Genomma Lab Internacional SAB de CV

BMV:LABB

Earnings Call Transcript 2021-Q1

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Genomma Lab First Quarter 2021 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'll now turn the call over to Enrique González, IRO of Genomma Lab. Please go ahead, sir.

[Enrique González, executive]

Thank you, operator. Good morning, everyone, and thank you for joining us today. We welcome you to Genomma's First Quarter 2021 Earnings Conference Call. Joining today are Jorge Brake, Genomma Lab, CEO; and Antonio Zamora, our Chief Financial Officer.

Please note that today discussions could contain forward-looking statements about the company's future business and financial performance. These are based on management's prudent expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially are included in our reports on file with the Mexican Stock Exchange. In particular, there is significant uncertainty about the regulation and contemplated impact of the COVID-19 pandemic. This means Genomma's results could change at any time and the impact of COVID-19 on the company's business results and outlook is a best estimate based on the information available as today's date.

I am now pleased to turn the call over to Mr. Jorge Brake. Jorge, please go ahead.

[Jorge Brake Valderrama, executive]

Thank you, Enrique, and welcome, everyone. While it was a challenging quarter with continued COVID-19 related headwinds, Genomma's strong execution helped mitigate these effects, a reflection of our company's resilience and adaptability. Importantly, we also made progress on our long-term operational goals and objectives.

As you have read in yesterday's release, Genomma achieved solid operational results for the first quarter of '21 despite obstacles. With a 6.4% year-on-year net sales growth and a noteworthy contribution by our Latin America operations reflected in an 11.6% year-on-year increase, with particularly remarkable performance in Chile, Colombia, Peru and Bolivia. This quarter's results were again driven by new product launches, outstanding point-of-sale execution and an increased presence and visibility within the region's key trade channels.

Further success on Genomma's 4 pillar strategy ensured continued strides towards our long-term and strategic objectives despite COVID challenges across the different regions. Reduced full traffic and significantly lower cough, cold and flu incidents during the Northern Hemisphere winter season led to significant declines in demand for related products mainly in Mexico and the U.S.

However, the transformation and growth strategy, we are successful -- we have successfully implemented has strengthened Genomma's business. And today, we benefit from continued demand for our extensive and advantaged personal care product portfolio, which we have been able to seamlessly fulfill it through a resilient supply chain with no major COVID-related disruption. Along these lines, let me share a few brief highlights from the quarter and some insight based on what we are seeing.

To begin, consumers today remain focused on their hygiene and self-care. This has accelerated in the current environment and we believe they will remain post pandemic. Our ability to deliver related transformational products again resonated during the first quarter of 2021 with important innovation and portfolio utilization projects as well as new product launches.

As a few examples by quarter's end, we successfully launched a new Fermodyl, Keratina hair growth, promoting shampoo line and the relaunch of Sistema GB brand alopecia hair loss treatment in Mexico. These shampoo line initiatives were complemented by the Tío Nacho line extension in Brazil. Additionally, our products children or Infantil relaunched for the Mexican market reflects our continued focus on the beverage category within this market.

We are particularly enthusiastic about the continued success of our Groomen brand disposable razors, which recently have been performing better than expected. You will recall that we had launched Groomen in the new -- in the Mexican market in retail chains and show a strong initial response during the last quarter of 2020. In the first quarter of 2021, we launched this disposable razor specifically target to the traditional channel, while also increasing Groomen's overall presence at the point-of-sale during the quarter, including drugstores, pharma chains, additional retailers such as Walmart, Soriana and Chedraui Mexico.

3 factors are driving Groomen brand significant success and also as an excellent example of Genomma's multiphase model. First, Groomen is truly a superior product to the extent that we are able to offer a 30-day guarantee. Second, we recalibrated women's advertising campaign during the quarter and added customer testimonials, which have truly resonated. Finally, women's success within the traditional channel is a strong testament of the capillarity of -- and diversity of Genomma's go-to-market network reach. We are currently in an ramp-up phase, but we are very encouraged by its prospects. We plan to extend this launch above Mexico in the coming quarters.

Also in Mexico, you will recall that in September 2019, we signed an exclusive license agreement with UP International to market UPI's full range of Novamil brand infant specialized nutrition products, a significant transition and exciting news on tier for our company. This product showed continued success during the quarter with a double-digit sell-out increase.

Turning to other relevant updates related to our growth strategy, as discussed. Today, consumers are buying their products and services online whatever possible, affecting most categories with increased consumption both through e-commerce and the convenience of informal traditional mom-and-pop channels, a trend that has deepened during the pandemic. In today's age of in e-commerce, Genomma is ensuring we evolve with a balanced strategy to ensure we successfully address the many channels critical to our continued success. With trends changing at a staggering speed and omnichannel consumers require our attention to ensure we win, it therefore became clear that a centralized decision-making system was critical to Genomma's omnichannel success.

