Good morning, and welcome to our third quarter 2026 conference call. We're pleased to have you all on the line and thankful for the opportunity to share results with you.

With me today as always are Mr. Raúl Cavazos Morales, Gruma's CFO, Rogelio Sánchez Martínez, Gruma's Corporate Finance VP.

To start the call, we'll take a few minutes to discuss the fundamentals and results for the quarter, and then we'll open it up to any questions you may have. The tortilla market overall continues to see pressure in the U.S.

as a result of record-low consumer sentiment in conjunction with an uncertain economic outlook based on looming high interest rates, an uncertain job market, and geopolitical events in different parts of the world that have contributed to additional inflation in most raw materials. Gruma's performance has been consistent with the overall performance of the tortilla category in the U.S., which remains under pressure with a perception of much weaker consumer purchasing power and added selectivity.

Gruma continues to execute its strategy that we've communicated in the past to adapt ourselves to these circumstances, which we consider temporary in nature rather than permanent structural changes until consumer confidence again reflects a perception of future purchasing power and job security. In Europe, we continue with our strategy of expanding retail, which has been optimized by the introduction of value-add tortillas in the market and well received in all the European distribution networks this subsidiary serves.

In Asia and Oceania, the trends remain positive overall, extending the solid performance both in Asia, mirroring the growth in food service industry, and Australia, where tortilla retail presence has increased. In corn flour, lower government-sponsored programs have led to temporary declines in Mexico, while the corn milling business has added volatility given the nature and seasonality of the industry it serves, coupled with geopolitical events.

Central America is in great shape and with plans to further expand its existing production capacity to satisfy growing demand. On a consolidated level, given these market dynamics that I just mentioned, volumes declined by 2.1%, primarily due to contraction in food service channel in the U.S.

and lower government programs in Mexico. Because of the effect of the current sales mix, coupled with the appreciation of the Mexican peso for this period, this actually led to a 1% rise in revenue.

That said, inflationary pressures were evident in the quarter, resulting in a 1.5% increase in COGS, which coupled with a 4.3% growth in SG&A, led to an EBITDA contraction of 4.2%. This translated into an EBITDA margin of 17%.

From a balance sheet perspective, working capital decreased in line with lower inventories, but lower accounts payable also partially mitigated the benefit of free cash flow generation. Both our cash generation and balance sheet balance remained robust with total net leverage of 1.3 times, down from 1.5 times last quarter, after paying down some debt.

Capital allocation remains the same with $100 million in dividends per year, and we will continue to be as active as we've been with our repurchase program. At least for now, we don't see any additional uses of capital in the form of M&A activity.

In the U.S., in the quarter, we continued seeing the same trends we saw where the consumer sentiment is still at all-time lows in conjunction with an uncertain economic outlook. Both these fundamentals have created a decline in the overall tortilla category in the U.S.

over the last 10 months of the year. However, within the category, the competitive landscape has changed and has drifted towards greater growth in private label rather than market share growth for a specific branded player in the market.

On the bright side, for the first time in a few quarters, we've now been able to outperform the category overall and have started a market share gain trajectory, currently standing at 59.6%. There's still several variables we're tracking to see how they develop over time, not the least of which is the future inflation in raw materials next year and how that will further affect the consumer overall.

However, with the situation as it stands today, we can confidently say that there are already signs of improvement compared to where we were a few months ago. It is important to note, however, that our end-game objective with our strategy is to create volume as an additional driver of absolute EBITDA growth, and in the future with a specific price mix from which we can grow with a better and more balanced structure in years to come.

We have, of course, not reached that point yet and will continue to work towards that end, but in the meantime, the results reflect the effects of this strategy and will continue adapting to future circumstances as they may arise. Inflation has also hit the cost structure, particularly in the form of transportation costs, which have been impacted on two fronts.

On the one hand, there are fuel surcharges related to high energy prices arising from the conflict in the Middle East. On the other, there is a shortage of transportation services, which has led to additional inflation on the cost structure.

We expect these factors to continue going forward. Volumes declined by 4.1% again, just as in the last quarter, led by dynamics I just mentioned in the food service channel, while revenues also fell proportionally.

