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Operator: Good afternoon, and welcome to Alfa's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would like to turn the call over to Mr. Hernan Lozano, Vice President of Investor Relations. Mr. Lozano, you may begin.
Hernan Lozano: Good day, everyone, and thank you for joining us. Further details about our financial results can be found in our press release, which was distributed yesterday afternoon, together with a summarized presentation. Both are available on our website in the Investor Relations section. Let me remind you that during this call, we will share forward-looking information and statements, which are based on variables and assumptions that are uncertain at this time. It is my pleasure to participate in today's call together with Roberto Olivares, Sigma's CFO. I will provide a brief update related to Alfa, Sigma, then Roberto will discuss Sigma's third quarter results and outlook. It is exciting to report Alfa, Sigma's first complete quarter as a streamlined global branded food player. We have experienced a smooth transition into a steady-state business after years of transformational developments. To better reflect Alfa's new identity and to concentrate on growing Sigma's corporate brand equity, we are implementing a re-branding initiative. As a first step to sunset the Alfa brand, an extraordinary shareholder meeting will be convened soon to propose adopting a Sigma-related entity name at the Alfa level. We will share updates on these changes in due course. Returning value to shareholders through cash dividends will remain core to capital allocation. On October 1, the Board approved the first dividend under the company's new food-focused structure, a $35 million payment, bringing total cash dividends for the year to $119 million. This amount is aligned with distribution levels historically supported by Sigma's strong cash generating ability. With that, I will now turn the call over to Roberto to discuss Sigma's results.
Roberto Olivares: Thank you, Hernan, and thank you all for joining us today. We are pleased to report another quarter of positive sequential improvement in volume, revenues and comparable EBITDA, underscoring consistent progress adapting to raw material cost pressures in a global environment of soft consumer confidence. Consumers are moving across channels, categories and brands, including varying shift between retail and food service, dairy and packaged meats as well as value and premium brands. The good news is that Sigma's diversified business platform gives us a relative advantage to maintain strong connections with consumers throughout the broad marketplace. One of the biggest industry-wide challenges we continue to face is rising raw material costs. In particular, turkey breast has experienced the sharpest price increase, reflecting supply constraints amplified by seasonal avian flu. Prices reached an all-time high of $7.10 per pound at the close of 3Q '25, which was an outstanding 244% increase from a year ago. Although we have certainly felt the effects of high turkey prices and other protein costs, Sigma's large scale and global supply chain have helped reduce their impact on our results. Looking ahead, we anticipate that current high prices, vaccination and low feed cost will be supportive of a gradual improvement in turkey supply and cost. In addition to Sigma's structural advantages, our experienced teams have done an incredible job staying on top of consumer needs and expectations. All the initiatives we have undertaken drove third quarter revenues to a record $2.4 billion, up 8% year-on-year and 5% sequentially. We have been implementing targeted price actions through a balanced approach to mitigate rising input costs while also supporting volume. EBITDA was down 9% year-on-year due to sustained raw material cost pressures and a record high comparison in 3Q '24. Adjusting for the Torrente property damage reimbursements in the second quarter, comparable EBITDA increased 3% sequentially, marking the third consecutive quarter of improvement. As a result, 9-month comparable EBITDA of $722 million is tracking in range with our full year guidance. We are confident that this upward trend will continue gaining momentum into the fourth quarter, which implies significant year-over-year growth for the first time in 2025. Moving next to key highlights by region. Mexico was once again the standout with revenues in local currency increasing both year-over-year and sequentially. Volume increased 1% quarter-on-quarter as growth from retail channels offset weaker performance in food service, which was impacted by soft hospitality demand. By product, yogurt and value branded packaged meats were key drivers in the retail channels. FX-neutral EBITDA improved 6% sequentially as ongoing revenue management and efficiency initiatives offset higher raw material costs. In the United States, revenues were flat year-on-year and quarter-on-quarter as favorable pricing was offset by lower volume in both periods. Softer demand for packaged meats in national brands was partially offset as Hispanic brands continue to gain traction in mainstream channels and new customer acquisitions. EBITDA was 17% lower quarter-on-quarter, reflecting lower volume in national brands and changes in mix involving lower dairy sales. Staying in the Americas, Latin America delivered 2% currency-neutral revenue growth in the third quarter, driven by higher volume year-on-year and sequentially. EBITDA decreased 11% versus 3Q '24 due to higher protein costs and mix effects, but increased 10% quarter-on-quarter due to operating efficiencies achieved in the Central American operations. The underlying business in Europe has maintained an upward trajectory. Adjusting for all insurance reimbursements received last quarter, EBITDA increased more than 100% sequentially as effective price actions and Torrente-related production adjustments drove a recovery trend that is expected to be amplified with seasonality effects in the fourth quarter. Lastly, Sigma's Europe capacity recovery plan continues advancing on schedule towards full restoration in 2027. Looking at our financial position and select cash flow items, we maintained a strong consolidated net debt-to-EBITDA ratio of 2.7x at the close of the third quarter with a stable net debt. CapEx represents our largest use of cash, driven by planned investments. Projects underway include capacity and distribution expansions, primarily in Mexico and the United States, plus the previously discussed capacity recovery in Spain. Next, let me briefly touch on some of the exciting steps we are actively taking to strengthen the business model for long-term success. Our growth business unit remains focused on piloting and scaling new products and ventures with disruptive growth potential. Grill House, our direct-to-consumer venture that caters to the grilling enthusiasts is ready to make its entrance into the U.S. after uninterrupted growth in Mexico for the last 5 years. At the same time, the Studio, Sigma's Global Center of Excellence for design and innovation is moving forward in its first year with developing 46 prototypes and advancing on 11 innovation commitments to boost core brands. Advancements in these areas like these will continue to set us apart from competitors in all regions. With this, let's open the call for questions. Please, operator.
