Good morning everyone, and welcome to Grupo Bimbo's second quarter results conference call. If you need a copy of the press release issued earlier today, it is available on the company's website at www.grupobimbo.com/en/investors/reports/quarterly-reports. Before we begin, I would like to remind you that this call is being recorded, and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. Our projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements. I will now turn the call over to Mr. Daniel Servitje, Chairman and Chief Executive Officer of Grupo Bimbo. Please go ahead, sir.
Thank you very much. Good afternoon, everyone, and thank you for joining us. Connected on the line today is our CFO, Diego Gaxiola, BBU's President, Fred Penny, and several members of our finance team. Top line performance was exceptional in the second quarter as we reached a record sales level of sales and saw broad-based share gains across our portfolio. Our volumes strongly grew across all our regions as a reflection of the high demand we are experiencing and that our brands continue to resonate with our consumers. We will continue to invest in our brands as we move forward. We also reached historic levels of profitability in the second quarter. However, we are experiencing expected margin pressure given the high inflationary environment globally. Most specifically, we are seeing increases in commodities, freight, and labor costs, as well as challenges and shortages across the supply chain.
We have been leveraging many tools to offset this rising inflation, including revenue growth management and strategy, category and product mix, pricing actions, and pursuing many productivity initiatives. We will continue this approach throughout the year to proactively look for restructuring opportunities across the value chain and to deploy our digital transformation strategy. Looking ahead to the second half of the year, we remain confident we will be able to reach our goals and guidance. We expect to see continued strength in our sales, driven by innovation, efficient revenue growth management, and efficiency to help offset continued inflation. Now, reviewing the quarterly results by region, North America had a very strong quarter in terms of top line. Our sales growing 16.8% in dollar terms because of our pricing actions, volume growth, and improved product and category mix.
As we saw, share gains across most categories, notably mainstream and premium bread, buns and rolls, breakfast and snacks. However, this strong performance in sales was offset by significant inflationary pressures, which have been impacting every aspect of our business, resulting in an adjusted EBITDA margin contraction of 210 basis points. We remain committed to delivering our 2022 expectations by focusing on successfully implementing our pricing actions, continuing to invest in our brands and innovation, improving operational performance on our field, and eliminating costs wherever possible. In Mexico, sales improved by 21.6% attributable to volume growth, favorable price product mix, and price increases. Every channel and category posted double-digit growth, most notably the convenience store channel and the bread, sweet baked goods, snack cakes, cookies, and snacks categories.
Our increased presence at the point of sale and favorable consumption trends also helped us boost the results. Our gross margin contracted by 160 basis points given the inflationary pressure, especially in commodities. Nevertheless, our operating leverage from higher sales and efficiencies in our operating expenses helped offset part of this effect, and we only saw a 60 basis point contraction in our adjusted EBITDA margin. To update on the recalling of the Dex two, we are waiting for the authorization from the authority, which we still expect to happen in the fourth quarter. In EAA, excluding FX effects, sales increased 17.4%. This was due to a price increase, volume growth and a favorable product mix across almost every country, most importantly, Spain and Portugal, and an inorganic contribution from the acquisition of Medina del Campo in Spain.
This was partially offset by a challenging environment in China, mainly related to COVID-19 lockdowns. The adjusted EBITDA margin expansion of 60 basis points resulted from sales performance and tradings across the distribution network in Spain, which was partially offset by weak results in China and higher commodity prices in every place. Finally, moving on to Latin America, net sales, excluding the effect of FX, increased nearly 38%. This was driven by strong volumes in almost all countries and a favorable price mix across our three organizations, as well as the acquisition of Aryzta's QSR business in Brazil. We reached a record EBITDA margin for the second quarter. This was attributable to several factors, including our acceleration plans in Brazil and Argentina, which resulted in EBITDA gains for both countries and continued positive trends of the last quarters.
The Latin Center division has been posting excellent results with continued great sales momentum, due to strong volumes in all categories, geographies, and channels. The successful implementation of price increases and the continued work on operational efficiency and productivity initiatives. The Latin South division performed very well due to our pricing actions, a favorable mix effect, and strong efficiencies across the supply chain. This was partly offset by challenges in Chile, which despite the significant devaluation and rising costs, it continues to grow and improve profitability. I would now like to turn over the call to Diego, who will walk you through our financials. Please, Diego, and go ahead.
