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

Good afternoon, 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 other members of the management team. Today they will be discussing the second quarter 2020 results after the press release issued by the company yesterday. 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 discussion during this call. If you need any assistance, please contact i-advize in New York at (212) 406-3695. 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, the 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 the 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, and good morning, everyone, and welcome to Alicorp's Second Quarter 2020 Earnings Call. I would like to start the call by wishing you and your families all the best, and hoping you are all staying safe and healthy. Given the development of the COVID-19 crisis, we are once again speaking to you from each of our homes. So please bear in mind with us if things are not as smooth as you would normally expect. I would also like to reiterate my gratitude to all our employees, without whom we would not be able to continue to fulfill our purpose of assuring the availability of food, home and personal care products in all the communities where we operate. More than ever, with this last quarter, this commitment has made it possible for us to meet the needs of our consumers with talent and creativity under these unique circumstances. During this call, we will discuss the impact that COVID-19 has had on our business thus far. And then we'll give you an overview of the opportunities we see going forward. Let's begin on Slide 4 for a brief update on the macroeconomic environment and government measures. The COVID-19 crisis reached all Latin America after other geographies in the world, which led governments to impose strict lockdowns, relatively soon starting in mid-March. Currently, even though the pandemic is still not controlled in our geographies, most industries have adapted their operations in order to fulfill safety [ conscious ] protocols and initiated a certainly challenging path towards economic reactivation. For 2021, current GDP growth forecasts are positive and show a partial recovery on the back of higher optimism in the development of a vaccine and the government's measures to boost the economy. Now let's move on to Slide 5 to give you an update of our business continuity plan. Under very challenging and ever-changing circumstances, we have continued to work with the framework of our business continuity plan in its forefronts: our people and community, clients and consumers, supply and logistics and liquidity and strong balance sheet. I'll touch briefly on the first 2 and then give you a deeper update on the supply and logistics front. The liquidity and strong balance sheet front will be explained by Juan later in further detail. Our first priority continues to be the well-being of our people. As the risk of contagion increased during the second quarter in most geographies, we continued with our strict safety protocols for plant workers while also providing them with private transportation in order to ensure their safety getting to and from our production plants. In addition, we continuously perform COVID-19 tests to monitor the health of our plant workers. As for our administrative staff, they continue to work from home. On the client and consumer front, we still observe a high demand for certain food staples as well as cleaning and hygiene products, while at-home consumption remains at high levels. In the B2B and aquafeed businesses, which are the most impacted by the COVID-19 crisis, we're working closely with our clients to understand their needs and challenges, not only offering extended credit terms on a case-by-case basis, but also providing advice regarding the reactivation protocols of operations and adapting our product portfolios accordingly. Let's continue with our food and supply logistics front on Slide 6. Ensuring the supply of food, home and personal care products for our communities remains a top priority. However, maintaining the production capacity has been a challenge during April and May, especially in Peru, where we experienced significant disruptions in production capacity in our plants. From June onwards, we have been able to restore production capacity to levels very close to those we had pre-COVID, thanks to an incredible job from our teams. In other geographies outside of Peru, production capacity has remained relatively stable with no major disruptions. However, we remain vigilant as to the development of the COVID-19 situation in those countries, in order to anticipate any possible supply issues. Let's now discuss our consolidated operating results for the second quarter of 2020, starting with the main highlights of our consolidated revenue on Slide #8. Consolidated revenue and volume decreased 7.6% and 6.6%, respectively year-over-year in the second quarter of 2020, mainly as a result of the impact COVID-19 had in our CGP, B2B and Aquafeed business. CGP decreased 8.7% year-over-year in terms of revenue, mainly due to restrictions in production capacity during April and May as previously mentioned, despite higher demand in certain categories. On the B2B front, it decreased 22.9% year-over-year as a result of the closing of [ restaurants ] and slower activity among industrial and bakery clients in the first months of the lockdown. Finally, Aquafeed's revenue decreased 12.8% year-over-year, explained by aggressive competition at shrimp feed unit as a result of lower global demand for shrimp and lower commodity prices, which affected the fish feed unit. These negative results were partially offset by an 8.6% year-over-year growth in our CGI business, on the back of solid growth in both the food and the home care platforms in Bolivia and Ecuador; and innovation on hair care, bar soaps and laundry detergents in Argentina, while our crushing business grew 3.5% year-over-year. It is worth mentioning that although results for the quarter are negative, when we look at the monthly progression of revenue, we have already passed the low point we had in May, where we experienced the majority of the impact from capacity disruptions. Starting June, we have been able to restore production capacity, and sales are almost back to 2019 levels, and we expect them to keep growing in the following quarters. When we look at accumulated figures, year-to-date revenue remained relatively stable, growing 0.7% year-over-year despite the negative results of the second quarter. COVID-19 had mixed impacts across our businesses. We will further discuss these impacts and the opportunities these new trends present when we dive into our operating results by business. Let's now review our consolidated EBITDA for the second quarter of 2020 on Slide #9. The top line reduction related to COVID-19 also impacted our consolidated EBITDA, in addition to higher costs and SG&A expenses also due to COVID, partially offset by a strong recovery of our crushing unit. Consolidated EBITDA decreased 5.3% year-over-year, explained by: first, a 6.6% year-over-year reduction in our CGP business, mainly as a result of the aforementioned restrictions in supply and higher SG&A expenses related to COVID; second, an 80.6% year-over-year decrease in our B2B unit, mainly due to the impact of COVID-19 in our food service platform, which resulted in lower margins; and third, a 28.7% year-over-year reduction in Aquafeed, explained by lower prices in both shrimp and salmon feed units, which resulted in lower gross profit. These effects were partially offset by a solid performance in our CGI business, which grew 2.5x in terms of EBITDA as a result of volume growth and significant SG&A savings on the back of our successful transformation initiatives in addition to strong year-over-year recovery of the crushing unit. Additionally, it is worth noting that year-over-year, EBITDA growth had a strong recovery with a 26% year-on-year rate in June after the decline we observed in April, and most materially in May. On a year-to-date basis, EBITDA remained flat year-over-year when excluding the one-off impairments of our operations in Brazil during the first quarter. Let's now review our consolidated net income for the second quarter of 2020 on Slide 10. Net income was PEN 84 million, a 20.3% reduction year-over-year, impacted by, first, the aforementioned impacts that COVID-19 had on our operating profit; and two, an increase in foreign exchange loss, explained by the devaluation of local currencies, which was offset by lower income tax payments. Year-to-date revenue decreased 28.9% year-over-year, excluding the impairment of our Brazilian operations, which are mainly due to lower operating income because of the COVID-19 crisis during the first half of the year. Let's move to Slide 11, where we'll provide more detail about the specific impacts COVID-19 had on our business. As we mentioned before, COVID-19 was -- has had a mixed impact across our businesses, especially in terms of revenue. First, our B2B unit was mainly affected by the closure of restaurants, which in turn impacted the profitability of the business, since our foodservice platform is the most profitable platform in our B2B business, with categories like oils and sauces that have had lower demand in this context. Second, in our Consumer Goods Peru business, although demand was solid, production disruption resulted in lower revenue, sold lower volumes. Additionally, high commissions in our distribution network also affected our top line. Regarding margins, we had mixed impacts, since the higher demand for hygiene and cleaning products was offset by a tuning down impact and higher sales through the modern channel. Third, the closure of restaurants around the world also resulted in a lower global demand and lower prices of shrimp and salmon. In this context, our clients, shrimp and salmon producers in our Aquafeed business unit, reduced the consumption of shrimp and salmon feed and opted for more value-based formulas. Fourth, our CGI business benefited from higher demand for certain categories while maintaining production capacity. However, certain government restrictions such as price freezes in Argentina, had some impact in our revenue. And finally, COVID-19 had no significant impact in our crushing business. In addition to these impacts on revenue, higher costs and SG&A expenses related to COVID amounted to PEN 52 million in the second quarter, mainly explained by higher conversion costs as well as transportation, food and safety protocols and COVID-19 tests for our plant workers. A portion of these expenses could continue for the next few quarters, especially those related to safety of our employees. Let's move on to the next section to discuss the operating results from our various businesses as well as how the market dynamics of each have changed in the context of COVID-19 and what opportunities we see going forward. Patricio Jaramillo, our VP for Consumer Goods Peru and corporate innovation, will begin with Consumer Goods Peru on Slide 13. Patricio, please go ahead.

