Becleb De Cv Aktie

Good morning, and thank you for joining Becle's First Quarter Unaudited Financial Results Call. During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases such as anticipate, believe, could, estimate, expect, intend and similar terms and phrases and may include references to assumptions.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements.

Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards, or IFRS, and published in the Mexican Stock Exchange. The information for the first quarter of 2026 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. [Operator Instructions]

Now I will pass the call on to Becle's CEO, Mr. Juan Domingo Beckmann.

Good morning, everyone, and thank you for joining us today to discuss Becle's first quarter 2026 results. We faced a challenging quarter, primarily driven by a significant distributor transition program in the U.S., which resulted in a 13.4% volume decline. Importantly, this impact does not reflect the underlying performance of the business. We view this as a forward-looking investment in our commercial foundation, establishing a stronger platform for long-term growth, although with temporary disruption to shipments.

On an organic basis, performance in the U.S. was affected by inventory resets versus year-end 2025 and continued softness in full strength spirits consumption. Mauricio will provide a more detailed breakdown of first quarter depletions across both transition and non-transition markets, offer greater visibility into underlying trends. In Mexico, our momentum remained strong throughout the quarter, and our brands not only held their ground but consistently gained market share across both the tequila category and total spirits.

Finally, our Rest of the World region also sustained its positive momentum with both shipments and depletions growing. We continue to perform resiliently and underlying category dynamics remain constructive. The strategic investments we have made to build our diversified global spirits portfolio proved their value this quarter, cushioning the impact of what we communicated last quarter would be transitional period in the -- would be a transitional period in the U.S.

With that, I will turn it over to Mauricio Vergara to walk us through our U.S. and Canada results in greater detail.

Thank you, Juan, and good morning, everyone. In the first quarter, our performance in the U.S. and Canada region reflected a continuation of the trends we outlined in the previous call. As expected, this is a period of transition for the business, driven by the execution of our distributor realignment strategy and deliberate actions to reduce inventory levels following the build we saw at the end of 2025.

While reported results for the quarter were soft, they were in line with our expectations. In this context, shipments declined 23.8% during the quarter, reflecting both intentional inventory reductions and the ongoing distributor transition. As we have highlighted, shipments are not fully representative of underlying demand in this environment. Depletions provide a clear view of performance, declining 9% overall.

Importantly, this reflects a divergence between transition and non-transition markets, with transition markets declining approximately 12%, while non-transition markets declined around 5%, which is better than the industry. This distinction remains critical to understand the underlying performance of the business. From a category standpoint, headwinds for the full-strength spirits have intensified during the quarter.

According to C-stores, data through February, full-strength spirits depletions declined 7.1% with tequila down 6.2%, meaning it is holding up better than most categories, but still clearly declining within a contracting environment. At the same time, prepared cocktails remained the primary growth driver in the industry, with the gap between ready-to-drink formats and full-strength spirits continuing to widen.

In our portfolio, RTD delivered double-digit growth, supported by increased focus and investment. Within this environment, our own portfolio performance reflects both the category backdrop and the impact of the distributor transition.

Year-to-date Nielsen data through March 21 shows that Proximo Tequila volumes declined 3.9% compared to flat performance for the industry, while Proximo Spirits volumes, excluding prepared cocktails, declined 4.9% versus a 3.1% decline of the broader market. While this reflects some short-term pressure, it is important to recognize that transition markets represent the largest portion of the markets measured by Nielsen. From an inventory standpoint, we're actively rebalancing stock levels as we move inventory from our previous distributors to the new partners.

This process will continue throughout the year and will keep shipments somewhat volatile as they reflect both destocking and transition-related movements. Importantly, the transition is progressing as expected with no material supply disruptions, although we are still working through gaps in distribution coverage, promotional continuity and retail execution across these transition markets. We are now focused on leveraging the strength of our new distributor partners to drive consistency in execution and are confident that once the transition is stabilized, our distribution and execution standards will show important improvements versus historical levels.

Turning to pricing. The environment remains highly competitive with continued pressure across categories as companies compete for share in a slowing market. Our approach remains disciplined as we believe avoiding aggressive discounting is critical to protecting long-term brand equity and margin integrity. From a channel perspective, on-premise continues to outperform off-premise by approximately 200 basis points, and we see this as a key opportunity.

We are increasing our focus and shifting investment towards high-impact accounts in major cities as this channel remains critical for brand building and long-term growth. Looking ahead, we are investing in what is working, including Reposado small formats, the Jose Cuervo Sparkling relaunch, prepared cocktails and accelerated expansion in the on-premise channel. These are areas where demand remains more resilient and where we are focusing our efforts.

While near-term pressures persist, we remain confident in the long-term strength of the U.S. spirits market and in our ability to deliver sustainable growth.

I will now turn the call over to Olga Limon to discuss Mexico.

Thank you, Mauricio, and good morning, everyone. Moving to Mexico. The spirits industry remains under pressure with year-over-year declines in both volume and value in the quarter. That said, the pace of contraction has moderated compared to last year. Relative to this challenging industry context, we began the year positively, underpinned by our resilient performance.

To provide a more accurate view of our underlying business, it is important to look at results, excluding the b:oost brand. On the basis, we delivered volume growth of 6.1% in the quarter, supported by our tequila portfolio, which grew 7%. According to [ NISCAN ] data through February, our performance in Mexico continues to outpace the industry. While total spirits industry volume declined 3.2%, our portfolio declined 1.3%. In value terms, we declined 3% against an industry decline of 6.3%. Within the tequila, while the category declined 0.8% in volume, we outperformed, delivering slight growth of 0.1%.

In value terms for the category, we declined 1.8% against an industry decline of 5.4%. These results underscore the continued strength of our portfolio and our undisputed leadership position in Mexico. During the quarter, product mix shifted slightly towards the value segment as our lower-end brands offer consumers a compelling value proposition. Importantly, this does not reflect downtrading as the higher-end segment continued to grow, although at a more moderate pace.

Additionally, the exit of [ foods ], which carried a dilutive price per case is contributing to an importance in the overall mix of our portfolio. From a pricing standpoint, while some peers have taken a more aggressive promotional approach, we have maintained our position as pricing leaders. As a result, our focus remains on execution and market share rather than pricing. Overall, despite a difficult environment, we remain confident in our ability to continue gaining share and strengthening our leadership position across Mexico and the broader region.

I will now turn the call over to Shane Hoyne. Thank you.

Thank you, Olga, and good morning, everyone. The first quarter of 2026 marked the third consecutive quarter of growth for the EMEA and APAC region. This reflects the underlying strength of our brands and what remains a relatively flat market environment. We are seeing a recovery in Asia following the market volatility experienced in 2025, while performance across EMEA remains supported by steady demand.

That said, certain markets, particularly in the Middle East, are still experiencing some instability, and it remains to be seen how this will evolve over the remainder of the year. Both shipments and depletions increased versus the prior year. Shipments grew 15%, while depletions increased 8.4%. While there can be periods where shipments and depletions move at different paces, these dynamics tend to balance out over the course of the year.

Inventory levels across the region are beginning to normalize following the fluctuations observed through 2025 as external factors impacted distributor behavior. However, pricing conditions remain relatively competitive -- sorry, highly competitive, and we expect this to remain a consistent theme across markets as we move into through 2026. From a category perspective, our tequila portfolio continues to gain momentum across the region, supported by growing consumer interest and a deeper understanding of the category.

As mentioned in the previous call, we are increasingly seeing tequila gaining share from Other Spirits, reinforcing its position across the spirits landscape. Overall, while the EMEA and APAC region remains exposed to a complex and evolving environment, Becle is delivering resilient performance and category fundamentals continue to support long-term growth. As we look ahead to the remainder of 2026, we remain confident in the opportunity for tequila to drive both volume and value expansion across the region. Our portfolio strength and established route-to-market strategy position us well to capture these opportunities.

I will now pass you over to Rodrigo, who will take you through the financial results.

Thank you, Shane, and good morning, everyone. I will now walk you through the financial results for the first quarter of 2026. The company reported a 23.1% decrease in consolidated net sales, reaching MXN 7.4 billion. This decline reflects foreign currency effects from the appreciation of the Mexican peso against the U.S. dollar. On a constant currency basis, our top line decreased by 13.5% for the quarter, in line with the shipments volume decline influenced by the distributor transition in the U.S.

Gross profit decreased by 29.7% in the first quarter to MXN 3.9 billion, while gross margin decreased from 57.8% in the first quarter of '25 to 52.8% in the first quarter of 2026. The decrease in gross margin was primarily driven by foreign currency effects related to the appreciation of the Mexican peso against the U.S. dollar as well as an adverse regional mix. This was partially offset by an improved product mix and a stable agave input cost. On a constant currency basis, gross margin would have been 56.1% for the quarter.

AMP expenses declined 24.9%, closing the quarter at 20.4% as a percentage of sales, aligned with our full year AMP guidance for 2026. Distribution expenses decreased by 15.1%, while SG&A expenses increased 2.6%, reflecting continued discipline on overhead and strong cost control across the organization.

Despite these efficiencies, our EBITDA for the first quarter declined 52.5% with EBITDA margin contracting 860 basis points to 13.9%. Adjusting for FX, EBITDA margin would have been 16.7%. First quarter consolidated net income decreased 66.5% to MXN 390 million with the net margin at 5.3% compared to 12.1% in the first quarter of last year. Earnings per share were MXN 0.11 compared to MXN 0.34 (sic) [ MXN 0.32 ] for the first quarter of 2025.

As of March 31, 2026, cash and cash equivalents totaled MXN 11.2 billion, while total debt was MXN 19.2 billion, a decrease of MXN 7.5 billion compared to the prior year. In the first 3 months of 2026, the company generated MXN 2.4 billion in net cash from operating activities, primarily reflecting working capital discipline. Our balance sheet remains very strong with adjusted net leverage of 1x, in line with our target range of 1 to 1.5x.

We remain confident in our long-term free cash flow generation and maintain flexibility to deploy capital effectively. In this context, we will propose a cash dividend payment and an extension of our share repurchase program at today's General Shareholders' Meeting. Finally, we are confirming our 2026 guidance of low single-digit consolidated net sales value decline on a constant currency basis.

I will now turn the call back to the operator for the questions and answer session. Thank you.

[Operator Instructions] Our first question comes from the line of Nadine Sarwat. Please state your company name and ask your question.

This is Nadine Sarwat from Bernstein. I have 2, please, both on the U.S. The first, when it comes to the very big gap we saw in Q1 in the U.S. between shipments and depletions, can you help us understand how much of that gap was due to, a, the distributor transition versus b, the action to reduce inventories in the system more broadly? That's my first question. And then the second, how should we think about U.S. shipments versus depletion in Q2?

Thank you, Nadine. This is Mauricio. So let me -- I'll take the first one in terms of the -- how much is what. So even though it's very difficult to really point or pinpoint the exact numbers, what I can tell you is that a big part of the -- of that gap on shipments is driven by the destocking. If we look at our last year, a lot of the highest inventory levels we had were in RNDC markets. So as we're transitioning, we're making sure that in addition to focusing on the right execution, we are resetting the right levels of inventory in the new distributors.

