Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Genomma Lab Q2 2022 results conference call. At this time, all participants are in a listen only mode. We will conduct a question and answer session following today's discussion. Instructions will be provided at that time for you to queue up for questions. A replay will also be available shortly after the conclusion of the call. I'll now turn the call over to Barbara Cano of the InspIR Group. Please go ahead.
Thank you and good morning, everyone. I wanna thank you for listening to our remarks for Genomma Q2 2022 earnings. Joining me today are Jorge Brake, Chief Executive Officer, and Antonio Zamora Galland, Chief Financial Officer. Before I hand our call over, let me first touch on a few items. On Genomma's website, you will find our press release that was posted yesterday after market closed. Please note that today's remarks include forward-looking statements that are based on management's current views and assumptions. While management believes that its assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements and to carefully review all documents filed by Genomma with the Mexican Bolsa. Let me now turn the call over to Mr. Jorge Brake. Jorge?
Yes. Thank you, Barbara, and thank you to everyone joining today. I would like to spend some time talking to you about some of the key actions which we are taking within our key strategic pillars and measurable progress. Antonio, as usual, will then take a few minutes to update you on our Q2 financial results. As you read in our press release, we again reported a strong year-over-year operating performance. This is our fifteenth consecutive quarter of top line growth in a quarter that was still very much marked by currency related and supply chain headwinds, which we have navigated. Our performance also represents a positive proof point for our successful execution on our strategy pillars. This was led by holistically applying innovation to our business and portfolio during the quarter. Marketing, packaging, and communications led innovation growth increased sales.
We also again effectively replicated our strategy of expanding Genomma's strongest portfolio brands and products, or what we call our proven innovation in new countries and markets. To call out a few examples, we launched Suerox in Chile, the third country to which the brands have expanded, and we increased Suerox presence in the U.S. Our Women Razors gained traction in Chile with a 50% increase year-on-year in sales. Early in the Q2, our simultaneous Mexico, Chile, and Costa Rica launch of our new environmentally sustainable Tío Nacho shampoo packaging was also well received. We introduced a new Tío Nacho shampoo format targeting the traditional channel. Q2 Tío Nacho sales in Mexico increased by a substantial 20% year-on-year. These examples of low risk innovation has a favorable risk relative to the return, which complements higher risk new product launches.
Genomma has developed a deep knowledge of who is shopping and when, where and why. We strengthen Genomma's brand's presence within the traditional channel in all countries where we are present. For example in Mexico, where we have aggressive exclusivity agreements on more than 550 sales routes. Our holistic approach to innovation during the quarter encompass not just the physical product, but the digital experiences that contribute to value wherever and however a consumer engages with our brand. During the quarter, we leveraged technology to invest in blended digital and physical experiences that enhance the overall customer experience and drive sales. We invested in a range of customized advertising, out of home local media, and leveraging exclusive brand ambassadors, as well as brand activation marketing to drive product trial, ongoing usage, and advocacy.
Q2 e-commerce sales reflect the most significant year increase to date and more than 10% of total personal care sales, and are more than 10% of total personal care sales for the U.S. and Colombia. Total first half e-commerce sales increased by 66% as compared to last year. We expect to reach or surpass 5% of our total 2022 sales through e-commerce as compared to 0 e-commerce sales just two years ago. Over the last several years, we have been navigating substantial headwinds, including the ongoing impact of supply pressures and rising level of inflation globally. The Genomma team has done a great job of managing the controllables. Our ability to identify new opportunities to optimize ingredients and packaging design to increase affordability while ensuring a strong consumer experience drove margin improvements during the quarter.
Genomma sales numbers also reflect success in ensuring our value propositions are right for today's consumer in a uniquely challenging inflationary environment. Since 2019, our improved execution, optimized logistics and headcount, coupled with a strengthened supply chain, enabled us to limit the effects of currency and inflationary headwinds on costs. We work with our retail partners to deploy targeted inflation-driven pricing effectively and thoughtfully to ensure a minimum effect on the consumer volumes and sales. Genomma's results this quarter reflect this work. Margins have remained stable while sales and absolute profits continue to expand. Pricing is just a part of our customer set of considerations, where we are collaborating closely with suppliers and remain vigilant of the pricing environment. There is a shift in calculating the food and fuel inflation, but we believe health and wellness will always be consumer priority. Turning to our markets.
