Genomma Lab Intl Sab Ord

Greetings, ladies and gentlemen. Thank you for joining Genoma Labs' second quarter 2023 earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. As a reminder, this meeting is being recorded and will be available for replay from the investor relations section of Genoma's website following the call. I'll now turn the call over to Barbara Cano of the Inspire Group. Please, go ahead.

Good morning, everyone, and thank you for joining. On today's call are Marcos Barbieri, Chief Executive Officer, and Antonio Zamora, Chief Financial Officer. Before we get started, I'd like to remind you that the remarks today will include forward-looking statements. such as the company's guidance and expectations, including long-term objectives and forecasts, as well as expectations regarding Genoma's business, assets, products, strategies, demand, and markets. These statements are subject to risks and uncertainties that could cause actual results to differ materially. They're also based on assumptions as of today. and the company undertakes no obligation to update them as a result of new information or future events. Let me now turn the call over to Mr. Marcos Barrieri.

Thank you, Barbara, and good morning, everybody. I am pleased to share that Genoma had another strong quarter with sales growing 17.4% year over year in like-for-like currency, excluding Argentina. Despite the challenging currency environment with a strong peso and a minus 23% devaluation in Argentina, when converted to Mexican peso, The growth stands at 1.1%. Our EBITDA margin also showed an important improvement, reaching 21.1%, a 50 basis points increase compared to the previous year. We remain confident in our forecast of growing our margins slightly ahead of 2022. Additionally, our free cash flow reached 429 million pesos, an increase of 209 million pesos versus a year ago. Let me provide some insights into our core business KPIs. 74% of our business grew ahead of inflation, with all our major countries reporting double-digit growth in the top line. Mexico grew 19%, the U.S. 23%, and Latam, without Argentina, 8.1%. Our strategy of focusing on core brands and categories continues to deliver strong results, with 61% of our sales gaining market share. Most of our core brands, except Cicatricure and Asepsia, have shown significant growth outpacing the categories where we compete. In terms of productivity, we had another strong quarter, successfully concluding two key projects that together contribute $96 million in annual productivity savings. Year-to-date, we have executed projects totaling $216 million in annual productivity savings. I will delve deeper into these projects and provide more perspective during the presentation. I would like to reiterate our two pillar strategy that will guide us for the next five years. Firstly, we remain steadfast in our intentional focus on driving and investing in our core brands. As we discussed in the last call, we are committed to selling or divesting the non-core assets. This strategic approach will allow us to maintain a more concentrated management focus and unlock valuable working capital. Secondly, productivity is deeply ingrained in our DNA, and it forms the foundation of our second pillar. As we committed during the Genoma Day back in February, we have robust plans in place to achieve a total of 1.8 billion pesos in productivity savings by 2027. These charts Demonstrates our strong performance, with 61% of our sales gaining market share in their respective categories. Tio Nacho is thriving with a remarkable 21% growth. Suerox is soaring with a significant 32%. Grumman is achieving an impressive 55%. And then our analgesics category is up by an impressive 43%. Additionally, our cough and cold products are flourishing with a strong 41% growth. And our gastro category is also showing a positive growth at 16%. However, it is important to note that cicatricure and asepsia are experiencing some challenges, with both showing a decline in sales. Cicatricure is down by minus 3%, while Asepsia is down by minus 25%. We are closely monitoring these brands, and we are committed to implementing the necessary strategies to address the current situation. I am delighted to share that most of our markets delivered strong performances this quarter. Mexico led the way with an impressive top-line growth of plus 19%, showcasing the strength of our presence in this vital market. The USA also demonstrated robust growth, achieving a 23%. Meanwhile, in Latin America, our performance was affected by the devaluation in Argentina, but excluding Argentina, we grew 8.1%. Now, let's delve into the performance of our core brands, Suerox. This quarter, Suerox demonstrated a remarkable growth, achieving an impressive 32% increase in sales. The brand reached record high sellout in Mexico, soaring at a 44%. In Chile, Xerox achieved a market share of 18.8%, reflecting its strong position in this market. Moreover, in the USA, Xerox had an outstanding performance with sales surging by an impressive 67%. Additionally, all market expansions are right on track and we anticipate surpassing the expected forecast in those regions. In this chart, you can appreciate the successful performance of Suerox. You can see the red line reaching 18.8% of market share in Chile, getting closer and fast to Gatorade and Powerade. This is a strong indicator that even outside Mexico, Suerox can be very successful. In Q2, Tio Nacho delivered a robust performance with sales soaring by 21%. This growth was driven by the successful launch of a new version that specifically targets eliminating gray hair, as well as the continued success of our 950 male size variant. I am excited to share that we have updated the share charts to the left, highlighting the rapid progress we are making in approaching the market shares of the category leader. Teonacho's strong growth and market gains are a testament of the effectiveness of our strategic focus and consumer appeal. Let's take a closer look at the chart on the screen, which showcases the success of our anti-gray hair version. As you can see, this variant has become one of our top sellers for the brand, rapidly gaining popularity among our customers. The anti-grey hair version has resonated exceptionally well with our target consumers, and its performance is a testament to the strength of the product offering and our ability to meet consumer demands effectively. Now, let's turn our attention to another achievement, the significant success of our 950 ml size variant. As depicted in the chart, the 950 ml size has experienced an outstanding sales growth, becoming a standout performer for our brand. This larger size has struck a chord with our consumers, providing them with added value and convenience, leading to its rapid adoption in the market. Its success is a testament to our ability to identify and cater to