Becle SAB de CV
BMV:CUERVO
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Becle SAB de CV
Earnings Call Analysis
Q2-2024 Analysis
Becle SAB de CV
The company reported consolidated net sales of MXN 11.1 billion for the second quarter of 2024, marking a modest 0.8% increase year-over-year. On a constant currency basis, this translates to a 3.1% growth, highlighting the company's focus on premiumization and favorable product mix. Gross profit rose by 7.7% to MXN 6.1 billion with a gross margin improvement of 350 basis points, reaching 54.3% .
In the United States and Canada, net sales value increased by 12.1%, driven mainly by the premiumization strategy and a robust 16.6% growth in tequila sales. Despite inflationary pressures and a slowdown in consumer spending, the region navigated these challenges by maintaining steady growth through strategic initiatives . Conversely, the EMEA region experienced shipment delays, approximately 15% behind due to geopolitical and economic headwinds. However, Asia reported strong double-digit depletion growth, indicating resilience and robust performance in these markets .
Despite industry headwinds, the company upheld its market leadership in Mexico through premiumization and strategic pricing initiatives. Although shipments declined by 15%, depletions were down by only 10%, suggesting successful destocking strategies. The focus on premium tequila offerings yielded positive results despite the overall market contraction . The Latin American markets, although small in the global portfolio, faced challenges due to unfavorable macroeconomic conditions and political uncertainties, influencing the regional performance .
A significant portion, approximately 20% to 25%, of the gross margin improvement was attributed to falling agave prices, although some inventory was still higher cost . SG&A expenses increased by 17% primarily due to investments in infrastructure and organizational capabilities, but measures are being taken to normalize this cost relative to sales in the second half of the year . The company's strategic focus on reducing distribution costs and optimizing inventory resulted in a distribution expense decrease of 11.4%, aiding overall margin expansion .
As of June 30, 2024, the company's cash and cash equivalents stood at MXN 9 billion, a considerable increase from the previous year . Net cash generated from operating activities was MXN 4.3 billion for the first half of 2024, marking a significant turnaround compared to a net use of MXN 3.3 billion in the same period of the previous year . The company successfully reduced its lease-adjusted net debt ratio from 3.2x to 2.6x, providing greater financial flexibility .
The company is optimistic about navigating future challenges and aims to continue its focus on premiumization and strategic pricing. The management reaffirmed its full-year guidance with net sales value growth expected in the mid-single-digit range for 2024. They also committed to an AMP spend of 21% to 23% of net sales and projected 2024 CapEx between $160 million to $180 million . Additionally, a dividend of MXN 0.39 per share will be distributed on August 6, 2024 .
A fire incident at the La Rojeña factory was promptly managed, with operations suspended only in the affected processing area. The impact was limited, with no significant damage to distilling or production areas. The company does not anticipate any material financial effect from this event and has prioritized employee safety and local community support .
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Good morning, and thank you for joining Becle's second quarter unaudited financial results call.
During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases, such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, goals, target, strategy and similar terms and phrases and may include references to assumptions. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements. For all the foregoing reasons, you are cautioned against relying on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with the International Financial Reporting Standards, or IFRS, and published in the Mexican Stock Exchange. The information for the second quarter of 2024 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. [Operator Instructions]
Now I will pass the call on Becle's CEO. Mr. Juan Domingo Beckmann.
Good morning, everyone, and thank you for joining us today as we discuss Becle's second quarter 2024 results. Before going into the numbers and key highlights, I want to take a moment to address the recent incident that occurred in our La Rojeña factory. There was an accident that resulted in a fire, which has already been controlled and managed under strict safety protocols. We're in the process of assessing the damages and are working in collaboration with the authorities to address and investigate the causes of the incident.
We have suspended operations in La Rojeña until further notice. The incident was isolated to a single processing area, with no impact on distilling, production areas and aging of inventory in our warehouses. As a result, we do not anticipate material financial impact. However, we will give further communication to the markets as new developments arise. At this moment, the top priority of the company is the safety and well-being of our employees and their families as well as providing support to local communities.
Moving on to our regional performance in the second quarter. We faced challenges across most regions. Nevertheless, we maintained or improved our position in key markets due to successful execution of our strategic plans and resilience of our brands.