Mexico net sales grew just under 6% to reach MXN 1.7 billion. The MXN 96 million year-on-year peso sales increase was due to increased points of sale served and the core brand product innovation I have described, led by sales of Suerox and Bio Natural. Supply chain issues, natural gas pricing, overall inflation, and geopolitical challenges have had a domino effect on Mexico and our Euro-based Novamil infant formula partner. We dampened the Mexican Q2 results. However, the combination of pricing points, productivity improvements, and cost savings initiatives I have described helped offset this effect. Mexico is a meaningful driver of Genomma's cash flow generation, which will be particularly relevant once our manufacturing facilities are fully operational and related investments have been completed. During the quarter, our Mexico beverage and personal care manufacturing plant progressed very well, achieving our commitment to full production of Genomma's Suerox line.
In June, the plant produced 7.8 million bottles of Suerox, an 11% increase from our prior high as we continue to improve the plant's efficiency. This also resulted in important cost savings, with costs that are 10% lower versus our expectations for manufacturing Suerox. Our shampoo and pomade lines continue ramping up to reach nearly 2 million shampoo bottles during the Q2. The pomade manufacturing line ramp-up reached a 45% utilization rate by the end of June 2022. Our body and facial cream lines will start operations next month. Genomma's personal care manufacturing process is therefore working well, with no stockouts expected, and is running in line with our expectations. US net sales increased by more than 13% compared to a year ago to reach MXN 361.
Prior interventions and strategies, which to date have been fully implemented, are now resonating on Q2 results for this market, which contributed significantly to Genomma's overall Q2 sales. To call out a few categories we are demonstrating success. Suerox saw record US sales during the quarter, 6 times that of last year's Q2. We also saw solid performance within our own anchor markets like Puerto Rico and California, which increased by 12% and 24% respectively. It is also important to note that we are seeing diversity by category growth in the US, with double-digit growth of all Genomma key brands. This includes a 26% increase in Picot sales, 14% increase in Bio Natural sales, and a significant double increase in Tukol sales.
We will also note that we are seeing strong sales within different channels, including the wholesale channel, while personal care grew 17% year-on-year, including key accounts like CVS, Walgreens, and Walmart. Q2 US sales through Amazon doubled as compared to last year. Further, our productivity improvements and the benefit of continued cost savings initiatives helped mitigate a continued inflationary environment in the US market as well. Genomma's Latin America Q2 2022 net sales grew just under 17% with a 23.5% EBITDA margin. We saw a remarkable top-line growth in cough, and cold, and flu Gastro brands in all Latin America, as well as the launch of Suerox in Chile. Sales growth during the quarter was led by Colombia, Peru, Brazil commercial performance. This was partially offset by local currency depreciation in some countries where Genomma operates.
Finally, as you read in Monday's announcement, Genomma was honored to be EDGE certified as the only pharmaceutical plant in the Western Hemisphere to receive the certification related to water and energy use and carbon dioxide emissions. EDGE is a green building standard and a global certification system of the International Finance Corporation, the private arm of the World Bank, that certifies the design and resource efficiency of green buildings. As further updates for the first half, vis-a-vis our 25 commitment we made in February, Genomma Mexico industrial complex achieved zero waste to landfill goal.
Secondary packaging for all Genomma's products sold in Argentina, for instance, now have the Forest Stewardship Council certification, committing to responsibly managed forests that provide environmental, social, and economic benefits. I would like to express my thanks and congratulations to Genomma's ESG director, María Fernanda Aguilar, and her team for their outstanding progress on our 2025 ESG targets. With that, let me turn our call over to Antonio for commentary on our Q2 financials. Antonio?
