Grupo Rotoplas S.A.B. de C.V. (AGUA) Earnings Call Transcript & Summary

[Audio gap] Today's discussion contains forward-looking statements. These statements are based on the environment as we currently see it, and as such, there may be certain risks and uncertainties associated with the following statements. The company has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Today's agenda is as follows: We will begin with insights from our keynote speaker, Lauren-Nicole Kung, on the global water situation. This will be followed by Carlos Rojas, introducing the main event, discussing the first 2 priorities on his CEO agenda. Mario Romero will then provide an update on the 5-year business plan, focusing on economic value creation. Next, Jose Luis Mantecon will delve into Rotoplas' strategies for sustainable value creation and ESG. Finally, Carlos Rojas will return to discuss priorities 3 and 4. We will conclude the day with a Q&A session. Let me introduce today's keynote speaker Lauren-Nicole Kung is an equity research strategist on the global thematic investing team. The team works to implement the Bank of America Global Research Enterprise-wide Transforming World framework by addressing long-term mega trends from both an opportunity and risk perspective. Kung joined the firm in 2022, starting on the European consumer discretionary team. Prior to this, she was a summer analyst on the European Capital Goods team in 2021. Kung graduated with a BA degree in Economics from the University of Cambridge. She is based in London. Please, Lauren, the floor is yours.

Thanks, [ Timmy ]. Hi, everyone. It's Lauren Kung here from Bank of America. So I work in research on the thematic investment team. And in a nutshell, what we do is we analyze long-term trends that could change our world. And one of those trends that we've been analyzing is water and water scarcity problem. So I'm very happy to be here today to discuss our recently published water primer and its content, which I was the lead author of. And with all the events that we speak at, I've been reminded by my colleagues in legal that we are not endorsing any particular solution or company in examining this issue, but simply laying out the complexity of the problems that we face when it comes to water. So what are we seeing? Well, we're at the tipping point. The water crisis is bad, and it's getting a lot worse. So water on Earth can actually run out by 2040. And what's behind all this? Well, there are various factors, one of them being that less than 1% of all water out there is usable, and we are running out of it so fast that we may need to expand access to clean water. We are already seeing and feeling the effects. Lake Mead, for example, is a reservoir on the Colorado River Basin and it hasn't been filled since 1983. It's actually decreased in supply by almost 2/3 just in the past 20 years, and you can see the very dramatic changes between 2000 and 2021 in the first and second images here on this slide. And actually, you can see in just the face of the year, how fast the problem had worsened. So last year, in 2022, it actually operated at 27% capacity. And as the water crisis worsened, we could see more examples of this while water supply dries up. What are the supply and demand dynamics? Well, firstly looking at supply, water supply has actually halved over the past 50 years and there are various pressures or trends that we can use to explain this. So in terms of water infrastructure, it's actually old, and that means it may need replacing. For example, globally, most of the dams were built between 1930 and 1970, making them between 50 and 100 years old. That means that there's greater pressure on existing water infrastructure. And in fact, globally, 1/3 of all fresh water running through our pipe is lost leakage. And in some countries like the U.S., there are still lead pipes in use. There are about 12.8 million lead pipes still used in the U.S., and we know that lead is toxic to humans. Climate change is another pressure on water supply. We have hotter temperature leading to rising sea levels, which increases the risk of flooding, floods damage water infrastructure, and they also can ruin your water quality. At the same time, hotter temperatures lead to an increased risk of droughts, and they can dry up the existing water supply that we have. For every 1 degree increase in the global average temperature, you get a 20% drop in the renewable water resources. And already since about the 1800s, the average global temperature has increased by 1.1 degrees Celsius. We also have urbanization as another pressure, not just on supply, but also demand. Half of the global population already lives in cities, but an additional 25% of the population will move to cities by 2050. Associated with that is also waste. But every year, 80% of global sewage is actually dumped into the sea without adequate treatment. What's happening with demand? Well, since the 1970s water demand has increased more than 40%. There are different pressures as well that we can think about here. So for example, with agriculture, the population is set to reach over 10 billion by the end of the century. That has implications for agriculture, which is one of the largest consumers of water globally. It represents just over 70% of all water withdrawals as we can see in this chart here. But even by 2050, the growing population will require 50% more food, and you have water for irrigation associated with that. It's not just these pressures, but we're also in this era of hyper consumption. And behind our everyday items, there is a water footprint or a water cost. And that's in addition to the water that we use for consumption. So as you can see on this chart, the water used to make a car is actually the same as all the water that 475 people together used in a single day. In the textiles industry, it takes 3 weeks' worth of showers to make 1 T-shirt. Or in the food industry, it takes 3.5 months' worth of showers to make a one [ KD steak ]. So there are lots of different facts that we could put out there. But knowing we have all the pressures, then it means managing our water usage to make sure that we're using motor efficiently to be beneficial. It's not just about consumption of the typical consumer goods, it's also about technology. So AI has been a very big topic this year. We believe that generated AI will change our world, and the continued unfolding of this AI revolution implies greater demand for data centers. Though GPUs are more efficient for AI purposes than CPUs, but they require double power as CPUs, and that means more cooling and more water used in the process. So data centers in the U.S., they're actually the tenth largest consumer of water. And even applications like ChatGPT, they are also water thirsty. We found a stat which says that ChatGPT drinks a liter of water every 40 commands. And there are just billions and billions of questions and queries going through that application a day, and that's just ChatGPT alone. You've got plenty of other generative AI models out there, like Ernie, Bard Claude, LLaMa and other companies also developing their own model or applications on top of these large language models. As the water scarcity problem worsens, we could see more hydro interactions over how water resources are allocated. That's because about 80% of all countries in the world share fresh water resources with at least 1 other country, but only about 85% of those lack -- they lack transboundary basin agreements over how resources are allocated. And it doesn't have to be just between countries, it can also be within countries. If we take this Colorado River Basin, for example, it supplies water for nearly 14 million people across 7 states, including Colorado, New Mexico, California, as well as cities like Denver and L.A. So I guess just to close this short presentation, some food for thought. We have lots of different solutions out there, but there's probably no single bullet because the water crisis is just so complex. There's no single water crisis out there, and that's because each region or country faces a very unique set of problems. You've got differences in population pressures, water resources, climate, how water utilities are run, the industry mix, regulation, et cetera, et cetera. So it means that they'll probably take a combination of solutions to address the water crisis. But if we look at just in terms of investment, what's needed to solve the water crisis, it only costs about 1% of GDP a year to 2030 to build that. But in terms of the path to actually achieving this, we need a fourfold increase in the current rate of achieving 100% global coverage of water, sanitation and hygiene services in 2030. And there are certainly advantages to investing in water. So as an example, in terms of return, every dollar invested in water access and sanitation generates, on average, about USD 7 in returns. So there's a lot to think about in terms of all of this, and this was a quick intro to some of the trends that we're seeing. But now I'll hand back over to [ Dani ] and the team to continue with today's event. [Presentation]

It's a privilege to be surrounded by so many humans with such a keen interest in understanding and solving the current water situation. Now after these valuable insights, I'll leave you with Daniela, my human cohost. Over to you, Dani.

