Street Calls of the Week
Grupo Rotoplas S.A.B. de C.V., a prominent player in the Building Products industry with a market capitalization of $358 million, reported its third-quarter 2025 earnings, highlighting a mixed financial performance with operational improvements but financial losses. The company recorded a net loss, impacted by $215 million in foreign exchange and inflation-related losses. Despite this, earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 15% year-over-year to $39.6 million, and operating income surged by 44%. The stock price rose 0.81% following the announcement, indicating cautious investor optimism. According to InvestingPro analysis, the company maintains a "Fair" overall financial health score of 2.08 out of 5.
Key Takeaways
- EBITDA increased by 15% year-over-year.
- Operating income rose by 44%.
- The company recorded a net loss due to foreign exchange and inflation-related losses.
- Stock price increased by 0.81% post-earnings.
- Operational efficiencies and cost reductions were achieved.
Company Performance
Grupo Rotoplas showed resilience in its operational performance, with significant improvements in EBITDA and operating income. The company maintained a healthy gross profit margin of 38.7% despite challenging conditions. However, the company’s financial results were marred by a net loss, primarily due to substantial foreign exchange and inflation-related losses. The challenging markets in Mexico and Argentina further impacted sales, although excluding Argentina, sales would have grown by 3%. InvestingPro has identified 8 additional key investment tips for Rotoplas, including its consistent 10-year dividend payment history.
Financial Highlights
- Revenue: $2.72 billion
- EBITDA: Increased by 15% year-over-year
- Operating income: Increased by 44%
- Net loss: Due to $215 million in foreign exchange and inflation-related losses
- Operating cash flow: Increased by 39% year-over-year
Market Reaction
Following the earnings announcement, Rotoplas’s stock price rose by 0.81%, closing at $13.57. This movement reflects a cautiously optimistic sentiment from investors, who may be encouraged by the company’s operational efficiencies and cost-cutting measures, despite the financial losses reported. The stock has shown strong momentum with a 27.9% return over the past six months, while maintaining relatively low price volatility with a beta of 0.71. Based on InvestingPro’s Fair Value analysis, the stock currently appears undervalued.
Outlook & Guidance
Rotoplas remains focused on controlling costs and exploring growth opportunities, particularly in its U.S. operations. The company anticipates growth in its services businesses, such as water treatment, and expects potential market recovery in Argentina post-elections. Innovation in water solutions continues to be a priority. Analysts maintain a strong buy consensus on the stock, with price targets ranging from $1.35 to $2.39, suggesting significant upside potential. For detailed analysis and comprehensive valuation metrics, investors can access the full Pro Research Report available on InvestingPro.
Executive Commentary
CEO Carlos Rojas Aboumrad stated, "By focusing on what we can control, we are operating more efficiently, strengthening our financial position, and actively defending our market share." This reflects the company’s commitment to operational efficiency and market presence. CFO Andres Pliego added, "The only businesses that are below year-on-year are Mexico and Argentina. The rest of the units and geographies and different services businesses are contributing to profitability."
Risks and Challenges
- Continued economic instability in Argentina and Mexico could further impact sales.
- Foreign exchange and inflation-related losses pose significant financial risks.
- Market conditions in the U.S. are mixed, with drought conditions and a soft residential market affecting demand.
- The company’s ability to maintain operational efficiencies amid these challenges will be crucial.
Q&A
During the earnings call, analysts inquired about the slowdown in Bavia subscriber growth, attributed to technology platform migration. The company expects Bavia to reach operating break-even in the next few quarters. Questions also focused on the potential for housing market growth in Argentina, which remains dependent on election outcomes.
