Alicorp S.A.A. (ALICORC1) Earnings Call Transcript & Summary

Good morning and welcome to Alicorp's conference call. [Operator Instructions] It is now my pleasure to turn the call over to Rafael Borja of i-advize Corporate Communications. Sir, you may begin.

Thank you, and good morning, everyone. We are very pleased that you could join us today. From Alicorp, we have Mr. Alfredo Perez, Chief Executive Officer; Mr. Juan Moreyra, Chief Financial Officer; and Mr. Patricio Jaramillo, Vice President, Consumer Goods Peru. Today, they will be discussing the fourth quarter and full year 2019 results after the press release issued by the company on Monday, February 17. If you have not yet received a copy of the earnings report, please visit www.alicorp.com.pe, where there is also a webcast presentation to accompany the discussion during this call. If you need any assistance, please contact i-advize in New York at (212) 406-3693. Please be advised that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. If you're a member of the media and wish to direct any questions to the company, please contact the company directly after the call. Before we begin, I would like to remind you that forward-looking statements may be made during this conference call, and they do not account for economic circumstances, industry conditions, the company's performance or financial results. As such, these forward-looking statements are based in several assumptions and factors that could change causing actual results to materially differ from the current expectations. Thus, we ask that you refer to disclaimer located in the earnings release prior to making any investment decision. It is now my pleasure to turn the call over to Mr. Alfredo Perez, Chief Executive Officer of Alicorp, who will begin the presentation. Alfredo, please go ahead.