Thank you, [ Dommy ]. Before introducing today's speakers, we want to know what you think. You'll see a poll on your screen with the question, "What do you perceive as the most difficult global water challenge today?" A, water scarcity; B, water quality; C, climate change impact; or D, equitable water access. [Voting]

The poll is now closed. The most popular answer was water scarcity. Now I'd like to introduce today's speakers. Carlos Rojas is the Chief Executive Officer and Board member of Grupo Rotoplas. Carlos joined the company in 2014, and since then, he has held various positions. He was part of the international expansion and responsible for driving the success of the innovation and development department. Before being appointed as CEO, he was the Vice President of Services. At Rotoplas, Carlos has driven transformation and innovation from diverse perspectives, as well as the development of projects and the expansion of the company. Carlos holds an undergraduate degree in Industrial Engineering from the Tecnológico de Monterrey and an MBA from Babson College. Mario Romero is the Chief Financial Officer and Board member of Grupo Rotoplas. He has long been recognized for his innovative approach and execution throughout his career, having led a wide branch of successful projects, including the transformation program, strategy design and delivery, several cross-border M&A transactions, Rotoplas' initial public offering and the issuance of the first Latin American sustainability bond. He is an advocate for sustainable investments and serves in several advisory councils and Boards. Thanks to his passion and drive in ESG, Mario assumed co-responsibility of the group's sustainability area in 2022. He has received multiple awards from institutional investors, including Best CFO and Best ESG metrics. Mario holds a Bachelor's degree in Economics from ITAM and a Graduate Certificate in Business Administration from Harvard University. Jose Luis Mantecon is Rotoplas' Chief Sustainability Officer. He joined the company in 1993 and held the International Operations Director position for several years, where he was responsible for the Southeast Mexico and Latin American expansion. In addition, as Vice President of Sustainability, he is the co-lead of the execution of the ESG strategy. Before joining Rotoplas, Jose Luis founded several companies in the construction sector. Jose Luis holds a Bachelor's in Business Administration from Saint Michael's College in the United States and Postgraduate Executive Degree in Marketing from Anáhuac University. Now to begin the presentation, I turn it over to Carlos Rojas. Carlos, the floor is yours.

Thank you. Good morning, and thank you for joining us today on this AGUA Day. We gather at a critical moment in the history of our planet. A moment where water trends are redefining business opportunities for companies like Rotoplas. This year, as we celebrate our 45th anniversary, we're more committed than ever to solving water issues. Despite the challenges faced in 2023, Rotoplas' robust business model, another strategy have enabled us to transform these obstacles into opportunities for evolution and innovation. In a complex global context, especially in water-related issues, our transition from a product-centric enterprise to a comprehensive provider of sustainable solutions marks a significant shift. We now perceive water as a holistic service integral to our mission. Our strategy to reach the 2025 goal is clearly defined. We focus on strategic levers that include innovation in products and services, greater penetration in key markets and the strengthening of our operations. The next steps involves the implementation of advanced technologies and the optimization of our processes to ensure sustainable and profitable growth, always keeping an eye on the changing needs of our customers and emerging market opportunities. Before diving into our 4 strategic priorities and as we celebrate our 45th anniversary, I'm very proud to share that Rotoplas has been honored as a famous brand by the Mexican Institute of Industrial Property, IMPI. A distinction awarded to fewer than 200 companies in the country for their reputation and prestige among consumers. This recognition reflects our strong position in the market that reinforces the commercial value of our brand. It's a clear indicator of the trust and credibility that consumers, distributors and employees have in us. This morning, we will examine in detail 2 of our 4 strategic priorities, starting with a sustainable growth of our traditional business, followed by the development of new businesses. Later in this session, I will cover the 2 additional priorities: digitalization of the water ecosystem and our commitment to all stakeholders. Beginning with the sustainability growth of our traditional business, this year we have taken significant steps in this regard, particularly through innovative projects such as SMART, which represents the start of the evolution of our legacy products with Tinaco Plus+. We have implemented the new blow molding manufacturing technology in 5 of our 8 storage solutions manufacturing plants in Mexico, and we're just 2 weeks away from having it in another plant, aiming to complete implementation in non-Mexican plants by 2024. This blow molding technology has not only increased efficiency in manufacturing and transportation, but also improved the product's perception among our customers. We now see that Tinaco Plus+ as a more resistant, reliable and innovative product. Moreover, the SMART project has had a significant impact on operational health, improving working conditions and allowing us to increase the number of women involved in the manufacturing process. We have also achieved other efficiencies through a shift from gas to electricity and an optimization in the use of resins, resulting in a more sustainable and efficient products. Compared to the Tinaco Plus+ with the traditional Tinaco, we see notable advances. The Tinaco Plus+ produces approximately 40% less CO2 emissions than the traditional model. Additionally, the Tinaco Plus+ uses minimal water for cooling compared to the 24 liters of the previous model. This, along with the incorporation of 40% recycled material compared to 17% of the traditional model and a reduced manufacturing time of 7 minutes compared to 25 minutes, demonstrates our progress in efficiency and sustainability. As we approach the project's completion, we have already allocated 70% of the total MXN 620 million investment, and we are on track for an IRR slightly above 20%, reflecting our practical and strategic investment approach. It is also important to highlight the enhancements that directly benefit the customer experience. The new Tinaco Plus+ features a new [ screw on lead ] that prevents the entry of pollutants, ensuring cleaning water storage. It also has vertical support for increased stability and strength, along with lifting lugs for better handling during installation. These tanks also have an antibacterial layer with Expel technology that inhibits bacterial growth, contributing to safer water storage. These customer-centric improvements are not just about offering a superior product. They are strategic moves to solidify Rotoplas' market position. By differentiating ourselves in a highly competitive market with the cost-effective design of the new Tinaco Plus+, we'll maintain our category leadership and curb the competitors' growth. Our commitment to innovation is reflected in meeting the current needs and addressing the pain points of our users. This advance not only represent a step forward in terms of innovation and sustainability, but also reflects our dedication to improving the customer experience and strengthening our position in the market. By focusing on efficiency in our traditional business, we are laying the foundation for continuous and responsible growth, aligning our operations with the needs of an increasingly environmentally conscious growth. Fueled by our commitment to strategic growth, we remain steadfast in refining our operational strategies and enhancing our core competencies. This vision is not merely a road map. It serves as our guiding star, influencing our cost management, pricing strategies, and now also including our M&A activities. Mario will later provide further detail on this aspect. Our second strategic priority is centered on the growth and the development of new businesses. We are targeting a yet to be fully developed market reach with unmet needs and significant growth potential with promises -- which promises a steady stream of revenue. In this endeavor, we are expanding our footprint and diversifying our solutions portfolio, carefully balancing the opportunities and challenges that come with such expansions. A strategic priority will continue to invest in research and development in this business unit to consistently deliver topnotch solutions. Our expansion efforts and initiatives to enhance brand awareness are crucial elements of our strategy. I would like to mention that the negative EBITDA experienced by this service business -- businesses as a group in recent years despite the profitability of some can be considered comparable to our investment in research and development. This investment is anticipated not only to drive the future profitability, but also to support the development of a completely new go-to-market strategy and initial market penetration efforts, both of which are fundamental to our long-term vision. Our strategy is manifested in the development of several high points for potential new businesses. Starting with bebbia, I want to take this opportunity at this event -- in light of the historic milestone where bebbia reached 100,000 units -- to introduce you to the latest innovation of our B2B purifiers. This new touchless purifier and dispenser features infrared sensors for water dispensing to ensure greater hygiene when drinking water. Reverse osmosis and ultrafiltration technology, a modern and compact design that optimizes space and enlarged cavity for all types of glasses and jars. It also includes a digital display with temperature control and a child safety lock. Our efforts are dedicated to transforming how water is consumed, moving away from the unsustainable practice of bottled water. Also this year, we have placed a strong emphasis on automating customer interactions, encompassing everything from contract initiation and scheduling, installation and maintenance appointments to managing user profiles and payment methods. As highlighted during our previous AGUA Day, our drinking water service has the potential to reach 3 million households or B2C clients and nearly 1 million institutional or B2B clients, with a potential annual recurring revenue of $0.5 billion. In 2024, we will implement key initiatives to expand and strengthen the service, complement and renew the portfolio of institutional and residential filters and [ try to mention some ] plumbers on customer and user interactions to continue improving their experience with them. Other important initiatives for this business is the implementation of the programmatic M&A strategy. Now moving into Rotoplas Water Services, our water treatment and recycling business in Mexico has a market opportunity of approximately $1 billion. We will need the implementation of important initiatives in the coming years, such as continuing to generate bookings with focus on water-intensive industries. Additionally, we will persist in exploring innovative technology and IoT solutions to offer a holistic approach to our customers? About Rieggo, we are leveraging the latest technological advancements to promote more efficient water use in agriculture. Rieggo represents a market opportunity of about $350 million. Our 2024 strategy includes expanding our footprint in high-yield agriculture, particularly in berry cultivation. The strategic acquisition of high-tech aggregation assets, an expert in irrigation systems with 3 decades of experience, a key lever for growth. This move enhances Rieggo's capability in delivering advanced automated irrigation solutions. Next, focusing on ACUANTIA Brazil. ACUANTIA Brazil specializes in water treatment and recycling plants in the largest domestic market in Latin America. This area represents a market opportunity of approximately $800 million. Over the next 12 months, we will continue to develop a detailed process to track leads and capture sales and expand our capabilities and generate bookings in this market, with a particular focus on water-intensive industries. Lastly, regarding ACUANTIA U.S. In the United States, our subsidiary ACUANTIA U.S. focuses on the septic business, representing one of the largest opportunities, with a served available market of around $1.35 billion. In the coming year, we will focus on building capabilities and generating research with special attention to adapting our offerings to the specific needs of the U.S. market while strengthening our position. Our main initiatives will include: first, launching advanced septic solutions. And secondly, enhancing our customer service by implementing a more efficient design build delivery model aimed to providing faster, more predictable results for our clients. Regarding our e-commerce business, it is advancing its water storage solutions with smart technology integration and light assembly capabilities. We are adopting a unique rental lease model for temporary storage needs and intensifying our focus on large enterprise customers to personalize service and an omnichannel experience. Now I will pass the presentation to Mario. Thanks again for your time.

