Welcome to the first quarter 2025 Grupo Bimbo results and conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to hand the conference over to Rafael Pamias, CEO of Grupo Bimbo. Please go ahead.
Good afternoon, everyone. Thank you for joining us. Connected on the line today are our CFO, Diego Gaxiola Cuevas, Executive Vice President, Mark Bendix, along with several members of our finance team. We kicked off 2025 with solid trends in most markets and facing some challenges in areas of opportunity in others, while navigating highly volatile macroeconomic and political landscapes in the world's leading economies. Despite these hurdles, our exceptional diversification and global presence enabled us to achieve record-breaking sales in the first quarter at a consolidated level and for Mexico and EAA as well, which led to positive volume contribution on a global basis. Furthermore, we experienced a high single-digit growth in EBITDA, and in our most profitable region, Mexico, we reached a 19% EBITDA margin, showcasing the remarkable strength and unwavering commitment of our frontline teams.
We're also pleased to report that the continued positive evolution in Latin America led us to achieve a 50 basis point increase in EBITDA. As a baking industry leader and relevant player in snacks, our continued success is built on innovation, operational excellence, and our commitment to meet customers' and consumers' needs across all markets. We remain confident in our ability to fire up sales volume everywhere and drive long-term value. On our ESG journey, I am proud to share that we have been named one of the world's most ethical companies for the ninth consecutive year. Also, 45% of our sales meet or exceed the 3.5-star benchmark under the Health Star Rating System, demonstrating optimal nutritional quality and delivering positive nutrition in every bite. Now, looking into the results by region, in Mexico, sales improved by nearly 2%, mainly due to the positive mix effect.
Despite a sequential softening in the consumption environment, we continue to see growth across most channels and geographies and categories, excuse me, with particularly strong performance in buns and rolls, sweet baked goods, cookies, and snacks. We are encouraged by the resilience of our business and its continued ability to generate value in a challenging environment. The expansion of our margins under these conditions highlights the strength and flexibility of our operating model, reaching a record high of 19%, driven by a favorable mix, lower commodity costs, and disciplined control of administrative expenses. Despite the slowdown in the consumer, we have maintained a strategic investment approach throughout the period, positioning the business for sustainable long-term growth. In North America, excluding the FX effect, sales decreased 4.9% due to an industry-wide soft consumption environment in the U.S., where consumers continue to seek pricing and value.
We're also lapping the impact of last year's strategic exits from certain non-branded clients. We remain focused on enhancing our revenue growth management strategy and strengthening our overall value proposition with innovation efforts closely aligned to the needs of key consumer demographics. We have recently launched a price value portfolio in the bread category to proactively address the slowdown in consumption trends through targeted and decisive strategies, while continuing to drive growth in artisanal breads. At the same time, we are maintaining our market share across sweet baked goods, buns and rolls, and snacks, reflecting the resilience and competitiveness of our portfolio. Additionally, we're actively broadening our distribution footprint to meet consumers where they shop, leveraging channel-specific price tag architectures to deliver compelling value across the board. On the other hand, in Canada, we saw a good performance where we had share gains in bread, sweet baked goods, and snacks.
Despite lower commodity costs and productivity gains, our adjusted EBITDA margin contracted by 130 basis points. This was primarily due to the soft top-line performance and the continued strategic investment in the transformation project, aimed at optimizing our go-to-market capabilities in the long term and increasing saturation with improved execution to enable growth as we serve more effectively our customers and consumers. Moving forward, we will remain focused on proactively seeking opportunities to improve productivity, expand distribution, and grow market share by connecting with consumers at every shopping opportunity. Moving on to Latin America, excluding FX effect, net sales increased 5.2%, mainly because of strong trends across the region, highlighting double-digit rates in Brazil and the Latin-Sur division, as well as solid growth in the Central America region.
Argentina continues to deliver strong sales growth, and Chile and Colombia confirmed the change in trend seen in the back half of 2024 due to our ability to quickly implement an effective revenue growth management strategy. As a result, adjusted EBITDA margin expanded 50 basis points. The acquisitions of Pagnifique and La Zarcereña also contributed to the inorganic growth of the region. Please be advised that we're still waiting for the authorization of the acquisition of Wickbold in Brazil, which we expect in the second half of the year. In Europe, Asia, and Africa, excluding FX effect, sales increased 4.5%. This was mainly due to growth in Romania, Bimbo QSR, the U.K., India, and Morocco, and the inorganic contribution from the acquisitions we completed in the last 12 months, including Trei Brutari in Romania and Moulin d'Or in Tunisia.
