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Earnings call: Alfa announces strategic growth and debt reduction plans

EditorAhmed Abdulazez Abdulkadir
Published 10/31/2024, 09:05 AM
© Reuters.
ALFAs
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Alfa's Third Quarter 2024 Earnings Conference Call, led by CEO Álvaro Fernández, unveiled a major organizational shift as the company completed its transformation into a single business structure by merging with Sigma. The reorganization enables Alfa's four business units—Nemak, Axtel, Alpek, and Sigma—to operate autonomously, positioning them for fair market valuations.

Alfa has secured the support of over 91% of bondholders for a planned $400 million capital raise to lower its debt. Alpek's EBITDA forecast for 2024 increased by 13% to $675 million, reflecting a strong recovery, while Sigma achieved a record EBITDA for the third quarter in a row due to solid performance in Mexico and the U.S. Sigma's growth is fueled by new initiatives in plant-based products and e-commerce.

The spinoff of Alpek, set for listing on the Mexican Stock Exchange in 2025, was approved with no expected fiscal impact, thanks to accumulated losses. The call highlighted Alfa's robust financial results and strategic direction for future expansion.

Key Takeaways

  • Alfa restructured into a single business entity, merging with Sigma, to allow independent operation of its four business units.
  • The company plans to raise $400 million to reduce debt, with strong bondholder backing.
  • Alpek's EBITDA guidance for 2024 was raised by 13% to $675 million, and Sigma reported record EBITDA.
  • Sigma's growth strategies include new plant-based products and e-commerce expansion.
  • The Alpek spinoff was approved with shares to be listed on the Mexican Stock Exchange in 2025, with no fiscal impact due to accumulated losses.
  • Alfa is committed to maintaining an investment-grade rating and will approach future acquisitions with caution.
  • Sigma will guarantee Alfa's $500 million bond and $200 million in bank debt.
  • A $97 million tax benefit from the Alpek spinoff will be reflected in Alfa's fiscal results upon completion.

Company Outlook

  • Alfa aims for strategic focus and value realization through the transition to independent business units.
  • The company is committed to maintaining an investment-grade rating for Alfa, Alpek, and Sigma.
  • Future acquisitions will be approached cautiously to ensure alignment with strategic goals.

Bearish Highlights

  • Potential FX volatility in Mexico could impact margins, though management does not expect major disruptions.
  • The company is considering divestitures of non-core assets as opportunities arise.

Bullish Highlights

  • Sigma's robust performance in Mexico and the U.S. is driving record EBITDA results.
  • Growth initiatives, including plant-based products and e-commerce platforms, are expected to contribute to Sigma's expansion.
  • Alpek's raised EBITDA guidance indicates a strong recovery.

Misses

  • There were no specific misses discussed in the earnings call.

Q&A Highlights

  • Management addressed debt questions, confirming Sigma's guarantee for Alfa's bond and bank debt.
  • The anticipated leverage ratio for the combined entity is expected to be around 2.5x by year-end.
  • There was no mention of specific questions or answers provided during the Q&A session.

In summary, Alfa is navigating a period of strategic transformation and financial optimization. The company's focus on independent operations for its business units and careful capital allocation reflects a prudent approach to growth and value creation. With the planned capital raise and debt reduction strategies, along with Sigma's promising growth initiatives, Alfa is positioning itself for a strong future in its various markets.

Full transcript - None (ALFFF) Q3 2024:

Hernan Lozano: Good day everyone and welcome to Alfa’s Third Quarter 2024 Earnings Conference Call. Further details about our financial results can be found in our press release, which was distributed yesterday afternoon together with a summarized presentation. Both are available on our website in the Investor Relations section. Let me remind you that during this call we will share forward-looking information and statements, which are based on variables and assumptions that are uncertain at this time. It is my pleasure to participate in today’s call together with Álvaro Fernández, Alfa’s Chairman and CEO; Eduardo Escalante, Alfa’s CFO; and Roberto Olivares, Sigma’s CFO. I will now turn the call over to Álvaro.

