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

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00:32 Thank you, Laura. Good afternoon, everyone and welcome to ALFA's first quarter 2022 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. 00:56 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.

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. 01:21 I will now turn the call over to Eduardo.

01:25 Thank you, Hernan. Good afternoon, everyone.

I hope you and your loved ones have remained safe and healthy. We are pleased to deliver another outstanding quarter led again by solid results from Alpek.

Double-digit growth in first quarter revenue and EBITDA placed ALFA in a favorable position to exceed its initial 2022 guidance. Also important is the consistent progress with our unlocking value plan and our full commitment to these transformational process.

02:03 With respect to consolidated financial results, first quarter revenue was $4.2 billion, up 24% over the same period of the prior year. Similarly, EBITDA increased 20% to $644 million, a record high first quarter for ALFA.

02:27 By subsidiary Alpek's results exceeded expectations once again as the positive momentum from 2021 carried over into this year. Specifically Alpek continues to benefit from high reference margins across its core products of polyester, polypropylene and expandable polystyrene.

Solid demand coupled with low marine freight availability, supported higher than expected petrochemical margins. 03:04 In contrast Axtel and Sigma were impacted by unexpected headwinds that resulted in lower EBITDA year-over-year.

Axtel was negatively impacted by further delays in implementation of customers’ project caused by the global semiconductor shortage, lower government segment sales and lower revenues from a large wholesale customer. For Sigma headwinds included higher energy and input costs at the European operations, which Roberto will cover in more detail.

03:46 I will now turn the call over to Roberto Olivares, Sigma's CFO to discuss the company's first quarter results and progress on the strategic initiatives. Please, Roberto.

03:59 Thank you, Eduardo. Good afternoon, everyone.

I hope you and your families are safe and healthy. Let's go right into the business update portion of the presentation for an overview of our operational and financial results, as well as recent strategic developments.

Consolidated revenues reached $1.7 billion, the highest first quarter in our history and 6% above year-on-year. This was driven by record first quarter figures in Mexico, the U.S.

and Latin America and they were partially offset by a decline in European revenues. 04:42 Quarterly consolidated EBITDA was $161 million, an 11% decline year-on-year, because of higher than expected cost increases due to the Russia-Ukraine conflict, as well as lower pork exports to China, which jointly impacted European operations.

These results more than offset the solid performance of the other Sigma regions. Specifically the conflict has caused significant energy and raw material cost increases in Europe, including higher energy, fuel, meat, ingredients and packaging.

05:24 In response to the situation, our revenue management and global supply teams are taking all the necessary actions to mitigate these impacts. For example, we implemented the first phase of pricing actions and are in final negotiation for a second phase that will be fully executed in the next months.

In addition, we are actively seeking alternatives to reduce energy consumption and achieve greater operational efficiencies. 05:56 Overall, and despite these results in the other business units, namely Mexico, the U.S.

and Latin America were better-than-expected. Therefore, our 2022 guidance remains unchanged.

However, we will continue to monitor the situation proactively. 06:16 Moving on to a strategic initiatives.

I want to briefly discuss the formation of Sigma's new advisory board. We believe that this is an important step to enhance long-term value creation as we advance towards becoming a fully independent business.

Our world class Board is made of 13 talented individuals with diverse backgrounds and nationalities. Eight of whom are independent and four are women with expertise that is closely aligned with Sigma's overall strategy.

Their experience includes strategic planning, retail, nutrition entrepreneurship and ESG among others. All of which we believe will greatly complement our overall capabilities.

07:07 With regard to grow initiatives, this quarter we launched the third edition of Tastech by Sigma, our business facilitator that seeks to transform the food industry. New companies from all around the world will join them more than 490 startups from 32 countries that participated in the first two editions.

07:30 During the quarter we also began operating our third-party distribution and commercialization business that connects companies with nostalgia and specialty products from Mexico and Latin America with consumers in the US by leveraging our Hispanic distribution network. To pilot this project we reached three new partnership agreements to distribute snack wafers, granola clusters and value-added guacamole packages to consumers throughout six U.S.

cities. 08:05 Our global plant-based brand Better Balance chose Spain, the U.S.

and Mexico to rollout its product offering, tailored to each communities local flavors. These products can be found at 300 establishments that includes restaurants, theme park, stadiums, music festivals and delivery platforms.