Thank you, Charlie, and good morning, everyone. I'm very glad you are joining us today. Let's begin by discussing our strategy and progress in 2023. Then we'll review our expectations for the remaining 2 years of our 5-year plan. And we'll conclude with some insights about our stock power. 2023 has been a year of strategic recalibration for us. Despite experiencing slower growth, we've achieved significant improvements in profitability. This year, we've navigated through several challenges, some of which we are -- beyond our direct control. This includes some credit exchanges rates, specific climate events and some political and macroeconomic factors. The Mexican peso, for instance, revalued by 11%, impacting the consolidated sales of our subsidiaries outside Mexico. In the U.S., higher rainfall levels prevented severe droughts in key states where we have a strong market presence. In Peru, El Nino pattern resulted in a warm winter, which in turn affected our water heater sales. In response to these challenges, we have concentrated on 3 key areas: one, operational excellence and profitability. Despite the drop in sales, our 9 months EBIT increased by 7% through effective pricing strategies, which have been adjusted to account for inflation, raw material costs, competition and profitability goals. It is also important to note that this year, we no longer recognize expenses related to the Flow transformation program, as this way of working has been fully adopted and integrated into our daily operations. Our leadership -- as the second one, we continue to lead in market share and product sales across the countries where we operate. And the third one, expansion of new businesses. Our services sector has seen a more than 40% increase in revenues this year, gaining traction and scale. Throughout this year, we have successfully improved our return on invested capital, maintaining it consistently above the cost of capital. However, our net income has been affected by currency exchange situations, particularly due to the impact of the Mexican peso to U.S. dollar exchange rate [ hedged valuation. ] As we approach the close of 2023, we find ourselves moderately behind our planned objectives. However, setting challenges aside, we remain firmly on track to double our sales and achieve an EBITDA margin of 20% or higher. We are committed to maintaining a leverage ratio below 2x net debt-to-EBITDA and achieving an ROIC close to 20%. To reach these goals, we are targeting a CAGR for the next 2 years of approximately 16% in products, our value creation portfolio, and 80% in services, our growth portfolio. Regionally, we expect Mexico to grow by 16%, Argentina by 13%, the U.S.A. by 25% and other regions, including Peru and Central America, by 17%. A pivotal lever for achieving this growth, especially in new businesses, will be programmatic M&A as an enabler. We anticipate this strategy contributing an additional 4% to 5% -- 4 percentage points of growth in the coming years. In terms of profitability, we are aiming for a 21% CAGR in product EBITDA and a breakdown EBITDA margin in services by 2025. Overall, this equates to a 21% growth in sales and 27% in EBITDA at the group level. During this period, we will keep government sales under 10% of our group-wide revenues. Our projected capital expenditure for maintenance is around 1.5% of revenues, with growth CapEx close to 3%. To achieve these growth rates, we'll define specific lines of action for each country or region. In Mexico, we'll continue with the national rollout of Tinaco Plus+, promote our newly launched products and maintain agile pricing strategies to uphold our brand leadership. In services, our focus is on scaling of bebbia, expanding [ bookings ] in RSA and further developing of Rieggo. For Argentina, we'll stick to our golden rules: responsive pricing strategies, sustainable cash flow, avoiding local currency debt and maintaining market leadership. In the U.S., as Charlie highlighted, we are introducing advanced septic solutions, partnered with installers and engineers for predictable project delivery. Our storage business leverages our omni touch model, which combines e-commerce, application sales expert team and 14 strategically placed physical stores. Our stores also serve as house for replacing parts and local services. On individual products, we are spending into light assembly and we'll introduce the smart water solutions with integrated sensors and software. In Peru, we are focusing on maintaining profitability by aligning costs and expenses with demand. In Central America, we will develop synergies between countries leveraging our Nicaraguan plant and continue penetrating the market with recent solution launches. Now let's dive into the programmatic M&A strategy piece. Our aim is to cultivate a competency in identifying and integrating acquisition targets, elevating our M&A capabilities to the same level of critical importance and expertise as our sales and marketing functions. To solidify our strategy, we established a dedicated M&A division focused exclusively on the streamlining these processes. This division is charged with systematically reviewing acquisition opportunities and actively supporting our business units that earmark potential acquisitions as part of their strategic objectives. Our programmatic M&A focus has been sharply defined by an exhaustive analysis of the water market. Understanding the market size, growth potential, industry trends and key players have led us to target the United States, Mexico and Brazil for bolt-on acquisitions. These acquisitions are pivotal in accelerating the growth of our developing businesses, particularly in water purification, irrigation and water treatment and recycling. Our approach to evaluating potential acquisitions, it is both rigorous and strategic. We prioritize 3 main criteria: strategic fit, financial attractiveness, as well as operational capabilities and synergies. Moreover, our aim is to focus on accretive acquisitions that significantly enhance our value, targeting an internal rate of return of over 18%. This discipline of method ensures alignment with our strategic objectives and augments our growth trajectory. On a monthly basis, our M&A committee regularly reviews the growth investment opportunities. This involves a comprehensive target screening based on key financial and operational metrics, ensuring we thoroughly assess each potential acquisition. A critical component of our M&A process is our focus on due diligence and valuation. This ensures we maintain accurate and strategic negotiation positions. Only after strategies satisfies our financial and operational requirements do we proceed. Post acquisition, our focus shifts to realizing synergies and planning the integration process, which is essential for the success of a transaction. Achieving seamless integration requires a collaborative effort. It involves multiple departments right from the analysis of opportunities, assessing potential synergies and planning for effective integration. This cross-functional approach ensures a comprehensive evaluation of each potential acquisition. Additionally, we proposed a special integration committee. We recently completed our first acquisition under our programmatic M&A approach. We've acquired assets from HiTech, including the brand, inventory and client databases. This deal also gives us the opportunity to onboard staff with extensive knowledge of the irrigation market in Mexico as well as the potential to finalize negotiations that were underway. As we conclude the financial section of the presentation, I'd like to touch on a few points regarding our stock outlook. Analyst consensus on the target price suggests that our stock price has over 50% upside potential. This is a robust indicator of the potential growth and profitability we foresee. Additionally, the consistent payment of dividends over the last 8 years with an average dividend yield of 4.5% stands as a testament to our financial strength and commitment to shareholder value. In comparing Rotoplas with other significant players in the water sector, our valuation is discounted, despite having experienced higher sales and EBITDA growth over the last 5 years, as well as the current ROIC that is 1.7x greater than the industry median. By investing in AGUA, stakeholders are not just investing in the company, but in a sector of growing global importance. AGUA represents a profitable legacy business with a promising growth segment set to enhance our scale and diversify our company profile in the coming years. I really appreciate your time and attention today. Now I'll hand over the presentation to Jose Luis, who will discuss our sustainability, results and aspirations. Thank you very much.

