Alsea, S.A.B. de C.V. (ALSSF) Q2 2023 Earnings Call Transcript

Alsea, S.A.B. de C.V. (OTCPK:ALSSF) Q2 2023 Earnings Call Transcript July 27, 2023 10:00 AM ET

Company Participants

Nicolás Espinoza Meneses – IR

Armando Torrado – CFO

Rafael Contreras – CEO

Conference Call Participants

Sergio Matsumoto – Citigroup

Camila Azevedo – UBS

Antonio Hernandez – Barclays

Joaquin Ley – Itaú

Felipe Cassimiro – Bradesco BBI

Bernardo Gonzalez – Sura IM

Jorge Izquierdo – BTG Pactual

Nicolás Espinoza Meneses

Good morning, everyone. And welcome to Alsea’s Second Quarter 2023 Earnings Video Conference. Today, our Chief Financial Officer, Armando Torrado; and our Chief Executive Officer; Rafael Contreras, will be presenting the quarter results.

Now I would like to hand it over to Armando for his initial remarks. Please, Armando go ahead.

Armando Torrado

Thank you, Nicolás. Good morning, everyone, and thank you for joining our second quarter 2023 earnings video conference. I’m very excited today to share our results, a regional and brand performance and some insights on our ESG achievements. In the second quarter, we experienced a constantly and strong sales across all the company brands. This is a result of our strategic long-term plan to continue to generate value for our shareholders. We are pleased to announce a 12% year-over-year increase in total sales, amounting to MXN18.9 billion post IFRS 16 and [MXN.99] increase excluding the impact of a stronger peso. Despite a sequential increase in the comparable base, same-store sales showed an impressive growth of 18.6 year-over-year. EBITDA pre-IFRS increased by 15% amounting to MXN2.5 billion for the quarter, with a margin of 13.7%. Post-IFRS EBITDA increased by 6% to MXN3.6 billion for the quarter with a margin of 20.3%. This quarter’s results and reflects a strong demand for our brands and the company’s high profitability, driven by positive consumer behavior and supported by our strong business model. We served over 12.3 million orders by home delivery this quarter, reaching MXN3.2 billion, representing a 12.8% increase compared to the second quarter of 2022. Home delivery sales accounted now for 17.1% of our total sales.

Regarding our brands, Starbucks. Starbucks reported an impressive year-over-year same-store sales growth in Mexico of 25.2% while in Europe, 15.3% and South America, 42.8%. Excluding Argentina, the percentage was 11.8%. Regarding Domino’s Pizza, sales were up in Spain and Mexico, 7.8% and 5.2%, respectively. We are pleased to announce that they were recognized — we were well recognized in our two biggest markets, Mexico and Spain, with a Gold Franny Award, the most prestigious honor bestowed on Domino’s franchisee owner. The award is based on several key factors, including operational outage scores, community involvement, store safety and security. Domino’s International, as you know, entered into an agreement with Uber. It’s [indiscernible] to enhance our delivery service, especially in Mexico and Spain, while gaining deeper insights into our customers. In Mexico, our successful commercial strategy to increase participation at the carryout segment resulted in a remarkable 19% sales increase compared to the year before in this prestigious channel. Regarding Burger King, we reported another positive quarter — positive increase in Mexico and Spain of 9.5% and 3.1% respectively. During this period in Mexico, it is important to say that our digital kiosk implementation is being very successful with a 17% increase in average ticket. We will be implementing this channel of our digital kiosks in all our brands in all our stores in the next quarters.

Regarding Vips, Mexico continued with strong second quarter same-store sales up to 7.5% year-over-year. Orders were up 8.1%. Vips remain to be focused on improving in-store overall experience. Also in [Spain], we reported a strong second quarter sales increase of 12.8% versus last year. In Mexico, we continue with our [revitalization] efforts to the brand with an additional of 10 remodel restaurants year-to-date with a target up to 40% by the year end, which resulted in sale improvements around 15%. The brand recently launching its communication platform [indiscernible] [Casa] with the aim to prove guests with a unique experience in a home environment, offering familiar, closed, warm and personalized [attention], taking care of every detail creating great moments in each visit. Likewise, the brand resumed its presence in television, which has brought an increase in sales in the week 29. Our global casual dining segment also had a solid quarter with a same-store sales of 10.2% and orders growing 5.6% versus the second quarter of 2022. Continue with our expansion strategy, I am delighted to announce a significant milestone, the opening of the first Starbucks store in Paraguay, making the brand’s debuted in the country. As we move forward, we will carefully evaluate each new potential location to ensure the profitability of our establishments.

