Grupo Rotoplas S.A.B. (AGUA) Q2 2024 earnings summary

Executive summary

• Demonstrated resilience and adaptability amid challenging macroeconomic and climatic conditions, with robust demand and record sales in Mexico and Central America, and strong growth in service platforms like bebbia, RSA, and rieggo.

• Net sales for 2Q24 were MXN 2,972 million, down 1.1% year-over-year due to Argentina's recession and devaluation; excluding Argentina, sales rose 14%.

• Service sales surged over 70% in 2Q24, while product sales fell due to Argentina and lack of drought in the US.

• Net income improved to MXN 60 million in 2Q24 from a loss in 2Q23; 6M24 net income reached MXN 364 million, mainly due to lower financial expenses and FX hedge accounting.

• Strategic focus on market leadership, expanding service platforms, and agile response to market changes.

Financial highlights

• Gross margin improved to 47% in 2Q24 (up 140 bps), and 49% for the semester (up 210 bps), driven by pricing and product mix.

• Operating income for 2Q24 was MXN 307 million, down 29% year-over-year; EBITDA margin at 15% in 2Q24, down 330 bps.

• Net income for 6M24 reached MXN 364 million, a significant increase from 6M23, due to lower financial expenses.

• Cash and cash equivalents rose 24% year-over-year to MXN 666 million.

• Cash conversion cycle improved by 23 days year-over-year.

Outlook and guidance

• 2024 net sales growth guidance revised to 0–5% (from >10%); EBITDA margin guidance lowered to 17–18% (from 18–19%).

• Net debt/EBITDA expected to remain below 2.0x; ROIC to stay above WACC.

• Second half outlook: stable performance in Mexico, Central America, and Peru; improved U.S. margins; Argentina remains uncertain but with potential for recovery.