Grupo Nutresa S. A. (NUTRESA) Earnings Call Transcript & Summary

Good morning. Welcome to the Conference of Results for the Fourth Quarter of 2021 for Grupo Nutresa. We have Carlos Ignacio Gallego, President of Grupo Nutresa; Jose Domingo Penagos, Vice President of Corporate Finance; and Diana Bernal, Director of Corporate Finance. My name is Catherine Chacon, Director of Investor Relations. After the presentation of the results for the quarter end for 2021, we'll have a Q&A session. [Operator Instructions] If you want to follow the slides in Spanish, because by default they are in English, you can download them from the platform screen. If you are connected to the webcast, please remember that you can change the language by clicking on the icon for configuration. Starting now for the presentation, I'll give the floor to Carlos Ignacio Gallego, the President of Grupo Nutresa.

Thank you. Good morning. Thank you for being with us during this conference. To start with, I'd like you to go to Slide #1 about sustainability. For Grupo Nutresa, sustainability is a capability that is associated with the possibility of continued existence and is based on identifying and managing risks and opportunities in social, environmental and economic areas. During 2021, we prioritized the care for live, health and people's well-being, protection of natural capital, capturing opportunities in all the countries in our strategic region. As a recognition to this commitment to the related group and the planet, Dow Jones Sustainability Index ratified, for the second year in a row, for Grupo Nutresa as the most sustainable food company in the world. This time, we had a performance higher by -- in 12 sustainable practices that reflect the company's efforts to have an operation that inspire developing -- an operation preserves the planet and help the society. In the social dimension, the highlights were the attraction and keeping talent and social reports in environmental and packaging management, water-related risks, environmental reports. And in the economic area, we had health and nutrition, innovation management, tax strategy, materiality management, managing customer relations and participation in the construction of public affairs. Also, the organization was awarded for the second time in a row, in the Gold Category in the Standard & Poor's Sustainability and Yearbook, we are honored and motivated by this award. This is a reward for our value generation, for our workers and related groups. We then go to Slide #2, and we show you 2 awards, 2 recognitions. The first one, Grupo Nutresa is still consolidating its internationalization strategy. And through its Coffee business, we've got the National Export Award for 2021. And these are the challenges that we build futures. This is given every year to the Analdex together with ProColombia. And together, that recognizes the internationalization strategy of Grupo Nutresa has been putting on since the beginning and currently includes a direct presence in 17 countries, our own distribution networks through which we reach the products with different nations in the 5 continents. This has been strengthened with the signature of the latest alliances with the distribution by Bimbo in [ our campus ]. And we also have in the direct part of this -- the right part of the slide, that the recent delivery of the portfolio awards, Grupo Nutresa was distinguished with the award of Digital Transformation, which recognizes those that are using 4.0 technologies in becoming stable and sustainable and increasing the sustainability and competitiveness by constant improvement of services that are responsive in personalized manner to the needs of the market. And now closing the section of events, highlights for the period. The last few of the months, the company shares have been -- have over 2 requests for purchases submitted by -- for the first offer was open from 21 November 2021 until 12 January 2022. And as a result of this operation, they bought 27.69% of the company's shares from the acceptance of the second was -- began in April 2022, and it will end in January '28. After the period events have been seen, let's now look at the Slide #4, where we will see how the sales were operated in the fourth quarter of 2021. In general, for the fourth quarter, continuing with the positive business trend showing good performance of revenues, both domestically and internationally. The assumption is continuing to recover in the countries of our strategic area, and we had more activity in our channels. In Colombia, during the first quarter, we had a growth of 21.1%, and the sales were COP 2.2175 billion with a growth -- double-digit growth in all our business units, including growth higher than -- more than 30% in the Retail Food and Coffee. We tell you that all business units grew by volume. This is thanks to the good consumption dynamics in the presence for our brands in our different brands and categories. Average prices grew 7.9%. And these results of changes in the mix in some price adjustments during the period. If we look at the performance during the quarter for the sales per business, in Biscuits, we had 23.5% growth, which includes an increase of 8.8% in -- by volume as a result of the performance of our brands in the market, higher industrial sales and good dynamics of the Christmas portfolio. In Cold Cuts, we have 17.6% growth with volumes that grew by 11%. And we have good dynamics in the entire portfolio. Chocolates, with a growth of 12.1%, keeps a good performance in its mix and especially the products impulse and snacks. Coffee had a growth of 30.3%. It includes 15.8% of increase by volume. All channels grew during the quarter. Retail Foods grew by 31.7% and has a balanced mix of revenue, which includes in-person sales in restaurants, a good performance in the digital platforms and home deliveries. In some cases, we believe that this growth in consumer is because 2020 has been very low. I can tell you now that if we compare those sales with 2019, pre-pandemic, the business grew by 2.9% versus 2019. Due to volumes, we had guide dynamics for -- like [ tours ] in the traditional end of the ice cream stores. Pasta had 21% growth with a growth by volume of 15.6%. And in Others, we have a good performance in double-digit growth in Atlantic Food Service and distributed to Dubai through Novaventa and the entrepreneurs. Going on to international sales. During this period outside of Colombia, we had revenues of $357.3 million, growing at 17.1%. In Colombian pesos, those sales are COP 1.2855 billion (sic) [ COP 1.3855 billion ] with an increase of 24%. Organic sales, that excluding the acquisition of Belina, the pet company bought in Costa Rica, grew by 13.3% in dollars and 19.9% in pesos. During the period, we had a devaluation of the pesos vis a vis the dollar 6% vis a vis the same quarter of the previous year. The total export from Colombia during the quarter, $89.96 million and