Thank you, Mario. Good morning, everyone. We deeply appreciate your time and interest in joining for this session. In our discussion today, I will focus on 3 key areas. First, I will provide an update on our progress and achievements towards our 2025 ESG targets. Next, I'd like to share with you the evolution of our climate change strategy, an area where we have made significant strides. And finally, I'll go through our approach to sustainability governance, particularly through our sustainability committee and various working groups dedicated to this cause. As we discussed last year, our sustainability strategy revolves around a conscious capital approach where people, profit and planet have an equal importance. This strategy is designed to create value for all stakeholders. Firstly, on the profit front, we have made significant progress. As of November 20, 2023, we have completed the evaluation of 50% of our critical suppliers. This surpasses our initial target and sets a strong foundation for our upcoming engagement program and pilot improvement plan with 5 critical suppliers in the next year. Our annual Net Promoter Score, a key indicator of our service level, is showing positive trends towards meeting our goal. We anticipate sharing the final result after the year's end. In terms of our planet objectives, I'm proud to announce that we are on track to meet our emission intensity targets for Scope 1 and 2 per ton of processed resin. Furthermore, for initiatives up significantly contributing to the purification of water measured in cubic meters through our solutions. Regarding our People pillar, were in line with our target for providing access to water and sanitation, a critical component of formation. On the front of gender diversity, while we are slightly behind our target, it is important to note that our efforts this year have been strategically focused. We have conducted a comprehensive assessment to let the [ gang ] work for welcoming more women into our workforce. This has involved a detailed analysis of our manufacturing sites and plants, evaluating necessary physical space adaptations, revising our benefits packages and developing robust career plans. These steps are essentially creating an inclusive and supportive environment for a more diverse workforce in the near future. In 2024, we will focus on implementing the Mexican standard for labor equality and nondiscrimination, meeting the requirements of regulation and enhancing our diversity and inclusion initiatives across gender, LGBT communities and disability sectors. Additionally, we will strengthen our analysis of risks and opportunities related to climate change and water security. This quarter, as part of our commitment to the community and our People pillar, we have reactivated the PAZA program, program for support in affected zones to assist in the emergency response in Guerrero following Hurricane Otis in October. To date, we have donated MXN 6 million, with plans to contribute an additional MXN 8 million. Our efforts include the distribution of water tanks, cisterns, a water purification system, purifiers and other essential solutions, benefiting approximately 240,000 people. This initiative not only aligns with our core values, but also demonstrates our dedication to making a tangible impact in the light of those affected by natural disasters. At Grupo Rotoplas, we are not only focused on meeting targets, but on creating a sustainable future for everyone. Also, I'm excited to present our enhanced and dynamic approach to climate change, a journey that began in 2016 with the measurement of our carbon footprint and consistently evolved, culminating in a comprehensive climate change strategy. This year, we have reached a pivotal point in our strategy. After diligently compiling and validating our 2022 greenhouse gas inventory across all 3 scopes, we have been able to set a definitive baseline year. This groundwork allowed us to propose ambitious yet achievable targets which we submitted to the science-based target initiative to which, I'm proud to share that our alignment with the SBTi has propelled us to transition from a goal of carbon neutrality to aiming for net 0. To clarify, carbon neutrality refers to the balancing emitted carbon with an equivalent amount of carbon offset, whereas net 0 involves reducing emissions to as close to 0 as possible, with any remaining emissions being balanced by removing carbon dioxide from the atmosphere. This shifting not only helps Rotoplas' commitment to the environment, but also aligns us more closely to the Paris Agreement and the global efforts needed to mitigate climate change. Our targets are clear. In the short term, by 2030, we aim to reduce all absolute emissions by 42% for Scopes 1 and 2 and by 25% for Scope 3. For the long term, by 2050, our ambition is to reduce emissions by 90% across all 3 scopes. We anticipate SBTi's review in March and expect to have our targets validated by mid-2024. To meet these targets, we have developed a comprehensive road map that includes continuous process -- progress in production, logistics, heat recovery, product improvement, supply chain management and more. For Scope 1, key initiatives include transitioning from rotomolding to blow molding, as well as reducing fuel consumption in our operations. This reduction can be achieved, for example, through the implementation of automatic sensors for gas regulation and the evaluation of biofuel use. For Scope 2, we are gradually transitioning to renewable energy sources for our operations in Mexico, alongside implementing energy efficiency measures like replacing motors with higher efficiency ones, mainly in the pipe business and optimizing heat utilization in manufacturing processes. In Scope 3, we are engaging with our suppliers to increase the use of recycled resins, encourage materials with lower carbon footprints, optimize distribution routes and fleets and boosting energy efficiency of our products like purifiers, heaters and pumps. We remain committed to transparent reporting. Our annual inventory covering scopes 1, 2 and 3, along with our progress in reducing emissions, will be diligently reported. This also aligns with our intention to comply with the upcoming IFRS 2 standards. Finally, I wish to address our governance strategies concerning ESG. This year, we introduced the Sustainability Committee 2.0, a revamped effort in orchestrating initiatives across ESG dimensions. Our innovative framework has been restructured to direct our endeavors to multidisciplinary work groups. These groups function independently, led by volunteer leaders along with a sustainability team co-leader, fostering grassroots involvement and empowering our teams to significantly contribute to our ESG goals. Their quarterly updates are essential in informing the Sustainability Committee, which then escalates the information to the corporate practices committee and ultimately, to our Board of Directors. A notable initiative in 2023 is we put on sustainable glasses campaign. This initiative is critical in embedding sustainable practices within our corporate culture, making a meaningful impact on employees at all levels and regions. However, we acknowledge the challenges we face, particularly in standardizing sustainable practices across diverse regions in the coming years. Our current focus is on Argentina and Peru, with plans to expand these practices to the U.S.A. and Brazil in the next phases. In closing, I'd like to reaffirm our commitment to being a best-in-class company in the ESG space. We are here towards ensuring that our sustainability initiatives continue to gain visibility, traction and reach. We understand that our journey is ongoing, and we are grateful for your continued support and trust in us. Now I'll pass the presentation over to Charlie for the concluding part of our session. Thank you again for your attention and for joining us today.