Álvaro Fernández: Thank you, Hernan. Good day everyone and thank you for your join us. I’m happy to be speaking with you today as we present the single business structure we have been envisioning since 2020, in which Alfa is Sigma. Over the past few years, Alfa has effectively transformed its 50-year-old conglomerate structure into four separate business units with leading positions in their respective industries. This organization is providing our shareholders with full flexibility to balance their ownership stakes in Nemak, Axtel, Alpek, and Sigma. By having complete independence from one another, each of these four businesses has the opportunity to achieve a fair valuation base on its individual merits and potential. This is particularly important for Sigma, to which the investment community will soon have direct access in the Mexican Stock Exchange. It is encouraging to see that Alfa’s share price rising as we move closer to the final structure. This increase reflects a portion of the attractive value opportunity concentrated around our branded food business. A number of essential conditions had to be fulfilled for us to finally spin-off Alpek, especially over the past year. Fortunately, we received overwhelming support from all parties involved. We’re raising $400 million in capital to reduce debt as we have obtained consents from more than 91% of Alfa’s bondholders, both of which provided the necessary clarity to move forward. The capital increase was oversubscribed by more than 2.6 times, offering shareholders a great opportunity to benefit from the upside of the transformation process through a subscription price of 10.75 pesos. Building on these key milestones, just last week Alfa shareholder approved our proposal to implement the last spin-off. We are pleased to have reached this stage for Alfa’s transformation with a remarkable turnaround in our petrochemical business, which reported its highest quarterly comparable EBITDA since 2022. These results prompted Alpek to raise its full year guidance by 13% to $675 million driven by improved reference margins and stable demand. Alpek has the capabilities to extend its full track record as an independent entity. Led by its experienced management team, the company has delivered growth and strong cash generation in every stage of the petrochemical cycle, supported by a highly competitive asset base. The timing is also right for Sigma to benefit from the simplification of Alfa’s corporate structure. Sigma has been proactively enhancing its leadership position as it expands its core, integrates accretive acquisitions, improves profitability of its European operations and steps up its efforts to develop new sources of revenue with disrupted capital growth. Sigma’s diversified portfolio of leading brands across all its product categories, multi-channel distribution in 17 countries and consumer centered innovation offer a unique opportunity in the resilient food sector. We anticipate that these factors will align our valuation multiple with our global food peers, highlighted by the simplified Alfa Sigma structure. I will now turn the call over to Roberto to discuss Sigma’s third quarter results.

Roberto Olivares: Thank you, Eduardo. And good afternoon everyone. Today I am delighted to discuss our outstanding results, highlight key regional achievements, share our progress in our growth initiatives and unveil a pivotal new phase for Sigma. To begin with, our performance this quarter has been extraordinary, achieving an all-time high in consolidated EBITDA for the third consecutive quarter. It’s also our 14th consecutive quarter of year-on-year growth reflecting solid consumer preference, leading to record breaking volume. This consistent growth across all regions exemplifies our robust operational success. We are closely monitoring market conditions, but our better than expected progress support an estimated $50 million further upside on our 2024 EBITDA guidance. Looking at our regional highlights, Mexico continues to demonstrate a strong trajectory with three consecutive quarters of record volume and EBITDA. Growth continues across all channels and categories, reinforcing our market leadership and deepening our connection with consumers. In the U.S. and Latin America, all-time high sales and volume have led to significant margin expansions. This performance was driven by our Mainstream and Hispanic brands in the U.S. and by robust results in Costa Rica and the Dominican Republic in Latin America. Europe, meanwhile is steadily progressing towards recovery supported by operational efficiencies that have delivered the highest third quarter EBITDA since 2021. On the strategic front, we’re actively making progress in developing new sources of revenue aligned with our long-term goals. We have recorded substantial year-on-year quarterly revenue growth in various of growth initiatives. These initiatives include Better Balance, our plant-based protein brand; Snack’In For You and our B2C e-commerce platforms. We’re also advancing in the pilot phase of Netport, our distribution business that connects Mexican and Latin American companies with U.S. consumers. As part of this effort, we launched a new brand, Mucho Gusto, featuring heritage and novelty products designed to meet their rapidly growing Hispanic cooking needs. While these are currently a small portion of our revenues, each initiative has promising potential to be scaled up over time and complement our core business, supporting sustainable long term growth as we move forward. As we look forward, we’re embarking on an exciting new chapter at Sigma. After supporting Alfa’s transformation process through EBITDA expansion and contributing to the constant solicitation process by bringing bondholders closer to Sigma via guarantees. We have reached a pivotal moment. Equity investors will have the opportunity to invest directly in our business. This marks a significant milestone in our journey and opens new avenues for value creation. To wrap up, we are encouraged by the progress made by the Sigma team and look forward to what lies ahead. We’re committed to maintaining this momentum and are optimistic about the future. Thank you all for ongoing support and trust in Sigma. I will now turn the call over to Eduardo for additional comments and closing remarks.

