Good morning, and welcome to the Sigma Foods third quarter 2026 earnings conference call. All participants are currently in listen-only mode. After the company's prepared remarks, we will open the call for a question and answer session. As a reminder, today's call is being recorded. The replay will be available on Sigma Foods' Investor Relations website later today. I will now turn the call over to Hernán Lozano, Sigma Foods' IRO.
Thank you, operator, and good morning to everyone joining us today. Further details regarding our third quarter results can be found in the press release and earnings presentation that were distributed yesterday. Both documents are available in the investor relation section of our website. Before we begin, please know that today's discussion will include forward-looking statements. These statements are based on current expectations and assumptions but are subject to risks and uncertainties. Actual results may differ materially. Sigma Foods undertakes no obligation to update these statements. It is my pleasure to participate in today's call together with Rodrigo Fernández, CEO, and Roberto Olivares, CFO. Today's agenda is straightforward. Rodrigo will start with a strategic overview of the quarter, Roberto will follow with a financial review, and we will conclude with Q&A. With that, I'll turn the call over to Rodrigo.
Thank you, Hernán, and good morning, everyone. The strong momentum from earlier in the year continued throughout the third quarter. We're pleased to report that Sigma Foods delivered record quarterly and year-to-date volume, revenues, and comparable EBITDA. In addition, we revised up our full-year comparable EBITDA guidance to approximately $1.14 billion, supported by a positive outlook for the remainder of the year. These results reflect consistent execution across our operations and the strength of our business model. A favorable balance of external factors also contributed to the good results during the quarter. Specifically, Sigma benefited from a positive foreign exchange rate effects and lower raw material costs versus 2025. Mexico delivered its strongest quarter ever. This is a region where we operate at a larger scale and with the highest level of diversification, highlighting the strength of our consumer-centered business model we're building across our current geographies.
Europe achieved its highest third-quarter comparable EBITDA since 2020, sustaining a remarkable multiyear turnaround. Solid performance in the Iberian Peninsula and positive results in the Fresh Meats business have been key drivers of our double-digit EBITDA growth year to date. We're pleased to be capturing temporary commodity-driven benefits in Fresh Meats, while the regulatory process for the sale of our majority stake in the business is completed. In the U.S., we delivered higher EBITDA year over year, driven mainly by operational efficiencies and the successful integration of Roger Wood Foods. Our U.S. team increased EBITDA per ton, offsetting the effects of lower volume in a soft consumer environment. Turning to capital allocation, we continue to prioritize investments that support our long-term growth prospects.
Through September, CapEx totaled $295 million, with approximately 70% directed to strategic projects, our three largest being the comprehensive capacity recovery in Spain, our global digital transformation initiative, and a set of high-return opportunities in Mexico to further grow cooked meats and dairy. Returning value to shareholders is also a core part of our balanced approach to capital allocation. Shortly after our quarter end, we paid the second installment of our annual cash dividend, approximately $75 million.
Together with the first payment in April, cash dividends for 2026 totaled approximately $150 million, up 26% versus 2025. To sum up, 2026 is on track to be a record year for Sigma Foods as we consistently deliver on our financial commitments, invest in our future growth, and return value to shareholders, all from a position of financial strength. I will now turn the call over to Roberto for a more detailed discussion of our third quarter financial results.
Thank you, Rodrigo, and good morning, everyone. Total revenues of $2.5 billion increased 3% versus 3Q25, and the accumulated $7.3 billion were 7% higher than the first nine months of the year. This good performance included a 2% quarterly volume growth and a 2% higher average prices, reflecting a favorable foreign exchange conversion effect. Third quarter EBITDA and comparable EBITDA were up by 23% and 20% respectively, supported by year-over-year growth across all regions. Let me walk you through key results by region. Mexico posted higher third-quarter volume, revenues, and EBITDA, both in local currency and in US dollars. Volume growth accelerated to 3% as average prices in Mexican pesos decreased 1% year over year. By channel, both retail and food service volume increased during the third quarter.