Thank you, Jose Luis. Now after listening to our financial and sustainability results, strategy and outlook, let me come back to our 2 other priorities. We're practically adapting to market changes and global trends such as digitalization and the evolution of the IoT ecosystem. The digitalization of the water ecosystem and our digital transformation is our third priority. This year, we have significantly advanced in our digital journey through a 5-year strategic agreement with Google Cloud supported by an enhanced partnership with SAP, making a major step in our transformation. The partnership with Google Cloud will guide us in leveraging their experience and capabilities, ensuring a seamless and transparent integration of their services into our operations. Google Cloud offers a broad array of cloud services, including infrastructure, data analytics, predictive and generative AI and machine learning. These technologies will enhance our efficiency, productivity and competitiveness. Notably, migrating our data centers to their more efficient cloud infrastructure will reduce our carbon footprints. Google data centers are twice as energy-efficient as typical ones. Simultaneously, SAP, a global leader in enterprise software, will aid in optimizing our processes, improving decision-making and elevating customer service. Their tools, such as RISE with SAP, are instrumental in the digitalization and optimization of our processes as both Google Cloud and SAP will be integrated, thereby enhancing data analysis. Specifically, the Rotoplas and Google Cloud collaboration is built on 6 pillars: accelerating our digital transformation, digitalizing the customer journey and optimizing the operations and product development, logistics, sustainability and intelligence. It focuses on streamlining processes through digitalization. This includes the migration of the ERP system to minimize our environmental impact; leveraging artificial intelligence to enhance the customer experience and create greater value for our stakeholders; empowering our workforce with technology through continuous training and educational programs; advancing our climate strategy, achieving through more effective data management the use of advanced technology -- technological platforms. Digitalization of IoT are creating new opportunities to improve water management and customer experience. In our water treatment and recycling plants, we have started the project to install a real-time noninvasive water consumption and wastewater discharge and recycling, monitoring system across different plants, providing crucial data for technical report generation, license renewal and regulatory compliance. Additionally, it seeks to establish a comprehensive database for sustainable water management, enabling the company to strategize on water footprint, optimize consumption and generate cost saving initiatives based on analyzed data. Our reading modules are installed in the flow meter to have real-time information. With this, our clients have access to the monitoring platform, as well as visits for preventive maintenance and error correction. Additionally, from the platform, reports and alerts can be directly -- can be sent directly to the customer. In plants where the readers have been installed, the consumption of fresh water has been reduced by up to 17% below the average, representing significant savings. Finally, our fourth priority is a commitment to all our stakeholders. We will continue to be driven by company's ultimate purpose: providing the best solutions and services to our customers and communities. We will apply the best ESG practices, always keeping our stakeholders' best interest in mind. Our sustainable and agile growth strategy will continue to create value for our shareholders, promoting the well-being of our societies and safeguarding the planet we all share. As we close this AGUA Day, I am deeply inspired by the path we have traveled together and excited about the future that awaits us. At Rotoplas, we're not only responding to global challenges, but we are really finding what it means to be a leading company in water management. With every innovation, each advance in our traditional and new businesses and every step we take in the digitalization of the water ecosystem, we are contributing to a more sustainable and resilient world. We're transforming the way water is viewed, used and valued, not just for our cost current generations, but also for those to come. Our vision, passion and commitment to all our stakeholders are clear. Together, we're building a lasting legacy, a world where every drop of water counts. Thank you very much for being part of this extraordinary journey at Rotoplas, where every day is an opportunity to innovate, impact and inspire. Let's move forward with confidence and the determination, knowing that the best path is the one we built together towards the future, where we -- where all people have more and better water. Thank you very much. And now we can go to the Q&A session.

Thank you, Charlie. We now have 2 more polls that will come up on your screen with their respective questions. First off, which side of the Rotoplas story most resonates with you as an investor? A, its growth story; B, its sustainability story; C, its transformation story; D, the price/target upside; or E, all of the above. [Voting]

Thank you. We have concluded this poll, and the most popular answer was all of the above. Our next question is, what are you most optimistic about regarding Rotoplas' future? A, its evolution of the product portfolio; B, Water-as-a-Service platform; C, water digitalization and data-driven solutions; D, hitting ESG targets; or E, all of the above. [Voting]

Thank you. The poll is now closed. Once again, the most popular answer was all of the above. Thank you all for answering and sharing your thoughts with us. We will now conduct a Q&A session.

[Operator Instructions] Our first question comes from [ Andrea Barreto ] from Miranda Partners. Can you provide more detail on the programmatic M&A strategy and how it differs from the previous M&A strategy?

Sure. Do you want me to take this one, [ Charlie ], or do you want to...

Go ahead, Mario.

Well, thank you for your question, Andrea. And just happy to explain -- the first component to explain the difference is scale. The traditional approach we were using was more on large and infrequent deals. As compared when you refer to our new program, the programmatic approach, we're going to be doing a smaller and more frequent deals. These are -- this programmatic M&A is more part of the long-term strategy that we're looking to build capabilities or market presence incrementally. The second part is around risk, the traditional approach, which I was referring largely in frequent has a higher risk, also higher reward versus programmatic, which -- risk is spread over multiple deals. Spreading investment in smarter deals and mitigate risk. Failures or underperformance in one acquisition can be offset by success in others. So that's the second component around the difference between one and the other one. The third one is around integration. Traditional one is very extensive overhaul, while programmatic is less complex and more selective. And the third one will be a strategic focus. The other one was like major market impact. What the programmatic is more gradual, building up our capabilities and so forth. So it's like building a portfolio of complementary business or products. So those are like the key differences. The frequency and scale, the strategic part, the integration part and the risk part. I don't know, I hope this answers your question. I don't know, Charlie, if you want to add anything else around the differences?

No, no, no.

Thank you. Our second question comes from Miguel Medina. You have a $1.35 billion total addressable market in the U.S.A. for ACUANTIA. And is this for the whole U.S.A. or just for the states or countries that you are targeting specifically?

Thanks for your question, Miguel, and thanks for joining. Well, the $1.35 billion market is a refreshed and focused look at the -- our addressable market for advanced septic solutions and overall water storage solutions. The market that the U.S. offers is tremendously big compared to the rest of the markets we participate in. So we really want to focus, and this is the way we want to offer something that's differentiated. Now this is going to be a strategy that will allow us to focus how we deploy our commercial resources and how we allocate resources in developing our offer. So this is the look we will have going into 2024 to have higher focus in these very large markets. But we will continue to develop our offering and the markets we serve to grow the opportunity. Thank you.

