Q3 2025 Genomma Lab Internacional SAB de CV Earnings Call

Speaker #1: You have joined the meeting as an attendee and will be muted throughout the meeting .

Speaker #2: Good day , ladies and gentlemen . Thank you for joining Genome Lab's third Quarter 2025 earnings conference call . All participants will be in listen only mode .

Christian Ibanez: Good day, ladies and gentlemen. Thank you for joining Genomma Lab Internacional S.A.B. de C.V.'s third 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. As a reminder, this meeting is being recorded and will be available for replay from the Investor Relations section of Genomma Lab's website following the call. I'll now turn the call over to Christian Ibanez, Genomma Lab's Head of Investor Relations. Please go ahead.

Speaker #2: 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 Genomas website .

Speaker #2: Following the call . I'll now turn the call over to Christian Ibanez . Genomas Head of Investor Relations . Please go ahead .

Speaker #3: Thank you , Daniel , and welcome everyone on today's call . Are Marcos Barbieri , chief Executive Officer , and Antonio Zamora , chief financial Officer .

[Company Representative]: Thank you, Daniel, and welcome, everyone. 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 Genomma Lab Internacional S.A.B. de C.V.'s business, assets, products, strategies, demand, and market. These statements are subject to risks and uncertainties that could cause actual results 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. Let me now turn the call over to Mr. Marcos Barbieri.

Speaker #3: 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 Genomas business assets , products , strategies , demand and markets .

Speaker #3: These statements are subject to risks and uncertainties that could cause actual results to differ materially. They are also based on assumptions as of today, and the company undertakes no obligation to update them.

Speaker #3: As a result of new information or future events, let me now turn the call over to Mr. Marcos Barbieri.

Speaker #4: Good morning , everyone , and thank you , Chris . I would like to begin today by addressing a clear reality . The company is going through a challenging period and the results I will present today are not the ones I wish to report , nor the ones we are used to delivering .

Marcos Barbieri: Good morning, everyone, and thank you, Chris. I would like to begin today by addressing a clear reality. The company is going through a challenging period, and the results I will present today are not the ones I wish to report, nor the ones we are used to delivering as a company. However, I hope that by the end of today's presentation, I can convey the same confidence and reassurance I personally have that our plan to reignite growth is solid, well-structured, and entirely focused on rebuilding our top line. My expectation is that after reviewing the next slides, you will share the same confidence that I have. Let me begin with a message of strength. Over the past few years, Genomma Lab Internacional S.A.B. de C.V. has achieved remarkable progress. Sales have grown nearly 70%. EBITDA has more than doubled.

Speaker #4: As a company . However , I hope that by the end of today's presentation , I can convey the same confidence and reassurance I personally have that our plan to reignite growth is solid , well structured and entirely focused on rebuilding our top line .

Speaker #4: My expectation is that after reviewing the next slide , you will share the same confidence that I have . Let me begin with a message of strength .

Speaker #4: Over the past few years, Genomma Lab has achieved remarkable progress. Sales have grown nearly 70%. EBITDA has more than doubled.

Speaker #4: Free cash flow has surged 152% , and EPs is up 46% . I don't mention this growth only to highlight results , but to demonstrate that we have successfully transformed the company from a deep restructuring phase into high growth , more profitable and more capable organization .

Marcos Barbieri: Free cash flow has surged 152%, and EPS is up 46%. I don't mention this growth only to highlight results, but to demonstrate that we have successfully transformed the company from a deep restructuring phase into a high-growth, more profitable, and more capable organization. We are better than ever positioned to emerge stronger from the current slowdown. This performance is underpinned by six strategic assets that we have built over time. Assets that very few companies possess and which would take any new entrant decades and hundreds of millions of dollars to replicate. The first is our powerful brand portfolio of over 40 brands, many of which were built during a period when television played a dominant role in influencing consumer purchasing decisions. Today, these brands enjoy exceptionally high awareness and strong positioning in consumers' minds.

Speaker #4: We are better than ever positioned to emerge stronger from the current slowdown. This performance is underpinned by six strategic assets that we have built over time.

Speaker #4: Assets that very few companies possess and which would take any new entrant decades and hundreds of millions of dollars to replicate. The first is our powerful brand portfolio of over 40 brands, many of which were built during a period when television played a dominant role in influencing consumer purchasing decisions.

Speaker #4: Today , this brands enjoy exceptionally high awareness and strong positioning in consumers mind . Brands such as Cicatricure , with its medical heritage , Asepxia with strong dermatological credentials , Goycochea in leg treatments and OTC leaders like Next , Xl3 and Tukol in Mexico , as well as Tafirol in Argentina , where we hold a 40% market share .

Marcos Barbieri: Brands such as Cicatricure, with its medical heritage, Asepsia, with its strong dermatological credentials, Goicoechea in leg treatments, and OTC leaders like Next, XL-3, and Tucol in Mexico, as well as Tafirol in Argentina, where we hold a 40% market share. All these brands form part of this invaluable portfolio. Equally important is our team. Building this leadership structure has taken time and effort of years. Having spent over 20 years at P&G, I can confidently say that our executive and managerial team match and, in many cases, exceed those of our multinational competitors. We have also developed an extraordinary distribution network in the highly resilient traditional channel and all the channels across, reaching over 890,000 points of sale across Mexico and Latin America every week. This is a core capability that would take any pharma or personal care competitor decades and a massive capital to replicate.

Speaker #4: All these brands from part of this invalid form , part of this invaluable portfolio . Equally important is our team building this leadership structure has taken time and effort of years .

Speaker #4: Having spent over 20 years at P&G , I can confidently say that our executive and managerial team match and in many cases exceed those of our multinational competitors .

Speaker #4: We have also developed an extraordinary distribution network in the highly resilient , traditional channel , and all the channels across reaching over 890,000 points of sale across Mexico and Latin America .

Speaker #4: Every week. This is a core capability that would take any farmer or personal care competitor decades and massive capital to replicate.

Speaker #4: We can launch a product and have it distributed to all the channels , and nearly 890,000 points of sales across Latin America simultaneously .

Marcos Barbieri: We can launch a product and have it distributed to all the channels and nearly 890,000 points of sales across Latin America simultaneously. This is not only a true competitive advantage, but also a clear growth avenue for the company. In addition, our decision to integrate our own manufacturing facility has proven highly strategic. Despite the complexity of regulatory and operational integration, it now provides us with stronger cost control and greater product quality assurance, while allowing for further productivity in the company. Our company culture, rooted in speed and agility, is also a major asset. While many of our competitors operate with more bureaucracy and slower decision-making, we have a structure that allows us to move faster and respond quicker to consumer needs. Finally, we have established solid footholds in two key markets with profitable operations: the U.S. Hispanic segment and Brazil. Although current results in the U.S.

Speaker #4: This is not only a true competitive advantage , but also a clear growth avenue for the company . In addition , our decision to integrate our own manufacturing facility has proven highly strategic despite the complexity of regulatory and operational integration , it now provides provides us with stronger cost control and greater product quality assurance while allowing for further productivity in the company .

Speaker #4: Our company culture , rooted in speed and agility , is also a major asset . While many of our competitors operate with more bureaucracy and slower decision making , we have a structure that allows us to move faster and respond quicker to consumer needs .

Speaker #4: Finally , we have established a solid food in two key markets with profitable operations . The US Hispanic segment and Brazil . Although current results in the US market warrant review , our presence , there represents a valuable long term asset .

Marcos Barbieri: market warrant review, our presence there represents a valuable long-term asset. Today, our products reach more than 50 million Hispanic households, with distribution in major retailers such as Walmart, Walgreens, and Amazon, generating close to $100 million in annual sales. Establishing this level of penetration and relationships from scratch would take any company years and significant investment, and the same holds true for our footprint in Brazil. All in all, this company has penetrated high barriers of entry and is positioned to continue consolidating its position to increase market share in a $3 trillion-sized industry, the largest in the world, $13 trillion. Let me now turn to the current environment and our plan to return the company to growth.

Speaker #4: Today, our products reach more than 50 million Spanish households, with distribution in major retailers such as Walmart, Walgreens, and Amazon, generating close to $100 million in annual sales.

Speaker #4: Establishing establishing this level of penetration and relationships from scratch would take any company years and significant investment , and the same holds true for our footprint in Brazil .

