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

Thank you and good morning, everyone. We are very pleased that you could join us today. I am Gisele Remy, Managing Director of Finance and Productivity and IRO at Alicorp. As presenters today we will have Mr. Alfredo Perez, Chief Executive Officer; Mr. Manuel Romero, Chief Financial Officer; Mr. Patricio Jaramillo, Vice President of Consumer Goods and other members of the management team who will join us during the Q&A session. Today we will be discussing the first quarter 2022 results after the financial results and earnings report we issued yesterday. If you have not yet received a copy of the earnings report, please visit 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 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. 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 you 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, Gisele, and good morning to everyone. Thank you for joining us today for Alicorp's First Quarter 2022 Earnings Call. We'll start today's call by giving you an overview of relevant events impacting our business, starting with an update on Peru, followed by an explanation on what we're seeing in terms of inflationary pressures and also internal as well as external factors that mitigate some of these pressures. Then we'll move on to an update on our efficiency program that aims at protecting margins without impacting our market positioning. I will continue with comments on our consolidated financial results followed by Patricio and Manuel, who will cover our financial results with business unit and an update on liquidity and our balance sheet. At the end, before the Q&A, I'll take the floor again for an update on our guidance for the full year 2022. Now let's move on to Slide 5 for an update on Peru's macro situation. On the sanitary front, indicators are looking more and more promising, which has enabled the government to lift the outdoor mask mandate. Vaccination levels are high with 81% of eligible population, people over 5 years old, having already received at least 2 doses. This has held out higher mobility rates, which have already surpassed pre-pandemic levels. Nevertheless, as in many Latin American countries, Peruvian families have not been able to recover the possible income as a consequence of higher unemployment rates and higher [ informality ]. This combined with 25-year old and 5-year high inflation rates leads to significant pressure for Peru's most vulnerable families. In this situation, the government has reacted with some temporary tax reliefs, exonerating the value-added tax for 5 basic products: bread, chicken, eggs, sugar and pasta. In addition, also the selective excise tax has been cut for the 84 and 90 octane gasoline. In line with this new regulation, Alicorp is no longer charging the value-added tax for our pasta products and free cope breads. We hope that these reductions will translate into lower prices for the end consumers. However, this will depend primarily on the rest of the value chain. This challenging situation has also led to protests during the last months. During April, we experienced a week-long strike of transport workers and a curfew in Lima imposed by the government. Fortunately, there were only minor disruptions for our company's logistics that allow us to secure the availability of basic goods everywhere in the country with some preventive measures. Let's move on to Slide 6 to discuss the impacts of the ongoing upward trend in commodity prices. As you know, since mid-2020, we have experienced steep increases in commodity prices. These increases have accelerated recently, mainly due to the Russia, Ukraine conflict and several climate-related events hindering the supply of several key commodities. This is already generating tight demand-supply balance, which we expect will continue over the next quarters with higher prices for commodities in the international markets. As a consumer goods company, our cost of goods sold is directly affected by this situation. As you can see in the slide, our cost structure has an important component of agricultural raw materials whose prices have increased significantly during the first quarter and have continued increasing so far in the second quarter. For example, as Russia and Ukraine are responsible for 29% of the global wheat exports, the international price of wheat increased by an additional 17% since the beginning of 2022. Moreover, the price of soybean oil, which is our most representative cost for our edible oil category, has increased by 47% year-to-date. In addition, the price of crude oil climbed because of higher activity around the world and more constrained supply due to the conflict between Ukraine and Russia, putting pressure not only on our logistics costs, but also in our packaging and all derivatives used in -- as raw materials in our home and personal care platforms. In direct response to these relative -- relevant increases in our costs, we have accelerated right-sizing and design to value initiatives. Moreover, following the situation we experienced in the second half of 2021, we are cautiously passing through our higher costs via pricing actions, ensuring that our clients and all our channels have sufficient time to adjust to the new prices. We are happy to announce that so far, these initiatives have proven successful, and we continue to recover volumes, market shares and profitability in key categories. Additionally, our company has first-class capabilities for the procurement and hedging of commodities, managed by a highly experienced team. Thus our company's practices active and constant hedging of our most representative agricultural commodities such as wheat, soybean oil, soybean meal, among others. Our strategy aims at layering our exposure and providing the necessary visibility and timing for our business units to react to the cost evolution through pricing, other revenue management initiatives and also efficiencies strategies. These skills represent for us an important competitive advantage that leaves us in a relatively favorable position when compared with our competitors. That tend to have shorter positions and less sophisticated hedging strategies. Another factor that helped us mitigate our exposure to commodity price inflation comes from the composition of our business portfolio. As 2021 showed, our Crushing business in Bolivia serves as a natural hedge for other business units with exposure to commodity prices. The profitability of the Crushing business depends on the crush margin which has a positive correlation to commodity prices. Even when the price of soybean and sunflower seed increases for us, in these scenarios, higher commodity prices lead to incremental EBITDA thanks to higher crush margins. Finally, another factor that helped us is the 4.5% appreciation of the average exchange rate of the Peruvian Sol against the US Dollar compares to the previous quarter. Now let's move on to Slide 7 for an update on our efficiency program announced 2 quarters ago. We continue on track with a multiannual efficiency program announced last year and expect to deliver over PEN 200 million in run rate savings by 2023. The program aims at reported profitability in line with the strategic prioritization without impacting market positioning. As we have already talked about the program in our last 2 calls, we'll focus on an compared to last quarter. Regarding COGS initiatives, 28% of our SKUs in Peru were rationalized in 2021. This has allowed us to reduce SKUs with negative contribution margin, reduce storage costs and reduce working capital needs as well. We will continue simplifying our portfolio, looking to focus on our products that drive our profitability and improving our return on invested capital. In terms of go-to-market and route to market, between 30 million and 40 million savings have already been executed, leading to a reduction in our cost to serve, mainly in storage and sales expenses. This will be reflected mostly in our 2022 results. Additionally, we have recently launched a profound revision of our go-to-market model to ensure that we continue optimizing and also strengthening these key competitive advantage for Alicorp in Peru. Regarding our transformation programs, we have estimated the contribution of the anal transformation program in our Aquafeed unit at over PEN 30 million in savings by 2023. As mentioned in our previous call, while the PEN 100 million in savings executed in general and admin expenses was partially reflected in 2021, most of these savings will be reflected in 2022. However, we will only see the entire impact in 2023 as we continue executing several efficiency programs during this year. All these multisectorial efforts contributed different metrics, we use to track our progress, and we expect further improvements in our SG&A over sales and SG&A over cross profit indicators by year-end and an estimated 3 to 4 percentage points relative to gross profit versus 2021. Let's now discuss our consolidated results for the first quarter of 2022 on Slide #9. Consolidated revenue grew 35%, while volume increased 12% year-on-year in the first quarter of 2022, mainly driven by the solid performance of our Aquafeed, crushing and B2B businesses. Our consumer goods units also exhibited an important increase year-over-year as a result of our price actions to partially offset the continuous increase in international commodity prices. Moving on to profitability. Let's now review our consolidated EBITDA for the first quarter 2022 on Slide #10. Consolidated EBITDA exhibits an important increase of 18% for the quarter compared to 2021, mainly explained by the strong performance of our Aquafeed, crushing and B2B platforms. This was partially offset by the decrease of our consumer goods unit due to cost pressure and also tiering down effects. It is important to mention that our consumer goods unit saw an important improvement compared to the last quarter, but still does not reflect on our year-on-year figures. Moreover, it is also important to mention that despite the dramatic increases in several of our COGS, our Peruvian business, both including Consumer Goods Peru, our B2B business performed pretty much in line with the first quarter of 2021, which was a good quarter for us. I would also like to highlight that we incurred in restructuring expenses, write-offs and other nonrecurring impacts with a net impact of PEN 13 million during the first quarter of 2022. During this quarter, we had about PEN 10 million of restructuring expenses and had around PEN 10 million of write-offs as we rationalized some unprofitable categories. These negative impacts were more than offset by the sale of real estate in Lima. As we continue rationalizing our portfolio, we would like to continue to experiencing one-offs and one short expenses. We're confident that despite these negative nonrecurring and noncash impact in our results, this initiative will be value-accretive in the medium term. Let's now review our consolidated net income for the first quarter of 2022 on Slide #11. Net income increased 18% year-on-year in the first quarter of 2022, mainly explained by higher operating profit and a positive base effect due to the loss of our discontinued operations, Brazil and Argentina during the first quarter of 2021. This was partially offset by an increase in our financial expenses and income tax. Excluding Brazil and Argentina, net income increased 4% year-on-year. Now let me pass the floor over to Patricio, who will discuss the operating results of our Consumer Goods Peru and Consumer Goods International businesses.