Better balance leverages decades of research and development and consumer preference knowledge to deliver its value proposition, focus on taste, texture, nutrition and flexibility. 08:43 Moving on, we reaffirm our commitment to sustainability, an essential element for the long-term continuation of solid financial results and growth for the company.

Because of this we are including sustainability as a core enabler to advance integration of ESG criteria to every day decision-making as we have all the way we think, we work and interact. As we face certain unexpected headwinds, our teams remains focus and is executing alternative actions to achieve their goals, we have set for this year.

All hands are on deck. We will continue pushing forward bringing communities everywhere favorite foods to love.

Thank you. 09:31 I will now turn the call back to Eduardo for additional comments and closing remarks.

09:38 Thank you, Roberto. As I mentioned at the beginning, first quarter results have positioned us ahead of our initial 2022 guidance.

Based on the outstanding performance year-to-date, an optimistic outlook Alpek has increased its 2022 EBITDA guidance 32% to $1.4 billion. Sigma have left its guidance unchanged as the business is supported by solid performances in Mexico, the U.S.

and Latin America. Axtel also maintains 2022 guidance, subject to potential revisions depending on future market developments.

10:23 Taking all these into consideration, Alpek, ALFA’s 2022 EBITDA guidance was raised to $2.3 billion, 17% higher than the guidance we provided in February. As a reminder these figure includes $115 million in extraordinary items from Alpek.

Comparable ALFA EBITDA guidance increased 11% to $2.2 billion. A better-than-expected outlook reinforces our financial position, which provides a solid foundation to continues ALFA, an orderly transformational process to mitigate this large conglomerate discount.

11:12 A quick update on each of the three key implementation directives of our unlocking plan are: starting with reducing leverage, this is an important precondition to achieve the independence of Alpek subsidiaries, sorry. A strong results coupled with financial discipline have driven significant improvement in financial ratios over the past two years.

Consolidated net debt to EBITDA of 2.3 times represents an improvement of 64 basis points year-over-year. Even though our efforts to accelerate deleveraging and be a strategic alternatives have not materialized in the transaction.

We continue seeking options in our shareholders best interest. 12:09 Moving next to a strengthened the individual businesses.

It is exciting to speak with you each quarter about the multiple actions the businesses have undertaken to boost long-term growth and capture profit opportunities. Roberto covered Sigma, so I will briefly touch on our Alpek and Axtel.

During the quarter, Alpek announced its transformational acquisition with the purchase of Octal, which will enable the company to further integrate into the adjacent high value business of PET sheet and accelerate its ESG agenda. Alpek expects to close the transaction by the end of the second quarter.

12:55 Upon closing Alpek estimates an $85 million EBITDA contribution from Octal during the second half of 2022. It is important to note that this figure is not yet included in the updated guidance for Alpek or ALFA.

Axtel is actively engaged in projects to capitalize on attractive market opportunities. For instance, leveraging an unparalleled offering of cloud and cyber security services that helps companies transition towards hybrid working environments.

Moreover, the company's mobility project Alestra Movil is rapidly gaining traction as an attractive service alternative among mobile and enterprise customers, who benefit from its intelligent multi-operator connectivity features. Axtel is also evaluating potential partnership with interested parties in certain parts of this business to accelerate this strategic agenda.

14:10 In terms of enhancing business independence, Sigma announced an important milestone in its journey to become an independent business with the formation of an advisory board covered a brief moment ago by Roberto. 14:27 At the ALFA level, Paulino Rodriguez, Senior Vice President of Human Capital and Services retired during the first quarter following a very successful career of almost two decades at Sigma and ALFA.

Paulino's enthusiasm and dedication in the development of Human Capital, live a long-standing legacy in our culture and balance. After Paulino's retirement, the corporate functions of Human Capital and Finance were merged.

15:06 On a final note related to enhancing business independence, first quarter expenses outside of our operating subsidiaries posted a 36% reduction versus 1Q '21. We expect this improvement to continue throughout the year.

15:27 ALFA held its Annual Shareholders Meeting last month. During the meeting, the shareholders approved a dividend of $196 million, equivalent to $0.04 per share and 5% yield.