Thank you, Alfredo. Let me begin with an update on consumer Goods Peru market dynamics on Slide 13. Due to the negative effects of COVID-19, the Peruvian GDP is expected to decline 14% for 2020, with quarter down -- quarter 2 down 29.5% versus 2019. Private consumption is also expected to decline in 2020 due to the long-term effect on companies and family incomes, with unemployment rates expected to reach between 14% and 18% for the year. Within this context, consumer habits are changing and adjusting to this new normal. According to Kantar, most consumer categories are registering double-digit growth versus 2019, especially household and personal care products related to cleaning and disinfecting. Several food categories such as pastas, flours and edible oils are also experiencing an increase in demand, as consumers are spending more time at home cooking and baking with their families. Within our results and despite temporary production restrictions due to COVID, we can see the shifts not only in our category mix, but also in our channel mix, with the modern trade growing 5 percentage points in the March-April 2020 bimester when compared to last year. We expect this tendency to moderate in the short term, coupled with an increase in retail e-commerce alternatives in which we are also accelerating. We see shoppers going less frequently to stores, although buying more per shopping trip, due still to some mobility restrictions that we experienced during the quarter. Alicorp market shares are mainly down compared to last year, as fill rate figures continue to be affected across all channels to an average 80% production fulfillment rate for the quarter. We expect these shares to improve in the rest of the year as sales continue to improve rapidly. We are recovering production capacity across most categories. We are also reinforcing marketing and innovation expenditures during the second half of the year to accelerate our growth rates. Let's move on to Slide 14 to discuss Consumer Goods Peru's second quarter performance. Reported volume and revenue for Consumer Goods Peru business decreased 12.4% and 8.7% year-over-year, respectively. Volume restrictions from our plants due to the reduced production is the primary reason for this decrease, affecting our ability to supply the market in light of an increased demand of food staples and cleaning categories. Foods revenue decreased 6.9%, primarily because of production restrictions and prioritization of several food staples across our production plants. This led to a decrease in output in several [ influenced ] categories such as cookies and crackers, chocolates, candies, powdered juices and cereal bars. Nevertheless, volume and revenue increased in other categories, such as pastas, canned tuna, frozen goods, flours and cereals, as consumers continue to adapt to new habits, cooking more meals at home for their families. Home care and household decreased 15%, driven also by production restrictions in light of higher demand of categories such as disinfectants, all-purpose cleaners, bleachers, bleaches and dishwasher soaps. Complementary laundry categories, on the other hand, had less demand as we continue to see reductions in frequency of use in softeners, stain removers and detergents, as people are continuing to stay at home. Personal care grew 41.2% as a consequence of a strong performance in our hand sanitizers and liquid soap categories as a response to the increased awareness of the importance of personal hygiene habits and hand washing. Reported EBITDA reached PEN 146 million, a 6.6% decrease with an EBITDA margin of 19.4%. The negative impact on volume, pricing and other COVID-related costs were partially offset by improved bad debt recoveries and savings in travel and consulting expenses. Finally, year-to-date revenue increased 1.4% year-over-year while year-to-date EBITDA increased 1.6% year-over-year because of one, an increased volume in certain food staples and home care and personal care categories; and secondly, deprioritization of marketing and advertising expenses. Intradevco registered a growth of 17% versus last year in terms of volume and 23% in terms of revenue on a year-to-date basis. Additionally, year-to-date EBITDA was also up 55% versus 2019. Let's move to Slide 15 to give you an overview of the main trends and opportunities that we see in our consumer goods businesses going forward. As we previously mentioned, we have seen a change in mix towards the modern trade channel. However, we expect the channel mix to restore to 2019 levels in the following quarters after production improvements in our key categories. Additionally, the e-commerce channel is expected to grow enormously in 2020, even though its share in total revenue will remain relatively low. In order to capture this growth, our digitalization efforts include higher differentiation in e-commerce platforms, the expansion of a direct e-commerce channel to consumers, the deployment of digital solutions for our traditional channel clients and ensuring our presence in marketplaces with strategic partners. On the other hand, we see that economic deterioration may intensify tiering down and households will increasingly look for good value for money propositions. In this sense, we are strengthening our value portfolio with improved points of differentiation within the value segment, while strategically managing price gaps to compensate tiering down. We are also implementing design to value and revenue management initiatives in light of lower pricing realization. Finally, we observed increased demand for certain categories, especially hygiene and home care products, and we expect this to continue as hygiene and cleaning habits become more permanent. In this context, we have launched products in categories with increased demand, such as Plusbelle soaps in Peru, Aval hand sanitizers in Argentina and Nutregal pasta in Bolivia and Ecuador. We have also expanded our offer of personal home care products with Opal and Marsella in the upper tiers and Sapolio and Patito in the lower tiers. Now let me pass the floor over to Juan, who will discuss the operating results of the rest of our businesses.