Full transcript - Rotoplas SA de CV (AGUA) Q3 2025:
Call Moderator/Operator: Good morning and welcome to Grupo Rotoplas S.A.B. de C.V.’s results conference call. Please note that today’s call is being recorded, and all participants are currently in listen-only mode to prevent background noise. The host will open the floor for questions later. Today’s discussion contains forward-looking statements. These statements are based on the environment as we currently see it, and as such, there may be certain risk and uncertainty associated with such statements. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, further events, or otherwise. Please allow me to remind you that the company issued its earnings press release yesterday after market close. It can be found in the Investors section of its website.
Also, the presentation for the call and the webcast link are in the Investors section. Today’s call will be hosted by Mr. Carlos Rojas Aboumrad, Chief Executive Officer, and Mr. Andres Pliego, Chief Financial Officer. I will now turn the call over to the speakers.
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: Good morning, everyone. Thank you for joining us. This quarter’s story is one of strategic resilience and disciplined execution. While we faced external headwinds and market contractions in key regions, our focus remained firmly on the variables within our control, demonstrating our ability to protect profitability and strengthen our financial position even in challenging environments. Our response to the market situation was clear and effective. Through cost and expense discipline, we achieved significant EBITDA growth and margin expansion. We executed a strategic defense play that fortified our balance sheet, increasing our cash position and accelerating our cash conversion cycle. This reflects our commitment to financial discipline and building a more robust and adaptable company, continuously working towards our long-term objectives. In our core business, we’re not simply reacting to the market; we’re actively shaping it through innovation and strategic positioning.
In Mexico, despite market pressures, our operational agility allowed us to deliver stable margins. We continue to innovate by launching a new pressurized storage solution, advancing our rainwater harvesting strategy, and continue to develop and integrate IoT solutions into our products to strengthen our market leadership. In the U.S., the business executed an outstanding turnaround, delivering positive EBITDA for the second consecutive quarter. This was driven by a significant gross margin expansion, a direct result of our focus on supply chain productivity and streamlined operations. Meanwhile, Central America and Peru continue their strong performance, and while Argentina remains a complex environment, our strategy has been to achieve financial self-sufficiency. Our disciplined cost and working capital management have enabled the operation to be sustained entirely within its own internal resources.
Our services pillar continues its strong trajectory, positioning sales growth that validates our strategy of building a more resilient business with recurring high-value revenues. Bavia continues its strong performance. The business is scaling efficiently and improving its performance ratios, which speak directly to its long-term viability. Slower subscriber growth this quarter was a deliberate result of a planned stabilization of our new technology platforms, a necessary step to enhance our operational capabilities and prepare the business to accelerate its growth moving forward. Our water treatment business in Mexico and Brazil also delivered a strong performance, building a solid commercial pipeline that will fuel future growth. We made tangible progress in our digital transformation this quarter, moving beyond platforms of intelligent automation that support both our core and new businesses.
We are advancing the continuous consolidation of our B2B and B2C e-commerce platforms, which are gaining traction and improving our customer experience. We’re also enhancing our capabilities with AI. We have begun launching new conversational AI agents designed to provide instant, automated support to our clients and distributors. This strategic move allows our team to focus on higher-value interactions and lay the groundwork for more scalable tech-enabled growth across the organization. Our ESG strategy received important external validations this quarter, confirming our industry leadership. First, we increased our score in the S&P Global Corporate Sustainability Assessment, achieving 71 points. Second, we were recognized by Econau as the first water-responsible company in Mexico, a milestone that reflects our deep commitment to sustainable water management. Third, we received the 2025 Sustainable Innovation Leadership Award from HSBC and EY in the environmental category.
With this achievement, we complete the full cycle of recognitions across the three ESG dimensions: environmental, social, and governance. After having earned the Governance Award in 2022 and the Social Award in 2023, and finally, we were included for the first time in Newsweek’s World’s Most Trustworthy Companies of 2025 ranking, a powerful validation of the trust we build around our stakeholders. Our disciplined execution in volatile markets is building a more balanced and resilient company. The key message today is that by focusing on what we can control, we are operating more efficiently, strengthening our financial position, and actively defending our market share. This strategic discipline is the foundation of our current performance and our future success. The strong growth and improving profitability of our services business and international operations validate this strategy.