To give you a little bit more color, as I mentioned during the script, the performance in non-transition markets, the decline in those non-transition markets, it's around 5% compared to the industry that is declining at -- if you look at C-stores, 6% to 7%. So I think that when you look at our non-transition markets, we're actually performing better than the industry, which tells you that a big expectation in our depletions is definitely driven by the transition markets, which takes me to link to your second question.

The destocking, because it's a significant amount, it will continue into Q2. Now what I can also say, which is what I'm looking at the initial numbers of April is our Q2 depletions will definitely show an improvement versus Q1. So the way I'm looking at the year is that every quarter, from a depletions perspective, we're going to start seeing a significant improvement as we stabilize the transition. Now in terms of the destocking, that will continue again through the rest of the maybe Q1, Q2, and we will stabilize both things as we get into the second half of the year.

Our next question comes from the line of Froylan Mendez. Please state your company name and ask your question.

This is Froylan Mendez from JPMorgan. A question in the U.S., too. If -- can you just explain to us, Mauricio, a little bit how does these transition markets are working? And what are the risks that if you are not able to supply the different channels because of this transition that the -- let's say, the underperformance versus peers is exacerbated in the next quarters? Because probably you are not putting inventory into the different channels because of this transition, other brands are doing it. So is there a risk that even when the transition is completed, you are a little bit behind and the destocking process takes a little bit longer because your product was in a certain way, replaced by other brands that were able to supply the channels or you were under this transition? That's my first question.

And second, on the comments regarding the stable input costs overall that you mentioned on the gross margin. What does that mean? Does that mean that there is no benefit from lower agave prices into your cost base already this year? Or what do you mean by stable input costs?

So I'll take the first one, Froylan. Thank you for your question. I think it's a very relevant one. So what I want to be very clear is since this transition was planned with significant time before we announced, we made sure that we built inventory in the new distributors to avoid any supply disruption.

So we are having absolutely none supply disruption in our customers from the transition because of the way it was managed in making sure that we have enough inventory and new distributors before executing the transition. That's one.

The other one, just to provide very strong confidence on your concern actually not manifesting in the marketplace, we see actually the opposite, because if I take a market like Florida, where RNDC had around 20% share of the market, breakthrough has over 40% of the market. So actually, we're -- what my expectation is that our coverage in the trade will significantly increase the presence of our portfolio in retail and the on-premise versus our previous distributors.

So one of the reasons that was driving the decisions we made in which distributors to choose in every market were distributors that actually have a stronger presence than our legacy partners. So actually, I see the opposite. I see this as an opportunity versus a risk because since we are not having any supply chain issues, we're not having any out of stocks, we're not having disruption in the supply, we are going to see over the next few months an increase in our coverage and distribution versus historical levels. So that's why the way we've been positioned is, even though there's short-term disruption, I see an upside for our business as we stabilize the transition.

Very clear. And on the input cost.

Yes. How are you, Froylan? The comment I made on -- in regards to stable input cost basically relates to the fact that we see market prices on agave being stable, and we have no expectations of significant changes to the current situation or the situation we've had in the last couple of quarters. That's basically the comment. There's nothing more to that.

So the benefit of lower agave prices basically was already seen or already impacting results last year. So now if they are stable versus 2025, you don't see an incremental impact, but you did benefit last year from that and not so much this year since they are, let's say, sequentially stable. Is that the right way to think about it?

The right way to think about it is we have continued to benefit from lower agave spot prices in the proportion we do leverage that part of the market, and we expect no changes going forward.

Our next question comes from the line of Henrique Morello. Please state your company name and ask your question.

This is Henrique Morello from Morgan Stanley, filling up for Ricardo Alves today. We have 2 quick ones on the margin side here. So the first one on the gross margin. We understand that most of the impact was from the FX, right? And by the way, thank you for the breakdown that in the release is very helpful. But on the other side that we understand that that's the underlying performance, right, the minus 170 basis points of underlying decline in the gross margin.

So you -- if you could just give a little bit more detail on the main drivers behind of that underlying decline? For instance, how much was lower prices or maybe operational leverage, something like that? And how should we think about that ex FX performance of gross margins for the rest of the year as well would be very helpful? And the second question on the SG&A front. So given the current tougher industry environment in the U.S., industry-wide decline in sales, so picking of your [ brands ], if you expect any eventual SG&A downsizing, perhaps efficiencies in production capacity optimization, adjustments to logistics or headcount or something like that? Or if you see any other low-hanging fruits on the SG&A side that could help boost your margins going forward in the coming quarters as well? So those are the questions.

Of course, thank you for both questions. Regarding the gross margin, out of the 500 basis points, and this was commented already, 330 basis points was driven by simply FX, unfavorable FX. The rest, the other 170 points (sic) [ basis points ], it's actually a result of unfavorable price mix and importantly, geographical mix as the U.S. performance underweights the -- what normally it does, right?

So there's not much more to comment in that regard. It's a matter of unfavorable mix is what explains the rest. Regarding your second question, we continue -- on a continuous basis, we look for opportunities to improve cost reduction and efficiencies, and we will continue to do that. Obviously, our numbers are affected right now due to operating deleverage that impacts all P&L line items, which have implicitly fixed expenses and costs. So yes, I mean, we continue to focus on driving productivity across the value chain. We have been doing that, and we will continue to do that as part of our ongoing strategy.

Thank you. That is all the time we have for questions. So that concludes the call. Thank you. You may now disconnect.

Good morning, and thank you for joining Becle's Fourth Quarter Unaudited Financial Results call. During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases such as anticipate, believe, could, estimate, expect, intend and similar terms and phrases and may include references to assumptions.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements.

Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards, or IFRS, and published in the Mexican Stock Exchange. The information for the fourth quarter of 2025 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. [Operator Instructions].

Now I will pass the call on to Becle's CEO, Mr. Juan Domingo Beckmann.

Good morning, everyone, and thank you for joining us today as we discuss Becle's Fourth Quarter and Full Year 2025 results. 2025 was a year of navigating challenges across our key markets. However, we defended or expanded our leadership position in Tequila across our main regions, protected pricing better than the industry average by leveraging our strong brand equity, and delivered solid financial performance supported by the decisive actions and disciplined execution. We are proactively assessing market conditions to reinforce our strong foundation for sustained long term growth.

At the same time, it is important to put the current environment into perspective. Spirits continue to take share from other alcoholic beverages, underscoring the structural strength of the segment. Within that context, Tequila continues to outperform other full-strength spirits categories with solid price mix growth, and premiumization trends remaining intact, favoring our core strengths.

Cautious of shifting consumption trends, we believe the current slowdown is mostly cyclical, driven by macroeconomic headwinds and inflationary pressures. Historically, the spirits industry has experienced periods of expansion and contraction, and we expect demand to recover as consumers' confidence improves.

In the U.S. and Canada, we are implementing changes to better capture both portfolio and route-to-market opportunities. We recently announced a full realignment of our U.S. distribution network with the transition beginning on February 1. In Mexico, we continue to advance premiumization, strengthening our on-premise capabilities and sharpen marketing through innovation.

Even in a cautious demand environment, we remain confident in our ability to defend our market leadership and compete effectively. In Rest of the World, we are focusing on our core brands and strengthening our premium portfolio. We continue to execute with discipline as we navigate evolving consumer behavior and macro conditions, and we continue to capture a relevant position in strategic growth markets in the region.

2025 evidenced an unusually complex global spirits sector likely to remain in 2026. However, we've consistently shown that we can drive competitive advantage through uncertain times by focusing on what matters most, the strength of our brands, the discipline of our strategy and the quality of our people.

We are entering 2026 with a healthy mix of realism and optimism as we anticipate that the years ahead will continue to require bold adjustments to position us better for 2027 and beyond. Thank you. And with that, I'll turn it over to Mauricio to discuss our U.S. and Canada results.

Thank you, Juan, and good morning, everyone. Our fourth quarter performance in the U.S. and Canada region reflected a combination of continued industry-wide headwinds and delivered commercial actions taken to position the business for long-term success. As full-strength spirits demand decelerated through the back of the half year, we remain focused on the areas firmly within our control: execution, disciplined pricing, targeting investment behind our brands and a thoughtful management of shipments and inventory across the system.

U.S. spirits trends deteriorated sequentially in 2025, with a slowdown, particularly evident to our year-end. Against this backdrop, tequila continues to stand out as the most resilient full-strength spirits category, delivering volume growth of 2.3% in the year, according to Nielsen data. While growth in the broader spirits market has skewed towards prepared cocktails, tequila has transitioned from a high-growth phase to a more normalized stabilization phase. It remains an attractive category and continues to outperform other spirits. Within this environment, our own portfolio continues to outperform the market, excluding prepared cocktails.

[indiscernible] data for the 3-month period ending in November shows that Proximo continued to outperform the broader industry in value growth within full-strength spirits and more specifically within the tequila category. Nielsen data for 2025 further supports this performance showing that Proximo's volume declined 2.5%, outperforming the overall market by approximately 100 basis points.

Pricing discipline remains a defining feature of our approach in the quarter. As demand moderated, competitive behavior intensified with the overall tequila category experiencing a price decline of approximately 9.2%. By contract, our average pricing decline was limited to 5.1%.

While this discipline can create short-term volume pressure, we believe avoiding aggressive discounting is critical to protecting long-term brand equity and margin integrity, particularly in an environment where several competitors have leaned more heavily into aggressive pricing actions. At the same time, we continue to invest behind our brands. Our advertising and marketing investment as a percentage of sales remains above peer levels. Reflecting our conviction and sustained brand support is essentially in peers of category softness. These investments are tightly focused on expanding points of distribution, opening new on-premise accounts and improving in-store performance.

From a category standpoint, strengthening our leadership position in Tequila continues to be our top priority. At the same time, RTDs represent one of the most attractive growth opportunities where we are currently underrepresented. During the second half of 2025, we increased our focus and investment behind RTDs and delivered solid double-digit growth. To further accelerate performance in this segment, we are building a stronger innovation pipeline and evaluating route-to-market alternatives that enhance coverage and execution.

Turning to shipments and inventory. We took deliberate actions during the quarter to ensure healthy alignment across the system. In response to the broader slowdown in consumer takeaway, we adopted a measured approach to shipments with the aim of avoiding further inventory build. This resulted in shipments declining more sharply than depletions on a quarterly basis. Our inventory levels vary significantly across distributors with our highest level sitting in what were RNDC markets. We will actively be working on balancing inventory levels as part of the transition into our new distributors during the first half of 2026.

In the quarter, retailers continue to reduce inventory to historically low levels. And in turn, distributors also actively work to reduce their own inventory levels. In addition, we had already anticipated our planned exit from RNDC, well ahead of the formal announcement, and we made a conscious decision to moderate shipments into RNDC during the end of the year to facilitate a smoother transition and mitigate disruption at the time of execution.