The adjusted EBITDA margin of 7.2% remained unchanged from Q1 2024, supported by strong sales performance and lower cost of sales. However, these positive effects were mostly upset by the impact of the minimum wage increases and the phase-out of wage subsidies in Romania and weaker results in our branded business in China. In this region, we're also pending the acquisition of Dondon in the Balkans, which we expect to complete in the next month. Earlier today, we closed the acquisition of Karamolegos Bakery in Romania, one of the country's leading baking brands in the retail channel, which enhances our presence and enables us to further grow in this category. With this, I would now like to turn over the call to Diego, who will walk you through our financials. Adelante, Diego.
Thank you, Rafael. Good afternoon, everyone, and thank you for joining us today. After 15 years of dedicated service at Grupo Bimbo and 6 years in the investor relations team, Paulina Larrea will be leaving the company. We are deeply grateful for her valuable contributions and unwavering commitment throughout her time with us. We wish Pao all the best in her future endeavors. Now, moving into our quarterly results, we saw notable performance across three regions this quarter, with net sales reaching historic levels for a first quarter. This success was driven by our focus on innovation, productivity, and engaging both customers and consumers throughout most regions. As anticipated and shared during our last 10-minute call, our EBITDA margin contracted due to the challenging environment in North America and the continued strategic investments we made to transform the business.
As we navigate through this volatile year, we remain confident in our ability to deliver value to our shareholders in the long term. I'd like to dive deeper into our EBITDA margin. Regarding the same exchange rate weighted by region, given the devaluation of the Mexican peso and considering that Mexico is our most profitable region, this has a negative impact in our regional mix, resulting in a consolidated margin dilution from this business mix effect of approximately 40 basis points. As for our capital allocation strategy, we executed approximately $260 million in capital during the quarter, which is 20% lower versus the first quarter of 2024. We generated almost $1 billion in working capital. This improvement is related to our continuous implementation of projects to optimize working capital in all our geography. Our total debt closed at MXN 161 billion.
This $10 billion increase when compared to 2024 was because of the two French-Mexican bonds we issued early in the year for MXN 15 billion. We reported the same net debt to adjusted EBITDA ratio as we did at the end of 2024 of 2.95. Reflecting our disciplined approach to financial management, we remain focused on navigating macroeconomic challenges we have proven. Despite external pressures, we have as a priority the operational efficiency, the cost discipline, and the strategic resources allocation to project margins and drive long-term value. Our strong financial foundation positions us to adapt to changing market conditions while continuing to invest in growth. We also maintain a solid liquidity position supported by our fully available almost $2 billion committed revolving credit facility.
As discussed during our last earnings call, we expect the first half of the year to remain challenging, driven by continued investments in our North America transformation project and persistent pressure on the region's consumer environment. It is important to note that the bulk of these investments began in the third quarter of 2024, creating a difficult year-over-year comparison for this semester. We are already seeing a sequential improvement, as we expected, of 150 basis points when compared with the fourth quarter of 2024. We do anticipate a gradual improvement in the second half as we begin to realize earlier benefits from the transformation project, so we feel confident that we will be able to deliver energetic growth in the second half of the year. To conclude, we are revising our full-year guidance. We now anticipate a stronger peso of MXN 20.50 versus the MXN 21.00 previously expected.
These $0.50 adjustments represent 2 percentage points of growth on a yearly basis for Grupo Bimbo. Second, we also expect a softer than anticipated consumption environment in North America. As a result, we are making corresponding adjustments to our outlook for the year. For sales, we now expect a high single-digit growth rate from the previous low double-digit growth rate. For our adjusted EBITDA, we expect it to grow at a mid-single-digit rate. Consequently, we are expecting a slight margin contraction as compared to last year. While this is shaping up to be a challenging year with many moving parts and ongoing uncertainty in the macroeconomic environment of key markets, we remain confident in our long-term strategy. As a highly diversified global company and a leader in our industry, we are well-positioned to navigate these headwinds.
We are committed to continue to invest in our business, driving growth, and creating sustainable value for our stakeholders. We can now proceed with the Q&A session, so please go ahead.
Thank you. We will now begin the question and answer session. To ask a question, you may press Star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star, then 2. At this time, we will pause momentarily to assemble our roster. Your first question comes from Renata Cabral from Citibank. Please go ahead.