The performance demonstrates that as conditions in our core markets of Mexico and Argentina normalize, Grupo Rotoplas S.A.B. de C.V. will be better positioned with a solid balance sheet and enhanced profitability, ready to create long-term sustainable value for all our stakeholders. Thank you, and now I will turn the call over to Andres Pliego.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Thank you, Charlie, and good morning, everyone. I will now walk you through the financial performance in more detail. Quarterly results were mostly affected by Argentina. Excluding Argentina, sales would have grown 3%, EBITDA 40%, and EBITDA margin would have reached 15%. The second challenging environment was Mexico, where heavy rains and slowdowns in residential construction affected product demand. To explain this in more detail, storage solutions are less needed when there are no water shortages or public rationing, while pipes and improvement categories are also impacted as construction activities slow during the rainy season. This year, we once again experienced record rainfall following another record year in 2023. As Charlie mentioned, all other regions and services business performed very well, continuing to grow and improve profitability. Regarding costs and expenses, discipline is yielding results.
Costs of sales and SG&A both decreased year over year, reflecting higher efficiency and operating leverage, supporting a 15% increase in EBITDA during the quarter. For the first nine months, EBITDA remained below last year’s level, but it’s important to remember that 2023 saw exceptional demand from drought conditions in Mexico and a stronger first half in Argentina, as the recession had begun but was not yet in full effect. Finally, although the company recorded a 44% increase in operating income, an impact of approximately $215 million was recognized due to foreign exchange losses and inflation effects in Argentina, both non-cash items. As a result, the quarter and year-to-date results reflect a net loss. Regionally, we’ve already discussed Argentina and Mexico, so let me now elaborate on other markets.
In the U.S., sales were impacted by customer and vendor delays that prevented the shipment of parts of the book of the backlog. Excluding these delays, sales would have grown, and orders and backlog are increasing at a high single-digit rate. Market conditions were mixed. Drought conditions, municipal infrastructure projects, and data center construction supported demand, while farming, residential, and construction, and existing home sales remained soft. The company captured additional value from supply chain efficiency initiatives and streamlined branch operations. EBITDA was positive for the second consecutive quarter, driven by SG&A productivity and gross margin expansion. In our other markets, Peru, Central America, and Brazil, we achieved double-digit growth and healthy margins, underscoring the strength of our diversified portfolio. We continue advancing with steady and profitable steps in these markets. Looking at segment performance, we have already covered products.
Meanwhile, the service segment accounted for 11% of quarterly sales and continued to post double-digit growth. As Charlie mentioned, Bavia added over 4,000 new subscribers during the quarter, at a slower pace as we completed the migration of our full technology platform, including e-commerce, field services, and CRM systems. During this transition, we intentionally limited the addition of new customers to have a smooth rollout. With the new platform now in place, we expect to resume our growth pace while improving customer satisfaction. We have also added new features to enhance user experience, such as appointment scheduling and real-time tracking of the technician who will provide the service. At the same time, our water treatment operations in Mexico and Brazil maintain momentum. EBITDA losses narrow year over year, driven by a greater scale, tighter expense control, and improved unit economics, particularly at Bavia.
As mentioned earlier, maintaining financial discipline continues to be a top priority, supported by tight cash management, efficient working capital practices, and a selective approach to strategic CapEx. Operating cash flow increased 39% year over year, reflecting strong execution and expense control. On liquidity, our cash position remained stable, and net financial debt declined slightly year over year, underscoring our continued focus on preserving a sound financial profile. Leverage stood at 3.18 times net financial debt to EBITDA, mainly reflecting the lower trailing 12-month EBITDA, a slight decrease compared to the last quarter. Total financial debt closed at $4.6 billion pesos, down 2% versus December. These figures include $491 million pesos in short-term debt, primarily related to working capital, and $4 billion pesos in long-term debt, corresponding to our fixed-rate sustainability bond. The blended cost of debt remained stable at 8.7%.
