Hello, and welcome, everyone, joining today's Kimberly-Clark de México Second Quarter 2026 Earnings Conference Call. Please note this call is being recorded.

It is now my pleasure to turn the meeting over to CEO, Pablo Gonzalez.

Thank you so much. Good morning, everyone.

I hope you're all doing well, and thanks for participating in our call. As usual, we will provide some brief remarks, and then we'll open it up for questions.

We had another strong quarter and a good first half of the year with record revenue behind the strong performance in our consumer products businesses, continued double-digit increases in gross profit, operating profit and EBITDA and EBITDA margin at the top end of our range. Our strategies and actions are having the intended impact, spearheaded by strong commercial and operating execution, and we continue to make progress on our KCM plus innovation, growth and transformation strategy.

More on that after Xavier takes you through our second quarter results. Xavier?

Thank you. Good morning, everyone.

During the quarter, our sales were MXN 14.4 billion, a 2.7% increase versus the second quarter of 2025 and an all-time high. Total volume was up 3.1%, driven by Consumer Products, while price/mix was flat.

Net sales were led by Consumer Products, which grew 5.2% with a 4% volume increase and 1.2% price and mix growth, while Away from Home decreased 5.1%. Exports were down 11.1%.

Cost of goods sold decreased 3%. Our cost reduction program once again had very good results and yielded approximately MXN 450 million of savings during the quarter.

These savings are mainly at the cost of goods sold level. They were generated through a combination of global fiber contracting initiatives, changes in sourcing and the use of alternative fibers, product redesigns and the introduction of new raw materials in nonwoven fabrics, diaper geometry redesigns to improve material efficiency and logistics and distribution efficiencies across our network.

These initiatives reflect ongoing actions across procurement, product design, manufacturing and logistics. In addition to these actions, compared to last year, fibers and fluff were favorable, while superabsorbent materials and resins compared negatively.

The FX was lower, averaging around 11% less than last year. Gross profit increased 11.9% and margin was 41.6% for the quarter.

SG&A expenses were 11.5% higher year-over-year and as a percentage of sales were up 140 basis points. Distribution expenses were higher, while we continue to invest behind our brands and work to improve our footprint and streamline logistics operations.

Operating profit increased 12.2% and operating margin was 23.7%, up 50 basis points sequentially. We generated MXN 3.9 billion of EBITDA, a 9.6% increase year-over-year with EBITDA margin at 27.1%, above the long-term range, representing 40 basis points sequential improvement.

Cost of financing was MXN 470 million in the second quarter compared to MXN 352 million in the same period last year. Net interest expense was higher since we have more debt.

During the quarter, we had a MXN 50 million FX gain compared to a MXN 20 million gain last year. Net income for the quarter was MXN 2 billion, a 9% increase.

Earnings per share were [ MXN 0.68 ], a 9.7% increase. We maintain a very strong and healthy balance sheet.

Our total cash position as of June 30 was MXN 19.6 billion. Our net debt-to-EBITDA ratio was 0.9x with EBITDA to net interest coverage of 9x.

Thank you.

As mentioned, we had a strong first half of the year despite still subdued economic growth and private consumption. As we move into the second half, we expect consumer products businesses to continue to lead the way, the Away from Home business to grow during the second half of the year and parent roll sales will be lower due to more tissue required for consumer product sales, but becoming less of a drag as the year goes on.

All in all, we expect stronger revenue growth going forward. With respect to raw material costs, fundamentals support lower dollar prices versus last year.

But given the current geopolitical tensions, all derivatives will be higher both sequentially and versus last year. We expect prices will return to underlying market fundamentals by end of the year.

In the meantime, we will accelerate our price realization efforts and stay focused on operational efficiencies and ensuring another good year in our cost reduction efforts. Of greater importance, we continue to make good progress on our KCM plus strategies.

Our core businesses are performing well, and our diamond categories are accelerating growth behind consumer-centric, relevant and differentiated innovation together with greater engagement and improved commercial execution. Further, we continue to make inroads in private label and continue to work with our strategic partner to strengthen the North American supply chain.

When it comes to new areas of growth, we continue to make progress on pet food and are actively analyzing the Kenvue opportunity. All in all, our KCM plus initiatives focused on accelerating growth are going well.

