Arca Continental Aktie

Good's day, everyone, and welcome to the Arca Continental First Quarter 2026 Conference Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Melanie Carpenter of Ideal Advisors. Please go ahead.

Thank you, operator. Good morning, everyone. Thank you for joining the senior management team of Arca Continental to review their results for the first quarter of 2026. Their earnings release went out this morning, and it's available on the company website at arcacontal.com in the Investor Relations section.

It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutierrez; the CFO, Mr. Emilio Marcos; the Chief Planning and Strategic Capabilities Officer, Mr. Jesus Garcia; and the Chief Operating Officer, Mr. Jean-Claude Tissault. They're going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance.

And with that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who is going to begin the presentation. So please go ahead, Arturo.

Thank you, Melanie. Good morning, and thank you for joining us to discuss our first quarter results. We are encouraged by our start to the year with sequential improvements in operating performance, better volumes and value share gains across most of our markets.

As we move through 2026, we're navigating a complex environment shaped by geopolitical tensions, input cost volatility and persistent inflation. Against this backdrop, we remain focused on managing the business with a prudent long-term approach, staying aligned with our playbook and prioritizing the fundamentals within our control.

With that, let's turn to our consolidated results. Total consolidated volume in the quarter increased 2.9%, driven primarily by stronger performance in the United States, Peru and Ecuador.

Our Still Beverage category grew 3.5%, cycling a 2.4% increase in the same period last year and underscoring the strength of our portfolio as we capture evolving consumption trends. Total consolidated revenue and EBITDA remained stable year-over-year, resulting in a margin of 18.6%. Overall, these results reflect consistent execution and solid operational discipline across the business, supported by effective revenue management and active hedging while maintaining a clear focus on protecting profitability.

Let me expand on the results across our geographies. Our beverage operations in Mexico delivered a better-than-expected performance during the quarter. Unit case volume, excluding jug water, increased 1.6%, driven by Stills and Water categories, which grew 3% and 11%, respectively. Within stills, growth remained strong across tea, up 15.7%, energy drinks, up 26.3% and dairy up 16.2%.

Coca-Cola Zero delivered another strong quarter, growing 28.5%, supported by expanded coverage, innovation and targeted pricing. We began executing our plan to mitigate the impact of the excise tax on volumes with affordability as a key priority. This included reinforcing our price pack architecture and expanding the mix of returnable packages.

Performance was solid across channels with both traditional and modern trade delivering sequential growth. Targeted promotions supported increased adoption of key formats, including the 500 ml returnable glass and the 1.5-liter returnable PET. Net sales increased 7.4% with average price per case, excluding jug water, up 5.8%. EBITDA grew 7.1% with a stable margin remaining at 20.8%, reflecting disciplined execution and cost efficiencies that help offset input cost volatility.

Finally, adoption of our B2B platform, Tuali, continued to expand with active usage reaching 64.7% of our customer base.

Moving now to South America. Total volume increased 3.7%, driven by strong results in Peru and Ecuador, partially offset by softer performance in Argentina.

Revenues declined 7.2%, primarily reflecting the unfavorable FX translation. Along the same lines, EBITDA decreased 11.4% with a margin of 19% as currency headwinds continue to weigh on results. The region is progressing through a gradual and uneven recovery. Our focus on execution, affordability and revenue management remains critical as conditions evolve.

Peru delivered an exceptional quarter with volume growth of 8.2%. This is the strongest first quarter performance since entering this market in 2015. Growth was broad-based, led by Colas up 9% and Stills up 8.4%. Coca-Cola and Inca-Kola grew 9.3% and 3.7%, respectively. In Stills, outstanding results were driven by energy drinks with additional contributions from sports drinks and juices.

Momentum remained strong across channels, led by modern trade, up 29.9%, alongside a favorable performance in traditional trade. This reflects the effectiveness of our price pack architecture and targeted market investments. During the quarter, we doubled down on our efforts to increase our share of visible inventory. We installed nearly 11,000 cold drink units, reaching our highest traditional trade coverage.

Additionally, we entered an exclusive distribution agreement with Heineken this quarter, expanding our presence in Lima's traditional channel and reinforcing customer relevance. In Ecuador, our beverage business delivered solid performance with volumes growing 5.3%, reflecting steady progress in this market. Growth was driven by strong results in both sparkling and Stills categories, up 4.5% and 7%, respectively.

Coca-Cola Zero continued to outperform, growing 20.4%, driven by targeted pricing and expanded availability. This performance was reinforced by positive momentum in modern and traditional trade channels as we focus on driving immediate consumption and promoting returnable packages. During the quarter, we launched Schweppes, our new sparkling water brand in Ecuador, aimed at capturing share in the high-value segment of the category. In the first month, we achieved over 40% coverage in the traditional channel and established a strong presence among modern trade customers.

In our value-added dairy business, Tonicorp delivered low single-digit sales growth and margin expansion in the first quarter. We gained share in core categories, including yogurt, flavored milk and ice cream, supported by our strong brand equity and ongoing innovation.

In Argentina, volume declined 8.5%, cycling a strong growth of 19.8% in the same prior year period. While early signs of stabilization are beginning to emerge, these have yet to translate into a recovery in consumer behavior. Against this backdrop, our commercial initiatives remain a key lever to navigate this environment. We achieved value share gains across NARTD categories, supported by affordability initiatives and continued focus on returnable packages.

The energy category delivered solid momentum with Monster growing 14% in the quarter, reflecting sustained sequential growth. We are also seeing gradual mix improvement with single-serve formats gaining relevance, driven in part by the rollout of the 220 ml mini can.

Finally, our digital agenda continues to advance with digital sales reaching 79.1% of total volume. This is the highest mix across our Latin American operations. Let's now turn to our beverage operation in the United States. As we mark our ninth anniversary in this territory, our business delivered another quarter of solid top and bottom line growth, along with record profitability.

Net revenues for the quarter rose 8.3%, reflecting a 3.5% increase in average price per case, driven by improved promotional efficiency and continued deployment of our trade promotion optimization tool. Volume grew 4.7% with transactions up 6%. These positive results were widespread across categories, with sparkling increasing by 3.5%, led by an outstanding growth of 11.2% in our low-calorie portfolio.

Flavors grew 2.1%, supported by Fanta, Sprite Zero and Fresca. Stills volume grew 4.5% with solid performances across our energy and sports drinks categories, including Monster at 15.7% and BodyArmor LYTE at 19.3%. Our market leadership position remains strong as we increased value share in NARTD beverages across both sparkling and stills categories.

During the quarter, we introduced over 95 new SKUs, including Coca-Cola Cherry Float, Diet Coke Cherry and FLRT by Monster. EBITDA grew 9.9%, reaching a margin of 16.4%, marking the most profitable first quarter since acquiring the U.S. operation. This is the second consecutive year achieving this milestone, highlighting the structural improvements we have embedded in the business over time. During the quarter, we further advanced the rollout of our upgraded suggested order application, incorporating enhanced value capture capabilities to drive incremental growth and strengthen execution across channels.

To close our operations review, our Food and Snacks businesses delivered a resilient start to the year while remaining focused on disciplined execution and profitability. Net sales declined in the low single digits in the quarter, cycling double-digit growth in the same period of 2025. At the operating level, Bokados in Mexico and Inalecsa in Ecuador delivered EBITDA margin expansion, supported by optimized price management, continued portfolio optimization and sustained progress on productivity initiatives.

In the area of sustainability, our business model continues to be recognized as a benchmark within our industry, reflected in our inclusion in the Dow Jones Sustainability Best-in-class World Index and for the fourth consecutive year in the S&P Global Sustainability Yearbook.

In closing, I'd like to highlight the recent release of our annual corporate integrated responsibility report, which outlines our progress against key commitments and reinforces our focus on environmental stewardship and generating a positive social impact. And with that, I'll turn it over to Emilio, who will walk us through our financial results for the quarter.

Please, Emilio.

Thank you, Arturo. Good morning, everyone. It's a pleasure to be with you today to review our first quarter performance. While the global environment continues to present challenges and volatility, our teams remain focused on execution. By applying our well-established revenue growth management capabilities together with cost and operational discipline, we delivered high single-digit currency-neutral growth in both revenues and EBITDA, while maintaining EBITDA margin broadly in line with last year.

Importantly, this performance demonstrates the resilience of our operating model and the strength of our portfolio and pricing architecture to consistently deliver results even under uncertain macro conditions. Let me offer further insight into our financial results. Consolidated revenues increased slightly by 0.2% to reach MXN 57.1 billion, mainly explained by our exposure to the U.S. dollar.

On a currency-neutral basis, revenue grew 8.8% during the quarter. As of March, gross profit increased 1.4%, reaching MXN 26.8 billion, while the gross margin reached 46.9%, an expansion of 60 basis points compared to the first quarter of 2025. On a currency-neutral basis, gross profit grew 17.8%, reflecting solid performance across our operations. Consolidated EBITDA reached MXN 10.6 billion, slightly below the prior year by 0.2%. On a currency-neutral basis, EBITDA grew 7.4%. The EBITDA margin was 18.6%, remaining fairly in line year-on-year, reflecting our continued cost discipline and ability to protect profitability.

Net income decreased 8.5% to MXN 3.8 billion with a margin of 6.6%, reflecting a 70 basis points contraction. This was mainly driven by the comprehensive financing result.

Now turning to the balance sheet. As of March, cash and equivalents totaled MXN 36 billion, while total debt stood at MXN 65 billion, resulting in a net debt-to-EBITDA ratio of 0.6x. Our strong balance sheet and consistent cash flow generation remains key pillars. providing the resilience to navigate a volatile environment while continuing to invest in the business and return capital to shareholders.

A dividend of MXN 4.28 per share was distributed on April 8, 2026, representing a 37% payout ratio of retained earnings and a dividend yield of 2.1%. Looking ahead, we will double down our operational efficiencies while maintaining a strong commitment to execution, cost control and financial discipline in order to face an uncertain macro environment. That concludes my review. And now I'll turn it back to Arturo.

Please, Arturo.

Thank you, Emilio. Against this backdrop, our business remains resilient, supported by strong fundamentals and disciplined execution. We start the year with a cautiously positive outlook, confident in the underlying strength of our business. Our financial strength and market leadership position us to navigate uncertainty while continuing to invest with discipline. Arca Continental is built for times like these. History has shown that sustained investment through challenging cycles prepares us to emerge stronger.

In summary, our priorities remain clear: strengthen market execution, maintain operational discipline, enhance commercial and digital capabilities and protect profitability.

Before we open the line for questions, I would like to take a moment to acknowledge that this is Ulises's final earnings call before his retirement at the end of May after more than 21 years with Arca Continental. Throughout these two decades, Ulises has played a key role in strengthening our financial discipline, enhancing transparency and building long-standing relationships with the investment community. We are deeply grateful for his leadership, professionalism and commitment to the company. Ulises, on behalf of the entire organization and our Board, thank you for your dedication, and we wish you all the best in your next chapter.

That concludes my remarks. Thank you all for your continued trust and support. Operator, please open the line for questions.

[Operator Instructions] We'll take our first question from Ulises Argote with Santander.

Maybe just quickly echoing Arturo there. I wanted to wish her well and all the best to Ulises. One of the most passionate and top-notch professionals I have come across. So all the best in what's to come for you. Here in the -- specifically on the question that we had, we wanted to get your thoughts, Arturo, maybe on the dynamics in Mexico. Is there anything you're noticing there related to the consumer dynamics, maybe moving more towards dealer or luxury categories and overall, how you're seeing both consumer and competition reacting with the increase in special taxes that we saw at the start of the year?

Thank you, Ulises. Well, we started this year in Mexico as we expected in a more demanding environment. We expected moderate economic growth and this tax-related price pressure and elasticity and also a consumer that's increasingly focused on affordability. So considering this context, we delivered what we believe was a very solid first quarter. I think this is a combination of deploying our traditional playbook and also incorporating our new capabilities in digital, our very solid price pack strategy and I also would mention our recent investments in infrastructure, which have supported our supply chain and our service to customers.

We did have some tailwinds in Mexico this first quarter as we expected. So all in all, we are very encouraged by our first quarter results. We are very confident on our fundamentals. And we know that cost pressure will build throughout the year. So we'll continue also focusing on disciplined profitability. In that context, the Coke Zero and the low sugar categories have been very relevant.

I'll turn it over to Jean-Claude to comment particularly on those categories.

Thank you, Ulises, for the question. And as you were mentioning, Arturo, we knew that we were going to face challenges during the first quarter. challenges because of the taxes and because of the dynamics in Mexico. Having said that, what we put together as a strategy for Mexico was going back to basics, strengthening our fundamentals while we embrace the future through our digital transformation with a focus on returnables, execution, cooler placement and all the digital initiatives and a good implementation in terms of our urgent strategy. As part of our RGM strategy plays a critical role, returnables, but also Coke Zero. And Coke Zero, if I can share a number, we had a very good growth of 28% in Coke Zero. And it's not just a consumer trend, but also our operational discipline to make sure that, that was going to be implemented.

And you will see more Coke Zero as we capitalize on the opportunity of the World Cup also throughout the year.

Our next question comes from Felipe Ucros with Scotiabank.

Congrats all the best, and thanks for all these years of fielding our questions. Thanks guys. I had one mainly on Mexico. You saw volume increase despite the excise tax. And I think it was better than what the market expected and better than what you expected as well.

So just wondering if you can talk about the forces that drove the quarterly volume, perhaps whether there was anything else other than the price elasticity in there, maybe there was a weather for or maybe it's just elasticity that's lower than what you expected. And also related to that weather question, water performed very, very strongly. So I imagine this may have played a part. And perhaps most importantly within this question, if you can comment about how the digital tools made this reaction to the tax different from what you experienced in 2014?

Thank you, Felipe. Well, yes, to your final point, we do believe we have stronger capabilities now as compared to those years. And -- but all in all, as I said, we're satisfied with our performance in the quarter. We -- based on the data that we observed this quarter and current consumer trends, we think performance is tracking pretty much in line, maybe slightly better than initially anticipated. I mean this is still early in the year, and we want to be prudent in our assessment.

We have to take into account that we did have a more favorable year-over-year comps relative to '25. And also in terms of weather, maybe temperatures were slightly higher versus previous year. And in a quarter, that certainly can make a difference. But again, all in all, we think we have a strong quarter. We remain cautiously positive going forward. And we do think that some of the capabilities that we invested in have also been a part of this. And elasticity effects are real. We do expect that throughout the year, but we also expect to benefit from some of the tailwinds that we have mentioned before, and that can help mitigate that impact.

And with respect to water and our digital capabilities, I'll have Jean-Claude give you some additional color.

Yes. Thank you, Arturo, and thank you, Felipe, for the questions. Then we knew that we were going to have some challenges with the taxes. Also that we have to take in consideration there are some elements that they play in our favor like that we didn't have the retaliation that we had previous year, and that helped.

And also, we had a better weather. But I would like to reinforce what the operation did. We had the best fast start ever with everything ready from day one. I'm saying the 2nd of January with a focus on back to basics, the focus on returnables. If you see the mix of returnables in the traditional channel group, -- and what we are saying that we are embracing the future through our digital initiatives. Something that is important to reinforce is that our digital execution in Mexico, now it covers 68.7% of our volume.

And it's also using other tools that we have in our digital initiatives such as the RGM tools like pricing copilot that they were a critical element to define our RGM strategy and initiative for this first quarter.

We will move next with Fernando Olvera with Bank of America.

Congratulations, Ulises, and good luck in the next chapter.

My question is related to the U.S. Maybe if you can explain the solid pricing seen this quarter? And what do you expect for the remaining of the year?

Thank you, Fernando. So well, yes, we're very satisfied with our strong start in 2026 in the U.S., both in volume and transaction growth. And it was actually the most profitable first quarter in that operation since we acquired that operation nine years ago. So this performance was driven really by a combination of good execution at the point of sale, stronger availability of key SKUs. And as you mentioned, a very effective revenue management. As I have been saying, if we need to get one capability right in the marketplace. I would say, in every market, it's our revenue management capabilities, not only in terms of pricing, but also in terms of promotion optimization.

That has become a very important part of our focus this year and actually previous year. So we're actually capitalizing on that. So we did have a true rate increase of 5% in the U.S. That is a combination of both price strategy and optimizing promotional activity. We had a mix effect that was negative, but still we achieved a very good price increase in the first quarter. The promotional activity has driven an improvement in ROI, and that translates into incremental profits and profitability for the operation.

Digital tools in that regard have been very important. And again, this is reaping the benefits of what we've been doing here in our Digital Nest in the U.S. operation and our pricing co pilot that you learned about. So I think that is going to continue to be our strategy, increasing prices, trying to be in line with inflation or above inflation in every business unit. And that's critical this year where, as you know, we're going to face additional cost pressures considering the geopolitical situation.

And maybe, Jean Claude, do you want to add something to that comment?

Fernando, thank you for the question. Yes, I would like to add, Arturo, if I may. We are celebrating the 17th of April, now nine years since we started our operation in the U.S. and to reinforce the momentum that, that operation has. And obviously, I am biased to talk about the U.S. operation, but it has been a continuity of what the team has done.

For this quarter, we have to take in consideration as well that we have some comparisons that play in our favor that we didn't have -- we had last year, as you remember, the retaliation. But what is important, we knew that we were going to face a challenge as well as taxes in Mexico with SNAP in the U.S. And we did the same back to basics, strengthening our fundamentals while we embrace the future through our digital tools.

Back to basics in the U.S. as it's a different market, is more about modern channel and is the focus on execution SOVI fill rate. Something that is important to share, Walmart gave us the recognition as the best bottler in terms of fill rate, which is the key indicator for Walmart and Walmart as our biggest customer. Then that demonstrates not just the focus on execution, but to achieve that level of fill rate is how we are implementing our digital tools such as the TPO pricing copilot, but also our digital tools, how we execute the MRT tools.

Our next question comes from Thiago Bortoluci with Goldman Sachs.

I'd also like to start extending our congrats to Ulises. I'm pretty sure everyone in this audience will miss the interactions, very, very, very nice tenure.

