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

Good afternoon, and welcome to Alicorp's Fourth Quarter 2022 Results Conference Call. I will now hand over to Manuel Romero to begin the presentation.

Good morning, everyone. Welcome, and thanks for joining us today. I would like to start this call introducing Álvaro Rojas [indiscernible] who has recently been appointed as Managing Director of Corporate Finance and IRO at Alicorp. Álvaro has an ownable professional career within the company with approximately 16 years of experience in which he has led marketing and sales teams in our consumer goods, vice presidency in Peru and Brazil, most recently working as our Regional Director of Marketing and Innovation. Alvaro, please go ahead.

Thank you, Manuel, and good morning, everyone. We are very pleased that you can join us today. At presenters today, we will have Mr. Alfredo Perez, Chief Executive Officer; Mr. Manuel Romero, Chief Financial Officer; Mr. Patricio Jaramillo, Vice President of Consumer Groups and Innovation; and other members of the senior management team, who will join us during the Q&A session. Today, we will be discussing the fourth quarter 2022 results after the financial results and earnings reports we issued on Wednesday. If you have not received a copy of the earnings report, please visit us at www.alicorp.com.pe, where you will also find a 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. These forward-looking statements are based on several assumptions and factors that could change causing the actual report to materially differ from current expectations. We ask that you refer to the disclaimer located in the earnings release prior to making any investment decision. It is now my pleasure to turn the call over to Mr. Alfredo Perez, Chief Executive Officer Alicorp, who will begin the presentation. Alfredo, please go ahead.

