Sigma Foods SAB

Good afternoon and welcome to Alpha's first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session with instructions given at that time. However, if you are participating via the webcast, you may submit questions at any time during the call using the ask the question option on your screen. As a reminder, today's conference call is being recorded. Now I would like to turn the conference call over to Mr. Hernan Lozano, Vice President of Investor Relations. Mr. Lozano, you may begin.

Thank you, Sherry. Good afternoon, everyone, and welcome to Alfa's earnings conference call. Further details about our financial results can be found in our press release, which was distributed yesterday afternoon, together with a summarized presentation. Both are available on our website in the Investor Relations section. Let me remind you that during this call, we will share forward-looking information and statements, which are based on variables and assumptions that are uncertain at this time. It is my pleasure to participate in today's call together with Eduardo Escalante, ALPHA's CFO, Carlos Jimenez, ALPHA's General Counsel, Roberto Olivares, SIGMA's CFO, and representatives from each alpha company. Before moving on to a discussion on results, just a quick reminder that as a result of the upcoming spinoff, Axtell meets the definition of a discontinued operation in accordance with IFRS. And we began accounting for this subsidiary as a discontinued operation in the third quarter 2022. Unless otherwise specified, All consolidated figures referenced in this call exclude Excel. I will now turn the call over to Eduardo. Thank you, Hernan, and good afternoon, everyone. We greatly appreciate your participation today. First quarter 2023 was in line with our expectations. reflecting a solid performance from SIGMA and the anticipated year-over-year decrease at ALPEC. Progress continues on the transformational front with the accelerated spin-off during its completion and financial flexibility at the alpha level enhanced via the full redemption of senior nodes. At the same time, We continued transferring value to shareholders, but we didn't pay them much. First quarter consolidated sales were $4.1 billion, and EBITDA was $376 million, keeping us on track to achieve 2023 guidance. Many of the temporary tailwinds that drove record ALPEC performance the 2021 and 22, have returned to normal levels. These factors include ocean freight waves and global reference margins, among others. As a result, Altec reported 12% lower revenue and a 59% decline in EBITDA. Adjusting for extraordinary items, Altec's comparable EBITDA was down 38%, reflecting the normalization of macro drivers and soft demand, and in a slowdown in certain sectors. It is important to note that extraordinary items correspond primarily to $14 billion in undercurrent costs associated with the shutdown of the PEP racing operation at the Cooper River site in South Carolina. Altec is keen at continuously improving cost competitiveness across its operations to enhance its leading industry position. The Cooper River shutdown is part of the company's comprehensive efforts to strengthen its core business, driving estimated annual savings of $20 million and improving capacity utilization by transferring PEP production to other sites. I will now turn the call over to Roberto Olivares, CISMA CFO, to let him discuss the company's strong first quarter results and progress on strategic initiatives. Please, Roberto.

Thank you, Eduardo, and good afternoon, everyone. I'll begin with an update on our quarterly financial and operational results and briefly mention a couple of noteworthy developments regarding the execution our business strategy. We began 2023 with a strong first quarter, as consolidated revenues reached $2 billion, making this our highest quarter yet, up 16% versus first Q22. Revenues reflected growth across all regions and were driven by price momentum, a slight increase in consolidated volume, as well as the appreciation of the Mexican pesco. In Mexico, solid demand for our products translated into a 6% volume increase year-over-year, which more than offset the lower volume in Europe amid operational adjustments in response to market conditions. Consolidated EBITDA rose to 192 million, a record first quarter figure of 19% year-on-year that was due to the favorable performance in America. In Europe, we made significant progress in mitigating the impact of inflationary pressures. Revenue management initiatives included a 29th average price increase in local currency. Moreover, energy prices had come down from their peak levels in 2022. However, current industry dynamics continue placing pressure on micro-material and other input costs. We remain focused on improving profitability in the region through targeted top-line actions together with cost and expense reductions. Moving on to strategic initiatives. We advance in our effort to expand capacity in the U.S. During the quarter, we signed an agreement to acquire a food production plant in Iowa that is uniquely positioned to better serve our customers from a supply chain standpoint. As a result, the operational network in the US will consist of seven production plants. In addition, we conducted an equipment renovation project to increase capacity at our Altus facility in Oklahoma. These actions will help us to continue to grow in the region. During the quarter, we established the Administrative Efficiency Office to strengthen the generation of cross-border synergies centralize known core processes and foster best practices across the regions. This office will consolidate activities to improve the spending efficiency, maximize outcomes for processes and ensure optimal performance. Our goal with these efforts is to improve the company's competitive position and provide resources necessary to continue exploring the future, launching new business models and developing novel categories. As we strive for sustainable long-term growth, we are encouraged by the improvement achieved by the more than 260 employees who are part of our sustainability community and the many more that are responsible for executing the various ESG initiatives. As of the end of the first quarter, SGMA's CDP supplier engagement rating improved to A-, a multi-step increase that reflects the actions underway in our value chain. Our climate change and water results were affirmed at B rating. In addition, our Sustainalytics ESG risk rating improved to medium, a one-category increase from our previous rating. These results evidence our clear commitment to sustainability, and increase transparency and disclosure we have sought to achieve. We are confident that our proactive approach won't fit in challenges. The capitalization of lessons learned and the structural changes underway will better position the company to capture opportunities and deliver continued value to our stakeholders. Thank you for your attention. I will now turn the call back to Eduardo for additional comments and closing remarks.