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

[Audio Gap] Gisele Remy please go ahead, the line is yours.

Thank you, Mike, and good morning, everyone. We are very pleased that you could join us today. Speaking to you is Gisele Remy, Investor Relations Associate at Alicorp. As presented 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 Innovation; and other members of the senior management team, who will join us during the Q&A session. Today, we will be discussing the first quarter 2023 results after the financial results and earnings reports were issued on Tuesday. If you have not received a copy of the earnings report, please visit us at www.alicorp.com.pe, where you will also find the webcast presentation to accompany our discussion during this call. Please be advised that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. If you are a member of the media and wish to direct any question to the company, please contact our team 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 report to materially differ from current expectations. We ask that you refer to the disclaimer located in the earnings release prior to make 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, and apologies for that. Well, again, good morning, everyone, and thank you for joining Alicorp's First Quarter 2023 Earnings Call today. In today's call, we will discuss the first quarter of 2023 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 a macro overview of the main geographies where we operate and an update on our key corporate efficiency efforts across our company. Then we will move on to our consolidated results, Patricio and Manuel will afterwards cover our financial results by business unit. At the end, before the Q&A session, I will take the floor again for an update on our guidance for this year. Now let's move on to Slide 5 to cover the most level external factors impacting our business performance. As we covered during our last call, the failed attempt to dissolve Congress by the former President of Peru, Pedro Castillo, led to a severe political and social crisis since early December of 2022. Social unrest escalated rapidly turning protest violent and resulting in a large number of road blocks, mainly in the southern part of the country. Unfortunately, after the holidays, protests resumed in January and quickly became more violent, increasing the death toll related to these protests. This situation lasted until February and not only had a negative impact on the distribution of our products, but also on the national activity during the first 2 months of 2023. Although the social crisis and protests are now under control, the new President and Congress continue with very low approval rates. One of the most effective transit routes by the bloggages was the border between Peru and Bolivia at the Desaguadero. Desaguadero is the BCS border between both countries and one of the most important routes for the living exports to pass through the Peru. This border remained closed for almost the entire first quarter of 2023 due to the social unrest. This affected our pricing business materially, reducing volumes sold to third parties during the first quarter of the year. As a temporary solution, we decided to use lower capacity of tariff route, which represented incremental logistics costs. Fortunately, by the end of March, most of the transfer spices in the border were lifted and economic activity is gradually recovered. On the climate front, by late February, Peru's Northern region was hit with intense rainfall causing cracks and river overflows, leading to the declaration of the state of emergency in 17 regions in the country. As a result of these climate-related events, demand and distribution of this region was affected. The combination of these effects added pressure to the Peruvian economy, which according to the Central Bank estimates will contract during the first quarter. Although we did not see a high likelihood of our return of protest or roadblocks, high inflation rates and the higher possibility of El Nino in the second half of 2023, will probably continue adding pressure from already weak private consumption and consumer confidence and in challenges, mainly in the demand front. Let's move on to Slide 6 to discuss the challenging outlook in Peru. As I mentioned earlier, the public scenario described in the previous slide, led to negative GDP growth estimates for the first quarter of 2023. Excluding the pandemic, this has been the first quarterly GDP contraction since 2009. Inflation continues well above the Central Bank's target, reducing real wages and disposable income of the end consumer. Moreover, our clients are experiencing lower liquidity due to higher interest rates. As a result, in the first quarter, we experienced volume contractions in key categories, the reduction of out-of-home consumption and a shift to more affordable products. In this adverse scenario, at Alicorp, we have remained disciplined, attentive continue recovering our gross profit per ton, while carefully