Back to the quarter and also limit myself to one question, Emilio. If we move back one quarter ago, you shared your guidance for the year where you expect to grow sales on an FX-neutral basis at mid-single digit. In this first quarter, you delivered a high single-digit FX-neutral growth in the top line, arguably with an even easier comps going forward, right?

The second quarter last year in Mexico was very pressured, you have the tailwinds from the World Cup and so forth, so on. So what prevents you from raising the guidance for top line growth at the moment? And what are the main risks for the remainder of the year? That's the question.

Thank you, Thiago. Thank you for the question. Well, as Arturo and Jean Claude has mentioned, we believe that it's too early to change the guidance. We said mid-single digit on sales. We are on 8%. So we want to wait for maybe next quarter and give you another new outlook. We've been protecting margins. So I think we're very on line with what we were expecting. We are 10 basis points below last year. So we're on track to meet our goals, I think.

Yes. This is here. We know we're going to face some pressures and some headwinds. As I said, there are some reasons to be optimistic about, but it's still one quarter. So we want to maintain ourselves cautiously positive, as I mentioned in my remarks.

Our next question comes from Renata Cabral with Citigroup.

Ulises, it's been a real pleasure interacting with you. Congratulations. So my question is a follow-up regarding logistics. So it was mentioned in the call that it was one of the levers are positives for the quarter, and I understood, especially in the U.S. So I wonder if you could give some color on specifics that you are seeing the benefits of it on the results and what we should expect for the rest of the year and even for 2027 on these sites?

Thank you, Renata. Yes, this is not only the U.S. I would actually highlight Mexico in terms of improved logistics. We have been investing in tools to improve our demand forecasting in every market, but I think it now starts to bear fruit in Mexico.

Just to mention, we had our best score in terms of forecasting our demand and also our best fill rate ever in the Mexican operation in the first quarter. So it's not only the tools that we have, but also the investments we've made in infrastructure that we've mentioned before, our CapEx and production lines and warehouses capacity in our warehouses. So that has been critical. And I think that's going to be even more important in the high season with the seasonality of our business, when we made those investments, we were actually planning for the summer. We didn't have a great summer last year due to several factors, including weather conditions. So we expect that to be better this year and to continue to capitalize on those capabilities.

And Chuy, you want to add to that?

Yes. I'd like to add a couple of things in that regard. We are deploying some artificial intelligence tools, specifically into the rebalancing of our inventories, and that is enabling us to improve our fill rate. And at the same time, as you know, and we have shared with all of you, most of the effort on digital tools was placed on the commercial side. There are a lot of learnings that we're taking from that side and now turning it into our supply chain management, specifically the warehouse.

And so today, we have tools for the people responsible to manage those warehouses and make sure we're making the right decisions as far as how we build the routes, how we balance inventories and how we improve the performance of such warehouses.

Our next question comes from Antonio Hernandez with Actinver.

Comments on those very solid results. Just a quick one regarding marketing expenses. You mentioned that those expenses were higher. What are your expectations going ahead?

And how much of this is driven by the World Cup?

Yes. I'll turn that over to Chuy.

Thank you, Arturo, for the question. Yes, you can see on the OpEx an increase during the quarter. And basically, the increase is explained by two things. One is higher maintenance. We want to be ready for the summer. And the second one is DME. We have a lot of commercial executions for the World Cup that has increased the OpEx during the quarter. But we remain committed and the ratio of OpEx to sales is basically in line for the full year on the levels of less than 32% as we have historical in the past years of less than 32%.

We will move next with Ben Theurer with Barclays.

This is Brian on for Ben today. We wanted to ask about South America. So a little bit of up and down there. You had some good results in some parts of the region, some weaker results in Argentina. So looking ahead to what you've seen in April and what you're seeing in the rest of the year.

What are you guys expecting, especially if you factor in FX?

Well, yes, we have different dynamics in the three markets in South America. In Peru, we had a historic first quarter growth in every single month of the quarter and across channels. As I've said before, this market has huge potential. The opportunity to grow per capita is tremendous in Peru. And just as I've mentioned many times, it's the same population that we serve in Mexico. And we have less than 1/3 of the volume that we sell in Mexico.

In Ecuador, we are seeing a clear recovery in volume and improved momentum, but the environment is still very challenging from the consumer point of view. So although we grew, we had balanced performance across categories, and we had a noticeable improvement in execution, but this is based mostly in deployment of what we call the savings portfolio strategy. It's a strong focus on affordability, which is what we're going to continue to do the rest of the year. Opportunities in stills there are very clear.

Argentina is the most challenging macro environment. The context is affecting our regions even more than the entire country, given the profile of our consumer base in some of the rural areas, and we're also cycling strong growth from last year. And so those year-over-year comparisons added further pressure to our results this quarter.

And so what are we doing in Argentina? We're focusing on returnables as we've done before, improving our productivity, route productivity, focusing on single-serve expansion. And although we're seeing some early signs of stabilization, this really has not yet translated into a recovery in consumer demand in Argentina. So we have to continue to focus on affordability on execution. Digital is very strong in Argentina.

And this is one of the countries where we're going to leverage this opportunity of the FIFA World Cup and that will progressively support volume recovery, we believe.

We will move next with Lucas Ferreira with JPMorgan.

First of all, congrats to Ulises for his career. I hope to keep in touch. And my question is regarding also Mexico, the amazing performance you guys delivered. Congrats on this. My question is twofold. One is if there were any sort of anticipation of acquisitions or some sort of a channel stuffing in the fourth quarter, given the anticipation of the price hikes for late December or early January. So there could have been maybe even better performance in the first quarter, if I would assume that part of the retailers could have anticipated a bit their acquisitions.

And then I have a bit on the market share, if you guys can comment how the competition behaved in this first quarter, if in line with your expectations?

And if you have any sort of early readings into market share that you can share with us?

Thank you, Lucas, for the question. Then we already said what has been the strategy in place, what were some of the elements that they were playing in our favor. Regarding the specific question about share, something to share with you is that in Mexico, thanks to that operational discipline back to the basics, embracing our digital tools, we have been gaining share in the first quarter.

We have been gaining share in sparkling. We have been gaining share in the Still category as well.

We will move next with Rodrigo Alcantra with UBS.

Arturo can you hear me.

Yes.

Congrats. It was a pleasure interacting with you. Yes, I mean, first of all, congratulations on the results. I mean undeniable an outstanding quarter. No comments there. Just Arturo, I want to picture your thoughts, I mean, totally agree with you on the potential about Peru, right? As you said, you serve the same population as you serve in Mexico. So we can, therefore, conclude it's a function there of increasing the per caps, right, per capital consumption there.

So my question here is what drivers or what drivers should we think, right, that could let you precisely increase the sales per point of sale -- we have spoken in the past about increasing the penetration of coolers there in the country. You recently also announced this very interesting partnership with Heineken, right?

So just curious to get your brains here on the potential of Peru, right? At the end of the day, if I'm not mistaken, your third most important country, right, in terms of volumes. That would be very, very interesting to hear from you.

And very quickly in the U.S., right, any learnings whatsoever on the -- how you are using the asset that you acquired there in the U.S., this is a small bottler in the U.S. What have been the learnings or the benefits that you have get from that minor acquisition? That would be my 2 questions.

Yes. Thank you, Rodrigo. First about Peru, yes, definitely, we agree. It has a huge potential. And I think it's the most promising market in terms of growth in the next few years. This is the comparison that I make all the time with probably they hate that, but with the team in Peru about the size of the market. We serve exactly the same population that we serve in Mexico, and it's such a similar country to Mexico that I do -- it's not going to be overnight, but certainly, we're going to get there eventually. I think it has a very particular strength, very unique in Peru, which is this dual Coca-Cola and Inca Kola strategy. That has proven to be a very important part of our recent good performance.

As you mentioned, also just the deployment of the traditional playbook of our company in that market, cold drink equipment, we expanded cold drink equipment to 50% coverage, and that's been a sustaining growth, but it's still a long way to go. I mean, Mexico, for example, is way above that. So that's a tremendous opportunity. The Stills categories in Peru are also a huge opportunity. And even those other categories like beer, this is also the most promising marketing for that multi-category strategy that we have.

And in terms of digital, we reached 310,000 customers registered in our digital B2B platform. This is almost 70% of traditional channel volume in Peru, and that enhances order accuracy, our productivity, data-driven execution. So we're really excited about this market. In terms of the Idabel acquisition, I'll ask Jean Claude to give you some details about that. But I think it does show that our playbook is very effective when we incorporate additional territories to the U.S. operation and just in the fundamentals of the business.

Jean-Claude?

Yes. Thank you, Rodrigo, for the question. If I may, Arturo, I would like to go back to Peru, just one small thing about the same strategy about back to the basics, but I would like to reinforce that simple strategy works and how to leverage that dual strategy, how we have been growing in key elements with Inca Kola and Coca-Cola working together both brands in terms of execution and also consumer connection, growing SOVY, growing availability, growing share and volume with both brands at the same time.

And that is something that we need to be consistent in the future. It's working right now, and it has to work in the mid and long term. Going to the U.S., as we were saying, the result that we saw back to the basics about using our tools and that discipline that we have in our execution back to the basics is working with the Idabel integration. The best example is fill rate. Fill rate that is so critical in the U.S., it has been one of our key elements that has been growing the most in that operation.

Maybe I would like to reinforce -- Sorry, I just wanted to add something that is super important for us, as you know, is the integration of this operation, bringing the great culture that we have at Arca Continental, the great culture that we have in Arca Continental in the U.S. has been a key element in this integration. That is a critical part for us, as you know.

We'll move next with Emiliano Hernandez with GBM.

Quick follow-up in South America. Could you elaborate on the potential impact of El Nino on consumption patterns and the execution in Peru and Ecuador, particularly?

Yes. Thank you, Emiliano. Yes, certainly, that's an effect that it's hard to predict and quantify. We consider that one of the potential headwinds for the rest of the year. And -- but truly, we're really focusing on the things that we can control. We try to avoid conversations about weather in the operations. So I think that's something that eventually evens out if you look at longer periods of time.

So what we're thinking now is about capitalizing on the opportunities in the rest of the year. We mentioned the World Cup, but also just deploying the capabilities that we've built. We still believe there's an opportunity that's part of the positives that we keep in mind for the rest of the year.

We will move next with Henrique Morello with Morgan Stanley.

I will just make a quick one on the cost side. Art, you mentioned that cost pressure will likely build up throughout the year. I think that's pretty clear. But on that side, if you could just provide a little update on your hedging positions and your positions in general your raw materials, but perhaps more on the packaging side, so aluminum, PET since those were the most volatile commodities we saw in the recent times.

So if you could just remind us how were your hedges before the recent spike, if you were building more positions in the past few weeks and months? And basically, when should we expect to see those cost pressures from PET, from aluminum hitting your cost in your P&L?

That's my question.

Thank you, I'll have Chuy comment on that, main raw materials, PET, aluminum and also sweeteners, sugar and fructose, which are so relevant for cost structure.

Thank you, Arturo, and thank you, Henrique, for your question. I mean, obviously, recent geopolitical developments are creating some short-term volatility across global commodity and energy markets. For us, the main areas of potential impact are aluminum, diesel and PET, all of which are highly sensitive, obviously, to oil prices and global supply dynamics. Now having said that, we believe we are well protected through our hedging strategy. Close to 97% of our aluminum needs LME are hedged and around 50% of the Midwest for 2026. And over 90% of diesel for 2026 and 2027.

In terms of raw materials, I will tell you the first quarter was overall favorable with the exception of aluminum, which, as you saw, remain under pressure. Looking ahead, we expect, obviously, continued volatility driven by some macroeconomic uncertainty and geopolitical tensions.

Regarding PET, yes, we do expect some increases for the full year, mainly driven by higher oil prices and freight costs. However, our contract in Mexico is helping us mitigate part of the impact. South America is a bit more exposed as PET is fully imported primarily from Asia. However, thanks to our sourcing strategy and obviously close relationships with suppliers, certain contractual structures, we have been able to mitigate the majority of this impact and remain below prevailing market conditions.

On sugar and fructose, we observed a downward trend during the first quarter, and we expect stability in that regard.

So overall, while we expect some pressure in the coming quarters, we believe we are well positioned to navigate this environment and be able to protect our margins.

And I would add, Henrique, that it's not only what we have in our contracts, we also have built very strong relationships with the suppliers over time, and that becomes really valuable in these times.

We have a follow-up from Felipe Ucros with Scotiabank.

Yes, I wanted to do a follow-up on Stills, guys. You had a very strong performance here, and it's several quarters at this point, where you've been performing so well in Stills. So I guess this starts to bring up some interesting structural questions as the mix of Stills increases. You have a higher ceiling when it comes to market shares here.

How does the competitive landscape change as this category grows above market for you? So put a different way, have competitors started getting more aggressive on Stills since you've been performing so well on this across regions?

And then obviously, anything you can tell us about how the changing mix here changes margins and returns for the business as Stills outgrows everything else?

Thank you, Felipe. I'll have Jean Claude comment on the dynamics in our main markets, maybe Mexico and the U.S. as the best examples. But what I can tell you is these categories have been growing for quite some time. And you have to kind of divide them into the different segments, dairy and energy and sports drinks. So we've been participants in these categories for a long time, and we're actually leaders in many of those categories.

They are much more developed in the U.S. as compared to Latin America. And that for us is kind of a window to what could be a -- opportunities in our Latin American markets. So I think we've been proving that we can also be marketplace leaders in those categories. The Powerade story in Mexico is a great example. And this is almost 20 years now since we've built leadership in Mexico and sports drinks. So we do monitor profitability, which, as you know, is super important for us, profitable growth and not only margins, but also gross contribution by category.

And that also has been part of the profitability story of our operations. But I'll have Jean Claude comment more specifically on growth in specific categories and subcategories in these markets.

Thank you, Felipe, for the question. Just to reinforce what you are sharing Arturo is two facts in our two key markets, Mexico and in the U.S., we are growing share in steels. There are some facts that I would like to reinforce is the execution that we have with the steels.

The execution in Mexico with a focus on the traditional channel to have a better SOVY and the cooler placement that we have in place to promote those categories.

In U.S., that focus on back to the basics, we display SOVY and to ensure the fill rate with our steel categories. Something to mention in some of the categories, what we have been done in Mexico with Santa Clara that is growing 16%. And as the Coca-Cola Company was sharing about Santa Clara, how it is now part of the club of $1 billion brands. The same trend in terms of growth we see with brands like Core Power and dairy in the U.S.

Something that is important, you were mentioning about Powerade it, also a brand that is a focus right now with the World Cup because World Cup is how we are promoting Coca-Cola, Coke Zero, but also Powerade is playing a critical role and how we are capturing the opportunity of the World Cup just to connect with the consumers the people that are going to be visiting Mexico and the U.S., but also how we are capturing that opportunity with our portfolio where the Stills play a relevant role.

We have a follow-up from Thiago Bortoluci with Goldman Sachs.

I have one follow-up question in Mexico. This is related to your packaging mix. We saw volume growth stronger than expected, although when I look to the consolidated mix, I see returnables losing share to nonreturnables. I'm pretty sure it has to do with the mix of channels and products, but would love to hear a little bit more how returnables have performed within those brackets and how it ties up to your affordability strategy. And the customers' elasticities that you have been highlighting throughout the call.

Thiago, thanks for the question. Indeed, you see the number, you see returnables going down. But the reality is the change and the shift of the mix of the channels. That other channels where we don't have as part of the strategy returnables, that channel is growing more.

When you zoom in, in the traditional channel, you see that returnables are growing in terms of mix, 0.2% in terms of the mix. And that is part of a back to the basics because the RGM strategy that we put in place is about affordability, where returnable is a critical element to win and to be competitive and affordable for our consumer. And we have been growing some of the key variables for returnable that is growing availability with our customers, but also the inventory of returnables with per customer as well.

What's important, Thiago, is that both packages are profitable. So we use returnability as a tool to balance affordability with profitable growth. I think we've been able to do that this quarter.

And this concludes today's Q&A portion. I would now like to turn the conference back to Arturo Gutierrez for any closing or additional remarks.

Thank you, operator. I'd like to thank you again for joining today's call and for your continued interest in our company.

If you have any follow-up questions, please reach out to our Investor Relations team, and we look forward to connecting with you again. Have a great day.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good day, everyone, and welcome to the Arca Continental Fourth Quarter 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to Melanie Carpenter of IDEAL Advisors. Please go ahead.

Thank you, operator. Good morning, everyone. Thanks for joining the senior management team of Arca Continental to review the results for the fourth quarter and full year of 2025.

The earnings release went out this morning. It's available on the company website at arcacontal.com in the Investor Relations section.

It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutierrez; the CFO, Mr. Emilio Marcos; the Chief Planning and Strategic Capabilities Officer, Mr. Jes�s Garc�a; and the Chief Operating Officer, Mr. Jean Claude Tissot. They're going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release or guidance.

And with that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who is going to begin the presentation. So please go ahead, Arturo.

Thanks, Melanie. Good morning, and thank you for joining us today to review our fourth quarter and full year 2025 results.

2025 was a complex and challenging year for our business. We faced extreme weather events, operational disruptions and a volatile macroeconomic backdrop. These factors influenced consumption patterns and weighed on traffic in several of our markets. Our teams responded with agility and discipline, delivering strong execution, sustaining profitability while continuing to invest in the long-term foundations of our business.

In many respects, 2025 marked a transition year. We navigated heightened volatility while staying firmly focused on what we can control. We made meaningful progress scaling digital platforms and analytics to enhance commercial capabilities, strengthening our end-to-end supply chain and driving productivity across the organization.

As a result, we closed the year with stronger fundamentals, greater operational flexibility and improved readiness to capture opportunities as conditions normalize. We are confident in the strength of our operating model and our readiness for the period ahead.

Moving on to our consolidated results. For the fourth quarter, total consolidated volume declined 0.8% and for the full year, 2.1%. Consolidated revenues in the quarter were down 0.6%. For 2025, revenues increased 4.6%, supported by revenue management, effective portfolio mix and strong execution across channels. Consolidated EBITDA in the fourth quarter declined 4.5%, posting a margin of 21%. Full year consolidated EBITDA increased 3% to a record level, surpassing MXN 50 billion for the first time in the company's history, underscoring the resilience of our operating model and continued focus on profitability.

