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Edited Transcript of NUTRESA.BG earnings conference call or presentation 28-Oct-19 1:00pm GMT

Q3 2019 Grupo Nutresa SA Earnings Call

N/A Nov 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Grupo Nutresa SA earnings conference call or presentation Monday, October 28, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carlos Ignacio Gallego Palacio

Grupo Nutresa S. A. - CEO & President

* Catherine Chacón Navarro

Grupo Nutresa S. A. - IR Director

* José Domingo Penagos Vásquez

Grupo Nutresa S. A. - CFO & VP of Corporate Finance

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Conference Call Participants

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* Carlos Enrique Rodríguez

Ultraserfinco S.A. Comisionista de Bolsa, Research Division - Director of Equity Research

* Felipe Ucros Nunez

Scotiabank Global Banking and Markets, Research Division - Analyst

* Johanna Castro Castro

Itaú Corretora de Valores S.A., Research Division - Research Analyst

* Julian Felipe Amaya Restrepo

Corredores Davivienda S.A., Research Division - Equity Research Analyst

* Valentina Martínez;Valores Bancolombia;Junior Analyst

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Presentation

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Catherine Chacón Navarro, Grupo Nutresa S. A. - IR Director [1]

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Good morning. Welcome to the results conference for the third quarter of 2019 for Grupo Nutresa. At the table, we have Carlos Ignacio Gallego, President of Grupo Nutresa; José Domingo Penagos, Vice President of Corporate Finance; and Santiago Escobar, Director of Corporate Finance. My name is Catherine Chacón, and I'm Director of Investor Relations. Thank you very much for being with us.

After the presentation of results, we will have a Q&A session. Any questions received through the webcast will be read verbatim. Those who wish to connect to the conference in English, we appreciate it if you send your questions in through the webcast chat option. Those who ask questions, we ask you to remember your name and the institution you represent.

Before starting the presentation, we have included in with an additional slide an interesting event that has to do with the approval received last Friday from the Superintendency of Corporations of Colombia for the acquisition of 51% of Atlantic Food Service, a transaction that we had announced last meeting. Please download the updated presentation from our web page in the section of Quarterly Results.

To start the presentation, I'll give the floor to Carlos Ignacio Gallego, the President of Grupo Nutresa.

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [2]

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Good morning. Thank you for being with us in this results presentation. To start with, please go to Slide #2, where we share some of the interesting events for the period. First of all, we are pleased to report that for the first time in its history, Grupo Nutresa is the most sustainable food company according to the Global Dow Jones Sustainability Index 2019. We had the best scores in history -- in the company's history in the very important areas for our related groups such -- as you can see in your slides: in the economic dimensions, we're the #1 in health and nutrition, materiality, taxes; in social dimensions, we're #1 in human capital development and corporate citizenship; and in the environmental dimensions, we're #1 in package management, water-related risks, in operating efficiency and environmental reporting.

Our permanence in this indication for the ninth consecutive year in our leadership therein shows the commitment and the consistent work our Grupo Nutresa's team looking for competitiveness using the best sustainability practices in all areas of our business.

We are very encouraged by this result because we know that it has to do with the possibility of meeting value objectives for the stakeholders. In the lower part of the same slide, we tell you that for the fifth year in a row, MERCO Empresas, the Corporate Reputation Monitor, recognized Grupo Nutresa as the second most reputable company in Colombia and the first in the food sector.

The evaluation in this ranking included the perception and evaluation of 24 sources of information around these 6 areas which are economic results, quality of the business, offer talent, ethics and corporate social responsibility, international dimension and innovation.

And after these 2 recognitions, we will go to Slide #3, please, where we speak about the acquisition of Cameron's Coffee. Cameron's is a company that if you take the numbers for the last 12 months up to July 2019 had sales for $72 million with an EBITDA of $11 million. This gives us a margin of 15.2%. The enterprise value was $113 million, which is 10.3x the EBITDA.

I'd like to go a little bit more into the strategic reasoning for this acquisition. First of all, it is to strengthen our platform that we have already in the U.S. in addition to coffee brand with a regional -- coffee brand with a national potential. And we have distribution to meet new clients, new geographies in the U.S., and this allows us to diversify our B2B business that we already have, and especially adding to our Nutresa team, a group of people which is highly trained, qualified team with experience in B2B in the U.S., which will enable us not to serve coffee but in all other categories for Grupo Nutresa. There is clearly a strategy with commercial synergies between Nutresa's current businesses in the U.S. and this new coffee company.

