Good morning, everyone. Thank you for joining the senior management team of Arca Continental to review the results for the first quarter of 2025.

Their earnings release went out this morning, and it's available on the company website at arcacontal.com in the Investor Relations section. It's now my pleasure to introduce our speakers.

Joining us from Monterrey is the CEO, Mr. Arturo Gutiérrez; the CFO, Mr.

Emilio Marcos; and the Executive Director of Planning, Mr. Jesus Garcia.

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

Arturo Gutiérrez, who is going to begin the presentation. So please go ahead, Arturo.

Thanks, Melanie. Good morning and thank you for being with us today to review our performance for the first quarter.

As we enter 2025, our business is navigating a unique confluence of external challenges that are shaping consumer behavior and overall market dynamics. Geopolitical tensions and the impact of tariffs, alongside persistent inflationary environment, have added layers of uncertainty to the operating environment.

These macro headwinds, coupled with less favorable weather conditions have weighted on near-term consumption patterns. Even amid this backdrop of heightened uncertainty, our company made solid progress, delivering a resilient performance while continuing to invest for long-term growth.

Let's take a closer look at our results. Total consolidated volume in the quarter decreased by 3.1% to reach 548 million unit cases.

Still beverages grew 2.4% primarily driven by volume gains in Mexico. This volume performance reflects a combination of factors, such as a subdued consumer environment and calendar effects, notably the leap year and the shift of Holy Week and Easter into the second quarter.

Total consolidated revenue increased 12.4% year-over-year to Ps.57 billion, while consolidated EBITDA rose 10.2% to Ps.10.6 billion, representing a margin of 18.7%. This positive EBITDA performance was underpinned by solid contributions from our U.S.

operations and strong momentum in South America, led by a robust recovery in Argentina. Our results highlight the impact of proactive pricing, disciplined cost control, and prudent hedging, which enabled us to mitigate input cost inflation and currency volatility while protecting profitability.

Let me begin our regional performance review with our beverage operations in Mexico, which experienced a softer start to the year. Total volume was down 3.6% in the first quarter, cycling three consecutive years of growth in the same period.

Volume performance was partially influenced by a high comparison base given the strong uplift seen in the first quarter of 2024, supported by government incentive programs ahead of last year's elections. Volume decline was partially offset by an 8.1% increase in still beverages mainly driven by the sports drinks, tea and fruit beverage categories, capitalizing key opportunities in the modern trade channel.

Notably, Coca-Cola No Sugar delivered robust growth of 17.8%, supported by its continued expansion across our territories and sustained innovation under the Coca-Cola Creations platform. Total net sales in Mexico grew 0.1% year-over-year to reach Ps.23.3 billion.

The average price per case, excluding jug water, increased by 5.3%, reaching Ps.89.51, reflecting our disciplined revenue growth management strategies. On the profitability front, EBITDA in Mexico declined by 6.2% to Ps.4.9 billion with a margin of 20.8%.

Following a strong track record of consecutive years of EBITDA growth in Mexico, this quarter was affected by slightly softer volumes and a temporary production pause on our Topo Chico plant in Monterrey caused by a longer-than-anticipated maintenance process. Operations have since returned to normal, and we remain confident in our ability to recover momentum in the coming quarters.

I would also like to highlight that Tuali, our second-generation B2B digital platform, continues to deliver strong results. By the end of the first quarter, our app accounted for over 68% of total orders from the traditional channels volume in Mexico.

Notably, we observed a meaningful uptick in performance among digitized customers compared to non-digitized ones, contributing to a 1.6 percentage points increase in overall sales volume. Moving now to our beverage business in South America.

Total volume declined 0.7% in the quarter primarily due to softer performances in Peru and Ecuador. This was partially offset by growth in Argentina.

Total revenue rose by 25.4%, reaching Ps.12 billion, supported by effective pricing and favorable mix. EBITDA increased 36% to Ps.2.4 billion, expanding margin to 19.9%.

This strong profitability performance underscores our disciplined execution, affordability strategies and ongoing portfolio optimization. While challenges persist, we remain cautiously optimistic about South America's outlook in 2025, underpinned by signs of gradual macroeconomic recovery and stabilization across our markets.

In Peru, total volume declined 4.6%, lapping a strong growth of 3.8% in the same quarter of 2024. However, we are seeing a sequential recovery trend.

Despite softer consumer demand and below-average temperatures, our actions to offer an affordable portfolio and the expansion of returnable package formats are supporting an improvement in volumes. In still beverages, flavored water and energy drink segments grew 33% and 41%, respectively, supported by new product launches.

Furthermore, we signed a five-year distribution agreement with Diageo, introducing the renowned portfolio of premium spirits to Peru's traditional trade and on-premise channels. Turning to Ecuador.

The country entered 2025 facing a complex landscape marked by economic slowdown, persistent political uncertainty and severe rainfall in certain regions. Against this challenging backdrop, volume in our beverage business declined 7.4% in the quarter, impacted by a strong comparison base following three consecutive years of solid first quarter growth.

We continued investing in market-focused initiatives, including expanding cooler coverage and reinforcing affordability for our portfolio of returnable packages. As a result, the mix of returnable presentations grew by 0.5 percentage points this quarter, a positive step in driving value and maintaining consumer relevance.

Our beverage operation in Argentina delivered solid volume increase of 19.8% in the first quarter. Growth was broad-based with sparkling beverages increasing 21.8% and Coca-Cola brand delivering a standout performance, up 22.6%.