Operator: Our first question comes from Ricardo Alves from Morgan Stanley.
Ricardo Alves: I had a question on Mexico. I think that certainly, as you mentioned in the preliminary remarks, another quite positive and resilient performance in top line in the low double digits. With that in mind, can you break that down into more details as it pertains to eventual share gains? I'm really looking forward to what has been driving the strength of you relative to other food players in Mexico. If you can talk about share gains or your revenue management initiatives or even on a channel by channel? Is it exposure to smaller purchases that is benefiting you more than others with a less diversified SKU? So just trying to get some more granularity to try and explain the strength in top line in Mexico and if that's something that should continue going forward, that would be helpful. My second question, I think that, Roberto, you did refer to the guidance. We appreciate the fact that the company is reiterating the guidance. I think that the message is pretty clear here, and it does imply to the comment that you made that the fourth quarter should be significantly stronger. I think that we're talking about almost 10% EBITDA growth on a sequential basis. So, with that in mind, can you also lay out in more details in your view, what are the key value drivers from the third quarter into the fourth quarter for this big sequential improvement? Is it -- when we look historically, the seasonality doesn't really help us to come to a conclusion that the fourth quarter is going to be significantly better. So is it something that we cannot model as well as you can, meaning your hedges may be looking better or to one of the points that you made, maybe Europe is going to be improving much faster than expected. Is there any top 2 or top 3 value drivers for us to be more confident about this sequential recovery into the fourth quarter?
Roberto Olivares: Thank you, Ricardo, for the question. Let me first address the first one related to Mexico. In general, let me first explain that in Mexico, we do have the retail business and the foodservice business. We have seen different dynamics in each one of them. Foodservice first being more soft on volume, particularly due to raw material cost increase, particularly beef, but also softer hospitality trends, as I explained in my initial remarks. If you divide the business, retail is actually growing a little bit more on volume and foodservice is decreasing in volume. And in retail, we have a good presence in both the modern and traditional channel and a good presence across the different value segments across the socioeconomic spectrum. So we do have brands that whenever a consumer is trading down or trading up, we manage to catch the consumer as they move. So we have been seeing a little bit of trading down. So volume from our value brands is growing a little bit higher than the premium and the mainstream brands. And also volume in some of our dairy brands, particularly yogurt, continues to increase. I would say those are the 2 main drivers of the resilient volume that we have seen in Mexico. Then let me address your second question regarding reiterating the guidance and what we see in the fourth quarter of 2025. First, let me just make the comment that last quarter was -- fourth quarter '24, we have some extraordinary impacts, particularly in Mexico. If you see the margin that we have seen through this year in Mexico up to today, up to the third quarter, we were almost at 15% EBITDA margin. If you normalize that effect, we have close to $30 million more in Mexico in the fourth quarter versus the fourth quarter of 2024 just because of that. Additionally, we do expect to receive -- to continue receiving the reimbursement from the business interruption insurance from the Torrente incident we expect between $15 million and $20 million of business interruption coming in the fourth quarter. We actually already received a small portion of that during the month of October. We do also expect the European operation to have better results than the fourth quarter of 2024 because of higher prices and the momentum that we have seen in the operation between $5 million to $10 million in that sense. And in the case of the U.S., we see that we will move from a decrease versus last year in this third quarter to actually being able to have a similar result in the U.S. versus the fourth quarter of 2024. So those are the main key drivers for us being in range with the guidance.
