Arca Continental, S.A.B. de C.V.

Do today's ARCA Continental 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 the star and 1 on your touch-tone phone. Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of Ideal Advisors.

Thank you, Operator. Good morning, everyone. Thanks for joining the senior management team of Arca Continental this morning to review the results for the first quarter of 2024. The earnings release went out this morning, and it's available on the company website at arcacontal.com in the investor relations section. It's now my pleasure to introduce our speakers. Joining us from Monterey is the CEO, Mr. Arturo Gutierrez, the CFO, Mr. Emilio Marcos, and the Executive Director of Planning, Mr. Jesús García. They're going to be making forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance. And with that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who's going to begin the presentation. So please go ahead, Arturo.

Thank you, Melanie, and good morning, everyone. We appreciate you joining us for an update on our first quarter performance. I'm happy to announce that we've experienced a favorable start to 2024, marked by positive momentum. We initiated the year on a high note, achieving strong operational performance and solid financial results. Total consolidated volume grew 0.1% in the quarter, reaching 565 million unit cases. We've posted positive volume readings in most of our operations, overcoming a still volatile economic landscape in South America, particularly Argentina. Total consolidated revenue was in line with last year, up 0.1%. On a currency-neutral basis, revenues grew 8.5% in the quarter. Consolidated EBITDA for the quarter grew 1.2%, representing a margin of 19%. Remarkably, this is the highest consolidated margin for a first quarter in the last six years. Before I turn to my discussion on our operating results, I'd like to highlight a significant milestone in our journey to evolve and scale Arca Continental's digital ecosystem. This quarter, we launched the Digital Nest, our technology and innovation hub. This center hosts approximately 200 experts specialized in fields of data science, platform development, and commercial strategies, focused on building our integrated ecosystem while developing our capabilities for the future. Our digital agenda continues to make progress as demonstrated by several key indicators. As of March 2024, AC Digital reached over 850,000 registered customers in LATAM. Among them, over 70% are actively engaged with our platform, and more than 60% of the volume from our traditional trade was ordered through the app. Our recent studies confirm that digitized customers consistently outperform non-digitized customers. These incremental volumes come from increased order frequency, higher drop size, and expansion of portfolio. Moreover, our digital channels generated revenues exceeding $500 million just in the first quarter of this year alone. Now let's review the performance and highlights across our operations. Our beverage business in Mexico continued driving steady positive momentum. delivering another solid quarter of volume growth of 3.1% and cycling a strong 5% from the same quarter in 2023. Mexico's volume was the highest first quarter performance since 2017. Volume growth was driven by a robust growth in colas of 3.3% and spills with a 10% growth. Sparkling variances represented over 65% of the total volume growth. Importantly, Coca-Cola without sugar grew 15% in the quarter, driven by increased coverage and supported with ongoing innovation through the Coca-Cola Creations platform. We continue to perform strongly in all our channels. Growth was mainly driven by the bar trade up 10.2%. Total net sales in Mexico rose 7.7% in the quarter, reaching 23.3 billion pesos, marking the 31st consecutive quarter of net revenue growth. Average price per case in Mexico in the quarter, not including drug water, rose 5.2%, reaching 85.01 pesos. We captured a dissonant non-alcoholic ready-to-drink value share in Mexico as a result of our team's ability to execute clear location-based channel strategies across all beverage categories. EBITDA increased 9.7% to 5.2 billion pesos in the quarter, representing a margin of 22.2%. This quarter, we reached 21 consecutive quarters of EBITDA growth, which demonstrates the resilience of our bearish business in Mexico. Turning now to our operations in South America, total volume was down 3.6% in the quarter, as a result of declining volume in Argentina, which was partially offset by growth in Peru and Ecuador. Total revenue was down 9.9% in the quarter, reaching 9.6 billion pesos, while EBITDA decreased 18.6% to 1.8 billion pesos, representing a margin of 18.3%. This region continued to be impacted by a challenging macroeconomic scenario, particularly by high inflation. As anticipated, Argentina and Ecuador are still facing headwinds, indicating a difficult first half of the year. However, we expect a recovery in the latter part of 2024. In Peru, our team delivered another quarter of outstanding sequential volume growth, up 3.8%, cycling a strong 6.7% growth in the same quarter of 2023. Total volume for the quarter reached 90.1 million unit cases, marking the 12th consecutive quarter of volume growth. Notably, this was the highest volume posted for the first quarter since we started operations in Peru in 2015. Volume growth was driven by COLAs up 6.2% and still beverages at 24.7%. The traditional trade was one of the best performance in the quarter with 