In still beverages, Cepita led growth in juices and nectars, Aquarius drove gains in flavored water, and Monster continued to perform strongly in energy drinks. Despite the still prevailing economic challenges, we gained value share across NARTD categories by driving affordability and promoting returnable packages.

We saw strong performance across channels. The traditional trade was one of the best performers in the quarter, up 14.9% and supported by our ongoing investments in market-focused initiatives, expanding cooler coverage and increasing our share of visible inventory.

Argentina's economic trajectory in 2025 has been encouraging with meaningful progress in reducing inflation and a significant appreciation of the local currency. These developments are supporting stronger real wages and improving consumer confidence, a positive backdrop for our business.

Our beverage operation in the United States closed out the first quarter with solid profitability improvements and its 28th consecutive quarter of EBITDA growth. This performance highlights the strength of our business model and our ability to successfully replicate the playbook that has delivered sustained results across our Latin American operations.

Net revenues for the quarter increased 0.4% to $994.6 million. The average price per case rose 6.4%, reflecting a true rate increase of 2.8% and 3.6% in mix to reach $10.26.

These results reflect the successful execution of our strategy to optimize price-pack architecture, drive transaction growth and effectively manage promotional spending as we continue refining point-of-sale execution with a sharp focus on the key metrics within our fundamentals. Volume for the quarter declined 5.6%, cycling strong 2.3% growth from the same quarter of 2024.

Coca-Cola Zero was up 5%, and the still beverage portfolio delivered 1.5% growth driven by BodyArmor, Powerade and Fairlife. Notably, Fairlife recorded a double-digit volume increase in the quarter with Core Power significantly outperforming across channels.

We continue to focus on higher profit per case packages, such as 10-pack mini cans, smartwater and vitaminwater, which increased 16.3%, 7.5% and 2.7%, respectively. The Topo Chico portfolio posted a 16.8% increase with Topo Chico Sabores leading the volume growth.

This quarter, we continued driving innovation and launched over 15 new SKUs, including Coca-Cola Orange Cream, Barrilitos, BodyArmor Flash IV and Monster Killer Brew. EBITDA grew 3.7% to $160.7 million, representing a margin of 16.2%.

This marks our most profitable first quarter since assuming control of our franchise territories in the U.S., underscoring the structural improvements we've made to the business over time. We are also proud to share a series of recognitions that reflect our operational excellence.

Our U.S. team earned the prestigious North America Market Street Challenge Award for the third time in seven years and for the second consecutive year, recognizing best-in-class execution across the Coca-Cola system in the United States.

Additionally, we were honored with Monster's Masters of the Claw designation for consistently leading in volume growth. On the innovation front, our U.S.-based advanced analytics team continues to enhance critical commercial processes through scalable data-driven solutions.

This quarter, we launched an upgraded version of our suggested order application, featuring enhanced value-capture modules designed to drive incremental growth. To close our operations review, our Food and Snacks businesses started the year with solid results.

During the quarter, we delivered double-digit sales increase and mid-single-digit EBITDA growth. This sustained earnings momentum was led by Bokados in Mexico, supported by effective pricing strategies, productivity enhancements, efficiency programs and consumer-centric innovation initiatives.

Now I would like to briefly walk you through the progress we've made in our sustainability agenda. We continue to strengthen our energy strategy by increasing the use of renewable sources, which now account for an average of 43.3% of our total energy consumption.

At the same time, we reduced our scope 1 and 2 emissions by 32.6% compared to our 2019 baseline, marking a meaningful step toward our long-term climate goals. In water stewardship, we maintained a strong efficiency ratio of 1.52 liters per liter of beverage produced in 2024.

This performance reflects our continued focus on implementing best-in-class practices and managing water responsibly across our operations. We are proud to share that Arca Continental was once again recognized for its sustainability leadership, earning a spot in the S&P's Sustainability Yearbook for the third consecutive year.

Moreover, we received the highest level PRIME certification from key financial institutions in Mexico, reflecting our strong corporate governance, financial discipline and commitment to sustainable practices. In closing, I'd like to highlight the recent release of our annual corporate integrated responsibility report, which outlines our progress against key commitments, all under the vision of environmental leadership and a positive social impact.

And with that, I'll turn it over to Emilio, who will walk us through our financial results. Emilio, please go ahead.

Thank you, Arturo. Good morning, everyone.

It's a pleasure to be with you today to review our first quarter performance. Our first quarter results were impacted by the volatility and a slowdown of the global economy, resulting in a contraction of consolidated volume.

However, due to our affecting pricing strategy, diversification and the foreign exchange effect, we delivered growth in the low teens in sales and EBITDA. Let me offer further insight into our financial results.

Consolidated revenues increased 12.4% to reach Ps.57 billion mainly driven by our price-pack architecture and exposure to U.S. dollar.

On a currency-neutral basis, revenue grew 2.2%. During the quarter, SG&A expenses increased 13.9%, reaching Ps.18.6 billion, while the SG&A to sales ratio increased 40 basis points to 32.6%.

On a currency-neutral basis, SG&A grew 5.5%. Consolidated EBITDA reached Ps.10.6 billion for the quarter, reflecting a 10.2% increase and 0.8% on a currency-neutral basis.

The EBITDA margin experienced a dilution of 30 basis points compared to the same period in 2024 mainly driven by lower volumes. Net income rose 10.2%, reaching Ps.4.1 billion with a margin of 7.3%, a slight dilution of 10 basis points mainly driven by the operating income result.

Now moving on to the balance sheet. As of March, cash and equivalents totaled Ps.36.5 billion, while total debt was Ps.55.6 billion, resulting in a net debt-to-EBITDA ratio of 0.3x, reported operating cash flow of Ps.6.9 billion.

