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Alpha Sigma (ALFA), a $4.14 billion market cap company, reported its second quarter 2025 earnings, showcasing a robust financial performance with significant EBITDA achievements and notable regional variations. The company’s stock has gained 18.58% year-to-date, outperforming expectations. Despite challenges, the company remains optimistic about future growth, underpinned by strategic initiatives and market positioning. According to InvestingPro analysis, the company appears slightly overvalued at current levels, with additional insights available in the comprehensive Pro Research Report.
Key Takeaways
- Achieved second-highest comparable EBITDA in company history at $468 million.
- Record revenue and volume in the United States, with a $6 million EBITDA.
- Strategic expansion in Europe with new production facilities.
- Ongoing challenges with raw material costs, particularly in turkey production.
- Positive outlook for margin improvement in the second half of 2025.
Company Performance
Alpha Sigma’s Q2 2025 results reflect a mixed performance across different regions. The company achieved its second-highest comparable EBITDA at $468 million, contributing to a trailing twelve-month EBITDA of $718 million and demonstrating strong operational efficiency. With a healthy gross profit margin of 30.72% and impressive revenue growth of 47.5% over the last twelve months, the company’s fundamentals remain solid. In the United States, ALFA saw record quarterly volume and revenue, contributing to a $6 million EBITDA, the highest for Q2 in the region’s history. Conversely, Latin America experienced a decline in EBITDA by 19% in local currencies, despite achieving all-time high currency-neutral revenues.
Financial Highlights
- Comparable EBITDA: $468 million, second highest in company history.
- Consolidated net debt to EBITDA ratio: 2.6x.
- Dividends paid: $84 million.
- Mexico sales growth: 12% currency neutral; EBITDA down 5% in peso terms.
- Nonrecurring gain in Europe: €68 million from insurance reimbursements.
Outlook & Guidance
Looking ahead, Alpha Sigma anticipates margin improvements in the latter half of 2025, driven by strategic pricing and volume management initiatives. InvestingPro data reveals a strong analyst consensus recommendation of 1.44 (Strong Buy), suggesting confidence in the company’s strategy. The company projects flat to low single-digit volume growth and potential additional pricing adjustments. In Europe, ALFA aims for a normalized EBITDA margin in the mid to high single digits by 2027. Discover more detailed analysis and financial metrics with InvestingPro’s comprehensive research tools and ad-free interface.
Executive Commentary
Roberto Olivarez, CFO, emphasized the company’s resilience, stating, "Scale, diversification, and business culture have played a key role navigating this year’s highly fluid environment." He also expressed optimism, saying, "We’re excited about the opportunities ahead and remain committed to delivering value for all our stakeholders."
Risks and Challenges
- Raw material cost pressures, especially in turkey production, continue to impact margins.
- Geopolitical and economic uncertainties affecting market sentiment.
- Currency fluctuations, particularly the Mexican peso, influencing cost structures.
- Softening demand in the foodservice channel, notably in Mexican tourism areas.
- Global low consumer confidence levels may dampen demand.
Q&A
During the earnings call, analysts raised concerns about ongoing raw material cost pressures and their impact on margins. The management highlighted the potential benefits of the Mexican peso’s appreciation in reducing cost of goods sold (COGS) and reiterated a cautious approach to pricing to maintain consumer loyalty. The company is also focusing on sustaining volume momentum in the foodservice channel.
Full transcript - Gpo Alfa A (ALFAA) Q2 2025:
Conference Operator: Question and answer session at the end of the presentation with instructions given at that time. You may also submit questions at any time during the call using the q and a button of the webcast, which will be answered during the q and a session. As a reminder, today’s conference call is being recorded. Now I would like to turn the call over to mister Hernan Lozano, Vice President of Investor Relations. Mr.
Lozano, you may begin.
Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Good afternoon, everyone, and thank you all for joining us today. Further details about our financial results can be found in our press release, which was distributed yesterday afternoon together with a summarized presentation. Both are available on our website in the Investor Relations section. Let me remind you that during this call, we will share forward looking information and statements, which are based on variables and assumptions that are uncertain at this time. It is my pleasure to participate in today’s call together with Roberto Olivarez, Sigma’s CFO.
I will provide a brief update related to Alpha Sigma’s transformation and Roberto will discuss Sigma’s results. The second quarter was marked by a pivotal moment on April 7. This was the first trading day of Alpha Sigma as a pure play packaged food company. Over the last twelve months, we have witnessed a substantial improvement in the company’s valuation, narrowing the gap against international branded high protein food peers. This positive trend has been supported by the complete simplification of ALFA’s corporate structure, solid operating performance and rapidly growing recognition as a consumer focused company.