The U.S. and Canada reported solid growth in volume and value, driven by the strong performance of key tequila brands. Our efforts to standardize inventory at the distributor level and enhanced brand positioning has helped us successfully navigate the region's economic challenges and fluctuations in consumer spending.
The EMEA and APAC region faced ongoing consumer demand pressures due to geopolitical and economic headwinds, affecting our shipments year-to-date. However, they are mainly driven by continued destocking at the distributor level, evidenced by the notably disparity between shipments and depletions. Despite the volatile environment in EMEA, Asia's growth was strong.
In the face of the continued industry contractions in Mexico, we maintain a market share leadership for strategic premiumization and pricing initiatives, especially with our tequila brands. Although shipments declined, divisions fell to a lesser degree, aided by positive trends in premium products. As the year progresses, we anticipate more favorable second half comparisons.
Turning to gross margins. In the second quarter, we posted a margin of 54.3%, marking a 350-basis-point increase from the previous year. This improvement was driven by regional price increases, our focus on premiumization and our favorable product and geographic mix. Additionally, we benefited from positive agave trends.
Overall, we recognized the challenges presented by the current economic landscape across several markets. However, we remain confident in our strategic approach. Our focus on premiumization and effective market strategies continues to drive positive trends and positions us well for the future. Going forward, we remain focused on leveraging our strengths and maintaining or improving our market presence.
I will now turn the call over to Luis Felix to discuss our U.S. and Canada results in further detail.
Thank you, Juan. Good morning, everyone. The United States and Canada reported solid second quarter 2024 results, despite the ongoing slowdown in consumption. Several factors impacted the region's performance, including ongoing inflationary pressures and slowdown in consumer spending. Despite these headwinds, we navigated the challenges resiliently, leveraging our strong brand portfolio and strategic initiatives to maintain steady growth. Please note that the results in the following remarks are presented on a constant currency basis.
Net sales value increased by 12.1% compared to the second quarter of 2023. This was mainly driven by our premiumization strategy and a 16.6% increase in tequila sales, which benefited from the price increases in the first quarter of 2024.
Shipments for the second quarter grew by 5.1%, driven by double-digit growth in our tequila portfolio. However, continued resale destocking resulted in depletions falling by 5.2%, lagging behind shipments. Throughout the second quarter, we worked diligently on inventory standardization with our distributor relationships to gain better visibility on days on hand. Moving into the third quarter, we expect depletions to accelerate ahead of shipments as we work to maintain optimal inventory levels.
Regarding specific categories, the tequila portfolio proved resilient with depletions growing by 1.3% compared to the same period of last year, in parallel to the whiskey portfolio, which increased by 4.8% in the quarter. Ready-to-serve remains the most challenging segment, underperforming compared to the trend seen in ready-to-drink.
Looking ahead, we will focus on adding new flavors and variants and reverting the 1800 ready-to-serve to glass bottles. Due to inflationary pressures, consumer spending in the U.S. continues to slow down across all price segments, particularly in the ultra and super premium categories. While recognizing the challenges and economic pressures affecting the industry, it's important to note that our product mix remains favorable.
By leveraging our strong brand equity, we have avoided reckless pricing moves that could harm our profitability, focus on sustaining our market position and long-term value creation. We're holding our leadership within price in line with our communication strategy.
I will now turn the call over to Manuel Coulomb to discuss the Mexico and Latin America results.
Thank you, Luis, and good morning to everyone. My name is Manuel Coulomb, and I'm the Marketing Director for Mexico. I will be representing Olga in this quarter's call as she's currently unavailable.
Despite numerous industry headwinds in the second quarter of 2024, we successfully maintained our market leadership in Mexico through strategic premiumization and pricing initiatives. We remain market leaders in both volume and value, with our tequila brands driving growth and strengthening our overall marketing standing. Our premiumization strategy continues to deliver results amid significant market shift. Although the industry has seen a contraction in both volume and value over the past 2 quarters, we have outperformed the market, achieving growth above the industry average.
Our focus on premium tequila offerings has been a key driver, reflecting -- reflected in 1% increase in price per case and a smaller decline in value compared to volume. Our strong brand equity and pricing initiatives have been -- had enabled us to maintain a favorable price mix, despite greater-than-expected promotional activity in the market.
