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

Good day everyone and welcome to the ALCA Continental first quarter 2025 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 questions by pressing the star and 1 on your telephone keypad. You may withdraw your question by pressing star 2. Please note this call is being recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of ITL Advisors. Please go ahead.

Good morning, everyone. Thank you for joining the senior management team of Arca Continentalis to review the results for the first quarter of 2025. Their earnings release went out this morning. and it's available on the company website at arcaconsales.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. Jesus Garcia. 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 for being with us today to review our performance for the first quarter. As we enter 2025, our business is navigating a unique confluence of external challenges that are shaping consumer behavior and overall market dynamics. Geopolitical tensions and the impact of tariffs alongside persistent inflationary environment have added layers of uncertainty to the operating environment. These macro headwinds, coupled with less favorable weather conditions, have weighted on near-term consumption patterns. Even amid this backdrop of heightened uncertainty, our company made solid progress, delivering a resilient performance while continuing to invest for long-term growth. Let's take a closer look at our results. Total consolidated volume in the quarter decreased by 3.1% to reach 548 million unit cases. Still, averages grew 2.4%, primarily driven by volume gains in Mexico. This volume performance reflects a combination of factors, such as a subdued consumer environment and calendar effects, notably the leap year and the shift of Holy Week and Easter into the second quarter. Total consolidated revenue increased 12.4% year-over-year to 57 billion pesos, while consolidated EBITDA rose 10.2% to 10.6 billion pesos, representing a margin of 18.7%. This positive EBITDA performance was underpinned by solid contributions from our U.S. operations and strong momentum in South America led by a robust recovery in Argentina. Our results highlight the impact of proactive pricing, disciplined cost control, and prudent hedging, which enabled us to mitigate input cost inflation and currency volatility while protecting profitability. Let me begin our regional performance review with our various operations in Mexico. which experienced a softer start to the year. Total volume was down 3.6% in the first quarter, cycling three consecutive years of strong growth in the same period. Volume performance was partially influenced by high comparison base, given the strong uplift seen in the first quarter of 2024, supported by government incentive programs ahead of last year's elections. Volume decline was partially offset by an 8.1% increase in skilled beverages, mainly driven by the sports drinks, tea, and fruit beverage categories, capitalizing key opportunities in the modern trade channels. Notably, Coca-Cola No Sugar delivered robust growth of 17.8%, supported by its continued expansion across our territories and sustained innovation under the Coca-Cola Creations platform. Total net sales in Mexico grew 0.1% year-over-year to reach 23.3 billion pesos. The average price per case, excluding jug water, increased by 5.3%, reaching 89.51 pesos, reflecting our disciplined revenue growth management strategies. On the profitability front, EBITDA in Mexico declined by 6.2% to 4.9 billion pesos, with a margin of 20.8%. Following a strong track record of consecutive years of EBITDA growth in Mexico, this quarter was affected by slightly softer volumes and a temporary production pause at our Topo Chico plant in Monterey, caused by a longer-than-anticipated maintenance process. operations have since returned to normal and we remain confident in our ability to recover momentum in the coming quarters. I would also like to highlight that Tuali, our second generation B2B digital platform continues to deliver strong results. By the end of the first quarter, our app accounted for over 68% of total orders from the traditional channels volume in Mexico. Notably, we observed a meaningful uptake in performance among digitized customers compared to non-digitized ones, contributing to a 1.6 percentage points increase in overall sales volume. Moving now to our beverage business in South America, total volume declined 0.7% in the quarter, primarily due to softer performances in Peru and Ecuador. This was partially offset by growth in Argentina. Total revenue rose by 25.4%, reaching 12 billion pesos, supported by effective pricing and favorable mix. EBITDA increased 36% to 2.4 billion pesos, expanding margin to 19.9%. This strong profitability performance underscores our discipline execution, affordability strategies, and ongoing portfolio optimization. While challenges persist, we remain cautiously optimistic about South America's outlook in 2025, underpinned by signs of gradual macroeconomic recovery and stabilization across our markets. In Peru, total volume declined 4.6%, lapping a strong growth of 3.8% in the same quarter of 2024. However, we are seeing a sequential recovery trend. Despite softer consumer demand and below average temperatures, our actions to offer an affordable portfolio and the expansion of returnable package formats are supporting an improvement in volumes. In still beverages, flavor water and energy drink segments grew 33% and 41% respectively, supported by new product launches. Furthermore, we signed a five-year distribution agreement with Diageo, introducing their renowned portfolio of premium spirits to peruse traditional trade and on-premise channels. Turning to Ecuador, the country entered 2025 facing a complex landscape marked by economic slowdown, persistent political uncertainty, and severe rainfall in certain regions. Against this challenging backdrop, Volume in our