Alfa SAB de CV Class A ((MX:ALFAA)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Alfa SAB de CV Class A painted a picture of resilience and optimism amidst a challenging economic landscape. The company reported record revenues and a robust performance in Mexico, despite facing headwinds such as rising raw material costs and declining EBITDA in the U.S. and Latin America. The management expressed confidence in future growth and innovation initiatives, underscoring their commitment to overcoming current challenges.
Record Third Quarter Revenues
Sigma achieved record third-quarter revenues of $2.4 billion, marking an impressive 8% increase year-on-year and a 5% rise sequentially. This achievement underscores the company’s ability to drive growth even in a challenging market environment.
Mexico’s Strong Performance
In Mexico, Sigma’s revenues in local currency saw a significant increase both year-over-year and sequentially. This growth was primarily driven by the expansion of the retail channel and a 1% increase in volume quarter-on-quarter, highlighting the region’s strong market dynamics.
Positive Sequential Improvement in EBITDA
Despite a year-on-year decrease, Sigma’s comparable EBITDA increased by 3% sequentially. This marks the third consecutive quarter of improvement, showcasing the company’s operational resilience and strategic focus on enhancing profitability.
Strong Financial Position
Sigma maintained a strong financial position with a net debt-to-EBITDA ratio of 2.7x at the close of the third quarter. This solid financial footing provides the company with the flexibility to pursue growth opportunities and navigate economic uncertainties.
Growth and Innovation Initiatives
Sigma is making significant strides in innovation, with 46 prototypes developed and 11 innovation commitments in progress. The expansion of Grill House into the U.S. is a testament to the company’s commitment to growth and market diversification.
Rising Raw Material Costs
The company is facing significant challenges due to rising raw material costs, particularly turkey, with prices increasing by 244% year-on-year. This has impacted the overall cost structure and profitability, necessitating strategic adjustments.
Decline in U.S. EBITDA
In the United States, Sigma experienced a 17% quarter-on-quarter decrease in EBITDA. This decline was driven by lower volume in national brands and changes in the product mix, highlighting the competitive pressures in the U.S. market.
Challenges in Europe
In Europe, Sigma’s operations are on an upward trajectory but remain in recovery mode due to previous disruptions. Full capacity restoration is expected by 2027, indicating a long-term commitment to stabilizing and growing the European market.
Decreased EBITDA in Latin America
Latin America’s EBITDA decreased by 11% compared to the third quarter of 2024, primarily due to higher protein costs and mix effects. However, there was a 10% quarter-on-quarter increase, suggesting potential for recovery and growth in the region.
Forward-Looking Guidance
During the earnings call, management provided forward-looking guidance, highlighting a $35 million cash dividend approval, bringing the total for the year to $119 million. This reflects Sigma’s robust cash flow and financial health. The company aims to maintain its net debt-to-EBITDA ratio and focus on capacity and distribution expansions, particularly in Mexico, the U.S., and Spain. Despite challenges, Sigma’s EBITDA for the first nine months aligns with full-year guidance expectations, indicating confidence in meeting financial targets.
In conclusion, Alfa SAB de CV Class A’s earnings call reflected a balanced mix of achievements and challenges. The company’s record revenues and strong performance in Mexico were offset by rising costs and declining EBITDA in some regions. However, the management’s optimistic outlook and strategic initiatives in growth and innovation suggest a promising path forward. Investors and market watchers will be keen to see how Sigma navigates these dynamics in the coming quarters.