Good morning, everyone. Thank you for joining Alicorp's Fourth Quarter 2022 Earnings Call today. In today's call, I will discuss the fourth quarter and the full year 2022 results. I would like to start by giving you an overview of the most important events that have taken place over the last few months, followed by an update on our cost structure, key performance indicators for the year and a macro overview of the main geographies where we operate. Then we'll move forward on to consolidated results. [indiscernible] will afterwards cover our financial research by business unit. And as always, at the very end before the Q&A section, I will take the floor again for an up in our guidance for 2023 at the end. We'll start now with Slide #5 to cover the most relevant external factors impacting our business performance. As we have covered during our last call, over the past year, Peru has been through several political crisis. In December 2022, after the former President of Peru, Mr. Pedro Castillo, failed in his unconstitutional attempts to dissolve Congress as well as calling for elections for a new constituent congress and the intervention of certain public entities was in peace by the majority of the Logicalis body, deriving Dina Boluarte, the former Vice President, to take office as President of Peru as mandated in the constitution succession mandate. Initially, [indiscernible] showed her intention to remain in office until the end of the government period in 2026. But this was not well received by part of a population, leading to several product process and violent events over the last 2 months. These protests have taken place mainly in the south of the country, where several roads have been blocked, and there have been several attempts to disrupt critical infrastructure. [indiscernible] has presented a normal course of transit and economic tires in the South. It is important to mention the distribution of our products, mainly in our consumer good [indiscernible] business has not been materially affected by these road blocks. However, we have incurred an additional logistic costs. The impact on our crushing business in Bolivia has been higher, as we will discuss during this presentation. While the debate in Congress for earlier general elections continues, it is unlikely that they will take place in 2023 as party of the Congress fails to [indiscernible]. However, [indiscernible] we signed as a result of the protest, Congress must call for new elections within 6 months after resignation. Regarding inflationary context, Peru's annual general inflation rate reached 8.6% year-on-year in 2022, while the food and beverage component reached 15.2% in the same period. As prices continue to increase, affecting Peruvian household disposable income, we anticipate consumers will continue prioritizing their expenses and reducing out-of-home consumption. Now let's move on to Slide 6 for an update on our cost structure. As you know, since mid-2020, we've begun to experience significant increases in international commodity prices. The scenario continued to the 2021 and 2022 period, adding more pressure on our margins, meaning categories is an important component of wheat, soybean oil, soybean meal among others. Thus, agricultural commodities became even more relevant within our cost structure, increasing a portion of total costs, excluding the pricing business in 10 percentage points from 53% in Q1 2021 to 63% in Q4 in 2022. Furthermore, total cost per metric ton, excluding the crushing business, increased 20% year-on-year in the fourth quarter of 2022. Despite those negative effects, we have been able to deliver a positive trend in our profitability over the last quarters. Gross profit per metric ton, excluding the crushing business, registered a 22% increase year-on-year in the fourth quarter of 2022. It is important to mention that a reduction versus Q3 2022 is mainly explained by losses related to obsolete products. On a full year basis, we continue to recover volumes, outperforming pre-pandemic levels. As mentioned in previous calls, we continue to closely monitor our international commodity market dynamics and practice active and constant hedging of our most representative agricultural commodities. This allows us to ensure optimal commodity procurement to minimize further increases in our cost structure. Our strategy aims at layering our exposure on providing the necessary visibility for business units to yet to the cost evolution through pricing, other revenue management initiatives and efficiency strategies. These positive results highlight the receiving and competitive advantage of our business, the strength of our brands, our strong tuition capabilities as well of our hedging strategy. Next, let's move on to Slide 7 to review some performance indicators for full year 2022. The challenging context that we have been facing over the last years, Alicorp has adapted to constant changes in circumstances, showing its resilience and ability to deliver strong results by leveraging our