Based on the success, Genomma has had in these diverse channels, order management is now needed for better inventory visibility and order routing logic across the broader supply chain. In addition to basic store fulfillment, to address these challenges, we developed outside the new Gen-Order, primary digital platform, which is currently in its beta phase. Order management has become the new retail paradigm and the key enablers to a holistic commerce strategy, and our new Gen-Order platform makes it possible for us to directly connect with client businesses as well as traditional channel points of sale.

Further commercializing Genomma's core product portfolio based on our new logistics model and enabling us to more quickly and efficiently reach a greater number of points of sale. We are now also able to route move given order to the optimal fulfillment source based on the retailer criteria, which is -- or such as profitability, proximity, store dynamics and inventory level. Needless to say, Gen-Order is a critical component to our company's continued evolution. We believe this enables us to balance flexibility modularity and time to market as our road map is specifically focused on driving our continued omnichannel retail success, in line with the second pillar of our growth and innovation strategy, which is to perfect our best-in-class go-to-market execution.

As mentioned, during the quarter, we were challenged by the historically soft cough, cold and flu season, primarily in the U.S. and Mexico, resulted in decreased sales of related product categories with a challenging 2020 comparison base due to consumers' pandemic-related panic, home inventory stocking in the first quarter of 2020. However, we are pleased to note encouraging demand for our Personal Care and other OTC SKUs in this market. In the U.S., particularly in California, Texas and Puerto Rico as well as in key local Mexican markets.

During the quarter, U.S. sales of Suerox further strengthened within the traditional channel in those states. And Genomma's terrific sales team has gradually been expanding the brand within key retail channels or chains such as Walmart, which helped offset a challenging quarter. It's important to note that Puerto Rico is an important engine for future growth within this region, too.

Robust sales at our South American operations were reflected in a double-digit year-on-year sales increase, led by particularly a strong performance in Chile, Colombia, Peru and Bolivia as said before. This was achieved through successful new product launches and line extensions, supported by outstanding point of service execution and an increased presence and visibility within the region's key e-commerce channels as well as added sales for more than 100,000 mom-and-pop traditional points of sales resulting from our new distribution strategy and expansion in Central America and Indian markets.

Regarding supply chain and logistics, in Brazil, we are pleased to announce that we began operation of our new warehouse site located in Minas Gerais. The new site has a 31,000 pallet capacity and 21 more truck docks than our prior warehouse, enabling increased transport by more than 50 trucks a day. Further, the new warehouse is located at a key logistics hub in Southeast Brazil, providing access to important logistics channels to the South, Southeast and Central East regions. This favorable location ensures expedited online purchase fulfillment from Genomma's warehouse, aligned with the company's omnichannel focus on both e-commerce and physical store channels with cost savings through improved efficiencies.

Mexico, Genomma's Personal Care manufacturing plant and central logistics warehouse at our industrial cluster formally began operations during the first quarter, as was reported on Feb 24, 2021. Genomma's Suerox isotonic beverage line began production with several million of bottles being manufactured as we speak.

Finally, I'm very pleased to share that in March, we unveiled our comprehensive 2025 sustainability strategy entitled, A commitment to the future, based on an extensive in-depth evaluation of Genomma's business model as it relates to social, environmental and governance. This detailed plan is closely aligned with our company's corporate culture and mission and reviews Genomma's 10 primary areas of operation, with clearly outlined goals and objectives as well as a specific target date. The plan is aligned with the United Nations Sustainable Development Goals to ensure we address the world's most important sustainability challenges. Needless to say, we are extremely proud of this detailed document and of the ambitious goals we have established as a company. We plan to share relevant updates with you twice a year on related accomplishments.

To conclude, we are capitalizing on the growing consumer focus on health and well-being, trusted brands as well as digital engagement and purpose-minded practices. These long-term trends have only accelerated during the pandemic and our alignment, which, combined with the breadth and reach of our portfolio and continued success building on our growth plan sustainability positions us for continued growth. We also remain focused on identifying exciting opportunities for potential inorganic growth through alliances, partnerships, M&A within our 2 core categories.

As we look to the year ahead, while uncertainty remains with limited visibility to the pace and magnitude of COVID recovery, we are confident that our continued disciplined execution, financial prudence and the strength of our underlying operations will drive shareholder value.

Thank you for your attention. It's now my pleasure to turn over to Antonio. Tonio?

