Grupo Bimbo Sa Spns/Adr

Good day and welcome to the Group of Monroe second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Rafael Pamir, CEO. Please go ahead.

Rafael Pamir, CEO, Good afternoon, everyone, and thank you for joining us. Connected on the line today are our CFO, Evo Gagiola, Executive Vice President, Mark Bendix, along with several members of our finance team. Before we begin, I would like to take a moment to express our deepest condolences for the passing of Don Roberto Servizio Sendra, one of Grupo Bimbo's visionary founders, but Roberto was not only instrumental in building and expanding the company into what it is today, a global leader in the baking industry, but he also embodied the values that continue to guide us, integrity, humility, hard work, high-quality standards, and a deep commitment to people and society. His legacy is woven into the fabric of our organization, and we remain profoundly grateful for his leadership and inspiration. On behalf of the entire group of Bimbo family, we honor his memory and extend our heartfelt sympathies to Daniel, his family, and loved ones. Now moving into our second quarter results. Our second quarter results clearly demonstrate the extent and resilience of our business as we continue to navigate a complex and rapidly evolving environment across multiple markets. What sets us apart is the power of our highly diversified model, spanning geographies, channels, categories, and currencies, which provides the flexibility to deliver strong results today while we are strategically investing for the future. We are pleased to report a sequential acceleration in sales growth. Our operations outside the U.S. maintain strong momentum, achieving record performance in either sales or everyday margin. In North America, our teams made significant progress in unlocking productivity across the supply chain despite a challenging environment and succeeded in regaining share in key categories that had been under pressure for several quarters. Innovation remains at the core of our growth agenda. Our innovation rate has now surpassed 12% and we're actively firing up volume everywhere. At the same time, we are unlocking value from prior investments and laying the foundation for long-term sustainable growth. We're managing the present with discipline, but we're not standing still. We're looking into strategic investments, entering new business models, and pursuing targeted acquisitions that strengthen our competitive position and accelerate value creation. We remain dedicated to advancing our ESG strategy. While we recognize the progress achieved, We continue to be focused on reducing our carbon footprint and are committed to enhance our portfolio by delivering the best nutritional experience with simpler and more natural recipes. We're proud to report that 99% of our daily consumption products, including our core categories of bread, plantain rolls, tortillas, bagels, and English muffins, are now free from artificial flavors and colorants. These mentioned categories represent roughly 50% of our net sales globally and more than 70% of our sales in the U.S. We continue making solid progress towards our health and wellness targets. By year end, we expect 100% of our bread, buns, and breakfast portfolio to have positive nutrition, meaning the achievement of health star rating score plus or equal 3.5 stars. We're also broadening our focus to remove artificial colors from all of our products by the end of 2026. Looking further ahead, we've set a clear ambition for 2030. 100% of our baked goods and snacks will be made with simple, natural recipes, ensuring our products remain safe, nutritious, affordable, and accessible to consumers worldwide. Now, looking into the results by region, in Mexico, we delivered sales growth of 3%, despite a softer consumer environment, and on top of the record results achieved in the second quarter of 2024, reaching a new all-time high for the business. This performance was driven by a favorable mix and strong momentum across key categories such as buns and rolls, cookies, cakes, and pastries. Nearly all channels contributed to this growth. with particularly strong results in convenience and traditional. It is worth noting that these results include a negative calendar effect from the shift of Easter week. Excluding this impact, sales would have grown by 4%. We remain encouraged by the resilience of our business and brands and their consistent ability to generate value. Our record high margin of 20.3% underscores the extent and flexibility of our operating model enabled by a favorable mix and lower cost of sales. We are prioritizing volume performance and meet short-term volatility with successful initiatives, focusing on the right price-back architecture to meet evolving consumer needs across segments. We are also strengthening our brand equity through innovative product launches such as Artesano Masa Madre, Bimbo Half-Loved Bread, a valued price cookies portfolio, and field premium pastries. We are committed to enhance our portfolio by delivering the best nutritional, oh, sorry. At the same time, we continue to our long-term strategy with discipline, investing to position the business for sustainable growth, aligned with our recent public commitment of investing over $2 billion in Mexico from 2025 to 2028. In North America, excluding FX, sales declined more than 4%, reflecting continued softness in U.S. consumption as value-seeking behavior persists. We are also lapping the impact of last year's strategic exits from certain non-branded clients, which happened in October on the U.S. and this quarter in Canada. We remain committed to strengthening our revenue growth management strategy and enhancing our value proposition through innovation that aligns with evolving consumer preferences. Our recently launched price value bread portfolio is effectively addressing shifting consumption dynamics, while our continued expansion in artisanal breads supports our premium offering. At the same time, we have gained market share in key categories such as branded buns and rolls, snacks, and mainstream bread, which had experienced several quarters of declines but are now stabilizing for us. This performance underscores the resilience and breadth of our portfolio. We're also capturing the benefits of the transformation project initiated a year ago with a strong notable productivity gains across our supply chain, including manufacturing, administrative, and logistic initiatives. As a result, our EBITDA margin has been improving sequentially, rising from 5.9 in Q4 24 to 7.4% in Q1 2025, and reaching 9% this quarter. Moving