Gruma, S.A.B. de C.V. (GRUMAB) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Gruma's First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Mr. Raúl Cavazos, Gruma's Chief Financial Officer. Please go ahead, sir.

Thank you, Melissa. Good morning, and welcome to our first quarter 2021 conference call. We thank you again for giving us the opportunity to share our results with you, which highlight the changing market dynamics. In terms of our business at Gruma, we are pleased to see that Gruma products are keeping share, have retained -- have remained strongly rooted within Gruma's traditional client base as well as within the -- a growing demand for our entire product line, especially in the U.S. The enhancement of growth at our super soft and more particularly, at our card-balance segment, which has shown double-digit growth over the last 2 years in the U.S., has convinced us that the trend that started with the familiarity of the tortilla as a healthy and versatile product for all cultures' diet and the preference of value-added products has remained and expected to keep increasing over the time even in a post-pandemic market. Meanwhile, globally, the food service channel continues with a slow paced recovery towards pre-pandemic level, at which point we will see the great benefit of having a strong retail base, coupled with returning growth from the food service business, which is already almost to being at pre-pandemic levels again. During the quarter, however, we did see our volume in soft temporarily decrease, driven mainly by lower corn flour sales. The comparison base of first quarter 2020 was a high benchmark to overcome as the client's purchase as a result of the pandemic increased our volumes sold considerably a year ago from the worldwide stockpiling effect. That, coupled with the severe weather conditions in the U.S. and Mexico presented a challenging environment for volume output in our corn flour operations during this event in February. On the back of these fundamentals, volumes sold dropped 3%. However, due to our shift toward value-added products within our portfolio, we were able to increase revenues by 3%. Cost increased, especially from corn in Mexico, taking at a toll on our EBITDA, leaving it almost flat relative to a year ago at MXN 3,472 million. We are pleased with our performance for the quarter, as it underscores a positive evolution of our retail channel, which, as you know, is part of our overall strategy. This positive evolution can be seen in the compounded annual growth rate we have experience in sales, EBIT, EBITDA and net income, which has grown 9%, 12%, 10% and 13%, respectively, since the first quarter 2019 before the change in fundamentals when new pandemic started. Given the temporary nature of these effects I just mentioned in the income statements, we are confident that we have a great base to get back on track, when these additional cost effects veer off. We know that the future cost of our raw materials, or in specific, have been a concern to the market. And we want to reassure everyone that, as always, we'll remain vigilant for any cost fluctuations that will affect our margins in the long term. In terms of our balance sheet, we have refinanced $200 million in dollar and peso-denominated liabilities through a credit facility with a maturity of 5 years and an interest rate of LIBOR plus 100 basis points spread. This is part of our effort to optimize our capital structure, and we will remain proactive in engaging refinancing opportunities. This quarter, relative to December 2020, we increased debt outstanding by USD 400 million, standing currently at $1.5 billion. However, our net debt-to-EBITDA ratio remains at 1.5x. In all, although we have to face a challenging environment for the various reasons itemized [ in the mid level ], we're feeling bullish by the fundamentals we see in the market and the product line we have lined up to match demand during the rest of the year. Now let me give you a brief drop down in our subsidiaries' performance during the quarter so you can get a good idea about the fundamental fundamentals in each region. In the U.S., sales volume decreased 3%, and the 7% drop in volumes sold of corn flour overshadowed the performance at our tortilla's retail business line. A much higher comparison base in first quarter 2020 due to the stockpiling that took place at the start of this pandemic during the first half of 2020 and severe weather conditions hindered our corn flour operations during February in this region. As volume decreased, a more profitable sales mix with a greater composition of value-added products supported our net sales, reaching a 3% growth. EBITDA increased 2% to MXN 2,354 million, and EBITDA margin declined 20 basis points to 18.5% from 18.7%. At GIMSA, sales volume decreased 1% also as a consequence of the higher base of comparison in the first quarter 2020 due to the stockpiling effect I already mentioned that took place globally during the first half of 2020. And also, in-store traffic was lower than a year ago as a result from the COVID-19 pandemic. Net sales increased 2% to MXN 5,628 million, due to price increases implemented during the first quarter 2021. These increases took place at the middle of first quarter 2021, generating a revenue dephasing effect relative to cost. And the higher cost of corn has not been fully reflected in price increases, and our utility costs added to our cost of goods sold from the freeze in the month of February. EBITDA was 34% lower at MXN 615 million, and EBITDA margin declined 600 basis points to 10.9% from 16.9%. We would also like to inform you that we have already implemented a second price increase of MXN 300 per ton, which became effective on April 15. This price increase will offset a dephasing effect of costs over revenues that took place during the quarter. In Europe, sales volume declined 17%. We saw a 22% drop in volumes sold at our milling operations resulting from higher sales generated during first quarter 2020 and lower sales derived from the COVID-19 pandemic. The tortilla operations also contributed to this drop, decreasing sales volume by 9% as higher volumes sold on the retail channels were not enough to offset the decrease in volumes sold to our food service business. Following these fundamentals, net sales decreased 2%, while EBITDA rose 130% to MXN 277 million, from a recovery of an insurance claim worth MXN 203 million. Lastly, in Centroamérica, volumes remain flat as we have higher demand in Honduras, but lower volumes saw to welfare program -- food program in Guatemala as well as lower demand in supermarkets and grocery stores relative to first quarter 2020. This in turn, created a 2% net sales decrease to MXN 1,257 million, driven mainly by a change in the sales mix relative to first quarter 2020. EBITDA decreased 9% to MXN 137 million, and EBITDA margin fell 90 basis points to 10.9% from 11.8%. At other subsidiaries, operating income increased MXN 141 million to MXN 169 million, given the strong performance that Asia and Oceania have had as tortilla and flat breads have been accepted and growing successfully in this region in addition to overall fewer corporate expenses. In terms of CapEx during this quarter, we invested approximately MXN 43 million (sic) [ $43 million ] in capacity expansions in Malaysia, construction work at a plant in Indiana, and upgrades for the reopening of the tortilla plant in Omaha, Nebraska, among other upgrades in technology, infrastructure and maintenance across all of our plants. On a side note, I would like also to communicate that we will hold our annual shareholders' meeting tomorrow morning, where we are set to look for approval with regards to the dividend payment of MXN 5.20 per share, and the cancellation of 11.3 million shares that were bought from April 2020 to April 2021 as part of our share repurchase program. With that, I would like to open the call for questions from our listeners today. Melissa, could you please open up the call for questions, please?