Ricardo Alves: Exactly what we are looking for, Roberto.
Operator: Our next question comes from Renata Cabral of Citi.
Renata Fonseca Cabral Sturani: So I have 2 regarding the U.S. business. One -- the first one about category trends. How would you describe the overall competitive environment right now in the U.S. in packaged meats and refrigerated food? Are private label or value play is gaining share right now? And how is Sigma positioning to defend pricing? And still on the U.S. business, in the release, it's mentioned that we have volumes in the national brands. My question is to what extent was this driven by category contraction or share loss and how the company has just seen the product mix to reaccelerate volumes in 2026?
Roberto Olivares: Thank you, Renata, for your question. Regarding category trends in the U.S., we have been seeing just more competition of private label in the category, particularly, I would say, because of all of our regions, probably the U.S. is the one that has a softer consumer confidence recently. Consumers in the U.S. are managing a tighter budget. They are more cost conscious. Having said that, we -- particularly in the national brands business, we play as a smart choice, I would say, very close to the segment where private label is playing. And although we have seen that private label is penetrating more in the category, has not necessarily impacted our brands, has impacted more of the mainstream brands in the category. We try to position ourselves as a smart value brand, playing a lot with innovation on convenience on -- not only on affordability that has helped maintain our position with the consumers. And actually, we, in that sense, have been doing well. In regards to what we see going forward, definitely, the category this year, mainly in the Americas has suffered a lot because of raw material cost. We have mentioned a lot that turkey, but also pork and also other -- beef, other materials has been increasing. We do expect for 2026 for raw materials to ease, to start to recover production, particularly in turkey, that will increase the supply in the production and also impacting raw material to the downside. And hopefully, with that, we do expect a pickup in the category for next year.
Operator: Our next question comes from Federico Galassi of Rohatyn Group.
Unknown Analyst: I don't know if I was allowed to speak. It's [ Matteo ] here. I wanted to know if you could give us some color on how is operating leverage looking in this scenario with lower volumes. I think the picture in terms of raw material costs is very clear. Everyone understands the pressure particularly turkey has had on your results. But I wanted to see if you could provide us some guidance on what we should expect in terms of OpEx as a percentage of sales with more granularity by country, if possible?
Hernan Lozano: Matteo, this is Hernan. Let me see if we understand your question correctly. So the first part refers to operating leverage and whether the decrease in volume is creating some slack in terms of the level of operation that we maintain across the different regions. Is that right?
Unknown Analyst: Yes, exactly.
Hernan Lozano: Okay. So the answer is no. This is not creating any slack in terms of operating leverage. What we're seeing is we are operating at pretty much capacity, especially in the Americas, in Mexico and the U.S., if you look at many of our CapEx projects, these have to do with catching up with volume that has grown at a pretty strong rate before 2025. So from an operating standpoint, the operations are normal, I would say.
Roberto Olivares: I will add that -- thank you. I will add that it's not that volume is necessarily decreasing a lot. I mean, again, in the case of the U.S., was 1% this quarter is -- we do expect to continue growing in volume in the next years.
Unknown Analyst: And one quick follow-up related to cost of raw materials. It should be fair to expect that particularly turkey prices stabilize towards the end of the year and that we see lower raw material prices for next year. What's your strategy, your view on pricing, if you could give us any idea on that for next year?
Roberto Olivares: Sure. Thank you, Matteo. I mean, in general, we do expect, I would say, more friendly raw material environment next year. We -- let me talk about turkey. We are starting to see some indications that some recovery in the turkey production is starting to happen. There was an inflection point in July where production is starting to increase versus last year. And actually, the rate of increment or the rate of how the production has increased has been at a good rate. Having said that, there is still some uncertainty on how it's going to continue that rate in the next months, particularly because, again, we're entering the winter in this hemisphere and potentially, there could be more diseases coming along. There was a particular disease that affected a lot the Turkey this year was a pneumovirus. And they developed a vaccine for that virus that started to help. They started to vaccinate the turkeys around April and May. So we do expect that, that continues helping with the production over the next months. We are cautiously optimistic. I will say that we do expect production of Turkey to continue increasing. But again, cautious about the rate of that increase.
Operator: Our next question comes from Fernando Olvera of Bank of America.
Fernando Olvera Espinosa de los Monteros: Roberto, Hernan can you hear me?
