Business Context and Reporting Period
Company: BETTERWARE DE MEXICO, S.A.P.I. DE C.V. (Ticker: BWMX)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal Year Ended December 31, 2024
Accounting Standard: International Financial Reporting Standards (IFRS)
Business Overview: A leading direct-to-consumer company operating in two segments: Home Organization (Betterware/BWM) and Beauty & Personal Care (JAFRA). Operations are concentrated in Mexico (>90%), with expanding presence in the United States.
Key Financial Metrics (2024 vs. 2023)
| Metric | 2024 (Ps. Millions) | 2023 Restated (Ps. Millions) | Variance |
|---|---|---|---|
| Net Revenue | 14,100.8 | 13,009.5 | +8.4% |
| Gross Profit | 9,580.5 | 8,748.7 | +9.5% |
| Operating Income | 1,686.2 | 2,338.8 | -27.9% |
| Net Income | 711.5 | 1,036.6 | -31.4% |
| EBITDA | 2,078.4 | 2,720.9 | -23.6% |
| Adjusted EBITDA | 2,774.7 | 2,720.9 | +2.0% |
| Cash & Equivalents | 296.6 | 549.7 | -46.0% |
| Total Debt | 4,824.9 | 5,131.4 | -6.0% |
Note: All figures in thousands of Mexican Pesos (Ps.). 2023 figures are restated due to material error corrections.
Material Changes and Segment Performance
- Revenue Growth: Driven by the JAFRA segment (+11.3% to Ps. 8.1B) due to product innovation and catalog redesign. The BWM segment grew +4.6% (to Ps. 6.0B) despite a 9.0% decrease in associates, offset by higher average order values.
- Profitability Decline: Operating income dropped significantly due to a Ps. 529.7 million loss on the sale of JAFRA properties (Las Flores and San Angel) and a Ps. 166.6 million impairment loss on assets held for sale (O'Farril land).
- Cost Pressures: BWM faced increased costs due to peso depreciation (-22.7%), higher import duties (17% to 33% on 16.5% of sales), and surging freight costs. JAFRA improved gross margins via productivity gains and favorable product mix.
- Restatements: The company restated 2023 and 2022 financials to correct the classification of production-related labor costs (moved from administrative expenses to Cost of Sales) and to recognize JAFRA Mexico lease liabilities correctly. This reduced reported Gross Profit for prior periods but did not affect Net Revenue or Net Income.
Guidance, Outlook, and Risks
- Expansion: Betterware USA launched in April 2024 targeting the Hispanic market in Texas. Expansion into the Andean region (Peru, Ecuador, Colombia) is expected to begin in June 2025.
- Liquidity Strategy: Management utilized cash reserves to prepay long-term debt, aiming for a leverage index below 2x. Cash balances decreased from Ps. 549.7M to Ps. 296.6M.
- Key Risks:
- Internal Controls: Material weaknesses were identified in internal controls over financial reporting (ICFR) regarding business combinations, period-end reporting, and IT general controls. Remediation is ongoing.
- Geopolitical & Tariffs: Potential U.S. tariffs (10% universal, up to 145% on China) announced in April 2025 pose uncertainty. A 90-day pause is currently in effect, but impacts on Mexican imports remain unclear.
- Supply Chain: Heavy reliance on Chinese manufacturers (>93% of BWM revenue) exposes the company to geopolitical and logistical disruptions.
- Concentration: Over 90% of operations and revenue are concentrated in Mexico, exposing the company to local economic, political, and currency risks.
Investor Verification Checklist
- Restatement Impact: Verify the full reconciliation of the 2023/2022 restatements regarding the reclassification of labor costs and lease liabilities to understand the true historical gross margin trajectory.
- Property Sale Losses: Confirm the recoverability of the Ps. 245.7 million long-term receivable from the JAFRA property sales, which is being collected semiannually without interest through 2027.
- Internal Control Remediation: Monitor the progress of the remediation plan for material weaknesses in ICFR, specifically regarding IT general controls and consolidation processes.
- Tariff Exposure: Assess the specific exposure of the BWM segment to potential U.S. tariffs on Chinese imports and the feasibility of shifting to national suppliers.
- Debt Covenants: Review compliance with leverage ratios (max 3.0x-3.5x) and debt service coverage ratios (min 1.25x) given the recent reduction in operating income.