Grupo Nutresa S. A. ($NUTRESA)

Good morning, everyone. This is Catherine Chacon, Grupo Nutresa's IR Officer and Corporate Finance Director, and it is my pleasure to welcome you to Grupo Nutresa's First Quarter 2026 Earnings Call. Joining me today is Mr. Jaime GIlinski, Grupo Nutresa's CEO; and Andres Bernal, our CFO and Chief Strategy Officer. We will begin the presentation with a brief overview of the quarter's highlights and key messages, followed by a detailed financial review. Afterwards, we will open the room for your questions. [Operator Instructions]. Similar questions will be grouped in order to allow for everyone to participate. To begin our presentation, I leave you with Mr. Jaime Gilinski.

Hello, everyone, and thank you for joining us. Grupo Nutresa had a slow start of the year. [indiscernible] sales increases in our home market of Colombia, up 14.3% and a high single-digit increase plus 8.2% in dollars in our other geographies. It's very important that sales were leveraged by a 2.5% increase in volumes. The company achieved a 370 basis point expansion in its gross margin, mainly due to strategic hedging decisions in both commodities and foreign exchange. The adjusted EBITDA margin reached 20.4%. We reported a margin of 20%. During the term, showcasing the structural results of our optimization plan. We continue to work in consolidating additional initiatives that will be reflected in the years and next year's financials. Continuing on Slide 4, we share the new category-based business reorganization within Grupo Nutresa, which will apply starting this quarter and going forward. This reorganization was decided with much thought and consideration, looking to simplify and unify the company regional operations to allow for faster decision-making and strategy implementation across our different geographies. One of the most relevant changes includes the removal of Tresmontes Lucchetti as a reporting unit. Our Chilean operation results will now be part corresponding business categories. The coffee business will consolidate Chilean coffee sales as well as the tea and beverage categories. pasta, chocolate confectionery and snacks will be reported under the corresponding business as well. Retail Food will continue to report to Colombia's restaurant operation and the ice cream division will integrate all region and ice cream businesses, including our POX and bond platforms in Central America and the Caribbean, which were previously reported under retail food. We will also report the Foodservice segment separately based on the special characteristics of this distribution business. Lastly, to find last year's sales and EBITDA results under this structure for comparative purposes, please access our detailed report via our Investor Relations web page. I will now turn it over to Catherine and Andres to continue with the presentation, and I will be back at the end of the presentation to deliver key messages about the ongoing years.

Thank you, Jaime. Moving to Slide 5. We report total sales reaching COP 5.2 trillion, representing a 6.6% increase. This performance reflects the broad-based expansion across our core regions and geographies, supported by a 2.5% increase in volumes and a 4% in price improvements. The quarter's results were mainly driven by double-digit advancements in several key segments, such as food service, ice cream, redial food and biscuits and snacks. FX played an important role in consolidating these results impacted international sales when translating them into our reporting currency. Without this effect, our total sales we have reported a 10.4% growth for the period. On Slide 6, we detail the sales execution for the term. In Colombia, sales reached COP 3.3 trillion with a 14.3% year-over-year growth. In dollars, these sales were $888 million with a 29.5% growth. Colombian business unit performance was led by the ICM division with a 31.5% growth, the coffee segment and the Biscuits and Snacks businesses. The Chocolate [ segment ] despite a modest 2% value growth achieved a 4% increase in volumes driven by strategic pricing adjustments that were well received by our consumers. Overall, Six of our 8 businesses reported double-digit growth. In terms of channel performance, growth was led by the traditional channel with a 23% increase for the quarter, followed by the modern channel with an increase of 15% on our restaurant chains with a 13.4% growth. International sales for the quarter reached $518 million with an increase of 8.3% over the same period in 2025. In Colombian pesos, total sales amounted to $1.9 trillion, a decrease of 4.4%, impacted by an 11.8% revaluation of the Colombian peso against the dollar. International business unit performance was driven by biscuits and snacks with a 15.3% growth, coffee with a 10% growth and pasta with a 12.6% growth. The Ice Cream division continued its international expansion, reflecting a 6% sales increase over the term. The chocolate performance was impacted by a contraction in the ingredient sales category for the period. In terms of geographies, we report double-digit growth in Chile, Ecuador and Peru. On Slide 7, we report our sales breakdown for the period. The breakdown in the region reflects a largely consistent sales execution across the different platforms. Colombian sales represent 63% of total followed by the U.S. with a 12.6% and Central America with a 9.3% for the term. On the next slide, we report our cost structure. On the left of the screen, we show a decrease of 28% in the Grupo Nutresa Commodities index, mainly due to the lower costs in commodities such as cocoa, which dropped 60%, sugars with a cost decline of 25% and coffee minus 16% and pork minus 19%. Our hedging strategy accompanied by a last volatile commodity environment resulted in a 370 basis point expansion in our gross margin. I now leave you with our CFO, Andres Bernal, who will detail EBITDA margins and the structure of our debt.

