Becle (CUERVO) Q3 2024 earnings summary

Executive summary

• Net sales rose 3.9% year-over-year to MXN 10.9 billion, despite a 7.2% decline in consolidated volumes, driven by premiumization and FX benefits.

• Gross margin expanded by 500 basis points to 53.1%, and EBITDA margin by 830 basis points, supported by lower agave costs, FX, and product mix improvements.

• EBITDA surged 82.7% to MXN 2.1 billion, and net income jumped 338.2% to MXN 907 million, with net margin at 8.3%.

• Premium tequila and whiskey brands led growth in the U.S., Canada, and Asia, while Europe and Mexico faced headwinds from consumer spending and macroeconomic pressures.

• Premiumization, favorable FX, and a strong brand portfolio offset market headwinds and volume declines.

Financial highlights

• U.S. & Canada net sales grew 11.7% year-over-year, despite a 2.7% volume drop, driven by premium brands and FX.

• Mexico net sales fell 15.1% due to a 14.6% volume decline amid market contraction and inventory adjustments.

• Rest of World net sales increased 4.6%, aided by premiumization and currency translation, despite an 11.5% volume drop.

• Net financial result was a loss of MXN 564 million, improved from a loss of MXN 604 million in Q3 2023, aided by higher interest income and FX hedging.

• Cash and cash equivalents stood at MXN 9.1 billion, up MXN 5.1 billion year-over-year; total debt at MXN 26.5 billion.

Outlook and guidance

• Full-year net sales value growth expected in the low single digits for 2024 at constant currency.

• A&P spend projected at the lower end of 21%-23% of net sales; 2024 CapEx guidance reduced to $110-$130 million.

• Q4 expected to remain challenging, especially in the U.S., with focus on inventory management and premiumization.

• Management focuses on maintaining momentum and positioning for a strong start to 2025, despite challenging market conditions and evolving consumer behavior.