Mexican Acne-Cream Maker Genomma Wins by Courting U.S. Hispanics

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Genomma Lab Internacional SAB, Mexico’s largest maker of over-the-counter medications such as acne cream and anti-balding formula, is winning back investors with signs of success marketing to Hispanics in the U.S.

The shares have surged 31 percent since mid-March as the company said sales north of the border are helping to reverse last year’s decline in earnings before interest, taxes, depreciation and amortization. The stock’s gain was three times that of the next-best performer on Mexico’s benchmark IPC index.

The rally signaled a turnaround for Mexico City-based Genomma, whose shares had tumbled 56 percent earlier this year amid slumping earnings at home, the company’s biggest market. Brokerage firms including Corp. GBM SAB had started to question Chief Executive Officer Rodrigo Herrera’s strategy of expansion abroad, saying he should instead focus on reviving brands that had lost their luster in Mexico.

“The international operations are better and even look strong, so this could mean a lot of potential,” said Annette Acosta, a money manager at Pichardo Asset Management in Mexico City, which oversees $220 million, including Genomma shares. “Their target is Hispanics in the U.S., and we’ve seen that the U.S. economy has been getting better.”

Genomma said March 20 that it expanded a distribution agreement with Walgreens Boots Alliance Inc., with a plan to roll out successful products nationwide.

The stock rally accelerated April 1, when Genomma said first-quarter sales outside Mexico were “very solid,” principally in the U.S., even as domestic sales slid compared with the same period a year earlier.

Focus Countries

Genomma’s shares rose 1.8 percent to 16.26 pesos a share at 12:47 p.m. in Mexico City.

International sales this year will surpass those from Mexico, Herrera said in a March 27 interview. In 2014, Mexico represented 53 percent of sales. While Genomma doesn’t disclose results from specific countries outside Mexico, the company says the U.S. was its fourth-biggest market last year.

“The countries of focus are the U.S., No. 1,” followed by Mexico, Brazil, Colombia and Chile, Herrera said. “These are where most of the time, the resources, the capacity of development and marketing, where all of these will be focused.”

The company forecasts Ebitda will climb 15 percent this year, after falling 15 percent in 2014.

The shares fell earlier this year because of investors’ concern about Herrera’s decision to move to Spain to oversee the start of operations there, according to Credit Suisse Group AG. Herrera said in an interview that he recently moved back to Mexico and that his son was studying abroad in Spain.

Among the Genomma products carried by Walgreens are Tio Nacho Mexican Herbs Shampoo, Silka Antifungal Cream and Cicatricure Scar Gel, according to the U.S. drugstore chain’s website.

“You keep seeing some weakness on the domestic side,” said Marco Montanez, an analyst at Vector Casa de Bolsa in Mexico City. “However, the business continues to show solidity in its international markets.”

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