managing our accounts receivables, which continue to show healthy levels. Despite the economic situation and the aforementioned factors, Peru maintains important macroeconomic strengths such as an appropriate monetary policy with a stable reference interest rate for the fourth consecutive month, a prudent fiscal policy and a strong currency. Moreover, the risk of radical less policy has been greatly reduced following [indiscernible] vacancy. Hopefully, Resident in [indiscernible] will be able to work closely with Congress to reactivate the economy after this challenging bit. Now let's go on to Slide 7 to discuss the outlook in other 2 main geographies, which are Bolivia and Ecuador. The political and economic outlet in Bolivia and Ecuador also represents significant challenges. Bolivia is currently facing severe macroeconomic challenges as a result of a significant increase in public spending and consistent reductions in exports, leading to structural deficits, which have been financed with public debt and international reserves. The situation has become unsustainable as access to further debt has become more restrictive and international reserves are green. This led to a speculation in Bolivia regarding access to the U.S. dollar, which added some pressure to the local borrowing. As a result, restrictions to limit access to U.S. dollars have already been implemented. The government has rolled out an official devaluation and has approved law that will allow the Central Bank to sell gold reserves. According to specialists, the Bolivian economy could face a parallel market scenario for the exchange rate. Regarding Ecuador, President Guillermo Lasso is facing an impeachment process for a lapsed active corruption, which could lead to 2 possible scenarios. The centre of the President, Guillermo Lasso will be replaced by the Vice President or a scenario where President Lasso calls for early elections both for Congress and the executive branch. Despite the fact that Ecuador's macroeconomic indicators such as a deficit and international reserves have improved over the past couple of years, this political instability has led to an increase in Ecuador's [indiscernible] premium by 7% so far in 2023. As a result, Ecuador's economic growth outlook has been reduced and financing conditions have tightened. It is important to mention that despite the adverse economic and political conficts described for both geographies, our main businesses in [indiscernible] crossing and agape mainly serve international export markets. Both the soy industry in Bolivia and the shrimp business in Ecuador have become strategically important for each country as they try to reduce the deficits. In the case of Bolivia, our soybean business accounts for around 70% of total revenue. In Ecuador, our shrimp business represents almost 90% of total revenue. Therefore, Ecuador's exposure to macroeconomic risk is largely mitigated. Despite this, we continue to monitor these risks and the potential impact on our operations. On Slide #8, we'll discuss the implementation of a fist initiative in this challenging context. As we will continue to describe in our earnings call, inflationary pressures and complex sociopolitical context in our main geographies have impacted the end consumer and end of profitability. This has led us to launch several corporate efficiency programs in order to medicate these impacts through strategic prioritization, design to value and reductions in SG&A across our businesses. In 2021, we launched our multi-annual efficiency program aiming to deliver more than PEN 200 million in run rate savings by 2023. As can be seen compared to 2021, we have reduced our last 12 months SG&A revenue ratio by 2.1 percentage points, while compensating inflationary pressures across all of our expenses. In 2022, we achieved a rationalization of approximately 20% of SKUs of our portfolio and implementing strategic design to value initiatives in certain categories such as edible orals and pastas. Our target for 2023 remains ambitious. In addition to our portfolio optimization and the sign over our initiatives, we will focus on our revenue management with a special focus on key categories such as detergents and pastas in Peru with the objective of strengthening the value of our brands, providing the right product packaging and presentations to the market. Now let's discuss our consolidated results for our first quarter 2023 on Slide #10. Consolidated revenue reached PEN 3.3 billion in the first quarter of 2023, exceeding a slight decrease of 0.6% when compared to the same quarter of 2022. As we mentioned before, this has been mainly due to the relevant volume contraction of 10.6% year-on-year. This contraction was mainly explained by the crushing business, although our other business units also experienced volume constructions. Excluding the packaging business, revenue grew 5% year-on-year, with revenue per metric ton increasing 14%, mainly reflecting carryover pricing from 2022 and some more modest additional pricing initiatives