Becle, S.A.B. de C.V.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.