Thank you, Patricio. Let's move to Slide 16, consumer Goods International Q2 2020 performance, in order to give you a snapshot on our business. Our CGI business grew 12.3% year-over-year in terms of volume, with all major geographies delivering healthy results. Bolivia increased 20% year-over-year; Ecuador, 16%; Argentina, 8%; and Brazil, 11%. Our market share in the core categories of all regions increased, actually gaining market share in 7 of the 8 categories we measure, benefited from product launches across different value tiers and from higher demand in certain categories due to COVID-19. In terms of revenue, CGI grew 8.6% year-over-year in Peruvian soles, explained by the solid growth in volume despite FX headwinds. In Bolivia, successful innovation in our food and home care platforms, coupled with lower competition entering from neighboring countries due to border closures because of COVID-19, resulted in a 26% year-over-year growth. Ecuador increased 14% year-over-year; and Argentina, 5%, explained by market share gains, as previously mentioned. Finally, although revenue in Brazil decreased 15% year-over-year in soles due to the depreciation of the real, revenue in reals increased 13% year-over-year. Gross margin showed significant growth, increasing 2.3% year-over-year to 29.3% as a result of a better product mix in Bolivia and Ecuador as well as higher value innovation and price increases in Argentina. Finally, in terms of EBITDA, all of our geographies contributed to a remarkable growth of 2.5x year-over-year in the second quarter, mainly explained by a double-digit growth in sales in both Bolivia and Ecuador; our successful transformation initiative in Brazil, Argentina and Bolivia, in addition to a higher gross margin. EBITDA margin for CGI was up 6.7 percentage points, improving from 4 -- 5.2% in Q2 2019 to 11.9% in Q2 2020, with Bolivia up 6.6%; Ecuador, 3.2; Argentina, 13.3; and Brazil, 5.8%. On a year-to-date basis, our CGI business had a strong first half of the year, growing 8% in terms of revenue. Excluding the Brazil impairment, our year-to-date EBITDA increased 2.1x to PEN 83 million as a result of significant SG&A savings, thanks to our transformation and cost reduction programs. Now let's move to Slide 17, B2B market dynamics. B2B market dynamics are explained by the impact generated by the lockdown and government restrictions established to fight COVID-19 since mid-March. This is reflected on restaurant GDP. We showed a decrease of 44.5% year-to-date as of May. In April, restaurant GDP decreased 93.8% as a result of the complete closure of restaurants. Since May, delivery and takeout was allowed. And finally, since July 20, dining-in has been permitted, with a limited seating capacity to 40%. In this context, we have been able to perform better than the sector GDP, thanks to our ability to adapt through digital tools, which allow us to continue to be close to our clients, giving them assistance in different aspects required to reopen their businesses, such as sanitation, delivery and credit support. Regarding our year-to-date performance, our food service platform has been the most impacted by a revenue decrease of 25.2%, while our bakery platform showed a 1.1% sales growth backed on higher-than-expected flour demand, which sales increased 7%. Let's move to Slide 18, B2B Q2 2020 performance. The B2B business reported sales of PEN 308 million, a 23% decrease year-over-year, impacted by restrictions that affected restaurants, bakeries and industrial clients. Regarding profitability, gross profit reached PEN 45 million, a decrease of 47.1% year-over-year, while gross margin decreased 6.7% to 14.6%, mainly due to impacts on our most profitable categories, such as edible oils and sauces, in addition to higher price of raw materials such as soybean and palm oil. EBITDA reached PEN 10 million, decreasing 81% year-over-year, while EBITDA margin totaled 3.3%, 9.8% lower than last year. On a year-to-date basis, revenue decreased 9.9% compared to 2019 with a 3.3% reduction in gross margin, reaching 18.1%. Year-to-date EBITDA decreased 71.6% year-over-year, accounted mainly by the impacts previously mentioned on our most profitable categories as well as COVID-19-related expenses. Let's turn to Slide 19 to give you a sense of how we see the B2B business going forward. The recovery of the restaurant industry has already started, and will gradually continue to for the coming quarters, with some changes in consumer habits. For example, consumers are highly likely to look for greater hygiene and maintain social distance. This will generate increased demand for hygiene and safety products and further growth of solutions such as e-commerce and cashless transactions. We are deepening our understanding of customer drivers to identify new opportunities and expanding our portfolio offering into cleaning categories, as we see more demand for cleaning and sanitation solutions. We will also expand our services to clients offering webinars and instructing clients in implementation of new operational protocols as well as liquidity management. Additionally, we will accelerate the development of our e-commerce platform in order to provide digital solutions for our customers. Let's move on to Slide 20, our profit market dynamics. In Ecuador, our most important market, shrimp export grew by [ 30 ]% in the first half of the year, mainly because of high demand in the context of low shrimp prices. However, in China, which represents 70% of Ecuadorian exports, shrimp consumption has been somehow affected since the beginning of the pandemic, slowing down due to the distrust generated by the restrictions to imported shrimp. Currently, consumption is below expectations, and inventory remains high. Consequently, a contraction of Ecuadorian shrimp exports is expected in the second half of the year. Moreover, since the beginning of July, China has halted imports from some Ecuadorian exporters because, according to their sources, had -- some samples of imported shrimp containers tested positive for COVID-19, which led to the recall of imported shrimp. This situation has affected the entire chain, from the final consumer to producers who are limited their plantings with lower densities and the closure of some farms. Similar restrictions were applied to other imported proteins such as poultry, pork, beef and salmon, all of which are gradually restarting after a temporary halt. Shrimp prices are at a historical low, putting some Ecuadorian shrimp farmers under pressure. In these circumstances, farmers have temporarily changed their purchase decision drivers by favoring feed brands with lower prices and more aggressive trade terms over products with higher quality and better service, such as ours. Having said that, Ecuador remains as a country with the lowest cost production worldwide. In this context, Vitapro's strategy has been to focus on our portfolio of clients with a stronger credit profile, while defending our market position. We expect a recovery with a 30% annual market share towards year-end. Regarding the salmon feed business, growth of salmon harvest in Chile is expected to remain at around 3% in 2020 despite lower consumption in the U.S. and Brazil, the main export markets for Chilean salmon. The greatest impact on the salmon industry has been the contraction of up to 38% in salmon prices between April and June. A recovery to a healthy platform is ongoing. In terms of business performance, salmon food grew 26% in volume compared to the first half of last year, based on new supply contracts in the fourth quarter of last year and an increase of spot sales. Salmon food is expected to maintain its #4 market position, with a 12% market share at the end of the year. Now let's move to Slide 21, Aquafeed Q2 2020 performance. Revenue decreased 15.5% year-over-year in U.S. dollars, mainly explained by a reduction in volume and lower prices in our shrimp feed units, due to an aggressive competitive environment as a result of lower shrimp prices. Gross margin for the business remained stable year-over-year at 21.2%, as a result of an increase in shrimp feed gross margin due to lower commodity prices, offset by a reduction in fish feed margins. EBITDA decreased 31% year-over-year in U.S. dollars, mainly due to a lower gross profit [interest rate ] in fish feed units in addition to COVID-19 related expenses. Year-to-date, revenue decreased 5.7% year-over-year, while year-to-date EBITDA decreased 23.6% year-over-year, mainly due to COVID-related expenses incurred in the first half of the year and to lower gross profit in Q2. Let's turn to Slide 22 to give you a glimpse on how we see the Aquafeed business going forward. Regarding the Ecuadorian street market, we expect it to recover in 2021 as growth fundamentals and competitive advantages over other producing countries remained strong. Also, initiatives to increase productivity and efficiency will remain as a high priority for the industry. To take advantage and capitalize on the market recovery, we are working on the strategies that will allow us to recapture market share based on new technical advisory services supported by digital tools and their digital ecosystem approach, the redesign of the go-to-market and value proposition according to the new market dynamic, and new manufacturing capacities for our product portfolio designed according to new market trends. Regarding the salmon market, we expect a contraction in 2021 due to lower planting of new salmon, which will have an impact on next year's salmon volumes, which have a cultivation period of more than 14 months. A recovery is expected in 2022. We will be ready to fulfill the new market needs with the relaunching of our salmon food brand based on advanced analytic tools, product quality supported by the experimental center, additional manufacturing capacity and agile services. Let's turn to Slide 23 to discuss the performance of our crushing business for the second Q 2020. Revenue remained relatively stable year-over-year, while volume decreased 3.1% year-over-year, mainly due to lower production at the beginning of the lockdown period and lower demand from the Peruvian poultry industry. In terms of EBITDA, we had strong recovery, increasing $9 million year-over-year, mainly due to higher gross profit explained by an improvement in crush margins for soybean summer and sunflower campaigns. On a year-to-date basis, revenue grew 8% year-over-year, while volume increased 4.6%. Year-to-date EBITDA increased $15 million. We continue to work on our agro solutions initiative in order to increase the profitability of our business, while giving farmers an [ integral ] offer of solutions such as training, technical assistance and digital tools. Let's move to Slide 25 to discuss liquidity and our strong balance sheet. Regarding Alicorp's debt metrics, as of the second quarter of 2020, our net to EBITDA ratio showed resilience, increasing slightly to 2.21x from 2.15x by the end of the first quarter of 2020. This result reflects a robust level of solvency despite 2 consecutive quarters of operating results being impacted by the effects of the COVID pandemic. Towards the end of the year, we expect an increase in the ratio due mainly to the decrease in the LTM EBITDA, driven by the negative effects of COVID-19 previously mentioned as well as higher CapEx plan versus 2019. However, we aim to continue deleveraging the company throughout 2020, maintaining our investment-grade rating. Regarding our liquidity levels, as of June 2020, we drew approximately $230 million of short-term debt. Most of these resources were drawn at the beginning of the COVID crisis as a preemptive measure in order to fund a stress scenario. Thankfully, liquidity has remained solid throughout the crisis, and we have not had to use these proceeds, which have remained in cash. As a result, as of June 2020, we had PEN 1.7 billion in cash, which represented a debt coverage of the principal of debt maturity over the next 12 months of 1.23x. Additionally, we maintain uncommitted credit lines available for $1.4 billion and have room to issue debt securities in the Peruvian market for PEN 1.6 billion. Our active working capital management continued delivering improvements. Our average LTM cash conversion cycle reached 23 days as of the second quarter of 2020, 5.1 days less or better than the last quarter and 15.2 days less when compared to the same period of 2019. This improvement in the second quarter of 2020 was mainly explained by an increase of days payable. Furthermore, our cash conversion cycle has been supported by the quality of our clients across our businesses. It is important to note that even in the current context, our receivables cycle has remained stable, showing a slight decrease versus the first quarter, indicating that after provisions we took in the first quarter of this year, we have maintained healthy accounts receivable. All the aforementioned actions and metrics are the consequence of our prudent financial management, leaving us in a robust liquidity position. This has been recognized by all 3 global rating agencies, who have maintained our investment-grade rating with a stable outlook. Finally, let me circle back to Alfredo to wrap up today's presentation with a glimpse of what we expect for the rest of the year.