Thank you, Daniel. Good afternoon, everyone, and thank you for joining us today. As a starting note, according to the accounting standards, beginning in this quarter, we are reporting Ricolino as a discontinued operation, so we also adjusted 2021 results in order to make it comparable. I would like to start with a summary of our financial results for the quarter, which were extraordinary, especially when we consider the challenging comparison from the strong results in the second quarter of 2021. Overall inflation and the complicated operating environment in some countries. Our net sales reached historic levels for a second quarter, posting an 18% growth. On the other hand, our adjusted EBITDA margin contracted as expected, almost 70 basis points, which was mainly due to the higher commodity prices and the high overall inflation environment across the different markets.
Even with our successful pricing strategy initiatives, this will continue throughout the rest of the year. Operating margin expanded 250 basis points, mainly due to the operating leverage from our sales, coupled with the non-cash benefit of $90 million related to the adjustment to the MEPP liability provision due to the increase in interest rates. We have also achieved productivity savings coming from capital and restructuring investments we have made in the past, which enable distribution efficiencies, automation improvements, and integrated system solutions. Our financing costs decreased by 37%, mainly reflecting lower interest expenses. Our cumulative effective tax rate stood at 34%, which continues to reflect the benefit from our turnaround businesses, which have been performing substantially better than previous years.
As a result, the net effect of these factors yielded an improvement in net majority income of more than double and a significant margin expansion of 270 basis points, reaching a record of 6.4%. Our return on equity also closed at a record level of 16.5%. Turning to the balance sheet, thanks to our strong operating results, we closed the quarter with a net debt to adjusted EBITDA ratio of 1.9 times, and our total debt closed at MXN 94 billion. Our net operating working capital, which mainly considers accounts receivables, inventories, and suppliers, has improved significantly by 2.8 days over the second quarter of 2022, which is the equivalent of close to MXN 3 billion, mostly due to improvements in accounts payable.
I'm sure you all are aware that after announcing the Ricolino transaction, we have been very active with our buyback program. We were able to buy back 41 million shares during May and June. So far in the year, we have returned to our shareholders MXN 5.5 billion through MXN 2.5 billion of our buybacks and MXN 2.9 billion of dividends. I will now update and upgrade our guidance for 2022, which considers Ricolino as a discontinued operation. Well, thanks to the strong top-line performance in the different markets in which we operate, we are upgrading our guidance from low double-digit that we upgraded at the end of the first quarter to a growth of low to mid-teens. Considering this updated top-line growth and the inflationary environment that we're facing, we see the adjusted EBITDA growth at a single-digit.
We expect to see margin pressure in 2022, as we have shared previously with you. In terms of our expectation for the effective tax rate, there is no change to our guidance. We continue to expect a low to mid-30s effective tax rate for the full year. As for our CapEx plan, we have seen some delays in some of our projects. We are now expecting to close the year between $1.3 billion-$1.4 billion of CapEx. The delay in the execution of our CapEx doesn't mean that we'll cancel any projects, so we will see them maturing in 2023 as we continue to be fully committed to increase our capacity given the ongoing demand for our products.
As you can see, despite the inflationary environment, we continue to see a strong 2022 as our volumes and sales continue to exceed our expectations and our commodity needs are fully hedged, which give us the ability and confidence that we will be able to reach this increase in the guidance. We can now proceed with the Q&A session.
Thank you. The floor is now open for questions. If you have a question, please press star one on your touch tone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Questions will be taken in the order they are received. We do ask that when you pull your question that you pick up your handset to provide optimum sound quality. Please hold while we pause for questions. Our first question will come from Fernando Olvera with Bank of America. Please go ahead.
Hi. Good afternoon, and thanks for taking my questions. Very quickly, Diego, if you don't mind, can you repeat your guidance for the adjusted EBITDA, please? My questions, my first question after that is, given the increase of prices across your divisions, have you witnessed any trade-down so far? My second question is, after the retreat that we have been witnessing on wheat prices, how do you expect costs to behave towards year-end and in 2023? Thank you.
