The pioneer manufacturers of lamination film in China.

edited transcript of ac*.mx earnings conference call or presentation 26-apr-19 3:00pm gmt

by:Top-In     2020-08-09
Revenue of 2019 Arca mainland SAB de CV in the first quarter of April 30, 2019 (
Thomson StreetEvents)--
The Ark European SAB de CV earnings conference call or speech for editing the text, april 26, 2019 3:00:00 new version of GMTTEXT Transcript = = = Name Enterprise = = = * Lo Gutierrez herná ndezArca European, s. A. B. de C. V. -
CEO Emilio Marcos chaluka ContinentalA. B. de C. V. -
Chief Financial Officer = = = conference call attendee = = = * Alan AlanisUBS investment bank, Research Office,
MD and Latin American equity strategist at research arm Alexander Reid RobartsCitigroup Inc.
Research Department general manager and head of the Latin American consumer staple stocks research team Antonio Gonzalez
Carlos Alberto LaboyHSBC, senior analyst at Latin American stock Research-
MD, head of global beverage research, senior analyst for Global Beverages, research unit Lucas FerreiraJP Morgan Chase & Co
Melanie Carpenter, analyst
Communications company Advize-Co-
Speech by founder and MD Presentation--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------
Hello everyone, welcome to the Arca Continental conference call. (
Operator instructions)
Please note that this call is being recorded. (
Operator instructions)
For the opening remarks and introductions, I would now like to hand over the meeting to my Melanie Carpenter
Advize company communications.
Please continue, madam. --------------------------------------------------------------------------------
This is Melanie Carpenter.
Communications company Advize-Co-Founder & MD [2]--------------------------------------------------------------------------------Thanks, Katie.
Good morning everyone, thank you all for joining the senior management team at Arca Continental to review the results of 2019.
The proceeds were released this morning and can be found on arcacontal\'s website.
In the investor relations section.
There is also a webcast of this event that lets you listen through live and replay.
I am happy to introduce our speaker now.
We are joined by Mr. CEO from Monterrey.
Mr. chief financial officer. Emilio Marcos; and Mr.
Jose Borda, chief commercial and digital officer;
And the investor relations team.
There will be some strikers-
Look at the statements today, so we ask you to refer to the disclaimer and the conditions surrounding these statements in the earnings release.
With this, I will transfer the call to Mr. CEO.
Mr. Arturo Gutierrez, first of all.
So please go ahead, Arturo. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [3]--------------------------------------------------------------------------------
Thank you, Melanie. good morning, everyone.
Thank you for joining us for our latest performance in the first quarter.
First of all, I am pleased to report to you the positive momentum in early 2019.
Our strategy and solid execution enable us to gain a share of value again and provide a solid financial performance despite the weaker consumer sentiment faced by some of our businesses.
The total number of mergers decreased by 1.
9%, reaching 0. 511 billion unit cases, while total consolidated sales increased by 2. 2% to MXN 36. 9 billion.
Our results are worth the money about profitability.
EBITDA rose 6 this quarter.
1%, to reach MXN 6.
3 billion, the profit margin of EBITDA expanded to 17%.
The modern digital platform drives our business capabilities;
Our operating discipline and strict cost control allow us to expand the profits of EBITDA.
This year, we are on track to achieve more than $45 million in productivity savings that will allow us to fund growth investments while making up for cost inflation and driving profit margins.
Once again, our balanced geographic footprint, our strong corporate culture based on the common principles of cross-business, our high
The performance team contributed to the positive results.
Now, let\'s start with Mexico and review the performance and highlights of our entire operation.
At the beginning of this year, our beverage business in Mexico was challenged.
The total volume in the first quarter decreased slightly, down 0.
7% due to unusually bad weather conditions and heavy rain in most of our territories, as well as the influence of the calendar, the Holy Week was transferred from April.
There\'s also an impact from 50-
The shutdown of our Matamoros plant and other labor disputes in the city\'s quiladora industry have had a negative impact on the local economy.
In the highlights of the quarter, the water volume of the kettle increased by 5.
5%, driven by modern trade.
Topo Chico mineral water provides solid 7.
Growth of 8% consolidated its leadership in the north and west.
Our business in Mexico has achieved net income growth for 15 consecutive quarters.
8% to MXN 14. 3 billion.
Excluding the jug quarter, Mexico\'s average price per box rose by 8.
8% reached MXN 61. 02.
EBITDA increased by 6 on the level of profit. 5% to MXN 2.
8 billion, compared with last year, the profit margin was 20% flat.
