Good day everyone, and welcome to the Kimberly's first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session. To ask questions at any time by pressing the star and one on your touch-tone phone. You may withdraw yourself from the queue by pressing star two. Please note this call may be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to CEO Pablo González. Please go ahead. Thank you, Nikki. Hello everyone, thanks for participating on the call. As usual, I'll make some preliminary remarks and pass it off to Javier to provide details of the first quarter results. Let me start by saying we had another good quarter. Our sales were a new record for the company, despite strong headwinds from our export business. Both consumer products and away from home grew double digits, volumes were slightly higher than last year and improved sequentially. On the profitability side, our progress towards our target margins continues, despite some additional cost pressures due to new contracts taking effect at the beginning of the year, we managed to improve sequentially and post strong growth. All in all, a strong start to the year. Javier? Thank you. Good morning, everyone. Sorry. Hello again, everyone. I don't know if you were able to hear me. During the quarter, our sales were MXN 13.5 billion, a 7.8% increase versus the first quarter of 2022 and a new record. Net sales were boosted by consumer products and away from home, which grew 12.3% and 23.1% respectively. Exports were down 31.1%. Sequentially, sales grew 6%, supported by volume growth while price mix was flat. We will continue monitoring prices and volumes to find the best combination going forward. Cost of goods sold decreased 0.1%. Against last year, every commodity and raw material category compared negatively except for SAM and resins. Energy also compared negatively, while gas was down. FX was lower, averaging 8% less. Our cost reduction program once again had very good results and yielded approximately MXN 400 million of savings in the quarter. These savings are mainly at the cost of goods sold level and are generated by sourcing, materials improvement and process efficiency. Gross profit increased 25%, and margin was 36.3% for the quarter. SG&A expenses were 10.8% higher year-over-year, and as a percentage of sales were up 40 basis points. We continue to look for additional opportunities to streamline our operations while strengthening the investment behind our brands. Operating profit increased 38.7%, and the operating margin was 20.5%. We generated MXN 3.3 billion of EBITDA, a 29.8% increase. EBITDA margin was 24.1%, a 100 basis point sequential improvement and a 410 basis point improvement versus the first quarter of 2022, underscoring our focus towards margin recovery. Cost of financing was MXN 415 million in the first quarter, compared to MXN 419 million in the same period last year. Net interest expense was lower despite our incremental gross debt, because we earned more on our cash investments. During the quarter, we had a MXN 21 million foreign exchange loss, which compares to a MXN 4 million loss last year. Net income for the quarter was MXN 1.6 billion with earnings per share of MXN 0.52. We maintain a very strong and healthy balance sheet. Our total cash position as of March 31st was MXN 17.9 billion. Our net debt to EBITDA ratio was 1.3x with EBITDA to net interest coverage of 7x. Thank you. Just a few brief comments on the outlook before we open it up for Q&A. Let me start by saying that the economy in general and domestic consumption, more specifically, continue to show resilience. So far, we see no meaningful changes in the dynamics of our categories. In addition, we believe our strong innovation pipeline, together with more effective investment behind the brands, will strengthen our market position. On the cost side, we see both virgin fiber prices coming down from historically high levels. The speed and amount of the adjustment is still not clear, but we expect the benefits to show up in our results as we move into the end of this quarter and certainly by the second half of the year. Fluff, on the other hand, is significantly higher than last year. Superabsorbent materials and resins will continue to be favorable. A better cost scenario, together with the investments we are making to optimize our footprint and strengthen our execution, as well as our consistent and effective focus on cost reduction, should allow us to reach our target margins by this year. On ILO, our shareholders approved a dividend of MXN 1.62, payable in four installments during the year, which currently amounts to a 4% yield. This is consistent with our continuous commitment to deploy our earnings in a shareholder-focused manner. Sorry, we are pleased with our progress and excited with the opportunities we see going forward. As always, we are committed and will be relentless in achieving our goals. With that, let me open it up for Q&A. At this time, if you would like to ask a question, please press the star one on your touchtone phone. You may withdraw your question by pressing star two. Once again, to ask a question, please press star one on your touchtone phone. We'll take our first question from Antonio Hernández with Barclays. Please go ahead. Your line is open. Hi, good morning. Thanks for space request and congrats on the results. My question is regarding pricing, and it was flattish sequentially. You see also delivered results. The decision to be maybe a little bit more cautious on the pricing side, how much of it because of the consumer environment or because of the competitive landscape, especially as retailers are pushing higher level penetration and of course other CPG companies? How is this pricing decision being driven, and what do you expect for the year? Thanks. Thanks, Antonio. Thanks for the, for the question. You didn't come out too clearly, so I'll try and answer, and if I miss something, please let me know. As, as we mentioned for the quarter, our volumes were slightly higher versus last