Thank you, Jorge, and good morning, everyone. As Jorge noted, we delivered solid growth in the Q2 across net sales, EBITDA, and our EBITDA margin amidst persistent macro headwinds. Our focus remains on ensuring we leverage our enhanced efficiencies and optimized organization to further strengthen our position for sustained growth. Our first half 2022 performance positions us well to deliver on our objectives. Q2 2022 consolidated net sales reached MXN 4.3 billion, a 12% year-on-year increase driven by the innovation that Jorge has discussed. However, these results were partially offset by supply chain and other related headwinds. Q2 EBITDA increased by 15% to reach MXN 892 million with a 20.6% margin.
A 50 basis points year-on-year increase due to successful target pricing initiatives which offset cost inflation and FOREX headwinds in some of the countries where we operate. Q2 2022 Mexico net sales reached MXN 1.7 billion, a 6% year-on-year increase, largely due to increased point of sale and the product innovation Jorge has mentioned before. However, global supply chain challenges continued to adversely impact Genomma's Novamil infant formula category sales. Q2 2022 EBITDA was MXN 351 million with a 20.1% margin, reflecting a 10 basis points decrease, primarily due to inflation of certain raw materials, as well as time investments related to the manufacturing line ramp up process at the industrial complex during the quarter.
Moving to the US, Q2 US net sales increased by 13.2% to reach MXN 361 million, notably with continued strong beverage performance and record Suerox sales for the quarter. Double-digit year-on-year sales in key markets such as Puerto Rico and California, with strong growth in Genomma's key brands. Going to Latin America, net sales for the quarter grew 17% year-on-year to just over MXN 2 billion, also due to innovation and expansion strategies as well as increased points of sale, yet partially offset by local currency depreciation. Genomma's Latin American EBITDA margin closed at 24%, a 70 basis points increase. This was primarily due to a positive price mix with increased operating leverage resulting from increased sales, successful cost and expense control management, and targeted price increases which mitigated macroeconomic headwinds.
Turning to profitability, Q2 2022 gross profit increased by 13.1% to reach MXN 2.6 billion. The 40 basis point gross margin decrease was due to a negative price mix and foreign exchange headwinds across all markets during the quarter. Q2 working capital was adjusted and the cash conversion cycle ended June 30th, 2022 at 100 days. Genomma closed Q2 with MXN 1.3 billion in cash and equivalents at quarter-end, a 7.8% year-on-year decrease as we continue paying down debt during Q2 2022, and we therefore have a very solid balance sheet with a considerably strong cash position and a net debt to EBITDA of just 1.2x, despite prudently paying dividends to our shareholders and paying down debt.
Important to note that this further reduces our interest expense as well as Genomma's inherent business risk. We repurchased a little bit over 1.6 million shares in the Q2 and that represents MXN 33 million. To conclude, we are encouraged by our strong quarter results as we continue to sharpen our focus and execute our strategy's pillars. As a leader in personal care and OTC, Genomma strives to deliver outstanding health and wellness for our customers and clients. With that, let me turn over the call to your questions, please operator.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star, you may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Joaquín Ley with Itaú. Please proceed with your question.
Hi, good morning, Jorge, Toño. Can you hear me?
Yes.
Hello? Hello?
Yes, yes, Joaquín.
I'm sorry. Hi. Hi. Good. Okay, good morning, and thank you for taking my question. You know, you continue to release very solid operating results and growth rates, but you know, there continues to be some noise below the operating line. Your EPS ultimately does not reflect what happens or the underlying trends of the business. How should we think about your non-consolidated subsidiaries? I mean, what strategic sense does it make to keep Marzam in there? Or just maybe thinking about, you know, divesting even at a loss, right? And get that noise out of the way, which ultimately, I believe would be a positive for your return metrics.
Also, you know, the hyperinflation accounting impact on your cost of financing, is there a chance that eventually we can see, you know, a parallel accounting as some other companies with relevant exposure to Argentina have, you know, and seeing a P&L excluding IAS 29, so we can have a better sense of what the real EPS of the company looks like?
Tonio, would you take that?