Now let's review the performance of our operations. Our beverage business in Mexico ended the year on an encouraging note, delivering a gradual and sequential volume recovery in the second half, supported by our sophisticated revenue growth management capabilities, portfolio optimization and continued progress in returnable packaging initiatives. In the fourth quarter, unit case volume, excluding jug water, declined 3%, cycling exceptionally strong growth of 7.8% and 3.5% versus the same quarter in the prior 2 years. For the full year, total volume declined 3.4%, reflecting strong 2024 comps.

Sparkling beverages declined 2.5% in the quarter, partially offset by outstanding sequential double-digit growth in Coca-Cola Zero. This momentum was supported by expanded coverage and affordable packages, including the 450-milliliter nonreturnable format. Remarkably, Coca-Cola Zero achieved a CAGR of 15.8% in the last 5 years. Stills increased 2.8%, led by teas, dairy, juices and nectars, driven by sustained momentum in the modern trade channel, mainly in supermarkets, which were up 6.3%. Net sales grew 1.2% in the quarter, with average price per case, excluding jug water, up 5%. For the full year, revenues rose 1%.

EBITDA in the quarter increased 5.1%, reaching a margin of 23.9%. For the full year, EBITDA declined 1.7% with a 23.4% margin, supported by disciplined expense control, operational efficiencies, proactive hedging initiatives and favorable negotiations on key inputs. Looking ahead, we will continue to accelerate the deployment of digital capabilities to drive operational efficiency and improve visit frequency and effectiveness. Key initiatives include broader use of TUALI and the Suggested Order tools, along with new AI-driven inventory planning and predictive analytics to further strengthen execution.

Turning to South America. Total volume during the quarter and the full year were broadly flat, reflecting softer results in Ecuador and Argentina, largely offset by growth in Peru. Total revenue declined 5.6% for the quarter, while increasing 3.1% for the full year. Fourth quarter EBITDA declined 14.9% with margins at 22.2%. On a full year basis, EBITDA increased 6.5%, reaching a margin of 19.6%. Overall, our results reflect the gradual and uneven recovery across the region with distinct dynamics by country. Taken together, the region remains on a constructive path characterized by modest growth, improving fundamentals and increasing confidence in the trajectory ahead.

In Peru, our operations delivered a strong finish to the year, supported by resilient demand and solid execution across channels. Total volume in the fourth quarter was up 3%, cycling strong growth over the same quarter in each of the past 4 years. Notably, this was the highest quarterly volume since we assumed operations in 2015. Growth was broad-based across categories, led by sparkling up 1.9%, stills 1% and water at 10%.

Core brands, Coca-Cola and Inca Kola delivered solid performance, with volumes up 2.7% and 3.1%, respectively. In stills, the water segment stood out, supported by double-digit expansion in brand San Luis. Sports and energy drinks also contributed, increasing 2.6% and 8.6%, respectively. Importantly, Powerade continued to build momentum following the rollout of its new formula, further enhancing its relevance within the category. For the full year, total volume increased by 0.5%, confirming a clear sequential recovery through the second half of the year. Volume growth was also supported by targeted market-focused investments. In 2025, our team in Peru installed nearly 44,000 cold drink units, reaching our highest coverage level to date. This momentum, combined with disciplined execution, drove value share gains in alcoholic ready-to-drink beverages across both sparkling and still categories.

Moving on to Ecuador. Volume in our beverage business declined 5.4% in the quarter and 4.4% for the full year, reflecting a consumer environment that remains moderate, though constructive. Despite this backdrop, we sustained a solid competitive position, delivering value share gains in both sparkling and still beverages. These results were supported by affordability initiatives, particularly the expansion of returnable packages. Notably, the mix of returnables increased by 0.3 percentage points during the year. We also continued to strengthen our portfolio through innovation with the introduction of the Flashlyte brand to compete in the fast-growing rapid hydration segment. Looking ahead, we remain focused on sustaining profitability through disciplined cost management and efficiency optimization across the supply chain.

Now lastly to Argentina. Fourth quarter volume declined 1%, while increasing 5.2% for the full year, supported by selective pricing and affordability initiatives with recovery led by the traditional trade. Our operation navigated this environment through strong end market execution and a continued focus on returnable packages. We also delivered value share gains in NARTD beverages, with single-serve packages gaining traction and driving a 1.1% improvement in mix during the quarter. These gains were led by a remarkable performance in the energy category, highlighted by the strong momentum of Monster. In addition, our digital agenda continues to advance with digital sales reaching 75%, supported by the rollout of our proprietary B2B platform, TUALI.

Our beverage business in the United States delivered another year of strong financial and operating performance. In the fourth quarter, volumes grew 2.2% and transactions increased 3.5%, reflecting our focus on sustaining consumer engagement and driving interaction at the point of sale.

For the full year, volume declined 1.2%. This quarter showed broad-based momentum across categories. Our low-calorie portfolio grew by 9% with Coca-Cola Zero up 11%, Diet Coke up 2% and Diet Zero Dr Pepper up 10%. Still beverages increased 3.7%, driven by strong performance by Monster, Fairlife and our water brands, supported by excellent holiday point-of-sale execution.

Quarterly net sales rose 4.9% with average price per case up 2.8%. Full year net sales increased 3.3%. EBITDA in the quarter declined 4.3% with a margin of 17.5%. For the year, EBITDA increased 4.2% with a margin of 17.2%. This is the highest full year EBITDA margin since we acquired this operation in 2017, underscoring the strength of our operational model.

Finally, we are pleased with the seamless integration of our recently acquired adjacent franchise territory in Oklahoma, which commenced operations on November 1, further strengthening our footprint and growth opportunities in the region.

To conclude our review of operations, the Food & Snacks business delivered low single-digit sales growth for the full year, demonstrating strong execution despite a high single-digit decline in the fourth quarter. Disciplined pricing, portfolio optimization and operational efficiencies continue to support profitability and strengthen the position of our Food & Snacks business going forward.

I will now hand it over to Emilio to discuss our financial results. Please, Emilio?

Thank you, Arturo. Good morning, everyone, and thank you for joining us today to review our results. We're closing a year impacted by significant challenges not only for our business, but also for the global economy, which has faced multiple external pressures.

Consistent with our historical approach, we remain focused on the factors within our control, our execution, operating discipline and effective management of costs and expenses. This sustained approach is reflected in our performance throughout the year. We delivered sequential volume improvement every quarter and achieved full year growth in both revenues and EBITDA, highlighting the solid fundamentals of our operations even in a highly complex environment. At the same time, disciplined cost and expense management enabled us to maintain our EBITDA margin within the 20% range despite the headwinds we faced.

These results demonstrate our ability to manage volatility while reinforcing our business fundamentals. And they confirm that even in challenging times, disciplined execution and a clear approach enable us to deliver a solid performance.

Now let me provide you with further details on our financial results. Consolidated revenues decreased 0.6% in the quarter to MXN 64.5 billion, mainly explained by the exchange rate effect given an exposure to U.S. dollar. For the full year, revenues grew 4.6% to MXN 247.9 billion, reflecting the consistent results derived from our successful RGM strategy. On a currency-neutral basis, revenues rose by 5.4% in the quarter and 3.6% for the full year period.

During the quarter, SG&A expenses decreased 0.3% to MXN 20.4 billion, while the SG&A to sales ratio was fairly in line with fourth quarter '24 at 31.4%, reflecting our continued commitment to operational discipline.

In the fourth quarter, consolidated EBITDA was MXN 13.5 billion, a decrease of 4.5% compared to the same period of 2024. For the full year, consolidated EBITDA rose 3% to reach MXN 50.2 billion. On a currency-neutral basis, EBITDA grew 1.3% for the quarter and 1.9% for the full year.

EBITDA margin for the fourth quarter contracted by 80 basis points to 21.8%. The contraction is explained by the high comps in the U.S. and South America region in the fourth quarter of 2024 given the factors that we have disclosed in previous calls. At the same time, profitability in our Mexico business continued to improve sequentially, with the region delivering a 90-basis points margin expansion during the quarter. For the full year, EBITDA margin was 20.2%, reflecting a 30-basis points contraction.

Despite the challenging environment and volume pressure, we successfully sustained margins within the 20% range, supported by our effective hedging strategy and disciplined expense control and ongoing operational initiatives to support margin stability.

Now moving on to the balance sheet. As of December, cash and equivalents totaled MXN 28.6 billion, while total debt stood at MXN 62.3 billion, resulting in a net debt-to-EBITDA ratio of 0.7x, reinforcing the strength and flexibility of our balance sheet.

In 2025, we distributed a total dividend of MXN 8.62 per share. This reflects a payout ratio of 75% of retained earnings and a dividend yield of 4.3%, consistent with our disciplined capital allocation approach.

On February 4, we successfully completed the issuance of MXN 9,500 million in a local bond on the Mexican debt market in 2 tranches, one for MXN 6,240 million with a 7-year term at a fixed rate of 8.96%, and the other for MXN 3,260 million with a 3-year term at a variable rate equivalent to TIIE de Fondeo plus 40 basis points. With this issuance, we improved our debt structure profile.

Looking ahead, we remain confident in our strategy. Our disciplined management of costs and expenses and a strong commercial and operational capabilities position us well to navigate uncertainty and continue delivering solid results. Thank you for your continued support as we remain committed on delivering sustainable long-term value.

And with that, I will turn it back to Arturo. Please, Arturo.

Thank you, Emilio. As we conclude today's call, I want to thank our exceptional team of associates. 2025 tested our execution and our teams rose to the challenge, delivering results in an environment that demanded agility, discipline and focus.

This year reinforced what differentiates our model, the importance of adaptability in navigating unstable conditions across our markets and the operating leverage we continue to unlock to our digital capabilities.

Even in a challenging year, we protected margins, stayed closely connected to customers and consumers and continued to strengthen the fundamentals of our business.

For the full year, we anticipate consolidated revenue growth in the mid-single digits year-over-year, driven by balanced contributions from volume, pricing and mix.

We will continue implementing pricing actions to at least offset inflation across our operations while remaining firmly committed to keeping our portfolio affordable and relevant for consumers. We plan to invest around 7% of total sales in capital expenditures with a disciplined focus on strengthening market execution, expanding and modernizing our production and distribution network and advancing our information technology and digital agenda.

Looking ahead, we entered 2026 with better visibility and a more normalized operating environment. We also see incremental upside from major brand-building occasions, including the FIFA World Cup. With 24 matches hosted in 2 of our territories, we expect to drive incremental demand and deepen consumer engagement.

2026 also marks 2 historic moments for our company. We celebrate 100 years of Coca-Cola in Mexico, a brand that has become deeply embedded in the country's culture. This anniversary provides a powerful opportunity to reinforce local relevance, strengthen brand affinity, deepen our connection with consumers and communities, and recognize the enduring partnership that has shaped our shared success.

At the same time, Arca Continental celebrates 100 years as a Coca-Cola bottler. This milestone honors a century of driving sustainable growth, continued investment, boosting the local economy and being a pillar for the communities where we operate.

Most importantly, honoring the past is about preparing for the future. We entered 2026 with confidence and momentum. Profitability, efficiency and disciplined growth will continue to guide our decisions. With stronger capabilities, disciplined execution and solid fundamentals in place, we are confident in our ability to perform across business cycles and deliver sustainable value creation.

Thank you for joining us today. Operator, please open the lines. We will be happy to take your questions.

[Operator Instructions] We'll take our first question from Ben Theurer with Barclays.

On Mexico, so fourth quarter profit finished clearly strong and probably a little bit stronger than what was initially expected. Could you elaborate what the drivers were towards the end of the year and how that positions you as we move into 2026, thinking broader picture around the backdrop of the adverse taxation that was put in place about a month ago. But then obviously, you've called about out the tailwinds from the World Cup, and then let's just hope for better weather. So just a little bit how we finished and how that sets us up for 2026?

Yes. Thank you, Ben. Certainly, we're satisfied with our fourth quarter in Mexico, especially considering that we were cycling a 7% volume increase from last year. And so we had a good result, especially from the perspective of profitability.

December was particularly very strong in the quarter, where we grew volume 2.1%. And we believe this validates the recovery potential of the business in Mexico, especially as we face new challenges in 2026.

From the profitability standpoint, we continue balancing the pricing and affordability scenario and promoting growth across some of the priority categories in our portfolio. If you look at the categories in Mexico, Coke Zero grew more than 18%, stills grew volume, tea had spectacular growth at also 18%. Energy, juices, nectars, all those categories grew volume in the quarter.

So the other thing is that we -- throughout the year, we adjusted our OpEx. We started '25 thinking that the consumer environment was going to be better than it turned out to be. So we were prepared for tailwinds throughout the year. So we had to adjust our OpEx. And at the end of the year, we were able to do that. So our margins continue to improve.

And so as we face '26, we are tracking in line with expectations. We're managing the tax adjustment with our proven affordability and pricing tools. And we remain confident that we're going to be delivering a healthy performance throughout the year, especially protecting profitability. So I'm going to turn it over to Jean Claude to talk a little more about '26.

Yes. Thank you, Arturo. And to your point, we have prior experience with similar taxes with [ IEPS ] and the use of our tools. But something that I would like to emphasize is why we had a very good fourth quarter and that is going to be the base for 2026.

But the local team and the leadership from the team in Mexico is that we are going back to basics. We are strengthening our foundation while embracing the future through our digital transformation.

Going back to basics with a strong momentum with pricing and packaging as a lever to ensure competitiveness and transactions. We are expanding returnables. We are protecting entry-level packages and managing mix with a more differentiated zero sugar strategy. And we are embracing the future through our digital transformation that you saw through our digital capabilities and artificial intelligence tools with our B2B platform, TUALI. Our pricing copilot and TPO initiatives, both with an end-to-end approach with supply, with our forecasting, distribution network and warehouse automation.

We worked together with the Coca-Cola Company to see the fast start in Mexico and the feedback that we received was really good. And yes, we are ready, as you are saying, for a great opportunity that we have in 2026, that is the World Cup.

Our next question comes from Froylan Mendez with JPMorgan.

Can you hear me well?

Yes.

I would really appreciate if you could dig in into the guidance of next year on a country-by-country basis, obviously focusing a little bit more on Mexico. If anything has changed from your original expectations on the impact on volumes from the increased taxation and whatever extra pricing you would do for next year. So a little bit more detail on country, region-by-region basis volume, pricing outlook for next year, that would be highly appreciated.

Sure, Froylan. Let me start by Mexico, as you requested. And the current environment, as you know, is that we're facing the price increase in line with what we anticipated.

So we -- as Jean Claude explained, we're going back to basics in our operation. We're focusing on our traditional playbook, but at the same time, deploying our digital initiatives. So that will help us mitigate the impact of elasticity as we increase prices.

So we've seen a constructive response from the consumer. Engagement remains very healthy across our core categories and channels. Modern trade particularly responds well to targeted promotions and competitive pricing. And the traditional trade remains resilient, especially as it is supported by digital execution in this market. So we are reinforcing affordability through returnables, entry-level packs, strengthening our execution or metrics for execution, cooler placement and as I said, leveraging digital tools, particularly our revenue management tools, pricing and promotions to fine-tune our decisions in the marketplace.

These -- all these actions are helping us manage the transition very effectively and at the same time, maintain competitiveness. So we're confident that we're going to deliver on our guidance for Mexico.

In the other markets, well, the U.S. has its particular challenges, but we also have the opportunity to capitalize on the World Cup, which is an extraordinary event in the year. And we're focusing on improving our execution, especially focusing on transactions and growth categories and also efficiency projects that we've been deploying in the last few months, and we're going to capitalize on those as well.

In Peru, it's probably our most promising market in terms of growth -- of the growth potential. We have the opportunity to continue to win in the stills categories, which is a huge opportunity in Peru as well as the dual cola strategy within Inca Kola, which is a unique advantage that we have in that market. And if you look at the -- just the growth in coolers, we had a historic cooler placement in Peru last year, 43,000 units. We're going to continue to do that. The coverage is still quite low as compared to Mexico.

And same thing in Ecuador. Ecuador faces different challenges. It's not as favorable the consumer environment, but we also have seen recovery in the last few months.

In the case of Argentina, well, Argentina is recovering. As you know, we expect lower volatility, improving consumer confidence. And I would say, more predictable backdrop performance in 2026. We have reversed the negative trend we saw in the third quarter. The key in Argentina is we have competitive price points across key categories, focused on immediate consumption, single-serve and very importantly, an efficiency program to protect margins. We expect margins to recover in Argentina throughout the year.

So every market has its particular challenges. There are some, I would say, basics in all of our markets, which we're going to be working on, digital deployment and the -- going back to our fundamentals or stick to our fundamentals and things we can control. So we're confident about our guidance in each of the markets.

If I can follow up just quickly in Mexico. So should we still expect a low single-digit decline in volumes and still some additional pricing efforts throughout the year to reach at least inflation? And what about margins? Is this shifting to more profitable mix or higher-priced SKUs? Is that helping margins and changes anything on your margin outlook for Mexico?

Yes. Well, we haven't seen anything in Mexico that would change our outlook and what we've mentioned before. And in terms of margins, we do anticipate -- and this was expected, we anticipate margin pressure from tax-related volume impacts and elasticity. But this will be also mitigated by volume tailwinds from major events as Jean Claude explained and digital rollouts and also the favorable comps with some unusual activity throughout 2025. So with efficiency initiatives and disciplined cost management, we're confident that we're going to be able to protect our margins throughout the year.

We will move next with Felipe Ucros with Scotiabank.

So first, a quick one on IEPS. Just wondering if you can comment on whether an offset has been implemented in the market? And what type of volume evolution? If so, what type of volume evolution you've seen after the offset in the beginning months of the year?

And then in second place, congrats on the M&A in the U.S. Just wondering if you can talk to us a little bit about the target and how it may impact the current operation in the U.S.? Anything you can give us in terms of size, margins and how things will change after this?

