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Ladies and gentlemen, we now have our presenters in conference. [Operator Instructions]
I'd now turn the conference over to Mr. Pablo Gonzalez. Please go ahead.
Good morning, everyone. I hope you all your families are healthy and safe. Let me start by saying that we continue to deliver good overall results, as we operate in line with the priorities and guidelines we set forth to navigate through the current environment, which is still very challenging on many fronts. Notwithstanding how challenging it is, we delivered strong top and bottom line growth, and our margins remained very solid and are among the best in our industry.
During the quarter, we reinforced the various measures and actions to protect the health of our employees and their families, our #1 priority. And we remain in contact with the authorities and communities to assist during the pandemic and mitigate its impact.
Also, the actions we have taken to guarantee our continued operation as well as that of our suppliers to ensure all our customers and consumers have access to our products have allowed us to operate our facilities without any meaningful disruption.
On the sales front, despite private and B2B consumption still being affected by the COVID lockdown and its impact on the economy. Several categories performed well, particularly those related to personal hygiene, health and protection, we continue capitalizing on new growth opportunities.
Altogether, our top line grew for the 24th consecutive quarter driven by strong volumes. On the cost side, most raw materials compared positively and together with our increased productivity and very good results on our cost reduction program, allowed us to deliver solid bottom line growth and improved margins year-over-year in spite of the significant peso depreciation.
In summary, another good quarter in the midst of a very challenging environment. Xavier will now provide more details on the quarter results.
Good morning. During the quarter, our sales were MXN 11.1 billion, a 7% increase versus the third quarter of 2019. Volume grew 7%, with pricing mix in line with last year's. Consumer products also grew 7%, with all the increase due to volume.
Our work-from-home products sales were down 31%, reflecting the slow reopening of offices, hotels and restaurants. Finally, our export business performed very well with sales growing 54%. Cost of goods sold increased 7% against last year, pulp, fluff, superabsorbent materials and resins compared favorably in dollars as did domestic fiber prices. Important recycled fiber and energy prices compared negatively. Finally, the FX was significantly higher, averaging 15% more.
A cost reduction program, an important component of our business DNA, have once again very good results and yielded approximately MXN 400 million of savings in the quarter. These savings are at the cost of goods sold level and are generated at various runs from resourcing, materials improvement and process efficiencies, all contributing in a meaningful way.
Although we cannot anticipate or forecast specific targets going forward, the fact that many of these savings are technology-driven, together with our intention to continue actively looking for developing and investing behind new product and process technologies, gives us confidence that we should be able to keep delivering good results on this growth.
Gross profit increased 5.5% and margin was 37.9% for the quarter. SG&A expenses were up 11.1%, and as a percentage of sales were 100 basis points lower. We achieved better efficiencies in distribution. I explain distribution expenses as well as on investment behind our brands, balancing advertising with point-of-sales promotion.
Needless to say, we continue to review other expenses to make sure our investment behind the lines remains a competitive advantage. Operating profit increased 9.5% and the operating margin was 21.3%. During the quarter, we generated MXN 2.8 billion of EBITDA, a 7.8% decrease and EBITDA value was 25.6%.
Cost of financing was MXN 428 million in the third quarter compared to MXN 391 million in the same period last year. Net interest expense was 9% higher.
As we previously disclosed, in July, the company very successfully placed a record Mexican Latin America and -- Latin America low rates, MXN 500 million of -- [from 144 ] senior unsecured notes, a 2.431% with partial maturities of 1/3 each in years 2029, 2030 and 2031 and entered into a related swap agreement to hedge the currency risk.
Since the proceeds of this placement will initially and primarily be used to pay down debt due late 2020 and early '21. Our long-term debt and cash position increased substantially. In addition to the fund from the placement, we have generated a very strong balance sheet, which reflects solid cash generation from EBITDA. With MXN 10 billion of free cash flow generated in the last 12 months, positive results from working capital management.
And in general, the priority we set up at the beginning of the year to protect cash, our total cash position was MXN 22 billion. Our net debt-to-EBITDA ratio was 0.9x, with an EBITDA to net interest coverage of 8x.
In the quarter, we had a MXN 10 million currency exchange loss, which compares to a MXN 6 million loss last year. Net income for the quarter was MXN 1.3 billion, an 8.9% increase with earnings per share of $0.44.
With that, I'll turn it back to Pablo.