Roberto Olivares: Yes.
Fernando Olvera Espinosa de los Monteros: Perfect. My question, just a couple of follow-ups. Regarding or linked to the cost outlook, I mean, thinking that turkey prices should start easing going forward, how are you thinking about pricing mainly in Mexico towards year-end and next year, trying to see if any additional adjustments might be needed. And also thinking about volume softness overall, how are you thinking about CapEx for next year?
Roberto Olivares: Thank you, Fernando. Let me just make the comment that although we have been seeing that some indication that production of turkey started to increase, prices of turkey has not reflect that. So prices of turkey continues to be at a record level, both in turkey breast and turkey thigh. And we do expect them to decrease in the following -- particularly in the following year. I will say more as the -- probably between the first and second quarter of the next year, that is our expectations. Regarding pricing, when that happened, we have been working very closely with the revenue management teams to be able to protect both margin and volume. We try to do any price increase that we do, we try to do it very -- with a lot of analysis in regards to elasticity, how the competition is moving and also how the consumer perceives that price increase. We want to maintain the preference of our consumers. So whenever there is something that we can see that we can act both on higher raw material costs and lower raw material costs, we will act upon that to be able to protect and to continue growing volume. In regards to that, your question about CapEx in general, again, particularly Mexico and the U.S. operation, for the last couple of years, we have been working at capacity or almost at full capacity. So we have been planning and investing in some projects to increase the capacity. We also have the recovery plan in Europe to recover the capacity that we lost in the Torrente flood. So we will be working also on that on next year. So at least, we still don't have our guidance number for CapEx for next year. But what I will say directionally, we'll continue to be around the same level that this year.
Fernando Olvera Espinosa de los Monteros: Okay. Roberto, regarding pricing, I mean, at this point, do you feel comfortable with the price hikes implemented so far or additional hikes might be seen going forward in that sense? I mean, thinking about the turkey price that you were saying that they might start to decline until the first and second quarter of next year.
Roberto Olivares: Yes. Thank you, Fernando. I will say that unless, again, the raw materials continues to increase, which we are not expecting that. We not necessarily will do something structural on prices as of right now. There might be the need to do some particular adjustments in some particular product, but not something that will be structural for the whole company.
Operator: Our next question comes from Felipe Ucros of Scotiabank.
Felipe Ucros Nunez: A couple of questions on my end. So one has to do with your pricing power. Can you talk a little bit about your capacity to maintain your pricing levels when costs start coming down and margins start expanding. Historically, what has been the behavior of your competitors? Are they typically disciplined? And I guess, how does that change by region? I have an impression that perhaps Mexico and the U.S. are stronger than Europe. But any color you can give us on that would be great. And then on the second question, is there any direction you can give us about which proteins are most important to you out of the ones you use? And I know this varies because there's reformulations depending on where the costs are at given times. But even if you can't give us precise numbers, perhaps you can give us a ranking or some directional idea of which ones are the most important proteins.
Roberto Olivares: Thank you, Felipe. Let me first tackle the second one. So we -- regarding protein, -- and when we have this information in our website in our corporate presentation, around 40% of our protein -- of our raw material cost of -- the raw materials is pork. Then we have close to 20% is turkey, then around 10% is chicken and then around 30% will be dairy, mainly milk, but also cheese and some other dairy proteins. We -- particularly pork ham, I would say, is our largest material that we buy, both in -- particularly in Europe, but also in Mexico. And in the case of Mexico, more turkey, turkey thigh, turkey breast and in the case of the U.S., particularly chicken. Regarding your first question, I will say we -- again, as I explained to the question that Fernando did, we try to take a very disciplined approach in terms of price management. Whenever the -- we take a look of elasticity, how the competition is moving. And whenever we see an opportunity area where we can either protect margin or protect volume, we will be taking that opportunity. In general, I will say it varies by region. But in Europe, given the competition, the penetration of private label and some excess capacity that there's in the industry, we have -- it takes us more time to increase prices between the rest of the regions.
Operator: There being no further questions, I would like to return the call to management.
Roberto Olivares: Thank you, everyone. On a final note, we entered the fourth quarter focused on a strong close for 2025, building upon our positive sequential momentum. Looking ahead, we're preparing to capitalize on opportunities in 2026 and advance our long-term consumer-centered growth initiatives. Thank you very much for your interest in Alfa, Sigma. Please feel free to reach out to us if you have additional questions. Have a great day. We will now disconnect.
Operator: This concludes today's conference call. You may disconnect.