Sigma Foods, S.A.B. de C.V.

Thank you, Laura. Good afternoon, everyone, and welcome to ALFA’s Fourth Quarter 2021 Earnings Conference Call.

Additional details about our quarterly results can be found in our press release, which was distributed yesterday afternoon together with a summarized presentation. Both are available on our website in the Investor Relations section.

Let me remind you that during this call, we will share forward-looking information and statements, which are based on variables and assumptions that are uncertain at this time. These uncertainties include, but are not limited to, ongoing risks related to the impact of COVID-19.

It is my pleasure to participate in today’s call together with Eduardo Escalante, ALFA’s CFO; Roberto Olivares, Sigma’s CFO, and representatives from each ALFA company. I will now turn the call over to Eduardo.

Thank you, Hernan. Good afternoon, everyone.

I hope you and your loved ones have remained safe and healthy as the world deals with the latest COVID variant. We are pleased that ALFA delivered outstanding results led by solid momentum from Alpek throughout 2021, and Sigma ending the year on a high note.

Fourth quarter and full year revenue both were more than 20% year-over-year. As a result, we exceeded our upwardly revised annual guidance, posting record revenue and the Company’s second best EBITDA.

Strong consolidated results highlight our subsidiaries’ resilience and remarkable capabilities to drive growth in a complex and challenging operating environment. Our capital allocation strategy includes a comprehensive and disciplined approach to balance deleveraging, investing for growth and returning value to our shareholders.

Capital expenditures amounted to $527 million in 2021 an increase of 32% over the prior year as the subsidiaries resumed investing in businesses following a pause brought about by the onset of COVID-19. During 2021, ALFA paid dividends totaling 124 million.

Moreover, the Company repurchased 3.5 million shares and canceled 145.9 million shares held at treasury, equivalent to [2.9 million] shares outstanding at the time. In addition to better-than-expected financial performance, ALFA maintained consistent progress in noting value strategy, focused on three key implementation directives: reducing leverage, focusing on core businesses and enhancing business independence.

ALFA is taking full advantage of its unique position to eliminate the conglomerate discount supported by real options and timing flexibility. With each passing quarter, our leverage ratio has decreased.

The business units have announced important initiatives to drive long-term growth and are closer to achieving service-related independence from ALFA. Most of our discussions since the beginning of this journey has centered around reducing leverage, ensuring that our consolidated and individual capital structures are appropriately balanced throughout the transformation process is fundamental to unlocking ALFA’s full value potential.

Our consolidated leverage ratio improved consistently every quarter, driven by organic cash flow generation and financial discipline. Consolidated net debt to EBITDA of 2.3 times is at the lowest level since 2018, and represents an improvement of 80 basis points from year-end 2020.

Continuing to the good performance was Alpek, low level of 1.1 times, and further improvement at Sigma, which posted its lowest leverage ratio since 2012. The potential sale of Axtel remains another source of funds to reduce leverage going forward.

Axtel continued discussions with potential buyers but the process has not yet resulted in a binding agreement. Axtel plans on maintaining an open dialogue with interested tariffs, while moving ahead with its internal strategic agenda to capital on attractive market opportunities.

It is important to note that ALFA’s unlocking value strategy is not entirely dependent on the potential sale of Axtel. It may extend, we view it as an attractive option under the right conditions towards our objective.

We have strongly believed that maintaining a flexible time horizon for an orderly execution - our shareholders’ best interest. Rest assured by maintaining a flexible time horizon on the potential sale of Axtel does not imply a value trade offer of our core businesses.

Alpek, Sigma and Axtel, continue driving growth and profit-enhancing initiatives that boost their underlying value while ALFA’s transformation process is underway. Alpek was busy on the acquisition front last year, and this has continued into 2022.

In early February, the company announced a transformational agreement with tremendous value potential as it acquired Axtel for $620 million. Alpek is a major global producer of PET - with operations in Oman, U.S.

and Saudi Arabia. This transaction forward integrates Alpek into a high-value business segment with best-in-class technology, accelerate the Company’s progress towards its year-over-year goals and expand sell PET resin capacity in a logistically advantaged location to service customers growing PET resin needs.

Importantly, from a financial standpoint, the deal will have immediate accretive benefit to earnings. Alpek is expected to maintain a strong balance sheet with ample financial flexibility for cash dividends post acquisition.

At the same time, Alpek is also summarizes to some existing businesses and facilities, but are not providing the desired margins or are facing an unfavorable industry outlook. Sigma has also been very active launching new products, rightsizing its manufacturing facilities and driving margin improvement.

Roberto will further discuss shortly, the actions the company has undertaken. Axtel launched the first mobile virtual network operator in Mexico to a partnership with AT&T, expanding the Company’s group solutions offering with new mobility services.