[Operator Instructions] Our first question comes from the line of Ben Theurer with Barclays.

It's a twofold question. So first, obviously, and you've mentioned a little bit corn cost pressure in Mexico. But considering the entire operation, not only Mexico, but also the U.S. for now, with corn prices just making one record after another, we're almost at $6.50 a bushel now. It was about $5.60, $5.70 throughout the quarter, but it continues to go up. I remember, I think you said in late 2020, something around close to $4 being hedged for 2021. So it doesn't impact that much, I suppose, in the short term. But thinking forward, how are you thinking about input cost pressure? And what does that mean for your profitability? That's one part of the question. The second, just along those lines, how do you think about the ability to put price increases through, both in Mexico as well in the U.S. in order to offset the input cost pressure?

Sure. Well, talking about the hedges as you already mentioned, we already hedged the full corn in the U.S. for 2020. And we already have about 20% of the corn that we will mill during 2022 already hedged at $4.50 per bushel. We are there, basically, in what we have now is analyzing kind of structure here to try to be or to have a hedge for the full amount as you said. Prices, corn prices have been going up. And we are not expecting to have any kind of reverse on the prices of corn during the rest of the year unless the corn harvest in the U.S. be substantially extraordinary or remarkable for the year, which we are not expecting in this particular case. Then what we see is we are looking kind of a structural kind of a collar option just to -- not to set the price for 2021 just for 2022, just to do not fix or set the price for the next year, and see that maybe corn prices could go down because of an extraordinary corn harvest. So we want to do -- to have kind of flexibility with a collar or something about that. We also try to be at least a little bit better than the market than our competitors in terms of the cost of corn. In terms of...

Okay. And your pricing power.