Thanks, Xavier. We continue to operate in an unprecedented and uncertain environment. This and moments like this with KCM's positioning, resiliency, reducibility, strategic model and very strong balance sheet allow us to not only successfully navigate through the challenges but also capitalize on the opportunities.
Mexico's economy experienced a sharp contraction in the second quarter and showed some signs of a rebound in the third quarter. But the impact on domestic consumption, together with the peso depreciation are evident. Notwithstanding, the fact that we sell essential products and participate in [very defensive ] categories, together with a multi-brand and multi-tier strategy, has allowed us to continue to grow and maintain very solid positions in our categories.
Going forward, despite the uncertain environment, we are confident we can continue to grow our business the recombination of volume, price and mix and taking advantage of developing opportunities and technologies for which we will increase investment.
On the cost side, raw materials are, in general, stable and comparing positively. For the most part, we expect that to continue. After that, our operational efficiencies and cost reduction and innovation DNA, which has been critical and will continue to play an important role and we expect to continue to boost healthy bottom line growth and margins.
So we have been able to operate efficiently to the most complicated part of the pandemic and are confident we will continue to be able to do so, always focused on our stated priorities and operating guidelines committed to improving the lives of our consumers, personnel, communities where we operate and the country as a whole.
In summary, we've had a good third quarter and the first 9 months of the year, and we're confident we can continue to deliver good results for our shareholders despite the very uncertain and challenging environment. So that concludes our very brief prepared remarks. And with that, let me open it up to questions, and thank you all again for participating on the call.
[Operator Instructions] Our first question comes from [ Jim Fitz ] with Morgan Stanley.
Yes. I just wanted to see if you could give a bit more color on the main drivers of the quarter-over-quarter top line decline. I mean, you posted a very strong second quarter but if you could give a bit more details on the main drivers of the decline in this quarter? And also, if you could provide an update on the situation of the recycled paper market and prices? It would be great if you could give color on the outlook and any trends you have observed there lately?
Jim, thanks for your questions. Look, we -- as we mentioned, we posted a 7% increase in net sales. Yes, it is sequentially lower than the 9% we achieved in the second quarter. In that quarter, of course, we had some sales attributed to the pandemic, so there were some increases that were beyond of what we normally expect. The categories have stabilized now. So you see demand a little bit thinner from that respect.
So having said that, we believe that under these circumstances, a 7% increase, it's still quite strong. And hopefully, going forward, we can continue, as we mentioned, given our resiliency and adaptability, we can continue to post to top line growth as well as bottom line growth.
When it comes to -- as you know, it results [ in ] volume driven. Going forward, we are analyzing opportunities on the pricing front. And there are certainly some categories, and in some cases, channels and even specific products or tiers where we see an opportunity. And there, we will go ahead and move on prices. It will not be a overall approach, more of a very specific and strategic approach, again, depending on the category, the channels, products and even tiers, as I mentioned. And where we don't currently see an opportunity to increase prices, we will strive to be much more efficient in our investments. And we should start to see that reflect, particularly in the first quarter of next year, as we work through that in this quarter.
And the competitive front on just the dynamic, we really -- overall, when it comes to pricing and promotion dynamics, we see no significant difference from prior years. As you know, our categories have always been very competitive. But having said that, we're not experiencing a particularly intense competitive environment. It's been very different from what we've seen in past years.
Okay. And regarding the recycled paper prices, I guess they remain high. Are you seeing any trends of them decreasing?
Yes. When it comes to recycled paper prices, we started to see late in third quarter, and we believe it will continue through the fourth quarter of prices coming down, and actually coming down in an important manner. So the past couple of quarters, they have been a headwind. I'm not sure that they will become a tailwind in the fourth quarter, but certainly, their impact or their negative impact will be much, much lower than it was in the past couple of quarters.
Our next question comes from [ Louis Hans with Compass.]
Congratulations on the quarter. Two questions on my side. I mean the first one, it's related to your leverage. I mean you're right now below 1x clearly, very strong results, this year drove that result. But I just wonder, given where you are, and historically, your desire to pay dividends, can we expect a step-up in dividends given where you are in terms of leverage or at least on the buyback front? Because it seems like your results -- strong results this year have not been fully reflected on a strong share price. So I wonder if there's something you can do on the buyback/dividend front?
