Q2 2026 Kimberly-Clark de Mexico SAB de CV Earnings Call

Speaker #1: Please stand by. Your meeting is about to begin. Hello and welcome, everyone. Joining today's KIMBERLY CLARK DE MEXICO second quarter 2026 earnings conference call.

Operator: Hello and welcome everyone joining today's Kimberly-Clark de México Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to CEO Pablo González.

Speaker #1: At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the Q&A session. To register to ask a question at any time, please press star one on your telephone keypad.

Operator 3: Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to CEO Pablo González.

Speaker #1: Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to CEO Pablo Gonzalez.

Speaker #2: Thank you so much. Good morning, everyone. Hope you're all doing well. And thanks for participating in our call. As usual, we'll provide some brief remarks, and then we'll open it up for questions.

Pablo R. González Guajardo: Thank you so much. Good morning, everyone. Hope you are all doing well, and thanks for participating on our call. As usual, we will provide some brief remarks, and then we will open it up for questions. We had another strong quarter and a good H1 of the year with record revenue behind a strong performance in our consumer products businesses, continued double-digit increases in gross profit, operating profit, and EBITDA, and EBITDA margin at the top end of our range. Our strategies and actions are having the intended impact, spearheaded by strong commercial and operating execution, and we continue to make progress on our KCM+ innovation, growth, and transformation strategy. More on that after Xavier takes you through our Q2 results. Xavier?

Pablo González: Thank you so much. Good morning, everyone. Hope you are all doing well, and thanks for participating on our call. As usual, we will provide some brief remarks, and then we will open it up for questions. We had another strong quarter and a good H1 of the year with record revenue behind a strong performance in our consumer products businesses, continued double-digit increases in gross profit, operating profit, and EBITDA, and EBITDA margin at the top end of our range. Our strategies and actions are having the intended impact, spearheaded by strong commercial and operating execution, and we continue to make progress on our KCM+ innovation, growth, and transformation strategy. More on that after Xavier takes you through our Q2 results. Xavier?

Speaker #2: We had another strong quarter and a good first half of the year, with record revenue and strong performance in our consumer products businesses.

Speaker #2: We continued to see double-digit increases in gross profit, operating profit, and EBITDA, with EBITDA margin at the top end of our range. Our strategy and actions are having the intended impact, spearheaded by strong commercial and operating execution. We continue to make progress on our KCM Plus innovation, growth, and transformation strategy.

Speaker #2: More on that after Xavier takes you through our second quarter results. Xavier?

Speaker #3: Thank you. Good morning, everyone. During the quarter, our sales were 14.4 billion pesos, a 2.7% increase versus the second quarter of 2025, and an all-time high.

Xavier Cortés Lascurain: Thank you. Good morning, everyone. During the quarter, our sales were MXN 14.4 billion, a 2.7% increase versus the Q2 of 2025 and an all-time high. Total volume was up 3.1%, driven by consumer products, while price mix was flat. Net sales were led by consumer products, which grew 5.2%, with a 4% volume increase and 1.2% price and mix growth, while away from home decreased 5.1%. Exports were down 11.1%. Cost of goods sold decreased 3%. Our cost reduction program once again had very good results and yielded approximately MXN 450 million of savings during the quarter. These savings are mainly at the cost of goods sold level.

Xavier Cortés Lascurain: Thank you. Good morning, everyone. During the quarter, our sales were MXN 14.4 billion, a 2.7% increase versus the Q2 of 2025 and an all-time high. Total volume was up 3.1%, driven by consumer products, while price mix was flat. Net sales were led by consumer products, which grew 5.2%, with a 4% volume increase and 1.2% price and mix growth, while away from home decreased 5.1%. Exports were down 11.1%. Cost of goods sold decreased 3%. Our cost reduction program once again had very good results and yielded approximately MXN 450 million of savings during the quarter. These savings are mainly at the cost of goods sold level.

Speaker #3: Total volume was up 3.1%, driven by consumer products, while price mix was flat. Net sales were led by consumer products, which grew 5.2%, with a 4% volume increase, and 1.2% price and mix growth.

Speaker #3: While away-from-home decreased 5.1%, exports were down 11.1%. Cost of goods sold decreased 3%. Our cost reduction program once again had very good results and yielded approximately 450 million pesos of savings during the quarter.

Speaker #3: These savings are mainly at the cost of goods sold level. They were generated through a combination of global fiber contracting initiatives changes in sourcing, and the use of alternative fibers, product redesigns, and the introduction of new raw materials in non-woven fabrics, diaper geometry redesigns to improve material efficiency, and logistics and distribution efficiencies across our network.

Xavier Cortés Lascurain: They were generated through a combination of global fiber contracting initiatives, changes in sourcing, and the use of alternative fibers, product redesigns, and introduction of new raw materials in non-woven fabrics, diaper geometry redesigns to improve material efficiency, and logistics and distribution efficiencies across our network. These initiatives reflect ongoing actions across procurement, product design, manufacturing, and logistics. In addition to these actions, compared to last year, fibers and fluff were favorable, while super absorbent materials and resins compared negatively. The FX was lower, averaging around 11% less than last year. Gross profit increased 11.9%, and margin was 41.6% for the quarter. SG&A expenses were 11.5% higher year-over-year, and as a percentage of sales were up 140 basis points. Distribution expenses were higher, while we continued to invest behind our brands and work to improve our footprints and streamline logistics operations.

Xavier Cortés Lascurain: They were generated through a combination of global fiber contracting initiatives, changes in sourcing, and the use of alternative fibers, product redesigns, and introduction of new raw materials in non-woven fabrics, diaper geometry redesigns to improve material efficiency, and logistics and distribution efficiencies across our network. These initiatives reflect ongoing actions across procurement, product design, manufacturing, and logistics. In addition to these actions, compared to last year, fibers and fluff were favorable, while super absorbent materials and resins compared negatively. The FX was lower, averaging around 11% less than last year. Gross profit increased 11.9%, and margin was 41.6% for the quarter. SG&A expenses were 11.5% higher year-over-year, and as a percentage of sales were up 140 basis points. Distribution expenses were higher, while we continued to invest behind our brands and work to improve our footprints and streamline logistics operations.

Speaker #3: These initiatives reflect ongoing actions across procurement, product design, manufacturing, and logistics. In addition to these actions, compared to last year, fibers and fluff were favorable, while super-absorbent materials and resins compared negatively.

Speaker #3: The FX was lower, averaging around 11% less than last year. Gross profit increased 11.9%, and margin was 41.6% for the quarter. SG&A expenses were 11.5% higher year over year, and as a percentage of sales were up 140 basis points.

Speaker #3: Distribution expenses were higher, while we continued to invest behind our brands and work to improve our footprint and streamline logistics operations. Operating profit increased 12.2%, and operating margin was 23.7%, up 50 basis points sequentially.

Xavier Cortés Lascurain: Operating profit increased 12.2%, and operating margin was 23.7%, up 50 basis points sequentially. We generated MXN 3.9 billion of EBITDA, a 9.6% increase year-over-year, with EBITDA margin at 27.1% above the long-term range, representing 40 basis points sequential improvement. Cost of financing was MXN 470 million in the Q2, compared to MXN 352 million in the same period last year. Net interest expense was higher since we have more debt. During the quarter, we had a MXN 15 million FX gain, compared to a MXN 20 million gain last year. Net income for the quarter was MXN 2 billion, a 9% increase. Earnings per share were MXN 0.68, a 9.7% increase. We maintain a very strong and healthy balance sheet. Our total cash position as of June 30 was MXN 19.6 billion.

Xavier Cortés Lascurain: Operating profit increased 12.2%, and operating margin was 23.7%, up 50 basis points sequentially. We generated MXN 3.9 billion of EBITDA, a 9.6% increase year-over-year, with EBITDA margin at 27.1% above the long-term range, representing 40 basis points sequential improvement. Cost of financing was MXN 470 million in the Q2, compared to MXN 352 million in the same period last year. Net interest expense was higher since we have more debt. During the quarter, we had a MXN 15 million FX gain, compared to a MXN 20 million gain last year. Net income for the quarter was MXN 2 billion, a 9% increase. Earnings per share were MXN 0.68, a 9.7% increase. We maintain a very strong and healthy balance sheet. Our total cash position as of June 30 was MXN 19.6 billion.

Speaker #3: We generated 3.9 billion pesos of EBITDA, a 9.6% increase year over year, with EBITDA margin at 27.1%, above the long-term range, representing a 40 basis point sequential improvement.

Speaker #3: Cost of financing was 417 million pesos in the second quarter, compared to 352 million pesos in the same period last year. Net interest expense was higher since we have more debt.

Speaker #3: During the quarter, we had a 15 million pesos FX gain, compared to a 20 million pesos gain last year. Net income for the quarter was 2 billion pesos, a 9% increase.

Speaker #3: Earnings per share were $0.68, a 9.7% increase. We maintained a very strong and healthy balance sheet. Our total cash position as of June 30 was 19.6 billion pesos.

Speaker #3: Our net debt-to-EBITDA ratio was 0.9 times, with EBITDA-to-net interest coverage of 9 times. Thank you.