Additionally, a share repurchase program for a maximum amount of MXN5,800 million or approximately $290 million was approved. This is aligned with our capital allocation strategy based on a disciplined approach to balance the deleveraging, investing for growth and returning capital to our shareholders.

16:12 At the Annual Meeting, shareholders were also provided with an update on ESG initiatives, an area of high importance for all the companies. Noteworthy, update included.

Sigma achieving three of its 2025 sustainability goals, several years ahead of plan and Alpek's increase in installed recycling capacity, reaching 268,000 tons of its 300,000 ton goal. Additionally ALFA, Alpek and Axtel recently published their 2021 integrated sustainability reports.

Sigma release an executive summary ahead of the extended GRI version to be published shortly. We invite you to review these documents available on each company's website.

17:16 In sum, 1Q 2022 was another exceptional quarter for ALFA and I want to thank every ALFA team member for the role in helping us to achieve these very good results. This concludes my remarks.

We are now available to take your questions. Hernan?

17:38 We would like to begin the Q&A session with questions on ALFA. Eduardo and I will take question on ALFA or corporate matters.

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

18:21 Hi, good morning. Thanks for taking my question.

So about Axtel in the statements made on the press release about strategic initiatives and partnerships for Axtel. Can you tell us more details on what you are looking for and what's the update on a potential partial sale of Axtel?

Thank you.

18:57 Sure, Vanessa and thank you for your question. Let me begin by saying that we continue looking for ways to eliminate the conglomerate discount in ALFA and certainly the monetization of Axtel is -- and continues to be one alternative.

However, in addition to the potential outright sale of Axtel, we have also engaged with interested parties in discussions to evaluate potential partnerships. The idea behind that is since we have been able to -- we have not been able to close a transaction for Axtel, we want to explore the possibility of advancing the strategic agenda of Axtel through these partnerships.

20:16 So we are looking at some high value-added services and high market growth in segments like cyber security and cloud among others and we are exploring possibility of doing partnerships with some other companies in order to accelerate our growth into these market segments. We are also continue negotiations regarding Axtel as a whole, as well as the infrastructure business unit, we are seeing a positive development in the market regarding the demand for services from our infrastructure unit in particular coming from the 5G technology deployment in some of the Mexican mobile operators, as well as the buildup of very large data centers -- new data centers in Mexico.

So we are confident is still, that we'll be able to monetize either Axtel as a whole or large portion of it or do some transactions at some specific high value-added services still looking at both options.

22:08 Okay. Are they exclusive?

Are they, is it one or the other?

22:15 In some cases, we are talking to some interested parties that are looking at both options. In other cases, we do have some companies looking at some very specific services in particular.

22:35 Thank you very much.

22:37 You're welcome.

22:46 Hi, thank you for taking my question. The first one is related to Axtel, also.

I mean, I know there is a lot of talks going on and all the information you just gave us, but when could we see something a bit more definitive like when could we get some more clearance in terms of Axtel, because everything is a bit of a still -- in the air? And also the other question I had is regarding Alpek, the spin up -- the possible spin up of Alpek.

Also when could this come, I mean, could this come only after the decision is taken regarding Axtel or where could we see something regarding this as well? Thank you so much.

23:32 Bernardo, let me -- I'll go into complementing my previous Axtel answer, but let me take this question from the ALFA point of view and then again, we can go into Axtel. First of all, let me assure you all that we remain fully committed to eliminating the conglomerate discount in ALFA.

We think the current level of these accounts that we have in the prices of our shares is unreasonable considering the fundamental value of our businesses and the very good results that they are achieving. Having said that, we are taking full advantage of the optionality and time flexibility that we have today coming mainly from the very good results and very strong balance sheets of our companies as you know and we reported Alpek today net leverage is 1.0 times and Sigma is 2.5 times.

So both companies have ample margins to support ALFA's unlocking value plan. 25:07 Having said that, let me again mention that no specific time has been set, nor for ALFA neither for a transaction in Axtel.

We feel we do have a space to manage the holding debt maturities, which the first important one matures in 2024. So, we are looking at different alternatives and our Board will make a decision when they are ready.