Yes. Yes. In terms of pricing power or price increases in the U.S., let me tell you that in the corn flour side, we are not expecting to have any kind of issue because this is an agreement that we've been operating in the last 25 years in the U.S. We will move the price according to the average prices of corn for the full year or for the year, which means that from January 1 to maybe August or September 30, what will be the average. And it will be compared with the cost of the corn that we are currently milling, and then it will be there, the increase. Also, we can impact those increases in the corn flour according if we have some kind of increases on the transportation basis of this corn. In the tortilla side, let me tell you that we already increased prices during this quarter on the food service. We have intended to increase prices on retail but this is not going to be an easy way to do it. But we're going to do that, and we are expected to make an approach with the retailers by the middle of the year, which is basically the -- they will have time to talk about those matters. But according -- with the current cost of corn in the market, we are expecting to have kind of success. If not, maybe what we can do then is to try to limit the portfolio close, not moving the price and be some more higher portfolio products, which we can increase prices or we can move the prices. And of course, in the line of value-added products, we can also manage our prices with our retailers. Then we feel that we can get something from there. This is in the U.S. as well as also we increased prices in Mexico -- excuse me, we increased prices in Europe in the tortilla side. And in Mexico, we increased prices in tortilla. We increase prices, as I already told you or explained during the conference, we increased prices in February 15. In the corn flour, we implemented MXN 650 per ton. And to complement all the cost increases in utilities and gas, let's say, gasoline, et cetera, we make an additional price increase of MXN 300 per ton. It was effective by last April 15. And with that, we already complete all the effects or the cost increase that we are needing during the first half of the year. For the second half of the year, what I can tell you is that we already have kind of options for the full corn that we will mill during the second half. That will allow us to have a lower-cost corn than the market. We have not hedged currently because what we need to do is just to purchase the corn once the corn harvest in Mexico take place, which will be during May and June, July even and maybe we will be required to make an additional price increase just to reflect the cost of the corn. But this is going to be for the whole industry because all of the participants, not only the corn flour side, but also on the traditional side of process to make tortilla, they are now having a tremendous price increases of the raw corn in Mexico. Just for will give you an example, at the beginning of the year, the tortilla producers of Asia, tortilla producers, they bought the corn at [ MXN 3,600 ] per ton. Corn is higher than MXN 7,000 per ton. And it might be even higher because the cost of corn will be higher for the second half of the year. China is still purchasing additional corn for their requirements, and it's moving the market. We are participating there. The company feel comfortable that we will be able to increase prices in the States as well as in Mexico, and we can recover the cost increase in that corn. Because it's going to be again for the full industry, for the full category, not only for the company.

Okay. And then just one last. Do you expect any pushback from the political side? I mean there's always been a lot of talk around, and it's been -- it's come up already in the past. So how do you think the current government thinks about increasing prices on a basic food item?

It was -- yes. Yes. It was at the beginning of the year, that we have the Mexico government ask us to delay a little bit, to dephase a little bit of price increase. It was because they didn't want to have a growth in the price of the tortilla at the beginning of the year, which will derive in increase in the inflation rate. I think it was a worry for them at the beginning of the year and is reasonable, and we're ready to do that. For the second half, we are not expecting to have any kind of call. Of course, if so the case, what we need to talk to them is just to explain them the cost of the corn, the cost of the utility, the cost of everything is going up, and what we need to do is to implement these price increases. This is something that maybe we will face. But if so the case, I think we will find out the way to increase prices in agreement with them.

Our next question comes from the line of Emiliano Hernández with GBM.

Just first, a quick one. Do you feel confident with the -- your year guidance share on the last conference call? And then my second question is regarding the impact on Mexico's EBITDA margin during the quarter. Could you give us more color on how much of the impact was explained by the extraordinary expenses you comment coming from the severe weather conditions seen in the quarter?

Yes, sure. Well, let me tell you, in terms of the guidance that we already gave you during the last conference call, what I can tell you is that basically, I would want to change a little bit GIMSA because of the effect that we have during this quarter. In volume, what we can expect for the year is going to be something between 1% and 2% volume growth. However, because of the price increases, we are expecting to have a sales -- net sales growing at about 7% to 10%. However, EBITDA margin, we are expecting to be something about -- a little bit lower than 100 -- maybe 100 basis points lower than the quarter -- the margin we shared with you during the last quarter. It's going to be something around 50% -- 15% -- excuse me, 15% for the full year. In Europe, we were talking about last time, 5% growth in volume. We are expecting now to reach something about 2% to 3%. In terms of net sales, we are expecting to do something about -- also something between 3% to 5%, which will be maybe a little bit lower than we shared with you last time. And EBITDA margin, we are expecting to be something about 8% or something around it. Central America would be basically the same. And that will derive in a consolidated figure that in terms of volumes, we can find -- we can have instead 2%, 3%, it's going to get more -- maybe more close than 2% instead of 3%. Sales growth in terms of net sales, it will be mid-single digits, maybe 5% to 6% -- 5% something about that or higher. And the margin, we are expecting to be basically flat throughout the year. Now this changed a little bit the guidance for the full year, and this is going to be according to what we already present in this quarter. In terms of how was -- what the cost we face in this quarter, particularly in GIMSA in terms of cost, let me tell you first of all, because of the price dephasing we did, we had an impact during the quarter of about MXN 285 million. And in utilities, we have an extra charge of natural gas from our distributors for about MXN 80 million. We are challenging this charge from our distributors, and we are in negotiations with them. We are expecting to recover part of this charge. We are not sure how much will we recover and when. But I'm sure that we will -- it will be something that maybe we can reduce this amount. The total effect of these charges during the first quarter for GIMSA was about [ MXN 255 million ], which represented the 600 basis points reduce on the EBITDA. Now because of the prices -- price increase was already implemented, we are expecting that for the second half of the year, a big part of this [ MXN 284 million ] because of the price dephasing, it was recovered. And we are expecting at least maybe 50% of this $80 million to be recovered. Then we are expecting an improvement -- an important improvement during the second quarter of the year for GIMSA in terms of EBITDA.