Xavier Cortés Lascurain: Our net debt to EBITDA ratio was 0.9 times, with EBITDA to net interest coverage of nine times. Thank you.

Xavier Cortés Lascurain: Our net debt to EBITDA ratio was 0.9 times, with EBITDA to net interest coverage of nine times. Thank you.

Speaker #2: As mentioned, we had a strong first half of the year, despite still subdued economic growth and private consumption. As we move into the second half, we expect consumer products businesses to continue to lead the way, the away-from-home business to grow during the second half of the year, and parent role sales will be lower due to more tissue required for consumer product sales but becoming less of a drag as the year goes on.

Pablo R. González Guajardo: As mentioned, we had a strong H1, despite still subdued economic growth and private consumption. As we move into the H2, we expect consumer products businesses to continue to lead the way, the away from home business to grow during the H2, and parent roll sales will be lower due to more tissue required for consumer product sales, but becoming less of a drag as the year goes on. All in all, we expect stronger revenue growth going forward. In respect to raw material costs, fundamentals support lower dollar prices versus last year. Given the current geopolitical tensions, all derivatives will be higher, both sequentially and versus last year. We expect prices will return to underlying market fundamentals by end of year.

Pablo González: As mentioned, we had a strong H1, despite still subdued economic growth and private consumption. As we move into the H2, we expect consumer products businesses to continue to lead the way, the away from home business to grow during the H2, and parent roll sales will be lower due to more tissue required for consumer product sales, but becoming less of a drag as the year goes on. All in all, we expect stronger revenue growth going forward. In respect to raw material costs, fundamentals support lower dollar prices versus last year. Given the current geopolitical tensions, all derivatives will be higher, both sequentially and versus last year. We expect prices will return to underlying market fundamentals by end of year.

Speaker #2: All in all, we expect stronger revenue growth going forward. With respect to raw material costs, fundamentals support lower dollar prices versus last year. But given the current geopolitical tensions, all derivatives will be higher, both sequentially and versus last year.

Speaker #2: We expect prices will return to underlying market fundamentals by end of year. In the meantime, we'll accelerate our price realization efforts and stay focused on operational efficiencies and ensuring another good year in our cost reduction efforts.

Pablo R. González Guajardo: In the meantime, we'll accelerate our price realization efforts and stay focused on operational efficiencies and ensuring another good year on our cost reduction efforts. Of greater importance, we continue to make good progress on our KCM Plus strategies. Our core businesses are performing well, and our diamond categories are accelerating growth behind consumer-centric, relevant, and differentiated innovation, together with greater engagement and improved commercial execution. Further, we continue to make inroads in private label and continue to work with our strategic partner to strengthen the North American supply chain. When it comes to new areas of growth, we continue to make progress on pet food and are actively analyzing the Kenvue opportunity. All in all, our KCM Plus initiatives focused on accelerating growth are going well.

Pablo González: In the meantime, we'll accelerate our price realization efforts and stay focused on operational efficiencies and ensuring another good year on our cost reduction efforts. Of greater importance, we continue to make good progress on our KCM Plus strategies. Our core businesses are performing well, and our diamond categories are accelerating growth behind consumer-centric, relevant, and differentiated innovation, together with greater engagement and improved commercial execution. Further, we continue to make inroads in private label and continue to work with our strategic partner to strengthen the North American supply chain. When it comes to new areas of growth, we continue to make progress on pet food and are actively analyzing the Kenvue opportunity. All in all, our KCM Plus initiatives focused on accelerating growth are going well.

Speaker #2: Of greater importance, we continue to make good progress on our KCM Plus strategies. Our core businesses are performing well, and our diamond categories are accelerating growth behind consumer-centric, relevant, and differentiated innovation, together with greater engagement and improved commercial execution.

Speaker #2: Further, we continue to make inroads in private label, and continue to work with our strategic partner to strengthen the North American supply chain. When it comes to new areas of growth, we continue to make progress on pet food and are actively analyzing the Kenvu opportunity.

Speaker #2: All in all, our KCM Plus initiatives focused on accelerating growth are going well. Equally important, our efforts to develop our skill set, better utilize data, work closely with our retail partners, and transform our end-to-end cost structure are gaining momentum.

Pablo R. González Guajardo: Equally important, our efforts to develop our skill set, better utilize data, work closely with our retail partners, and transform our end-to-end cost structure are gaining momentum. As we've mentioned before, effectively deploying and efficiently utilizing the most advanced technology solutions is the fundamental layer to support and drive all these efforts, and time is of the essence. We hope these comments provide a good picture of where we stand. With that, we open the call for questions.

Pablo González: Equally important, our efforts to develop our skill set, better utilize data, work closely with our retail partners, and transform our end-to-end cost structure are gaining momentum. As we've mentioned before, effectively deploying and efficiently utilizing the most advanced technology solutions is the fundamental layer to support and drive all these efforts, and time is of the essence. We hope these comments provide a good picture of where we stand. With that, we open the call for questions.

Speaker #2: As we've mentioned before, effectively deploying and efficiently utilizing the most advanced technology solutions is the fundamental layer to support and drive all these efforts in times of the essence.

Speaker #2: We hope this comments provide a good picture of where we stand. With that, let me open the call for questions.

Speaker #1: Thank you. If you would like to ask a question, please press star 1 on your keypad. To leave the queue at any time, press star 2.

Operator 2: Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star and one to ask a question. We'll take our first question from Alejandro Fuchs with Itaú. Please go ahead. Your line is open.

Operator: Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star and one to ask a question. We'll take our first question from Alejandro Fuchs with Itaú. Please go ahead. Your line is open.

Speaker #1: Once again, that is star and 1 to ask a question. We'll take our first question from Alejandro Fuchs with Itaú. Please go ahead, your line is open.

Speaker #4: Thank you, operator. Hola, Pablo, Javier. Thank you for your questions, and congratulations on the results. I have two quick ones, if I may. The first one: Pablo, I wanted to see if maybe you can elaborate a little bit on what are the main differences driving growth for the consumer segment relative to the away-from-home segment. We have seen, in a couple of quarters, that there's a big difference in terms of growth in the top line.

Alejandro Fuchs: Thank you, operator. Hola, Pablo, Javier. Thank you for taking the questions and congratulations on the results. I have two quick ones if I may. The first one, Pablo, I wanted to see if maybe you can elaborate a little bit, what are the main differences driving growth for the consumer segment relative to the away-from-home segment, where we have seen a couple of quarters where there's a big difference in terms of growth in top line. Maybe you can elaborate a little bit why is there such a big difference? I know that you said you expect better growth for away from home going forward. What's going to change for the H2? Maybe the last one would be regarding the Kenvue deal, if you have any updates in terms of timing of the conversations.

Alejandro Fuchs: Thank you, operator. Hola, Pablo, Javier. Thank you for taking the questions and congratulations on the results. I have two quick ones if I may. The first one, Pablo, I wanted to see if maybe you can elaborate a little bit, what are the main differences driving growth for the consumer segment relative to the away-from-home segment, where we have seen a couple of quarters where there's a big difference in terms of growth in top line. Maybe you can elaborate a little bit why is there such a big difference? I know that you said you expect better growth for away from home going forward. What's going to change for the H2? Maybe the last one would be regarding the Kenvue deal, if you have any updates in terms of timing of the conversations.

Speaker #4: So, maybe if you can elaborate a little bit on why there is such a big difference? And I know that you said you expect better growth for away-from-home going forward.

Speaker #4: What's going to change for the second half? And maybe the last one would be regarding the Kenvu deal. If we have any updates in terms of timing of the conversations, should we expect maybe more caller towards the third quarter or the fourth quarter?

Alejandro Fuchs: Should we expect maybe more color towards the Q3 or the Q4? Thank you very much.

Alejandro Fuchs: Should we expect maybe more color towards the Q3 or the Q4? Thank you very much.

Speaker #4: Thank you very much.

Speaker #2: Thanks, Alejandro. Thanks for the questions, and both are very important. Look, as you've mentioned, we've had a very good quarter on the consumer side, and that's driven by strong innovation behind our brands.

Pablo R. González Guajardo: Thanks, Alejandro. Thanks for the questions. Both very important. Look, as you've mentioned, we've got very good quarters on the consumer side, and that's driven by strong innovation behind our brands and relatively strong market shares, plus making inroads in certain opportunities that we've identified. Doing well both in our core categories and accelerating our growth in our diamond categories. Overall, I would say consumer products is going well, particularly when it comes to volume. We're pretty happy with that performance, and we're working hard to make sure that continues. When it comes to away from home, we've been talking a little bit about, one, distributors being a little bit more careful given the economic scenario. Now, what we also saw happening is that they became a little bit more aggressive betting on the outcome on consumption given the World Cup experience.

Pablo González: Thanks, Alejandro. Thanks for the questions. Both very important. Look, as you've mentioned, we've got very good quarters on the consumer side, and that's driven by strong innovation behind our brands and relatively strong market shares, plus making inroads in certain opportunities that we've identified. Doing well both in our core categories and accelerating our growth in our diamond categories. Overall, I would say consumer products is going well, particularly when it comes to volume. We're pretty happy with that performance, and we're working hard to make sure that continues. When it comes to away from home, we've been talking a little bit about, one, distributors being a little bit more careful given the economic scenario. Now, what we also saw happening is that they became a little bit more aggressive betting on the outcome on consumption given the World Cup experience.

