Arca Continental SAB de CV
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Arca Continental SAB de CV
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Good day, everyone, and welcome to the Arca Continental Conference Call. [Operator Instructions] Please note that this call is being recorded. [Operator Instructions]
For opening remarks and introductions, I would now like to turn the conference over to Melanie Carpenter of i-advize Corporate Communications. Ma'am, Please go ahead.
Thanks, Katie. Good morning, everyone, and thanks for joining the senior management team of Arca Continental to review the results for the first quarter of 2019. The earnings release went out this morning and it's available on the website at arcacontal.com in the Investor Relations section. There is also a webcast of this event for you to listen live and via replay.
It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutiérrez; the Chief Financial Officer, Mr. Emilio Marcos; and Mr. Jose Borda, the Chief Commercial and Digital Officer; as well as the Investor Relations team.
There are going to be some forward-looking statements today, so we ask that you please refer to the disclaimer and the conditions surrounding these statements in the earnings release.
And with that, I'm going to turn the call over to the CEO, Mr. Arturo Gutiérrez, to begin the presentation. So please go ahead, Arturo.
Thank you, Melanie, and good morning, everyone. We appreciate you joining us for an update on our first quarter performance. Let me begin by saying that I'm pleased to report positive momentum for the start of 2019. Our strategies and solid execution enabled us to once again capture value share and deliver solid financial performance despite weaker consumer sentiment facing certain of our operations.
Total consolidated volume declined 1.9% in the quarter, reaching 511 million unit cases, while total consolidated sales rose 2.2% to MXN 36.9 billion. Regarding profitability, our results were rewarding. Consolidated EBITDA in the quarter rose 6.1%, reaching MXN 6.3 billion, expanding EBITDA margin to 17%. Our commercial capabilities fueled by modern, digital platforms; our operating discipline combined with our tight control of expenses allowed us to expand EBITDA margin. We are on track to deliver more than $45 million in productivity savings this year, enabling us to fund our growth investments while covering cost inflation and driving margin expansion. Once again, our balanced geographic footprint, our strong company culture based on common principles across businesses, our high-performing team contributed to the positive results.
Now let's review the performance and highlights across our operations, starting with Mexico. Our beverage business in Mexico faced a challenging start of the year. Total volume declined slightly in the first quarter, down 0.7%, due to unseasonably adverse weather conditions and heavy rains across most of our territories and due to a calendar effect, a holy week shifted from March to April.
There was also an impact resulting from the 50-day work stoppage at our Matamoros plant as well as other labor disputes across the maquiladora industry in that city, which negatively affected the local economy. Among the highlights of the quarter, jug water volume grew 5.5%, driven by the modern trade. Topo Chico mineral water delivered a solid 7.8% volume growth, consolidating its leadership position in the northern and western territories.
Our business in Mexico delivered its 15th consecutive quarter of net revenue growth, up 6.8% to reach MXN 14.3 billion. Average price per case in Mexico, not including jug quarter, rose 8.8% reaching MXN 61.02. At the profit level, EBITDA increased 6.5% to MXN 2.8 billion, representing a margin of 20% flat compared to last year.
We recognize digitization as a key element of our growth strategy and we're defining data-driven business models with a clear road map to develop new capabilities in analytics. We kicked off collaboration projects with the data science department at the Tecnológico de Monterrey and the Capstone Project at MIT.
Despite the headwinds in the first quarter, we remain confident of the resilience of our flagship market in Mexico. We're optimistic that volume in Mexico will gradually improve in the following months as we head into our high season.
In South America, our total volume was down 2.4% in the quarter as a result of declining volume in Argentina and Ecuador, which was partially offset by growth in Peru. Total revenues were down 6.4% in the quarter, reaching MXN 9.5 billion as we double down on execution and a disciplined implementation of our price back-channel strategy, while driving affordability by expanding the mix of returnable presentations.
EBITDA declined 0.7% to MXN 2.1 billion for the quarter, representing a margin of 22% for an expansion of 130 basis points. We're confident that our revenue initiatives, the expansion of our portfolio as well as product innovation and reformulation will enable us to sustain value share growth, while expanding profitability.
In Ecuador, volume was down 4.4% in the first quarter, cycling solid double-digit growth from last year. Despite the macroeconomic uncertainty, we continued gaining value share due to pricing and package initiatives to optimize revenue. We're also driving innovation by offering more low and no calorie options. We're capitalizing on the success of the new Fanta formula and of Dasani Sensations, a new flavored water that was launched to expand our sparkling beverage portfolio.
