Release Date: April 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arca Continental SAB de CV (EMBVF, Financial) reported a 12.4% increase in total consolidated revenue year over year, reaching 57 billion pesos.
- The company achieved a 10.2% rise in consolidated EBITDA to 10.6 billion pesos, with a margin of 18.7%, driven by strong contributions from US operations and a robust recovery in Argentina.
- Coca-Cola no sugar delivered robust growth of 17.8% in Mexico, supported by its expansion and innovation under the Coca-Cola Creations platform.
- The company's B2B digital platform, TAli, accounted for over 68% of total orders from traditional channels in Mexico, contributing to a 1.6% increase in overall sales volume.
- Arca Continental SAB de CV (EMBVF) continues to strengthen its sustainability agenda, with renewable energy sources now accounting for 43.3% of total energy consumption and a 32.6% reduction in emissions compared to the 2019 baseline.
Negative Points
- Total consolidated volume decreased by 3.1% to 548 million unit cases, impacted by geopolitical tensions, tariffs, and inflationary pressures.
- Volume in Mexico declined by 3.6% due to a high comparison base and a temporary production pause at the Topochico plant.
- The company's operations in Peru and Ecuador faced challenges, with volume declines of 4.6% and 7.4% respectively, due to economic slowdown and political uncertainty.
- In the US, volume declined by 5.6%, attributed to economic challenges, consumer caution, and the impact of tariffs.
- The EBITDA margin experienced a dilution of 30 basis points compared to the same period in 2024, mainly driven by lower volumes.
Q & A Highlights
Q: Can you help reconcile the slowdown in retail sales in the US with the volume decline reported, and discuss the impact of pricing on elasticity? Also, could you provide guidance on EBITDA margin trends in Argentina given the recent volume growth?
A: The US market faced unexpected challenges, including consumer caution due to inflation and potential tariffs, contributing to volume contraction. The transition of the Sani Caack and calendar effects also played a role. Despite this, pricing was effective, with a 6.4% increase and a positive mix shift. In Argentina, favorable economic changes and volume expansion are expected to improve margins, with a current margin of 15.4% and potential for further improvement throughout the year. – CEO Arturo Gutierrez and CFO Emilio Marcos.
Q: Can you provide insights into consumer behavior in Mexico and the potential for pricing adjustments to drive top-line growth?
A: Mexico experienced a challenging first quarter due to high growth comparisons from previous years and pre-election consumption patterns. Despite a decrease in consumption, the NARTD category showed resilience. The traditional channel was more resilient, and we expect improvement in the coming quarters. Pricing increased by 4.9% in Q1, with further increases planned for Q2. – CEO Arturo Gutierrez.
Q: How is the US system approaching pricing with big box retailers, and what are the key bottlenecks in increasing Tuwali's order share in Mexico?
A: In the US, pricing strategy includes a focus on high-profit SKUs and effective promotional tools. Collaboration with retail partners is crucial for improving mix and managing promotions. In Mexico, Tuwali has seen significant adoption, with 65% of traditional trade volume transacted digitally. The strategy involves an omnichannel approach, combining digital tools with traditional sales methods to enhance customer intimacy and drive growth. – CEO Arturo Gutierrez.
Q: How does the current momentum align with your guidance for high single-digit top-line growth, given the 12% growth in Q1?
A: Despite Q1 challenges, we are confident in future growth and profitability due to our effective playbook and focus on controllable factors. Initiatives like cooler placement, returnable packaging, and digital tools are expected to drive sequential improvement and position us for stronger leadership as conditions improve. – CEO Arturo Gutierrez.
Q: What is the potential impact of tariffs on your business, and how are you mitigating these risks?
A: Our business has limited direct exposure to international trade, with most operations being local. The main exposure is in aluminum for US packaging, but hedges mitigate this impact. Products exported to the US are excluded from tariffs under the USMCA agreement. – CEO Arturo Gutierrez and CFO Emilio Marcos.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
