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

Ladies and gentlemen, thank you for your patience in holding. We now have your presenters in conference. [Operator Instructions] It is now my pleasure to introduce today's first presenter, Ms. Gisele Remy with Alicorp.

Thank you, and good morning, everyone. We are very pleased that you could join us today. I am Gisele Remy, Managing Director of Corporate Finance and Investor Relations at Alicorp, and I will be introducing the call today. As presenters today, we will have Mr. Alfredo Perez, Chief Executive Officer; Mr. Juan Moreyra, Chief Financial Officer, Mr. Patricio Jaramillo, Vice President of Consumer Goods Peru and Innovation and other members of the management team who will join us during the Q&A session. Today, we will be discussing the first quarter 2021 results after the earnings report issued by the company yesterday. If you have not received a copy of the earnings report, please visit our website at www.alicorp.com.pe, where you will also find the webcast presentation to accompany our discussion during this call. Please be advised that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. If you are a member of the media and wish to direct any questions to the company, please contact us 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 or our performance or financial results. As such, these forward-looking statements are based on 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 decisions. 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?

Thank you, Gisele, and good morning, everyone, and welcome to Alicorp's First Quarter 2021 Earnings call. We would like to start our call wishing you and your families are remaining safe and healthy. Once again, we're presenting from our respective homes. So we hope everything runs smoothly. And we kindly ask you to please bear with us if we have any technical difficulties. Today, I will start by giving you an our overview of the key events of the quarter, followed by an update on some of our strategic initiatives and our consolidated results. After that, Patricio and Juan, will cover our financial results by business unit. At the end, before the Q&A section, I will take the floor again for an update on guidance. Let's begin on Slide 5 to fill you in on some of our recent key events. In the first quarter of 2021, Peru and most of our other LATAM geographies faced a second COVID-19 wave, which led to economic deceleration due to tighter restrictions. It is important to mention that we did not experience disruptions to our production capacity in any of our geographies. Nonetheless, mobility restrictions and the fear of contagion did have an impact on demand, especially in the case of our B2B unit, that caters to the food service industry. This was also an electoral quarter with governmental elections in 2 of our most important geographies. In the case of Ecuador, the newly elected President, Guillermo Lasso, will take office on May 24. In Peru, the first round of elections left the Congress without parliamentary majority and a runoff between Keiko Fujimori and Pedro Castillo, which will take place in June 6. Another relevant event for this quarter is the cost pressure we are experiencing with international commodity prices rising for 10 months in a row at a pace not seen in over a decade. This situation, which continues so far in the current quarter, require us to be at the top of our game regarding pricing and efficiency measures to limit the impact on margins. Finally, we're happy to inform that we continue our transformation journey, and we have a successful migration to SAP's S4/Hana platform in our biggest subsidiary in Peru, impacting over 2000 employees. Now let's move on to Slide 6 to comment in more detail on the cost pressure we're seeing. In recent months, our gross margin has experienced pressure from different sources. The most important one is certainly the increase in agricultural commodity prices. As you can see in the chart, the weight of oils, fats and wheat in our COGS is material. And it is the impact from the significant increase in international prices from these products and other agricultural commodities. But this is not the only source of COGS pressure we're experiencing. The rising prices of oil derivatives translates into higher packaging, freight, transportation, cost and logistical costs across the supply chain. Moreover, the devaluation of local currencies, including the Peruvian Sol, which lost around 10% value against the U.S. dollar year-over-year in the quarter, represent an additional source of cost pressure. We would also like to highlight some characteristics of our COGS composition that mitigate the impact of external volatility. First, the expansion of our Home & Personal Care platforms during the last years diversifies our COGS structure. Furthermore, the vertical integration of our consumer goods business in Bolivia partially offsets the impact of agricultural commodity fluctuations in Alicorp's consolidated COGS. Next, I would like to share with you some details about our commodity strategy on Slide 7. During the last few years, we have created first-class capabilities in the procurement and hedging of commodities, providing us with the visibility necessary in order to manage our pricing and efficiency strategies accordingly. In 2017, we created a vice presidency dedicated to the procurement and hedging of commodities, giving this role the necessary attention in order to manage our exposure through best-in-class market practices. It is important to highlight that the activity of our commodities department is supervised by the financial risk department, which reports to the finance VP, assuring, therefore, independent supervision. The risk department controls the financial risk taken and also compliance with our hedging policies. Thus, we practice active and constant hedging of our most represented agricultural commodities such as wheat, soybean oil, soybean meal, palm oil, among others, through futures, options and over-the-counter products. Our strategy aims at layering our exposure and providing the necessary visibility for our business units to react to the cost evolution through pricing or efficiency strategies. These skills