Yes, Jorge and Joaquín, thank you for both of your questions. Excellent questions. Going to the first one, talking about the affiliated company, Marzam, that where Genomma owns 50% less one share. We don't control it. We don't consolidate. It's for that reason, we don't manage that company. At this moment, Marzam is going through a turnaround. You know, the management, the Moench cooperative team that is managing and controlling the company, they are streamlining some expenses and some of the operations, things that we believe are the right things to be done at that company. That's good.
Obviously, when you do some turnarounds, there's some short-term impacts, especially, you know, some severance payments, et cetera. That's what's driving some of the short-term negative effects of that, of the affiliated, subsidiary. Obviously, there's going to be savings in the future and the busi.ess is going to be a stronger one. Although we don't control Marzam, we think that the measures that they are taking are the right ones. Having said this, I'm going to a more strategic level conversation, which is basically what you're bringing, Joaquín. Thank you again for that. Is Marzam strategic for Genomma in the long term? Not necessarily. We are focused, as Jorge has always mentioned, on providing, you know, health and wellness to our consumers.
We're mostly focused on OTC and personal care. We have that investment and we are analyzing strategic options for the Marzam business. That would, whenever that happens, hopefully reduce that noise and we can move forward with the investments in the categories where we are mostly present. Yes, this is something that we are thinking, we're looking at a number of alternatives. For the time being, as I mentioned before, I think what's going on at Marzam is the right thing. Again, it's a short-term noise that obviously impacts our net income and has an effect on EPS, which is unfortunate. It, again, as I said, this is short term and we are analyzing alternatives for the long term.
I don't know if I was able to answer your first question, Joaquín. I think we lost Joaquín.
Thank you. Our next question.
Um-
is from Vanessa Quiroga with
No, just operator, hold on one second because I still need to answer Joaquín's second question, which was related to Argentina, the hyperinflationary accounting, IAS 29 and IAS 21, which is, there's a specific provision for hyperinflationary accounting. You know, the IFRS rules are the ones that exist. We cannot change them. We may like them or not. The IFRS rules, IAS 21 and 29, basically require that we convert the hyperinflationary subsidiaries using the official exchange rate, which is determined by the central bank. Well, we think that's right or not because there's a free market exchange rate that's obviously a lot of discussion.
We have many, many discussions with the auditors whether we should use the official exchange rate or the free market exchange rate. I mean, from a personal point of view, I'd rather use whatever is more you know, the open market, the reality. The accounting rules are the way they are. We take your suggestion about thinking of pro forma parallel kind of reporting. We'll analyze that and we'll see what other companies are doing in this regard as well. We'll see if there's a better way to communicate to shareholders and analysts you know, the potential impact of a depreciation in that currency. Again, this is something that we will analyze.
Thank you for the suggestion, we'll keep you posted.
Thank you. Our next question is from Vanessa Quiroga with Credit Suisse. Please proceed with your question.
Thank you very much. I want to ask about the new manufacturing plant and if you could provide some color on how supply chain restrictions are affecting in any way the speed of the ramp-up of the plant and your expectations regarding the ramp-up of the different lines that you are working on currently. Thank you.
Yes. Vanessa, thank you for your question, which I was with the line. Would you please repeat it?
Sure, Toño. I would like to ask you to give some color on how supply chain restrictions are affecting the ramp-up of the new manufacturing plant in any way, and what's your expected ramp-up for the lines that you are working on currently? Thank you.
Excellent, Vanessa. Thank you so much for your question. What I would say is that any new plant in any company, and Genomma is not the exception. I've seen this in my career in, you know, different companies and Jorge as well. We have a lot of experience in terms of, you know, the startup of new plants, new facilities. There's always that period of time where you need to synchronize the supply chain. You need to get, you know, new suppliers, new materials, sometimes fine-tuning the specs on the supply chain model, et cetera. What I can tell you is we have not experienced anything unexpected or different from what we've seen in other experiences in our careers.