Our financial discipline serves as a robust foundation to face the challenging landscape. A dividend of Ps.4.12 per share was distributed on April 3, 2025, which represents a payout ratio of 36% of retained earnings and a dividend yield of 2.1%.

Total CapEx investment during the quarter reached Ps.3.6 billion, representing 6.2% of sales, deployed in increasing production capacity and reinforcing our distribution and commercial capabilities to drive long-term growth and better serve our customers. Going forward, our priorities will remain unchanged as we continue to leverage our developed RGM and digital tools to optimize our operations and foster growth.

At the same time, we'll maintain our financial and operational discipline to navigate the volatile environment we are facing. This approach will enable us to stay resilient and adapt to the challenges posed by the global economy as we continue to deliver value to our shareholders.

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

Please, Arturo.

Thank you, Emilio. While 2025 has started on a challenging note, I remain confident in our team's ability to execute with discipline, agility and focus.

Despite temporary headwinds, we stayed true to our strategy, delivering results that demonstrate the strength and adaptability of our business model. As external conditions begin to stabilize, we are well positioned to regain momentum and deliver on the full year targets aligned with the guidance we shared earlier this year.

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

Hi. Hello.

Can you hear me, Emilio, Arturo?

Yes. Good morning, Rodrigo.

Thanks. Awesome.

Thanks. Good morning, Arturo.

Good morning, Emilio. Thanks for taking my question.

On the U.S., I mean, I would like to explore the following, right? I mean when looking at retail sales, food retail sales, even at the Texas level, we indeed perceive a slowdown, right?

But I mean, it was still kind of like a 2 percentage growth retail in general, right? I mean just help us to understand I mean to reconcile these numbers that we see in the retail as a whole versus the magnitude of the volume decline in the U.S., right?

I mean it's hard for me to reconcile this number again in this slowdown context. And number two, in the U.S., also I just want to make sure here that perhaps the pricing that you have amazingly executed, I mean, is not having an adverse elasticity.

But I here wanted to understand your thoughts on this in the U.S. And also, I mean, on the positives Argentina, amazing rebound there, meaningful implications on operating leverage.

So in this context, just wondering if you can give us any range, any guidance of where the EBITDA margin could be trending in 2025, I mean, just for a sec to have an idea here, right? Again, as this rebound, 20% volume growth, nothing that we have seen I don't know how many years.

So the operating leverage would be here something that maybe any of us are currently modeling. So would be helpful to understand here again on the Argentina volumes, if you can share something on this topic.

Thank you very much for taking my questions.

Yes. Thank you, Rodrigo.

I will address the first part first. And well, certainly, we had a challenging quarter in our U.S.

market. The economy faced these unexpected challenges that led to increased caution among consumers, and that impacted spending overall.

Apparently, inflation concerns and rising prices of certain goods caused consumers to cut back on certain discretionary spending and also the anticipation of potential tariffs. It's more of uncertainty than anything else, but that prompted consumers to adjust some spending habits.

You have to take into account probably ywo other things. One is that our comparison includes the transition of the Sami case pack, which we explained before.

And that would account for approximately 30% of the contraction of our volume on a comparable basis versus the first quarter of 2024. And the second effect there is that February 2025 had one less day due to the leap year in 2024.

And then we had the shift in the Easter holiday that also has an impact. So all these factors contributed to the quarter challenges that we recognize it was a difficult environment for sure, but those two additional factors contributed to a bigger contraction.

But certainly, the store traffic was down. So in terms of pricing, we were pretty satisfied with our results in pricing, especially considering that if you look at pricing in the U.S.

total, price was up 6.4%, but true rate was only 2.8%. That means that we had a very positive shift in mix, which -- I think it's a positive sign of the consumer moving to some of the premium price and for us more value-added packages and categories.

Also, I think it reflects the work that we've been doing in our pricing tools and especially our promotional tools. So all in all, we know that we have to work on several fronts, on innovation, our capabilities, on improving execution.

There's a lot of things that are under our control and can be improved and also on efficiency, on the efficiency front and protecting our margins. So in summary, overall, we expect growth in volume for the entire year, but for sure, this first quarter was very challenging.

Then moving to Argentina. In Argentina, well, quite the opposite.

I mean the comps were more favorable, as you know, in terms of volume. The economic context has drastically changed compared to previous years, lower inflation and gradual consumption recovery.

2024 was a transitional period, many adjustments and volume contraction. But now we're seeing significant volume expansion, and we will capitalize on our investments and a more favorable economic outlook.

So our levers there are going to be obviously increasing volume, but also focusing our pricing capabilities. It's a very, very important capability when even inflation is coming down, but it's still a challenge.

And we have also cost inflation. And for that, there are also some advantages that we have integrating into sugar, for example.

And OpEx management is going to be critical throughout the year. But I will let Emilio expand a little bit on Argentina and the outlook for profitability this year.

Sure, Arturo. Thank you, Rodrigo, for your question.

And yes, as Arturo mentioned, we're coming last year volume declined on the quarter, 26%. So we were expecting this positive result in margin of around 20% this quarter.

And looking ahead, we anticipate that volume will continue this recovery and the positive business performance, more stable inflation and exchange rate. And this, we expect to improve even the current margins of this quarter of 15.4% for the full year.

So we're very positive on the trend for margins in Argentina for this year.

Thank you. Thank you very much for that Arturo and Emilio.

So if I understood correctly, I mean, reasonable to model a sequential expansion in Argentina, is that correct?

Yes. In terms of volume, yes.