Eduardo Escalante: Thank you, Roberto. Let me begin by discussing guidance. With respect to Alfa, following the spin-off approval and considering that Alpek is now reported as a discontinued operation, we will no longer be issuing a consolidated guidance. Reflecting a strong third quarter results, Alpek’s 2024 EBITDA guidance has been revised upward and Sigma is optimistic about its full year estimates. Going forward, Sigma accounts for Alfa’s consolidated results. Next, let me discuss two accounting items. The first one is related to discontinued operation and its effect on Alfa’s PV EBITDA. While Alpek is reported as a discontinued operation, Alfa’s EBITDA will reflect a temporary reclassification impact. This is mainly associated with services that Alfa provides to Alpek on an arm’s length basis. The net impact of discontinued operations with Alpek will be disclosed as an extraordinary item for compatibility purposes while the spin-off concludes at which time this effect is eliminated. As reference, the accumulated net impact of $11 million explains the difference between Alfa’s EBITDA and comparable EBITDA in 2024. The second accounting item involves a change in methodology related to the ownership stakes of the holding entity in its subsidiaries, including Alpek and Sigma. Pursuant to IFRS 12, 7 and 9, as of August, we adopted the firm market value method for the holdings individual financial results, replacing the equity method used previously. We opted to implement this change given that the fair market value method reflects a proportion of value among the subsidiaries that is aligned with current market conditions. The accumulated effect associated with this change in methodology turned third quarter consolidated majority net income into a $2 million loss. Next, I would like to make some further comments about the transformation process. We are paying down parent-level debt totaling $575 million with proceeds from the capital increase and cash dividends obtained from both Alpek and Sigma. Share allocation notices related to the capital increase have been distributed to custodians and we expect to have the proceeds by November 4th. Investment grade credit ratings were affirmed by Fitch, Moody’s and Standard & Poor’s for Alfa, Sigma and Alpek. Most recently, Standard & Poor’s raised its outlook to credit watch positive for Alfa and Sigma. A brief overview of the Alpek spin-off, the structure and process that Alfa undertook for the spin-offs of Nemak 2020 and Axtel in 2022 will be the same for Alpek. Shareholders approved the spin off to be executed by forming a new entity called Controladora Alpek as the spun off company. These new company shares will be listed on the Bolsa Mexicana de Valores. Next, Alfa will transfer its entire share ownership of 82% in Alpek to Controladora Alpek. And finally, Alfa shareholders will receive one share of Controladora Alpek for each of their Alfa shares, while also maintaining the Alfa shares. Let me discuss timing, this process formally kick off with the spinoff approval at Alfa’s extraordinary shareholders meeting on October 24. Among other requirements, Controladora Alpek will need to complete a registration and listing approval process with the Mexican Banking and Securities Commission. Upon completion of this registration process, Alfa will issue a share distribution notice to its shareholders and distribute the new shares. Alfa will work with all relevant parties to complete the spin-off process as quickly as possible. We expect the process to be completed in 2025. This concludes my remarks. We are now available to take your questions. Please, Hernan.

Hernan Lozano: We would like to begin the Q&A session with questions on Alfa. Álvaro, Eduardo and I will take questions on Alfa or corporate matters. As a reminder, Sigma and Alpek will be available to answer individual questions later in the Q&A session. Operator, please instruct participants to queue for questions on Alfa’s.

Operator: [Operator Instructions] Our first question comes from Ricardo Alves of Morgan Stanley. Please, sir, go ahead.

Ricardo Alves: Hello everyone, thank you so much for the call, impressive numbers. I have two questions, one for Sigma which I’m going to ask later. The other one, it’s for Alfa, it’s also related to Sigma, but the forum here seems to be the correct one to ask this question because it’s related to capital allocation. There were news article published couple of – a few days ago listing Alfa through the Sigma subsidiary among companies potentially interested in buying assets in the U.S. I know there’s probably not a lot that you can discuss around the press reports, but given the very important timing on the investment narrative around Alfa today, the corporate simplification process, the capital increase, the spinoff that you just very well educated us again on the call right now. Given all of that, the news was kind of surprising to some investors. So I just wanted to take the opportunity to ask you to give us an update on your current views on capital allocation and priorities for the company. Perhaps a good opportunity for you to be addressing potential divestment from non-core assets that you may have in mind. So just taking the opportunity of the news that was published to get your most recent update on capital allocation and priorities for the company. Thank you very much.