year. Consumer products, roughly 1% and away from home, 3%. The rest of the growth comes from pricing, which is really pricing we've been carrying over from 2022, and we're seeing the effects right now. Going forward, we are currently implementing single-digit increases in our tissue business, which is the one that has seen the most pressure from raw materials. We will evaluate further opportunities in pricing in terms of the timing and the amount and the participating categories, depending on how the raw materials behave. For now, just a little bit of a further pricing on tissue, nothing more. As we've said at the start of the year, we're looking to find a better balance for growth between volume and price. We'll be very careful monitoring how the market is behaving, and where we have opportunities, we'll take them. We're gonna be a little bit more cautious with going forward with pricing and focus on balancing it with volume. Let me just add to just to be sure that we're clear. The carryover of the price increases from last year will of course phase down throughout the year, but, on average on the year will still have a positive impact on sales. Absolutely. Okay. Thanks for that color. What about the competitive landscape? Are you seeing in terms of competitors also delaying some price increases? What in general you overall seeing in the competitive environment? First, when it comes to pricing, this last round of pricing on tissue, we've seen all of our competitors also move forward. In terms of the competitive dynamics, we see no significant changes in the first quarter of this year versus the end of last year. Pretty stable, both in pricing and competitive dynamics. We are entering, you know, the most aggressive promotional period during the summer. We don't expect it to be different from prior years. Of course, that remains to be seen. So far, again, in tissue, competition also moving their prices. Everywhere else, a little bit more stability. Perfect. Thanks a lot and congrats on the results. Thanks. Thank you, Antonio. We'll take our next question from Luis Yance with Compass. Please go ahead. Hi, Pablo, Javier. Thanks for taking my questions, and congrats on the results. Two questions from my side. I mean, the first one would be on margins. You know, very nice improvement we continue to see quarter-over-quarter in terms of margin expansion. Help us understand the potential evolution of margins. If the current conditions that we're witnessing on Forex, you know, the Mexican peso being strong, pulp and oil, you know, kind of coming down, et cetera. If that were to kind of stay where they are, is it fair to assume that most of the benefit we haven't yet seen it in. It seems to be that, you know, while the 25%-26% margin is a reasonable normalized margin, you know, the stars seems to be aligned so that actually you could go even higher than this, at least for a couple of quarters only. Am I right on those assumptions, or what's your thought process around that? Well, first, thanks for the question and for participating on the call. Look, if stars align, yeah, our margins will continue to increase. Look, there's so many variables that go into have a role into the margins that it's hard to tell. At least at this point, given the cost scenario we're seeing, we expect our margins to continue to improve, and again, to be by the end of the year within our target range of 25%-27%. If indeed, as you say, stars align, and we certainly hope that's the case, well, then we would have to see if we can be above that range or not. Again, hard to tell right now because there's again, many variables, a lot of volatility. Some things seem to be going our way. We still have some headwinds with fluff, with our export business, et cetera. We're very positive on what we see going forward, but hard to tell if we can take it up a notch from the 25%-27%. It really depends on what happens with the different variables. What we've mentioned is that we can be on the lower side of that range by the end of the year. If things continue to improve, the range is a little bit wide, 200 basis points, so. Great. That's a great color. In particular, you know, when we see pulp prices around the world, you know, they've been coming down. I guess there's different indexes, different countries that have certain lags. There seems to be a way for us to get a sense on the oil-related inputs that you have. Is oil prices a good proxy, or are you seeing a bit of divergence in terms of, you know, perhaps oil prices have been coming down, but perhaps the components that you use are not coming down, they're actually going up? If you could help us understand what's, you know, the oil-related inputs and whether oil, I guess, Brent is a good proxy to get a sense on potential tailwinds or headwinds for your cost structure. There's some correlation, but it's very far from perfect. Most of these raw materials have their own dynamics, their own markets. Oil is also it's only one of their cost components. Hardly use it as a proxy. Okay, thanks. My last question on your cost reduction program. You know, great to see that you're still finding ways to do this and then the MXN 400 million you reported. I mean, that's about 3% of sales. I understand that a lot of those savings, I guess, are reinvested in the business through different measures. Could you give us a sense how much of those savings typically, not this quarter, but just in general terms, how much of those savings typically flow to the EBITDA? Is it hard to determine that? I guess most of it is reinvested, but maybe you typically keep, I don't know, 50 basis points, 100 basis points as true margin improvement. Just to get a sense on that would be great. That's a good question. I don't think I have a precise answer to that. I think that varies. As you mentioned it, some of it going back into improving the product at the different levels and different tiers, and some goes down to margin. How much? I really could not tell. I would say this varies