Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales increased by 15.9%, driven by strong performance in major markets such as Mexico, Brazil, Argentina, and the US.
- Gross margin improved by 184 basis points, reaching 64.3%, indicating successful productivity initiatives and manufacturing efficiencies.
- EBITDA expanded by 245 basis points to 23.7%, reflecting effective cost management and operational improvements.
- Net income surged by 78.1%, with earnings per share growing by 81.6%, showcasing strong financial performance.
- Cash flow generation reached a record high of MXN2,404 million, representing a 68.1% increase, highlighting robust cash management.
Negative Points
- Challenges persist in the skincare category, with expectations to resolve issues by Q2 2025.
- Blades and razors face issues related to Celine, although sellout remains healthy in Mexico.
- Headwinds were encountered in Peru and Chile, impacting overall regional performance.
- Receivables increased by seven days year over year, and days payable outstanding decreased by seven days, indicating potential cash flow management challenges.
- Forex was a headwind in Argentina and Brazil, affecting financial results in these regions.
Q & A Highlights
Q: Can you share your thoughts on the growth prospects for Suerox outside of Mexico, especially in the US and Latin America?
A: We have completed the expansion of Suerox in Latin America, and early results are optimistic. In Chile, we have achieved almost a 20% market share. We expect similar success in Argentina, Brazil, Colombia, and Central America. In the US, where we've been present for 3-4 years, growth is promising, and we have strong plans for next year.
Q: How long should we expect continued sequential improvement in margins?
A: You should expect an average of 24% EBITDA. Some quarters may be slightly below or above this, but on average, 24% is the target. Productivity savings will continue, and anything above 24% will be reinvested to drive top-line growth. By the end of 2025, we aim for a margin range of 24% to 25%.
Q: Could you provide more details on the recent isotonic acquisitions and any specific categories or regions you are targeting?
A: We acquired two brands, Reon and Ibu 400, in Argentina. These acquisitions allow us to enter the ibuprofen submarket. We focus on core categories and see opportunities in the US and Brazil, but we remain open to other markets if opportunities arise.
Q: What strategies are you implementing in the US, and what can we expect for next year?
A: In the US, we focus on core categories and have reduced the number of SKUs. We expect continued expansion of Hispanic brands and success in the general market with brands like Suerox and Silka. We are confident in maintaining growth levels seen in the past.
Q: Could you explain the increase in other current liabilities and the acquisitions line in the cash flow statement?
A: The increase in other current liabilities includes deferred taxes and VAT. The acquisitions line reflects payments for the recent purchase of four brands, including two in the isotonic category in the US and two in Argentina. The multiple paid was 1.2 times trailing 12-month sales, which is attractive given the potential under Genomma's management.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
