Grupo Bimbo SAB de CV

BMV:BIMBOA

Good afternoon, everyone, and welcome to Grupo Bimbo's Third Quarter Results Conference Call. If you need a copy of the press release issued earlier today, it is available on the company's website at grupobenbo.com.

Before we begin, I would like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements.

I will now turn the call over to Mr. Rafael Pamias, Chief Executive Officer of Grupo Bimbo. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining us. Connected on the line today is our CFO, Diego Gaxiola; Mark Bendix, Executive Vice President; and several members of our finance team.

Before presenting the company's financial results, I would like to express on behalf of myself and all Grupo Bimbo's associates, our deepest solidarity with the people from the state of Florida, North Carolina, Yucatan and Guerrero, who continue to deal with an extremely difficult situation after the impact of Hurricane Celine, Milton and John. More than 3,200 associates live in the affected areas. Thankfully, everyone is safe, and we will continue to support them through these challenging times and to serve these impacted communities and those supporting the recovery efforts. Our commitment to the safety and well-being of our associates and the communities reserve remains a top priority.

These third quarter results continue to demonstrate the strength of our business, showcasing our diverse geographies and categories as well as the exceptional execution by our teams. Overall, our volume showed positive growth, and our net sales increased 7.4%. In Mexico, we achieved strong volume growth exceeding the mix effect and reached a strong EBITDA margin of nearly 22%. We also saw remarkable results in EAA, where we attained the highest EBITDA margin ever at 10%. And our LatAm region began to show signs of recovery despite ongoing challenges with improving trends in Colombia and Chile and resilience in Argentina. These successes help offset the difficult environment in North America, where while we observed improvements compared to the first half of the year, consumption remains soft.

Collectively, all the mentioned results contributed to a record adjusted EBITDA margin for the third quarter at 14.7%. As we move ahead, our focus will be on firing up volume everywhere and reinventing our productivity to secure our long-term sustainability. I would like to share that in line with our ongoing efforts to optimize our global footprint, we will be closing 5 bakeries, 3 in the U.S., which we communicated last quarter, 1 in , Spain and 1 in Canada. Throughout this process, our main priority remains to associates well-being. We communicated to providing -- we are committed, apologies to providing support during this transition, ensuring that all team members receive the assistance they need.

In September, we held the ninth Bimbo global race and thanks to more than 300,000 participants, including 160,000 virtual runners more than 3 million slices of bread are being donated to food banks around the world. We are honored to have received multiple recognitions this quarter. One, as the company with the best corporate reputation in Mexico, by Merco and 2 global recognitions, one of the world's best employers by the Forbes magazine and for a second consecutive year, one of the world's best companies within the top global food category by Times Magazine.

Now looking into the results by region. In Mexico, sales improved by 6.6% mainly due to strong trends across most categories and throughout every channel. A positive mix effect increasing the value to our consumers with 4 quarters in a row with positive and improving volume evolution. Adjusted EBITDA margin in Mexico reached a strong level at almost 22% and with an expansion of 160 basis points, reflecting the positive volume contribution, favorable mix effect and lower commodity costs.

In North America, excluding FX effect, top line declined 4%, mainly due to the continued industry-wide weak consumption environment, driven by a stressed consumer seeking value from extended inflation pressures and the strategic exit of certain nonbranded business. Within this tough context, the good news is that we are generally seeing a slightly improved trend sequentially. In fact, our branded business is already flat on a volume basis, and we have grown unit share in Vegas, Sweetbay Goods and snack categories. We continue to evaluate promotions to ensure we have competitive pricing in the marketplace and enable the right price volume equation while continuing to drive consumer engagement and market penetration.

We are making efforts to expand our distribution to meet the consumer where they shop and provide the right value for them through price pack architecture aligned with the channel. Despite lower commodity costs and the realization of strong productivity benefits, adjusted EBITDA margin contracted 140 basis points mainly due to strategic investments to lower our costs and expanding our value chain to increase our capabilities to better serve more customers and consumers. These investments include part of the onetime charges related to the closure of the bakeries I mentioned before, which are older and slower bakeries with limited impact on our overall capacity as well as investments to optimize our go-to-market capabilities. Our forward focus will remain on proactively pursuing opportunities to improve our cost structure, expand our distribution and grow share by meeting consumers at every shopping occasion.