We recognize that digitization is a key element of our growth strategy, and we are defining data --
Drive business models with a clear roadmap to develop new features in analytics.
We launched a collaborative project with the data science department of the Monterey Technology Center and the MIT capstone project.
Despite the downside in the first quarter, we remain confident in the resilience of Mexico\'s flagship market.
We are optimistic that Mexico\'s sales will gradually increase over the next few months as we enter the peak season.
Our total is down by 2 in South America.
As the number of Argentina and Ecuador declined, it increased by 4% in the quarter, and growth in Peru partially offset the decline.
Total income fell by six.
The first quarter reached 4% to MXN 9.
5 billion when we double-enforce and strictly enforce our prices --
Channel strategy while improving the ability to pay by expanding the combination of returnable demos.
EBITDA dropped 0. 7% to MXN 2.
The quarter was 1 billion per cent, up 22% basis points and a profit margin of 130 per cent.
We believe that our revenue plan, the expansion of our portfolio, and product innovation and re-development will enable us to maintain a share of value growth while expanding our profitability.
In Ecuador, volume fell by 4.
4% in the first quarter, riding a solid double-
A few more than last year.
Despite macroeconomic uncertainty, we continue to gain a share of value due to a package of pricing and optimizing revenue.
We also drive innovation by offering more options for low and no heat.
We are taking advantage of the success of the new Fanta formula and the sense of Dasani, a new seasoning water designed to expand our sparkling beverage mix.
Our value-
Increased Ecuador dairy business with coca
Coke Company low order-
Sales fell in the first quarter.
We are able to maintain market leadership and gain an additional share of value in the 4 categories of Tonicorp.
We introduced new products in the yogurt, oatmeal and ice cream categories this quarter and achieved great results.
Prepare for our business in Argentina.
Volume fell by 17 in the quarter.
8%, 5 strong cycling.
Growth of 2% over the same period in 2018.
Currency depreciation, runaway inflation and high interest rates have had a negative impact on consumer spending.
Despite the sharp economic slowdown, we have gained a share of value.
Our Shining category has grown by 0. 1%, Powerade 2.
8% and 3 increase in personal water. 2%.
As consumer purchasing power declines during the economic contraction, we continue to refine the price package structure to reach key price points.
At the same time, we will focus on cost optimization.
We started handing out the new 2-
The returnable standard format can also be affordable while reducing the overall production cost.
Moving to Peru, the economy of the core market grew by 2019 in a positive manner.
Total sales for the quarter increased by 5.
4%, a solid momentum was confirmed.
Colas and personal water drove growth, up 14. 8% and 7.
9% and by launching our new low
Benedictino sodium water brand.
Driven by the growth of sports drinks, juices and beverages, total revenue increased by 9% this quarter and we continue to gain a share of value.
We have been investing in the market.
Key initiatives to strengthen our recycling base.
This quarter, we expanded the introduction of recyclable packaging by installing 3,000 cold drink units and increased the coverage of the cooler.
Most importantly, EBITDA grew by 20% to 26--25.
6%, an expansion of 240 basis points.
Driven by execution and revenue management, our Peruvian beverage business achieved this solid top and bottom performance this quarter, while improving the efficiency of the entire supply chain.
To our beverage company in the United States.
Volume fell by 4 in the quarter.
3% due to several factors, especially the untimely weather in our territory in February, the delivery day was reduced by one day and the Easter holiday was transferred from April.
Despite these challenges,
Southwest Coke achieved net income growth for the eighth consecutive quarter, up 1 year on year. 4%.
Once again, we gained a share of value from drinks and consolidated our market leadership.
Our share of tea, soda, and sports drinks is growing, and in these drinks, bullet-proof clothing plays a strategic role.
Based on our organic income guidance throughout the year, pricing remains one of the main drivers of revenue growth to meet or exceed consumer inflation.
In the first quarter, the price mix increased by 6%, mainly delivered at a true price of 4.
6% this was achieved by continuing last year\'s growth and price adjustments in our local market in early 2019.
The remaining 1.
Growth and trading packages, as well as bullet-proof clothing, yield 4%.
EBITDA grew 11% to $68 million with a profit margin of 10.
8%, 93 basis points were expanded.
We also continue to accelerate the deployment of our ACT business model to achieve the best resultsin-Class execution.
During the quarter, we launched a new picture of the success tool and allocated more than 480,000 action projects to better implement key service indicators, such as the completion of the visit, the strike rate of the strike area and the cooler.
It is worth noting that we accelerated the introduction of cold drink equipment before the peak season.