I think that the plant is going well. The ramp-up is going according to our expectations. Some of the initial hiccups that happen in any line, they are there. We are managing those. Yeah, maybe today there's a little bit of more difficulties in the world, in the global supply chain networks. I don't think that's impacting in a significant manner our ramp-up processes. You know, the sort of line we were already very, very happy with the efficiencies that we had a couple of months ago, where we reached 7 million bottles a month in terms of production. Right now, we're at 7.8. That's a significant productivity increase. The cost per unit is even lower than what we had anticipated.
What we need to be in this process is we need to make it right. We need to do the ramp-up in the right way. There's always a learning curve that needs to happen. It's happening. Some of the other lines that we have, the shampoo line or the ointment lines, right now, I would say that they are at the 40%-45% mark of the ramp-up process, so they are going well. We expect the ramp-up process for each line to take between 5-6 months, each one of them. Again, shampoos, I mean, suelo, it's perfect, it's fine-tuned, it's delivering even more than what we had anticipated. Shampoos and ointments, very well according to the ramp-up curve. Facial creams and body creams will start operations in August.
I think that you will start to see, we will start to see savings and synergies from the manufacturing facility, obviously. You know, the caveat is that there's COGS inflation everywhere in the world. Some of the COGS increases will be offset by this productivity gains that we will have in the plant. That's a little bit of the process. I think it's an excellent question, but we are not worried in terms of the personal care plant. In terms of the pharma plant, that's a different story. We are still dependent on the permits, on the GMPs from COFEPRIS. This is the story that we know.
As we've mentioned the previous quarter, we think that it's still going to take a couple of months. In the case of the pharma business or the pharma manufacturing facilities, there's longer lead times for raw materials that need to be taken into consideration. We'll get there when we'll get there. Hopefully, you know, the COFEPRIS and the other permits from the other countries will come soon. At this moment, that's something that we are dependent on the authorities. I don't know if I was able to answer your question, Vanessa.
Yes. Thank you. That's helpful, thanks.
Thank you. Our next question is from Alvaro Garcia with BTG Pactual. Please proceed with your question.
Hi, Jorge and Antonio. Thanks for the call. A couple questions. One on infant formula. You mentioned there was a drag once again. I was wondering if you could maybe quantify that maybe within the OTC category in Mexico, which did see lower growth. If maybe you'd adjust for that, you know, what type of growth we'd be seeing there? My second question is on maybe more for Jorge on sort of new line extensions and new product rollouts. What are you most excited about, you know, into the second half of the year in terms of new line extensions or potentially new product rollouts? Thank you very much.
You take the first one, I'll take the second. Yes. Thank you, Álvaro, for your question. The infant formula category is one of our fastest-growing categories. I think we're very happy with the performance of our commercial team and the acceptance of the products. They are indeed superior products that the market is accepting really well. As we mentioned last quarter, and this is still happening today, our partner, United Pharmaceuticals, who manufactures Novamil in their two plants in France and what used to be East Germany, are experiencing some hiccups in terms of some raw materials, but especially energy. You know, Germany is supplied by natural gas, usually supplied by much natural gas from Russia.
Everybody has seen in recent weeks there's been some disruptions there, and that's affecting the ability of UPI to source the kind of growth that we need. There's probably a couple of percentage points that Mexico could have grown faster because we have the demand. The demand is there. We just simply were not able to cope with it because of this situation. Hopefully this will be short-term.
Now, there's another aspect, another macro aspect that is happening, which is, we all know that there were some major disruptions in the infant formula category in the U.S., and that is driving the U.S. to go out to the world for the first time ever and try to buy infant formula from everywhere, from Europe, from Australia, from New Zealand, et cetera. That is also creating some pressures in the supply chain network because of that. That's a macro situation as well. Again, this is temporary. Eventually things will get solved. Unfortunately, we didn't get all the products that we could have sold, and as I'm saying, the demand is there. The demand is strong, and our plans to expand the brand to other countries in Latin America is there.
It's unfortunate, but we have to live for the time being with that. I don't know if I was able to answer your first question or not.
