kofpr1q18_6k.htm - Generated by SEC Publisher for SEC Filing

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 2018
Commission File Number
1-12260

 

COCA-COLA FEMSA, S.A.B. de C.V.

(Translation of registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

Calle Mario Pani No. 100,
Santa Fe Cuajimalpa,
Cuajimalpa de Morelos,
05348, Ciudad de México,

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)

Yes    No  X 

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)

Yes    No  X 

Indicate by check mark whether the registrant by furnishing the information contained in this Form 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-__.

 

 

 

 

2018 FIRST QUARTER RESULTS

Mexico City, April 25, 2018, Coca-Cola FEMSA, S.A.B. de C.V. (BMV: KOFL, NYSE: KOF) (“Coca-Cola FEMSA” or the “Company”), the largest Coca-Cola franchise bottler in the world by sales volume, announces results for the first quarter of 2018.

 

(1)Comparability

 

The comparability of our financial and operating performance in the first quarter of 2018, as compared to the same period of 2017, was affected by the following factors: (a) as previously announced, due to a change in reporting method, the results from Coca-Cola FEMSA de Venezuela are no longer included in our consolidated financial statements as of January 1, 2018; and (b) the consolidation of Coca-Cola FEMSA Philippines commencing on February 1, 2017. In addition, the consolidation generated a one-time non-cash gain during the first quarter of 2017.

 

In order to better describe the performance of our business, for certain information we present the comparable figures excluding the effects of: (i) mergers, acquisitions, and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of Coca-Cola FEMSA de Venezuela in 2017; and including the results of Coca-Cola FEMSA Philippines, Inc., as if its consolidation had taken place at the beginning of first quarter 2017.

 

Furthermore, as of January 1, 2018, margin comparability in the Philippines was impacted by the excise tax on soft drink production, accounted for in cost of goods sold.

Operational and Financial Highlights

 

·         Revenues declined 3.2%, impacted by an unfavorable currency translation effect, while comparable revenues grew 7.2% for the quarter.

·         Volume increased in Brazil, Central America and Colombia driven by the rollout of our portfolio and affordability initiatives, while transactions outperformed volumes in key markets such as Argentina, Brazil and the Philippines.

·         Operating income declined 3.4%, while comparable operating income declined 1.1% for the quarter, driven mainly by cost pressures in Central America, Mexico, and the Philippines, partially offset by raw material tailwinds in South America.

·         Majority net income decreased 59.0% during the first quarter of 2018, as compared to the same period of 2017 which included a one-time non-cash gain related to the consolidation of the Philippines.

 

Results Summary

 

 

First Quarter

 

as Reported

 

Comparable (1)

Expressed in millions of Mexican pesos.

2018

D%

 

D%

Total revenues

49,713

(3.2%)

 

7.2%

Gross profit

21,917

(1.7%)

 

6.1%

Operating income

5,883

(3.4%)

 

(1.1%)

Operating cash flow (2)

8,706

(8.9%)

 

4.0%

Net income attributable to equity holders of the company

2,414

(59.0%)

 

 

Earnings per share (3)

1.15

 

 

 

 

 

 

 

 

(2) Operating cash flow = operating income + depreciation + amortization & other operative non-cash charges.

(3) Quarterly earnings / outstanding shares as of the end of the period. Outstanding shares as of 1Q'18 were 2,100.8 million

 

Message from the Chief Executive Officer

“At the start of the year, we faced a mixed macroeconomic environment across our operations, coupled with a new tax environment in the Philippines. However, our ability to adapt to ever-changing market and consumer dynamics, combined with our transformational initiatives, enabled us to deliver comparable revenue and operating cash flow growth of 7.2% and 4.0%, respectively. By leveraging our clear strategy, the encouraging recovery of our South America division, a resilient Mexico, and an adaptable Philippines, we aim to continue Coca-Cola FEMSA’s growth, while hitting new milestones in transforming our operating model, protecting our short-term results, and ensuring sustainable social and economic value for all of our stakeholders,” said John Santa Maria Otazua, Chief Executive Officer of the Company.

Page 1


 
 

 

Consolidated results for the first quarter

Comparable figures:(1)

Revenues: Comparable total revenues grew 7.2% in the first quarter of 2018 as compared to the same period of 2017, driven by average price per unit case growth in Argentina and Mexico, coupled with volume growth in Brazil, Central America, and Colombia, partially offset by volume declines in the rest of our operations.

Transactions: Comparable number of transactions increased 1.0%. Our sparkling beverage category grew 0.4%, driven by 1.3% growth in our colas portfolio, partially offset by a 2.3% decline in flavors. Our positive performance in colas was driven by growth in Argentina, Brazil, Central America and Colombia, partially offset by a decline in Mexico and the Philippines. Our decline in flavors was driven by Brazil, Colombia, and Mexico, partially offset by growth in Argentina, Central America, and the Philippines. Our still beverage category grew 0.8%, driven mainly by the positive performance of Brazil, Central America, and Mexico. Finally, our water category’s transactions increased by 7.7%, driven by growth in almost all of our operations, partially offset by a decline in Argentina.

Volume: Comparable sales volume remained flat in the first quarter of 2018 as compared to the same period in 2017. Our sparkling beverage portfolio’s volume remained flat, driven by 1.5% growth in our colas portfolio, partially offset by a 4.4% decline in flavors. Growth in our colas portfolio was driven mainly by the performance of Brazil, Central America, and Colombia, while our decline in flavors was driven mainly by declines in Brazil, Colombia, and the Philippines. Our still beverage category’s volume declined 6.6%, as growth in most of our operations was offset by declines in Argentina, Colombia, and the Philippines. Our personal water portfolio’s volume grew 10.6% due to positive performance in most of our operations. Finally, our bulk water portfolio’s volume declined 1.2%, driven by Mexico and Colombia, partially offset by growth in the rest of our operations.