In line with our digital transformation strategy, our digital sales, which include e-commerce, aggregators and loyalty, grew 21.4% versus last year, reaching MXN4.7 billion at the end of the second quarter 2023. This represents a 28% share of the total sales. Domino’s achieved with a remarkable 40.2% penetration of digital sales and Starbucks, which sets a remarkable growth of 48.1% compared to the last year. Starbucks Rewards program Stars for Everyone, was — we did a soft launching in Spain and Portugal in this quarter. More than 170,000 new members joined the program since we launched it. Spain, France and Portugal, Portugal have a tender of 12%, 11% and 10%, respectively. In Mexico, the Starbucks Rewards tender was a 28%. We expect to grow the tender in the Europe in the coming quarters. Regarding ESG.

Finally, I would like to give you a quick overview of what has been going on in the company. In Europe, we highlight Domino’s Pizza effort in Spain to transition from regular delivery fleet to electric vehicles, having already modified 13% of our fleet with a goal of reaching 30% by 2026. Additionally, the installation of solar panels in three out of our four factories that we have in Spain and also in other four freestanding stores, resulting in a 20.27 reduction of CO2 emissions for the factories. In Mexico, Alsea and its brands through Va por Mi Cuenta [indiscernible] Fundación Alsea, delivered five vehicles, two with a capacity of 5 tons and three with 1.5 tons benefit five Food Banks of BAMX Network, increasing the association capacity to combat hunger among [indiscernible] populations. In Mexico also, we have 1,188 units powered by a clean and renewable energy consuming 81 GWH, which represents 69% of our [consummation] in the country, thereby, reducing the impact of Scope 2 emissions. Also, during this quarter, we certified 23 Starbucks Greener stores, bringing the global total to 42, embracing the Starbucks’ Greener store framework. The equipment in these Greener stores increased efficiency, leading to a reduction in water consumption by 15%, energy consumption by 28% and carbon emission by 4% compared to normal regular stores.

So I would like to — thanks to our — all our team for a strong number in the first quarter. I’m pleased to report that we are running ahead of our guidance so far. We will see how the rest of the years unfolds. Well, based on the current information I am upbeat about the outlook going forward. The consumption in Mexico is strong, the summer season in Europe is looking promising, cost pressures have been eased in most of our regions, operating leverage is being benefiting us and our team has been executing exceptionally well our commercial strategies. Now I will pass the voice to Rafael, so he can give you a more detailed overview of our brands, regions, results and balance sheet items. Thank you very much.

Rafael Contreras

Thank you, Armando. Good morning, everyone. We were pleased with the performance pre-IFRS 16 numbers also. Quarterly sales increased 10.9% on a pre-IFRS 16 basis year-over-year. Costs were up 45 basis points versus last year and adjusted EBITDA was up 15% to MXN2.5 billion. Looking to regions. In Mexico, sales were up 17.6% to MXN9.8 billion and adjusted EBITDA was up 23.1% to MXN2.3 billion. This improvement was driven by digital innovations, new menu offering and the continuous improvement in the retention of key talent, decreasing 2.9 percentage points in the turnover rate of the [country] compared to the same period of the last year. Also, sales growth helped us to improve our operating leverage and the cost was benefited from the appreciation of the Mexican peso, resulting in a cost reduction of 100 basis points. In Europe, sales were up 4.4% to MXN6.6 billion and adjusted EBITDA was down 5.1% pre-IFRS 16 to MXN866 million. However, when excluding the effect of foreign exchange fluctuations, sales grew by 15.7%. The increase in sales was driven by the normalization of consumption in the region, digital strategies implemented and product innovation. The contraction in the EBITDA was mainly due to the impact of the raw material and energy costs year-over-year as well as the rise in minimum wage, partially offset by [responsibly] price increases, cost control and value strategies.