In the first three months of this year, we installed more than 10,000 new coolers.
In terms of marketing activities and new product launches, it was very intense in early 2019.
Following the reinvention of two new flavors last year, we have maintained the momentum of Diet Coke.
In the first quarter, we also launched Coca.
Vanilla Cola Orange
This is the first new coca.
Cola flavor was introduced in 10 years.
In addition, we continue to enhance our hydration platform by launching 2 new versions of the premium Smartwater brand.
Close our beverage business in the USS.
I am pleased to report that we are on track to achieve synergies of $90 million.
Our 2019 target includes some additional $20 million plan as our centralized sourcing efforts, plastic pallets, stylish cans and vending machine projects exceed our original expectations.
More importantly, we are laying the groundwork for ensuring the savings and efficiency of the new manufacturing and distribution facilities that will be set up in Houston, Texas, where we continue to make significant progress in building.
We plan to open the facility in 2020.
To end our operational review, let\'s start our food and snack business now.
Smart American snacks. S. delivered mid-single-
While expanding its share of value, revenue achieved a single-digit increase this quarter, confirming a continuous recovery.
Thanks to improved distribution in New York City and western Massachusetts, Deep River continues to expand product coverage and growth is driven by the category of potato chips.
In addition, Deep River has updated a key distribution agreement to serve more than 200 restaurants and retail boutiques at North American airports.
In addition, Carolina country snacks continue to maintain a strong pace, expanding coverage at more than 1,200 new stores worth [1]channel].
Now go to Boca dos, Mexico.
We provide a solid highsingle-
As Prispas is a very successful squeeze chip brand, its sales grew rapidly in the first quarter.
Finally, Inalecsa of Ecuador released a lowsingle-
Sales fell in the first quarter.
While opening up a new international market, we have continued to consolidate our leading position in the field of plantain chips.
With this, I will now transfer the call to Emilio to give you further information on our financial performance.
Emilio, please continue. --------------------------------------------------------------------------------
Emilio Marcos Chalu, mainland ArcaA. B. de C. V. -CFO [4]--------------------------------------------------------------------------------
Thank you Arturo, and thank you for calling.
We thank you for taking the time today to review our financial performance for the first three months of this year.
The first quarter was characterized by positive revenue growth due to an effective price mix strategy, partially offset by weak sales performance.
Although there has been an increase in raw materials such as PET, our strict operating expense control has improved our business profitability.
Before entering the numbers, in order to better reflect the results of our United StatesS.
Operation, after this quarter, we will return to the method used before recording sales outside our region, deducting other costs under the line of income and expenses.
This decision is driven by two factors: The first is that the results of these sales are very important to our EBITDA, and the second is their dependence on other US needsS. bottlers.
In addition to this change, we have been reviewing some of the best practices for revenue release.
Starting this quarter, we will include more information, such as the Branch notes we submitted on the Mexican Stock Exchange.
We have also added an Excel file to the website for easy access to the financial information of Arca Continental.
Next is quarterly data.
Consolidated revenue growth 2.
2% is mainly due to the favorable price combination of 8.
8% in Mexico, 6% in the United States. S.
However, as Arturo mentioned earlier, our earnings performance was partially offset by our quantitative results.
The sales cost is MXN 21.
2 billion increased by 1.
4%, mainly driven by the increase in MXN 0. 203 billion PET prices, was driven to a lesser extent by MXN 13.
5 million aluminum price impact in the United States.
This effect resulted in the dilution of the marginal contribution of 80 basis points.
EBITDA increased by 6 this quarter.
1%, to reach MXN 6. 3 billion.
This represents a 60 basis point increase in the EBITDA margin at the consolidated level.
Excluding the benefits of adopting IFRS 16 accounting standards, EBITDA increased by 4% and profit margin increased by 30 basis points.
Our net income increased to MXN 1.
7 billion from MXN.
In 2018, there were 3 billion persons representing 28 persons. 2% growth year-over-year at a 4. 5% margin.
This is due to the increase in the cost of comprehensive financing caused by the loss of monetary positions last year.
On April 4, we announced the estimated investment of MXN 13 billion in capital expenditure in 2019, mainly for obtaining synergies in the United States. S.
Operate and strengthen innovation in production, distribution and execution capabilities in the countries we serve.
This investment is about 7.
We expect 5% of our revenue for the whole year, higher than the historical average of the Arca mainland.
This is due to the capital needed for the new Houston facility.
On the same day, MXN 2 dividends.
30 per share, total MXN 4.
