Becle, S.A.B. de C.V. (OTCPK:BCCLF) Q3 2022 Results Conference Call October 28, 2022 10:00 AM ET
Company Participants
Juan Beckmann – CEO
Luis Félix – President and CEO of Proximo
Olga Limon – Managing Director, Mexico and LATAM
Gordon Dron – Managing Director, EMEA and APAC
Fernando Suárez – Chief Financial Officer
Victor Chavez – VP, Commercial Strategy, Proximo
Conference Call Participants
Felipe Ucros – Scotiabank
Alan Alanis – Santander
Ben Theurer – Barclays
Ricardo Alves – Morgan Stanley
Drew Levine – J.P. Morgan
Fernando Olvera – Bank of America
Operator
Good morning. And thank you for joining Becle’s Third Quarter Unaudited Financial Results Call. During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies, and maybe identified by the use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, goals, target, strategy, and similar terms and phrases and may include references and assumptions. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements. For all the foregoing reasons, you are cautioned against relying on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with international financial reporting standards or IFRS and published in the Mexican Stock Exchange. The information for the third quarter of 2022 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. At this time, we would like to remind participants that your lines will be in listen only mode until the question-and-answer session.
Now I will pass the call on to Becle’s CEO, Mr. Juan Domingo Beckmann.
Juan Beckmann
Good morning, and thank you for joining us today as we discuss Becle’s third quarter 2022 results. Our regions posted solid numbers and a portfolio proof wants more to be resilient against macroeconomic challenges, such as inflationary pressures and continued supply chain constraints. Despite these, underlying demand for brands remain strong, allowing us to capitalize on market opportunities across regions and continue to build a better and more resilient organization. Looking at overall results for the quarter. Total volume and net sales grew by 5% and 20% year-over-year respectively. We saw the full effect of our price increases play out in regions that were particularly affected by cost inflationary pressures, and we were pleased that they were well received by the market. Our depletions and inventory levels demonstrate a stronger and non affected demand. As of today, we have not seen any signs of trade down. And we are reassured by our portfolio step of options and price points for consumers.
In the US and Canada region, volume was down versus third quarter of 2021 due to a decrease in the nonalcoholic and ready-to-drink categories, which were primarily affected by the quickly growing and high competitive environment in the space, the post pandemic resurgence of on premise demand and a tough year-over-year comparison basis. However, our tequila portfolio is overperforming the category per Nielsen data. Results for Mexico and LATAM for the quarter were very positive to a persistent growth in tequila, along with our well executed premiumization strategy. On-premise sales continue to show off strong results, and small COVID restrictions were lifted while off-premise sales also showed up good momentum. These results demonstrate our enduring leadership in the region and resilient demand for all our brands. Our strong results in the EMEA and APAC regions are attributed to growth in on-premise sales, increasing tequila adoption and our premiumization strategy, which also played a key role in driving a double digit increase in net sales value, allowing us to outperform our peers in key markets. These results came despite high inflationary environment and continued COVID restrictions, especially in China, suggesting a strong demand for our brands in the region. We are pleased with our brands’ performance and our overall results. Our premiumization strategy continues to be a key driver of growth and has allowed us to successfully manage emerging headwinds. As a result, we were able to continue delivering sustainable value growth for our shareholders and remain confident in our brands’ underlying demand to help us thrive in the face of macroeconomic challenges.
I will now turn the call over to Luis Félix to discuss our US and Canada results in detail.
Luis Félix
Thank you, Juan, and good morning, everyone. We are excited to share our commercial performance in the United States and Canada for the third quarter and year-to-date 2022. In the third quarter, net sales value increased 14% year-over-year despite a 1% contraction in shipped volumes. We estimate that without disruption cost by Hurricane Ian proforma volume on the quarter-to-quarter would have been flat. These decrease in shipments volume was due to a 15% year-on-year declining in our ready to drink Margarita and non-alcoholic Margarita Mix offerings. These offset the strong growth on our full strength spirits portfolio, which increased 8% in the third quarter and drove our overall solid top line results. The RTD and Margarita Mix categories have faced difficult conditions due to the robust reopening of the on-premise channel and a highly competitive and dynamic prepared cocktail category, driven by continuous growth of canned options and new agave wine introductions. We’re undertaken a strategy to support our RTD offerings by addressing 2022’s challenges and looking through innovation and investments within the category. We will carry these jointly with the strategic actions in our tequila and whiskey portfolios. So simultaneously it strengthened our overall spirits portfolio and restored our position in the prepared cocktail category.
