Becle SAB de CV
BMV:CUERVO
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
24.79
41.25
|
| Price Target |
|
We'll email you a reminder when the closing price reaches MXN.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Becle SAB de CV
You don't have any saved screeners yet
Good morning. And thank you for joining Becle's Fourth Quarter and Full Year 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 maybe 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 and 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 International Financial Reporting Standards or IFRS and published in the Mexican Stock Exchange. The information for the third quarter of 2022 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats.
At this time, we would like to remind participants that your lines will be in listen-only mode until the question-and-answer session.
Now, I will pass the call on to Becle’s CEO, Mr. Juan Domingo Beckmann.
Good morning, everyone, and thank you for joining us today as we discuss Becle’s fourth quarter and full year 2022 results. Once again, I'm pleased to announce that our regions posted solid numbers, despite facing several headwinds such as inflationary pressures and supply chain constraints. Underlying demand for our brands remains strong, allowing us to continue building up last quarter's momentum and position ourselves for a healthy start to 2023.
Becle’s strong fourth quarter and full year results are a testament to the company's resiliency, adaptability and successful strategy execution. Throughout the quarter and full year, we saw the benefits of premiumization, our product mix strategies play-out across the regions reflected in the report results in volumes or net sales.
For the greatest quarter, total volume and net sales grew respectively by 3.8% and 5.1% year-over-year. For the full year, total volume increased 7.4%, with net sales growing 16%.
In the US and Canada region volume was boosted by strong growth in tequila for the quarter and full year, partially offset by decreases in the highly competitive – quickly growing non-alcoholics and RTDs market. Nevertheless, depletions grew in line with shipments, leading to adequate inventory levels highlighting the strong demand for our brands.
Our premiumization strategy in the region continuous to stimulate growth – is a key driver of net sales. Mexico and LATAM overall results for the quarter, a year – and the year were very positive, driven by continuous growth in our tequila portfolio. Successful premiumization our product mix strategies, along with sustainable growth figures for both year and on-premise channel. We remain committed to diversify our suppliers in the region to mitigate continued supply chain constraints.
EMEA and APAC regions posted solid volume and net sales growth demonstrating increased tequila adoption aided by a well executed premiumization strategy. These excellent results came despite a high inflationary environment, suggesting a strong demand for our brands. We are pleased the quality fourth quarter results achieved across our brands and regions. Our study depletion levels combined with robust and the effective execution of our premiumization strategy has sparked volume and net sales growth across regions. This has allowed us to navigate emerging challenges and secured sustained value growth for our shareholders.
I will now turn the call over to Luis Félix to discuss our US and Canada results in the project in further detail.
Thank you, Juan, and good morning, everyone. We are very pleased with our commercial performance in the United States and Canada for the fourth quarter and for the full year of 2022. Net sales value for the region was up 3.7% compared to the fourth quarter of 2021 and ended the third year up 6.6%. On a constant currency basis, net sales value for the quarter was up 9% year-over-year and increased 7.4% for the full year.
Our full year NSB growth reflects the positive effects of 2022 price increase across our full strength spirits portfolio, and the successful execution of a premiumization strategy, driven by improved performance of our super and ultra premium tequila brands. Full year 2022 depletions match shipments with 2.5 year-over-year decrease in both. This is an excellent base leading into 2023. Shipments and depletions for the quarter grew 1.8% and 4.1% over the previous year respectively, lapping a top comparison here in fourth quarter 21 where shipments and depletions were up 11% and 6% respectively.
Looking to US Nielsen data for the 13 weeks ending December 31 of 2022, our brands consumer takeaway increased by 8.7%, strongly outpacing the industry, which grew by 3% in value. Our tequila portfolio depletions were up 12% for the quarter and increase 8.1% for the full year, driven by continuous strength of our super premium and ultra premium tequilas. Our supply chain teams proactive actions improved class availability in the fourth quarter and manage to know the production gap by the end of the year.
Our ready-to-drink margarita category regain momentum and recorded 5.1% shipments growth during the quarter, but ended the year with a 7.7% decrease versus the prior year, lapping a hard comparison basis for unprecedented growth during the pandemic, coupled with top competitive environment. Our non-alcoholic portfolio shipment continues to underperform relatively impacting volume figures for the quarter. This category have faced difficult conditions due to the robust reopening of the on-premise channel at our margarita mix offering is highly skewed to off-premise consumption.