More broadly, I'd like to tell you that the United States is the consumer -- the highest coffee consumption in the world, importing more than 29 million sacks a year with a market that if you were only to look at the retail in coffee, it's about $15 billion growing. Most Americans use coffee. They spend more than $1,100 per person a year in coffee. And there is a major consumption still at home.

This consumption is both ground and roasted, which is a major trend in this country in which is Cameron's is strong as well as the capsule market, which have significant price and are pretty profitable. That is the reasoning. And as you can see, behind these acquisitions, there is a clear strategy and there are numbers to support the reason why we're in there. We're very happy. This is a very important step for Grupo Nutresa.

And this new -- good news is complemented with a slide that we added that Catherine was mentioning and which is #4 now, which is an acquisition in Atlantic Food Service. We had announced this on March 6, 2019. We had announced an agreement that was subject to approval by the fair competition authorities in Colombia.

Fortunately, on October 25, the Superintendency of Industry and Trade approved the transaction, which Nutresa will acquire 51% of the shares. Atlantic is a company with about COP 95 billion enterprise value. Their sales for the last -- of last year were COP 213,000 million with an EBITDA of COP 16,600 billion. This is a 7.8% EBITDA margin and a retail value of 7.5x per enterprise value. Although it has a moderate EBITDA margin, it's very good to generate value in sales. And behind this, the strategy that we have, this is a food service company that will enable us to consolidate the over-the-counter market. We will complement what we have, and we're going to complete -- continue with our one-stop-shopping strategy. This is a very strong company, which allows us to diversify our channels. We have a demonstration in supplies. It's a significant growth in the local market in Colombia, where we -- where tourism is growing very, very fast and where that institutional market is extremely important.

So these events, which are basically 2 record -- major recognitions for -- to the organization and 2 inorganic growth news are the ones that we want to highlight at this time.

Then, let's go to Slide #5 to talk about the sales for the third quarter of 2019. As you can see, we had very good dynamics in Colombia during the third quarter. We sold COP 1.5696 billion with a growth of 8.5%. All the businesses had positive behaviors both in value and in volume.

I would highlight that this growth is mainly due to higher volumes, which increased by 8.9% during the period. And the price, there is a slight decrease of 0.4%, which is due mainly to changes in the sales mix. It is not a problem. There is an opportunity that I want to put out right now because what it shows is that there is some pressure on the cost due to the rate of exchange.

We have enough room to do some price increases that we might need along the way. As you can see, the pasta, the biscuit, the ice cream and retail food have growth over 8%. In the lower part of that slide, we can see that outside of Colombia, we have sales for $294.7 million with a growth of 4.3%, which reported in Colombian pesos is COP 9.840 billion with a growth of 17.7% due to the effect of a 12.8% devaluation during the period.

These sales include the sales of Cameron's Coffee, which are approximately $10 million. If we were to look at the organic growth, excluding the acquisition, we still have a very good period. It would be $288.7 million with a growth of 2.2%. COP 9.637 billion with a growth of 15.3%.

By business, when we analyze the bars, I would like to say that here you reflect is the effect of the cross rates because there is also devaluations in other countries. In TMLUC, which we see with a minus 4.8% growth in local currency grew at 1.4%.

With respect to biscuits, we had good business dynamics in Central America and in the U.S. with a growth of exports from Colombia. In chocolates, we have the cost effect of a good growth in Central America, good growth in exports from Colombia and a period with lower volumes from Peru and Mexico.

In coffee, we have a very good period with a growth of 21.7% organic and 39.8%, if we include Cameron's only during September. With respect to retail food, we have good performance in local currencies for Central America and Dominican Republic that gives us a growth of 4.1%. And the cold cuts, we report a growth of 2.5% growth with some beginnings of recovery of exports in meat from Colombia.

When we combine this good performance, both in Colombia and in international operations, we can see in Slide #6 that we had total sales of COP 2.5536 billion with a growth of 11.9%. This is an excellent business dynamics if we were to eliminate the effect of the Cameron's acquisition. It will be a quarter of COP 2.5333 billion with a growth of 11%. And I would like to highlight the growth of business like coffee, which grew 25.7%; pasta, which grew at 18%; and biscuits that grew at 14%; and retail food that grew at 11%.

However, it's worth mentioning that there are also important signals in the growth of business such as cold cuts where we had said we're making efforts, and we see some recovery. It's very important because of the size of this business in the group. During the quarter, sales from innovations were 22%. Again, innovation is still an important growth factor.

Going to Slide #7, how the accumulated figures are for the end of the third quarter, we have Colombian sales for COP 4.4815 billion with an accumulation of 6.4%, a good performance with positive trend, which is sustained.