We plan to continue making consistent progress in the three fronts that I mentioned before, reducing leverage with the potential sale of Axtel, but also with all alternatives as the sale of the real estate that we have at the corporate level in Monterrey. We will also continue working on our core businesses of Octal, the acquisition of Octal is a very good example of that, as well as been -- we'll continue working towards achieving business independence from our subsidiaries and we already mentioned several examples regarding that.

26:35 So again, Bernardo, no specific time has been set. It is true that the sale process of Axtel has been affected.

It has been much longer than what we anticipated earlier on and has been affected by several factors. Global uncertainty is an important one of them, but also volatility, changes in the industry and what is going through in the country now have also affected.

So we will continue pursuing it. We will continue pursuing it both the outright sale, as well as potential partnerships for some services as I mentioned before.

27:32 Hi, good afternoon, thank you for the call. My question is from Alpek and the potential tax implications.

Given that the price of Alpek shares have gone up quite a bit year-to-date, does that necessarily imply that the eventual tax bill on Alpek spin off would be higher? Or are there alternatives that would mean that the tax bill is not entirely dependent on the share price at the time when you decide to do it?

28:17 Thank you Gilberto for the question. The Alpek's price of the shares could have an implication regarding taxes, depending on what we do and when we do it.

As you know the spinoff of any company in Mexico is treated like sale from the taxes point of view, so the higher that the benefit we achieve with this potential sale is we'll decide to do something like a spinoff. It has -- may have tax implications.

In ALFA, we have historically been a very conservative regarding our physical practices. We really try to make sure and comply with every regulation both from my country, as well as any other country where we operate.

29:36 However, the tax costs will largely depend on how the company has become independent. If it is a spinoff or if we do something different.

The -- or idea as we did with Nemak is we plan to disclose the tax implications when a deal is announced. At this time again, no path forward has been decided.

30:14 Thank you.

30:26 Hi, good morning Eduardo and Hernan, just a quick one. You mentioned a lot of options regarding the reduction of your leverage at the holding level.

My question is out of all those options, the refinancing of the $500 million 2024 bond, is that an option to refinance that bond?

31:05 We are aiming at not doing so, at least not fully Alejandro with the -- for the full $500 million. We think we do have flexibility before the bond matures in order to be able to at least not be in a position to refinance it fully.

The -- probably a portion of it may be refinanced either to a new bond or through some other facilities, but we are not and we would not like to refinance it, in particular with the new bond.

31:51 Okay, thank you.

31:53 You're welcome.

32:04 Hey, hi Eduardo, Hernan, thanks for the call. Two questions regarding to Axtel continues -- that there is question, the first one is, if you maintain the guidance for this year in particular, in the revenue side?

32:18 And the second question is, when they see the debt in U.S. dollars continue to going down, lower than in the past, but in terms of net debt to EBITDA is increasing, do you feel comfortable with this level, maybe 2020 was the lowest level of the net debt to EBITDA, but still comfortable with this growth in the ratio?

And the second one is how is the positioning from the debt side of the company side, if we continue to see a depreciation of the Mexican Peso?

33:00 Sure, Federico and thanks for the questions. Regarding guidance, let me answer you and Adrian de los Santos is also here, and I will turn it over to him in order if he has any comments.

But let me begin by saying that we decided to -- for the time being maintain the guidance we have for the year for Axtel at the current level $563 million in sales and $178 million in EBITDA. Since we -- even though the quarter as we mentioned had some headwinds, we do expect to have some positive factors going forward.

One of them is we see encouraging signs regarding the semiconductor shortage. I think we hope that the worst is behind us and we are seeing slightly better supply times by the providers and that allows Axtel to fulfill the contracts that we have already signed ahead of what the original expectation was.

So that's a very good sign. 34:31 The development as I mentioned before, the demand growth regarding 5G and the installation of new data centers in Mexico is also a very positive factor that we are trying to take advantage of, as well as what we are doing regarding the new business lines, the reorganization -- internal reorganization we did regarding the value-added services.