South America posted a strong 49% increase in same-store sales for the quarter with adjusted pre-IFRS 16 EBITDA increasing 13.2% to MXN526 million. The results in this region are mainly related to the inflationary impact in Argentina as well as responsible pricing strategies and product innovation. Our net income pre-IFRS 16 for the second quarter increased 89.7% to MXN475 million year-over-year. This result comes from a very strong EBITDA generation and a benefit of the exchange rate variation. In the second quarter of the year, we achieved pre-IFRS 16 earnings per share of MXN2.74 and including IFRS 16 earnings per share rose to MXN2.37. In terms of our investments, the total CapEx for the second quarter amounted at MXN1.7 billion. We allocated 39% of this amount to maintenance, 45% to store openings and remodeling and 16% for the strategic projects. In the quarter, we paid MXN44 million of net amortizations. Our pre-IFRS gross debt increased MXN3.1 billion year-over-year, closing at MXN25.5 billion at the end of the quarter. This reduction in debt corresponds mainly to the devaluation of the euro against the Mexican peso and the debt amortization during the period. Our pre-IFRS 16 gross debt-to-EBITDA ratio at the end of the quarter was 2.7 times versus a covenant of 4.9 times and EBITDA to interest paid at 3.2 times. Net debt-to-EBITDA 2.2 times with a cash position of MXN4.3 billion. The debt structure at the end of the quarter was 63% on fixed rate and 37% variable, also 87% long term with 64% in Mexican pesos and 36% in euros, and we reached a return on equity of 25%.

We can go to Q&A, please.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Mr. Sergio Matsumoto from Citigroup.

Sergio Matsumoto

Could you comment more on the employee retention plan that you implemented, announced in Alsea this year? It looks like you’re gaining quite a bit of traction with, with [front-line] employees, you mentioned maturing training better. If you could give us more color on that. And is there more that we can expect from this program, perhaps on technology and automation that’s part of that. And also, if you can comment on the store managers’ compensation that may help improve productivity.

Armando Torrado

I mean what we are going to — I briefly hear you when you talk about the retention plans that we are doing, right? What are we doing regarding the retention plans, and I’ve been very, very focused on that. Actually, we are very pleased in record numbers in Mexico regarding turnovers. We are working hard in Spain to do so. But we did some major things, where focus is in the people from zero to 90 days. The people that are here most and passed — that surpassed the 90 days target, they stay longer. So we are already working very hard and retain all those peoples in our program. Of course, we do some adjustments, salary adjustments. That is also with the ESG program in two of our brands regarding salaries. Other, we are focusing in critical zones, critical regions, especially in Mexico, we have four states where labor is starting to get — it’s been complicated regions that the labor is growing [fastly], it’s complicated to get those hands. So we are focused in there. We are also having a really good robust selection plan also working with AI, I will tell you. We’ve been having that platform of hiring with AI since last year, it’s working very good for us because we — in Mexico, just in Mexico, we hired more than 2,000 people a month, so that is working fine. And also, why not, I mean, develop process of promotions with internal up signing our people. And then the other one, as you know, Alsea has a [indiscernible] new program and [indiscernible] program that it’s been working in two or three years. So that’s also giving us a good response of having the best managers and the best staff in our stores.

Sergio Matsumoto

Just if I may clarify, those are four states with more shortage. Is that fair to assume they’re up north in Mexico?

Armando Torrado

Yes, it’s Nuevo León. For sure, it’s Queretaro, we have in Quintana Roo, those three states. And we still — we’ve seen some problems also in [Bajio] [indiscernible] shorting, we are looking — there is shortage of people in especially in Nuevo León, that is a little bit the biggest one that we are [indiscernible].

Operator

Our next question is from Ms. Camila Azevedo from UBS.