in certain categories executed in the first quarter. Now let's review our consolidated gross profit for the first quarter of 2023 on Slide #11. Consolidated gross profit increased 20.8% in the first quarter of 2023, mainly explained our performance of our crushing business due to lower volume and a relevant reduction in gross margins. Excluding the crushing business, gross profit was almost flat with a 0.7% reduction explained to our Consumer Goods international B2B and Aquafeed units, partially offset by consumer goods [indiscernible]. It is important to mention that our gross profit per metric ton, excluding the Crushing business increased 8% year-on-year, which reflects our focus on profitability to compensate market and volume of contractions. Let's now review our consolidated EBITDA for the first quarter 2023 on Slide #12. Consolidated EBITDA reached PEN 235 million in the first quarter, a 44% year-on-year decrease. 80% of such decrease is explained by the reduction in the crushing business gross profit. Excluding our crushing business, which is cyclical, EBITDA decreased 16% year-on-year. This reduction is mainly explained by lower volume, higher SG&A expenses related to advertising innitiative to fuel growth in strategic initiatives such as the launch of our personal care brand, Amaras, and the fact that in 2022, we had positive one-offs related to the sale of real estate. These negative impacts were partially offset by higher gross profit per ton. Let's now review our consolidated net income for the first quarter 2023 on Slide 13. The Consolidated income decreased PEN 154 million from PEN 160 million in the first quarter of 2022 to PEN 6 million in the same period of 2023. And it's important to mention that the decrease is mainly explained by the lower operating profit driven by the performance of our crushing business as explained before. To a lesser extent, net financial expenses increased due to higher hedging costs. This was partially offset by a lower income tax expense. 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 15. Peru has faced a very difficult first quarter during 2023 as explained earlier by Alfredo. Our national GDP is expected to decline 0.3% for the quarter, which marks the first negative results in 20 quarters with private consumption expected to post also a modest 1.6% increase, showing a significant slowdown versus previous quarters. Signs of a struggling economy, driven by constant political turmoil after President Castillo left office, ongoing social unrest with strikes, roadblocks and process across the country, coupled with rain and flooding from El Niño phenomenon are becoming more evident and have affected our shipments during the quarter. Despite volume declines, our revenue per metric ton continues to increase year-over-year, up almost 15%, driven mainly by pricing and revenue growth initiatives that are helping us to recover our historical margins in the year-to-date versus last year and also versus quarter 4 2022, where we see improvement in our gross profit per ton, EBITDA per ton, gross profit margin and EBITDA margin indicators. Furthermore, declines improving spending power have also driven our main market to post the declines in consumption versus last year. In 2023, salaries in the private sector, excluding inflation, have decreased almost 9% versus 2019 and have remained flat versus last year. In the informal sector, which accounts for more than 75% of workers, declines are close to 13% versus 2019. As of our first January, February meeting, consumption markets had an average 5% below last year with heavy declines in categories such as Cantuna, sauces, edible oils, margarines and bleach with per capita consumptions almost returning to 2019 pre-pandemic levels. Within this context, we are gaining or maintaining market share across most categories, both in the modern and traditional trades, which show that our category focused on defending our core brands is working. We will continue to 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 lines. We have also reignited innovation efforts across many categories, such as detergents, sauces, cookies and stain removers. Importantly, we see share increases in edible oils, bleach, margarines and shampoos driven by the recent introduction of Amaras which continues its positive momentum in this extended summer period. Finally, regarding channel mix, the split continues to favor the traditional trade channel, which contributes greatly to our profitability, allowing us to continue to increase our gross profit per ton while lowering our cost to serve in that channel. On this end, we will continue deploying digital strategies under the DDA initiative to accelerate its growth and double down on maximizing visibility, assortment and product mix of key categories at the point of sale. Let's move on to the financial performance of our Consumer Goods unit on Slide #16. Volume for the quarter is down 6% versus last year, driven by lost shipments in January and February due to road blocks, protests and