Genomma Lab Intl Sab Ord

Good day, ladies and gentlemen. Thank you for joining Genoma Lab's second 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 Christianne Ibáñez, Genoma's Head of Investor Relations. Please go ahead.

Thank you and welcome everyone. On today's call are Marco Sparvieri, 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. Now, let me turn the call over to Mr. Marco Sparvieri. Please go ahead.

Thank you, Chris, and thank you everyone for joining our second quarter 2026 earning call. Let me open with the quarter highlights. First, the quarter came in line with our expectations and our growth initiatives are gaining traction. Mexico delivered a sequential sales improvement as we maintained or grew market share across all our businesses units, despite full market category contraction. The consumption environment remains challenging. Full market category contractions in Mexico continue to wait on the company's sellout, and the United States remains pressured by Hispanic retail disruption and a weak cough and cold category. We are executing targeted actions on each front and we expect a continued gradual recovery during the second half of 2026. Second, productivity remains a significant buffer against operational leverage and increased operational expenses. Our gross margin increased during the quarter while SG&A expenses remained flat. All in all, EBITDA Thank you for your continued trust. Turning to Mexico, sell-in declined minus 4.4%, a sequential improvement from minus 8.6% in the first quarter of 2026 and minus 22% in the fourth quarter of 2025. Sell-out declined minus 4%, also a sequential improvement, while the sell-in to sell-out gap narrowed to 43 basis points assigned That channel health is improving. Last quarter, we told you momentum would be rebuilt. This slide shows it's happening. With both curves converging, our reported sales now reflect real consumer demand, not inventory movements, though additional adjustments may be required if market weakness persists. This view shows the sell-out recovery path across Mexican monitored retailers, reflecting the most demanding channel behavior for the company, from minus 15.7% in April to minus 10% in May and minus 6.8% in June. We delivered a nine-point improvement within the quarter. In the first two weeks of July, monitored sell-out turned positive at plus 2.4%, back to growth and 21 points above the low point of Q2 2025. This is not one good data point. It is a consistent month-by-month recovery showing through our most demanding channels. At the leading retailer, our largest client in Mexico, the recovery is ahead of the curve. Sellout growth went from minus 7% in April to plus 4% in May and plus 5.2% in May and accelerated to plus 15.3% in the first two weeks of July. That is a 34 points recovery from the low point of Q2 2025. This matters because it is a leading indicator. Not only does it show the recovery in our largest client in Mexico, it also shows we can replicate this performance across our other clients as we execute the same strategy with each of them. A key driver behind the acceleration is Suerox. This graph shows Suerox growing in a sustained double digit at the leading retailer in the last month, supported by our growth strategies and specific to this client. We will continue to support Momentum through the second half of 2026. The share data confirms it. Suarez's share at the leading retailer climbed to 12.2% in the second week of July, an historic high level, up 3.6 percentage points versus the first quarter of 2026. These are early weeks at a single retailer, so we remain measured, but the trajectory tells us that our strategy is pulling the brand up. Let me go deeper on Suero's economics in Mexico because they show our model is working. We move pricing from 25 to 22 Mexican pesos to stay competitive. We fully absorbed Mexico's new one peso per bottle tax on non-caloric sweetened beverages, and we held market share at 6.9% at the full Mexican market level. And yet, Suerox Mexico gross margin grew 11.7 percentage age points year over year during Q2 2026. and is 2.8 points above pre-discount levels, a testament to the impact of our productivity initiatives and manufacturing capabilities. Suerox is one example of many productivity initiatives across the company that are funding our competitiveness without sacrificing profitability. Against that backdrop, it is important to size the market we are operating in. At the full market level, Pernobloch and Nielsen Data through May, every category where we compete in Mexico is contracting. Isotonic beverage is down minus 6.6%, OTC minus 6.3%, and personal care minus 1.4%. and Infant Nutrition minus 1.1% year to date. This is a full market headwind and it continues to wait directly on our sellout. Within that contracting market, we maintained or increased year-to-date market share across all businesses units versus 2025 year-end levels. Isotonic beverages, OTC, and personal care remained stable while infant nutrition stepped up from 4.2% to 5.2% at a full percentage point. These moves are modest, but they confirm our initiatives are working where it counts, and defending market share today is what protects the company's value tomorrow. Turning to our consolidated results, like-for-like sales declined minus 3.6%, and net sales declined minus 6%, reflecting the ongoing recovery in Mexico, continued softness in the U.S. Hispanic market, and a 10.8% appreciation of the Mexican peso during the quarter. Gross margin expanded 106 basis points to 64.6%, driven by productivity gains, partially offset by higher promotional investment. EBDA margin declined minus 200 basis points to 21.8% on operational deleverage, with SG&A flat as productivity offset higher OPEX and inflation. And net margin expanded 93 basis points to 8.5% driven by lower financial expenses and reduced foreign exchange losses. Let me be direct about the margin implication. Last quarter, we guided to EVDA pressure over three to six months. As we prioritize market share, this quarter landed within that window. The choice to invest remains deliberate. and we expect operational leverage to improve as sales recover gradually in the second half of 2026. This view shows the geographic picture in gross sellout and local currency. Latam, ex-Argentina, 30% of the mix grew plus 5.6%, driven by Central America, and the Andean region with OTC and beverage market shares gains in key markets and traditional channel expansion. Argentina, 15% of the mix grew 37.7%, outpacing inflation by 4.5 percentage points. The United States, 8% of the mix, declined minus 7.9% in local currency, pressured by Hispanic retail disruption and a COFA and gold category weakness by two consecutive milder seasons. We are realigning our commercial footprint and distribution model to stabilize performance. With Suerox allowed, growing double-digit and e-commerce expanding. All in all, LATAM is compensating, but the recovery works sit squarely on Mexico and the United States. Before I close, let me leave you with four messages that summarize how we see the path forward. First, Mexico performed in line with our expectations with a sequential sales improvement and monitored sellout back to growth in early July. Second, we defended market share across our business units despite full market category contraction, which is the foundation every recovery is built on. 3. Margins behaved as we guided. Productivity expanded, gross margin and held SG&A flat, while EBDA contracted on operational deleverage within the window we communicated. 4. We expect a continued gradual recovery towards the second half of 2026, supported by four commercial levers. Stronger in-store execution, competitive pricing, expanded digital and TV communication, and e-commerce growth, reinforced by our innovation pipelines of OTC Lounges and Xerox Ramp-Up. To close, the quarter confirmed we are on the right path towards sales recovery. Momentum is rebuilding. Our initiatives are gaining traction and our fundamentals position us to emerge stronger as the consumption cycle recovers. I want to thank our team for their disciplined execution and our investors for your continued trust. Tonio, go ahead.