Thanks, Juan. Let's turn to Slide 28 to tell you why we are confident about the future. In Alicorp we see the future with optimism. We believe the strong fundamentals of the company remain intact even in these difficult times. We believe in our unique business model, with a leading multi-tier brand portfolio and strong product diversification, coupled with a unique multichannel distribution network. We're constantly adapting to a new reality, innovating product offerings across all segments according to new consumer trends and to our client needs, while maintaining a strong presence across all distribution channels. In this sense, we're also prioritizing our digital transformation initiatives, developing new channels in order to respond to the changing needs of our clients and consumers while also preparing the company's digital infrastructure, as with our migration to SAP S/4HANA will happen. None of these would be possible without a prudent financial management, for which we have a proven track record and without the hard work of our talented teams, who remain our most valuable strategic growth pillar. Finally, let's turn to Slide 29 to give you some guidelines about our expectations for 2020. As we mentioned before, we remain confident that the current prices will not have a structural impact on our operations, neither in terms of growth or profitability. Regarding 2020, we expect flat to low single-digit growth in terms of revenue for the full year, since production to remain -- should maintain normal levels during the second half of the year, which is our base case scenario going forward. Under the same assumption, we expect mid- to high single-digit growth for Consumer Goods Peru. A portion of SG&A expenses related to COVID could continue for the rest of the year, but in a smaller proportion, especially those related to the safety and health of our employees. Finally, we expect CapEx for approximately PEN 450 million, but some projects have been delayed for next year. Now let me just turn it back to questions.

