Q2 2025 Genomma Lab Internacional SAB de CV Earnings Call

Operator: Reading ID, followed by pounds.

Welcome to zoom, enter your meeting ID, followed by pound.

Operator: You have not entered.

You have not entered.

Operator: Enter your participant ID followed by pound. Otherwise, just press pound to continue.

Enter your participant ID. Followed by pound otherwise just press pound to continue.

You have joined the meeting as an attendee and will be muted throughout the meeting.

Operator: Greetings, ladies and gentlemen, thank you for joining Genoma Lab's second quarter 2025 earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions.

Greetings, ladies and gentlemen. Thank you for joining genomal lab's. Second quarter 2025 earnings conference call.

Operator: As a reminder, this meeting is being recorded and will be available for replay from the Investor Relations section of Genoma's website following the call.

Christian Ibanez: I'll now turn the call over to Christian Ibanez, Genoma's Head of Investor Relations. Please go ahead. Thank you and welcome everyone.

All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. As a reminder, this meeting is being recorded and will be available for replay from the investor relations section of genomics website. Following the call,

Speaker Change: I'll now turn the call over to Cristiano's head of investor relations. Please go ahead.

Christian Ibanez: On today's call are Marcos Barbieri, Chief Executive Officer, and Antonio Zamora, Chief Financial Officer. Before we get started, I'd like to remind you that the remarks today will include forward-looking statements such as the company's financial guidance and expectations, including long-term objectives and forecasts, as well as expectations regarding Genoma's business, assets, products, strategies, demand, and market. These statements are subject to risks and uncertainties that could cause actual results to material to differ materially. They 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.

Speaker Change: Thank you, and welcome everyone. On today's call, I'm Marcos Pari chief executive officer and I'm Da Samora Chief Financial Officer. Before we get started, I'd like to remind you that the remarks today will include forward-looking statements such as the company's Financial guidance and expectations, including long-term, objectives and forecasts, as well as expectations regarding genomics, business as its products, strategies demand and markets.

Marcos Barbieri: Let me now turn the call over to Mr. Marcos Perrieri. Good morning, everyone, and thank you, Chris. Turning to second quarter results, Genoma's second quarter sales grew 0.5% or plus 5.5% when excluding Argentina, reflecting a significant Argentine peso depreciation and a weak beverage season in Mexico. Worth noting, the company's profitability remains solid. We delivered a plus 4.4% EVDA growth with a plus 89 basis points margin expansion to 23.8% driven our ongoing productivity program. Genoma also delivered continued momentum across the P&L. Although net income was impacted by hyperinflationary accounting adjustments. following the minus 18.8% Argentine peso depreciation coupled with a lower inflation.

These statements are subject to risks and uncertainties that could cause actual results to material to different materially. They 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.

Marcos Paris: Let me now turn the call over to Mr. Marcos Paris.

Good morning everyone and thank you. Chris.

Turning to second quarter results. Genoma second quarter sales, grew 0.5% or plus 5.5%. When excluding Argentina reflecting a significant Argentine peso depreciation, and a weak beverage season in Mexico.

Worth noting, the company's profitability remains solid, we delivered a plus 4.4%. Evda growth with a plus 89 basis points, margin expansion to 23.8%, driven our ongoing productivity program

Genoma also delivered continued momentum across the p&l. Although net income was impacted by hyperinflationary accounting adjustments.

Marcos Barbieri: Pro forma net income increased plus 16.6% when excluding this non-cash effect. These profitability levels and a seven-day improvement in cash conversion cycle drove a plus 64% free cash flow increase reaching 2.7 million in the trailing 12 months. Our business remains healthy with 67% of our sales maintaining or gaining market share and 75% of our sales outpacing inflation. The following graph shows a minus 2.4 degree Celsius drop in average temperatures during Mexico's peak beverage season. significantly impacting isotonic category performance in the region. In this context, Swerox maintained its market share and outperformed the category, with sell-out down minus 4% versus a minus 20% year-to-date category decline.

Marcos Paris: Following the minus 18.8% Argentine peso depreciation coupled with a lower inflation increased plus 16.6% when excluding this non-cash effects.

this profitability levels and a 7-Day Improvement in cash conversion cycle, drove a plus, 64% free cash flow, increase reaching 2.7 million

Marcos Paris: In the trailing, 12 months.

Marcos Paris: Our business remains healthy with 67% of our sales, maintaining or gaining market, share and 75% of our sales outpacing inflation.

Marcos Paris: Outperformed the category, which say, which sell out down minus 4% versus a minus 20% year to date category decline.

Marcos Barbieri: outlines our traditional channel expansion across markets. Specifically for the Mexican market, we have accelerated our distribution expansion plans to mitigate weather impacts. Genoma opened 30 new routes in the Mexican Northwestern region, targeting higher temperature areas, and plan to open a total of 120 new routes nationwide over the next 12 months.

Marcos Paris: These slides.

Marcos Paris: Outlines our traditional Channel expansion across markets.

Marcos Barbieri: with an expected ramp-up period of 18 to 24 months.

Marcos Paris: Specifically, for the Mexican market, we have accelerated our distribution expansion plans to mitigate whether impacts the Noma opened 13 new routes in the Mexican Northwestern region, targeting, higher temperature, areas and plan to open a total of 120 new routes Nationwide over the next 12 months.

Marcos Paris: With an expected ramp up period of 18 to 24 months.

Marcos Barbieri: The next chart shows year-to-date performance by business unit in Mexican pesos. Despite a challenging beverage season in Mexico, the beverage division continues to drive growth with market share gains in Latin America and expanding U.S. distribution.

the next chart shows year to date performance by business unit, in Mexican pesos,

Marcos Barbieri: Personal care grew mild. grew mid-single digits, led by diasepsia, relaunched, and increased hair care sales. OTC performance was impacted by happy inflationary accounting from Argentine peso depreciation with analgesics most affected.

despite a challenging beverage season in Mexico, the beverage division continues to drive growth with market, share gains in Latin America and expanding Us distribution. Personal Care, grew mild

Marcos Paris: Group meet single digits led by the asepsia relaunch and increased Hair Care sales.

OTC performance was impacted by happy. Inflationary accounting from Argentine peso depreciation, with analgesics most affected.

Marcos Barbieri: The next chart presents year-to-date performance by country in local currency. Argentina is growing in line with inflation, supported by continued market share gains in Ivo 400, TREC, and SUEDOX, while lapping a tough comparison from last year's Tafirol 1 grams. Most LATAM subsidiaries are in positive territory except Chile, which remains a challenge.

The next chart.

Marcos Barbieri: In the U.S., Hispanic consumption is disrupted, and we do not expect the market to recover into growth this year.

Marcos Paris: Presents ear to date performance by country, in local currency. Argentina is growing in line with inflation supported by continued market share gains in EU quatro Centos strike. And so while lapping a tough comparison from last year's top 1 1, G sub subsidy most latam subsidiaries are in positive territory except Chile, which remains a challenge

Marcos Paris: In the US, Hispanic consumption is disrupted, and we do not expect the market to recover into growth this year.

Marcos Barbieri: The next graph shows a sequential gross margin improvement supported by a favorable. favorable sales mix and manufacturing cost efficient. Gross margin has expanded plus 6.6 points over the last couple of years, a testament to the impact of our productivity initiatives and manufacturing capabilities.

Marcos Paris: The next graph shows a sequential gross margin Improvement supported by a federal.

Marcos Paris: Favorable sales mix and Manufacturing cost. Efficiencies gross margin has expanded plus 6.6 points over the last couple of years, a testament to the impact of our productivity initiatives and Manufacturing capabilities.