CapEx represented 4% of sales during the quarter, down 7% year over year. The majority of investments were directed towards the services business in Mexico and Brazil, mainly for the construction of water treatment plants and acquisitions of new Bavia systems. Consistent with our disciplined capital allocation strategy, we continue to prioritize investments that strengthen our core operations. Within services, most CapEx is linked to revenue-backed projects, meaning we deploy resources only once contracts are secured or client commitments are confirmed. This approach provides greater visibility and ensures attractive, measurable returns on investment. Before moving to the Q&A session, I’d like to close by emphasizing that we remain focused on controlling what is within our reach.
Despite external factors that are difficult to predict, we continue to build a leaner and more efficient organization, one that enhances profitability and strengthens our balance sheet, while staying true to our purpose and reason for being. Thank you once again for your attention. We’re now ready to take your questions.
Thank you. We will now begin the Q&A session. Our first question comes from Adonai Felix with Apalache. Hello. Thank you very much for taking my questions. First, in the report, we see that service sales grew 50% during the quarter, and Bavia surpassed 159,000 active subscribers. Could you share your growth expectations for Bavia growth towards 2026, and when do you expect this segment to reach break-even at the operating level?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: I’ll start with growth. Thanks for your question, Mariana. Sorry, Adonai, and thanks for joining. Bavia actually had a bit of a slowdown in growth because we implemented new technological platforms. To stabilize them and have the minimum negative impact on our customers, we didn’t push as strongly for new customers. We do see this business performing really well with continued validation of all of the hypotheses. We continue also to evolve the business as we learn more about the business. We do foresee continuing to grow at similar rates as we’ve had in the past. Regarding profitability at the operating level, I don’t know if you would like to comment on anything regarding that, Andres.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Sure, sure. Profitability continues to improve. Each quarter, we see better profitability. We expect to become profitable in the next few quarters, as we have commented before. We don’t specifically open Bavia’s profitability, but we’re in the right direction for sure. We expect to continue high growth in the future, increasing profitability or improving profitability.
Thank you, guys. The second question from Adonai is, the report notes that the U.S. operations delivered a second consecutive profitable quarter. Could you elaborate on the main drivers behind this improvement and whether current performance already reflects a structurally profitable operation or if it remains influenced by temporary factors?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: Revenues in the U.S. have not been able to grow, and we accomplished profitability based on our discipline on expenses and costs. I do think that this is something that can be sustained. We are exploring avenues for growth beyond just demand increasing because of growth of the industry, both industrial and agroindustrial. With a larger business, we will have operational leverage, improving further profitability. I do think that we will be able to sustain these profitability levels going forward and with this discipline of cost and expenses. We should be finding in the future other avenues for growth that should contribute to profitability with operational leverage.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Yeah, probably just stress that both COGS and SG&A, as we mentioned in our remarks, were very much reduced. That was across the company, but in the U.S., we also saw that trend. Those were structural changes that will continue for the future. It was not any one-offs that were in place.
We’ll move on to the next question from Orlando Alcantara, BTG Pactual, to go deeper on COGS. What was the cause for COGS turnaround for this quarter? What kind of savings were the main driver of COGS to drop 6% year over year? Was it an inventory management deficiency? What role did raw material acquisition, direct labor, installation costs, and factory overhead play into the COGS efficiency? Can we expect further negative COGS growth into the following quarters? At what level?
Yeah, thank you, Orlando. I think it’s all of the above. We, and all of the above, and again, in most of the regions. Probably I would focus on Mexico and Argentina in our products businesses. Both Mexico and Argentina have reduced inventories. Part of that was inventory management. Also, resin prices are helping, and exchange rate is helping as well. Also, efficiency in our lines of production. In Argentina, as we have reported, we have made significant changes in our production lines. We have reduced operating personnel both in Mexico and Argentina, and that has been helping in productivity across the board. I would say it’s improvements in most of the lines that compose the COGS and in most of the businesses. We spoke about the U.S. in the previous question. Mexico and Argentina both take a big toll on improving COGS. I think it’s across the board, generally.