plots explained earlier, with net revenue increasing 5%, driven mainly by pricing initiatives to offset raw material increases in soybean oil, wheat and palm oil and better product and channel mix. Our gross profit per ton increased 15% year-on-year with a higher gross margin per metric ton of PEN 1,635 versus PEN 1,427 for the same period last year on a per ton base. EBITDA for the first quarter decreased 10% versus last year due to higher SG&A expenses due to one PEN 5.7 million of corporate expense reallocations and 2, PEN 6.6 million of additional advertising and trade investments to fuel Amaras growth. Adjusting for these 2 items, our EBITDA is flat versus last year despite volume declines explained earlier. Let's move on to Slide #17, Consumer Goods Bolivia market dynamics. Bolivan's economic scenario has also deteriorated during this first quarter with peers of the valuation ongoing political instability. From 2014 to 2022, Bolivian has experienced a prolonged exchange rate and inflation stability with a GDP growth of around 4%, higher than Peru and LatAm averages. Economic growth was fueled by the income from natural resources, mainly gas exports. However, lack of public investment has reduced export income and has, therefore, triggered higher public spending, increasing the fiscal deficit from 3.4% of GDP in 2014 to 7.3% in 2022. This translates in debt levels of above 80% of the GDP compared to 60% in the LatAm average. Also, the international reserves have declined to less than $3.5 billion for the first quarter 2023 compared to $13 billion in 2014. Consumers' confidence has also decreased from 35 percentage points in September 2022 to 23 percentage points in March 2023. Today, less than 1/4 of the population has an optimistic view, while 77% of the population have either pessimistic or a neutral view of what will come afterwards. The Bolivian households are increasingly becoming more concerned with 5 basket prices, considering that more than 50% faced a reduction in their income and are reducing purchasing frequency and favoring down tiering in many categories. According to Kantar, consumption for the first trimester in Bolivia is down 2.1% versus last year, continuing a 10 trimester decrease, which is mainly driven by foods with 3.2% decline in home care products with a 0.8% decrease. Alicorp's categories basket comprised of 20 categories also decreases at the same rate. However, the volume platform is still at a higher level than prepandemic levels. Within this environment, Alicorp grows in volume and values shares across all of its categories, mainly in detergents and in bleach and all-purpose cleaners, where we have reached record highs. Importantly, in detergents, we are very close of gaining market leadership versus Unilever. Let's move on to performance of the Consumer Goods Bolivia on Slide 18. Bolivia's revenue increased 5% for the first quarter 2023 versus last year's same period. In our home care platform, revenue increased 31% and gross profit 32% versus last year, reflecting the positive results of market share gains in detergents, bleach and all-purpose cleaners. Our EBITDA post negative results versus last year, explained mainly by PEN 4.6 million of negative EBITDA coming from the edible oils category that, as mentioned before, has price controls and higher SG&A expenses to fuel growth with advertising and trade initiatives in our homecare care platform that has driven growth. Excluding these 2 items, EBITDA for the quarter would increase 11% versus last year. Let's move on to Slide 19, Consumer Goods Ecuador market dynamics. In Ecuador, we continue to highlight the positive role of our go-to-market strategy that has enabled us to reach 50,000 clients. This is a significant increase versus the 5,000 clients we reached at the beginning of 2022 with our previous distribution model. This is a consequence of years of experience and learnings gained in Peru and extraordinary efforts of the strong local leadership teams that have leveraged corporate capabilities under the One Alicorp mindset. Despite a 6.3% market decline, our share continues to show positive momentum, growing this first trimester in detergents and sauces in value and across all categories in volume. The new normal is still 15% above prepandemic per capita consumption levels. Finally, the discounter channel continues to grow with Rosales 2P, which now represents almost 4% of total market sales. There are now 310 stores nationwide. Let's move on to the performance of Consumer Goods Ecuador on Slide #20. Ecuador's revenue grew 34% year-on-year in the first quarter of 2023, fueled by volume growth of 39%. EBITDA versus last year's same period decreased due to higher SG&A expenses mainly due to PEN 5.5 million in advertising and PEN 2.5 million in additional headcount expenses incurred to fuel volume and revenue growth. Now let me pass over the floor to Manuel who will discuss the operating results for our B2B [indiscernible] feed and crushing businesses as well as our liquidity and credit ratings.