In addition to those factors, we also have -- had a negative impact from Altan, the wholesale mobile customer that we have in the first quarter, the Concurso Mercantil process of Altan has been moving at a very quick pace the last few weeks, and we expect to have a clear picture going forward for the rest of the year, while the impact of Altan would be for Axtel. 35:35 Let me mention that Altan presents a 4% -- less than 4% of the revenues of Axtel, but even so it’s an important customer that we need to clarify what the outcome of the Concurso Mercantil is in order to be able to have a better assessment of the impact in the year.

36:02 Regarding the net debt to EBITDA for Axtel, yes it is a little bit a higher today than it was before. Today, we are at 3.3 times, but that has a lot to do, first with the first quarter.

Traditionally, we do have an increase in working capital in the first quarter and you can see that reflected in our numbers, but in addition to that also to the negative impact we had in the first quarter versus the previous periods, so we do -- we are confident that we'll be able to continue managing the net leverage and will come down the rest of the year. Adrian?

36:52 Hi, Federico. Just to complement acquisition has been trending up in recent months, so that's positive for revenues in the second back of the year.

So that's something embedded in our guidance in your expected results so that will increase the expected revenues and EBITDA. And additionally, we have a positive cash flow.

We have been generating cash flow. Yes EBITDA has been affected, Eduardo mentioned the factors.

So we have been analyzing. We have no rush to do anything regarding our debt structure, our maturity is by the end of 2024.

So, we have time to decide when it's the right time to do some liability management or to do something regarding our senior notes. 38:03 Our debt, it's $3.25, the rest is in pesos and we managed to do active hedging mostly on cash flow in our interest payments and our CapEx obligations as well.

So we are actively trying to mitigate the foreign exchange risk on the current cash flows on the -- month-to-month cash flows.

38:41 Okay, thank you so much.

38:50 Thank you for taking my question. Just a follow-up on the previous question on Axtel.

Just to understand how this performance that we saw this quarter, with infrastructure revenues down 20 per -- almost 20% year-on-year. I mean, how does this affect the sale process?

I mean, you mentioned in your previous answer about the bankruptcy process expected to conclude this year. I mean that this weakness on whether it is infrastructure or for the whole part for the government side, I mean this performance impact this timeline on the sale?

Thank you.

39:31 Hey thanks, thanks Rodolfo. No, we don't think so.

We think it is clear what factors are affecting us these first quarter is not something that has anything to do with any structural change in Axtel and our position in the market. So again, we do expect the results to improve going forward.

40:00 Thank you.

40:02 You're welcome.

40:10 Hi, my question is on Sigma. Can I make it right now or should I wait?

40:18 Sure Vanessa, we can ask Roberto to answer your question on Sigma.

40:24 Okay, great. Thank you.

So about the advisory Board congrats on the talented people that you were able to recruit. My question is what's the mission for the Advisory Board and it is substitute to ALFA Board given the participation of ALFA Board members in the Advisory Board in Sigma?

And if ultimately what's expected to happen with regards to Sigma and potential spin-off or listing? Thank you.

41:10 Hi, Vanessa and thank you for your question. Sure, so the mission of the Board is to be an strategic board that supports the company to achieve its long-term strategy, not necessarily covering the day-to-date operations, but more the long-term strategy, help us discover and build the future, including the capabilities to get there.

And obviously, leveraging the knowledge that they have, the different perspectives, their point of views and backgrounds to help us achieve the strategy. 41:48 In regards to the governance, as of right now the company governance remains unchanged as Sigma is wholly owned by ALFA and hence reports to ALFA's Board of Directors.

Eventually, when ALFA is looking for value strategy continues and we become an independent company we might transform this Advisory Board into our Board of Directors.

42:18 Thank you.

42:20 Thank you, Vanessa.

42:28 Hi, thanks. I don't know if we switch to Sigma, but I have a question on Sigma.

42:35 Go ahead Rodolfo.

42:36 We will switch to Sigma next, but you can go ahead.

42:42 Okay. It's just a -- I wanted to get your take on your expectations for price increases.

You increased the prices 12% in Mexico. And we have started to hear from the government these plan to at least institute a pack and we don't know if it's going to be a pack to cut prices or if it will be something more rigid like a cap on certain prices of certain goods.

So I just wanted get your take on this and what could be the impact on your ability to continue these price increases to offset the input cost pressures? Thank you.

