FMXUF Fomento Economico Mexicano SAB DE (PK)

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April 2019

 

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V.

(Exact name of Registrant as specified in its charter)

 

Mexican Economic Development, Inc.

(Translation of Registrant’s name into English)

 

United Mexican States

(Jurisdiction of incorporation or organization)

 

General Anaya No. 601 Pte.

Colonia Bella Vista

Monterrey, Nuevo León 64410

México

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F    x       Form 40-F    ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _______

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _______

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes    ¨      No    x

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_____________

 

 

 

 

FEMSA Announces First Quarter 2019 Results

 

Monterrey, Mexico, April 29, 2019 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) (NYSE: FMX; BMV: FEMSAUBD) announced today its operational and financial results for the first quarter of 2019.

 

FINANCIAL HIGHLIGHTS:

 

·

5.6% revenue growth (3.7% on an organic 1 basis) at FEMSA Consolidated

·

270 basis points gross margin expansion at FEMSA Comercio’s Proximity Division

·

2.4% revenue growth at FEMSA Comercio’s Health Division

·

2.5% revenue growth at FEMSA Comercio’s Fuel Division

·

9.2% volume growth at Coca-Cola FEMSA’s operations in Brazil

 

Eduardo Padilla, FEMSA’s CEO, commented:

 

“During the first quarter we were able to leverage the resilience and confidence of the consumer in Mexico to deliver a robust set of numbers at FEMSA Comercio’s Proximity Division, despite a difficult comparison base driven by the Holy Week calendar shift. The Health Division delivered strong growth in Colombia and a steadily improving operation in Mexico even as it faced a soft quarter in Chile and foreign exchange headwinds across South America, and the Fuel Division faced supply disruptions early in the quarter that put some pressure on revenue growth. For its part, Coca-Cola FEMSA delivered top-and-bottom line growth in Mexico and Central America, as well as particularly encouraging volume growth in Brazil. All in all, it was a solid start to the year across the FEMSA business platform.”

 

FINANCIAL SUMMARY FOR THE FIRST QUARTER OF 2019

Change vs. Comparable Results

		Revenues				Gross Profit				Income from Operations				Same-Store Sales
FEMSA CONSOLIDATED			5.6	%			7.8	%			0.4	%
FEMSA COMERCIO
Proximity Division			9.3	%			17.8	%			12.5	%			3.2	%
Health Division			2.4	%			(0.9	)%			(4.0	)%			1.3	%
Fuel Division			2.5	%			24.6	%			17.5	%			(7.5	)%
COCA-COLA FEMSA			4.8	%			3.3	%			(1.1	)%

 

¹ Excludes the effects of significant mergers and acquisitions in the last twelve months. For this quarter, it includes the consolidation of Caffenio, our sole coffee supplier in Mexico, which we now control with 50% share ownership.

 

 

 

 

As of the first quarter of 2019, we have adopted the International Financial Reporting Standard 16 – “Leases” (“IFRS 16”) across all our business units. Therefore, in order to provide a more useful base of comparison for investors and other market participants, we have included a set of numbers which estimate the retroactive effect that the adoption of IFRS 16 would have had on FEMSA’s 2018 financial results (the “Comparable Results”). The actual application of IFRS 16 to FEMSA’s 2018 financial results may yield different results. The performance comparisons expressed in this document will be made relative to the Comparable figures unless stated otherwise.

 

 

Results are compared to the same period of previous year

 

femsa consolidateD

 

FEMSA CONSOLIDATED

1Q19 Financial Summary

(Millions of Ps.) 

		Comparable																Reported
		1Q19				1Q18				Var.*				Org.*				1Q18
Revenues			115,938				109,746				5.6	%			3.7	%			109,746
Income from Operations			8,978				8,944				0.4	%			(1.9	)%			8,295
Income from Operations Margin (%)			7.7				8.1				-40 bps								7.6
Operative Cash Flow (EBITDA)			15,612				14,963				4.3	%			1.5	%			12,465
Operative Cash Flow (EBITDA) Margin (%)			13.5				13.6				-10 bps								11.4
Net Income			3,849				1,233				N.S.								1,478

*vs.

Comparable Results

 

CONSOLIDATED BALANCE SHEET

(Millions of Ps.) 

As of March 31, 2019		Ps.				US$ 3
Cash			74,854				3,859
Short-term debt			18,695				964
Long-term debt 4			96,038				4,951
Net debt 4			39,879				2,056

 

Total revenues increased 5.6% in 1Q19 compared to 1Q18, reflecting growth across all business units. On an organic basis ¹ total revenues grew 3.7%.

 

Gross profit grew 7.8%. Gross margin expanded 70 basis points, mainly driven by strong gross margin expansion at FEMSA Comercio’s Proximity Division, partially offset by a contraction at Coca-Cola FEMSA and FEMSA Comercio’s Health Division.

 

Income from operations increased 0.4%. On an organic basis ¹ income from operations decreased 1.9%. Consolidated operating margin decreased 40 basis points to 7.7% of total revenues, reflecting margin contractions at Coca-Cola FEMSA and FEMSA Comercio’s Health Division.

 

Income tax was Ps. 1,930 million in 1Q19.

 

Net consolidated income increased significantly to Ps. 3,849 million, mainly reflecting an undemanding comparison base in 1Q18 caused by a non-cash foreign exchange loss related to FEMSA’s U.S. dollar-denominated cash position as impacted by the appreciation of the Mexican peso, coupled with lower interest expenses and an increase in other financial products during this quarter.

 

Net majority income was Ps. 0.62 per FEMSA Unit ² and US$ 0.32 per FEMSA ADS.

 

¹ Excludes the effects of significant mergers and acquisitions in the last twelve months. For this quarter, it includes the consolidation of Caffenio, our sole coffee supplier in Mexico, which we now control with 50% share ownership.

² FEMSA Units consist of FEMSA BD Units and FEMSA B Units. Each FEMSA BD Unit is comprised of one Series B Share, two Series D-B Shares and two Series D-L Shares. Each FEMSA B Unit is comprised of five Series B Shares. The number of FEMSA Units outstanding as of March 31, 2019 was 3,578,226,270, equivalent to the total number of FEMSA Shares outstanding as of the same date, divided by 5.

 

 

Capital expenditures amounted to Ps. 4,077 million, reflecting higher investments at FEMSA Comercio’s Proximity and Fuel Divisions.

 

FEMSA COMERCIO – Proximity DIVISION

 

FEMSA COMERCIO – PROXIMITY DIVISION

1Q19 Financial Summary

(Millions of Ps. except same-stores sales)  

		Comparable																Reported
		1Q19				1Q18				Var.*				Org.*				1Q18
Same-store sales (thousands of Ps.)			728				705				3.2	%							705
Revenues			41,250				37,747				9.3	%			8.7	%			37,747
Income from Operations			2,648				2,354				12.5	%			10.2	%			1,956
Income from Operations Margin (%)			6.4				6.2				20 bps								5.2
Operative Cash Flow (EBITDA)			5,014				4,448				12.7	%			10.1	%			3,184
Operative Cash Flow (EBITDA) Margin (%)			12.2				11.8				40 bps								8.4

*vs.

Comparable Results

 

 

 

Total revenues increased 9.3% in 1Q19 compared to 1Q18. On an organic basis, ¹ total revenues grew 8.7%, reflecting the opening of 234 net new OXXO stores in the quarter to reach 1,416 total net new store openings for the last twelve months. As of March 31, 2019, FEMSA Comercio’s Proximity Division had a total of 18,233 OXXO stores. OXXO’s same-store sales increased an average of 3.2%, driven by 2.3% growth in average customer ticket and an increase of 0.9% in store traffic, reflecting a resilient consumer environment that partially offset the adverse effect of the calendar shift of the Holy Week vacation period.

 

Gross profit reached 38.4% of total revenues, reflecting: i) sustained growth of the services category including income from financial services; ii) healthy trends in our commercial income activity; iii) increased and more efficient promotional programs with our key supplier partners; and iv) the consolidation of Caffenio.

 

³ The exchange rate published by the Federal Reserve Bank of New York for March 29, 2019 was 19.3980 MXN per USD.

⁴ Includes the effect of derivative financial instruments on long-term debt.