Equally important, our efforts to develop our skill set, better utilize data, work closely with our retail partners and transform our end-to-end cost structure are gaining momentum. As we've mentioned before, effectively deploying and efficiently utilizing the most advanced technology solutions is the fundamental layer to support and drive all these efforts and time is of the essence.

We hope these comments provide a good picture of where we stand. With that, let me open the call for questions.

We'll take our first question from Alejandro Fuchs with Itau.

Congratulations on the results. I have 2 quick ones, if I may.

The first one, Pablo, I wanted to see if you can elaborate a little bit what are the main differences driving growth for the consumer segment relative to the Away from Home segment where we have seen a couple of quarters where there's a big difference in terms of growth in top line. So maybe if you can elaborate a little bit why is there such a big difference?

And I know that you said you expect better growth for Away from Home going forward. What's going to change for the second half?

And maybe the last one would be regarding the Kenvue deal, if you have any updates in terms of timing of the conversations? Should we expect maybe more color towards the third quarter or the fourth quarter?

Thanks, Alejandro. Thanks for the questions, and both very important.

Look, as you mentioned, we've had very good quarters on the consumer side, and that's driven by strong innovation behind our brands and relatively strong market shares, plus making inroads in certain opportunities that we've identified. So doing well both in our core categories and accelerating our growth in our diamond category.

So overall, I would say consumer products is going well, particularly when it comes to volume. So we're pretty happy with that performance, and we're working hard to make sure that continues.

When it comes to Away from Home, I mean, we've been talking a little bit about, one, distributors being a little bit more careful given the economic scenario. And now what we also saw happening is that they became a little bit more aggressive bending on the outcome on consumption given the World Cup experience.

And what we actually saw is that those expectations did not materialize. And as a result, really competition to drive volumes intensified and that negatively impacted pricing.

So we did see in Away from Home sequentially volume improvements, but pricing was affected because of this competition, again, to get more volume into the market. That may continue here in at least July, but we expect that to subside as the year progresses and have inventories and the business return to more normal levels.

It will still probably be lower growth rates because, again, the economic conditions are not conducive for our distributors to supply more products to restaurants, to hotels, et cetera. But we do expect it to come back to growth end of this quarter and certainly in the fourth quarter of the year.

I hope that helps when it comes to consumer versus Away from Home. When it comes to the Kenvue acquisition, we are very, very actively working on it with our partner.

And I would think that during this third quarter, we will have more information on that front.

Our next question comes from Bob Ford with Bank of America.

Pablo, your export business was down year-on-year, but up quarter-on-quarter, right? And you mentioned master rolls being down.

How should we think about the mix? And how are you thinking about sales over the balance of the year?

And then I was hoping, given the outlook for some of the inputs over the balance of the year, how are you thinking about industry pricing dynamics, particularly during the summer selling season, but from this position of strength with respect to your shares right now?

Thanks, Bob. Thanks for the questions.

First, on the export business, yes, you're right. Our export to finished product was down versus last year, but it was up sequentially.

Our export or parent rolls was also down versus last year, but was also up sequentially. And this has to do, particularly on the export to finished product side with a couple of things.

One, the exchange rate differential, of course, versus last year; two, that we were comparing to a record quarter in export finished product sales last year. Third quarter was also pretty strong and a slightly lower volume demand from our partner.

So just it was really timing in the second quarter, and there will be a little bit of that in the third quarter. But as you know, overall, we've been working with our partners to position ourselves to strengthen the North American supply chain, and we still believe that's the case, and we're finding good opportunities.

And so over a longer period of time and certainly for next year, we're seeing very, very good -- our expectation is for a strong growth certainly in that business. When it comes to parent rolls, again, it depends on how much we consume internally, and we're consuming more internally because of how strong our performance has been in consumer products.

But we're also finding ways to produce more. So hopefully, we'll be able to find here a combination where we can both use more internally, but also supply more externally and at least have that be less of a drag as we move forward.

When it comes to the cost side, again, hard to say where this -- how long this will last. I mean we expected this to be a very short time and with relatively lower impact, but it's dragged on for a little longer, I think that pretty much everyone expected.

It didn't get as bad as also some people expected it could get, but it has certainly had an impact. So we will see some of that impact in cost here in the third quarter.

And hopefully, as we mentioned, if you go back to fundamentals, those support lower dollar prices in our raw materials. So hopefully, we get back to that by the end of the year.