grew by 24%, 6% (sic) [ 24.6% ]. We have here in Biscuits, we have a growth of 8.2%, good dynamics for the quarter and especially in Central America, I just want to look at, we have 11.3% in dollars. In the functional currency, we had a growth of 20.7%. Coffee had a 22% -- 32% due to exports from Colombia, which grew by 40%. And the good performance of the operation in the U.S. Chocolate, we had a growth in revenue by 10.4% mainly due to increases in volume. International Retail Food operations grew by 20.7%. And in the Cold Cuts, we had a decrease of 5.8% especially due to lower exports of fresh beef from Colombia. In others, we had a significant increase because of the sales of Belina and the business activity in the products that we distribute for third parties in the U.S. Going now to Slide -- the next slide, we have that by coordinating these good growth in Colombia of 21.1% and the international growth of 21%. We have sales -- consolidated sales during the period of COP 3.603 billion with an increase of 22.2%. All our business units and in others have double-digit growth. As you can see, this is a very good quarter for the fourth quarter of the year in terms of business. After this report for the quarter, we can go to Slide #6 to see the accumulated sales for the year. In 2021, looking at the whole year was part of our economic recovery due to the vaccination campaigns, lower mobility restrictions. And during the year, we evolved in proposing our portfolio to become more appropriate, more pertinent and more competitive, and we strengthened our channels. Going to the numbers in Colombia, had sales for COP 7.7793 billion with an increase of 16.3% and the positive results in all our business units. Volumes during the period grew 12.9% (sic) [ 2.9% ] with good dynamics for the second quarter of the year. The average price has a positive variation of 8% due to changes in the product mix and some price adjustments. We point out the double-digit growth in Retail Foods, Coffee, Ice Creams, Cold Cuts and Others. In the Pasta and Biscuits, we had slightly lower volumes than last year because of the -- compared to a huge sales peaks that we had in those categories during 2020. Outside of Colombia, revenue in dollars were $1.3218 million, and they grew 10.2%. In Colombian pesos, those sales are COP 4.959 billion with an increase of 11.8%. Total exports from Colombia during the period was $332.8 million with a growth significantly 16.4%. And in Slide #7, we see the total accumulated sales for 2021, where we reported revenue for COP 12.7383 billion with a growth of 14.5%. Organically, the growth was 13.7%, also pretty good. Innovation sales during the year were 6 -- 17.02% of the total sales, and they are still an important driver for the company's development. Every year, during this conference, we report our participation of market share. Here, you can see in the graph that Grupo Nutresa maintains its leadership position. We have a slight decrease of 0.1%. We have significant positions in the categories where we participate, and we reached a consolidated participation in Colombia during 2021 of 53.7%. This measurement doesn't include the food-serving, vending machine sales or the wholesale sales, which have a very good report for a year that was -- had some transformations in the mix of channels, where the country had some very difficult times during the first semester, and we had some events that we had that affected our growth. But we maintain our participation in the market with some increases in some categories and slight decreases in others. In the Cold Cuts, it's 0.7% less participation. The second participant in Colombia was private brands. And Biscuits, we have 0.8%. In the lower part of the graph, we have the competitors with their shares. In Chocolates, we are leaders. In snack, we have a slight decrease. We grew in table and milk modifiers and slight decrease in nuts and roasted. coffees are in nice behavior and a slight decrease in soluble coffee. In Ice Creams, we are #1 in Colombia. But due to the methodology in this participation, it is not part of our 53.7% because we're still fine-tuning those figures. In Pastas, we're leader with 53%, and we are growing. And I know it's not included here, but we have very significant participation in Colombia. The figures with TMLUC are showing additionally as inflation -- as information. It's a very good year. We improved our share by 1.3% in instant powder drinks, pasta. Very important growth in potatoes, in Mexico in drinks and good performance in soluble coffee in Chile. But in general, a good behavior, and we maintain our market share. Going on to Slide #9, we can see the sales by region. You can see here that the first geography is Colombia, which 61.1% of our sales in 2021. The second geography was the U.S. with 11.4% of the sales. The third is Central America with 10.2% and then Chile with 6.4%. The growth in Dominican Republic, Mexico, Central America and Colombia are significant, which were more than the average for the group. That is why Colombia is bigger. And there's other geographies that we didn't do well, but in this year in Colombia was pretty significant. Now to tell you about the raw materials and talk about profitability, let's go to Slide #10, where you -- there's no doubt that the main challenges for 2021 were the global production chain with the sustained increase in cost of inputs and the disruption of global logistics chains. In Grupo Nutresa, we've responded to these circumstances by having consistent proactive actions in our coverage, both financially and physical hedging. And this has enabled us to compensate partially this significant increases. The commodity index for Grupo Nutresa on the average for the fourth quarter is higher than we had in the same period last year. This is to higher leverage prices for all raw materials that we use in our production, many of them have double-digit increases. This thing is not only for Grupo Nutresa, right? This is a global event that we are facing all -- by all the food companies around the world. I'd like to say also that the only way that we can deal with the situation, it's not by the coverage or we work a lot of integration, we work on working capital management, and we always have a long-term vision taking care of the categories, the flexibility and working on the efficiency and productivity. And I hope that one of the strategies that were taking care of these categories is to share part of those coverage with our clients, buyers and consumers so that they can continue to have access to our products. This will allow us to meet our objective of profitable growth. If we work only for the short term, we could sacrifice the future of the brand, sacrifice the channels and have the consumers migrate to other categories. Now going about the profitability, I'll give the floor to our Vice President of Corporate Finance, Jose Domingo Penagos. Welcome, Jose Domingo.