Although we did find some efficiencies in the cost structure in the U.S., the decline in volumes, coupled with high inflationary pressures on other items such as labor and transportation, as I mentioned a minute ago, offset those savings, putting pressure on EBITDA for the quarter and resulting in an 18.9% decline, which was equivalent to an EBITDA margin of 17.9%. In Mexico, GIMSA's core businesses remained healthy and continued to deliver growth, which translated into positive performance.

Nevertheless, outside of the core business, lower government programs yielded 2% lower volumes relative to a year ago. Given the type of product and its current mix, net sales decreased proportionally and in line with its volume concentration, declining by 1.2%.

Please remember that as these results are under convenience translation accounting, they do not reflect the effects from the appreciation of the peso compared to a year ago. Although inflationary pressures were also present, particularly in the form of freight costs, GIMSA still delivered EBITDA growth of 4%.

Volumes in Europe were impacted by a decline in the corn milling business due to the effects of the war in Ukraine, which center around ports in the region, coupled with seasonality effects from clients. The performance on this side of the business overshadowed single-digit growth in the tortilla operation, which continues to operate as usual, expanding its retail presence across Europe and optimizing its sales mix.

As a matter of fact, the expansion that we've experienced in retail has led to a 60% composition in this market, with the added benefit of having progressively put private label production in a downward trend, helping both our brand and the introduction of newer products into this market. We will continue to move forward with our plans for this subsidiary, despite a few headwinds around transportation and overall logistics costs as a result of the conflict in the Middle East.

Volumes declined by 6.5%, while net sales remained flat. This resulted in EBITDA growth of 2.4%, reaching an EBITDA margin of 15.1% for the quarter in this subsidiary.

Our subsidiary in Central America has had a remarkable run over the last few quarters, positioning itself as an important contributor to profitability. The third quarter of the year was no exception, as the healthy demand we have been serving drove volume growth of 2%, while the sales mix that we have been able to create over time resulted in a 6.4% higher net sales.

As with other subsidiaries, inflation remained a common theme in this subsidiary as well, especially around materials, which prompted COGS to grow by 6.6%, with additional pressure in freight costs. This quarter, it's important to note that we had an extraordinary gain from an insurance claim in the amount of $9 million, which benefited results.

EBITDA increased by 46.9%, and EBITDA margin stood at 28.4% in the quarter. Asia and Oceania's momentum continues to deliver results in line with both the food service evolution in Asia and a greater retail presence in Australia.

In the quarter specifically, due to the geopolitical conflict in the Middle East, operations in Malaysia were temporarily hindered given some exports that are delivered to the Middle East in the regular course of business. This volatility will be a reality as long as the conflict is ongoing, but the overall health of the operation cannot be better and with a very positive outlook for years to come.

Volumes declined by 2% as a result of the performance that I just mentioned in Malaysia, while sales grew by 10.3% on the back of a much healthier contribution from the retail market in Australia. Both these fundamentals drove EBITDA to grow by 22.2% and yielding EBITDA margin of 15.2% for the quarter.

We're very pleased with the performance that this operation has achieved thus far, and currently we don't see immediate challenges that can compromise the revenue-generating dynamics that have led to this performance. Now that we've covered the subsidiaries and consolidated performance of the company overall, we'd like to bring to your attention to our guidance again, as we'd like to adjust it accordingly to the trends that we've been seeing and the changes in the marketplace that have taken place in the last four months of the year.

Given the circumstances that we described in the U.S. and the way we've been adapting to them to restructure our EBITDA-generating capabilities, we're adjusting our guidance downwards for the U.S., where EBITDA margin is forecast to decrease by 250 basis points instead of 200 basis points we guided on in our first call.

This is just to give you more of an insight of what we're expecting, given the additional production of private label products that are being placed in the market, in addition to any other trade-downs that may occur along our SKU offering as consumer sentiment continues in the low end of the spectrum. Adjusting EBITDA margin in the U.S.

to decrease by 250 basis points, coupled with a better performance in the rest of the subsidiaries, also means that on a consolidated basis, EBITDA should decrease by 120 basis points instead of 160 basis points we guided on during our last call. We hope that this gives the market a clear sense of impact of the market dynamics in the U.S.

and where we think we're going to be as we adapt ourselves to these circumstances going forward. Although we realize these are challenging times, we're pleased to see that our strategy that we laid forward at the beginning of the year has been materializing in line with our expectations.

We've managed to increase our market share in the U.S. with a full recovery to the levels we saw in 2025, as well as outperforming the category as a whole.

