Earnings call transcript: Alpha Sigma Q3 2025 sees revenue growth amid cost pressures

Alpha Sigma, a $4.37 billion market cap company that has delivered an impressive 20% return year-to-date, reported its Q3 2025 earnings, showcasing a record revenue of $400 million, an 8% increase year-over-year. Despite this growth, the company’s EBITDA faced a 9% decline due to rising raw material costs. According to InvestingPro analysis, the stock appears fairly valued based on its comprehensive Fair Value model. The earnings call highlighted key strategic initiatives, including product innovation and market expansion, against a backdrop of challenging market conditions.

Key Takeaways

• Q3 2025 revenues reached a record $400 million, up 8% year-on-year.
• EBITDA decreased by 9% due to raw material cost pressures.
• The company is launching a direct-to-consumer venture in the U.S. market.
• Alpha Sigma approved its first dividend of $35 million for the year.
• Turkey protein prices surged, impacting industry-wide performance.

Company Performance

Alpha Sigma demonstrated resilience in Q3 2025, achieving record revenues despite facing significant cost challenges. The company’s diversified business platform and strong retail presence have provided a buffer against market volatility. However, the pressure from increased raw material costs has affected profitability, reflected in the 9% year-on-year decline in EBITDA.

Financial Highlights

• Revenue: $400 million, up 8% year-on-year.
• Nine-month comparable EBITDA: $722 million, down 9% year-on-year.
• Consolidated net debt to EBITDA ratio: 2.7x.
• Total cash dividends for the year: $119 million.

Outlook & Guidance

Looking ahead, Alpha Sigma anticipates a gradual improvement in turkey supply and costs. The company projects significant year-over-year growth in the fourth quarter, supported by expected business interruption insurance reimbursements of $15-20 million. With an overall Financial Health Score of "GOOD" from InvestingPro and strong analyst consensus recommending "Buy," the company’s outlook appears promising. Analysts have set price targets ranging from $0.92 to $1.28, suggesting potential upside. The management remains cautiously optimistic about raw material cost stabilization in 2026.

Executive Commentary

"We have experienced a smooth transition into a steady state business after years of transformational developments," stated Hernan Lozano, VP of Investor Relations. CFO Roberto Olivarez added, "We try to position ourselves as a smart value brand, playing a lot with innovation, on convenience."

Risks and Challenges

• Raw material cost pressures continue to impact profitability.
• Market competition, particularly from private labels in the U.S., poses challenges.
• Consumer confidence remains soft, affecting purchasing patterns.
• High turkey protein prices could further strain margins.
• The ongoing need for innovation and market adaptation.

Alpha Sigma’s strategic focus on innovation and market expansion positions it well for future growth, despite current challenges. Trading at an EV/EBITDA multiple of 8.94x and P/E ratio of 31.5x, the company’s valuation metrics reflect market confidence in its growth strategy. The company’s efforts in rebranding and capacity expansion are expected to bolster its competitive edge in the evolving market landscape. Discover comprehensive valuation analysis and growth projections in Alpha Sigma’s detailed Pro Research Report, available exclusively on InvestingPro.

Full transcript - Gpo Alfa A (ALFAA) Q3 2025:

Conference Operator: Good afternoon, and welcome to Alpha’s Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. There will be a question and answer session at the end of the presentation with instructions given at that time. You may also submit your 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.

I would like to turn the call over to Mr. Hernan Lozano, Vice President of Investor Relations. Mr. Lozano, you may begin.

Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Good day, everyone, and thank you for joining us. 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, then Roberto will discuss Sigma’s third quarter results and outlook. It is exciting to report Alpha Sigma’s first complete quarter as a streamlined global branded food player. We have experienced a smooth transition into a steady state business after years of transformational developments. To better reflect Alpha’s new identity and to concentrate on growing Sigma’s corporate brand equity, we are implementing a rebranding initiative. As a first step to sunset the Alpha brand, an extraordinary shareholder meeting will be convened soon to propose adopting a Sigma related entity name at the Alpha level.

We will share updates on these changes in due course. Returning value to shareholders through cash dividends will remain core to capital allocation. On October 1, the Board approved the first dividend under the company’s new food focused structure, a $35,000,000 payment, bringing total cash dividends for the year to 119,000,000 This amount is aligned with distribution levels historically supported by Sigma’s strong cash generating ability. With that, I will now turn the call over to Roberto to discuss Sigma’s results.

