BMBOY (BMBOY) Q3 2026 Earnings Report, Transcript and Summary

Afternoon, everyone. And welcome to Grupo Bimbo's Third Quarter 26 Results Conference Call. Before we begin, we kindly ask all participants to update their Zoom display name to include their name and the organization they represent. This will help facilitate the Q&A session later. We will be using automated subtitles during today's presentation, and turn this feature on or off through your Zoom settings. If you would like to ask a question during today's call, please use the raise hand feature. When invited to speak, please unmute your microphone, identify yourself, your organization, and then proceed with your question. If you need a copy of the press release issued earlier today, it is available on the company's website at grupobimbo.com. Before we begin the presentation, I would like to remind you this call is being recorded and that the information discussed today may include forward looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward looking statements. I will now turn the call over to Mr. Alejandro Rodríguez Bas, Chief Executive Officer of Grupo Bimbo. Please go ahead, sir. Alejandro Rodríguez Bas: Good afternoon, everyone. And thank you for joining us today. With me today are our Chief Financial Officer, Diego Gaxiola, and the President of Bimbo USA, Greg Koehrsen, along with members of our finance team. Before we begin, I want to recognize our more than 152 thousand associates around the world. Their commitment to serving our consumers and customers every day is what drives our performance. And I want to thank them for another strong quarter. The third quarter demonstrated the strength and resilience of our business. Excluding foreign exchange, net sales increased 3.6% supported by price mix, positive volume, and to a lesser extent, recent acquisitions. Importantly, that growth translated into strong into stronger profitability. Adjusted EBITDA-to-EBIT margin reached 15.7%, an expansion of 100 basis points while net margin increased 80 basis points to 3.9%. We delivered these results despite a consumer environment that remains challenging in several markets. Inflation continues to pressure household budgets but our performance reinforces what we have long believed. Bakery and snacking are resilient. Everyday categories and our scale, brands, geographic diversification, and execution capabilities are powerful competitive advantages. Our focus is not simply on growing, it is on growing profitably, consistently, and sustainably. Let me turn to our regions. In North America, the recovery continues to gain momentum. Net sales grew in U. S. Dollars for a third consecutive quarter. Providing further evidence that our transformation is delivering results. Volumes remain soft as consumers continue to manage their spending carefully. At the same time, our sales trajectory is clearly improving. Supported by a stronger revenue growth management and a better marketplace execution. We are also seeing progress where it mars most. We gained share in 4 of our 6 categories, and margins improved for a 5th consecutive quarter. Our productivity agenda continues to deliver across the value chain. We are reducing waste, improving recipes, and packaging. Operating our plants more efficiently, optimizing our manufacturing footprint and routes, strengthening, sourcing, and simplifying the organization. The important point is that these improvements are structural. Not temporary. We are building a more competitive, efficient, and agile North America business. We are encouraged by the progress but we are not declaring victory. The transformation will not be completed until North America returns to sustained profitable volume growth. That remains our object. Mexico delivered another outstanding quarter. The business continued to grow profitably while strengthening consumer preference. With contributions across categories and channels. Adjusted EBITDA margin expanded 200 basis points to 22.4% driven primarily by a strong top line performance and a lower cost of sales. Supported by a stronger exchange rate and lower waste. EAA also delivered an excellent quarter. Almost every business in the region grew in local currency despite a demanding comparison base. While adjusted EBITDA margin expanded 110 basis points to 12.3%. A particularly strong performance across Bimbo QSR India, The Balkans, and The UK. Complemented by a small contribution from our recent acquisition, Bonelli, Indonesia. Latin America was more mixed. Most of our markets continued to show healthy sales momentum. While profitability was affected. Primarily by Brazil. Brazil remains our priority. We are taking targeted actions to strengthen commercial execution and advance the integration of Wickbold and we expect those efforts to increasingly contribute to performance. As a reminder, beginning next quarter, Wickbold will no longer be included in our inorganic growth. Contribution following its acquisition in October 2025. Let me close with how we see the business going forward. We remain confident but we are also clear about what comes next. Our priority is to build volume momentum while continuing to protect and expand profitability. As we move into 2027, we remain mindful of a more inflationary environment. But we enter it with significant strengths. A diversified geographic and category portfolio leading brands, a strong innovation agenda, a meaningful productivity pipeline, and above all, exceptional people. Those advantages give me the confidence in our ability to navigate what comes next. And continue delivering profitable sustainable growth over the long term. With that, let me turn the call over to Diego to take you through the financial results in greater detail.