represent for us an important competitive advantage and have left us in a relatively favorable position over the last 6 months. Finally, it is worth mentioning, we'll look for the constant development of new capabilities and how to incorporate and mitigate new sources of risks. As in the previous quarters, we would like to use this opportunity to cover some of our strategic initiatives. Let's move on to Slide 8, please. As you know, for the last few years, our corporate strategic efforts have been and continue to be based on our 3 pillars; growth, efficiency and people. In addition, we can also identify 2 enablers that will help us achieve our goals; digital analytics and innovation. Let me focus today on our efficiency pillar. Let's move on to Slide 9, please. We firmly believe that a culture that promotes the constant search for efficiencies is necessary in order to support our vision of sustainable long-term growth. In time with this, when we are experiencing material pressure on our margins, these capabilities give us the ability to react and mitigate the impact on profitability. At Alicorp, we have a dedicated corporate efficiency department that continuously monitors and manages both day-to-day efficiency initiatives as well as transformational efficiency programs. We constantly analyze the profitability and returns of our different business units, platforms and categories, providing us with the necessary information to continually search for efficiencies as well as make optimal capital allocation decisions. Additionally, over the past several years, we have implemented several transformational efficiency programs, working with multidisciplinary internal teams and first-class consultancy firms, unlocking sustainable long-term efficiencies. As a result of all these efforts, our company is succeeded in improving continuously various efficiency KPI's, positioning us above many of our Latin peers. In 2020, however, as you can see on the slide, we experienced a slight deterioration of indicators due to the impacts of the pandemic; both on revenues and profitability, partially offset by our constant efficiency measures. On Slide Number 10, we will discuss some of the initiatives on our efficiency programs in our consumer goods international unit. In Brazil, our transformation program began in late 2018. We managed to reduce our organizational structure by 12%. Furthermore, we achieved efficiencies in marketing expenditures, focusing on higher return on investment digital and trade marketing [ unlocking ] 2 percentage points of margin. Moreover, we generated sales expense reductions for more than 30% due to improvement in sales force productivity. As you can see in the chart, the SG&A over revenue ratio improved from 35.4% in 2018 to an expected 26.5% by the end of 2021. In Argentina, our transformation journey began in late 2017, with the reduction of 15% in organizational structure. Moreover, additional efficiency were implemented in areas such as warehousing, travel and consulting services and advertising and promotional expenses. As a result, the SG&A over revenue ratio improved from 29.3% in 2018 to an expected 21% by the end of 2021. In the case of Bolivia, we implemented a successful integration program starting in 2018 after the acquisition of Fino and Sao in Bolivia. And in 2020, this was then followed by an [ efficient ] program. In this geography, our organizational structure was reduced by 13%. Some of the efficiencies implemented across the business are: first, on the back office front, the centralization of certain operations to the corporate shared service center and the automation of processes. Second, the integration of our Intradevco products in our distribution network, generating cost dilution; and third, the optimization of advertising and promotion expenses. As a result, the reduction of the SG&A over revenue ratio is nutritious, falling from 24.9% in 2018 to nonexpected 17.6% by the end of 2021. Let's now discuss our consolidated results for the first quarter of 2021 on Slide Number 12. Consolidated revenue grew 8.5%, while volume remained flat year-over-year in the first quarter of 2021; mainly driven by the solid performance of our crushing unit and the successful implementation of pricing actions in our consumer goods Peru and B2B units. Our Aquafeed unit begins a recovery in the shrimp platform, posting positive progression quarter-over-quarter. On the [ country ], the economic deterioration of the consumer goods international geographies impacted its results. It's worth highlighting that we are comparing a quarter in 2020 in which COVID-19 had an impact only during the last 2 weeks to a quarter in 2021, fully impacted by COVID-19. Moving on to profitability. Let's now review our consolidated EBITDA for the first quarter of 2021 on Slide Number 13. Consolidated EBITDA increased 68.5% for the quarter compared to 2021, mainly explained by the strong performance of our crushing unit, margin resilience in our consumer goods per unit and the encouraging recovery of our B2B unit. Also, the positive base effect from significant COVID-19 related costs and expenses included in the first quarter of 2021. As mentioned previously, we saw margin pressure from the increase in commodity prices. Also, the devaluation of local currencies and price controls are reflected in our consumer goods international unit results. COVID-related costs and expenses in the quarter amounted to PEN 21 million, mainly related to transportation and additional plant workers. It is worth noting that COVID-related costs and expenses in the first quarter of 2020 were significantly higher as an impairment of our Brazilian operation, bad debt provisions and other one-off charges were included in the quarter results. Let's now review our consolidated net income for the first quarter 2021 on Slide Number 14. The net income reached [ PEN ] 135 million, mainly explained by higher operating income and a lower effective tax rate in some of our nonrecurring costs and expenses, including the first quarter of 2020 results, such as the impairment of Brazilian assets and a tax contingency had no tax yield. Now let me pass the floor over to Patricio, who will discuss the operating results of our CGP business. Patricio?