Roberto Olivarez, CFO, Sigma: Thank you, Hernan, and thank you all for joining us today. We are pleased to report another quarter of positive sequential improvement in volume, revenues and comparable EBITDA, underscoring consistent progress adapting to raw material cost pressures in a global environment of soft consumer confidence. Consumers are moving across channels, categories and brands, including varying shifts between retail and food service, dairy and packaged meats, as well as value and premium brands. The good news is that Sigma’s diversified business platform give us a relative advantage to maintain strong connections with consumers throughout the broad marketplace. One of the biggest industry wide challenges we continue to face is rising raw material costs.

In particular, Turkey Rez has experienced the sharpest price increase reflecting supply constraints amplified by seasonal avian flu. Prices reached an all time high of $7.1 per pound at the close of 3Q twenty twenty five, which was an outstanding 244% increase from a year ago. Although we have certainly felt the effects of high Turkey prices and other protein costs, Sigma’s large scale and global supply chain have helped reduce their impact on our results. Looking ahead, we anticipate that current high prices, vaccination and low feed cost will be supportive of a gradual improvement in Turkey supply and cost. In addition to Sigma’s structural advantages, our experienced teams have done an incredible job staying on top of consumer needs and expectations.

All the initiatives we have undertaken drove third quarter revenues to a record $400,000,000 up 8% year on year and 5% sequentially. We have been implementing targeted price actions through a balanced approach to mitigate rising input costs while also supporting volume. EBITDA was down 9% year on year due to sustained raw material cost pressures and a record high comparison in 3Q twenty twenty four. Adjusting for the torrented property damage reimbursements in the second quarter, comparable EBITDA increased 3% sequentially, marking the third consecutive quarter of improvement. As a result, nine month comparable EBITDA of $722,000,000 is tracking in range with our full year guidance.

We are confident that this upward trend will continue gaining momentum into the fourth quarter, which implies significant year over year growth for the first time in 2025. Moving next to key highlights by region. Mexico was once again the standout with revenues in local currency increasing both year over year and sequentially. Volume increased 1% quarter on quarter as growth from retail channels offset weaker performance in foodservice, which was impacted by soft hospitality demand. Byproduct, yogurt and value branded packaged meats were key drivers in the retail channels.

FX neutral EBITDA improved 6% sequentially as ongoing revenue management and efficiency initiatives offset higher raw material costs. In The United States, revenues were flat year on year and quarter on quarter as favorable pricing was offset by lower volume in both periods. Softer demand for packaged meats in national brands was partially offset as Hispanic brands continue to gain traction in mainstream channel and new customer acquisitions. EBITDA was 17% lower quarter on quarter, reflecting lower volume in national brands and changes in mix involving lower dairy sales. Staying in The Americas, Latin America delivered 2% currency neutral revenue growth in the third quarter, driven by higher volume year on year and sequentially.

EBITDA decreased 11% versus 3Q twenty twenty four due to higher protein cost and mix effects, but increased 10% quarter on quarter due to operating efficiencies achieved in the Central American operations. The underlying business in Europe has maintained an upward trajectory. Adjusting for all insurance reimbursements received last quarter, EBITDA increased more than 100% sequentially as effective price actions and torrente related production adjustments drove a recovery trend that is expected to be amplified with seasonality effects in the fourth quarter. Lastly, Sigma’s Europe capacity recovery plan continues advancing on schedule toward full restoration in 2027. Looking at our financial position and select cash flow guidance, we maintain a strong consolidated net debt to EBITDA ratio of 2.7 times at the close of the third quarter with a stable net debt.

CapEx represents our largest use of cash, driven by planned investments. Projects underway include capacity and distribution expansions, primarily in Mexico and The United States, plus the previously discussed capacity recovery in Spain. Next, let me briefly touch on some of the exciting steps we’re actively taking to strengthen the business model for long term success. Our growth business unit remains focused on piloting and scaling new products and ventures with disruptive growth potential. GRILL HUSE, our direct to consumer venture that caters to the grilling enthusiast is ready to make its entrance into The U.

S. After uninterrupted growth in Mexico for the last five years. At the same time, the studio, Sigma’s global center of excellence for design and innovation is moving forward in its first year with developing four eighty six prototypes and advancing on 11 innovation commitments to boost core brands. Advancements in these areas like these will continue to set us apart from competitors in all regions. With this, let’s open the call for question.

: Please, operator.

Conference Operator: Our

Conference Operator: first question comes from Ricardo Alves of Morgan Stanley. Please go ahead.

