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

Ladies and gentlemen, thank you for standing by. I'd like to welcome you to Alicorp's First Quarter 2025 Results Call on the 30th of April 2025. [Operator Instructions] So without further ado, I'd like to pass the floor to Mr. Roberto Dongo-Soria, Investor Relations at Alicorp. Please go ahead, sir.

Thank you very much. Good afternoon, everyone. This is Roberto Dongo-Soria, Alicorp's Investor Relations Officer. We are very pleased to have you with us in our first quarter of 2025 earnings call. Presenting today will be Mr. Alvaro Correa, Chief Executive Officer; and Mr. Luis Banchero, Chief Financial Officer. Other members of the management team will join us during the Q&A session. We will discuss the first quarter of 2025 results after the financial results and earnings release were issued yesterday. If you have not received a copy of the earnings release, please visit us at www.allicorp.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 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 statements are based on several assumptions and factors that could change causing the actual results to differ materially from the current expectations. We ask you refer to the disclaimer included in the earnings release prior to making any investment decisions. It is now my pleasure to turn the call over to Mr. Alvaro Correa, Chief Executive Officer of Alicorp, who will begin the presentation. Alvaro, please go ahead.

Thank you, Roberto, and good afternoon, everyone. I would like to begin today's call by highlighting the key decisions made during our Annual Mandatory Shareholders' Meeting held on March 27. A new Board of Directors was elected from the 2025-2028 term. Notable additions include Manuel Romero, former CFO and Deputy CEO of our company; Leslie Pierce, our former CEO; Fernando Romero; and Walter Susini, who joins us as Independent Director. This new Board brings a strong combination of experience and strategic vision. It is fully committed to upholding the strategic discipline we have demonstrated recently with a clear focus on driving long-term growth and delivering tangible value to our shareholders. Among other key decisions, shareholders also approved a dividend distribution of PEN 0.3769 per share, which will be paid on May 14. This decision underscores our ongoing commitment to returning value to our investors. Additionally, our authorization was granted to seek financing through the capital markets for a liability restructuring of up to $500 million. This move will strengthen our financial position, enabling us to continue executing on our strategic priorities and enhancing our capacity for sustainable growth. Now I will turn the floor over to Luis Banchero, who will provide a more detailed discussion on the operating results and on our expectations for 2025. Please, Luis, go ahead.