Moreover, Axtel successfully pilot tested a specialized commercial model to accelerate enterprise segment sales. Axtel will focus on high-growth digital transformation services to roll out this new go-to-market approach.

The objective of ALFA’s unlocking value strategy involves enhancing business independence. A key component has been assisting the subsidiary in achieving service-related independence from Alpek, which includes the gradual transfer of corporate team members to our subsidiaries.

As a result, ALFA’s corporate headcount was down 18% when compared with year-end 2020. It is important to note how much progress we have made in reducing expenses outside our main subsidiaries, including the corporate level.

For reference, the difference between ALFA’s consolidated EBITDA versus EBITDA from Alpek, Sigma, Axtel and Newtek shows a 40% reduction from a loss of $71 million in 2019 to a loss of $42 million in 2021. Further improvement is expected this year.

Also, related to business independence, Sigma has been stepping up its exposure to the investing community, beginning with the dedicated section on ALFA’s quarterly earnings conference calls over the past year as well as participation in investor conferences and meetings. We reaffirm our full commitment to successfully execute ALFA’s ordering transformation by maintaining consistent progress focused on the three key implementation directives to eliminate the conglomerate discount.

I will now turn the call over to Roberto Olivares, Sigma’s CFO, to discuss the Company’s fourth quarter results and progress on strategic initiatives in more detail. Please, Roberto.

Thank you, Eduardo, and good afternoon, everyone. I am pleased to provide an update on the business and comment on our operational and financial results.

This includes recent developments related to our European profitability improvement plan and other initiatives aimed at enhancing growth across all of our regions. During the fourth quarter, Sigma achieved consolidated revenues of 1.7 billion, 6% above year-on-year driven by higher average prices, Brazilian volume and the recovery of the Foodservice channel.

EBITDA during the fourth quarter was 201 million, up 13% year-on-year. That was also the result of the solid growth rates of 14% in Mexico, 24% in Europe and 9% in Latin America, year-over-year.

I am proud to announce that despite the challenging environment, 2021 consolidated revenues reached 6.8 billion, 7% higher year-on-year and in line with the guidance. EBITDA reached 741 million, up 8% year-on-year and 2% above guidance.

These are our highest revenues and EBITDA yet. We continue to make progress on the 2025 double-digit EBITDA margin target for Europe.

In 2021, we achieved a 93 basis point margin expansion in the region, and continue to grow our leadership positions in the core European markets. Furthermore, during 2021, we set the foundation for increased European profitability in the coming years.

This included the agreement to sell our operations in Belgium and the Netherlands with an estimated 40 basis point margin improvement once the transaction is cleared by the respective competition authorities. Also, in December, we concluded the sale of two plants in France to consolidate production across fewer more cost-efficient plans that will yield an estimated 20 basis point margin improvement by the end of a three-year transitional period.

We firmly believe that financial results and responsible operations go hand-in-hand as we strive to become a more sustainable company. In October, we joined the United Nations Global Compact, the world’s largest corporate sustainability initiative.

Additionally, we improved our CDP score for climate change for water from C to B, and our supplier engagement score from B to B minus. Also, we advance in mapping of our value chain emissions by completing a Scope three Analysis for the European operations.

We expect to measure the rest of our regions in 2022. Next, I would like to comment on our 2022 guidance.

We forecast revenues of 7.1 billion and an EBITDA of 760 million. This includes revenues and EBITDA from the operations in Belgium and the Netherlands.

Once approval from the competition authorities is received and the transaction is completed, the guidance will be updated. Also, our 2022 guidance consider a 3% euro depreciation and a 5% Mexican peso depreciation when compared to the U.S.

dollar year-on-year, which translates into an impact of 237 million on revenues and 26 million in EBITDA. In addition, during 2022, we plan on increasing our growth business unit OpEx investment by 16 million as initiatives advance from exploratory to a piloting phase.

Adjusting for growth business unit OpEx investments and foreign exchange rate fluctuations, pro forma EBITDA is 802 million, 8% higher year-on-year. Looking back on 2021, I’m amazed of the determination and effort from the Sigma team.

As a company, we were able to navigate through various industry-wide challenges by leveraging our global sourcing infrastructure and employer our revenue management capabilities to overcome inflationary pressures, all while we continue to innovate, maintain consumer preference and strengthen our long-term relationship with clients and suppliers. We look forward to another strong year in 2022.

I will now turn the call back to Eduardo for additional comments and closing remarks. Thank you.

Thank you, Roberto. Before opening the call to questions, I will briefly touch on two final items.

ESG and our 2022 guidance. ALFA’s businesses strive to continuously improve on environmental, social and governance parameters, by integrating best practices into the way we do business, and continue towards creating a more sustainable future.

