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.

Hi everyone, thank you so much for the space for questions. Adolfo, maybe a follow up and diving deeper on the US trends that you mentioned regarding the channels. So breaking down by channels, if you could provide just a bit more color on what you're seeing in terms of food service and retail. And perhaps if you're seeing any encouraging signs in food service salary in June or in early July that make you think that things are stabilizing or if it's more a matter of comps in the food service side. And how are you seeing retail competition and retail performance as well. And talking about more specifically about retail, if you could break down as well, how is your private label portfolio performing versus your branded part of the portfolio and how is your head or the company's head around the mix between the two in the retail segment, that would be very helpful as well. Thank you.

Sure. Thank you for your question. Well, the first part, in terms of the food service channel overall, the stabilization we're talking about is more an end of a cycle. In other words, the comparative basis will be similar year over year. As I mentioned just a minute ago, there's everyone that we expected to come back after The adjustments we did has come back, but they've come back wanting contracts with lower volume amounts. So that has been the case every quarter since this started happening. Now, if you remember, it all started with an inflation situation taking place almost a year and a half ago or almost two years ago. And that's spiraled into what's happening today with everything that's going on in the world. where the consumer is just extremely anxious. So that's led them to ask for lower volumes, and that's what we're asking. That's why we feel that during the third queue, we'll be able to have a more stable base. That doesn't mean that it will be an inflection point of growth specifically for the food service channel in specific. In terms of retail, competitive landscape has Sab De Cv Unsp As a response to this effect, and it is something that we're monitoring very closely, as I mentioned a minute ago also, we're pleased to see that on a sequential basis, that inflection point happens during the quarter. We need to see if this is in fact a trend going forward and that will evolve into further improvement. But so far, the strategy worked. We know that on a year-to-year comparison basis, It is, you know, we still have work to do, but the overall transit seems evolving positively. So, we're very pleased with that, given the that we're upper and under.

In terms of portfolio, I mean, right now, it's growing probably at around 7%

It is something that we've seen before. We've been accelerating growth in that space, you know. We've been seeing also a lot more restraint from the Hispanic community, as we talked about also in buying or being asked for us to buying at retail spaces. So, that's also been a challenge for us. I would say that that which encompasses standard tortilla overall has been the primarily factor behind what we're seeing in retail. Retail right now probably, we were accustomed to grow around mid single digits, even high single digits. Right now we're probably growing, we're flat-ish even, in retail, while in food service, that's where all the contractions are taking place. In food service, the contractions are in double digits. So, that is what is overshadowing what's happening in retail, but in retail specific, that flat behavior that I was talking about earlier is more of a result of the standard tortilla Thank you for the question.

Our next question is from Ben Thor with Barclays.

Yeah, good morning, and thanks for taking my question. Just staying on the topic a little bit, would also like to understand to a degree obviously with Dan and the margin guidance, Unsp Unsp De Cv Unsp. What are your expectations right now as it relates to these distribution costs that have gone up, but also the marketing costs? How much makes sense spending versus not spending? So, what's the balance here, and how should we think about the go-forward trajectory on those three items?

Thank you. I would say that overall, the one challenge every company every sector will have is the inflation specifically related to older oil derivatives overall um going forward it is something that we have accounted for in the guidance fortunately obviously to a certain degree if oil shoots up to 150 dollars per barrel obviously that's just not being contemplated at this point but certainly uh margin is being contemplated with high fuel prices. These prices are just the surcharges over the freight rates that we normally pay. So the variability that you will see during the second half and maybe going forward depending on how long this lasts will be on the SD&A front. You'll have to see how much inflation that creates and that would be there and also probably on the packaging front as well in terms of within COGS. So far, at least for the second half of the year, we'll have to see how the year ends with everything that's happened geopolitically and how inflation behaves in light of everything that's also taking place in terms of monetary policy in the U.S. But I would say that for the second half, those two items are the ones that we're taking care of.

Thank you very much. Thank you.

Our next question is from Renata Cabral with Citibank.

Hi, everyone. Thank you so much for taking my question. My question is related to the Mexican operation. So, the organic growth remaining below. Your long term algorithm despite the stable pricing. So I would like to ask if you could elaborate on whether demand weakens sequentially to the quarter or if trends were more to stabilize in the end of the quarter and the performances in different channels across Mexico as you gave some color related to the US and Just adding to that related to Mexico is about pricing and pricing has remained disciplined despite soft consumption. We see, we still see room for pricing realization going forward. What you should expect in revenue mix to become quality driven. Thank you so much.

Thank you so much for your question. In general terms, Mexico is stable. We, as you know, we're trying to be in line with the traditional methods, so there are no arbitrages in place. However, you know, we've been, you know, protecting the prices that we give our products on. Sab De Cv Unsp and it was just in line with the inflation that we're feeling at this point. We don't see maybe what you see in other companies or assets that you look or that you report on and you analyze. We haven't seen a pullback from the consumer. What you're seeing there is just one change in mix and lower government programs that are in place each year. So whether it's for humanitarian purposes or others, there are certain government programs in place each year that add a little bit of volatility on the volume side, and the mix also affects on this front. We did have, as we announced a quarter ago relative to a year ago, we did have a slight change in mix in our industrial portion of the business. Um, that makes us evolve positively. So it's returning back to where it was. Um, but, uh, but, uh, on a competitive basis, year to year, it's still, it's still changed. So, um, we are, um, you know, estimating that by the third and fourth quarter, um, we'll have the, um, the mix back in place and, um, also we'll have some positive effect coming in from, from the project justice that we carried out.

