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 October 2013

 

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-____________

 

 

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/ Javier Astaburuaga
		Javier Astaburuaga
		Chief Financial Officer
Date:  October 25, 2013

 

 

 

FEMSA Reports 3Q13 Total Revenues

Growth of 7.2% in a challenging environment

 

Monterrey, Mexico, October 25, 2013 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the third quarter of 2013.

 

Third Quarter 2013 Highlights:

 

·

FEMSA consolidated total revenues grew 7.2% compared to the third quarter of 2012, reflecting growth at Femsa Comercio and Coca-Cola FEMSA. On an organic basis1 total revenues grew 3.7%.

 

·

Coca-Cola FEMSA total revenues increased 3.6% compared to the third quarter of 2012. On an organic basis1 total revenues grew 0.4% despite a negative translation effect resulting from the devaluation of currencies in our South America division. On a currency neutral basis and excluding the non-comparable effect of the integrations, total revenues grew 14.8%.

 

·

FEMSA Comercio achieved total revenues growth of 12.5%, compared to the third quarter of 2012, driven by 1,043 net new store openings and 1.6% growth in same-store sales. On an organic basis1 total revenues grew 9.3%.

 

José Antonio Fernández Carbajal, Chairman and CEO of FEMSA, commented: “In many ways, the third quarter results showed a continuation of trends that have been present since the beginning of the year. For Coca-Cola FEMSA, its diversified geographical footprint again allowed the company to deliver top-line results that, in the aggregate, show some resilience in light of the very challenging environments that remain in its main markets, particularly Brazil and to a lesser extent, Mexico and Colombia. For FEMSA Comercio, sequential trends improved slightly and expenses were contained in the midst of soft consumer demand that has yet to show meaningful signs of a recovery. Importantly, both businesses were negatively impacted by a month of September that brought torrential rains across Mexico, particularly during the key Independence holiday weekend.

 

And yet, we are convinced that the short-term challenges are more than offset by the long-term opportunities. In that vein, during the quarter we announced Coca-Cola FEMSA’s acquisition of Spaipa, a key bottling franchise in Southern Brazil that fits perfectly with our existing territories, and FEMSA Comercio announced the acquisition of a majority stake in Doña Tota, a strong regional player in the quick service restaurant segment with high consumer preference in Northern Mexico. We will continue to invest, through acquisitions as well as capital projects, because we believe our evolving business platform has very compelling growth avenues ahead.”

 

1

Excludes non-comparable results from Coca-Cola FEMSA and FEMSA Comercio acquisitions in the last twelve months.

 

 

 

FEMSA Consolidated

 

Total revenues increased 7.2% compared to 3Q12 to Ps. 63.977 billion in 3Q13. FEMSA Comercio and Coca-Cola FEMSA drove the incremental consolidated revenues. On an organic basis¹ total revenues increased 3.7% compared to 3Q12.

 

For the first nine months of 2013, consolidated total revenues increased 6.6% compared to the same period in 2012 to Ps. 184.617 billion. On an organic basis¹, total revenues for the first nine months of 2013 increased 4.5% compared to the same period in 2012.

 

Gross profit increased 6.4% compared to 3Q12 to Ps. 27.037 billion in 3Q13. Gross margin decreased 30 basis points compared to the same period in 2012 to 42.3% of total revenues, driven by the effect of the faster growth of lower-margin FEMSA Comercio, which tends to compress FEMSA’s consolidated margins over time.

 

For the first nine months of 2013, gross profit increased 7.4% compared to the same period in 2012 to Ps. 77.811 billion. Gross margin increased 30 basis points compared to the same period in 2012 to 42.1% of total revenues, driven by the margin expansion at Coca-Cola FEMSA and FEMSA Comercio.

 

Income from operations decreased 2.7% as compared to 3Q12 to Ps. 7.187 billion in 3Q13. On an organic basis¹ income from operations decreased 4.0% compared to the same period in 2012. Consolidated operating margin decreased 120 basis points compared to 3Q12 to 11.2% of total revenues in 3Q13, driven by margin contraction at Coca-Cola FEMSA, reflecting the devaluation of South American currencies and higher operating expenses.

 

For the first nine months of 2013, income from operations increased 2.6% compared to the same period in 2012 to Ps. 19.816 billion. On an organic basis¹ income from operations increased 1.1%. Our consolidated year-to-date operating margin was 10.7% as a percentage of total revenues, a contraction of 50 basis points as compared to the same period of 2012.

 

Our effective income tax rate was 32.6% in 3Q13 compared to 30.4% in 3Q12.

 

Net consolidated income decreased 8.2% compared to 3Q12 to Ps. 6.106 billion in 3Q13, driven by (i) a decrease in our income from operations, (ii) a decrease in FEMSA’s 20% participation in Heineken’s 3Q13 net income and (iii) higher financing expenses related to bonds issued recently both by FEMSA and Coca-Cola FEMSA.

 

For the first nine months of 2013, net consolidated income decreased 4.1% to Ps. 15.217 billion compared to the same period of 2012, resulting from higher financing expenses which were partially offset by the growth in income from operations.

 

Net majority income for 3Q13 was Ps. 1.25 per FEMSA Unit². Net majority income per FEMSA ADS was US$ 0.95 for the third quarter of 2013. For the first nine months of 2013, net majority income per FEMSA Unit² was Ps. 3.00 (US$ 2.28 per ADS).

 

Capital expenditures amounted to Ps. 5.360 billion in 3Q13, reflecting incremental investments at Coca-Cola FEMSA and FEMSA Comercio.

 

Our consolidated balance sheet as of September 30, 2013 recorded a cash balance of Ps. 50.322 billion (US$ 3.825 billion), an increase of Ps. 12.206 billion (US$ 927.9 million) compared to December 31, 2012. Short-term debt was Ps. 12.294 billion (US$ 934.5 million), while long-term debt was Ps. 51.023 billion (US$ 3.879 billion). Our consolidated net debt balance was Ps. 12.995 billion (US$ 987.8 million).

 

1

Excludes non-comparable results from Coca-Cola FEMSA and FEMSA Comercio acquisitions in the last twelve months.

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 September 30, 2013 was 3,578,226,270, equivalent to the total number of FEMSA Shares outstanding as of the same date, divided by 5.

 

 

 

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.

 

FEMSA Comercio

 

Total revenues increased 12.5% compared to 3Q12 to Ps. 25.337 billion in 3Q13, mainly driven by the opening of 195 net new stores in the quarter, reaching 1,043 total net new store openings for the last twelve months. On an organic basis¹ total revenues increased 9.3% compared to 3Q12. As of September 30, 2013, FEMSA Comercio had a total of 11,210 convenience stores. Same-store sales increased an average of 1.6% for the third quarter of 2013 over 3Q12, reflecting a 2.5% increase in average customer ticket that offset a 0.9% decrease in store traffic.

 

For the first nine months of 2013, total revenues increased 12.7% compared to the same period in 2012 to Ps. 71.848 billion. On an organic basis¹, total revenues for the first nine months of 2013 increased 10.8% compared to the same period in 2012. FEMSA Comercio’s same-store sales increased an average of 2.3% compared to the same period in 2012, driven by a 3.1% increase in average customer ticket that offset a 0.7% decrease in store traffic.

 

Gross profit increased by 13.1% in 3Q13 compared to 3Q12, resulting in a 20 basis point gross margin expansion to 35.1% of total revenues. This increase reflects more efficient use of promotion-related marketing resources and a better execution of segmented pricing strategies across markets. For the first nine months of 2013, gross margin expanded by 40 basis points compared to the same period in 2012 to 34.4% of total revenues.

 

Income from operations increased 13.1% over 3Q12 to Ps. 1.989 billion in 3Q13. On an organic basis¹ income from operations increased 11.3% compared to the same period in 2012. Operating expenses also increased 13.1% in 3Q13 compared to 3Q12 to Ps. 6.906 billion, reflecting the growing number of stores and distribution centers as well as incremental expenses related to, among other things, the development of specialized distribution routes aimed at enabling our prepared food initiatives. Operating margin expanded 10 basis points compared to 3Q12, to 7.9% of total revenues in 3Q13.