on to Latin America, excluding FX effect, we set a record for a second quarter for net sales, fueled by robust volume and sales momentum across every organization, showcased by the double-digit growth achieved in Latin Sur, Brazil, and El Salvador, along with consistent gains in Colombia and Chile. This robust top-line growth, combined with a solid volume performance and disciplined cost management, resulted in an adjusted EBITDA margin expansion of 100 basis points. Chile and Colombia continued to deliver strong profitability, while the Latin Sur and Latin Central divisions stood out with exceptional performance, further reinforcing the region's positive trajectory. During this quarter, We acquired the remaining 40% stake of our business in Colombia. The acquisition of Panific also contributed to a lesser extent to the growth of the region. Please be advised that we are still waiting for the authorization of the acquisition of Wikibold in Brazil, which we expect in the second half of the year. In Europe, Asia, and Africa, excluding FXFX, sales increased by nearly 7%. This performance was primarily driven by the consistent strength of the BIMBO QSR business unit, India, Romania, and the UK, and the contribution from the acquisitions we completed in the last 12 months, including in Tunisia, in Romania, and one month of in the Balkans. The adjusted EBITDA margin was benefited by the strong sales performance, lower commodity costs, and administrative expenses, along with the accretive effect from past acquisitions. However, these gains were upset by weaker results in our branded business in China, as well as the combined effect of minimum wage increases and the phase-out of wage subsidies in Romania. I'm happy to share that we closed the acquisition of Dondon, a leading player in the baking industry in Southeast Europe with operations in four countries. Serbia, Slovenia, Croatia, and Montenegro, and exports to several others. Dondon has a strong, well-established brand, a robust manufacturing footprint, and an extensive distribution network. This acquisition is accretive and complements our recent investment in this region, characterized by solid growth and high per capita bread consumption. With this acquisition, we now operate in 39 countries, and through some strategic partnerships, we serve a total of 76 countries worldwide. With this, I would like 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. We saw an honorable performance across key regions this quarter, with net sales reaching historic levels for a second quarter. This success was driven by our focus on innovation, productivity benefits in key markets, such as North America, and engaging both customers and consumers throughout most regions. As anticipated, I shared during our last earnings call, our EBITDA margin contracted mostly due to the continued challenging environment in North America. In defense of ongoing volatility, we continue to take deliberate actions that position us to generate sustained value for our shareholders over the long term. Our total debt close at 157 billion pesos, representing a 6 billion increase compared to the end of 2024. This was primarily driven by the acquisitions completed during the year and our ongoing CapEx program, which reached $486 million as of the end of June. These effects were partially offset by the appreciation of the Mexican peso. Despite this investment, our net debt to adjusted dividend remained unchanged from the end of 2024 at 2.9 times. Our disciplined approach to financial management enabled us to navigate macroeconomic challenges with prudence. In the face of external pressures, we continue to prioritize operational efficiency, cost control, and strategic resource allocation to project margins and drive long-term value creation. Supported by a strong financial foundation and a fully available $1.93 billion committed revolving credit facility, we are well positioned to adapt to a changing market dynamics while remaining focused on sustainable growth. As noted during our previous earnings call, We anticipated a challenging first half of the year in terms of margin, primarily due to the continued pressure in North America from the transformation initiatives and a challenging consumer environment. It's important to note that the majority of the investments related to our transformation project began in the third quarter of 2024, creating a difficult year-over-year comparison during the first half of 2025. That said, we continue to anticipate an improvement in the second half of the year, driven by ongoing operational enhancements and a more favorable year-over-year comparison. These factors reinforce our confidence in delivering area margin expansion during the second half. Importantly, we are already beginning to see the benefits from this investment as evidenced by our sequential margin improvement in North America from 5.9% in the fourth quarter to 7.4 in the first quarter and closing the second quarter at 9%. To conclude the call, we are revising our full year guidance because of having a stronger peso. We now anticipate an average exchange rate of 19.75 pesos versus the 20 pesos 50 cents that we previously expected. This 75 cents change represents an impact of 250 basis points on our top line growth. So we are adjusting our full year outlook reflecting this change. For sales, we now expect a mid single digit growth rate from the previous high single digit growth rate. For our adjusted dividend margin, We anticipate a slight improvement compared to the previous guidance of a slight margin contraction. We now expect a slap to a very slight margin contraction for the full year. As mentioned before, we foresee a margin expansion in the second half, which will contribute to this expectation for the full year. As for CAPEX, we are lowering our guidance to be between $1.3 to $1.4 billion from the $1.4 to $1.5 billion initially expected. And finally, regarding the leverage ratio, since the change in guidance is driven by a stronger peso, we now expect our net leverage ratio to close the year at around three times, as a portion of our debt is denominated in US dollars. Despite the challenges we have faced this year and the ongoing uncertainty across key macroeconomic environments, we remain confident in our long-term strategy. As a highly diversified global company and industry leader, We are well positioned to navigate . Our unwavering commitment to investing in the business, driving growth, and delivering sustainable value to all our stakeholders continues to guide our actions. Thank you for your time, and we can now move to the Q&A session.