As I mentioned in this -- previous quarter, this is basically based on higher volumes. The volumes grew in the accumulated at 5.8%, while prices on average increased by 0.5%. All business units have positive growth dynamics in -- both in value and in volume during the period. Outside of Colombia, the report -- that was reported revenue for $838.7 million with a positive variation of 1.1%. In Colombian pesos, this would be COP 2.7185 billion with a growth of 13.5%. Average devaluation is 12.5% -- 2%.

If you only look at the organic growth only without Cameron's, organic is $832.7 million, which is equivalent of COP 2.6982 billion with a growth of 12.6%. The numbers for each of the businesses, as you can see, perhaps add something to what I said earlier for the quarter is that all the operations -- international operations are growing in their functional currencies.

I would also say a very good year, growing exports from Colombia. This is very important because it adds to what we do outside the country. When we combine these sales inside and outside Colombia, you can see in Slide #8 that accumulated sales for the period were COP 7.2 billion with a growth of 8.9%. If you want to look at the organic, the growth is 8.6%, also extremely good.

I would say that there's a good dynamic reflects the strategy of diversification in categories, geographies and channels. The channel development in strengthening relevant brands and powerful innovation that adds value for the clients, buyers and consumers. The sale of innovation products in the years accumulated figures is 1.9%.

And you can see in the accumulated significant growth. Coffee 16%, pasta 13.4%, biscuits 11.7% and retail food 9.8%. And you can also see that cold cuts that we had a long, the time being very quite, now it's increased to 1.6%, and as we said in the quarter, for this semester, with a much more positive trend.

In Slide #9, you can see that these sales by region. We had, in Colombia, 62.2% of our sales; outside of Colombia, 37.8%. After Colombia, the most important geography is Central America, where we have 9.8%; in the U.S., we already have 8.9%; and in Chile, 7.8%.

If we were to take Cameron, the acquisition in the state this country would represent -- and for full year, this will represent 10.2% of total sales and Colombia would go down a little bit to 61.1%.

One of the strengths of the group is this basket of geographies that allows us to move ahead when one geography has a slight positive trend, you can make it the best out of the good trends in other regions. In addition, this gives us a coverage -- internal coverage. This is a desired plan and it has to do with the internationalization strategy for the group.

With respect to market position, we show that in Slide #10, I will start by saying that there are no significant changes. We're still having shares and positions that once -- that were reported here. They are very significant. That are supported by the sound business strategies, as I said earlier, based on the effective innovation and having stronger brands and with a strong purpose and a clear channel development.

In general, the positions are all maintained. And as we said, this is a company that has a people-based business model and is also based on brands and capabilities that support our value offering, the brands are pillars of the group and working every day to develop them and make them more powerful.

Going more into profitability in Slide #11. We can give you the Nutresa Commodity Index. This is expressed in dollars. As you can see, this average index is less than what's reported for the previous year. Although we see a better trend, I'd like to say that in some countries where we operate, local prices do not necessarily reflect the international dynamics and the devaluation of local currencies, vis-à-vis, the dollar have an impact on the cost of imported raw materials.

But this is a favorable trend, which as I said, this is not always reflected in the cost. And as I said at the beginning of the presentation, we are feeling pressure in a way, especially due to the currencies that have high ratio devaluation around the region.

On this right-hand of the slide, you can see the pie showing the composition of the cost. If we look at the single major category, packaging material will still be the most representative item, and then we will have coffee, wheat and pork. For more details into these profitability issues, I want you to listen to José Domingo Penagos, our CFO.

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José Domingo Penagos Vásquez, Grupo Nutresa S. A. - CFO & VP of Corporate Finance [3]

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Thank you, Carlos Ignacio. Good morning, everyone. Let's go to the profits for the period. The EBITDA for the group in 8 divisions. This is in Slide #12.

As a framework we have, as a consequence of applying the -- in the 2016 financial reporting standards would have a better comparable -- and the total for the group is without the effect, then we can see that for this quarter, we have an EBITDA -- consolidated EBITDA, which is COP 3.440 (sic) [3.445] billion with a margin of 13.5%, and then we can see the pro forma of COP 3.068 billion with a margin of 12% and a growth of 2%. This is what I'm going to refer to here on -- in -- and for each unit, we have a decrease in the EBITDA compared to the same period in the previous year and this is because of a significant impact on the cost and especially in the rate of exchange.

We have for the structure of the group approximately 56%, 57% of our costs are indexed to the dollar by internationally or even locally, but they are indexed to the dollar. So we feel that impact especially during the quarter. Some of the businesses -- most businesses have, and I'm talking about cost -- but -- have revenue cost structures in dollars. Cold cuts and pastas have mostly local cost -- revenue structure. This provide a better -- higher impact in the EBITDA.

