Arca Continental (AC) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales rose 4.7% to MXN 58.7 billion, with EBITDA up 7.5% to MXN 12.2 billion and net income up 15.2% to MXN 5.54 billion; 1H24 net sales increased 2.5% to MXN 109.4 billion, EBITDA up 4.6%, and net income up 8.8%.

• Q2 EBITDA margin reached 20.7%, the highest for a Q2 in seven years, and net profit margin expanded by 80 basis points.

• Strong performance in Mexico offset volume declines in South America and the US, with Mexico achieving its highest Q2 volume since 2011.

• CEO credits execution, price-pack strategy, and raw material management for strong results.

• Focus remains on digital transformation, supply chain improvements, and expanding into new categories.

Financial highlights

• Q2 gross profit increased 7.1% to MXN 27.6 billion, with gross margin up 110 basis points to 47.1%.

• Q2 operating income was MXN 9.9 billion, up 8.3%, with a 60 basis point margin expansion to 16.9%.

• Q2 EBITDA margin reached 20.7%, net margin at 9.2%; 1H24 EBITDA margin at 19.9%, net margin at 8.4%.

• 1H24 net operating cash flow was MXN 16.9 billion; CAPEX at MXN 5.86 billion.

• Net income for the first half totaled MXN 9.2 billion, up 8.8% year-over-year.

Outlook and guidance

• Expectation of low single-digit growth for the rest of the year, with a focus on maintaining profitability and continued investment in digital tools, supply chain, and new production lines.

• Pricing in Mexico for 2024 expected to be at least in line with consumer inflation.

• Cautious optimism for Argentina's potential recovery in 2H24 and continued growth opportunities in all markets.