So we again increased AMP spending during the fourth quarter, reflecting higher media and sponsorship expenses from strategic initiatives within our premium tequila and whiskey portfolios.
I will now turn the call over to Olga Limon to discuss the Mexico and Latin America results.
Thank you, Luis. And good morning, everyone. Mexico and LATAM posted encouraging results for both fourth quarter and the full year 2022, despite supply chain constraints, inflation for the region despite slight positive growth in both the on and off-premise channel posted solid numbers, driven by our successful premiumization and portfolio strategies, which continue to drive the region's net sales growth.
Recent sales increases in the region were successfully implemented. Although, we have strong demand for our brands reflected in the full year. We did see a slight slowdown in some of our brands in the fourth quarter. Despite supply chain challenges during the quarter, Mexico reported flat volume growth of 0.2 year-over-year, and 15.5 increase for the full year.
Net sales rose 6.8% and 32.7% for the quarter and full year respectively with the tequila leading the way driven by our successful premiumization and strong price segmentation strategies. The tequila portfolio grew 1% in volume for the quarter and 18.6% for the full year, while non-alcoholic and RTDs saw 21.3% increase in volume for the quarter spurred by product availability.
The LATAM region posted strong results with an 8.2% increase in volume year-over-year and 36.9% growth for the full year. Net sales rose was 10.1% for the quarter and 33% for the full year. Depletions improved year-over-year, but experienced the slowdown in the last quarter due to macroeconomic factors in the region. However, on-premise sales remain strong with tequila volume rising 38.6% for the full year and net sales growing 42.4% with premium and super premium brands leading the way.
Overall, we expect the challenging supply chain environment to continue. We are confident that our strategy of expanding and diversifying our suppliers will mitigate this. We remain optimistic about the region's underlying demand for our diverse and attractive brand portfolio and our confidence in our premiumization and product mix strategies to continue driving successful results.
I will now turn the call over to Gordon Dron, Managing Director of EMEA and APAC region.
Many thanks, Olga, and good afternoon from Europe. The EMEA and APAC region closed out the year with a record performance delivering over 1 million cases above the 2021 performance, representing a 42% growth. Depletion is also grew over 30% to finish the year with adequate stocks on all brands as we enter 2023.
Despite the backdrop of a challenging economic environment across many of the EMEA markets, and with the Eurozone Consumer Price Index recording inflation of 9.2% to the end of December 2022. The fourth quarter in EMEA remains strong for Becle, with sales growing 37% in value for the full year showcasing the company's resilience in the region. Asia Pacific is still recovering from lockdowns, nonetheless, our business grew in Q4 by 27% in volume as compared to the previous year.
Looking at the EMEA and APAC regions on a full year basis, volume and value grew by 42% and 35% respectively, a very pleasing set of results, including double-digit growth from all brands. We ended the year with better balanced stocks and we're confident that this will give us a strong start to 2023.
I will now hand over the call to Fernando Suárez to walk you through our financial results.
Thank you and good morning. During the quarter, despite supply chain constraints and FX headwinds, the company reported a 5% increase in consolidated net sales to MXN14 billion However on a pro forma basis for constant currency, consolidated net sales would have increased 11%.
For the full year, net sales increased 60% to MXN46 billion. This growth speaks to the company's successful premiumization strategy with a product mix skewed toward brands with higher sales per case. In addition to year-over-year price increases. Gross profit increased 9% in the fourth quarter to MXN8 billion while the gross margin increased 200 basis points to 57.5%.
For the full year 2022, gross margin was 54.9% compared to 54% in 2021. The quarterly and full year gross margin increases reflect a stable pricing environment and improve product mix. And pricing initiatives across our region's. AMP expenses as a percentage of net sales increased to 28.6% from 26.1% in the fourth quarter of 2021. On a full year basis 2022 to AMP as a percentage of net sales was nearly flat compared to the previous year up 20 basis points to 22.2%. This was as a result of our previously communicated catch up of AMP investment opportunities and is in line with our 2022 full year guidance that we had given.
Distribution expenses increased 2% to MXN657 million compared to the fourth quarter of 2021. As a percentage of net sales distribution decreased to 8 -- 4.8% from 5.1% in the fourth quarter primarily driven by decreased freight, warehousing and logistics costs arising from reduced supply chain constraints.