competitive advantages, strategically developed over the years. We are proud that all of our hard work has translated into positive results despite the headwinds already discussed. While consolidated revenue grew 56% versus pre-pandemic levels, reflecting mainly in passionary pressures, we highlight our EBITDA in 2022 outperform 2019 EBITDA by 27%. This would not have been possible without the efficiency program launched in 2021. This program has allowed us to counterbalance raw material pressures within our COGS with SG&A representing a smaller portion of sales and gross profit. Additionally, efforts in SKU rationalization and design-to-value initiatives have played an important role in our path to recover historical levels of profitability. Regarding our strategic initiatives, we're glad to see how our digital projects continue to consolidate, leveraging on our first class capabilities. Insuma, Diadia and Vitapro Ventures aim to continue to put Alicorp ahead of the digital transformation. On the innovation front, our recent launch in the haircare platform, Amaras, has delivered excellent results in the first 4 months on the market. Later, we will discuss in detail the most relevant achievements of Amara. We remain confident that these initiatives will continue accelerating growth in our current geographies and provide attractive returns in the medium and long term. Finally, and regarding corporate awards, during 2022, Alicorp has been recognized as one of the best companies to attract and retain talent on one of the most large companies in Peru. Additionally, we were included in the S&P and the BVL Peru general ESG Index. This recognition and achievements motivators to continue working in line with our purpose of feeding a better tomorrow. Let's move on to Slide 8 to discuss economic conditions in the main regions where we operate. Most economies experienced a significant recovery during 2021 after a very challenging 2020 due to the COVID-19 pandemic. In 2022, economies of the main geographies where we operate, Peru, Bolivia and Ecuador, exhibited moderate growth in terms of GDP and private consumption and the similar trend is expected in 2023. Current outlook considers lower growth rates, mainly due to higher interest rates to call inflation and wholesale because of social political tenor. Peruvian consumer confidence and therefore, market dim is expected to remain below an optimistic threshold despite improvement activity in the last 2 months. Furthermore, according to the Peruvian Central Bank, the estimated inflation rate for 2023 will exceed 5% for the third consecutive year. This scenario will continue to affect household disposable income and lead to certain market contractions and preference for products with the best value for our clients' money. Let's now discuss our consolidated results for the fourth quarter 2022 on Slide #10. Consolidated revenue reached PEN 4.2 billion in the fourth quarter of 2022, outperforming by 16% in the same period of 2021, mainly driven by solid performance of our Aquafeed and Consumer Goods Peru units. B2B also see an important increase year-on-year. On a full year basis, revenue increased 26% year-on-year and volume 5%, reflecting higher revenue in our business units with a remarkable performance in Aquafeed and crushing business. Moving on to profitability. Let's now review our consolidated EBITDA for the fourth quarter 2022 on Slide #11. The Consolidated EBITDA exceeds a 13% increase for the quarter when compared to the same period in 2021, mainly explained by the strong performance of our Aquafeed and Consumer Goods Peru units. This growth is partially offset by a decrease in EBITDA on [indiscernible] goods international business, mainly explained by the continuous pressure on our cost structure, pricing regulations in Bolivia and the investment to grow our go-to-market reach in both Bolivia and Ecuador. Full year EBITDA increased a strong 23% year-on-year, mainly boosted by the performance of our Aquafeed and crushing business units. Let's now review our consolidated net income for the fourth quarter 2022 on Slide #12. The Consolidated net income increased PEN 48 million in the fourth quarter of 2022. It's important to mention that the increase is mainly explained by the base effect in the fourth quarter of 2021 due to the sale of our operations in Brazil or Argentina. Excluding the effect of the discontinued operations, net income reached a 19% increase year-on-year, mainly explained by higher operating profit, partially offset by the effect of our FX and hedging costs. On a full year basis, net income increased PEN 562 million. And excluding discontinued operations, full year net income increased 36%, reaching PEN 554 million. As mentioned in previous calls, we continue to focus our efforts on simplifying our business and prioritizing key initiatives to generate the most value and return to our shareholders. Now let me pass the floor over to Patricio, who will discuss the operating results of our CGP and CGI businesses.