On year-to-date basis net sales value grew 8% despite a 4% shipment volume contraction, both compared to the same period of 2021. Year-to-date shipments were also primarily impacted by the ready to drink Margarita and non-alcoholic Margarita Mix offerings, which decreased by 17%. Shipments for the [full strength] spirits portfolio grew 6% over the same period, and our tequila portfolio shipments were up 7%. Our net sales increase demonstrated the successful execution and positive impact of our premiumization strategy, which accounted for 75% of [NSP] gains, as well as the positive effect of our April and May 2022 price increase on most SKUs within our [full strength] portfolio, which accounted for 25% of the gains. Excluding the prepared cocktail malt based and non-alcoholic portfolios from the Nielsen data, our Nielsen takeaway for the 13 and 26 week periods ended October 8, 2022 were up 3.8% and 2.3% respectively on volume and up 10.6% and 8.1% respectively on value. This compares to an equivalent industry volume contraction of 2.4% and 3.4% for the 13 and 26 week period, respectively, with no changing value for the 13 week period and minus 1.3 decrease in value for the 26 period. As this numbers show, we does continued to gain share in these categories. Including all categories, our Nielsen takeaway for the 13 and 26 week periods ended October 8, 2022 were down 3.2% and 5.9% respectively on volume but up 5% and 2.1% respectively on value. This compared to an industry gain volume of 6% and 4.8% respectively and a 3.4% and 1.1% increase in value for the same periods. This demonstrates the meaningful impact of prepared cocktails, malt base and non-alcoholics in the overall industry figures.
US and Canada wholesaler depletions were down 1% in both the third quarter and the year to date. Our tequila portfolio depletions were up 5% for the quarter with all of our brands showing growth. Our super premium tequila brands grew 13% for the quarter. On a year to date basis, our tequila depletion posted an 8% expansion with our super premium offering scoring by for 14%. For both the 13 and 26 week periods ended October 8, 2022, our tequila portfolio growth in the off premise outpaced the overall category volume growth of 3.7% and 3% respectively as measured by Nielsen. Our tequila portfolio continue to perform exceptionally well, further demonstrating the successful execution on our strategic initiatives and corporate priorities. Moving on to our marketing activities. We continue to support our portfolio with strong AMP spending during the third quarter and year to date periods. We look forward to taking advantage of our strategic opportunities for our super and ultra premium tequila brands to be provided by greater AMP spending in the fourth quarter, reaffirming our commitment to strengthening our brand.
And now I will turn the call over to Olga Limon to discuss Mexico and Latin America results.
Olga Limon
Thank you Luis, and good morning, everyone. We are pleased with Mexico and LATAM results for this quarter. On premise sales extended with all of our markets now open for business, while at the same time off premise sales still grew. We also continue to successfully implement our price and product mix strategy led by our premium tequila portfolio. This quarter’s resilient results came notwithstanding continued supply chain constraints and delays, which were especially pronounced in the LATAM region. Despite inflationary and cost moving pressures, overall depletions remain strong, demonstrating the resilient demand for our brand. In Mexico, volume for the quarter increased year over year with net sales increasing by 27% for the same period. Demand remains strong but we have been limited by supply constraints and delays on availability. Additionally, the premiumization strategy continues to drive profitability as we notice sustained consumption for high value brands. The Latin America region faced a tough comparison base versus the same quarter of last year, coupled with macroeconomic and supply chain challenges. However many markets within the region posted growth. The tequila category has proven momentum across demographics and age groups, as well as versatility in consumption occasions. Therefore, we continue to be optimistic about the region’s underlying demand for our diverse brand portfolio and the benefits of our successful premiumization strategy.
I will now turn the call over to Gordon Dron, Managing Director of EMEA and APAC Region.
Gordon Dron
Many Thanks, Olga, and good afternoon from Europe. The third quarter has produced another set of strong results across the region. EMEA and the global travel retail channels have benefited from the consumer demand, boosted by the warm weather and the increased number of tourists. Asia Pacific except for China reopened during the quarter, leading to a strong pickup in demand as had been seen when Europe opened. Third quarter results demonstrate excellent growth versus the previous year. EMEA and APAC grew by 44% and 36% in volume versus last year, respectively, with value growing 38% and 44% respectively. Year-to-date, the EMEA business results have shown strong growth with volume up by 56% and net sales up 54% versus last year. The easing of restrictions in Asia except for China is kickstarting consumer demand in the on premise. The on premise is playing a significant role for our tequila portfolio, and is essential to our premiumization strategy in APAC region. As the business has reopened, we see increased depletion trends with year-to-date depletions up 28% versus last year and net sales value plus 36%. Shipments remain strong as well, growing 38% versus last year. Tequila shipments continue to accelerate versus 2021, Cuervo growing by 51% year-to-date versus last year and premium tequila by 131% with net sales growing even faster in both cases. All our tequila brands have performed strongly and the premium tequila brands showing exceptionally strong growth as we extend distribution and focus on our refreshment strategy. Our own route to markets continue to perform strongly. All our IMCs, except for China, which is down due to the heavy COVID mobility restrictions, are performing very well with double digit growth across the portfolio.