Gross profit: Comparable gross profit grew 6.1%. Our pricing initiatives, coupled with lower sweetener prices in most of our operations, were offset by an unfavorable currency hedging position, higher sweetener and concentrate prices in Mexico, higher sweetener and PET costs and the inclusion of the excise tax on beverage production in the Philippines, which is applied as a cost, and the depreciation in the average exchange rate of the Argentine Peso, the Brazilian Real, and the Philippine Peso as applied to our U.S. dollar-denominated raw material costs.

Operating Income: Comparable operating income declined 1.1% for the first quarter of 2018 as compared to the same period of 2017.

Operating cash flow: Comparable operating cash flow increased 4.0% in the first quarter of 2018.

As reported figures:

Revenues: Total revenues declined 3.2% to Ps. 49,713 million in the first quarter of 2018, mainly due to the negative translation effect resulting from the depreciation of all of our operating currencies as compared to the Mexican Peso, combined with the deconsolidation of Coca-Cola FEMSA de Venezuela as of December 31, 2017, and an unfavorable price/mix in Brazil, Central America and Colombia. These effects were partially offset by price increases aligned with or above inflation in key territories such as Argentina and Mexico, supported by volume growth in Brazil, Central America and Colombia.

Transactions: Reported total number of transactions increased 6.9% to 6,137.6 million in the first quarter of 2018 as compared to the same period in 2017.

Volume: Reported total sales volume increased 3.0% to 907.8 million unit cases in the first quarter of 2018 as compared to the same period in 2017.

Gross profit: Gross profit declined 1.7% to Ps. 21,917 million, and gross margin expanded 70 basis points to 44.1%.

(Continued on next page)

Page 2


 
 

 

 

Equity method: The reported share of the profits of associates and joint ventures recorded a loss of Ps. 49 million in the first quarter of 2018, compared to a gain of Ps. 46 million recorded in the first quarter of 2017. This is mainly due to: (i) a loss in our dairy joint venture in Panama; (ii) larger gains in our joint ventures in Brazil during the first quarter of 2017 as compared to the first quarter of 2018; and (iii) the consolidation of Coca-Cola FEMSA Philippines, Inc., which is no longer included in the equity method as of February 2017.

Operating Income: Operating income decreased 3.4% to Ps. 5,883 million, and operating margin contracted 10 basis points to 11.8% during the first quarter 2018 as compared with the same period of 2017, which benefited from the reversal of expense-related provisions that did not materialize.

Other non-operative expenses, net: Other non-operative expenses, net, recorded an expense of Ps. 62 million, compared to a gain of Ps. 2,471 million during the first quarter of 2017, due mainly to the consolidation of Coca-Cola FEMSA Philippines, Inc., starting February 2017.

Comprehensive financing result: Comprehensive financing result in the first quarter of 2018 recorded an expense of Ps. 2,072 million, compared to an expense of Ps. 1,286 million in the same period of 2017.

During the first quarter of 2018, we recorded an interest expense, net, of Ps. 1,598 million, compared to Ps. 2,328 million in the first quarter of 2017. This decrease was driven by the decline of short-term interest rates in Brazil; the average exchange rate depreciation of the Brazilian Real compared to the Mexican Peso as applied to existing Brazilian Real-denominated interest expense; and the reduction of debt in Argentina, Brazil, and Colombia. However, these effects were partially offset by: (i) an interest rate increase in Mexico; (ii) additional debt in Mexico; and (iii) an interest rate increase resulting from swapping U.S. dollar-denominated debt to Brazilian Real and Mexican Peso-denominated debt, as part of our strategy to eliminate our U.S. dollar net debt exposure.

In addition, for the first quarter, we recorded a foreign exchange loss of Ps. 228 million as compared to a gain of Ps. 53 million in 2017, which resulted from the quarterly appreciation of the Mexican Peso as applied to our U.S. dollar-denominated cash position.

Additionally, due to the announced change in the reporting method, the results of Coca-Cola FEMSA de Venezuela are no longer included in our consolidated financial statements, for this reason no monetary position in hyperinflationary subsidiaries was recorded as of January 1, 2018.

Market value on financial instruments recorded a loss of Ps. 246 million as compared to a gain of Ps. 434 million in the first quarter of 2017 due to the decrease during the quarter in the long-term interest rates in Brazil as applied to our fixed rate cross-currency swaps.

Income tax: During the first quarter of 2018, reported income tax as a percentage of income before taxes was 32.0%, compared to 17.1% in the same period of 2017. The lower tax rate in the first quarter of 2017 was driven mainly by one-time non-cash gain recorded in connection with the consolidation of Coca-Cola FEMSA Philippines, Inc.

Net income: Consolidated net controlling interest income decreased 59.0% to Ps. 2,414 million in the first quarter of 2018, resulting in earnings per share (EPS) of Ps. 1.15 (Ps. 11.49 per ADS), in the face of a high comparable driven mainly by one-time non-cash gain recorded in connection with the consolidation of Coca-Cola FEMSA Philippines, Inc.

Operating cash flow: Operating cash flow decreased 8.9% to Ps. 8,706 million, and operating cash flow margin contracted 110 basis points to 17.5%.

 

 

Page 3


 
 

 

Balance Sheet (1)

 

As of March 31, 2018, we had a cash balance of Ps. 19,549 million, including US$353 million denominated in U.S. dollars, an increase of Ps. 777 million as compared to December 31, 2017. As of March 31, 2018, total short-term debt was Ps. 11,238 million, and long-term debt was Ps. 67,463 million. Total debt decreased by Ps. 4,664 million, and net debt decreased by Ps. 5,447 million compared to year-end 2017, due mainly to our cash flow generation during the year and the positive translation effect resulting from the appreciation of the end-of-period exchange rate of the Mexican Peso as applied to our U.S. dollar-denominated debt position.