 

 

Income from operations amounted to 6.4% of total revenues. Operating expenses increased 18.9% to Ps. 13,206 million, above revenues, mainly reflecting: i) our continuing and gradual shift from commission-based store teams to employee based teams; ii) higher secure cash handling costs driven by increased volume and higher operational costs; iii) a demanding comparison base in electricity tariffs; iv) the consolidation of Caffenio; and v) the continued organic growth of OXXO’s international operations, which have yet to reach the desired scale.

 

FEMSA COMERCIO – HEALTH DIVISION

 

FEMSA COMERCIO – HEALTH DIVISION

1Q19 Financial Summary

(Millions of Ps. except same-stores sales) 

		Comparable												Reported
		1Q19				1Q18				Var.*				1Q18
Same-store sales (thousands of Ps.)			1,512				1,493				1.3	%			1,493
Revenues			12,758				12,454				2.4	%			12,454
Income from Operations			316				329				(4.0	)%			280
Income from Operations Margin (%)			2.5				2.6				-10 bps				2.2
Operative Cash Flow (EBITDA)			995				1,004				(0.9	)%			531
Operative Cash Flow (EBITDA) Margin (%)			7.8				8.1				-30 bps				4.3

*vs.

Comparable Results

 

 

 

Total revenues increased 2.4% in 1Q19 compared to 1Q18, reflecting growth in Colombia as well as steadily improving trends in Mexico. As of March 31, 2019, FEMSA Comercio’s Health Division had a total of 2,384 points of sale across our territories. This figure reflects the addition of 23 net new stores in the quarter to reach 149 total net new store openings for the last twelve months. Same-store sales for drugstores increased an average of 1.3%, reflecting positive trends across our markets, which were partially offset by a negative currency translation effect related to the appreciation of the Mexican peso compared to the Chilean and Colombian pesos in our operations in South America.

 

Gross profit reached 28.7% of total revenues, reflecting; i) a demanding comparison base in our operations in South America, where gross margin expanded above trend in 1Q18; ii) new pricing regulations in Colombia; and iii) increased promotional activity in Chile. These were partially offset by improved efficiency and more effective collaboration and execution with our key supplier partners in Mexico.

 

Income from operations amounted to 2.5% of total revenues. Operating expenses decreased 0.6% to Ps. 3,345 million reflecting cost efficiencies and tight expense control across our territories.

 

 

FEMSA COMERCIO – FUEL DIVISION

 

FEMSA COMERCIO – FUEL DIVISION

1Q19 Financial Summary

(Millions of Ps. except same-stations sales)

		Comparable												Reported
		1Q19				1Q18				Var.*				1Q18
Same-station sales (thousands of Ps.)			7,070				7,641				(7.5	)%			7,641
Revenues			10,853				10,593				2.5	%			10,593
Income from Operations			309				263				17.5	%			137
Income from Operations Margin (%)			2.8				2.5				30 bps				1.3
Operative Cash Flow (EBITDA)			535				448				19.3	%			174
Operative Cash Flow (EBITDA) Margin (%)			4.9				4.2				70 bps				1.6

*vs.

Comparable Results

 

 

 

Total revenues increased 2.5% in 1Q19 compared to 1Q18, reflecting the addition of 1 net new OXXO GAS station in the quarter to reach 73 total net new stations in the last twelve months, representing an increase of 15.6%. As of March 31, 2019, FEMSA Comercio’s Fuel Division had a total of 540 OXXO GAS service stations. Same-station sales decreased an average of 7.5%, mainly reflecting a 17.3% average volume decrease stemming from a disruption in the fuel distribution chain that affected some of our territories early in the quarter.

 

Gross profit reached 10.2% of total revenues.

 

Income from operations amounted to 2.8% of total revenues. Operating expenses increased 27.6% to Ps. 796 million, above revenues, reflecting: i) higher wages and improved compensation structures for in-station personnel aimed at reducing turnover in a tight labor market; and ii) expenses related to the remodeling of our stations.

 

 

coca-cola femsa

 

Coca-Cola FEMSA’s financial results and discussion thereof are incorporated by reference from Coca-Cola FEMSA’s press release, which is attached to this press release or may be accessed by visiting www.coca-colafemsa.com .

 

 

·

On March 22, 2019, FEMSA held its Annual Ordinary General Shareholders Meeting, during which the shareholders approved the Company’s annual report for 2018 prepared by the Chief Executive Officer, the Company’s consolidated financial statements for the year ended December 31, 2018 and the election of the Board of Directors and its Committees for 2019. The shareholders approved the payment of a cash dividend in the amount of Ps. 9,692 million, consisting of Ps. 0.6042 per each Series "D" share and Ps. 0.4833 per each Series "B" share, which amounts to Ps. 2.9000 per "BD" Unit (BMV: FEMSAUBD) or Ps. 29.0000 per ADS (NYSE: FMX), and Ps. 2.4167 per "B" Unit (BMV: FEMSAUB). The dividend payment will be split in two equal payments, payable on May 7, 2019 and November 5, 2019. In addition, the shareholders established the amount of Ps. 7,000 million as the maximum amount that could potentially be used for the Company’s share repurchase program during 2019.

 

CONFERENCE CALL INFORMATION:

 

Our First Quarter 2019 Conference Call will be held on: Monday, April 29, 2019, 9:30 AM Eastern Time (8:30 AM Mexico City Time). To participate in the conference call, please dial: Domestic US: (800) 289 0438; International: +1 (323) 794 2423; Conference Id: 2305270. The conference call will be webcast live through streaming audio. For details please visit www.femsa.com/investor .

 

If you are unable to participate live, the conference call audio will be available on http://ir.FEMSA.com/results.cfm .

 

FEMSA is a company that creates economic and social value through companies and institutions and strives to be the best employer and neighbor to the communities in which it operates. It participates in the retail industry through FEMSA Comercio, comprising a Proximity Division operating OXXO, a small-format store chain, a Health Division, which includes drugstores and related activities, and a Fuel Division, which operates the OXXO GAS chain of retail service stations. In the beverage industry, it participates through Coca-Cola FEMSA, a public bottler of Coca-Cola products; and in the beer industry, as a shareholder of Heineken, a brewer with operations in over 70 countries. Additionally, through its Strategic Businesses unit, it provides logistics, point-of-sale refrigeration solutions and plastics solutions to FEMSA's business units and third-party clients. Through its business units, FEMSA has approximately 300,000 employees in 12 countries. FEMSA is a member of the Dow Jones Sustainability MILA Pacific Alliance, the FTSE4Good Emerging Index and the Mexican Stock Exchange Sustainability Index, among other indexes that evaluate is sustainability performance.

 

The translations of Mexican pesos into US dollars are included solely for the convenience of the reader, using the noon buying rate for Mexican pesos as published by the Federal Reserve Bank of New York on March 29, 2019, which was 19.3980 Mexican pesos per US dollar.

 

 

FORWARD-LOOKING STATEMENTS

 

This report may contain certain forward-looking statements concerning our future performance that should be considered as good faith estimates made by us. These forward-looking statements reflect management’s expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact our actual performance.

 

Seven pages of tables and Coca-Cola FEMSA’s press release to follow

 

 

FEMSA

Consolidated Income Statement

Millions of Pesos

 

 