1 billion was approved at our annual general meeting with a payment ratio of 47%, higher than our historical average.
The dividend was paid on April 16.
In the first quarter of 2019, our cash position was MXN 17 billion and our debt was MXN 55.
4 billion, 1. 39 net debt-to-
EBITDA ratio without the influence of IFRS 16.
Our revenue growth plan, strategy and operational savings plan led us to a positive 2019 results in the first quarter.
With this, we have laid the foundation for protecting our profitability. standardize]
The number of countries we operate in.
With it I will turn it back to Arturo. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [5]--------------------------------------------------------------------------------
Thank you, Emilio.
Before concluding my prepared statement, I would like to highlight some of the important progress we have made in the area of sustainable packaging.
For decades, Coca
The Coke system has done a lot of work in recycling.
We have made most of our packaging fully recyclable and have made R & D investments around reuse plastics.
On the mainland of Arca, we fully support Coca-
There is no Coke world that wastes global initiatives.
Our PetStar factory in Mexico proved this commitment.
At 2018, PetStar recycled more than 3.
1 billion bottles, more than 51,000 tons of food
Grade recycled PET resin.
Finally, I would like to add that it is very clear to us that the turbulent economic situation today is likely to continue until this year.
Our 2019 strategic focus is therefore clear.
We will continue to focus on driving shareholder value through the long term
While maintaining strict cost and expense discipline, achieve long-term profit growth.
I want to reiterate that we have a solid institutional foundation,
Class management team with value creation as the core
Establish a lasting relationship of mutual trust with our customers and establish an integrated corporate culture in our operations.
These are the core pillars of profitable growth in 2019 and the next few years.
Thank you for your support.
I want to start asking questions.
Operator, please answer our question.
Questions and Answers--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------(
Operator instructions)
Our first question came from Alan Alanis of UBS. --------------------------------------------------------------------------------
Alan Alanis, UBS Investment Bank research department-
Latin American equity strategist2]--------------------------------------------------------------------------------
My question is related to pricing in Mexico and the United States.
I understand the effect of the Easter calendar, the comments you made in the weather and in less than one day.
But even with these factors in mind, if my calculation is correct, your price in the US will riseS.
Nearly $5.
In pesos, Mexico was 5%, or about 8%.
Can you talk about pricing strategies for these two regions?
This seems a bit aggressive compared to local inflation in both countries.
This is the problem. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [3]--------------------------------------------------------------------------------Yes.
Thank you, Alan.
Nice to talk to you.
Yes, your price is right for the first quarter.
In fact, they may be a little higher in terms of Mexico.
Our price, average price, rose by 9.
First quarter 3%. In the U. S.
Our price is up about 6%.
This is a combination of interest rates, that is, nominal price increases, which is 4.
6%, then positive changes in mixing--
In the case of Latin America, mixing is usually another way. In the U. S.
With the growth of categories such as body armor and monsters, mix can help you increase the average price.
So in both cases, prices are definitely higher than expected inflation this year, in the U. S.
It may be slightly more than 2%.
In Mexico, we estimate that inflation will be below 5%. For the --
If you talk about this year\'s strategy, it\'s still the same.
Our strategy is higher than inflation, higher than inflation, which works for every market we run. The way the --
If you look at the price curve in 2018, and the implementation time of the price in the second half of last year, for example, in the first part of 2019, there is a larger area between the two curves.
So it tends to shrink a little bit so that by the end of the year we will at least reach our target for the year.
So of course, from the price comparison, it looks better in the first half of this year. -
But we have a very clear plan for the rest of the year.
In Mexico, we actually raised prices in April 15.
But we do it selectively, not as comprehensive as in the past.
This is based on a very robust process.
I think this is the most important part of the pricing strategy and the reason why it is truly sustainable.
We also focus on optimizing discounts and promotions.
If you look at the numbers, the numbers are what we don\'t usually talk about, but they have been improving over time, again, in a more robust process, this helps to get a better average price.
So in the USS.
Similarly, we have some price increases in the local market.
Let\'s take a look at the end of this year.
We have a price above inflation. -
We discussed it with the United States. S. system.
As you know, in the United StatesS.
System, we have to discuss pricing across the country because we want to increase profit margins while creating a more profitable business in the positive cycle you see in some Latin American markets, then you continue to invest in the market and the United States. S.
Of course, the market needs a lot of investment. -
Especially in terms of the capabilities and routes of the market, this comes from a more efficient price strategy, as you said, but we believe it is a cautious process based on a very robust one. --------------------------------------------------------------------------------
Alan Alanis, UBS Investment Bank research department-
Latin American equity strategist4]--------------------------------------------------------------------------------Got it.