And in margin, the current margin first quarter was 15.4%. Last year, we had a margin full year of 12.3%.

So we will expect to have an even better margin than this quarter for the full year this year. But to be conservative, let's say, that at least the current margin levels that we have this quarter.

Awesome. That was very helpful.

Thank you very much.

Thank you, Rodrigo.

Yes, good morning Arturo and Emilio. Thank you very much for taking my question.

Just two quick ones. So number one, on Mexico.

Obviously, we know about the issues like the weather, the day that was missing in February, plus the Easter shift. But maybe any color that you can give us in terms of like just consumer behavior on like a normal like cadence?

Maybe how was January versus February versus March? And what are you seeing so far in April?

And does that give you any like confidence or ability to maybe work a little bit on the pricing side to drive the top line? So that would be my first question just on Mexico the cadence.

And then I have a quick follow up for Emilio.

Yes, good morning, Ben. Well, yes, Mexico had a -- also a challenging first quarter.

As you know, we were recycling growth from the past two years, two consecutive years of significant growth in the first quarter. And there was a decrease in private consumption in this quarter.

Consumption patterns were influenced last year probably with the pre-election period, and then we have this uncertainty that also prevailed in Mexico. I would add to that, same as in the U.S., we had some factors that were particular to us.

Some supply chain issues have been normalized. And then also the calendar headwinds that you mentioned.

So the -- what we have as insights from our own information, as you know, Yomp! is now providing interesting information in real time.

There is a decreasing consumption across industries, and that's evident. But the resilience of the NARTD category was evident.

Purchase frequency in our categories was less impacted compared to the overall basket. That's information that we have in our market.

And in terms of channels, I think another positive thing is that the traditional channel was somewhat more resilient in Mexico as compared to the other channels. So I think that also shows a sign of resiliency that channel in their markets.

But going forward and looking at trends for the rest of the year, we expect the rest of the year to be better. The second quarter comps are tough.

We had a an extraordinary month of May. And this year -- this month of April actually has one less day.

But when we compare the daily volume in the last few weeks of the first quarter and the average daily volume in April, I think we see positive signs of recovery. So that makes us believe that we're going to have better quarters as we move forward.

And we maintain our goals of growing volume in Mexico for the year. And there are also reasons to believe that we're going to be doing better, all the many, many things that we're doing that you know about, our new go-to-market models, investment in digital capabilities, our focus on affordability and also what we've been doing in our infrastructure for supply chain, manufacturing and distribution that will result in us serving the market in a much better way in the summer months that we expect to be very high volume.

So that's the overall environment for Mexico.

Okay. And then just if you can comment real quick on pricing dynamics.

And then for Emilio, one question I wanted to squeeze in for some of your capital projects in the United States, have you seen any issues, constraints, be it, a, on labor availability; or b, just the cost of raw materials going higher on some of the construction materials just given the whole tariff-induced inflationary dynamics that we're seeing in the U.S.? Those two quick ones.

Yes. In terms of pricing in Mexico, Ben, our price first quarter was up 4.9%.

True rate was a bit higher than that. We had a mix -- a small mix impact from transfer from single-serve to multi-serve, which is typical in quarters where we have contraction in volume.

But we did have growth in stills, which kind of that offsets it. So we are looking at a very similar pricing outcome for the year as we had anticipated.

We actually had price increases starting in the second quarter. So we're very much in line to meet our goals.

As you know, we are leveraging our tools for pricing and promotions. Our TPO, our promotional tool, has reduced unproductive promo spend 30% versus the baseline of a few years ago.

So that also continues to be very important for us as we meet our pricing goals in Mexico. So I'll turn it over to Emilio for your other question.

Yes. Thank you for your question, Ben.

We haven't seen any impact in labor, not in construction, not in the availability for labor in all the operation. We've been working really hard on the culture and with people.

And that, I think we can see a very positive result on all these initiatives that we have in the business. The people engagement is very high.

So we haven't seen any impact so far on labor.

Thank you, Ben.

Hi, good morning. Can you hear me?

Yes, Alvaro. Good morning.

Very good morning. Just two questions.

One on the U.S., just sort of on how the U.S. system is thinking about pricing versus big-box retailers in this environment.

And my second question is on Tuali in Mexico. You mentioned 68% of orders from the traditional channel are being taken via Tuali now.

What are sort of the key bottlenecks to push that number higher? And you can maybe give some more color.

You mentioned the sales uplift of 1.6 points. How do you isolate certain variables within that?

And -- yes, if you can give us more color on how you get to those 1.6 points that would be very helpful. Thank you.

Yes, for sure. Alvaro, good morning.

Well, in terms of pricing in the U.S. as I mentioned, we had a very good quarter in terms of pricing that was critical for our profitability in the first quarter, as I said, 6.4%.

But it was an important mix effect of 3.6% in the first quarter driven by the high profit per case SKUs that increased in their mix. As I said, the TPO, the promotional tool has been rolled out very, very effectively.

And we've been focusing on a very good price-pack architecture that includes pricing and promotions. We are working very closely with our retail partners.

As you know, true rate is not the only lever here. We improved the mix, and that requires working together to understand our consumers and especially to manage our promotions and make sure that they bring value to us based on the information that we keep collecting.

So I think we have a very positive pricing scenario based on -- again, on the investments that we've made in our tools and our team and the good relationships that we have with our retail partners. With respect to Tuali in Mexico, though it's being rolled out, as you know, in the rest of Latin America, well, yes, we've had a tremendous adoption of that platform.

As of March 25, we have in our digital platform, which is, as you know, transitioning to Tuali, we have 760,000 customers registered. And that resulted in positive volume performance.