Thank you, Alejandro, and good afternoon to everyone. We appreciate you taking the time to join us today. This quarter represents 1 of the clearest demonstrations of strength of our business model in recent years. We deliver broad based growth across geographies, continued margin expansion, strong cash generation, and further deleveraging. All while continuing to invest behind our brands operations, and long term growth agenda. Throughout the year, we have consistently delivered growth through both volume and price mix. Demonstrating not only the resilience of demand for our brands, but also our ability to capture growth while maintaining pricing discipline. We believe this combination is the strongest indicator of the quality and sustainability of our growth profile. We reached a record EBITDA margin at 15.7%. A 100 basis point expansion versus last year. Which is the largest third quarter improvement we have seen in more than a decade. This also marks our 5th consecutive quarter with EBITDA margins above 14%. Providing further evidence that the improvements we have made across our network manufacturing footprint, revenue management capabilities, and operational execution, are becoming embedded in the business. 1 of the standout highlights of the first 9 months of the year was our free cash flow generation. The strong EBITDA performance together with improvements in working capital allowed us to generate approximately 17 billion of free cash flow. Even after investing approximately 12 billion pesos in CapEx. This strong cash generation also allow us to further deleverage the company. Bringing net debt to EBITDA down to 2.4x. Even after returning 6 billion pesos to our shareholders. Moving on to our guidance. it is worth taking a step back for a moment. We started the year expecting slight EBITDA margin expansion. And as our results came in consistently, ahead of our expectations, We have raised our guidance quarter after quarter. Throughout the year. Today, we are raising our guidance once again. marking the third upward revision this year and reflecting both the extent of our year to date performance and our increasing confidence in the trajectory of our business. So we are raising the lower end of our full year adjusted EBITDA margin guidance from 70 to 85 basis points. Resulting in a new range of 85 to 120 basis points of expansion as compared to 2025. On the top line, we continue to expect net sales excluding FX to grow at a mid single digit rate. Which translates into flat to a low single digit decline in pesos. Looking ahead to 2027, we see a number of encouraging drivers across the portfolio. We expect continued benefits from the transformation initiatives underway in North America. Sustained profitable growth in Mexico, improving performance across Latin America, and a continued momentum in EAA. At the same time, the investments we have made in capacity distribution, automation, and digital capabilities over the last several years position us well to support future growth while enhancing productivity. As every year, we will provide formal guidance on our fourth quarter conference call. On CapEx, for 2026, our guidance remains in the range of $1 billion to $1.2 billion As we mentioned on prior calls, we made a decision to push certain projects into 2027. And as a result, we now expect CapEx next year to come in somewhat above the level we will see in 2020. As we look to the future, we remain focused on the same priorities that have served us well. Driving profitable growth, expanding margins, generating strong cash flow, and creating long term value for our shareholders. We appreciate your continued interest in Grupo Bimbo. And look forward to updating you on our progress in the coming quarters. Thank you for your time. Operator, please open the line for questions.

Thank you. We have our first raised hand from Fernando Olvera Fernando, please unmute and go ahead and ask a question. If I ask you to confirm your organization, please.

Hi. Can you hear me? Yes. Oh, perfect. Fernando Olvera of Bank of America. Thank you for the space for questions. My first 1 is related to North America. As you highlighted in your initial remarks, Top line has been very. Has been for the third quarter in just dollar terms. So wondering if you can elaborate what is your outlook for consumption, you know, in the next quarter and in 2027 considering that US inflation is likely to continue rising amid raw material price volatility. that is the first question.

