Genomma Lab Intl Sab Ord

Greetings, ladies and gentlemen. Thank you for joining Genoma Lab's first quarter 2024 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 Cristian Ibáñez, Genoma's Head of Investor Relations. Please, go ahead.

Thank you and welcome, everyone. 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 financial 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 are 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 Parvieri.

Thank you, Chris, and good morning, everybody. I am excited to announce strong results for the first quarter of 2024. The highlight of the quarter is that we grew ABDA margin to 22.3%, that is 153 basis points in Greece versus a year ago. These results are driven by efficiencies in our manufacturing plant in San Cayetano and the result of the productivity initiatives that I will discuss in more detail in this presentation. We remain committed to our margin expansion plans, and I believe these levels of margin are sustainable in the future. In terms of sales, we grew 9.7% in life-for-life terms. In Mexican pesos, sales are up 5.8%, and when we include Argentina, we grew 0.5%. Our business remains healthy across the majority of the brands and regions. However, the strong Mexican peso and Argentina's economic crisis are impacting our sales results in the reported currency. Net income grew 3.9%, impacted by non-controlled subsidiaries' negative results, and EPS is up 6.8%, reflecting the cancellation of 20 million shares in Q2. The cash conversion cycle saw an improvement of three days, and the free cash flow amounted to $1,780 million over the past 12 months, up 51% versus the previous period. The following chart shows the performance of core brands and categories during the period. As you can see, with the exception of skin care, we showed healthy levels of growth across the board. In the case of hair care, we were affected by a supply issue that is already solved with no impact in Tio Nacho's sellout. I would like to remind everybody of our two pillar strategy that we presented in February, 2023. The first pillar is focused on growing top line with a strong focus on our core brands, selling or divesting the non-core. The second pillar is focused on driving 1,800 million pesos in productivity initiatives that are already identified, of which 40% has been executed. More on this topic further in this presentation. This chart simply shows graphically what we already discussed in terms of brands and category performance. Asepsia and cicatricure remain a challenge. We have a clear plan to turn around asepsia by the third quarter, and we are working on a turnaround plan for cicatric cure. And the same chart, but now showing countries' performance. During Q1, we faced headwinds in Peru and Chile. Both markets I expect to turn around and be on the green side by Q2. In the case of the U.S., when excluding our flu season brand to cold, we grew double digits. Not a good winter in the U.S. this year, but nothing to worry about this market's performance. Let's now switch gears to the category review. We continue to see a strong performance in Xerox after growing 42% in 2023. We are growing 14% in Q1. We have already launched Xerox in more than 10 countries. We expect to finish the rollout of the brand to all markets in 2024. As mentioned before, the decline in Tio Nacho has to do with a supply issue that is already solved and had no impact in the brand's sellout. Nothing to worry about Tio Nacho. It continues to perform strongly across regions. Grooming continues to perform well in Chile and Mexico. The launch of disposables and cartridges is helping the share. Analgesics also had a strong quarter, growing 13% after a strong 2023, growing 24%. All brands are performing well in this category and we continue to grow share. The chart in the screen shows how well we continue to do it in Colombia, where X-Ray has reached double-digit share levels, positioning as the number three brand in the category. In cough and cold, we also did well in Q1. With the exception of the cold in the US that declined due to a milder winter season, all the other brands and regions are performing strongly. In gastro, we had a phenomenal quarter growing 27% behind the relaunch of all the brands with the new image and a new communication campaign. Derma OTC performed well, growing 7% for the quarter. The relaunch of Silca in Mexico has performed well, and we are planning to roll out this initiative to the balance of the markets throughout the year. Novamil continues to be a star, growing 50% for the quarter after growing 44% in 2023. All variants are growing market share in their respective segments. And finally, in skincare, I am happy to announce that we have a strong plan to relaunch Asepsia in the third quarter. And I personally believe that it is going to be a total success. Still working on plans to turn around Cicotic Cure. Let's now talk about how we are going to continue to grow margin, our productivity initiatives. As I mentioned before, we are committed to deliver 1,800 million in cost savings coming from specifically identified productivity initiatives. As of Q1, 2024, we have completed the execution of the initiatives for a total of 40% of the 1,800 million. Let me now talk about the initiatives that account for the $711 million I just mentioned. The first one is an improvement of $207 million in our cost to serve our customers. It includes a reduction in terms, more efficient promotions, and more productive go-to-market programs. In 2023, we continued a full re-engineering of the Suerox product. We worked on efficiencies coming out of the bottle, the label, and the sleeves. This work amounted a total of $100 million in annual cost savings. Another very large project was the re-engineering of the Banar product. As well as in Xerox, we worked on making more efficient the manufacturing process, the bottle, the caps, and the formula. This work is worth $93 million in annual cost savings. As mentioned in other calls, we have signed a contract manufacturing agreement with a large bottler in Mexico. By doing so, we created $63 million in annual cost savings for Suerox. During 2023, we implemented a new logistics program in which we optimized the parameters such as minimum order quantities and mix of products. This new logistics program accounted for a total annual savings of $45 million. By moving from 23 suppliers of carton folding packaging to only two, and from 72 SKUs to only 12, we optimized our packaging to create a total annual cost savings for a total of $25 million. Same as we did with our packaging, in the case of labels, we moved from 16 suppliers to only two, optimizing our cost for a total of $22 million in annual cost savings. In January 2024, we started the operation of our own blowing equipment to blow Tio Nacho bottles. This project amounted for a total of $12 million in annual cost savings. During Q1, we continued a global bidding for our forwarding process. In this bidding, we selected three top global suppliers and we lowered the cost by 11 million in annual cost savings. During Q1, we simplified our OTC aluminum packaging by eliminating the color printing. This project will deliver a total annual cost savings of 10 million. With that, we finish the business review. Let me now turn it to Antonio Zamora, our CFO.