Thank you, Alfredo. Let's begin with an update on CGP market dynamics on Slide 16. After our challenging 2020 that closed with a GDP decline of 11% and a reduction in private consumption of around 9%. The new year comes with a more positive outlook., as Peruvian GDP is expected to recover much of the terrain lost in 2020. This economic recovery relies on several factors, but it's mostly related to the reactivation of mining, electricity and irrigation projects. However, these estimates are also contingent on no additional lockdowns or more restrictive measures being imposed, which is still uncertain as the second wave of COVID-19 continues to show no sign of weakening. Furthermore, the presidential elections this year in Peru represent a further source of uncertainty. In these challenging times, we continue to stand side-by-side our clients, maintaining our flexible and agile nature, adapting to these new circumstances with a clear responsibility of ensuring product supply to millions of households. Regarding consumption trends, we continue to see increases in overall consumption, mainly driven by an increase in volume as lockdowns have continued during this first quarter. Even though shoppers are buying less frequently, they're choosing bigger sized SKU's. There is also some tiering down trends in the pasta, edible oils and detergents due to the ongoing economic challenging situation and rising prices to compensate increasing raw material costs discussed earlier. Fortunately, Alicorp is well prepared to actively capture consumers with more profitable and affordable product alternatives while continuing to maximize profit through revenue management and cost efficiencies. We continue to recover market shares in most of our categories versus our lowest point in May, June 2020 when we lost some points as a consequence of the production disruptions experienced during the second quarter in 2020. Since then, we have seen strong growth in surface cleaners, edible oils, margarines, sauces and bleach, gaining or maintaining share in more than 70% of the total categories. Regarding channel mix, we experienced higher growth in the modern trade channel during this quarter due to the previously mentioned lockdowns that accelerated sell-out as well as a temporary stocking by supermarkets previous to our SAP S/4Hana migration. Now let's move on to the performance of our Consumer Goods Peru unit on Slide Number 17. First quarter revenue increased 7% year-over-year, with gross margin at 32.9%, slightly down 0.7 percentage points due to higher commodity and COVID related costs. Revenue growth was achieved due to innovation and brand-building activities to regain market share, as I mentioned earlier, and strategic pricing to offset commodity costs. It is important to mention that we're seeing higher commodity prices since Q4 2020, especially in raw materials affecting our food categories, such as edible oils, pasta, biscuits, sauces and flour. Higher costs in soybean, palm oil and wheat will continue to be offset by pricing and revenue management programs in a year ago. First quarter EBITDA increased 13% year-over-year, and EBITDA margin reached 19.2%. Growth was achieved as a result of increasing revenues, coupled with productivity programs and cost-saving initiatives aimed to improve our bottom line. Finally, Intradevco grew 16% in volume, 14% in revenue and 11% in EBITDA quarter-on-quarter, reaching PEN 16 million in EBITDA in the first quarter of 2021. Growth is driven by persisting trends of higher at home cleaning and personal hygiene habits adopted during the pandemic, resulting in double-digit category growth. Now let me pass the floor over to Juan, who will discuss the operating results of the rest of our business units.

