Earnings call transcript: Becle’s Q2 2025 shows strong growth in net income

Becle SAB de CV, the company behind the iconic Jose Cuervo tequila brand, reported robust financial results for the second quarter of 2025. The company saw a significant rise in net income, supported by strong sales growth and operational efficiencies. Following the earnings release, Becle’s stock price increased by 6.02%, closing at 43.29 pesos, nearing its 52-week high of 43.32 pesos. According to InvestingPro analysis, the company maintains a "GOOD" Financial Health score of 2.59, with particularly strong cash flow metrics. InvestingPro’s Fair Value model suggests the stock is currently undervalued, presenting a potential opportunity for investors.

Key Takeaways

• Net income surged to 2 billion pesos, marking triple-digit growth.
• EBITDA increased by 16.7%, with margins expanding by 270 basis points.
• The company reaffirmed its full-year guidance, focusing on premiumization.
• Strong performance in premium tequila segments, despite global challenges.

Company Performance

Becle’s performance in Q2 2025 was marked by a notable increase in consolidated net sales, which rose by 2.8% to 11.5 billion pesos. The company’s strategic focus on premiumization and disciplined cost management contributed to a significant improvement in profitability. Despite a challenging global spirits market, Becle managed to outperform in the tequila segment, particularly in premium categories.

Financial Highlights

• Revenue: 11.5 billion pesos, up 2.8% year-over-year
• EBITDA: 2.7 billion pesos, up 16.7% year-over-year
• EBITDA margin: Expanded to 23.4%, up 270 basis points
• Net income: 2 billion pesos, showing triple-digit growth
• Net cash from operations: 1.7 billion pesos
• Net debt ratio: Improved to 1.7x from 1.9x in Q1

Outlook & Guidance

Becle reaffirmed its full-year guidance, expecting continued gross margin expansion and volume leverage improvements. The company is optimistic about market stabilization and remains focused on enhancing its premium tequila offerings and maintaining strong brand equity. Analyst consensus from InvestingPro supports this positive outlook, with targets suggesting potential upside. For deeper insights into Becle’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

"Our focus remains on accelerating the U.S. region," stated Juan Domingo Beckmann Legorreta, CEO, highlighting the company’s strategic priorities. Mauricio Vergara Herrera, Managing Director for the U.S. and Canada, added, "We continue to see higher-end tequilas outperform lower-end," emphasizing the resilience of premium segments. He further expressed confidence in the company’s strategy and its ability to adapt to market dynamics.

Risks and Challenges

• Competitive pricing pressures, especially in the U.S. market, could impact margins.
• The complex global spirits landscape and cautious consumer sentiment present challenges.
• Macroeconomic uncertainties could affect consumer spending and demand.

Q&A

During the earnings call, analysts inquired about the benefits of agave cost reductions and the company’s strategy in the ready-to-drink (RTD) category. Executives addressed regional inventory normalization and competitive dynamics in the U.S. market, providing insights into Becle’s strategic initiatives.

Becle’s strong Q2 performance, driven by strategic focus and operational efficiencies, positions the company well for continued growth in the competitive spirits industry. Investors should note that Becle’s next earnings report is scheduled for October 22, 2025, just 8 days away, which could provide further clarity on the company’s trajectory. Visit InvestingPro to explore detailed analysis and discover other undervalued opportunities in the market.

Full transcript - Becle SAB de CV (CUERVO) Q2 2025:

Call Operator: Good morning and thank you for joining Becle’s second quarter unaudited financial results call. During this call you may hear certain forward looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases such as anticipate, believe, could, estimate, expect, intend and similar terms and phrases and may include references to assumptions. Forward looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward looking statements relate to the future, by their nature they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward looking statements.

Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards or IFRS and published in the Mexican Stock Exchange. The information for the second quarter of 2025 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. At this time we would like to remind participants that your lines will be in listen only mode until the question and answer session. Now I will pass the call on to Becle’s CEO, Mr. Juan Domingo Beckmann Legorreta.

