Grupo Herdez (HERDEZ) Q2 2024 earnings summary

Executive summary

• Achieved 6.2% sequential sales growth, with net sales rising to MXN 9.3 billion, driven by strong performance in ice cream, mayonnaise, and Impulse and Exports segments.

• Operating income increased 21.3% to MXN 1.3 billion, with margin expansion from cost management and favorable input pricing.

• Consolidated net income grew 11.9% to MXN 786 million, with majority net income up 18.1%.

• Ice cream sales soared 36% year-over-year, aided by heat waves and a profitable sales mix.

• Retail segment saw double-digit growth in both average ticket and traffic compared to Q2 last year.

Financial highlights

• Gross margin reached 40.4%, up 2.6 percentage points year-over-year, supported by favorable cost mix and lower soft commodity prices.

• EBITDA reached MXN 1.6 billion, up 19.7% year-over-year, with margin at 17.2%.

• EBIT margin expanded 1.6 points in Preserves, 1.5 in Exports, and 4.7 in Impulse, the latter reaching positive single digits for the first time since Q3 2019.

• Free cash flow was negative MXN 385 million, impacted by inventory build-up, tax, dividends, and share repurchases.

• Net debt to EBITDA improved to 1.2x, and net debt to equity remained at 0.5x.

Outlook and guidance

• Anticipates mid-single-digit consolidated sales growth for the year, with low single-digit growth in Preserves, mid-teens in Impulse, and low 20s in Exports.

• Expects consolidated gross margin in the low to mid-40s, Impulse in the low 60s, and Exports in the mid-teens.

• Majority net income projected to grow in the low to mid-double digits; MegaMex net income expected to decline 30% for the full year.

• CapEx deployment planned at MXN 1,200 million.

• Management remains confident in brand resilience and value generation despite economic challenges.