Moving on to Latin America. Excluding FX effect, net sales increased 7.7% and mainly because of the good results in Brazil and the Latin Sur division and also smaller countries such as Costa Rica and El Salvador. On top of that, our business in Argentina has shown signs of resilience due to our ability to capitalize our risk management policies, together with proactive revenue growth management strategies. And our Colombia and Chile organizations have shown improved trends. In fact, Colombia started to grow its profitability.

During the quarter, we also completed the acquisition of in Uruguay, a well-recognized player in the high-quality frozen bread market. This transaction will allow us to continue expanding our local portfolio as well as exporting successful business model to various countries in South America. And during the quarter, we also signed an agreement to acquire, a player in the baking industry in Brazil. This family-owned business complements our brand portfolio with brands that consumers love and better positioned our company in the south region of Brazil.

In Europe, Asia and Africa, excluding FX effect, sales increased 7.3%. This was mainly due to a strong performance in, double-digit sales growth in Romania, U.K., India and Morocco. Coupled with the inorganic contribution from the 3 acquisitions we have completed in the region over the last 12 months. The remarkable adjusted EBITDA margin expansion of 240 basis points resulted from a solid sales performance, lower cost of sales, efficiencies throughout the supply chain and the positive contribution from the past acquisitions, which led to a record margin for the third quarter of 10%.

We are excited to announce the signing of an agreement to acquire Don Don, a leading player in the baking industry in Southeast Europe with presence in 4 countries: Serbia, Slovenia, Croatia and Montenegro, with exports to several others. This acquisition is accretive and complement our recent investments in a region of solid growth and high per capita consumption of bread products. Don Don has a strong well-established brands, a robust manufacturing footprint and an extensive distribution network. This acquisition is still pending regulatory approvals. While it is a bolt-on acquisition, it aligns strategically with our company's long-term goals.

With this, I would like now -- like to turn over the call to Diego, who will walk you through our financials. Please, Diego, go ahead..

Thank you, Rafael. Good afternoon, everyone, and thank you for joining us today. This quarter results were good and a perfect example of the benefits of being a well-diversified company, not only in terms of categories and channels, but also in terms of countries and currencies. We achieved an all-time high in sales, a positive mix evolution, and we continue to benefit from lower commodity prices and the acquisitions made in the past resulting in a record adjusted EBITDA margin for the third quarter. All this happened despite the soft consumer environment, we and most CPGs are experiencing in the U.S. while we continue to invest in our transformation journey for our value chain in the country.

Going a little bit deeper into the results I want to mention that most of the difference between our gross margin expansion and a lower EBITDA margin expansion comes from North America. And it is mainly explained by, one, the investments we are making to transform our value chain for the long term; second, the onetime expenses related to the bakery closures, and third, and to a lesser extent, the 4% decrease in top line. On a smaller degree, we are also investing in our distribution network in Mexico to expand our reach, which is already partially reflected in our strong sales performance, and we feel confident this will continue to deliver the expected growth in our revenues. And finally, in Latin America, we saw a challenging consumption environment in Colombia and Chile as well as onetime expenses related to the relocation of our plant in Paraguay.

Moving on to the balance sheet. We closed the quarter with a net debt to adjusted EBITDA ratio of 2.8x, our total debt closed at MXN 146 billion. The increase in our debt position when compared to 2023 was because of the financing for our strategic investments, including our bolt-on acquisitions that were closed during the quarter, and also because of the depreciation of the Mexican peso of more than 16%, MXN 2.7 per dollar.

As for our accumulated operating working capital, we saw an improvement of approximately $50 million as compared to the 9 months of last year, mainly due to an improvement in suppliers and inventories. Overall, we remain optimistic about our future, especially because of the investments we're making for our long-term performance and because of our solid diversification and leadership position within the countries where we operate.

While we continue to anticipate a challenging consumer environment in North America, all our other regions are showing a strong trend. So we reiterate our guidance for the full year. We anticipate that our CapEx investments will end the year close to the low part of the range at approximately $1.8 billion.

