Grupo Bimbo, S.A.B. de C.V.

Good afternoon, everyone, and welcome to Grupo Bimbo's third quarter results conference call. If you need a copy of the press release issued earlier today, it is available on the company's website at grupobimbo.com. Before we begin, I would like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risk and uncertainty, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements. I will now turn the call over to Mr. Rafael Pamias, Chief Executive Officer of Grupo Bimbo. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining us. Connected on the line today is our CFO, Diego Gagiola, Mark Bendix, Executive Vice President, and several members of our finance team. Before presenting the company's financial results, I would like to express on behalf of myself and all Grupo Bimbo's associates Our deepest solidarity with the people from the state of Florida, North Carolina, Yucatan, and Guerrero, who continue to deal with an extremely difficult situation after the impact of Hurricane Helen, Milton, and John. More than 3,200 associates live in the affected areas. Thankfully, everyone is safe, and we will continue to support them through these challenging times. and to serve these impacted communities and those supporting the recovery efforts. Our commitment to the safety and well-being of our associates and the communities we serve remained a top priority. These third quarter results continue to demonstrate the strength of our business, showcasing our diverse geographies and categories, as well as the exceptional execution by our teams. Overall, our volumes showed positive growth and our net sales increased 7.4%. In Mexico, we achieved strong volume growth exceeding the mixed effect and reached a strong EBITDA margin of nearly 22%. We also saw remarkable results in EAA where we attained the highest EBITDA margin ever at 10%. And our Latin region began to show signs of recovery despite ongoing challenges. with improving trends in Colombia and Chile, and resilience in Argentina. These successes help offset the difficult environment in North America, where while we observe improvements compared to the first half of the year, consumption remains soft. Collectively, all the mentioned results contributed to a record adjusted EBITDA margin for the third quarter at 14.7%. As we move ahead, our focus will be on firing up volume everywhere and reinventing our productivity to secure our long-term sustainability. I would like to share that in line with our ongoing efforts to optimize our global footprint. We will be closing five bakeries, three in the U.S., which we communicated last quarter, one in Valladolid, Spain, and one in Canada. Throughout this process, our main priority remains our associates and their well-being. We communicated to providing, we are committed, apologies, to providing support during this transition, ensuring that all team members receive the assistance they need. In September, we held the ninth BIMBO Global Race, and thanks to more than 300,000 participants, including 160,000 virtual runners, more than 3 million slices of bread are being donated to food banks around the world. We are honored to have received multiple recognitions this quarter, one as the company with the best corporate reputation in Mexico by Merco, and two global recognitions, one of the world's best employers by the Forbes magazine, and for a second consecutive year, one of the world's best companies within the top global food category by Times Magazine. Now, looking into the results by region, in Mexico, sales improved by 6.6%, mainly due to strong trends across most categories and throughout every channel. A positive mixed effect increasing the value to our consumers with four quarters in a row with positive and improving volume evolution. Adjusted EBITDA margin in Mexico reached a strong level at almost 22%, with an expansion of 160 basis points, reflecting the positive volume contribution, favorable mixed effect, and lower commodity costs. In North America, excluding FX effect, top line declined 4%, mainly due to the continued industry-wide weight consumption environment, driven by a stressed consumer seeking value from extended inflation pressures and the strategic exit of certain non-branded business. Within this tough context, the good news is that we are generally seeing a slightly improved trend sequentially. In fact, our branded business is already flat on a volume basis, and we have grown unit share in bagels, sweet baked goods, and snack categories. We continue to evaluate promotions to ensure we have competitive pricing in the marketplace and enable the right price volume equation while continuing to drive consumer engagement and market penetration. We are making efforts to expand our distribution to meet the consumer where they shop and provide the right value for them through price pack architecture aligned with the channel. Despite the lower commodity costs and the realization of strong productivity benefits, adjusted EBITDA margin contracted 140 basis points, mainly due to strategic investments to lower our costs and expanding our value chain to increase our capabilities to better serve more customers and consumers. These investments include part of the one-time charges related to the closure of the bakeries I mentioned before, which are older and slower bakeries with limited impact on our overall capacity, as well as investments to optimize our go-to-market capabilities. Our forward