As you can probably see from our results, the headwinds ahead have more to do with the economy in the U.S. and its effects on the consumer, rather than a structural shift of the prevailing preference for tortilla over some other carb-intensive foods.

Given the nature of this challenge, we're confident that this is a transitory environment through which we will have to adapt ourselves to later have a better structured and more balanced approach to EBITDA generation once the operation for your U.S. subsidiary has normalized.

Until then, we'll be adapting and adjusting to the dynamics of the market, as we've done in the past quarters, to accommodate ourselves to the current demands and needs of the consumer during these challenging times and be in the best positions possible in the short term for the benefit of our long-term goals. With that, I'd like to open the call for questions from the listeners today.

Can you help us with that, operator, please?

Hi. Good morning.

Thanks for taking my question. Adolfo, regarding the U.S., I understand that food service comparisons were expected to become easier starting this third quarter.

Can you comment on what explains the volume weakness, and what should we expect from food service in coming quarters? That's the first one.

The second one, regarding your change of guidance for the EBITDA margin in the U.S., now we have seen a contraction or that the contraction has worsened sequentially, no? In fact, year-to-date, you have a margin contraction of 250 basis points, which I understand is what you are expecting for the whole year.

My question here is, it seems that this sequential contraction should reduce in the fourth quarter? Is that correct?

Is something to assume? Thank you.

Thank you, Fernando, for your question. Yes, we expected a stabilization of volumes in the food service channel during the third quarter.

That, we're still expecting it. It's going to be probably at some point in the fourth quarter.

Right now, the dragging effect, if you will, is twofold. One is that the expectations of the consumer has worsened progressively over time as new economic data has been put out there in the U.S.

They've become even more selective, and the flow that our clients were expecting is lower than usual during these times, if you will. In addition to that, the Cyclospora effect has also taken a toll on the speed of recovery that we were expecting.

Overall, the conclusion is that you will see a stabilization for sure. It'll be obviously later than we were expecting, but it will be at some point in the fourth quarter as far as we can see right now.

In regards to the sequential decline in margin, they're the result of two variables: additional private label production that we've put in place, and also this decline and a continued decline, if you will, in food service, which has been really the main factor because of how much volume it's represented in revenue generation. I would expect that that will stabilize in line with what I just commented in regards to the food service situation and the stabilization of volumes.

However, as we've talked about in the past and as I mentioned a minute ago, the whole purpose of our strategy is to keep on generating value alongside the private label growth in the U.S. and provide our clients with solutions in terms of private label given the circumstances.

Overall, the strategy is intended for margins to readjust so that we may grow once we hit a specific margin target in the future, once our clients received their targeted volume of private label that they are requiring today. Once we see that, we're hoping that we can see some volume inflection once we get that margin target in place, and from there grow as we've grown alongside the category once the economy and the consumer sentiment changes.

Great. Thank you, Adolfo.

Thank you, Fernando.

Thank you, operator. Hello, Adolfo, Rogelio, and team.

Thank you for space for questions. I have two questions if I may.

The first one is also on the U.S. Adolfo, you mentioned maybe a little bit better trends in the short term that you guys are seeing, and it seemed that the 2027 prospect looks a little bit more constructive.

Wanted to see maybe you can elaborate a little bit on which specific channels are you seeing this. Is it more food service recovering?

Is it more the retail? Maybe better for you?

If you could give us a little more color on where are you seeing this improvement? Then the second one just very quickly, wanted to see if you could touch up a little bit on the cost side.

What are you guys expecting for 2027 when you look at corn, and the hedging position that you guys could have also on the FX? That would be also very helpful.

Thank you.

Thank you for your question, Alejandro. The first one, in terms of better trends, you can also see that publicly in the Nielsen data out there, but for the first time, I think, in the last, I want to say, 18 months, we've been able to have a smaller decline in volumes relative to the category itself.

As the category has been declining overall from where it was a year ago, and the volumes that we've seen in the past have been greater in terms of their decline relative to the category. Since this is Nielsen's, this is speaking exclusively only about retail.

For the first time, those declines from our side has been lower than the category overall after we started implementing the strategy that we laid out at the beginning of the year. That for us, in addition to the fact that we've recovered market share to be today at 59.6%, we were at 58% prior to that, speaks to the better trends that I was referring to a minute ago.