So with this, we can now proceed with the Q&A session, please.

[Operator Instructions] The first question comes from Fernando Olvera with Bank of America.

I have 2 questions, both related to the U.S. First, can you comment how the promotional activity behave quarter-over-quarter and year-over-year? And what is your outlook on this going ahead? And my second question is if you can explain the difference between the EBIT and EBITDA margins, given that the first 1 decreased $30 million basis points year-over-year and the second only 140 basis points -- thank you.

Fernando, this is Mark Bendix. I'll take the first question, and I'm sure Diego will answer the second question on EBITDA margins. First of all, what we're seeing in terms of promotions, we want to have the right promotional activity for our customers. And we've made investments geared towards offering more value to our consumers with price reductions and promotions smaller offerings and improving in-store availability, which has slightly improved volume. I will say that we're not seeing the same kind of response in promotions that we had seen in previous years.

So we're using our RGM process to continue to evaluate our promotions and gearing our new efforts on price pack architecture to meet the changing consumer need. We plan to continue to compete and to focus to provide the right value propositions that meet the needs of all of our consumers across all of our categories and all of our channels. We're using and developing new offerings to win that value-conscious consumer Diego, do you want to take the second question? .

Yes, no. Sure, Fernando. Well, yes, as you mentioned, we do have a higher decrease on our EBIT margin as compared to the EBITDA of the region in North America. This is mainly because of the increased depreciation and amortization. That is the main reason for having this higher decrease and to a much lower extent, we have a small charge from mix. You remember that we still have a pending liability on EPS on mix on our balance sheet and we still suffer from any interest rate variances. So this also impacted a little bit the results of EBIT as we exclude from our EBITDA or the net effect.

Your next question comes from Renata Cabral with Citibank.

Hi, everyone. My question is related to capital allocation. I'd like to understand the level of leverage that we would be comfortable with. And in terms of share buybacks, if you continue to -- with the program.

Yes. Happy to share with you that -- I mean, when we feel comfortable is with a leverage of between or around 2.5x. Clearly, we are slightly above that level, although it is not a concern, we're not in the comfort zone. But as you know, we have a very conservative capital structure. And also and not less important, a very strong profile on our debt maturities with more than 11 years.

The next big maturity that we have on the debt side is in 2026. It's a certificate or having a local bond of MXN 10 billion, and then we have another MXN 10 billion in 2027. So on that front, we feel very comfortable. We have almost fully available the revolving credit facility. We have close to $1.9 billion out of the $1.95 billion. So we have ample liquidity. And that's why we still feel confident that the right strategy is to continue doing some bolt-on acquisitions. And it is the case of that hopefully will be concluded next year as well as both acquisitions are still pending to receive the approval of the authorities.

Now regarding the buyback program. During the year, we have bought back close to 55 million shares, which represents MXN 3.8 billion. We still have a reserve -- a legal reserve of a little bit more than MXN 11 billion for potential future buybacks although -- we will continue to execute our buyback program as we have been doing it in the past on a conservative way, but constantly operating when we have a window to operate and as we continue to see an opportunity regarding the valuation of the company. So you can expect a little bit of a further pressure in our leverage because of the resources we are allocating for the buy back program.

Great. And my second question would be on the trends on Mexico. We saw very resilient result for Bimbo this quarter. And we saw in other consumer names, some weaknesses. So I would like just to understand the main trends, if you can give us some color in terms of what performance better or traditional China or the modern channel or any highlights in terms of products would be really helpful.

Yes. I will take that one. We are quite happy with the performance of the third quarter in Mexico. As we mentioned before, we had a positive volume for 4 quarters in a row. So I would say that the first reason is that our efforts to reconnect with consumers are working through price pack architecture through going to channels that they are shopping more and geographies that are suffering less. I would say that our efforts have been successful. .

Also, we have had a strong and successful pipeline of innovation. It's been in the high double digits. We're also extending the boundaries of our business model. We are taking a lot of efforts on omnichannel. And I would say that we keep extending our distribution network. So I would say that we saw growth in almost every category and channel based on these 4 reasons.