Thank you, Cathy. On Slide 9, we report for the term. The quarter yielded an adjusted EBITDA margin of 20.4%, highlighted by double-digit growth across our core business units. These results stem from gross margin expansion and a disciplined operational expense execution. Adjusted EBITDA excludes nonrecurring expenses for the period. Regarding EBITDA, the adjusted EBITDA reached COP 1.26 billion, while reported EBITDA stood at COP 1.04 billion. growth that is on adjusted EBITDA was plus 43.4%, not only with the exception of retail food and food service, all business units achieved double-digit growth, led by pasta, sugars, ice cream and others unit, which posted growth exceeding 60%. In terms of the above areas results, ice cream, sugars, retail food and cold cuts, all maintained EBITDA margins of 20%. On Slide 10, we report consolidated for the first quarter of the year. Our net debt-to-EBITDA ratio for the term is 3.22x. That includes principal and hedging for financial negations and right-of-use labels. And it is to 2.5x on a run rate basis for the term. The company closed the term with a cash position of COP 3.8 trillion. On Slide 11, we'll report our forward-looking principal debt amortizations. For 2030 and 2035, you can see the principal repayments of our $3 billion for last year and so is more local debt repayments across 2027 and 2032. [indiscernible] duration of our debt is currently 5.54 years. I will now turn to Mr. Jaime Gilinski for some final remarks.

Thank you, Andres. For the year ahead, we maintain our initial guidance, which includes a high single to double-digit top line growth with an adequate balance between local and international execution. EBITDA margins will remain in a corridor of between 19% and 20% and equivalent to USD 1.15 billion to USD 1.25 billion. CapEx execution will be approximately 2.8% of total sales for the year investing in current and new capabilities to fuel growth. I will now turn it over to Cathy to take your questions, and thank you again for your time.

[Operator Instructions]. We have two questions from Robert and those are, what is the net gross leverage pro forma with the perpetual that was issued in mid-April. And do you plan to pay down any debt this year?

I'll take that one. Using the 50% equity treatment methodology, which is given by the agencies for the perpetual, the expected pro forma net levels is in the high fat, while gross [indiscernible] is around mid [indiscernible] we plan to pay local debt during the course of the year, some during the second quarter. And keep in mind that Colombia has elections in less than a month, and we're going into the cycle with a large cash position and hedging position.

Thank you, Andres. The next question comes from VG. Can you share 1Q transactions PEP was 1.250 billion and how much of this is yet in cash with Nutresa versus upstream? Also, is there any intention to upsize the preference share capital issuance given the approved limit was not fully utilized during 1Q of '26.

Yes. I will take that one. I think that we don't expect in the short term to increase the preferred issue. It was 500 million, which came into Nutresa at the end of March. And I think the second question that you are asking, is in terms of the leverage, the 1.5 came in, and we're going to use that to reduce debt. And as it was mentioned, about 1 billion of it was upstream.

Thank you, Jaime. The following question is from Luisa Fernanda from Legal General. Could you elaborate on the working capital outflows during the quarter and your expectation going forward? And also, what are your expectations on inflation effect and profitability for the company in the coming quarters and your view on commodity prices.

Regarding your first question, working capital for on the first quarter record additional days in mainly raw materials. This is the first time in several years that the company was able to using its own cash flow get all the working capital in place with no additional debt. For the following quarters, those inventories should reduce and therefore, net increase in working capital shouldn't be significant this year as we continue working in inventories and receivables. On your second question, for inflation, at this point in time, packaging has been hit by the oil situation. We do expect some increase in prices on those. However, for the last couple of months, cocoa, sugar, coffee, had been on a downturn except the last couple of weeks. Obviously, it's quite difficult to foresee what's going to happen with those prices. However, at this point in time, our hedging is quite complete for the rest of the year in the most important -- the commodities that we use.

Thank you, Andres. The next question is from Luisa again and it states. Could you elaborate on all the intercompany transactions during the quarter, this year issuance to relate a company, the buybacks and the increase of intercompany debt by Colombian pesos and what to expect on this going forward beyond the perpetual bond issuance.

I'll take this one because Andres -- Sure, Luisa, the share buybacks were COP 1 billion available to shareholders. The intercompany debt is within the perimeter of the company and used to facilitate the movement of cash in different jurisdictions. And in regards to the intercompany loans that you were mentioning, remember that those are back-to-back. So those are not necessarily debt. Those are just a way of using the international cash in a more efficient financial way for us. Let us see the next question. And it says, how much have you guys advanced in the Venezuelan market I guess this question relates to how are we doing in terms of our prospects in this country, and this is stated by Karen.

Good. Thank you. I'll answer on that. Since January 3, we have spent a lot of time analyzing opportunities and strategies to grow in Venezuela. During the first quarter of the year, we started to experience some increase in sales from the operation that we had there. As you know, last year, our revenues in Venezuela were only about $14 million. We expect to continue to grow this year. We have strategies for our different categories and we hope to be able to be somewhere between $6 million and $10 million at the end of the year in terms of run rate. And that is an optimistic goal. But we see that Venezuela used to be for us close to 25% of our revenues 20 years ago. And there is a tremendous opportunity for our products in the market. We have continued to look at opportunities there and we feel that Venezuela should be during 2027, 2028, an important growth generation for our company.

