Genomma Lab Intl Sab Ord

Good day, ladies and gentlemen. Thank you for joining Genoma Lab's first quarter 2026 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, 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 Pervietti.

Thank you, Chris, and thank you everyone for joining our first quarter 2026 earnings call. Let me open with where we stand. We are executing on our growth initiatives, expanding distribution, opening up new routes in the traditional channel, stepping up in-store execution, and increasing media investment. This execution is delivering early signs of market share recovery in Mexico, which is encouraging. At the same time, sell-out is growing slower than we expected, driven by further full-market category contraction in Mexico, most notably in OTC. The main performance issues are concentrated in three areas, beverage in Mexico, gastro in Mexico, and cuckold in the United States. We are adapting our plans. with targeted interventions on these issues, and we expect recovery between Q2 and Q3 2026. We remain confident in our growth initiatives as we navigate a tough consumption environment in Mexico. I would also like to thank our investment community for your continuous trust. We will continue to operate with the highest level of transparency, and please Do not hesitate to reach out with any questions beyond this code. Now, let me address five key highlights of the quarter. Number one, LATAM continues to deliver solid results, while net sales remain under pressure from a weak consumption environment in Mexico and Hispanic market disruptions in the United States. Two, we are facing the toughest comparative phase of the year, with significant FX headwinds offsetting LATAM's strong life-for-life performance. Three, in Mexico specifically, full market category contractions are waiting on sellout and we are adjusting our plans to offset targeted weakness. Number four, our disciplined optics behind growth initiatives kept margins stable despite operating deleverage. Number five, Increased investment is required to support sell-out and defend market share, aiming to increase competition while Mexican consumption remains soft. Turning to our consolidated results, like-for-like sales declined minus 3.9%, and net sales minus 4.9%, impacted by a 13.9% appreciation of the Mexican peso. The top line reflects a soft Mexican consumption environment, partially offset by plus 5.3% life-for-life growth in Latam. Gross margin expanded plus 61 basis points to 63.4%, reflecting the productivity gains we have been building. EBITDA margin declined minus 96 basis points to 22.8%. As we invested behind our growth initiatives into a weaker than expected demand environment, net margin expanded plus 49 basis points to 11.8% on lower taxes and financial expenses. This view shows where the pressure is coming from. Two geographies are driving the consolidated gap. Mexico representing 45% of our business contracted minus 5.8% in sell-out. And the USA, at 8% of the mix, declined minus 10.3%. On the other side, Latam, ex-Argentina, grew plus 45%, 4.5%, and Argentina grew plus 96.6% in local currency. LATAM is compensating at the recovery work. Squirrel on Mexico and the United States. One of the macro headwinds we are navigating is remittances, which directly affect Mexican consumer purchasing power. After declining 5% in dollar terms in 2025, The peso value of remittances deteriorated sharply in early 2026, down minus 16.9% in January and minus 15.6% in February. This is the combined effect of lower dollars inflow and a stronger Mexican peso. It is a real drag on the consumer reserve. At the full market level, the categories where we compete are contractive. After a week, 2025, OTC is now down minus 6.3% year-to-date through March, reflecting a softer consumer. Beverages, personal care, and infant nutrition are all slightly negative as well. This is a full-market headwind, not a genoma-specific one, but it continues to weigh directly on our sellout. Against that contracting market backdrop, this is one of the most encouraging signals of the quarter. Genoma Lab Mexico is improving market share sequentially across every key category. In full year 2025, market share remained largely stable across categories, with the exception of oral serums, which declined 1.8% points due to pricing pressure late in the year. With the available diet data for 2026, we can see sequential improvements versus the full year 2025 across categories. Our categories are gradually recovering terrain. These moves are modest, but they indicate that our growth initiatives are beginning to gain traction despite a challenging environment. Let me walk you through the three priority issues we are actively addressing. These are the concentrated performance issues. and we want to be very specific about the challenges and the action plans behind each. First, Suerox in Mexico, pressured by a contracting category and increased competition. We're launching Suerox Gas, exclusive in Walmart, OXXO, and the traditional channels, targeting 250,000 points of sales within three months. Second, Gastro in Mexico, under pressure from a contracting category and generous gaming terrain. We're bringing Genoprasol to price parity to generics and investing in incremental media behind Coge Cinco and Nixon. And third, Tukol in the United States, where the brand is pressured and the B2B Hispanic channel is contracting. Following the deep U.S. Hispanic market disruptions, we're scaling perfect store execution and e-commerce while protecting cash recovery on these three priorities expected