Well, okay. Let me again repeat on the guidance very quickly. For the top line, we were expecting, sorry, low double-digit growth. We are now expecting low to mid-teens. This is for the top line. Now, for the EBITDA, we're expecting a high single-digit growth.
Great.
Daniel, do you want me to take the question regarding the consumer trade-down, or you wanna take it? Well, let me take it. What I can tell you, Fernando, is that we haven't seen consumers trading down as demand continues to be very strong, and it is reflected in our volume growth across all the different organizations. In terms of
Okay.
Yes. Your last question, I believe, was regarding the commodities and the expectation. Well, first of all, it's already included in the guidance, the incremental cost in commodities that we're gonna face in the second half. Remember that we have a hedging strategy in place. So what we're gonna see are basically previous prices of commodities which were higher, and that's gonna be reflected and putting some additional pressure to our gross margins in the second half of the year. Today we are 100% hedged for 2022, so let's say that we have certainty on the pressure that we're gonna be facing. Now for 2023, still early to tell. It's been very volatile, as you know. Impossible to give any specific comment.
We already started to hedge some of the needs for the first quarter of 2023, a fraction of the quarter. Still, long time to go, with the volatility we're seeing, in order to be able to provide a little bit more color for 2023.
Great, very helpful. Thank you, Diego.
Our next question will come from Luis Yance with Compass. Please go ahead.
Hi, Daniel, Diego, congratulations on such a great quarter. Two questions from my side. The first one has to do with capital allocation now that, you know, you're about to close the transaction of Ricolino. You already mentioned that you started deploying a bit more, you were more active on the buyback side, given that. But I'm just wondering if you could comment as we move forward, can we expect a much bigger buyback program in that sense? Or are you guys considering any sort of dividend? Because CapEx coming down, your results seem to be improving and, you know, your debt levels are gonna come down with this acquisition. Just wondering if we could get some clarity about the capital allocation going forward.
Then my second question has to do with costs. I know you mentioned that given the commodity prices that you will be, I guess, reflecting on your results in the second half, you're gonna see some additional pressure on margins. Just wondering if it's just that or also perhaps pretty much just, you know, you're rolling into higher commodity prices that were hedged before and that creates that additional pressure, or if it's also something else that you're seeing that is creating additional pressure, call it labor, call it distribution costs or other things, that'd be helpful to know. Thanks.
Yes. Let me take the first question. Regarding the capital allocation definition because of the Ricolino transaction, Luis, it's still early to tell, no? We have to wait until the transaction is completed. Then we will have to see the amount of taxes that we will have to pay because of the profit from selling Ricolino. Still we do not have any specific definition on the use of proceeds. As we did comment from the last quarter, we're gonna be paying down debt. Still we haven't defined the specific amount. Again, the timing depends on till we get the final authorization of the antitrust authorities in the different markets.
In terms of the capital allocation strategy, a little bit more or beyond the use of proceeds of Ricolino, I would say that the priority for the company will, as always, continue to be to make sure that we have the ability to fund our CapEx program. We have a lot of opportunities in front of us to increase our capacity and be able to produce the products that are being demanded all over the markets. So that's the first priority. Of course, we will continue to pay dividends. As it has been in the past, we will continue to be active with our buyback program, depending on the volume and also on the valuation of the company, how active we will be.
It's very uncertain, so it's hard to give any specific guidance on how big it's gonna be in the coming quarters. Finally, now I can answer also on the inflation pressure. Yes, it goes beyond commodities in more in some markets with more pressure than in others, like in the U.S. with the labor, transportation as well. Energy also has continued to go up. I mean, general inflation, as you know, it's high. Markets of the U.S. seeing more than 9% inflation that we haven't seen in many, many years. Some other markets that used to have higher inflations, like the case of Argentina today, are more or less stable with very high rates. In Mexico, we're also seeing the pressure.
I'll say that inflation is all over the place in all the different markets in which we operate.
Great. Thanks a lot for the color, Diego. Just my last question, I mean, always the focus is, has been mainly on what goes on with your U.S. and Mexican division. But as I look into, you know, your European-Asian division as well as Latin America, the margin improvement that we've seen over the past, I don't know, four, eight , 12 quarters has been quite nicely, and they seem to be approaching this kind of high single-digit around 8%. Just wondering if that improvement we've seen, there's still more to come. Can we envision those divisions, you know, being in the double-digit territory? And if so, what else, you know, what would be the drivers to keep getting this kind of margin expansion going forward?
