Lala closed weak units, went private, and lifted 2023 net profit 90.7%

Grupo Lala, Mexico's largest dairy group, entered the 2020s with overseas operations — Brazil's Vigor, the US and Central America — that burned cash, and COVID made demand worse. Its US unit sold MXN3,158m in 2021, down 7.8%, and posted a marginal EBITDA loss of MXN17m for the year.

Under CEO Arquímedes Celis, who took over in late 2020, the response was deliberate subtraction. Lala closed its Costa Rica operation in December 2020 — one plant, one distribution center and 12 routes — freeing capital for stronger markets, and reengineered the US portfolio, closing the Floresville, Texas plant, outsourcing Promised Land production and improving utilization at Colorado Springs.

The company also refinanced short-term maturities and then went private: after an OPA that closed in September 2021, a second offer at MXN17.36 per share lifted the Tricio family's control to 99.6%, and the stock delisted from the BMV in 2022. Fitch, in December 2022, revised its outlook to positive, expecting Brazilian profitability in 2023, a US breakeven, an EBITDA margin near 8.5% and net debt/EBITDA below 3.0x.

The payoff showed in 2023: fourth-quarter net income was MXN2,112m against a MXN3,995m loss a year earlier, and full-year normalized net income rose 90.7% to MXN2,791m.

Normalized 2023 net income rose 90.7% to MXN2,791m and Q4 swung from a MXN3,995m loss to MXN2,112m profit; Fitch saw net debt/EBITDA below 3x with a positive outlook.

Exiting Costa Rica and reallocating capital to stronger markets improved EBITDA by about US$3m and simplified the portfolio.

Delisting freed management from quarterly market pressure, letting the Tricio family execute a multi-year fix.

Cost control and refinancing repaired the balance sheet, supporting Fitch's positive outlook and sub-3x net debt/EBITDA target.

When expansion bleeds cash, shrink deliberately: Lala closed weak units, disciplined its US operations, refinanced and went private to execute the fix — and normalized 2023 profit rose 90.7%.

The turnaround let Lala remain independent and family-controlled while reporting results privately after its 2022 delisting. Fitch's expectation of EBITDA margin improvement toward 9% by 2024 set the trajectory for the post-delisting years, with the company still operating 29 plants and 172 distribution centers across Mexico, Brazil, the US and Central America.