Regarding volume performance, shipments declined by 15% in Q2 2024 compared to the same period last year. However, depletion fell to a lesser degree by 10%, indicating a significant divergence and underscoring the impact of the trade destocking. This reduction in depletions was largely driven by declines in our lower end brands, while our super and ultra-premium tequila lines showed positive performance. Notably, our Cristalino tequila demonstrated an 8% growth in depletions in the quarter. We currently see healthy inventory levels at the retailer.
We are also witnessing a return to normal seasonality patterns in the first and second quarters, aligned with historical trends and consumer demand. Typically, the weight of the second half of the year is more significant in terms of volume of sales.
Latin America, though representing a small part of the global portfolio, remains challenging. Unfavorable macroeconomic conditions, inflationary pressures and persistent political uncertainties prevail in key markets in South America, affecting regional performance. Additionally, the quarterly and year-to-date decline in depletions is smaller than shipments, indicating a significant inventory adjustment. Overall, while we face a challenging environment, our strategic focus on premiumization and strong brand equity position us well for the future.
Looking ahead to the second half of the year, we expect better performance thanks to a favorable comparison. However, the market is still contracting and we will continue to monitor and prudently adapt to these dynamics.
I will now turn the call over to Gordon Dron, Managing Director of the EMEA and APAC region. Thank you.
Many thanks, Manuel, and good morning, everyone.
As previously announced, I will be retiring at the end of this month. I would like to thank Juan Domingo and everyone at Becle for the last 9 very exciting years. I am also delighted to welcome Shane Hoyne as my successor as Managing Director of EMEA and APAC.
Shane brings extensive industry experience from Heineken, William Grant and Bacardi, where he held senior international marketing roles. Most recently, Shane worked with Altos Planos running the business, driven by Mijenta, across EMEA and APAC.
I will now hand over to Shane to take you through the second quarter results. Thank you.
Thank you, Gordon, and good morning, everyone. It is an honor to address for you today.
Overall year-to-date trends in the EMEA and APAC regions remained consistent with last year's sales outperformance. However, shipments are approximately 15% behind due to several factors in the EMEA region. These include ongoing conflicts in Eastern Europe and the Middle East; electorial uncertainties in the U.K. and France, impacting consumer spending; and continued trade destocking.
Key European spirits markets declined for the second consecutive year. Additionally, reduced consumer spending on spirits and Travel Retail Europe has led to Duty Free operators reporting a year-on-year drop in spirit sales according to mindset.
Conversely, Asia's environment is more favorable, marked by stable inflation and consumer prices. The region reported strong year-on-year depletion growth, driven by a positive mix effect. In the second quarter, depletions continued to grow by double digits, coupled with robust shipment growth compared to last year.
Turning to specific categories. Tequila depletions in EMEA and APAC grew by low single digits year-to-date, while whiskey grew by high single digits. This reflects our portfolio expansion in Asian markets for continued growth in Europe despite negative spirit trends. Despite the economic pressures in EMEA driven by multiple factors, we believe we are well prepared to navigate the challenges of 2024. Going forward, we anticipate continued strong performance in Asia and some recovery in EMEA.
I will now pass over to Rodrigo de la Masa Maza, who will take you through the financial results.
Thank you, Shane, and good morning, everyone. I will now walk you through the financial results for the second quarter of 2024.
The company reported a 0.8% increase in consolidated net sales, reaching MXN 11.1 billion. On a constant currency basis, our top line increased by 3.1% for the quarter. This increase reflects our progress on premiumization, showcasing a favorable product mix increasingly skewed towards brands with higher revenues per case and margin.
Despite operating in a weak market, these strategic initiatives helped us achieve solid results. These results are further evidenced by depletions outpacing shipments in several key markets, including Mexico and the Rest of the World.
Gross profit for the quarter increased by 7.7% to MXN 6.1 billion, while gross margin reached 54.3%, increasing by 350 basis points compared to the same quarter of last year. The increase in gross margin was primarily driven by a favorable shift in the product and regional mix, modest price increases across the regions and lower input costs. This was partially offset by the negative impact of a stronger peso compared to a year ago, resulting in approximately 50 basis points of margin erosion. On a constant currency basis, the gross margin would have been 54.8%, which would have marked the 400-basis-point expansion year-on-year.