 

The weighted average cost of debt for the quarter, including the effect of debt swapped to Brazilian Reals and Mexican Pesos, was 7.67%, a reduction as compared to the fourth quarter 2017, due mainly to the reduction of interest rates in Brazil. The following charts set forth the Company’s debt profile by currency and interest rate type and by maturity date as of March 31, 2018.

 

Currency

% Total Debt(2)

% Interest Rate Floating(2)(3)

Mexican Pesos

45.9%

3.1%

U.S. Dollars

1.4%

0.0%

Colombian Pesos

2.9%

71.8%

Brazilian Reals

49.7%

50.9%

Argentine Pesos

0.1%

0.0%

Debt Maturity Profile

Maturity Date

2018

2019

2020

2021

2022

2023+

% of Total Debt

13.9%

8.7%

12.1%

8.1%

2.00%

55.23%

 

(1)       See page 14 for detailed information.

(2)       After giving effect to cross-currency swaps.

(3)       Calculated by weighting each year’s outstanding debt balance mix.

 

 

Selected Financial Ratios

 

 

 

LTM 2018

 

FY 2017

D %

Net debt including effect of hedges (1)(3)

 

64,321

 

68,973

-6.7%

Net debt including effect of hedges / Operating cash flow (1)(3)

1.65

 

1.74

 

Operating cash flow/ Interest expense, net (1)

 

5.45

 

4.99

 

Capitalization (2)

 

38.1%

 

39.3%

 

 

 

 

 

 

 

(1) Net debt = total debt - cash

 

 

 

 

 

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

 

 

 

 

 

(3) After giving effect to cross-currency swaps.

 

 

 

 

 

 

 

 

 

 

 

 

Page 4


 
 

 

Mexico & Central America Division

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

 

Comparable figures:(1)

Revenues: Comparable total revenues from our Mexico and Central America division increased 5.2% in the first quarter of 2018, compared to the same period in 2017, driven by an increase in average price per unit case in Mexico and volume growth in Central America, partially offset by a slight volume decline in Mexico and an unfavorable price/mix effect in Central America.

Transactions: Total transactions in our Mexico and Central America division remained flat in the first quarter of 2018. Our sparkling beverage portfolio’s transactions contracted 0.8%, driven mainly by a 0.7% decline in our colas portfolio and a 1.5% decline in flavors. Our still beverage category’s transactions increased 2.0% in the division, driven by 1.4% growth in Mexico and 4.3% growth in Central America, while our water transactions, including bulk water, increased 3.1%, driven by 3.0% growth in Mexico and 4.7% growth in Central America.

Volume: Total sales volume for the division remained flat in the first quarter of 2018, compared to the same period of 2017. Our sparkling beverage category’s volume remained flat, driven by a 0.6% increase in our colas portfolio and flat performance in flavors. Our performance in colas was driven mainly by 14.2% growth in Central America, while our performance in flavors was driven by 2.2% growth Central America. Our still beverage category’s volume increased 1.6%, driven by growth in both Mexico and Central America. Our personal water portfolio’s volume increased 6.8%, driven by 6.2% growth in Mexico and 13.0% growth in Central America. Our bulk water portfolio’s volume declined 3.0% in the division due to a contraction in Mexico, partially offset by growth in Central America.

Gross profit: Comparable gross profit grew 1.9% in the first quarter of 2018 as compared to the same period in 2017. In Mexico, our pricing initiatives and the appreciation of the average exchange rate of the Mexican Peso as applied to U.S. dollar-denominated raw material costs were offset by the increase in concentrate cost, higher prices of sweeteners, and an unfavorable currency hedging position. In Central America, lower sweetener prices were offset by higher PET prices, an unfavorable price/mix, and the depreciation of the average exchange rates of the Costa Rican Colon and the Nicaraguan Cordoba as applied to U.S. dollar-denominated raw material costs.

Operating income: Comparable operating income in the division decreased 10.5% in the first quarter of 2018 as compared to the same period in 2017.

Operating cash flow: Comparable operating cash flow decreased 1.7% in the first quarter of 2018 as compared to the same period in 2017.

As reported figures:

Revenues: Reported total revenues increased 3.7% in the first quarter of 2018 as compared to the same period of 2017.

Gross profit: Reported gross profit increased 0.6% in the first quarter of 2018, and gross profit margin reached 47.1%, a gross margin contraction of 150 basis points.

Operating income: Reported operating income decreased 11.0% in the first quarter of 2018, and operating income margin reached 11.9%, contracting 200 basis points during the period.

Operating cash flow: Reported operating cash flow decreased 3.3% in the first quarter of 2018, resulting in a margin contraction of 130 basis points to 18.4%.

 

Page 5


 
 

 

South America Division

(Argentina, Brazil and Colombia)

 

Comparable figures: (1)

Revenues: Comparable total revenues increased 6.7%, driven mainly by volume growth in Brazil and Colombia, coupled with an average price per unit case increase in Argentina, which was partially offset by an unfavorable price/mix in Brazil and Colombia.

Transactions: Comparable transactions in the division increased 4.4% during the first quarter of 2018. Our sparkling beverage portfolio’s transactions increased 3.7%, driven by 7.9% growth in our colas portfolio, partially offset by an 8.9% contraction in flavors. Our positive performance in colas was driven by growth across our South American operations. However, flavors’ negative performance was driven by Colombia and Brazil, partially offset by growth in Argentina. Our still beverage category’s transactions increased 2.0%, driven by growth in Brazil, partially offset by a decline in Argentina and Colombia. Our water transactions, including bulk water, increased 12.0%, driven by growth in Brazil and Colombia, partially offset by a decline in Argentina.