Tonicorp, our value-added dairy business in Ecuador, jointly owned with The Coca-Cola Company, posted a low single-digit sales decline in the first quarter. We have been able to sustain market leadership and capture additional value share across Tonicorp's 4 categories. This quarter, we launched new products in the yogurt, oatmeal and ice cream categories with great results.
Shifting gears to our business in Argentina. Volume in the quarter declined 17.8%, cycling a strong 5.2% growth from the same quarter in 2018. Currency devaluation, runaway inflation and high interest rates negatively affected consumer spending. Despite the sharp slowdown in the economy, we gained value share. Our sparkling categories grew 0.1%, Powerade 2.8% and personal water increased 3.2%.
We continue refining our Price Pack Architecture to hit key price points as consumers purchasing power decreased during the economic contraction. At the same time, we placed a strong focus on cost optimization. This quarter, we started distributing our new 2-liter returnable standard format, which allows affordability while reducing our overall production cost.
Moving over to Peru, the economy in this core market started 2019 on a positive notes. Total volume in the quarter grew 5.4%, confirming the solid momentum. Growth was driven by colas and personal water, up 14.8% and 7.9%, respectively, and by the launch of our new low-sodium water brand, Benedictino.
Total revenues increased 9% in the quarter as we continued gaining value share, driven by growth in sports drinks, juices and nectars.
We have kept investing in market-focused initiatives, bolstering our returnable base. This quarter, we expanded the introduction of returnable packaging and increased cooler coverage by installing 3,000 cold drink units. Most importantly, EBITDA grew 20%, reaching a margin of 26 -- 25.6%, an expansion of 240 basis points.
Our Peruvian beverage operation delivered this solid top and bottom line results in the quarter, driven by execution and revenue management while capturing additional efficiencies across the supply chain.
Moving over to our beverage operation in the United States. Volume in the quarter declined 4.3% due to several factors, particularly unseasonable weather in February across our territories, one less delivery day and the shift of the Easter holiday from March to April. Despite these challenges, Coca-Cola Southwest delivered its eighth consecutive quarter of net revenue growth, up 1.4%.
Once again, we captured value share gains in sparkling beverages and solidified our market leadership. We grew share in teas, sparkling water and sports drinks where BodyArmor has played a strategic role. Pricing continues to be one of the main drivers for revenue growth in line with our full year organic revenue guidance to be at or above consumer inflation.
Price mix grew 6% in the first quarter, delivered mainly by true rate of 4.6% that was achieved by the carryover of last year's increase and from price adjustments in our local markets made at the beginning of 2019. The remaining 1.4% gain from growth and transaction packages and BodyArmor.
EBITDA increased 11% to $68 million, representing a margin of 10.8% with an expansion of 93 basis points. We also continued to accelerate deployment of our ACT commercial model to achieve best-in-class execution.
During the quarter, we rolled out the new picture of success tool and assigned over 480,000 action items targeted to better execute in key service metrics, such as visit completion, strike rate and coolers in the strike zone. Notably, we accelerated the introduction of cold drink equipment before the peak season. In the first 3 months of this year, we placed over 10,000 new coolers. The beginning of 2019 was very intense in terms of marketing activities and new product launches. We maintained momentum for Diet Coke following last year's recast by introducing 2 new flavors. Also in the quarter, we introduced Coca-Cola Orange Vanilla. This is the first new Coca-Cola flavor launched in 10 years. Furthermore, we continued enhancing our hydration platform through the launch of 2 new versions of our premium Smartwater brand.
To close our beverage operations in the U.S., I'm pleased to report that we are on track to achieve $90 million in synergies. Our 2019 target incorporates a number of initiatives for additional $20 million as our centralized procurement efforts, plastic pallets, sleek can and vending projects have outperformed our original expectations.
More importantly, we are laying a foundation to ensure savings and efficiencies from our upcoming new manufacturing and distribution facility in Houston, Texas, where we continue to make significant progress on construction. We are on track to open the facility in the first quarter of 2020.
To wrap up our operations review, let's move now to our Food and Snacks business. Wise snacks in the U.S. delivered mid-single-digit revenue growth in the quarter, while expanding value share, confirming a sequential recovery. Growth was driven by the potato chip category as Deep River continued expanding product coverage, thanks to improved distribution in New York City and Western Massachusetts. Additionally, Deep River renewed a key distribution agreement to service over 200 restaurants and retail boutiques in airports across North America. Furthermore, Carolina Country Snacks continued its strong pace by expanding coverage in over 1,200 new stores in the value [ channel ].