Juan Domingo Beckmann Legorreta, CEO, Becle: Good morning everyone and thank you for joining us today as we discuss Becle’s second quarter 2025 results. The global spirits landscape remains challenging throughout the first half of the year despite the more cautious consumer and volatile competitive landscape. The resilience of our core categories, particularly Premium Tequila, reinforces our confidence in the fundamental strength of our segment and our portfolio, encouraging early signs of recovery in key markets alongside sustained demand for high quality authentic brands. This supports a more constructive outlook ahead. During the quarter we delivered EBITDA margin expansion and healthy cash generation. While gross margin growth was modest, this reflected the impact of regional mix shifts within a changing market context. Overall, our financial performance puts us in a strong position to continue advancing our strategic agenda as we move through the second half of the year. Our focus remains on accelerating the U.S.

region, capitalizing on positive trends seen in Mexico and rebalancing shipments and depletions in the rest of the world, while protecting brand equity and building towards sustainable profitable growth. Before I close, I’d like to extend a warm welcome to Mauricio Vergara Herrera, our new Managing Director for Proximo US & Canada. I’ll now hand it over to him to share more detail on performance in that region. Thank you Juan and good morning everyone. It is an honor to address you today as the newly appointed Managing Director for Proximo US & Canada. Please note that the figures discussed in today’s remarks are presented on a constant currency basis. In the second quarter, operations in the United States and Canada faced a complex and competitive environment characterized by softer consumer demand in several categories and heightened pricing pressures.

Despite these challenges, our core portfolio remained resilient with tequila performing particularly well and small formats gaining momentum. Net sales value declined 9.9% compared to the same period in 2024, primarily due to a 7.1% decrease in shipments. This reflects continued softness in our RTD category and increased pricing pressures across key categories. Shipments were further impacted by external retail limitations in Canada affecting select U.S.-made products. However, a favorable product mix led by tequila and whiskey helped partially offset the impact on net sales value. Depletions decreased by 9.3%, remaining relatively aligned with shipments following our efforts to optimize inventory levels. In terms of consumer takeaway, our performance remains stable across key segments. According to the last 13-week Nielsen data ending in June 28, our spirits portfolio, excluding prepared cocktails, declined by 0.9%, outperforming the total industry which saw a 2.5% decrease.

Our total tequila business grew by 0.6%, further confirming its importance as a key driver for growth. We’re also closely monitoring external factors including inflation and trade policy. To date, no significant material regulatory changes have occurred, and trade between the U.S. and Mexico remains stable under the current frameworks. Looking ahead, we expect near-term volatility to persist in the U.S. and Canada as the industry adjusts to ongoing challenges. That said, we remain focused on driving performance in our core categories, advancing premiumization, and responding decisively to evolving consumer behavior. We are confident in our strategy, our brands, and our team’s ability to adapt to market dynamics while strengthening our leadership and delivering sustainable long-term growth. I will now turn the call over to Olga Limón Montaño to discuss the results for Mexico and Latin America.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Thank you, Mauricio, and good morning, everyone. In a challenging industry landscape, Mexico posted solid second quarter results. Even with constrained consumer demand, we outperformed our key categories and continued to improve our leadership position. Net sales value grew 4.8% in the quarter, primarily driven by an increase in volume. Growth was strongest among our more accessible brands, while premium offerings also performed well, underscoring the overall resilience of our portfolio. Shipments increased 7.1% year over year with depletions up 7.3%, reflecting improved alignment and healthier inventory levels across both retail and wholesale channels after several quarters impacted by destocking. These results reflect a positive shift, positioning us well as we enter the second half of the year. That said, underlying market conditions remain challenging, with inflation, economic uncertainty, and insecurity impacting consumer behavior.

We are closely monitoring the environment and remain focused on disciplined pricing and consistent execution to preserve our long-term brand equity and market leadership. According to NISCAM data through May, tequila remains the most resilient category within the spirits industry. We outperformed the total spirits market and the tequila segment in both volume and value, resulting in additional market share gains and further consolidation of our market leadership. In Latin America, we continue to see encouraging signs of stabilization. Shipments increased modestly, while net sales grew at a high double-digit pace, driven by a more favorable regional mix, normalized inventory levels, and FX tailwinds. Still, we remain cautious given ongoing macroeconomic and political volatility across the region as we enter the second half of the year. Healthier trends across key sales channels are encouraging and may support future growth.

