Good day, everyone, and welcome to the Arca Continental third quarter 2026 conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask questions at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. In the interest of time, we ask you please limit yourself to one question. Please note, this call is being recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of IDEAL Advisors.
Please go ahead.
Thank you, operator. Good morning, everyone. Thank you for joining the senior management team of Arca Continental to review the results for the third quarter and first nine months of 2026. Their earnings release went out this morning, and it is available on the company website at arcacontal.com in the Investor Relations section. It is now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutiérrez, the CFO, Mr. Emilio Marcos, the Chief Planning and Strategic Capabilities Officer, Mr. Jesús García, and the Chief Operating Officer, Mr. Jean-Claude Tissot.
They are going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance. With that, I am going to go ahead and turn the call over to the CEO, Mr. Arturo Gutiérrez, who is going to begin the presentation.
Please go ahead, Arturo.
Thank you, Melanie. Good morning, everyone, and thank you for joining us today. Arca Continental delivered a strong third quarter performance, demonstrating the adaptability of our business model and our ability to evolve quickly as market conditions change. During the period, volume trends improved in each of our operations, while profitability remained solid. By staying close to consumers and customers, our teams responded with greater speed and flexibility, adjusting commercial execution and operating priorities to local dynamics while maintaining prudent financial management and a clear focus on business fundamentals. While our operating environment remains complex, we enter the final part of the year with greater momentum across our markets and a solid foundation to sustain this progress.
Let me begin with our consolidated results. Total consolidated volume increased 4.6% in the third quarter and 2.7% year-to-date, marking a clear acceleration from the first half of the year.
Notably, our Stills category grew 7.1%, while Sparkling was up 4.9%, with positive contributions from both segments of our beverage portfolio. Consolidated net sales rose 5.9% in the period and 2.1% year-to-date, supported by solid commercial execution and disciplined pricing. EBITDA improved 6.2% in the quarter and 2.1% for the first nine months, reaching margins of 20.5% and 20%, respectively, underscoring the quality of the recovery and the strength of our underlying business economics. Turning now to our operating results. For our Beverage business in Mexico, unit case volume, excluding jug water, increased 2.1% in the quarter and 0.7% year-to-date, marking a notable sequential improvement. This result reflects the consistency of our business and the alignment between our commercial priorities, market execution, and the capabilities we have built over time. Our revenue growth management agenda remains central to this approach.
Returnable formats and single-serve packages gained share of mix, serving as commercial levers within a price pack architecture designed to address affordability and support the profitability of the business. Channel trends were positive during the quarter, led by modern trade and supported by growth in traditional trade, while on-premise remained broadly stable. Coca-Cola Zero maintained a strong trajectory, growing 32% during the period and gaining share within the Coca-Cola brand mix. Our initiatives are broadening the consumer base, driving frequency, and converting higher engagement into incremental volume through a growing number of transactions.
We are strengthening our route-to-market strategy through improved service models and further digitalization at the point of sale. Timely investments in planning and operating capabilities are reinforcing product availability, with out-of-stock levels remaining at historical lows. Together with The Coca-Cola Company, our innovation agenda is increasingly consumer-centric by being relevant to the occasion.
Closer connections to the market, supported by faster data and insights, enable us to identify emerging trends and assess category performance. Launches such as Topo Chico Aguas and Coca-Cola Zero Caffeine Free reflect this mindset, expanding consumption occasions and reinforcing brand relevance while supporting our long-term growth algorithm. For the region, net sales increased 3.7% in the quarter and 4% year-to-date, with average price per case, excluding jug water, up 3.9% over the three-month period and 4.6% year-to-date. EBITDA grew 7.5% in the quarter, with margin expanding 80 basis points to 24.7%. Year-to-date, EBITDA improved 4.9%, reaching a margin of 23.5%, an increase of 20 basis points. Moving to our operations in the U.S., Coca-Cola Southwest Beverages delivered a positive third quarter, with total volume increasing 1.1% and transactions growing 1.5%, reflecting improved commercial trends despite a cautious consumer environment.