Eduardo Escalante: Sure, Ricardo, thanks for the question. This is Eduardo. Regarding the published notes, the recent one, we – as you already mentioned, we have no comments on this matter. However, let me make a couple of points. First of all, we and Alfa focus on completing the Alpek spinoff and the capital increase. We are in the middle of those processes, so we are looking forward to finishing them as soon as possible. In addition to that, I think it’s also important to point out that as we have shown during all this process, we are firmly committed to the investment grade not only on Alfa, but in each and every one of the companies, meaning Alpek and Sigma. So we will continue to be extremely careful in each step that we take regarding any potential future acquisition with this issue. And specifically in the case of Alfa, the next steps in Alfa, in addition to finalizing the processes that I just mentioned really are housekeeping items. Housekeeping items in terms of finalizing the cleanup at the Alfa, at the Alfa Holding in order to continue focusing exclusively within Alfa to the operation of Sigma. And having said that, let me turn the call over to Roberto for see – if he wants to make any additional comments regarding the published note.

Roberto Olivares: Thank you. Thank you, Ricardo. I think in line to what Eduardo mentioned, no comments or reactions on the news, but happy to discuss any questions regarding the performance of Sigma during the quarter and particularly our involvement in Alfa’s transformation process. Thank you, Ricardo.

Ricardo Alves: Absolutely. Thank you so much, Eduardo, and Roberto. I’ll get back to in more details on Sigma later on the call. Thank you so much.

Eduardo Escalante: Thank you.

Operator: Our next question comes from Andrés Cardona of Citi. Please, sir, go ahead.

Andrés Cardona: Hi, good morning, Álvaro, Eduardo, Hernan. Let me ask you about the potential tax payment, you will have to do when the Alpek spinoff is completed. As far as I understand, the reference price was settled as of October 24. So maybe you could already guide us about the size of this potential payment or clarify if I am misunderstanding the situation. Thanks.

Eduardo Escalante: Sure. Andrés, this is Eduardo and thanks for the question. You’re right. The actual price at what fiscally the spinoff is valued is the last transaction of October 24. So that’s what will be used. What we can disclose at this time is that we expect no fiscal impact regarding the spinoff of Alpek since we will be able to cover the impact using losses that we have accumulated at the at the holding company, in particular the spin-off of Axtel, as we have discussed in the past.

Andrés Cardona: Thank you. Thank you, Eduardo.

Eduardo Escalante: You’re welcome.

Operator: Our next question comes from Emilio Fuentes of GBM. Please, sir, go ahead.

Emilio Fuentes: Hi. Thank you for taking my question. I have further questions on Sigma, but as for now, I’m wondering what will happen to the holding structure post OpEx spin-off and if you have any current plans on Alfa’s other assets, what will happen to them? Or will they be transferred to Sigma? Thank you.

Eduardo Escalante: Thank you, Emilio. This is Eduardo again. Let me talk a little bit about the way we see the holding company. We still have some services that are provided by personnel here in the holding company, mainly related to issues of the holding company, accounting, reporting and this process, the outside of the restructuring process that we’re going through. We plan to reduce those internal functions going forward as soon as possible. That’s what I was referring to as housekeeping items going forward in one of my previous comments. We do provide very few services to the companies, including Sigma. And all those services are provided today on an arm’s length basis. They receive those services and we expect going forward to reduce them significantly and basically disappear them as we continue doing. We have been doing the last few years, since 2020, moving people from Alfa to the companies, to each one of the companies in order for them to be fully complete in terms of having their functions, the areas in house.