On the other hand, businesses such as biscuits or TMLUC, which is international coffee, retail foods even, given that natural hedging, this allows us to better manage this variable. This is a general issue for the group for the quarter.

Well, let's look at the order in the graph. In cold cuts, we improve sales. In the business section, we have the details. So the revenue structure, which is local concentrated has decreased the impact, especially in raw materials, such as pork and some of the inputs are also back to the dollar and that affect a margin of 9% and a decrease of 15%.

Biscuits has a very significant 12.7% EBITDA. Good growth, 8%. The revenue structure is more 50-50. Half of the revenue is in Colombia, the half is outside. Very diversified U.S., Central America, Southern -- South America. And it's easy to manage the impact of rate of exchange. We have a better expense control in biscuits and allows us to show these good results in the EBITDA.

In chocolates, this is a business it continues with a financial and business sound outlook. It has a diversified revenue in geographies and categories. This allows us to have a good period with a margin of 14%. TMLUC had a very good margin, 13.4%. This is supported by good business dynamics and a very efficient expense structure. A couple of years ago, we made some adjustments in expenses they would've been -- to maintain that over time, it's business dynamics and this gives us a very good EBITDA for the quarter. And you can see that in the accumulated figures.

Coffee has good dynamics, the business dynamics, especially in international dynamics. And it's the other way around with a high rate of exchange allows us to bring in very good revenue. So that is the main difference goes to the EBITDA and that's where we had a 13.5%, a growth of 56.9% in -- we recorded the Cameron's for the first time, but that is not the reason. Without Cameron, the EBITDA is 13.2% and the growth is 44.4%. Good dynamics -- organic dynamics with a good dynamics due to the consolidation of this acquisition, of which we already mentioned the margin, which is about 15%. So it helps a lot to that some.

Retail food, we -- it is stable. It recovered soundly for the second quarter in a row. This business had an increase in this variable grew at 28%, and margin is 13.2%. And it comes with mostly transactions that we mentioned here repeatedly. It has been our focus for these transactions, the strategy has been remodelings in Colombia, mostly through the operations in Dominican Republic and Central America, but in Colombia, especially transactions to remodel has been working.

We'll do the remodeling with a zone strategy. We capture that in the results that we had for the quarter, and there is no much difference in the accumulation that we see later. In ice cream, also good results, having a EBITDA of 15%. It grows at 6.6%, very good business dynamics as we just saw this diluted and fixed expenses very well and has good results and faster. It grows very well. It has good business dynamics both for the quarter and for the semester. The size of the business and the concentration of the cost of raw materials, which is -- in dollar index, has an EBITDA margin of around 7%. The -- anything in wheat that affects the EBITDA heart hits our good business dynamics, but the rate of exchange has some impact. Wheat has about 65% or 70% of total cost of this business. So any movement in the rate of exchange affects our EBITDA. This is for the quarter. In the accumulated -- this is more general, the accumulated in Slide #13, we have an EBITDA at September of COP 9.920 (sic) [9.925] billion with a margin of 13.8% -- with a margin of 12.2% and close to 0.4% growth.

This is a general comment. Both cold cuts and pastas, which I already referred to in the quarter because of the effect of the rate of exchange on the raw materials. All the businesses have good dynamics, profitability, bearing in mind those absorption of the rate of exchange, we have good control over expenses. We'll see that in the P&L.

We've managed to include growth of the categories, practically with the same percentage. They've grown a little -- slightly less with the sales expenses and that is reflected in the profit margins.

A single comment about chocolate. Because it has a decrease here of 9.7%, but it also represents a high rate from the previous year. Even with that decrease, we can see that the dynamic is very positive with a 14.4% profit. It has a very good sound profit levels in this chocolate business as well.

Going to the P&L, the statement of resource over the quarter and accumulated the quarter is on Slide #14. We can see that in revenue, we have all the -- we have said about the good business dynamics and in this quarter, the growth is double-digit, 11.9%. We already mentioned the details about the origins of the dynamics and the impact on the cost, which has been highlighting that the rate of exchange is more highly reflected in the quarter, at least in the accumulated because we had a very good semester. You can see that it was at 14.8%. Obviously, it goes above our revenue and reach close to 140 basis points in our gross margin.