Our next question comes from the line of Felipe Ucros with Scotiabank.

I think Ben asked a couple of my questions. So just one left. In the U.S., what do you expect the competition to do? Do you think that they will also be trying to argue with retailers for a higher price? And if you see that your competitors increase prices, you're obviously in a very good hedged position for the year. Is your preference to take market share? Or would you like to increase prices with competition if they do that?

Well, let me tell you. On -- first of all, for most our competitors in the tortilla -- you are talking about tortilla business or tortilla side or corn flour side or both?

Tortilla.

Tortilla, right. Let me tell you, for most of our competitors in the U.S., we supply them the corn flour to make on tortillas. Keep in mind that we have about 25% of market share in corn flour in the states for -- excluding Frito Lay, of course, in corn flour for both tortilla and tortilla chips. In an industry or in this corporate categories, about 75% or 80%, maybe in this particular categories. Maybe 87% -- 75% of these categories are prepared with corn flour. Then all of them are followers. Of course, if we do not increase prices, they will not. Or some of them will -- they will ask for price increases just to try to recover because you know they're going to have very bad times. And -- but again, the company will try to do that. We -- if we -- let me tell you, talking about retailers, you mentioned if we will favor it, if I understood you well, we will favor the margins instead of sales. We cannot be out of our retailers, of course. But we will find out the way to do it. As you have seen during the last couple of years, the company has not increased prices but have been able to increase volumes and increase net sales because of the value-added products and because of the -- a big portion of our portfolio, we are managing the prices with our retailers, and we are doing quite well. We will find out a way to make a good performance on that, and we will recover the cost increase on that. And for the new year, I think it's going to be quite clear that if prices of corn goes up, it goes up, it goes up, it's going to be understood by the retailers. And they will need to accept a price increase because nobody will be able to provide the tortilla without increased prices.

Okay. Great. That's great color. Let me ask you a follow-up. Do the retailers have a lot of private label? I mean are they going to see increase in corn themselves?

Can you repeat that question, please Felipe?

Yes, of course. Do the retailers have a lot of private label brands in tortilla? I mean are they feeling the pinch of corn costs as well?

Well, the retailers, they are really -- the prices of the corn is public in an open market. And they know very well what is happening with that, then they will increase prices also, of course.

Our next question comes from the line of Lucas Ferreira with JPMorgan.

I just wanted to follow up on the guidance. And just to understand what was exactly kind of the surprising factor to you guys? Because the guidance that you gave was actually published in the end of February, right? So within like 2 months of the quarter already, and at least the public corn prices that we track haven't shown any major surprises by then. So I just wanted to understand if there was any other surprising factor in May and March that could justify this major drop in the margins in Mexico in the first quarter that you're not forecasting in the end of February. And just to double check your new guidance, you're talking about something like 100 bps decline in margins. If not mistaken, that would imply that on average, on the last -- in the next 3 quarters, you have to have an EBITDA margin of around 16.5%, which is higher than the average -- actually, higher than the average you have been posting in the last couple of years. So do you think this additional price increase, you'll be able to cover? And this cost pressures you're seeing? Are you ready with this price hike comfortable to reach the 16.5% level, roughly?