Camila Azevedo

Gentlemen, thank you for this place for questions and congratulations on the results. I have two from my side, the first for Armando. So could you comment about the commercial initiatives implemented at Vips Mexico, and which were the impacts on traffic? And the second for Rafa. So considering the strength of the Mexican peso and your debt denominated in euro. Is there any chance you can take advantage of this, swapping or hedging the debt perhaps?

Armando Torrado

I will let Rafa start…

Rafael Contreras

Well, in terms of the credit that we have in euros, we don’t have a hedge because we have a natural hedge with the areas that we have in Europe. And in Mexico, we did hedge when we issued the US bond. So really with the FX that we have right now, we can do anything to have a better rate in terms of the cost of debt.

Armando Torrado

And regarding the strategy in Vips since we started in last December, we run — we were losing traffic in that specific brand versus 2019. Mobility was a big concern and that family restaurant segment is really moved by mobility. So what we did in January, February, March is actually do a very aggressive strategy in, I would say, in price, but also involve innovation process. We look at what was working, what was the product that has originally for us, we look at the receipts. We focus in the quality of what we were selling given attractive menu during the weekdays. So we did that from January to March with a long, well executed strategy that give us traffic and momentum. And right now, we went again with Los Clasicos and another promotion that is just working well. As I told you, the brand was back in national TV. We’ve been having two or three record weeks the last week, the best week they ever had in Vips, so we are very pleased with that. Margins are strong going back to 2019 and there’s a lot of things well and good momentum to come in that brand regarding — especially in innovation. That’s why we want to make a transformation there. We are pleased that we’re going to remodel 40 stores, these 40 restaurants that’s a big milestone for us. We are already up to 12 more or less year-year-to-date. And we’ve seen an increase of sales when we do our remodelations of 15%. So that’s why — that’s a little bit our comment in why the results are strong in this brand.

Operator

Our next question is from Mr. Antonio Hernandez from Barclays.

Antonio Hernández

Regarding Europe, I don’t know if you could provide more light on your expectations there. And also — I mean you mentioned strong summer season but now, I mean, for the last part of the year, your expectations there, both in terms of sales and profitability and how much is a warm weather in that zone, in that region, also impacting both sales and margins because of energy?

Armando Torrado

Antonio, as I mentioned, yes, it’s been strong. The first four weeks of July, we are up 12%. So above — way above the second quarter that is Europe unit report. So it’s been a great steady, especially in the tourism places. We also, in the tourism places, Starbucks, and we have restaurants, we’ve seen a good momentum and increase. I mean we have still way more to go because you know [indiscernible] [Agos] there is stronger. So we are looking. There is — regarding the heat waves that have been coming for our business the cold beverage moved and that is a strong profitability product. Now we moved just in Mexico for 42% to 46% in those two weeks, so that gives us a good momentum. We have the same impact in Europe. As you know and I mentioned with some third parties, we did an analysis on a strategic price and strategic analytics. So we are — right now in place, especially in Europe in some of the summer places of vacation, having a differentiation in price that is giving us a better result in margins. And then regarding energy, as you know, with the worst quarter that we report energy effects [Multiple Speakers] the third quarter of last year in Europe, things are way down in the price of electricity that we are paying. So the results from Europe, three quarter of this year regarding that one, it will be a lot stronger. And we are seeing a good momentum, raising prices in the products that really are affecting us like coffee, like cheese, like wheat and [indiscernible]. So that is a little bit what is happening. There is a good momentum in all the geography and with all the brand’s noise. So I am happy to announce that things look better than we thought and expected and especially [indiscernible] the second quarter or the first quarter in Europe.

Operator

Our next question is from Mr. Joaquin Ley from Itaú.

Joaquín Ley

Two questions, if I may. The first one, now that you’ve sold El Portón. So are you comfortable with the portfolio of brands that you have, or should we expect further rationalization, right? And along that question, what have you learned from the acquisition of El Portón regarding potential future M&A, okay? And the second question goes to Europe energy. So could you elaborate a bit more on the sequential behavior of energy prices that you’re seeing for your operation in Europe, and are you thinking again about potentially hedging at the prices that you’ll see for the second half for 2024?