[Antonio Zamora Galland, executive]

Thank you, Jorge, and good morning, and thank you all for being part of Genomma's earnings call. I'll keep this quarter's comments focus on key highlights related to the first quarter 2021. Genomma achieved MXN 3.5 billion in consolidated net sales for the first quarter of the year, reaching a 6.4% year-on-year increase despite a challenging year-on-year sales comparison due to 2020 pandemic-related panic sales and to reduce sales of cough and cold products during the quarter, as Jorge has already discussed. Also with some ForEx headwinds in some of our markets impacted our top line growth.

Continued successful execution of our growth strategies as well as innovation and product launches supported our top line during the quarter. A 20.4% EBITDA margin for the quarter reflected a 10 basis point year-on-year margin improvement, a reflection of continued cost control and expense containment throughout the organization. A MXN 63 million nonrecurring logistics expense associated with the migration of logistic operations in Mexico and the warehouse relocation in Brazil also impacted the quarter's EBITDA margin as well as increased operating expenses associated with innovation, product launches and expenses associated with operations ramp-up at our new Personal Care Facility in Mexico. To a lesser extent, an unfavorable product mix, we decreased sales in higher margin categories and lower operating leverage impacted the margins for the quarter as well.

Mexico EBITDA margin for the quarter closed at 20%, a 320 bps year-on-year margin decline, primarily due to the previously mentioned extraordinary expenses related to Genomma's relocation of our distribution center in our new Industrial Cluster as well as growth and optimization investments made during the quarter. First quarter EBITDA margin for Genomma's U.S. operations closed at 3.7%. This is the result of the decreased sales, as Jorge has described, resulting in lower operating leverage as well as negative sales mix as higher-margin cough and cold product sales declined during the quarter.

First quarter 2021 EBITDA margin was also impacted by increased expenses related to digital marketing initiatives, and to a lesser extent, to an increase in extraordinary expenses related to one-off logistics and operational cost in the U.S. In Latin America, new product launches and line extensions drove a 12% year-on-year increase in net sales for the quarter. We have noteworthy double-digit sales increase in Chile, Colombia, Peru and Bolivia. This was partially offset by a negative ForEx impact in Argentina, Brazil, Uruguay and Paraguay, among others.

First quarter 2021 EBITDA for Latin America reached MXN 404 million, with a 23.9% EBITDA margin at 390 basis points year-on-year increase due to efficient cost and expense control as well as the positive effect of increased higher-margin product sales during the quarter and positive operating leverage and sales mix effect in Latin America.

Consolidated gross profit grew 5.8% during the quarter to MXN 2.2 billion, with a 30 basis points year-on-year gross margin decline due to increased import costs, resulting from primarily FX headwinds during the quarter. Net income reached MXN 390 million, a MXN 54 million year-on-year decrease. This decline is largely explained due to increased income tax expense when we repatriate cash from Genomma's international subsidiaries, and to a lesser extent, to increase all-in cost of financing, impacted by FX losses in the countries that I have previously described during the quarter.

Genomma remains with a very strong financial position with a leverage ratio of just 1.5x net debt-to-EBITDA and a solid MXN 1.8 billion in cash balance at the quarter's end, a 33% year-on-year cash position increase as compared to the prior year. We further optimized Genomma's working capital during the quarter, reducing our cash conversion cycle by 3 days to 96 days at the end of March 2021 from 99 days a year before.

Finally, Genomma repurchased more than 1.3 million shares during the 3 months ended March 31, 2021, an investment of approximately MXN 28 million. Our active share buyback during the quarter is a testament of our continued confidence in Genomma's continued growth and future success while ensuring prudent approach to use of our cash and maintaining balance -- the balance sheet strength.

In summary, we continue to deliver on our financial expectations. Our first quarter performance was strong -- was a strong start for the year from an operating perspective, and we are optimistic for the balance of the year, while also making investments to drive growth in 2021 and beyond.

With that, Omar, let's open it up to questions, please.

[Operator]

[Operator Instructions] And our first question is from Álvaro García with BTG Capital.

[Alvaro Garcia, analyst]

I have 2 questions. The first one is on sort of a housekeeping question on the one-off expenses we saw in the quarter. I wonder if you could sort of break out how much was the -- how much of the MXN 63 million was Brazil versus Mexico, but more so whether you expect more of these one-off expenses going forward throughout 2021.

And my second question, I suppose, maybe a little bit more of a strategic question on the U.S., sort of what's preventing the U.S.? Obviously, there are some big headwinds, demand-driven headwinds, no cough, cold, flu season. But as you ramp up all of this new innovation, what is it -- maybe it's your channel approach? Or maybe you can explain on sort of what your strategy in the U.S. might be going forward.