Marcos Barbieri: The next chart shows a steady sequential EBITDA margin with a plus 3.9 points expansion over the past couple of years, supported by our ongoing productivity program. Looking ahead, we will continue to execute our growth projects by reinvesting excess profits and cash while maintaining a 24% average EBITDA margin.

Marcos Paris: The next chart shows a steady sequential evda margin with a plus 3.9 points expansion over the past couple of years. Supported power ongoing productivity program, looking ahead. We will continue to execute our growth projects by reinvesting, excess profits and cash. While maintaining a 24%, average evda margin.

Marcos Barbieri: The following chart highlights our acceleration momentum down the P&L with EPS significantly outpacing sales and EBITDA growth, achieving a plus 19% CAGR over the past five years. This is resulting in a higher free cash flow, where we have reached a 67% CAGR over the past five years, while returning a healthy dividend to our shareholders. Cash conversion cycle reached 115 days, a seven-day improvement, driven by a four-day reduction in receivables and a 10-day decrease in inventory.

Marcos Paris: The following chart highlights our acceleration momentum down the pnl with EPS significantly outpacing sales and evda growth. Achieving a plus 19% kear over the past 5 years

This is resulting in a higher free cash flow where we have reached a 67% kegger over the past 5 years. While returning a healthy dividend to our shareholders

Marcos Barbieri: following the rollout of our inventory build-up post-Beverage Season in May. A decrease in days payable reflects the company's transition to in-house OTC manufacturing in Mexico. All this efficiency has resulted in a much better ROIC, a central variable for our leadership team. In the chart you can see the evolution of ROIC over the past four years. Our current business model is delivering 1.4 times more value for every invested Mexican peso than four years ago. ROIC will remain a key metric throughout investments in growth projects.

Cash conversion. Cycle reached 115 days. A 7-Day Improvement driven by a 4-day reduction in receivables and a 10-day decrease in inventories.

Marcos Paris: Following the roll out of our inventory. Build up post, beverage season in Mexico, a decreasing days, payable reflects the company's trans, transition to in-house OTC Manufacturing in Mexico,

Marcos Paris: All these efficiency has resulted in a much better roic. A central variable for our leadership team, in the chart, you can see the evolution of roic over the past 4 years.

Marcos Paris: Remain a key metric throughout investments in growth projects.

Marcos Barbieri: As we enter the second half of the year, we want to provide visibility into our year-end 2025 expectations. Ongoing FX headwinds and related hyperinflationary adjustments are expected to bring full-year sales growth to near zero. Q3 is likely to be the weakest quarter with a projected single-digit contraction.

Marcos Barbieri: We expect the Argentine peso to reach the maximum depreciation allowed by the local government, which would significantly impact quarterly sales. Despite this, we remain confident in sustaining profitability, targeting an average 24% EBD margin for the year. As new routes ramp up, distribution expands, and product relaunches advance, we expect gradual growth in 2026, keeping us on track toward our mid-term double-digit sales growth target. Our ongoing productivity program will continue to support our 24% EVDA margin throughout this transition.

Marcos Paris: As we enter the second half of the year, we want to provide visibility into our year end 2025, expectations, ongoing effects. We, headwinds and related hyperinflationary adjustments are expected to bring full year sales. Growth to near zero cost. 3 is likely to be the weakest quarter with a projected, single digit contraction.

Marcos Paris: We expect the Argentine peso to reach the maximum depreciation Allowed by the local government, which would significantly impact, quarterly sales, despite this we remain confident in sustaining profitability Target, Target Target, targeting and average 24% EV margin for the year.

Marcos Paris: As new routes ramp up distribution expands and product. Relaunches Advanced, we expect gra gradual growth in 2026. Keeping us on track toward our midterm, double digit sales growth Target our ongoing productivity program will continue to support our 24% evda margin throughout this transition.

Marcos Barbieri: Our capital allocation priorities remain focused on reinvesting excess profitability and cash into the core business. with 500 million in capex projected for year-end 2025. Investments will fund the commissioning of the new Xerox production line, our new plastic plant, and the expansion of the central warehouse. CAPEX is expected to increase in the second half of the year with no additional needs anticipated for 2026. These projects are designed to support long-term growth.

Marcos Paris: Our Capital allocation priorities remain focused on re reinvesting excess profitability and cash into the core business.

Marcos Paris: With 500 million in capex projected for year end, 2025 investments will fund the commissioning of the new socks, production line, our new plastic plant and the expansion of the central warehouse capex is expected to increase in the second half of the year with no additional.

Marcos Barbieri: The company plans to maintain its 800 million annual dividend in quarterly installments with the excess cash allocated to strategic buybacks to enhance total shareholders' returns. Let me now provide more detail on the initiatives underway to gradually improve sales growth. We remain confident in the company's long-term potential.

Marcos Paris: Needs anticipated for 2026. These projects are designed to support long-term growth. The company plans to maintain, its 800 million annual dividend, in quarterly, installments with the excess cash, allocated to strategic BuyBacks to enhance total shareholders return.

Marcos Paris: Let me now.

Marcos Barbieri: Momentum is building and the outlook is compelling.

Marcos Paris: Provide more detail on the initiatives and their way to gradually improve sales growth, we remain confident in the company's long-term potential momentum is building and the Outlook is compelling.

Marcos Barbieri: First, some historical context. Following a high-growth post-IPO phase, the company faced a significant profitability challenge. Current management led a deep operational restructuring, during which sales remained flat as strong financial and operational controls were implemented.

Marcos Barbieri: With these foundations in place, the company reignited profitability growth throughout expanded go-to-market productivity and new manufacturing capabilities.

Marcos Barbieri: Today, we are entering a new growth chapter, our iconic product phase. Our growing market share still has significant room to expand across the large categories where we operate. As this chart shows, our current shares remain small relative to category size, highlighting the opportunity ahead. Sustained gains will require a competitive focus with a strategic aim.

Marcos Paris: First, some historical content context following a high growth post, IPO phase the company faced a significant profitability challenge challenges current management led a deep operational restructuring during which sales remain flat, a strong financial and operational. Controls were implemented with this foundations in place, the company rigged profitability growth throughout expanded go to market productivity and new manufacturing capabilities.

Today, we are entering a new growth chapter our iconic products face.

Marcos Paris: Our growing market share. Still has significant and significant room to expand across the large categories, where we operate as this chart shows, our current shares remains small relative to category size, highlighting the opportunity ahead sustained. Gains will require a competitive focus with a strategic Edge.

Marcos Barbieri: I would like to highlight the key competitive advantages that Genoma is leveraging to drive sales growth.

Marcos Barbieri: Our edge lies in three areas. Firstly, on Genoma's capability to develop iconic products. Secondly, on its speed to market and agility to adjust to market feedback faster than the competition. And thirdly, on an impeccable execution in the point of sales underpinned by a culture of exploitation. As we sharpen our focus on growth, we are doubling down on this trend.

Marcos Paris: I would like to highlight the key competitive advantages that genoma is leveraging to drive sales growth, our Edge lies, in 3 areas, firstly on genomes capability, to develop iconic products.

Marcos Paris: Secondly on its speed to Market and Agility to adjust to Market feedback faster than the competition and thirdly on an impeccable execution. In the point of sales, underpinned, by a culture of Excellence,

Marcos Barbieri: For 2025-2026, we have laid out a clear roadmap for brand relaunches and innovation, centered on clean, healthy, high-performing formulas in minimalistic aesthetic packaging with fewer more impactful messages. This slide shows a glimpse of the future state of our portfolio, reflecting refreshed brands and improved value propositions. We have already begun with Asepsia. The brand was relaunched in Mexico with improved formula, refreshed design, and expanded positioning from facial acne treatment to full body daily care. Leveraging our speed to market capabilities, we executed in just seven months from development to shelf. Execution was strong. Asepsia moved from a pharmacy niche to general soap aisle.