[Operator Instructions], Our first question comes from the line of Felipe Ucros with Scotiabank.

I hope your families are still doing well since the last time we talked. Let me start with one about the supply shock. I guess this is not the first time that you have a supply shock. This time, it was planned shutdowns in CGP and also the import bans. But Alicorp had some experience with these in Chile when you had the strike last year. And in that experience, it was a little hard and it took some time to gain back clients, and you had to do a little bit of discount in the following quarters, some discounting in order to get them back. So I'm wondering if you could describe how you think this is similar or different from that previous supply shock. And what you think in terms of timing to recover, I guess, Aquafeed's presence in China or diversify away from it? And also in Peru, where you guys are so strong and you have such high market share in consumer goods, that it's hard to imagine that the competition was able to completely fill the gap of the production disruption you guys had. So not sure if the competition is able to take market share there, or maybe the retailers just relied on the inventory they had. So just if you could give us a description of what you think will happen in terms of market share in the coming quarters here, that would be great. And then the second question I had was on innovation. It seems you guys have been doing a lot of special stuff in Bolivia, Argentina, especially, but also it looks like you mentioned in the call that you're going deeper into HPC categories in the B2B channel. So I was hoping you guys could give us a little more color on how much you're doing in different countries in different categories? And what percentage of sales is coming from that? That would be great.