Armando Torrado

Do you want to comment Rafa on energy?

Rafael Contreras

Well, in terms of energy, the cost of energy in the first quarter was in average EUR97 per megawatt and in this second quarter, it was EUR95 per megawatt. What we are expecting is that the cost goes down for the second semester. The special guys told us that it can be better next year, and we can expect around EUR60 per megawatt. And I think — we think that, that can be a good cost to have a hedge on a long term contract with somebody.

Armando Torrado

Also, just to mention that, Joaquin, and just going to your second — to first on your second question. There is a big impact there, renewable energies in Europe are really coming back. There is going to — there are some big projects of renewable energy. We are seeing to have the whole amount to go to close a deal with some other guys. We’re already talking to that. So I think we’re going to stand by now to see what is the future and not signing anything. Thank you for your question, that was a very good one. I mean, regarding, first of all, the portfolio. I think we still have some other units that you can see that we have been not growing those units and those brands and some regions, we’re going to try to exit that. And we’ve been trying already since the last probably one year that I saw you and that I took position. I was very clear that we’re going to focus in the brand that makes us really remarkable, different, but still, our casual business division of the whole is being very profitable, it’s growing in traffic, it’s growing in sales. And they are four wall EBITDA, above 20%, so they are doing well. Even though there’s two, three brands there in our portfolio that are already in the process and they are already in the market with some special people to seek for a sale, so that is a fact.

And regarding what are we learning? That’s a lot of learnings. If we don’t have critical mass, we have to decide where to — where and where to play the game. And El Portón, it’s a great brand, was a great product for us since the beginning when we bought 10 years ago from Walmart, that was a second brand in the portfolio. Vips was the first one always. And if you go to — we have a lot of combos where sales of those combos — Vips did 100,000 and the other one did 40,000. And so that was always back to the store and back to the door of Vips. So that was never a brand actually, we never opened since we started, we never opened a new Portón. We opened another kind of segment, Corazón de Barro, [La Finka], but we never saw that, that brand had a growing path to focusing. So I think that now not having in the portfolio is a good news for us. So we can focus in the brands and in the strategy or long term strategy that I’ve been talking in this table.

Operator

Our next question is from Mr. [Fernando Herrera] from Compass Group.

Unidentified Analyst

First of all, congrats on the results. Just two questions. The first one is related to margins in Mexico. In EBITDA pre-IFRS, we have seen an expansion in margins maybe due to raw materials like coffee and cheese. But I just want to understand what’s going on with EBITDA post IFRS because we’re seeing a contraction there?

Rafael Contreras

In EBITDA post IFRS, we have some — the increase in sales in many of our brands, but mainly in Starbucks. We have this variable rents higher than last year, so that’s the main impact. If you see — we open the rents on our report and you can see the impact of 1 point because of the variable rents that we are paying and the variable rent we doesn’t take out of the IFRS 16 expenses.

Unidentified Analyst

And second question it’s related to Starbucks. What are you seeing in terms of drive-thru model?

Armando Torrado

Well, in drive-thrus, actually, like I said, the most of our portfolio, there is a big amount of percentage of drive-thrus open this year. Last year too [Multiple Speakers] 50%. So that also is giving us the amount to average weekly unit sales that we have because the average also an investment is bigger, but the average of that channel is around 2 times the regular stores with better margins also because we’ve been able to have better proposals in rents, site selection. Those stores are mainly in highways, [carreteras] and that is being very [proven]. We are also opening our first drive-thru in France this year and in Spain this year, and we will continue with our strategy that is being very way good profitably for the brand and for the sale. So that is going to be still a momentum to focus and a channel that we are all very [interested] to still develop.

Operator

Our next question is from Mr. Felipe Cassimiro from Bradesco BBI.

Felipe Cassimiro

Just I wanted to dig deeper into the competitive landscape in the fast food segment, that is one of the underperforming segments in Mexico, right, alongside casual dining. But mostly on pizza segment, how is the competitive landscape with Little Caesars and how are you dealing with the pressure from this more aggressive player? And if we could dig deeper also in Burger King performance in Mexico as well, that could be very helpful?

