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Excuse me, ladies and gentlemen. Thank you for your patience in holding. We now have our presenters in conference. [Operator Instructions] I'd like to now turn the conference over to Mr. Pablo Gonzalez. Please go ahead.
Good morning. Thanks for participating on the call. I hope you and your families are all safe and well. Let me first make a few brief comments about the quarter, and then Xavier will provide the details behind the numbers. During the quarter, we faced 3 distinct challenges: the comparison to last year's COVID sales, 4e's continued recall and raw material-related cost pressures.
As you all know, last year's second quarter sales were a typical since some of our businesses saw a boost from the pandemic, particularly 4e, but also experts and some consumer health-related products, while others experienced a severe contraction, mainly Away from Home. 4e deserves specific attention since it had extraordinary export sales and profits during that period. If you add to that the fact that it is currently facing the continued costs of the recall of some of its products, the corresponding impact to our consolidated results is very significant. That is why for purposes of clarity and to facilitate the analysis, we've provided more information in our press release and are ready to discuss it with you today.
With respect to cost pressures, we experienced high and rapid price increases in most of our raw materials. This is not unique to our industry, and it is certainly unprecedented. A combination of increased demand due to strong global economic growth, some speculation and the supply chain and distribution bottlenecks have caused big disruptions. We expect this will correct itself, but it's hard to say when. In the meantime, the increased costs are upon us, while measures to deal with them take some time to implement. Having said that, excluding 4e, our EBITDA contraction was in the low single digits, and we maintained healthy margins. We're not happy with the quarter results. But we believe that given the above-mentioned circumstances, the adjusted results clearly reflect the underlying resilience and strength of our business. So let me pass it on to Xavier.
Good morning. Given the impact of 4e in the quarter's results, particularly when compared with last year, on this occasion, we presented results excluding this business, and I'll provide more details on both the consolidated as well as the segregated numbers.
Let me start with the underlying business results. During the quarter, our sales were MXN 11.3 billion, a 3% increase versus the second quarter of 2020. Volume was stable with better price and mix. Consumer products, again, not including 4e, grew 1% as we continued to face a slow consumer environment. If we exclude from 2020, the onetime sales related to the COVID-19 pandemic, namely antibacterial soaps, cleaning sprays, surface wipes, hand sanitizers and face masks, consumer products grew 4%. Away from Home product sales increased 50% as they compared with their weakest quarter last year when most of the economy was shut down. Export sales decreased 9%. The contraction comes from lower parent roll sales. Exports of finished products continue to grow and are expected to double total 2020 sales, despite exceptional sales of tissue finished products last year as we supplied a large volume to Kimberly-Clark to help them cope with the surge in demand.
Cost of goods sold increased 5%. We continue to face rapid and unexpected cost increases in most of our raw materials. Against last year, pulp, domestic recycled fibers, fluff, superabsorbent materials, resins, energy and natural gas compared negatively. Particularly damaging has been the very strong rise in resins and superabsorbent material prices. Only imported recycled fibers compared positively. The FX was lower, averaging 13 less -- 13% less.
Our cost reduction program once again had very good results and yielded approximately MXN 350 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 decreased 3% and margin was 35.3% for the quarter. SG&A expenses were 2% lower year-over-year and down 60 basis points as a percentage of sales. Operating profit decreased 4% and the operating margin was 20.1%. We generated MXN 2.7 billion of EBITDA, a 4% decrease, and EBITDA margin was 24%.
Let me now talk about the consolidated results. On a consolidated basis, during the quarter, our sales were MXN 11.7 billion, a 5% decrease versus the second quarter of 2020. Volume decreased 6% and price and mix grew 1%. With respect to 4e, the sales comparison is particularly challenging as last year they sold a very large volume of sanitizers in the U.S., and sales this year are still impacted by the effect of the product recall. Given the recall, not only 4e is not selling in the U.S., but we are creating provisions that further affected this year's sales, which were lower by more than MXN 900 million and decreased 80%.
Gross profit decreased 14% and margin was 34.5% for the quarter. SG&A expenses were 5% lower year-over-year and flat as a percentage of sales. Operating profit decreased 21% and the operating margin was 19%. EBITDA decreased 18% and the EBITDA margin was 23.2%. The cost of financing was MXN 452 million in the first quarter compared to MXN 401 million in the same period last year. Net interest expense was 24% higher as we have additional debt.