Thank you, Charlie. Our third question comes from [ Matthias Pesqueda ] from Miranda Partners. Do you expect dividend payments to continue in coming years?

We don't -- maybe you want to answer in more details, Mario, but it is something that we have been doing for the last 8 years or so. It's something that I think we can continue to offer with the dynamics that we have currently in the company. It is a practice that at the moment, can continue to [indiscernible] considering the investments we're making and how we're allocating resources in Rotoplas. And so hopefully, we can expect this in the longer term. But for the foreseeable future, we do think that this can be expected. Mario?

Just -- just complement, as part of -- dividend payments is part of our long-term plan. As we mentioned earlier in the presentation, we paid in the last 8 years roughly around MXN 8 in cash and in kind. So it's about MXN 1 per year. Obviously, we have had years with MXN 0.50. And the reimbursement has been insured, it has been more. But at the end, it is part of our sustainable growth story to give back to our shareholders a part of our results as a form of dividend. So the short answer is yes.

Great. Thanks, guys. Our next question comes from [ Martin Lara ] from Miranda Global Research. Thank you for the presentation. I have 2 questions, actually. Could you please share with us your pricing strategy for 2024? And how do you see the raw material costs coming up in 2024 as well?

Well, thank you very much for your question, Martin, and for joining. We do not see raw materials prices come down next year, that I can tell you. It has been very difficult to be accurate in having foresight for what will happen in the future with tremendous work environment. So it's difficult to commit to a particular strategy. One of the things that we have developed at Rotoplas is agility to be able to adapt to events beyond our capability to predict. And so we do see prices being more stable in the coming year. But again, we have been surprised by different events impossible to predict, year after year for the last 4 years. So what I can tell you is that we will continue to have a very dynamic and agile approach to face any unforeseeable events. Mario, anything else you would like to add?

Well, probably yes. Right now, the curve for energy prices and oil prices seems pretty much the same for 2024 as in for 2023. So we expect -- sorry, bottlenecks on the supply chain around the globe as -- are not there anymore. So we expect a very similar year in terms of raw material costs going into 2024.

Great. Our next question is for Jose Luis from Carmen Barroso at Miranda Partners. With the significant reduction in CO2 emissions and efficient use of water in the new Tinaco Plus+, how are you assessing and communicating the positive environmental and social impact to customers?

So let me just comment real quickly. You'll be forecasting the -- there were 2 sort of risk. Like I mentioned, we are already 5 manufacturing plants with this process out of 8. The sixth is coming online in just a couple of weeks. And so since it has not been -- the transition has not been completed in all of our plants, we have been doing very local communication strategies. But we do expect to have a national, very strong communication strategy happening during next year. And that will be a great opportunity to communicate these ESG benefits from this new process. Jose Luis, would you care to comment -- as well as you, Mario -- on how we communicate this to other more specific groups of people that may be interested in this?

Sure, Charlie. This year, we first worked with manufacturing sites across Mexico to fully assess the positive impacts in terms of emissions and water consumption. Once we had segmenting in terms of the data, we started communicating it through workshops with key people in the sales team, where we provided information about the environmental benefits of the Tinaco Plus+ that can be used during client meetings. We plan to strengthen our communication efforts to our customers next year as we will undergo the environmental product declaration methodology. We will be able to fully disclose the environmental footprint of this product. And once it is approved, we plan to use that information extensively, both in terms of labeling and in communication materials. Mario, I don't know if you want to add -- like to add something else?

Well, to all you guys from our investor community, we are continuously sharing with you how we're performing on our ESG goals. So I would say it's a very holistic and comprehensive approach to communicate all the benefits of what we do to all of our stakeholders.

Great. Thank you. Our next question -- or actually questions, there's 3 of them, and we can take them in order, is from Felipe Barragan from BTG. The first question is, following the Argentine elections, what can we expect from Rotoplas' operations in Argentina? The second question is, what's the status of the programmatic M&A? Are you currently in negotiations to close the transaction? Or when can we expect to see some of those transactions close? And the third question is, can you share with us the IRR of the recent Hi-Tech acquisition, assuming it's above 18%? If you need any reminders on these, please do let me know.

Mario, do you want to go ahead and answer that?

Thank you very much, Felipe, and thanks for joining us this morning. If you don't mind, I would like to first go to the Argentinian question and tie up that 1 with Sofia Martin from GBM, that -- she's also joining us this morning -- that she has 3 questions around Argentina. And to be frank, with all you guys today while I was doing my early running, I was thinking about Argentina and yesterday's devaluation. So -- and here, it was coming this morning. So I hope you can understand our position regarding Argentina. Well, first, I think it's fair to say that Rotoplas, it will not be its first rodeo in Argentina, we've been there for more than 20 years. And as you all know, Argentina, it's a country that comes and goes and has this kind of volatility. So overall, through time, we have always aimed to position the company and to focus on its long-term perspectives. To focus on sustainability, to focus on operational efficiency and financial stability. Let me just give you some data points before jumping into the -- answering your questions. Today, Argentina represents 30% of the [ Grupo Rotoplas ], total company revenues, 28% of the EBITDA and 12% of total assets. And the reason I'm mentioning assets, that's because -- that is where -- it takes more time to offset the whole effect of the devaluation. And as you can see, revenues and EBITDA are way larger than assets. And that's the strategy behind -- we always tend to be a light asset company in Argentina because we know when these volatility presents is what it takes longer to come back to its real value. So in that, I will explain first. In terms of balance, it is going to be a neutral effect because we have as many assets and -- and liabilities that offset at the end. And we don't have any local debt. So with that in mind, on the balance sheet, we will be reflecting a onetime effect surely in December, and that will be offsetted pretty much quite fast. In terms of revenue and EBITDA, as always in Argentina, it will be a price adjustment. Today, this morning, we received a very comprehensive list from our team in Argentina, what were all the different decisions being taken to offset this devaluation of yesterday's -- of yesterday's decisions. So we anticipate that we will -- we're comfortable to navigate the situation in Argentina in the short term. And for the long term, we feel more constructive with this new government coming in. We feel confident with our long-term strategy. And as mentioned, we will be still be focusing on sustainability, operational efficiency and financial strength. So all in all, it's going to be a short-term effect, and we'll come out very well positioned. Obviously, some opportunities will be presented. I would say mainly -- probably competitors are not as well positioned as we are. So we'll be assessing those and taking advantage of probably gaining market share in a more efficient way. So that's about Argentina in the short term. And in the long term, to connect with Sofia's question, I don't -- we don't see that the 2025 guidance will be affected because of Argentina, given what we -- what I just explained about how fast revenues and EBITDA adjust through inflation. So that's pretty much the answer around Argentina. And then following back to Felipe's questions around programmatic M&A, we do have a very active pipeline currently of M&A opportunities. When do we expect to close these transactions, you're only hearing a lot around closing transactions because as explained to Andrea, 1 of the things around programmatic M&A is to be smaller and more frequent transactions. And finally, on your Hi-Tech question, We have an NDA and we cannot disclose the amount of the transaction. So that's very much it.

Mario, would you -- or can we go to Michael Birkel question? You got a comment on that?

If you want, I can read it off as well.

Yes.

From Michael Birkel from Zenon, there are quite a few best practice operators when it comes to a regular bolt-on acquisition strategy. Do you have company benchmarks that you have studied to design your programmatic M&A? And can you explain a bit more how your integration process looks like for the acquisition, assuming it too has some sort of common process for all?