Thank you, Alvaro. As mentioned in previous calls, the figures we are presenting today are on a pro forma basis. These adjusted figures exclude nonrecurring impacts from the respective periods. For further details on these nonrecurring items, please refer to our earnings release and the footnotes in this presentation. Please, let's review our consolidated results for the first quarter of 2025 on Slide 5. Consolidated gross profit amounted to PEN 784 million for the quarter, representing a 32% increase compared to the same period in 2024. This growth was primarily driven by the performance of our Aquafeed business unit, which contributed PEN 111 million to the year-over-year increase. This result reflects the successful execution of strategic initiatives supported by the consolidation of the expansion of our production capabilities in Ecuador, which enabled a significant rise in sales volume amid a more favorable market environment, particularly in the shrimp segment. Now if we move to Slide 6, we can see how this growth in adjusted gross profit is reflected to our adjusted EBITDA. Consolidated adjusted EBITDA reached PEN 459 million, representing a 50% year-over-year increase for the quarter. Again, this growth was primarily attributed to the growth in our Aquafeed business unit with PEN 115 million, while B2B and international businesses also contributed with PEN 30 million and PEN 12 million, respectively, partially offset by lower adjusted EBITDA in Consumer Goods Peru. Adjusted EBITDA margin improved by 2.5 percentage points, reaching 15.8%. Please, let's turn to our operating results by business unit, starting with Consumer Goods Peru and International Businesses, as shown on Slide 8. In the first quarter of 2025, in Consumer Goods Peru, we remain strategically disciplined, prioritizing profitable growth through our emblematic brands and consistent execution across all distribution channels. This approach drove continued market share gains in 5 of our 7 emblematic brands. Alacena stood out, increasing its share by 2.8 percentage points compared to previous 2-month periods. Notably, Alacena, Casino and Amarás achieved their highest market shares in the past 7 bimonthly periods. However, we're currently facing competitive pricing dynamics in the laundry segment. In response, we have implemented a targeted plan aimed at enhancing economic accessibility, particularly in the value detergent category to protect our market position. As a result, adjusted EBITDA for the quarter decreased by 4% compared to the same period in 2024, primarily due to the strategic actions taken to address the headwinds in the laundry segment. Early results are encouraging. Detergents volume sales grew 7% this quarter versus the same period last year. It is worth highlighting that categories such as sauces, edible oils and pasta performed strongly during the quarter, partially offsetting the impact from the laundry segment. In this regard, when excluding detergents from the total business, EBITDA increased by 6% year-over-year. In our International Businesses, Bolivia continues to face a challenging macroeconomic environment, further influenced by the upcoming general election scheduled for August this year. Nonetheless, in Ecuador, Daniel Noboa was elected as President for the 2025-2029 term and expected that he could continue with the current economic policies in the country. Despite this external context, we remain strategically focused, which continues to enable significant improvements on key and prioritized categories. Adjusted EBITDA for the quarter reached PEN 31 million, reflecting a 67% year-over-year increase. This performance was mainly driven by Bolivia, where broad-based price adjustments across the economy helped mitigate the impact of higher financial costs resulting from exchange rate fluctuations. Additionally, in Ecuador, adjusted EBITDA also improved by PEN 7 million. In other geographies, we exceeded our expectations for our Tari brand, placing the product in nearly 1,000 stores across strategic areas in the U.S. and outperforming the category's average velocity in each of them. Looking ahead to 2025, international businesses will maintain operational discipline and focus on growth across prioritized categories and geographies. Specifically for the Tari brand in the U.S., we will continue to drive expansion while supporting business as usual in other geographies through a defined export portfolio centered on profitable categories and cost efficiencies. Now let's move on to the performance of our B2B and Aquafeed unit on Slide 9, please. For our B2B business, we continue to experience sustained volume growth during the quarter with a 35% increase compared to 2024. This growth was primarily driven by the incorporation of Refinería del Espino operations as well as an increase in out-of-home consumption and tourism, which positively impacted the performance of categories such as flower and edible oils. However, we are seeing increased competitiveness in our core categories such as oils, shortenings and detergents, driven by the growing presence of new competitors. As a result, adjusted EBITDA for the quarter amounted to PEN 98 million, reflecting a 45% increase compared to last year. In this context, our focus will be on reinforcing commercial leadership and implementing strategies to protect our market positions. We expect sustained growth in demand for our products by the end of the year. Moving on to Aquafeed. In the first quarter of 2025, global shrimp and salmon markets remained relatively stable. Shrimp prices held steady, while salmon prices saw a slight decline. In Ecuador, shrimp exports volumes grew at a double-digit rate compared to the same period in 2024, though this growth partially reflects the low baseline from last year. Within this context, we remain focused on optimizing feed formulations, strengthening relationships with key clients in Ecuador and reinforcing our leadership position in Central America. Additionally, we're actively pursuing new feed contract opportunities in Chile, reaffirming our commitment to the regional growth. EBITDA for the first quarter reached $37 million, representing a sixfold increase year-over-year. This significant growth was primarily driven by the strong increase in sales volume which contributed to a notable improvement in gross profit. Additionally, favorable raw material costs and the continued tiering up of our portfolio further supported this positive performance. We remain confident in Ecuador's competitive advantages over the other shrimp producing countries, positioning Vitapro to capture value and lead as the market continues to recover. With that, let's move on to Slide 11 to comment on our leverage, debt and liquidity metrics, please. We continue to deliver strong cash flow generation, primarily driven by the operating performance during the quarter, which positively contributed to a reduction in our leverage from 2.5x as of March 2024 to 1.8x as of March 2025. Notably, these achievements were accomplished despite the execution of our share buyback program in March 2025, totaling PEN 391 million. Excluding this impact, our leverage ratio would have been approximately 1.6x. In terms of liquidity, our available cash position stood at PEN 2.5 billion, an increase of around PEN 982 million compared to March 2024. This variation is primarily driven by positive and stable cash flow generation and funding increases to support intercompany liability management. This cash position covers 1.2x our debt maturities over the next 12 months. And when considering our committed facilities, this ratio increases to 1.4x. Looking ahead, our focus on increasing our profitable revenue and improving our channel mix, along with active management of working capital should continue to support stable cash flow generation and help maintain healthy leverage levels, providing us with both financial and strategic flexibility. Now let's wrap up today's presentation with a glimpse of what we expect for 2025 results on Slide 13, please. As mentioned during the call, first quarter results remained positive, primarily driven by the recovery of our Aquafeed business despite facing significant challenges in the consumer segment, particularly in the detergents category as previously discussed. These results and the current market context are in line with our expectations for 2025. Key growth drivers such as continued improvements of our emblematic brands, and the performance of our Aquafeed business remains critical to achieve our target. However, the primary risks we're closely monitoring include competitive dynamics in our most relevant categories as well as other key factors impacting our operations. In this regard, we maintain the expectations communicated last quarter, anticipating sales growth of 10% to 12% and mid- to high single-digit growth in adjusted EBITDA for 2025. The stable cash flow generation, improvements in profitability and initiatives such as the current share buyback program, dividend distribution and the acquisition of Jabonería Wilson will lead us to believe the leverage ratio will remain within the range of 2x to 2.5x net debt to adjusted EBITDA. As of our investments, we continue to expect our CapEx to reach $70 million. Now I would like to stop and open the session to any questions you may have.

