Genomma Lab Intl Sab Ord

Ladies and gentlemen, thank you for joining Genoma Lab's second 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 Christian Ibanez, 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 Marco.

Thank you, Chris. Good morning, everyone. I'm excited to announce Strong Quarter 2 2024 results. The highlight of the quarter is the profitability results with improvements across the P&L, starting with a gross margin that reached a very healthy level of 64%, that is 7.1 points of improvement over the past one and a half years. EBDA margin grew to 22.9%, a 186 basis points increase versus last year. Net income grew 50.1% to 631 million pesos. And EPS grew by 53.1% to 0.63 pesos. These results are driven by efficiencies in our San Cayetano manufacturing plant and productivity initiatives across the company. We remain committed to our margin expansion plans and believe these levels of margins are sustainable in the future. Our plans are on track to deliver the guidance of 23 to 24% margin in Q4 2024. Sales grew by 6.4% in Mexican pesos and on a like for like basis, sales are up 5.8%. Our business remains healthy across most brands and regions. The cash conversion cycle extended to 122 days, including Argentina, and 105 days, excluding Argentina. This change is due to two effects. Number one, a minus 16 days reduction in supplier days to mitigate raw materials and API shortages, aiming at COVID uptrend. And number two, Argentina's hyperinflationary accounting. Without Argentina, accounts receivables decrease by three days year over year. Antonio will expand on this last topic in his presentation. The following chart shows the performance of core brands and categories during the period. As you can see in the second column, we showed healthy levels of growth across the board. In the case of cough and cold, CELINE was affected by a category contraction during the flu season in the US and Mexico, but we were able to grow share. In the case of blades and razors, the issue is related to CELINE, but CELOUT remains healthy. This chart simply shows graphically what we already discussed in terms of brands and category performance here today. Skincare remain a challenge, but showing signs of turning around in Q2. Cough and cold and blades and razors should not be a problem going forward. And the same chart, but now showing countries' performance. During Q2, we face headwinds in Peru and Chile. Both markets I expect to turn around and be on the green side by Q3. This chart shows how we have grown gross margin, an impressive plus 7.1 points. We improved our gross margin from 57% to 64%, a testament of the impact that our productivity initiatives and manufacturing capabilities are having in the business. We firmly believe that this improvement in gross margin is sustainable. Let's now take a look at how this improvement in gross margin is translated into EBITDA. In the chart, you can see how we grew three points of EBITDA over the past year and a half. Around half of the gross margin gains were already translated into EBITDA growth, and the balance was reinvested in the business to continue accelerating top-line growth in the core categories. A variable that is becoming a central focus of our leadership team is ROIC. In the chart, you can see the evolution of LABS ROIC over the past three years. As you can see, we have already improved the ROIC by plus 2.1 points, mostly behind the margin expansion. Divesting non-core assets, continue to expand margin and improving our cash conversion cycle will remain the core focus to improving ROIC going forward. In this chart, you can appreciate the impact of improving our cash conversion cycle, expanding margin and divesting non-core assets. We have the potential of adding plus 6.4 points of ROIC in the coming years. Let's now switch gears to some exciting news, fresh from the oven. In Q2, 2024, we completed a series of M&As that were very strategic and will add on the growth we are seeing in our core brands. In total, we spent 25.6 million for a total of past 12 months sales of 22 million. I am convinced that without our power of marketing and point of sale execution, These new brands will more than double in the coming years. The first acquisition has to do with Suerox USA. We acquired two isotonic beverages, Suero Repone and Suero Oral. With this strategic move, Genoma owns the Suero brand in the US. a concept that is very powerful among Hispanics. Additionally, these two new brands will add incremental distribution to Suerox and Suerox to these two brands. The plan in the midterm is to change the name of the new brands to Suerox. The other acquisition is in Argentina. As shown in the pie chart, 47% of the analgesics category is sold as paracetamol. where we lead with Tafriol holding 80% of the segment share. 33% of the category is all as ibuprofen. We have acquired Evo 400, the second player in the ibuprofen segment. With this acquisition, Genoma becomes the absolute leader in the analgesics category in Argentina. Let's now switch gears to productivity. we continue to make progress against the 1,800 million in productivity savings. As of Q2 2024, we completed 41% of the 1,800 in savings. And finally, I want to share with you the latest acquisition in the productivity arena, which is a Flexo machine to produce our own syrup labels. This machine is in fact testing and will deliver total savings of 30 million pesos per year with an investment of 18 million pesos. The repayment period is less than one year. Tonio, over to you.