SG&A expenses increased 3% in the fourth quarter representing 8.3% of net sales compared to 8.5% in the fourth quarter of 2021. On a full year basis, SG&A as a percentage of sales was 8.5% compared to 8.9% during 2021. This reduction was primarily driven by cost efficiencies.
Operating income was up 4% for the quarter and the operating margin decreased to 15.8% from 16.0%. For the full year, operating profit increased 25% to MXN8.5 billion and operating margin increased to 19.4% from 18.1% both compared to the previous year.
Third quarter EBITDA increased 8% year-over-year to MXN2.5 billion with an 18.1% margin. For the full year the EBITDA margin was 21.5% compared to the 20.1% margin from 2021. Net financial results for the quarter resulted in a loss of MXN230 million, which was primarily impacted by higher net interest expenses year-over-year, as well as a difficult comparison basis, considering the extraordinary gain of MXN192 million in the same period of the prior year of the prior year that came from debt modification under IFRS, which was a product of our liability management exercise of last year.
For full year 2022, net financial results were a loss of MXN620 million. Fourth quarter consolidated net income decreased 11% to MXN1.4 billion. Net margin was 10.1% compared to 12% in the fourth quarter of 2021. For the full year, net margin was 12.9% earnings per share was MXN0.39 per share for the quarter and MXN1.64 for the full year.
As of December 31, 2022, cash and cash equivalents were MXN4.5 billion and total debt was MXN17.6 billion. We maintained a strong balance sheet, extended debt maturity schedule with access to comparative long-term financing and conservative financial leverage to execute our long-term growth strategy.
Regarding guidance for 2023, we expect to deliver full year net sales value growth between high-ingle digit and low-teens. Regarding our CapEx program, we're continuing with our strategic expansion projects, the most significant of which are our 18th distillery in Tequila Jalisco and our ageing and warehouses and facilities. Our 2023 CapEx guidance is in the $250 million to $300 million range.
Now we will turn the call back to the operator for questions-and-answers.
Thank you. We will now move to the question-and-answer section. [Operator Instructions] Our first question comes from Andrea Teixeira from JPMorgan. Please go ahead.
Thank you. Good morning. Wanted to just go back to the outlook. So I guess, how should we be thinking in terms of like demand, depletions and puts and takes from an inventory perspective, as well as the glass supply that I believe is normalizing. And if you can walk us through the regions, how you're thinking of your algorithm into 2023, as well as the margin components there. Thank you all.
Yes, Andrea. Thank you for the question. We'll start out with a US on commenting on what's underlying the 2023 outlook. So, Luis, if you can go ahead.
So, in the case of the US, we are trying to maintain value shipments equal to the patients and our estimate is like going on a mid-single digit growth for the US and Canada in volume. That’s our projection
And from a pricing perspective you still have carryover, right from 2022?
No, that was fully executed. The thing is that we also – we have our price increase implemented in January this year. So from a value standpoint, we're also sticking to the low-single digit growth for next year. So we implemented the new pricings in January this year.
So Luis, just to compliment, so mid-single digit top line growth and plus low-single digit pricing. So that tells us like high-single top line growth for 2023?
Andrea, again, the full year guidance on a consolidated basis is -- on a sales basis, is high single digit to low teens on a consolidated basis. We're not providing specific regional guidance --
Optional there. No, that's fine.
Other than what Luis qualitatively just commented that, we expect shipments to be in line with the play issues next year. And as to your glass and supply chain and margins questions, on supply chain and in particular glass, we see a gradual improvement of the supply chain, but we're still not out of the woods.
We're still supply chain challenged and we'll be continuing to work through that process. Although, marginally, more positive on the matter. Lastly, on margin guidance, unfortunately, as you know, we do not provide margin guidance. We only supply top line guidance at this stage. Thank you for the questions Andrea.
Just on the facts, if I can just ask a follow up on what you're saying about the top line globally. What is -- is that in custom currency, or is that embedded as some sort of FX headwind or -- ?
The pro forma comment that we made on constant currency is precisely that. On a constant currency basis, we estimate that net sales would have grown 11%.
Okay, perfect. Thank you.
Thank you. Our next question comes from Fernando Olvera from Bank of America. Please, go ahead.
Hi. Good morning, everyone. And thanks for taking my questions. I have two different ones. The first one is related to the performance by category. Can you explain the volume decline in non-alcoholic beverages? And what is the performance that we should expect this year?
