Kimberly-Clark de México

Good day, everyone, and welcome to today's Kimberly-Clark, New Mexico's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your telephone keypad. Please note this call is being recorded and that I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Pablo Gonzalez, Chief Executive Officer.

Thanks, Chelsea. Hello, everyone. Thanks for participating on the call. As usual, I'll make some preliminary remarks and pass it on to Javier to provide details on the second quarter results. Let me start by providing some perspective on our sales. Excluding experts' tissue parent roles, our sales grew more than 5%. Consumer products business grew mid-single digit, driven by healthy volume growth, while price contributed less as we lapped important price increases. Professional posted strong growth, although much lower than in prior quarters, as we also lapped price increases. All in all, Our consumer and professional businesses continue to perform well, albeit at lower growth rates because of less price contribution, but with healthy volume and strong shares. On top of that, our exports of finished product also grew significantly. Tissue parent rolls, on the contrary, decreased substantially and were roughly half those of last year. This was due to increased supply from Asian producers, significantly lower prices, and the exchange rate differential. This hard growth sales decrease impacted our top line by more than 800 million pesos and 640 basis points and cost our total sales to be slightly below last year. On the bottom line, we again posted important increases and we continue to improve margins. This results from a combination of higher volume and efficiencies, raw material price decreases materializing, and continued progress on our cost reduction efforts. Going forward, we expect our overall sales to improve and our bottom line to stay strong. Let me pass it on to Javier to provide details on the quarter.

Good morning. During the quarter, our sales were 12.7 billion pesos, a 0.9% decrease versus the third quarter of 2022. Net sales were boosted by consumer products and away from home, which grew 5.3% and 6.5% respectively. Exports were down 35.4% due to an exceptional quarter of hard-rolled sales in Q3 2022, in combination with the factors mentioned by Paolo. Converted product exports showed important improvements and grew double digits. Year over year, consumer products had a more balanced growth with volume up 3.2% and price mix 2.1%. We will continue monitoring prices and volumes to find the best combination going forward. Cost of goods sold decreased 11%. Against last year, virgin fibers, imported recycled fibers, SAM and resins were favorable. Fluff and energy compared negatively. The FX was lower, averaging 16% less. Our cost reduction program once again had very good results and yielded approximately 450 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 20% and margin was 40.2% for the quarter. SG&A expenses were 7.8% higher year over year, and as a percentage of sales were up 130 basis points. We continue to look forward, we continue to look for additional opportunities to streamline our logistics operations while strengthening the investment behind our brand and provisioning for higher variable compensation. Operating profit increased 30.6% and the operating margin was 23.2%. We generated 3.4 billion pesos of EBITDA, a 24.5% increase. EBITDA margin was 27.1%, a 150 basis points sequential improvement, and a 560 basis points differential versus the third quarter of 2022, underscoring our focus towards margin recovery. During the last 12 months, we generated 10 billion pesos of free cash flow. The cost of financing was 414 million pesos in the third quarter, compared to 425 million in the same period of last year. Net interest expense was lower since we have less net debt. During the quarter, we had a 4 million FX loss, which compares to a 2 million loss last year. Net income for the quarter was 1.7 billion pesos, with earnings per share of 54 cents, a 34.2% increase. We maintain a very strong and healthy balance sheet. Our total cash position as of September 30 was 18.4 billion pesos. Our net debt to EBITDA ratio was 0.9 times, with an EBITDA to net interest coverage of 8 times. Thank you.