Speaker #2: And relatively strong market shares, plus making inroads in certain opportunities that we've identified. So, doing well both in our core categories and accelerating our growth in our diamond categories.

Speaker #2: So overall, I would say consumer products is going well, particularly when it comes to volume, so we're pretty happy with that performance, and we're working hard to make sure that continues.

Speaker #2: When it comes to away-from-home, I mean, we've been talking a little bit about, one, distributors being a little bit more careful given the economic scenario.

Speaker #2: And now what we also saw happening is that they became a little bit more aggressive betting on the outcome on consumption given the World Cup experience.

Speaker #2: What we actually saw is that those expectations did not materialize. As a result, competition to drive volumes intensified, and that negatively impacted pricing.

Pablo R. González Guajardo: What we actually saw is that those expectations did not materialize. As a result, really competition to drive volumes intensified, and that negatively impacted pricing. We did see in away from home sequentially volume improvements, but pricing was affected because of this competition, again, to get more volume into the market. That may continue here in at least July, but we expect that to subside as the year progresses and have inventories and the business return to more normal levels. It will still probably be lower growth rates because, again, the economic conditions are not conducive for our distributors to supply more product to restaurants, to hotels, et cetera. We do expect it to come back to growth end of this quarter and certainly in the Q4 of the year. I hope that helps when it comes to consumer versus away from home.

Pablo González: What we actually saw is that those expectations did not materialize. As a result, really competition to drive volumes intensified, and that negatively impacted pricing. We did see in away from home sequentially volume improvements, but pricing was affected because of this competition, again, to get more volume into the market. That may continue here in at least July, but we expect that to subside as the year progresses and have inventories and the business return to more normal levels. It will still probably be lower growth rates because, again, the economic conditions are not conducive for our distributors to supply more product to restaurants, to hotels, et cetera. We do expect it to come back to growth end of this quarter and certainly in the Q4 of the year. I hope that helps when it comes to consumer versus away from home.

Speaker #2: So we did see, in away-from-home, sequential volume improvements, but pricing was affected because of this competition—again, to get more volume into the market.

Speaker #2: That may continue here in at least July, but we expect that to subside as the year progresses and have inventories and the business return to more normal levels.

Speaker #2: It will still probably be lower growth rates, because again, the economic conditions are not conducive for our distributors to supply more product to restaurants, to hotels, etc.

Speaker #2: But we do expect it to come back to growth at the end of this quarter, and certainly in the fourth quarter of the year. I hope that helps when it comes to consumer versus away-from-home.

Speaker #2: When it comes to the Kenvu acquisition, we are very, very actively working on it with our partner. And I would think that during this third quarter, we will have more information on that front.

Pablo R. González Guajardo: When it comes to the Kenvue acquisition, we are very, very actively working on it with our partner, and I would think that during this Q3, we will have more information on that front.

Pablo González: When it comes to the Kenvue acquisition, we are very, very actively working on it with our partner, and I would think that during this Q3, we will have more information on that front.

Speaker #4: Thank you. That is Pablo.

Alejandro Fuchs: Muchas gracias, Pablo.

Alejandro Fuchs: Muchas gracias, Pablo.

Speaker #2: Thank you, Alejandro.

Pablo R. González Guajardo: Thank you, Alejandro.

Pablo González: Thank you, Alejandro.

Speaker #1: Thank you. Our next question comes from Bob Ford with Bank of America. Please go ahead.

Operator 2: Thank you. Our next question comes from Robert Ford with Bank of America. Please go ahead.

Operator: Thank you. Our next question comes from Robert Ford with Bank of America. Please go ahead.

Speaker #5: Thank you so much. Good morning, Pablo, Javier. Thanks for taking my questions. Pablo, your export business was down year on year, but up quarter on quarter, right?

Robert Ford: Thank you so much. Good morning, Pablo, Javier. Thanks for taking my questions. Pablo, your export business was down year-on-year, but up quarter-on-quarter, right? You mentioned master rolls being down. How should we think about the mix, and how are you thinking about sales over the balance of the year? Then I was hoping, given the outlook for some of the inputs over the balance of the year, how are you thinking about industry pricing dynamics, particularly during the summer selling season, from this position of strength with respect to your shares right now?

Robert Ford: Thank you so much. Good morning, Pablo, Javier. Thanks for taking my questions. Pablo, your export business was down year-on-year, but up quarter-on-quarter, right? You mentioned master rolls being down. How should we think about the mix, and how are you thinking about sales over the balance of the year? Then I was hoping, given the outlook for some of the inputs over the balance of the year, how are you thinking about industry pricing dynamics, particularly during the summer selling season, from this position of strength with respect to your shares right now?

Speaker #5: And you mentioned master roles being down. How should we think about the mix? And how are you thinking about sales over the balance of the year?

Speaker #5: And then I was hoping, given the outlook for some of the inputs over the balance of the year, how are you thinking about industry pricing dynamics, particularly during the summer selling season, but from this position of strength with respect to your shares right now?

Speaker #2: Thanks, Bob. Thanks for the questions. First, on the export business, yeah, you're right. Our export of finished product was down versus last year, but it was sequentially.

Pablo R. González Guajardo: Thanks, Bob. Thanks for the questions. First, on the export business, yeah, you're right. Our export to finished product was down versus last year, but it was up sequentially. Our export of parent rolls was also down versus last year, but was also up sequentially. This has to do, particularly on the export finished product side, with a couple of things. One, the exchange rate differential, of course, versus last year. Two, that we were comparing to a record quarter in exports finished product sales last year. Q3 was also up pretty strong. A slightly lower volume demand from our partner. It was really timing in Q2, and there will be a little bit of that in Q3.

Pablo González: Thanks, Bob. Thanks for the questions. First, on the export business, yeah, you're right. Our export to finished product was down versus last year, but it was up sequentially. Our export of parent rolls was also down versus last year, but was also up sequentially. This has to do, particularly on the export finished product side, with a couple of things. One, the exchange rate differential, of course, versus last year. Two, that we were comparing to a record quarter in exports finished product sales last year. Q3 was also up pretty strong. A slightly lower volume demand from our partner. It was really timing in Q2, and there will be a little bit of that in Q3.

Speaker #2: Our export to our parent roles was also down versus last year, but was also up sequentially. And this has to do particularly export to Finnish product side with a couple of things.

Speaker #2: One, the exchange rate differential, of course, versus last year. Two, that we were comparing to a record quarter in exports of Finnish product sales last year, third quarter was also up pretty strong.

Speaker #2: And a slightly lower volume demand from our partner. So just it was really timing in the second quarter, and there will be a little bit of that in the third quarter.

Speaker #2: But as you know, overall we've been working with our partner to position ourselves to strengthen the North American supply chain, and we still believe that's the case, and we're finding good opportunities.

Pablo R. González Guajardo: As you know, overall, we've been working with our partners to position ourselves to strengthen the North American supply chain, we still believe that's the case, and we're finding good opportunities. Over a longer period of time, certainly for next year, our expectation is for strong growth certainly in that business. When it comes to parent rolls, again, it depends on how much we consume internally, we're consuming more internally because of how strong our performance has been in consumer products. We're also finding ways to produce more. Hopefully we'll be able to find here a combination where we can both use more internally, also supply more externally, and at least have that be less of a drag as we move forward. When it comes to the cost side. Again, hard to say how long this will last.

Pablo González: As you know, overall, we've been working with our partners to position ourselves to strengthen the North American supply chain, we still believe that's the case, and we're finding good opportunities. Over a longer period of time, certainly for next year, our expectation is for strong growth certainly in that business. When it comes to parent rolls, again, it depends on how much we consume internally, we're consuming more internally because of how strong our performance has been in consumer products. We're also finding ways to produce more. Hopefully we'll be able to find here a combination where we can both use more internally, also supply more externally, and at least have that be less of a drag as we move forward. When it comes to the cost side. Again, hard to say how long this will last.

Speaker #2: And so over a longer period of time, and certainly for next year, we're seeing very, very good our expectation is for a strong growth in certainly in that business.

Speaker #2: When it comes to parent rolls, again, it depends on how much we consume internally, and we're consuming more internally because of how strong our performance has been in consumer products.

Speaker #2: But we're also finding ways to produce more. So hopefully, we'll be able to find here a combination where we can both use more internally, but also supply more externally and at least have that be less of a drag as we move forward.

Speaker #2: When it comes to the cost side, again, hard to say where this how long this will last. I mean, we expected this to be a very short time and with relatively lower impact, but it's dragged on for a little longer.

Pablo R. González Guajardo: We expected this to be a very short time and with relatively lower impact, but it's dragged on for a little longer, I think, than pretty much everyone expected. It didn't get as bad as also some people expected it could get, but it has certainly had an impact. We will see some of that impact in costs here in Q3. Hopefully, as we mentioned, if you go back to fundamentals, those support lower dollar prices in our raw materials, hopefully we'll get back to that by the end of the year. Having said that, we will see more pressure on this quarter. We still expect to be within the range of our EBITDA margin target for the quarter, notwithstanding those cost pressures. Again, hopefully even improving in Q4 as we move along.