throughout the different times. I think that's as much as I can say. Okay, great. Thanks a lot for the color and congrats guys on the results. Good job. Thank you. Thank you. We will take our next question from Bernardo Malpica with Compass Group. Please go ahead. Hi, Pablo. Hi, Javier. Thank you for taking my question, and congrats on the results. All my questions have been asked, maybe just in terms of the raw material environment, maybe just looking at the first quarter data, what do you see in terms of raw material behavior in infrastructure versus last month? Or maybe how different was it in March versus the beginning of the year? Just to understand what has been the evolution in terms of raw material, the raw material environment you have. Thanks so much. Thanks for your question, Bernardo. Sorry, again, you didn't come out too clearly. Again, I'll answer, and if I'm missing anything, please let me know. If I understand correctly, your question has to do with how do we see raw materials going forward. Again, on the pulp and recycled fibers, we start to see them come down. From historical levels, that's very important to say. The pace and velocity, if you will, at which this will happen is still not clear. Many of us and most in the industry have contracts. When you start playing with the contracts, have to spot volume and then renegotiating some of the prices in the contract. Plus you have inventories that are built up. Exactly how fast that'll show well in the results is not clear. Finally, we see the trend of those prices coming down, which is very, very important, as you know, for our business. It's been a year and a half or even two years, where we just saw important increases. It's nice to see this start to really operate as it usually done in the past with cycles. Hopefully this cycle will be strong to the downside. On the fluff side, the prices are pretty much stable, maybe coming down a little bit, but again, from very, very high levels because many of the producers of pulp have produced less fluff to keep the market tighter and protect those prices and margins. Understanding that probably protecting pulp at this point will be harder. We're moving production over to pulp, keeping production of fluff a little tighter. Again, in that sense, keeping prices a little higher. On the derivatives, as Javier was mentioning, I mean, this really has to do with polypropylene and then some of the derivatives. So far, those have behaved favorably. They will come up a little bit in the second quarter of this year, but still will look below last year, and we expect them to be fairly stable for the rest of the year at this point. As you know, this, these things can change fairly quickly. At this point, we are certainly seeing a better, a more positive cost scenario, evolving here, at the end of this quarter for the second half of the year. Of course, that would be very, very good news for us. We'll see how it pans out. Thank you so much. That is very, very clear. Thank you. Thank you, Bernardo. We'll take our next question from Jens Spiess with Morgan Stanley. Please go ahead. Yes. Thank you for taking my call, and congrats again on the strong results. I mean, some of my questions were already answered. I also think that you might be overshooting your margins by the second half of this year. Yeah, it's looking pretty good there. I just want to maybe ask on the exports, which have been decreasing year-over-year, and understand what is decreasing there, if it's finished product, if it's jumbo rolls, and what do you envision going forward? Thank you. Absolutely. Thanks, Jens. On the export side, I mean, our parent roll sales to the U.S. did grow in the quarter. That continues to be a positive, particularly on the sales side. Exports of finished product is really where we have the headwind because at this time last year, in the first quarter last year, we had very strong sales of different products, particularly diapers and some wipes to our partner, particularly in the U.S., some to Latin America, but mostly to the U.S. This year, we didn't have those sales. I mean, just if you see the finished product part of this, our sales were down roughly 65%. A significant reduction and a significant drag both on the top line and on the bottom line. The reason for that, as we've mentioned before, is our partner, given conditions in the U.S., is being a little bit more cautious in what they, how they wanna manage their inventories. We're in very close contact with them, and when needed, we're ready to support them. Given the market conditions right now, they're being a little bit more careful with, again, handling their inventories and moving forward. Export of finished products will continue to be a drag in the second quarter of this year, not as big as it was in the first quarter, but it will continue to be a drag. We're expecting it to stabilize and be flat to slight growth in the second half of the year given the progress we have in place. Okay. Perfect. Very clear. Thank you. Congrats. Thank you, Jens. We'll take our next question from Rodrigo Alcantara with UBS. Please go ahead. Hi. Good afternoon. Thanks for taking my question. Just two quick ones, if I may share. First one, probably if you have already said on this, just curious if you can help us here quantify the carryover that you mentioned at the beginning of the call. It should be like 4% or 5% carryover effect for price mix this year. The second one would be more like a mid to long-term basis. As we have seen, bottlers, you know, trying to launch their multi-category distribution platforms, et cetera. My question would be if that at some point, would it make sense for you to put your products in those categories to work with them in the distribution side, if that could generate some savings for you? Any comments about that would be helpful. Thank you very much. Thanks, Rodrigo. Well, first on the pricing, again, for the first quarter of this year versus last year, our volumes were just slightly over last