Turning now to Bokados in Mexico. We delivered solid high-single-digit sales growth in the first quarter, driven by growth in Prispas, which is a highly successful extruded chips brand.
Lastly, Inalecsa in Ecuador posted a low-single-digit sales decline in the first quarter. We continued solidifying the leadership in the plantain chips category while capturing new international markets.
And with that, I will now turn the call over to Emilio to give you further details on our financial performance. Please go ahead, Emilio.
Thank you, Arturo, and thanks everyone for being on the call. We appreciate your taking the time today to review our financial performance for the first 3 months of the year. The first quarter was characterized by positive revenue growth due to an effective price mix strategy, partially offset by a weak performance in volume. Despite some raw material increases such as PET, our disciplined operating expense controls resulted in improved profitability to our business.
Before going into numbers, to better reflect the results of our U.S. operation, after this quarter, we are reverting to the methodology previously used with recorded sales outside of our territory net to their cost under the other income and expenses line. This decision is driven by 2 factors: the first is that the results of these sales highly material to our EBITDA and the second is that their dependency on the needs of other U.S. bottlers.
In addition to this change, we have been reviewing some of the best practices of earnings releases. And from this quarter onward, we're including additional information, such as the segment notes also filed in our Mexican Stock Exchange filing. We're also including an Excel file on our website to facilitate access to Arca Continental's financial information.
Moving on to the quarterly figures. The growth in consolidated revenue of 2.2% was mainly due to a favorable price mix of 8.8% in Mexico and 6% in the U.S. However, as Arturo previously mentioned, our revenue performance was partially offset by our volume results.
Cost of sales reached MXN 21.2 billion for an increase of 1.4%, primarily driven by the MXN 203 million PET price increase, and to a lesser extent, by the MXN 13.5 million aluminum price impact in the United States. This effect contributed to the dilution in contribution margin of 80 basis points. EBITDA growth for the quarter was 6.1%, reaching MXN 6.3 billion. This represent an EBITDA margin increase of 60 basis points at a consolidated level. Excluding the benefit from the adoption of IFRS 16 accounting standards, EBITDA grew 4% and had a margin improvement of 30 basis points.
Our net income increased to MXN 1.7 billion from MXN 1.3 billion in 2018, representing a 28.2% growth year-over-year at a 4.5% margin. This was driven by an improvement in a comprehensive cost of financing, which is due to last year's monetary position loss.
On April 4, we announced an estimated CapEx investment of MXN 13 billion throughout 2019, mainly allocated to capture synergies in our U.S. operation and to enhance innovation in our production, distribution and execution capabilities in the countries we serve. This investment represent around 7.5% of our full year estimated revenue, which is above Arca Continental historic average. This is attributed to the capital required for the new Houston facility. On the same day, a dividend of MXN 2.30 per share totaling MXN 4.1 billion was approved at our Annual Shareholders' Meeting with a payout ratio of 47%, above our historical average. The dividend was paid out on April 16.
We ended the first quarter of 2019 with a cash position of MXN 17 billion and a debt of MXN 55.4 billion, resulting in a 1.39 net debt-to-EBITDA ratio without IFRS 16 effect.
Our revenue growth initiative, strategies and operations saving plan led to our 2019 first quarter positive results.
With this, we have set the foundation to protect our profitability as we [ standardize ] volume in all the countries where we operate.
And with that, I'll turn it back to Arturo.
Thank you, Emilio. Before concluding my prepared remarks, I would like to highlight some of the important progress we're making in the area of sustainable packaging. For many decades, the Coca-Cola system has done a lot of work in recycling. We have made most of our packaging fully recyclable and invested in R&D around reusing plastic. At Arca Continental, we are fully committed to supporting Coca-Cola's World Without Waste global initiative. Our PetStar plant in Mexico is a testament to this commitment.
In 2018, PetStar recycled over 3.1 billion bottles and produced more than 51,000 tons of food-grade recycled PET resin.
To close, I would like to add that we are keenly aware that today's turbulent economic landscape is likely to extend through this year. As such, our 2019 strategic priorities are clear. We will remain focused on driving shareholder value through long-term profitable growth while maintaining a rigorous discipline in costs and expenses.