During the quarter, we had a MXN 4 million foreign exchange gain, which compares to a MXN 33 million loss last year. Net income for the quarter was MXN 1.2 billion with earnings per share of MXN 0.40.
We have a very strong balance sheet, which reflects solid cash generation from EBITDA. Our total cash position at June 30 was MXN 14 billion. Our net debt-to-EBITDA ratio was 1.1x with an EBITDA-to-net-interest coverage of 7x. Thank you.
We hope we've provided greater clarity behind second quarter results, and we'll be happy to answer any additional questions you may have. But before doing so, let me make a few comments on the second half of the year.
In the short term, although we will still face some COVID-19 top line headwinds, the toughest comparisons are behind us and continued impacts related to 4e's recall will be smaller. As the Mexican economy reopens and domestic consumption improves based on a recovery of jobs and strong remittances, our domestic sales should improve both on the consumer and Away from Home businesses. Also, sales of finished product exports will continue to show strong growth and for the year will be double those of last year.
On the cost side, on a year-on-year basis in dollars, the second half will present negative cost comparisons in almost all raw materials with very significant increases in energy and resins and superabsorbent materials. Industry publications point to the fact that many such raw material prices will peak in the third quarter before tapering during the fourth quarter, but year-on-year comparisons will continue to pressure margins.
To address this situation, we will be implementing price increases in the coming months, averaging 4% to 5%. We'll accelerate our efforts to achieve greater price realization, operating ever more efficiently, leverage raw material purchasing contracts and accelerate cost and expense reduction efforts. We expect top line to strengthen and margins to remain under pressure, while raw material costs come off their highs and our price increases take effect. But our business fundamentals remain strong. And as we use this period to push further and harder to achieve efficiencies, we are certain we will come out stronger and better position for what lies ahead.
With that, let me open it up for questions, and thank you all again for participating on the call.
[Operator Instructions] Our first question comes from Ben Theurer with Barclays.
Two quick ones. So you've talked about just now about the price increases you're targeting. We're in the usual summer promotion period. So could you elaborate a little bit of what you've been seeing more recently in recent weeks with some of the promotional activity in retail? And by when you actually plan to implement some of those price increases to get a little bit of a feeling when we should expect those to actually kick in? Is it already in 3Q? Or is this more a 4Q event? That would be the first question.
Thanks, Ben. Thanks for the question. Look, the summer promotional season has been pretty similar to last year and prior years. And what we are expecting is that as the summer tapers out that we will be able to implement our price increases. So you should be seeing or we should be seeing a little bit of a price increase late in this quarter, so particularly September. But mostly, we will see the impact during the fourth quarter.
So basically, with that in mind, we should really expect that the margin compression is most likely going to peak in 3Q because you've said that the raw material cost is what you would expect to be peaking into 3Q and then easing off a little bit into 4Q. Now with those raw material pressures in mind and the cost cutting, could you give us a little more guidance or at least directional guidance? How much of incremental cost savings you see within the organization? And what you think you can realize over the next couple of quarters?
Sure. Look, we -- again, industry publications point to the fact that costs should peak in the third quarter, but this has been changing almost every week. It's been unprecedented the rise that we've seen. And hopefully, we'll see a correction that's equally important on the downside. But so far, that's not the prediction. The prediction is that it will peak in the third quarter and start to taper in the fourth quarter. So yes, we will continue to see some pressure in the third quarter and hopefully by fourth quarter, when we have our -- not only our price increases, but we're working very hard on price. We have greater price reputation. And that, together with increased focus on savings, as you just mentioned, should help us bring our margins back up late in the year.
When it comes to savings, I think you should at least expect the same amount of savings that we've been able to deliver in the first and second quarter of this year, but we're certainly working hard to see what else we can bring to the table.
Our next question comes from Jens Spiess with Morgan Stanley.
I just want to ask how much upside do you still see for the recovery on Away from Home going forward? And also if you could elaborate on the 4e impact, how much ballpark figure was impacted by high comps? And how much of it was related to the recall of the product?
Well, first in Away from Home, we can still expect more growth. I mean, the 50% increase from prior year, that number still leaves us short of where we were pre-pandemic. So as the economy continues to reopen and Mexico is going to be recovered, we expect that growth to continue going forward and reach not only pre-pandemic levels, but be higher than that given some products that we've launched in that area.
When it comes to 4e, I mean, the -- let me put it this way, normally, 4e sales are roughly MXN 300 million in a quarter. Last quarter, they were over MXN 1.1 billion. And of that, most of it -- I mean, really most of it has to do with just sales that were lost to the recall. It is about MXN 100 million for the year. The cost of the...