We hope that this is the start of a trend and not a single data point, but that will be, again, dependent on the consumer's outlook on the economy and their purchasing power in the future. We are expecting hopefully that we will continue to see some improvement, but we don't want to be overly confident in that regard given the economy as it stands today.

In regards to your other question, 2027 will be, by all means, a challenging year for everyone. I don't want to generalize here.

Everyone had its own challenges, but I think it's no mystery that raw materials have gone up considerably, energy costs have gone up considerably, transportation costs, as a result, have gone up considerably in addition to other challenges within transportation industry and logistics. As you've pointed out, we've been known for having very effective hedges and throughout the years, but we'll be experiencing inflation nevertheless.

The growth that, for example, diesel prices have experienced relative to last year are just too much, and wheat as well. We do have hedges in place, obviously, as but we'll still experience inflation that we'll have to deal with next year.

Good to hear. Thank you, Adolfo.

Thank you.

Hi, everyone. Hi, Adolfo.

Thank you so much for the space for questions. Maybe a quick one in the Mexico division, Adolfo.

One thing that called our attention was the gross margin expansion in Mexico despite the lower volumes. I know that that may be some comp effect from last year as well, but if you could just dive a bit deeper on the dynamics around profitability in that region.

You mentioned efficiencies in the release, if you could explore a bit more about those efficiencies and also if you see any effects on raw materials, pricing, and how should we think about that in the context of higher energy and raw material costs that you mentioned into the next quarter and next year as well. Thank you very much.

No, thank you, Henrique. You cut off a little bit, please let me know if I'm responding all your questions.

I'm just going to respond the ones that I actually heard. First and foremost, in Mexico, we were able to pass on some of the inflation during the second quarter of the year.

In that regard, that's why you could see an improvement in gross margins. We also see demand being very stable in Mexico.

The one variable there, as we've talked about in the past as well, are government programs, which are very, very unpredictable year to year, and this year has been no exception. That itself represents approximately 6%, I want to say, of volumes in the Mexican operation, and that is what's causing that effect, the effect that you see there on volumes and on gross margins, as your question was referred to that.

Then, in addition to that, in terms of costs, I would say that for this year, you should be confident about the costs during the fourth quarter. I don't think they will differ too much from the trends that you've been seeing or that you saw in the third and second quarter of the year.

I'd be more cautious about 2027. As I mentioned, inflation is extremely high in items that are important for us in terms of raw materials and other products that we use in the daily operations.

I would be very cautious with that given that, as the timing of that inflation is unfortunate because of the economy in the U.S. and how it's behaving.

We'll have to see at the end of the year how we make our budget for that and how we adjust to that inflation during 2027 to give you a clearer picture how that will unfold, not only in Mexico or in the U.S., but worldwide.

That's clear, Adolfo. Thank you very much.

Thank you.

Hi. Good morning.

Thanks for taking my question. Regarding private labels, how much growth are you seeing in this category?

You're already participating there, but how much of actual opportunity do you see there, and how much do they represent right now of total sales? Thanks.

No, thank you for your question, Antonio. Private label is now the fastest-growing player in the market.

Right now, contrary to other times in the past, private labels got a very solid number of SKUs out there. It has more SKUs being offered than in the past, and we expect that trend to continue going forward.

Right now, we also gave you in the past the number 13% as a threshold as the highest number that private labels ever been at in terms of market share. In the latest Nielsen report, you can see that private label is now at 13.5%, they're already went over the historical threshold.

Now we're living a new normal if you want to call it that, and it will be growing continuously until the economy and the purchasing power of the consumer changes. Right now, it represents approximately 7% of our retail sales, and it's growing at around 10%.

How much that can get to is an unknown based on, or depending on the consumer. We're definitely right now navigating in a new normal.

We don't see that growing to the extent of Europe, obviously, which is private label dominant, but I would assume we will probably see it at the highest levels that we've seen it historically in the U.S. We are right now at the highest point that we've seen it so far, and it will keep growing.

Just a quick follow-up regarding that. How much are the margins differ between private label and, of course, better for you is the highest margin, but overall versus consolidated margins?

They're substantially different, right? It's a branded product versus a private label.

As I said, there are various SKUs right now in private label, but the conclusion, which I'm assuming is where you're trying to get to, is margins will be adjusted proportionally with the higher production or the additional production of private label going forward, to as much as it need be in order for the request of our clients to be fulfilled to answer the challenges that they're experiencing themselves with this situation. We're all in the same boat, and we're all experiencing the same pressures from the economy overall.