		For the first quarter of:
										Comparable (A)																As Reported
		2019				% of rev.				2018 (B)				% of rev.				% Var.				% Org. (C)				2018 (B)				% of rev.				% Var.				% Org. (C)
Total revenues			115,938				100.0				109,746				100.0				5.6				3.7				109,746				100.0				5.6				3.7
Cost of sales			73,144				63.1				70,052				63.8				4.4								70,084				63.9				4.4
Gross profit			42,794				36.9				39,694				36.2				7.8								39,663				36.1				7.9
Administrative expenses			4,697				4.1				3,950				3.6				18.9								3,992				3.6				17.7
Selling expenses			28,720				24.8				26,623				24.3				7.9								27,199				24.7				5.6
Other operating expenses (income), net (1)			399				0.3				177				0.2				125.4								177				0.2				125.4
Income from operations (2)			8,978				7.7				8,944				8.1				0.4				(1.9	)			8,295				7.6				8.2				5.7
Other non-operating expenses (income)			254								189								34.4								189								34.4
Interest expense			3,470								3,652								(5.0	)							2,590								34.0
Interest income			744								730								2.0								730								2.0
Interest expense, net			2,726								2,922								(6.7	)							1,860								46.6
Foreign exchange loss (gain)			1,187								4,918								(75.9	)							4,926								(75.9	)
Other financial expenses (income), net.			(24	)							256								(109.4	)							256								(109.4	)
Financing expenses, net			3,889								8,096								(52.0	)							7,042								(44.8	)
Income before income tax and participation in associates results			4,835								659								N.S.								1,064								N.S.
Income tax			1,930								350								N.S.								509								N.S.
Participation in associates results (3)			944								872								8.3								872								8.3
Net income from continuing operations			3,849								1,181								N.S.								1,427								169.8
Net income from discontinued operations			-								51								(100.0	)							51								(100.0	)
Net consolidated income			3,849								1,233								N.S.								1,478								160.4
Net majority income			2,233								(243	)							N.S.								2								N.S.
Net minority income			1,616								1,476								9.5								1,476								9.5
Operative Cash Flow & CAPEX			2019				% of rev.				2018	(B)			% of rev.				% Var.				% Org. (C)				2018	(B)			% of rev.				% Var.				% Org. (C)
Income from operations			8,978				7.7				8,944				8.1				0.4				(1.9	)			8,295				7.6				8.2				5.7
Depreciation			5,673				4.9				5,296				4.8				7.1								3,448				3.1				64.5
Amortization & other non-cash charges			961				0.9				722				0.7				33.1								722				0.7				33.1
Operative Cash Flow (EBITDA)			15,612				13.5				14,963				13.6				4.3				1.5				12,465				11.4				25.2				21.9
CAPEX			4,077								3,838								6.2								3,838								6.2

 

(A)

Unaudited consolidated financial information. For more detail please refer to our Press Release published on april 5th, 2019.

(B)

The Philippines is presented as a discontinued operation in 2018.

(C)

Organic basis (% Org.) excludes the effects of significant mergers and acquisitions in the last twelve months.

(1)

Other operating expenses (income), net = other operating expenses (income) +(-) equity method from operated associates.

(2)

Income from operations = gross profit - administrative and selling expenses - other operating expenses (income), net.

(3)

Mainly represents the equity method participation in Heineken´s results, net.

 

 

FEMSA

Consolidated Balance Sheet

Millions of Pesos

 

 

ASSETS		Mar-19				Dec-18				% Inc.
Cash and cash equivalents			74,854				62,047				20.6
Investments			18,413				30,924				(40.5	)
Accounts receivable			24,181				28,164				(14.1	)
Inventories			34,212				35,686				(4.1	)
Other current assets			21,307				20,786				2.5
Total current assets			172,967				177,607				(2.6	)
Investments in shares			92,610				94,315				(1.8	)
Property, plant and equipment, net			107,385				108,602				(1.1	)
Right of use			50,168				-				N.S.
Intangible assets (1)			144,464				145,610				(0.8	)
Other assets			49,525				50,247				(1.4	)
TOTAL ASSETS			617,119				576,381				7.1
LIABILITIES & STOCKHOLDERS´ EQUITY
Bank loans			1,994				2,436				(18.1	)
Current maturities of long-term debt			16,701				11,238				48.6
Interest payable			1,367				964				41.8
Current maturities of long-term leases			5,822				-				N.S.
Operating liabilities			98,506				86,826				13.5
Total current liabilities			124,390				101,464				22.6
Long-term debt (2)			96,038				108,161				(11.2	)
Long-term leases			45,038				-				N.S.
Laboral obligations			4,653				4,699				(1.0	)
Other liabilities			25,361				26,515				(4.4	)
Total liabilities			295,480				240,839				22.7
Total stockholders’ equity			321,639				335,542				(4.1	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			617,119				576,381				7.1

 

		March 31, 2019
DEBT MIX (2)		% of Total				Average Rate
Denominated in:
Mexican pesos			50.2	%			8.1	%
U.S. Dollars			5.9	%			3.9	%
Euros			19.1	%			1.8	%
Colombian pesos			1.2	%			4.0	%
Argentine pesos			0.1	%			36.8	%
Brazilian reais			19.1	%			8.5	%
Chilean pesos			3.3	%			5.8	%
Uruguayan Pesos			1.1	%			10.0	%
Total debt			100.0	%			6.7	%
Fixed rate (2)			91.5	%
Variable rate (2)			8.5	%

 

DEBT MATURITY PROFILE		2019				2020				2021				2022				2023				2024+
% of Total Debt			5.4	%			9.8	%			11.1	%			2.1	%			22.7	%			48.9	%

 

(1)

Includes mainly the intangible assets generated by acquisitions.

(2)

Includes the effect of derivative financial instruments on long-term debt.

 

 

FEMSA Comercio - Proximity Division

Results of Operations

Millions of Pesos

 

 

		For the first quarter of:
										Comparable (A)																As Reported
		2019 (A)				% of rev.				2018 (B)				% of rev.				% Var.				% Org. (C)				2018 (B)				% of rev.				% Var.				% Org. (C)
Total revenues			41,250				100.0				37,747				100.0				9.3				8.7				37,747				100.0				9.3				8.7
Cost of sales			25,396				61.6				24,286				64.3				4.6								24,286				64.3				4.6
Gross profit			15,854				38.4				13,461				35.7				17.8								13,461				35.7				17.8
Administrative expenses			1,002				2.4				844				2.2				18.8								845				2.2				18.6
Selling expenses			12,156				29.5				10,199				27.1				19.2								10,596				28.1				14.7
Other operating expenses (income), net			48				0.1				65				0.2				(25.8	)							65				0.2				(25.8	)
Income from operations			2,648				6.4				2,354				6.2				12.5				10.2				1,956				5.2				35.4				32.7
Depreciation			2,226				5.4				1,982				5.3				12.3								1,116				3.0				99.5
Amortization & other non-cash charges			140				0.4				112				0.2				24.5								112				0.2				24.5
Operative cash flow			5,014				12.2				4,448				11.8				12.7				10.1				3,184				8.4				57.5				53.8
CAPEX			1,830								1,476								24.0								1,476				-				24.0
Information of OXXO Stores
Total stores			18,233								16,817								8.4
Net new convenience stores:
vs. Last quarter			234								240								(2.5	)
Last-twelve-months			1,416								1,367								3.6
Same-store data: (1)
Sales (thousands of pesos)			728.1								705.3								3.2
Traffic (thousands of transactions)			21.4								21.2								0.9
Ticket (pesos)			34.0								33.2								2.3

 

(A)

Unaudited consolidated financial information. For more detail please refer to our Press Release published on april 5th, 2019.

(B)

The Proximity Division includes proximity and proximity-related operations across markets. 1Q18 has been adjusted to reflect the change from Comercial Division to Proximity Division implemented since September, 2018.

(C)

Organic basis (% Org.) Excludes the effects of significant mergers and acquisitions in the last twelve months.

(1)

Monthly average information per store, considering same stores with more than twelve months of operations, income from services are included.

 

 

FEMSA Comercio - Health Division

Results of Operations

Millions of Pesos

 

 

		For the first quarter of:
										Comparable (A)												As Reported
		2019				% of rev.				2018				% of rev.				% Var.				2018				% of rev.				% Var.
Total revenues			12,758				100.0				12,454				100.0				2.4				12,454				100.0				2.4
Cost of sales			9,097				71.3				8,758				70.3				3.9				8,758				70.3				3.9
Gross profit			3,661				28.7				3,696				29.7				(0.9	)			3,696				29.7				(0.9	)
Administrative expenses			522				4.1				485				3.9				7.6				485				3.9				7.6
Selling expenses			2,810				22.0				2,861				23.0				(1.8	)			2,910				23.4				(3.4	)
Other operating expenses (income), net			13				0.1				21				0.2				(38.1	)			21				0.2				(38.1	)
Income from operations			316				2.5				329				2.6				(4.0	)			280				2.2				12.9
Depreciation			598				4.7				590				4.7				1.3				166				1.3				N.S.
Amortization & other non-cash charges			81				0.6				85				0.8				(4.7	)			85				0.8				(4.7	)
Operative cash flow			995				7.8				1,004				8.1				(0.9	)			531				4.3				87.4
CAPEX			291								351								(17.1	)			351								(17.1	)
Information of Stores
Total stores			2,384								2,235								6.7
Net new stores: (1)
vs. Last quarter			23								10								130.0
Last-twelve-months			149								99								50.5
Same-store data: (2)
Sales (thousands of pesos)			1,512.1								1,492.9								1.3

 

(A)

Unaudited consolidated financial information. For more detail please refer to our Press Release published on april 5th, 2019.