Similar to the first half of the year, dairy remained the largest contributor to volume growth in Mexico, primarily driven by value-added yogurt. In addition, lower raw material costs provided packaged meats greater flexibility to improve volume trends. In Europe, third quarter volume increased 5% year over year, while EBITDA grew 48% in US dollars and 50% in euros. This performance reflects the operational recovery in the Iberian Peninsula and a positive contribution from Fresh Meats business. Both EBITDA margin and EBITDA per ton have improved consistently since 2022, and we anticipate this progress should expand further in 2027. In the U.S., operating efficiency has taken center stage during the current soft part of the consumer cycle. Third quarter volume decreased 4%, yet EBITDA increased 2% year over year, including the contribution from Roger Wood Foods. On an organic basis, EBITDA was flat, supported by productivity initiatives.
EBITDA per ton increased 6% in the quarter, and by protecting unit profitability, we are preserving a solid base for EBITDA to accelerate when volume recovers. LATAM achieved record third quarter volume driven by strong demand in Peru and Ecuador, with revenues up 3% year-on-year in local currencies. Quarterly EBITDA increased 3% in USD and declined 3% in local currencies, reflecting lower contributions from the Dominican Republic and Costa Rica. On an accumulated basis, EBITDA grew 8% year-over-year in local currencies, supported by improved price cost alignment and operational efficiencies. Moving on to selected items below the EBITDA line. Our financial cost net was $90 million during the third quarter, compared to $55 million in the same period last year.
The increase was primarily driven by foreign exchange fluctuations, which resulted in a $19 million loss this quarter versus a $13 million gain a year ago. Underlying financial expenses increased only 3% year-over-year. A similar effect is observed in accumulated financial cost net, which is 90% higher year-over-year, mainly driven by lower exchange rate gains. Consolidated net income was $249 million during the nine months ended in September. This is 12% lower versus a high comparable base in the same period of 2025, which benefited from $104 million in extraordinary gains at the EBITDA level. We closed the third quarter with a solid financial position. Net debt totals approximately $2.7 billion, down $174 million sequentially, reflecting a strong EBITDA generation, a recovery in working capital, and the benefit of non-cash foreign exchange conversion effect on our peso-denominated debt.
This brought our net debt to EBITDA ratio to 2.4 times, back below our 2.5 times long-term target. Before we open the call for questions, a brief comment on initial thoughts regarding 2027. We are pleased to be closing 2026 with an upward EBITDA guidance revision, and we are beginning to identify factors that could shape 2027. From a macro standpoint, we anticipate a weaker Mexican peso than the year-to-date average exchange rate of 17.4. In the Americas, current raw material trends point to a supportive environment, particularly in the first half of the year, which is expected to benefit from a high comparable base. In the U.S., focus will remain on the variables we can control, working on new initiatives to support volume recovery while building on efficiency gains we have achieved to protect profitability.
In Europe, we look forward to the start-up of our new facility in Valencia, restoring a key component of our manufacturing footprint. 2027 should be also the region's first year of operations with a sharper focus on branded product, following the sale of a majority stake in our Fresh Meats business. We plan to turn our full year 2027 guidance in February together with our fourth quarter results. As in previous years, revenues and EBITDA will be presented on both an FX neutral and an FX specific basis. We will continue to monitor external factors as we prepare our outlook. We are now ready to take your questions. Please, Hernán.
Thank you, Roberto. We will now open the line for questions. Operator, please.
Dear participant, if you would like to ask a question, please use the raise your hand button of your Zoom tool.
Our first question comes from Henrique Morello of Morgan Stanley. Please, go ahead.
Hi, Rodrigo, Roberto, Hernán. Thank you so much for taking my question. I have just a follow-up on the previous slide that you shared about the 2027 outlook. Pretty helpful information already, but, if you could just dive a bit deeper on your comment on the raw material side. For instance, if you could comment, if you are already building, inventories or hedges, positions that make you more comfortable with the first half or even the second half of next year, and how you are seeing also oil-related costs such as logistics and packaging and other items as well. Also, on the Mexican peso, if you are already hedging some positions or if you did hedge some positions a while ago as well. Just more granularity and color on what to expect in term of costs into next year would be very helpful. Thank you very much.