Year-to-date, volume and transactions were up 1% and 1.8%, respectively. Transaction growth remains an important indicator for our business. Our focus is on expanding purchase occasions through targeted affordability and premiumization, relevant packaging, and sharper promotional activity. Behind this effort, advanced analytics and digital tools are enabling more precise outlet-level decisions, improving product availability and route-to-market productivity, while allowing our teams to respond faster to evolving consumer behavior. Results across the portfolio were encouraging. Sparkling beverages increased 2% and Stills grew 5.9%, with Coca-Cola Zero up 15%, Sports Drink rising 10.9%, and Fairlife increasing 20.6%. Net sales increased 5.4% in the quarter and 5.1% year-to-date, with average price per case up 4.3% during the period. EBITDA grew 4.6% and 5.1% respectively, with margins of 17% and 17.1%, demonstrating the resilience and profitability of the business.
This performance was supported by efficiency measures, rigorous cost control, and an effective hedging strategy to mitigate ongoing cost pressures. Finally, the expansion of our San Antonio facility represents a significant milestone in the ongoing optimization of our Coca-Cola Southwest Beverages operation, increasing capacity, enhancing operational flexibility, and supporting a more streamlined supply chain to serve our markets. For our beverage operations in South America, total volume increased 17.5% in the third quarter and 10.5% year-to-date. Peru and Ecuador led this performance, where volumes reached record levels, while Argentina delivered a sequential recovery. Revenues increased 30.1% in the quarter, with EBITDA up 23.3% and a margin of 17.1%. Year-to-date, revenues grew 8.2% and EBITDA increased 3.7%, with a margin of 17.7%. The region's progress reflects stronger operating trends, disciplined execution, and the benefits of the capabilities and investments developed in recent years.
Peru delivered another exceptional quarter, reaching the highest quarterly volume in the history of our operation. Total volume increased 24.3% year-over-year, reflecting broad-based strength across categories, channels, and regions. Performance remains solid across our strategic priorities. Coca-Cola and Inca Kola grew 23.8% and 18.4% respectively, while our hydration platform expanded 37.7%. The Energy Drink category delivered a notable performance as well, increasing 33.4% during the quarter and further expanding its mix within our portfolio. Positive momentum was evident throughout our route to market, with all channels delivering double-digit growth during the quarter. Investments in cooler coverage, service frequency, customer development, and distribution are sustaining this trajectory while improving product availability and execution. Looking ahead, we are preparing proactively for potential weather-related impacts, with infrastructure and contingency measures designed to protect service levels, our communities, and business continuity.
In Ecuador, volume increased 18.1% in the quarter and 11.9% year-to-date, reaching its highest level in six years. Performance benefited from segmented plans by brand, sharper price pack architecture, and targeted initiatives behind our zero-sugar portfolio and priority packages. By category, Sparkling and Stills grew 18.8% and 19.6% during the quarter respectively. Additionally, channel dynamics were favorable, with both modern and traditional trade delivering double-digit growth. During the quarter, we expanded availability, reinforced execution, and supported value share gains in Sparkling, while disciplined expense management and operating efficiencies contributed to improved profitability. In Argentina, volume returned to positive territory during the third quarter, up 0.3% year-over-year. This result underscores the progress we are making in a still challenging consumption environment. Sparkling beverages remain broadly stable, with Coca-Cola Zero and Sprite among the main drivers of the recovery in the category.
Furthermore, single-serve formats continue to gain relevance within the portfolio. Our market position remains solid, with additional value share gains in NARTD beverages versus the prior year, as Sparkling strengthened its leadership. We are complementing our commercial initiatives with greater precision. Our suggested order tool, advanced segmentation, and new service models are helping expand the portfolio, improve product availability, and strengthen execution at the point -of -sale. For our Food and Snacks businesses, Bokados posted positive third quarter results in Mexico, with net sales and EBITDA growth driven by core category strength, lower variable costs, disciplined expense control, and broader brand coverage. In Ecuador, Inalecsa maintained its market leadership and gained share while delivering double-digit EBITDA growth, benefiting from effective pricing, expanded customer reach, and solid commercial execution. On sustainability, we keep taking tangible action across our longstanding commitment to community development and circular economy strategies.
As part of our 100th anniversary, we brought together our ongoing volunteer efforts in a commemorative initiative spanning all five operating countries. More than 8,000 associates and family members contributed approximately 25,000 hours to educational infrastructure projects, benefiting 170 schools. We also expanded our PetStar collection network with new centers in Mexicali and Chihuahua, each able to recover up to 54 million PET bottles annually. These investments add to our local collection capacity and support our approach to circular packaging, recycling, and environmental awareness. Together, these actions show how sustainability is embedded in our operations, promoting responsible resource management and generating shared value for the communities where we operate. With that, I will turn it over to Emilio. Please, Emilio.