Thanks for the question, Fernando. Appreciate it. I would say the consumer environment in The United States continues to be mixed Certainly, see a consumer that is value conscious, especially in lower and middle income households. But categories remain resilient, Bread's a staple. People are still buying brands that deliver clear value. there is a bifurcation, of course, between the value conscious consumer and the premium consumer both value conscious consumer and the premium consumer are continuing to gain traction within the market. Our portfolio bifurcates into value mainstream and premium. We make sure that we have the right products at the right price points for each of them. So while the total environment may be mixed, We also believe that we are well positioned to activate with the various consumer segments, not only for the balance of this year, but going into next year.

Okay. Thank you. And my second question is related to Mexico. If you can comment how much of the gross margin expansion came from efficiencies versus lower costs And how should we think about gross margin in Q4 and 2027? Any color would be great.

Yes, Fernando. You know that we do not provide the specifics. What I can tell you is that thanks to the hedges that we had on commodities, we still have not faced a significant inflation. On our cost of sales. On the most important raw materials. On the other hand, the exchange rate helped. You know that we have a big exposure to the US dollar. The peso has been strong. We also have a hedging strategy in place But even if you see the exchange rate that was let's say 6 months ago, which is more or less as a rule of thumb what you can contemplate in our current P&L for the quarter. We have a positive effect versus the same quarter of last year. So that is healthy. And of course, a lot of efficiencies that have been implemented in the manufacturing process in the different plants that help also to expand together with the increasing volumes that because of the operating leverage also has a positive impact on our gross margins. So all these together gave us the expansion that we reported. Now it is still early to provide a specific guidance for 2027, even more for a segment either Mexico or any other of the segments. What I can tell you in advance is that 2027, we are gonna face headwinds in terms of the cost of sales because of the cost of the raw materials. We have continue with our disciplined hedging strategy but considering the cost that we have had for 2026 and 2027, it is gonna be a challenge. Now just to be clear, we are not providing any guidance that we are expecting. A decline in margins. I am just mentioning that it can be a negative effect and particularly for Mexico my guess is that we will have some pressure from the exchange rate. As it was a very strong peso And as everybody knows, it has started to evaluate a little bit. But again, it is too early to tell and early to give a specific guidance. Oh, this is very helpful. Thank you, Diego.

Thank you. Our next raised hand is Antonio Hernandez. Antonio, please unmute and go ahead and ask your question and please confirm your company or organization.

Hey, sure. Hi. This is Antonio Hernandez from Actinver. Congrats on your results. Well, my question is regarding margin performance in The US. I mean, it is been quite strong. Expanding and above our estimates. But overall, you also mentioned that the work is not done until volumes improve and get positive. Right? So I wanted to get a sense on your expectations. I know you do not provide guidance per se, at least right now for next year, but overall expectations on volumes and maybe how far away are we from seeing North American operations in maybe the optimal target margin that you see. Thanks.

Yeah. Thank you, Antonio. Appreciate the question. First of all, let me thank the team. You know, the progress that we have made over the last number of quarters is largely due to the incredible work that they have done. We have talked about in previous calls all the work that we have done from a cost perspective along procurement, supply chain, our manufacturing operations, to name a few. We have made changes that, as Alejandro mentioned, we believe are structural in nature. And so we feel good about the progress and the sustainability going forward. We will continue to push all productivity levers to make sure that we are turning over every rock to ensure that we are delivering product at the most efficient way that we can for consumers. And, you know, as it relates to growth going forward, we have many opportunities working on with customers. As Alejandro said, we are not going to be satisfied until we create consistent volume growth within The US. And so that is what we continue to strive for with all of our customers. Thank you.

Our next raised hand is from Felipe Ucros Nunez. Felipe, please unmute and go ahead and ask your question.