Thanks. It was very helpful.

Have a nice day.

No, thank you. Bye.

Good morning, Adolfo. Thanks for taking my questions as well.

Just two quick ones. One's a follow-up on Alejandro's question earlier on in terms of corn, which has been obviously very volatile, but I think we haven't received much of an answer just yet as where you are in terms of hedges.

How should we think about just the cost environment for the next couple of quarters, maybe on a rolling, whatever, 6- to 12-month basis forward? It's still higher, but have you done anything on the hedge side?

Just to get an understanding how much more of corn costs we should anticipate. That would be just the first one I wanted to follow up on.

Sure, no problem. Yes, throughout the year, we've done hedges, of course, which is our custom to get the optimal cost, inventory cost, that we can get when harvest takes place.

We layered in different costs, obviously, because we started from the beginning of the year, and we left some of the requirements on the spot market. On the one hand, we hedge at the beginning of the year, having some benefits given the cost at that point, but then when corn spiked and we didn't want to wait a lot for it to get even higher than that, we covered another 40% of our needs.

We have approximately 70% of our needs covered and 30% in the spot market. That is for corn.

In regards to the other raw materials, we've been able to hedge just well, the first quarter of next year. Given the volatility in prices, we want to be opportunistic as possible.

Again, as I mentioned, even with that, we are expecting inflation, and we are expecting that inflation to potentially hit margins next year.

Yeah. Then that's actually my follow-up question on that then, and the real question.

As you have this input cost inflation, you clearly have to kind of find the balance as to what you can and cannot pass on to the customer. Have you had initial talks with your key customers, be it in retail or food service in the U.S., as to where prices might go, and a little bit of a preliminary indication as how much of a margin pressure it could potentially bring if pricing does not offset the cost inflation?

I agree with you. That is the question that many of you have.

However, to answer that question, first of all, we would need to get together and see what level of inflation we're actually experiencing with the different layers of inventories that we're counting on for next year, and that will be during our budgeting season at the end of the year. We haven't talked about this at all with our clients, and we will intend to talk about it with them whenever we have a very good understanding of what that inflation looks like for us in the cost structure, and we'll try to get an adequate price for all, our clients, ourselves, and the consumer, given the circumstances that we're living through.

Far, I cannot give you a detailed explanation in that regard.

Thank you very much.

No, thank you.

Hello, Adolfo. Can you hear me?

I can hear you very well. How are you?

Awesome. Great.

Great. I have a question on the category itself.

I was wondering if you could sort of delve deeper into what you guys are seeing in terms of category weakness overall relative to the past, and within that, how better-for-you is performing year-to-date within your portfolio? Thank you.

Sure, no problem. The categories overall, let's start with the value-add portion.

The better-for-you, which as represents approximately 32% of retail sales, that's been slowing down, there's no question about it. In the past, as we reported, we had been growing at around 15% per year, and that slowed down probably to 8% today.

It is a category that is slowing down, and it's being trading down to either, I want to call it plain value-add tortilla or even standard tortilla, given the circumstances. That portion of value-add tortilla is growing.

Potentially, I would say that it could grow in line with better-for-you, but right now it's growing a little bit lower than better-for-you. It's growing at around 5% to 6%.

Private label, as I mentioned, which is outside of categories overall, obviously, is growing at 8% more or less, and the rest of the categories, which are more standard in nature, are the ones being hit the most on the retail side of the business. Those are the categories that have to do with corn, which are aimed to Hispanics more so than anything else.

They are standard wheat, which are aimed to people that may have more price sensitivity along the SKU or along the clients that buy different SKUs or the consumers that buy different SKUs. Those that are more prone to have that price sensitivity within the category, which are more or less 35% of retail sales, are the ones that are trending down to private label.

Now within private label, the interesting part is that there are now levels of private label. There's also the standard one and now the value-add ones as well.

We will have, without a doubt, a environment where private label will have a lot more SKUs, where margins will be different between each of them. It won't be at the same margin for the private label product, and we'll see where that gets us at the end of the day once the consumer responds to that.

That's more or less how these things have been moving overall.

That's super helpful color, Adolfo. That's great.