Marcos Paris: As we sharpen our focus on growth, we are doubling down on this trends.

For 2025 2026, we have laid out a clear, road map for brand relaunches and Innovation centered on clean healthy. High-performing formulas in. Minimalistic aesthetic. Packaging with fewer more impactful messages.

Marcos Paris: Of our portfolio reflecting refreshed Brands and improved value proposition.

We have already began with a sepia. The brand was relaunched in Mexico with improved formula. Refresh design, and expanding positioning, from facial acne treatment to full body. Daily care, leveraging. Our speed to Market capabilities. We executed in just 7 months from development to Shelf.

Marcos Barbieri: With increased shelf presence, in-store media support, and a price point well below category leaders. The relaunch continued to scale in Mexico with Brazil set to follow next.

Marcos Paris: execution was strong a sepia moved from a pharmacy in it to General soap, aisle with increased shelf presence in stores media support,

Marcos Paris: And a price point. Well, below category leaders, the relaunch continues to scale in, Mexico, with Brazil set to follow next year.

Marcos Barbieri: This graph highlights Asepsia's sustained post-relaunch sellout growth. Green bars represent weekly sellout in the current year, while the gray area shows the prior year. In Q2 2025, Asepsia achieved 27% sellout growth in Mexico and 15% year-to-date.

Marcos Paris: this graph highlights a sepsis sustained post, relaunch, sellout growth,

green bars, represent weekly sellout in the current year while the gray area shows the prior year in Q2 2025

Marcos Paris: Asepsia achieved 27%, sellout growth in Mexico, and 15% year to date.

Marcos Barbieri: In skin care, we are elevating our portfolio with EWG verified clean formulas that prioritize organic, naturally derived ingredients. Our new formulas will eliminate parabens, sulfates, and phthalates. featuring hypoallergenic fragrances and embracing vegan, cruelty-free solutions. Our multi-step routines aim to enhance visibility and expanding shelf presence.

Marcos Paris: In skin care. We are elevating our portfolio with ewg verified clean formulas. That prioritize organic natural, derived ingredients. Our new formulas will eliminate parabens sulfates, and fat lattes.

Marcos Barbieri: In our premium skincare brand, Cicatricure, we are aiming at delivering targeted solutions for two distinct growing segments, Gen C and 45 plus castings. based on our EWG verified clean formulas. We are launching a skincare routine for Gen Z using probiotics and organic restorative actives providing a natural hydrated glow with a microbiome friendly formulation. For 45 plus customers, we are launching a multi-benefit line, catering to a more mature customer's desire for efficacy and simplicity with clinically-inspired benefits, lifting, firming, and skin tone.

Marcos Paris: Featuring hypoallergenic fragrances and embracing vegan cruelty-free Solutions. Our multi-step routines aim to enhance visibility and expanding shelf presence. In our Premium, skin care, brand psychic. We are aiming at delivering targeted solutions for 2D stick growing segments, JC and 45 plus customers based on our ewg verified clean formulas.

We are launching a skincare routine for JC using probiotics and organic restorative activities. Providing a natural hydrated glow with a microbiome friendly formulation.

Marcos Paris: For 45 plus customers. We are launching a multi-benefit line. Catering to a more mature customer's desire for efficacy and simplicity with clinically inspired benefits lifting firming and skin tone evening.

Marcos Barbieri: In our affordable skincare brand, Theatrical, based on our EWG verified clean formulas, we're aiming at democratizing high-end skincare. We are launching a line of single active serums featuring hyaluronic acid, glycolic acid, niamicid, smale, mucin, and collagen, a strategy that taps into the growing ingredients literacy trend, empowering consumers to mix and match for personalized results. This strategy aims at positioning our brand as clean, transparent, and science-driven while offering an accessible price point, making premium cosmetics available to a broader audience. Additionally, we are introducing a new size that will fit the affordability demand in a traditional channel, leveraging our go-to-market capability.

Marcos Paris: In our affordable, skin care brand theatrical based on our ewg. Verified clean formulas were aiming at democratizing high-end skin care,

Marcos Paris: We are launching a line of single active, serums featuring high, yonic acid, glycolic acid.

Marcos Paris: Smell musing and collagen a strategy that stops into the growing ingredients. Literacy Trend, empowering consumers to mix and match for personalized results.

This strategy aims at positioning our brand as clean transparent, and science-driven. While offering an accessible price point, making premium Cosmetics available to a broader audience. Additionally, we are introducing a new size that will fit the affordability demand in the traditional Channel, leveraging our go-to Market capabilities,

Marcos Barbieri: In our premium hair care brand, Teonacho, we are repositioning from a specialized treatment to a daily, clean, three-step hair care routine, using EWG verified clean formulas and leveraging the brand's existing natural ingredients. This strategy delivers the best cosmetic performance and cleanest daily hair care solution in Latin America's mass market. Additionally, we are introducing new Teonacho sizes that will fit emerging channels such as hard discounts and clubs.

Marcos Paris: In our premium Hair Care brand Theon. We are repositioning from a specialized treatment to a daily clean 3 step hair care routine using ewg verified, clean formulas, and leveraging. The brands existing natural ingredients

Marcos Paris: This strategy delivers, the best cosmetic performance, and cleanest daily, hair care, solution in Latin, America's Mass Market.

Marcos Paris: Additionally, we're introducing new tonitos sizes that will fit emerging channels such as hard discounts and clubs.

Marcos Barbieri: In OTC, we are advancing with clean formulas and aesthetic packaging. We will expand our cough and cold portfolio with new pharmaceutical forms and functions while strengthening our gastro line with ProAvio.

Marcos Barbieri: and enter the high-potential sleep aid category. This slide shows the full portfolio under development for our upcoming Sleep Aid Lounge, leveraging the strength of the daily brand that I brand. We currently hold registrations for a 2026 launch of the Herbal SKUs formulated with Valerian, Passiflora, and Melissa. Additional submissions for melatonin, magnesium, and lavender are underway to support future portfolio expansion. As we advance our product launches, we are seeing strong momentum in OTC registration. with submissions since 2023, now nearing approval, further strengthening our innovation pipeline. We expect to bring our relaunches and innovations to market in just 10 to 18 months, underscoring the organizational agility that sets Genoma apart.

Marcos Paris: In OTC, we are Advanced advancing with clean, formulas and Aesthetics packaging. We will expand our Co and call portfolio with new pharmaceutical forms and functions while strengthening our gastro line with products.

And enter the high potential sleep aid category.

Marcos Paris: Shows the full portfolio under development for our upcoming sleep aid, launch leveraging the strength of the daily brand, that I brand.

We currently hold registrations for a 2026 launch of the herval. Skus, formulated with Valerian passiflora, and Melissa

Marcos Paris: Additional submissions for melatonin. Magnesium. And lavender are underway to support future portfolio expansion.

Marcos Paris: As we advance our product launches, we are seeing strong momentum in OTC registrations.

Marcos Paris: With submissions since 2023. Now nearing approval, further strengthening our Innovation pipeline.

Marcos Barbieri: This agility allows us to act as first movers, identifying emerging fragmented trends and translating them into accessible mass-market solutions, capturing consumers' demand ahead of competitors. Finally, our proven point-of-sale execution will be critical to turning this strategy from planned to measurable success.

Marcos Paris: We expect to bring our relaunches and Innovation to Market in just 10 to 18 months underscoring the organizational agility that sets genoma apart. This agility allows us to ask ask first movers identifying emerging fragmented Trends and translating them into accessible Mass Market Solutions. Capturing consumers demand ahead of competitors.