We are also excited to see our full focus on Sigma being reflected in a formal transition to consumer staples within the global industry classification standard and an expanding consumer specialized sales type coverage. To further highlight our new identity, preparations for a corporate rebranding that will redefine the ALFA name and ticker are well underway. Once completed, we will call an extraordinary shareholders meeting to obtain the necessary approvals and implement these changes. We look forward to continuing this rewarding journey by raising awareness of Alpha Sigma as a highly attractive investment alternative in the global food sector. I will now turn the call over to Roberto to discuss Sigma’s results.
Roberto Olivarez, CFO, Alpha Sigma: Thank you, Ron. We’re pleased to once again deliver consistent results driven by the disciplined execution in the current environment of global uncertainty. There is widespread low consumer confidence resulting from various geopolitical issues and economic concerns affecting sentiment. Scale, diversification and business culture have played a key role navigating this year’s highly fluid environment. Our multi segment brand portfolio, multinational footprint, multichannel distribution and global supply chain are some components of our business model that mitigate risk in volatile conditions.
Our teams have done a remarkable job of leveraging Sigma’s unique strengths to stay ahead of consumer needs, while adapting swiftly to remain aligned with expectations. The positive sequential momentum observed in second quarter sales, comparable EBITDA and comparable EBITDA margin expansion give us confidence in our ability to overcome certain headwinds and continue advancing in all regions. Implicit in this positive EBITDA margin trend, our targeted actions and core capabilities that enable us to counter higher than expected protein input costs, primarily Turkey, which is being affected by avian flu. It is important to highlight that Turkey price reference in The United States and Europe were more than 50% higher year over year during second Q twenty twenty five and remain subject to upward pressure. To further illustrate the cost headwinds we have faced this year, our largest region, Mexico, has effectively offset more than $200,000,000 associated with higher raw material costs year to date.
As referenced, this figure is equivalent to 66% of Mexico’s accumulated EBITDA. In sum, similar efforts to address raw material cost pressures across all regions have contributed to delivering the second highest accumulated comparable EBITDA in Sigma’s history, dollars $468,000,000. More importantly, consistent with our full year guidance, we remain focused on sustaining this positive sequential trend into the second half of twenty twenty five. Moving on to key highlights by region. Starting with Mexico, the region posted an outstanding 12% currency neutral sales growth with resilient volume as targeted revenue management actions and other initiatives advanced during the second quarter to address cost pressures.
Even so, peso denominated EBITDA was down 5% versus second Q twenty twenty four. This was primarily due to softer demand in the foodservice channel and a product mix impact in other channels. Next, The United States achieved record quarterly volume and revenues driven by national and Hispanic brands with EBITDA of 6,000,000 the highest second quarter figure in the region’s history. We were pleased to see resilient performance in Hispanic brands despite the rise in immigration related events during the quarter, which caused certain disruptions in specialty store traffic and operations. This is supported by the growing penetration that our Hispanic brands are achieving across complementary mainstream channels.
A final comment related to The Americas. Our Latin America region reached all time high currency neutral revenues, driven by volume and prices increasing 1%, respectively. By contrast, EBITDA was down 19% in local currencies, reflecting persistent raw material cost pressures and lagging operational effectiveness relative to other regions. On an absolute basis, most of this EBITDA reduction was concentrated in Costa Rica and The Dominican Republic. Targeted revenue management initiatives and additional margin recovery efforts are on the way.
In Europe, currency neutral revenues were flat year on year as higher prices offset a 2% decrease in volume associated with the residual effects of the Torrenton plant floating. The temporary plan to distribute production across other plants and trusted co packers is helping mitigate most of the short term impact on volume, which is a key area of focus for us to maintain a healthy presence in the market. At the same time, the European team is working diligently with multiple parties involved in obtaining reimbursements for the flood damages and putting together a comprehensive plan to recover the lost capacity in Spain. The second quarter benefited significantly from our progress in the damage reimbursement process. EBITDA included a nonrecurring gain of EUR 68,000,000 comprised of EUR 56,000,000 for property damages and EUR 11,000,000 for business interruption.
In total, we have received €88,000,000 since the unfortunate floating event in the fourth quarter of twenty twenty four. Insurance reimbursements will be the main source of funding for our permanent production recovery projects in Spain. As recently announced, these projects involve building a new packaged meat plants in Valencia with an estimated investment of €134,000,000 and expanding capacity at our most modern facility, La Boreba, with an estimated investment of €23,000,000 These investments are designed to recover production capacity, while reinforcing competitiveness and building upon profitability improvement efforts in the region.