Thank you, Henrique. This is Roberto. Sure. Let me walk through some of the key assumptions. Regarding raw material, as you remember, prices of most of the Americas raw material, turkey, but mainly boneless pork, started to decrease through this year. We have, particularly for the first half of next year, we will have a high comparison base, in regard to turkey. We do expect that to help a little bit with the comparison. As of right now, we continue to see, particularly in the Americas, a positive raw material environment for next year. There's no signals that could lead us to think otherwise. Again, particularly in the first half of the year is where we're looking for a better comparable base. In regards to inventory, we usually do some inventory, for some key raw materials.
As the prices have gone down, those strategic inventories have gone down as well. We are taking advantage of these low prices. If we see the potential of these prices to go up, we will start to do more strategic inventory in order to hedge ourself for high raw material prices. Regarding oil and oil prices and the implication that has on both raw material, as you mentioned, packaging and freight, we do expect that the volatility on gas prices and oil prices continues to impact through the fourth quarter and maybe in the first half of 2027. We're still reviewing the impacts of that effects on our EBITDA guidance. As we mentioned, we're going to launch or release our official, 2027 guidance, in February of next year. Regarding Mexican peso hedges, we do hedge, for the raw materials that we buy in USD for the Mexican operation.
We have a rolling forward program that hedges for three months in advance. This is something that we have all year. That is kind of the time that it takes us in the Mexican operation to be able to reflect prices in case it's necessary for a depreciation of the Mexican peso. We continue to have that program in place as the Mexican peso fluctuates and has fluctuated recently.
That's very helpful color. Thank you very much.
Thank you, Henrique.
Our next question comes from Ryan Lavitt of Barclays. Please go ahead.
Hey, thanks for the space for questions today. My quick follow-up is a little bit about raw material costs. With the favorable environment this quarter and appears to be next quarter and into early 2027, how are you thinking about reinvesting those cost benefits into price and volume versus retaining them in margins, especially as you think about volume initiatives in the Americas for early next year? Thanks.
Thank you, Ryan. This is Roberto. Yes, we have seen a good raw material environment, and as you see prices both in Mexico and the U.S. have remained either flat or decreased a little bit. Particularly in Mexico, in the case of processed meats, where we have seen most of the cost fluctuating downwards is because we are seeing a little bit more impacting volume, more flexibility to impact volume. We are focusing right now on increased volume in packaged meats in Mexico. In the case of U.S., on one side, we have lower raw material costs, but on the other side, we have had, particularly this last quarter, more logistic and freight costs, given what is happening to gas prices in the U.S.
The lower raw material prices has helped us to mitigate some of that impact and not necessarily put in a lot of effort into increased prices in the U.S. in order to incentivize more volume there. This is a good balance between protecting margins and protecting the long term. We want both of the times, and as the raw material prices continues to remain in this level, we will have more flexibility to improve volume trends.
Ryan, this is Rodrigo. Just to complement, a good way of thinking about it in general is we do want to have long-term growth or midterm growth, and at the same time, we do see EBITDA per ton. A good way of thinking about it is perhaps maintaining EBITDA per ton, especially when prices of raw materials go up or down and balance that with some growth in the short and medium long term.
That's perfect. Thanks so much for the color. I'll pass it on.
Our next question comes from Felipe. Please go ahead.
Good morning, Rodrigo, Roberto. Thanks for the space. Couple questions on my side. The first one relates to peak gross margins. The quarter saw the highest gross margins we have seen in a decade and a half at Sigma, as far as I can tell from my model. However, the price in your raw materials was still falling throughout the quarter. I am guessing that that still needs to make its way through inventories, right? Am I thinking correctly that even though gross margins are kind of a peak in a long time, it may continue to climb into next quarter? The second question is about the EU. It is a bit hard to look at the underlying business with the M&A noise and the replacement production that you have, so you cannot really look through the underlying performance.
Wondering if you can talk a little bit about whether you have been able to maintain packaged meat prices in the EU or maybe how that is tracking versus the downward trend that you are seeing in the commodities. That would be great. Thank you.