Thank you, Alfredo. Let's begin with an update on Consumer Goods Peru market dynamics on Slide #13. For the first quarter of 2022, Peru's GDP is expected to grow at around 4.2% year-over-year and private consumption, 4.9%. Importantly, Alicorp's revenue growth outperforms statistics with an 8.3% growth year-over-year. We continue recovering our business with the first quarter 2022, exceeding our fourth quarter 2021 results in revenue by 5%, gross profit by 26%, gross margin by 4.2 percentage points and a remarkable EBITDA recovery of 169%. This confirms that our strategy focused on accelerating the growth of our premium brands through increased advertising spending, while highlighting product differentiation versus key competitors. Implementing the sign to value initiatives across key categories to reduce costs and capturing pricing opportunities is working well when we are recovering profitability and volumes faster than expected. Additionally, our channel mix continues to tilt towards the traditional trade channel, which benefits the company's overall profitability. During the first quarter 2022, the traditional channel represented 77% of our sales plan, 2 percentage points higher versus the fourth quarter 2021 and 7 percentage points higher than the third quarter 2021. Also, we are starting to see a faster-than-expected recovery of our core brands within our product mix that is also benefiting profitability, reaching a gross margin of 24.5% versus the 20.3% we achieved in the fourth quarter of 2021, despite higher cost of goods sold in key several categories mentioned earlier. Also, we continue to recover our market share according to Kantar. During the first bimester in 2022, we have recovered or maintained share of volume in 64% of our categories when compared to our loss trading in 2021. Also, in the modern trade, value shares for the quarter are up in more than 55% of our categories also when compared to last year. Regarding innovation, we entered a new category, salad dressings with the introduction of Alinos Alacena. This effort is aimed at converting the homemade salad dressing market to a more flavorful, convenient and easy-to-use alternative. Since its launch in November 2021, we have achieved a 46.5% share of volume in the modern trade, doubling the market size in less than 5 months. Other innovations during the quarter include the introduction of Don Vittorio, Alfredo white pasta sauce and the re-launch of our Pesto alternative to complement our existing red sauce product line. Let's move on to the financial performance of our Consumer Goods Peru Unit on Slide 14. First quarter volume grew 0.7% when compared to the fourth quarter of 2021, however, decreasing 7.2% versus last year. Importantly, volumes have been recovering on a monthly basis, with March volumes growing 32% versus January and reaching more than 64,000 tons, up 14% versus our average fourth quarter 2021 results. This is despite the fact that historically, first quarter volumes have had lower numbers than fourth quarter volumes due to seasonality. Volumes grew in categories such as pasta, domestic flour and cookies and crackers when also compared to last year. Revenue in Peru grew 4.6% compared to the fourth quarter of 2021 and 8.3% versus last year. Growth versus last year is predominantly driven by pricing initiatives in several categories such as edible oil, pasta, flour, laundry soap and detergents to partially offset raw material increases in soy, wheat and palm. As we can see, in this quarter, we are also able to increase our gross profit per ton by 25%, reaching PEN 1,417, still slightly below historic levels, but recovering versus last quarter due to a better channel mix and better product mix explained earlier. Despite this increase, our gross margin decreased 8.4 percentage points versus last year, reaching 24.5%, mainly due to higher costs of goods sold. Recovering volumes and gross profit per ton gives us confidence that we continue on the right track and evidences the resiliency of our business and the strength of our brands. EBITDA for the first quarter decreased 20.7% versus last year, however, increasing 169% versus the fourth quarter of 2021. Our EBITDA for the first quarter 2022 reached PEN 130 million. Considering restructuring and one-off expenses, our adjusted EBITDA would have reached PEN 139 million. Let's move on to Slide 15. Consumer Goods International market dynamics. Regarding our Consumer Goods International unit, we continue to focus on our home care category expansion and strengthening our go-to-market initiatives to accelerate growth, both in Bolivia and Ecuador. In Bolivia, we are delivering significant total growth in our home care categories, achieving close to a 20% increase in revenue year-over-year. Importantly, regarding our key household categories such as bleach, cleaners and insecticides, we're experiencing a 35% increase in the first quarter versus 2021 behind advertising, innovation and improved visibility and distribution. This is part of our strategy to continue building our home care platform to reduce our dependency on our edible oils business, which has limited capacity to attend its profitability during cost increases due to local price controls in the country. Additionally, our horizontal distribution model is expanding with the opening of our second exclusive distributor in La Paz, El Alto which started operations in -- This complements the one we have already opened in Santa Cruz during 2021. We now aim to reach directly more than 15,000 points of sale by the second quarter of 2022. In Ecuador, a positive economic momentum continues as unemployment numbers have improved from 5.4% in February 2021 to 4.3% in February 2022. This means that around 80,000 Ecuadorians have on jobs and are generating higher incomes. In this geography, we're also focusing on our home care categories with new marketing initiatives in detergents, insecticides and surface cleaners with our brand Sapolio. Additionally, our new go-to-market strategy aims at increasing growth through an improved distribution model that will enable us to reach close to 45,000 points of sales by year-end. This evolution of our model includes the development of close to 20 territorial distributors in key areas that will predominantly reach our mom-and-pop universe and will complement our 2 macro distributors that already operate nationwide. Let's move on to the performance of our Consumer Goods Bolivia on Slide 16. Bolivia's revenue increased 9.5% year-over-year in the first quarter, fueled by our focus on home care categories explained earlier. However, our EBITDA fell 32.2% due to a lower gross profit because of price controls in edible oils, added to cost pressure and chewing down. Let's move on to the performance of Consumer Goods Ecuador, on Slide #17, please. Ecuador's revenue grew close to 5% year-over-year, fueled by increases in volumes sold, mainly in home care categories, price picking initiatives and gross to net efficiencies. EBITDA increased 12.3% as a consequence of higher volumes sold, revenue and especially SG&A efficiencies due to savings compared to the first quarter of 2022.