From a more exhaustive and comparable perspective, ALFA’s rating increased in the S&P Global Corporate Sustainability Assessment for the second consecutive year and remains above industry average for conglomerates. 2021 highlights include Alpek setting specific targets to reduce its emissions and increasing its recycling capabilities.

Also, Sigma securing more than 60% of its power needs from cleaner or renewable energy sources as it navigates our net emissions. Importantly, Alfa Fundacion is supporting social mobility through education, benefiting over 1,900 junior high, high school and university students in Mexico.

Among other initiatives related to governments, a periodic review of ESG topics was incorporated into ALFA’s Audit Committee agenda, with results reported to the Board of Directors. We hope we have the opportunity to learn more about our comprehensive ESG efforts in ALFA’s annual report to be released in the upcoming shareholder assembly.

Let me close with a brief overview of our guidance. 2021 was an exceptional year for us.

We are excited to build upon the strong results momentum and consistent progress on the strategic front as we head into this year. We will take a balanced and disciplined approach as we continue with our unlocking value strategy.

A healthy balance sheet supported by solid cash flow generation provide us with unique flexibility to drive long-term shareholder value. Our underlying macroeconomic assumptions were included in the guidance press release issued earlier today.

We anticipate year-over-year GDP growth in all regions, although at a lower pace versus the strong recovery in 2021. Also, some peso and euro depreciation versus the U.S.

dollar and higher average oil prices. Consolidated revenues are expected to increase 7% year-on-year to 60.26 billion driven primarily by price and volume growth from Alpek and Citi.

EBITDA is projected at 1.95 billion in 2022, excluding extraordinary items, unlike 2021 which benefited from 185 million in net extraordinary gains. Adjusting for the extraordinary items in 2021, comparable EBITDA is expected to increase [3%] (Ph) a year driven by Alpek and Axtel.

Consolidated CapEx of 1.21 billion for 2022 is more than double the amount we invested last year, boosted by Alpek’s acquisition of Axtel. Lastly, ALFA will propose a cash dividend of $0.04 per share in the upcoming annual shareholders meeting totaling approximately $196 million to be paid as of March 16th.

Summing up, everything we have discussed in this call is the result of the dedicated effort across our entire organization. I want to thank every ALFA team member for their extraordinary work.

This concludes my remarks. We are now available to take your questions.

Please, Hernan.

We would like to begin the Q&A session with questions on ALFA. Eduardo and I will take questions on ALFA or corporate matters.

Laura, please instruct the participants to queue for questions on ALFA.

Thank you hi guys congratulations on the results and thanks for taking my questions. Two questions for ALFA.

And I appreciate all the remarks around that you don’t need the Axtel sale necessarily to further advance into your unlocking value strategy. So if you could give us a little bit of color on what we should expect in that front for this year?

I know you want to get this flexible time line anything like you started pretty strong once you announce now it has been a bit slower in terms of how we get to where you want to be. So just to get a sense of how should we think about that in the sense that if Axtel doesn’t and go through what other avenues are you considering to deleverage further and eventually, I guess, a spin-off Alpek and Sigma becomes ALFA.

Because it also looks like even though on the Alpek side, the acquisition looks very, very good. Just wondering that removes a little bit of degrees of freedom for you guys to extract more from Alpek in terms of extra dividends and, therefore, deleveraged further.

So just trying to understand what other avenues you do have there. That will be good.

And then the second question in terms of enhancing business independence. I mean it is impressive the reduction you have done over the past couple of years in terms of OpEx or negative EBITDA at the corporate level, and you mentioned you are at 42 million last year.

Just wondering how much lower do you think you can take it this year or do we have to wait for a bigger reduction once you spin off Alpek and then Sigma becomes ALFA, you could still go further. How much further just for us to get a sense how much lower you can get it in the near-term?

Thank you.

Thank you, Luis. Thanks for the questions.

And let me go into your first one. We do expect for this year to have a consistent progress within a balanced approach.

Let me assure that we remain fully committed to eliminate the conglomerate discount. Since we made our strategy public, we mentioned that after the inactive spin-off, we were to move forward when we are ready to take solid steps.

We certainly have to make sure that our companies remain in a strong position in any steps that we take. No specific time was or has been said for any forward progress.

However, I think it is important, as you mentioned that the current positive results and strong balance sheets of Alpek and Sigma provide a lot of optionality and timing flexibility for any next steps that our shareholders may decide in the future. So again, we do expect to make progress but still are looking at different options.

And regarding the second question, the business independence. Yes, we expect a further decrease in this year.

I mentioned in my previous remarks that the corporate head count was reduced 18% this year, and we expect further reductions in 2022. If you consider the $42 million of expenses, and negative impact on EBITDA outside the subsidiaries, we do expect that amount to become about half of it this year.

So then we do expect a positive year regarding the reduction in our expenses.

Great. Thanks a lot guys.

You are welcome.