Thanks, operator. Evening, Alejandro, Diego, and team. Thanks for the space. This is from Scotia. Quick question on US margins. You know, you are almost back 2019 levels. But it seems to me that after the volume contractions that we have over the last 2 to 3 years, You probably have some spare capacity in there, so there is some operating leverage. And, also, it seems that, you know, you. You have had the margin bounce back largely on lower restructuring costs. But I imagine there is a payback on margins from these projects that you have embarked on the last couple of years. So you know, just looking at it from here, it seems like there is a lot of upside to The US from this point, which was a high point before COVID. Correct me if I am wrong here and give us some idea of where things can go. I know you cannot give us exact numbers, but, you know, directionally, do you also feel like there is a lot of upside? And then the second 1 on leverage. Pretty powerful effect on the lower interest costs below the line as you continue to deleverage. I think pretax was up something like 18%. But you are already at 2.4, you know, in previous cycles, previous few cycles where you where you have levered above 3x and then come back down, something around 2 to 2.5 seems to be the bottom. So are you ready to start relevering again, or do you wanna see a little more deleveraging on the balance sheet before you start looking reaccelerate M&A? Thank you. Alejandro Rodríguez Bas: Thank you. Thank you, Felipe, for the question. So you are spot on. We believe the opportunity in The US is ready for us to take on. Most of it has come from productivity, and some price mix The reality is we have installed capacity We are developing differentiated products according to the new trends We are creating new offerings as we have said We need to go out, service, and conquer that volume. So we do have capacity, and we are working on it. And that is our main focus, to regain volume to continue to take advantage of our capabilities. You mentioned leverage. And we are continuously evaluating opportunities. And we will continue to do that. And when the time comes, if we find the right fit whether it is a tuck-in or whether it is something strategic that we decide to go on, we will take advantage of that leverage.

Yeah. And let me probably here complement a little bit Alejandro I mean, we have strong pipeline of projects and we have been working very hard on many different targets. But we have a very disciplined strategy on the M&A front. So we have to make sure that whatever we close becomes a successful acquisition. So we do not. I know that in the history of the company, if you look back probably in the last 20 years, you will see this cycle of getting to 2.5 or even slightly below 2.5 and then taking more depth and doing more acquisitions But that is not really the way we are managing the capital structure of the company. I would say, and we have mentioned this several times in several times in the past. Where we feel comfortable is having a leverage of 2.0x to 2.5x. That does not necessarily means that because we are below 2.5 or slightly below today, we are gonna become more aggressive or start to do bigger acquisitions. I think we have the space Also, it is important to keep in mind that today, just to put the example, to quantify the impact of the leverage ratio, because of the size of the company and the EBITDA generation that we have. To go back to about 3x, we will have to do like, $2 billion of acquisitions. Which we have never done. So my point is do not do not necessarily expect that because we have been able to deleverage the company, we are going to go on a shopping spree to see what we can buy. We are gonna continue to be very disciplined and make sure that any acquisition that we make has a strategic component has the right value and also we do a very thorough due diligence process. Just to make sure that we capture the synergies, the risks, everything that has to do with an acquisition.

Fantastic. Very clear. Thanks a lot, guys. Felipe, you are welcome. Yep. Sorry? I was saying fantastic color. Thanks so much.

Okay. Thank you. Our next raised hand is from Henrique Morello Henrique, please unmute and go ahead and ask your question and confirm your company or organization please.

Hi, everyone. Thank you so much for taking my question. This is Henrique Morello from Morgan Stanley. Congratulations on the results. I have just a follow-up on The US margin dynamics. Maybe similar to Mexico, I guess, you are not cycling still significant inflation in raw materials given your hedges. But we are curious to hear if, this quarter,, are already cycling maybe some higher energy fuel distribution logistics costs or other unhedged parts of your cost structure? And how does that inflation so far compares to what you can reap in terms of benefits from, the restructuring that you guys have been doing in The US and thinking about the restructuring as well, if you could provide some, examples or where are most of your efforts right now in terms of low hanging fruits for offsetting such, inflation pressures in the next couple of quarters, that would be very helpful as well. Thank you very much.

Yes. So, Enrique, thank you for the question. Let me give you some color in the cost of sales of North America. Yes. We also have the same hedging strategy as we do for most of the markets. So still we are not seeing still the spot that you see on the different commodities. That have gone up So in terms of other components of inflation, we have had an impact, which is probably not fully reflected because of other efficiencies that we have been able to achieve. On the manufacturing process. In our operations in North America. I would say we are seeing a bigger impact on the increase of fuel has been in distribution. The cost of transportation has gone up. This also has an impact on the cost of sales. Because 1 thing is that we hedge the commodity The other is the embedded costs that we faced on having the transportation of the ingredients to our different production points. So it is impacting, but the whole strategies and initiatives that we have implemented are offsetting most of these negative impact.