Having said that, having said that we will see more pressure on this quarter, we still expect to be within the range of our EBITDA margin target for the quarter, notwithstanding those price cost pressures. And again, hopefully, even improving in the fourth quarter as we move along.

Now given that this is happening, we will continue to monitor any opportunity for price realization. It's always tough during the promotional summer season, and this one has been particularly aggressive again, as consumption has been subdued.

So some of the retailers and some of our competitors have been a little bit more aggressive. So it's really hard at this time to really reflect pricing, but we also expect that to start to die down as this July passes and certainly into August and definitely through September.

So we'll continue to look for opportunities on price realization to be able to absorb some of these cost increases. But again, even if we're not able to do that, we are expecting to be able to deliver EBITDA margins within our target range.

Understood. And if I could just follow up, Pablo, you touched on private label in your comments.

And I was curious if you're seeing a downtrend within your own price tiers? And how are you thinking about participating in private label and the equilibrium with the branded side of the business?

Sure. That's a great question, Bob.

Yes, I mean, what we're seeing, not different from other economies is we're seeing what many are calling the K-shape, right? So consumers who are buying premium products continue to do so.

But we do see some consumers on the value segment trending down to economy segment and in some cases, trending down to private label offerings, particularly when it comes to hard discounters and some of the more economy-driven formats, for example, [indiscernible] et cetera, where there's also a big push to help consumers and provide these products at a lower cost. So certainly, that dynamic is happening.

As you know, our strategy has always been to have this multi-tier and multi-brand offerings with superior products in every tier to all of the private label offerings out there. And that will continue to be the norm, and that will continue to be our strategy, and we will bring innovation behind that very aggressively in the coming quarters and certainly into next year.

We've got a really, really nice pipeline that we put into place this year, and we love how it looks going forward. So that will certainly help.

But we've also said that we want to be more strategic about participating in private label. And given that it's a trend that continues and certainly something that retailers want to push forth, we see an opportunity for growth there if we participate.

So we're making inroads. We're working with quite a few of them and starting to supply some of their products, gaining that traction, momentum, confidence or trust with them to build that business.

And what we're going to have really is have our private label where we can supply it, compete with our brands for consumers' preference. And again, on the one hand, multitier and continued innovation to stay a step ahead and on the other, providing very good products for private label to be able to meet the demand of both our customers and our clients.

So a dual strategy, which started to pay off, but a lot more to do there, a lot of room for improvement and growth.

Our next question comes from Antonio Hernandez with Actinver.

Congrats on your results. Well, actually following up on the last answer that you provided.

Can you share more light on how much is private label as a share of sales? How much has it been growing within Kimberly-Clark?

And maybe how much of a potential do you see there? And also within innovation, how much of that innovation is addressing both the trade-off and the trade down?

I mean the K-shift economy?

Sure, Antonio. I mean innovation, private label still a small business for us.

We expect that maybe this year, it will be around MXN 800 million. That's about double what we did last year.

But again, with expectations that it can continue to grow at a very interesting clip in the next couple of years as we gain traction behind our initiatives. So a lot of focus there to make that happen.

In terms of innovation, I mean, really, the strong performance behind consumer products, diapers, bathroom tissue, feminine care incontinence. So both on our core categories and some of our diamond categories is supported by strong innovation.

We've been able to, in every category, bring new products to market, of course, together with a good commercial execution. So from new offerings in Cottonelle in bathroom tissue to new offerings in pretty much every tier in our diaper business, and we will be introducing more innovations in the premium side of the business this year to improvements in the value and economy tier in the wipes business and a new product line in feminine care, a new product line and incontinence.

So I would say that it's broad-based and that is in a very important way, why we've been able to continue to grow at a very good clip in consumer products despite the consumer environment.

We will move next with Reid Monahan with Barclays.

So I was wondering with quarterly savings of -- another quarter with savings around MXN 450 million and EBITDA margins holding above the long-term target range. Sort of how much of the current savings are run rate -- savings run rate would you consider structural versus timing related?

And as we look towards 2027, how sustainable are these current margin levels? And what do you expect the raw material and FX conditions as that plays out?

The way we usually -- not usually, the way we account for the cost savings is we only include cost savings that are for the most part for the long term. These are things that we can add on 1 year and go forward.

So they're more structural than conjunctural. That was your question, right?

Yes. Yes.

And then also sort of how you see, I guess, material costs play out over the course of the year?

