Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arca Continental SAB de CV (EMBVF, Financial) reported a 10% increase in consolidated revenues, reaching MXN62.6 billion, driven by effective pricing and exchange rate gains.
- The company achieved a 10.2% increase in consolidated EBITDA, marking the highest third-quarter EBITDA margin in eight years.
- In Mexico, Arca Continental SAB de CV (EMBVF) gained value share in non-alcoholic ready-to-drink beverages, outpacing the industry.
- The launch of TUALI, a next-generation B2B digital platform, is expected to revolutionize operations for nearly 1 million customers in Latin America.
- Sustainability efforts have led to a 74% PET bottle collection and recycling rate in Mexico, moving closer to the goal of 100% by 2030.
Negative Points
- Total consolidated volume decreased by 4.6% in the quarter, attributed to unfavorable weather conditions and tough comparisons from previous years.
- South America faced challenges due to a volatile macroeconomic environment and weakening consumer demand, with total volume down 8.6%.
- Ecuador experienced a severe energy crisis, leading to an 8.1% volume decline due to widespread power outages.
- In Argentina, volume declined by 13.1%, although there are signs of economic contraction easing.
- The company faced a challenging quarter in terms of volume performance in Mexico, with a 2.6% decline in unit case volume due to heavy rains and below-average temperatures.
Q & A Highlights
Q: In the US, what is driving the better margin performance, and are there benefits from the efficiency program in distribution?
A: The improved margins are due to effective pricing, volume mix, and efficiency projects. The company has been focusing on digital transformation and optimizing production logistics, which has resulted in better cost management. Additionally, investments in production facilities in Fort Worth, Texas, are expected to enhance supply chain efficiencies and support future growth. - Arturo Hernandez, CEO
Q: Can you discuss the distribution agreement for Pisco in Peru and similar deals in Argentina?
A: The company is leveraging its distribution capabilities to explore categories like beer, spirits, and groceries. These initiatives are enhancing customer loyalty and expanding the product portfolio. In Argentina, the company is replacing previous beer distribution with new agreements in beer, spirits, dairy, and snacks, which complement and strengthen the core business. - Arturo Hernandez, CEO
Q: How do digital initiatives in the US compare to those in Latin America, and could they be a competitive advantage for potential acquisitions?
A: The digital initiatives are tailored to each market, with the US focusing on platforms like myCoke.com to enhance customer relationships. The digital nest in Monterrey supports both US and Latin American operations, providing a centralized approach to digital transformation. These initiatives could offer a competitive edge in potential acquisitions by leveraging economies of scale and advanced digital capabilities. - Arturo Hernandez, CEO
Q: What are the expectations for consumption trends in Mexico, and how are hedges positioned for the fourth quarter?
A: Despite a challenging quarter, the company expects better volume performance in the fourth quarter. Hedges for key inputs like aluminum and fructose are well-positioned, with favorable pricing secured for 2025. The company remains optimistic about maintaining profitability and achieving full-year guidance. - Arturo Hernandez, CEO and Emilio Marcos Charur, CFO
Q: How does the company plan to utilize its low leverage and excess cash?
A: The company plans to continue its strategy of investing in CapEx and dividends. In the absence of M&A opportunities, extraordinary dividends have been paid. The company remains active in seeking value-creating opportunities in the US and Latin America. - Emilio Marcos Charur, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