Recovery on the three priorities is expected between Q2 and Q3 2026. Let me go deeper on Swerves because it is the largest single priority. We launched a bolder new brand image in March, cleaner label, stronger self-impact, a unified look across the portfolio. We are adding 60,000 new stores in the traditional channels, and deploying 27,000 branded coolers at the point of sale. We are also launching Swerves Mineral, a zero-sugar carbonated isotonic beverage that extends the brand beyond traditional hydration into functional carbonated refreshment. Same brand equity, genuinely new consumer experience. The launch is backed by cooler replacements as 25,000 OXXOs, and all Walmart stores supported by AI-powered digital apps. We are timing the Mexican launch for summer 2026. The peak category season. This is the category that with the biggest near-term upside on volume and share. We're also evolving how we communicate with our consumers. We're shifting digital-first mix. TikTok, Instagram, Reels, and YouTube Shorts. At the same time, AI-powered creativity production is lowering our cost per asset, accelerating time to market, and letting us test far more variants. Critically, this communication engine is directly aligned to our Mexico priorities. Nixle, reactivating the gastrocategory, and Xerox support the gas launch. Let me be direct about the margin implications. Over the next three to six months, we expect EVDA margin pressure as we prioritize market share. To increase discounts, higher gaps, and digital communication increases, and stronger install and distributions end. Beyond that window, we expect growth initiatives to ramp up and operational leverage to improve. The choice to invest now is deliberate Defending market share today is what protects the company's value tomorrow. Our productivity engine is what is letting us self-earn this investment. What started as a modest program in 2023 has compounded into accumulated savings of 1.8 billion pesos through 2025. We have secured an additional 1.1 billion pesos in savings by 2026, bringing the accumulated total close to Mexican $3 billion. These resources are secure and are fueling every growth initiative in our 2026 recovery plan. However, further resources are needed to defend market share in a weak consumption environment. Let me give you a couple of examples of our growth initiatives. The traditional channel expansion is a key growth engine. and it is already executed. In 2026, we're opening 430 new routes and adding 138,000 new points of sales across Mexico and Latam. We are also deploying Istros Media in 314,000 points of sales. So we are not just expanding coverage. We are activating it. In-store execution is the single largest contributor to our growth plan. We are ramping up the perfect store model and expanding the pharmacy's recommendation program across independent pharmacies, supported by better brand visibility in-store. We have a particular aggressive plan in analgesics, and we are preparing top-notch in-store executions for both the summer and winter seasons ahead. Innovation is what keeps our distinctive brands distinctive. In OTC, we are launching five new products that conquer new segments. In beverage, we are refreshing swirls with a new image and opening new consumption occasions. In hair care, we're delivering improved clean performance and an expected routine. And in skincare, we are democratizing high-end formulations with clean formulas and a refreshing science. We are stepping up our media investment and rebalancing the mix toward a more efficient, more diversified structure with a stronger weight on digital. This is a conscious decision to put the investment where our consumer engagement is actually happening. And it directly backs the priority actions we just discussed. E-commerce continues to be one of our highest growth channels. We expect to grow 30% in 2026. reaching 7% to 8% of consolidated sales and contributing 310 million pesos in incremental sales. We're investing in traffic generation tools and digital capabilities to sustain that trajectory. Before I close, I want to step back and anchor on our long-term trajectory. Over the past six years, consolidated net sales have grown at a 5.5% CAGR and EVDA at a faster 8.8% CAGR. The faster EVDA expansion is not an accident. It is the reflection of the compounded benefits of vertical integration, manufacturing, efficiencies, cost discipline, and the productivity program we have built over time. The same operating model that delivered this track record is what will carry through this cycle. Let me leave you with four messages that summarize how we see the fast forward. First, momentum is rebuilding at a lower than expected pace as Mexico's sellout remains pressured from a soft consumption environment. Second, increased investment is required to protect Mexico market share, and we expect short-term EBITDA margin pressure until the operational leverage normalizes. Third, Our growth initiatives are starting to show early signs of recovery with year-to-date sequential market share improvements in Mexico. Third, LATAM remains a growth engine with growth projects yielding clear results and a disciplined focus on winning initiatives. And to close, we are executing on our growth initiatives and we are seeing early signs of market share recovery. And we understand where the concentrated issues are We remain confident in our growth initiatives as we navigate this tough consumption environment, and we expect to be in a better place by Q2 and Q3. Thank you for your continued support. Antonio, please go ahead.