Thank you so much. That's very helpful.

Thank you for your question, .

Our next question is from Diego Serrano with HSBC.

Hi. Good morning. Thank you for taking my question. So you gave a pretty good call there on the food service business, and you pretty much answered my question. understand a bit more what's driving the weakness. I mean, trying to get a sense if it's mostly weaker consumer sentiment, or if you are still seeing any impact from immigration issues affecting the Hispanic consumer. Thank you.

It's really both. In food service, I mean, the Hispanic consumer effect is more in retail rather than food service. It has some effect in food service, obviously, for the same reasons that it's taking place in retail, but it's more weighted on retail. In food service, what we're seeing is just too much inflation relative to the purchasing power of the average consumer. The flow in all restaurants or QSRs in the US is not as it used to be, and whoever goes or is part of this flow, will tell you that privates in the US are a little, not a little bit, are way higher than what they used to be. So the regular people are just taking lunch boxes to work now instead of heading out for a quick lunch outside of the office. For example, they're not dining out at the end of the day, they're heading back home, having something at home with friends and family. So it's the environment has changed the social dynamic from a maybe venue-oriented dynamics to an at-home dynamics when it comes to socializing with friends or families. And that is something that we've been grappling with, not only us, but everybody else in the industry, just because overall flows are down. And that is obviously not good for anybody in the sector overall. So that is what took place or what is taking place in the food service channel.

Great. Thank you. Thank you.

Our next question is from with JP.

Hello, Greg.

Can you hear me? Yeah, we can hear you. How are you? Thank you so much for taking the question. Can you maybe help us make a simple bridge for the U.S. margin contraction this quarter? I want to understand what were the biggest drivers if it was mixed pricing or it was more on the gross margin side. Can you help us size the top two, three items in the contraction this quarter?

No problem. Well, I mean, if you look at the gross margins themselves, there were not, I mean, there was an effect there, but it wasn't as drastic as an EBITDA margin or EBIT margin. The effect of what's happening is you have two points of pressure. One is the volumes at the food service channel, which obviously drive down revenues proportionally. And secondly, on the retail channel, you're producing more product label and more standard value add products to have an answer to the sensitive consumer. In addition to that, we're also increasing shelf space in value-add and better-for-you products. So in retail, you have a dynamic where, yes, you're producing more product label overall, trying to offset that with more better-for-you value-add products. But in reality, in the grand scheme of things, you will have more product label production to incentivize volume growth. So that additional Subtitles by the Amara.org community As you already know probably will have a substantial lower margin than other products in the market So that is that is the effect right there what you're seeing. So everything that you're seeing margin wise is just a reflection of this strategy that we're carrying out in order for us to Cater to the sensitive consumer in the context that we're living under And in that sense level how easy is to go back and

to the previous mix, talking about just retail, because food service, I understand that it's more of a base recipe, but on the retail side, if at some point the consumer comes back, is it really feasible to think that the private label penetration will go lower, so you'll start, you'll produce less in private label and go more to the higher end product, or The stickiness of the consumer once it tastes this, that the product label is good, et cetera, stays there. I mean, how feasible is it for us to understand how fast that could revert if the consumer comes back? Without a question, the consumer will come back.

The U.S. is an economy that is driven by branded products relative 2 other economies like Europe. It's more product label driven economy. You see that the market share in Europe of product label is around 31%. The product label market share in the US has always been between 12 and 13%. It's fluctuated that way depending on the economic cycle that you find yourself. Sab De Cv Unsp But the main point here is that it is a branded-driven economy in the sense that as soon as people have the purchasing power again and the visibility in the economy to go and buy branded products, they will. The question is, when will that happen? And unfortunately for that, we do not have an answer. We know it's going to come back, but we don't know the exact timing. That is why we're operating here. Sab De Cv Unsp The ones that have been affected in the retail channel are standard products. And those are the ones that have been been traded down to private label. But it is something that is bound to change as soon as the consumer has the means to do so. Right now, it's a situation where the consumer is no longer valuing quality, but rather pricing. And, you know, whenever whenever Sab De Cv Unsp

Our next question is from Felipe Ugros with SocialBank.

Hi, operator. My questions were already answered. You just answered them in the last question, so I'll skip this one. Thank you. Well, you know what? I did notice that you accelerated the purchases a little bit this quarter. Is that a step you hope to maintain throughout the rest of the year? or is it kind of a one-off because you saw lower prices?

No, I think that valuation of the stock of raw is in the very, very low range of what we're expecting. So, as long as that is an attractive valuation for us to repurchase, we'll still repurchase it. We have a very thorough program in place that will be It will continue for a year and then beyond. I mean, as long as liquidity is not compromised for funds to invest in our stock, we'll still have that in place.