Thank you, Alfredo. Let's begin with an update on CGP market dynamics on Slide #14. For the fourth quarter of 2022, Peru's GDP is expected to grow 2.8% year-on-year, with private consumption growing only 1.9%. Despite signs of a struggling economy and constant political turmoil, Alicorp delivers again outstanding revenue growth of 22.4% year-on-year for the quarter. We are consistently outperforming the market and continue to recover historical margins and volume platforms. The business strategy designed and implemented at the end of 2021 continues to deliver results, improving the performance of our businesses and strengthening our brands. This path of recovery is reflected in our financial performance during the fourth quarter, in which we continue to improve year-on-year in key markets and financial metrics across the P&L, mainly driven by an effective revenue management efforts in terms of pricing, design-to-value strategies that helped partially mitigate cost impacts and increased marketing investments aimed at recovering market share in key categories. In addition, we also executed efficiencies in our SG&A expenses that have allowed us to achieve an outstanding 2x growth in EBITDA for the quarter when compared to last year. These results highlight that we are in the right track to recover our historical profitability levels. Our strategy will continue to be focused on defending our core brands in a more challenging social and economic environment. We will strengthen our efforts on highlighting our value-added products, differentiation versus key competitors, coupled with multi-tier pricing strategies to maximize our top and bottom line. We have also reignited innovation across many categories such as detergents, sauces, cookies and stain removers. Regarding channel mix, our split continues to favor the traditional channel, which contributes to our profitability, allowing us to continue to increase our gross profit per ton, by lowering our cost to serve. On this end, we will continue deploying digital strategies under the Diadia initiative to accelerate its growth and double down on maximizing visibility, assortment and product mix of key categories at the point of sale. Finally, we continue to see positive results in our market share readings, especially in the modern trade when compared to last year, in which we have maintained or gained value share in 75% of our categories in 2022. We have gained share points in edible oils, cookies and crackers, cooking sauces and bleach. Also, we are starting to map important share gains in shampoo and conditioners after the launch of our new brand, Amaras, which we will comment next. Let's move on to Slide 15 to comment on the first results and achievements of Amaras aligned with our goal of delivering first-class value propositions and after several years of hard work and collective team effort in October 2022, we launched our new personal care brand, Amaras. The first line of her products especially designed for Peruvian women. This launch represents a milestone for our company. Since global players and local competitors have not yet developed products with similar characteristics. This journey started with a very exhaustive research plan where we discovered and address consumer needs in this segment during our consumer-centric innovation process. This is a clear example of our design thinking capabilities, which allow us to capitalize market opportunities through relevant innovation investments. Our differentiated value proposition combines the following features that will allow us to strengthen our position in the personal care market. First, we will use natural and local nutritional ingredients that we're not present in products available on the market. Second, taking into account specific Peruvian consumer needs, we will have considered local weather and water conditions in Peru. Both factors in Peru are fairly unique and have significant impact on performance of hair care products First results achieved reflect our ability to develop top-quality products directly addressing the specific needs of our consumers. After the deployment of our marketing and sales campaigns, we have achieved almost 10% of value share in supermarkets during the first month of our introduction. In the traditional trade, we are now reaching more than 85,000 points of sales with an average of client repurchasing numbers between 30% and 40%, in line with our most successful launches. Finally, our digital marketing strategy has been outstanding, generating viral impact of more than 300 organic videos with over 7.2 million views in TikTok. In other social media, our positive sentiment is higher than 85% with an average of 15% engagement rate. Let's move on to the financial performance of our Consumer Goods Peru unit on Slide 16, please. For the fourth quarter, revenue grew 22% versus last year, predominantly driven by pricing initiatives in several categories to partially offset raw material increases in soybean oil, [indiscernible] palm oil, better coal value mix of products sold and a channel mix improvement. Our gross profit per ton increased 40% year-on-year with higher gross margin per metric ton of PEN 1,593 versus PEN 1,139 for the same period last year. On a full year basis, revenue grew 18%. And while gross margin lost 1.9 percentage points, gross profit per metric ton increased 12%. These results show our strong focus on margins per ton as a guideline since the significant increases in COGS challenge the ability of maintaining an increased percentage of margins. EBITDA for the fourth quarter increased almost 2x versus last year and 17% on a full year basis versus the same period of 2021. For the fourth quarter of 2022, EBITDA reached the amount of PEN 101 million. Let's move on to Slide #17, 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 top line growth in our home care platform, mainly driven by a 26% increase in volume year-on-year. Also, we have taken several pricing initiatives in categories impacted by high commodity prices, such as large and margins. Our new [indiscernible] in Cochabamba is up and running in our addition to our 2 new initiatives in La Paz and are already running initiative in Santa Cruz. As such, we continue expanding our direct distribution model, now reaching more than 15,000 points of sales using analytics as a key tool to deploy digital strategies to accelerate growth. It is important to mention also that we have implemented a new compensation model for direct sales team that will leverage on innovation, mix improvement and execution to boost sales. Finally, our pasta third-party local manufacturing for [indiscernible] started in the last quarter, which have helped us increase our category profitability, giving us more production flexibility while also improving our working capital. In Ecuador, revenue grew 20% on a full year base compared to last year, reaching monthly historic heights. We continue to highlight the positive role of our go-to-market strategy that has enabled us to reach 15,000 clients. This is a significant increase versus the 5,000 clients we were reaching at the beginning of 2022 with our previous distribution model. Finally, we would like to highlight the airing of our marketing campaigns for Don Vittorio with the [indiscernible] detergents. These have helped us achieve over 50% of volume growth as some of those brands compared to the monthly average we had before the campaign. All in all, our go-to-market strategies in Bolivia and Ecuador are being rolled out successfully across both geographies. This is a consequence of years of experience and learnings gain in Peru and extraordinary efforts of local -- strong local leadership teams that leverage corporate capabilities under the One Alicorp mindset. Let's move on to the performance of Consumer Goods Bolivia on Slide 18. Bolivia's revenue remained basically flat year-on-year in the fourth quarter of 2022 and grew 4% on a full year base. In our homecare platform, revenue increased 22% year-on-year and in the fourth quarter 2022, gross profit increased 22%, reflecting the positive results of the strategies deployed to increase the profitability and volume growth of this platform. EBITDA fell 71% in the fourth quarter 2022 and 46% on a full year base when compared to 2021 due to lower gross profit in our edible oil category, explained by higher commodity costs and price controls in Bolivia. In addition, we had higher SG&A expenses. However, importantly, our EBITDA, excluding Edible Oils reached a 9% growth year-on-year for the fourth quarter. Let's move on to the performance of Consumer Goods Ecuador, on Slide 19. The Ecuador's revenue grew 33% year-on-year in the fourth quarter, fueled by volume growth, pricing initiatives and gross to net efficiencies to offset higher commodity prices. Full year EBITDA versus last year's same period decreased due to higher SG&A expenses. However, these were mainly related to marketing incurred to fuel future volume and revenue growth. Now let me pass the floor over to Manuel, who will discuss the operating results for our B2B Aquafeed and crushing businesses as well as our liquidity and credit ratings.