Volume: Comparable total sales volume in South America grew 3.2% during the first quarter of 2018 as compared to the same period of 2017. Our sparkling beverage category’s volume increased 2.3%, driven by 6.4% growth in our colas portfolio, which was partially offset by a 9.3% decline in flavors. Colas’ positive performance was driven by growth in Brazil and Colombia, while our decline in flavors was also driven by Brazil and Colombia. Our still beverage category’s volume increased 1.5%, driven by growth in Brazil, partially offset by a decline in Colombia. Our personal water category’s volume increased 18.2%, driven by growth in Brazil and Colombia, offset by a decline in Argentina. Our bulk water business’s volume declined 9.0%, driven by a decline in Colombia, partially offset by growth in Argentina and Brazil.

Gross profit: Comparable gross profit increased 16.2% as a result of lower sweetener prices, a favorable currency hedging position, and the appreciation of the Colombian Peso as applied to U.S. dollar-denominated raw material costs, which offset higher PET prices in Colombia, an unfavorable raw material hedging position, and the depreciation of the average exchange rate of the Brazilian Real and the Argentine Peso as applied to U.S. dollar-denominated raw material costs.

Operating income: Comparable operating income in the division increased 11.7% as compared to the same period in 2017.

Operating cash flow: Comparable operating cash flow increased 12.3% as compared to the same period of 2017.

As reported figures:

Revenues: Reported total revenues declined 16.9% to Ps. 21,845 million in the first quarter of 2018, driven by an unfavorable currency translation effect resulting from the depreciation of all of our operating currencies as compared to the Mexican Peso, the deconsolidation of Coca-Cola FEMSA de Venezuela, and the unfavorable price-mix effect in Brazil and Colombia. These effects were partially offset by volume growth in Brazil and Colombia, coupled with an average price per unit case increase in Argentina.

Transactions: Reported total number of transactions decreased 0.3% to 2,011.5 million in the first quarter of 2018 as compared to the same period in 2017.

Volume: Reported total sales volume decreased 1.0% to 313.0 million unit cases in the first quarter of 2018 as compared to the same period in 2017.

Gross profit: Reported gross profit decreased 6.7% to Ps. 9,732 million in the first quarter of 2018, and gross profit margin expanded 480 basis points to 44.5%.

Operating income: Reported operating income grew 8.1% to Ps. 3,103 million in the first quarter of 2018, resulting in a margin expansion of 330 basis points to 14.2%.

Operating cash flow: Reported operating cash flow declined 13.8% to Ps. 4,068 million in the first quarter of 2018, resulting in a margin expansion of 70 basis points to 18.6%.

 

Page 6


 
 

 

Asia Division

(The Philippines)

As of January 1, 2018, the Philippines implemented a comprehensive tax reform to fund infrastructure investments. As part of this reform, among other initiatives, excise taxes on sweetened beverages were applied as follows: (i) 6 Philippine Pesos per liter on beverages containing sugar or non-caloric sweeteners; and (ii) 12 Philippine Pesos per liter on beverages containing high fructose corn syrup (HFCS).

As this excise tax is applied to soft drink production, margins in this operation are incomparable with margins from 2017. This impact in comparability is caused by the recognition of this excise tax in cost of goods sold and the Company’s increased prices to adjust to this change, resulting in increased revenues.

Comparable figures: (1)

Revenues: Comparable total revenues increased 18.5% during the first quarter of 2018, driven by average price per unit case increase as an adjustment to the excise tax, partially offset by a volume decline.

Transactions: Comparable transactions decreased 1.2% in the first quarter of 2018. Our sparkling beverage portfolio’s transactions decreased 1.4%, driven by a 3.5% decline in our colas portfolio, partially offset by 2.6% growth in flavors. Our still beverage category’s transactions, not including powders, increased by 35.1%. Our water transactions, including bulk water, increased 8.2%.

Volume: Comparable total sales volume decreased 8.1% in the first quarter of 2018. Our sparkling beverage category’s volume decreased 7.0%, driven by an 8.4% decline in our colas portfolio and a 4.2% decline in flavors. Our still beverage category’s volume, excluding powders, increased 18.8%. Our personal water category’s volume decreased 1.3%. Our bulk water business’s volume grew 20.6%.

Gross profit: Comparable gross profit decreased 14.9% as compared to the same period of 2017, driven mainly by the inclusion of the excise tax on soft drink production as a cost of goods sold, as well as higher sweetener and PET resin prices and the devaluation of the Philippine Peso as applied to our U.S. dollar-denominated raw material costs.

Operating income: Comparable operating income decreased 38.8% to Ps. 117 million during the first quarter of 2018.

Operating cash flow: Comparable operating cash flow decreased 6.4% to Ps. 541 million as compared to the same period of 2017.

 

As reported figures:

Revenues: Reported total revenues increased 55.2% to Ps. 5,591 million for the first quarter 2018 as compared to the results of February and March 2017. Additionally, total revenues were driven by an average price per unit case increase, as an adjustment to the excise tax, partially offset by a volume decline and the negative translation effect resulting from the depreciation the Philippine Peso as compared to the Mexican Peso.

Transactions: Reported total number of transactions increased 39.0% to 1,452.1 million in the first quarter of 2018 as compared to the same period of 2017.

Volume: Reported total sales volume increased 29.9% to 119.9 million unit cases in the first quarter of 2018 as compared to the same period of 2017.

Gross profit: Gross profit grew 17.9% to Ps. 1,701.3 million, and gross margin contracted 970 basis points to 30.4%.

Operating income: Reported operating income declined 48.7% to Ps. 117.3 million in the first quarter of 2018, resulting in a margin of contraction of 430 basis points to 2.1%.