As previously announced, we have recently completed a comprehensive review of our route-to-market strategy across the United States. As a result of this evaluation and while we value the relationships and history we've built with RNDC, we decided to transition our distribution away from them in all current markets, except for Georgia and New Mexico, effective February 1, 2026. This decision reflects our performance first mindset, aligning our brand with partners who demonstrate strong execution, focus on accountability. And while these transitions may introduce some near-term volatility, particularly in the first half of the year, we believe this change will significantly strengthen our commercial foundation and position us to compete more effectively in an increasingly dynamic U.S. marketplace.

Looking beyond current market cycles, the long-term fundamentals of the U.S. spirits market remains strong. We believe tequila is positioned to be the industry's main growth category over the next decade, a trend that directly benefits Proximo as a category leader. We continue to see durable consumer appetite for premiumization and authenticity, reinforcing our confidence in the long-term trajectory of the business.

I will now turn the call over to Olga Limon to discuss Mexico and the Latin America results.

Thank you, Mauricio, and good morning, everyone. Moving to our performance in Mexico. I would like to frame our 2025 results within the context of the broader industry landscape. While the spirits industry remained in contraction, it is important to highlight that the pace of decline moderated meaningfully compared to 2024. Within this context, Tequila continues to prove its status as a clear outperformer. Our brands not only held their ground, but consistently gained market share across both Tequila category and Total Spirits.

According to [ NisCom ] data through November, our performance in Mexico clearly outpaced the industry. While Total Spirits volume declined 1.4%, our portfolio delivered a 2.5% volume increase. In value terms, we grew 2.0% against an industry decline of 1.6%. The Tequila category specifically remains a growth engine. While the category grew 2.5% in volume, we outperformed with 3.9% growth. These results underscore the continued strength of our portfolio and our undisputed leadership position in our home market.

When evaluating our performance, it is essential to look beyond the quarterly volatility and focus on a full year trajectory. Additionally, moving forward to provide a more accurate reflection of our underlying business, it is important to look at results, excluding the b:oost brand.

On a full year basis and excluding our b:oost brand, Mexico delivered a 1% volume growth, broadly in line with depletions. We which decreased 1% versus the previous year. While our fourth quarter volumes decreased by 10.3%, depletions declined 7.1%. These figures follow an exceptionally strong third quarter where depletions grew by 5.2%. We evaluated -- when evaluated on a second half basis, shipments increased 0.5%, while depletions decreased by 2.5%. It is also important to note that we are lapping a particularly strong fourth quarter seen in 2024, which created a high bar for comparison.

In response to softer depletions observed late this year, we intentionally moderated shipments to ensure that we close 2025 with healthy inventory levels across the system. This disciplined approach to inventory management provides us with a clean runway as we enter 2026. Throughout the year, our shipments and depletions remain well aligned confirming that the underlying consumer demand for our brands remains robust.

Looking at the global picture, Mexico continues to be one of the best performing regions for Tequila and for the company as a whole. Overall, our leadership in Tequila and our ability to gain share in a challenging market gives us great confidence. By prioritizing disciplined execution and protecting the long-term health of our equity, we believe we are well positioned to continue building value in Mexico and across the region.

I will now turn the call over to Shane Hoyne, Managing Director of EMEA and APAC region.

Thank you, Olga, and good morning, everyone. In the fourth quarter of '25, the region sustained its positive momentum with both shipments and depletions growing. APAC continued to deliver double-digit depletions growth while EMEA recorded positive depletions compared to the same period last year. For the full year '25 shipments in the EMEA and APAC region were flat versus '24, while depletions increased by 1.5%, reflecting continued underlying demand despite a challenging trade environment.

Inventory remained a key factor throughout the year. Particularly in the first half, elevated inventory levels across the broader industry impacted shipment patterns as distributors and retailers focused on reducing working capital and operating with lower inventory levels. These dynamics were evident across multiple markets and remained a consistent theme over the course of the year.

Pricing conditions in '25 remained highly competitive with aggressive discounting across money markets as peers sought to defend volumes. While pricing pressure remains elevated, discounting activity appears to have largely stabilized.

From a category standpoint, Tequila is gaining momentum across the region, driven by growing consumer interest and a deeper understanding of the category. And increasingly, tequila expanding into new occasions positioning itself as a more sophisticated option for cocktails and early evening parties. We also see tequila switch consumers from traditional brand spirits such as cognac and whiskey with many entering directly into the aged tequila segment, reinforcing the category's long-term premiumization opportunity.

Overall, while the region is operating in a complex and uncertain environment, Becle continues to perform resiliently and underlying category dynamics remain constructive. Looking ahead to '26, we remain optimistic with Tequila offering significant long-term volume and value growth potential across multiple markets. Our portfolio strength and established route-to-market strategy position us well to capitalize on these trends. I'll now hand you over to Rodrigo, who will take you through the financial results.

Thank you, and good morning, everyone. I will now walk you through the financial results for the fourth quarter and full year 2025. In the fourth quarter, the company reported consolidated net sales of MXN 11.1 billion, reflecting a 14% decline year-over-year and an 8.4% decline on an FX adjusted basis. This and other reported results were negatively impacted by the appreciation of the Mexican peso in Q4.

Operationally, results were impacted by deliberate inventory rebalancing actions in the U.S., mainly due to a softer demand environment into the year-end. Our price/mix increased 0.4%, reflecting our ability to sustain pricing even under extreme competitive environment, leveraging our brand equity and portfolio. However, this was more than offset by 5.7 points of unfavorable currency translation. This quarter marks our eighth consecutive quarter of year-over-year gross margin expansion, a significant achievement given an unfavorable regional mix and the appreciation of the Mexican peso, which represented a significant drag on margins.

We continue to benefit from lower agave-related input costs and ongoing cost efficiencies from strategic sourcing and manufacturing operations, resulting in a gross margin of 55.2%, an expansion of 110 basis points versus a year ago.

While net sales remained under pressure, we maintained investment behind our brands to protect long-term equity and ensure we are well positioned for a better time. We have done so while remaining highly selective and focused on investment efficiency.

Turning to operating expenses. Distribution costs declined 6.5% and SG&A expenses decreased 6.2%, reflecting continued discipline on overheads and strong cost control across the organization. Other income increased by MXN 438 million during the quarter, primarily driven by anticipated contractual settlements related to U.S. distribution agreements. As a result, EBITDA for the fourth quarter was flat year-on-year, with EBITDA margin expanding 340 basis points to 24.4%.

Net income for the quarter was MXN 1.4 billion, benefiting from MXN 148 million year-over-year foreign exchange gain as the appreciation of the Mexican peso positively impacted our net U.S. dollar debt exposure. This benefit was partially offset by a retroactive full year effective tax rate increase to 27%, which was recorded in the fourth quarter.

As of December 31, 2025, cash and cash equivalents totaled MXN 10.8 billion, while total debt was MXN 18.9 billion, a decrease of MXN 7.4 billion compared to the prior year. In 2025, the company generated MXN 8.1 billion in net cash from operating activities driven primarily by the setup in underlying operating profit and continued working capital and CapEx discipline.

Our balance sheet remains very strong with adjusted net leverage of 0.9x, slightly below our targeted range of 1 to 1.5x. We remain confident in our long-term free cash flow generation and have ample balance sheet capacity to execute our capital allocation agenda, which prioritizes reinvesting in the business and returning capital to shareholders.

Before moving to guidance, I want to take a step back and highlight the progress we have made over the past several years. Using 2019 as a pre-Covid reference point, net revenues are up 45%, driven by 10% volume growth and a 35% increase in average price per case. This reflects the significant premiumization of our portfolio with average price per case growing at a 5% CAGR since 2019.

Importantly, our Rest of the World business has doubled in size since 2019 in net sales value, reinforcing that tequila remains a high-growth category with substantial long-term potential, particularly in markets where penetration remains low.

Gross profit has grown at a 7.5% CAGR since 2019 and gross margin is now 320 basis points above 2019 levels. At the same time, marketing expenses as a percentage of net sales have declined by 90 basis points versus 2019 while consolidated net sales value has grown at a 6.4% CAGR, reflecting a more efficient and disciplined investment approach. Importantly, these improvements were not driven by foreign exchange movements as the average effects in 2019 was broadly the same as in 2025.

From a working capital standpoint, we have improved our cash conversion cycle. Total inventory days are back to 2019 levels, even though we have significantly premiumized our portfolio since then. Payables have improved from 36 days to 56 days and receivables have shortened from 110 days to 100 days as of year-end 2025. CapEx has also declined both in absolute terms and as a percentage of net sales from 6.9% to 3.4%. We have continued to deliver consistent dividends and free cash flow has strengthened, improving from a 4% free cash flow yield in 2019 to 14% at the end of '25.

When you look at our performance over the past 6 years, the company has evolved into a more mature and resilient business, one that has strengthened its ability to premiumize consistently, invest efficiently, improve cash conversion and capital return to shareholders through a sustainable and disciplined financial model.

Finally, moving on to 2026 guidance. This will be a transition year for our business as we execute the previously announced realignment of our U.S. distribution network. Changes of this scale take time to fully stabilize and may create temporary disruptions, shipment volatility, inventory realignment and added complexity. Our priority is to start this new partnerships the right way by maintaining clear communication, aligning closely on execution standards and managing inventories carefully to avoid unnecessary stock build.

At the same time, we expect the broader operating environment in 2026 to remain challenging with limited visibility given macroeconomic volatility and continued consumer uncertainty. Considering these factors, we expect net sales value to decline in the low single-digit range in 2026 on a constant currency basis. Additionally, we expect A&P as a percentage of NSV to be in the range of 19% to 21% and our capital expenditures to be in the range of $90 million to $110 million.

We are not providing specific guidance on operating income, particularly as we will be lapping nonrecurring gains recorded in 2025 related to the sale of b:oost and distributor contractual settlements. While we recognize the near-term complexity, we believe the actions we are taking are necessary to build a more effective commercial platform positioning us for improved performance in 2027 and beyond.

I will now turn the call back to the operator for questions-and-answer session.

[Operator Instructions]

Our first question comes from the line of Lucas Mussi.

I have one on margin performance this quarter. Gross margin was up about 100 bps year-over-year. And as you mentioned, Rodrigo, on your remarks, it was still heavily impacted by FX dynamics in the quarter, geographical mix. So I wanted to see if you could share more details on the drivers behind the quarter. That would be my first question. So how much could we think about as it pertains to agave contributing to your margin on a year-over-year basis? How much came from headwinds related to FX? So any color on that front would be welcomed.

And my second question still on margin is how to think about 2026 from your main drivers, mainly raw material related. As we think about agave, how you're thinking about the spot price in the market today? Has it been stable throughout the year? Do you see -- do you still see more downside to market prices? So any color on how you're thinking about your raw materials into 2026 would also be very helpful?