Álvaro Fernández: If I may add to that, the idea is to have the four businesses, Axtel, Alpek, Sigma and Nemak as fully independent companies. That’s the whole idea. I guess, the other big asset that we still have here is the land that we have here at the corporate offices. Just to remind you this office is not only used by Alfa, it’s used by some of the people here at the corporate offices by some of the companies. And as Eduardo said, this is an arm’s length basis but we charge them rent for these offices but they are free to move to any other place they want. And this is just why the corporate offices or the land is. We’re in the process – actively in process of valuing it and deciding what we’re going to do to it. We believe that there’s the possibility to develop it or to sell it as is. But I would like to ask you not to concentrate on that. I think we have finally made the four companies independent and I think that’s what is important. I guess the right word is being used here is housekeeping aspects that we will do in the next few months to finalize everything and have the companies become completely independent.

Emilio Fuentes: Thank you. May I have a follow-up question? Regarding fiscal credits will there be any remaining credit on the holding post spinoff?

Eduardo Escalante: No, Emilio. The plan is to pay down a debt at the holding company and we – we do have some additional fiscal credits in the holding company, which we will see if there is use for them going forward.

Emilio Fuentes: Thank you. Very clear.

Eduardo Escalante: You’re welcome.

Operator: Our next question comes from Nicolas Riva of Bank of America. Please sir, go ahead.

Nicolas Riva: Thanks very much. Hernan and management team for the chance to ask questions. I have three questions. The first one is going back to an earlier question about the M&A. The news really related to potential M&A of Sigma being potentially interested in Oscar Mayer in the mix business of craft and you have addressed it to some extent. In my case, again, I would be given that right now both Alfa and Sigma are very focused on this spin-off of Alpek and as you said keeping the investment grade ratings of both Sigma and Alfa. I would be surprised of Alfa and Sigma pursuing such a large M&A in the sense that the numbers I think referenced by Reuters in that article were $300 million in annual EBITDA potentially 10x EBITDA for enterprise value $3 billion. That definitely will have an implication in terms of ratings for both Alfa and Sigma. So again any additional comment regarding this would be useful. Second, I know Sigma is going to be guaranteeing the $500 million on the 2044 bonds of Alfa. Any additional debt that Sigma will be guaranteeing of Alfa besides the $500 million on the 2044’s? That’s my second question. And then my third question. As you said, you are not providing financials for Alfa considering Alpek discontinued operations. So we can see leverage excluding Alpek. The number that I have seen for net debt is $2.8 billion. And from memory, I believe that was going to be the net debt of Alfa, including debt repayment at the holding company level of about $500 million. Now we are including $575 million. But anyway, I thought that $2.8 billion in net debt excluding Alpek was going to be reached only after repaying these $500 million in debt at the holding company. So I wanted to ask about reconciling the figure provided before and now this figure, because I would assume that you haven’t included yet as of September, the debt repayment at the holding company level using the proceeds from the capital increase and from the dividend from Alpek. Thanks.

Hernan Lozano: Hi Nicolas, this is Hernan. Thank you for your question. Regarding the first item about the news, sorry, but we have no comment about that topic. So we’ll move on to your other two questions and for that I’ll ask Eduardo to jump in, please.

Eduardo Escalante: Sure, Hernan. And thanks Nicolas for bringing these topics. Regarding the guarantee, the way we look at the debt that still remains, but it will remain at the holding company after we pay down the $575 million coming from the capital increase and the dividends from Alpek and Sigma. We look at that debt together with the debt of Sigma as one entity. We see Sigma now together with Alfa as one entity, with one debt of which Sigma will be handling financially. Regarding expected leverage for the combined entity, we do expect, after we finish this pay down of debt to have the combined entity very close at the end of the year, very close to 2.5x, which is the target that we have set up to maintain for the company. It will, of course, depend on the performance and results of Sigma during the fourth quarter, but we are confident that we will move very close to two and a half times.

Nicolas Riva: Okay. But one follow up there. At the end of September with these numbers you had not yet included the debt repayment of the $575 million at the holding company level, is that correct?

Eduardo Escalante: Correct. And the reason is very clear. We haven’t received the $400 million capital injection, which we expect to have by November 4th. We did include the dividends from Alpek and from Sigma that were paid before the end of the quarter.

Nicolas Riva: Okay. And just one more follow up, given that for now Alfa and Sigma are two separate entities. Just to clarify, the debt from Alfa that is going to be guaranteed by Sigma is going to be the $500 million on the 2044 bond of Alfa. And what else?

Eduardo Escalante: $200 million of a bank debt.

Nicolas Riva: Okay, thanks very much.

Eduardo Escalante: You’re welcome.