Your next question comes from Ricardo Alves with Morgan Stanley.

Hello, everyone. Good night. Thanks for the call. As always, couple of questions. In North America, we've been discussing the challenge -- the challenging top line trends. If I could get some more details specifically on competition, it appears to us that the competitive landscape has become a little bit more difficult in terms of -- when we look at different categories. So if we are able to go into that level of granularity grade, but what we have been seeing, for instance, on Nielsen is that bread, rolls and buns. It's not only all the discussion that we had in this forum in this call on private label, but we also see evidence of other competitors being a little bit more aggressive. .

So I just wanted to pick your brains if you see prospects for better or more rational competition from your competitors? Or maybe the data that you are seeing on the margin is already indicating a more rational scenario. So just an update on North America, specifically on competition, but if you could go into a couple of categories. I think that, that would be helpful.

Ricardo, thanks for the question. As Rafael and Diego indicated in their opening, I think it's important to understand that we've exited several nonstrategic private label businesses. And if we look at our core operating and our branded business, it's sequentially improving quarter-to-quarter. And in this quarter, our branded business is actually flat on a volume basis. And we've grown unit share in begels in sweet bake goods and snack categories. And all 3 of those categories are imminently important to our profile and our success in the U.S.

So we remain optimistic we have to get stronger, and we continue to work on innovation and price pack architecture. As Rafa said, it remains relevant and important to the North American consumer. We're focused on eliminating waste at all levels and keenly focused on enterprise cost management. We've been making investments in North America to transform our value chain, to deliver long-term and savings. And we're always looking for ways to drive value by optimizing our North American footprint. So we are encouraged on where we're going. We see sequential improvement and balance of the year, we're also optimistic. Hopefully, that helps Ricardo.

It does help. Just to clarify, in terms of competition, you do not see a more or maybe more aggressive or maybe less aggressive? You'd say that competition is more or less the same at this point in time?

Yes. I would say competition -- yes, competition is about the same. We always have good competition, and it's been a rational marketplace, I would say.

Got it. Super helpful. And if I may, just 1 final follow-up, perhaps this one to Diego. Just a quick one. Other expenses, I believe it was EUR 2.3 billion when we try to reconcile your operational performance, which was better than what we expected, but we saw a miss on net income. And I think that that's the line that was more that we didn't predict very well. So this EUR 2.3 billion also compared to the last couple of quarters, it was significantly higher. Can you just provide some more details on that line, just so that we model a little bit better going forward? Again, I appreciate the time, everyone.

Yes. Sure, Ricardo. I would say our other expenses line also was a little bit probably higher than previous quarters. And this is highly connected with all the transformation program in North America, particularly in the U.S. An important part of this MXN 2.3 billion has to do with the expenses, onetime expenses related to the restructuring of the business in the U.S. We also have some other onetime expenses that are related with the closure of the plants, the 3 plants that we announced on the call of last quarter, a new 1 in Canada and also the close of a plant in Spain.

So all this is putting some pressure to the other expenses line. Again, just important to mention, not all of it is a cash expense. We have some noncash but also cash expenses. We also had, as I mentioned on the previous question, an impact from mix negative impact from MEPPs because of the movement on interest rates.

Your next question comes from Philip Ucros with Scotiabank.

Thanks, operator. A couple of my questions were answered, but let me do this one. So on EAA, obviously, very good performance here, particularly on the margin side, you did very, very well. But obviously, there's some inorganic noise there in the numbers. So just wondering if you can break out for us kind of what was organic versus inorganic and then on the flip side, also related to that, you're also seeing some synergies, which you mentioned in the call. So just wondering if you could talk about those. And then I have a follow-up.

Felipe, this is Diego. Unfortunately, we do not disclose the specifics from organic and inorganic. What we have mentioned, and we can reiterate is that the acquisitions that we have performed particularly in this region are being accretive, of course, on growth, but more importantly on the margin expansion, but unfortunately, we do not disclose the specific .

