Good day, everyone, and welcome to today's Kimberly-Clark de México's Q3 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your telephone keypad. Please note, this call is being recorded, and that I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Pablo González, Chief Executive Officer. Thanks, Chelsea. Hello, everyone. Thanks for participating on the call. As usual, I'll make some preliminary remarks and pass it on to Xavier to provide details on the Q2 results. Let me start by providing some perspective on our sales. Excluding exports tissue parent rolls, our sales grew more than 5%. Consumer Products business grew mid-single-digit, driven by healthy volume growth, while price contributed less as we lapped important price increases. Professional posted strong growth, although much lower than in prior quarters, as we also lapped price increases. All in all, our Consumer and Professional businesses continued to perform well, albeit at lower growth rates because of less price contribution, but with healthy volume and strong shares. On top of that, our exports of finished product also grew significantly. Tissue parent rolls, on the contrary, decreased substantially and were roughly half those of last year. This was due to increased supply from Asian producers, significantly lower prices, and the exchange rate differential. This parent roll sales decrease impacted our top line by more than MXN 800 million and 640 basis points, and caused our total sales to be slightly below last year. On the bottom line, we again posted important increases and we continued to improve margins. This result from a combination of higher volume and efficiencies, raw material price decreases materializing, and continued progress on our cost reduction efforts. Going forward, we expect our overall sales to improve and our bottom line to stay strong. Let me pass it on to Xavier to provide details on the quarter. Good morning. During the quarter, our sales were MXN 12.7 billion, a 0.9% decrease versus the Q3 of 2022. Net sales were boosted by consumer products and away-from-home, which grew 5.3% and 6.5%, respectively. Exports were down 35.4% due to an exceptional quarter of parent roll sales in Q3 2022, in combination with the factors mentioned by Pablo. Converted product exports showed important improvements and grew double digits. Year-over-year, consumer products had a more balanced growth, with volume up 3.2% and price mix 2.1%. We will continue monitoring prices and volumes to find the best combination going forward. Cost of goods sold decreased 11%. Against last year, virgin fibers, imported recycled fibers, SAM, and resins were favorable. Fluff and energy compared negatively. The FX was lower, averaging 16% less. Our cost reduction program once again had very good results and yielded approximately MXN 450 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 efficiencies. Gross profit increased 20% and margin was 40.2% for the quarter. SG&A expenses were 7.8 higher year-over-year, and as a percentage of sales were up 130 basis points. We continue to look for additional opportunities to streamline our logistics operations while strengthening the investment behind our brand and provisioning for higher variable compensation. Operating profit increased 30.6%, and the operating margin was 23.2%. We generated MXN 3.4 billion of EBITDA, a 24.5% increase. EBITDA margin was 27.1%, a 150 basis points sequential improvement, and a 560 basis points differential versus the Q3 of 2022, underscoring our focus towards margin recovery. During the last 12 months, we generated MXN 10 billion of free cash flow. Cost of financing was MXN 414 million in the Q3, compared to MXN 425 million in the same period of last year. Net interest expense was lower, since we have less net debt. During the quarter, we had a MXN 4 million FX loss, which compares to a MXN 2 million loss last year. Net income for the quarter was MXN 1.7 billion, with earnings per share of MXN 0.64, a 34.2% increase. We maintain a very strong and healthy balance sheet. Our total cash position as of September 30 was MXN 18.4 billion. Our net debt to EBITDA ratio was 0.9x, with an EBITDA to net interest coverage of 8x. Thank you. Let me make a few brief comments before going to Q&A. On the top line, the economy in general, and domestic consumption, more specifically, continue to show resiliency. We expect the trend to continue and support growth in our categories. In addition, we believe our strong innovation pipeline, together with more effective investments behind the brands, will strengthen our market positions. On the cost side, pulp, recycled fiber, super absorbent materials, and resins will continue to be favorable. Fluff, on the other hand, will stay significantly higher than last year. Continued growth in our most important businesses, a better cost scenario, together with the investments we're making to optimize our footprint and strengthen execution, as well as our consistent and effective focus on cost reductions, should allow us to continue posting margins within our target range. 