Thank you, Patricio. Let's move to Slide Number 18, B2B, update on market dynamics. The restaurant industry continues to face a challenging context, while showing a slow recovery. Our foodservice platform continues to outperform the Peruvian restaurant GDP, growing 10% in January versus a 21% reduction of restaurant GDP. Compared to a pre-COVID base, our foodservice business reached 88% of pre-COVID volumes sold and 77% of recovered gross profit levels in the first quarter of 2021, explained by the fact that clients are favoring products of lower tiers as they recognize and enter the path to recovery. Meanwhile, our bakery and industrial businesses showed a faster recovery. In addition, through our Crecemos Juntos program, which consolidates all our initiatives to help over 24,000 businesses during the pandemic, we continue to support our customers. During the first quarter, our webinars reached 200 entrepreneurs and our digital content got more than 6800 views, while our team delivered assistance to more than 700 customers through one-on-ones, showrooms and demo classes. Let's move on to Slide 19, B2B Q1 2021 performance. Revenue grew 8% compared to last year due to higher prices aimed to compensate commodity prices and gross profit recovery. This growth is particularly solid when we consider, as mentioned before, that we are comparing a quarter in 2020 where COVID-19 had an impact only during the last 2 weeks to a quarter in 2021, fully impacted by COVID-19. It is also important to mention that our food service platform showed a growth of 6% year-over-year on the back of a reopening of most of our clients, our digital initiatives and higher prices. While our bakery platform grew 1% due to lower volumes on our flour category. Regarding gross margin, although we saw a decline of 4.1 percentage points year-over-year due to a first quarter of 2020, not fully impacted by COVID and the impact of the increase in commodity prices not fully translated into price when comparing to the first quarter of 2021 against last quarter, gross margin has improved sequentially by 1.7 percentage points. Profitability increased 80% due to savings measures, industry recovery and COVID-related expenses on the first quarter of 2020. This is reflected in an improvement of 2.8 percentage points on our EBITDA margin. Let's move on to Slide 20, consumer goods international market dynamics. Regarding consumer goods international, we are seeing a tough macroeconomic environment in most Latin American countries. GDP in 2021 will only partially recover all the activity lost in 2020, while consumer confidence is a very -- at a very low level. This is mainly explained by the regions inability to secure vaccines to fight of the pandemic, coupled with higher unemployment. Political and social instability remain hot topics with recently held elections in Ecuador and midterm elections in Argentina later this year. Lastly, the base effect of strict lockdowns from March 2020 onwards, which generated incremental volume due to foundry loading and increase at home consumption will be tough to maintain this year. This difficult macroeconomic environment, coupled with raw material price increases at historical levels, make it extremely difficult to fully offset increased cost with pricing as we look to strike a balance between defending market share gains from 2020 and managing the pressure on margins. Let's move on to Slide 21, CGI Q1 2020 performance. As a result of these and other country-specific factors, revenue in CGI decreased 4%, driven by a 9% decrease in volumes, partially offset by higher pricing in all countries. Volume was mostly affected in Ecuador due to a sharp decrease in demand for a detergent that we produce for a large client in the face of intense competition. It is important to point out that Alicorp's portfolio, which excludes contract manufacturing volume, grew 6% year-over-year. Meanwhile, in Brazil, the entire pasta category has been suffering mid-single-digit volume constructions due to industry-wide price increases to compensate rising wheat prices. As mentioned earlier, pricing actions were taken across the board in multiple categories across countries, helping revenues to contract by only half of what volume contracted. EBITDAR a quarter was PEN 13 million, up PEN 34 million from a negative PEN 21 million resolved last year. However, it is important to note that the last year result includes a onetime cost attributed to the impairment of our Brazil operations. Excluding this effect, EBITDA for CGI, would have been down around PEN 14 million. The largest impact behind this year-on-year decrease in EBITDA has to do with our Argentina operation, where we are down PEN 17 million from Q1 2020. It is important to remember that last year, we had a record EBITDA of PEN 14 million and 12.9% EBITDA margin in Argentina as a result of successful innovation with the launch of premium product lines, important pricing actions and successful efficiency programs. However, since April 2020, the government-imposed pricing restrictions have resulted in significant market margin dilution as we were unable to offset inflation and devaluation. EBITDA was also down in other geographies such as Bolivia and Ecuador, primarily due to higher commodity costs, which were not fully offset by pricing actions, thus resulting in lower gross profit. Looking forward, we are expecting sequential improvements, both in top and bottom line in CGI as our pricing actions are fully translated and our innovation efforts hit the markets. However, compared to 2020, year-on-year evolution will continue to be challenging as strict lockdowns in Q2 and Q3 2020 resulted in higher at-home consumption with lower raw material costs and the fact that we have not yet felt the full effect of the pricing restrictions in Argentina. Let's move on to Slide 22, Aquafeed market dynamics. In Ecuador, shrimp exports continued to grow but a smaller growth rate due to changes in the exported product mix. Due to the diversification, the Ecuadorian shrimp industry has experienced regarding their export markets, exporters have increased their offer value-added and headless shell of products, which are preferred in the U.S. and European markets. This change in product offerings means that export volumes do not correlate to production in the same way as in previous years. As a result, we estimate that although exports have grown only 2% year-over-year in the first quarter of 2021, shrimp production has increased 10% in the same comparison period. International trade for shrimp is improving and slowly building a path