Thank you, Lucas, for the question. From a gross margin perspective, which was your focus, what I can share is that foreign exchange was a drag in terms of our ability to expand further by 170 basis points. So pretty much all components of gross margin equation worked favorably, the most important driver being the agave input costs which continue to be favorable to us, plus the productivity initiatives that I did mention on my script. So other than FX, the gross margin expansion could have been 280 basis points in the quarter.

And looking forward, at this point in time, we don't expect major changes to this environment. Obviously, we rely on volatility from FX, which could continue to play a role.

Our next question comes from the line of Nadine Sarwat.

This is Nadine Sarwat from Bernstein. Two questions from me. The first on your guidance, you talked about this being a transition year to set up your business for the future. So related to that, can you unpack that transition that you referred to? How much of that is a weak macro versus deliberate strategy. And then if we look beyond 2026, are you expecting to return to solid growth?

And then just one additional shorter-term question. In the Nielsen data over the last couple of weeks, we've been seeing an underlying improvement in the U.S. spirits market. Are you seeing that in your business? And if so, what do you think is behind that?

So thank you, Nadine. On your first question, I think the way we see it in -- why we mentioned this is a transition year is mostly related to the realignment of distributor network in the U.S. It's mostly that where we expect conditions in terms of macro, et cetera, to remain challenging. Having said that, I'll pass it along to Mauricio to take you through the transition and expectations for 2026 and beyond.

Nadine, it's Mauricio. From a transition perspective, I would make reference to the distributor changes we're making. So I do believe those changes, even though I have stated during the script will cause short-term disruption, they are definitely setting us for sustainable growth in the future. We are aligning with what we believe are the best distributors in each of the states. So as we go through that transition in H1, I think as we go into the second half of the year and especially into 2027, that should actually be reflected in improved performance in a sustainable way for the future.

Regarding your question on share, we do see it. What I would say is if you could see the second semester of the year in the U.S., tequila started to decelerate even further. One of the things we have remained extremely disciplined is in managing prices. If you look at our average price has decreased a lot less than our competitors, and we continue to invest behind our brands ahead of industry benchmarks.

So I think the combination of 3 things: very disciplined focus on execution, driving investment behind our brands and being able to balance pricing through promotional activity to stay competitive while still not being as aggressive to undermine long-term rapid equity, I think those things combined is what is actually driving our improvement in share in the short term.

Got it. And just to clarify on that medium term looking past 2026, potential to return to growth. I appreciate everything you said on the distributor transitions and distractions this year. But just thinking longer term, you had that slide up that showed your historical growth. So trying to get a sense of what investors can expect after the transition?

So look, from the U.S. perspective, leaving aside the transition in terms of distributors, I think what we will continue to do in 2026 and beyond, we'll continue to invest behind the brands to be perfectly positioned to capture growth as the category returns into growth. We do expect that in 2026, the category will continue to see compression. And what we want to do is make sure we're setting all the fundamentals in place in terms of route-to-market, brand health investment and being very strategic on pricing to actually start capturing, I would say, or disproportionate growth of the industry as it returns into growth, which I do believe we should start to expect happening in 2027.

Our next question comes from the line of Rodrigo Alcantara.

I guess the first one would be -- it's Rodrigo Alcantara at UBS. The first one would be follow-up on the RNDC transition in the U.S. We get this transition period, right? But any rough estimate or any number you can give us in terms of how much volume we're talking about that could be impacted just as a way of trying to quantify this transition period. That would be my first question.

And the other one, if we could reflect a bit on the performance in Mexico, right? I mean you gave the figures there from a sell-in perspective, right? Just judging looking at performance of beer in Mexico in 4Q, it was not that -- the contraction was not as high, right, as what we saw today. So I mean, if you can help me here, understand, reconciliate the difference in the magnitude of contraction of other categories like beer versus the one we saw at spirits in Mexico? Those will be my 2 questions.

Thank you, Rodrigo. On the first question you had in terms of the RNDC transition, I think providing a number would be very difficult to really estimate what the impact from a number perspective would be. All these transitions really have a very short-term impact, that we will manage. We have a PMO -- very disciplined PMO office in place to try to minimize the disruption. We did see, as I mentioned in my script, that because of this lower depletion, especially in RNDC markets at the end of the year, that's where our highest level of inventories were. So we will be working as part of this transition to rebalance that as we go to the new distributors.

So that, combined with a very volatile environment in an industry that continues to actually experiment contraction, it's very difficult to understand or predict what volume impact will be from the transition, industry contraction and competitive dynamics. So for now, what we're focused on is executing this transition in the most disciplined way, making sure that -- and actually, we feel very confident that we have the right distributor in each market. In each of the new distributors, we are, if not the biggest, one of the biggest suppliers there that will guarantee more focus and attention behind our portfolio that gives a lot of confidence that once that transition is behind us, we should start to see improved performance.

Rodrigo, this is Olga. From the Mexico part, regarding the 7.1% decline in Mexico depletions this quarter, I would like to reinforce that we are seeing an improvement in consumer trends. In fact, the industry remains -- while the industry remains in contraction, the pace of decline has moderated significantly compared to 2024. And we continue to gain market share within this context.

But I would like to talk about 2 factors that bridge the gap between the minus 7% and the reality of our business. There are 2 specific factors that accounted for nearly the entire decline. As we finalize the exit of the b:oost brand, we focused on clearing remaining inventory rather than commercial prioritization. These brands decline alone created a 200 basis point drag on our total Mexico depletions.

The second factor is that we are being disciplined in not engaging in value-destroying activities. We intentionally chose not to participate in specific [indiscernible] promotions where we felt discounting in depth compromised our brand equity. This disciplined approach to price integrity impacted our quarterly depletions by almost 500 basis points. So when you strip away these 2 tactical factors, we are effectively flat. So basically, that would be my answer.

That's a good point. So just to clarify, excluding the -- I mean, not participating in [indiscernible] had this 500 basis points impact. Did I get that correct?

Yes, that's correct, Rodrigo.

Our next question comes from the line of Antonio Hernandez.

This is Antonio Hernandez from Actinver. Just wanted to get a sense on nonalcoholic beverages and others that are also declining. Are these following similar trends, a competitive environment? How are you seeing there? And maybe you could provide an outlook on those? And if there are any organic or inorganic opportunities there?

Sorry, Antonio, thank you for your question. If I understood correctly, you're talking about nonalcoholic beverages and how they may be...

Exactly. Yes, how they performed this last quarter and throughout the year underperforming as well and your expectations going forward?

Antonio, this is Brian. So that's probably related to the b:oost brand. That was a significant impact for us in the quarter, and that's within the nonalcoholic beverages part that we report in the press release. That's a big portion of it. So it's probably related to that.

Okay. And going forward, do you expect more stable, of course, excluding that comp from the b:oost brand?

Yes, we do.

Our next question comes from the line of Froylan Mendez.

Froylan Mendez from JPMorgan. On the gross margin effect during the quarter and going forward, I read the transcript from 1 year ago, and we were speaking about positive effect from agave. 2025, you also have positive effect from agave. So it's 1 year with positive effects from agave. Should we assume that the positive impact from lower agave in 2026 should be much lower than what we have seen in the past 2 years given just the lapping of the benefit now that your inventory probably reflects a much lower average cost of agave. That's my first question.

And secondly, can you provide with some directional color on your top line guidance if it is coming from volume drops similar to last year, but with better pricing or the other way around. And within the different regions, which one are the ones growing a little bit better than the other? Which one is dragging? How you created that guidance of low single-digit drop for next year, please?

Thank you, Froylan, for those questions. Regarding your first on gross margin, yes, in fact, we -- since last year, second -- last quarter of last year, we reported benefits on agave. As you see, overall, agave cost continues to benefit result this year. Excluding FX, as I mentioned, it was a significant contributor to positive gross margin expansion.

We don't provide specific guidance on this topic. However, what I can say is that a lot of the -- let's say, extra benefit we've had this year and in particularly Q4, is related to simply higher agave sugar content on agave. And we expect that, that trend should continue going forward. So there is no changes necessarily expected there on agave cost from the market.

And regarding your second question on top line guidance, the guidance, it's a combination, of course, in terms of volume, price mix, et cetera. So the guidance is general. We would like to stick with that guidance as it is because considering the volatility in the environment, we continuously manage those levers to deliver on the low single-digit decline that we announced.

And sorry, my ignorance, but the low -- the higher agave sugar content, does that mean that, I don't know, the crop that you are having from agave, it contains higher sugar and so it will remain -- like you have an inventory with high efficiency for the next year? So how does that work? I'm sorry if this is a stupid question. Just to understand.

Yes, no problem, Froylan. I think what's important to say is that market conditions on agave should remain similar. Internally, we do expect some further pressure on agave cost. As we balance the equation out, we have some, let's say, extraordinary, let's say, benefits this year that may not be replicable next year. So we should not expect, let's say, improvement over this year necessarily. But this is obviously something we manage on a day-to-day basis, and we expect to deliver the best possible results given that the market conditions will be similar.

Our next question comes from the line of Nicolas Rodrigues.

Nicolas Rodrigues from Citibank. My first question is regarding GLP-1. As the adoption continues to expand across key markets such as U.S., have you observed any change in consumption behavior, particularly in tequila. And my second question is about GLP-1 -- not GLP-1, about development in Jalisco. Could you comment how and if these events have any impact on Cuervo operations?

Thank you, Nicolas. It's Mauricio. And I'll take a question on GLP-1. Look, it is very difficult, almost impossible to estimate what an impact on tequila is on GLP-1. We do see evolving consumer trends. I think there's a lot of different things happening in the market at the moment that consumers are looking for different alternatives. We see the emergence of RTD, we see changes in patterns of consumption. So attributing any sort of impact to GLP-1 becomes, I would say, almost impossible. So it's something that we do monitor closely, but at this point, attributing any impact to that is really difficult.

Regarding the incidents in Jalisco, as of today, we have not seen any impact in our operations, and we don't foresee that happening. .

[Operator Instructions]

We have not received any further questions at this point. So that concludes today's call. You may now disconnect.

Good morning, and thank you for joining Becle's Third Quarter Unaudited Financial Results Call. During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases such as anticipate, believe, could, estimate, expect, intend and similar terms and phrases and may include references to assumptions.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements.

Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards, or IFRS, and published in the Mexican Stock Exchange. The information for the third quarter of 2025 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in appropriate electronic formats.

[Operator Instructions] Now I will pass the call on to Becle's CEO, Mr. Juan Domingo Beckmann.

Good morning, everyone, and thank you for joining us today as we discuss Becle's third quarter 2025 results. In a challenging environment, we continue to strengthen our position in key markets, supported by the consistent execution of our strategic initiatives and the strength of our brand portfolio.

Consolidated volumes increased by 3.7%, mainly driven by a 5.2% growth in our spirits portfolio. In the U.S. and Canada, Tequila remained the main growth driver, and we continue to protect long-term brand equity while prioritizing premiumization.

In Mexico, our core categories continue to gain momentum, and we consistently outperformed the market, gaining share across most segments. Finally, EMEA and APAC delivered double-digit growth, supported by strong execution and healthy inventory levels.