Thank you, Rafael. Good morning, everyone, and welcome to our fourth quarter 2019 earnings call. On behalf of Alicorp's management team, I want to thank you for your time as we discuss our performance for the quarter and for the full year 2019. We'll begin today's call with a review of the Latin American macroeconomic environment in 2019. So please turn to Slide 4. 2019 was a challenging year for the Latin America region, particularly during the second half of the year, given the well-known political and macro events. Consequently, growth in the region, and in each of our main operating countries, was well below what was initially forecasted. Despite this challenging environment, Alicorp succeeded in capturing growth opportunities with remarkable results, considering its leadership across LatAm markets and achieved growth in all its businesses. Let's now discuss the main highlights of our consolidated results for the fourth quarter of 2019 on Slide #5. Consolidated revenue and volume grew 15.3% and 13.5%, respectively, year-over-year in the fourth quarter of 2019, mainly driven by the acquisition of Intradevco, which contributed PEN 145 million of total revenue growth for the quarter, in addition to the acceleration of our quarter-on-quarter organic growth. Organic revenue increased 5.7% year-over-year this quarter, as our Consumer Goods Peru and B2B unit delivered strong growth of 3.9% and 4.5% respectively despite a slowdown in private consumption in Peru. Additionally, our Aquafeed business showed outstanding results, growing 15.5% year-over-year in the quarter. Our turnaround in our Consumer Goods Southern Cone unit also contributed to organic growth in the quarter. Let's move to Slide 6 to review our consolidated revenue for the full year 2019. As previously mentioned, Alicorp delivered strong results in 2019 despite unfavorable macro conditions. Consolidated revenue and volume grew 19.1% and 26.8%, respectively, mainly driven by the acquisition of Intradevco Peru and Fino and Sao in Bolivia as well as by solid organic growth. Organic revenue increased 3.3% in 2019, outperforming economic and private consumption growth in most of our markets. This result was driven by a positive performance in all of our businesses. We'll wrap up the year with strong results, continuing a trend of strong growth in the past 4 years on the back of consistent organic growth and the successful integration of our acquisitions. Thus, we continue to consolidate our leadership in Peru and the Andean region, achieving a consolidated revenue CAGR of 15.4% from 2016 to 2019. Let's now review our consolidated EBITDA for the fourth quarter of 2019 on Slide #7. Moving on to profitability, Alicorp's consolidated EBITDA grew 48.2% for the quarter compared to 2018, supported by acquisition of Intradevco as well as for our organic growth. EBITDA margin increased 3.1 percentage points to 13.8% for the quarter, mainly due to the higher profitability of our Consumer Goods and B2B units. Regarding our overall profitability performance, excluding our Crushing unit, consolidated EBITDA margin, both organic and M&A, reached 14.1% during the quarter, an increase of 1.8 percentage points year-over-year. The significant increase proves that we're on the right track in terms of extracting profitability of both our legacy businesses as well as the new acquisitions. Organic EBITDA for the quarter grew 22.8% compared to 2018, underpinned by the strong performance of our B2B business platforms and our shrimp feed platform in Ecuador. In addition, we had positive contributions from our Consumer Goods Peru unit and higher margins in our Consumer Goods Bolivia, Central America and Ecuador and the Southern Cone unit as well. Organic EBITDA margin increased 2.3 percentage points compared to the same quarter of last year to 16.4% with margin increases in our CGP, B2B and CGI businesses. Let's now move to Slide 8 to review our consolidated EBITDA for the full year 2019. Alicorp also had solid results in terms of profitability in the full year 2019. Consolidated EBITDA grew 25%, mainly explained by the acquisition of Intradevco Peru and Fino and Sao Bolivia, in addition to strong organic growth across businesses. Organic EBITDA increased 6.4% in 2019, driven once again by positive contributions of all of our businesses with notable margin growth in our B2B business, our shrimp feed segment in Ecuador and our Consumer Goods International business. We will provide further detail about each business later in our presentation. As we mentioned in last quarter, we're in the process of building new capabilities and new teams, who will have material impact in our growth and profitability in the medium and long term. These investments in new capabilities include our innovation and digital transformation centers of excellence and the consolidation of our sustainability strategy, among others. These investments resulted in high organic expenses in our Consumer Goods Peru unit throughout 2019, which we'll further discuss. Our revenue and management strategy and successful efficiency programs across our business have allowed us to improve profitability despite a slowdown and tiering-down trends in the markets. These initiatives have helped us reach a consolidated EBITDA CAGR of 16.8% from 2016 to 2019. Now allow me to share with you a brief update on our strategy. Let's move to Slide 9. For 2020, we maintain our 3 strategic pillars, growth, efficiencies and people, and continue to develop our enablers, innovation and digital analytics. This will prepare us to continue to succeed through market challenges as a result of the continued changes in market dynamics and adapt our organization to better face market and consumer trends. This time, we'll only comment on growth and efficiencies. Regarding growth, our focus remains on, first, strengthening our growth in the Andean region by leveraging our key competitive advantages. We have both grown organically, above the market in multiple categories and inorganically through our acquisitions of Intradevco, Fino and Sao, achieving solid results and meeting and eventually passing our acquisition business basis. Furthermore, we aim to, second, continue to maximize our proposition and value in key strategic categories within our portfolio. Third, boost growth in platforms with high potential across B2C and B2B businesses. And fourth, propel the creation of new businesses to ensure future growth align with strengths. In parallel, we continue to explore inorganic opportunities in the region where we operate. Regarding efficiencies, we continue to work on 2 main fronts, first, the strengthening and scaling up of our efficiencies practiced across geographies outside Peru, hence, our transformation progress in Brazil and Argentina continue. Additionally, 2 weeks ago, we started another transformation program in Bolivia, which includes our Consumer Goods and Crushing businesses. And second, the second front is a completion of our synergy plans in our recently acquired companies, Fino, Sao and Intradevco. Now let's move on to enablers. We recognize the potential impact of embracing digital analytics within our strategy to maintain competitiveness and meet dynamics and market demands. Moving to digital and analytics can drive value creation. In this context, we're very pleased to share with you our next transformation project. Let's move on to Slide 10 to tell you about Project Fenix, a transformational project for Alicorp. Since 2017, we've embarked on a multi-annual ERP transformation at Alicorp to enhance our capabilities and to ensure the sustainability of the business. We started with the implementation of several ERP modules to improve our capabilities in key areas of finance and managerial information, demand forecasting, warehousing and transportation. This year, with the support of more than 400 talented professionals from inside and outside Alicorp, we're launching our migration to SAP4HANA in the consumer and B2B businesses in Peru. Although this type of process usually entails a disruption in sales, which we expect will cause certain volatility in the second and third quarters of the year, we have been preparing our operations for some time now in order to mitigate this effect. All costs, expenses and CapEx requirements have been included in our guidance for 2020. During the following years, we'll be implementing these IT upgrades to Vitapro, Intradevco and the international operations. The full implementation is expected for 2022. There is now behind this important project, which we see as transformational, we summarize in the following points: first, support and accelerate the data management and digital transformation processes; second, keep up-to-date a reliable operational platform for the future, avoiding technological obsolescence; third, update Alicorp's core processes to support expansion, both organic and inorganic; fourth, reduce current IT costs, due to maintenance and legacy developments, to reinvest in new functionalities. As we see on the blue boxes in the slide, since 2015 to 2018, we managed to reduce the ratio of IT expense, both CapEx and OpEx, over sales, applying our efficient capabilities in the areas of IT that are commoditized. However, in the periods 2019 to 2021, we are reinvesting a large part of those efficiencies to later on recover the 1% objective we foresee as a deal for IT expenses. In the coming months, we'll be working with a solid plan to assure a successful and controlled go-live of our SAP4HANA, which aims to put us in the best position to maintain our growth and decapturing the identified efficiencies. Let's now move on to Slide 11 to share with you a review of our corporate governance and sustainability strategy, which are as well an important part of our corporate strategy. Alicorp recognizes the importance of having solid corporate governance practices and a clear sustainable development strategy and sees both as imperative to ensure a sustainable long-term growth path in the digital course to all the other initiatives previously mentioned. For this reason, our company is continuing to make an effort to increase its standards of corporate governance, which are already recognized by third parties as being at the top of the Peruvian market. For example, we are proud to have some -- to have been consistently included in the Good Corporate Governance Index of the Lima Stock Exchange since its inception as the highest ranked consumer packaged goods company. The Good Corporate Governance Index is the system through which compliance with principles of corporate governance, such as responsibility to shareholders and other stakeholders, transparency and integrity of information, social responsibility, combined with regulatory authorities' implementation of risk management systems, among others, is evaluated and monitored. Our sustainable development strategy is focused on promoting wellness, taking care of the environment and development of a sustainable value chain. During 2019, we implemented 2 high-level initiatives, Ponle Punche Ponle Hierro, in alliance with the Ministry of Health, and RevelArte, in alliance with the Ministry of Education as well as other relevant actors in Peru. For the future, we're committed to continue to work under the highest ESG standards implementing efforts to find areas of improvement, keeping the best interest of our shareholders and stakeholders. Now let's move on to Slide 12, to share with you our financial milestones for the quarter. Regarding our financial leverage, our net debt-to-EBITDA ratio on a pro forma basis improved to 2.52x as of Q4 2019 from 2.96x as of Q3 2019. Furthermore, excluding raw material inventory from our Crushing business, our net debt to EBITDA ratio reached 2.41x compared to 2.87x as of Q3 2019. These ratios include the effect of IFRS 16. Such improvement was due to, first, a higher EBITDA LTM on a pro forma basis; and two, our working capital initiatives, that combined allowed a reduction of our financial debt. Additionally, adjusted financial expense for the quarter was flat compared to last year even when considering the noncash impacts of IAS 29. We'll now move on to the next section to discuss the operating results for our various businesses. Along with the results, my team will provide an update on the current macro situation and cycle dynamics. Patricio Jaramillo, our VP for Consumer Goods Peru, will begin the Consumer Goods Peru on Slide 14.

