July 18 (Bloomberg) -- Arca Continental SAB, the second-largest Coca-Cola bottler in Latin America, rose to an 11-month high as company executives cited prospects for improved consumer spending in Mexico and Argentina.
Shares of Arca climbed 3 percent to 92.98 pesos at 2:14 p.m. in Mexico City, the highest level on a closing basis since August 2013. The gain was the biggest on the benchmark IPC equity index, which advanced 0.8 percent.
Arca executives said on a conference call yesterday that they see evidence of increased consumption and reduced sugar prices although a full recovery from Mexico’s excise tax on sweet drinks will take a “couple of years.” Second-quarter adjusted net income increased 3 percent from a year earlier.
“Concerns about commodity costs and consumer confidence are improving with the more stable environment,” Lauren Torres, an HSBC Holdings Plc analyst, said by phone from New York. “Investors know that if there are going to be price increases in the future, then they will be selective.”
Torres cited Arca’s strategy of raising prices in the first quarter to cover the excise tax and then adding another increase in the second quarter to account for inflation. HSBC maintained its hold rating in a report today.
Mexico began taxing sugary drinks in January at one peso per liter in an effort to curb obesity. Also this year, the government applied an 8 percent levy on junk food.
“The challenging economic and consumption environments facing the first half of the year in Mexico and Argentina require us to be more productive and efficient on the cost and expense side,” Emilio Marcos Charur, the chief financial officer of Monterrey, Mexico-based Arca, said on the conference call. “We expect a better consumption environment in the coming months.”
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