Betterware Reports Steady Growth in Q2 2024 Despite Challenges

Betterware de Mexico S.A.B. de C.V. (BWMX), a prominent direct-to-consumer company in Mexico, showcased steady revenue growth in its second quarter of 2024 financial results. Despite encountering global supply chain challenges and market fluctuations, the company expressed optimism, with both Betterware Mexico and Jafra US demonstrating revenue increases. Furthermore, the firm announced its 18th consecutive quarterly dividend, highlighting its dedication to enhancing shareholder value.

### Key Insights

– Betterware recorded a 5.3% year-over-year revenue increase in Q2 2024, marking the third straight quarter of growth for Betterware Mexico.
– Jafra US experienced its first annual revenue growth since being acquired in 2022.
– The company faced global supply chain disruptions and temporary market volatility in Mexico following elections.
– Betterware remains confident in achieving its 2024 revenue and EBITDA goals despite obstacles.
– An 18th consecutive quarterly dividend was declared, yielding 10.7% at the end of the quarter.

### Company Outlook

– The outlook for the latter half of the year is positive, with expectations to meet full-year guidance.
– Continued growth is anticipated for both Betterware Mexico and Jafra Mexico.
– Jafra US is projected to expand due to a growing associate network and new initiatives.

### Challenges

– Global supply chain issues and geopolitical tensions have impacted operations.
– The Mexican peso depreciated by 7.5% in June, partly due to the presidential election, affecting costs.
– Increased import taxes on 116 SKUs are placing pressure on profitability.

### Positive Indicators

– Historically strong performance with a net revenue compound annual growth rate (CAGR) of 23% and EBITDA CAGR of 24.5% as of 2023.
– Jafra Mexico’s revenue grew by 8.7% in the quarter, with a 10.1% increase in the first half of 2024.
– Jafra US’s revenue increased by 1.2% in Mexican pesos and 4.4% in US dollars.

### Shortcomings

– Consolidated gross margin fell by 103 basis points due to a less favorable product mix and elevated costs.
– Free cash flow dropped by 39% owing to lower operational cash flow and increased capital expenditures.

### Q&A Highlights

– Betterware tackled product availability challenges and aims to meet future demand.
– The company has strategies in place to mitigate the impact of rising freight costs and import taxes, including supplier negotiations and selective price adjustments.
– Jafra’s innovation pipeline is robust, focusing on skincare with planned launches across all product categories in the second half of the year.

Betterware’s financial position strengthened, showing a 2.1% reduction in total net debt when compared to the second quarter of 2023. The company improved its net debt to EBITDA ratio and aims to achieve a ratio of at least 1.5 times by year-end. The sale of former Jafra Mexico offices contributed to positive cash flow, with more property sales planned to address Betterware’s obligations. The company remains confident in seizing growth opportunities and enhancing long-term shareholder value.

### Closing Remarks

In summary, Betterware’s second quarter of 2024 reflects its resilience and strategic execution amid market pressures. The company is positioned for ongoing growth and profitability, with a strong focus on innovation and market adaptation. As Betterware looks towards the future, its emphasis on shareholder value and operational excellence remains a key aspect of its business strategy.