Yeah, well, Luis, you know. Do you wanna take it, Daniel?
No, you go ahead, Diego. Go ahead, Diego.
Yeah, no, I mean, what I was gonna say, Luis, is that first, we do not provide a specific guidance by segment. I mean, you're completely right, the improvement has been amazing. More if you take a look at the profitability of these two divisions, three, four years ago, as you mentioned, they are now in the high single- digit. What I can tell you is definitely we're targeting to continue to improve the profitability of these segments as well as in Mexico and the North America segment, you know, regardless of the already achieved improvement. Unfortunately, I mean, we cannot provide a specific guidance on what we're expecting for the coming quarters.
Great. Thanks a lot, Diego, again, and congratulations.
Thank you.
Our next question will come from Ricardo Alves with Morgan Stanley. Please go ahead.
Yes. Hello, everyone. Thanks for the call. A couple of questions. In the U.S., pricing in the U.S., can you just talk a little bit about that, as we head into the second half? Appreciated the cost pressure will continue in some of the lines of your costs. You just made a point, right, Diego, that that pressure is still, maybe depending on the line, even higher. Just wanted to pick your brains on the possibility of further price increases. That's the first question. Also on that question, are you seeing on the margin any kind of price elasticity?
I mean, your volumes have been also surprising to the upside, but just wanted to see if maybe in July or your recent interactions with the retailers, if there is some movement on the volume front. Second question on competition in the U.S. I believe that looking at the data we have over the past few months, actually, it seems that Bimbo considering all of your categories, yours putting price significantly ahead of the competition, your volume is also performing ahead of the competition. I mean, pretty remarkable, but just wanted to see if you could give a little bit more detail on categories that you believe that you are outperforming or maybe a few brands or products that you think you're ahead of peers.
Just a little bit more granularity because we see the big picture, but we don't see the details on a by-category basis or maybe products that you are performing a little bit better or channels. Thank you.
Diego, I'll be happy to take the
You take it, right? Mm-hmm.
Yeah, I'd be happy to take those two questions. First, Ricardo, thanks for the questions. Before I jump in, I just wanna, because I have the opportunity, I just wanna recognize all of the associates in BBU and frankly, in all of North America for what they've done now for going on 2.5+ years, in terms of executing in the marketplace to serve our customers and consumers. They've frankly done an unbelievable job in a very challenging environment, a challenging labor environment, certainly a challenging environment when it comes to COVID, et cetera, that you're all aware of. I just wanna make sure, I just wanna put a shout-out to them. They deserve a lot of credit. The front line has really delivered. That's number one.
Number two, on pricing, we put a recent price increase into the market in the U.S. Our business has held up well. Our business is performing well both in terms of tonnage and revenue. We've seen minimal, so far at least, and it's very early in the recent pricing, minimal impact from an elasticity standpoint. We feel pretty good about that across most of our categories, if not all of our categories. We're continuing to evaluate in a really difficult inflationary environment the need for potentially additional pricing later in the year. The inflation pressures continue to be strong pretty much across the board. I think our Q2 results are some evidence of that.
If you could, Ricardo, your second question, if I hadn't answered it, was?
Yeah, Fred, thanks for that. The second question was more on competition. It seems that-
Yeah.
You're putting a little bit more pricing and volume. Just want a little bit more details on what stands out to you relative to your competition, brands or channels or whatever surprised you to the upside.
No. Yeah. Terrific. Without being too specific, I think, you know, we feel good about our marketing, our market performance, our share performance in particular, in pretty much all the categories we compete in. As you know, we're in mainstream bread, we're in premium bread, we're in buns and rolls, we're in breakfast, we're in sweet baked goods. For the most part, our volume and share performance has been positive. I will say we've struggled in some cases with supply chain order fill issues, which I think is not a surprise given the labor challenges that we're facing in the market and the capacity challenges. Overall, I'd say we feel very good about our position relative to our performance in the market and vis-à-vis competition.