[Jorge Brake Valderrama, executive]

Antonio, could you take the first one?

[Antonio Zamora Galland, executive]

Sure, Jorge. Thank you, Álvaro, for your question. This is Antonio. Regarding our one-off expenses for the quarter, as we have described, we basically move the whole central warehouse in Mexico, which was a significant operation. It was more than 1,500 trucks and more than 20,000 pallets, a more than 140,000 man hours. So it was a very complex project that obviously involved a number of expenses, paying moving trucks, people installing racks, et cetera. That was the big part, Álvaro. So the majority was located in Mexico.

We also relocated our distribution center in Brazil to a much more convenient location where there's operating savings that we're going to be getting and also logistic savings. And most importantly, we're going to be able to reduce 5 days of transit when we ship our products to our clients on average from the new distribution center. So there's also going to be efficiencies in Brazil with the new operation. But again, the large impact, the majority of the impact was located in Mexico.

And just to illustrate, this is a little bit of when you buy a new house or a new apartment and you move from the old one to the new one. When you are packing everything, sometimes you find those clothes, those items, those furniture and you say, "Okay, this is very old. I'm not going to use it anymore. This is this sale. I don't want it in my new house," et cetera. And that happens when you do this kind of operation. So we identify some very old items that we don't want that complexity. Let's just write them off some old SKUs that have very little impact on our top line, basically to reduce complexity.

So we took advantage of this very important project to clean up some -- all the inventory that was there, and that's also included in this figure. So in that regard, this is a onetime. We don't anticipate to move to a new warehouse in the near term, so that's it. It's a onetime. And I don't know if I was able to answer your question, Álvaro, or you want me to expand there?

[Alvaro Garcia, analyst]

No, that's clear. Just to clarify, within that MXN 63 million, you have the sort of old inventory cleanup as well reflected this quarter, right?

[Antonio Zamora Galland, executive]

Yes. Yes, exactly.

[Jorge Brake Valderrama, executive]

Yes. Just to reinforce, it includes also the moving expenses of the Brazilian distribution center to a much better place, as I explained in my remarks. The second question, Álvaro, the U.S. Just quickly going back to 2019. Remember that by late 2019, we agreed in a renewed strategy for the U.S. that we launched at that time, late 2019, early 2020. Unfortunately, the pandemic hit early in 2020, and it kind of slowed down, of course, what we were doing. And but it didn't stop us from launching a few new initiatives, including the launch of Suerox in California in the second semester of 2020. But unfortunately, again, this very, very low -- historically low flu, cold and cough season really affected the U.S. in the first quarter. And Mexico, somewhat too, because those countries were in the winter season.

And so with that in context, I can say that we continue to be very, very optimistic regarding the strategy. We are focusing, as we said, in 3, 4 states that are large so that our efforts can be much more efficient. We, in addition to the initiative that we launched in the second semester, including Suerox that has been very successful. And now we will be going through a process of expansion in the next months.

We approved early this year a set of innovations in different categories that are non related, not related to cough and cold and flu. We want to continue balancing efficiently our portfolio, especially in these countries. And the U.S. is one of those, so that our categories are less "dependent" or our business is less dependent of specifically cough and cold and flu remedies. So you will be seeing these new initiatives that we approved early this year in the market in the second semester. And that will be a battery of initiatives that will bring much more -- it will strengthen our current model there in the U.S. and we'll rebalance the way we are focusing versus, as I said, cough and cold and flu products.

[Operator]

And our next question is from Ben Theurer with Barclays.

[Benjamin Theurer, analyst]

So first of all, congrats on the results. Just 2 quick ones I wanted to hit. So first of all, you've talked a little bit about the gross margin compression, and we saw obviously a little bit of increased input cost. And the one thing we've seen in many areas, be it higher packaging costs, raw material costs, energy costs. So there's a lot of things currently in a more of an inflationary environment. So just wanted to understand what is your expectation in regards to input costs and your possibility to potentially offset those or mitigate those going forward. That would be my first question.

[Jorge Brake Valderrama, executive]

Tonio?

[Antonio Zamora Galland, executive]

Thank you, Ben, for your question. This is Antonio. As we all know, there has been a number of external situations that have happened in the world. The major storm in Texas created a disruption in many hydrocarbon products, gas, ethylene, gasoline, different components that are used in the chemical industry and in the packaging industry. So that created some kind of inflation there, and that obviously has impacted, I would say, Mexico in general, but also other countries, and the U.S.