Thank you, Alfredo. 2019 was a challenging year for Peru with our GDP growing 2%, half of the initial estimate of 4%. The fourth quarter registered a 1.6% year-over-year growth with private consumption affected mainly by the acceleration of total investment and a deteriorated political environment. Within this context, Alicorp's strategies basket -- categories basket, as measured by Kantar, remained flat in 2019 with a contraction during the second half of the year. In addition, the implementation of the Healthy Nutrition Act represented an additional challenge impacting some categories such as cereals, cookies and crackers and margarines. Nevertheless, Alicorp's consumption growth continues to offset this market contraction and keeps gaining share in key categories as a result of its multi-tier brand portfolio, mega brand strategic position and strong traditional trade distribution. Let's move on to Slide 15 to provide you more insights about Intradevco's performance. Picking up from our third quarter 2019 earnings call, we remain on track with our integration plan and continue to generate incremental value through synergies, value-creation initiatives and an efficient execution of our business-as-usual model. These initiatives have provided us with better-than-expected results in comparison, not only to our business case, but also in comparison to what we reported in our last quarterly call, resulting in an incremental 2024 run rate EBITDA in the range of $18 million to $25 million, with a net present value range of $180 million to $250 million. In terms of EBITDA generation, given the synergies we were able to capture in 2019, we managed to grow EBITDA in 2019 with a notable 16% increase versus our business case and 41% compared to 2018, driven by design-to-value initiatives and optimized marketing and sales expenditures. We are very excited to share with you that when considering the synergies we were able to capture in 2019, we have achieved an increased enterprise value range EBITDA 2019 multiple well below the 1 we had initially projected in January of last year, dropping from 12.5x to 10.7x. This is certainly a testament to the integration capability we have built in Alicorp and how it is generating value for our shareholders. For 2020, our integration management office will focus on the transition of the synergies and value-creation initiatives through our efficiency team to ensure the incremental run rate EBITDA inside our business-as-usual scope. We will also focus on documenting our integration process, including the methodology and lessons learned in order to enhance our knowledge management for future integrations. Let's move on to Slide 16, Consumer Goods Peru quarter 4 2019 performance. Reported revenue and volume from Consumer Goods Peru business grew 17.7% year-over-year and 24.8% year-over-year, respectively, reaching PEN 862 million and 184,000 tons. The acquisition of Intradevco is the main reason behind this double-digit increase. Despite the slowdown of the market, organic revenue growth was 3.9%, led primarily by strong performance in our home care platform. Detergents grew 7.7% due to price value creation after the acquisition of Intradevco and further expansion of our value brand, Trome. Foods revenue growth remained stable with pasta growing 11.6% year-over-year, driven by the development of a Tier 3 strategy for the Nicolini brand and the strengthening of our core brand, Don Vittorio. Cookies & Crackers grew 9.2% year-over-year, backed by innovation in core brands and the positive impact of price taking in selected value brands. Reported EBITDA reached PEN 165 million, an 18.7% increase, with an EBITDA margin of 19.2%. Excluding Intradevco's results, EBITDA reached PEN 150 million with an EBITDA margin of 19.7%. Excluding long-term investments related to our digital transformation, the creation of our innovation COE and the consolidation of our corporate sustainability strategy, EBITDA would have reached PEN 161 million, growing 15.7% year-over-year with an EBITDA margin of 21.2%, 2.2 percentage points above Q4 2018 figures, reflecting brand and marketing efficiencies. Finally, reported full year 2019 revenue increased 20.6% year-over-year while EBITDA increased 15.7% year-over-year, primarily driven by the consolidation of Intradevco's results. Organically, revenue and volume grew 3.1% year-over-year and 4.1% year-over-year, respectively, driven by growth in Detergents, Canned Tuna, Pastas, Cookies & Crackers and Sauces. Nevertheless, this result was offset by Edible Oils' lower revenue due to price reductions in line with lower commodity prices and tiering down in some of our categories because of market trends. EBITDA margin remained stable, thanks to design-to-value initiatives and brand and marketing efficiencies. Now let me pass the floor over to our CFO, Juan Moreyra, to discuss the performance of the rest of our business units.