A&P expenses as a percentage of net sales decreased to 21.3% from 22.4% in the second quarter of 2023, aligning with our full year A&P guidance for '24. Distribution expenses decreased by 11.4% to MXN 447 million compared to the second quarter of 2023, mainly driven by lower freight, warehousing and logistics costs arising from reduced supply chain constraints. As a percentage of net sales, distribution expenses for the quarter decreased to 4% from 4.6% in the second quarter of last year.
During the quarter, SG&A expenses increased by 17%, accounting for 10.8% of net sales compared to 9.3% in the second quarter of '23. This increase was mainly due to an increased investment in infrastructure and organizational capabilities. Operating income increased by 23.7% for the quarter, while the operating margin expanded 340 basis points to 18.3% from 14.9%.
EBITDA for the second quarter increased by 20.2% year-over-year to MXN 2.3 billion, with an FX adjusted growth of 26%. The EBITDA margin expanded 340 basis points to 20.7%. The net financial result for the second quarter of '24 was negative MXN 1.3 billion compared to a gain of MXN 203 million in the same period of last year. This decline was mainly driven by MXN 1.1 billion year-over-year, noncash foreign exchange loss. As a result, second quarter consolidated net income decreased by 62.4% to MXN 501 million. The net margin was 4.5% compared to 12% in the second quarter of last year. Earnings per share were MXN 14 for the quarter.
As of June 30, 2024, cash and cash equivalents stood at MXN 9 billion, an increase of MXN 4.7 billion versus the same period of the previous year, while total debt amounted to MXN 26.1 billion. During the first half of 2024, the company generated net cash from operating activities of MXN 4.3 billion compared to a use of MXN 3.3 in the same period of the previous year, marking a swing of MXN 7.6 billion.
Over the past 3 quarters, we've successfully reduced our lease adjusted net debt ratio from 3.2x to a more favorable 2.6x. This improvement aligns us closely with industry peers and provides us with the flexibility to invest behind our brands, pursue high-return projects and pay dividends.
We are benefiting from sustained lower agave prices, which are positively impacting our working capital requirements and cash flow. Although some higher cost inventory remains, the ongoing transition to lower agave costs throughout 2024 should continue to improve our financial results, enhancing our long-term profitability and cash flow generation.
A key highlight for the quarter is our inventory optimization, which generated MXN 964 million in additional cash flow. This positive outcome is a product of the strategic drawdown of raw material and finished goods inventories, significantly improving the company's free cash flow.
Additionally, through tax efficiencies, we have reduced cash tax burden by MXN 762 million year-to-date versus the same period of last year. This strategic initiative will support our ongoing focus on generating cash flow and strengthening our financial position. Regarding capital allocation, a cash dividend payment will be distributed on August 6, 2024. Each outstanding share, representing Becle's capital stock, will receive a dividend of MXN 0.39.
Turning to our guidance. We reaffirm our expectation for full year net sales value growth in the mid-single-digit range in 2024, assuming an exchange rate of MXN 17.5 per dollar. Additionally, we estimate our AMP spend to range from 21% to 23% of net sales value and our 2024 CapEx to fall within the range of $160 million to $180 million.
Finally, we are pleased to announce the release of our integrated annual report with detailed sustainability disclosures. This marks a key milestone for the company, demonstrating our commitment to creating value for consumers, partners and shareholders, while prioritizing responsible corporate governance, sustainability and the preservation of the environment for future generations.
I will now turn the call back to the operator for Q&A session. Thank you.
[Operator Instructions] Our first question comes from the line of Ricardo Alves.
.
This is Ricardo Alves, Morgan Stanley. Thanks for the call, everybody. We were really sad to hear about the accident. We hope everything gets resolved as soon as possible. I just wanted to let you know our thoughts are with you and your employees.
Specifically on the impacts of the blast, just to make sure, can you give more details on how many tanks or exactly the parts of the facility that were impacted? For instance, we understood that Camichines was not affected. So I just wanted to make sure that we get that right. And maybe on the older facility, how much of that was compromised? So just if you can give a little bit more details, that would be helpful.