Thank you, Arturo. Good morning, everyone, and thank you for joining our call. As Arturo highlighted, our third quarter results reflect continued progress despite a still challenging macroeconomic environment. Our solid revenue growth management capabilities were reflected in our positive top-line performance, while disciplined cost and expense management drove EBITDA growth and margin expansion during the quarter. We remain committed to maintaining this discipline while continuing to support the growth of our business. Let me offer further insight into the financial results. In the third quarter, consolidated revenues increased 5.9%, reaching MXN 66.6 billion. Revenues for the nine months of the year rose 2.1% to MXN 187.8 billion, mainly driven by positive volume performance and an effective pricing strategy. On a currency-neutral basis, revenue rose 7.5% in the quarter and 7% year-to-date.
During the quarter, gross profit increased 7.2% to MXN 31.7 billion, while gross margin expanded 60 basis points to 47.5%. For the nine months of the year, gross profit grew 3.6% to MXN 88.8 billion, with gross margin expanding 60 basis points to 47.4%. On a currency-neutral basis, gross profit grew 10.6% in the quarter and 8.5% year-to-date. For the quarter, consolidated EBITDA increased 6.2% to MXN 13.6 billion, with a 10 basis points margin expansion reaching 20.5%. In the nine-month period, EBITDA grew 2.1% to MXN 37.4 billion, while we reflected EBITDA margin at 20%. On a currency-neutral basis, EBITDA rose by 7.9% in the quarter and 6.3% as of September. Net income for the quarter decreased 4.8%, reaching MXN 5.1 billion, resulting in 80 basis points contraction in net profit margin.
For the year-end period, net income totaled MXN 13.8 billion, marking a 7.5% decrease compared to the previous year, with a 70 basis points contraction in net profit margin, mainly explained by operating margin dilution and variation in the comprehensive cost of financing. Now moving on to the balance sheet. As of September, cash and equivalents totaled MXN 28.6 billion, while total debt stood at MXN 61.7 billion, resulting in a net debt-to-EBITDA ratio of 0.7 times. We declared an additional extraordinary dividend of MXN 2 per share paid on October 28th. Together with the ordinary dividend of MXN 4.28 per share paid in April and MXN 2.5 per share paid in August, total cash distribution reached MXN 8.78 per share.
This represents a payout ratio of 77% of retained earnings and a dividend yield of 4.3%. Looking ahead, macroeconomic conditions are expected to remain challenging through the year-end.
We're confident in the strength of our business and our ability to navigate the current environment effectively. Our core capabilities and disciplined approach to cost and expense management will continue to support our commitment to delivering sustainable long-term value. That concludes my remarks. I will turn it back to Arturo. Please, Arturo.
Thank you, Emilio. As we conclude the third quarter, our consistency continues to stand out. The sequential improvement in our operations, together with solid profitability, reflects the strength of the fundamentals underpinning Arca Continental and supports our decision to confirm our 2026 guidance for mid-single-digit consolidated sales growth on a currency-neutral basis. This is grounded in how we manage our business, staying close to our customers, acting decisively on the factors within our control, preserving financial discipline, and directing resources towards priorities that reinforce our competitive advantages over time. Looking ahead, that same approach guides our decisions, combining thoughtful capital allocation and a long-term investment perspective, while building the capabilities that support sustainable value creation. We are now ready to answer your questions. Operator, please proceed.
Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. In the interest of time, we ask you please limit yourself to one question. We'll take our first question from Ulises Argote with Santander. Please go ahead. Your line is open.
Hola, buenos días. Thanks for the space for questions. Wanted to get some color there on the U.S. execution and the drivers behind the volume improvement we saw in the quarter. Also, maybe if you can comment a little bit in terms of what we could expect or how we should think about the EBITDA margin trajectory going forward there in the U.S., given the dynamics as we saw this quarter. Thank you very much.
Thank you, Ulises, for the question. I'll turn that over to Jean-Claude.
Thank you, Arturo. Thank you, Ulises, for the question. We had a very solid performance during the third quarter in the U.S. There was a main focus on execution. One of the key metrics was SOVI. We were able to gain SOVI through all our large stores. We increased more than four points. Something that I would like to remark is that the solid result allow us to grow share in sparkling to a record high in market share for sparkling. There was a focus on regular Coke that we were able to grow.