our customers' preferences effectively. In these charts, you can appreciate how Tio Nacho is already the number one brand in the pharmacy channel in Chile. The chart in the left shows how Tio Nacho is the leading brand in the category. That's the yellow line at the top. And in the chart at the right, you see a spike in the yellow line that shows how the introduction of Henahypsia boosted the brand growth at the largest perfumery in Chile, Preunique. Grumman also had a strong quarter, achieving a record high market share of 7.6% in Chile. This remarkable achievement indicates strong market acceptance and consumer trust, showcasing the superiority of our products and effectiveness of our communication strategy compared to our competitor Gillette. Our strategic approach and focus on product excellence have resonated well with consumers, driving increased adoption and loyalty. This success further solidifies Grumman's position as a leading brand in the market. Analgesics demonstrated yet another outstanding quarter, achieving all-time record high sales. Our strategic efforts are paying off, as X-Ray Colombia reached an impressive milestone, consolidating as a solid number three position in the category, with a remarkable total of 8.7 percentage points in just two years. Moreover, the successful launches of X-Ray in Chile and Ecuador are exceeding expectations, with extraordinary growth rates of 224% and 120% respectively. In Mexico, Aliviax reported record high sales, delivering a plus 36% growth in this quarter. This strong performance reflects the effectiveness of our products and our ability to meet consumers' needs effectively. Our analgesics portfolio continues to drive exceptional results, and we are excited about the continued growth and opportunities ahead. Let's take a closer look at the chart, which vividly illustrates the phenomenal growth of X-Ray in Colombia. In just a few years, X-Ray has achieved remarkable progress, consolidating its position as the number three player in the category. It is worth noting that a short while ago, X-Ray barely existed in this market. This achievement reflects our brand's strong performance, effective strategies, and the strong acceptance of X-Ray by Colombian consumers. We are proud of the team's dedication and the brand's rapid ascent to a prominent position in the market. Gulf and cold also delivered a robust performance, achieving a plus 41% growth in the quarter. As shown in the chart on the left, we have hit record high market shares in key markets, including Mexico, the USA, Argentina, Colombia, and Peru. This growth is a testament to the effectiveness of our product offerings and our ability to meet consumer needs effectively in each market. The success of Coffin Cold reinforces its position as a leading brand, and we are excited about the continued opportunities for growth in this category. I am thrilled to share that we are making strong and steady progress in a category that holds a significant potential worth 2.5 billion U.S. dollars in Latin America. Our brand, Novamil, demonstrated remarkable growth, gaining market share in all segments where we compete. Specifically, in the constipation segment, Novamil grew by 2.9 share points. In the rice segment, we achieved a growth of 6.5 points. Additionally, our premium variant also saw significant gains, with an increase of 0.7 points. In the reflux segment, Novamil's success continued, gaining 2.0 points. These remarkable results are a testament to the effectiveness of our strategic initiatives and the superiority performance of Novamil. We are excited about the potential in this category and remain committed to further expanding our presence of these brands throughout Latin America. Now, let's switch gears and discuss our remarkable progress in productivity initiatives. As of February 2023, we committed to achieve a total of 1.8 billion Mexican pesos in productivity savings by 2027. I am delighted to report that our efforts have been yielding significant results. Year-to-date, our productivity initiatives have successfully generated a total of $216 million in annual savings. This steady progress puts us well on track to meet and even exceed our target. Our dedication to enhancing productivity across the organization reflects our commitment to operational excellence and creating sustainable value of our stakeholders. We will continue to drive these initiatives to ensure ongoing efficiency, gains, and profitability. I am thrilled to share that during Q2, we achieved a significant milestone with the successful commissioning of a new Xerox line. This expansion has blustered our manufacturing capacity by an additional 96 million bottles per year. Not only has the new Swerox line increased our production capacity, but it has also played a pivotal role in our optimization efforts. The expansion has led to a remarkable production of 63 million pesos in Suerox cogs, resulting in substantial annual savings. This achievement reflects our commitment to continuous improvement and investment in our manufacturing capabilities. The increased capacity and cost savings position as well to meet growth in the market, meeting demands, and further enhancing our competitive edge. We extend our gratitude to the entire team involved in making this expansion a resounding success, and we look forward to the positive impact it will have on our company's growth and performance. In Q2, we successfully concluded a project aimed at optimizing our product labels, and the results have been nothing short of remarkable. Through this initiative, we achieved a significant cost reduction of minus 55%, translating to an impressive annual savings of 25 million pesos. One of the key strategies behind this success was consolidating our label production from 18 suppliers to just two. By streamlining our label sourcing, we have not only reduced complexity, but also minimized cost associated with the aspect of our operations. This optimization project exemplifies our commitment to continuous improvement and cost efficiency. The substantial savings achieved will further foster our profitability and create value for our shareholders. I commend the efforts of the team involved in executing this project and the strategic vision that has led to its success. We will continue to seek opportunities for enhancement across all aspects of our operations to drive sustainable growth. I added a few more slides to remind you of the two productivity projects that we concluded last quarter. In this slide, you can see how we generated close to $30 million in savings by reducing the number of packaging suppliers from 23 to 2 and the number of SKUs from 73 to only 12. In this last slide, I wanted to remind the audience of the vertical integration we finalized in Q1 that will deliver a total annual savings of 96 million pesos. With all that said, I will pass it on to Tonio.