Although we’re staying alert to broader market risks, our priorities are clear: to protect market share, adapt to evolving consumer trends and market conditions. I will now turn the call over to Shane Hoyne, Managing Director of the EMEA & APAC region.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thank you, thank you Olga and good morning everyone. During the first half of 2025, EMEA and APAC face a complex and uneven trading environment shaped by ongoing macroeconomic pressures and continued inventory adjustments. That said, consumer demand for premium spirits remained resilient. Depletions across EMEA and APAC grew 2% year over year while shipments declined -13%, mainly due to timing differences in order placements and deliveries in Asia, as well as ongoing efforts by third party distributors to reduce inventory and optimize working capital management. On a reported basis, net sales value increased by 1.1% compared to the prior year. This was primarily attributed to currency translation effects, partially offset by lower shipments, some destocking, and increased promotional and marketing activity, particularly in EMEA. In EMEA, consumer sentiment remained cautious amid persistent cost of living pressures, which weighed on demand in the on-trade channel.

The region also experienced aggressive pricing and elevated promotional activity. Despite these challenges, depletions for the first half of the year increased 1.5%. APAC faced a challenging first half reflecting ongoing macroeconomic uncertainty and temporary disruptions in selected markets. That said, shipments began to recover in Asian markets by late June and we continue to see this improvement trend too.

Continue.

In the second half of the year. Year to date, depletions in Asia increased by 14% driven by strong growth in premium categories and resilient underlying consumption across key markets. As we enter the second half of the year, we remain focused on disciplined execution and agile decision making in the face of evolving consumer and macroeconomic dynamics. We anticipate sustained growth in Asia, gradual stabilization in Europe, and emerging opportunities in Africa and the Middle East. Backed by the strength of our portfolio and premiumization strategy, we believe we are well positioned to drive sustainable growth across the region. I’ll pass you over now to Rodrigo who will take you through the financial results. Thank you, Shane, and good morning everyone. I will now walk you through the financial results for the second quarter of 2025.

Despite a complex industry environment, the company reported a 2.8% increase in consolidated net sales, reaching $11.5 billion pesos. This growth was primarily driven by favorable foreign exchange effects and continued progress on our premiumization strategy. This marks the sixth consecutive quarter year over year gross margin expansion. We continued to benefit from lower agave-related input costs, the gradual sell through of older, higher cost inventory, and ongoing cost efficiencies stemming from improvements in strategic sourcing and manufacturing operations. Foreign exchange tailwinds also contributed positively. That said, gross margin expansion this quarter was partially offset by unfavorable regional mix, with Mexico posting the strongest performance below the gross profit line. EBITDA for the quarter grew 16.7%, reaching $2.7 billion pesos. EBITDA margin expanded by 270 basis points to 23.4%. AMP expenses declined year over year, underscoring our strategic prioritization and disciplined resource allocation amid moderate demand.

Meanwhile, distribution and SGA expenses increased as a percentage of sales, primarily due to their U.S. dollar denominated nature and related FX impacts. However, in constant currency, these costs remained broadly in line with prior year. The financing result recorded favorable swing of $1.7 billion pesos in the second quarter of 2025. The appreciation of the Mexican peso during the quarter generated a non-cash FX gain tied to our net U.S. dollar cash position. Consequently, net income grew at a triple-digit rate year over year, reaching $2 billion pesos. From a cash flow perspective, the company generated $1.7 billion pesos in net cash from operating activities, primarily driven by strong profits and continued progress in inventory rightsizing. Our cash balance declined relative to the end of the first quarter, reflecting two deliberate capital allocation decisions.