Pablo González: We expected this to be a very short time and with relatively lower impact, but it's dragged on for a little longer, I think, than pretty much everyone expected. It didn't get as bad as also some people expected it could get, but it has certainly had an impact. We will see some of that impact in costs here in Q3. Hopefully, as we mentioned, if you go back to fundamentals, those support lower dollar prices in our raw materials, hopefully we'll get back to that by the end of the year. Having said that, we will see more pressure on this quarter. We still expect to be within the range of our EBITDA margin target for the quarter, notwithstanding those cost pressures. Again, hopefully even improving in Q4 as we move along.

Speaker #2: I think that pretty much everyone expected. It didn't get as bad as also some people expected it could get, but it has certainly had an impact.

Speaker #2: So, we will see some of that impact and cost here in the third quarter. And hopefully, as we mentioned, if you go back to fundamentals, those support lower dollar prices in our raw materials. So, hopefully, we get back to that by the end of the year.

Speaker #2: Having said that, having said that, we will see more pressure on this quarter. We still expect to be within the range of our EBITDA margin target.

Speaker #2: For the quarter, notwithstanding those price-cost pressures—and again, hopefully even improving in the fourth quarter as we move along—now, given that this is happening, we will continue to monitor any opportunity for price realization.

Pablo R. González Guajardo: Given that this is happening, we will continue to monitor any opportunity for price realization. It's always tough during the promotional summer season, this one has been particularly aggressive, again, as consumption has been subdued. Some of the retailers and some of our competitors have been a little bit more aggressive. It's really hard at this time to really reflect pricing, we also expect that to start to die down as this July passes and certainly into August and definitely through September. We'll continue to look for opportunities on price realization to be able to absorb some of these cost increases. Again, even if we're not able to do that, we are expecting to be able to deliver EBITDA margins within our target range.

Pablo González: Given that this is happening, we will continue to monitor any opportunity for price realization. It's always tough during the promotional summer season, this one has been particularly aggressive, again, as consumption has been subdued. Some of the retailers and some of our competitors have been a little bit more aggressive. It's really hard at this time to really reflect pricing, we also expect that to start to die down as this July passes and certainly into August and definitely through September. We'll continue to look for opportunities on price realization to be able to absorb some of these cost increases. Again, even if we're not able to do that, we are expecting to be able to deliver EBITDA margins within our target range.

Speaker #2: It's always tough during the promotional summer season, and this one has been particularly aggressive. Again, as consumption has been subdued, some of the retailers and some of our competitors have been a little bit more aggressive.

Speaker #2: So it's really hard at this time to truly reflect pricing, but we also expect that to start to die down as this July passes, and certainly into August, and definitely through September.

Speaker #2: So, we'll continue to look for opportunities on price realization to be able to absorb some of these price increases—cost increases. But again, even if we're not able to do that, we are expecting to be able to deliver EBITDA margins within our target range.

Speaker #5: No, understood. And if I could just follow up—Pablo, you touched on private label in your comments, and I was curious if you're seeing a downtrend within your own price tiers.

Robert Ford: Understood. If I could just follow up. Pablo, you touched on private label in your comments, I was curious if you're seeing a downtrend within your own price tiers, how are you thinking about participating in private label and the equilibrium with the branded side of the business?

Robert Ford: Understood. If I could just follow up. Pablo, you touched on private label in your comments, I was curious if you're seeing a downtrend within your own price tiers, how are you thinking about participating in private label and the equilibrium with the branded side of the business?

Speaker #5: And how are you thinking about participating in private label and the equilibrium with the branded side of the business?

Speaker #2: Sure. That's a great question, Bob. Yeah. I mean, what we're seeing not different from other economies is we're seeing what many are calling the K-shape, right?

Pablo R. González Guajardo: Sure. That's a great question, Bob. What we're seeing, not different from other economies, is we're seeing what many are calling the K shape, right? Consumers who are buying premium products continue to do so. We do see some consumers on the value segment trending down to economy segment and in some cases trending down to private label offerings, particularly when it comes to hard discounters and some of the more economy-driven formats, for example, Bodega Aurrerá, et cetera, where there's also a big push to help consumers and provide these products at a lower cost. Certainly that dynamic is happening. As you know, our strategy has always been to have this multi-tier and multi-brand offerings with superior products in every tier to all of the private label offerings out there.

Pablo González: Sure. That's a great question, Bob. What we're seeing, not different from other economies, is we're seeing what many are calling the K shape, right? Consumers who are buying premium products continue to do so. We do see some consumers on the value segment trending down to economy segment and in some cases trending down to private label offerings, particularly when it comes to hard discounters and some of the more economy-driven formats, for example, Bodega Aurrerá, et cetera, where there's also a big push to help consumers and provide these products at a lower cost. Certainly that dynamic is happening. As you know, our strategy has always been to have this multi-tier and multi-brand offerings with superior products in every tier to all of the private label offerings out there.

Speaker #2: So consumers who are buying premium products continue to do so. But we do see some consumers on the value segment trending down to economy segment and in many in some cases trending down to private label.

Speaker #2: Offerings particularly when it comes to hard discounters and some of the more economy-driven formats for example, Bodega Aurrera, etc., where there's also a big push to help consumers and provide these products at a lower cost.

Speaker #2: So, certainly that dynamic is happening. As you know, our strategy has always been to have these multi-tier and multi-brand offerings with superior products in any and every tier, to all of the private label offerings out there.

Speaker #2: And that will continue to be the norm, and that will continue to be our strategy. We'll bring innovation behind that very aggressively in the coming quarters and certainly into next year. We've got a really, really nice pipeline that we put into place this year, and we love how it looks going forward.

Pablo R. González Guajardo: That'll continue to be the norm, that'll continue to be our strategy, we will bring innovation behind that very aggressively in the coming quarters and certainly into next year. We've got a really, really nice pipeline that we put into place this year, and we love how it looks going forward. That will certainly help. We've also said that we want to be more strategic about participating in private label. Given that it's a trend that continues and certainly something that retailers want to push forth, we see an opportunity for growth there if we participate. We're making inroads. We're working with quite a few of them and starting to supply some of their products, gaining that traction, momentum, confidence, or trust with them to build that business.

Pablo González: That'll continue to be the norm, that'll continue to be our strategy, we will bring innovation behind that very aggressively in the coming quarters and certainly into next year. We've got a really, really nice pipeline that we put into place this year, and we love how it looks going forward. That will certainly help. We've also said that we want to be more strategic about participating in private label. Given that it's a trend that continues and certainly something that retailers want to push forth, we see an opportunity for growth there if we participate. We're making inroads. We're working with quite a few of them and starting to supply some of their products, gaining that traction, momentum, confidence, or trust with them to build that business.

Speaker #2: So that will certainly help, but we've also said that we want to be more strategic about participating in private label. And given that it's a trend that continues, and certainly something that retailers want to push forth, we see an opportunity for growth there.

Speaker #2: If we participate, so we're making inroads, we're working with quite a few of them, and starting to supply some of their products. Gaining that traction, momentum, confidence, or trust with them to build that business.

Speaker #2: And what we're going to have, really, is our private label, where we can supply it and compete with our brands for the consumer's preference.

Pablo R. González Guajardo: What we're going to have really is have a private label where we can supply it, compete with our brands for the consumer's preference. Again, on the one hand, multi-tier and continued innovation to stay a step ahead, and on the other, providing very good products for private label to be able to meet the demand of both our customers and our clients. A dual strategy, which started to pay off, but a lot more to do there, a lot of room for improvement or growth.

Pablo González: What we're going to have really is have a private label where we can supply it, compete with our brands for the consumer's preference. Again, on the one hand, multi-tier and continued innovation to stay a step ahead, and on the other, providing very good products for private label to be able to meet the demand of both our customers and our clients. A dual strategy, which started to pay off, but a lot more to do there, a lot of room for improvement or growth.

Speaker #2: And again, on the one hand, multi-tier and continued innovation to stay a step ahead, and on the other, providing very good products for private label to be able to meet the demand of both our customers and our clients.

Speaker #2: So a dual strategy, which is starting to pay off, but there is a lot, lot more to do there—a lot of room for improvement or growth.

Speaker #5: That was very helpful, Pablo. Thank you so much.

Robert Ford: Very helpful, Pablo. Thank you so much.

Robert Ford: Very helpful, Pablo. Thank you so much.

Speaker #2: Thank you, Bob.

Pablo R. González Guajardo: Thank you, Bob.

Pablo González: Thank you, Bob.

Speaker #1: Thank you. Our next question comes from Antonio Hernandez with Acting There. Please go ahead, your line is open.

Operator 2: Thank you. Our next question comes from Antonio Hernandez with Actinver. Please go ahead. Your line is open.

Operator: Thank you. Our next question comes from Antonio Hernandez with Actinver. Please go ahead. Your line is open.

Speaker #6: Hi, good morning. Congrats on your results. Well, actually, following up on the last answer that you provided, can you shed more light on how much is private label as a share of sales?