Thank you, Patricio. Let's move to Slide 18 for an update on our B2B business market dynamics. The restaurant industry remains close to pre-pandemic levels as restrictions are loosened and consumers resume out-of-home activities. Our foodservice platform outperforms Peruvian restaurants GDP and exceeds 2019 revenues. This has been achieved, thanks to our brand equity, our strongly relationship to existing customers and our successful new client protection. Regarding active clients, we reached 21,000, slightly below pre-pandemic levels. We are very pleased to share with you that our results already surpassed pre-pandemic levels with volume and gross profit 8% and 22% higher than in 2019, respectively. These results include the impact of SKU rationalization. Excluding this effect, our volume growth would have been 9% year-on-year. In this ongoing path to recovery, customers are looking for more value products, accelerating tiering down in most of our categories, such as edible oils, lard and flour. This client's need is addressed by our multi-tier strategy, strong brands and service level, allowing us to maintain our clients' preference and gross margin per ton. Let's move on to Slide 19 for an overview on B2B financial performance. Revenue grew 45% this quarter compared to last year due to market recovery, client's prospection and higher prices aim to compensate the increase in commodity prices. Our foodservice platform showed a 37% growth year-over-year, and our bakery platform grew 50% year-over-year, thanks to our pricing strategy that balances market competitiveness and profitability. Gross profit increased by a remarkable 45% with an improvement of the gross profit per ton of 12% on the back of our pricing strategies and our de-complexity initiatives. EBITDA increased 74%, supported by our gross profit improvement and additional SG&A efficiencies. This quarter, we had restructuring and write-offs for 2.9 million ton. Excluding these nonrecurring expenses, EBITDA would have increased 64% year-over-year. Next, we will cover the Aquafeed market dynamics on Slide 20. In Ecuador, shrimp exports grew 43% year-on-year, mainly due to the recovery of demand from China. China continues to regain ground among Ecuadorian shrimp exports. However, there are still significant volumes exported to the U.S. and Europe, consolidating the trend for a more balanced and diverse Ecuadorian shrimp go-to-market strategy compared to previous years. To fulfill the demand from U.S. and European clients, Ecuadorian exporters continue to increase the offer of value-added and headless shell-on products, which are preferred in these 2 markets. At the same time, exporters also continued to focus on shipping greater volumes to China. As we move further into 2022, we will expect strong growth rates from the Ecuadorian markets. International trade for shrimp continues to improve despite logistics disruptions and new COVID-19 related lockdowns in China. A positive demand scenario has kept global export prices relatively high compared to historic levels, even though we see a minor setback compared to the previous quarter. However, the prices paid to small farmers in Ecuador are currently low due to growing uncertainty that exporters have about the Chinese market. These uncertainty stems from the Chinese authorities 0 COVID policy, which has resulted in the suspension of export licenses to Ecuadorian stream producer. Nevertheless, market experts see only minor short-term impacts. Despite the recent concern on the Chinese market outlook, we continue to see farmers maintain their production strategies that have boosted returns during the last quarters. Thus, there are increasing on densities, which also increases the demand for feed, investing even more in automation and new technologies, which includes Vitapro's new digital ecosystem, slowly tiering up towards more premium diets where Vitapro is a market leader and reopening dry ponds and improvement industrial facilities in order to better cope with growing demand from the U.S. and Europe. Regarding the salmon feed business, exports of salmon from Chile increased 44% versus the fourth quarter of 2021 and are continue -- and are expected to continue along road to recovery in 2022. As we shrink the recovery of demand from salmon, especially from the U.S., but also from other main import regions is above pre-pandemic levels and continues its upward trend mainly due to higher out-of-home consumption, increased retail sales and the recovery of the foodservice industry. Prices in the salmon market have bounced back to above pre-pandemic levels and are now at 5-year highs, which has incentivized farmers to rapidly start selling. Therefore, we expect slightly higher export volumes in 2022 and especially in 2023. To compete successfully in the Chilean salmon industry, Vitapro is continuing to deploy its differential go-to-market strategy in order to capture new tenders in 2022. All in all, during the first quarter of 2022, we continue to see a recovery in both the shrimp and salmon industries, and we expect this trend to continue throughout the year. Vitapro continues displaying exponential growth, especially in Ecuador. This growth plus our differential feed products and strong brands allows us to continue generating value for Alicorp. Let's move on to Slide 21 to cover Aquafeed performance. In terms of business performance, the 62% revenue growth is mainly explained by an increase in volumes in both our business units, the tiering up of our portfolio to value-added fees, mainly in Ecuador and by price initiatives introduced to compensate for the increase in our raw material prices. Gross margin decreased 2.8%, mainly due to price increases in our raw materials and technical problems in one of our Chilean production lines that is now under control. Despite this, EBITDA increased a remarkable 52% year-over-year, mainly due to the growth in volume, while EBITDA per ton increased 8% year-on-year, explained by the