I would like to reiterate that we have a solid institutional foundation, a world-class management team focused on value creation, a long-lasting relationship of mutual trust with our customers and an integrated corporate culture across our operations. These are the core pillars that will enable profitable growth in 2019 and in the years to come. Thank you for your continued support.
I would like to open the call for questions. Operator, we're ready for questions, please.
[Operator Instructions] Our first question will come from Alan Alanis with UBS.
My question has to do with pricing and both in Mexico and in the United States. I understand the Easter calendar effect, the comments that you did in weather and the one less day. But even taking into account those elements, if my calculations are right, you increased prices in the United States in U.S. dollars by almost 5.5% and in Mexico in pesos by high single digits, around 8%. Could you speak a bit about what's the pricing strategy in these 2 territories? It seems that it's a bit aggressive relative to the local inflation of each of these 2 countries. That will be the question.
Yes. Thank you, Alan. Good to talk to you. And well yes, the prices that you have for the first quarter are right. Actually, they're maybe even a little higher in the case of Mexico. Our price, average price, increased 9.3% in the first quarter. In the U.S., our price increase is about 6%. It's a combination of the rate, which is, let's say, the nominal price increase, which was 4.6%, and then a positive change in mix that -- in the case of Latin America usually mix works the other way. In the U.S., with the growth of categories like BodyArmor and Monster, mix helps you to increase average price. So in both cases, certainly that price is above projected inflation for the year, which in the U.S. would be maybe slightly over 2%. In Mexico, we're estimating inflation to be below 5%.
For the -- if you talk about the strategy for the year, it remains the same. Our strategy is to be above inflation, at or above inflation, and that works for every market where we operate. The way the -- if you look at the price curves in 2018 and how the timing of the prices were implemented in the second half of last year, that gives you a, let's say, a bigger area between the 2 curves in the first part of 2019. So it tends to even out a little bit so that at the end of the year we'll get at least to our target for the year.
So certainly, the first half of the year looks better in terms of the price comparison and -- but we have a very clear plan for the remainder of the year. In Mexico, we have actually increased our prices in April 15. But we do this selectively, it's not like across the board prices like in the past. This is based on a very robust process. I think that is what is most important about pricing strategy, and that is what makes it really sustainable.
At the same time we also focus on optimizing discounts and promotions. If you look at that and those are numbers that we normally don't talk about, but they have been improving over time based on, again, on a more robust process and that contributes to have a better average price.
So in the case of the U.S., same thing, we've had some price increases in local market. We look at the end of the year. We have a price that would be above inflation and that -- what we've discussed with the U.S. system. As you know, in the U.S. system, we have to have a national discussion about pricing is that we are looking to improve margins and at the same time to create this positive cycle that you see in some of the Latin American markets where you have a more profitable business and then you continue to invest in the market and the U.S. market certainly requires a lot of investment in -- especially in capabilities and route to market and that comes from a more effective, and as you would say maybe aggressive price strategy, but we believe that it's prudent and it's based on a very robust process.
Got it. That's very clear and very useful. But just to make sure that I heard correctly. So you increased prices again in April 15, after the quarter ended, correct?
Yes. Those are small increases. They're very selective. And again, prices are for particular packages and then you increase prices on a segmented way across regions as well. So the complexity that you see in our portfolio also translates and the complexity that we have in our RGM process. So that's the way it works and that's the way it's going to work for the future. So that's why we need to be I think more effective and focused on enhancing our capabilities with respect to these types of core processes of our company.
The other important part there is that we balance that with the share of market. I mean you make sure that these prices -- and one of the ways that you know that it's effective is that you have been able to maintain or even improve share at the same that you improve margin. That's the best of all worlds.
Is that true also, the market share comment, is that also true for the U.S., Arturo?
Yes.
Our next question comes from Lucas Ferreira with JPMorgan.
My question is super simple. Actually, I wanted to make sure these margin growth numbers we see for the U.S. [ as ] specific are comparable given the IFRS 16 effect. So just wanted to understand how that the MXN 120 million impact on the consolidated EBITDA is sort distributed within the regions. And then my second question is, apart from the pricing in the U.S., if you guys can comment a little bit on the other lines that drove these margins up, sort of the synergies you guys have been working on capturing, efficiency costs and also, yes, cost of all your remaining raw materials just to understand how much of that is really on the top line and on the other lines?