Thank you, Felipe. And also hope that you and your family are all staying safe and healthy. There were a number of questions and comments on your question, so I'll structure it the following way. I'll take the initial part of the question related to supply shocks and how comparable they are to some other periods in history where we have suffered, for example, strikes, as you mentioned. I'll also take a crack at the question on Vitapro and China situation. Then I'll refer to Patricio so he can talk a little bit about the whole impact on the Peru situation, including all the elements associated with market share, our innovation strategy. And then finally, I'll ask Lucio Estrada, our new VP of our B2B business, to also take that part of the question related to our B2B activities and also related to our home care products associated with that. So I'll start with the supply shock. As you correctly point out, this has been a tremendous shock for the company. Can it be compared in theory to any other space and time where something like that happened? I think it's not the case. This has been unique. We have had strikes in different situations, different countries in Brazil and sometimes in Peru a long time ago, but nothing, nothing compares to what we saw today. Because first of all, it was originated, but [ instead of ] factors, it was COVID-19, but also because of the relative impact it had in almost all our major production facilities, which are basically located in Lima, and I guess in Peru, which was the country mostly affected. To me, it was a day-to-day work in terms of understanding the situation, getting our workers safely to our plant, and then little by little, starting to gain momentum and therefore, capacity for production. So that impact was mostly true, as we explained, and other countries was not the case. And the production levels have been relatively normal and stable, even though we have obviously some impact in terms of workers getting the COVID-19. Now on the question associated with China, as we explained in the presentation, our Aquafeed business have different elements to consider. The first element is the overall impact that the COVID-19 has had in demand of different products through foodservice channels, and that happens all over the world. And that translates into reduced demand for products coming from the aqua world, and therefore, affecting all the value chain associated with shrimp and salmon, which are obviously 2 of our businesses within the Vitapro platform. So that has been one level of impact. The other level of impact is the one you also mentioned it, some very specific measures that the Chinese government took related to certain exporters coming from Ecuador. The extent of the impact of that decision, it was not exactly because of those exports that couldn't go through China, of those 3 exporters. But overall, it was the impact associated with all the expectation of Chinese consumers and traders associated with Ecuadorian shrimp. So that impacted all the value chain going back to feed, in our case in the country. We are now seeing some positive news. The Chinese government has lifted the ban on 2 of the 3 exporters. That will obviously translate in supply chains improving. But what we'd be expecting is, as times go by, that we'll see demand -- overall demand for Aquafeed products -- I'm sorry, for aqua products, not only China, but also in Europe and the United States, to increase. But that will take some time. We'll see how fast all those economies recover, how fast those food service sectors recover and therefore, demand more aqua products. And then obviously, all the value chain will follow through after that. That will take some time. Hopefully, it will be a fast recovery. We'll be talking as the year goes by more about our expectations in general terms for next year. Obviously, we'll see a rebound, that is for, sure, for the sector. We are very optimistic, as you know us. This is a business that we know well. But we are clear leaders in the Latin America region, and we see Ecuador as the most important exporter of shrimp in the world. And despite this, obviously, current situation, we believe that all the dynamics are there for the country to keep sourcing and going back to the growth levels that we have seen in the history. Now with that, I'll turn it over to Patricio to take on the more consumer products question related to Peru, innovation and market share impacts. Patricio?

Thank you, Alfredo. Thank you, Felipe, for the question. Yes, as we said before, we've seen during the quarter still some categories, many of the categories across food and also home care products, double digiting in terms of growth versus last year. And with the current restrictions that we mentioned over the call on our production output, then definitely, we have been a little bit short of gaining share on the bimester. I think that we've lost share in many of the categories. Not big numbers, we're talking anywhere from 1.5 to 3 or 4 percentage points in some of those categories. And those market shares too have been capitalized by some of our competitors. For example, in the case of oils, we've seen that we have more than 40 brands within the marketplace. So some are small, some are somewhat medium in size. Also there's a [ labeled ] product that's been imported from abroad. So they have been filling those gaps in terms of product availability to -- in light of those category increases. Also in terms of household products, we must take into account that we are producers, local producers of many of those categories, all of them actually. And many of our competitors, multinational companies, are importers. So they have not had the impact on production output that we have had, given the fact that we are producing in Peru. So I would say that they have been managing their inventories to gain that market share. However, that being said, as part of the volume recovery efforts that we have managed to get starting in June and also in July, we are recovering inventory levels on our main clients, not only in the modern trade, but also in the traditional trade. And also with that, we've seen already shares in the modern trade recovering heavily since the lower points that we had during the April-May product shortage. So we've seen shares recovering in sauces. We've seen shares recovering in pastas. We've seen shares recovering in edible oils. We're also seen shares recovering in detergents and many of our products across laundry. So we are feeling very, very confident that we are going to be continuing to recover over the next months. Actually, we're looking at high double-digit growth numbers for many of those categories in the month of July, and we expect that to continue for August as well, as we continue to recover those share levels. As part of that recovery effort, we're also doubling down on our innovation, new product launches of the -- during the pandemic and the production shortages that we've got out of the plants, we had to reduce our innovation cycle. And now we're doubling down on that going forward, and we're launching anywhere from 15 to 20 new products among many different categories, to try to accelerate that growth and still take advantage of some of those categories that continue to grow and will continue to grow over time until the end of 2020. And in terms of our other innovation efforts related, especially to B2B, as Alfredo said, I will defer the question to Lucio Estrada, who will give you a little bit more color on that.