to recovery. China is showing increasing signs of recovery, an uptick in demand in the last weeks of the first quarter, which was translated into improved prices for Ecuadorian farmers. Nevertheless, prices are still around 10-year lows. In this context, farmers maintained their preference for low-cost feed alternatives and try to take longer and lighter credit terms. However, vertically integrated clients are now introducing more premium feeds incentivized by a positive outlook for the market and prices in the coming months. Faced with this environment, Vitapro has focused its strategy in 2 key areas; first, redefining our go-to-market strategy with cohesive farmer-centric solutions, such as new product launches and the implementation of state of the art digital tools, among other initiatives that aim to better position us against the market that [ we're on ]. In this first quarter, we have already deployed many of our initiatives, and we expect to start consolidating the results throughout the second semester of the year. And second, keeping a financially healthy client portfolio, we have been able to limit our collection risk by not matching the longer credit terms currently offered by competitors in the market. Regarding the salmon feed business, exports of salmon from Chile dropped 1% year-on-year. Throughout 2021, we expect to see the effect of less [ plants ] in 2020 in Chile, which will result in lower salmon stocks and exports for the course of this year. On the market side, the recovery of demand in the U.S. and other main importing countries has been important, mainly due to higher consumption outside homes and higher consumption in the retail channel as well as consumers have started to eat more seafood at home as well. This has created a new consumption opportunity, which will probably, to some extent, increase demand once food service channels return to normal. With this initial recovery, market recovery, and the expectation of lower exported volume from Chile for 2021, prices in the salmon markets have bounced back aggressively and are now at the pre-pandemic levels. This increase in prices has incentivized farmers to rapidly start farming, and we expect a better export volume outlook for 2022. In order to win in this highly mature and consolidated market, Vitapro is deploying a countercyclical strategy with a re-launch of our Salmofood brand based on high-quality supported by the experimental center, additional manufacturing capacity, agile services and the launch of PatagonIA, our advanced analytical tool. Let's move on to Slide 23, Aquafeed's Q1 2021 performance. In terms of business performance, the 70% drop is mainly explained by the reduction in volume in both of our business units and by tiering down of our portfolio to low-cost feed, mainly in Ecuador. This again compares to a quarter in 2020 with very few top line effects related to COVID-19 against a quarter in 2021 where the industry -- and our business have been very impacted by the pandemic. However, it is important to note that there is a sequential improvement in revenue growth compared to the last few quarters, showing signs of recovery with a 4.4% quarter-on-quarter revenue growth. Gross margin decreased 4 percentage points due to the tiering down of our portfolio aligned to our clients' demand shift toward low-cost feed products in Ecuador and price increases in raw materials. However, gross margin increased 1.6 percentage points quarter-on-quarter. EBITDA decreased 20% year-over-year, mainly due to the reduction in our volume and lower gross margin. EBITDA margin remained stable due to the base effect of nonrecurring expenses in the first quarter of 2020, including bad debt provisions related to COVID 19. Finally, let's move on to Slide 24, crushing Q1 2021 performance. The crushing business had another remarkable quarter due to the positive impact on this business as a result of the increase in commodity prices. Volumes sold increased 26% year-over-year, including sales to third-parties and internal consumption, while revenue increased 58% year-over-year in U.S. dollars. Finally, EBITDA increased almost 8 times in dollars, due mainly to the shift in the commodity cycle and to a lesser extent, to the base effect of COVID-related expenses incurred during the first quarter of 2020. Let's move to Slide 26 to discuss liquidity and our strong balance sheet. Regarding our debt metrics. As of the first quarter of 2021, our net debt-to-EBITDA ratio decreased to 2.2x from 2.7x as of the fourth quarter of 2020. This improvement was mainly explained by a higher EBITDA over the last 12 months, mainly due to a strong performance of our consumer goods Peru and crushing units. And two, a higher cash generation capacity due to several improvements in managing our working capital. Let's move to Slide 27, please. Regarding our liquidity levels as of March 2021, we secured funds for working capital purposes with medium-term debt for PEN 60 million, and we improved our cash conversion cycle through several working capital initiatives for PEN 485 million, including create for finance and sales of receivables. As a result, we closed the first quarter with PEN 700 million in cash, which means that we held funds equivalent to almost 3x the principal of the maturity over the next 12 months. Furthermore, we maintain available and committed credit lines for [ PEN ] 1.5 billion and have room to issue debt securities in the Peruvian market and our local bond programs for PEN 1.6 billion. Our active focus on improving working capital continues delivering outstanding results. The last 12-month average of our cash conversion cycle reached 12 days as of Q1 2021, a 3-day improvement over the last quarter and about 15-day improvement when compared to the same period in 2020. Even in the context of the COVID-19 crisis, our cash conversion cycle was well supported by the quality of our receivable portfolio and improved due to an increase in cash sales in 2020 and our active management and collection cycle. This improvement also relies on the increase in accounts payable as our suppliers agree on longer tenures with us and that pre-export contracts in our crushing business. All the aforementioned actions and metrics were the result of a comprehensive and prudent financial strategy that allow us to have a solid liquidity position, which has been recognized not only by local rating agencies, which maintained us in the highest possible rating in Peru, but also by all 3 global rating agencies, which have reaffirmed our investment 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 2021.