Yeah. And as it relates to some examples from the productivity savings that we have been able to earn over time. We have talked about the main categories in which we have achieved them. I will give you just a flavor of some of them. We have talked about our supply chain in the past. For our supply chain, it really is about taking a close look at our footprint, the way that products are flowing from bakeries through our sales centers to stores, We are looking at all of our transportation lanes. From a bakery operations perspective. it is literally a bakery by bakery look at all of the opportunities that we have to become more efficient at producing the products that we produce. A procurement perspective, you could imagine that we are we have taken a hard look at all of our purchasing categories and worked collaborative with our vendor partners to ensure that we are getting not only the highest quality products, but certainly those at those at the right cost. You know, another couple of other key components of this we have talked about this before, our sales disciplines. Ensuring that we are providing the right product in the right amount. For every single customer and store in which we serve. And finally, part of our transformation has been reinvigorating our leadership team in Dallas That was a move that we made at the beginning of the year. And so we have, as a leadership team, come together to be able to work more collaboratively and cross functionally than we have previously. So that is been part of it. So hopefully, Enrique, that provides a little bit of color into the transformation.

Yeah. And Enrique, also let me add probably forgot to mention in terms of another impact that we are facing in the US operations, as opposed to Mexico a strong exchange rate has a negative impact in our US operations. So just to give you an example, we of course, comply with the transfer pricing regulation. So we have manufacturing in Mexico. We have a fixed markup. Let's say that the cost is more or less the same. Then we have to apply the markup but the receiving product in The US operations has a substantial increase in the cost seen in US dollars. Now, this does not mean that our operations are gonna be able to transfer this through. Increases in the market. So at the end, we have to absorb and we have a negative impact in our North America operations because of these internal trade operations that are becoming more relevant quarter by quarter. that is super helpful. Thank you very much.

Thank you. Our next raised hand is from Reid Monaghan. Reid, please unmute and go ahead and ask your question. Reed. Can you hear us please unmute and go ahead and ask your question? Possibly, Reid's having an issue. We will move to our next raised hand. Our next raised hand is from Alejandro Fuchs. Alejandro, please unmute and go ahead and ask your question, please.

Thank you, operator. Alejandro Fuchs from Itau. Alejandro, Diego, Greg, thank you for the space for questions. And congratulations on very impressive results. I have 2 quick ones, if I may. The first 1 maybe for Greg. I wanted to see if you could elaborate a little bit into how much of this more cautious consumer in The US and these new trends evolving in the market in terms of consumption dynamics, how much of that do you think is structural, and how much do you think maybe this is people having a tough time with purchasing power and inflation? So do we go back to how things were in the past, or has the market changed going forward? That will be the first 1. And the second 1, maybe for Diego, we just wanted to understand a little bit the interest payment line Right? When we see on a sequential basis, there was a big decrease year over year. Is this the new level that we should expect going forward? Or was there any type of hedging that maybe made this quarter a little bit below Alejandro, which line did you say? We. You cut off. The interest expense line. Okay. It decreased a lot sequentially, so I wanted to see if maybe there was any hedge in place there, or is this the new level that we should expect? Thank you.

Yeah. Thank you very much, Alejandro. Appreciate the question. As it relates to the consumer in The US, I would say it is. It would probably be overrepresenting my understanding to predict how sustainable these changes are. What I would say, however, is that clearly the consumer has been moving over the last number of months and years. there is no doubt about that. And some of the things that consumers are asking for is they are asking for value They are asking for quality. They are asking for, let's say, renovation and innovation of portfolio. And so we have really grabbed onto that. As we have talked about, before in terms of having the right propositions for all of the consumer cohorts in the market, whether that be value based or more mainstream or more premium, it is important for us that we are we have a portfolio of solutions across various consumer cohorts. that is 1 element. The other element, as we have asked and we have we have stated publicly before, is we have been doing a pretty significant renovation within our portfolio. it is been work that we have done previously in terms of things like taking Red 3 out of products before it actually is required. By the end of this year. All artificial colors are gonna be removed from every single product, and the vast majority, that is already true. And we are continuing to evolve our portfolio across our brands continuing to change the recipes that we have to continue to move towards where the consumer is going. So we feel very excited about the moves even though the consumer is changing and their expectations have evolved over the last couple of years. We also believe that we are well positioned to be able to stay in front of those consumers and where they are going.