focus will remain on proactively pursuing opportunities to improve our cost structure, expand our distribution, and grow share by meeting consumers at every shopping location. Moving on to Latin America, excluding effects In fact, net sales increased 7.7%, mainly because of the good results in Brazil and the Latin Sur division, and also smaller countries such as Costa Rica and El Salvador. On top of that, our business in Argentina has shown signs of resilience due to our ability to capitalize our risk management policies together with proactive revenue growth management strategies. and our Colombia and Chile organizations have shown improved trends. In fact, Colombia started to grow its profitability. During the quarter, we also completed the acquisition of Panyific in Uruguay, a well-recognized player in the high-quality frozen bread market. This transaction will allow us to continue expanding our local portfolio as well as exporting Panyific's successful business model to various countries in South America. And during the quarter, we also signed an agreement to acquire Wickbolt, a player in the baking industry in Brazil. This family-owned business complements our brand portfolio with brands that consumers love and better positioned our company in the south region of Brazil. In Europe, Asia, and Africa, exploding FX sales increased 7.3%. This was mainly due to strong performance in BIMBO QSR, double-digit sales growth in Romania, UK, India, and Morocco, coupled with the inorganic contribution from the three acquisitions we have completed in the region over the last 12 months. The remarkable adjusted EBITDA margin expansion of 240 basis points resulted from a solid sales performance, lower cost of sales, efficiencies throughout the supply chain, and the positive contribution from the past acquisitions, which led to a record margin for a third quarter of 10%. We are excited to announce the signing of an agreement to acquire Dondon, a leading player in the baking industry in Southeast Europe, with presence in four countries, Serbia, Slovenia, Croatia, and Montenegro, with exports to several others. This acquisition is accretive and complements our recent investments in a region of solid growth and high per capita consumption of bread products. Dondon has a strong, well-established brand, a robust manufacturing footprint, and an extensive distribution network. This acquisition is still pending regulatory approvals. While it is a bolt-on acquisition, it aligns strategically with our company's long-term goals. With this, I would now like to turn over the call to Diego, who will walk you through our financials.

Please, Diego, go ahead. Thank you, Rafa. Good afternoon, everyone, and thank you for joining us today. These quarter results were good and a perfect example of the benefits of being a well-diversified company, not only in terms of categories and channels, but also in terms of countries and currencies. We achieved an all-time high in sales, a positive mix evolution, and we continue to benefit from lower commodity prices and the acquisitions made in the past, resulting in a record adjusted dividend margin for a third quarter. All this happened despite the sub-consumer environment we and most CPGs are experiencing in the U.S., while we continue to invest in our transformation journey for our value chain in the country. Going a little bit deeper into the results, I want to mention that most of the difference between our gross margin expansion and our lower EBITDA margin expansion comes from North America. And it is mainly explained by, one, The investments we are making to transform our value chain for the long term. Second, the one-time expenses related to the bakery closures. And third, and to a lesser extent, the 4% decrease in top line. On a smaller degree, we are also investing in our distribution network in Mexico to expand our reach. which is already partially reflected in our strong sales performance. And we feel confident this will continue to deliver the expected growth in our revenues. And finally, in Latin America, we saw a challenging consumption environment in Colombia and Chile, as well as one-time expenses related to the reallocation of our plant in Paraguay. Moving on to the balance sheet, we closed the quarter with a net debt to adjusted EBITDA ratio of 2.8 times. Our total debt closed at 146 billion pesos. The increase in our debt position when compared to 2023 was because of the financing for our strategic investments, including our bolt-on acquisitions that were closed during the quarter and also because of the depreciation of the Mexican peso of more than 16%, or 2.7 pesos per dollar. As for our accumulated operating working capital, we saw an improvement of approximately $50 million as compared to the nine months of last year, mainly due to an improvement in suppliers and inventories. Overall, we remain optimistic about our future, especially because of the investments we're making for our long-term performance and because of our solid diversification and leadership position within the countries where we operate. While we continue to anticipate a challenging consumer environment in North America, All our other regions are showing strong trends. So we reiterate our guidance for the full year. We anticipate that our CapEx investments will end the year close to the low part of the range at approximately $1.8 billion. So with this, we can now proceed with the Q&A session, please.