On profitability, our gross margin expanded by 300 basis points, reaching 56.1%, mainly reflecting our lower input costs and operating efficiencies. Additionally, EBITDA for the quarter reached MXN 3.5 billion, marking a 63.3% increase year-over-year.

As we approach year-end, our priority remains balancing shipments and depletions while continuing to execute our premiumization strategy across all regions. I'm confident in our ability to close the year strongly and position ourselves for sustained growth in 2026.

Thank you. With that, I'll turn it over to Mauricio Vergara to discuss our U.S. and Canada results.

Thank you, Juan, and good morning, everyone. Please note that [indiscernible].

During the third quarter, the U.S. and Canada region continued to face a complex and highly competitive market environment, characterized by persistent pricing pressures, cautious consumer spending and evolving category dynamics. Despite these challenges, our team remained focused on disciplined execution.

Net sales value declined 10.3% compared to the same period of last year, reflecting a 6.4% decrease in shipments and a 4.4% decline in depletions. This result was mainly driven by continued softness in our Ready-to-Serve portfolio and retail boycotts in Canada, which resulted in approximately 120,000 cases in lower shipments.

Encouragingly, our full-strength spirits portfolio outperformed the region's overall trend, led by stronger performance in high-end tequilas, which continue to drive premiumization across our mix.

In terms of consumer takeaway, our performance was in line with the overall market. According to Nielsen 13-week data through September 27, our spirits portfolio, excluding prepared cocktails, declined 3.5% compared to a 3.4% decrease of the total industry. Meanwhile, C-stores, which provides one of the most comprehensive views of the industry performance, shows that Proximo outperformed the broader industry within full-strength spirits, including the Tequila category, over the 3-month period ending in August.

Our prepared cocktails portfolio continued to weigh on consolidated shipments, largely due to softness in our large-format Ready-to-Serve offerings. But in contrast, our ready-to-drink cans gained momentum versus the first half of the year, signaling a positive turnaround as we align our portfolio with evolving consumer dynamics.

Within Tequila, we continue to observe intensified industry-wide pricing competition. Average tequila pricing in the market declined 7.9% versus last year as leading competitors implemented material negative price adjustments. In this environment, we have remained disciplined, focused on selective strategic promotions while maintaining an overall responsible pricing approach.

Notably, small format offerings of our super-premium and ultra-premium brands continue to outperform, underscoring that consumers are seeking high-quality products while managing their spending. Our strategy to strengthen the on-premise continues to deliver results. On-premise shipments outpaced the off-premise, driven by initiatives that enhance brand visibility and consumer reach.

Looking ahead, we anticipate improving long-term fundamentals in the U.S. spirits market, particularly within our focus categories. Premiumization continues to drive growth in Tequila, where demand for authentic high-quality brands remain robust.

I will now turn the call over to Olga Limon to discuss the results for Mexico and Latin America.

Thank you, Mauricio, and good morning, everyone. In a challenging industry landscape, Mexico posted solid third quarter results. Even with constrained consumer demand, we outperformed in our key categories and continue to improve our leadership position.

Net sales value increased 24.3% in the quarter, primarily driven by an increase in volume. This was further supported by a favorable product and channel mix as high-end Tequila outperformed the rest of the portfolio.

Shipments in the quarter increased 18.3% year-over-year, driven by market share gains and an easy comparison against last year. As you recall, 2024 was a typical year marked by strong industry destocking. Compared to the third quarter of 2023, shipments grew 1%, demonstrating that we have returned to premarket contraction shipment levels, and we have done so with a normalized inventory position. Overall, inventory levels remain healthy and well balanced across channels as we head into the year-end.

Our brands continue to gain market share in Mexico, reinforcing our leadership in both Tequila category and the broader spirits industry. According to [ Nielsen ], we grew in value 3.4% year-to-date compared to flat performance for the overall industry, while our volume rose 3.4% versus a 1.1% industry decline. These results underscore the strength and consumer appeal of our brands in the Mexican market.

During the quarter, we took a strategic step to further optimize our portfolio with the sale of Boost, reinforcing our commitment to focus on our core spirits business. The fourth quarter of 2025 will serve as a transition period, during which we will continue to operate the brand in close collaboration with the buyer to ensure business continuity.

As of January 1, 2026, Boost will no longer be consolidated in our financial statements. For reference, in 2024, Boost sold 938,000 9-liter cases, representing 3.7% of our consolidated volume and therefore, will impact our volume comparables in 2026.

In Latin America, performance was strong, with shipments and net sales both increasing. We also achieved a double-digit increase in net sales value per case, reflecting the successful execution of our premiumization strategy. Despite persistent macroeconomic uncertainty, underlying trends continue to improve across the region, and we remain focused on disciplined pricing, protecting profitability and reinforcing our leadership position.

I will now turn the call over to Shane Hoyne, Managing Director of the EMEA and APAC region. Thank you.

Thank you, Olga, and good morning, everyone. During the third quarter, we operated in a volatile trading environment influenced by macroeconomic uncertainty, aggressive competitive pricing and continued cost-of-living pressures. These factors led distributors to manage inventories cautiously.

Even in this context, our premium spirits portfolio delivered solid results, driven by robust growth in super premium tequilas across key Asian markets and emerging EMEA countries.

Shipments in EMEA and APAC increased 11% in the quarter. Asia remained a key growth engine, achieving double-digit growth in both shipments and depletions. Tequila remained our primary growth driver across the region with shipments up 20% year-over-year and super-premium tequila shipments accelerating 38%. These results demonstrate the strength of our premiumization strategy and the growing global appeal of our brands.

Looking ahead, the fourth quarter will be a pivotal trading period. Through effective commercial execution and agile decision-making, we expect to maintain momentum in the EMEA and APAC region, backed by the strength of our portfolio and our disciplined focus on premiumization. We believe we are well positioned to deliver sustainable growth across the region.

I will now hand over to Rodrigo, who will take you through the financial results.

Thank you, Shane, and good morning, everyone. I will now walk you through the financial results for the third quarter of 2025.

The company reported a 3.7% increase in volume, driven primarily by a 5.2% growth in our spirits portfolio, marking our first quarter of volume recovery since Q1 '23. Consolidated net sales were flat at MXN 10.9 billion, reflecting the continued impact of price normalization, geographic mix dynamics and unfavorable FX.

This quarter marks our seventh consecutive period of year-over-year gross margin expansion, a significant achievement despite unfavorable regional mix and despite the appreciation of the Mexican peso, which represented a modest drag on margins. Despite these headwinds, we continue to benefit from lower agave-related input costs and ongoing cost efficiencies from strategic sourcing and manufacturing operations, resulting on a gross margin of 56.1%, an expansion of 300 basis points.

A&P expenses declined year-over-year, reflecting our focus on strategic brand prioritization and disciplined resource allocation amid moderate demand. SG&A expenses also decreased as a percentage of sales as productivity gains and tighter cost controls more than offset inflationary pressures.

EBITDA increased 63.3% year-over-year to MXN 3.5 billion, while the EBITDA margin expanded to 31.7%. This increase reflects both strong organic performance across the business and inorganic contributions.

Turning to the financial results. We recorded a favorable swing of MXN 3 billion in the quarter, primarily driven by a MXN 2.5 billion gain from asset divestitures as well as MXN 188 million year-over-year foreign exchange gain, as the appreciation of the Mexican peso positively impacted our net U.S. dollar debt exposure. As a result, net income grew at triple-digit rate year-over-year, reaching MXN 4.1 billion.

From a cash flow perspective, the company generated MXN 3.3 billion in net cash from operating activities, primarily reflecting strong profitability. Our cash balance increased MXN 5.1 billion relative to the end of the second quarter, mainly due to proceeds from the portfolio optimization activities.

Our capital allocation approach remains consistent and disciplined. Every decision aims to support long-term value creation and sustainable growth. Our top priority continues to be investing in organic growth through brand prioritization, targeted A&P spending, innovation and R&D to ensure the continued strength and resilience of our portfolio.

At the same time, we remain disciplined in managing our portfolio, acting decisively when brands no longer fit our strategic direction. The recent divestment of the Boost brand is a clear example of this, an action aligned with our ongoing efforts to sharpen our portfolio and exit noncore assets.

Looking ahead, we will continue to explore value-creating investment opportunities, being mindful that our portfolio is unique and any acquisitions must be both strategic and accretive to the business.

The following chart shows how our company is delivering on CapEx efficiency. The business is generating more EBITDA while requiring less CapEx to do so, demonstrating the success of our efficiency initiatives and our progress towards a more asset-light value-accretive operating model.

Finally, our lease adjusted net debt-to-EBITDA ratio improved to 1.0x from 1.7x in the previous quarter, underscoring the strength of our balance sheet and our capacity to create long-term value. Overall, the step-up in underlying operating profit was the main driver behind a 160 basis points increase in ROIC compared to the same period last year.

With that, I will now turn the call back to the operator for the questions-and-answer session. Thank you.

[Operator Instructions] Our first question comes from the line of Ricardo Alves.

Ricardo Alves from Morgan Stanley. Impressive numbers. I had a couple of questions on the main positive surprise to us came on the gross margin, the 56% number in the third quarter, certainly very impressive.

Is it possible to go a little deeper or to quantify any agave impact or raw materials in general that boosted your margin for the third quarter? Any color that you could share? Even if qualitative, in terms of how you're cycling the inventory of raw materials in the portfolio that you're selling today, that would be helpful.

We've been talking about going back to that 60% gross margin or so for many years now, and it seems that we are approaching that. So any qualitative or if you're able to quantify in a way how you're cycling through the inventory of agave finished products? I think it would be helpful for us to have a better idea of how your profitability could shape up in 2026. That would be my first question.

The second question, really impressive numbers in Mexico and Rest of the World. So I think that we have less concerns there. But I think that the U.S., I believe that one of the comments that you made is that the competition remains tougher in that market. So I wanted to focus on that market.

We noticed that your unit revenue on a U.S. dollar terms was down, I believe, 5% in U.S. dollar. And we also assume that your product mix continues to improve in the U.S. So that would imply that there seems to be some discount activity on the spirits category.

I just want to pick your brains on that to see if indeed, you're still seeing your competitors more aggressive in pricing. And if there is a light at the end of the tunnel here, maybe things are looking better as we go into the fourth quarter and shipments and depletions could be more aligned. So just trying to see if we are closer to a stabilization of the U.S. market.

Thank you, Ricardo. This is Rodrigo. I will take the first question.

In fact, yes, we're satisfied with the progress on gross margin. So far, we continue to cycle all the inventory, as you correctly mentioned. And I want to highlight that most of the benefit on gross margin is coming actually from agave-related input, everything that happens there in terms of the agave, the yields and also the manufacturing efficiencies that have been implemented through manufacturing investments. And so the main driver is that.

