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

Good morning, everyone, and welcome to Group O Hairdress Third Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode, and should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note today's event is being recorded. Also note, information discussed may include forward-looking statements subject to risk and uncertainties. Please refer to the forward-looking statements disclaimer in the company's press release. I'll now turn the call over to Gerardo Canabati, Chief Financial and Information Officer. Please go ahead.

Thank you, Rocco. Good morning, everyone, and thank you for joining us today to discuss Group Web's third quarter results. This quarter was marked by significant steps in our company's trajectory, one that dominates a new course for continued value creation. We successfully completed the split of Grupo Nutrisa, a move designed to allow the retail division to unleash its full potential and having Grupo Aves dedicated completely to its core business. This action alongside the divestment of a portion of our stake in McCormick de Mexico, fundamentally reconfigures our portfolio to pursue further opportunities. We will now transition to the details of our operational performance. Andrea, please go ahead.

Thank you, Gerardo. Good morning, everyone. Before diving into the figures, it is important to consider that starting September of 2025, The results of the retail business were deconsolidated from Grupo Herde. So, our third quarter and year-to-date growth rate versus last year are highly distorted. As you have seen in the press release, we decided to also report performance figures that do not consider numbers of the retail business both in 2024 and this year. As well, we adopted a new segmentation reporting. that resulted in domestic and export tactics. Now, our domestic sales have incorporated the results of a lot of . We believe this segmentation will allow the market to better assess the inherent profitability and growth of our corporate portfolio in the key two markets that we attend. Getting into the results. The consumption environment during the third quarter in Mexico faced persistent pressure. This slowdown was characterized by a sluggish consumer environment, largely influenced by structural factors such as the decline in remittances in testers, inventory adjustments in some clients, and extraordinary weather conditions. Despite this challenging environment, Grupo Herbes demonstrated remarkable resilience. Our disciplined execution allowed us to report a mid-single-digit growth rate in the top line while increasing our market share in key categories of our portfolio. Our consolidated net sales would have recorded a 1% growth for the quarter. This is a solid performance given the macro headwinds, and it was entirely anchored by our domestic segments, which saw sales growth of 4.2%. This growth rate, supported by our core categories such as mayo, tomato purée, and ketchup, was crucial in compensating for the 25.9% contraction in the export segment, which faced challenges particularly in the U.S. and in the Hispanic consumers. The structural change from the divestiture had a clear positive effect on our profitability. Growth margin would have expanded by more than one percentage point, reaching almost 40%, thanks to effective cost management and favorable sales mix within the domestic segment. Operating profit would have grown slightly above 1%, with a stable margin of 15.3%, while the domestic segment would have reached a 16.1% operating margin. EBITDA will have seen modest growth of close to 1%, reaching 1.5 billion pesos. This EBITDA stability is further reinforced by the structural benefit from the elimination of the NIF or the IFRS 16, which mitigates the overall depreciation and amortization expense of the retail business. Moving below the operating line, we saw bottom-line resilience, too. our majority net income would have surged more than 23% for the quarter, reaching 426 million pesos. This strong growth underscores the benefits of our operational, streamlining, and core business efficiency effectively as well as the contribution of our associate Megamex. This last result Obviously, compared with a very low base in 2024 that, as you can recall, had a significant pressure from the crisis of avocado. In this quarter, the profitability was driven by a sequential improvement in the profitability of Don Miguel and Holy Guacamole, which allowed it to largely offset the negative operational impact faced by our expert site. The financial position reflects the benefits of the strategic transformations that we have already mentioned, supporting a stable and strong cash flow. We ended the quarter with a cash position of 2.3 billion pesos. The decline in available cash versus the previous quarter was due to a strategic buildup of inventories and the extraordinary dividend paid in May. The assets and liabilities related to operating leases significantly decreased to 452 million pesos, retracing the cleanup of the retail segment's lease portfolio. Our financial position remains sound with a net debt to EBITDA ratio of 1.2 times. With that, I will now turn the call over to Gerardo to discuss further on the outlook for the remainder of the year.

Thank you, Andrea. We believe that the third quarter marks the bottom of the consumption environment, and we expect a gradual recovery going forward, despite the softness of the overall economy to end the year on a higher note held by ECCOMS. I would like to update you in the implementation of our new programs. As you may be aware, we transitioned a subsidiary in June, which carried 80% of the overall processes of the group. It was a huge success. Now we have the confidence to preparing the rollout to go live in April of next year. This, obviously, will require significant working capital for the next quarters. Talking about the closing of the year, I'm going to refer to our guidance and the pro forma figures. That is excluding Grupo Nutrisa for the fourth quarter. In all our lines, net sales, operating income, and EBITDA, we are hitting the target discussed in the start of the year. We have seen a performance in Megamex better than expected, and we are confident that that's going to continue going forward. In terms of our CapEx, even though the figures are lower in the third quarter, we are expecting to complete our guidance near between 1,500 and 2 billion pesos. That will conclude my prepared remarks, and we'll open for your questions. Rocco?

Yes, sir. Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If at any time your question has been addressed and you would like to remove yourself from queue, please press star then 2.

Once again, ladies and gentlemen, that's star then 1 if you have a question. And once more, if you have a question, please press star then 1 at this time. We'll pause for just a moment to assemble our roster. And that concludes our question and answer session. I'd like to turn the conference back over to the management team for the closing remarks. Thank you.

for participating in our earnings call. If you have any questions, don't hesitate to contact our team and have a good day. Thank you, Rocco.

Yes, sir. Thank you. And we thank you all for attending today's presentation. You may now disconnect your lines. Have a wonderful day.