First, we brought forward our annual dividend payment from August to May and increased the payout ratio. Second, we chose to retire $153 million in maturing senior notes using cash on hand rather than refinancing. These actions reflect our ongoing commitment to returning excess capital to shareholders while preserving financial strength and flexibility. As a result, our latest adjusted net debt ratio improved to 1.7 times from 1.9 times in Q1, underscoring the strength of our balance sheet and positioning us well for sustained long-term value creation. Overall, despite continuous industry headwinds, we reported solid financial results for the quarter. Net sales increased, gross and EBITDA margins expanded, and our ROIC improved by 130 basis points versus the same period of the previous year. Looking ahead, we reaffirm our full year guidance. With that, I will now turn the call back to the operator for the Q&A session.

Call Operator: Thank you. We will now conduct a Q&A session. If you would like to ask a question, please press the raise hand button located at the bottom of the screen or dial 9. If you are connected via telephone, we remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be given permission to speak. You will then be able to unmute yourself and ask your question. Our first question comes from the line of Ricardo Alves. Please state your company name and ask your question.

Everyone, thanks for the call. Thanks for the opportunity. As the operator said, Ricardo Alves speaking from Morgan Stanley. A couple of questions on the gross margin, the 80 bps expansion year over year. I think that you alluded to the fact that the expansion slowed down. Could you break that down in terms of how much of that was still driven by agave and then on the flip side, how much of a headwind the stronger peso and the fact that the Mexico operation being bigger this quarter, how much of a headwind those components were. That’s the first part of the question. The second part, when we look into the second half still on the gross margin, we are anticipating a significant acceleration of margin expansion.

I wanted to see if you’d agree with that assessment given that there has been a lot of volatility in terms of key drivers for your margin. The Mexico peso, of course, the Mexico operations rebounding faster than expected and at the same time lower pricing in the U.S. and on the flip side, you still have the benefits of agave. When we look into the second half after what we saw in the latest quarter, there’s a lot of moving parts. Some of them are positive, some of them are potentially more negative for the margin. I just wanted to see how you are weighing everything together. That’s my first question. My second question, perhaps to Mauricio on the U.S. side.

We noticed the unit revenue in dollar terms down 4% and at the same time, if I’m not mistaken, I think that your mix actually I would assume it improved. I know there’s no breakdown between the different countries, but I would assume that given that RTD and non-alcoholic came down a lot, I would assume that the mix is actually positive. I’m curious to hear your thoughts on the competition. I know the competitive environment, it’s tough, but how are you positioning your own brands in that environment, particularly 1800 and Jose Cuervo Especial. Just an update on the competitive environment. I know that there are some local U.S.-based brands that are playing an aggressive game, but I’m more interested in how you are positioning your own brands. Again, congrats on the numbers and I appreciate the opportunity everybody. Thank you.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Of course, Ricardo, thank you so much for the questions. First of all, just to clarify, relative to last quarter, 600 basis points gross margin expansion, it’s important to mention that it’s challenging to look at margins on a sequential basis as quarters have different dynamics in product mix and geographic mix usually changes. On top of that, last quarter we were overlapping a tougher, let’s say, comparison. In Q1 2024, we had a relatively lower margin and that also drove part of the expansion. Having said that, yes, we continue to benefit from lower agave input-related costs on our gross margin. Importantly, not only price but also sugar content has been positive and we expect it to remain positive in the balance of the year. That’s the first comment.

Second, we do have continued favorable tailwinds from our product mix as a direct result of our premiumization strategy, which continues to perform well. Third, while we continue to benefit from the Mexican peso depreciation, in other words, FX benefits are reflected in our gross margin, this benefit was actually lower relative to Q1, so it is important to have that in mind. In terms of impacts, in addition to the FX, as it was mentioned before, we did face unfavorable geographic mix this quarter, in particular with lower margin region like Mexico outperforming the US and the rest of the world.

Finally, yes, we had heightened promotional activity resulting in lower price per case, which actually did affect our gross margin, especially in the US, and this is a result of the competitive pricing dynamics happening in the marketplace, which I’m sure Mauricio will touch on in the second question. To your second point, yes, there are many balancing acts that we are having to face to manage profitability at this point. I would say most of these variables continue to be with some level of uncertainty, but we do expect continued solid margin expansion going forward in the year. We should be in a similar situation versus what you’re seeing in Q2. With that, Ricardo, I will pass the microphone to Mauricio for the second question.