Felipe, let me start with the first part, and I will let Roberto answer the second one. Again, I think when you think about the raw materials and gross margins, I think it is important to think about it in per ton and at the same time, our volume growth. It could be the case in the past that we have a big increase of prices or costs in some of our raw materials, and we did increase prices to maintain EBITDA per ton. Sometimes that can get to a consumer, not to growing volume. What we try to do is have that balance of being able to have a consumer that can buy more of our products and at the same time have a healthy gross margin or EBITDA per ton.
The way we would think about it is if we see raw materials going one way or another one, that will leave us some space to, either if the price of raw materials go up, perhaps we can increase prices some to maintain EBITDA per ton. If the prices of raw materials go down, then we can play with that and some volume growth. I think it is more about the balance of those two.
In regards to your second questions about Europe, Felipe. In Europe, in general, if you see revenues in EUR were 5% below, but that has a lot to do with price. Price is around 9% below. Volume is 5% above last year. The effect on price has to do with the mix effect of both higher Fresh Meats sales, because we are improving, in general, volume there, but also, given that this is more a commodity market, raw material prices has gone down, and so prices of our sales have also gone down. The prices of our sales have also gone down. If you see that as effect of revenues, if you see profitability of that sales, EBITDA has increased a lot during this quarter versus last year. 50% in EUR.
That has to do with the more sales that we are doing both in packaged meats and Fresh Meats are giving more EBITDA per ton. If you see EBITDA per ton in Europe has increased significantly versus last year. You start to see the turnaround to continue in Europe. This quarter, we are more similar in terms of EBITDA margin than before the Russia-Ukraine war. We expect that trend to continue in 2027.
Felipe, just to go a little further, I think the Fresh Meats business in Europe goes even more to the side that I was mentioning on your first question. We do see changes in the cost of raw materials, and for that fresh part, we are more immediate of changing prices, but at the end, that allows us to maintain EBITDA per ton, and that brings some of good growth.
Roberto said, we do see a decrease in prices in Fresh Meats. We do see an increase in volume Fresh Meats, and we do see the combination of those two being a very positive EBITDA on that business.
Very clear. Thanks a lot, guys.
Our next question comes from Rodolfo Ramos of Bradesco. Please go ahead.
Good morning. Thank you, Rodrigo, Roberto, Hernán, for taking my question, and congratulations on the strong results. Quite encouraging to see record volumes in Mexico in what has been a challenging consumer environment. Just wanted to see if you can tell us a bit about the performance you've seen on the volume side. Is it coming from better execution, market share gains, or is it more of a channel expansion within the specific categories that you're in? Not sure if the World Cup had also some impact in July. Thank you.
Thank you, Rodolfo, for your question. This is Roberto. In Mexico, we're seeing better volume this quarter in both the retail and food service business. Retail is increasing around 3% and food service around 5% volume versus last year. Similar dynamics that has happened through this year, where we see dairy growing higher than packaged meats. Although this quarter, we start to see some different trends in packaged meats, again, due to the flexibility that raw materials and prices has had effect on volume. Yogurt remains to be the largest contributor to Mexico's volume growth, particularly value-added yogurt, the Greek yogurts that we have had growth. In general, we are getting into, protecting our categories. I will say we're trending a little bit better than the category, and that has a lot to do with execution and innovation.
We have been able to understand the needs of our consumer and be able to serve them as best as possible. That is mainly the big reason.
Thank you.
Our next question comes from Antonio Hernández of Actinver. Please go ahead.
Hi. Good morning. Thanks for taking my question. Congrats on your results. Just a quick one regarding U.S. performance across channels. Any highlight there, and how was your performance month-over-month? Thanks.
Thank you, Antonio. In the U.S., at the end of last quarter, we were expecting some volume improvement based on a couple of things. We saw, for example, some volume improvement in June. It was pretty much a flat year-over-year. We saw a positive, or we are seeing positive summer-related traffic and demand. We also saw some gas price relief at that time, at the end of the quarter. We saw some easing immigration enforcement, so that made us believe that the volume on the third quarter was going to be a bit better. What we saw through June and perhaps during the third quarter was a sequential decline of consumer sentiment. We also saw some lower than usual traffic and demand after the summer. We also saw a reversing of favorable gas price trends.