This is very clear and useful.
Just to make sure what I hear is correct.
So after the end of the quarter, you raised the price again in April 15, right? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [5]--------------------------------------------------------------------------------Yes.
These are just small increases.
They are very selective.
Similarly, the price is for a specific package, and then you will also increase the price in a segmented manner in different regions.
So the complexity you see in our portfolio also translates into our complexity in the RGM process.
So this is how it works and how it works in the future.
So I think that\'s why we need to be more effective and focus on improving our capabilities in core processes like the company.
Another important aspect is that we have to strike a balance between market share and market share.
I mean, you want to make sure these prices-
One of the ways you know it works is that you are able to maintain or even increase your share, just as you do to increase your profit margin.
This is the best in the world. --------------------------------------------------------------------------------
Alan Alanis, UBS Investment Bank research department-
Latin American equity strategist6]--------------------------------------------------------------------------------
Is that the same for market share reviews? For America, too. S. , Arturo? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [7]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------Operator [8]--------------------------------------------------------------------------------
The next question comes from Lucas Ferreira of JPMorgan Chase. --------------------------------------------------------------------------------
Lucas Ferreira, JP Morgan research department-Analyst [9]--------------------------------------------------------------------------------
My question is simple.
In fact, I want to make sure that we see these profit margin growth figures in the US. S. [as]
Given the impact of the IFRS 16, the specific circumstances are comparable.
So I just want to know how the MXN 0. 12 billion impact on merging EBITDA is distributed within the region.
Then my second question is, except for pricing in the US. S.
, If you can make a little comment on other routes that drive these profit growth, you \'ve been trying to capture synergies, efficiency costs, and, of course, the cost of all your remaining raw materials, just to understand how many of them are really on top and other lines? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [10]--------------------------------------------------------------------------------
Thank you Lucas.
Well, I\'m going to have Emilio detail this.
But I just want to say that these two issues are interrelated because of the profit margin in the USS. have improved.
You can identify some different effects there.
Synergy is very important, especially if you think our revenue management strategy is a synergy, we will do that, and if you compare it to last year, it\'s a profit for the first quarter.
The decline in numbers has a negative impact there, but as we said, the number of the first quarter of the United StatesS.
From our point of view, this is indeed an anomaly in the performance of the whole year.
We have some effect that can be easily explained and now has--
Recovery in the first part of the second quarter, which is very important for all of this, although volume has affected our performance in the USS.
At this stage close to the end of April, our sales volume was almost flat --to-date in the U. S.
When we dropped 4%
So the transformation of the Easter holiday is very relevant.
In addition, the weather explains that it will also tend to be uniform after a longer period of time, which is effective in a shorter period of time.
These are both positive and negative influences.
Synergies also contribute positively there.
What I want to mention is that we still have a negative effect, that is, the effect of raw materials, because of the price of aluminum and the price of pets.
The first quarter of this year still had a negative impact compared with last year.
We are confident that this will change as time goes on, but we do have this impact in the first quarter of this year.
But if you want to add some details to these concepts, I will hand it over to Emilio. --------------------------------------------------------------------------------
Emilio Marcos Chalu, mainland ArcaA. B. de C. V. -CFO [11]--------------------------------------------------------------------------------Sure.
Thank you for your question, Lucas.
Yes, as you can see in the report, in our U. S.
Our profit margin grew by 114 basis points, including the benefits of the IFRS 16.
But without the IFRS 16, our margin is still growing by 84 basis points, comparable base ---
84 basis points.
As Arturo mentioned, this price is mainly due to the very good pricing for the quarter and the positive impact of our collaborative initiatives ---
As we planned during the year, basically compensated for the negative effects of our decline in quantity, and the price of raw materials that Arturo just mentioned about pets, aluminum and transportation.
As we continue to highlight our collaborative initiatives, as well as our pricing strategy for this year, and our more favourable outlook for raw materials this year, our expectations for higher margins for the rest of the year, we still see some improvement in the United States. S.
Profit margins for the rest of the year. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [12]--------------------------------------------------------------------------------
Especially if you take into account that we have a significant impact on volume, as I told you, this has started to change very quickly in the second quarter and it will be--
From the volume of trading, about 190 points
Then, the negative impact of this raw material, these adverse factors will also change in the second half of this year or from the second quarter.
It could also be close to 90.
So if you take this into account, the profit margin looks very healthy.