dilution of SG&A expenses. Next, we will cover the crushing business financial performance on Slide 22. The Russian business had another notable quarter, mainly explained by the positive effect of price increases in meals and oils and higher soybean production. We would like to highlight that gross volume in the first quarter reached 315,000 metric tons, growing 37% year-over-year. Revenue increased 54% year-on-year in U.S. dollars, explained by higher prices and a 17% growth in volumes sold to third parties. As you know, reported results in our financial statements come from the sale to third parties only. However, it is important to highlight that volume for internal consumption grew 17%, reaching 71,000 metric tons. This is our remarkable result product of an outstanding margin management and sales contracts with first-class counterparts such as [ Calio ], [ Buze ] or [ Seaport ] and larger growth versus last year. These initiatives allowed us to increase our market share, highlighting the strength of our relationship with local farmers and the success of our strategy to become a one-stop shop for them with best-in-class service. In line with this strategy, our agricultural solutions line doubled its gross profit year-on-year, reaching $1.5 million in the first quarter. EBITDA increased $12 million year-on-year, backed on our ability to negotiate prices and our commercial team efforts in developing the business. Let's move to Slide 24 to discuss our liquidity and credit rating. Regarding our liquidity levels, as of March 2022, we reduced debt by PEN 699 million, repaying PEN 308 million. Despite these reductions, we maintained a comfortable cash position, which amounted to PEN 139 million, PEN 134 million more than by the end of last quarter. Both the prepayment of long-term liabilities and the partial repurchase of our global bond allowed us to reduce our financial expenses as we use cash available to complete such reductions. During the rest of 2022, we will continue looking for ways to reduce debt and interest expense, prepaying or repurchasing debt with cash or readily available loans with lower interest rates. As of March, our liquidity covers 2.32x the principle of debt maturing over 2022. Moreover, and to further boost our liquidity, we have committed credit lines in the amount of PEN 167 million, ready to be disbursed and committed credit facilities for more than PEN 5 billion and have room to issue debt securities in the Peruvian market under our local bond programs for PEN 1.6 billion. Both international rating agencies, Fitch and Moody's maintain Alicorp's investment grade rate. However, Moody's recently changed our outlook from stable to negative. The reason behind the rating action was our expectation that our credit metrics will remain weak for our rating category over the next 12 months to 18 months as a result of our exposure to an economic slowdown in Latin American countries and negative consumer sentiment and political risk in Peru. In order to tackle these concerns, we remain active in exploring opportunities to improve our maturity profile through the extension of our liabilities and the better use of our cash as a way to reduce our financial expenses and to secure our liquidity. We remain confident that with the strong recovery throughout all our businesses, this should mitigate most of these concerns. Let's move on to Slide 25 to comment on our debt metrics. Regarding our debt metrics, our net debt-to-EBITDA ratio improved from 3.3x as of the fourth quarter of 2021 to 2.64x as of the first quarter of 2022. The decrease was mainly explained by a positive operating cash flow and an increase in our EBITDA over the last 12 months as a result of the good performance of crushing, Aquafeed and B2B units. This ratio will probably deteriorate over the next couple of quarters because of the purchase, storage and processing of soybean and sunflower seeds, a process that occurs over the second and third quarter and makes our debt seasonal. As you can see in the chart on the top of the slide, that seasonality is driven by the behavior of our readily marketable inventories, which prepares exclusively to the soybean and sunflower seed stored in our facilities in our Bolivian operation and advanced payments to farmers, advances that secure the purchase of readily marketable inventories. It is also important to note that because of the upward trend in both the commodity prices and the purchase volumes, we expect an increase in the fund stability to this business line over the following quarters. It is also noteworthy that since these really marketable inventories are hedged and the prices are sustainable through commodity exchanges in highly liquid markets, we believe that this inventory is a cash proxy that could further enhance our liquidity position. Let's move on to Slide 26, please, for an update on working capital and our average cost of debt. Debt maturities in 2023 or liabilities incurred several years ago at an average rate of 7.95%. Therefore, we expect to refinance part of such maturities by year-end at a rate close to these levels despite the global increase in interest rates. These refinancing should improve our maturity profile while keeping our interest expenses at similar levels. Regarding our working capital over the last 12 months as of March 2022, our custom versus cycle averaged 16 days. Despite higher inventories due to some supply chain disruptions, high commodity prices and the volume increase in our crushing units, we were able to improve our cash conversion cycle by 1 day when compared to the last quarter as a result of efficiencies in our receivable management. Looking forward, even though we are aiming to improve our cash generation for 2022, commodity prices and plans to protect against logistics disruptions could cause some volatility in our working capital ratios through 2022. Finally, let me sort go back to Alfredo to wrap up today's presentation with a view of what we expect for 2022.