Juan Domingo Beckmann Legorreta, CEO, Becle: Thank you, Ricardo, for your question. As you said, we’re facing very aggressive competitive pricing in the category in the United States. The average pricing of total tequila in the market is down almost 9%. What we’re doing is taking very measured and strategic promotional actions to remain competitive and protect our position in the market. However, our objective is not to reposition the pricing of our brands because what we’re trying to do is stay very committed to the position and where they stand versus our competition to protect equity for the long term. We will continue to take actions to remain competitive through that promotional activity. Our real strategy is to remain protecting that brand equity as the market stabilizes into the future.

Gentlemen, I appreciate the time. Thank you so much.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thank you.

Call Operator: Our next question comes from the line of Fernando Froylan Mendez Solther. Please state your company name and ask your question.

Hello everyone. Fernando Froylan Mendez Solther from JPMorgan. Thank you for taking my question. I was wondering if you could give some color on the regional evolution of the gross margin into probably the first half. We know that last year we saw a very strong improvement in Mexico’s gross margin. It’s causing a diluted effect just on the mix. If we were to look at first half evolution of gross margin in Mexico, in the U.S., and in the rest of the world, has that continued to be a positive trend on an individual regional basis?

Secondly, just to clarify the comment on having a similar situation in the second half on gross margin as what we saw in the second quarter, what you mean is that we’re going to see margin expansion around 80 to 100 basis points into the second half rather than the more than 300 basis points that we saw in the recent past. Thank you so much.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Yes, thank you for the questions. Yes. You know, gross margin on a region by region basis continues to improve based on the drivers that I explained earlier. Definitely we do have higher NSV per case in the U.S. and rest of the world relative to Mexico. Most of the downside when we refer to unfavorable geographical mixes is driven by the fact that Mexico played a more important role on the mix in this particular quarter. Having said that, this is more of a short term, I would say, dynamic. We don’t expect this to continue. In other words, if you were assuming going back to the normal mix and in addition to that, as you know, international markets provide also the benefit of the FX translation which we expect to continue to benefit from in the balance of year.

Based on my previous comment, just to mention, all these variables will continue to play out on our gross margin outlook for the balance of year but most importantly, long term we continue to expect more than gross margin, only EBITDA margin expansion. Following our premiumization strategy which continues to have a positive impact on our results, we do continue to foresee lower agave, you know, low agave input costs going forward. We pursue as well operating efficiencies across the value chain and we’re making cautious and thoughtful decisions in terms of capital allocation throughout the P&L. Of course, as we expect volumes to perform better going forward, we would be benefiting from increasing volume leverage in our margins. There’s no reason why we should think that this dynamic would change going forward. Thank you Rodrigo.

If I made one follow up more on Mexico, could you just try to explain what was the positive calendar effect into the volumes into this quarter? If the calendar effect hadn’t been there, how much would the normalized volume have been? Or what was the impact of the positive calendar effect in Mexico? Could you repeat the question please? Yes, there was a positive calendar effect on Mexico volumes this quarter. Can you help us quantify how much was it just to understand how much of this was just the timing of semantic.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Yeah, this is just a phasing effect. It really didn’t make a difference in the result. I think the important thing is we’re an important player in the industry that is driving growth, and we have in place strategies that are making this happen. Our challenge is to have sustainability in this volatile environment, perfect.

Thank you, Olga.

Call Operator: Next question comes from the line of Renata Fonseca Cabral Sturani. Please state your company name and ask your question.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Good morning everyone. Thank you so much for taking my question. Renata Fonseca Cabral Sturani here from Citigroup. Thanks Juan, Rodrigo, for the opportunity. My first question is actually a follow-up regarding volumes in Mexico. For us, it was an ambassador highlight here to see this volume. My question is, can you provide some color for us to understand what were the main drivers here? It has to do with promotions or inventory levels with retailers. Anything you can share will be really helpful for us to understand the outlook for the second half of the year. My second question is more straightforward. It is related to advertising, market, promotions, expenditures. You have the guidance, and we know that it’s not 50/50% that you need to spend in the first half of the year related to the second half of the year.