(1)

Aquisitions are included.

(2)

Monthly average information per store, considering same stores with more than twelve months of all the operations of FEMSA Comercio - Health Division.

 

 

FEMSA Comercio - Fuel Division

Results of Operations

Millions of Pesos

 

 

		For the first quarter of:
										Comparable (A)												As Reported
		2019				% of rev.				2018				% of rev.				% Var.				2018				% of rev.				% Var.
Total revenues			10,853				100.0				10,593				100.0				2.5				10,593				100.0				2.5
Cost of sales			9,748				89.8				9,706				91.6				0.4				9,706				91.6				0.4
Gross profit			1,105				10.2				887				8.4				24.6				887				8.4				24.6
Administrative expenses			43				0.4				52				0.5				(16.5	)			52				0.5				(17.3	)
Selling expenses			735				6.8				572				5.4				28.6				697				6.6				5.5
Other operating expenses (income), net			18				0.2				1				-				N.S.				1				-				N.S.
Income from operations			309				2.8				263				2.5				17.5				137				1.3				125.5
Depreciation			203				1.9				178				1.7				13.9				30				0.3				N.S.
Amortization & other non-cash charges			23				0.2				7				-				N.S.				7				-				N.S.
Operative cash flow			535				4.9				448				4.2				19.3				174				1.6				N.S.
CAPEX			123								64								92.0				64								92.0
Information of OXXO GAS Service Stations
Total service stations			540								467								15.6
Net new service stations
vs. Last quarter			1								15								(93.3	)
Last-twelve-months			73								79								(7.6	)
Volume (million of liters) total stations			616								674								(8.6	)
Same-stations data: (1)
Sales (thousands of pesos)			7,070.0								7,641.2								(7.5	)
Volume (thousands of liters)			402.3								486.4								(17.3	)
Average price per liter			17.6								15.7								11.9

 

(A)

Unaudited consolidated financial information. For more detail please refer to our Press Release published on april 5th, 2019.

(1)

Monthly average information per station, considering same stations with more than twelve months of operations.

 

  

Coca-Cola FEMSA

Results of Operations

Millions of Pesos

 

 

		For the first quarter of:
										Comparable (A)																As Reported
		2019				% of rev.				2018 (B)				% of rev.				% Var.				% Org. (C)				2018 (B)				% Integral				% Var.				% Org. (C)
Total revenues			46,248				100.0				44,122				100.0				4.8				0.5				44,122				100.0				4.8				0.5
Cost of sales			25,355				54.8				23,905				54.2				6.1								23,907				54.2				6.1
Gross profit			20,892				45.2				20,218				45.8				3.3								20,215				45.8				3.3
Administrative expenses			2,201				4.8				2,218				5.0				(0.8	)							2,221				5.0				(0.9	)
Selling expenses			12,645				27.3				12,140				27.5				4.2								12,149				27.5				4.1
Other operating expenses (income), net			332				0.7				80				0.2				N.S.				-				80				0.2				N.S.
Income from operations			5,714				12.4				5,779				13.1				(1.1	)			(3.8	)			5,765				13.1				(0.9	)			(3.5	)
Depreciation			2,262				4.9				2,138				4.8				5.8								1,983				4.5				14.1
Amortization & other non-cash charges			564				1.2				417				1.0				35.4								416				0.9				35.6
Operative cash flow			8,541				18.5				8,334				18.9				2.5				(1.1	)			8,164				18.5				4.6				0.9
CAPEX			1,541								1,612				-				(4.4	)							1,612				-				(4.4	)
Sales volumes
(Millions of unit cases)
Mexico and Central America			478.0				60.0				474.9				60.3				0.7
South America			105.7				13.3				118.3				15.0				(10.6	)
Brazil			212.4				26.7				194.8				24.7				9.2
Total			796.1				100.0				787.9				100.0				1.0

 

(A)

Unaudited consolidated financial information. For more detail please refer to our Press Release published on april 5th, 2019.

(B)

The Philippines is presented as a discontinued operation in 2018.

(C)

Organic basis (% Org.) excludes the effects of significant mergers and acquisitions in the last twelve months.

 

 

FEMSA

Macroeconomic Information

 

 

		Inflation								End-of-period Exchange Rates
		1Q 2019				LTM (1) Mar-19				Mar-19								Dec-18
										Per USD				Per MXN				Per USD				Per MXN
Mexico			0.03	%			3.52	%			19.38				1.0000				19.68				1.0000
Colombia			1.76	%			2.88	%			3,174.79				0.0061				3,249.75				0.0061
Venezuela			1278.45	%			931193.84	%			3,294.48				0.0059				638.18				0.0308
Brasil			1.18	%			4.00	%			3.90				4.9733				3.87				5.0797
Argentina			10.80	%			53.26	%			43.35				0.4470				37.70				0.5221
Chile			0.20	%			2.21	%			681.09				0.0285				695.69				0.0283
Zona Euro			-0.63	%			2.39	%			0.89				21.7624				0.87				22.5383

 

(1)

LTM = Last twelve months.

 

 

 

Coca-Cola FEMSA Announces First Quarter 2019 Results

 

Mexico City, April 26, 2019, Coca-Cola FEMSA, S.A.B. de C.V. (BMV: KOF UBL, NYSE: KOF) (“Coca-Cola FEMSA”, “KOF” or the “Company”), the largest Coca-Cola franchise bottler in the world by sales volume, announces results for the first quarter of 2019.

 

OPERATIONAL AND FINANCIAL HIGHLIGHTS

 

·

Volumes performed strongly in Brazil; transactions outperformed volumes in Argentina and Brazil.

 

·

Revenues increased 4.8%, while comparable revenues grew 10.0%. Pricing ahead of inflation in most of our operations, combined with volume growth in Brazil was partially offset by unfavorable currency translation effects from all of our operating currencies.

 

·

Operating income declined 0.9% while comparable operating income increased 9.2%, driven mainly by higher concentrate costs, higher PET prices, the depreciation of most of our operating currencies as applied to our U.S. dollar denominated raw material costs and higher labor expenses, effects that were partially offset by lower sweetener costs and operating expense efficiencies.

 

·

Earnings per share 1 were Ps. 0.15 (earnings per unit were Ps. 1.23 and per ADS were Ps. 12.33).

 

FINANCIAL SUMMARY FOR THE FIRST QUARTER RESULTS

Change vs. same period of last year

 

				Total Revenues				Gross Profit				Operating Income				Majority Net Income
				1Q19				1Q19				1Q19				1Q19
		Consolidated			4.8	%			3.3	%			(0.9	)%			7.3	%
As Reported (2)		Mexico & Central America			11.4	%			12.4	%			15.6	%
		South America			(1.9	)%			(6.4	)%			(15.0	)%
		Consolidated			10.0	%			8.8	%			9.2	%
Comparable (3)		Mexico & Central America			7.2	%			8.3	%			12.4	%
		South America			13.7	%			9.7	%			5.4	%

 

John Santa Maria, Coca-Cola FEMSA’s CEO, commented:

 

“I am pleased with our Company’s positive results to start the year. Despite currency volatility and uncertain economic conditions that affected our financial performance, our revenues grew 4.8% while our comparable revenues grew 10.0%. In addition, our operating income declined 0.9% while our comparable operating income increased 9.2%. In Mexico & Central America, we reported healthy top-and-bottom line growth, as we continued leveraging our state-of-the-art analytics capabilities. Our South America Division’s performance was driven mainly by strong volume growth in Brazil, where we continued to gain share across categories thanks to our robust portfolio and relentless point-of-sale execution. To protect our profitability, we continued to implement mitigation actions to navigate complex environments in Colombia and Argentina. Finally, guided by the clarity of our vision of becoming a total beverage leader with global footprint, on April 11, we completed our previously announced stock split and listing of units for trading in the Mexican Stock Exchange and the New York Stock Exchange. This important milestone enhances the flexibility of our capital structure by increasing our capacity to issue equity, positioning our Company for further sustainable, profitable growth and expansion.”