43:31 Thank you, Rodolfo. First of all, maybe deliver there are complex -- we participate in an industry that imports most of the raw material from the U.S.

and thus is payable in U.S. dollars.

So whenever we have a price -- the evaluation of the Mexican peso or an increase in cost, the whole industry moves into taking pricing action. We in particular have the capability not only to take some revenue management initiatives to be able to be more precise when raising prices or giving promotions or discounts, but also we have the reformulation capabilities and that gave us a little bit of advantage in a sense that we can be able to reformulate products in order to maintain the preference of our consumers and whether the cost is necessary.

44:42 I will also mention Rodolfo that we have been working since the last two years in Mexico in expense saving initiatives. We have been able to reduce expense even in real terms.

And with that, we also have the capability to put less pressure on margins and on price increases in order to maintain margins.

45:10 Thank you. This reformulation, assuming moving to a smaller presentations is that way –

45:17 No, not necessarily reformulation means for example -- using -- for example powder milk instead of fresh milk or the contrary in cases, which one is more cost wise, moving from for some particular products that we market that has been pork and poultry, moving from Turkey to pork et cetera. So changing some of the formulation of our products in order to maintain the preference of our consumers and we discussed.

45:54 Thank you.

46:08 Thank you, Laura. We will now take questions on Sigma.

Roberto Olivares, Sigma's CFO will answer your questions. Please prompt for questions on Sigma, Laura.

46:33 Hi, Eduardo, Hernan and Roberto. Thanks for taking my questions.

I guess my first question is on Sigma, it's related to your guidance. The fact that you kept despite what we saw in the first quarter.

So just trying to understand what are the main assumptions you're making for the remaining three quarters to get there, especially in terms of pricing initiatives beyond what you've already done? If you have any initiatives in mind that will be helpful to know?

Also on costs, does that imply perhaps a pullback in some of the commodity prices relative to what we've seen? And when I look at first quarter results, you had margin compression year-over-year pretty much across the board.

Does that assume a recovering margins in certain regions or not? So if you can help us understand what needs to happen for you from now on to be able to achieve the guidance, that would be my first question?

47:33 Okay, thank you, Luis for your question. So let me start by saying that we kicked off the year with better than expected results in Mexico, The US and Latin America.

And we remain optimistic for the rest of the year in this regions. In regards to Europe, clearly the higher cost that resulted from the escalation of the conflict took a toll on this quarter results.

But as I mentioned, we have already implemented first phase of price increases in the region that are not fully reflected on the first quarter results and we have ongoing negotiations to continue implementing a second pricing action phase and that will be fully executed in the second quarter. We expect these, Luis to allow us to close the gap with respect to our budget or our guidance throughout the year.

48:25 We will continue passing cost increases in case if necessary as again these are factors that are impacting the whole industry. So, it is natural to expect more pricing actions if cost dynamics continue to rise.

I will also highlight that we are working on efficiency and optimization projects to reduce cost and expenses, in some cases these may include delay in some OpEx for non-essential projects. However, we acknowledge that the situation is still evolving and we will continue to monitor it proactively, but as of right now, we do expect to finish within range of our guidance release.

49:08 Great. That's great to hear, Roberto.

And I guess a follow-up on that, is it fair to assume that the biggest impact from a cost standpoint will happen in the second quarter given that most of the sharp increases and all the issues actually, started happening in the second half of the first quarter and therefore maybe you still had some inventory and lower prices and therefore in the second quarters, we will see the full impact, you might get more than offset by the pricing initiatives that you mentioned, but from a cost standpoint, is that fair to assume?

49:43 Sure. I think from a cost standpoint, prices increase since the second half of the first quarter abruptly in all Europe and they have stay high since that moment, since the first quarter had -- the first half of the first quarter, not having those impact and the second half of those quarters of the same quarter having the impact, you may assume that the second quarter in terms of cost, we will have higher impact, but we will not have how the prices that we didn't have in the first quarter, but in the second quarter, we do have the first increase in prices that we did -- we're working on the second increase in prices.

As of right now we are ready have some countries done the negotiations for the second phase and some of the other will be fully executed by the end of the second quarter. So we will have -- we expect to have less impact on margin than on first quarter.

50:52 And then lesser impact on margins in the second quarter relative to the first quarter also applies to some of the other regions or just to Europe?