Thanks, Manuel. Let's turn to Slide 28 for a glimpse of what we expect for our full year 2022 results. Despite all the factors discussed in this call that represent additional pressures on profitability versus our last earnings call, we see that both our pricing as well our efficiency efforts should be successful in offsetting most of these impacts, and we are, therefore, maintaining our previous guidance for 2022. In that sense, I would like to update the main assumption behind our guidance. In 2022, we expect the economy of our main geographies to continue the recovery from the 2020 recession. And even though inflation rates put pressure on farmer's income, we're confident that our Consumer Goods units will keep recovering in the second half of the year. We also see clear positive tailwinds for the Aquafeed and crushing businesses that are surpassing our growth and profitability expectations. On the other hand, we do see some headwinds for our consumer goods businesses. Even though we had a very solid start of the year, the dramatic increase in commodity prices is adding pressure on our pricing actions. We remain cautiously optimistic that we will be able to pass through our rising costs, but it is possible that we might have some lag in the following quarters, which may temporarily impact our gross profit per ton. Considering the aforementioned assumptions, we expect revenue to reach double-digit growth in the full year. EBITDA growth should reach high single digits, which means that the contraction of percentage margins will continue. Nevertheless, we will invite you to pay more attention to the gross profit and EBITDA per ton metrics since commodity price inflation is generating a distortion of percentage margin metrics, given that they are relative to sales as in the case of several other consumer goods companies. This makes current margins not comparable to the ones we had before 2020. CapEx should reflect our prioritization efforts falling to USD 70 million, excluding equity. This represents an almost 30% reduction versus 2021 levels, excluding Aquafeed. Including Aquafeed and the expenses planned for this unit, CapEx should reach USD 125 million. For leverage, our net debt-to-EBITDA ratio should fall to approximately 2.7x by year-end 2022 on the back of our solid free cash flow generation. This concludes our presentation. And now, as always, we welcome any questions or comments that you may have.

