work on that one.
Speaker Change: And.
Speaker Change: And that's it so I don't know if that helps.
Speaker Change: It's helpful. Thank you so much sure.
Speaker Change: Thank you.
Speaker Change: And our next question will be from Luis Miranda with Shire Amy.
Speaker Change: Please turn on your microphone and proceed with your question.
Luis Miranda: Yes Hello.
Luis Miranda: Congratulations for the results I would like to ask is there any plan to increase on recover some arbitrary in the used market.
Speaker Change: You mean Gulf Wind goes right, yes, correct yeah.
Luis Miranda: What happened.
Luis Miranda: Is that.
Luis Miranda: We significantly reduced the investment on TV and there the assumption that Hispanic television in the U S was not helping our sales.
Luis Miranda: Last year, and we did that pretty much across the board and we replaced that.
Luis Miranda: That investment with more digital and e-commerce.
Luis Miranda: Stuff.
Luis Miranda: But what we have realized is that for some brands like to coal in the U S. We need a Spanish television. So for the next season. We are working on we have already started some very.
Luis Miranda: Preliminary conversations with we didn't even see on it to.
Luis Miranda: To see where we can start reinvesting.
Luis Miranda: On the Spanish TV in the U S and I think that that'll that'll change the trend that we're seeing to coles in the U S right now.
Luis Miranda: Perfect. Thank you very much sure.
Luis Miranda: Thank you.
Luis Miranda: One moment, please while we hold for more questions.
Yes.
Luis Miranda: Lopes.
Speaker Change: Thank you. Our next question will be from Alvaro Garcia with BTG Pactual.
Alvaro Garcia: Thanks for the follow up.
Alvaro Garcia: Was wondering if you can maybe talk about how youre thinking about the buyback here Daniel.
Speaker Change: And one more for Michael I was wondering if you could expand a bit you mentioned.
Alvaro Garcia: Which makes a lot of sense sort of.
Speaker Change: The more rational stock with process in Argentina, and lower inflation.
Speaker Change: I was wondering if you can maybe give a bit more color on what happened in Argentina.
Speaker Change: Quarter, whether you expect that to continue for the rest of the year. Thank you.
Speaker Change: Yeah, let.
Speaker Change: Let me start with Argentina, and then I will turn it on to Daniel for the buybacks.
Speaker Change: So.
Speaker Change: In Argentina, we are seeing.
Speaker Change: A very strong.
Speaker Change: Recuperation of sales.
Speaker Change: A recovery of sales.
Speaker Change: Our sell out grew 11% in units.
Speaker Change: In Argentina, we chose and that that was pretty much across all categories. I mean, with some exceptions, but in general we're seeing a strong recovery versus last year.
Speaker Change: In sell out and.
Speaker Change: And shares.
Speaker Change:
Speaker Change: So from that angle from a sell out and share point of view I am very happy with what.
Speaker Change: What we are seeing there on the other hand.
Speaker Change: In the past several years.
Speaker Change: You know customers used to get.
Speaker Change: Inventories.
Speaker Change: Yeah.
Speaker Change: Hi, very high and that and that obviously has to do with.
Speaker Change: These practice of building up inventories during inflations.
Speaker Change: And because inflation is.
Speaker Change: The slowing down significantly in the country.
Speaker Change: What we are we have started seeing.
Speaker Change: Actually.
Speaker Change: By the end of the last quarter last year is that customers started to be a lot more conscious on.
Speaker Change: Keeping inventories at lower levels and that explains.
Speaker Change: The difference between sell in and sell out.
Speaker Change: That we are seeing in the country.
Speaker Change: But.
Speaker Change: I'm not concerned about that I mean, I'm very happy with what we're seeing in terms of sellout on shares in Argentina, So far.
Great.
Speaker Change: Thank you Michael.
Speaker Change: Although regarding youre.
Speaker Change: The person about the buybacks of IMAX will continue and the company will also continue canceling shares.
Speaker Change: Just as a reminder for everybody noted in these years I'm on shareholders.
Speaker Change: Shareholders' meeting, but in last years 'twenty 'twenty four.
Speaker Change: Shareholders.
Speaker Change: Approved.
Speaker Change: That they would delegate to the board of directors the possibility to cancer.
Speaker Change: <unk> million shares that is around 10% Borgwarner total shares.
Speaker Change: In the future without having to go through.
Speaker Change: So on a GSM again, so that authorization still in place.
Speaker Change: The rule is now complete.
Speaker Change: Considering you know Glenda next cancellation is going to be and how they use and that is going to we would we will continue doing the buybacks.
Speaker Change: Because again that was that is a long term strategy.
Speaker Change: Canceling.
Speaker Change: Up to 10% of our market cap.
Speaker Change: In the future how big is that going to be we need to wait for the board to make that decision.
Speaker Change: It's eventually will will have good news for everybody as we all saw during the Q1 earnings release.
Speaker Change: EPS grew faster than net income.
Speaker Change: Net income grew 15% in EPS.
Speaker Change: EPS grew 17% and we are also considering dps dividend per share. So we know that canceling shares as important as we've said in the past.
Speaker Change: Sure.
Speaker Change: Not only our investors, but mark or myself legal management.
Speaker Change: We are all investors as well, we like dividends and we like.
Speaker Change: Shareholder return, so there's going to be some consolidations in the future.
Speaker Change: It didn't happen this quarter, but it will happen in the future.
Speaker Change: Thank you.
Speaker Change: Please hold as we wait for more questions.
Luis Miranda: Thank you. Our next question from Luis Miranda with February Amir. Please turn on your microphone and proceed.
Luis Miranda: Yes, thank you everybody.
Luis Miranda: A few minutes or Oh, you mentioned.
Luis Miranda: The gross margin outlook it would be between 63 and 66, one doing right that for the.
Luis Miranda: For the next quarter yeah.
Luis Miranda: I think the a range between.
Luis Miranda: Between 63 and 65.
Luis Miranda: There is a reasonable.
Luis Miranda: Reasonable I mean.
Luis Miranda: Yeah.
Luis Miranda: This is not exact maps, but that that that would be my my.
Luis Miranda: Might take.
Luis Miranda: Okay.
Luis Miranda: Nothing to Marcos' comment I think what's more important for everybody to know is that we said that we committed to deliver an average EBITDA margin of 24%.
Luis Miranda: We've always talked about the EBITDA and obviously getting down to EBITDA. There was a gross margin component and this is G&A and an answer to that.
Luis Miranda: But as Mark will describe the area theres going to be some quarters, where agile bernick beverages will represent a higher percentage of our product mix and we know that cash on Rover.
Luis Miranda: Gross margin and there's going to be some quarters, where you know corporate.
Luis Miranda: Corporate core or RPC or are the products, we have a a.
Luis Miranda: A more important.
Luis Miranda: Brazil will represent the highest percentage of ourselves so gross margin will be higher putting the year. What you should expect is an average EBITDA margin of around 24%.
Greg: Yeah, Greg.
Luis Miranda: Got that.
Sorry, I don't Wanna.
Get fixated in like all the lines of the P&L, because it's very complex to manage.
Luis Miranda: I think.
Speaker Change: I want to Echo Daniel Coleman.
Luis Miranda: What we are really committing here is an average.
Luis Miranda: EBITDA margin of 24%. Okay then.
Luis Miranda: Managing.
Luis Miranda: Yeah.