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 the floor for questions. At this, time if you would like to ask a question, please press the star and one key on your telephone keypad. You may remove yourself from the queue at anytime by pressing star two. Once again, that is star one to ask a question. And our first question will come from Ben Theurer with Barclays. Your line is open. Yeah, good morning, and thank you very much for taking my question. I have actually two questions. One, you just shared some more details on the price volume on a year-over-year basis, but I was wondering if you could give us a little more color as to the pricing dynamics, Q3 versus Q2, particularly in light of the very strong gross margin expansion that was almost 200 basis points just sequentially. Was there something on the pricing side sequentially, or was it all costs? That would be my first question. Yes, Ben, thanks for your question. Our prices sequentially were a little behind or a little lower than Q2. For example, in Consumer Products, it was -1.3%. Total for the company, given the impact of exports, was -2.2%. Sequentially, we did see prices a little bit lower Q3 versus Q2. Okay. That actually then brings me nicely into the second question. As we move into the Q4 and then into 2024, how should we think about the sequential price movement? Is there going to be some sort of a recovery to be expected in the Q4, which on top of what you've just said, the favorable cost environment will help you on the margin side? Do you think there is need to be a little more cautious on the pricing side to maintain the volumes, and as margin expand nonetheless, you don't have to be as aggressive on pricing? Help us frame that balance, please. Sure, Ben. Well, first of all, as we mentioned, it's very important to understand that we've already lapped. Yeah The price increases, the very aggressive price increases that we posted prior year and early this year. Q3, a little bit of what we saw was somewhat slightly more promotional activity, given of inventories that were in the channel. As you know, Q2 is sometimes the strongest because all of our retailers, all of our clients prepare for the promotional season, so they load up an inventory, then comes the Q3 promotional season, and it's not unusual that some of that inventory stays with them. There's a little bit more promotional activity as the summer promotional season comes to an end. Going forward, we expect, again, volume to be the main contributor, prices to stay at a little over last year, but pretty much in line with what just happened in the Q3. Going forward, for 2024, we expect volumes to continue to be healthy, as the consumer, again, is showing to be resilient. We will be defining what we wanna do in pricing, most likely moving forth with some of it in the Q 1 to be fully implemented by the Q2 of next year. Okay, perfect. Thank you. I hope that helps. Yep, it does. Thank you. Thank you, Ben. Thank you. Our next question will come from Jens Spiess with Morgan Stanley. Your line is open. Hello, Pablo, Xavier. Thank you for taking my question. I just wanted to know if you could provide some more color on the export situation. Do you expect it to remain a headwind next quarter, or will the comparables be much easier going forward? Also, if you could give some color on FX. Have you made any hedges whatsoever on your cost side? Let's say, hypothetically, if the FX goes to, I don't know, MXN 20-MXN 21, would you be able to increase prices relatively quickly or how is the situation looking? Thank you. Thanks for the questions, Jens. On the export side, I mean, it's two tales. Do you remember the Q2? Both our exports of finished product and our exports of parent rolls were both lower than last year. We saw the exports of finished product rebound nicely in the Q3, and we expect that to continue through the Q4 and into 2024. We are supplying more to our partner and it seems on a more consistent basis going forward. That part of the business will pick up nicely again, Q4 and into 2024. When it comes to parent roll sales, they will continue to be a headwind in the Q4, not as big of a headwind as they were in the Q3. I mean, it was really a big, big impact. They were more than half below last year, so it was really a big, big impact in the Q3. They will still be down in the Q4, but not by as much. As we get into next year, I think our volumes will be pretty much on par with what we were able to do first half of this year, but pricing will probably be still a little bit lower given all the imports that we're seeing from Asia into the U.S. I would suspect that parent rolls will be a headwind for some quarters to come, but again, much, much less than they were in the Q3 of this year. Hi, Jens. On FX, I assume your question on hedges is on costs, but before that, let me just to make sure everyone is in line, say that we have all of the balance sheet hedged, so there is no exposure there. On costs and purchases, we have no hedges at this moment. As we've mentioned in the past, every peso that moves has an impact of approximately 150 basis points on our margin. Could the peso move swiftly? Could we be able to pass that on prices? That's gonna depend on a lot of factors, but if that puts pressure on everyone, we could and would definitely consider that. Let me just add there very quickly that given our analysis, even if the peso was somewhere in the MXN 19 range, we would still be seeing some improvements on our cost side. If it were to be above that, then as Xavier is saying, we would need to analyze the situation, but most likely would move faster with pricing into the market. The 2019, having still a benefit is assuming all else equal in terms of pulp, recycled fibers, resins, and et cetera? Yeah, just as we're seeing them right now. Okay. Perfect. Very clear. Thank you. Thank you. Thank you. Our next question will come from Pedro Fabregat with Compass. Your line is open. Hi. Thanks a lot for taking my question. Just one quick question following up on Jens's question. In terms of the level of inventories that you guys have for fiber, so derivatives, what would you expect in terms of margins for the Q4 and 2024? Thank you. Well, as you know, we don't give guidance on sales or margins. What I can tell you is, as we just mentioned during the call, that we believe, given how we expect some of the raw materials to behave in the coming quarters, that being pulp, recycled fibers, super absorbent materials, and resins, to continue to be favorable, and just fluff would be significantly higher than last year, then we would expect our trend on costs to continue through the Q4 and into 2024. Early to say still what we see for all of 2024, because as you know, things are pretty volatile, but so far here for the near term, we continue to see