Thank you, Andres. We have another question from Orlando, and it’s pretty similar, but now about OPEX. What about operating expenses at the consolidated level? We observed a 10% drop in OPEX. What role did payroll, logistics, services, marketing expenses, and software leases play in this efficiency? Can we still expect further negative growth of OPEX in the following quarters?
Yeah, yeah, similar to COGS. Since you might recall, but since November last year, we have started a significant push towards efficiency. It’s both in admin personnel. We have become more and more efficient, including AI tools in some of the marketing processes, for example. Also, in the digital side, as we have reported previously, most of the investments have already been done. Right now, it’s only about controlling, managing the contracts, the large contracts. We’re not seeing an increase in IT expenses generally. It’s across the board, and it’s structural. As you can see in the reports, we reduced almost 400 people from last year to this year, right? That’s, I would say, part goes into COGS and part goes into SG&A. We’re becoming a leaner, more efficient organization in general. Unfortunately, the market is not there, both in Argentina and Mexico, as we have mentioned.
We’re positioning ourselves with a very strong structure, both in COGS and in SG&A.
Okay, let’s take our next question. It’s from Martin Lara, Miranda Global Research. How do you see the performance in Argentina going forward?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: Hello, Martin. Thanks for joining and your question. I think we’re all looking forward to the elections that will take place this weekend, and that will be material on what will happen with the country. We are optimistic about Argentina continuing its path of transformation. There is a big shortage of housing, which would be a relevant driver for our business in Argentina. As there’s availability of credits for mortgages for homes in Argentina, the housing industry would grow materially. For this, we need lower interest rates and more financial stability in the country. I think that’s going to depend a little bit on what happens in the next elections and the response to those elections. I do think that at some point, the market will come back because the need for the housing is very large.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Anything else that you’d like to comment?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: No, I think that’s complete.
We have another question from Martin, and it’s, in the U.S., are you experiencing customer delays in the fourth quarter 2025?
Not necessarily. We’re expecting a very similar consistency in terms of customer demand going into the fourth quarter.
Good. The next question comes from Roberto Nava, GBM. Given the challenging backdrop in Argentina and slower demand in Mexico, what are the top priorities for 2026 to sustain profitability and improve cash flow generation?
Hello, Roberto. Thanks for joining and for your question. Yeah, that’s a great question. We are a very innovative company. We do see that there continue to be opportunities around the water space. While this year in Mexico, they were very different because we had a lot of rains. We had more rains than in the, it was a record year. I think it was the most rains in the last 60 years. Even a lot of rains bring some other opportunities. We continue to innovate and develop our offering and evolve the customer journey, how we serve our customers. Leveraging both new solutions for water opportunities and leveraging digital technologies, we continue to be market shapers in evolving how customers resolve their water needs. Specifically, we see for next year, new products in the core of the business having growth.
That’s contributing to the Mexico products part of the business, regardless of the demand changing in the country. There is also a high need in Mexico for new housing, and the government is looking to promote a program for new houses as well, to build new houses. Obviously, we do think that we will have growth in the services businesses, Bavia and water treatment plants in Mexico and Brazil. That will also be driving growth for 2026. In the U.S., as I had mentioned, we are exploring other growth avenues, and I think that will start to deliver some results also, contributing to the growth of the company. Anything else that you’d like to share regarding ’26?
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Probably more of the same, but we will continue to control what is within our reach, right? Which is, again, COGS, expenses, CapEx, investments.
