Business context and reporting period
Betterware de México, S.A.P.I. de C.V. filed this audited Form 20-F for the fiscal year ended December 31, 2023; it is an annual report, not a standalone fourth-quarter report. The filing does not provide clear standalone Q4 financial results. Financial statements are prepared under IFRS and presented in Mexican pesos. Unless noted otherwise, amounts below are in Ps. millions.
The group sells through direct-selling networks in two segments: Betterware (home organization) and JAFRA (beauty and personal care). In 2023, they represented 44% and 56% of consolidated revenue, respectively. JAFRA was included for the full year in 2023 but only from April 7 in 2022, making consolidated year-over-year comparisons less comparable.
Financial results and key metrics
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Net revenue | Ps.13,009.5 | Ps.11,507.5 | Up 13.1% |
| Gross profit / margin | Ps.9,308.3 / 71.5% | Ps.7,928.5 / 68.9% | Margin expanded about 2.6 percentage points |
| Operating income / margin | Ps.2,345.8 / 18.0% | Ps.2,028.4 / 17.6% | Operating income up about 15.6% |
| Net income / margin | Ps.1,046.7 / 8.0% | Ps.870.0 / 7.6% | Net income up 20.3% |
| EBITDA / margin | Ps.2,720.9 / 20.9% | Ps.2,316.1 / 20.1% | EBITDA up 17.5%; non-IFRS measure |
| Cash from operating activities | Ps.2,366.8 | Ps.1,409.7 | Up 40.4% |
| Cash used in investing activities | Ps.65.3 | Ps.4,825.2 | 2022 included Ps.4,698.5 for JAFRA acquisition |
| Cash used in financing activities | Ps.2,567.4 | Cash generated Ps.3,056.0 | 2023 included debt repayments, interest, and dividends |
| Cash and cash equivalents | Ps.549.7 | Ps.815.6 | Down Ps.265.9 |
| Debt and borrowings | Ps.5,131.4 | Ps.6,148.7 | Borrowings excluding lease liabilities |
Including lease liabilities of Ps.373.0 million, reported debt and lease obligations were approximately Ps.5,504 million at year-end. Cash less those obligations implies net debt of approximately Ps.4,955 million. Current assets were Ps.3,992.1 million and current liabilities Ps.3,826.2 million, a current ratio of approximately 1.04. Total assets were Ps.11,088.1 million and total liabilities Ps.9,615.1 million.
Revenue by segment: Betterware was Ps.5,726.6 million, down 9.7%; JAFRA was Ps.7,282.9 million, up 41.0% versus its partial-year 2022 contribution. Betterware unit volume fell 20.8% to 79.4 million units while average price per unit rose 13.1%. JAFRA’s growth reflected a full year of consolidation and reported operating initiatives.
Material changes versus the prior comparable period
- Consolidated revenue, profit, and EBITDA increased, but the comparison includes a full year of JAFRA in 2023 versus about nine months in 2022.
- Betterware revenue and EBITDA declined, reflecting a smaller associate network and lower unit sales. Active associates fell 4.8% to 741,170; distributors increased 6.1% to 41,825.
- JAFRA reported improved revenue and EBITDA; management cited brand refresh, faster product development, commercial technology, catalog changes, and salesforce incentives. JAFRA EBITDA rose 60.4% to Ps.1,286.4 million.
- Group financing costs rose 42.6% to Ps.914.6 million, mainly reflecting higher interest expense and higher average variable rates. Interest expense increased to Ps.820.3 million from Ps.543.3 million.
- Cash from operations increased, partly due to lower working-capital investment. Inventory days rose to 205 from 174; payable days fell to 156 from 171; receivable days increased to 29 from 27.
- Long-term debt was reduced by about Ps.1,000 million versus 2022. The company prepaid the JAFRA acquisition syndicated loan in July 2023, refinancing with BBVA and HSBC facilities, new bonds, and short-term facilities.
Outlook, management commentary, risks, and unusual items
- Outlook: The company announced a planned enhanced Betterware direct-selling model in the United States, initially targeting Hispanic consumers, beginning in Q2 2024, with approximately US$6 million of expected investment in 2024. It also plans Latin American expansion, initially including Peru and Colombia. No numerical revenue or earnings guidance is provided.
- Liquidity and debt: Management targets leverage below 2x and states it expects operating resources to meet debt service. At December 31, 2023, unused credit facilities were reported at Ps.1,980 million. The group was in compliance with debt covenants at year-end. About 69% of long-term debt had variable rates.
- Foreign exchange: Betterware imports most of its products, with approximately 91% of its products supplied by Chinese manufacturers. Forward contracts with a US$97.3 million notional amount and an average strike of Ps.17.96 covered stated home-organization product needs through December 2024. Derivative fair-value liability was Ps.47.9 million.
- Internal controls: Management and the auditor concluded internal control over financial reporting was not effective at December 31, 2023, due to material weaknesses involving the control environment and risk assessment, business-combination and impairment controls, period-end reporting and consolidation controls, and IT general controls. Remediation is ongoing. The financial-statement audit opinion was unqualified; the auditor separately reported ineffective internal controls.
- Accounting corrections and estimates: The filing describes immaterial corrections to 2021 financial statements, including revenue cutoff, inventory/freight costing, catalog expense timing, provisions, and tax accruals. Goodwill and indefinite-lived intangibles totaled approximately Ps.2,701.8 million. No impairment was recorded; JAFRA Mexico goodwill and brand impairment testing was identified as a critical audit matter and relies on forecast revenue growth and discount-rate assumptions.
- Other items: The company recognized Ps.50.4 million of remaining syndicated-loan issuance costs on refinancing. Dividends paid in 2023 were Ps.648.7 million, versus Ps.949.6 million in 2022. A Ps.250 million dividend was approved in March 2024. The company reported no material legal proceeding expected to materially affect its financial position, results, or cash flows; a historic tax dispute was settled and paid in April 2023.
- Principal risks: Distributor and consultant retention, consumer spending, supplier concentration and China-related disruption, production continuity at JAFRA’s Querétaro facility, inflation and input costs, peso-dollar movements, interest rates and debt service, acquisition integration and impairment, Mexican political and regulatory conditions, and cybersecurity. Non-material phishing attempts were reported in 2023 without material business impact.
Most important facts for investors to verify
- Review the audited statements and segment disclosures to distinguish organic performance from the full-year JAFRA consolidation effect; standalone Q4 figures are not clearly provided.
- Track Betterware’s associate count, order frequency, units sold, average pricing, and gross margin to assess whether the home-organization decline is stabilizing.
- Verify cash conversion and working-capital trends, especially inventory days, supplier payment terms, receivables, and the rising expected-credit-loss allowance.
- Reconcile total debt, lease obligations, maturities, variable-rate exposure, available facilities, and the company’s progress toward its leverage target.
- Assess progress in remediating the material weaknesses and whether future filings report effective financial reporting controls.
- Monitor JAFRA’s growth, margins, integration costs, and goodwill impairment assumptions, alongside delivery and returns from the announced U.S. launch investment.
- Consider the controlling shareholder’s 53.91% ownership, dividend decisions, and related-party transactions when assessing governance and capital allocation.