Confirm that that growth there is below potential on the supply side of things. That's clear, and thanks for all the color. That was helpful for that first question.
Excellent. Let's move to the second question with Jorge. What are the new line extensions that excites him the most?
Alvaro, the second semester looks bright too. This is, I would say, the main reason why we feel positive about it despite of what is happening around us everywhere, is that our growth is very solid and is broad-based. If we were to get into a lot of detail in terms of where the growth is coming from, and looking at the big perspective, our total company, I would have to say that it's coming from everywhere in terms of countries.
All countries are growing very healthy, including now this year, the U.S. that has had two very strong quarters in terms of building critical mass. We see that that will continue on the next few quarters, for sure, because we have the plans and we are proving that the plans are working. Latin America as a whole is also growing very healthy. I'd like to mention especially Brazil and Colombia, which are coming very strongly this year, with Brazil growing almost double digits, very healthy business that is now being diversified. As Toño explained, Mexico, it is in the high single digits, and we'll keep in the high single digits in the foreseeable future.
Also in terms of categories and brands, we see a broad-based growth, actually. We see basically growth in all our categories. Could be personal care, could be OTC or could be beverages now. Suerox continues to grow very healthy in all countries, including California and Chile. We will continue expanding that. We see growth, very healthy growth in OTC, basically in all our key categories and some of them that are related to cough and cold, of course, even better, given the situation, the health situation in the world. Finally, all our personal care led by Bio Natural and Cicatricure, that are two of our top brands as a company that are growing also double digits, basically in most of the countries in which we operate.
In overall terms, we are very satisfied by the fact that the growth is very healthy, coming from all key categories, all key countries and all key channels. I want to reinforce what I said in my opening, that in terms of channels beyond the traditional channels and the supermarkets and the pharmacies, that really growing very fast in the e-commerce platforms. As I mentioned, we grew 66% this last quarter over the same quarter previous year as a total company. We already have some countries with 10% of their business coming from e-commerce and others getting closer to 5% and in their journey to get to 10% as the minimum goal that we have for the next 1 to 2 years.
That's also very healthy situation in terms of growing the e-commerce platforms. What is coming? I would say that more of the same, because this is behind solid plans that have been built as we were making progress in the last few years. Plus some additional expansions of some of these brands to other countries, including Novamil, including Groomen, including Suerox. They will continue to expand to other countries because they are proving that their models are successful. As we normally do that, with that growth, we expand to other countries. That's something that is gonna happen very, very quickly in the next few months.
Finally, at the beginning of this year, we agreed on a fine-tuned plan with our leaders, country managers and category leaders, in a three-year plan that is basically 2022, 2023 and 2024, that will take us to the next level. You will be seeing that as we make progress quarter by quarter. We continue very focused on our target as I mentioned at the early 2019 of surpassing the MXN 1 billion sales mark with a 24%-25% EBITDA margin. That continues to be alive. We believe that we will get there in the next two and a half years. We will keep you posted.
As I said, that we reviewed and strengthened some of the plans at the beginning of this year to make sure that we get there. Was that helpful, Alvaro?
Yes, very complete. Thank you very much.
Thank you.
Thank you. Our next question is from Antonio Hernandez with Barclays. Please proceed with your question.
Hi, good morning. Thanks for taking our question and congrats on your results. My question regarding the U.S. operations. I mean, you mentioned in your press release a new launch there and just wanted to get a sense of the different brands that you're operating there in the U.S. and what are your plans there for the country, especially as.
One moment. I believe our analyst line has been disconnected.
We do want to apologize with everybody for the communication issues that we are having. We discuss this with the vendor because this shouldn't be the case. This is the second analyst that gets disconnected, operator. This is unacceptable.
Yes, I understand. I'll move on to the next question while we wait for them to see if they dial back in. Our next question is from Rodrigo Alcantara with UBS. Please proceed with your question.