How do we make that up for that with efficiency in the cost, the area for cost, which administrative expenses go a little above inflation, but they're still below the increase in revenue. Sales expenses also are below revenue and production costs have the same effect of the rate of exchange. So in some -- that loss of margin of 140 basis points. Operating expense controls, we were able to have a quarter with an operating profit of COP 236 million with a growth of 1.4%. That in operations, we have some records of -- due to the difference in the rate of exchange, this has mostly move into our working capital accounts, which are also affected by these rate of exchange in our accounts payable and international debt. We have a growth of 1.4%.

And after operations, I mentioned especially is financial expenses, which have been growing by 5.2%. There is a set of expenses that I classified as financial, but the expenses of our debt and decreased during the period by 3.2%. We'll see you in the (inaudible) that we're still -- are still decreasing. Our interest rate for the quarter is about 6.2%. So there's good dynamics to show growth in profits before taxes of 7.8% and a net profit of COP 138,000 million with a decrease of 1.6%. That's for the quarter.

And for the year-to-date, we have a growth of 8.9% in revenue and point due to the same effect that we have been mentioning of the cost and gross profit of COP 3.187 billion or 7.4%, very different from what happened in the quarter. Good expense control, the same administrative expenses and sales expenses gives a growing operating profit, 8-point percent, COP 864 million. I already mentioned to the -- you mentioned the financial expenses, which we see a decrease of 7.3%, but -- which I just mentioned for the quarter. And the formula is the same, the effect of the cost efficiency gives us an increase in profits and captures the good word of revenue to provide profit and cash for the group.

I would say, to a net period of COP 132,000 million for the period with a 12% growth with respect to the same period in the previous year.

And finally, in Slide #16, we show you our debt position. This includes a debt we had accumulated close the Cameron's operation. I'll show you 2 things here. First, the debt in the equivalent in Colombian pesos of COP 2.9 million. This is 2.49x. Because at September, we've crossed all the debt of Cameron's, but only the EBITDA for 1 month. So you should mention the pro forma with the EBITDA of the Cameron's for a year-to-date and this is 2.42x. This is the Cameron's operation. I remind you, it's $115 million at the end of the year, but we had a debt of $105 million in that currency and with a bullet structure at 10 years, we told you in our previous conference that we had.

Our idea was to improve the average life of the debt. This will help us to go down to 3.4 years. And our interest rate for this loan is less than 5%. This also helps with the average that I just mentioned for the entire group of 6%. So this is the Cameron's operations.

But in Friday, we got the operations by the Superintendency of Industry and Trade for the operation of AFS and that operation is going to involve COP 114,000 million more debt. And the pro forma for -- after these 2 acquisitions, Cameron's and AFS, the Grupo will have 2.43x as the debt level.

I already mentioned about the structure for Cameron's, the AFS would probably be in Colombian pesos so not to have the decrease of the effect of the rate of exchange. It's going to be very variable so far. This completes the debt equation.

I would highlight the CapEx. We have COP 117,000 million. The budget is COP 260,000 million and we have to work with COP 263,000 million where everything is on track to achieve that CapEx budget of COP 263,000 million.

I'll give you the floor to Carlos Ignacio, so that he can share with us his final vision for the year, and then we will open up for questions and answers.

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [4]

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Thank you, José Domingo. Now talking about the outlook, I'd like to start by saying that business like commercially was, we have a good business dynamics. We believe that the markets where we operate have positive behaviors and what we've been doing in our strategy, we think that this good dynamic will continue. We see some very specific price increases in some preferences and categories and specific channels. We're going to be doing this defending our profits. We have room to do that because so far we've been very careful in handling the prices, and the business outlook is sustained positive.

Normally, the fourth quarter has a seasonality, which is slightly less in profits. We believe that our efficiency and productivity that we're using will allow us to have an appropriate balance of growth, vis-à-vis, profit levels.

Now with a view of the 2020, we believe it is going to be a good growth and good results. We don't see any shocks that will produce any drastic changes. We forecast good returns and good growth. We will be active in both fronts, organic and inorganic. These 2 acquisitions that we mentioned are going to show a partial the year effect -- the effect this year, but next year, we'll see more complete effect.

I give Catherine the floor now to go through our Q&A.

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Catherine Chacón Navarro, Grupo Nutresa S. A. - IR Director [5]

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Thank you, Carlos Ignacio. We'll now start the question-and-answer session and go to Sylvia to check with the questions in the Spanish audio.

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Questions and Answers

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Operator [1]

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This is Jason. Now we'll have the question-and-answer session. We will now start our session. Thank you for your attention. (Operator Instructions) We have a question from Carlos Rodríguez from Ultraserfinco.