The only thing that I can add is that -- we do feel that the AAA margins for the future are sustainable. Why? Because our organic business is growing over a strong basis of comparison. And also, the 3 recent acquisitions completed over the last 12 months have been accretive and continue to have excellent results. So I would say that definitely, there has been a lot of movement in AAA -- EAA. So you can expect that as the acquisitions start to mature, we will also see productivity initiatives that will further the results.

So I would think that very recently, we have discovered a region of high per capita consumption, strong growth, recommended competition and those are the places we want to be to enhance our global portfolio and know-how. So I would believe that they are sustainable margins both because of the growth of the organic business and the accretive acquisitions.

And a little early expand here just a little bit more. The -- from the EAA EBITDA growth, just to give you some color, the most relevant growth is coming organically. Inorganically, we're having this accretive effect on our margins because on the profitability of the businesses that we acquired but because of the relative size to the region and of course, to the whole Grupo Bimbo operation, the most important contributor to contributor of the growth, it's the organic growth, not inorganic.

No, I understand that you can't give exact results, but that was actually very helpful to help us understand that most of it is organic. Definitely are good news. And then I may ask a follow-on on the closures. You announced 2 new closures, 1 in Canada, 1 in Spain. I imagine that they're not huge, but just wondering a little more about the message for the future. Does this mean that the footprint realignment is being reassessed worldwide, so a little bit of what you did in the U.S. over the last few quarters. Is that now kind of going into a global mode and we'll see more of these? Or do you think that you're mostly done with the process?

Yes. No, it is not necessarily a global strategy, I would say that, yes, globally, we are continuously looking for opportunities on where we can capture some incremental profitability by reallocating the production to a plant that can have a better performance, either because of the location or because of the speed of the lines and the design of the plant.

In some cases, we have some more plans as it was the case in the U.S. So it makes a lot of sense to reaccommodate where we're having the production without losing the volume and this way, taking out some expenses that, of course, we will see this payback in the coming quarters. Cash on cash, we typically have a return of less than a year or around a year. So it's a very nice productivity project and now it's hard to predict if we're going to be able to find more of these opportunities.

Again, we're constantly looking into that. In some cases, we need to expand aligned. We need to increase the speed of our existing plant in order to be able to reallocate the production from A to point B. So it's not a Cs. It's not that we necessarily today have the full visibility that we could say we're going to close x number of plants. It's more on a case-by-case basis. And what we can assure you is that we will continue to look for these opportunities that are very profitable and will help us continue expanding our margins in the coming future.

Your next question comes from Antonio Hernandez with Barclays.

Just a quick 1 regarding this -- the impact of the closure of this fiber bakeries. Is this something that we should expect, I mean, just for 1, 2 quarters? Or how should we think of this going forward? I know that in the medium to long term, there's positive upside from this, but any type of -- is it like onetime like 1 quarter? Or is it more maybe like a quarter, a quarter and maybe a slight impact in molding perhaps?

Yes. I mean we already recognized in the third quarter, part of the costs from these bakery closures. But we do still expect to have additional cash and noncash expenses during the fourth quarter. Regarding the volume potential volume loss, I would say, no, we're not expecting anything, hopefully, unless we have a program or we make a mistake, but we're planning not to lose any volume. So really switching beforehand the volume to the plants that correspond and then close the plant with all the necessary procedures with the people and with the assets and with the fixed assets and the lines and we accommodate those assets in our operations.

Okay. Perfect. And so most of the impact was in the third quarter versus fourth quarter? Just confirming that.

No, not necessarily as we're just announcing the following closures. We did announce back in July, the closure of the 3 plants in the U.S. although the impact in our results, this is still not fully reflected. So not necessarily, it is more in the third quarter than in the fourth. In fact, it's going to be more the other way around.

Your next question comes from Trey Chen with Barclays.

This is actually Ben or for whatever strange reason, there was a wrong name transmitted. Now just following up on some of like the closure questions that you got tonight and thanks for some of the clarity. So as we look at it, I mean, obviously, a lot of that is driven by some of the M&A activity and like looking through the portfolio, what is efficient, what is not efficient. So just wanted to follow up on the more recent M&A activities. As you look at those assets. I mean, as you grow your footprint in some of those.

other regions, how should we think about the fit today and maybe the fit of tomorrow? So where do you think there is a need to maybe do similar actions as you've done as you're doing it right now in the U.S. in some of the other regions, be it in Europe, beer in South America or in Asia.