 

(1)

Quarterly earnings / outstanding shares. Earnings per share (EPS) for all periods are adjusted to give effect to the stock split resulting in 16,806.7 million shares outstanding. For the convenience of the reader, as a KOF UBL Unit is comprised of 8 shares (3 Series B shares and 5 Series L shares); earnings per unit are equal to EPS multiplied by 8. Each ADS represents 10 KOF UBL Units.

(2)

According to IFRS 5, figures for 2018 do not include the Philippines as it is presented as a discontinued operation as of January 1, 2018.

(3)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

 

 

RECENT DEVELOPMENTS

 

·

During the first quarter 2019, the Company prepaid Ps. 4,700 million of bilateral loans due in October 2019.

 

·

On March 8, 2019, the Company held an Extraordinary General Shareholders Meeting that resolved amendments to the Company´s bylaws. As a result, Series A shareholders are entitled to appoint up to 13 Directors, Series D shareholders are entitled to appoint up to 5 and Series L shareholders continue to have the right to appoint up to 3. On March 14, as a result of these amendments our shareholders approved a Board of Directors composed of 18 members as compared to 21, previously.

 

·

On March 14, 2019, the Company held its Annual Ordinary General Shareholders Meeting, during which its shareholders approved the Company’s consolidated financial statements for the year ended December 31, 2018, the annual report presented by the Board of Directors, the declaration of dividends corresponding to fiscal year 2018, and the composition of the Board of Directors and the Finance and Planning, Audit, and Corporate Practices Committees for 2019. Shareholders approved the payment of the proposed cash dividend of Ps. 3.54 per share. After giving effect to the stock split, the dividend payment approved is equivalent to Ps. 0.4425 per share, to be paid in two installments as of May 3, 2019, and November 1, 2019.

 

·

On April 11, 2019, Coca-Cola FEMSA completed the previously announced eight-for-one stock split, the issuance of new Series B shares (with full voting rights) and the creation and listing of KOF UBL units. As a result, (a) Series A and Series D split eight-for-one, and (b) for each Series L shares (KOF L), its holders received a new KOF UBL unit that replaces the previous KOF L. Each new KOF UBL unit consists of 3 Series B shares and 5 Series L shares (with limited voting rights). As of the same date, KOF UBL units were listed for trading on the Mexican Stock Exchange (BMV) under ticker symbol KOF UBL and ADSs (each representing 10 units) were listed for trading on the New York Stock Exchange (NYSE) under ticker symbol KOF.

 

The capital stock of the Company prior to and immediately after the Stock Split is as follows:

 

OUTSTANDING SHARES PRIOR TO THE STOCK SPLIT

 

		Series of						Outstanding				% of the				% of shares with
Trading Ticker		shares				Shareholders		shares				capital stock				full voting rights
Not trading			A			Wholly-owned subsidiary of Fomento Economico Mexicano, S.A.B. de C.V.			992,078,519				47.223	%			62.964	%
Not trading			D			Wholly-owned subsidiaries of The Coca-Cola Company			583,545,678				27.777	%			37.036	%
Trading KOF L in BMV KOF in NYSE			L			Public float (limited voting rights)			525,208,065				25.0	%			0.0	%
			Total						2,100,832,262				100	%			100	%

 

OUTSTANDING SHARES IMMEDIATELY AFTER THE STOCK SPLIT

 

		Series of						Outstanding				% of the				% of shares with
Trading Ticker		shares				Shareholders		shares				capital stock				full voting rights
Not trading			A			Wholly-owned subsidiary of Fomento Economico Mexicano, S.A.B. de C.V.			7,936,628,152				47.223	%			55.968	%
Not trading			D			Wholly-owned subsidiaries of The Coca-Cola Company			4,668,365,424				27.777	%			32.921	%
Trading KOF UBL unit in BMV KOF in NYSE			B			Public float (full voting rights)			1,575,624,195				9.375	%			11.111	%
(Each unit comprised of 3 series B shares and 5 series L shares)			L			Public float (limited voting rights)			2,626,040,325				15.625	%			0.0	%
			Total						16,806,658,096				100	%			100	%

 

·

Coca-Cola FEMSA released its 2018 integrated report entitled “Clarity, Consistency and Commitment”, the annual report on Form 20-F filing to the U.S. Securities and Exchange Commission, and the annual report filing to the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores). These three reports are available on the Investor Relations section of Coca-Cola FEMSA´s website at www.coca-colafemsa.com

 

CONFERENCE CALL INFORMATION

 

 

 

CONSOLIDATED FIRST QUARTER RESULTS

 

 

CONSOLIDATED FIRST QUARTER RESULTS

 

		As Reported (1)												Comparable (2)
Expressed in millions of Mexican pesos		1Q 2019				1Q 2018				Δ%				Δ%
Total revenues			46,248				44,122				4.8	%			10.0	%
Gross profit			20,892				20,215				3.3	%			8.8	%
Operating income			5,714				5,765				(0.9	)%			9.2	%
Operating cash flow (3)			8,541				8,164				4.6	%			11.1	%

 

Volume increased 1.0% to 796.1 million unit cases, driven mainly by a 9.1% growth in Brazil and the consolidation of recently acquired territories in Guatemala and Uruguay partially offset by volume declines in the rest of our operations. On a comparable basis, total volumes remained flat at 0.1%.

 

Total revenues increased 4.8% to Ps. 46,248 million, driven mainly by price increases in line with or above inflation across our territories coupled with volume growth in Brazil, the consolidation of recently acquired territories in Guatemala and Uruguay and a favorable mix effect driven by transactions growing ahead of volumes. These factors were partially offset by the negative translation effect resulting from the depreciation of all of our operating currencies as compared to the Mexican Peso, combined with volume decline in Argentina, Colombia and Mexico. On a comparable basis, total revenues increased 10.0%.

 

Gross profit increased 3.3% to Ps. 20,892 million, and gross margin contracted 60 basis points to 45.2%. Lower sweetener prices were offset by i) higher concentrate costs in Mexico; ii) higher concentrate costs in Brazil, related to the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone; iii) higher PET prices across most of our operations; and iv) the depreciation in the average exchange rate of most of our operating currencies as applied to our U.S. dollar-denominated raw material costs. On a comparable basis, gross profit increased 8.8%.

 

Operating income declined 0.9% to Ps. 5,714 million, and operating margin contracted 70 basis points to 12.4%. This decline was driven mainly by higher labor and freight expenses coupled with restructuring indemnities, effects that were partially offset by operating expense efficiencies. On a comparable basis, operating income increased 9.2%.

   

(1)

According to IFRS 5, figures from 2018 do not include the Philippines as it is presented as a discontinued operation as of January 1, 2018.

(2)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

(3)

Operating cash flow = operating income + depreciation + amortization & other operating non-cash charges.

 

 

Comprehensive financing result recorded an expense of Ps. 1,593 million, compared to an expense of Ps. 2,100 million in the same period of 2018. This reduction was driven mainly by a reduction in our interest expense, net, a reduction in foreign exchange loss—as our cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican Peso during the first quarter of 2019—and a reduction in other financial expenses.

 

Income tax as a percentage of income before taxes was 32.6% as compared to 30.7% during the same period of the previous year. This increase was driven mainly by the increase in the relative weight of Brazil’s profits in our consolidated results, which has a higher tax rate, and a higher effective tax in Colombia.

 

Net income attributable to equity holders of the company reached Ps. 2,590 million as compared to Ps. 2,414 million during the same period of the previous year. Earnings per share ¹ were Ps. 0.15 (earnings per unit ⁵ were Ps. 1.23 and earnings per ADS were Ps. 12.33).

 

(1)

Quarterly earnings / outstanding shares. Earnings per share (EPS) for all periods are adjusted to give effect to the stock split resulting in 16,806.7 million shares outstanding. For the convenience of the reader, as a KOF UBL Unit is comprised of 8 shares (3 Series B shares and 5 Series L shares), earnings per unit are equal to EPS multiplied by 8. Each ADS represents 10 KOF UBL Units.