I'll talk about Mexico, and then I'll turn it over to Chuy to talk about the M&A activity in the U.S. As I said, we haven't seen anything in Mexico that would change our view on what to expect for the year. We did have some favorable weather in the first part of the year. So it's hard to figure out how much of that will have an effect on what we're seeing in the market.

Again, we are approaching the situation with the same discipline and the same playbook that has proven effective in previous cycles. So we have the experience of dealing with situations like this one. So we -- I think we have -- we're able to predict better and also to execute better. What are we doing is maintaining competitiveness through the best price pack architecture for the current situation.

We are protecting our consumer affordability with returnable packages and very strategic price points. When this happens, you have the opportunity to kind of realign your price pack curves and architecture to promote the price points and the SKUs that are more favorable.

And also, we're leveraging our tools, basically, pricing and promotional tools that also have proven very effective, and that is certainly an improvement as compared to 12 years ago when we faced similar a situation.

So we do expect the volume decline derived from the tax in '26. But there are, as we've said, strong tailwinds that will be also mitigating that impact. So we haven't seen anything that would change our view in that regard. So we are going to be consistent with the playbook. And with that, I'll turn it over to Chuy.

Thank you, Arturo, and thank you, Felipe, for your question. Our most recent transaction, the acquisition of Idabel Coca-Cola Bottling in Oklahoma in December of last year, reflects how we approach consolidation, adjacent territories, clear strategic fit and real opportunities to generate synergies.

Idabel is a long-established small Coca-Cola bottler operating since 1911 with strong ties to its local community and previously owned by the Fulmer family. It is located next to our existing footprint, and it does not have a production facility as it was supplied by Coca-Cola Southwest Beverages as well as other nearby bottlers. This obviously makes integration simpler, and it lowers execution risk.

Idabel also distributes Dr Pepper and Monster brands, which strengthens the overall commercial opportunity with our partners.

I will summarize this as deals like this are representative of the type of consolidation we favor. They're focused, value-accretive and operationally aligned. So we're really excited to be serving a new set of clients and customers for Coca-Cola Southwest Beverages.

So this is the natural thing that we think will be happening in the next few years in the U.S. marketplace.

We will move next with Rodrigo Alcantara with UBS.

Congratulations on the results. Also to Jean Claude for the appointment as COO. My question is precisely in the U.S., Jean Claude. Maybe to understand better, I mean precisely this playbook that is allowing you to deliver that volume growth in not necessarily such a friendly consumer environment in Southeastern region -- the South region in the U.S., right? I mean we have all these of this context right of the Spanish population. In addition to that we have the upcoming cups -- World Cup to the [ SNAP ]. So you already spoke very clearly about the tailwinds, right, that could lift your bonds like the World Cup, right? But it would be nice to understand precisely the playbook that is allowing you to navigate this challenging factor in the U.S. That will be my question.

Thank you, Rodrigo for the questions. And yes, obviously, I am biased and excited to talk about U.S. performance. Yes, we had a very good year. As you know, we won the Candler Cup in 2025.

And the question is, why the good results. We are -- we have confidence in North America outlook. As you're saying, we finished with positive momentum. And even though we had the challenge of some fake news during the year, but recovering volume, share and transactions. Why?

Something that we have been sharing with you that has been a priority in the U.S., the culture. The culture that we have with our frontline heroes on how we are working together with the Coca-Cola system, the Coca-Cola Company and the other bottlers.

But also, we have been implementing what we have been sharing that we are doing in the rest of our countries. A simple formula that is going back to the basics, strengthening our foundation while embracing the future through digital transformation.

Going back to the basics in the U.S. has been a focus on all 3 channels with a focus on solid fill rate and growing transactions. And in terms of the digital transformation has been our myCoke.com implementation that is like TUALI in Latin America.

Also the tools that we are providing to our commercial teams that they have the information by store to see our execution and performance, working together with our customers, but with that end-to-end approach between supply and commercial, connecting the dots between those 2 areas.

Then three pillars: culture, going back to the basics and the fundamentals of our business, and the digital transformation that we have been implementing together with our Digital Nest.

So I think that Rodrigo, this is -- the U.S. for us is a story, not about what we're going to do in '26, but throughout the years, it's consistent, high-quality customer-focused execution. And that is based, as Jean Claude said, on a strong culture that has been transformed.

Just -- and we don't talk about these metrics usually in some of these meetings, but when we came to the U.S., engagement score was in the 60s, and last year, it's in the high 80s with all of our associates. So this is the culture that we're talking about. So we think this delivers consistent results throughout the years, aside from particular things that we're going to have as headwinds or tailwinds throughout '26.

Thank you, Arturo. Indeed very consistent results. Congrats.

Thank you, Rodrigo.

Thank you, Rodrigo.

We will move next with Alejandro Fuchs with Itau.

Congratulations on the results and also on the 100 years of Arca this year, pretty impressive milestone. I have just one very quick question for Emilio. I think the rest of the questions have been answered already.

But for Emilio, there was a big net financial expense this quarter of almost MXN 2 billion. I was to see -- was there anything unusual this quarter there that explain a little bit of a higher financial expense? Or is this the level that we should expect going forward, especially for 2026. I think if you could provide some color there, that would be very helpful.

Thank you, Alejandro. Yes, we're celebrating 100 years of being a franchise in Mexico. Thank you for your comment.

Yes. Well, the main variation on the net interest expense is basically 2 reasons. One is the increase in the financial expenses, explained by a higher interest payment that we have since we have new debt in Mexico of around MXN 15,000 million associated with CapEx and the M&A activity that we had last year. And the second one is the decrease in financial income since interest rates were lower than last year and also, we had a lower cash position basically in Mexico and U.S.

So what you're seeing on the financials is the net of expenses and income. So at the end, I think the short answer is higher debt in Mexico and U.S.

We will move next with Fernando Olvera with Bank of America.

It's a follow-up regarding the acquisition in the U.S. and I would like to hear your thoughts of what changed versus previous years that motivated this franchise to sell its business? And how can this cause other franchises to again, to be motivated to sell their business in the future?

Well, we don't really know exactly what motivated them. We have been having conversations with the owners of the franchise for some months or maybe a couple of years.

But I think at the end of the day, what we have to realize is that this is kind of the logical thing to happen as the business of Coke franchises becomes more a business of scale. If you think about this business throughout time, probably 30, 40 years ago, owning a Coke franchise, scale was not really the name of the game because you had a very local operation. You had kind of a obviously, most favored nation treatment by Coca-Cola. And you didn't require the sophisticated capabilities that you require now or you didn't have the large accounts.

Now it's different. And one of the things that's changing is, particularly as we move into digital conversations with customers that we need to have, as I said, more modern tools for a lot of the commercial core processes, it makes sense to have more scale in the operation. It's not -- that's not specifically the reason in this case, but what it creates is the opportunity to share the value that will be created through consolidation.

So that's why I've been arguing that consolidation is a positive thing for everybody in the system and Coca-Cola Company also believes that. And I think that is a trend that will continue.

Exactly when that is going to happen, it's hard to predict because it depends on very personal decisions by franchise owners. But again, it's -- I think it's the logical thing to happen in the future.

We will move next with Alvaro Garcia with BTG.

Two on my side. One on the cost outlook for '26. We still saw some gross margin pressure, which I think probably had to do with the U.S. in this fourth quarter, but into '26. I was wondering if -- I mean if you can give some color on sort of key raw materials and what you're seeing in the context of obviously a pretty important affordability strategy in Mexico.

And then my second question is on snacks. You mentioned this high single-digit decline in the fourth quarter. So any sort of update on sort of how you're thinking about allocating capital to this business strategically would be helpful.

Sure, Alvaro. Let me turn it over to Emilio. Just mentioning first that as we look at margins going forward, I mentioned the challenges and opportunities we have in our operations, particularly in the case of volume in '26. We are confident about our pricing strategy. We're going to be consistent with what we've said and especially as we improve our tools for pricing and promotions. The raw material environment, Emilio can expand on that and a very strong focus on OpEx efficiency throughout '26. So Emilio, please.

Thank you, Arturo, and thank you, Alvaro, for your question. Well, I would like to mention that despite the macroeconomic volatility, most of our key raw materials continued to show stable trends during the fourth quarter, and we expect that stability to continue this year.

I would say that with the exception of -- for aluminum. Aluminum prices continue to rise, especially MWP component. So for that reason, we have fully hedged our LME, which is the other component of aluminum. So we have hedged 100% of our needs in Mexico and 97% of our needs in U.S. for LME, and both at a higher price than last year but lower than the current spot prices. So we are in a better position compared with the market as of today.

In addition, we hedged 50% of our MWP requirements in the U.S. also above last year prices but below the current market prices. We have also covered 90% of our sugar needs in Peru at levels below 2025. So we are better than last year here. And 71% of our high fructose needs in Mexico in line with inflation and 43% in U.S. at the same levels of 2025. So as you can see, we are basically very well on the hedges with the exception of aluminum basically in U.S.

With respect to snacks, well, the fourth quarter, we had a mixed performance in our snacks operations, some net sales declining in some markets like Mexico, U.S. and growing in Ecuador. And this reflects a varied market dynamics by country. So in some countries, we have more synergies. Your question was about snacks business, just confirming?

Yes, it was about sort of how you're thinking about the business longer term, sort of how you think about...

So yes, this -- we don't allocate a disproportionate amount of capital in this business, and we constantly evaluate strategic opportunities to strengthen the business and maximize volume. Let me tell you that we do regularly assess this business in our portfolio, including the U.S. Snacks division. And this is part of our commitment to long-term growth.

As I said, in some cases, we have stronger synergies as in Ecuador. In other cases, it's not the same. And also the business is not connected to our beverage operation. It's quite independent. So we are very flexible to make decisions about this business in the future.

Our next question comes from Ricardo Alves with Morgan Stanley.

I want to go back to the U.S. Besides frontline pricing, I wanted to go into more details on revenue management, your strategy longer term on revenue management. It would be super helpful for us maybe to illustrate your strategy on ground, if you can share some specific examples.

Where is really the focus of the management in stuff that it's really going to move the needle on your unit revenues? Is it opportunity on a higher value mix, higher value brands? Is it more get more exposure or work better on your packaging and mix of packaging, use smarter promotion activity now with the digital. You mentioned digital in several fronts. So I wonder if maybe this is where the -- there are several ways in which we are able to think about how you are tackling new opportunities to improve even more the U.S. business, but it's difficult for us to really have a grasp on what really could move the needle, what are the practical examples that you are implementing right now.

So I just wanted to understand a little bit better your longer-term strategy, what could be the upside in the U.S. Maybe it's efficiencies, right? You talked about efficiencies as well. I know that in the U.S., we talked in the past about route optimization, integration of distribution centers. There's many things in my mind right now. I just wanted to get from you what is really on top of your mind to improve even further the U.S. business?

Thank you, Ricardo. I will turn it over to Jean Claude, just by saying that, yes, you pretty much described the many opportunities that we have in the market. Revenue management pricing has been a fundamental capability, and that's been a driver for value in that operation. And in every operation, as I've said, if there would be one commercial capability that we really want to get right, it's pricing and promotion. I think we've -- we're off to a very good start in the last few years.

Efficiency is becoming more of a priority in the U.S. as well. We're investing for making our supply chain more efficient. And -- but I will turn it over to Jean Claude to provide details.

Thank you for the question, Ricardo. And indeed, RGM has been and will continue to be critical in our strategy in the U.S. What we have done? We have been focused on increasing transactions. 2025, despite all the challenges that we had at the beginning of the year due to the fake news, we were able to finish the year once again growing transactions.

Why do we grow transaction is because we have been developing a new portfolio. We have strengthened our portfolio in terms of packages, but also in terms of categories, in terms of innovation. We have been -- you have seen the improvement that we have done with brands such as Core Power. But RGM is also how we are bringing our digital transformation and use the implementation of tools such as the price promotions and the copilot pricing.

And pricing as well has been the alignment that we have with the Coca-Cola system with the Coca-Cola Company, the other bottlers and the customers. Then it's a combination of initiatives that are together with our execution, allowing us to grow the margins as you saw.

We will move next with Renata Cabral with Citi.

My question is about the strategy on Coca-Cola Zero, we saw -- any standout growth in the quarter? And also, if you see the -- over the last 5 years, the CAGR has been around 16%. So my question is how much we can continue to see this trend over the Coca-Cola Zero. And if you can say for country, where do you see still the biggest opportunity to increase the portfolio?

Yes. Thank you, Renata. I think Coca-Cola Zero is probably the biggest innovation we've had in the portfolio and in the Coca-Cola system in recent years. And it's been a very, very successful product as it captures new consumers, younger consumers and also consumers from Coke Original Taste that would prefer a zero-calorie version.

So this has been relevant in every market. It's been growing . As I mentioned before, it grew 18% in Mexico. It's growing in the U.S. It's actually sustaining the sparkling segment in the U.S. and Coca-Cola brand.

So we will continue to promote Coke Zero in every market. And one example of that is that in the case of Mexico, it will take center stage in all advertising and promotions tied to the '26 FIFA World Cup. This is a very powerful global platform that we will use to celebrate our iconic brand and showcase our commitment to offering this no-calorie versions of our products. So you're going to see a much more relevant presence of Coke Zero in all of our marketing activity. And also, it's obviously a very profitable product. So it helps to sustain our profitability as we grow into the zero-calorie segment.

Our next question comes from Antonio Hernandez with Actinver.

Just a quick follow-up on the Snacks business in Mexico, and particularly in the U.S. Obviously, the competitive environment and its performance being affected by consumer trends or any other highlights that you could provide?

I'm sorry, just to clarify, your question is about consumer trends, competitive environment in Mexico and the U.S.?

In the Snacks business.

In the Snacks business. Okay. Yes, I will turn it over to Chuy to make some comments about Snacks. This operation now reports to Jean Claude, but it was supervised by Chuy last year.

I can tell you that Snacks had a mixed performance in the fourth quarter. That reflects different dynamics in different countries. Much more challenging, I would say, in the U.S. than in Latin America. So we've been focusing on, again, being very profitable in this business, focusing on growth categories and also continue to invest in the brands that are more relevant for our consumers in each of the markets. And innovation is very important in this business. So I will let Chuy expand on that.

Thank you, Arturo, and thank you, Antonio, for your question. I think the fourth quarter reflects what happened during the year. The Bokados performance as well as the Inalecsa performance was very good. Most of our challenges are in the U.S. market.

I'll give you an example, in Mexico, our focus is basically on 3 categories, extruded snacks, tortillas and mixes. And the products in these categories for the most part, grow double digit.

Ecuador has been facing some political and economic challenges. But at the same time, we have a very good position across channels, and we have been investing primarily on product displays and that has been very successful. As far as the U.S., we definitely see more aggressive pricing from competitors and ongoing category contraction in all segments.

And we're basically continuing to strengthen our portfolio profitability through an optimized price package strategy. And we'll continue strengthening our innovation agenda, sponsorship strategies and expanded distribution network, particularly for Deep River in some of our key strategic accounts.

We will move next with Carlos Laboy.

My question maybe is more directly for Jean Claude. Look, the passion and intensity for client service that your people in the U.S. have, I mean, I haven't seen anything like that anywhere in the world.

But the revenue growth management tools that they operate with, right, for volume, price mix, trade discount, how do you see them in terms of their stage of development for where they need to be or where they can get to?

And what's the upside that you have in terms of -- in 2026, 2027 for the efficiency, the capacity of these tools given how you see your IT projects in the pipeline moving along?

Thank you for the question, and thank you also for the nice words about our culture, something that make us super proud.

Regarding our question about RGM is part of going back to the basics as well. As you know, we have that vision how to evolve to be a shelf replenisher, to be a market developer in U.S. market and RGM is essential.

We have been developing tools to grow our transactions to expand our portfolio with single-serve packages in all the categories, not just in sparkling. The development of zero sugar and the tools -- and the digital tools, as you are saying, that we have to make sure that we connect our digital tools such as the TPO, pricing copilot with our supply tools as well to ensure that going back to the basics, we have the best fill rate.

A lot of improvement working together with the Digital Nest with [ CONA ], but we are excited as well for what is coming. We cannot say that we are done with all our digital initiatives. We are excited about what is coming.

To continue with that vision that is about culture, is about being a market developer, is about back to the basics, embracing the future through our digital transformation and all our RGM tools.

And Carlos, I would say that the tools continue to evolve as the portfolio continues to evolve, and there's also an element of change management as we have to somehow involve our brand partners into the effort. I would say that in terms of promotional activity, there's still a lot of opportunity as we continue to refine the tools.

Thank you. This concludes today's Q&A portion. I would now like to turn the conference back to Arturo Gutierrez for any additional or closing remarks.

Thank you, and thank you again for your time and your continued interest in Arca Continental. If you have any additional questions, our Investor Relations team is always available. We look forward to connecting with you again in the next quarter. Have a great day.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good day, everyone, and welcome to the Arca Continental Third Quarter 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to Melanie Carpenter of IDEAL Advisors. Please go ahead.

Thanks, Nicky. Good morning, everyone. Thanks for joining the senior management team of Arca Continental to review their results for the third quarter and the first 9 months of 2025. Their earnings release went out this morning, and it's available on the company website at arcacontal.com in the Investor Relations section.

It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutierrez; the CFO, Mr. Emilio Marcos; and the Executive Director of Planning, Mr. Jesus Garcia. They're going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance.

And with that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who is going to begin the presentation. So please go ahead, Arturo.

Thanks, Melanie. Good morning, everyone, and thank you for joining us today to review our results for the third quarter and to share some important recent developments.

Let's begin with our consolidated results. I'm pleased to report another quarter of solid execution and sequential progress across our territories, even as the broader economic environment remains challenging. Our teams continue to navigate market headwinds with agility and discipline, driving robust profitability. Total consolidated volume declined 1.8% in the quarter, while consolidated revenues grew 0.5%, supported by effective portfolio mix and revenue management, partially offset by unfavorable FX impacts.

Consolidated EBITDA grew 1.2% in the quarter, reaching a margin of 20.4%. This achievement marks a significant milestone with third quarter EBITDA margin at its strongest point since the acquisition of our U.S. operation in 2017. These results underscore our relentless execution, the strength of our portfolio and our continued focus on driving profitable growth.