Operating cash flow: Reported operating cash flow declined 9.8% to Ps. 541.1 million in the first quarter of 2018, resulting in a margin of contraction of 700 basis points to 9.7%.

 

Page 7


 
 

 

Recent Developments

 

·         On March 9, 2018, Coca-Cola FEMSA held its Annual Ordinary General Shareholders Meeting, during which its shareholders approved the Company’s consolidated financial statements for the year ended December 31, 2017, the annual report presented by the Board of Directors, the declaration of dividends corresponding to fiscal year 2017, and the composition of the Board of Directors and the Finance and Planning, Audit, and Corporate Practices Committees for 2018. Shareholders approved the payment of a cash dividend in the amount of Ps. 3.35 per share outstanding, equivalent to Ps. 7,038 million, to be paid in two installments as of May 3, 2018, and November 1, 2018.

Conference Call Information

Our first quarter 2018 conference call will be held on April 25, 2018, at 11:00 A.M. Eastern Time (10:00 A.M. Mexico City Time). To participate in the conference call, please dial: Domestic U.S.: 888-726-2418 or International: 719-785-1753. Participant code: 6219919. We invite investors to listen to the live audio cast of the conference call on the Company’s website, www.coca-colafemsa.com. If you are unable to participate live, the conference call audio will be available at www.coca-colafemsa.com.

Mexican Stock Exchange Quarterly Filing

Coca-Cola FEMSA encourages the reader to refer to our quarterly filing to the Mexican Stock Exchange (Bolsa Mexicana de Valores or BMV) for more detailed information. This filing contains a detailed cash flow statement and selected notes to the financial statements, including segment information. This filing is available at www.bmv.com.mx in the Información Financiera section for Coca-Cola FEMSA (KOF) and on our corporate website at www.coca-colafemsa.com/inversionistas/registros-bmv.

 

Page 8


 
 

 

Additional Information

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.

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

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 in a given measure excluding the effects of: (i) mergers, acquisitions, and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of Coca-Cola FEMSA de Venezuela in 2017; and including the results of Coca-Cola FEMSA Philippines, Inc., as if its consolidation had taken place at the beginning of first quarter 2017. In preparing this measure, management has used its best judgment, estimates, and assumptions in order to maintain comparability.

Earnings per share were computed based on 2,100.8 million shares (each ADS represents 10 local shares).

For reporting purposes, all corporate expenses, including the equity method recorded from our stake of the results of Coca-Cola FEMSA Philippines, Inc., were included in the results of the Mexico and Central America division. Starting on February 2013 and ending on January 2017, we incorporated our stake of the results of Coca-Cola FEMSA Philippines, Inc. through the equity method.

About the Company

 

Stock listing information: Mexican Stock Exchange, Ticker: KOFL | NYSE (ADR), Ticker: KOF | Ratio of KOF L to KOF = 10:1

Coca-Cola FEMSA, S.A.B. de C.V. is the largest 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 169 brands to more than 349 million consumers daily. With over 96 thousand employees, the company markets and sells approximately 3.8 billion unit cases through 2.6 million points of sale a year. Operating 60 manufacturing plants and 300 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, Colombia, Argentina, and Guatemala and, nationwide, in the Philippines, Nicaragua, Costa Rica, and Panama. For further information, please visit www.coca-colafemsa.com

 

For additional information or inquiries, contact the Investor Relations team:

·         Maria Dyla Castro | mariadyla.castro@kof.com.mx | (5255) 1519-5186

·         Jorge Collazo | jorge.collazo@kof.com.mx | (5255) 1519-5218

·         Maria Fernanda Garcia | maria.garciacr@kof.com.mx | (5255) 1519-6240

 

 (7 pages of tables to follow)

 

 

Page 9


 
 

 

 

Quarter - Consolidated Income Statement

                 

Expressed in millions of Mexican pesos(1)

 

 

 

 

 

 

 

 

 

 

1Q 18

% Rev

 

1Q 17

% Rev

 

D %
Reported

 

D %
Comparable (8)

Transactions (million transactions)

          6,137.6

   

          5,741.7

   

6.9%

 

1.0%

Volume (million unit cases) (2)

             907.8

   

             881.3

   

3.0%

 

0.1%

Average price per unit case (2)

             50.69

   

             54.17

   

-6.4%

   

Net revenues

           49,596

   

           51,262

   

-3.2%

   

Other operating revenues

                 117

   

                   96

   

22.3%

   

Total revenues (3)

           49,713

100.0%

 

           51,357

100.0%

 

-3.2%

 

7.2%

Cost of goods sold

           27,796

55.9%

 

           29,060

56.6%

 

-4.3%

   

Gross profit

           21,917

44.1%

 

           22,297

43.4%

 

-1.7%

 

6.1%

Operating expenses

           15,934

32.1%

 

           16,644

32.4%

 

-4.3%

   

Other operative expenses, net

                   51

0.1%

 

               (391)

-0.8%

 

NA

   

Operative equity method (gain) loss in associates(4)

                   49

0.1%

 

                 (46)

-0.1%

 

NA

    

Operating income (5)

             5,883

11.8%

 

             6,090

11.9%

 

-3.4%

 

-1.1%

Other non operative expenses, net

                   62

   

            (2,471)

   

NA

   

Non Operative equity method (gain) loss in associates(6)

                   12

 

 

                 (37)

 

 

NA

   

Interest expense

             2,012

   

             2,513

   

-19.9%

   

Interest income

                 414

 

 

                 185

 

 

123.8%

   

Interest expense, net

             1,598

   

             2,328

   

-31.4%

   

Foreign exchange loss (gain)

                 228

   

                 (53)

   

NA

   

Loss (gain) on monetary position in inflationary subsidiries

                    -  

   

               (555)

   

NA

   