 

For the first nine months of 2013, income from operations increased 11.9% compared to the same period in 2012 to Ps. 4.912 billion, resulting in an operating margin of 6.8%, which represents a 10 basis point contraction from the same period in the prior year. On an organic basis¹ income from operations increased 10.8% compared to the same period in 2012.

 

¹ Excludes non-comparable results from FEMSA Comercio acquisitions in the last twelve months.

 

 

 

Recent Developments

 

·

On August 31, 2013, Coca-Cola FEMSA announced that it had reached an agreement to acquire 100% of Spaipa S.A. Industria Brasileira de Bebidas (“Spaipa”), the second largest privately owned bottler in the Brazilian Coca-Cola system, in an all-cash transaction. During the last twelve months ended June 30, 2013, Spaipa sold 233.3 million unit cases of beverages, including beer, generating approximately US$905 million in net revenues. The aggregate enterprise value of this transaction is US$1,855 million. During 2012, Spaipa sold 236.0 million unit cases of beverages, generating net revenues of approximately US$929 million and a pro forma consolidated EBITDA of US$152 million.

 

·

On September 23, 2013, FEMSA announced that its retail subsidiary FEMSA Comercio agreed to acquire 80% of the capital stock of Doña Tota, a leading quick-service restaurant operator, with the founding shareholders staying with the remaining 20%. This transaction brings relevant capabilities in the area of prepared food operation to FEMSA Comercio, while opening a compelling new avenue for growth. Doña Tota has built a strong brand and will continue to operate as a stand-alone format.

 

·

The Mexican government’s proposal to tax sugary beverages has been approved by the lower house of Congress and sent to the Senate where it must be voted on by October 31, 2013. If approved, Coca-Cola FEMSA will work to make the necessary adjustments to our operating structure and portfolio in order to protect the profitability of our business.

 

 

FEMSA is a leading company that participates in the beverage industry through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the world; and in the beer industry, through its ownership of the second largest equity stake in Heineken, one of the world's leading brewers with operations in over 70 countries. In the retail industry it participates with FEMSA Comercio, operating various small-format chain stores, including OXXO, the largest and fastest-growing chain of stores in Latin America. All of which is supported by a Strategic Business unit.

 

The translations of Mexican Pesos into US Dollars are included solely for the convenience of the reader, using the noon day buying rate for Mexican Pesos as published by the U.S. Federal Reserve Board in its H.10 weekly Release of Foreign Exchange Rates for September 30, 2013, which was 13.1550 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.

 

Five pages of tables and Coca-Cola FEMSA’s press release follow.

 

 

 

FEMSA

Consolidated Income Statement

Millions of Pesos

 

		For the third quarter of:																								For the first nine months of:
		2013				% of rev.				2012				% of rev.				% Var.				% Org (A)				2013				% of rev.				2012				% of rev.				% Var.				% Org (A)
Total revenues			63,977				100.0				59,675				100.0				7.2				3.7				184,617				100.0				173,178				100.0				6.6				4.5
Cost of sales			36,940				57.7				34,258				57.4				7.8								106,806				57.9				100,741				58.2				6.0
Gross profit			27,037				42.3				25,417				42.6				6.4								77,811				42.1				72,437				41.8				7.4
Administrative expenses			2,550				4.0				2,258				3.8				12.9								7,289				3.9				7,253				4.2				0.5
Selling expenses			17,273				27.1				15,847				26.5				9.0								50,538				27.4				45,917				26.4				10.1
Other Operating expenses (income), net (1)			27				-				(71	)			(0.1	)			(93.3	)							168				0.1				(46	)			-				N.A.
Income from operations(2)			7,187				11.2				7,383				12.4				(2.7	)			(4.0	)			19,816				10.7				19,313				11.2				2.6				1.1
Other Non-Operating expenses (income)			(79	)							(76	)							3.9								42								187								(77.5	)
Interest expense			910								556								63.7								2,523								1,743								44.8
Interest income			427								166								N.A.								811								530								53.0
Foreign exchange loss (gain)			163								54								N.A.								289								108								N.A.
Other financial expenses (income), net.			(74	)							22								N.A.								201								(0	)							N.A.
Financing expenses, net			572								466								22.7								2,202								1,321								66.7
Income before income tax and Participation in Heineken results			6,694								6,993								(4.3	)							17,572								17,805								(1.3	)
Income tax			2,182								2,127								2.6								5,670								5,042								12.5
Participation in Heineken results(3)			1,594								1,788								(10.9	)							3,315								3,106								6.7
Net consolidated income			6,106								6,654								(8.2	)							15,217								15,869								(4.1	)
Net majority income			4,478								4,725								(5.2	)							10,750								10,970								(2.0	)
Net minority income			1,628								1,929								(15.6	)							4,467								4,899								(8.8	)
		2013				% of rev.				2012				% of rev.				% Var.				% Org (A)				2013				% of rev.				2012				% of rev.				% Var.				% Org (A)
Operative Cash Flow & CAPEX
Income from operations			7,187				11.2				7,383				12.4				(2.7	)			(4.0	)			19,816				10.7				19,313				11.2				2.6				1.1
Depreciation			2,161				3.4				1,845				3.1				17.1								6,269				3.4				5,306				3.1				18.1
Amortization & other non-cash charges			298				0.5				299				0.5				(0.3	)							859				0.5				980				0.5				(12.3	)
Operative Cash Flow (EBITDA)			9,646				15.1				9,527				16.0				1.2				(0.5	)			26,944				14.6				25,599				14.8				5.3				3.6
CAPEX			5,360								3,965								35.2								12,269								9,273								32.3
Financial Ratios			2013				2012				Var. p.p.
Liquidity(4)			1.52				1.56				(0.03	)
Interest coverage(5)			19.97				24.43				(4.46	)
Leverage(6)			0.55				0.41				0.14
Capitalization(7)			23.28	%			15.26	%			8.02

 

(A)

% Org. represents the variation in a given measure excluding the effects of mergers, acquisitions and divestitures of Coca Coca FEMSA and FEMSA Comercio. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

(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)

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

(4)

Total current assets / total current liabilities.

(5)

Income from operations + depreciation + amortization & other / interest expense, net.

(6)

Total liabilities / total stockholders' equity.

(7)

Total debt / long-term debt + stockholders' equity.

    Total debt = short-term bank loans + current maturities of long-term debt + long-term bank loans.

 

 

 

FEMSA

Consolidated Balance Sheet

Millions of Pesos

 

ASSETS		Sep-13				Dec-12				% Var.
Cash and cash equivalents			50,322				38,116				32.0
Accounts receivable			10,072				11,812				(14.7	)
Inventories			16,086				16,345				(1.6	)
Other current assets			12,386				9,182				34.9
Total current assets			88,866				75,455				17.8
Investments in shares			95,317				83,840				13.7
Property, plant and equipment, net			67,217				61,649				9.0
Intangible assets (1)			82,725				67,893				21.8
Other assets			8,783				7,105				23.6
TOTAL ASSETS			342,908				295,942				15.9
LIABILITIES & STOCKHOLDERS´ EQUITY
Bank loans			4,405				4,213				4.6
Current maturities of long-term debt			7,889				4,489				75.7
Interest payable			569				207				N.S.
Operating liabilities			45,563				39,607				15.0
Total current liabilities			58,426				48,516				20.4
Long-term debt (2)			51,023				27,574				85.0
Labor liabilities			3,939				3,675				7.2
Other liabilities			8,574				6,016				42.5
Total liabilities			121,962				85,781				42.2
Total stockholders’ equity			220,946				210,161				5.1
LIABILITIES AND STOCKHOLDERS’ EQUITY			342,908				295,942				15.9

 

		September 30, 2013
DEBT MIX (2)		% of Total				Average Rate
Denominated in:
Mexican pesos			61.3	%			5.4	%
Dollars			32.6	%			2.1	%
Colombian pesos			2.4	%			5.6	%
Argentine pesos			1.6	%			22.1	%
Brazilian Reais			2.0	%			6.2	%
Total debt			100	%			4.6	%
Fixed rate(2)			38.4	%
Variable rate(2)			61.6	%

 

% of Total Debt		2013				2014				2015				2016				2017				2018 +
DEBT MATURITY PROFILE			12.3	%			9.6	%			13.7	%			14.3	%			4.0	%			46.2	%

 

⁽¹⁾ Includes mainly the intangible assets generated by acquisitions.

