Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Becle SAB de CV (BCCLF, Financial) reported a 3.9% increase in consolidated net sales, driven by favorable foreign exchange effects and a successful premiumization strategy.
- The company's gross margin expanded by 500 basis points, and EBITDA margin improved by 830 basis points, attributed to reduced agave-related input costs and foreign exchange benefits.
- Tequila continues to lead growth in the US and Canada, with a 4.3% increase in tequila volumes, demonstrating the resilience of the premiumization strategy.
- In Mexico, premium brands are gaining momentum, helping to mitigate broader market pressures and expand market share.
- Asia remains a key growth driver with a 33% year-over-year increase in depletions, supported by stable inflation and demand for premium brands.
Negative Points
- Consolidated volumes declined by 7.2%, indicating challenges in maintaining shipment levels across various regions.
- The US and Canada faced market pressures, reduced consumer spending, and intensified competition, leading to a 2.7% decrease in shipments.
- EMEA and APAC regions experienced a 13% decline in shipments, primarily due to cautious consumer spending and declines in tourism in Europe.
- Macroeconomic pressures in Mexico contributed to a contraction across the spirits industry, with shipments falling 14.6% year-over-year.
- The company faces ongoing challenges from inflationary pressures and political uncertainty in Latin America, impacting retailer inventory adjustments.
Q & A Highlights
Q: Can you explain the reduction in marketing spending and how it aligns with industry conditions?
A: Luis Fernando Felix Fernandez, Managing Director, US and Canada, explained that the reduction in marketing spending in Q3 was mostly due to phasing. They plan to partially catch up in Q4 and are strategically implementing AMP containment measures to ensure responsible spending, but not at the level seen in Q3.
Q: How do you view the current consumer trends in the US, and when do you expect volume recovery?
A: Luis Fernando Felix Fernandez noted that consumer dynamics in the US are challenging due to macroeconomic pressures and health-conscious trends. They expect consumers to return to spirits, aiming for single-digit growth in volume and net sales value next year, with Q4 being critical for early 2025 projections.
Q: Can you break down the factors contributing to the gross margin improvement year-over-year?
A: Rodrigo de la Maza Serrato, CFO, attributed the 500 basis points improvement in gross margin to FX benefits (40%), reduced agave costs (40%), and mix improvements in portfolio management (20%).
Q: What are your expectations for the US market in Q4, considering the competitive environment?
A: Luis Fernando Felix Fernandez stated that Q4 will be challenging with aggressive pricing moves in the market. They are responding with tactical adjustments and will continue to monitor the competitive environment, making pricing decisions based on consumer trends and brand health.
Q: How is the company planning to take advantage of low agave prices, and what is the strategy regarding potential US tariffs?
A: Rodrigo de la Maza Serrato mentioned that they will continue to optimize costs by taking advantage of lower agave prices. Regarding potential US tariffs, they are monitoring the situation but do not have confirmed negative impacts at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