 

 

MEXICO & CENTRAL AMERICA DIVISION FIRST QUARTER RESULTS

 

(Mexico, Guatemala, Costa Rica, Panama, and Nicaragua)

 

 

MEXICO & CENTRAL AMERICA DIVISION RESULTS

 

		As Reported (1)												Comparable (2)
Expressed in millions of Mexican pesos		1Q 2019				1Q 2018				Δ%				Δ%
Total revenues			24,823				22,277				11.4	%			7.2	%
Gross profit			11,781				10,484				12.4	%			8.3	%
Operating income			3,076				2,662				15.6	%			12.4	%
Operating cash flow (3)			4,772				4,096				16.5	%			12.5	%

 

Volume increased 0.7% to 478.0 million unit cases, driven by the consolidation of recently acquired territories in Guatemala and volume growth in Costa Rica, partially offset by volume decline in Mexico, Nicaragua and Panama. On a comparable basis, volume declined 2.3%.

 

Total revenues increased 11.4% to Ps. 24,823 million, driven by pricing ahead of inflation across the division, volume growth in Costa Rica and the consolidation of recently acquired territories in Guatemala as of May 1, 2018, partially offset by volume declines in Mexico, Nicaragua and Panama and by an slight unfavorable mix driven by volumes outperforming transactions. On a comparable basis, total revenues increased 7.2%.

 

Gross profit increased 12.4% to Ps. 11,781 million and gross profit margin expanded 40 basis points to 47.5% driven mainly by our pricing initiatives and lower sweetener costs. These factors were partially offset by higher concentrate costs in Mexico, higher PET prices and an unfavorable currency hedging position in Mexico. On a comparable basis, gross profit increased 8.3%.

 

Operating income increased 15.6% to Ps. 3,076 million in the first quarter of 2019, and operating income margin expanded 50 basis points to 12.4% during the period driven mainly by lower maintenance and freight costs, partially offset by a non-cash operating foreign exchange loss and restructuring indemnities. On a comparable basis, operating income increased 12.4%.

  

(1)

According to IFRS 5, figures from 2018 do not include the Philippines as it is presented as a discontinued operation as of January 1, 2018.

(2)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

(3)

Operating cash flow = operating income + depreciation + amortization & other operating non-cash charges.

 

 

SOUTH AMERICA DIVISION FIRST QUARTER RESULTS

 

(Brazil, Argentina, Colombia, and Uruguay)

 

 

SOUTH AMERICA DIVISION RESULTS

 

		As Reported (1)												Comparable (2)
Expressed in millions of Mexican pesos		1Q 2019				1Q 2018				Δ%				Δ%
Total revenues			21,425				21,845				(1.9	)%			13.7	%
Gross profit			9,111				9,732				(6.4	)%			9.7	%
Operating income			2,638				3,103				(15.0	)%			5.4	%
Operating cash flow (3)			3,768				4,068				(7.4	)%			9.1	%

 

Volume increased 1.6% to 318.1 million unit cases, driven by a 9.1% volume growth in Brazil and the consolidation of the recently acquired territory in Uruguay partially offset by volume declines in Argentina and Colombia. On a comparable basis, volume grew 4.3%.

 

Total revenues declined 1.9% to Ps. 21,425 million, driven mainly by a volume contraction in Argentina and Colombia, coupled with an unfavorable currency translation effect resulting from the depreciation of the Argentine Peso, the Brazilian Real, and the Colombian Peso as compared to the Mexican Peso. These factors were partially offset by strong volume growth in Brazil, pricing ahead of inflation in Argentina, Brazil, and Colombia, a favorable mix effect driven by transactions outperforming volumes, and the consolidation of the recently acquired territory in Uruguay as of July 1, 2018. On a comparable basis , total revenues increased 13.7%.

 

Gross profit decreased 6.4% to Ps. 9,111 million, and gross profit margin contracted 200 basis points to 42.5%. This is a result of higher PET prices in the division, higher concentrate costs in Brazil related to the reduction of tax credits on concentrate purchased from the Manaus free trade zone, and the depreciation of the average exchange rate of the Argentine Peso, the Brazilian Real, and the Colombian Peso as applied to our U.S. dollar-denominated raw material costs. These factors were partially offset by our pricing initiatives and lower sweetener prices. On a comparable basis, gross profit increased 9.7%.

 

Operating income decreased 15.0% to Ps. 2,638 million in the first quarter of 2019, resulting in a margin contraction of 190 basis points to 12.3% driven mainly by restructuring indemnities in Colombia, partially offset by operating expense efficiencies. On a comparable basis, operating income increased 5.4%.

 

(1)

According to IFRS 5, figures from 2018 do not include the Philippines as it is presented as a discontinued operation as of January 1, 2018.

(2)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

(3)

Operating cash flow = operating income + depreciation + amortization & other operating non-cash charges.

 

 

DEFINITIONS

 

Volume is expressed in unit cases. Unit case refers to 192 ounces of finished beverage product (24 eight-ounce servings) and, when applied to soda fountains, refers to the volume of syrup, powders and concentrate that is required to produce 192 ounces of finished beverage product.

 

Transactions refers to the number of single units (e.g. a can or a bottle) sold, regardless of their size or volume or whether they are sold individually or in multipacks, except for soda fountains, which represent multiple transactions based on a standard 12 oz. serving.

 

Operating income is a non-GAAP financial measure computed as “gross profit – operating expenses – other operating expenses, net + operative equity method (gain) loss in associates.”

 

Operating cash flow is a non-GAAP financial measure computed as “operating income + depreciation + amortization & other operating non-cash charges.”

 

Earnings per share are equal to “quarterly earnings / outstanding shares.” Earnings per share (EPS) for all periods are adjusted to give effect to the stock split resulting in 16,806,658,096 shares outstanding. For the convenience of the reader, as a KOF UBL Unit is comprised of 8 shares (3 Series B shares and 5 Series L shares), earnings per unit are equal to EPS multiplied by 8. Each ADS represents 10 KOF UBL Units.

 

COMPARABILITY

 

In an effort to provide our readers with a more useful representation of our company's underlying financial and operating performance, we are including the term “Comparable.” This means, with respect to a year-over-year comparison, the change of a given measure excluding the effects of: (i) mergers, acquisitions, and divestitures, including acquisitions made in Guatemala and Uruguay as of May and July 2018, respectively; (ii) translation effects resulting from exchange rate movements; and (iii) the results of hyperinflationary subsidiaries in both periods: Argentina’s results from 2019 and 2018. In preparing this measure, management has used its best judgment, estimates, and assumptions in order to maintain comparability. The relation between our reported and comparable figures is described in the following chart:

 

 

 

(*)Reported 2018 figures reflect the Philippines as a discontinued operation.

 

 

ABOUT THE COMPANY

 

Stock listing information: Mexican Stock Exchange, Ticker: KOF UBL | NYSE (ADS), Ticker: KOF | Ratio of KOF UBL to KOF = 10:1

 

Coca-Cola FEMSA files reports, including annual reports and other information with the U.S. Securities and Exchange Commission, or the “SEC”, and the Mexican Stock Exchange (Bolsa Mexicana de Valores, or the “BMV”) pursuant to the rules and regulations of the SEC (that apply to foreign private issuers) and of the BMV. Filings we make electronically with the SEC and the BMV are available to the public on the Internet at the SEC’s website at www.sec.gov , the BMV’s website at www.bmv.com.mx and our website at www.coca-colafemsa.com .

 

Coca-Cola FEMSA, S.A.B. de C.V. is the largest Coca-Cola franchise bottler in the world by sales volume. The Company produces and distributes trademark beverages of The Coca-Cola Company, offering a wide portfolio of 131 brands to a population of more than 257 million. With over 83 thousand employees, the Company markets and sells approximately 3.3 billion unit cases through close to 2 million points of sale a year. Operating 49 manufacturing plants and 275 distribution centers, Coca-Cola FEMSA is committed to generating economic, social, and environmental value for all of its stakeholders across the value chain. The Company is a member of the Dow Jones Sustainability Emerging Markets Index, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the Mexican Stock Exchange’s IPC and Social Responsibility and Sustainability Indices, among others. Its operations encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, Uruguay, and Venezuela through its investment in KOF Venezuela. For further information, please visit www.coca-colafemsa.com

 

 

ADDITIONAL INFORMATION

 

All of the financial information presented in this report was prepared under International Financial Reporting Standards (IFRS).

 

This news release may contain forward-looking statements concerning Coca-Cola FEMSA’s future performance, which should be considered as good faith estimates by Coca-Cola FEMSA. These forward-looking statements reflect management’s expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, many of which are outside Coca-Cola FEMSA’s control, which could materially impact the Company’s actual performance. References herein to “US$” are to United States dollars. This news release contains translations of certain Mexican peso amounts into U.S. dollars for the convenience of the reader. These translations should not be construed as representations that Mexican peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.