Thank you for taking my question. Good morning and congrats on the strong close for the year.

I have a follow-up on the Axtel sale. And I was wondering if you can clarify if you have honed in with a single potential buyer at this point or are you still entertaining multiple interested parties?

And also, if there is anything, a second one on this point. If there is anything on the tax side that we should be vigilant on given the government’s more hawkishness on past transactions and even commenting on future transactions.

Thank you.

Sure, Rodolfo, and thank you for those questions. Regarding the potential sale of Axtel, it remains an option to accelerate deleveraging in ALFA.

And as I mentioned in my previous remarks, we will do it under the right conditions. We have maintained a dialogue with multiple interest parties so far.

Certainly, the process has been affected by global uncertainty, volatility and changes in the industry. However, I think it is important to mention, as I said before, that the next steps regarding the reduction of the conglomerate discount, we are looking at options regardless if we are able to gross with potential sale of Axtel or not.

And even regarding Axtel own operations, it is important to point out that we plan to move forward Axtel’s internal agenda and continue developing some broad strategic projects such as going - decreasing going to the mobile market via an alliance with AT&T as well as growth that we expect in the infrastructure demand market for coming from 5G and the deployment of new data centers in the area of [telecom] (Ph). So again, it looks good for Axtel in terms of demand going forward, and we plan to take advantage of those opportunities.

Regarding to your second question about taxes, I would like to make a couple of remarks. First of all, ALFA has historically adopted a sound and conservative fiscal practice in every one of the transactions that we do, and we plan on continue doing so.

Now regarding the tax costs of any future step, it really depends on the step itself, it will be affected by when and how the company is become independent. So I really don’t have any more color to provide orders and saying that each one of the alternatives is being analyzed, including the tax front.

Okay, thank you. And if I may, just a follow-up on what you have made on your comment about other transactions.

I don’t know if you can give a little sense of how much it could bring in either in proceeds or timing. I know that you had mentioned before real estate as a noncore part of the business.

I don’t know if you can give a little bit of color there. Thank you.

Sure. Sure.

We are looking at many alternatives. You mentioned several of them in your questions.

And again, we think we are in a very strong position since the good results, and balance sheet of our company give us a lot of flexibility. You mentioned the real estate.

That is an option. But also Sigma and Alpek’s strong balance sheets and results provide ample opportunity.

And let me mention at a point in case, the equivalent position of Alpek. Alpek even after the acquisition of Axtel, Alpek - as you know, the net leverage of Alpek at the end of last year was 1.1 times.

But even if you look at it pro forma, including the Opal investment, it would be below 1.6. So we do expect to continue having financial flexibility also from Alpek regarding options in order to move ahead with the reduction in the conglomerate discount.

Thank you very much.

You are welcome.

Hi thank you for taking my question and congratulations for the results. Two questions, Eduardo, if I may.

The first one is you are expecting in your guidance or your work with your guidance with GDP growth of 3.1% of this year in Mexico, I’m not sure -two. When we see the consensus, the number going down.

There is any sensitive if the GDP will be, I don’t know. Below 2%, it could affect.

I don’t believe in Alpek, but in the case of Sigma, do you see any effect for a lower GDP growth? This is the first question.

Sure. Sure, Federico.

Thanks for the question. I firstly the question is specifically for Sigma to Roberto.

But before going to that, I think something that was proven in the results of both Sigma and Alpek last year was the resilience in the results of both companies regardless of the changes in the environment. So we are confident that the companies will be able to achieve the guidance that we are providing this year.

And Roberto, I don’t know if you want to go specifically into the GDP growth in Mexico and its impact on - do you expect on Sigma results?

Yes. Sure.

Thank you, Eduardo. Yes, I mean if you see Mexico and let me give you an example.

If you see 2020, in the middle of the pandemic, the GDP of Mexico decreased significantly. And in terms of our volume, it was fairly flat, I will say.

And the main impact was the Foodservice channel. So although GDP has some influence given that we are in the food industry, GDP has not that a big effect on us.

Okay, thanks. And second question, and I come back to Axtel again, and the possible -.

But when you announced the unlocked value strategy almost two-years ago. The revenues and EBITDA of the company have fallen.

You are expecting almost flat in Mexican pesos, the EBITDA growth for this year in Axtel. And when we see the participation of the breakdown of Axtel in the value of the company, it is lower than 5%.

Maybe the question is, if the same not happen, how is the strategy of how is not the strategy, but how is the strategic view of Axtel from the ALFA point of view? That is my question.

And I think that we that some time, but it is hard to me to understand why it is so difficult to sell the company and these companies every year is low - is smaller than the year before.

Sure. Sure, Federico.

First of all, let me reiterate that we will do a transaction under the right conditions, and certainly in those conditions, we have not been able to get from a buyer. We will continue pursuing that, but we have been unable.

