Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Genomma Lab Internacional SAB de CV (GNMLF, Financial) reported a strong gross margin of 64%, marking a 7.1-point improvement over the past 1.5 years.
- EBITDA margin increased to 22.9%, a 186 basis points rise compared to the previous year.
- Net income grew by 50.1% to MXN631 million, with EPS increasing by 53.1% to MXN0.63.
- The company completed strategic M&As, including acquisitions in the US and Argentina, expected to enhance growth in core brands.
- Genomma Lab Internacional SAB de CV (GNMLF) achieved 41% of its MXN1,800 million productivity savings target as of Q2 2024.
Negative Points
- The cash conversion cycle extended to 122 days, influenced by hyperinflationary accounting in Argentina and reduced supplier days.
- Challenges were noted in the Skincare category, with Asepxia and Cicatricure brands facing mixed performance.
- Macroeconomic headwinds, including the strengthening of the Mexican peso, impacted results in some regions.
- Sales in Chile and Peru faced headwinds, with Chile experiencing a consumption contraction and Peru affected by government policy changes.
- The company is still navigating a highly volatile macro environment, impacting figures in countries like Chile and Brazil.
Q & A Highlights
Q: Can you provide more details on the challenges faced in Chile and Peru, and your expectations for improvement?
A: In Chile, we are experiencing a consumption contraction in most categories, but it's easing off, and we expect improvement by next quarter. In Peru, a government policy change impacted OTC sales, but we anticipate a turnaround as we reach our base next quarter.
Q: Regarding Argentina, what are you seeing in terms of volume for key brands, and how was the M&A funded?
A: We are witnessing a turnaround in volume, with significant recovery and market share gains. The M&A in Argentina was funded locally with resources from the subsidiary and some debt, allowing us to exchange Argentine pesos for intangible assets in the Analgesics category.
Q: Could you expand on the strategic rationale for the M&A in the US?
A: The acquisition involves isotonic beverages that align with our Suerox brand. We plan to switch production to Mexico to reduce costs and leverage distribution synergies between the East and West Coasts of the US.
Q: What are your expectations for the lagging Skincare category in the second half of the year?
A: We have solid plans to turn around the Asepxia brand, expecting market impact by Q4. For Cicatricure, we are working on plans to address mixed results across markets.
Q: Can you provide an update on the sale of non-core brands and assets?
A: We are advancing in the process, with a bank managing the transaction. The strategy includes divesting non-core assets like land adjacent to our plant and investments in affiliate companies, beyond just brands.
Q: What is your outlook for Mexico in the second half of the year, considering the electoral year?
A: We expect to maintain low double-digit growth in sell-out, driven by a strong winter season and rising COVID cases, which benefit our OTC business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