Antonio Hernandez: Hi. Good morning. Congrats on your results. Well, actually following up on the last answer that you provided, can you share more light on how much is private label as a share of sales? How much has it been growing within Kimberly-Clark, and maybe how much of a potential do you see there? Also within innovation, how much of that innovation is addressing both the trade up and the trade down? I mean, the K shape economy. Thanks.

Antonio Hernandez: Hi. Good morning. Congrats on your results. Well, actually following up on the last answer that you provided, can you share more light on how much is private label as a share of sales? How much has it been growing within Kimberly-Clark, and maybe how much of a potential do you see there? Also within innovation, how much of that innovation is addressing both the trade up and the trade down? I mean, the K shape economy. Thanks.

Speaker #6: How much has it been growing within KIMBERLY CLARK and maybe how much of a potential do you see there? And also within innovation, how much of that innovation is addressing both the trade-off or the trade-down?

Speaker #6: I mean, the K-shape economy. Thanks.

Speaker #2: Sure, Antonio. I mean, innovation still a sorry, private label still a small business for us. We expect that maybe this year it'll be around 800 million pesos.

Pablo R. González Guajardo: Sure, Antonio. Private label is still a small business for us. We expect that maybe this year it'll be around MXN 800 million. That's about double what we did last year. Again, with expectations that it can continue to grow at a very interesting clip in the next couple of years as we gain traction behind our initiative. A lot of focus there to make that happen. In terms of innovation, really the strong performance behind consumer products, diapers, bathroom tissue, feminine care, incontinence, so both on our core categories and some are our diamond categories, is supported by strong innovation. We've been able to, in every category, bring new products to market, of course, together with a good commercial execution.

Pablo González: Sure, Antonio. Private label is still a small business for us. We expect that maybe this year it'll be around MXN 800 million. That's about double what we did last year. Again, with expectations that it can continue to grow at a very interesting clip in the next couple of years as we gain traction behind our initiative. A lot of focus there to make that happen. In terms of innovation, really the strong performance behind consumer products, diapers, bathroom tissue, feminine care, incontinence, so both on our core categories and some are our diamond categories, is supported by strong innovation. We've been able to, in every category, bring new products to market, of course, together with a good commercial execution.

Speaker #2: That's about double what we did last year. But again, with expectations that it can continue to grow at a very interesting clip in the next couple of years as we gain traction behind our initiatives.

Speaker #2: So a lot of focus there to make that happen. In terms of innovation, I mean, really the strong performance behind consumer products diapers, bathroom tissue, feminine care, incontinence.

Speaker #2: So both on our core categories and some of our diamond categories, this is supported. By strong innovation, we've been able to, in every category, bring new products to market.

Speaker #2: Of course, together with good commercial execution. So, from new offerings in Cottonelle and bathroom tissue, to new offerings in pretty much every tier in our diaper business, and we will be introducing more innovations on the premium side of the business this year.

Pablo R. González Guajardo: From new offerings in Cottonelle, in bathroom tissue to new offerings in pretty much every tier in our diaper business, we will be introducing more innovations in the premium side of the business this year, to improvements in the value and economy tier in the wipes business, a new product line in feminine care, a new product line in incontinence. I would say that it's broad-based, that is in a very important way why we've been able to continue to grow at a very good clip in consumer products despite the consumer environment.

Pablo González: From new offerings in Cottonelle, in bathroom tissue to new offerings in pretty much every tier in our diaper business, we will be introducing more innovations in the premium side of the business this year, to improvements in the value and economy tier in the wipes business, a new product line in feminine care, a new product line in incontinence. I would say that it's broad-based, that is in a very important way why we've been able to continue to grow at a very good clip in consumer products despite the consumer environment.

Speaker #2: To improvements in the value and economy tier in the wipes business and a new product line in feminine care, a new product line in incontinence.

Speaker #2: So I would say that it's broad-based and that is in a very important way a why we've been able to continue to grow at very good clip in consumer products despite the consumer environment.

Speaker #6: Okay, makes sense. Thanks a lot for the caller. Have a nice day.

Antonio Hernandez: Okay. Makes sense. Thanks a lot for the color. Have a nice day.

Antonio Hernandez: Okay. Makes sense. Thanks a lot for the color. Have a nice day.

Speaker #2: Thank you, Antonio.

Pablo R. González Guajardo: Thank you, Antonio.

Pablo González: Thank you, Antonio.

Speaker #1: Thank you. We will move next to Reed Monahan with Barclays. Please go ahead.

Operator 2: Thank you. We will move next with Reid Monaghan with Barclays. Please go ahead.

Operator: Thank you. We will move next with Reid Monaghan with Barclays. Please go ahead.

Speaker #7: Hey, thank you for taking the question. So I was wondering with quarterly savings of or I guess another quarter with savings around 450 million pesos and even margins holding above the long-term target range.

Reid Monaghan: Hey, thank you for taking the question. I was wondering, with quarterly savings of, or I guess another quarter with savings around MXN 450 million and EBITDA margins holding above the long-term target range, how much of the current savings run rate would you consider structural versus timing related? As we look towards 2027, how sustainable are these current margin levels, and what do you expect the raw material and FX conditions as that plays out?

Reid Monahan: Hey, thank you for taking the question. I was wondering, with quarterly savings of, or I guess another quarter with savings around MXN 450 million and EBITDA margins holding above the long-term target range, how much of the current savings run rate would you consider structural versus timing related? As we look towards 2027, how sustainable are these current margin levels, and what do you expect the raw material and FX conditions as that plays out?

Speaker #7: How much of the current savings or run rate savings would you consider structural versus timing-related? As we look towards 2027, how sustainable are these current margin levels, and what do you expect with the raw material and FX conditions?

Speaker #7: If that plays out.

Pablo R. González Guajardo: Hello. The way we account for the cost savings is we only include cost savings that are, for the most part, for the long term. These are things that we can add on 1 year and go forward. They're more structural than conjuncture.

Xavier Cortés Lascurain: Hello. The way we account for the cost savings is we only include cost savings that are, for the most part, for the long term. These are things that we can add on 1 year and go forward. They're more structural than conjuncture.

Speaker #2: Hello. The way we usually well, not usually. The way we account for the cost savings is we only include cost savings that are for the most part for the long term.

Speaker #2: These are things that we can add in one year and carry forward. So they're more structural than conjunctural.

Speaker #7: Got it.

Reid Monaghan: Got it.

Reid Monahan: Got it.

Pablo R. González Guajardo: That was your question, right?

Xavier Cortés Lascurain: That was your question, right?

Speaker #2: That was your question, right?

Speaker #7: Yeah. Yeah. And then also sort of how you see I guess material costs play out over the course of the year.

Reid Monaghan: Yeah. Then also sort of how you see, I guess, material costs play out over the course of the year.

Reid Monahan: Yeah. Then also sort of how you see, I guess, material costs play out over the course of the year.

Speaker #2: Yeah. I mean, let me just touch a little bit on what Javier said in terms of this being structural and we mentioned in our comments a couple of the things, but maybe that's useful because, for example, when we were generating savings through global fiber contracting initiatives and changing sources sourcing in different raw materials, so of course that's structural.

Pablo R. González Guajardo: Yeah. Let me just touch a little bit on what Javier said in terms of this being structural, we mentioned in our comments a couple of the things, but maybe that's useful because, for example, when we were generating savings through global fiber contracting initiatives and changing sourcing in different raw materials. Of course, that's structural. We're out there, I'm gonna say, around the world, looking for sourcing the best prices in our materials. When we find that, it doesn't end there. We continue to look for the best sourcing possible, and we've been able to source materials from different parts of the world at preferred costs. That's one example of the things we continuously do. That's really structural because it's behind our culture of just being out there and making sure we find the best opportunities.

Pablo González: Yeah. Let me just touch a little bit on what Javier said in terms of this being structural, we mentioned in our comments a couple of the things, but maybe that's useful because, for example, when we were generating savings through global fiber contracting initiatives and changing sourcing in different raw materials. Of course, that's structural. We're out there, I'm gonna say, around the world, looking for sourcing the best prices in our materials. When we find that, it doesn't end there. We continue to look for the best sourcing possible, and we've been able to source materials from different parts of the world at preferred costs. That's one example of the things we continuously do. That's really structural because it's behind our culture of just being out there and making sure we find the best opportunities.

Speaker #2: I mean, we're out there, I’m going to say, around the world, looking for sourcing the best prices in our materials. And when we find that, it doesn't end there.

Speaker #2: We continue to look for the best sourcing possible, and we've been able to source materials from different parts of the world at preferred costs. That's one example of the things we continuously do.

Speaker #2: So that's really structural because it's behind our culture of just being out there and making sure we find the best opportunities. And the same can be said for product redesigns and some other efficiencies.

Pablo R. González Guajardo: The same can be said for product redesigns and some other efficiencies. Again, always looking to structurally improve our cost structure and our efficiencies. Going forward, as we say, hard to tell if it was just by fundamentals, we should be seeing lower dollar prices in most of our raw materials, because there's in many of them, quite a bit more supply than demand, and in many areas of the world, subdued domestic consumption. That's being interrupted because of the current geopolitical tensions. How long that lasts, it's anyone's guess. Right now we will see an impact, but eventually we believe we will see those raw materials come back to fundamentals, that will support lower costs, and certainly that, together with our efficiencies and our cost efforts, help us continue to deliver good margins, and certainly within our target range.

