Genomma Lab Internacional (LABB) Q2 2024 earnings summary

Executive summary

• Achieved strong Q2 2024 results with significant profitability improvements and margin expansion, driven by productivity initiatives and manufacturing efficiencies.

• Net income rose 51.3% year-over-year to MXN 631.6 million, and EPS increased by 54% to MXN 0.63, supported by higher operating income and a 20 million share cancellation.

• Sales grew 6.4% in MXN to MXN 4,652 million, with like-for-like sales up 5.8%, and 78% of sales outpacing inflation.

• EBITDA margin expanded to 22.9%, up 186 basis points, reflecting productivity initiatives and manufacturing cost efficiencies.

Financial highlights

• Gross margin reached 64%, up 7.1 points over the past 1.5 years, with gross profit increasing 11.7% to MXN 2,978 million.

• Operating income rose 12.9% to MXN 983.3 million, representing 21.1% of sales.

• Free cash flow for the trailing twelve months increased 35% to MXN 1,806 million, converting 10.8% of TTM net sales.

• Cash and equivalents at period end were MXN 1,233.4 million.

• Cash conversion cycle extended to 122 days (or 105 days excluding Argentina), mainly due to supplier term reductions and advanced raw material purchases.

Outlook and guidance

• On track to deliver 23%-24% EBITDA margin in Q4 2024, with margin expansion plans expected to be sustainable.

• Focus remains on strengthening core brands and achieving MXN 1,800 million in annual cost savings by 2027.

• Mexico expected to maintain 11%-12% sell-out growth in the second half, with a strong winter season anticipated.

• Continued quarterly dividend payments are planned.