Hello, everyone. Thank you so much for taking my question. I have two here. The first one would be if you could give us some color about the early benefits that you are already having on the investments that you have in the U.S., as we saw here on the release, would really be helpful to us. My second question is regarding the revising guidance. Can you give some color on what is the main impact you are seeing other than the FX, for instance, if you are seeing with this new scenario in the globe with tariffs, a lower consumption environment that you already cited, but also some change in terms of commodity prices or any different fronts on the consumption behavior regarding some specific products, continuous change to private label, something like that would also be really helpful. Thanks so much.
Okay. Renata, this is Mark Bendix from North America. I'll answer your question first on our transformational program in North America. We are optimizing and integrating all aspects of our business in North America. That includes our people, our processes, our technologies, and our systems to reach our full potential. We're refining and implementing new capabilities and technologies and processes. We are aimed at growing our customer base across all major channels, and we're investing in world-class operational efficiency. Our transformation remains aligned with our long-term expectations, and we will be experiencing increasing sequential benefits as we progress towards the long-term goals. This is a multi-year plan, Renata, so we're going to see benefits in three to four years across that same area.
We have a strategic focus on continuing to expand our offerings to the right value propositions across North America that meet all of consumers' and customers' needs and categories and channels, ensuring we have the right product to meet where they shop. From our productivity, our productivity target for 2025 is a record for us, and it's on track. It's driven by automation, route optimization, and digital tools, including warehouse management systems and adaptation in our bakeries to drive efficiency. We're continuing to minimize waste. We're increasing labor efficiencies, and our EBITDA growth is a clear priority for us. All in all, we're changing the ways we're working through a dedicated execution engine, operating on a weekly cadence with clear accountability across the full P&L for North America. Diego, I'll let you talk about the next question.
Sure. Thank you, Mark. Hi, Renata. First of all, let me tell you that considering the actual tariffs, the direct impact is not material for Grupo Bimbo. As the majority of the products that we export to the U.S. from Mexico do not have an impact from the current tariffs, as they are within the framework of the USMCA. The smaller adjustments to the guidance from the expectation of the environment that we're seeing in the U.S., it's more based on what we are seeing today. I think that the big unknown remains how overall tariffs might have an impact on inflation and, as a consequence of a higher inflation, then consumption, disposable income for consumers, and if there can be a change on consumer habits and behaviors. Today, I would say that it's still early to tell.
Just to be very clear, we're not assuming any incremental impact of tariffs in the existing guidance, knowing that it is a risk that we face today.
That's super helpful. Thanks so much for the color.
Thank you. Your next question comes from Antonio Fernandez of Luxembourg. Please go ahead.
Hi. Thanks for taking the question. Just wanted to see if you could provide a little bit more color on consumption trends in Mexico. I mean, you've provided a little bit more light on North America, but what about Mexico? Where do you see maybe some pressure from a category standpoint, and do you see any improvements throughout the quarter, or was it soft overall? Of course, this all excluding Carmen Bertilles. Thanks.
Yes. Hello. How are you doing? We have witnessed some softness in consumption coming mostly from the convenience challenge. Despite that, we're still seeing a resilient consumer in Mexico, with the retail and traditional channels showing favorable trends and convenience showing signs of recovery in April. We feel that we're going to be seeing a soft volume, but for us, there is a space to accelerate our portfolio. On one side, we have the ability to adapt our portfolio to accommodate to price value offerings. Also, we have identified enough opportunities in Mexico in key occasions, growing needs, emerging channels, and some areas of the country. In fact, if I may, our strong position in Mexico and the confidence of customers and consumers alike provide margin of maneuvering to try to play the whole field. As you know, we're present in branded and unbranded.
We're able to deliver a competitive portfolio in every channel, category, occasion, and need. Plus, we can even deliver fresh or frozen. I'm proud to say that the Mexican teams also have an ability to adapt quite quickly. All in all, we see a soft scenario, a resilient consumer, and opportunities for us to try to beat the wind tails and keep growing.
Okay. Thanks for the call, Carlos Fernandez. Thanks.
Thank you. Your next question comes from Felipe Ucros Nunez from Scotiabank. Please go ahead.