Operator: Our next question comes from Andrés Ortiz of BTG Pactual. Please sir, go ahead.

Andrés Ortiz: Thank you. Thank you, Álvaro and Eduardo. Just a quick question on my side. Looking at the financials, I see a tax benefit at the Alfa level this quarter. Just want to understand why that happened given the such strong results during the quarter in the standard. Thank you very much.

Álvaro Fernández: Andrés, I’m sorry, but the question did not come through clearly. Could you please repeat it?

Andrés Ortiz: Sure. Looking at the financials at the Alfa level, I’m seeing a $97 million tax benefit or $3.9 billion versus tax benefit. I just want to understand why didn’t rise this quarter.

Eduardo Escalante: I believe it’s about the – the question is about the tax benefit?

Andrés Ortiz: You have [indiscernible] income tax provision that it’s positive?

Álvaro Fernández: I will try to answer the question as we understood it. As we understood it is that there is a $97 million tax benefit that we show in the report. And you want to know where that is, right?

Andrés Ortiz: Yes.

Álvaro Fernández: Okay, let me address that. When we spun-off at spell [ph], the tax shield that we obtained is not reflected in the accounting statements in the results. It is only reflected on the fiscal front of the company. So what we did at this time was we included a portion of that tax yield that we estimated was going to be used for the spin-off of Alpek, in addition to what we already had coming from the regular operations of the holding company. So that’s why you see that as a benefit which will be used when the spin-off of Alpek is consummated is concluded.

Andrés Ortiz: Understood. Thank you very much.

Eduardo Escalante: You’re welcome.

Operator: There are no further questions at this time.

Álvaro Fernández: There are no further questions on the chat either. So in that case, we will then take questions on Sigma. Roberto Olivares, Sigma’s CFO will answer your questions. Operator, please prompt for questions on Sigma.

Operator: [Operator Instructions] Our first question comes from Ricardo Alves of Morgan Stanley. Please, sir, go ahead.

Ricardo Alves: Thank you very much for the follow-up. Mexico was strong, but the biggest beat versus our numbers. Roberto came on the U.S. side, so I wanted to focus on that region. When we’re looking at Nielsen [ph] or the data on the margin, the numbers seem even more impressive. We’re still seeing 6%, 7% top line expansion. Can you expand on the U.S. a little bit as we go into the fourth quarter? And not only what your expectations are to close out the year again, the numbers that we see are encouraging to us. I’m curious to hear your thoughts on that. But also can you explain the competitive dynamic as well? Because on top of a good top line, we’re also seeing Sigma gaining share, in hot dogs, in cold cuts, across the board. We see not only top line trends that are optimistic to us, but also margin gains. So if you can expand on those two points, your relative positioning versus competitors, what is driving that, but also your overall expectations to close out the year? That would be helpful. Thank you so much.

Roberto Olivares: Thank you, Ricardo, for the question. Yes. First, the U.S. has done a – the U.S. team has done a fantastic job in trying to capture volume and also profitability. We have grown particularly in our Mainstream and Hispanic business markets. I will say in both equally, but we have seen in the Hispanic business very good dynamics that we expect to continue being present [ph] in the following years. We are operating almost at capacity in most of our plants and with some revenue management initiatives being able to sustain some of the margins. We have also worked a lot on efficiencies, I would say not only in the U.S. but also in Sigma overall, trying to optimize some of our SG&A and expenses across the company and particularly in the U.S. that has helped. We do expect to continue having this strength in the following quarter and I would say year. We – there’s still some opportunity to grow. There’s a third business that we have in the U.S., our European heritage business that has a lot of potential that we expect to help us continue gaining some margin.

Ricardo Alves: That’s helpful. Thank you, Roberto. The top line strength on the margin on the recent data in October. Is that a fair assessment that things are just holding up well? Is that a fair assessment of your U.S. operation today?

Roberto Olivares: Yes, that is correct. As you have mentioned, we have been, I would say, a lot through consistency, quality and innovation for products. As you mentioned, we have seen that we have gained some market share. We do expect to continue operating at that level.

Ricardo Alves: Very helpful. Much appreciated. Thank you, Roberto.

Roberto Olivares: Thank you, Ricardo.

Operator: Our next question comes from Juan Ponce of Bradesco. Please, sir, go ahead.