Thank you, Patricio, and thank you, Felipe, for the questions. Let me start with what we're doing on the digital front on the B2B. Before the pandemic, we were already running concept testing on minimal viable products on a digital platform that would allow us to sell through that platform and connect with our customers. As -- once we -- the pandemic hit us and we started identifying the needs of the customers, we actually accelerated the pilots that we have scheduled for the coming months. And the pilots, they performed better than we were expecting, as we have seen in other places as well in the world with digital solutions. And we just anticipated all our initiatives that we had for the year. And actually, Felipe, we just launched this week our digital platform for selling in the Lima area to our distributors. So I expect to be able to share with you some of the results on the next call, because we just recently launched, actually this week. What I can share with you is that the results on all the concept testing and the pilots were better than expected, and we look with optimism the growth of that digital platform within B2B and also across the company. In terms of the cleaning platform, we also, very recently, last 10 days of July, launched our cleaning platform, first to our current customers. So we're selling cleaning products that our B2B customers require to use themselves, in their sites. And -- but we're also looking at exploring other segments that we normally do not serve with goods, like laundries, dry cleaners. And that's a segment that we're dedicating efforts to understand what are the drivers, and it's going to be probably on the pipeline of customers that we will be targeting in the future. So that's very recent activity, as I have just shared with you. I expect to be able to bring some more information of how they're performing on the next quarter call. But we're certainly and definitely looking this with a lot of optimism.

And Felipe, and everybody on the call, really, obviously there are many topics that are very strategic for Alicorp. You've mentioned a couple, which are all the innovation efforts and investments that we are pursuing. There are many elements also very important in nature and a very high impact to the company on the digital front. We also have many other initiatives associated with our new strategy on the efficiency program that you know well. And also, the work that our integration management office has done in the different acquisitions that we have done over the last 2 years, I mean, phenomenal with fantastic value added. So all these elements, unfortunately, through this call, we cannot really explain ourselves in further detail. Hopefully, we'll be able to get some time off either in the next calls or some specific moment to really share with you all the strategic initiatives and the value that we see from them. So thank you, Felipe, for the question.

Your next question comes from Johanna Castro with Ita.

Just a quick question. What would be the EBITDA margin of the Consumer Goods Peru without Intradevco this quarter?

Thank you, Johanna. I'll defer the question to Patricio about the margin that you asked. Patricio?

Patricio, you might be on mute.

Sorry for that. Without Intradevco on the margins that we're getting -- hold on just 1 second, please. It will be -- our EBITDA margin for the quarter was 19.4%. Without Intradevco, that margin will be somewhere around 20%. So it's a little bit higher than with the Intradevco number put in.

Okay. Perfect. And then just one follow-up, just to understand the dynamics there, because as I understood, Intradevco had [ 17% ] year-over-year growth in volume, but you guys didn't mention about the performance of the sales, so maybe I missed it. So just to understand how are the dynamics there, that would be super good.

Go ahead, Patricio.

Johanna, can you repeat the question? You didn't explain the dynamics on what, I'm sorry?

Sorry, is that -- you mentioned that Intradevco, for Intradevco, the volume grew [ some 17% ] year-over-year and that the EBITDA margin grew 55% year-over-year. But then the sales of Intradevco, what was the performing of the sales number?

All right. So with Intradevco, we have been growing in terms of the year-to-date. And I think that we mentioned it before during the call, hold on just 1 second. So in terms of Intradevco, what we said was that our volumes, our revenue was growing -- hold on. Right, so here: we said that in terms of volume our growing was 17% and also 23% in terms of revenue. And that, from an EBITDA -- from an EBITDA number, it was 55% growth versus last year. So 17% in volume, 23% in revenue and 55% in EBITDA. Sorry for that.

Our next question comes from Alonso Arambur with BTG.

Sorry, I was on mute. I have a couple of questions, following up on the production disruptions. We are seeing an increase in cases of the new COVID cases in Peru recently. I think actually, yesterday was the highest number we've had. Can you just comment on what contingencies you're doing, whether there's risks that you get more disruptions in coming days or weeks? Or what's the risk of this happening again in the second half of the year? Assuming there's this high level of virus contagion continuing. And then I wanted to ask about Brazil. Obviously, all international markets are doing better in consumer goods. Brazil has been in the process of restructuring. Just wondering how far along are you in this restructuring? And where do you expect to be by the end of the year?