Thank you. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. First question comes from Tiago Ardeo with CIDI. Please go ahead.

Yes. Hello. Good afternoon, everyone. Thank you for taking my questions. I would like to explore a bit more two points here that were already discussed in the initial remarks. First, on the US performance, we saw sales on an FX neutral basis declining 5%. So just wondering if we could get a little bit of discussion regarding volumes versus pricing, whatever you can you can share with us so we can understand the two impacts here. And still in the U.S., we saw more optimism regarding the good performance in snacks. So just wondering if we could also discuss what's improving on a sequential basis for this category. And secondly, if I may, going into Mexico, we saw stronger profitability, cross-margin improving 80 bps year-on-year and EBITDA margin 30 bps. So just hoping if you could drive us, just lead us through the main impacts here, regarding COGS, SG&A, and the initial remarks you mentioned also favorable mix. So just whatever you can give us to understand the different magnitudes of impact for the profitability in Mexico. That's it. Thank you very much.

Okay. I'll take the first question about results in the U.S. and what we're seeing in terms of business performance. Thanks for the question. So many of our categories, as Rafa remarked, remain challenged in the U.S., but we are seeing small gains in our mainstream, in our buns and rolls, and as you indicated, in our salty snacks business. In the U.S., we're seeing a bifurcation of consumers where the economically stressed consumers are moving down to private label or other value offerings, while more affluent consumers are moving to more premium products. So that challenge as the largest player, we have an oversized exposure in the largest segment of that category in the middle, which is where the bulk of the category declines are occurring. In our business momentum, we are, we don't have enough momentum yet to offset that, offset the losses. But what we're now focused on is expanding our offerings in the value segment. As Rafa indicated, we've introduced thoroughly hot half lobes, which are doing extremely well, and bimbo bread. in the value segment and the distribution is expanding across the entire country so we're seeing uh bimbo buns in also introduced into the value mainstream and in the premium segment we're expanding distribution of our rustique and the introduction of protein focused products which have really resonated with the health conscious and the glp consumers so That should give you a good sense of how our categories are performing and where we're challenged and where we're seeing some momentum.

Yes. Thank you, Mark. Now, regarding the difference in Mexico between the expansion in the gross margin and the EBITDA margin that you mentioned that, yes, effectively, we have, let's say, 60 basis of pressure in our SG&A. mainly has to do that we have been investing heavily in our distribution to expand our reach in order to continue growing our top line as we did during the quarter. So this we feel very confident will continue to create benefits in the coming quarters.

Fantastic. Very clear. Thank you very much.

The next question comes from Henrique Morello with Morgan Stanley. Please go ahead.