Armando Torrado

Let me tell a little bit. What are we doing here to gain more share of wallet against, not only Little Caesars against all our competitors and why — how that resolves that. I mean same-store sales had, of course, a comparable tougher base for other brands, especially in delivery that 2022 was stronger. However, you saw that there is a same-store sale growth of around 5.2% this quarter. That’s a lot higher than the other quarters. And there we’re expecting, again, to boost them in the upcoming quarters with a different strategy that we are focused. We implement an attractive, very attractive promotion in the carryout segment. One that it’s been in the market probably 10 weeks now, that is — pizzas are MXN149 and we have some other stores like 175 stores with 129 large pizza. So now we are seeing our segment growing, like I said, 19%. So very focused in, first of all, that we are the owners, the leaders in the category, the number one in the [indiscernible] delivery. We are going against — to take out also the carryout business. I think that’s a very lucrative business that is — it’s very well in margins. We don’t do the delivery that we save a lot amount and we can offer a very good quality product there and differentiation of our competition. Our competitors, they do pizzas for carryout well with a different kind quality and sizes. And we do it to order and they order, they do it ready to roll. Those pizzas are already done versus the ones that we have, you order it and we’re doing customer [indiscernible].

So I think that, as you know, we are also switching to Domino’s Cloud application app that will be ready, hopefully, in this quarter and that will give us a high conversion rate also in service in the counter and also in delivery. So that is a little bit of the momentum that is going. We have 100 stores more than our second competitor. And we are growing a base of 50 to 80 stores this year in Mexico, the first time the franchisees opened more stores than us. So that’s a little bit of credibility that the brand and the momentum that we are doing that. Regarding Burger King, and when I addressed that in the report. Things are looking very well, and only that company increased their profits 3 times in the wholesale — in the semester from last year going into the decreasing cost almost 4 points, so that is a great momentum that the brand is doing. Also, like I told you that kiosks, the digital kiosks that we are starting to implement, I will say we are looking to an 18% increase in ticket average and around 22% conversion, people that go directly to the digital kiosks. We are doing our program of remodel the whole portfolio. In Argentina, it’s already at 70%, in Chile, it’s already 89%. We are starting to do it in Mexico with 10 stores that we’re going to remodel, so that is — I think we are leaving the best times for that brand, and I’m excited to report again, in this quarter, better numbers for that unit.

Operator

Our next question is from Mr. Bernardo Gonzalez from Sura IM.

Bernardo Gonzalez

Thank you for the space and congratulations on the results. My first question is regarding the certificados bursátiles are coming due in the short term. Is there any refinancing plans for them?

Rafael Contreras

The next certificados bursátiles that we are going to have it’s MXN1.3 billion in March next year, but we are going to work first is with the rate agencies. We think that with these numbers, we can have a better rate. And yes, I think we have two opportunities to refinance this certificados bursátiles to the market next year or with a bank credit. Also in Mexico, as you know, we only have [Bancomext], we don’t have any other bank credit. So we have a pretty good opportunity also to have a bank credit to refinance the [indiscernible] for next year.

Bernardo Gonzalez

And my second question is regarding the debt covenants, specifically the interest coverage. I saw that for this quarter, it was very close to the limit of 3 times. So if you can comment on that. I don’t know if — I mean, what could happen if you reach this level in the coming quarters?

Rafael Contreras

We don’t — in our projections, we don’t see that we can break the covenant, because the increase in EBITDA and also that 66% of our credits are fixed. So even though the increase in cost of the other 30% that is variable, we don’t see that we can break the covenants.

Operator

[Operator Instructions] Our next question is from Mr. Jorge Izquierdo from BTG Pactual.

Jorge Izquierdo

The first one has to do with the impressive results we saw on your global employee turnover rate, almost 2 percentage points of rate reduction. If you could share any color on the performance by region would be very helpful. And the second one is regarding home delivery. Why is it growing so fast, what is behind these dynamics? Thank you very much and congrats on the results.