Yes, sure. Well, let me tell you, when we come forward with this guidance in the last call in February, we didn't have the effect of the severe weather. And let me tell you that because of the Texas government stop the supply of natural gas for all the facilities in the state in Texas, we shut down the corn flour facilities in the U.S. for a week, basically. And we were not taking that into consideration, of course. In Mexico, we were able to continue producing. We will move to some other kind of energy just to produce the corn flour, but we work at a lower rate than we used to run off our facility. That's why with this, we feel quite comfortable. That's going to be -- we expect it to be within reachable this guidance. And throughout the year, you will see the sales that we have in the States now after the severe weather is going up in a very good way. We are recovering in the world and sales to the food service, doing quite well in Asia and Oceania, doing much better in Europe. In Europe also, since we took advantage of the pandemic, we enter in most of the retailers in Europe with our brand, which is a better price than the private label we were producing for some of our retailers. That's the same case in the States as well as in Mexico. Then we feel comfortable with that, and we feel that it's going to be something that we will reach throughout the year.

[Operator Instructions] Our next question comes from the line of Isabella Simonato with Bank of America.

So my question will be mainly on the U.S. market, right? The vaccination is being rolled out and probably the economy will be almost fully opened during summer, right? What sort of structural change in consumption habits are you anticipating? I mean will people continue to eat more at home, even with their lives pretty much back to normal? How are you' forecasting volumes not only for this year but beyond, right? How much of a tough comp 2020 and 2021 will be for 2022?

Sure, Isabella. Well, let me tell you that what we did basically during this year, it was taking out the peak of the sales on retail because of the pandemic and have the run rate of about 1.52% growth for the year in terms of volumes in the -- on retail and our recovery in the second half of the year on the food service, particularly in the U.S. We are now facing a most rapid recovery on the food service. In terms of the sales to retail, are doing well, a little bit lower because of we have that peak of our sales during the last year in March -- in April or during this quarter. Particularly this quarter, we had the peak of the pandemic. But if you remember to our conference calls last year, we always were talking about when you -- when you guys ask the question about what you can expect in terms of growth for the next years, I always says, well, taking out the peak of the pandemic. This is an extraordinary sales that we were not expecting to have. But what I see is that retail is higher than, let's say, if you see the growth from first quarter 2018 to first quarter 2021, that the volume rate of the company is going up in a very healthy way. And we had this -- we are not expecting to change habits out there. A lot of people are still working at home. A lot of people, because with this pandemic, they were now using at home then the wrap, and the wrap is very well consumed. You see [ new range ], for example, area or region growing at about 20%, 25% rate of our products. And this is again because it was too long time in home. Now they already took the wrap as a way -- a part of the mainstream consumption for them at their home. Then we are expecting, of course, can change a little bit, but not too much. And now everything is going up. It's going up retail, and it's going up food service. But again, retail, take out a little bit this peak of sales that we had during the last year because of the pandemic, the panic purchase people make. And then for -- yes. Then for 2022, we can expect, again, the run rate running in both in food service as well as in -- on retail.

Our next question comes from the line of Barbara Halberstadt with JPMorgan.

Most of my questions have been answered, but I would like to follow up on the Mexican political landscape and the outsourcing bill. If you could comment if that -- if it does impact you. And if it does, how much you would expect of an impact from this new bill? And then on the second question, as you are adjusting your outlook for 2021, would you also review CapEx and shareholders' utilization numbers?

Sure. Well, talking about the outsourcing, we already are taking some actions. We have not too much people outsource in the company. It really is a very small part of the people, particularly in some of the plants. What we are doing is we are basically changing the agreement that we have, particularly with the transport people, which can be, let's say, considered an outsourcing. Then what we are doing basically is just signing an agreement with them just to be clear that they're going to give us the service of transportation of corn flour or corn or whatever without any kind of complication. And we are not expecting to have any kind of issue on that. We are already review everything that we already have. And we are not expecting to have any kind of materiality on this issue. And of course, the outsourcings that we already have because of the corporate offices, we have not any issue with that. In terms of CapEx, we want to keep the certain amount that we already discussed with you guys last conference call. It's going to be something about between $300 million, $320 million. We are not sure if we're going to be able -- due to the velocity of the way that we can invest. But if we can do it, that's what we want to do. What we want to do basically is just to start up the Omaha and Alaska facility beginning second half of this year, and the Indianapolis facility beginning in 2022. Then to digest what we need to just invest to accelerate with our CapEx. We are focused on that, and we want to keep the same amount.

Our next question comes from the line of Álvaro García with BTG Pactual.

Can you hear me?

Yes. Yes, Álvaro.