Hi, Alejandro. Well, you know that the net financing cost is made up of several components. In terms of the interest expense that we have it has probably 3 components. The amount of debt which is lower, that is helping. The exchange rate exposure that we have on the interest that we pay that also helped during the third quarter which is not necessarily going to be the case. In fact, my belief is that we will see some pressure in this effect in 2027. As we are a little bit more cautious on the exchange rate expectation for 2027. And there are some other items and you probably remember that I explained the BPPA which is a virtual power purchase agreement that we have for energy in some of our operations. That is quite volatile as we have to recognize the difference in the mark to market. In the cost of financing. And that also creates some volatility So probably and to be clear, we do not necessarily expect this level of interest expenses to continue to be either to continue to decline or even to maintain the reported leverage. Super clear. Diego and Greg. Thank you very much, and congratulations again.

Thank you. Thank you. Our next raised hand is from Alvaro Garcia. Alvaro, please unmute and go ahead and ask your question.

Hi, gentlemen. How are you? Alvaro Garcia from BTG Pactual. Have a couple of questions. The first 1's on taxes in Mexico. There were some changes on sort of deductibility sort of in drafts for next year's budget. And I was wondering, Diego, if you could have any sort of preliminary color on whether there would be an impact to Grupo Bimbo. As a result? that is my first question.

Yes. Hi, Alvaro. Well, you know that the proposed tax reform is still going through the approval process. We continue to assess its potential implications. And based on the proposal, as it is currently drafted, we do not currently anticipate a significant impact on our operations. There might be some things that we will have to better understand and see if we have to do some things about it or if we will face a slight negative impact.

Okay, great. that is helpful. And then on hedging, you know, you. You have been very clear over the years on sort of the clear parameters your team has on procurement on sort of hedging of soft commodities for your business. And there is a specific time frame in place for that. there is obviously been a lot of volatility some of your key input prices over the last 6 months and my point. I guess my question is my understanding is that when volatility spikes to this degree, you are you are more likely to be on the shorter end of that range and my. I guess my question is, is that true? And is that fair heading into 2027 that maybe you are less covered than you would typically be? Heading into 2027?

No. Not really. I mean, we probably may start to be a little bit more cautious. on the tenor on the hedges that we take But I would not say that we are less hedged as any other year during this month. So I think we have a good visibility, which is the main objective of this strategy. Today, we are able to provide this visibility to the different business units Of course, not fully hedged to 2027 because that will represent 15 months and as that is something that we never do. But just to give an idea on the main raw materials, already hedge almost 100% of the first half. And of course, fourth quarter is fully hedged. Understood. Awesome. Thank you very much for the color. Thank you.

Thank you so much. Our next raised hand is from Renata Cabral. Renata, please unmute and go ahead and ask your question.

I Alejandro, Diego, Greg. Thank you so much for the space for question. My first 1 then is a follow-up on Mexican operations. The company highlighted that convenience in wholesale as outperforming channels in Mexico. So my question is about the continued opportunities on those channels for growth. And as their contribution increases, should we expect a change in terms of profitability mix even before considering further productivity improvements for the first question. Alejandro Rodríguez Bas: Thank you, Renata. All channels grew, and despite that we recognize 2 of them growing a little bit more. The reality is we do not see a major change going forward. And, yes, our margin expansion has come a little bit of price mix, but mostly out of productivity, and we will continue to replicate what we are doing in other geographies which is to continue to try to compensate with productivity what we are facing going forward that we have talked, which could potentially be the rise in prices.