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Carlos Enrique Rodríguez, Ultraserfinco S.A. Comisionista de Bolsa, Research Division - Director of Equity Research [2]

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I have 2 questions. One is about retail food margins that we've seen about 13% in -- over the last 3 quarters. Is this something structural? Or could we -- should we see some improvements in the future? Or are we very far from looking at the margins of 17%, 18% when this unit was consolidated?

And the second question has to do whether you have some estimate or a negative impact due to the current situation in Chile. Do you have any effect under the margins? Or could we see any write-off in inventories?

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José Domingo Penagos Vásquez, Grupo Nutresa S. A. - CFO & VP of Corporate Finance [3]

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I'll take the first question and Carlos will take the second one. We believe that those margins that we see right now in retail foods are structural and are increasing. The statistics that you mentioned of 18%, when it was purchased, were in the business plan, we have considered some adjustments to these margins. We are recovering during this period. So we did a major effort to maintain the transactions, but they are coming back. The remodeling plant is doing very well by zones, but we still have to go in. We have more zones to be remodeled, and this will bring some positive transactions. This is a category that has very good response to macro improvements, and the better we have controlled inflation and appropriate growth in the country, the increase of revenue outside the home will continue to increase. That is structural, and it is a rising trend in the medium term.

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [4]

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And about the question about Chile, I'd like to start by reminding you that Chile in the recent competitive results of the world freedom was the first place in Latin America, it's a country that has sound institutions and this situation was dealt with in a mature manner, and there is very important reflection in the country that will allow us to do some adjustments that improve the quality of life and to keep the country along that path of development.

With respect to what we have had -- what's happening, we had -- we didn't have any effect on the people in the company and no effects or impacts on facilities or company goods. We focus on protecting our employees. We try to be very flexible with the working hours. We try to care for all the company's assets, but at the same time, to help the people have the supplies of our foods when there is a situation like sort of chaos or instability in a country like this one that had been following a different path.

Our first gut feeling is that the supply is at risk. Although on one hand, several supermarket chains were attacked, and there were some looting and some fires. And in some neighborhoods, the owners of the trucks didn't go to distributor because of safety concerns. There was a higher average -- higher demand than usual because people wanted to have food available at home. So there is a cross effect in the market and some decrease, but over demand not only because of the business because these companies are able to be of use at times when we have those needs. We've tried to do the utmost to not to interrupt the supply.

So far, we have not had any inventory to write-off or locations that have been affected, as you mentioned. I do believe that there will be some specific impact during sometimes could be some lower sales, but we do not think that so far this is going to be significant.

This is an important topic. I will add to your questions because we can have something about Ecuador or Peru. And I say that Ecuador, we also didn't have any effect. Ecuador has low or lower than business dynamic because of the recent events of protests. And in Peru, the country has also having lower economic growth, still the politics affects -- expectations and the economy, most not only based on realities of the past, but also for expectations about the future.

So -- but neither -- or in none of the 3 countries, we had any significant material impact that will make it necessary to advise some -- any sort of real price with the results. We're very -- paying a lot of attention. One of the capabilities of these -- Latin capabilities is that we have to learn to grow and prosper in turbulent environments. We would like not to have them so turbulent, but it's the company capability. We've had some situation in Colombia that have taught us how to work when things are not as you would -- as you planned. So this is the comment that I could make. Carlos, thank you for being with us.

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Operator [5]

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Our next question is from Julian Felipe Amaya from Corredores Davivienda.

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Julian Felipe Amaya Restrepo, Corredores Davivienda S.A., Research Division - Equity Research Analyst [6]

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I have a question about the acquisition of Cameron's Coffee. I understand that they have a plant where they do -- where they process the product. My question is, what other products do you intend to take there? And what adjustments would you have to make in the plant to use these synergies?

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [7]

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Thank you, Julian Felipe. I'd be pleased to tell you, Cameron's Coffee has a plant in Minnesota that is mainly producing roasted and ground coffee in different presentations, mostly bags, what they call bulk, which is our presentations that people buy, they're going to grind and take it home. And in capsules, where they have a significant leadership position in capsules, especially degradable -- biodegradable capsules under the appropriate conditions. We believe that, that is their main strength. But that world of ground and roasted can be -- have some developed -- some areas that can be developed. There is no solubles or extract capabilities, and most of their sales are brand products. They're really well-known in the market and very highly valued in the roasted and ground with different blends using coffees from all over the world, including Colombian. And they have the ability, they can combine it with all the ways of producing coffee that we have in Colombia. But you always start with the market, what does the market need? What does the market want? It's not only what you want to think over there. So we believe that the team's capability is very important. That management capability, that knowledge of the networks, that go-to-market, that's as important or more than technical knowledge we know. We've been headquartered in a coffee-growing country. We know all about growing coffee, but that team is going to help us a lot with the go-to-market in the states, not only in coffee but in other categories as well. This doesn't retract from validating a plant there that is part of our network of platforms where we first analyze what the client or consumer or a buyer needs and wants and what platform to use to supply them. This is our answer. Thank you for being here.