Yes. I mean let me just touch a little bit on what Xavier said in terms of this being structural.

And we mentioned in our comments a couple of the things, but maybe that's useful because, for example, when we're generating savings through global fiber contracting initiatives and changing sourcing in different raw materials. So of course, that's structural.

I mean we're out there, I'm going to say, around the world looking for sourcing the best prices in our materials. And when we find that it doesn't end there.

We continue to look for the best sourcing possible, and we've been able to source materials from different parts of the world at preferred costs. And that's one example of the things we continuously do.

So that's really structural because it's behind our culture of just being out there and making sure we find the best opportunities. And the same can be said for product redesigns and some other efficiencies.

So again, always looking to structurally improve our cost structure and our efficiencies. Going forward, as we say, I mean, hard to tell if it was just by fundamentals, we should be seeing lower dollar prices in most of our raw materials because there's quite a bit more -- in many of them, quite a bit more supply than demand and in many areas of the world, subdued domestic consumption.

But that's being interrupted because of the current geopolitical tensions. How long that lasts it's anyone's guess.

So right now, we will see an impact. But eventually, we believe we will see those raw materials come back to fundamentals, and that will support lower costs.

And certainly, that, together with our efficiencies and our cost efforts help us continue to deliver good margins and certainly within our target range. This was the 13th consecutive quarter within or above our range, and we certainly expect that to continue as we move into the rest of the year and 2027.

Our next question comes from Guilherme Mendes with JPMorgan.

Another question on private label. Pablo, how do you define the point where more private label starts hurting the branded business?

I don't know if it's through the price gaps, the shelf space or even the consumer trade down but away from your portfolio? And how do you decide when to lean into private label to keep your plant utilization high and maybe even contain competition versus stepping back to protect your branded mix?

That's my first question. And the second, this extra gain on margins ahead of the guidance range, given the overall weak consumer backdrop that we're seeing, how much of this extra gain do you think you should need to invest into pricing or marketing into the second quarter?

Or this is something that you think can go throughout the year and really go above the guidance for the full year?

Let me start by this second one for you, and thanks for the question. Again, as we said, on the cost side, the third quarter will certainly be more challenging sequentially and to some degree versus last year because of everything that we mentioned so far, particularly when it comes to all derivatives.

And I mean, eventually, we'll see that come down, but certainly, the third quarter will be a little bit more challenging. Having said that, we do expect to be able to deliver within our target range and as things come back to the fundamentals, we will see better costs, and that should be helpful going forward.

So on pricing, that's on the cost side. And on pricing, again, we'll continue to look for opportunities for price realization, but it is clear that as we're in the summer promotional season and the economies are growing much, there's quite a bit of pricing going into the market.

And so it won't be that easy to be able to achieve higher pricing within the quarter. But still, we think we'll be able to deliver.

Now we won't be able to surpass what we did in the second quarter, but we should be able to deliver within our target range and improve on that for the fourth quarter, assuming costs get on a better footing and the promotional season and pricing aggressiveness starts to die down. And you know that's usually what happens in the third quarter every single year.

It's not a surprise. It's not uncommon.

It's just that now we have the cost pressure also on top of that. When it comes to private label, again, and leaning into it, it's a combination of all of the things you've mentioned, right?

There's a trend given that the economy has not really grown too much over the past decade and inflation has been higher, consumers are stretched. And so it's become more of a trend that they're really trying to look for offerings out there where they can make their money last longer and be worth more.

So it is a trend. We expect that to continue because we see no big catalysts for the economy to improve.

So we expect the consumer to continue to be stretched. So given that it's a trend, we want to be make sure we participate.

But at the same time, we will compete as we've always done with our brands through innovation and commercial execution to be able to provide offerings at every tier in the market. So it will be a dynamic that will unfold here for the coming years, and we want to make sure we participate in both, and we want to make sure we're successful in both and that, that helps us drive revenue growth for the company.

We will move next with Nicolas Rodrigues with Citi.

Regarding consumer products, which delivered like 5% of growth, could you provide more color on the categories and commercial [indiscernible] it is driving this performance and how you see the growth opportunity going forward, please?

Sure, Nicolas. Thanks for the question.

I mean when it comes to consumer products, we see our core categories, that's bathroom tissue, diapers, napkins, our biggest categories with strong performances, let me call it low to mid-single digit. And of course, those are the biggest categories.