On the contrary, we have, at least in this quarter, an unfavorable Mexico peso impact, driven by the appreciation of the peso, also mix -- unfavorable mix dynamics overall, given the U.S. results as a percentage of the total portfolio, plus, as you mentioned, the heightened promotional activity resulting in a lower price per case. Overall, that's what's driving the gross margin, which stands at 56%, which is quite positive.

On your second question, Ricardo, this is Mauricio. You're right. The market continues to be extremely competitive. If you look at total Tequila, the overall pricing is down by almost 8%. So what we -- the approach we have had has been to actually indeed have some targeted promotional activity to remain competitive and protect our share in the marketplace, but without chasing competition.

So our focus continues to be protecting our competitive position in the marketplace whilst protecting the brand equity for the long term. So we will refrain from chasing competition on the downside. We need to remain competitive, but our focus is really long-term equity growth in what I think will continue to be for the next year or so, a very competitive market environment.

That's helpful, Mauricio. Do you see any early indications that maybe the market is going to become more rational anytime soon? Or maybe the trends that we saw in the third quarter did remain the same into the fourth quarter?

Look, based on what we're looking at all the data sources and for me, the most comprehensive one is [ DeepSource ], what we're seeing is a projection of next year of the market of our potentially continue to decline at a rate of 4.5%.

So with that projection of the market, I would expect the market to remain extremely competitive as everyone will be focused on share. So I don't see the current dynamics changing at least for the next 18 months.

Our next question comes from the line of Nadine Sarwat.

This is Nadine Sarwat from Bernstein. Two for me, please. First, sticking to the U.S. on RTDs, I know that continues to be the main drag. It's been the case for quite some time. Although I believe in your prepared remarks, you did call out better momentum as you've adjusted your strategy.

Could you please flash that out, what is this current strategy when it comes to the subsegment over the coming quarters? And what are you expecting the performance to be there?

And then a second question, I appreciate the clarification of calling out Mexico shipments versus 2023. Could you just confirm or clarify that depletion number for Mexico so that we ensure we get the full picture?

Thank you, Nadine. So in terms of your first question, this is Mauricio, on the U.S. RTDs, as I mentioned during the call, what continues to be a drag on our performance in [ RTS ], so which is the large formats, and that -- if you look at the marketplace, that continues to trend down as consumers are shifting to cans or RTDs. So when we talk about RTDs, we're talking mainly about cans.

So what we are doing is changing and adjusting our portfolio with a lot of focus in RTDs, both in terms of execution format configuration, driving increased penetration across different channels. And we saw actually a big shift in the last quarter. We're showing growth of around 30% versus last year in our cans.

So as we go forward, we will continue to drive not only execution, but also you would see innovation coming from us in that space, which is just pretty much adapting our portfolio to the evolving consumer needs.

As for the Mexico question, as we have already talked about, we had an easier comparable base in terms of shipments in the third quarter. So it's more meaningful to look at the year-to-date performance. In the year-to-date performance, where shipments are and depletions are broadly in line, we are up 4.7% year-to-date in shipments versus 2.5%, respectively, in depletions. So I hope that answer your question.

Perfect. And then could you just remind us your split for -- of your RTD segment? I guess, how much is that large format versus RTS versus the cans, now that you've been implementing these changes?

So still from a mix perspective, we still hold a large part of our mix in RTS, but our focus will then to continue to increase the mix now on RTD. So for now, our mix continues to be larger on RTS. We feel that the market will continue to evolve within the cans. And therefore, you would see in the future, our mix of RTDs/cans continue to increase relative to the large format.

Our next question comes from the line of Froylan Mendez.

Froylan Mendez from JPMorgan. A couple of questions. First, on a follow-up on the gross margin. Just trying to understand how sustainable is this margin gain from agave? Because if we look back in the previous quarters, it has been very volatile, let's say, the margin dynamic into the third quarter, I would have expected more of a headwind from FX, which was clearly offset by the agave.

But is there any reason why the fourth quarter shouldn't be at least this 300 basis points gross margin expansion if similar volume conditions remain into the quarter? Or what are we missing to understand the gross margin dynamics into the fourth quarter into 2026?

And secondly, into Mexico, I mean, it's very impressive to see the performance, given the weak economic backdrop in general in Mexico. Do you see any difference in the consumer behavior in Mexico versus what we see in the U.S. in terms of consumption per capita? Or what is driving this recovery in volumes in Mexico? Those two questions.

Thank you, Froylan. I'll take the first question regarding the gross margin expectation.

We will be facing a much more unfavorable situation from an FX perspective in the short term. Q4 comparable relative to last Q4 is going to be unfavorable as exchange rate was 20.1% on average.

Other than FX, which could impact negatively the gross margin in Q4, we don't see any meaningful trend, changes regarding cost components. So besides that, that's the only impact that we, at this point, would be concerned about.

As for Mexico, we continue to see a volatile and challenging market environment and a very cautious consumer. We continue to see a contraction, but the good news is contraction at a slower rate. And also the good news is Tequila remains one of the few categories that is growing, and we are actually outperforming the industry within it. So that's what I can tell you.

If I may just follow up, Rodrigo. So can I understand that the inventory that you are passing through the P&L is now at, let's say, a much lower cost versus what we have been seeing in most of the first half of 2025 and second half of 2024, so we are facing a real advantage on the cost side on agave from this point onwards?

Yes. I think that sounds right, Froylan.

Our next question comes from the line of Antonio Hernandez.

This is Antonio from Actinver. Just wanted to see if you can provide more color on the lower A&P expenses as a percentage of sales, if this at all, maybe this is impacting maybe sales performance? And in which regions are you mostly lowering this expense? And what are your expectations going forward?

Of course, Antonio. I'll take the question first. So A&P investment as a percentage of NSV is simply reflecting the more, let's say, some efforts in terms of efficiency on how we spend the A&P. But definitely, that's not a driver that we perceive is impacting top line performance in any of the regions.

Okay. And these efficiencies are all over the place, I mean, in all the regions?

Yes.

Our next question comes from the line of Ben Theurer.

This is Ben Theurer from Barclays. So I wanted to just understand a little bit and ask if there's more something in the pipeline. I mean, you've been divesting some of these like smaller noncore things. We've seen the Boost divestment. We have the Lalo brand this quarter. And we've seen this in the past by kind of like this review of the portfolio.

So I just wanted to understand, as you look at the current portfolio in different regions, et cetera, specifically considering some of the softness also in RTD in the U.S., are there other things that you would consider as an asset for sale or like kind of like a noncore to kind of like really be able to focus and concentrate on the key things within Tequila, other tequilas and those other spirits that have been driving growth and have been doing better?

Yes. We -- this is Juan Domingo. Yes, we are continuing analyzing our portfolio and -- to see which brands should we invest more and which less and which brands so we can dispose. So yes, probably there will be more.

Okay. And then I have one follow-up. Just as we look into the dynamics of spending on A&P over the last couple of quarters, it's clearly been, I would say, on the softer side. So as you look ahead, do you think this is a new level and new balance? Or as volume picks up and some of the momentum comes back up as we think into 2026 that you're probably going to be as well a little more on the upper end of what your usual guidance is for A&P?

So this is Mauricio. So for the U.S., what we've been working on is a very disciplined approach to return on investment, making sure that we're understanding more and more what are the activities that are actually having the best impact in the marketplace.

We continue to spend ahead of industry standards. So I think that we're actually in a very healthy level of spend, and our focus is more on understanding where can we put the dollars that will have the maximum return so we can drive efficiencies without compromising our -- how we compete in the marketplace.

We have not received any further questions at this point. That concludes today's call. You may now disconnect.

Good morning, and thank you for joining Becle's Second Quarter Unaudited Financial Results Call. During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, and similar terms and phrases and may include references to assumptions.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements.

Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards, or IFRS, and published in the Mexican Stock Exchange. The information for the second quarter of 2025 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. [Operator Instructions] Now I will pass the call on to Becle's CEO, Mr. Juan Domingo Beckmann.

Good morning, everyone, and thank you for joining us today as we discuss Becle's Second Quarter 2025 Results. The Global Spirits landscape remained challenging throughout the first half of the year despite a more cautious consumer and volatile competitive landscape. The resilience of our core categories, particularly premium Tequila reinforces our confidence in the fundamental strength of our segment and our portfolio. Encouraging early signs of recovery in key markets alongside sustained demand for high-quality authentic brands support a more constructive outlook ahead.

During the quarter, we delivered EBITDA margin expansion and healthy cash generation. While gross margin growth was modest, this reflected the impact of regional mix shifts within a changing market context. Overall, our financial performance puts us in a strong position to continue advancing our strategic agenda. As we move through the second half of the year, our focus remains on accelerating the U.S. region, capitalizing positive trends seen in Mexico and rebalancing shipments and depletions in rest of the world, while protecting brand equity and building towards sustainable profitable growth.

Before I close, I'd like to extend a warm welcome to Mauricio Vergara, our new Managing Director for Proximo U.S. and Canada. I'll now hand it over to him to share more detail on performance in that region.

Thank you, Juan, and good morning, everyone. It is an honor to address you today as the newly appointed Managing Director for Proximo in the U.S. and Canada. Please note that the figures discussed in today's remarks are presented on a constant currency basis. In the second quarter, operations in the United States and Canada faced a complex and competitive environment, characterized by softer consumer demand in several categories and heightened pricing pressures. Despite these challenges, our core portfolio remained resilient with Tequila performing particularly well as small formats gaining momentum.

Net sales value declined 9.9% compared to the same period in 2024, primarily due to a 7.1% decrease in shipments. This reflects continued softness in our RTD category and increased pricing pressures across key categories. Shipments were further impacted by external retail limitations in Canada affecting select U.S.-made products. However, a favorable product mix led by Tequila and Whiskey helped partially offset the impact on net sales value. Depletions decreased by 9.3%, remaining relatively aligned with shipments following our efforts to optimize inventory levels.

In terms of consumer takeaway, our performance remained stable across key segments. According to the last 13-week Nielsen data ending in June 28, our spirits portfolio, excluding prepared cocktails, declined by 0.9%, outperforming the total industry, which saw a 2.5% decrease. Our total Tequila business grew by 0.6%, further confirming its importance as a key driver for growth. We're also closely monitoring external factors, including inflation and trade policy.

To date, no significant material regulatory changes have occurred and trade between the U.S. and Mexico remained stable under the current frameworks. Looking ahead, we expect near-term volatility to persist in the U.S. and Canada as the industry adjusts to ongoing challenges. That said, we remain focused on driving performance in our core categories, advancing premiumization and responding decisively to evolving consumer behavior. We are confident in our strategy, our brands, and our team's ability to adapt to market dynamics while strengthening our leadership and delivering sustainable long-term growth. I will now turn the call over to Olga Limon Montano to discuss the results for Mexico and Latin America.

Thank you, Mauricio, and good morning, everyone. In a challenging industry landscape, Mexico posted solid second quarter results. Even with constrained consumer demand, we outperformed our key categories and continue to improve our leadership position. Net sales value grew 4.8% in the quarter, primarily driven by an increase in volume. Growth was strongest among our more accessible brands, while premium offerings also performed well, underscoring the overall resilience of our portfolio.