Market value (gain) loss on financial instruments

                 246

   

               (434)

   

NA

   

Comprehensive financing result

             2,072

 

 

             1,286

 

 

61.1%

   

Income before taxes

             3,737

   

             7,312

   

-48.9%

   

Income taxes

             1,196

   

             1,254

   

-4.6%

   

Consolidated net income

             2,541

 

 

             6,058

 

 

-58.1%

   

Net income attributable to equity holders of the company

             2,414

4.9%

 

             5,887

11.5%

 

-59.0%

   

Non-controlling interest

                 127

 

 

                 171

 

 

-25.6%

   

Operating income (5)

             5,883

11.8%

 

             6,090

11.9%

 

-3.4%

   

Depreciation

             2,353

   

             2,496

   

-5.7%

   

Amortization and other operative non-cash charges

                 470

   

                 968

   

-51.4%

   

Operating cash flow (5)(7)

             8,706

17.5%

 

             9,554

18.6%

 

-8.9%

 

4.0%

                   

CAPEX

             1,786

   

             3,834

         
                   

(1) Except volume and average price per unit case figures.

                 

(2) Sales volume and average price per unit case exclude beer results.

                 

(3) Includes total revenues of Ps. 19,084 million from our Mexican operation, Ps. 14,848 million from our Brazilian operation, Ps. 3,600 million from our Colombian operation, Ps. 3,397 million from our Argentine operation, and Ps. 5,591 million from our Philippines operation for the first quarter of 2018; and Ps. 18,113 million from our Mexican operation, Ps. 16,074 million from our Brazilian operation, Ps. 3,635 from our Colombian operation, and Ps. 3,707 million from our Argentine operation for the same period of the previous year. Total Revenues includes Beer revenues in Brazil of Ps.  3,586 million for the first quarter of 2018 and Ps. 3,525 million for the same period of the previous year.

(4) Includes equity method in Jugos del Valle, Leao Alimentos, Estrella Azul, among others. For January '17 includes Coca-Cola FEMSA Philippines, Inc.

         

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

             

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

               

(7) Operative cash flow = operating income + depreciation, amortization & other operative non-cash charges.

               

(8) Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of of: (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of Coca-Cola FEMSA de Venezuela in 2017, and including the results of Coca-Cola FEMSA Philippines, Inc., as if its consolidation had taken place at the beginning of first quarter 2017.

 

 

 

 

Page 10


 
 

 

 

Mexico & Central America Division

                 

Expressed in millions of Mexican pesos(1)

 

 

 

 

 

 

 

 

 

Quarterly information

 

 

 

 

 

 

 

 

 

 

1Q 18

% Rev

 

1Q 17

% Rev

 

D %
Reported

 

D %
Comparable(6)

Transactions (million transactions)

             2,674.0

   

             2,680.4

   

-0.2%

 

-0.2%

Volume (million unit cases)

                474.9

   

                472.9

   

0.4%

 

0.4%

Average price per unit case

                46.89

   

                45.37

   

3.4%

 

 

Net revenues

              22,269

   

              21,459

         

Other operating revenues

                        9

   

                      14

   

 

 

 

Total revenues (2)

              22,277

100.0%

 

              21,472

100.0%

 

3.7%

 

5.2%

Cost of goods sold

              11,794

52.9%

 

              11,047

51.4%

       

Gross profit

              10,484

47.1%

 

              10,425

48.6%

 

0.6%

 

1.9%

Operating expenses

                7,866

35.3%

 

                7,509

35.0%

       

Other operative expenses, net

                  (103)

-0.5%

 

                    (79)

-0.4%

       

Operative equity method (gain) loss in associates (3)

                      59

0.3%

 

                        4

0.0%

 

 

 

 

Operating income (4)

                2,662

11.9%

 

                2,991

13.9%

 

-11.0%

 

-10.5%

Depreciation, amortization & other operative non-cash charges

                1,434

6.4%

 

                1,245

5.8%

       

Operating cash flow (4)(5)

                4,096

18.4%

 

                4,237

19.7%

 

-3.3%

 

-1.7%

                   

(1) Except volume and average price per unit case figures.

                 

(2) Includes total revenues of Ps. 19,084  million from our Mexican operation for the first quarter of 2018 and 18,113 for the same period of the previous year

   

(3) Includes equity method in Jugos del Valle, Estrella Azul, among others. For January '17 includes Coca-Cola FEMSA Philippines, Inc.

   

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

         

(5) Operative cash flow = operating income + depreciation, amortization & other operative non-cash charges.

             

(6) Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of: (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of Coca-Cola FEMSA de Venezuela in 2017, and including the results of Coca-Cola FEMSA Philippines, Inc., as if its consolidation had taken place at the beginning of first quarter 2017.

 

 

Page 11


 
 

 

 

South America Division

                 

Expressed in millions of Mexican pesos(1)

 

 

 

 

 

 

 

 

 

Quarterly information

 

 

 

 

 

 

 

 

 

 

1Q 18

% Rev

 

1Q 17

% Rev

 

D %
Reported

 

D %
Comparable(7)

Transactions (million transactions)

             2,011.5

   

             2,016.7

   

-0.3%

 

4.4%

Volume (million unit cases) (2)

                313.0

   

                316.1

   

-1.0%

 

3.2%

Average price per unit case (2)

                57.98

   

                71.75

   

-19.2%

 

 

Net revenues

              21,737

   

              26,202

         

Other operating revenues

                   108

   

                      82

   

 

 

 

Total revenues (3)

              21,845

100.0%

 

              26,284

100.0%

 

-16.9%

 

6.7%

Cost of goods sold

              12,113

55.5%

 

              15,855

60.3%

       

Gross profit

                9,732

44.5%

 

              10,429

39.7%

 

-6.7%

 

16.2%

Operating expenses

                6,504

29.8%

 

                7,932

30.2%

       

Other operative expenses, net

                   135

0.6%

 

                  (323)

-1.2%

       

Operative equity method (gain) loss in associates (4)

                    (10)

-0.0%

 

                    (50)

-0.2%

 

 

 

 

Operating income (5)

                3,103

14.2%

 

                2,870

10.9%

 

8.1%

 

11.7%

Depreciation, amortization & other operative non-cash charges

                   965

4.4%

 

                1,848

7.0%

       

Operating cash flow (5)(6)

                4,068

18.6%

 

                4,717

17.9%

 

-13.8%

 

12.3%

                   

(1) Except volume and average price per unit case figures.