Marcos Barbieri: As we navigate macroeconomic headwinds in 2025, we remain sharply focused on executing our growth initiative. The team is energized by the potential of our new iconic product phase and fully committed to delivering on our growth ambition.

Finally, our proven point of sale, execution will be critical to turning this strategy from plan to measurable success.

Marcos Barbieri: Before handing the call to Tonio, I want to thank our team for our focus and dedication, and I want to thank our investors for your continuous trust and support. Please, Tonio, go ahead.

Marcos Paris: As we navigate macroeconomic, headwinds in, 2025 will remain sharply focused on executing our growth initiatives. The team is energized by the potential of our new iconic product, phase and fully committed to delivering on our growth ambitions.

Before handing the call Tio Tonio, I want to thank our team for our focus and dedication. And I want to thank our investors for our, your continuous trust and support. Please turn you. Go ahead.

Antonio Zamora: Thank you, Marco, and good day, everybody. on a consolidated basis. Genomma Lab reported net sales of $4,676,000,000.00 representing a 0.5% increase year-over-year or 0.3% on a like-for-like basis, which obviously excludes our hyperinflationary subsidiaries. The quarter's performance was negatively impacted by an 18% depreciation of the Argentine Peso against the Mexican Peso, coupled with a soft beverage season in Mexico, a trend that many of you are likely aware of. Observing these headwinds was strong sales growth in Brazil, the Andean cluster, Central America, and the U.S.

Speaker Change: Thank you, Marco and good day everybody.

Marcos Paris: On a Consolidated basis.

Marcos Paris: It's a normal lab reported, net sales of 4 billion, 676 million pesos,

Marcos Paris: representing a 0.5% increase year-over-year or 0.3% on a like, for like basis, which obviously excludes our hyperinflationary subsidiary,

Marcos Paris: The quarters performance was negatively impacted by an 18%, depreciation of the Argentine, peso against the Mexican peso.

Marcos Paris: coupled with a soft beverage season in Mexico, a trend that many of you are likely aware of

Marcos Paris: Upsetting this headwinds was strong sales growth, in Brazil, the Indian cluster, Central America and the US.

Antonio Zamora: Excluding Argentina, this is very important because we're going to be talking about hyperinflationary accounting. Excluding Argentina, second quarter net sales increased by 5.5 percent. As we all know, on the IFRS accounting standards, IAS 29 and IAS 21, the results from Argentina from the first quarter must be restated using the standards in order to express the financials of this subsidiary using the value of the Argentine currency as of June 30. The inflation during the second quarter in Argentina was just 6%. while the devaluation of the Argentine peso versus the Mexican peso during the second quarter was 18%.

Excluding Argentina. This is this is very important because we're going to be talking about hyperinflationary accounting effects.

Excluding Argentina second quarter, net sales increased by 5.5%.

Marcos Paris: As we all know, on the IFRS Accounting, Standards IAS 29 and IAS 211 the result from Argentina from the first quarter from the first quarter, must be restated using the standards in order to express.

The financials of this subsidiary, using the value of the Argentine currency, as of June 30th.

Marcos Paris: The inflation during the second quarter in Argentina was just 6%.

Marcos Paris: While the devaluation of the agent in peso.

Antonio Zamora: The gap between inflation and devaluation in this country implied a negative accounting impact as a result of the restatement of the first quarter of Argentina. Again, it's important to highlight that if we exclude Argentina and all of these hyperinflationary accounting effects, all of the other countries that are based on stable currencies reported a top-line growth of 5.5%.

Marcos Paris: Versus the Mexican peso during the second quarter was 18%.

Marcos Paris: The gap between inflation and devaluation in this country. Implied, a negative accounting impact, as a result of the restatement of the first quarter of Argentina,

Marcos Paris: again, it's important to highlight that. We if we exclude Argentina, and all of these hyperinflationary accounting effects, all of the other countries that are based on stable, currencies reported a Topline growth of 5.5%.

Antonio Zamora: On a consolidate, and by the way, if anybody wants to look at how the mechanics work, let me remind you that we published a white paper back in the fourth quarter 2023 that you can review in case you want to follow the math that may be useful for us.

Marcos Paris: On a Consolidated app. And by the way, um, if anybody wants to, uh, look at how the mechanics work, let me remind you that we, uh,

Marcos Paris: We published, uh, white paper back in the fourth quarter 2023 that you can review in case you want to follow the the math.

Antonio Zamora: anybody who's interested in understanding this hyperinflationary accounting effects in our Going back to our consolidated results, EVDA margin reached 23.8%. That's up 89 basis points, or 4.4% year-on-year improvement. This reflects ongoing gains from our company-wide productivity initiatives and manufacturing cost efficiency. Additionally, a favorable sales mix also contributed to the margin.

Marcos Paris: that may be useful for a

Understanding this hyperinflationary accounting affecting Argentina.

Marcos Paris: Going back to our Consolidated results every day margin reached 23.8% that's up 89 basis points or 4.4% year on year Improvement.

Marcos Paris: This reflects ongoing gains from our companywide productivity initiatives and Manufacturing cost efficiencies

Additionally, a favorable sales. Mix also contributed to the margin expansion.

Antonio Zamora: Net income for the second quarter totaled 355 million pesos, that's a 43 percent decline year over year, primarily due to non-cash forex and non-cash inflationary losses related to our monetary position in Argentina. Again, it is worth noting that the main driver of the decline in net income comes from items that I will explain in a minute. as the Mexican person. appreciated against all currencies between March 31st and June 30th and non-cash. non-operational, non-extrapolable. and non-recurring impact was recorded in our P&L. This is the result of translating the balance sheet of the international subsidiary. And the currency trend that you saw there with the U.S.

Marcos Paris: Net income for the second quarter total, 355 million pesos, that's a 43% decline year-over-year.

Marcos Paris: Due to non-cash, Forex and non-cash inflationary losses related to our monetary position in Argentina.

Marcos Paris: Again, it is worth noting that the main driver of the decline in net income comes from items that I will explain in a minute.

Marcos Paris: As the Mexican peso.

Marcos Paris: Appreciate it against all currencies between March 31st and June 30th. A non-cash.

Marcos Paris: Non-operational non-.

Marcos Paris: A non-recurring impact was recorded in our pnl.

Marcos Paris: This is a result of translating the balance sheet of the international subsidiaries.

Antonio Zamora: dollar was also mirrored across several countries where we operate. And obviously, the most significant impact was seen in Argentina.

Marcos Paris: and the currency Trend that you saw there with the US dollar was also mirrored across several countries where we operate and obviously the most significant impact was seen in Argentina,

Antonio Zamora: If we are just on a pro forma basis. For all of these non-cash and hyperinflationary effects, the pro forma net income grew 16.6% year over year, driven by higher operating income and lower net interest expense. Proforma EPS gave me 67 Mexican cents, also a 16.6% income.

Marcos Paris: if we adjust on a performer basis,

Marcos Paris: For all of these non-cash and hyperinflationary effects. The performance, net income, grew 16.6% year-over-year driven by higher operating income and lower net interest expenses.

Marcos Paris: perform my EPS came in, at

Marcos Paris: 67. Mexican cents. Also a 16.6% increase.

Antonio Zamora: Moving on to our cash conversion cycle. Genoma achieved a 115-day cash conversion cycle in Q2. marking a seven-day improvement versus the same period last year. This was driven by a 10-day decrease in inventory base and a four-day reduction in receipt.

Marcos Paris: Moving on to our cash conversion cycle, genoma achieved a 115 day, cash conversion cycle in Q2.

Marking a 7-Day Improvement versus the same period last year.