Then on top of that, there was another situation with Suez Canals that for some time, added more pressure in certain components of certain manufacturers. And let me just give you an example, pallets. One of the largest pallet providers in the Americas is this company called CHEP. And they have problems to source certain raw materials that they require to manufacture those pallets. So the country basically run out of pallets, and that created some pressure on everyone, not just Genomma, but also our competitors, retailers, et cetera.

So again, the Texas situation and the Suez Canal are the things that are, I would say, temporary, that are there. And obviously, everybody is coping with that. We saw some inflation due to these particular situations. I don't expect that to continue for the long run because as prices go up, more companies jump in and expand production. So I think that's going to be somehow short term.

Having said this, obviously, our strategy to cope with input cost inflation has a lot to do with the plant, with a manufacturing facility, that is something that -- where we have placed a lot of energy. And the good news is that the Personal Care plant started operations with 1 line. At this moment, it's just 1 for the beverage business. But we are commissioning the other lines that we expect to have -- to start operations by the end of the first half, second -- end of second quarter. So that's going to give us -- to help us cope with some -- with this input inflation that you described.

Now obviously, we don't have a crystal ball. We think that the Suez Canal situation and the Texas major storm were temporary and that things will get a little bit back to normal. But if -- but let's assume for a moment that, that doesn't happen. Well, that is going to impact everybody's input cost that is not only Genomma, but also the P&Gs, Unilever, Glaxos, the AstraZeneca. So as long as it's level playing field, we are fine. The good news is we have these initiatives to improve our gross margins with the plant. I don't know if I was able to answer your question, Ben.

[Benjamin Theurer, analyst]

Yes. That was very good, Antonio. And then the second one I wanted to ask is around capital allocation. So take a look at your cash balance, we take a look at your leverage. It's fairly low now compared to where we saw some years back. You've done, obviously, a big investment into the new facility, but that's coming to an end as well.

So how should we think aside from what's already out there in terms of share purchases, buyback program, et cetera? How should we think about capital allocation between more buybacks, dividends versus M&A versus organic growth? Just to understand a little bit where is Genomma heading within the next, call it, 2 to 3 years from a capital allocation perspective?

[Antonio Zamora Galland, executive]

That's a great question, Ben. And as we show the market, we want to be very prudent with the use of cash in 2020. We were very prudent, and we were able to refinance ahead of time, the long-term bonds that were outstanding with great success. So that was -- obviously, they were oversubscribed, and that's an excellent signal that at least the fixed income market, which have -- which is much more prudent and more risk-averse bet on Genomma. That was great.

So we want to be very prudent with the use of cash. As we all know, there was a dividend declared by the company some years back. And -- but we decided not to pay it until we have completed the plant, and we could start delivering savings. So yes, the Board is now considering possibly that dividend may come in the future. That's something that has been discussed because that's a commitment to our shareholders. And that also reflects our commitment to generating cash and creating value to the shareholders.

Obviously, there's going to be buybacks. You've seen throughout this quarter that we've increased our buyback program, and we will continue doing so at this moment. Jorge and I are very much involved in the organic and the inorganic growth opportunities. We want to be very -- we want to maximize shareholder value. So everything that we do needs to be accretive, and we want to make the best returns possible.

So it's interesting, your question because there's a number of growth initiatives that are being worked at this moment. Organic opportunities like in the blades and razors category, infant nutrition, et cetera. But we have also other projects that when you consider the invested capital versus the return, it's a very good business. So we are going to continue investing organically because we see a lot of potential there. The buyback program, definitely, that's going to be reinforced because obviously, we think that the current valuation doesn't reflect what the company is worth.

And M&A is something that we are -- Jorge and I are very -- spending a lot of time looking at that, but not only M&A for the sake of M&A and for the sake of buying something. We're also thinking about alliances, strategic alliances and developing new businesses that if we can do it the way we like to do it, it's going to -- it's not going to require a lot of CapEx or goodwill -- investment in goodwill. So that the return on investment capital will be maximized.

It's -- your question, Ben, is excellent because we are approaching a new phase of Genomma. At this moment, we need to focus on making sure that the plant delivers the savings that we planned. With those savings, we're going to generate more cash and with more cash, obviously, there's going to be more opportunities to develop all the different things that you mentioned. That is why we're also considering -- or the Board is considering a dividend, but the decision has not been made yet. But we're just sharing with everybody that capital allocation is clearly going to be a focus, and we want to be accretive, and we want to maximize the return for our shareholders.

Jorge, I don't know if you want to add some comment to this.