I think the way we look at it is, it is true that the importance of Axtel within the portfolio has decreased, but it has increased because Alpek, and Sigma given their very good results have increased their value. So we feel that still remains a very solid asset for ALFA.

Again, we have a very positive and optimistic expectations for extending the future as we expect demand for telecommunication services and infrastructure growth in our country in particular, because of the development of 5G and also because of the coming to Mexico of several hyperscalers that are building data centers now in Mexico. So we are confident that this positive impact on demand that we haven’t seen in the last few years regarding telecommunications infrastructure, we will start picking up in Mexico this year and going into the future.

Okay, thanks.

Thank you.

Hi there, thank you for taking my question. Just have a couple actually.

The first one is maybe on your view at ALFA level of the environment in terms of inflation. Do you see some inflation at cost level and your capacity to pass through depending on the business, obviously.

The second question is on the strategy to unlock value. We are now two-years into the announcement.

You made it in the summer of 2020. You made a lot of progress in the first year and seen then it is looking like it is pretty complicated.

I understand your position, you want to be flexible. You don’t want to commit to any time line or agenda.

But do you understand as well the view of maybe the investors who can get tired and what would it fit. And I wouldn’t be ready at some time soon to commit to kind of agenda to give us an idea on the timing we can expect for you to go through to put a deadline on some operations such as Axtel thing that you are not going to sell it and you look to other alternatives.

And the last question is maybe for the holding debt. I believe you reported out of December holding debt of 1.2 billion.

You made a lot of progress in terms of reducing the people working at ALFA, and to reduce the cost and so on. But it looks like there is not a big impact in terms of holding debt.

What can we expect for the reduction in 2022? What will be your target to get by the end of the year in terms of audit debt?

Sure. Jean, thank you for the questions.

Regarding our view of inflation for the guidance, what we consider is inflation to be in Mexico, around 4.8% and in the U.S., 2.8%. Again, this may be changing constantly.

But that is how we build the numbers. And again, we don’t think our results really depend on the inflation level that happens in those regions or in the other important region where we operate that in Europe.

Regarding the timing of the next steps of the unlocking value. Again, we have no deadline, no specific time was or has been said.

We will continue moving forward with solid steps in order to maximize value. And finally, regarding the guidance of the consolidated leverage.

What I can tell you is considering the base case, the way we bill the guidance, which includes the Axtel investment but not EBITDA from Axtel this year, we expect the ALFA consolidated leverage to be at around 2.5 times. That is a little bit of an increase coming from the end of 2021 of 2.3 times.

But again, we are including just to be conservative, the full impact of the $620 million investment and no benefit trade since we don’t know when Alpek is going to be able to close the transaction.

Okay. Thank you very much.

Your are welcome.

Thank you very much. Thanks for taking my questions and congratulations on your strong numbers in key divisions.

Sorry to being slow here. I see the key priorities of management.

I hear you would talk about the top three priorities. The question is very simple.

Is the North Star still, the collapse of the holding into operating or are you increasingly exploring other options to generate shareholder value? Thank you very much.

No, I think the main issue here, Nikolaj, is to reduce, and hopefully, we will be able to eliminate the conglomerate discount in order to provide value to our shareholders. One way to do so is certainly to reduce the size of the conglomerate the same way we did with Nemak, and transfer the companies to our shareholders.

But certainly, there may be some other steps, intermediate steps that we may take regarding how to transfer the value that we feel the fundamentals of our companies have. So everything is being analyzed, and we are trying to keep full flexibility in order to present options for analysis to our bold and to our - later on to our shareholders.

No specific path of time has been defined.

Got you. Thank you.

You are welcome.

Hi good afternoon and thank you for the call. I guess my question you just answered.

I was going to ask if the sale of Axtel fails to materialize. Are you currently considering any specific alternatives that you can tell us about to move forward with the unlocking value strategy?

Thanks, Gilberto, for the comments. We are looking at several alternatives.

As you can imagine, again, the strong results and balance sheets of Alpek and Sigma give us a lot of flexibility to move forward with different options. I really prefer not to mention any specific alternatives since we do not have a definition of any one of them.

We are working several of them. But certainly, the very good results of Alpek and Sigma last year, and expected for this year, give us optionality.

Okay. Understood.

And on the potential for an eventual spin-off of Alpek, is it set early to have a sense of what the potential tax bill on that would be?

Yes. Yes.

Again, there are different ways of doing - our shareholders decide to do anything with Alpek. There are different ways of doing it and depending on how we do it and when we do it.

it would be the tax impact. Of course, any tax implications are part of the analysis of the different alternatives, but it is too early to mention anything regarding the tax impact for any at present times.

Okay, great. Thank you.

Hi ALFA team, thanks for taking my question. It is a very simple one.