At the end, some of the volume that you are seeing comes more from Bar-S, because it over-indexes in this cost-sensitive population. Today, for this population, with everything they are going through, gas price becomes a little more relevant, and I would say that that has a double impact. On one side, you have a consumer that is taking care a little bit more of their money, and at the same time, you have higher transportation costs from our side. With that in mind, we thought that it was better not to increase prices and be well-prepared so when the volume comes back. Thinking about that in the fourth quarter, we expect a consumer backdrop in line with third quarter volume, especially compared to last year. We do not see any changes in our prices for the fourth quarter, so price should stay a little bit up.
Additionally, we are making some incremental marketing investments on the fourth quarter to promote volume. All this is included in the revised Sigma Foods guidance that we just gave. We do see the U.S. as a key component of our long-term strategy growth. We believe it is a very important country, and the actions that we are taking are to be better positioned once the current consumer cycle turns around, for us to take advantage of that.
Perfect. Thanks a lot. I will message.
Our next question comes from Pablo Mulas of GBM. Please go ahead.
Hello. Hi, Rodrigo, Hernán, Roberto. Thank you for taking my question, and congrats on the results. This is just a quick follow-up on U.S. volumes. U.S. volumes remain under pressure despite improvements in operating efficiency. Could you give just a little bit more color on what are some initiatives you are implementing to recover volumes? And when do you expect to see a meaningful improvement in consumer demand in the U.S.? Thank you.
Thank you, Pablo. This is Roberto. I think similar to what Rodrigo just mentioned in the last answer, we are seeing a soft consumer environment in the U.S., mainly driven by inflation, particularly gas prices. Our main consumer is over-indexed to this effect. So when are we expecting to see a change in this trend? It depends a lot on the economy, on inflation, and on that particularly. What we're doing ourselves is try to focus on the things that we can control. As you mentioned, we're looking for efficiencies of things that give us a better position for when volume recovers, we're able to accelerate the growth. We're looking as well into innovation, into getting into new formats, new retailers in order to promote some of our products. There's things regarding portfolio and assortment that can help us to incentivize volume.
We're looking into different work streams, more on the understanding the consumer, understanding, particularly in this environment, how the consumer is behaving, what do we expect from CPGs like us to be able to serve their needs. And also looking for efficiencies internally so we are better prepared to deal with this type of environment.
Very clear. Thank you.
As a final reminder, to ask a question, please use the raise your hand button of your Zoom tool.
Our next question comes from Brian Duarte, Oxhamtowner. Please go ahead.
Hi, Rodrigo, Roberto, Hernán. Thanks for taking the question. Just a quick one here from my side. We noticed that the company currently holds a little over 4 million shares in treasury. Could you please elaborate on your intentions regarding these shares? Should we expect them to eventually be canceled, or could they be paid back into the market in the future? Along the same lines, we understand that dividends remain the company's priority in capital allocation, but could we expect additional share buybacks going forward? Thank you very much.
Thank you, Brian. Yes, so dividends are the most important mechanism for shareholder returns. Whenever we see some opportunistic time to buy some shares, we will do it to signal the market of our thoughts. Right now, the 4 million shares that we have in treasury are expected to be canceled in the next general assembly of shareholders. Again, we're focused right now, our main focus will be on dividends going forward.
Thank you very much.
Our next question comes from Fernando Olvera of Bank of America. Please go ahead.
Hello, guys. Can you hear me?
Yes, Fernando.
Thank you for the space for questions. Just quick questions. Can you give us more details of the challenges witnessed in Dominican Republic and Costa Rica that pressure your LatAm operation? The other question is, regarding, and sorry if I missed the comment, but regarding your new EBITDA guidance, just want to double-check if it's with the same FX that you were using initially. Also, you can share an update about Grupo Vall Companys transaction. Thank you.