Thank you, Patricio. Let's move to Slide 17, B2B: Update on Market Dynamics. B2B performance is highly correlated to restaurant GDP, which showed an increase of 5.9% in the fourth quarter and 4.9% year-to-date as of November 2019, mainly driven by the higher out-of-home consumption due to the boost in some Foods supported by delivery applications and social media promotions. Additionally, market price dynamics have been strongly influenced by bullish commodity prices in the last quarter. This trend has resulted in a less aggressive behavior from our competitors. However, the tiering down trend in the market continues. In this context of tiering down, Alicorp managed to maintain its leadership in the platform in which we compete and increased its profitability through our multi-tier and multi-channel strategy. This strategy has allowed us a 4.6% growth in revenue while gaining 2 percentage points in EBITDA margin in the last 3 years. Our Food Service platform grew 4% in terms of revenue in the last 2 years while EBITDA margin increased 3.3 percentage points. This lower-than-average revenue growth compared to our B2B platform is explained by our Edible Oils strategy, which aims to increase profitability. Excluding this category, Food Service revenue growth for the last 2 years would have been 6.4%. Let's move on to Slide 18, B2B fourth quarter 2019 performance. Our B2B business reported sales for PEN 435 million, a 4.5% growth year-over-year. Our 3 platforms, Bakery, Food Service and Industrial clients, grew year-over-year with Industrial clients growing 7.5%, mainly due to a higher number of clients. Food Service revenue increased 2%, explained by our Edible Oils' profitability strategy. And excluding Edible Oils' category, revenue growth would have been 8.6%. Regarding profitability, gross profit reached PEN 96 million, growing 11.9%, while gross margin increased by 1.5 percentage points, reaching 22.1%. This improvement was a result of, first, controlling the tiering-down effect of oils and flour with a robust pricing and revenue management strategy; second, capitalizing on the efficiency program executed in the first half of the year to reduce costs; and third, executed an efficient pricing strategy that allow us to maintain advantages obtained during the year in raw materials. EBITDA reached PEN 61 million, increasing 23.2% year-over-year, while EBITDA margin was 14.1%, a 2.1 percentage point increase due to higher gross margin. Finally, regarding full year 2019 results, our B2B unit grew 3.8% in revenue and 21% in EBITDA with EBITDA margin 1.9 percentage points above last year, thanks to the multi-tier and multi-channel strategy that allow us to compete without affecting the value of our brands. Additionally, since the second quarter, we have been working in the consolidation of our gross-to-net governance model. These factors represent savings of PEN 21.6 million year-over-year and 1.3 percentage points increase in EBITDA margin. Now let's move to Slide 19, Consumer Goods International fourth quarter 2019 performance, in order to give you a matchup on our business. Reported revenue amounted to PEN 467 million while volume reached 105,000 tons, growing 29.6% and 15% year-over-year, respectively, mainly explained by the acquisition of Intradevco, which has contributed PEN 44 million in terms of revenue. Excluding the impact of acquisition and IAS 29, revenue decreased 1.8% year-over-year while volume increased 1.2% year-over-year. The reduction in revenue was explained by decreases in our CAM-Ec and Bolivia operations, partially offset by a turnaround in our Southern Cone unit. Although Bolivia had a strong organic and inorganic growth throughout the year, there was a decrease in organic revenue in the fourth quarter, explained by the social and political unrest that affected production and distribution during October and November. The decrease in revenue of our CAM-Ec business was explained by a one-off effect due to the presale of Edible Oils in Colombia in 2018, which resulted in a higher volume sold later in the fourth quarter of 2018. On the other hand, our Ecuador and Colombia units showed solid organic growth in the quarter. Regarding our Southern Cone business, volume increased 8.7% organically, mainly due to the growth in our personal care and home care platforms. In Brazil, volume and revenue increased 4.2% and 1.8% year-over-year in Brazilian reals, respectively, mainly explained by a recovery in the Pasta market of Minas Gerais in the last 2 months of the year. As for EBITDA, it amounted to PEN 48 million in the fourth quarter of 2019, an increase of PEN 68 million year-over-year compared to the fourth quarter of 2018 results, which included PEN 30 million in a onetime nonrecurring expenses, primarily due to the Fino and Sao acquisitions. This remarkable performance was achieved on the back of efficiencies in SG&A expenses across all businesses. Excluding IAS 29, fourth quarter 2019 EBITDA doubled year-over-year organically, while organic EBITDA margin was 12.9%, an increase of 6.5 percentage points compared to the fourth quarter of 2018. These results were due to, first, increased profitability in Argentina in terms of gross and EBITDA margins. We had volume growth, revenue management and restructuring. Second, higher EBITDA margin in Bolivia behind our integration synergies; third, increased profitability in the CAM-Ec region behind efficiencies; and fourth, on a quarter-on-quarter recovery of EBITDA margin in Brazil as we begin to see the results of our restructuring program. It is important to mention that in the fourth quarter of 2019, we record a noncash onetime effect due to the impairment of our Brazil and Argentina operations for PEN 30 million and PEN 7 million, respectively. Including this effect, EBITDA for our Consumer Goods International business increased PEN 31 million year-over-year in the fourth quarter of 2019. Although we forecast a more favorable year for 2020 in both Brazil and Argentina, we will continue to monitor these results closely for any potential additional impairments. Reported full year 2019 revenue increased 32.4% year-over-year while EBITDA increased PEN 90 million year-over-year and EBITDA margin amounted to 5.2%, mainly driven by the acquisitions of Fino, Sao and Intradevco and organic growth from all international businesses, except Brazil. Let's move on to Slide 20 to take a closer look at our Consumer Goods Bolivia for fourth quarter 2019 performance. During 2019, we implemented the initiatives to improve our total sales such as the relaunch of our UNO brand in order to consolidate our product portfolio and the implementation of the following commercial projects. First, suggested order with the objective of increasing revenue 4% in a traditional channel through the use of advanced technology and data analytics; second, client segmentation in order to increase sales in 20% in our premium clients; and third, the call center implementation in order to reduce our receivable days and increase sales. Furthermore, with regard to our efficiency initiatives, we have had very positive results capturing while we projected to the dividends mainly explained by, first, cost reductions and raw material standardization as part of our [ SUMA class ] program, which aims to optimize and standardize our industrial processes within our facilities; second, reduction in transportation costs of our trucks; and third, efficiencies in our SG&A expenses. Reported revenue in the fourth quarter of 2019 reached $48 million, a 4.4% increase year-over-year, mostly explained by the acquisition of Intradevco. Organic revenue decreased 3.7% compared to the fourth quarter of 2018 due to the widespread protests that caused roadblocks and strikes, which affected production and distribution