I would say that more than having a percentage, which we actually have right now, as you know, 65%-plus of the traditional trades volume in Latin America is now being transacted digitally by the customers this year. But I would think that more than a specific percentage, it's not going to be a completely separate go-to-market connection with the customer versus our traditional way of selling.

It's going to be more of an omnichannel strategy, where you have the salesperson still interacting face-to-face probably, in some cases, complementing or supporting the order placing of the customer that they had taken care autonomously. So it's going to be a system where we have both our call center, our frontline sales force and the digital platform interacting to reach our goal.

So we have very clear metrics of what we want to accomplish, not only in terms of sales uplift and adoption of our tools like suggested order algorithms. But very importantly, our Net Promoter Score with customers increases.

And as you know, that's what we are all about of creating this customer intimacy. And that will be the foundation for our leadership in the future in traditional categories and in new categories and in other things that we are selling to the traditional trade.

But additional to that, I think it's very important to point out that this is not only a B2B platform. That's also part of the metrics that we're going to be following.

It's the use of other -- of the features and functionalities of Tuali, like a loyalty program that's being rolled out in Mexico and Ecuador, the buy now pay later option that we keep exploring and rolling out in more of our markets. So the point here is that we're creating really an ecosystem with the traditional trade more than just a transactional tool for placing orders.

And so we continue to refine that capability, and we're very optimistic how that is going to transform go-to-market models for, I would say, the entire consumer industry in Latin America.

That's very clear. Thank you very much Arturo.

Thank you, Alvaro.

Yes. Hi, good morning everyone.

Thanks Arturo and Emilio. Always a pleasure to talk you guys.

I have two questions. The first one is about further momentum and how it relates to your guidance, right?

Appreciate there are a few tools and levers to deliver better momentum in Mexico, namely and chiefly the calendar, which is more favorable for this quarter. But when I see, you're still reaffirming a guidance of high single-digit top line growth, while in this first quarter, with all these headwinds, you delivered 12% top line growth, right?

So I would just like to understand and reconcile, right, how this potentially better momentum going forward ties up with a guidance that assumes some moderation in revenue growth over the next few quarters. And I might follow up with the second one.

Yes. Thank you, Thiago.

Well, first quarter was, indeed, a very challenging quarter and a slowdown in overall consumption in most of our markets. And we, additionally, as I said, had tough comps in most of our markets as well.

We know that several factors contributed to the decline of volume. And some of those factors, as I said before, are non-recurring.

But given our playbook's effectiveness and what has been proven over and over across various challenges and various difficult contexts that we've gone through, we are very confident in future and most of our future profitability even in this volatile environment. If we focus on things that we -- that depend more on us, and there are plenty of opportunities there.

We have our cooler placement strategy, which is part of the, I would say, the more traditional playbook; the expansion of returnable packaging, which we've been investing in, in our Latin American markets. And that's also going to be critical to face these challenges, the use of the universal bottle in a wider portfolio of products and the new go-to-market models, which those are based on the implementation of digital initiatives.

But that will increase value-creating activities of our front line, improving our execution at the point of sale. And we have metrics for all of that, and those have been improving.

Also, and despite the challenges, the external challenges, we continue investing in the business. We maintain a long-term perspective and we're confident growth potential in each market.

As you know, we've installed many new lines, seven new lines in 2024, and we will install more in 2025, three more in Mexico, U.S. mainly, new distribution centers in those countries.

So we will continue to capture volume opportunities driven by all these initiatives and the expansion of digital capabilities. So our main thesis here, Thiago, is that we have demonstrated resilience in difficult times, economic slowdowns, throughout the pandemic, and we have delivered solid results, but most of all, setting the foundations for a stronger leadership as conditions improve.

So we expect those to be sequentially improving throughout this year. And we will come out much better positioned for growth in the future.

So that's why we maintain our guidance.

That's for sure. Thank you, Arturo.

And then the second one, I think prior to the call, we saw some headlines with some comments of the potential impact of tariffs into your business there. Could you guide us through -- obviously, this is still super volatile and ongoing, right?

But potentially, what could be the risks and the potential factors to mitigate that? I know concentrate prices is one area of attention.

I would just like to learn from you, if anything, how the new cooperation framework could eventually protect you there and what are the risks going forward? Thank you very much.

Yes. Well, despite this uncertainty about tariffs, one of the good things about our business is that we don't have a significant direct exposure to trade -- to bilateral international trade in sourcing of our inputs or the sale of our products.

Our business is mostly local, both in our exports to the U.S. of Mexican products and also for sourcing of inputs.

And that puts us in relative terms on a better position than some other companies that are facing more uncertainty. There is exposure, though, and Emilio can comment on that, particularly in aluminum, which, as you know, is a key raw material in -- for packaging and also in the U.S.

So Emilio, can you expand?

Yes. Sure.

Yes. As Arturo mentioned, the only raw material that is having an impact from tariffs is aluminum.

As we mentioned last conference call, the spot market of aluminum has already reflected some of the impacts on pricing. But thanks to our hedges, we will be able to mitigate a significant portion of that impact.

At the end, as Arturo mentioned, the impact for us is only in aluminum cans in U.S. And that could be less than 1% of COGS in our Coca-Cola Southwest Beverages in the U.S., considering that the tariffs remain at the current levels.

And the products that we export to U.S. like Topo Chico, Coca-Cola Nostalgia, Barrilitos are excluded from tariffs because of the USMCA agreement.

And even if they were included, it's less than 2% of the business.

That's great guys. Thank you very much.