Pablo González: The same can be said for product redesigns and some other efficiencies. Again, always looking to structurally improve our cost structure and our efficiencies. Going forward, as we say, hard to tell if it was just by fundamentals, we should be seeing lower dollar prices in most of our raw materials, because there's in many of them, quite a bit more supply than demand, and in many areas of the world, subdued domestic consumption. That's being interrupted because of the current geopolitical tensions. How long that lasts, it's anyone's guess. Right now we will see an impact, but eventually we believe we will see those raw materials come back to fundamentals, that will support lower costs, and certainly that, together with our efficiencies and our cost efforts, help us continue to deliver good margins, and certainly within our target range.

Speaker #2: So again, always looking to structurally improve our cost structure and our efficiencies. Going forward, as we say, I mean, it's hard to tell, but just by fundamentals we should be seeing lower dollar prices in most of our raw materials.

Speaker #2: Because there's quite a bit more in many of them quite a bit more supply than demand and in many areas of the world subdued domestic consumption.

Speaker #2: But that's being interrupted because of the current geopolitical tensions. How long that lasts? It's anyone's guess. So right now we will see an impact, but eventually we will we believe we will see those raw materials come back to fundamentals and that will support lower costs and certainly that together with our efficiencies and our cost efforts help us continue to bring to deliver good margins and certainly within our target range.

Speaker #2: This was the 13th consecutive quarter within or above our range, and we certainly expect that to continue as we move into the rest of the year and 2027.

Pablo R. González Guajardo: This was the 13th consecutive quarter within or above our range, we certainly expect that to continue as we move into the rest of the year and 2027.

Pablo González: This was the 13th consecutive quarter within or above our range, we certainly expect that to continue as we move into the rest of the year and 2027.

Speaker #7: Got it. Thank you. I appreciate it.

Reid Monaghan: All right. Thank you. Appreciate it.

Reid Monahan: All right. Thank you. Appreciate it.

Speaker #2: You're welcome.

Pablo R. González Guajardo: You're welcome.

Pablo González: You're welcome.

Speaker #1: Thank you. Our next question comes from Florian Mendes with JP Morgan. Please go ahead.

Operator 2: Thank you. Our next question comes from Froylan Mendez with J.P. Morgan. Please go ahead.

Operator: Thank you. Our next question comes from Froylan Mendez with J.P. Morgan. Please go ahead.

Speaker #5: Hello, Jensen. Thank you very much for taking my question. Another question on private label, Pablo: how do you define the point where more private label starts hurting the branded business?

Froylan Mendez: Hello, gents. Thank you very much for taking my question. Another question on private label. Pablo, how do you define the point where more private label starts hurting the branded business? I don't know if it's through the price gaps, the shelf space, or even this consumer trade-down, but away from your portfolio. How do you decide when to lean into private label to keep your plant utilization high and maybe even contain competition versus stepping back to protect your branded mix? That's my first question. The second, this extra gain on margins, ahead of the guidance range, given the overall weak consumer backdrop that we're seeing, how much of this extra gain you think you should need to invest into pricing or marketing into the Q2?

Froylan Mendez: Hello, gents. Thank you very much for taking my question. Another question on private label. Pablo, how do you define the point where more private label starts hurting the branded business? I don't know if it's through the price gaps, the shelf space, or even this consumer trade-down, but away from your portfolio. How do you decide when to lean into private label to keep your plant utilization high and maybe even contain competition versus stepping back to protect your branded mix? That's my first question. The second, this extra gain on margins, ahead of the guidance range, given the overall weak consumer backdrop that we're seeing, how much of this extra gain you think you should need to invest into pricing or marketing into the Q2?

Speaker #5: I'm not sure if it's due to price gaps, shelf space, or even consumer trade down away from your portfolio. How do you decide when to lean into private label to keep your plant utilization high and maybe even contain competition, versus stepping back to protect your branded mix?

Speaker #5: That's my first question. And the second, these extra gains on margins, ahead of the guidance range, given the overall weak consumer backdrop that we're seeing, how much of these extra gains do you think you should need to invest into pricing or marketing into the second quarter, or is this something that you think can go throughout the year and really go above the guidance for the full year?

Froylan Mendez: This is something that you think can go throughout the year and really go above the guidance for the full year? Thank you.

Froylan Mendez: This is something that you think can go throughout the year and really go above the guidance for the full year? Thank you.

Speaker #5: Thank you.

Pablo R. González Guajardo: Let me start by this second one, Froylan. Thanks for the question. Again, as we've said, on the cost side, the Q3 will certainly be more challenging sequentially and to some degree, versus last year, because of everything that we've mentioned so far, particularly when it comes to oil derivatives. Eventually we'll see that come down, but certainly the Q3 will be a little bit more challenging. Having said that, we do expect to be able to deliver within our target range, and as things come back to the fundamentals, we will see better costs and that should be helpful going forward. That's on the cost side. On pricing, again, we'll continue to look for opportunities for price realization.

Pablo González: Let me start by this second one, Froylan. Thanks for the question. Again, as we've said, on the cost side, the Q3 will certainly be more challenging sequentially and to some degree, versus last year, because of everything that we've mentioned so far, particularly when it comes to oil derivatives. Eventually we'll see that come down, but certainly the Q3 will be a little bit more challenging. Having said that, we do expect to be able to deliver within our target range, and as things come back to the fundamentals, we will see better costs and that should be helpful going forward. That's on the cost side. On pricing, again, we'll continue to look for opportunities for price realization.

Speaker #2: Let me start with this second one, Florian. Thanks for the question. Again, as we've said, on the cost side, the third quarter will certainly be more challenging sequentially and, to some degree, versus last year.

Speaker #2: Because of everything that we mentioned so far, particularly when it comes to all the derivatives—and, I mean, eventually we'll see that come down—but certainly the third quarter will be a little bit more challenging.

Speaker #2: Having said that, we do expect to be able to deliver within our target range and as things come back to the fundamentals, we will see better costs and that should be helpful going forward.

Speaker #2: So, on pricing—that's on the cost side—and on pricing, again, we'll continue to look for opportunities for price realization. But it is clear that as we're in the summer promotional season and the economies are growing, there's quite a bit of pricing going into the market, and so it won't be that easy to be able to achieve higher pricing within the quarter.

Pablo R. González Guajardo: It is clear that as we're in the summer promotional season and the economy is not growing much, there's quite a bit of pricing going into the market. So it won't be that easy to be able to achieve higher pricing within the quarter. Still, we think we'll be able to deliver. Now, we won't be able to surpass what we did in the Q2, but we should be able to deliver within our target range and improve on that for the Q4, assuming costs get on a better footing and the promotional season and pricing aggressiveness starts to die down. You know that's usually what happens in the Q3 every single year. It's not a surprise. It's not uncommon. It's just that now we have the cost pressure also on top of that.

Pablo González: It is clear that as we're in the summer promotional season and the economy is not growing much, there's quite a bit of pricing going into the market. So it won't be that easy to be able to achieve higher pricing within the quarter. Still, we think we'll be able to deliver. Now, we won't be able to surpass what we did in the Q2, but we should be able to deliver within our target range and improve on that for the Q4, assuming costs get on a better footing and the promotional season and pricing aggressiveness starts to die down. You know that's usually what happens in the Q3 every single year. It's not a surprise. It's not uncommon. It's just that now we have the cost pressure also on top of that.

Speaker #2: But still, we think we'll be able to deliver now. We won't be able to surpass what we did in the second quarter, but we should be able to deliver within our target range and improve on that for the fourth quarter assuming costs get on a better footing and the promotional season and pricing aggressiveness starts to die down.

Speaker #2: That's — and you know, that's usually what happens in the third quarter every single year. It's not a surprise, it's not uncommon. It's just that now we have the cost pressure also on top of that.

Speaker #2: When it comes to private label, again, and leaning into it, it's a combination of all of the things you've mentioned, right? There's a trend given that the economy has not really grown too much over the past decade.

Pablo R. González Guajardo: When it comes to private label, again, and leaning into it's a combination of all of the things you've mentioned, right? There's a trend given that the economy has not really grown too much over the past decade, and inflation has been higher, consumers are stretched. So it's become more of a trend that they're really trying to look for offerings out there where they can make their money last longer and be worth more. It is a trend. We expect that to continue because we see no big catalysts for the economy to improve. We expect the consumer to continue to be stretched.

Pablo González: When it comes to private label, again, and leaning into it's a combination of all of the things you've mentioned, right? There's a trend given that the economy has not really grown too much over the past decade, and inflation has been higher, consumers are stretched. So it's become more of a trend that they're really trying to look for offerings out there where they can make their money last longer and be worth more. It is a trend. We expect that to continue because we see no big catalysts for the economy to improve. We expect the consumer to continue to be stretched.

Speaker #2: And inflation has been higher. Consumers are stretched, and so it’s become more of a trend that they’re really trying to look for offerings out there where they can make their money last longer and be worth more.