Thank you, Carlos Ignacio. Good morning, everybody. Let's go to Slide #11, to look at profitability in the last quarter of 2021. But to give you the perspective, this could be the positive business performance as we saw in Carlos Ignacio's presentation, a continued pressure on cost, we had sustained that. Especially of the last part of the year, we had big pressures, and the coverage have been exhausted. We're still continuing with those coverage but at other levels and will add to the discipline of our expenses that we have been seeing here that is reflected in the statement of results. Carlos Ignacio also mentioned the prices. We are sharing part of those coverage with the consumers so that we can -- those massive categories we'll be sharing in the long term. So let's go to the numbers. We have a quarter with EBITDA of COP 354.8 billion with a growth of 8.6%, with a margin of 9.8%. Compared to cost, it was a specifically high pressure cost on cost, but international logistics, the prices and the logistics, we're talking, in some cases, not only of the cost but also of availability. Some of the inputs, the delays in deliveries, and that has effects on storage and our availability and in general for the entire group and for all the business units. But if we go through the -- in the same slide, unit by unit, they accumulated in more general, I'll let you -- tell you that some numbers that refer to the cost pressure where we go unit by unit. Starting with Biscuits, we have a good business dynamics we saw how in the first quarter growth rate, high double-digit growth. But it doesn't compensate that pressure. We grew 23.8%. Beyond that, the volume -- look, it's all double-digit growth, high in many of the cases. So you have this cost pressure. We maintain our expense discipline to achieve these results. The second business is Cold Cuts. It's very similar to Biscuits because we have good business dynamics during the period, but it doesn't make up some of the growth for those raw materials. We have, for example, pork, which is important here. It grew at 21%, but the beef and chicken grew at 21% and 50%. It is not only the business unit of which the pressure in cost has been -- also had an impact. In Chocolate, we have a lower pressure in the cost. We have some longer coverage with a margin of 10%. And it grew 8.4% during the period. Here, the coverage is the same or similar actually to the rest of the group. But with the cost pressure is less, and that contributes a lot to the results. We have to point out here in the other 2 business units the discipline in operation costs. But in Chocolates, it's very significant. In Coffee, a significant pressure in its main input, which is Coffee grew at close to 40%. The margin has most pressured commodities internationally, and we have coverage there, both physical and financial coverage. It's very high. That raw material is very high now. In TMLUC, we have diversified units. So we apply what I mentioned about the wheat, about coffee and even packing materials. We have the same for the same business unit, which mainly headquartered in Mexico and Chile, worth of 12.6%, it increased 42% (sic) [ 43% ] compared to the same period the previous year. We have a disciplined management of the expenses that allow us to have these results. And we started with some higher-than-usual performance in the Retail Food, Ice Creams, Pastas and Others. In Retail Foods also we had some cost pressures in raw materials. The business management was very significant, big recovery. And we have the control of the costs and the fixed expenses that shows a good business result. This is relevant, and it has a good recovery in terms of the business part. Practically the same stores, we have the same 3 or 4 fewer stores than the previous year, so 816 stores in all. In the Ice Cream, where margin of 12.7% is not distant from the pressure of raw material at sugar, fat. In the packaging materials, we've been able to hold up with results. And Pasta, the wheat pressure was very similar with different qualities, very similar to what I mentioned in the Biscuits, packing material also grew. But through controlling the expenses, we maintained the margin of close to 13%, very sustained during the entire year, although I'm referring to this quarter specifically. In others, this is 8%. We have distribution, food service. And right now, we include here the numbers for Belina, which are very much aligned with their business plans. We have an EBITDA margin in double digits. And we have positive results during the quarter. This is for the quarter and details by business unit. After Slide #12, we've seen the results of the year, duration of COP 1.5324 billion, growth of 6.2% with an EBITDA margin of 12%, which is also with the colors, you can see how for 8 business units have significant results, increasing in the EBITDA. And we have impact basically in Biscuits, Cold Cuts. These are the results of the accumulated EBITDA for the year. Look at the financial statements. We'll go to first for the quarter in the P&L for the quarter and then the restatement of results. The first one is on Slide #13. That's for the quarter. And we can see here some sales of COP 3.6 billion with a growth 22%. These sales include organic and Belina. But we do an analysis, they grow at 20.6%, and they also grow very, very significantly. In gross profits, we find that the impact of the cost, to which we referred in a contraction of 340 basis points, a significant contraction in gross