⁽²⁾ Includes the effect of derivative financial instruments on long-term debt.

 

 

 

Coca-Cola FEMSA

Results of Operations

Millions of Pesos

 

		For the third quarter of:																								For the first nine months of:
		2013				% of rev.				2012				% of rev.				% Var.				% Org (A)				2013				% of rev.				2012				% of rev.				% Var.				% Org (A)
Total revenues			37,494				100.0				36,193				100.0				3.6				0.4				109,737				100.0				106,202				100.0				3.3				0.9
Cost of sales			19,919				53.1				19,207				53.1				3.7								58,225				53.1				57,219				53.9				1.8
Gross profit			17,575				46.9				16,986				46.9				3.5								51,512				46.9				48,983				46.1				5.2
Administrative expenses			1,647				4.4				1,481				4.1				11.2								4,709				4.3				4,802				4.5				(1.9	)
Selling expenses			10,859				29.0				10,102				27.8				7.5								32,208				29.3				29,733				28.0				8.3
Other Operating expenses (income), net			6				-				(84	)			(0.2	)			N.A.								95				0.1				(97	)			(0.1	)			N.A.
Income from operations			5,063				13.5				5,487				15.2				(7.7	)			(8.9	)			14,500				13.2				14,545				13.7				(0.3	)			(1.9	)
Depreciation			1,562				4.2				1,353				3.7				15.4								4,555				4.2				3,788				3.6				20.2
Amortization & other non-cash charges			186				0.5				150				0.4				24.0								521				0.4				679				0.6				(23.3	)
Operative Cash Flow			6,811				18.2				6,990				19.3				(2.6	)			(4.4	)			19,576				17.8				19,012				17.9				3.0				1.0
CAPEX			3,458								2,578								34.1								8,092								5,804								39.4
Sales volumes
(Millions of unit cases)
Mexico and Central America			494.3				62.2				478.1				63.0				3.4				(1.2	)			1,454.0				62.6				1,395.0				62.5				4.2				(0.4	)
South America			301.1				37.9				281.3				37.0				7.1				5.6				868.7				37.4				837.7				37.5				3.7				3.2
Total			795.4				100.0				759.4				100.0				4.7				1.3				2,322.7				100.0				2,232.7				100.0				4.0				1.0

 

^(A) % Org. represents the variation in a given measure excluding the effects of mergers, acquisitions and divestitures of Coca Coca FEMSA . In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

 

 

 

FEMSA Comercio

Results of Operations

Millions of Pesos

 

		For the third quarter of:																								For the first nine months of:
		2013				% of rev.				2012				% of rev.				% Var.				% Org (A)				2013				% of rev.				2012				% of rev.				% Var.				% Org (A)
Total revenues			25,337				100.0				22,521				100.0				12.5				9.3				71,848				100.0				63,763				100.0				12.7				10.8
Cost of sales			16,442				64.9				14,659				65.1				12.2								47,150				65.6				42,093				66.0				12.0
Gross profit			8,895				35.1				7,862				34.9				13.1								24,698				34.4				21,670				34.0				14.0
Administrative expenses			448				1.8				436				1.9				2.8								1,410				2.0				1,243				1.9				13.4
Selling expenses			6,432				25.3				5,661				25.2				13.6								18,305				25.5				16,012				25.2				14.3
Other Operating expenses (income), net			26				0.1				7				-				N.A.								71				0.1				27				-				N.A.
Income from operations			1,989				7.9				1,758				7.8				13.1				11.3				4,912				6.8				4,388				6.9				11.9				10.8
Depreciation			575				2.3				448				2.0				28.3								1,645				2.3				1,381				2.2				19.1
Amortization & other non-cash charges			93				0.3				90				0.4				3.3								261				0.4				207				0.3				26.1
Operative Cash Flow			2,657				10.5				2,296				10.2				15.7				14.1				6,818				9.5				5,976				9.4				14.1				13.1
CAPEX			1,720								1,296								32.7								3,765								3,143								19.8
Information of OXXO Stores
Total stores																											11,210								10,167								10.3
Net new convenience stores:
During third quarter			195								178								9.6
vs. September prior year			1,043								1,019								2.4
vs. December prior year			609								606								0.5
Same store data: (1)
Sales (thousands of pesos)			696.8								685.9								1.6								681.7								666.2								2.3
Traffic (thousands of transactions)			25.3								25.6								(0.9	)							24.9								25.1								(0.7	)
Ticket (pesos)			27.5								26.8								2.5								27.4								26.6								3.1

 

⁽¹⁾ Monthly average information per store, considering same stores with more than twelve months of operations.

^(A) % Org. represents the variation in a given measure excluding the effects of mergers, acquisitions and divestitures of FEMSA Comercio. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

 

 

 

FEMSA

Macroeconomic Information

 

										End of period, Exchange Rates
		Inflation								Sep-13								Sep-12
		2013				LTM(1)  Sep-13				Per USD				Per Mx. Peso				Per USD				Per Mx. Peso
Mexico			1.94	%			3.39	%			13.01				1.0000				12.85				1.0000
Colombia			2.16	%			2.27	%			1,914.65				0.0068				1,800.52				0.0071
Venezuela			38.70	%			49.38	%			6.30				2.0654				4.30				2.9889
Brazil			3.79	%			5.86	%			2.23				5.8349				2.03				6.3292
Argentina			7.43	%			10.49	%			5.79				2.2461				4.70				2.7362
Euro Zone			0.69	%			1.09	%			0.73				17.7523				0.77				16.6300

 

⁽¹⁾ LTM = Last twelve months

 

 

2013 THIRD-QUARTER AND FIRST NINE-MONTH RESULTS

 

			Third Quarter					YTD
			2013	2012	Reported Δ%	Excluding M&A Effects Δ%(5)		2013	2012	Reported Δ%	Excluding M&A Effects Δ%(5)
		Total Revenues	37,494	36,193	3.6%	0.4%		109,737	106,202	3.3%	0.9%
		Gross Profit	17,575	16,986	3.5%			51,512	48,983	5.2%
		Operating Income	5,063	5,487	-7.7%	-8.9%		14,500	14,545	-0.3%	-1.9%
		Net Income Attributable to Equity Holders of the Company	2,954	3,543	-16.6%			8,292	8,923	-7.1%
		Operative cash flow (1)	6,811	6,990	-2.6%	-4.4%		19,576	19,012	3.0%	1.0%
		Net Debt (2)	20,825	6,680	211.8%
		Net Debt / Operative cash flow (3)	0.74	0.36
		Operative cash flow/ Interest Expense, net (3)	15.28	18.46
		Earnings per Share(3)	6.05	6.12
		Capitalization (4)	30.0%	17.5%
		Expressed in millions of Mexican pesos.
		(1) Operative cash flow = Operating income + Depreciation + Amortization & Other operative Non-cash Charges.
		See reconciliation table on page 8 except for Earnings per Share
		(2) Net Debt = Total Debt – Cash
		(3) LTM figures
		(4) Total debt / (long-term debt + shareholders' equity)
		(5) Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.
		Reported total revenues reached Ps. 37,494 million in the third quarter of 2013, an increase of 3.6% as compared to the third quarter of 2012. Excluding the integration of Grupo Yoli (“Yoli”) in our Mexican territories and Companhia Fluminense de Refrigerantes (“Fluminense”) in our Brazilian operation, total revenues increased despite a negative translation effect resulting from the devaluation of the currencies in our South America division. On a currency neutral basis and excluding the non-comparable effect of the integrations, total revenues grew 14.8%.
		Reported consolidated operating income reached Ps. 5,063 million in the third quarter of 2013, reaching an operating margin of 13.5%.
		Reported consolidated net controlling interest income reached Ps. 2,954 million in the third quarter of 2013.
		Mexico City (October 24, 2013), Coca-Cola FEMSA, S.A.B. de C.V. (BMV: KOFL, NYSE: KOF) (“Coca-Cola FEMSA” or the “Company”), the largest franchise bottler in the world, announces results for the third quarter of 2013.
		"In the face of a continued tough consumer environment mainly in Mexico and Brazil, our geographically balanced portfolio of franchises delivered mid-single digit volume growth, including the integration of Grupo Yoli in Mexico and Fluminense in Brazil. Our company continues to diversify and strengthen our competitive position with the acquisition of Spaipa in Brazil, while reinforcing our positive long term view of the country. We welcome the talented team of professionals from Fluminense, who will certainly contribute to the future success of our company. Now, we will enjoy the privilege of serving close to 340 million consumers across nine Latin American countries and the Philippines. We are confident that the investments we have made throughout our territories this year will enable us to capitalize on future growth opportunities," said Carlos Salazar Lomelín, Chief Executive Officer of the Company.