My second question on competition and pricing dynamics in the U.S.. Very strong volumes indeed. I appreciate the commentary -- the preliminary remarks that you gave, 5% really impressive, but also the 6% increase in U.S. dollar terms as it pertains to price and mix.
Are you able to break that down into the pricing? How much of that was the pricing you took in January? How much of that was mix? Because I believe that the premiumization and also the outperformance of tequila versus RTD is part of it. And how do you -- so that's the first part of the question. But then how do you view that relative to commentary that we see on the street that a couple of your competitors may be more aggressive in prices?
Depending on the situation, depending on the line of products, but we heard that also, for instance, sometimes Patron have been more aggressive on prices. I don't know if that's a dynamic that it's more on the mainstream part of your portfolio. So I just wanted to hear from you if you were seeing any evidence of more tactical pricing activity, maybe in mainstream, maybe bothering Jose Cuervo's [indiscernible] line. So just an update on competition.
Let me address, Ricardo, your first question in regards to the incident at La Rojeña.
As we explained, as Juan mentioned in his opening statements, La Rojeña factory, obviously, it's an important factor for us. We were fortunate that this incident really occurred on an isolated, let's say, processing area of the facility. In other words, none of the other areas, including 2 distilling facilities and warehousing or anything else, was really damaged.
We're obviously currently assessing the damages completely. But the incident within that processing area was limited to 1 tank that caught the fire. And so as a result, obviously, we haven't -- we don't have still a good reading in terms of services related in that area if some services will be -- will have to be replaced or redone. But we were fortunate that the damage itself was quite limited from an asset perspective on this regard.
So even though we haven't finished the assessment, because this was quite recent, we do not expect this to become, let's say, a significant issue in terms of getting it back up and running and most importantly, let's say, a threat to continuing to perform and supply the market and customers going forward.
So that would be my answer at this point in time because we're -- we obviously don't have all the details that we will have and we will be sharing a little bit later on.
So I will now pass it to Luis for the second question.
Thank you, Ricardo, for your question. So in your first part of the question regarding mix, we had a very strong volume in tequila in the second quarter. So the majority of the gains are coming from mix.
Pricing, we -- as you probably know, we took pricing at the beginning of the year and the -- could say, the compound increase was a little bit less than 2%. So the majority of what you see is a much better mix between tequila and of course, the ready-to-serve and the other categories.
The second part of your question, regarding the competitors and the approach that they are having, we have seen more aggressive pricing actions from some competitors. We're actively working to adapt quickly to changes in pricing. So we took -- we're not going to move our pricing, but we are actively working with our team in the field to adjust in case we need to do, but it's only like temporary pricing adjustments that we're doing. And this will -- and we're always considering that we should -- considering to add value to our shareholders.
And we know that -- it's important to mention that our portfolio is strategically diversified to meet consumer preference and the different price sections of the market. So I think we're confident. We -- of course, both are the 2 largest brands that we have. We've made some adjustments in a few markets. But yes, we're seeing more aggressive pricing overall, not only -- basically in all sections of the tequila category.
Our next question comes from the line of Ulises Argote.
This is Ulises Argote from Santander. I wanted to see if we could get a bit more color on actually how much of that margin improvement that you do -- that you posted in the quarter is coming from those better agave prices? Maybe just trying to understand a little bit how those lower inventory levels are starting to flow through the P&L.
Of course, Ulises. Thank you for your question.
The gross margin improvement, it's a mix of different things, as we've already explained. Most of the benefit is coming from favorable mix, both geographic and in the product mix. However, there is some pricing. It was, as originally planned, executed at the beginning of the year. And the cost of goods has been benefiting from agave, as you mentioned.
And as we said, we haven't had the full benefit of agave falling prices, but it is starting to contribute. It did a little bit Q2 was a little better. I would say approximately 20% to 25% of this gross margin improvement is related to agave falling prices overall. And as we mentioned as well, there is an unfavorable impact still as we compare to last year, just driven by unfavorable FX, which amounted 500 basis points also. So I hope that clarifies a little bit, Ulises.
Our next question comes from the line of Ryan [indiscernible].
So this is Ryan filling in for Ben at Barclays. So a quick 2-parter. So looking at the volume declines and destocking in Mexico and Rest of the World. Do you guys have any time line on when those issues could start to slow down and we've seen more normalized shipments and depletions?