I appreciate it.

Thank you, Thiago.

Hi. Good morning and thanks for taking my question.

The first question that I have is related to Mexico, if you can give us more color about what was the main driver of the margin contraction in Mexico and how do you envision the recovery of margins going forward? That's the first one.

And then I'll have a second one.

Yes. Good morning, Fernando.

I will turn it over to Emilio to talk about margins in Mexico. But I would say it's mostly driven by the volume contraction, which was quite severe.

And as I mentioned before, we are seeing a recovery and a positive trend recently. But go ahead, Emilio.

Yes. Thank you, Fernando, for the question.

But yes, basically, the decrease in EBITDA in Mexico is mainly explained by the volume contraction during the quarter of minus 3.6%. In April, we have already observed a better trend in volume.

So going forward, what -- while we have still some challenges, we'll continue to evolve our commercial capabilities and digital transformation and the advantage to offer to the consumer affordable options in our portfolio. We will continue to -- with our discipline in OpEx, as always.

And with our hedges that we have already, we should be able to reach the same EBITDA margin levels that we have last year. So this quarter, we expect next quarter to improve to have a positive trend as we have seen in April.

And when you look at OpEx, Fernando, it's -- in terms of labor cost, it's not an entirely fixed cost. So it also has an anticipation of volume that as it declined, it impacted as well, but it's all connected to the circumstances in the market.

So that's where we expect that to recover.

Okay. And in this sense, does the pause in the introduction in the Topo Chico plant generated extraordinary expenses?

Well, not extraordinary expenses, but certainly, it was a disruption in our supply chain, which is, again, one of the explanations of our decline in volumes in the first quarter that is non-recurring as the situation has now normalized.

Okay. Great.

And my second question is related to Peru, if you can elaborate more on your distribution agreement with Diageo, if you can share some highlights, it would be great. Thank you.

Yes. Well, as you know -- and Peru is one of the markets where we have the opportunity to expand our portfolio to other categories beyond our traditional beverage categories.

And we've been exploring that with different partners. So I will ask Chuy to comment on that.

I'll turn it over to him. Go ahead, Chuy.

Thank you, Arturo, and thank you, Fernando, for your question. As you know, our current models currently consists of three categories, which focus on LATAM's traditional and on-premise channels and that is beer, spirits and a basic assortments of groceries.

In the case of Peru, we have a partnership with Heineken, and that represents roughly 3% of our revenue. We also have a partner with La Caravedo, which has enabled us to increase the share of value for Schweppes, which is one of our products within the ginger ale category.

And we recently closed a long-term distribution agreement with Diageo nationwide to sell in those two channels, traditional and on-premise. And what we have seen so far is a very good reception from customers related to the Diageo portfolio.

Great, thank you.

Thank you, Fernando.

Thank you, operator. Hello, Arturo, Emilio and Jesus.

Thank you for the safer questions. I have a quick one on the U.S.

Wanted to see if you could share with us maybe some of the early findings of the efficiency program that you have on the distribution level and the cost of serving consumers and so on? And how is the plan developing so far?

And what do you expect maybe for this year and then years to come in terms of efficiencies looking at the U.S. business?

Thank you.

Yes. Thank you, Alejandro.

Well, we have worked in a number of initiatives for efficiency in the U.S. as part of the -- kind of the next stage of our improvement or profitability goals for that market.

And I would say that the most important ones are in our supply chain. And there are a large number of initiatives, and we actually have a project management office to follow up and lead those.

But one of the most important things that we're doing, as you know, is the investment in our manufacturing footprint in Texas and Oklahoma. We -- in first quarter, we actually broke ground on all three sites for the project, which is our largest project in this market.

It's a $267 million investment. As you know, it was announced last year.

And that will enhance significantly our supply chain efficiencies and also will support growth for the future. We have three new lines.

We have expanded warehouse capacity. We also have implemented process automation, which are initiatives that have a very good return in that market.

So that will bring an improvement in our overall cost, not in our secondary distribution but in our overall supply chain costs both in production cost and warehousing. And that will support, again, our margins and profitability going forward.

Another initiative was the new distribution center in Waco, Texas, also that was opened this year. So it also will support our efficiencies in our supply chain.

This is also supported by new planning technology has improved our forecast accuracy and reducing out-of-stocks. So there are a number of projects that we're implementing, but these would be, I think, the most relevant initiatives that will provide very important returns for the years to come.

Thank you, Arturo. That was very clear.

Thank you, Alejandro.

Thanks operator. Good morning, Arturo, Emilio and team.

Thanks for the space. I think most of my questions have been asked, but I have a small one on Ecuador and Peru.

In Ecuador, we're now kind of past the electoral uncertainty. There's still other challenges with utilities and others.

But do you expect an improvement in Ecuador from here and now that we're kind of past that electoral cycle? And then in Peru, the economy hasn't been as bad as it has been in Ecuador, but -- and you also have easier comps on the next two quarters.

So just wondering if you can comment on this quarter's weakness in Peru and how it might relate to the rest of the year. Thank you.

Thank you, Felipe, for your question. Well, first of all, in Ecuador, well, the challenges that we faced have obviously impacted the consumer sentiment and volumes.

There's an economic weakening, but also an insecurity crisis in the country that affects consumption and traffic to stores. There was also this first quarter some climatic disturbances, significant more rain than last quarter, so that's non-recurring.

And this pre-election uncertainty, that also negatively impacted the economy and our business. So this obviously was expected to subside with the recent election outcomes, and that will bring more stability, more certainty.

And so we expect that to improve. We also, as you know, had tough comparisons of the two previous years with the growth of 3.5% and more than 7%.