 

 

 

 

 

 

 

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

Our Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of July, 2013 through September, 2013.

Our South America division’s operating results include the non-comparable effect of Fluminense’s results for the month of September, 2013.

As of February 2013, we are incorporating our stake of the results of Coca-Cola Bottlers Philippines, Inc. through the equity method on an estimated basis.

 

Our reported total revenues increased 3.6% to Ps. 37,494 million in the third quarter of 2013, compared to the third quarter of 2012. This growth was mainly driven by the Mexico & Central America division, including the integration of Yoli in our Mexican territories, the performance of Venezuela and Argentina in our South America division, and the integration of Fluminense in our Brazilian operation.⁽¹⁾⁽²⁾ Excluding the recently merged territories in Mexico and Brazil,⁽¹⁾⁽²⁾ total revenues increased 0.4%. On a currency neutral basis and excluding the integrations,⁽¹⁾⁽²⁾ total revenues grew 14.8%, driven by average price per unit case growth in almost every territory and volume growth mainly in Venezuela, Argentina, Colombia and Central America.

 

Reported total sales volume increased 4.7% to reach 795.4 million unit cases in the third quarter of 2013 as compared to the same period in 2012. Excluding the integration of Yoli in Mexico and Fluminense in Brazil,⁽¹⁾⁽²⁾ volumes increased 1.3% to reach 769.4 million unit cases. On the same basis, our sparkling beverage category grew 0.8%, driven by 2% growth in brand Coca-Cola. The still beverage category grew 9.1%, mainly driven by the performance of the Jugos del Valle line of business, Powerade and FUZE Tea across our territories. In addition, our bottled water portfolio grew 8.5%. These increases compensated for a 2.1% decline in our bulk water business.

 

Our reported gross profit increased 3.5% to Ps. 17,575 million in the third quarter of 2013, as compared to the third quarter of 2012. Lower sugar prices in most of our territories in combination with the appreciation of the average exchange rate of the Mexican peso,⁽³⁾ were compensated by the depreciation of the average exchange rate of the Venezuelan bolivar,⁽³⁾ the Argentine peso,⁽³⁾ the Brazilian real⁽³⁾ and the Colombian peso⁽³⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin remained flat as compared to the third quarter of 2012, reaching 46.9%.

 

Our reported operating income decreased 7.7% to Ps. 5,063 million in the third quarter of 2013 and our reported operating margin reached 13.5%. Excluding the integration of the new territories in Mexico and Brazil,⁽¹⁾⁽²⁾ operating income was Ps. 4,998 million, representing an operating margin of 13.8%. In local currency and excluding the non-comparable effect of Yoli and Fluminense,⁽¹⁾⁽²⁾ operating expenses increased mainly as a result of higher labor and freight costs across the South America division and continued marketing investments across our territories to support our marketplace execution and bolster our returnable packaging base.

 

During the third quarter of 2013, the other operative expenses, net line registered a gain of Ps. 22 million. Additionally, the operative equity method line recorded a loss of Ps. 28 million, mainly due to an equity method loss from our participation in Coca-Cola Bottlers Philippines, Inc., which volume performance was negatively affected by typhoons during the quarter. This loss was compensated by a gain in the participation of our joint-ventures in Brazil and Estrella Azul in Panama.

 

Our comprehensive financing result in the third quarter of 2013 recorded an expense of Ps. 457 million as compared to an expense of Ps. 20 million in the same period of 2012. This increase was mainly driven by higher interest expenses due to a larger debt position and a foreign exchange loss originated by the quarterly appreciation of the Mexican peso as applied to our U.S. dollar-denominated cash position.

 

During the third quarter of 2013, income tax, as a percentage of income before taxes, was 34.7% as compared to 31.8% in the same period of 2012. The difference was mainly driven by the inflationary adjustment registered in our Venezuelan operation and a non-recurring charge recorded in our Colombian subsidiary during the quarter.

 

Our reported consolidated net controlling interest income reached Ps. 2,954 million in the third quarter of 2013. Earnings per share (EPS) in the third quarter of 2013 were Ps. 1.43 (Ps. 14.25 per ADS) computed on the basis of 2,072.9 million shares (each ADS represents 10 local shares). 

 

(1)

Our Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of July, 2013 through September, 2013.

(2)

Our South America division’s operating results include the non-comparable effect of Fluminense’s results for the month of September, 2013.

(3)

See page 12 for average and end of period exchange rates for the third quarter of 2013.

 

 

 

 

As of September 30, 2013, we had a cash balance of Ps. 23,765 million, including US$ 566 million denominated in U.S. dollars, an increase of Ps. 531 million compared to December 31, 2012. During August, 2013 we assumed a US$ 500 million bilateral loan in connection with the Spaipa S.A. Industria Brasileira de Bebidas (“Spaipa”) acquisition in Brazil. In May, 2013, we issued Ps. 7,500 million in 10-year Certificados Bursátiles at a fixed rate in Mexican pesos of 5.46%.

 

As of September 30, 2013, total short-term debt was Ps. 8,524 million and long-term debt was Ps. 36,066 million. Total debt increased by Ps. 14,676 million, compared to year end 2012. Net debt increased Ps. 14,145 million compared to year end 2012, as a result of the cash outflows related to the acquisitions of Companhia Fluminense de Refrigerantes in Brazil, Coca-Cola Bottlers Philippines, Inc. and Grupo Yoli, in addition to the payment of the first installment of the 2012 dividend. The Company’s total debt balance includes U.S. dollar-denominated debt in the amount of US$1,152 million.⁽¹⁾

 

The weighted average cost of debt for the quarter was 5.2%. The following charts set forth the Company’s debt profile by currency and interest rate type and by maturity date as of September 30, 2013.

 

Currency		% Total Debt(1)				% Interest Rate Floating(1)(2)
Mexican pesos			46.0	%			11.1	%
U.S. dollars			33.6	%			68.1	%
Colombian pesos			3.3	%			100.0	%
Brazilian reals			14.8	%			95.0	%
Argentine pesos			2.3	%			7.3	%

 

(1)

After giving effect to interest rate swaps

(2)

Calculated by weighting each year’s outstanding debt balance mix

 

Debt Maturity Profile

 

Maturity Date		2013				2014				2015				2016				2017				2018+
% of Total Debt			9.3	%			13.5	%			19.5	%			20.3	%			0.1	%			37.3	%

 

 

 

 

Our Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of July, 2013 through September, 2013.

As of February 2013, we are incorporating our stake of the results of Coca-Cola Bottlers Philippines, Inc. through the equity method on an estimated basis.

 

Revenues

 

Reported total revenues from our Mexico & Central America division increased 6.1% to Ps. 17,935 million in the third quarter of 2013, as compared to the same period in 2012, supported by the integration of Yoli in our Mexican operations.⁽¹⁾ Excluding the integration of Yoli in Mexico,⁽¹⁾ total revenues grew 0.7%. On the same basis, increased average price per unit case, mainly reflecting selective price increases across our product portfolio, implemented over the past several months, accounted for incremental revenues. On a currency neutral basis and excluding Yoli in Mexico,⁽¹⁾ total revenues increased 1.0%.