a positive picture on our cost side. Thank you. Just one follow-up question on that answer. Does it make sense for you to increase the level of inventories, especially on fluff, to defend somewhat the margins or it doesn't make sense? Well, what we expect on fluff, it'll be higher than last year in the Q4, but sequentially, it should be a little bit better in the Q4 versus Q3. On the contrary, we're trying to have very lean inventories on fluff so that we can take advantage of any prices coming down. We're always taking a look at that to figure out whether it makes sense to have a little bit more inventories if we believe prices will go up, or stay very, very lean on inventories when we believe that prices might be stable or come down. It's more of the latter at this point than the former, again, because prices are. Reduction in material prices has materialized, and fluff will be coming down from high levels, still higher than last year, but it'll come down sequentially. We're trying to maintain our inventories as lean as possible to take advantage of any price decrease out in the market. Okay, thank you very much, and congratulations on the results. Thank you. Thank you. Our next question will come from Bob Ford with Bank of America. Your line is open. Good morning, Pablo, Xavier, congratulations on the results, and thanks for taking my question. Pablo, are you seeing any Asian imports in Mexico or just in the U.S.? Are you happy with your current market shares and industry pricing behavior? How are sales across channels, especially the modern versus the traditional trade? How do you expect the current COFECE investigation to impact asymmetries across clients and channels? I hope I answer all of the questions, Bob, because that was quite a few of them. First, I think you asked about imports from Asia into Mexico. We're seeing some of it, but mostly to the U.S. Again, what usually happens is, on the Q2, we use most of our capacity to produce finished product in Mexico, again, as sales pick up during that quarter in preparation for the summer promotional season. That means we walk away from the U.S. market to some extent, and in this case, as logistics costs have come down and there's quite a bit of capacity in Asia, given that China has not popped, as everyone expected after the COVID reopening. Some of that capacity is finding its way into the U.S. and into markets that we participate in, but that we retracted a little bit from in the Q2. As we started to come back in the Q3, of course, there was some purchasing that had been done for some of our, by some of our clients of products in Asia, and that made it a little bit harder to put our product into the U.S. It's leveling off, it's looking a little bit better here in October and going forward, but again, most of the product going into the U.S., a little bit maybe coming into Mexico, but the majority really going into the U.S. In terms of just the dynamics out there, I mean, we are seeing, as I mentioned, or we saw a little bit more promotional activity to get rid of some of the inventories that were hangover from the promotional season and during the summer, but nothing too significant. Let's see how Q4 behaves, but we expect a more continued rational approach. When it comes to being happy or satisfied with our shares, I mean, we're gaining share in our most important categories, but as we've said, we're never satisfied, and we have a very, very aggressive innovation pipeline. We'll continue to act and support our brands aggressively out there and hope to continue to improve our shares in the coming quarters. When it comes to the different channels, I think all of the channels are pretty much holding their ground. I think they're all doing a good job and all of them focusing on their strengths, and it's a very competitive market, but so far we see growth in all of them, and going forward, we expect that to continue again, because most of them are focused on their strengths, and they're executing well. When it comes to COFECE, I unfortunately cannot offer any comments on that matter, Bob. I hope you can understand that. I do. Thank you so much. Did I answer all of the questions? Wait, I just noticed the "Except the last one." Is it possible. Okay. Okay. Thank you. Thanks, Bob. Thank you. As a reminder, that is star one to ask a question, and our next question will come from Rodrigo Alcántara with UBS. Your line is open. Rodrigo, please make sure that you're unmuted. I'm sorry, sorry. Hi, good morning. Thanks for taking my, my question. Two quick ones here if I may. The first one would be if any idea how should we think about the dividend for next year? I know it's, it's, it's too early, right, to say, but just given the strong rebound in net income, you know, what, what, what could be a fair, fair assumption for next year? The second question would be, I mean, for Pablo, Xavier, I mean, it looks like, you know, all the stars are getting aligned right now for the COGS environment. Looks like, I mean, the only one that it's giving you still some troubles is fluff, right? As you said, and energy. Just curious here on, I mean, when looking about, you know, industry reports, kind of like a points, you know, pulp prices coming down, you know, significantly, like rates of 30%-35% in dollar terms. I mean, just curious if this is close to what you are essentially seeing there at the ground, but you're experiencing there in, when you make decision with suppliers or, you know, there are some other considerations there to be, you know, as, on longer-term contracts or something that, you know, could, you know, make this picture different to the number that I see on pulp prices for instance? Those would be my two questions. Sure. First on the dividend, as you know, and you mentioned this early to say, but just it's important to remind everyone that in our case, I mean, with the payment of dividends is linked to retained earnings which will be