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Operator [8]

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Our next question is from Juan (inaudible), Porvenir.

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Unidentified Analyst, [9]

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Two questions. Could you give more details about the chocolate line because the EBITDA was around 18% a year ago and now it's about 14%. So give me more details about that?

The second question is about the organic growth after the purchase of Cameron's Coffee. What do you have in sight for the next few months or quarters?

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [10]

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Thank you, Juan, for your questions. And although it's a financial question. I'll talk about it. The chocolate business, EBITDA is still very good. Last year was exceptionally good. When you look at the behavior of commodities, especially cocoa, you can see that so far during the year, we had some increase. Last year, it was $2,200, $2,300 per ton and now we have $2,300 -- $2,400, $2,500

So although we have very good coverage, and thanks to that coverage, we've been able to protect our margins, the combination of some price increases in the commodities and the devaluations that José Domingo has mentioned, it's an import, which, although it does not come imported into Colombia, it has a local price related to dollar, all growers expected price, which is usually close to the international price and the rate of exchange. So in this case, the 2 factors that are used to calculate the cost of coffee increased, thanks to the cover -- the physical inventory management, and we've been able to manage this appropriately and that is the biggest impact because the business is still doing very well. We could say that the category such as chocolate sweets or chocolate bars, we are in historically good times in -- I think that is Central America.

And I would mention -- I think I mentioned it in my past conference, we are leaders in the Central American chocolate bars. So the business part is doing well, but it went from a very favorable condition to another one, which is not as favorable. But with our recovery strategy, it is still moderated and still very good profit. About inorganic, we're around 2.42, 2.43x our debt indicator to EBITDA, so we have room to work in organic, but obviously each inorganic growth project is analyzed, looking at the best financial -- financing structure possible. It might be not only debt, there might be other ways of funding. We're still looking, and I'd like to underline something that I said in every conference is that we are not going to be inorganic just to have some numbers. If you look at our last acquisitions, they all have a reason behind or a capability or access to a market, and they add to the group's capabilities. I wanted to give you peace of mind. We're not going to do any operations just to -- just for the sake of it. We're going to keep looking for those good acquisitions that makes sense, that make us -- that turns us into better company and then any capabilities that they bring along together with the ones that we have already give us a way to develop.

What is the good news? That inorganic growth continues to be the main lever for growth. Historically, and then we said it here, 2/3 of our growth in this company had come from organic and inorganic has been only 1/3 and we think that we still have that ability to grow innovation.

These levels of innovation that we have 22% of our sales come from innovation. So we will continue along this path. And I think there is still room for the inorganic, and we have projects all going on because it's a public company, we cannot disclose them until we don't have any agreements in, but we do within the law at the appropriate time and with the breadth that is needed. Thank you, Juan.

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Operator [11]

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Our next question is from Johanna Castro from Itau.

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Johanna Castro Castro, Itaú Corretora de Valores S.A., Research Division - Research Analyst [12]

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My questions are about the acquisition of Cameron's, I don't know if you said it already, but we don't have any details about the composition about branded coffee or bulk coffee and about management. The press release said it was very important because of the partnership that they had with the original owners. So we want to have more information about your plans for -- those? Are they going to be there, the previous owners? What is the plan for the future.

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [13]

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Your question is very interesting. I'll be very glad to tell you that approximately 70% of Cameron's sales are Cameron's brand. This is important because their brand that has their operations at the retail level, especially in the U.S. Midwest. And the rest is in private label. It's a -- not certain if I mentioned earlier that the B2B is a source of growth. I have given in the conference I made a team, I highlighted the team that comes with this acquisition. It is a competent team. The entire team has said that they want to continue, and in our case, our variable compensation systems were a -- significant part of their top management revenue is tied to their staying in short, medium and long-term goals. I think we've managed to have an attractive combination to keep them on. Our idea is to hold on to that team and to give them enough challenges for them to continue to be motivated and contribute to the company's development.

This is a structure -- that compensation structure leads to -- or tied to results, is competitive vis-à-vis the market and it's similar to what we use in other geographies. So we are relying on that team. We're not intending to change the management. They're still there. What we're going to do is continue along a path of major challenges in getting these people to contribute to the development of Grupo Nutresa and can keep making Cameron's successful. I think, Johanna, that is your answer, and thank you for being with us at the conference.

