Gruma Sab De Cv Unsp/Adr

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to GRUMA's second quarter 2026 earnings conference call. During today's call, all parties will be in a listen-only mode. Following the speaker's remarks, the conference will be open for questions. If you have a question, please press star 1 on your telephone keypad. Please press star 0 for any operator assistance. For participants using speaker equipment, it may be necessary to pick up your handset before making your selection. I would now like to turn the conference over to Mr. Adolfo Fritz. Thank you. Good morning and welcome to our second quarter 2026 conference call.

We're pleased to be here and thankful for the opportunity to share our results with you. With me today, as always, are Mr. Raul Carrasos Morales, Plumas CFO, and Jorge Arancel Martinez, Plumas Corporate Finance VP. To start, we'll take a few minutes to share the fundamentals and results for the quarter, and then we'll open it up to any questions you may have. During the second quarter, performance was very solid and promising, not to a T of business and subsidiaries outside of the U.S. In Asia and Oceania, we significantly benefited from the revamped activity in Malaysia, our solid performance in China with an improving operating leverage combined with greater retail concentration in Australia. In Europe, our operation has exceeded our initial expectations with a wet acceptance of value-added products as we continue to grow our retail distribution footprint throughout the continent. In the U.S., our main subsidiary, the overall trend we've been seeing in the tortilla category continued, primarily spurred by price sensitivity and weak consumer sentiment. It was nearly failed to the food service channel, which was the main driver of bone contractions during past quarters. We are estimating, however, that the volume run-up rate in this channel will stabilize by the third quarter so that we may see results on a more even comparative base once this happens. Additionally, it will allow the market to see with more clarity the evolution in the retail market, which has remained considerably more resilient after the strategy we're implementing. In the cornflower market in Mexico, the core operation remains as stable as always, although experiencing mild volatility from sell to the government during the period, while the solid footing in innovation has positioned Central America as our second most profitable subsidiary. With these fundamentals in place, volumes contracted by 1% due to the fractures in the food service channel in the U.S. we just mentioned. However, sales increased by 3%, supported by net sales growth in Europe, Asia and Oceania, and Central America, in addition to the relative strengthening of the Mexican peso against the U.S. dollar. As a result, EBITDA contracted 5%, also reflecting the effects of these dynamics. In our balance sheet, we increase our in-debt business levels up to 1.5 times in terms of in-debt EBITDA due to the seasonality of the summer harvest in Mexico. Therefore, most of the additional debt incurred wasn't short-term debt, some of which will be paid off in the future with the cash we have available. Continuing with our debt profile, during the quarter, we will refinance the pace of the non-native note in the amount of $250 million by extending and increasing the amount of existing revolver facilities. The total of these two revolver facilities is a $425 million and will be maturing in 2031. In the U.S., we continue to navigate a challenging operating environment shift that weak consumer sentiment and uncertainty in the broader economic outlook. These conditions have affected our commercial channels in different ways and to varying degrees. In the food service channel, customers have returned, which is encouraging. We've renewed contracts at lower volumes due to ongoing market uncertainty. Sab De Cv Unsp At the same time, the seed price sensitivity consumer behavior has driven stronger demand for product-related production, which has reshaped the competitive landscape since 2025 and the first half of this year. In response, we have been executing the strategy we outlined at the beginning of the year to specifically address this more value-oriented market environment. But we had a strong loss during the quarter, The volatility remained, emerged in June, underscoring that the market has not yet fully normalized. That said, our strategy remains on track, and as we continue to execute, our objective is to build greater stability over the coming months. As a matter of fact, we can already see this happening. On a sequential basis, the net sales were flat while volumes grew by 1.3%, so it's just a matter of keeping ourselves disciplined and on track with our current strategy. Importantly, Because most of the recent volume pressure has been concentrated in the food service channel, we believe the third quarter will be a key transition period. As the execution of our strategy overlaps with the end of the expected runoff, we should begin to see the foundation for more positive results going forward. The U.S. operation closed the quarter with volumes contracting 3%, and sales also contracted a similar amount in line with volumes. EBITDA contracted by 15% in the second quarter, although higher freight and overall distribution costs had an impact in the quarter. The main driver for this change was the volume performance stemming from the food service channel. In Mexico, that has historically been the case. The core operation remains stable with demand from both retail and industrial clients. We did experience some temporary volatility in the back of slower activity in the government programs in addition to a change in net relative to a year ago, which is gradually improving from what we saw in the first quarter of 2026. As such, bonds remain flat in 2022-26, while sales contracted marginally. EBITDA and EBITDA saw improvement of 1% and EBITDA margin rose to 10.9% of 20 basis points from last year. We continue to expand distribution with retailers across the continent and with the sale of value-added products where we're seeing growing demand. As you already know, the formula in business in the subsidiary is highly volatile, doing fluctuating demand and dynamics in this market to change quarter over quarter. During the second quarter of the year, this business experience lowered volume than a year ago and thus hindered the solid performance of the tortilla business in the subsidiary. Therefore, bonds were flat during the quarter despite mid-single due to growth of the strategic business on the back of the dynamics I mentioned. Sales grew by 5%, which speaks to the rich mix that has been sold today and the efforts being carried out of the retail channel and the subsidiary. Moreover, the same mix spurred a growth of 17% year-over-year, reaching an EBITDA margin of 14.8%. Central America also continues with excellent news, with the only constraint being capacity as we've communicated previously. We're also contemplating building a new mill for next year assuming the man remains at its current high level It is because of these products and our team's excellent commercial efforts that we've been able to expand efficiently across the entire region for this subsidiary service with volumes and sales rising 3% and 7% respectively. In turn, this yielded even a growth of 12% and even a margin of 19% decisioning the subsidiary a strong profitability center for Grima going forward. In Asia and China, the operation also yields with great results. Malaysia recalled it from a year ago, and both Australia and China are operating at optimal levels. More specifically, Australia has successfully carried out more aggressive commercial efforts in peripheral space, while China is now benefiting from a new facility in Foshan, which has improved their operational leverage there. Volumes at 4 grew by 4%, while sales expanded by 15%. The corrosion sales, coupled with their disciplined approach and costs, allowed for a significant 47% rise in EBITDA, with the region delivering an EBITDA margin of 16.2%. In light of these results, the current market Sab De Cv Unsp Therefore, our guidance for our consolidated results will also be adjusted proportionally to a fractional decline in revenue and volume and even a margin contraction of approximately 160 basis points. Given that our principal subsidiary continues to operate in an uncertain and rapidly evolving economic environment, we will remain focused on adapting our commercial strategy in the U.S. while executing it with discipline. Our priority is to support sustainable volume growth and further strengthen our competitive position. We believe the actions we're taking today will make the business structurally stronger once the current economic cycle normalizes. Supported by the continued strong performance of our smaller subsidiaries, we're confident the company will be well positioned to achieve new levels of financial performance over the long term. With that, I'd like to open up the call for questions, please. Operator, can you help with that, please? Thank you.

We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. You may press star 2 if you'd like to withdraw your question from the queue. Because using, participants using speaker equipment, you may need to lift the handset before making your selection. One moment please while we call for questions. Thank you. Our first question is from Enrique Morello with Morgan Stanley.