I noticed that results for Sigma in Europe were super strong. Surprising to see at almost 9% margin, if I’m correct.

If you can tell us a little bit more about that share improvement, because it doesn’t appear to have come from pricing, but rather of cost cutting. So could you tell us a little bit more about why this happened, how sustainable the increased level of margins towards, that you can give would be super helpful.

Thanks.

Hello, Alejandro, this is Hernan. Thank you very much for your question.

Would you mind if we hold that question up for the Sigma section of the call? We will hold a dedicated Sigma Q&A section, and that is the next step in our call.

We will take that question first.

Thank you, Laura. Actually, we do have a couple of questions on the webcast.

One refers to what is management’s message to investors that may be worried by the long time, the process has taken. This comes from Alfonso Salazar.

Thanks, Alfonso, for the question. The message I have been trying to communicate during this call, and let me reaffirm is that we remain fully committed to eliminate the conglomerate discount.

And certainly, we will take a balanced approach and plan to have consistent progress on this strategy. And we plan to do that under very strict financial discipline in order to balance the transfer of value to our shareholders.

We will be maintaining a strong positions in the companies in particular, regarding their balance sheets.

There is another question on Axtel, but I will hold that question coming from [William] (Ph). I will hold that question for the Axtel section of the call.

Thank you very much for your question. We will take that on the Axtel section.

So Laura, could you please instruct the participants to queue for questions on Sigma.

I think you already leased to my question, but just as I remember, I was asking about the margins of Sigma in Europe that were super strong. If you could give a bit more color on that front?

Thank you very much, Alejandro. Roberto, would you be able to put that, please?

Thank you, Alejandro. Thank you for your question.

Yes, we have a very positive results in the fourth quarter in Europe, our highest EBITDA in the fourth quarter since 2017, and this was due to three things. The first one, better margins coming from lower pork prices in the region.

Also a strong seasonal effect due to the holiday season. Just keep in mind that European EBITDA is very seasonal.

And the third one, solid volumes on the packaged meat business. We also benefited from a 2.3 million extraordinary gain from the real estate sale of our Deventer plant, if you remember, we closed that plan back in 2019.

And the positive results from the packaged meat business in Europe more than offset the impact from the lower fresh pork meat export to China. We continue to wait for the response from the Chinese authorities to export our products to that country.

In the meantime, we are strengthening our presence in our Asian markets, and diversifying the sales to mitigate some of those effects. We do expect to eventually reach double-digit margins annually, but keep in mind that this is a gradual process.

During 2022, we will see some benefit from the assets we have made that will yielding higher annual margin in Europe.

Thanks.

Thank you Alejandro.

Two questions on Sigma. First one is if you could give us a little bit more detail on your revenue and EBITDA guidance by region, just to get a sense where you will be expecting to grow a bit more.

And obviously, the guidance implies a bit of a margin contraction at the consolidated level. So just to get a sense by region where that contraction comes from and also the extra OpEx related to the growth unit, where does it get accounted for it?

Does it get accounted mainly in the Mexican union or it gets spread out into some of the other ones. So that will be my first question.

A little bit more detail on the guidance by region would be helpful. And the second question is on CapEx.

We see on your guidance, a sharp increase in CapEx. Just wondering how much of that is also related to this OpEx increase in the growth units and perhaps just get factor into CapEx and can you give us some color there and how much of that 290, I guess, is maintenance CapEx versus some of that and whether that is kind of the level we should be thinking of CapEx for Sigma going forward?

Thank you.

Sure. Thank you, Luis, for your question.

Let me start with the first one on guidance. In terms of revenue and volume, we expect low single-digit volume growth in Mexico, Europe and Latin America, while in the U.S., volume could be a little bit impacted by a government program that stopped last year, and that we have that volume during at the beginning of 2021.

We expect some further pricing actions in the Americas, particularly because of a higher poultry and dairy cost, while prices in Europe are expected to remain stable. We also anticipate higher utilities costs, specifically in Europe, due to the higher natural gas prices.

And also in terms of volume, we expect Foodservice channels to continue recovery in all of our regions. In regards to the OpEx, related to our growth business unit.

This is happening because we are moving from an exploratory to a piloting phase. This year, 2022, the idea is to invest close to $26 million, and around 85% is because of our plant base and snacking businesses.

And out of that 85%, around one-third will be dedicated towards the teams that run these particular vendors. Another one-third will be consumer research, marketing and brand positioning, and then the balance will be the cost of producing this overhead product development and trade spend.

We are growing these businesses, particularly plant base and snacking in all of our three main regions, so Mexico, the U.S. and Europe, and we are advancing in all three fronts.

And in regards to CapEx. So the last year guidance actually was $270 million.

We came a little bit below that guidance due to longer lead times and in general, supply chain issues still due to COVID, but this year guidance is around the same area. Just to keep in mind, we have a depreciation of around $200 million.