Hi, everyone. Thank you so much for taking my question. So I'd just like to ask a follow-up on the revenue performance in the U.S. So if you could share any quantitative or even qualitative information or data or any additional details that could help us understand how the progress of the transformational progress you are going through in the U.S., is evolving, that would be very helpful for us. And then, given you already achieved the 9% of EBITDA margin this quarter, if you could also touch on how we should think about margins going forward and if we should still think about big sequential improvements and when perhaps we should see double digits again would be very helpful as well. Thank you very much.

Great. Thanks for the question. Let me first start on the qualitative side of the transformation. And, Diego, I'll let you address the quantitative side. First, what we're doing with our transformation program is we are optimizing and integrating across all aspects of our business, which includes our people, our processes, the technology, and our systems. And this is aimed at helping us reach our full potential in the U.S. We're refining and implementing our new capabilities and technologies and processes. We're growing our customer base across all major channels, and we're expanding our ability to get to new channels, including away from home. We're investing in our world-class operational efficiencies, and our transformation really remains aligned with our long-term expectations. The expected benefits from our transformation really begin in 2026. But we expect for our business to have sequentially improving results in the back half of this year. So the progress is a little bit slower than anticipated due to the uncertain economic environment that we're seeing in the US. But our productivity transformation is really well on track. and we continue to make steady progress towards our long-term goals for both growth and productivity. Diego, do you want to take it from here?

Sure. Thank you, Mark, again. Yes, I think you're right. Sequentially, we have been able to achieve important margin expansion in North America since the fourth quarter. We feel very confident we will continue to see a margin expansion, not necessarily sequentially because in the business, there is seasonality. Remember that second quarter and third quarter for North America are the rest quarters. Well, I mean, taking out the seasonality, this is going to be really the big driver of our margin expansion in Group of England for the second half. I don't think we're going to be reaching the double-digit as you mentioned, but we're going to see consistent high single-digit EBITDA margins for the region in the coming two quarters.

That's very helpful. Thank you very much. Great.

The next question comes from Antonio Fernandez with Actinware. Please go ahead.

Hi, good afternoon. Thanks for taking up this Congress on the resource. Just a quick one regarding this updated CapEx guidance. We're using most of the changes in this new CapEx guidance. Thanks. Yes. We're lowering the guidance basically $100 million to reflect the current pace at which our key projects are progressing. This adjustment aligns with the actual timing of execution and ensures our investment levels remain disciplined while still supporting our long-term strategic priorities. So we're not canceling any projects. We will continue to grow as we were planning. It's just that we're going a little bit slower in the execution, and these $100 million will be reflected more as a carryover capex in 2026. Okay. Thanks for the follow-up. And finally, just a follow-up on food service. What food service trends are you seeing across the different operating regions, mainly the most relevant regions? Thanks.

In the food service world, we're seeing the same challenge in North America that we see on the consumer side, consumer seeking value. But in developed European markets and the Asian markets, we're seeing growth in our food service businesses, primarily in our QSR business, which continues to have very good growth and very good profitability appreciation. challenges in the U.S. better and develop European and Asia is very good.

Okay.

Thanks for the comments.

Have a great day.

The next question comes from Lucas Herrera with JP Morgan. Please go ahead.

I hope you hear me well. My first question is regarding Mexico. So we've been seeing of the consumer in Mexico. The remittances numbers show this, and that's, you know, the mood I know you're very aware of. So my question is, in Mexico, if you were seeing the consumer, you know, tending liquor, especially now in June, July, if we're seeing any important deceleration in sales and if you are, what the company is doing to avoid that deceleration or to eventually increase market share, is the company more promotional? Any color you can leave on the consumption environment in Mexico and what the company is doing to face these challenges would be great. And the second question maybe to Diego. I just wanted to double-check and run some quick calculations here on the guidance. Just to make sure these 200 bits change in top line is just exclusively related to your effects of forecast change or if there's anything else driving this decline that you can share with us. Thank you very much.