I will now pass you over to Fernando Suárez, who will take you through the financial results.
Fernando Suárez
Thank you, and good morning everyone. Let me walk you through the third quarter financial results. Consolidated net sales for the company increased 20%, reaching MXN11.5 billion. This increase and our strong 64% growth in total revenue since the third quarter 2019 speaks to the company’s successful premiumization strategy with a product mix skewed towards brands with higher sales per case in addition to year-over-year price increases. These results also reflect our consistent brand building efforts and investments in our business. In the third quarter, gross profit increased 23% to MXN6.2 billion while gross margin increased 1.2 percentage points to 54.1% year-over-year. These results come despite significant cost inflation and supply chain disruptions, an unfavorable geographic mix and higher non-agave related input costs. However, our product mix strategy, price increases across the region and a steady agave market pricing environment more than offset those headwinds. Year-over-year AMP expenses as a percentage of net sales slightly decreased, coming in at 19.2% compared to 19.7% in the third quarter of 2021. This decrease is largely reflective of the timing of AMP spend as we have not yet exhausted the 2022 budget, which we expect to catch up by year end. Distribution expenses stayed flat at MXN534 million. As a percentage of net sales, distribution expenses decreased to 4.6% from 5.6% in the third quarter of 2021, mainly driven by a reduction in logistics and carrier costs. SG&A expenses increased 15% year-over-year, representing 8% of net sales compared to 8.3% in the third quarter of 2021. This decrease was primarily driven by strict cost control measures.
Operating income increased 36% while operating margin expanded to 22.5% from 19.9% in the third quarter of 2021. EBITDA increased 33% year-over-year to MXN2.8 billion with an EBITDA margin of 24.4%.
Net financial results for the quarter were a loss of MXN173 million, mainly caused by higher net interest expenses versus the same period of the previous year. Consolidated net income increased 29% to MXN1.7 billion and net margin was 14.9% compared to 13.9% in the third quarter of 2021. Earnings per share were MXN0.48 for the quarter. As of September 30, 2022, cash and cash equivalents were MXN5.8 billion and total that was MXN18.6 billion. As announced in the company’s capital allocation program during the annual general ordinary shareholders’ meeting held on April 29th of this year, our cash dividend payment was made on August 4th for the amount of MXN0.42051 for each outstanding share, representing Becle’s capital stock. We are refining guidance towards a net sales value, [one] in which we estimate full year consolidated net sales value growth in the mid teens. For full year CapEx, we stick to our range of $225 million and $275 million. In sum, we hope these quarterly results are further evidence of our long term strategy and commitment to creating value for our shareholders.
I will now turn the call back over to the operator for questions and answers.
Question-and-Answer Session
Operator
[Operator Instructions] So our first question comes from Felipe Ucros from Scotiabank.
Felipe Ucros
Maybe I’ll start with one on distribution expenses, which I found had a trend that was very different, especially on the commentary from everything else we’ve seen from computers and the food and beverage sector. You mentioned logistics and carrier expenses coming down and it’s different from what we’ve seen with inflation going on throughout the world. So just wanted to ask you about how you managed to control these distribution expenses and what’s going on in those line items?
Juan Beckmann
Specifically, for distribution costs? Yes, we’ve seen an improvement in carrier and logistic costs. In the US specifically, we’ve undertaking various efficiency projects that have yielded good results in terms of our cost control in the US specifically.
Felipe Ucros
And then maybe I had another question on rest of the world. So obviously fantastic results. I think the average growth rate that I calculated for the last six quarters is more than 50% on a year-on-year basis. So clearly, the segment is growing very impressively. At the same time, it’s been the on-premise reopening. So maybe a question there on how much of that you think is rebuilding the inventory and how much is actually driven by end consumer demand.