Also, we continue with the solid performance with Coca-Cola Zero, growing more than double digit, and the efforts that we are doing with Core Power. Then execution, and execution with an end-to-end approach, where we have a record high in our fill rate numbers with the customers and internally in our supply chain.
Term of EBITDA margin, Emilio, I think that you can help us.
Yeah, sure. Thank you, Ulises, for your question. Yes, we had in the region a contraction of 10 basis points due to higher aluminum prices and transportation costs in Coca-Cola Southwest, and a lower result in our snack business. But talking about our beverage operation, the margin for the quarter was 17.1% with a 10% dilution in the quarter. But year-to-date, we have an expansion of 10 basis points. Going forward, we feel comfortable to close the year at the same levels of last year for Coca-Cola Southwest.
Ulises, you can see that most of the pressure in margins comes from the volatility that arises out of the geopolitical tensions impacting some of our input costs, not necessarily from the fundamentals of our own business.
Perfect. No, thank you very much. I think that's kind of the detail that we wanted to get some insight on. Thank you very much to you and Emilio for the detail.
Thank you, Ulises.
Thank you. We will move next with Ben Theurer with Barclays. Please go ahead.
Arturo, Emilio, team, thanks for taking my question. Picking up on the other side, in Mexico, you obviously had margin expansion, so we discussed already the U.S. contraction. Now let's go on the expansion side in Mexico. Can you maybe help us understand more what were the drivers of that margin expansion? What is the mix shift? Was it raw materials, operating efficiencies? Just how to understand a little bit the drivers behind that and what we should think about in the more immediate future for the fourth quarter, and then maybe looking a little bit beyond on the Mexico profitability side as it relates to your margin profile. Thank you.
Sure, Ben. Good morning, and thanks for your question. I would say it's kind of all of the above in a way. We're very happy with the results in Mexico in a very challenging year for different reasons. I'll ask Emilio to give you a bit more detail on margin performance in Mexico.
Yes. Thank you, Ben, for the question. I think it's a combination of several variables. EBITDA in Mexico grew 7.5% in the region, and with a margin expansion of 80 basis points to 24.7%. The performance, as you mentioned, there's several variables. One is positive volume growth. The second one is pricing. We increased prices during the quarter. Price, if you compare the quarters, is 3.5% evolved compared to last year. Our returnables and single-serve packages gained share in the mix, so that also helps. Also, we should consider the hedging strategies and the lower sugar prices also in the quarter. Looking forward, we will continue working to maintain this year-to-date positive trend, so we expect the year to close with the same trend as we have in the first nine months of the year.
I want to only add, Ben, that we also are very satisfied with the indicators of our fundamentals and how those have improved over time. Some of that is leveraging our digital capabilities. Also, the investments that we have made over time, and those also are giving us this momentum. As we think about our strategy, we have talked about our fundamental strategy of affordability in Mexico and in other countries. I think it is very important to highlight that this is a strategy that is also looking for a profitability behind it. It is easy to be affordable if you are not looking at the profitability side of the business. For us, the returnable strategy, for example, supports precisely that idea where both variables are really important. I think we have achieved that this first three quarters of the year.
Okay, perfect. Thank you very much for the color.
Thank you, Ben.
Thank you. We will move next with Lucas Ferreira with JPMorgan. Please go ahead.
Hi, guys. Thanks for the space for question. My question is also on Mexico, talking about both pricing dynamics and market share. Can you talk a little bit about the schedule for pricing? If you already took a pricing mid of this year, and if you think we require more pricing to adjust for first inflationary pressure that we normally see, and how you see this combined with how the market is pricing as well, considering the competition. Thank you very much.
Thank you, Lucas. I'll turn it over to Jean-Claude.
Thank you, Arturo. Thank you, Lucas, for the question. Regarding pricing, as we have been sharing in other opportunities, we are very proud of our RGM capabilities. RGM in the case of Mexico means about consistency, and consistency in four pillars that we have. That is the tools that we have for our RGM strategy, the portfolio that we have, and in portfolio, I would like to reinforce that the strategy is about affordability, and affordability that help us with profitability at the same time through returnables, and how we are also promoting premium prices with some of our packages and brands. It is the feedback that we receive from our consumer and customers.