Thanks, operator. Good evening, Rafa, Diego, Mark, and team. My first question is on North America. It looks like last quarter was the bottom for margins as you guys had forecasted, and we did see some sequential improvement. Can you give us an idea of what the quarter was like, both in sales and EBITDA, if you adjust for the businesses that you exited and the transformation investments? We understand that consumption is weak in the U.S., but just trying to understand the magnitude of that impact, if possible. On EAA, the division had been coming in at around 10% EBITDA margins for the last three quarters, and it was slightly lower this quarter. I think you mentioned labor expenses in Romania as one of the main causes.
Just wondering if there are other things in there since you're still doing M&A and deals that you haven't closed, or if the majority came from that impact and whether we could assume that it's going to hit the rest of the year. Thank you.
Yes. Hi, Felipe. This is Diego. On the North America question, I'll tell you that, unfortunately, we're not disclosing the specifics on the investments and the charges that we have on our results during the quarter. Unfortunately, I'm not going to be able to provide any specific comments on the first question. Regarding the EAA performance during the quarter, I would say that our margins in the region are sustainable, and we believe that there is still room to continue to improve. Can you hear me? We had a lot of noise now. Okay. I would tell you that the margins are sustainable, and we continue to see a lot of room of improvement.
Now, unfortunately, during the beginning of the year, we started to see these two impacts, particularly in Romania, one that had to do with a very aggressive increase on the minimum salary of 17%, and the other is that, sorry, I don't know what's going on with the noise. We also lost a benefit, a subsidy that we were receiving, and these two created some additional pressure that we feel very confident that we're going to be able to manage and to offset and, of course, continue growing and find the productivities that will offset this more in the short term, I would say. It is a region that we feel very optimistic to continue to see margin improvements, as it has been the case in the last many quarters. Can you hear me? Are we still connected?
Hello?
Yeah. We are connected. Wait.
We're connected.
Yeah, we're connected.
You probably also.
The operator.
Operator, are you in the line?
Yes. We can manage it ourselves.
We need to unmute them. I believe the next question is from Ben Froehlich from Barclays. I do not know, Ben, if you are unmuted or you can unmute yourself. We cannot hear you.
Hi. Thank you very much. The piece has been resolved on the same. I'll continue with the Q&A session. Thank you.
Yes, please.
Thank you. Your next question will be coming from Ben, Tara from Barclays. Please go ahead.
Yeah. Trying this again. Diego, Rafa, can you hear me?
Yes, we can, Ben.
Okay. Fantastic. Yeah. A little bit of tech issues here, I guess. Just two quick ones. Number one, and thanks for giving already a little bit of detail as to the softness of the U.S. consumer, but wanted to understand, and maybe if you can help us dig a little bit deeper as to just the competitive dynamics, what you're seeing in the different categories in the U.S., and how much of a pressure you've been getting from private label, just general dynamics, and if you're seeing also significant swings from food service into retail, just the general downtrading trends. I have a quick follow-up as well. Thank you.
Okay, Ben. This is Mark. You're right. All the categories remain challenged in the U.S. What we're seeing is we're seeing a bifurcation of consumers where economically stressed consumers are moving down to private label or other value offerings, while more affluent customers, consumers are moving to more premium products. That challenge as the largest player in the midstream or the mainstream, we have an oversized exposure to that larger segment of the category in the middle, which is where the bulk of the category declines are occurring right now. Our business and momentum do not have sufficient size to offset those losses, but what we're focused on is expanding our value segment offerings. We've just introduced in April Sara Lee Half-Loves. We've also introduced Bimbo Bread as a value component in this category as well, and it's doing exceptionally well.
Alternatively, in the premium side of the business, we've expanded the distribution of Rustik and introduced a number of protein-focused products along with Artesano Hawaiian to get that premium product. We are trying to play the high and the low, and then through RGM, we are doing selective promotions because things are a lot different now in terms of promotional response from consumers in the U.S. after the pandemic. Hopefully, that helps out a little bit then.
Yep. It does. A quick follow-up for Diego. Just thanks for the clarity on the guidance and the explanation behind that. As we look into it for certain other items, how should we think about CapEx for the year as we progress throughout the coming quarters? Are you looking into reducing some of the CapEx just given that there might not be the need for it? Just how to think about CapEx, but also needs for working capital, and the update that you can give us on cash flow items, that would be great. Thank you.