Gordon Dron
I think, that’s a game of two parts really, but certainly in the early part of the reopening, which took place much earlier in this year within EMEA, we did have a supply chain refill. And there was also a pipeline refill within the travel retail sector, which is also reported in our results. But in the second half, we have very much seen a significant growth of tequila consumption. We monitor this through various trackers and we can see that the usage of tequila is growing and the frequency of tequila consumption is growing. So I think there are definitely two elements to our very positive growth.
Felipe Ucros
And maybe if I can do a last one. On glass, obviously, you guys have had some supply constraints and you have to make some decisions on prioritizing certain categories over others. At the same time, we also knew that tequila mixers, for example, were coming from a very, very strong high. So there’s kind of a mix of two forces there. One is it obviously the comparables are very hard, but on the other hand you’re kind of prioritizing the higher value products. Just wonder what you think we should expect as the glass supply issues kind of normalize for those categories?
Juan Beckmann
On glass, we have been noting in recent quarters and basically since last year, we’ve been under pressure on glass. However, we’ve been working with different glass suppliers and expanding the number of suppliers, and obtaining commitments for glass to secure production. We continue to work on that front with glass. It continues to be an issue but we’re working towards obtaining commitments. And regarding glass allocation within the company, in general, SKUs compete for profitability. So we allocate accordingly based on profitability. And the most profitable brands usually get their allocation first, that’s how we go about rationalizing or directing glass.
Operator
Our next question comes from Alan Alanis from Santander.
Alan Alanis
Thank you so much for taking my question and congratulations on the results. Very impressive. A couple of questions. One for on Domingo regarding marketing, particularly of the super premium category, the United States, you’re getting traction and success on those initiatives. What are you doing different this time in terms of the super premium category? How do you want to position your brand here in the United States? And the second question has to do with agave prices. You’re mentioning steady agave prices. What’s the outlook that you’re seeing for agave prices going forward?
Juan Beckmann
Agave prices, they’re steady and really we don’t know when are they going to come down, but it’s difficult to tell. Every time I think they’re coming down, they don’t come down. So I really don’t want to, because the demand is so high that probably that’s part of the problem. I don’t know. Regarding marketing, so I think that we have a — well, first the company is focusing more on in marketing the super ultra premium. And I think we have a much better team that it’s creating better marketing plans and they are being executed quite well, and it takes time. But now we are seeing traction in the US of our super ultra premium brands. And I think we are on the right track, the growth rates are quite good. And I think the upside is also big if we continue with this quality of plans, I believe that the brands will continue growing as they are now.
Alan Pena
And this is mainly driven by [Milo Tasentos] or it’s the whole portfolio of super premium brands?
Juan Beckmann
If you want, I’ll let Luis Félix answer that.
Luis Félix
What we’re seeing is that the entire portfolio of the super premium and above our growing, and are growing at a double digit pace. So it’s not just one brand, I think it’s a concentration. It’s internal focus on building these categories and from a sales force standpoint, and also working with our distributors to make sure that we have the attention that we need.
Alan Alanis
And if I may, one last question, regarding mezcal. I mean, I know it’s a very small portion of the portfolio, but growing very fast. What is the priority or the vision with mezcal and the [provision] or positioning cuatrocientos conejos or cliente as the undisputable leader in the ultra premium mezcal in the United States?
Luis Félix
Mezcal is — as you mentioned, it’s a small category, but it’s growing and it’s premium. So that’s why we are also interested in building a mezcal category. So yes, we do have cuatrocientos conejos and cliente growing at a very significant digit double growth in the US. And that’s basically built, because in Mexico, as you know, cuatrocientos conejos is the leader of the category with more than 30% market share. So we have a tremendous opportunity by bringing this mezcal into the US.
Operator
Our next question comes from Ben Theurer from Barclays.
Ben Theurer
First question — actually, Fernando, thank you very much for sharing the guidance on sales growth. Can we maybe go a little bit into the details? I mean, obviously, there’s a lot of moving pieces to it. But it feels like with the pace we have in the first nine months that you assume some sort of a deceleration of the growth rates into 4Q. But I remember on previous calls, we’ve talked about how growth in the US on the volume side is likely to pick up towards the year end. So can you help understand a little bit of what’s part of your assumption in terms of price mix is going and as to volume?