profit or in gross margin because of what we've explained in the slope will go deeper in the end of the year. An organization with the global exposure -- benefits from the global impact, but this is a global impact from the supply chain. In this case, it's 340 basis points is the effect on our gross margin. Now as we mentioned in previous conferences, through our discipline in expenses in administration, sales and production also, we had an efficiency of 280 basis points. Obviously, the basis of the cost and the expenses are different, but the reaction in addition to the prices we mentioned, in this case, during this period, we recovered most of that impact on the cost. This is so far to the mid part of the P&L. After that, we have some effects. The effect of the difference in the rate of exchange have been positive or were positive during the period, both in operating and nonoperating expenses. And this is due to the different hedging positions for the rate of exchange, higher volatility and pressure on cost but also with our coverage process which we have in our -- difference in operating expenses. We have a difference of [ COP 3,029,200 ] contrary to what we had in the previous year. All this shows were the middle line of the P&L COP 238,000 million in operating profit and with a margin of 7.4% over sales. Below that middle line, we have the financial and tax activities. In this case, we have some financial revenue from a healthy cash position in which we grew by COP 22,000 million. The financial expenses has an increase of 10.9%. You'll see compared to the accumulated for the year. This is a change in the trend. Remember, our sales structure is variable. I'll show you how this -- we determined that. But at the end of the year, so this has seen some pressures. And in taxes, by an effective tax rate of 26.7%. It was 21.6% from the previous year. This is much aligned. We had some tax effects would be -- we were explaining that from previous conferences is going to have about COP 20,000 million a year. In our cash and our effective rate, it doesn't have a major impact. So we have COP 146,000 million of net profits with a growth of 144%. And this is compared to the same quarter of the previous year. The statement of results for the end of the year, which is Slide #14. We have strong revenue of COP 12.7 billion with a growth of 14%. This pressure on costs, has -- we've mentioned, the effect was 160 -- it's a contraction of 160 basis points. The recovery due to the discipline is 100 basis points. In the different rate of exchange, we have some revenue, about COP 20,000 million for an operating profit of COP 1.105 billion with a growth of 8.4%. And with a -- no, the EBITDA was 8.4%, and operating increased by 6.2% over sales. At the post-operating because of the events of the rate of exchange and the effect on tax, effect is very similar to the same quarter. We have an effective tax rate of 27.5% compared to 28.3% for 2020. So you can see here at the end of the P&L what we call discontinued operations, we mentioned the effect of the [ Agogo ] fund in the third quarter of the year. But it should -- it's worthwhile mentioning it. We had a donation for the biological assets we had together with 81 growers, and this is due to the activity for encouraging business -- the Chocolate business unit, which had some positive impact for our organization. We've been working with them for over 60 years, so what we did right now was make that donation that we have shown the impact of in the P&L. So for the year, the consolidated figures is COP 677, 000 million with a growth of 17%. This is for the P&L. For -- to connect that with the magnitude in the balance sheet in Slide #15 we show you the debt position in some of the effects on working capital. The slide shows net debt of COP 2.4 billion with a coverage of 1.81x, less than 2020, 1.86. And this is a reflection of the cash position of the organization during the year of the consistent decreases as we have some cash flow. We decreased the leverage, which we think is very healthy, 1.81x. The cost of our financial structure, as I mentioned, December 31 was at 14 -- 31%, this was mostly a variable debt. We don't have much exposure in dollars. We have in the operations in that currency. And we have set our interest rate is close to 23% for the target. On an average life of about 4 years, this is our debt position. Let's talk about CapEx. We had compared to the budget for 2022, which we shared with this conference, we had COP 269,000 million for CapEx or equivalent because we include all the operations, Colombia and overseas. This is 86% of what we had budgeted for the year. Some small delays due to the [ such ] international logistics, also good discipline in that area. And for this year, for 2022, we have set COP 413 billion for CapEx. And we have a combination between maintenance and growth. We could say that 40% of that figure is for maintenance and 60% is for growth. And you can see what we just saw. The outlook, which will -- the business dynamics is very active and requires -- it's worthwhile supporting them by CapEx. This is to support our growth activities and to complete the project that we mentioned in previous conferences. All of this represents a return on capital in the food business of 9.1%. And this number produces value for the investors. Thus, I will complete this presentation. I'll give the floor to Carlos Ignacio. He will give us an idea for the outlook for 2022, and then we'll have the Q&A.