That, obviously, similar to what we are doing in U.S. and in the five countries, they focus on execution, because it's not just to have an RGM strategy if you don't have the fundamentals at the point of sales. We expect to continue to have prices above inflation, and pricing is not just about the pricing, but is the strategy and also how we are going to continue leveraging our tools and our promotional strategy to continue to have a price above inflation.
Lucas, it's important to see that, considering those four elements that Jean-Claude described, you can see how this is an example of how we combine technology and new tools with the human capabilities that we have, and that is when you really create a differentiation or a competitive advantage for the business. This is the strategy as we deploy also other technologies in our operations.
Thank you very much, guys.
Thank you, Lucas.
Thank you. We will move next with Thiago Bortoluci with Goldman Sachs. Please go ahead.
Yes. Hi, good morning, everyone. Thank you very much for the call-out. Arturo, my question is in innovation across the portfolio, not necessarily just in Mexico. In your opening remarks, you had a call-out for Topo Chico and Coca-Cola Caffeine Free. Obviously, we know of the success of the rollout of Coca-Cola Zero Sugar. I know you are also piloting Sprite Zero Sugar. My question is, when you take the global benchmarks across The Coca-Cola Company system, where do you think these new products, and by new, I mean on top of the trademark Coca-Cola, what is the penetration that this could get into your mix? With this, I am just trying to get some sense on how much growth, incremental growth without cannibalization you could extract from the pipeline. Thank you very much.
Hello, Thiago. Thank you for your question. We do believe innovation is going to bring significant growth in the future in our system. It is, as you know, very important in the U.S., North America in general, but also in Latin America. It will become an important source of growth in the future. I think the growth in our market, in Latin America in the next few years, probably 1/4, 1/3 of the growth should come from innovation, although it is not going to be maybe a significant part of the mix initially, but we come from a very small baseline. We are moving more into the functional type of innovation in our markets rather than just the, I would say, sensorial innovation that we have seen before in terms of flavors.
I would say that this is supported not only by our partnership with The Coca-Cola Company, but also by, I would say that the data from the consumers that we continue to improve on that, the capabilities in our supply chain, and our ability to execute to manage the complexity that that brings to the system. We believe that growth through innovation will be granular. It would be brand extensions, some seasonal launches, some things that will stay for a longer time. At the end, I think strategically, the challenge it presents is that we need to be able to operate under a more complex environment going forward. That is for what we have been preparing for in the last few years in terms of investment in supply chain, human capabilities, and technology, et cetera.
Helpful. Thank you very much, Arturo.
Thank you, Thiago.
Thank you. We will move next with Henrique Morello with Morgan Stanley. Please go ahead.
Hi, everyone. Thank you so much for taking my question. I just have a follow-up on the margin discussion from the start of the call. If you could just give us an update on your hedges coverage and at what levels you are hedged for next year, so into 2027, that would be very helpful. Still on that, I know it's hard to make predictions on this volatile market, but when you balance out your current hedges for next year versus what is happening in the spot market and what you have been doing in terms of efficiencies and pricing and cetera, what are the biggest challenges or headwinds you see into next year in terms of profitability?
What you have been doing and what are the tailwinds that can offset that and maybe keep margins more flattish or even expanding into a tough cost environment next year? That is my question. Thank you very much.
Thank you, Henrique. I will have Chuy explain to you our hedging situation, and then I will complement the comments with a general perspective on how we see that future. Go ahead.
Thank you, Arturo, and thank you, Henrique, for your question. During the third quarter, we continued to observe a certain amount of pressure, particularly on aluminum and PET costs. While we do not currently anticipate any supply disruptions, obviously the continued geopolitical uncertainty could maintain some pressure on cost during the coming quarter. We do also anticipate continued pressure in the short and medium term for fuel. However, in the future, if geopolitical tensions ease, we expect energy prices to take some time to adjust, but those levels will normalize. As we have shared with you before, in the case of aluminum, we do have hedges in place that help mitigate part of this impact. Our LME exposure in Mexico and the U.S. are fully covered and 90% cover above 2025 levels, but well below current spot prices.
As far as the Midwest Premium requirements for the U.S., we have hedged 50% of those, also above last year, but below spot prices. There is no financial hedging instrument available for PET, but we do have supplier contracts in place across all of our operations, and these are designed to partially offset the current market price increases. We believe that the impact has been mostly contained in the U.S. Those contractual mechanisms have helped limit cost increases. We see more meaningful increases in Mexico and South America, but those increases remain significantly below spot market levels. We are obviously taking actions to control expenses to limit the impact. We do have a number of initiatives that are focused in generating good savings for us in the year.