Speaker #4: All in all , this company has penetrated high barriers of entry and is positioned to continue consolidating its position to increase market share in a 3 trillion size industry , the largest in the world .

Speaker #4: 13 trillion . Let me now turn to the current environment and our plan to return the company to growth . We are operating in a complex consumption environment and navigating a difficult situation , particularly in Mexico , ruined by two consecutive failed seasons , a weaker winter season due to an unfavorable weather conditions and a summer season that practically did not materialize .

Marcos Barbieri: We are operating in a complex consumption environment and navigating a difficult situation, particularly in Mexico, driven by two consecutive failed seasons: a weaker winter season due to unfavorable weather conditions and a summer season that practically did not materialize. These dynamics have affected roughly 50% of our Mexican portfolio, primarily our OTC products during the past winter season, and roughly 20% of our portfolio with OTC during the summer season. Despite these top-line headwinds, our EBITDA margin remains resilient, with stability around 24%, underscoring the strength of our cost discipline and efficiency programs. I am fully confident that this EBITDA margin level is both solid and sustainable going forward. What we're doing to offset this slowdown?

Speaker #4: This dynamics have affected roughly 50% of our Mexican portfolio , primarily our OTC products . During the past winter season , and roughly 20% of our portfolio , with Xerox during the summer season .

Speaker #4: Despite this top line headwinds , our EBITDA margin remains resilient , with stability around 24% , underscoring the strength of our cost discipline and efficiency programs .

Speaker #4: I am fully confident that this is this everyday margin level is both solid and sustainable . Going forward . So what we're doing to offset this slowdown at certain point , we were facing two possible paths .

Marcos Barbieri: At a certain point, we were facing two possible paths: either we sacrifice margin to invest more aggressively in the business and accelerate the top line, or we preserve margins and identify additional resources to fund our growth strategies without compromising profitability. We initially set a productivity target of $1.8 billion pesos in savings by 2027. Given the current top-line environment, we challenge ourselves to find additional resources to invest in growth without compromising margins. As a result, we have identified and already secured an additional $1.1 billion pesos in efficiencies, bringing our total accumulated savings to $3 billion pesos by 2026. These resources have been secured and are reinvesting $1.1 billion pesos directly into the business to drive top-line growth. Our 2026 investment plan focuses on three pillars: product innovation, go-to-market and distribution, and emerging channels.

Speaker #4: Either we sacrifice margin to invest more aggressively in the business and accelerate the top line , or we preserve margins and identify additional resources to fund our growth strategies .

Speaker #4: Without compromising profitability . We initially set a productivity target of $1.8 billion in savings by 2027 . Given the current top line environment , we challenge ourselves to find additional resources to invest in growth without compromising margins .

Speaker #4: As a result , we have identified an already secured an additional $1.1 billion in efficiencies , bringing our total accumulated savings to $3 billion by 2026 .

Speaker #4: This resources have been secured and are reinvesting $1.1 billion directly into the business to drive top line growth . Our 2026 investment plan focuses on three pillars product innovation , go to market and distribution , and emerging channels .

Speaker #4: Altogether , we estimate this initiatives would generate up to $5 billion in incremental sales opportunities between 2026 and 2027 , with some cannibalization .

Marcos Barbieri: Altogether, we estimate these initiatives would generate up to $5 billion pesos in incremental sales opportunities between 2026 and 2027. While some cannibalization is expected, these projects represent our North Star, a clear roadmap to reignite growth starting in the first half of 2026. With these actions, I am confident we can restore top-line growth to prior levels while maintaining a healthier margin and cash flow structure than ever. Now, moving to the third quarter results, on a like-for-like basis, sales declined 2.9%, which is translated to a 12.8% decrease in reported Mexican pesos. Approximately 80% of the impact stems from accumulated non-cash hyperinflationary accounting effects in Argentina, following a 53% depreciation of the Argentine peso during the quarter. Our real operating indicator, like-for-like performance, reflects a 2.9% decline, while EBITDA margins remain strong at 23.7%, consistent with our 24% average target.

Speaker #4: Is expected . This projects represent our North Star , a clear roadmap to reignite growth , starting in the first half of 2026 .

Speaker #4: With these actions , I am confident we can restore top line growth to prior levels while maintaining a healthier margin and cash flow structure than ever .

Speaker #4: Now , moving to the third quarter results . On a like for like basis sales declined 2.9% , which is translated to a 12.8% decrease in reported Mexican pesos .

Speaker #4: Approximately 80% of the impact . The impact stems from accumulated , accumulated , non-cash hyperinflationary accounting . Effects in Argentina , following a 53% depreciation of the Argentine peso during the quarter .

Speaker #4: Our real operating indicator like for like performance , reflects a 2.9% decline , while margins remain strong at 23.7% , consistent with our 24% average target .

Speaker #4: Adjusted net income , excluding non-cash hyperinflation effects , declined 3% to $6,632 million . Free cash flow reached nearly $1.6 billion , down 35% , mainly due to lower net income and three days increase in the cash conversion cycle .

Marcos Barbieri: Adjusted net income, excluding non-cash hyperinflation effects, declined 3% to $632 million pesos. Free cash flow reached nearly $1.6 billion pesos, down 35%, mainly due to lower net income and three days' increase in the cash conversion cycle, also related to hyperinflationary accounting effects. As mentioned, we have accelerated our productivity program, delivering the initial $1.8 billion pesos savings by 2025 and adding another $1.1 billion pesos for 2026. These resources are already identified and in execution, not a plan, but a reality. We have already secured resources for our investment projects. We will reinvest $1.1 billion pesos across five strategic areas: product innovation, go-to-market and distribution, communication, e-commerce, and pricing. These initiatives represent approximately $5 billion pesos in growth opportunities for 2026 and 2027. While some may overlap and cannibalization is expected, a significant portion will translate into incremental sales and long-term top-line expansion.

Speaker #4: Also related to Hyperinflationary accounting effects . As mentioned , we have accelerated our productivity program , delivering the initial $1.8 billion savings by 2025 and adding another $1.1 billion for 2026 .

Speaker #4: These resources are already identified and in execution , not a plan , but a reality . We have already secured resources for our investment projects .

Speaker #4: We will reinvest $1.1 billion across five strategic areas product innovation . Go to market and distribution , communication , e-commerce and pricing . This initiatives represent approximately $5 billion in growth opportunities for 2026 and 2027 .

Speaker #4: While some may overlap and cannibalization is expected , a significant portion will translate into incremental sales and long term top line expansion . Let me provide a few examples in innovation , we have a robust pipeline across all key categories in skincare .

Marcos Barbieri: Let me provide a few examples. In innovation, we have a robust pipeline across all key categories. In skincare, we are reformulating and relaunching products with cleaner formulations and more accessible price points. For example, a consumer who today pays $350 pesos in Mexico for a premium hyaluronic acid serum will soon be able to purchase the same product from Teatrical for around $90 pesos. In hair care, we are fully relaunching Teonaceo, strengthening its treatment positioning with second and third routine steps, while revitalizing the entire product line with clean formulas, improved packaging, and competitive pricing. In beverages, Xerox will devote a renewed image and expand into new consumption occasions. In OTC, we expect 25 new pharma registration approvals to be launched between 2026 and 2027, allowing us to enter new segments. All of this innovation will be supported by a renewed communication strategy.

Speaker #4: We are reformulating and relaunching products with cleaner formulations and more accessible price points . For example , a consumer who today pays $350 in Mexico for a premium hyluronic acid serum will soon be able to purchase the same product from theatrical for around $90 in haircare .

Speaker #4: We are fully relaunching Tio Nacho , strengthening its treatment positioning with second and third routine steps while revitalizing the entire product line with clean formulas .

Speaker #4: Improved packaging and competitive pricing in beverages , syrups will devote a renewed image and expand into new consumption occasions in OTC , we expect 25 new pharma registration approvals to be launched between 2026 and 2027 , allowing us to enter new segments .

Speaker #4: All of these innovation will be supported by a renewed communication strategy . We are shifting from functional frequency driven advertising to more emotional storytelling that resonates and engage consumers emotionally .

Marcos Barbieri: We are shifting from functional, frequency-driven advertising to more emotional storytelling that resonates and engages consumers emotionally. Let me show you an example.