during October and November. This process resulted in a disruption of the operation of our Cochabamba edible oil plant for a week and difficulties with the sale and distribution of our products nationally during that period. Despite all of these, we achieved our target for full year 2019. EBITDA reached $8 million in the fourth quarter of 2019, which represented an $11 million increase when compared to the fourth quarter of 2018 results. This remarkable recovery is mainly explained by a base effect from a noncash adjustment due to the purchase price allocation of Fino and Sao in the fourth quarter of 2018. EBITDA margin was 15.6% compared to negative 7.2% in the fourth quarter of 2018. Excluding the noncash adjustment, EBITDA growth was 82% year-over-year, while organic EBITDA growth, excluding Intradevco acquisition, our nonrecurring fourth quarter 2018 expenses was 27.1% year-over-year. Overall, 2019 was our first full year for the Fino and Sao operations fully integrated. Despite the context of a challenging environment in the last quarter, we were still able to meet our business case for the full year. And, hence, the environment's been more favorable for -- we would have been outperforming our business case. We achieved record market shares in key categories such as laundry detergents, which with -- sorry, with 21.3% as a result of a multi-tiered strategy. Full year revenue increased 63.7% year-over-year to $177 million, mainly explained by the Fino, Sao and Intradevco acquisitions, and also volume growth due to innovation and market share growth in most of our categories. Full year EBITDA was $25 million with a 14% EBITDA margin compared to $1 million and 0.8% EBITDA margin in 2018, mainly explained by the Fino, Sao and Intradevco acquisitions. Let's move on to Slide 21. Aquafeed, update on market dynamics. First, let me comment on the current market environment for shrimp feeds. In 2019, Ecuador's shrimp export grew 25% year-over-year, mainly driven by China. We expect lower shrimp demand to continue to grow in 2020, with China being the main driver, even though sanitary controls and the outbreak of the coronavirus may pose some challenges for the industry. The Ecuadorian shrimp industry is expected to grow at around 15%, not taking into consideration the impact of coronavirus, which cannot be yet quantified. Regarding this context, higher stocks of shrimp acquired by traders for the Chinese New Year have not yet been consumed because markets are only working partially. Meanwhile, in Ecuador, farmers are being very cautious in planting for new shrimp productions. As a result, shrimp prices have gone down substantially. Nevertheless, there are expectations that the market will recover quickly in the next quarter as we did with SARS disease in 2003. In terms of business performance, we continue to lead the market in Ecuador with a 34% market share for the full year. We grew below market levels because we ran out of capacity, production capacity due to very strong demand growth, in addition to a construction in -- our main client's production and an aggressive competitive environment. To ensure our growth, we have completed in the fourth quarter of 2019 a line expansion of an additional 70 -- sorry, 60,000 metric tons in our Ecuador facility, which represents an expanded capacity of 25% to the existing one. And also, we started the construction of a new 105,000 metric tons line, which represent an additional expanded capacity of 35% over the recently expanded one. Additionally, to preserve our competitiveness, we have deployed advanced analytics and services and digital tools. Let's now talk about salmon feed and the present dynamics of the sector. Salmon breeding in Chile increased 5% year-on-year with international prices at healthy levels. Given the current market consolidation, we expect further vertical integration of salmon producers in the feeds. In this context, new tenders are going to be obtained with lower margins due to strong competition. To be prepared for continuing growth in demand, we completed our Chilean salmon plant expansion in the second quarter of 2019 with 66% more capacity, which will allow us to meet future demand from new clients and produce high-energy feeds. In 2020, salmon harvest growth in Chile is expected to remain between 3% and 5%. Our deployment of advanced analytic tools will help us to mitigate from a cost-plus to a performance-based pricing methodology, which will be instrumental in capturing lease growth for 2020. Let's move on to Slide 22, Aquafeed fourth quarter 2019 performance. Regarding our fourth quarter results, revenue and volume increased 15.3% and 19.5% year-over-year, respectively. Revenue growth was mainly due to a strong recovery of volume in our fish feed business in Chile and to sustain growth in our shrimp feed business in Ecuador. Our gross margin decreased 0.3 percentage points due to lower prices in our Chilean operation. EBITDA reached $28 million with an EBITDA margin of 16.2%, down 0.9 percentage points, mainly due to lower gross margin in the salmon feed business and negative base effect of reversals of bad debt provisions in the fourth quarter of 2018. Regarding our full year results, reported revenue reached $650 million, an increase of 2.3% year-on-year, while volume amounted to 650,000 tons, an increase of 5.8% year-on-year. The performance of our shrimp feed business was healthy, growing 6.3% year-on-year in terms of volume on the back of strong demand in Ecuador. And in terms of the fish feed business, we also saw good results with volume growing 5% year-on-year, mainly due to growth in our spot sales in Chile. Regarding profitability for full year, our gross margin increased 1.2 percentage points due to our cost optimization strategy regarding raw materials, such as soybean and fish meal, partially offset by the market tiering down in the shrimp feed business that affected our price/mix. EBITDA reached $95 million with EBITDA margin at 14.6%, down 0.2 percentage points, mainly due to a higher reversion of bad debt provision in 2018. Excluding this effect, EBITDA margin would have been 0.5 percentage points in 2019. Let's move on Slide 23, Crushing fourth quarter 2019 performance. Let's start with the performance of our Crushing business for the quarter. Volume and revenue grew 6.6% and 5% year-over-year, respectively, mainly due to a larger soybean crop and an increase in international prices of soybean meal and soybean oil. These results were achieved despite tough progress, which forced us to relate 60,000 tons to 2020, which will have been accounted for an addition of $2 million in profit in 2019. In the first full year for the Crushing unit, we have successfully consolidated Fino and Sao operations and even gained market share. This integration process allowed us to identify additional $8 million in overall synergies. Full year volume doubled, and total revenue increased 80% year-over-year, mainly explained by the acquisition of Fino and Sao. Our EBITDA for the quarter increased $10 million year-over-year due to better-than-expected synergies and, as we already mentioned, increasing commodity prices. Finally, we are actively working on various levers to increase profitability for the business in an uncertain competitive environment such as, first, agro solutions by selling agricultural inputs to soybean and sunflower seed producers as well as offering our eel storage capacity to salmon producers; second, soybean and soy meal and soybean oil products through commercial alliances with the poultry industry absorbing oil refineries; and third, efficiently by generating economies of scale by -- via consolidating -- consolidation of shipments. Finally, let me take this back to Alfredo to discuss our guidance for the full year 2020.