Thank you, Lucas. Well, I'm going to let Emilio go into the details of this particular point. But I'm just going to say in general that the 2 questions are connected because margins in the U.S. have improved. There are some different effects that you can identify there. Synergies is very important especially if you consider our revenue management strategy as a synergy, which we do and that has a significant impact on margin improvement for the first quarter if you compare that to last year. Declining volume has a negative effect there, but as we've said, volume in the first quarter of the U.S. from our perspective is something that is really an anomaly within the performance of the year all in all. We've had a few effects that can be easily explained and that have now been -- reverted in the first part of the second quarter and this is very important for all that, although volume has impacted our results in the U.S., at this stage, which is close to the end of April, we're close to flat in volumes year-to-date in the U.S. when we had a decline of 4%. So really the shift in the Easter holiday is very relevant. And also the weather explanation, which is something that works for shorter periods of time, after longer period of time it also tends to even out. So those are positive and negative effects.
Synergies are also contributing positively there. And I'm just going to mention, there is certainly one negative effect that we still have, which is the raw material impact because aluminum prices and PET prices. This first quarter of the year still have a negative comparison with last year. And we believe that as the year goes by that also is going to change, but we do have that impact in the first quarter of the year. But I'll turn it over to Emilio, if you want to add some details to those concepts.
Sure. Thank you, Lucas, for your question. Yes, as you can see in the report, in our U.S. region we have margin expansion of 114 basis points, including the benefits from IFRS 16. But without that IFRS 16, we're still growing our margin 84 basis points, comparable basis -- 84 basis points.
As Arturo has mentioned, this price is mainly due to a very good pricing on the quarter and the positive effect of our synergy plan that it's -- as we have planned during the year and compensate the negative impact from our volume decline and the raw material prices that also Arturo just mentioned about PET, aluminum and transportation, basically. And since we're continuing to emphasizing on our synergy initiatives and along with the pricing strategy that we have, for this year, and also more favorable raw material outlook that we have for the year, our expectations for margins improvement for the rest of the year, we still see some improvements in U.S. for the rest of the year on margins.
Especially if you take into account that we have a significant impact from volume, which as I told you, this has already started to change in the second quarter very quickly and that would be a -- like 190 points just from volume. And then this raw material negative impact, those headwinds that also are going to change in the second part of the year, or starting in the second quarter. That would be also maybe close to 90. So if you consider that, margins look very healthy. IFRS does have a positive impact, but it's really minor as compared to the 2 effects that I mentioned.
That was super, super helpful. Congrats on the results. Just -- if I may, a very quick follow up. Given these volumes, I suppose would be the -- in the -- sort of a low point of the cycle there for the year given seasonality, given any -- the affects you guys mentioned. What sort of capacity utilization you guys currently have in the U.S. operations?
Excuse me, could you repeat the question at the end, Lucas?
Yes. What's the capacity utilization you guys have in the U.S. right now in the first quarter?
You mean of our facilities?
Yes.
Yes. Well, we have a complex production system because we don't necessarily produce all that we are selling. In fact, most of the growth categories are not manufactured within our system. And our own production capacity is being restructured with the construction of the new facility for SSD in Houston. So that is going to change. So there is no concern there with respect of utilization capacity. That is pretty stable, I would say. But in terms of volume, we -- as you said, we expect to increase volume in the second quarter and then that should stabilize for the rest of the year. So we are still expecting a volume growth between probably flat and 1% for the whole year, which was our original guidance.
Our next question comes from Alex Robarts with Citigroup.
So yes, I guess, I wanted to go back to the United States as well. And first, just to clarify, the 84 basis points that you're saying is the pro forma apples-to-apples margin expansion in the U.S. without IFRS 16. Is this also just to clarify adjusting for the change in the agency volume accounting? So I just wanted clarify that. But the real kind of -- the main USA question has 2 bits. We've seen some of the Mexican consumer in the U.S. not really get price increases so far this year and I know you guys were looking at the food service in On-Premise channel. Can you tell us how the price increasing the price increase stickiness? What was going on with that particular increase? And how you're looking at the prospect for another increase with your Big Box supermarket clients later in the year? And then the second piece of the U.S. question is on aluminum. And we've talked about the trend kind of still not being stable year-over-year. How are you seeing it in the short term vis-à-vis year-on-year cost of aluminum? Do we get some relief in the second quarter or second half? Do we get stabilization in the second quarter or second half? So if you could comment on those that would be great.