Speaker #4: Let me show you an example .

[Company Representative]: you, who have been in the neighborhood so long that you know everyone. To him, to whom you gave his first Tafirolito. And when he started going to the club, Tafirol 500. Later, to relieve him on that first day of work, Tafirol Forte. When he picked up the Thursday soccer game again at 40, Tafirol Plus. In the end, look at how life goes. Once again, Tafirolito. To you and to every pharmacist in the country, we want to say thank you for a lifetime of relieving the pain of Argentinians. Tafirol.

Speaker #5: A todos , Rolito y cuando empieza el quinientos después para aliviar el primer dia de trabajo . Tafirol forte Y cuando se de Los jueves a la cuarenta tafirol plus y al final son las vueltas de la vida .

Speaker #5: Otra vez esta ferolito a voz y farmaceutico del pais . Les queremos decir , gracias por toda una vida llevando Los valores de Los argentinos .

Speaker #5: Tafirol .

Speaker #4: The company is entering a completely new communication strategy . We are investing in mass micro-influencers partnerships and brand ambassadors on TikTok and Instagram , while driving traffic to e-commerce and direct conversion .

Marcos Barbieri: The company is entering a completely new communication strategy. We are investing in mass micro-influencers, partnerships, and brand ambassadors on TikTok and Instagram, while driving traffic to e-commerce and direct conversion. Let me show you some user-generated content examples for our Asepsia relaunch.

Speaker #4: Let me show you some user generated content examples for our relaunch .

[Company Representative]: Yo iba contentísima a lavarme mi cara cuando mi amorcito me dijo: "Espera, te encargué esto, mi vida." Yo dije: "¡Wow! Son los mentadísimos jabones Asepsia." "A barbaridad, ¿cuánto te costaría?", dije yo. ¿Y qué creen? Tienen cuatro jabones por $100. No, hombre, mi amorcito pidió el jabón regenerador. No sé si me vio muy jodida, aunque. Lo padre es que no solo es para la cara, sino que para todo el cuerpo. "Ay, yo dije: 'De una vez lo voy a estrenar.'" A ver si con este se me van quitando los granos, oye, porque ya ven que de repente me salen. También es hidratante. Huele a fresco. No, hombre, yo encantada con mi nuevo ja...

Speaker #6: Cuando mi amorcito me dijo espera esto mi vida y yo di Como son las caridad . Cuando yo tienen cuatro jabones por cien pesos nombra mi amorcito pidio regenerador no sé si me vio lo padres no solo es para todo el cuerpo .

Speaker #6: De una vez . Lo voy a estrenar con este se me van quitando Los granos porque ya me salen Y también es la fresco nombre encantada con mi nuevo .

Speaker #5: Soltero .

Speaker #7: Con y con un algunos . Ya saben ya .

[Company Representative]: Soltero, cotizado y con piel on point. Como algunos ya saben, ya.

Speaker #4: We are also leveraging artificial intelligence to produce high quality , cost efficient content . Let me show you an example of advertising spots produced by one person with no actors , no cameras .

Marcos Barbieri: We are also leveraging artificial intelligence to produce high-quality, cost-efficient content. Let me show you an example of advertising spots produced by one person with no actors, no cameras, for as little as $500 investment.

Speaker #4: For as little as 500 USD . Investment .

Speaker #5: In naturaleza .

[Company Representative]: In nature, everything opens and closes. The earth opens, it closes. A cell with royal jelly opens, it closes. Tío Nacho opens, your split ends close. New Tío Nacho Keratina, royal jelly, plus plant-based keratin and aloe vera extracts. Prevents and seals 54% of split ends. Open Tío Nacho, close your split ends. New Tío Nacho Keratina, the king of royal jelly.

Speaker #8: Todo se abre y se cierra se abre la tierra se cierra se abre una celda con jalea real . SE cierra se abre tio nacho se Sierra juntas nuevo tio nacho Tina jalea real .

Speaker #8: Mas Giratina vegetal extractos de aloe Rivera y se las puertas abiertas abre nacho . Cierra two puntos nuevo tio nacho Tina del Rey de la jalea .

Speaker #8: Real .

Speaker #4: This slide illustrates the depth of our product innovation pipeline . Entering new categories , introducing new packaging sizes and formulations . All with clear and ambitious relaunch timelines .

Marcos Barbieri: This slide illustrates the depth of our product innovation pipeline, entering new categories, introducing new packaging, sizes, and formulations, all with clear and ambitious relaunch timelines. On the distribution front, we currently have nearly 3 billion pesos in sales operations in the traditional channel, where we plan to expand our coverage from 730,000 to over 1 million points of sale, targeting almost 2 billion pesos in incremental sales over the next two years. Our e-commerce business is set to reach 1.2 billion pesos in sales by 2025. We plan to add 500 million pesos in 2026 and another 500 million pesos in 2027, bringing the channel to 2 billion pesos by 2027, supported by strong communication investments to drive traffic and conversion.

Speaker #4: On the distribution front , we currently have nearly 3 billion sales operations in the traditional channel where we plan to expand our coverage from 730,000 to over 1 million points of sales , targeting almost $2 billion in incremental sales over the next two years .

Speaker #4: Our e-commerce business is set to reach $1.2 billion in sales by 2025 . We plan to add $500 million in 2026 , and another $500 million in 2027 , bringing the channel to $2 billion by 2027 , supported by strong communication investments to drive traffic and conversion .

Speaker #4: In Hardee's counters and convenience stores , two of the fastest growing channels in Mexico and Latin America . Our $420 million operation is set to expand coverage from 35,000 to 57,000 points of sales and reaching roughly $1 billion in annual sales by 2027 .

Marcos Barbieri: In hard discounters and convenience stores, two of the fastest growing channels in Mexico and Latin America, our 420 million pesos operation is set to expand coverage from 35,000 to 57,000 points of sale and reach roughly 1 billion pesos in annual sales by 2027. In summary, Genomma Lab Internacional S.A.B. de C.V. is facing a challenging environment, particularly in Mexico, driven by two consecutive weak consumption seasons. Nevertheless, our EBITDA margin remains resilient, our resources are secured, and our growth plan is clear and fully actionable. We are confident that after weathering the next quarters and by executing this plan, the company will return to growth by the first half of 2026, reaching and potentially exceeding its historical growth rates, supported by a stronger, more efficient, and more profitable structure.

Speaker #4: In summary , Genome Lab is facing a challenging environment , particularly in Mexico , driven by two consecutive weak consumption seasons . Nevertheless , our EBITDA margin remains resilient .

Speaker #4: Our resources are secured and our growth plan is clear and fully actionable . We are confident that after weathering the next quarters and by executing this plan , the company will return to growth by the first half of 2026 , reaching an potentially exceeding its historical growth rates , supported by a stronger , more efficient and more profitable structure .

Speaker #4: Before turning the call over to Tonio, I would like to thank our investors for their continuous trust and the entire Genome Lab team for their unwavering commitment to driving the company towards its next stage of growth.

Marcos Barbieri: Before turning the call over to Tonio, I would like to thank our investors for their continued trust and the entire Genomma Lab Internacional S.A.B. de C.V. team for their unwavering commitment to driving the company towards its next stage of growth. Tonio, please go ahead.

Speaker #4: Tonio , please go ahead . Thank you . Marco , and thank you everyone for joining us today . As Marco mentioned , third quarter net sales decreased 12.8% .

Christian Ibanez: Thank you, Marco. Thank you, everyone, for joining us today. As Marco mentioned, third quarter net sales decreased 12.8%. Results were mainly impacted by forex headwinds from a stronger Mexican peso, as well as hyperinflationary accounting effects following the Argentine peso depreciation during the quarter. On a like-for-like basis, sales declined only 2.9%, primarily due to the impact of a cooler and rainier summer season in central Mexico and a softer consumption environment in our country. These effects were partially offset by strong sales growth in Brazil, Chile, Central America, and the Andean cluster. Genomma Lab Internacional S.A.B. de C.V.'s third quarter EBITDA margin closed at 23.7%, representing a two basis point increase year over year and reflecting the ongoing benefits from manufacturing cost efficiencies as we deliver our targeted EBITDA margin of around 24%.

Speaker #4: Results were mainly impacted by forex headwinds from a stronger Mexican peso , as well as Hyperinflationary accounting effects . Following the Argentine peso depreciation during the quarter .