beverage business declined 7.4% in the quarter, impacted by a strong comparison base following three consecutive years of solid first quarter growth. We continued investing in market-focused initiatives, including expanding cooler coverage and reinforcing affordability for a portfolio of returnable packages. As a result, the mix of returnable presentations grew by 0.5 percentage points this quarter, a positive step in driving value and maintaining consumer relevance. Our beverage operation in Argentina delivered solid volume increase of 19.8% in the first quarter. Growth was broad-based, with sparkling beverages increasing 21.8% and Coca-Cola brand delivering a standout performance up 22.6%. In still beverages, Cepita led growth in juices and nectars, Aquarius drove gains in flavored water, and Monster continued to perform strongly in energy drinks. Despite the still prevailing economic challenges, we gained value share across any RTD categories by driving affordability and promoting returnable packages. We saw strong performance across channels. The traditional trade was one of the best performers in the quarter, up 14.9%, and supported by our ongoing investments in market-focused initiatives, expanding cooler coverage, and increasing our share of visible inventory. Argentina's economic trajectory in 2025 has been encouraging. with meaningful progress in reducing inflation and a significant appreciation of the local currency. These developments are supporting stronger real wages and improving consumer confidence, a positive backdrop for our business. Our beverage operation in the United States closed out the first quarter with solid profitability improvements and its 28th consecutive quarter of EBITDA growth. This performance highlights the strength of our business model and our ability to successfully replicate the playbook that has delivered sustained results across our Latin American operations. Net revenues for the quarter increased 0.4% to $994.6 million. The average price per case rose 6.4%, reflecting a true rate increase of 2.8% and 3.6% in mix to reach $10.26. These results reflect the successful execution of her strategy to optimize price pack architecture, drive transaction growth, and effectively manage promotional spending as we continue refining point of sale execution with a sharp focus on the key metrics within our fundamentals. Volume for the quarter declined 5.6%, cycling strong 2.3% growth from the same quarter of 2024. Coca-Cola Zero was up 5% and the skilled beverage portfolio delivered 1.5% growth, driven by Body Armor, Powerade, and Fairlife. Notably, Fairlife recorded a double-digit volume increase in the quarter, with Core Power significantly outperforming across channels. we continue to focus on higher profit per case packages, such as 10-pack mini cans, smart water, and vitamin water, which increased 16.3%, 7.5%, and 2.7% respectively. The Topo Chico portfolio posted a 16.8% increase, with Topo Chico Sabores leading the volume growth. This quarter, we continued driving innovation and launched over 15 new SKUs, including Coca-Cola Orange Cream, Barrelitos, Body Armor Flash ID, and Monster Killer Brew. EBITDA grew 3.7% to $160.7 million, representing a margin of 16.2%. This marks our most profitable first quarter since assuming control of our franchise territories in the US, underscoring the structural improvements we've made to the business over time. We are also proud to share a series of recognitions that reflect our operational excellence. Our U.S. team earned the prestigious North America Market Street Challenge Award for the third time in seven years, and for the second consecutive year, recognizing best-in-class execution across the Coca-Cola system in the United States. Additionally, we were honored with Masters of the Claw designation for consistently leading in volume growth. On the innovation front, our U.S.-based advanced analytics team continues to enhance critical commercial processes for scalable, data-driven solutions. This quarter, we launched an upgraded version of our suggested order application, featuring enhanced value capture modules designed to drive incremental growth. To close our operations review, our food and snacks businesses started the year with solid results. During the quarter, we delivered double-digit sales increase and mid-single-digit EBITDA growth. This sustained earnings momentum was led by Bocados in Mexico, supported by effective pricing strategies, productivity enhancements, efficiency programs, and consumer-centric innovation initiatives. Now, I would like to briefly walk you through the progress we've made in our sustainability agenda. We continue to strengthen our energy strategy by increasing the use of renewable sources. which now account for an average of 43.3% of our total energy consumption. At the same time, we reduced our Scope 1 and 2 emissions by 32.6%, compared to our 2019 baseline, marking a meaningful step toward our long-term climate goals. In water stewardship, we maintain a strong efficiency ratio of 1.52 liters per liter of beverage produced in 2024. This performance reflects our continued focus on implementing best-in-class practices and managing water responsibly across our operations. We are proud to share that Arca Continental was once again recognized for its sustainability leadership, earning a spot in the S&P's Sustainability Yearbook for the third consecutive year. Moreover, we received the highest level prime certification from key financial institutions in Mexico, reflecting our strong corporate governance, financial discipline, and commitment to sustainable practices. In closing, I'd like to highlight the recent release of our annual Corporate Integrated Responsibility Report, which outlines our progress against key commitments, all under the vision of environmental leadership and a positive social impact. And with that, I will turn it over to Emilio, who will walk us through our financial results. Emilio, please go ahead.