 

Reported total sales volume increased 3.4% to 494.3 million unit cases in the third quarter of 2013, as compared to the third quarter of 2012. Excluding the integration of Yoli,⁽¹⁾ volumes decreased 1.2% to 472.3 million unit cases. On the same basis, our bottled water portfolio grew 4.2%. Still beverages grew 2.7% mainly driven by the performance of del Valle Fresh and FUZE Tea in Central America, and the performance of Powerade in the division. These increases partially compensated for a decrease of 1.5% in sparkling beverages and a 3.0% decline in the bulk water business.

 

Operating Income

 

Our reported gross profit increased 10.4% to Ps. 8,897 million in the third quarter of 2013 as compared to the same period in 2012. Reported gross margin reached 49.6% in the third quarter of 2013, an expansion of 190 basis points as compared with the same period of the previous year, as a result of lower sugar prices in the division in combination with the average appreciation of the Mexican peso⁽²⁾ as applied to our U.S. dollar-denominated raw material costs.

 

Reported operating income⁽³⁾ increased 5.1% to Ps. 2,831 million in the third quarter of 2013, compared to Ps. 2,694 million in the same period of 2012. Our reported operating margin reached 15.8% in the third quarter of 2013. Excluding the non-comparable effect of Yoli in Mexico,⁽¹⁾ operating income was Ps. 2,752 million, representing an operating margin of 16.2%. On the same basis, operating expenses grew mainly due to continued marketing investments across our territories to support our marketplace execution and bolster our returnable packaging base.

 

(1)

Our Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of July, 2013 through September, 2013.

(2)

See page 12 for average and end of period exchange rates for the third quarter of 2013.

(3)

For reporting purposes, all corporate expenses, including the equity method recorded from our stake of the results of Coca-Cola Bottlers Philippines, Inc., are included in the results of the Mexico & Central America division.

 

 

 

 

Coca-Cola FEMSA is including the results of Fluminense as of September, 2013 in our South America division’s operating results. 

Volume and average price per unit case exclude beer results.

 

Revenues

 

Reported total revenues were Ps. 19,559 million in the third quarter of 2013, an increase of 1.4% as compared to the same period of 2012 mainly as a result of the integration of Fluminense in Brazil⁽¹⁾ during the quarter and despite the negative translation effect due to the devaluation of our division’s currencies.⁽²⁾ Excluding beer, which accounted for Ps. 822 million during the quarter, revenues increased 2.2% to Ps. 18,737 million. Excluding the recent integration of Fluminense in Brazil,⁽¹⁾ total revenues grew 0.2%. On a currency neutral basis and excluding Fluminense,⁽¹⁾ total revenues increased 26.9% due to average price per unit case increases in Venezuela, Argentina and Brazil, and volume growth in Venezuela, Argentina and Colombia.

 

Reported total sales volume in our South America division increased 7.0% to 301.1 million unit cases in the third quarter of 2013 as compared to the same period of 2012, as a result of volume growth in Venezuela, Argentina and Colombia and the integration of Fluminense in Brazil.⁽¹⁾ Excluding Fluminense,⁽¹⁾ volume grew 5.6% to 297.1 million unit cases. On the same basis, sparkling beverages grew 4.2%, mainly driven by 6% growth of brand Coca-Cola, contributing close to 65% of incremental volumes. The still beverage category grew 19.9%, mainly driven by the Jugos del Valle line of business in Colombia and Venezuela, accounting for 20% of incremental volumes. Our water portfolio, including bulk water, grew 10.7%.

 

Operating Income

 

Reported gross profit reached Ps. 8,678 million, a decrease of 2.8% in the third quarter of 2013, as compared to the same period of 2012, as a result of the negative translation effect of the devaluation of this division’s currencies. In local currency, cost of goods sold increased as a result of the depreciation of the average exchange rate of the Venezuelan bolivar,⁽²⁾ the Argentine peso,⁽²⁾ the Brazilian real⁽²⁾ and the Colombian peso⁽²⁾ as applied to our U.S. dollar-denominated raw material costs, which compensated for lower cost of sweeteners across the division and lower cost of PET in Brazil. Reported gross margin reached 44.4% in the third quarter of 2013.

 

Our reported operating income decreased 20.1% to Ps. 2,232 million in the third quarter of 2013, compared to the same period of 2012, mainly due to the negative translation effect resulting from the devaluation of this division’s currencies. Reported operating expenses increased 4.2%. In local currency, operating expenses increased mainly as a result of higher labor and freight costs in the division and continued marketing investments to support our marketplace execution and bolster our returnable packaging base. Our reported operating margin was 11.4% in the third quarter of 2013.

 

(1)

Our South America division’s operating results include the non-comparable effect of Fluminense’s results for the month of September, 2013.

(2)

See page 12 for average and end of period exchange rates for the third quarter of 2013.

 

 

 

 

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

Our Mexico & Central America division’s operating results include the non-comparable effect of Grupo Fomento Queretano’s results for the months of January, 2013 through April, 2013 and Grupo Yoli’s results for the months of June, 2013 through September, 2013.

Our South America division’s operating results include the non-comparable effect of Fluminense’s results for the month of September, 2013.

As of February 2013, we are incorporating our stake of the results of Coca-Cola Bottlers Philippines, Inc. through the equity method on an estimated basis.

 

Our reported consolidated total revenues increased 3.3% to Ps. 109,737 million in the first nine months of 2013, as compared to the same period of 2012. Revenue growth of 6.9% in our Mexico & Central America division, including the new franchises in Mexico, coupled with growth in Venezuela and Argentina and the integration of Fluminense in Brazil,⁽¹⁾⁽²⁾ compensated for a negative translation effect in our South America division resulting from the devaluation of this division’s currencies.⁽³⁾ Excluding the recently integrated territories in Mexico and Brazil,⁽¹⁾⁽²⁾ total revenues grew 0.9%. On a currency neutral basis and excluding the non-comparable effect of Foque, Yoli and Fluminense,⁽¹⁾⁽²⁾ total revenues grew 16.1%, in the first nine months of 2013.

 

Reported total sales volume increased 4.0% to 2,322.7 million unit cases in the first nine months of 2013, as compared to the same period in 2012. Excluding the integration of Foque and Yoli in Mexico and Fluminense in Brazil,⁽¹⁾⁽²⁾ volumes grew 1.0% to 2,255.0 million unit cases. On the same basis, the sparkling beverage category grew 0.5%, driven by growth in brand Coca-Cola. In addition, and excluding the newly merged territories, the still beverage category grew 8.0%, mainly driven by the performance of the Jugos del Valle line of business, FUZE Tea and Powerade across our territories. Our bottled water portfolio grew 4.0%. These increases compensated for a decline of 2.3% in our bulk water business.

 

Our reported gross profit increased 5.2% to Ps. 51,512 million in the first nine months of 2013, as compared to the same period of 2012. Lower sugar prices in most of our territories in combination with the appreciation of the average exchange rate of the Mexican peso,⁽³⁾ compensated for the depreciation of the average exchange rate of the Venezuelan bolivar,⁽³⁾ the Argentine peso,⁽³⁾ the Brazilian real⁽³⁾ and the Colombian peso⁽³⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 46.9%, an 80 basis points expansion as compared to the same period of 2012.

 

Our reported consolidated operating income remained almost flat at Ps. 14,500 million in the first nine months of 2013, as compared to the same period of 2012, driven by 16.5% operating income growth in our Mexico & Central America division, including the integration of Foque and Yoli in Mexico,⁽¹⁾⁽²⁾ which was compensated by a negative translation effect in our South America division, including the integration Fluminense in Brazil.⁽¹⁾⁽²⁾ Our reported operating margin was 13.2% for the first nine months of 2013. In local currency and excluding the non-comparable effect of the integrated franchises,⁽¹⁾⁽²⁾ operating expenses increased mainly as a result of (i) higher labor and freight costs in our South America division and (ii) continued marketing investments to support our marketplace execution and bolster our returnable packaging base.

 

During the first nine months of 2013, the other operative expenses, net line registered an expense of Ps. 216 million mainly due to (i) the effect of the devaluation of the Venezuelan bolivar⁽³⁾ on our U.S. dollar-denominated accounts payable in that operation and (ii) certain restructuring expenses across our operations, including those registered in the recently merged franchises, which results are now fully comparable.