Appreciate the color. Thanks for that, Fred.
Our next question will come from Bernardo Malpica with Compass Group. Please go ahead.
Hi, Diego. Thank you so much for the space for questions and for taking my question. My question is just to understand a little bit more towards where ROE is going. I mean, regarding net income performance, there was, of course, a significant improvement that you detailed. I mean, is this 6.4% margin sustainable? I mean, is it more normalized? Is it something we should see going forward in the next periods? Or do you see a specific factor that boosted results during this quarter as a one-time benefit kind of thing? Thank you.
Yes. Hi, Bernardo. Thank you for your question. Oh, definitely, as I mentioned, and we have it in the pre-release and the financial statement, we did have an extraordinary income because of MEPP at $90 million. That is creating an upside in the quarter so on. Because of that, we tend to focus a little bit more on providing guidance and focus on the EBITDA more as an operational measure that excludes any effect, you know, because, in the case, I don't think, but in the case that we start to see interest rates coming down, then we will start to face a negative impact in our P&L as it was the case in previous years.
Perfect. That's very clear. Thank you so much.
Our next question will come from Sergio Matsumoto with Citigroup. Please go ahead.
Yes. Hi, good afternoon. Thanks for taking my question. My question is on the European segment and the margin improvement that took place. You provided some color in the prepared remarks. Just wanted to get more color on the high single-digit margin that you achieved, only because, you know, you were kind of there last year, and the first quarter you took a dip. So I'm just wondering, like, if perhaps first quarter was an anomaly and this high single- digit appears to be more normalized. If you can give us some color as to, you know, what made it help. You mentioned some, you know, Spain distribution efficiencies, and whether that was enough to offset the challenges on the commodities.
With regards to the acquisition that you have in the EAA segment, is that a high margin that perhaps that also helped? The last thing that I, you know, I would like to check is on the QSR business, which is heavy in the EAA business, and I know that's higher margin, and whether the reopening perhaps helped push up that margin as well. Thanks.
Yes, hello, Sergio. Our India EAA operation benefit from the restart of the QSR business in that region. We have some hiccups in some countries, but all in all, it was much better than last year. We also had basically the effect of price increases in most of the countries. We also have the effect of the bakery that we bought last year in Spain. Basically, that's the bulk of it. We're seeing an improvement in the operations all in all with a relatively good single-digit as with last year.
Daniel, let me comment just on the question that Sergio regarding the first quarter. Remember that we explained that we had some operational issues in particularly in Spain because of a strike that we faced. That created a little bit of a distortion during the first quarter, and that's why we saw a dip in the margins during that period, Sergio.
Understood. Thanks for that clarification.
Our next question will come from Alan Alanis with Santander. Please go ahead.
Thanks so much, and congratulations for the results. My question has to do with the increasing likelihood of an upcoming recession in North America. What actions are you taking right now ahead of a potential recession in the United States? Have you seen any changes in patterns of consumption, I guess, specifically on the food service channel that would indicate that the likelihood of a recession is going up? That would be the question. Thank you.
Daniel, you want me to take that?
Fred, will you take it? Yes, please.
Yeah, sure. Hey, Alan, how are you? I would say, you know, we continue to be focused on executing in the marketplace every day with all of our brands and products to ensure that we're doing the best we can to serve our customers. It's so far served us well, despite the fact that we've needed to put price increases in. We've seen. We've not seen a significant shift, I'd say.
In food service business to the downside. I think it may be too early to call that yet. We'll see. No significant changes either way yet on food service trends for our business. In fact, up until this point, I would say in general, it's been more of a recovery mode, continuing to come out of the impacts of COVID over the last couple of years.
Well, that's very interesting. While I have you on the microphone, I mean, we're seeing oil prices starting to come down and commodity prices collapsing or coming down very fast. What changes are you seeing on the labor cost in the United States? Are they still remain pretty strong in terms of the pressures, or are you starting to see some easing on the labor cost in the United States?
Yeah, without getting too specific about it, I would say generally, labor continues to be a challenge.
Okay.
At least in our industry. I can't speak for other industries, obviously. It continues to be a challenge. I think the labor market continues to be tight. It's one of the issues that we continue to have to struggle with and work through in all of our facilities. At least at this stage of the game, no significant shift in the labor market from my point of view.