Let me expand on the results across our geographies. In Mexico, unit case volume, excluding jug water, declined 2.9%, largely reflecting the impact of heavy rains and below-average temperatures across much of our territory. Despite this temporary weather-related pressures, still beverages grew 2.2%, led by tea, juices and nectars and energy drinks, capitalizing on the positive momentum in the supermarket channel.

Coca-Cola Zero continued to outperform delivering sequential double-digit growth, supported by the introduction of the new 450-milliliter format, which continues to resonate with consumers seeking convenient and affordable options. Santa Clara brand continues to deliver strong performance in Mexico, achieving double-digit volume growth rates, supported by robust momentum in flavored and specialized milk.

We continue to gain value share in the value-added dairy category, reflecting the strength of our innovation and disciplined execution. Net sales grew 2.8%, with average price per case, excluding jug water, up 6.4%, underscoring our strong revenue management capabilities. EBITDA decreased 3% in the quarter, resulting in 23.9% margin, reflecting our disciplined commercial execution and solid revenue management capabilities in a softer demand environment.

In South America, total volume declined 0.6% in the quarter, primarily due to softer performances in Ecuador and Argentina. This was partially offset by growth in Peru. Total revenue declined 13.6% and EBITDA was down 1% with a margin of 18%. This quarter reflects a steady though cautious progression of the recovery that began in the first half of the year with meaningful variation across countries. Collectively, our South American operations are advancing through a period of disciplined stabilization, setting the stage for more balanced and sustainable growth ahead.

In Peru, total volume increased 2% in the quarter, supported by a stable economic environment and resilient consumer demand. Growth was broad-based across categories, led by sparkling up 1.7%, stills up 1.9% and water at 4.8%. Our core brands, Coca-Cola, Inca Kola and Sprite delivered strong growth, up 1.2%, 1.6% and 8%, respectively. Volume recovery remained consistent across channels with convenience stores leading the way up 22%. Supermarkets showed a sustained rebound while traditional trade maintained solid momentum, supported by our effective price pack and cross-category strategies, further enhanced by our digital capabilities.

Turning to Ecuador. Volume declined 1.2%, reflecting softer market conditions and a fragile yet gradually improving macro environment. Even so, our team remained focused on executing our fundamentals and driving performance in the areas within our control. We sustained our value share in NARTD beverages, driven by continued growth momentum in still beverages, up 3.6%. In the sparkling category, Coca-Cola Zero once again delivered solid growth of 2.2%, while Fanta and Fioravanti grew 6.2% and 3.6%, respectively. The water segment rose 3%, showcasing the strength of our diversified portfolio.

We also continue to refine our price pack and channel strategies, drive the adoption of returnable packages and invest in targeted market initiatives to strengthen our long-term position. Year-to-date, we have installed more than 17,000 cold drink units, further enhancing our market coverage and reinforcing execution at the point of sale.

In Argentina, volume declined 5.6% in the quarter, reflecting the near-term effects of the country's economic adjustment. Nevertheless, we gained value share across NARTD categories, supported by our sparkling portfolio and our continued focus on affordability and returnable packaging initiatives. While volatility remains, our disciplined execution and agile commercial approach positions us well to capture growth as conditions normalize.

Our beverage business in the United States delivered another strong quarter, sustaining solid momentum and achieving robust operating results. This marks our 30th consecutive quarter of EBITDA growth. Adding to this momentum, our U.S. team was recognized as the best Coca-Cola bottler in the world, receiving the prestigious Candler Cup. We are proud to be the only bottler to have earned this award twice, underscoring our operational excellence and market leadership. These impressive milestones reflect our team's consistent execution and the strength of our business model.

Solid performance this quarter was driven by effective management of our price pack architecture, disciplined cost controls and continued focus on maximizing the value of our most profitable packages. Net revenues rose 3.5% this quarter, with the average price per case up 4.8%, supported by our strategic focus on boosting promotional efficiency through our trade promotion optimization digital platform. Volume for the quarter declined 1.3% and transactions grew 0.1%.

Key performance highlights included a 5.9% increase in our low-calorie portfolio led by Coca-Cola Zero, Diet Coke and both Diet Dr. Pepper and Dr. Pepper Zero. In the stills portfolio, Monster, Fairlife, Core Power and Smartwater continued to post sequential growth, supported by robust brand execution. Notably, EBITDA increased an outstanding 9.7%, representing a margin of 17.2%.

And an important update on our digital agenda, our e-commerce business continued to deliver strong results, driven by enhancement in our eB2B capabilities and outstanding execution in the e-retailer space.

I'd like to close our U.S. update by sharing our excitement for the 2026 FIFA World Cup and our role as whole city supporters for the Dallas and Houston venues. Through this partnership with the World Cup Organizing Committee, we will actively support the city's legacy programs and showcase our brand through targeted initiatives that engage fans and local communities.

Our Food and Snacks business delivered a resilient performance posting a low single-digit sales decline for the quarter. While facing top line challenges, our team remained focused on profitability through effective price management, portfolio optimization and operational efficiencies. In line with our broader sustainability objectives, we continue to advance the clean label initiative across our U.S. Snacks portfolio. This includes the removal of artificial colors, flavors and preservatives as well as the simplification of ingredients lists. These efforts exemplify our commitment to transparency, product integrity and long-term consumer trust.

And with that, I will now turn the call over to Emilio. Please, Emilio?

Thank you, Arturo. Good morning, everyone, and thank you for joining our call. As Arturo highlighted, the same factor that influenced our performance in the first half of the year continued to play a significant role in the third quarter. Macroeconomic environment remained challenging and weather conditions were still unfavorable. Even so, we have a sequential improvement in volume for most of our operations, demonstrating strong team performance despite challenges. The improvement in volume, together with our solid revenue growth management capabilities and disciplined approach to expense control resulted in an expansion of our consolidated EBITDA margin.

Let me offer further insight into our financial results. In the third quarter, consolidated revenues increased 0.5%, reaching MXN 62.9 billion. Revenues for the 9 months of the year rose 6.6% to MXN 183.4 billion, mainly driven by an effective pricing strategy. On a currency-neutral basis, revenue rose 3.8% in the quarter and 3% year-to-date.

During the quarter, SG&A expenses rose 1%, reaching MXN 19.4 billion. Despite the contraction in volume, SG&A to sales ratio was fairly in line with third quarter '24 at 30.8%, reflecting our continued commitment to operational discipline.

In the quarter, gross profit increased 1.2% to MXN 29.5 billion, while gross margin expanded by 30 basis points due to a solid price pack architecture and solid hedging strategy.

For the quarter, consolidated EBITDA increased 1.2% to MXN 12.8 billion with a 10 basis point margin expansion reaching 20.4%. In the 9-month period, EBITDA grew 6.1%, reaching MXN 36.6 billion, while EBITDA margin decreased by 10 basis points to 20%. On a currency-neutral basis, EBITDA rose 2.6% in the quarter and 2.2% as of September.

Net income in the third quarter reached MXN 5.3 billion for an increase of 3.5%. Net profit margin increased 20 basis points to 8.4%.

Now moving on to the balance sheet. As of September, cash and equivalents totaled MXN 32.3 billion, while total debt stood at MXN 63.9 billion, resulting in a net debt-to-EBITDA ratio of 0.62x. In our most recent Board meeting, it was approved to distribute an additional dividend of MXN 1 per share to be paid on November 5. Combined with the ordinary dividend of MXN 4.12 distributed in April and the extraordinary dividend of MXN 3.50 paid in June, we will reach a total dividend of MXN 8.62 per share. This reflects a payout ratio of 75% of retained earnings and a dividend yield of 4.3%.

Total CapEx reached MXN 11.8 billion, representing 6.4% of sales. Investments were primarily directed towards expanding our production capacity, ensuring that we are well positioned and sustained future growth. We also continue to enhance our distribution and commercial capabilities, which are key enablers for our long-term strategic plan.

Looking ahead, we expect market volatility to continue throughout the rest of the year. We remain confident in our business strength and ability to create value despite challenging conditions. We will continue managing expenses carefully to drive profit and sustainable growth.

That concludes my remarks. I will turn it back to Arturo. Please, Arturo.

Thank you, Emilio. As we reflect on this quarter, our disciplined execution enabled us to protect volumes, sustain market share and maintain profitability even in challenging conditions. Furthermore, as we marked the third year of our collaboration agreement with the Coca-Cola Company, this partnership continues to deliver on its core objectives while unlocking new opportunities through a broader portfolio.

At the same time, we are staying proactive on regulatory developments and pursuing strategic initiatives, ensuring our readiness to capture growth when market conditions improve. By balancing resilience with agility, we're positioned to deliver a strong and sustainable performance across cycles and continue creating long-term value for our shareholders. We are focused, ready and energized to capture the opportunities ahead.

Thank you for your continued trust and support. Operator, please open the line for questions.

[Operator Instructions] We'll take our first question from Ulises Argote with Santander.

My question is related to the margins in the U.S., right? So another quarter with positive surprises there. I was just wondering if you could give us some color on what continued to be the main drivers there and the main levers despite that slowdown in top line that we're seeing. And maybe just to pick your brain on how sustainable do you think these trends are going forward?

Thank you, Ulises. Well, first of all, we have to say that we're very satisfied with the profitability in our U.S. business, considering also that we faced many challenges in that market. As you know, third quarter, we grew EBITDA, in dollar terms, close to 10%. And our margin is above 17%, which we -- again, we're very pleased with that. The drivers behind it, as we've said before, our pricing capabilities and also the management of promotions. We're looking forward to combine this premiumization of our portfolio with also a price architecture that would cover all segments, considering, again, the economic dynamics.

We've also worked on efficiency projects. And I would say that our OpEx ratio has shown this operational discipline. We expect that also to be sustained. There's some efficiency projects underway. And in fact, one of the most important ones will not be fully captured in '26, the Wild West project that we call, which is the restructuring of supply chain in some of our plants and warehouses in the U.S. We also are looking at input costs in '26. They're expected to rise due to inflation, but we do have also a strong hedging strategy. I will ask Emilio to expand on that part. But in general, I would say that we are very confident for '26 to sustain our current margins.

Emilio, why don't you expand on our raw materials and hedging situation?

Yes. Thank you for your question, Ulises. Yes, for this year, as we have mentioned, we have over 97% of our LME needs in U.S. and 48% Midwest premium portion for this year and 79% of high fructose needs. And we started to hedge for next year. For 2026, we have 95% of our LME needs next year and 20% of Midwest premium. So that will allow us to together with what Arturo already mentioned, to consolidate the levels -- the margin levels that we have this year, and we expect it to reach those levels -- at least those levels for next year.

Our next question comes from Thiago Bortoluci with Goldman Sachs.

Arturo, question on you for Mexico, right? How should we read the combination of negative sparkling volumes with returnables losing participation in your mix? And if I may expand, the reason I'm asking this is because the big debate today in the space is clearly how much of the drag is structural versus temporary issues, namely comps, weather and another few. So it would be very helpful to hear your perceptions on how you're seeing underlying elasticity, affordability, price pack performance and overall performance by channel. And again, if we can read anything between your volume print and your packaging performance in the quarter, especially in the context where weather conditions didn't help.

Thank you, Thiago. Let me start by giving the context of the consumer environment in the third quarter in Mexico. As you said, this is a combination of not very favorable weather, increased rainfall, cooler temperatures. It was very, very unusual. Rainfall was probably 40% higher than usual in the North of Mexico, even more than that, maybe in some cases, just doubled and tripled in the West regions for us. So temperature has also affected volumes and consumption and traffic throughout the quarter.

There was also the economic dynamics where activity slowed down and any activity really was driven by exports rather than domestic demand. So internal consumption has been reduced and special retail activity and traffic weakened. I would like to think that, that is also temporary, not only weather, which would naturally be different as we think about next year. But in terms of the economic weakness, we believe that as we gain greater clarity around trade rules and tariffs and the relationship with Mexico and the bilateral trade with the U.S. that will enhance Mexico's competitiveness and will provide even formal job creation and with that, domestic consumption.

If you look at returnable packages, well, the main reason is that supermarkets were basically the only channel that grew volume in the third quarter, and that was driven mostly by intensified promotion, considering the current situation. But we're going to be pursuing our strategy of affordability going forward in Mexico, which means entry-level packages, both returnable and nonreturnable packages. And the 235-milliliter, 12-ounce 250 ml one-way packages. The 450 milliliter that probably you've seen in the market, one-way, very important for us. The multi-server fillable format, what we call the universal model. All those strategies will continue to move forward as we face these challenges.

So that is -- it's hard to isolate the effect of weather and the economic situation, but we are convinced that those are the main factors. Our execution in the market continues to improve and our leadership in the market as well, which we believe that's the most important part.

Our next question comes from Ben Theurer with Barclays.

I wanted to get a little bit of how you think about pricing going forward. I mean, obviously, we know about what's in the proposal in terms of taxes for the different categories. But as we think about raw material inflation you face and what you usually pass on, what is your strategy going to be towards the end of the year and then into next year? How should we think about pricing? How much is needed for the taxes? How much would you do on top of that? And what are kind of like the sensitivities you're looking at as it relates to your volume if you were to raise those prices?

Yes. Thank you, Ben. First, let me talk in general about our pricing strategy, which really has not changed. And I think under this market conditions, it's demonstrated that these capabilities do work very effectively of increasing prices in line or above inflation in every business unit. This requires not only this very advanced pricing tools that we have designed jointly with the Coca-Cola Company, but also leveraging the trade promotion models, which operate at a local level.

So I think, for years, we have demonstrated these capabilities, which, as I've said, if there is one fundamental capability that consumer goods companies need to get right now or the future is precisely revenue management. So for us, it's combining affordability and also a premiumization strategy, as I said before. We will continue to monitor those pricing dynamics and make sure that we are competitive in the marketplace.

And then going specifically to your point about taxes and Mexico. Well, this tax that we are expecting to be implemented for '26 would require us to pass through the impact via prices. And as you know, we've done that before, actually 12 years ago. And we have estimated that, that increase would be in the range of 8% to 10% probably. And that we would have to add inflation after that, considering that we want to remain competitive in terms of margins in '26. So we don't know exactly what the elasticity would be, but there's certainly going to be an impact in volume for next year. We have some of the learnings of past elasticity patterns following similar adjustments in 2014. But at the same time, we have so many things that work in our favor in the Mexico market going forward.

I mean there are reasons to believe that we're going to be able to mitigate part of that impact. And there are many factors. I mentioned before, the impact of unfavorable weather this year. We also face this difficult economic situation. We expect normalization next year, considering the challenges we faced with brand retaliation that you know about some product constraints in our supply chain, particularly Topo Chico in '25 and the opportunities to keep deploying our digital capabilities that are still going to be rolled out, some of the new features and very particularly, the incremental demand that would be driven by the major events in Mexico and the U.S., the FIFA World Cup. In Mexico, we're also going to have the 100th anniversary of Coca-Cola in Mexico. So there are so many things that will work in our favor considering that certainly, it's going to be a challenging volume situation as we pass along these -- the tax that has been imposed, but that's going to be imposed.

Our next question comes from Felipe Ucros with Scotiabank.

A quick question on the taxes in Mexico. Of course, not great news getting this tax increase. I was wondering if you can comment on a couple of things. The first one is the differences between this tax and the one that we saw 12 years ago. No tax for beer were changed. So the gap between soft drinks and beer, I guess, is changing. And I'm wondering if you can comment on what type of impact you would expect through that differential. And whether it's material for us to monitor it or you think the occasions are so different that it's really not a concern.

And then the second question related to this is, it looks like there's more serious incentives in place to move the consumer towards no-low options. So I'm wondering if you can talk about how this may change profitability and returns for the business in the long run, if at all. And I'm talking about there's differences on the price per unit of sweetening from sucralose and sugar, perhaps there's a margin differential between the different presentations and concentrating price -- concentrate pricing might also be different. So just wondering if there's going to be like a change on the profitability of the business in the future from the change to no-low categories.

Thank you, Felipe. Well, to the first part, we really don't anticipate an impact from any difference in the tax treatment of other categories really. We're looking at the dynamics within our own industry for sure. And in this case, as you saw, we really have a commitment to reduce the calories in our portfolio going forward. And this is not something that is new or that is improvised by the system.

We've been, for years, developing and promoting options with less sugar and with no sugar in Mexico and in other markets. So now what we intend to do is to offer more proactively our broader portfolio, a more balanced and lower-calorie portfolio. And those are part of the commitments we've made with the government as we discussed the implementation of the tax.

So as part of that, we also want to promote competitive prices and affordable Coca-Cola Zero packages, particularly. This, as you know, has been a great innovation in our portfolio. Coca-Cola Zero continues to grow, and we will connect that also even to the FIFA World Cup next year. Coke Zero will take center stage in many of the campaigns connected to the World Cup. In terms of profitability, we don't think that, that will really affect overall profitability going forward.

Great. That's very clear. And if I can do a second one on sales in Mexico, they did very well. And it's another quarter with the same categories, tea, energy and juice doing very well. So I was wondering if you could talk a little bit about what you're doing there and why the category is behaving differently from others during adverse weather. Is it that the elasticity for this category is a little different? Or it's more a case of things that you're doing at the micro level?

I think it shows the opportunity that we have to grow these categories. As I said before, energy and juices and sports drinks and tea, they're underdeveloped really in the Mexican market. So we have proved that we can be successful in those categories as well. I think that's very important as you look at the story of Powerade in the last 15 years. And now you see Santa Clara, which I mentioned, also, it's a great success story. Tea grew 22%. Juices grew 6%. Monster continues to grow.

So I think it's interesting to see them grow even under very challenging conditions, which means the great opportunity that we have to increase the per capitas of these categories that they don't compare very favorably to more developed markets like our own U.S. market. So it's very promising to see them grow even under a more challenging conditions. So we're excited about those possibilities and especially that we can be leaders in those categories as well as we've also demonstrated.

Our next question comes from Rodrigo Alcantara with UBS.