Antonio Zamora: As Marco noted earlier, this improvement significantly contributed to a 65% increase in training 12 months free cash flow, which reached 2.7 billion pesos. We converted 14% of our trailing 12-month net sales into pre-cash flow during this. Are days payable decreased by seven days from 103 to 96 days as we continue transitioning to our in-house OTC manufacturing in Mexico?

Marcos Paris: This was driven by a 10-day, decrease in inventory days and a 4-day reduction in receivables.

As Marco noted earlier. This Improvement significantly contributed to a 65% increase in trailing 12 months, free cash flow.

Which reached 2.7 billion pesos.

Marcos Paris: We converted 14% of our trailing 12 months. Net sales into 3, cash flow during this quarter.

Antonio Zamora: Let's now move on to our regional performance.

Marcos Paris: Our days payable decreased by 7 days from 103, to 96 days, as we continue transitioning to our in-house OTC Manufacturing in Mexico.

Antonio Zamora: We will start with Mexico. Net sales in Mexico declined 1.3 percent year-over-year, impacted by the weak beverage season amid a challenging macroeconomic backdrop and unseasonably cool weather and rain. That said, these challenges were partially offset by total digit growth in OTC sales. with strong sellout and market share gains in our Anal G6 and Kof and Koka. Personal care growth led by double-digit healthcare sales. Mixed Skin Care Results and Ongoing Double-Digit Growth in Asepsia following the relaunch that Marco mentioned earlier. Infant nutrition also posted strong double-digit growth driven by improved feed rates and market share gains in key formulas.

Marcos Paris: Let's now move on to our regional performance. We will start with Mexico.

Marcos Paris: net sales in Mexico declined, 1.3% year-over-year,

Marcos Paris: Impacted by the weak beverage season, amid a challenge, but a challenge a challenging, macroeconomic backdrop. And on seasonally,

Marcos Paris: Cool weather and rain.

Marcos Paris: that said, these challenges were partially upset by

Marcos Paris: total digit growth in OTC sales.

Marcos Paris: With strong sellout, and market market share gains in our analytics and conference call categories.

Marcos Paris: Personal Care growth led by double digit her career sales.

Marcos Paris: Mix a skin care results, an ongoing double digit growth, in a sepia following, the relaunch that Marco uh mentioned earlier.

Antonio Zamora: Suerox maintained market share with just a 3.7% sellout decline during the first half of 2025, outperforming the contraction in Mexico's isotonic category. Mexico's everyday margin also rose 207 basis points to reach 24.6 percent, driven by the productivity initiatives previously discussed.

Marcos Paris: Infant nutrition. Also posted strong double digit growth driven by improved field rates and market share gains in key formulas.

Soy rocks, maintain market share with just a 3.7% sellout decline during the first half.

Marcos Paris: Of 2025 outperforming the contraction in Mexico's, isotonic category.

Antonio Zamora: Before we review the performance of our international subsidiaries, I will be presenting a brief overview of the exchange rate environment to provide important context for our second quarter performance in the international division. On a year-over-year basis, the Mexican peso depreciated double-digit against the U.S. dollar.

Marcos Paris: 4.6% driven by the productivity initiatives. Previously discussed.

Marcos Paris: Before we, before we review the performance of our International subsidiaries, I will be presenting a brief overview of the exchange rate environment.

Marcos Paris: To provide important context for our second quarter performance in the international division.

On a year-over-year basis. The Mexican peso depreciated double digits against the US dollar.

Antonio Zamora: Now, moving on to the U.S. Genoma's net sales in the U.S. increased 11.2% in Mexican peso terms, primarily due to favorable forex effects. in local currency terms. Net sales grew almost 1%. This model's growth reflects ongoing beverage expansion. and strong healthcare performance despite broader macroeconomic pressures in that country and softer Hispanic consumer sentiment. EVDA margin in the U.S. reached 15.8%, which is also a 204 basis point improvement year over year, highlighting continued productivity gain.

Marcos Paris: Now.

Marcos Paris: Moving on to the US.

Marcos Paris: General market sales in the US increased 11.2% in Mexican peso terms.

Marcos Paris: Primarily due to favorable Forex effects.

Marcos Paris: In local currency terms.

Marcos Paris: Net sales grew almost 1%.

These models growth reflects ongoing beverage expansion.

Marcos Paris: And strong hair care performance. Despite broader macroeconomic pressures in that country and softer, Hispanic consumer sentiment.

Marcos Paris: Eva margin in the US reached 15.8%, which is also a 2004 basis point Improvement, year-over-year highlighting continued, productivity. Gains.

Antonio Zamora: Moving on to Latin America, if we exclude Argentina, net sales rose 10.5 percent, driven by solid performance in Brazil, Central America, and the Andean Plus. If we include Argentina, net sales only represent an improvement of 0.4%, but we explained the hyperinflationary accountings. FDA margin for the region, including Argentina, was 24.7%, down 44 basis points.

Marcos Paris: Moving on to Latin America. If we exclude Argentina, net sales Rose 10.5% driven by solid performance, in Brazil, Central America, and the ND and cluster,

Marcos Paris: if we include Argentina, uh, net sales, uh, only represent an improvement of 0.4%, but we explained the hyperinflationary accountings already

Antonio Zamora: Again, driven due to hyperinflationary accounting impacts in that. In Argentina, I think it's important when we talk about Argentina, let me exclude all this counting effect. because in Argentina, local currency sales increased 37% year over year. And this is very much in line with inflation. that obviously help us to highlight a stable underlying demand in that context.

Marcos Paris: FDA margin for the region, including Argent, including Argentina. Was 24.7% down 44 basis. Point again.

Marcos Paris: Driven due to hyperinflation Nar accounting impacts in that country.

Marcos Paris: In Argentina local for I think it's important. When we talk about Argentina, let let me explore all these accounting effects.

Marcos Paris: Because in Argentina local currency sales, increased 37% year-over-year and this is very much in line with inflation.

Antonio Zamora: Due to hyperinflationary accounting rules, Argentina net sales reported in Mexican pesos declined 14.2%, as we mentioned earlier, driven by almost 19% currency depreciation.

Marcos Paris: Uh, that I obviously help us to highlight a stable on a stable, underlying demand in that country.

Marcos Paris: Due to hyperinflationary accounting rules Argentina, net sales reported in Mexican pesos declined, 142% 14.2%.

Antonio Zamora: Let's move on to the capital structure. and allocation. We close the quarter with a leverage ratio of just 1.2%. 0 times net debt to EVTA, maintaining ample financial flexibility.

Marcos Paris: Uh, as we mentioned earlier driven by almost 19% currency depreciation.

Marcos Paris: Let's move on to the capital structure.

Marcos Paris: And allocation.

We close the the quarter with a leverage ratio of just 1.

Marcos Paris: 0 times netted to a vda.

Antonio Zamora: On June 3rd, the company successfully issued 1.2 billion pesos in unsecured Mexican corporate bonds or seguras. These instruments were rated AA+, both by Fitch and HR rating agencies. and the offering was 1.25 times over.

Maintaining ample Financial flexibility.

Marcos Paris: On June 3rd, the company successfully issued 1.2 billion pesos in unsecured. Mexican corporate bonds for severe.

Marcos Paris: This uh, instruments were rated double A Plus both by Fitch and HR rating agencies.

Antonio Zamora: Proceeds from these transactions were used to optimize our debt maturity profile, including the early amortization of existing debt. On June 11th, we completed the full early amortization of Lab 23, totaling $1 billion, and also repaid $400 million in back debt.

Marcos Paris: And the offering was 1.25 times over subscribed.

Marcos Paris: Proceeds from these transactions were used to optimize our debt maturity profile including the early amortization of existing debt.

Marcos Paris: On June 11th. We completed the full earlier amortization of last.