Thanks, Juan. Let's start with the macro environment and market expectations for the LatAm region for 2020 on Page 25. LatAm's economic growth is expected to pick up in 2020, supported by stronger activity, a recovery of domestic demand and improving sentiments, especially in Peru, Brazil and Bolivia, due to more stable political and social landscapes. In this context, growth estimates for 2020 are above 2019 performance. Political uncertainty, social unrest and the pace of reforms in the region remain as potential risks. Now let's move on to Slide 26, where we will provide our consolidated guidance for the full year 2020. It is important to note that 2020 will be a year of material investment for Alicorp as we continue to transform our business with strategic initiatives such as Fenix, our SAP4HANA implementation as well as expanded capacity to support future growth. First, our consolidated revenue growth target range from 4% to 6%. It is important to notice that these growth rates are considerably lower than 2019 performance because there will no longer be a base effect from Intradevco, Fino and Sao. However, growth is expected to be above our 2019 organic growth. We also expect some volatility in the second and third quarters of the year due to sales disruptions related to the implementation of SAP4HANA, which is included in our guidance. We're expecting our consolidated EBITDA margin to range from 12.5% to 13.5%, demonstrating that we will be maintaining EBITDA margin levels compared to last year considering the high levels of investments we are making on 2020. For net margin, we expect a range between 4.5% and 5.5%, also including the investment planned for the year. Our CapEx target range for this year is between PEN 530 million to PEN 560 million, which also includes the CapEx required for capacity expansions to support future growth as well as our material investment for the year, such as the $33 million associated to our SAP4HANA implementation. Our expected net debt-to-EBITDA range is between 2.5 and 2.6x. Moreover, net debt to EBITDA, excluding raw material inventory of our Crushing business is expected to end the year between 2.4 and 2.5x. And so the EPS, our range is between PEN 0.6 per share to PEN 0.8 per share. A deep dive on our revenue guidance for business on Page 27. For CPG and B2B businesses, we expect a growth of 3% to 5%, which is above GDP and consumption growth estimate for Peru. This guidance includes any potential disruption to sales due to the implementation of SAP4HANA. We will be exclusive to our Peru operations this year. For CGI unit, we expect a growth of between 4% to 7%, given the expected recovery of Brazil and stabilization of Bolivia. For Aquafeed business, we foresee top line growth of 6% to 8%, backed on a steady growth of the shrimp industry as well as our advanced and other initiatives to capture growth. Finally, for our Crushing business, we expect top line growth between 5% and 10%. Let's close this quarter call with our EBITDA margin guidance by business on Page 28. For CPG business, we expect an EBITDA margin between 18% and 20%, in line with 2019 performance, which includes long-term investments and new capabilities, such as innovation and digital transformation centers of excellence, and the consolidation of the sustainability strategy. For B2B business, EBITDA margin is expected to range between 10% and 12%, partially impacted by a higher allocation of corporate expenses. For CGI unit, we expect an EBITDA margin of 7% to 9% due to the implementation of our restructuring programs. For Aquafeed business, we foresee EBITDA margin of 12% to 14%, mainly due to the margin pressures in the fish feed business and highly embedded in our capacity expansions for our Ecuador shrimp feed operation. Finally, for our Crushing business, we expect an EBITDA margin between 0.5% and 1.5%. Let's now begin with the Q&A session.

