Grupo Herdez, S.A.B. de C.V.

Good morning, everyone, and welcome to Group O'Hare Dev's second quarter 2021 results conference call. Before we begin, I'd like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties and actual results may differ materially. Please refer to a detailed note in the company's press release regarding forward-looking statements. At this time, I would like to turn the conference over to Mr. Gerardo Canavati, Chief Financial Officer. Please go ahead, sir.

Thank you, Grupo RAN. Good morning, everyone. Welcome to Grupo ERDE's second quarter, 2029 Earnings Conference Calls. Once again, I hope you are and your families are doing well. The second quarter of last year will be remembered as the time when the COVID crisis impacted our country the most due to the full consequences of the extreme lockdown, which were felt obviously in our retail business. On the other hand, volume on our preserves and export segments were extraordinary, translating into double-digit growth in sales for both. Today, the coin flipped and the performance in our two main segments reflect the opposite as we adapt to the new conditions of the market, including higher inflation and more normalized demand. As usual, Andrea will now walk you through the results for the quarter, and we will take your questions at the end. Andrea.

Thank you, Gerardo. Good morning, everyone. Just as a reminder, 2021 results are not fully comparable versus the previous year for several reasons. First, the divestment of the tuna business and the naive brand. Furthermore, we ended the distribution agreement with Ocean Spray effective 2021. And starting in April of this year, we began the distribution of the General Mills brand. Consolidated net sales decreased 1.2% in the quarter and were practically flat considering the first six months of the year. The decrease in net sales for the quarter came mainly as a result of lower volume in the preserves and export segments due to a very challenging comparison base. On the other hand, the frozen segment recovered somewhat due to the reopening of stores and a return in traffic. Sales in the Preserve Division decreased 2.2% on the quarter and were sluggish on a cumulative basis as a result of lower volume due to the high comparison base and was offset by the price increases implemented in the last 12 months. Sales increased 36.2% on the quarter and 10% on a cumulative basis due to the reopening of stores and improved traffic metrics. In exports, Net sales decreased almost 35% in the quarter and 13.7% on a cumulative basis due to the combination of a stronger currency against the U.S. dollar and a decrease in volume of mail and home-style sauces compared to the same quarter of last year. Consolidated gross margin in the quarter was 37.3, 30 basis points below the second quarter of last year. This was mainly as a result of the 110 basis point impact on preserves due to higher input costs, as well as a decrease of 940 basis points in the exports segment. For the first six months, gross margin was 37.4, 30 basis points lower than the previous year due to the gradual recovery of the frozen margin and the impact on the exports front. Consolidated SD&A was 27.1% and 26.9% of net sales, 30 and 40 basis points higher for the quarter and for the first half of the year. SD&A on preserves was slightly higher on the quarter, mainly due to the reconditioning of our distribution center in Mexico and the digital transformation project. Consolidated EBIT before other incomes decreased 7% in the quarter as a result of a 14% decrease in preserves and a 136 million recovery in frozen operating loss compared to the previous year. For the first half, EBIT before other income decreased to 1.2 billion, which is 5.6% lower than last year, mainly due to the results of exports and preserves, sorry, exports as preserves remained sluggish compared to 2020. In the quarter, we registered other expenses of 70 million, which are mainly related with COVID. And compare unfavorably with last year when we registered other income coming from the divestiture of the tuna business. EBIT and EBITDA margins decreased 16.5 and 18.1% in the quarter, while margins decreased 160 and 270 basis points respectively. On a cumulative basis, they decreased 21.3 and 17.6% with margins of 10 and 13.8 of net sales, respectively. In the quarter, income from unconsolidated companies was 173 million, 17% lower than in 2020, mainly due to a double digit depreciation of the U.S. dollar against the Mexican peso. In cumulative figures, it was 416 million, 20.6% higher than last year due to stronger results at Megamex. Consolidated net income for the quarter was 391 million pesos, which was 20.7% lower than the previous year. In cumulative figures, consolidated net income was 933 million, almost 20% lower than last year. Majority net income decreased 6% and 19.5% during the quarter and year to date, respectively. mainly due to the operating performance of the frozen and retail segments. As of June, consolidated cash amounted 2.7 billion pesos, down 1.3 billion for the first quarter. After buying back 8.9 million shares, net capex of 130 million, hedges and inventory buildup, including general mills. Interest-bearing liabilities remain at 9.5 billion pesos with an average life of 5.6 years and an average cost of 7.41%. Leverage ratios remain comfortable, and net debt to consolidated EVBA was two times. With that, I will now turn the call over to Gerardo.