My question is precisely to understand if the number should be within guidance or maybe this year you decide to spend a little bit less. Just to have an idea of this line, please. Thank you so much. Hey, Renata. As for Mexico, like I’ve said, we are an important player that’s driving growth within the industry, and our strategies are making this happen. We have not made any additional pricing movements. We have had some promotionals on a per brand basis, and as you have seen and reflected on our results, the overall impact was modest. An average price per case declined just 2.2%. We have also had more alignment in terms of shipments and depletions and also destocking. We’re entering a better position for the second half. That’s what I can tell you.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Hi, Renata. Regarding amp, we continue to, you know, we are in Q2, and we continue to expect to be within the guidance that we provided at the beginning of the year.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Okay. Super clear. Thank you so much.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thank you.

Call Operator: Next question comes from the line of Antonio Hernandez. Please state your company name and ask your question.

Hey, good morning.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: This is Antonio Hernandez from Actinver Casa de Bolsa. Just a quick one.

Regarding other tequilas, I mean this was a category that was able to outperform.

From a volume perspective, the only one with positive performance. How was the pricing strategy, or maybe.

Sales mix playing a role here.

How was competition there as well? Thanks.

In any region in particular, Antonio, or just general consolidated?

General Consolidated.

If you have any highlights from.

A regional perspective, that will be great as well.

Thanks. Yeah, we don’t disclose too much regarding brands, Antonio, but what we can say within other tequilas is that you continue to see our premiumization strategy play out. If you focus on the other two categories like Family Jose Cuervo, Family 1800.

Those are a little bit more disclosed.

Within other tequilas, we continue to see higher end tequilas outperform lower end. That’s driven by smaller format presentations in the U.S., driving higher growth in reposados, for example. That’s what we continue to see within our markets.

Okay, from a pricing perspective, should we expect something similar to what you just commented?

I mean, throughout the call in terms of the overall expectations, in terms of.

Pricing strategy for the rest of the year.

Same for other tequilas.

Juan Domingo Beckmann Legorreta, CEO, Becle: I would say that in the U.S. the expectation is to continue to see a very competitive environment. What we will continue to be doing is take very measured promotional activity just to protect our position in the marketplace whilst not repositioning where we play with our price to protect long-term brand equity. That is what we have been doing in the first half of the year. That will continue to be our focus for the second half.

Perfect. Thanks.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Have a nice day.

Call Operator: Next question comes from the line of Fernando Olvera Espinosa de los Monteros. Please state your company name and ask your question.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Can you hear me there? Perfect.

Oh great.

Thanks for taking my questions. My first question is related to the gain registered at other income of $130.

Million pesos this year. If you can give us some color to what is related, no.

Juan Domingo Beckmann Legorreta, CEO, Becle: My second question, just curious, can.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: You give us some color about the.

Juan Domingo Beckmann Legorreta, CEO, Becle: Disruption in Canada and how much of that affected volumes in the US and Canada division?

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thank you. Of course, thank you, Fernando. Regarding other income, it did increase in this quarter. It was primarily due to contractual settlements related to U.S. distribution agreements. This includes those linked to RNDC’s decision to exit the California market. It is expected that similar benefits may continue in the coming quarters.

Okay.

Okay. For how long? I mean only one more quarter, or we will have similar benefits most likely in the next couple quarters. Ah, okay, excellent.

Juan Domingo Beckmann Legorreta, CEO, Becle: From a Canada perspective, it’s very straightforward. The liquor boards in Canada decided to remove all U.S. made spirits from the shelves as a protest for the U.S. tariffs. That’s really what’s happening. In terms of the impact on our side, even though Canada is a relatively small part of our region, it did have a meaningful impact, especially in RTDs, impacting approximately 100,000 cases.

Great, thank you.

Call Operator: Our next question comes from the line of Felipe Ucros Nunez. Please state your company name and ask your question.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thanks, operator, and good morning, everyone. Thanks for the space.