We have shared some of those with you before, the Wild West project in the U.S. that will start generating some savings by the end of this year, among many others, and obviously our continuous improvement initiatives. We have secured 90% of the sugar needs in Peru at levels below 2025. We have also hedged around 90% of our fructose needs for the businesses, broadly in line with last year. Finally, we have hedged 100% of diesel needs in the U.S. for 2026 and 2027. We are very comfortable with what we did for 2026, and we feel very confident in our hedge strategy moving forward.
Henrique, from a general perspective as we look ahead to 2027, we do expect a more stable landscape, hopefully without some of the external impacts that we faced this year, and supported by our pipeline of innovation, our capabilities, the investments in the marketplace. We remain cautious considering this volatile and inflationary cost environment. We will continue to focus on our RGM or price architecture, cost control, and efficiencies. In the case of Mexico, for example, we do expect a better macro environment, and that together with improved fundamentals in our commercial processes, a very solid supply chain, this innovation pipeline, and also capitalizing on the investments that we made, that is why we look optimistic at 2027.
That is very helpful, Arturo. Thank you very much.
Thank you, Henrique.
Thank you. We will move next with Alejandro Fuchs with Itaú. Please go ahead.
Thank you, operator. Good morning, Arturo, Emilio, Jean-Claude, Jesús. Thank you for the space for questions. I just have one very quick one regarding South America. I wanted to see maybe, Arturo, if you could also give us a little bit of your sense of what you expect maybe for the medium term, maybe next year. We have a lot of moving parts in many of the countries with El Niño. Volume performance was very impressive in South America this quarter. I wanted to see if maybe you can dig a little bit into what is driving this strong performance. Thank you.
Yeah. Thanks, Alejandro. Well, let me go through the different operations in South America. In Peru, as you saw, we grew the volume significantly. That is leveraging our dual-core strategy that we talked before, growing Coca-Cola and Inca Kola. We actually grew in every category, in every channel in that market. We did have favorable weather and a better environment in terms of consumer confidence, and we capitalized on investments, particularly cold drink equipment investments. We have been increasing our reach in that market. Provinces in Peru have a tremendous opportunity going forward. We expect this market to continue to perform really well. Looking at just the perspective for the future, this is something we repeat over and over, we serve the same population in Peru than in Mexico, and volumes in Mexico are more than three times the volumes that we have in Peru.
That gives you an idea of the size of the opportunity. Ecuador is similar. The per capitas still present a significant opportunity there. The strategy of competitiveness in the portfolio and affordability has worked really well for us. We have been accelerating the growth in stills, and this is one of the markets where we have scaled digital capabilities very effectively. We have 78% of digital mix in traditional trade in Ecuador. All of that has been supporting growth, and we believe there is still significant white space in that market, and unlocking these opportunities for 2027. Argentina, probably a different story. Consumer demand remained under a lot of pressure, but we are seeing a more stable macroeconomic environment.
We did have growth in the third quarter. We maintain our value leadership in the NARTD categories. That is very important. We are focusing on single serve.
That grew 3% in the quarter, which is also super important. We expect, in the case of Argentina, I would say a gradual recovery in volume in the third quarter. We are going to see a more favorable comparison base. The consumer environment remains challenging, but we do expect a recovery for 2027. With respect to El Niño, which you referred to, these weather events do have some favorable impact in our business, but also present some challenges. The advantage of this El Niño phenomenon is that we actually can anticipate some of the potential disruptions and activate mitigation measures to protect our infrastructure, our people, our supply chain in general, and maintain the business continuity and service levels throughout early next year.
Super clear. Muchas gracias, Arturo.
Gracias. Thank you, Alejandro.
Thank you. We will move next with Alvaro García with BTG. Please go ahead.
Hey, gentlemen. Thanks for the space for questions. Two questions. One on Wild West in the U.S. I was wondering if you could perhaps provide an update as to the outlook for that plan. And two, I know you don't give specific guidance on, let's say, the magnitude of investments around digital capabilities, whether it be in CapEx or SG&A, but I was wondering if you could perhaps comment on the degree to which that could potentially come down going forward, or maybe perhaps not. But I guess, yeah, directionally, it would be great to hear your thoughts on how we should think return on those investments and whether those investments should increase going forward. Thank you.
