• Net Sales (Q4 2024): MXN9.9 billion, up 0.9%.
• Net Sales (Full Year 2024): MXN37.4 billion, up 3.3%.
• Gross Margin: 40%, up 1.1 percentage points.
• Operating Income: MXN5.3 billion, up 5.1%.
• Operating Margin: 14.1%.
• Net Income: MXN3.3 billion, in line with the previous year.
• Cash on Hand (Year-End): MXN3.3 billion, up MXN1.3 billion.
• Interest-Bearing Liabilities: MXN9.5 billion.
• Dividends: MXN487 million.
• Share Buybacks: Almost MXN400 million.
• Water Consumption Reduction: 2.06 per ton, 1.9% below target.
• Impulse Segment Growth (2025 Estimate): Over 20%.
• CapEx (2025 Estimate): MXN1.5 billion to MXN1.8 billion.

• Warning! GuruFocus has detected 5 Warning Signs with NMAKF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Grupo Herdez SAB de CV (GUZOF) achieved a record net sales of MXN37.4 billion for the full year, marking a 3.3% increase compared to the previous year.
• The Exports segment showed strong performance with a 19.8% growth in the fourth quarter.
• The company reported a gross margin increase to 40%, up by 1.1 percentage points, attributed to higher volumes and lower soybean oil costs.
• Grupo Herdez SAB de CV (GUZOF) demonstrated resilience through tactical initiatives, cost management, and efficient working capital, resulting in unprecedented free cash flow.
• The Impulse segment is expected to grow over 20% in 2025, driven by product innovation and expansion in Nutrisa's commercial category.

Negative Points

• The fourth quarter faced challenges due to high comparison bases, economic uncertainties, and a soft consumption environment.
• Preserves segment was impacted by avian flu, leading to salted egg yolk shortages and limited orders in December.
• Potential tariffs on Mexican imports could materially impact the US business, affecting pricing and demand for products like avocados and guacamole.
• Operating margins are expected to experience slight pressures due to input costs, depreciation of the Mexican peso, and expenses related to ERP implementation.
• The consumer landscape in Mexico remains soft, with high personal debt and reduced disposable income affecting market conditions.

Q & A Highlights

Q: Can you provide an update on MegaMex, specifically regarding Wholly and Don Miguel, and their long-term outlook? A: Gerardo Canavati Miguel, Chief Financial and Technology Officer, explained that MegaMex is showing positive trends with stabilized market dynamics and increased marketing investments. Wholly is dealing with volatile avocado prices, but efforts are underway to mitigate costs by increasing production in Colombia and optimizing supply chains. Don Miguel has turned around with strong demand and improved plant efficiency, offsetting avocado cost pressures.

Q: What are the expectations for the Impulse segment's profitability as it continues to recover? A: Gerardo Canavati Miguel stated that while mid-teens margins are not expected, low double-digit margins are achievable. The segment is gaining traction, and future investments in CapEx will focus on increasing distribution and sales points. Retail strategies include transferring branded products to other channels, which is expected to enhance brand awareness and customer experience.

Q: Can you elaborate on the current consumer environment and its impact on Grupo Herdez's categories and channels? A: Gerardo Canavati Miguel noted that the consumer environment is currently soft, with flattish performance in key categories. Despite this, the company aims to increase market share. The mayo category faced challenges due to egg yolk shortages, but supply has stabilized. Overall, the company expects to gain market share in a flat environment.

Q: What are the short-term and long-term expectations for mayo exports, considering the avian flu impact? A: Gerardo Canavati Miguel highlighted that mayo exports have shown strong growth, with distribution expanding in clubs and supermarkets. The company anticipates mid-single-digit growth, with investments in point-of-sale allowances to maintain traction. The avian flu has caused supply constraints, but the situation is expected to improve in two to three months.

Q: How is Grupo Herdez addressing potential tariffs on Mexican imports, and what impact could this have on the US business? A: Gerardo Canavati Miguel acknowledged the potential impact of tariffs on pricing and demand, particularly for avocados and guacamole. The company plans to mitigate this through currency adjustments, price increases, and cost absorption. Despite potential tariffs, Mexico remains a profitable manufacturing location for salsa products, and the company has secured inventory to allow time for trade resolution.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.