Marcos Paris: 23 totaling 1 billion pesos and also repaid 400 million pesos in back death.

Antonio Zamora: Here you can see in this graph. how their maturity profile used to be before the refinance.

Ahead of schedule.

Marcos Paris: here, you can see in in this uh, graphs

Antonio Zamora: and after the reclaiming. Capital allocation during the quarter also included a 12 consecutive quarterly cash dividend of 200 million pesos. A share report just of 4.6 million shares, totaling $104 million pesos.

Marcos Paris: how our debt maturity maturity profile used to be before the refinancing

Marcos Paris: and after the refinancing,

Marcos Paris: Capital asset Capital allocation during the quarter. Also included a 12 consecutive quarterly, cash dividend of 200 million pesos.

Antonio Zamora: Ongoing investment in the business that included capex for manufacturing equipment, such as the commissioning of our new Soyrux production line, the expansion of our distribution center, and the investment on new packaging manufacturing equipment to drive future productivity. To conclude, as Marco mentioned, Q2 results underscore the resilience and adaptability of Genoma's business model, even amid macroeconomic challenges. Despite facing forex pressures and other external headwinds that we discussed, we deliver strong underlying performance with every DA margin expansion driven by favorable mix, cost control, and productivity gain. These results are aligned with our strategic objective to maintain a 24% average EVDA margin while scaling investments in core growth areas.

Marcos Paris: A share report, just a 4.6 million shares total in 104 million pesos.

Marcos Paris: Ongoing investment in the business that included capex for manufacturing equipment. Such as the commissioning of our new socks production line, the expansion of our distribution center and the investment on new cap. New packaging, manufacturing equipment to drive future productivity.

Marcos Paris: Marco mentioned Q2 results underscore their resilience and adaptability of genomes business model.

Marcos Paris: Even amid microeconomic challenges.

Marcos Paris: Despite facing for expressions and and other external headwinds.

Marcos Paris: That we discussed, we deliver strong, underlying performance with evda margin expansion, de driven by favorable mix cost, control and productivity gains.

Antonio Zamora: a working capital improvement and 65% free cash flow increase reflect disciplined execution and ongoing capital discipline. We also enhance our debt maturity profile through proactive refinancing and early repayment.

These results are aligned with our strategic objective, to maintain a 24%. Average Eva margin while scaling investments in core growth areas.

Marcos Paris: I work working, Capital Improvements, and 65%, free cash flow, increase reflect disciplined execution.

Marcos Paris: And ongoing Capital discipline.

Antonio Zamora: Looking ahead, while the macro environment remains dynamic, we are confident in our ability to navigate volatility, sustain momentum, and deliver long-term value for our shareholders.

Antonio Zamora: Thank you once again for your trust and continued support.

We also enhance our debt maturity profile to proactive refinancing and early repayments. Looking ahead, while the macro environment remains Dynamic, we are confident in our ability to navigate, volatility sustain, momentum and deliver long-term value for our shareholders.

Operator: I will now turn it over to the operator to begin the Q&A session.

Operator: Thank you. Thank you, Antonio.

Marcos Paris: Thank you. Once again for your trust and continued support, I will now turn it over to the operator to begin the Q&A session. Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may raise your hand using the icon, Raise Your Hand, located at the bottom of your screen. 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 and ask your question. One moment, please, while we hold for questions. Thank you.

Marcos Paris: Thank you, Antonio.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question, you may raise your hand using the icon, raise your hand located at the bottom of your screen.

Speaker Change: To withdraw your question, press the same icon at any time.

Speaker Change: This will be required in order to allow you to turn on your microphone and ask your questions.

Speaker Change: 1 moment, please while we hold for questions.

Alejandro Fot: Our first question comes from Alejandro Fot. with Itao.

Alejandro Fot: Please turn on your microphone to proceed with your question. Thank you, operator. Hola, Marco, Tonio, Christian, and Tim. Thank you for the space for questions. I have two quick ones, if I may. The first one for Marco, on the top line, especially 2026. Wanted to see, Marco, if you could elaborate a little bit more on the top line growth. You mentioned double digits, slowly going there next year. Maybe on a geographical basis, you think that this top line growth is gonna come, let's say, from an Argentine recovery? Is this mainly sweaters recovering, OTC? How do you see Mexico?

Speaker Change: Thank you. Our first question comes from Alejandro, folks.

Speaker Change: With ital, please turn on your microphone to proceed with your question.

Speaker Change: Thank you, operator. Thank you for the space for questions I have.

Alejandro Fot: Maybe you can elaborate a little bit more into what's driving the growth next year. And also, thank you very much for all of the detail on the release, per category, per country. I thought that was very helpful.

Marcos Barbieri: That'll be my first one, and then I have a follow-up. Yeah, thank you, Alejandro. Um So we have several buckets of growth that I foresee for next year. The first one has to do with... with all the initiatives that we have both in the OTC portfolio and the personal care portfolio. We have a significant amount of relaunches in personal care and a lot of innovation coming in in OTC. Those projects will be impacting all the markets across. in different timings, but it will impact from Mexico all the way down to Argentina. Okay, so that's the first bucket of growth.

Speaker Change: 2, quick ones, if I met the first 1 for Marco, h, on the top line, specially 2026 wanted to see Marco, if you get elaborate a little bit more, you know, on the Topline growth, you you mentioned, double digits, you know, slowly going there next year, maybe on a geographical basis. You think that this Topline growth is going to come. Let's say from an Argentine recovery. Is this mainly, you know, a sweat of recovering OTC. How do you see Mexico? Maybe if you can, elaborate a little bit more into what's driving the growth in next year and and, and also thank you very much for all of the details on the release, you know, per category per country. I thought that was very helpful. That would be my first 1, and then I have a follow. Thank you. Yeah, thank you Alexandro.

Speaker Change: Um,

Speaker Change: So we have several buckets of growth uh, that I foresee for next year.

Speaker Change: uh, the first 1 has to do with, um,

Speaker Change: with the all the initiatives that we have, uh, both in the OTC, uh, portfolio and the personal care portfolio. We have a significant amount uh, of relaunches in personal care and a lot of innovation coming in in OTC.

Speaker Change: Uh, projects will be impacting.

Speaker Change: All the markets across.

Marcos Barbieri: The second one. is Argentina. I think, I hope that We're going to see the worst of the devaluation this year and we are expecting, actually we are forecasting the third quarter with a very strong devaluation of the Argentine peso, almost reaching the cap that the government put in place. We expect that that cap will remain for the following years. And so I don't expect that the depreciation of Argentina will be impacting us in 2026.

Uh, in different timings, uh, but it will impact, uh, from Mexico, all the way down to Argentina. Okay? So that's the first bucket of growth.

Speaker Change: Uh, the second 1.

Speaker Change: is um,

Speaker Change: It's Argentina. I think I hope uh that um

We're going to see the worst of the devaluation uh, this year.

Speaker Change: And uh, we are expecting actually. We are forecasting, the third quarter uh, with a very strong devaluation of the Argentine peso almost reaching the cap that the government put in place.

Speaker Change: Uh, we expect that that cap uh will remain uh for the following years.

Marcos Barbieri: That, coupled with the fact that we are growing market share right now, in most of the categories where we compete in Argentina, we really expect Argentina to be a source of growth for 2026. The third bucket of growth is mostly focused in Mexico where, and that has to do with swarovski. and we are investing heavily this year in opening new routes of distribution and significant efforts on gaining more distribution in places where our numerical distribution has historically been a little bit too low, okay? So, you know, the three. efforts that we expect to hit in 2026.

Speaker Change: And so I don't expect that the depreciation of Argentina uh will be impacting Us in 2026 that coupled with the fact that we are growing market. Share right now in most of the categories where we compete in Argentina, we really expect Argentina to be a source of growth, uh, for 2026.