Arturo, Emilio, nice to hear from you. I want to go deeper into some of the comments about the commitments regarding -- with the government, right, ahead of the tax discussion, right, in the conference, the government and the Coke system hosted a couple of days ago. As you mentioned, there were some commitments in relation to this trend of increasing low-carb categories, et cetera, et cetera, right, like namely the reduction of commitment to reduce by 30% caloric needs of your products in a period of, if I'm not mistaken, 1 year or something like that, right, in addition to other commitments, right?

So the question here would be how much of a challenge or deal in your view is implementing this, right? How are you implementing this? And possibly linked to the previous question is as a result of implementing this, we may see some impact on margins or profitability, which I think you already said no, right? But I mean just to confirm that, that would be the main question.

And the other one, just because this is the one that we're receiving from investors as we speak. We have seen macro numbers in Mexico at the margin not looking as good as we may decide, right? Retail sales in September quite weak. So I mean how would you think 4Q would be shaping up in terms of volumes looking from a consumer demand perspective in Mexico? That would be my question.

Thank you, Rodrigo. Talking about the taxes and also the commitments, as I said, this is really not new for us in terms of the commitments that we made with the government, with Congress. This is part of this plan to strengthen our caloric reduction innovation. And this has been around for years. So plan builds on the calorie content that we've actually been testing in the market for a long time in the Coke portfolio.

So here, what we're going to do is just continue the migration. So those commitments are actually part of our own strategy in the last few years and also part of the promotion of Coke Zero that has been our strategy as well. But I think the most important takeaway of those commitments is how we remain committed to be part of the solution and how we've been able to have a dialogue with the government and stakeholders and how this collaboration really highlights our ability to engage constructively with the government and adapt to the frameworks and advance really our journey towards a more sustainable and health-focused portfolio because we really share with the government the need to advance in reducing obesity rates in the country. So we want to be, again, part of that solution. So I think that's main takeaway that we are -- that all this story about tax implementation concluded with a very constructive dialogue and conversation with government.

And then talking about volumes and profitability, there is -- our concern is not really that this transition to low-calorie or no-calorie version is going to impact our profitability. Obviously, the impact will come from the volume decline that will be the result of the elasticity in these categories. But again, as I mentioned, looking forward in 2026, we have many things to be positive about as we compare with '25, where we've had so many negative factors combined with -- for the performance that we are seeing so far and that we expect to continue to see throughout the end of the year.

So that is why, aside from our ability to pass through the tax and pricing in a smarter way, promoting the packages that we believe are important to protect, I think also we have these mitigating effects that I mentioned before, including our promotional activities, the FIFA World Cup and also the uplift we've seen from the deployment of our capabilities that we've been talking about before. So all in all, I think we're good positioned to mitigate that impact.

We will move next with Lucas Ferreira with JPMorgan.

Sorry to insist on the [indiscernible] topic. And just comparing and contrasting 2014 with the situation guys you will face in 2026, what sort of the tools do you think the company has now enhanced to mitigate the impact and mainly talking about price pack architecture, but also the sort of more developed relationship with Coca-Cola company, better partnership, I would put it this way. And if you can speak about -- generally about your, let's say, market share expectations for next year. If you think this is a situation, obviously, a challenging situation, but at the end of the day, could help you even expand your share. So how to think about that?

And also, if I may, a quick follow-up on the very short term, obviously, second quarter for Mexico was already better in -- sorry, third quarter better than second. If you expect to end the year at a better note, how sort of the latest news are coming regarding consumer demand and traffic on the floor, et cetera?

Thank you, Lucas. Well, first of all, talking about the tax and the learnings from 2014, increased prices double digit at the time plus inflation. I guess it was around 12%. We had a 3% volume decline approx, a little less than 3% in 2014 and -- but the volume decline was sequentially better throughout the year. I mean we started with a strong decline in volume in first quarter. By the end of the year, there were -- volumes were pretty flat that year, which means there's kind of a psychological impact as well in that elasticity.

Now I think to your point about how are we better prepared. I think we've developed our RGM capabilities in this last 12 years quite a lot. We have a stronger leadership in the marketplace. And as you mentioned, we have a stronger partnership with the Coca-Cola company to jointly navigate through this situation, which is not only about passing along the prices, but also what are we going to do in the market to sustain leadership and increase our presence. So what are the things that works in our favor is that the price -- the tax is designed as a peso per liter. So that means for more premium-priced products, it's going to be a less percentage increase as compared to, let's say, value products out there, brands in the market.

And thinking about the fourth quarter, well, the environment will remain very challenging. Again, we are continuing to focus on things that we can control, which are basically 3 pillars: disciplined execution with very targeted campaigns. We have very well-designed campaigns to be implemented in this final part of the year. We're launching especially higher impact marketing campaigns for the Gen Z consumers and also Share a Coke and Christmas that kind of deepens the connection of our brands with consumers as well. We continue to double down on our affordability initiatives, as I mentioned before, with entry packages and with single-serve packages that also provide affordability. And we'll start also deploying all of our efficiency initiatives and playbook in this next quarter and throughout' '26, which means reducing cost to serve as we have redesigned new service models.

And a number of other projects like lightweighting, improvement in distribution logistics as well. We have an organizational restructuring that mostly addresses agility and clarifying roles, but also it's going to bring more efficiency. So there are a number of things that will help us mitigate this adverse environment.

Our next question comes from Álvaro Garcia with BTG Pactual.

Arturo, I have a question on Texas. I was wondering if you can comment on potential changes to SNAP benefit in Texas and how that might impact demand for your products. And just general commentary on sort of Hispanic consumer and just the consumer environment in general into next year ex World Cup would be very helpful.

Thank you, Álvaro. Yes. Well, we are currently assessing the potential implications of those SNAP benefit changes in our portfolio. It's not -- we don't anticipate a significant impact, but it's something that certainly we're monitoring and looking at consumer trends and consumer demands and especially paying attention to the segment that this is going to impact the most, which is mostly the take-home segment. So we -- at this point, on the impact, we don't have a specific number to provide. But we continue to believe that's important to give consumers the freedom to choose what groceries they want to purchase for the family with the SNAP benefits, but we're still assessing the implications.

What I can tell you about the U.S. market dynamics is that we have seen a sentiment among low mid-income and Hispanic consumers that has declined this year. Rising cost of living or interest rates probably, that's been softening spending. If you look at, for example, our value channel in the U.S., that grew almost 4% year-over-year. It's gained some mix. And also that's related to some of the border tensions we've seen this year, fewer people crossing. And Hispanic traffic has declined more sharply in retailers, even in Walmart Hispanic outlets as compared to the non-Hispanic stores. So total retail traffic did fall in this third quarter convenience stores only. Again, club and value saw traffic growth. So that tells you about how the dynamics are playing out.

So what we have adopted is, as I said before, this premium strategy -- this dual strategy of premiumization with brands like Topo Chico or Smartwater for some consumers, for the higher income consumers and the introduction of a packaging architecture that addresses the pressure in that middle and lower-income segments in the U.S. market. And for sure, we're going to capitalize the FIFA World Cup events that are going to start actually this year. These major events include the tournament itself next year, we're going to be hosting 24 of the 104 matches in our 4 cities in Mexico and the U.S. We're the Coke bottler with the highest of matches in the tournament and 16 of those are going to be in our U.S. market. So we'll capitalize on all the activities surrounding the World Cup and also the celebration of the 250 anniversary of the independence of the U.S., we're going to be part of that as well next year.

We will move next with Alejandro Fuchs with Itaú.

I wanted to shift gears and ask you one about South America, especially Argentina and Ecuador. I know it's a very uncertain scenario, right, but I want to see what your expectations going forward, maybe in the next 12 months. We're seeing volumes coming down, but margins going up. So I want to see how you see the business on the ground talking to the teams and what would be kind of the expectations if we should continue to see volumes being pressured or maybe profitability normalizing a little bit.

Yes. Thank you, Alejandro. Let me start with Argentina. As you've seen, we've been facing a very challenging macro environment in the third quarter, rising uncertainty and some of the indicators deteriorating. And that has impacted the lower income segments of consumers and those provinces with high public employment. Unfortunately, we're in a market with high public employment. So we saw the steepest impact of this situation with consumption falling between 6% and 7% in general as compared to the central regions, which were -- had a less significant impact.

So our year-to-date performance was still ahead of last year. But certainly, the trend is not very favorable. What we're doing is we're balancing our pricing discipline and affordability and our operational efficiency to stay competitive in this highly dynamic market. What's been important for that are, again, our pricing tools, our promotional tools to align prices with inflation. Our affordability and our playbook for things like Tapipesos promotions, tactical pricing on nonreturnable formats as well. Returnable is very important in Argentina. As you know, it's the highest mix of returnable in all of our markets. And to protect margins, we've been implementing very strict cost control measures. We are also launching new products and continue to innovate in some of the stills category.

So we expect Q4 to outperform the third quarter as we expect a gradual improvement. But certainly, we're going to continue to focus on efficiency initiatives to protect margins. If we look at the context for margins in Argentina, we're going to see some upward pressure in some of the expenses related to payroll, particularly, but we're going to have efficiency in other concepts that will offset these pressures. Raw materials, we expected them to rise, driven by inflation. But we had the acquisition of the second sugar mill in Tucumán that is going to mitigate the impact of input cost for us. And I think that's also going to be very important going forward.

If we look at Ecuador, and the dynamics in that market, also a difficult environment, mostly challenged by rising insecurity. The economy actually grew in the third quarter in Ecuador, but declining oil production and increased costs have resulted in some new policies like the elimination of the subsidy on diesel fuel and things like that. So -- but retail remains active despite this complex environment in Ecuador. And I think it's important to see how our business, and this is the same case for, I would say, all of our markets in this very difficult third quarter have demonstrated very strong resilience, improving in the case of Ecuador, profitability in the third quarter and outperforming the industry's volume decline in the year.

So here, affordability also is going to be important. The execution of our point of sale with new cold drink equipment. That's also a very important in Ecuador. And how we leverage our new service models to enhance customer experience and also to bring efficiency to our go-to-market strategy. So stills categories is an opportunity and deployment of digital as well in Ecuador.

So under this challenging environment, again, we're able to effectively protect the profitability for '26 in Ecuador. We are expecting OpEx to grow above inflation, and this is mainly due to the increased depreciation and diesel costs that I mentioned. And -- but some of the pressures will be partially offset by the optimizations that we have planned for our service models, our go-to-market models and some other adjustments. So PET are expected to rise in '26 with freight cost. Sugar is expected to be in line with the '25. So there's going to be some margin pressure considering all these factors, basically the removal of the subsidy, but our focus will be to protect our '25 margin in '26.

Our next question comes from Renata Cabral with Citi.

It's a follow-up about Mexico. I would like to ask you if you can give some color in terms of competitiveness and how the brand has been reacting to the current environment for volumes and the company has been sustaining shares? And if you can provide some color on the performance in the channel strategy, the traditional channel versus the modern trade if they are different in terms of one is better than the other in the current environment?

Thank you, Renata. Well, in terms of channels, the traditional channel received part of the impact and the decline in consumption this quarter, also convenience store reduced traffic. The only channel that actually increased volume in the quarter was supermarkets. And as I mentioned, was mostly driven by intensified promotions and more competitive pricing. So I think that's a natural consequence of the economic dynamics.

But most importantly, we are strengthening our leadership in the marketplace, even considering that we have a price gap versus our main competitor versus rebrands as well. We did have an impact on our share of market with the first half of the year as a result of the retaliation of our brand that you know about. But that really has been solved, and now we're back to the position of leadership that we've had before.

We will move next with Henrique Morello with Morgan Stanley.

So I would just like just to explore the margin performance in Mexico. As you saw another quarter of compression on a year-on-year basis and at higher levels if compared to the last quarter, right? So if you could dive deeper on the dynamics behind the margin decline this quarter, perhaps beyond the volume decline? And if anything changed from last quarter? And how do you expect the margin to behave in Mexico going forward when you look at your hedge positions right now?

Thank you, Henrique. I will turn that over to Emilio to respond the question. Go ahead, Emilio, please?

Yes. Thank you, Henrique, for your question. Yes. Well, in Mexico, basically, there's several factors that affected the margin -- EBITDA margin being the one, the decline in volume as we have explained already. But there are also some changes that Arturo already mentioned. One is the mix of channels. The traditional trade was more affected by the rainfalls during the quarter compared to supermarkets. So channel mix change and also presentations. The mix of single-serve also declined in the quarter. So that was basically the main impact for the margin -- EBITDA margin in Mexico. .

For the rest of the year, we've been working on expense control. You also can see that throughout the year, we've been improving our sales -- OpEx to sales ratio every quarter. So internally, everything that we control, we are looking in every efficiency that we can implement in all the operations. So in Mexico, we've been able to mitigate part of the volume decline impact talking about the margin. So for the full year, we're expecting to maintain -- at least maintain the current levels of EBITDA margins for the region.

We will move next with Axel Giesecke with Actinver.

Just a quick one. Given your healthy balance sheet position, are you considering further M&A opportunities? And if so, which regions are you looking forward into?

Thank you for the question. Yes. Well, as you know, there's -- talking about capital allocation, that's one of our main priorities. Well, as we have mentioned, number one is investing in our operations, and then we just announced an additional dividend. But yes, M&A, as you know, we continue to evaluate, basically, opportunities in U.S. and Latin America. So we have a very strong balanced position in order to close any opportunities. But in the meantime, we've been able to find another avenues for inorganic growth that we are on line with our core business, such as the recent acquisition that we announced, the Imperial, the vending and micro market business in U.S. But we keep exploring opportunities, basically, within the Americas.

We will move next with Fernando Olvera with Bank of America.

I just have one, and it's related to Mexico. Arturo or Emilio, how are you thinking about CapEx next year and the potential tax increase? Any insight on this would be helpful.

Thank you, Fernando, for your question. Yes, regarding CapEx, well, as I mentioned, as of September, we reached MXN 11.8 billion, representing 6.4% of sales. We were expecting to invest around 7%. That's what we mentioned at the beginning of the year. The [ 6% ] of those CapEx are in Mexico and U.S. But at the beginning of the year, when we saw a slowdown in volume, we have postponed some initiatives this year. So ratio OpEx -- CapEx ratio will be around the same level that we have right now, 6.4%, instead of 7%. So we just adjusted some of the CapEx that we were expecting for this year without compromising our long-term growth strategy. So we remain committed to the strategic investment that we have for our capabilities and expanding our capacity and distribution, but I would say in a slower pace than we expected at the beginning of the year.

Okay, Emilio. And thinking -- I mean, considering that the increase of the excise tax was just announced, I mean, how do you expect CapEx to behave in Mexico next year? I mean, is it possible that you keep postponing some projects for 2027 or...

There are some projects that we started and we need to continue in order to be ready for the volume in the next, let's say, 2, 3 years. So there's some of the CapEx that needed to keep going to be ready in 2, 3 years. But the short-term ones are the ones that we are just postponing and see how the volume behave and then we'll decide if we continue with those next year or if we go and move it to 2027. So we expect around 5% to 6% maybe in Mexico CapEx to sales.

This concludes today's Q&A portion. I would like to now turn the conference back to Arturo Gutierrez for closing remarks.

Thank you. We really appreciate your time today and especially your ongoing commitment for company. So please reach out to our investor relations team for any follow-up questions you might have. Look forward to speaking with you again next quarter. Have a great day.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.

Good day, everyone, and welcome to the Arca Continental Second Quarter 2025 Conference Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of IDEAL Advisors. Please go ahead.

Thank you, operator. Good morning, everyone. Thanks for joining the senior management team of Arca Continental to review the results for the second quarter and first half of 2025. Their earnings release went out this morning, and it's available on the company website at arcacontal.com in the Investor Relations section. It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutierrez; the CFO, Mr. Emilio Marcos; and the Executive Director of Planning, Jesús García.

They're going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance. And with that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who is going to begin the presentation. So please go ahead, Arturo.

Thank you, Melanie. Many thanks to everyone for being with us this morning. We appreciate the opportunity to share an update on our second quarter and first half 2025 results. Let me begin by saying that our strategic initiatives and solid execution have enabled us to deliver a solid financial performance and recover value share even in the face of a softer consumer sentiment in some of our markets.

The first half of the year has brought a particularly complex landscape. The macroeconomic backdrop remains uncertain, shaped by evolving trade dynamics and ongoing cost volatility across key input categories. Nonetheless, our business has remained resilient. We responded swiftly to these challenges, protecting margins, investing in high potential growth platforms and commercial capabilities, strengthening our manufacturing footprint and supply chain and effectively executing the levers within our control.

Moving now to our consolidated results halfway through the year. Total consolidated volume declined 2.7% in the quarter and 2.9% year-to-date. Despite softer volumes, total consolidated revenue increased 8% in the quarter, driven by effective pricing strategies and favorable FX effects. Year-to-date, consolidated revenue increased 10.1%. Consolidated EBITDA rose 8.1% in the quarter and 9% year-to-date, with corresponding margins of 20.7% and 19.8%, respectively.

This strong EBITDA performance was driven by solid contributions from our U.S. operations and further supported by the ongoing recovery and improving momentum across our markets in South America. Remarkably, we have delivered EBITDA growth in every second quarter over the past 15 years. Let me now walk you through a brief overview of our performance across our 5 markets, beginning with Mexico. During the quarter, unit case volume, not including jug water, declined 4.8% as we cycled 3 consecutive years of strong growth in the same period.

On a year-to-date basis, unit case volume, not including jug water, declined 4.8% Importantly, the second quarter of last year marked the highest volume performance in any year in Mexico since our merger in 2011, creating a particularly challenging comparison base. Volume performance in the quarter was partially impacted by unseasonably adverse weather conditions, including below average temperatures and persistent heavy rainfall across most of our territories, which weighed on overall consumer demand.

This impact was partially offset by a better performance in still beverage categories, particularly energy drinks, tea and fruit beverages, driven by continued momentum in the modern trade channel, mainly in supermarkets. Coca-Cola Zero delivered sequential double-digit growth, supported by the successful launch of the new 450-milliliter format and a continued expansion across our territory.

