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

And welcome to Grupo ERDE's fourth quarter and annual 2023 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 uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding the forward-looking statements. At this time, I would like to turn the call over to Andrea Amosurutia, Head of Finance and Sustainability. Please go ahead.

Thank you, Aria. Good morning, everyone. Thank you for joining us on today's call. We are delighted to present our fourth quarter and fourth year 2023 results, which highlights the strength of our brands and the fruits of our operational discipline. We reached record levels of sales and profits, despite challenges such as shifting consumption patterns. And as the rest of the industry, we benefited from a downward trend in inflation, higher disposable incomes, declining commodities, and a strong Mexican peso. As outlined in our earnings release, our consolidated net sales increased by 10% in the last quarter of the year, reaching $9.8 billion. with full-year sales climbing 14.4% to $36.2 billion. This growth was mainly fueled by the positive effect of pricing actions taken over the past 12 months, while volumes remained steady. In the research segment, quarterly net sales reached $7.9 billion, a 6.3% increase from the last period of last year. Full-year sales rose by 13.7% to $28.8 billion, driven by strong growth in categories like mayo, tomato puree, mole, spices, and pasta. We reached a record high market share in mayo, reaching 67.2% in volume, and food service sales surpassed $2 billion. It is worth highlighting that recently McCormick was recognized as one of the top 10 brands in Mexico by Canva. In the income segment, Quarterly sales surged by 21% to 1 billion, with accumulated sales reaching 4.7 billion, up 19.4%. A lot of Nestlé played a significant role in driving this growth, particularly through the traditional channel. While in retail, we continue to witness a recovery in store traffic. Notably, this year, we surpassed 2019 net sales levels in three out of four brands in retail. In the export segment, quarterly net sales surged by 39.2% to 869 million, driven primarily by increased sales of canned vegetables, which doubled its volume, while peppers and home-style salsas experienced growth of more than 25%. Additionally, the mayonnaise category saw strong growth, and it attributed to the catch-up of sales delayed in the third quarter and increased sales of the new twin pack presentation of our Mayonesa Limon to Costco, which allows us to access new regions. Full year net sales reached 2.7 billion, marking a 13.5% increase over 2022. Our consolidated growth margin for the quarter reached 40.4%, up 3.9 percentage points from the previous year. This is mainly the result of lower prices for soybean oil combined with the strength of the pestle. Research on impulse segment experience margin increases of 5 and 2 percentage points to 41.2 and 59.2% respectively. Export growth margins remain steady at 9.8. For the four years, growth margins reached 38.9%, the highest level in the past five years. but it's still below our long-term target of 40%. SG&A expense for the quarter were 24.3% of net sales, up 2.9 percentage points year over year. Accumulated SG&A expenses were 25.1% of net sales, up 1.4 percentage points from 2022, primarily driven by increasing investments in the market to stimulate demand. Moving to EBIT and EBITDA, in the quarter we reached 1.6 and 2 billion respectively, which represented increases of 19.8 and 18.9%. For the full year, EBIT and EBITDA reached 5 and 6.2 billion, 31.1 and 25.7% higher than in 2022, while margins expanded to 13.9 and 17.2%. Consolidated net income for the quarter reached 997 million, increasing 6.3% year-over-year. For the full year, it surged by 46.8 to 3.3 billion, achieving a consolidated net margin of 9.2. This growth is primarily attributed to the improved performance of Megamex, which contributed 753 million to the net earnings, and the strong growth margin performed. Our financial structure remains robust, with available cash at $2 billion as of December 31st and consolidated debt of $9.5 billion. Our efforts to improve working capital discussed over the entire year generated $414 million in free cash flow in the quarter and $3.2 billion for the full year, enabling to pay down $1 billion in debt, $400 million in dividends, and share buybacks of $223 million. In terms of our commitment to propel sustainable finance initiatives, we are delighted to share that at the end of 2023, we reduced our water consumption per ton produced to 2.15 cubic meters, aligned with our commitment in the sustainability bond issued in 2022. We have just launched a supply chain finance program with BBVA aligned with our sustainability goals. Suppliers now can access a better interest rate if, after an independent evaluation, we have aligned strategies towards sustainability goals. With that, I will now pass the call over to Gerard.

Thank you, Andrea. Mexico finished 2023 with the highest consumer confidence levels since the beginning of 2019, aided by lower inflation, higher disposable income, plus some government spending for social programs that is likely to remain this year. These factors will relieve some pressure from consumers during the first half of this year. With this in mind, we present our guidance for 2024 year results, but with a ticket to give. After our outstanding results of the last two years, 2024 will be less dynamic. Impulse sales are forecasted to grow in the low teens. while exports are anticipated to maintain its growth trends in the high teens, as Andrea mentioned. Preserves are expected to remain flattish. Consequently, consolidated net sales are projected to increase in the low single digits. Growth margins for the preserves segment and impulse are expected to maintain the 2023 levels, while exports should return to the low teens. As a result, EBIT is expected to grow across segments with reserves showing steady performance aligned with EBITDA. Enjoyable net income is forecasted to increase in the high single-digit percentage range, primarily due to stabilization of Megamex growth. GAPEX for the year will be approximately 1 to 1.3 billion pesos, towards maintenance, carryover of the capacity increased projects ongoing, and ERP migration. We're now ready to take your questions. Ariel, please proceed.