Becle (CUERVO) Q2 2024 earnings summary

Executive summary

• A fire incident at the La Rojeña factory was contained to a single processing area, with no expected material financial impact or disruption to production and inventory; safety and support for employees and communities remain a top priority.

• Net sales rose 0.8% year-over-year to MXN 11.1 billion, with gross profit up 7.7% and EBITDA up 20.2%, despite a 4.2% decline in volume and a 62.4% drop in net income due to FX losses.

• Premiumization, innovation, and lower agave prices offset macroeconomic headwinds and trade destocking, especially in key tequila markets.

• Management remains cautiously optimistic for the second half of 2024, confident in meeting full-year guidance.

Financial highlights

• Consolidated net sales increased by 0.8% to MXN 11.1 billion; on a constant currency basis, net sales grew 3.1% year-over-year.

• Gross profit rose 7.7% to MXN 6.1 billion, with gross margin up 350 basis points to 54.3%.

• Operating income increased 23.7% to MXN 2.04 billion, and operating margin expanded to 18.3% from 14.9%.

• EBITDA grew 20.2% to MXN 2.3 billion, with margin up to 20.7%.

• Net income declined 62.4% to MXN 501 million, mainly due to a MXN 1.1 billion non-cash FX loss.

• Cash and equivalents reached MXN 9 billion, up MXN 4.7 billion year-over-year.

Outlook and guidance

• Full-year net sales value growth expected in the mid-single-digit range, assuming an exchange rate of 17.5 MXN/USD.

• AMP spend guided at 21%-23% of net sales; 2024 CapEx expected between $160 million and $180 million.

• Ongoing focus on premiumization, inventory optimization, and leveraging lower agave prices to improve profitability.

• Management expects to deliver on full-year guidance, leveraging premiumization and innovation to counteract sluggish industry consumption and macroeconomic challenges.