 

The operative equity method line recorded a gain of Ps. 121 million, mainly due to gains from our participation in Coca-Cola Bottlers Philippines, Inc., Jugos del Valle in Mexico and Leão Alimentos in Brazil.

 

Our consolidated net controlling interest income reached Ps. 8,292 million in the first nine months of 2013. Earnings per share (EPS) in the first nine months of 2013 were Ps. 4.04 (Ps. 40.44 per ADS) computed on the basis of 2,050.6 million shares⁽⁴⁾ outstanding (each ADS represents 10 local shares).

 

(1)

Our Mexico & Central America division’s operating results include the non-comparable effect of Grupo Fomento Queretano’s results for the months of January, 2013 through April, 2013 and Grupo Yoli’s results for the months of June, 2013 through September, 2013.

(2)

Our South America division’s operating results include the non-comparable effect of Fluminense’s results for the month of September, 2013.

(3)

See page 12 for average and end of period exchange rates for the third quarter and first nine months of 2013.

(4)

According to International Financial Reporting Standards (IFRS), Earnings Per Share is computed on the basis of the weighted-average number of shares outstanding during the period. The weighted average number of shares is calculated based on the number of days within a reporting period that each share was outstanding, divided by the full length of that reporting period.

 

 

 

 

PHILIPPINES OPERATION

 

Our Philippines operation recorded a revenue decrease during the quarter, as a result of lower volumes, mainly due to the typhoons that struck the country. During the quarter, we continued to register solid performance in the launch of the single-serve one way presentation for brand Coca-Cola and continued to reinforce our 750ml returnable glass offering for brands Coca-Cola and Royal in the sparkling beverage category. As a consequence of these initiatives, brand Coca-Cola grew 9% in the quarter. Our Go-To-Market approach has been implemented in six distribution centers with encouraging results in terms of both client and delivery partner acceptance. We continue to work on achieving efficiencies in our manufacturing footprint in the country.

 

RECENT DEVELOPMENTS

 

On August 30, 2013, Coca-Cola FEMSA announced an agreement to acquire 100% of Spaipa S.A. Industria Brasileira de Bebidas (“Spaipa”), in an all-cash transaction of US$ 1,855 million. During the last twelve months ended June 30, 2013, Spaipa sold 233.3 million unit cases of beverages, generating US$905 million in net revenues and an estimated pro-forma consolidated EBITDA of US$ 134 million. The Brazilian antitrust authority (“CADE”) has already approved this transaction. As part of the acquisition financing of this transaction, Coca-Cola FEMSA has assumed US$ 2,000 million of new bank debt, of which US$500 million are included in the Company’s debt and cash position as of September 30, 2013.

As of September, 2013 we are incorporating the operation of Companhia Fluminense de Refrigerantes (“Fluminense”) in the results of our Brazilian subsidiary, the South America division and the Consolidated results.

As of September 23, 2013, Coca-Cola FEMSA is part of the Dow Jones Sustainability Emerging Markets Index, comprised by a group of 81 emerging markets companies, which include 30 Latin American companies.

The Mexican government’s proposal to tax sugary beverages has been approved by the lower house of Congress and sent to the Senate where it must be voted on by October 31, 2013. If approved, our Company will work to make the necessary adjustments to our operating structure and portfolio in order to protect the profitability of our business.

As of November, 2013 we will pay the second installment of the 2012 dividend in the amount of Ps. 1.45 per share.

 

CONFERENCE CALL INFORMATION

 

Our third-quarter 2013 Conference Call will be held on October 24, 2013, 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.: 888-503-8175 or International: 719-325-2323. Participant code: 3038201. If you wish to participate in the conference call using a specific toll free number for your country, please visit the Company’s website for additional information. We invite investors to listen to the live audiocast 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.

 

v v v

 

Coca-Cola FEMSA, S.A.B. de C.V. produces and distributes Coca-Cola, Fanta, Sprite, Del Valle, and other trademark beverages of The Coca-Cola Company in Mexico (a substantial part of central Mexico, including Mexico City, as well as southeast and northeast Mexico), Guatemala (Guatemala City and surrounding areas), Nicaragua (nationwide), Costa Rica (nationwide), Panama (nationwide), Colombia (most of the country), Venezuela (nationwide), Brazil (greater São Paulo, Campiñas, Santos, the state of Mato Grosso do Sul, part of the state of Goias, part of the state of Rio de Janeiro and part of the state of Minas Gerais), Argentina (federal capital of Buenos Aires and surrounding areas) and Philippines (nationwide), along with bottled water, juices, teas, isotonics, beer, and other beverages in some of these territories. The Company has 63 bottling facilities and serves more than 321 million consumers through 2,700,000 retailers with more than 115,000 employees worldwide.

 

v v v

 

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)

 

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. This filing is available at www.bmv.com.mx in the Información Financiera section for Coca-Cola FEMSA (KOF).

 

 

 

 

Consolidated Income Statement
Expressed in millions of Mexican pesos(1)

 

		3Q 13				% Rev				3Q 12				% Rev				Reported Δ%				Excluding M&A Effects Δ%(8)				YTD 13				% Rev				YTD 12				% Rev				Reported Δ%				Excluding M&A Effects Δ%(8)
Volume (million unit cases) (2)			795.4								759.4								4.7	%			1.3	%			2,322.7								2,232.7								4.0	%			1.0	%
Average price per unit case (2)			45.83								46.18								-0.8	%			-0.6	%			45.91								46.01								-0.2	%			0.4	%
Net revenues			37,272								36,033								3.4	%							109,123								105,621								3.3	%
Other operating revenues			222								160								38.8	%							614								581								5.7	%
Total revenues			37,494				100	%			36,193				100	%			3.6	%			0.4	%			109,737				100	%			106,202				100	%			3.3	%			0.9	%
Cost of goods sold			19,919				53.1	%			19,207				53.1	%			3.7	%							58,225				53.1	%			57,219				53.9	%			1.8	%
Gross profit			17,575				46.9	%			16,986				46.9	%			3.5	%							51,512				46.9	%			48,983				46.1	%			5.2	%
Operating expenses			12,506				33.4	%			11,583				32.0	%			8.0	%							36,917				33.6	%			34,535				32.5	%			6.9	%
Other operative expenses, net			(22	)			-0.1	%			(29	)			-0.1	%			-24.1	%							216				0.2	%			(21	)			0.0	%			-1128.6	%
Operative equity method (gain) loss in associates(3)(4)			28				0.1	%			(55	)			-0.2	%			-150.9	%							(121	)			-0.1	%			(76	)			-0.1	%			59.2	%
Operating income (5)			5,063				13.5	%			5,487				15.2	%			-7.7	%			-8.9	%			14,500				13.2	%			14,545				13.7	%			-0.3	%			-1.9	%
Other non operative expenses, net			51				0.1	%			87				0.2	%			-41.7	%							232				0.2	%			576				0.5	%			-59.7	%
Non Operating equity method (gain) loss in associates(6)			(48	)			-0.1	%			-				0.0	%											(111	)			-0.1	%			-				0.0	%
Interest expense			623								425								46.6	%							1,830								1,344								36.2	%
Interest income			220								68								223.5	%							441								269								63.9	%
Interest expense, net			403								357								12.9	%							1,389								1,075								29.2	%
Foreign exchange loss (gain)			162								(355	)							-145.6	%							319								(430	)							-174.2	%
Loss (gain) on monetary position in Inflationary subsidiries			(76	)							(4	)							1800.0	%							150								(20	)							-850.0	%
Market value (gain) loss on ineffective portion of
derivative instruments			(32	)							22								-245.5	%							(18	)							10								-280.0	%
Comprehensive financing result			457								20								2185.0	%							1,840								635								189.8	%
Income before taxes			4,603								5,380								-14.4	%							12,539								13,334								-6.0	%
Income taxes			1,596								1,712								-6.8	%							4,077								4,036								1.0	%
Consolidated net income			3,007								3,668								-18.0	%							8,462								9,298								-9.0	%
Net income attributable to equity holders of the Company			2,954				7.9	%			3,543				9.8	%			-16.6	%							8,292				7.6	%			8,923				8.4	%			-7.1	%
Non-controlling interest			53								125								-57.6	%							170								375								-54.7	%
Operating income (5)			5,063				13.5	%			5,487				15.2	%			-7.7	%			-8.9	%			14,500				13.2	%			14,545				13.7	%			-0.3	%			-1.9	%
Depreciation			1,562								1,353								15.4	%							4,555								3,788								20.2	%
Amortization and other operative non-cash charges			186								150								24.0	%							521								679								-23.3	%
Operative cash flow (5)(7)			6,811				18.2	%			6,990				19.3	%			-2.6	%			-4.4	%			19,576				17.8	%			19,012				17.9	%			3.0	%			1.0	%

 

(1)

Except volume and average price per unit case figures

 

(2)

Sales volume and average price per unit case exclude beer results

 

(3)

Includes the equity method from our participation in companies with a similar line of business such as Jugos del Valle, Coca-Cola Bottlers Philippines, Leao Alimentos and Estrella Azul, among others.