Ricardo Alves, Analyst, Morgan Stanley: Hello, everybody. Hello, Hernan, Roberto. Thanks as always for the call and for the opportunity to talk to you. I had a question on Mexico. I think that certainly, as you mentioned in the preliminary remark, another quite positive and resilient performance in top line in the low double digits.

With that in mind, can you break that down into more details as it pertains to eventual share gains? I’m really looking forward to what has been driving the strength of you relative to other food players in Mexico. If you can talk about share gains or your revenue management initiatives or even on a channel by channel, Is it exposure to smaller purchases that is benefiting you more than others with a less diversified SKU? So just trying to get some more granularity to try and explain the strength in top line in Mexico and if that’s something that should continue going forward, that would be helpful. My second question, think that Roberto, did refer to the guidance.

We appreciate the fact that the company is reiterating the guidance. I think that the message is pretty clear here and it does imply to the comment that you made that the fourth quarter should be significantly stronger. I think that we’re talking about almost 10% EBITDA growth on a sequential basis. So with that in mind, can you also lay out in more details in your view, what are the key value drivers from the third quarter into the fourth quarter for these big sequential improvement? Is it when we look historically, the seasonality doesn’t really help us to come to a conclusion that the fourth quarter is going be significantly better.

So is it something that we cannot model as well as you can, meaning your head is maybe looking better or to one of the points that you made, maybe Europe is going to be improving much faster than expected. Is there any top two or top three value drivers for us to be more confident about this sequential recovery into the fourth quarter? Again, thank you so much for the time and opportunity.

Roberto Olivarez, CFO, Sigma: Thank you, Ricardo, for the question. Let me first address the first one related to Mexico. In general, let me first explain that in Mexico, we do have the retail business and the foodservice business. We have seen different dynamics in each one of them, foodservice first being more soft on volume, particularly due to raw material cost increase, particularly beef, but also softer hospitality trends, as I explained in my initial remarks. If you divide the business, retail is actually growing a little bit more on volume and foodservice is decreasing in volume.

And in retail, we have a good presence in both the modern and traditional channel and a good presence across the different value segments, across the socioeconomic spectrum. So we do have brands that whenever a consumer is trading down or trading up, we manage to catch the consumer as they move. So we have been seeing a little bit of trading down. So volume from our value brands is growing a little bit higher than the premium and the mainstream brands. And also volume in some of our dairy brands, particularly yogurt, continues to increase.

I will say those are the two main drivers of the resilient volume that we have seen in Mexico. Then let me address your second question regarding us reiterating the guidance and what we see in the 2025. First, let me just make the comment that last quarter was but for quarter twenty twenty four, we have some extraordinary impacts, particularly in Mexico. If you see the margin that we have seen through this year in Mexico up to today, up to the third quarter, we were almost at 15% EBITDA margin. If you normalize that effect, we have close to $30,000,000 mostly Mexico in the fourth quarter versus the 2024 just because of that.

Additionally, we do expect to receive to continue receiving the reimbursement from the business interruption insurance from the Torente incident. We expect between $15,000,000 and $20,000,000 of business interruption coming in the fourth quarter. We actually already received a small portion of that during the month of October. We do also expect the European operation to have better results than the 2024 because of higher prices and the momentum that we have seen in the operation between 5,000,000 to $10,000,000 in that sense. And in the case of The U.

S, we see that we will move from a decrease versus last year in this third quarter to actually being able to have a similar result in The U. S. Versus the 2024. So those are the main key drivers for us being in range with the guidance.

Ricardo Alves, Analyst, Morgan Stanley: Exactly what we’re looking for, Roberto. Thank you so much for the level of granularity. Appreciate it.

Roberto Olivarez, CFO, Sigma: Thank you, Ricardo.

Conference Operator: Our next question comes from Renata Cabral of Citi. Please go ahead.

Renata Cabral, Analyst, Citi: Hi, everyone.

Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Renata.

Renata Cabral, Analyst, Citi: Yes. Can you hear Now I can. Thank you so much for taking my question. So I have two regarding The U. S.

Business. One, the first one about category trends. How would you describe the overall competitive environment right now in The U. S. In packaged meat and refrigerated foods.

Are private label or value play is gaining share right now? And how is Sigma positioning to defend pricing? And still on The U. S. Business, in the release, it’s mentioned the weaker volumes in the national brands.

My question is to what extent was this driven by category contraction or share loss? And how the company has just seen the product mix to reaccelerate volumes in 2026?