Thank you, Patricio. Let's move to Slide 22 for an update on our B2B market dynamics. As we mentioned in our previous call, the number of out-of-home consumers continues to be impacted by inflationary pressures, social political stability and climate-related disruptions. Moreover, during the first quarter, the tourism sector has been severely impacted by the protests and roadblocks. Therefore, this year, we are seeing market contractions in key categories such as edible oils, shrimps and flour. In contrast, we have positive expectations on sauces given the resilience of the chicken rotisserie segment. Our strategy in this category is to support its growth, maintaining good profitability, especially in the associate programs. In this context and backed on our competitive advantages, we managed to gain or maintain market share in core categories, such as edible oils, with an increase of more than 4 percentage points on sauces. On the other hand, an increase in bulk bread consumption impacted our large and flour categories volume. However, we managed to gain profitability and increase our gross profit per tonne in both categories to compensate volume reductions. Our strategy to recover our shares in flour and Laundry will be based on the revamp of our Nicolini brand and a development of the pastry market. During this complex scenario, with market contractions and volume reductions, we have been very disciplined in order to avoid value destruction. We remain focused on our digital initiatives and technical assistance for our clients attending to strengthen our brands and customer loyalty in these turbulent times. Let's move on to Slide 23 for an update on our B2B financial performance. Despite the challenges mentioned in the slide before, in terms of market size and impact in consumption, we managed to increase our gross margin by 0.3 percentage points. As a result, our gross profit per ton reached PEN 643, which represents a solid increase of 16% year-on-year. Despite lower volume and lower revenue, we achieved this higher per ton gross profit, thanks to our higher solution revenue management activities and better product mix. EBITDA for the first quarter reached the amount of PEN 50 million, slightly lower compared to the first quarter of 2022. Next, we will cover the Aquafeed market dynamics on Slide 24. In Ecuador, Fintechs grew 23% in the first quarter of 2023 versus the first quarter of 2022. Export growth was above market expressions, and this was mainly due to the impact of harvest delays in the fourth quarter of last year at that were finally exported in the first quarter of this year. In the last weeks of the first quarter of 2023, we have seen a slight uptick in export prices as China continues to regain ground among other power and shrimp exports. Ecuadorian trade continued to improve despite low prices when compared to the first quarter of 2022 and higher cost due to higher fuel prices and expenses related to heavier than-usual rains. Farmers continue to invest in automation and new technologies, which include Vitapro's new digital ecosystem as well as aerators and automatic feelers. 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, during the first quarter, Chilean farmers saw improved production conditions, thanks to the absence of Calderon which has been our recurring seasonal problem in previous years. Thanks to this, they were able to extend their harvest days in order to achieve higher final weights and therefore, higher production volumes. In Norway, a reduction in growth rate is expected due to the government resource tax, which is limited in investments in the industry. For the first quarter, prices were higher compared to the first quarter of 2022 because of lower harvest in Norway and because of lower yields, concerns on the Norway tax and lower offers of [indiscernible]. Despite these higher prices, demand seems to stay firm in retail and in foodservice. Current price levels are attractive and healthy for Chilean producers and their profits, which could incentivize farmers to continue and so on. So competition in the Chileon salmon industry [indiscernible] to employ its differential go-to-market strategy in order to capture new tenders in 2023. All in all, in the first quarter, we continue to see growth in both the shrimp and salmon industries, and we expect this trend to continue throughout the year as well. Vitapro's continues displaying growth especially in Ecuador, mix growth plus our differentiated fee products and strong brands allow us to continue to create value for Alicorp. Let's move on to Slide 25 for an update on our Aquafeed performance. In terms of business performance, Vitapro's posted a 12% revenue growth, mainly explained the price initiatives introduced on the sale for the increase in our raw material prices and cueing up of our portfolio to value-added fee