51:01 So in the case of the Americas, we have not -- as of right now we have not seen additional cost increases related as of right now to the Russia-Ukraine conflict. We do have for some particular raw material higher prices than last year, but those were already reflected before the conflict has started and we have already implemented price increases both in the US, Mexico and Latin America to offset those cost increases.

And with that, we have maintained the margins and we do expect to continue sustain in the margins in the Americas.

51:47 Great. And my last question and I apologize if you already said that on your prepared remarks, but I wasn't able to connect better.

The lower pork meat exports to China, can you comment on that and whether that's an issue that is already solved or it could resurface again in the future?

52:05 Sure. So glad to give you an update on this topic, so since July of last year we have mounted intense lobbying efforts with the Spanish Government through the Ministry of Agriculture and the industry associations for them to directly contact the Chinese authorities and solicit their help in the process of re-homologation.

It is important to mention that this issue must be resolved collectively with the Spanish government as it affects eight other meat companies in Spain and not only Campofrio Frescos. On the operational side, we have completed all their requirements asked by the Chinese authorities with regards to the spot protocol and we are in regular contact with our Chinese distributors to expedite the process from their side.

53:01 In the meantime, our Fresco team continues to the diversify and expand our client base to offset the volume impact. We have more than doubled our sales to other Asian countries, like the Philippines and Korea.

And we have also developed new markets in Africa as well as started exporting to Mexico. Apart from this, we have launched initiatives to optimize the buy products and add value while finding new markets for these.

And lastly, let me just comment that we're implementing cost and expense saving initiatives. For example, we have improved efficiency by concentrating plan operations from six to five days to save labor and energy and we have reduce the external expense by optimizing our in-house freezing operations.

With that I can say that we are working diligently to resolve the situation as soon as possible.

54:08 So should I interpret that -- you still will have some issues in terms of exports to China in the second quarter, hopefully in the second half, they might get resolved and in the meantime, we are trying to diversify the effort?

54:21 That is correct.

54:22 Great. Thanks a lot Roberto.

54:25 Thank you, Luis.

54:34 Hi Roberto, I have a two questions regarding our margin in Europe and results, I mean, I understand that I’m [Technical Difficulty]

54:47 I cannot hear.

54:51 I think we lost Bernardo, Roberto.

54:59 Well, in case in case Bernardo comes on line again, please send them through Laura, if not I would like to move forward and take questions on Alpek and Axtel. So from Alpek we have Jose Carlos Pons, CFO; and from Axtel we have Eduardo Escalante, Interim CEO and Adrian de los Santos, CFO who are available to answer any additional questions.

Laura, could you please prompt for questions on Alpek and Axtel?

55:50 Hi, good morning. I was moved to these side of the question.

My question is for Roberto on Sigma and it's a quick one. Just if you could tell us Roberto, how fast can you increase prices in each region?

I mean, I understand that it's harder to increase price at a faster rate in Europe and the US when compared to Mexico and Latam? Thank you.

56:22 Sure, Alejandro. Thank you for your question.

I think one important thing to consider is the different channels in which we participate in the different regions. In the case of Mexico, one tenant that is a little bit faster to take some pricing action is for example, the duration on channel, where we have our direct sales distribution network that can implement a price increase faster than on a retail chain, thus having those in Mexico make us increased price faster.

In the case of Europe and the U.S., we have been working a lot with -- through the different industry chambers with the relationship that we have with the retailers in order to expedite the negotiations and take on pricing actions whenever is necessary. Usually, as I mentioned these type of things happen to the whole industry, especially right now inflation in Europe is happening not only to the mini industry, but to every sector in the shelf.

So retail -- our retailers are feeling the same pressure from all of their suppliers in order to increase prices.

57:49 Thank you, Roberto.

57:51 Thank you, Alejandro.

58:01 Sorry, Eduardo, my call got disconnected. So my question was regarding EBITDA margin in Europe.

I mean I guess that on a consolidated basis guidance remain the same, but I just want to understand if this comes from a better than expected results from other regions or because Europe results will come back in the second half and you have really good results in Europe? Thank you.

58:25 Sure. Thank you, Bernardo.