Speaker Change: The the and the third uh bucket of growth uh is mostly focused in Mexico where uh that and that has to do with s.

Speaker Change: And we are investing heavily this year in opening new routes of distribution um and um, and significant efforts on gaining more, uh, distribution in places where our numerical distribution has historically been a little bit too low. Okay, so, you know, the third, the 3

Marcos Barbieri: are, I will repeat, all the projects of innovation across the world, OTC and personal care. Argentina, we really expect it to be a source of growth for next year and Xerox Mexico. a from a distribution point of view. And if you add to that, that a hopefully we have a better summer season, then you know, I think Swarovsia, Mexico will be a very, a very important source of growth for next year. Thank you, Marco. That's the way I see it.

Speaker Change: Efforts that we expect to hit from 2026.

Speaker Change: Are I will repeat all the projects of innovation across the world OTC and personal care Argentina. We really expect it to be a source of growth for next year and cerox Mexico.

Speaker Change: From a distribution point of view. And if you add to that, that, hopefully we have a better summer season. Then, you know, I think surros Mexico will be h a, a very, a very important source of growth uh for next year.

Speaker Change: and um,

Alejandro Fot: Thank you very much for all of the details.

Mark: Thank you, Mark, for the, the that's that's uh, that's the way I see it.

Alejandro Fot: Sorry, and one more thing, one more thing. The other piece that I expect in 2026 to impact the business positively is the huge effort we are doing in creating this digital capability to drive demand. So that would be the fourth. That was super clear.

Thank you very much for all of the details. Sorry, and 1 more thing 1 more thing. The the other piece that I expect in 2026 to, uh, impact, the business positively is the huge effort. We are doing in creating this, uh, digital capability to, to, to drive demand.

Mark: So that would be the fourth.

Antonio Zamora: I'm going to do a follow-up, maybe to Tonya real quick, on buybacks. I believe from the cash flow statement on the release and the buyback line, there's a cash inflow to the company, but both on the release and here on the prepared remarks, you mentioned that you bought back 4.6 million shares. So I want to see, does this mean that you sold some of those shares back to the market and there was no cancelling of them? Or is this a timing, like the dividend that maybe was done on July? So maybe if you could explain to me, Tonya, a little bit more on the buyback, that would be very helpful.

Mark: Perfect, that that would be clear. I'm going to do a follow-up maybe to turn your real quick. Um,

Antonio Zamora: No, thank you. Thank you, Alex. No, we have not sold the shares. We believe that at the current valuation, obviously, it's an excellent opportunity to keep on accumulating our own shares and eventually to the cancellation. We haven't done the cancellation this year yet. So no, I think it has more to do with the timing of the dividend, because the dividend for the second quarter, we ended up paying that on July 1st. So I think that may be the reason why you see that. But no, we are net buyers, and we will continue doing buybacks. And eventually, when the board decides, do the cancellation.

Speaker Change: On BuyBacks, I believe on the cash flow statement on the release. In the buyback line, there's a cash inflow to the company but both of the release and here on the preferred remarks you mentioned that you bought back 4.6 million shares. So I want to see does this mean that you sold some of those shares back to the market and and there was no canceling of them or or is this a timing like the the the dividend that maybe was done on July? So maybe if if, if you were to explain to me to you a little bit more on the buyback, that would be very helpful. Thank you.

No, thank you. Thank you. Alex know we have not uh sold the shares. We Believe at that at the current evaluation obviously it's a an excellent opportunity to keep on accumulating our own shares and eventually to the cancellation. We haven't done the cancellation this year yet. Uh, so no, I I think it has more to do with the timing of the dividend because the dividend for the second quarter. Uh, we ended up paying uh, that on July 1st. So that that may I think that may be the reason why you see that.

Alejandro Fot: Super clear, thank you very much. Thank you, Alex.

Speaker Change: But no we we are we are net buyers and we will continue to uh doing BuyBacks and eventually when the board decides do the cancellation.

Speaker Change: Thank you very much.

Marcos Paris: Thank you, Alex.

Antonio Hernandez: Thank you. Our next question comes from Antonio Hernandez with Actinver.

Antonio Hernandez: Please turn on your microphone to proceed with your question. Hi, good morning. Thanks for taking my question. Just a quick one regarding CAPEX expectations going forward. I mean, because of these different moving pieces in terms of swaddles distribution or more distribution, just as you mentioned, maybe other initiatives, what are your CAPEX expectations going forward? Thanks.

Speaker Change: Thank you. Our next question, comes from Antonio Hernandez with actinver. Please turn on your microphone to proceed with your question.

Antonio Hernandez: Hi, good morning. Thanks for taking my question. Just a quick 1 regarding capex, expectations going forward. I mean because of these different moving pieces in terms of sweat, also distribution more more distribution, just as you mentioned, maybe other initiatives, what are your capex expectations uh going forward? Thanks.

Antonio Zamora: Thank you, Antonio, for the question. We expect the third quarter and the fourth quarter to be heavy on CAPEX. mainly behind the construction of the new distribution center. the payment of the second Swerox line. and the completion of the acquisitions that we need to make for the plastics, the injection plant that we are building in San Cayetano. After the third and the fourth quarter, we expect CAPEX to be reduced again in 2026 to its normal level.

Thank you. Antonio for the question, the we expect uh the third quarter and the fourth quarter to be heavy on capex

Antonio Hernandez: Uh, mainly behind the construction of the new uh, Distribution Center.

Antonio Hernandez: The payment uh, of the second swirls line.

Antonio Hernandez: And um, the completion of the Acquisitions that we need to make for the uh, Plastics uh, the injection plant uh, that we are building in San caetano.

Antonio Hernandez: After the third and the fourth quarter, uh, we expect capex to be reduced again in 2020 2026 to its normal levels.

Antonio Hernandez: Okay, thanks for that call. For the second half of the year then, these ramp up, what does that translate into? Can you provide maybe a number or an estimate? Sorry, can you repeat the question? Yes, can you provide maybe an estimate of how much will CAPEX increase for the second half of the year? Yes, we presented I think it was in the range of 500 million.

Speaker Change: Okay, thanks for for that color for for this second half of the year then uh this ramp up, what does that translate into? Uh, can you provide me a number for an estimate? Sorry in. Can you repeat the question?

Speaker Change: Yes. Can you provide maybe an estimate of how much will capex increase for this second half of the Year? Ah, yes, we presented. I think it was, uh, in the range of 500 million

Antonio Hernandez: OK, OK, thanks for the call. Have a nice day.

Speaker Change: Okay.

Speaker Change: Okay, thanks for the caller. Have a nice day.

Froylan Mendes: Thank you. Our next question comes from Froylan Mendes from JP Morgan.

Froylan Mendes: Please turn on your microphone to proceed with your question. Hello, Marco, Tonio, Christian. Thank you very much for taking my question. Kind of a follow up to one of my colleagues previous question on the digital advertising channels that you mentioned also as a bucket of growth. Can you dig deeper into specifically what are you doing to conquer these channels? And what are the products that the products most dependent on these digital marketing channels?

Speaker Change: Thank you. Our next question comes from Freud. Lan Mendes from JP Morgan. Please turn on your microphone to proceed with your question.

Lan Mendes: Hello. Marco Antonio, Christian, thank you very much for for taking my question. Uh, kind of a follow up to 1 of the of my colleagues. Previous question on the digital advertising channels that, that you mentioned also as a bucket of growth.