year. Consumer products, as I mentioned, about 1%, away from home around 3%. The rest that you're seeing is pricing, and it's coming from last year because we're just in the process of implementing our first price increase this year in tissue. We've got all of that pricing from the prior year carrying over into this year. Now if you look at it sequentially, again, our volumes were quite a bit stronger than the fourth quarter. Consumer products about 8%, the same as in away from home. Total company about 6% sequentially, has to do with, as we just explained, the drop in the exports business. Strong volume sequentially and then we have the pricing that's carrying over from last year, and that's how we're putting together the results. Going forward, we're putting a lot of focus on balancing this between volume and pricing. We did and we are moving on tissue because of the pressures we've seen on that business. As pulp and fibers come down, as we mentioned, there's less pressure on the businesses, but we still have some margin to recover. That's the only pricing we've, passed at this point. Going into the year, again, we have to be very careful on understanding consumer context, as well as the raw material context. Depending how that evolves, we'll decide if we need to do anything else and where we need to do it and what we need to do when it comes to pricing. I hope that answers the first question. The second one. No, that's it. Sorry? No, yeah, that was two. Thank you. Okay. Yeah, the second one in terms, if I was able to catch the question correctly, you're thinking of what are we thinking of in terms of expansion and other categories that where we could use our supply chain and our leverage our strength to get into other categories and have some more options with our portfolio. We are certainly looking both at categories that could be adjacent to some of what we do. There are a couple others that might not be as clear cut in terms of adjacency going forward, but where we see that there's categories that are growing, that the margins are attractive and very important where we see we can add value to both consumers and clients. We'll continue to analyze those categories and, at some point, we'll figure out whether we wanna move on them or not. Nothing that we can report yet at this time, we'll just continue to analyze that. On the one hand and on the other hand, we'll continue to analyze what we can do with our technology, because we've got some very good technology that might be applicable in for certain supply chains. We're also exploring that aggressively. Those are the two areas that we're exploring going forward, but very early stages. Yeah. That, that's interesting. Thanks, Pablo, for that. Just wanted to hear your thoughts on that. Thank you very much. Thank you, Rodrigo. As a reminder, it is star one on your touchtone phone if you would like to ask a question. We'll take our next question from Melissa Byun with Bank of America. Please go ahead. Thank you. Hi, Pablo, Javier and Salvador. Just a couple of, well, themes on my, from my end. First is, can you provide some additional color on consumer behavior? Within that, which categories or price tiers are you seeing the strongest trends and are you seeing any signs of down trading or mix changes? The next question I had is just that you had mentioned looking for additional opportunities to streamline operations. Can you provide some more detail on the sources and magnitude of these opportunities? Thank you. Absolutely. And thanks so much for the questions. I mean, first in terms of the market or category dynamics, again, we see no significant changes from the prior quarter. It's pretty stable and pretty common in terms of the rationale behind the moves of the competitors and the clients out there. No big changes. In terms of the question of down trading, we haven't seen anything that's material when it comes to down trading. There might be a little bit in some categories, but again, nothing that's material. What we're maybe seeing a little bit more is just consumers stretching the use of the product a little further where they can, where they can do so. That's pretty much I think the way they're coping with the inflationary environment we have. Now, if indeed, as you know, we were to see some slowdown, which, again, hasn't happened right now, the consumer has been very resilient. If it were to happen, again, our strategy of multi-tier, multi-channel, multi-brand will come, as many years it has, will come really in handy to try and catch those consumers regardless of what tier they wanna participate on. In terms of streamlining of operations, I mean, we've talked about our new footprint for bath and tissue, which is currently being implemented. We expect very interesting things on that end because of course we'll have more capacity, better quality, and improved products and more production, not only flexibility, but production will be closer to demand. As we did that with bath and tissue, we're taking a look at all of our businesses to figure out how we can further streamline them. This is a never-ending process. There's always opportunities. We will continue to analyze every single line of business to figure out how we can do, if not similar things that will allow all of our lines of business to be more productive and more efficient as we go forward. Again, nothing new. It's something we always do and it's part of our culture, it's part of our cost reduction program, and we'll continue to look and hopefully find good opportunities on that end. Okay. Thank you. Thank you. We show no further questions at this time. I will turn the call back to Mr. González for closing remarks. Well, again, just thanks so much for participating on the call. We'll be glad to take your calls after this meeting if you have any additional questions. I hope you have a great day and a great weekend, and thanks so much. This does conclude today's program. Thank you for your participation. You may disconnect at any time.