Gruma B de C : Press release

Quarterly Financial Information

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[105000] Management commentary

Management commentary [text block]

FIRST QUARTER 2023 RESULTS

The market dynamics and fundamentals for our business have unfolded better than expected during the first quarter of the year. We experienced resilient demand for both of our main products but led by the expansion in the US business, as a result of a positive performance from our "Better for You" product line and higher corn flour consumption in both the US and Mexico. We are pleased with our performance, which delivered consolidated sales growth of 25% and EBITDA growth of 28% stemming from the US division´s performance. We remain committed to protect profitability going forward, which grew 22% in terms of EBITDA per ton, our internal profitability measure, but also cautious about a potential change in consumer behavior, for which we are prepared should it take place during the year.

HIGHLIGHTS

Disclosure of nature of business [text block]

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GRUMA, S.A.B. de C.V., is one of the world's leading tortilla and corn flour producers. With leading brands in most of its markets, GRUMA has operations in the United States, Mexico, Central America, Europe, Asia and Oceania.

Disclosure of management's objectives and its strategies for meeting those

objectives [text block]

Our strategy is to focus on our core business-corn flour and tortilla-as well as to expand our product portfolio towards the flatbreads category in general. We will continue taking advantage of the increasing popularity of Mexican food and, more importantly, tortillas, in the U.S., European, Asian and Oceanian markets. We will also continue taking advantage of the adoption of tortillas by the consumers of several regions of the world for the preparation of different recipes other than Mexican food. Our strategy includes the following key elements:

Expand in the Tortilla Market in the United States: We believe that the size and growth of the tortilla market in this country still offer us significant opportunities for expansion, mainly in the retail channel, looking to continuously innovate our products with emphasis on healthy alternatives based on the preferences of our customers.

Enter and Expand in the Tortilla, Flatbread Markets and Flavored Corn Chips in Europe, Asia and Oceania: We believe that markets in other continents such as Europe, Asia and Oceania offer us significant opportunities. We believe our current operations will enable us to better serve our customers in those regions, with fresher products and respond more quickly to their needs.

Gradually Enter the Flat Bread and Flavored Corn Chips Markets in the United States and Mexico.

Maintain MISSION® and GUERRERO® Tortilla Brands as the First and Second National Brands in the United States and Position our Mission Brand in Other Regions of the World: We intend to achieve this by increasing our efforts at building brand name recognition, and by expanding and having presence in more supermarket chains.

Encourage Transition from the Traditional Cooked-Corn Method to the Corn Flour Method as Well as New Uses for Corn Flour: GRUMA introduced the corn flour method for the production of tortilla and other corn-based products to the market. We believe that there is still much growth potential and that the transition from the Traditional Method to the corn flour method of making tortillas and other corn-based products, is the primary opportunity for increased corn flour sales, particularly in Mexico. We continue working in expanding the use of corn flour in the manufacture of different types of products.

Invest in our Core Business and Focus on Optimizing Operational Matters: We intend to focus our capital expenditure program on our core business to enable us to meet future demand, consolidate our leading position in the industry and continue generating returns to the shareholders above our cost of capital.

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Disclosure of entity's most significant resources, risks and relationships [text block]

Our financial condition and results of operations may be influenced by some of the following factors:

• level of demand for tortillas and corn flour;
• increase or decrease in the Hispanic population in the United States;
• increases in Mexican food consumption by the non-Hispanic population in the United States; and use of tortillas in non-Mexican cuisine in the United States, Europe, Asia and Oceania;
• costs and availability of corn and wheat flour;
• costs of energy and other related products;
• acquisitions, plant expansions and divestitures;
• effects of government initiatives and policies;
• effects from variations of interest rates and exchange rates;
• volatility in corn and wheat prices and energetics costs;
• competition from tortilla manufacturers, especially in the United States;
• competition in the corn flour business; and
• general economic conditions in the countries where we operate and worldwide.

Disclosure of results of operations and prospects [text block]

FISRT QUARTER 2023 RESULTS

The market dynamics and fundamentals for our business have unfolded better than expected during the first quarter of the year. We experienced resilient demand for both of our main products but led by the expansion in the US business, as a result of a positive performance from our "Better for You" product line and higher corn flour consumption in both the US and Mexico. We are pleased with our performance, which delivered consolidated sales growth of 25% and EBITDA growth of 28% stemming from the US division´s performance. We remain committed to protect profitability going forward, which grew 22% in terms of EBITDA per ton, our internal profitability measure, but also cautious about a potential change in consumer behavior, for which we are prepared should it take place during the year.

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HIGHLIGHTS

CONSOLIDATED RESULTS OF OPERATIONS 1Q23 versus 1Q22

Sales volume increased 5% to 1,090 thousand metric tons compared to 1Q22 driven mainly by the U.S. division and GIMSA.

Net sales increased 25% to US$1.6 billion due to (1) the transfer of incremental costs and expenses to the top line of the income statement; and (2) higher sales volume. Sales from non-Mexican operations represented 73% of consolidated figures.

Cost of sales ("COGS") increased 27% to US$1,044.8 million due to (1) the impact of a higher overall rate of inflation on raw material costs in all divisions; (2) higher labor costs; and (3) sales volume growth. As a percentage of net sales, COGS increased to 65.9% from 65.3%.

Selling, general and administrative expenses ("SG&A") increased 17% to US$372.2 million due to (1) higher commissions paid, in line with higher revenues and volume growth; and (2) elevated distribution and logistics costs. As a percentage of net sales, SG&A improved to 23.5% from 25.2%.

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