[Operator Instructions] Okay. Our -- from Felipe Ucros from Scotiabank.

Can you guys hear me okay?

Yes. Yes, Okay.

Okay. Perfect. So a couple of questions on my side. So the first one on Consumer Goods Peru. First, wondering if you can expand a little bit on the difficulties that you're having in the value segment of the laundry category with new entrants and what your defense strategy is here. Just wondering any color you can give us on that would be great. And then on Aquafeed, very nice recovery here. Wondering if you can give us some color on what drove that recovery, whether it was a new strategy behind it, the new capacity or simply down to market forces? And what do you expect here for the rest of the year, specifically whether you think this new volume level is a sustainable one for us to model -- or whether you think there were one-offs here that made it this much better than last year?

Okay. Thank you, Felipe. Thank you for your questions. As for the laundry category, you asked about the challenges. Basically, what we're facing is strong competition from imported products that attack mainly the value segments. And in response to that, we have implemented a strategy to protect that area of the category. That's a combination of understanding what the clients need, what the consumer wants and what the product that we have -- how the product that we have fit that need. It's a combination of a deeper and more intensive, I would say, go-to-market strategy as well as pricing, but basically is defending our traditional position in that segment as well. So that's basically what we're doing. I don't know, [indiscernible], if you want to complement on that.

Very quickly, Alvaro. Thank you, Felipe, for the question. We invest heavily in understanding consumer needs, and that applies not only for the core segment, but also for the value segment. So we have deployed different initiatives from revisiting our portfolio, from launching new brands and new product lines, and we are confident that we're going to be able to continue with growth in that segment and defend the laundry detergent category.

As for your second question regarding Aquafeed, yes, we had a very good start in this -- in the year. That's a result, I would say, of several factors. One is consistency of the strategy, how we get closer and understand better the needs of our clients. The level of sophistication in the shrimp industry is growing. So the needs are there. We have worked a lot on the feed performance, the quality of our product is fundamental in this -- in winning the market. That has enabled us to -- and competitive also in our cost structure that has enabled us to maintain and even grow our market share there. Yes, this quarter is also a positive one in terms of demand. The production of shrimps in this quarter has been very good, good weather, good weather conditions, and that has helped. And some positive trends also on raw materials that also has helped. So it's a combination of factors. If that will continue, I would say that the more permanent ones, the competitive advantages that we have, yes, will be there. The volumes, you know that this is a business that is volatile and it's seasonal as well. So that will depend on the weather and the demand for food.