Thank you so much. Very clear. Thanks for the color, and my second question is about the Brazilian operations. On the initial remarks, the company highlighted the importance, the strategic importance of Brazil. So beyond the integration cost, my question is has Wickbold given your access to customers, channels, or regions where Bimbo previously had limited penetration And are there opportunities to consolidate distribution network or differences in product portfolio and geographical coverage. make those synergies more easy or difficult to capture if you can give some color on the Brazilian operations, specifically on Wickbold. Alejandro Rodríguez Bas: You are spot on. Wickbold will allow us to reach places where we traditionally did not reach through the Bimbo. Servicing network. At the same time, we have products that we can bring from Wickbold to the Bimbo system. We have faced operating challenges, and it has taken us more time than we anticipated. Because as you know, geographies clients, portfolio are being leveraged, but it is taking more time. We do expect some more pressure as we continue to integrate this mature companies and this will take time But we see a meaningful opportunity that we will unlock over the many months to come to see all our products in all our geographies all the time. Very clear. Thank you so much.

Thank you. Thank you very much. Our next raised hand is from Ulysses Argote. Ulysses, please unmute and go ahead and ask your question.

Hi. Thanks for the space for questions. This is Ulysses Argote from Santander. So I just had a follow-up there on the capital allocation comments that you were making? So with the improvement of free cash flow that you were citing and your comments on M&A, how are you thinking in terms of the potential for buybacks or incremental dividends going forward? And then the other question that I had was obviously, after the good results that we are seeing in North America with all of the transformation initiatives and investments that you made there. Is there any other region where you see kind of a space to run a similar revamp and target kind of target this improving profitability on the longer run as well? Thank you.

Yes. Hi, Ulysses. We would say, strategically speaking, the capital allocation of the company has not changed. Our first priority will continue to be to put money back into the business. Now as I mentioned, we have a lower expectation on the capital because we have deferred some projects. And this will have an increase on CapEx for 2027. We still believe we are gonna close between $1 billion to $1.1 billion in 2026. And a little bit higher most likely for 2027. So that is the main priority. Now in terms of dividends, we will continue to the same strategy that we have been implementing the last many years which is to be able to grow our dividend slightly above inflation. And I think that we are very well positioned to do that. And we are not gonna face any challenges in terms of our capital structure to be able to increase our dividends. In terms of the buyback program, definitely we see an opportunity We have been active in the market We bought back 20 million shares. Approximately 1.2 billion pesos in the quarter We still have around MXN 14 billion in our legal reserve And definitely with current valuation, that it is a very good place to put our capital. So you can expect the buyback program to continue to operate.

Okay. Thank you. We will go to our next raised hand. Lucas Ferreira. Lucas, please unmute and go ahead and ask your question.

Hi, guys. Hope, you hear me well. I have a couple of follow ups on The US operations. The first 1 is that you mentioned that now you have a sort of leaner organization, more agile organization. now you are going to be, you know, fighting to deliver volume expansion. My question is simply, where do you see these opportunities? Is this about more the convenience channel you guys were focusing on? Or any other specific channel or category you see more room to grow so you can, you know, give us a bit more details where you are going to be focusing your go to market in 2027 And then on the profitability side of The US, you already discussed you know, cost trends, etcetera, but it also mentioned, you know, being leaner So where is the margin opportunity? Is it coming from in your view, pricing or better monetizing the channels? You already, you know, you are already gaining penetration, you know, maybe removing discounting just to understand the profitability drivers beyond, obviously, you know, the natural raw material price volatility we normally see. But beyond that, how to better monetize, you know, these channels? Thank you.

Yeah. Thanks, Lucas. Appreciate the question. You might not be satisfied with my simple version of the answer to your first question, which is basically everywhere. You know, saying a little bit more historically, our business has really been focused on what I would call large format retail. We still believe that there are opportunities for us to grow and compete effectively in the space. Places where we have been maybe less penetrated on average would be small format retail and our away from home business. If you take them all together, that is effectively the entire market. And so you know, we have teams that are actively working against all of those opportunities across our entire customer base. You know, as it relates to, you know, let's say, margins going forward, I would just simply say that we are gonna continue to be diligent about looking at our overall operating business. Continuing to look for opportunities to remove cost out of the business and drive productivity. Yes. We will be disciplined on pricing and promotion, but the vast majority of what we see going forward is to continue to be very diligent about being as low cost an operation as we possibly can be. I hope that helps. Yes. Thank you very much.