[Jorge Brake Valderrama, executive]

Just one comment quickly, Antonio. Just to highlight what you mentioned about inorganic and organic growth. That was part of the question. I think that is a very important topic, and we are really working very hard, a few of us, in the inorganic area of that comment. As you know, we've been growing organically. It's been 2.5 years already, and this year will continue going organically. And we've been doing this in the, let's say, high single digits and profitably because our -- the rate of growth of our profits is even higher than the rate of growth of sales in overall terms.

So we want as part of our strategy for the next, as you know, 3 years, 4 years, is to add an inorganic piece to this growth strategy. So that it will be periods of time in which you can double the rate of growth with solid strong projects. And that's why Tonio and myself, especially are spending a lot of our time talking, discussing, analyzing alliances, partnerships, M&A, et cetera, et cetera. But we will do it in a very responsible way. This new Genomma, when we do something new, it will be something that has high chances of -- or probability of success, and it brings to the company additional, very profitable volume with minimum capital required. But that's the way we are looking at all these projects.

And just examples of Novamil and Groomen are great because we haven't -- we didn't invest in capital on those as you know, because we have partners that provide the manufacturing and the R&D. They are the best in terms of technology in the infant formula and razors. And we provide the rest. We provide the brand, in the case of Groomen, and we input to the project our best skills in marketing, go-to-market, logistics, et cetera. So we'll continue, as I said, doing this. And you will be seeing in the near future, new things related to this focus on inorganic growth also in the near term.

[Operator]

And our next question is from Andrés Ortiz with Crédit Suisse.

[Andrés Ortiz, analyst]

I hope you're well. I would like to ask the relocation of the central warehouse in Mexico. Besides the one-off that you recorded, did you saw some impact in lead times towards your clients? Could this have affected top line growth during the quarter? Do you have some visibility on this? And the second question -- sure.

[Jorge Brake Valderrama, executive]

Go ahead.

[Andrés Ortiz, analyst]

Okay. And the second quarter, if you could give us an update on the product that you launched during last year, particularly those that were -- that you take advantage of the overall situation of the pandemic. How are they doing? What change have you done to that strategy? Are you continue pushing in that regard? And what are your next steps? So those are my questions.

[Jorge Brake Valderrama, executive]

Okay. Okay. Thank you. In the -- in your question regarding the central distribution warehouse move. Yes, I would say that as normal, as you would expect in a move of this complexity and size, we had some effects in terms of our service to the clients at the beginning. That was for the first few weeks in overall terms. But yes, I would say that, that affected fee rate for a few weeks until we stabilize the system and all the processes. Remember that this move is not only to a new place, but it's -- is in theory, a move that would give us more efficiency and effectiveness in what we do from a logistic and service standpoint, in addition to being next to the 2 plants.

So -- but that was a short period of time now. It's under control now. So nothing major, I would say, happened during these times. Yes, we can say that, that fee rate may be that was affected for a few weeks, affected somewhat our sales. But despite that, we were able to catch up a lot of that during the second and third months of the quarter. We don't foresee that will continue being a major issue.

And let me just take advantage of your question because I just wanted to reinforce something that we have said in the past that 2021, we are calling it the year of our supply chain. And we call it the year of supply chain because if just going back to our 4 pillar strategy, you know very well that in the first 2 years, we focused on product innovation and go-to-market. But those were our key priorities to reignite profitable growth. And it worked. It will continue working, and we have worked very hard in perfecting well how we do innovation and how we improve the way we win at the point-of-sale with our go-to-market.

This year, which is the third year of the strategy is the year of the supply chain together with the start-up of the plants, of course. So just to remember the group -- remind the group that in late 2020, we started upgrading our supply chain team in all fronts. We hired a couple of very experienced plant managers, directors, 1 for OTC and 1 for Personal Care, and they are there up and running already. They have more than 20 years of experience in their respective categories. We hired a new quality control corporate director, with lots of experience also in both types of businesses or categories. We hired early this year a new purchasing director that also comes with great experience in multinationals in his previous life. We have hired a new demand planning person that is bringing this process to the next table -- next level, et cetera, et cetera.

So if you think about all of those interventions, the new plant, the plant that we have with all our key suppliers so that we continue optimizing not only the size of the suppliers, the amount of the suppliers, but also the processes and all these new people that we have brought. We are betting that by the second semester of this year. We will be talking about a totally renewed, redesigned, much improved and efficient supply chain as a whole, from the day where we forecast demand to the day we go and deliver the product to the point of sales. All that change is being taken to the next level.

So that's great news. And we are very excited about the work that is being done on that front. And that is the thing that in addition to the talks of optimization that the plant will bring, we are also expecting great efficiencies from our interventions in the whole supply chain model.

