Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coca-Cola Femsa SAB de CV (KOF, Financial) reported a 7.5% year-on-year increase in consolidated volumes, driven by strong performance in Mexico, Brazil, Guatemala, and Central America South Territories.
- The company achieved double-digit top and bottom-line growth, with total revenues for the quarter growing 13.1% to MXN69.5 billion.
- Gross profit increased by 17.2% to MXN32 billion, leading to a margin expansion of 160 basis points to 46%, driven by solid top-line performance and favorable packaging costs.
- Adjusted EBITDA for the quarter increased 21.7% to MXN13.9 billion, with an EBITDA margin expansion of 140 basis points to 20%.
- The rollout of the Juntos+ app in Mexico and Brazil has digitized more than 50% of the customer base, enhancing customer engagement and sales efficiency.
Negative Points
- The company faced challenges due to unprecedented flooding in Rio Grande do Sul, Brazil, which led to operational disruptions and extraordinary expenses.
- Volume declines were reported in Argentina and Uruguay, with Argentina experiencing a 9.9% decrease due to a 31% contraction in disposable income.
- The depreciation of the Brazilian real and Argentine peso negatively impacted revenue growth when translated into Mexican pesos.
- Higher sweetener costs and the significant depreciation of the Argentine peso posed challenges to maintaining cost efficiencies.
- Capacity constraints in Mexico led to stockouts, limiting share recovery efforts despite strong demand.
Q & A Highlights
Q: How are you thinking about your volume guidance after the strong demand seen in the first half of the year? What is your view for the remaining of the year?
A: Jorge Collazo Pereda, Director of Investor Relations, stated that they are encouraged by the performance year-to-date but maintain a mid-single digit volume growth outlook for the full year. Despite the strong first half, they believe it's too early to change the guidance but remain optimistic about the second half.
Q: Can you discuss your expectations for costs and hedging strategies for 2024 and 2025?
A: Gerardo Cruz Gelaya, CFO, explained that they maintain a rolling 12-month hedge position for FX and raw materials. For 2024, over 60% of dollarized raw materials in Mexico and Argentina are hedged, with over 40% in Brazil, Colombia, and Uruguay. They have strong hedging positions for sweeteners, aluminum, and PET, providing better certainty for operations.
Q: Can you give more color on the impact of a slightly weaker consumer in Mexico and other regions?
A: Ian Marcel Craig Garcia, CEO, noted that consumer pressure is mainly in Colombia and Argentina. In Mexico, recent softness is attributed to weather rather than consumer strength, as unemployment remains low and projects continue. The softness is seen in water and single-serve products, consistent with weather impacts.
Q: What are the drivers behind the strong margin performance in South America, and can we expect healthier margins for the year?
A: Ian Marcel Craig Garcia, CEO, attributed the strong margins to their sustainable growth model and operating leverage. While they see a better cost outlook, particularly in sugar, they are cautious about projecting significant margin changes for the full year, maintaining a flattish margin expectation compared to last year.
Q: How is the Juntos+ program impacting volume growth, and what are the updates on the fintech side?
A: Ian Marcel Craig Garcia, CEO, highlighted that Juntos+ is driving a significant uplift in volume and customer engagement. The loyalty program has been well-received, with 750,000 customers online in Mexico. On the fintech side, they are working on partnerships across the region, though specific updates were not detailed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