Well, hi, Michael, and I guess good afternoon for you. Thanks for joining us today. Well, yes, when we put together this initiative, we get a very deep advisory from McKinsey. We run through different practices, and what it's like the -- the 7 things that we need as a company to put together to be successful in a program such like this. And that is what we've been building. It is not that we are starting program at M&A today, it is that we already started around 12 months ago, and we've been building internally all the processes and capabilities to be successful on the strategy. And as explained, when I was running through my intervention, we have focused in 3 tracks, which is 1 that best practices to observe -- not -- you don't want to chase everything. You have to be very specific on what the tracks you're going to be chasing. And that is why we were mentioning the Rieggo opportunity. We are active on that space in Mexico. Then the second one goes around water treatment and recycling. That track, now we're looking after assets in Mexico and Brazil. And the third one is water filtration and purification to enhance bebbia, and that we're looking into Mexico. So those are the 3 tracks that was one of the best practices to put in. And so that's where we are very active building the pipeline and assessing the assets and so on. And that's pretty much it. And in the sake of time, whenever you want, we can go online and I can explain to you in more detail all the different processes that we're putting together.

And maybe just briefly explain on the capability we developed along with the McKinsey consulting approach of identifying synergies, developing initiatives.

Yes, do you want to go and...

Yes. So as you know very well, we worked extensively with McKinsey on developing the deploy program. And it was about identifying opportunities and developing initiatives and executing on those initiatives. Originally, the methodology really came from acquisition strategies to identify synergies, putting those synergies -- translating them into initiatives, having a whole practice of executing those initiatives with initiative owners and complete methodology, which is a methodology that -- because of low -- we came very good on. And so that is also the methodology that we'll be using and integrating these companies.

Just to complement. And probably just in the sake of time, it's like -- we verified those strategic objectives that I just explained. Then we set the financial criteria, then we established operational criteria, and that is how we look at targets. We have these templates, and we filter through those criteria. And if it makes sense, then we can get into the next step on a lot of new diligence evaluation. In we didn't fit, we use this [indiscernible] very fast.

Great. I'm just going to add a question on there that sort of tags on to the same line of thought from Miguel Medina. Any metrics you can disclose in terms of the M&A budget to acquire that 4% to 5% revenue growth?

Yes. Well, this -- we have defined as part of the strategy, we have a full document that we deal when we decide to go after this approach. To achieve this, we think we will be investing around MXN 6 billion for the next 5 years. That should bring additional sales in the neighborhood of MXN 4 billion, which will represent an additional growth rate of 4% to 5% for the total company. So those -- that is what it is our higher-level numbers that goes after this programmatic M&A initiative.

Great. Thank you. Our next question comes from an anonymous attendee. And if you do want to share your name with us later on, we'd be happy to get that on our side. What are the various initiatives pursued to increase the percentage of women in the workforce at Rotoplas?

Jose Luis, did you want to...

Well, first, I'd like to comment that we have a dedicated diversity and inclusion committee where key members across all areas participate to discuss and review this matter. We are also working in line with the NMX 025, which is a Mexican standard of labor and equality and nondiscrimination. Through this process, we are reassessing our policies, benefits, packages and compensation, code of ethics, work-life balance, turnover rate, among others. Together with human capital and our human resources business partners, we are working on improving our manufacturing facilities and have set local achievable targets, what prioritizing the well-being of all -- of our [indiscernible] workers. Additionally, thanks to the implementation of blow-molding, we also expect to increase the percentage of women in the work -- in the workplace. I don't know if Charlie, Mario want to add something else?

No, no.

Okay. Thank you.

Mario, do you have a comment?

No, just also that we are adjusting some of our processes internally to promote and accelerate that KPI in the coming months and years.

And the other thing that I would add, which is not -- we are very focused on women employment, in total around diversity. So we are big believers of diversity. And so we really want to increase the population of women in Rotoplas, but diversity, including other segments, is of tremendous importance to improve the quality of our content. And in doing that, I can say that we also make big efforts and increasing the diversity at Rotoplas, which is, in my opinion, already very diverse community. And we already enjoy the benefits of having content in our process of evolving the company of very high quality. Thank you.

Thanks. Our next question comes from David Seaman from Alpha Cygni. As you roll out [ Tinaco Plus+ ], given the product enhancements, what is the comparable price versus the traditional product?

Thank you for your question, David. It is -- a very similar price of it. There's tremendous benefits. There's also improvements in -- in some of the costs. And with this, we can have a very high investment in evolving our very core legacy products. And we're having a very high investment, having a very healthy return on investment. So for this, we keep prices at the same level. Mario, anything else that you'd like to add?

Yes. And we are having a few cost savings, which is making our margins performance better. So in all, it's like we're going to have -- we're going to be -- we brought to the market a much better product in all senses, sustainability-wise, performance-wise and so on. Plus, at the same price. So that should give us some advantage on market share in the coming years. On the other hand, because of the technology we're using, it is offering some cost advantages as well. So margin expansion is happening. So it's a very interesting blend to bring this new product with better cost profile to enhance the long-term perspective of these business segments.

Just -- by the way, it's something that will be very difficult for competitors to replicate, not that they wouldn't have access to technology like that. But since these machines produce so much out, you really have to have high demand to have high utilization of these machines, which are much higher in terms of investment compared to the rotation modeling investments. So it's going to be a differentiator for Rotoplas. Just because of the output we have.

Our next questions, because there's 3 of them, come from Rodrigo Salazar at AM Investors -- sorry, AM Advisors. Congratulations on the exciting growth story. I have 3 questions. The first being, could you expand on the compound growth rate that you were expecting? So which ones can be achieved with current organic capabilities, and which will be driven more by the M&A mentioned? The second question...

We can do 1 at a time.

Right. Go for it.

Do you want to go ahead, Mario? The first one?

Yes. I think a good way to see if this is -- obviously, all of you have different our models. And when you see the growth to achieve our target for 2025, give or take, 3/4 -- 3 quarters or 75% of that growth will come around organic. And 1/4 will come from inorganic, mainly through this programmatic M&A, I think we've been discussing this morning very thoroughly. That programmatic approach is focused, as mentioned, in one -- Rieggo, which we -- this week, we released the market that we acquired the first company. And the second one will be water treatment and recycling mainly focused in Mexico and Brazil. And the third component will be bebbia, which is doing bolt-ons. So those 3 businesses are going to be benefiting from inorganic growth as well. And the reason is to accelerate growth and take advantage of the opportunities. Most of the organic growth will come from the Products division. So that -- those 2 things together, again, organic, 75%, inorganic, 25%, that will make it up to our 2025 revenue target.

Thank you. The second question is on services. What changed that you were expecting a much stronger growth than before? And what businesses would this growth be coming from? And in terms of profitability, he understands that this strong growth can come from investments, but what do you expect in terms of margins once that growth stabilizes?

Thanks for your question, Rodrigo. So 1 of the things that changed is really building the capabilities emanated from this business. This is a business that requires different processes, different digital technologies and different talent. And so it was fairly easy at the beginning to identify an opportunity that was very clear to us because of our experience in the space and the experience we have with our customers. But then to really be able to grow and take advantage of that opportunity, we have to develop the capabilities. So that's what has been changing very much in the past few years. And so once that is happening, growth can continue. Growth rate is going to continue to increase, or much larger basis, also in the future, they can continue to remain. So like we're saying, we don't expect growth to stabilize anytime soon. And so regarding margins, where will they be at, that's still going to be -- some years down the line. Mario, anything else that you'd like to comment?