Yes. For sure, Alex. Good to talk to you. Let me address first pricing in the U.S. Maybe Emilio can jump in with respect to the first technical part of the question and then we'll go to the aluminum.
Prices in the U.S., as we've said, we have a plan. Most of the increase you've seen in this first quarter was a carryover from last year. So if you think about stickiness that this price increase was already implemented a few months ago and it was very successful. It was very successful in terms of how it was accepted by customers and how also it had a little effect on volume and how we learned that. This is one of the discussions we have that elasticity in these categories is many times much lower than people might expect. So that worked really well. And we're actually just seeing the comparison of the carryover. So this is the same strategy that we're going to follow for the rest of the year. And we have a very clear business plan. And again, since we need to discuss this as a system, the plan is already set for what we're going to do for the remainder of the year and the price increases that we have from the national retail sales perspective, and then how we adjust in our local markets just to ensure our price coherency with the system as a whole. So we're actually now discussing prices for 2020 and that is how the system works. So I think we've been successful because, again, we have, I think, stronger processes that support the price increases. And we maybe need to improve in some aspects, I would say, mostly in segmentation and this is one of the things that we've tried to introduce to the conversation in the U.S. And we know that it requires a lot of persuasion with customers. But we have better segmentation in pricing in Mexico than in the U.S., even with the same retailers that we all know, the largest customers. And it's obvious that the brand has different presence and different equity in different regions within the country. So we need to move further there and we're not there yet. But on the other hand, we do have a better process for making the prices being accepted by retailers. So that's worked really well. Even we've had -- even the whole industry following a price increases, which is also an additional factor of success, I would say, when we implement those, and that has happened. So let me just turn it over to Emilio, because you had a question about margins and agency. And then I'll take the -- your question on aluminum.
Sure. Thank you, Alex. It's important to have clarity on this issue. The 84 basis points increase on margins are on comparable basis. We're not considering sales of agency in this comparison. So it's apples-to-apples. So the 84% -- 84 basis points are basically without that consideration and without IFRS 16.
And now let me move into the aluminum situation in the U.S., Alex. As you know, the aluminum price is composed by 2 separate factors, which is the price of the metal itself, which is called the LME, and then the Midwest premium, which is this logistics component and that has been -- that increased after the tariffs were imposed in the U.S. to imported aluminum and that has created really the distortion in price for us in the last almost 12 months. So this is another quarter where we've seen a negative comparison in the price of aluminum, especially with respect to the Midwest premium pricing. So the situation that we have right now is that we've hedged 80% of our aluminum consumption for 2019 and that is at a lower price than our aluminum price for 2018. So that is a very positive thing. At the same time, we continue to see high prices for the high levels of the Midwest premium above $400 per ton when that used to be at the, let's say, $200 per ton level approximately in 2017 and before. So that might tend to be solved, depends on the free trade agreements and conversations among the governments in North America, might have an effect. But for the time being, we're in a better position for aluminum for this year based on our hedging of the LME prices.
That was really clear. But just to clarify one last thing. So do you think that in the short term there is a prospect to be stable year-on-year with the LME plus MWP components of the aluminum cost?
Yes. We expect the year -- full year 2019 to be below 2018. That is not shown in the first quarter where we're basically flat. Although in the first quarter, we had a lower LME that is less than $2,000 actually, but a higher Midwest premium for the first quarter. So for the remainder of the year, we see things improving. So at the end of the day, we can have a lower aluminum overall price even with the Midwest premium above $400. So if the Midwest premium situation is resolved by other means, then that would be even better, but we're not discounting that at this point.
[Operator Instructions] Our next question comes from Carlos Laboy with HSBC.
I was hoping you could expand on your non-carb economics in the U.S. How that's evolving and specifically you seem to have a couple of really good winners going on in the non-carb space in the U.S., right now, BodyArmor, you mentioned that one. Perhaps you can expand on that a little bit.
Yes. Carlos. Yes, good to talk to you. Well, as you know, the stills categories in the U.S. -- as many of our markets are an important source for growth, so they might still be sometimes a smaller portion of the mix, but they are an important portion of the growth in our markets. In the case of the U.S., even -- then if you consider the mix of revenues, they become much more relevant, especially Monster and now BodyArmor. So the situation with these categories is that, as you know, the economics are different. And if you just look at margins, you might not be as excited with these products because margins certainly tend to be smaller than in some of the sparkling categories. But if we look at gross profit per case, which is something that is very important to identify in each of these categories, things look much better. Like in the case of BodyArmor, I think margins might not be, again, very high, but the profit per case is at least comparable with our sparkling categories.