Hi, Fernando. This is Roberto. Very quickly on the EBITDA guidance. For the rest of the year, we're expecting an exchange rate of 18.5 pesos per dollar for the fourth quarter. Regarding the Grupo Vall Companys transaction, we're still in the process of getting the approval from the competition authorities. It has taken a little bit more time. As of right now, we do not expect anything different to what our original thesis that we will divest the majority stake of that business at the end of this year. Hopefully, by the beginning of next year, we don't have that anymore.
Regarding the Dominican Republic and Costa Rica, there have been some challenges in both regions, more regarding first volume trends. In general, volume in Dominican Republic and Costa Rica and the rest of Central America has trended downwards relative to last year, both for market perspective, but also some temporary operational issues that we have. On the other side, Peru and Ecuador have done a fantastic job of offsetting that effect. Peru particularly has increased a lot, both volume and also EBITDA per ton. So the good part of our diversified model that help us offset some of the tailwinds with some of the headwinds and also some of the internal performance of the countries that are performing good with the countries that are performing not so good.
Okay, great. Thank you, guys.
There being no further questions, I would like to return the call to management.
Thank you, operator. There seems to be one additional question related to our ambition to double the size of the business over the next decade. The question is, what do we see as the two or three most important growth drivers to achieve that ambition?
Thank you for your question. First, we want to continue growing our core business model, particularly in the Americas. We are expanding some capacity in Mexico and the U.S. We are seeing better getting into adjacent categories, particularly in Mexico, and having more penetration in the Hispanic business in the U.S. In regards to Europe, we will continue working to increase profitability in the region as we have done in the past, and with the Fresh Meats business restructuring, we are going to continue doing so.
Snacking is a particularly category that we are looking into expanding more and investing more in the snacking, and it is a category that is growing significantly all around the world. A lot working internally in strengthening the organization and on getting the systems, the capabilities, the process in place, and having the teams already working on the essential things that are going to help us get there. That is mainly it.
Rodrigo, what can help you a little bit of how we think about it. We do go through a process, each one of the geographies, and what we see is how can we maintain and grow what we have today, and where we are very strong, where we have the brands, where we have the people to do it. We do that, again, region by region. Then we go back and say, which places, like the ones Roberto just mentioned, for example, Hispanic in the U.S. We can grow more than what the market is growing. Again, we go and see very specifically each one of the geographies, what are the opportunities.
Then we go back and say, "Well, how can we enable the organization to make this happen?" For that, you have a lot of things of how to make the company work better. How can we have better innovation capabilities? How can we understand the consumer better? Those are some of the things that we have been working as a company. We also think about how can we have better processes and more efficient and what is best anywhere becomes normal everywhere. Then we also think about long-term. Once we have all that from all the geographies, we come back and we say, "Which are the ones that can make the most difference?
Let us make that we focus our resources, both in people and money, to make sure they happen." Then we go back and say, "Yeah, for the longer term, is there anything else we can do?" The way we think about it is we are approaching two different things. On one side is health and food, and we are finding some good opportunities that we see in the medium-long term that can make a big change. For example, you see GLP-1 usage in geographies, and there is some side effects on using GLP-1. You have a stomach that works perhaps slowly. You have bloating stomach and things like that. You might have some loss of muscle. We are working on things that could help through food that can tackle those things. We can be high in protein and perhaps some other things.
And like those, there are different examples. We're also looking that there might be an opportunity, and especially more in the shorter term in Europe, different type of proteins that the consumer are very conscious about it. We're working with those tools. Overall, that's how we see the whole package. What we're looking for is to make sure that we not only double the business, but we do it in a profitable way. We want to make sure that we double it, keeping or improving our return on invested capital.
I think that finalizes the call. I will turn the call back to Rodrigo for a quick closing remark.
Thank you, everyone. We're pleased with our results for the first 9 months of 2026. Our solid operation performance, disciplined capital allocation, and a healthy balance sheet position, Sigma Foods well to continue investing for the future and returning capital to our shareholders. I also want to thank our global teams for their dedication and commitment. Their work is central to our good performance and to achieving our long-term goals. We greatly appreciate the continued support of our investors and business partners, and we look forward to updating you next quarter. Thank you all for your interest in Sigma Foods.
This concludes today's conference call. You may disconnect.