So I will say, to keep the lights on, we need to invest a similar amount to that. And then the rest is on increasing capacity or new projects.

How much of this is allocated to growth? I will say, close to 5% as of right now of the CapEx guidance is assigned to growth to the growth business unit.

But again, we are just piloting some of these projects, this percentage could change in the coming years.

Thanks Roberto and as a follow-up, with the comments you made, do we assume margin contraction in all the regions that you have, or perhaps Europe is the one that keeps heading towards that double-digit in the long term and the others kind of contract or how do we think about that?

Yes. So Europe, specifically, Europe, we expect to continue improving the market there.

We did several import - we took several important steps during 2021 that will yield a margin improvement in the next year. In regards to the other regions, we do expect, for example, the U.S.

to - proposal average margin, maybe from the other regions due to - that this year was an extraordinary - with extraordinary results, we could see a little bit of a setback.

Great, thanks. And just a quick last question.

Can you remind us how much of I guess your revenues currently come from plant based and some of those initiatives, and if there is a target in mind in the medium to long-term on that front?

Sure. So let me just make a clarification about the last question because you also have to keep in mind that FX is affecting us in terms of margin.

We forecasted FX, specifically the Mexican peso, to have 5% depreciation in 2022, and that impacts a little bit results, particularly in Mexico and also the additional OpEx investment that we are doing on growth business unit that is also impacting a little bit the consolidated margin. So talking about the - can you repeat the other question, sorry?

Yes. Just to get a sense, how much of your revenues currently are coming from plant-based initiatives, and if there is a target in mind that you have for the medium term to reach?

Sure. I think most of the - where we are here in plant base, we are more by looking some of the initiatives.

We are currently operating in more than 200 restaurants across U.S., particularly Spain and Mexico. We are escalating some of that business.

For next year, we are probably around less than of revenues will come from plant based, but we do expect that to continue growing in the next coming years.

Great. Thanks a lot Roberto for the answers.

Thank you Luis.

Thank you. Just a follow-up on your guidance.

Can you talk about what level of price increases are implied in your guidance for Mexico vis-a-vis the 4.8% inflation that you are expecting and how a continued recovery on mobility - generally speaking, but also seeing the recovery on the Foodservice segment that you have seen, how could these propose upside risk the numbers on your guidance, especially what we have seen up until now this month, and as we emerge out of the Omicron variant.

Sure. Thank you.

Rodolfo. Let me first talk about price.

As I mentioned, we expect to further increase prices if necessarily due to higher poultry and dairy costs. In the case of Mexico, we actually already do a price increase in these first two months to offset some of the impact on poultry and dairy.

The idea for the rest of the year to maintain margins similar to - contribution margins similar to what we saw last year, and with that have been able to mitigate the impact. In regards to how we see food servicing in guidance.

We expect the Foodservice channels to continue recovery. We saw a very strong Foodservice numbers last year.

Just to give you an idea, EBITDA in the 4Q 2021 in Mexico was 129% higher than 4Q 2020. The European Foodservice EBITDA reverse from a loss in 4Q 2020 to a positive single-digit in 4Q 2021.

And the recovery last year was faster than we expected due to the increased mobility. But again, we remain actually optimistic about the evolution of the pandemic.

In regards to the last wave that we experienced in the beginning of this year. Yes, we started to see less mobility, particularly in Mexico, but this change in the past two weeks, no.

I think things are getting back to normal now.

Thank you very much.

Thank you Rodolfo.

Thank you, Laura. We do have a couple of questions from our webcast for Sigma.

So the first question comes from [indiscernible]. Hi good afternoon and congrats on the results.

Do you see growth in Sigma through organic growth and start-ups or do you continue to analyze M&A options. This is the question for you, Roberto.

Thank you, Hernan. Thank you, [Mario] (Ph), for your question.

Yes, our objective is to achieve mid- to high single-digit organic growth rate, both through our core businesses and also through our new success of revenue. The late includes the initiatives from our growth business unit.

And yes, some of this could come from linked to the start-up ecosystem. This could be further boosted by M&A.

So on top of that will be M&A.

Thank you. The next question comes from Alfonso Salazar with Scotiabank.

Revenue from new products at Sigma has been increasing. To what extent do these reflect an increase in market share or is only a change in your product sales mix.

In Mexico, have you seen or do you anticipate some trade down due to high inflation? Thanks.

So there is two parts to that question.

Sure. Thank you.

So the first one related to revenues, we have increased revenues, particularly and mainly because of price action, but also our volume has being stable or resilient even though we have a significant pricing action just to give you an idea, prices in Mexico 4Q 2021 versus 4Q 2020 were 10% higher and that volume was very resilient. I will not say that we are right now increasing market share.

is more related to that effect. All the whole industry is increasing prices.