Thank you, Jose Domingo. In talking about the commercial dynamics, I would say that we're going to be -- or continue to be active in prices in our price strategy. We will make a major effort in productivity and efficiency, but we have to continue managing this variable. As you saw the previous year, we changed prices, but we did it very carefully. We mentioned in these conferences that our pricing strategy for Nutresa is based on a model where we have a scenario analysis and which will simulate various competitive responses because this is -- we're working in a free competition world, and we analyze what happens to volumes when we change prices. So we're going to be working on practice. In the second place, we will likely have some changes in volumes and decreases in volume. When I speak about that decreases, I must also say that because of the decrease in the disruption in the supply chain companies like Nutresa, which knows how to act locally in different geographies at the same time, are having not only the risk of everybody else but also opportunities to capture volume and go after new businesses. So this will have some decreases in volume. Innovation will still be a very important growth driver, channel and brand management will also contribute. And as a combination of all these factors, we will -- we're projecting a good commercial dynamics for the first quarter. You understand that we are in a pretty turbulent and volatile situation, but we believe that the first quarter is going to be very good in terms of business. In profitability, we will continue to have the pressure on the cost of commodities in the distortion of global change that we mentioned. This is not going to be resolved during the first quarter, at least not during the first quarter and part of the second half of the year. We will still have some effects. When I speak about effect, not only about the net negative effects but also the positive effects, in terms of opportunities. That pressure on availability of inputs in products has some pressure on inventories, and it's likely to be able to operate appropriately. We will have to increase some inventories, not all of them. It's likely that we will have some other stores that will decrease our availability, but we are a very resourceful company. And we are flexible and we are adaptable, and we manage solving problems. And we're very active in coverage and, obviously, in the efficiency and productivity as well. And we will adjust prices as needed but carefully with a long-term vision. And we have an eye on the category so that we can have the least impact and we will not be outside of the consumers' reach. So we hope that the combination of these strategies will allow us to have returns higher than the cost of capital. But this is going to be the first part of the year. It's going to be very good business-wise. And it's going to be a challenge, as we said in the last investor conferences, in terms of profitability, but I think the company has the capabilities to face the challenge and provide some opportunities for investors. So I'll give the floor back to Catherine so that we can go to our question-and-answer session.