Thank you, Jim. The next question states what are the terms of the intercompany loan that was used to upstream the 1 billion of proceeds from the hybrid issuance. Separately, is there any guidance on dividend policy for 2026?

I think the terms of that loan were exactly similar to the cost of the funds. So the interest is being paid in every semester. So there's really no cash flow requirement to pay for the debt and it has been quite some time since Nutresa has accessed the capital markets prior to -- okay, looking at our capital structure going forward, we don't have any plans of issuing more financing in the short term.

Perfect. Jaime,that was the next question. Thank you. And it was stating we were interested in accessing capital markets at this point, and that was answered already by Jaime. Next question, again, from Luisa from Legal & General. Are you expecting any impact on the spike on energy prices?

I think that the answer is yes. It's a minor effect. We don't think it's going to be more than probably 1% or cost in the short term. And we have, as you know, in some of our plants already incorporated some saving efficiencies that are going to allow us not to have the [indiscernible] increase. I think that it will affect us in terms of the cost our transportation because of the gasoline. But we don't think that it's going to be more than 1% of our total revenues.

Thank you, Jaime. The next question comes from Patrick. It's actually a couple of questions. Is there any significant M&A transaction expected in the near term? And are there any material one-off restructuring expenses projected for the year? Or will there be any significantly -- will they be significantly lower than 2025?

Yes, I think that to answer that, effectively, we don't expect significant one-offs this tier. As you saw in the first quarter, our EBITDA margin was 20.4% and reported 20%. So it was a much smaller delta than what we had last year. And we don't expect that to be as high as it was last year, as we have mentioned or only in the road show, but in our previous calls. In terms of M&A, at the moment, we are not looking at anything significant. There's a couple of small opportunities that have been shown to us, which we are analyzing. Important to mention that our MIMOs acquisition, which took almost 9 months to get all the regulatory approvals, we're fully approved, and we will be closing on that transaction by the end of this week.

Perfect. Jim, the next question states can you share some color on consumer health, both in Colombia and international markets? Have you done any price increases already? And how has the consumer and competition reacted? Do you hedge any of the key costs?

Okay. First, on Consumer Health in Colombia, it has been stable. Obviously, as we are very close to elections, things changed a little bit for the next couple of months. However, the World Cup also have Latin economies, and we expect a significant increase in consumption in the month of June and July based on that international markets have been stable as well. We haven't been increasing prices recently. As I mentioned before, the commodity prices went down. So we have enough forwards and hedging to cover those volatilities. And therefore, we have not increased prices. In fact, during the first quarter, we decreased the price of the main product, the main SKU we have which is chocolate. This is called Jet #1 by 16.6% and came with a significant increase in sales in units. Do we hedge any key costs? Yes, we do. We hedge a main commodities. We hedge electricity, we hedge gas as well. We do try to buy as much packaging in advance and to retain prices. However, as I mentioned before, for the last couple of months as the oil prices have been up, we are getting some increase in cost for those paging products.

Thank you, Andres. The next question is, where do you expect gross leverage to end this year? It's currently in the mid-4s what is the time line for achieving IG ratings from Fitch?

As we have mentioned, we expect this year to be in a range between 3x and 4x. We expect at the end of the year to be much closer to 3.4% to 3.5% as we mentioned on the road. I think that in terms of the investment grade, as we have mentioned on our previous roadshow, we have both Fitch and Morris analyzing the company. We have been told by Moody's that it's important for us to demonstrate the numbers for this year in order for them to eliminate the ones that they gave us. And we need to reach the 1.15 to 1.25 goal for them to consider it. In terms of it we don't expect an investment grade this year. I think they have said to us that they want to continue seeing as how we develop and we continue to deleverage. And I think that's something that they're going to analyze in 2027.

Perfect. The next question is from Josephine from JPMorgan. Could you explain the debt hedging currently in place and its impact on the FX loss during the quarter.

Thank you. Yes, we have 2 billion in hedges. These are principal-only swaps that are don the following months. We plan to keep most of those 2 billion for the coming elections. And obviously, as the peso and some of Latin merchant currencies revaluated during the first quarter. that generated as a loss of roughly COP 0.5 billion trillion. However, for the last 1.5 months, as the spot of the Colombian pace has been going up, we have been recurring those accounting losses.

Thank you. That was our last question. I'm going to pass the floor to Jaime for some closing comments.

Thank you very much, Andreas and Cathy, and thank you very much to all the investors and everyone on the call. I think that we continue to implement our strategy. We have been very focused on making sure that the optimization continues in 2026. We were able to achieve a 20.4% number in EBITDA margin in the first quarter. We expect, as Katy said, that to be somewhere between 19% and 20% for the year which is a much better situation than what we had about 1.5 years ago. We continue to be optimistic. We will continue delivering our results. We are being very careful in terms of continuing to deleverage the company. to reach the goals that we have mentioned. And we look forward to being with you on our next call when we present the second quarter results. Thank you very much, and we wish everyone a good day. Bye-bye.