Thank you, Patricio. Let's move to Slide 20 for an update on our B2B market dynamics. The last quarter showed that the number of out-of-home consumers is still below pre-pandemic levels, impacted by inflationary pressure and sociopolitical instability. Consequently, we are seeing a market size that is growing below our initial estimates and revising our expectations for the coming months as blockades and instability seems to continue. Unfortunately, this situation affects both the tourism industry and out-of-home consumption. In this context, our B2B business has depended its market share, thanks to our multi-tier portfolio, distribution footprint and capabilities that enabled us to, as mentioned in the last call, successfully executed an aggressive plan to attract new clients, leading us to surpass our pre-pandemic customer accounts for the first time. Let's move on to Slide 21 for an update on the B2B financial performance. Despite the challenges faced in terms of out-of-home consumption, our revenue grew 12% this quarter compared to last year, fueled by pricing strategies aimed at offsetting the rise in commodity costs. However, our volume declined 9% due to a decrease in wheat flour volumes and discontinued products that were not adding value. Excluding the volume of the discontinued products from the base year, the decrease in volume would have been 1 percentage point less. Fourth quarter gross profit increased 5%, primarily due to higher margins in flour and lard. This led to our gross profit per ton to an improvement of 15% over last year. Regarding EBITDA, excluding positive pandemic-related reversal of provisions last year remained flat. On a full year basis, our gross profit grew 14%, landing near the PEN 400 million mark, a historical record, while our EBITDA grew 16% due to our different efficiency programs, which we plan to maintain and expand in 2023. Next, we will cover the Aquatic market dynamics on Slide 22. In Ecuador, shrimp exports grew 12% during the fourth quarter versus last year for the fourth quarter, mainly due to the recovery of demand from China. China continues to regain ground among Ecuadorian shrimp exports, representing 59% of the volume in the fourth quarter of 2022. Although Ecuador also maintained significant volume exports to the U.S. and Europe compared to previous years. In the full year 2022, exports grew 26% versus 2021 despite market constraints, such as COVID-19-related restrictions and inflation. Ecuadorian trade for shrimp continued to improve despite some COVID-19 related restrictions in China and inflation in the U.S. and Europe. In December, China announced the end of import controls, which led to higher demand from that market. In the same month, the Ecuadorian government announced an end of diesel subsidy for the shrimp farming, which led to an increase in production cost of around USD 0.16 per pound of shrimp, affecting 82% of the country's shrimp production area. Despite this, Ecuadorian Shrimp farmers seem to have a strong market position due to lower structural costs compared to their Asian competitors. Additionally, in the fourth quarter, international prices for shrimp temporarily fell. The price reduction, together with increases in the cost of production has forced the industry to search for cost efficiencies, and this is where Ecuador excels, thanks to the fast-paced technological adoption by many farmers. Thanks to this advantage, Ecuadorian farmers continue generating profits, while other less-efficient countries struggle. Farmers continue investing in automation and new technologies, which include Vitapro's new digital ecosystem as well as radars and automatic [indiscernible]. Exporters are also improving industrial facilities in order to produce value-added presentations to better cope with future demand from the U.S. and Europe. Regarding the salmon feed business, due to the strict enforcement of Chilean regulation that limits the amount of biomass that is produced in certain areas, Chilean farmers accelerated their harvest towards the end of the year. That translated into a higher yearly production of Chile in salmon than initially estimated. This harvest strategy led less salmon in the water to be fed. In Norway, there are also concerns because of the government proposal of our resource tax of 40%, which could have a significant impact on Norwegian salmon producers. Higher global salmon prices in during the fourth quarter were the result of lower harvest in Norway because of lower yields, concern on the Norway tax, lower offers and lower offers of Wilson. Despite these higher prices, demand seems to have increased in retail and in foodservice. These price levels are very attractive and healthy for Chilean producers and their profits, which could incentivize farmers to continue solving. 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 2023. All in all, during 2022, we continue to see growth in both the shrimp and salmon industries, and we expect this trend to continue throughout 2023. In summary, Vitapro continues to displaying exponential growth, especially in Ecuador. This growth, plus our differentiated feed products and strong brands allow us to continue to create value for Alicorp. Let's move on to Slide 23 for an update on our Aquafeed performance. In terms of business performance, Vitapro posted a remarkable 43% revenue growth, mainly explained by an increase in volume in both of our fee business units and by price initiatives introduced to compensate for the increase in our raw material prices and a tiering up of our portfolio to value-added feed mainly in Nepal. Gross profit gained 53% year-over-year due to higher volumes driven by the same leverages that grew revenue. Gross margin increased 0.9 percentage points. Furthermore, EBITDA increased 75% year-on-year, mainly due to the higher gross profit. Next, we will cover the Crushing business' financial performance on Slide 24. During the fourth quarter, our crushing business based supply chain disruptions caused by the blockages and riots related to the social political terminal in Bolivia and Peru. As a result, our sales volume to third parties declined by 11% year-on-year. However, our revenue remained unchanged. Regarding EBITDA, the fourth quarter saw a decline of 39% caused by shipping delays related to blockages in Bolivia and Peru. On a full year basis, our total volume grew 5%, reaching 1.3 million metric tons from which 1 million metric tons were sold to third parties, representing a 7% growth. Our revenue grew 39%, driven by higher prices for soybean and volume growth to third parties. EBITDA reached $19 million, supported by our close relationship with farmers vast business development expertise and our hedging risk management capabilities, which enabled us to capitalize from soybean and sunflower market price fluctuations. Furthermore, our Agricultural Solutions business reached $5 million, growing 6% year-on-year. Additionally, our soybean export program achieved $8 million, contributing to EBITDA while bolstering our solution portfolio for our farmers as part of our consumer-centric strategies. Now let's move to Slide 26 to discuss our liquidity and credit rating. Regarding our liquidity levels, as of December 2022, we exceeded our comfortable cash position, which amounted to PEN 940 million, PEN 329 million less than as of September 2. The reduction is mainly explained by the share buyback program, where we acquired PEN 565 million, where we required PEN 565 million to acquire 10% of Alicorp's outstanding shares, which was partially offset by our positive operating cash flow. During the quarter, we refinanced USD 31 million of short-term debt improving our maturity profit. We will continue looking for ways to keep our debt structure that allow us to have financial flexibility. As of December, our cash position covers 1.07x our current debt, including the committed credit line for USD 120 million, the ratio would be 1.59x. On the back of a strong cash flow generation and after securing liquidity for more than half of our maturities over the next 12 months, thanks to a committed credit line, we shortened the duration of our financial liabilities are as a way to mitigate the impact of interest rate increases over our results. These actions show our comprehensive and prudent financial strategy, which has been recognized not only by local rating agencies who have maintained our rating at the highest possible rating level in Peru, but also by 2 global rating agencies, Fitch and Moody's, who have maintained our investment ratings. Moving on to Slide 27 to comment on our debt metrics. Regarding our debt metrics on the back of a positive operating cash flow due to our working capital management, the rationalization of our CapEx and the increase in our EBITDA, our net debt-to-EBITDA ratio has stayed around 2.5x range since the third quarter of 2022. The 2.5x was achieved even after successfully concluding both our share buyback program and our regular dividend payment, which together meant an outflow of PEN 779 million. As in previous quarters, the impact of the readily marketable inventories continue to set the pace of the seasonality in our leverage. If we correctly consider RMI as a cash proxy and subtracted from the net debt-to-EBITDA ratio in the fourth quarter would have been 2.2x at a consolidated level compared to the 2.5x mentioned before. Finally, let me circle back to Alfredo to wrap up today's presentation with a view of what we expect for 2023.