We evaluate case by case. But I would say that our last acquisitions are being chosen because of their ability to deliver volume growth with competitive margins. Remember that we have been insisting on the accretive nature of the last acquisition. So we're evaluating and nothing is written in stone, but we are quite happy up to now with what the new acquisitions are bringing to the party. They are allowing us to expand our footprint to reach more customers and consumers.

Well, and then just like maybe just following up on just like the consumer trends. And I mean, that's obviously been the question, and I think it was pointed out well as it relates to the consumer in Mexico, the strength, the weakness, however you want to put this. How do you guys see the current consumer environment evolving into the fourth quarter? And what's your expectation into next year just in light of some potential disruption from U.S. elections, et cetera.

Yes, Ben, as I mentioned in my speech, when I said that we believe we're going to be on target with our guidance for the year with -- I mean, if we go on details, what we're falling behind the initial objective. It's clearly North America with a soft consumer environment. We believe the fourth quarter will be a little bit on the -- with the same trend.

Now for the other 3 regions, we feel a little bit more optimistic. We think that we will continue some growth, good performance, not only on top line, but also being able to capture some incremental productivity that will be reflected on the margins of these regions. So only, we think that Grupo Bimbo will end the year pretty much aligned to the guidance.

Now still early to talk about 2025, I think that we should wait as we always do for the next conference call. And of course, we will provide some specific targets both in top line margins and CapEx for the next year.

I would just add, possibly many, many other companies are sharing too that we have entered an era of calculated spending with consumers, right? And they are more -- they discern more about which groceries and in which categories they spend more or less. I would say that some of our consumers, they need to wait for the salaries to catch up the price increases. So we're hopeful because when we apply this strategy the right way, we grow volume, right? I mean -- and I would say that the name of the game will be to be sure that we deliver the right price pack architecture and also that we find those segments that are more resilient to price. We see opportunities in premium segments. We see opportunities in health awareness. So it's too early to tell, but we are adjusting our strategies already to face this more discerning consumer.

Your next question comes from Alvaro Garcia with BTG. .

Two questions for me. One, just kind of double-clicking on -- I think you had some comments on mix in Mexico, in my sense that is that it's more of a channel thing, maybe more geared towards the traditional channel? We've seen some commentary on that. But I was wondering if maybe that might be a category mix thing. So if you can clear that -- those mix comments on Mexico, that would be very helpful. And then my second question is on China. I was wondering if you could provide maybe a strategic update on your investment plans on your branded business, specifically in China. .

Yes. On Mexico, I would say that we have -- we see a strong growth in all channels, right, from wholesalers to convenience, the special channels, modern trade traditional and out of end. I would say that also, we are growing solidly in all the categories we are present. So I would say that a good job done by the local team is about our ability to reconnect with consumers. We have done a lot of work on sizes and prices and having a different strategy per channel.

I have to reiterate that the main growth lever for Mexico, it has been positive volume, strong positive volume for 4 quarters in a row, okay? So I would say we still have intact, our ability to extend the distribution network the innovation was quite positive with double-digit growth. And again, price pack architecture.

When it comes to China, I would say that we are still on the same trend. There are some slight improvement versus the same quarter of a year ago. It is true that the overall consumption environment and business environment in China is quite trying. We do have strong and resilient business in quick service restaurants. And there are some channels that are already responding well to our branded initiatives. It is too early to say that the consumer environment and the business environment is on the right side. So I would say that 2025 is a year to keep building and profiting from our strong presence in many categories.

And I mean, just to complement, Alvaro, you probably know, the branded business that we have in China is very small for JV and it's even small for EAA. So as you can see, even still with the not as positive performance of the branded business in China, we have a very healthy business in the whole region, a very good margin expansion, top line growth. So we will continue to work on fixing the branded business in China. We don't expect any big negative effect from this operation.