Sure, Ben. You probably know this, and everybody knows this, and I would probably highlight with this question that it was a quarter in which we were able to generate positive free cash flow, $18 million. This is because even though having a lower—I mean, even excluding the FX effect and the challenges that we have already discussed during the call, we have been, I would say, cautious and looking for efficiencies on the way that we execute our CapEx program, and that led us to a total investment program in the first quarter of $260 million. I would say we are still not adjusting the forecast. If you remember, we said around $1.4 billion, $1.4-$1.5 billion. Today, we probably feel more in the low end of the range. We are still analyzing several projects, so that's why we still did not want to adjust the guidance.
I would not be surprised if in the next quarter we move the number slightly below the initial guidance. That is for the CapEx. For the working capital, as you saw, we generated close to MXN 1 billion, $40-something million of positive working capital during the first quarter. We have been working very intensively internally to improve our working capital position. We still see a lot of opportunities in many different lines and many different geographies. I would say that I feel confident that we will also generate cash from our working capital as opposed to last year. We have an easy point of departure without taking any merit from the whole program that we have been executing. I think in that regard, it is going to be a positive year, and of course, it will help us to improve our financial position.
Okay. Perfect. Thank you very much for that, Diego.
You're welcome, Ben.
Thank you. The next question comes from Alvaro Garcia from BTG Pactual . Please go ahead.
Hi. I'm Diego, Rafa, Mark. Hope you're doing well. My first question is on innovation, I guess, maybe for Rafa or Mark, about how you think about innovation in this environment. Obviously, a lot of shifting consumer habits, people trying new ingredients, but at the same time, probably a tougher environment to sort of lean into innovation. Any thoughts with regards to innovation, specifically in the U.S., would be helpful. My second question is on private label in Mexico, something we've discussed on this call quite a bit. I was just wondering, Rafa, if you could comment on the degree of change or the degree of, let's say, how the consumer is taking on private label bread in Mexico. It's a new sort of phenomenon. I know you're present in the space, but any sort of comments with regards to that would be very helpful. Thank you.
I'll start out on innovation, and you can augment as necessary.
Yeah.
Thank you.
Our strategic focus on innovation is multi-brand channel and format strategy to capture younger and new consumers. Refreshing our portfolio with new flavors, products, price-packed architecture. Examples include Butter Buns from Bimbo, Thomas Protein Bagel, the expansion of Muffin Tops, Thomas' Croissant Bread, Sara Lee Half-Loves, all of those things addressing underpenetrated consumers, including value-oriented consumers and products to meet the evolving consumer needs. We have execution precision, improving in-store availability, and going after the healthy space. With the advent of GLP-1 drugs, we need to have products that meet that consumer, and high protein is a way to get there, including plant-based and high protein breads and snacks. Rafa, if there's something else you want to add.
Yeah. Thank you, Mark. What I would complete is, Alvaro was saying that we have an extended meaning for innovation. We go from very actively pursuing a price-packed architecture to be close to those demographics that are having some more trouble to reach month-end. We have also developed worldwide the premium segment portfolio, which is growing in many geographies, double-digit. There is a space for price-packed architecture for value offerings, but also there is a lot of appetite for the premium segment. Last but not least, I mean, we are still having the opportunity to cover better key occasions and growing needs, notably in the health and wellness, but also pushing the transition from artisanal bread and sweet baked goods into the packaged category. We see plenty of opportunities if we do them right. I would move to private label in Mexico.
What I would say is that private label are increasing in Mexico, where definitely our mission is to follow the shopper wherever they go. In this sense, we are ready to commit to those who push private label, notably modern trade and hard discounters, into a complete offering that will have branded and unbranded propositions. So far, we are quite active on the bread category in important customers, and we plan to grow more to make sure that we go where our shopper is going to feel more comfortable with completing their shopping missions. You will see more of us in such an arena.
That's clear. Thank you very much.
Thank you.
Thank you. Once again, if you would like to ask a question, please press star, then one. Your next question comes from Julio Cesar Martinez from Sura Investments. Please go ahead.
My question has been answered.
Thanks. Your next question will then come from Fervisio Galeisi from The Rohatyn Group .
Hi, Rafa, Diego, and Ben. One question related to the cash position. You almost covered the cash position, almost $900 million, and you have a maturity in 2026. This increase in cash is for this maturity or for the other acquisition that you did or you are planning to do in the competition? The last question is the new acquisition in Eastern Europe, did you pay or you have to pay? Again, just thinking in the cash position. Hi, Federico. Yeah. I will try and start by the second one. We already paid for this acquisition. It's a small but relevant for Romania, a strategic acquisition. We already paid for it literally today in the morning Europe time. That is why Rafa during the call announced this, and it's also in the press release as I recently read. Regarding the cash position, you're right.