mainly aqua. These initiatives were partially offset due to less volumes sold in a major account in this specific quarter. We expect to recover this volume during the second quarter of 2023. Gross margin decreased 2.1 percentage points, mainly due to an increase in our net EBITDA increased 2.9% year-on-year, mainly due to the reduction of SG&A expenses and a reduction in corporate expenses allocated to the business units. Next, we will cover the crushing business financial performance on Slide 26. During the first quarter, our crushing business day supply chain disruptions caused pipe blockages under the Saguaro Border related to the sociopolitical disability in Peru. In this context, we have to lower our volume process, which resulted in a decrease of 13% year-on-year in our sales volume to third parties. Consequently, revenues for the first quarter resulted in a 21% decrease year-on-year. Regarding EBITDA, the first quarter saw a decline of 92% due to lower volumes process, and more importantly, a relevant decrease in our crush margins caused by a price reduction on commodities. Even though we had already anticipated a reduction in profitability for this business unit in our previous earnings call, the profitability challenges in our so far have exceeded our expectations. In this context, the business will continue to develop strategies to mitigate these lower crushed margins such as delay in grain purchases and managing payment terms with farmers. Moreover, our Agricultural Solutions business achieved an increase in sales of 27% versus the first quarter of 2022. Now let's move to Slide 28 to discuss our liquidity and credit rating. Regarding our liquidity levels, as of March 2023, we exhibited a comfortable cash position, which amounted to PEN 1.21 billion, PEN 270 million more than as of the end of 2022. The increase is mainly explained by prefunding and the working capital needs for our crushing business. Despite a challenging environment in the Bolivia during the first quarter of 2023, we issued a promissory note for the $114 million in local currency through the capital market with a remarkably competitive rate. As of March, our cash position covers 1.01x our current debt. And if we consider the committed credit line for $120 million, such ratio would be 1.38x. As always, we remained active in exploring opportunities to improve our maturity profile through the extension of our liabilities to secure liquidity. Even though we have several alternatives to do so, we do not believe that the timing is adequate to issue long-term debt due to higher interest rates worldwide. Our ratios show our comprehensive and prudent financial strategy, which has led us to maintain our local rating and the highest possible rating level in Peru as well as maintaining our rating by its global agencies, Fitch and Moody's. Moving on to Slide 29 to comment on our debt metrics. Regarding our debt metrics, the first quarter of 2023 has been a challenging one, yielding a lower EBITDA than expected. Nonetheless, the company managed to partially offset this effect with several working capital initiatives. As a result, our net debt-to-EBITDA ratio increased only by 0.3x since the first quarter of 2022 from 2.6x to 2.9x. 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 31 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. The first quarter of 2023 was conditioned by external events that strongly affected our sales volumes, mainly in our crushing business due to the blockage in the [indiscernible] in addition to lower gross margins. Furthermore, the normal distribution of our consumer product was also affected by roadblocks and climate events. Finally, inflationary pressures continue to affect household disposable income impacting our out-of-home consumption. Taking these factors into account, we expect low to middle single-digit year-on-year growth for revenue, mainly due to challenging volume in our consumer markets and lower volume for the crushing business as we will properly process less volume due to the lower expected crushed margins. Regarding EBITDA, we expect that mid-single-digit decrease for the full year, mainly explained by a higher-than-expected decline in our crushing business profitability. In this challenging context, we will expect our consumer segments and Aquafeed business to continue increasing profitability, offsetting most of the decline in our crushing business. As for investments for the year, capital will continue to reflect our efforts to accelerate growth, reaching USD 145 million, including equity. If we exclude Aquafeed, CapEx is estimated in USD 76 million. Finally, for leverage, we continue to estimate a 2.4x net debt-to-EBITDA ratio by the end of 2023 on the back of solid free cash flow generation. This concludes our presentation, and now we welcome any questions that you may have.