Thank you, Carlos Ignacio. We will now start the question-and-answer session. You'll dial through the audio, Yuna, would you help us, please?

[Operator Instructions] We have a question from Julian Ausique from Davivienda.

I have several questions. The first one is somewhat related to the expectations for 2022. Aligned with the dynamics, although we expect a good growth of the economy, do you also see good growth of volumes like we had in 2021? And the second has to do with the margins. Do you have any expectations? Right now, look at the future is very difficult. But do you have any ideas of the gross margins and EBITDA margins for the future?

Thank you, Julian. I'll take both questions. And let me tell you that in the strategic region of Grupo Nutresa, and I'm going to give you not only for Colombia because now when I was telling you about our sales that we -- 61% is Colombia, so we have to look at the whole picture. So most countries, including the U.S., are having major pressure, inflationary pressure in terms of raw materials, as we said, is a common challenge. There are economies in general around the world, and I'll refer to Ukraine, the world was having a recovery of the economy in some countries, especially the U.S., were facing difficulties in getting the labor because people have changed their way to look at the relationship with work. And that also has been a challenge. So in Grupo Nutresa, what we see is that the way we are organized because of the networks that we have, because of the capabilities that we have, we are projecting a good growth. There is a challenge because that inflation affects the consumers' purchasing power. Fortunately, we're not a luxury company. What is going to happen with inflation is that, although, in spite of the seller increases, consumers will be reducing their purchasing power, and that will be changing a transfer of consumption between categories because what people do is -- what they prioritize, what they use their money for, usually food. When you're going to sacrifice food is at the end of the line, and you eliminate all luxury or all nonessential expenses or luxury. That's why when we have too much cash, also luxury goods also shoot up. For example, in Chile and Peru, when they get the resources from the pension funds. So we believe that the economies are going to grow. There will be consumption. But we also think that there's going to be a decrease in volumes as I expected. We have the issue of Ukraine -- of the Ukraine which is impacting the world. They are a major wheat producer for our business in Grupo Nutresa. This is the first effect. As you look at the commodities today, the pace was going -- price was going up more than 5%. And it's also a major gas producer, and that has increased the prices of oil. And there is some correlation within that close adjustment. But there's [ no ] correlation between the price of oil and dollar in Colombia, vis-a-vis our exports were not major exports to Russia. We don't have any major impact. Colombia has -- we produce -- it does export to Russia, but it might have some -- in fact, it might soften the effect on the unprocessed meat in Colombia. Exports in Colombia are more in America, Asia. We're starting in Africa. And I think there will be -- as the result of the Ukraine, we have a pressure of fertilizer. They have a major producer fertilizers, and that might have some impact on the productivity of foods in the field or around the world. But the world will adjust, and there will be other sources. So that's the impact of the Ukraine. So we -- that's why we have to be -- insist to look at this, has a long-term view. It's not only to passing on the extra cost to the consumers. Look at the whole thing. Work on productivity. And we will touch prices like try to get that balance and to get some profitable growth, which is the objective of our company. The margins, we do not give you any ideas of the margins. What I said earlier, our outlook is recognized, there's pressure. But at the same time, I would not say that -- we've been working very hard on our coverage and on hedges and at a different level than last year, but we have more than 50% cover our main commodities that we use in Grupo Nutresa and I'd say much less but still working in some countries for 2023 because this is something we do very, very carefully to manage our risk. And this is one of the risks of this organization. Thank you, Julian, for being with us. And that is the answer to your both questions.