And my second question, very quickly is, if you can comment what explain the last register at the equity method, and how should we think about this line in 2023? Thank you.
The first question was related to non-alcoholic?
Yes, right.
Okay. In non-alcoholic, remember during the pandemic, we saw a huge increase in our volume for both the RTDs and the non-alcoholic and that was totally related to the at home consumption, which is normally -- which, right now, after the pandemic, people are going back to on-premise. So that's the reason why we see some declines in the particularly in the non-alcoholic category that we have.
Okay. So do you expect this weakness to continue in 2023?
We believe that we have a base which is not going to be affected, because right now almost all year in 2022, we were in -- out of the pandemic and we see that on-premise will continue to be the same. So we believe that the bases already discounted the negative effect that we saw in 2022. So we're projecting more stable numbers.
Okay.
And now to your second question, Fernando, we understand regarding the equity pickup method. We don't expect any changes there. We just reflect there, whatever minority investments we have -- that we reflect through the equity pickup method. Thank you.
Great. Thank you, Fernando.
Thank you. [Operator Instructions] So, our next question comes from Antonio Hernandez from Barclays. Please go ahead.
Hi, good morning. Thanks for taking my question. Congrats on your results. My question is regarding the -- you mentioned that last headwind is improving, is that relative to a performance of all other spirits as well, or just were other spirits lower growth in terms of volume compared to [indiscernible] related to other factors? Thanks.
Antonio regarding glass supply, we understand that there's more availability of glass from glass manufacturers. They in turn have been pressured last year by increasing input costs, but we are now seeing gradual improvement in glass supply from our suppliers and we've also been developing and expanding our supplier base on glass. That's what we would care to comment.
Okay. And follow-up given -- sorry.
Go ahead.
Thanks. Thanks. So, a follow-up would be really while on-premises is recovering, of course, do you expect that to change a little bit? Your AMP expenses basically to keep it around that 22% level on all your basis?
Thank you, Antonio. In the case of the US, the on-prem is yes, it is increasing our AMP. We see -- we continue -- we will continue with a strong investment in AMP. We believe that our brands are in growth pace, so we continue to drive a significant AMP spending in at least in the US. We will continue to have strong AMP, but not related just to the on premise opening.
And Antonio regarding consolidated AMP, you'll recall that we gave guidance of 22% area for full year. This year we're still working through our marketing plans. We expect a similar figure plus minus a certain degree there depending on how the year plays out. As the year progresses, we might be able to refine specific AMP guidance, but not at this stage.
Perfect. Thanks all. Appreciate the color. Have a great day.
Thank you. Our next question comes from Felipe Ucros from Scotiabank. Please go ahead.
Thanks and good morning everyone. Thanks for taking my question. First one on the -- maybe a question on verticalization. Obviously, when you did the IPO, you guys had a target of verticalization and then eventually that target that guidance was removed.
Just wondering -- and I know you don't give exact numbers on this, but just wondering if you can comment qualitatively or directionally, where vertical integration is moving? What are you expecting in the next few years? Do you expect still a positive impact from vertical integration?
We will talk about that because as you know, the prices drivers have been very volatile. And whatever we say can influence the pricing of driving the markets.
Understood and maybe we can do a follow-up on the other spirits category. Obviously, industry numbers are showing the volumes are turning negative in the U.S. for a number of categories, but you're seemingly still growing in this segment.
And just wondering, if this is mainly driven by the Irish whiskey category or maybe it's because Rest of the World is still in a very strong reactivation mode. Just wondering, if you could be can break down how other spirits is still growing, when most large other spirits categories for the industry have been shrinking?
In the in the U.S., as you may see Irish whiskey category is flat versus last year. We are seeing some of growth in some of our brands, in whiskey, but we're still very small in our portfolio of whiskey.
So we fully have our particular strategy in place and the investments on our super-premium and ultra-premium tequila portfolio. And we also have some growth in some of our brands in whiskey, but we -- as you know, we don't comment on a specific brands performance.
And we've seen the Europe and Asia is growing for us.
Understood. Thanks for the color.
[Operator Instructions] We'll just wait maybe another 20 seconds or so, just to see if there are any final questions. I'm not seeing any more questions, so perhaps we can wrap the call up there. That concludes the call for today. Thank you very much. And have a nice day.