Unidentified Speaker, Alpha Sigma: Resuming normal operation in Spain is our priority, as is continuing to expand our underlying EBITDA margin in Europe.
Roberto Olivarez, CFO, Alpha Sigma: This concludes my comments by reading. Regarding our financial position and select cash flow items, we maintain a strong consolidated net debt to EBITDA ratio of 2.6 times at the close of the second quarter. Looking at our year to date change in net debt, net working capital and CapEx represent the largest uses of cash. Notably, investments in net working capital decreased significantly quarter on quarter, while CapEx deployment accelerated as planned. Lastly, Alpha Sigma shareholders received dividends totaling $84,000,000 during the second quarter, which were aligned with dividends paid by Sigma to Alpha in the same period.
As we move into the second half of the year, we remain focused on executing our priorities, effectively addressing higher than expected raw material cost pressures, meeting guidance expectations and accelerating the recognition of Alpha’s new identity centered around Sigma. We’re excited about the opportunities ahead and remain committed to delivering value for all our stakeholders. Let’s open the call for questions. Please, Hernan.
Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Sure. Happy to do that, Roberto. Operator, could you please instruct participants to queue for questions? Roberto and I will take your questions on Alpha Sigma.
Conference Operator: Our
Conference Operator: first question comes from Renata Cabral of Citi. My
Renata Cabral, Analyst, Citi: first one is related to raw material prices. You comment on the release, but I do would like to understand how you see the impact moving forward since many things happened during the quarter, including a change in terms of FX. So it would be really useful if you can shed any color on this. And then I’ll make my second question after that. Thank you.
Roberto Olivarez, CFO, Alpha Sigma: Thank you, Renata, for your questions. Yes. Let me first make the comment about the particular raw materials. As described in my initial remarks, prices of Turkey has continued to go up during the quarter, and we do expect to that pressure to continue in in The US market in the second in in the second half of the of the year. Having said that, we have been increasingly bringing more raw material from Brazil and other regions, and that has also mitigated some of the some of the COGS impacts.
In regards to FX, it has been the opposite. During the second quarter of of of twenty twenty five. We we saw the peso appreciated almost all of the quarter. If if the if the peso continues to be at the same at the same level that we’re right now around $18.50, we do expect to have a a a decrease a decrease in COGS in in the in the second half of the year. Let me just mention that particularly during the second, in in the second quarter, p and l, we do have some higher cost inventory that was bought at a higher FX.
We expect that to be consumed all done in maybe the first months of the third quarter.
Renata Cabral, Analyst, Citi: Awesome. That’s really, really helpful. Thank you so much. And for the the second question, I would like to ask about specifically Mexico. We saw in terms of top line in margins for this quarter.
If you can help us even if qualitatively to say how is going the July or your perspectives for the second half of the year, both in top line and in terms of margins?
Unidentified Speaker, Alpha Sigma: Sure.
Roberto Olivarez, CFO, Alpha Sigma: Let me first cover the the the margin part. Again, as as as as I already mentioned, have, with with the effects at at the current, level that we’re that we’re right now, we do expect to have a stronger margin in the second half of the year. In regards to to to top line, we have been very cautious about the the price increases that we have done recently. And let let me let me split the business in two. For the retail business, top line has been has been solid or has been resilient.
It depends on the category, but in some of the categories, we’re we’re we’re gaining some some some volume growth in others where we’re resilient or flat. In regards to food service, particularly in Mexico, we we we see softer hospitality dynamics coming mainly from tourism in some of the comp in some of the, of of the tourist places in in Mexico. We’re working, or our our main focus right now is is is is to gain some some volume momentum in in the foodservice to con to to recover some of some of that volume.
Renata Cabral, Analyst, Citi: Alright. Thank you so much. Very good call.
Roberto Olivarez, CFO, Alpha Sigma: Thank you, Vamata.
Conference Operator: Our next question comes from Ricardo Alves of Morgan Stanley.
Ricardo Alves, Analyst, Morgan Stanley: Everybody. Hernan, Roberto, I hope you can me. Thanks for the opportunity. It’s a pleasure to talk to you. Very strong in the top line in Mexico.
I was wondering the 12% pricing. Can we zoom into that and perhaps talk about the component of pricing and mix just so that we can understand how we can think about unit revenue as we go into the second half? And then on top of that, I just wanted to ask a follow-up on Mexico margins into the second half related to the question that Renata was asking just to make sure if I understood correctly. Because if we have this scenario of a very resilient top line performance in Mexico, and then at the same time, the Mexican peso has been more supportive, is it indeed the case that we could expect the margins to improve significantly from here in Mexico assuming that the top line remains resilient? So the first part of the question, just to get some more color on the 12% on the unit revenue front.