Hi, Lucas. Good afternoon. Look, definitely remittances declined by nearly 5% in May, and this could place some pressure on the already soft in consumption in Mexico. Definitely, we're seeing some softness, but we continue to deliver growth in all channels and most categories in Mexico. I mean, we're happy to share that the convenience channel showed a recovery. because we were working together with the customer, the main customer in this channel, with targeted initiatives to accelerate growth. I would say that the fact that Mexico has a strong market position and the trust of customers and consumers, we feel that we're going to be wavering this softness in consumption. Let me remind you that we have a lot of margin of maneuvering because we're present across both branded and unbranded. We offer a competitive portfolio across channels, categories, locations, and consumer needs. We can deliver fresh and frozen, and we are quite fast in adapting. Actually, we have kept growing in this soft environment because we have been quite smart on GPA activities in bread to play the whole field. We have been betting on premium offer in both bread and buns and also with high-quality chocolate fillings. Also, we have been able to activate quickly some products with on-pack offerings and free gifts. Definitely, it is helping the fact that we are on high double-digit innovation in Mexico. And last but not least, we also plan to keep extending our commercial footprint in all channels. I mean, with our renewed effort and focus on wholesale, car discounts, and the digital DSD. So, all in all, I think that we are ready to fight this self-missing consumption. Hi, Alvaro. Yes, the answer is the adjustment and the guidance is 100% because of the effects. And let me, in order to try to be clear, give you some rough numbers on how we arrived to the 250 basis adjustment on the top line growth for the full year. So, again, this is rough numbers. you know that we have close to 70% of our revenues outside of Mexico, a little bit less than, but rounding the number to 70, that will get you to approximately $15 billion, which are done outside of Mexico. Fifteen billion times 75 cents is an adjustment of more than 11 billion pesos of negative effect in our top line. From the base, this means more than 250 basis. So that is why we are adjusting the top line growth because of expecting now a stronger peso than what we did in the last call. Now, following that effect, which of course it is good news for us when you see the whole picture, the Mexico, operation will win share within our group for portfolio, as the operations outside of Mexico will be lower because of the stronger Mexican peso. In Mexico, the organization of the businesses with the highest margin creates also a positive effect in a way with the margin, and that is why we also adjusted the expectation on the EBITDA margin contraction. And we believe it can either be flat to last year to a very slight contraction.

Thank you very much, guys.

The next question comes from Alvaro Garcia with BTG. Please go ahead.

Hi. Thanks for the space for questions. First off, sorry to hear. Sad news about the passing of Don Roberto, he's a legend. Questions on, I have three questions. One, just to triple check what you literally just said, Diego, on the guidance. The margin improvement is entirely a function of seeing more Mexico in your P&L or if there's any specific margin improvements that you have relative to your initial expectations. That's my first question, which I think you just answered, but just to triple check on that. On Dondon, Rafa, you mentioned it was a creative. Obviously, that has been a success in that region. I don't want to generalize. A lot of different countries. But it's a big bet. It seems like a pretty big bet, Dondon. I was just wondering if you could maybe expand on the opportunity and the plans BIMBO has, and maybe if you could expand potentially on some numbers. I don't know if you, now that it's closed, you could maybe share. some numbers given that you noted it's a creative profitability or the like. And then one last one on artificial colors. Pretty interesting comments you had on sort of getting rid of that through 2026. Is there a cost impact to this? And does this impact the taste profile at all of your products? Thank you.

Hi, Alvaro. I'm sorry, Lucas, that I mentioned a lot. Well, answering your question regarding the adjustment on the expectations, I would say the vast majority has to do with the adjustment on the exchange rate, but as I explained, creates a positive effect in our consolidated period of margin because of the business mix of our portfolio. because we're seeing a better performance in LATAM, and we also feel very confident this will continue to be the case in the coming quarters. And as you have seen, in Mexico, even though the consumer environment hasn't been strong, our brands have proven to be very resilient, and we have been able to continue to grow our top line. We have been investing in our distribution. which also give us the confidence that we will continue to achieve top-line growth for the coming quarter. And I will let Rafa for the strategic part of Rondon, but let me get in advance just to mention, we do not disclose the specific of the acquisitions. What I can share with you is that This operation represents approximately 1% of our sales, and more than that, a group of InvoSales on a consolidated level, not for the region, and on an EBITDA level, more than that, because it is an accretive acquisition. It already was in the second quarter. Unfortunately, only one month as we closed the transaction at the very end of May.

That was 1% of sales?