[Operator Instructions] And we'll take our first question from Luis Pardo with Compass Group.

Just a quick question on how Intradevco plays in the Consumer Goods through guidance. If you could give any more color on that.

Oh, yes. Thank you very much, Luis, for the question. I'll make a very quick intro, and then I'd like to switch it over to Patricio for further details on Intradevco. And as Patricio mentioned on the call, Intradevco in 2019 really outperformed our numbers that we expected during the due diligence phase and when -- when we announced actually the transaction. So we are very pleased with all the efforts that affect both the top line as well as the profitability figures. For the year 2020, we expect that to continue, meaning that we expect to outperform our businesses definitely related to what we initially thought when we acquired the business. Our optimism remains very high at that end. And so that -- let me just -- let me switch it over to Patricio for any further details on his side.

Right. Thank you, Alfredo, and thank you for the question. Yes, as Alfredo said before, we are very optimistic of the results that we have seen in Intradevco 2019 and what we can capitalize on 2020, given that that's going to be the first full year of the implementation of our strategy. Let's remember that in 2019, we started with some commercial initiatives that was putting some of the Intradevco categories within our direct distribution model. And that will obviously have its full capitalization on 2020 full year effect. We are also scaling up on innovation. We have launched new lines of liquid soaps that we plan to expand on 2020. And also the strengthening of our personal care platform that, as you know, was acquired with Intradevco, and we have plans also to expand it furthermore. If you take a look at the Slide #15, our run rate EBITDA capitalization from our synergy strategy and value creation takes us from anywhere from $3 million to $5 million in terms of additional EBITDA that we plan to capture in 2019 aside from the business-as-usual business growth.