The IFRS do have a positive impact, but it\'s really small compared to the two I mentioned. --------------------------------------------------------------------------------
Lucas Ferreira, JP Morgan research department-Analyst [13]--------------------------------------------------------------------------------
Very, very helpful.
Congratulate the results. Just --
I will follow up soon if I can.
Considering these volumes, I think it should be--in the --
To some extent is the low point of a given seasonal one-year cycle, given any--
The impact you mentioned
What capacity utilization do you currently have in the United States? S. operations? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [14]--------------------------------------------------------------------------------
Sorry Lucas, could you please repeat the last question? --------------------------------------------------------------------------------
Lucas Ferreira, JP Morgan research department-Analyst [15]--------------------------------------------------------------------------------Yes.
What is your capacity utilization in the United States? S.
Is it the first quarter? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [16]--------------------------------------------------------------------------------
Are you talking about our facilities? --------------------------------------------------------------------------------
Lucas Ferreira, JP Morgan research department-Analyst [17]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [18]--------------------------------------------------------------------------------Yes.
Well, we have a complex production system because we don\'t necessarily produce all the products we sell.
In fact, most growth categories are not made in our system.
With the construction of the new SSD facility in Houston, our own production capacity is being reorganized.
So this will change.
Therefore, there is no problem in using capacity.
This is quite stable, I would say.
But in terms of quantity, we-
As you said, we expect sales to increase in the second quarter, and then that should stabilize for the rest of the year.
Therefore, we still expect sales growth to be flat for the whole year to reach 1%, which is our initial guidance. --------------------------------------------------------------------------------Operator [19]--------------------------------------------------------------------------------
The next question comes from Alex Robarts of Citigroup. --------------------------------------------------------------------------------
Alexander Reid Robarts, Citigroup Research-
[General manager and head of the Latin American consumer staple stocks research team20]--------------------------------------------------------------------------------
So, yes, I think, I want to go back to the United States.
First of all, to clarify, the 84 basis points you are talking about are form apples --to-
Apple\'s profit expansion in the USS.
Non-monthly international financial reporting guidelines.
Is this just to clarify the adjustment to the change in accounting for the number of agents as well?
So I want to clarify.
But the real--
There are two main problems in the United States.
We have seen some Mexican consumers in the United States. S.
Prices haven\'t really gone up so far this year, I know you guys are looking at food services onlinePrerequisite channel.
Can you tell us how the price increases the price stickiness?
What\'s going on with this particular growth?
How do you see the prospect of your big box supermarket customers increasing again later this year?
And then the second in America. S.
Questions about aluminum
We have talked about trends that remain unstable this year. over-year.
What do you think of it in the short term? à-vis year-on-
Annual cost of aluminum?
Will we get some relief in the second quarter or the second half?
Have we achieved stability in the second quarter or in the second half?
So it would be great if you could comment on these. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [21]--------------------------------------------------------------------------------Yes. For sure, Alex.
Nice to talk to you.
Let me talk about the first pricing in the United States. S.
Maybe Emilio can join in on the first technical part of this issue and then we will discuss aluminum. Prices in the United StatesS.
We have already said that we have a plan.
Most of the growth you saw in the first quarter was carried forward from last year.
So, if you think that the stickiness of this price increase has been implemented a few months ago, it is very successful.
It is very successful in terms of how it is accepted by the customer and how it affects the quantity and how we understand this.
This is one of the issues we are talking about, that is, the flexibility of these categories is many times lower than expected.
So the effect is very good.
We actually just saw the comparison of carry-over.
So this is also the strategy we will follow for the rest of the year.
We have a very clear business plan.
Again, since we need to discuss this as a system, the plan has been set for what we have to do for the rest of the year and for our price increases from the perspective of national retail sales, then how do we adjust in the local market to make sure our prices are aligned with the whole system.
So we\'re talking about a price of 2020. that\'s how the system works.
So I think we have succeeded because again I think we have a stronger process to support the price increase.
I would say that we may need to improve in some ways, mainly in terms of segmentation, which is one of the things we are trying to introduce to the dialogue in the United StatesS.
We know that this requires a lot of persuasion with our customers.
But we have a better breakdown of pricing in Mexico than in the US. S.
Even the retailers we all know are the biggest customers.
It is clear that the brand has different presence and different assets in different parts of the country.
So we need to move on and we haven\'t arrived yet.
But on the other hand, we do have a better process in making prices acceptable to retailers.
So the effect is very good.
We did. -
Even in the industry as a whole after the price increases, I would say that when we implement these measures, this is another factor in success, which has already happened.