1%, yes. Thank you very much. Let me give you a qualitative perspective. Less than five years ago, our presence in EMEA was in four countries, Morocco, Portugal, Spain, and UK. Today, we are in 10 countries directly and serving through smart logistic arcs and many more. I would say that what happened differently five years ago, we turned our focus on still fragmented, but growing hypercapita consumption markets that were yet to be consolidated. And we thought that our know-how and our know-how in marketing, but also know-how in manufacturing and logistics was a great fit to really have the first mover advance and opportunity. And we're happy with that because all of our acquisitions in the region are positive and the overall conclusion of all that investment is that we are on top of our business cases and in overall with a criticalness. So we're looking for synergies and efficient logistic arcs in an area many people consuming bread products, and we're happy with what we've seen. Also, we have found great talent, great local talent that allow us to take the companies to the next level. So we're quite happy with the new focus on EMEA. And, Alvaro, I don't know if you can repeat the last question because we couldn't understand it.

Sure. Yeah, you gave some new color on artificial coloring in your products in your prepared remarks and in the press release. I think you mentioned that you would do away with artificial colors in your products by the end of 2026, and I was wondering if there was a cost, a relevant cost, and if it impacted the taste profile of your products at all.

Yes, absolutely. I would say that we do not anticipate that we're going to be having significant changes or significant impact in cost, and we're making sure that we're going to remain a favorite of our consumers. Let me give you a quick background, so I think it is the right moment to share it. The food industry has a fundamental responsibility of offering safe, nutritious, affordable, and accessible products. around the world. And this is seldom said, right? But definitely, we're fully dedicated to delivering a superior healthy experience. And let me share with you that our efforts have led to measurable progress. For example, 45 of our global sales come from products that meet or exceed optimal nutritional standards. 99% of our daily consumption portfolio is free from artificial flavors and colorants. The daily portfolio is around bread, breakfast, flatbreads, right? And definitely, our commitment doesn't stop there. In 2026, we're going to, by the end of 2026, we will have removal artificial colors from all our portfolio. And by 2030, we're going to ensure that 100% of our baked goods and snacks will be made with simple, natural recipes. that remains still affordable across all points of sale. So, it is our commitment, but it is also the progress we have been making.

Great. Thank you very much. I'm sorry for all the questions. Thank you.

The next question comes from Fernando Alvarez with Bank of America. Please go ahead.

Hi. Good afternoon, and thanks for taking my question. The first one is related to Mexico, and if you can comment about how the $2 billion in capex mentioned in the initial remarks and press release will be distributed between 25 and 28, and what will be the main projects in which you will invest. That's the first one.

Yes. Hi, Fernando. Well, as you know, this is in four years. This is already included in our expectation. It's not necessarily one single project. As you know, we're investing in different businesses in different locations in Mexico, manufacturing, distribution, distribution centers, electric bands that we're using, So it's, I would say, spread all over our operations. And it's also equally, I could say, equally spread for the years. It's not that we would see a specific jump in one of the years. And again, this is already included in the guidelines that we provided for 2025.

Okay, great. And my second question, And if you have any update about WigVault.

Yep. That goes with me. The transaction is still under the regulatory process. We expect to have the resolution in the second half of the year. Since the last time we met, the tribunal of the CADE is performing the usual procedures. And we are providing the information they require. But it's going to, the process is going to conclude by the second semester of the year. It's actually, we feel regulatory timings. That we know for sure.

Great. Thank you so much.

Thanks to you.

The next question comes from Philippe Ucos with Kosher Bank. Please go ahead.

Thanks operator. Good evening. Two quick questions. One on hedging off raw materials. Prices for some of the raw materials you use have remained stable. Volatility has been low. So just wondered if you've moved ahead on your hedging plans for 2026, taking advantage of this. And then the second one on your brief mention about market shares in the U.S., since you've been recovering in the categories where you have shipped some share, just wondering if you could share a little bit about what the drivers behind that were. I know you mentioned innovation, Wondering if there's also been promotions or any other types of drivers that are kind of helping you make your way back up. Thank you.

Yes. Hi, Felipe. Mark, if you want, I can take first the hedging.

Please take the hedging. Yeah.