strong this year. Maybe what I can say, again, reminding everyone that it's early, it's that we will probably move forward with a dividend that will mean a increase in real terms versus the dividend of last year. But again, that's something we will take a look in January, February, so that we can take to the Board and then to the shareholders meeting. We're excited with where we see that going. Two, when it comes to costs, I mean, yes, the cost of fibers and pulp and some resins have come down. Let's just remember that they're coming down from historical highs. We saw an incredible uptick of about 15-18 months, and now we've seen those prices come down significantly from those high levels. What will happen going forward, really hard to tell. I mean, what we see most recently here in the market is that prices are stabilizing. There's some efforts by some industry participants to increase prices, particularly in China, with little to no true impact so far, but there's no doubt that they will continue to try to move that forth. At this point, probably stability is what I can say about the costs. Now, what that means going forward, as you know, we use a mix of contracts and spot buying in the market. We'll be very diligent and try and negotiate with our suppliers, as we always do, the best prices available in the market. We'll determine how much we put in contracts and how much we leave out for spot markets, depending on how we feel this can behave going forward. We're right in the process of some of those negotiations, and we'll see how that turns out for 2024. Yeah, that's helpful. I know that you don't hedge, right, for pulp, or I don't think actually there exists hedging for that. No. Are you able to perhaps fix at six prices for that, like long term with suppliers or, you know, something that can be done on the contracts? There's a whole bunch of options. I mean, you can negotiate a contract with a fixed price. Sometimes we negotiate contracts where there's a fixed formula, and it adjusts every quarter. Depending what's happening in the market, it reflects some of the increases or decreases, maybe not all of them. Again, it's a combination of what you negotiate and again, what you put into contracts and what you leave as spot buying. It really depends on how we believe prices will behave. To the extent we believe that prices will continue to go lower, then we leave a little bit more spot margin for us to purge some of them out there. Again, early for 2024, the process of analyzing it and negotiating, but we expect for the short term and into 2024, a stability in prices as we see them right now. Sure. Thank you. Thank you. Our next question will come from Luis Willard with GBM. Your line is open. Hi, guys. Good morning. Thanks for the space for questions. Just a quick one, Pablo, and a follow-up on exports. I mean, as you stated, it's a two-tail story, you know, volume from rolls coming down, but perhaps compensated with better margins from sales of finished products. Delving into 2024, and from a strategic point of view, how did you assess both things? I mean, perhaps it makes a bit more sense from a profitability point of view, having more share of finished products, but I don't know why you got there. Thank you. Sure, Luis. I mean, it's always better for us to sell finished product than just tissue parent rolls. But remember, it's really what we sell in parent rolls is just the capacity we have that we cannot convert into a finished product because of demand. It's a safety valve, if you will, that we can always put this tissue parent rolls in the U.S. and get some for it, and of course, with all of the advantages that it brings with using all of our capacity, so all of the advantages and costs. But no doubt, if the more we can put in finished product, the better our sales and the better our margins. All right. Thank you. Thank you. Thank you. Our next question will come from Juan Guzmán with Deutsche Bank. Your line is open. Hi, good morning, Pablo, Xavier, Salvador, and the whole team there. Congrats on the quarter results, and thanks for the space for questions. Some of my questions have already been answered, so I just have a follow-up on the cost performance. I'm sorry if these have already been asked before. To understand this better, in terms of contribution, what would you say were the main drivers for gross margin expansion between pricing and commodity costs during the quarter and in which magnitude? The past quarter, you mentioned that most of the gains came from the pricing side, so I'd like to understand how this perform in Q3 and what would we expect going forward. Thank you very much. Thanks for the question. I mean, it's, again, it's a combination. On the one, you have higher volumes, which of course help in terms of efficiencies. We also have higher prices, and then you have the raw materials coming down and then FX comparing favorably versus last year. It's really the four components that came together, and that's why we were able to post strong increases and strong margins for the quarter. We expect volumes to continue to add to this going forward. We will monitor prices to see what it is we need to do on that front, and we expect both raw materials and FX, of course, to continue to be positive going forward. Hopefully we can have the whole formula contribute in the coming quarters as it did in this Q3. Great. That's clear. Thank you very much. Thank you. At this time, there are no further questions in the queue. Well, thank you all for participating on the call. Glad to take any further questions that you might have. If you can just let us know, give us a call, and I'm glad to get on the line with you. Hope you all have a tremendous end to the year and look forward to talking to you early in 2024. Thanks so much. Thank you, ladies and gentlemen. This concludes today's program, and we appreciate your participation. You may disconnect at any time. Thank you, Chelsea.