Kimberly-Clark Corporation

Good day, everyone, and welcome to today's Kimberly Clark de Mexico's 2Q24 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. Please note this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to CEO Pablo Gonzalez. Please go ahead.

Thank you. Hello, everyone. We hope you're having a terrific summer and thanks for participating on the call. As usual, I'll make some preliminary remarks and then pass it on to Javier to provide some details on the second quarter results. We had another record quarter net sales, EBITDA, and net income, and we continue to post strong margins. We sequentially improved our EBITDA margin for the 10th consecutive quarter. Let me first provide some perspective on the top line. Our consumer products business remains very strong. Our brand's metrics continue to improve, and our shares are healthy. We're flat. We're gaining share in most categories. Sales, sequentially higher and also record, grew low single digits versus a strong comparison. Sales grew 2% on top of 12% last year. Volumes were slightly down because of a sequential slowdown in our categories, coupled with actions on our part to adequately develop the categories going forward. On the one hand, we intentionally reduced volumes for summer promotional activities, given that the same had been expanding in length and depth for some years, We don't believe it's conducive to healthy and consistent category growth. On the other, we implemented price increases during the quarter in our tissue businesses, averaging 5%, to absorb all price increases, which, as is always the case, had a temporary negative effect on volumes. Given the steps we have taken, we're confident our sales will pick up supported by relevant innovations and our effective commercial execution. Professional posted strong volume growth and expert finished products achieved another quarter of strong double-digit growth. However, tissue parent rolls once again decreased and impacted our top line by more than 100 million pesos and roughly 100 basis points. It's important to point out that we expect a positive contribution for this line of business during the second half of the year. I will share some thoughts on our cost perspectives going forward once Javier covers the details on the quarter's results.

Good morning, everyone. During the second quarter, our sales were 14.1 billion pesos, a record and a 2.6% increase versus the previous year. Total volume was up 1.6% and price and mix contributed 1%. Consumer products grew 1.7%, away from home 3% and exports 10.5%. Year over year, consumer products volume was down 1%, while price and mix was up 2.7%. As Pablo mentioned, export sales were impacted by approximately 100 million pesos of lower hard-boiled sales, while exports of finished products grew 67.7%. Cost of goods sold decreased 4%. Against last year, recycled fibers, SAM, Resins and fluff were favorable, while virgin fibers compared negatively. The FX was lower, averaging 6% less. Our cost reduction program once again had very good results and yielded approximately 400 million pesos of savings in the quarter. We continue investing behind cost savings and production efficiencies and finding more cost-efficient materials and sourcing. Gross profit increased 13.7%, and margin was 42.3% for the quarter. SG&A expenses were 9% higher year over year, and as a percentage of sales were up 108 basis points. Distribution expenses are up year on year, although the investments to improve our footprint and streamline our logistic operations have started to yield positive results, and we are improving sequentially. Operating profit increased 16.8%, and the operating margin was 25.1%. We generated a record 4 billion pesos of EBITDA, a 14.8% increase. EBITDA margin was 28.7%, a 50 basis points sequential improvement, and a 310 basis points differential versus the second quarter of 2023. Cost of financing was 356 million pesos in the second quarter, compared to 381 million in the same period last year. Net interest expense was lower since we have less net debt. During the quarter, we had a 37 million peso FX loss, which compares to a 1 million gain last year. Net income for the quarter was 2.1 billion pesos with earnings per share of 69 cents and 18.5% increase. We maintain a very strong and healthy balance sheet. During the quarter, we paid 3.3 billion pesos of debt, and our total cash position as of June 30 was 16.9 billion pesos. Our net debt to EBITDA ratio was 0.7 times, with an EBITDA to net interest coverage of 11 times. All of our debt is denominated in Mexican pesos, thus avoiding foreign exchange variations. Thank you. Back to Pablo.