Next raised hand is Regina Carrillo. Regina, please unmute and go ahead and ask your question.

Hi. Congratulations on the results and thank you for taking my question. I wanted to relate it to a previous question on market or consumer changes in the market. We are seeing a lot of private label competition across the industry. I just wanted to ask specifically for Mexico and The US. Are you seeing this competition in The US you are gaining market share and your competitors are losing market share. Also to private label. So I just wanted to see in which categories you are seeing this competition and how you are fighting it. Alejandro Rodríguez Bas: Regina, thank you. Thank you for the question. We. We are following the consumer wherever they choose to shop. And the reality is both in Mexico, and in The US these channels, these offerings are growing, and we will continue to try to gain a space there. The reality is we are positioned because we have the capability, we have the recipes, We understand the consumer. And we can provide tailored offerings for those channels. So we will continue to pursue those opportunities. As Greg mentioned, we are trying to be not only physically everywhere, but we are trying to pursue this key consumer. We are on the 1 hand seeking value, but on the opposite side, they are looking for functionality and value equations. So we do see that happening. And our focus will be to capture demand more effectively in all these new upcoming segments while trying not to cannibalize serving all the market. That is very clear. Thank you. Thank you.

We will just try the raised hand from Reid Monaghan again, please. Reid, unmute, and let's see if we can hear your question. Are you there? Please, Reid. Probably his connection is not working. Yeah. I am so sorry. Obviously, I am having a technical issue. In that case, can I please hand back to Mr. Alejandro Rodríguez Bas to close the call? Can we try just once more for read? Reed, you are still muted. You are unable to speak to us. Ah, there we go.

Can you hear me? Yes. Oh, awesome. Sorry about that. New headset. I do not know what is going on. Thank you for the question. I really appreciate it. So I wanted to start with LatAm. We saw, you know, 15%-plus growth ex FX. But we saw EBITDA decline, you know, slightly. EBIT nearly flat How much of that profitability pressure kinda reflects the temporary Wickbold's integration costs associated with that versus underlying weakness in Brazil. So, how are you guys addressing, you know, the remaining underperformance in that market? Alejandro Rodríguez Bas: The reality is all of it is in Brazil. We see a very strong results across Latin America. We are growing, as you can see, volume in Brazil. We are trying to find a way to capture the synergies As Renata asked us before, what is the possibility we see? And we see all our products in all the corners but it is taking time and it is costing. And the cost of the integration perhaps is higher than what we thought it was gonna be. But we are working hard on an operational turnaround and trying to sustain the strong momentum in the top line. That we are getting there. So we believe that over time profitability will improve But right now, we are focusing on gaining preference and continue to drive volume there to become the choice. Great. that is very Thank you.

And then I just have a quick follow-up on. Yeah. So we saw good margin expansion, EBITDA margin expansion there. Despite the continued weakness in China and Romania. I am sort of wondering how much of the improvement reflects sustainable operating gains or. Versus like, lower restructuring expenses in Spain. Sort of what is needed to improve the performance there.

Yes. The. I mean, the margin improvement that we have seen in the region definitely is sustainable. Remember that a few years ago, a few quarters, we were able to reach a double digit EBITDA margin. We are now at 12.3% It was definitely a very strong performance. In most of the markets. So we continue to see potential in the region We have grown sales in the last 5 years at a low double digit compounded annual growth rate while being able to expand our EBITDA margin 23 basis points. We are not over. We still have potential So I would say that you can expect gradual improvements in the coming quarters and the coming years. that is very helpful. Thank you. Congrats on the results. Appreciate the question. Thank you. Thank you.

There are no further raised hands So, if I can please hand back to Mr. Alejandro Rodríguez Bas to close the call. Alejandro Rodríguez Bas: Thank you. Thank you all for joining us today. Please feel free to reach out to our Investor Relations team with additional questions or comments you may have. I hope you all have a great rest of your day.