 

(5 pages of tables to follow)

 

 

COCA-COLA FEMSA

CONSOLIDATED INCOME STATEMENT

Millions of Pesos ⁽¹⁾

 

 

		For the First Quarter of:
		2019				% of Rev.				2018 (4)				% of Rev.				Δ% Reported				Δ% Comparable (8)
Transactions (million transactions)			4,837.8								4,685.5								3.3	%			3.1	%
Volume (million unit cases)			796.1								787.9								1.0	%			0.1	%
Average price per unit case			52.57								51.30								2.5	%
Net revenues			46,021								44,005								4.6	%
Other operating revenues			227								117								93.8	%
Total revenues (2)			46,248				100.0	%			44,122				100.0	%			4.8	%			10.0	%
Cost of goods sold			25,355				54.8	%			23,907				54.2	%			6.1	%
Gross profit			20,892				45.2	%			20,215				45.8	%			3.3	%			8.8	%
Operating expenses			14,847				32.1	%			14,370				32.6	%			3.3	%
Other operative expenses, net			310				0.7	%			31				0.1	%			890.0	%
Operative equity method (gain) loss in associates (3)			22				0.0	%			49				0.1	%			-55.6	%
Operating income (6)			5,714				12.4	%			5,765				13.1	%			-0.9	%			9.2	%
Other non operative expenses, net			75				0.2	%			62				0.1	%			21.1	%
Non Operative equity method (gain) loss in associates (5)			(34	)			-0.1	%			12				0.0	%			NA
Interest expense			1,735								2,009								-13.7	%
Interest income			249								376								-33.9	%
Interest expense, net			1,486								1,633								-9.0	%
Foreign exchange loss (gain)			112								221								-49.1	%
Loss (gain) on monetary position in inflationary subsidiries			(5	)							-								NA
Market value (gain) loss on financial instruments			(0	)							246								NA
Comprehensive financing result			1,593								2,100								-24.1	%
Income before taxes			4,079								3,592								13.6	%
Income taxes			1,331								1,102								20.8	%
Result of discontinued operations			-								51								NA
Consolidated net income			2,749								2,541								8.2	%
Net income attributable to equity holders of the company			2,590				5.6	%			2,414				5.5	%			7.3	%
Non-controlling interest			158				0.3	%			127				0.3	%			24.3	%

 

Operating Cash Flow & CAPEX		2019				% of Rev.				2018 (4)				% of Rev.				Δ% Reported				Δ% Comparable (8)
Operating income (6)			5,714				12.4	%			5,765				13.1	%			-0.9	%
Depreciation			2,262								1,983								14.1	%
Amortization and other operative non-cash charges			564								416								35.6	%
Operating cash flow (6)(7)			8,541				18.5	%			8,164				18.5	%			4.6	%			11.1	%
CAPEX			1,541								1,612								-4.5	%

 

(1)

Except volume and average price per unit case figures.

(2)

Please refer to page 12 for revenue breakdown.

(3)

Includes equity method in Jugos del Valle, Leao Alimentos, Estrella Azul, among others.

(4)

According to IFRS 5, figures from 2018 do not include the Philippines as it is presented as a discontinued operation as of January 1, 2018.

(5)

Includes equity method in PIASA, IEQSA, Beta San Miguel, IMER and KSP Participacoes among others.

(6)

The operating income and operating cash flow lines are presented as non-gaap measures for the convenience of the reader.

(7)

Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

(8)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

 

 

MEXICO & CENTRAL AMERICA DIVISION

RESULTS OF OPERATIONS

Millions of Pesos ⁽¹⁾

 

 

		For the First Quarter of:
		2019				% of Rev.				2018				% of Rev.				Δ% Reported				Δ% Comparable (6)
Transactions (million transactions)			2,688.4								2,674.0								0.5	%			0.0	%
Volume (million unit cases)			478.0								474.9								0.7	%			-2.2	%
Average price per unit case			51.86								46.89								10.6	%
Net revenues			24,788								22,269
Other operating revenues			35								9
Total Revenues (2)			24,823				100.0	%			22,277				100.0	%			11.4	%			7.2	%
Cost of goods sold			13,042				52.5	%			11,794				52.9	%
Gross profit			11,781				47.5	%			10,484				47.1	%			12.4	%			8.3	%
Operating expenses			8,556				34.5	%			7,866				35.3	%
Other operative expenses, net			112				0.5	%			(103	)			-0.5	%
Operative equity method (gain) loss in associates (3)			36				0.1	%			59				0.3	%
Operating income (4)			3,076				12.4	%			2,662				11.9	%			15.6	%			12.4	%
Depreciation, amortization & other operating non-cash charges			1,696				6.8	%			1,434				6.4	%
Operating cash flow (4)(5)			4,772				19.2	%			4,096				18.4	%			16.5	%			12.5	%

 

(1)

Except volume and average price per unit case figures.

(2)

Please refer to page 12 for revenue breakdown.

(3)

Includes equity method in Jugos del Valle, Estrella Azul, among others.

(4)

The operating income and operating cash flow lines are presented as non-gaap measures for the convenience of the reader.

(5)

Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

(6)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

 

SOUTH AMERICA DIVISION

RESULTS OF OPERATIONS

Millions of Pesos ⁽¹⁾

 

 

		For the First Quarter of:
		2019				% of Rev.				2018				% of Rev.				Δ% Reported				Δ% Comparable (6)
Transactions (million transactions)			2,149.4								2,011.5								6.9	%			7.9	%
Volume (million unit cases)			318.1								313.0								1.6	%			4.3	%
Average price per unit case			53.65								57.98								-7.5	%
Net revenues			21,233								21,737
Other operating revenues			192								108
Total Revenues (2)			21,425				100.0	%			21,845				100.0	%			-1.9	%			13.7	%
Cost of goods sold			12,314				57.5	%			12,113				55.5	%
Gross profit			9,111				42.5	%			9,732				44.5	%			-6.4	%			9.7	%
Operating expenses			6,291				29.4	%			6,504				29.8	%
Other operative expenses, net			197				0.9	%			135				0.6	%
Operative equity method (gain) loss in associates (3)			(15	)			-0.1	%			(10	)			0.0	%
Operating income (4)			2,638				12.3	%			3,103				14.2	%			-15.0	%			5.4	%
Depreciation, amortization & other operating non-cash charges			1,130				5.3	%			965				4.4	%
Operating cash flow (4)(5)			3,768				17.6	%			4,068				18.6	%			-7.4	%			9.1	%

 

(1)

Except volume and average price per unit case figures.

(2)

Please refer to page 12 for revenue breakdown.

(3)

Includes equity method in Leao Alimentos, Verde Campo, among others.

(4)

The operating income and operating cash flow lines are presented as non-gaap measures for the convenience of the reader.

(5)

Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

(6)

Please refer to page 7 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

 

 

COCA-COLA FEMSA

CONSOLIDATED BALANCE SHEET

Millions of Pesos

 

Assets		Mar-19				Dec-18				% Var.
Current Assets
Cash, cash equivalents and marketable securities			23,615				23,727				0	%
Total accounts receivable			10,814				14,847				-27	%
Inventories			10,661				10,051				6	%
Other current assets			8,699				8,865				-2	%
Total current assets			53,789				57,490				-6	%
Non-Current Assets
Property, plant and equipment			105,485				106,259				-1	%
Accumulated depreciation			(45,073	)			(44,316	)			2	%
Total property, plant and equipment, net			60,411				61,942				-2	%
Right of use assets			1,637				-				NA
Investment in shares			10,688				10,518				2	%
Intangible assets and other assets			115,640				116,804				-1	%
Other non-current assets			16,931				17,033				-1	%
Total Assets			259,095				263,788				-2	%

 

		March 31, 2019
Debt Mix		% Total Debt (1)				% Interest Rate Floating (1) (2)				Average Rate
Currency
Mexican Pesos			57.3	%			10.9	%			8.4	%
U.S. Dollars			9.5	%			0.0	%			3.9	%
Colombian Pesos			1.9	%			85.3	%			5.7	%
Brazilian Reals			29.3	%			1.8	%			8.5	%
Uruguayan Pesos			1.7	%			0.0	%			10.0	%
Argentine Pesos			0.3	%			0.0	%			39.7	%
Total Debt			100	%			4.6	%			8.1	%

 

(1)

After giving effect to cross- currency swaps.