So we are forecasting volume growth actually for the second quarter and for the full year. And that would be consistent with a moderate GDP recovery projection that we have in Ecuador.

And also, considering all the things that we're doing despite these headwinds that would be a combination of the basic playbook, including coolers and returnable packaging. I would say, those are the two fundamental strategies of things that we can control, that are under our control.

And then some of the more innovative things that we're doing in terms of digital capabilities and also of reinforcing our strategies, particularly for Powerade energy drinks, are bringing incremental volume. So that's our expectation for Ecuador.

In terms of Peru, well, Peru, the consumer confidence also declined, and we had the tough comps over the last two years as well. Insecurity has also altered the behavior, I would say, in general in Peru.

But we have a positive trend as well in the month of March, actually. So we anticipate growth in the year as well.

There are so many things that we can do in Peru to improve our business, and that depends really on us. The adoption of the digital platform by the customers continues to grow, all the usability of the digital tools by our own sales force.

And the opportunity that we have within Coca-Cola that had growth in March even outperforming brand Coke and just the deployment of coolers, 7,000 new coolers and 12,000 new racks in Q1, that has -- is going to bring incremental volume throughout the year. Stills performance in Peru is a huge opportunity for that market, considering our market share.

And so we've seen good growth in some categories, energy, flavored water. So those are very good signs of recovery for the future.

So we have very, very good plans to mitigate external factors and, at the same time, capitalize on a sequential improvement of the economy. So that's why we maintain our goals for the year.

Great. That's fantastic.

And if I can throw a follow-up in there to the Diageo distribution question, just wondering if you can talk about now that you've signed the Diageo deal improvement, you've had such a good experience, what does that kind of imply your guide for the rest of the markets where you were fermenting with Diageo?

Yes. Well, every market has some particularities and dynamics.

We do think that there is a possibility for a good partnership with Diageo in some other markets. As Chuy explained, maybe there are some experiences that are more demand in certain countries like Pisco in Peru or there would be other cases in particular countries in Argentina.

In Mexico, I think Diageo is a good opportunity as well. And we've been working with them in our western market, particularly in the Jalisco region.

So even though our core products are still our main focus, with the adoption of technology, these opportunities can be really leveraged if we find the right partner, the right brands. And it does not really increase our routines in the market.

It's really opportunities depending on finding the partner and the right brands in each of our markets.

Great. Thanks so much for the color.

Thank you. Thank you, Felipe.

Hi, good morning everyone. Thank you so much for the opportunity.

Good morning, Emilio and Arturo. It's just a follow-up about commentary in the beginning of the call in terms of product mix in the U.S.

and opportunities. So yes, my question is if you could give us some color of what opportunity you are taking right now in terms of product mix in the U.S., if it's more related to single-serve, Coca-Cola Zero or other products.

And they said that would be related also to channel, for instance, you think within the traditional channel and the opportunity here for improvement in margins in the future? Thank you.

Thank you, Renata. Well, the U.S., the mix of products that we've seen recently is basically a mix, as I said, to more of the value-added or high profit per case products that has improved our average pricing.

But we do see a significant growth in some of the categories. Let me just mention some of the ones that are bringing incremental volume.

It's Fairlife, it's Monster, it's Topo Chico. Coke Zero for sure has been a driver of growth in that market.

So going forward, I think, it's going to be a matter of capturing opportunities in those categories, adding to also innovation. As you know, in the U.S., we continue introducing a number of new SKUs to the market.

And this competitive market, I think that is very important. We will continue to do that.

And I think it's basically working on three pillars: innovation on these categories and supporting growth of this higher price per case packages; second, working on our capabilities in the marketplace for better execution, including deployment of digital capabilities; and third, working on efficiencies and our operation basically in our supply chain. So a combination of that jointly with -- working -- still working on the culture of that organization, which has improved significantly.

As you know, we've had an improvement in engagement score over the past five years. That has been a key element for our execution and performance.

I think all of that is going to combine to sustain the margins, the historical margins that we've seen recently.

Thank you so much for the color.

Thank you, Renata.

Hi, Arturo and Emilio. Thank you for taking my question.

I just want to quickly explore a bit the market share trends in the U.S. We noticed in the consumer takeaway data we follow some market share losses for Coca-Cola in soft drinks, I think, in the cola categories in South U.S.

during the quarter. So just wondering if you also saw that in your operations and if it's perhaps related to competition being more aggressive or if you have any other takes on why that happened.

And if you also could explore if you are planning any promotions or other initiatives to recover their share, that would be helpful as well. Thank you very much.

Yes. Thank you, Henrique.

Well, share market share volume for -- in our categories experiences natural quarterly fluctuations. So what we try to look at is like longer-term trends.

What I can tell you is over the last two years in the U.S., we have consistently shown a positive or stable trend throughout -- in all of our categories. So we do track very particular movements in share, and we can react accordingly, as you say, with our promotional activity or any adjustment that we need to make in our packaging.

But all in all, we're pretty satisfied with the performance that we had in terms of our share in the last few years in that market.

That's clear. Thank you.

Thank you, Henrique.

Hi, good morning. Arturo and Emilio thanks for taking our questions.

Just a quick one. You've been mentioning, you've been providing quite a lot of color regarding operations in the U.S.

But if you could maybe provide a little bit more of how much of this benefit in sales and margins is originated from innovation, how much do they represent, how much do they positively benefit sales mix? Thanks.

Thank you, Antonio. So your question is about margins, how they have evolved and what are the drivers behind that in the U.S.?

