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

Good day, everyone, and welcome to 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 may be recorded. 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 to review the results for the third quarter and first nine months of 2024. Their earnings release went out this morning, and it's available on the company website at arcacontinental.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, Jesús García. They're going to be making some 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 is going to begin the presentation. So please go ahead, Arturo.

Thanks, Melanie. Good morning and thank you everyone for joining us today. I am pleased to report that we delivered sound financial results and a solid operational performance in the third quarter. By staying focused on our strategic priorities, we delivered top-line growth, expanded underlying margins, and increased market share. With the first nine months now in the books, we're on track to achieve full-year results in line with our outlook. Let's take a closer look at our performance. Total consolidated volume in the quarter decreased by 4.6% to reach 634 million unit cases. This decline followed strong volume growth in the same quarter over the past three years. which recorded increases of 7.4%, 4.2%, and 7.1%. Consolidated revenues rose 10% to reach 62.6 billion pesos. In terms of profitability, our results were rewarding. Consolidated EBITDA increased 10.2%, reaching 12.7 billion pesos. Remarkably, this is the highest consolidated EBITDA margin for a third quarter over the past eight years. While the third quarter proved to be challenging, we achieved sequential earnings growth through a disciplined approach to volume, price, and mix management. Now let's delve deeper into our performance across our regions, beginning with Mexico. Unit case volume, not including jug water, declined 2.6%, cycling an outstanding 8.7% record-breaking third quarter of last year, and strong growth rates in 2022 and 2021. Volume contraction this quarter was caused by heavy rains and unseasonably below average temperatures across most of our territories. This decline was partially offset by an 8.2% growth in still beverages, mainly driven by the sports drinks, tea, and coffee categories. Coca-Cola no sugar sustained its momentum up 19.1%, thanks to continuous product innovation with Coca-Cola Zero Sugar Oreo and appealing campaigns with Coca-Cola Marble. Total net sales rose 4.8% to reach 29.3 billion pesos. This marks the 33rd consecutive quarter of net revenue growth in Mexico. Average price per case in the quarter, not including jug water, rose 7.6%, reaching 85.88 pesos. Additionally, we gained value share in non-alcoholic ready-to-drink beverages this quarter, outpacing the industry in Mexico. EBITDA increased 6.6% to 7.4 billion pesos for the quarter, achieving a margin of 25.3% and marking the 23rd consecutive quarter of EBITDA growth. In South America, the region was challenged once again by the volatile macroeconomic environment and weakening consumer demand. Total volume was down 8.6% in the quarter, reaching 141 million unit cases. Volume performance in the third quarter is cycling strong growth rates of 8.1% in the same quarter of 2023, 6.4% in 2022, and 24% in 2021. Total revenues rose 8.7% in the quarter to 10.6 billion pesos, and EBITDA increased 1% to 1.7 billion pesos, representing a margin of 15.7%. Moving over to our various business in Ecuador, the country is facing a severe energy crisis due to the worst drought in 61 years, resulting in widespread power outages and economic challenges. Daily blackouts now last up to 10 hours, with industrial firms ordered to cut back on electricity usage. Volume declined 8.1% compared to solid growth in the previous three years, which is consistent with the trend seen in our other South American markets. While we cannot change the market conditions, we have continued to focus on the things we can control. We gain value share across NARPD villages by perfecting our price-back channel strategy, promoting returnable packages, and investing in market-focused initiatives. So far this year, our team in Ecuador has installed over 21,000 cold drink units and expanding our cooler coverage. In Peru, the country has been experiencing unseasonably cold weather, especially in Lima and other key coastal areas. Due to these challenges, volume declined 6.7% following strong double-digit growth in the same quarter of last year. However, we are beginning to see a moderation in the rate of volume contraction bolstered by our affordability initiatives and ongoing investments in returnable bottles. We continue to advance in our strategy to capture new revenue streams. As you may recall, At the start of 2024, we began distributing one of the top fiscal brands, which has resulted in double-digit growth in our ginger ale category. In Argentina, volume in the third quarter was down 13.1%. As anticipated, we are seeing positive signs that the economy's contraction is starting to ease. Our actions to provide an affordable portfolio and expand returnable presentations are driving sequential steady volume recovery across channels. Returnable presentations continue gaining positive momentum, up 9.3 percentage points in mix. Moreover, as part of our multi-category strategy, we began distributing two prestigious brands, one in the craft beer category and the other in the value-added dairy segment. We are encouraged by our results in Argentina and remain optimistic that this forward momentum will carry through the rest of 2024. In the United States, Coca-Cola's Southwest beverages sustained its business momentum and achieved strong third quarter results. Net revenues for the quarter rose 5.1% to $1.1 billion. Average price per case grew 7.6%, with 3.6% of true rate increases. This reflects our successful strategy of optimizing price packaging and promotional spending, growing transactions and value share while maintaining efficient labor management. Volume for the quarter declined 2.4% to 118 million unit cases. Importantly, the sparking beverages category grew 1.3% led by Coca-Cola brand and flavors. The sugar portfolio keeps growing too, led by Coca-Cola Zero and Sprite Zero, up 11.2% and 6.2% respectively. The Stills portfolio finished the quarter up 0.8%, as we continue to see positive momentum in Monster, Smart Water, Fairlife, Core Power, and Tea. The Topo Chico brand delivered 10.5% volume growth, led by Topo Chico Sabores. We gained value share in non-alcoholic ready-to-drink beverages this quarter, with growth in both the SSD packages and still beverages categories. For the quarter, EBITDA grew 10.5% to $182 million, with a margin of 16.2%. marking the 26th consecutive quarter of EBITDA growth. This represents the highest per quarter EBITDA margin since we acquired the U.S. operation, setting a record for the longest consecutive growth streak across all our business units. Our food and snack businesses posted high single-digit sales increase and sustained steady earnings momentum in the third quarter, led by Bocados in Mexico. I would like to take a moment to highlight an important announcement we recently shared. We're thrilled to unveil the next phase of our digital transformation with the launch of Tuali, our next generation B2B digital platform. Our core B2B capabilities have gained significant traction, with over 60% of traditional trade volume now captured digitally, contributing $2.4 billion in digital sales. Tuali builds on the evolution of AC Digital, aiming to further revolutionize the operations of nearly 1 million of our customers in the traditional trade across our geographies in Latin America. Developed by our digital nest in Monterrey, Tuali is designed to empower customers by offering a wide selection of features, including AI-powered predictive ordering based on data-driven insights. It also includes advanced loyalty programs and financial services, ensuring our customers not only streamline operations, but also benefit from these tools designed to grow their businesses. I'd like to conclude my opening remarks with an update on our sustainability efforts. Through PETSTAR, the world's largest DC recycling plant, and together with Coca-Cola Mexico and other partners of the Coca-Cola system, we've reached a key milestone by boosting our PET bottle collection and recycling capacity to 74%, meaning we now collect and recycle 7 out of every 10 bottles we sell in Mexico. This is equivalent to collecting 5.5 billion bottles annually, moving us closer to our objective of retrieving 100% of the bottles we put on the market by 2030. in alignment with the global initiative, a world without waste. This milestone was achieved through PestArts expansion, which included a 3.2 billion pesos investment. This expansion will increase the number of PST collection centers in Mexico from eight to 45 and double the recycling capacity. Furthermore, In collaboration with Coca-Cola Mexico, we implemented our 100th rainwater harvesting system in public schools, providing clean water to over 44,000 students and capturing more than 27 million liters of rainwater annually. We are committed to enhancing water stewardship by improving access to water in the communities we serve. And with that, I will now turn the call over to Emilio. Please, Emilio.