Femsa Profit Rises on Soft Drinks, Convenience Stores

Fomento Economico Mexicano SAB (FEMSAUBD), the largest Coca-Cola bottler in Latin America, said fourth-quarter profit jumped almost sevenfold as it sold more soft drinks, raised prices and expanded its Oxxo convenience-store chain.

Net income rose to 4.07 billion pesos ($313 million) from 586 million pesos a year earlier. Sales jumped 20 percent to 53.7 billion pesos, Femsa, as the Monterrey, Mexico-based bottler and brewer is known, said today in a statement.

Sales volume at Coca-Cola Femsa SAB, the soft-drink unit that trades separately, gained 8.7 percent, helped by sparkling drinks in Mexico and Central America. Beer and soft-drink prices in Mexico rose, and currency translation also bolstered earnings. Femsa added 340 Oxxo stores in the quarter.

Volume increases for soft drinks “kept their momentum,” Alan Alanis, an analyst with JPMorgan Chase & Co. in New York, wrote in a Feb. 10 report. “Positive currency translation and single-digit price increases in line with local inflation” helped spur sales and profit, he wrote.

Sales at Coca-Cola (KO) Femsa advanced 28 percent to 29 billion pesos. Earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as Ebitda, rose 17 percent to 5.81 billion pesos.

Femsa’s Ebitda rose 17 percent to 10.6 billion pesos.

Alanis predicted net income of 2.72 billion pesos and sales of 54.5 billion pesos for Femsa. Net income was higher than forecast because of an extraordinary tax gain of 2 billion pesos, Alanis said today. He had estimated sales of 27.6 billion pesos for Coca-Cola Femsa.

Acquisition Opportunities

The company budgeted capital expenditures of $500 million for Coca-Cola Femsa, of which about $420 million to $450 million actually will be spent, said Hector Trevino, chief financial officer of the soft-drink unit, on a conference call with analysts.

Coca-Cola Femsa proposed paying dividends totaling 2.6 billion pesos, a 94 percent increase from last year. The company will build cash as it seeks acquisition opportunities, Trevino said. The owners of the Coca-Cola franchise in Ecuador had been accepting offers, but the sale process has now been stopped, he said.

Oxxo probably will open 900 to 1,000 new stores this year and will have capital expenditures of $220 million to $230 million, said Javier Astaburuaga, chief financial officer of Femsa, in a separate conference call.

Oxxo, which opened stores outside of Mexico for the first time, in Colombia, probably won’t expand to an additional country this year, he said.

Femsa declined 55 centavos to 53.33 pesos at 4:10 p.m. New York time in Mexico City trading. Coca-Cola Femsa lost 1.25 pesos to 76.53 pesos.

To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net.

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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