Kimberly-Clark de México

Good day, everyone, and welcome to Kimber's third quarter 22 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity during the question and answer session. You may register to ask a question at any time by pressing the star and one on your touchtone phone. You may withdraw yourself from the queue by pressing the star and two. Please note this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to your Chief Executive Officer, Mr. Pablo Gonzalez. Please go ahead.

Thank you. Good morning, everyone. Thanks for your participation on the call and we hope you and your families are doing well. Our third quarter results continue to show improvement as we significantly increase stop line, bottom line, and margins versus prior year. we achieved bottom line and margin improvements versus the previous quarters. We're on the right track and expect to continue delivering better results in the fourth quarter and into 2023. We achieved strong net sales for the quarter with better pricing and robust exports and away from home performance. Price realization, higher operating efficiencies and solid advances in our cost reduction efforts outpaced the raw material sequential cost inflation. and we were able to improve profit and margins versus the third and fourth quarter of last year, as well as versus the first and second quarters of this year. From their lows at the fourth quarter, their EBITDA margins have improved 370 basis points, notwithstanding the continuous cost pressures. Progress, no doubt, but we still have much to do. Our focus on greater price realization, achieving further efficiencies, And expanding the cost reduction program while aggressively innovating, investing behind our brands and in the state-of-the-art technology and strengthening shares is steadfast. I'll share more details on each of these after Javier provides a review of results. Thank you. Good morning. During the quarter, our sales were 12.8 billion pesos, a 12.8% increase versus the third quarter of 2021. Net sales were boosted by very strong growth in exports, a highlight in the quarter, and away from home, which grew 36.3% and 17.2% respectively. Consumer products were 8% up. We will continue monitoring prices and volumes to find the best combination going forward. Cost of goods sold increased 10.4%. Against last year, Every commodity and raw material category compared negatively except for resins. All imported and domestic recycled fibers compared negatively. On the personal care side, superabsorbent materials and fluff also compared negatively while resins were down. Finally, energy compared negatively as natural gas prices grew 60%. The FX was slightly higher, averaging 1% more. Our cost reduction program once again had very good results and yielded approximately 500 million pesos of savings in the quarter. These savings are mainly at the cost of goods sold level and are generated by sourcing, materials improvement, and process efficiencies. Gross profit increased 18% and margin was 33.2% for the quarter. The G&A expenses were 7% higher year over year and as a percentage of sales were 80 basis points lower. Operating profit increased 29.7%, and the operating margin was 17.6%. We generated 2.8 billion pesos of EBITDA, a 23.3% increase. EBITDA margin was 21.5%, a 70 basis points sequential improvement, and a 180 basis points improvement versus the third quarter of 2021, underscoring our focus towards margin recovery. During the quarter, we issued Certificados Bursátiles, or SEBURES, for 10 billion pesos through two placements. The first for 7.75 billion pesos with equal amortizations in years 10, 11, and 12. The second for 2.25 billion pesos with a term of five years. This allowed us to anticipate our financing needs for the maturities of 23, 24, and 25 under favorable conditions and to improve our debt maturity profile. During the quarter, we also prepaid 1.5 million pesos of a bank loan that originally matured in 2023. Cost of financing was 425 million pesos in third quarter compared to 445 million in the same period last year. Net interest expense was lower despite our incremental gross debt because we earned more on our cash investments. During the quarter, we had a 2 million pesos FX loss, which compares to an 8 million pesos gain last year. Net income for the quarter was 1.2 billion pesos with earnings per share of 40 cents. We maintained a very strong and healthy balance sheet. Our total cash position at September 30 was 18.1 billion pesos. Our net debt-to-earnings ratio was 1.5 times, with an EBITDA-to-net interest coverage of six times. Thanks. Back to Paulo. Thanks, Javier. Continued progress spearheaded by our focus on execution on different fronts. particularly our relentless focus on consumers, price realization, accelerating efficiencies, and our cost reduction program, but not as fast as we would like to. Unfortunately, costs have not abated. In many areas, they continue to increase or are stable but at historic highs. As Javier pointed out, such is the case of bulk, recycled fiber, and energy. A few others have come down slightly but are also at very high levels compared to last year. We are seeing some improvements in residence, but prices are very volatile. All in all, still a challenging cost environment. We expect it to improve as we get into next year, but the degree and speed remain to be seen. Notwithstanding, our actions are taking hold and are allowing us to continue to post sequential improvements. We still have much to do, and we're confident that our laser focus on the priorities I mentioned will allow us to continue to improve results sequentially and have a strong fourth quarter in 2023. Thanks again for participating in the call, and now we will take your questions.

Thank you. At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question. We will pause for a moment to allow questions to queue. We'll take our first question from Luis Yance with Compass.