And then also just a quick one. With SG&A up 17% and really the only cost that rose significantly with all of those investments, when could we start to see that realized in the margins and start to see improvement there?
Ryan, this is Manuel from Mexico. Regarding your question, what we're seeing is really volatile kind of situation between depletions and shipments. So what I would say is, at the moment, we are having a slightly higher inventory than previous year, but nothing to worry about. And we are working very closely with our partners, retail partners, to ensure that we adjust shipments according to depletions. So we are not expecting to -- by the end of the year to have high inventories. We will do it month by month.
[indiscernible], do you want to add something for the Rest of the World?
For the Rest of the World, a slightly different picture. Our depletions are growing slightly ahead of our shipments. We're watching it very carefully, trying to get to optimum stocking levels across various markets. We do have to deal with a lot, in some instances, some quite long lead time shipments, et cetera, but we are managing very carefully how our depletions are performing slightly ahead of our shipments, and that will gradually correct itself.
But again, hard to commit to a time line given some of the volatilities in the market. My colleague, Gordon, may have something to add to that. Gordon, if you have anything to add to it, please do so.
Thanks, Shane. I think the only thing I would say is that, particularly for EMEA, the next 2, 3 months over the summer period, are absolutely critical. And I think by the end of the third quarter that we will have a clearer position. But at this stage, as Shane said, it's impossible to forecast exactly what's going to happen.
Thank you, Gordon. And Ryan to address your second question with regards to SG&A, SG&A -- we're executing our program on SG&A as planned. And obviously, there are some inflationary pressures year-over-year, but most of the increase is driven by plant investment behind, let's say, selling capabilities in several key markets, including the U.S., EMEA and APAC.
Centrally, we're also investing behind IT capabilities and infrastructure as it relates to opportunities on operating our integrated supply chain planning and, yes, mostly planning capabilities across the company.
So as you can see, there is a leverage factor in regards to SG&A, as it's a fixed cost, and we're obviously short in terms of volume year-to-date. But second half, this number should normalize and go back to normalize SG&A as a percentage of sales numbers.
Our next question comes from the line of Lucas Ferreira.
Lucas Ferreira from JPMorgan.
I have a couple of follow-ups, if I may. The first one is on the U.S.. How you guys see the inventories across the value chain that ties into the discussion on price aggressiveness for some of your competitors? Just wondering if you see this as something or sort of specific in some of the product lines and something controlled given the stock adjustment going on? Or if you think that it might be sort of a tougher competitive environment going forward given the, I don't know, maybe lower agave prices or just attracting the category, attracting more volumes, more attention.
And the second question regarding the gate prices. So interesting comments on how much that helped gross margin going forward that we see apparently the margin, prices remain very low, right, in Mexican pesos.
So my question is, how long it should take for your -- that agave prices to be fully reflected in your numbers. So how many more quarters do you think you should be outflowing agave prices that is sort of a low single-digit type of prices that we've been seeing in the industry so far?
Thank you, Lucas. I'll take the first part. This is Luis Felix.
So we -- basically, in the case of inventory level with our distributors, we -- in the first -- in the first semester, we basically standardized our inventory levels across our distribution system. We -- I can tell you that in the second quarter, even though there was a mismatch in the percentages that we -- when you compare shipments and depletions, the amount of cases that we ship we're totally aligned to what we depleted.
So in the let's say, in the second half, what we are concentrating is to make sure that we accelerate depletions, so we can get to optimum levels of inventory across our distribution sector. So right now, we're still a little bit higher than what we want to be in terms of inventory. And the majority of that is coming not from tequila, it's more on the nonalcoholic ready-to-mix business.
Lucas, regarding your second question on agave. As I mentioned since the last quarter, the agave pricing will be favorable, of course, to us in the coming quarters. Q2 already reflects a little bit more benefit, and we expect this to continue improving gradually Q3 and Q4.
Just as a reminder, we have a mix of agave costs embedded within our costs. We have our own production as well. So it's something that will come in marginally in the next, I would say, 2 to 3 quarters, Lucas.
We will pause one more any further questions. We have not received any further questions at this point. So that concludes today's call. You may now disconnect.