I will say that also, as Lauren early on explained -- and for all of you guys, I really recommend the [indiscernible] paper. It's very, very interesting around water. But what I was trying to convey and to complement, Charlie, is that I think now the water, our test is starting to materialize. 80% of sewage water just being dumped without any treatment, no. It's like governments and companies are turning to become more aware of that. Agriculture, feeding, what, 10 million people, with all the different constraints that we have and on the water that is used in agriculture, that is also paying a lot of attention. The infrastructure is getting really old. So water scarcity is playing a big role in the Products division. So -- and what is becoming more evident is around climate change. Here in Mexico City, we're getting like 3 days of rain in December. After a big drought -- and it's really changing a lot. So that is really affecting water supply, while water demand is increasing. So one of the reasons we see behind water services having a stronger growth is that we really anticipate that all these macro trends will start to show up as revenue into our business. Thank you.

Great. And then our last question is, could you expand on the EBITDA margin expectation or EBITDA margin reduction expectation in the U.S.? Is it driven by the septic business investments? And also going forward, what do you expect in that region in terms of profitability?

So the septic business investment. Yes. Thank you for your question, Rodrigo. So part of it, part of the margin reduction was a higher investment in developing septic business in the U.S.. And then another part of it had to do with a market that in the core products that we were commercializing contracted in 2023 as a consequence of very high growth in the previous years because of drought and because of different dynamics that happened from the pandemic. And in the last season, having had one of the wettest seasons in a very long time. And so that affected the market size in a very temporary term. And so both of those effects sets, and the precipitation of the losses really affected the margins on this business.

Great. Our next question comes from Alejandro Lavin from Santander Asset Management, and it is regarding M&A. What is your firepower in U.S. dollars? It seems that you could be a bit more constrained in terms of size and accretive acquisition valuation, given that your leverage targets and thus leverage capacity and the valuation gap could [indiscernible] yourselves and peers. Any thoughts on this?

Well, thank you, Alejandro, for joining us. In AGUA Day. Yes. As I explained before, we have in our long-term financial model the firepower of deploying MXN 6 billion in the next 5 years. And that is without incurring in new additional debt or crossing the 2x net debt-to-EBITDA selling that the company has. So we feel, on 1 hand, we are just coming out from a couple of years of investing heavily in the Products division with all this Tinaco Plus+. Going forward, the Products division will be more of a cash flow play. And the second 1 is services that we've been investing for the last 5 years very aggressively, as pointed out, we expect the whole division to break even by 2025. So those 2 things really creates a lot of cash flow momentum. And obviously, enables Rotoplas to go after this programmatic M&A approach with this MXN 6 billion and being still very conservative in terms of balance sheet management and debt leverage.

Mario, you care to comment on valuation. I think, considering the size of the targets and the markets, we're pursuing that.

Yes, that's a good point, Charlie. The assets we're pursuing is -- they also are suffering of all these valuation gap. It is not a particular thing about Rotoplas. Its own Mexico to say so and that are affected by these valuation metrics. So obviously, we'll be -- we will be very, very thoughtful about not about making an acquisition not accretive to our shareholders. But as what we have seen so far, the ones that we have in the pipeline that the ones that are close to -- to close and the ones that are already closed, all of them are accretive at this point.

Great. Thank you. Our next question comes from David Seaman. It's a follow-up question. He's from Alpha Cygni. You mentioned that bebbia is 1 of the key focal points of the M&A strategy. He's curious as to what types of assets there are to buy in this segment, given that it is a new service in the market.

Thanks, David, for your question. And that's 1 of the things -- as you know, we've been a few years with bebbia, some small players are coming into place. Some of them in the B2C, some of them in the B2B. So what we are looking at is just accelerating the speed of our users. As Charlie mentioned, we are hitting the 100,000 mark this year. And by screening these, some of them, they have 5,000, some of them have 2,000. So we believe that like creating this momentum and putting into bebbia's platform and accelerate our long-term goal of 1 million users. So that's -- there are a few businesses that small, all of them, but can be interesting as bolt-on our -- bebbia's platform.

Thank you. Our next question comes from Carlos Alcaraz from Apalache Research. In your M&A plan from the Service segment, will you prioritize the development of any of the brands such as Rieggo, for example, during 2024? Or which 1 do you consider could have the highest growth?

Go ahead, Mario.

Yes. Thanks, Carlos, for your question and for joining us in today's conference. Well, actually, we will be done in January with the Rieggo track because we have already explored all the different alternatives, and we will be concluding that track in terms of programmatic M&A. And we are considering, going into 2024, that water treatment and recycling will be the highest growth opportunity to come from programmatic M&A.

Thank you. We have 1 last question. It is a follow-up question from Carmen Barroso at Miranda Partners. Regarding collaboration with Google Cloud and SAP, or S-A-P, how are you handling potential integration and training challenges for employees as they adapt to these new technologies? What benefits do you expect once this integration is completed?

Thank you, Carmen, for your question. So that -- 1 of the main reasons of -- on doing this partnership with both Google Cloud and SAP is because we can increase the rate at which we are developing and training our talent, then cutting such large capabilities around the topic. Rotoplas naturally is not a subject matter expert in a lot of the topics that would the lines will cover. And so the biggest thing in this line is that we'll be able to have access to both talent in these components and talent in their ecosystems. And their ecosystems are very large. And so it is very clear for us that as we believe that the centralized water solutions is the way as a complement to centralized infrastructure is a win sustainability in terms of water in solving the water issues. We're very clear that this will only happen at scale with leveraging digital technologies. And so we have been very focused on identifying what is the best way to develop a subject matter expertise within Rotoplas, as it's going to be so core in the centralized water solutions. Mario?

Yes. And then just to complement you, Charlie, I think the SAP and Google Cloud as a combo, I think it's a very good combination for any company. And not only for us. I don't know if you are aware, but back in -- I think it was June, July. Actually, Google Cloud and SAP make a global partnership that can -- that makes it easier to work with both of them together. And while we believe that -- it really reduces the friction about employee training. Because before, you have to do a lot of interfaces between the different solutions. Today, you will have everything running smoothly. Second, Google Cloud and SAP, they both have -- they -- what they call their sources, where there are multiple digital solutions to sell any type of business or functioning situations that seem very easily within their platform. So instead of probably a project that will normally take you 4, 5 months, then you can accelerate and do it in 2 months. We believe that by having these 2 partnerships and as part of our technological and digital pillars will accelerate Rotoplas' digital initiatives and help our employees to try better on releasing our full potential on the digital space.

Thank you, Mario. That concludes our question-and-answer session. If we were unable to answer any of your questions today, please do reach out to our Investor Relations team, and they will be happy to help you. We would like to take this opportunity to thank all our speakers again for their contributions and to thank you all for joining us virtually today. As I thank you for your time and interest, we would like to offer everyone on the call today 12 months with 20% off discount when you subscribe to bebbia, with the code [ AGUADAY23 ]. Please visit bebbia.com for more information. Please don't hesitate to reach out. If you have any further questions, we appreciate your interest in Rotoplas and look forward to speaking with you again soon. That concludes today's event. You may now disconnect.

Thank you very much.

Thank you very much. Have a great weekend. Bye-bye.

Thank you. Goodbye.