 

(4)

As of February 2013, we are incorporating our stake of the results of Coca-Cola Bottlers Philippines, Inc. Through the equity method on an estimated basis in this line

 

(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 from our participation in companies with different lines of business such as PIASA, IEQSA and Beta San Miguel, among others.

 

(7)

Operative cash flow = Operating Income + depreciation, amortization & other operative non-cash charges

 

(8)

Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability

 

As of May 2013, Grupo Fomento Queretano completed a twelve month period since its integration. Consequently its results are included in Mexico on an organic basis for financial information purposes for the months May, 2013 through September, 2013

 

As of June 2013, we integrated Grupo Yoli in our Mexican operations the months of June 2013 through September 2013 are not comparable)

 

As of September 2013, we integrated Fluminense in our Brazilian operations

 

 

 

 

Consolidated Balance Sheet

Expressed in millions of Mexican pesos.

 

Assets		Sep 13				Dec 12
Current Assets
Cash, cash equivalents and marketable securities		Ps.	23,765			Ps.	23,234
Total accounts receivable			7,419				9,329
Inventories			8,240				8,103
Other current assets			7,182				5,231
Total current assets			46,606				45,897
Property, plant and equipment
Property, plant and equipment			77,767				71,652
Accumulated depreciation			(32,205	)			(29,135	)
Total property, plant and equipment, net			45,562				42,517
Other non-current assets			101,911				77,689
Total Assets		Ps.	194,079			Ps.	166,103
Liabilities and Equity		Sep 13				Dec 12
Current Liabilities
Short-term bank loans and notes		Ps.	8,524			Ps.	5,139
Suppliers			12,766				14,221
Other current liabilities			15,122				10,190
Total Current Liabilities			36,412				29,550
Long-term bank loans			36,066				24,775
Other long-term liabilities			9,080				6,950
Total Liabilities			81,558				61,275
Equity
Non-controlling interest			3,081				3,179
Total controlling interest			109,440				101,649
Total equity (1)			112,521				104,828
Total Liabilities and Equity		Ps.	194,079			Ps.	166,103

 

(1)

Includes the effect of the devaluation of the Venezuelan bolivar as of February 13, 2013. For more detailed information, please refer to the notes to the financial statements published in our filing to the Mexican Stock Exchange (Bolsa Mexicana de Valores or BMV).

 

 

 

 

Mexico & Central America Division

Expressed in millions of Mexican pesos(1)

 

		3Q 13				% Rev				3Q 12				% Rev				Reported Δ%				Excluding M&A Effects Δ%(6)				YTD 13				% Rev				YTD 12				% Rev				Reported Δ%				Excluding M&A Effects Δ%(6)
Volume (million unit cases)			494.3								478.1								3.4	%			-1.2	%			1,454.0								1,395.0								4.2	%			-0.4	%
Average price per unit case			36.09								35.18								2.6	%			1.8	%			35.83								34.91								2.6	%			2.7	%
Net revenues			17,841								16,822								6.1	%							52,092								48,695								7.0	%
Other operating revenues			94								77								22.1	%							256								290								-11.7	%
Total revenues			17,935				100.0	%			16,899				100.0	%			6.1	%			0.7	%			52,348				100.0	%			48,985				100.0	%			6.9	%			2.1	%
Cost of goods sold			9,038				50.4	%			8,841				52.3	%			2.2	%							26,487				50.6	%			25,764				52.6	%			2.8	%
Gross profit			8,897				49.6	%			8,058				47.7	%			10.4	%							25,861				49.4	%			23,221				47.4	%			11.4	%
Operating expenses			6,048				33.7	%			5,385				31.9	%			12.3	%							17,453				33.3	%			15,963				32.6	%			9.3	%
Other operative expenses, net			(21	)			-0.1	%			(22	)			-0.1	%			-4.5	%							66				0.1	%			9				0.0	%			633.3	%
Operative equity method (gain) loss in associates (2)(3)			39				0.2	%			1				0.0	%			3800.0	%							(97	)			-0.2	%			6				0.0	%			-1716.7	%
Operating income (4)			2,831				15.8	%			2,694				15.9	%			5.1	%			2.2	%			8,439				16.1	%			7,243				14.8	%			16.5	%			13.1	%
Depreciation, amortization & other operative non-cash charges			1,003				5.6	%			841				5.0	%			19.3	%							2,646				5.1	%			2,327				4.8	%			13.7	%
Operative cash flow (4)(5)			3,834				21.4	%			3,535				20.9	%			8.5	%			4.7	%			11,085				21.2	%			9,570				19.5	%			15.8	%			12.0	%

 

(1)

Except volume and average price per unit case figures.

(2)

Includes the equity method from our participation in companies with a similar line of business such as Jugos del Valle, Coca-Cola Bottlers Philippines and Estrella Azul, among others.

(3)

As of February 2013, we are incorporating our stake of the results of Coca-Cola Bottlers Philippines, Inc. Through the equity method on an estimated basis in this line

(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)

Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

 

As of May 2013, Grupo Fomento Queretano completed a 12 month period since its integration. Consequently its results are included in Mexico on an organic basis for financial information purposes from May, 2013 through September, 2013

 

As of June 2013, we integrated Grupo Yoli in our Mexican operations the months of June 2013 through September 2013 are not comparable)

 

South America Division

Expressed in millions of Mexican pesos(1)

 

		3Q 13				% Rev				3Q 12				% Rev				Δ%				Excluding M&A Effects Δ%(6)				YTD 13				% Rev				YTD 12				% Rev				Δ%				Excluding M&A Effects Δ%(6)
Volume (million unit cases) (2)			301.1								281.3								7.0	%			5.6	%			868.7								837.7								3.7	%			3.2	%
Average price per unit case (2)			61.81								64.87								-4.7	%			-4.6	%			62.79								64.49								-2.6	%			-2.6	%
Net revenues			19,431								19,211								1.1	%							57,031								56,926								0.2	%
Other operating revenues			128								83								54.2	%							358								291								23.0	%
Total revenues			19,559				100.0	%			19,294				100.0	%			1.4	%			0.2	%			57,389				100.0	%			57,217				100.0	%			0.3	%			-0.1	%
Cost of goods sold			10,881				55.6	%			10,366				53.7	%			5.0	%							31,738				55.3	%			31,455				55.0	%			0.9	%
Gross profit			8,678				44.4	%			8,928				46.3	%			-2.8	%							25,651				44.7	%			25,762				45.0	%			-0.4	%
Operating expenses			6,458				33.0	%			6,198				32.1	%			4.2	%							19,464				33.9	%			18,572				32.5	%			4.8	%
Other operative expenses, net			(1	)			0.0	%			(7	)			0.0	%			-85.7	%							150				0.3	%			(30	)			-0.1	%			-600.0	%
Operative equity method (gain) loss in associates (3)			(11	)			-0.1	%			(56	)			-0.3	%			-80.4	%							(24	)			0.0	%			(82	)			-0.1	%			-70.7	%
Operating income (4)			2,232				11.4	%			2,793				14.5	%			-20.1	%			-19.6	%			6,061				10.6	%			7,302				12.8	%			-17.0	%			-16.8	%
Depreciation, amortization & other operative non-cash charges			745				3.8	%			662				3.4	%			12.5	%							2,430				4.2	%			2,140				3.7	%			13.6	%
Operative cash flow (4)(5)			2,977				15.2	%			3,455				17.9	%			-13.8	%			-13.7	%			8,491				14.8	%			9,442				16.5	%			-10.1	%			-10.0	%

 

(1)

Except volume and average price per unit case figures.