Total net sales in Mexico were flat, both in the quarter and year-to-date. Average price per case in the quarter, not including jug water, rose 5.1%. EBITDA declined in the quarter by 3% for a margin of 24.6%. On a year-to-date basis, EBITDA decreased 4.3% with a margin of 22.9%. Importantly, this quarter, we announced the opening of our largest distribution center in Mexico. Located in Tonalá, Jalisco, this new facility will serve over 40,000 customers and significantly enhance our operational footprint in Guadalajara's metropolitan area.

Turning to our beverage operations in South America. Total volume increased by 2.2% in the second quarter, reflecting sequential volume improvement in Peru and Ecuador, along with the strong performance in Argentina. Total revenue for the quarter grew 11.8%, while EBITDA increased 29.2% with a margin of 17.3%. Year-to-date, revenue was up 18.8% and EBITDA rose 33%, representing a margin of 18.7%. South America's economic landscape presents a mixed but improving outlook.

Collectively, the region is showing renewed momentum and overall consumption shows signs of recovery, although disparities prevail. In Peru, total volume grew 1.8%, supported by strong growth in still beverages and water categories, up 3.7% and 9.3%, respectively. This performance was led by solid 30.4% expansion in the flavored water segment with sports and energy drinks also contributing up 10.5% and 5.1%, respectively.

Volume recovery continued at a steady pace across channels, with supermarkets leading the way, up 5.9%, driven by our price pack and cross-category strategies and the momentum from high-impact marketing campaigns like “Share a Coke and Inca Kola's 90th anniversary.

Moving over to Ecuador. The environment remained difficult with rising security concerns disrupting consumer mobility and weighing on shopping behavior. Nonetheless, we are beginning to see encouraging signs that the economic contraction is starting to ease. In this context, total volume declined 3.1% in the quarter. However, we are seeing early signs of a sequential moderation in the rate of volume decline, supported by our affordability strategy and continued investments in returnable bottles. Coca-Cola Zero stood out with 6% growth, driven by the strong performance of the 1.6 liter PET format.

We gained value share in NARTD beverages, supported by growth in the Cola segment. The mix of returnable packages grew by 0.5 percentage points this quarter, a positive step in driving value and maintaining consumer relevance. Our beverage business in Argentina delivered another quarter of sequential volume improvement, up 11.6%. Nearly all categories contributed to this strong performance, reflecting solid consumer demand across our portfolio.

Sparkling beverages increased 11.4% with brand Coca-Cola delivering a solid performance, up 13.5% and flavors up 3.4%. Still beverages grew a strong 32.2%, led by Monster in energy drinks, Aquarius in flavored water and AdeS in the soy-based beverage segment. We achieved value share gains in NARTD beverages, driven by strong performances across channels and our initiatives to promote affordability.

This quarter, we acquired a second sugar mill in Argentina, expanding production capacity and strengthening our vertical integration in cane sugar. We are pleased with our performance and remain confident that improving economic conditions will support our continued growth in the second half of the year.

Moving to our beverage operation in the United States. Coca-Cola Southwest Beverages closed the second quarter with positive forward momentum, delivering sound financial results and a strong operating performance. These outstanding results were driven by our solid points-of-sale execution, ongoing refinement of our commercial strategies, effective management of our price pack architecture and disciplined cost controls. Net revenues rose 3.9% in the quarter and 2.2% year-to-date. The average price per case increased 4.5% in the quarter.

As a result, we achieved a 2.9% improvement in true rate and a 1.6% uplift in mix rate. Volume for the quarter declined slightly 0.6%. However, excluding the change in the distribution model of the DASANI case packs deployed last year, underlying volume grew 0.2%. This effect will be fully cycled in the next quarter. Key performances, including Coca-Cola Zero up 8% and still's portfolio growing 2%, driven by Monster, Fairlife and BodyArmor.

We continue to focus on high profit per case packages such as 10-pack SSD mini cans, Smartwater and Vitaminwater, which increased 22%, 11% and 9.3%, respectively. Our mix shifted towards single-serve packages, increasing by 0.3 percentage points. Our low-calorie portfolio grew 7.3%, driven by Coke Zero, Diet Coke and Sprite Zero. EBITDA increased 9.1% in the quarter, representing a margin of 17.8%. Year-to-date EBITDA grew 6.7% with a margin of 17%.

Notably, this was our most profitable second quarter since taking over the U.S. beverage franchise in Texas and Oklahoma, and it also marks the 29th consecutive quarter of EBITDA growth. To wrap up the review of our operations, our Food and Snacks division continued to deliver solid results with mid-single-digit sales growth. Performance was led by Inalecsa in Ecuador, supported by a compelling price value proposition, disciplined execution of productivity initiatives and sharp focus on consumer-driven innovation.

And now to close, let me provide a brief update on the progress of our sustainability agenda. This quarter, we achieved important milestones in our plastics collection and recycling systems. In Ecuador, we entered into a partnership with the National Recyclers Network to support financial inclusion through targeted training and capacity building efforts. And in Mexico, we expanded our PET collection center in San Luis Potosí, enhancing our infrastructure to recover and process over 380 million PET bottles annually.

Moreover, we continued strengthening our sustainability risk management, achieving our most significant improvement since 2019 in the latest r Sustainalytics Morningstar assessment. We are pleased to share that we are now ranked among the top 10 best rated companies in the beverage industry, climbing 5 positions year-over-year. Our sustainability risk score outperformed both the industry and sub-industry averages, earning us the highest risk management rating.

I will now turn the call over to Emilio. Please, Emilio.

Thank you, Arturo. Good morning, everyone, and thank you for joining our call to review our performance for the second quarter of 2025. As Arturo mentioned, the second quarter remained challenging with macroeconomic headwinds and adverse weather conditions impacting volume performance, particularly in Mexico. Despite these pressures, we delivered high single-digit growth in both revenue and EBITDA.

It is important to mention that we successfully protected our EBITDA margin by leveraging our revenue growth management capabilities and maintaining a disciplined approach to expense control. Let me offer further insight into the financial results. In the second quarter, consolidated revenues rose 8%, reaching MXN 63.4 billion. First half revenue grew 10.1% to MXN 120.5 billion, mainly driven by effective pricing strategies and exposure to the U.S. dollar. On a currency-neutral basis, revenue rose 2.7% in the quarter and 2.5% year-to-date.

During the quarter, SG&A expenses increased 7.6%, reaching MXN 19.3 billion. Despite the contraction in volume, our continued commitment on operational discipline and efficiency resulted in a 20 basis point improvement in the SG&A to sales ratio to 30.4%. On a currency-neutral basis, SG&A grew 2.4%. Consolidated EBITDA grew 8.1% in the quarter to MXN 13.2 billion, while we protected our EBITDA margin at 20.7%, reflecting the improvement in the SG&A to sales ratio.

For the first half of the year, EBITDA increased 9% to MXN 23.8 billion, with a slightly 10 basis point dilution in the EBITDA margin, which stood at 19.8%. On a currency-neutral basis, EBITDA grew 2.9% in the quarter and 2% in the first half of the year. Net income for the quarter increased 1.2%, reaching MXN 5.5 billion, resulting in 60 basis point contraction in the net profit margin. For the year-to-date period, net income totaled MXN 9.6 billion, marking a 4.9% increase compared to the previous year with a 40 basis point contraction in the net profit margin. The margin dilution was driven by the comprehensive financing result given the effect of our U.S. dollar cash position in Mexico.

Now moving on to the balance sheet. As of June, cash and equivalents totaled MXN 26.6 billion, while total debt stood at MXN 57.4 billion, resulting in a net debt-to-EBITDA ratio of 0.6x. We distributed an extraordinary dividend of MXN 3.5 per share, combined the ordinary dividend of MXN 4.12 paid in April, resulting in a total distribution of MXN 7.62 per share. This reflects a payout ratio of 66% of retained earnings and a dividend yield of 3.8%.

As of June, total CapEx reached MXN 8.3 billion, representing 6.9% of sales. These investments were mainly allocated toward expanding production capacity and enhancing our distribution and commercial capabilities in line with our long-term strategic plan. Looking forward, while volatility is likely to continue, we're confident in the resilience of our business and capacity to face market challenges effectively. We will continue to leverage our core strength and maintain our disciplined approach to expense management.

That concludes my review. And now I'll turn it back to Arturo. Please, Arturo.

Thank you, Emilio. Before we wrap up, I want to thank our teams across the organization for their continued focus, resilience and commitment to execution during what has been a complex and demanding first half of the year. Despite ongoing headwinds, we are seeing encouraging progress across multiple areas of the business even as the broader context remains challenging. Importantly, we remain firmly committed to delivering the full year guidance we shared at the start of the year.

Our strong fundamentals, disciplined approach and continued investments give us confidence in our outlook. Throughout our long history, we have successfully navigated challenging environments by staying focused on our long-term strategy and continuing to invest even in downturns. This consistent disciplined approach has helped us emerge stronger time and again. Moreover, we see meaningful potential to unlock greater operating leverage. By capitalizing on our capabilities and disciplined cost management, we aim to sustain healthy profitability going forward.

Our partnership of 99 years with the Coca-Cola Company continues to be a key driver of share value creation. Our aligned strategies are delivering sustainable and profitable growth while opening up promising new opportunities across our markets. Looking ahead to the second half of the year, we anticipate a more favorable macroeconomic environment and a gradual improvement in consumer sentiment.

Combined with strengthened production capabilities, end-to-end supply chain improvements, advanced digital tools and focused strategic execution, we are well positioned to build momentum and continue delivering strong results. Our growth story remains compelling, and we are well equipped to continue creating value for all stakeholders.

And with that, we'll now open the floor for questions. Operator, please go ahead.

[Operator Instructions] We'll take our first question from Ulises Argote with Santander.

I have a couple here on my side. So first one there for Arturo. I mean you just reiterated the guidance for the year. So double-clicking a bit on that, given the current operating dynamics and the sequentially lower pressure that we saw on margins for Mexico, do you still see space to close the year with flattish margins for full year '25, specifically thinking on Mexico? And then I have another one for...

Thank you, Ulises. Well, yes, the situation for margins in Mexico was mostly impacted by volume performance as we saw. And so we are very confident to recover profitability throughout the year as volumes improve, which we are expecting that to happen actually in the third quarter. On our side, we are continuing our cost control initiatives, which are very important and our pricing strategy, which is consistent with what we've said before.

And also on the cost side, we are leveraging our hedging strategies for our main raw materials. So the outlook going forward is positive. Again, this is dependent on the recovery of volumes, which we have a better perspective for third quarter. We have obviously not as difficult comps as we had for the second quarter of the year, which was a big factor also for the decline that we saw in the second quarter. And we're already seeing some improvement in the last few days. But our goal is always to protect the margin for the full year, and that is what we are expecting.

Super clear. And the question that I have for Emilio was more on the distribution there of dividends, right? So you already paid out the extraordinary in June, payout now closer to like that 66% that you were mentioning. So can we still expect any additional dividend if no M&A materializes throughout the next few months? Or would you say this extraordinary dividend basically already covers for that portion?

Yes, as you know, we have already distributed 2 dividends, the ordinary dividends of MXN 3.5 per share in April and then in June, MXN 4.12 per share. So we have distributed 67% (sic) [ 66%] payout ratio. So it will depend on the decision of the Board to pay any additional dividends. So in the lack of any M&A, they may approve an additional dividend in the remainder of the year.

And our next question comes from Thiago Bortoluci with Goldman Sachs.

Arturo, Emilio, thank you very much for the presentation. It's always a pleasure to talk to you guys. Congrats on the performance on the U.S., right? It's really remarkable. But having said that, I'd like to focus the conversation here first on Mexico, right? The question we hear people asking and this includes ourselves, right, is from the pressure we saw year-to-date, how much of this is really structural and how much of this is related to comps weather to the comps from the government incentives last year and so forth and so on, right?

So to this point, Arturo, when you look to your performance by packaging, by channel, do you see any evidences to say that the consumer is still relatively protected to the extent that is possible in this environment and that would make you confident that going forward, momentum should pick up and it will not just be driven by comps, but by solid fundamentals in the market. This is my number one question. And then still related to this, how confident you are that Mexico eventually would support further pricing activity in the second half of the year? Those are the questions.

Yes. Thank you, Thiago. Well, in Mexico, if we analyze the second quarter, we identified several factors. I think you mentioned all of them. First, it's a tough comparison versus the previous year. If we remember, May '24 was really a record-breaking month in terms of volume. And it was actually recycling a 12% growth versus 2023. So that made it very, very hard as a comp. And we had also very really adverse weather in the second half of the quarter. We had cooler temperatures. We have more than 51% above rainfall. And this is really not an excuse. It's just trying to find the explanation behind this.

We also had a slower economy and reduced traffic. It's hard to break that down, but certainly, we have identified and the Coca-Cola Company has also helped us analyze performance. And I think weather was the biggest factor nonetheless. But the other two did come into play. We also had consumption patterns in '24 that were positively influenced by the pre-election period, if you remember.

So we had all that going on. And if we look at the channel performance that you were asking, our traditional channel declined 4.8%. It had a significant increase last year. Modern channel also declined, but very slightly. It was almost flat, and it was cycling significant growth from last year.

Store traffic remains under pressure, no doubt. If you break that down, supermarkets had a better performance than proximity convenience stores and on-premise was down more than 5%. What that tells you is that there's certainly less traffic. It's probably a typical pattern of bad weather, people not going out, less on-the-go consumption. So that would obviously, going forward, will regress to the mean and even out. So comps will work in our favor in the third quarter, maybe not in the fourth.

So we do see some slowdown, but the other factors were quite relevant. We don't see price as a factor. I mean, price elasticity in the second quarter. So going to the second part of your question, we're still looking at a year where price is going to be in line with inflation. That would be our goal. If you look at what we've done so far in the second quarter, true rate was up 4.9%, some carryover and an increase in the month of March.

So we're going to protect some of the packages that will support our affordability strategy, mostly the returnable packages, but we will continue to leverage our tools to effectively increase prices. And also very importantly, our price -- our promotional optimization tools, which brought us significant efficiencies in the way we deploy discounts and promotions in the traditional trade. So that also is going to have an impact as it has so far.

So that's what we're looking forward to sustain our profitability and margins, which I think considering the declining volume in the second quarter, margins were protected to a great extent.

[Operator Instructions] We will move next with Benjamin Theurer with Barclays.

This is Rahi on for Ben. Moving to a different note, maybe more color on the distribution center in Jalisco. How long will it take to ramp up to 100%? And maybe if you can give more color on the construction of the distribution centers in the U.S. Are you seeing any labor shortages -- any labor shortage issues there yet?

And well, yes, our distribution center in Tonalá in the metropolitan area of Guadalajara was opened recently this year actually. And this initiative jointly with many other projects that are either already completed or underway in Mexico are going to contribute to be better prepared when we have a better market environment. What we see up to now and what are the indicators that we are following are fill rate to the market, which are improving.

Unfortunately, the quarter was not great in terms of volume and demand. So that probably doesn't reflect as we wanted, but definitely, it's going to be a factor going forward. The support freight between plants has dropped also, which is an important indicator of efficiency and our inventory policies and the compliance of those policies also has improved. So we are reducing saturation in distribution centers. So those are the kind of metrics that will tell us that we are better prepared to meet the demand of the market, which, honestly, in the last peak seasons in '24, '23, we had many opportunities in that regard.

In the U.S. in terms of labor, now, we've been pretty stable in terms of labor and staffing. So we've been having some issues in the past, but that has stabilized this year. So it's actually not an issue really anymore. But our biggest project in the U.S. is not yet in operation. That is going to be open up next year. In '27, we'll see most of the benefits. Currently, we opened a distribution center in the city of Waco, Texas, but there are many other projects underway.

Awesome. And then just on the profitability of the U.S., again, congratulations. What was the difference in strategy that you pushed this quarter to go for the more profitable packages? And are you implementing those in 3Q? Or was it just some kind of promotion this quarter? Maybe just more context on the continuing profitability in the U.S.

Yes. In the U.S., we have a solid playbook that has given us significant results. In terms of execution, as you know, we are ranked #1 in the market suite challenge ranking in the U.S. of the U.S. bottlers. So what we do is we prioritize most of all associate engagement, and we empower the frontline to lead market execution. And that's in summary, the idea, the fundamental idea.

So we are focused on some brands that have grown faster, like Core Power, Fairlife, BodyArmor, Monster, Topo Chico, all of those are SKUs that are profitable and have been growing significantly this year, particularly in the second quarter. And also activations and partnerships with MLS, the FIFA World Cup, et cetera. We have new campaigns also like Share a Coke. We have campaigns for Smartwater. There's a lot of innovation behind it, also the promotion of mini-cans which are a very important package.

So it's a combination of better execution and innovation alignment with the front line and also more sophisticated pricing tools and promotional tools as well, optimization of promotions, suggested order algorithms we've talked about before. So it's a number of things. And I would say, a combination of a traditional playbook that we've used in our markets in Latin America as well and how we align incentives with the front line and also the new technologies that have supported many of the decisions in the marketplace.

There are additional effects that helped margin in the U.S. I will turn it over to Emilio to explain some of the OpEx of comps that we had in the quarter that also were important to have great margins in the second quarter.

Thank you, Arturo. Thank you for the question. Yes, I'd just add that the single-serve packages, as Arturo mentioned at the beginning, has increased by 0.7%. So that's also part on the first half of the year. So that's part also of the better mix in presentations with more profitable packages.

And also, as we have mentioned, the disciplined expense management has been reflected in a lower OpEx in the quarter and the first half of the year. As you may remember, the first half of last year in U.S., we accelerated some direct marketing expenses and also training and maintenance in our facilities. So this year, we -- it was not needed to accelerate those expenses. So the comparison is -- we have lower OpEx. So that helped the margin in the first half of the year. So we should end the year with the same margin levels than last year at the end of the year.

And we will move next with Froylan Mendez with JPMorgan.

Just regarding your last comment about the channel performance in Mexico, I think you mentioned the traditional channel was down almost 5% versus the modern channel being flat. Is that like the typical behavior that you see in a slowdown as the one that we are seeing? Probably I would have expected a different combo there on the traditional channel probably outperforming the modern, but is that a typical situation? Or was there anything in particular during the quarter to explain this?