Thanks, Juan. Let's turn to Slide 21 to give you some guidelines about our expectations for 2021. Although there's still a high level of uncertainty for the year ahead, I wanted to share with you some key trends that we expect for 2021. In terms of revenue growth, we expect consolidated revenue to grow double-digit for the full year and our biggest unit, consumer goods Peru, to grow double digit in terms of revenue as well. Regarding profitability, we expect consolidated EBITDA growth of approximately 20% year-over-year, although we still see a certain level of uncertainty in terms of commodity prices and FX. Our consumer goods Peru unit is expected to deliver a double-digit EBITDA growth year-over-year. As for our investment for the year, we affirm our previous guidance of capex of around [ PEN ] 150 million. Finally, I would like to reaffirm my confidence in the capacity of our people, our competitive advantages and the resilience of our market, businesses and brands to continue to get us through these challenging times. Thank you for joining us today. And now we welcome any questions that you may have.

Yes, that concludes our presentation for today. At this time, we would like to take questions from the audience.

[Operator Instructions] Our first question comes from Alonso Aramburu with BTG.

I have 2 questions. The first one on the crushing business. I'm just wondering how sustainable do you think is the performance you've had the last couple of quarters? You've mentioned in the past the high commodity prices are good for the business? Or are we to expect that this sort of performance and growth in margins can continue in 2021? And my second question is regarding gross margins, just generally, in the consumer goods business, with the pressure from raw materials, I mean, how much pricing actions can you take? Are you taking more in 2Q? Or would you still feeling -- will you start feeling even more pressure on the rest of the year given the increase in prices of commodities?

Thank you, Alonso. I'll make a very quick comment, but then I'll direct each of the questions to the respective people responsible for the businesses. On the first one on crushing, you're right, Alonso. This is a business that, as we have been explaining since we acquired a company in Bolivia, its performance is closely related to that of not only of the commodity prices themselves. As we have been explaining, as prices are on a higher level, there should be more room to get profitability out of the crushing business for sure. There are also other variables that also impact how the business performed, which are more related to some supply-demand dynamics locally in Bolivia as the yields for soybeans and actually Bolivia. Also, they are production capacity or crushing capacity available in the market. So those variables that also impact. But one of the key ones is the ones that you just mentioned to you right now. But let me just turn it over to Jose to just maybe fill us in some more details about your question as well. Jose?

Just to give a little bit more color on that, the first quarter was exceptional on crushing. We do see still firm prices on soybean and sunflower for the next couple of quarters. So definitely, on that front, we will continue to see high margins. Now probably not as high as what we saw on Q1. Remember that most of sunflower and soybean that we sold in Q1, we bought in Q4 or Q3 of last year at lower prices. Now as we begin to cycle into this year's crop, we see higher prices on the ground. That's a little bit of the supply and demand dynamics that Alfredo was referring to. So yes, we will continue to see high margins in the next couple of quarters, but probably not at the levels that we've seen in Q1.