Yeah. Hi, good morning, good afternoon, Antonio. Hope I don't get disconnected. The first question would be, you know, the CapEx is going to accelerate, right, you know, regardless of the EPS, the cash EPS potentially was much higher than what you reported on an accounting basis. Just curious here on the outlook for dividends. I mean, you already paid the second dividend, MXN 400 million dividend, right? Can we expect, you know, more active dividend policy for 2023? My second question would be, regarding the cash conversion cycle.
I mean, is it fair to say that improvement that we have seen mainly on the receivables has been driven by the higher addition or the high penetration of the traditional channel? That would be my two questions. Thank you.
Thank you, Rodrigo, for both of your questions. Yeah, I think that we've mentioned this, that 2022 is an inflection year, especially in terms of cash flow generation, because as you very well pointed out, there's not much CapEx left to be done. I mean, there's always a little bit of maintenance CapEx, and there's a little bit of the CapEx that is required for completing the commissioning of the lines that will start operations. It's very minimal. There's not going to be significant CapEx anymore. We have enough capacity, more than enough capacity, sufficient for the growth that the company requires.
At the same time, as you very well pointed out, the cash conversion cycle is improving because we're putting a lot of effort in terms of that. The inventory, the days of inventory, it's a challenge that we have to manage, as everybody knows. During the first months of the plant's operation, we do need to increase a little bit of inventory to, because we are receiving raw materials, because we don't wanna create any disruption in the market while we transition from co-packers to our plant. So we're managing that, and we have been able to manage that. Some people had expected higher levels of inventories, but we are doing very good work there. In terms of accounts receivable, you are right.
The more that we sell to the traditional channel, the better it gets, because that's a channel that pays cash. We do provide some financing to certain distributors, business partners, but it's more efficient from a DSO point of view. Yes, that's right. I wouldn't say that it's the only factor. Yes, it helps, but I think that the whole organization is putting a lot of effort in terms of collections and being very efficient, but at the same time investing in clients, investing in when we launch new categories, you need to provide some financing so that they put your products, the new products in their shelves and the business starts.
That is something where we invested in the Novamil, in the infant formula. As our customers get used to it and they see that this is a very interesting business, things get normalized. I think it's a combination of everything that you've mentioned. We're very proud of this higher and better cash flow generation. Going back to your other question about the dividend, there is not a formal dividend policy. Let me underscore policy. It's not a policy at this moment, it's a dividend practice. The difference between a practice and a policy is that the policy is set in stone, and a practice is more of a the way we do business.
At this moment, shareholders and the board and management and everybody is committed to reward our shareholders as much as we can. The dividend that we paid in December and the dividend that we paid in June, and more, most likely there's going to be more dividends coming in the near future, and it's going to look more like a policy. If in the future we find an interesting opportunity where we need to source some certain sources of financing, we may analyze if that needs to change. For the time being, as everybody knows, and as you very well pointed out, Rodrigo, we're generating cash. We hope that the plant will help us generate even more cash.
As such, I think that investors and analysts should expect a dividend stream in the future. We are happy to reward our shareholders. As everybody knows, top management, I mean, we are shareholders as well, and we like to get some rewards as much as all other investors. That's a little bit of what you can expect. Again, it's not something written in stone. We are a very dynamic company. We are always looking at opportunities. If there's a very good business where we should invest for the future, and there's a lot of organic growth initiatives taking place. Jorge was very clear in terms of innovation.
When we talk about innovation, we have what is called a route to success or La Ruta de Éxito , which is bringing innovation that has been successful in some countries to the rest of the countries. If we see that there's a big opportunity there, we will invest in our organic business as well. It's always going to be a combination of in terms of capital allocation. There will be dividends, there will be buybacks, but we will always continue investing in the business because we see that there's a lot of opportunities that may be captured. As we capture them, we grow the business, we grow top line, EBITDA, and cash flow. That, for the long term, is in the best interest of all shareholders. Was I able to answer your question, Rodrigo?
No. Yeah, that was great. Also, if you have not, I mean, if you have already answered this, please feel free to go to the next one. If you can comment on the this exclusivity agreement strategy that you mentioned on page two. I found that interesting as well. Thank you very much, Antonio and Jorge.
