Kimberly-Clark de México

Good day, everyone, and welcome to today's Kimberly Clark Day Mexico 3Q 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the 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 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star and 2. Please note, this call is being recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to CEO, Mr. Pablo Gonzalez.

Hello, everyone. Thanks for participating on the call. As usual, I'll make some preliminary remarks and then pass it on to Javier to provide some details on the third quarter results. Our sales accelerated and our margins remained strong. Let me first provide some perspective on the top line. Both our consumer products and professional businesses managed to boast growth despite a soft market and a very aggressive promotional environment. Volumes in consumer products were slightly down given that, as we mentioned in last quarter's call, we decided to decrease our promotional activities and increased prices on our tissue businesses to offset raw material costs. Also, during the quarter, retailers and consumers reduced their inventories as is always the case after the summer promotional season. Prices were up 2% and those sales increased 1%. Road for the Quarter was supported by exports and parent role sales. With the former, we continued to expand our relationship with our partner, Kimmerich Clark Corporation, as well as establish a base for increased sales of other personal care products, particularly in the U.S. On the latter, Operating our tissue machines at full capacity and exporting what our converted products do not consume has always been a way for us to maintain operating efficiencies and boost growth in times of lower domestic market dynamics. Our model and strategy clearly worked during the quarter. With respect to margins, achieving an EBITDA margin on the high side of our range despite increased costs, the substantial peso depreciation and a less favorable sales mix shows KCM's strength and resiliency. I'll share some thoughts on our perspectives going forward once Javier covers the details of the quarter's results.

Good morning. During the third quarter, our sales were 13.2 billion pesos, a 3.8% increase versus the previous year. Total volume was up 1.8%, And price and mix contributed 2%. Consumer products grew 0.6%. Aware from home, 2.4%. And exports, 25%. Exports of hard-rolled sales increased 42.2%. While exports of finished products grew 7.7%. Cost of goods sold increased 5%. Against last year, recycled fibers Superabsorbent materials and fluff were favorable, while pulp and resins compared negatively. Energy was lower. The FX was considerably higher after an abrupt 16% devaluation, averaging 11% more, a 2 pesos depreciation. Our cost reduction program had very good results and yielded approximately 400 million pesos of savings in the quarter. We continue investing behind cost savings and production efficiencies and finding more cost efficient materials and sourcing. Gross profit increased 2.4% and margin was 29.6% for the quarter. SG&A expenses were 4.6% higher year over year and as a percentage of sales were up 14 basis points. Distribution expenses are still up year on year although the investments to improve our footprint and streamline our logistics operations have started to yield positive results and we are improving sequentially. Operating profit increased 0.7% and the operating margin was 22.5%. We generated 3.5 billion pesos of EBITDA, a 1% increase. EBITDA margin was 26.3%. 80 basis points lower versus the third quarter of 2023. This margin is in the high end of our long-term range, despite the significant FX pressure and pulp price headwinds. Cost of financing was 200 million pesos in the third quarter, compared to 440 million in the same period last year. Net interest expense was lower since we have less net debt. During the quarter, we had a 4 million peso FX gain, which compares to a 4 million loss last year. Net income for the quarter was 1.8 billion pesos, with earnings per share of 59 cents, a 9.2% increase. For the first nine months of the year, net sales grew 3%, EBITDA was up 12%, and net income increased 19%. EBITDA margin was 27.8% during the same period. We maintain a very strong and healthy balance sheet. Our total cash position as of September 30 was 16.7 billion pesos. Our net debt to EBITDA ratio was 0.7 times, with an EBITDA to net interest coverage of 12 times. All of our debt is denominated in Mexican pesos. During the quarter, we bought back approximately 600 million pesos of shares. We will be buying approximately 400 million pesos during the fourth quarter, in line with our authorized amount of 1 billion pesos. Thank you.