Thank you, Jose. Now Patricio, could you please elaborate on the second question was margins and pricing dynamics on the consumer products business in Peru.

Sure. Thank you, Alfredo. Thank you, also, for the question. Yes, as we discussed earlier, worldwide prices of commodities have been growing up to 2 digits in the last month. So we certainly had to modify prices of some of our products. After a long period last year, we did our best to avoid any type of adjustment, especially due to the pandemic. However, as a company, we have always made our best efforts, I would say, to offer a wide portfolio to our clients and consumers that will allow them to access to different type of product alternatives depending on each household. Definitely, as we move along, there will be pressures, or more pressures, that we are seeing on the raw material side, especially on the wheat and soy-driven categories. However, while we still think that there will be some tiering down and definitely some affected, some margins might be affected. We are doubling down our marketing investments in our pro brands to maximize or minimize, I'm sorry, the effort, the effect. We are also taking, I would say, stronger pricing on our lower-tier portfolio to try to offset also tiering down that might happen on those categories. But we are fortunate enough to have wide range of product alternatives within different price points that consumers can actually take and [ craft ] and continue to consume. So there is some pressures. We are trying to offset as much as possible in pricing, and there's also some revenue management activities that we are holding and continue to maintain during the next upcoming months across cross elasticity programs that will help us take more strategic pricing efficiencies also on our cost to serve and definitely designed to value initiatives that will offset costs and will prevent us from doing additional pricing and protect our margins.

[Operator Instructions] And we have a submitted question via the platform from [ Mike Sell ], who asks, how could the presidential election impact you both now and after, especially if Castillo wins?

Well, that is a good question, obviously, very relevant given the context [ living ] in Peru specifically. As we all know, Peru is the main geography. And obviously, what happens on the political front is definitely something that we always take into consideration. The current political environment is one that really worries us given the option of potentially Peru following a path that is probably plagued by communist policies that, in our view, very much would affect negatively the country and the people that live in Peru. So that is an element that we are considering, obviously, very seriously. We are preparing on our side, contingency plans, being very careful as to the deployment of resources should that happen and taking all the precautions that a company like ours should take. So yes, that is an element that we'll consider. Our business is consumer products. And therefore, there could be many different type of policies related that could affect our business. However, we -- today, we're a company that we are pushing forward for our business. We are very keen on deploying our long-term view. And hopefully, on the political front, we won't have any setbacks.

We had another submitted question via the platform from [ Luis Ordes Ruiz ], who says it is hard to know, but specifically how an anti-establishment model in the country would affect fundamentals? And are you preparing a contingency plan to face this risk?

Well, I think it's very much the same question that we got before, and I think I've already responded it. So yes, we are preparing a contingency plans in all fronts.

We now have an audio question from Felipe Ucros with Scotiabank.

Two questions on my side. The first one on crushing, maybe piggyback on what Alonso asked. Obviously, what has happened on price is very evident, and I could see the explanation for that very clearly. But you also have had a very significant uptick on volumes. So I'm wondering how you could manage to increase volumes so quickly and how that part of the equation, how sustainable that part of the equation is on the upcoming quarters? And then my second question is on Aquafeed. Obviously, salmon and shrimp prices have been increasing since November, right, which is good news. I mean shrimp is still fairly below the prices that we had a couple of years ago, but at least we're seeing a recovery. What kind of timing do you expect for all of that to trickle down into your business? What kind of timing do you think you're going to see there? Thank you.

I'll very quickly take the second question on Aquafeed and then I'll turn it over to Jose to elaborate a bit further on your crushing question regarding volumes. On Aquafeed, you're totally right. We're seeing prices of both salmon and shrimp products go up, not dramatically yet, but they're going up. And that's obviously happening as demand is slowly picking up the pace as the pandemic in many geographies, stores at least to slow down a bit in terms of impact in the demand, mostly in the food service world. Specifically, in the case of shrimp, what we're seeing is China [ coming ] back to markets to buy. And when China buys, there's a heavy impact to that. One element that we are always watching is will happen with our old value chain, meaning the shrimp exporters in Ecuador have been traditionally focused on seeing China as a main market. After last year with China's decreasing demand because of the effects of the pandemic, they start actually to look for other markets. And now geographies such as the U.S. or even Europe are now taking a larger share than they did historically. So now I could Ecuadorian exporters are actually diversifying that export market base, which is very good news, of course. China, though, is still huge. And when they come back in terms of demand, they become big. So what we're seeing is [ in any case ], specifically, the demand is picking up. Our clients are seeing that demand, and they're reacting to it. Obviously, it takes some time into the whole value chain, but I think we're [ thinking ] months, Felipe, not a year or so. So we'll see demand go up. Our expectation for the market in Ecuador is an important growth overall exports, and therefore, that will affect directly the whole value chain. So we are optimistic on that front for sure. Now let me just it over to Jose, just to go back to the first question, Felipe. Jose?

