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

Good morning, everyone, and welcome to Grupo Herdez's third quarter 2022 earnings conference call. Before we begin, I would 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 the certainties and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements. At this time, I would like to turn the call over to Mr. Guillermo Perez, Investor Relations Manager. Mr. Perez, please go ahead.

Thank you, Charisse. Good morning, everyone. Thank you for joining us on today's call. We appreciate your interest in Grupo Herdes. 2022 has been a year full of unexpected and impactful events. We keep dealing with the lingering supply chain constraints, the high levels of inflation in decades, and pressure on raw materials. Nevertheless, we remain focused on what is under our control, market execution, discipline management of expenses, and working capital. Net sales increased 17.7% in the quarter and 22.2% year-to-date. Volume was responsible for one-fifth of the growth on a cumulative basis, although price increases are still the main driver of top-line performance in quarterly and year-to-date numbers. Results in the pre-serve segment remain with a similar behavior as the consolidated figures increasing 18.5% for the quarter and 21.1% year-to-date. Volume in supermarkets, wholesalers, and food service remained steady in the quarter, and increases were driven by pricing actions in the last 12 months. Impulse continued sequential recovery due to the reopening and normalization in stores, as well as price increases. which translated into a high mid-single-digit average ticket for the quarter. Similarly, the DSD channel at the Loudoun Slate continued with the upward trend seen in the first half of the year. In exports, net sales increased just 8.4% in the quarter and 27.8% on a cumulative basis, as demand softened somewhat. Homestyle salsa was the best-performing category in the quarter. Consolidated gross margin in the quarter was 13.9%, 130 basis points lower than in the third quarter of 2021, as input prices remain stubbornly high alongside other costs which are not comparable versus last year. By segment, the margin was mainly impacted by 180 basis points decrease in preserves, although inputs registered 170 basis points improvement. Consolidated SG&A was 23.8% of net sales for the quarter and 24.6% for the first nine months of the year. This was 90 and 100 basis points lower, respectively, due to the operating leverage resulting from increased sales that completely upset higher FIRE expenses as well as other expenses. With that backdrop, I will turn the call over to Andrea to discuss profitability results as well as other company initiatives.

Thank you, Guillermo. Good morning, everyone. As you saw in our numbers, despite gross margin pressure, consolidated EBIT and EBITDA increased 30.5 and 32%, with margin expansions of 100 and 160 basis points, respectively. On a cumulative basis, EBIT and EBITDA increased 34 and 30.5%, with a margin expansion of 100 basis points each. This was mainly driven by operating leverage at the preserved sector. During the quarter, income from unconsolidated companies was 92 million pesos, 43% lower than in 2021, mainly due to the continued pressure on Megamex results caused by the cost of avocados and increased logistics. Year-to-date, performance is similar, with income from unconsolidated companies decreasing almost 57%, dragged down by the results that were 61% lower at Megamex. Nevertheless, it is important to highlight that we have turned the corner resulting from price strategies and lower COGS, which are reflected in a quarter-over-quarter recovery of 115%. Consolidated net income for the quarter was 469 million pesos, 3% higher than the previous year. The above resulted from lower results of Megamex as well as higher income taxes due to higher proceeds coming from operations in the United States. On a cumulative basis, the consolidated net income decreased 4.3% to 1.3 billion pesos with a 160 basis point margin contraction, also explained by the gap on Megamex performance when compared to last year. Our financial position remains strong. Cash was 5.1 billion pesos, and interest-bearing liabilities were 12.4 billion, same as those of the second quarter of the year. As a reminder, these amounts include 1.8 billion pesos of a bank loan that will be paid in November, so we expect the cash position to return to normalized levels by year-end. In terms of our advancements on our sustainability strategies, This quarter, Grupo AERDE signed Pacto por la Comida, an initiative for companies along supply chains in Mexico to join forces to reduce food waste and losses by 50% in 2030. With this initiative, we will be contributing to one of the most important KPIs for our industry and the Sustainable Development Goals No. 2, Zero Hunger. We are very glad to share that Grupo Herder was recognized by Merco, one of the most important corporate reputation monitors in Latin America, as one of the 100 companies with the best reputation in Mexico, going up four positions to hit the 13th place. In the food sector, we ranked third. Considering that this ranking takes into account practically all of our stakeholders, We feel honored to have these results and will continue to build communication strategies that strengthen our good relationship with all groups of interest and put up our good practices. With that, I will now turn the call over to Gerard.