Thanks, Manuel. Let's turn to Slide 29 to wrap up today's presentation with a glimpse of what we expect for our full year 2023 results. First, I would like to share with you our main assumptions behind our guidance. In 2023, we will continue to expect moderate economic growth in our main geographies as part of a challenging context for consumer goods and B2B business units. We also continue to expect positive tailwinds for Aquafeed through the solid growth of Ecuadorian shrimp export volumes. Regarding our Crushing business, we foresee that a high cycle of commodity prices will slow down, which will impact our sales and EBITDA for the business. Taking the aforementioned factors into consideration, we expect revenue to reach a mid-single-digit growth for the full year. EBITDA should remain flat as our crushing business will take a step back from the record performance of the past 2 years due to more challenging market conditions. We'll seek to offset that effect with the continued recovery of our consumer goods business and the positive tailwinds of our Aquafeed unit. We do not expect to fully recover margins to the pre-pandemic and pre high commodity pricing levels this year due to the slowdown in growth in the social political turmoil in our main geographies. In that sense, we will continue to be focused on gross profit and EBITDA per ton level methods. As for our investments for the year, CapEx will reflect our efforts to accelerate growth through key initiatives, reaching $76 million, excluding Aquafeed. This represents almost a 10% increase versus 2022 levels. Including Aquafeed, CapEx is expected to be $145 million. As for leverage, we estimate a 2.4x net debt-to-EBITDA ratio by year-end 2023 on the back of a solid free cash flow generation capability. This concludes our presentation, and we will now welcome any questions that you may have.

