Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grupo Herdez SAB de CV (GUZOF, Financial) reported a 6.2% increase in overall sales compared to the previous quarter, driven by strong performance in the ice-cream and mayonnaise categories.
- The company achieved a gross margin of 40.4%, surpassing their 40% expectation, due to favorable cost mix and declining commodity prices.
- EBITDA grew by almost 20% year-over-year, leading to an EBITDA margin expansion of 1.9 percentage points to 17.2%.
- The company successfully introduced larger presentations of salsa in the U.S. market, which was well received, boosting export sales.
- Grupo Herdez SAB de CV (GUZOF) leveraged near-shoring opportunities to enhance production capabilities and expand their exported portfolio.
Negative Points
- Expenses increased due to credit costs and expenses related to ERP implementation, impacting overall profitability.
- MegaMex faced challenges with avocado prices, which surged more than 20% during the period, affecting profitability.
- The company reported a negative free cash flow for the period due to capital allocation for inventory construction and annual tax payments.
- Preserves segment is expected to face difficult comparisons due to nonrecurring expenses and higher investments in advertising and promotion.
- Despite improvements, the company anticipates mid-single-digit sales growth, indicating potential challenges in maintaining high growth rates.
Q & A Highlights
Q: Can you provide an overview of Grupo Herdez's sales performance for the quarter?
A: Andrea Amozurrutia Casillas, IR Contact Officer, reported that overall sales grew by 6.2% compared to the previous quarter. This growth was driven by strong performances in the ice cream and mayonnaise categories, with ice cream sales benefiting from a heat wave and a profitable sales mix in supermarkets. The retail segment saw double-digit growth in average ticket and traffic, while exports were boosted by larger salsa presentations in the U.S. market.
Q: How did Grupo Herdez's gross margin perform during the quarter?
A: The gross margin for the quarter was 40.4%, slightly above the company's 40% expectation. This was due to improvements across all segments, a favorable cost mix, and a decline in commodity prices. The exchange rate also contributed positively, being 2.3% lower than the same period last year.
Q: What were the main factors affecting Grupo Herdez's expenses during the quarter?
A: Expenses were higher compared to the same period last year due to credit costs and expenses related to the ERP implementation. Despite this, the EBIT margin expanded in the Preserves and export segments, with notable improvements in the income segment.
Q: How is Grupo Herdez managing risks related to input costs and supply chain?
A: Gerardo Canavati Miguel, Chief Financial and Technology Officer, stated that the company has extended its hedging activities into 2025 and secured additional raw materials inventory. This strategy aims to reduce input cost variability and ensure uninterrupted supply chains.
Q: What is the outlook for Grupo Herdez's sales and margins for the rest of the year?
A: The company anticipates mid-single-digit sales growth, with low single-digit volume growth for Preserves, mid-teens growth in Impulse, and low 20s for Exports. EBIT and EBITDA margins are expected to expand in the Impulse and Export segments, with consolidated sales growth in the mid-single digits and majority net income growth in the low to mid double digits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