Roberto Olivarez, CFO, Sigma: Thank you, Renato, for your question. Regarding category trends in The U. S, we have been seeing just more competition of private label in the category, particularly, I will say, because of all of our regions, probably The U. S. Is the one that has the softer consumer confidence recently.

Consumers in The U. S. Are managing a tighter budget. They’re more cost conscious. Having said that, we particularly in the national brands business, we play as a smart choice, I will say, very close to the segment where private label is playing.

And although we have seen that private label is penetrating more in the category, it has not necessarily impact our brands, has impact more of the mainstream brands in the category. We try to position ourselves as a smart value brand, playing a lot with innovation, on convenience, on not only on affordability, that has helped maintain our position with the consumers. And actually, we, in that sense, have been doing well. In regards to what we see going forward, definitely, category this year, mainly in The Americas, has suffered a lot because of raw material cost. We have mentioned a lot that the turkey, but also pork and also other beef, other materials have been increasing.

We do expect for for 2026 for raw materials to to ease, to start to recover production, particularly in Turkey, that will increase the the supply in in in in the production and also impacting raw material to the downside. And and hopefully, with that, we we do expect a pickup in the category for next year.

Conference Operator: Our next question comes from Fereco Galasi of Rohatting Group.

: Hi, guys. I don’t know if I was allowed to to to speak. I it’s Matteo here. Hi, Yannan. Hi, Robertos.

Thank you for the the call and and the time to ask ask questions. I wanted to to know if you could give us some color on how is operating leverage looking in this scenario with lower volumes. I think the picture in terms of raw material costs is very clear. Everyone understands the the pressure that the particularly Turkey has had on on your results. But I wanted to to see if you could provide us some guidance on what we should expect in terms of OpEx as a percentage of sales with more granularity by country, if possible.

Thank you.

Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Hi, Matteo. This is Hernan. Let me see if we understand your question correctly. So the first part refers to operating leverage and whether the decrease in volume is creating some slack in terms of the level of operation that we maintain across the different regions. Is that is that right?

Yes.

Roberto Olivarez, CFO, Sigma: Exactly. Okay.

Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: So the answer is no. This is not creating any slack in terms of operating leverage. What we’re seeing is we’re operating at pretty much capacity, especially in The Americas. In Mexico and The U. S, if you look at many of our CapEx projects, this has to do with catching up with volume that has grown at a pretty strong rate before 2025.

So from an operating standpoint, the operations are normal, I would say.

Roberto Olivarez, CFO, Sigma: I will add thank you, Ram. I will add just that it’s not that volume is necessarily decreasing a lot. I mean, again, in the case of The U. S, was 1% this quarter is we do expect to to continue grow in volume in in in the next in the next year or so.

: Great. Thank you. And and and one quick follow-up related to to cost of of raw materials.

Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Yeah. Yeah.

: Should be fair to expect that particularly Turkey prices stabilize towards the end of the year and that we see lower raw material prices for for next year. What’s your strategy, your view on pricing, if you could give us any idea that for next year?

Roberto Olivarez, CFO, Sigma: Sure. Thank you, Matteo. I mean, in general, we do expect, I would say, more friendly raw material environment next year. We let me talk about Turkey. We are starting to see some indicate indications that some recovery in the Turkey production is is is starting to happen.

There was an inflection point in July where production is starting to increase versus last year. And actually, rate of of of increment or or the the rate of how the production has increased has has been at at a good rate. Having said that, there’s still some uncertainty on how it’s going to continue that rate in the next months, particularly because, again, we’re entering the winter in this hemisphere and potentially there could be more diseases coming along. There was a particular disease that affected a lot. The turkey this year was a pneumovirus, and they developed a vaccine for that virus that started to help.

They started to vaccinate the turkeys around April and May. So we do expect that that continues helping with the production over the next months. We are cautiously optimistic. I will say that we do expect production of Turkey to continue increasing. But again, cautious about the rate of that increase.

Conference Operator: Our next question comes from Fernando Olvera of Bank of America.

Hernan Lozano, Vice President of Investor Relations, Alpha Sigma: Roberto, Ran, can you hear me?

Fernando Olvera, Analyst, Bank of America: Great. Perfect. Thank you for the space. My question, just a couple of follow ups. Regarding or linked to the cost outlook, I mean, thinking that Turkey prices should start easing going forward, how are you thinking about pricing mainly in Mexico towards year end and next year, trying to see if any additional adjustments might be needed.

