Becle Earnings Call: Strong Margins Amid Transition

Becle Sab De Cv ((MX:CUERVO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Becle’s latest earnings call painted a cautiously optimistic picture as management balanced strong margin gains, cash generation and share wins against a sharp Q4 sales drop and a tough 2026 outlook. The tone was disciplined rather than upbeat, stressing financial resilience and brand health while acknowledging that the coming year will be a challenging transition for top-line growth.

Stronger cash generation fortifies Becle’s balance sheet

Becle highlighted a step-change in cash generation, with MXN 8.1 billion in net cash from operations in 2025 and cash balances of MXN 10.8 billion. Total debt fell to MXN 18.9 billion, pushing adjusted net leverage down to 0.9x and lifting free cash flow yield to 14%, giving the group ample flexibility for both investment and shareholder returns.

Gross margin expansion underpinned by lower agave costs

Gross margin improved to 55.2% in Q4, up 110 basis points year on year and marking the eighth straight quarter of expansion. Management credited easing agave-related input costs and ongoing sourcing and manufacturing efficiencies, reinforcing the view that structural cost improvements are now embedded in the business model.

EBITDA margins rise despite flat earnings

Fourth-quarter EBITDA was flat in absolute terms, but the EBITDA margin expanded 340 basis points to 24.4%. This reflected tight cost control, including mid‑single‑digit reductions in distribution and SG&A, along with MXN 438 million of other income tied to contractual settlements that cushioned the weaker top line.

Mexico outperforms a declining spirits market

In Mexico, Becle grew volumes by 2.5% and value by 2.0% in 2025, outpacing a spirits market that shrank in both measures. In tequila, the company’s 3.9% volume growth beat the 2.5% category advance, underscoring continued leadership and share gains in its core domestic market despite broader industry softness.

U.S. tequila shows relative strength and pricing discipline

In the U.S., tequila remained a resilient category with modest volume growth, while Proximo’s brands posted a smaller volume decline than peers and outperformed the market by about 100 basis points. Becle limited its average price decline to 5.1%, substantially better than the roughly 9.2% category price drop, signaling a clear choice to defend brand equity over aggressive discounting.

Rest of World maintains momentum, led by APAC

The Rest of World business has doubled net sales value since 2019, confirming it as a key growth pillar. EMEA and APAC kept positive momentum in Q4, with APAC delivering double‑digit depletions growth and full‑year EMEA/APAC depletions up 1.5%, even as shipments were flat amid cautious inventory management.

Premiumization continues to drive long-term growth

Since 2019, Becle’s net revenues have climbed 45%, with 10% volume growth and a 35% rise in average price per case illustrating successful premiumization. Average price per case has grown around 5% annually, while gross profit has compounded at 7.5% and gross margin is 320 basis points higher, demonstrating durable pricing power in its portfolio.

Sharp Q4 net sales drop and FX drag cloud results

Q4 was notably weak on the top line, with consolidated net sales down 14% year over year to MXN 11.1 billion. Even after adjusting for currency, sales were still down 8.4%, and FX translation alone was a 5.7‑point headwind, highlighting how macro and currency factors amplified the quarter’s slowdown.

U.S. distributor realignment brings near-term volatility

Becle is undergoing a significant U.S. distributor realignment, transitioning away from a major partner in most markets from early 2026. Management warned that this shift will likely trigger shipment volatility, inventory rebalancing and temporary disruption in the first half of 2026, with Q4 already showing shipments falling faster than depletions due to deliberate moderation.

Mexico’s quarter softens as company avoids deep discounts

Despite strong full‑year trends, Mexico volumes fell 10.3% in Q4 and depletions declined 7.1% versus the prior year. The company attributed most of the weakness to the exit from the b:oost brand and its decision to shun deep discounting, suggesting the quarterly dip reflects strategic choices rather than an underlying collapse in demand.

Category-wide discounting pressures tequila pricing

Management flagged intense competitive discounting across the tequila category, which drove an approximate 9.2% price decline industry-wide. While Becle’s own price erosion was more limited at 5.1%, the overall environment created near-term volume headwinds and underscored the challenge of balancing share, profitability and brand positioning.

Higher tax rate dilutes net income gains

Net income was supported by a MXN 148 million FX gain, but the benefit was partially offset by a retroactive increase in the full‑year effective tax rate to 27%. The higher tax burden weighed on reported bottom‑line performance, complicating the year-on-year comparison even as operational profitability improved.

Guidance signals a transitional 2026 with softer sales

For 2026, Becle framed the year as a transition as it realigns U.S. distribution and navigates a tough macro backdrop, guiding to a low single‑digit net sales decline on a constant‑currency basis. The company plans A&P spending of 19–21% of net sales and capex of $90–$110 million, expects shipment volatility and limited visibility, and reiterated a balanced capital allocation between reinvestment and shareholder returns.

Becle’s earnings call portrayed a company in solid financial shape but bracing for a consolidation phase after years of strong growth and premiumization. For investors, the key takeaway is that margins, cash flow and brand health look robust, yet 2026 will likely test the stock’s patience as management executes its U.S. reset and works through a softer revenue environment.