Yes, Alfredo. Felipe, on the volume question on crushing, it is hard to extrapolate quarterly volumes on crushing. This quarter, we benefited from some forward selling. We also have some logistic dynamics when you have shipments available and when you don't. We also have some internal versus external shipment dynamic that can switch from quarter-to-quarter. We have gained market share in the poultry sector in Peru. So that accounts for a portion of the higher volumes, but that does not explain the 24% volume increase that we are seeing year-on-year. We would expect the year to close with a mid-to-high single-digit growth on volume, not what you saw on the first quarter.

Super clear. And then maybe I can ask a last one, Alfredo. Obviously, very bullish prediction for EBITDA growth for the year, close to 20%. So I wanted to ask you, what kind of commodity picture are you guys building into that case? Are you assuming that prices stay where they are? Or does that include some collection by the end of the year?

Well, thank you, Felipe, for the question as well. Look, our view is that the commodity price dynamic will stay at high levels for the upcoming months for sure till year-end? Yes. And actually, even longer, maybe. We keep obviously analyzing supply and demand dynamics that affect all the different markets. And actually, we're seeing still pressures for even further increases. So what you see on our side is, as Patricio was pointed out, and you'll see -- you'll actually -- obviously, on our B2B business in Peru, as well, we are very, very proactive on pricing actions, on gross to net initiatives and also on efficiency initiatives, [ to try to ] use more than one tool to help us alleviate the impact of the commodities. So yes, the bottom line is, yes, we do see commodity prices staying at high levels for the upcoming months.

[Operator Instructions] And at this time, I show no further questioners in the queue, so I'll turn it back -- Oh, I'm sorry. We do have a questioner now. Our next questioner is Andres Soto with Santander.

Congratulations on the results. It's always good to see that you guys are able to increase prices, and at the same time, record market share in some key categories. My question is related to our capital allocation and leverage. Looking at your numbers, it looks like on your guidance, it looked like you are going to have very comfortable bid levels. And I'm wondering how you're trying to use this increased financial flexibility if your priority is going to be additional acquisition? Or it's going to be an increase in the return to shareholders?

Andres, thank you very much for the call. Yes, we are -- as we did also last year, we are extremely proactive in managing cash, working capital and obviously, hopefully, becoming very efficient also on the CapEx front. So our expectation on leverage, yes, gives us a significant flexibility. Okay. Part of that flexibility, I think we need to keep it because of current context that we're facing, especially in Peru. So we'll have some news in a month or so. So we'll see what happens there. But on the growth front, we always -- as you know well, we always are in the lookout for opportunities, again, that fit our strategic positioning in the country that we have defined as strategic countries. And we see M&A? Yes. But again, it's -- the times always provide us with a sense of being very careful as to how we allocate additional capital today. However, if we see the right opportunity at the right price, we'll pull the trigger. But obviously, very -- being extremely cautious on the leverage front. We are always aiming at the investment grade, keeping the investment-grade rating as part of our strategy. So therefore, that will always be something to bear in mind. But yes, the cash flow should be, is, very positive. Leverage is low. So it gives us enough flexibility, not only to palliate any political issues that we see potentially happening in the next year, but also to keep investing as we think that -- and that actually obviously is aligned to our strategy. But thanks for the question, Andres.

This concludes all the time we have for questions. So I'll turn it back to Mr. Perez for closing comments.

Well, I want to thank you all once again for participating in this call. And as we always say, if you please, any additional questions, please don't hesitate to contact us directly. You have all our numbers. We're more than happy to connect and provide additional answers and comments. So thank you very much, and please keep staying safe. Thank you.

Thank you. Ladies and gentlemen, this concludes today's presentation. You may disconnect your phone lines, log off your webinars, and thank you for joining us today.