I would just add, if I was not clear before, we need to praise the good job done by our quick service restaurant business in China that is doing very well. And that is the bulk of our business over there.

Your next question comes from Alejandro Fuchs with Itau.

Two very quick ones from my side. First 1 for Diego. Diego, I was wondering if you could give us maybe some color on the company's current hedge position on raw materials thinking into the end of the year and maybe into the next year? And the second one, maybe for Rafael. I was wondering if you could give us also some color on the weakness that you mentioned on Chile and Colombia. Is this more of a macro dynamics? Is this more of a competitive dynamics? And how do you see this improving going forward?

Yes, Alejandro. Well, regarding the hedges for the fourth quarter, I'd say that we're very close to 100%. So we feel very, very confident we will still continue to see these positive wins and these positive effect once we reported last quarter of the year. Now for 2025, we have a smaller hedge position, let's say, almost a fair 1/3 of our needs for the year. And the overall result today, of course, without taking into account what can happen with the other 2/3, but with what we already hedged, it's a positive effect for -- of course, not as big as in 24. That was the biggest tailwind, but we will continue to see some positives in 2025. .

Yes. When it comes to LatAm status and going forward. Well, as you know, LATAM is a combination of 15 countries, right? Brazil is the biggest 1 and has been outperforming for several years now. I have to reiterate that Argentina has been showing resiliency with positive results about our expectations. And yes, as I said before, Colombia and Chile have been the recent underperformance for 2 different reasons, right? In Chile, we are experiencing a challenging competitive environment, especially on pricing in modern trade. On the other side, in Colombia, the consumption overall is weak across categories, and we continue to be impacted by the new food tax and the development of hard discounters. .

On the positive side, we're seeing improvement sequentially in both markets. I was actually both in Chile and Bogota last week, and the teams presented those improvements and the turnaround initiatives. And I am quite confident that soon we will find some more robust growth in both countries. They have I believe, started to find a solution, and it's going to happen in the next quarters of '25 and possibly beginning '26. I -- we feel optimistic about the evolution of the region because we feel optimistic about Chile and Colombia.

Your next question comes from Matteo from BRG.

I actually have 2 quick ones, if I may. -- as one. I wanted to know if you could provide some more color on what drives the difference between EBITDA and operating margin expansion in Mexico as well? Because you mentioned that at the consolidated level, it is mostly driven by the U.S. But in Mexico, it's the same thing. We have -- if my numbers are right, a big growth in D&A in Mexico. And I wanted to notice what could be driving this? And the second 1 is regarding net debt and whether we should expect net debt to stabilize around here after I believe, 6 or 7 quarters of the figure growing.

Can you repeat the second question, please? .

Second question is related to net debt and whether we should expect the number, net debt to stabilize around here after a couple of quarters of the number growing a .

Matteo. Regarding the difference between EBIT and EBITDA in Mexico, it's mainly because of an incremental depreciation and amortization. As for the past 2 years, we invested heavily in the country on many different fronts. And this is affecting or increasing the depreciation and amortization. Here, we do not have anything in additional or extraordinary as it was the case with a question of North America with the MEPPs. So it is mainly that it is part of the growth that we've been able to achieve because of this past investment.

Regarding the net debt, what I can tell you is that more than saying that it will stabilize and let me expand here a little bit, and a quick and important assumption, assuming that we get the approval for the 2 acquisitions that we already signed and announced. If we are to conclude these 2 acquisitions, we will continue to face some additional pressure on the leverage of the company. Nothing material as these 2 acquisitions are bolt-on and none of them will be transformational for the company.

Now with a long-term view, what we believe is that once we go through 2025, assuming that we conclude these 2 projects, and we will start to see leverage okay? So it's not necessarily a stabilization. It is not a view on a quarterly basis. We really have a long-term view on where we can go and then how we can deleverage the company and of course, always making sure that we have the right debt profile so we can continues to build on this future growth of Grupo Bimbo.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Rafael Pamias, for any closing remarks.

Okay. Thank you all for your time today. Please do not hesitate to contact us with any further comments or questions you might have. Goodbye, and have a good day.

The conference call has concluded. Thank you for attending today's presentation. You may now disconnect.