All right. Turn it over to Jean-Claude to talk about Wild West.
Thank you, Arturo. Wild West, very proud to share with you that we started with our San Antonio facility. Actually, we had the opening event two weeks ago. As you know, the Wild West project is what we are doing in our San Antonio facility, our Dallas-Fort Worth facility. That is going to be the most modern facility in the U.S. Thinking about what we are doing from supply and in the warehouse, and the new warehouse that we are building in Oklahoma. We are going to see the benefits of the Wild West project at the second half of next year, and fully embedded in our P&L for 2028. What is the strategy behind the Wild West project is that it's going to allow us to continue expanding our transaction.
It's going to give us more flexibility with our immediate consumption and transaction packages, a flexibility that we have opportunities to improve right now. That is the strategy and the status of that project.
Alvaro, with respect to digital, it's a very broad agenda what we are doing. This includes all of the work we're doing at Digital Nest here in Monterrey, plus a number of different investments and specific use cases. I would say that any CapEx related to that is part of the CapEx that we've been talking about and the levels of CapEx that we've had historically and going forward. We are going to have some very particular use cases where we're going to track the return on investment for those projects. We are going to start exploring also agentic AI solutions for our business early next year. We're launching the project now, and that definitely is going to bring significant productivity, we believe, to some of our core processes. But we don't have specific business cases for those yet.
I think it's certainly an upside for our business going forward and continue to capture those opportunities. We are, at the same time, strengthening the foundations to be a more digitized enterprise in terms of digital and AI literacy of our leadership, responsible AI governance, cybersecurity, et cetera.
Wonderful. Thank you very much.
Thank you, Alvaro.
Thank you. We will move next with Antonio Hernández with Actinver. Please go ahead.
Hi, good morning. Congrats on your results. You already mentioned hedges and cost perspective and so on, but wanted to get a sense on SG&A expectations going forward, especially given higher labor costs expected next year. Also, as logistics costs around the industry having grown quite a lot as well. Any feedback on the SG&A? Thanks.
Emilio?
Yes. Thank you for your question, Antonio. Yes, we had an increase on our ratio of OpEx. We closed the quarter with 32.4%, which is 110 basis points higher than the first nine months of the year. We have implemented, as Jesús mentioned, some productivity and saving programs. Some of these increase are mainly driven by higher depreciation, as we have mentioned. Also, we have increased our CapEx investment in the past years, so that's reflected on the OpEx. It also has some planned system upgrades aligned with the needs of our operations, so that make OpEx a little bit higher than previous year. But we should end the year with a ratio around 32%. That's for this year, and also that's what we expect for next year, 32% OpEx to sales ratio.
Perfect. Thanks. It was very helpful. Have a nice day.
Okay. Thank you, Antonio.
Thank you. We will move next with Kevin Zavala with UBS. Please go ahead.
Hello. Hi, everyone. Hi, Arturo. Hi, Emilio. Just want to hear from you about the capital allocation. The levels are very low, just to understand how you approach to increasing dividend distribution, or perhaps potential M&A. Thank you.
Emilio?
Yes. Thank you, Kevin, for the question. Yes, we keep the same priorities as historically. First, CapEx, as we mentioned, this year we plan to close the year in a range from 6%-7% of CapEx to sales ratio. We have invested a little bit more in the past two years, and we expect next years to lower that ratio to 5%-6% in a couple of years. Second, dividends. You know that we have a dividend policy. As we mentioned, we pay an ordinary dividend of MXN 4.28 on April, and then we have paid two extraordinary dividends, one in August of MXN 2.5 per share, and the second one just two days ago of MXN 2 per share. So, together with the ordinary dividend, the cash distribution, total cash distribution was MXN 8.78 per share, representing 77% of retained earnings.
We don't see any additional payment for this year. Third, M&A, as you know, we continue evaluating value creation opportunities to grow inorganically. Basically, those are the three main priorities talking about capital allocation.
Thank you very much.
Thank you, Kevin.
Thank you. We will move next with Fernando Olvera with Bank of America. Please go ahead.
Hi. Good morning, guys. Thanks for taking my question. It's just a quick one. If you can comment what caused the increase in net interest expenses. Just wondering if it was the bond you issued or was there something else, and if this is the new level of interest that we should consider going forward. Thank you.
Thank you, Fernando, for your question. Good to talk to you. I will turn it over to Emilio.