(2)

Sales volume and average price per unit case exclude beer results

(3)

Includes the equity method from our participation in companies with a similar line of business such as Leao Alimentos, among others.

(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)

Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

 

As of September 2013 we integrated Fluminense to the operation of Brazil.

 

 

 

SELECTED INFORMATION

 

For the three months ended September 30, 2013 and 2012

 

Expressed in millions of Mexican pesos.

 

	3Q 13			3Q 12
Capex	3,458.3		Capex	2,578.0
Depreciation	1,562.0		Depreciation	1,353.0
Amortization & Other non-cash charges	186.0		Amortization & Other non-cash charges	150.0

 

VOLUME

Expressed in million unit cases

 

	3Q 13						3Q 12
	Sparkling	Water (1)	Bulk Water (2)	Still	Total		Sparkling	Water (1)	Bulk Water (2)	Still	Total
Mexico	331.8	23.7	77.5	24.3	457.3		318.8	20.6	79.7	22.7	441.8
Central America	30.9	1.8	0.1	4.2	37.0		30.8	1.8	0.1	3.6	36.3
Mexico & Central America	362.7	25.5	77.6	28.5	494.3		349.6	22.4	79.8	26.3	478.1
Colombia	48.9	5.6	7.7	5.8	68.0		46.8	5.4	7.5	4.2	63.9
Venezuela	52.0	3.6	0.8	4.5	60.9		45.8	2.4	0.7	3.4	52.3
Brazil	105.1	6.4	0.9	6.0	118.4		103.0	6.2	0.7	5.7	115.6
Argentina	47.8	3.5	0.1	2.4	53.8		44.7	2.5	0.2	2.1	49.5
South America	253.8	19.1	9.5	18.7	301.1		240.3	16.5	9.1	15.4	281.3
Total	616.5	44.6	87.1	47.2	795.4		589.9	38.9	88.9	41.7	759.4

 

⁽¹⁾ Excludes water presentations larger than 5.0 Lt ; includes flavored water

⁽²⁾ Bulk Water = Still bottled water in presentations larger than 5.0L t; includes flavored water

 

 

Volume of Mexico, the Mexico & Central America division, and Consolidated for the third quarter 2013 results includes the non-comparable results of Grupo Yoli for the months of July, 2013 through September, 2013, accounting for 22.0 million unit cases, of which 82.2% is Sparkling Beverages, 12.6% is Water, 0.5% is Bulk Water and 4.7% is Still Beverages.

Volume of Brazil, the South America division, and Consolidated for the third quarter 2013 results includes the non-comparable results of Fluminense for the month of September, 2013, accounting for 4.0 million unit cases, of which 91.8% is Sparkling Beverages, 3.1% is Water and 5.1% is Still Beverages.

 

SELECTED INFORMATION

 

For the nine months ended September 30, 2013 and 2012

 

Expressed in millions of Mexican pesos.

 

	YTD 13			YTD 12
Capex	8,091.5		Capex	5,803.7
Depreciation	4,555.0		Depreciation	3,788.0
Amortization & Other non-cash charges	521.0		Amortization & Other non-cash charges	679.0

 

VOLUME

Expressed in million unit cases

 

	YTD 13						YTD 12
	Sparkling	Water (1)	Bulk Water (2)	Still	Total		Sparkling	Water (1)	Bulk Water (2)	Still	Total
Mexico	957.5	72.4	237.1	72.8	1,339.8		918.5	65.3	233.4	66.7	1,283.9
Central America	95.9	5.8	0.3	12.2	114.2		94.5	5.7	0.3	10.6	111.1
Mexico & Central America	1,053.4	78.2	237.4	85.0	1,454.0		1,013.0	71.0	233.7	77.3	1,395.0
Colombia	144.0	16.5	22.4	15.5	198.4		136.3	15.7	20.8	12.2	185.0
Venezuela	146.2	8.9	2.1	11.7	168.9		132.8	6.4	1.6	9.5	150.3
Brazil	302.9	17.9	2.4	17.7	340.9		308.8	18.4	2.2	17.3	346.7
Argentina	142.2	11.0	0.4	6.9	160.5		139.6	9.1	0.5	6.5	155.7
South America	735.3	54.3	27.3	51.8	868.7		717.5	49.6	25.1	45.5	837.7
Total	1,788.7	132.5	264.7	136.8	2,322.7		1,730.5	120.6	258.8	122.8	2,232.7

 

⁽¹⁾ Excludes water presentations larger than 5.0 Lt ; includes flavored water

⁽²⁾ Bulk Water = Still bottled water in presentations larger than 5.0L t; includes flavored water

 

  

Volume of Mexico, the Mexico & Central America division, and Consolidated for the first nine months of 2013 results includes the non-comparable results of Grupo Fomento Queretano for the months of January, 2013 through April, 2013 and Grupo Yoli for the months of June, 2013 through September, 2013, accounting for 64.7 million unit cases, of which 68.5% is Sparkling Beverages, 8.8% is Water, 18.3% is Bulk Water and 4.4% is Still Beverages.

Volume of Brazil, the South America division, and Consolidated for the first nine months of 2013 results includes the non-comparable results of Fluminense for the month of September, 2013, accounting for 4.0 million unit cases, of which 91.8% is Sparkling Beverages, 3.1% is Water and 5.1% is Still Beverages.

  

 

 

 

 

September 2013

Macroeconomic Information

 

		Inflation (1)
		LTM	3Q 2013		YTD
Mexico		3.39%	0.63%		1.94%
Colombia		2.27%	0.42%		2.16%
Venezuela		49.38%	10.96%		38.70%
Brazil		5.86%	0.62%		3.79%
Argentina		10.49%	2.62%		7.43%
(1) Source: inflation is published by the Central Bank of each country.

 

 

Average Exchange Rates for each Period

 

		Quarterly Exchange Rate (local currency per USD)					YTD Exchange Rate (local currency per USD)
		3Q 13		3Q 12	Δ%		YTD 13	YTD 12	Δ%
Mexico		12.9141		13.1932	-2.1%		12.6806	13.2410	-4.2%
Guatemala		7.8847		7.8913	-0.1%		7.8422	7.8190	0.3%
Nicaragua		24.8717		23.6885	5.0%		24.5709	23.4023	5.0%
Costa Rica		505.6211		504.6911	0.2%		505.3980	509.6392	-0.8%
Panama		1.0000		1.0000	0.0%		1.0000	1.0000	0.0%
Colombia		1,907.6137		1,797.9857	6.1%		1,853.7552	1,795.2168	3.3%
Venezuela		6.3000		4.3000	46.5%		5.9825	4.3000	39.1%
Brazil		2.2883		2.0287	12.8%		2.1180	1.9200	10.3%
Argentina		5.5865		4.6110	21.2%		5.2809	4.4669	18.2%

 

 

End of Period Exchange Rates

 

		Exchange Rate (local currency per USD)					Exchange Rate (local currency per USD)
		Sep 13		Sep 12	Δ%		Jun 13	Jun 12	Δ%
Mexico		13.0119		12.8521	1.2%		13.0235	13.6530	-4.6%
Guatemala		7.9337		7.9572	-0.3%		7.8330	7.8461	-0.2%
Nicaragua		25.0222		23.8314	5.0%		24.7163	23.5409	5.0%
Costa Rica		505.5700		503.3100	0.4%		504.5300	503.8500	0.1%
Panama		1.0000		1.0000	0.0%		1.0000	1.0000	0.0%
Colombia		1,914.6500		1,800.5200	6.3%		1,929.0000	1,784.6000	8.1%
Venezuela		6.3000		4.3000	46.5%		6.3000	4.3000	46.5%
Brazil		2.2300		2.0306	9.8%		2.2156	2.0213	9.6%
Argentina		5.7930		4.6970	23.3%		5.3880	4.5270	19.0%