And then the second question is related to margins. You continue to fund margins year-over-year throughout the year. But as we move into this fourth quarter, you start facing, I guess, tougher comps. The 27% EBITDA margins kind of thing for the next couple of quarters. Are you comfortable that the margin expansion that we have witnessed could continue going forward?
[ Luois ], let me take the first one. Yes, our balance sheet, as you mentioned, is strong, and we have been generating cash, and we should continue to generate cash and earnings going forward.
At this moment, we will continue to be conservative with our balance sheet. Going forward, if this situation continues and our view is that it will continue. We will definitely consider our alternatives and this is something that we will probably start thinking about next year.
At this moment, again, our plans continue to be conservative with the balance sheet.
And let me take the other question. As you mentioned, even under very challenging circumstances, we've been able to stay within the target of our EBITDA margin that we stated are between 25% and 27%, which we believe are very strong margins. And again, some of the strongest in our categories worldwide. And yes, we will continue -- we will start to face more challenging comparisons, particularly this fourth quarter and first quarter of next year, even into the second quarter of next year.
So we're -- again, we're doing what we know how to do, so that we try to maintain that margin in its target, which is certainly growing the top line. And again, we hopefully will start to see not only volume, but a little bit of price and the mix going forward. And we will continue to be very aggressive on being more efficient on our cost reduction program on expense reduction.
I mean, just what we know very well how to do, and we will be very, very aggressive on it as we've been in the past. So we believe we will continue to have those types of margins going forward, and we're redoubling our efforts to make sure that's the case.
Great. Congratulations again.
Our next question comes from Nicolas Larrain with JPMorgan.
I have 3 questions, very brief. One, on the cost front, you guys mentioned in the release and on some of the opening remarks that some of them compared positively in dollars. So I just wanted to get a sense with you on how those -- how most of the -- or the most relevant costs are comparing in pesos year-over-year? Also, if you could maybe expand a bit, bit more details on the SG&A efficiencies. I mean, they came in very strong. I just wanted to understand where are you guys sourcing these efficiencies from?
And lastly, maybe the discussion is not to have here, how much debt do you expect to pay in fourth quarter and first quarter on '21 after the issuance of the bonds?
Well, on the third one, the comparisons in -- I'm sorry, I had my face mask on. On the third one, the comparisons on fibers, if you put them in pesos, there's still -- very good fibers are still slightly down to flattish in terms of recycled, they are up as you could say that for all derivatives once you translate those to pesos, their flattish.
And so overall, when you -- I think when you turn those costs in dollars into pesos, for the most part, we're flat to higher than last year, and that's where, again, our efficiencies and our cost reduction programs come into play to ensure and reduce the impact and allow us to have the margins that we posted. So that's on the cost.
On the SG&A efficiencies and then a couple of things. One, as we've mentioned, we have seen opportunities in the logistics side, and we've been working very hard on that front and seeing some nice improvements, both working with third parties to improve not only the service, but the cost and within around fleet where we become much more efficient given the process changes that we've put forward. And this is an area where we continue to believe there's a good opportunity.
And then there's also, of course, our A&P investment, where we're, as I mentioned, in China, we're striving to be much more efficient in our investment and does obtain the same results with less money invested.
And on expenses, we're just going line-by-line and looking at any opportunity to be tighter and bring down those costs. So it's really a combination of the things that we've been doing on the SG&A front that have worked pretty well. And again, we will continue to be very aggressive in all those fronts.
On the debt that we have coming due later this year and very early in January next year. Altogether it's very close to MXN 7 billion. That's where we will be paying down. We have an additional maturity in 2022 of MXN 3 billion. And we, in essence, prefinance that given the conditions that we were able to obtain on the pump placements that we did this year.
Our next question comes from [ Louis Zeller ] with [ GPS ].
Congratulations on the result. I mean, I think most of my questions have already been answered, Pablo and Xavier, but can you talk about a little bit more on the dynamics of mix that you have seen across the years? Are you seeing some sort of trade down that could be hurting mix in the comparison?
Sure, [ Louis ]. Thanks for being on the call. We are seeing some trade down, no doubt, in some categories. But I would say, so far, [just in March], just to give you an idea, it represented less than 100 basis points top line reduction in consumer products for this past quarter. So no doubt there's a little bit of that going on, but it hasn't been significant.
Our next question comes from Rodrigo Alcantara with UBS.