                 

(2) Sales volume and average price per unit case exclude beer results.

                 

(3) Includes total revenues of Ps. 14,848 million from our Brazilian operation, Ps. 3,600 million from our Colombian operation, and Ps. 3,397 million from our Argentine operation for the first quarter of 2018; and Ps. 16,074 million from our Brazilian operation, Ps. 3,635 from our Colombian operation, and Ps. 3,707 million from our Argentine operation for the same period of the previous year. Total Revenues includes Beer revenues in Brazil of Ps. 3,586 million for the first quarter of 2018 and Ps. 3,525 million for the same period of the previous year.

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

                 

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

         

(6) Operative cash flow = operating income + depreciation, amortization & other operative non-cash charges.

             

(7) Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of: (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of Coca-Cola FEMSA de Venezuela in 2017, and including the results of Coca-Cola FEMSA Philippines, Inc., as if its consolidation had taken place at the beginning of first quarter 2017.

 

 

Page 12


 
 

 

 

Asia Division

                 

Expressed in millions of Mexican pesos(1)

 

 

 

 

 

 

 

 

 

Quarterly information

 

 

 

 

 

 

 

 

 

 

1Q 18

% Rev

 

1Q 17 (2)

% Rev

 

D %
Reported

 

D %
Comparable(4)

Transactions (million transactions)

             1,452.1

   

               1,044.6

   

39.0%

 

-1.2%

Volume (million unit cases)

                119.9

   

                     92.3

   

29.9%

 

-8.1%

Average price per unit case

                46.64

   

                   39.03

   

19.5%

 

 

Net revenues

                5,591

   

                   3,601

         

Other operating revenues

                       -  

   

                          -  

   

 

 

 

Total revenues (3)

                5,591

100.0%

 

                   3,601

100.0%

 

55.2%

 

18.5%

Cost of goods sold

                3,889

69.6%

 

                   2,158

59.9%

       

Gross profit

                1,701

30.4%

 

                   1,443

40.1%

 

17.9%

 

-14.9%

Operating expenses

                1,564

28.0%

 

                   1,203

33.4%

       

Other operative expenses, net

                      20

0.4%

 

                        12

0.3%

       

Operating income (5)

                   117

2.1%

 

                      229

6.4%

 

-48.7%

 

-38.8%

Depreciation, amortization & other operative non-cash charges

                   424

7.6%

 

                      371

10.3%

       

Operating cash flow (5)(6)

                   541

9.7%

 

                      600

16.7%

 

-9.8%

 

-6.4%

 

                 

(1) Except volume and average price per unit case figures.

             

 

 

(2) Includes only February and March for 2017

             

 

 

(3) Operative cash flow = operating income + depreciation, amortization & other operative non-cash charges.

             

(4) Comparable means, with respect to a year-over-year comparison, the change in a given measure excluding the effects of: (i) mergers, acquisitions and divestitures, (ii) translation effects resulting from exchange rate movements, (iii) the results of Coca-Cola FEMSA de Venezuela in 2017, and including the results of Coca-Cola FEMSA Philippines, Inc., as if its consolidation had taken place at the beginning of first quarter 2017.

 

Page 13


 
 

 

 

Consolidated Balance Sheet

         

Expressed in millions of Mexican pesos.

 

 

 

 

 

 

 

Mar-18

 

Dec-17

 

Assets

 

 

 

 

 

Current Assets

         

Cash, cash equivalents and marketable securities

Ps.

           19,549

Ps.

           18,767

 

Total accounts receivable

 

           13,132

 

           17,576

 

Inventories

 

           12,142

 

           11,364

 

Other current assets

 

           10,374

 

             7,950

 

Total current assets

 

           55,197

 

           55,657

 

Property, plant and equipment

         

Property, plant and equipment

 

         118,382

 

         121,968

 

Accumulated depreciation

 

         (47,137)

 

         (46,141)

 

Total property, plant and equipment, net

 

           71,244

 

           75,827

 

Investment in shares

 

           12,033

 

           12,540

 

Intangibles assets and other assets

 

         119,533

 

         124,243

 

Other non-current assets

 

           17,751

 

           17,410

 

Total Assets

Ps.

         275,759

Ps.

         285,677

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current Liabilities

         

Short-term bank loans and notes payable

Ps.

           11,233

Ps.

           12,171

 

Suppliers

 

           18,440

 

           19,956

 

Other current liabilities

 

           30,041

 

           23,467

 

Total current liabilities

 

           59,714

 

           55,595

 

Long-term bank loans and notes payable

 

           67,463

 

           71,189

 

Other long-term liabilities

 

           19,637

 

           18,184

 

Total liabilities

 

         146,813

 

         144,968

 

Equity

         

Non-controlling interest

 

           16,538

 

           18,141

 

Total controlling interest

 

         112,408

 

         122,568

 

Total equity

 

         128,946

 

         140,710

 

Total Liabilities and Equity

Ps.

         275,759

Ps.