Felipe Ucros from Scotiabank.

In margin for consumer goods, the margin's on the same levels for the last 2 quarters. But since the business has changed so much and deliveries are more important to compare that to when we bought that segment in the company, the numbers right now are different. It's difficult to compare. Can you compare that to the margins? Have you reached the margins that you wanted to recover to? And then I'll ask another question.

Thank you, Felipe, for being with us. I'll take part of the question, and I'll as Jose Domingo to complete it. Restaurants had a very good year. Look at the sales, COP 164,000 million with a growth of 46% and EBITDA 224,000, grew 23.3%. And with the growth of 172%, this is a very good year. I point out first that we have to consider that the previous year, that category was still in Colombia -- not only in Colombia because we also have outside of Colombia. When Colombia was enjoying some stimuli given by the government which provides a major source of employment. We had a major challenge in this business. We have more -- almost 4 months of almost 4,000 people who couldn't go to work and that the company cared for it or isolated people who were vulnerable. And we've been recovering by the end of the year. It was harder in Colombia than outside of Colombia. Obviously, Ice Cream was affected but much less. It was -- 2021 was a very good recovery because people went back to restaurants, but that overhead that we had created of electronic means and deliveries, they don't disappear. Those non-in-person sales were troubled. But when the situation went back to normal, they didn't return to the previous number, but they remained at a different high. They were double instead of what they were before the pandemic. But the difficult times of 2020 has helped us make decisions, and we closed some of the stores that we had difficulties with profitability. And we offered other that were more profitable. And those results were achieved without -- with an insignificant number of stores but rather improving the performance of the existing stores. This year, because of the changes in laws in Colombia, we have some most stimuli are going to disappear. And we have about 5 points of that EBITDA margin are going to go away, 5 points that you have to recover especially through efficiency and productivity. Efficiency and the integrators that had a very important role for this business to be successful in 2020. And there's still interesting allies, but we're interested -- we're not too dependent on those integrators only. They help us get to the homes, but we believe that restaurants, we want them to be very vibrant. So I'd say that in general, that is the comment that we have. But some stimuli are going to disappear, but we still have very good performance. And about your questions in the revenue outside of the point of sales, this is an installed capacity that remained in -- it's about 25% of the revenue. And not only about the aggregators, we have aggregators, they're online sales, deliveries, and this has become consolidated as the time goes by. Probably the pandemic drove them, but it created an installed capacity. So 25% of those revenues come from those channels. About the pro forma that you were mentioned when we did acquisitions and all that, this 24% of EBITDA margin for El Corral or consumer foods or Retail Food has 8 or 9 points in leases, and that's the change in the new law. So [ 2,000 ] could be about 15% or 16%, which compared to the purchase of the acquisition was 18%. So right now, 18% involves some adjustments for integration of that organization into Grupo Nutresa. And we're going to have that adjustment we had said earlier. So this is very much in line with what our profits were going to be when we acquired them, 15% to 16% pro forma. So the adjustment is still 8% or 9% is part of the business structure changes because the lease component decreases as that percentage change. The characteristics will change, but we managed to get the balance with a different composition. The aggregators also have a cost. The home delivery also have a cost, but they also have a good speed, a good -- a different way to have with practical results. And today, it is working.

Can I ask you, the rates are going up and how fast do you expect that the net debt will be adjusted? Or how long do we have to wait until we see how it increases?