Very clear. And thanks for calling and giving the last question. That answers the big question.

Thank you. Thank you. Thank you for your .

Our next question is from Alvaro Garcia with BTQ.

Hi, thanks for space for questions. In the release, you mentioned at one point that, you know, to build a healthier operating structure. And I wonder if that means there might be some cost savings in place in the US, just given the contraction of the business we've seen this year, if there's any plans on the SG&A front, sort of reduce the size of your platform. Thank you.

Thank you for your question. No, it wasn't intended to be that. What we mean by having a better structure is that if you look back at, you know, 2012, we've been more focused on price mix more than anything else. And then we went into a period where, you know, costs started being the next thing of focus in parallel to price mix. But we haven't really taken care of the volume equation in the business. And we want to see going forward is a business that does have price mix with the innovation and this is that we are producing as part of the wellness trend taking place. But in addition to that, we do want to have some volume growth as well. In the mid the low to mid single digits. So if you were to ask me what that picture will look like what we call a better structure would be to have revenues grow by mid to high single digits volumes grow by low to mid single digits and have EBITDA grow by high single digits. That would be the perfect the picture perfect scenario for us with the entire structure of how we, of our P&L really, changes based on the strategy that we're trying to implement this year.

Great. Thank you. And just to clarify the new guidance on the U.S., you mentioned a 200 basis point contraction EBITDA margin for the U.S. for this year. Is that right? Yeah, that is correct, yes. All right. Awesome. Great. Thank you very much.

Thank you.

Our next question is from Regina Carrillo with UBM.

Hi. Have a good morning. I wanted to ask you about free cash flow generation and leverage. Could you maybe share with us your expectations for the second half of the year on working capital requirements, and maybe what leverage do you expect towards the end of the year?

Sure. Thank you for your question. So, I mean, the business is really, aside from the U.S. economy and that context that we just talked about, the business is really doing great financially and operationally. We're still producing very healthy, a very healthy level of free cash flows. The net debt to EBITDA ratio increased this quarter just because of seasonality. of the summer harvest here in Mexico. That is bound to decrease given that we already made the purchases that we needed. So working capital will be decreasing over time. We also had some receivables increase more than we necessarily needed to have them increased by. So I think the cleaning of inventories and the receivables Those were the reasons why working capital increased so much. But going forward, that is bound to decrease as we take care not only of the inventories because the summer season will be over, but also as those receivables start materializing. In terms of the leverage ratio itself, that is bound to decrease. As you know, our upper range for that ratio is right now 1.5. As long as it's between 1.2 and 1.5, we feel very comfortable in that operating in that leverage range. But it will eventually, to answer your question, by the end of the year, it will probably be 1.3 maybe as we operate for the second half. So that is our expectation, but there is nothing to worry about. to be anxious about in terms of leverage or free cash flow in the region or any of that sort of financial analysis.

Excellent. That is very clear.

Thank you. Our next question is from Fernando Olvera with Bank of America.

Hi. Good morning. Thanks for the question, Fabrizio. The first one is related to the U.S. Maybe if you can share your thoughts about pricing, given that costs are going up and the consumer environment continues to be soft. And my second question is related to the efficiencies that you highlighted in Mexico, in the press release, that favor EBITDA margin expansion despite Thank you for your question, sir. So in terms of pricing in the U.S. and inflationary pressures is something that we're taking day by day, really, as I mentioned.

We do feel the guidance incorporates that, as I also mentioned, in terms of those two variables, the packaging and the freight and fuel sewer charges and freights. So on that front, I think we're covered. We need to see how much inflation rises in the future. Sab De Cv Unsp When inflation starts hitting our P&L drastically, we'll obviously, or when we see a possibility of that, we'll always see the possibility to reach a fair agreement of price adjustments. So we'll have to wait and see, really. I hate to answer it like that, but we'll have to wait and see how it behaves. But that's how we operate. And in regards to your second question, we've been, since the third quarter of last year, as you know, We had some spikes in the corn prices because of the agreements that are reached with local farmers in Mexico. It's gone down. We've been able to have fair pricing dynamics. That being said, you know, for the next harvest, right now the corn prices increased, so we need to set a pricing in place for our agreements for the next harvest. So we're trying our best to maintain the good momentum that we have in the purchases that we make for corn. We're constantly analyzing the corn market and we're hoping that the price will decrease, but everything points out that the overall price of corn will keep increasing relative to all these news about weather issues around the world because of their mean effect. As you know, we're very active on that front, and we're very proactive on that front, so we'll try to get the best pricing possible, both here and in the U.S.

Okay. Thank you. Thank you. Thank you.

Thank you. There are no further questions at this time. I would now like to hand the floor back over to Mr. Frist for any closing comments.

Thank you so much everyone for being here with us. We look forward to seeing you and meeting you again in future market events. Take care and have a great day.

This concludes Groomless second quarter 2026 earnings conference call. Thank you again for your participation. You may now disconnect.