Speaker #4: On a like for like basis , sales declined only 2.9% . Primarily due to the impact of a cooler and rainier summer season in central Mexico and a softer consumption environment in our country .

Speaker #4: These effects were partially offset by strong sales growth in Brazil , Chile , Central America , and the Andean cluster Genomas . Third quarter EBITA margin closed at 23.7% , representing a two basis point increase year over year and reflecting the ongoing benefits from manufacturing cost efficiencies .

Speaker #4: As we deliver our targeted EBITDA margin of around 24% . Pro forma net income for the quarter , excluding non-cash effects , related effects , decreased 3% , reflecting the strong margin performance and lower net interest expenses .

Christian Ibanez: Proforma net income for the quarter, excluding non-cash FX-related effects, decreased 3%, reflecting the strong EBITDA margin performance and lower net interest expenses during the period. Moving on to our regional results, third quarter net sales in Mexico declined 6.4%, mainly due to a weaker summer season that impacted sales performance. This decline was partially offset by strong OTC performance, driven by market share gains in the cough and cold and infant nutrition categories. As you can see in this chart, there is a high correlation between climate and beverage sales in Mexico. Besides this headwind, competition significantly lowered their prices during the quarter, adding more pressure to this particular category. On the bright side are the growth initiatives that Marco described earlier. We will increase our geographical presence to other areas of the country next year, and this effort is expected to drive renewed momentum in 2026.

Speaker #4: During the period moving on to our regional results, third quarter net sales in Mexico declined 6.4%, mainly due to a weaker summer season that impacted sales performance.

Speaker #4: This decline was partially offset by strong OTC performance , driven by market share gains in the cough and cold and infant nutrition categories .

Speaker #4: As you can see in this chart , there is a high correlation between climate and beverage sales in Mexico . Besides this headwind , competition significantly lower their prices during the quarter , adding more pressure to this particular category .

Speaker #4: On the bright side, the growth initiatives that Marco described earlier will increase our geographical presence to other areas of the country next year.

Speaker #4: And this effort is expected to drive renewed momentum in 2026 . Nvda margin for Mexico improved by nearly 300 basis points , reaching 27% despite the consumption headwinds and the leveraging pressures previously mentioned is a strong performance reflects the accelerated impact of our company wide productivity initiatives .

Christian Ibanez: EBITDA margin for Mexico improved by nearly 300 basis points, reaching 27% despite the consumption headwinds and the leveraging pressures previously mentioned. This strong performance reflects the accelerated impact of our company-wide productivity initiatives. Moving on to the U.S. business, the U.S. dollar declined 1.6% versus the Mexican peso compared to the same quarter last year. U.S. selling net sales decreased 24% in U.S. dollar terms, reflecting ongoing disruption in the U.S. Hispanic retail market, which continues to weigh on selling performance. However, sellout declined only 8%, showing early signs of recovery led by Xerox and hair care, both of them gaining market share despite the challenging environment. The difference in this quarter between selling and sellout comes from customer returns of some cough and cold products due to the past weak winter season of 2024, 2025, as Marco described earlier.

Speaker #4: Moving on to the U.S. business, the U.S. dollar declined 1.6% versus the Mexican peso compared to the same quarter last year. U.S. selling net sales decreased 24% in U.S. dollar terms, reflecting ongoing disruption in the U.S.

Speaker #4: Hispanic retail market , which continues to wait on selling performance . However , sellout declined only 8% . Showing early signs of recovery led by Xerox and haircare .

Speaker #4: Both of them gaining market share . Despite the challenging environment . The difference in this quarter between selling and sell out comes from customer returns of some cough and cold products due to the past week , winter season of 2024 2025 as Marco described earlier .

Speaker #4: Even margin for the region was 13.6% , down 150 basis points , mainly to the operational deleverage and higher advertising investments during the quarter point to Latin America net sales , excluding Argentina , increased 10.6% for the quarter , driven by strong performance in Brazil , Chile , Central America and the Andean Cluster .

Christian Ibanez: EBITDA margin for the region was 13.6%, down 150 basis points, mainly due to the operational deleverage and higher advertising investments during the quarter. Going to Latin America, net sales, excluding Argentina, increased 10.6% for the quarter, driven by strong performance in Brazil, Chile, Central America, and the Andean cluster. EBITDA margin, including Argentina, was 21.7%, down approximately 360 basis points, mainly reflecting the impact of hyperinflationary accounting adjustments. However, if we exclude Argentina, EBITDA margin increased by 90 basis points during the quarter. Net sales for Argentina, obviously because of all these hyperinflationary accounting effects, declined 49% in Mexican peso terms, and this is a reflection of a 53% depreciation in the Argentine peso. However, and this is very important for everybody to know, in local currency terms, sales grew 35% during the quarter in Argentina.

Speaker #4: Eva margin , including Argentina , was 21.7% , down approximately 360 basis points , mainly reflecting the impact of Hyperinflationary accounting adjustments . However , if we exclude Argentina , EBITDA margin increased by 90 basis points during the quarter .

Speaker #4: Net sales for Argentina obviously , because of all this hyperinflationary accounting effects , declined 49% in Mexican peso terms . And this is a reflection of a 5,053% depreciation in the Argentine pesos .

Speaker #4: However, and this is very important for everybody to know that, in local currency terms, sales grew 35% during the quarter in Argentina.

Speaker #4: This is in line with inflation actually above inflation and driven by strong unit sales share gains in some of our key brands , like IBU 400 and among other brands .

Christian Ibanez: This is in line with inflation, actually above inflation, and driven by strong unit sale share gains in some of our key brands like IBU 400, Trek, Xerox, and among other brands. Just as a reminder of what happened with hyperinflationary accounting, the depreciation of the Argentine peso versus the Mexican peso needs to be taken into account when we report figures in our reporting currency, which is the Mexican peso. Likewise, we also take into account inflation, and while inflation in Argentina has been declining, hyperinflationary accounting is mandatory when cumulative inflation exceeds 100% in the previous 36 months. We will have to deal with it for a while. To help us understand a little bit better these IFRS rules, the company's performance in the region has to be reevaluated every quarter.

Speaker #4: Just as a reminder of what happened with Hyperinflationary accounting , the depreciation of the Argentine peso versus the Mexican peso needs to be taken into account .

Speaker #4: When we report figures in our reporting currency , which is the Mexican peso . Likewise , we also take into account inflation and while inflation in Argentina has been declining , hyperinflationary accounting is mandatory when cumulative inflation exceeds 100% in the previous 36 months .

Speaker #4: So we'll have to deal with it for a while . So just to help us understand a little bit better of these IFRS rules , the company's performance in the region has to be reevaluated every quarter when the difference between accumulated inflation and FX depreciation is negative .

Christian Ibanez: When the difference between accumulated inflation and FX depreciation is negative, this will result in a non-cash decrease in accordance with hyperinflationary accounting rules. Last year, the effect was a positive 13% difference, but this quarter, we had to cope with a 47% negative delta. Thus, a huge 60% impact on our Argentine results for the quarter and Q1 and Q2. That is what explains, again, what we are reporting. The good news for the future is that historically, high levels of devaluation of inflation tend to follow significant currency devaluations. We expect this positive effect in the short-term future. Turning back to our financials, cash conversion cycle reached 120 days.

Speaker #4: This will result in a non-cash decrease in accordance with Hyperinflationary accounting rules . Last year , however , the effect was a positive 13% difference , but this quarter we had to cope with a 47% negative delta .

Speaker #4: Thus, a huge 60% impact on our Argentine results for the quarter and Q1 and Q2. That is what explains what we are reporting.

Speaker #4: The good news for the future is that historically , high levels of devaluation of inflation tends to follow significant currency devaluations . So we expect this positive effect in the short term .

Speaker #4: Future . Turning back to our financials . Cash conversion cycle reached 120 days . And and Mexico . These DSO has been in line with historic averages .