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Operator [14]

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Our next one question is from Valentina Martínez from Bancolombia.

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Valentina Martínez;Valores Bancolombia;Junior Analyst, [15]

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Well, we have 1 last question is what expectations do you have for the fourth quarter, should we continue to see these devaluation rates and what can we expect for the EBITDA margin for the last quarter?

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [16]

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Thank you, Valentina, for your questions. We usually do not give any exact guidance quarter-to-quarter. And if you look at the trend for the dollar one thing is a technical analysis, technical analysis give us some signs that we hit the cap, and that meant there is some return to rates below. But sometimes the market doesn't behave just as a technical and then there's a [slope] and there's some external factors that could create some volatility. And as far as the outlook, we are going to have some activities that are going to be higher than we had during the year -- for the year with respect to prices, we're going to have more influence from what we had with respect to prices, perhaps volumes might be changed a little bit, but there's still very, very good growth levels. And the channel development issue is very important. I don't think there will be any extreme reactions. These are changes that are analyzed with care, keeping in mind the areas, the references that need to defend their profit levels. And how do we foresee a scenario of analysis of behaviors of competitors because where we're working in areas of free competition, and we like it. So we can get our profits and grow and without losing the consumer preference. So there's no special measure.

I was saying that at the end of the year, what we're going to keep is the advantage, growth, good profits and good returns, but we will not give you a guidance for the quarter -- end of the quarter.

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Operator [17]

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Our next question is from Felipe Ucros from Scotiabank.

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Felipe Ucros Nunez, Scotiabank Global Banking and Markets, Research Division - Analyst [18]

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A couple about the inorganic structure. There's been some local changes, a couple of changes vis-à-vis what the investors think your company is, first is our regional strategy. You guys are going to become the second -- most important country after Colombia. The growth in biscuits grew a little better, but I think that the U.S. is going to be the most important market after Colombia. Does that change the vision or the view of the investors as a LatAm company? Do you think that going to the U.S. has changed a bit in the strategic regional mix? And a follow-up on Johanna's question about it's not usually that you've been a little reluctant to grow into as a category and Cameron's is also a change in this respect? Are you changing your outlook vis-à-vis private labels or that is a very specific situation for Cameron's?

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Carlos Ignacio Gallego Palacio, Grupo Nutresa S. A. - CEO & President [19]

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Thank you, Felipe. I'll take both questions. First, about the inorganic growth. I -- the importance that is this going to be acquiring, if you project the performer for this year. Now with the Cameron's for the full year, the second geography will be the U.S., about 10.3%. The first thing I have to say is that we already have a significant presence in the U.S. in -- you mentioned the biscuits, but we also have an important export activity for chocolates and coffee. So I would say that is more than $100 million, and we've been working that market. We believe that the -- this is such a large country, you don't need to do absolutely national to be successful in the state. We have some markets. We have some comfort about the taxes such as we've been acting for several years now. And I was talking about this because the market in Texas, only Texas, the market is -- drives the total business for biscuits in Colombia. So in some categories where we can act, any help how, we know how to act, and where we already had a presence, platforms such as Cameron's are a very, very important component. I would highlight a topic of go-to-market. Humbly, I don't think that our desire to -- the idea of getting Cameron's was a technical issue, because as I said earlier, all the technical aspects for ground and roasted coffee. We know about that. But it was an opportunity because of the ability to get to market. So for Grupo, there is still a mostly emerging markets company, but with activities in some regions in the U.S., in categories we can work with a combination of brands which is branches that are profitable in B2B, which in that market, in the U.S. is profitable. We do not do private labels in countries where we have very representative market participation, market shares, that still hasn't changed. That is our usual goal. But without a doubt, we will be creating capabilities in the U.S. that will enable us to grow and generate some significant profits.

The acquisition of Cameron's is important not only because of what it brings with it because it complements what we already have and adds capabilities to what we already have to take it to other -- take them to other regions in the U.S. and do some jobs more efficiently. That's what the synergy is referred to, and then we're going to be getting with the team with -- from Grupo Nutresa. The private label is a profitable activity in the U.S., and we do not have plans to extend it to regions where we have leading brands. Thank you, Felipe.

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Operator [20]

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We have no further questions.

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Catherine Chacón Navarro, Grupo Nutresa S. A. - IR Director [21]

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Thank you, Jason. This ends the teleconference for results for the third quarter of 2019. We remind you that the contact line with the Investor Relations division is open for any questions or concerns. Thank you very much. Have a happy week.