Genomma Lab Internacional (LABB) Q2 2024 earnings summary

Executive summary

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

• Net income grew 51.3% year-over-year to MXN 631.6 million; EPS up 54% to MXN 0.63, supported by operating income growth and a 20 million share cancellation.

• Net sales increased 6.4% year-over-year to MXN 4,652 million, with 78% of sales outpacing inflation.

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

• Strategic M&A activity in the U.S. and Argentina to strengthen core brands and market leadership.

Financial highlights

• Gross margin reached 64%, up 7.1 points over 18 months; gross profit increased 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 (including Argentina), mainly due to supplier term reductions and hyperinflationary accounting.

Outlook and guidance

• On track to deliver 23%-24% EBITDA margin in Q4 2024.

• Margin expansion plans considered sustainable; productivity savings target of MXN 1.8 billion by 2027, with 41% achieved as of Q2 2024.

• Expect continued double-digit sell-out growth in Mexico for the second half, supported by a strong winter season and rising COVID cases.

• Continued quarterly dividend payments are planned.