[Operator Instructions] We have a question from Mr. Felipe Ucros from Scotiabank.

Just a couple from my end. The first one on the Aquafeed business and the China shutdowns that we've seen recently. Obviously you've seen a very solid recovery in the division, probably above what you were expecting definitely above what we were expecting. So congrats on that. You also mentioned last year that you embarked on a mission to diversify away from China where you were receiving some export bands last year. And you mentioned some of that in the call. So just wondering now that China went back into severe lockdowns in some cities, how has the impact been different? And how well diversified has the business been compared to last year, now that you're kind of refocusing your efforts on expanding the U.S. and EU a little more?

Thank you, Felipe, for the question. And I think you're exactly right in the sense that the business has been performing above our expectations, especially our Ecuadorian unit. As we mentioned during the call, there has been some hiccups in the capacity of some of our clients to export and to get their products out to China because of those severe COVID related lockdowns that prohibited import from China of certain products coming from the Ecuadorian farmers. That has not had a significant impact on the market. And hopefully, we expect that to solve itself in the very near future. You also mentioned about the diversification from Ecuadorian exports from China into U.S. and European markets rally. That has continued this year. Obviously, China has been and will remain to be the main export market for the Ecuadorian shrimp. But the share that both the U.S. and Europe are gaining is something that will provide some more stability to the export business on the business in Ecuador. I don't know if Hugo was present, he will have to add anything on top of what I just say.

Thank you, Alfredo. As you said, in this case, the grow of the spot volume from Ecuador to U.S. and Europe is growing year-by-year. So now the volume of China represents less than 50% of the total volume. So we can manage and the quarters can manage to redirect the volume to other countries.

Thank you, Hugo.

Perfect. That's very clear. And now maybe turning a little bit to Ecuador. You've been having a lot of changes in this division, right, bringing more Intradevco products, switching to distribution a little bit more towards there and also reducing a portion of the production you have for third parties. All that points towards a push to grow the consumption and home care businesses organically in Ecuador. So just wondering if you could give us a bit more color on the change of strategy here. And where you see that business, let's say, 5 years from now or something like that?

Thank you, Felipe. We are very proud of the inroads we're making into the Ecuadorian market on our consumer business platform. But I would love to have Patricio to give -- provide more color into all the different efforts on the marketing, brand building, especially also go-to-market strategies that we are deploying there. Patricio, the floor is yours.

Thank you, Alfredo, and thank you, Felipe, for the question. Yes, we're putting a lot of effort on developing Ecuador from an organic standpoint. I think that we have a tremendous opportunity to enter new categories where we have, I would say, significant competitor advantage versus the key incumbents there in the country. We have had a business that has been dependent on sauces and pass that for the last 10 years. However, we do see opportunities to enter new categories such as what we have done over the past year or so entering cookies and crackers, entering detergents, obviously, expanding our home care portfolio with the introduction of the Sapolio brand. And we continue on that effort. I think that home care is a platform that we are heavily investing, not only in Ecuador, but also in Bolivia, as I mentioned over the call. The biggest challenge in the case of Ecuador was getting our go-to-market strategy to work towards really what we wanted to do. We were only reaching anywhere from 7,000 to 8,000 points of sales. And now with the new strategy that we are implementing in place, we're hopeful to reach close to 50,000 points of sales by the year-end. And this is something that, as you know, Ecuador is predominantly, I would say, similar to Peru in terms of the traditional trade and the modern trade a little bit more concentrated on the modern trade, which we serve directly, but we need to get a go-to-market strategy that will enable us to reach that traditional trade, which is very important for us. And that is where we have been focusing on with the introduction of this new close to 20 distributors that will enable us to reach those point of sales and will complement the efforts of the already 2 big distributors that we have in the country. So there's a lot of, I would say, initiatives in terms of what to do in Ecuador. If you ask me where would I like to see the country? I would like to see it and close to $100 million in terms of revenue over the next 3 to 4 years. And that is where we're looking at developing it.

Very useful color. And congrats on the question on that. Maybe since there are not a lot of people on the queue, maybe I can do another follow-up, Alfredo. We've talked about the hedging position of the company, and you mentioned on the call that you feel you kind of have an advantage locally versus some of your competitors. And so I'm somewhat confident that you'll be able to fight the increase in commodity costs. So just wondering because I'm having a lot of trouble with in solving this. Obviously, on consumer, you're very strong in many categories. But some of your competitors are large international guys, which I would assume would be very well hedged and very long into the year. So just wondering why you guys are feeling so confident versus the competition on the hedging angle?

Thank you for the question again, Felipe. I'm sitting here with [ Lucho ]. I will turn the answer to him to actually go for it. One very small comment, as you know, our company, given the businesses that we are in, we have different types of competitors depending on the category. A few are large international players, but many are more smaller, medium-sized, local/regional, regional and Peruvian players that compete against us mostly in the food categories. So I'll just turn it over to -- way better answer.