[Antonio Zamora Galland, executive]

Okay, if I may add, and thank you, Andrés, for your question. When you move the central warehouse from one location to the new location, it's obviously a very, very complex project. As I said -- as we said before, it involved more than 140,000 man hours, which is a lot. And obviously, you want to plan and try to make it perfect. So what we did is plan in advance and ship products to our clients in advance. So during the few days of the blackout, the sellout would not suffer at that point of sale, consumers would find the products that they need that they want them because our clients would have enough inventory. And by doing those spaces that the blackout took place, obviously, there could be an occasion where a consumer goes to a point of sale, and they don't find the Tío Nacho that they want. And obviously, that sale was lost, okay, because it wasn't there.

So the -- I mean, your specific question was, do you think sales could have been higher if you hadn't relocated during the quarter. And the answer is, yes, a little bit. Not so much because the planning, I think, it was done really well. And so the impact was not huge. However, we do need to acknowledge that there was more demand of certain brands that simply the product wasn't there for a few days, but the black out took place. That happened a little bit with Tío Nacho. That also happened with our blades and razor business, as Jorge described, has been really, really successful, and we could grow significantly more. We're probably more successful than what we had anticipated. So there's some supply chain improvements that we need to make.

So I'm just saying this because when you look at your model and obviously, Andrés, you're making this question to try to see if you need to calibrate your model or not, I think there's more demand in certain categories. There's opportunities there, and the team is clearly committed to catch up and to cover those minor gaps, I would say, during the first quarter. So that's going to be covered in the rest -- in the balance of the year. Again, we are very proud of what the team achieved in moving very a complex operation from one side to the other and do the same thing in our another major market like Brazil. So the impact was not much. But again, your question is, could you have had a slightly higher growth? Possibly, yes.

[Operator]

And our next question is from Rodrigo Alcantara with UBS.

[Rodrigo Alcantara, analyst]

Just a quick one here, if I may. So in previous meetings, Jorge, we have discussed about this midterm objective target to double sales by 2024. So I was wondering if based on what we saw in this first quarter trends that you're looking at for 2021, if you could help us reconcile or make sense of this target. That would be my question.

[Jorge Brake Valderrama, executive]

It's related to what I said a few minutes ago, is that we think that vision are planned to include inorganic growth, but we are basically not seeing in this first 2.5 years, all of the strategy. And we plan to continue growing organically behind our 4 pillars, our strategy and that will continue being probably around the high single digits in overall terms. And we need to add inorganic growth, new businesses, and that's part of what Tonio and I are looking for. I'm sure you will start seeing the contribution of those new things as soon as before the end of this year. And those will continue in the next 2 to 3 years, so that we can achieve these numbers.

So it's not -- it wouldn't be possible to achieve it with only what we are doing today. We need to get into this new business opportunities that we are assessing. Plus the growth of the new things that we launched last year, like Novamil and Groomen expansion to other countries, et cetera, et cetera. So that is what is included in the whole vision.

[Rodrigo Alcantara, analyst]

That's very helpful. So in summary, we should expect like similar agreements such as the one with UP, which is only a distribution agreement. So this would be it? Or what...

[Jorge Brake Valderrama, executive]

I would say that you will see 3 different type of things happening. You will see us launching new brands or own brands like we did with Groomen and we are finalizing several projects from that standpoint. You will also see agreements, licensing agreements like the one we have with UPI. You will see others that are -- also we are right now working on. And you will see some M&A, too. We are also looking some opportunities of brands that are maybe very important accretive to what we have in our portfolio today. Always with shareholder value in mind, but you will see things coming from those 3 fronts.

[Operator]

And our next question is from Nicolas Larrain with JPMorgan.

[Nicolas Larrain, analyst]

I had 2 actually. The first one more related to the first quarter. If you could help us to understand how relevant the cough and cold category is during first quarter so we have like a better grasp of how much it actually suffered. And also thinking about the plant you guys have been ramping up in several production lines. I was just wondering how has this ramp-up been performing. Has it been according to your expectations in terms of speed? So I just wanted to get your 2 sense on how the ramp-up is going on the Personal Care front.

[Jorge Brake Valderrama, executive]

Okay. Let me take the first question, and we'll answer the second together with Tonio. Oh, let me start for the plant. I think that will be better. The ramp-up of the plant has been very, very fluent, I would say. We have had several weeks already in the last 2 months, I would say, March and April, basically since February, of a clear ramp-up in the production of Suerox. Suerox has gone for a few thousand battles to millions now on a weekly basis and it's already been shipped to our clients in Mexico. So -- and we still are planning to go to the maximum capacity in May. So in May, we should achieve maximum capacity in the Suerox line in overall terms.