How much -- particularly innovation in the U.S., how much do they contribute to both sales and profitability, if you could provide a little bit more light on that.

Yes. Well, I think innovation in a broader sense has been very important for our margin expansion in the U.S.

in the last few years, but it has been reflected in many different aspects. I would say, pricing is critical, obviously.

As I said, promotion optimization in the U.S., which also has improved 25% of promotional spend since it was implemented. So it tells you how -- and this is innovation because it's a new technology and how we incorporate the information that we have into our models.

So that's for, let's say, the top line. Then innovation and packaging, I mean, in products is also important.

We continue to introduce a big number of SKUs to that market every year, and we're going to do that this year as well. We -- sometimes they're in-and-out initiatives and some would stay for a longer time, but we've had the flexibility to do that.

And then you have all the projects in our supply chain and throughout our operations that would improve our profitability and our production and warehousing cost per case. Our lines are now more agile and flexible and faster, that has required investment over the years.

Same thing of what we are doing now in Fort Worth and San Antonio and Oklahoma, and that is innovation in processes in our plants. The other important thing that's also part of our -- the changes that we made and the innovation in our processes is on our S&OP, sales and operation planning, and the technology that has been incorporated there.

And it reflects in many different ways in less waste, better prediction of our demand and better supply to the market, so a reduction in out-of-stocks. There are so many indicators where that is reflected.

So that is, I would say, in general, a culture that we try to install in our U.S. operation.

Okay. Thanks for the color.

That's amazing.

Thank you, Antonio.

Thank you, Antonio.

Hi, guys. Thanks so much for the space for questions.

I just had a quick one, I think, similar to one that was asked, but this time focused on competitive dynamics in Mexico. So there, with the challenging kind of consumer environment we're seeing in the country and the volumes we saw obviously for the first quarter, I just wanted to double-check with you if there's anything worth noting there from competitions?

Any step-up, any change in the dynamics there? Or basically, we're still in that scenario where you guys keep outperforming the rest of the peers?

Thank you.

Yes. Well, Mexico, as you know -- thank you, Ulises, a very competitive market.

We have traditional competitors and some others coming in. What we know is that we have increased our weekly-plus consumers in Mexico.

I think that is very important to the health and the growth of our brand and particularly brand Coca-Cola. And we've been leveraging also the flexibility of our model.

And I think that is really important to -- for the introduction of returnable packaging, especially in times that are more challenging as we are seeing now. So all in all, we are confident in our price-pack architecture and our brands and the investments that we're making.

And -- but for sure, this year is going to be more challenging than others. But as I said before, we expect sequential recovery and growth at the end of the year.

Very clear. Thanks, Arturo.

Thank you, Ulises.

Hi, guys. Thank you very much for taking my question.

Can you hear me well?

Yes, Froylan. How are you?

Good morning.

Good morning. Thank you.

So a question on the U.S. We've been hearing about SNAP program potentially removing soft drinks from their purchasing basket, let's say.

Have you made any analysis or do you have any sense on how much this could impact demand for your product in the U.S.?

We don't have a specific impact. We keep analyzing all those initiatives and potential changes in regulation and also how to mitigate that.

But no, we don't have a specific number to provide at this point.

Okay. And just as a follow-up, just to understand better the impact of the Topo Chico maintenance.

If you could give us more color on volume and margin impact just to understand how much was a non-recurring on the drop this quarter.

Well, first of all, the Topo Chico situation only impacted Mexico, not the U.S. market.

We have plenty of inventory in the U.S. Actually, Topo Chico in the U.S.

was one of the categories that grew significantly. So the impact with the--

I meant in Mexico, sorry. I meant in Mexico.

Sorry, if I wasn't clear.

No, no, no, you were. I was just clarifying the point.

So in Mexico, if we look at decline in categories, water declined 28%. And in Mexico, and that was driven mostly by sparkling.

So that gives you an idea of the impact. But the volume, we expect that to be recovering throughout the year now that situation has normalized.

Understood. Thank you very much.

Thank you, Forylan.

Yes, good afternoon everyone. Arturo, the Dr.

Pepper relationship is really important to you, and we don't hear a lot about it. Can you speak a little bit to how that relationship is working for you and how the really strong focus we've seen that you have behind those brands in some of your markets in Texas is, is helpful to how you sell Coke better as well?

Yes. Thank you, Carlos, for that question.

I think it's really important because, first of all, it tells you how -- what is building strong partnerships with great brands and getting them to the market in an effective way and creating the connection with the customers. So we've done that with our main partner, The Coca-Cola Company, for almost 100 years.

But I think Dr. Pepper is also a great example of a very strong partnership.

And as I mentioned in my initial remarks, we were recognized by them as being one of the best partners in the U.S. We've been leading volume in that market.

But I think the important point is what you mentioned. We are convinced that, at least in our market in Texas, the Dr.

Pepper brand and Coca-Cola complement each other very effectively. As you know, Dr.

Pepper is the number two brand in the state. And so they reinforce each other as we go to market.

And that also has resulted in very, very good results both for brand Coca-Cola and Dr. Pepper as well.

We don't have that in all of the Texas market, as you know, and that allows us to compare. So we know how strong Dr.

Pepper is and how we perform better if we have this unified approach to the market. And they are also very good in innovation.

And I think we've also worked with them very closely and effectively in launching the innovation pipeline that they have.

Thank you.

Thank you, Carlos.

Thank you, and thanks all for joining us in today's call, for your continued interest and trust in our company. And as always, our Investor Relations team will be available for any follow-up questions.

We look forward to connecting with you again in the next quarter. Thank you.