4.2% growth as we continued actively promoting affordability with returnable packages. Our mix of returnable packages increased 5.2 percentage points. Let me now share with you an update of the rollout for our multi-category platform in Peru, as we continue to see encouraging progress in the development of these categories. We are extending beer distribution to 40% of our territories, surpassing the targeted coverage objective. An important discovery lies in customers who have the opportunity to increase coverage of beer category. These high-potential customers drive growth rates of roughly 3% to 5% in our core portfolio. Furthermore, we started distribution of one of the finest Pisco brands. This category of spirits represents the most relevant SKU in the on-premise channel and is driving incremental sales of our Schweppes ginger ale brand. In Ecuador, the nationwide state of emergency was extended due to the country's ongoing struggle with increasing violence and security issues. These challenges are impacting consumption, especially in the on-premise channel. Despite the weakening consumer demand, our beverage business boasted a solid 3.5% volume growth in the quarter, cycling 7.5% growth from the prior year. Volume growth in the quarter was led by the sparkling category, up 6.2%, and driven by double-digit growth in Coca-Cola Zero Sugar. Shifting gears to our beverage business in Argentina, volume in the first quarter was down 26.1%, tackling a strong 5% growth from the same quarter in 2023. Severe currency devaluation, triple-digit inflation, and high interest rates continue to negatively impact consumer spending. Despite the prevailing economic turmoil, we gained value share across NARTD categories by driving affordability and promoting returnable packages, resulting in a significant increase in product mix in these presentations. Although the economy in Argentina looks set to remain in recession, we anticipate a moderation in the rate of contraction and a gradual recovery towards the second half of the year. Coca-Cola's Southwest beverages maintained its steady momentum and delivered another quarter of solid top and bottom line results. marking the 24th consecutive quarter of EBITDA growth. Net revenues for the quarter rose 6.9% to $990.6 million. Average price per case grew 4.6%, reaching $9.65, as we focused on the optimal execution of our most valuable packages, coupled with promotional spend optimization powered by our trade promotion optimization tool. Volume for the quarter grew 2.3% to 103 million unit cases. Sparkling category was up 1.6% and transactions grew 2.3% as we continue to focus on higher profit per case packages such as 16 ounce cans and 1.25 liter PET up 16% and 35.4% respectively. Notably, Coca-Cola brand grew 3%, and Coca-Cola Zero was up 6.4%, while the sales portfolio delivered 1.6% growth, driven by Monster, Fairlife, and Titty. We saw positive volume performance across large and small stores, up 2.1% and 4.2% respectively. We continue the positive momentum trend of value share growth, leading the non-alcoholic ready-to-drink beverages industry. This quarter, we continued driving innovation and launched over 17 new SKUs, including Coca-Cola Spiced. EBITDA in the quarter grew 9.9% to $155.1 million, representing a margin of 15.7%. Notably, this is the most profitable first quarter since we took over the operation in the U.S. The six consecutive years of EBITDA growth undoubtedly demonstrate our ability to adapt the playbook that we have successfully executed across our LATAM operations. We are excited to share that our team in the U.S. won the North America Market Street Challenge Award for the second time in the last six years. This is the most prestigious award within the U.S. Coca-Cola system, recognizing excellence in execution. And to conclude with the review of our operations, our food and snacks businesses started the year with sustained earnings momentum, driven by productivity and cost-efficiency programs. Bocados delivered mid-single-digit sales increase and posted its 26th consecutive quarter of revenue growth. The modern trade was the best performer as we capitalized on solid execution at the point of sale. One notable achievement this quarter was the opening of Weiss Mac's new distribution center in Ashley, Pennsylvania. The 256,000 square feet facility will play a pivotal role in enhancing supply chain operations, optimizing inventory management, and ensuring seamless service to sales. Inalexa in Ecuador is making great progress to spark consumer-centric innovation, expanding its portfolio products, and leveraging on the strong brand equity of our leading confectionery offerings. Let me now provide an update on our most relevant sustainability activities in the quarter. Our subsidiary, AC Bevidas, successfully completed our first issuance of sustainability-linked bonds in the Mexican debt market. This issuance reaffirms our commitment to promote a circular economy by increasing the percentage of recycled PET content utilized in our packaging. It builds upon a prior announcement to invest nearly $175 million in partnership with Coca-Cola Mexico and fellow bottlers, to expand PETSTAR's recycling capacity and reach over 40 PET collection centers in Mexico by 2027. Through PETSTAR, the largest food grade PET recycling facility worldwide, we are making significant strides in providing sustainable packaging for our markets in Mexico and the United States. I will now turn the call over to Emilio. Please, Emilio.