(2)

Calculated by weighting each year´s outstanding debt balance mix.

 

Financial Ratios		LTM 2019				FY 2018				Δ%
Net debt including effect of hedges (1)(3)			51,590				56,934				-9.4	%
Net debt including effect of hedges / Operating cash flow (1)(3)			1.43				1.61
Operating cash flow/ Interest expense, net (1)			5.75				5.40
Capitalization (2)			41.2	%			40.5	%

 

(1)

Net debt = total debt - cash

(2)

Total debt / (long-term debt + shareholders' equity)

(3)

After giving effect to cross-currency swaps.

 

Liabilities & Equity		Mar-19				Dec-18				% Var.
Current Liabilities
Short-term bank loans and notes payable			16,862				11,604				45	%
Suppliers			16,547				19,746				-16	%
Short-term leasing Liabilities			498				-
Other current liabilities			22,587				14,174				59	%
Total current liabilities			56,494				45,524				24	%
Non-Current Liabilities
Long-term bank loans and notes payable			59,328				70,201				-15	%
Long Term Leasing Liabilities.			1,146				-
Other long-term liabilities			16,645				16,313				2	%
Total liabilities			133,612				132,037				1	%
Equity
Non-controlling interest			6,808				6,807				0	%
Total controlling interest			118,674				124,943				-5	%
Total equity			125,483				131,750				-5	%
Total Liabilities and Equity			259,095				263,788				-2	%

 

Debt Maturity Profile

 

 

 

COCA-COLA FEMSA

QUARTERLY- VOLUME, TRANSACTIONS & REVENUES

 

Volume

 

		1Q 2019																				1Q 2018 (3)																				YoY
		Sparkling				Water (1)				Bulk (2)				Stills				Total				Sparkling				Water (1)				Bulk (2)				Stills				Total				Δ %
Mexico			304.5				21.9				66.0				29.2				421.6				310.1				25.2				66.5				28.2				430.0				-1.9	%
Central America			48.0				3.0				0.2				5.1				56.4				36.8				2.9				0.2				5.0				44.9				25.5	%
Mexico and Central America			352.5				24.9				66.2				34.3				478.0				347.0				28.1				66.7				33.1				474.9				0.7	%
Colombia			45.7				6.3				4.7				3.6				60.4				50.4				6.8				5.1				4.4				66.7				-9.4	%
Brazil			182.3				14.6				2.4				13.1				212.4				169.3				12.4				2.1				10.9				194.8				9.1	%
Argentina			27.4				3.8				1.0				2.5				34.7				40.8				5.3				1.5				4.0				51.6				-32.7	%
Uruguay			9.5				1.0				-				0.1				10.6				-				-				-				-				-				NA
South America			264.9				25.7				8.1				19.4				318.1				260.5				24.6				8.6				19.3				313.0				1.6	%
TOTAL			617.4				50.6				74.3				53.7				796.1				607.5				52.6				75.3				52.4				787.9				1.0	%

 

(1)

Excludes water presentations larger than 5.0 Lt ; includes flavored water.

(2)

Bulk Water = Still bottled water in 5.0, 19.0 and 20.0 - liter packaging presentations; includes flavored water

 

Transactions

 

		1Q 2019																1Q 2018 (3)																YoY
		Sparkling				Water				Stills				Total				Sparkling				Water				Stills				Total				Δ %
Mexico			1,827.4				144.3				251.4				2,223.1				1,886.4				182.7				230.3				2,299.4				-3.3	%
Central America			388.4				17.9				58.9				465.3				295.2				16.3				63.1				374.6				24.2	%
Mexico and Central America			2,215.9				162.3				310.3				2,688.4				2,181.6				199.0				293.4				2,674.0				0.5	%
Colombia			333.5				84.8				39.5				457.8				373.5				83.6				48.7				505.8				-9.5	%
Brazil			1,180.9				124.8				130.0				1,435.7				1,024.3				108.3				116.0				1,248.7				15.0	%
Argentina			160.0				22.6				18.3				200.9				204.4				27.5				25.1				257.0				-21.8	%
Uruguay			50.1				4.2				0.7				55.0				-				-				-				-				-
South America			1,724.4				236.4				188.6				2,149.4				1,602.2				219.4				189.9				2,011.5				6.9	%
TOTAL			3,940.3				398.7				498.8				4,837.8				3,783.8				418.4				483.3				4,685.5				3.3	%

 

Revenues

 

Expressed in million Mexican Pesos		1Q 2019				1Q 2018 (3)				Δ %
Mexico			20,574				19,084				7.8	%
Central America			4,248				3,193				33.0	%
Mexico and Central America			24,823				22,277				11.4	%
Colombia			3,189				3,600				-11.4	%
Brazil (4)			15,512				14,848				4.5	%
Argentina			1,825				3,397				-46.3	%
Uruguay			899				-				-
South America			21,425				21,845				-1.9	%
TOTAL			46,248				44,122				4.8	%

 

(3)

Volume, transactions and revenues for 1Q 2018 are re-presented excluding the Philippines.

(4)

Brazil includes beer revenues of Ps.4,166.6 million for the first quarter of 2019 and Ps. 3,586.5 million for the same period of the previous year.

 

 

(1)

Volume is expressed in unit cases. Unit case refers to 192 ounces of finished beverage product (24 eight-ounce servings) and, when applied to soda fountains, refers to the volume of syrup, powders and concentrate that is required to produce 192 ounces of finished beverage product.

 

(2)

Transactions refers to the number of single units (e.g. a can or a bottle) sold, regardless of their size or volume or whether they are sold individually or in multipacks, except for fountain which represents multiple transactions based on a standard 12 oz. serving.

 

 

COCA-COLA FEMSA

MACROECONOMIC INFORMATION

 

Inflation ⁽¹⁾

			LTM				1Q19
Mexico			3.52	%			0.03	%
Colombia			2.88	%			1.76	%
Brazil			4.00	%			1.18	%
Argentina			53.26	%			10.80	%
Costa Rica			1.40	%			0.21	%
Panama			-0.70	%			-0.09	%
Guatemala			4.81	%			1.63	%
Nicaragua			3.41	%			0.30	%
Uruguay			7.60	%			4.17	%

 

⁽¹⁾ Source: inflation estimated by the company based on historic publications from the Central Bank of each country.

 

Average Exchange Rates for each period ⁽²⁾  

		Quarterly Exchange Rate (Local Currency per USD)
		1Q19				1Q18				Δ %
Mexico			19.22				18.76				2.5	%
Colombia			3,134.36				2,860.36				9.6	%
Brazil			3.77				3.24				16.2	%
Argentina			39.10				19.70				98.4	%
Costa Rica			609.96				571.95				6.6	%
Panama			1.00				1.00				0.0	%
Guatemala			7.72				7.37				4.8	%
Nicaragua			32.53				30.98				5.0	%
Uruguay			32.83				28.46				15.4	%

 

End-of-period Exchange Rates

		Closing Exchange Rate (Local Currency per USD)												Closing Exchange Rate (Local Currency per USD)
		Mar-19				Mar-18				Δ %				Dic-18				Dic-17				Δ %
Mexico			19.38				18.34				5.6	%			19.68				19.74				-0.3	%
Colombia			3,174.79				2,780.47				14.2	%			3,249.75				2,984.00				8.9	%
Brazil			3.90				3.32				17.2	%			3.87				3.31				17.1	%
Argentina			43.35				20.15				115.1	%			37.70				18.65				102.1	%
Costa Rica			602.36				569.31				5.8	%			611.75				572.56				6.8	%
Panama			1.00				1.00				0.0	%			1.00				1.00				0.0	%
Guatemala			7.68				7.40				3.8	%			7.74				7.34				5.4	%
Nicaragua			32.72				31.16				5.0	%			32.33				30.79				5.0	%
Uruguay			33.48				28.35				18.1	%			32.39				28.76				12.6	%

 

⁽²⁾ Average exchange rate for each period computed with the average exchange rate of each month.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.

 

FOMENTO ECONÓMICO MEXICANO, S.A. DE C.V .

 

	By:	/s/ Gerardo Estrada Attolini
		Gerardo Estrada Attolini
		Director of Corporate Finance
Date:  April 29, 2019