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: And innovation.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Regardless of the market, we hope that it comes back. Regardless of the market internally, all the structural changes that we have done and all the efforts that we have done will continue to happen. Just one last comment, the only businesses that are below, let’s say, year on year are Mexico and Argentina. The rest of the units and geographies and different services businesses are contributing to profitability. We expect that to continue, right? If we continue to do what we have done in the last few quarters, we think we will come out really solid for when the market starts coming back, particularly in Argentina.
Up next, we have another question from Roberto. Are there any M&A or strategic partnership opportunities being evaluated to accelerate the services or treatment business?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: No, nothing material. We are doing partnerships with suppliers and other companies that have capabilities to continue to evolve our offering. It is a business that, as we are participating more with an approach of network, where we are connecting the best solutions available in the world with the customer needs, we obviously do this in partnership with other companies, but no material M&A.
We’ll take the next question from Rodrigo Salazar, AM Advisors. You mentioned maintenance CapEx has been low. Are you concerned about potential underinvestment and its impact on operations once demand recovers? What should we expect for total CapEx next year in terms of level and allocation between maintenance and growth?
Hello, Rodrigo. Thanks for joining. No, the lower maintenance CapEx is also related to efficiencies and evolution of our practices. We’re not doing it in a way where we will not be able to serve increased demand when it’s there. In terms of your second part of this question regarding CapEx for next year, I think it really depends on our ability to grow the business, and it will also depend largely on demand for Mexico and Argentina. We remain highly flexible and agile to deploy CapEx based on the cash flow generation of the business. Nothing that needs to happen in a materially different way. We will pursue opportunities as we feel we are in a financially healthy position. Anything else that?
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Probably just add that, I mean, we haven’t compromised any maintenance at all, right? We have done the CapEx needed. We have just been more, I would say, diligent or more cautious with spending. We’re not, we don’t have a backlog of maintenance CapEx. Also, the blow molding machines, newer machines that we have invested in the last couple of years, need less maintenance at this point. Yeah, we’re not compromising the operations at all.
Good. Rodrigo’s second question is regarding Bavia. Should we expect the pace of around 12,000 additions per quarter to continue, or could that accelerate once the tech investments are completed?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: I think at some point, we can experience growth in the number of new customers, net customers per quarter. The tech capabilities are the most relevant thing for us to be able to serve customers at a growing rate in a more and more efficient and effective way. I think that the customers coming into the platform today are validating that this is the way that they would prefer to consume drinking water. We have a very little, very small part of the market share. As that hypothesis has been validated and we have the capability to serve them in bigger quantities per month, I think our number of new customers per quarter can increase.
Okay, so one last question, and it’s from Orlando Alcantara, BTG Pactual. Why is the interest rate on debt still high, 13.5% despite lower Banxico rates?
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Thank you, Orlando. I don’t know where that 13.5% comes from. Our blended cost of debt is 8.7%. That is basically composed of our long-term sustainability bond at 8.65%, and then the short-term debt, which is $491 million pesos, is at TIIE plus 1, TIIE plus 90, TIIE plus 110. The blended is 8.7%. I guess that’s it.
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: Since the biggest part of the debt is the long-term debt with a fixed rate, that wouldn’t change too much.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Exactly.
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: Based on how rates change.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Correct. 90% of the debt is fixed at 8.65%.
The last question from Orlando, it’s pretty much about debt. Could you give more color on debt maturities?
Sure.
Just to close that, yeah.
We have, again, the $490 million pesos short-term. Those are mostly one-year contracts, short-term, one year, and we continue to roll them over as needed. We use them precisely as working capital lines of credit, so we increase and decrease. Those are mostly one-year loans. The sustainable bond is due in the summer of 2027, about 15 months away. We have started to look into the refinance of that, but we still have some time to refinance that one as well.
Perfect. That was the last question. This concludes today’s Q&A session. Any final comments?
Carlos Rojas Aboumrad, Chief Executive Officer, Grupo Rotoplas: Thank you very much for joining, and we’re looking forward to seeing you next year.
Thank you, guys. See you next quarter.
Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Bye.
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