And also in the next month or 2 months, we will be seeing the start of pallet brands in the shampoo lines. Those are being finalized and assembling, and you will see first Vanart, and after Vanart, you will see Tío Nacho, and those are already under works so that they can start production in a few weeks. Tonio, anything else in the plant?

[Antonio Zamora Galland, executive]

I think you [indiscernible].

[Jorge Brake Valderrama, executive]

Okay. I'm sorry, what was the first question, I'm sorry?

[Antonio Zamora Galland, executive]

It was how relevant...

[Nicolas Larrain, analyst]

Yes, it was on the -- on how relevant cough and cold is in the first quarter. Yes.

[Jorge Brake Valderrama, executive]

I would say that if the cough and cold flu season in the U.S. and Mexico would have been normal, just normal, and we will hold exactly what we saw the previous year, that would have added a couple of growth points to the top line. So that's something that Tonio and I calculated. And the number of the growth will be between 8% and 9% instead of 6.4%.

[Antonio Zamora Galland, executive]

Yes. Nicolas, the -- expanding on Jorge's comment. We've -- if you look at previous reports in prior years, we always talked about the winter season over the winter season, winter season for Q4, Q1, et cetera, because we have very relevant products for cough and cold. We have the Tukol syrup. We have -- Next, we have Tafirol, we have Alliviax. We have a number of brands and a number of categories that are extremely relevant. And by the way, they are very highly profitable.

So let's put it this way. If we had just followed the macro trend, just following the macro trend and you look at the statistics from the CDC in the U.S. and same thing is happening in Mexico. Basically, there's no flu. It disappeared. And there's -- I haven't seen anyone getting a call in my family or relatives or friends, et cetera. It's a unique phenomenon where -- because people are socially distancing, use -- wearing masks, washing their hands, taking a lot of vitamins, not using public transportation, et cetera. It's like if that cough and cold and the flu just disappear from earth, okay? And that's happening in the Northern Hemisphere, obviously, in Southern Hemisphere. It's different because you're now in the summer.

So it was really drastic. Again, if we had just followed the macro trends, this could have been a very bad quarter. The good news is that whenever there's a challenge, Genomma leadership team is flexible enough to say, well, this is happening. What are we going to do? So let's try to conquer some other categories. Let's expand market share in other businesses, in other countries, et cetera. And what you've seen is a remarkable growth in Latin America.

So okay, the Northern Hemisphere is having this situation that impacted the U.S. heavily. In the case of Mexico, we have placed resource infant formula isotonic beverage. So we expanded our commercial strength in those categories. And Mexico did well. But then we also said we need to cover the gap. So let's put a lot of more energy in Latin America, and the growth was remarkable, especially taking into consideration the that we have to cope with ForEx headwinds, significant headwinds in the largest markets in South America.

So with these comments, what I'm trying to say is that, yes, we were impacted. As Jorge said, if the cough and cold season or the winter season or the influenza, the flu, et cetera, would have been normal, our results would have been a lot better. But the good news is that Genomma is flexible enough it's very well diversified in terms of geographies, in terms of categories that whenever we find a challenge, then we try to find a way to cope with it and keep on growing and keep on generating profits and cash flow so that we keep on adding value to our shareholders.

And that's the beauty of a business like Genomma, where we are present in 18 countries in so many categories that we can do that, and we have the flexibility and the culture. Jorge always talks about the fourth pillar, which is culture, of a team that says, yes, we can do it. Okay, this challenge is major, we can do it now.

The other question that you might have is what is going to happen with the flu season next year? Well, nobody knows. Nobody knows. We expect the world to be more normal and people to get more vaccinated. And so the people going to the office and traveling and this and that. So we expect a much more normal winter season next year, and that's going to be positive. So I just wanted to expand those comments Nicolas. I hope they help.

[Jorge Brake Valderrama, executive]

Just a quick comment to close our answers is that the fact that we had great growth coming from Latin America also helped the profit mix because our margins in Latin America are very healthy, higher than the average of the company. So that was good news, too. Thank you.

I think we don't have any more questions. So I will go ahead with my closing remarks.

Thank you, everyone, for joining us today. We are encouraged by the underlying positive signs that our strategy is taking hold. While COVID and the related soft peak flu season have had an outsized impact on our overall results, we are very well positioned to capitalize on exciting opportunities as life begins to return to normal. We are confident in our strategy, the results we are currently seeing and energized by our efforts. We look forward to continue to drive progress on our key strategic initiatives, and we are embracing our critical role in helping our customers have amazing health and well-being. Thank you, everyone.