So let me hand it over to Emilio because you have a question about profit and agency.
And then I will--
Questions about aluminum--------------------------------------------------------------------------------
Emilio Marcos Chalu, mainland ArcaA. B. de C. V. -CFO [22]--------------------------------------------------------------------------------Sure.
Thank you, Alex.
It is important to clarify this issue.
The 84 basis points increase in profit margins is comparable.
In contrast, we do not consider agency sales. So it\'s apples-to-apples. So the 84% --
There are basically no such considerations for 84 basis points and no IFRS 16. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [23]--------------------------------------------------------------------------------
Now let me enter the aluminum situation in the United States. S. , Alex.
You know, the price of aluminum is composed of two independent factors, the price of the metal itself, called LME, and then the Midwest premium, which is an integral part of logistics, has always been--
This has increased since the US imposed tariffs. S.
For imported aluminum, this does create a distortion of our prices over the past 12 months.
So this is another quarter where we see negative comparisons on aluminum prices, especially in the Midwest premium.
So what we have now is that we have hedge 80% of aluminum consumption at 2019, which is lower than 2018 of aluminum.
This is a very positive thing.
At the same time, we continue to see the Midwest premium level above the high price of $400 per ton, for example, about $200 per ton in 2017 and before.
This may therefore be resolved, depending on free trade agreements and dialogue between governments in North America, which may have an impact.
But for now, based on our hedging of LME prices, we are in a better position in the aluminum market this year. --------------------------------------------------------------------------------
Alexander Reid Robarts, Citigroup Research-
[General manager and head of the Latin American consumer staple stocks research team24]--------------------------------------------------------------------------------
This is very clear.
Just to clarify the last thing.
So, do you think there is a stable one-year prospect in the short term? on-
Year of LME plus MWP assembly for aluminum cost? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [25]--------------------------------------------------------------------------------Yes.
We look forward to this year. -
The year 2019 will be below 2018.
Our basically flat first quarter was not shown.
Although our LME was lower in the first quarter and actually less than $2,000, the premium for the Midwest in the first quarter was higher.
So, for the rest of the year, we see an improvement.
So at the end of the day, even if the Midwest premium is over $400, we can have a lower overall price for aluminum.
So it would be better if the issue of premium in the Midwest was solved by other means, but we are not ignoring that at the moment. --------------------------------------------------------------------------------Operator [26]--------------------------------------------------------------------------------(
Operator instructions)
The next question comes from Carlos Laboy of HSBC. --------------------------------------------------------------------------------
Carlos Alberto Laboy, HSBC, research,
Global head of beverage research, MD, senior analyst, global beverage27]--------------------------------------------------------------------------------
I hope you\'re in your place.
Carbohydrate economics in the United StatesS.
How does this develop, especially you seem to have a few very good winners in the non-
Space for carbohydrates. S.
Now, the vest, you mentioned that one.
Maybe you can do a little extension at this point. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [28]--------------------------------------------------------------------------------Yes. Carlos.
Yes, it\'s a pleasure to talk to you.
Well, as you know, stills category in the USS. --
Because many of our markets are important sources of growth, they may still be a small part of the mix at times, but they are an important part of our market growth.
In the case of the United StatesS. , even --
Then, if you consider a mix of income, they become more relevant, especially the monsters and now the body armor.
So the case for these categories is, as you know, economics is different.
If you only look at the profit, you may not be excited about the products because the profit is definitely smaller than some sparkling categories.
But if we look at the gross profit of each case, which is something that is very important in each category, things will look much better.
As in the case of BodyArmor, I don\'t think the profit margin may be high, but the profit per case is at least comparable to our shiny category.
So it\'s important.
When we look only at the profit side of the business,-
Because this may not reflect the overall impact on our asset returns, especially given that many times our investment levels are different from some of the sparkling categories we may invest in.
So this is an analysis that we continue to do.
We believe that we have some opportunities in certain categories that are not as good as, say, bullet proof analysis, and we are still having conversations to see how we should be better aligned, creating the right incentives for the system as a whole, I would say, for companies and for us, for third parties, this could be the brand owners that promote the growth of these categories.
So this is an ongoing conversation.
But it is clear that the margin view is not the only one, it is mainly about the contribution of the dollar in each case.
In the case of bullet-proof clothing, this is a category that has grown significantly and gained share in the field of sports drinks, which I think is very respectable. --------------------------------------------------------------------------------
Carlos Alberto Laboy, HSBC, research,
Global head of beverage research, MD, senior analyst, global beverage29]--------------------------------------------------------------------------------
What makes the vest useful to you? --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [30]--------------------------------------------------------------------------------Because it --
First of all, it captures a space that is new to us.