I guess the first one would be for Pablo. So as we have seen Kimberly-Clark in other countries are launching a business-to-consumer platform. Just curious about your thoughts about perhaps doing the same in Mexico. Would it make sense or not for you?
And also, my second question would be, well, so far, you have elaborated very clear on the drivers of the SG&A line-lead marketing and distribution. Just wondering, looking ahead I mean, to get a sense of your operating leverage that you can achieve. Just wondering if you think that at least for you, it's going to be sustainable or easy to sustain at current levels of SG&A or perhaps lower than a bit in real terms? Do you see any tailwind or any headwind on the SG&A? That would be helpful.
On the B2C platform, look, we -- we're right now really focused on both the -- what you call the traditional business and the tremendous growth that we're seeing on e-commerce. Having said that, we're no doubt analyzing different opportunities. We have not come to conclusion, whether that's one that we should be pursuing, but it is something we are looking into.
When it comes to SG&A and sustaining those levels, sure. I mean, it's not easy, and it gets harder times to be able to squeeze more and more out of what we're doing and become more efficient, but you know that's in our DNA, and we will continue day in and day out to look for those opportunities. And we feel pretty comfortable that we can maintain the current levels, and we'll continue to look for additional improvements going forward.
Great. And lastly, if you could comment please, on product innovation, are you working in something that you can comment now or any material changes on your product assortment? That would be my last question.
Sure, Rob. Look, we have continued to innovate throughout the year, and we've introduced new products in the diaper front and wipes, certainly in the soaps and cleaning services categories, we're even producing some masks. So there's quite a bit of things going on. As I mentioned, particularly on diapers, we've got quite a few things that we introduced into the market in the past couple of years that have performed very well, particularly the closed diapers as opposed to the open diapers and same on wipes, et cetera.
So we are comfortable. We're glad with the way our innovations have gone forward. We are introducing right now into the market some additional products that have to do with diapers and that tend to bring into the mix materials that are more sustainable or more friendly to the environment. And that's certainly an area where we will continue to push.
And in all of our categories, we're looking particularly into that area and seeing how we can be more aggressive and bring to market some better solutions in that front.
Going forward, we are, quite flaky, exploring some technologies, and we're excited about the possibility of bringing innovations and significant improvements to some of our categories. Not in a position to disclose those at this point, because we're wearing the, again, exploring -- exploratory [ face ].
But we're excited with what we see going forward and with the pipeline that we have of innovation coming in the next couple of years. And thus, we will increase our investment behind them as well as on not just product improvements, but just technology as a whole to bring more efficiencies into our operations. So excited with some of the opportunities we see going forward, very good pipeline. And as we go along to next year, I'm sure we'll be able to touch on some of these particular introductions that we will get into the market.
[Operator Instructions] Our next question comes from [ Mohamed Hamed ] with SGP.
I hope all yourselves and your families are doing well. My question is, one, regarding consumer business. I think right at the start of the call, you did mention about how much of consumer revenue growth was volume versus price mix? If you could just sort of say that again because I didn't quite catch it.
And also just building on the trade down discussion, can you give a sense of how much of the pricing situation or lack of price/mix growth is mix versus pricing?
Sure. [ Mohamed ], thanks for being in the call. And like wise, hope you and your family are doing well. Look, on the share of the consumer product side, as we mentioned, it was -- the growth was all volume, volume-driven. And that when you look at price and mix, there was a little bit of price in there, but mix was slightly down, as I mentioned, a little bit less than 100 basis points top line reduction of consumer products. So when you look at price and mix, prices slightly up and mix slightly down. And that's why they come in flat versus volume up at 7%.
Our next question comes from David Cardona with Signum Research.
Congrats for the good results. And my question is, well, it's more than a question. Can you give us a guidance for the whole 2020 year on the margins, please?
I'd say we generally don't do that kind of guidance. What I can say is that this fourth quarter shouldn't be very different from what we are seeing in the third quarter. The conditions are not that different. So that's as much as we can say at this moment.
There are no additional questioners at this time.
Great. Thank you all again for participating in the call. We'll be glad to take your calls as we go forward. And again, hope you and your families are healthy and safe. We won't talk to you at least, all of you together, until the first quarter of next year. So we hope you have a terrific end to the year. And again, stay healthy and safe and look forward to continue talking to you. Thanks so much.
Thank you, ladies and gentlemen, this concludes today's presentation. You may now disconnect.