         285,677

 

 

 

Page 14


 
 

 

 

Quarter - Volume & Transactions

                 

For the three months ended March 31, 2018 and 2017

 

 

 

 

 

 

 

 

 

 

                       

Volume

                     

Expressed in million unit cases

 

 

 

 

 

 

 

 

 

 

 

 

1Q 2018

 

1Q 2017

 

Sparkling

Water (1)

Bulk Water (2)

Still

Total

 

Sparkling

Water (1)

Bulk Water (2)

Still

Total

Mexico

310.1

25.2

66.5

28.2

430.0

 

312.0

23.7

68.6

28.0

432.4

Central America

36.8

2.9

0.2

5.0

44.9

 

33.2

2.6

0.2

4.6

40.5

Mexico & Central America

347.0

28.1

66.7

33.1

474.9

 

345.2

26.3

68.8

32.6

472.9

Colombia

50.4

8.8

3.1

4.4

66.7

 

44.9

5.4

4.8

5.8

60.9

Venezuela

-

-

-

-

-

 

10.5

1.5

0.1

0.6

12.7

Brazil

169.3

12.4

2.1

10.9

194.8

 

168.1

11.2

1.8

9.1

190.2

Argentina

40.8

5.3

1.5

4.0

51.6

 

41.7

5.8

0.8

4.1

52.4

South America

260.5

26.5

6.7

19.3

313.0

 

265.2

23.9

7.4

19.6

316.1

Philippines (3)

97.1

5.9

10.2

6.7

119.9

 

73.4

4.3

5.9

8.7

92.3

Asia

97.1

5.9

10.2

6.7

119.9

 

73.4

4.3

5.9

8.7

92.3

Total

704.6

60.5

83.6

59.1

907.8

 

683.8

54.5

82.1

60.9

881.3

(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

           

(3) Philippines information reported for 2017 includes only February and March.

   

 

         

Transactions

                     

Expressed in million transactions

 

 

 

 

 

 

 

 

 

 

 

 

1Q 2018

 

1Q 2017

 

Sparkling

Water

Still

Total

 

Sparkling

Water

Still

Total

Mexico

1,886.4

182.7

230.3

2,299.4

 

1,922.5

177.4

227.0

2,327.0

Central America

295.2

16.3

63.1

374.6

 

277.3

15.6

60.5

353.4

Mexico & Central America

2,181.6

199.0

293.4

2,674.0

 

2,199.8

193.0

287.5

2,680.4

Colombia

373.5

83.6

48.7

505.8

 

350.2

67.4

59.9

477.6

Venezuela

-

-

-

-

 

71.4

14.8

3.8

90.0

Brazil

1,024.3

108.3

116.0

1,248.7

 

994.3

100.0

99.9

1,194.2

Argentina

204.4

27.5

25.1

257.0

 

200.1

28.5

26.4

255.0

South America

1,602.2

219.4

189.9

2,011.5

 

1,616.1

210.7

189.9

2,016.7

Philippines (1)

1,290.5

72.5

89.1

1,452.1

 

927.4

48.6

68.7

1,044.6

Asia

1,290.5

72.5

89.1

1,452.1

 

927.4

48.6

68.7

1,044.6

Total

5,074.3

490.9

572.3

6,137.6

 

4,743.3

452.3

546.1

5,741.7

(1) Philippines information reported for 2017 includes only February and March.

           

 

 

Page 15


 
 

 

 

Macroeconomic Information

         

First quarter 2018

 

 

 

 

 

 

 

               

Inflation(1)

 

 

 

 

 

 

 

               
 

LTM

1Q 18

         

Mexico

5.13%

1.30%

         

Colombia

3.07%

2.05%

         

Brazil

2.83%

0.93%

         

Argentina

25.48%

6.74%

         

Philippines

4.41%

2.59%

         

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

   
               
               

Average Exchange Rates for each Period (2)

 

 

 

 

 

               
 

Quarterly Exchange Rate (local currency per USD)

       
 

1Q 18

1Q 17

D %

       

Mexico

18.76

20.39

-8.0%

       

Guatemala

7.37

7.43

-0.9%

       

Nicaragua

30.98

29.50

5.0%

       

Costa Rica

571.95

564.72

1.3%

       

Panama

1.00

1.00

0.0%

       

Colombia

2,860.36

2,922.07

-2.1%

       

Brazil

3.24

3.14

3.2%

       

Argentina

19.70

15.67

25.7%

       

Philippines

51.45

49.99

2.9%

       
               

End of Period Exchange Rates

 

 

 

 

 

 

               
 

Quarter Exchange Rate (local currency per USD)

 

Previous Quarter Exchange Rate (local currency per USD)

 

Mar 2018

Mar 2017

D %

 

Dec 2017

Dec 2017

D %

Mexico

18.34

18.81

-2.5%

 

19.74

20.66

-4.5%

Guatemala

7.40

7.34

0.8%

 

7.34

7.52

-2.4%

Nicaragua

31.16

29.68

5.0%

 

30.79

29.32

5.0%

Costa Rica

569.31

567.34

0.3%

 

572.56

561.10

2.0%

Panama

1.00

1.00

0.0%

 

1.00

1.00

0.0%

Colombia

2,780.47

2,880.24

-3.5%

 

2,984.00

3,000.71

-0.6%

Brazil

3.32

3.17

4.9%

 

3.31

3.26

1.5%

Argentina

20.15

15.39

30.9%

 

18.65

15.89

17.4%

Philippines

52.21

50.19

4.0%

 

49.92

49.81

0.2%

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

 

 

 

 

 

 

 

 

Page 16

 

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 by the undersigned, thereunto duly authorized.

 

 

 

COCA-COLA FEMSA, S.A.B. DE C.V.

 

By:  /s/ Héctor Treviño Gutiérrez              

 

Héctor Treviño Gutiérrez

Chief Financial Officer

 

 

 Date: April 25, 2018