Fernando Suárez
As stated in the scripted remarks, we’re changing the — or refining the guidance from a volume one to a net sales value one for full year consolidated in the teens. We’re leaving out the underlying volume guidance, because we want to have that flexibility on how we get to the value. But in some we’re expecting positive gearing in terms of how to get to that teens growth, and it’s a combination of the different regions’ performance. That’s what we would care to comment on that. Leave it to us on how we get there on the volume side. But we can tell you that it does reflect positive gearing to get to that full year guidance figure on top line, which is what really matters.
Ben Theurer
And then second question is really about the go forward strategy into next year, and what you’re kind of thinking on the pricing side, how you think you have to price your product. Also, in light of a potential economic slowdown, how do you think you need to act on pricing to potentially further recover input cost pressure, while at the same time, not causing any elasticities to go against you from a volume perspective?
Juan Beckmann
So we will try to price to increase prices as much as we can. Obviously, yes, there’s this concern of slowing of the economy, but our costs have increased, are increasing and so on. We need to try to pass those costs or at least part of those costs as price increase.
Operator
Our next question comes from Ricardo Alves, Morgan Stanley.
Ricardo Alves
I missed part of the call, so apologies if this was addressed. I believe that these are follow-ups from questions that were asked. The supply chain issue perhaps, Fernando. Can you give a little bit more details on what happened in the third quarter, for example, the glass bottle you are coming to terms with solutions, with your suppliers. But still there was an effect, right, based on your commentary, I understand that there is still an effect. Can you help us quantify that? Or is it at least qualitatively speaking fair to say that your performance in the US, for example, would have been better? So just a little bit more details on that front, if I may. And then the second question, also kind of related to this last discussion. The theme of down trade or price elasticity has been more and more in our discussions, both in Mexico and for the US exposed names. So just wanted to see, from your perspective, your portfolio, how do you think that you’re positioned for that scenario? Particularly when you think about Jose Cuervo Especial, for example, is the price elasticity for Jose Cuervo Especial at this point in time, if you see any specific movements? Both from a Mexico angle but also from the US, if you can comment anything about that specific brand and price elasticity and down trade?
Fernando Suárez
Let me take the first one regarding supply chain issues specifically in the quarter. As commented by the US region, there was a supply chain disruption in the third quarter for the US related to Hurricane Ian. Approximately we’re speaking about 60,000 cases was the estimated impact in the US specifically. Without that impact, volumes would have probably been closer to flat, as mentioned in the scripted remarks earlier in the call. Regarding the rest of the regions, also Mexico and LATAM were substantially affected by supply chain issues and availability. We continue to see supply chain issues in those regions, in particular. And moving on to the second question, I’ll let Luis answer that.
Luis Félix
Ricardo, we acknowledge that the market conditions are changing with the risk of a weaker consumer confidence. I think it’s too soon to see a clear evidence of down trading. So I think if that happens, I think the range of our portfolios prepare to catch consumers at different price points. And specifically for Cuervo Especial, we took a price increase this year. We saw like a slowdown in the first couple of months and then the brand recover. So we’re confident that the strength of our brands and the — I think we can we can manage some of the price increases without any much further deterioration in volume.
Ricardo Alves
If I may just to squeeze one last question. In rest of the world, you guys already commented on the strength. Is there a particular market, if you had to point out a single market that has been a big focus for you guys? Because part of the — the second part of the answer earlier was that there is indeed evidence of higher demand, higher consumption, higher frequency, you mentioned. Is there a specific market where you see that new level of penetration? Is it coming more from mainstream tequila, is it coming more from premium market? So any more specific color you can give on that will be appreciated?
Gordon Dron
The tequila market within the EMEA and APAC regions is still largely driven by standard tequila. However, the growth in percentage terms is coming from premium and super and ultra premium products. So with our portfolio, we can focus on all the different categories. So we’re really well placed to focus in all the categories. As part of our strategy, our major focus is in our IMCs, in our in market companies and that is where we are seeing specific growth.
Operator
[Operator Instructions] Our next question comes from Andrea Teixeira from J.P. Morgan.
Drew Levine
This is Drew Levine on for Andrea. Thank you for taking our questions and congratulations on the strong results. So I wanted to ask about sort of RTDs and how it relates to the — maybe change in our refining and the guidance to net sales value. Clearly they remain ahead and Luis Félix talked about some kind of strategic actions that the company is going to take to kind of, I guess, stabilize the performance. So I guess how are you viewing the volume trends in this category? Are we reaching a point where we’re going to see normalization maybe over the next few quarters? Are you thinking about any sort of SKU rationalization, or any more specifics on the investments that the company’s looking to undertake as we head into ‘23?