Armando Torrado

I think in that turnover, we are only are reporting Mexico in the report, but I think we can give you — I don’t have exactly right now that. In Mexico, we did exactly second quarter 67.7% more or less. And then in the second quarter, we did 64%. So we are reducing, yes, the turnover by 2.5 points, percent on points. And in global, we were 73% and I think we are reporting around 68%. So we did also a reduction in turnover about 5.5 points. So I think that is globally. So I think also that is the important — the first question, that’s [indiscernible] me around what are we doing really in there, and that’s the five things very simple, but very aligned to our strategy of being the best employer of the channel, right, also in turnover. And so I think that is the greatest like somebody also asked me, the first thing we need to do is have the people and enhancing the stores as well as to give the better service and the better — and perform the traffic that we’re having in stores. So that’s taking care.

Regarding home delivery, it’s still strong. I mean there are some other players. I was — I’ve been having one-on-ones with our — with aggregators, companies with our — align aggregators for partnerships aggregators that we have. There is some other restaurants that are stepping down in the delivery. They are stepping down. They took that decision to go to delivery when this [pandemia] came on and they are not doing right, so they are not doing for the long term. So there is, I think, some other less players still in those platforms and we are one of those. We are — we have, as you know, a special area, the apartment here in Alsea that just do the home delivery besides the delivery that we do for Domino’s. So we have people and a team just every day, taking care of the platforms around the globe, how can we do better and attractive promotions and products and innovation products for delivery, taking care of the packaging, taking care of the times and of course, how we don’t have any errors in those orders. Most of the problems that come from that channel or one of the first things that the customers reclaim is exactly, I didn’t receive my product like he was and the time, and that we are an experts in that. So we are doing a very well focused in the order that is complete and in the time, it has to be delivered in the time that is.

Rafael Contreras

So also that something that helped us in the quarter is that the client can pay in cash right now, not only with a credit or debit card. So that increase also sales because of this.

Operator

[Operator Instructions]

Armando Torrado

Thank you very much for [Foreign Language] There’s one left. Okay. Let’s finish with…

Unidentified Analyst

Actually, what I wanted to understand a bit more is if you have any changes for the cash flow walk that you gave us during the Investor Day or anything regarding the share buyback plan that you have. So just trying to understand how the free cash flow should shape through year end.

Rafael Contreras

Really, in terms of the free cash flow for the whole year, we maintain our budget to have a positive free cash flow of around MXN200 million. As I mentioned with a CapEx of MXN5.5 billion and EBITDA of higher than 13%, we mentioned that the EBITDA can be around MXN10 billion. It can be a little bit better because of the performance that we have the first semester, but free cash flow will be positive for the full year.

Unidentified Analyst

And do you still expect to go with the share buyback plan that you had, if I’m not mistaken, it was MXN500 million?

Rafael Contreras

In terms of the buyback shares, we already did that the amount that we already can sell. If you — this year, we bought back MXN4.9 billion and we already canceled that. For this year, it was it and for the next year, we’ll see what we’re going to do in terms of dividend or something like that.

Operator

Our next question is from Mr. [Armando Heredia] from [Bancomext].

Unidentified Analyst

My question is based on the good results reported at the second quarter 2023, do you expect any upgrade in the ratings aside from Fitch and [indiscernible] ratings?

Rafael Contreras

As I mentioned, we’re going to start with the result of the second quarter. Yes, we expect a better rate with both of them, because one of the main concerns, it was the leverage ratio that we have now. As you saw, net debt EBITDA for IFRS 16 was 2.2 times right now. So it’s pretty good number, better than the projection that we had two years ago.

Operator

That was the last question. This concludes the Q&A session for today. I will now hand over to Mr. Armando Torrado for final comments. Please go ahead.

Armando Torrado

Thank you very much for attending our quarterly video conference. Thanks for the questions in the Q&A. And if you have any further questions like anywhere else, please be in touch with our Investor Relations team. And thanks for today and we hope to see you in October, and have a great day. Thank you.

Operator

Alsea would like to thank you for participating in today’s video conference. You may now disconnect.