Okay. That's very useful. Thank you so much. Again, congratulations on the results.
Again, if you have a question, please press star then one. Our next question will come from Álvaro García with BTG. Please go ahead.
Hi, gentlemen. A couple of questions from me. I think most of them for Diego. On the buyback, let's say, are you cognizant of liquidity? Do you have a specific liquidity threshold in mind considering your float is 19%? Sort of on capital allocation, generally in this higher rate environment, I think last call you mentioned that your target leverage is 2x. You seem to have a very comfortable leverage profile today with a lot of fixed rate debt, but maybe you wanna de-lever a bit more in this environment, maybe you're rethinking that 2x. A question on liquidity and a question on your target leverage.
Hi, Álvaro . Of course, I mean, liquidity for our stock is. I would say it's an issue definitely, no? I mean, we're not the only company suffering from a lack of liquidity. We're doing $6 million-$7 million a day, which definitely is low, and we would love to see a higher liquidity. Now, on the other hand, we're conscious that every stock that we buy back will subtract a little bit of liquidity to the market. On the other hand, what we consider is the best use of our capital and seeing the opportunity in terms of the valuation of the company, as it has been the case in the last three years, that's why we have been very active.
I would say that the negative side of the equation is reducing liquidity, of course. You know, it's something that we're willing to take the hit as long as we are able to give money back to our shareholders through an efficient method through the buyback. As I said, we will continue to be active with our buyback program. In terms of the leverage, basically, on the leverage, Álvaro , what we're expecting is that we're gonna be below 2x by the end of the year net debt to adjusted EBITDA without IFRS 16. We have mentioned that we feel comfortable between 2x-2.5x.
Now, we're having some delay on the CapEx projects and we could see opportunities in the future on the M&A space. We do not feel uncomfortable on being below the targeted ratio that we have mentioned as the comfort zone for the company.
Great. Thanks for that color. Just one last quick follow-up on Ricolino. Is everything on track? Any comments on sort of timing? We appreciate the extra color on their financials, seem to be pretty high margin, but just wanted to see if everything was on track in terms of the timing you provided last quarter.
Yes, as we see everything on track. We have the expectation to close this transaction in the fourth quarter. We have been advancing with the different antitrust authorities in the markets in which we need the approval.
Wonderful. Thank you.
Our next question will come from Felipe Ucros with Scotiabank. Please go ahead.
Thank you. Good evening, Daniel, Diego. Congrats on another good set of results. Maybe if I could start with a question about valuations. Very interestingly, you just touched on that and the buybacks. How do you think about what is an adequate valuation that makes it attractive for buybacks? And I ask the question because not in very distant memory, LatAm food companies used to trade as high as 12 or 13 times. During the pandemic, they traded as low as 6 times. Just wondering kind of what's that threshold where you think, "We're no longer cheap. I'll probably not do any more buybacks at this point." Just wonder if you have anything like that kind of.
In your valuation outlook. That might be a question for Fred. Just wondering, you know, admittedly, I've been pretty skeptical that the consumer was gonna be as resistant as it's been, and I'm not sure if I'm alone here or not, but I was especially skeptical because if I recall correctly, it was about three or four years ago where you drove through a price increase, and then you had to dial it back a little. I can't remember exactly when it was, but I was wondering what's different in this situation versus that situation that you experienced. It was one or two years before COVID if I recall correctly, Fred.
Maybe you can walk us through what's been so different, whether it's the competitive front or more discipline from the competitors, with the price increases. Just wondering about that. Thank you.
Fred, if it's okay, I can take the first question, and then you can take the second one.
Yeah.
So Felipe, I mean, unfortunately, it's impossible for us to give you any specific comments on our opinion or the expectation that we have for the valuation of the company. I mean, you probably know better than us that that's your job and you're the specialist. What I can tell you is that we do have, of course, an internal model that we do not disclose any information. That's a little bit on what we use to determine, again, also considering the daily liquidity of the stock in order to operate the buyback program. Just very quickly, I mean, this is a very high level comment, no?