Christian Ibanez: Mexico DSO has been in line with historic averages despite the tough consumer environment that we are facing in 2025. Genomma Lab ended the quarter with a leverage ratio of 1.2 times net debt to EBITDA, which is in line with the same quarter last year. This is notably a historical low in financial leverage, not only for Genomma Lab, but for most companies in the industries where we participate. Free cash flow totaled approximately $1.8 billion pesos over the trailing 12 months, representing a 31% decline, mainly due to lower net income and higher capital expenditures related to our growth projects. It's worth mentioning that during the quarter, we converted 9% of our net sales into free cash flow. Capital allocation during the quarter included our 13th consecutive quarterly dividend payment of $200 million pesos, which is $0.20 per share, and we also repurchased 1.4 million shares.

Speaker #4: Despite the tough consumer environment that we are facing in 2025 . Genoma ended the quarter with a leverage ratio of 1.2 times net debt to EBITDA , which is in line with the same quarter last year .

Speaker #4: And this is notably a historical low in financial leverage, not only for Genomma but for most companies in the industries where we participate.

Speaker #4: Free cash flow totaled approximately $1.8 billion over the trailing 12 months, representing a 31% decline, mainly due to lower net income and higher capital expenditures related to our growth projects.

Speaker #4: It's worth mentioning that during the quarter, we converted 9% of our net sales into free cash flow capital allocation. During the quarter, we included our 13th consecutive quarterly dividend payment of $200 million, which is $0.20 per share.

Speaker #4: And we also reported just 1.9 1.4 million shares . In closing . In closing this quarter , highlighted both the challenges and the resilience within Genomas portfolio , as well as the as our company's strong fundamental fundamentals over many years has been built on a foundation of sustainable growth , and we continue to advance with a long term perspective .

Christian Ibanez: In closing, this quarter highlighted both the challenges and the resilience within Genomma Lab's portfolio, as well as our company's strong fundamentals. Over many years, Genomma Lab has been built on a foundation of sustainable growth, and we continue to advance with a long-term perspective. We remain encouraged by the solid fundamentals across our core markets and the traction of our strategic projects that Marco described, and we look forward to capitalizing on opportunities once these challenging conditions ease. With that, let's now turn on to Q&A. Thank you, Marco. Antonio, 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.

Speaker #4: We remain encouraged by the solid fundamentals across our core markets and the traction of our strategic projects that Marco described , and we look forward to capitalize on opportunities once these challenging conditions , conditions is .

Speaker #4: With that, let's now turn to Q&A.

Speaker #2: Thank you . Marco Antonio . We will now begin the question and answer session . To ask a question , you may raise your hand using the icon .

Speaker #2: 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 questions .

Christian Ibanez: This will be required in order to allow you to turn on your microphone and ask your questions. One moment, please, while we hold for questions. Thank you. Our first question comes from Alejandro Fuches from Banco Itaú BBA. Alejandro, please turn on your microphone and proceed with your question.

Speaker #2: One moment please . While we hold for questions . Thank you . Our first question comes from Alejandro Fuchs from Itau . Alejandro , please turn on your microphone and proceed with your question .

Speaker #9: Yes . Thank you . Operator . Hola , Marco . Antonio , thank you for the space for questions and the very detailed presentation .

Alejandro Fuches: Yes, thank you, operator. Hola, Marco Antonio. Thank you for the space for questions and the very detailed presentation. I have two very quick ones. First, for Marco. I want to see, Marco, if you can maybe walk us through your expectations for next year, right? Maybe a little bit better consumption in Mexico, but we also have some headwinds in terms of now it seems that we have more color on potential EF taxes for beverage companies. Maybe you can tell us what you see and expect for next year in Mexico. That would be very helpful. The second one is for Tonio, very quickly. In terms of working capital, I saw a big decrease in accounts of days payables this quarter, and then an increase in receivables in Mexico.

Speaker #9: I have two very quick ones . First , for Marco , I wanted to see Marco . If you can , maybe a walk us through your expectations for next year .

Speaker #9: Right ? Maybe a little bit better consumption in Mexico . But we also have some headwinds in terms of now it seems that we have more color on potential taxes for beverage companies .

Speaker #9: So maybe you can tell us what you see and expect for next year in Mexico. That would be very helpful.

Speaker #9: And then the second one is for Tonio . Very quickly in terms of working capital , I saw a big decrease in accounts of days , payables in days , payables .

Speaker #9: This quarter . And then an increase in receivables in Mexico . Wanted to see maybe if you can walk us through , if there is something unusual that that is you know , occurring this quarter , we should expect this to normalize .

Alejandro Fuches: I wanted to see, maybe, Tonio, if you can walk us through if there is something unusual that is occurring this quarter, if we should expect this to normalize, or is this just business as usual? Thank you.

Speaker #9: Or is this just business as usual? Thank you.

Speaker #4: Thank you . Alejandro . On Mexico , I would say that my expectation , although I don't have the crystal ball , but I do expect a a few more quarters difficult few more quarters in a very difficult environment from a consumption point of view .

Marcos Barbieri: Thank you, Alejandro. On Mexico, I would say that my expectation, although I don't have the crystal ball, is I do expect a few more quarters, difficult few more quarters in a very difficult environment from a consumption point of view. As I said, regarding the overall context in the market categories and competitors, I am very, very confident that the plans that we are currently putting in place, I am presenting the whole plan today, but we have started working and implementing many of these strategies several months ago. I am very confident that we are going to see a gradual recuperation of the top line at some point in the first half of 2026.

Speaker #4: But as I said , regarding of the overall context in the market categories and competitors , I am very , very confident . That the plans that we are currently putting in place , I am presenting , you know , the whole plan today , but we have started working and implementing many of these strategies several months ago .

Speaker #4: So I am very confident that we are going to see a gradual recuperation of the top line at some point in the first half of 2026 , and I am very confident that with the investments that we are making in the business , the additional resources that we have secured , the $1.1 billion that I just mentioned reinvesting that money thoroughly and intentionally in the business to reignite the top line growth .

Marcos Barbieri: I am very confident that with the investments that we are making in the business, the additional resources that we have secured, the $1.1 billion pesos that I just mentioned, reinvesting that money thoroughly and intentionally in the business to reignite the top-line growth, I am very confident that we are going to put this company to grow again, at least at the same levels that we have been growing over the past seven, eight years. You asked also about the EFs. The EFs right now, the way it stands, based on all the public information that you all have access to, it's impacting both our competitors, okay, and ourselves. When I say competitors, I mean all the competitors: isotonic beverages and electrolyte beverages in the same category, okay? We have an advantage right now because we don't sell our products, Xerox, with sugar.

Speaker #4: I am very confident that we are going to put this company to grow again . At least at the same levels that we have been growing over the past 7 or 8 years .

Speaker #4: You asked also about the yes . Look , the ABS right now , the way it stands , based on all the public information that you all have access to , it's impacting both our competitors .

Speaker #4: Okay . And ourselves . And when I say competitors , I mean all the competitors . Isotonic beverages and electrolyte beverages in the same category .

Speaker #4: Okay . But we have an advantage right now because we don't sell our products with sugar . So the current situation as it stands today , based on the public information that we know , is that the yes , that will be applicable to is have of what will be applicable to our competitors in Isotonics and electrolytes .

Marcos Barbieri: The current situation, as it stands today, based on the public information that we know, is that the EFs that will be applicable to Xerox are half of what will be applicable to our competitors in isotonics and electrolytes. That puts us in an advantage. There are two scenarios here that we have fully accounted in the plans for next year. One is if our competitors increase prices and do not absorb the EFs, we will follow and the EFs will have no impact in our margins. If our competitors do not increase prices, we will have to absorb, and that impact, it's already in the financials and the plans for 2026.

Speaker #4: So that put us in a in an advantage . There's two scenarios here that we have fully accounted in the plans for next year .

Speaker #4: Is one is if our competitors , you know , increase prices and do not absorb the yes , we will follow and the yes will have no impact in our margins .

Speaker #4: But if our competitors do not increase prices , we will have to absorb . And that impact , it's already in the financials and the plans for 2026 .

Speaker #9: Super clear , Marcos , thank you very much .

Christian Ibanez: Super clear, Marcos. Thank you very much.

Speaker #4: Hi , Alejandro . This is Antonio . Thank you for your for your question regarding working capital . So in terms of days payables , the 93 days that we presented for the Q3 are pretty much in line with the 96 for Q2 or the 94 for Q4 2024 , as we all know , when you transition from third party contracting , you know , the maquiladoras to our own facilities , the kind of suppliers that we have are different .