The reason why we feel confident in terms of how we're managing and hedging the risk position of the company is basically because we have I would say we have comparable processes, comparable risk policies, comparable hedging tools that we have access to comparable to multinational companies. And we have a team that we have developed their capabilities within the past, I would say, 5 years. We constantly have different conversations with multinational companies with trading companies to not only get and gain market inside the information, but also build the capabilities of the team. It's going to be a challenging environment, as you know. Just to give a little bit of color and perspective yesterday, the board trade released expanded limits, which -- what does that mean? That means that the price which the commodities can vary every single day are -- have been expanded. And to give you a perspective, just on soybean oil as of -- up to last Friday, the prices could vary, roughly speaking, $88 per metric ton up or down every single day. As of yesterday, the prices can vary $110 up or down every single day. So the environment is going to be challenging, but we feel confident of the capabilities of not only the capabilities of the team, but as I mentioned, the different processes, the risk policy and the limits that we have established in the company.

Our next question comes from Mr. Alonso Aramburú from BTG Pactual.

I just wanted to follow up on the latest comment on hedging and COGS pressure. I mean we saw an improvement in gross profit per ton from fourth quarter to the first quarter, but this was really before the spike that we've seen in commodity prices in the last few months. So I'm just wondering how do you think that is going to evolve maybe into -- are you feeling now more the pressure of this so I think commodity prices? Or are you hedged into maybe the second quarter of the year and maybe we should be clearly more of a pressure in the second half of the year? And my second question is just regarding the use of cash. You have a nice cash position. You paid an extraordinary dividend last year. I'm just wondering if you are considering potentially another dividend like that this year?

Okay. On the first one, I'll ask both [indiscernible] and Patricio to tackle it from different angles. On the first side is just the hedging angle in terms of our strategy and how -- what we can actually say about our long position. And then the second part of that answer for it to be is how we, as a business, are planning to react towards this increased pressure from a cost standpoint because of the higher commodity prices. As we commented on during the call, myself and Manuel, our strategy in terms of how we pass along these cost increases quarter-by-quarter might actually show some margins pressures in the second quarter, for example, okay? We're expecting that, but I will allow both [indiscernible] and Patricio to comment a bit more on that. On a year basis, we remain confident as we said during the call. So [indiscernible], let me first turn it over to you, and then to Patricio.

Okay. Thank you, Alfredo, and thank you Alonso for the question. Regarding the hedging strategy and what we can share with you in this call, one of the approaches that -- or the main approach that we have when we hedge the different commodities of the company uses and the business uses very linked to what is the visibility that the different business units require -- for instance, if the Aquafeed business requires a 3-month visibility on cost of goods sold, and we have certain conviction of where the market is going to be heading to. We tend to advance on positioning the company on soybean meal and the wheat that the Aquafeed business unit requires. So what -- basically what we do is we give the required visibility that the business requires. Going beyond that, Alonso, it's quite risky for the main -- for the reasons I explained before. With such violence variations of prices going too long can be a very risky proposition. The countermeasure to go long could be to buy optionality and by puts, but volatility is at historical high levels, which basically creates the cost of optionality very high. So that's -- what I can share with you is that we will be looking at our -- at any given time, the position of the company, we have constantly been having an in-demand position. If we would be -- it's been constantly below the market levels. And regarding the B2B business, the ability of having a commodity team in-house give us a very fast visibility as to what are the different pricing actions that we're going to have to make for the next quarter and allow us to make really quick and fast decisions. And we've been approaching the -- our pricing strategy on the B2B front for more a leading position, and so far has been working well. However, as Manuel mentioned, especially on the B2B front, as we have seen in the presentation, there is a tiering down in place. I do not expect that on the B2B front, we're going to have a tearing up anytime soon. When we go and visit customers and go to the markets, price, as you may imagine, is becoming -- the weight of price on the customer drivers is becoming more and more important as you may imagine. I'm going to let now Patricio comment on the B2C front.

Yes, I mean, we are experiencing important increases in costs of raw material and packaging supplies. And this is something that will certainly be impacting several product categories, such as pasta, edible oil, detergents and the majority of our home care categories, I would say, in order to offset these costs either totally or partially, as we have done during the first quarter, we continued to implement pricing initiatives and we have learned a lot from the strategies that we implemented in 2021 to trim them down and to I would say, make them better. Also, we are implementing several design-to-value initiatives, reformulations that we are going to be implementing during the second half of the year, rightsizing of some of our important categories within the portfolio, where still, as I said before, continue to capture opportunities in terms of pricing. As [indiscernible] mentioned, for the B2B business in the B2C, we are also expecting some tiering down in certain food categories, especially in the ones that I would say are low differentiated categories where we have, as Alfredo mentioned, low-tier local competition, more than multinational, I would say, local competition that are obviously being affected by cost increases in terms of the commodities, but perhaps their margin targets are somewhat different to the ones that we have. But to offset this effect that we have done also during this first quarter, we are increasing our marketing expenditure of our core brands with the objective of highlighting our product's point of differentiation versus competition and also accelerating innovation as we have done for our core brands for the remainder of the year. As I said before, we have learned a lot in 2021 in terms of pricing and how to capture those pricing initiatives and better balance profitability and sales. We feel that our clients are working. We still aim to manage cost increases with additional pricing, as I said before. However, I would say that we are in the right track of recovering them. And with the right strategies as we have been deploying it, deploying them over the first quarter, I think where we're going to be able to achieve our targets.