Then just one follow-up on the guidance. You mentioned 250 basis point contraction in the U.S., and I believe you said 120 basis point contraction on a consolidated basis.

My question is if that's right, and then two, does that include the $9 million gain within that calc from this quarter?

No, no, no, that doesn't include the $9 million gain. It's just a assumption that we're making that the other subsidiaries will have an accretive effect on margins that will make the consolidated margins have a better adjusted margin than the one we gave before in our guidance in our last call.

Great. It's 120 on a consolidated basis, just to check that.

Correct.

Correct, yes.

Great. Awesome.

Thank you very much, Adolfo.

No, thank you, Alvaro. Take care.

Hello, Adolfo. Can you hear me?

I can hear you very well. How are you?

Everything

all good. Thank you so much.

Just curious, sorry, you've talked a lot about this, but it seems that it's the retailers, the ones that are driving, let's say, a little bit of the demand. What will happen if at some point you see that the push that they are making is well beyond your optimal on your own, let's say, mix between private and branded, particularly given the margin dilution?

How willing are you to follow the retailers on their own goals on private label, and how far do you think they are on their own mind as of how much private label should represent? That's the first question.

Second, on Europe, can you just give a little bit more granularity on how the tortilla business is performing in terms of volume and retail penetration, and if the, let's say, favorable mix that you're seeing will offset the challenges you're seeing in the milling business? Will that continue?

Thank you so much.

Of course. I'm going to start with the second question.

The first one, you cut out a little bit, I'm going to ask you to repeat that after I answer the second question, if that's okay. In regards to the second question in Europe, things have been evolving quite favorably for us since we started adding more distribution outside of the U.K.

The retail presence that we've been able to create there has been really outstanding. Right now, it's as I mentioned in the comments, is 60% retail today, which is something really incredible relative to where we were, because as you probably know, this is a or was a food-service-centric subsidiary.

Now that being said, within that retail presence of 60%, 30% or close to 30% of our sales are private label. That gives you a perspective how different the market is there relative to the U.S.

The other 70% is a combination of what we call the nostalgia market, which are tortillas that are targeted to people that are living outside of their home countries. They can have these options to buy tortillas that are in line with their traditional cuisine, in addition to standard tortilla or value-add tortilla today, which is something that will add or that is adding a lot of accretion to our margins in addition to the higher retail distribution.

In addition to that, which is interesting, is that we've been able, because of the acceptance that we've been able to generate in Europe, the composition of private label or the growth, I would say, of private label has been diminishing over time. You can clearly see a preference or a trend line that points out to a clear preference of branded products, namely our brand Mission, relative to private label over time.

We hope that this trends continues. We're doing all that we can in our control to continue that trend.

As I mentioned, there are challenges also ahead. The conflict in the Middle East is something that affects us all globally.

Diesel prices are challenging. Logistics overall are challenging.

Given the nature of the revenue-generating dynamics of that business, I think that that subsidiary will be fine. I don't see any meaningful challenges that would compromise the trend that I was talking about.

This quarter specifically, you probably don't see how well the tortilla channel is growing because of the volatility in the corn milling business, which does represent a lot of volume in that subsidiary. In spite of the growth that retail has had in time and to the tortilla business overall has had during all this time, the corn milling business volume-wise still represents a considerable amount of tonnage.

Any volatility present there will affect the volumes, but that doesn't mean that the tortilla business is passing through a challenging time or anything of the sort. It's growing quite favorably.

I will ask you now if you can repeat the first question, please?

Hi, Adolfo. Thanks for taking my question.

We have two from our side here. The first one, if you can please share how food service volumes have evolved throughout the quarter.

I think that would help us understand how far into 4Q we should expect a stabilization in volumes. Also, the second one, in the U.S., if you could please break down the pressures between the higher logistics costs and higher marketing would be very helpful.

Thank you.

Thank you for your question. In regards to your first question, the food service channel has experienced declines of around 15% over the last 18 months that we've been operating, and this quarter was no different.

This quarter, we experienced also probably a 17% decline in that respect. That is obviously accentuated by the Cyclospora effect that I mentioned a minute ago.

In the U.S., marketing and logistics, marketing, I would say it's been an important factor, but as you all probably know, we're not a company that has a product that needs a lot of advertising in the traditional way. We do some advertising, in-store advertising, when it need be, and we've engaged in that to promote the brand and to promote the different products that we have and new products that we have, but in reality, out of the entirety of SG&A, I would say, 85% of this quarter was logistics.