I know that we have been discussing the channel exposure, traditional being more relevant. So just trying to separate a bit what is pricing, what is mix, that would be helpful and then how we think about margins into the second half. And my last question into The U. S. The performance of Sigma in The U.
S. Had surprised us to the upside over the past couple of quarters really. But when we look at the very marginal information on scanner data, we noticed a deceleration. We noticed, for instance, particularly in Frank’s, that, private label has become, more relevant. It’s growing, in the double digits.
So I just wanted to to get some color, into The US, maybe more specifically in France, if you are seeing the the consumer that is more selective, or if you see a pricing environment that is a little tougher, just so that we can get your your perspective for the next couple of quarters or if maybe just this is just a one off and you do have some strategies in terms of pricing to make front for this eventual more price sensitive consumer in The U. S. In the second half? Again, appreciate your time. Thank you so much.
Roberto Olivarez, CFO, Alpha Sigma: Thank you. Thank you, Ricardo, for your question. Let let me go one by one. The first one relating to pricing in Mexico, the 12% increase. You asked about the components of of that pricing.
Let let me first say that, obviously,
Juan Ponce, Analyst, Bradesco: the
Roberto Olivarez, CFO, Alpha Sigma: 12% the 12% increase is an average of of of the region. If if you see if you see first by channel and and and then by by different categories, we have increased for some for some categories and for some channels a significant amount. So, particularly, all those products related to Turkey, we have had the prices increases more than 20%. In the case of food service, and that’s also another another reason why volume has has been a little bit more soft in food service because we have increased 16% prices in food service in in in in in Mexican pesos. So there’s there’s some a mix between the different categories that that obviously is impacting some elasticity.
You you talk about pricing and mix. We have seen some further mix impact regarding some of the categories. Given the the substantial price increases in some of the turkey lines, we have seen people moving from turkey to pork or or even within the same turkey line, people moving from breast to to to turkey ham since since those products are more affordable. There’s still going to the Mexico margin, although FX, as you mentioned, is at a level that we were not expecting right now. We do continue to see some pressures in the Turkey environment in the second half of the year.
So it will depend on on on on on those pressures and and the effects to see if if the margin improvement, the sequential margin improvement that that that we, as of right now, see in the second half of the year, how big is that that improvement. But let me just say that we’re obviously following very closely the raw material market, bringing product from other regions, trying to to to to reduce the the the COGS as much as possible and doing some raw mat targeted revenue management initiatives to to improve the margin for the second half of of the year. In in regards to The US, the first you you mentioned some data about about Nielsen’s. Let let me just mention that Nielsen for us is is is a proxy. We we cover more channels that that those are that those are represented on the Nielsen data.
The US has maintained a resilient volume. Let me just talk about the national brand business because you talk about France. Quarter on quarter, we we saw sales of the national brand business increasing 17% on a sequential basis, and that has a lot to do with the promotion and a promotion that that that we are right now running in in some of of our big clients. We do expect that the promotions extend into some months of the third quarter. In regards to France, particularly our position in The U.
S. Market is that we participate as a smart choice brand for our consumers. So have although private label has penetrated a little bit more on the market, We still own the preference of our consumers that sector, and the retailers are helping us a lot to continue capturing that market.
Ricardo Alves, Analyst, Morgan Stanley: Much appreciated, Roberto. Thanks for the detailed answer.
Roberto Olivarez, CFO, Alpha Sigma: Thank you, Ricardo.
Conference Operator: Our next question comes from Felipe Ucros of Scotiabank. Please, sir. Go ahead.
Felipe Ucros, Analyst, Scotiabank: Thanks, operator, and good afternoon, guys. So very strong price mix in Mexico as it was already, mentioned, and and and you broke that segmentation between price and mix very well. I was impressed that the volume’s barely flinched. And that’s happening, you know, at a moment where there’s a lot of concerns about the state of the consumer in Mexico. So I’m wondering if you can just give us some more details around this perhaps as it it’s an understanding of how, these protein categories work.
And and perhaps when you see increases that are as sharp as you saw, you do see elasticity in the category, but it’s just that the consumer moves to other protein categories and you just get the volume somewhere else and the mix in your business changes. Is that how it usually works? And then the other side of that question, again, trying to understand the industry a little better, how do you usually behave? Because what we’ve seen historically in branded food and beverage categories is that after commodities come back down, there are no real immediate price reversals, and then you see kind of a margin increase across companies, that participate in these branded goods. But in protein, you see very sharp commodity moves.