So that is very important. When we look only at the margin perspective of the business and -- because that might not reflect the overall impact on our return on assets, especially considering that many times we're not investing at the same level that we might be investing in some of the sparkling categories. So this is an analysis that we continue to do. We believe we have some opportunity in some categories that are not as positive as the, let's say the BodyArmor analysis probably, and we still have conversations going on to see how we should be aligning better to create the right incentives, I would say, for the whole system, for the company and for us, and many times for a third party, which might be the owner of the brand to promote growth of these categories. So this is an ongoing conversation. But obviously, the margin perspective is not the only point of view, it's mostly about contribution on a dollar basis per case. And that in the case of BodyArmor, which is a category that's been growing significantly and gaining share in the sports drinks space, I think it's very respectable.
What makes BodyArmor work for you?
Because it -- first of all, it captures a space that is new for us. I mean it's a subsegment of sports drinks that is -- it's additional volume. Second, it's a strong brand, no doubt about that. And that it also adds to the profitability of our overall business without cannibalizing more profitable categories. So I think it makes sense to us within the perspective of the overall portfolio.
Our next question comes from Antonio Gonzalez with Crédit Suisse.
Just got a quick one on the U.S. margins again. If I see your guidance for synergies for 2019, you're talking about $20 million incremental, right? On top of you what you've captured already in order to get to the $90 million long-term target. And if I just take as a base, the last 12-month revenues, we're talking about roughly 60 to 70 bps margin accretion, right? Yet this quarter, your EBITDA margin is growing above that number, right? Even after adjusting for IFRS as Emilio has just described and so forth -- with volumes down 4%. So I was just wondering if you can guide us. What do you think the margin improvement is going to be on a full year basis? Do you think the level that we're seeing in the U.S. specifically in the first quarter is sustainable, especially as volumes improve for the remainder of the year? Maybe these are things unrelated to synergies that you've been mentioning already throughout the call, your raw material outlook and so forth. But I was just wondering what magnitude of margin improvement should we be expecting in the U.S. operations.
Thank you, Antonio. And I'll let Emilio provide some detail on that. But let me tell you just conceptually what happens with margins. And as I said before, there are many factors that are playing into the margin variations for the first quarter. If you look at the first quarter, a big part of the improvement in margins would be our pricing, which is really good. And I think it's sustainable. But as I explained also before, the area between the 2 curves of pricing tends to be smaller as the year progresses. On the other hand, some things might improve in the rest of the year, which is volume and maybe some of the raw material headwinds that we've had before. So kind of those concepts are going to be having a different effect in the remaining quarters of the year. So we definitely see margin improvement, but you just cannot project the same pricing situation and consider growth in volume with the similar scenario. I mean pricing comparison will be different for the second half of the year. We believe volume would be better. We also believe, as I told Alex, aluminum comparison will be better. So there are a number of things to play out. And synergies will be also coming into play. Synergies for the first quarter probably explain 80 points or so of increase in margin. So if you think about that, certainly our perspective is to continue increasing margin.
But there is another effect that we have to take into account and this effect only works at a margin explanation level, not at the EBITDA level, which is the change in mix. What I was talking about with Carlos a minute ago and how these categories that contribute to the EBITDA undoubtedly because if you think about BodyArmor, the contribution per case is higher than coke cans. But on the other hand, the margin is eroded if we sell more BodyArmor as compared to coke cans. So if you think about growth and EBITDA, which at the end is what counts, you will see an improvement based on this growth of stills categories, but you think about EBITDA margin, there would be an erosion there. So it gets quite complicated. I just wanted to put out there all the concepts that come into play for purposes of the margin. At the end of the day, what counts is our return on invested capital where the important factor there is the incremental EBITDA [ after difference ]. So I don’t know, Emilio if you want to add to that.
Well, as you know, this quarter is the quarter with basically the lowest margin. So we see full year improvement of margins based on the synergies, but also the impact on the maintenance Arturo also mentioned. We should be seeing an improvement in margins and up to maybe 50 points for the full year compared to 2018 without IFRS and all that.
At this time, I would now like to turn the call over to Arturo Gutiérrez for closing remarks.
Thank you. And as always, we appreciate your interest in Arca Continental. Please reach out to our Investor Relations team for any questions you may have. And have a great day.
Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.