What happened last year, all the inflationary pressures are things that happen to the whole industry for the whole industry also reflect those inflationary pressures on price. In regards to trade down, yes, we have seen a few signs of trade down in our Mexican operation.

However, we have a broad range of well-known brands in all the consumer segments and this allow us to capture the demand that has shifted between the segments. We have the brands that have different price points, but I will say, with similar margins.

So in that sense, even if consumers trade down, we are able to capture them and also to maintain margins.

Perfect. Thank you.

So that was our last question on Sigma from the webcast. We will move forward and take questions on Alpek, Axtel and Newpek.

From Alpek, we have Jose Carlos Pons, CFO. From Axtel, Eduardo Escalante, Interim CEO; and Adrian de los Santos, CFO, are available to answer any additional questions.

And from Newpek, Rodolfo Gamboa, Senior Vice President of Oil and Gas. Laura, could you please prompt for questions on Alpek, Axtel and Newpek.

Hello again. I was wondering on Axtel.

If you could comment on what the right valuation would be for the asset? Thank you.

Sure. Gilberto, and thanks for the question.

We feel, as we have discussed in the past, that in the case of the infrastructure business, the right valuation of such a business is in the low double-digit multiple. And in the case of the services portion of the company, we think it is in the mid-single-digit range multiple.

Again, we think there was a delay in demand for infrastructure as we have discussed for telecommunications infrastructure, but we do expect demand to pick up going forward.

Thank you very much.

You are welcome.

Hi everyone. Two questions on Axtel.

I mean the first one a follow-up on to what Gilberto asked about the right valuation. Just wondering, given that you have had multiple discussions with potential buyers, some getting close to deals or not, I guess, just wondering how far away in general were those bids relative to where you think the right valuation is just to get a sense how apart you guys are still in terms of the view of value there?

And then the second question is, you were named as an interim CEO. A while ago we just thought that potentially this business will be sold, and therefore, there was no need to have a permanent CEO at that point.

So just wondering if that remains true, you will remain a interim CEO. And if you decide to name a more permanent one, would that be a sign for us to see that perhaps the Axtel sale might not go through?

Thank you.

Sure. Sure, Luis, and thanks for both questions.

I don’t think I can give you a lot of details on how far the devaluations have been. Again, we have not enabled to have an appropriate offer for the assets, and we will continue trying to attract it.

And regarding my position, the plan is at least for the time being for me to continue being Interim CEO of Axel, and helping the company on both fronts, both on the transaction as well as moving the company forward, the developing of the new strategies that we plan to put into motion. And that is the plan, plan to later on go back as a full-time CFO of ALFA.

When and how that is going to happen really depends on how we are able to move forward, if we are able to move forward, and when with the transaction. But that has been the plan all along and continues to be the plan.

Great. Thanks Eduardo.

You are welcome.

Thank you, Laura. We do have one more question on Axtel.

I think this question is suited for you, Adrian, saying Lilian Ochoa from Actinver is asking about the Company’s leverage. And she says, Axtel’s leverage is high and the debt payment is not enough to cover maturities, which actions is the company taking to pay down its debt?

Yes, Hernan. Axtel has been reducing debt consistently for the last five years.

And in a higher proportion than the EBITDA that is being related to the transactions to the assets we have divested. So the delevering has been occurring.

Last year, we generated significant cash flow, over $50 million pre-taxes. And this year, we expect to continue generating positive free cash flow.

So by doing so, we will gradually continue with the objective of delevering, and potentially reaching eventually the 2.5 times objective. This moment, as has been mentioned in multiple questions, there is the strategic process, but at the same time, we are working diligently on the different projects and initiatives that we expect will be translated into long-term growth, higher EBITDA and at the end of the day, delevering through the generation of more EBITDA and positive free cash flow.

How we use that cash flow? Well, it will depend and it is part of an analysis that we continuously do regarding our liabilities and the maturity profile that we have that - by the way, it is over three years and an average life.

So we don’t have any significant maturities coming due in the next couple of years.

Thank you very much, Adrian. We do have one last question for Alpek.

So Jose Carlos, if you could do us a favor of answering this question. .

Does Alpek guidance include the acquisition? And this question comes from [indiscernible].

Yes. Thank you, [Juan] (Ph), for the question.

No, the short answer, it does not include the guidance for Axtel. I mean the guidance does not include the expected octal EBITDA.

It would be around $80 million if we are able to close the transaction by summer, that which is our forecast. However, the CapEx is included.

Yes. Thank you.

So that was the end of our questions. I would just like to thank everyone very much for your interest in ALFA.

If you have additional questions, please feel free to reach out to us. We would be pleased to assist you.

We also extend our best wishes to you and your families to stay safe and healthy. Thank you for joining us today, and have a great day.