Juan Ponce: Hi Fatian [ph], thank you for taking my question and congrats on the very strong results. Regarding the growth business units, particularly the plant-based proteins and the direct to consumer e-commerce platforms, what’s your expectation as we look out to 2025 and specifically on this direct-to-consumer e-commerce platform you mentioned in the report that it still represents a low single-digit of consolidated sales, but I would like to know if you can give us some color on where you see this ratio going forward? Thank you very much.

Álvaro Fernández: So regarding the e-commerce direct-to-consumer platform, these are business that we launched back in 2020 and it has grown significantly, I will say almost double-digit growth on a monthly basis since we launched it. We launched app, sorry as a website and an app and now we have some physical stores in Mexico to sell directly to consumers, products that goes to the grill and particularly steaks and some other products. We also complement that business with another business that sells direct to home some of the products that we have in our portfolio and we’re expanding actually that business into the U.S. next year. We’re already piloting some initiatives in some markets in the U.S. that we think will going to be good environments to grow. We as you mentioned right now the percentage of revenue coming from low [ph] business units and particularly this initiative is low. We do expect them to continue growing. We’re exploring different, as you have seen, different new business models. I talked in my initial comments about the business that we have that is called Netport. That is a business that distributes and sells third-party products from Mexican or Latin American heritage into the U.S. Hispanic market. We recently launched a new brand there particularly focused on Central American products, cheeses to be specific. We have covered almost all of the portfolio Mexican cheeses with our acquisitions through the year and we’re a relevant player in the Mexican Hispanic cheese market in the U.S. Now with this new business we’re trying to explore the Latin American, particularly Central American Hispanic cheese market. So all these initiatives are right now in between a pilot and a scaling phase and we do expect them to become more relevant in revenues and EBITDA in the following years.

Juan Ponce: Got it. Thank you very much.

Álvaro Fernández: Thank you, Juan.

Operator: Our next question comes from Emilio Fuentes of GBM. Please sir, go ahead.

Emilio Fuentes: Hi. Thank you for taking my question. I’m wondering if you could give us any further color on your margins, particularly in Mexico. Have you seen any FX impact? Or do you expect any delay in this impact on inventories if you haven’t seen it yet? And another question, I’m wondering if you’re still looking to divest non-core assets or brands in Sigma? Thank you.

Álvaro Fernández: Thank you, Emilio. And your first question regarding margin in Mexico, we do anticipate that in the fourth quarter we see some, as you can see, FX volatility that could potentially impact the margin. In terms of raw materials, we don’t see any major disruptions, to be honest, we have already some inventory in place of the major raw materials that we use. And in terms of effects, again, we’re doing some revenue management initiatives to offset the cost impact. Just to be clear, I think during the third quarter we also experienced some benefits regarding some effects derivatives that we have that impacted cost that we – were mainly during the third quarter. There’s still some hedging for the fourth quarter for, to be honest, just a couple of weeks. So there’s that positive impact in the third quarter in Mexico because of that. And let me talk about your second question regarding the non-core asset monetization. We, as we have talked in the past, we’re looking into some opportunities, particularly because of our fiduciary responsibility to entertain some offers when there’s someone interested in some of our assets that makes sense for them. As we have discussed in the past, these are non-core and not significant for our business.

Emilio Fuentes: Thank you. Very clear.

Operator: There are no further questions at this time.

Hernan Lozano: Okay. No further questions in the chat either. So in that case, let’s move forward and take questions on Alpek, we have José Carlos Pons, Alpek’s CFO. Operator, please prompt for questions on Alpek.

End of Q&A:

Operator: [Operator Instructions] There being no further questions, I would like to return the call to management.

Hernan Lozano: Thank you. So let me turn the call back to Álvaro for closing remarks.

Álvaro Fernández: Thank you, Hernan. This is an exciting inflection point for Alfa, finally leaving behind the conglomerate structure and clearing the way for independent business units that have full control to trace their individual futures. Each business will continue working relentlessly to reach their fair value. This is particularly important for Alfa|Sigma as a new branded for food pure play. We greatly appreciate all the support we have received from market participants. We are especially thankful to all the Alfa team members for their hard work throughout this amazing journey. Thank you very much for your interest in Alfa. If you have additional questions, please feel free to reach out to us. Have a great day. We will now disconnect.

Operator: This concludes today’s conference call. You may disconnect.

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