Great. Great. My question is also on the U.S., on pricing power generally, but we've had a lot of questions today on the topic. So I was wondering if you could take us back in time, a little bit back, maybe back to 2011, 2012, part of 2013, where we saw a similar spike in prices. I know it's a long way back, but -- and I know that Gruma was a very different company at the time. But I was wondering if you could talk to us about your experience maybe with retailers back then trying to pass price. And maybe what you learned from that experience? Or how Gruma is different today to cope with this increase in prices?

Yes. Yes, Álvaro. Well, no, it's not that it's going to be Gruma is growing up and now what we are basically doing is focusing in the new trend of consumption, which is basically value-added products that has been allowing us just to -- when we cannot increase prices, we can take advantage of that. And we can, let's say, the recover part of the price increase that we have in some products, which are not quite profitable with us through this value-added products. Then price increases with retailers, of course, Gruma have a very strong relationship with all the retailers and major retailers, of course, in the States. Unfortunately, for we are a public company, we show our results. It was a year -- I don't remember it was, the last year of 2019. So at least one of the retailers says, come on. See your margins and see mine. I will increase prices. I will take advantage of that because you have very good margins, and I have not. And they increased prices to the consumer, but they took everything from them, and they didn't share anything with us. But in this particular case, I think we have -- and it was in an environment in which that commodities were not moving up. It was basically quite stable. In these new environment, we have prices of commodities, all the commodities. We're talking about corn. We are talking about wheat. We are talking about everything is going up in a very important way. And again, this is going to be applicable for all of the participants in this category, in the tortilla category, in the wrap category, let's say. Then everybody will buy the corn, will buy the wheat, will buy the soybean at a higher cost. Gruma, because of the economic scale and because of the presence and because of the geography in the U.S., we can avoid kind of distribution costs for some orders. And they have a couple of new facilities, and they can move or they must move the products at a longer reaches than us. Once we have operating Omaha and Indianapolis, we will save a lot in distribution because of that. Then these kind of things, I'm sure that, that will -- and of course, even we are a high-cost producer -- let's say we're high-cost producer. We have a higher investment to produce the tortilla because we have a large innovation, technology and facilities for everyone. They're quite grateful when they visit our facilities and approve everything to produce for them, of course. We are more, let's say, much better -- in a much better position just to capitalize that. Then of course, we do not increase prices. Maybe even if we don't increase prices, they will need it because they're going to be really affected. The cost of raw materials is going to be substantially higher. But I think is going to be quite reasonable for the retailers to say, okay, guys, you have a couple or 3 years. The environment is quite substantially different. You already have all these kind of additional cost, et cetera, et cetera. And they're going to be -- of course, everybody will need the job. The retailers, they didn't want to see price increases. The producers, they didn't want to see price increases. The consumer, they didn't want to see increased prices in the product, but this is part of the dynamics of the market. And I'm not sure, once the market -- the corn market in the States, this stabilize, I don't know if it's going to go back to the $3.20, $3.40 or whatever it was the prices, the average prices for corn in a year. I don't know it's going to be -- it's going to be a new higher average price for the corn. The world is growing. More people is eating. China, particularly, is affecting everything. And they affect us because they can purchase the corn in the States at $6 per bushel when they can sell in China at $11 or $12 per bushel of corn. They are requiring. They purchase all the other soybean from -- a huge amount of soybean in the States, a huge amount of soybean in Brazil. Because what they need to use just to produce pork versus the -- in China that they have been facing and what they need to do just to recover their inventories of pork meat. Then that's their why. Then I think that's the difference. The company is much very well positioned and the retailers. We provide them most of the tortilla that is sold in the market. We don't want to be out of any single retailer. We don't want to cede our positions in ourselves to our competitors, of course. But I'm sure that we're going to find out the way to try to compensate this increase through additional average prices of products.

Just I guess one follow-up would be, do you think that maybe some competitors in tortilla, specifically in the U.S., might -- do you think it's so bad that maybe some of them go out of business? Or is it too early to tell now?

No, I think they are going to be there. But again, if we have a higher cost of corn, we're going to have a high price of corn flour that will be supplied to these guys. Another way to do it, to subsidize in that way the tortilla to the retailers.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Cavazos for any final comments.

Well, thank you very much again for your participation in this call. And please feel free to call us if you have additional questions, that I'm sure you will have. Please call us. We will be pleased to talk to you again. Thank you very much, and please stay safe. Bye-bye.

Thank you. This concludes today's Gruma's First Quarter 2021 Earnings Conference Call. Thank you for your participation. You may now disconnect.