Thank you. I think he's referring to the strategic alliances, right, Antonio?
Just wanted to clarify with Rodrigo.
Yeah, it's.
Are you talking about?
The rest is a strategic agreement in Australia on the 550 sales routes that you mentioned on page two.
Well, there's many exclusivities that we have. As everybody knows, we have alliances with our business partners, and they help us distribute products to the mom-and-pops, to the more than 500,000 points of sale. Those are exclusive arrangements. They may only sell and carry Genomma's products, not the competitors. That's something that is working well, that we continue to do that, and that's been a very successful model. It's a win-win situation both for us and the business partners.
On top of that, as Jorge was mentioning, we have exclusivity agreements with some of our strategic allies, like in the case of the infant formula or in the case of blades and razors and a couple of others that are coming that, as we said in the past, Genomma is becoming like the gateway to Latin America for certain categories, for certain partners. We lever our commercial and marketing strengths together with the strengths of our partners. That's a strategic lever of growth. All of them, I mean, exclusivity with the business partners for the traditional channel as well as the strategic alliances that Jorge mentioned.
That's super helpful. Thank you very much, Antonio and Jorge.
Let me take quickly Antonio Hernández's question that we didn't answer because he got disconnected in the last couple of minutes. He asked about the US and the brands that we were selling in the US and what was our plans in the near future. Antonio, I'll mention quickly that we're very positive about what is happening in our business in the US, especially in the last three quarters, because I'm including the last quarter of 2021. Behind the plan that we launched in, as you may remember, we launched in late 2020, after an analysis and a revision of our strategic focus in the country. Now we are seeing widespread growth coming fortunately from different fronts.
Our key brands there, Tukol cough syrup, Cicatricure skincare, Silka Medic, Bio Natural, haircare, shampoo, Suerox beverages, among other brands, are our key brands in the country. All of them in the last two quarters have been growing double digits, even much more than double digits in some cases like Cicatricure, Bio Natural, and Suerox that are much higher growth than low double digits. That's behind specific brands and specific strategic moves in the brands. Cicatricure expanding their portfolio, Bio Natural with the relaunch of the sustainable line of products, and Suerox that continues to be successful as a brand preferred by the consumers wherever we put it on the shelves.
Now with a program that will continue to expand the brand as a general in the general market. In the upcoming months. It's very energizing to see a brand like Suerox that is proving what could be a road to success for a Genomma Lab's brand entering the general market in the US. The potential is huge, as you can imagine. Also the category, the markets in which we have focused behind that renewed strategy, especially California, which is, as you know, larger than many of the countries in Latin America, there we are growing 24%. That is another proof that we can do it with a specific focus on some key markets.
As you know, we will continue doing this in other key states in the U.S. as we go ahead, like Texas and Florida, et cetera, et cetera. It's a more targeted surgical type of approach that is delivering much better results than in the past. Finally, Amazon in the U.S. is a key partner of Genomma now, and we are basically doubling every quarter our business with them. That's another key contributor to what we are seeing in the U.S. We see positively the future because of all of these things that are very solid pillars behind the growth that we are seeing. Of course, we always continue assessing and exploring potential new businesses or new brands in the market to further accelerate this. Thank you.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from Antonio Hernandez with Barclays. Please proceed with your question.
Yes, this is the question that you sent to us.
It's just Antonio.
Thanks a lot. Yes.
Yes. Thanks a lot. Appreciate it. Thanks.
Okay. Thank you. I don't think we have more questions.
Thank you. This concludes the question and answer portion of today's call. I would like to turn it back over to Mr. Brake for any closing remarks.
Okay. Thank you, operator, and to those joining our call today. This quarter's diversified results reflect consistent progress against the themes and pillars we have established as our guidepost for sustainable growth. Our consumer-centric model is working and will continue working. We're tracking well against all of our key milestones for this year and remain very optimistic about our long-term growth potential. Thank you to all, and have a great week.
Ladies and gentlemen, this concludes Genomma Lab Q2 2022 results conference call. We would like to thank you again for your participation. You may now disconnect.