So just wondering if, you know, with turkeys, let’s say, they the the the price comes later on, do you attempt to to try to keep that price mix high, or how does that usually behave for you guys? Thanks. Thanks a lot.
Roberto Olivarez, CFO, Alpha Sigma: Thank you. Thank you, Filipe, for your question. Maybe just let let me comment that we take a very cautious approach regarding revenue management. There’s there’s always a a sweet spot in regards to protecting margin for for today and and and in the long term and gaining market share. So we but there’s let me say there’s some efforts that we have done to to be more targeted whenever we we increase prices affecting maybe the some lines, some products that elasticity is is lower.
And then whenever it’s it’s a contrary whenever, as as you mentioned, the the cost goes down, it takes some opportunities to to to to give discounts whenever we see the the the the more value. It’s a it’s a very coordinated approach between the marketing team, the trade marketing, the revenue management team, and and and we do that in all regions to keep, again, volume strong and to keep margin strong. In regards to the concerns of the state of the consumer, obviously, we take that into consideration whenever we do a price increase because we want the consumer to to to be there in the long term. No. We don’t we whenever there’s a lot of volatility in in raw material or in COGS, there’s there’s opportunities for some for for some brands to enter our sector, maybe private label.
So we take that a lot into consideration when when when doing some some price increases.
Felipe Ucros, Analyst, Scotiabank: That’s very helpful. Thanks a lot for the color, guys.
Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Thank you, Felipe.
Conference Operator: Our next question comes from Juan Ponce of Bradesco. Please, sir. Go ahead.
Juan Ponce, Analyst, Bradesco: Hi. Thank you for taking my question. I have a quick one on Europe. Where do you see the normalized EBITDA margin? Maybe after 2027 when the when the new plant is ready?
And and before that, do you think that we we could we could expect some type of margin expansion next year, and and and maybe in 2027 as well? Thank you very much.
Roberto Olivarez, CFO, Alpha Sigma: Thank you. Thank you, Juan. Sure. Normalized EBITDA margin for ’27, it will it will be or the expectation, it will be to be between mid to high single digits or so around 88%. That is that that that will happen not only with the ongoing business environment that we have, all the efficiencies that that we’re that we’re looking, but also other strategic projects that that that we’re analyzing.
Obviously, that also will be or will happen if it will normalize the effect of the rebuilding of the plant. For next year, we do expect to have a if things continue to look as we have seen, we do expect to have a margin improvement versus 25%. Let me make just two comments. First one, regarding branded volume in in in the region. We have seen volume, particularly for some for in some of the regions, Spain, for example, that branded volume has increased significantly this this year.
And the other one, there’s a this year, we have suffered some impact from the fresh meat business due to the dynamics of the industry that those we do not expect to pull that in the long term.
Juan Ponce, Analyst, Bradesco: Great. Thank you
Conference Operator: very much, Roberto.
Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Thank you, Juan.
Conference Operator: Our next question comes from Fernando Olvera of Bank of America. Please, sir, go ahead.
Unidentified Speaker, Alpha Sigma: Can you hear me?
Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Yes. Yes.
Unidentified Speaker, Alpha Sigma: Yeah. Great. Thank you for taking my questions. I just have one, related to to volumes. Maybe if you can comment about what is your outlook in the different regions for the second half of the year, and how are you thinking on this compared to your guidance?
Thank you. Sure.
Roberto Olivarez, CFO, Alpha Sigma: Thank you, Fernando. So volume during this quarter was flat, but that comes mainly from significant price increases in Mexico that obviously has some impact on on volume. Euro Europe was two percent below, but if you we normalize that versus the with with the Torrente impact is is around flat and actually has a 2% increase sequential. And in the case of The US and Latin America, we have positive growth in in in in volume. In the in the second half of the year of the outlook, we we continue to see, let me say, good numbers in terms of of volume, I would say, between flat and and and low single digit growth.
It will depend, obviously, there are some opportunities or or the the need to increase some more pricing in the second half of the year that will have an impact. But we we see that in in general, the dynamics of the industry well. Obviously, there are some concerns about the sentiment, but, we have been able to tackle that that those concerns in in in most of the regions and and and have a good and solid results in volume.
Unidentified Speaker, Alpha Sigma: Okay. Great. Thank you.
Conference Operator: There being no further questions, I would like to return the call to management.
Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Thank you very much, everyone, for joining us today. Please feel free to reach out if you have any follow-up questions, and have a great day.
Conference Operator: This concludes today’s conference call. You may disconnect.
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