Grupo Herdez (HERDEZ) Q3 2024 earnings summary

Executive summary

• Third quarter net sales rose 3.6% year-over-year to MXN 9.3 billion, with strong export momentum offsetting challenges in other segments and weather-related disruptions in impulse.

• Majority net income declined 12.4% to MXN 294 million, mainly due to lower MegaMex results and higher avocado costs.

• EBITDA remained stable at MXN 1.6 billion, with a margin of 17.1%, while gross margin reached 40.5%.

• MegaMex underperformed due to avocado price volatility and shifting consumer trends.

Financial highlights

• Export segment sales grew 24.1% in dollar terms and 37.9% in pesos, supported by favorable exchange rates and new product launches.

• Gross profit increased 3.1% to MXN 3.8 billion, with a gross margin of 40.5%.

• EBIT was MXN 1.3 billion, down 0.4% year-over-year, with a margin of 13.7%.

• Free cash flow for the quarter was MXN 603 million, supporting ongoing investments.

• All-in cost of financing rose 34.3% to MXN 179 million, mainly due to lower FX gains.

Outlook and guidance

• Fourth quarter expected to see low 20s percent sales growth in Impulse and Export, with Preserves flattish; consolidated EBIT and EBITDA also expected to be flat year-over-year.

• No forecast provided for MegaMex due to recent leadership changes.

• 2025 expected to be challenging due to labor reforms, inflation, and a softer consumption environment, with updated guidance to be provided in January.

• Management remains focused on leveraging export growth and operational efficiencies despite a competitive environment and weather-related challenges.