Froylan Mendes: And as a second question, you mentioned this new iconic brand face. Does this mean going forward further simplification of the portfolio, focusing, obviously, on sweat ox, other very specific OTCs, like even simplifying more the portfolio? And would this come at the expense of the agility to capturing shipping consumer trends that you have had in the past, like being more concentrated, more focused, giving more time to develop a specific product? Will that entail that you might need some of the incipient consumer trends and bring new products to the market in a slower pace than before?

Lan Mendes: Can you dig deeper into specifically? What are you doing, uh, to conquer these Channel and what are the products that the products most dependent uh, on on these digital uh, marketing channels? And as a second question, you mentioned this new iconic brand face

Marcos Barbieri: Thank you. Yeah, thank you, Fraulein. No, on digital, I think we are creating a capability that no other company has. We think, we estimate that we are going to be able to create 100 contents or assets per day to advertise in digital. So I think, you know, what we have done with television in the last decade or so, we are going to be able to do in digital. And regarding to your question on which products are more appealing to digital, I mean there's some obvious brands, you know, that are more appealing to younger people like Asepsia, but in reality we all know that, you know, television's effectiveness is decreasing across the market in different pacing, but the overall trend is that television effectiveness is decreasing and that people are spending more and more time in, you know, social media and platforms and so on, YouTube, so it's really important for the company that, you know, we finish this project, which I think is going to happen in the next month or so, and that we put it in place and put it to work at full steam, and I think you're going to see a very strong impact in 2026.

Does this mean going forward further simplification of the portfolio focusing obviously on on FedEx other other very specific ltc's. Uh like even simplify simplifying more, the portfolio. And with this come at the expense of the agility to capture in shipping consumer trends that you have had in the past like being more, concentrated more focused, giving more time to develop a specific product will that entail that you might need some of the incipient uh consumer Trends and and and bring new products to the market in a slower Pace than before thank you.

Speaker Change: Yeah. Uh, thank you for and no on digital. I think we are creating a capability that no other company has. Uh, we think we estimate that we are going to be able to create a 100, contact, contents or assets per day, um, to advertise uh, in digital. Uh so I think

Speaker Change: You know what we have done with, uh, television, uh, in the last decade or so, we are going to be able to do in, in digital and regarding to your question, on which products are more appealing, uh, to digital. I mean, there's some obvious Brands, uh, you know that are more, uh,

Marcos Barbieri: I don't know if that clarifies the question. Very useful, Marco. Thank you. Yeah.

Speaker Change: Next month or so. And that we put it in place, uh, and put it to work at Full Steam and I think you're going to see a very strong impact in 2026.

Marcos Barbieri: And then regarding portfolio, we will continue to drive productivity across our portfolio. We're going to be accelerating the pacing of innovation across the board. But at the same time, we're going to be reducing or eliminating the SKUs or brands that are unproductive. So, you know, it's not that we're just doing one or the other because we don't want to end up where we were like three or four years ago with like, you know, thousands of SKUs, unproductive SKUs. So we're doing this very diligently. Excellent.

Speaker Change: I, I don't know if that clarifies the, the question. Very useful, Marco. Thank you. Yeah. And then, uh, regarding portfolio, will we will continue, you know, to drive productivity across our portfolio. Uh, we're going to be accessing uh the pacing of innovation across the board.

Speaker Change: Um, but at the same time, we're going to be reducing our or eliminating the skus, uh, or brands that are on productive. So, you know, it's not that we're just doing 1 or the other because we don't want to end up uh where we were like 3 or 4 years ago with like you know, thousands of skus and productive skus. So we're doing this very digitally.

Marcos Barbieri: Thank you so much, Marco. Sure. Thank you.

Excellent, thank you so much, Mark.

Speaker Change: Sure.

Roberto Nava: Our next question comes from Roberto Nava with GVM.

Speaker Change: Thank you.

Roberto Nava: Please turn your microphone on to proceed with your question. Hi, thank you, Marco, Antonio, and Christian. I wanted to ask you, given this perfect volatility in Argentina, how are you mitigating currency risk ahead of the expected improvement in 2026? Are you relying on hedging price inactions for other operational layers?

Speaker Change: Our next question comes from Roberto Neva with heavy. Please turn your microphone on to proceed with your question.

Roberto Neva: Hi. Thank you, Marco. Antonio and Christian. I wanted to ask you given this perfect volatility in Argentina. How are you mitigating currency risk ahead of the expected Improvement in 2026? Are you relying on edging, price price in actions or other operational levels?

Antonio Zamora: Thank you for your question, Roberto. Generally speaking, Genoma has a natural hedge because we operate in 18 countries, so it is... on a long-term basis, we have that natural hedge. And actually, when the Mexican peso depreciates, our numbers are actually a little bit better. Okay, so the natural hedge is there. What we cannot manage is huge fluctuations with the Argentine peso. And as you. you and everybody knows, there are no hedging instruments that make sense, especially with that specific country. So I think that the Argentine government has done tremendous jobs in terms of lowering inflation.

Roberto Neva: Thank you for your question, Roberto. Uh, generally speaking genoma has a natural hedge because we operate in 18 countries. So it is um,

Roberto Neva: On a long-term basis. Um, we have a natural hedge and actually for the Mexican peso depreciates, uh, you know, our numbers are actually a little bit better.

Antonio Zamora: And you can see that the currency has been somewhat stable. Unfortunately, that didn't happen this quarter. But yeah, it's very, it's very hard to do any. against that currency. Having said this, as I said earlier, generally speaking, because we have fragmented or very diverse portfolio of countries, categories, etc., that we don't need to hedge anything in particular. However, if there's big FX swings, we do have to record non-cash, non-operational, non-recurrent, and non-extrapolable charges when we translate the balance. from the defense of Syria, but again it's non-cash. It's the same situation that we saw last year.

Okay. So the natural hedge is there. What we cannot manage is huge fluctuations with the Argentine peso? And as you as you and everybody knows there are no hedging instruments that make sense, especially with that specific country. So I I think that the Argentine government has done a tremendous job in terms of lowering inflation and you can see that the currency has been somewhat stable unfortunately that didn't happen this quarter but yeah it's very it's very hard to do any hedging.

Roberto Neva: Against that currency, having said this. Uh, as I, as I said earlier, generally speaking because we have uh, uh, fragmented or very diverse portfolio of countries, categories, Etc that we don't need to hedge anything in particular. However, if there's big FX swings, we do have to record non-cash non-operational non-recurring, and

Roberto Neva: Charges. Uh, when we translate the balances from from the difference of serious. But again, it's non-cash.

Antonio Zamora: In the second quarter 2024, we reported 126 million pesos in FX gains. Yeah, it was a gain, but it was also non-cash. So if it's a gain or a loss, those are non-cash. So I think that the important talking about cash is a free cash flow generation. And it's very important to highlight that we increased 65% free cash flow from the business. So that's more of a balance sheet effect. That's why we, in this particular quarter, we provided some proxies or performance of where the net income would have been excluding these. I don't know if I answered your question, but...

Roberto Neva: It's the same situation that we saw last year in the second quarter 2024. We reported 126 million pesos in FX gains. Yeah, it was again but it was also non-cash. So if it's again or a loss those are not cash. So I think that the important talking about cash is a free cash flow generation.

Roberto Neva: And it's a, it's very important to highlight that we increase 65% free cash flow from the business.

So that's that's more of a balance sheet effect. Uh, that's why we in this particular quarter, we provided some uh, proxies or performance or where the net income would have been excluding these effects

Roberto Nava: Yeah, thank you very much.

Roberto Neva: I don't know if I answer your question, but

Speaker Change: Yes, thank you very much.

Operator: One moment, please, while we hold for questions.

Speaker Change: 1 moment, please while we hold for questions.

Operator: That concludes our second quarter results conference call. Thank you for your attention.

That concludes our second quarter results conference call. Thank you for your attention.

Goodbye.