The freight costs there have accentuated, and this quarter specifically was not so much because of the spike in diesel more so than the availability of transportation services overall, which has been challenging, and that has spiked freight costs a lot. Within logistics, freight is the challenge, and as I said in my comments, that will continue being a challenge going forward.

Perfect. Thank you, Adolfo.

Thank you.

Hi, Adolfo. Thanks for taking my question.

I just wanted to know, as far as you can see, how should we think about free cash flow and therefore leverage in 2027, particularly around CapEx and working capital needs?

Thank you for your question, Regina. Now free cash flow, we're fine.

We are generating close to $400 million per year, that's not bound to change. Even more so with the requirements of CapEx that we have today, which are not many and will not be many in the short term or medium term really, unless we build a new plant in the U.S.

In terms of CapEx for the future, I think the plan that we have at least right now on the whiteboard is we need some additional storage capacity in Europe. We need to invest for that.

Some additional production capacity as well. We're probably going to invest in Central America further.

As that's one of the main priorities right now because demand is just too much for the capacity that we have installed there. In addition to that, also some storage capabilities in Australia.

That will be really it as of now in terms of our immediate needs. That will probably translate into $200 million in terms of CapEx for next year, which will ease further capital in form of free cash flow.

Net working capital, we normally, since we have a priority of having enough corn and enough wheat every year, we normally grow at around, I would say, between $80 to $100 million per year. Given the circumstances today, we'll probably also be saving in that, but just not as much as in CapEx.

In all senses, we will have a better picture, a much better picture in terms of free cash flow. It is already great, but it will be even better with these little adjustments.

I don't see, at least right now, something that would challenge that in the future. Free cash flow is perfectly fine.

Thank you, Adolfo. That is very clear.

Just to clarify, because I think I didn't hear you well when you answered a few questions ago, you said you had 70% of your needs of corn hedged for next year. Is that right?

70,

7-0,

for next year's needs.

Perfect. Thank you so much.

No problem. Thank you.

Hi. Thanks for taking my question.

It was partially answered, but I did want to follow up on this last point that you mentioned. If I understood correctly, you're expecting working capital to be positive despite the higher raw material prices?

If you can clarify that. If there was anything specific, or if you can comment if there was anything unusual on the big release in inventory this quarter, or what we should expect for next quarter.

Thank you.

The release that you saw in inventories had more to do with seasonal reasons rather than anything else. We're coming off of the harvest season in Mexico, and you had that spike last quarter there.

In this quarter, you have that release. In terms of net working capital, yes, that is the whole point, right?

We have to, we still have needs in terms of working capital, and we will pay more for them relative to the hedges that we may or may not have relative to inflation and other adjustments in costs. We cannot let go of increasing or growing our net working capital based on just inflation, given that is our main raw material to produce our products.

Thank you.

Thank you.

Thanks, operator. Good afternoon, Adolfo.

Quick couple on my side today. On the U.S., given that food service has been on a different track than the rest of the tortilla business, has the composition of the business materially changed?

Where's the composition today after the divergent trends that we're seeing on better-for-you on one angle and then food service declining on the other angle? Then the second one on Central America, obviously you'll be adding new capacity because the segment is performing very well.

Just wondering on whether you expect a quick deployment of that capacity and whether we should imagine an impact on margins initially as you ramp up and you start diluting the new fixed costs. Thank you.

Thank you for your question. In the U.S.

right now, with all the declines in volumes in food service, we're approximately at 84% retail and 16% food service. Obviously, the mix in that retail portion, I gave it a minute ago, has changed, and also the growth rates for each one of those components in retail.

That will keep on changing relative to the consumer in the U.S. and the U.S.

economy overall. Food service, I think that once volumes stabilize, you will have a much clearer picture of what is happening in retail and the evolution of retail going forward.

In terms of Central America, the deployment of capital for the new mill that I just mentioned, we're going to be investing in it next year. I would say that the deployment will take place next year, but in reality, the actual benefit in margins of that new mill will not be immediate.

I would say at the end of next year, probably first quarter of the following year.

That's very clear. Thanks a lot, Adolfo.

Thank you.

Thank you so much, everyone, for being with us this morning, and we hope to see you in future market events. Take care, everyone.

Bye.