It's a difficult -- not a very difficult percentage. During the last quarter, we had about 3.5%, 3.6%. Now we have 4.3% -- 4.78% of our debt is variable local markets. So you can say about 100 basis points is we might reach as an entire cost for EBITDA and debt because we have a significant part of our fixed ended, which is about 5% for the 2021, which will continue to be just an estimate it's still pretty good, competitive.

One last question. Margins were a little low in Cold Cuts and Biscuits. Those are the units where we had that share has decreased, but I still see that behavior. Is it the same competition? Or are they more competitors are being irrational with the prices?

No, let me answer that. First of all, in the Cold Cuts, I'd say that for the categories, when you look at the data figures of the institute that measures inflation in Colombia, the ones that have increased the prices the most, the first thing you see here is unprocessed meat, chicken, oils and milk, and we don't see cold cuts like ours. There is a major cost pressure. I think that in your market share table, I was saying that the main competitor there are their own -- by the brands, one brand and brands, but it's very, very positive what's happening in the volumes in that category. So what we've done is to face this challenge in raw materials. And what happens is that when we have to increase the prices when we've done that, the volumes are somewhat impacted, and that's why our market share decreases a little bit. But it's still very, very good. I'd say that that's as far as the main part. Growth -- volume growth has been much higher than historical numbers. Biscuits last year had -- Biscuits and Pasta in 2020 has been a very high growth. Last year was more and more in terms of growth there. The competitors -- main competitors are global companies, very serious and very professionals. I have nothing negative to say. But what I would say is that we made a major effort with improving our capabilities. And as volumes increase, we will see some recovery in margins for Biscuits. For example, in wheat, we see this is going to have the effect of the Ukraine. But that is not going to be leading to irrational competitive behaviors. I was mentioning that in this situation of the supply chains, we're seeing the abilities, management activities of those who have the abilities to compete, those who act as locals and have an advantage or not who depends on containers or not. And that should be the multi-locals, which are the [ privileged ]. And it's very powerful in defenses or protection from some of our those issues, but we are still vulnerable because the companies are not really perfect. But I would think that we have very interesting capabilities to play with. Thank you for being with us, Felipe.

Two questions from the webcast. Due to the persistence of the increase in costs, what would be the EBITDA margin for 2022? And the second question would be, does the company have some significant cash flow levels, that was COP 102,700 million? What we expect to use those resources for?

Well, thank you, [ Juan Camilo ]. I'll take both questions. As far as the EBITDA margin, we are not going to give any guidance. And those who follow us in the last conferences will see that our profitability, we've been working on it on several angles, flows, value ratio, ROI and, obviously, the EBITDA also. So we do not give you an EBITDA margin target for the end of 2022. What we're saying is that we are looking for returns higher than the cost of capital, which is the best guidance I could give you for the year. As far as cash, that figure, that's good cash is like a picture of the cash at the end of the year. This changes depending on the seasonality of the business. But I'd like to mention that, recently, the Board of Directors published some relevant information saying that they will propose to the assembly an increase of 35% in the dividend. And the company intends to use part of that capital to compensate, to reward the shareholders by increasing the dividends. So this company and -- this company is going to be 102 years old, and we've been paying dividend for 42 years. We have more growth than inflation. Over the last 41 years, the dividend has grown by 18.2% per year. For the past 20 years, 1.8x inflation. Over the last 10 years, twice the inflation. And over the last 5 years, 2.8x inflation. So that's the first part is this is going to be a significant CapEx budget. And it's part of the -- cash is going to be for that CapEx. It has to do with growth and productivity. But also that we will -- ended the year with a very healthy situation. It's a company that is not with high debt levels, and we have access to other sources of funding for the projects that we want to implement. So that I would say that answers in general.

Jose Domingo, I would like to add this is a significant growth we use part of the cash is going to be used for CapEx, for the working capital and maintenance.

Thank you very much for your interest. Right now, we have no further questions. And so with this, we will conclude the conference for results for the year, for the fourth quarter for 2021. Any additional questions you can go through the -- our management for Investor Relations. And thank you very much for being with us today. Thank you.

Thank you for your participation in this event. You may now disconnect. [Statements in English on this transcript were spoken by an interpreter present on the live call.]