[Operator Instructions] So we have a text question from [ Alexander Javier Flora Sabila ]. By 2023, do you expect the contribution of the business lines to consolidated revenue to be similar to 2022? What are the main trends that will be present in the company's business in 2023?

Thank you for the question. And as had just explained where our guidance would be for the year 2023. There will be some changes as to the different businesses that we are in. I commented on the fact that, for example, our crushing business will potentially take a step back in terms of profitability, given that the last 2 years have been -- have had record performance on an EBITDA level. And that -- the reason being because we're seeing more challenging conditions as the cycle for commodities will not be as high as it has been for the last 2 years. As we have explained over the last quarters and the last few years, this is a very cyclical business, and our expectation now sort of a cool down period for that profitability generation for this year. Now we are planning on offsetting the impact of that profitability with the continued recovery of our consumer goods and also the Aquafeed businesses. The Aquafeed unit, as we have mentioned before, the industry overall, especially in the [indiscernible] is a very positive cycle for the Ecuadorian product. And we expect that to continue this year. We as you know, we have been investing in this business. We'll have new production coming in early next year. So therefore, we will have certain limitations as to growth just because of that. However, we expect very positive results from that business this year as well. And then again, reinforcing the fact that we expect the consumer products businesses to continue the recovery in terms of profitability, but being all very cautious given the current environment that we're seeing on a macro standpoint and a sociopolitical standpoint in the geography that we current operate, meaning Peru, as you know well, as it is the case of also Ecuador and to a lesser extent, Bolivia as well.

We also have a question from Julio Torres from Inteligo. So I would like to know what are your perspectives about the shrimp market in the medium term? And also, if you could give us a breaking down of the use of CapEx, excluding Aquafeed.

Of course. We mentioned during the presentation that our prospects for this year and the medium term, especially for the shrimp market and Ecuador is still very positive. We're seeing demand from both China but also markets such as the U.S. and Europe to be strong. There might be certain ups and downs in the years. However, the macros and all the dynamics in the industry are telling us that the consumption of aqua based protein, it will continue to be strong and that Ecuador is uniquely positioned to take advantage of that growth. given the competitive advantage that it has as a producing country of shrimp right now. So our views are positive in that sense. And the CapEx is obviously expected from our side to continue accompanying that expected growth. We are, this year, forecasting CapEx, a total CapEx for the company of approximately $145 million, of which $76 million will be nothing related to Aquafeed. So the difference basically is the Aquafeed CapEx program that we have already explained also on previous calls. And then I see here, there's another question also from Integra. And basically, are you expecting more negative impacts in revenue for your business license Peru due to social risk and what strategy are you implementing to offset those higher logistic costs -- we make a few comments on that on the presentation. But given the call, I'll ask Patricio to comment a little bit more on that and give more color as to our expectations for the impact on our premium business. Well, I think we're having some connection problems with Patricio response. So given -- yes. Now yes, Patricio, please go ahead.

Thank you. All right, Alfredo. Yes, thanks for the question. Yes, what I was commenting a little bit earlier on was that the main impact that we have had on logistic costs have been present mainly during this first quarter rather than that last quarter of 2022 seems most of the protests and mobilizations have been testified during this January and February months. We are seeing some logistic incremental costs, mainly in the south lands of the country, where it has been difficult, I would say, to source products from Lima. However, the way that we are doing to offset this is by increasing our design-to-value initiatives and pricing initiatives in places where we still have opportunities to take prices. And also regarding productivities in other areas such as SG&A and definitely advertising on overhead expenses. So we do see increases in costs in terms of logistics, but we have a year ahead of us to try to offset those. So we don't expect those to materially affect as we continue to move forward. Plus on the more positive side, despite the process that we have had during the earlier days and I would say, the entire month of January. February has softened a little bit in terms of the intensity of them. So hopefully, that will continue to reduce as the days go forward.

[Operator Instructions] So our next question comes from Felipe Ucros from Scotiabank.

Just a quick question on B2B. SG&A jumped as a percentage of sales quite a bit this quarter, and it didn't seem to be the same in some of the other divisions, like in Consumer [indiscernible], which I would have expected some correlation due to the protest there. So just wondering if there was something special in B2B that caused that jump in SG&A as a percentage of sales?

Thank you, Felipe, for the question. And I'll direct it to Luis Estrada, who is with us to answer it. [indiscernible]?

Thank you, Felipe, for the question. Basically, it's probably the impact that we have because of the reduced volume Felipe on flour and also the difficulties that we have had on the distribution and extra expenses on the logistics plus the fact that as we reduce flour volume, the cost of production on our operations impacted our [indiscernible] structure.

So thanks, Luis, for the color. That gives me a good idea of the cost picture, but just wondering about SG&A. Was that all related to the protests...

Most of it was related to the protest indeed and the reduction of the volume, as I mentioned.

Got it. Okay. Perfect. And then maybe I can do a follow-up on crushing. You mentioned the logistics. So I was just wondering what piece of the logistics was affected? I think obviously, the proved piece of it is pretty obvious. I'm just wondering if you could give us some more details about what happened in Bolivia and how do you expect developments or what you've seen this quarter this far.