Shipments increased 7.1% year-over-year with depletions up 7.3%, reflecting improved alignment and healthier inventory levels across both retail and wholesale channels. After several quarters impacted by destocking, these results reflect a positive shift, positioning us well as we enter the second half of the year. That said, underlying market conditions remain challenging with inflation, economic uncertainty and insecurity impacting consumer behavior. We are closely monitoring the environment and remain focused on disciplined pricing and consistent execution to preserve our long-term brand equity and market leadership.

According to [ Nielson ] data through May, Tequila remains the most resilient category within the spirits industry. We outperformed the total spirits market and the Tequila segment in both volume and value, resulting in additional market share gains and further consolidation of our market leadership. In Latin America, we continue to see encouraging signs of stabilization. Shipments increased modestly, while net sales grew at a high double-digit pace, driven by a more favorable regional mix, normalized inventory levels and FX tailwinds. Still, we remain cautious given ongoing macroeconomic and political volatility across the region.

As we enter the second half of the year, healthier trends across key sales channels are encouraging and may support future growth, although we're staying alert to broader market risks. Our priorities are clear: to protect market share, adapt evolving consumer trends, and market conditions. I will now turn the call over to Shane Hoyne, Managing Director of the EMEA and APAC region. Thank you.

Thank you, Olga, and good morning, everyone. During the first half of 2025, EMEA and APAC faced a complex and uneven trading environment shaped by ongoing macroeconomic pressures and continued inventory adjustments. That said, consumer demand for premium spirits remains resilient. Depletions across EMEA and APAC grew 2% year-over-year, while shipments declined minus 13%, mainly due to timing differences in order placements and deliveries in Asia as well as ongoing efforts by third-party distributors to reduce inventory and optimize working capital management.

On a reported basis, net sales value increased by 1.1% compared to the prior year. This was primarily attributed to currency translation effects, partially offset by lower shipments, some destocking and increased promotional and marketing activity, particularly in EMEA. In EMEA, consumer sentiment remained cautious amid persistent cost of living pressures, which weighed on demand in the on-trade channel. The region also experienced aggressive pricing and elevated promotional activity. Despite these challenges, depletions for the first half of the year increased 1.5%. APAC faced a challenging first half, reflecting ongoing macroeconomic uncertainty and temporary disruptions in selected markets. That said, shipments began to recover in Asian markets by late June, and we continue to see this improvement trend to continue.

In the second half of the year, year-to-date depletions in Asia increased by 14%, driven by strong growth in premium categories and resilient underlying consumption across key markets. As we enter the second half of the year, we remain focused on disciplined execution and agile decision-making in the face of evolving consumer and macroeconomic dynamics. We anticipate sustained growth in Asia, gradual stabilization in Europe and emerging opportunities in Africa and the Middle East. Backed by the strength of our portfolio and premiumization strategy, we believe we are well-positioned to drive sustainable growth across the region. I'll pass it over now to Rodrigo, who will take you through the financial results.

Thank you, Shane, and good morning, everyone. I will now walk you through the financial results for the second quarter of 2025. Despite a complex industry environment, the company reported a 2.8% increase in consolidated net sales reaching MXN 11.5 billion. This growth was primarily driven by favorable foreign exchange effects and continued progress on our premiumization strategy. This marks the sixth consecutive quarter year-over-year gross margin expansion. We continued to benefit from lower Agave-related input costs, the gradual sell-through of older higher cost inventory and ongoing cost efficiencies stemming from improvements in strategic sourcing and manufacturing operations.

Foreign exchange tailwinds also contributed positively. That said, gross margin expansion this quarter was partially offset by unfavorable regional mix with Mexico posting the strongest performance. Below the gross profit line, EBITDA for the quarter grew 16.7%, reaching MXN 2.7 billion. EBITDA margin expanded by 270 basis points to 23.4%. AMP expenses declined year-over-year, underscoring our strategic prioritization and disciplined resource allocation amid moderate demand. Meanwhile, distribution and SG&A expenses increased as a percentage of sales, primarily due to the U.S. dollar-denominated nature and related FX impacts. However, in constant currency, these costs remained broadly in line with prior year.

The financing result recorded favorable swing of MXN 1.7 billion in the second quarter of 2025. The appreciation of the Mexican peso during the quarter generated a non-cash foreign exchange gain tied to our net U.S. dollar cash position. Consequently, net income grew at a triple-digit rate year-over-year, reaching MXN 2 billion.

From a cash flow perspective, the company generated MXN 1.7 billion in net cash from operating activities, primarily driven by strong profits and continued progress in inventory rightsizing. Our cash balance declined relative to the end of the first quarter, reflecting two deliberate capital allocation decisions. First, we brought forward our annual dividend payment from August to May and increased the payout ratio. Second, we chose to retire $153 million in maturing senior notes using cash on hand rather than refinancing. These actions reflect our ongoing commitment to returning excess capital to shareholders while preserving financial strength and flexibility.

As a result, our lease adjusted net debt ratio improved to 1.7x from 1.9x in Q1, underscoring the strength of our balance sheet and positioning us well for sustained long-term value creation. Overall, despite continuous industry headwinds, we reported solid financial results for the quarter. Net sales increased, gross and EBITDA margins expanded and our ROIC improved by 130 basis points versus the same period of the previous year. Looking ahead, we reaffirm our full year guidance. With that, I will now turn the call back to the operator for the Q&A session.

[Operator Instructions] Our first question comes from the line of Ricardo Alves.

As the operator said, Ricardo Alves, speaking from Morgan Stanley. A couple of questions. On the gross margin, the 80 bps expansion year-over-year, I think that you alluded to the fact that the expansion slowed down. Could you break that down into -- in terms of how much of that was still driven by Agave? And then on the flip side, how much of a headwind the stronger peso and the fact that the Mexico operation being bigger this quarter, how much of a headwind those components were? That's the first part of the question. The second part, when we look into the second half, still on the gross margin, we are anticipating a significant acceleration of margin expansion.

I wanted to see if you would agree with that assessment given that there has been a lot of volatility in terms of key drivers for your margin, the Mexico peso, of course, the Mexico operations rebounding faster than expected and at the same time, lower pricing in the U.S. And on the flip side, you still have the benefits of Agave. So when we look into the second half after what we saw in the latest quarter, there's a lot of moving parts. Some of them are positive. Some of them are potentially more negative for the margin. I just wanted to see how you are weighing everything together. So that's my first question.

My second question, perhaps to Mauricio on the U.S. side. We noticed the unit revenue in dollar terms down 4%. And at the same time, if I'm not mistaken, I think that your mix actually -- I would assume it improved. I know there is no breakdown between the different countries, but I would assume that given that RTD and non-alcoholic came down a lot, I would assume that the mix is actually positive. So I'm curious to hear your thoughts on the competition. I know the competitive environment is tough, but how are you positioning your own brands in that environment, particularly 1800 and Jose Cuervo special. So just an update on the competitive environment. I know that there are some local U.S.-based brands that are playing an aggressive group game, but I'm more interested on how you are positioning your own brands. Again, congrats on the numbers, and I appreciate the opportunity, everybody.

Of course, Ricardo, thank you so much for the questions. First of all, just to clarify, relative to last quarter, 600 basis points gross margin expansion. It's important to mention that it's challenging to look at margins on a sequential basis as quarters have different dynamics, and product mix and geographic mix usually changes. And on top of that, last quarter, we were overlapping a tougher, let's say, comparison. So we had -- in the first quarter of '24, we had a relatively lower margin, and that also drove part of the expansion. Having said that, yes, I mean, we continue to benefit from lower Agave input-related costs on our gross margin. Importantly, not only price, but also sugar content has been positive, and we expect it to remain positive in the balance of the year. That's the first comment.

Second, we do have continued favorable tailwinds from our product mix as a direct result of our premiumization strategy, which continues to perform well. And third, while we continue to benefit from the Mexican peso depreciation, in other words, FX benefits are reflected in our gross margin. This benefit was actually lower relative to the Q1. So it is important to have that in mind. But in terms of impacts, in addition to the FX, as it was mentioned before, we did face unfavorable geographic mix this quarter, in particular, with lower-margin region like Mexico outperforming the U.S. and the rest of the world.

And finally, yes, we heightened by -- we had heightened promotional activity resulting in lower price per case, which actually did affect our gross margin, especially in the U.S. And this is a result of the competitive pricing dynamics happening in the marketplace, which I'm sure Mauricio will touch on the second question. And to your second point, yes, there are many balancing acts that we are facing -- having to face to manage profitability. At this point, I would say most of these variables continue to be with some level of uncertainty, but we do expect continued solid margin expansion going forward in the year. So we should be in a similar situation versus what you're seeing in Q2. So with that, Ricardo, I will pass the microphone to Mauricio for the second question.

Thank you, Ricardo, for your question. As you said, we're facing very aggressive competitive pricing in the category in the United States. The average pricing of total Tequila in the market is down almost 9%, what we're doing is we're taking very measured and strategic promotional actions to remain competitive and protect our position in the market. But however, our objective is not to reposition the pricing of our brands because what we're trying to do is stay very committed to the position and where they stand versus our competition to protect equity for the long term. So we will continue to take -- just to remain competitive through that promotional activity, but our real strategy is to remain protecting that brand equity as the market stabilizes into the future.

Our next question comes from the line of Froylan Mendez.

Froylan Mendez from JPMorgan. I was wondering if you could give some color on the regional evolution of the gross margin into probably the first half. We know that last year, we saw a very strong improvement in Mexico's gross margin. It's causing a dilutive effect just on the mix. But if we were to look at first half evolution of gross margin in Mexico, in the U.S. and in the rest of the world, has that continued to be a positive trend on an individual regional basis? And just to -- and secondly, just to clarify the comment on having a similar situation in the second half on gross margin as what we saw in the second quarter, what you mean is that we're going to see margin expansion around 80 to 100 basis points into the second half rather than the more than 300 basis points that we saw in the recent past?

Yes. Thank you for the questions. Yes, gross margin on a region-by-region basis continues to improve based on the drivers that I explained earlier. So definitely, we do have higher NSV per case in the U.S. and rest of the world relative to Mexico. So most of the downside when we refer to unfavorable geographical mix is driven by the fact that Mexico played a more important role on the mix in this particular quarter. Having said that, we don't -- this is more of a short term, I would say, dynamic. We don't expect this to continue. In other words, if you -- we're assuming going back to the normal mix. And in addition to that, as you know, international markets provide also the benefit of the FX translation, which we expect to continue to benefit from in the balance of the year.

So -- and based on my previous comment, just to mention, this -- all these variables will continue to play out on our gross margin outlook for the balance of year. But most importantly, long term, we continue to expect more than gross margin only EBITDA margin expansion following our premiumization strategy, which continues to have a positive impact on our results. We do continue to foresee low Agave input costs going forward. We pursue as well operating efficiencies across the value chain. And we're making cautious and thoughtful decisions in terms of capital allocation throughout the P&L. So -- and of course, as we expect volumes to perform better going forward, we would be benefiting from increasing volume leverage in our margins. So there's no reason why we think we should think that this dynamic would change going forward.