I mean, this is a sub-part of a sports drink ---
Extra volume.
Second, there is no doubt that this is a strong brand.
This also increases the profitability of our overall business without devouring more profitable categories.
So I think it makes sense for us from the perspective of the overall portfolio. --------------------------------------------------------------------------------Operator [31]--------------------------------------------------------------------------------
The next question comes from Antonio Gonzalez of Credit Suisse. --------------------------------------------------------------------------------
Antonio Gonzalez Anaya, research arm of Credit Suisse bank
Senior analyst in Latin American stock research [32]--------------------------------------------------------------------------------
Just got a quick one in America. S. margins again.
If I see your guidance on 2019 synergies, you\'re talking about an increase of $20 million, right?
Besides you, you have captured something that is $90 million long --term target.
If I just put the last 12 as bases
We\'re talking about profit growth of 60 to 70 basis points, right?
But this quarter, your EBITDA margin is higher than that, right?
Even after making adjustments to the IFRS just described by Emilio ---
Sales fell 4%.
So I was just wondering if you could guide us.
What do you think will be the increase in profit margins throughout the year?
What do you think we see in the United StatesS.
Specifically, the first quarter was sustainable, especially as sales increased for the rest of the year?
Perhaps these have nothing to do with the synergies you have already mentioned throughout the conference call, your raw material prospects, etc.
But I just want to know how much profit margins we should expect in the US to improve. S. operations. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [33]--------------------------------------------------------------------------------
Thank you, Antonio.
I will have Emilio provide some details.
But let me tell you conceptually what is going to happen with profit margins.
As I said before, there are many factors at work in the first quarter profit change.
If you look at the first quarter, a big part of the increase in profit margins is our price, which is really good.
I think it\'s sustainable.
But as I explained earlier, the area between the two pricing curves tends to get smaller over the years.
On the other hand, some things may improve for the rest of the year, which is the quantity, maybe some of the raw materials we have encountered before.
So these concepts will have different implications for the rest of the year.
Therefore, we will definitely see an increase in profit margins, but you can\'t predict the same pricing situation, and you can\'t consider sales growth in similar situations.
I mean, the pricing comparison will be different in the second half of this year.
We believe sales will be better.
As I told Alex, we also believe that the comparison of aluminum will be better.
So there\'s a lot to do.
Synergy will also play a role.
The synergies in the first quarter may explain about 80 points of increased profit margins.
So, if you think so, our view is definitely to continue to increase profit margins.
But we have to consider another effect that is only valid at the margin interpretation level, not at the EBITDA level, which is a change in mixing.
A minute ago, Carlos and I were talking about the contribution of these categories to EBITDA, and there is no doubt that, because if you think about bullet-proof clothes, each case contributes more than a Coke can.
But on the other hand, profits can be eroded if we sell more bullet-proof clothes compared to Coke cans.
So if you consider growth and EBITDA, and finally the most important, you will see improvements based on the growth of the stills category, but you consider the EBITDA profit margin, there will be erosion there.
So it becomes quite complicated.
I just want to take out all the concepts that work for profit.
At the end of the day, it is important that we return on investment capital, and the important factor is the incremental EBITDA [
After the difference].
So I don\'t know, Emilio, if you want to add. --------------------------------------------------------------------------------
Emilio Marcos Chalu, mainland ArcaA. B. de C. V. -CFO [34]--------------------------------------------------------------------------------
You know, this quarter is basically the lowest profit margin quarter.
So we see an increase in profit margins for the whole year based on synergies, but also mention the impact on the maintenance of Arturo.
Compared to 2018, we should see an increase in profit margins, which may increase by 50 points throughout the year. --------------------------------------------------------------------------------Operator [35]--------------------------------------------------------------------------------
At this point in time, I would now like to transfer this call to the closing word of Arturo Gutierrez. --------------------------------------------------------------------------------
Alturo Gutierrez herndez, mainland ArcaA. B. de C. V. -CEO [36]--------------------------------------------------------------------------------Thank you.
As always, we appreciate your interest in the mainland of Arca.
If you have any questions, please contact our investor relations team.
Have a good day. --------------------------------------------------------------------------------Operator [37]--------------------------------------------------------------------------------
Thank you, ladies and gentlemen.
This is the end of today\'s conference call.
You can disconnect now.
Custom message
Chat Online 编辑模式下无法使用
Chat Online inputting...