Got it. Very clear. And maybe if I can do a follow-up on -- a follow-up question on B2B. Just wondering if you could give us some detail on what it would have looked like on an organic basis. It seems like whatever you got from the Refinería del Espino is doing pretty well. but it seems like some of the other categories are having some difficulties. So just wondering ex M&A, what it looks like.

I will allow Luis Estrada, who is in charge of the business to answer that question.

Thank you, Alvaro. Thank you, Felipe. Yes, the -- if we compare the gross profit, Felipe, without Refinería del Espino, we would have instead of the PEN 114 million that you see in adjusted gross profit would be close to PEN 123 million. So there is a slight, I would say, reasonable growth if you take into consideration the growth of the market and the consumption out of home. If we convert that and look at the EBITDA numbers, the numbers look more flat, but that's basically because in this current year, B2B has a higher allocation of admin expenses. So if we look at the gross profit, basically is a more direct reflection of the business, I would say that we still have a growth versus last year. In terms of the main categories, volumes are growing according to market growth. And in some cases, we are focusing on increasing our market share, considering that market share in most of the categories that we have -- that we're managing are in leading positions. So keep increasing the market share in flower, in sauces, in oils, it's quite challenging because we have a higher market share. Nevertheless, the volume is growing and the gross margin per metric ton is also growing slightly higher than the previous year.

Our next question comes from Alonso Aramburú from BTG Pactual.

I wanted to follow up on your comments on Consumer Goods Peru. And if you maybe can give us some color as to how should we think about gross margins? You had some pressure this quarter, likely due to the competitive environment you mentioned. So given that this is, I assume, likely to continue and given also what you've seen in terms of raw material prices, maybe product mix, how should we think about gross margins for the rest of the year?

Thank you, Alonso. We have deployed this strategy and put a lot of focus on the laundry segment. And there, we will probably -- even though we have very healthy margins, and we are planning to keep them relatively stable, there will probably some reduction there. But I would say that for the rest of the categories, margins will continue to be healthier than before. And I think we're reaching a level in which we feel comfortable with the margins. There is always the need to protect. Competition is there. Consumer needs are there, and we have to protect that. But basically, we don't see margins being affected that much for -- I mean, going forward.

Okay. So if that is the case, then when we look at your consolidated EBITDA margins, should we think that this closer to 15% to 16% level, that's sort of the level you think EBITDA margin should be at the consolidated level?

Yes. Yes. In consumer -- you were asking about Consumer Goods Peru, right?

But I'm referring to -- I think Consumer Goods Peru is higher, right? It's closer to...

Around 20%.

Right. So if I'm referring to consolidated margins, right? You've had margins close to 16% in the last couple of quarters. So I'm just wondering if you think that's a sustainable level.

Yes, it is. It is also -- that is, as you can imagine, affected by mix. And if we see, for instance, Aquafeed growing faster, that's a business with lower gross margins and EBITDA margins. So that affects the result. But basically, at this level, I would say that the margins that you're mentioning we will be able to maintain going forward.

[Operator Instructions] Okay. It looks like we have no further questions. We would like to thank everyone for the participation. I will now hand it back to the Alicorp team for the closing remarks.

Okay. Thank you. Thank you, everyone. Thank you for the questions. I would just like to close this call by reaffirming our strong confidence in the solid foundations of our business and the effectiveness of our long-term strategy. We are backed by the strength of our brands, the resilience of our team and the competitive advantages we have built. These fundamentals position us not only to navigate short-term challenges, but to capture future opportunities and continue generating sustainable long-term value for all our shareholders. We remain fully committed to disciplined execution and to delivering results that support our strategic priorities and long-term growth. Thank you once again for your time. And in case you have any further questions, please do not hesitate to contact us. Goodbye, everyone.

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