Antonio Zamora: Hi, Alejandro. This is Antonio. Thank you for your question regarding working capital. In terms of days payables, the 93 days that we presented for Q3 are pretty much in line with the 96 for Q2 or the 94 for Q4 2024. As we all know, when you transition from third-party contracting, you know, the maquiladores to our own facilities, the kind of suppliers that we have are different. We are now buying raw materials directly, and so it's a new game. I would say that this range of around 90-something days for payables at this moment, that's going to be the new normal. Obviously, we are working with suppliers. We're negotiating as they get to know us better and as we can get to better negotiations. We hope that in the future, this is going to improve.

Speaker #4: We are now buying raw materials directly and so it's it's a new game . And I would say that this range of around 90 something days for payables at this moment , that's going to be the new normal .

Speaker #4: Obviously we are working with suppliers . We're negotiating as they get to know us better and as we can get to better negotiations , we hope that in the future this is going to improve .

Speaker #4: But that's part of the reason why , you know , in the past , when we were buying a finished products , we have better terms .

Antonio Zamora: That's part of the reason why, you know, in the past, when we were buying finished products, we have better terms, but those products were costlier. I mean, that's why the cost was higher, significantly higher. I think it's a lot better to have productivity, you know, the kind of productivity in terms of costs, while we have to work, we still have to work on payables. This is going to be around the new normal. If you see Q4, Q2, Q3, you will see that the numbers are pretty much around, you know, mid-90s in terms of DPO. In terms of DSO in Mexico, that's why I presented a chart with the historical DSOs. In 2024, we were improving our DSO. Obviously, last year, it was a different year. Everything was more optimistic. This year has been more challenging. There are two reasons.

Speaker #4: But those products were costlier . I mean , that's why the Cogs was higher , significantly higher . So I think it's a lot better to have productivity , you know , the kind of productivity in terms of costs , while we have to work , we we still have to work on payables .

Speaker #4: But this is going to be around the new normal . And if you see Q4 , Q2 , Q3 , you will see that the numbers are pretty much around mid 90s in terms of BPO , in terms of of DSO in , in Mexico .

Speaker #4: That's why I presented a chart with the historical Dsos . Yeah . In 2024 , we were improving our DSO . Obviously last year it was a different year .

Speaker #4: Everything was more optimistic . This year has been more challenging . So there's two reasons . One is obviously the market is a little bit slower for everybody .

Antonio Zamora: One is, obviously, the market is a little bit slower for everybody, and you can see this in most companies in the consumer landscape in Mexico. Also, it's a little bit tricky because it's part of the accounting formula of DSO because you divide the ending balance of receivables by a denominator, which is the past sales from a certain period, whether it's 90 days or 360 days. If sales have been declining lately, unfortunately, in the case of Mexico, from a mathematical point of view, that increases artificially the number of days in DSO. If sales start growing faster, it's going to be the opposite. You will see that effect. What I can tell you in terms of DSO, I think that considering the very tough consumer environment that we are facing, we are pretty much in line with average and what we should expect this year.

Speaker #4: And you can see this in most companies in the consumer landscape in Mexico , but also it's a little bit tricky because it's part of the accounting formula of DSO because you divide the ending balance of receivables by a denominator , which is the the past sales from a certain period , whether it's 90 days or , or 360 days .

Speaker #4: So if sales have been declining lately , unfortunately , in the case of Mexico , from a mathematical point of view , that increases artificially , the number of of the of days in DSO , if sales start growing faster , it's going to be the opposite .

Speaker #4: So you will see that that effect . So what I can tell you in terms of DSO , I think that considering the very tough consumer environment that we are facing , we are pretty much in line with with average and what we should expect this year .

Speaker #4: Obviously , if for 2026 , as you very well pointed out , the expectations for the consumer market is a little bit better .

Antonio Zamora: Obviously, if for 2026, as you very well pointed out, the expectations for the consumer market are a little bit better, we obviously are going to work to improve that ratio. I don't know if I was able to answer your question, Alex.

Speaker #4: We obviously are going to work to , to make to improve that ratio . I don't know if I was able to answer your question , Alex .

Speaker #9: No , super clear . Antonio , thank you very much .

Christian Ibanez: No, super clear, Antonio. Thank you very much. Thank you. Our next question will now be from Álvaro García with BTG Pactual US Capital. Álvaro, please turn on your microphone and proceed with your question.

Speaker #2: Thank you . Our next question will now be from Alvaro Garcia with BTG Pactual . Alvaro , please turn on your microphone and proceed with your question .

Speaker #10: Hi , gentlemen . How are you ? One question . We've gotten quite a bit . Is , is how is it that your EBITDA margin is so stable considering pretty significant sales decline we saw this quarter .

Álvaro García: Hi, gentlemen. How are you? One question we've gotten quite a bit is, how is it that your EBITDA margin is so stable considering a pretty significant sales decline we saw this quarter? I was wondering if we could kick it off with that one.

Speaker #10: So I was wondering if you could kick it off with with that one .

Speaker #4: Yeah . Thank you . Alvaro , this is Marco . It's it's it's really the a huge amount of efficiencies and productivity that we are generating behind the plan .

Marcos Barbieri: Thank you, Álvaro. This is Marco. It's really the huge amount of efficiencies and productivity that we are generating behind the plan we put in place a few years ago. Most of the impact of the efficiencies we are seeing today are from the plans that we implemented like two years ago with CapEx, like integrating our packaging manufacturing and so on. The short answer is basically that.

Speaker #4: We put in place a few years ago . Most of the , the impact of the efficiencies we are seeing today of the plans that we implemented , like two years ago with CapEx , like integrating our our packaging , manufacturing and so on .

Speaker #4: So but short answer is basically that .

Speaker #10: Great . And , you know , two more , one bigger picture just I can't remember a time with so many sort of relaunches , sort of renewed images across all your different brands .

Álvaro García: Great. Two more. One, a bigger picture. I can't remember a time with so many sort of relaunches, sort of renewed images across all your different brands. I was curious, Marco, how your clients are taking this, especially maybe the larger retailers. How are they sort of digesting all of this? What's the prospect or what's the outlook for the uplift in sales you'd expect from all of these relaunches?

Speaker #10: So I was curious , Marco , how your clients are taking this , especially maybe the larger retailers , how are they sort of digesting all of this and sort of what's the prospect or what's the outlook for the uplift in sales ?

Speaker #10: You'd expect from all of these relaunches ?

Speaker #4: No clients . They are like fascinated . I mean , they they like innovation . And that's what the categories where we compete actually need , you know , not not just to drive our growth but to drive the total category growth .

Marcos Barbieri: Clients are like fascinated. I mean, they like innovation, and that's what the categories where we compete actually need, not just to drive our growth, but to drive the total category growth. The Walmart skincare buyer is really fascinated with all the things that we are doing. You have to remember that this is not just for one distribution channel. When you see all the new sizes and all that, it doesn't necessarily impact just one channel all at the same time. Many of the things that we are doing are some for the traditional channel, some for the modern retail channel, clubs, hard discounters, e-commerce. It's not that one single customer is going to have to absorb, you know, 50 different changes. I don't know if that makes sense.

Speaker #4: So , you know , like the Walmart skincare buyer is , is really a fascinated with like all the things that we are doing and so and you know , also you have to remember that this is not just for one distribution channel .

Speaker #4: Like when you see like this , all the new new sizes and all that , it doesn't necessarily impact just one channel all at the same time .

Speaker #4: Many of the things that we are doing are some for the traditional channels , some from the modern retail channel , clubs , hard discounters , e-commerce .

Speaker #4: So it's it's not that like one single customer is going to have to absorb like , you know , 50 different changes . I don't know if that makes sense .

Speaker #10: Yeah , yeah , that's that's helpful . And the last one maybe for you on CapEx , I've seen the uptick sort of year to date .

Álvaro García: Yeah, that's helpful. The last one I need for Antonio on CapEx. I've seen the uptick sort of year to date. I was wondering if you could maybe provide guidance for maybe this year or next year on, you know, what that is and what we should expect going forward in the context of free cash flow. Thank you.

Speaker #10: I was wondering if you could maybe provide guidance for maybe this year or next year on on what that is and , and what we should expect going forward .

Speaker #10: In the context of free cash flow . Thank you .