Luis Félix
I think the RTD and the mix business that we have, and I want to go back to 2020 where this category and particularly our business in 2020 grew 34%. So our business went from a very strong position to plus 34%. And last year in 2021, we only decreased 1.7% in shipments. So what happened is that this year in 2022, there was a normalization of the business because of the opening of on-premise and the strength of on-premise. Remember, during the pandemic this category was mostly used for preparing cocktails at home and that is changing. So realizing that, our business today is still 11% above the base that we have in 2019. So we believe that there are some opportunities of capturing initiatives and volumes, and that’s what we’re trying to do. So we need to stabilize the mix without alcohol, which we also had a change in distributor, and also basically maintaining our focus in the strong flavor performers and some new initiatives that we are preparing. So we believe that the normalization happened this year and we are ready for a better next year in RTDs.
Drew Levine
And just a follow up on the US and Canada. So shipments are running down 4% or so year-to-date, depletions minus 1%. Is the plan to be able to catch up shipments to depletions by the end of the year, or are you thinking that there could remain a gap basically because of the supply chain challenges, and maybe that’s more of a ‘23 catch up?
Juan Beckmann
Victor Chavez to take on this answer, he will take this.
Victor Chavez
So through 2022, we’ve seen a more conservative inventory management in our distributors across the board. Yet, we don’t affirm this as a risk to us, given that our depletion trends continue to favor our portfolio and drive demand. So it’s mitigated a lot of that shipment impact. We do anticipate that — to plan to get back to that number. But again, it’s something that we’ve been working with our distributors on. And as you know, the macroeconomic conditions play a part in how those decisions play out. But as of now, we’re not called any risk given our depletion trends.
Operator
[Operator Instructions] So we’ll just give it a few more moments in case any more questions come in. So I think we have a follow-up question from Ricardo Alves at Morgan Stanley.
Ricardo Alves
We noticed a very significant spike in short term biological assets, nearly fourfold, if I’m not mistaken. So just wanted to to see if you can comment a little bit about that. Should we expect a higher level of vertical integration? I know you guys cannot give guidance on that. But directionally, qualitatively speaking, should we be considering that you could be improving your internal agave sourcing based on that? Just a few thoughts on that, just because we saw that it was a big move.
Fernando Suárez
As you well know, we do not comment on integration for strategic purposes. On the biological ask, increase in the short term, in particular, this reflects our expectation or our estimate of when we are going to crop our own plants in the next 12 months. So that’s just an estimate based on our plantation and our crop estimates for the next 12 months. We continue with our plantation efforts and those you see then reflected in the long term biological asset, but that’s what we would care to comment regarding biological asset. And lastly, just as a reminder, as we pointed out during the scripted remarks regarding AMP, we would also like to remind AMP guidance for the year where we continue to target the 22% AMP percentage of NAV as our target for full year. We expect to have AMP faced and very backended this year. So we will continue our efforts to try to catch up without AMP and in the fourth quarter. So expect a larger print in the fourth quarter regarding AMP given this backended or faced investment of AMP.
Operator
We also have a question from Fernando Olvera from Bank of America.
Fernando Olvera
The first one is related to taxes. In the last four years, your tax rate has been on average 26% while year to date your tax rate has been consistently at 29%. What explains such increase and what tax rate would be reasonable to assume going forward? And my second question, very quickly, can you explain the decline on cash on your cash position?
Fernando Suárez
Regarding effective tax rate, remember that we reflect a combination of different tax jurisdictions where we do business and undertake operations. So at least for the year to date, we’re booking an estimate of 29% effective tax rate. But as always, the fourth quarter as we close the books is when we can really have finer estimate on what will be the effective tax rate given effects to all of the transactions and operations during the year, and that’s where we normally adjust if there’s any adjustment to be made in the fourth quarter and reflecting full year effective tax rate. So for now, we would steer you towards continuing to book in or around 29%. And if there are any changes, we will reflect them in the fourth quarter. And regarding your second question on cash flow, in the third quarter, bear in mind that we did pay the dividend in August. So that’s why you see an important decrease in the cash flow for the quarter. But basically, other than that, we continue with our funds from operations and changes in working capital. Yes, we’ve already commented in different times the important investments that we’re doing in terms of inventory build to support our long term growth strategy, and that’s what we’re reflecting in the cash flow position.
Operator
I’m not seeing any more questions. So perhaps I can hand back to the Becle team for closing remarks.
Juan Beckmann
Thank you very much, and have a great day.
Operator
Thank you very much. That concludes the call for today. Thank you, and have a nice day.
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