Thank you, Alonso. I'll take the first question on the production -- potential future production disruptions, and then I'll ask Jose Cabrera to take on the Brazil side of the equation. First, I think all this, all through this pandemic, it's been a learning process for us, obviously, in terms of how to first regain production capacity lost, how to bring back safely our workers, and then getting all the processes within our factories to comply with the most strictest protocols there are. And that system has worked very well. Now we have our workforce trusting the system, trusting what we as a company were doing. And obviously, through the process, we have seen ups and downs in terms of the level of contagion that we have seen in the level of the populations. Now over the last 2 months, obviously, the improvement has been very material in terms of the role, the number of people getting back safely to work, and obviously impacting positively in how we produce. What you've been mentioning, Alonso, as to, let's say, some pickup in the numbers of people getting COVID, we are seeing it likewise, obviously. However, we're seeing a more mature phase happening in Lima, let's put it that way, and that affects our production capabilities. We are seeing more of an impact in the Southern part of Peru. And we're seeing some pickups as well in some countries. Now because of the protocols and all the learning process that we have had so far, I think we are very well prepared to really handle, obviously, what will come to us through the next few months. Could it impacting materially? I don't think so, honestly, Alfonso -- Alonso. We are confident in the process what we're handling so far, and that's why we are forecasting or giving that guidance for growth as a whole. So we are relatively okay. We remain very vigilant as well. And I think the protocols that we have put in place are solid, and obviously we learn through every day that [ happens ]. Now on the second question, in Brazil, as I said, I will turn it over to Jose to go with the answer. Jose?

Yes. Thank you, Alfredo. In our previous transformational programs we've seen, it takes us about 3 years to fully turn around a struggling business. In Brazil, we're in the second of the 3 years. First year usually is when you do the heavy lifting, you have the onetime expenses. We did that last year. This year, we're already beginning to see the benefits and the full-time effect of all those onetime expenses that we took on last year. And then next year, we should see the full annualization benefit of these initiatives. This quarter, we are reporting a 4.4% EBITDA margin for Brazil. That's 5.9% above, year-on-year, above the second quarter of 2019. So we are happy with where we are. We still have a little bit of a ways to go. We have some headwinds in Brazil, mainly devaluation. We've seen a 33% year-on-year devaluation. That's obviously not going to help going forward, but we continue to see a decent mid-single-digit margin level for the next couple of quarters.

Thank you, Jose. And a final comment from our side, Alonso, on that, is that we are now -- we still know that as a company we've been able to build a new capability, which is really to turn businesses around, to use our efficiency programs and our integration management office as key tools to really extract value of struggling businesses or recently acquired companies. So we already have now a track record of successful transformation, successful integrations. So therefore, we feel confident that the figures and the issues that Jose just pointed out will pan out. But thank you for the question.

[Operator Instructions] And our next question comes from Andres Soto with Santander.

Perfect. Alfredo, Juan and Patricio. My first question is related to the Aquafeed business. Obviously, volumes have not helped in terms of profitability. But given the low price, the low raw material prices that we have at this point, can we expect some margin improvement from the current level? Or given the tiering down that you are seeing in this category, your margins for this segment should be at around 12% instead of the 14% that we used to see in the past? That will be my first question.

Thank you, Andres. Yes, I'll quickly take the question. I think the winds affecting the business, I think you have pointed out very correctly, all the dynamics we're seeing as a direct impact of the COVID-19 crisis. And more specifically, what I answered before to a question of Felipe on the China situation, have different impacts. One of them is actually having prices of shrimp go down dramatically. Obviously, that immediately has a direct impact on our clients. Our clients then start demanding different situation. At the first, they stop producing as many, as much as possible. They will also require lower-margin products for us, more value-based products. And that obviously has a hit on our profitability for the business. In parallel, as you might imagine, we immediately kickstart different efforts. First, there are efforts on the efficiency front just to make sure that we -- on purchasing and other elements of our business model, we become as efficient as possible given the current situation of the marketplace. What has been happening is, that many of our clients that shifted their value proposition or their strategy towards more value-based products, their understanding that the impact that those products have and their productivity levels in their farms is significant. So what we're seeing now is, little by little, we might see actually a turn back to products that provide higher profitability. Now that will take a little bit of time, because with the current prices, I mean, that will take some time. The tiering down has been an element. But as I said, I think we will come back slowly as our clients realize that the return scenario is not the most adequate. But the pricing is what it is, which is very low right now.

Great, Alfredo. My second question is related to Bolivia. We saw -- previous saw results this quarter. Unfortunately, the situation in that country has deteriorated dramatically over the past few weeks in terms of the political and social situation. I'm just curious about the -- what has been the impact of this into your operations, both for the consumer goods platform and for the crushing unit? And thinking about the October elections, what are your thoughts on what could happen there? And if we could see any type of long-term repercussions for any of your operations in this country?

Thank you, Andres, for the question. I'll turn it over to Jose to go ahead and answer it. Jose?

Yes. Thank you, Alfredo. We remain very vigilant on the Bolivia situation, but we are not overly worried about the impact that it could have on our business. As you say, we are entering an election cycle and it is difficult to see both political and social disruption prior to elections. Over the last few weeks, we have seen some roadblocks that are having some negative effects on our distribution, both in our crushing and the consumer goods business units, but they have not been a material impact yet on the business. We expect to see these types of disruptions on and off until October or maybe even November, if there's a second round, which up to this point is the more likely scenario. But after that, we foresee a relatively calm period while the new government takes control and the population waits to see the program that it will follow. So no, not forecasting any major impact to our operations. We have done very well under very different government platforms in Bolivia, and we expect to continue to do so in the future.

There appears to be no further questions at this time. I would like to turn the floor back over to Mr. Alfredo Perez for any closing remarks.

Thank you very much to you all for participating of our second quarter 2020 call. In case you obviously have any additional inquiries or info requests, please don't hesitate to contact us. We'll be more than happy to answer them. And please stay safe and healthy, and have a great day.

This concludes today's conference call. You may now disconnect.