A couple of questions on my end.

Agave has, I got a.

Juan Domingo Beckmann Legorreta, CEO, Becle: Costs have been coming down quite a bit.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Bit in the spot market for the better part of the last three years. Obviously, that takes time to flow through your income statement and through your inventory. Just wondering if you could give us some detail about how that process is going, how far along the process you guys think you are, and also on inventories. Perhaps this question is for the rest of the world. Just wondering if you can discuss how far you think you are from a normalized inventory situation here given the comments on the call. The last one on RTDs and non-alcoholic drinks. They’ve been suffering in the last few years and I know you guys have been trying some new innovations to try to make an offset on the growth trajectory here. Just wondering if you can give us an update on the performance and innovations there. Thank you. Thank you, Felipe.

As you know, we don’t disclose too much information regarding specifics on our agave situation. As we’ve mentioned before, we do continue to benefit from the current low environment on agave prices. Yes, there are inventories which we have to go through. I would say, for the most part, we are on the final stages of benefiting from that. As I mentioned before, there’s also improved economics from agave relative to sugar content, which we also are benefiting from and expect to continue doing that in the balance of the year. For that, I’ll pass it on to Shane. To answer your question on Rest of the World inventories. Hi Felipe, Shane here. The issue on inventories is really an EMEA regional issue as opposed to APAC. APAC inventory management is quite in line with where we need it to be.

To answer your question specifically, we are starting to see normalization now and we expect through quarter three for that to fully materialize.

Juan Domingo Beckmann Legorreta, CEO, Becle: Felipe, on the RTD side, the market continues to be extremely competitive and very, very fragmented. With that in mind, what we’re doing is exploring new formats, sizes, different flavors, just making sure that our offerings truly align with the evolving consumer needs in that space that is really dynamic and evolving significantly. We believe that with our brand equity and innovation that really aligns to consumer needs, we should be in a good position to scale those new offerings.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Great.

Thanks a lot for the call, gentlemen.

Call Operator: Next question comes from the line of Ulises Argote Bolio. Please state your company name and ask your question.

Hi guys, thanks for the space for questions.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: This is Ulises Argote Bolio from Santander.

I had a follow-up related to A&P. I wanted to see if you guys could share a bit more color on what kind of investments you are cutting back on, and how do you reconcile this lower A&P?

I mean obviously it’s still in line with the lower part of the guidance.

Overall, this figure is lower versus where we usually see it.

How do you reconcile this with.

Kind of the volume growth outlook.

Expectations you guys have? Obviously, this is a relevant component of this business.

I just wanted to get your thoughts there. Thank you.

Thank you, Ulises. As we’ve mentioned before, we are within guidance and we continue to expect to be within guidance for the balance of the year and the full year. I don’t know if there’s much more we can mention except for the fact that obviously we’re being very disciplined in how we allocate resources, given the current market environment.

All right, so that part then probably for the full year, then maybe the expectation is for us to be, or to continue being here near this low part of the guidance.

Is that something reasonable to assume? I think we should assume what I just said, Ulises. We will stay within the range, and there’s obviously some phasing and calendarization, but we’re going to be within the guidance that we have provided for the full year.

All right, perfect. Thank you so much.

Thank you.

Call Operator: Our next question comes from the line of Ben Thurer. Please state your company name and ask your question.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: This is Rahi on for Ben from Barclays.

Just a question.

For the US with more pricing pressures.

Call Operator: That we’ve been seeing, do you see?

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Any overstocking at home for the consumer? If you have any data points you can point to, is there any potential?

Call Operator: For overstocking in Mexico? As we also see, price was also pressured there.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Thanks so much.

Juan Domingo Beckmann Legorreta, CEO, Becle: Thank you for your question, Ben. I think for the US the pricing environment, as I mentioned, will continue to be very, very aggressive and competitive. We’re also experiencing lower disposable income from the consumer perspective. I don’t foresee any overstocking at home from the consumer because of that reason.