One follow-up more on Mexico. Could you just try to explain what was the positive calendar effect into the volumes into this quarter? So if the calendar effect hadn't been there, how much would the normalized volume had been? Or what was the impact of the positive calendar effect in Mexico?

Could you repeat the question, please?

Yes. There was a positive calendar effect on Mexico volumes this quarter. Can you help us quantify how much was it? Just to understand how much of this was just the timing of [indiscernible] and everything.

Yes. This is just a phasing effect. It really didn't make a difference in the result. So what -- I think the important thing is we're an important player in the industry that is driving growth. And we have in place strategies that are making this happen. Our challenge is to make sustainability -- to have sustainability in this volatile environment.

Our next question comes from the line of Renata Cabral.

Renata Cabral here from Citi. So my first question is actually a follow-up regarding volumes in Mexico. So for us, it was an absolute highlight here to see this volume. My question is, can you provide some color for us to understand what were the main drivers here? It has to do with promotions or inventory levels with retailers? Anything you can share, it will be really helpful. for us to understand the outlook for the second half of the year.

My second question is more straightforward is related to advertising, market promotions, expenditures. You have the guidance, and we know that it's not 50-50% that you need to spend in first half of the year related to the second half of the year. So my question is precisely to understand if this -- the number should be within the guidance or maybe this year, you decide to spend a little bit less? Just to have an idea of this line, please.

Hi, Renata. As for Mexico, like I said, we are an important player that's driving growth within the industry, and our strategies are making this happen. We have not made any additional pricing movements. We have had some promotions on a per brand basis. And as you have seen and reflected in our results, the overall impact was modest and average price per case declined just 2.2%. So we also have more alignment in terms of shipments and depletions and also destocking. So we're entering in a better position for the second half. So yes, that's what I can tell you.

Hi, Renata. Regarding AMP, we continue to -- we are in Q2, and we continue to expect to be within the guidance that we provided at the beginning of the year, okay?

Okay. Super clear.

Our next question comes from the line of Antonio Hernandez.

This is Antonio Hernandez from Actinver. Just a quick one. Regarding other Tequilas, I mean, this was a category that was able to outperform from a volume perspective, only one with positive performance. How was the pricing strategy or maybe sales mix playing a role here? And how was competition there as well?

In any region in particular, Antonio, or just general consolidated?

General consolidated. And if you have any highlights from a regional perspective, that will be great as well.

Yes. We don't disclose too much regarding brands, Antonio, but what we can say within other Tequilas is that you continue to see our premiumization strategy play out. If you focus on the other two categories like Family Jose Cuervo, Family 1800, those are a little bit more disclosed. But within other Tequilas, we continue to see higher-end Tequilas outperform lower end. And that's driven by smaller format presentations in the U.S., driving higher growth in Reposados, for example, and that's what we continue to see within our markets.

Okay. And from a pricing perspective, should we expect something similar to what you just commented, I mean, throughout the call in terms of the overall expectations in terms of pricing strategy for the rest of the year, same for other Tequilas.

Yes. I would say that in the U.S., we will -- the expectation is to continue to see a very competitive environment. And what we will continue to be doing is take very measured promotional activity just to protect our position in the marketplace, whilst not repositioning the -- where we play with our price to protect long-term brand equity. So that is what we have been doing in the first half of the year that will continue to be our focus for the second half.

Our next question comes from the line of Fernando Olvera.

Can you hear me there?

Perfect.

My first question is related to the gain registered at other income of MXN 130 million this year. If you can give us some color to what is related? And my second question, just curious, can you give us some color about the disruption in Canada and how much of that affected volumes in the U.S. and Canada division?

Of course. Thank you, Fernando. Regarding other income, it did increase in this quarter. It was primarily due to contractual settlements related to U.S. distribution agreements. This include those linked to RNDC's decision to exit the California market. And it is expected that similar benefits will -- may continue in the coming quarters, okay?

Okay. For how long? I mean, only one more quarter or...

We will have similar benefits most likely in the next couple of quarters.

And Fernando, it's Mauricio here. From a Canada perspective, it's very straightforward. The liquor boards in Canada decided to remove all U.S. made spirits from the shelves as a protest for the U.S. tariffs. So that's really what's happening. And in terms of the impact on our side, even though Canada is a relatively small part of our region, it did have a meaningful impact, especially in RTDs, impacting approximately 100,000 cases.

Our next question comes from the line of Felipe Ucros.

A couple of questions on my end. Agave costs have been coming down quite a bit in the spot market for the better part of the last 3 years. But obviously, that takes time to flow through your income statement and through your inventory. So just wondering if you could give us some detail about how that process is going, how far along the process you guys think you are? And also on inventories, but perhaps this question for the rest of the world. Just wondering if you can discuss how far you think you are from a normalized inventory situation here given the comments on the call.

And then the last one on RTDs and NAVs, they've been suffering in the last few years. And I know you guys have been trying some new innovations to try to make an offset on the growth trajectory here. Just wondering if you can give us an update on the performance of innovations there.

Thank you, Felipe. Well, I guess, as you know, we don't disclose too much information regarding specifics on our Agave situation. But as we've mentioned before, we do continue to benefit from the low -- current low environment on Agave prices. And yes, there are inventories which we have to go through. I would say, for the most part, we are on the final stages of that of benefiting from that. But as I mentioned before, there's also improved economics, I guess, from Agave relative to sugar content, which we also are benefiting from and expect to continue doing that in the balance of the year. And for that, I'll pass it on to Shane to answer your question on rest of the world inventories.

Hi, Felipe, it's Shane here. The issue on inventories, it's really an EMEA regional issue as opposed to APAC. In APAC, our inventory management is quite in line with where we needed to be. To answer your question specifically, we are starting to see normalization now, and we expect through quarter 3 for that to kind of fully materialize.

And from my side, Felipe, on the RTD side, the market continues to be extremely competitive and very, very fragmented. So with that in mind, what we're doing is exploring new format sizes, different flavors, just making sure that our offerings truly align with the evolving consumer needs in that space that is really dynamic and evolving significantly. But we believe that with our brand equity and innovation that really aligns to consumer needs, we should be in a good position to scale those new offerings.

Our next question comes from the line of Ulises Argote.

This is Ulises Argote from Santander. I had a follow-up related to AMP. So I wanted to see if you guys could share a bit more color on what kind of investments you are cutting back on? And how do you reconcile this lower AMP? I mean, obviously, it's still in line with the lower part of the guidance, but lower overall versus where we usually see this figure. So how do you reconcile this with kind of the volume growth outlook and expectations you guys have? Obviously, this is a relevant component of this business. So I just wanted to get your thoughts there.

Thank you, Ulises. And as we've mentioned before, I mean, we are within guidance, and we continue to expect to be within guidance for the balance of the year and the full year. So I don't know if there's much more we can mention, except for the fact that, obviously, we're being very disciplined in how we allocate resources given the current market environment.

All right. No. So that part, then probably for the full year, then maybe the expectation is for us to be or to continue being here near this low part of the guidance range. Is that something reasonable to assume?

I think we should assume what I just said, Ulises. So we will stay within the range. And there's obviously some phasing and calendarization, but we're going to be within the guidance that we have provided for the full year.

Our next question comes from the line of Ben Theurer.

This is Rahi on for Ben from Barclays. Just a question for the U.S. With more price pressure that we've been seeing, do you see any overstocking at home for the consumer? If any data points you can point to? Is there any potential for overstocking in Mexico as we also see prices also pressured there?

So thank you for your question, Ben. I think for the U.S., the pricing environment, as I mentioned, will continue to be very, very aggressive and competitive. And we're also experiencing lower disposable income from the consumer perspective. So I don't foresee any overstocking at home from the consumer because of that reason.

As for Mexico, we also don't see an overstocking issue. I don't know if you have any more questions or you want to go deeper on that, but that's basically my answer. There's no problem with that.

Our next question comes from the line of Alejandro Fuchs.

Alejandro Fuchs from Itau BBA. I wanted to make two. If I may -- the first one is on the portfolio of products, right? We're seeing a very healthy balance sheet, as you commented, 1.7x net debt to EBITDA, leverage continues to come down. And we know that there are assets for sale in the market. So maybe how are you thinking about potential inorganic opportunities to maybe continue to strengthen some of the portfolio? Maybe you can tell us a little bit how you feel with the current portfolio. I think that will be very helpful.

We always look at opportunities, and we still have a lot of runway in our actual portfolio. I think we're in the right categories now with a very good portfolio of Tequila and also our Whiskey brands. We believe have a lot of potential still, but we are always looking for premium brands that have potential to be of scale.

And then if I may real quick a follow-up regarding ready-to-drink. We have seen volumes coming down for the last couple of years, right? Do you see a world in where you think that the company leaves a little bit that category and maybe continues to focus, as you pointed out, on Tequila and Whiskey and some of the other parts of the portfolio and see some, let's say, portfolio optimization? Or is this something that you feel strongly about for the medium term? So maybe if you can a little bit elaborate how do you see the ready-to-drink category as a whole going forward?

We will continue to play in that space. It's an evolving space. So as I mentioned, our view actually is how do we align better our portfolio to the evolving consumer needs and strengthen our presence and our offering there.

And bear in mind, Alejandro, just quickly, ready-to-drink continues to be the fastest-growing category out there. And also, it serves as a recruitment for our other Tequila brands. So it's very interesting for us to play within that category. So we're probably going to stay within that and try to stabilize the declines.

Our next question comes from the line of Ricardo Alves.

Ricardo Alves, Morgan Stanley again. Just a final follow-up on my end to Mauricio. So into the U.S., but focusing on volumes because I think it's very clear that the competitive environment remains difficult and you're doing what you have to do to face that. But when you're thinking about volumes specifically for the next couple of quarters, it seems that the inventories are more adequate. The comps for the next couple of quarters are also easier. But I guess that on the flip side, we have this discussion. I don't remember who just mentioned that the [ RNDC ] potential disruption in California. So that could be a headwind into the third quarter and fourth.

So when you put all of that together, how are you thinking about volumes? What are the mitigating measures you're taking to avoid potential distribution disruption in California and so forth. Can you just expand a little bit more in what you're doing at a micro level so that we can think about volumes specifically for the second quarter -- sorry, second half?

Thank you, Ricardo. In the case of California, we have in place a working group that is working very closely with the leadership and the whole team in breakthrough beverage to ensure that, that transition runs in a very smooth way. We don't -- and what we're trying to do is minimize any meaningful impact into our business in California. Beyond California, as you've seen, we have been outperforming the spirits market. So we will continue to make sure that we continue strengthening our presence in Tequila, which is the category that we expect to continue to be outperforming the rest of spirits and making sure that we're not only protecting but continue to strive for share gains in that aspect as the category continues to face challenges.

We have not received any further questions at this point. So that concludes today's call. You may now disconnect.