I would say both Bernardo. As of right now, results seen in the other two regions are better-than-expected and we also expect margin in Europe to recover throughout the year as we start to reflect the price increases that we have already done and continue reflecting than going in negotiations.

58:53 Thank you, Eduardo.

58:55 Thank you, Bernardo.

59:03 Hello again. My question is on the magnitude of the updated guidance at Alpek.

So early in the year, sooner than your traditional update only after the second quarter. Obviously a lot of moving parts with the energy prices supply chain issues and so on.

And well the -- obviously in the right direction, it could also we argued that it reflects the very limited visibility in the business, do you think that might explain why the market is not reacting to the new guidance at this point? Thank you.

59:46 Thank you, Gilberto for your question. Well, the guidance that we have provided reflects what we believe will happen in the year.

As Pepe indicated in the call that we had in the morning. We still believe that the second half of the year could be potentially a little bit better, but we're not ready yet to confirm that the results could be better.

But in the end we're improving our guidance significantly based on the fact that we had a strong first quarter and we believe that the second quarter will also be strong. 60:22 Answering your question, why the market is not reacting and the share is not recognizing, that was beyond us.

We believe that the valuation is quite attractive look at from the performance of the company, look at it from the dividend yield. Well you know maybe you can do a very job explaining to your customers, but in the end performance is quite strong and we've been having the best two years in a row on the history of the company.

60:58 Thank you for your explanation.

61:09 Hi, my question is on Axtel. Thanks for taking it.

Just two simple questions, one is on the first quarter to understand how much of the EBITDA decline was explained by the semiconductor shortage and how much probably those charges from all-time to better understand how we could look semi shortage improve and without a one-off charge?

61:38 Hi, Alejandro, as we said in our call, the impact from the semiconductors was approximately MXN40 million in the first quarter. So that's the revenue impact on a margin basis.

Some of it is equipment sales, which on average have 20% gross margin and recurring services have higher -- significantly higher margins. These were about half on half from each, so that's the effect in margin of contribution.

On the impact from Altan, we don't disclose specifics regarding customers margins or similar. Additionally, that as you know there is a legal process with this customer.

So we rather not comment on your questions.

62:49 Okay. Thanks, very useful.

And the second one, you mentioned that changes in the industry have affected their sale or the monetization process and also their results. I just wanted to understand like more broadly, what do you mean by base industry changes?

Do you see that software-based solutions have taken precedence of our VPN or Ethernet for example, or did you mean on the mobile side, the consolidation that we're seeing in the industry, what are you seeing that was not expected in your industries?

63:27 Hello. Hello, Alejandro, this is Eduardo.

No, what I was referring to was more regarding the global uncertainty and the situation in general with the emerging markets. As we have discussed before, some of the most interested potential companies are for aiming base stores and certainly they look closely at these type of factors, that have been affecting their investment process as a whole.

64:07 Okay, understood. Just, if I can push back a little bit Eduardo to better understand, we have seen several transactions in telecom and TMT of Latam assets.

For example, the KKR deal in Colombia, many asset sales in Central America and those in Mexico with the sale of KIO. There have been many transactions, so I didn't understand why this transaction in particular was more affected than others?

64:39 I don't know if it was more affected, but certainly they were able to close those transactions and we have not. Again we'll continue pursuing it, but I can assure you, some of those buyers have also been working with us and hopefully we'll be able to do something with one of them.

65:02 Okay, thank you very much Eduardo. Congratulations.

65:04 You're welcome.

65:13 Thank you, Laura. We do have one last question from our webcast participants and this is for Alpek.

This is from Edward Santevecchi with Bradesco. And the question is, any update on financing plans for the closing of Octal?

Jose Carlos?

65:31 Thank you, Hernan. Well, yes, as we indicated in our conference call, we are very close to closing the transaction.

We have received all the relevant authorizations in terms of the Trade Commission of each of the relevant countries. So it's, it seems likely that we will close the transaction during May for or sure during the second quarter and we have secured financing for that transaction.

We already are in the final stages of signing the agreements with the relevant banks and well -- we will have the funds available for the closing the transaction.

66:10 Great. So this was our final question.

We would like to thank you very much for your interest in ALFA. If you have any 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 very much for joining us today and have a great day.