Yeah. Thank you for the question, Fernando. I think it is important everyone to understand this because it has an important impact on our net profit. We have basically three reasons why the comprehensive financial result is higher than previous year. The first one, and the biggest one, is a non-cash foreign exchange loss resulting from the depreciation of the Mexican peso due to our USD debt in Mexico. The difference in the quarter, it is a non-cash impact of almost MXN 600 million in the quarter.
The second one is the decrease in the financial income reflected lower interest rates and lower cash balance. That is around MXN 150 million. And the third one is the financial expenses, which is the lowest, and it is also main of that, it is a one-time financial fees and expenses that we have registered in that concept of around MXN 100 million.
As you can see, the main one is based on the U.S. dollar peso depreciation in the quarter, and the same for the year. Basically, the three concepts.
Great. Thank you, Emilio, and thank you, Arturo. Take care.
Thank you, Fernando.
Thank you. We will move next with Henrique Brustolin with Bradesco BBI. Please go ahead.
Hello, everyone. Thank you for taking my question. My question is about the volumes in Mexico. It would be great to get your assessment on the consumer environment there. We saw, Arca Q3 volumes going back to growth. How do you assess the performance through the quarter, and how do you see the growth we are seeing? How much of that is the share gain versus the overall industry performance? What you are seeing right now shapes your outlook, your view for 2027 as well. That would be very helpful. Thank you.
Thank you, Henrique. If we go back at the beginning of the year with the challenges that we were going to face in Mexico with the taxes, no one was expecting that this year was going to be so positive. The main reason is the strategy that we implemented with our RGM initiative that we already explained. All this focus that we have on our digital initiative and improvement of execution. If we go to the results in term of value share in Mexico, we have a positive trend, especially in stills and in water as well. This with the new innovation that we have with Topo Chico and Coca-Cola Caffeine Free, that is going to help us as well.
Then, as we already explained, we expect that for the coming years, with the level of investment that we have been doing, the focus that we have on the fundamentals and the digital initiative, that we are going to continue with the current performance.
We think, Henrique, as we compare 2026 with 2014, which was the year in which we had a similar situation of passing through a big tax increase, we think this has been a great year. That reflects the better capabilities that we have now, and that positions us to capture future opportunities, both in the core categories and the pipeline that Jean-Claude was referring to. We are very happy with the results for this year.
Very clear. Thank you very much.
Thank you, Henrique.
Thank you. We will move next with Emiliano Hernández with GBM. Please go ahead.
Hi, Arturo, Emilio. Thanks for the space and congratulating the results. Just a follow-up in Mexico. Could you provide additional color on the trends across channels, particularly on-premise versus off-premise? Also, just quickly on snacks in the U.S., we saw a strong margin contraction despite solid sales growth. Could you elaborate a little bit more on the main factors behind this? Thank you.
Yes. Jean-Claude, go ahead.
All right. Regarding the first question about the trend across channel, we had a very positive quarter of the year, much better as original expectation in all channels. We are improving in a modern channel, capturing the growth of the channel with a similar strategy and focus as we have in the U.S. That is about savvy and fill rate. Those are like the two key metrics that we need to track on our modern channel and that we have been improving. Also, that we work very closely with The Coca-Cola Company in terms of the relationship with our main customers. Traditional channel, based on our fundamentals of digitalization for our customers, the investment that we have been doing in coolers and the focus on returnables, also we are capturing a positive trend in the traditional channel.
In terms of snacks-wise, we have solid results in Bokados and in Inalecsa in Ecuador. Wise in the U.S. and the snack business and category is under stress. It is under stress because the consumer situation, and it is a challenging environment that we are facing.
We have been focusing on strengthening brand awareness, especially the expansion of Deep River, which is our strongest brand in the U.S. But certainly, the result has been mixed across businesses. Wise is a very, very small portion of our overall portfolio, but we are going to continue to focus on portfolio profitability, the same playbook, price pack architecture, and as in our core business, personal size formats in that market. Thank you, Emiliano.
Thank you. This concludes today's Q&A portion. I would like to now turn the conference back to Arturo Gutiérrez for any closing or additional remarks.
Thank you. We appreciate your time today and your continued engagement with Arca Continental. Should you have any additional questions, our investor relations team remains available to assist you. We wish you a successful close to the year, and we look forward to speaking with you again following our fourth quarter results. Have a good day.
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.