[Operator Instructions] Our next question comes from Nicolas Larrain with JPMorgan.
I wanted to ask you guys about how you're seeing the underlying trends and excluding 4e during these recent months. You guys mentioned growth around 3%, excluding 4e in the second quarter. I want to understand how you're seeing this during the last few months?
Yes, let me just come back to 4e for a second. I mentioned on the sales. If we take a look at the EBITDA for 4e quarter-over-quarter, there was a difference of almost MXN 500 million. So again, the impact was very important for the quarter. Now going forward, what do we see underlying, I mean the domestic demand in Mexico is still not very strong, but there is growth. And again, we expect domestic consumption to pick up as the economy reopens and gain some steam behind job growth and remittances. So I think we can expect growth going forward. I don't know, I'm going to say roughly 3% to 5% going forward given domestic consumption, which when you consider the sales of consumer products for the quarter, which were up 1%. But when you account for the fact that we also have COVID sales last year and you adjust for that, we were, again, as Xavier mentioned, about 4%. So we're comfortable with where our brands are and our shares are. So hopefully, with more growth with the economy, we can increase our growth as well.
Our next question comes from Rodrigo Alcantara with UBS.
Just two quick ones here, if I may. So you reported on price mix increase this quarter, right? And if I am not mistaken, in your last conference call, you mentioned about a price increase of 4% for this year. So I was wondering if you can help me [ reconstruit ] this previously announced 4% price increase versus the reported 1% in this quarter. I assume most of it has to do with the product mix or the recall, but just if you can help me understand this.
And the second question very quickly, if you can just repeat, that's interesting about the -- about consumer products growing 4%, excluding this COVID-related products. If you can repeat to us like what were those products? And what are the latest dynamics that you have seen on these products that may support consumer growth for the rest of 2021? That would be my 2 questions.
Thank you, Rodrigo. Yes, as you know, we talked about pricing in the last quarter. And when you break down the numbers and you take a look at the consumer products, for the quarter, again, 1% growth, but that really comes from price and mix because volume was down. So we did see some of that price certainly come into the market. It's just that it's not enough given the very rapid and unexpected increases in cost. So again, volumes are down, prices are up and that's why we're seeing growth in consumer products. But we expect volumes to recover as the economy reopens. And we hope that there's no price increases will add to what we've done in the year and push us forward.
When it comes to the products that have to do with COVID, again, there was some increased sales last year on bathroom tissue. Certainly not quite as big as it happened in the U.S., but there was an uptick last quarter in those products. But particularly, increases had to do with antibacterial soaps, cleaning sprays, surface wipes, hand sanitizers and face masks. And although all these products are above pre-pandemic levels, they certainly have come down significantly from where they were last year. They will continue to be a lag in the -- during the third quarter given the comparisons to COVID last year. But as we get into the fourth quarter and early into next year, they will be a positive. So it's really just a time lag. But again, we expect all of those categories to be higher pre-pandemic, but just not at the levels of the peak, which was second and third quarter of last year. I hope that helps.
[Operator Instructions] Our next question comes from Mohammed with FGB.
Just want to sort of confirm some of the numbers because the sound broke up for me a little bit. You said quarter-over-quarter MXN 400 million EBITDA impact from 4e recall. Can you also confirm the revenue quarter-over-quarter impact? I know you gave those numbers, but I didn't quite catch them right.
Yes, Mohammed. Thanks for the question. Again, when it comes to the revenue, the impact was a little over MXN 900 million. And when it comes to the EBITDA margin, it was over MXN 450 million, close to MXN 500 million in impact. But that's a really -- most of it -- Mohammed, yes, that's for the quarter. And most of it has to do with the fact that last year, sales and -- both sales and EBITDA of 4e were really extraordinary for the company. It has less to do with the fact of the recall. There is some impact on the recall there, but most of it has to do with just very, very high sales and profitability last quarter -- second quarter of last year for 4e.
Oh, sorry, these numbers are Q2 last year versus Q2 this year then?
Correct. Correct.
Okay. Okay. I understand. So if you compare to Q2 '19, and if I look at the gross margin, obviously, with the cost inflation, it is down quite a bit. Can you sort of give me a little color because this -- as you have gone through very high cost [Audio Gap] as well. And the worst your gross margin got was around this level, which was around 34%. So I'm just trying to get a sense of, as you talk about more cost inflation into Q3, are we actually going to start seeing your gross margin being sort of hitting all-time or like 10-year lows here or this quarter sort of sets the floor?