And also thinking about volume softness overall, how are you thinking about CapEx for next year? Thank

Roberto Olivarez, CFO, Sigma: you, Fernando. Let me just make the comment that although we have been seeing that some indication that production of Turkey has started to increase, prices of Turkey has not reflect that. So prices of Turkey continues to be at a record level, in Turkey breast and Turkey thigh. And and we do expect them to to to decrease in the following particularly in the following year. I will say more as as as the probably between the first and and and second quarter of of of the next year.

That that is our expectations. Regarding pricing, when when that happened, we we we have been working very closely with the revenue management teams to be able to protect both margin and volume. We try to do any price increase that we do, we try to do it very with a lot of analysis in regards to elasticity, how the competition is moving and also how the consumer perceives that price increase. We want to maintain the preference of our consumers. So whenever there is something that we can see that we cannot vote on higher material costs or lower raw material costs, will act upon that to be able to protect and to continue growing volume.

In regards to that, your question about CapEx in general, again, particularly Mexico and The U. S. Operation for the last couple of years, we have been working at capacity or almost at full capacity. So we have been planning and invest and investing in some projects to increase the capacity. We also have the recovery plan Europe to recover the capacity that we lost in the Torrente flood.

So we will be working also on that on next year. So at least we still don’t have our guidance number for CapEx for next year. But what I would say, directionally, we’ll continue to be around the same level

Fernando Olvera, Analyst, Bank of America: Roberto, regarding pricing, I mean, at this point, do you feel comfortable with the price hikes implemented so far? Or additional hikes might be seen going forward in that sense? I mean, thinking about the third price that you were saying that they might start to decline until the first and second quarter of next year.

Roberto Olivarez, CFO, Sigma: Yes. Thank you, Fernando. I will say that unless, again, the raw materials continues to increase, which we are not expecting that, we we not necessarily would do something structural on prices as of as of right now. There might be the need to to do some some some particular adjustments in in some particular product, but not something that will be structural for the whole company.

Conference Operator: Our next question comes from Felipe Ucross of Scotiabank. Go ahead.

Felipe Ucross, Analyst, Scotiabank: Operator. Hi, Roberto, Hernan. Thanks for the space. A couple of questions on my end. So one has to do with your pricing power.

Can you talk a little bit about your capacity to maintain your pricing levels, when costs start coming down and margins start expanding. Historically, what has been the behavior of your competitors? Are they typically disciplined? And I guess, how does that change by region? I have an impression that perhaps Mexico and The US are stronger than Europe, but any color you can give us on that, would be great.

And then on on the the second question, is there any direction you can give us about which proteins are most important to you out of the ones you use? And and I know this varies because there’s reformulations depending on where the costs are at given times. But even if you can’t give us precise numbers, perhaps you can give us a ranking or some directional idea of which ones are the are the most important proteins. Thank you.

Roberto Olivarez, CFO, Sigma: Thank you. Thank you, Felipe. Let let me first tackle the the the second one. Sure. So so we we we regarding regarding protein, And and when we have this information in in our website, in our in our corporate presentation, around 40% of our of our of our protein of our raw material cost of of of of the raw materials is is pork.

Then we have close to 20% is turkey, then around 10% is chicken, and then around 30% will be dairy, mainly mainly milk, but also cheese and some and some other dairy dairy proteins. We we’ve particularly for hub, I would say, our largest material that we buy, both in particularly in Europe, but also in Mexico. And in the case of Mexico, more Turkey, Turkey Thai, Turkey breast, and in the case of The U. S, particularly chicken. Regarding your first question, I will say we, again, as I explained to the question that Fernando did, we try to take a very disciplined approach in terms of price management.

Whenever there we take a look of elasticity, how the competition is moving. And whenever we see an opportunity area where we can either protect margin or protect volume, we will be taking that opportunity. In general, I will say it varies by region. But in Europe, given the competition, the penetration of private label and some excess capacity that there’s in the industry, we have it takes us more time to increase prices between the rest of the regions.

Conference Operator: There being no further questions, I would like to return the call to management.

Roberto Olivarez, CFO, Sigma: Thank you, everyone. On a final note, we entered the fourth quarter focused on a strong close for 2025, building upon our positive sequential momentum. Looking ahead, we’re preparing to capitalize on opportunities in 2026 and advance our long term consumer center growth initiatives. Thank you very much for your interest in Alpha Sigma. Please feel free to reach out to us if you have additional questions.

Have a great day. We will now disconnect.

Conference Operator: This concludes today’s conference call. You may disconnect.

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