We ended the quarter with a very strong cash position that has to do with the issuance of the certificate of what happened that we did at the beginning of the year, the MXN 15 billion issuance. We anticipated the needs that we have, I would say, with the combination, of course, of the two M&A projects that were announced last year, Dondon in Europe and Wikivault in Brazil. We thought it was a good momentum to go to the market, issue the debt, and make sure that we have the money, not only for the acquisitions. Also, remember that although we're lowering the CapEx as compared to last year and an important reduction as compared to two years ago, it's still, I would say, a very active investment program that we have.
I would not link this issuance to the maturity that we have in 2026, MXN 10 billion of a certificate of what happened as well, which is more towards the end of 2026, October of 2026. For that liability management, we still have a lot of time. Okay. Perfect. Thank you so much.
Thank you. Your next question comes from Fernando Alvera from Bank of America. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. Diego, I think actually I need the answer. Just wanted to check. Regarding the new guidance for the year of all the growth with single digits, I mean, this lower growth is mainly explained by North America or is there something else?
Yes, Fernando. Let me try to guide you with a little bit of details. First, what we're assuming and the most relevant component of the adjustment for the guidance for the year has to do with the change that we're doing on the assumption of the exchange rate for 2025. As you know, it has been very volatile. A few weeks ago, we were above MXN 21. Now we're seeing the peso at MXN 19.50. I would still feel confident on the assumption, but we believe that it was probably a little bit off the range to continue to assume MXN 21 for the average of the year. In the first quarter, the average was MXN 20.40 something cents.
Of course, we do not think that it's going to remain at 19.50, but doing our calculations and the best effort that we can do, and again, not assuring any that we're going to be accurate, we think it was responsible to lower this number. By lowering the exchange rate with the diversification that we have in Grupo Bimbo, having almost two-thirds of our revenues outside of Mexico, we're having a decrease in our top-line growth of approximately 2 percentage points. If you think that we provided a couple of months ago an expectation of low double digits, considering these 2 percentage points, you basically go down to a high single digit. That's for the top line. On top of the exchange rate, it's clear that we're seeing a more challenging environment in the U.S.
We did adjust our expectation for the operations in North America, mainly because of the U.S., not in Canada. This event is not as big as the adjustment on the exchange rate, remains on the expectation of a high single digit. That is for the top line. Now, if we go to the EBITDA line, we also have a very important component, approximately 50% of our EBITDA outside of Mexico. Lowering the exchange rate means a lower growth. Here, a little bit more impactful than the exchange rate, it is lowering our top-line expectation in the U.S. with the flow-through on the profits of the company. Because of this, we are moving our expectation on margins from a slight margin increase to a slight margin decrease. I just wanted to be clear that it is very relevant, the adjustment that we are doing on the exchange rate.
It is not the only one. We are also adjusting our expectations for North America with a lower impact than the exchange rate.
Got it. Got it.
My second question also related to North America. You mentioned that you saw some pressure from labor costs. Can you give us more color on that? What was the reason behind that and what should you expect going forward? Yeah. If I got your question correctly, I'm sorry, Fernando. This is not being very clear on the communication, but what we mentioned on labor cost is more, let's say, on a global point of view, not necessarily focused for North America. Specifically in EAA, and if we go more granular, in Romania, we had an important increase in the cost of labor. Now, in some other regions, we're still seeing some pressure. On one hand, because of inflation. In other operations, like in the U.S., because of having lower volumes.
With the operating leverage that we have in the company, of course, we're losing part of the margin because of the cost of labor. In some other markets, because salaries are going up, continue to go up, as is the case of Mexico. I would say that overall, we're seeing some inflation in labor, particularly the effect that I mentioned in Romania, the one that made us to put the comment, more than North America. Okay. Okay. Got it. Got it. Perfect. Thank you, Diego.
Thank you. Again, if you have a question, please press star and one. Your next question comes from Nicole Helm from MetLife. Please go ahead. Nicole, your line is currently live. Please go ahead. As there are no further questions, this does conclude our question and answer session. I would now like to turn the conference back to Mr. Pamias for any closing remarks.
Yes, thank you all for your time today. Please do not hesitate to contact us with any further comments or questions you might have. Thank you very much for joining, and have a great day.
I'd like to know, do you have any comment on the line?
The conference has now concluded. Thank you for attending today's presentation. You may now.