Sigma Foods SAB

Welcome to Alpha's third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. There will be a question and answer session at the end of the presentation with instructions given at that time. You may also submit your questions at any time during the call using the Q&A button of the webcast, which will be answered during the Q&A session. As a reminder, today's conference call is being recorded. I would like to turn the call over to Mr. Hernan Lozano.

Good day everyone, and thank you for joining us. 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 Roberto Olivares, Sigma's CFO. I will provide a brief update related to Alpha Sigma, then Roberto will discuss Sigma's third quarter results in Outlook. It is exciting to report Alpha Sigma's first complete quarter as a streamlined, global, branded food player. we have experienced a smooth transition into a steady state business after years of transformational developments. To better reflect Alpha's new identity and to concentrate on growing Sigma's corporate brand equity, we are implementing a rebranding initiative. As a first step to sunset the Alpha brand, an extraordinary shareholder meeting will be convened soon to propose adopting a Sigma-related entity name at the Alpha level. We will share updates on these changes in due course. Returning value to shareholders through cash dividends will remain core to capital allocation. On October 1st, the Board approved the first dividend under the company's new food-focused structure, a $35 million payment bringing total cash dividends for the year to $119 million. This amount is aligned with distribution levels historically supported by Sigma's strong cash generating ability. With that, I will now turn the call over to Roberto to discuss Sigma's results.

Thank you, Hernan, and thank you all for joining us today. We are pleased to report another quarter of positive sequential improvement in volume, revenues, and comparable levita, underscoring consistent progress adapting to raw material cost pressures in a global environment of soft consumer confidence. Consumers are moving across channels, categories, and brands, including varying shift between retail and food service, dairy and packaged meats, as well as value and premium brands. The good news is that SIGMA's diversified business platform gives us a relative advantage to maintain strong connections with consumers throughout the broad marketplace. One of the biggest industry-wide challenges we continue to face is rising raw material costs. In particular, Turkey Breast has experienced the sharpest price increase, reflecting supply constraints amplified by seasonal avian flu. Prices reached an all-time high of $7.10 per pound at the close of 3Q25, which was an outstanding 244% increase from a year ago. Although we have certainly felt the effects of high turkey prices and other protein costs, SIGMA's large-scale and global supply chain have helped reduce their impact on our results. Looking ahead, we anticipate that current high prices, vaccination and low feed costs will be supportive of a gradual improvement in turkey supply and cost. In addition to SGMA's structural advantages, our experienced teams have done an incredible job staying on top of consumer needs and expectations. All the initiatives we have undertaken drove third-quarter revenues to a record $2.4 billion, up 8% year-on-year and 5% sequentially. We have been implementing targeted price actions through a balanced approach to mitigate rising input costs while also supporting boiling. Erida was down 9% year-on-year due to sustained raw material cost pressures and a record high comparison in 3Q24. Adjusting for the torrented property damage reimbursements in the second quarter, Comparable EBITDA increased 3% sequentially, marking the third consecutive quarter of improvement. As a result, 9-month comparable EBITDA of $722 million is tracking in range with our full-year guidance. We are confident that this upward trend will continue gaining momentum into the fourth quarter. which implies significant year-over-year growth for the first time in 2025. Moving next to key highlights per region. Mexico was once again the standout, with revenues in local currency increasing both year-over-year and sequentially. Volume increased 1% quarter-on-quarter as growth from retail channels offset weaker performance in food service, which was impacted by soft hospitality demand. Byproduct, yogurt, and value-branded packaged meats were key drivers in the retail channels. FX-neutral EBITDA improved 6% sequentially as ongoing revenue management and efficiency initiatives offset higher raw material costs. In the United States, revenues were flat year-on-year and quarter-on-quarter, as favorable pricing was offset by lower volume in both periods. Software demand for packaged meats in national brands was partially offset as Hispanic brands continued to gain traction in mainstream channels and new customer acquisitions. Evita was 17% lower quarter on quarter, reflecting lower volume in national brands and changes in mix involving lower dairy sales. Staying in the Americas, Latin America delivered 2% currency-neutral revenue growth in the third quarter, driven by higher volume year-on-year and sequentially. EBITDA decreased 11% versus 3Q24 due to higher protein costs and mixed effects, but increased 10% quarter-on-quarter due to operating efficiencies achieved in the Central American operations. The underlying business in Europe has maintained a not-worth trajectory. Adjusting for all insurance reimbursements received last quarter, EVITDA increased more than 100% sequentially as effective price actions and torrente-related production adjustments drove a recovery trend that is expected to be amplified with seasonality effects in the fourth quarter. Lastly, SGMA's Europe Capacity Recovery Plan continues advancing on schedule toward full restoration in 2027. Looking at our financial position and select cash flow items, we maintain a strong consolidated net debt to EBITDA ratio of 2.7 times at the close of the third quarter, with a stable net debt. CAPEX represents our largest use of cash, Driven by planned investments, projects underway include capacity and distribution expansions, primarily in Mexico and the United States, plus the previously discussed capacity recovery in Spain. Next, let me briefly touch on some of the exciting steps we are actively taking to strengthen the business model for long-term success. Our growth business unit remains focused on piloting and scaling new products and ventures with disruptive growth potential. Grillhouse, our direct-to-consumer venture that caters to the grilling enthusiast, is ready to make its entrance into the U.S. after uninterrupted growth in Mexico for the last five years. At the same time, the studio, Sigma's global center of excellence for design and innovation is moving forward in its first year with developing 46 prototypes and advancing on 11 innovation commitments to boost core brands. Advancements in these areas like this will continue to set us apart from competitors in all regions. With this, let's open the call for questions. Please, operator.