Please. Okay. So, Felipe, we have already hedged, I would say, very close to 100% of our commodity needs for 2025. In fact, we already started to hedge part of 2026. And we have a very disciplined approach and a very disciplined methodology on how we hedge. So it is more like a rolling methodology that we don't necessarily take a view if we believe commodities are cheap and we tend to be more aggressive. I mean, we do operate within a bandwidth, but it's a consistent methodology with the philosophy of providing the visibility for our operations on the cost of the most important raw materials. So that way we can properly do all the strategic planning for prices. So, again, that is why we already started to hedge 2026, and we will continue to do this rolling methodology within the internal policy for hedges that we have in place and that we're very strict, and we basically never move.

Understood. And if I can follow up a little bit on that, 2026 is the year that I was interested in. I know you have some relay between the bands in which you move. Any color you can give us on where you are and percentage of needs for 2026?

It's still not very relevant. We have some hedges for the first quarter. I'd say for some of the most important raw materials, probably more than half. of our commodity needs in the first quarter, and we have just started to hedge the second quarter of 2026.

Exactly what I was looking for. Thanks a lot for that.

Great.

Felipe, for the second part of your question, just a few comments. Hopefully, that helped. First, we're driving stronger commercial performance through, first of all, portfolio simplification. expanding our distribution of value and premium products so bimbo bread is really resonating with consumers at the value end and our product rustique which is a sourdough super premium product has really also resonated at the high end so we're hitting both value and super premium where the where the market has bifurcated to and we've uh we've implemented some strategic pricing And we've maximized our buns and rolls season capturing really good opportunities and making sense to the consumer in our stratification of our value mainstream and premium. So, we feel good about that. And the reason why we're still optimistic is our brand, our top brands continue to grow household penetration and resonate with our consumers. We have exciting innovation, as Rafa said, our pipeline of ballpark butter buns, bimbo buns, Thomas's protein bagels, and we're expanding muffin tops and Thomas's croissant bread. So, while trade down does exist, consumers are sticking with brands that they trust, and we have some of those most dominant brands. And so, especially when those brands offer clear functional or emotional benefits. We're also deploying our RGM discipline so that we're looking at promotions very, very critically because they're not responding as they have in the past. So, we found that discipline is helping a great deal. And interestingly enough, what you would, I think, find interesting in North America, our brands have a penetration above 83%. So, strong base. There is a difficult consumer environment, but we remain optimistic.

Great color in that. Maybe if I can, if any additional color you can give us on functional categories since they seem to be resonating with consumers quite a bit. I think you mentioned protein-focused breads. Just wondering what the view is on whether it's a fad or you think there's this functionality in bread is something that can stick for the long run.

No, I think with the younger consumers, what we're seeing is the functional benefits are clearly important, and it's not a fad. It's a trend. And so Rafa mentioned that we introduced Thomas's Protein Bagels, where each bagel has 20 grams of protein in it, and it tastes great. So we have other products that are premium bred that include protein that we're just rolling out now. And I think you'll see more functional benefit products come from our innovation pipeline in the quarters and years to come, for sure.

Great. Thanks a lot for that call, Mark.

The next question comes from Regina Carrillo with GBM. Please go ahead.

Hi. Thank you for taking my question, and congratulations on the results. I was wondering about the CAPEX guidance. Do you think you could maybe guide us on how much of that guidance should we expect it to be maintenance versus gross CAPEX, and in the gross CAPEX, how much you use for organic versus inorganic development?

Yes. Our maintenance capex is between $800 to $900 million every year. On top of that, we have some capex typically on the range of $100 million for productivity, and we have between $300 to $400 million of capex for growth for this year, which is the one that has been lowering as compared to the previous two years. And that is why in 2023, we surpassed $2 billion of capital. We invested heavily for future growth in different geographies and categories. Then in 2024, we invested $1.6 billion. And now, as I mentioned, we expect to be within the range of $1.3 to $1.4 billion.

Thank you so much. And if I may add another question, I was wondering how about your snacks division. Could you give us some color on how, you know, Barcel and Taki have been performing versus other categories in your product line, please? Thank you.

Well, we do not disclose specific information, Regina, sorry, by product or by category. So, unfortunately, we cannot share any specifics on that.

Okay. No worries. Thank you so much. This concludes the question and answer session. I would like to turn the conference back over to Rafael Palmeiro for any closing remarks. Please go ahead.

Thank you. Thank you all for your time today. Please do not hesitate to contact our investor relations team with any further comments or questions you might have. Have a great day. Bye-bye.

The conference is now concluded. You may now disconnect.