Well, we -- again, we certainly hope that this quarter is the lowest you will see, and that -- we will see a little bit of pressure on some of the raw materials coming into the third quarter, a little more pressure on raw materials coming in the third quarter, particularly for both. But we will see some better comparisons even though versus last year, they'll still very -- will be very high. The comparisons will be better for resins and some other materials. So our initiatives on pricing and cost savings, we hope we will be able to offset this impact in the third quarter. And that little by little, we will bring those margins up to the levels that we are used to. Again, in the second quarter, notwithstanding all these impacts, our EBITDA margin was 24%, which is very healthy and close to our 25% to 27% long-term range. So we will work hard on the pricing front and on the cost reduction front to make sure those margins continue to tick up.
So from that, like the message seems to me -- and again, I realize you [Audio Gap] margin or anything like that. But it does seem like that, at least sequentially, things should improve from here, both your compares get easier and sequentially the cost inflation might not be as much as higher, sequentially, not year-over-year.
Given what we see right now, Mohammed, that is the case. But again, this is changing -- has changed so rapidly that we hope it changed for the better. And it helps us, but it's very, very volatile at this point.
Yes. No, I understand. And that's unfortunately the case with the world right now. But no, I just wanted to see how you see things right now, and I appreciate your clarity on that.
[Operator Instructions] Our next question comes from [Indiscernible] with [ Makara Investments ].
Can you hear me?
Yes. Now we can hear you.
So I had a question on -- well, a few follow-ups. Just on the 4e, I just wanted to confirm. So is the recall impact done and we're mostly kind of going to see the comparison base effect in 3Q? Or are we still seeing some impact from the recall going forward? And then I also wanted to confirm the numbers in your release because I'm seeing your EBITDA with and without 4e is the same in your release. So I just wanted to understand if that's correct.
Let me first take the first one regarding 4e and the recall. The recall is still underway. But most of the impact has already been put into the numbers. You will still see a little bit of an impact in the third and fourth quarter, but it will be much smaller than what we've had to impact the results in the first half of this year. And Xavier.
And yes, for the second, that's correct, the EBITDA number is the same with and without 4e. The recall effect that 4e still has this past quarter basically neglected all of its profitability.
Okay. Got it. Okay. And then I guess another -- just a follow-up on your cost pressures. I wanted to understand, I mean, you mentioned that you're going to kind of -- I forget how you said it but leverage or kind of lean on your purchasing contracts. Just wanted to understand kind of how we should think about those purchasing agreements. I mean, have you been able to secure raw materials kind of farther in advance? Have you been able to get bigger discounts than what we see in the market?
And then another question I had on the cost pressures. I just wondered on the energy and natural gas side just because I can get a sense of the oil derivatives and the pulp, but I'm not sure exactly kind of what you're facing there. So if you could give us a little bit more color on those as well.
Well, on the purchasing contracts for some raw materials, we negotiated contracts back in October of last year that are -- that worked throughout all of this year. And we've used those contracts in some instances to secure raw materials, which have been a concern in certain areas. And in other, certainly, to minimize the price impact that you'll see out there in the market as a whole, given the discounts that we negotiated. So those contracts have been very favorable for us, and we will continue to leverage going forward, again, to get the volume we need and the best prices we can get. And then on oil and gas, I mean oil seems to be tapering up a little bit, and it might be a little bit more stable after [ with the OpEx ] loss, as they call it, has agreed to. Gas seems to continue to be pushing higher. And that's certainly having an impact. And we have no hedges for those. We really have never had hedges on those and we're just working through it but making sure we operate as efficiently as we can to use less gas, less energy and have those increases affect the least they can our costs.
So when you say energy compared negatively, is that energy and natural gas compared negatively? Is that including also electricity costs are increasing for you? And can you confirm there's more or less natural gas? What kind of weight it has on your cost of goods sold?
Energy is not increasing significantly like electricity. Natural gas is increasing significantly.
And how much does that weigh on your COGS, more or less? If you could give me a little color on that?
I will. Total energy, including all of components is around 7%, 8%. But natural gas is only a small component of that.
There are no additional questions at this time.
Well, thanks again, everyone, for participating on the call. I hope you and your families stay healthy and safe, and we'll look forward to talking to you after the third quarter results. Hope you have a great summer.
Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.