Speaker #2: So, it is a trend. We expect that to continue because we see no big catalysts for the economy to improve. So, we expect that consumers will continue to be stretched.

Speaker #2: So, given that it's a trend, we want to make sure we participate, but at the same time, we will compete as we've always done with our brands through innovation and commercial execution to be able to provide offerings at every tier in the market.

Pablo R. González Guajardo: Given that it's a trend, we want to make sure we participate, but at the same time, we will compete, as we've always done with our brands, through innovation and commercial execution, to be able to provide offerings at every tier in the market. It'll be a dynamic that will unfold here for the coming years, and we want to make sure we participate in both and we want to make sure we're successful in both, and that helps us drive revenue growth for the company.

Pablo González: Given that it's a trend, we want to make sure we participate, but at the same time, we will compete, as we've always done with our brands, through innovation and commercial execution, to be able to provide offerings at every tier in the market. It'll be a dynamic that will unfold here for the coming years, and we want to make sure we participate in both and we want to make sure we're successful in both, and that helps us drive revenue growth for the company.

Speaker #2: So it'll be a dynamic that will unfold here over the coming years, and we want to make sure we participate in both. We want to make sure we're successful in both, and that that helps us drive revenue growth for the company.

Speaker #5: Very clear. Thank you very much.

Froylan Mendez: Great to hear. Thank you very much.

Froylan Mendez: Great to hear. Thank you very much.

Speaker #2: Thank you.

Pablo R. González Guajardo: Thank you.

Pablo González: Thank you.

Speaker #1: Thank you. We will move next with Nicholas Rodriguez with Citi. Please go ahead.

Operator 2: Thank you. We will move next with Nicolas Rodriguez with Citi. Please go ahead.

Operator: Thank you. We will move next with Nicolas Rodriguez with Citi. Please go ahead.

Speaker #6: Hi, Pablo, Javier, good morning. Regarding consumer products, which delivered about 5% growth, could you provide more color on the categories and commercial initiatives driving this performance, and how you see the growth opportunity going forward, please?

Nicolas Rodriguez: Hi, Pablo, Javier. Good morning. Regarding consumer products, which deliver 5% of growth, could you provide more color on the categories and commercial initiatives driving this performance and how you see the growth opportunity going forward, please?

Nicolas Rodriguez: Hi, Pablo, Javier. Good morning. Regarding consumer products, which deliver 5% of growth, could you provide more color on the categories and commercial initiatives driving this performance and how you see the growth opportunity going forward, please?

Speaker #2: Sure, Nicholas, thanks for the question. I mean, when it comes to consumer products, we see our core categories that's bathroom tissue, diapers, napkins, or biggest categories with strong performances.

Pablo R. González Guajardo: Sure, Nicolas, thanks for the question. When it comes to consumer products, we see our core categories. That's bathroom tissue, diapers, napkins. Our biggest categories with strong performances, let me call it low to mid-single-digit. Of course, those are the biggest categories, so those are to some extent driving the overall growth. Then our diamond categories, which are those with where we see greater opportunity because of penetration, distribution, greater usage, et cetera, like for example, wipes, incontinence, feminine care, even our Evenflo bottles, et cetera, those we're seeing high single-digit growth. Overall, a good mix of growth in all of our categories. Again, our shares being strong and we expect that to continue going forward.

Pablo González: Sure, Nicolas, thanks for the question. When it comes to consumer products, we see our core categories. That's bathroom tissue, diapers, napkins. Our biggest categories with strong performances, let me call it low to mid-single-digit. Of course, those are the biggest categories, so those are to some extent driving the overall growth. Then our diamond categories, which are those with where we see greater opportunity because of penetration, distribution, greater usage, et cetera, like for example, wipes, incontinence, feminine care, even our Evenflo bottles, et cetera, those we're seeing high single-digit growth. Overall, a good mix of growth in all of our categories. Again, our shares being strong and we expect that to continue going forward.

Speaker #2: Let me call it low- to mid-single-digit. And, of course, those are the biggest categories, so those are, to some extent, driving the overall growth.

Speaker #2: And then our diamond categories, which are those where we see greater opportunity because of penetration, distribution, greater usage, etc.—like, for example, wipes, incontinence, feminine care, Evenflo bottles, etc.

Speaker #2: Those, we're seeing high single-digit growth. So overall, a good mix of growth in all of our categories, and again, our shares being strong. We expect that to continue going forward.

Nicolas Rodriguez: Thank you. If I may, another. This quarter, the margin was above your long-term range. Could you help us understand how do you think about the sustainability of this margin in the H2? Thank you.

Nicolas Rodriguez: Thank you. If I may, another. This quarter, the margin was above your long-term range. Could you help us understand how do you think about the sustainability of this margin in the H2? Thank you.

Speaker #6: Thank you. If I may, another question—this quarter, if the margin was above your long-term range, could you help us understand how you think about the sustainability of this margin in the second half?

Speaker #6: Thank you.

Speaker #2: Sure. Again, the margin was higher because we had both strong performance from consumer products behind volume, but there was also a little bit of price and mix in there.

Pablo R. González Guajardo: Sure. Again, the margin was higher because we had both strong performance from consumer products behind volume, but there was also a little bit of a price and mix in there. We had a good cost during the quarter. As I've mentioned, costs during the Q3, given geopolitical tensions, will be higher, particularly when it comes to oil derivatives. We expect within the quarter to deliver EBITDA margin within our target range. Most likely not at this rate of 27% or 27.1% that we delivered this quarter, but within our target range. The geopolitical tensions subside and raw material costs come back to fundamentals, then we expect to be able to improve on the performance of the Q3. It'll be probably assuming that the cost fundamentals come back by the end of the year.

Pablo González: Sure. Again, the margin was higher because we had both strong performance from consumer products behind volume, but there was also a little bit of a price and mix in there. We had a good cost during the quarter. As I've mentioned, costs during the Q3, given geopolitical tensions, will be higher, particularly when it comes to oil derivatives. We expect within the quarter to deliver EBITDA margin within our target range. Most likely not at this rate of 27% or 27.1% that we delivered this quarter, but within our target range. The geopolitical tensions subside and raw material costs come back to fundamentals, then we expect to be able to improve on the performance of the Q3. It'll be probably assuming that the cost fundamentals come back by the end of the year.

Speaker #2: Plus, we had good costs during the quarter. As I’ve mentioned, costs during the third quarter, given geopolitical tensions, will be higher, particularly when it comes to all the derivatives.

Speaker #2: So, we expect within the quarter to deliver EBITDA margin within our target range—most likely not at this rate of 27% or 27.1% that we delivered this quarter, but within our target range.

Speaker #2: And as the geopolitical tensions subside and raw material costs come back to fundamentals, then we expect to be able to improve on the performance of the third quarter.

Speaker #2: So it'll be probably assuming that the cost fundamentals come back by the end of the year, it'll be a mixed second half with probably the fourth quarter being stronger than the third.

Pablo R. González Guajardo: It'll be a mixed H2 with probably the Q4 being stronger than the Q3. Again, very important in all cases, our margins being within our target. As we've said, this was the 13th consecutive quarter within or above our range, and we expect that to continue for the rest of the year and into 2027.

Pablo González: It'll be a mixed H2 with probably the Q4 being stronger than the Q3. Again, very important in all cases, our margins being within our target. As we've said, this was the 13th consecutive quarter within or above our range, and we expect that to continue for the rest of the year and into 2027.

Speaker #2: But again, very important in all cases, our margins being within our target and as we've said, this was a 13 consecutive quarter within or above our range and we expect that to continue for the rest of the year and into 2027.

Speaker #6: Thank you so much.

Nicolas Rodriguez: Thank you so much.

Nicolas Rodriguez: Thank you so much.

Speaker #2: Thank you, Nicholas.

Pablo R. González Guajardo: Thank you, Nicolas.

Pablo González: Thank you, Nicolas.

Speaker #1: Thank you. And once again, if you would like to ask a question, please press star one on your keypad. We will move next with Juan Duman with Deutsche Bank.

Operator 2: Thank you. Once again, if you would like to ask a question, please press star one on your keypad. We will move next with Juan Guzman with Deutsche Bank. Please go ahead.

Operator: Thank you. Once again, if you would like to ask a question, please press star one on your keypad. We will move next with Juan Guzman with Deutsche Bank. Please go ahead.

Speaker #1: Please go ahead.

Speaker #7: Hi, good morning. Pablo, Javier, and all the team, congratulations on another solid quarter. Thanks for the space for questions. Just a quick one here regarding the dynamics of SG&A expenses.

Juan Guzman: Hi, good morning, Pablo, Javier, and all the team, congrats on another solid quarter. Thanks for the space for questions. Just a quick one here regarding the dynamics on SG&A expenses. I suspect there's some brand and top-line reinvestments embedded there, but also there might be some impact of higher freight or distribution expenses. I don't know. I just want to be sure what you're expecting here, what the breakdown is possible, and what are you seeing for the coming quarters. Thank you very much.