I think what we needed to do to understand it better is to break down the modern channel performance, which, again, was down slightly, but supermarkets performed much better than convenience stores. So we did see a significant reduction in traffic, both in the retail -- the convenience retail and traditional channels. I think that was affected by weather to a great extent. That's what we have concluded.

But definitely, supermarkets outperformed the other channels throughout the quarter. So I think that kind of sustains the theory that it's mostly weather-related and some comps that we had, but also some slowdown in consumption and traffic that would affect everybody because even the fast -- the growing brands and channels were slower than what we would expect in the second quarter.

So I think we have to take into consideration that we did have an exceptional second quarter last year. So we've said before, this is not going to be a straight line if we look at growth going forward. We still expect growth to be recovered. And if you look at the next probably 12 months in Mexico, I think it's going to be great because we don't see any fundamental issue. We've been solid in our market leadership and our market share is recovering. So I think it was basically the factors that I mentioned before.

And if I may just ask on South America, the margin strength that we saw during the quarter. Could you just give some color on the main drivers for this?

Yes. Well, I'll ask Emilio to elaborate. But in general, South America, what we saw was a significant recovery in volume in Argentina, Peru as well. And in Ecuador, even though the market was -- the conditions of the market were not very favorable, we were very good at sustaining margins through efficiencies. They did a great job in OpEx efficiencies and cost controls. But I'll ask Emilio to elaborate further on South America margins.

Yes. Thank you. Well, basically, the volume and the positive trend is the main driver for that. But also in Argentina, as you know, we have -- we keep having the positive trend in volume and continue improving profitability supported with the recovery in volumes and very stability in both the exchange rate and inflation so that is helping a lot the margin in Argentina.

Then in Peru, we have a sequential improvement in volumes. Last quarter, we have a positive volume. First quarter was negative volumes. So that has a positive also effect in margins. And the main one is Ecuador, which besides the positive trend also in volumes, even though still negative, but much better than the first quarter.

We also have better sugar pricing, better OpEx compared to last year. So that's making the margin improve in the quarter and the first half of the year. So we are expecting to continue with this favorable market dynamics in all these 3 countries to continue the positive trends in margins for the rest of the year.

[Operator Instructions] We will move next with Álvaro García with BTG Pactual.

I have a question, Arturo, on sweeteners. President Trump yesterday talked about coke in the U.S. using cane sugar. My understanding is that 100% of your sweetener needs in the U.S. are fructose. I was wondering if you can make some comments as to how your production might have to adapt and how you're thinking about? I know that the news is sort of fresh off the shelf, but any sort of context would be very helpful.

Yes. Thank you, Álvaro. Well, yes, as the Coca-Cola Company has noted, we, first of all, appreciate President Trump's enthusiasm for our brand. And yes, together with Coke, we are working on developing some innovative offerings for our U.S. consumers in a way to expand our portfolio and to introduce new options under the Coca-Cola brand in the U.S. We look forward to sharing more details with all of you very soon.

We will move next with Fernando Olvera with Bank of America.

My question, Arturo, if I may, is regarding your -- the top line guidance for the year that you rated at the beginning of the call or in your initial remarks. Maybe if you can give us some color of what would be the growth drivers for the second half of the year, considering that in the first half, we saw low single-digit growth on a currency-neutral basis. And I understand that the guidance is to achieve a high single-digit growth, right? So if you can give us some color on the drivers, it would be great.

Yes, Fernando. Yes, actually, we confirm our guidance for '25 to have revenue growth in high single digit. That would be our consolidated revenue for the year aside from FX effect. So what we expect is for the rest of the year, volume to stabilize in our main markets, meaning the Mexico and the U.S. And again, we're going to be working on sustaining margins and profitability as we do that.

That means pricing, we expect that to be in line with inflation, I would say, in every market. Argentina would be the most challenging considering inflation, how it's been declining, but it's hard to estimate, but we expect that to be achieved as well. So we are looking at obviously much better second half of the year in general, and that's why we are still confident on the guidance that we have provided.

And just very quickly regarding your acquisition of the sugar mill in Argentina, if you can comment about the rationale behind that and how this helps you to cover your sugar needs in the country?

Yes. Well, if you see our project of the sugar mill that we acquired in Argentina some years ago, it has been very successful to optimize our cost of sweeteners in that market. That vertical integration has resulted in a very good project for us. So we are expanding the operation of a sugar mill acquiring this additional facility, which would get us to a further integration and to reach 80% of our sugar needs in that market. So I think that's very favorable for our costs and also for our stability of margins going forward.

Our next question comes from Rodrigo Alcantara with UBS.

Can you hear me?

Yes.

Yes. So most of my questions have already been answered. So I guess just for not to be repetitive here, maybe you can comment on the rationale of that acquisition that you announced of Imperial, right, of the vending machines. If you can comment a bit about the economics of that and also the rationale behind that acquisition? That would be my question, Arturo.

Thank you, Rodrigo. I'll turn it over to Chuy that would explain that further. I would just tell you that our vending machine operation has been a key pillar for our strategy over many, many years. We currently operate close to 60,000 platforms and we have been engaged actively in this segment for a long time. So we're going to leverage our capabilities, and we see this as a good opportunity and a lot of synergies with our current business as well.

But I'll have Chuy explain a bit more about the rationale and the project.

Thank you, Arturo, and thank you, Rodrigo, for your question. I mean as Arturo mentioned, we have been actively engaged since 1998 in the vending business. This is obviously very close to our core beverage business. and it's a key pillar of our direct-to-consumer strategy. We are, in fact, one of the leading players in both Peru and Mexico, but our footprint in the U.S. remains relatively small. So we do see some potential for growth in that market and obviously generating some synergies for our beverage business as well.

As Arturo mentioned, we operate over 60,000 vending platforms in those 3 markets and serving mainly work, education, entertainment and health channels. As far as the economics of the transaction, that hasn't closed, so we're not able to disclose any of that information at the time.

And just to confirm here, I guess that asset class [ had budge further ] segments, you are just acquiring the vending machine segment. Is that correct?

Vending machine and some of the micro markets platforms as well.

We will move next with Felipe Ucros with Scotiabank.

So a couple of questions on my side. The first one on brand sentiment. What's your level of confidence that we're past the anti-American sentiment that you guys experienced in the earlier months of the year? I know you weren't very vocal about it, but it seemed like the Coca-Cola Company was a little more vocal on their call last quarter. And I'm just wondering if your market shares seem to be back where they were. So I guess from now on, we should be dealing with different issues than this in the past. So just wondering what your confidence is around that.

And then the second one on efficiency. One of the things that usually attracts investors to the business model is your historical ability to deal with hard moments with good gains on efficiency. So I imagine your plans are being rolled out in Mexico or have already been given that the volumes haven't been very strong. But just wondering if you can give us some details about what you have in store on this front.

Yes, for sure, Felipe. So first, in terms of the consumer sentiment about the brands, yes, I think that it did not have an impact in the second quarter. We did have that issue in the first quarter of the year. We had a few weeks where it did impact share, as you mentioned, but I think we are recovered completely now. Maybe a small impact in the first part of the second quarter, but not relevant.

Many learnings, we will be very proactive in addressing all these potential threats and providing consumers with accurate and transparent information. So that's really key for the future and monitor all these potential confusion that can temporarily have an impact.

With respect to efficiencies, yes, we have a strong pipeline of projects in many different areas. Let me just summarize a few. Probably the most critical packaging, continuously evaluating, testing optimizations in packaging, lightweighting, driving cost efficiency, also sustainability. We have reduced the use of PET resin in the last few years, and we're on track to reduce that further. We have a plan up to 2030.

In logistics, new supply chain technology with Blue Yonder, that's improved our forecast accuracy. And that's an all-time high now in Mexico and the U.S. So -- and we're rolling that out. In manufacturing, centralized maintenance planning is fully implemented in Peru and in Mexico. So we are preparing for a launch in the U.S. and further rollout. This technology that we call [ RedSubmarine ], which is equipment for carbonating beverages at higher temperatures also has been rolled out.

We still have probably maybe 25 of facilities to install those devices, which, as you know, have a significant impact in cost and also on -- a positive impact on sustainability and carbon footprint. And digitalization is also an efficiency project as we rolled out our platforms, we identify opportunities to reduce cost to serve, incorporating AI, machine learning, et cetera.

So in coolers, the IoT technology and controllers in coolers allow location tracking and give us performance insights. So that also reduces maintenance costs. So there's a long list of projects, and that is what sustains the profitability and makes us very confident of our prediction to be able to sustain margins going forward, even in this very difficult environment.

So ultimately, what we try to demonstrate is that in difficult times like we've seen in the second quarter, probably we're not going to see growth, but we're still going to see a profitable operation. And then when we have some tailwinds in the future, we will capitalize on many of the investments that we continue to do to sustain market leadership, like improving our infrastructure, our digital initiatives and also our fundamental playbook with coolers, et cetera.

And if I can ask a very short follow-up on CapEx plans. Obviously, you guys were driving this, I would guess, a little bit of an accelerated expansion given that you were a little bit constrained, particularly in Mexico in recent years. Just wondering if the fact that volumes have slowed down a little, whether that has kind of made you reevaluate plans at all? Or should we assume that the exact same plans are still in place?

Yes. That's a very good point. We have been revaluating it and considering things that might not be as critical and that can be postponed. But at the same time, we are very keen on identifying those things that are really important to emerge stronger out of this situation and the slowdown, and those will continue. Some of the infrastructure projects for sure, some of the cooler expansion.

A good example of that is we're increasing coverage of coolers in Peru, which has been very low. Actually, we've increased our CapEx for that specific need in Peru, but we are looking at the same time to optimize things or postpone some of the less critical for the year.

We will move next with Renata Cabral with Citibank.

So the first one is about the margin protection that you mentioned early in the call. Can you give us some color in terms of how is the hedging position right now in terms of raw materials. So that would be my first question.

Yes. Thank you, Renata. I will turn that over to Emilio, please.

Thank you, Renata, for the question. Well, as we have mentioned, we have continued with stable and favorable trends in most of our raw materials. And we have a very healthy hedge program in place. So let me give you some specifics. For example, for aluminum, we have 100% hedged for our needs in LME in Mexico and 97% in U.S. That's one of the components on the aluminum cost. And that's below the spot price, the current spot prices, but a little bit above 2024. So we are basically 100% covered on that part of the aluminum cost.

And also for MWP, which is the other component of the cost, we have hedged 46% for our needs in U.S., also below the spot price -- the current market prices. And that's helping us mitigate an important part of the impact from the tariffs that were -- to aluminum in the U.S. at the beginning of the year. So we are mitigating a lot of this impact on tariffs for aluminum.

And additionally, we have 100% hedge our needs in Peru for sugar below 2024 prices. So we have a better position there in Peru with sugar and 100% also hedge of our high fructose needs in Mexico in line with 2024 prices and 79% of our high fructose needs in U.S., also in line with last year cost.

So we -- as you can see, we are very well covered on any risk on changes on this trend on raw materials. And regarding currencies, we have hedged 100% of our needs in Mexico of U.S. dollar and 80% in Peru with a better exchange rate than last year. So also regarding currency, we are in a very good position there.

And my second question, it's a quick one and a follow-up regarding Argentina. So your comment about the margin improvement. We saw that the last quarter was 1.5%, this quarter, 7.1%. In the past, we saw that margin in Argentina was already plus 14%. So we understand that the recovery can be in a soft pace. But do you think it's possible to achieve in a long term this 14% that the company had in the past?

Yes, Renata, we are working our way back to get to those levels. So if you look at our top line, consumption is recovering in Argentina this year and we have strong momentum in some sectors, but we're not yet at the 2023 level. So as we move in the second half of the year closer to that baseline, we're also going to be recovering margins. We're working also very actively on our OpEx, which is very important in Argentina, as you know, in this still high inflationary environment. And in our cost side, I mentioned the sugar mill project that's also going to help. So yes, we're working our way back to that level of margins.

Our next question comes from Antonio Hernandez with Actinver.

Just a quick question on my side. Regarding still beverages in both Mexico and the U.S., you performed quite well there. You mentioned already a couple of strategies that you're following, I guess, in the U.S. Just wanted to know if -- what are the drivers of this category in Mexico? And how were -- was this category in both countries protected from the other headwinds that other categories faced, i.e., weather and so on?

Yes, Antonio, what I would say in general is that in the case of Mexico and even in the U.S., these categories have a significant runway for future growth and development. If you look at Mexico, the mix in relevant categories in sports drinks and energy, the basic categories, it's still fairly low. So that will continue to drive growth, even though we were cycling a strong growth from '24 as compared to '23, we grew in Mexico more than 17% stills in '24.

We still were able to achieve growth this year, driven by tea, by juices, by -- tea was double digit, energy drinks were double digit. So I think those categories still have a significant runway because they are not as developed as in other markets. In the U.S. I think there's also an opportunity mostly based in innovation, I would say. So products like Core Power, like BodyArmor have a tremendous opportunity. And brands like Topo Chico, which is not in the stills segment, but it's a similar performance, brands that still have an opportunity for further growth. We'll continue to see that, we believe, in the future.

So even though we have this difficult environment in the U.S., we were cycling, I believe, more than 6% growth in stills categories. we were able to grow those -- that segment in this difficult environment. So it tells you about how we have a tremendous opportunity as we have expanded our portfolio beyond the traditional sparkling categories and brands.

We will move with Henrique Morello with Morgan Stanley.

So I'd like to ask a more broad question about your low and no sugar portfolio expansion. So we continue to see your products such as Coke Zero growing a lot quarter after quarter at an accelerated pace. So if you could comment on how was your experience so far with the low and zero sugar portfolio in markets that are -- that have a lower penetration of such products such as Mexico.

And if you could explore maybe if you did some specific adjustments for those countries, how are you seeing the cannibalization of the full sugar portfolio? And perhaps if you think it's feasible to reach like the 30% level that we see in more mature markets on that front in the longer term? And what are your goals here? That will be very helpful.

Yes. Thank you, Henrique. I think it will be a similar answer to what I told Antonio a moment ago. These subcategories or the subcategory in Latin America is not really as developed. So it will continue to grow. I think it's supported by great innovation. This new version of Coke Zero has been very successful, I would say, in every market. So what we have seen in this quarter, particularly in Mexico, growth of almost 24%, which is under this environment, it tells you a lot about how successful this product would be.

And there would be maybe a natural transition of some consumers many times as they age from classic Coke to Coke Zero. That would be probably a natural thing to expect. But also, it's been a way to capture more weekly consumers in those markets. And I think that's a similar situation in other of our Latin American markets as well. In Ecuador, also a significant opportunity. It has additionally some tax advantages in some of the markets. So that also will continue to drive growth of this portfolio.

Our next question comes from Carlos Laboy with HSBC.

It would have been very easy, I think, for Jean Claude and for your U.S. team to focus on the account base that you found at Coca-Cola Southwest when you got there. But it seems that the U.S. team has been growing the number of clients significantly looking for different ways to develop the market. I was hoping you could maybe expand on that a little bit.

And even this small canteen business that you just bought in the U.S. would seem to be an example of that. Can you speak to how significant or important it's been to grow that client base? And any context you can give us around that?

Yes. Thank you, Carlos. I think this goes back to this fundamental philosophy that we have discussed and you have pointed out over time about how you have to be more customer-centric in operations. And obviously, efficiency and cost to serve are important for everybody. But I think the main purpose of our business is how to create share value with our customers and connect better.

I think what the team has done in the U.S. is precisely have that priority of that idea come to life with the front line more than anything and aligning incentives of the front line of the many things that we are doing in the marketplace. But one additional factor that I think has been very important for that is the incorporation of platforms and technology and how that combines with the reskilling of our front line to connect better with our customers and to focus on also the on-premise market with -- I would say, with more intensity and to leverage the equity of our brands in every market.

Promote more of the bottle can formats versus just go for the simple solutions of the fountain options. So there are so many things behind that in that change that has been implemented over the years in the U.S. And again, I go back -- and it probably sounds a bit cliche, but it goes back to the culture that has been built in the U.S. And it does have a metric. And so we -- when we see engagement scores in the U.S. I don't know if we've told you this before, Carlos, but engagement scores now in the U.S. for our associates are the highest in our 5 beverage business units.

So it tells you a lot of the work that has been done with our associates. And obviously, that translates with a much better connection with the customer. So our investment in this new business Imperial, I think it's going to be based on the same fundamental idea. And we hope that it's going to bring synergies, particularly for Coca-Cola Southwest, which a big portion of the synergies of that acquisition are going to be materialized in the Coca-Cola Southwest P&L actually, but it's based on the same fundamental idea.

Our next question comes from Federico Galassi with TRG.

Congrats again for the results. Most of the question was answered before, but it was more related to U.S. But maybe the question is, after you made the acquisition, you have a target and you pass -- your initial targets, in particular in margin. But thinking in the next year, do you continue to see room to improve margins, operation, distribution? And in particular, when you show the numbers of the growth in Coke Zero, BodyArmor, Monster, how is all these brands, no coke brands, if you want, improving the margins and improving the revenues?

Yes. Thank you, Federico. Well, as we look at the future, we are working on things that we can control. I mentioned some of the efficiency projects in the U.S. I would highlight this project of bringing in 3 new high-speed lines and warehouse capacity in Fort Worth, San Antonio, Oklahoma, that's going to bring a significant productivity to our manufacturing and distribution costs.

So projects like that require investment, but we will continue to do, and that is going to bring productivity and efficiency to our operation. We're also going to face obviously some headwinds in -- particularly in the challenge of growing some categories. So at the end, we expect and we aim to sustain our margins going forward.

The goal also has been to focus on some of the more profitable packages, as I said before, that we're going to continue to do. So if you look at the business case that we prepared when we acquired the business going back to your point of our acquisition more than 8 years ago, we far exceeded that business case. So we're now setting ourselves new goals. But I think it's -- for us, I think it's a prudent goal to say we're going to sustain margins going forward.

And we show no further questions at this time. I will turn the call back to Arturo Gutierrez for closing remarks.

Thank you, operator, and thank you again, everybody, for your time and for your continued support and trust in our company. As always, our Investor Relations team will be available for any follow-up discussions or questions you may have. We look forward to reconnecting with you in our next quarterly update. Have a great day.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.