If we were just to see a comparison very quickly of Grupo Bimbo trading at around 8x-8.5x versus other peers, and let me put the example of Flowers Foods trading 14x. I wouldn't see, in my opinion, a reason, although there are many other factors, liquidity of the stock, being a Mexican company, the Mexican risk. You see Grupo Bimbo, it's a global company, regardless of where we're based and where we're trading. 60% of our revenues today is in hard currency, euro, dollar, and Canadian dollar. 60%. Mexico is just a little bit more than 30% of our revenues. We have a very important discount in terms of the multiple.
Again, if you do the comparison versus Flowers or any other CPG in the U.S., and in my opinion, I don't see a specific reason for having such a big discount. I mean, we're talking probably of a 40%-50% discount in, in as a multiple trading valuation. I mean, that's the only comment I will make. Fred, if you wanna take the second one.
Yeah. Yeah, absolutely, Diego. Thanks. Yeah, Felipe, I would say, two big things that are very different than they were four or five years ago. The first is the obvious one, which is the impact that COVID has had on consumer behavior and consumption, at home, in-home. If you had asked me maybe a year ago or a year and a half ago, was that sustainable or was that gonna continue, I would've been skeptical, and I would've probably said, "I think it might revert to a degree, to more food away from home consumption." But the reality of it is that really hasn't panned out. Now we're two and a half years into the COVID issue, the COVID pandemic.
I think, consumers have discovered that, they can, consume more food at home, with value, whether they do that by, e-com buying or, Click & C ollect or whatever the format is. Certainly that has been a huge shift that the industry hadn't experienced prior. I think the second, thing I would say, that impacts the industry results overall is that, certainly in recent months, we're dealing with a level of inflation that, at least in my 40 years in the industry, I've never seen in terms of the depth and breadth of it. We've had prior years where we've had significant commodity inflation or a run-up in wheat, and then it came back down. We're in a different place altogether now, with broad-based inflation and pressuring almost all of our input costs.
I think that's given not just our industry, but many industries, sort of a wake-up call of, you know, how do you deal with that? I think the result of that is that pricing has been put into the market that needed to go into the market, and so far it's held up. But, you know, we'll see where we go from here. But to me, the single biggest shift is the shift in consumer behavior to food consumed at home, which certainly plays into the business that we're in.
Okay. Very clear. Sounds like a very structural change, Fred. Maybe if I can do a follow-up on the first one, Diego. Obviously we've written about this a little and other analysts have asked the question, but obviously no LatAm company that I can think of in the sector independent of their exposure to hard currency, be it you guys, Gruma, Arca, even Sigma's failed IPO because of trying to get a U.S. valuation have worked in, you know, in any shape or form. At what point do you guys kind of reevaluate floating a U.S. vehicle to see if you at least can get the U.S. valuation on the U.S. vehicle or maybe a developed market vehicle?
Yes. Today, I mean, we're trading in the Mexican Bolsa. We will continue to trade here. I mean, we will always be open to analyze different alternatives and opportunities, but I mean, for today, we will continue to be trading in the Mexican Bolsa.
Got it. Okay. Thanks a lot, and congrats again on your results.
Our next question will come from Antonio Hernández with Barclays. Please go ahead.
Hi, thanks for all the results. You've already provided quite a lot of color or very helpful color on your overall capital allocation expectations and so on. Just wanted to have a follow-up on your M&A expectations. Even, I mean, after mentioning the Ricolino transaction, is there any specific, maybe specific channel or specific geography or specific type of product that you're trying to increase your sales penetration or maybe decrease your sales penetration? Thanks.
Hi, Antonio. Well, let me tell you, we're always looking into different opportunities in the different geographies in which we operate. I mean, we have a strong pipeline, although we haven't been able to close a transaction for the first half of the year. I mean, as you can imagine, we cannot give any specific color on what we're targeting and the projects that we have in the pipeline.
Okay. Thanks for the color.
This concludes our question and answer session. I would like to turn the conference back to Mr. Daniel Servitje for any closing remarks.
Daniel Servitje
Mr. Servitje, your line might be muted.
Sorry. Thank you for all your time today, and please do not hesitate to contact us with any further comments or questions you might have.
Thank you. This thus concludes today's presentation. You may disconnect your line at this time, and have a nice day.