[Operator Instructions] The first question comes from Felipe Ucros from Scotiabank.

Just a couple of questions on my end. The first one relating to the protests in the border between Peru and Bolivia. I think you clearly laid out last quarter when the construction was for crushing. But just wondering if you can give us any detail about whether the disruptions are affecting any of the other businesses. For instance, any flow of finished goods for the consumer business in Bolivia or maybe any flow of commodity inputs for your consumer businesses in Peru? Just wondering if those disruptions are affecting anything else other than crushing.

Thank you, Felipe. It's Alfredo here. I will ask Luis Estrada to elaborate a little bit more on the impacts on our crushing business. But overall, yes, it does affect, obviously, volumes flowing from Bolivia into Peru and then from Peru for their export business. Also affects volumes going from Peru into Bolivia to, for example, provide finished products that we sell in consumer products in Bolivia. But let me just turn it over to [ Luco ] who will elaborate further on the response. Go ahead, [ Luco ].

Thank you, Alfredo, and thank you, Felipe, for the question. I think, Felipe, you were also interested on a little bit of color on the flows of commodity inputs into Peru. Basically, a couple of flows that we have from Bolivia into Peru from the point of view of sourcing commodities. One, it's related to the vegetable oils and the second one related to soybean meal. What we have done, Felipe in this last quarter was to get access to soybean meal from Paraguay, from Argentina and even from the U.S.A. given the higher liquidity on both Paraguay and the U.S. and, to some extent, some liquidity in Argentina, despite the fact that the crop has been impacted by climate change, we were able to source EBITDA pro from other origins. And in the case of soybean oil as well, most of our crude oil, not all of it, but most of our crude oil, both soybean oil and sunflower oil coming to our plants in Peru, we're urging that from Argentina, and we have not had a disruption from that flow.

Yes. Sorry, I was in -- so thanks for that. That addresses one of the 2 questions I had, which was a flow of commodities from Bolivia to Peru. Just wondering if you can give us some details also on the flow of finished goods from Peru to Bolivia. I imagine you keep some inventories for your B2B categories in Bolivia. But just wondering if you expect any disruptions in Bolivia consumer business due to the disruptions.

Right. I don't know, Patricio if you want to complement, but basically in the same token that we have looked for different routes for the soy meal that goes to Peru from Bolivia. We have also looked at different flows and different routes at higher cost, of course, of finished products and other raw materials needed for the production of finished products in Bolivia. I would let Patricio and Manuel to comment on that.

Yes. Thank you, [ Luco ]. Yes Felipe, we had actually very minor disruptions on the finished goods. The atrocious compare from Peru to Bolivia, meaning the laundry and compare division and also some pasta that we do also export to Bolivia. But fortunately, we were able to manage different routing alternatives as Luco mentioned. And the inventories that we had in Bolivia pretty much compensated for the initial adjustments that we had. However, we do have had impact on costs in terms of shipments because the base of different routes are coming in at higher cost versus the original ones that we had. And from Bolivia to Peru, we actually export also one brand of edible oils that sources the southern part of Peru, but our factory in Lima was able to compensate that production without any disruption. Okay.

The next question is from Mr. Alonso Aramburu from BTG Pactual.

Yes. I wanted to ask about potentially what's happened after the quarter, whether there's a normalization of sales and costs at the beginning of 2Q, especially in Consumer Goods Peru. And related to that also, how do you see the evolution of expenses, which you mentioned your growing marketing expenses to go in some segments, can you please give us some color on both of that?

Let me ask first, Patricio to answer the first part of the question, then Manuel to just complement on the SG&A side. Patricio?

Yes. Thank you, Alfredo, and thank you Alonso also for the question. Yes, we are seeing some improvements in terms of shipments during the second quarter of the year. Obviously, we are fortunate that we do not have road blocks up to this point and also the flooding and the severe raining that we have had in the northern part of the country has stopped, at least for a while. So we are seeing some normalization in terms of those shipments. We foresee that perhaps that will continue to happen. However, we are more concerned nowadays in terms of markets and the way that those markets are declining. Obviously, we have only received the first January, February reading, but we are concerned that given the, I would say, slow economic recovery that Peru is having those markets will continue to be affected in the short term. So on one hand, we have a recovery of shipments driven by open roads and our ability to reach those point of sales. But on the other hand, we have consumers that are not necessarily buying and purchasing as much goods and products as they were doing. So in the earlier part of last year, where we have had if you compare our quarter 1 last year, it was a very high quarter in terms of consumption. We had a lot of money, I would say, in the market that produced to consumer looking for goods and services, which is not necessarily the case during this year. So we are very cautious of what will happen in the upcoming quarters, and we're -- and we are obviously acting accordingly. In terms of advertising expenses, as you mentioned, we are -- we continue supporting Amaras definitely, which is a recent introduction, which has had great results. And we are also being very selective in any other pieces of communication and advertising and trade promotions that we're putting in the market so that it does reflect positive ROIs on an investment side.