Okay. Just quickly, a friendly reminder. It will be very helpful for us, investors, if the lag between the earnings release and the conference call will be shortened, especially when you're releasing 2020 guidance, so that we're able to price these numbers into our models without the whole week as a lag. Just a friendly piece of advice, and it would be very helpful for us.

Let me just -- thank you very much for the comment. And actually, we are already working on that, and we'll have further news on that end on the next call, for sure.

Our next question from Andres Soto with Santander.

I have 2 questions. The first one is probably a follow-up to Luis' question. I would like to understand what, if there is any, specific to the fourth quarter results of Intradevco. When I do the math, I see that the EBITDA margin for Intradevco's operations was 15%, which is significantly below what we were expecting to see at around 20% for this business unit. So I would like to understand, what is the reason for this performance in the fourth quarter? And the second question is regarding cash flow generation and the use of your cash flow. As you start to regain financial flexibility, I would like to understand what will be the primary use of your excess cash flow, if it's going to be paid out as dividends? Or are you planning to conduct further major acquisitions?

Yes. Thank you for the question. I'll take the Intradevco fees, and then I'll pass the floor to Juan for the cost -- for the cash flow question. In terms of Intradevco, yes, our fourth quarter margin was a little below of what we expected it to be and what we were reaching on a year-to-date base prior to that end. And that is predominantly because, as you know, we had the implementation of the transition of Intradevco staff to Alicorp staff, and then generated some initial disruption in terms of our ability to service our clients with some incremental costs based on warehousing and also on shipping that temporarily hurt our margins on that end. However, we have passed already that front, and we have recovered fully operations. And we expect to continue to capitalize growth during 2020. So that initial expenses from that transition from Alicorp's -- from Intradevco staff SAP to Alicorp's is what generated that slight decline in margins.

Okay. I mean, in terms of cash flow generation for 2020, we continue to -- we expect that we're going to be generating good cash flows. However, this year, as Alfredo pointed out, in which we are going to have a larger amount of CapEx due to the Fenix project and also to some increase in capacities, as it was pointed out in the guidance, the CapEx number is going to be around 80% higher than what it used to be for 2019. So that is going to have an impact in terms of cash flow generation. In terms of dividend, we continue to keep the same or we're planning to --predicting to have the same level of dividend payouts that we had in the previous years as well. So we don't see any changes in there. For us, it is very important to keep and maintain our investment-grade rating. So we now are at a very healthy level at around 2.5x, so we also expect that number to remain for 2020 as well unless if there's any new projects that are coming over. But that's what we are expecting for now.

And Andres, this is Alfredo speaking. Let me just chip in with an additional comment. Overall -- okay, a very strategic one. And the region overall, where we operate, over the last year or 2 or so have been facing significant headwinds on both the political as well the macro side. However, and despite that element, we, as a company, remain very optimistic about the prospects from our side of maintaining our investment program to generate further value for shareholders. That's been proving up very successful, both on the organic and the inorganic front. So from that end, from that side, you see a management team fully committed to keep pushing the envelope to even generate more growth and more profitability all over the country that we currently operate in.

And our next question comes from Felipe Ucros with Scotiabank.

So maybe a question on strategy around the regions. Obviously, the social turmoil was pretty impactful in Bolivia and Ecuador, and there's been quite a bit of uncertainty in those markets. So how are you looking at those 2 strategic regions in light of what has happened? And how has it changed your strategy, if anything, if it has changed at all? Do you see it as an opportunity to double down on, hopefully, finding cheap assets? Or is it an opportunity to reevaluate the strategy and focus in different markets? How have the events of this year changed your strategic perspective?

Thank you, Felipe, for the question. We have stated in the past that both Ecuador and Bolivia are strategic countries for us, and they remain so. What has happened over the last year especially is always remind us that we, as company is operating in a region that is always prone to suffer these type of headwinds. And we -- as you correctly point out, we look at these opportunities always. We obviously take care of our operations, take care of our people just to make sure that we always have a safe operation in place. But our view for both countries is a long-term one, and, therefore, we'll keep investing in both. The result of Bolivia keeps surprising us as to how successful we have integrated the business into our operating model. And in the case of Ecuador, it is a huge opportunity for us. Obviously, there's always -- the issue remains cautious with respect to -- especially in the country's macro side. We are always taking a decision that on the long term, it remains a pretty significant opportunity. So on a broad base, we remain optimistic as to our potential for generating value in both countries, and, therefore, our investment program should be aligned to that.