Thank you, Patricio. Now on the second part of your question, let me just turn it over to Manuel to go ahead with the response. Manuel?

So regarding our cash position, as I mentioned, right now, we have around PEN 1 billion in cash. However, during the -- as I mentioned during the second and third quarters, we will probably need some of that cash or to build up the readily marketable inventories for the crushing business. So in the second and third quarter, we will probably see an increase in our net debt-to-EBITDA ratio. Regarding extraordinary dividend payments, we don't -- we currently don't have any plans to distribute any more dividends during the year. However, if we see that in the fourth quarter, cash generation and EBITDA is stronger than what we expect, we could evaluate the possibility of distributing additional dividends. Right now, we are mostly focused on reducing the debt and making prepayments for 2022 and 2023 to reduce -- but obviously, we will continue evaluating this -- keeping in mind that we don't want to increase net debt to EBITDA above 3x to ensure that we maintain investment grade.

We have 2 text questions that have come through. Given the time, I'll probably read them out both at the same time. The first question, thank you very much for the presentation. Congratulations on the results. To what factor would you explain that this association between your operations and the behavior of the stock price? Have you considered a share buyback program? That's the first question. The second question is why higher EBITDA is explained by higher commodity prices as it was the case in some other business units? So those are the 2 questions.

Regarding the first question regarding the difference or the association between our operations and the stock price, obviously, the political situation in Peru is having uncertainty, which has a direct impact on our share price. And additionally, there is a risk that Congress might approve additional withdrawals from pension funds, local pension funds own around between 30% and 35% of our share. So there is an expectation that, that might put short-term pressure on our stock. So when that initiative from the executive branch was announced that caused a direct reduction in our share price. Obviously, we don't believe that relates to the -- our current operations for our results. And we strongly believe that current share prices are well below the intrinsic value of our business. Regarding the second question about share buybacks, we will -- in line with what I answered to Alonso's question is not something that we might evaluate in the fourth quarter, taking into account all alternatives, making sure that we allocate capital in the most efficient way possible. But right now, we are not considering any share buybacks mainly because of the debt situation that I discussed previously.

We have one more text question. I have 2 questions. Firstly, what are your expectations on volume growth for CGP and CGI for this year, particularly considering the price actions in those businesses? Second, how much room do you see to rise prices in your businesses in payroll, taking into account the current political environment? In which categories do you see less room to increase prices?

I think in -- we have talked a little bit about this during the presentation and by answering previous questions. But please, Patricio, and then also [ Lucio ], could you please comment a little bit further on the question?

Sure. On the volume front, we're expecting Consumer Goods Peru to be mainly flat versus last year, and this is obviously driven by pressures that we need to take on pricing to offset what we are seeing in terms of cost. In the case of our CGI business, I say it's going to be single-digit growth, and this is mainly driven by volume growth that we're going to be experiencing as we have had in the Ecuadorian business and perhaps also single-digit growth in the business in Bolivia, given the fact that we're getting very good results on the development of the home care platform, as I explained earlier. In terms of pricing, yes, I would say that the scenario is to be cautious. However, as I said before, we are taking prices in several categories. We have taken prices in pastas. We have taken prices in edible oils, we have taken prices in detergents. We are following, I would say, the upward trend that the market is providing us in terms of trying to recover our profitability. As I said before, also, it's not only about prices. It's also about trying to reduce costs in terms of implementing the sign-to-value initiatives that we are putting in place and also some rightsizing of the portfolio to better fit in terms of the out-of-pocket that consumers are paying today for several categories. So I would say that the strategy is a sound one. It's a very robust one that will enable us to reach our margin targets by year-end and continue the upward trend in terms of the margin per ton that the increases that we are experiencing on the year-to-date.

On the B2B front, we expect and we're prepared for increased volumes basically as we see, again, the out-of-home consumption growing and recovering in the country. We also see some growth on our cleaning categories that we have launched -- we started piloting actually last year, and we have launched this year. So that is growing at the unexpected pace. In terms of -- well, I think just to complement what Patricio mentioned, how are we preparing to face the continuous pressure on cost of goods sold -- we're trying to be very precise and careful as to what segments we serve. We're also working very actively on what we call the complexity, which, in essence, is identifying through ABC tools, what are those flows, what are those categories, what are those segments that are not really adding value to the company and select and making some decisions, hard ones and making some decisions that are aiming towards continued creating value for the company.

We see no further questions on the line right now. I would now like to pass the line to Mr. Alfredo for his closing remarks. Please go ahead, sir.

Thank you, again. Well, thank you all for the time you spent with us. As we always do say, please, if you have further questions, comments, don't hesitate to contact us directly in our Investor Relations department. And also, please stay safe and have a great day. Take care guys.

Thank you very much. This concludes today's conference call. Have a great day.