Sure, sure. Most of the flow of the Bolivian exports, mainly soybean meal and soybean oil flows primarily through the Desaguadero border, the Bolivia and Peruvian border. And as you know, that's the area that we have had with most logistic disruptions. So what we have been working to solve that disruption is moving the flow of exports through other flows. And mainly, Felipe, what we have been doing, it's moving soybean meal and soybean oil through Arica, through Chile and then going inland via the Chile-Peru border. As you may imagine, that has incurred a couple of things. One, slowness on the distribution and an increase on costs that has impacted also the cost of warehousing of raw material of beans in Bolivia because as we slowed down the logistics, we keep at which we are feeding the plant on the speed on which we're moving soybean meal and soybean oil out of the plant is lower than it used to be when we had the normal supply chain.

Makes all the time [indiscernible] that was very clear. The last one maybe for Patricio. Just wondering on consumer goods improved. You've been giving us some very good data over the last few quarters on how core was recovering in the mix as compared to value? Just wondering how that recovery is progressing.

Patricio, we cannot hear you. You may have to unmute yourself.

Felipe, thanks for the question. Yes, as we have been commenting a little bit earlier on our volumes in terms of the way that we are mixing internally have been trending more into the core, I would say, brands and categories, which is doing nicely in terms of -- working nicely in terms of our profitability of increasing our margins per metric ton. And this has been done in spite the fact that the market is actually trending on tiering down, I would say, scenarios in many of the categories in which we do perform in. So for example, categories such as oils have trended from being 42% of the total market in 2021 to almost 45% of the total market in 2022 or, I would say, the value propositions within that category, the same in detergents, 20% in 2021 and 25% in 2022. So the market is trending on a tuning down perspective. However, even though we are keeping our share within that tier down, we are increasing our efforts in marketing expenditures and growth in our core brands, and that has been progressing and has progressed very nicely during 2022 and has continued to progress during the early months of 2023. So especially in detergents and Homecare as a whole, we have been seeing those volumes perform very, very well.

We have a question next from Julio Torres from Inteligo. So the question is, apologies, I think we've lost that question. So we've got a voice question instead. Julio, please go ahead...

I would like to know how much is the contribution in terms of sales of Into main business to business. And also a week ago, it was published on the media that you are planning to enter certain provinces. Could you share us what size of market are we talking about?

Luis, you can go ahead and answer the question, please.

Yes, sure. Thank you for the question. Yes, we're very excited with Insuma, that we finished the year in a little bit above 10% of our total B2B revenue is what Insuma is representing, and we're expecting to keep growing this year. As you have mentioned, one of the growth avenues that we're expecting to have this year is going to be out of Lima and basically because we're going to be applying all the learnings that we have acquired by growing Insuma in the Lima market and applying them into outside of Lima. We are probably going to start in a couple of provinces first because we have to understand the dynamics on the promises on the out-of-home consumption are probably different. One of, as an example, not necessarily the drivers of the bakeries and the drivers of the restaurants are the same in Lima. And Insuma, as you probably know, is leveraging not only our own portfolio but portfolio of third-party suppliers and not necessarily the third-party suppliers that we have relationships with in Lima are going to be applicable in the different provinces. So we're probably going to start looking at what are those potential partners that we can find in these specific provinces where we're going to start growing.

[Operator Instructions] So we'll just give it another 30 seconds or so just to see if there's any final questions.

I think there's a question regarding the impact if Bolivia devalues sharply the currency, what would be the effect on our numbers. So in Bolivia, we have the crushing business where revenues are in U.S. dollars. And obviously, the consumer business that has more exposure to the Bolivian Peso Boliviano. Most of our debt in Bolivia is in Peso Boliviano. So if Bolivia devalued sharply, we would probably see a positive impact in our P&L, especially in Bolivia and given that we're constantly trying to maximize debt in Bolivia pesos to minimize that risk.

And also, I would comment that we don't actually expect our competitiveness to be affected because this is an industry that if this happens, it would be a wide nationwide problem. So and also, it is important to mention that according to many of the economist that we have also been in contact with a fast -- the probability of a scenario of this magnitude is still very low up to this point.

So I'm not seeing any more questions. So perhaps I can hand back to the Alicorp team for closing remarks.

Perfect. Thank you. And once again, thank everybody for participating of our fourth quarter 2022 conference call. In case you have any further questions, please don't hesitate to contact us as was mentioned at the beginning of the call. Alvaro Rojas will now be heading our Investor Relations team. So please feel free to contact him and his team with any further questions you may have. Please see safe, and have a great day.

Thank you. That concludes the call for today. Thank you, and have a nice day.