Genomma Lab Intl Sab Ord

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Denoma Lab second quarter 2021 results conference call. At this time, all participants are in listen-only mode. Following today's discussion, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. A replay will also be available shortly after the conclusion of the call. I'll now turn the call over to Barbara Cano of Inspire Group. Please go ahead, Barbara.

Thank you, Robin. Good morning. Welcome to HENOMA's Conference Call to Review Second Quarter 2021 Results. On today's call are Jorge Braque, HENOMA Labs Chief Executive Officer, and Antonio Zamora, Chief Financial Officer. Our results were released yesterday afternoon. and can be found within the Investor Relations section of our website, along with the appropriate filings with the Mexican Stock Exchange. Certain comments made during today's discussion may be deemed forward-looking statements within the meaning prescribed by the securities laws, including statements related to future business and financial performance. All forward-looking statements represent management's judgment as of the date of this conference call. and are subject to risks and uncertainties that can cause actual results to differ materially from current expectations. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the Mexican Stock Exchange. In particular, uncertainty remains about the duration and impact of the COVID-19 pandemic. This means results could change at any time due to the pandemic's impact on the company's business results. Management's outlook is a best estimate based on the information as of today's date. With that, I'm now pleased to turn the call over to Mr. Jorge Bray. Jorge, please go ahead.

Thank you, Barbara. Good morning, everyone, and thank you for joining us today. Throughout the last year and a half, Denoma Labs has come together as a strong team through the pandemic and made decisions prioritizing the safety and well-being of our employees while swiftly adapting to the changing needs of our customers and consumers. This approach has served us well, enabling us to make meaningful progress on our four-pillar strategy despite the volatile operating environment. Our team pulled together, we executed with excellence, and we delivered strong operating results. As you read in our press release yesterday, the normal second quarter results reflected the expected challenge in comparison to the prior year as we cycled the demand surge that accompanied the COVID-19 pandemic in Q2 2020, while navigating several current headwinds. Vaccination rates in Latin America continue to lag, with growing unemployment that impacts consumption across the board. Genomics also experiencing effects of headwinds compounded by a challenging macroeconomic environment and inflationary impacts across the two markets where we operate. However, we delivered 3.9 billion pesos in sales for the second quarter of 2021, a 6.3% year-on-year increase reflecting genomics as a healing and dynamic business model based on our four pillars of strategy. From a top-line perspective, second quarter 2021 represented the 11th consecutive quarter of increased sales, and one of the best quarters in the history of the company. Our sales benefited from the continued momentum of our product portfolio utilization, as well as innovation strategies, with line extensions and new product launches, also with new categories such as novel meal and rooming, etc. Net sales on EBITDA, as you know, has Mexico operations, grew almost 9% and 14% year-on-year, respectively, to close at 1.64 billion pesos with a 20.2% EBITDA margin. Latin American net sales reached 1.9 billion pesos during the second quarter, a 15%, almost 16% year-on-year increase. It's also important to note that today, close to 25% 20% of genomic growth comes from innovation initiatives. To put this into perspective, potentially none of our growth was driven by innovation before 2019, but jumped to almost 15% in 2020 and 20% in 2021, as already mentioned. We are now at a solid level as compared to our global peers on this front. Theonacro is an excellent example of a heritage genomic product that today is growing behind innovation, reflected in a double-digit year-on-year increase in sales for this product. This is achieved through improved formulas and fragrances, strengthened distribution channels, and an expanded presence in the countries where we operate. The strong quality resources were also driven by our decision to invest in supply and service, while preserving brand investments through advertising and consumer promotions. This has further enabled Genoma to gain share in a difficult operating environment. While we faced significant inflationary pressure in the quarter, we anticipated and mitigated the vast majority of the impact by consolidating Genoma's third-party manufacturers. Today, our suppliers are fewer, larger, more efficient, at a lower cost. We have also fine-tuned our pricing strategy. to be able to pass through costs while continue growing our volume. Discoverers' results were favorably impacted by the interventions we have successfully made within our supply chains through the third quarter of 2020. The enormous new and strong talent is focused on proactively and aggressively addressing all related opportunities, expanding from demand forecasting the purchasing, specifically what, where, and how much, while optimizing costs. As I have commented on our call last quarter, this is the year of the supply chain. In particular, we are focused on transforming our supply chain in line with our new plan initiating operations. We, therefore, are confident that we can continue addressing future headwinds. reflected in the plans and pricing already in place. We have also identified purchasing targets where we see important opportunities to further optimize costs, particularly related to raw materials and packaging, from which Genoma can benefit, in tandem with the benefits we're seeing from streamlining our suppliers to become more efficient and productive of our manufacturing plan. We also have seen our continued strength in market underpinned by the fact that Genoma has been uniquely competitively positioned to win. Genoma's broad range of products have powerful local brand recognition and can be an attractive price point related to our competitors. Further, we continue developing a deep presence within the tradition of China, the famous mom-and-pop stores. while at the same time we were able to shift the pivot towards e-commerce early in the pandemic, more than tripling genomic business within this platform over the last 18 months. We drove a strong quarterly performance with an expanded presence with the traditional channels in Mexico, Central America, and the Andean region during the first two quarters of 2020, while we also deepening e-commerce channels not only in Mexico, through attractive hot share campaigns that increase the number of shares within this marketing quarter. Consumers are increasingly moving online, as we all know, and we are ramping up our connected e-commerce efforts to continue to take advantage of related opportunities. Finally, the number was once again selected as a component within the S&P BNB Total Mexico EOK Index for the second consecutive year. as one of 29 companies recognized for outstanding E&T practices based on this standard and core corporate system ability assessment. Additionally, during the second quarter, we updated our diversity, inclusion, and gender equality policy, also inaugurating our Global Committee for Diversity, Inclusion, and Gender Equality. Further. We've worked with a consultancy to update our climate risk and opportunities analysis to closely align with the task force on climate-related financial disclosure recommendations. In closing, when I joined Genoma, our initial focus was on managing the company to increase market share. We also strived to help Genoma employees work differently and more effectively, supported by our company's effective four-pillar growth strategy. As a result, the NOMA has not only survived today's unprecedented challenges, it also prevailed, and we continue doing so. Thank you for your attention. It is now my pleasure to turn it over to Antonio, and I'll be back to answer your questions and opinions. Thank you.