Speaker #4: Yeah , I'm going to take that one . Tonio , I have the numbers . Pressure the . So we have this quarter , the quarter three , quarter four and quarter one with some heavy CapEx investments .

Marcos Barbieri: Yeah. I am going to take that one, Antonio. I have the numbers fresher. We have this quarter, Q3, Q4, and Q1, with some heavy CapEx investments there. We are paying for the new distribution center, which is spectacular. We are taking our levels from 7 to 10 in the distribution center, and it's going to bring us savings of around $12 million per year. We are still paying for the second line of Xerox and several other CapEx investments in the plastic plants, okay? I expect the next two quarters to be a little bit heavy on CapEx.

Speaker #4: There . We we are , you know , paying for the new distribution center , which is spectacular . We are taking our levels from 7 to 10 in the distribution center .

Speaker #4: And it's going to bring us savings of around $12 million per year . We are still paying for the second line of drugs and , you know , several other CapEx investments in the plastic plants .

Speaker #4: Okay , so I expect the next two quarters to be a little bit heavy on CapEx . But 2026 , like overall , based on the current forecast that we have , both in terms of CapEx and operational , operational cash flow , we we we expect that we are going to return to the levels of free cash flow that we have been reporting in the past few quarters , which is in the round of $2.73 billion per year annually .

Marcos Barbieri: For 2026, overall, based on the current forecast that we have, both in terms of CapEx and operational cash flow, we expect that we are going to return to the levels of free cash flow that we have been reporting in the past few quarters, which is in the round of $2.73 billion pesos per year annually.

Speaker #10: Great, awesome. Thank you very much for the space. Thank you.

Álvaro García: Great. Awesome. Thank you very much for the space. Thank you.

Speaker #11: Yep .

Marcos Barbieri: Yeah.

Speaker #2: Thank you . Our next question will be from Axel Gizycki from activewear . Axel , please turn your microphone on and proceed with your question .

Christian Ibanez: Thank you. Our next question will be from Axel Yuseki from Actinver Casa de Bolsa. Axel, please turn your microphone on and proceed with your question.

Speaker #12: Hello to everyone . Thank you for taking my question . Just a quick one regarding the resilience of OTC in Mexico . I just want to know what share gains are you achieving in this categories and how sustainable are they as we move into 2006 , 2026 and looking forward ?

Antonio Zamora: Hello to everyone. Thank you for taking my question. Just a quick one regarding the resilience of OTC in Mexico. I just want to know what share gains are you achieving in these categories, and how sustainable are they as we move into 2026 and looking forward. Thank you.

Speaker #12: Thank you .

Speaker #4: Thank you . Axel . So . First , I mean OTC in general is very resilient . Okay . A lot more resilient than personal care or even beverages .

Marcos Barbieri: Thank you, Axel. OTC in general is very resilient, a lot more resilient than personal care or even beverages, and that is true not only for Mexico, but also for all the markets and basically all the categories or subcategories within OTC. What we are seeing is that, from a total sellout standpoint, regardless of the very difficult environment that we are seeing in general in Mexico from a consumption point of view, we were able to navigate in these categories with a lot more strength. Just to provide a little bit of color in terms of numbers, we are recently, it's very early to say, but I think it's important that you guys know that the early signs that we have from both execution and incidence of the cold and flu season for 2025 and 2026, the early signs that we are seeing are very encouraging.

Speaker #4: Okay . And that that that is true for not only for Mexico but but also for all the markets and basically all the categories or subcategories within OTC .

Speaker #4: What we are seeing is that first , from a total sell out standpoint , regardless of the very difficult environment that we are seeing in general in Mexico from a consumption point of view , we were able to navigate in this categories with a lot more strength .

Speaker #4: Okay . And just to provide a little bit of color in terms of numbers , we are recently , it's very early to say , but I think it's important that you guys know that the early signs that we have from the both execution and incidents .

Speaker #4: Are of the cold and flu season for 2025 and 2026 . The early signs that we are seeing are very encouraging . We are growing double digits in several of the brands that have to do with cough and cold and and you know , so it remains to be seen what happens .

Marcos Barbieri: We are growing double digits in several of the brands that have to do with cough and cold, and it remains to be seen what happens. Normally, when a season starts strong, it remains strong, hopefully.

Speaker #4: But normally when , when a season starts strong , it remains strong hopefully . But you know , yeah .

Speaker #12: Perfect. Very clear. Thank you.

Christian Ibanez: Perfect. Very clear. Thank you. Thank you. Our next question will now be from Froilán Méndez from J.P. Morgan. Froilán, please feel free to turn on your microphone and proceed with your question.

Speaker #2: Thank you. Our next question will now come from Froilan Méndez from J.P. Morgan. Froilan, please feel free to turn on your microphone and proceed with your question.

Speaker #13: Hi , guys . Thank you very much for for taking my question . I was hoping you could illustrate on where are the peso 1.1 billion productivity measures , incremental ones coming from .

Froilán Méndez: Hi, guys. Thank you very much for taking my question. I was hoping you could illustrate on where the $1.1 billion productivity measures, the incremental ones, are coming from. I'm just curious, I mean, if the weakness in the market is clearly a top-down and even weather-driven, why do you feel the need to invest more in growth levers today if the market is supposed to stabilize at some point? Am I missing something in any of your markets that will require an extra boost of growth beyond this to offset this macro slowdown, maybe some changing competitive dynamics? That's my first question. Secondly, I wanted to understand better the performance in the U.S., the decline of almost 24%. You mentioned something about some returns, I guess, from the different channels. What do you expect these productivity gains being invested in growth to translate into in the United States?

Speaker #13: And just curious , I mean , if the weakness in the market is clearly a top down and even weather driven , why do you feel the need to invest more in growth levers today ?

Speaker #13: If the market is supposed to stabilize at some point ? Or am I missing something in any of your markets that will require an extra boost of growth ?

Speaker #13: Beyond this ? To offset this macro slowdown , maybe some change in competitive dynamics ? That's my first question . And secondly , I wanted to understand better the performance in the in the in the US .

Speaker #13: The decline of almost 24% . You mentioned something about some returns from , I guess from the different channels . But what do you expect this productivity gains being invested in growth to translate into the United States , into the United States ?

Speaker #13: Should they should the US react before other countries ? Where does the US stand in in the recovery path that you foresee ?

Froilán Méndez: Should the U.S. react before other countries? Where does the U.S. stand in the recovery path that you foresee?

Speaker #4: Yeah . Thank you for Island . Let me address one by one . Productivity is mainly coming from for us a key interventions .

Marcos Barbieri: Yeah. Thank you, Froilán. Let me address one by one. Productivity is mainly coming from four key interventions. Number one is a very strong implementation of artificial intelligence across different functions and processes that before required a lot of headcount, and now it doesn't. That's one piece. Second is the strengthening of our cost reduction original plan. We had a plan, a very aggressive plan to reduce costs, and we strengthened that plan even further. We stretched all the interventions that we are making even further to get more productivity there. We expect the costs to continue to go down. Third, we are eliminating a massive amount of administrative cost that was previously in the P&L. We are cutting administrative costs by around 30%. The fourth pillar is go-to-market spending. With that, I mean unproductive spending, okay?

Speaker #4: Number one is a very strong implementation of artificial intelligence across different functions and processes that before required a lot of headcount, and now it doesn't.

Speaker #4: So you know that's one piece . Second is the . Strengthening of our cocks reduction . Original plan . So we had a plan a very aggressive plan to reduce costs .

Speaker #4: And we strengthened that plan . Even further . So we stretched all the interventions that we are making even further to get more productivity .

Speaker #4: So we expect the costs to continue to go down. Third, we are eliminating a massive amount of administrative costs that were previously in the P&L.

Speaker #4: So we are cutting administrative costs by around 30% . And fourth , the fourth pillar is go to market spending and with that , I mean unproductive spending .

Speaker #4: Okay. So, like we made a very thorough analysis of all the money that we were spending in pricing and promotions, point of sale execution.

Marcos Barbieri: We made a very thorough analysis of all the money that we were spending in pricing and promotions, point of sale execution. We are closing distribution routes that are not profitable. We made a very thorough analysis of every spending that we have in that bucket, and we are cutting a huge amount of spending that was unproductive. All that adds up to 1.1. The second question is, why investing in the business? The answer is, first, I don't know what's going to happen with the consumption market or environment or context in 2026, and I don't want to wait until the context saves us and we start growing the top line again. We are deciding to invest a massive amount of money to reignite growth regardless of what's happening out there. We want to be aggressive because we have a very strong portfolio of brands with very strong positioning.