Juan Guzman: Hi, good morning, Pablo, Javier, and all the team, congrats on another solid quarter. Thanks for the space for questions. Just a quick one here regarding the dynamics on SG&A expenses. I suspect there's some brand and top-line reinvestments embedded there, but also there might be some impact of higher freight or distribution expenses. I don't know. I just want to be sure what you're expecting here, what the breakdown is possible, and what are you seeing for the coming quarters. Thank you very much.

Speaker #7: I suspect there's some brand and top line reinvestments embedded there, but also there might be some impact of higher flight or distribution expenses. I don't know.

Speaker #7: So I just want to be sure what you're expecting here what the breakdown is possible and what are you seeing for the coming quarters.

Speaker #7: Thank you very much.

Speaker #2: The main things that you're seeing in well, first, hello. The main things that you're seeing in SG&A beyond what you already mentioned of investing behind the brands which is key given all the things that we've talked about and which has been one of the drivers behind the performance of our consumer products.

Pablo R. González Guajardo: First, hello. The main things that you're seeing in SG&A, beyond what you already mentioned of investing behind the brands, which is key given all the things that we've talked about, and which has been one of the drivers behind the performance of our consumer products. The other thing that you see there, which is growing more than the top line, is compensation-related expenses or provisions, particularly the profit sharing. As you know, we pay 10% of profit sharing directly, and we've been doing that for many years. That together with other compensation-related items, adds to the SG&A. I don't know if you, Pablo, have something else. No, that's true. The other thing that we're seeing there, particularly when it comes to on the sales side, is more use of the technology and information platforms of our customers.

Xavier Cortés Lascurain: First, hello. The main things that you're seeing in SG&A, beyond what you already mentioned of investing behind the brands, which is key given all the things that we've talked about, and which has been one of the drivers behind the performance of our consumer products. The other thing that you see there, which is growing more than the top line, is compensation-related expenses or provisions, particularly the profit sharing. As you know, we pay 10% of profit sharing directly, and we've been doing that for many years. That together with other compensation-related items, adds to the SG&A. I don't know if you, Pablo, have something else.

Speaker #2: The other thing that you see there which is growing more than the top line is compensation related expenses or provisions particularly the profit sharing.

Speaker #2: As you know, we pay 10% of profit sharing directly and we've been doing that for many years or many, many, many years. So that together with other compensation related items add to the SG&A.

Speaker #2: I don't know if you, Pablo, have something else. No, that's true. The other thing that we're seeing there particularly when it comes to on the sales side is more use of the technology and information platforms of our customers.

Pablo González: No, that's true. The other thing that we're seeing there, particularly when it comes to on the sales side, is more use of the technology and information platforms of our customers.

Speaker #2: And of course, they're trying to monetize that and we're participating and we're making very, very good use of that information to figure out trends, to figure out what's happening in the market and determine our strategies and commercial execution.

Pablo R. González Guajardo: Of course, they're trying to monetize that, and we're participating and we're making very good use of that information to figure out trends, to figure out what's happening in the market and determine our strategies and commercial execution. That is increasing year over year. It'll certainly won't look that way next year, but, for this year, there's an important increase in that line item, and it'll continue, again, being an important increase versus last year. As we get into next year, we shouldn't see that line item increase as significantly as it has right now. Very important to have access to that information. Very importantly, we're using it very aggressively with our technology and even with artificial intelligence agents to be able to take advantage of all that knowledge that's in there.

Pablo González: Of course, they're trying to monetize that, and we're participating and we're making very good use of that information to figure out trends, to figure out what's happening in the market and determine our strategies and commercial execution. That is increasing year over year. It'll certainly won't look that way next year, but, for this year, there's an important increase in that line item, and it'll continue, again, being an important increase versus last year. As we get into next year, we shouldn't see that line item increase as significantly as it has right now. Very important to have access to that information. Very importantly, we're using it very aggressively with our technology and even with artificial intelligence agents to be able to take advantage of all that knowledge that's in there.

Speaker #2: So, that is increasing year over year. It'll certainly look that way next year, but for this year, there's an important increase in that line item, and it'll continue being an important increase versus last year. Then, as we get into next year, we shouldn't see that line item increase as significantly as it has right now.

Speaker #2: But it's very important to have access to that information, and, very importantly, we're using it very aggressively with our technology and even with artificial intelligence agents to take advantage of all that knowledge that's in there.

Speaker #7: Super clear. Thank you very much.

Juan Guzman: Super clear. Thank you very much.

Juan Guzman: Super clear. Thank you very much.

Speaker #1: Thank you. We do have a follow-up from Bob Ford with Bank of America. Please go ahead.

Operator 2: Thank you. We do have a follow-up from Robert Ford with Bank of America. Please go ahead.

Operator: Thank you. We do have a follow-up from Robert Ford with Bank of America. Please go ahead.

Speaker #4: Thank you so much for taking the follow-up question. And I was curious with respect to Kenji, do you need any additional debt to close on Kenji or do you expect to wrap up the transaction with existing resources?

Robert Ford: Thank you so much for taking the follow-up question. I was curious with respect to Kenvue, do you need any additional debt to close on Kenvue, or do you expect to wrap up the transaction with existing resources? Then I was curious, how are you and KCC thinking about Kenvue markets in Latin America outside of Mexico?

Robert Ford: Thank you so much for taking the follow-up question. I was curious with respect to Kenvue, do you need any additional debt to close on Kenvue, or do you expect to wrap up the transaction with existing resources? Then I was curious, how are you and KCC thinking about Kenvue markets in Latin America outside of Mexico?

Speaker #4: And then I was curious, how are you in KCC thinking about Kenji markets in Latin America outside of Mexico?

Pablo R. González Guajardo: Thanks, Bob. Thanks for your question. Our discussion with Kimberly-Clark is strictly for Kenvue Mexico, for the Kenvue Mexico business. We're trying to figure out what's the best structure for the deal going forward. That's really where we stand. Assuming this goes forth, we absolutely would be able to deliver on it with our current structure, certainly adding some of Kenvue's, because as you know, given the products that they sell, particularly they have a sales force that visits doctors, et cetera. That is a key item or key element of how they do business and a very important one. It would be a combination, but for the most part, with our structure, we would be able to just handle that incremental growth.

Pablo González: Thanks, Bob. Thanks for your question. Our discussion with Kimberly-Clark is strictly for Kenvue Mexico, for the Kenvue Mexico business. We're trying to figure out what's the best structure for the deal going forward. That's really where we stand. Assuming this goes forth, we absolutely would be able to deliver on it with our current structure, certainly adding some of Kenvue's, because as you know, given the products that they sell, particularly they have a sales force that visits doctors, et cetera. That is a key item or key element of how they do business and a very important one. It would be a combination, but for the most part, with our structure, we would be able to just handle that incremental growth.

Speaker #2: Thanks, Bob. Thanks for your question. I mean, our discussion with Kimberly-Clark is strictly for Kenji Mexico. For the Kenji Mexico business, we're trying to figure out what's the best structure for the deal going forward.

Speaker #2: And that's really where we stand. But we assuming this goes forth, we absolutely would be able to deliver on it with our current structure.

Speaker #2: Certainly adding some of Kenji's because as you know, given the products that they sell, they particularly they have a Salesforce that visits doctors etc.

Speaker #2: that is a key item or key element of how they do business and a very important one. So it would be a combination, but for the most part, with our structure, we would be able to just handle that incremental growth.

Speaker #4: Understood. And from a financing perspective, again, no need for additional debt. You’ve got it on the balance sheet. You can close this pretty quickly, correct?

Robert Ford: Understood. From a financing perspective, again, no need for additional debt. You've got it on the balance sheet, you can close this pretty quickly, correct?

Robert Ford: Understood. From a financing perspective, again, no need for additional debt. You've got it on the balance sheet, you can close this pretty quickly, correct?

Speaker #2: Yeah. Financing it shouldn't be an issue.

Pablo R. González Guajardo: Yeah, financing it shouldn't be an issue.

Xavier Cortés Lascurain: Yeah, financing it shouldn't be an issue.

Speaker #4: Thank you, appreciate it. Thank you so much. And again, congratulations on the quarter.

Robert Ford: Thank you. Appreciate it. Thank you so much. Again, congratulations on the quarter.

Robert Ford: Thank you. Appreciate it. Thank you so much. Again, congratulations on the quarter.

Speaker #7: Thank you, Bob.

Pablo R. González Guajardo: Thank you, Paul. No, I appreciate the questions.

Pablo González: Thank you, Paul. No, I appreciate the questions.

Speaker #2: No, I appreciate the questions.

Speaker #1: Thank you. At this time, there are no further questions in the queue. I will now turn the meeting back to CEO Pablo Gonzalez for closing comments.

Operator 2: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to CEO Pablo Gonzalez for closing comments.

Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to CEO Pablo Gonzalez for closing comments.

Speaker #2: Well, no, just thank you for participating in the call. I hope you all have a wonderful summer, and I look forward to having our conversation after the third quarter.

Pablo R. González Guajardo: Well, no. Just thank you for participating in the call. I hope you all have a wonderful summer, and looking forward to having our conversation after Q3. Just thanks again.

Pablo González: Well, no. Just thank you for participating in the call. I hope you all have a wonderful summer, and looking forward to having our conversation after Q3. Just thanks again.

Speaker #2: And just thanks again.

Operator 2: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.