So those are, to some extent, driving the overall growth. And then our diamond categories, which are those with -- where we see greater opportunity because of penetration, distribution, greater usage, et cetera, like, for example, wipes, incontinence, feminine care, even our even flow bottles, et cetera, those we're seeing high single-digit growth.

So overall, a good mix of growth in all of our categories. And again, our shares being strong, and we expect that to continue going forward.

If I may, another -- this quarter, EBITDA margin was above your long-term range. Could you help us understand how do you think about the sustainability of this margin in the second half?

Sure. Again, the margin was higher because we had both strong performance from consumer products behind volume, but there was also a little bit of price and mix in there, plus we had a good cost during the quarter.

As I mentioned, costs during the third quarter, given geopolitical tensions will be higher, particularly when it comes to oil derivatives. So we expect within the quarter to deliver EBITDA margin within our target range, most likely not at this rate of 27% or 27.1% that we delivered this quarter, but within our target range.

And as the geopolitical tensions subside and raw material costs come back to fundamentals, then we will be able -- we expect to be able to improve on the performance of the third quarter. So it will be probably assuming that the cost fundamentals come back by the end of the year, it will be a mixed second half with probably the fourth quarter being stronger than the third.

But again, very important in all cases, our margins being within our target. And as we've said, this was the 13th consecutive quarter within or above our range, and we expect that to continue for the rest of the year and into 2027.

We will move next with Juan Duman with Deutsche Bank.

Congrats on another solid quarter. Just a quick one here regarding the dynamics on SG&A expenses.

I suspect there's some brand and top line reinvestments embedded there. But also there might be some impact of higher freight or distribution expenses, I don't know.

So I just want to be sure what you're expecting here? What's the breakdown if possible?

And what are you seeing for the coming quarters?

The main things that you're seeing in as well, first, the main things that you're seeing in SG&A beyond what you already mentioned of investing behind the brands, which is key given all the things that we've talked about and which has been one of the drivers behind the performance of our consumer products. The other thing that you see there, which is growing more than the top line is compensation-related expenses or provisions, particularly the profit sharing.

As you know, we pay 10% of profit sharing directly, and we've been doing that for many years or many, many, many years. So that together with other compensation-related items add to the SG&A.

I don't know if you Pablo have something else.

No, that's true. The other thing that we're seeing there, particularly when it comes to -- on the sales side is more use of the technology and information platforms of our customers.

And of course, they're trying to monetize that, and we're participating and we're making very, very good use of that information to figure out trends to figure out what's happening in the market and determine our strategies and commercial execution. So that is increasing year-over-year.

It will certainly won't look that way next year. But for this year, there's an important increase in that line item, and it will continue again, being an important increase versus last year.

And then as we get into next year, we shouldn't see that line item increase as significantly as it has right now. But very important to have access to that information.

And very importantly, we're using it very, very aggressively with our technology and even with artificial intelligence agents to be able to take advantage of all that knowledge that's in there.

We do have a follow-up from Bob Ford with Bank of America.

I was curious with respect to Kenvue, do you need any additional debt to close on Kenvue or do you expect to wrap up the transaction with existing resources? And then I was curious, how are you and KCC thinking about how Kenvue markets in Latin America outside of Mexico?

Thanks, Bob. Thanks for your question.

I mean our discussion with Kimberly-Clark is strictly for the Kenvue Mexico business. And we're trying to figure out what's the best structure for the deal going forward.

And that's really where we stand. But assuming this goes forth, we absolutely would be able to deliver on it with our current structure, certainly adding some of Kenvue because, as you know, given the products that they sell, particularly they have a sales force that visits doctors, et cetera, that is a key item or key element of how they do business, a very important one.

So it would be a combination. But for the most part, with our structure, we would be able to just handle that incremental growth.

Understood. And from a financing perspective, again, no need for additional debt.

You've got it on the balance sheet. You can close this pretty quickly, correct?

Yes. Financing, it shouldn't be an issue.

And at this time, there are no further questions in queue. I will now turn the meeting back to CEO, Pablo Gonzalez, for closing comments.

No, just thank you for participating in the call. I hope you all have a wonderful summer and looking forward to having our conversation after the third quarter.

And just thanks again.

Thank you. This brings us to the end of today's meeting.

We appreciate your time and participation. You may now disconnect.