Olga Limón Montaño, Managing Director Mexico & Latin America, Becle: Hi. As for Mexico, we also don’t see an overstocking issue. I don’t know if you have any more questions or you want to go deeper on that, but that’s basically my answer. There’s no problem with that. No, that sounds good.

Thanks so much.

Call Operator: Our next question comes from the line of Alejandro Fouch. Please state your company name and ask your question.

Yes.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thank you. Thank you. Alejandro Fuchs from ITAU BBA. Thank you for the space for questions.

I wanted to make two, if I may.

The first one is on the portfolio of products. We’re seeing a very healthy balance sheet as you commented, 1.7 times. Net leverage continues to come down and we know that there are assets for sale in the market. Maybe how are you thinking about potential inorganic opportunities to maybe continue to strengthen some of the portfolio?

Maybe you can tell us a little.

Bit how you feel with the current portfolio. I think that’ll be very helpful, thank you.

Juan Domingo Beckmann Legorreta, CEO, Becle: Yeah, we always look at opportunities and we still have a lot of runway in our actual portfolio. I think we’re in the right categories now with the very good portfolio of tequila and also our whiskey brands.

Are.

We believe we have a lot of potential still, but we are always looking for premium brands that have potential to be of scale.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Thank you. If I may real quick, a follow up regarding RTD. You know, we have seen volumes coming down for the last couple of years.

Juan Domingo Beckmann Legorreta, CEO, Becle: Right.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Do you see a world where you think that the company lives?

Juan Domingo Beckmann Legorreta, CEO, Becle: A little bit that category and maybe.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Continues to focus, as you pointed out, on tequila and whiskey and some of the other parts of the full portfolio and see some, let’s say, portfolio optimization, or is this something that you feel strongly about for the medium term? Maybe if you can a little bit elaborate, how do you see the.

Ready to Drink just category as a whole going forward?

Thank you.

Juan Domingo Beckmann Legorreta, CEO, Becle: We will continue to play in that space. It’s an evolving space. As I mentioned, our view actually is how do we align better our portfolio to the evolving consumer needs and strengthen our presence and our offering there.

Bear in mind, Alejandro, just quickly, RTD continues to be the fastest growing category out there, and it also serves as a recruitment for our other tequila brands. It is very interesting for us to play within that category. We are probably going to stay within that and try to stabilize the declines.

Rodrigo/Shane Hoyne, CFO/Managing Director EMEA & APAC, Becle: Super clear. Thank you very much.

Call Operator: Next question comes from the line of Ricardo Alves. Please state your company name and ask your question.

Hello everybody. Thanks for the follow up. Ricardo Alves, Morgan Stanley. Again, just a final follow up on my end to Mauricio. Into the U.S., but focusing on volumes because I think it’s very clear that the competitive environment remains difficult and you’re doing what you have to do to face that. When you’re thinking about volumes specifically for the next couple of quarters, it seems that the inventories are more adequate. The comps for the next couple of quarters are also easier. I guess that on the flip side, we have this discussion. I don’t remember who just mentioned that. The RNDC, potential disruption in California. That could be a headwind into the third quarter and fourth. When you put all of that together, how are you thinking about volumes? What are the mitigating measures you’re taking to avoid potential distribution disruption in California and so forth?

Can you just expand a little bit more in, you know, what you’re doing at a micro level so that we can think about volumes specifically for the second quarter? Sorry, second half. Thanks again for the follow up.

Juan Domingo Beckmann Legorreta, CEO, Becle: Thank you, Ricardo. In the case of California, we have in place a working group that is working very closely with the leadership and the whole team in Breakthru Beverage to ensure that transition runs in a very smooth way. What we’re trying to do is minimize any meaningful impact into our business in California. Beyond California, as you’ve seen, we have been outperforming the spirits market. We will continue to make sure that we continue strengthening our presence in tequila, which is the category that we expect to continue to be outperforming the rest of spirits and making sure that we’re not only protecting, but continue to strive for share gains in that aspect as the category continues to face challenges.

Very clear. Thank you so much.

Call Operator: We have not received any further questions at this point. That concludes today’s call. You may now disconnect.

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