Speaker #4: We are closing distribution routes that are not profitable . So we made like a very thorough analysis of every spending that we have in that bucket .

Speaker #4: And we are cutting a huge amount of spending that was unproductive. All that adds up to $1.1 billion. The second question is: why invest in the business?

Speaker #4: And the answer is, well, first, I don't know what's going to happen with the consumption market or environment or context in 2026.

Speaker #4: And I don't want to wait , you know , until the context saves us and we start growing the top line again . So we are deciding to invest a massive amount of money to reignite growth , regardless of what's happening out there .

Speaker #4: And, second, you know, we want to be aggressive because we have a very strong portfolio of brands with very strong positioning.

Speaker #4: We have a very strong pipeline of innovation . And importantly , we have a very strong capabilities to execute . Okay . So and we have the resources .

Marcos Barbieri: We have a very strong pipeline of innovation, and importantly, we have very strong capabilities to execute, okay? We have the resources. We have the pipeline, we have the capabilities, we have the resources, and we want to put this company back to growth. That's basically the reason. In terms of the U.S. decline, it's fairly simple. The sellout is declining 8%. It's not great, but it's not a massive crisis. We have brands that are relatively healthy in the U.S., like XL-3 and Tío Nacho and some of our over-the-counter brands. Unfortunately, we had a very bad winter season across the U.S. as well as in Mexico last year. What we are seeing now is that, you know, we loaded a huge amount of inventory of our winter season brands because we want to play big in the seasons. The same we did in Mexico with XL-3 this year.

Speaker #4: So we have the pipeline , we have the capabilities . We have the resources . And we want to put this company back to growth .

Speaker #4: You know . So that's that's basically the reason . And in terms of the US decline , you know , it's fairly simple .

Speaker #4: I mean, we see that the sellout is declining 8%. You know, it's not great, but it's not a massive crisis.

Speaker #4: We have, you know, brands that are relatively healthy in the U.S. like Tío Nacho and some of our OTC brands. But unfortunately, we had a very bad winter season across the U.S. as well as in Mexico last year.

Speaker #4: And what we are seeing now is that, you know, we loaded a huge amount of inventory of our winter season brands because we want to play big in the seasons.

Speaker #4: And the same we did in Mexico this year. We loaded big time because who wins is the one with more inventory out there in the stores, and we want to play big, and we play big in the U.S.

Marcos Barbieri: We loaded big time because who wins is the one with more inventory out there in the stores. We want to play big, and we played big in the U.S. Now, you know, after a season that, you know, didn't go so well, we are receiving customer returns in those brands that are impacting the top line in selling, but the sellout, you know, is not declining as much as the selling. I don't know if that provides perspective on the question you asked.

Speaker #4: And now , you know , after a season that , you know , didn't go so well , we are receiving a customer returns in those brands .

Speaker #4: That is impacting the the top line in selling . But the sell out , you know , is not declining as much as the as the selling .

Speaker #4: I don't know if that provides perspective on the on the question . You you ask .

Speaker #13: Yes . Thank you . Do you think that the channels are let's say more balanced today in terms of inventory so that the next season will be , let's say , more , more , more correlated to , to the actual demand ?

Froilán Méndez: Yes, Marco, thank you. Do you think that the channels are, let's say, more balanced today in terms of inventory so that the next season will be, let's say, more correlated to the actual demand? How do you see the inventory levels?

Speaker #13: Or how do you see the inventory levels?

Speaker #4: You know , it's it's like , you know , moving pieces all the time because it's we play a lot in seasons . We play in the winter season , seasons with with OTC .

Marcos Barbieri: It's like, you know, moving pieces all the time because we play a lot in seasons. We play in the winter seasons with OTC, and then we play big time in summer with beverages and some of our OTC categories for the summer. The strategy we follow and has worked really well in the past is that we play very aggressive in terms of both point of sale, execution, communication, innovation, and also huge inventory at the stores, okay? It's a bet all the time. It's a bet, okay? That's how it works. You load big time upfront, and then you expect for the best. If it works, you know it's fantastic. If it doesn't work, then you have to deal with the inventories and the product that you put out there. For example, you are seeing a strong decline in OTC this quarter, in Mexico in particular, in selling.

Speaker #4: And then we play big time in summer with , with beverages and , and some of OTC categories for the summer . So the strategy we follow and has worked really well in the past is that we we play very aggressive in terms of both point of sale execution , communication , innovation , and also huge inventory at the stores .

Speaker #4: Okay , so we it's a bed all the time . It's a bed . Okay . And that's how it works . So you load a big time upfront and then you expect for the best .

Speaker #4: And if it works, you know it's fantastic. And if it doesn't work, then you have to deal with the inventories and the product that you put out there.

Speaker #4: So for example , you are seeing a , a strong decline in this quarter . In Mexico , in particular in Celine , that doesn't align with the sell out numbers for the quarter , because we had , you know , big inventories for the summer season .

Marcos Barbieri: That doesn't align with the sellout numbers for the quarter because we had, you know, big inventories for the summer season. The summer season didn't work. Now, you know, we are not selling a lot of OTC because customers still have inventory. At the same time, we are playing a big bet for the winter season. This quarter, we loaded a massive amount of OTC here in Mexico. You know, we're seeing early signs that this is working and that we are growing market share in some of these categories. If it works well, we're going to have a great next quarter in OTC, you know, behind a good season, and we're all going to be happy. If it doesn't work, we're going to see the same dynamic that we are seeing today in the U.S. and in Mexico with beverages.

Speaker #4: The summer season didn't work . Now , you know , we are not selling a lot of because customers still have inventory . But at the same time , we are we are playing a big bet for the winter season .

Speaker #4: And this quarter, we loaded a massive amount of OTC here in Mexico. And you know, we're seeing early signs that this is working and that we are growing market share in some of these categories.

Speaker #4: And if it works well, we're going to have a great next quarter in OTC. You know, behind a good season.

Speaker #4: And we're all going to be happy if it doesn't work. We're going to see the same dynamic that we are seeing today in the U.S. and in Mexico with beverages.

Speaker #4: .

Speaker #13: And lastly , and thank you for for the questions . When you say that you expect growth to to recover in the second half of 2026 , do you expect beverage Mexico to come first , then cough and call us second ?

Froilán Méndez: Marcos, lastly, and thank you for the thorough questions. When you say that you expect growth to recover into the second half of 2026, do you expect Mexico to come first, then cold and flu U.S. second? What's the timing on the different regions and products that you expect this reignited growth to come?

Speaker #13: What's the timing on the different regions and products that you expect ? This reignited growth to come .

Speaker #4: That's that's a difficult one . Let me think . I think OTC we are going to see a better performance in OTC first beverages , second .

Marcos Barbieri: That's a difficult one. Let me think. I think OTC, we are going to see a better performance in OTC first, beverages second, hopefully, because if we, like, you know, if we have a better season in terms of weather next year, which we should because this year we didn't have a summer, then you know we're going to sell a lot of XL-3, okay? With a good winter season that we are.

Speaker #4: Hopefully , because if we like , you know , if we have a better season in terms of weather next year , which we should , because this year we didn't have a summer , then , you know , we're going to sell a lot of swirls .

Speaker #4: Okay . So with a good winter season that we are starting to see for OTC , that's going to come first , second , second .

Operator: For OTC, that's going to come first. Second, skincare, and third, most of the initiatives that I just presented for skincare and personal care are hitting the market in the second half of 2026. Third will come personal care. That's, I think, the order.

Speaker #4: Swirls. And third, most of the initiatives that I just presented for skincare and personal care are hitting the market in the second half of 2026.

Speaker #4: So, third will come personal care. That's, I think, the order.

Speaker #13: Perfect. Thank you so much.

Christian Ibanez: Perfect. Thank you so much.

Speaker #2: Thank you. Please hold for any further questions.

[Company Representative]: Thank you. Please hold for any further questions.

Speaker #14: Hello .

Christian Ibanez: This concludes our third-quarter results conference call. Thank you for your attention.

Marcos Barbieri: Goodbye.